V&M Precision Machining & Grinding, No. 153 (June 3, 2002) Docket No. SDBA-2001-09-20-03 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. ) IN THE MATTER OF: ) Docket No. SDBA-2001-09-20-03 ) V&M Precision Machining & ) Grinding ) Decided: June 3, 2002 ) Petitioner ) APPEARANCES Christina Perez - Verbeek, President For V&M Precision Machining & Grinding Gene Marie M. Pade, Esq. Office of General Counsel For the Small Business Administration DIGEST The Acting Associate Administrator is not arbitrary and capricious in concluding that the individual upon whom a Small Disadvantaged Business (SDB) applicant concern's claim of eligibility is based lacks the requisite management experience of the extent and complexity needed to run the applicant concern where: the individual's claim of management experience is based upon a bachelor's business degree; "growing up with" the firm; running another, three- person firm in an unrelated business for eight years, while also going to college for three of those years; and where the individual took over the firm not long before its SDB application, from the very experienced nondisadvantaged family members who remain involved with the business. INITIAL DECISION HOLLEMAN, Administrative Judge: Jurisdiction This appeal petition is decided under the Small Business Act of 1958, 15 U.S.C. Sections 631 et seq., and 13 C.F.R. Parts 124 and 134. Issue Whether the Acting Associate Administrator is arbitrary and capricious in concluding that the individual upon whom a Small Disadvantaged Business (SDB) applicant concern's claim of eligibility is based lacks the requisite management experience of the extent and complexity needed to run the applicant concern where: the individual's claim of management experience is based upon a bachelor's business degree; "growing up with" the firm; running another, three- person firm in an unrelated business for eight years, while also going to college for three of those years; and where the individual took over the firm not long before its SDB application, from the very experienced nondisadvantaged family members who remain involved with the business. I. BACKGROUND V&M Precision Machining & Grinding (Petitioner) is a precision machining and grinding company specializing in the aerospace industry. Founded in 1946 by Borgert Vedder, and incorporated in Los Angeles, California, in 1948, Petitioner is located at 1130 Columbia Street, Brea, California (Columbia Street Address). Its primary Standard Industrial Classification (SIC) [1] code is 3728, Aircraft Parts and Auxiliary Equipment, not elsewhere classified, with an applicable size standard of 1000 employees. [2] This is Petitioner's second appeal in connection with its request for certification as a Small Disadvantaged Business (SDB). 13 C.F.R. Section 124.1008(a). A. Procedural History On or about February 5, 1999, Petitioner applied to the Small Business Administration's (SBA or Agency) Acting Assistant Administrator for Small Disadvantaged Business Certification and Eligibility (AA/SDBCE) for certification as a SDB. On October 27, 1999, the AA/SDBCE denied Petitioner's application (First Denial). On December 9, 1999, Petitioner appealed the First Denial. On May 23, 2000, the SBA amended its regulations to permit an unsuccessful SDB applicant to request reconsideration and present additional evidence to overcome the reasons for denial of its application. 65 Fed. Reg. 33249, 33250. On June 30, 2000, the parties jointly moved to dismiss the appeal to allow Petitioner to request reconsideration. On July 5, 2000, the Administrative Law Judge granted the motion and dismissed the appeal. Matter of V & M Precision Machining and Grinding, SBA No. SDBA-145 (2000). On September 12, 2000, a member of the AA/SDBCE's staff told Petitioner how to request reconsideration. On October 2, 2000, Petitioner, through counsel, requested reconsideration, and on October 3, 2000, forwarded its evidence on reconsideration. On March 9, and April 19, 2001, Petitioner's counsel wrote and demanded action on Petitioner's request for reconsideration. On August 8, 2001, the AA/SDBCE reconsidered Petitioner's application, but again denied it (Second Denial). 1. Petitioner's Application Petitioner based its claim of SDB eligibility on its President, Christina Perez - Verbeek (Ms. Verbeek), who is Hispanic, and the granddaughter of Borgert Vedder. Ms. Verbeek stated that she owned 100% of all voting stock. For "officers, directors, and key managers and the hours devoted" to managing Petitioner, Ms. Verbeek listed herself as President, 40 hours per week; Donna Perez as Secretary, 12 hours per year; and Manuel Perez as Vice President, 12 hours per year. Petitioner submitted resumes of Ms. Verbeek, Donna Perez, and Manuel Perez. Ms. Verbeek's resume shows she majored in business administration and sociology; has 9 years of work experience, 7 of them in bookkeeping, accounting, payroll, and human resource benefit administration as an accounting and human resources manager for SC Hydraulic Engineering Corporation (SC Hydraulic); and has been Petitioner's