[Federal Register Volume 75, Number 25 (Monday, February 8, 2010)]
[Rules and Regulations]
[Pages 6098-6108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-2648]
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DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 74
RIN 2900-AM78
VA Veteran-Owned Small Business Verification Guidelines
AGENCY: Department of Veterans Affairs.
ACTION: Final rule with request for comments.
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SUMMARY: This document affirms as final, with changes, an interim final
rule that implements portions of the Veterans Benefits, Health Care,
and Information Technology Act of 2006. This law requires the
Department of Veterans Affairs (VA) to verify ownership and control of
veteran-owned small businesses, including service-disabled veteran-
owned small businesses. This final rule defines the eligibility
requirements for businesses to obtain ``verified'' status, explains
examination procedures, and establishes records retention and review
processes. The final rule retains the interim final rule with changes
based on the comments received. This document additionally implements
new interim final requirements, that eligible owners work full-time in
the business for which they have applied for acceptance in the
Verification Program, changes the time period for issuance of
reconsideration decisions from 30 to 60 days, and changes the
distribution of profits for limited liability companies and employee
stock ownership plans and solicits comments on these regulatory
amendments only.
DATES: Effective Date: February 8, 2010.
Comment Date: Comments on the interim final amendments only must be
received on or before March 10, 2010.
ADDRESSES: Written comments may be submitted through http://www.Regulations.gov; by mail or hand delivery to the Director,
Regulations Management (02REG), Department of Veterans Affairs, 810
Vermont Ave., NW., Room 1068, Washington, DC 20420; or by fax to (202)
273-9026. Comments should indicate that they are submitted in response
to RIN 2900-AM78--``VA Veteran-Owned Small Business Verification
Guidelines.'' Copies of comments received will be available for public
inspection in the Office of Regulation Policy and Management, Room
1063B, between the hours of 8 a.m. and 4:30 p.m., Monday through Friday
(except holidays). Please call (202) 461-4902 (this is not a toll-free
number) for an appointment. In addition, during the comment period,
comments may be viewed online through the Federal Docket Management
System (FDMS) at http://www.Regulations.gov.
FOR FURTHER INFORMATION CONTACT: Ms. Gail Wegner, Acting Director,
Center for Veterans Enterprise (00VE), Department of Veterans Affairs,
810 Vermont Ave., NW., Washington, DC 20420, phone (202) 303-3260
x5239.
SUPPLEMENTARY INFORMATION:
In an interim final rule published in the Federal Register on May
19, 2008 (73 FR 29024), we established new 38 CFR part 74 setting forth
a mechanism for verifying ownership and control of veteran-owned small
businesses (VOSBs), including service-disabled veteran-owned small
businesses (SDVOSBs). We provided a 60-day comment period which ended
on July 18, 2008. We received comments from five commenters. The issues
raised in the comments are discussed below. Based on the rationale set
forth in the interim final rule and in this document, we are adopting
the provisions of the interim final rule as a final rule with changes
explained below. Due to the nature of the changes and for the
convenience of the reader, the regulation text portion of this document
restates all of revised part 74.
a. Eligibility of surviving spouses. One commenter expressed the
opinion that a surviving spouse of a veteran who had any disability
rating should be permitted to maintain a VOSB or a SDVOSB for as long
as the spouse owns and controls the business.
The rule is consistent with Congress's limitation set forth in 38
U.S.C. 8127(h)(3), which permits the surviving spouse to maintain the
status of a VOSB or SDVOSB only if the veteran was rated as 100 percent
disabled or the veteran dies as a result of a service-connected
disability. VA does not have authority under section 8127 to expand
VOSB or SDVOSB status as the commenter suggests. We will not make any
changes to the rule based on the comment.
b. Yearly verification. One commenter suggested that an annual
signed statement by the veteran business owner stating there are no
changes in ownership or control should be sufficient to protect the
Department's interests. If ownership or control changes, it should be
mandated that the business owner report it immediately to
[[Page 6099]]
the Center for Veterans Enterprise (CVE), and the CVE may determine it
necessary to redo the verification application process entirely. 38 CFR
74.3(e) and 74.21(c)(10) established that a business has up to 60 days
after a change of ownership to file a new VA Form 0877, VetBiz VIP
Verification Program application. This timeframe was established with
sensitivity to the needs of surviving spouses and others who may have
significant demands due to health or medical challenges. 38 CFR 74.15
also establishes that eligibility is limited to 1 year. VA has
determined that annual examinations are necessary to ensure the
integrity of the Verification Program. This is consistent with the
annual Federal size recertification requirement in the Central
Contractor Registry.
c. Examination visits should concentrate on management and control
of operations to establish that a company is truly independent and not
a representative of a non-veteran-owned business employing the veteran
on a commission or fee basis. Two commenters expressed concern about
legitimate parties controlling veteran-owned small businesses. One
commenter suggested that examination visits should examine the actual
business relationship among the partners, to include: Individuals who
control bank account number, terms, lines of credit, sale price of
goods and services, contracts for purchase of goods and services, and
acceptance of quotations from suppliers. This commenter also
recommended reviewing records to establish that the eligible party and
not the non-veteran is receiving funds from payments and distributing
funds to employees and contractors and to ensure that there is no
record of a payment, including a percentage or commission, to the
eligible party from a non-veteran. The second commenter recommended
that examination visits of pharmaceutical distributors include
inspection of Pedigree or E-Pedigree filings, state-issued
pharmaceutical licenses, and the product liability insurance policy to
ensure that the business name and manager/owner signatures match and
that insurance policies are current and have an aggregate value of 5
million dollars. We make no changes to the rule based on this comment.
38 CFR 74.3-4 address examples of ownership and control. 38 CFR
74.20(b) establishes that the scope of examination is not limited to
the documents identified in that section. It only establishes that
examiners shall review those documents as a minimum and provides the
CVE with the flexibility to examine other records. VA has determined
for administrative purposes, it is not practical to have specific
document review requirements for particular industries. The rule
provides VA the discretion to review any pertinent documents necessary
to satisfy Verification requirements.
d. Site visits. One commenter recommended that the Department
conduct an on-site visit at the applicant's place of business for 100
percent of the applications found to be complete. The site visit must
include attendance by the veteran owner(s) and executive management
team (if applicable). The purpose of the visit would be to substantiate
information on the application and to review business operations. Any
conflicts would be subject to a second review. The site visit would be
mandatory for the initial application and subsequent visits would occur
every three years as part of the recertification process, or more
frequently at the applicant's discretion. Such initial site visits
would be performed within 60 days of receipt of the complete
application package. The site visit would be at no cost to the
business, and the government would agree that there would not be
unscheduled site visits.
