VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned Small Businesses, 49141-49155 [E8-19261]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 73, Number 162 (Wednesday, August 20, 2008)]
[Proposed Rules]
[Pages 49141-49155]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-19261]


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

DEPARTMENT OF VETERANS AFFAIRS

48 CFR Parts 802, 804, 808, 809, 810, 813, 815, 819, 828, and 852

RIN 2900-AM92


VA Acquisition Regulation: Supporting Veteran-Owned and Service-
Disabled Veteran-Owned Small Businesses

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would implement portions of the Veterans 
Benefits, Health Care, and Information Technology Act of 2006 and 
Executive Order 13360, Providing Opportunities for Service-Disabled 
Veteran Businesses to Increase Their Federal Contracting and 
Subcontracting. The Public Law and Executive Order authorize the 
Department of Veterans Affairs (VA) to establish special methods for 
contracting with service-disabled veteran-owned small businesses 
(SDVOSBs) and veteran-owned small businesses (VOSBs). Under this 
proposed rule, a VA contracting officer could restrict competition in 
contracting for SDVOSBs or VOSBs under certain conditions. Likewise, 
sole source contracts with SDVOSBs or VOSBs would be permitted under 
certain conditions. The proposed rule would implement these special 
acquisition methods as a change to the VA Acquisition Regulation 
(VAAR).

DATES: Comments on the proposed rule should be submitted on or before 
October 20, 2008 to be considered in the formulation of the final rule.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, 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-AM92--VA Acquisition Regulation: Supporting Veteran-Owned and 
Service-Disabled Veteran-Owned Small Businesses.'' All comments 
received will be available for public inspection in the Office of 
Regulation Policy and Management, Room 1063B, between the hours of 8 
a.m. and 4:30 p.m., Monday through Friday (except holidays). Please 
call (202) 461-4902 for an appointment. This is not a toll-free number. 
In addition, during the comment period, comments are available online 
through the Federal Docket Management System (FDMS) at 
www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Derek Underwood, Acquisition Policy 
Division (049P1A), Office of Acquisition and Logistics, Department of 
Veterans Affairs, 810 Vermont Ave., NW., Washington, DC, 20420, 
telephone number (202) 461-6865 (not a toll-free number) or e-mail 
Derek.Underwood@va.gov.

SUPPLEMENTARY INFORMATION:

Background

    VA's mission is to serve veterans. Buying from SDVOSBs and VOSBs 
directly supports VA's mission. Supporting service-disabled veterans 
who own businesses contributes significantly in restoring their quality 
of life while enhancing transition from active duty to civilian life. 
Such acquisitions maintain the socioeconomic well-being of the Nation 
and carry out VA's strategic goals. Section 1.102-2(d) of the Federal 
Acquisition Regulation (FAR) (codified at 48 CFR chapter 1) provides 
that the Federal Acquisition System ``must support the attainment of 
public policy goals adopted by the Congress and the President.'' It is 
public policy, as expressed in 15 U.S.C. 637 and 644 that SDVOSBs and 
VOSBs, among others, shall have the maximum practicable opportunity to 
participate in the

[[Page 49142]]

