Proposed Rule2022-13563
Veteran-Owned Small Business and Service-Disabled, Veteran-Owned Small Business-Certification
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 6, 2022
Issuing agencies
Small Business Administration
Abstract
The Small Business Administration (SBA) is proposing to amend its regulations to implement a statutory requirement to certify Veteran-Owned Small Business Concerns and Service-Disabled Veteran- Owned Small Business Concerns participating in the Veterans Certification Program.
Full Text
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[Federal Register Volume 87, Number 128 (Wednesday, July 6, 2022)]
[Proposed Rules]
[Pages 40141-40164]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-13563]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 87, No. 128 / Wednesday, July 6, 2022 /
Proposed Rules
[[Page 40141]]
SMALL BUSINESS ADMINISTRATION
13 CFR Parts 121, 125, and 128
RIN 3245-AH69
Veteran-Owned Small Business and Service-Disabled, Veteran-Owned
Small Business--Certification
AGENCY: U.S. Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: The Small Business Administration (SBA) is proposing to amend
its regulations to implement a statutory requirement to certify
Veteran-Owned Small Business Concerns and Service-Disabled Veteran-
Owned Small Business Concerns participating in the Veterans
Certification Program.
DATES: Comments must be received on or before August 5, 2022.
ADDRESSES: You may submit comments, identified by RIN 3245-AH69, by any
of the following methods:
1. Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow
the instructions for submitting comments.
2. For Mail, Paper, Disk, or CD/ROM Submissions: Timothy Green,
U.S. Small Business Administration, Office of Veterans Business
Development, 409 Third Street SW, 5th Floor, Washington, DC 20416.
3. Hand Delivery/Courier: Timothy Green, U.S. Small Business
Administration, Office of Veterans Business Development, 409 Third
Street SW, 5th Floor, Washington, DC 20416.
Instructions: SBA will post all comments on <a href="http://www.regulations.gov">www.regulations.gov</a>. If
you wish to submit confidential business information (CBI) as defined
in the User Notice at <a href="http://www.regulations.gov">www.regulations.gov</a>, please submit the
information to Timothy Green, U.S. Small Business Administration,
Office of Veterans Business Development, 409 Third Street SW, 5th
Floor, Washington, DC 20416, or send an email to <a href="/cdn-cgi/l/email-protection#cc98a5a1a3b8a4b5e2abbea9a9a28cbfaeade2aba3ba"><span class="__cf_email__" data-cfemail="4014292d2f3428396e273225252e003322216e272f36">[email protected]</span></a>.
Highlight the information that you consider to be CBI and explain why
you believe SBA should hold this information as confidential. SBA will
review the information and make the final determination on whether it
will publish the information.
FOR FURTHER INFORMATION CONTACT: Timothy Green, U.S. Small Business
Administration, Office of Veterans Business Development, 409 Third
Street SW, 5th Floor, Washington, DC 20416; (202) 205-6777;
<a href="/cdn-cgi/l/email-protection#f9ad9094968d9180d79e8b9c9c97b98a9b98d79e968f"><span class="__cf_email__" data-cfemail="eeba8783819a8697c0899c8b8b80ae9d8c8fc0898198">[email protected]</span></a>. This phone number may also be reached by
individuals who are deaf or hard of hearing, or who have speech
disabilities, through the Federal Communications Commission's TTY-Based
Telecommunications Relay Service teletype service at 711.
SUPPLEMENTARY INFORMATION:
I. Background
The U.S. Small Business Administration (SBA) is seeking input and
comments on a proposed rule to establish a certification program for
Veteran-Owned Small Businesses (VO SBC) and Service-Disabled Veteran-
Owned Small Businesses (SDVO SBC). SBA is planning to amend its
regulations to implement section 862 of the National Defense
Authorization Act for Fiscal Year 2021, Public Law 116-283, 128 Stat.
3292 (January 1, 2021) (NDAA 2021).
The Veteran-Owned Small Business and Service-Disabled Veteran-Owned
Small Business Programs, set forth in 38 U.S.C. 8127, authorize Federal
contracting officers to restrict competition to eligible VO SBCs and
SDVO SBCs for Department of Veterans Affairs (VA) contracts. To be
eligible for VA contracts, VO SBCs and SDVO SBCs must be verified by
VA's Center for Verification and Evaluation (CVE) in accordance with 38
U.S.C. 8127. There is currently no Government-wide SDVO SBC
certification program, and firms seeking to be awarded SDVO SBC sole
source or set-aside contracts with Federal agencies other than the VA,
only need to self-certify their status as set forth in section 36 of
the Small Business Act, 15 U.S.C. 657f.
NDAA 2021 amended the VO SBC/SDVO SBC requirements to transfer the
responsibility for certification of VO SBCs and SDVO SBCs to SBA as of
January 1, 2023 (Transfer Date) and created a certification requirement
at SBA for SDVO SBCs seeking sole source and set-aside contracts across
the Federal Government. Section 862 also created a one-year grace
period after the Transfer Date for businesses currently self-certifying
to file an application for SDVO SBC certification with SBA. Self-
certified SDVO SBCs that submit an application within the one-year
grace period will maintain eligibility until SBA makes a final
eligibility decision. With the exception of this grace period, once
this rulemaking is finalized, VO SBCs and SDVO SBCs that are not
certified by SBA's Veterans Certification Program (Vets Program) will
not be eligible to receive sole source or set-aside VO SBC or SDVO SBC
awards across the Federal Government.
Firms verified by VA's CVE prior to the Transfer Date will be
deemed eligible by SBA during the time that remains in the firm's
three-year term of eligibility. To remain certified by SBA after the
Transfer Date, those verified firms will be required to meet all
conditions of eligibility as described in SBA's revised regulations.
With this rulemaking, SBA is also proposing to grant reciprocity to
participants in SBA's 8(a) Business Development and Women-Owned Small
Business (WOSB) programs that are owned and controlled by one or more
veterans, or in the case of an SDVO SBC, service-disabled veterans.
Both the 8(a) and WOSB programs require applicants to demonstrate
ownership and control to be eligible for certification. The ownership
and control requirements for those programs are basically the same as
those set forth in this proposed rule for VO SBCs and SDVO SBCs, and
the rulemaking would provide an expedited application and review
process for 8(a)/WOSB-certified firms seeking VO SBC/SDVO SBC
certification. In such cases, SBA would confirm the identified
individual's eligibility as a veteran or service-disabled veteran
before granting certification. SBA believes reciprocity between SBA's
certification programs would create program administration efficiencies
as well as reduced processing time for applicants.
SBA proposes to implement the Veterans Certification Program in a
new 13 CFR part 128. As proposed, 13 CFR part 128 would be organized
into the following subparts: Subpart A--Provisions of General
Applicability, Subpart B--Eligibility Requirements for the Veterans
Certification Program, Subpart C--Certification of VO SBC or SDVO SBC
Status, Subpart D--Federal
[[Page 40142]]
Contract Assistance, Subpart E--Protests Concerning VO SBC and SDVO
SBCs, Subpart F--Penalties and Retention of Records, and Subpart G--
Surplus Personal Property for Veteran-Owned Small Business Programs.
SBA's proposed rule is an effort to create a seamless transfer of the
VO SBC/SDVO SBC verification function from VA to SBA. To accomplish
this task, SBA consolidated existing regulations for the SDVO SBC
program at 13 CFR part 125 with VA's CVE verification guidelines at 38
CFR part 74. To further ensure continuity for Vets Program participants
during and after the transfer, SBA generally adopted VA's application
guidelines, rules on continuing eligibility, program examinations, and
program exit procedures at 38 CFR part 74 with few exceptions.
Concurrently, SBA proposes to amend 13 CFR part 125 to remove SDVO
SBC regulations in subparts A through F, consisting of Sec. Sec.
125.11 through 125.100, and include them in 13 CFR part 128. SBA also
proposes to amend references to part 125 in SBA's size regulations at
13 CFR part 121.
II. Section-by-Section Analysis
For ease of review, SBA organized proposed part 128's ``Section-by-
Section Analysis'' into subparts and sections. Each section has a
citation, heading, and the section's source citation. The source
citations correspond to either 13 CFR part 125 or 38 CFR part 74.
Sections with no corresponding regulation are marked ``New.''
Subpart A--Provisions of General Applicability
Section 128.100 What is the purpose of this part? (New)
Proposed Sec. 128.100 would add a general purpose section for the
Veterans Certification Program with statutory authority for contractual
assistance to VO SBCs and SDVO SBCs. There was no equivalent section in
previous SDVO regulations at part 125 and SBA is proposing this
amendment to match the general applicability subparts found in SBA's
other certification programs.
Section 128.101 What type of assistance is available under this part?
(New)
Given the unique nature of VA's contractual assistance program, SBA
believes it is important to distinguish the differences in contractual
assistance available between VO SBC/SDVO SBC contracts at VA and SDVO
SBC contracts across the rest of the Federal Government. Accordingly,
this proposed amendment adds the two types of assistance available to
participants in the Veterans Certification Program. There was no
equivalent section in previous SDVO SBC regulations in part 125.
Section 128.102 What definitions are important in the Veterans
Certification Program? (Former Sec. 125.11 and 38 CFR 74.1)
Section 128.102 as proposed, consolidates the definitions sections
of 13 CFR 125.11 and 38 CFR 74.1. In general, Sec. 128.102 would adopt
VA's existing definitions which applied to the verification process,
remove duplicate definitions between VA and SBA regulations, remove VA
definitions that referenced SBA's definitions at Sec. 125.11, and
eliminate definitions that are no longer applicable to the SBA's new
certification program. Section 125.11 currently includes a definition
of VO SBC and SDVO SBC. SBA is proposing to move these definitions into
the eligibility section at Sec. 128.200 in subpart B.
Subpart B--Eligibility Requirements for the Veterans Certification
Program
Section 128.200 What are the requirements a concern must meet to
qualify as a VO SBC or SDVO SBC? (New)
As proposed, this section would reflect the separate and distinct
eligibility requirements for certification as a VO SBC or SDVO SBC.
Proposed Sec. 128.200 would incorporate the definitions of VO SBC and
SDVO SBC previously included as definitions in Sec. 125.11. Proposed
Sec. 128.200 would also expand how SBA currently defines a VO SBC/SDVO
SBC. Previously, only VO SBC/SDVO SBCs that were small in their primary
North American Industry Classification System (NAICS) code were
considered eligible. This proposed amendment would allow an entity to
apply for certification if the concern, with its affiliates, meets the
size standard corresponding to any NAICS code under which it currently
conducts business activities. Given that ``currently conducts business
activities'' is not defined in regulations, SBA is seeking comment on
how best to define this term for the purposes of certification. For set
aside or sole source VO or SDVO contracts, certified firms would still
be required to be small within the size standard corresponding to the
NAICS code assigned to the contract. This proposed amendment is also
reflected in the definitions section at Sec. 128.102 and application
procedures at Sec. 128.303.
Pursuant to NDAA 2021, the proposed section would add paragraph
(c)(1) to require participants to certify with SBA and paragraph (c)(2)
to clarify that certification is only required for sole source and set-
aside awards. Firms that do not apply for certification in the Vets
Program may continue to self-certify their status, receive contract
awards outside the Vets Program through open competition or other types
of set-asides, and count toward an agency's goals. For example, a self-
certified SDVO SBC may be awarded a small business set-aside and the
agency may count the award as both a small business and SDVO SBC toward
the agency's goals. For those purposes only, contracting officers would
be able to accept self-certifications without requiring them to verify
any documentation.
Section 128.201 What other eligibility requirements apply for
individuals or businesses? (Former 38 CFR 74.2(b) Through (f))
Section 128.201 as proposed, would add conditions of eligibility
for certification which are incorporated from additional eligibility
requirements for verification by CVE at Sec. 74.2(b) through (f). This
rulemaking proposes to eliminate consideration of whether an individual
who is currently incarcerated, or on parole or probation owns or
controls an applicant concern in determining whether the applicant
possesses good character and qualifies as a VO SBC or SDVO SBC. SBA
believes that its role should be limited to determining whether an
applicant is owned and controlled by one or more veterans or service-
disabled veterans. Whether an individual involved with the applicant is
currently incarcerated, or on parole or probation is a responsibility
issue, and whether a concern possesses the responsibility to perform a
contract is a contract specific issue, not an underlying eligibility
issue. SBA views the issues as to whether the concern has the necessary
integrity to perform a contract in the same way as it does questions
relating to whether the concern has the necessary financial
wherewithal, capacity or tenacity, and perseverance to perform a
contract. All are responsibility issues determined by a contracting
officer relating to a specific contract. SBA's certification as to
whether an applicant is owned and controlled by one or more veterans or
service-disabled veterans should be limited to consideration of an
individual's status as a veteran or service-disabled veteran, the
ownership and control of the applicant, and ensuring that the applicant
qualifies as
[[Page 40143]]
small under the size standard corresponding to any work that it
currently performs and would continue to seek to perform through the VO
or SDVO small business programs. Thus, as proposed, the good character
review would be limited to ensuring that an applicant or principal was
not debarred or suspended. SBA also considered retaining a modified
good character requirement that could render an applicant ineligible if
there were outstanding issues relating to moral turpitude or business
integrity, but again concluded that that would also be more
appropriately considered by a contracting officer as an issue of
responsibility. SBA specifically requests comments on this issue.
The regulations at 38 CFR 74.2(a) currently include ownership and
control as a condition of eligibility. As proposed, Sec. 128.200
already requires ownership and control as an eligibility requirement,
so it was not included in this section. While drafting this proposed
section, SBA considered adopting additional eligibility requirements
found in other SBA programs such as 8(a) additional eligibility
requirements in Sec. 124.108. However, for continuity purposes, SBA is
proposing to adopt the additional eligibility requirements directly
from 38 CFR part 74.
Section 128.202 Who does SBA consider to own a Veteran-Owned or
Service-Disabled Veteran-Owned SBC? (Former Sec. 125.12)
While SBA's existing ownership requirements at Sec. 125.12 apply
to both VO SBC and SDVO SBCs, Sec. 125.12 refers only to service-
disabled veterans. This section as proposed, would add a reference to
veterans in the following section: Sec. 128.202(a) through (g), which
correspond to current regulations at Sec. 125.12(a) through (g).
Proposed Sec. 128.202(f) would incorporate 38 CFR 74.3(b)
requiring participants to notify SBA of any change of ownership. In
Sec. 125.12(f), SBA addresses change of ownership but does not require
notification to the agency. Proposed Sec. 128.202(f) would require
participants to notify SBA of a change of ownership and attest to
continued eligibility in accordance with proposed Sec. 128.307. There
are no other proposed amendments to SBA's existing ownership
regulations at Sec. 125.12. SBA is also requesting comment on this
section as proposed, including any suggested amendments to VO/SDVO
ownership; for example, whether the proposed regulations at Sec.
128.202 should more closely match the WOSB/Economically Disadvantaged
WOSB (EDWOSB) ownership regulations found at 13 CFR 127.201.
Section 128.203 Who does SBA consider to control a Veteran-Owned or
Service-Disabled Veteran-Owned SBC? (Former Sec. 125.13)
Proposed Sec. 128.203 would include SBA's existing control
requirements at Sec. 125.13 and revise the section to add reference to
veterans. SBA previously administered only the SDVO SBC self-
certification program and Sec. 125.13 did not specifically reference
VOSB requirements. To be verified by VA and subsequently certified by
SBA on the Transfer Date, VO SBCs are required to meet the same control
requirements as SDVO SBCs per 38 CFR 74.4. There are no other proposed
amendments to SBA's existing control regulations at Sec. 125.133. As
proposed, SBA control regulations do not address franchise, license, or
distributor agreements. SBA is seeking comment as to whether these
types of agreements should be addressed within proposed Sec. 128.203.
For example, should SBA take a similar approach to the agency's loan
assistance regulations in Sec. 121.301(f)(5)?
Current SBA regulations at Sec. 125.13(i), (k), and (l) list
several ``rebuttable presumptions'' of control by a non-veteran. As
proposed, SBA is adopting those existing regulations in full but is
soliciting comment as to whether those rebuttable presumptions should
be viewed merely as factors of control by non-veterans rather than
conditions of ineligibility that an applicant must rebut. Additionally,
SBA is requesting comment on whether any of the rebuttable presumptions
as proposed should be amended. SBA is also requesting comment on this
section as proposed including any suggested amendments to VO SBC/SDVO
SBC control. For example, whether the proposed regulations at Sec.
128.203 should more closely match the WOSB/EDWOSB control regulations
found at 13 CFR 127.202.
Section 128.204 What size standards apply to VO SBC and SDVO SBCs?
(Former Sec. 125.14)
Proposed Sec. 128.204 would include SBA's existing size
requirements at Sec. 125.14 and revise the section to incorporate VO
SBCs. SBA previously administered only the SDVO SBC self-certification
program, so Sec. 125.14 did not specifically reference VO SBC
requirements. To be verified by VA and subsequently certified by SBA on
the Transfer Date, VO SBCs are required to meet the same size
requirements as SDVO SBCs. As such, this section would also be amended
to reflect the VO SBCs.
