Attention Veteran Owned and Service-Disabled Veteran Owned Small Businesses.

In this two-part blog series, we are going to highlight and peel back the onion on some of the proposed draft rules that the SBA recently issued in August on the Veteran Owned Small Business and Service-Disabled Veteran Owned Small Business July 6, 2021 (Comments closed August 5, 2022), as well as on the 8(a) Business Development Certification Program on September 9, 2021 (Comments due on or before Nov 8, 2022). If you have not been following this – and I get it, there is a lot going on in the world today – then you should know that the SBA’s proposed rules deal with how the agency will go about certifying Veteran Owned Small Businesses (VOSB) and Service-Disabled Veteran Owned Small Businesses (SDVOSB). Even if you do not hold this particular certification, but you hold a WOSB or you are an 8(a), you should know that there are proposed rules for these certifications as well. Some rule explanations are impactful while others are just there for clarification of the previous rule that was well let’s say "confusing" and definitely required clarification. The SBA took this opportunity to address sections that were in need of further clarification. On the positive side, since the requirements on certification, the application of regulations for size, status, JV’s, et al. varies within agencies, this proposed rule is a good start to standardizing this certification process across all programs.

Why did the SBA take over the Veteran certifications from the VA?

Congress’s National Defense Authorization Act for F/Y 2021 eliminated SDVOSB self-certification and adopted a government wide SDVOSB certification requirement. This certification process was previously in the hands of the Veterans Administration. With this change, the certification process is now overseen by the SBA. Is this a good thing? Well, that’s not really the purpose of this blog. Look for comments on this in a future blog that will be focused on the success (or not) of the roll out.

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.  These proposed Rules will allow for sole source or set aside contracts. That is definitely a positive.

December 31, 2023- Mark Your Calendar

January 1, 2023 is the date (Transfer Date) that the SBA will take over all Veteran Owned certifications. The Veterans Certification Program rules will be codified in a new 13 CFR Part 128. There is a one-year grace period which will allow you to maintain eligibility until the SBA makes a final eligibility decision on your application. You should submit your application for SDVOSB certification within this grace period. If you do not submit within this grace period you will not be eligible to receive sole source or set-aside awards across the federal government. So be sure to mark your calendar for December 31, 2023 as the date to apply for certification if you are self-certified SDVOSB. The one-year grace period will allow you to maintain eligibility until SBA makes a final eligibility decision. Of additional importance is that if you are a participant in the 8(a) Program and/or WOSB program and are owned and controlled by a veteran or service-disabled veteran, reciprocity will be granted.

Size Matters and this Proposed Rule is HUGE

Many firms have several NAICS codes attached to their business. You have your primary business activities and then you may perform ancillary business activities which are listed under a different NAICS code. (Example: 561612- Guard Services and 561611- Investigations) Previously, only VO SBC/SDVO SBCs that were small in their primary North American Industry Classification System (NAICS) code were considered eligible. However, under the proposed Rule, firms can now qualify if they are small for any NAICS code which it currently conduct business activities. A firm must qualify as small under the size standard corresponding to the NAICS code assigned to that contract.

The 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. Of note: the term ‘currently conducts business activities’ is not defined in the Regulations.

"Pursuant to the National Defense Authorization Act of 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."

What length of time may a business participate in the Veterans Certification Program?

The SBA’s proposed rule would adopt VA’s eligibility period of three years so this will not change. However, the SBA did solicit comments and therefore it could change after comments are reviewed by the SBA.

I have identified a set aside offer and want to submit a bid but I am not yet certified. Will I lose out on that opportunity?

The current regulation that requires certification to be eligible for a VO or SDVO SBC set-aside or sole source contract (§ 125.18(a)) will be amended to allow an uncertified VO SBC or SDVO SBC to submit an offer while their application is pending with SBA. The SBA intends to prioritize those applications where the contracting officer has identified the applicant as the apparent successful offeror. (§ 128.401)

What’s the rush?

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. A word to the wise – get your application in sooner rather than later to avoid losing opportunities.