[Federal Register Volume 80, Number 215 (Friday, November 6, 2015)]
[Proposed Rules]
[Pages 68795-68807]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-28256]



[[Page 68795]]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF VETERAN AFFAIRS

38 CFR Part 74

RIN 2900-A063


VA Veteran-Owned Small Business (VOSB) Verification Guidelines

AGENCY: Department of Veteran Affairs.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Veterans Affairs (VA) is proposing to amend 
its regulations governing the VA Veteran-Owned Small Business (VOSB) 
Verification Program. VA seeks to find an appropriate balance between 
preventing fraud in the Veterans First Contracting Program and 
providing a process that would make it easier for more VOSBs to become 
verified. The Verification Program has been the subject of reports from 
both the Government Accountability Office (GAO) and VA's Office of 
Inspector General stating that despite VA's Verification Program, fraud 
still exists in the Veterans First Contracting Program. Some 
stakeholder feedback has been that the current regulations at 38 CFR 
part 74 are too open to interpretation and are unnecessarily more 
rigorous than similar certification programs run by the Small Business 
Administration (SBA). This proposed rule would clarify the eligibility 
requirements for businesses to obtain ``verified'' status, add and 
revise definitions, reorder requirements, redefine the definition of 
``control'', and explain examination procedure and review processes. 
This proposed rule would additionally implement new changes--references 
to community property restrictions, ``unconditional'' ownership, day-
to-day requirements, and full-time requirements would be removed or 
revised and limited in scope; an exception for majority, supermajority, 
unanimous, or other voting provisions for extraordinary business 
decisions would be added.

DATES: Comments must be received by VA on or before January 5, 2016.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, Regulation 
Policy and 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-AO63--VA Veteran-Owned Small Business (VOSB) Verification 
Guidelines''. Copies of comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1068, between the hours of 8:00 a.m. and 4:30 p.m., Monday through 
Friday (except holidays). Please call (202) 461-4902 for an 
appointment. (This is not a toll-free number.) In addition, during the 
comment period, comments may be viewed online through the Federal 
Docket Management System (FDMS) at www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Tom Leney, Executive Director, Office 
of Small and Disadvantaged Utilization (00VE), Department of Veterans 
Affairs, 810 Vermont Ave. NW., Washington, DC 20420, (202) 461-4300. 
(This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: An Advanced Notice of Proposed Rulemaking 
was provided with a 60-day comment period which ended on July 12, 2013. 
We received comments from 39 commenters; the issues raised by these 
comments have been considered in drafting this proposed rule. We thank 
all commenters for their participation in this process. The bases for 
the proposed amendments are as follows.
    Within Sec.  74.1, VA proposes to create two new terms and amend or 
remove several definitions. New terms; ``daily business operations'' 
and ``Permanent caregiver'' would be added. The term ``daily business 
operations'' would replace ``Day-to-day management'' and ``day-to-day 
operations'' both of which would be removed; these definitions would be 
merged in order to simplify amendments made to Sec.  74.4 while 
ensuring statutory requirements are still enforced/imposed. In 
addition, Permanent caregiver would be incorporated into Sec.  74.1 
whereas previously the concept and terminology was referenced in the 
regulation, most clearly at Sec.  74.4(g)(1), but not defined. The term 
would be changed to permanent caregiver and references to personal 
caregiver would be removed. This amendment would create a definition 
which would account for definitions of similar and related terms found 
in 13 CFR 125.8(c), 13 CFR 125.8(d), 38 CFR 3.340(b), and 38 CFR 71.30. 
This change is intended to take multiple requirements, found throughout 
regulation, and synthesize them into a single cohesive definition. For 
purposes of this Part, a requirement that the applicant provide an 
explanatory statement which states the nexus between the veteran's 
disability and the need for the permanent caregiver to manage the 
concern would be added to assist in program administration.
    The following terms would be amended:
    The term Center for Veterans Enterprise would be changed to revise 
Center for Verification and Evaluation (CVE) to reflect the name change 
effectuated at 78 FR 59861, September 30, 2013. The definition of CVE 
would be further amended to reflect the change to the functions of this 
office.
    Joint venture would be amended to contain project and time 
restrictions utilized by other set-aside programs. VA has also added 
language to clearly address the current policy by indicating that at 
least one venturer must be a Veteran Owned Small Business (VOSB).
    The definition of Office of Small and Disadvantaged Business 
Utilization would be amended to more accurately convey the role 
fulfilled by this office with respect to VOSB matters.
    Participant would be amended to emphasize CVE's role in verifying 
status.
    Primary industry classification would be amended to make a 
technical change to use the acronym NAICS as it had already been 
spelled out and properly noted in a parenthetical earlier in the 
definition.
    Principal place of business would be amended to make a technical 
change, specifically the term ``day-to-day operation'' would be removed 
and replaced by ``daily business operations'' in accordance with the 
amended term from earlier in the definitions section.
    Service-disabled veteran would be amended as the current definition 
has led to confusion regarding the documentation necessary to establish 
a service-connected disability. This change would also help increase 
program efficiency by specifically referencing BIRLS, the system that 
allows CVE to quickly and accurately determine veteran status.
    Service-disabled veteran-owned small business concern would be 
amended to remove reference to Reservists or members of the National 
Guard. This reference is appropriately addressed by the amended 
definition of Veteran. The word spouse would be removed in the first 
sentence and the word ``the'' would be added before ``permanent 
caregiver''. This change would clarify for the public and potential 
participants the situations under which a permanent caregiver, 
previously referred to as a personal caregiver or spouse, would be able 
to maintain VOSB eligibility on behalf of a veteran. In the amended 
regulation, the requirements one must meet to serve as a permanent 
caregiver would be clearly defined. In order to avoid fraud, waste and 
abuse any spouse seeking to stand in for a veteran with permanent

[[Page 68796]]

