Buckskin Construction Company, Inc., No. MSB-480 (August 22, 1994) Docket No. MSBE-94-5-25-20 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. IN THE MATTER OF: ) ) Docket No. MSBE-94-5-25-20 Buckskin Construction ) Company, Inc. ) APPEARANCES For the Petitioner: For the Agency: Mr. Stanley A. McCasland John T. Spotila, Esq. President General Counsel Buckskin Construction Katherine C. Power, Esq. Company, Inc. Agency Representative Route 1, Box 250 Small Business Administration Wilburton, OK 74578 409 Third Street, SW Washington, DC 20416 DIGEST The regulations published at 54 Federal Register 34692, et seq., on August 21, 1989 and codified at 13 CFR Part 124 must be used to evaluate all applications for participation in the Agency's 8(a) Program pending as of August 21, 1989 or filed thereafter. 13 CFR 124.1(a)(2)(i). An applicant for participation in the 8(a) Program has the burden of proving, by a preponderance of the evidence, all elements of its eligibility. 13 CFR 124.210(h)(3)(ii); 13 CFR 134.31(a). Ordinarily, in order to be eligible to participate in the 8(a) Program, an applicant concern must be one which is at least 51 percent unconditionally owned by an individual who is determined by SBA to be socially and economically disadvantaged, and the socially and economically disadvantaged individual upon whom eligibility is based must have the power to control the day-to- day operations of the applicant firm. 13 CFR 124.103; 13 CFR 124.104. When credible evidence adduced by the Petitioner in support of its position is not controverted in any way, it will be found to preponderate. Matter of B&H Contracting Company Inc., No. 460 (April 6, 1994). "Another firm in the same or [a] similar line of business as the applicant...concern," as used in 13 CFR 124.104(c)(2), means "all business activities within the same two-digit 'Major Group' of the Standard Industrial Classification (SIC) System (set forth in the SIC Manual) as the primary industry classification of the applicant concern. 13 CFR 124.100; Matter of Super Solutions Corporation, No. 461 (April 12, 1994). Although the nondisadvantaged part owner's providing, without cost, land for use as the base of the applicant firm's business operations may not, in and of itself, form the basis for con cluding that he thereby secured the power to control the firm, a reasoned conclusion to that effect can result from a consider ation of all the facts found in the business relationship between the disadvantaged individual and the nondisadvantaged individual as co-owners. 13 CFR 124.104(a)(1); 13 CFR 124.104(d)(3). Matter of Advent Engineering Services. Inc., No. 470 (June 9, 1994). The Associate Administrator may reasonably conclude from the record that power to control the Petitioner resides in a non disadvantaged individual even though there is no evidence that that power is being exercised, has been exercised or will be exercised in the future. Matter of Sequro Project Services Inc., No. 472 (June 16, 1994). All of the circumstances relating to the relationship between disadvantaged and nondisadvantaged individuals found in an appli cant firm must be considered when seeking to determine where and with whom the power to control the firm resides. Matter of Advent Engineering Services. Inc., No. 470 (June 9, 1994). If several reasons for denial of eligibility are set forth in the Associate Administrator's final determination, and at least one, though not all of those reasons, is grounded in the law or the regulations and is factually supported by the record, the denial may be upheld on review under the arbitrary and capricious standard. Matter of Anion Corporation, No. 473 (June 20, 1994). Evidence that was not adduced for the administrative record that was considered by the Associate Administrator in making his determination may not be admitted in a proceeding to set aside that determination. 13 CFR 124.210(h)(3)(i). Premier Abatement Technologies Corporation, No. 468 (May 20, 1994). FINAL DECISION August 22, 1994 USHER, Administrative Law Judge: Jurisdiction Authority for these proceedings is found in Section 409 of the Business Opportunity Development Reform Act of 1988, Public Law 100-656 (Section 8(a)(9) of the Small Business Act of 1958, as amended; 15 U.S.C. 637(a)(9)), hereinafter referred to as "the Act," and in the regulations codified at 13 CFR Parts 124 and 134, which are referred to hereinafter by section numbers only. Issues Is there a reasonable factual basis and an evidential rationale for the conclusion of the Acting Associate Administrator 1/ in the record that was before him at the time he made his determina tion; is it clear from the record and from the determination it self that the Acting Associate Administrator did not err in interpreting the facts or the law or in applying the law to the facts found in the record? Facts and Arguments of the Parties The Petitioner, an Oklahoma corporation located in Wilburton, Oklahoma, was incorporated on or about January 24, 1986 and is engaged in residential and nonresidential building construction. The firm's President, Stanley A. McCasland, owns 51 percent of the corporation's stock; its Secretary/Treasurer, Clayton Browne, Jr., owns 