In the interim final rule, 38 CFR 74.20(a) provided that the
Department reserves the right to conduct random verification
examinations of applicants. Also, the interim final rule provided at 38
CFR 74.20(b) that VA could determine to conduct all or part of the
verification examination at the applicant's offices. First, VA is
revising 38 CFR 74.20(a) to clarify that its intent was that
verification examinations, including site visits, may be random and
unannounced. Next, in addressing the commenter, conducting 100 percent
site visits upon receipt of complete applications is not in the best
interests of the Department as many of the businesses that are seeking
verification are brand new and have not yet applied for any Federal or
VA contracts. Also VA finds that mandatory site visits could be an
unnecessary burden to vendors when VA can adequately verify firms
through other means, such as document review. The Department will
monitor awards to companies in the Verification Program and make
decisions on which companies to inspect using a combination of factors,
including staffing and funding. VA does not have the resources to
conduct 100 percent site visit for all applicant firms in the VIP
database. We will not make any changes to the rule based on the
comment.
e. Relationship between VA's Verification Program and the
government-wide SDVOSB protest process under the Federal Acquisition
Regulations (FAR), 48 CFR 19.302 and 19.307. One commenter sought
clarification on the relationship between the Department's Verification
Program and the protest procedures contained in the FAR. Specifically,
a question was submitted regarding the Department's intended action
when the Small Business Administration finds a firm ineligible due to a
protest decision.
We agree with the commenter that clarification is needed, and Sec.
74.2(e) has been added to include guidance in these cases. Any firm
registered in the VA VetBiz VIP database that is found to be ineligible
due to an SBA protest decision or other negative finding will be
immediately removed from the VetBiz VIP database.
f. Appeals of verification application denial or program
cancellation decisions. One respondent recommended that the Department
establish an appeals process for matters limited to the Verification
Program. Requests for reconsideration of application denial decisions
are addressed in 38 CFR 74.13, ``Can an applicant ask CVE to reconsider
its initial decision to deny an application?'' The language has been
revised to add the mailing address for submission of requests for
reconsideration. The Director, CVE, shall make the decision on requests
for reconsideration of application denials, and 38 CFR 74.13(b) has
been revised to reflect that the timeframe for the issuance of a
decision has changed from 30 days to 60 days to allow for a thorough
consideration of the applicant's request. The decision of the Director,
CVE shall be final with no further appeal rights. This document
additionally revises the interim final requirement, for the issuance of
a decision from 30 days to 60 days, to allow for a more thorough
consideration of the applicant's request and solicits comments on this
regulatory amendment.
With regard to businesses that are already participants in the
Verification program, the rule provides procedures for cancellation of
verified status, as described in 38 CFR 74.22. The interim final rule
provided that the Director, CVE would issue cancellation decisions. The
final rule has been modified such that the Director, CVE issues a
Notice of Verified Status Cancellation; however, a participant may
appeal this notice to the Executive Director, Office of Small and
Disadvantaged Business Utilization. Section 74.22(e) provides that the
Executive Director, Office of Small and
[[Page 6100]]
Disadvantaged Business Utilization and Center for Veterans Enterprise
shall render a decision on such an appeal within 60 days after receipt.
g. Full-time control: One commenter suggested that the Department
revise 38 CFR 74.4(c)(1) to require the eligible party to work full-
time in order to establish control of the firm. The commenter suggested
that the original language which requires owners ``show sustained and
significant time invested in the business'' is insufficient to protect
the interests of the program and of the Department. The commenter
offered alternate language that would ``require the veteran to devote
the majority of his/her time to managing the concern.'' This commenter
further recommended ``permitting the veteran to be engaged in outside
employment/management activities only where he/she can show that doing
so won't have a significant impact on his/her ability to run the VOSB
or SDVOSB.''
Based on this comment, we have revised Sec. 74.4(c)(1) to clarify
the issue of control of a VOSB and SDVOSB. In lieu of the commenter's
suggested language, VA has revised the interim final rule to require an
eligible owner have only one business in the program at one time and
must work full-time in the business. VA has determined that this
revision will ensure the integrity of the program. In addition, VA has
defined ``full-time'' in 38 CFR 74.1. The public is invited to comment
on the requirement for full-time work in the business.
h. Ownership: Profits and distributions. Two comments were received
concerning 38 CFR 74.3. One respondent recommended revising 74.3(a) to
adopt language from the Internal Revenue Code, 26 U.S.C. 1563(c)(2)(B),
which states that stock in a corporation that is held by an employees'
trust described in section 401(a) of the Code will be treated as
``excluded stock'' if 5 or fewer persons who are individuals, estates,
or trusts own 50 percent or more of the total combined voting power of
the corporation. Under this proposed language, if 4 individuals own 10
percent each and an Employee Stock Ownership Plan (ESOP) owns 60
percent, the stock held by the ESOP would be treated as excluded stock,
and the four individuals would be treated as owning 100 percent of the
outstanding stock. In this example, eligible parties would be required
to own 51 percent or more of the outstanding stock (excluding the ESOP
stock). Conversely, if there were 10 shareholders who own 9 percent
each and an ESOP that owns 10 percent, the ESOP stock would be treated
as outstanding stock. In this case, eligible parties would be required
to own 51 percent of all outstanding stock, including the ESOP stock.
The original text required that veterans own 51 percent of the
outstanding stock (including employee stock ownership trusts). VA
accepts this comment and has revised 38 CFR 74.3(a). The net effect of
this change is that a company that is closely held by veterans would
qualify regardless of the size of the ESOP. Alternatively, a firm that
is not closely held by veterans will find it much more difficult to
qualify for the Verification Program. This commenter noted that there
are a number of government programs that are designed to encourage
employee ownership as a technique to encourage teamwork, reduce
employee turnover, and increase productivity. Adopting this change
affects a small number of VOSBs and SDVOSBs that have adopted ESOPs and
is consistent with the intent and spirit of public policy objectives.
The second commenter recommended expanding 38 CFR 74.3(d) to state
that a veteran's ability to share in the profits of a concern should be
commensurate with the extent of his/her ownership interest in that
concern. Such revision would also cover limited liability companies
(LLC) and partnership structures. For instance, if a VOSB owns 51
percent of an LLC, he/she would be entitled to receive 51 percent of
the profits of that LLC.
VA accepts this comment and has revised 38 CFR 74.3(d)(3) to
include a partnership or an LLC. Additionally, 38 CFR 74.3(d)(4) has
been added to state that an eligible individual's ability to share in
the profits of the concern should be commensurate with the extent of
his/her ownership interest in that concern. This document additionally
revises the interim final requirement for the evaluation of profits and
distributions to determine ownership interest in ESOPs and LLCs and
solicits comments on this regulatory amendment.
Other Non-Substantive Changes to the Final Rule: The Changes Below
Serve To Clarify Particular Items From the Interim Final Rule in This
Final Rule
The section headings of Sec. Sec. 74.1, 74.11, 74.12, 74.15, and
74.21 have been revised to include the word ``Program'' following
verification.
The definition of small business concern has been revised for
purpose of consistency to refer to the FAR Part 2 definition of small
business.