and severe disability would have to meet these same requirements. 
Therefore, the reference to spouse, separately from permanent 
caregiver, would be redundant and potentially confusing. Due to the use 
of the term ``veteran'' as opposed to ``veteran or service-disabled 
veteran'' throughout the amended regulation, a new last sentence would 
be added to clearly state that this change did not alter the 
requirements for an SDVOSB.
    Small business concern would be amended to make a technical change 
removing the word ``is'' simply for clarity.
    Surviving Spouse would be amended to make a technical change, 
specifically the Veterans Benefits Administration would be abbreviated 
as VBA.
    The definition for unconditional ownership would be removed; the 
concept of ownership as required for this program would be addressed 
only in Sec.  74.3(b) to avoid any conflict in the interpretation of 
the meaning.
    Verification eligibility period would be amended to reflect the 
increased period for eligibility--which was changed from 12 months to 2 
years; this amendment was established via 77 FR 38181, June 27, 2012. 
Additionally a technical change would amend the reference to Center for 
Veterans Enterprise by replacing it with the abbreviation CVE. A final 
technical change would replace the word ``year'' with ``eligibility 
period'' to agree with the change in the first sentence.
    Veteran would be amended to add a reference to VBA. This revised 
definition is meant to be inclusive of all persons who served on active 
duty and were discharged or released under conditions other than 
dishonorable. Historically the program has had an issue wherein 
applicants who did in fact qualify as veterans under the statutory 
definition, did not meet the standards outlined in Sec.  74.1. This 
change is not intended to create a new class of veteran, but rather to 
clarify that those who are eligible under the applicable statutes will 
be found eligible for participation in this program.
    Veterans Affairs Acquisition Regulation is amended to remove 
Veterans Affairs and refer to VA as this is previously defined within 
the section.
    Section 74.2 would be amended by revising paragraphs (a)-(e) and 
adding new paragraphs (f) and (g). In both 2010 and 2012, GAO published 
reports tasking VA with reducing potential instances of fraud, waste 
and abuse. VA has found in its administration of the verification 
program that the use of the procedures identified in Sec.  74.2(e) best 
protects VA acquisition integrity and diminishes ongoing exposure to 
fraud, waste and abuse. Therefore, for such limited situations as 
identified in Sec.  74.2, and only in these limited instances, VA finds 
that immediate removal from public listing is warranted in order to 
protect the integrity of VA procurement. Accordingly, the amendments to 
Sec.  74.2 would serve to more comprehensively outline the 
circumstances under which a participant would be found ineligible for 
the VOSB Verification program
    Section 74.2(a) would be amended to add the clause ``submitted 
required supplemental documentation at http://www.VetBiz.gov,'' to 
clearly explicate the key steps necessary for an application and 
verification. Additionally, a technical change would be made to use the 
abbreviated form ``CVE'' for consistency.
    Section 74.2 (b) would be amended to support the current policy use 
of good character to address the potential impact of criminal activity 
on eligibility and thus to better protect the government from fraud, 
waste and abuse. The title would be amended to reference the System for 
Award Management (SAM), which has replaced the Excluded Parties List 
System. Additionally, the language of the first sentence would be 
amended to address the impact of 38 U.S.C. 8127(g)(3), which now 
provides VA authority to exclude all principals in the business 
concern. Accordingly, the language of Sec.  74.2 would be amended to 
provide notice that the debarment of any individual holding an 
ownership and control interest in the concern will impact the concern's 
eligibility.
    Section 74.2(c) would be amended by adding the phrase ``false 
statements or information'' to reference the title and provide further 
clarification on the eligibility requirements. The removal provision 
would be additionally reworded to clarify the current policy 
interpretation that removal is immediate. Finally a technical change 
would remove ``the'' before CVE in the last sentence.
    Section 74.2(d) would be amended by including tax liens and 
unresolved debts owed to various governmental entities outside of the 
Federal government as financial obligations that would disqualify an 
applicant for inclusion in the Vetbiz VIP database. The title would be 
additionally amended to reflect this change.
    Section 74.2(e) would be amended to clarify the consequences of SBA 
protest decisions and other negative findings. ``Other negative 
findings'' was additionally clarified by specifically referencing 
status protest decisions pursuant to 48 CFR 819.307. The title of this 
section would be accordingly amended to clarify this section is not 
limited to SBA decisions. In order to properly effectuate the 
provisions of the amended 48 CFR 819.307, Sec.  74.2(e) would be 
amended to allow for immediate removal. The final sentence would be 
amended to take into account ``other negative findings.''
    Section 74.2(f) would be added to better effectuate the licensure 
requirement previously found in Sec.  74.21(9). Through administration 
of the program, VA has determined that continued inclusion of concerns 
who fail to obtain and keep current required licenses creates a 
significant risk to the procurement process. Therefore, immediate 
removal from the VetBiz VIP database is warranted to protect the agency 
from fraud, waste and abuse.
    Section 74.2(g) would be added to specifically reference SAM 
registration. SAM is a consolidated listing of previous databases and 
was not in existence at the time the original regulation was created 
and therefore was not referenced. Registration through SAM is required 
by 48 CFR 4.1200 (supplemented by 48 CFR 804.1102).
    Section 74.3(a) would be amended to simplify the title in order to 
avoid the potential for confusion. A technical change would remove the 
reference service-disabled Veteran. Reference to both veterans and 
service-disabled veterans in the regulation has proven to cause 
confusion for some applicants. By referencing only veterans, and making 
a change to the definition of service-disabled veteran owned small 
business, that confusion would be eliminated. The reference to employee 
stock ownership plans (ESOPs) would also be removed. Through years of 
program administration it has become clear that this exception does not 
fit within the verification program. ESOPs have changed in ways making 
evaluation very difficult. It is not clear how this exception benefits 
the veteran owner. Concerns having ESOPs could still be verified, so 
long as they meet all of the ownership requirements set forth in the 
regulation.
    Section 74.3(b) would be amended to directly address the concerns 
of VA in balancing commercially reasonable business practices against 
procurement integrity. Section 74.3(b) as it is currently written is 
considered by many in the veteran community to be unduly burdensome. VA 
considered these concerns and addressed them by proposing to limit the 
scope of unconditional ownership, accepting commercially reasonable 
conditions and excluding only those that create a significant risk of 
fraud, waste and

[[Page 68797]]