president since 1999. Manuel Perez's resume shows he attended school for 12 years; has 42 years of work experience, 21 of them managing all aspects of a machining business as Petitioner's president; and now serves as a director of Petitioner, having retired as its president and chief executive officer (CEO) in 1998. Donna Perez's resume shows she has a BS in chemistry; has 33 years of work experience, 19 of them managing all aspects of a manufacturing business and 9 of them as president and CEO of SC Hydraulic, a hydraulic and pneumatic air driven pump manufacturing company; and now serves both as a director of Petitioner and president and CEO of SC Hydraulic. Petitioner also provided a commercial lease agreement (Lease). The Lease shows that Manuel and Donna Perez, owners of the Columbia Street Address, agreed to rent it to Petitioner. 2. First Denial The AA/SDBCE denied Petitioner's application because she found a non-disadvantaged individual or entity controlled or had the power to control Petitioner. The AA/SDBCE based her finding on the following grounds: (1) Ms. Verbeek lacked the managerial experience required to run Petitioner; and (2) Petitioner was so dependent on non-disadvantaged individuals that it could not exercise independent business judgment without great economic risk. As to ground (1), the AA/SDBCE stated that SDB regulations "require that disadvantaged individuals managing the concern have managerial experience of the extent and complexity needed to run the concern." The AA/SDBCE concluded that Ms. Verbeek's experience in personnel, accounting, and general office operations showed she was unable to "exercise the managerial and supervisory control needed to run" Petitioner. By contrast, she continued, Manuel and Donna Perez, with 21 and 19 years, respectively, of management experience in all aspects of the machining and grinding industry, possessed "all of the technical experience in the machining and grinding industry." As to ground (2), the AA/SDBCE stated that, under the SDB regulations, "business relationships cannot exist with non- disadvantaged individuals, which cause such dependence that independent business judgment cannot be exercised without great economic risk." Noting that Petitioner's building was "owned by non-disadvantaged members of the Board of Directors," the AA/SDBCE concluded that "the non- disadvantaged individuals control or have the potential to control the day-to-day management of the firm." The AA/SDBCE concluded that, though Ms. Verbeek owned the stock and held the position of president, the evidence of record did not support a finding that she could control Petitioner as required. Because, at the time of the First Denial, the regulation did not permit reconsideration, the AA/SDBCE advised Petitioner only of its appeal rights. However, after dismissal of Petitioner's appeal, a member of the AA/SDBCE's staff later sent Petitioner a memorandum via telecopier, instructing it to "request reconsideration of your SDB application & send any information to refute our stated reasons for decline in our 10/27/1999 letter to you." 3. Petitioner's Request for Reconsideration On reconsideration, Petitioner submitted affidavits by Ms. Verbeek and several employees of the concern. As to ground (1), Petitioner argued that Ms. Verbeek has the training and experience required to run Petitioner; as shown by her academic business training, her experience in managing SC Hydraulic for several years before taking control of Petitioner; and her familiarity with the machining and grinding business, gained through being involved with the concern since she was a small child, or "growing up with the business." Moreover, ownership and control are exercised only by Ms. Verbeek, not Manuel and Donna Perez, who are retired and have ceded "full ownership and control" of Petitioner to Ms. Verbeek and do not actively participate in, or receive compensation from, Petitioner. Regarding Ms. Verbeek's business training, Petitioner presented Ms. Verbeek's resume, which states that, from 1990 to 1996, she majored in business administration and sociology at Fullerton College. As to Ms. Verbeek's management of SC Hydraulic, her resume states that, from 1993 to present, she has been general manager (accounting and human resources), making all major administrative decisions and solving key accounting, administrative and human resource problems; supervising three employees; and administering all benefit plans. To support her claim of ownership and control, Ms. Verbeek stated that, in 1999, her parents, Manuel and Donna Perez, had decided to retire from the business and, confident in her business education, experience with Petitioner, and proven management ability, "transferred sole ownership and operation" of Petitioner to her. Mr. and Ms. Perez are neither officers, board members, nor shareholders of Petitioner, and receive no compensation from Petitioner. Ms. Verbeek has been involved in all phases of Petitioner's operations, such as accounting supervision and analysis; contract negotiation, approval, and payment; human resources, including key employee hiring and benefit plan design; information systems; marketing to improve Petitioner's performance between 1999 and 2000, despite a lack of SDB certification that had cost Petitioner hundreds of thousands of dollars in defense contract revenues; production and manufacturing; and quality assurance. As to ground (2), Petitioner argued that its lease from Mr. and Ms. Donna Perez was mutually beneficial yet terminable by Ms. Verbeek, and thus did not influence Ms. Verbeek's ability to control Petitioner. 