In early 2018, the US Department of Veterans Affairs proposed a set of amendments to its Veteran-Owned Small Business (VOSB) and Service-Disabled Veteran-Owned Small Business (SDVOSB) Verification Guidelines. The final rule, effective Oct. 1, 2018, implements the National Defense Authorization Act (NDAA) for Fiscal Year 2017, which shifted VOSB verification to the Small Business Administration (SBA). The changes will create better alignment and clarity for VOSBs and simplify verification issues governing ownership and control of a business.
Historically, the SBA’s regulations regarding ownership and control have been more strictly enforced compared with the VA’s requirements. As a result, a VOSB could meet the standards under the VA eligibility guidelines but fall short of those required by the SBA. Now, by matching the VA’s guidelines with the SBA’s eligibility rules under 13 CFR part 125, VOSBs and SDVOSBs should have a clearer path towards ensuring their compliance under both authorities.
The following are some of the key features of interest for VOSB and SDVOSB contractors:
- Change of ownership. A participant may remain eligible after a change in its ownership or business structure provided one or more veterans owns and controls it after the change. The participant must file an updated VA Form 0877 and supporting documentation identifying the new veteran owners or the new business interest within 30 days of the change. Contractors must file an updated VA Form 0877 with the Center for Veterans Enterprise (CVE) within 60 days of a change of ownership that results from death or incapacity. Existing contracts may be performed to the end of the instant term. However, no options may be exercised. Continued eligibility of the participant with new ownership requires that CVE verify that all eligibility requirements are met by the concern and the new owners.
- Protests. The revised guidelines remove the reconsideration process and vest jurisdiction exclusively before the SBA’s OHA.
- Good character and financial responsibility. Section 74.2(b) requires all individuals having an ownership or control interest in verified businesses to have good character. That means debarred or suspended concerns or concerns owned or controlled by debarred or suspended persons are ineligible for VIP Verification. In addition, concerns owned or controlled by an individual who is currently incarcerated, or on parole or probation are ineligible for VIP Verification. Concerns owned or controlled by a person who is formally convicted of a crime set forth in 48 CFR 9.406-2(b)(3) are also ineligible for VIP Verification during the pendency of any subsequent legal proceedings. Per this provision, the CVE can immediately remove a formerly verified eligible participant. Similarly, an applicant firm/eligible individuals cannot be eligible for VIP Verification if they are behind on significant financial obligations, including federal student loans, unresolved tax liens or defaults on any other federal, state, or government assisted financing. A participant will not be eligible, and CVE can remove the participant from the VIP database.
- False Statements. The CVE can immediately remove a formerly verified eligible participant if they determine that the applicant submitted any false information (and, it seems, “regardless of whether correct information was given to CVE in accompanying documents”).
- Bankruptcy. Should a VOSB enter into bankruptcy, the participant must inform the CVE of the filing event within 30 days.
The SBA is also undergoing an update to its eligibility rules, with new regulations proposed in January 2018. The comment period has closed and contractors should keep an eye out for the SBA’s publication of its final rules in the months to come.
Please contact me at Shiva.Hamidinia@oflaw.com with questions or for additional information. I may also be reached by phone at 703-218-2155.