Government Contracts Monitor

VA Invites Comments to Improve the Veteran-Owned Small Business Verification Program

June 10, 2013

The Department of Veterans Affairs Office of Small and Disadvantaged Business Utilization (“OSDBU”) is currently reviewing its regulations governing the VA’s Veteran-Owned Small Business (“VOSB”) Program, and is inviting comments, by July 12, 2013, as to “any issue related to improving these specific regulations and the program.”  See Advance Notice of Proposed Rulemaking (“ANPRM”), VA Veteran-Owned Small Business (VOSB) Verification Guidelines, 78 Fed. Reg. 27882 (May 13, 2013) (emphasis added).

The subject regulations are found at 38 C.F.R. Part 74, and lay out the criteria for determining a firm’s eligibility to participate in VA’s Veterans First Contracting Program.  That Program provides set-aside and sole source authority placing service-disabled veteran-owned small businesses (“SDVOSBs”) and VOSBs as first and second priority in VA acquisitions from commercial sources under the Federal Acquisition Regulation (“FAR”) (other than Federal Supply Schedule purchases).  VA’s Veterans First Contracting Program does not apply to other agencies.

VA’s regulations were first published on February 8, 2010 (75 Fed. Reg. 6101), and were most recently amended on January 19, 2011 (76 Fed. Reg. 3022).  These regulations were developed using the Small Business Administration’s (“SBA’s”) regulations governing the Government-wide SDVOSB Program (13 C.F.R. Part 125) and the 8(a) Business Development Program (13 C.F.R. Part 124) for guidance generally with respect to Federal small business set-aside programs that involve agency verifications. However, VA’s regulations vary from the referenced SBA models in various regards, as well as in their interpretation and application by VA.

As OSDBU acknowledges in the ANPRM, VA’s Verification Program has been under attack from all sides.  The Government Accountability Office (“GAO”) and VA Inspector General’s Office both have issued reports stating that, despite the Verification Program, fraud still exists in the Vets First Contracting Program.  At the same time, stakeholders have complained “that the current regulations . . . are too open to interpretation and are unnecessarily more rigorous than similar certification programs run by SBA.”  78 Fed. Reg. 27882.  OSDBU states that “VA seeks to find an appropriate balance between preventing fraud . . . and providing a process that would make it easier for VOSBs to become verified.”  Id.

OSDBU states that it “intends to improve the regulations [1] to provide greater clarity, [2] to streamline the program, and [3] to encourage more VOSBs to apply for verification.”  Id.  OSDBU further states that “[i]n addition to regulatory improvements, VA is also committed to making the verification process more efficient and less burdensome[,] and creating greater clarity by providing improved training tools.”  Id.

The ANPRM states that VA has already collected suggestions from “a wide range of sources for changes to the regulations,” and has compiled them into a single document available here.  OSDBU invites comments on “any issue relating to improving these specific regulations and the program,” including, but not limited to, the “ideas offered in th[e foregoing] compilation document, as well as the following [specific eight] questions”:

1. What could be changed to improve the clarity of the regulations?  Where might bright lines be drawn to more clearly indicate compliance with the regulations and reduce potential for misinterpretation?  Where might the addition of bright line tests create unintended consequences?
2. It has been suggested that VA should develop a list that would clearly delineate what constitutes ownership and control[,] and what constitutes lack of control or ownership.  Should a list like this be included in the rule, and if so, what should be on the list? Are there changes to VA’s regulations that could be made to reduce the economic impact on VOSBs?
3. Are there changes to VA Form 0877 (application) that could streamline the process? What verification process improvements could help to increase efficiency and reduce burden for VOSBs?
4. What additional training tools or assistance might be offered to create more clarity for stakeholders and help them more efficiently and effectively navigate the verification regulations?
5. What documents, records, or other materials could the Office for the Center for Veterans enterprise use to distinguish legitimate VOSBs/SDVOSBs from businesses that fraudulently seek contracts from the Government?
6. Would a special Hotline to report suspected ineligible VOSBs/SDVOSBs help the Government ensure that contracts are awarded to legitimate VOSBs/SDVOSBs?

This ANPRM provides an excellent opportunity for all those who have been frustrated with the existing regulations and process to play a constructive role in improving the same so that service-disabled and other veterans can more easily obtain the envisioned program benefits, while still precluding program abuse.

 

 

Hopewell Darneille is the attorney responsible for the content of this article.