47 percent; and its Vice President, G. Don Hill, owns two percent. On or about September 25, 1992, the Petitioner's President filed an application for admission to the Agency's 8(a) Program. In a letter dated October 18, 1993, the Associate Administrator denied the application because her office determined that McCasland, a Native American and the individual upon whom eligi bility was based, was not economically disadvantaged and did "not devote full-time [sic] to the management of the applicant concern." It was further determined by the Associate Adminis trator that "the firm does not comply with the [Agency's] requirements governing the participation of nondisadvantaged individuals," and that the "firm may not qualify as a small business." The Associate Administrator elaborated upon her assertion about nondisadvantaged individuals, in pertinent part: Current program policy provides that nondisadvantaged individuals may be involved in the management of an applicant concern and may be stockholders, partners, Officers, and/or Directors of such concern, provided that they, their spouses or immediate family members, who reside in the individual's household, may not: Be an officer, Director, or more than ten percent owner, stockholder, or partner of another firm in the same or similar line of business as the applicant...concern. Your application indicates that Clayton Browne, Jr., a shareholder not claiming disadvantaged status, owns Browne's Right of Way Maintenance, Inc., a firm in a similar industry as the applicant concern [sic]. Regarding the finding that McCasland does not devote full time to the management of the applicant concern, the Associate Administrator advised the Petitioner, in pertinent part: Current 8(a) program regulations require that the disadvantaged individual holding the position of President or Chief Executive Officer must be engaged full-time [sic] in the day-to-day operations of the applicant concern. This requirement precludes outside employment and other business interests which conflict with the management of the firm or prevents [sic] it from achieving the business development objectives of the 8(a) program. In this regard, we note that you own Mac Lumber and have reported at least two other sole proprietorships on your personal tax forms. These outside activities, in our view, will conflict with your management of the applicant concern. The Associate Administrator advised McCasland that if the firm wished to have the application reconsidered, it would be necessary to supply the following to support such a request: 1) Evidence to document that you [Stanley A. McCasland] meet the economic disadvantage criteria. Your documentation should include, but not be limited to, the following: Updated SBA Forms 413, Personal Financial Statements for you and your spouse; and your 1992 Personal Income Tax statements; 2) Evidence that nondisadvantaged officials of the firm do not have excessive control because they have the ability to control the firm through facility leases; 3) Application for Small Business Size Determination (SBA Form 1340). These forms may be obtained from the Division of Program Certification and Eligibility, U.S. Small Business Administration, Dallas Central Office Duty Station; 4) Financial statements and Income Tax Returns for each of the three preceding fiscal years for your other businesses, all affiliates and subsidiaries of your firm and Browne's Right of Way Maintenance, Inc.; and 5) Financial information to include, but need not be limited to: (a) business income tax returns for the applicant concern's most recent year-end [sic]; (b) business financial statements no older than 90 days; and (c) most recent year- end business financial statements. The Petitioner requested reconsideration of the Associate Administrator's determination on June 24, 1993 and supplied, among other things, the following: 1) Updated SBA Forms 413, Personal Financial Statements and copies of 1992 personal Income Tax statements for McCasland and his wife; 2) Buckskin's financial statements for the periods ending December 31, 1992 and September 30, 1993, together with income tax returns for the year ending December 31, 1992; 3) Browne's financial statements for the period ending July 31, 1993, together with income tax returns for the past three fiscal years; and 4) "Evidence that nondisadvantaged officials of the firm do not have excessive controls - leases." [2/] Relative to the adverse finding of the Associate Administrator that McCasland does "not devote full-time [sic] to the management of the applicant concern," the Petitioner argued, in relevant part: McCasland devotes 100% of his working time to Buckskin Construction. He is engaged full-time [sic] in the day-to- day operations of the corporation. The alleged conflicts noted on Mr. McCasland's return are Hadson Petroleum, which is a working interest only in a gas well (a passive business relationship), royalty interests (passive business relationships), and J&J Race Horses of which Mr. McCasland is not a trainer, etc. He has an ownership stake, limited to receiving income, and is not in the day-to-day management. This is only an investment (ownership interest) and