[Federal Register Volume 87, Number 228 (Tuesday, November 29, 2022)]
[Rules and Regulations]
[Pages 73400-73429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-25508]



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Vol. 87

Tuesday,

No. 228

November 29, 2022

Part II





Small Business Administration





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13 CFR Parts 121, 125, 128, et al.





Veteran-Owned Small Business and Service-Disabled Veteran-Owned Small 
Business--Certification; Final Rule

  Federal Register / Vol. 87 , No. 228 / Tuesday, November 29, 2022 / 
Rules and Regulations  

[[Page 73400]]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121, 125, 128, and 134

RIN 3245-AH69


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

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The Small Business Administration (SBA) amends 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 Veteran Small Business Certification 
Program.

DATES: This final rule is effective on January 1, 2023.

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) amends its regulations 
to establish a certification program for Veteran-Owned Small Businesses 
(VOSB) and Service-Disabled Veteran-Owned Small Businesses (SDVOSB) 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 VOSBs and 
SDVOSBs for Department of Veterans Affairs (VA) contracts. Previously, 
to be eligible for VA contracts, VOSBs and SDVOSBs had to be verified 
by VA's Center for Verification and Evaluation (CVE) in accordance with 
38 U.S.C. 8127. There was no Government-wide SDVOSB certification 
program, and firms seeking to be awarded SDVOSB sole source or set-
aside contracts with Federal agencies other than the VA only needed to 
self-certify their status as set forth in section 36 of the Small 
Business Act, 15 U.S.C. 657f.
    Section 862 of the NDAA 2021 amended the VOSB/SDVOSB requirements 
to transfer the responsibility for certification of VOSBs and SDVOSBs 
to SBA as of January 1, 2023 (Transfer Date) and created a 
certification requirement at SBA for SDVOSBs 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 
to file an application for SDVOSB certification with SBA and to 
continue to self-certify. Self-certified SDVOSBs that apply 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, VOSBs and SDVOSBs that are not certified 
by SBA's Veteran Small Business Certification Program will not be 
eligible to receive sole source or set-aside VOSB or SDVOSB awards 
across the Federal Government.
    Firms verified by VA's CVE prior to the Transfer Date will be 
deemed certified by SBA during the time that remains in the firm's 
three-year term of eligibility. To be recertified 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. In 
addition, the Administrator may extend a participant's eligibility 
period up to one year. To facilitate the transition of those firms 
already verified by VA's CVE before the Transfer Date with an 
eligibility period that expires in the first year of the Program, SBA 
intends to extend the eligibility of those verified firms for a period 
up to one year. Firms must continue to meet the VOSB or SDVOSB 
requirements at all times while certified and may be subject to a 
program examination or a VOSB or SDVOSB status protest.
    SBA will implement the Veteran Small Business Certification Program 
in a new 13 CFR part 128. Part 128 is organized into the following 
subparts: Subpart A--Provisions of General Applicability; Subpart B--
Eligibility Requirements for the Veteran Small Business Certification 
Program; Subpart C--Certification of VOSB or SDVOSB Status; Subpart D--
Federal Contract Assistance; Subpart E--Protests Concerning VOSB and 
SDVOSBs; Subpart F--Penalties and Retention of Records; and Subpart G--
Surplus Personal Property for VOSB Programs.
    As part of the process to draft the regulations governing the 
Veteran Small Business Certification Program, SBA published a proposed 
rule in the Federal Register on July 6, 2022 (87 FR 40141). The 
proposed rule solicited public comments to assist SBA in drafting a 
final rule to implement the Veteran Small Business Certification 
Program. SBA received 168 comments from 90 commenters in response to 
the proposed rule (Regulations.Gov Docket #SBA-2022-0007). SBA has 
reviewed all input from interested stakeholders while drafting this 
rule.
    SBA received a number of comments requesting that SBA eliminate 
self-certification entirely. As discussed further below, SBA has 
considered these comments and decided to implement its proposal to 
continue allowing self-certification for SDVOSBs at the subcontract 
level and for purposes of SDVOSB goaling credit. SBA determined that 
eliminating all forms of self-certification at this time would be 
contrary to its overarching goal of harmonizing its small business 
certification programs, which largely allow self-certification for 
purposes of subcontracts and goaling. Establishing a policy to 
eliminate self-certification for these purposes could also adversely 
impact the implementation of the Veteran Small Business Certification 
Program. Given the broad implications to the federal small business 
procurement system, SBA believes a change of this magnitude is outside 
the scope of this rule. SBA intends to comprehensively review the use 
of self-certification in its socioeconomic certification programs for 
goaling and subcontracting purposes with federal government 
stakeholders and SBA contracting program participants. However, SBA 
anticipates sunsetting these forms of self-certification after five 
years, through a separate rulemaking.

II. Section-by-Section Analysis

    For ease of review, SBA organized its final rule for part 128 
``Section-by-Section Analysis'' into subparts and sections. Each 
section has a citation, heading, and the section's source citation 
which correspond to either 13 CFR part 125 (SBA's previous regulations 
governing the SDVO SBC program) or 38 CFR part 74 (VA's Veterans Small 
Business regulations). 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)
    As proposed, Sec.  128.100 added a general purpose section for the 
Veteran

[[Page 73401]]

Small Business Certification Program with statutory authority for 
contractual assistance to VOSBs and SDVOSBs. There was no equivalent 
section in previous SDVOSB regulations at part 125. SBA received no 
comments on this section. As such, SBA is implementing Sec.  128.100 as 
proposed.
Section 128.101 What type of assistance is available under this part? 
(New)
    Given the unique nature of VA's contractual assistance program, SBA 
proposed to distinguish the differences in contractual assistance 
available between VOSB/SDVOSB contracts at VA and SDVOSB contracts 
across the rest of the Federal Government. There was no equivalent 
section in previous SDVOSB regulations in part 125. SBA received no 
comments on this section. As such, SBA is implementing Sec.  128.101 as 
proposed to clarify the two types of assistance available to 
participants in the Veteran Small Business Certification Program.
Section 128.102 What definitions are important in the Veteran Small 
Business Certification Program? (Former Sec.  125.12 and 38 CFR 74.1)
    Proposed Sec.  128.102 consolidated the definitions sections of 
former 13 CFR 125.12 and 38 CFR 74.1. In general, proposed Sec.  
128.102 adopted VA's existing definitions that applied to the 
verification process, removed duplicate definitions between VA and SBA 
regulations, removed VA definitions that referenced SBA's definitions 
at former Sec.  125.12, and eliminated definitions that were no longer 
applicable to the SBA's new certification program. Former Sec.  125.12 
included definitions of the terms ``veteran owned small business 
concern'' and ``small business concern owned and controlled by service-
disabled veterans.'' SBA proposed to move these definitions into the 
eligibility section at Sec.  128.200 in subpart B. However, upon 
review, SBA decided to include definitions of these terms and has added 
them to Sec.  128.102 in this final rule.
    SBA received 1 comment asking SBA to remove the definition of 
``principal place of business'' in Sec.  128.102, as it is no longer 
relevant to modern recordkeeping. In part 128, the sole reference to 
``principal place of business'' is in Sec.  128.303(b), which requires 
the participant to retain a copy of the application materials at the 
principal place of business for inspection during program examinations. 
SBA agrees with the commenter that this requirement is not relevant to 
modern recordkeeping practices and serves no practical purpose for the 
program or applicant. Accordingly, SBA has removed this definition and 
the requirement at Sec.  128.303(b) to maintain these records at the 
principal place of business.
    In this final rule, SBA adds definitions for the terms 
``certification database'' and ``qualifying veteran'' to add clarity to 
the regulations. The final rule provides that the ``certification 
database'' is the database of certified VOSBs and SDVOSBs eligible to 
participate in the Veteran Small Business Certification Program. The 
final rule defines ``qualifying veteran'' to mean a veteran upon which 
a VOSB's eligibility is based, or in the case of an SDVOSB, a service-
disabled veteran (or in the case of a veteran with permanent and severe 
disability, the spouse or permanent caregiver of such veteran) upon 
which a SDVOSB's eligibility is based.
    Proposed Sec.  128.102 included definitions for the following 
terms, which have been removed from this final rule: ``eligible 
individual,'' ``interested party,'' ``joint venture,'' ``primary 
industry classification,'' and ``unconditional ownership.'' The final 
rule replaces the term ``eligible individual'' with the term 
``qualifying veteran,'' as explained above. SBA moves the definition of 
``interested party'' in this final rule to part 134, as explained 
further below. The final rule removes the definition of the term 
``joint venture'' from Sec.  128.102 because it is unnecessary, as 
Sec.  128.402 describes joint ventures in detail. The final rule also 
removes the term ``primary industry classification'' because it is no 
longer relevant to part 128, as eligibility is based on the qualifying 
veteran and certification is no longer based on primary industry 
classification, as explained further below. Finally, the final rule 
moves the definition of the term ``unconditional ownership'' from the 
definitions section to Sec.  128.202, which addresses ownership.

Subpart B--Eligibility Requirements for the Veteran Small Business 
Certification Program

Section 128.200 What are the requirements a concern must meet to 
qualify as a VOSB or SDVOSB? (New)
    As proposed, this section reflected the separate and distinct 
eligibility requirements for certification as a VOSB or SDVOSB. 
Previously, only firms that were small in their primary North American 
Industry Classification System (NAICS) code were considered eligible 
for certification as VOSBs or SDVOSBs. Proposed Sec.  128.200 did not 
require an applicant to be small in its primary industry but instead 
proposed to allow an entity to apply for certification if the concern, 
together with its affiliates, meets the size standard corresponding to 
any NAICS code under which it currently conducts business activities. 
This policy is consistent with changes SBA has also proposed making in 
the WOSB program. See 87 FR 55642.
    SBA received 4 comments in support of proposed Sec. Sec.  
128.200(a)(1) and 128.200(b)(1), which expanded program eligibility to 
firms that qualify as small in any NAICS code in which they currently 
conduct business, and 2 comments that opposed this proposal. One 
commenter suggested that certified VOSBs and SDVOSBs should be small in 
all NAICS codes in which they operate and the other commenter suggested 
that SBA remove ``currently conducts business activities'' because the 
commenter believed this requirement would limit opportunities for 
businesses entering new industries. 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 a firm to demonstrate that it qualifies as small under its 
primary industry classification.
    To be eligible for a specific VOSB/SDVOSB 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. 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 VOSB/SDVOSB set-aside contract.
    However, SBA agrees with the commenter that the language 
``currently conducts business activities'' could be vague or overly 
restrictive and has amended Sec. Sec.  128.200(a)(1) and 128.200(b)(1) 
in this final rule to provide that a VOSB or SDVOSB must be small under 
the size standard corresponding to at least one NAICS code listed in 
its SAM profile. This will allow SBA to determine that an applicant is 
small in at least one NAICS code by reviewing the firm's SAM profile, 
without restricting the firm's ability to expand its operations into 
new industries.
    SBA proposed Sec.  128.200(c)(2) to clarify that certification is 
only required for VOSB/SDVOSB sole source and set-

[[Page 73402]]

aside awards. Firms that do not apply for certification in the Veteran 
Small Business Certification Program may continue to self-certify their 
status, receive contract awards outside the Veteran Small Business 
Certification Program through open competition or other types of set-
asides, and count toward an agency's goals. This approach is consistent 
with SBA's WOSB and 8(a) BD programs, which allow businesses to self-
certify as ED/WOSBs or SDBs for awards that are made outside of those 
respective programs and for agencies to receive WOSB or SDB credit for 
such awards. SBA received several comments in opposition to this 
approach.
    With this final rule, SBA follows its statutory mandate to certify 
VOSB and SDVOSB status for set-aside and sole source awards. The final 
rule also adopts proposed Sec.  128.200 to allow self-certification 
outside of VOSB and SDVOSB set-aside and sole source awards by prime 
contractors and subcontractors for goaling purposes, as it does in the 
8(a) BD and WOSB programs. While SBA acknowledges the potential issues 
to implement self-certification for these purposes, it believes that 
for the time being, applying this treatment equally to the Veteran 
Small Business Certification Program is appropriate. After 
comprehensive review of the use of self-certification in socioeconomic 
certification programs for goaling and subcontracting purposes with 
federal government stakeholders and SBA contracting program 
participants, SBA anticipates sunsetting these forms of self-
certification after five years, through a separate rulemaking.
Section 128.201 What other eligibility requirements apply for 
certification as a VOSB or SDVOSB? (Former 38 CFR 74.2(b) Through (f))
    Proposed Sec.  128.201 generally added conditions of eligibility 
for certification that were incorporated from existing CVE requirements 
at 38 CFR 74.2(b) through (f). However, the proposed rule eliminated 
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 thus may 
qualify as a VOSB or SDVOSB. SBA received 6 comments in support of the 
elimination of incarceration, parole, or probation as eligibility 
exclusions to the Veteran Small Business Certification Program. 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 related 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. The elimination of these eligibility factors will 
not affect the veteran's obligation to meet the control requirements at 
Sec.  128.203, at the time of application and to maintain a firm's 
certification as a VOSB or SDVOSB. Accordingly, SBA did not adopt the 
VA's eligibility requirement that excludes individuals currently 
incarcerated, on parole, or on probation.
    Instead, SBA proposed that good character review would be limited 
to ensuring that an applicant or principal was not debarred or 
suspended. SBA considered a modified good character requirement that 
could render an applicant ineligible if there were outstanding issues 
relating to moral turpitude or business integrity but concluded it is 
an issue of responsibility determined by the contracting officer, as 
explained above. SBA received 3 comments recommending elimination of 
the good character requirement altogether. SBA considered the comments 
and decided to remove the ``good character'' provision from Sec.  
128.201 in the final rule. Since the ``good character'' analysis was 
limited to issues of suspension and debarment, this requirement was 
duplicative, as suspension and debarment is already addressed in Sec.  
128.201(a). Further, ``good character'' is not a requirement for 
eligibility to participate in SBA's WOSB or HUBZone programs, and as 
explained throughout this rule, SBA seeks to make its contracting 
program regulations as consistent as possible.
    The final rule reorganizes paragraph (a) of Sec.  128.201, 
addressing suspension and debarment, to make several clarifications. 
The final rule clarifies that if a participant is debarred from federal 
contracting, SBA will immediately decertify the firm and remove it from 
the certification database. If a participant is suspended from federal 
contracting, SBA will propose the firm for decertification.
Section 128.202 Who does SBA consider to own a VOSB or SDVOSB? (Former 
Sec.  125.13)
    Proposed Sec.  128.202 incorporated SBA's ownership requirements at 
former Sec.  125.13 and revised the section to add references to non-
service-disabled veterans. Proposed Sec.  128.202(f) incorporated the 
requirements of 38 CFR 74.3(b), requiring participants to provide 
notice of any change of ownership. Proposed Sec.  128.202(f) required 
participants to notify SBA of a change of ownership and attest to 
continued eligibility in accordance with proposed Sec.  128.307. SBA 
received no comment on these proposed regulations and is implementing 
these sections as proposed. In the final rule, SBA also made several 
revisions to ``Ownership of a corporation'' at Sec.  128.202(e) to 
eliminate duplicative regulations, reduce complexity of the section, 
and encourage readability.
    With this final rule, SBA also adds 128.202(b)(3) as a limited 
exception to unconditional ownership. With this final rule, SBA does 
not abandon its previous interpretation of ``unconditional ownership'' 
but merely adds a limited exception for a commercially reasonable right 
of first refusal. Unconditional ownership continues to mean that a 
qualifying veteran's ownership must be unrestricted. However, SBA 
believes that allowing non-qualifying-veterans a commercially 
reasonable right of first refusal benefits the program by acknowledging 
that qualifying veterans often partner with non-qualifying-veterans to 
form VOSBs and SDVOSBs. This approach encourages investment in VOSBs 
and SDVOSBs, allows non-qualifying-veterans to protect their business 
investments, and allows more firms to qualify for certification.
Section 128.203 Who does SBA consider to control a VOSB or SDVOSB? 
(Former Sec.  125.14)
    Proposed Sec.  128.203 incorporated SBA's control requirements at 
former Sec.  125.14 and revised the section to add references to non-
service-disabled veterans. SBA previously administered only the SDVOSB 
self-certification program and former Sec.  125.14 did not specifically 
reference VOSB requirements. To be verified by VA and subsequently 
certified by SBA after the Transfer Date, VOSBs are required to meet 
the same control requirements as SDVOSBs per 38 CFR 74.4. SBA did not 
propose any other changes to SBA's control regulations at former Sec.  
125.14.
    In the proposed rule, SBA requested comment from the public on 
whether additional changes to former Sec.  125.14 were necessary. 
Commenters generally supported uniformity between SBA's regulations at 
parts 124, 127, and 128, to support reciprocity between SBA's 
contracting programs. SBA believes uniformity between its small 
business

