Understanding the Extended Surviving Spousal Protections for SDVOSBs

PilieroMazza PLLC

PilieroMazza PLLC

[author: Marc Langston]

Marc Langston

A surviving spouse, who is not a Service-Disabled Veteran, must satisfy specific criteria in order to continue running a company as though it remained a Service-Disabled Veteran-Owned Small Business (“SDVOSB”). This right is not automatic, and failure to meet the eligibility criteria will prevent a surviving spouse from being able to run the decedent’s company as a SDVOSB.

It is important to consider that there are two separate SDVOSB set-aside programs. The older program, the Service-Disabled Veteran-Owned Small Business Concern Procurement Program, is administered by the U.S. Small Business Administration (“SBA”) and is a self-certification program. The newer program, the Vets First Contracting Program, is administered by the U.S. Department of Veterans Affairs (“VA”) and requires verification by the VA’s Center for Verification and Evaluation (“CVE”). 

Notably, even after obtaining CVE verification, a SDVOSB cannot rely on that certification for all government procurements because the two programs are currently regulated differently. Historically, the SBA’s program is regulated by Title 13 of the Code of Federal Regulations, while the VA’s program is regulated by Title 38 of the Code of Federal Regulations.

The 2017 National Defense Authorization Act (“NDAA”), Pub.L. No. 114-328, which was signed into law on December 23, 2016, signaled Congress’s intent to bridge the regulatory framework of both programs in order to establish uniformity. To achieve consistency, the 2017 NDAA indicates that both the VA and SBA will adhere to a consolidated definition of SDVOSB, which will be set forth in the Small Business Act. However, the effectiveness of these amendments is delayed by Section 1832(e) of the 2017 NDAA, until “the date on which the Administrator of the Small Business Administration and the Secretary of Veterans Affairs jointly issue regulations implementing such sections.”  

The SBA’s current regulations do not permit a surviving spouse to continue to operate a SDVOSB. Therefore, the 2017 NDAA will eventually change this by permitting a surviving spouse to continue to operate a company as a SDVOSB under the conditions that:

  1. the VA rated the decedent Veteran’s service connected disability “as 100 percent disabling” or he/she “died as a result of a service-connected disability”;
  2. the surviving spouse inherited the Veteran’s ownership interest;
  3. the CVE verified the SDVOSB and included it within the VetBiz database prior to the decedent Veteran’s death. If a surviving spouse meets the three conditions, they are permitted to operate the company

If a surviving spouse meets the three conditions, they are permitted to operate the company as a SDVOSB for 10 years. However, a surviving spouse’s loss of ownership or remarriage will result in the forfeiture of the company’s SDVOSB status.

The surviving spousal criteria under current VA regulations, defined at Title 38 of the Code of Federal Regulations Section 74.1, are very similar to the criteria provided by the 2017 NDAA. Although the VA regulations are subject to change under the 2017 NDAA, they are currently the only regulations providing surviving spousal rights.

By extending surviving spousal rights to the consolidated definition of SDVOSB, Congress recognized that the spouse of a Service-Disabled Veteran should be guaranteed some added stability when a Veteran’s death is directly related to his/her military service and sacrifice. If you are concerned about whether you or your spouse may be eligible to continue running a company as a SDVOSB, please contact us to ensure you are eligible to exercise your full legal rights.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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