Procurement Lawyer

What New Veteran-Owned Small Businesses Need to Know About the Rules

by David S. Black, Mitchell A. Bashur & Amy L. Fuentes

David S. Black is a partner in the Tysons, Virginia, office of Holland & Knight LLP. Mitchell A. Bashur and Amy L. Fuentes are associates in the Tysons office of Holland & Knight LLP.

The U.S. Small Business Administration (SBA) and the U.S. Department of Veterans Affairs (VA) support veteran-owned small businesses (VOSBs) and service-disabled veteran-owned small businesses (SDVOSBs) through the agencies’ respective VOSB and SDVOSB programs. These programs allow SDVOSBs1 to receive set-aside and sole-source awards. The SBA and VA programs have continued to develop since being created. Unfortunately, both programs have not evolved in unison, resulting in a divergence of rules that creates compliance difficulties for SDVOSBs.

The U.S. Congress, recognizing these ongoing issues, amended the authorizing statutes in the National Defense Authorization Act for Fiscal Year 2017 (2017 NDAA) to consolidate ownership and control rules under the SBA. Congress further consolidated jurisdiction to hear status protest and eligibility appeals in the SBA’s Office of Hearings and Appeals (OHA). In response to congressional direction, in the fall of 2018, the SBA and VA published final rules intending to resolve many of the long-standing conflicts between the rules by establishing a single consolidated set of rules. The consolidated rules take important steps forward and create consistent rules for ownership and control that will be applied by the VA and SBA. However, the rule changes also include provisions not directed by Congress, which may create traps for the unwary.

Given these notable changes against the complicated backdrop of the VA and SBA programs overall, it is important for contractors and the government contracts industry to consider what these new rules mean, and where gaps or inconsistencies still remain. This article first presents a background on the VA and SBA VOSB and SDVOSB programs. It then discusses and provides an example of conflicts between the VA and SBA regulations.  The article next discusses Congress’s solution in the 2017 NDAA, which directed the consolidated and unified ownership and control SBA regulations. It subsequently discusses corresponding changes with the OHA that unified the size status protest and appeals process. Finally, the article concludes by reviewing additional “clarifications” introduced by the SBA that may provide unforeseen obstacles for SDVOSBs navigating this recently changed landscape.

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