[[Page 73403]]

contracting programs facilitates reciprocity and makes the programs 
easier to use for participants. As discussed throughout this rule, SBA 
attempted to achieve uniformity wherever possible. Additionally, SBA 
received numerous comments on specific topics related to control, 
including comments regarding franchises, SBA's use of ``rebuttable 
presumptions,'' and ``extraordinary circumstances.''
    The proposed rule asked for comments on whether SBA should address 
the eligibility of franchises in the final rule. SBA received 6 
comments in support of addressing control issues associated with 
franchises. SBA considered these comments. However, to make the control 
regulations for the Veteran Small Business Certification Program as 
consistent as possible with the WOSB and 8(a) BD program regulations, 
SBA has decided not to address franchises specifically in the final 
rule. Applications from franchisees will be reviewed on a case-by-case 
basis, in accordance with how those programs evaluate control of 
franchises. In general, SBA reviews whether the franchisee has the 
right to profit from its efforts and bears the risk of loss 
commensurate with ownership.
    SBA received 13 comments related to the ``rebuttable presumptions'' 
at proposed Sec.  128.203(i). The proposed regulations described a 
number of rebuttable presumptions of control by a non-qualifying-
veteran, including circumstances where the non-veteran: is a former 
employer; receives the highest compensation; provides critical bonding 
or financial support; co-locates with another firm in a similar line of 
business; shares services and resources; and holds required licenses.
    SBA has considered the comments received and revised the section 
(redesignated as Sec.  128.203(h)) to be more consistent with the 8(a) 
BD program regulations governing control. The 8(a) BD regulations 
provide a non-exhaustive list of circumstances that may lead to a 
finding of control by a non-disadvantaged individual. Likewise, this 
final rule provides a non-exhaustive list of circumstances at Sec.  
128.203(h)(2) that may lead to a finding of control by a non-
qualifying-veterans. The final rule provides that in certain 
circumstances, a concern may demonstrate that a non-qualifying-veteran 
does not control the firm. SBA believes this lighter approach to 
control balances flexibility for the applicant or participant while 
maintaining the integrity of the certification process.
    In this final rule, SBA has revised Sec.  128.203(i) (proposed 
Sec.  128.203(k)) to be less restrictive and more consistent with the 
WOSB and 8(a) BD program regulations governing outside employment and 
normal business hours. The final rule at Sec.  128.203(i) states that 
the qualifying veteran cannot engage in outside activities that prevent 
the individual from devoting sufficient time and attention to the 
business concern to control its management and daily operations. Where 
a qualifying veteran claiming to control a business concern devotes 
fewer hours to the business than its normal hours of operation, SBA 
would assume that the individual does not control the business concern, 
unless the firm provides evidence that the qualifying veteran has 
ultimate managerial and supervisory control over both the long-term 
decision making and day-to-day management of the business.
    SBA received 1 comment on proposed Sec.  128.203(m) (redesignated 
at Sec.  128.203(j)), which addressed the exception to control by a 
non-veteran in ``extraordinary circumstances.'' SBA's former 
regulations at Sec.  125.14(m) stated that SBA would not find that a 
lack of control exists where a service-disabled veteran does not have 
the unilateral power and authority to make decisions in certain 
extraordinary circumstances. ``Extraordinary circumstances'' were 
defined at proposed Sec.  128.102 and former Sec.  125.12, as 
including: adding a new equity stakeholder; dissolution of the company; 
sale of the company; the merger of the company; and the company 
declaring bankruptcy. The commenter suggested that SBA add the 
following to the definition of extraordinary circumstances at Sec.  
128.102: ``amendments of the bylaws, operating agreement, or other 
corporate governance documents.'' SBA considered this comment but has 
decided not to expand the list of allowable extraordinary circumstances 
to include these additional circumstances. However, in the final rule, 
SBA has clarified that ``sale of the company'' includes sale of all 
assets of the company. The final rule also removes the term 
``extraordinary circumstances'' from the definitions section at Sec.  
128.102 and instead lists them in the control section of the 
regulations at Sec.  128.203(j).
Section 128.204 What size standards apply to VOSBs and SDVOSBs? (Former 
Sec.  125.15)
    Proposed Sec.  128.204 included SBA's size requirements at former 
Sec.  125.15 and revised the section to incorporate VOSBs. SBA 
previously administered only the SDVOSB self-certification program, so 
former Sec.  125.15 did not specifically reference VOSB requirements. 
To be verified by VA and subsequently certified by SBA on the Transfer 
Date, VOSBs are required to meet the same size requirements as SDVOSBs. 
SBA received 1 comment on proposed Sec.  128.204(a), which established 
size ``at the time of contract offer,'' noting that this was 
inconsistent with SBA's size requirements at Sec.  121.404(a), which 
provide that SBA determines the size of a concern ``as of the date the 
concern submits a written self-certification that it is small to the 
procuring activity as part of its initial offer or response which 
includes price.'' In response to this comment, SBA has amended Sec.  
128.204 to be consistent with Sec.  121.404. Additionally, to remove 
any confusion regarding size status at the time of application and the 
time of offer, SBA reorganized proposed Sec.  124.204 to include a 
paragraph (a) addressing size at time of application and paragraph (b) 
addressing size at time of contract offer.

Subpart C--Certification of VOSB or SDVOSB Status

Section 128.300 How is a concern certified as a VOSB or SDVOSB? (Former 
38 CFR 74.2)
    Proposed Sec.  128.300 included VA's eligibility requirements at 38 
CFR 74.2(a), with revisions to remove references to VA and to reflect 
SBA's certification program. SBA's proposed rule also granted 
certification based on an applicant's participation in SBA's 8(a) 
Business Development and WOSB/EDWOSB programs. 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 Veteran Small Business 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 VOSB/SDVOSB 
applicant. In such cases, SBA would confirm the identified individual's 
eligibility as a veteran or service-disabled veteran.
    SBA received 8 comments to its proposal at Sec.  128.300(b) and (c) 
to grant reciprocity to participants in SBA's 8(a) BD and WOSB programs 
that are owned and controlled by one or more veterans, or in the case 
of an SDVOSB, service-

[[Page 73404]]

disabled veterans. All 8 comments agreed that reciprocity between SBA's 
certification programs would create administration efficiencies as well 
as reduced processing time for applicants. One comment expressed that 
the success of reciprocity would heavily rely on the uniformity between 
regulations, where possible.
    In this final rule, SBA removed the references to the 8(a) BD 
Program and the WOSB Program from Sec.  128.300 and moved them to 
Sec. Sec.  128.303(b) and 128.303(c). Section 128.303 describes what an 
applicant must apply to be certified as a VOSB or SDVOSB. Section 
128.303(b) provides that 8(a) BD program participants must demonstrate 
that the disadvantaged individual is a qualifying veteran, provide 
documentation of its most recent annual review (or of its 8(a) BD 
program acceptance if it has not yet undergone annual review), and 
certify that there have been no material changes in its ownership or 
control. Similarly, section 128.303(c) provides that an ED/WOSB firm 
must demonstrate that the woman/women upon whom the firm's eligibility 
is based is a qualifying veteran, provide documentation of its ED/WOSB 
certification or its most recent annual recertification, and certify 
that there have been no material changes in its ownership or control.
Section 128.301 Where must an application be filed? (Former Sec.  
74.10)
    Proposed Sec.  128.301 included VA's requirements at 38 CFR 74.10 
for application to CVE, proposed revisions to remove references to VA, 
and reflected that an applicant must apply to SBA for certification 
after the rule is effective. SBA did not receive comment on this 
section. SBA is implementing Sec.  128.301 as proposed.
Section 128.302 How does SBA process applications for certification? 
(Former Sec.  74.11)
    Proposed Sec.  128.302 included VA's guidelines for application 
processing by CVE at 38 CFR 74.11. As proposed, this section removed 
specific processing guidelines in Sec.  128.302(a). SBA also proposed 
to add an additional sentence at the end of Sec.  128.302(e) to 
establish SBA's authority to decertify a firm if 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, was 
incorporated into Sec. Sec.  128.302(e) and 128.307 to require 
participants to notify SBA in the event of a bankruptcy filing. SBA 
received no comment on this section and is implementing Sec.  128.302 
as proposed.
Section 128.303 What must a concern submit to apply for VOSB or SDVOSB 
certification? (Former Sec.  74.12)
    Proposed Sec.  128.303 amended VA's documentation requirements at 
38 CFR 74.12 for application to CVE. This amendment included general 
requirements for submission to SBA rather than listing each document 
individually as with the current VA regulation. As proposed, this 
section granted certification based on participants in SBA's 8(a) BD 
and WOSB/EDWOSB programs that are owned and controlled by one or more 
veterans, or in the case of SDVOSBs, service-disabled veterans. The 
proposed amendment demonstrated how applicants may submit documentation 
as evidence of program eligibility. Proposed Sec.  128.303 added 
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.
    In terms of demonstrating that an applicant qualifies as a small 
business, the proposed rule provided 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. The 
change to this language was discussed above in the discussion of Sec.  
128.200. SBA received no comments on this section and is implementing 
the remainder of Sec.  128.303 as proposed.
Section 128.304 Can an Applicant appeal SBA's initial decision to deny 
an application? (Former Sec.  74.13)
    Proposed Sec.  128.304 included VA's regulation at 38 CFR 74.13 for 
a denied application with CVE. Proposed Sec.  128.304(a) established 
that there is no reconsideration process for denied applications. 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 the proposed 
rule did not permit reconsideration for initial applications, SBA 
proposed to shorten the reapplication period after denial from 6 months 
to 90 calendar days.
    SBA received several comments requesting clarity on an applicant's 
due process rights for denials, decertification, and protests to SBA 
Office of Hearings and Appeals (OHA) in Sec.  128.304, Sec.  128.310, 
and Sec.  128.500. In response, this final rule amends part 134 so that 
all elements of the certification process, including appeal rights for 
denied applicants, terminations, and protests, are addressed.
    In addition, the final rule provides that a denial or 
decertification based on the failure to provide sufficient evidence of 
the qualifying individual's status as a veteran or a service-disabled 
veteran is not subject to appeal to OHA. SBA believes it important to 
include a statement in Sec.  128.304 to address appeals for denials 
solely based on an individual's status as a veteran or service-disabled 
veteran. The decision as to whether an individual is a veteran or 
service-disabled veteran is one outside of SBA's authority and it would 
not be appropriate for SBA to evaluate this eligibility criteria. It 
also removes the provisions stating the filing party bears the risk 
that the delivery method chosen will not result in timely receipt by 
OHA and specifying how the decision will be issued, since these 
requirements would be governed by part 134.
Section 128.305 Can an Applicant or Participant reapply for 
certification after a denied certification or decertification? (Former 
38 CFR 74.14)
    Proposed Sec.  128.305 included VA's reapplication requirements 
contained in 38 CFR 74.14 that the applicant must wait for a period of 
90 calendar days after a denial decision before a new application will 
be processed (proposed Sec.  128.305(a)). SBA received 2 comments in 
support of the proposed changes at Sec.  128.305. As stated above, 
SBA's proposed rule adopted the existing VA regulations for 
reapplication in 38 CFR 74.14 but believes that it is more appropriate 
to adopt the format of SBA's WOSB regulation at Sec.  127.305 instead. 
There are no material changes to the substantive requirements at Sec.  
128.305, however the format was changed in the interest of creating 
uniform regulations between programs.
    Proposed Sec.  128.305(b) provided that participants may reapply 
for certification within 120 calendar days prior to the end of their 
eligibility period and the subsequent eligibility period would be based 
on the date of the new determination letter. SBA believes that 
discussing the 120-day recertification window in proposed Sec.  
128.305(b) may be confusing to the reader and more appropriate to 
discuss in Sec.  128.306, which explains how a concern may maintain its 
VOSB or SDVOSB certification. Accordingly, in this final rule, SBA 
provides that a participant may recertify within 120

[[Page 73405]]

calendar days prior to the end of their eligibility period--to Sec.  
128.306(a).
Section 128.306 How does a concern maintain its VOSB or SDVOSB 
certification? (Former 38 CFR 74.15)
    Proposed Sec.  128.306 included VA's three-year program eligibility 
term and continuing obligation requirements at 38 CFR 74.15, with 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 VOSB or SDVOSB certified status. Although SBA received 
comments supporting annual recertification, SBA does not believe that 
yearly recertification is necessary. SBA wants to ensure that it meets 
its statutory mandate, but at the same time does not want to impose any 
unnecessary burden on VOSBs and SDVOSBs.
    Proposed paragraphs (e) and (f) of this section included the 
consequences of a program examination. For organizational purposes, SBA 
moved these provisions to the section specifically addressing program 
examinations, Sec.  128.308(c).
    SBA received a number of comments in support of SBA's 3-year term 
of eligibility for the Veteran Small Business Certification Program. 
Three comments proposed an additional one-year period of eligibility on 
the Transfer Date for those firms already certified by VA or an 
additional period of eligibility granted at the discretion of the 
Administrator or designee. SBA agrees this extension will allow SBA to 
process the large number of applications it will receive in the first 
year of the program. An extension will allow SBA to focus on 
applications from self-certified SDVOSB firms, while not delaying 
recertifications from firms already participating in VA's program. 
Accordingly, the final rule provides in Sec.  128.306(d) that the 
Administrator or designee may extend eligibility up to one year beyond 
the three-years eligibility period.
Section 128.307 What are a Participant's ongoing obligations to SBA? 
(Former Sec.  74.3(b))
    Proposed Sec.  128.307 included the requirement at 38 CFR 74.3(b) 
for participants to notify CVE of any change of ownership. The proposed 
section did not require prior SBA approval of a material change. 
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 VOSB or SDVOSB. As noted above in the discussion of Sec.  
128.306, SBA proposed that a VOSB or SDVOSB 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. SBA received one comment on this 
section supporting this requirement and is implementing Sec.  128.307 
as proposed.
Section 128.308 What is a program examination and what will SBA 
examine? (Former Sec.  74.20)
    Proposed Sec.  128.308 adopted VA's 38 CFR 74.2(a) verification 
exam requirements. Proposed Sec.  128.308(a) included a general 
description of the certification exam and stated that examiners will 
review a participant's current eligibility and its eligibility at the 
time of its application or its most recent size recertification. For 
the final rule, SBA will remove the reference to the most recent size 
recertification as it is not applicable to the Veteran Small Business 
Certification Program. SBA may conduct a program examination at any 
time after the application.
    Proposed Sec.  128.308(b) stated that SBA may conduct the program 
examination at one or all of the participant's offices or work sites, 
to be determined by SBA. SBA received 1 comment requesting that SBA 
conduct virtual program examinations rather than in-person visits. SBA 
has removed the language referencing physical site visits from Sec.  
128.308(b), allowing SBA to conduct either virtual or on-site visits, 
as appropriate.
Section 128.309 What are the ways a Participant may exit the Veteran 
Small Business Certification Program? (Former Sec.  74.21)
    Proposed Sec.  128.309 included VA's guidelines on exiting the CVE 
program at 38 CFR 74.21. The proposed section included a paragraph 
providing that failure to recertify would be a basis on which to remove 
a firm from the Veteran Small Business Certification Program. With the 
final rule, SBA organized the ways a participant could exit the program 
into four categories: voluntary withdrawal, decertification by SBA 
through the proposed decertification process, decertification due to 
adverse protest findings, and decertification due to suspension or 
debarment.
    SBA received one comment on Sec.  128.309 recommending that SBA 
include misrepresentation and false statements as a basis for 
decertification from the program. The commenter suggested that if 
decertified or denied certification on this basis, such decertified 
firms or denied applicants should have appeal rights to OHA. The 
commenter also suggested that if a representative of an applicant or 
participant submits a false statement, SBA should take steps to bar 
that representative from participation in SBA contracting programs. SBA 
agrees but believes that for organizational purposes, these 
requirements are more appropriate for inclusion in the additional 
eligibility requirements at Sec.  128.201(b).
Section 128.310 What are the procedures for decertification? (Former 
Sec.  74.22)
    Proposed Sec.  128.310 included VA's 38 CFR 74.22 guidelines on 
canceling program participation by the agency. SBA did not receive 
relevant comments on this section and has implemented this section as 
proposed with only minor modifications to improve clarity.

