[Federal Register Volume 77, Number 124 (Wednesday, June 27, 2012)]
[Rules and Regulations]
[Pages 38181-38183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15801]
-----------------------------------------------------------------------
DEPARTMENT OF VETERANS AFFAIRS
38 CFR Part 74
RIN 2900-AO49
VA Veteran-Owned Small Business Verification Guidelines
AGENCY: Department of Veterans Affairs.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: This document implements a portion of the Veterans Benefits,
Health Care, and Information Technology Act of 2006, which requires the
Department of Veterans Affairs (VA) to verify ownership and control of
veteran-owned small businesses (VOSBs), including service-disabled
veteran-owned small businesses (SDVOSBs) in order for these firms to
participate in VA acquisitions set-aside for SDVOSB/VOSBs. This interim
final rule contains a minor revision to require re-verification of
SDVOSB/VOSB status only every two years rather than annually. The
purpose of this change is to reduce the administrative burden on
SDVOSB/VOSBs regarding participation in VA acquisitions set asides for
these types of firms.
DATES: Effective date: June 27, 2012.
Comment date: Comments must be received on or before August 27,
2012.
ADDRESSES: Written comments may be submitted by: mail or hand-delivery
to Director, Regulations Management (00REG1), Department of Veterans
Affairs, 810 Vermont Ave. NW., Room 1068, Washington, DC 20420; fax to
(202) 273-9026; or email through http://www.Regulations.gov. Comments
should indicate that they are submitted in response to ``RIN 2900-
AO49--VA Veteran-Owned Small Business Verification Guidelines.'' All
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) 273-9515 for an appointment.
FOR FURTHER INFORMATION CONTACT: Michelle Gardner-Ince, Director,
Center for Veterans Enterprise (00VE), Department of Veterans Affairs,
810 Vermont Ave. NW., Washington, DC 20420, phone (202) 303-3260 x5237.
SUPPLEMENTARY INFORMATION: In a final rule published in the Federal
Register on February 8, 2010, (73 FR 6098), VA established new 38 CFR
part 74 setting forth a mechanism for verifying ownership and control
of VOSBs, including SDVOSBs. At that time, with respect to 38 CFR
74.15, VA anticipated that annual examinations were necessary to ensure
the integrity of the Verification Program. This was deemed consistent
with the annual Federal size and status recertification requirement in
the Central Contractor Registry.
In administering this program since February 2010, VA has concluded
that an annual examination is not necessary to adequately maintain the
integrity of the program and proposes a 2-year eligibility period. This
change is appropriate because VA conducts a robust examination of
personal and company documentation to verify ownership and control by
Veterans of applicant businesses. In addition to verifying individual
owners' service-disabled veteran status or veteran status, in
accordance with 38 CFR 74.20(b), VA reviews an applicant's financial
statements; Federal personal and business tax returns; personal history
[[Page 38182]]
statements; 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. Given the
depth of this review, annual re-verification examinations have become
an unnecessary administrative burden on both applicants/participants
and VA.
Given this extensive initial examination, VA is confident that the
integrity of the verification program will not be compromised by
establishing a 2-year eligibility period. Other integrity aspects of
the program remain adequate to oversee a 2-year eligibility period.
Once verified, 38 CFR 74.15(a) mandates that the participant must
maintain its eligibility during its tenure and, if ownership or control
changes occur, must inform VA's Center for Veterans Enterprise (CVE) of
any changes that would adversely affect its eligibility. Moreover, in
accordance with 38 CFR part 74.20(a), VA has the right to conduct
random, unannounced site examinations of participants or to conduct a
further examination upon receipt of specific and credible information
that a participant is no longer eligible. Lastly, in the course of
specific SDVOSB/VOSB set-aside acquisitions, VA contracting officers
and also competing SDVOSB/VOSBs have the right to raise a SDVOSB/VOSB
status protest to VA's Office of Small and Disadvantaged Business
Utilization (OSDBU) if either has a reasonable basis upon which to
challenge the SDVOSB/VOSB status of a verified firm.
Establishment of a longer, 2-year eligibility period is consistent
with other Federal set-aside programs. With respect to the Historically
Underutilized Business Zone (HUBZone) small business certification
program, U.S. Small Business Administration (SBA) regulations at 13 CFR
126.500 require that any qualified HUBZone small business concern
seeking to remain on the HUBZone approved list must recertify every 3
years with SBA. With regard to SBA's Section 8(a) Business Development
program, SBA authorizes a program term of up to 9 years in 13 CFR
124.2. For VA's SDVOSB/VOSB verification program, VA has now determined
that a program term of 2 years is reasonable given the mandatory nature
of VA's SDVOSB/VOSB set-aside authority in contrast to the
discretionary nature of the HUBZone and Section 8(a) set-aside
programs. In accordance with 38 U.S.C. 8127 and VA Acquisition
Regulation, 48 CFR Part 819, VA is required to set aside any open
market procurement for SDVOSBs and then VOSBs, first and second
respectively, if two or more such concerns are reasonably anticipated
to submit offers at fair and reasonable pricing. Given the large volume
of appropriated funds subject to these set-aside requirements, a 2-year
eligibility period prior to re-examination is deemed reasonable to
adequately balance the burden on SDVOSB/VOSBs and to protect the
integrity of the program.