Subpart C--Certification of VO SBC or SDVO SBC Status
Subpart C as proposed, would adopt VA's existing application and
oversight guidelines at 38 CFR 74.10 through 74.22 and incorporate
these sections into SBA certification for VO SBC and SDVO SBCs.
References to VA's application, the CVE program, the term
``verification,'' the Vendor Information Pages (VIP) database, and VA
forms would be removed throughout proposed Sec. Sec. 128.300 through
128.310 and replaced where relevant with SBA, certification, and
references to SBA's database and online application system.
VA's Records Management section (38 CFR 74.25 through 74.29) would
not be incorporated into subpart C, as these provisions are no longer
applicable to this program. SBA will seek Office of Management and
Budget (OMB) approval for the information collection required for this
program. SBA does not anticipate collecting additional information that
was not previously collected by VA.
Section 128.300 How is a concern certified as a VO SBC or SDVO SBC?
(Former Sec. 74.2)
Proposed Sec. 128.300 would include VA's eligibility requirements
at 38 CFR 74.2(a), with proposed revisions to remove references to VA
and to reflect SBA's certification program. SBA's proposed rule would
also grant certification based on an applicant's participation in SBA's
8(a) Business Development and WOSB/EDWOSB programs. SBA anticipates
that many participants may seek multiple certifications and believes
reciprocity between SBA's certification programs will create program
administration efficiencies as well as reduce the processing time for
applicants. In granting certification for these programs, SBA reviews
ownership and control of the applicant to determine eligibility. The
ownership and control requirements that apply to disadvantaged
individuals for 8(a) certification and those applying to women for
WOSB/EDWOSB certification are basically the same as those applying to
veterans and service-disabled veterans for the Veterans Certification
Program. An applicant would be required to certify that there are no
material changes in its ownership or control since its 8(a) or WOSB
certification, and SBA would then accept its previous determinations
that the identified individual owned and controlled the VO SBC/SDVO SBC
[[Page 40144]]
applicant. In such cases, SBA would confirm the identified individual's
eligibility as a veteran or service-disabled veteran.
There is likelihood that 8(a) or WOSB firms granted reciprocity
will have remaining ``time in program'' on their existing
certifications that would not align with the proposed three-year
eligibility period for this Vets Program. In these instances, SBA would
align recertification based on the firm's existing certification
eligibility period. As an example, a WOSB firm certified in 2022 would
be required to reapply for WOSB certification at the end of their
three-year eligibility period in 2025. If granted reciprocity into the
proposed Vets Program in 2023, that firm would have two remaining years
of eligibility. In 2025, the firm would apply for recertification to
WOSB and then if eligible, would be granted a three-year eligibility
period for both programs. That firm would then be required to update
their status in the Veterans Certification Program to reflect
recertification by WOSB. SBA is seeking comment on this approach to
recertification and whether SBA should amend 8(a) regulations at part
124 and WOSB/EDWOSB regulations at 13 CFR part 127 to reflect
reciprocity between programs.
Section 128.301 Where must an application be filed? (Former Sec.
74.10)
Proposed Sec. 128.301 would include VA's requirements at 38 CFR
74.10 for application to CVE, propose revisions to remove references to
VA, and reflect that an applicant must apply to SBA for certification
after the rule is effective. At the time of this proposed rule, SBA has
not announced its application platform or certification database for
the Vets Program. Accordingly, the proposed amendments have general
references to this technology. When finalized, the rule will include
instructions to apply online and access the certification database.
Section 128.302 How does SBA process applications for certification?
(Former Sec. 74.11)
Proposed Sec. 128.302 would include VA's guidelines for
application processing by CVE at 38 CFR 74.11, propose revisions to
remove references to VA, and reflect SBA's certification program. As
proposed, this section would remove specific processing guidelines in
Sec. 128.302(a) as SBA has not established the policies and procedures
for application processing at this time. SBA also proposes to add an
additional sentence at the end of Sec. 128.302(e) to establish SBA's
authority to decertify a firm in the event that the firm failed to
inform SBA of any changed circumstance in accordance with Sec.
128.306. The regulation at 38 CFR 74.11(e)(1), which requires
participants to notify VA of bankruptcy details within 30 days, would
be incorporated into Sec. Sec. 128.302(e) and 128.307 to require
participants to notify SBA in the event of a bankruptcy filing.
Section 128.303 What must a concern submit to apply for VO SBC or SDVO
SBC certification? (Former Sec. 74.12)
Proposed Sec. 128.303 would amend VA's documentation requirements
at 38 CFR 74.12 for application to CVE. This amendment would include
general requirements for submission to SBA rather than list each
document individually as with the current VA regulation. As proposed,
this section would grant certification based on participants in SBA's
8(a) Business Development and WOSB/EDWOSB programs that are owned and
controlled by one or more veterans, or in the case of SDVO SBCs,
service-disabled veterans. The proposed amendment would demonstrate how
applicants may submit documentation as evidence of program eligibility.
Proposed Sec. 128.303 would add paragraphs (d) and (e) to require a
concern to provide a full explanation in the case of an applicant that
was previously decertified, previously denied certification, or failed
to notify SBA of a material change affecting its eligibility. SBA is
seeking comment whether an explanation in these circumstances should be
required as part of an application and if so, should SBA establish a
time limit for reapplication in which an explanation would be required
(e.g., A firm that reapplies within three years of denial would be
required to provide an explanation of that denial. If that firm
reapplies after a period of three years, it would not be required to
submit an explanation with the application).
In terms of demonstrating that an applicant qualifies as a small
business, the proposed rule would provide that an applicant must
demonstrate that it qualifies as small under the size standard
corresponding to any NAICS code under which it currently conducts
business activities. SBA believes that this standard makes more sense
than requiring an applicant to qualify as small under the size standard
corresponding to its primary industry classification. In order to be
eligible for a specific SDVO or VO small business contract, a firm must
qualify as small under the size standard corresponding to the NAICS
code assigned to that contract. Whether a firm qualifies as small under
its primary industry classification is not relevant to that
determination (unless the size standard for the firm's primary industry
classification is the same as that for the NAICS code assigned to the
contract, but even then, the only relevant size standard is that
corresponding to the NAICS code assigned to the contract). SBA believes
that a firm that does not qualify as small under its primary industry
classification should not be precluded from seeking and being awarded
SDVO or VO small business contracts if it qualifies as small for those
contracts. SBA believes that the certification process should ensure
that an applicant is owned and controlled by one or more veterans or
service-disabled veterans and that it could qualify as a small business
for a VO or SDVO set-aside contract. As such, SBA believes that
requiring an applicant to demonstrate that it qualifies as small for
any industry under which it currently conducts business is more
appropriate than requiring it to demonstrate that it qualifies as small
under its primary industry classification.
Section 128.304 Can an applicant appeal SBA's initial decision to deny
an application? (Former Sec. 74.13)
Proposed Sec. 128.304 would include VA's regulation at 38 CFR
74.13 for a denied application with CVE and proposed revisions would
remove references to VA and reflect SBA's certification program. In
addition, this section would add a sentence at the beginning of Sec.
128.304(a) which would clearly establish that there is no
reconsideration process for initial applications once they have been
denied. SBA believes that the appeals process with SBA's Office of
Hearings and Appeals (OHA) as outlined in 13 CFR part 134 serves as an
adequate substitute for the process of reconsideration. Given that this
proposed rule would eliminate reconsideration upon initial application,
SBA proposes to shorten the reapplication period after denial from 6
months to 90 calendar days. SBA seeks comment on the proposed
elimination of the reconsideration process. If, on appeal, OHA
overturns SBA's initial decision to deny an applicant, should SBA
consider a reconsideration process where the remanded application is
then denied for reasons other than those identified in the initial
application? Should SBA allow a reconsideration of all denials prior to
OHA appeal? SBA also requests comment specifically on denial decisions
based solely on eligibility as a veteran or service-disabled veteran.
Current VA
[[Page 40145]]
regulations do not allow for reconsideration of these types of denials.
Should SBA allow for reconsideration in these limited circumstances?
This section as proposed would not incorporate 38 CFR 74.13(b)
through (f): paragraph (b) reconsideration of veteran eligibility
criteria, paragraph (c) reconsideration, paragraph (d) is no longer
applicable as it references an SBA determination on size, paragraph (e)
is a duplicate of paragraph (b), and paragraph (f) is a second
reference to the reconsideration process.
Section 128.305 Can an applicant or participant reapply for
certification? (Former Sec. 74.14)
As proposed, Sec. 128.305 would include VA's 38 CFR 74.14
reapplication requirements, proposed revisions would remove references
to VA and to reflect SBA's certification program. SBA's proposed rule
would adopt the VA requirement that the applicant must wait for a
period of 90 calendar days after a denial decision before a new
application will be processed by SBA. As proposed participants may
reapply for certification within 120 calendar days of the end of their
eligibility period and the subsequent eligibility period would be based
on the date of the new determination letter. SBA is requesting comment
on this proposed procedure for recertification. Specifically, should
SBA reduce the window for applicants to reapply prior to the end of
eligibility period and if an applicant successfully reapplies to the
Vets Program, should the eligibility period be based on the original
date that eligibility was set to expire as opposed to the date of the
determination letter?
Section 128.306 What length of time may a business participate in the
Veterans Certification Program? (Former Sec. 74.15)
Proposed Sec. 128.306 would include VA's 38 CFR 74.15 program
eligibility term and continuing obligation requirements, including a
provision specifying that a business concern would receive an
eligibility term of three years from the date of SBA's approval letter
establishing its VO SBC or SDVO SBC certified status. Proposed
revisions would remove references to VA and reflect SBA's certification
program. SBA does not believe that yearly recertification is necessary,
but requests comments as to whether recertification every three years
is the appropriate term of certification. Paragraphs (e) and (f) of
this section would include the consequences of a program examination
referenced in paragraph (d). For organizational purposes, SBA would
redesignate paragraphs (e) and (f) as paragraphs (d)(1) and (2),
respectively. SBA's proposed rule would adopt VA's eligibility period
of three years. SBA is soliciting comment on whether that period is
appropriate for the proposed SBA Vets Program.
Section 128.307 What are a participant's ongoing obligations to SBA?
(Former Sec. 74.3(b))
Proposed Sec. 128.307 would include 38 CFR 74.3(b) that requires
participants to notify CVE of any change of ownership; proposed
revisions would remove references to VA and to reflect SBA's
certification program. This section as proposed does not require prior
SBA approval of a material change. SBA is soliciting comment as to
whether this section should require SBA approval prior to a material
change that could affect eligibility. Sections 36 and 36A of the Small
Business Act (15 U.S.C. 657f and 657f-1) ``require the periodic
recertification'' of a firm's status as an eligible VO SBC or SDVO SBC.
As noted above in Sec. 128.306, SBA is proposing that a VO SBC or SDVO
SBC certification generally last three years. SBA has interpreted the
``periodic recertification'' requirement set forth in the Small
Business Act to require recertification every three years. This
proposed rule would not require participants to recertify on an annual
basis as an ongoing obligation. SBA requests comments as to whether
three years is the appropriate length of time to require
recertification. SBA wants to ensure that it meets its statutory
mandate, but at the same time does not want to impose any unnecessary
burdens on VO SBCs and SDVO SBCs.
Section 128.308 What is a certification examination and what will SBA
examine? (Former Sec. 74.20)
Proposed Sec. 128.308 would include VA's 38 CFR 74.2(a)
verification exam requirements, with revisions that would remove
references to VA and to reflect SBA's certification program.
Section 128.309 What are the ways a business may exit certification
status? (Former Sec. 74.21)
Proposed Sec. 128.309 would include VA's 38 CFR 74.21 guidelines
on exiting the CVE program, with revisions that would remove references
to VA and reflect SBA's certification program. The proposed section
would also include paragraph (d)(10) which adds failure to recertify as
good cause to remove a firm from the Vets Program.
Section 128.310 What are the procedures for decertification? (Former
Sec. 74.22)
Proposed Sec. 128.310 would include VA's 38 CFR 74.22 guidelines
on canceling program participation by the agency; proposed revisions
would remove references to VA and to reflect SBA's certification
program.
Subpart D--Federal Contract Assistance
Section 128.400 What are VO and SDVO contracts? (Former Sec. 125.17)
As proposed, Sec. 128.400(a) would amend the text in Sec. 125.17
to reflect VA's authority to award set-aside and sole source to VO SBCs
and SDVO SBCs. The amendment references the VA Acquisition Regulation
(VAAR) at chapter 8 of title 48, Code of Federal Regulations. An
additional amendment at Sec. 128.400(b) as proposed, would distinguish
VA contracts from SDVO SBC contracts with the rest of the Federal
Government.
Section 128.401 What requirements must an SDVO SBC meet to submit an
offer on a contract? (Former Sec. 125.18)
As proposed, Sec. 128.401 would amend the current regulation at
Sec. 125.18(a) to require certification to be eligible for a VO or
SDVO SBC set-aside or sole source contract. The proposed rule would add
Sec. 128.401(a)(2)(i) and (ii) to allow an uncertified VO SBC or SDVO
SBC to submit an offer while their application is pending with SBA. SBA
intends to prioritize those applications where the contracting officer
has identified the applicant as the apparent successful offeror. This
proposed rule would also amend former paragraph (b) at Sec. 125.18 to
add eligibility for VO SBC joint ventures (JV) in the Vets Program and
reference Sec. 128.402, a new stand-alone section to address JV
requirement for VOVO SBCs and SDVO SBCs. The remaining paragraphs in
Sec. 125.18 would add references to VO SBCs.
Section 128.402 May a joint venture submit an offer on a VO SBC or SDVO
SBC requirement? (Former Sec. 125.18(b))
As stated above, SBA is proposing a stand-alone Sec. 128.402 that
would address JV requirements for VOVO SBCs and SDVO SBCs. Section
128.402(a) as proposed, generally would state conditions upon which a
JV may be certified by SBA and as set forth in 48 CFR part 819,
includes the requirement that all joint ventures must be certified to
be awarded a VO SBC or SDVO SBC contract with VA. SBA does not intend
to require SDVO SBC JVs to certify for contracts with the rest of the
Federal Government.
[[Page 40146]]
The proposed rule would also add paragraph (b)(11) in Sec. 128.402
to provide that a VO SBC or SDVO SBC participant cannot be a joint
venture partner on more than one joint venture that submits an offer
for a specific VO SBC or SDVO SBC contract. Although the proposed rule
would apply this requirement to all contracts, procuring agencies and
small businesses have raised concerns to SBA in the context of multiple
award contracts where it is possible that one firm could be a member of
several joint ventures that receive contracts. In such a situation,
several agencies were troubled that orders under the Multiple Award
Contract may not be fairly competed if one firm was part of two or more
quotes. They believed that one firm having access to pricing
information for several quotes could skew the pricing received for the
order.
Sections 128.403 Through 128.408 (Former Sec. Sec. 125.21 Through
125.26)
Generally, Sec. Sec. 128.403 (former Sec. 125.21) ``requirements
not available to VO or SDVO contracts,'' 128.405 (former Sec. 125.23)
``sole source contracts to VO and SDVO SBCs,'' and 128.406 (former
Sec. 125.24) ``VO or SDVO contracts at or below the simplified
acquisition threshold'' would be amended to distinguish VA procurements
from all other procurements. As previously stated, VAAR specifically
governs requirements exclusive to VA prime and subcontracting actions
at chapter 8 of title 48, Code of Federal Regulations, and supplements
the Federal Acquisition Regulation (FAR), which contains guidance
applicable to most Federal agencies.
As proposed, Sec. 128.404(d) would add a requirement that
prohibits agencies from requiring one or more certifications in
addition to its VO SBC/SDVO SBC certification. This amendment is
already included in SBA's regulations at Sec. 125.2(e)(6)(i) but had
not been added to the SDVO SBC program.
No amendments are proposed were made to existing regulations in
either Sec. 128.407 or Sec. 128.408 currently at Sec. 125.25 or
Sec. 125.526.
Subpart E--Protests Concerning VO SBCs and SDVO SBCs
Section 128.500 What are the requirements for filing a VO SBC and SDVO
SBC status protest? (New)
As proposed, Sec. 128.500 would serve as the sole section
addressing status protests for VO SBCs and SDVO SBCs. Currently, SBA's
Director of Government Contracting processes all status protests of
self-certified SDVO SBCs for non-VA contracts in accordance with 13 CFR
part 125 and SBA's OHA hears all challenges to a VO SBC or SDVO SBC's
inclusion in the VA database in accordance with 38 U.S.C.
8127(f)(6)(B)(i). NDAA 2021 transfers the entirety of 38 U.S.C. 8127(f)
to 15 U.S.C. 657f and authorizes OHA to review all status protests of
VO SBCs and SDVO SBCs, regardless of the procurement agency.
Accordingly, proposed part 128 would not include Sec. Sec. 125.27
through 125.31 on SDVO SBC status protests. Proposed Sec. 128.500
would add paragraph (a) to reflect revised status protest procedures
described above with a reference to part 134. Paragraph (b) as proposed
would distinguish separate procedures for size and status protests.