Subpart D--Federal Contract Assistance

Section 128.400 What are VOSB and SDVOSB contracts? (Former Sec.  
125.17)
    As proposed, Sec.  128.400(a) changed the text in former Sec.  
125.17 to reflect VA's authority to award set-aside and sole source to 
VOSBs and SDVOSBs. Proposed Sec.  128.400(a) referenced the VA 
Acquisition Regulation (VAAR) at chapter 8 of title 48, Code of Federal 
Regulations. In the final rule, SBA clarified in Sec.  128.400(a) that 
VOSB contracts are exclusively VA procurements, including prime 
contracts and subcontracts for which the VA is the procuring agency.
    Proposed Sec.  128.400(b) distinguished VA contracts from SDVOSB 
contracts with the rest of the Federal Government. SBA received no 
relevant comments on this section.
Section 128.401 What requirements must a VOSB or SDVOSB meet to submit 
an offer on a contract? (Former Sec.  125.18)
    Proposed Sec.  128.401(a) changed the requirements at former Sec.  
125.18(a), which required self-certification of SDVOSB status at the 
time of offer, to require a concern to be certified as a VOSB or SDVOSB 
to be eligible for a VOSB or SDVOSB set-aside or sole source contract. 
The proposed rule also included provisions to allow an uncertified VOSB 
or SDVOSB to submit an offer while their application is pending with 
SBA. In the proposed rule, SBA explained that it intended to prioritize 
those applications where the contracting officer has identified the 
applicant as the apparent successful offeror. SBA received 2 comments 
asking SBA to remove this priority review. The commenters did not

[[Page 73406]]

support allowing uncertified firms to submit an offer while their 
application is pending. The commenters believed that this procedure 
would result in wasted time and resources for SBA, the contracting 
activity, and all impacted bidders. They stated it would introduce a 
source of delay in the award process because contracting officers would 
be required to wait for the apparent awardee to be certified and the 
apparent awardee could end up not being eligible for certification. In 
addition, VA's existing regulations require offerors to be certified at 
the time of offer. Based on the comments received, SBA has opted to 
revise Sec.  128.401(a) in this final rule to require SDVOSBs and VOSBs 
to be certified at the time of offer, subject to the grace period 
required by NDAA 2021.
    Proposed Sec.  128.401(b) added eligibility for VOSB joint ventures 
and referenced Sec.  128.402, which addressed the joint venture 
requirements for both VOSBs and SDVOSBs. The remainder of proposed 
Sec.  128.401 described the requirements applicable to VOSB and SDVOSB 
contracts, including: compliance with the non-manufacturer rule at 
Sec.  121.406(b)(1); requirements for Multiple Award Contracts; 
contract-level recertification requirements; compliance with the 
limitations on subcontracting at Sec.  125.6; and treatment of an 
``ostensible subcontractor.'' These requirements are consistent with 
the requirements applicable to SBA's other small business contracting 
programs. SBA did not receive relevant comments on these provisions and 
has generally implemented them as proposed, with only minor 
modifications intended to add clarity to the regulations.
Section 128.402 When may a joint venture submit an offer on a VOSB or 
SDVOSB contract? (Former Sec.  125.18(b))
    SBA proposed a stand-alone section at Sec.  128.402 to describe the 
joint venture requirements applicable to VOSBs and SDVOSBs. As 
proposed, SBA did not require SDVOSB joint ventures to be certified to 
be eligible for non-VA contracts. SBA received 1 comment asking SBA to 
require certification for all joint ventures. With the exception of 
8(a) BD sole source contracts, SBA does not require certification of 
joint ventures in its certification programs and SBA is seeking to 
create uniformity among its programs wherever possible. Accordingly, in 
this final rule, SBA has removed the requirement that VOSB joint 
ventures be certified.
    The proposed rule included a provision at Sec.  128.402(b)(10) 
providing that a VOSB or SDVOSB participant cannot be a joint venture 
partner on more than one joint venture that submits an offer for a 
specific VOSB or SDVOSB contract. 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. SBA received 1 comment in support of proposed Sec.  
128.402(b)(10). To make this requirement more prominent within the 
section and to be more consistent with corresponding changes that have 
been proposed for SBA's other certification programs (see 87 FR 55642), 
SBA has moved it to Sec.  128.402(a)(3).
    In addition, the final rule revises the organization of this 
section to more closely match the corresponding sections governing 
joint ventures for SBA's other contracting programs. The final rule 
also clarifies that where Sec.  128.402 references the requirements of 
a VOSB or SDVOSB joint venture partner for eligibility purposes, the 
VOSB or SDVOSB status of that joint venture partner must correspond 
with the type of award (e.g., to be eligible for a SDVOSB contract, a 
SDVOSB joint venture partner must be the managing venturer of the joint 
venture).
Sections 128.403 Through 128.408 (Former Sec. Sec.  125.21 Through 
125.26)
    Proposed Sec. Sec.  128.403 (former Sec.  125.21, addressing 
requirements not available as VOSB or SDVOSB contracts), 128.405 
(former Sec.  125.23, addressing sole source contracts), and 128.406 
(former Sec.  125.24, addressing VOSB or SDVOSB contracts at or below 
the simplified acquisition threshold) generally mirrored SBA's former 
requirements but distinguished VA procurements from all other 
procurements, where necessary.
    Proposed Sec.  128.403 provided that VA procurements are governed 
by the VAAR and that for non-VA SDVOSB procurements, a contracting 
activity was limited in which procurements could be made available as 
SDVOSB contracts based on the requirements of 18 U.S.C. 4124 or 4125 
(awards to Federal Prison Industries, Inc.), 41 U.S.C. 8501 (awards to 
Javits-Wagner-O'Day Act participating non-profit agencies for the blind 
and severely disabled), and the procurement's current acceptance in 
8(a) BD program. SBA did not receive any comments on this section and 
is implementing it as proposed.
    Proposed Sec.  128.404(d) added a requirement to SBA's existing 
regulations, prohibiting agencies from requiring one or more 
certifications in addition to its VOSB/SDVOSB certification. SBA has 
consistently interpreted the authority in the Small Business Act for 
socioeconomic set-asides to prohibit an agency from requiring multiple 
certifications (i.e., SDVOSB, 8(a), HUBZone, WOSB). This policy is 
already reflected in SBA's regulations at Sec.  125.2(e)(6)(i) with 
respect to set-aside orders under multiple award contracts, and SBA is 
in the process of amending its 8(a), HUBZone, and WOSB regulations to 
reflect this policy as well. See 87 FR 55642. Accordingly, SBA is 
implementing this provision as proposed.
    Proposed Sec.  128.407 incorporated the provision at former Sec.  
125.25, permitting the SBA Administrator to appeal a contracting 
officer's decision not to make a particular requirement available for 
award as an SDVOSB sole source or a SDVOSB set-aside contract. SBA 
received no comments on this section and adopts it as proposed.
    Proposed Sec.  128.408 incorporated the requirements at former 
Sec.  125.26, describing the procedures applicable to the 
Administrator's appeal authority provided in former Sec.  125.25. SBA 
received no comments on this section and adopts it as proposed.

Subpart E--Protests Concerning VOSBs and SDVOSBs

Section 128.500 What are the requirements for filing a VOSB or SDVOSB 
status protest? (New)
    Proposed Sec.  128.500 addressed status protests for VOSBs and 
SDVOSBs. Prior to this final rule, SBA's Director of Government 
Contracting processed all status protests of self-certified SDVOSBs for 
non-VA contracts in accordance with 13 CFR part 125, and SBA's OHA 
heard all challenges to a VOSB or SDVOSB's inclusion in the VA database 
in accordance with 38 U.S.C. 8127(f)(6)(B)(i). However, NDAA 2021 
transferred the entirety of 38 U.S.C. 8127(f) to 15 U.S.C. 657f and 
authorized OHA to decide all status protests of VOSBs and SDVOSBs, 
regardless of the procuring agency. Accordingly, proposed part 128 did 
not include the SDVOSB status protest requirements described in former 
Sec. Sec.  125.27 through 125.31. Proposed Sec.  128.500(a) provided 
that OHA would hear protests challenging a VOSB or SDVOSB's inclusion 
in the certification database

[[Page 73407]]

based on the status of the concern as a small business concern or the 
ownership or control of the concern, in accordance with part 134. 
Proposed Sec.  128.500(b) clarified that there were separate procedures 
for size protests and status protests.
    The final rule adds paragraph (c), which provides that when 
challenging the SDVOSB status of a joint venture, the managing SDVOSB 
party to the joint venture must be a certified SDVOSB as of the date of 
the joint venture's initial offer, including price, for the SDVOSB 
contract and compliance with the joint venture agreement requirements 
set forth in Sec.  128.402(c) is determined as of the date of the final 
proposal revision for negotiated acquisitions and final bid for sealed 
bidding.

Subpart F--Penalties and Retention of Records

    Proposed Sec. Sec.  128.600 and 128.601 adopted SBA's regulations 
at former Sec. Sec.  125.32 and 125.33 and revised these sections to 
add references to VOSBs. SBA received no comments on these sections. 
SBA is implementing Sec.  128.600 as proposed. In this final rule, SBA 
has deleted proposed Sec.  128.601, because SBA believes it was 
unnecessary and potentially confusing, given the new requirements for 
firms to be certified to receive VOSB and SDVOSB contracts.

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

Section 128.700 How does a VOSB obtain Federal surplus personal 
property? (Former Sec.  125.100)
    The Veterans Small Business Enhancement Act provides that VOSBs 
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. Proposed Sec.  128.700(a)(1) 
reflected the transfer of certification to SBA as mandated by NDAA 
2021. SBA did not receive any comments on this section and is 
implementing Sec.  128.700 as proposed.

Parts 121, 125, and 134

    This final rule amends references to the current SDVOSB program in 
part 121. These amendments correspond to the new part 128.
    SBA amends the definition of ``similarly situated entity'' in Sec.  
125.1 to clarify that a subcontractor must be certified as VOSB or 
SDVOSB in order to qualify as a similarly situated entity for purposes 
of complying with the limitations on subcontracting. The final rule 
also amends Sec.  125.6(a) to clarify that the limitations on 
subcontracting apply to VOSB contracts. The VA statute at 38 U.S.C. 
8127(k) provides that the limitations on subcontracting in section 46 
of the Small Business Act (15 U.S.C. 657s), including the definition of 
the term ``similarly situated entity,'' ``shall apply with respect to a 
small business concern owned and controlled by veterans that is awarded 
a contract under this section.'' These amendments are meant to ensure 
that SBA's regulations are consistent with this statutory provision.
    SBA also amends 13 CFR part 125 to remove the SDVOSB regulations in 
subparts A through F, consisting of Sec. Sec.  125.12 through 125.100.
    SBA amends part 134 to reflect updated OHA appeal and protest 
procedures in accordance with NDAA 2021, which transferred the entirety 
of 38 U.S.C. 8127(f) to 15 U.S.C. 657f and authorized OHA to decide all 
status protests of VOSBs and SDVOSBs, regardless of the procuring 
agency, and to decide all challenges to inclusion in the SBA 
certification database. In the proposed rule, SBA stated that revisions 
to part 134 would likely occur through a separate direct final rule. In 
response to this statement, one commenter strongly urged SBA to include 
amendments to part 134 in the final rule to clarify OHA's role in 
deciding all VOSB and SDVOSB status protests per NDAA 2021. SBA agrees 
with this comment and believes there is good cause to include 
amendments to part 134 in this rule because the revisions reflect 
statutory requirements and do not substantially alter the existing 
processes used by OHA. In the interest of efficiency and continuity, 
SBA chooses to revise part 134 in this final rule rather than through a 
separate rulemaking.
    The final rule amends Sec.  134.102, the rules for establishing 
OHA's jurisdiction, to remove paragraph (q), and to revise paragraphs 
(u) and (v). Previous paragraph (q) applied to appeals from the SDVOSB 
protests decided under part 125 and was deleted because it is now 
obsolete. Revised Sec.  134.102(u) addresses protests of eligibility 
for inclusion in the Veteran Small Business Certification Program, and 
revised Sec.  134.102(v) addresses appeals of denials of certification 
in and decertification from the Veteran Small Business Certification 
Program.
    The final rule amends Sec.  134.201, governing the scope the rules 
of Subpart B of part 134, by removing paragraph (b)(3) and revising 
paragraphs (b)(8) and (b)(9). Revised Sec.  134.201(b)(8) provides that 
the rules of practice for protests of eligibility for inclusion in the 
Veteran Small Business Certification Program are in subpart J of part 
134; revised Sec.  134.201(b)(9) provides that the rules of practice 
for appeals of denials and cancellations of certification for inclusion 
in the Veteran Small Business Certification Program are in subpart K of 
part 134.
    The final rule deletes subpart E of part 134, which applied to 
appeals from the SDVOSB protests decided under part 125, because it is 
now obsolete.
    Finally, the final rule revises subparts J and K of part 134 to 
reflect the transfer of authority for certifying VOSBs and SDVOSBs from 
VA to SBA. As stated above, revised subpart J addresses protests of 
eligibility for inclusion in the Veteran Small Business Certification 
Program, and revised subpart K addresses appeals of denials and 
cancellations of certification for inclusion in the Veteran Small 
Business Certification Program.

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 
final 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 VOSBs and SDVOSBs.
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

[[Page 73408]]

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 VOSBs and SDVOSBs 
seeking sole source and set-aside contracts across the Federal 
Government. This regulation is intended to replace VA's existing 
regulations governing the verification of VOSBs and SDVOSBs for sole 
source or set-aside contracts awarded by VA. Prior to NDAA 2021, SDVOSB 
firms seeking to contract with Federal agencies other than VA only 
needed to self-certify their status. SDVOSB firms self-certified on the 
Transfer Date must apply within a one-year grace period after the 
Transfer Date.
    This final rule 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.
    This final rule will institute the same process of initial 
application, program examination, and recertification at the end of the 
applicant's three-year term of eligibility. Firms verified by VA prior 
to the Transfer Date will 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 will be 
required to meet all conditions of eligibility as described in the 
regulations such as program examinations and recertification 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 SBA's regulations implementing the Veteran Small Business 
Certification Program. VA existing regulations for VOSBs and SDVOSBs 
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 SDVOSBs 
that would be required to certify with SBA.
Benefit
    The benefit of the final regulation is a reduction in the ambiguity 
and uncertainty for contracting officers in the process of making 
Federal contract awards to eligible SDVOSB firms that were previously 
only required to self-certify. Under the existing system for agencies 
outside of VA, the burden of SDVOSB eligibility compliance is placed 
upon the awarding contracting officer. Contracting officers must review 
the documentation of the apparent successful offeror on a SDVOSB 
contract. Under this final 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 SDVOSB 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 Veteran Small Business Certification 
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 this final rule, SBA 
anticipates costs associated with self-certified SDVOSBs currently 
seeking contracts with the rest of the Federal Government. Previously, 
those firms only needed to self-certify their status to pursue SDVOSB 
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 SDVOSB 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 examination, and reapply for 
certification at the end of their eligibility period.
    To estimate the number of SDVOSB applicants within the first year 
of the certification, SBA reviewed firms actively registered as SDVOSBs 
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 Veteran Small Business Certification 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 SDVOSBs 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 SDVOSB in SAM will apply for certification 
within the first year of the Veteran Small Business Certification 
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 
SDVOSBs could apply for initial certification within the first year of 
the program. This estimate is based on 32,284 SDVOSB firms registered 
in SAM and excludes 10,816 firms registered in SAM but already verified 
by VA as of December 2021.

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

    Although the table above represents the entire population of self-
certified SDVOSBs, SBA does not believe all 21,468 firms will apply for 
certification in the first year. To estimate the total participation in 
the first year, SBA used 17,174 total firms or 80% of the total self-
certified SDVOSBs in SAM as a basis for determining program costs. The 
following table represents the estimated total number of program 
participant actions during the first five years of the Veteran Small 
Business Certification Program.

[[Page 73409]]



                                         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 final rule, SBA estimated ``time to 
complete'' for three types of certification actions: initial 
application, program examination, and recertification at the end of the 
eligibility period. For the initial application, SBA estimates that 
applicants will complete the application process in 1 hour, a program 
examination in 1 hour, and recertification in 1 hour. The estimated 
time to complete includes 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, was previously required to self-
certify, and requires minimum preparation prior to submission. 
Similarly, participants will be minimally burdened during program 
examinations and recertifications. During their period of eligibility, 
participants are 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 will have 
previously notified SBA of the change and already uploaded 
documentation to support eligibility. SBA's final rule does not require 
additional information or documents that the firm would not already 
have on hand and does not impose additional burdens on the participant. 
SBA received one comment stating that SBA's estimate for the time 
burden for applicants was lower than the actual time it would take, due 
to system issues and document submission requirements. SBA does not 
anticipate having system issues and intends to make the document 
submission requirements clear on the application platform, to allow 
applicants to be able to complete the process within one hour. 
Additionally, SBA plans to offer training courses and materials prior 
to application so that applicants are familiar with the process and 
documents required for submission.
    Hourly cost to the participant is based on the 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 will be $6,372,062. SBA estimates that an applicant's 
cost burden to apply and maintain eligibility for this 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 will not incur any start-up costs, 
operation or maintenance costs, service costs, or require additional 
capital as a result of this final 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 estimates the cost to the government of implementing the 
certification program to be $30M across fiscal year FY2022 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 FY2021 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.