performance of contracts let by any Federal agency.
    Sections 502 and 503 of Public Law 109-461, the Veterans Benefits, 
Health Care, and Information Technology Act of 2006, (codified at 38 
U.S.C. 8127 and 8128) contain provisions that authorize VA to create a 
unique procurement program among Federal agencies. This program would 
permit VA contracting officers to conduct acquisition actions limited 
to SDVOSBs or VOSBs for the Department's requirements. The law requires 
the Secretary to give priority to a small business concern owned and 
controlled by veterans.
    On October 20, 2004, the President issued Executive Order 13360, 
Providing Opportunities for Service-Disabled Veteran Businesses to 
Increase Their Federal Contracting and Subcontracting. The Executive 
Order directs the heads of agencies to significantly increase 
opportunities for service-disabled veteran businesses in Federal prime 
contracting and subcontracting actions. To achieve that objective, the 
Executive Order requires agencies to more effectively implement section 
15(g) of the Small Business Act (15 U.S.C. 644(g)) through various 
efforts, including the development of a strategic plan to implement 
Executive Order 13360. VA has developed its strategic plan, which is 
posted at the following Internet Web site: https://www.vetbiz.gov/fpp/
fpp.htm.
    VA proposes to amend the VAAR to implement the changes required by 
38 U.S.C. 8127 and 8128 and some rulemaking aspects of VA's strategic 
plan for Executive Order 13360. Specifically, this proposed rule would 
allow VA contracting officers to:
     Under certain conditions, permit non-competitive sourcing 
under the simplified acquisition threshold with SDVOSBs or VOSBs.
     Require set-asides for SDVOSBs or VOSBs above the 
simplified acquisition threshold when the contracting officer has a 
reasonable expectation that two or more eligible SDVOSBs or VOSBs will 
submit offers and that the award can be made at a fair and reasonable 
price that offers the best value to the United States.
     Under certain conditions, permit non-competitive sourcing 
for SDVOSBs or VOSBs above the simplified acquisition threshold when 
the contracting officer determines that a fair and reasonable price 
will be obtained as a result of negotiations for requirements not to 
exceed $5 million.
     Include evaluation factors in negotiated acquisitions that 
give preference to SDVOSBs and VOSBs and preference to offerors who 
propose to include such businesses as subcontractors.
     Require offerors who propose to use SDVOSBs or VOSBs as 
subcontractors to utilize eligible businesses.
     Require VOSBs participating in the Department's 
acquisitions to register in VetBiz.gov's Vendor Information Pages (VIP) 
database and verify that the business meets eligibility requirements.
     Establish a VA Mentor-Prot[eacute]g[eacute] Program and 
give large businesses that participate in the program a preference in 
the award of VA prime contracts.
     Encourage prime contractors and mentors to assist SDVOSBs 
and VOSBs in obtaining bonding when required.
     Revise the eligibility definition for ``service-disabled 
veteran-owned small business concerns'' to include a spouse who obtains 
ownership rights upon the death of a 100 percent service-disabled 
veteran or a veteran who died as a direct result of a service-connected 
injury for a period of 10 years unless the spouse remarries or sells 
the interest in the business.
     Recommend debarment of any business that willfully or 
deliberately misrepresents ownership and control of the business for 
purposes of registering in the VetBiz.gov Vendor Information Pages 
database or other Federal databases.
     Under certain conditions, authorize Contracting Officers 
to acquire supplies and services from SDVOSBs and VOSBs in lieu of 
Federal Prison Industries (FPI) and the Government Printing Office 
(GPO).

Section 802.101 Definitions

    In proposed section 802.101, VA adopts and incorporates various 
statutory definitions. FAR 2.101 defines ``service-disabled veteran-
owned small business (SDVOSB) concern'' and ``veteran-owned small 
business (VOSB) concern.'' Prime and subcontracting actions conducted 
under the authority of 38 U.S.C. 8127, as implemented in VAAR subpart 
819.70, revise the definition of ``service-disabled veteran-owned small 
business concern'' and require that SDVOSBs and VOSBs must be 
registered in the Vendor Information Pages (VIP) and that the ownership 
and control of such businesses has been verified by VA. In addition, 
section 8127(h) enables a surviving spouse who obtains ownership rights 
to a business upon the death of a veteran with a service-connected 
disability rated at 100 percent, or a veteran who dies as a direct 
result of a service-connected disability, to have VA treat the business 
as a ``service-disabled veteran-owned small business'' for a 10-year 
period after the death of the veteran, unless the surviving spouse 
remarries, sells the interest in the business or the business outgrows 
the small business size standards. This section also includes a 
definition of VIP.

Section 804.1102 Vendor Information Pages

    FAR 4.1102 currently requires all businesses to be registered in 
the Central Contractor Registration (CCR). Proposed section 804.1102 
would require VOSBs, including SDVOSBs, to register in the VIP 
database, available at https://www.VetBiz.gov, in order to be eligible 
to participate in set-asides for SDVOSBs and VOSBs issued by VA 
contracting officers. In completing registration, businesses would 
provide information establishing that the business is owned and 
controlled by eligible parties, according to the criteria defined in 38 
U.S.C. 8127 and FAR 19.1403.

Section 808.603 Purchase Priorities

    Under certain conditions, this section would authorize contracting 
officers to purchase supplies and services produced or provided by FPI 
from eligible SDVOSBs and VOSBs, in accordance with procedures set 
forth in proposed VAAR subpart 819.70, without seeking a waiver from 
FPI. We interpret section 8128 and the legislative history to mean that 
SDVOSBs and VOSBs must receive priority in VA contracting opportunities 
without regard to other provisions of law concerning contracting 
preferences. This interpretation conflicts with the current contracting 
priorities in law, and as implemented in the FAR, for Federal agencies 
buying from FPI. VA finds that section 8128, being directly applicable 
solely to VA and providing authority without regard to any other 
provision of law, requires VA contracting officers to have the 
authority to override other statutory contracting preferences to 
provide priority to SDVOSBs and VOSBs to meet VA's socioeconomic goals 
for such concerns. Therefore, proposed section 808.603 is the only 
means available to VA to implement the requirement in section 8128 that 
veterans' small businesses have priority in VA acquisitions that would 
normally be awarded under FPI.