Amendments to part 134 are not included in this proposed rule and will
be amended separately to reference SBA's Veterans Certification
Program.
Subpart F--Penalties and Retention of Records
The proposed rule would adopt SBA's existing regulations at 13 CFR
125.32 and 33 (former Sec. Sec. 125.32 and 125.33) and revise the
sections to add reference to VO SBCs. SBA previously administered only
the SDVO SBC self-certification program, so Sec. Sec. 125.32 and
125.33 did not specifically reference VO SBC requirements.
Subpart G--Surplus Personal Property for Veteran-Owned Small Business
Programs
Section 128.700 How does a small business concern owned and controlled
by veterans obtain Federal surplus personal property? (Former Sec.
125.100)
The Veterans Small Business Enhancement Act provides that VO SBCs
should be considered for surplus personal property distributions. Those
firms seeking to participate in the program are required to be verified
by VA's CVE as a condition of eligibility. Section 128.700(a)(1) would
amend this regulation to reflect the transfer of certification to SBA
as mandated by NDAA 2021.
Part 121
This proposed rule would amend references to the current SDVO SBC
program in part 121. These amendments would correspond to the newly-
created part 128.
SBA has not proposed amendments to part 124, 127, or 134 with this
rulemaking. However, SBA is seeking comment whether the final rule
should include amendments to these parts to reflect the proposed Vets
Program. For example, part 124 may need to be amended to reflect
reciprocity with the proposed Vets Program; part 127 grants reciprocity
to firms verified by CVE and would be amended to reference this Vets
Program; and part 134 would need to be amended to remove references to
CVE and update procedures for denial, cancellation, and inclusion in
the SBA database.
III. Compliance With Executive Orders 12866, 12988, 13132, 13175,
13563, the Congressional Review Act (5 U.S.C. 801-808), the Paperwork
Reduction Act (44 U.S.C., Ch. 35), and the Regulatory Flexibility Act
Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
proposed rule is a significant regulatory action for the purposes of
Executive Order 12866. Accordingly, the next section contains SBA's
Regulatory Impact Analysis.
Regulatory Impact Analysis
1. Is there a need for the regulatory action?
This rulemaking is necessary to satisfy statutory requirements to
implement section 862 of the National Defense Authorization Act for
Fiscal Year 2021 amendments to the Small Business Act which requires
SBA to certify VO SBCs and SDVO SBCs.
2. What is the baseline, and the incremental benefits and costs of this
regulatory action?
OMB directs agencies to establish an appropriate baseline to
evaluate any benefits, costs, or transfer impacts of regulatory actions
and alternative approaches considered. The baseline should represent
the agency's best assessment of what the world would look like absent
the regulatory action. For a regulatory action that modifies or
replaces an existing regulation, a baseline assuming no change to the
regulation generally provides an appropriate benchmark for evaluating
benefits, costs, or transfer impacts of proposed regulatory changes and
their alternatives.
Baseline
Section 862 of NDAA 2021 amended sections 36 and 36A of the Small
Business Act to require SBA to certify the status of VO SBCs and SDVO
SBCs seeking sole source and set-aside contracts across the Federal
Government. This regulation would replace VA's existing regulations
governing the verification of VO SBCs
[[Page 40147]]
and SDVO SBCs for sole source or set-aside contracts awarded by VA.
Prior to NDAA 2021, SDVO SBC firms seeking to contract with Federal
agencies other than VA only needed to self-certify their status. SDVO
SBC firms currently self-certifying must apply within a one-year grace
period after the Transfer Date.
SBA's proposed regulations will not add any additional burden to
current participants in VA's VIP Verification Program. The VIP
Verification Program has a three-year term of eligibility and to enter
the program, applicants submit an online application with documents
supporting the application. To remain in the program, VA requires
participants to notify the agency of a change in circumstances such as
a change in ownership or control of the firm. VA also requires
participants to undergo a program examination to verify the accuracy of
any statement or information provided as part of the verification
application process. At the end of the three-year term of eligibility,
a participant must reapply to the program using the same procedures as
the initial application.
With the proposed regulations, SBA would institute the same process
of initial application, program examination, and reapplication at the
end of the applicant's three-year term of eligibility. Firms verified
by VA prior to the Transfer Date would be deemed eligible by SBA for
the time that remains in the firm's three-year term of eligibility. To
remain certified by SBA after the Transfer Date, those verified firms
would be required to meet all conditions of eligibility as described in
the proposed regulation such as certification examinations and
reapplication at the end of the firm's term of eligibility. Current
participants in the VIP Verification Program would have no additional
cost burden associated with the SBA's proposed regulations implementing
the Veterans Certification Program. VA existing regulations for VO SBCs
and SDVO SBCs that contract solely with the VA serve as an appropriate
benchmark for this regulatory impact analysis. Accordingly, this
analysis will focus on the benefits and costs to those previously self-
certified SDVO SBCs that would be required to certify with SBA.
Benefit
The benefit of the proposed regulation is a reduction in the
ambiguity and uncertainty for contracting officers in the process of
making Federal contract awards to eligible SDVO firms that were
previously only required to self-certify. Under the existing system for
agencies outside of VA, the burden of SDVO SBC eligibility compliance
is placed upon the awarding contracting officer. Contracting officers
must review the documentation of the apparent successful offeror on a
SDVO SBC contract. Under this proposed rule, the burden is placed upon
SBA. All a contracting officer needs to do is to confirm that the firm
is in fact a certified SDVO SBC in SBA's certification database and a
responsible contractor. A contracting officer would not have to look at
any documentation provided by a firm or prepare any internal memorandum
memorializing any review. This will encourage more contracting officers
to set aside opportunities for SDVO SBC Vets Program participants as
the validation process will be controlled by SBA in the System for
Award Management (SAM), the Dynamic Small Business Search (DSBS)
database, and SBA's certification database. The reduced responsibility
to verify eligibility at contract award may also result in a minor cost
savings to the contracting agencies.
Cost
While current participants in the Vet VIP Verification Program
would have no additional costs associated with the proposed
regulations, SBA anticipates costs associated with self-certified SDVO
SBCs currently seeking contracts with the rest of the Federal
Government. Previously, those firms only needed to self-certify their
status to pursue SDVO SBC sole source and set-asides. With NDAA 2021,
those firms must apply to SBA for certification within a one-year grace
period ending on January 1, 2024. Eligible SDVO SBC firms that are
certified by SBA after the Transfer Date will then be required to meet
all program eligibility requirements going forward to include: notify
SBA of a change in circumstances, undergo a program certification
examination, and reapply for certification at the end of their
eligibility period.
To estimate the number of SDVO SBC applicants within the first year
of the certification, SBA reviewed firms actively registered as SDVO
SBCs in SAM. SBA believes that the number of firms listed in SAM is the
most recent and reliable data to estimate participation and total costs
of the Vets Program for the purposes of this regulatory impact study.
Registration in SAM is required for all businesses seeking to contract
with the Federal Government, registrants may select to represent
themselves as SDVO SBCs without going through a certification process,
and firms must recertify their registration one-year after initial SAM
registration. While it is not anticipated that every firm registered as
an SDVO SBC in SAM will apply for certification within the first year
of the Vets Program, SAM registrations serve as what SBA would consider
the maximum number of firms that would likely seek certification.
Accordingly, SBA estimates that as many as 21,468 self-certified
SDVO SBCs could apply for initial certification within the first year
of the program. This estimate is based on 32,284 SDVO SBC firms
registered in SAM and excludes 10,816 firms registered in SAM but
already verified by VA as of December 2021.
------------------------------------------------------------------------
------------------------------------------------------------------------
SDVO SBCs Registered in SAM............................. 32,284
Less: VA-Verified SDVO SBCs Included in SAM............. 10,635
Self-Certified SDVO SBCs................................ 21,649
Less: VA-Verified VO SBCs Self-Certified as SDVO SBCs... 181
Self-Certified SDVO SBCs Anticipated to Seek SBA 21,468
Certification..........................................
------------------------------------------------------------------------
The following table represents the estimated total number of
Program Participant actions during the first five years of the Vets
Program.
[[Page 40148]]
Number of Program Participants
----------------------------------------------------------------------------------------------------------------
Initial Program
Year applications examinations Recertifications Yearly totals
----------------------------------------------------------------------------------------------------------------
1................................... 17,174 1,025 2,114 19,288
2................................... 8,500 560 2,006 10,506
3................................... 7,500 420 527 8,027
4................................... 7,500 810 7,715 15,215
5................................... 7,500 635 4,202 11,706
---------------------------------------------------------------------------
Totals.......................... 48,174 3,455 16,565 64,739
----------------------------------------------------------------------------------------------------------------
For the purposes of this proposed rule, SBA estimated ``time to
complete'' for three types of certification actions: initial
application, program examination, and reapplication at the end of the
eligibility period. For the initial application, SBA estimates that
applicants would complete the application process in 1 hour, a program
examination in 1 hour, and reapplication in 1 hour. The estimated time
to complete would include entering information into SBA's online
application platform and submission of supporting documentation to
prove eligibility. It also assumes that the information requested by
SBA during initial certification is already held by the firms during
the ordinary course of business and would require minimum preparation
prior to submission. Similarly, participants would be minimally
burdened during program examinations and reapplications. During their
period of eligibility, participants would be required to review,
maintain, and update documentation submitted to SBA during initial
certification. In the event of a change in circumstances while in the
Program, participants would have previously notified SBA of the change
and already uploaded documentation to support eligibility. SBA's
proposed rule would not require additional information or documents
that the firm would not already have on hand and would not impose
additional burden on the participant. SBA is soliciting comment as to
whether these times to complete these actions are reasonable.
Hourly cost to the participant is based on estimated manager's
salary of $93.44/hour (based on the median hourly wage of $46.72 for
construction managers, according to the BLS 2020 Occupational Outlook
Handbook, plus 100% for benefits and overhead). Based on an estimate of
1 hour per program action and an hourly cost of $93.44, the five-year
total cost burden for the proposed rule would be $3,219,569. SBA
estimates that an applicant's cost burden to apply and maintain
eligibility for this proposed Program would require 3 total hours at a
cost burden of $280.32 per applicant.
Costs to Participants
----------------------------------------------------------------------------------------------------------------
Initial Program
Year applications examinations Recertifications Yearly totals
----------------------------------------------------------------------------------------------------------------
1................................... $1,604,776 $95,776 $197,532 $1,898,084
2................................... 794,240 52,326 187,441 1,034,007
3................................... 700,800 39,712 49,243 789,755
4................................... 700,800 75,686 720,923 1,497,410
5................................... 700,800 59,334 392,672 1,152,807
---------------------------------------------------------------------------
Totals.......................... 4,501,416 322,835 1,547,811 6,372,062
----------------------------------------------------------------------------------------------------------------
SBA believes that participants would not incur any start-up costs,
operation or maintenance costs, service costs, or require additional
capital as a result of this proposed rule because there should be no
cost in setting up or maintaining systems to collect the required
information. As stated previously, the information requested should be
collected and retained by the applicant in the ordinary course of
business. SBA is soliciting comment as to whether this assumption is
accurate.
SBA estimates the cost to the government of implementing the
certification program to be $30M across fiscal year (FY) 2022 and
FY2023 and approximately $20M annually thereafter. SBA worked with VA
and OMB to secure a $10M transfer from VA's Supply Fund to cover
transition costs, including tech system development. An additional $20M
was requested in the President's Budget for FY2023 for year one program
operations. SBA and VA anticipate an up to 250% surge in application
volume relative to VA's current volume. The increase in volume will be
handled primarily by surging contract support. SBA's $20M request
includes $2.5M for full time equivalents (FTEs) (current salaries and
expenses (S&E) for VA FTEs assigned to the program), $1.35M for
information technology (IT) overhead (system maintenance and standard
IT services for staff and contractors), and $16M in contract costs
(based on FY21 VA contract costs scaled to account for application
surge and projected efficiencies). The cost of operating the program
may decrease after the initial application surge, but would rise every
third year when the 2023 cohort is up for recertification. This cost
estimate also eliminates CVE's costs of administering the program. CVE
reported a cost of $12,302,497 for 14,762 cases in FY2021. This cost is
not directly comparable to SBA's estimate, however, because it excludes
items like some support costs, that are included in SBA's cost
estimate.
3. What are the alternatives to this rulemaking?
This proposed rule would implement specific statutory provisions in
Section 862 of the 2021 NDAA. There are no alternatives that would meet
the statutory requirements.
Executive Order 12988
This proposed rule meets applicable standards set forth in sections
3(a) and 3(b)(2) of Executive Order 12988, Civil
[[Page 40149]]
Justice Reform, to minimize litigation, eliminate ambiguity, and reduce
burden. The action does not have retroactive or preemptive effect.
Executive Order 13132
This proposed rule does not have federalism implications as defined
in Executive Order 13132. It will not have substantial direct effects
on the States, on the relationship between the National Government and
the States, or on the distribution of power and responsibilities among
the various levels of government, as specified in the Executive order.
As such it does not warrant the preparation of a federalism assessment.
Executive Order 13175
This proposed rule does not have tribal implications under
Executive Order 13175, Consultation and Coordination with Indian Tribal
Governments, because it would not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.
Executive Order 13563
This Executive order directs agencies to, among other things: (a)
Afford the public a meaningful opportunity to comment through the
internet on proposed regulations, with a comment period that should
generally consist of not less than 60 days; (b) provide for an ``open
exchange'' of information among government officials, experts,
stakeholders, and the public; and (c) seek the views of those who are
likely to be affected by the rulemaking, even before issuing a notice
of proposed rulemaking. As far as practicable or relevant, SBA
considers these requirements in developing this rule, as discussed
below.
1. Did the agency use the best available techniques to quantify
anticipated present and future costs when responding to E.O. 12866
(e.g., identifying changing future compliance costs that might result
from technological innovation or anticipated behavioral changes)?
To the extent possible the agency utilized the most recent data
available in the Federal Procurement Data System-Next Generation, SAM,
and VA's VIP database.
2. Public participation: Did the agency: (a) Afford the public a
meaningful opportunity to comment through the internet on any proposed
regulation, with a comment period that should generally consist of not
less than 60 days; (b) provide for an ``open exchange'' of information
among Government officials, experts, stakeholders, and the public; (c)
provide timely online access to the rulemaking docket on
<a href="http://Regulations.gov">Regulations.gov</a>; and (d) seek the views of those who are likely to be
affected by rulemaking, even before issuing a notice of proposed
rulemaking?
The proposed rule will have a 30-day comment period and will be
posted on <a href="http://www.regulations.gov">www.regulations.gov</a> to allow the public to comment
meaningfully on its provisions. SBA believes a 30-day comment period is
reasonable and sufficient for this proposed rule for several reasons.
First, SBA believes a 30-day comment period is sufficient for this
proposed rule because the rule does not propose significant changes to
the programs that are not statutorily mandated. In drafting this
proposed rule, SBA sought to minimize the impact to the certification
process as the certification authority moves to SBA and generally
adopted VA's existing program guidelines in 38 CFR part 74. Second, SBA
anticipates that this proposed rule will receive a substantial number
of comments from the public, even with a 30-day comment period. Third,
SBA and VA have taken significant efforts to engage the veteran small
business community during preparations for the transfer and have used
this engagement as consideration while drafting this proposed rule.
Finally, a 30-day comment period is needed due to the time required to
promulgate a final rule to be effective on January 1, 2023. SBA intends
to use these comments as an integral component in drafting the final
rule.
3. Flexibility: Did the agency identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public?
This rulemaking is necessary to satisfy statutory requirements to
implement section 862 of 2021 NDAA 2021. A description of the need for
this regulatory action and the benefits and costs associated with this
action, including possible distributional impacts that relate to
Executive Order 13563, are included above in the Regulatory Impact
Analysis under Executive Order 12866.
Congressional Review Act (5 U.S.C. 801-808)
The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a ``major rule'' may take effect, the
agency promulgating the rule must submit a rule report, which includes
a copy of the rule, to each House of the Congress and to the
Comptroller General of the United States. SBA will submit a report
containing this rulemaking and other required information to the U.S.
Senate, the U.S. House of Representatives, and the Comptroller General
of the United States. A major rule cannot take effect until 60 days
after it is published in the Federal Register. This rulemaking has been
reviewed and determined by OMB not to be a ``major rule'' under 5
U.S.C. 804(2).
Paperwork Reduction Act, 44 U.S.C. Ch. 35
In carrying out its statutory mandate to certify VO SBC and SDVO
SBC firms, SBA intends to collect information from VO SBC and SDVO SBC
applicants or participants through an online application system. This
collection of information will require submission or retention of
documents that support the applicant's certification and continued
eligibility.
SBA intends to implement a certification and information collection
platform that replicates the currently approved information collection
by VA's CVE (OMB Control Number 2900-0675). In other words, the
information collected by SBA will include eligibility documents
previously collected by VA. SBA does not anticipate that these changes
would impact the content of the information currently collected or add
additional burden to what is currently required by VA for verification.