is a passive business relationship. The information furnished on IDS Services is his wife's job. This, of course, has nothing to do with his daily work schedule. The tax return will clearly show that these are not major roles in Mr. McCasland's daily schedules. The net loss on the 1991 return on the oil & gas and the horses was ($2,665). A person is not going to invest time to lose $2,665 and jeopardize a $6,000,000 business. Also, in regard to the ownership of Mac Lumber: Mac Wholesale Lumber was established for the benefit of Buckskin Construction. At the time of Mac Lumber's establishment, Buckskin was required to purchase its construction materials from an Indian-owned material supplier. Mr. McCasland, being Choctaw Indian, set up this sole proprietorship in order to satisfy the requirements of Housing and Urban Development (HUD), which established the criteria for bidding to and working for the Indian Housing Authorities. The attached personal tax return shows that Mac Lumber is incorporated in Mr. McCasland's personal return. For the lumber yard to meet the eligibility requirements maintained by the Indian Housing Authorities, the lumber yard was open to the public. However, the sales were basically to Buckskin Construction and its staff, and no aggressive effort was made to seek outside business (other than minimal advertising and maintenance of a phone line, as was also required). * * * * * * * The lumber yard was on the premises, and the staff did the transfers and paperwork. Any time spent managing Mac Lumber was no different from time Mr. McCasland would spend purchasing materials, figuring prices, etc. However, for further clarification of this matter, Mr. McCasland has phased out Mac Lumber as of July, 1993. The main reason for this being that the Indian Housing Authorities have become more self-sustaining and are no longer required to answer to HUD as much as in the past. * * * * * * * The phasing out...should further help to expedite any confusion on this matter [sic]. About the Associate Administrator's determination that the Petitioner "does not comply with the requirements governing the participation of nondisadvantaged individuals" in its affairs, the Petitioner argued, in pertinent part: Clayton Browne, Jr., a shareholder in Buckskin...does own 51% of Browne's Right of Way Maintenance, Inc. However, this firm is definitely not a similar industry as the applicant concern. Browne's...is in the business of clearing brush and trees, etc., from under electrical lines for rural electrical cooperatives, etc. This company does not use the same equipment nor share the same resources, etc. The last three years [sic] tax returns, as well as the latest financial statement, are attached as documentation that this company is not a business affiliate nor [sic] in the same or similar industry as the applicant concern. In order to further stress that these are not of similar industry [sic], please note that the SIC Code for Browne's...is 1629, and the primary SIC Code for Buckskin...is 1521 and the secondary SIC Code is 1541. Almost ten months after the Petitioner sought reconsideration of its application, in a letter dated April 13, 1994, the Agency's Acting Associate Administrator again denied the application, advising McCasland, in relevant part, as follows: After a careful review of the materials submitted in your reconsideration request, it is our view that you have not provided sufficient documentation to overcome two of the original four reasons for decline. The following conditions have not been met: 1) You have not provided sufficient new evidence to allow us to conclude that you [Stanley A. McCasland], the individual upon whom eligibility is based, devote full-time [sic] to the management of the applicant concern. In this regard, we note that in an effort to overcome this reason for decline you stated in your request for reconsideration that Mac Lumber was phased out as of July 1993. However, we note that your request for reconsideration does not contain any documented evidence to indicate that Mac Lumber has been phased out and is no longer operational. Therefore, in the absence of information evidencing that Mac Lumber has been phased out and is no longer operational, we can not [sic] conclude that you have provided sufficient new evidence to allow us to conclude that you are devoting full- time [sic] to the management of the applicant concern. 2) You have not presented sufficient new evidence to allow us to conclude that the applicant concern is in compliance with the requirements governing the participation of nondisadvantaged individuals. In the above referenced decline letter, we specifically advised you that our determination was based on the fact that Mr. Clayton Browne, Jr., a nondisadvantaged shareholder in the applicant concern, owned Browne's Right of Way Maintenance, Inc., a firm in the same or similar line of business as the applicant concern. Furthermore, we also requested that you provide evidence indicating that nondisadvantaged officials of the firm do not have excessive control because of leasing arrangements. A review of your reconsideration request reveals that Mr. Clayton Browne, Jr., is still a