FR Doc 2010-2648

http://edocket.access.gpo.gov/2010/2010-2648.htm[2/23/2010 9:07:56 PM]

[Federal Register: February 8, 2010 (Volume 75, Number 25)]

[Rules and Regulations]

[Page 6098-6108]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr08fe10-10]

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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 74

RIN 2900-AM78

VA Veteran-Owned Small Business Verification Guidelines

AGENCY: Department of Veterans Affairs.

ACTION: Final rule with request for comments.

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SUMMARY: This document affirms as final, with changes, an interim final

rule that implements portions of the Veterans Benefits, Health Care,

and Information Technology Act of 2006. This law requires the

Department of Veterans Affairs (VA) to verify ownership and control of

veteran-owned small businesses, including service-disabled veteranowned

small businesses. This final rule defines the eligibility

requirements for businesses to obtain ``verified'' status, explains

examination procedures, and establishes records retention and review

processes. The final rule retains the interim final rule with changes

based on the comments received. This document additionally implements

new interim final requirements, that eligible owners work full-time in

the business for which they have applied for acceptance in the

Verification Program, changes the time period for issuance of

reconsideration decisions from 30 to 60 days, and changes the

distribution of profits for limited liability companies and employee

stock ownership plans and solicits comments on these regulatory

amendments only.

DATES: Effective Date: February 8, 2010.

Comment Date: Comments on the interim final amendments only must be

received on or before March 10, 2010.

Regulations Management (02REG), Department of Veterans Affairs, 810

Vermont Ave., NW., Room 1068, Washington, DC 20420; or by fax to (202)

273-9026. Comments should indicate that they are submitted in response

to RIN 2900-AM78--``VA Veteran-Owned Small Business Verification

Guidelines.'' Copies of comments received will be available for public

inspection in the Office of Regulation Policy and Management, Room

1063B, between the hours of 8 a.m. and 4:30 p.m., Monday through Friday

number) for an appointment. In addition, during the comment period,

comments may be viewed online through the Federal Docket Management

FOR FURTHER INFORMATION CONTACT: Ms. Gail Wegner, Acting Director,

Center for Veterans Enterprise (00VE), Department of Veterans Affairs,

x5239.

SUPPLEMENTARY INFORMATION:

In an interim final rule published in the Federal Register on May

19, 2008 (73 FR 29024), we established new 38 CFR part 74 setting forth

a mechanism for verifying ownership and control of veteran-owned small

businesses (VOSBs), including service-disabled veteran-owned small

businesses (SDVOSBs). We provided a 60-day comment period which ended

on July 18, 2008. We received comments from five commenters. The issues

raised in the comments are discussed below. Based on the rationale set

forth in the interim final rule and in this document, we are adopting

the provisions of the interim final rule as a final rule with changes

explained below. Due to the nature of the changes and for the

convenience of the reader, the regulation text portion of this document

restates all of revised part 74.

a. Eligibility of surviving spouses. One commenter expressed the

opinion that a surviving spouse of a veteran who had any disability

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rating should be permitted to maintain a VOSB or a SDVOSB for as long

as the spouse owns and controls the business.

The rule is consistent with Congress's limitation set forth in 38

U.S.C. 8127(h)(3), which permits the surviving spouse to maintain the

status of a VOSB or SDVOSB only if the veteran was rated as 100 percent

disabled or the veteran dies as a result of a service-connected

disability. VA does not have authority under section 8127 to expand

VOSB or SDVOSB status as the commenter suggests. We will not make any

changes to the rule based on the comment.

b. Yearly verification. One commenter suggested that an annual

signed statement by the veteran business owner stating there are no

changes in ownership or control should be sufficient to protect the

Department's interests. If ownership or control changes, it should be

mandated that the business owner report it immediately to

[[Page 6099]]

the Center for Veterans Enterprise (CVE), and the CVE may determine it

necessary to redo the verification application process entirely. 38 CFR

74.3(e) and 74.21(c)(10) established that a business has up to 60 days

after a change of ownership to file a new VA Form 0877, VetBiz VIP

Verification Program application. This timeframe was established with

sensitivity to the needs of surviving spouses and others who may have

significant demands due to health or medical challenges. 38 CFR 74.15

also establishes that eligibility is limited to 1 year. VA has

determined that annual examinations are necessary to ensure the

integrity of the Verification Program. This is consistent with the

annual Federal size recertification requirement in the Central

Contractor Registry.

c. Examination visits should concentrate on management and control

of operations to establish that a company is truly independent and not

a representative of a non-veteran-owned business employing the veteran

on a commission or fee basis. Two commenters expressed concern about

legitimate parties controlling veteran-owned small businesses. One

commenter suggested that examination visits should examine the actual

business relationship among the partners, to include: Individuals who

control bank account number, terms, lines of credit, sale price of

goods and services, contracts for purchase of goods and services, and

acceptance of quotations from suppliers. This commenter also

recommended reviewing records to establish that the eligible party and

not the non-veteran is receiving funds from payments and distributing

funds to employees and contractors and to ensure that there is no

record of a payment, including a percentage or commission, to the

eligible party from a non-veteran. The second commenter recommended

that examination visits of pharmaceutical distributors include

inspection of Pedigree or E-Pedigree filings, state-issued

pharmaceutical licenses, and the product liability insurance policy to

ensure that the business name and manager/owner signatures match and

that insurance policies are current and have an aggregate value of 5

million dollars. We make no changes to the rule based on this comment.

38 CFR 74.3-4 address examples of ownership and control. 38 CFR

74.20(b) establishes that the scope of examination is not limited to

the documents identified in that section. It only establishes that

examiners shall review those documents as a minimum and provides the

CVE with the flexibility to examine other records. VA has determined

for administrative purposes, it is not practical to have specific

document review requirements for particular industries. The rule

provides VA the discretion to review any pertinent documents necessary

to satisfy Verification requirements.

d. Site visits. One commenter recommended that the Department

conduct an on-site visit at the applicant's place of business for 100

percent of the applications found to be complete. The site visit must

include attendance by the veteran owner(s) and executive management

team (if applicable). The purpose of the visit would be to substantiate

information on the application and to review business operations. Any

conflicts would be subject to a second review. The site visit would be

mandatory for the initial application and subsequent visits would occur

every three years as part of the recertification process, or more

frequently at the applicant's discretion. Such initial site visits

would be performed within 60 days of receipt of the complete

application package. The site visit would be at no cost to the

business, and the government would agree that there would not be

unscheduled site visits.