[[Page 73410]]

3. What are the alternatives to this rulemaking?
    This final rule implements specific statutory provisions in Section 
862 of the 2021 NDAA. There are no alternatives that would meet the 
statutory requirements.

Executive Order 12988

    This final rule meets applicable standards set forth in sections 
3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to 
minimize litigation, eliminate ambiguity, and reduce burden. The action 
does not have retroactive or preemptive effect.

Executive Order 13132

    This final 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 final rule does not have tribal implications under Executive 
Order 13175, Consultation and Coordination with Indian Tribal 
Governments, because it does 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 
considered 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?
    SBA published a proposed rule in the Federal Register on July 6, 
2022 (87 FR 40141). The proposed rule solicited public comments to 
assist SBA in drafting a final rule to implement a Veteran Small 
Business Certification Program. SBA received 168 comments from 90 
commenters in response to the proposed rule (Regulations.Gov Docket 
#SBA-2022-0007). SBA has reviewed all input from interested 
stakeholders while drafting this 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 the 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 VOSB and SDVOSB 
firms, SBA intends to collect information from VOSB and SDVOSB 
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 VA CVE's currently approved information 
collection (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 final rule will 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 Veteran Small Business Certification Program. As a result of these 
changes, the final rule eliminates SDVOSB self-certification and sets 
the standards for certification by SBA. SBA anticipates that these 
changes will impact self-certified firms; however, this impact would be 
minimal as this information is already held by applicants during the 
ordinary course of business, was previously required for self-
certification, and would require minimum preparation prior to 
submission.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires an 
agency to consider the potential economic impact that a draft 
regulatory action may have on small entities. Agencies must prepare an 
initial RFA (IRFA) for any proposed rulemakings and a final RFA (FRFA) 
for final rulemakings when such rulemakings are subject to notice and 
comment procedures under section 553(b) of the Administrative Procedure 
Act. Section 605 of the RFA permits an agency to forgo such analyses by 
certifying a draft rulemaking that is not expected to have a 
significant economic impact or not expected to impact a substantial 
number of small entities.

[[Page 73411]]

Generally, an agency's certification must include a statement providing 
the factual basis for this determination, such as a description of the 
affected entities and an estimate of the cost of the impacts that 
justify the ``no impact'' certification.
    SBA, hereby, certifies to the Chief Counsel of Advocacy of SBA and 
others that the instant final rulemaking will not have a significant 
economic impact on a substantial number of small entities. SBA 
previously certified that the instant rulemaking would likely not have 
a significant economic impact on a substantial number of small 
entities. See 87 FR 40141, 40150. SBA did not receive any comments 
during the public comment period disputing this certification. 
Immediately below, SBA sets forth the factual basis for this final 
certification by addressing the following questions: (1) What are the 
reasons for and objectives of the rule?; (2) What are SBA's description 
and estimate of the number of small businesses to which the rule will 
apply?; (3) What are the projected reporting, recordkeeping, and other 
compliance requirements of the rule?; (4) What are the relevant Federal 
rules that may duplicate, overlap, or conflict with the rule?; and (5) 
What alternatives will allow the Agency to accomplish its regulatory 
objectives while minimizing the impact on small businesses?
1. What are the reasons for and objective of the rule?
    This final 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 require the transfer and consolidation of VOSB and SDVOSB 
certification operations to SBA. Section 862 of NDAA 2021 amends 
sections 36 and 36A of the Small Business Act to require SBA to certify 
the status of VOSBs and SDVOSBs seeking sole source and set-aside 
contracts across the Federal Government. This final rulemaking intends 
to replace VA's existing regulations governing the verification of 
VOSBs and SDVOSBs for sole source or set-aside contracts awarded by VA. 
Prior to NDAA 2021, SDVOSB firms seeking to contract with Federal 
agencies other than VA only needed to self-certify their status. SDVOSB 
firms that have self-certified on the Transfer Date, described herein, 
must apply within a one-year grace period after the Transfer Date for 
certification by SBA.
2. What are SBA's description and estimate of the number of small 
businesses to which the rule will apply?
    This final rulemaking will not have a significant economic impact 
on a substantial number of small entities. The instant rulemaking adds 
no additional burden to current participants in VA's VIP Verification 
Program, as the requirements for the new SBA certification program will 
be nearly identical to those of VA. The only change in this rule 
affecting small businesses is the requirement that is specific to 
SDVOSBs, wherein SDVOSBs must apply to SBA for certification for set-
aside and sole source awards. Before this rulemaking, there has been no 
Government-wide SDVOSB certification program. Firms seeking sole source 
or set-aside contracts with Federal agencies other than the VA only 
needed to self-certify as SDVOSBs.
    To estimate the number of SDVOSB applicants within the first year 
of the certification, SBA reviewed firms actively registered as SDVOSBs 
in the System for Award Management (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 Veteran-Owned Small Business 
Federal Contracting Program for the purposes of this analysis because 
registration in SAM is required for all businesses seeking to contract 
with the Federal Government, registrants may select to represent 
themselves as SDVOSBs 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 SDVOSB in SAM will apply for certification within the first year of 
the Veteran-Owned Small Business Federal Contracting 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 21,500 self-certified 
SDVOSBs could apply for initial certification within the first year of 
the program. This estimate is based on 32,284 SDVOSB firms registered 
in SAM and excludes 10,816 firms registered in SAM but already verified 
by VA as of December 2021.
3. What are the projected reporting, recordkeeping, and other 
compliance requirements of the rule?
    SBA identified three types of reporting required by this final 
rule: initial application, program examination, and recertification at 
the end of the eligibility period.This final rulemaking will institute 
the same process of initial application, program examination, and 
recertification at the end of the applicant's three-year term of 
eligibility that currently exists for VA's VIP Verification Program. In 
short, the process for initial application, examination, and 
recertification will largely remain the same, albeit managed now by 
SBA. For the initial application, applicants will be required to enter 
information into SBA's online application platform and submit 
supporting documentation to prove eligibility. However, these entries 
will closely mirror the existing entries for VA's VIP Verification 
Program. Further, the information required for initial application as 
VOSB and SDVOSB is already held by the firms during the ordinary course 
of business and would require minimum preparation prior to submission. 
Firms likely already have the documentation required for application, 
examination, and recertification through the transferred program 
because either such documentation was already required for 
certifications through VA's VIP Verification Program or such 
documentation is likely needed for a firm to knowingly self-certify as 
an SDVOSB.
    For the program examinations and recertifications, participants 
would be minimally burdened. The rule does not require recordkeeping 
beyond what firms do in the ordinary course of business.
    For compliance, 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 is aware of reporting, recordkeeping and other compliance 
requirements and is therefore minimizing the impact on participants in 
the program by accepting verifications already received from VA's CVE 
program during the term of the firm's eligibility period, granting up 
to a one-year extension on recertification for verified firms, and by 
providing SDVOSB firms that self-certify a one-year grace period to 
apply for certification.

[[Page 73412]]

4. What are the relevant Federal rules, which may duplicate, overlap, 
or conflict with the rule?
    VA regulations at 38 CFR part 74 currently govern the qualification 
of veteran-owned and service-disabled veteran-owned small businesses 
for the VA's Veterans preference programs in Federal contracting. This 
regulation is intended to replace VA's existing regulations governing 
the verification of VOSBs and SDVOSBs for sole source or set-aside 
contracts awarded by VA.
5. What alternatives will allow the Agency to accomplish its regulatory 
objectives while minimizing the impact on small entities?
    This final rule is intended to maintain the contracting program for 
SDVOSBs and VOSBs under the requirements of Section 862 of NDAA 2021. 
SBA is minimizing the impact on VOSBs and SDVOSBs by accepting 
verifications already received from VA's CVE program during the term of 
the firm's eligibility period, granting up to a one-year extension on 
recertification for verified firms, and by providing SDVOSB firms that 
self-certify a one-year grace period to apply for certification. The 
additional costs to VOSBs and SDVOSBs for certification will likely be 
minimal, because the required documentation (e.g., articles of 
incorporation, bylaws, stock ledgers or certificates, tax records) is 
already maintained in the normal course of business and is used to 
support existing certifications and self-certifications. Moreover, 
applicants must already provide this information to VA's CVE for 
verification. SBA does not anticipate that these changes will impact 
the content of the information currently collected.
    In sum, SBA believes that this final rulemaking comprises 
provisions to preserve the benefits of VA's contracting programs for 
VOSBs and SDVOSBs while minimizing costs and satisfying the 
requirements of Section 862 of NDAA 2021.
    For the aforementioned reasons, SBA certifies that the instant 
final rulemaking will not 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 amends 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 in paragraph (h)(1)(ii) by removing the 
references to ``Sec.  125.18(b)(2) and (3)'' and adding in their place 
a reference to ``Sec.  128.402(c) and (d)''.


Sec.  121.404  [Amended]

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

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.


0
5. Amend Sec.  125.1 by revising the definition of ``Similarly situated 
entity'' to read as follows:


Sec.  125.1   What definitions are important to SBA's Government 
Contracting Programs?

* * * * *
    Similarly situated entity means a subcontractor that has the same 
small business program status as the prime contractor. This means that: 
For a HUBZone contract, a subcontractor that is a certified HUBZone 
small business concern; for a small business set-aside, partial set-
aside, or reserve, a subcontractor that is a small business concern; 
for a SDVOSB contract, a subcontractor that is a certified SDVOSB; for 
a VOSB contract, a subcontractor that is a certified VOSB; for an 8(a) 
contract, a subcontractor that is a certified 8(a) BD Program 
Participant; for a WOSB or EDWOSB contract, a subcontractor that is a 
certified WOSB or EDWOSB. In addition to sharing the same small 
business program status as the prime contractor, a similarly situated 
entity must also be small for the NAICS code that the prime contractor 
assigned to the subcontract the subcontractor will perform.
* * * * *


Sec.  125.6  [Amended]

0
6. Amend Sec.  125.6 by:
0
a. Removing ``an SDVO SBC contract,'' in paragraph (a) introductory 
text and adding in its place ``an SDVOSB contract, a VOSB contract,''; 
and
0
b. Removing ``SDVO,'' in paragraph (f)(1)(v) and adding in its place 
``SDVOSB, VOSB,''.

Subparts A through F [Removed]

0
7. Remove subparts A through F, consisting of Sec. Sec.  125.12 through 
125.100.

0
8. Add part 128 to read as follows:

PART 128--VETERAN SMALL BUSINESS 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 Veteran Small Business 
Certification Program?
Subpart B--Eligibility Requirements for the Veteran Small Business 
Certification Program
128.200 What are the requirements a concern must meet to qualify as 
a VOSB or SDVOSB?
128.201 What other eligibility requirements apply for certification 
as a VOSB or SDVOSB?
128.202 Who does SBA consider to own a VOSB or SDVOSB?
128.203 Who does SBA consider to control a VOSB or SDVOSB?
128.204 What size standards apply to VOSBs and SDVOSBs?
Subpart C--Certification of VOSB or SDVOSB Status
128.300 How is a concern certified as a VOSB or SDVOSB?
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 VOSB or SDVOSB 
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 
after a denied certification or decertification?

[[Page 73413]]

128.306 How does a concern maintain its VOSB or SDVOSB 
certification?
128.307 What are a Participant's ongoing obligations to SBA?
128.308 What is a program examination and what will SBA examine?
128.309 What are the ways a Participant may exit the Veteran Small 
Business Certification Program?
128.310 What are the procedures for decertification?
Subpart D--Federal Contract Assistance
128.400 What are VOSB and SDVOSB contracts?
128.401 What requirements must a VOSB or SDVOSB meet to submit an 
offer on a contract?
128.402 When may a joint venture submit an offer on a VOSB or SDVOSB 
contract?
128.403 What requirements are not available for VOSB or SDVOSB 
contracts?
128.404 When may a contracting officer set aside a procurement for 
VOSBs or SDVOSBs?
128.405 When may a contracting officer award a sole source contract 
to a VOSB or SDVOSB?
128.406 Are there VOSB or SDVOSB 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 a SDVOSB contract?
128.408 What is the process for such an appeal?
Subpart E--Protests Concerning VOSBs and SDVOSBs
128.500 What are the requirements for filing a VOSB or SDVOSB status 
protest?
Subpart F--Penalties and Retention of Records
128.600 What are the requirements for representing VOSB or SDVOSB 
status, and what are the penalties for misrepresentation?
Subpart G--Surplus Personal Property for Veteran-Owned Small Business 
Programs
128.700 How does a VOSB 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 (VOSB) and Service-Disabled Veteran-Owned Small 
Business Concerns (SDVOSB) 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 SDVOSBs 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 VOSB and SDVOSBs. This 
part implements these mechanisms and ensures that the program created, 
referred to as the Veteran Small Business 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 SDVOSBs. In addition, 
48 CFR chapter 8 authorizes VA contracting officers to restrict 
competition or award sole source contracts or orders to eligible VOSBs 
and SDVOSBs.


Sec.  128.102  What definitions are important in the Veteran Small 
Business Certification Program?

    Applicant means a firm applying for certification in the Veteran-
Owned Small Business Contracting Program.
    Certification database means the database of certified VOSBs and 
SDVOSBs eligible to participate in the Veteran Small Business 
Certification Program.
    Contracting officer has the meaning given such term in section 
2101(1) of the Office of Federal Procurement Policy Act (41 U.S.C. 
2101(1)).
    Day-to-day operations means the marketing, production, sales, and 
administrative functions of the firm.
    Employee Stock Ownership Plan (ESOP) has the meaning given such 
term in section 4975(e)(7) of the Internal Revenue Code of 1986 (26 
U.S.C. 4975(e)(7)).
    Negative control includes, but is not limited to, instances where a 
non-qualifying-veteran has the ability, under the concern's governing 
documents (e.g., charter, by-laws, operating agreement, or 
shareholder's agreement), to prevent a quorum or otherwise block action 
by the board of directors or qualifying veteran owner(s).
    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 small business that has been certified by SBA 
as eligible to participate in the Veteran Small Business Certification 
Program or verified by VA's Center for Verification and Evaluation 
prior to January 1, 2023, and appearing in the certification database.
    Permanent caregiver, for purposes of this part, means 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.
    Qualifying veteran means a veteran upon which a VOSB's eligibility 
is based, or in the case of an SDVOSB, a service-disabled veteran (or 
in the case of a veteran with permanent and severe disability, the 
spouse or permanent caregiver of such veteran) (as those terms are 
defined in this part) upon which a SDVOSB's eligibility is based.
    Service-connected has the meaning given that term in 38 U.S.C. 
101(16).
    Service-disabled veteran means a veteran who possesses either a 
valid

[[Page 73414]]

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-Owned Small Business Concern (SDVOSB) 
means a small business concern that meets the requirements described in 
Sec.  128.200(b).
    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 (SBC) means, a concern that, with its 
affiliates, meets the size standard corresponding to any North American 
Industry Classification System (NAICS) code listed in its SAM profile, 
pursuant to part 121 of this chapter. At the time of contract offer, a 
VOSB or SDVOSB 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).
    System for Award Management (SAM) (or any successor system) means a 
federal system available at www.sam.gov that consolidates various 
federal procurement systems (e.g., Central Contractor Registration, 
Federal Agency Registration, Online Representations and Certifications 
Application, Excluded Parties List System) and the Catalog of Federal 
Domestic Assistance into one system.
    VA means the U.S. Department of Veterans Affairs.
    Veteran has the meaning given such 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, 
located at 48 CFR chapter 8, that specifically govern requirements 
exclusive to VA prime and subcontracting actions.
    Veteran-Owned Small Business Concern (VOSB) means a small business 
concern that meets the requirements described in Sec.  128.200(a).

Subpart B--Eligibility Requirements for the Veteran Small Business 
Certification Program


Sec.  128.200  What are the requirements a concern must meet to qualify 
as a VOSB or SDVOSB?

    (a) Qualification as a VOSB. To qualify as a VOSB, a business 
entity must be:
    (1) A small business concern as defined in part 121 of this chapter 
under the size standard corresponding to any NAICS code listed in its 
SAM profile;
    (2) Not less than 51 percent owned and controlled by one or more 
veterans.
    (b) Qualification as an SDVOSB. To qualify as an SDVOSB, a business 
entity must be:
    (1) A small business concern as defined in part 121 of this chapter 
under the size standard corresponding to any NAICS code listed in its 
SAM profile;
    (2) Not less than 51 percent owned and 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) VOSB and SDVOSB certification requirement. (1) A concern must 
be certified as a VOSB or SDVOSB pursuant to Sec.  128.300 in order to 
be awarded a VOSB or SDVOSB set-aside or sole source contract. Any 
small business concern that submits a complete certification 
application to SBA on or before December 31, 2023, shall be eligible to 
self-certify for SDVOSB sole source or set-aside contracts (other than 
VA contracts) until SBA declines or approves the concern's application. 
Any small business concern that does not submit a complete SDVOSB 
certification application to SBA on or before December 31, 2023, will 
no longer be eligible to self-certify for SDVOSB sole source or set-
aside contracts effective January 1, 2024.
    (2) Other small business concerns that meet the eligibility 
requirements of this part but do not seek SDVOSB set-aside or sole 
source contracts may continue to self-certify their SDVOSB status, 
receive prime contract or subcontract awards that are not SDVOSB set-
aside or sole source contracts, and count toward an agency's goal for 
SDVOSB awards.