shareholder and official (Secretary/Treasurer) in the applicant concern and a 50 percent owner of Browne's Right of Way Maintenance, Inc. and a 33 1/3 percent owner of Piney Creek Lumber & Supply, Inc. Furthermore, you state that the applicant concern leases land from Mr. Browne for $1.00 (per year). Such an agreement can not [sic] be construed as an arms-length [sic] agreement. Therefore, based on the information contained in your request for reconsideration, we can not [sic] conclude that you have provided sufficient new evidence to allow us to conclude that the applicant concern is in compliance with the requirements governing the participation of nondisadvantaged individuals and that nondisadvantaged individuals do not control or have the power to control the applicant concern. In a letter dated May 20, 1994 (received and docketed on May 25, 1994), the Petitioner's President filed a Petition, in accordance with the provisions of Section 124.210(a)(1) of the regulations, seeking my review of the Acting Associate Administrator's adverse determination. 3/ McCasland argued, insofar as is relevant and admissible here: SBA's letter of denial described Browne's Right of Way Maintenance, Inc. as "a firm in the same or similar line of business as the applicant concern." This issue was addressed in my letter dated November 17, 1993. Specifically, I stated that the activities of Browne's Right of Way, Inc. are TOTALLY different from the activities of Buckskin Construction Company, Inc. My comments were: Browne's Right of Way Maintenance, Inc. is in the business of clearing trees, etc. from under electrical lines for rural electric cooperatives, etc. This company does not use the same equipment nor share the same resources, etc. Neither firm at any time shares personnel, vehicles, nor [sic] operating equipment. I further stated that the two firms did not have the same primary nor [sic] secondary SIC codes. The SIC code for Browne's Right of Way Maintenance, Inc. is 1629, and the primary SIC code for Buckskin Construction Company, Inc. (the applicant concern) is 1521 and the secondary SIC code is 1541. Also in response to paragraph #2: Lease arrangements. Buckskin...leases land from Mr. Clayton Browne primarily for reasons of reducing operating expenses. Mr. Browne does NOT exert "excessive control" over Buckskin...because I (Stanley A. McCasland) always have the OPTION to place the equipment and building on my personal 40 acres. In terms of lease agreement: please note that the lease agreement is basically advantageous to me (Stanley A. McCasland). There is no penalty clause, no requirements to restore the land to its original condition, etc., and I have the option to relocate at any time. Mr. Browne's primary contribution to Buckskin...is his skill and expertise as a construction cost estimator. However, the firm is not totally reliant upon Mr. Browne for his skills. I have another construction cost estimator, Mr. G. Don Hill, who is equally as skilled. Therefore, Mr. Browne does not exert excessive control because of his skills as an estimator. As Majority Owner and President, I (Stanley A. McCasland) use the skills of these estimators in an advisory capacity. I retain the right to accept or modify both Mr. Browne's and Mr. Hill's estimates prior to final submission of any bid. [Emphasis by capitalization in original.] The Agency's Counsel filed a timely Response to the Petition on July 11, 1994. Counsel referred to the regulations found at Section 124.104(a) and asserted that compliance with those regulations is "critical to the integrity of the 8(a) program." She further asserted that the Acting Associate Administrator's determination that McCasland was not in compliance with the requirements of these regulations because of the necessity of his devoting considerable time to the operation of Mac Lumber was a reasonable one inasmuch as it was based on these facts of record: Mac Lumber is a business, and for Mr. McCasland to run such a business would prevent him from devoting full time to his management of Buckskin. The 1992 tax return McCasland filed for Mac Lumber lists $1,568,000 in sales, and $1,550,000 in costs, which would seem to reflect an active business in 1992, the time period in which he submitted his application. Counsel recognized that [t]here have been a number of...decisions [of this Office] which deal with the issue of whether or not the disadvantaged individual upon whom eligibility is based devotes full-time [sic] to the applicant concern...[and that, in several of them, this Office] reasoned that if the [Petitioner] offers evidence that the individual upon whom eligibility is based is in full-time control of the applicant concern, and the evidence is uncontroverted, then a finding to the contrary by SBA could be arbitrary and capricious. Counsel pointed out that this Office found, in the Matter of Allside Services Corporation, No. 439 (August 31, 1993), that "there was evidence in the record (corporate tax returns) which demonstrate that it was reasonable...to find that the CEO of an applicant firm spent considerable time in another business," and she suggested that "the instant case is analogous to Allside... since the tax returns of Mac Lumber [Exhibit E], admittedly owned and managed by Mr. McCasland, show considerable sales and thus a volume of business which indicates time spent by Mr. McCasland on Mac Lumber, away from the applicant concern, Buckskin." With regard to the issue of Browne's power to control Buckskin, Counsel cited several decisions rendered by this Office wherein it was held that "whether nondisadvantaged individuals may ac quire the power to control the [applicant] concern 'will depend on all the facts involved in the relationship between the disad vantaged individual and the nondisadvantaged individuals or entities."' 