In the interim final rule, 38 CFR 74.20(a) provided that the

Department reserves the right to conduct random verification

examinations of applicants. Also, the interim final rule provided at 38

CFR 74.20(b) that VA could determine to conduct all or part of the

verification examination at the applicant's offices. First, VA is

revising 38 CFR 74.20(a) to clarify that its intent was that

verification examinations, including site visits, may be random and

unannounced. Next, in addressing the commenter, conducting 100 percent

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site visits upon receipt of complete applications is not in the best

interests of the Department as many of the businesses that are seeking

verification are brand new and have not yet applied for any Federal or

VA contracts. Also VA finds that mandatory site visits could be an

unnecessary burden to vendors when VA can adequately verify firms

through other means, such as document review. The Department will

monitor awards to companies in the Verification Program and make

decisions on which companies to inspect using a combination of factors,

including staffing and funding. VA does not have the resources to

conduct 100 percent site visit for all applicant firms in the VIP

database. We will not make any changes to the rule based on the

comment.

e. Relationship between VA's Verification Program and the

government-wide SDVOSB protest process under the Federal Acquisition

Regulations (FAR), 48 CFR 19.302 and 19.307. One commenter sought

clarification on the relationship between the Department's Verification

Program and the protest procedures contained in the FAR. Specifically,

a question was submitted regarding the Department's intended action

when the Small Business Administration finds a firm ineligible due to a

protest decision.

We agree with the commenter that clarification is needed, and Sec.

74.2(e) has been added to include guidance in these cases. Any firm

registered in the VA VetBiz VIP database that is found to be ineligible

due to an SBA protest decision or other negative finding will be

immediately removed from the VetBiz VIP database.

f. Appeals of verification application denial or program

cancellation decisions. One respondent recommended that the Department

establish an appeals process for matters limited to the Verification

Program. Requests for reconsideration of application denial decisions

are addressed in 38 CFR 74.13, ``Can an applicant ask CVE to reconsider

its initial decision to deny an application?'' The language has been

revised to add the mailing address for submission of requests for

reconsideration. The Director, CVE, shall make the decision on requests

for reconsideration of application denials, and 38 CFR 74.13(b) has

been revised to reflect that the timeframe for the issuance of a

decision has changed from 30 days to 60 days to allow for a thorough

consideration of the applicant's request. The decision of the Director,

CVE shall be final with no further appeal rights. This document

additionally revises the interim final requirement, for the issuance of

a decision from 30 days to 60 days, to allow for a more thorough

consideration of the applicant's request and solicits comments on this

regulatory amendment.

With regard to businesses that are already participants in the

Verification program, the rule provides procedures for cancellation of

verified status, as described in 38 CFR 74.22. The interim final rule

provided that the Director, CVE would issue cancellation decisions. The

final rule has been modified such that the Director, CVE issues a

Notice of Verified Status Cancellation; however, a participant may

appeal this notice to the Executive Director, Office of Small and

Disadvantaged Business Utilization. Section 74.22(e) provides that the

Executive Director, Office of Small and

[[Page 6100]]

Disadvantaged Business Utilization and Center for Veterans Enterprise

shall render a decision on such an appeal within 60 days after receipt.

g. Full-time control: One commenter suggested that the Department

revise 38 CFR 74.4(c)(1) to require the eligible party to work fulltime

in order to establish control of the firm. The commenter suggested

that the original language which requires owners ``show sustained and

significant time invested in the business'' is insufficient to protect

the interests of the program and of the Department. The commenter

offered alternate language that would ``require the veteran to devote

the majority of his/her time to managing the concern.'' This commenter

further recommended ``permitting the veteran to be engaged in outside

employment/management activities only where he/she can show that doing

so won't have a significant impact on his/her ability to run the VOSB

or SDVOSB.''

Based on this comment, we have revised Sec. 74.4(c)(1) to clarify

the issue of control of a VOSB and SDVOSB. In lieu of the commenter's

suggested language, VA has revised the interim final rule to require an

eligible owner have only one business in the program at one time and

must work full-time in the business. VA has determined that this

revision will ensure the integrity of the program. In addition, VA has

defined ``full-time'' in 38 CFR 74.1. The public is invited to comment

on the requirement for full-time work in the business.

h. Ownership: Profits and distributions. Two comments were received

concerning 38 CFR 74.3. One respondent recommended revising 74.3(a) to

adopt language from the Internal Revenue Code, 26 U.S.C. 1563(c)(2)(B),

which states that stock in a corporation that is held by an employees'

trust described in section 401(a) of the Code will be treated as

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``excluded stock'' if 5 or fewer persons who are individuals, estates,

or trusts own 50 percent or more of the total combined voting power of

the corporation. Under this proposed language, if 4 individuals own 10

percent each and an Employee Stock Ownership Plan (ESOP) owns 60

percent, the stock held by the ESOP would be treated as excluded stock,

and the four individuals would be treated as owning 100 percent of the

outstanding stock. In this example, eligible parties would be required

to own 51 percent or more of the outstanding stock (excluding the ESOP

stock). Conversely, if there were 10 shareholders who own 9 percent

each and an ESOP that owns 10 percent, the ESOP stock would be treated

as outstanding stock. In this case, eligible parties would be required

to own 51 percent of all outstanding stock, including the ESOP stock.

The original text required that veterans own 51 percent of the

outstanding stock (including employee stock ownership trusts). VA

accepts this comment and has revised 38 CFR 74.3(a). The net effect of

this change is that a company that is closely held by veterans would

qualify regardless of the size of the ESOP. Alternatively, a firm that

is not closely held by veterans will find it much more difficult to

qualify for the Verification Program. This commenter noted that there

are a number of government programs that are designed to encourage

employee ownership as a technique to encourage teamwork, reduce

employee turnover, and increase productivity. Adopting this change

affects a small number of VOSBs and SDVOSBs that have adopted ESOPs and

is consistent with the intent and spirit of public policy objectives.

The second commenter recommended expanding 38 CFR 74.3(d) to state

that a veteran's ability to share in the profits of a concern should be

commensurate with the extent of his/her ownership interest in that

concern. Such revision would also cover limited liability companies

(LLC) and partnership structures. For instance, if a VOSB owns 51

percent of an LLC, he/she would be entitled to receive 51 percent of

the profits of that LLC.

VA accepts this comment and has revised 38 CFR 74.3(d)(3) to

include a partnership or an LLC. Additionally, 38 CFR 74.3(d)(4) has

been added to state that an eligible individual's ability to share in

the profits of the concern should be commensurate with the extent of

his/her ownership interest in that concern. This document additionally

revises the interim final requirement for the evaluation of profits and

distributions to determine ownership interest in ESOPs and LLCs and

solicits comments on this regulatory amendment.

Other Non-Substantive Changes to the Final Rule: The Changes Below

Serve To Clarify Particular Items From the Interim Final Rule in This

Final Rule

The section headings of Sec. Sec. 74.1, 74.11, 74.12, 74.15, and

74.21 have been revised to include the word ``Program'' following

verification.

The definition of small business concern has been revised for

purpose of consistency to refer to the FAR Part 2 definition of small

business.

