[Federal Register Volume 87, Number 128 (Wednesday, July 6, 2022)]
[Proposed Rules]
[Pages 40141-40164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13563]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 87, No. 128 / Wednesday, July 6, 2022 / 
Proposed Rules  

[[Page 40141]]



SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 125, and 128

RIN 3245-AH69


Veteran-Owned Small Business and Service-Disabled, Veteran-Owned 
Small Business--Certification

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: The Small Business Administration (SBA) is proposing to amend 
its regulations to implement a statutory requirement to certify 
Veteran-Owned Small Business Concerns and Service-Disabled Veteran-
Owned Small Business Concerns participating in the Veterans 
Certification Program.

DATES: Comments must be received on or before August 5, 2022.

ADDRESSES: You may submit comments, identified by RIN 3245-AH69, by any 
of the following methods:
    1. Federal eRulemaking Portal: https://www.regulations.gov. Follow 
the instructions for submitting comments.
    2. For Mail, Paper, Disk, or CD/ROM Submissions: Timothy Green, 
U.S. Small Business Administration, Office of Veterans Business 
Development, 409 Third Street SW, 5th Floor, Washington, DC 20416.
    3. Hand Delivery/Courier: Timothy Green, U.S. Small Business 
Administration, Office of Veterans Business Development, 409 Third 
Street SW, 5th Floor, Washington, DC 20416.
    Instructions: SBA will post all comments on www.regulations.gov. If 
you wish to submit confidential business information (CBI) as defined 
in the User Notice at www.regulations.gov, please submit the 
information to Timothy Green, U.S. Small Business Administration, 
Office of Veterans Business Development, 409 Third Street SW, 5th 
Floor, Washington, DC 20416, or send an email to [email protected]. 
Highlight the information that you consider to be CBI and explain why 
you believe SBA should hold this information as confidential. SBA will 
review the information and make the final determination on whether it 
will publish the information.

FOR FURTHER INFORMATION CONTACT: Timothy Green, U.S. Small Business 
Administration, Office of Veterans Business Development, 409 Third 
Street SW, 5th Floor, Washington, DC 20416; (202) 205-6777; 
[email protected]. This phone number may also be reached by 
individuals who are deaf or hard of hearing, or who have speech 
disabilities, through the Federal Communications Commission's TTY-Based 
Telecommunications Relay Service teletype service at 711.

SUPPLEMENTARY INFORMATION:

I. Background

    The U.S. Small Business Administration (SBA) is seeking input and 
comments on a proposed rule to establish a certification program for 
Veteran-Owned Small Businesses (VO SBC) and Service-Disabled Veteran-
Owned Small Businesses (SDVO SBC). SBA is planning to amend its 
regulations to implement section 862 of the National Defense 
Authorization Act for Fiscal Year 2021, Public Law 116-283, 128 Stat. 
3292 (January 1, 2021) (NDAA 2021).
    The Veteran-Owned Small Business and Service-Disabled Veteran-Owned 
Small Business Programs, set forth in 38 U.S.C. 8127, authorize Federal 
contracting officers to restrict competition to eligible VO SBCs and 
SDVO SBCs for Department of Veterans Affairs (VA) contracts. To be 
eligible for VA contracts, VO SBCs and SDVO SBCs must be verified by 
VA's Center for Verification and Evaluation (CVE) in accordance with 38 
U.S.C. 8127. There is currently no Government-wide SDVO SBC 
certification program, and firms seeking to be awarded SDVO SBC sole 
source or set-aside contracts with Federal agencies other than the VA, 
only need to self-certify their status as set forth in section 36 of 
the Small Business Act, 15 U.S.C. 657f.
    NDAA 2021 amended the VO SBC/SDVO SBC requirements to transfer the 
responsibility for certification of VO SBCs and SDVO SBCs to SBA as of 
January 1, 2023 (Transfer Date) and created a certification requirement 
at SBA for SDVO SBCs seeking sole source and set-aside contracts across 
the Federal Government. Section 862 also created a one-year grace 
period after the Transfer Date for businesses currently self-certifying 
to file an application for SDVO SBC certification with SBA. Self-
certified SDVO SBCs that submit an application within the one-year 
grace period will maintain eligibility until SBA makes a final 
eligibility decision. With the exception of this grace period, once 
this rulemaking is finalized, VO SBCs and SDVO SBCs that are not 
certified by SBA's Veterans Certification Program (Vets Program) will 
not be eligible to receive sole source or set-aside VO SBC or SDVO SBC 
awards across the Federal Government.
    Firms verified by VA's CVE prior to the Transfer Date will be 
deemed eligible by SBA during the time that remains in the firm's 
three-year term of eligibility. To remain certified by SBA after the 
Transfer Date, those verified firms will be required to meet all 
conditions of eligibility as described in SBA's revised regulations. 
With this rulemaking, SBA is also proposing to grant reciprocity to 
participants in SBA's 8(a) Business Development and Women-Owned Small 
Business (WOSB) programs that are owned and controlled by one or more 
veterans, or in the case of an SDVO SBC, service-disabled veterans. 
Both the 8(a) and WOSB programs require applicants to demonstrate 
ownership and control to be eligible for certification. The ownership 
and control requirements for those programs are basically the same as 
those set forth in this proposed rule for VO SBCs and SDVO SBCs, and 
the rulemaking would provide an expedited application and review 
process for 8(a)/WOSB-certified firms seeking VO SBC/SDVO SBC 
certification. In such cases, SBA would confirm the identified 
individual's eligibility as a veteran or service-disabled veteran 
before granting certification. SBA believes reciprocity between SBA's 
certification programs would create program administration efficiencies 
as well as reduced processing time for applicants.
    SBA proposes to implement the Veterans Certification Program in a 
new 13 CFR part 128. As proposed, 13 CFR part 128 would be organized 
into the following subparts: Subpart A--Provisions of General 
Applicability, Subpart B--Eligibility Requirements for the Veterans 
Certification Program, Subpart C--Certification of VO SBC or SDVO SBC 
Status, Subpart D--Federal

[[Page 40142]]

Contract Assistance, Subpart E--Protests Concerning VO SBC and SDVO 
SBCs, Subpart F--Penalties and Retention of Records, and Subpart G--
Surplus Personal Property for Veteran-Owned Small Business Programs. 
SBA's proposed rule is an effort to create a seamless transfer of the 
VO SBC/SDVO SBC verification function from VA to SBA. To accomplish 
this task, SBA consolidated existing regulations for the SDVO SBC 
program at 13 CFR part 125 with VA's CVE verification guidelines at 38 
CFR part 74. To further ensure continuity for Vets Program participants 
during and after the transfer, SBA generally adopted VA's application 
guidelines, rules on continuing eligibility, program examinations, and 
program exit procedures at 38 CFR part 74 with few exceptions.
    Concurrently, SBA proposes to amend 13 CFR part 125 to remove SDVO 
SBC regulations in subparts A through F, consisting of Sec. Sec.  
125.11 through 125.100, and include them in 13 CFR part 128. SBA also 
proposes to amend references to part 125 in SBA's size regulations at 
13 CFR part 121.

II. Section-by-Section Analysis

    For ease of review, SBA organized proposed part 128's ``Section-by-
Section Analysis'' into subparts and sections. Each section has a 
citation, heading, and the section's source citation. The source 
citations correspond to either 13 CFR part 125 or 38 CFR part 74. 
Sections with no corresponding regulation are marked ``New.''

Subpart A--Provisions of General Applicability

Section 128.100 What is the purpose of this part? (New)
    Proposed Sec.  128.100 would add a general purpose section for the 
Veterans Certification Program with statutory authority for contractual 
assistance to VO SBCs and SDVO SBCs. There was no equivalent section in 
previous SDVO regulations at part 125 and SBA is proposing this 
amendment to match the general applicability subparts found in SBA's 
other certification programs.
Section 128.101 What type of assistance is available under this part? 
(New)
    Given the unique nature of VA's contractual assistance program, SBA 
believes it is important to distinguish the differences in contractual 
assistance available between VO SBC/SDVO SBC contracts at VA and SDVO 
SBC contracts across the rest of the Federal Government. Accordingly, 
this proposed amendment adds the two types of assistance available to 
participants in the Veterans Certification Program. There was no 
equivalent section in previous SDVO SBC regulations in part 125.
Section 128.102 What definitions are important in the Veterans 
Certification Program? (Former Sec.  125.11 and 38 CFR 74.1)
    Section 128.102 as proposed, consolidates the definitions sections 
of 13 CFR 125.11 and 38 CFR 74.1. In general, Sec.  128.102 would adopt 
VA's existing definitions which applied to the verification process, 
remove duplicate definitions between VA and SBA regulations, remove VA 
definitions that referenced SBA's definitions at Sec.  125.11, and 
eliminate definitions that are no longer applicable to the SBA's new 
certification program. Section 125.11 currently includes a definition 
of VO SBC and SDVO SBC. SBA is proposing to move these definitions into 
the eligibility section at Sec.  128.200 in subpart B.

Subpart B--Eligibility Requirements for the Veterans Certification 
Program

Section 128.200 What are the requirements a concern must meet to 
qualify as a VO SBC or SDVO SBC? (New)
    As proposed, this section would reflect the separate and distinct 
eligibility requirements for certification as a VO SBC or SDVO SBC. 
Proposed Sec.  128.200 would incorporate the definitions of VO SBC and 
SDVO SBC previously included as definitions in Sec.  125.11. Proposed 
Sec.  128.200 would also expand how SBA currently defines a VO SBC/SDVO 
SBC. Previously, only VO SBC/SDVO SBCs that were small in their primary 
North American Industry Classification System (NAICS) code were 
considered eligible. This proposed amendment would allow an entity to 
apply for certification if the concern, with its affiliates, meets the 
size standard corresponding to any NAICS code under which it currently 
conducts business activities. Given that ``currently conducts business 
activities'' is not defined in regulations, SBA is seeking comment on 
how best to define this term for the purposes of certification. For set 
aside or sole source VO or SDVO contracts, certified firms would still 
be required to be small within the size standard corresponding to the 
NAICS code assigned to the contract. This proposed amendment is also 
reflected in the definitions section at Sec.  128.102 and application 
procedures at Sec.  128.303.
    Pursuant to NDAA 2021, the proposed section would add paragraph 
(c)(1) to require participants to certify with SBA and paragraph (c)(2) 
to clarify that certification is only required for sole source and set-
aside awards. Firms that do not apply for certification in the Vets 
Program may continue to self-certify their status, receive contract 
awards outside the Vets Program through open competition or other types 
of set-asides, and count toward an agency's goals. For example, a self-
certified SDVO SBC may be awarded a small business set-aside and the 
agency may count the award as both a small business and SDVO SBC toward 
the agency's goals. For those purposes only, contracting officers would 
be able to accept self-certifications without requiring them to verify 
any documentation.
Section 128.201 What other eligibility requirements apply for 
individuals or businesses? (Former 38 CFR 74.2(b) Through (f))
    Section 128.201 as proposed, would add conditions of eligibility 
for certification which are incorporated from additional eligibility 
requirements for verification by CVE at Sec.  74.2(b) through (f). This 
rulemaking proposes to eliminate consideration of whether an individual 
who is currently incarcerated, or on parole or probation owns or 
controls an applicant concern in determining whether the applicant 
possesses good character and qualifies as a VO SBC or SDVO SBC. SBA 
believes that its role should be limited to determining whether an 
applicant is owned and controlled by one or more veterans or service-
disabled veterans. Whether an individual involved with the applicant is 
currently incarcerated, or on parole or probation is a responsibility 
issue, and whether a concern possesses the responsibility to perform a 
contract is a contract specific issue, not an underlying eligibility 
issue. SBA views the issues as to whether the concern has the necessary 
integrity to perform a contract in the same way as it does questions 
relating to whether the concern has the necessary financial 
wherewithal, capacity or tenacity, and perseverance to perform a 
contract. All are responsibility issues determined by a contracting 
officer relating to a specific contract. SBA's certification as to 
whether an applicant is owned and controlled by one or more veterans or 
service-disabled veterans should be limited to consideration of an 
individual's status as a veteran or service-disabled veteran, the 
ownership and control of the applicant, and ensuring that the applicant 
qualifies as

[[Page 40143]]

small under the size standard corresponding to any work that it 
currently performs and would continue to seek to perform through the VO 
or SDVO small business programs. Thus, as proposed, the good character 
review would be limited to ensuring that an applicant or principal was 
not debarred or suspended. SBA also considered retaining a modified 
good character requirement that could render an applicant ineligible if 
there were outstanding issues relating to moral turpitude or business 
integrity, but again concluded that that would also be more 
appropriately considered by a contracting officer as an issue of 
responsibility. SBA specifically requests comments on this issue.
    The regulations at 38 CFR 74.2(a) currently include ownership and 
control as a condition of eligibility. As proposed, Sec.  128.200 
already requires ownership and control as an eligibility requirement, 
so it was not included in this section. While drafting this proposed 
section, SBA considered adopting additional eligibility requirements 
found in other SBA programs such as 8(a) additional eligibility 
requirements in Sec.  124.108. However, for continuity purposes, SBA is 
proposing to adopt the additional eligibility requirements directly 
from 38 CFR part 74.
Section 128.202 Who does SBA consider to own a Veteran-Owned or 
Service-Disabled Veteran-Owned SBC? (Former Sec.  125.12)
    While SBA's existing ownership requirements at Sec.  125.12 apply 
to both VO SBC and SDVO SBCs, Sec.  125.12 refers only to service-
disabled veterans. This section as proposed, would add a reference to 
veterans in the following section: Sec.  128.202(a) through (g), which 
correspond to current regulations at Sec.  125.12(a) through (g).
    Proposed Sec.  128.202(f) would incorporate 38 CFR 74.3(b) 
requiring participants to notify SBA of any change of ownership. In 
Sec.  125.12(f), SBA addresses change of ownership but does not require 
notification to the agency. Proposed Sec.  128.202(f) would require 
participants to notify SBA of a change of ownership and attest to 
continued eligibility in accordance with proposed Sec.  128.307. There 
are no other proposed amendments to SBA's existing ownership 
regulations at Sec.  125.12. SBA is also requesting comment on this 
section as proposed, including any suggested amendments to VO/SDVO 
ownership; for example, whether the proposed regulations at Sec.  
128.202 should more closely match the WOSB/Economically Disadvantaged 
WOSB (EDWOSB) ownership regulations found at 13 CFR 127.201.
Section 128.203 Who does SBA consider to control a Veteran-Owned or 
Service-Disabled Veteran-Owned SBC? (Former Sec.  125.13)
    Proposed Sec.  128.203 would include SBA's existing control 
requirements at Sec.  125.13 and revise the section to add reference to 
veterans. SBA previously administered only the SDVO SBC self-
certification program and Sec.  125.13 did not specifically reference 
VOSB requirements. To be verified by VA and subsequently certified by 
SBA on the Transfer Date, VO SBCs are required to meet the same control 
requirements as SDVO SBCs per 38 CFR 74.4. There are no other proposed 
amendments to SBA's existing control regulations at Sec.  125.133. As 
proposed, SBA control regulations do not address franchise, license, or 
distributor agreements. SBA is seeking comment as to whether these 
types of agreements should be addressed within proposed Sec.  128.203. 
For example, should SBA take a similar approach to the agency's loan 
assistance regulations in Sec.  121.301(f)(5)?
    Current SBA regulations at Sec.  125.13(i), (k), and (l) list 
several ``rebuttable presumptions'' of control by a non-veteran. As 
proposed, SBA is adopting those existing regulations in full but is 
soliciting comment as to whether those rebuttable presumptions should 
be viewed merely as factors of control by non-veterans rather than 
conditions of ineligibility that an applicant must rebut. Additionally, 
SBA is requesting comment on whether any of the rebuttable presumptions 
as proposed should be amended. SBA is also requesting comment on this 
section as proposed including any suggested amendments to VO SBC/SDVO 
SBC control. For example, whether the proposed regulations at Sec.  
128.203 should more closely match the WOSB/EDWOSB control regulations 
found at 13 CFR 127.202.
Section 128.204 What size standards apply to VO SBC and SDVO SBCs? 
(Former Sec.  125.14)
    Proposed Sec.  128.204 would include SBA's existing size 
requirements at Sec.  125.14 and revise the section to incorporate VO 
SBCs. SBA previously administered only the SDVO SBC self-certification 
program, so Sec.  125.14 did not specifically reference VO SBC 
requirements. To be verified by VA and subsequently certified by SBA on 
the Transfer Date, VO SBCs are required to meet the same size 
requirements as SDVO SBCs. As such, this section would also be amended 
to reflect the VO SBCs.

