Breaking: SBA Issues Veteran-Owned Certification Rules, Will Eliminate SDVOSB Self-Certification

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The SBA has issued its draft rules on how it will go about certifying Veteran-Owned Small Businesses (VOSBs) and Service-Disabled, Veteran-Owned Small Businesses (SDVOSBs). Below, we highlight some of the main components of these rules. The changes stem from Congress’s requirement in the 2021 NDAA to to eliminate SDVOSB self-certification and adopt a government-wide SDVOSB certification requirement, while transferring control of the certification process from the VA to the SBA. For the most part, SBA has taken a simple approach, combining its existing rules on eligibility with much of the application procedures from VA. But the details do matter, and below we’ll walk through some of them.

SBA issued its proposed rule on July 6, with comments due August 5, 2022. So, if you have questions about the process, be sure to send your comments to SBA.

SBA will take over veteran-owned certifications on as of January 1, 2023 (the Transfer Date) and, for those self-certified SDVOSBS out there (and I’m sure there are a lot), those companies “that submit an application within the one-year grace period will maintain eligibility until SBA makes a final eligibility decision.” So, better mark December 31, 2023 on your calendars as the date to apply for certification if you are a self-certified SDVOSB.

Key Aspects

Here are some of the key aspects of the proposed rule:

  • SBA is establishing a Veterans Certification Program (Vets Program) to handle the required certifications for SDVOSBs and VOSBs. SBA will house the Veterans Certification Program rules in a new 13 CFR part 128.
  • SBA will grant reciprocity to participants in the 8(a) Program and Women-Owned Small Business (WOSB) program that are owned and controlled by veterans or service-disabled veterans.
  • Firms certified with the VA CVE program will continue to be certified for the remainder of the 3-year eligibility term. SBA generally adopted the procedures that the VA had used for application guidelines, rules on continuing eligibility, program examinations, and program exit procedures.
  • Generally, the eligibility rules would be similar to the SDVOSB ownership and control rules that currently exist in SBA’s rules.
  • “SBA has not established the policies and procedures for application processing at this time.” Those details will be released in a future rule.

Noteworthy Changes

There are some interesting changes from how things worked under the CVE verification process.

  1. Size of Firms. Firms can qualify if they are small for any NAICS code under which it currently conducts business activities, not just a primary NAICS code, but SBA is still working on how to define what “currently conducts business activities” means.
  2. Self-Certification for Limited Purposes? For the limited purpose of counting agency’s SDVOSB goals, a firm may still self-certify. SBA states: “a self-certified SDVO SBC may be awarded a small business set-aside and the agency may count the award as both a small business and SDVO SBC toward the agency’s goals.”
  3. Parole Removal. SBA “proposes to eliminate consideration of whether an individual who is currently incarcerated, or on parole or probation owns or controls an applicant concern” as being a responsibility issue. Therefore, the good character review would be limited to whether a company was debarred or suspended.
  4. Rebuttable Presumptions? Interestingly, SBA is requesting comments on the so-called rebuttable presumptions and whether they should be amended. For instance, there is a “rebuttable presumption that non-service-disabled veteran individuals or entities control” an SDVOSB if the “non-service-disabled veteran individual or entity who is involved in the management or ownership of the firm is a current or former employer or a principal of a current or former employer of any service-disabled veteran individual.” 13 CFR 125.13.

Those are some of the major points from SBA’s proposed rule on SDVOSB and VOSB certification. We’ll keep you up to date as new developments on this important change come out.

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