The definition of surviving spouse has been revised to add ``or

died as a direct result of a service-connected disability'' to be

consistent with the statutory definition at 38 U.S.C. 8127(h)(3).

The term ``in the line of duty'' in the definition of veteran has

been changed to ``in line of duty'' to be consistent with the term of

art as used in title 38 of the United States Code.

The options for transmitting decisions on applications and requests

for reconsideration have been clarified, as stated in 38 CFR 74.11(g)

and 74.13(g), to include mail, commercial carrier, facsimile, or other

electronic means.

VA has revised language in 38 CFR 74.14 to clarify the time period

for reapplication for admission to the VA VetBiz VIP Verification

Program. ``Or participant'' has been added to address those concerns

whose verification status is cancelled.

Administrative Procedure Act

Regarding the new interim final amendments published within this

final rule at 38 CFR 74.1 and 74.4(c)(1), pursuant to 5 U.S.C.

553(b)(3)(B) and (d)(3), we find that there is good cause to dispense

with advance public notice and opportunity to comment and with the 30-

day delayed effective date. Advance solicitation of comments on the

additional interim final provisions would be impracticable and contrary

to the public interest, as it could delay VA's examination and

verification procedures. VA has good cause to publish the interim final

provisions in light of the urgent need to ensure that business concerns

are being properly characterized as VOSBs or SDVOSBs, which is

accomplished through verification of ownership and control. Immediate

implementation of these provisions is consistent with the prior interim

final rule and permits VA to continue reviewing basic information

necessary to the verification process. This information is necessary

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even if, as a result of any additional comments received after

publication of this notice, VA needs to further revise any of the rules

set forth herein. Accordingly, VA has found good cause for the

additional interim final provisions to become effective upon

publication.

Regulatory Flexibility Act

The Secretary hereby certifies that this final rule will not have a

significant economic impact on a substantial number of small entities

as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-

612.

This final rule would generally be small business neutral as it

applies only to applying for verified status in the VetBiz.gov VIP

database. The overall impact of the final rule will be of benefit to

small businesses owned by veterans

[[Page 6101]]

or service-disabled veterans. VA estimates the cost to an individual

business to be less than $100.00 for 70-75 percent of the businesses

seeking verification, and the average cost to the entire population of

veterans seeking to become verified is less than $325.00 on average. A

related rule describes the effect that verified businesses will have in

the Department's acquisition regulation. This impact is discussed in

the proposed rule modifying the VA Acquisition Regulation which was

published in the Federal Register at 73 FR 49141 on August 20, 2008. On

this basis, the Secretary certifies that the adoption of this final

rule would not have a significant economic impact on a substantial

number of small entities as they are defined in the Regulatory

Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 605(b),

this regulation is exempt from the initial and final regulatory

flexibility analysis requirements of sections 603 and 604.

Executive Order 12866

Executive Order 12866 directs agencies to assess all costs and

benefits of available regulatory alternatives and, when regulation is

necessary, to select regulatory approaches that maximize net benefits

(including potential economic, environmental, public health and safety,

and other advantages; distributive impacts; and equity). The Executive

Order classifies a ``significant regulatory action,'' requiring review

by the Office of Management and Budget (OMB) unless OMB waives such

review, as any regulatory action that is likely to result in a rule

that may: (1) Have an annual effect on the economy of $100 million or

more or adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities; (2) create a serious inconsistency or otherwise interfere

with an action taken or planned by another agency; (3) materially alter

the budgetary impact of entitlements, grants, user fees, or loan

programs or the rights and obligations of recipients thereof; or (4)

raise novel legal or policy issues arising out of legal mandates, the

President's priorities, or the principles set forth in the Executive

Order.

The economic, interagency, budgetary, legal, and policy

implications of this rule have been examined and it has been determined

to be a significant regulatory action under the Executive Order.

Unfunded Mandates

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C.

1532, that agencies prepare an assessment of anticipated costs and

benefits before issuing any rule that may result in the expenditure by

State, local, and tribal governments, in the aggregate, or by the

private sector, of $100 million or more (adjusted annually for

inflation) in any given year. This rule would have no such effect on

State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act

This final rule contains provisions that constitute collections of

information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

OMB has approved these collections and has assigned control number

2900-0675. VA displays this control number under the applicable

sections of the regulations in this final rule. OMB assigns control

numbers to collections of information it approves. VA may not conduct

or sponsor, and a person is not required to respond to, a collection of

information unless it displays a currently valid OMB control number.

Catalog of Federal Domestic Assistance

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This final rule affects the verification guidelines of veteranowned

small businesses, for which there is no Catalog of Federal

Domestic Assistance program number.

List of Subjects in 38 CFR Part 74

Administrative practice and procedures, Privacy, Reporting and

recordkeeping requirements, Small business, Veteran, Veteran-owned

small business, Verification.

Approved: October 5, 2009.

John R. Gingrich,

Chief of Staff, Department of Veterans Affairs.

0

Accordingly, the interim final rule adding 38 CFR Part 74, which was

published in the Federal Register at 73 FR 29024, on May 19, 2008, is

adopted as a final rule with changes, as follows:

PART 74--VETERANS SMALL BUSINESS REGULATIONS

General Guidelines

Sec.

74.1 What definitions are important for VetBiz Vendor Information

Pages (VIP) Verification Program?

74.2 What are the eligibility requirements a concern must meet for

VetBiz VIP Verification Program?

74.3 Who does the Center for Veterans Enterprise (CVE) consider to

own a veteran-owned small business?

74.4 Who does CVE consider to control a veteran-owned small

business?

74.5 How does CVE determine affiliation?

Application Guidelines

74.10 Where must an application be filed?

74.11 How does CVE process applications for VetBiz VIP Verification

Program?

74.12 What must a concern submit to apply for VetBiz VIP

Verification Program?

74.13 Can an applicant ask CVE to reconsider its initial decision to

deny an application?

74.14 Can an applicant or participant reapply for admission to the

VetBiz VIP Verification Program?

74.15 What length of time may a business participate in VetBiz VIP

Verification Program?

Oversight Guidelines

74.20 What is a verification examination and what will CVE examine?

74.21 What are the ways a business may exit VetBiz VIP Verification

Program status?

74.22 What are the procedures for cancellation?

Records Management

74.25 What types of personally identifiable information will VA

collect?

74.26 What types of business information will VA collect?

74.27 How will VA store information?

74.28 Who may examine records?

74.29 When will VA dispose of records?

Authority: 38 U.S.C. 501, 513, and as noted in specific

sections.

General Guidelines

Sec. 74.1 What definitions are important for VetBiz Vendor

Information Pages (VIP) Verification Program?

For the purposes of part 74, the following definitions apply.

Center for Veterans Enterprise (CVE) is an office within the U.S.