Sec.  128.201  What other eligibility requirements apply for 
certification as a VOSB or SDVOSB?

    (a) Suspension and debarment. (1) In order to be eligible for VOSB 
or SDVOSB certification and to remain certified, the concern and any of 
its owners must not have an active exclusion in SAM.
    (2) An Applicant or Participant must immediately notify SBA of any 
active exclusion.
    (3) If, after certifying a Participant, SBA discovers that a firm 
has been suspended from Federal Government contracting, SBA will 
propose the firm for decertification pursuant to Sec.  128.310.
    (4) If, after certifying a Participant, SBA discovers that a firm 
has been debarred from federal government contracting, SBA will remove 
the Participant from the certification database immediately, 
notwithstanding the provisions of Sec.  128.310.
    (b) False statements. If, during the processing of an application, 
SBA determines, by a preponderance of the evidence standard, that an 
Applicant or its representative 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 a Participant, SBA discovers that a 
firm or its representative knowingly submitted false information, SBA 
will initiate proceedings to decertify the Participant and remove it 
from the certification database pursuant to Sec.  128.310. Whenever SBA 
determines that the Applicant or representative of an Applicant 
submitted false information, the matter will be referred to the SBA 
Office of Inspector General for review. In addition, SBA may request 
that Government-wide debarment proceedings be initiated by the agency.
    (c) Financial obligations. An Applicant is not eligible for 
certification as a VOSB or SDVOSB if the concern, or any of the 
principals, fail to pay significant financial obligations owed to the 
Federal Government, including unresolved tax liens and defaults on 
Federal loans, or other government-assisted financing. An Applicant may 
become eligible for certification as a VOSB or SDVOSB 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 a Participant, SBA discovers that the 
Participant or any principals have failed to pay significant financial

[[Page 73415]]

obligations owed to the Federal Government, SBA will initiate 
proceedings to decertify the Participant and remove it from the 
certification database pursuant to Sec.  128.310.


Sec.  128.202  Who does SBA consider to own a VOSB or SDVOSB?

    To qualify as a VOSB, one or more veterans must unconditionally and 
directly own at least 51 percent of the concern. To qualify as a 
SDVOSB, one or more service-disabled veterans must unconditionally and 
directly own at least 51 percent of the concern.
    (a) Direct ownership. To be considered direct ownership, the 
qualifying veteran must own 51 percent of the concern directly, and not 
through another business entity or trust (including an ESOP). However, 
ownership by a trust, such as a living trust, may be considered direct 
ownership where the trust is revocable, and qualifying veterans are the 
grantors, trustees, and the current beneficiaries of the trust.
    (b) Unconditional ownership. To be considered unconditional, 
ownership must not be subject to any conditions, 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).
    (1) 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.
    (2) In determining unconditional ownership, SBA will disregard any 
unexercised stock options or similar agreements held by qualifying 
veterans. However, any unexercised stock options or similar agreements 
(including rights to convert non-voting stock or debentures into voting 
stock) held by non-veterans will be treated as exercised, except for 
any ownership interests which are held by investment companies licensed 
under 15 U.S.C. 681 et. seq.
    (3) A right of first refusal granting the non-qualifying-veteran 
the contractual right to purchase the ownership interests of the 
qualifying veteran, does not affect the unconditional nature of 
ownership, if the terms follow normal commercial practices. If those 
rights are exercised by the non-qualifying-veteran, a Participant must 
notify SBA in accordance with Sec.  128.307. If the exercise of those 
rights results in the qualifying veteran(s) owning less than 51% of the 
concern, SBA will initiate decertification pursuant to Sec.  128.310.
    (c) Ownership of a partnership. In the case of a concern that is a 
partnership, at least 51% of aggregate voting interest must be 
unconditionally owned by one or more qualifying veterans. The ownership 
must be reflected in the concern's partnership agreement.
    (d) 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 
qualifying veterans.
    (e) 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 qualifying 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 qualifying veterans.
    (f) Change of ownership. A Participant may change its ownership or 
business structure so long as one or more qualifying veterans own and 
control it after the change. A Participant must notify SBA of a change 
of ownership in accordance with Sec.  128.307 and attest to its 
continued eligibility.
    (g) Dividends and distributions. One or more qualifying 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, and a qualifying veteran's ability to share in the 
profits of the concern must be commensurate with the extent of his/her 
ownership interest in that 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
    (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, 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, 3 years after 
the date of the death of the veteran.


Sec.  128.203  Who does SBA consider to control a VOSB or SDVOSB?

    (a) General. To be an eligible VOSB, the management and daily 
business operations of the concern must be controlled by one or more 
veterans. To be an eligible SDVOSB, 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 qualifying veterans means that one or more 
qualifying veterans controls both the long-term decision-making and the 
day-to-day operations of the Applicant or Participant.
    (b) Managerial position and experience. A qualifying veteran must 
hold the highest officer position in the concern (usually President or 
Chief Executive Officer) and must have managerial experience of the 
extent and complexity needed to control the concern. The qualifying 
veteran need

[[Page 73416]]

not have the technical expertise or possess the required license to be 
found to control of the concern if the qualifying 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 qualifying veterans 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 qualifying veterans must serve 
as managing members, with control over all decisions of the limited 
liability company.
    (e) Control over a corporation. One or more qualifying veterans 
must control the Board of Directors of the concern.
    (1) SBA will deem qualifying veterans to control the Board of 
Directors where:
    (i) One qualifying veteran owns 100% of all voting stock and is on 
the Board of Directors;
    (ii) One qualifying veteran owns at least 51% of all voting stock, 
the qualifying veteran is on the Board of Directors, and no 
supermajority voting requirements exist for shareholders to approve 
corporation actions. Where supermajority voting requirements are 
provided for in the concern's articles of incorporation, its by-laws, 
or by state law, the qualifying veteran must own at least the percent 
of the voting stock needed to overcome any such supermajority voting 
requirements; or
    (iii) Two or more qualifying veterans together own at least 51% of 
all voting stock, each such qualifying veteran is on the Board of 
Directors, no supermajority voting requirements exist, and the 
qualifying veteran shareholders can demonstrate that they have made 
enforceable arrangements to permit one qualifying veteran to vote the 
stock of all qualifying veterans as a block without a shareholder 
meeting. Where the concern has supermajority voting requirements, the 
qualifying veteran shareholders must own at least that percentage of 
voting stock needed to overcome any such supermajority ownership 
requirements.
    (2) Where a concern does not meet the requirements set forth in 
paragraph (e)(1) of this section, the qualifying veteran(s) 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 qualifying veteran and one is not, the 
qualifying 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-
qualifying-veteran Directors to control the Board of Directors, 
directly or indirectly; and
    (ii) Any Executive Committee of Directors must be controlled by 
qualifying veteran Directors unless the Executive Committee can only 
make recommendations to and cannot independently exercise the authority 
of the Board of Directors.
    (iii) Non-qualifying-veterans may be found to control or have the 
power to control in circumstances where non-qualifying-veterans control 
the Board of Directors of the Applicant or Participant, either directly 
through majority voting membership, or indirectly, where the by-laws 
allow non-qualifying-veterans to prevent a quorum or block actions 
proposed by the qualifying veterans.
    (3) Non-voting, advisory, or honorary Directors may be appointed 
without affecting qualifying veterans' control of the Board of 
Directors.
    (4) Arrangements regarding the structure and voting rights of the 
Board of Directors must comply with applicable state law.
    (f) Supermajority requirements. One or more qualifying veteran(s) 
must meet all supermajority voting requirements regarding the 
management and daily business operations of the concern, regardless of 
the legal structure of the firm. An Applicant must inform the SBA, when 
applicable, of any supermajority 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 supermajority voting requirements.
    (g) Unexercised rights. A qualifying veteran's unexercised right to 
cause a change in the control or management of the concern does not in 
itself constitute control, regardless of how quickly or easily the 
right could be exercised.
    (h) Limitations on control by non-qualifying-veterans. (1) A non-
qualifying-veteran must not:
    (i) Exercise actual control or have the power to control the 
concern;
    (ii) Have business relationships that cause such dependence that 
the qualifying veteran cannot exercise independent business judgment 
without great economic risk;
    (iii) Control the Applicant or Participant through loan 
arrangements (which does not include providing a loan guaranty on 
commercially reasonable terms);
    (iv) Provide critical financial or bonding support or a critical 
license to the Applicant or Participant, which directly or indirectly 
allows the non-qualifying-veteran significantly to influence business 
decisions of the qualifying veteran.
    (2) A non-qualifying-veteran may be involved in the management of 
the concern, and may be a stockholder, partner, limited liability 
member, officer, and/or director of the concern. However, a non-
qualifying-veteran generally may not:
    (i) Be a former employer, or a principal of a former employer, of 
any qualifying veteran, unless the concern demonstrates that the 
relationship between the former employer or principal and the 
qualifying veteran does not give the former employer actual control or 
the potential to control the Applicant or Participant and such 
relationship is in the best interests of the concern; or
    (ii) Receive compensation from the concern in any form as a 
director, officer, or employee, that exceeds the compensation to be 
received by the qualifying veteran who holds the highest officer 
position (usually Chief Executive Officer or President), unless the 
concern demonstrates that the compensation to be received by the non-
qualifying veteran is commercially reasonable or that the qualifying 
veteran has elected to take lower compensation to benefit the concern.
    (i) Limitation on outside obligations. The qualifying veteran who 
holds the highest officer position of the business concern may not 
engage in outside obligations that prevent the qualifying veteran from 
devoting the time and attention to the concern necessary to control its 
management and daily business operations. A qualifying veteran 
generally must devote full-time during the business's normal hours of 
operations, unless the concern demonstrates that the qualifying veteran 
has ultimate managerial and supervisory control over both the long-term 
decision making and day-to-day management of the concern. Where a 
qualifying veteran claiming to control a business concern devotes fewer 
hours to the business than its normal hours of operation, SBA will 
assume that the qualifying veteran does not control the concern, unless 
the concern demonstrates that the qualifying veteran has ultimate 
managerial and supervisory control over both the long-term decision 
making and day-to-day management of the business.
    (j) Exception for extraordinary circumstances. SBA will not find 
that a

[[Page 73417]]

lack of control exists where a qualifying veteran does not have the 
unilateral power and authority to make decisions regarding the 
following extraordinary circumstances:
    (1) Adding a new equity stakeholder;
    (2) Dissolution of the company;
    (3) Sale of the company or all assets of the company;
    (4) The merger of the company; and
    (5) Company declaring bankruptcy.
    (k) Exception for active duty. Notwithstanding the requirements of 
this section, where a qualifying veteran 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 qualifying veteran during the 
period of active duty. The concern must keep records evidencing the 
qualifying veteran's active duty status and the written designation of 
control and provide those documents to SBA.


Sec.  128.204  What size standards apply to VOSBs and SDVOSBs?

    (a) Time of certification. At the time of certification, a VOSB or 
SDVOSB must be a small business under the size standard corresponding 
to any NAICS code listed in its SAM profile. If SBA is unable to verify 
that an Applicant is small, SBA may deny the concern's application as a 
certified VOSB or SDVOSB, or SBA may request a formal size 
determination pursuant to part 121 of this chapter.
    (b) Time of contract offer. In connection with a VOSB or SDVOSB 
contract, a VOSB or SDVOSB must be small under the size standard 
corresponding to the NAICS code assigned to the contract at the time it 
submits its initial offer or response which includes price. To be 
eligible for a VOSB or SDVOSB multiple award contract, a VOSB or SDVOSB 
must be small pursuant to the requirements of Sec.  121.404(a)(1) of 
this chapter. If the contracting officer is unable to verify that the 
VOSB or SDVOSB is small, the contracting officer should submit a size 
protest to SBA in accordance with part 121 of this chapter.

Subpart C--Certification of VOSB or SDVOSB Status


Sec.  128.300  How is a concern certified as a VOSB or SDVOSB?

    A concern must apply to SBA for certification as a VOSB or SDVOSB. 
The concern must submit evidence that it is a small business owned and 
controlled by one or more qualifying veterans. SBA will consider the 
information provided by the concern in order to determine whether the 
concern qualifies. If SBA determines that a concern meets the 
eligibility requirements of a VOSB or SDVOSB, it will notify the 
concern and designate the concern as a certified VOSB or SDVOSB in the 
certification database.


Sec.  128.301  Where must an application be filed?

    An application for certification as a VOSB or SDVOSB must be 
electronically filed according to the instructions on SBA's website at 
www.sba.gov. Upon receipt of the Applicant's electronic submission, an 
acknowledgment message will be dispatched to the concern containing 
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 as a 
VOSB or SDVOSB.
    (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 such a request.
    (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.
    (d) An Applicant's eligibility will be based on the totality of 
circumstances, including facts set forth in the application, supporting 
documentation, any information received in response to any SBA request 
for clarification, any independent research conducted by SBA, and any 
changed circumstances. The Applicant bears the burden of proof to 
demonstrate its eligibility as a VOSB or SDVOSB.
    (e) The Applicant must inform SBA of any changed circumstances that 
occur during its application review and that could affect its 
eligibility for the program (e.g., change in size status, ownership, or 
control, filing of bankruptcy, or calling to active duty) and may 
withdraw its application at that time. Changed circumstances will be 
considered by SBA in determining an Applicant's eligibility and may 
constitute grounds for denial of the application. The D/GC may propose 
decertification for any VOSB or SDVOSB 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 reason(s) for denial and will inform the Applicant of any 
appeal rights.
    (g) If the D/GC approves the application, the period of program 
eligibility will be specified in the concern's certification letter.
    (h) SBA will send a copy of the decision letter to the electronic 
mail address provided with the application. SBA will consider any 
decision sent to this electronic mail address provided to have been 
received by the applicant concern. It is the responsibility of the 
Applicant to ensure all contact information is current in the 
certification database.


Sec.  128.303  What must a concern submit to apply for VOSB or SDVOSB 
certification?

    (a) To be certified by SBA as a VOSB or SDVOSB, a concern must 
provide documents and information demonstrating that it is owned and 
controlled by one or more qualifying 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 listed in its SAM profile. A 
list of the minimum required documents that must be submitted can be 
found on SBA's website at www.sba.gov on or before January 1, 2023.
    (b) Where an Applicant small business concern is a participant in 
the 8(a) Business Development (BD) Program and the individual upon whom 
8(a) BD Program eligibility is based is a qualifying veteran, the 
Applicant may use documentation of its most recent annual review, or 
documentation of its 8(a) BD Program acceptance if it has not yet had 
an annual review, in support of its application for certification as a 
VOSB or SDVOSB. An Applicant must certify that there have been no 
material changes in its ownership or control since its 8(a) BD Program 
certification or annual review and demonstrate that the individual(s) 
who own and control it are qualifying veterans.
    (c) A small business concern that is certified by the WOSB/EDWOSB 
Program and the individual(s) upon whom WOSB/EDWOSB Program eligibility 
is based is one or more qualifying veterans 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

[[Page 73418]]

since its WOSB certification or recertification and demonstrate that 
the individuals who own and control it are qualifying veterans.
    (d) If a concern was decertified or previously denied certification 
from the Veteran Small Business Certification Program 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 deny 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 deny the concern.
    (f) Participants must retain documentation demonstrating 
satisfaction of all qualifying requirements during the entire period of 
participation.


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

    An Applicant may appeal SBA's decision to deny an application for 
certification as a VOSB or SDVOSB by filing an appeal with the SBA's 
Office of Hearings and Appeals (OHA) in accordance with part 134 of 
this chapter. A denial or decertification based on the failure to 
provide sufficient evidence of the qualifying individual's status as a 
veteran or a service-disabled veteran is not subject to appeal to OHA.


Sec.  128.305  Can an Applicant or Participant reapply for 
certification after a denied certification or decertification?

    An Applicant that SBA denied certification or a Participant that 
SBA has decertified may submit an application for certification no 
sooner than ninety (90) calendar days from the date of final agency 
decision (i.e., the SBA decision if no appeal is filed or the decision 
of SBA's OHA where an appeal is filed pursuant to Sec.  128.304) if it 
believes that it has overcome all of the reasons for denial or 
decertification and is currently eligible.


Sec.  128.306  How does a concern maintain its VOSB or SDVOSB 
certification?

