November 20, 2015 - Small Business

The Department of Veterans Affairs Proposes Amendments to Veteran-Owned Small Business Verification Program

small-businessThe Department of Veterans Affairs (VA) recently proposed a rule that would amend its regulations governing the Veteran-Owned Small Business (VOSB) Verification Program.  The amendments target the dual objectives of preventing fraud in the Veterans First Contracting Program (the “Program”), which is a small business set-aside eligibility verification program, and simplifying the Program verification process.  To achieve the stated objectives, the proposed rule:

  • Tightens and clarifies certain elements of the eligibility requirements to prevent fraud;
  • Informs prospective applicants about the review process; and
  • Revises and adds definitions.

The revised definition of “ownership” in the proposed rule best exemplifies the VA’s attempt to streamline Program eligibility verification and sharpen the focus on preventing fraud.  “Ownership” is redefined by limiting the scope of unconditional ownership requirements, accepting certain commercially reasonable ownership conditions, and prohibiting ownership conditions that Program auditors cited as creating more significant risk of fraud, waste, or abuse.  The proposed rule outright eliminates the definition for “unconditional ownership.”

Program auditors also expressed fraud concerns regarding control over VOSBs.  In response, the VA focused on tightening requirements around veteran control over the functional aspects of each qualifying entity.  The proposed rule redefines “control” to clarify that certain elements apply to all business entities, while other aspects of control only apply to certain types of entities.  In an effort to focus on high-priority concerns, the proposed rule adds two new terms; “daily business operations” and “permanent caregiver.” It also replaces the terms “day-to-day management” and “day-to-day operations” with “daily business operations.”

The revised definition of the term “veteran,” which now includes all individuals who served on active duty and were discharged or released under other than dishonorable conditions, is an example of the simplified verification process.  The change clarifies the scope of Program eligibility to match the broader admissibility criteria set forth in the overarching statutory authority.

Comments on the proposed rule are due no later than January 5, 2016.