As discussed above, this rule proposes to fully implement the
statutory requirement for small business concerns to be certified by
SBA in order to be awarded a set-aside or sole source contract under
the Veterans Certification Program. As a result of these changes, the
rule proposes to eliminate SDVO SBC self-certification and set the
standards for certification by SBA. SBA anticipates that these changes
would impact firms currently self-certifying; however, this impact
would be minimal as this information is already held by applicants
during the ordinary course of business and would require minimum
preparation prior to submission.
At this time, SBA does not have an OMB-approved method for
collection but intends to have approval for the collection of
information before the rule is finalized.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires
administrative agencies to consider the effect of their actions on
small entities, small
[[Page 40150]]
nonprofit enterprises, and small local governments. According to the
Regulatory Flexibility Act (RFA), 5 U.S.C. 601, when an agency issues a
rulemaking, it must prepare a regulatory flexibility analysis to
address the impact of the rule on small entities. However, section 605
of the RFA allows an agency to certify a rule, in lieu of preparing an
analysis, if the rulemaking is not expected to have a significant
economic impact on a substantial number of small entities. The RFA
defines ``small entity'' to include ``small businesses,'' ``small
organizations,'' and ``small governmental jurisdictions.'' This
proposed rule concerns various aspects of SBA's contracting programs.
As such, the rule relates to small business concerns, but would not
affect ``small organizations'' or ``small governmental jurisdictions.''
SBA's contracting programs generally apply only to ``business
concerns'' as defined by SBA regulations, in other words, to small
businesses organized for profit. ``Small organizations'' or ``small
governmental jurisdictions'' are non-profits or governmental entities
and do not generally qualify as ``business concerns'' within the
meaning of SBA's regulations.
As stated in the regulatory impact analysis, this rulemaking will
impact approximately 21,468 service-disabled veteran-owned small
businesses. If adopted in final form, these businesses will have to
apply to SBA for certification. However, SBA has proposed to minimize
the impact on VO SBCs and SDVO SBCs by accepting verifications already
received from VA's CVE program during the term of the firm's
eligibility period, and by providing SDVO SBC firms that self-certify a
one-year grace period to apply for certification. The additional costs
to VO SBCs and SDVO SBCs for certification should be minimal, because
the required documentation already exists and is maintained in the
normal course of business: such as articles of incorporation, bylaws,
stock ledgers or certificates, tax records, etc. In addition,
applicants must already provide this information to VA's CVE for
verification. SBA does not anticipate that these changes would impact
the content of the information currently collected. Thus, the
Administrator certifies that the rulemaking is not expected to have a
significant economic impact on a substantial number of small entities.
List of Subjects
13 CFR Part 121
Administrative practice and procedure, Government procurement,
Government property, Grant programs--business, Individuals with
disabilities, Loan programs--business, Small businesses.
13 CFR Part 125
Government contracts, Government procurement, Reporting and
recordkeeping requirements, Small businesses, Technical assistance.
13 CFR Part 128
Government contracts, Government procurement, Reporting and
recordkeeping requirements, Small businesses, Technical assistance,
Veterans.
For the reasons stated in the preamble, SBA proposes to amend 13
CFR chapter I as follows:
PART 121--SMALL BUSINESS SIZE REGULATIONS
0
1. The authority citation for part 121 is revised to read as follows:
Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, 694a(9),
and 9012.
Sec. 121.103 [Amended]
0
2. Amend Sec. 121.103 by removing the references to ``Sec.
125.18(b)(2) and (3)'' in paragraph (h)(1)(ii) and adding in their
place a reference to ``Sec. 128.402(b)(2) and (3)''.
Sec. 121.404 [Amended]
0
3. Amend Sec. 121.404 by removing the reference to ``Sec.
125.18(b)(2) and (3)'' in paragraph (d) and adding in its place a
reference to ``Sec. 128.402(b)(2) and (3)''.
PART 125--GOVERNMENT CONTRACTING PROGRAMS
0
4. The authority citation for part 125 is revised to read as follows:
Authority: 15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657b,
and 657r.
Subparts A through F [Removed]
0
5. Remove subparts A through F, consisting of Sec. Sec. 125.11 through
125.100.
0
6. Add part 128 to read as follows:
PART 128--VETERANS CERTIFICATION PROGRAM
Subpart A--Provisions of General Applicability
Sec.
128.100 What is the purpose of this part?
128.101 What type of assistance is available under this part?
128.102 What definitions are important in the Veterans Certification
Program?
Subpart B--Eligibility Requirements for the Veterans Certification
Program
Sec.
128.200 What are the requirements a concern must meet to qualify as
a VO SBC or SDVO SBC?
128.201 What other eligibility requirements apply for individuals or
businesses?
128.202 Who does SBA consider to own a VO SBC or SDVO SBC?
128.203 Who does SBA consider to control a VO SBC or SDVO SBC?
128.204 What size standards apply to VO SBCs and SDVO SBCs?
Subpart C--Certification of VO SBC or SDVO SBC Status
Sec.
128.300 How is a concern certified as a VO SBC or SDVO SBC?
128.301 Where must an application be filed?
128.302 How does SBA process applications for certification?
128.303 What must a concern submit to apply for VO SBC or SDVO SBC
certification?
128.304 Can an Applicant appeal SBA's initial decision to deny an
application?
128.305 Can an Applicant or Participant reapply for certification?
128.306 What length of time may a business participate in SBA's
Veterans Certification Program?
128.307 What are a Participant's ongoing obligations to SBA?
128.308 What is a certification examination and what will SBA
examine?
128.309 What are the ways a business may exit certification status?
128.310 What are the procedures for decertification?
Subpart D--Federal Contract Assistance
Sec.
128.400 What are VO and SDVO contracts?
128.401 What requirements must a VO SBC or SDVO SBC meet to submit
an offer on a contract?
128.402 May a joint venture submit an offer on a VO SBC or SDVO SBC
requirement?
128.403 What requirements are not available for VO or SDVO
contracts?
128.404 When may a contracting officer set aside a procurement for
VO SBCs or SDVO SBCs?
128.405 When may a contracting officer award sole source contracts
to VO SBCs and SDVO SBCs?
128.406 Are there VO or SDVO contracting opportunities at or below
the simplified acquisition threshold?
128.407 May SBA appeal a contracting officer's decision not to make
a procurement available for award as an SDVO contract?
128.408 What is the process for such an appeal?
Subpart E--Protests Concerning VO SBCs and SDVO SBCs
Sec.
128.500 What are the requirements for filing a VO SBC and SDVO SBC
status protest?
[[Page 40151]]
Subpart F--Penalties and Retention of Records
Sec.
128.600 What are the requirements for representing VO SBC or SDVO
SBC status, and what are the penalties for misrepresentation?
128.601 What must a concern do in order to be identified as a SDVO
SBC in any Federal procurement databases?
Subpart G--Surplus Personal Property for Veteran-Owned Small Business
Programs
Sec.
128.700 How does a small business concern owned and controlled by
veterans obtain Federal surplus personal property?
Authority: 15 U.S.C. 632(q), 634(b)(6), 644, 645, 657f, 657f-1.
Subpart A--Provisions of General Applicability
Sec. 128.100 What is the purpose of this part?
Section 8127 of Title 38 within the U.S. Code (38 U.S.C. 8127)
authorizes certain procurement mechanisms to provide Veteran-Owned
Small Business Concerns (VO SBC) and Service-Disabled Veteran-Owned
Small Business Concerns (SDVO SBC) with contracting assistance
opportunities at the Department of Veterans Affairs (VA). Section 36 of
the Small Business Act (15 U.S.C. 657f) authorizes certain procurement
mechanisms to provide SDVO SBCs with contracting assistance
opportunities across the Federal Government. In addition, sections 36
and 36A of the Small Business Act (15 U.S.C. 657f,657f-1) authorize the
Small Business Administration (SBA) to certify the status of VO and
SDVO SBCs. This part implements these mechanisms and ensures that the
program created, referred to as the Veterans Certification Program, is
substantially related to this important congressional goal in
accordance with applicable law.
Sec. 128.101 What type of assistance is available under this part?
Contracting officers are authorized to restrict competition or
award sole source contracts or orders to eligible Service-Disabled
Veteran-Owned Small Businesses. In addition, 48 CFR chapter 8
authorizes VA contracting officers to restrict competition or award
sole source contracts or orders to eligible Veteran-Owned and Service-
Disabled Veteran-Owned Small Businesses.
Sec. 128.102 What definitions are important in the Veterans
Certification Program?
Applicant means a firm applying for inclusion in the certification
database.
Contracting officer has the meaning given such term in section 2101
of the Office of Federal Procurement Policy Act (41 U.S.C. 2101).
Day-to-day operations of a firm means the marketing, production,
sales, and administrative functions of the firm.
Eligible individual means a veteran, service-disabled veteran, or
surviving spouse, as defined in the United States Code and this part.
ESOP has the meaning given the term ``employee stock ownership
plan'' in section 4975(e)(7) of the Internal Revenue Code of 1986 (26
U.S.C. 4975(e)(7)).
Extraordinary circumstances, for purposes of this part, are only
the following:
(1) Adding a new equity stakeholder;
(2) Dissolution of the company;
(3) Sale of the company;
(4) The merger of the company; and
(5) Company declaring bankruptcy.
Interested party means the contracting activity's contracting
officer, SBA, any concern that submits an offer for a specific sole
source or set-aside VO or SDVO contract or order (including Multiple
Award Contracts), or any concern that submitted an offer in full and
open competition and its opportunity for award will be affected by a
reserve of an award given to a VO or SDVO SBC.
Joint venture is an association of two or more business concerns
for which purpose they combine their efforts, property, money, skill,
or knowledge in accordance with this part. A joint venture must be
comprised of at least one service-disabled veteran-owned (or veteran-
owned as applicable) small business. For VA contracts, a joint venture
must be in the form of a separate legal entity.
Negative control includes, but is not limited to, instances where a
minority shareholder has the ability, under the concern's charter, by-
laws, or shareholder's agreement, to prevent a quorum or otherwise
block action by the board of directors or shareholders.
Non-veteran means any individual who does not claim veteran status,
or upon whose status an Applicant or Participant does not rely in
qualifying for certification.
Participant means a veteran-owned or service-disabled veteran-owned
small business concern that has certified status with SBA.
Permanent caregiver, for purposes of this part, is the spouse, or
an individual, 18 years of age or older, who is legally designated, in
writing, to undertake responsibility for managing the well-being of the
service-disabled veteran with a permanent and severe disability, as
determined by the Department of Veterans Affairs' Veterans Benefits
Administration, to include housing, health and safety. A permanent
caregiver may, but does not need to, reside in the same household as
the service-disabled veteran with a permanent and severe disability. In
the case of a service-disabled veteran with a permanent and severe
disability lacking legal capacity, the permanent caregiver shall be a
parent, guardian, or person having legal custody. There may be no more
than one permanent caregiver per service-disabled veteran with a
permanent and severe disability.
(1) A permanent caregiver may be appointed, in a number of ways,
including:
(i) By a court of competent jurisdiction;
(ii) By the Department of Veterans Affairs, National Caregiver
Support Program, as the Primary Family Caregiver of a Veteran
participating in the Program of Comprehensive Assistance for Family
Caregivers (this designation is subject to the Veteran and the
caregiver meeting other specific criteria as established by law and the
Secretary and may be revoked if the eligibility criteria do not
continue to be met); or
(iii) By a legal designation.
(2) Any appointment of a permanent caregiver must in all cases be
accompanied by a written determination from the Department of Veterans
Affairs that the veteran has a permanent and total service-connected
disability as set forth in 38 CFR 3.340 for purposes of receiving
disability compensation or a disability pension. The appointment must
also delineate why the permanent caregiver is given the appointment,
must include the consent of the veteran to the appointment and how the
appointment would contribute to managing the veteran's well-being.
Primary industry classification means the six-digit North American
Industry Classification System (NAICS) code designation which best
describes the primary business activity of the Participant. The NAICS
code designations are described in the NAICS Manual published by the
U.S. Office of Management and Budget.
Principal place of business means the business location where the
individuals who manage the concern's day-to-day day operations spend
most working hours and where top management's current business records
are kept. If the office from which management is directed and where the
current business records are kept are in different locations, SBA will
determine the principal place of business for program purposes.
Service-connected has the meaning given that term in 38 U.S.C.
101(16).
[[Page 40152]]
Service-disabled veteran is a veteran who possesses either a valid
disability rating letter issued by the Department of Veterans Affairs,
establishing a service-connected rating between 0 and 100 percent, or a
valid disability determination from the Department of Defense or is
registered in the Beneficiary Identification and Records Locator
Subsystem or successor system, maintained by Department of Veterans
Affairs' Veterans Benefits Administration as a service-disabled
veteran. Reservists or members of the National Guard disabled from a
disease or injury incurred or aggravated in line of duty or while in
training status also qualify.
Service-disabled veteran with a permanent and severe disability
means a veteran with a service-connected disability that has been
determined by the Department of Veterans Affairs, in writing, to have a
permanent and total service-connected disability as set forth in 38 CFR
3.340 for purposes of receiving disability compensation or a disability
pension.
Small business concern means, at the time of qualification, a
concern that, with its affiliates, meets the size standard
corresponding to any NAICS code under which it currently conducts
business activities, pursuant to part 121 of this chapter. At time of
contract offer, a VO or SDVO SBC must be small within the size standard
corresponding to the NAICS code assigned to the contract.
Surviving spouse has the meaning given the term in 38 U.S.C.
101(3).
Unconditional ownership means ownership that is not subject to
conditions precedent, conditions subsequent, executory agreements,
voting trusts, restrictions on or assignments of voting rights, or
other arrangements causing or potentially causing ownership benefits to
go to another (other than after death or incapacity). The pledge or
encumbrance of stock or other ownership interest as collateral,
including seller-financed transactions, does not affect the
unconditional nature of ownership if the terms follow normal commercial
practices and the owner retains control absent violations of the terms.
VA is the U.S. Department of Veterans Affairs.
Veteran has the meaning given the term in 38 U.S.C. 101(2). A
Reservist or member of the National Guard called to Federal active duty
or disabled from a disease or injury incurred or aggravated in line of
duty or while in training status also qualifies as a veteran.
Veterans Affairs Acquisition Regulation (VAAR) is the set of rules
that specifically govern requirements exclusive to VA prime and
subcontracting actions. The VAAR, 48 CFR chapter 8, supplements the
Federal Acquisition Regulation (FAR) in 48 CFR chapter 1, which
contains guidance applicable to most Federal agencies.
Subpart B--Eligibility Requirements for the Veterans Certification
Program
Sec. 128.200 What are the requirements a concern must meet to qualify
as a VO SBC or SDVO SBC?
(a) Qualification as a Veteran-Owned Small Business Concern. To
qualify as a VO SBC, a business entity must be:
(1) A small business concern under the size standard corresponding
to any NAICS code under which it currently conducts business
activities;
(2) Not less than 51 percent of which is owned by one or more
veterans or, in the case of any publicly owned business, not less than
51 percent of the stock (not including any stock owned by an ESOP) of
which is owned by one or more veterans; and
(3) The management and daily business operations of which are
controlled by one or more veterans.
(b) Qualification as a Service-Disabled Veteran-Owned SBC. To
qualify as an SDVO SBC, a business entity must be:
(1) A small business concern under the size standard corresponding
to any NAICS code under which it currently conducts business
activities;
(2) Not less than 51 percent of which is owned by one or more
service-disabled veterans or, in the case of any publicly-owned
business, not less than 51 percent of the stock (not including any
stock owned by an ESOP) of which is owned by one or more service-
disabled veterans; and
(3) The management and daily business operations of which are
controlled by one or more service-disabled veterans or, in the case of
a veteran with a disability that is rated by the Secretary of Veterans
Affairs as a permanent and total disability who are unable to manage
the daily business operations of such concern, the spouse or permanent
caregiver of such veteran.
(c) Veteran-Owned SBC and Service-Disabled Veteran-Owned SBC
certifications. (1) A concern must be certified as a VO or SDVO SBC
pursuant to Sec. 128.300 in order to be awarded a VO or SDVO set-aside
or sole source contract.
(2) Other small business concerns that do not seek SDVO set-aside
or sole source contracts may continue to self-certify their status,
receive prime contract or subcontract awards outside the programs, and
count toward an agency's goal for awards.
Sec. 128.201 What other eligibility requirements apply for
individuals or businesses?
(a) Suspension and debarment. In order to be eligible for VO or
SDVO SBC certification and to remain certified, the concern and any of
its owners must not have an active exclusion in the System for Award
Management at the time of application or recertification or at any time
during the concern's period of eligibility. If, after certifying the
Participant's eligibility, SBA discovers that a firm has an active
exclusion, SBA will remove the Participant from the certification
database immediately, notwithstanding the provisions of Sec. 128.308.
(b) Good character. Individuals having an ownership or control
interest in certified businesses must have good character. If, after
certifying a Participant's eligibility, the person(s) controlling the
Participant is found to lack good character, SBA will immediately
terminate the Participant's certification, notwithstanding the
provisions of Sec. 128.310.
