In April 2017, regulatory changes affecting Virginia’s Small, Women-Owned, and Minority-Owned Business (“SWaM”) program, operated by the Department of Small Business and Supplier Diversity (“SBSD”), went into effect. The following changes to the SWaM regulations expand the rights of individuals seeking to qualify for and maintain SWaM status. Those changes include:
1. Subsidiary Ownership of SWaM Entities: SWaM eligibility requires that qualifying individuals directly own and control at least 51% the business. So a firm that is 51% owned by another firm is not eligible for SWaM certification. The April 2017 changes to 7VAC13-20-100 create a limited exception permitting parent company ownership of a SWaM business if:
a. The parent company was “established for tax, capitalization, or other legitimate business purposes”; and
b. “Qualifying individuals” cumulatively own and control at least 51% of the subsidiary, by virtue of their ownership share of the parent company and the parent company’s ownership share of the subsidiary.
2. Revocation Process: Revocation occurs when SBSD reevaluates a current SWaM’s eligibility for the program and finds that the business no longer qualifies for SWaM status. The April 2017 changes modified the revocation procedure by: a) giving the affected business the right to demand an informal fact-finding proceeding; b) creating a 10-day appeal notice period; and c) keeping the business’s SWaM certification effective until SBSD issues a letter of revocation. 7VAC13-20-210(C).
3. Reapplication Following SWaM Denial: Prior to the recent changes, unsuccessful SWaM applicants were required to wait twelve (12) months from the later of the date they received a notice of denial or the date their appeal was concluded to reapply in the same category of certification. An unsuccessful applicant’s decision to appeal his denial, therefore, extended the amount of time he had to wait to reapply, thereby discouraging appeals.
In April, 7VAC13-20-220 was amended, including to provide that appeals no longer extend commencement of the 12-month waiting period for reapplication. Additionally, 7VAC13-20-220 was amended to clarify that an unsuccessful applicant is immediately eligible to reapply “for certification in any other category.” So, for example, a business that is denied woman-owned SWaM status need not wait to re-apply for minority-owned SWaM status, but can do so immediately.
These changes, which give SWaM applicants and participants expanded rights, are timely since SWaM requirements and preferences are becoming increasingly prevalent in Virginia public contracts at all levels.