abuse. The new language would outline the concept of commercially 
reasonable business practices and how they will be evaluated by the 
program. The exception for conditions after death or incapacity would 
remain unchanged. Section 74.3(b)(1) would be added to explain the 
process by which CVE will evaluate the commercial reasonability of 
conditions. This would be done on a case-by-case basis. Section 
74.3(b)(2) would be added separately as the scenario addressed, 
regarding absence of fully vested interests, relates to a significant 
risk for fraud, waste and abuse, which would therefore bespecifically 
exempted from the commercial reasonability analysis described in Sec.  
74.3(b)(1).
    Section 74.3(c) would be amended by numerous technical changes. 
Specifically, subparagraphs (1), (2), and (3) would be removed from 
paragraph (b) and redesignated in new paragraph (c). Additional 
technical change to new paragraph (c) would remove references to 
``unconditional'' as the requirements of this paragraph apply to all 
aspects of ownership. The reference to service-disabled veteran would 
be removed to conform with changes outlined in the explanation of Sec.  
74.3(a). Language would be added to paragraphs 74.3(c) (2) and (3) to 
align with a similar statement in paragraph (1) expressing how 
ownership must be demonstrated.
    Section 74.3(c) would be redesignated as Sec.  74.3(d) to account 
for new Sec.  74.3(c) having been added. A technical change would 
remove the reference to service-disabled veteran to conform with 
changes outlined in the explanation of Sec.  74.3(a).
    Section 74.3(d) would be redesignated as Sec.  74.3(e) to account 
for addition of new Sec.  74.3(c). A technical change would remove the 
reference to service-disabled veteran to conform with changes outlined 
in the explanation of Sec.  74.3(a). The clause relating to joint 
venture profit distribution would be removed from this section. This 
requirement would be now addressed in Sec.  74.5. Section 74.4(d)(5) 
(redesignated Sec.  74.4(e)(4)) would be amended to change ``should'' 
to ``must'' in order to create an enforceable requirement.
    Section 74.3(e) would be redesignated as Sec.  74.3(f) to account 
for addition of new Sec.  74.3(c). A technical change would remove the 
reference to service-disabled veteran to conform with changes outlined 
in the explanation of Sec.  74.3(a). Section 74.3(e)(1) would be 
amended by a technical change to replace ``application'' with ``VA Form 
0877'' in order to clarify the requirement and conform language to the 
rest of the regulation. Section 74.3(e)(1) would be changed to add a 
30-day time period for submission of new application after a change in 
ownership. This change would provide the agency the ability to 
definitively and accurately track changes of ownership. By adding a 
time period for new application, the program would be better able to 
comply with its statutory mandate of verifying that all concerns listed 
in the VIP Database meet the ownership and control requirement of the 
regulation.
    Section 74.3(e)(3) would be amended by a technical change to 
replace ``application'' with ``VA Form 0877'' in order to clarify the 
requirement and conform language to the rest of the regulation.
    Section 74.3(e)(4) would be amended to add a reference to Sec.  
74.14 to demonstrate the potential impact of change of ownership on the 
eligibility period.
    Section 74.3(f) would be removed in its entirety. In administering 
the program, this requirement was found to be unduly burdensome on 
veterans. CVE has also found that implementation of this provision does 
not significantly reduce the risk of fraud, waste and abuse in the 
program.
    Section 74.4(a) would be amended to align with the changes made to 
definitions in Sec.  74.1. The term ``day-to-day management'' would be 
removed as described above, and this would require the language of 
Sec.  74.4(a) to be revised. The second sentence is moved from Sec.  
74.4(b) for organizational purposes and clarity.
    Section 74.4(b) would be amended to align with the changes made to 
definitions in Sec.  74.1. The term ``day-to-day management'' would be 
removed as descried above, and this would require the language of Sec.  
74.4(b) to be revised. The last sentence would be amended to add a 
reference to Sec.  74.4(j)(2) in order to properly identify the 
paragraph which establishes this requirement.
    Section 74.4(c)(1) would be amended by technical change to remove 
``or service-disabled veterans'' to eliminate confusion. Veteran 
classification issues are already addressed in Sec.  74.1 as described 
above. The second and third sentences would be edited to clarify that 
the requirements apply only to Veteran owners, as opposed to non-
Veteran owners of the concern. Section 74.4(c)(2) would be amended by 
technical change to redesingatelist as (c)(3). Section 74.4(c)(3) would 
be amended by technical change to be listed as (c)(2). The new 
organization would more logically group related concepts. Section 
74.4(c)(4) would be amended by a technical change to be listed as Sec.  
74.4(d). This amendment would make it clear that this requirement 
applies to all aspects of control, not just those detailed in Sec.  
74.4(c). An additional technical change would amend the reference to 
paragraph (f) to paragraph (h) to correspond with redesignating of 
sections described below.
    Section 74.4(e) would be amended and reorganized. VA would 
reorganize this provision, as well as following paragraphs of Sec.  
74.4 to clarify that there are certain control requirements that apply 
to all business entities, while others apply to specific business types 
(e.g. Corporation, LLC, Partnership). This new organization would 
clearly lay out the generally applicable standards in paragraph (e) and 
then move to the specific requirements for different business types in 
the following paragraphs. In the current version of the regulation, 
these general and specific requirements exist, but are not laid out in 
a logical and clear manner.
    A new provision would be added in at Sec.  74.4(e) in order to 
describe the general control requirements outlined in the explanation 
above. A reference to ``extraordinary business decisions'' would be 
added at Sec.  74.4(e)(1) and (3) to clarify existing program policy. 
This exception would protect the minority owners of firms thereby 
encouraging investment and participation in veteran owned businesses. 
Section 74.4(d) would be redesignated as Sec.  74.4(f) to account for 
addition of new Sec.  74.4(d) and Sec.  74.4(e). Language would be 
added to refer to Sec.  74.4(e)(1) to assimilate the exception created 
therein. Section 74.4(e) would be redesignated as Sec.  74.4(g) to 
account for addition of new Sec.  74.4(d) and Sec.  74.4(e). Language 
would be added to refer to Sec.  74.4(e)(1) to assimilate the exception 
created therein. Section 74.4(f) would be redesignated as Sec.  74.4(h) 
to account for the addition of new Sec.  74.4(d) and Sec.  74.4(e). 
Section 74.4(f) is would also be amended to account for the general 
requirements of 74.4(e) and to emphasize the specific criterion 
relating only to incorporations. Section 74.4(f) (new Sec.  74.4(h) 
would also be amended to succinctly and clearly encapsulate the 
exception created in existing Sec.  74.4(f)(1) (i), (ii), and (iii), 
and referenced in Sec.  74.4(c)(4). The language ``at any time for any 
reason'' would be added to focus the provision on commercially 
reasonable business structures. VA intends these changes to simplify 
requirements relating to control and delete redundancies. Section 
74.4(g) and its associated subparagraphs would be redesignated as Sec.  
74.4(i). It would be further amended by technical change to remove the 
word ``such'' from the

[[Page 68798]]