4/ Counsel argued that: [W]hen one examines the relationship between Browne and Buckskin, one sees the following: Mr. Browne is an officer and 47% shareholder in Buckskin who also owns two other companies; one of which is in the same SIC division as Buckskin, and one [of] which provides Buckskin its main supplies; and, both of Browne's companies have the same address as Mr. McCasland's other business, Mac Lumber. Also, Browne leases the land Buckskin is located on for only $1.00 a year. SBA submits that when the totality of this relationship is considered, and the above factors were considered, it was reasonable for SBA to conclude that Mr. Browne has the power to control Buckskin. Discussion To determine the Petitioner's eligibility for admission to the Agency's 8(a) Program, the Acting Associate Administrator was bound to follow the Agency's regulations. The regulation at Section 124.103 provides, insofar as is relevant here: Except for concerns owned by Indian tribes, Alaska Native Corporations or Native Hawaiian Organizations, in order to be eligible to participate in the 8(a) program, an applicant concern must be one which is at least 51 percent unconditionally owned by an individual who is a citizen of the United States...and who is determined by SBA to be socially and economically disadvantaged. The regulation at Section 124.104 requires, in pertinent part: Except for concerns owned by Indian tribes, Alaska Native Corporations...and Native Hawaiian Organizations...an applicant concern's management and daily business operations must be controlled by an owner(s) of the applicant concern who has (have) been determined to be socially and economically disadvantaged. * * * * * * * (a)(1) An applicant concern must be managed on a full time basis by one or more individuals who have been found by SBA to be socially and economically disadvantaged, and such person(s) must possess requisite management or technical capabilities as determined by SBA. * * * * * * * (2) At least one socially and economically disadvantaged full-time manager must hold the position of President or Chief Executive Officer. This precludes outside employment or any other business interest by the individual which conflicts with the management of the firm or hinders it in achieving the objectives of its business development plan. Any disadvantaged person upon whom 8(a) eligibility is based, who is engaged in the management and daily business operations of the 8(a) concern and who wishes to engage in outside employment, must notify SBA of the nature and anticipated duration of the outside employment and obtain the written approval of SBA prior to engaging in such employ ment. SBA will review such notification for compliance with the requirement of day-to-day management and control of the 8(a) concern. * * * * * * * (c) Individuals who are not socially and economically disadvantaged may be involved in the management of an applicant concern, and may be stockholders, partners, officers, and/or directors of such concern. Such individual(s), their spouses or immediate family members who reside in the individual's household may not however: (1) Exercise actual control or have the power to control the applicant or 8(a) concern. (2) Be an officer or director or more than a 10% owner, stockholder, or partner of another firm in the same or similar line of business as the applicant ...concern. * * * * * * * (d) Nondisadvantaged individuals or entities may be found to control or have the power to control in any of the following circumstances, which are illustrative only and not all inclusive: * * * * * * * (3) The nondisadvantaged individual or entity provides critical financial or bonding support or licenses to the...concern which directly or indirectly allows [sic] the nondisadvantaged individual to gain control or direction of the...concern. (6) Other contractual relationships exist with nondis advantaged individuals or entities, the terms of which would create control over the disadvantaged concern. When carefully considered in light of the law and the regula tions, the evidence of record 5/ clearly supports the Acting Associate Administrator's conclusion that the Petitioner did not adduce preponderant evidence to prove that Browne does not have the power to control the Petitioner (as that term was envisioned by the drafters of the regulation found at Section 124.104(c)(4)) resulting from his relationship with the Petitioner. However, the record does not support the Acting Associate Admin istrator's conclusion that the Petitioner did "not provide suf ficient new