Department of Veterans Affairs (VA) and is a subdivision of VA's Office

of Small and Disadvantaged Business Utilization. The CVE helps veterans

interested in forming or expanding their own small businesses. It also

helps VA contracting offices identify veteran-owned small businesses

and works with the Small Business Administration's Veterans Business

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Development Officers and Small Business Development Centers nationwide

regarding veterans' business financing, management, and technical

assistance needs.

Days are calendar days. In computing any period of time described

in part 74, the day from which the period begins to run is not counted,

and when the last day of the period is a Saturday, Sunday, or Federal

holiday, the period extends to the next day that is not a Saturday,

Sunday, or Federal holiday. Similarly, in circumstances where CVE is

closed for all or part of the last day, the period extends to the next

day on which the agency is open.

[[Page 6102]]

Day-to-day management means supervising the executive team,

formulating sound policies and setting strategic direction.

Day-to-day operations mean the marketing, production, sales, and

administrative functions of the firm.

Eligible individual means a veteran, service-disabled veteran or

surviving spouse, as defined in this section.

Full-time means working at the business during the normal working

hours, which equate to Monday through Friday, approximately 9 a.m. to 5

p.m.

Immediate family member means father, mother, husband, wife, son,

daughter, brother, sister, grandfather, grandmother, grandson,

granddaughter, father-in-law, and mother-in-law.

Joint venture is an association of two or more small business

concerns to engage in and carry out a single, specific business venture

for joint profit, for which purpose they combine their efforts,

property, money, skill, or knowledge, but not on a continuing or

permanent basis for conducting business generally. For VA contracts, a

joint venture must be in the form of a separate legal entity.

Negative control includes, but is not limited to, instances where a

minority shareholder has the ability, under the concern's chapter, bylaws,

or shareholder's agreement, to prevent a quorum or otherwise

block action by the board of directors or shareholders.

Non-veteran means any individual who does not claim veteran status,

or upon whose status an applicant or participant does not rely in

qualifying for VetBiz Vendor Information Pages (VIP) Verification

Program participation.

Office of Small and Disadvantaged Business Utilization is the

office within the Department of Veterans Affairs that establishes and

monitors small business program goals at the prime and subcontract

levels and which functions as the ombudsman for veterans and servicedisabled

veterans seeking procurement opportunities with the

Department.

Participant means a veteran-owned small business concern that has

verified status in the VetBiz Vendor Information Pages database.

Primary industry classification means the six-digit North American

Industry Classification System (NAICS) code designation which best

describes the primary business activity of the participant. The NAICS

code designations are described in the North American Industry

Classification System (NAICS) Manual published by the U.S. Office of

Management and Budget.

Principal place of business means the business location where the

individuals who manage the concern's day-to-day operations spend most

working hours and where top management's current business records are

kept. If the office from which management is directed and where the

current business records are kept are in different locations, CVE will

determine the principal place of business for program purposes.

Same or similar line of business means business activities within

the same three-digit ``Major Group'' of the NAICS Manual as the primary

industry classification of the applicant or participant. The phrase

``same business area'' is synonymous with this definition.

Service-disabled veteran is a veteran who possesses either a

disability rating letter issued by the Department of Veterans Affairs,

establishing a service-connected rating between 0 and 100 percent, or a

disability determination from the Department of Defense.

Service-disabled veteran-owned small business concern is a business

not less than 51 percent of which is owned by one or more servicedisabled

veterans, or in the case of any publicly owned business, not

less than 51 percent of the stock of which is owned by one or more

service-disabled veterans; the management and daily business operations

of which are controlled by one or more service-disabled veterans, or in

the case of a veteran with a permanent and severe disability, a spouse

or permanent caregiver of such veteran. In addition, some businesses

may be owned and operated by an eligible surviving spouse. 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.

Small business concern is--CVE applies the small business concern

definition established by 48 CFR 2.101.

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Surviving spouse is any individual identified as such by VA's

Veterans Benefits Administration and listed in its database of veterans

and family members. To be eligible for VetBiz VIP Verification, the

following conditions must apply:

(1) If the death of the veteran causes the small business concern

to be less than 51 percent owned by one or more veterans, the surviving

spouse of such veteran who acquires ownership rights in such small

business shall, for the period described in paragraph (2) of this

definition, be treated as if the surviving spouse were that veteran for

the purpose of maintaining the status of the small business concern as

a service-disabled veteran-owned small business.

(2) The period referred to in paragraph (1) of this definition is

the period beginning on the date on which the veteran dies and ending

on the earliest of the following dates:

(i) The date on which the surviving spouse remarries;

(ii) The date on which the surviving spouse relinquishes an

ownership interest in the small business concern;

(iii) The date that is 10 years after the date of the veteran's

death; or

(iv) The date on which the business concern is no longer small

under Federal small business size standards.

(3) The veteran must have had a 100 percent service-connected

disability or died as a direct result of a service-connected

disability.

Note to definition of surviving spouse: For program eligibility

purposes, the surviving spouse has the same rights and entitlements

of the service-disabled veteran who transferred ownership upon his

or her death.

Unconditional ownership means ownership that is not subject to

conditions precedent, conditions subsequent, executory agreements,

voting trusts, restrictions on or assignments of voting rights, or

other arrangements causing or potentially causing ownership benefits to

go to another (other than after death or incapacity). The pledge or

encumbrance of stock or other ownership interest as collateral,

including seller-financed transactions, does not affect the

unconditional nature of ownership if the terms follow normal commercial

practices and the owner retains control absent violations of the terms.

VA is the U.S. Department of Veterans Affairs.

Vendor Information Pages (VIP) is a database of businesses eligible

to participate in VA's Veteran-owned Small Business Program. The online

Verification eligibility period is a 12-month period that begins on

the date the Center for Veterans Enterprise issues the approval letter

establishing verified status. The participant must submit a new

application each year to continue eligibility.

Veteran is a person who served on active duty with the U.S. Army,

Air Force, Navy, Marine Corps or Coast Guard, for any length of time

and at any place and who was discharged or released under conditions

other than dishonorable. Reservists or members of

[[Page 6103]]

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 qualify as a veteran.

Veteran-owned small business concern (VOSB) is a small business

concern that is not less than 51 percent owned by one or more veterans,

or in the case of any publicly owned business, not less than 51 percent

of the stock of which is owned by one or more veterans; the management

and daily business operations of which are controlled by one or more

veterans and qualifies as ``small'' for Federal business size standard

purposes. All service-disabled veteran-owned small business concerns

(SDVOSBs) are also, by definition, veteran-owned small business

concerns. When used in these guidelines, the term ``VOSB'' includes

SDVOSBs.

Veterans Affairs Acquisition Regulation (VAAR) is the set of rules

that specifically govern requirements exclusive to the U.S. Department

of Veterans Affairs (VA) prime and subcontracting actions. The VAAR is

chapter 8 of title 48, Code of Federal Regulations, and supplements the

Federal Acquisition Regulation (FAR), which contains guidance

applicable to most Federal agencies.