second sentence in order to clarify that these limitations apply to all 
non-Veterans. This change would help to guard against fraud. The term 
``personal caregiver'' would be changed to ``permanent caregiver'' to 
be consistent with the definition added to Sec.  74.1. Section 
74.4(g)(3), redesignated as Sec.  74.4(i)(3), would be amended to 
replace the word ``salary'' with ``compensation'' in order to be 
consistent. Additionally, in order to reflect current program policy, 
the word ``dividends'' would be replaced by the word ``distributions'' 
with regard to sources of compensation. This reference would be moved 
to directly follow the word ``compensation'' for clarity. Section 
74.4(i) would be redesignated as Sec.  74.4(j) with conforming and 
clarifying changes.
    Section 74.5 would be revised to include joint ventures. The 
language would be reworded to clearly establish that 38 CFR part 74 
does not supersede 13 CFR part 121 with respect to size determinations. 
A paragraph (b) would be added to specifically address eligibility of 
joint ventures. Subparagraph (b)(2) would be moved from its previous 
placement in 38 CFR 74.3(d)(2) for organization and to address all 
joint venture issues in one section. Additionally, the language would 
be edited in order to clarify that the VOSB entity, rather than the 
individual Veteran owner(s), must be entitled to the distribution. 
Subparagraphs (b)(1) and (b)(3) would be added to provide notice of the 
requirements outlined elsewhere in VA Regulation (819.7003).
    Section 74.10 would be amended to remove reference to physical 
address for CVE. Addresses or methods for submission may change over 
time, and this change allows CVE to make reasonable and necessary 
adjustments without the need for amendment of the regulation.
    Section 74.11 would be amended by a technical change to redesignate 
paragraphs (c)-(g) to account for addition of new paragraph (c). 
Additionally, ``Center for Veterans Enterprise'' would be changed to 
``CVE'' in paragraph (a). Finally, ``[t]he CVE'' would be changed to 
``CVE'' in paragraph (a).
    Section 74.11(c) would be added to address the potential 
circumstances created if CVE does not receive all requested 
documentation. As a result of statutory changes, the program now must 
certify applicants prior to admission in the database. In order to 
comply with the statute, VA requests documentation to demonstrate 
eligibility. This paragraph would put the public on notice that failure 
to adequately respond to these document requests may render CVE unable 
to verify the eligibility of a concern and therefore may result in 
denial. The original Sec.  74.11(c) would be redesignated as Sec.  
74.11(d) and would be amended by a technical change to insert a 
reference to the newly added paragraph (c). Additionally, the reference 
to paragraph (d) would be changed to paragraph (e) to account for 
redesignating. The term ``totality of circumstances'' would be added to 
clarify long standing CVE interpretation and procedure. References to 
Sec.  74.11(b) and Sec.  74.13(a) would be added to highlight all 
applicable exceptions. Finally, a last sentence would be added to 
clarify in the regulatory text longstanding VA policy that the 
applicant bears the burden of establishing VOSB status.
    Section 74.11(d) would be redesignated as Sec.  74.11(e). The third 
sentence would be removed as it refers to withdrawal or removal of 
verified status. This issue is addressed in 38 CFR 74.21, which 
specifically deals with how participants can exit the VetBiz VIP 
database. Therefore, the removal would help to eliminate redundancy and 
reduce the likelihood of confusion. Current Sec.  74.11(e) would be 
redesignated as Sec.  74.11(f), and Sec.  74.11(f) would be 
redesignated as Sec.  74.11(g).
    The revised Sec.  74.11(e) would consist of subparagraphs (1) and 
(2). Subparagraph (1) would continue to provide notice of the 
requirement for participants to provide notice to CVE of changed 
circumstances. Subparagraph (2) would specify that bankruptcy is a 
changed circumstance, and the section would include requirements to 
protect the agency through the bankruptcy process.
    Current section 74.11(g) would be redesignated as Sec.  74.11(h). A 
second sentence would be added to increase program efficiency by 
ensuring that applicants provide updated contact information. This 
would allow the program to use the most efficient methods to dispatch 
determinations and ensure that applicants will receive determinations 
in a timely manner.
    Section 74.12 would be amended to expand the list of required 
documentation in order to provide notice of documentation that is 
routinely requested by CVE. This amended list would include documents 
previously referenced by Sec.  74.20(b). While the documents would 
still be required for examination as described in Sec.  74.20(b), they 
also are initially required for the application. As the application is 
a concern's first exposure with the process, VA finds this list would 
be more appropriately placed in this section to put the public on 
notice of the documentary requirements. Additionally, ``electronic 
form'' would be changed to ``VA Form 0877'' throughout for clarity. 
Similarly, ``attachments'' would be changed to ``supplemental 
documentation'' throughout. Finally, the last two sentences would be 
combined and slightly reworded for clarity.
    Section 74.13(a) would be amended to modify the start of the 
relevant 30-day time period. This change would provide the agency the 
ability to definitively and accurately track the request for 
reconsideration proceedings. Additionally, this change would provide 
the agency the ability to control the regulatory time period and 
consistently apply the subsequent provisions of the paragraph. The 
instructions for submission of a request for reconsideration would be 
changed to indicate that all instructions for proper submission will be 
found in the denial decision. Addresses or methods for submission may 
change over time, and this change would allow CVE to make reasonable 
and necessary adjustments without the need for amendment of the 
regulation. A sentence stating that the applicant may submit additional 
or amended documentation would be added to clarify existing program 
policy. Finally, the last sentence would be removed due to redundancy 
with the first sentence of paragraph (b).
    Section 74.13(d) would be amended to change ``or'' to ``and'' in 
the first sentence to accurately reflect the actions taken by CVE in 
these situations. Additionally, information regarding how an applicant 
can request a formal size determination from the SBA would be removed 
as individual business concerns cannot request formal size 
determinations. In an instance where CVE denies for size issues, CVE 
would request a formal size determination directly, and the company 
would be eligible to submit a request for reconsideration. A conforming 
amendment would be made to Sec.  74.13(e). Section 74.13(g) would be 
amended to add a sentence to increase program efficiency by ensuring 
that applicants provide updated contact information. This would allow 
the program to use the most efficient methods to dispatch 
determinations and ensure that applicants will receive the 
determinations in a timely manner.
    Section 74.14 would be amended to include notices of verified 
status cancellation in the list of determinations that trigger a 
waiting period before a concern may submit a new verification

[[Page 68799]]

application. This appears to have been an omission in the prior version 
of the regulation. Additionally, the waiting period would be expanded 
from 6 months to 12 months. The program has instituted several 
procedures to assist applicants to identify and address easily 
correctable issues that render the applicant ineligible. The class of 
notices listed in Sec.  74.14 are generally issued to applicants with 
substantial issues causing ineligibility. The 12-month waiting period 
would ensure that applicants will be motivated to avail themselves of 
the resources provided by CVE and allow sufficient time for ineligible 
concerns to address significant issues. Additionally, this would 
increase the efficiency of the program by reducing the number of 
applications submitted by concerns that do not conform to the 
verification guidelines.
    The current text of Sec.  74.14, as amended, would be designated as 
Sec.  74.14(a) and new provisions would be added in Sec.  74.14(b) 
providing for immediate removal of ineligible participants from the 
VetBiz VIP verification database. VA only intends, to the extent 
practicable, to list as verified in the VetBiz VIP database concerns 
which currently meet verification requirements. This would serve the 
important purpose of assisting COs in the procurement process by 
ensuring the database only includes concerns that are eligible for 
award of set aside procurements.
    Section 74.15(a) would be split into paragraphs (a), (b), and (c). 
A technical change would be made to what would be redesignated as Sec.  
74.15(a) to improve specificity. A change would be made to what would 
be redesignated as Sec.  74.15(b) to require participants to inform CVE 
within 30 days of changes affecting eligibility, consistent with Sec.  
74.3(f)(1). A substantive change would be made to the list that would 
be redesignated as Sec.  74.15(c), which would be expanded to include 
all situations in which the eligibility period may be shortened. 
Section 74.15(b) would be removed because it dealt with affiliation. 
Section 74.5 would state that the SBA will make determinations on 
affiliation. Therefore, any shortening of the eligibility period due to 
an affiliation determination would result from an SBA determination. 
This scenario would be addressed by Sec.  74.2(e), and is referenced 
appropriately at what would be designated Sec.  74.15(c). Finally, 
paragraphs (c), (d), and (e) would be redesignated as (d), (e) and (f) 
respectively.
    Section 74.20(b) would be amended by minor technical changes in the 
first three sentences for simplicity and clarification. In the first 
sentence, the phrase, ``or parts of the program examination'' would be 
removed. In the second sentence, ``location'' would be changed to 
``location(s).'' In the third sentence, the word ``[e]xaminers'' is 
changed to ``CVE.'' Section 74.12, ``[w]hat must a concern submit to 
apply for VetBiz VIP Verification Program,'' would fully address the 
required documentation necessary for verification and therefore the 
complete list would be removed from Sec.  74.20 in order to avoid 
redundancy and confusion.
    Section 74.21 would be extensively reordered for clarity and to 
conform with changes made to other sections of the regulatory text. 
Section 74.21(a) would be amended by a technical change to remove 
reference to the ``verified' status button'' in order to reflect the 
current graphical user interface of the VIP database. Additionally, 
``Vendor Information Pages'' would be changed to ``VIP.'' Section 
74.21(b) would include a technical edit, ``Vendor Information Pages'' 
changed to ``VIP.'' Section 74.21(c) would be added to reference the 
immediate removal provisions established by and clarified in Sec.  
74.2. Previous Sec.  74.21(c) and associated subparagraphs would be 
redesignated as Sec.  74.21(d) and associated subparagraphs. 
Additionally, reference to the ``'verified' status button'' would be 
removed to reflect the current graphical user interface of the 
database. Section 74.21(c)(5) would be removed as involuntary 
exclusions would now be addressed in Sec.  74.2. Section 74.21(c)(6) 
would be redesignated as Sec.  74.21(d)(5) to account for deletion of 
(c)(5). Additionally, the phrase ``or its agents'' would be added to 
clarify who may request documents. Section 74.21(c)(7) would be 
redesignated as Sec.  74.21(d)(6) to account for deletion of (c)(5). 
Section 74.21(c)(8) would be removed as the action addressed by that 
provision would now be addressed in Sec.  74.2. Section 74.21(c)(9) 
would be removed as the provision would now be included in Sec.  74.2 
as a grounds for immediate removal. Section 74.21(c)(10) would be 
redesignated as Sec.  74.21(d)(7). The term ``application'' would be 
removed as VA Form 0877 reflects current program requirements. 60 days 
would be changed to 30 days to conform with revised Sec.  74.3(f)(1) of 
this part. Section 74.21(e) would be added as notice to the public that 
failure to report changed circumstances within 30 days is in and of 
itself good cause to initiate cancellation proceedings.
    Section 74.22(a) would be amended to base the start of the relevant 
30-day time period on the date on which CVE sent notice of proposed 
cancellation of verified status. This change would provide the agency 
the ability to definitively and accurately track the cancellation 
proceedings. Additionally, this change would provide the agency the 
ability to control the regulatory time period and consistently apply 
the subsequent provisions of the paragraph. section 74.22(e) would be 
amended by a technical change to replace ``Office of Small and 
Disadvantaged Business Utilization'' with ''OSDBU.''
    Section 74.25 would be amended by a technical change to replace 
``Department'' with ``VA.'' Additionally, the provision would be 
revised to expand the pool of individuals required to provide 
personally identifiable information.
    Section 74.26 would be amended by technical change to reflect the 
amended title of Sec.  74.12.
    Section 74.27 would be amended to reword the first sentence to 
specify that all documents submitted to the program, not only those 
used to complete applications, will be stored electronically. 
Additionally, ``VetBiz Vendor Information Pages'' would be changed to 
``CVE'' in order to clearly denote who will be in possession of the 
documents and responsible for their retention. The location reference 
would be removed due to the electronic nature of the records to be 
maintained by the program. The second sentence would be revised to 
indicate that any owner information provided will be compared to any 
available records. Finally, references to records management procedures 
to be followed and procedures governing data breaches would be added.
    Section 74.28 would be amended to abbreviate references to VA and 
CVE.
    Section 74.29 would be amended to refer to VA's records management 
procedures, which would govern, absent a timely written request from 
the Government Accountability Office.