4. Second Denial On reconsideration, the AA/SDBCE again denied Petitioner's application, this time relying on three grounds. In addition to finding that Petitioner had not submitted "any new or updated information that would overcome" the grounds stated in the First Denial, (1) lack of requisite management experience to run Petitioner, and (2) undue dependence on non-disadvantaged individuals; the AA/SDBCE found (3) insufficient proof that Ms. Verbeek owned Petitioner. As to ground (1), the AA/SDBCE found that Ms. Verbeek's experience from 1993 to 1999-making administrative decisions and solving accounting, human resources, and administrative problems; supervising three administrative employees; and administering various benefit plans- was not "the management experience necessary to run a multi-million dollar aircraft parts manufacturing business." Second, the AA/SDBCE noted that, though Ms. Verbeek's resume identified her as "General Manager (Accounting and Human Resources)," her 1999 personal Federal tax return identified her as a "bookkeeper." Third, the AA/SDBCE questioned who was managing and running Petitioner during its normal working hours while Ms. Verbeek was performing her extensive duties at SC Hydraulic. As to ground (2), the AA/SDBCE stated that other evidence contradicted Ms. Verbeek's statement that her parents had retired and no longer were owners, directors, officers, or employees of Petitioner. The AA/SDBCE concluded that business relationships with non-disadvantaged individuals existed and caused such dependence that Petitioner could not exercise independent business judgment without great economic risk, citing evidence that Petitioner was affiliated with SC Hydraulic; that Ms. Verbeek was a manager at SC Hydraulic; that Ms. Verbeek's parents once owned and operated Petitioner and still owned and remained active in SC Hydraulic; and that Petitioner leased space from Ms. Verbeek's parents at SC Hydraulic's premises. In addition, The AA/SDBCE stated that because Ms. Vedder was general manager of SC Hydraulic, she could not be working full-time on Petitioner's business during normal working hours. Further, because the AA/SDBCE concluded she could not establish what share of Petitioner's stock Ms. Vedder owned, she could not establish that Ms. Vedder controlled the Board of Directors. Accordingly, the AA/SDBCE concluded Ms Verbeek did not control Petitioner. Further, the AA/SDBCE raised a new ground (3) for finding Petitioner ineligible. The AA/SDBCE found that Ms. Verbeek had not established she owned at least 51% both of voting stock and of all other outstanding stock in Petitioner, based on the documentation Petitioner submitted. B. Proceedings on Appeal On September 20, 2001, Petitioner filed an Appeal Petition with this Office and served it on the SBA. Petitioner attached evidence, some of it new, and added some factual assertions in response to the Second Denial. On September 25, 2001, the Administrative Judge issued a Notice and Order, requiring (1) SBA to file, no later than 45 days after service of the Appeal Petition on the SBA, the Administrative Record (AR), with Vaughn Index [3] and Answer, if any; and (2) Petitioner to file, no later than 10 days after service of the AR and any Vaughn Index, any objections to privilege claims or other omissions from the AR. On November 28, 2001, the Administrative Judge ordered the SBA, no later than December 5, 2001, to show cause to avoid default and to file the AR (Order to Show Cause). On November 30, 2001, the SBA responded to the Order to Show Cause. On December 5, 2001, the Administrative Judge ordered the SBA to file its Answer no later than December 13, 2001. Also on December 5, 2001, the SBA filed and served the AR. SBA withheld certain documents from the AR, claiming deliberative process, attorney-client, and attorney work product privileges. On December 13, 2001, the SBA filed its Answer. Petitioner has not objected to SBA's privilege claims or any other omissions from the AR. 1. Appeal Petition Petitioner asserts the AA/SDBCE erred for the following reasons. As to ground (1), the AA/SDBCE concluded Ms. Verbeek lacked adequate management experience by failing to consider (a) Ms. Verbeek's business training; (b) her familiarity with and participation in Petitioner as she was growing up; (c) that the regulation required, not technical experience, but ultimate managerial and supervisory control over those with the technical expertise; and (d) that she had ultimate authority over all employees, as evidenced by the affidavits submitted