Reacting to a February federal court decision, the VA’s Center for Veterans Enterprise has reversed its position on provisions restricting the rights of service-disabled veterans to transfer their ownership interests in their service-disabled veteran-owned small businesses.
Previously, the VA CVE had taken the position that any restriction on a service-disabled veteran’s right to transfer his or her interest in the company was improper. Because such transfer restrictions are commonplace, many otherwise-eligible SDVOSBs had their verification applications denied.
No more. In a newsletter to SDVOSBs issued yesterday, the VA CVE stated that it would no longer deny verification based on certain ownership transfer restrictions–and offered an expedited reconsideration process to companies previously denied on this basis.
The VA CVE’s position is welcome news, but doesn’t mean that most SDVOSBs should rush to include transfer restrictions in their bylaws or operating agreements, because the SBA may not agree with the VA CVE’s change of heart.
The VA Center for Veterans Enterprise will soon begin giving some applicants the opportunity to correct problems with their SDVOSB verification applications before denying their applications.
In a letter sent yesterday to a number of SDVOSB advocates, VA OSDBU Executive Director Thomas Leney announced that the VA CVE’s new “pre-determination findings” program will launch on May 1, 2013. If the new program works as intended, it could significantly reduce the number of SDVOSBs requesting reconsideration, lead to quicker verifications, and reduce the backlog of verification applications.
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.
In an important decision impacting many SDVOSB verification applicants, the U.S. Court of Federal Claims has held that the VA’s SDVOSB regulations did not prevent a service-disabled veteran from controlling his company remotely.
In KWV, Inc. v. United States, No. 12-882C (2013), the Court held that a veteran could control his Rhode Island-based construction company by electronic means, even though the veteran spent half of the year residing in Florida.
VA SDVOSB reconsideration requests were approved in 48% of cases resulting in a decision, according to a GAO report released on Monday.
In the lengthy report, which weighs in at 63 pages, the GAO broadly concludes that the VA CVE has made progress when it comes to the verification of SDVOSBs, but has a ways to go in order for the SDVOSB verification process to be quick, effecient and effective.
This broad conclusion is not in the least bit surprising to anyone who has followed the evolution of the VA SDVOSB verification program. However, the report is also packed with a great deal of interesting information about SDVOSB verification at the VA–including statistics on applications, reconsideration success rates, and more.
The VA CVE reconsideration process is an important component of the VA’s SDVOSB verification program–especially in light of news earlier this year that the VA’s Center for Veterans Enterprise is rejecting 60% of new SDVOSB verification applications.
For many companies, SDVOSB verification hinges on a successful VA CVE reconsideration request, but VA CVE reconsideration is often misunderstood. After working with many SDVOSBs to successfully obtain verification through the VA CVE reconsideration process, I have compiled this list of common “Q&As” regarding SDVOSB reconsideration.
SDVOSB protests relating to VA set-aside procurements may only be decided by the VA Office of Small and Disadvantaged Business Utilization. In a recent decision, the SBA Office of Hearings and Appeals confirmed that the SBA currently lacks jurisdiction to decide SDVOSB protests under VA set-aside procurements.