Subpart C--Certification of VO SBC or SDVO SBC Status

    Subpart C as proposed, would adopt VA's existing application and 
oversight guidelines at 38 CFR 74.10 through 74.22 and incorporate 
these sections into SBA certification for VO SBC and SDVO SBCs. 
References to VA's application, the CVE program, the term 
``verification,'' the Vendor Information Pages (VIP) database, and VA 
forms would be removed throughout proposed Sec. Sec.  128.300 through 
128.310 and replaced where relevant with SBA, certification, and 
references to SBA's database and online application system.
    VA's Records Management section (38 CFR 74.25 through 74.29) would 
not be incorporated into subpart C, as these provisions are no longer 
applicable to this program. SBA will seek Office of Management and 
Budget (OMB) approval for the information collection required for this 
program. SBA does not anticipate collecting additional information that 
was not previously collected by VA.
Section 128.300 How is a concern certified as a VO SBC or SDVO SBC? 
(Former Sec.  74.2)
    Proposed Sec.  128.300 would include VA's eligibility requirements 
at 38 CFR 74.2(a), with proposed revisions to remove references to VA 
and to reflect SBA's certification program. SBA's proposed rule would 
also grant certification based on an applicant's participation in SBA's 
8(a) Business Development and WOSB/EDWOSB programs. SBA anticipates 
that many participants may seek multiple certifications and believes 
reciprocity between SBA's certification programs will create program 
administration efficiencies as well as reduce the processing time for 
applicants. In granting certification for these programs, SBA reviews 
ownership and control of the applicant to determine eligibility. The 
ownership and control requirements that apply to disadvantaged 
individuals for 8(a) certification and those applying to women for 
WOSB/EDWOSB certification are basically the same as those applying to 
veterans and service-disabled veterans for the Veterans Certification 
Program. An applicant would be required to certify that there are no 
material changes in its ownership or control since its 8(a) or WOSB 
certification, and SBA would then accept its previous determinations 
that the identified individual owned and controlled the VO SBC/SDVO SBC

[[Page 40144]]

applicant. In such cases, SBA would confirm the identified individual's 
eligibility as a veteran or service-disabled veteran.
    There is likelihood that 8(a) or WOSB firms granted reciprocity 
will have remaining ``time in program'' on their existing 
certifications that would not align with the proposed three-year 
eligibility period for this Vets Program. In these instances, SBA would 
align recertification based on the firm's existing certification 
eligibility period. As an example, a WOSB firm certified in 2022 would 
be required to reapply for WOSB certification at the end of their 
three-year eligibility period in 2025. If granted reciprocity into the 
proposed Vets Program in 2023, that firm would have two remaining years 
of eligibility. In 2025, the firm would apply for recertification to 
WOSB and then if eligible, would be granted a three-year eligibility 
period for both programs. That firm would then be required to update 
their status in the Veterans Certification Program to reflect 
recertification by WOSB. SBA is seeking comment on this approach to 
recertification and whether SBA should amend 8(a) regulations at part 
124 and WOSB/EDWOSB regulations at 13 CFR part 127 to reflect 
reciprocity between programs.
Section 128.301 Where must an application be filed? (Former Sec.  
74.10)
    Proposed Sec.  128.301 would include VA's requirements at 38 CFR 
74.10 for application to CVE, propose revisions to remove references to 
VA, and reflect that an applicant must apply to SBA for certification 
after the rule is effective. At the time of this proposed rule, SBA has 
not announced its application platform or certification database for 
the Vets Program. Accordingly, the proposed amendments have general 
references to this technology. When finalized, the rule will include 
instructions to apply online and access the certification database.
Section 128.302 How does SBA process applications for certification? 
(Former Sec.  74.11)
    Proposed Sec.  128.302 would include VA's guidelines for 
application processing by CVE at 38 CFR 74.11, propose revisions to 
remove references to VA, and reflect SBA's certification program. As 
proposed, this section would remove specific processing guidelines in 
Sec.  128.302(a) as SBA has not established the policies and procedures 
for application processing at this time. SBA also proposes to add an 
additional sentence at the end of Sec.  128.302(e) to establish SBA's 
authority to decertify a firm in the event that the firm failed to 
inform SBA of any changed circumstance in accordance with Sec.  
128.306. The regulation at 38 CFR 74.11(e)(1), which requires 
participants to notify VA of bankruptcy details within 30 days, would 
be incorporated into Sec. Sec.  128.302(e) and 128.307 to require 
participants to notify SBA in the event of a bankruptcy filing.
Section 128.303 What must a concern submit to apply for VO SBC or SDVO 
SBC certification? (Former Sec.  74.12)
    Proposed Sec.  128.303 would amend VA's documentation requirements 
at 38 CFR 74.12 for application to CVE. This amendment would include 
general requirements for submission to SBA rather than list each 
document individually as with the current VA regulation. As proposed, 
this section would grant certification based on participants in SBA's 
8(a) Business Development and WOSB/EDWOSB programs that are owned and 
controlled by one or more veterans, or in the case of SDVO SBCs, 
service-disabled veterans. The proposed amendment would demonstrate how 
applicants may submit documentation as evidence of program eligibility. 
Proposed Sec.  128.303 would add paragraphs (d) and (e) to require a 
concern to provide a full explanation in the case of an applicant that 
was previously decertified, previously denied certification, or failed 
to notify SBA of a material change affecting its eligibility. SBA is 
seeking comment whether an explanation in these circumstances should be 
required as part of an application and if so, should SBA establish a 
time limit for reapplication in which an explanation would be required 
(e.g., A firm that reapplies within three years of denial would be 
required to provide an explanation of that denial. If that firm 
reapplies after a period of three years, it would not be required to 
submit an explanation with the application).
    In terms of demonstrating that an applicant qualifies as a small 
business, the proposed rule would provide that an applicant must 
demonstrate that it qualifies as small under the size standard 
corresponding to any NAICS code under which it currently conducts 
business activities. SBA believes that this standard makes more sense 
than requiring an applicant to qualify as small under the size standard 
corresponding to its primary industry classification. In order to be 
eligible for a specific SDVO or VO small business contract, a firm must 
qualify as small under the size standard corresponding to the NAICS 
code assigned to that contract. Whether a firm qualifies as small under 
its primary industry classification is not relevant to that 
determination (unless the size standard for the firm's primary industry 
classification is the same as that for the NAICS code assigned to the 
contract, but even then, the only relevant size standard is that 
corresponding to the NAICS code assigned to the contract). SBA believes 
that a firm that does not qualify as small under its primary industry 
classification should not be precluded from seeking and being awarded 
SDVO or VO small business contracts if it qualifies as small for those 
contracts. SBA believes that the certification process should ensure 
that an applicant is owned and controlled by one or more veterans or 
service-disabled veterans and that it could qualify as a small business 
for a VO or SDVO set-aside contract. As such, SBA believes that 
requiring an applicant to demonstrate that it qualifies as small for 
any industry under which it currently conducts business is more 
appropriate than requiring it to demonstrate that it qualifies as small 
under its primary industry classification.
Section 128.304 Can an applicant appeal SBA's initial decision to deny 
an application? (Former Sec.  74.13)
    Proposed Sec.  128.304 would include VA's regulation at 38 CFR 
74.13 for a denied application with CVE and proposed revisions would 
remove references to VA and reflect SBA's certification program. In 
addition, this section would add a sentence at the beginning of Sec.  
128.304(a) which would clearly establish that there is no 
reconsideration process for initial applications once they have been 
denied. SBA believes that the appeals process with SBA's Office of 
Hearings and Appeals (OHA) as outlined in 13 CFR part 134 serves as an 
adequate substitute for the process of reconsideration. Given that this 
proposed rule would eliminate reconsideration upon initial application, 
SBA proposes to shorten the reapplication period after denial from 6 
months to 90 calendar days. SBA seeks comment on the proposed 
elimination of the reconsideration process. If, on appeal, OHA 
overturns SBA's initial decision to deny an applicant, should SBA 
consider a reconsideration process where the remanded application is 
then denied for reasons other than those identified in the initial 
application? Should SBA allow a reconsideration of all denials prior to 
OHA appeal? SBA also requests comment specifically on denial decisions 
based solely on eligibility as a veteran or service-disabled veteran. 
Current VA

[[Page 40145]]

regulations do not allow for reconsideration of these types of denials. 
Should SBA allow for reconsideration in these limited circumstances?
    This section as proposed would not incorporate 38 CFR 74.13(b) 
through (f): paragraph (b) reconsideration of veteran eligibility 
criteria, paragraph (c) reconsideration, paragraph (d) is no longer 
applicable as it references an SBA determination on size, paragraph (e) 
is a duplicate of paragraph (b), and paragraph (f) is a second 
reference to the reconsideration process.
Section 128.305 Can an applicant or participant reapply for 
certification? (Former Sec.  74.14)
    As proposed, Sec.  128.305 would include VA's 38 CFR 74.14 
reapplication requirements, proposed revisions would remove references 
to VA and to reflect SBA's certification program. SBA's proposed rule 
would adopt the VA requirement that the applicant must wait for a 
period of 90 calendar days after a denial decision before a new 
application will be processed by SBA. As proposed participants may 
reapply for certification within 120 calendar days of the end of their 
eligibility period and the subsequent eligibility period would be based 
on the date of the new determination letter. SBA is requesting comment 
on this proposed procedure for recertification. Specifically, should 
SBA reduce the window for applicants to reapply prior to the end of 
eligibility period and if an applicant successfully reapplies to the 
Vets Program, should the eligibility period be based on the original 
date that eligibility was set to expire as opposed to the date of the 
determination letter?
Section 128.306 What length of time may a business participate in the 
Veterans Certification Program? (Former Sec.  74.15)
    Proposed Sec.  128.306 would include VA's 38 CFR 74.15 program 
eligibility term and continuing obligation requirements, including a 
provision specifying that a business concern would receive an 
eligibility term of three years from the date of SBA's approval letter 
establishing its VO SBC or SDVO SBC certified status. Proposed 
revisions would remove references to VA and reflect SBA's certification 
program. SBA does not believe that yearly recertification is necessary, 
but requests comments as to whether recertification every three years 
is the appropriate term of certification. Paragraphs (e) and (f) of 
this section would include the consequences of a program examination 
referenced in paragraph (d). For organizational purposes, SBA would 
redesignate paragraphs (e) and (f) as paragraphs (d)(1) and (2), 
respectively. SBA's proposed rule would adopt VA's eligibility period 
of three years. SBA is soliciting comment on whether that period is 
appropriate for the proposed SBA Vets Program.
Section 128.307 What are a participant's ongoing obligations to SBA? 
(Former Sec.  74.3(b))
    Proposed Sec.  128.307 would include 38 CFR 74.3(b) that requires 
participants to notify CVE of any change of ownership; proposed 
revisions would remove references to VA and to reflect SBA's 
certification program. This section as proposed does not require prior 
SBA approval of a material change. SBA is soliciting comment as to 
whether this section should require SBA approval prior to a material 
change that could affect eligibility. Sections 36 and 36A of the Small 
Business Act (15 U.S.C. 657f and 657f-1) ``require the periodic 
recertification'' of a firm's status as an eligible VO SBC or SDVO SBC. 
As noted above in Sec.  128.306, SBA is proposing that a VO SBC or SDVO 
SBC certification generally last three years. SBA has interpreted the 
``periodic recertification'' requirement set forth in the Small 
Business Act to require recertification every three years. This 
proposed rule would not require participants to recertify on an annual 
basis as an ongoing obligation. SBA requests comments as to whether 
three years is the appropriate length of time to require 
recertification. SBA wants to ensure that it meets its statutory 
mandate, but at the same time does not want to impose any unnecessary 
burdens on VO SBCs and SDVO SBCs.
Section 128.308 What is a certification examination and what will SBA 
examine? (Former Sec.  74.20)
    Proposed Sec.  128.308 would include VA's 38 CFR 74.2(a) 
verification exam requirements, with revisions that would remove 
references to VA and to reflect SBA's certification program.
Section 128.309 What are the ways a business may exit certification 
status? (Former Sec.  74.21)
    Proposed Sec.  128.309 would include VA's 38 CFR 74.21 guidelines 
on exiting the CVE program, with revisions that would remove references 
to VA and reflect SBA's certification program. The proposed section 
would also include paragraph (d)(10) which adds failure to recertify as 
good cause to remove a firm from the Vets Program.
Section 128.310 What are the procedures for decertification? (Former 
Sec.  74.22)
    Proposed Sec.  128.310 would include VA's 38 CFR 74.22 guidelines 
on canceling program participation by the agency; proposed revisions 
would remove references to VA and to reflect SBA's certification 
program.

Subpart D--Federal Contract Assistance

Section 128.400 What are VO and SDVO contracts? (Former Sec.  125.17)
    As proposed, Sec.  128.400(a) would amend the text in Sec.  125.17 
to reflect VA's authority to award set-aside and sole source to VO SBCs 
and SDVO SBCs. The amendment references the VA Acquisition Regulation 
(VAAR) at chapter 8 of title 48, Code of Federal Regulations. An 
additional amendment at Sec.  128.400(b) as proposed, would distinguish 
VA contracts from SDVO SBC contracts with the rest of the Federal 
Government.
Section 128.401 What requirements must an SDVO SBC meet to submit an 
offer on a contract? (Former Sec.  125.18)
    As proposed, Sec.  128.401 would amend the current regulation at 
Sec.  125.18(a) to require certification to be eligible for a VO or 
SDVO SBC set-aside or sole source contract. The proposed rule would add 
Sec.  128.401(a)(2)(i) and (ii) to allow an uncertified VO SBC or SDVO 
SBC to submit an offer while their application is pending with SBA. SBA 
intends to prioritize those applications where the contracting officer 
has identified the applicant as the apparent successful offeror. This 
proposed rule would also amend former paragraph (b) at Sec.  125.18 to 
add eligibility for VO SBC joint ventures (JV) in the Vets Program and 
reference Sec.  128.402, a new stand-alone section to address JV 
requirement for VOVO SBCs and SDVO SBCs. The remaining paragraphs in 
Sec.  125.18 would add references to VO SBCs.
Section 128.402 May a joint venture submit an offer on a VO SBC or SDVO 
SBC requirement? (Former Sec.  125.18(b))
    As stated above, SBA is proposing a stand-alone Sec.  128.402 that 
would address JV requirements for VOVO SBCs and SDVO SBCs. Section 
128.402(a) as proposed, generally would state conditions upon which a 
JV may be certified by SBA and as set forth in 48 CFR part 819, 
includes the requirement that all joint ventures must be certified to 
be awarded a VO SBC or SDVO SBC contract with VA. SBA does not intend 
to require SDVO SBC JVs to certify for contracts with the rest of the 
Federal Government.

[[Page 40146]]

    The proposed rule would also add paragraph (b)(11) in Sec.  128.402 
to provide that a VO SBC or SDVO SBC participant cannot be a joint 
venture partner on more than one joint venture that submits an offer 
for a specific VO SBC or SDVO SBC contract. Although the proposed rule 
would apply this requirement to all contracts, procuring agencies and 
small businesses have raised concerns to SBA in the context of multiple 
award contracts where it is possible that one firm could be a member of 
several joint ventures that receive contracts. In such a situation, 
several agencies were troubled that orders under the Multiple Award 
Contract may not be fairly competed if one firm was part of two or more 
quotes. They believed that one firm having access to pricing 
information for several quotes could skew the pricing received for the 
order.
Sections 128.403 Through 128.408 (Former Sec. Sec.  125.21 Through 
125.26)
    Generally, Sec. Sec.  128.403 (former Sec.  125.21) ``requirements 
not available to VO or SDVO contracts,'' 128.405 (former Sec.  125.23) 
``sole source contracts to VO and SDVO SBCs,'' and 128.406 (former 
Sec.  125.24) ``VO or SDVO contracts at or below the simplified 
acquisition threshold'' would be amended to distinguish VA procurements 
from all other procurements. As previously stated, VAAR specifically 
governs requirements exclusive to VA prime and subcontracting actions 
at chapter 8 of title 48, Code of Federal Regulations, and supplements 
the Federal Acquisition Regulation (FAR), which contains guidance 
applicable to most Federal agencies.
    As proposed, Sec.  128.404(d) would add a requirement that 
prohibits agencies from requiring one or more certifications in 
addition to its VO SBC/SDVO SBC certification. This amendment is 
already included in SBA's regulations at Sec.  125.2(e)(6)(i) but had 
not been added to the SDVO SBC program.
    No amendments are proposed were made to existing regulations in 
either Sec.  128.407 or Sec.  128.408 currently at Sec.  125.25 or 
Sec.  125.526.

Subpart E--Protests Concerning VO SBCs and SDVO SBCs

Section 128.500 What are the requirements for filing a VO SBC and SDVO 
SBC status protest? (New)
    As proposed, Sec.  128.500 would serve as the sole section 
addressing status protests for VO SBCs and SDVO SBCs. Currently, SBA's 
Director of Government Contracting processes all status protests of 
self-certified SDVO SBCs for non-VA contracts in accordance with 13 CFR 
part 125 and SBA's OHA hears all challenges to a VO SBC or SDVO SBC's 
inclusion in the VA database in accordance with 38 U.S.C. 
8127(f)(6)(B)(i). NDAA 2021 transfers the entirety of 38 U.S.C. 8127(f) 
to 15 U.S.C. 657f and authorizes OHA to review all status protests of 
VO SBCs and SDVO SBCs, regardless of the procurement agency. 
Accordingly, proposed part 128 would not include Sec. Sec.  125.27 
through 125.31 on SDVO SBC status protests. Proposed Sec.  128.500 
would add paragraph (a) to reflect revised status protest procedures 
described above with a reference to part 134. Paragraph (b) as proposed 
would distinguish separate procedures for size and status protests. 
Amendments to part 134 are not included in this proposed rule and will 
be amended separately to reference SBA's Veterans Certification 
Program.

