Veteran-Owned Small Business Certification Moves from VA to SBA

Blank Rome LLP

Blank Rome LLPEffective January 1, 2023, the certification process for veteran-owned small businesses (“VOSBs”) and service-disabled veteran-owned small businesses (“SDVOSBs”) will be transferred from the Department of Veterans Affairs (“VA”) to the Small Business Administration (“SBA”). Except for implementation transitioning discussed below, to be eligible for sole-source and set-aside acquisitions, VOSBs and SDVOSBs will need to be certified by the SBA.

Previously, VOSB and SDVOSB verifications were made by the VA’s Center for Verification and Evaluation (“CVE”). To be eligible for VA contracts, VOSBs/SDVOSBs had to be verified by the CVE; there was no government-wide certification program, and firms seeking SDVOSB sole-source or set-aside contracts outside the VA only needed to self-certify their status pursuant to Section 36 of the Small Business Act, 15 U.S.C. 657f.

On November 29, 2022, the SBA published a final rule implementing Section 862 of the FY 2021 National Defense Authorization Act (“NDAA”) transferring authority for VOSB/SDVOSB certifications from the VA to the SBA. The final rule consolidates the eligibility requirements for the Veteran Small Business Certification Program, and the SBA is assuming control of VOSB/SDVOSB certification for purposes of nearly all small business federal contracting. SBA also published a Frequently Asked Questions (“FAQ”) page regarding the final rule.

VOSB/SDVOSB certification criteria will largely mirror existing SBA rules (i.e., ownership and control structures), and the SBA will largely adopt procedural rules from the CVE’s verification process; however, the SBA made several important changes with respect to the VOSB and SDVOSB verification process regarding firm size and joint venture certification. For instance, firms can qualify if they are small for any North American Industry Classification System (“NAICS”) code listed on their System for Award Management (“SAM”) profile, whereas previous guidance exclusively focused on a firm’s primary NAICS code. Joint ventures themselves need not be certified, but they must meet requirements that will be included in the forthcoming 13 C.F.R. § 128. Other key nuances include:

      • Self-certified SDVOSBs have a one-year grace period (beginning January 1, 2023) to apply to SBA for SDVOSB certification. Self-certified SDVOSBs that apply during the grace period will maintain eligibility until SBA makes a final eligibility decision.
      • Firms previously verified by the VA’s CVE are deemed certified by SBA during the time that remains in the firm’s three-year term of eligibility. To be recertified by SBA, firms are required to meet all conditions of eligibility as described in the SBA’s new regulations.
      • After the grace period or expiration of current terms of CVE eligibility, VOSBs/SDVOSBs that are not certified by SBA become ineligible to receive or compete for sole source or set-aside awards across the federal government.
      • Firms must recertify eligibility every three years. A firm may recertify within 120 calendar days prior to the termination of their eligibility period.
      • SBA will grant reciprocity to 8(a) Program and Women-Owned Small Business Program participants that are owned and controlled by veterans.
      • SBA will continue to permit self-certification for SDVOSBs for subcontracting purposes and goaling credit. SBA plans to “sunset” this exception within five years.

Veteran-owned businesses and their “other than small” business partners should analyze these issues now. Failure to do so could result in the inability to receive future VOSB/SDVOSB set-aside or sole source federal government prime contracts.

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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