The definition of surviving spouse has been revised to add ``or
died as a direct result of a service-connected disability'' to be
consistent with the statutory definition at 38 U.S.C. 8127(h)(3).
The term ``in the line of duty'' in the definition of veteran has
been changed to ``in line of duty'' to be consistent with the term of
art as used in title 38 of the United States Code.
The options for transmitting decisions on applications and requests
for reconsideration have been clarified, as stated in 38 CFR 74.11(g)
and 74.13(g), to include mail, commercial carrier, facsimile, or other
electronic means.
VA has revised language in 38 CFR 74.14 to clarify the time period
for reapplication for admission to the VA VetBiz VIP Verification
Program. ``Or participant'' has been added to address those concerns
whose verification status is cancelled.
Administrative Procedure Act
Regarding the new interim final amendments published within this
final rule at 38 CFR 74.1 and 74.4(c)(1), pursuant to 5 U.S.C.
553(b)(3)(B) and (d)(3), we find that there is good cause to dispense
with advance public notice and opportunity to comment and with the 30-
day delayed effective date. Advance solicitation of comments on the
additional interim final provisions would be impracticable and contrary
to the public interest, as it could delay VA's examination and
verification procedures. VA has good cause to publish the interim final
provisions in light of the urgent need to ensure that business concerns
are being properly characterized as VOSBs or SDVOSBs, which is
accomplished through verification of ownership and control. Immediate
implementation of these provisions is consistent with the prior interim
final rule and permits VA to continue reviewing basic information
necessary to the verification process. This information is necessary
even if, as a result of any additional comments received after
publication of this notice, VA needs to further revise any of the rules
set forth herein. Accordingly, VA has found good cause for the
additional interim final provisions to become effective upon
publication.
Regulatory Flexibility Act
The Secretary hereby certifies that this final rule will not have a
significant economic impact on a substantial number of small entities
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612.
This final rule would generally be small business neutral as it
applies only to applying for verified status in the VetBiz.gov VIP
database. The overall impact of the final rule will be of benefit to
small businesses owned by veterans
[[Page 6101]]
or service-disabled veterans. VA estimates the cost to an individual
business to be less than $100.00 for 70-75 percent of the businesses
seeking verification, and the average cost to the entire population of
veterans seeking to become verified is less than $325.00 on average. A
related rule describes the effect that verified businesses will have in
the Department's acquisition regulation. This impact is discussed in
the proposed rule modifying the VA Acquisition Regulation which was
published in the Federal Register at 73 FR 49141 on August 20, 2008. On
this basis, the Secretary certifies that the adoption of this final
rule would not have a significant economic impact on a substantial
number of small entities as they are defined in the Regulatory
Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 605(b),
this regulation is exempt from the initial and final regulatory
flexibility analysis requirements of sections 603 and 604.
Executive Order 12866
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, when regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety,
and other advantages; distributive impacts; and equity). The Executive
Order classifies a ``significant regulatory action,'' requiring review
by the Office of Management and Budget (OMB) unless OMB waives such
review, as any regulatory action that is likely to result in a rule
that may: (1) Have an annual effect on the economy of $100 million or
more or adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities; (2) create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in the Executive
Order.
The economic, interagency, budgetary, legal, and policy
implications of this rule have been examined and it has been determined
to be a significant regulatory action under the Executive Order.
Unfunded Mandates
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C.
1532, that agencies prepare an assessment of anticipated costs and
benefits before issuing any rule that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more (adjusted annually for
inflation) in any given year. This rule would have no such effect on
State, local, and tribal governments, or on the private sector.
Paperwork Reduction Act
This final rule contains provisions that constitute collections of
information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).
OMB has approved these collections and has assigned control number
2900-0675. VA displays this control number under the applicable
sections of the regulations in this final rule. OMB assigns control
numbers to collections of information it approves. VA may not conduct
or sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid OMB control number.
Catalog of Federal Domestic Assistance
This final rule affects the verification guidelines of veteran-
owned small businesses, for which there is no Catalog of Federal
Domestic Assistance program number.
List of Subjects in 38 CFR Part 74
Administrative practice and procedures, Privacy, Reporting and
recordkeeping requirements, Small business, Veteran, Veteran-owned
small business, Verification.
Approved: October 5, 2009.
John R. Gingrich,
Chief of Staff, Department of Veterans Affairs.
0
Accordingly, the interim final rule adding 38 CFR Part 74, which was
published in the Federal Register at 73 FR 29024, on May 19, 2008, is
adopted as a final rule with changes, as follows:
PART 74--VETERANS SMALL BUSINESS REGULATIONS
General Guidelines
Sec.
74.1 What definitions are important for VetBiz Vendor Information
Pages (VIP) Verification Program?
74.2 What are the eligibility requirements a concern must meet for
VetBiz VIP Verification Program?
74.3 Who does the Center for Veterans Enterprise (CVE) consider to
own a veteran-owned small business?
74.4 Who does CVE consider to control a veteran-owned small
business?
74.5 How does CVE determine affiliation?
Application Guidelines
74.10 Where must an application be filed?
74.11 How does CVE process applications for VetBiz VIP Verification
Program?
74.12 What must a concern submit to apply for VetBiz VIP
Verification Program?
74.13 Can an applicant ask CVE to reconsider its initial decision to
deny an application?
74.14 Can an applicant or participant reapply for admission to the
VetBiz VIP Verification Program?
74.15 What length of time may a business participate in VetBiz VIP
Verification Program?
Oversight Guidelines
74.20 What is a verification examination and what will CVE examine?
74.21 What are the ways a business may exit VetBiz VIP Verification
Program status?
74.22 What are the procedures for cancellation?
Records Management
74.25 What types of personally identifiable information will VA
collect?
74.26 What types of business information will VA collect?
74.27 How will VA store information?
74.28 Who may examine records?
74.29 When will VA dispose of records?
Authority: 38 U.S.C. 501, 513, and as noted in specific
sections.
General Guidelines
Sec. 74.1 What definitions are important for VetBiz Vendor
Information Pages (VIP) Verification Program?
For the purposes of part 74, the following definitions apply.
Center for Veterans Enterprise (CVE) is an office within the U.S.
Department of Veterans Affairs (VA) and is a subdivision of VA's Office
of Small and Disadvantaged Business Utilization. The CVE helps veterans
interested in forming or expanding their own small businesses. It also
helps VA contracting offices identify veteran-owned small businesses
and works with the Small Business Administration's Veterans Business
Development Officers and Small Business Development Centers nationwide
regarding veterans' business financing, management, and technical
assistance needs.
Days are calendar days. In computing any period of time described
in part 74, the day from which the period begins to run is not counted,
and when the last day of the period is a Saturday, Sunday, or Federal
holiday, the period extends to the next day that is not a Saturday,
Sunday, or Federal holiday. Similarly, in circumstances where CVE is
closed for all or part of the last day, the period extends to the next
day on which the agency is open.