Subpart F--Penalties and Retention of Records

    The proposed rule would adopt SBA's existing regulations at 13 CFR 
125.32 and 33 (former Sec. Sec.  125.32 and 125.33) and revise the 
sections to add reference to VO SBCs. SBA previously administered only 
the SDVO SBC self-certification program, so Sec. Sec.  125.32 and 
125.33 did not specifically reference VO SBC requirements.

Subpart G--Surplus Personal Property for Veteran-Owned Small Business 
Programs

Section 128.700 How does a small business concern owned and controlled 
by veterans obtain Federal surplus personal property? (Former Sec.  
125.100)
    The Veterans Small Business Enhancement Act provides that VO SBCs 
should be considered for surplus personal property distributions. Those 
firms seeking to participate in the program are required to be verified 
by VA's CVE as a condition of eligibility. Section 128.700(a)(1) would 
amend this regulation to reflect the transfer of certification to SBA 
as mandated by NDAA 2021.
Part 121
    This proposed rule would amend references to the current SDVO SBC 
program in part 121. These amendments would correspond to the newly-
created part 128.
    SBA has not proposed amendments to part 124, 127, or 134 with this 
rulemaking. However, SBA is seeking comment whether the final rule 
should include amendments to these parts to reflect the proposed Vets 
Program. For example, part 124 may need to be amended to reflect 
reciprocity with the proposed Vets Program; part 127 grants reciprocity 
to firms verified by CVE and would be amended to reference this Vets 
Program; and part 134 would need to be amended to remove references to 
CVE and update procedures for denial, cancellation, and inclusion in 
the SBA database.

III. Compliance With Executive Orders 12866, 12988, 13132, 13175, 
13563, the Congressional Review Act (5 U.S.C. 801-808), the Paperwork 
Reduction Act (44 U.S.C., Ch. 35), and the Regulatory Flexibility Act

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
proposed rule is a significant regulatory action for the purposes of 
Executive Order 12866. Accordingly, the next section contains SBA's 
Regulatory Impact Analysis.
Regulatory Impact Analysis
1. Is there a need for the regulatory action?
    This rulemaking is necessary to satisfy statutory requirements to 
implement section 862 of the National Defense Authorization Act for 
Fiscal Year 2021 amendments to the Small Business Act which requires 
SBA to certify VO SBCs and SDVO SBCs.
2. What is the baseline, and the incremental benefits and costs of this 
regulatory action?
    OMB directs agencies to establish an appropriate baseline to 
evaluate any benefits, costs, or transfer impacts of regulatory actions 
and alternative approaches considered. The baseline should represent 
the agency's best assessment of what the world would look like absent 
the regulatory action. For a regulatory action that modifies or 
replaces an existing regulation, a baseline assuming no change to the 
regulation generally provides an appropriate benchmark for evaluating 
benefits, costs, or transfer impacts of proposed regulatory changes and 
their alternatives.
Baseline
    Section 862 of NDAA 2021 amended sections 36 and 36A of the Small 
Business Act to require SBA to certify the status of VO SBCs and SDVO 
SBCs seeking sole source and set-aside contracts across the Federal 
Government. This regulation would replace VA's existing regulations 
governing the verification of VO SBCs

[[Page 40147]]

and SDVO SBCs for sole source or set-aside contracts awarded by VA. 
Prior to NDAA 2021, SDVO SBC firms seeking to contract with Federal 
agencies other than VA only needed to self-certify their status. SDVO 
SBC firms currently self-certifying must apply within a one-year grace 
period after the Transfer Date.
    SBA's proposed regulations will not add any additional burden to 
current participants in VA's VIP Verification Program. The VIP 
Verification Program has a three-year term of eligibility and to enter 
the program, applicants submit an online application with documents 
supporting the application. To remain in the program, VA requires 
participants to notify the agency of a change in circumstances such as 
a change in ownership or control of the firm. VA also requires 
participants to undergo a program examination to verify the accuracy of 
any statement or information provided as part of the verification 
application process. At the end of the three-year term of eligibility, 
a participant must reapply to the program using the same procedures as 
the initial application.
    With the proposed regulations, SBA would institute the same process 
of initial application, program examination, and reapplication at the 
end of the applicant's three-year term of eligibility. Firms verified 
by VA prior to the Transfer Date would be deemed eligible by SBA for 
the time that remains in the firm's three-year term of eligibility. To 
remain certified by SBA after the Transfer Date, those verified firms 
would be required to meet all conditions of eligibility as described in 
the proposed regulation such as certification examinations and 
reapplication at the end of the firm's term of eligibility. Current 
participants in the VIP Verification Program would have no additional 
cost burden associated with the SBA's proposed regulations implementing 
the Veterans Certification Program. VA existing regulations for VO SBCs 
and SDVO SBCs that contract solely with the VA serve as an appropriate 
benchmark for this regulatory impact analysis. Accordingly, this 
analysis will focus on the benefits and costs to those previously self-
certified SDVO SBCs that would be required to certify with SBA.
Benefit
    The benefit of the proposed regulation is a reduction in the 
ambiguity and uncertainty for contracting officers in the process of 
making Federal contract awards to eligible SDVO firms that were 
previously only required to self-certify. Under the existing system for 
agencies outside of VA, the burden of SDVO SBC eligibility compliance 
is placed upon the awarding contracting officer. Contracting officers 
must review the documentation of the apparent successful offeror on a 
SDVO SBC contract. Under this proposed rule, the burden is placed upon 
SBA. All a contracting officer needs to do is to confirm that the firm 
is in fact a certified SDVO SBC in SBA's certification database and a 
responsible contractor. A contracting officer would not have to look at 
any documentation provided by a firm or prepare any internal memorandum 
memorializing any review. This will encourage more contracting officers 
to set aside opportunities for SDVO SBC Vets Program participants as 
the validation process will be controlled by SBA in the System for 
Award Management (SAM), the Dynamic Small Business Search (DSBS) 
database, and SBA's certification database. The reduced responsibility 
to verify eligibility at contract award may also result in a minor cost 
savings to the contracting agencies.
Cost
    While current participants in the Vet VIP Verification Program 
would have no additional costs associated with the proposed 
regulations, SBA anticipates costs associated with self-certified SDVO 
SBCs currently seeking contracts with the rest of the Federal 
Government. Previously, those firms only needed to self-certify their 
status to pursue SDVO SBC sole source and set-asides. With NDAA 2021, 
those firms must apply to SBA for certification within a one-year grace 
period ending on January 1, 2024. Eligible SDVO SBC firms that are 
certified by SBA after the Transfer Date will then be required to meet 
all program eligibility requirements going forward to include: notify 
SBA of a change in circumstances, undergo a program certification 
examination, and reapply for certification at the end of their 
eligibility period.
    To estimate the number of SDVO SBC applicants within the first year 
of the certification, SBA reviewed firms actively registered as SDVO 
SBCs in SAM. SBA believes that the number of firms listed in SAM is the 
most recent and reliable data to estimate participation and total costs 
of the Vets Program for the purposes of this regulatory impact study. 
Registration in SAM is required for all businesses seeking to contract 
with the Federal Government, registrants may select to represent 
themselves as SDVO SBCs without going through a certification process, 
and firms must recertify their registration one-year after initial SAM 
registration. While it is not anticipated that every firm registered as 
an SDVO SBC in SAM will apply for certification within the first year 
of the Vets Program, SAM registrations serve as what SBA would consider 
the maximum number of firms that would likely seek certification.
    Accordingly, SBA estimates that as many as 21,468 self-certified 
SDVO SBCs could apply for initial certification within the first year 
of the program. This estimate is based on 32,284 SDVO SBC firms 
registered in SAM and excludes 10,816 firms registered in SAM but 
already verified by VA as of December 2021.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
SDVO SBCs Registered in SAM.............................          32,284
Less: VA-Verified SDVO SBCs Included in SAM.............          10,635
Self-Certified SDVO SBCs................................          21,649
Less: VA-Verified VO SBCs Self-Certified as SDVO SBCs...             181
Self-Certified SDVO SBCs Anticipated to Seek SBA                  21,468
 Certification..........................................
------------------------------------------------------------------------

    The following table represents the estimated total number of 
Program Participant actions during the first five years of the Vets 
Program.

[[Page 40148]]



                                         Number of Program Participants
----------------------------------------------------------------------------------------------------------------
                                           Initial            Program
                Year                     applications       examinations     Recertifications    Yearly totals
----------------------------------------------------------------------------------------------------------------
1...................................             17,174              1,025              2,114             19,288
2...................................              8,500                560              2,006             10,506
3...................................              7,500                420                527              8,027
4...................................              7,500                810              7,715             15,215
5...................................              7,500                635              4,202             11,706
                                     ---------------------------------------------------------------------------
    Totals..........................             48,174              3,455             16,565             64,739
----------------------------------------------------------------------------------------------------------------

    For the purposes of this proposed rule, SBA estimated ``time to 
complete'' for three types of certification actions: initial 
application, program examination, and reapplication at the end of the 
eligibility period. For the initial application, SBA estimates that 
applicants would complete the application process in 1 hour, a program 
examination in 1 hour, and reapplication in 1 hour. The estimated time 
to complete would include entering information into SBA's online 
application platform and submission of supporting documentation to 
prove eligibility. It also assumes that the information requested by 
SBA during initial certification is already held by the firms during 
the ordinary course of business and would require minimum preparation 
prior to submission. Similarly, participants would be minimally 
burdened during program examinations and reapplications. During their 
period of eligibility, participants would be required to review, 
maintain, and update documentation submitted to SBA during initial 
certification. In the event of a change in circumstances while in the 
Program, participants would have previously notified SBA of the change 
and already uploaded documentation to support eligibility. SBA's 
proposed rule would not require additional information or documents 
that the firm would not already have on hand and would not impose 
additional burden on the participant. SBA is soliciting comment as to 
whether these times to complete these actions are reasonable.
    Hourly cost to the participant is based on estimated manager's 
salary of $93.44/hour (based on the median hourly wage of $46.72 for 
construction managers, according to the BLS 2020 Occupational Outlook 
Handbook, plus 100% for benefits and overhead). Based on an estimate of 
1 hour per program action and an hourly cost of $93.44, the five-year 
total cost burden for the proposed rule would be $3,219,569. SBA 
estimates that an applicant's cost burden to apply and maintain 
eligibility for this proposed Program would require 3 total hours at a 
cost burden of $280.32 per applicant.

                                              Costs to Participants
----------------------------------------------------------------------------------------------------------------
                                           Initial            Program
                Year                     applications       examinations     Recertifications    Yearly totals
----------------------------------------------------------------------------------------------------------------
1...................................         $1,604,776            $95,776           $197,532         $1,898,084
2...................................            794,240             52,326            187,441          1,034,007
3...................................            700,800             39,712             49,243            789,755
4...................................            700,800             75,686            720,923          1,497,410
5...................................            700,800             59,334            392,672          1,152,807
                                     ---------------------------------------------------------------------------
    Totals..........................          4,501,416            322,835          1,547,811          6,372,062
----------------------------------------------------------------------------------------------------------------

    SBA believes that participants would not incur any start-up costs, 
operation or maintenance costs, service costs, or require additional 
capital as a result of this proposed rule because there should be no 
cost in setting up or maintaining systems to collect the required 
information. As stated previously, the information requested should be 
collected and retained by the applicant in the ordinary course of 
business. SBA is soliciting comment as to whether this assumption is 
accurate.
    SBA estimates the cost to the government of implementing the 
certification program to be $30M across fiscal year (FY) 2022 and 
FY2023 and approximately $20M annually thereafter. SBA worked with VA 
and OMB to secure a $10M transfer from VA's Supply Fund to cover 
transition costs, including tech system development. An additional $20M 
was requested in the President's Budget for FY2023 for year one program 
operations. SBA and VA anticipate an up to 250% surge in application 
volume relative to VA's current volume. The increase in volume will be 
handled primarily by surging contract support. SBA's $20M request 
includes $2.5M for full time equivalents (FTEs) (current salaries and 
expenses (S&E) for VA FTEs assigned to the program), $1.35M for 
information technology (IT) overhead (system maintenance and standard 
IT services for staff and contractors), and $16M in contract costs 
(based on FY21 VA contract costs scaled to account for application 
surge and projected efficiencies). The cost of operating the program 
may decrease after the initial application surge, but would rise every 
third year when the 2023 cohort is up for recertification. This cost 
estimate also eliminates CVE's costs of administering the program. CVE 
reported a cost of $12,302,497 for 14,762 cases in FY2021. This cost is 
not directly comparable to SBA's estimate, however, because it excludes 
items like some support costs, that are included in SBA's cost 
estimate.
3. What are the alternatives to this rulemaking?
    This proposed rule would implement specific statutory provisions in 
Section 862 of the 2021 NDAA. There are no alternatives that would meet 
the statutory requirements.

Executive Order 12988

    This proposed rule meets applicable standards set forth in sections 
3(a) and 3(b)(2) of Executive Order 12988, Civil

[[Page 40149]]

Justice Reform, to minimize litigation, eliminate ambiguity, and reduce 
burden. The action does not have retroactive or preemptive effect.

Executive Order 13132

    This proposed rule does not have federalism implications as defined 
in Executive Order 13132. It will not have substantial direct effects 
on the States, on the relationship between the National Government and 
the States, or on the distribution of power and responsibilities among 
the various levels of government, as specified in the Executive order. 
As such it does not warrant the preparation of a federalism assessment.

Executive Order 13175

    This proposed rule does not have tribal implications under 
Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments, because it would not have a substantial direct effect on 
one or more Indian tribes, on the relationship between the Federal 
Government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal Government and Indian tribes.

Executive Order 13563

    This Executive order directs agencies to, among other things: (a) 
Afford the public a meaningful opportunity to comment through the 
internet on proposed regulations, with a comment period that should 
generally consist of not less than 60 days; (b) provide for an ``open 
exchange'' of information among government officials, experts, 
stakeholders, and the public; and (c) seek the views of those who are 
likely to be affected by the rulemaking, even before issuing a notice 
of proposed rulemaking. As far as practicable or relevant, SBA 
considers these requirements in developing this rule, as discussed 
below.
    1. Did the agency use the best available techniques to quantify 
anticipated present and future costs when responding to E.O. 12866 
(e.g., identifying changing future compliance costs that might result 
from technological innovation or anticipated behavioral changes)?
    To the extent possible the agency utilized the most recent data 
available in the Federal Procurement Data System-Next Generation, SAM, 
and VA's VIP database.
    2. Public participation: Did the agency: (a) Afford the public a 
meaningful opportunity to comment through the internet on any proposed 
regulation, with a comment period that should generally consist of not 
less than 60 days; (b) provide for an ``open exchange'' of information 
among Government officials, experts, stakeholders, and the public; (c) 
provide timely online access to the rulemaking docket on 
Regulations.gov; and (d) seek the views of those who are likely to be 
affected by rulemaking, even before issuing a notice of proposed 
rulemaking?
    The proposed rule will have a 30-day comment period and will be 
posted on www.regulations.gov to allow the public to comment 
meaningfully on its provisions. SBA believes a 30-day comment period is 
reasonable and sufficient for this proposed rule for several reasons. 
First, SBA believes a 30-day comment period is sufficient for this 
proposed rule because the rule does not propose significant changes to 
the programs that are not statutorily mandated. In drafting this 
proposed rule, SBA sought to minimize the impact to the certification 
process as the certification authority moves to SBA and generally 
adopted VA's existing program guidelines in 38 CFR part 74. Second, SBA 
anticipates that this proposed rule will receive a substantial number 
of comments from the public, even with a 30-day comment period. Third, 
SBA and VA have taken significant efforts to engage the veteran small 
business community during preparations for the transfer and have used 
this engagement as consideration while drafting this proposed rule. 
Finally, a 30-day comment period is needed due to the time required to 
promulgate a final rule to be effective on January 1, 2023. SBA intends 
to use these comments as an integral component in drafting the final 
rule.
    3. Flexibility: Did the agency identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public?
    This rulemaking is necessary to satisfy statutory requirements to 
implement section 862 of 2021 NDAA 2021. A description of the need for 
this regulatory action and the benefits and costs associated with this 
action, including possible distributional impacts that relate to 
Executive Order 13563, are included above in the Regulatory Impact 
Analysis under Executive Order 12866.

Congressional Review Act (5 U.S.C. 801-808)

    The Congressional Review Act, 5 U.S.C. 801 et seq., as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally provides that before a ``major rule'' may take effect, the 
agency promulgating the rule must submit a rule report, which includes 
a copy of the rule, to each House of the Congress and to the 
Comptroller General of the United States. SBA will submit a report 
containing this rulemaking and other required information to the U.S. 
Senate, the U.S. House of Representatives, and the Comptroller General 
of the United States. A major rule cannot take effect until 60 days 
after it is published in the Federal Register. This rulemaking has been 
reviewed and determined by OMB not to be a ``major rule'' under 5 
U.S.C. 804(2).

