The VA CVE has instructed verified SDVOSBs to remove so-called “large NAICS codes” from their VetBiz Vendor Information Pages profiles within 30 days–or else.

According to a recent email from the VA CVE (which was kindly shared with me), SDVOSBs must remove any NAICS codes for which they do not qualify as a small business.  Failing to remove these “large NAICS codes” may result in potentially harsh penalties, including debarment.

The VA CVE’s August 1 email states, in part:

Companies verified in the VetBiz VIP database generally list the NAICS Codes under which they are qualified to provide goods and services. The VetBiz VIP database is restricted to service-disabled Veteran-owned and Veteran-owned small businesses. If any verified company lists one or more NAICS Code(s) on its profile in which it is other than small, the Department of Veterans Affairs, Center for Veterans Enterprise (CVE), is requiring that those NAICS Codes be removed. If such NAICS Codes are not removed, CVE may request the SBA to conduct a formal Size Determination, and CVE may also initiate debarment and/or cancellation proceedings against the company.

After quoting a portion of the SBA’s Standard Operating Procedure for Size Determinations, the VA CVE states: “[t]o fulfill the small business concern requirement found in the regulations, CVE is requesting each company, verified in the VetBiz VIP database, to remove all NAICS Codes in its profile that are other than small within thirty (30) days.”

I agree with the VA CVE that it is important for verified SDVOSBs (and VOSBs) to understand whether they qualify as “small.”  However, the SBA’s size rules are quite a bit more complex than they might appear from the brief Standard Operating Procedure section excerpted in the VA CVE’s email. Indeed, my government contracts book spends two chapters explaining how a small business can determine if it is small (not including a third chapter discussing ostensible subcontractor affiliation).  A SDVOSB undertaking a self-audit of its small business size should be familiar with the SBA’s regulations governing annual receipts or employee count (as appropriate), as well as the affiliation rules under 13 C.F.R. 121.103 and SBA Office of Hearings and Appeals precedent interpreting the size and affiliation rules.

Although I agree that all small government contractors should be aware of whether they qualify as “small” under the NAICS codes in which they operate, I am not sure that the VA CVE’s removal mandate is the best approach.  In my opinion, it would be preferable to simply require that SDVOSBs state whether they are small for each NAICS code listed on their VIP profiles, rather than forcing SDVOSBs to remove all “large” NAICS codes.  A system of this sort, which has long been used in the SBA’s Dynamic Small Business Search, would allow Contracting Officers, large primes and prospective teammates to obtain a fuller sense of a SDVOSB’s capabilities, while still understanding whether or not the SDVOSB is small for each listed NAICS code.

Of course, the VA CVE’s opinion is the only one that counts.  For SDVOSBs, the marching orders are clear: perform an internal size audit, if necessary, and remove all “large” NAICS codes from VetBiz VIP profiles within 30 days–or else.