The 2017 National Defense Authorization Act will essentially prevent the VA from developing its own regulations to determine whether a company is a veteran-owned small business.
Yes, you heard me right. If the President signs the current version of the 2017 NDAA into law, the VA will be prohibited from issuing regulations regarding the ownership, control, and size status of an SDVOSB or VOSB–which are, of course, the key components of SDVOSB and VOSB status. Instead, the VA will be required to use regulations developed by the SBA, which will apply to both federal SDVOSB programs: the SBA’s self-certification program and the VA’s verification program.
A contractor has agreed to pay the government $1 million–and to dissolve as an ongoing entity–to resolve allegations that it falsely claimed SDVOSB status in order to receive VA SDVOSB set-aside contracts.
According to a government press release, the settlement comes after VA investigators alleged that the company’s non-veteran partner made all important corporate decisions, while the service-disabled veteran partner spent much of his time away from the company.
Even if the VA Center for Verification and Evaluation has found that a service-disabled veteran “unconditionally” controls a SDVOSB, the SBA may nonetheless determine that other individuals or entities also control the company within the meaning of the SBA’s affiliation rules.
As demonstrated by a recent decision of the SBA’s Office of Hearings and Appeals, VA CVE verification does not shield a SDVOSB from an adverse SBA affiliation determination, even if that determination is based on a finding that non-veterans control the company.
A would-be SDVOSB’s relationships with a company controlled by the SDVOSB’s minority owner undermined the service-disabled veteran’s control–and cost the SDVOSB an Air Force contract.
In a recent decision, the SBA Office of Hearings and Appeals ruled that a SDVOSB did not adequately control his company where the company (and the veteran) appeared to be unduly dependent on an outside firm.
A service-disabled veteran, who owned 80% of this business and served as its highest officer, “controlled” the company within the meaning of the SBA’s SDVOSB regulations, according to a recent decision of the SBA Office of Hearings and Appeals.
SBA OHA’s commonsense decision overturned an earlier SBA determination that the veteran’s majority ownership and officer position did not amount to “control.”
Despite its VA VetBiz verification, a small business was recently found ineligible for a Navy SDVOSB set-aside, in a decision issued by the SBA’s Office of Hearings and Appeals.
The SBA’s decision stands as a warning that SDVOSB verification does not guarantee SDVOSB eligibility–especially when an eligibility protest arises under a non-VA procurement.
As many service-disabled veteran-owned small businesses have discovered, the VA CVE believes that so-called “right of first refusal” provisions prevent veterans from freely selling or transferring their ownership interests. Because such transfer restrictions are commonplace in standard corporate bylaws and operating agreements, countless SDVOSBs have been denied VA CVE verification for including them.
Those days may be over.
In a decision released to the public late last week, the U.S. Court of Federal Claims held that the VA OSDBU had erred by sustaining a SDVOSB eligibility protest on the basis of the company’s right of first refusal provision. That decision, Miles Construction, LLC v. United States, No. 12-597C (2013), also includes other important rulings on the scope of “unconditional” ownership and the VA OSDBU’s evaluation of SDVOSB eligibility protests.