Paperwork Reduction Act, 44 U.S.C. Ch. 35

    In carrying out its statutory mandate to certify VO SBC and SDVO 
SBC firms, SBA intends to collect information from VO SBC and SDVO SBC 
applicants or participants through an online application system. This 
collection of information will require submission or retention of 
documents that support the applicant's certification and continued 
eligibility.
    SBA intends to implement a certification and information collection 
platform that replicates the currently approved information collection 
by VA's CVE (OMB Control Number 2900-0675). In other words, the 
information collected by SBA will include eligibility documents 
previously collected by VA. SBA does not anticipate that these changes 
would impact the content of the information currently collected or add 
additional burden to what is currently required by VA for verification.
    As discussed above, this rule proposes to fully implement the 
statutory requirement for small business concerns to be certified by 
SBA in order to be awarded a set-aside or sole source contract under 
the Veterans Certification Program. As a result of these changes, the 
rule proposes to eliminate SDVO SBC self-certification and set the 
standards for certification by SBA. SBA anticipates that these changes 
would impact firms currently self-certifying; however, this impact 
would be minimal as this information is already held by applicants 
during the ordinary course of business and would require minimum 
preparation prior to submission.
    At this time, SBA does not have an OMB-approved method for 
collection but intends to have approval for the collection of 
information before the rule is finalized.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small

[[Page 40150]]

nonprofit enterprises, and small local governments. According to the 
Regulatory Flexibility Act (RFA), 5 U.S.C. 601, when an agency issues a 
rulemaking, it must prepare a regulatory flexibility analysis to 
address the impact of the rule on small entities. However, section 605 
of the RFA allows an agency to certify a rule, in lieu of preparing an 
analysis, if the rulemaking is not expected to have a significant 
economic impact on a substantial number of small entities. The RFA 
defines ``small entity'' to include ``small businesses,'' ``small 
organizations,'' and ``small governmental jurisdictions.'' This 
proposed rule concerns various aspects of SBA's contracting programs. 
As such, the rule relates to small business concerns, but would not 
affect ``small organizations'' or ``small governmental jurisdictions.'' 
SBA's contracting programs generally apply only to ``business 
concerns'' as defined by SBA regulations, in other words, to small 
businesses organized for profit. ``Small organizations'' or ``small 
governmental jurisdictions'' are non-profits or governmental entities 
and do not generally qualify as ``business concerns'' within the 
meaning of SBA's regulations.
    As stated in the regulatory impact analysis, this rulemaking will 
impact approximately 21,468 service-disabled veteran-owned small 
businesses. If adopted in final form, these businesses will have to 
apply to SBA for certification. However, SBA has proposed to minimize 
the impact on VO SBCs and SDVO SBCs by accepting verifications already 
received from VA's CVE program during the term of the firm's 
eligibility period, and by providing SDVO SBC firms that self-certify a 
one-year grace period to apply for certification. The additional costs 
to VO SBCs and SDVO SBCs for certification should be minimal, because 
the required documentation already exists and is maintained in the 
normal course of business: such as articles of incorporation, bylaws, 
stock ledgers or certificates, tax records, etc. In addition, 
applicants must already provide this information to VA's CVE for 
verification. SBA does not anticipate that these changes would impact 
the content of the information currently collected. Thus, the 
Administrator certifies that the rulemaking is not expected to have a 
significant economic impact on a substantial number of small entities.

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Individuals with 
disabilities, Loan programs--business, Small businesses.

13 CFR Part 125

    Government contracts, Government procurement, Reporting and 
recordkeeping requirements, Small businesses, Technical assistance.

13 CFR Part 128

    Government contracts, Government procurement, Reporting and 
recordkeeping requirements, Small businesses, Technical assistance, 
Veterans.

    For the reasons stated in the preamble, SBA proposes to amend 13 
CFR chapter I as follows:

PART 121--SMALL BUSINESS SIZE REGULATIONS

0
1. The authority citation for part 121 is revised to read as follows:

    Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, 694a(9), 
and 9012.


Sec.  121.103  [Amended]

0
2. Amend Sec.  121.103 by removing the references to ``Sec.  
125.18(b)(2) and (3)'' in paragraph (h)(1)(ii) and adding in their 
place a reference to ``Sec.  128.402(b)(2) and (3)''.


Sec.  121.404  [Amended]

0
3. Amend Sec.  121.404 by removing the reference to ``Sec.  
125.18(b)(2) and (3)'' in paragraph (d) and adding in its place a 
reference to ``Sec.  128.402(b)(2) and (3)''.

PART 125--GOVERNMENT CONTRACTING PROGRAMS

0
4. The authority citation for part 125 is revised to read as follows:

    Authority:  15 U.S.C. 632(p), (q), 634(b)(6), 637, 644, 657b, 
and 657r.

Subparts A through F [Removed]

0
5. Remove subparts A through F, consisting of Sec. Sec.  125.11 through 
125.100.
0
6. Add part 128 to read as follows:

PART 128--VETERANS CERTIFICATION PROGRAM

Subpart A--Provisions of General Applicability
Sec.
128.100 What is the purpose of this part?
128.101 What type of assistance is available under this part?
128.102 What definitions are important in the Veterans Certification 
Program?
Subpart B--Eligibility Requirements for the Veterans Certification 
Program
Sec.
128.200 What are the requirements a concern must meet to qualify as 
a VO SBC or SDVO SBC?
128.201 What other eligibility requirements apply for individuals or 
businesses?
128.202 Who does SBA consider to own a VO SBC or SDVO SBC?
128.203 Who does SBA consider to control a VO SBC or SDVO SBC?
128.204 What size standards apply to VO SBCs and SDVO SBCs?
Subpart C--Certification of VO SBC or SDVO SBC Status
Sec.
128.300 How is a concern certified as a VO SBC or SDVO SBC?
128.301 Where must an application be filed?
128.302 How does SBA process applications for certification?
128.303 What must a concern submit to apply for VO SBC or SDVO SBC 
certification?
128.304 Can an Applicant appeal SBA's initial decision to deny an 
application?
128.305 Can an Applicant or Participant reapply for certification?
128.306 What length of time may a business participate in SBA's 
Veterans Certification Program?
128.307 What are a Participant's ongoing obligations to SBA?
128.308 What is a certification examination and what will SBA 
examine?
128.309 What are the ways a business may exit certification status?
128.310 What are the procedures for decertification?
Subpart D--Federal Contract Assistance
Sec.
128.400 What are VO and SDVO contracts?
128.401 What requirements must a VO SBC or SDVO SBC meet to submit 
an offer on a contract?
128.402 May a joint venture submit an offer on a VO SBC or SDVO SBC 
requirement?
128.403 What requirements are not available for VO or SDVO 
contracts?
128.404 When may a contracting officer set aside a procurement for 
VO SBCs or SDVO SBCs?
128.405 When may a contracting officer award sole source contracts 
to VO SBCs and SDVO SBCs?
128.406 Are there VO or SDVO contracting opportunities at or below 
the simplified acquisition threshold?
128.407 May SBA appeal a contracting officer's decision not to make 
a procurement available for award as an SDVO contract?
128.408 What is the process for such an appeal?
Subpart E--Protests Concerning VO SBCs and SDVO SBCs
Sec.
128.500 What are the requirements for filing a VO SBC and SDVO SBC 
status protest?

[[Page 40151]]

Subpart F--Penalties and Retention of Records
Sec.
128.600 What are the requirements for representing VO SBC or SDVO 
SBC status, and what are the penalties for misrepresentation?
128.601 What must a concern do in order to be identified as a SDVO 
SBC in any Federal procurement databases?
Subpart G--Surplus Personal Property for Veteran-Owned Small Business 
Programs
Sec.
128.700 How does a small business concern owned and controlled by 
veterans obtain Federal surplus personal property?

    Authority: 15 U.S.C. 632(q), 634(b)(6), 644, 645, 657f, 657f-1.

Subpart A--Provisions of General Applicability


Sec.  128.100  What is the purpose of this part?

    Section 8127 of Title 38 within the U.S. Code (38 U.S.C. 8127) 
authorizes certain procurement mechanisms to provide Veteran-Owned 
Small Business Concerns (VO SBC) and Service-Disabled Veteran-Owned 
Small Business Concerns (SDVO SBC) with contracting assistance 
opportunities at the Department of Veterans Affairs (VA). Section 36 of 
the Small Business Act (15 U.S.C. 657f) authorizes certain procurement 
mechanisms to provide SDVO SBCs with contracting assistance 
opportunities across the Federal Government. In addition, sections 36 
and 36A of the Small Business Act (15 U.S.C. 657f,657f-1) authorize the 
Small Business Administration (SBA) to certify the status of VO and 
SDVO SBCs. This part implements these mechanisms and ensures that the 
program created, referred to as the Veterans Certification Program, is 
substantially related to this important congressional goal in 
accordance with applicable law.


Sec.  128.101  What type of assistance is available under this part?

    Contracting officers are authorized to restrict competition or 
award sole source contracts or orders to eligible Service-Disabled 
Veteran-Owned Small Businesses. In addition, 48 CFR chapter 8 
authorizes VA contracting officers to restrict competition or award 
sole source contracts or orders to eligible Veteran-Owned and Service-
Disabled Veteran-Owned Small Businesses.


Sec.  128.102  What definitions are important in the Veterans 
Certification Program?

    Applicant means a firm applying for inclusion in the certification 
database.
    Contracting officer has the meaning given such term in section 2101 
of the Office of Federal Procurement Policy Act (41 U.S.C. 2101).
    Day-to-day operations of a firm means the marketing, production, 
sales, and administrative functions of the firm.
    Eligible individual means a veteran, service-disabled veteran, or 
surviving spouse, as defined in the United States Code and this part.
    ESOP has the meaning given the term ``employee stock ownership 
plan'' in section 4975(e)(7) of the Internal Revenue Code of 1986 (26 
U.S.C. 4975(e)(7)).
    Extraordinary circumstances, for purposes of this part, are only 
the following:
    (1) Adding a new equity stakeholder;
    (2) Dissolution of the company;
    (3) Sale of the company;
    (4) The merger of the company; and
    (5) Company declaring bankruptcy.
    Interested party means the contracting activity's contracting 
officer, SBA, any concern that submits an offer for a specific sole 
source or set-aside VO or SDVO contract or order (including Multiple 
Award Contracts), or any concern that submitted an offer in full and 
open competition and its opportunity for award will be affected by a 
reserve of an award given to a VO or SDVO SBC.
    Joint venture is an association of two or more business concerns 
for which purpose they combine their efforts, property, money, skill, 
or knowledge in accordance with this part. A joint venture must be 
comprised of at least one service-disabled veteran-owned (or veteran-
owned as applicable) 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 charter, 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 certification.
    Participant means a veteran-owned or service-disabled veteran-owned 
small business concern that has certified status with SBA.
    Permanent caregiver, for purposes of this part, 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 the Department of Veterans Affairs' Veterans Benefits 
Administration, 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. 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. There may be no more 
than one permanent caregiver per service-disabled veteran with a 
permanent and severe disability.
    (1) A permanent caregiver may be appointed, in a number of ways, 
including:
    (i) By a court of competent jurisdiction;
    (ii) By the Department of Veterans Affairs, 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 law and the 
Secretary and may be revoked if the eligibility criteria do not 
continue to be met); or
    (iii) By a legal designation.
    (2) Any appointment of a permanent caregiver must in all cases be 
accompanied by a written determination from the Department of Veterans 
Affairs that the veteran has a permanent and total service-connected 
disability as set forth in 38 CFR 3.340 for purposes of receiving 
disability compensation or a disability pension. The appointment must 
also delineate why the permanent caregiver is given the appointment, 
must include the consent of the veteran to the appointment and how the 
appointment would contribute to managing the veteran's well-being.
    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 day-to-day day operations spend 
most working hours and where top management's current business records 
are kept. If the office from which management is directed and where the 
current business records are kept are in different locations, SBA will 
determine the principal place of business for program purposes.
    Service-connected has the meaning given that term in 38 U.S.C. 
101(16).

[[Page 40152]]

    Service-disabled veteran is a veteran who possesses either a valid 
disability rating letter issued by the Department of Veterans Affairs, 
establishing a service-connected rating between 0 and 100 percent, or a 
valid disability determination from the Department of Defense or is 
registered in the Beneficiary Identification and Records Locator 
Subsystem or successor system, maintained by Department of Veterans 
Affairs' Veterans Benefits Administration as a service-disabled 
veteran. Reservists or members of the National Guard disabled from a 
disease or injury incurred or aggravated in line of duty or while in 
training status also qualify.
    Service-disabled veteran with a permanent and severe disability 
means a veteran with a service-connected disability that has been 
determined by the Department of Veterans Affairs, in writing, to have a 
permanent and total service-connected disability as set forth in 38 CFR 
3.340 for purposes of receiving disability compensation or a disability 
pension.
    Small business concern means, at the time of qualification, a 
concern that, with its affiliates, meets the size standard 
corresponding to any NAICS code under which it currently conducts 
business activities, pursuant to part 121 of this chapter. At time of 
contract offer, a VO or SDVO SBC must be small within the size standard 
corresponding to the NAICS code assigned to the contract.
    Surviving spouse has the meaning given the term in 38 U.S.C. 
101(3).
    Unconditional ownership means ownership that is not subject to 
conditions precedent, conditions subsequent, executory agreements, 
voting trusts, restrictions on or assignments of voting rights, or 
other arrangements causing or potentially causing ownership benefits to 
go to another (other than after death or incapacity). The pledge or 
encumbrance of stock or other ownership interest as collateral, 
including seller-financed transactions, does not affect the 
unconditional nature of ownership if the terms follow normal commercial 
practices and the owner retains control absent violations of the terms.
    VA is the U.S. Department of Veterans Affairs.
    Veteran has the meaning given the term in 38 U.S.C. 101(2). A 
Reservist or member of the National Guard called to Federal active duty 
or disabled from a disease or injury incurred or aggravated in line of 
duty or while in training status also qualifies as a veteran.
    Veterans Affairs Acquisition Regulation (VAAR) is the set of rules 
that specifically govern requirements exclusive to VA prime and 
subcontracting actions. The VAAR, 48 CFR chapter 8, supplements the 
Federal Acquisition Regulation (FAR) in 48 CFR chapter 1, which 
contains guidance applicable to most Federal agencies.

Subpart B--Eligibility Requirements for the Veterans Certification 
Program


Sec.  128.200  What are the requirements a concern must meet to qualify 
as a VO SBC or SDVO SBC?

    (a) Qualification as a Veteran-Owned Small Business Concern. To 
qualify as a VO SBC, a business entity must be:
    (1) A small business concern under the size standard corresponding 
to any NAICS code under which it currently conducts business 
activities;
    (2) Not less than 51 percent of which is owned by one or more 
veterans or, in the case of any publicly owned business, not less than 
51 percent of the stock (not including any stock owned by an ESOP) of 
which is owned by one or more veterans; and
    (3) The management and daily business operations of which are 
controlled by one or more veterans.
    (b) Qualification as a Service-Disabled Veteran-Owned SBC. To 
qualify as an SDVO SBC, a business entity must be:
    (1) A small business concern under the size standard corresponding 
to any NAICS code under which it currently conducts business 
activities;
    (2) 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 (not including any 
stock owned by an ESOP) of which is owned by one or more service-
disabled veterans; and
    (3) 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 disability that is rated by the Secretary of Veterans 
Affairs as a permanent and total disability who are unable to manage 
the daily business operations of such concern, the spouse or permanent 
caregiver of such veteran.
    (c) Veteran-Owned SBC and Service-Disabled Veteran-Owned SBC 
certifications. (1) A concern must be certified as a VO or SDVO SBC 
pursuant to Sec.  128.300 in order to be awarded a VO or SDVO set-aside 
or sole source contract.
    (2) Other small business concerns that do not seek SDVO set-aside 
or sole source contracts may continue to self-certify their status, 
receive prime contract or subcontract awards outside the programs, and 
count toward an agency's goal for awards.


Sec.  128.201  What other eligibility requirements apply for 
individuals or businesses?

    (a) Suspension and debarment. In order to be eligible for VO or 
SDVO SBC certification and to remain certified, the concern and any of 
its owners must not have an active exclusion in the System for Award 
Management at the time of application or recertification or at any time 
during the concern's period of eligibility. If, after certifying the 
Participant's eligibility, SBA discovers that a firm has an active 
exclusion, SBA will remove the Participant from the certification 
database immediately, notwithstanding the provisions of Sec.  128.308.
    (b) Good character. Individuals having an ownership or control 
interest in certified businesses must have good character. If, after 
certifying a Participant's eligibility, the person(s) controlling the 
Participant is found to lack good character, SBA will immediately 
terminate the Participant's certification, notwithstanding the 
provisions of Sec.  128.310.
    (c) False statements. If, during the processing of an application, 
SBA determines, by a preponderance of the evidence standard, that an 
Applicant has knowingly submitted false information, regardless of 
whether correct information would cause SBA to deny the application, 
and regardless of whether correct information was given to SBA in 
accompanying documents, SBA will deny the application. If, after 
certifying the Participant's eligibility, SBA discovers that false 
statements or information have been submitted by a firm, SBA will 
remove the Participant from the certification database immediately, 
notwithstanding the provisions of Sec.  128.310. Whenever SBA 
determines that the Applicant submitted false information, the matter 
will be referred to the SBA Office of Inspector General for review. In 
addition, SBA may request that debarment proceedings be initiated by 
the agency.
    (d) Financial obligations. Neither an Applicant firm nor any of its 
eligible individuals that fail to pay significant financial 
obligations, including unresolved tax liens and defaults on Federal 
loans, other government-assisted financing, owed to the Federal 
Government is eligible for certification. However, a firm will not be 
ineligible to participate in the Veterans Certification Program if the 
firm or the affected principals can demonstrate that the financial 
obligations owed have been settled, discharged, or forgiven by the 
Federal Government. If after certifying the Participant's eligibility 
SBA discovers that the Participant no longer

[[Page 40153]]

satisfies this requirement, SBA will remove the Participant from the 
certification database in accordance with Sec.  128.310.
    (e) Protest decisions or other negative findings. Any firm verified 
in the certification database that is found to be ineligible by a VO or 
SDVO status protest decision will be immediately removed from the 
certification database, notwithstanding the provisions of Sec.  
128.310. Any firm certified in the certification database that is found 
to be ineligible due to an SBA protest decision or other negative 
finding may be immediately removed from the certification database, 
notwithstanding the provisions of Sec.  128.310. Until such time as SBA 
receives official notification that the decision is overturned on 
appeal or the firm applies for and receives certified status from SBA, 
the firm will not be eligible to participate in the Veterans 
Certification Program.
    (f) System for Award Management (SAM) registration. All Applicants 
and Participants must be registered in SAM at https://www.sam.gov, or 
successor system, prior to application submission.