    (a) Any Participant seeking to remain certified must recertify its 
eligibility every 3 years. There is no limitation on the number of 
times a business may recertify. Participants may recertify within 120 
calendar days prior to the termination of their eligibility period. If 
the concern fails to recertify, SBA may decertify the firm at the end 
of their eligibility period.
    (b) The Participant must maintain its eligibility during its 
participation in the program and must inform SBA of any changes that 
may affect its eligibility within 30 calendar days in accordance with 
Sec.  128.307.
    (c) The Participant must respond to any program examination 
initiated by SBA to remain a certified VOSB or SDVOSB.
    (d) At the discretion of the Administrator (or designee), a 
Participant's eligibility period may be extended by a period of up to 
one year.


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

    Once certified, a VOSB or SDVOSB must notify SBA of any material 
changes that could affect its eligibility, within 30 calendar days of 
any such change, and attest to its continued eligibility. Material 
changes include, but are not limited to, a change in the firm's 
ownership, business structure, or control, filing of bankruptcy, or 
change in active duty status. The method for notifying SBA can be found 
on SBA's web page. A concern's failure to notify SBA of a material 
change may result in decertification, pursuant to Sec.  128.310. In 
addition, SBA may seek the imposition of penalties under Sec.  128.600.


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

    (a) General. A program examination is an investigation by SBA 
officials, which verifies the accuracy of any statement or information 
provided by a certified Participant. SBA 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. An 
examination may be conducted on a random, unannounced basis, or upon 
receipt of specific and credible information alleging that a 
Participant did not meet the eligibility requirements in this part when 
it was certified or no longer meets all of those requirements.
    (b) Scope of examination. SBA may review any information related to 
the concern's eligibility including, but not limited to, documentation 
related to the firm's legal structure, ownership, and control. 
Examiners may review any information previously provided to SBA and any 
additional information requested by SBA at the time of program 
examination. SBA may draw an adverse inference from a concern's failure 
to cooperate with a program examination or provide requested 
information and assume that the information that the concern failed to 
provide would demonstrate ineligibility, and decertify on this basis 
pursuant to Sec.  128.310.
    (c) Outcome of examination. Upon its completion of the examination, 
SBA will issue a written decision.
    (1) If SBA finds that the Participant does not qualify as a VOSB or 
SDVOSB, 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 
VOSB or SDVOSB, the original eligibility period remains in effect.


Sec.  128.309  What are the ways a Participant may exit the Veteran 
Small Business Certification Program?

    (a) Voluntary withdrawal. A Participant may voluntarily withdraw 
from the Veteran Small Business Certification Program at any time. Once 
a concern notifies SBA that it seeks to voluntarily withdraw from the 
program, SBA will decertify the concern and remove its designation as a 
certified VOSB or SDVOSB in the certification database. The concern may 
reapply for SDVOSB or VOSB certification ninety (90) calendar days 
after the date of decertification. At reapplication, the concern must 
demonstrate that it meets all eligibility requirements.
    (b) Decertification by SBA. SBA may decertify a Participant and 
remove its designation as a VOSB or SDVOSB in the certification 
database in accordance with Sec.  128.310. The concern may reapply for 
certification ninety (90) calendar days after the date of 
decertification. At reapplication, the concern must demonstrate that it 
meets all eligibility requirements.
    (c) Decertification pursuant to a protest. Any certified VOSB or 
SDVOSB that is found to be ineligible through a VOSB or SDVOSB status 
protest decision will be immediately removed from the certification 
database. The concern may reapply for certification ninety (90) 
calendar days after the date of decertification. At reapplication, the 
concern must demonstrate that it meets all eligibility requirements.
    (d) Decertification due to suspension or debarment. SBA may 
decertify a Participant immediately upon notice that the Participant or 
any of its owners has an active exclusion in SAM, pursuant to Sec.  
128.201.


Sec.  128.310  What are the procedures for decertification?

    (a) Proposed decertification. If SBA has information indicating 
that a Participant may not meet the eligibility requirements of this 
part, SBA may propose decertification of the concern. The notice of 
proposed decertification will notify the concern that it has 30

[[Page 73419]]

calendar days from the date it receives the letter to submit a written 
response to SBA explaining why the proposed ground(s) should not 
justify decertification. SBA will consider that written notice was 
provided if SBA sends the notice of proposed decertification to the 
concern at an email address in the Participant's certification database 
profile.
    (b) Response to proposed decertification. The Participant must 
submit a written response to the notice of proposed decertification 
within the timeframe specified in the notice. In this response, the 
Participant must rebut each of the reasons set forth by SBA in the 
notice of proposed decertification, and where appropriate, the rebuttal 
must include documents showing that the concern is eligible as of the 
date specified in the notice. If a Participant fails to cooperate with 
SBA or fails to provide the information requested, SBA may draw an 
adverse inference and assume that the information that the concern 
failed to provide would demonstrate ineligibility.
    (c) Decision. SBA will review the response and determine whether 
the Participant remains eligible. If SBA determines that the 
Participant is not eligible, the D/GC will issue a notice of 
decertification. The notice will set forth the specific facts and 
reasons for the decision, notify the concern of the right to appeal, 
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). If SBA finds that the concern is 
eligible, the Participant will continue to be designated as a VOSB or 
SDVOSB in the certification database.
    (d) Effect of decertification. On the effective date of a concern's 
decertification, SBA will remove its designation as a certified VOSB or 
SDVOSB 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 concern that has been decertified pursuant to this 
section may file an appeal with OHA in accordance with part 134 of this 
chapter. The decision on the appeal shall be final. If no appeal is 
filed, the D/GC's decision is the final agency decision.

Subpart D--Federal Contract Assistance


Sec.  128.400  What are VOSB and SDVOSB contracts?

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


Sec.  128.401  What requirements must a VOSB or SDVOSB meet to submit 
an offer on a contract?

    (a) Certification requirement. In order for a concern to submit an 
offer and be eligible for the award of a VOSB or SDVOSB set-aside or 
sole source contract, the concern must qualify as a small business 
concern under the size standard corresponding to the NAICS code 
assigned to the contract and be a certified VOSB or SDVOSB. Any small 
business concern that submits a complete certification application with 
to SBA on or before December 31, 2023, shall be eligible to self-
certify for SDVOSB sole source or set-aside contracts (other than VA 
contracts) until SBA declines or approves the concern's application. 
Any small business concern that does not submit to SBA a complete 
SDVOSB certification application to SBA on or before December 31, 2023, 
will no longer be eligible to self-certify for SDVOSB sole source or 
set-aside contracts effective January 1, 2024.
    (b) Joint ventures. A joint venture may submit an offer for a VOSB 
or SDVOSB contract if the joint venture meets the requirements set 
forth in Sec.  128.402.
    (c) Non-manufacturers. A certified VOSB or SDVOSB that is a non-
manufacturer may submit an offer on a VOSB or SDVOSB 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) VOSB or SDVOSB 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 a VOSB or SDVOSB's eligibility for the 
underlying Multiple Award Contract as of the date a business concern 
certifies its status as a certified VOSB or SDVOSB as part of its 
initial offer or response 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 VOSB or SDVOSB. For an unrestricted 
Multiple Award Contract or other Multiple Award Contract not 
specifically set aside for VOSBs or SDVOSBs, if a business concern is a 
certified VOSB or SDVOSB at the time of offer and contract-level 
recertification for the Multiple Award Contract, it is a VOSB or SDVOSB 
for goaling purposes for each order issued against the contract, unless 
a contracting officer requests recertification as a VOSB or SDVOSB for 
a specific order or Blanket Purchase Agreement or a contracting officer 
sets aside an order exclusively for VOSBs or SDVOSBs. 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 VOSBs 
or SDVOSBs, a concern must be a certified VOSB or SDVOSB at the time it 
submits its initial offer or response 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 VOSB or SDVOSB 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 VOSB or 
SDVOSB pool, concerns need not recertify their status as VOSBs or 
SDVOSBs (unless a contracting officer requests size certifications with 
respect to a specific order or Blanket Purchase Agreement).
    (B) VOSB or SDVOSB set-aside Multiple Award Contracts. For a 
Multiple Award Contract that is specifically set aside for VOSBs or 
SDVOSBs, if a business concern is a certified VOSB or SDVOSB at the 
time of offer and contract-level recertification for the Multiple Award 
Contract, it is a VOSB or SDVOSB for each order issued against the 
contract, unless a contracting officer requests recertification as a

[[Page 73420]]

VOSB or SDVOSB for a specific order or Blanket Purchase Agreement.
    (ii) SBA will determine VOSB or SDVOSB status at the time of 
initial offer or response which includes price, for an order or an 
Agreement issued against a Multiple Award Contract, if the contracting 
officer requests a new VOSB or SDVOSB certification for the order or 
Agreement.
    (iii) For an indefinite delivery, indefinite quantity (IDIQ), 
Multiple Award Contract, where concerns are not required to submit 
price as part of the offer for the IDIQ contract, size will be 
determined as of the date of initial offer, which may not include 
price.
    (2) Total set-aside contracts. The certified VOSB or SDVOSB 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 VOSBs or SDVOSBs. However, contracting 
officers, in their discretion, may require a 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 certified VOSB or SDVOSB 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 
VOSB or SDVOSB need not comply with any limitations on subcontracting 
or nonmanufacturer rule requirements. However, contracting officers, in 
their discretion, may require a concern to perform the applicable 
amount of work or comply with the nonmanufacturer rule for each order 
awarded under the contract.
    (4) Orders. The certified VOSB or SDVOSB 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 VOSBs or SDVOSBs.
    (5) Reserves. The certified VOSB or SDVOSB 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 VOSBs or SDVOSBs. However, the VOSB or SDVOSB 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 among VOSBs or SDVOSBs, and 
other-than-small business concerns.
    (e) Recertification. (1) A Participant that qualifies as a VOSB or 
SDVOSB at the time of initial offer response which includes price, 
including a Multiple Award Contract, is generally considered to be a 
VOSB or SDVOSB throughout the life of that contract. This means that if 
a VOSB or SDVOSB is certified at the time of initial offer for a 
Multiple Award Contract, then it will be considered a VOSB or SDVOSB 
for each order issued against the contract, unless a contracting 
officer requests a new VOSB or SDVOSB eligibility review in connection 
with a specific order. Where a concern is later decertified from the 
Veteran-Owned Small Business Contracting Program, the procuring agency 
may exercise options and still count the award as an award to a VOSB or 
SDVOSB. For a Multiple Award Contract, a concern that has been 
decertified from the Veteran-Owned Small Business Contracting Program 
may still be issued orders as a VOSB or SDVOSB unless the contracting 
officer requests recertification of VOSB or SDVOSB status in connection 
with the order. 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 VOSB or SDVOSB to the procuring agency or inform the 
procuring agency that it does not qualify as a VOSB or SDVOSB within 30 
calendar days of the novation approval. If the concern is not a VOSB or 
SDVOSB, the agency can no longer count the options or orders issued 
pursuant to the contract from that point forward towards its VOSB or 
SDVOSB 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 VOSB or SDVOSB status to the procuring 
agency or inform the procuring agency that it no longer qualifies as a 
VOSB or SDVOSB. If the contractor is not a VOSB or SDVOSB, the agency 
can no longer count the options or orders issued pursuant to the 
contract from that point forward towards its VOSB or SDVOSB 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 VOSB or SDVOSB status protest on the 
solicitation or contract, part 134 of this chapter describes the effect 
of the status determination on the contract award.
    (2) For the purposes of VOSB or SDVOSB 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 VOSB or SDVOSB 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 status as a certified VOSB or SDVOSB, 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 
VOSB or SDVOSB goals.
    (i) A business concern that did not certify itself as a VOSB or 
SDVOSB, either initially or prior to an option being exercised, may 
recertify itself as a VOSB or SDVOSB for a subsequent option period if 
it meets the eligibility requirements in this part at that time.
    (ii) 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. However, a concern that initially 
self-certified as an SDVOSB for the award of an SDVOSB contract may 
recertify as an SDVOSB only if it is currently a certified SDVOSB.
    (iii) 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.
    (iv) 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 
VOSB or SDVOSB contract must meet the applicable limitations on 
subcontracting requirements set forth in Sec.  125.6 of this chapter.
    (g) Ostensible subcontractor. Where a subcontractor that is not a 
certified VOSB or SDVOSB will perform the primary and vital 
requirements of a VOSB or SDVOSB contract, or where a

[[Page 73421]]

VOSB or SDVOSB prime contractor is unduly reliant on one or more small 
businesses that are not certified VOSBs or SDVOSBs to perform the VOSB 
or SDVOSB contract, the prime contractor is not eligible for award of 
that VOSB or SDVOSB contract.
    (1) When the subcontractor qualifies as small for the size standard 
assigned to the procurement, this issue may be grounds for a VOSB or 
SDVOSB status protest, as described in Sec.  134.1003(c) of this 
chapter. When the subcontractor is alleged to be other than small for 
the size standard assigned to the procurement, this issue may be 
grounds for a size protest under the ostensible subcontractor rule, as 
described at Sec.  121.103(h)(2) of this chapter.
    (2) SBA will find that a prime VOSB or SDVOSB contractor is 
performing the primary and vital requirements of a contract or order, 
and is not unduly reliant on one or more subcontractors that are not 
certified VOSBs or SDVOSBs, where the prime contractor can demonstrate 
that it, together with any subcontractors that are certified VOSBs or 
SDVOSBs, will meet the limitations on subcontracting provisions set 
forth in Sec.  125.6 of this chapter.
    (h) Two-step procurements. For purposes of architect-engineering, 
design-build or two-step sealed bidding procurements, a concern must be 
certified as a VOSB or SDVOSB as of the date that it submits its 
initial bid or proposal (which may or may not include price) during 
phase one.


Sec.  128.402  When may a joint venture submit an offer on a VOSB or 
SDVOSB contract?

    (a) General. A certified VOSB or SDVOSB may enter into a joint 
venture agreement with one or more other small business concerns, or 
with an approved mentor authorized by Sec.  125.9 of this chapter, for 
the purpose of submitting an offer for a VOSB or SDVOSB contract. The 
joint venture itself need not be a certified VOSB or SDVOSB. Where this 
section references the requirements of a VOSB or SDVOSB joint venture 
partner, the VOSB or SDVOSB status of that joint venture partner must 
correspond with the type of award (e.g., to be eligible for a SDVOSB 
contract, a SDVOSB joint venture partner must be the managing venturer 
of the joint venture).
    (1) The VOSB or SDVOSB joint venture partner must be certified in 
accordance with this part;
    (2) The joint venture agreement must comply with the requirements 
set forth in this part; and
    (3) A VOSB or SDVOSB 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 VOSBs or SDVOSBs.
    (b) Size. (1) A joint venture of at least one certified VOSB or 
SDVOSB and one or more other business concerns may submit an offer as a 
small business for a competitive VOSB or SDVOSB procurement or sale, or 
be awarded a sole source VOSB or SDVOSB contract, so long as each 
concern is small under the size standard corresponding to the NAICS 
code assigned to the procurement or sale.
    (2) A joint venture between a prot[eacute]g[eacute] firm certified 
as a VOSB or SDVOSB 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 VOSB or SDVOSB procurement or sale.
    (c) Contents of joint venture agreement. Every joint venture 
agreement to perform a VOSB or SDVOSB contract, including those between 
a prot[eacute]g[eacute] firm certified as a VOSB or SDVOSB and its SBA-
approved mentor authorized by Sec.  125.9 of this chapter, must contain 
a provision:
    (1) Setting forth the purpose of the joint venture;
    (2) Designating a certified VOSB or SDVOSB as the managing venturer 
of the joint venture and designating a named employee of the certified 
VOSB or SDVOSB managing venturer as the manager with ultimate 
responsibility for performance of the contract (the ``Responsible 
Manager'');
    (i) 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;
    (ii) The individual identified as the Responsible Manager of the 
joint venture need not be an employee of the certified VOSB or SDVOSB 
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 VOSB or SDVOSB 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 VOSB or SDVOSB for purposes of performance 
under the joint venture; and
    (iii) 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;
    (3) Stating that with respect to a separate legal entity joint 
venture, the certified VOSB or SDVOSB must own at least 51% of the 
joint venture entity;
    (4) Stating that the certified VOSB or SDVOSB must receive profits 
from the joint venture commensurate with the work performed by the 
certified VOSB or SDVOSB, or a percentage agreed to by the parties to 
the joint venture whereby the certified VOSB or SDVOSB receives profits 
from the joint venture that exceed the percentage commensurate with the 
work performed by the certified VOSB or SDVOSB;
    (5) 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 VOSB 
or SDVOSB contract will be deposited in the special account; all 
expenses incurred under the contract will be paid from the account as 
well;
    (6) 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;
    (7) 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 VOSB or SDVOSB partner(s) to the 
joint venture will meet the limitations on subcontracting 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