on reconsideration. As to ground (2), the AA/SDBCE failed to consider that (a) Petitioner is not affiliated with SC Hydraulic; (b) they are separate companies in unrelated fields; (c) Ms. Verbeek's parents had never owned Petitioner, but her father managed it for many years and both parents served as directors until removed in 1999; (d) Petitioner and SC Hydraulic share the same building but occupy separate spaces; and (e) each concern has its own employees and management, files a separate tax return under a separate tax ID number, and is organized differently from the other. Ms. Perez is SC Hydraulic's owner and full-time president, but Ms. Verbeek manages SC Hydraulic when Ms. Perez is away or ill. As to ground (3), Petitioner submits a letter from counsel asserting Ms. Verbeek is Petitioner's sole owner. 2. New Evidence on Appeal Though Petitioner attaches documents to the Appeal Petition, the only documents not already in the AR are a letter discussing the effect of a Stock Agreement, Petitioner's Brochure, and SC Hydraulic's Brochure. Additionally, Petitioner makes the following factual assertions in response to new factors raised by the SBA in the Second Denial: As to ground (1), Petitioner responds (a) Ms. Verbeek did work as a bookkeeper for several years before 1999, but failed to change the title on the federal tax form; and (b) Ms. Verbeek ran Petitioner full-time and acted as general manager for SC Hydraulic only when Donna Perez was away because of business, vacation, or illness. As to ground (3), Petitioner responds (a) Ms. Verbeek's grandparents, Borgert and Nellie Vedder, owned 100% of Petitioner until 1989, when Borgert died and left Nellie in sole ownership; and (b) Ms. Verbeek's parents served on the board with proxy rights granted to them by her grandparents until her parents were removed from the board in 1999. Petitioner does not argue how manifest injustice would occur if the Administrative Judge were to limit the appeal to the AR. 3. Answer SBA asserts the AA/SDBCE reasonably determined that the individual upon whom Petitioner based its eligibility did not establish she had the managerial experience of the extent and complexity needed to run Petitioner. SBA asserts: Ms. Verbeek's "previous management experience is not the type of experience necessary to run a multi-million dollar aircraft parts manufacturing business." The SBA makes no argument in support of either ground (2), undue dependence on non-disadvantaged individuals; or ground (3), insufficient proof that Ms. Verbeek owned Petitioner. As to ground (1), the SBA argues that the AA/SDBCE reasonably concluded Ms. Verbeek lacked adequate management experience of the extent and complexity necessary to run Petitioner, because: (a) The affidavits showing Ms. Verbeek makes final decisions, has problem-solving and leadership skills, and actively participates in Petitioner's management do not establish adequate management experience, because her past supervisory experience extended only to three administrative employees, and her experience does not demonstrate an ability to supervise managers with extensive technical experience as she does at V&M. (b) Ms. Verbeek's "growing up with the company" is not the same as experience in a working position. (c) Petitioner's financial success does not establish that Ms. Verbeek herself has the ability to manage the firm. (d) Ms. Verbeek's role in approving major purchases and signing checks is merely a ministerial function that does not demonstrate management skills. (e) Ms. Verbeek's statements that the Perezes are no longer involved in Petitioner and cannot control Petitioner through the lease agreement do not establish management experience on Ms. Verbeek's part. (f) Ms. Verbeek's managerial experience consisted merely of making administrative decisions and solving accounting, human resources, and administrative problems, and does not rise to the level of experience necessary to run a machining and grinding manufacturing business. (g) Ms. Verbeek's college experience, which, because she attended college at the same time she was managing at SC Hydraulic, detracts from her assertions she was engaged in full-time management of Petitioner. (h) Ms. Verbeek's claimed experience as a general manager at SC Hydraulic is belied by her self- identification as a bookkeeper. SBA further asserts that there are statements in the Appeal Petition which contradict Ms. Verbeek's affidavit, and thus calls her credibility into question. SBA does not identify these statements. Consequently, SBA argues, the Administrative Judge should either affirm the Second Denial based on ground (1) or remand for a second reconsideration of Petitioner's application based on the grounds first stated in the Second Denial. II. DISCUSSION A. Timeliness The Administrative Judge first concludes Petitioner's Appeal Petition, filed within 45 days after the SBA served its decision denying SDB certification, is timely. 