[[Page 6102]]
Day-to-day management means supervising the executive team,
formulating sound policies and setting strategic direction.
Day-to-day operations mean the marketing, production, sales, and
administrative functions of the firm.
Eligible individual means a veteran, service-disabled veteran or
surviving spouse, as defined in this section.
Full-time means working at the business during the normal working
hours, which equate to Monday through Friday, approximately 9 a.m. to 5
p.m.
Immediate family member means father, mother, husband, wife, son,
daughter, brother, sister, grandfather, grandmother, grandson,
granddaughter, father-in-law, and mother-in-law.
Joint venture is an association of two or more small business
concerns to engage in and carry out a single, specific business venture
for joint profit, for which purpose they combine their efforts,
property, money, skill, or knowledge, but not on a continuing or
permanent basis for conducting business generally. For VA contracts, a
joint venture must be in the form of a separate legal entity.
Negative control includes, but is not limited to, instances where a
minority shareholder has the ability, under the concern's chapter, by-
laws, or shareholder's agreement, to prevent a quorum or otherwise
block action by the board of directors or shareholders.
Non-veteran means any individual who does not claim veteran status,
or upon whose status an applicant or participant does not rely in
qualifying for VetBiz Vendor Information Pages (VIP) Verification
Program participation.
Office of Small and Disadvantaged Business Utilization is the
office within the Department of Veterans Affairs that establishes and
monitors small business program goals at the prime and subcontract
levels and which functions as the ombudsman for veterans and service-
disabled veterans seeking procurement opportunities with the
Department.
Participant means a veteran-owned small business concern that has
verified status in the VetBiz Vendor Information Pages database.
Primary industry classification means the six-digit North American
Industry Classification System (NAICS) code designation which best
describes the primary business activity of the participant. The NAICS
code designations are described in the North American Industry
Classification System (NAICS) Manual published by the U.S. Office of
Management and Budget.
Principal place of business means the business location where the
individuals who manage the concern's day-to-day operations spend most
working hours and where top management's current business records are
kept. If the office from which management is directed and where the
current business records are kept are in different locations, CVE will
determine the principal place of business for program purposes.
Same or similar line of business means business activities within
the same three-digit ``Major Group'' of the NAICS Manual as the primary
industry classification of the applicant or participant. The phrase
``same business area'' is synonymous with this definition.
Service-disabled veteran is a veteran who possesses either a
disability rating letter issued by the Department of Veterans Affairs,
establishing a service-connected rating between 0 and 100 percent, or a
disability determination from the Department of Defense.
Service-disabled veteran-owned small business concern is a business
not less than 51 percent of which is owned by one or more service-
disabled veterans, or in the case of any publicly owned business, not
less than 51 percent of the stock of which is owned by one or more
service-disabled veterans; the management and daily business operations
of which are controlled by one or more service-disabled veterans, or in
the case of a veteran with a permanent and severe disability, a spouse
or permanent caregiver of such veteran. In addition, some businesses
may be owned and operated by an eligible surviving spouse. Reservists
or members of the National Guard disabled from a disease or injury
incurred or aggravated in line of duty or while in training status also
qualify.
Small business concern is--CVE applies the small business concern
definition established by 48 CFR 2.101.
Surviving spouse is any individual identified as such by VA's
Veterans Benefits Administration and listed in its database of veterans
and family members. To be eligible for VetBiz VIP Verification, the
following conditions must apply:
(1) If the death of the veteran causes the small business concern
to be less than 51 percent owned by one or more veterans, the surviving
spouse of such veteran who acquires ownership rights in such small
business shall, for the period described in paragraph (2) of this
definition, be treated as if the surviving spouse were that veteran for
the purpose of maintaining the status of the small business concern as
a service-disabled veteran-owned small business.
(2) The period referred to in paragraph (1) of this definition is
the period beginning on the date on which the veteran dies and ending
on the earliest of the following dates:
(i) The date on which the surviving spouse remarries;
(ii) The date on which the surviving spouse relinquishes an
ownership interest in the small business concern;
(iii) The date that is 10 years after the date of the veteran's
death; or
(iv) The date on which the business concern is no longer small
under Federal small business size standards.
(3) The veteran must have had a 100 percent service-connected
disability or died as a direct result of a service-connected
disability.
Note to definition of surviving spouse: For program eligibility
purposes, the surviving spouse has the same rights and entitlements
of the service-disabled veteran who transferred ownership upon his
or her death.
Unconditional ownership means ownership that is not subject to
conditions precedent, conditions subsequent, executory agreements,
voting trusts, restrictions on or assignments of voting rights, or
other arrangements causing or potentially causing ownership benefits to
go to another (other than after death or incapacity). The pledge or
encumbrance of stock or other ownership interest as collateral,
including seller-financed transactions, does not affect the
unconditional nature of ownership if the terms follow normal commercial
practices and the owner retains control absent violations of the terms.
VA is the U.S. Department of Veterans Affairs.
Vendor Information Pages (VIP) is a database of businesses eligible
to participate in VA's Veteran-owned Small Business Program. The online
database may be accessed at no charge via the Internet at http://www.VetBiz.gov.
Verification eligibility period is a 12-month period that begins on
the date the Center for Veterans Enterprise issues the approval letter
establishing verified status. The participant must submit a new
application each year to continue eligibility.
VetBiz.gov (VetBiz) is a Web portal VA maintains at http://www.VetBiz.gov. It hosts the Vendor Information Pages database.
Veteran is a person who served on active duty with the U.S. Army,
Air Force, Navy, Marine Corps or Coast Guard, for any length of time
and at any place and who was discharged or released under conditions
other than dishonorable. Reservists or members of
[[Page 6103]]
the National Guard called to Federal active duty or disabled from a
disease or injury incurred or aggravated in line of duty or while in
training status also qualify as a veteran.
Veteran-owned small business concern (VOSB) is a small business
concern that is not less than 51 percent owned by one or more veterans,
or in the case of any publicly owned business, not less than 51 percent
of the stock of which is owned by one or more veterans; the management
and daily business operations of which are controlled by one or more
veterans and qualifies as ``small'' for Federal business size standard
purposes. All service-disabled veteran-owned small business concerns
(SDVOSBs) are also, by definition, veteran-owned small business
concerns. When used in these guidelines, the term ``VOSB'' includes
SDVOSBs.
Veterans Affairs Acquisition Regulation (VAAR) is the set of rules
that specifically govern requirements exclusive to the U.S. Department
of Veterans Affairs (VA) prime and subcontracting actions. The VAAR is
chapter 8 of title 48, Code of Federal Regulations, and supplements the
Federal Acquisition Regulation (FAR), which contains guidance
applicable to most Federal agencies.
Sec. 74.2 What are the eligibility requirements a concern must meet
for VetBiz VIP Verification Program?
