This is the first blog post by Holland & Knight’s newest government contracts attorney; Mitchell Bashur. Mitchell focuses his practice on government contracts and has extensive experience with protests, small and disadvantaged business issues, claims and disputes, domestic preference programs, as well as compliance issues. –Eds.

In a rulemaking process that can be traced back to 2013, the Department of Veterans Affairs (VA) published proposed rules on Jan. 10, 2018, seeking to place jurisdiction for eligibility determinations for Service Disabled Veteran Owned Small Businesses (SDVOSB) and Veteran Owned Small Businesses (VOSB) with the Small Business Administration (SBA). Because the VA’s and SBA’s eligibility criteria had diverged in some areas, the National Defense Authorization Act for Fiscal Year 2017 required the VA to eliminate any contradictions or confusion between the two regulatory schemes. This issue has recently received evaluation through the decisions in the Veterans Contracting Grp., Inc. cases in the Court of Federal Claims and the SBA’s Office of Hearings and Appeals. The VA’s proposed rules clear up any questions of interpretation by designating the SBA as the federal agency responsible for creating regulations governing ownership and control rules for SDVOSBs and VOSBs. The proposal amends the VA’s existing regulations to adopt the SBA’s rules, including:

  1. Joint Ventures: The VA is proposing to amend the definition of joint venture in § 74.1 to conform to the SBA’s rules. The new definition would remove the requirement that the joint venture “engage in and carry out a single, specific business venture for joint profit” and remove the limitation that the joint venture operate “not on a continuing or permanent basis for conducting business generally.” The new definition also states that the definition of joint venture is in accordance with 13 CFR part 125. The VA also proposes to amend § 74.5 to make clear that “CVE does not determine affiliation. Affiliation is determined by the SBA in accordance with 13 CFR part 121.” The proposed rules further amend § 74.5 to clarify that joint ventures may apply for inclusion in the VIP Verification Program, so long as: “(1) The underlying VOSB upon which eligibility is based is verified in accordance with this part; (2) The joint venture agreement complies with the requirements set forth in 13 CFR part 125 for SDVOSBs.” While the SBA’s rules are limited to SDVOSBs, the VA proposes applying the same requirements to joint venture firms seeking verified VOSB status.
  2. Service-connected disability: The VA is proposing to amend the definition of service-disabled veteran as the current definition ledto confusion regarding the documentation necessary to establish a service-connected disability. The new definition allows service-connected disability to be established by “registration in the Beneficiary Identification and Records Locator Subsystem (BIRLS) maintained by the Veterans Benefits Administration (VBA), a disability rating letter issued by VA, or a disability determination from the Department of Defense.”
  3. Surviving Spouse: The VA is proposing rules to implement the 2017 NDAA’s requirements that in certain circumstances a firm can qualify as a VOSB or SDVOSB where there is a surviving spouse or an ESOP. The amended definition would provide that immediately prior to death of the deceased veteran the concern must have been owned and controlled in accordance with 13 CFR part 125 and the concern was listed in VIP.
  4. Employee Stock Ownership Plan (ESOP):The VA is proposing rules to amend the definition of VOSB to reflect that stock owned by ESOPs which in turn are owned by one or more veterans are not included in determining requisite ownership percentage.
  5. New Appeal Procedures: The VA is proposing to amend § 74.22(e) to implement the new appeals procedure to OHA prescribed in the 2017 NDAA. An entity receiving a Notice of Proposed Cancellation Letter may file an appeal with OHA concerning the Notice of Verified Status Cancellation decision in accordance with 13 CFR part 134, and the decision on the appeal will be final.

Comments on the proposed new rules are due by March 12, 2018.