13 C.F.R. Sections 134.202(a), 134.204(e)(1). B. SBA's Claim of Privilege The Agency submits a claim of privilege under the deliberative process privilege as to the Business Opportunity Specialist's analysis of Petitioner's application, and the attorney-client and attorney work product privilege as to legal opinions on Petitioner's application. Petitioner does not object to these claims of privilege, and the Administrative Judge finds, after an in camera inspection of the documents, that they fall within the claimed privileges and GRANTS the Agency's claim of privilege. C. Petitioner's Proffer of New Evidence Petitioner makes no argument supporting consideration of the new evidence. The Administrative Judge's review on appeal of an SDB determination is limited to the record before the AA/SDBCE at the time of her decision. 13 C.F.R. Section 124.1008(f)(4)(ii). The Administrative Judge may not consider any new evidence unless he determines that manifest injustice would occur if the appeal were limited to the record. Id. This Office has defined "manifest injustice" as a case where failure to admit the evidence would be clearly wrong and result in substantial prejudice to the Petitioner, such as would shock the judicial conscience. Matter of Aero CNC, Inc., SBA No. SDBA-106, at 6 (1999). Accordingly, the Administrative Judge EXCLUDES Petitioner's proffered new evidence. D. Merits of the Appeal Turning to consideration of the reasons the AA/SDBCE articulated for declining Petitioner's application, the Administrative Judge notes that an applicant for SDB certification has the burden of demonstrating that socially and economically disadvantaged individuals own and control the firm. 13 C.F.R. Sections 124.1001(b), 124.1008(c)(2). SBA has detailed the ownership and control requirements in 13 C.F.R. part 124, subpart A. [4] In determining whether the applicant firm has met its burden (13 C.F.R. Section 124.1008(f)(1)), the AA/SDBCE must examine the relevant data and articulate a satisfactory explanation for its action, including a "rational connection between the facts found and the choice made." Matter of IRECOR, Inc., SBA No. SDBA-104, at 5 (1999). In considering an Appeal Petition, this Office reviews the AA/SDBCE's determination. This Office's standard of review is whether the record demonstrates the determination was "arbitrary, capricious, or contrary to law." 13 C.F.R. Section 124.1008(f)(4)(ii). The scope of review under the "arbitrary and capricious" standard is narrow, and this Office cannot substitute its judgment for that of the AA/SDBCE. Aero CNC, supra at 7. This Office must consider whether the AA/SDBCE's decision "was based on a consideration of the relevant factors and whether there has been a clear error of judgment." IRECOR, supra at 5. In denying Petitioner's application for lack of control by a disadvantaged person, SBA relied on three independent grounds: (1) Lack of requisite management experience; (2) undue dependence on non-disadvantaged individuals; and (3) insufficient proof that Ms. Verbeek owned Petitioner. Regarding lack of requisite management experience, the regulation provides: Control is not the same as ownership, although both may reside in the same person. SBA regards control as including both strategic policy setting exercised by boards of directors and the day-to-day management and administration of business operations. ... Disadvantaged individuals managing the concern must have managerial experience of the extent and complexity needed to run the concern. 13 C.F.R. Section 124.106. This Office's controlling precedent on the issue of management expertise by the disadvantaged individual is Matter of T&K Painting Contractors, Inc., SBA No. SDBA-122, at 5 (2000). In T&K, this Office adopted, from its case law developed in 8(a) eligibility appeals, [5] a four-factor analysis to analyze whether the disadvantaged individual possessed "managerial or technical experience and competency" to control the applicant concern. The four factors are (1) the characteristics of the applicant concern; (2) the disadvantaged individual's education and employment history, including supervisory experience, as opposed to that of the nondisadvantaged individuals involved in the firm's management; (3) the disadvantaged individual's role at the applicant concern; and (4) the extent of nondisadvantaged individuals' involvement in the operations of the applicant concern. Here, Petitioner is a highly technical manufacturing enterprise in the aerospace industry. Petitioner has demonstrated that, as to Ms. Verbeek's education and employment, she has an undergraduate business degree, and has "grown up around the business." Due to this experience, she asserts she is familiar with both the manufacturing and administrative operations of the business. Further, Ms. Verbeek has experience with SC Hydraulic. However, the character of this experience is not altogether clear. Petitioner's initial submission characterizes it as Accounting and Human Resources Manager of SC Hydraulic, from 1993 to present, and currently President of the firm. This time period overlaps with the time taken to complete her degree, 1990 to 1996. She states that, after college, she supervised three employees, and