evidence to allow [the Agency] to conclude that... [Stanley A. McCasland], the individual upon whom eligibility is based, devote[d] full-time [sic] to the management of the applicant concern." As has been decided previously: The regulation clearly requires that "the applicant firm must be managed on a full-time basis" by the individual who has been determined to be socially disadvantaged. There is no requirement, as the [Acting Associate Administrator] seems to insist, that the socially disadvantaged individual devote all of his or her time to the management of the firm. Section 124.104(a)(1). This requirement is conditioned only on the preclusion of "outside employment or any other business interest which conflicts with the management of the firm or hinders it in achieving the objectives of its business development plan." Matter of B&H Contracting Company, Inc., No. 460 (April 6, 1994). As in B&H Contracting, the evidence here convinces me that McCasland does indeed devote the fullest amount of time to the management of the Petitioner as is needed for a successful business operation. McCasland has said as much, and there is no refutation of that testimony. As was held in B&H Contracting: "When credible evidence adduced by the Petitioner in support of its position is not controverted in any way, it will be found to preponderate." See also Matter of Art Construction Systems Inc., No. 432 (June 4, 1993). The Agency's insistence that any outside employment or other business interest conducted by the disadvantaged individual necessarily conflicts with the management of the applicant firm or prevents it from achieving the business development objectives of the 8(a) program, regard less of the uncontroverted facts of record, is clearly error and bespeaks of consummate capriciousness and arbitrariness. See also Matter of Westsun Petroleum Products. Inc., No. 427 (March 15, 1993), pages 12, 13 and 14; Matter of KRW. Incorporated, No. 379 (August 29, 1991). I take issue with Counsel's comparison of the facts obtaining here and the situation found in the Matter of Allside Services Corporation, No. 439 (August 31, 1993). 6/ If McCasland's testimony is credible - and there is no apparent reason to disbelieve him - the amount of business generated by Mac Lumber, as reflected in the firm's 1992 income tax return, is of no evidentiary significance, and it does not allow for a factual comparison with the situation described in the Allside decision. The Acting Associate Administrator's position regarding the Petitioner's violation of "the [Agency's] requirements governing the participation of nondisadvantaged individuals" on the basis of Browne's being "an officer, Director, or more than ten percent owner, stockholder, or partner of another firm in the-same or similar line of business as the applicant or 8(a) concern" is not legally sound. Browne is an officer and a 51 percent owner of Browne's Right of Way Maintenance, Inc. However, as McCasland correctly argued, that firm is not in the same or a similar line of business as Buckskin. According to the regulation found at Section 124.100, "same or similar line of business means all business activities within the same two-digit 'Major Group' of the Standard Industrial Classification (SIC) System...as the primary industry classification of the applicant concern." 7/ McCasland was correct in pointing out that: "Browne's...is in the business of clearing brush and trees, etc., from under electrical lines for rural electrical cooperatives, etc. [and] does not use the same equipment nor share the same resources, etc. * * * * * * * [P]lease note that the SIC Code for Browne's...is 1629, and the primary SIC Code for Buckskin...is 1521 and the secondary SIC Code is 1541. The Standard Industrial Classification Manual bears this out. Major Group 15 includes residential building construction; "land clearing contractors" are listed under SIC code 1629, a part of Major Group 16. 8/ Turning again to the Acting Associate Administrator's conclusion that the Petitioner failed to prove that Browne does not have the power to control the Petitioner on the basis of his relationship with the Petitioner, notwithstanding the Acting Associate Admin istrator's error concerning a violation of the regulation found at Section 124.105(c)(2), the evidence of record supports the general proposition of the Agency's Counsel that "when the totality of [Browne's] relationship [to the applicant firm] is considered...it [is] reasonable...to conclude that...Browne has the power to control Buckskin." Browne's "relationship" to Buckskin consists of his ownership of 47 percent of Buckskin's stock, his lease to Buckskin, virtually rent free, of the premises upon which Buckskin does business, and his ownership of Piney Creek Lumber & Supply, Inc., a firm that seemingly supplies Buckskin with the essential supplies for its operation. Perhaps no one of these factors, standing alone, would suffice to support the conclusion that Browne has the power to control Buckskin, but, considering these facts together, one is certainly able to hypothesize a situation in which the nondisadvantaged individual could utilize his ultimate ability to manage and direct