Sec. 74.2 What are the eligibility requirements a concern must meet

for VetBiz VIP Verification Program?

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(a) Ownership and control. A small business concern must be

unconditionally owned and controlled by one or more eligible veterans,

service-disabled veterans or surviving spouses, have completed the

Enterprise. Such businesses appear in the VIP database as ``verified.''

(b) Good character. Veterans, service-disabled veterans and

surviving spouses with ownership interests in VetBiz verified

businesses must have good character. Debarred or suspended concerns or

concerns owned or controlled by debarred or suspended persons are

ineligible for VetBiz VIP Verification.

(c) False Statements. If, during the processing of an application,

CVE determines that an applicant has knowingly submitted false

information, regardless of whether correct information would cause CVE

to deny the application, and regardless of whether correct information

was given to CVE in accompanying documents, CVE will deny the

application. If, after verifying the Participant's eligibility, CVE

discovers that false information has been knowingly submitted by a

firm, CVE will remove the ``verified'' status from the VIP database and

notify the business by phone and mail. Whenever CVE determines that the

applicant submitted false information, the matter will be referred to

the Office of Inspector General for review. In addition, the CVE will

request that debarment proceedings be initiated by the Department.

(d) Federal financial obligations. Neither a firm nor any of its

eligible individuals that fails to pay significant financial

obligations owed to the Federal Government, including unresolved tax

liens and defaults on Federal loans or other Federally assisted

financing, is eligible for VetBiz VIP Verification.

(e) U.S. Small Business Administration (SBA) Protest Decisions. Any

firm registered in the VetBiz VIP database that is found to be

ineligible due to an SBA protest decision or other negative finding

will be immediately removed from the VetBiz VIP database. Until such

time as CVE receives official notification that the firm has proven

that it has successfully overcome the grounds for the determination or

that the SBA decision is overturned on appeal, the firm will not be

eligible to participate in the 38 U.S.C. 8127 program.

Sec. 74.3 Who does the Center for Veterans Enterprise (CVE) consider

to own a veteran-owned small business?

An applicant or participant must be at least 51 percent

unconditionally and directly owned by one or more veterans or servicedisabled

veterans.

(a) Ownership must be direct. Ownership by one or more veterans or

service-disabled veterans must be direct ownership. An applicant or

participant owned principally by another business entity or by a trust

(including employee stock ownership plans [ESOP]) that is in turn owned

by one or more veterans or service-disabled veterans does not meet this

requirement. However, ownership by a trust, such as a living trust, may

be treated as the functional equivalent of ownership by a veteran or

service-disabled veteran where the trust is revocable, and the veteran

or service-disabled veteran is the grantor, a trustee, and the sole

current beneficiary of the trust. For employee stock ownership plans

where 5 or fewer persons who are individuals, estates, or trusts own 50

percent or more of the total combined voting power of the corporation,

the employee plan will be determined to be ``excluded stock'' and

eligible parties must control 51 percent or more of the combined voting

power of the corporation. For employee stock ownership plans where

greater than 5 persons who are individuals, estates, or trusts own 50

percent or more of the total stock, eligible parties must control 51

percent or more of the combined voting power of the corporation,

including the ESOP stock.

(b) Ownership must be unconditional. Ownership by one or more

veterans or service-disabled veterans must be unconditional ownership.

Ownership must not be subject to conditions precedent, conditions

subsequent, executory agreements, voting trusts, restrictions on

assignments of voting rights, or other arrangements causing or

potentially causing ownership benefits to go to another (other than

after death or incapacity). The pledge or encumbrance of stock or other

ownership interest as collateral, including seller-financed

transactions, does not affect the unconditional nature of ownership if

the terms follow normal commercial practices and the owner retains

control absent violations of the terms. In particular, CVE will

evaluate ownership according to the following criteria for specific

types of small business concerns.

(1) Ownership of a partnership. In the case of a concern that is a

partnership, at least 51 percent of every class of partnership interest

must be unconditionally owned by one or more veterans or servicedisabled

veterans. The ownership must be reflected in the concern's

partnership agreement.

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(2) Ownership of a limited liability company. In the case of a

concern that is a limited liability company, at least 51 percent of

each class of member interest must be unconditionally owned by one or

more veterans or service-disabled veterans.

(3) Ownership of a corporation. In the case of a concern that is a

corporation, at least 51 percent of each class of voting stock

outstanding and 51 percent of the aggregate of all stock outstanding

must be unconditionally owned by one or more veterans or servicedisabled

veterans.

(c) Stock options' effect on ownership. In determining

unconditional ownership, CVE will disregard any unexercised stock

options or similar agreements held by veterans or service-disabled

veterans. However, any unexercised stock options or similar agreements

(including rights to convert non-voting stock or debentures into voting

stock) held by non-veterans will be treated as exercised, except for

any ownership interests that are held by investment companies licensed

under

[[Page 6104]]

part 107 of title 13, Code of Federal Regulations.

(d) Profits and distributions. One or more veterans or servicedisabled

veterans must be entitled to receive:

(1) At least 51 percent of the annual distribution of profits paid

to the owners of a corporate, partnership, or LLC applicant concern;

(2) 100 percent of the value of each share of stock owned by them

in the event that the stock is sold; and

(3) At least 51 percent of the retained earnings of the concern and

100 percent of the unencumbered value of each share of stock owned in

the event of dissolution of the corporation, partnership, or LLC.

(4) An eligible individual's ability to share in the profits of the

concern should be commensurate with the extent of his/her ownership

interest in that concern.

(e) Change of ownership. (1) A participant may remain eligible

after a change in its ownership or business structure, so long as one

or more veterans or service-disabled veterans own and control it after

the change and the participant files a new application identifying the

new veteran owners or their new business interest.

(2) Any participant that is performing contracts and desires to

substitute one veteran owner for another shall submit a proposed

novation agreement and supporting documentation in accordance with FAR

Subpart 42.12 to the contracting officer prior to the substitution or

change of ownership for approval.

(3) Where the transfer results from the death or incapacity due to

a serious, long-term illness or injury of an eligible principal, prior

approval is not required, but the concern must file a new application

with contracting officer and CVE within 60 days of the change. Existing

contracts may be performed to the end of the instant term. However, no

options may be exercised.

(4) Continued eligibility of the participant with new ownership and

the award of any new contracts require that CVE verify all eligibility

requirements are met by the concern and the new owners.

(f) Community property laws given effect. In determining ownership

interests when an owner resides in any of the community property States

or territories of the United States, CVE considers applicable State

community property laws. If only one spouse claims veteran status, that

spouse's ownership interest will be considered unconditionally held

only to the extent it is vested by the community property laws.

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

business?