(c) False statements. If, during the processing of an application,
SBA determines, by a preponderance of the evidence standard, that an
Applicant has knowingly submitted false information, regardless of
whether correct information would cause SBA to deny the application,
and regardless of whether correct information was given to SBA in
accompanying documents, SBA will deny the application. If, after
certifying the Participant's eligibility, SBA discovers that false
statements or information have been submitted by a firm, SBA will
remove the Participant from the certification database immediately,
notwithstanding the provisions of Sec. 128.310. Whenever SBA
determines that the Applicant submitted false information, the matter
will be referred to the SBA Office of Inspector General for review. In
addition, SBA may request that debarment proceedings be initiated by
the agency.
(d) Financial obligations. Neither an Applicant firm nor any of its
eligible individuals that fail to pay significant financial
obligations, including unresolved tax liens and defaults on Federal
loans, other government-assisted financing, owed to the Federal
Government is eligible for certification. However, a firm will not be
ineligible to participate in the Veterans Certification Program if the
firm or the affected principals can demonstrate that the financial
obligations owed have been settled, discharged, or forgiven by the
Federal Government. If after certifying the Participant's eligibility
SBA discovers that the Participant no longer
[[Page 40153]]
satisfies this requirement, SBA will remove the Participant from the
certification database in accordance with Sec. 128.310.
(e) Protest decisions or other negative findings. Any firm verified
in the certification database that is found to be ineligible by a VO or
SDVO status protest decision will be immediately removed from the
certification database, notwithstanding the provisions of Sec.
128.310. Any firm certified in the certification database that is found
to be ineligible due to an SBA protest decision or other negative
finding may be immediately removed from the certification database,
notwithstanding the provisions of Sec. 128.310. Until such time as SBA
receives official notification that the decision is overturned on
appeal or the firm applies for and receives certified status from SBA,
the firm will not be eligible to participate in the Veterans
Certification Program.
(f) System for Award Management (SAM) registration. All Applicants
and Participants must be registered in SAM at <a href="https://www.sam.gov">https://www.sam.gov</a>, or
successor system, prior to application submission.
Sec. 128.202 Who does SBA consider to own a VO SBC or SDVO SBC?
Generally, a concern must be at least 51% unconditionally and
directly owned by one or more veterans, or in the case of an SDVO SBC,
service-disabled veterans. More specifically:
(a) Ownership must be direct. Ownership by one or more veterans, or
in the case of an SDVO SBC, service-disabled veterans, must be direct
ownership. A concern owned principally by another business entity that
is in turn owned and controlled by one or more veterans or service-
disabled veterans does not meet the requirement in this paragraph (a).
Ownership by a trust, such as a living trust, may be treated as the
functional equivalent of ownership by veterans or service-disabled
veterans where the trust is revocable, and veterans or service-disabled
veterans, respectively, are the grantors, trustees, and the current
beneficiaries of the trust.
(b) Ownership of a partnership. In the case of a concern which is a
partnership, at least 51% of aggregate voting interest must be
unconditionally owned by one or more veterans, or in the case of an
SDVO SBC, service-disabled veterans. The ownership must be reflected in
the concern's partnership agreement.
(c) Ownership of a limited liability company. In the case of a
concern which is a limited liability company, at least 51% of each
class of member interest must be unconditionally owned by one or more
veterans, or in the case of an SDVO SBC, service-disabled veterans.
(d) Ownership of a corporation. In the case of a concern which is a
corporation, at least 51% of the aggregate of all stock outstanding and
at least 51% of each class of voting stock outstanding must be
unconditionally owned by one or more veterans, or in the case of an
SDVO SBC, service-disabled veterans. In the case of a publicly-owned
business, not less than 51 percent of the stock (not including any
stock owned by an ESOP) must be unconditionally owned by one or more
veterans.
(e) Stock options' effect on ownership. In determining
unconditional ownership, SBA will disregard any unexercised stock
options or similar agreements held by veterans, or in the case of an
SDVO SBC, service-disabled veterans. However, any unexercised stock
options or similar agreements (including rights to convert non-voting
stock or debentures into voting stock) held by non-veterans or non-
service-disabled veterans, in the case of an SDVO SBC, will be treated
as exercised, except for any ownership interests which are held by
investment companies licensed under 15 U.S.C. 681 et seq.
(f) Change of ownership. A concern may change its ownership or
business structure so long as one or more veterans, or in the case of
an SDVO SBC, service-disabled veterans own and control it after the
change. A concern must notify SBA of a change of ownership in
accordance with Sec. 128.307 and attest to continued eligibility.
(g) Dividends and distributions. One or more veterans or, in the
case of an SDVO SBC, service-disabled veterans must be entitled to
receive:
(1) At least 51 percent of the annual distribution of profits paid
to the owners of a corporation, partnership, or limited liability
company concern;
(2) 100 percent of the value of each share of stock owned by them
in the event that the stock or member interest is sold;
(3) At least 51 percent of the retained earnings of the concern and
100 percent of the unencumbered value of each share of stock or member
interest owned in the event of dissolution of the corporation,
partnership, or limited liability company; and
(4) An eligible individual's ability to share in the profits of the
concern must be commensurate with the extent of his/her ownership
interest in that concern.
(h) Community property. Ownership will be determined without regard
to community property laws.
(i) Surviving spouse. (1) A small business concern owned and
controlled by one or more service-disabled veterans immediately prior
to the death of a service-disabled veteran who was the owner of the
concern, the death of whom causes the concern to be less than 51
percent owned by one or more service-disabled veterans, will continue
to qualify as a small business concern owned and controlled by service-
disabled veterans during the time period specified in paragraph (i)(2)
of this section if:
(i) The surviving spouse of the deceased veteran acquires such
veteran's ownership interest in such concern;
(ii) Such veteran had a service-connected disability (as defined in
38 U.S.C. 101(16)); and
(iii) For a Participant, immediately prior to the death of such
veteran, and during the period described in paragraph (i)(2) of this
section, the small business concern is included in the certification
database.
(2) The time period described in paragraph (i)(1)(iii) of this
section is the time period beginning on the date of the veteran's death
and ending on the earlier of--
(i) The date on which the surviving spouse remarries;
(ii) The date on which the surviving spouse relinquishes an
ownership interest in the small business concern;
(iii) In the case of a surviving spouse of a veteran with a
service-connected disability rated as 100 percent disabling or who dies
as a result of a service-connected disability, is 10 years after the
date of the death of the veteran; or
(iv) In the case of a surviving spouse of a veteran with a service-
connected disability rated as less than 100 percent disabling who does
not die as a result of a service-connected disability, is 3 years after
the date of the death of the veteran.
Sec. 128.203 Who does SBA consider to control a VO or SDVO SBC?
(a) General. To be an eligible VO SBC, the management and daily
business operations of the concern must be controlled by one or more
veterans. To be an eligible SDVO SBC, the management and daily business
operations of the concern must be controlled by one or more service-
disabled veterans (or in the case of a veteran with permanent and
severe disability, the spouse or permanent caregiver of such veteran).
Control by one or more veterans, or in the case of
[[Page 40154]]
an SDVO SBC, service-disabled veterans, means that both the long-term
decision-making and the day-to-day management and administration of the
business operations must be conducted by one or more veterans or
service-disabled veterans (or in the case of a veteran with permanent
and severe disability, the spouse or permanent caregiver of such
veteran).
(b) Managerial position and experience. A veteran, or in the case
of an SDVO SBC, a service-disabled veteran (or in the case of a
service-disabled veteran with permanent and severe disability, the
spouse or permanent caregiver of such veteran) must hold the highest
officer position in the concern (usually President or Chief Executive
Officer (CEO)) and must have managerial experience of the extent and
complexity needed to run the concern. The veteran or service-disabled
veteran manager (or in the case of a veteran with permanent and severe
disability, the spouse or permanent caregiver of such veteran) need not
have the technical expertise or possess the required license to be
found to control the concern if the veteran or service-disabled veteran
can demonstrate that he or she has ultimate managerial and supervisory
control over those who possess the required licenses or technical
expertise.
(c) Control over a partnership. In the case of a partnership, one
or more veterans, or in the case of an SDVO SBC, service-disabled
veterans (or in the case of a veteran with permanent and severe
disability, the spouse or permanent caregiver of such veteran) must
serve as general partners, with control over all partnership decisions.
(d) Control over a limited liability company. In the case of a
limited liability company, one or more veterans, or in the case of an
SDVO SBC, service-disabled veterans (or in the case of a veteran with
permanent or severe disability, the spouse or permanent caregiver of
such veteran) must serve as management members, with control over all
decisions of the limited liability company.
(e) Control over a corporation. One or more veterans, or in the
case of an SDVO SBC, service-disabled veterans (or in the case of a
veteran with permanent and severe disability, the spouse or permanent
caregiver of such veteran) must control the Board of Directors of the
concern.
(1) SBA will deem veteran or service-disabled veteran individuals
to control the Board of Directors where:
(i) A single veteran or service-disabled veteran individual owns
100% of all voting stock of an Applicant or concern;
(ii) A single veteran or service-disabled veteran individual owns
at least 51% of all voting stock of an Applicant or concern, the
individual is on the Board of Directors and no super majority voting
requirements exist for shareholders to approve corporation actions.
Where super majority voting requirements are provided for in the
concern's articles of incorporation, its by-laws, or by state law, the
veteran or service-disabled veteran individual must own at least the
percent of the voting stock needed to overcome any such super majority
voting requirements; or
(iii) More than one veteran, or in the case of an SDVO SBC,
service-disabled veteran shareholder seeks to qualify the concern
(i.e., no one individual owns 51%), each such individual is on the
Board of Directors, together they own at least 51% of all voting stock
of the concern, no super majority voting requirements exist, and the
veteran or service-disabled veteran shareholders can demonstrate that
they have made enforceable arrangements to permit one of them to vote
the stock of all as a block without a shareholder meeting. Where the
concern has super majority voting requirements, the veteran or service-
disabled veteran shareholders must own at least that percentage of
voting stock needed to overcome any such super majority ownership
requirements. In the case of super majority ownership requirements
where there is more than one eligible individual, the veteran or
service-disabled veteran shareholders can demonstrate that they have
made enforceable arrangements to permit one of them to vote the stock
of all as a block without a shareholder meeting.
(2) Where an Applicant or concern does not meet the requirements
set forth in paragraph (e)(1) of this section, the veteran or service-
disabled veteran individual(s) upon whom eligibility is based must
control the Board of Directors through actual numbers of voting
directors or, where permitted by state law, through weighted voting
(e.g., in a concern having a two-person Board of Directors where one
individual on the Board is a veteran or service-disabled veteran and
one is not, the veteran or service-disabled veteran vote must be
weighted--worth more than one vote--in order for the concern to be
eligible). Where a concern seeks to comply with this paragraph (e)(2):
(i) Provisions for the establishment of a quorum cannot permit non-
veteran or, in the case of an SDVO SBC, non-service-disabled veteran
Directors to control the Board of Directors, directly or indirectly;
and
(ii) Any Executive Committee of Directors must be controlled by
veteran or, in the case of an SDVO SBC, service-disabled veteran
directors unless the Executive Committee can only make recommendations
to and cannot independently exercise the authority of the Board of
Directors.
(3) Non-voting, advisory, or honorary Directors may be appointed
without affecting veteran or service-disabled veteran individuals'
control of the Board of Directors.
(4) Arrangements regarding the structure and voting rights of the
Board of Directors must comply with applicable state law.
(f) Super majority requirements. One or more veteran or, in the
case of an SDVO SBC, service-disabled veterans must meet all super
majority voting requirements, regardless of legal structure of the
Applicant firm. An Applicant must inform the SBA, when applicable, of
any super majority voting requirements provided for in its articles of
incorporation, its by-laws, by state law, or otherwise. Similarly,
after being certified, a Participant must inform the SBA of changes
regarding super majority voting requirements.
(g) Licenses. A firm must obtain and keep current any and all
required permits, licenses, and charters, required to operate the
business.
(h) Unexercised rights. A veteran or, in the case of an SDVO SBC,
service-disabled veteran owner's unexercised right to cause a change in
the control or management of the Applicant concern does not in itself
constitute control and management, regardless of how quickly or easily
the right could be exercised.
(i) Control by non-veterans or non-service-disabled veterans. Non-
veteran, or in the case of an SDVO SBC, non-service-disabled veteran
individuals or entities may not control the firm. There is a rebuttable
presumption that non-veteran or, in the case of an SDVO SBC, non-
service-disabled veteran individuals or entities control or have the
power to control a firm in any of the following circumstances, which
are illustrative only and not inclusive:
(1) The non-veteran or, in the case of an SDVO SBC, non-service-
disabled veteran individual or entity who is involved in the management
or ownership of the firm is a current or former employer or a principal
of a current or former employer of any veteran, in the case of an SDVO
SBC, service-disabled veteran individual upon whom the firm's
eligibility is based. However, a firm may provide evidence to
demonstrate that the relationship does not give the non-veteran or non-
service-disabled veteran
[[Page 40155]]
actual control over the concern and such relationship is in the best
interests of the concern.
(2) One or more non-veterans or, in the case of an SDVO SBC, non-
service-disabled veterans receive compensation from the firm in any
form as directors, officers, or employees, including dividends, that
exceeds the compensation to be received by the highest-ranking officer
(usually CEO or President). The highest-ranking officer may elect to
take a lower amount than the total compensation and distribution of
profits that are received by a non-veteran or, in the case of an SDVO
SBC, non-service-disabled veteran only upon demonstrating that it helps
the concern.
(3) In circumstances where the concern is co-located with another
firm in the same or similar line of business, and that firm or an
owner, director, officer, or manager, or a direct relative of an owner,
director, officer, or manager of that firm owns an equity interest in
the concern.
(4) In circumstances where the concern shares employees, resources,
equipment, or any type of services, whether by oral or written
agreement with another firm in the same or similar line of business,
and that firm or an owner, director, officer, or manager, or a direct
relative of an owner, director, officer, or manager of that firm owns
an equity interest in the concern.
(5) A non-veteran or, in the case of an SDVO SBC, non-service-
disabled veteran individual or entity, having an equity interest in the
concern, provides critical financial or bonding support.
(6) In circumstances where a critical license is held by a non-
veteran or, in the case of an SDVO SBC, non-service-disabled
individual, or other entity, the non-veteran or non-service-disabled
individual or entity may be found to control the firm. A critical
license is considered any license that would normally be required of
firms operating in the same field or industry, regardless of whether a
specific license is required on a specific contract.
(7) Business relationships exist with non-veteran or, in the case
of an SDVO SBC, non-service-disabled veteran individuals or entities
which cause such dependence that the Applicant or concern cannot
exercise independent business judgment without great economic risk.
(j) Critical financing. A non-veteran or, in the case of an SDVO
SBC, non-service-disabled veteran individual or entity may be found to
control the concern through loan arrangements with the concern or the
veteran(s)/service-disabled veteran(s). Providing a loan or a loan
guaranty on commercially reasonable terms does not, by itself, give a
non-veteran or non-service-disabled veteran individual or entity the
power to control a firm, but when taken into consideration with other
factors may be used to find that a non-veteran or, in the case of an
SDVO SBC, non-service-disabled veteran firm or individual controls the
concern.
(k) Normal business hours. There is a rebuttable presumption that a
veteran or, in the case of an SDVO SBC, service-disabled veteran does
not control the firm when the veteran or, in the case of an SDVO SBC,
service-disabled veteran is not able to work for the firm during the
normal working hours that businesses in that industry normally work.
This may include, but is not limited to, other full-time or part-time
employment, being a full-time or part-time student, or any other
activity or obligation that prevents the veteran or, in the case of an
SDVO SBC, service-disabled veteran from actively working for the firm
during normal business operating hours.
(l) Close proximity. There is rebuttable presumption that a veteran
or, in the case of an SDVO SBC, service-disabled veteran does not
control the firm if that individual is not located within a reasonable
commute to firm's headquarters and/or job-sites locations, regardless
of the firm's industry. The veteran or, in the case of an SDVO SBC,
service-disabled veteran's ability to answer emails, communicate by
telephone, or to communicate at a distance by other technological
means, while delegating the responsibility of managing the concern to
others is not by itself a reasonable rebuttal.
(m) Exception for ``extraordinary circumstances.'' SBA will not
find that a lack of control exists where a veteran or, in the case of
an SDVO SBC, service-disabled veteran does not have the unilateral
power and authority to make decisions in ``extraordinary
circumstances.'' The only circumstances in which the exception in this
paragraph (m) applies are those articulated in the definition of the
term in Sec. 128.102.
(n) Exception for active duty. Notwithstanding the provisions of
this section requiring a veteran or, in the case of an SDVO SBC,
service-disabled veteran to control the daily business operations and
long-term strategic planning of a concern, where a veteran or, in the
case of an SDVO SBC, service-disabled veteran individual upon whom
eligibility is based is a reserve component member in the United States
military who has been called to active duty, the concern may elect to
designate in writing one or more individuals to control the concern on
behalf of the veteran or, in the case of an SDVO SBC, service-disabled
veteran during the period of active duty. The concern will not be
considered ineligible based on the absence of the veteran or service-
disabled veteran during the period of active duty. The concern must
keep records evidencing the active duty and the written designation of
control and provide those documents to SBA.