made all the major decisions at SC Hydraulic. However, in the Appeal Petition, Ms. Verbeek says "the statements about me being the General Manager of SDC Hydraulic may have been misleading." Her mother, Ms. Perez, is President and owner of SC Hydraulic, and Ms. Verbeek assumed a leadership role a SC Hydraulic while Ms. Perez was ill or traveling. Petitioner also asserts in the Appeal Petition that SC Hydraulic and Petitioner are separate companies with nonrelated functions. Ms. Verbeek's role in Petitioner is President of the firm, as she has been since 1999, shortly before Petitioner's initial application. Her parents, Mr. and Ms. Perez, nondisadvantaged individuals, now state they each only serve as Directors of the firm, and do not spend much time there, after having previously owned the firm and effected a "generational transfer" to their daughter. Ms. Perez remains in charge of SC Hydraulic at the same address, and they are Petitioner's landlords. Thus, the AA/SDBCE had before her an individual upon whom the claim of eligibility was based whose main claim to the requisite management expertise to run this business with annual sales well into seven figures are a bachelor's business degree, "growing up with" the firm, and running another, three-person firm in an unrelated business for eight years, while going to college for three of those years. She described herself in her tax returns filed during this time as a "bookkeeper." She continues to participate in the management of the other firm. Further, she took over Petitioner not long before it applied to an SDB. In addition, the nondisadvantaged former owners, with over twenty years of experience, remain involved with the firm. Ms. Verbeek's experience was thus not extensive, was with a firm in a different line of business, and was dwarfed by that of her nondisadvantaged parents, who remain involved. The AA/SDBCE was thus not arbitrary and capricious in concluding that this was not sufficient management expertise to run Petitioner, given this Office's precedents. Arteaga Construction, supra at 6-7; Matter of SS Medical, Inc., SBA No. MSB-602, at 7-8 (1998); T&K Painting, supra at 5. Further, while the Administrative Judge may view this as a harsh decision by the AA/SDBCE, given the record submitted by Petitioner, this is not grounds for finding the decision arbitrary and capricious. Matter of Paragon Dynamics, Inc., SBA No. MSB-486, at 16-18 (1994). The AA/SDBCE's conclusion is, if anything, reinforced by Petitioner's pleadings, which cast doubt on just what role Ms. Verbeek played, and continues to play, at SC Hydraulic, by emphasizing Ms. Perez's role at that firm, and minimizing that of Ms. Verbeek. Accordingly, the Administrative Judge concludes that the AA/SDBCE's determination was not arbitrary, capricious, or contrary to law, but, instead, was based on the specific regulatory requirement that the disadvantaged individual upon whom the applicant firm's claim of eligibility is based actually controls the firm. When the SBA bases its determination to deny an SDB application on two or more independent grounds, and at least one ground is reasonable, the SBA's determination cannot be found arbitrary, capricious, or contrary to law. Matter of Escoe/Bliss Communication, SBA No. SDBA-126 at 6 (2000); Matter of ID Systems, Inc., SBA No. SDBA-114, at 7 (1999). Therefore, because this issue is dispositive, the Administrative Judge need not consider the other grounds for decline. III. CONCLUSION Because the Administrative Judge concludes the AA/SDBCE's determination was not arbitrary, capricious, or contrary to law, he AFFIRMS the SBA Determination and DENIES the Appeal Petition. This is the initial decision of the SBA. Absent a request for review, this decision will become the SBA's final decision 30 days after today. 13 C.F.R. Sections 134.227(b), 134.228(a). ___________________________________ ______ CHRISTOPHER HOLLEMAN Administrative Judge _________________________ 1 The North American Industry Classification System (NAICS) has replaced the SIC system as the basis for SBA's small business size standards, 65 Fed. Reg. 30836, 30838 (May 15, 2000) (stating that all small business programs would employ NAICS-based size standards on and after October 1, 2000); 13 C.F.R. Section 121.201. Because Petitioner applied for SDB certification before the effective date of the NAICS-based size standards, it did not state a primary NAICS code. 2 Small Business Administration, Table, Small Business Size Standards Matched to SIC Codes, available at http://www.sba.gov/regulations/siccodes (last modified July 21, 2000); accord, 13 C.F.R. Section 121.201 (2000). 3 Vaughn v. Rosen, 484 F.2d 820 (D.C. Cir. 1973), cert. denied, 415 U.S. 977 (1974). 4 The SDB program has adopted the 8(a) eligibility criteria. 13 C.F.R. Sections 124.106, 124.1002(a), 124.1008(d); Matter of Trisha Koch & Associates, SBA No. SDBA-113, at 4 (1999). 5 Matter of Arteaga Construction, Inc., SBA No. MSB- 584, at 5 (1997); accord, Matter of Applied Quality Communications, Inc., SBA No. 433, at 1 (1993). Posted: July, 2002