[[Page 73422]]

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 VOSB or SDVOSB partner(s) to the joint 
venture will meet the limitations on subcontracting 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;
    (8) Obligating all parties to the joint venture to ensure 
performance of the VOSB or SDVOSB contract and to complete performance 
despite the withdrawal of any member;
    (9) Designating that accounting and other administrative records 
relating to the joint venture be kept in the office of the certified 
VOSB or SDVOSB managing venturer, unless approval to keep them 
elsewhere is granted by the District Director (or designee) upon 
written request;
    (10) Requiring that the final original records be retained by the 
certified VOSB or SDVOSB managing venturer upon completion of the VOSB 
or SDVOSB contract performed by the joint venture;
    (11) 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
    (12) 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.
    (d) Limitations on subcontracting. (1) For any VOSB or SDVOSB 
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.
    (2) The certified VOSB or SDVOSB partner(s) to the joint venture 
must perform at least 40% of the work performed by the joint venture, 
except that in the context of a joint venture between a 
prote[acute]g[acute] VOSB or SDVOSB and its SBA-approved mentor the 
VOSB or SDVOSB prot[eacute]g[eacute] must individually perform at least 
40% of the work performed by the joint venture.
    (i) The work performed by the certified VOSB or SDVOSB partner(s) 
to a joint venture must be more than administrative or ministerial 
functions so that they gain substantive experience.
    (ii) The amount of work done by the partners will be aggregated and 
the work done by the certified VOSB or SDVOSB partners must be at least 
40% of the total done by all partners. In determining the amount of 
work done by a non-VOSB or SDVOSB partner, all work done by the non-
VOSB or SDVOSB partner and any of its affiliates at any subcontracting 
tier will be counted.
    (e) Certification of compliance--(1) At time of offer. If 
submitting an offer as a joint venture for a VOSB or SDVOSB contract, 
at the time of initial offer (and if applicable, final offer), each 
certified VOSB or SDVOSB joint venture partner must make the following 
certifications to the contracting officer separately under its own 
name:
    (i) It is a certified VOSB or SDVOSB;
    (ii) It, together with its affiliates, is small under the size 
standard corresponding to the NAICS code assigned to the procurement;
    (iii) It will comply with the applicable limitations on 
subcontracting during performance of the contract, as set forth in 
Sec.  125.6 of this chapter.
    (2) Prior to identification as apparent successful offeror. (i) 
Prior to being identified as an apparent successful offeror for a VOSB 
or SDVOSB contract, the certified VOSB or SDVOSB partner to the joint 
venture must submit a certification to the contracting officer and SBA, 
signed by an authorized official of each partner to the joint venture, 
stating as follows:
    (A) The parties have entered into a joint venture agreement that 
fully complies with paragraph (c) of this section;
    (B) The parties will perform the contract in compliance with the 
joint venture agreement and with the limitations on subcontracting 
requirements set forth in paragraph (e)(2)(i)(A) of this section.
    (ii) Although the managing venturer must be a certified VOSB or 
SDVOSB as of the date of the joint venture's initial offer which 
includes price in order for the joint venture to qualify as an eligible 
VOSB or SDVOSB, the joint venture must meet the joint venture agreement 
requirements set forth in paragraph (c) of this section at the time the 
joint venture is identified as an apparent successful offeror.
    (f) Capabilities, past performance, and experience. When evaluating 
the capabilities, past performance, experience, business systems, and 
certifications of an entity submitting an offer for a VOSB or SDVOSB 
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 VOSB or SDVOSB 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.
    (g) Contract execution. The procuring activity will execute a VOSB 
or SDVOSB contract in the name of the joint venture entity or the 
certified VOSB or SDVOSB, but in either case will identify the award as 
one to a VOSB or SDVOSB joint venture or a VOSB or SDVOSB mentor-
prot[eacute]g[eacute] joint venture, as appropriate.
    (h) 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.
    (i) Performance of work reports. A certified VOSB or SDVOSB partner 
to a joint venture must describe how it is meeting or has met the 
applicable performance of work requirements for each VOSB or SDVOSB 
contract it performs as a joint venture.
    (1) The certified VOSB or SDVOSB 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.
    (2) At the completion of every VOSB or SDVOSB contract awarded to a 
joint venture, the certified VOSB or SDVOSB 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.
    (3) 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.
    (j) Basis for suspension or debarment. The Government may consider 
the following as a ground for suspension or

[[Page 73423]]

debarment as a willful violation of a regulatory provision or 
requirement applicable to a public agreement or transaction:
    (1) Failure to enter a joint venture agreement that complies with 
paragraph (b)(2) of this section;
    (2) Failure to perform a contract in accordance with the joint 
venture agreement or limitations on subcontracting requirements in 
paragraph (b)(3) of this section; or
    (3) Failure to submit the certification required by paragraph 
(b)(4) of this section or comply with paragraph (b)(7) of this section.


Sec.  128.403  What requirements are not available for VOSB or SDVOSB 
contracts?

    For VA procurements, a contracting officer may award a VOSB or 
SDVOSB contract as set forth in the VAAR. For non-VA SDVOSB contracts, 
a contracting activity may not make a requirement available for a 
SDVOSB 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) BD program participant currently is performing that 
requirement or SBA has accepted that requirement for performance under 
the authority of the section 8(a) BD program, unless SBA has consented 
to release of the requirement from the section 8(a) BD program.


Sec.  128.404  When may a contracting officer set aside a procurement 
for VOSBs or SDVOSBs?

    (a) VA procurements. For VA procurements, a contracting officer may 
set aside a contract for a VOSB or SDVOSB 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 SDVOSB 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 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), SDVOSB, 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, SDVOSB, 
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, SDVOSB, 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) SDVOSB set-asides. If the contracting officer decides to set 
aside the requirement for competition restricted to SDVOSBs, the 
contracting officer must:
    (1) Have a reasonable expectation that at least two responsible 
SDVOSBs 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 SDVOSB competition (for either a contract or order) to 
require certifications other than SDVOSB certification (i.e., a 
competition cannot be limited only to business concerns that are both 
SDVOSB and 8(a), SDVOSB and HUBZone, or SDVOSB and WOSB).


Sec.  128.405  When may a contracting officer award a sole source 
contract to a VOSBs or SDVOSB?

    For VA procurements, a contracting officer may award a sole source 
contract to a VOSB or SDVOSB as set forth in the VAAR. A contracting 
officer may award a sole source contract to an SDVOSB 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 SDVOSB 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 VOSB or SDVOSB contracting opportunities at or 
below the simplified acquisition threshold?

    (a) For VA procurements, a contracting officer may award at or 
below the simplified acquisition threshold as set forth in the VAAR.
    (b) For non-VA procurements, if a SDVOSB requirement is at or below 
the simplified acquisition threshold, the contracting officer may set 
aside the requirement for consideration among SDVOSBs using simplified 
acquisition procedures or may award a sole source contract to an 
SDVOSB.


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

    The SBA Administrator may appeal a contracting officer's decision 
not to make a particular requirement available for award as an SDVOSB 
sole source or a SDVOSB 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

[[Page 73424]]

recommendation by SBA's Procurement Center Representative to make a 
requirement available for award as an SDVOSB 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 VOSBs and SDVOSBs


Sec.  128.500  What are the requirements for filing a VOSB or SDVOSB 
status protest?

    (a) All challenges to the inclusion in the certification database 
of a VOSB or SDVOSB based on the status of the concern as a small 
business concern or the ownership or control of the concern, 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 VOSB or SDVOSB 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 VOSB or SDVOSB and whether the 
concern meets the VOSB or SDVOSB 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 VOSB or SDVOSB 
contract.
    (c) When challenging the SDVOSB status of a joint venture, the 
managing SDVOSB party to the joint venture must be a certified SDVOSB 
as of the date of the joint venture's initial offer, including price, 
for the SDVOSB contract and compliance with the joint venture agreement 
requirements set forth in Sec.  128.402(c) is determined as of the date 
of the final proposal revision for negotiated acquisitions and final 
bid for sealed bidding.

Subpart F--Penalties and Retention of Records


Sec.  128.600  What are the requirements for representing VOSB or 
SDVOSB 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 VOSBs or 
SDVOSBs, 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 VOSB or SDVOSB willfully sought and received the award by 
misrepresentation.
    (b) Deemed certifications. The following actions shall be deemed 
affirmative, willful, and intentional certifications of VOSB or SDVOSB 
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 VOSBs or SDVOSBs.
    (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 VOSB or SDVOSB.
    (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 VOSB or SDVOSB.
    (c) Signature requirement. Each offer, proposal, bid, or 
application for a Federal contract, subcontract, or grant shall contain 
a certification concerning the VOSB or, in the case of an SDVOSB, 
SDVOSB 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 SDVOSB 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 VOSB or SDVOSB 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' VOSB or SDVOSB status. 
Relevant factors to consider in making this determination may include 
the firm's internal management procedures governing VOSB or SDVOSB 
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 VOSB or 
SDVOSB 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 VOSB or SDVOSB 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 VOSB or SDVOSB 
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

[[Page 73425]]

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.

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


Sec.  128.700  How does a VOSB 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 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.

PART 134--RULES OF PROCEDURE GOVERNING CASES BEFORE THE OFFICE OF 
HEARINGS AND APPEALS

0
9. The authority citation for part 134 is revised to read as follows:

    Authority:  5 U.S.C. 504; 15 U.S.C. 632, 634(b)(6), 634(i), 
637(a), 648(l), 656(i), 657t and 687(c); E.O. 12549, 51 FR 6370, 3 
CFR, 1986 Comp., p. 189.

    Subpart J issued under 15 U.S.C. 657f.
    Subpart K issued under 15 U.S.C. 657f.
    Subpart L issued under 15 U.S.C. 636(a)(36); 15 U.S.C. 
636(a)(37); 15 U.S.C. 636m.


0
10. Amend Sec.  134.102 by removing and reserving paragraph (q) and 
revising paragraphs (u) and (v).
    The revisions read as follows:


Sec.  134.102  Jurisdiction of OHA.

* * * * *
    (u) Protests of eligibility for inclusion in the Veteran Small 
Business Certification Program;
    (v) Appeals of denials of certification in and decertification from 
the Veteran Small Business Certification Program; and
* * * * *

0
11. Amend Sec.  134.201 by removing and reserving paragraph (b)(3) and 
revising paragraphs (b)(8) and (9).
    The revisions read as follows:


Sec.  134.201  Scope of the rules in this subpart.

* * * * *
    (b) * * *
    (8) For protests of eligibility for inclusion in the Veteran Small 
Business Certification Program, in subpart J of this part;
    (9) For appeals of denials of certification and decertification in 
the Veteran Small Business Certification Program, in subpart K of this 
part; and
* * * * *

Subpart E--[Removed and Reserved]

0
12. Remove and reserve subpart E, consisting of Sec. Sec.  134.501 
through 134.515.

0
13. Revise subparts J and K to read as follows:
Subpart J--Rules of Practice for Protests of Eligibility for Inclusion 
in the SBA Veteran Small Business Certification Program Database (VOSB 
or SDVOSB Status Protests)
Sec.
134.1001 Scope of rules.
134.1002 Who may file a VOSB or SDVOSB status protest?
134.1003 Grounds for filing a VOSB or SDVOSB status protest.
134.1004 Commencement of VOSB or SDVOSB status protests.
134.1005 Contents of the VOSB or SDVOSB status protest.
134.1006 Service and filing requirements.
134.1007 Processing a VOSB or SDVOSB status protest.
134.1008 Discovery.
134.1009 Oral hearings.
134.1010 Standard of review and burden of proof.
134.1011 Weight of evidence.
134.1012 The record.
134.1013 Request for reconsideration.

Subpart J--Rules of Practice for Protests of Eligibility for 
Inclusion in the SBA Veteran Small Business Certification Program 
Database (VOSB or SDVOSB Status Protests)


Sec.  134.1001  Scope of rules.

    (a) The rules of practice in this subpart apply to VOSB or SDVOSB 
status protests. A VOSB or SDVOSB status protest is the process by 
which an interested party (see Sec.  134.1002(b)) may challenge a 
concern's inclusion in the SBA Veteran Small Business

[[Page 73426]]

Certification Program database or the VOSB or SDVOSB status of an 
apparent successful offeror on a VOSB or SDVOSB contract, including a 
joint venture submitting an offer under Sec.  128.402 of this chapter. 
OHA will also consider a protest challenging whether a prime contractor 
is unduly reliant on a small, non-similarly situated entity 
subcontractor or if such subcontractor performs the primary and vital 
requirements of the contract.
    (b) Except where inconsistent with this subpart, the provisions of 
subparts A and B of this part apply to protests listed in paragraph (a) 
of this section.
    (c) The protest procedures described in this subpart are separate 
from those governing size protests and size appeals. All protests 
relating to whether a VOSB or SDVOSB 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 a VOSB or SDVOSB and the concern's eligibility for the 
SBA Veteran Small Business Certification Program, SBA will process each 
protest concurrently, under the procedures set forth in part 121 of 
this chapter and this part. SBA does not review issues concerning the 
administration of a VOSB or SDVOSB contract.
    (d) Appeals of denials and cancellations of certification for 
inclusion in the Veteran Small Business Certification Program are 
governed by subpart K of this part.


Sec.  134.1002  Who may file a VOSB or SDVOSB status protest?

    (a) For sole source procurements, SBA, VA, or the contracting 
officer may protest the proposed awardee's VOSB or SDVOSB status.
    (b) For all other procurements, any interested party may protest 
the apparent successful offeror's VOSB or SDVOSB status. An interested 
party means the contracting officer, SBA, VA, any concern that submits 
an offer for a specific set-aside VOSB or SDVOSB contract (including 
Multiple Award Contracts) or order, 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 VOSB or SDVOSB.
    (c) SBA and VA may file a VOSB or SDVOSB status protest at any 
time.


Sec.  134.1003  Grounds for filing a VOSB or SDVOSB status protest.

    (a) Veteran status. In cases where the protest is based on service-
connected disability, permanent and severe disability, or veteran 
status, the Judge will only consider a protest that presents specific 
allegations supporting the contention that the owner(s) cannot provide 
documentation from the VA, Department of Defense, or the U.S. National 
Archives and Records Administration to show that they meet the 
definition of veteran, service-disabled veteran, or service-disabled 
veteran with a permanent and severe disability.
    (b) Ownership and control. In cases where the protest is based on 
ownership and/or control, the Judge will consider a protest only if the 
protester presents credible evidence that the concern is not 51% owned 
and controlled by one or more veterans or service-disabled veterans.
    (c) Ostensible subcontractor. In cases where the protest is based 
on an allegation that the prime contractor appears unduly reliant on 
one or more, non-VOSB or non-SDVOSB subcontractors, or the non-VOSB or 
non-SDVOSB subcontractor is performing the primary and vital 
requirements of the contract, OHA will consider a protest only if the 
protester presents credible evidence of the alleged undue reliance or 
credible evidence that the primary and vital requirements will be 
performed by the subcontractor(s).
    (d) Joint ventures. A VOSB or SDVOSB joint venture may be protested 
regarding the status of the managing VOSB or SDVOSB joint venture 
partner or for failure to meet the requirements of Sec.  128.402 of 
this chapter. If the joint venture is found to be ineligible solely 
based on failure to meet the requirements of that section, the joint 
venture will be ineligible for the contract at issue. The finding of 
ineligibility is limited to that contract and will not affect the 
underlying eligibility of the VOSB or SDVOSB joint venture partner.
    (e) Date for determining eligibility. (1) If the VOSB or SDVOSB 
status protest pertains to a procurement, the Judge will determine a 
protested concern's eligibility as a VOSB or SDVOSB as of the date of 
its initial offer or response which includes price. For a protest 
challenging an ostensible subcontractor or a joint venture's compliance 
with the joint venture agreement requirements set forth in Sec.  
128.402(c), the Judge will determine eligibility as of the date of the 
final proposal revision for negotiated acquisitions or as of final bid 
for sealed bidding.
    (2) If the VOSB or SDVOSB status protest does not pertain to a 
procurement, the Judge will determine a protested concern's eligibility 
as a VOSB or SDVOSB as of the date the VOSB or SDVOSB status protest 
was filed.


Sec.  134.1004  Commencement of VOSB or SDVOSB status protests.