(a) Control means both the day-to-day management and long-term

decision-making authority for the VOSB. Many persons share control of a

concern, including each of those occupying the following positions:

Officer, director, general partner, managing partner, managing member

and manager. In addition, key employees who possess expertise or

responsibilities related to the concern's primary economic activity may

share significant control of the concern. CVE will consider the control

potential of such key employees on a case-by-case basis.

(b) Control is not the same as ownership, although both may reside

in the same person. CVE regards control as including both the strategic

policy setting exercised by boards of directors and the day-to-day

management and administration of business operations. An applicant or

participant's management and daily business operations must be

conducted by one or more veterans or service-disabled veterans.

Individuals managing the concern must have managerial experience of the

extent and complexity needed to run the concern. A veteran need not

have the technical expertise or possess a required license to be found

to control an applicant or participant if he or she can demonstrate

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that he or she has ultimate managerial and supervisory control over

those who possess the required licenses or technical expertise.

However, where a critical license is held by a non-veteran having an

equity interest in the applicant or participant firm, the non-veteran

may be found to control the firm.

(c)(1) An applicant or participant must be controlled by one or

more veterans or service-disabled veterans who possess requisite

management capabilities. With the exception of joint-venture

agreements, an eligible owner may only have one business participating

in the Verification Program at one time and must work full-time in the

business as defined in Sec. 74.1.

(2) An eligible full-time manager must hold the highest officer

position (usually President or Chief Executive Officer) in the

applicant or participant.

(3) One or more veterans or service-disabled veteran owners who

manage the applicant or participant must devote full-time to the

business during the normal working hours of firms in the same or

similar line of business. Work in a wholly-owned subsidiary of the

applicant or participant may be considered to meet the requirement of

full-time devotion. This applies only to a subsidiary owned by the VOSB

itself, and not to firms in which the veteran has a mere ownership

interest.

(4) Except as provided in paragraph (d)(1) of this section, a

veteran owner's unexercised right to cause a change in the management

of the applicant concern does not in itself constitute veteran control,

regardless of how quickly or easily the right could be exercised.

(d) In the case of a partnership, one or more veterans or servicedisabled

veterans must serve as general partners, with control over all

partnership decisions. A partnership in which no veteran is a general

partner will be ineligible for participation.

(e) In the case of a limited liability company, one or more

veterans or service-disabled veterans must serve as management members,

with control over all decisions of the limited liability company.

(f) One or more veterans or service-disabled veterans must control

the board of directors of a corporate applicant or participant.

(1) CVE will deem veterans or service-disabled veterans to control

the board of directors where:

(i) A single veteran owns 100 percent of all voting stock of an

applicant or participant concern;

(ii) A single veteran owns at least 51 percent of all voting stock

of an applicant or participant, the individual is on the board of

directors and no super majority 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 veteran must own at

least the percent of the voting stock needed to overcome any such

supermajority voting requirements; or

(iii) No single veteran owns 51 percent of all voting stock but

multiple veterans in combination do own at least 51 percent of all

voting stock, each such veteran is on the board of directors, no

supermajority voting requirements exist, and the veteran shareholders

can demonstrate that they have made enforceable arrangements to permit

one of them to vote the stock of all as a block without a shareholder

meeting. Where the concern has supermajority voting requirements, the

veteran shareholders must own at least that percentage of voting stock

needed to overcome any such supermajority ownership requirements.

(2) Where an applicant or participant does not meet the

requirements set forth in paragraph (d)(1) of this section, the

veteran(s) upon whom eligibility is based must control the board of

[[Page 6105]]

directors through actual numbers of voting directors or, where

permitted by state law, through weighted voting (e.g., in a concern

having a two-person board of directors where one individual on the

board is a veteran and one is not, the veteran vote must be weighted--

worth more than one vote--in order for the concern to be eligible for

VetBiz VIP Verification). Where a concern seeks to comply with this

paragraph:

(i) Provisions for the establishment of a quorum cannot permit nonveteran

directors to control the board of directors, directly or

indirectly;

(ii) Any executive committee of the board of directors must be

controlled by veteran directors unless the executive committee can only

make recommendations to and cannot independently exercise the authority

of the board of directors.

(3) Non-voting, advisory, or honorary directors may be appointed

without affecting veterans' or service-disabled 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.

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(g) Non-veterans may be involved in the management of an applicant

or participant, and may be stockholders, partners, limited liability

members, officers, or directors of the applicant or participant. With

the exception of a spouse or personal caregiver who represents a

severely disabled veteran owner, no such non-veteran or immediate

family member may:

(1) Exercise actual control or have the power to control the

applicant or participant;

(2) Be a former employer or a principal of a former employer of any

affiliated business of the applicant or participant, unless it is

determined by the CVE that the relationship between the former employer

or principal and the eligible individual or applicant concern does not

give the former employer actual control or the potential to control the

applicant or participant and such relationship is in the best interests

of the participant firm; or

(3) Receive compensation from the applicant or participant in any

form as directors, officers or employees, including dividends, that

exceeds the compensation to be received by the highest officer (usually

chief executive officer or president). The highest ranking officer may

elect to take a lower salary than a non-veteran only upon demonstrating

that it helps the applicant or participant.

(h) Non-veterans who transfer majority stock ownership or control

of the firm to an immediate family member within 2 years prior to the

application and remain involved in the firm as a stockholder, officer,

director, or key employee of the firm are presumed to control the firm.

The presumption may be rebutted by showing that the transferee has

independent management experience necessary to control the operation of

the firm, and indeed is participating in the management of the firm.

(i) Non-veterans or entities may be found to control or have the

power to control in any of the following circumstances, which are

illustrative only and not all inclusive:

(1) Non-veterans control the board of directors of the applicant or

participant, either directly through majority voting membership, or

indirectly, where the by-laws allow non-veterans effectively to prevent

a quorum or block actions proposed by the veterans or service-disabled

veterans.

(2) A non-veteran or entity, having an equity interest in the

applicant or participant, provides critical financial or bonding

support or a critical license to the applicant or participant which

directly or indirectly allows the non-veteran significantly to

influence business decisions of the participant, unless an exception is

authorized by the Office of Small and Disadvantaged Business

Utilization.

(3) A non-veteran or entity controls the applicant or participant

or an individual veteran owner through loan arrangements. Providing a

loan guaranty on commercially reasonable terms does not, by itself,

give a non-veteran or entity the power to control a firm.

(4) Business relationships exist with non-veterans or entities

which cause such dependence that the applicant or participant cannot

exercise independent business judgment without great economic risk.

Sec. 74.5 How does CVE determine affiliation?

The Center for Veterans Enterprise applies the affiliation rules

established by the Small Business Administration in 13 CFR part 121.

Application Guidelines

Sec. 74.10 Where must an application be filed?

An application for VetBiz VIP Verification status must be

electronically filed in the Vendor Information Pages database located

Upon receipt of the applicant's electronic submission, an

acknowledgment message will be dispatched to the concern, containing

estimated processing time and other information. Address information

for the CVE is also contained on the Web portal. Correspondence may be

dispatched to: Director, Center for Veterans Enterprise (00VE), U.S.

Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC

20420.

(The Office of Management and Budget has approved the information

collection requirements in this section under control number 2900-

0675.)

Sec. 74.11 How does CVE process applications for VetBiz VIP

Verification Program?

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(a) The Director, Center for Veterans Enterprise, is authorized to

approve or deny applications for VetBiz VIP Verification. The CVE will

receive, review and evaluate all VetBiz VIP Verification applications.

CVE will advise each applicant within 30 days, when practicable, after

the receipt of an application whether the application is complete and

suitable for evaluation and, if not, what additional information or

clarification is required to complete the application. CVE will process

an application for VetBiz VIP Verification status within 60 days, when

practicable, of receipt of a complete application package. Incomplete

application packages will not be processed.

(b) CVE, in its sole discretion, may request clarification of

information contained in the application at any time in the eligibility

determination process. CVE will take into account any clarifications

made by an applicant in response to a request for such by CVE.

(c) An applicant's eligibility will be based on circumstances

existing on the date of application, except where clarification is made

pursuant to paragraph (b) of this section or as provided in paragraph

(d) of this section.

(d) Changed circumstances for an applicant occurring subsequent to

its application and which adversely affect eligibility will be

considered and may constitute grounds for denial of the application.

The applicant must inform CVE of any changed circumstances that could

adversely affect its eligibility for the program (i.e., ownership or

control changes) during its application review. Failure to inform CVE

of any such changed circumstances constitutes good cause for which CVE

may withdraw verified status for the participant if non-compliance is

discovered after a participant has been verified.

(e) The decision of the Director, CVE, to approve or deny an

application will

[[Page 6106]]

be in writing. A decision to deny verification status will state the

specific reasons for denial, and will inform the applicant of any

appeal rights.

(f) If the Director, CVE, approves the application, the date of the

approval letter is the date of participant verification for purposes of

determining the participant's verification eligibility term.

(g) The decision may be sent by mail, commercial carrier, facsimile

transmission, or other electronic means.

(The Office of Management and Budget has approved the information

collection requirements in this section under control number 2900-

0675.)

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

Verification Program?

Each VetBiz VIP Verification applicant must submit the electronic

forms and attachments CVE requires. All electronic forms are available

on the VetBiz.gov Vendor Information Pages database Web pages. At the

time the applicant dispatches the electronic forms, the applicant must

also retain on file at the principal place of business a completed copy

of the electronic forms supplemented by manual records that will be

used in verification examinations. These forms and attachments will

include, but not be limited to, financial statements, Federal personal

and business tax returns, payroll records and personal history

statements. An applicant must also retain in the application file IRS

Form 4506, Request for Copy or Transcript of Tax Form. These materials

shall be filed together to maximize efficiency of verification

examination visits. Together with the electronic documents, these

manual records will provide the CVE verification examiner with

sufficient information to establish the management, control and

operating status of the business on the date of submission.

(The Office of Management and Budget has approved the information

collection requirements in this section under control number 2900-

0675.)

Sec. 74.13 Can an applicant ask CVE to reconsider its initial

decision to deny an application?

(a) An applicant may request that the Director, CVE, reconsider his

or her decision to deny an application by filing a request for

reconsideration with CVE within 30 days of receipt of CVE's denial

decision. ``Filing'' means a document is received by CVE by 5:30 p.m.,

eastern time, on that day. Documents may be filed by hand delivery,

mail, commercial carrier, or facsimile transmission. Hand delivery and

other means of delivery may not be practicable during certain periods

due, for example, to security concerns or equipment failures. The

filing party bears the risk that the delivery method chosen will not

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result in timely receipt at CVE. Submit requests for reconsideration

to: Director, Center for Veterans Enterprise (00VE), U.S. Department of

Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420. A

formal decision will be issued within 60 days after receipt.

(b) The Director, CVE, will issue a written decision within 60

days, when practicable, of receipt of the applicant's request. The

Director, CVE, may either approve the application, deny it on the same

grounds as the original decision, or deny it on other grounds. If

denied, the Director, CVE, will explain why the applicant is not

eligible for the VetBiz VIP Verification and give specific reasons for

the denial.

(c) If the Director, CVE, denies the application solely on issues

not raised in the initial denial, the applicant may ask for

reconsideration as if it were an initial denial.

(d) If CVE determines that a concern may not qualify as small, they

may directly deny an application for VetBiz VIP Verification or may

request a formal size determination from the U.S. Small Business

Administration (SBA). A concern whose application is denied because it

is other than a small business concern by CVE may request a formal size

determination from the SBA Associate Administrator, Office of

Government Contracting (ATTN: Director, Office of Size Standards), 409

3rd Street, SW., Washington, DC 20416. A favorable determination by SBA

will enable the firm to immediately submit a new VetBiz VIP

Verification.

(e) A denial decision that is based on the failure to meet any

veteran or service-disabled veteran eligibility criteria is not subject

to a request for reconsideration and is the final decision of CVE.

(f) Except as provided in paragraph (c) of this section, the

decision on the request for reconsideration shall be final.

(g) The decision may be sent by mail, commercial carrier, facsimile

transmission, or other electronic means.

Sec. 74.14 Can an applicant or participant reapply for admission to

the VetBiz VIP Verification Program?

Once an application, a request for reconsideration, or an appeal to

a cancellation notice, as applicable, has been denied, the applicant or

participant shall be required to wait for a period of 6 months before a

new application will be processed by CVE.

Sec. 74.15 What length of time may a business participate in VetBiz

VIP Verification Program?

(a) A participant receives an eligibility term of 1 year from the

date of CVE's approval letter establishing verified status. The

participant must maintain its eligibility during its tenure and must

inform CVE of any changes that would adversely affect its eligibility.

The eligibility term may be shortened by cancellation by CVE or

voluntary withdrawal by the participant (i.e., no longer eligible as a

small business concern), as provided for in this subpart.

(b) When at least 50 percent of the assets of a concern are the

same as those of an affiliated business, the concern will not be

eligible for verification.

(c) CVE may initiate a verification examination whenever it

receives credible information calling into the question a participant's

eligibility as a VOSB. Upon its completion of the examination, CVE will

issue a written decision regarding the continued eligibility status of

the questioned participant.

(d) If CVE finds that the participant does not qualify as a VOSB,

the procedures at Sec. 74.22 will apply.

(e) If CVE finds that the participant continues to qualify as a

VOSB, the program term remains in effect.

Oversight Guidelines

Sec. 74.20 What is a verification examination and what will CVE

examine?

(a) General. A verification examination is an investigation by CVE

officials, which verifies the accuracy of any statement or information

provided as part of the VetBiz VIP Verification application process.

