September 24, 2018

BREAKING: The VA Issues a Final Rule Amending Its Veteran-Owned Small Business Guidelines

Holland & Knight Government Contracts Blog
Amy L. Fuentes

More than eight months after issuing its proposed rules, the U.S. Department of Veterans Affairs (VA) has finally issued the long awaited final rule amending its Veteran-Owned Small Business Guidelines. The final rule amends regulations related to the VA’s Veteran-Owned Small Business (VOSB) verification program and implements the National Defense Authorization Act for Fiscal Year 2017 (NDAA). Notably, the final rule implements the NDAA by referencing U.S. Small Business Administration (SBA)'s regulations governing ownership and control and also adds and clarifies certain terms and references that are currently part of the VA’s verification process. These substantive rules are effective Oct. 1, 2018—the same date the SBA’s Office of Hearings and Appeals (OHA) appeal rules are also anticipated to become effective. Because the final rule suggests that SBA’s corresponding substantive amendments will also be effective Oct. 1, 2018, we expect SBA’s final rule on ownership and control to be released soon.

The VA’s final rule does not significantly stray from the proposed rules. Below are some of the significant changes in the final rule:

  • The VA’s new regulations generally refer to SBA’s regulations. This means that the VA’s regulations will be immediately updated when the SBA updates its regulations. This could be great news for contractors because it will ensure consistency between for the ownership and control regulations.
  • The VA’s final rule clarifies the timing and procedure for a contractor to become a verified veteran-owned small business. The VA is expected to complete a verification review within 90 days from “registering an application,” which is the initiation of the verification or reverification application.
  • As part of the consolidation, the VA has removed its stated requirements for joint ventures and provided that it adopts the SBA’s regulations at 13 CFR Part 125. This change will resolve any lingering inconsistencies regarding how profit must be allocated. The final rule also requires that joint ventures be in the form of a separate legal entity.
  • The VA’s final rule strengthens and expands the reasons for removal from the Vendor Information Pages (VIP) database, which now includes having tax liens or unresolved debts. The final rule also requires that contractors are immediately removed from the VIP database for submitting false information, as well as the debarment of any individual owning or controlling the business concern. Notably, the VA rejected comments calling to align this process with SBA’s 8(a) program to provide for a review on a case-by-case basis. The VA also clarified that the standard for reviewing a VOSB’s eligibility is the “totality of the circumstances,” with the burden of proving eligibility on the applicant. Finally, bankruptcy is added as a changed circumstance that can lead to a contractor’s removal from the VIP database. 
  • The VA’s final rule also clarifies and amends a 30-day time period for submission of a new application after a contractor experiences a change in ownership. The final rule also makes clear that a new application should be filed with the VA and not with the contracting officer.
  • The VA’s final rule expands and consolidates the list required documentation routinely requested by the VA’s Center for Veterans Enterprise (CVE) into one location. The final rule also clarifies that if a document on the required documentation list is not relevant to a particular application, the VA will accept letters of explanation that explain why the documents or information are unavailable.
  • The VA rejected a call for an appeals process for overreaching documents requests outside of an appeal of a final determination.
  • The final rule updates the appeals procedure, including removing the reconsideration process, as those processes will be moved to the SBA’s OHA starting Oct. 1, 2018.

With the publication of its final rule, contractors are one step closer to having consistent rules for ownership and control applied by the VA and SBA. Holland & Knight’s Government Contracts Group will be watching for the SBA’s corresponding ownership and control regulations and will provide further updates once these are published. 

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