Effect of Rulemaking

    The Code of Federal Regulations, as proposed to be revised by this 
rulemaking, would represent the exclusive legal authority on this 
subject. No contrary rules or procedures would be authorized. All VA 
guidance would be read to conform with the rule finally adopted if 
possible or, if not possible, such guidance would be superseded.

[[Page 68800]]

Paperwork Reduction Act

    This proposed rule contains no provision constituting a collection 
of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3521).

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed 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). This proposed rule would generally be small business 
neutral, as it would apply only to applying for verified status in the 
VetBiz.gov Vendor Information Pages (VIP) database. The proposed 
regulation would merely seek to clarify and streamline the existing 
rule and would add no additional burdens or restrictions on applicants 
or participants with regard to the VA VOSB Verification Program. The 
overall impact of the proposed rule would be of benefit to small 
businesses owned by veterans 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. On this basis, the Secretary certifies that 
the adoption of this proposed rule would not have a significant 
economic impact on a substantial number of small entities as they are 
defined in the Regulatory Flexibility Act. Therefore, under 5 U.S.C. 
605(b), this rulemaking is exempt from the initial and final regulatory 
flexibility analysis requirements of Sec. Sec.  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 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.

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 one year. This proposed rule would have no such 
effect on State, local, and tribal governments, or on the private 
sector.

Catalog of Federal Domestic Assistance

    This proposed rule would affect 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. Robert L. 
Nabors II, Chief of Staff, Department of Veterans Affairs, approved 
this document on October 20, 2015, for publication.

List of Subjects in 38 CFR Part 74

    Administrative practice and procedure, Privacy, Reporting and 
recordkeeping requirements, Small businesses, Veterans.

    Dated: November 2, 2015.
Michael P. Shores,
Chief Impact Analyst, Office of Regulation Policy & Management, Office 
of the General Counsel, Department of Veterans Affairs.

    For the reasons set forth in the preamble, we propose to amend 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 and 513, unless otherwise noted.

0
2. Revise Sec.  74.1 to read as follows:


Sec.  74.1  What definitions are important for VetBiz Vendor 
Information Pages (VIP) Verification Program?

    For the purpose of part 74, the following definitions apply.
    Center for Verification and Evaluation (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. CVE 
receives and reviews all applications for eligibility under this part 
and maintains the VIP database. CVE assists VA contracting offices to 
identify veteran-owned small businesses and communicates with the Small 
Business Administration (SBA) with regard to small business status.
    Daily Business Operations are, at a minimum, the marketing, 
production, sales, and administrative functions of the firm, as well 
as, the supervision of the executive team, the implementation of sound 
policies and the setting of the strategic direction of the firm.
    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.
    Eligible individual means a veteran, service-disabled veteran, or 
surviving spouse, as defined in this section.
    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 no more than three specific or 
limited-purpose business ventures for joint profit over a two year 
period, for which purpose they

[[Page 68801]]

combine their efforts, property, money, skill, or knowledge, but not on 
a continuing or permanent basis for conducting business generally. A 
joint venture must be comprised of at least one veteran owned small 
business. 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 (OSDBU) is 
the office within VA that establishes and monitors small business 
program goals at the prime and subcontract levels. OSDBU works with VA 
Acquisitions to ensure the creation and expansion of small businesses 
opportunities by promoting the use of set-aside contracting vehicles 
within VA procurement. OSDBU connects and enables veterans to gain 
access to these federal procurement opportunities. The Executive 
Director, OSDBU, is the VA liaison with the SBA. Information copies of 
correspondence sent to the SBA seeking a certificate of competency 
determination must be concurrently provided to the Director, OSDBU. 
Before appealing a certificate of competency, the Head of Contracting 
Activity must seek concurrence from the Director, OSDBU.
    Participant means a veteran-owned small business concern which CVE 
has ``verified'' and deemed eligible to participate in VA's veteran-
owned small business program.
    Permanent caregiver is the spouse, or an individual, 18 years of 
age or older, who is legally designated, in writing, to undertake 
responsibility for managing the well-being of the service-disabled 
veteran with a permanent and severe disability, as determined by VA's 
Veterans Benefits Administration (VBA), to include housing, health and 
safety. A permanent caregiver may, but does not need to, reside in the 
same household as the service-disabled veteran with a permanent and 
severe disability. The applicant or participant must demonstrate that 
but for the permanent and severe disability the veteran would meet the 
requirements of this part. There may be no more than one permanent 
caregiver per service-disabled veteran with a permanent and severe 
disability. To be eligible for VetBiz VIP Verification, the applicant 
must provide the following:
    (1) Appointment of the Permanent Caregiver. A permanent caregiver 
must be formally appointed. This can be accomplished by: (i) Order of a 
court of competent jurisdiction; (ii) designation of the VA, National 
Caregiver Support Program, as the Primary Family Caregiver of a veteran 
participating in the Program of Comprehensive Assistance for Family 
Caregivers (this designation is subject to the Veteran and the 
caregiver meeting other specific criteria as established by Public Law 
111-163 and the Secretary and may be revoked if the eligibility 
criteria do not continue to be met); or (iii) a legal designation which 
clearly states that the permanent caregiver will undertake 
responsibility for managing the well-being of the service-disabled 
veteran.
    (2) Determination of Disability. A written determination from VBA 
that the veteran has a permanent and total service-connected disability 
as set forth in 38 CFR 3.340.
    (3) Explanatory Statement. A written statement that must include: 
(i) The rationale for the appointment of the permanent caregiver; (ii) 
an explanation of how the appointment contributes to the veteran's 
well-being; (iii) an explanation of why the permanent caregiver is 
needed to manage the applicant concern (including how the permanent 
caregiver is actually representing the veteran's interests in 
controlling/running the concern); and (iv) the veteran's consent to the 
appointment of the permanent caregiver.

