On November 6, 2015, the Department of Veterans Affairs (“VA”) issued a proposed rule (the “Proposed Rule”) to clarify the byzantine verification process for veteran-owned small businesses (“VOSB”) and veteran-owned service-disabled veteran-owned small businesses (“SDVOSB”)1 who want to participate in the VA’s Veterans First Contracting Program. VA Veteran-Owned Small Business Verification Guidelines, Proposed Rule, 80 Fed. Reg. 68,795 (to be codified at 38 C.F.R. Part 74). The Proposed Rule revises a 2013 advanced notice of proposed rulemaking and considers 39 public comments received in response to the prior notice. Comments on the latest proposed rule are due on or before January 5, 2016.
Under the Veterans First Contracting Program, the VA offers set-asides and sole source opportunities to certified VOSB and SDVOSB firms. Unfortunately, the program has struggled to gain a foothold in the government procurement landscape because its VA-administered regulations are confusing and the set-aside opportunities are limited to VA procurements. At the same time, the Government Accountability Office and the VA’s Office of the Inspector General have targeted the program for pervasive fraud, and stakeholders have criticized the verification program as unnecessarily rigorous when compared against other socio-economic programs administered by the Small Business Administration (“SBA”).
As a result, through its Proposed Rule, the VA “seeks to find an appropriate balance between preventing fraud . . . and providing a process that would make it easier for more VOSBs to become verified.” The VA attempts to strike this balance by significantly amending the VOSB ownership regulations to make them easier to understand, and bringing many of the requirements in line with SBA interpretations of similar requirements under similar programs.