Technological innovation has brought us telecommuting-that is, working remotely from home, a coffee shop or vacation and nevertheless staying connected with the office. Airports, coffee shops, and restaurants are full of people checking their smart phones and staying in touch with what is going on in their respective business.
The issue of whether a telecommuter is actually in charge of his or her business was recently addressed by the Veterans Administration (“VA”) in KWV, Inc. v. United States.[i] A Rhode Island based service-disabled, veteran-owned business (“SDVOSB”), owned by a Korean war veteran who had more than 30 years of experience, was awarded a federal government set-aside for SDVOSB by the VA. A competitor, likely disappointed that it was not awarded the contract, challenged KWV’s SDVOSB status, asserting that the service-disabled veteran did not actually “control” his company within the meaning of 38 CFR §74.4, because the Korean war veteran lived in Florida for part of the year. The allegation was that the veteran’s sons, who were not veterans, worked for the company and actually controlled the company in Rhode Island.
The agency (VA) Office of Small and Disadvantaged Business Utilization (“OSDBU”) agreed with the protestor and found that because the service-disabled veteran resided in Florida for part of the year, he could not effectively and sufficiently control the day to day management of KWV. The OSDBU therefore held that KWV was ineligible for the contract and revoked KWV’s SDVOSB status, making it unable to bid on future SDVOSB contracts issued by the VA. KWV then appealed this decision to the United States Court of Federal Claims, seeking injunctive relief, and prevailed. The court found that the service-disabled veteran’s decision to live in Florida for part of the year did not preclude him from “controlling” KWV within the meaning of 38 CFR §74.4. The court held that the owner of KWV “employs various electronic means to keep track of the day-to-day business of KWV,” and concluded this was an acceptable means of controlling KWV’s operations per the requirements of 38 CFR §74.4. Based on this finding, the court issued a preliminary injunction setting aside the VA’s decision to sustain the protest and the court ordered the VA to restore KWV’s SDVOSB eligibility.
Comment: This case is pertinent and relevant for Disadvantaged Business Enterprises (DBEs), as well as MBEs and WBEs. The VA must now recognize that “control” under 38 CFR §74.4 is not dependent on the owner’s physical presence at the office or the project. Rather, service-disabled veterans can remotely manage the day-to-day affairs of their SDVOSBs, provided they fulfill the other prerequisites regarding control.
This firm represented a DBE in a recent application to the Washington State Office of Minority and Women Business Enterprises (OMWBE). In our case, the owner of the DBE business lived in California, but remained in control of his Washington business by working remotely and traveling from time to time to the state of Washington. Initially, the agency challenged the DBE owner that he was not in control of the business because he did not spend full time in the state running the day-to-day affairs of the local enterprise. The owner of that business was able to successfully demonstrate to the OMWBE that he satisfied the control requirements of 49 CFR §26.71. This case should provide future DBE/MBE and WBE businesses with precedent that managing the affairs of an enterprise from afar is now recognized as “control” of the business.
[i] 108 Fed. Cl. 448 (Fed. Cl. 2013).