Veteran-owned small businesses (VOSBs) and service-disabled veteran-owned small businesses (SDVOSBs) looking to contract with the federal government will be subject to new certification requirements beginning January 1, 2023, pursuant to a final rule published recently by the U.S. Small Business Administration (SBA).

The rule—compelled by the National Defense Authorization Act (NDAA) for Fiscal Year 2021—reflects a broader changing of the guard in many respects, as the SBA will take over in January from the Department of Veterans Affairs (VA) as the federal entity responsible for verifying a business's eligibility to participate or compete in any VOSB or SDVOSB set-asides and sole-source acquisitions across the government. Accordingly, businesses that intend to remain eligible for such opportunities after the effective date will need to account for and take proactive steps to comply with the rule—or risk being left out.

Background

Established by Congress in 2006, the VOSB and SDVOSB program—referred to as the Veterans First Contracting Program—authorizes contracting officers to restrict competition for, or sole-source an award of, certain VA contracts to eligible VOSBs and SDVOSBs.

To date, eligibility determinations have been made by the VA's Center for Verification and Evaluation (CVE) under the Vets First Verification Program. If a business is not verified for eligibility, it cannot qualify for participation in the Veterans First Contracting Program. For set-aside or sole-source contract opportunities with all other federal agencies, SDVOSBs only had to self-certify their status under the Small Business Act.

The NDAA for FY21—and the SBA's finalized rule carrying out its command—changes the status quo. Beginning January 1, 2023, the responsibility for verifying eligibility of VOSBs and SDVOSBs shifts to the SBA's new Veteran Small Business Certification Program. Absent certain exceptions and grace periods, VOSBs and SDVOSBs whose status is not verified by the SBA after January 1 will not be eligible to receive sole-source or set-aside VOSB or SDVOSB awards across the federal government. Furthermore, self-certification will no longer suffice, except at the subcontract level.

The Certification Rule

The recently finalized rule implements the SBA's Veteran Small Business Certification Program, setting forth qualification requirements, certification of VOSB or SDVOSB status and records retention requirements, and procedures for protests concerning VOSBs and SDVOSBs—among other provisions. For example:

• To qualify as a VOSB or SDVOSB under the rule, a business must meet certain thresholds, including not less than 51 percent ownership and control by a veteran or service-disabled veteran. 13 CFR § 128.200.
• A business "must be certified as a VOSB or SDVOSB pursuant to § 128.300 [of the rule] in order to be awarded a VOSB or SDVOSB set-aside or sole source contract." 13 CFR § 128.200(c)(1). To do so, a business "must apply to SBA for certification as a VOSB or SDVOSB" via the SBA's website and "submit evidence that it is a small business owned and controlled by one or more qualifying veterans." 13 CFR § 128.300.
• An applicant "must provide documents and information demonstrating that it is owned and controlled by one or more qualifying veterans and qualifies as a small business concern," and "[p]articipants must retain documentation demonstrating satisfaction of all qualifying requirements during the entire period of participation" in the Program. 13 CFR § 128.303(a), (f).

To smooth the transition, there is a one-year grace period for currently self-certifying SDVOSBs to file an application for certification with the SBA. Those that apply by December 31, 2023 will maintain eligibility for set-asides and sole-source awards until the SBA makes a final eligibility decision.

Additionally, a VOSB or SDVOSB previously verified by the VA's CVE will be deemed certified by the SBA for the time remaining in its three-year term of eligibility. The SBA Administrator also announced that all participants verified by the VA as of January 1, 2023 will receive a one-year extension of their eligibility.

For more information, the SBA offers a website providing updates on the Veteran Small Business Certification Program, which can be viewed here.

Takeaways

Venable will continue to watch closely whether this new program increases efficiencies, improves accountability, and results in increased opportunities for VOSBs and SDVOSBs.

In the meantime, while some of the verification requirements may from a practical standpoint appear similar between the VA and SBA, businesses that wish to remain eligible for set-asides and sole-source awards in 2023 (and beyond) should be diligent in planning ahead to seek (re)certification under the new rule.