Sec.  128.202  Who does SBA consider to own a VO SBC or SDVO SBC?

    Generally, a concern must be at least 51% unconditionally and 
directly owned by one or more veterans, or in the case of an SDVO SBC, 
service-disabled veterans. More specifically:
    (a) Ownership must be direct. Ownership by one or more veterans, or 
in the case of an SDVO SBC, service-disabled veterans, must be direct 
ownership. A concern owned principally by another business entity that 
is in turn owned and controlled by one or more veterans or service-
disabled veterans does not meet the requirement in this paragraph (a). 
Ownership by a trust, such as a living trust, may be treated as the 
functional equivalent of ownership by veterans or service-disabled 
veterans where the trust is revocable, and veterans or service-disabled 
veterans, respectively, are the grantors, trustees, and the current 
beneficiaries of the trust.
    (b) Ownership of a partnership. In the case of a concern which is a 
partnership, at least 51% of aggregate voting interest must be 
unconditionally owned by one or more veterans, or in the case of an 
SDVO SBC, service-disabled veterans. The ownership must be reflected in 
the concern's partnership agreement.
    (c) Ownership of a limited liability company. In the case of a 
concern which is a limited liability company, at least 51% of each 
class of member interest must be unconditionally owned by one or more 
veterans, or in the case of an SDVO SBC, service-disabled veterans.
    (d) Ownership of a corporation. In the case of a concern which is a 
corporation, at least 51% of the aggregate of all stock outstanding and 
at least 51% of each class of voting stock outstanding must be 
unconditionally owned by one or more veterans, or in the case of an 
SDVO SBC, service-disabled veterans. In the case of a publicly-owned 
business, not less than 51 percent of the stock (not including any 
stock owned by an ESOP) must be unconditionally owned by one or more 
veterans.
    (e) Stock options' effect on ownership. In determining 
unconditional ownership, SBA will disregard any unexercised stock 
options or similar agreements held by veterans, or in the case of an 
SDVO SBC, service-disabled veterans. However, any unexercised stock 
options or similar agreements (including rights to convert non-voting 
stock or debentures into voting stock) held by non-veterans or non-
service-disabled veterans, in the case of an SDVO SBC, will be treated 
as exercised, except for any ownership interests which are held by 
investment companies licensed under 15 U.S.C. 681 et seq.
    (f) Change of ownership. A concern may change its ownership or 
business structure so long as one or more veterans, or in the case of 
an SDVO SBC, service-disabled veterans own and control it after the 
change. A concern must notify SBA of a change of ownership in 
accordance with Sec.  128.307 and attest to continued eligibility.
    (g) Dividends and distributions. One or more veterans or, in the 
case of an SDVO SBC, service-disabled veterans must be entitled to 
receive:
    (1) At least 51 percent of the annual distribution of profits paid 
to the owners of a corporation, partnership, or limited liability 
company concern;
    (2) 100 percent of the value of each share of stock owned by them 
in the event that the stock or member interest is sold;
    (3) At least 51 percent of the retained earnings of the concern and 
100 percent of the unencumbered value of each share of stock or member 
interest owned in the event of dissolution of the corporation, 
partnership, or limited liability company; and
    (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.
    (h) Community property. Ownership will be determined without regard 
to community property laws.
    (i) Surviving spouse. (1) A small business concern owned and 
controlled by one or more service-disabled veterans immediately prior 
to the death of a service-disabled veteran who was the owner of the 
concern, the death of whom causes the concern to be less than 51 
percent owned by one or more service-disabled veterans, will continue 
to qualify as a small business concern owned and controlled by service-
disabled veterans during the time period specified in paragraph (i)(2) 
of this section if:
    (i) The surviving spouse of the deceased veteran acquires such 
veteran's ownership interest in such concern;
    (ii) Such veteran had a service-connected disability (as defined in 
38 U.S.C. 101(16)); and
    (iii) For a Participant, immediately prior to the death of such 
veteran, and during the period described in paragraph (i)(2) of this 
section, the small business concern is included in the certification 
database.
    (2) The time period described in paragraph (i)(1)(iii) of this 
section is the time period beginning on the date of the veteran's death 
and ending on the earlier of--
    (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) In the case of a surviving spouse of a veteran with a 
service-connected disability rated as 100 percent disabling or who dies 
as a result of a service-connected disability, is 10 years after the 
date of the death of the veteran; or
    (iv) In the case of a surviving spouse of a veteran with a service-
connected disability rated as less than 100 percent disabling who does 
not die as a result of a service-connected disability, is 3 years after 
the date of the death of the veteran.


Sec.  128.203  Who does SBA consider to control a VO or SDVO SBC?

    (a) General. To be an eligible VO SBC, the management and daily 
business operations of the concern must be controlled by one or more 
veterans. To be an eligible SDVO SBC, the management and daily business 
operations of the concern must be controlled by one or more service-
disabled veterans (or in the case of a veteran with permanent and 
severe disability, the spouse or permanent caregiver of such veteran). 
Control by one or more veterans, or in the case of

[[Page 40154]]

an SDVO SBC, service-disabled veterans, means that both the long-term 
decision-making and the day-to-day management and administration of the 
business operations must be conducted by one or more veterans or 
service-disabled veterans (or in the case of a veteran with permanent 
and severe disability, the spouse or permanent caregiver of such 
veteran).
    (b) Managerial position and experience. A veteran, or in the case 
of an SDVO SBC, a service-disabled veteran (or in the case of a 
service-disabled veteran with permanent and severe disability, the 
spouse or permanent caregiver of such veteran) must hold the highest 
officer position in the concern (usually President or Chief Executive 
Officer (CEO)) and must have managerial experience of the extent and 
complexity needed to run the concern. The veteran or service-disabled 
veteran manager (or in the case of a veteran with permanent and severe 
disability, the spouse or permanent caregiver of such veteran) need not 
have the technical expertise or possess the required license to be 
found to control the concern if the veteran or service-disabled veteran 
can demonstrate that he or she has ultimate managerial and supervisory 
control over those who possess the required licenses or technical 
expertise.
    (c) Control over a partnership. In the case of a partnership, one 
or more veterans, or in the case of an SDVO SBC, service-disabled 
veterans (or in the case of a veteran with permanent and severe 
disability, the spouse or permanent caregiver of such veteran) must 
serve as general partners, with control over all partnership decisions.
    (d) Control over a limited liability company. In the case of a 
limited liability company, one or more veterans, or in the case of an 
SDVO SBC, service-disabled veterans (or in the case of a veteran with 
permanent or severe disability, the spouse or permanent caregiver of 
such veteran) must serve as management members, with control over all 
decisions of the limited liability company.
    (e) Control over a corporation. One or more veterans, or in the 
case of an SDVO SBC, service-disabled veterans (or in the case of a 
veteran with permanent and severe disability, the spouse or permanent 
caregiver of such veteran) must control the Board of Directors of the 
concern.
    (1) SBA will deem veteran or service-disabled veteran individuals 
to control the Board of Directors where:
    (i) A single veteran or service-disabled veteran individual owns 
100% of all voting stock of an Applicant or concern;
    (ii) A single veteran or service-disabled veteran individual owns 
at least 51% of all voting stock of an Applicant or concern, the 
individual is on the Board of Directors and no super majority voting 
requirements exist for shareholders to approve corporation actions. 
Where super majority voting requirements are provided for in the 
concern's articles of incorporation, its by-laws, or by state law, the 
veteran or service-disabled veteran individual must own at least the 
percent of the voting stock needed to overcome any such super majority 
voting requirements; or
    (iii) More than one veteran, or in the case of an SDVO SBC, 
service-disabled veteran shareholder seeks to qualify the concern 
(i.e., no one individual owns 51%), each such individual is on the 
Board of Directors, together they own at least 51% of all voting stock 
of the concern, no super majority voting requirements exist, and the 
veteran or service-disabled veteran shareholders can demonstrate that 
they have made enforceable arrangements to permit one of them to vote 
the stock of all as a block without a shareholder meeting. Where the 
concern has super majority voting requirements, the veteran or service-
disabled veteran shareholders must own at least that percentage of 
voting stock needed to overcome any such super majority ownership 
requirements. In the case of super majority ownership requirements 
where there is more than one eligible individual, the veteran or 
service-disabled veteran shareholders can demonstrate that they have 
made enforceable arrangements to permit one of them to vote the stock 
of all as a block without a shareholder meeting.
    (2) Where an Applicant or concern does not meet the requirements 
set forth in paragraph (e)(1) of this section, the veteran or service-
disabled veteran individual(s) upon whom eligibility is based must 
control the Board of Directors through actual numbers of voting 
directors or, where permitted by state law, through weighted voting 
(e.g., in a concern having a two-person Board of Directors where one 
individual on the Board is a veteran or service-disabled veteran and 
one is not, the veteran or service-disabled veteran vote must be 
weighted--worth more than one vote--in order for the concern to be 
eligible). Where a concern seeks to comply with this paragraph (e)(2):
    (i) Provisions for the establishment of a quorum cannot permit non-
veteran or, in the case of an SDVO SBC, non-service-disabled veteran 
Directors to control the Board of Directors, directly or indirectly; 
and
    (ii) Any Executive Committee of Directors must be controlled by 
veteran or, in the case of an SDVO SBC, service-disabled veteran 
directors unless the Executive Committee can only make recommendations 
to and cannot independently exercise the authority of the Board of 
Directors.
    (3) Non-voting, advisory, or honorary Directors may be appointed 
without affecting veteran or service-disabled veteran individuals' 
control of the Board of Directors.
    (4) Arrangements regarding the structure and voting rights of the 
Board of Directors must comply with applicable state law.
    (f) Super majority requirements. One or more veteran or, in the 
case of an SDVO SBC, service-disabled veterans must meet all super 
majority voting requirements, regardless of legal structure of the 
Applicant firm. An Applicant must inform the SBA, when applicable, of 
any super majority voting requirements provided for in its articles of 
incorporation, its by-laws, by state law, or otherwise. Similarly, 
after being certified, a Participant must inform the SBA of changes 
regarding super majority voting requirements.
    (g) Licenses. A firm must obtain and keep current any and all 
required permits, licenses, and charters, required to operate the 
business.
    (h) Unexercised rights. A veteran or, in the case of an SDVO SBC, 
service-disabled veteran owner's unexercised right to cause a change in 
the control or management of the Applicant concern does not in itself 
constitute control and management, regardless of how quickly or easily 
the right could be exercised.
    (i) Control by non-veterans or non-service-disabled veterans. Non-
veteran, or in the case of an SDVO SBC, non-service-disabled veteran 
individuals or entities may not control the firm. There is a rebuttable 
presumption that non-veteran or, in the case of an SDVO SBC, non-
service-disabled veteran individuals or entities control or have the 
power to control a firm in any of the following circumstances, which 
are illustrative only and not inclusive:
    (1) The non-veteran or, in the case of an SDVO SBC, non-service-
disabled veteran individual or entity who is involved in the management 
or ownership of the firm is a current or former employer or a principal 
of a current or former employer of any veteran, in the case of an SDVO 
SBC, service-disabled veteran individual upon whom the firm's 
eligibility is based. However, a firm may provide evidence to 
demonstrate that the relationship does not give the non-veteran or non-
service-disabled veteran

[[Page 40155]]

actual control over the concern and such relationship is in the best 
interests of the concern.
    (2) One or more non-veterans or, in the case of an SDVO SBC, non-
service-disabled veterans receive compensation from the firm in any 
form as directors, officers, or employees, including dividends, that 
exceeds the compensation to be received by the highest-ranking officer 
(usually CEO or President). The highest-ranking officer may elect to 
take a lower amount than the total compensation and distribution of 
profits that are received by a non-veteran or, in the case of an SDVO 
SBC, non-service-disabled veteran only upon demonstrating that it helps 
the concern.
    (3) In circumstances where the concern is co-located with another 
firm in the same or similar line of business, and that firm or an 
owner, director, officer, or manager, or a direct relative of an owner, 
director, officer, or manager of that firm owns an equity interest in 
the concern.
    (4) In circumstances where the concern shares employees, resources, 
equipment, or any type of services, whether by oral or written 
agreement with another firm in the same or similar line of business, 
and that firm or an owner, director, officer, or manager, or a direct 
relative of an owner, director, officer, or manager of that firm owns 
an equity interest in the concern.
    (5) A non-veteran or, in the case of an SDVO SBC, non-service-
disabled veteran individual or entity, having an equity interest in the 
concern, provides critical financial or bonding support.
    (6) In circumstances where a critical license is held by a non-
veteran or, in the case of an SDVO SBC, non-service-disabled 
individual, or other entity, the non-veteran or non-service-disabled 
individual or entity may be found to control the firm. A critical 
license is considered any license that would normally be required of 
firms operating in the same field or industry, regardless of whether a 
specific license is required on a specific contract.
    (7) Business relationships exist with non-veteran or, in the case 
of an SDVO SBC, non-service-disabled veteran individuals or entities 
which cause such dependence that the Applicant or concern cannot 
exercise independent business judgment without great economic risk.
    (j) Critical financing. A non-veteran or, in the case of an SDVO 
SBC, non-service-disabled veteran individual or entity may be found to 
control the concern through loan arrangements with the concern or the 
veteran(s)/service-disabled veteran(s). Providing a loan or a loan 
guaranty on commercially reasonable terms does not, by itself, give a 
non-veteran or non-service-disabled veteran individual or entity the 
power to control a firm, but when taken into consideration with other 
factors may be used to find that a non-veteran or, in the case of an 
SDVO SBC, non-service-disabled veteran firm or individual controls the 
concern.
    (k) Normal business hours. There is a rebuttable presumption that a 
veteran or, in the case of an SDVO SBC, service-disabled veteran does 
not control the firm when the veteran or, in the case of an SDVO SBC, 
service-disabled veteran is not able to work for the firm during the 
normal working hours that businesses in that industry normally work. 
This may include, but is not limited to, other full-time or part-time 
employment, being a full-time or part-time student, or any other 
activity or obligation that prevents the veteran or, in the case of an 
SDVO SBC, service-disabled veteran from actively working for the firm 
during normal business operating hours.
    (l) Close proximity. There is rebuttable presumption that a veteran 
or, in the case of an SDVO SBC, service-disabled veteran does not 
control the firm if that individual is not located within a reasonable 
commute to firm's headquarters and/or job-sites locations, regardless 
of the firm's industry. The veteran or, in the case of an SDVO SBC, 
service-disabled veteran's ability to answer emails, communicate by 
telephone, or to communicate at a distance by other technological 
means, while delegating the responsibility of managing the concern to 
others is not by itself a reasonable rebuttal.
    (m) Exception for ``extraordinary circumstances.'' SBA will not 
find that a lack of control exists where a veteran or, in the case of 
an SDVO SBC, service-disabled veteran does not have the unilateral 
power and authority to make decisions in ``extraordinary 
circumstances.'' The only circumstances in which the exception in this 
paragraph (m) applies are those articulated in the definition of the 
term in Sec.  128.102.
    (n) Exception for active duty. Notwithstanding the provisions of 
this section requiring a veteran or, in the case of an SDVO SBC, 
service-disabled veteran to control the daily business operations and 
long-term strategic planning of a concern, where a veteran or, in the 
case of an SDVO SBC, service-disabled veteran individual upon whom 
eligibility is based is a reserve component member in the United States 
military who has been called to active duty, the concern may elect to 
designate in writing one or more individuals to control the concern on 
behalf of the veteran or, in the case of an SDVO SBC, service-disabled 
veteran during the period of active duty. The concern will not be 
considered ineligible based on the absence of the veteran or service-
disabled veteran during the period of active duty. The concern must 
keep records evidencing the active duty and the written designation of 
control and provide those documents to SBA.


Sec.  128.204  What size standards apply to VO SBCs and SDVO SBCs?

    (a) At time of contract offer, a VO or SDVO SBC must be small 
within the size standard corresponding to the NAICS code assigned to 
the contract.
    (b) If the contracting officer is unable to verify that the VO or 
SDVO SBC is small, the concern shall be referred to the responsible SBA 
Government Contracting Area Director for a formal size determination in 
accordance with part 121 of this chapter.

