By Pam Racer, PTAC counselor at Western Carolina University
Veteran-Owned Business eligibility requirements are changing. Growing inconsistencies between the processes used by the Small Business Administration (SBA) and Veteran’s Affairs (VA) Veteran Owned Small Business Programs, initiated a push to overhaul the regulations for eligibility of veteran-owned small business (VOSB) and service-disabled veteran owned small business (SDVOSB). In an attempt to “fix” some of the problems, Congress provided a statutory definition of ownership and
control for VOSBs and SDVOSBs as a part of the National Defense Authorization Act of 2017 (NDAA 2017). Sub section 1832 of the NDAA 2017 amends the SBA’s charter (Small Business Act) to include the following definition:
NDAA 2017 § 1832
The term ‘small business concern owned and controlled by service-disabled veterans’ means any of the following:
A small business concern— (i) not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more service-disabled veterans; and (ii) the management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran. (B) A small business concern— (i) not less than 51 percent of which is owned by one or more service-disabled veterans with a disability that is rated by the Secretary of
Veterans Affairs as a permanent and total disability who are unable to manage the daily business operations of such concern; or (ii) in the case of a publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more such veterans.
The NDAA allowed businesses owned and controlled by the surviving spouse of a deceased service disabled veteran as a third category of SDVOSBs. The NDAA further mandated that the SBA would enforce these new definitions and make determinations about whether an SDVOSB met the definitions of ownership and control for both agencies; however, the VA could still verify SDVOSB status.
NDAA 2017 made it clear that the VA should no longer issue regulations related to the status of a small business concern or its ownership. Instead, the terms “small business concern owned and controlled by veterans” and “small business owned and controlled by service-disabled veterans” would be governed by the definitions provided in the Small Business Act. Additionally, NDAA directed that the companies included in the VIP database must be verified using the procedures and regulations issued by the SBA. In a nutshell, all definitions concerning size, ownership, and control, are to fall under the authority of the SBA. Both the SBA and VA have issued rules concerning incorporation of the “uniformed definition” in NDAA 2017. The VA’s proposed changes would eliminate the sections of the VA regulations dealing with VOSB/SDVOSB ownership and control; this would be governed by SBA regulations (giving authority to the SBA on decisions on whether businesses would qualify as an SDVOSB). However, the VA wants to increase requirements for veteran “good character” (38 C.F.R. 74.2(b)). The VA proposes to amend the requirements for any misrepresentation in the materials submitted – even a misrepresentation not material to the verification –may become grounds to deny verification. Also, to prevent verification of any business owner that fails to pay financial obligations to federal or state authorities (possibly disqualifying any business owner who is in arrears on a federally guaranteed student loan). Essentially, making it much harder for an SDVOSB to be verified going forward.
The SBA’s proposed rule makes clear that it, pursuant to the directives in NDAA 2017, plans to issue regulations for “one definition of ownership and control for [VOSB/SDVOSB] concerns, which will apply to the Department of Veterans Affairs in its verification and Vets First Contracting Program procurements and all other government acquisitions which require self-certification”.
When the final regulations are released, it will be important for the PTACs and the VOSB/SDVOSB businesses to become familiar with the new rules.
Speaking of changes: On May 21, 2018, CVE (Center for Verification and Evaluation-formally the Center for Veterans’ Enterprise) will suspended all incoming case applications to facilitate the transition to the new VIP (Vendor Information Pages) interface. Details available at https://www.vip.vetbiz.gov/ (For a more details regarding the changes coming for SBA and VA Overhaul of VOSB/SDOSB Eligibility Requirements, please go to http://www.aptac-us.org/media/SP18-eMagazine.final_.pdf and look for the article by Maria L Panichelli and Michael A Richards.)