Government Contracts Monitor

Right of First Refusal No Longer Grounds for Rejecting VOSB Eligibility

April 3, 2013

By: Eric Whytsell

According to recent testimony by Tom Leney, Executive Director of the Department of Veterans Affairs (VA) Office of Small and Disadvantaged Business (OSDBU), the VA will no longer consider “transfer restrictions that are part of normal commercial dealings, such as the right of first refusal, do not material affect the ability of a Veteran to unconditionally own and control the business” and, therefore, effective March 6, 2013, the VA shall no longer interpret [38 C.F.R. 74.4(f)] to mean that such restrictions constitute a reason for denying eligibility.”

The testimony was part of a joint hearing entitled, “Consistently Inconsistent: Challenges for Service-Disabled Veteran-Owned Small Businesses,” before the House Veterans Affairs Committee Subcommittee on Oversight and Investigations and the House Small Business Committee Subcommittee on Contracting and Workforce.  In general, witnesses and lawmakers both expressed support for Congressional efforts to resolve several discrepancies between the implementation of VOSB programs by the VA and the Small Business Administration (SBA).

Mr. Leney’s announcement of a new approach by VA with respect to ownership and control determinations came within his broader explanation of ongoing efforts by the VA to review its approach to verification and, where appropriate, make changes to better align the VA and SBA programs.  He also described an anticipated Advance Notice of Proposed Rulemaking based on the VA’s engagement with a variety of stakeholders concerning potential changes, but did not provide an expected issuance date.

Only time will tell whether and to what extent the VA is able to remedy the problematic aspects of its VOSB verification program.  In the meantime, however, at least we have the VA OSDBU’s commitment that rights of first refusal and similar standard commercial terms will not derail a veteran’s application.

 

Eric Whytsell is the attorney responsible for the content of this article