Administrative Procedure Act
The Secretary of Veterans Affairs finds good cause to issue this
interim final rule prior to notice and comment procedures. The interim
rule makes only a minor modification to extend the eligibility period
for SDVOSB/VOSBs after VA's initial robust verification examination and
approval from 1 year to 2 years. The rule will reduce the
administrative burden on SDVOSB/VOSB participants by eliminating annual
re-verification submissions. The integrity of the program remains
protected by the initial robust and detailed verification examination,
the regulatory requirement of participants to report changes to
ownership and control during their eligibility period, VA's authority
to conduct random site examinations and to re-examine eligibility upon
receipt of any reasonably credible information affecting SDVOSB/VOSB
verified status, and, for individual acquisitions, the status protest
process, where VA contracting officers or competing vendors can
challenge the SDVOSB/VOSB status of offerors if a reasonable basis can
be asserted to be decided by VA OSDBU on SDVOSB/VOSB set-aside
acquisitions. For these reasons, the Secretary of Veterans Affairs is
issuing this as an interim final rule. In view of the detrimental
effects of continuing an unnecessary administrative burden on program
participants and verifying officials, and to avoid delays in
verification caused by repetitive annual reviews, the Secretary finds
it is impracticable, unnecessary, and contrary to public interest to
delay the effective date of this regulation for the purpose of
soliciting advance public comment. The Secretary of Veterans Affairs
will consider and address comments that are received within 60 days of
the date this interim final rule is published in the Federal Register.
For these same reasons, and because this interim final rule
relieves a restriction, the Secretary finds that this rule will be
effective on the date of publication.
Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, applies to this
final rule. This interim final rule is generally neutral in its effect
on small businesses because it relates only to small businesses
applying for verified status in VA's SDVOSB/VOSB verified database. The
overall impact of the rule will benefit small businesses owned by
veterans or service-disabled veterans because it will reduce their
administrative burden associated with maintaining verified status by
extending the need for re-verification by VA from 1 year to 2 years. VA
has estimated 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. Increasing the verification
period will decrease the frequency of any such costs. On this basis,
the Secretary certifies that the adoption of this interim 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 Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess the
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 effects, and other advantages; distributive impacts;
and equity). Executive Order 13563 (Improving Regulation and Regulatory
Review) emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
Executive Order 12866 (Regulatory Planning and Review) defines a
``significant regulatory action,'' which requires review by the Office
of Management and Budget (OMB), 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
[[Page 38183]]
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 this Executive Order.''
The economic, interagency, budgetary, legal, and policy
implications of this regulatory action have been examined and it has
been determined not to be a significant regulatory action under
Executive Order 12866.
VA has already established the SDVOSB/VOSB verification program in
regulation at 38 CFR part 74, and the minor change in this interim
final rule will solely modify the term of eligibility after initial
verification from 1 year to 2 years in 38 CFR 74.15(a) before re-
verification would be required.
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 interim final rule would have no
such effect on State, local, and tribal governments, or on the private
sector.
Paperwork Reduction Act
This document contains no provisions constituting a collection of
information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3521).
Catalog of Federal Domestic Assistance
This interim final rule affects the verification guidelines of
veteran-owned small businesses, for which there is no Catalog of
Federal Domestic Assistance program number.
Signing Authority
The Secretary of Veterans Affairs, or designee, approved this
document and authorized the undersigned to sign and submit the document
to the Office of the Federal Register for publication electronically as
an official document of the Department of Veterans Affairs. John R.
Gingrich, Chief of Staff, Department of Veterans Affairs, approved this
document on June 22, 2012, for publication.
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.
Dated: June 22, 2012.
Robert C. McFetridge,
Director of Regulation Policy and Management, Office of General
Counsel, Department of Veterans Affairs.
For the reasons set out in the preamble, VA amends 38 CFR part 74
as follows:
PART 74--VETERANS SMALL BUSINESS REGULATIONS
0
1. The authority citation for part 74 continues to read as follows:
Authority: 38 U.S.C. 501, 513, and as noted in specific
sections.
Sec. 74.15 [Amended]
0
2. In Sec. 74.15, paragraph (a), the first sentence is amended by
removing ``1 year'' and adding, in its place, ``2 years''.
[FR Doc. 2012-15801 Filed 6-26-12; 8:45 am]
BILLING CODE 8320-01-P