Sec. 128.204 What size standards apply to VO SBCs and SDVO SBCs?
(a) At time of contract offer, a VO or SDVO SBC must be small
within the size standard corresponding to the NAICS code assigned to
the contract.
(b) If the contracting officer is unable to verify that the VO or
SDVO SBC is small, the concern shall be referred to the responsible SBA
Government Contracting Area Director for a formal size determination in
accordance with part 121 of this chapter.
Subpart C--Certification of VO SBC or SDVO SBC Status
Sec. 128.300 How is a concern certified as a VO SBC or SDVO SBC?
(a) A small business concern must be unconditionally owned and
controlled by one or more eligible veterans, in the case of an SDVO
SBC, service-disabled veterans or surviving spouses, have completed the
online application forms, submitted required supplemental documentation
to SBA, and have been examined by SBA.
(b) A certified Participant in SBA's 8(a) Business Development (BD)
Program that is owned and controlled by one or more veterans, or in the
case of SDVO SBC, service-disabled veterans. The eligible individual(s)
for both designations must be the same individual(s) to receive
expedited review.
(c) A certified Participant in SBA's Women Owned Small Business
(WOSB) or Economically Disadvantaged WOSB (EDWOSB) Program that is
owned and controlled by one or more veterans, or in the case of SDVO
SBC, service-disabled veterans. The eligible individual(s) for both
designations must be the same individual(s) to receive expedited
review.
Sec. 128.301 Where must an application be filed?
An application for certification must be electronically filed in
the database located on SBA's web portal. Guidelines and forms are
located on the web portal. Upon receipt of the Applicant's electronic
submission, an acknowledgment message will be dispatched to the concern
containing
[[Page 40156]]
estimated processing time and other information.
Sec. 128.302 How does SBA process applications for certification?
(a) SBA's Director of Government Contracting (D/GC) or designee is
authorized to approve or deny applications for certification. SBA will
receive, review, and examine all certification applications.
(b) SBA, in its sole discretion, may request clarification of
information relating to eligibility at any time in the eligibility
determination process. SBA will take into account any clarifications
made by an Applicant in response to a request for such SBA.
(c) SBA, in its sole discretion, may request additional
documentation at any time in the eligibility determination process.
Failure to adequately respond to the documentation request shall
constitute grounds for a denial or administrative removal.
(d) An Applicant's eligibility will be based on the totality of
circumstances existing on the date of application, except where
clarification is made pursuant to paragraph (b) of this section,
additional documentation is submitted pursuant to paragraph (c) of this
section, as provided in paragraph (e) of this section or in the case of
amended documentation submitted pursuant to Sec. 128.304(a). The
Applicant bears the burden to establish its status as a VO SBC or SDVO
SBC.
(e) Changed circumstances for an Applicant occurring subsequent to
its application and which affect eligibility will be considered and may
constitute grounds for denial of the application. The Applicant must
inform SBA of any changed circumstances that could affect its
eligibility for the program (e.g., ownership, control changes, or
bankruptcy filing) during its application review and may withdraw their
application at that time. The D/GC may propose decertification for any
VO SBC or SDVO SBC that failed to inform SBA of any changed
circumstances that affected its eligibility for the program during the
processing of the application.
(f) The decision of the D/GC to approve or deny an application will
be in writing. A decision to deny certification status will state the
specific reasons for denial and will inform the Applicant of any appeal
rights.
(g) If the D/GC approves the application, the date of the approval
letter is the date of Participant certification for purposes of
determining the Participant's certification term of eligibility. For
approvals contingent on reciprocity due to participation in SBA's other
certification programs (e.g., WOSB or 8(a)), the approval letter will
contain a date for the Vets Program certification which aligns with the
remaining time in the other program(s) in which the Applicant is
participating.
(h) The decision may be sent by mail, commercial carrier, or other
electronic means. It is the responsibility of the Applicant to ensure
all contact information is current in the Applicant's profile.
Sec. 128.303 What must a concern submit to apply for VO SBC or SDVO
SBC certification?
(a) To be certified by SBA as a VO or SDVO SBC, a concern must
provide documents and information demonstrating that it is owned and
controlled by one or more veterans or, in the case of an SDVO SBC,
service-disabled veterans and qualifies as a small business concern as
defined in part 121 of this chapter under the size standard
corresponding to any NAICS code under which it currently conducts
business activities. SBA maintains a list of the minimum required
documents that can be found on SBA's website. A concern may submit
additional documents and information to support its eligibility. The
required documents must be provided to SBA during the application
process electronically. This may include, but is not limited to,
corporate records, business and personal financial records, including
copies of Federal personal and business tax returns as filed with the
Internal Revenue Service, and individual and business banking
information. From the time the Applicant submits the application, the
Applicant must also retain on file, at the principal place of business,
a complete copy of all supplemental documentation required by, and
provided to, SBA for use in certification examinations.
(b) A small business concern that is certified by the 8(a) BD
Program and the individual(s) on whom 8(a) BD Program eligibility is
based is one or more veterans, or service-disabled veterans in the case
of an SDVO SBC, may use documentation of its most recent annual review,
or documentation of its 8(a) acceptance if it has not yet had an annual
review, in support of its application for certification. An Applicant
must certify that there are no material changes in its ownership or
control since its 8(a) certification or annual review and demonstrate
that the individuals who own and control it are veterans or, in the
case of an SDVO SBC, service-disabled veterans.
(c) A small business concern that is certified by the WOSB/EDWOSB
Program and the individual(s) on whom WOSB/EDWOSB Program eligibility
is based is one or more veterans, or service-disabled veterans in the
case of an SDVO SBC, may use documentation of its most recent annual
recertification, or documentation of its acceptance in support of its
application for certification. An Applicant must certify that there are
no material changes in its ownership or control since its WOSB
certification or recertification and demonstrate that the individuals
who own and control it are veterans or, in the case of an SDVO SBC,
service-disabled veterans.
(d) If a concern was decertified or previously denied certification
within the past 3 years, it must include with its application for
certification a full explanation of why it was decertified or denied
certification, and what, if any, changes have been made. If SBA is not
satisfied with the explanation provided, SBA will decline to certify
the concern.
(e) If the concern was decertified for failure to notify SBA of a
material change affecting its eligibility pursuant to Sec. 128.307, it
must include with its application for certification a full explanation
of why it failed to notify SBA of the material change. If SBA is not
satisfied with the explanation provided, SBA will decline to certify
the concern.
Sec. 128.304 Can an Applicant appeal SBA's initial decision to deny
an application?
(a) An Applicant may appeal SBA's decision to deny an application
by filing an appeal with the SBA's Office of Hearings and Appeals (OHA)
after the Applicant receives the denial in accordance with part 134 of
this chapter. The filing party bears the risk that the delivery method
chosen will not result in timely receipt by OHA.
(b) The decision may be sent by mail, commercial carrier, or other
electronic means.
Sec. 128.305 Can an Applicant or Participant reapply for
certification?
(a) Once an application, an appeal of a denial of an application,
or an appeal of a certified status decertification has been denied, or
a certified status decertification which was not appealed has been
issued, the Applicant or Participant shall be required to wait for a
period of 90 calendar days before a new application will be processed
by SBA.
(b) Participants may recertify within 120 calendar days prior to
the termination of their eligibility period. If a Participant is found
to be ineligible, the Participant will forfeit any time remaining on
their eligibility period and will be immediately removed from the
[[Page 40157]]
certification database. An Applicant removed pursuant to this section
may appeal the decision to OHA in accordance with Sec. 128.304. The
date of a new determination letter certifying an Applicant will be the
beginning of the next 3-year eligibility period.
Sec. 128.306 What length of time may a business participate in SBA's
Veterans Certification Program?
(a) A Participant receives an eligibility term of 3 years from the
date of SBA's approval letter establishing certified status. There is
no limitation on the number of times a business may recertify to
continue eligibility past an initial 3-year term.
(b) The Participant must maintain its eligibility during its tenure
and must inform SBA of any changes that may affect its eligibility
within 30 calendar days in accordance with Sec. 128.307.
(c) The eligibility term may be shortened by removal pursuant to
Sec. 128.201, recertification pursuant to Sec. 128.305(b), failure to
maintain certification pursuant to Sec. 138.307, voluntary withdrawal
by the Participant pursuant to Sec. 128.309, decertification pursuant
to Sec. 128.310, or an adverse status protest pursuant to part 134 of
this chapter.
(d) SBA may initiate a certification examination whenever it
receives credible information concerning a Participant's eligibility as
a VO or SDVO SBC. Upon its completion of the examination, SBA will
issue a written decision regarding the continued eligibility status of
the questioned Participant.
(1) If SBA finds that the Participant does not qualify as a VO or
SDVO SBC, the procedures at Sec. 128.310 will apply, except as
provided in Sec. 128.201.
(2) If SBA finds that the Participant continues to qualify as a VO
or SDVO SBC, the original eligibility period remains in effect.
Sec. 128.307 What are a Participant's ongoing obligations to SBA?
Once certified, a VO SBC or SDVO SBC must notify SBA of any
material changes that could affect its eligibility within 30 calendar
days of any such change and attest to continued eligibility. Material
changes include, but are not limited to, a change in the ownership,
business structure, management, or bankruptcy. The notification must be
in writing and must be uploaded into the concern's profile with SBA.
The method for notifying SBA can be found on SBA's web page. A
concern's failure to notify SBA of such a material change may result in
a certification examination as described in Sec. 128.308, and/or
decertification and removal from the certification database for the
program (or any successor system) as a designated certified VO SBC or
SDVO SBC. In addition, SBA may seek the imposition of penalties under
Sec. 128.600.
Sec. 128.308 What is a certification examination and what will SBA
examine?
(a) General. A certification examination is an investigation by SBA
officials, which verifies the accuracy of any statement or information
provided by a certified Participant. Thus, examiners may verify that
the Participant currently meets the eligibility requirements of this
part, and that it met such requirements at the time of its application
or its most recent size recertification. An examination may be
conducted on a random, unannounced basis, or upon receipt of specific
and credible information alleging that a Participant no longer meets
eligibility requirements in this part.
(b) Scope of examination. SBA may conduct the examination at one or
all of the Participant's offices or work sites. SBA will determine the
location(s) of the examination. SBA may review any information related
to the concern's eligibility requirements under this part including,
but not limited to, documentation related to the legal structure,
ownership, and control. Examiners may review any or all of the
organizing documents, financial documents, and publicly available
information as well as any information identified in Sec. 128.303.
Sec. 128.309 What are the ways a business may exit certification
status?
A Participant may:
(a) Voluntarily decertify its status by submitting a written
request to SBA requesting that the concern be removed from public
listing in the certification database; or
(b) Delete its record entirely from the certification database; or
(c) SBA may remove a Participant immediately pursuant to Sec.
128.201; or
(d) SBA may remove a Participant from public listing in the
certification database for good cause upon formal notice to the
Participant in accordance with Sec. 128.310. Examples of good cause
include, but are not limited to, the following:
(1) Submission of false information in the Participant's
application.
(2) Failure by the Participant to maintain its eligibility for
program participation.
(3) Failure by the Participant for any reason, including the death
of an individual upon whom eligibility was based, to maintain
ownership, management, and control by veterans, service-disabled
veterans, or surviving spouses.
(4) Failure by the concern to disclose to SBA the extent to which
non-veteran or, in the case of an SDVO SBC, non-service-disabled
veteran persons or firms participate in the management of the
Participant.
(5) Failure to make required submissions or responses to SBA or its
agents, including a failure to make available financial statements,
requested tax returns, reports, information requested by SBA or SBA's
Office of Inspector General, or other requested information or data
within 30 calendar days of the date of request.
(6) Cessation of the Participant's business operations.
(7) Failure by the concern to provide SBA notification within 30
calendar days of any change in ownership.
(8) Failure to inform SBA of any such changed circumstances, as
outlined in Sec. 128.307.
(9) Failure by the concern to obtain and keep current any and all
required permits, licenses, and charters, including suspension or
revocation of any professional license required to operate the
business.
(10) SBA will decertify a concern found to be ineligible during a
status protest.
(e) The examples of good cause listed in paragraph (d) of this
section are intended to be illustrative only. Other grounds for
decertifying a Participant include any other cause of so serious or
compelling a nature that it affects the present responsibility of the
Participant.
Sec. 128.310 What are the procedures for decertification?
(a) General. When SBA believes that a Participant's certified
status should be cancelled prior to the expiration of its eligibility
term, SBA will notify the Participant in writing. The Notice of
Proposed Decertification Letter will set forth the specific facts and
reasons for SBA's findings and will notify the Participant that it has
30 calendar days from the date SBA sent the notice to submit a written
response to SBA explaining why the proposed ground(s) should not
justify decertification.
(b) Recommendation and decision. Following the 30-day response
period, the D/GC will consider any information submitted by the
Participant. Upon determining that decertification is not warranted,
the D/GC will notify the Participant in writing. If decertification
appears warranted, the D/GC will determine whether to cancel the
Participant's certified status.
[[Page 40158]]
(c) Notice requirements. Upon deciding that decertification is
warranted, the D/GC will issue a Notice of Certified Status
Decertification. The Notice will set forth the specific facts and
reasons for the decision and will advise the concern that it may re-
apply after it has met all eligibility criteria in this part and
completed the waiting period as set forth in Sec. 128.305(a).
(d) Effect of decertification. After the effective date of
decertification, a Participant is no longer eligible to appear as
``certified'' in the certification database. However, such concern is
obligated to perform previously awarded contracts to the completion of
their existing term of performance.
(e) Appeals. A Participant may file an appeal with OHA concerning
the Notice of Certified Status Decertification decision in accordance
with part 134 of this chapter. The decision on the appeal shall be
final.
Subpart D--Federal Contract Assistance
Sec. 128.400 What are VO and SDVO contracts?
(a) For VA procurements, the VAAR specifically governs requirements
exclusive to VA prime and subcontracting actions. The VAAR, 48 CFR
chapter 8, supplements the Federal Acquisition Regulation (FAR), which
contains guidance applicable to most Federal agencies.
(b) For all other SDVO contracts, including Multiple Award
Contracts (see Sec. 125.1 of this chapter), such are available to an
SDVO SBC through any of the following procurement methods:
(1) Sole source awards to an SDVO SBC;
(2) Set-aside awards, including partial set-asides, based on
competition restricted to SDVO SBCs;
(3) Awards based on a reserve for SDVO SBCs in a solicitation for a
Multiple Award Contract (see Sec. 125.1 of this chapter); or
(4) Orders set aside for SDVO SBCs against a Multiple Award
Contract, which had been awarded in full and open competition.
Sec. 128.401 What requirements must a VO SBC or SDVO SBC meet to
submit an offer on a contract?
(a) General. (1) In order for a concern to submit an offer and be
eligible for the award of a VO or SDVO set-aside or sole source
contract, the concern must qualify as a small business concern under
the size standard corresponding to the NAICS code(s) assigned to the
contract and be a certified VO SBC or SDVO SBC, or represent that it
has submitted a complete application for VO SBC or SDVO SBC
certification to SBA and has not received a negative eligibility
determination regarding that application.
(2) If a concern is not certified by SBA at the time of offer, the
concern must represent to the contracting officer for the particular
contract that it has submitted a complete application to SBA for VO SBC
or SDVO SBC certification.
(i) If a concern becomes the apparent successful offeror while its
application for VO or SDVO SBC certification is pending, the
contracting officer for the particular contract must immediately inform
SBA's D/GC. SBA will then prioritize the concern's VO or SDVO SBC
application and make a determination regarding the firm's status within
15 calendar days from the date that SBA received the contracting
officer's notification.
(ii) If the contracting officer does not receive an SBA
determination within 15 calendar days after the SBA's receipt of the
notification, the contracting officer may presume that the apparently
successful offeror is not an eligible VO SBC or SDVO SBC and may award
the subject contract accordingly to the next highest evaluated offeror,
unless the contracting officer grants SBA an extension to the 15-day
response period.
(b) Joint ventures. A business concern seeking a VO SBC or SDVO SBC
contract as a joint venture may submit an offer if the joint venture
meets the requirements as set forth in Sec. 128.402.
(c) Non-manufacturers. A certified VO SBC or SDVO SBC which is a
non-manufacturer may submit an offer on a VO or SDVO contract for
supplies if it meets the requirements of the non-manufacturer rule set
forth at Sec. 121.406(b)(1) of this chapter.
(d) Multiple Award Contracts--(1) VO or SDVO status. With respect
to Multiple Award Contracts, orders issued against a Multiple Award
Contract, and Blanket Purchase Agreements issued against a Multiple
Award Contract:
(i) SBA determines VO or SDVO small business eligibility for the
underlying Multiple Award Contract as of the date a business concern
certifies its status as a certified VO or SDVO small business concern
as part of its initial offer (or other formal response to a
solicitation), which includes price, unless the firm was required to
recertify under paragraph (e) of this section.