Subpart C--Certification of VO SBC or SDVO SBC Status


Sec.  128.300  How is a concern certified as a VO SBC or SDVO SBC?

    (a) A small business concern must be unconditionally owned and 
controlled by one or more eligible veterans, in the case of an SDVO 
SBC, service-disabled veterans or surviving spouses, have completed the 
online application forms, submitted required supplemental documentation 
to SBA, and have been examined by SBA.
    (b) A certified Participant in SBA's 8(a) Business Development (BD) 
Program that is owned and controlled by one or more veterans, or in the 
case of SDVO SBC, service-disabled veterans. The eligible individual(s) 
for both designations must be the same individual(s) to receive 
expedited review.
    (c) A certified Participant in SBA's Women Owned Small Business 
(WOSB) or Economically Disadvantaged WOSB (EDWOSB) Program that is 
owned and controlled by one or more veterans, or in the case of SDVO 
SBC, service-disabled veterans. The eligible individual(s) for both 
designations must be the same individual(s) to receive expedited 
review.


Sec.  128.301  Where must an application be filed?

    An application for certification must be electronically filed in 
the database located on SBA's web portal. 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

[[Page 40156]]

estimated processing time and other information.


Sec.  128.302  How does SBA process applications for certification?

    (a) SBA's Director of Government Contracting (D/GC) or designee is 
authorized to approve or deny applications for certification. SBA will 
receive, review, and examine all certification applications.
    (b) SBA, in its sole discretion, may request clarification of 
information relating to eligibility at any time in the eligibility 
determination process. SBA will take into account any clarifications 
made by an Applicant in response to a request for such SBA.
    (c) SBA, 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 or administrative removal.
    (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 Sec.  128.304(a). The 
Applicant bears the burden to establish its status as a VO SBC or SDVO 
SBC.
    (e) Changed circumstances for an Applicant occurring subsequent to 
its application and which affect eligibility will be considered and may 
constitute grounds for denial of the application. The Applicant must 
inform SBA of any changed circumstances that could affect its 
eligibility for the program (e.g., ownership, control changes, or 
bankruptcy filing) during its application review and may withdraw their 
application at that time. The D/GC may propose decertification for any 
VO SBC or SDVO SBC that failed to inform SBA of any changed 
circumstances that affected its eligibility for the program during the 
processing of the application.
    (f) The decision of the D/GC to approve or deny an application will 
be in writing. A decision to deny certification status will state the 
specific reasons for denial and will inform the Applicant of any appeal 
rights.
    (g) If the D/GC approves the application, the date of the approval 
letter is the date of Participant certification for purposes of 
determining the Participant's certification term of eligibility. For 
approvals contingent on reciprocity due to participation in SBA's other 
certification programs (e.g., WOSB or 8(a)), the approval letter will 
contain a date for the Vets Program certification which aligns with the 
remaining time in the other program(s) in which the Applicant is 
participating.
    (h) The decision may be sent by mail, commercial carrier, or other 
electronic means. It is the responsibility of the Applicant to ensure 
all contact information is current in the Applicant's profile.


Sec.  128.303  What must a concern submit to apply for VO SBC or SDVO 
SBC certification?

    (a) To be certified by SBA as a VO or SDVO SBC, a concern must 
provide documents and information demonstrating that it is owned and 
controlled by one or more veterans or, in the case of an SDVO SBC, 
service-disabled veterans and qualifies as a small business concern as 
defined in part 121 of this chapter under the size standard 
corresponding to any NAICS code under which it currently conducts 
business activities. SBA maintains a list of the minimum required 
documents that can be found on SBA's website. A concern may submit 
additional documents and information to support its eligibility. The 
required documents must be provided to SBA during the application 
process electronically. This may include, but is not limited to, 
corporate records, business and personal financial records, including 
copies of Federal personal and business tax returns as filed with the 
Internal Revenue Service, and individual and business banking 
information. From the time the Applicant submits the application, 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, SBA for use in certification examinations.
    (b) A small business concern that is certified by the 8(a) BD 
Program and the individual(s) on whom 8(a) BD Program eligibility is 
based is one or more veterans, or service-disabled veterans in the case 
of an SDVO SBC, may use documentation of its most recent annual review, 
or documentation of its 8(a) acceptance if it has not yet had an annual 
review, in support of its application for certification. An Applicant 
must certify that there are no material changes in its ownership or 
control since its 8(a) certification or annual review and demonstrate 
that the individuals who own and control it are veterans or, in the 
case of an SDVO SBC, service-disabled veterans.
    (c) A small business concern that is certified by the WOSB/EDWOSB 
Program and the individual(s) on whom WOSB/EDWOSB Program eligibility 
is based is one or more veterans, or service-disabled veterans in the 
case of an SDVO SBC, may use documentation of its most recent annual 
recertification, or documentation of its acceptance in support of its 
application for certification. An Applicant must certify that there are 
no material changes in its ownership or control since its WOSB 
certification or recertification and demonstrate that the individuals 
who own and control it are veterans or, in the case of an SDVO SBC, 
service-disabled veterans.
    (d) If a concern was decertified or previously denied certification 
within the past 3 years, it must include with its application for 
certification a full explanation of why it was decertified or denied 
certification, and what, if any, changes have been made. If SBA is not 
satisfied with the explanation provided, SBA will decline to certify 
the concern.
    (e) If the concern was decertified for failure to notify SBA of a 
material change affecting its eligibility pursuant to Sec.  128.307, it 
must include with its application for certification a full explanation 
of why it failed to notify SBA of the material change. If SBA is not 
satisfied with the explanation provided, SBA will decline to certify 
the concern.


Sec.  128.304  Can an Applicant appeal SBA's initial decision to deny 
an application?

    (a) An Applicant may appeal SBA's decision to deny an application 
by filing an appeal with the SBA's Office of Hearings and Appeals (OHA) 
after the Applicant receives the denial in accordance with part 134 of 
this chapter. The filing party bears the risk that the delivery method 
chosen will not result in timely receipt by OHA.
    (b) The decision may be sent by mail, commercial carrier, or other 
electronic means.


Sec.  128.305  Can an Applicant or Participant reapply for 
certification?

    (a) Once an application, an appeal of a denial of an application, 
or an appeal of a certified status decertification has been denied, or 
a certified status decertification which was not appealed has been 
issued, the Applicant or Participant shall be required to wait for a 
period of 90 calendar days before a new application will be processed 
by SBA.
    (b) Participants may recertify within 120 calendar days 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

[[Page 40157]]

certification database. An Applicant removed pursuant to this section 
may appeal the decision to OHA in accordance with Sec.  128.304. The 
date of a new determination letter certifying an Applicant will be the 
beginning of the next 3-year eligibility period.


Sec.  128.306  What length of time may a business participate in SBA's 
Veterans Certification Program?

    (a) A Participant receives an eligibility term of 3 years from the 
date of SBA's approval letter establishing certified status. There is 
no limitation on the number of times a business may recertify to 
continue eligibility past an initial 3-year term.
    (b) The Participant must maintain its eligibility during its tenure 
and must inform SBA of any changes that may affect its eligibility 
within 30 calendar days in accordance with Sec.  128.307.
    (c) The eligibility term may be shortened by removal pursuant to 
Sec.  128.201, recertification pursuant to Sec.  128.305(b), failure to 
maintain certification pursuant to Sec.  138.307, voluntary withdrawal 
by the Participant pursuant to Sec.  128.309, decertification pursuant 
to Sec.  128.310, or an adverse status protest pursuant to part 134 of 
this chapter.
    (d) SBA may initiate a certification examination whenever it 
receives credible information concerning a Participant's eligibility as 
a VO or SDVO SBC. Upon its completion of the examination, SBA will 
issue a written decision regarding the continued eligibility status of 
the questioned Participant.
    (1) If SBA finds that the Participant does not qualify as a VO or 
SDVO SBC, the procedures at Sec.  128.310 will apply, except as 
provided in Sec.  128.201.
    (2) If SBA finds that the Participant continues to qualify as a VO 
or SDVO SBC, the original eligibility period remains in effect.


Sec.  128.307  What are a Participant's ongoing obligations to SBA?

    Once certified, a VO SBC or SDVO SBC must notify SBA of any 
material changes that could affect its eligibility within 30 calendar 
days of any such change and attest to continued eligibility. Material 
changes include, but are not limited to, a change in the ownership, 
business structure, management, or bankruptcy. The notification must be 
in writing and must be uploaded into the concern's profile with SBA. 
The method for notifying SBA can be found on SBA's web page. A 
concern's failure to notify SBA of such a material change may result in 
a certification examination as described in Sec.  128.308, and/or 
decertification and removal from the certification database for the 
program (or any successor system) as a designated certified VO SBC or 
SDVO SBC. In addition, SBA may seek the imposition of penalties under 
Sec.  128.600.


Sec.  128.308  What is a certification examination and what will SBA 
examine?

    (a) General. A certification examination is an investigation by SBA 
officials, which verifies the accuracy of any statement or information 
provided by a certified Participant. Thus, examiners may verify that 
the Participant currently meets the eligibility requirements of this 
part, 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 in this part.
    (b) Scope of examination. SBA may conduct the examination at one or 
all of the Participant's offices or work sites. SBA will determine the 
location(s) of the examination. SBA may review any information related 
to the concern's eligibility requirements under this part including, 
but not limited to, documentation related to the legal structure, 
ownership, and control. Examiners may review any or all of the 
organizing documents, financial documents, and publicly available 
information as well as any information identified in Sec.  128.303.


Sec.  128.309  What are the ways a business may exit certification 
status?

    A Participant may:
    (a) Voluntarily decertify its status by submitting a written 
request to SBA requesting that the concern be removed from public 
listing in the certification database; or
    (b) Delete its record entirely from the certification database; or
    (c) SBA may remove a Participant immediately pursuant to Sec.  
128.201; or
    (d) SBA may remove a Participant from public listing in the 
certification database for good cause upon formal notice to the 
Participant in accordance with Sec.  128.310. Examples of good cause 
include, but are not limited to, the following:
    (1) Submission of false information in the Participant's 
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 SBA the extent to which 
non-veteran or, in the case of an SDVO SBC, non-service-disabled 
veteran persons or firms participate in the management of the 
Participant.
    (5) Failure to make required submissions or responses to SBA or its 
agents, including a failure to make available financial statements, 
requested tax returns, reports, information requested by SBA or SBA's 
Office of Inspector General, or other requested information or data 
within 30 calendar days of the date of request.
    (6) Cessation of the Participant's business operations.
    (7) Failure by the concern to provide SBA notification within 30 
calendar days of any change in ownership.
    (8) Failure to inform SBA of any such changed circumstances, as 
outlined in Sec.  128.307.
    (9) Failure by the concern to obtain and keep current any and all 
required permits, licenses, and charters, including suspension or 
revocation of any professional license required to operate the 
business.
    (10) SBA will decertify a concern found to be ineligible during a 
status protest.
    (e) The examples of good cause listed in paragraph (d) of this 
section are intended to be illustrative only. Other grounds for 
decertifying a Participant include any other cause of so serious or 
compelling a nature that it affects the present responsibility of the 
Participant.


Sec.  128.310  What are the procedures for decertification?

    (a) General. When SBA believes that a Participant's certified 
status should be cancelled prior to the expiration of its eligibility 
term, SBA will notify the Participant in writing. The Notice of 
Proposed Decertification Letter will set forth the specific facts and 
reasons for SBA's findings and will notify the Participant that it has 
30 calendar days from the date SBA sent the notice to submit a written 
response to SBA explaining why the proposed ground(s) should not 
justify decertification.
    (b) Recommendation and decision. Following the 30-day response 
period, the D/GC will consider any information submitted by the 
Participant. Upon determining that decertification is not warranted, 
the D/GC will notify the Participant in writing. If decertification 
appears warranted, the D/GC will determine whether to cancel the 
Participant's certified status.

[[Page 40158]]

    (c) Notice requirements. Upon deciding that decertification is 
warranted, the D/GC will issue a Notice of Certified Status 
Decertification. The Notice will set forth the specific facts and 
reasons for the decision and will advise the concern that it may re-
apply after it has met all eligibility criteria in this part and 
completed the waiting period as set forth in Sec.  128.305(a).
    (d) Effect of decertification. After the effective date of 
decertification, a Participant is no longer eligible to appear as 
``certified'' in the certification database. However, such concern is 
obligated to perform previously awarded contracts to the completion of 
their existing term of performance.
    (e) Appeals. A Participant may file an appeal with OHA concerning 
the Notice of Certified Status Decertification decision in accordance 
with part 134 of this chapter. The decision on the appeal shall be 
final.

Subpart D--Federal Contract Assistance


Sec.  128.400  What are VO and SDVO contracts?

    (a) For VA procurements, the VAAR specifically governs requirements 
exclusive to VA prime and subcontracting actions. The VAAR, 48 CFR 
chapter 8, supplements the Federal Acquisition Regulation (FAR), which 
contains guidance applicable to most Federal agencies.
    (b) For all other SDVO contracts, including Multiple Award 
Contracts (see Sec.  125.1 of this chapter), such are available to an 
SDVO SBC through any of the following procurement methods:
    (1) Sole source awards to an SDVO SBC;
    (2) Set-aside awards, including partial set-asides, based on 
competition restricted to SDVO SBCs;
    (3) Awards based on a reserve for SDVO SBCs in a solicitation for a 
Multiple Award Contract (see Sec.  125.1 of this chapter); or
    (4) Orders set aside for SDVO SBCs against a Multiple Award 
Contract, which had been awarded in full and open competition.


Sec.  128.401  What requirements must a VO SBC or SDVO SBC meet to 
submit an offer on a contract?

    (a) General. (1) In order for a concern to submit an offer and be 
eligible for the award of a VO or SDVO set-aside or sole source 
contract, the concern must qualify as a small business concern under 
the size standard corresponding to the NAICS code(s) assigned to the 
contract and be a certified VO SBC or SDVO SBC, or represent that it 
has submitted a complete application for VO SBC or SDVO SBC 
certification to SBA and has not received a negative eligibility 
determination regarding that application.
    (2) If a concern is not certified by SBA at the time of offer, the 
concern must represent to the contracting officer for the particular 
contract that it has submitted a complete application to SBA for VO SBC 
or SDVO SBC certification.
    (i) If a concern becomes the apparent successful offeror while its 
application for VO or SDVO SBC certification is pending, the 
contracting officer for the particular contract must immediately inform 
SBA's D/GC. SBA will then prioritize the concern's VO or SDVO SBC 
application and make a determination regarding the firm's status within 
15 calendar days from the date that SBA received the contracting 
officer's notification.
    (ii) If the contracting officer does not receive an SBA 
determination within 15 calendar days after the SBA's receipt of the 
notification, the contracting officer may presume that the apparently 
successful offeror is not an eligible VO SBC or SDVO SBC and may award 
the subject contract accordingly to the next highest evaluated offeror, 
unless the contracting officer grants SBA an extension to the 15-day 
response period.
    (b) Joint ventures. A business concern seeking a VO SBC or SDVO SBC 
contract as a joint venture may submit an offer if the joint venture 
meets the requirements as set forth in Sec.  128.402.
    (c) Non-manufacturers. A certified VO SBC or SDVO SBC which is a 
non-manufacturer may submit an offer on a VO or SDVO contract for 
supplies if it meets the requirements of the non-manufacturer rule set 
forth at Sec.  121.406(b)(1) of this chapter.
    (d) Multiple Award Contracts--(1) VO or SDVO status. With respect 
to Multiple Award Contracts, orders issued against a Multiple Award 
Contract, and Blanket Purchase Agreements issued against a Multiple 
Award Contract:
    (i) SBA determines VO or SDVO small business eligibility for the 
underlying Multiple Award Contract as of the date a business concern 
certifies its status as a certified VO or SDVO small business concern 
as part of its initial offer (or other formal response to a 
solicitation), which includes price, unless the firm was required to 
recertify under paragraph (e) of this section.
    (A) Unrestricted Multiple Award Contracts or set-aside Multiple 
Award Contracts for other than VO or SDVO. For an unrestricted Multiple 
Award Contract or other Multiple Award Contract not specifically set 
aside for VO or SDVO small business concerns, if a business concern is 
a certified as a VO or SDVO small business concern at the time of offer 
and contract-level recertification for the Multiple Award Contract, it 
is a VO or SDVO small business concern for goaling purposes for each 
order issued against the contract, unless a contracting officer 
requests recertification as a VO or SDVO small business for a specific 
order or Blanket Purchase Agreement. Except for orders and Blanket 
Purchase Agreements issued under any Federal Supply Schedule contract, 
if an order or a Blanket Purchase Agreement under an unrestricted 
Multiple Award Contract is set aside exclusively for VO or SDVO small 
business concerns, a concern must recertify that it qualifies as a VO 
or SDVO small business concern at the time it submits its initial 
offer, which includes price, for the particular order or Blanket 
Purchase Agreement. However, where the underlying Multiple Award 
Contract has been awarded to a pool of concerns for which certified VO 
or SDVO small business status is required, if an order or a Blanket 
Purchase Agreement under that Multiple Award Contract is set aside 
exclusively for concerns in the certified VO or SDVO small business 
pool, concerns need not recertify their status as VO or SDVO small 
business concerns (unless a contracting officer requests size 
certifications with respect to a specific order or Blanket Purchase 
Agreement).
    (B) VO or SDVO set-aside Multiple Award Contracts. For a Multiple 
Award Contract that is specifically set aside for a VO or SDVO small 
business concern, if a business concern is a VO or SDVO small business 
concern at the time of offer and contract-level recertification for the 
Multiple Award Contract, it is a VO or SDVO small business concern for 
each order issued against the contract, unless a contracting officer 
requests recertification as a VO or SDVO small business concern for a 
specific order or Blanket Purchase Agreement.
    (ii) SBA will determine VO or SDVO small business status at the 
time of initial offer (or other formal response to a solicitation), 
which includes price, for an order or an Agreement issued against a 
Multiple Award Contract if the contracting officer requests a new VO or 
SDVO small business certification for the order or Agreement.
    (2) Total set-aside contracts. The VO SBC or SDVO SBC must comply 
with the applicable limitations on subcontracting provisions (see Sec.  
125.6 of this chapter) and the nonmanufacturer rule (see Sec.  
121.406(b) of this chapter), if applicable, in the performance of a 
contract totally set aside for VO SBCs or