    Note to Definition of Permanent Caregiver:  In the case of a 
service-disabled veteran with a permanent and severe disability 
lacking legal capacity, the permanent caregiver shall be a parent, 
guardian, or person having legal custody.

    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 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 daily business 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 a service-
connected disability rating between 0 and 100 percent. For the purposes 
of VA's veteran-owned small business program the service-connected 
disability can be established by either registration in the Beneficiary 
Identification and Records Locator Subsystem (BIRLS) maintained by the 
VBA, a disability rating letter issued by VA, or a disability 
determination from the Department of Defense.
    Service-disabled veteran-owned small business concern (SDVOSB) 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, the permanent caregiver of such veteran. In 
addition, some businesses may be owned and operated by an eligible 
surviving spouse. Ownership and control by a veteran, as opposed to a 
service-disabled veteran, will not meet the SDVOSB requirements set 
forth in this Part.
    Small business concern--CVE applies the small business concern 
definition established by 48 CFR 2.101.
    Surviving spouse is any individual identified as such by VA's VBA 
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

[[Page 68802]]

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.

    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 2-year period that begins on 
the date CVE issues its Notice of Verified Status Approval letter 
establishing ``verified'' status. The participant must submit a new 
application for each eligibility period 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 has the meaning given the term in section 101(2) of Title 
38, United States Code, as interpreted through Title 38 of the CFR. In 
addition, any person having a determination of veteran status from VBA, 
and who was discharged or released under conditions other than 
dishonorable will be deemed to be a veteran for the purposes of this 
program.
    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 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 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.
0
3. Revise Sec.  74.2 to read as follows:


Sec.  74.2  What are the eligibility requirements a concern must meet 
for VetBiz Vendor Information Pages (VIP) Verification Program?

    (a) Ownership and control. A small business concern must be owned 
and controlled by one or more eligible veterans, service-disabled 
veterans or surviving spouses, have completed the online VIP database 
forms, submitted required supplemental documentation at http://www.VetBiz.gov, and have been examined by VA's CVE. Such businesses 
appear in the VIP database as ``verified''.
    (b) Good character and exclusions in System for Award Management 
(SAM). Individuals having an ownership or control interest 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. Concerns owned or 
controlled by a person(s) who is currently incarcerated, or on parole 
or probation (pursuant to a pre-trial diversion or following conviction 
for a felony or any crime involving business integrity) are ineligible 
for VetBiz VIP Verification. Concerns owned or controlled by a 
person(s) who is formally accused of a crime involving business 
integrity are ineligible for VetBiz VIP Verification. If, after 
verifying a participant's eligibility, the person(s) controlling the 
participant is found to lack good character, CVE will remove the 
participant from the VIP database immediately, notwithstanding the 
provisions found in Sec.  74.22 of this part.
    (c) False statements. If, during the processing of an application, 
CVE determines, by a preponderance of the evidence standard (in keeping 
with other administrative actions), 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 statements or information has 
been submitted by a firm, CVE will remove the participant from the 
VetBiz VIP database immediately, notwithstanding the provisions of 
Sec.  74.22 of this part. Whenever CVE determines that the applicant 
submitted false information, the matter will be referred to the Office 
of Inspector General for review. In addition, CVE will request that 
debarment proceedings be initiated by the Department.
    (d) Financial obligations. Neither a firm nor any of its eligible 
individuals that fails to pay significant financial obligations, 
including unresolved tax liens and defaults on Federal loans or State 
or other government assisted financing, owed to the Federal government, 
the District of Columbia or any state, district, or territorial 
government of the United States, is eligible for VetBiz VIP 
Verification.
    (e) Protest Decisions or other negative findings. Any firm verified 
in the VetBiz VIP database that is found to be ineligible by a SDVOSB/
VOSB Status Protest decision will be immediately removed from the 
VetBiz VIP database, notwithstanding the provisions of Sec.  74.22 of 
this part. Any firm verified in the VetBiz VIP database that is found 
to be ineligible due to a U.S. Small Business Administration (SBA) 
protest decision or other negative finding may be immediately removed 
from the VetBiz VIP database, notwithstanding the provisions of Sec.  
74.22 of this part. Until such time as CVE receives official 
notification that the firm has proven that it has successfully overcome 
the grounds for the determination, that the decision is overturned on 
appeal, or the firm applies for and receives verified status from CVE, 
the firm will not be eligible to participate in the 38 U.S.C. 8127 
program.
    (f) Permits, licenses and state charters. A concern must obtain and 
keep current any and all permits, licenses, and charters required to 
perform contracts sought by the concern. If CVE determines that an 
applicant fails to meet this requirement CVE will deny the application. 
If after verifying the participant's eligibility CVE discovers that the 
participant no longer satisfies this requirement, CVE will remove the 
participant from the VetBiz VIP database immediately, notwithstanding 
the provisions of Sec.  74.22 of this part.
    (g) System for Award Management registration. All applicants for 
VetBiz VIP Verification must be registered in SAM at http://www.sam.gov, or its successor prior to application submission.
0
4. Revise Sec.  74.3 to read as follows:

[[Page 68803]]

Sec.  74.3  Who does the Center for Verification and Evaluation (CVE) 
consider to own a veteran-owned small business?

    An applicant or participant must be at least 51 percent directly 
and unconditionally owned by one or more veterans.
    (a) Direct ownership. Ownership by one or more veterans must be 
direct ownership. An applicant or participant owned principally by 
another business entity that is in turn owned by one or more 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 where the trust is revocable, and the veteran is 
the grantor, a trustee, and the sole current beneficiary of the trust.
    (b) Unconditional ownership. Ownership must not be subject to 
prohibited conditions which cause or potentially cause ownership 
benefits to go to another (other than after death or incapacity).
    (1) CVE will analyze conditions on ownership on a case-by-case 
basis. A condition(s) which is determined to align with commercially 
reasonable business practices will not be considered a prohibited 
condition. For purposes of determining commercial reasonability CVE 
will consider factors, including but not limited to, general use of 
similar conditions by concerns within the same or similar line of 
business and uniform applicability of the condition(s).
    (2) Notwithstanding paragraph (b)(1) of this section, a veteran's 
ownership interest must be fully vested with immediate entitlement to 
all associated benefits.
    (c) 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 each class of partnership interest 
must be owned by one or more 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 owned by one or more veterans. 
The membership interests must be reflected in the concern's operating 
agreement.
    (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 owned by one or more veterans. The ownership interests must be 
reflected in the concern's stock certificates and stock ledger.
    (d) Stock options' effect on ownership. In determining ownership, 
CVE will disregard any unexercised stock options or similar agreements 
held by 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 Part 107 of title 13, Code of Federal 
Regulations.
    (e) Profits and distributions. One or more 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 or 
participant;
    (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 must be commensurate with the extent of his/her ownership 
interest in that concern.
    (f) 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 own 
and control it after the change. The participant must file an updated 
VA Form 0877 and supporting documentation identifying the new veteran 
owners or the new business interest within 30 days of the change.
    (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 an updated VA Form 
0877 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 
requires that CVE verify that all eligibility requirements are met by 
the concern and the new owners. Therefore, submissions made in 
accordance with paragraph (f)(1) of this section shall be treated as a 
reapplication and will be processed by CVE pursuant to section 74.14 of 
this part.
0
5. Revise Sec.  74.4 to read as follows:


Sec.  74.4  Who does CVE consider to control a veteran-owned small 
business?