(a) Ownership and control. A small business concern must be
unconditionally owned and controlled by one or more eligible veterans,
service-disabled veterans or surviving spouses, have completed the
online Vendor Information Pages database forms at http://www.VetBiz.gov, and has been examined by VA's Center for Veterans
Enterprise. Such businesses appear in the VIP database as ``verified.''
(b) Good character. Veterans, service-disabled veterans and
surviving spouses with ownership interests in VetBiz verified
businesses must have good character. Debarred or suspended concerns or
concerns owned or controlled by debarred or suspended persons are
ineligible for VetBiz VIP Verification.
(c) False Statements. If, during the processing of an application,
CVE determines that an applicant has knowingly submitted false
information, regardless of whether correct information would cause CVE
to deny the application, and regardless of whether correct information
was given to CVE in accompanying documents, CVE will deny the
application. If, after verifying the Participant's eligibility, CVE
discovers that false information has been knowingly submitted by a
firm, CVE will remove the ``verified'' status from the VIP database and
notify the business by phone and mail. Whenever CVE determines that the
applicant submitted false information, the matter will be referred to
the Office of Inspector General for review. In addition, the CVE will
request that debarment proceedings be initiated by the Department.
(d) Federal financial obligations. Neither a firm nor any of its
eligible individuals that fails to pay significant financial
obligations owed to the Federal Government, including unresolved tax
liens and defaults on Federal loans or other Federally assisted
financing, is eligible for VetBiz VIP Verification.
(e) U.S. Small Business Administration (SBA) Protest Decisions. Any
firm registered in the VetBiz VIP database that is found to be
ineligible due to an SBA protest decision or other negative finding
will be immediately removed from the VetBiz VIP database. Until such
time as CVE receives official notification that the firm has proven
that it has successfully overcome the grounds for the determination or
that the SBA decision is overturned on appeal, the firm will not be
eligible to participate in the 38 U.S.C. 8127 program.
Sec. 74.3 Who does the Center for Veterans Enterprise (CVE) consider
to own a veteran-owned small business?
An applicant or participant must be at least 51 percent
unconditionally and directly owned by one or more veterans or service-
disabled veterans.
(a) Ownership must be direct. Ownership by one or more veterans or
service-disabled veterans must be direct ownership. An applicant or
participant owned principally by another business entity or by a trust
(including employee stock ownership plans [ESOP]) that is in turn owned
by one or more veterans or service-disabled veterans does not meet this
requirement. However, ownership by a trust, such as a living trust, may
be treated as the functional equivalent of ownership by a veteran or
service-disabled veteran where the trust is revocable, and the veteran
or service-disabled veteran is the grantor, a trustee, and the sole
current beneficiary of the trust. For employee stock ownership plans
where 5 or fewer persons who are individuals, estates, or trusts own 50
percent or more of the total combined voting power of the corporation,
the employee plan will be determined to be ``excluded stock'' and
eligible parties must control 51 percent or more of the combined voting
power of the corporation. For employee stock ownership plans where
greater than 5 persons who are individuals, estates, or trusts own 50
percent or more of the total stock, eligible parties must control 51
percent or more of the combined voting power of the corporation,
including the ESOP stock.
(b) Ownership must be unconditional. Ownership by one or more
veterans or service-disabled veterans must be unconditional ownership.
Ownership must not be subject to conditions precedent, conditions
subsequent, executory agreements, voting trusts, restrictions on
assignments of voting rights, or other arrangements causing or
potentially causing ownership benefits to go to another (other than
after death or incapacity). The pledge or encumbrance of stock or other
ownership interest as collateral, including seller-financed
transactions, does not affect the unconditional nature of ownership if
the terms follow normal commercial practices and the owner retains
control absent violations of the terms. In particular, CVE will
evaluate ownership according to the following criteria for specific
types of small business concerns.
(1) Ownership of a partnership. In the case of a concern that is a
partnership, at least 51 percent of every class of partnership interest
must be unconditionally owned by one or more veterans or service-
disabled veterans. The ownership must be reflected in the concern's
partnership agreement.
(2) Ownership of a limited liability company. In the case of a
concern that is a limited liability company, at least 51 percent of
each class of member interest must be unconditionally owned by one or
more veterans or service-disabled veterans.
(3) Ownership of a corporation. In the case of a concern that is a
corporation, at least 51 percent of each class of voting stock
outstanding and 51 percent of the aggregate of all stock outstanding
must be unconditionally owned by one or more veterans or service-
disabled veterans.
(c) Stock options' effect on ownership. In determining
unconditional ownership, CVE will disregard any unexercised stock
options or similar agreements held by veterans or service-disabled
veterans. However, any unexercised stock options or similar agreements
(including rights to convert non-voting stock or debentures into voting
stock) held by non-veterans will be treated as exercised, except for
any ownership interests that are held by investment companies licensed
under
[[Page 6104]]
part 107 of title 13, Code of Federal Regulations.
(d) Profits and distributions. One or more veterans or service-
disabled veterans must be entitled to receive:
(1) At least 51 percent of the annual distribution of profits paid
to the owners of a corporate, partnership, or LLC applicant concern;
(2) 100 percent of the value of each share of stock owned by them
in the event that the stock is sold; and
(3) At least 51 percent of the retained earnings of the concern and
100 percent of the unencumbered value of each share of stock owned in
the event of dissolution of the corporation, partnership, or LLC.
(4) An eligible individual's ability to share in the profits of the
concern should be commensurate with the extent of his/her ownership
interest in that concern.
(e) Change of ownership. (1) A participant may remain eligible
after a change in its ownership or business structure, so long as one
or more veterans or service-disabled veterans own and control it after
the change and the participant files a new application identifying the
new veteran owners or their new business interest.
(2) Any participant that is performing contracts and desires to
substitute one veteran owner for another shall submit a proposed
novation agreement and supporting documentation in accordance with FAR
Subpart 42.12 to the contracting officer prior to the substitution or
change of ownership for approval.
(3) Where the transfer results from the death or incapacity due to
a serious, long-term illness or injury of an eligible principal, prior
approval is not required, but the concern must file a new application
with contracting officer and CVE within 60 days of the change. Existing
contracts may be performed to the end of the instant term. However, no
options may be exercised.
(4) Continued eligibility of the participant with new ownership and
the award of any new contracts require that CVE verify all eligibility
requirements are met by the concern and the new owners.
(f) Community property laws given effect. In determining ownership
interests when an owner resides in any of the community property States
or territories of the United States, CVE considers applicable State
community property laws. If only one spouse claims veteran status, that
spouse's ownership interest will be considered unconditionally held
only to the extent it is vested by the community property laws.
Sec. 74.4 Who does CVE consider to control a veteran-owned small
business?
(a) Control means both the day-to-day management and long-term
decision-making authority for the VOSB. Many persons share control of a
concern, including each of those occupying the following positions:
Officer, director, general partner, managing partner, managing member
and manager. In addition, key employees who possess expertise or
responsibilities related to the concern's primary economic activity may
share significant control of the concern. CVE will consider the control
potential of such key employees on a case-by-case basis.