[[Page 40159]]

SDVO SBCs. However, the contracting officer, in their discretion, may 
require the concern to perform the applicable amount of work or comply 
with the nonmanufacturer rule for each order awarded under the 
contract.
    (3) Partial set-aside contracts. For orders awarded under a partial 
set-aside contract, the VO SBC or SDVO SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  125.6 of 
this chapter) and the nonmanufacturer rule (see Sec.  121.406(b) of 
this chapter), if applicable, during each performance period of the 
contract (e.g., during the base term and then during each option period 
thereafter). For orders awarded under the non-set-aside portion, the VO 
SBC or SDVO SBC need not comply with any limitations on subcontracting 
or nonmanufacturer rule requirements. However, the contracting officer, 
in their discretion, may require the concern to perform the applicable 
amount of work or comply with the nonmanufacturer rule for each order 
awarded under the contract.
    (4) Orders. The VO SBC or SDVO SBC must comply with the applicable 
limitations on subcontracting provisions (see Sec.  125.6 of this 
chapter) and the nonmanufacturer rule (see Sec.  121.406(b) of this 
chapter), if applicable, in the performance of each individual order 
that has been set aside for VO SBCs or SDVO SBCs.
    (5) Reserves. The VO SBC or SDVO SBC must comply with the 
applicable limitations on subcontracting provisions (see Sec.  125.6 of 
this chapter) and the nonmanufacturer rule (see Sec.  121.406(b) of 
this chapter), if applicable, in the performance of an order that is 
set aside for VO SBCs or SDVO SBCs. However, the VO SBC or SDVO SBC 
will not have to comply with the limitations on subcontracting 
provisions and the nonmanufacturer rule for any order issued against 
the Multiple Award Contract if the order is competed amongst VO SBCs or 
SDVO SBCs and one or more other-than-small business concerns.
    (e) Recertification. (1) A concern that qualifies as a VO SBC or 
SDVO SBC at the time of initial offer (or other formal response to a 
solicitation), which includes price, including a Multiple Award 
Contract, is considered a VO SBC or SDVO SBC throughout the life of 
that contract. This means that if a VO SBC or SDVO SBC is qualified at 
the time of initial offer for a Multiple Award Contract, then it will 
be considered a VO SBC or SDVO SBC for each order issued against the 
contract, unless a contracting officer requests a new VO SBC or SDVO 
SBC eligibility review in connection with a specific order. Where a 
concern later fails to qualify as a VO SBC or SDVO SBC, the procuring 
agency may exercise options and still count the award as an award to a 
VO SBC or SDVO SBC. However, the following exceptions apply to this 
paragraph (e)(1):
    (i) Where a contract is novated to another business concern, the 
concern that will continue performance on the contract must recertify 
its status as a VO SBC or SDVO SBC to the procuring agency or inform 
the procuring agency that it does not qualify as a VO SBC or SDVO SBC 
within 30 days of the novation approval. If the concern is not a VO SBC 
or SDVO SBC, the agency can no longer count the options or orders 
issued pursuant to the contract from that point forward towards its VO 
or SDVO goals.
    (ii) Where a concern that is performing a contract acquires, is 
acquired by, or merges with another concern and contract novation is 
not required, the concern must, within 30 days of the transaction 
becoming final, recertify its VO SBC or SDVO SBC status to the 
procuring agency or inform the procuring agency that it no longer 
qualifies as a VO SBC or SDVO SBC. If the contractor is not a VO SBC or 
SDVO SBC, the agency can no longer count the options or orders issued 
pursuant to the contract from that point forward towards its VO or SDVO 
goals. The agency and the contractor must immediately revise all 
applicable Federal contract databases to reflect the new status.
    (iii) Where there has been a VO SBC or SDVO SBC status protest on 
the solicitation or contract, see part 134 of this chapter for the 
effect of the status determination on the contract award.
    (2) For the purposes of VO SBC or SDVO SBC contracts (including 
Multiple Award Contracts) with durations of more than five years 
(including options), a contracting officer must request that a business 
concern recertify its VO SBC or SDVO SBC status no more than 120 
calendar days prior to the end of the fifth year of the contract, and 
no more than 120 calendar days prior to exercising any option. If the 
business is unable to recertify its VO or SDVO status, the procuring 
agency may no longer be able to count the options or orders issued 
pursuant to the contract, from that point forward, towards its VO or 
SDVO goals.
    (3) A business concern that did not certify itself as a VO SBC or 
SDVO SBC, either initially or prior to an option being exercised, may 
recertify itself as a VO SBC or SDVO SBC for a subsequent option period 
if it meets the eligibility requirements in this part at that time.
    (4) Recertification does not change the terms and conditions of the 
contract. The limitations on subcontracting (see Sec.  125.6 of this 
chapter), nonmanufacturer (see Sec.  121.406(b) of this chapter), and 
subcontracting plan requirements (see Sec.  125.3(a) of this chapter) 
in effect at the time of contract award remain in effect throughout the 
life of the contract.
    (5) Where the contracting officer explicitly requires concerns to 
recertify their status in response to a solicitation for an order, SBA 
will determine eligibility as of the date the concern submits its 
response to the solicitation for the order.
    (6) A concern's status may be determined at the time of a response 
to a solicitation for an Agreement and each order issued pursuant to 
the Agreement.
    (f) Limitations on subcontracting. A business concern seeking a VO 
SBC or SDVO SBC requirement must also meet the applicable limitations 
on subcontracting requirements as set forth in Sec.  125.6 of this 
chapter for the performance of VO SBC or SDVO SBC contracts (both sole 
source and those totally set aside for VO SBC or SDVO SBC), the 
performance of the set-aside portion of a partial set-aside contract, 
or the performance of orders set-aside for VO SBC or SDVO SBC.
    (g) Ostensible subcontractor. Where a subcontractor that is not 
similarly situated performs primary and vital requirements of a set-
aside or sole source service contract or order, or where a prime 
contractor is unduly reliant on a small business that is not similarly 
situated to perform the set-aside or sole source service contract or 
order, the prime contractor is not eligible for award of a VO or SDVO 
contract.
    (1) When the subcontractor is small for the size standard assigned 
to the procurement, the issue in paragraph (g) introductory text may be 
grounds for a VO or SDVO status protest, as described in subpart E of 
this part. When the subcontractor is other than small or alleged to be 
other than small for the size standard assigned to the procurement, the 
issue in paragraph (a) introductory text may be grounds for a size 
protest subject to the ostensible subcontractor rule, as described at 
Sec.  121.103(h)(2) of this chapter.
    (2) SBA will find that a prime VO or SDVO contractor is performing 
the primary and vital requirements of a contract or order and is not 
unduly reliant on one or more non-similarly situated subcontracts where 
the prime contractor can demonstrate that it, together with any 
similarly situated entity, will meet the limitations on

[[Page 40160]]

subcontracting provisions set forth in Sec.  125.6 of this chapter.


Sec.  128.402  May a joint venture submit an offer on a VO SBC or SDVO 
SBC requirement?

    (a) Certification. For VA contracts, a VO SBC or SDVO SBC joint 
venture must be certified to submit an offer on a VO SBC or SDVO SBC 
contract, as set forth in 48 CFR part 819. For all other SDVO SBC 
contracts, joint ventures may apply for certification. To be eligible 
for inclusion, a joint venture must demonstrate that:
    (1) The underlying VO SBC or SDVO SBC upon which eligibility is 
based is certified in accordance with this part; and
    (2) The joint venture agreement complies with the requirements set 
forth in this part.
    (b) General. A VO SBC or SDVO SBC may enter into a joint venture 
agreement with one or more other SBCs or its SBA-approved mentor for 
the purpose of performing a VO or SDVO contract if the joint venture 
meets all of the following requirements:
    (1) Size of concerns to a VO or SDVO SBC joint venture. (i) A joint 
venture of at least one certified VO SBC or SDVO SBC and one or more 
other business concerns may submit an offer as a small business for a 
competitive VO SBC or SDVO SBC procurement or sale, or be awarded a 
sole source VO or SDVO contract, so long as each concern is small under 
the size standard corresponding to the NAICS code assigned to the 
procurement or sale.
    (ii) A joint venture between a prot[eacute]g[eacute] firm certified 
as a VO SBC or SDVO SBC and its SBA-approved mentor (see Sec.  125.9 of 
this chapter) will be deemed small provided the prot[eacute]g[eacute] 
qualifies as small for the size standard corresponding to the NAICS 
code assigned to the VO or SDVO procurement or sale.
    (2) Contents of joint venture agreement. Every joint venture 
agreement to perform a VO or SDVO contract, including those between a 
prot[eacute]g[eacute] firm certified as a VO SBC or SDVO SBC and its 
SBA-approved mentor authorized by Sec.  125.9 of this chapter, must 
contain a provision:
    (i) Setting forth the purpose of the joint venture;
    (ii) Designating a certified VO SBC or SDVO SBC as the managing 
venturer of the joint venture and designating a named employee of the 
certified VO SBC or SDVO SBC managing venturer as the manager with 
ultimate responsibility for performance of the contract (the 
``Responsible Manager'');
    (A) The managing venturer is responsible for controlling the day-
to-day management and administration of the contractual performance of 
the joint venture, but other partners to the joint venture may 
participate in all corporate governance activities and decisions of the 
joint venture as is commercially customary;
    (B) The individual identified as the Responsible Manager of the 
joint venture need not be an employee of the certified VO SBC or SDVO 
SBC at the time the joint venture submits an offer, but, if he or she 
is not, there must be a signed letter of intent that the individual 
commits to be employed by the certified VO SBC or SDVO SBC if the joint 
venture is the successful offeror. The individual identified as the 
Responsible Manager cannot be employed by the mentor and become an 
employee of the certified VO SBC or SDVO SBC for purposes of 
performance under the joint venture; and
    (C) Although the joint venture managers responsible for orders 
issued under an indefinite delivery/indefinite quantity contract need 
not be employees of the prot[eacute]g[eacute], those managers must 
report to and be supervised by the joint venture's Responsible Manager;
    (iii) Stating that with respect to a separate legal entity joint 
venture, the certified VO SBC or SDVO SBC must own at least 51% of the 
joint venture entity;
    (iv) Stating that the certified VO SBC or SDVO SBC must receive 
profits from the joint venture commensurate with the work performed by 
the certified VO SBC or SDVO SBC, or a percentage agreed to by the 
parties to the joint venture whereby the certified VO SBC or SDVO SBC 
receives profits from the joint venture that exceed the percentage 
commensurate with the work performed by the certified VO or SDVO SBC;
    (v) Providing for the establishment and administration of a special 
bank account in the name of the joint venture. This account must 
require the signature or consent of all parties to the joint venture 
for any payments made by the joint venture to its members for services 
performed. All payments due the joint venture for performance on a VO 
or SDVO contract will be deposited in the special account; all expenses 
incurred under the contract will be paid from the account as well;
    (vi) Itemizing all major equipment, facilities, and other resources 
to be furnished by each party to the joint venture, with a detailed 
schedule of cost or value of each, where practical. If a contract is 
indefinite in nature, such as an indefinite quantity contract or a 
multiple award contract where the level of effort or scope of work is 
not known, the joint venture must provide a general description of the 
anticipated major equipment, facilities, and other resources to be 
furnished by each party to the joint venture, without a detailed 
schedule of cost or value of each, or in the alternative, specify how 
the parties to the joint venture will furnish such resources to the 
joint venture once a definite scope of work is made publicly available;
    (vii) Specifying the responsibilities of the parties with regard to 
negotiation of the contract, source of labor, and contract performance, 
including ways that the parties to the joint venture will ensure that 
the joint venture and the certified VO or SDVO small business 
partner(s) to the joint venture will meet the performance of work 
requirements set forth in paragraph (b)(3) of this section, where 
practical. If a contract is indefinite in nature, such as an indefinite 
quantity contract or a multiple award contract where the level of 
effort or scope of work is not known, the joint venture must provide a 
general description of the anticipated responsibilities of the parties 
with regard to negotiation of the contract, source of labor, and 
contract performance, not including the ways that the parties to the 
joint venture will ensure that the joint venture and the certified VO 
or SDVO small business partner(s) to the joint venture will meet the 
performance of work requirements set forth in paragraph (d) of this 
section, or in the alternative, specify how the parties to the joint 
venture will define such responsibilities once a definite scope of work 
is made publicly available;
    (viii) Obligating all parties to the joint venture to ensure 
performance of the VO or SDVO contract and to complete performance 
despite the withdrawal of any member;
    (ix) Designating that accounting and other administrative records 
relating to the joint venture be kept in the office of the certified VO 
SBC or SDVO SBC managing venturer, unless approval to keep them 
elsewhere is granted by the District Director or his/her designee upon 
written request;
    (x) Requiring that the final original records be retained by the 
certified VO SBC or SDVO SBC managing venturer upon completion of the 
VO or SDVO contract performed by the joint venture;
    (xi) Stating that quarterly financial statements showing cumulative 
contract receipts and expenditures (including salaries of the joint 
venture's principals) must be submitted to SBA not later than 45 days 
after each operating quarter of the joint venture; and

[[Page 40161]]

    (xii) Stating that a project-end profit and loss statement, 
including a statement of final profit distribution, must be submitted 
to SBA no later than 90 calendar days after completion of the contract.
    (3) Performance of work. (i) For any VO or SDVO contract, including 
those between a prot[eacute]g[eacute] and a mentor authorized by Sec.  
125.9 of this chapter, the joint venture must perform the applicable 
percentage of work required by Sec.  125.6 of this chapter.
    (ii) The certified VO SBC or SDVO SBC partner(s) to the joint 
venture must perform at least 40% of the work performed by the joint 
venture.
    (A) The work performed by the certified VO SBC or SDVO SBC 
partner(s) to a joint venture must be more than administrative or 
ministerial functions so that they gain substantive experience.
    (B) The amount of work done by the partners will be aggregated and 
the work done by the certified VO SBC or, in the case of an SDVO SBC, 
SDVO SBC partner(s) must be at least 40% of the total done by all 
partners. In determining the amount of work done by a non-VO SBC or, in 
the case of an SDVO SBC, SDVO SBC partner, all work done by the non-VO 
SBC or, in the case of an SDVO SBC, SDVO SBC partner and any of its 
affiliates at any subcontracting tier will be counted.
    (4) Certification of compliance. Prior to the performance of any VO 
or SDVO contract as a joint venture, the certified VO SBC or SDVO SBC 
partner to the joint venture must submit a written certification to the 
contracting officer and SBA, signed by an authorized official of each 
partner to the joint venture, stating as follows:
    (i) The parties have entered into a joint venture agreement that 
fully complies with paragraph (b)(2) of this section;
    (ii) The parties will perform the contract in compliance with the 
joint venture agreement and with the performance of work requirements 
set forth in paragraph (b)(3) of this section.
    (5) Capabilities, past performance, and experience. When evaluating 
the capabilities, past performance, experience, business systems, and 
certifications of an entity submitting an offer for a VO or SDVO 
contract as a joint venture established pursuant to this section, a 
procuring activity must consider work done and qualifications held 
individually by each partner to the joint venture as well as any work 
done by the joint venture itself previously. A procuring activity may 
not require the certified VO SBC or SDVO SBC to individually meet the 
same evaluation or responsibility criteria as that required of other 
offerors generally. The partners to the joint venture in the aggregate 
must demonstrate the past performance, experience, business systems, 
and certifications necessary to perform the contract.
    (6) Contract execution. The procuring activity will execute a VO or 
SDVO contract in the name of the joint venture entity or the certified 
VO SBC or SDVO SBC, but in either case will identify the award as one 
to a VO or SDVO joint venture or a VO or SDVO mentor-
prot[eacute]g[eacute] joint venture, as appropriate.
    (7) Inspection of records. The joint venture partners must allow 
SBA's authorized representatives, including representatives authorized 
by the SBA Inspector General, during normal business hours, access to 
its files to inspect and copy all records and documents relating to the 
joint venture.
    (8) Performance of work reports. A certified VO SBC or SDVO SBC 
partner to a joint venture must describe how it is meeting or has met 
the applicable performance of work requirements for each VO or SDVO 
contract it performs as a joint venture.
    (i) The certified VO SBC or SDVO SBC partner to the joint venture 
must annually submit a report to the relevant contracting officer and 
to SBA, signed by an authorized official of each partner to the joint 
venture, explaining how and certifying that the performance of work 
requirements are being met.
    (ii) At the completion of every VO or SDVO contract awarded to a 
joint venture, the certified VO SBC or SDVO SBC partner to the joint 
venture must submit a report to the relevant contracting officer and to 
SBA, signed by an authorized official of each partner to the joint 
venture, explaining how and certifying that the performance of work 
requirements were met for the contract, and further certifying that the 
contract was performed in accordance with the provisions of the joint 
venture agreement that are required under paragraph (b)(2) of this 
section.
    (iii) Any person with information concerning a joint venture's 
compliance with the performance of work requirements may report that 
information to SBA and/or the SBA Office of Inspector General.
    (9) Basis for suspension or debarment. The Government may consider 
the following as a ground for suspension or debarment as a willful 
violation of a regulatory provision or requirement applicable to a 
public agreement or transaction:
    (i) Failure to enter a joint venture agreement that complies with 
paragraph (b)(2) of this section;
    (ii) Failure to perform a contract in accordance with the joint 
venture agreement or performance of work requirements in paragraph 
(b)(3) of this section; or
    (iii) Failure to submit the certification required by paragraph 
(b)(4) of this section or comply with paragraph (b)(7) of this section.
    (10) Limitation on offers from joint venture partners. A VO SBC or 
SDVO SBC cannot be a joint venture partner on more than one joint 
venture that submits an offer for a specific contract set aside or 
reserved for VO SBCs or SDVO SBCs.