    (a) Control means the strategic policy, long-term decision-making 
authority, and the management of daily business operations for the 
VOSB. An applicant's or participant's management must be conducted by 
one or more veterans. 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 management of 
daily business operations. 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 license(s) or 
technical expertise. However, where a critical license(s) 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 pursuant to 
paragraph (j)(2) of this section.
    (c)(1) An applicant or participant must be controlled by one or 
more veterans who possess requisite management capabilities. Veteran 
owners need not work full-time but must show sustained and significant 
time invested in the business. A veteran owner engaged in employment or 
management outside the applicant concern must submit a written 
statement supplemental to the application which demonstrates that such 
activities will not have a significant impact on the owner's ability to 
manage and control the applicant concern. Applications from concerns

[[Page 68804]]

seeking joint-venture status are exempt from the requirement to submit 
a supplemental written statement.
    (2) One or more veterans 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.
    (3) An eligible full-time manager must hold the highest officer 
position (usually President or Chief Executive Officer) in the 
applicant or participant.
    (d) Except as provided in paragraph (h) 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.
    (e) The veteran(s) upon whom eligibility is based must control the 
applicant or participant's governing body. Control may be established 
through actual numbers, voting based on ownership interest held by 
directors, members, managers or partners, bloc voting (e.g., where two 
or more directors vote as a single block pursuant to a written 
agreement), or 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:
    (1) The veteran(s) upon whom eligibility is based must have control 
over all decisions of the governing body, with the exception of 
extraordinary business decisions. Extraordinary business decisions 
include, but are not limited to, acceptance of new capital 
contributions, addition of members to an LLC or partnership, amendment 
of an operating or partnership agreement in a manner that materially 
alters members' rights, material amendments to bylaws, issuance of 
additional shares of capital stock, and the sale or lease of all or 
substantially all of a concern's assets.
    (2) Provisions for the establishment of a quorum cannot permit non-
veterans, such as directors, members, managers or partners to control 
the governing body, directly or indirectly;
    (3) A veteran upon whom eligibility is based must be able to 
unilaterally amend the governing documents without requiring the 
consent of non-veterans, such as shareholders, directors, members, 
managers or partners, except amendments that are extraordinary business 
decisions;
    (4) Any executive committee of the applicant's or participant's 
governing body must be controlled by veteran(s) acting as director(s) 
unless the executive committee can only make recommendations to and 
cannot independently exercise the authority of the board of directors;
    (5) Non-voting, advisory, or honorary directors, members, managers 
or partners may be appointed without affecting veterans' control of the 
governing body.
    (6) Arrangements regarding the structure and voting rights of the 
board of directors, or other governing bodies, must comply with 
applicable state law.
    (f) In the case of a partnership, one or more veterans must serve 
as general partners, with control over all partnership decisions, 
except as provided in paragraph (e)(1). A partnership in which no 
veteran is a general partner will be ineligible for participation.
    (g) In the case of a limited liability company, one or more 
veterans must serve as management members, with control over all 
decisions of the limited liability company, except as provided in 
paragraph (e)(1).
    (h) In the case of a corporation, one or more veterans must control 
the board of directors of a corporate applicant or participant. CVE 
will deem veterans to control the board of directors when veterans 
owning at least 51% of voting stock have the power to unilaterally, or 
through a block voting agreement, remove any director at any time for 
any reason.
    (i) 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. 
However, with the exception of a surviving spouse, or permanent 
caregiver who represents a severely disabled veteran owner, no 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 in any form, including distributions, from 
the applicant or participant as directors, officers or employees, which 
exceeds the compensation to be received by the highest officer (usually 
President or Chief Executive Officer). The highest ranking officer may 
elect to receive less compensation than a non-veteran only upon 
demonstrating that it helps the applicant or participant.
    (j) 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.
    (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. For the 
purposes of this part, financing, bonding or licensure will be deemed 
critical where the withholding or withdrawal of the support may cause a 
business to fail to meet its financial obligations, may allow a non-
veteran or entity to significantly influence business decisions, or may 
result in a dependent relationship with a non-veteran or entity.
    (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.
0
6. Revise Sec.  74.5 to read as follows:


Sec.  74.5  How does CVE determine affiliation?

    (a) CVE does not determine affiliation. Affiliation is determined 
by the SBA in accordance with 13 CFR part 121.
    (b) Joint ventures may apply for inclusion in the VetBiz VIP 
Verification Program. To be eligible for inclusion in the VetBiz VIP 
Verification Program a joint venture must demonstrate that:
    (1) The underlying VOSB upon which eligibility is based is verified 
in accordance with this part;

[[Page 68805]]

    (2) The underlying VOSB upon which eligibility is based is entitled 
to at least 51% of the net profits earned by the joint venture;
    (3) The joint venture agreement complies with the requirements set 
forth in 13 CFR 125.15(b)(2).
0
7. Revise Sec.  74.10 to read as follows:


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 
on the CVE'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 located on the Web portal.
    (The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)
0
8. Revise Sec.  74.11 to read as follows:


Sec.  74.11  How does CVE process applications for VetBiz VIP 
Verification Program?

    (a) The Director, CVE, is authorized to approve or deny 
applications for VetBiz VIP Verification. CVE will receive, review and 
examine 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 a 
verification examination 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 relating to eligibility 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) CVE, in its sole discretion, may request additional 
documentation at any time in the eligibility determination process. 
Failure to adequately respond to the documentation request shall 
constitute grounds for a denial.
    (d) An applicant's eligibility will be based on the totality of 
circumstances existing on the date of application, except where 
clarification is made pursuant to paragraph (b) of this section, 
additional documentation is submitted pursuant to paragraph (c) of this 
section, as provided in paragraph (e) of this section or in the case of 
amended documentation submitted pursuant to section 74.13(a) of this 
part. The applicant bears the burden to establish its status as a VOSB.
    (e)(1) 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.
    (2) Bankruptcy. Bankruptcy is a change in circumstance requiring 
additional protection for the agency. Should a VOSB enter into 
bankruptcy the participant must:
    (i). Inform CVE of the filing event within 30 days;
    (ii). Specify to CVE whether the concern has filed Chapter 7, 11 or 
13 under U.S. Bankruptcy code; and
    (iii) Any participant that is performing contracts must assure 
performance to the contracting officer(s) prior to any reorganization 
or change if necessary including such contract's in the debtor's estate 
and reorganization plan in the bankruptcy.
    (f) The decision of the Director, CVE, to approve or deny an 
application will 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.
    (g) If the Director, CVE, approves the application, the date of the 
Notice of Verified Status Approval letter is the date of participant 
verification for purposes of determining the participant's verification 
eligibility term.
    (h) The decision may be sent by mail, commercial carrier, facsimile 
transmission, or other electronic means. It is the responsibility of 
the applicant to ensure all contact information is current in the 
applicant's profile.


