XOTech, LLC v. United States, No. 19-1743 (Fed. Cir. 2020)Annotate this Case
The Small Business Act requires that many federal agencies set aside contracts to be awarded to certain categories of small businesses, including service-disabled-veteran-owned (SDVO) small businesses, 15 U.S.C. 644(g)(1)(B). For a limited liability company (LLC) to qualify as SDVO, one or more SDVs must directly and unconditionally own at least 51% of each class of member interest. For an LLC to be controlled by SDVs, one or more SDVs must control the company’s long-term decision making, conduct its day-to-day management and administration of business operations, hold the highest officer position, serve as managing members, have “control over all decisions” of the LLC and “meet all supermajority voting requirements,”
XOtech LLC, previously organized with Marullo (an SDV) as its only manager, became a multiple-manager company with four “Members” as owners. The Army issued a Request for Proposals seeking an SDVO contractor to provide logistics support for Army Reserve facilities. XOtech was awarded the contract. The Director of the SBA’s Office of Government Contracting determined that XOtech did not qualify for SDVO status and sustained a protest, finding that, although Marullo owned XOtech, he lacked sufficient control over XOtech’s operations because he required the vote of at least one non-SDV to make management decisions. The Claims Court and the Federal Circuit affirmed, finding that service-disabled veterans do not control “all decisions” of XOtech as required by 13 C.F.R. 125.13(d).