Sec.  128.403  What requirements are not available for VO or SDVO 
contracts?

    For VA procurements, a contracting officer may award a VO or SDVO 
contract as set forth in the VAAR. For non-VA SDVO contracts, a 
contracting activity may not make a requirement available for a SDVO 
contract if:
    (a) The contracting activity otherwise would fulfill that 
requirement through award to Federal Prison Industries, Inc. under 18 
U.S.C. 4124 or 4125, or to Javits-Wagner-O'Day Act participating non-
profit agencies for the blind and severely disabled, under 41 U.S.C. 
8501 et seq., as amended; or
    (b) An 8(a) Participant currently is performing that requirement or 
SBA has accepted that requirement for performance under the authority 
of the section 8(a) program, unless SBA has consented to release of the 
requirement from the section 8(a) program.


Sec.  128.404  When may a contracting officer set aside a procurement 
for VO SBCs or SDVO SBCs?

    (a) VA procurements. For VA procurements, a contracting officer may 
set aside a contract for a VO SBC or SDVO SBC as set forth in the VAAR. 
For non-VA procurements, the contracting officer first must review a 
requirement to determine whether it is excluded from SDVO contracting 
pursuant to Sec.  128.403.
    (b) Contracting among small business programs--(1) Acquisitions 
valued at or below the simplified acquisition threshold. For VA 
procurements, a contracting officer may award at or below the 
simplified acquisition threshold as set forth in the VAAR. For non-VA 
procurements, the contracting officer shall set aside any acquisition 
with an anticipated dollar value exceeding the micro-purchase threshold 
but not exceeding the simplified acquisition threshold (defined in the 
FAR at 48 CFR 2.101) for small business concerns, regardless of the 
place of performance, when there is a reasonable

[[Page 40162]]

expectation that offers will be obtained from at least two small 
business concerns that are competitive in terms of quality and delivery 
and award will be made at fair market prices. The requirement in this 
paragraph (b)(1) does not preclude a contracting officer from making an 
award to a small business under the 8(a) BD, Historically Underutilized 
Business Zone (HUBZone), SDVO SBC, or WOSB Programs.
    (2) Acquisitions valued above the simplified acquisition threshold. 
(i) For VA procurements, a contracting officer may award above the 
simplified acquisition threshold as set forth in the VAAR. For non-VA 
procurements, the contracting officer shall set aside any acquisition 
with an anticipated dollar value exceeding the simplified acquisition 
threshold (defined in the FAR at 48 CFR 2.101) for small business 
concerns, regardless of the place of performance, when there is a 
reasonable expectation that offers will be obtained from at least two 
small business concerns that are competitive in terms of quality and 
delivery and award will be made at fair market prices. However, after 
conducting market research, the contracting officer shall first 
consider a set-aside or sole source award (if the sole source award is 
permitted by statute or regulation) under the 8(a) BD, HUBZone, SDVO 
SBC, or WOSB programs before setting aside the requirement as a small 
business set-aside. There is no order of precedence among the 8(a) BD, 
HUBZone, SDVO SBC, or WOSB programs. The contracting officer must 
document the contract file with the rationale used to support the 
specific set-aside, including the type and extent of market research 
conducted. In addition, the contracting officer must document the 
contract file showing that the apparent successful offeror's 
certifications in the System for Award Management (SAM) (or any 
successor system) and associated representations were reviewed.
    (ii) SBA believes that progress in fulfilling the various small 
business goals, as well as other factors such as the results of market 
research, programmatic needs specific to the procuring agency, 
anticipated award price, and the acquisition history, will be 
considered in making a decision as to which program to use for the 
acquisition.
    (c) SDVO SBC set-asides. If the contracting officer decides to set 
aside the requirement for competition restricted to SDVO SBCs, the 
contracting officer must:
    (1) Have a reasonable expectation that at least two responsible 
SDVO SBCs will submit offers; and
    (2) Determine that the award can be made at fair market price.
    (d) Prohibition on combined set-asides. A procuring activity cannot 
restrict an SDVO SBC competition (for either a contract or order) to 
require certifications other than SDVO SBC certification (i.e., a 
competition cannot be limited only to business concerns that are both 
SDVO SBC and 8(a), SDVO SBC and HUBZone, or SDVO SBC and WOSB).


Sec.  128.405  When may a contracting officer award sole source 
contracts to VO SBCs and SDVO SBCs?

    For VA procurements, a contracting officer may award a sole source 
contract to a VO SBC or SDVO SBC as set forth in the VAAR. A 
contracting officer may award a sole source contract to an SDVO SBC for 
non-VA procurements only when the contracting officer determines that:
    (a) None of the provisions of Sec.  128.403 or Sec.  128.404 apply;
    (b) The anticipated award price of the contract, including options, 
will not exceed:
    (1) $7,000,000 for a contract assigned a manufacturing NAICS code; 
or
    (2) $4,000,000 for all other contracts;
    (c) A SDVO SBC is a responsible contractor able to perform the 
contract; and
    (d) Contract award can be made at a fair and reasonable price.


Sec.  128.406  Are there VO or SDVO contracting opportunities at or 
below the simplified acquisition threshold?

    For VA procurements, a contracting officer may award at or below 
the simplified acquisition threshold as set forth in 48 CFR part 819 of 
the VAAR. If the non-VA SDVO requirement is at or below the simplified 
acquisition threshold, the contracting officer may set aside the 
requirement for consideration among SDVO SBCs using simplified 
acquisition procedures or may award a sole source contact to an SDVO 
SBC.


Sec.  128.407  May SBA appeal a contracting officer's decision not to 
make a procurement available for award as an SDVO contract?

    The SBA Administrator may appeal a contracting officer's decision 
not to make a particular requirement available for award as an SDVO 
sole source or a SDVO set-aside contract at or above the simplified 
acquisition threshold.


Sec.  128.408  What is the process for such an appeal?

    (a) Notice of appeal. When the contracting officer rejects a 
recommendation by SBA's Procurement Center Representative to make a 
requirement available for award as an SDVO contract, the contracting 
officer must notify the Procurement Center Representative as soon as 
practicable. If the SBA Administrator intends to appeal the decision, 
SBA must notify the contracting officer no later than five business 
days after receiving notice of the contracting officer's decision.
    (b) Suspension of action. Upon receipt of notice of SBA's intent to 
appeal, the contracting officer must suspend further action regarding 
the procurement until the Secretary of the department or head of the 
agency issues a written decision on the appeal, unless the Secretary of 
the department or head of the agency makes a written determination that 
urgent and compelling circumstances which significantly affect the 
interests of the United States compel award of the contract.
    (c) Deadline for appeal. Within 15 business days of SBA's 
notification to the contracting officer, SBA must file its formal 
appeal with the Secretary of the department or head of the agency, or 
the appeal will be deemed withdrawn.
    (d) Decision. The Secretary of the department or head of the agency 
must specify in writing the reasons for a denial of an appeal brought 
under this section.

Subpart E--Protests Concerning VO SBCs and SDVO SBCs


Sec.  128.500  What are the requirements for filing a VO SBC and SDVO 
SBC status protest?

    (a) If an interested party challenges the inclusion in the database 
of a VO SBC or SDVO SBC based on the status of the concern as a small 
business concern or the ownership or control of the concern, the 
challenge shall be heard by the Office of Hearings and Appeals of the 
Small Business Administration in accordance with part 134 of this 
chapter. The decision of the Office of Hearings and Appeals shall be 
considered final agency action.
    (b) The protest procedures described in part 134 of this chapter 
are separate from those governing size protests and appeals. All 
protests relating to whether an eligible VO SBC or SDVO SBC is a 
``small'' business for purposes of any Federal program are subject to 
part 121 of this chapter and must be filed in accordance with that 
part. If a protester protests both the size of the VO SBC or SDVO SBC 
and whether the concern

[[Page 40163]]

meets the VO SBC or SDVO SBC requirements set forth in Sec.  128.200, 
SBA will process each protest concurrently under the procedures set 
forth in parts 121 and 134 of this chapter. SBA does not review issues 
concerning the administration of a VO or SDVO contract.

Subpart F--Penalties and Retention of Records


Sec.  128.600  What are the requirements for representing VO SBC or 
SDVO SBC status, and what are the penalties for misrepresentation?

    (a) Presumption of loss based on the total amount expended. In 
every contract, subcontract, cooperative agreement, cooperative 
research and development agreement, or grant which is set aside, 
reserved, or otherwise classified as intended for award to VO SBCs or 
SDVO SBCs, there shall be a presumption of loss to the United States 
based on the total amount expended on the contract, subcontract, 
cooperative agreement, cooperative research and development agreement, 
or grant whenever it is established that a business concern other than 
a VO SBC or SDVO SBC willfully sought and received the award by 
misrepresentation.
    (b) Deemed certifications. The following actions shall be deemed 
affirmative, willful, and intentional certifications of VO SBC or SDVO 
SBC status:
    (1) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement, or 
cooperative research and development agreement reserved, set aside, or 
otherwise classified as intended for award to VO SBCs or SDVO SBCs.
    (2) Submission of a bid, proposal, application or offer for a 
Federal grant, contract, subcontract, cooperative agreement or 
cooperative research and development agreement which in any way 
encourages a Federal agency to classify the bid or proposal, if 
awarded, as an award to a VO SBC or SDVO SBC.
    (3) Registration on any Federal electronic database for the purpose 
of being considered for award of a Federal grant, contract, 
subcontract, cooperative agreement, or cooperative research and 
development agreement, as a VO SBC or SDVO SBC.
    (c) Signature requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the VO SBC or, in the case of an SDVO SBC, 
SDVO SBC status of a business concern seeking the Federal contract, 
subcontract, or grant. An authorized official must sign the 
certification on the same page containing the SDVO SBC status claimed 
by the concern.
    (d) Limitation of liability. Paragraphs (a) through (c) of this 
section may be determined not to apply in the case of unintentional 
errors, technical malfunctions, and other similar situations that 
demonstrate that a misrepresentation of VO SBC or SDVO SBC status was 
not affirmative, intentional, willful, or actionable under the False 
Claims Act, 31 U.S.C. 3729, et seq. A prime contractor acting in good 
faith should not be held liable for misrepresentations made by its 
subcontractors regarding the subcontractors' VO SBC or SDVO SBC status. 
Relevant factors to consider in making this determination may include 
the firm's internal management procedures governing VO SBC or SDVO SBC 
status representations or certifications, the clarity or ambiguity of 
the representation or certification requirement, and the efforts made 
to correct an incorrect or invalid representation or certification in a 
timely manner. An individual or firm may not be held liable where 
Government personnel have erroneously identified a concern as a VO SBC 
or SDVO SBC without any representation or certification having been 
made by the concern and where such identification is made without the 
knowledge of the individual or firm.
    (e) Penalties for misrepresentation--(1) Suspension or debarment. 
The SBA suspension and debarment official or the agency suspension and 
debarment official may suspend or debar a person or concern for 
misrepresenting a firm's status as a VO SBC or SDVO SBC pursuant to the 
procedures set forth in 48 CFR part 9, subpart 9.4.
    (2) Civil penalties. Persons or concerns are subject to severe 
penalties under the False Claims Act, 31 U.S.C. 3729-3733, the Program 
Fraud Civil Remedies Act, 31 U.S.C. 3801-3812, and any other applicable 
laws or regulations, including part 142 of this chapter.
    (3) Criminal penalties. Persons or concerns are subject to severe 
criminal penalties for knowingly misrepresenting the VO or SDVO SBC 
status of a concern in connection with procurement programs pursuant to 
section 16(d) of the Small Business Act, 15 U.S.C. 645(d), as amended, 
18 U.S.C. 1001, 18 U.S.C. 287, and any other applicable laws. Persons 
or concerns are subject to criminal penalties for knowingly making 
false statements or misrepresentations to SBA for the purpose of 
influencing any actions of SBA pursuant to section 16(a) of the Small 
Business Act, 15 U.S.C. 645(a), as amended, including failure to 
correct ``continuing representations'' that are no longer true.


Sec.  128.601  What must a concern do in order to be identified as a 
SDVO SBC in any Federal procurement databases?

    (a) In order to be identified as an SDVO SBC in the System for 
Award Management (SAM) database (or any successor thereto), a concern 
must certify its SDVO SBC status in connection with specific 
eligibility requirements at least annually.
    (b) If a firm identified as a VO SBC or SDVO SBC in SAM fails to 
certify its status within one year of a status certification, the firm 
will not be listed as a VO SBC or SDVO SBC in SAM, unless and until the 
firm recertifies its VO SBC or SDVO SBC status.

Subpart G--Surplus Personal Property for Veteran-Owned Small 
Business Programs


Sec.  128.700  How does a small business concern owned and controlled 
by veterans obtain Federal surplus personal property?

    (a) General. (1) Pursuant to 15 U.S.C. 657b(g), eligible small 
business concerns owned and controlled by veterans may receive surplus 
Federal Government property from State Agencies for Surplus Property 
(SASPs). The procedures set forth in 41 CFR part 102-37 and this 
section will be used to transfer surplus personal property to such 
concerns.
    (2) The surplus personal property which may be transferred to SASPs 
for further transfer to eligible small business concerns owned and 
controlled by veterans includes all surplus personal property which has 
become available for donation pursuant to 41 CFR 102-37.30.
    (b) Eligibility to receive Federal surplus personal property. To be 
eligible to receive Federal surplus personal property, on the date of 
transfer a concern must:
    (1) Be a small business concern owned and controlled by veterans, 
that has been certified by SBA under this part;
    (2) Not be debarred, suspended, or declared ineligible under title 
2 or title 48 of the CFR; and
    (3) Be engaged or expect to be engaged in business activities 
making the item useful to it.
    (c) Use of acquired surplus personal property. (1) Eligible 
concerns may acquire Federal surplus personal property from the SASP in 
the state(s) where the concern is located and

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operates, provided the concern represents and agrees in writing:
    (i) As to what the intended use of the surplus personal property is 
to be;
    (ii) That it will use the surplus personal property to be acquired 
in the normal conduct of its business activities or be liable for the 
fair rental value from the date of its receipt;
    (iii) That it will not sell or transfer the surplus personal 
property to be acquired to any party other than the Federal Government 
as required by General Services Administration (GSA) and SASP 
requirements and guidelines;
    (iv) That, at its own expense, it will return the surplus personal 
property to a SASP if directed to do so by SBA, including where the 
concern has not used the property as intended within one year of 
receipt;
    (v) That, should it breach its agreement not to sell or transfer 
the surplus personal property, it will be liable to the Federal 
Government for the established fair market value or the sale price, 
whichever is greater, of the property sold or transferred; and
    (vi) That it will give GSA and the SASP access to inspect the 
surplus personal property and all records pertaining to it.
    (2) A concern receiving surplus personal property pursuant to this 
section assumes all liability associated with or stemming from the use 
of the property, and all costs associated with the use and maintenance 
of the property.
    (d) Costs. Concerns acquiring surplus personal property from a SASP 
may be required to pay a service fee to the SASP in accordance with 41 
CFR 102-37.280. In no instance will any SASP charge a concern more for 
any service than their established fees charged to other transferees.
    (e) Title. Upon execution of the SASP distribution document, the 
firm receiving the property has only conditional title to the property 
during the applicable period of restriction. Full title to the property 
will vest in the recipient concern only after the recipient concern has 
met all of the requirements of this part and the requirements of GSA 
and the SASP that it received the property from.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-13563 Filed 7-5-22; 8:45 am]
BILLING CODE 8026-09-P