SDVOSB Eligibility Update: SBA Issues New Rule

Earlier this week, Steve updated SmallGovCon readers on a very important SDVOSB eligibility change: beginning October 1, the VA will begin using the SBA’s eligibility rules to verify SDVOSBs and VOSBs.

The SBA has now followed suit—in a final rule published today, the SBA has amended its eligibility rules for SDVOSBs. These rules provide important clarity into SDVOSB eligibility going forward.

Let’s take a look at some of the most important changes.

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VA Will Use SBA SDVOSB Eligibility Rules Starting October 1, 2018

The VA will begin using the SBA’s eligibility rules to verify SDVOSBs and VOSBs beginning October 1, 2018.

In a final rule published today in the Federal Register, the VA confirms that the SBA’s eligibility requirements will apply beginning next week–but in my eyes, one very important question remains unanswered.

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SBA Proposes Consolidated SDVOSB Eligibility Rules

The SBA has released its proposed consolidated rule for SDVOSB eligibility, which was published in the Federal Register today.  Once the rule becomes final, it will apply government-wide, to both VA and non-VA SDVOSB contracts.

For SDVOSBs, a uniform set of rules is a very good thing.  There has been far too much chaos and confusion under the current system, in which the SBA and VA have different SDVOSB eligibility requirements.  But how about the substance of the proposal itself?  Well, there are certainly some things to like–and some areas that could use improvement.

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VA Proposes Expanded “Good Character” SDVOSB Exclusions

The VA has proposed expanding its definition of the “good character” required to own or control an SDVOSB or VOSB.

The VA’s proposed rule would exclude many people convicted of felonies (including felonies unrelated to business integrity), which may raise questions about the rule’s fairness.  And I have to wonder–is the VA’s proposal consistent with the Congressional directive requiring the VA to use the SBA’s SDVOSB eligibility rules?

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VA Proposes Elimination of SDVOSB Ownership & Control Rules

The VA has formally proposed to eliminate its SDVOSB and VOSB ownership and control regulations.

Once the proposed change is finalized, the VA will use the SBA’s regulations to evaluate SDVOSB and VOSB eligibility, as required by the 2017 National Defense Authorization Act.

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VA CVE Unreasonably Decertified SDVOSB, Court Rules

The VA Center for Verification and Evaluation unreasonably decertified an SDVOSB based on the results of an SBA SDVOSB decision.

According to the U.S. Court of Federal Claims, it was improper for the VA to remove the SDVOSB from the VA’s database without evaluating whether the SBA’s determination was consistent with the VA’s separate SDVOSB requirements.

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Court Upholds “Draconian and Perverse” SBA SDVOSB Ownership Rules

The SBA’s strict SDVOSB ownership rules can produce “draconian and perverse” results, but are nonetheless legal, according to a federal judge.

In a recent decision, the U.S. Court of Federal Claims condemned the SBA’s SDVOSB unconditional ownership requirements, while holding that the SBA was within its legal rights to impose those requirements on the company in question.

The Court’s decision emphasizes the important differences between the SBA and VA SDVOSB programs, because the Court held that although the company in question didn’t qualify as an SDVOSB under the SBA’s strict rules, it was eligible for VA SDVOSB verification under the VA’s separate eligibility rules.

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