Companies that want to apply to the Small Business Administration’s (SBA) 8(a) Business Development Program must meet a number of eligibility criteria. Specifically, the SBA regulations require that the company be a small business that demonstrates potential for success and is unconditionally owned and controlled by one or more socially and economically disadvantaged individuals. These individuals must be of good character and citizens and residents of the United States.
With regard to the good character criterion, the SBA regulations require the company and all its principals have good character. During the processing of an application, SBA may determine that a company or its principals lack good character if, among other things, SBA determines that the company has knowingly submitted false information in its application. When SBA makes a determination that the company or its principals lack good character, the company may not have the right to appeal that determination to SBA’s Office of Hearings and Appeals (OHA). This is what recently happened to the contractor in GeologyReview LLC, SBA No. BDPE-586, 2020 (Nov. 10, 2020).
In that case, GeologyReview was initially denied admission into the 8(a) Program when the Associate Administrator for the Office of Business Development (AA/BD) determined that the disadvantaged owner did not manage the company on a full-time basis and that the company did not have the potential for successfully meeting the business development objectives of the 8(a) Program. GeologyReview challenged this determination in its request for reconsideration. On reconsideration, the AA/BD determined that GeologyReview had submitted evidence to overcome the initial reasons for declining the application. Nevertheless, the AA/BD went on to once again deny the application; this time finding that the SBA had independently obtained information calling into question the veracity of information regarding the disadvantaged owners’ employment history. As a result, the AA/BD concluded that the company failed to establish good character necessary for participation in the 8(a) Program.
GeologyReview then filed an appeal with OHA, alleging that SBA acted in bad faith. That appeal was dismissed for lack of jurisdiction. Under SBA’s regulations, a company may appeal a denial of its application only if the denial is based upon a negative finding of social disadvantage, economic disadvantage, ownership or control, or any combination of these four criteria. OHA previously held that it lacks jurisdiction to entertain appeal on other grounds. Thus, OHA dismissed the appeal. OHA stated that the company’s “unsubstantiated” allegations that SBA acted in bad faith do not grant OHA jurisdiction over an SBA determination that is not appealable under the controlling statutes and regulations.
This case is another reminder of the requirement that government contractors submit accurate information to the Government. Failure to do so can result in a number of consequences, including exclusion from government programs.