Buck skin's daily operations. Matter of Advent Engineering Services. Inc., No. 470 (June 9, 1994). In Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 28 L.Ed.2d 136, 91 S.Ct. 814 (1971) the Court held that scrutiny of the facts does not end, however, with the determination that the Acting Associate Administrator has acted within the scope of his statutory authority. The law requires a finding that the actual choice made was not "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." To make a finding that the Acting Associate Administrator had a rational basis for his determination, I must consider whether that determination was based on a consideration of the relevant factors and whether there has been a clear error of judgment. See also Bowman Transportation Inc. v. Arkansas-Best Freight System. Inc., 419 U.S. 281, 42 L.Ed.2d 447, 95 S.Ct. 438 (1974); Burlington Truck Lines. Inc. v. United States, 371 U.S. 156, 9 L.Ed.2d 207, 83 S.Ct. 239 (1962); United States Lines v. Federal Maritime Commission, 584 F.2d 519 (D.C. Cir. 1978). I find from the determination and from the administrative record upon which it was based that there has been no clear error of judgment on the part of the Acting Associate Administrator; the determination here accords with the law and the applicable regulations and is based on the evidence of record. Having decided that the Associate Administrator's conclusion that the Petitioner did not adduce preponderant evidence to prove that Browne does not have the power to control the Petitioner, as the result of his relationship with the firm, is grounded in the law and the regulations and is factually supported by the record, I must conclude that his denial of eligibility has a reasonable basis and should, therefore, be upheld on review under the arbitrary and capricious standard. If several reasons for denial of eligibility are set forth in a final determination, and at least one has its basis in the law and in the facts of record, the denial will be held to be not arbitrary, capricious or contrary to law. Matter of Anjon Corporation, No. 473 (June 20, 1994); Matter of Advent Engineering Services. Inc., No. 470 (June 9, 1994). Conclusion The April 13, 1994 determination denying 8(a) entry eligibility to the Petitioner, Buckskin Construction Company, Inc., accords with the law and the pertinent regulations and is reasonably based upon the record that was before the Acting Associate Administrator at the time he made that determination; therefore, I find that the determination IS NOT ARBITRARY, CAPRICIOUS OR CONTRARY TO LAW. This constitutes the final decision of the Small Business Admin istration, and it is binding upon the Petitioner, the Agency and its employees. See Section 124.210(i). _______________________________ Benjamin G. Usher Administrative Law Judge 1/ The Associate Administrator for the Agency's Office of Minority Small Business and Capital Ownership Development made the initial determination concerning the Petitioner's eligibility, but prior to the Petitioner's request for a reconsideration of that determination she was replaced by the Agency's Acting Associate Administrator for Minority Enterprise Development, who rendered the reconsidered determination on April 13, 1994. 2/ Other evidence submitted with the reconsideration request is not pertinent to this appeal. 3/ With the Petition, the Petitioner's President submitted additional evidence, including a bank statement for Mac Wholesale Lumber Company indicating a zero balance on November 11, 1993; an Oklahoma Sales Tax Report, dated July 15, 1993; and a letter from the Petitioner to the Oklahoma Tax Commission, dated May 20, 1994, requesting verification of the assertion that Mac Wholesale Lumber Company "has been taken off the Tax Commission's rolls." This evidence was not a part of the administrative record that was before the Acting Associate Administrator at the time he made his reconsidered determination on April 13, 1994 and, for that reason, cannot be considered in this appeal proceeding. See Section 124.210(h)(3)(i). 4/ Counsel cited the Matter of M.J.S., Inc., No. 435 (July 20, 1993) among others. 5/ The record consists of that evidence adduced by the Petitioner prior to the reconsideration of the application by the Acting Associate Administrator. To the extent that additional evidence was adduced by the Petitioner with its Petition for my review, such evidence cannot, and does not, form any basis for this decision. Section 124.210(h)(3)(i). 6/ Further, as I said in B&H Contracting, "to the extent the reasoning of the deciding judge [in Allside, and Matter of MSC Electric, No. 442 (September 24, 1993)] diverges from the precedential principles set out in [Matter of] Westsun [Petroleum Products, Inc., No. 427 (March 15, 1993)] and [Matter of] KRW [Incorporated, No. 379 (August 29, 1991)], I disagree. 7/ The Agency's Counsel erred when she stated: "'Similar line of business' is not defined within the SBA size regulations at 121.401 [or] the 8(a) definitions at 124.100." Agency Answer, page 10, footnote 4. 8/ Standard Industrial Classification Manual, Executive Office of the President, Office of Management and Budget, 1987 Ed., pages 55 - 59.