(b) Control is not the same as ownership, although both may reside
in the same person. CVE regards control as including both the strategic
policy setting exercised by boards of directors and the day-to-day
management and administration of business operations. An applicant or
participant's management and daily business operations must be
conducted by one or more veterans or service-disabled veterans.
Individuals managing the concern must have managerial experience of the
extent and complexity needed to run the concern. A veteran need not
have the technical expertise or possess a required license to be found
to control an applicant or participant if he or she can demonstrate
that he or she has ultimate managerial and supervisory control over
those who possess the required licenses or technical expertise.
However, where a critical license is held by a non-veteran having an
equity interest in the applicant or participant firm, the non-veteran
may be found to control the firm.
(c)(1) An applicant or participant must be controlled by one or
more veterans or service-disabled veterans who possess requisite
management capabilities. With the exception of joint-venture
agreements, an eligible owner may only have one business participating
in the Verification Program at one time and must work full-time in the
business as defined in Sec. 74.1.
(2) An eligible full-time manager must hold the highest officer
position (usually President or Chief Executive Officer) in the
applicant or participant.
(3) One or more veterans or service-disabled veteran owners who
manage the applicant or participant must devote full-time to the
business during the normal working hours of firms in the same or
similar line of business. Work in a wholly-owned subsidiary of the
applicant or participant may be considered to meet the requirement of
full-time devotion. This applies only to a subsidiary owned by the VOSB
itself, and not to firms in which the veteran has a mere ownership
interest.
(4) Except as provided in paragraph (d)(1) of this section, a
veteran owner's unexercised right to cause a change in the management
of the applicant concern does not in itself constitute veteran control,
regardless of how quickly or easily the right could be exercised.
(d) In the case of a partnership, one or more veterans or service-
disabled veterans must serve as general partners, with control over all
partnership decisions. A partnership in which no veteran is a general
partner will be ineligible for participation.
(e) In the case of a limited liability company, one or more
veterans or service-disabled veterans must serve as management members,
with control over all decisions of the limited liability company.
(f) One or more veterans or service-disabled veterans must control
the board of directors of a corporate applicant or participant.
(1) CVE will deem veterans or service-disabled veterans to control
the board of directors where:
(i) A single veteran owns 100 percent of all voting stock of an
applicant or participant concern;
(ii) A single veteran owns at least 51 percent of all voting stock
of an applicant or participant, the individual is on the board of
directors and no super majority voting requirements exist for
shareholders to approve corporation actions. Where supermajority voting
requirements are provided for in the concern's articles of
incorporation, its by-laws, or by State law, the veteran must own at
least the percent of the voting stock needed to overcome any such
supermajority voting requirements; or
(iii) No single veteran owns 51 percent of all voting stock but
multiple veterans in combination do own at least 51 percent of all
voting stock, each such veteran is on the board of directors, no
supermajority voting requirements exist, and the veteran shareholders
can demonstrate that they have made enforceable arrangements to permit
one of them to vote the stock of all as a block without a shareholder
meeting. Where the concern has supermajority voting requirements, the
veteran shareholders must own at least that percentage of voting stock
needed to overcome any such supermajority ownership requirements.
(2) Where an applicant or participant does not meet the
requirements set forth in paragraph (d)(1) of this section, the
veteran(s) upon whom eligibility is based must control the board of
[[Page 6105]]
directors through actual numbers of voting directors or, where
permitted by state law, through weighted voting (e.g., in a concern
having a two-person board of directors where one individual on the
board is a veteran and one is not, the veteran vote must be weighted--
worth more than one vote--in order for the concern to be eligible for
VetBiz VIP Verification). Where a concern seeks to comply with this
paragraph:
(i) Provisions for the establishment of a quorum cannot permit non-
veteran directors to control the board of directors, directly or
indirectly;
(ii) Any executive committee of the board of directors must be
controlled by veteran directors unless the executive committee can only
make recommendations to and cannot independently exercise the authority
of the board of directors.
(3) Non-voting, advisory, or honorary directors may be appointed
without affecting veterans' or service-disabled veterans' control of
the board of directors.
(4) Arrangements regarding the structure and voting rights of the
board of directors must comply with applicable state law.
(g) Non-veterans may be involved in the management of an applicant
or participant, and may be stockholders, partners, limited liability
members, officers, or directors of the applicant or participant. With
the exception of a spouse or personal caregiver who represents a
severely disabled veteran owner, no such non-veteran or immediate
family member may:
(1) Exercise actual control or have the power to control the
applicant or participant;
(2) Be a former employer or a principal of a former employer of any
affiliated business of the applicant or participant, unless it is
determined by the CVE that the relationship between the former employer
or principal and the eligible individual or applicant concern does not
give the former employer actual control or the potential to control the
applicant or participant and such relationship is in the best interests
of the participant firm; or
(3) Receive compensation from the applicant or participant in any
form as directors, officers or employees, including dividends, that
exceeds the compensation to be received by the highest officer (usually
chief executive officer or president). The highest ranking officer may
elect to take a lower salary than a non-veteran only upon demonstrating
that it helps the applicant or participant.
(h) Non-veterans who transfer majority stock ownership or control
of the firm to an immediate family member within 2 years prior to the
application and remain involved in the firm as a stockholder, officer,
director, or key employee of the firm are presumed to control the firm.
The presumption may be rebutted by showing that the transferee has
independent management experience necessary to control the operation of
the firm, and indeed is participating in the management of the firm.
(i) Non-veterans or entities may be found to control or have the
power to control in any of the following circumstances, which are
illustrative only and not all inclusive:
(1) Non-veterans control the board of directors of the applicant or
participant, either directly through majority voting membership, or
indirectly, where the by-laws allow non-veterans effectively to prevent
a quorum or block actions proposed by the veterans or service-disabled
veterans.
(2) A non-veteran or entity, having an equity interest in the
applicant or participant, provides critical financial or bonding
support or a critical license to the applicant or participant which
directly or indirectly allows the non-veteran significantly to
influence business decisions of the participant, unless an exception is
authorized by the Office of Small and Disadvantaged Business
Utilization.
(3) A non-veteran or entity controls the applicant or participant
or an individual veteran owner through loan arrangements. Providing a
loan guaranty on commercially reasonable terms does not, by itself,
give a non-veteran or entity the power to control a firm.
(4) Business relationships exist with non-veterans or entities
which cause such dependence that the applicant or participant cannot
exercise independent business judgment without great economic risk.
Sec. 74.5 How does CVE determine affiliation?
The Center for Veterans Enterprise applies the affiliation rules
established by the Small Business Administration in 13 CFR part 121.
Application Guidelines
Sec. 74.10 Where must an application be filed?
An application for VetBiz VIP Verification status must be
electronically filed in the Vendor Information Pages database located
in the Center for Veterans Enterprise's Web portal, http://www.VetBiz.gov. Guidelines and forms are located on the Web portal.