(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)
0
9. Revise Sec.  74.12 to read as follows:


Sec.  74.12  What must a concern submit to apply for VetBiz VIP 
Verification Program?

    Each VetBiz VIP Verification applicant must submit the VA Form 0877 
and supplemental documentation as CVE requires. All electronic forms 
are available on the VetBiz.gov VIP database Web pages. From the time 
the applicant dispatches the VA Form 0877, the applicant must also 
retain on file, at the principal place of business, a complete copy of 
all supplemental documentation required by, and provided to, CVE for 
use in verification examinations. The documentation to be submitted to 
CVE includes, but is not limited to: Articles of Incorporation/
Organization; corporate by-laws or operating agreements; shareholder 
agreements; voting records and voting agreements; trust agreements; 
franchise 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; financial statements; Federal personal 
and business tax returns for up to 3 years; and licenses. These 
materials shall be filed together to maximize efficiency of 
verification examination visits, and will provide CVE 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.)
0
10. Revise Sec.  74.13 to read as follows:


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 CVE sending the denial 
decision. ``Filing'' means a document is received by CVE by 11:59 p.m., 
Eastern Time, on that day. Requests for reconsideration must be 
submitted in accordance with the directions and to the address 
identified in the denial letter. The filing party bears the risk that 
the delivery method chosen will not result in timely receipt at CVE. An 
applicant may submit additional or amended documentation as directed by 
CVE.
    (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

[[Page 68806]]

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 and may 
request a formal size determination from the SBA. A concern whose 
application is denied because it is other than a small business concern 
by CVE may request that CVE reconsider the decision pursuant to this 
section. 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 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 on the request for reconsideration may be sent by 
mail, commercial carrier, facsimile transmission, or other electronic 
means. It is the responsibility of the applicant to ensure all contact 
information is current in the applicant's profile.
0
11. Revise Sec.  74.14 to read as follows:


Sec.  74.14  Can an applicant or participant reapply for admission to 
the VetBiz VIP Verification Program?

    (a) Once an application, a request for reconsideration, or an 
appeal of a verified status cancellation has been denied, or a verified 
status cancellation has been issued, the applicant or participant shall 
be required to wait for a period of 12 months before a new application 
will be processed by CVE.
    (b) Participants may reapply prior to the termination of their 
eligibility period. If a participant is found to be ineligible the 
participant will forfeit any time remaining on their eligibility period 
and will be immediately removed from the VetBiz VIP Verification 
database. An applicant removed pursuant to this section may ask CVE to 
reconsider its decision in accordance with section 74.13 of this Part. 
The date of a new determination letter verifying an applicant will be 
the beginning of the next two-year eligibility period.
0
12. Revise Sec.  74.15 to read as follows:


Sec.  74.15  What length of time may a business participate in VetBiz 
VIP Verification Program?

    (a) A participant receives an eligibility term of 2 years from the 
date of CVE's Notice of Verified Status Approval letter establishing 
verified status.
    (b) The participant must maintain its eligibility during its tenure 
and must inform CVE of any changes that would adversely affect its 
eligibility within 30 days.
    (c) The eligibility term may be shortened by removal pursuant to 
Sec.  74.2 of this Part, application pursuant to Sec.  74.14(b) of this 
Part, voluntary withdrawal by the participant pursuant to Sec.  74.21 
of this Part, or cancellation pursuant to Sec.  74.22 of this Part.
    (d) CVE may initiate a verification examination whenever it 
receives credible information concerning 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.
    (e) If CVE finds that the participant does not qualify as a VOSB, 
the procedures at Sec.  74.22 of this Part will apply, except as 
provided in Sec.  74.2 of this Part.
    (f) If CVE finds that the participant continues to qualify as a 
VOSB, the original eligibility period remains in effect.
0
13. Revise Sec.  74.20 to read as follows:


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 at one or 
all of the participant's offices or work sites. CVE will determine the 
location(s) of the examination. CVE 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. As a minimum examiners shall review any or all of the 
organizing documents, financial documents and publicly available 
information as well as any information identified in section 74.12 of 
this part.
0
14. Revise Sec.  74.21 to read as follows:


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 concern be removed from public listing in 
the VIP database; or
    (b) Delete its record entirely from the VIP database; or
    (c) CVE may remove a participant immediately pursuant to Sec.  
74.2; or
    (d) CVE may remove a participant from public listing in the VIP 
database 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) A pattern of failure to make required submissions or responses 
to CVE or its agents, 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.
    (6) Cessation of the participant's business operations.
    (7) Failure by the concern to provide an updated VA Form 0877 
within 30 days of any change in ownership, except as provided in 
paragraph 74.3(f)(3) of this part.
    (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.
    (e) Failure to inform CVE of any such changed circumstances, as 
outlined in paragraphs (c) and (d) of this section, within 30 days 
constitutes cause for which CVE may cancel verified status of the 
participant.
0
15. Amend Sec.  74.22 by revising paragraphs (a) and (e) to read as 
follows:


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

[[Page 68807]]

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 CVE sent the 
notice to submit a written response to CVE explaining why the proposed 
ground(s) should not justify cancellation.
* * * * *
    (e) Appeals. A participant may file an appeal with the Executive 
Director, OSDBU, 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.
0
16. Revise Sec.  74.25 to read as follows:


Sec.  74.25  What types of personally identifiable information will VA 
collect?

    In order to establish owner eligibility, VA will collect individual 
names and Social Security numbers of all owners who represent 
themselves as having ownership interests in a specific business seeking 
to obtain verified status.
0
17. Revise Sec.  74.26 to read as follows:


Sec.  74.26  What types of business information will VA collect?

    VA will examine a variety of business records. See section 74.12, 
``What must a concern submit to apply for VetBiz VIP Verification 
Program?''
0
18. Revise Sec.  74.27 to read as follows:


Sec.  74.27  How will VA store information?

    VA stores records provided to CVE fully electronically on the VA's 
secure servers. CVE personnel will compare information provided 
concerning owners against any available records. Any records collected 
in association with the VetBiz VIP verification program will be stored 
and fully secured in accordance with all VA records management 
procedures. Any data breaches will be addressed in accordance with the 
VA information security program.
0
19. Revise Sec.  74.28 to read as follows:


Sec.  74.28  Who may examine records?

    Personnel from VA, CVE and its agents, including personnel from the 
SBA, may examine records to ascertain the ownership and control of the 
applicant or participant.
0
20. Revise Sec.  74.29 to read as follows:


Sec.  74.29  When will VA dispose of records?

    The records, including those pertaining to businesses not 
determined to be eligible for the program, will be kept intact and in 
good condition and retained in accordance with VA records management 
procedures 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. 2015-28256 Filed 11-5-15; 8:45 am]
 BILLING CODE 8320-01-P