Recently, a self-certified woman-owned small business (WOSB) was determined to be ineligible for a WOSB set-aside contract because the woman owner’s husband held the company’s highest officer position and appeared to manage its day-to-day operations.
In a WOSB, a woman must be responsible for managing the day-to-day business and her role must be reflected both in the corporate paperwork and in practice.
OHA’s decision in Yard Masters, Inc., SBA No. WOSB-109 (2017) involved an Army solicitation for grounds maintenance services. The solicitation was issued as a WOSB set-aside under NAICS code 561730, with a corresponding $7 million size standard.
After evaluating competitive proposals, the Army awarded the contract to Yard Masters, Inc. A competitor then filed a protest, alleging that Yard Masters was ineligible because a man, Bryce Wade, was Yard Masters’ majority owner and President until recently and still exercised control over the company.
In response, Yard Masters admitted that Bryce Wade had been the majority owner, but he sold stock to his wife, Sally Wade, making her the 51% owner. Yard Masters produced Sally Wade’s resume and meeting minutes showing that Sally Wade was listed as the Chief Executive Officer.
The SBA Director of Government Contracting reviewed Yard Masters’ bylaws, and determined that the bylaws “do not create a CEO position” or assign any duties to the CEO. The bylaws identified the President (a position held by Bryce Wade) as the “chief executive and administrative officer of the corporation.” The SBA noted that “Bryce Wade signed company proposals and contract documents for the instant procurement,” as well as the company’s tax returns. The tax returns “identify Bryce, and not Sally, Wade as a compensated officer.”
The SBA found that Sally Wade did not control Yard Masters, and issued a determination finding the company ineligible for the WOSB set-aside contract.
Yard Masters appealed to OHA. Yard Masters argued that the corporation’s meeting minutes made clear that Sally Wade had ultimate direction and control of the company.
Yard Masters “argues that Sally Wade is its CEO,” OHA wrote. “The problem is that the Board did not formally create a position of CEO.” OHA continued, “[t]he Bylaws were never changed to add the position of CEO. The Bylaws clearly state that the President is the corporation’s ‘chief administrative and executive officer.’ Bryce Wade holds that position.” OHA concluded that Yard Masters’ “highest officer position is President, and Bryce Wade, not Sally Wade, holds it.”
OHA also noted that “all actions taken on [Yard Masters’] behalf were taken by Bryce Wade.” Even after Sally Wade “supposedly had taken control” of the company, “Bryce Wade signed [Yard Masters’] offer” and was listed as the point of contact. And incredibly, after the WOSB protest was filed, “[i]t was Bryce Wade, not Ms. Sally Wade, who communicated with SBA on [Yard Masters’] behalf.”
OHA denied the appeal and upheld the SBA Area Office’s decision.
So WOSBs need to make sure that titles/positions are clearly defined in the company’s governing documents. That is the only way to show who hold the “highest” position. It is also important who signs the documents. If a man signs all the contracts and other documents, it makes it appear that he has significant influence in the company. Remember this when registering in SAM. List the woman owner as the primary POC.
The SBA is still working on the formal rules that will require all WOSBs to be formally certified. This ruling is a great lesson that self-certified WOSBs must ensure that they comply with all WOSB requirements.