(A) Unrestricted Multiple Award Contracts or set-aside Multiple
Award Contracts for other than VO or SDVO. For an unrestricted Multiple
Award Contract or other Multiple Award Contract not specifically set
aside for VO or SDVO small business concerns, if a business concern is
a certified as a VO or SDVO small business concern at the time of offer
and contract-level recertification for the Multiple Award Contract, it
is a VO or SDVO small business concern for goaling purposes for each
order issued against the contract, unless a contracting officer
requests recertification as a VO or SDVO small business for a specific
order or Blanket Purchase Agreement. Except for orders and Blanket
Purchase Agreements issued under any Federal Supply Schedule contract,
if an order or a Blanket Purchase Agreement under an unrestricted
Multiple Award Contract is set aside exclusively for VO or SDVO small
business concerns, a concern must recertify that it qualifies as a VO
or SDVO small business concern at the time it submits its initial
offer, which includes price, for the particular order or Blanket
Purchase Agreement. However, where the underlying Multiple Award
Contract has been awarded to a pool of concerns for which certified VO
or SDVO small business status is required, if an order or a Blanket
Purchase Agreement under that Multiple Award Contract is set aside
exclusively for concerns in the certified VO or SDVO small business
pool, concerns need not recertify their status as VO or SDVO small
business concerns (unless a contracting officer requests size
certifications with respect to a specific order or Blanket Purchase
Agreement).
(B) VO or SDVO set-aside Multiple Award Contracts. For a Multiple
Award Contract that is specifically set aside for a VO or SDVO small
business concern, if a business concern is a VO or SDVO small business
concern at the time of offer and contract-level recertification for the
Multiple Award Contract, it is a VO or SDVO small business concern for
each order issued against the contract, unless a contracting officer
requests recertification as a VO or SDVO small business concern for a
specific order or Blanket Purchase Agreement.
(ii) SBA will determine VO or SDVO small business status at the
time of initial offer (or other formal response to a solicitation),
which includes price, for an order or an Agreement issued against a
Multiple Award Contract if the contracting officer requests a new VO or
SDVO small business certification for the order or Agreement.
(2) Total set-aside contracts. The VO SBC or SDVO SBC must comply
with the applicable limitations on subcontracting provisions (see Sec.
125.6 of this chapter) and the nonmanufacturer rule (see Sec.
121.406(b) of this chapter), if applicable, in the performance of a
contract totally set aside for VO SBCs or
[[Page 40159]]
SDVO SBCs. However, the contracting officer, in their discretion, may
require the concern to perform the applicable amount of work or comply
with the nonmanufacturer rule for each order awarded under the
contract.
(3) Partial set-aside contracts. For orders awarded under a partial
set-aside contract, the VO SBC or SDVO SBC must comply with the
applicable limitations on subcontracting provisions (see Sec. 125.6 of
this chapter) and the nonmanufacturer rule (see Sec. 121.406(b) of
this chapter), if applicable, during each performance period of the
contract (e.g., during the base term and then during each option period
thereafter). For orders awarded under the non-set-aside portion, the VO
SBC or SDVO SBC need not comply with any limitations on subcontracting
or nonmanufacturer rule requirements. However, the contracting officer,
in their discretion, may require the concern to perform the applicable
amount of work or comply with the nonmanufacturer rule for each order
awarded under the contract.
(4) Orders. The VO SBC or SDVO SBC must comply with the applicable
limitations on subcontracting provisions (see Sec. 125.6 of this
chapter) and the nonmanufacturer rule (see Sec. 121.406(b) of this
chapter), if applicable, in the performance of each individual order
that has been set aside for VO SBCs or SDVO SBCs.
(5) Reserves. The VO SBC or SDVO SBC must comply with the
applicable limitations on subcontracting provisions (see Sec. 125.6 of
this chapter) and the nonmanufacturer rule (see Sec. 121.406(b) of
this chapter), if applicable, in the performance of an order that is
set aside for VO SBCs or SDVO SBCs. However, the VO SBC or SDVO SBC
will not have to comply with the limitations on subcontracting
provisions and the nonmanufacturer rule for any order issued against
the Multiple Award Contract if the order is competed amongst VO SBCs or
SDVO SBCs and one or more other-than-small business concerns.
(e) Recertification. (1) A concern that qualifies as a VO SBC or
SDVO SBC at the time of initial offer (or other formal response to a
solicitation), which includes price, including a Multiple Award
Contract, is considered a VO SBC or SDVO SBC throughout the life of
that contract. This means that if a VO SBC or SDVO SBC is qualified at
the time of initial offer for a Multiple Award Contract, then it will
be considered a VO SBC or SDVO SBC for each order issued against the
contract, unless a contracting officer requests a new VO SBC or SDVO
SBC eligibility review in connection with a specific order. Where a
concern later fails to qualify as a VO SBC or SDVO SBC, the procuring
agency may exercise options and still count the award as an award to a
VO SBC or SDVO SBC. However, the following exceptions apply to this
paragraph (e)(1):
(i) Where a contract is novated to another business concern, the
concern that will continue performance on the contract must recertify
its status as a VO SBC or SDVO SBC to the procuring agency or inform
the procuring agency that it does not qualify as a VO SBC or SDVO SBC
within 30 days of the novation approval. If the concern is not a VO SBC
or SDVO SBC, the agency can no longer count the options or orders
issued pursuant to the contract from that point forward towards its VO
or SDVO goals.
(ii) Where a concern that is performing a contract acquires, is
acquired by, or merges with another concern and contract novation is
not required, the concern must, within 30 days of the transaction
becoming final, recertify its VO SBC or SDVO SBC status to the
procuring agency or inform the procuring agency that it no longer
qualifies as a VO SBC or SDVO SBC. If the contractor is not a VO SBC or
SDVO SBC, the agency can no longer count the options or orders issued
pursuant to the contract from that point forward towards its VO or SDVO
goals. The agency and the contractor must immediately revise all
applicable Federal contract databases to reflect the new status.
(iii) Where there has been a VO SBC or SDVO SBC status protest on
the solicitation or contract, see part 134 of this chapter for the
effect of the status determination on the contract award.
(2) For the purposes of VO SBC or SDVO SBC contracts (including
Multiple Award Contracts) with durations of more than five years
(including options), a contracting officer must request that a business
concern recertify its VO SBC or SDVO SBC status no more than 120
calendar days prior to the end of the fifth year of the contract, and
no more than 120 calendar days prior to exercising any option. If the
business is unable to recertify its VO or SDVO status, the procuring
agency may no longer be able to count the options or orders issued
pursuant to the contract, from that point forward, towards its VO or
SDVO goals.
(3) A business concern that did not certify itself as a VO SBC or
SDVO SBC, either initially or prior to an option being exercised, may
recertify itself as a VO SBC or SDVO SBC for a subsequent option period
if it meets the eligibility requirements in this part at that time.
(4) Recertification does not change the terms and conditions of the
contract. The limitations on subcontracting (see Sec. 125.6 of this
chapter), nonmanufacturer (see Sec. 121.406(b) of this chapter), and
subcontracting plan requirements (see Sec. 125.3(a) of this chapter)
in effect at the time of contract award remain in effect throughout the
life of the contract.
(5) Where the contracting officer explicitly requires concerns to
recertify their status in response to a solicitation for an order, SBA
will determine eligibility as of the date the concern submits its
response to the solicitation for the order.
(6) A concern's status may be determined at the time of a response
to a solicitation for an Agreement and each order issued pursuant to
the Agreement.
(f) Limitations on subcontracting. A business concern seeking a VO
SBC or SDVO SBC requirement must also meet the applicable limitations
on subcontracting requirements as set forth in Sec. 125.6 of this
chapter for the performance of VO SBC or SDVO SBC contracts (both sole
source and those totally set aside for VO SBC or SDVO SBC), the
performance of the set-aside portion of a partial set-aside contract,
or the performance of orders set-aside for VO SBC or SDVO SBC.
(g) Ostensible subcontractor. Where a subcontractor that is not
similarly situated performs primary and vital requirements of a set-
aside or sole source service contract or order, or where a prime
contractor is unduly reliant on a small business that is not similarly
situated to perform the set-aside or sole source service contract or
order, the prime contractor is not eligible for award of a VO or SDVO
contract.
(1) When the subcontractor is small for the size standard assigned
to the procurement, the issue in paragraph (g) introductory text may be
grounds for a VO or SDVO status protest, as described in subpart E of
this part. When the subcontractor is other than small or alleged to be
other than small for the size standard assigned to the procurement, the
issue in paragraph (a) introductory text may be grounds for a size
protest subject to the ostensible subcontractor rule, as described at
Sec. 121.103(h)(2) of this chapter.
(2) SBA will find that a prime VO or SDVO contractor is performing
the primary and vital requirements of a contract or order and is not
unduly reliant on one or more non-similarly situated subcontracts where
the prime contractor can demonstrate that it, together with any
similarly situated entity, will meet the limitations on
[[Page 40160]]
subcontracting provisions set forth in Sec. 125.6 of this chapter.
Sec. 128.402 May a joint venture submit an offer on a VO SBC or SDVO
SBC requirement?
(a) Certification. For VA contracts, a VO SBC or SDVO SBC joint
venture must be certified to submit an offer on a VO SBC or SDVO SBC
contract, as set forth in 48 CFR part 819. For all other SDVO SBC
contracts, joint ventures may apply for certification. To be eligible
for inclusion, a joint venture must demonstrate that:
(1) The underlying VO SBC or SDVO SBC upon which eligibility is
based is certified in accordance with this part; and
(2) The joint venture agreement complies with the requirements set
forth in this part.
(b) General. A VO SBC or SDVO SBC may enter into a joint venture
agreement with one or more other SBCs or its SBA-approved mentor for
the purpose of performing a VO or SDVO contract if the joint venture
meets all of the following requirements:
(1) Size of concerns to a VO or SDVO SBC joint venture. (i) A joint
venture of at least one certified VO SBC or SDVO SBC and one or more
other business concerns may submit an offer as a small business for a
competitive VO SBC or SDVO SBC procurement or sale, or be awarded a
sole source VO or SDVO contract, so long as each concern is small under
the size standard corresponding to the NAICS code assigned to the
procurement or sale.
(ii) A joint venture between a prot[eacute]g[eacute] firm certified
as a VO SBC or SDVO SBC and its SBA-approved mentor (see Sec. 125.9 of
this chapter) will be deemed small provided the prot[eacute]g[eacute]
qualifies as small for the size standard corresponding to the NAICS
code assigned to the VO or SDVO procurement or sale.
(2) Contents of joint venture agreement. Every joint venture
agreement to perform a VO or SDVO contract, including those between a
prot[eacute]g[eacute] firm certified as a VO SBC or SDVO SBC and its
SBA-approved mentor authorized by Sec. 125.9 of this chapter, must
contain a provision:
(i) Setting forth the purpose of the joint venture;
(ii) Designating a certified VO SBC or SDVO SBC as the managing
venturer of the joint venture and designating a named employee of the
certified VO SBC or SDVO SBC managing venturer as the manager with
ultimate responsibility for performance of the contract (the
``Responsible Manager'');
(A) The managing venturer is responsible for controlling the day-
to-day management and administration of the contractual performance of
the joint venture, but other partners to the joint venture may
participate in all corporate governance activities and decisions of the
joint venture as is commercially customary;
(B) The individual identified as the Responsible Manager of the
joint venture need not be an employee of the certified VO SBC or SDVO
SBC at the time the joint venture submits an offer, but, if he or she
is not, there must be a signed letter of intent that the individual
commits to be employed by the certified VO SBC or SDVO SBC if the joint
venture is the successful offeror. The individual identified as the
Responsible Manager cannot be employed by the mentor and become an
employee of the certified VO SBC or SDVO SBC for purposes of
performance under the joint venture; and
(C) Although the joint venture managers responsible for orders
issued under an indefinite delivery/indefinite quantity contract need
not be employees of the prot[eacute]g[eacute], those managers must
report to and be supervised by the joint venture's Responsible Manager;
(iii) Stating that with respect to a separate legal entity joint
venture, the certified VO SBC or SDVO SBC must own at least 51% of the
joint venture entity;
(iv) Stating that the certified VO SBC or SDVO SBC must receive
profits from the joint venture commensurate with the work performed by
the certified VO SBC or SDVO SBC, or a percentage agreed to by the
parties to the joint venture whereby the certified VO SBC or SDVO SBC
receives profits from the joint venture that exceed the percentage
commensurate with the work performed by the certified VO or SDVO SBC;
(v) Providing for the establishment and administration of a special
bank account in the name of the joint venture. This account must
require the signature or consent of all parties to the joint venture
for any payments made by the joint venture to its members for services
performed. All payments due the joint venture for performance on a VO
or SDVO contract will be deposited in the special account; all expenses
incurred under the contract will be paid from the account as well;
(vi) Itemizing all major equipment, facilities, and other resources
to be furnished by each party to the joint venture, with a detailed
schedule of cost or value of each, where practical. If a contract is
indefinite in nature, such as an indefinite quantity contract or a
multiple award contract where the level of effort or scope of work is
not known, the joint venture must provide a general description of the
anticipated major equipment, facilities, and other resources to be
furnished by each party to the joint venture, without a detailed
schedule of cost or value of each, or in the alternative, specify how
the parties to the joint venture will furnish such resources to the
joint venture once a definite scope of work is made publicly available;
(vii) Specifying the responsibilities of the parties with regard to
negotiation of the contract, source of labor, and contract performance,
including ways that the parties to the joint venture will ensure that
the joint venture and the certified VO or SDVO small business
partner(s) to the joint venture will meet the performance of work
requirements set forth in paragraph (b)(3) of this section, where
practical. If a contract is indefinite in nature, such as an indefinite
quantity contract or a multiple award contract where the level of
effort or scope of work is not known, the joint venture must provide a
general description of the anticipated responsibilities of the parties
with regard to negotiation of the contract, source of labor, and
contract performance, not including the ways that the parties to the
joint venture will ensure that the joint venture and the certified VO
or SDVO small business partner(s) to the joint venture will meet the
performance of work requirements set forth in paragraph (d) of this
section, or in the alternative, specify how the parties to the joint
venture will define such responsibilities once a definite scope of work
is made publicly available;
(viii) Obligating all parties to the joint venture to ensure
performance of the VO or SDVO contract and to complete performance
despite the withdrawal of any member;
(ix) Designating that accounting and other administrative records
relating to the joint venture be kept in the office of the certified VO
SBC or SDVO SBC managing venturer, unless approval to keep them
elsewhere is granted by the District Director or his/her designee upon
written request;
(x) Requiring that the final original records be retained by the
certified VO SBC or SDVO SBC managing venturer upon completion of the
VO or SDVO contract performed by the joint venture;
(xi) Stating that quarterly financial statements showing cumulative
contract receipts and expenditures (including salaries of the joint
venture's principals) must be submitted to SBA not later than 45 days
after each operating quarter of the joint venture; and
[[Page 40161]]
(xii) Stating that a project-end profit and loss statement,
including a statement of final profit distribution, must be submitted
to SBA no later than 90 calendar days after completion of the contract.
(3) Performance of work. (i) For any VO or SDVO contract, including
those between a prot[eacute]g[eacute] and a mentor authorized by Sec.
125.9 of this chapter, the joint venture must perform the applicable
percentage of work required by Sec. 125.6 of this chapter.
(ii) The certified VO SBC or SDVO SBC partner(s) to the joint
venture must perform at least 40% of the work performed by the joint
venture.
(A) The work performed by the certified VO SBC or SDVO SBC
partner(s) to a joint venture must be more than administrative or
ministerial functions so that they gain substantive experience.
(B) The amount of work done by the partners will be aggregated and
the work done by the certified VO SBC or, in the case of an SDVO SBC,
SDVO SBC partner(s) must be at least 40% of the total done by all
partners. In determining the amount of work done by a non-VO SBC or, in
the case of an SDVO SBC, SDVO SBC partner, all work done by the non-VO
SBC or, in the case of an SDVO SBC, SDVO SBC partner and any of its
affiliates at any subcontracting tier will be counted.
(4) Certification of compliance. Prior to the performance of any VO
or SDVO contract as a joint venture, the certified VO SBC or SDVO SBC
partner to the joint venture must submit a written certification to the
contracting officer and SBA, signed by an authorized official of each
partner to the joint venture, stating as follows:
(i) The parties have entered into a joint venture agreement that
fully complies with paragraph (b)(2) of this section;
(ii) The parties will perform the contract in compliance with the
joint venture agreement and with the performance of work requirements
set forth in paragraph (b)(3) of this section.
(5) Capabilities, past performance, and experience. When evaluating
the capabilities, past performance, experience, business systems, and
certifications of an entity submitting an offer for a VO or SDVO
contract as a joint venture established pursuant to this section, a
procuring activity must consider work done and qualifications held
individually by each partner to the joint venture as well as any work
done by the joint venture itself previously. A procuring activity may
not require the certified VO SBC or SDVO SBC to individually meet the
same evaluation or responsibility criteria as that required of other
offerors generally. The partners to the joint venture in the aggregate
must demonstrate the past performance, experience, business systems,
and certifications necessary to perform the contract.
(6) Contract execution. The procuring activity will execute a VO or
SDVO contract in the name of the joint venture entity or the certified
VO SBC or SDVO SBC, but in either case will identify the award as one
to a VO or SDVO joint venture or a VO or SDVO mentor-
prot[eacute]g[eacute] joint venture, as appropriate.
