On January 10, 2018, the VA issued a proposed rule to eliminate its own ownership and control criteria for SDVOSB and VOSB eligibility under the Vets First contracting program, in order to align ownership and control requirements with the SBA’s SDVOSB program regulations. The proposed rule implements Congress’ mandate in the 2017 National Defense Authorization Action (“NDAA”) that the SBA be the sole agency responsible for the establishment of ownership and control requirements governing SDVOSB and VOSB eligibility. 

In an attempt to perhaps simplify the mandate of the 2017 NDAA, the VA proposes to eliminate the six definitions currently found in 38 C.F.R. § 74.1 relating to ownership and control, and instead insert references to the criteria established under the SBA’s regulations found at 13 C.F.R. part 125. The VA has identified for removal the following current definitions: day-to-day management, day-to-day operations, immediate family member, negative control, same or similar line of business, and unconditional ownership. In addition, the VA also proposes to remove one additional definition, VetBiz.gov, to account for anticipated changes to the location of the Vendor Information Pages database.

The VA has also taken the opportunity in the proposed rule to define new terms relevant to the Vets First program and amend other existing definitions, in part to conform and align with the SBA’s regulations. For example, the definition of joint venture would be amended to conform to the amendments made to the SBA’s regulations last year. New references are also included to the SBA’s Office of Hearings and Appeals, which will have jurisdiction over appeals made by applicants regarding initial denials of eligibility on the grounds of ownership and control. 

In addition, the proposed rule incorporates new requirements in the definition of surviving spouse that were outlined in the 2017 NDAA, and further refines CVE verification procedures and the maintenance of the VIP database. 

Although the proposed rule should bring conformity between the VA’s and SBA’s SDVOSB programs regarding ownership and control, it is important to note that the VA’s existing regulations have not been entirely repealed and will continue to govern the VA’s Vets First contracting program. And, under the terms of the 2017 NDAA, the VA and SBA are still required to publish a consolidated version of regulations regarding SDVOSB and VOSB eligibility. It is unclear how the proposed revisions to the VA regulations will work with any revised requirements in the future. The SBA’s requirements regarding ownership and control are very strictly enforced when compared to the somewhat looser VA regulations. It remains to be seen whether the SBA will continue to impose such strict ownership and control requirement and make it hard to participate in the VA’s program. 

The VA is requesting comments on the proposed rule by March 12, 2018. Please let us know if you have any questions or concerns regarding the proposed rule, as we at PilieroMazza plan on submitting comments to the VA – we welcome all feedback. 

About the Author:
 Katie Flood is counsel with PilieroMazza in the Government Contracts Group. She may be reached at [email protected].