Thus, examiners may verify that the concern currently meets the

eligibility requirements, and that it met such requirements at the time

of its application or its most recent size recertification. An

examination may be conducted on a random, unannounced basis, or upon

receipt of specific and credible information alleging that a

participant no longer meets eligibility requirements.

(b) Scope of examination. CVE may conduct the examination, or parts

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of the program examination, at one or all of the participant's offices.

CVE will determine the location of the examination. Examiners may

review any information related to the concern's eligibility

requirements including, but not limited to, documentation related to

the legal structure, ownership and control of the concern. As a

minimum,

[[Page 6107]]

examiners shall review all documents supporting the application, as

described in Sec. 74.12. These include: Financial statements; Federal

personal and business tax returns; personal history statements; and

Request for Copy or Transcript of Tax Form (IRS Form 4506) for up to 3

years. Other documents, which may be reviewed include (if applicable):

Articles of Incorporation/Organization; corporate by-laws or operating

agreements; organizational, annual and board/member meeting records;

stock ledgers and certificates; State-issued Certificates of Good

Standing; contract, lease and loan agreements; payroll records; bank

account signature cards; and licenses.

Sec. 74.21 What are the ways a business may exit VetBiz VIP

Verification Program status?

A participant may:

(a) Voluntarily cancel its status by submitting a written request

to CVE requesting that the ``verified'' status button be removed from

the Vendor Information Pages database; or

(b) Delete its record entirely from the Vendor Information Pages

database; or

(c) CVE may cancel the ``verified'' status button for good cause

upon formal notice to the participant. Examples of good cause include,

but are not limited to, the following:

(1) Submission of false information in the participant's VetBiz VIP

Verification application.

(2) Failure by the participant to maintain its eligibility for

program participation.

(3) Failure by the participant for any reason, including the death

of an individual upon whom eligibility was based, to maintain

ownership, management, and control by veterans, service-disabled

veterans or surviving spouses.

(4) Failure by the concern to disclose to CVE the extent to which

non-veteran persons or firms participate in the management of the

participant.

(5) Debarment, suspension, voluntary exclusion, or ineligibility of

the participant or its owners.

(6) A pattern of failure to make required submissions or responses

to CVE in a timely manner, including a failure to make available

financial statements, requested tax returns, reports, information

requested by CVE or VA's Office of Inspector General, or other

requested information or data within 30 days of the date of request.

(7) Cessation of the participant's business operations.

(8) Failure by the concern to pay or repay significant financial

obligations owed to the Federal Government.

(9) Failure by the concern to obtain and keep current any and all

required permits, licenses, and charters, including suspension or

revocation of any professional license required to operate the

business.

(10) Failure by the concern to provide an updated application (VA

Form 0877) within 60 days of any change in ownership.

(d) The examples of good cause listed in paragraph (c) of this

section are intended to be illustrative only. Other grounds for

canceling a participant's verified status include any other cause of so

serious or compelling a nature that it affects the present

responsibility of the participant.

Sec. 74.22 What are the procedures for cancellation?

(a) General. When CVE believes that a participant's verified status

should be cancelled prior to the expiration of its eligibility term,

CVE will notify the participant in writing. The Notice of Proposed

Cancellation Letter will set forth the specific facts and reasons for

CVE's findings, and will notify the participant that it has 30 days

from the date it receives the letter to submit a written response to

CVE explaining why the proposed ground(s) should not justify

cancellation.

(b) Recommendation and decision. Following the 30-day response

period, the Director, CVE, will consider any information submitted by

the participant. Upon determining that cancellation is not warranted,

the Director, CVE, will notify the participant in writing. If

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cancellation appears warranted, the Director, CVE, will make a decision

whether to cancel the participant's verified status.

(c) Notice requirements. Upon deciding that cancellation is

warranted, the Director, CVE, will issue a Notice of Verified Status

Cancellation. The Notice will set forth the specific facts and reasons

for the decision, and will advise the concern that it may re-apply

after it has met all eligibility criteria.

(d) Effect of verified status cancellation. After the effective

date of cancellation, a participant is no longer eligible to appear as

``verified'' in the VetBiz VIP database. However, such concern is

obligated to perform previously awarded contracts to the completion of

their existing term of performance.

(e) Appeals. A participant may file an appeal with the Executive

Director, Office of Small and Disadvantaged Business Utilization and

Center for Veterans Enterprise, concerning the Notice of Verified

Status Cancellation within 30 days of receipt of CVE's cancellation

decision. ``Filing'' means a document is received by CVE by 5:30 p.m.,

eastern time, on that day. Documents may be filed by hand delivery,

mail, commercial carrier, or facsimile transmission. Hand delivery and

other means of delivery may not be practicable during certain periods

due, for example, to security concerns or equipment failures. The

filing party bears the risk that the delivery method chosen will not

result in timely receipt at CVE. Submit appeals to: Executive Director,

Office of Small and Disadvantaged Business Utilization and Center for

Veterans Enterprise (00VE), U.S. Department of Veterans Affairs, 810

Vermont Avenue, NW., Washington, DC 20420. A formal decision will be

issued within 60 days after receipt. The decision on the appeal shall

be final.

Records Management

Sec. 74.25 What types of personally identifiable information will VA

collect?

In order to establish owner eligibility, the Department will

collect individual names and Social Security numbers for veterans,

service-disabled veterans and surviving spouses who represent

themselves as having ownership and control interests in a specific

business seeking to obtain verified status.

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

VA will examine a variety of business records. See Sec. 74.12,

``What is a verification examination and what will CVE examine?''

Sec. 74.27 How will VA store information?

VA intends to store records provided to complete the VetBiz Vendor

Information Pages registration fully electronically on the Department's

secure servers. CVE personnel will compare information provided

concerning owners who have veteran status, service-disabled veteran

status or surviving spouse status against electronic records maintained

by the Department's Veterans Benefits Administration. Records collected

during examination visits will be scanned onto portable media and fully

secured in the Center for Veterans Enterprise, located in Washington,

DC.

Sec. 74.28 Who may examine records?

Personnel from the Department of Veterans Affairs, Center for

Veterans Enterprise and its agents, including personnel from the Small

Business Administration, may examine records to ascertain the ownership

and control of the applicant or participant.

Sec. 74.29 When will VA dispose of records?

The records, including those pertaining to businesses not

determined

[[Page 6108]]

to be eligible for the program, will be kept intact and in good

condition for seven years following a program examination or the date

of the last Notice of Verified Status Approval letter. Longer retention

will not be required unless a written request is received from the

Government Accountability Office not later than 30 days prior to the

FR Doc 2010-2648

http://edocket.access.gpo.gov/2010/2010-2648.htm[2/23/2010 9:07:56 PM]

end of the retention period.

(Authority: 38 U.S.C. 8127(f))

[FR Doc. 2010-2648 Filed 2-5-10; 8:45 am]

BILLING CODE P