(7) Inspection of records. The joint venture partners must allow
SBA's authorized representatives, including representatives authorized
by the SBA Inspector General, during normal business hours, access to
its files to inspect and copy all records and documents relating to the
joint venture.
(8) Performance of work reports. A certified VO SBC or SDVO SBC
partner to a joint venture must describe how it is meeting or has met
the applicable performance of work requirements for each VO or SDVO
contract it performs as a joint venture.
(i) The certified VO SBC or SDVO SBC partner to the joint venture
must annually submit a report to the relevant contracting officer and
to SBA, signed by an authorized official of each partner to the joint
venture, explaining how and certifying that the performance of work
requirements are being met.
(ii) At the completion of every VO or SDVO contract awarded to a
joint venture, the certified VO SBC or SDVO SBC partner to the joint
venture must submit a report to the relevant contracting officer and to
SBA, signed by an authorized official of each partner to the joint
venture, explaining how and certifying that the performance of work
requirements were met for the contract, and further certifying that the
contract was performed in accordance with the provisions of the joint
venture agreement that are required under paragraph (b)(2) of this
section.
(iii) Any person with information concerning a joint venture's
compliance with the performance of work requirements may report that
information to SBA and/or the SBA Office of Inspector General.
(9) Basis for suspension or debarment. The Government may consider
the following as a ground for suspension or debarment as a willful
violation of a regulatory provision or requirement applicable to a
public agreement or transaction:
(i) Failure to enter a joint venture agreement that complies with
paragraph (b)(2) of this section;
(ii) Failure to perform a contract in accordance with the joint
venture agreement or performance of work requirements in paragraph
(b)(3) of this section; or
(iii) Failure to submit the certification required by paragraph
(b)(4) of this section or comply with paragraph (b)(7) of this section.
(10) Limitation on offers from joint venture partners. A VO SBC or
SDVO SBC cannot be a joint venture partner on more than one joint
venture that submits an offer for a specific contract set aside or
reserved for VO SBCs or SDVO SBCs.
Sec. 128.403 What requirements are not available for VO or SDVO
contracts?
For VA procurements, a contracting officer may award a VO or SDVO
contract as set forth in the VAAR. For non-VA SDVO contracts, a
contracting activity may not make a requirement available for a SDVO
contract if:
(a) The contracting activity otherwise would fulfill that
requirement through award to Federal Prison Industries, Inc. under 18
U.S.C. 4124 or 4125, or to Javits-Wagner-O'Day Act participating non-
profit agencies for the blind and severely disabled, under 41 U.S.C.
8501 et seq., as amended; or
(b) An 8(a) Participant currently is performing that requirement or
SBA has accepted that requirement for performance under the authority
of the section 8(a) program, unless SBA has consented to release of the
requirement from the section 8(a) program.
Sec. 128.404 When may a contracting officer set aside a procurement
for VO SBCs or SDVO SBCs?
(a) VA procurements. For VA procurements, a contracting officer may
set aside a contract for a VO SBC or SDVO SBC as set forth in the VAAR.
For non-VA procurements, the contracting officer first must review a
requirement to determine whether it is excluded from SDVO contracting
pursuant to Sec. 128.403.
(b) Contracting among small business programs--(1) Acquisitions
valued at or below the simplified acquisition threshold. For VA
procurements, a contracting officer may award at or below the
simplified acquisition threshold as set forth in the VAAR. For non-VA
procurements, the contracting officer shall set aside any acquisition
with an anticipated dollar value exceeding the micro-purchase threshold
but not exceeding the simplified acquisition threshold (defined in the
FAR at 48 CFR 2.101) for small business concerns, regardless of the
place of performance, when there is a reasonable
[[Page 40162]]
expectation that offers will be obtained from at least two small
business concerns that are competitive in terms of quality and delivery
and award will be made at fair market prices. The requirement in this
paragraph (b)(1) does not preclude a contracting officer from making an
award to a small business under the 8(a) BD, Historically Underutilized
Business Zone (HUBZone), SDVO SBC, or WOSB Programs.
(2) Acquisitions valued above the simplified acquisition threshold.
(i) For VA procurements, a contracting officer may award above the
simplified acquisition threshold as set forth in the VAAR. For non-VA
procurements, the contracting officer shall set aside any acquisition
with an anticipated dollar value exceeding the simplified acquisition
threshold (defined in the FAR at 48 CFR 2.101) for small business
concerns, regardless of the place of performance, when there is a
reasonable expectation that offers will be obtained from at least two
small business concerns that are competitive in terms of quality and
delivery and award will be made at fair market prices. However, after
conducting market research, the contracting officer shall first
consider a set-aside or sole source award (if the sole source award is
permitted by statute or regulation) under the 8(a) BD, HUBZone, SDVO
SBC, or WOSB programs before setting aside the requirement as a small
business set-aside. There is no order of precedence among the 8(a) BD,
HUBZone, SDVO SBC, or WOSB programs. The contracting officer must
document the contract file with the rationale used to support the
specific set-aside, including the type and extent of market research
conducted. In addition, the contracting officer must document the
contract file showing that the apparent successful offeror's
certifications in the System for Award Management (SAM) (or any
successor system) and associated representations were reviewed.
(ii) SBA believes that progress in fulfilling the various small
business goals, as well as other factors such as the results of market
research, programmatic needs specific to the procuring agency,
anticipated award price, and the acquisition history, will be
considered in making a decision as to which program to use for the
acquisition.
(c) SDVO SBC set-asides. If the contracting officer decides to set
aside the requirement for competition restricted to SDVO SBCs, the
contracting officer must:
(1) Have a reasonable expectation that at least two responsible
SDVO SBCs will submit offers; and
(2) Determine that the award can be made at fair market price.
(d) Prohibition on combined set-asides. A procuring activity cannot
restrict an SDVO SBC competition (for either a contract or order) to
require certifications other than SDVO SBC certification (i.e., a
competition cannot be limited only to business concerns that are both
SDVO SBC and 8(a), SDVO SBC and HUBZone, or SDVO SBC and WOSB).
Sec. 128.405 When may a contracting officer award sole source
contracts to VO SBCs and SDVO SBCs?
For VA procurements, a contracting officer may award a sole source
contract to a VO SBC or SDVO SBC as set forth in the VAAR. A
contracting officer may award a sole source contract to an SDVO SBC for
non-VA procurements only when the contracting officer determines that:
(a) None of the provisions of Sec. 128.403 or Sec. 128.404 apply;
(b) The anticipated award price of the contract, including options,
will not exceed:
(1) $7,000,000 for a contract assigned a manufacturing NAICS code;
or
(2) $4,000,000 for all other contracts;
(c) A SDVO SBC is a responsible contractor able to perform the
contract; and
(d) Contract award can be made at a fair and reasonable price.
Sec. 128.406 Are there VO or SDVO contracting opportunities at or
below the simplified acquisition threshold?
For VA procurements, a contracting officer may award at or below
the simplified acquisition threshold as set forth in 48 CFR part 819 of
the VAAR. If the non-VA SDVO requirement is at or below the simplified
acquisition threshold, the contracting officer may set aside the
requirement for consideration among SDVO SBCs using simplified
acquisition procedures or may award a sole source contact to an SDVO
SBC.
Sec. 128.407 May SBA appeal a contracting officer's decision not to
make a procurement available for award as an SDVO contract?
The SBA Administrator may appeal a contracting officer's decision
not to make a particular requirement available for award as an SDVO
sole source or a SDVO set-aside contract at or above the simplified
acquisition threshold.
Sec. 128.408 What is the process for such an appeal?
(a) Notice of appeal. When the contracting officer rejects a
recommendation by SBA's Procurement Center Representative to make a
requirement available for award as an SDVO contract, the contracting
officer must notify the Procurement Center Representative as soon as
practicable. If the SBA Administrator intends to appeal the decision,
SBA must notify the contracting officer no later than five business
days after receiving notice of the contracting officer's decision.
(b) Suspension of action. Upon receipt of notice of SBA's intent to
appeal, the contracting officer must suspend further action regarding
the procurement until the Secretary of the department or head of the
agency issues a written decision on the appeal, unless the Secretary of
the department or head of the agency makes a written determination that
urgent and compelling circumstances which significantly affect the
interests of the United States compel award of the contract.
(c) Deadline for appeal. Within 15 business days of SBA's
notification to the contracting officer, SBA must file its formal
appeal with the Secretary of the department or head of the agency, or
the appeal will be deemed withdrawn.
(d) Decision. The Secretary of the department or head of the agency
must specify in writing the reasons for a denial of an appeal brought
under this section.
Subpart E--Protests Concerning VO SBCs and SDVO SBCs
Sec. 128.500 What are the requirements for filing a VO SBC and SDVO
SBC status protest?
(a) If an interested party challenges the inclusion in the database
of a VO SBC or SDVO SBC based on the status of the concern as a small
business concern or the ownership or control of the concern, the
challenge shall be heard by the Office of Hearings and Appeals of the
Small Business Administration in accordance with part 134 of this
chapter. The decision of the Office of Hearings and Appeals shall be
considered final agency action.
(b) The protest procedures described in part 134 of this chapter
are separate from those governing size protests and appeals. All
protests relating to whether an eligible VO SBC or SDVO SBC is a
``small'' business for purposes of any Federal program are subject to
part 121 of this chapter and must be filed in accordance with that
part. If a protester protests both the size of the VO SBC or SDVO SBC
and whether the concern
[[Page 40163]]
meets the VO SBC or SDVO SBC requirements set forth in Sec. 128.200,
SBA will process each protest concurrently under the procedures set
forth in parts 121 and 134 of this chapter. SBA does not review issues
concerning the administration of a VO or SDVO contract.
Subpart F--Penalties and Retention of Records
Sec. 128.600 What are the requirements for representing VO SBC or
SDVO SBC status, and what are the penalties for misrepresentation?
(a) Presumption of loss based on the total amount expended. In
every contract, subcontract, cooperative agreement, cooperative
research and development agreement, or grant which is set aside,
reserved, or otherwise classified as intended for award to VO SBCs or
SDVO SBCs, there shall be a presumption of loss to the United States
based on the total amount expended on the contract, subcontract,
cooperative agreement, cooperative research and development agreement,
or grant whenever it is established that a business concern other than
a VO SBC or SDVO SBC willfully sought and received the award by
misrepresentation.
(b) Deemed certifications. The following actions shall be deemed
affirmative, willful, and intentional certifications of VO SBC or SDVO
SBC status:
(1) Submission of a bid, proposal, application or offer for a
Federal grant, contract, subcontract, cooperative agreement, or
cooperative research and development agreement reserved, set aside, or
otherwise classified as intended for award to VO SBCs or SDVO SBCs.
(2) Submission of a bid, proposal, application or offer for a
Federal grant, contract, subcontract, cooperative agreement or
cooperative research and development agreement which in any way
encourages a Federal agency to classify the bid or proposal, if
awarded, as an award to a VO SBC or SDVO SBC.
(3) Registration on any Federal electronic database for the purpose
of being considered for award of a Federal grant, contract,
subcontract, cooperative agreement, or cooperative research and
development agreement, as a VO SBC or SDVO SBC.
(c) Signature requirement. Each offer, proposal, bid, or
application for a Federal contract, subcontract, or grant shall contain
a certification concerning the VO SBC or, in the case of an SDVO SBC,
SDVO SBC status of a business concern seeking the Federal contract,
subcontract, or grant. An authorized official must sign the
certification on the same page containing the SDVO SBC status claimed
by the concern.
(d) Limitation of liability. Paragraphs (a) through (c) of this
section may be determined not to apply in the case of unintentional
errors, technical malfunctions, and other similar situations that
demonstrate that a misrepresentation of VO SBC or SDVO SBC status was
not affirmative, intentional, willful, or actionable under the False
Claims Act, 31 U.S.C. 3729, et seq. A prime contractor acting in good
faith should not be held liable for misrepresentations made by its
subcontractors regarding the subcontractors' VO SBC or SDVO SBC status.
Relevant factors to consider in making this determination may include
the firm's internal management procedures governing VO SBC or SDVO SBC
status representations or certifications, the clarity or ambiguity of
the representation or certification requirement, and the efforts made
to correct an incorrect or invalid representation or certification in a
timely manner. An individual or firm may not be held liable where
Government personnel have erroneously identified a concern as a VO SBC
or SDVO SBC without any representation or certification having been
made by the concern and where such identification is made without the
knowledge of the individual or firm.
(e) Penalties for misrepresentation--(1) Suspension or debarment.
The SBA suspension and debarment official or the agency suspension and
debarment official may suspend or debar a person or concern for
misrepresenting a firm's status as a VO SBC or SDVO SBC pursuant to the
procedures set forth in 48 CFR part 9, subpart 9.4.
(2) Civil penalties. Persons or concerns are subject to severe
penalties under the False Claims Act, 31 U.S.C. 3729-3733, the Program
Fraud Civil Remedies Act, 31 U.S.C. 3801-3812, and any other applicable
laws or regulations, including part 142 of this chapter.
(3) Criminal penalties. Persons or concerns are subject to severe
criminal penalties for knowingly misrepresenting the VO or SDVO SBC
status of a concern in connection with procurement programs pursuant to
section 16(d) of the Small Business Act, 15 U.S.C. 645(d), as amended,
18 U.S.C. 1001, 18 U.S.C. 287, and any other applicable laws. Persons
or concerns are subject to criminal penalties for knowingly making
false statements or misrepresentations to SBA for the purpose of
influencing any actions of SBA pursuant to section 16(a) of the Small
Business Act, 15 U.S.C. 645(a), as amended, including failure to
correct ``continuing representations'' that are no longer true.
Sec. 128.601 What must a concern do in order to be identified as a
SDVO SBC in any Federal procurement databases?
(a) In order to be identified as an SDVO SBC in the System for
Award Management (SAM) database (or any successor thereto), a concern
must certify its SDVO SBC status in connection with specific
eligibility requirements at least annually.
(b) If a firm identified as a VO SBC or SDVO SBC in SAM fails to
certify its status within one year of a status certification, the firm
will not be listed as a VO SBC or SDVO SBC in SAM, unless and until the
firm recertifies its VO SBC or SDVO SBC status.
Subpart G--Surplus Personal Property for Veteran-Owned Small
Business Programs
Sec. 128.700 How does a small business concern owned and controlled
by veterans obtain Federal surplus personal property?
(a) General. (1) Pursuant to 15 U.S.C. 657b(g), eligible small
business concerns owned and controlled by veterans may receive surplus
Federal Government property from State Agencies for Surplus Property
(SASPs). The procedures set forth in 41 CFR part 102-37 and this
section will be used to transfer surplus personal property to such
concerns.
(2) The surplus personal property which may be transferred to SASPs
for further transfer to eligible small business concerns owned and
controlled by veterans includes all surplus personal property which has
become available for donation pursuant to 41 CFR 102-37.30.
(b) Eligibility to receive Federal surplus personal property. To be
eligible to receive Federal surplus personal property, on the date of
transfer a concern must:
(1) Be a small business concern owned and controlled by veterans,
that has been certified by SBA under this part;
(2) Not be debarred, suspended, or declared ineligible under title
2 or title 48 of the CFR; and
(3) Be engaged or expect to be engaged in business activities
making the item useful to it.
(c) Use of acquired surplus personal property. (1) Eligible
concerns may acquire Federal surplus personal property from the SASP in
the state(s) where the concern is located and
[[Page 40164]]
operates, provided the concern represents and agrees in writing:
(i) As to what the intended use of the surplus personal property is
to be;
(ii) That it will use the surplus personal property to be acquired
in the normal conduct of its business activities or be liable for the
fair rental value from the date of its receipt;
(iii) That it will not sell or transfer the surplus personal
property to be acquired to any party other than the Federal Government
as required by General Services Administration (GSA) and SASP
requirements and guidelines;
(iv) That, at its own expense, it will return the surplus personal
property to a SASP if directed to do so by SBA, including where the
concern has not used the property as intended within one year of
receipt;
(v) That, should it breach its agreement not to sell or transfer
the surplus personal property, it will be liable to the Federal
Government for the established fair market value or the sale price,
whichever is greater, of the property sold or transferred; and
(vi) That it will give GSA and the SASP access to inspect the
surplus personal property and all records pertaining to it.
(2) A concern receiving surplus personal property pursuant to this
section assumes all liability associated with or stemming from the use
of the property, and all costs associated with the use and maintenance
of the property.
(d) Costs. Concerns acquiring surplus personal property from a SASP
may be required to pay a service fee to the SASP in accordance with 41
CFR 102-37.280. In no instance will any SASP charge a concern more for
any service than their established fees charged to other transferees.
(e) Title. Upon execution of the SASP distribution document, the
firm receiving the property has only conditional title to the property
during the applicable period of restriction. Full title to the property
will vest in the recipient concern only after the recipient concern has
met all of the requirements of this part and the requirements of GSA
and the SASP that it received the property from.
Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-13563 Filed 7-5-22; 8:45 am]
BILLING CODE 8026-09-P
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</html>Indexed from Federal Register on July 6, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.