Upon receipt of the applicant's electronic submission, an
acknowledgment message will be dispatched to the concern, containing
estimated processing time and other information. Address information
for the CVE is also contained on the Web portal. Correspondence may be
dispatched to: Director, Center for Veterans Enterprise (00VE), U.S.
Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC
20420.
(The Office of Management and Budget has approved the information
collection requirements in this section under control number 2900-
0675.)
Sec. 74.11 How does CVE process applications for VetBiz VIP
Verification Program?
(a) The Director, Center for Veterans Enterprise, is authorized to
approve or deny applications for VetBiz VIP Verification. The CVE will
receive, review and evaluate all VetBiz VIP Verification applications.
CVE will advise each applicant within 30 days, when practicable, after
the receipt of an application whether the application is complete and
suitable for evaluation and, if not, what additional information or
clarification is required to complete the application. CVE will process
an application for VetBiz VIP Verification status within 60 days, when
practicable, of receipt of a complete application package. Incomplete
application packages will not be processed.
(b) CVE, in its sole discretion, may request clarification of
information contained in the application at any time in the eligibility
determination process. CVE will take into account any clarifications
made by an applicant in response to a request for such by CVE.
(c) An applicant's eligibility will be based on circumstances
existing on the date of application, except where clarification is made
pursuant to paragraph (b) of this section or as provided in paragraph
(d) of this section.
(d) Changed circumstances for an applicant occurring subsequent to
its application and which adversely affect eligibility will be
considered and may constitute grounds for denial of the application.
The applicant must inform CVE of any changed circumstances that could
adversely affect its eligibility for the program (i.e., ownership or
control changes) during its application review. Failure to inform CVE
of any such changed circumstances constitutes good cause for which CVE
may withdraw verified status for the participant if non-compliance is
discovered after a participant has been verified.
(e) The decision of the Director, CVE, to approve or deny an
application will
[[Page 6106]]
be in writing. A decision to deny verification status will state the
specific reasons for denial, and will inform the applicant of any
appeal rights.
(f) If the Director, CVE, approves the application, the date of the
approval letter is the date of participant verification for purposes of
determining the participant's verification eligibility term.
(g) The decision may be sent by mail, commercial carrier, facsimile
transmission, or other electronic means.
(The Office of Management and Budget has approved the information
collection requirements in this section under control number 2900-
0675.)
Sec. 74.12 What must a concern submit to apply for VetBiz VIP
Verification Program?
Each VetBiz VIP Verification applicant must submit the electronic
forms and attachments CVE requires. All electronic forms are available
on the VetBiz.gov Vendor Information Pages database Web pages. At the
time the applicant dispatches the electronic forms, the applicant must
also retain on file at the principal place of business a completed copy
of the electronic forms supplemented by manual records that will be
used in verification examinations. These forms and attachments will
include, but not be limited to, financial statements, Federal personal
and business tax returns, payroll records and personal history
statements. An applicant must also retain in the application file IRS
Form 4506, Request for Copy or Transcript of Tax Form. These materials
shall be filed together to maximize efficiency of verification
examination visits. Together with the electronic documents, these
manual records will provide the CVE verification examiner with
sufficient information to establish the management, control and
operating status of the business on the date of submission.
(The Office of Management and Budget has approved the information
collection requirements in this section under control number 2900-
0675.)
Sec. 74.13 Can an applicant ask CVE to reconsider its initial
decision to deny an application?
(a) An applicant may request that the Director, CVE, reconsider his
or her decision to deny an application by filing a request for
reconsideration with CVE within 30 days of receipt of CVE's denial
decision. ``Filing'' means a document is received by CVE by 5:30 p.m.,
eastern time, on that day. Documents may be filed by hand delivery,
mail, commercial carrier, or facsimile transmission. Hand delivery and
other means of delivery may not be practicable during certain periods
due, for example, to security concerns or equipment failures. The
filing party bears the risk that the delivery method chosen will not
result in timely receipt at CVE. Submit requests for reconsideration
to: Director, Center for Veterans Enterprise (00VE), U.S. Department of
Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420. A
formal decision will be issued within 60 days after receipt.
(b) The Director, CVE, will issue a written decision within 60
days, when practicable, of receipt of the applicant's request. The
Director, CVE, may either approve the application, deny it on the same
grounds as the original decision, or deny it on other grounds. If
denied, the Director, CVE, will explain why the applicant is not
eligible for the VetBiz VIP Verification and give specific reasons for
the denial.
(c) If the Director, CVE, denies the application solely on issues
not raised in the initial denial, the applicant may ask for
reconsideration as if it were an initial denial.
(d) If CVE determines that a concern may not qualify as small, they
may directly deny an application for VetBiz VIP Verification or may
request a formal size determination from the U.S. Small Business
Administration (SBA). A concern whose application is denied because it
is other than a small business concern by CVE may request a formal size
determination from the SBA Associate Administrator, Office of
Government Contracting (ATTN: Director, Office of Size Standards), 409
3rd Street, SW., Washington, DC 20416. A favorable determination by SBA
will enable the firm to immediately submit a new VetBiz VIP
Verification.
(e) A denial decision that is based on the failure to meet any
veteran or service-disabled veteran eligibility criteria is not subject
to a request for reconsideration and is the final decision of CVE.
(f) Except as provided in paragraph (c) of this section, the
decision on the request for reconsideration shall be final.
(g) The decision may be sent by mail, commercial carrier, facsimile
transmission, or other electronic means.
Sec. 74.14 Can an applicant or participant reapply for admission to
the VetBiz VIP Verification Program?
Once an application, a request for reconsideration, or an appeal to
a cancellation notice, as applicable, has been denied, the applicant or
participant shall be required to wait for a period of 6 months before a
new application will be processed by CVE.
Sec. 74.15 What length of time may a business participate in VetBiz
VIP Verification Program?
(a) A participant receives an eligibility term of 1 year from the
date of CVE's approval letter establishing verified status. The
participant must maintain its eligibility during its tenure and must
inform CVE of any changes that would adversely affect its eligibility.
The eligibility term may be shortened by cancellation by CVE or
voluntary withdrawal by the participant (i.e., no longer eligible as a
small business concern), as provided for in this subpart.
(b) When at least 50 percent of the assets of a concern are the
same as those of an affiliated business, the concern will not be
eligible for verification.
(c) CVE may initiate a verification examination whenever it
receives credible information calling into the question a participant's
eligibility as a VOSB. Upon its completion of the examination, CVE will
issue a written decision regarding the continued eligibility status of
the questioned participant.
(d) If CVE finds that the participant does not qualify as a VOSB,
the procedures at Sec. 74.22 will apply.
(e) If CVE finds that the participant continues to qualify as a
VOSB, the program term remains in effect.
Oversight Guidelines
Sec. 74.20 What is a verification examination and what will CVE
examine?
