Vorago Technologies, Inc. recently appealed a size determination that categorized the company as "other than small" and consequently rendered it ineligible for the Small Business Innovation Research (SBIR) program. The U.S. Small Business Administration (SBA) Office of Government Contracting Area V conducted the initial determination. The company contested the size determination, asserting that it was "clearly erroneous" and requested a reversal of the decision. 

Vorago's Ownership Dispute

Vorago's eligibility for the SBIR program was questioned by the Area Office due to failure to meet the ownership requirements. According to the Area Office, Vorago did not comply with the regulatory ownership prerequisites for SBIR program participation. They argued that New Science Ventures (NSV), a venture capital management company, held over 50% ownership in Vorago, thus exceeding the threshold for ownership and control requirements.

Vorago refuted this claim, stating that NSV did not possess any ownership rights, and the limited partnerships had no control over the company. Vorago emphasized that it was primarily owned by individuals and provided evidence to support its position.

Vorago's Appeal

Vorago proceeded to file an appeal, contending that the size determination was based on an error of fact. They maintained that they were in compliance with the SBIR requirements through majority ownership by U.S. individuals and limited partnerships controlled by U.S. individuals. To reinforce their argument, Vorago submitted additional documentation, including a declaration from counsel, a letter to the U.S. Attorney's Office, and a detailed chart illustrating ownership percentages. Furthermore, Vorago addressed the issue of control, clarifying that it resided with individuals having direct ownership, the CEO, and an independent director.

In their appeal, Vorago highlighted two specific errors made by the Area Office. Firstly, they disputed the conclusion that NSV held a controlling interest in Vorago, presenting evidence to the contrary. Secondly, they challenged the assertion that NSV was owned by limited partnerships. Vorago contended that the Area Office had placed undue weight on internet research, maintaining that greater importance should have been given to actual submissions.

Judge Orders Revised Size Determination

Vorago's appeal proved successful as the judge granted their motion to include additional evidence in the record of discussions with the Area Offices. The judge explained the eligibility requirements for the SBIR program, specifically emphasizing the necessity of ownership and control by U.S. citizens or permanent resident aliens. After reviewing the evidence, the judge determined that the Area Office had erred in concluding that NSV held a majority interest in Vorago. Furthermore, the judge criticized the Area Office's reliance on website evidence, stating that regulatory guidelines mandated a preference for specific, signed, factual evidence.

Consequently, the judge ruled in favor of Vorago, finding that the size determination was based on a factual error. The judge invalidated the initial determination, remanding the case to the Area Office for a revised size determination.

Learn More About Size and Status Protests in our Free eBook

As the value of government contracts increases, so does the likelihood your company, as the winning bidder, will face a size and standard protest from a disappointed bidder.

Defending a size and standard protest is at best annoying and, at worst, truly concerning.  However, there are several things that can be done to protect your business well before a protest is filed, and few more in the unfortunate event you face a size and standard protest.​ 

We invite you to read our free eBook on Size Protests, "A Summary of Size and Status Protests," and learn more about:

• Avoiding Small Business Association (SBA) Adverse Outcomes​
• Small Business Association (SBA)​ Issues Proposed Rule Change​
• Size Status Protest Dismissal Sustained by Office of Hearings and Appeals (​OHA)​
• HUBZone Program Needs Policing​​
• Changes Ahead for the Small Business Association (SBA)​ HUBZone Program​
• Small Business Association (SBA) and The Federal Acquisition Regulatory (FAR) Council's Lack of Rule Making Confusing
• Small Business Association (SBA)​ Protest Regarding Two Classes of Stock​
• United States Court of Federal Claims (CoFC) Overturns Center for Verification and Evaluation's​ (CVE) Revocation of Service-Disabled Veteran-Owned Small Business​ (SDVOSB) Status​

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