    (a) Timeliness. (1) The Secretary of the VA (or designee) or SBA 
may file a VOSB or SDVOSB status protest at any time.
    (2) The contracting officer, SBA, or VA may file a VOSB or SDVOSB 
status protest at any time after the apparent awardee has been 
identified or after bid opening, whichever applies.
    (3) For negotiated acquisitions, an interested party (see Sec.  
134.1002(b)) must submit its protest by close of business on the fifth 
business day after notification by the contracting officer of the 
apparent successful offeror.
    (i) Except for an order or Blanket Purchase Agreement issued under 
a Federal Supply Schedule contract, for an order or Agreement that is 
set-aside for VOSBs or SDVOSBs under a multiple award contract that was 
not itself set aside or reserved for VOSBs or SDVOSBs, an interested 
party must submit its protest by close of business on the fifth 
business day after notification by the contracting officer of the 
intended awardee of the order or Agreement.
    (ii) Where a contracting officer has required offerors for a 
specific order under a multiple award VOSB or SDVOSB contract to 
recertify their VOSB or SDVOSB status, an interested party must submit 
its protest by close of business on the fifth business day after 
notification by the contracting officer of the intended awardee of the 
order.
    (4) For sealed bid acquisitions, a protest from an interested party 
(see Sec.  134.1002(b)) must be received by close of business on the 
fifth business day after bid opening. Where the identified low bidder 
is determined to be ineligible for award, a protest of any other 
identified low bidder must be received prior to the close of business 
on the 5th business day after the contracting officer has notified 
interested parties of the identity of that low bidder.
    (5) The rule for counting days is in Sec.  134.202(d).
    (6) Any protest received after the time limit is untimely, unless 
it is from SBA, VA, or the contracting officer. An untimely protest 
will be dismissed.
    (b) Filing. (1) An interested party, other than SBA, VA, or the 
contracting officer, must deliver a VOSB or SDVOSB status protest to 
the contracting officer in person, by email, facsimile, by express 
delivery service, or by U.S. mail (postmarked within the applicable 
time period) to the contracting officer.
    (2) VA, SBA, or the contracting officer must submit a VOSB or 
SDVOSB status

[[Page 73427]]

protest directly to OHA in accordance with the procedures in Sec.  
134.204. The protest should include in the referral letter the 
information set forth in paragraph (c) of this section.
    (3) SBA must submit a VOSB or SDVOSB status protest directly to OHA 
in accordance with the procedures in Sec.  134.204.
    (c) Referral to OHA. The contracting officer must forward to OHA 
any VOSB or SDVOSB status protest received, notwithstanding whether the 
contracting officer believes it is premature, sufficiently specific, or 
timely. The contracting officer must send all VOSB or SDVOSB status 
protests, along with a referral letter, directly to OHA, addressed to 
Office of Hearings and Appeals, U.S. Small Business Administration, 409 
Third Street SW, Washington, DC 20416, or by email at 
[email protected], marked ``Attn: VOSB Status Protest'' or ``Attn: 
SDVOSB Status Protest''. The referral letter must include information 
pertaining to the solicitation that may be necessary for OHA to 
determine timeliness and standing, including:
    (1) The solicitation number;
    (2) The name, address, telephone number, and email address of the 
contracting officer;
    (3) Whether the contract was a sole source or set-aside VOSB or 
SDVOSB procurement;
    (4) Whether the protester submitted an offer;
    (5) Whether the protested concern was the apparent successful 
offeror;
    (6) Whether the procurement was conducted using sealed bid or 
negotiated procedures;
    (7) The bid opening date, if applicable;
    (8) When the protested concern submitted its initial offer which 
included price;
    (9) When the protest was submitted to the contracting officer;
    (10) When the protester received notification of the apparent 
successful offeror, if applicable; and
    (11) Whether a contract has been awarded.


Sec.  134.1005  Contents of the VOSB or SDVOSB status protest.

    (a) VOSB and SDVOSB status protests must be in writing. There is no 
required format for a VOSB or SDVOSB status protest, but it must 
include the following:
    (1) The solicitation or contract number, if applicable;
    (2) Specific allegations supported by credible evidence that the 
concern (or joint venture) does not meet the VOSB or SDVOSB eligibility 
requirements listed in part 128 of this chapter;
    (3) Any other pertinent information the Judge should consider; and
    (4) The name, address, telephone number, and email address, if 
available, and signature of the protester or its attorney.
    (b) If the protester intends to seek access to the SBA case file 
under Sec.  134.205, the protester should include in its protest a 
request for a protective order. Unless good cause is shown, a protester 
must request a protective order within five days of filing the protest.


Sec.  134.1006  Service and filing requirements.

    The provisions of Sec.  134.204 apply to the service and filing of 
all pleadings and other submissions permitted under this subpart.


Sec.  134.1007  Processing a VOSB or SDVOSB status protest.

    (a) Notice and order. If the Judge determines that the protest is 
timely, sufficiently specific, and based upon protestable allegations, 
the Judge will issue a notice and order, notifying the protester, the 
protested concern, the Director, Office of Government Contracting (D/
GC), SBA Counsel, and, if applicable, the contracting officer of the 
date OHA received the protest, and order a due date for responses.
    (b) Dismissal of protest. If the Judge determines that the protest 
is premature, untimely, nonspecific, or is based on non-protestable 
allegations, the Judge will dismiss the protest and will send the 
contracting officer, D/GC, SBA's Associate General Counsel for 
Procurement Law, and the protester a notice of dismissal, citing the 
reason(s) for the dismissal. The dismissal is a final agency action.
    (c) Transmission of the case file. Upon receipt of a notice and 
order, the D/GC must deliver to OHA the entire case file relating to 
the protested concern's inclusion in the certification database. The 
notice and order will establish the timetable for transmitting the case 
file to OHA. The D/GC must certify and authenticate that the case file, 
to the best of his/her knowledge, is a true and correct copy of the 
case file.
    (d) Protective order. A protester seeking access to the SBA case 
file must file a timely request for a protective order under Sec.  
134.205. Except for good cause shown, a protester must request a 
protective order within five days of filing the protest. Even after 
issuance of a protective order, OHA will not disclose income tax 
returns or privileged information.
    (e) Supplemental allegations. If, after viewing documents in the 
SBA case file for the first time under a protective order, a protester 
wishes to supplement its protest with additional argument, the 
protester may do so. Any such supplement is due at OHA no later than 15 
days from the date the protester receives or reviews the SBA case file.
    (f) Response--(1) Timing. The protested concern, the D/GC, the 
contracting officer, and any other interested party (see Sec.  
134.1002(b)) may respond to the protest and supplemental protest, if 
one is filed. The response is due no later than 15 days from the date 
the protest or supplemental protest was filed with OHA. The record 
closes the date the final response is due.
    (2) Service. The respondent must serve its response upon the 
protester or its counsel and upon each of the persons identified in the 
certificate of service attached to the notice and order or, if a 
protective order is issued, in accordance with the terms of the 
protective order.
    (3) Reply to a response. No reply to a response will be permitted 
unless the Judge directs otherwise.
    (g) Basis for decision. The decision will be based primarily on the 
case file and information provided by the protester, the protested 
concern, and any other parties. However, the Judge may investigate 
issues beyond those raised in the protest and may use other information 
or make requests for additional information to the protester, the 
protested concern, or SBA.
    (h) Award of contract. The contracting officer may award a contract 
before the Judge issues a decision only if the contracting officer 
determines that an award must be made to protect the public interest 
and notifies the Judge and D/GC in writing of such determination. 
Notwithstanding such a determination, the provisions of paragraph (j) 
of this section shall apply to the procurement in question.
    (i) Decision. OHA will serve a copy of the written decision on each 
party, or, if represented by counsel, on its counsel. The decision is 
considered the final agency action, and it becomes effective upon 
issuance.
    (j) Effect of decision. (1) A contracting officer may award a 
contract to a protested concern after the Judge has sustained the 
protest and determined either that the protested concern is an eligible 
VOSB or SDVOSB, and no OHA appeal has been filed, or has dismissed all 
protests against it.
    (2) A contracting officer shall not award a contract to a protested 
concern that the Judge has determined is not an eligible VOSB or 
SDVOSB. If the contract has already been awarded, then the awarded 
contract shall be deemed void ab initio (invalid from the outset),

[[Page 73428]]

and the contracting officer shall rescind the contract and award the 
contract to the next eligible concern in line for the award.
    (3) The contracting officer must update the Federal Procurement 
Data System (or successor system) and other procurement reporting 
databases to reflect the Judge's decision.
    (4) If the Judge finds the protested concern is not an eligible 
VOSB or SDVOSB, the D/GC must immediately remove the protested concern 
from the certification database.
    (5) A concern found to be ineligible may not submit an offer on a 
future VOSB or SDVOSB procurement until the protested concern reapplies 
to the Veteran Small Business Certification Program and has been 
designated by SBA as a VOSB or SDVOSB into the certification database.


Sec.  134.1008  Discovery.

    Discovery will not be permitted in SBA VOSB or SDVOSB status 
protest proceedings.


Sec.  134.1009  Oral hearings.

    Oral hearings will be held in VOSB or SDVOSB status protest 
proceedings only upon a finding by the Judge of extraordinary 
circumstances. If such an oral hearing is ordered, the proceeding shall 
be conducted in accordance with those rules of subpart B of this part 
as the Judge deems appropriate.


Sec.  134.1010  Standard of review and burden of proof.

    The protested concern has the burden of proving its eligibility, by 
a preponderance of the evidence.


Sec.  134.1011  Weight of evidence.

    The Judge will give greater weight to specific, signed, factual 
evidence than to general, unsupported allegations or opinions. In the 
case of refusal or failure to furnish requested information within a 
required time period, the Judge may assume that disclosure would be 
contrary to the interests of the party failing to make disclosure.


Sec.  134.1012  The record.

    Where relevant, the provisions of Sec.  134.225 apply. In a protest 
under this subpart, the contents of the record also include the case 
file or solicitation submitted to OHA in accordance with Sec.  
134.1007.


Sec.  134.1013  Request for reconsideration.

    The decision on a VOSB or SDVOSB status protest may not be 
appealed. However:
    (a) The Judge may reconsider a VOSB or SDVOSB status protest 
decision. Any party that has appeared in the proceeding, or the SBA, 
may request reconsideration by filing with OHA and serving a petition 
for reconsideration on all the parties to the VOSB or SDVOSB status 
protest within twenty (20) calendar days after service of the written 
decision. The request for reconsideration must clearly show an error of 
fact or law material to the decision. The Judge may also reconsider a 
decision on his or her own initiative.
    (b) If the Judge reverses his or her initial decision on 
reconsideration, the contracting officer must follow Sec.  134.1007(j) 
in applying the new decision's results.
Subpart K--Rules of Practice for Appeals of Denials of Certification 
and Decertification in the SBA Veteran Small Business Certification 
Program (VOSB or SDVOSB Appeals)
Sec.
134.1101 Scope of rules.
134.1102 Who may file a VOSB or SDVOSB Appeal?
134.1103 Grounds for filing a VOSB or SDVOSB Appeal.
134.1104 Commencement of a VOSB or SDVOSB Appeal.
134.1105 The appeal petition.
134.1106 Service and filing requirements.
134.1107 Transmission of the case file.
134.1108 Response to an appeal petition.
134.1109 Discovery and oral hearings.
134.1110 New evidence.
134.1111 Standard of review and burden of proof.
134.1112 The decision.

Subpart K--Rules of Practice for Appeals of Denials of 
Certification and Decertification in the SBA Veteran Small Business 
Certification Program (VOSB or SDVOSB Appeals)


Sec.  134.1101  Scope of rules.

    (a) The rules of practice in this subpart apply to appeals of 
denial of certification and decertification for inclusion in the SBA 
Veteran Small Business Certification Program certification database 
(VOSB or SDVOSB Appeals).
    (b) Except where inconsistent with this subpart, the provisions of 
subparts A and B of this part apply to appeals listed in paragraph (a) 
of this section.
    (c) Protests of a concern's eligibility for inclusion in the SBA 
Veteran Small Business Certification Program Database (VOSB or SDVOSB 
Status Protests) are governed by subpart J of this part.


Sec.  134.1102  Who may file a VOSB or SDVOSB Appeal?

    A concern that has been denied certification as a VOSB or SDVOSB or 
has had its VOSB or SDVOSB status decertified may appeal the decision 
to OHA.


Sec.  134.1103  Grounds for filing a VOSB or SDVOSB Appeal.

    Denial of certification and decertification of VOSB or SDVOSB 
status may be appealed to OHA. A denial or decertification based on the 
failure to provide sufficient evidence of the qualifying individual's 
status as a veteran or a service-disabled veteran are final VA 
decisions and not subject to appeal to OHA.


Sec.  134.1104  Commencement of VOSB or SDVOSB Appeal.

    (a) A concern whose application for VOSB or SDVOSB certification 
has been denied or whose status has been decertified must file its 
appeal within 10 business days of receipt of the denial or 
decertification.
    (b) The rule for counting days is in Sec.  134.202(d).
    (c) OHA will dismiss an untimely appeal.


Sec.  134.1105  The appeal petition.

    (a) Format. VOSB or SDVOSB appeals must be in writing. There is no 
required format for an appeal petition; however, it must include the 
following:
    (1) A copy of the denial or decertification and the date the 
appellant received it;
    (2) A statement of why the denial or decertification is in error;
    (3) Any other pertinent information the Judge should consider; and
    (4) The name, address, telephone number, and email address, if 
available, and signature of the appellant or its attorney.
    (b) Service. The appellant must serve copies of the entire appeal 
petition upon the Director, Office of Government Contracting (D/GC) and 
SBA Counsel at [email protected].
    (c) Certificate of service. The appellant must attach to the appeal 
petition a signed certificate of service meeting the requirements of 
Sec.  134.204(d).
    (d) Dismissal. An appeal petition that does not meet all the 
requirements of this section may be dismissed by the Judge at his/her 
own initiative or upon motion of a respondent.


Sec.  134.1106  Service and filing requirements.

    The provisions of Sec.  134.204 apply to the service and filing of 
all pleadings and other submissions permitted under this subpart.


Sec.  134.1107  Transmission of the case file.

    Once a VOSB or SDVOSB appeal is filed, the D/GC must deliver to OHA 
the entire case file relating to the denial or decertification. The 
Judge will issue a notice and order establishing the

[[Page 73429]]

timetable for transmitting the case file to OHA. The D/GC must certify 
and authenticate that the case file, to the best of his/her knowledge, 
is a true and correct copy of the case file.


Sec.  134.1108  Response to an appeal petition.

    (a) Who may respond. The D/GC (or designee) or counsel for SBA may 
respond to the VOSB or SDVOSB appeal. The response should present 
arguments to the issues presented on appeal.
    (b) Time limits. The notice and order will inform the parties of 
the filing of the appeal petition, establish the close of record as 15 
days after service of the notice and order, and inform the parties that 
OHA must receive any responses to the appeal petition no later than the 
close of record.
    (c) Service. The respondent must serve its response upon the 
appellant and upon each of the persons identified in the certificate of 
service attached to the appeal petition pursuant to Sec.  134.1105.
    (d) Reply to a response. No reply to a response will be permitted 
unless the Judge directs otherwise.


Sec.  134.1109  Discovery and oral hearings.

    Discovery will not be permitted and oral hearings will not be held.


Sec.  134.1110  New evidence.

    Except for good cause shown, evidence beyond the case file will not 
be admitted.


Sec.  134.1111  Standard of review and burden of proof.

    The standard of review is whether the D/GC denial or 
decertification was based on clear error of fact or law. The appellant 
has the burden of proof, by a preponderance of the evidence.


Sec.  134.1112  The decision.

    (a) Timing. The Judge shall decide a VOSB or SDVOSB Appeal, insofar 
as practicable, within 60 calendar days after close of the record.
    (b) Contents. Following closure of the record, the Judge will issue 
a decision containing findings of fact and conclusions of law, reasons 
for such findings and conclusions, and any relief ordered.
    (c) Basis for decision. Decisions under this subpart will be based 
primarily on the evidence in the SBA case file, arguments made on 
appeal, and any response(s) thereto. However, the Judge, in his/her 
sole discretion, may consider issues beyond those raised in the 
pleadings and the denial or cancellation letter.
    (d) Finality. The decision is the final agency decision and becomes 
effective upon issuance. Where OHA dismisses an appeal of a D/GC denial 
or decertification, the D/GC determination remains in effect.
    (e) Service. OHA will serve a copy of all written decisions on each 
party, or, if represented by counsel, on its counsel.
    (f) Effect. If the Judge grants the appeal and finds the appellant 
eligible for inclusion in the SBA certification database, the D/GC must 
immediately include in the SBA certification database.
    (g) Reconsideration. A decision of the Judge may be reconsidered. 
Any party that has appeared in the proceeding, or the SBA Administrator 
or his or her designee, may request reconsideration by filing with OHA 
and serving a petition for reconsideration on all parties to the VOSB 
or SDVOSB Appeal within twenty (20) calendar days after service of the 
written decision, upon a clear showing of an error of fact or law 
material to the decision. The Judge also may reconsider a decision on 
his or her own initiative.

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2022-25508 Filed 11-28-22; 8:45 am]
BILLING CODE 8026-09-P