(a) General. A verification examination is an investigation by CVE
officials, which verifies the accuracy of any statement or information
provided as part of the VetBiz VIP Verification application process.
Thus, examiners may verify that the concern currently meets the
eligibility requirements, and that it met such requirements at the time
of its application or its most recent size recertification. An
examination may be conducted on a random, unannounced basis, or upon
receipt of specific and credible information alleging that a
participant no longer meets eligibility requirements.
(b) Scope of examination. CVE may conduct the examination, or parts
of the program examination, at one or all of the participant's offices.
CVE will determine the location of the examination. Examiners may
review any information related to the concern's eligibility
requirements including, but not limited to, documentation related to
the legal structure, ownership and control of the concern. As a
minimum,
[[Page 6107]]
examiners shall review all documents supporting the application, as
described in Sec. 74.12. These include: Financial statements; Federal
personal and business tax returns; personal history statements; and
Request for Copy or Transcript of Tax Form (IRS Form 4506) for up to 3
years. Other documents, which may be reviewed include (if applicable):
Articles of Incorporation/Organization; corporate by-laws or operating
agreements; organizational, annual and board/member meeting records;
stock ledgers and certificates; State-issued Certificates of Good
Standing; contract, lease and loan agreements; payroll records; bank
account signature cards; and licenses.
Sec. 74.21 What are the ways a business may exit VetBiz VIP
Verification Program status?
A participant may:
(a) Voluntarily cancel its status by submitting a written request
to CVE requesting that the ``verified'' status button be removed from
the Vendor Information Pages database; or
(b) Delete its record entirely from the Vendor Information Pages
database; or
(c) CVE may cancel the ``verified'' status button for good cause
upon formal notice to the participant. Examples of good cause include,
but are not limited to, the following:
(1) Submission of false information in the participant's VetBiz VIP
Verification application.
(2) Failure by the participant to maintain its eligibility for
program participation.
(3) Failure by the participant for any reason, including the death
of an individual upon whom eligibility was based, to maintain
ownership, management, and control by veterans, service-disabled
veterans or surviving spouses.
(4) Failure by the concern to disclose to CVE the extent to which
non-veteran persons or firms participate in the management of the
participant.
(5) Debarment, suspension, voluntary exclusion, or ineligibility of
the participant or its owners.
(6) A pattern of failure to make required submissions or responses
to CVE in a timely manner, including a failure to make available
financial statements, requested tax returns, reports, information
requested by CVE or VA's Office of Inspector General, or other
requested information or data within 30 days of the date of request.
(7) Cessation of the participant's business operations.
(8) Failure by the concern to pay or repay significant financial
obligations owed to the Federal Government.
(9) Failure by the concern to obtain and keep current any and all
required permits, licenses, and charters, including suspension or
revocation of any professional license required to operate the
business.
(10) Failure by the concern to provide an updated application (VA
Form 0877) within 60 days of any change in ownership.
(d) The examples of good cause listed in paragraph (c) of this
section are intended to be illustrative only. Other grounds for
canceling a participant's verified status include any other cause of so
serious or compelling a nature that it affects the present
responsibility of the participant.
Sec. 74.22 What are the procedures for cancellation?
(a) General. When CVE believes that a participant's verified status
should be cancelled prior to the expiration of its eligibility term,
CVE will notify the participant in writing. The Notice of Proposed
Cancellation Letter will set forth the specific facts and reasons for
CVE's findings, and will notify the participant that it has 30 days
from the date it receives the letter to submit a written response to
CVE explaining why the proposed ground(s) should not justify
cancellation.
(b) Recommendation and decision. Following the 30-day response
period, the Director, CVE, will consider any information submitted by
the participant. Upon determining that cancellation is not warranted,
the Director, CVE, will notify the participant in writing. If
cancellation appears warranted, the Director, CVE, will make a decision
whether to cancel the participant's verified status.
(c) Notice requirements. Upon deciding that cancellation is
warranted, the Director, CVE, will issue a Notice of Verified Status
Cancellation. The Notice will set forth the specific facts and reasons
for the decision, and will advise the concern that it may re-apply
after it has met all eligibility criteria.
(d) Effect of verified status cancellation. After the effective
date of cancellation, a participant is no longer eligible to appear as
``verified'' in the VetBiz VIP database. However, such concern is
obligated to perform previously awarded contracts to the completion of
their existing term of performance.
(e) Appeals. A participant may file an appeal with the Executive
Director, Office of Small and Disadvantaged Business Utilization and
Center for Veterans Enterprise, concerning the Notice of Verified
Status Cancellation within 30 days of receipt of CVE's cancellation
decision. ``Filing'' means a document is received by CVE by 5:30 p.m.,
eastern time, on that day. Documents may be filed by hand delivery,
mail, commercial carrier, or facsimile transmission. Hand delivery and
other means of delivery may not be practicable during certain periods
due, for example, to security concerns or equipment failures. The
filing party bears the risk that the delivery method chosen will not
result in timely receipt at CVE. Submit appeals to: Executive Director,
Office of Small and Disadvantaged Business Utilization and Center for
Veterans Enterprise (00VE), U.S. Department of Veterans Affairs, 810
Vermont Avenue, NW., Washington, DC 20420. A formal decision will be
issued within 60 days after receipt. The decision on the appeal shall
be final.
Records Management
Sec. 74.25 What types of personally identifiable information will VA
collect?
In order to establish owner eligibility, the Department will
collect individual names and Social Security numbers for veterans,
service-disabled veterans and surviving spouses who represent
themselves as having ownership and control interests in a specific
business seeking to obtain verified status.
Sec. 74.26 What types of business information will VA collect?
VA will examine a variety of business records. See Sec. 74.12,
``What is a verification examination and what will CVE examine?''
Sec. 74.27 How will VA store information?
VA intends to store records provided to complete the VetBiz Vendor
Information Pages registration fully electronically on the Department's
secure servers. CVE personnel will compare information provided
concerning owners who have veteran status, service-disabled veteran
status or surviving spouse status against electronic records maintained
by the Department's Veterans Benefits Administration. Records collected
during examination visits will be scanned onto portable media and fully
secured in the Center for Veterans Enterprise, located in Washington,
DC.
Sec. 74.28 Who may examine records?
Personnel from the Department of Veterans Affairs, Center for
Veterans Enterprise and its agents, including personnel from the Small
Business Administration, may examine records to ascertain the ownership
and control of the applicant or participant.
Sec. 74.29 When will VA dispose of records?
The records, including those pertaining to businesses not
determined
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to be eligible for the program, will be kept intact and in good
condition for seven years following a program examination or the date
of the last Notice of Verified Status Approval letter. Longer retention
will not be required unless a written request is received from the
Government Accountability Office not later than 30 days prior to the
end of the retention period.
(Authority: 38 U.S.C. 8127(f))
[FR Doc. 2010-2648 Filed 2-5-10; 8:45 am]
BILLING CODE P