Section 808.803 Priority for Acquisition of Printing and Related 
Supplies

    This section would authorize contracting officers to acquire 
government printing from eligible service-disabled veteran-owned small 
businesses and veteran-owned small businesses, in accordance with

[[Page 49143]]

procedures set forth in VAAR subpart 819.70, in lieu of the Government 
Printing Office (GPO). We interpret section 8128 and the relevant 
legislative history as authorizing VA to give priority in contracting 
to SDVOSBs and VOSBs without regard to other provisions of law 
concerning contracting preferences. This interpretation conflicts with 
the current contracting priority in law, and as implemented in the FAR, 
which provides that Federal agencies buying printing services must 
procure such services from GPO. VA finds that section 8128, being 
directly applicable solely to VA and providing authority for priority 
in VA contracting without regard to any other provision of law, 
requires VA contracting officers to have the authority to override the 
statutory contracting preference for GPO services and instead provide 
priority in contracting to SDVOSBs and VOSBs for printing services and 
related supplies. Therefore, proposed section 808.803 is the only means 
available to VA to implement section 8128.

Section 809.406-2 Causes for Debarment

    FAR 9.406-2 lists several reasons for which a debarring official 
may initiate a debarment action. Proposed VAAR 809.406-2 adds one 
additional reason: misrepresentation of status as an SDVOSB or a VOSB, 
in accordance with section 8127(g).

Section 810.001 Market Research Policy

    FAR 10.001 requires agencies to conduct market research on an 
ongoing basis and to effectively identify the capabilities of small 
businesses to meet agency requirements. VAAR section 810.001 would 
establish that, when conducting market research, VA contracting teams 
shall use the VIP database, in addition to other sources of 
information.

Section 810.002 Market Research Procedures

    This section would require contracting officers to record VIP 
queries in the solicitation file.

Section 813.106 Soliciting Competition, Evaluation of Quotations or 
Offers, Award and Documentation

    This section would clarify that contracting officers may use other 
than competitive procedures to enter into a contract with an SDVOSB or 
VOSB when the amount is less than the simplified acquisition threshold 
not to exceed $5 million. Contracting officers would give first 
consideration to SDVOSBs.

Section 813.202 Purchase Guidelines

    FAR 13.202(a)(1) provides that, to the extent practicable, open 
market micro-purchases shall be distributed equitably among qualified 
suppliers. The set-aside provisions of FAR Part 19 do not apply to 
micro-purchases. However, in accordance with sections 8127 and 8128, VA 
would make an exception to this FAR requirement when supplies are 
available from SDVOSBs or VOSBs. We would add section 813.202 to allow 
preference for SDVOSB and VOSB sources when making local open market 
micro-purchases using the purchase card. In such cases, equitable 
distribution of open market micro-purchases among all qualified 
suppliers would not be required. Instead, open market micro-purchases 
would be equitably distributed among all qualified SDVOSBs or VOSBs, 
respectively, to the maximum extent practicable. We believe that this 
change would assist VA in meeting its statutory goals for award of 
contracts to SDVOSBs and VOSBs.

Sections 815.304 and 852.215-70 Evaluation Factors and Significant 
Subfactors

    To implement sections 8127 and 8128, VA would add sections 815.304 
and 852.215-70 to require VA contracting officers to: (1) Include 
provisions in negotiated solicitations giving preference to offers 
received from VOSBs and additional preference to offers received from 
SDVOSBs; (2) use past performance in meeting SDVOSB subcontracting 
goals as a non-price evaluation factor in selecting offers for award; 
(3) use the proposed inclusion of SDVOSBs or VOSBs as subcontractors as 
an evaluation factor when competitively negotiating the award of 
contracts or task or delivery orders; and (4) consider participation in 
VA's Mentor-Prot[eacute]g[eacute] Program as an evaluation factor when 
competitively negotiating the award of contracts or task or delivery 
orders. VA is particularly interested in receiving comments on the 
proposed mandatory inclusion of evaluation preferences for SDVOSBs and 
VOSBs in negotiated acquisitions.

Section 815.304-70 Evaluation Factor Commitments

    In accordance with section 8127(a)(4), we propose to require prime 
contractors who offer to use one or more SDVOSBs or VOSBs as 
subcontractors in accordance with proposed section 852.215-70, Veteran-
Owned Small Business Evaluation Factors, to actually use those 
subcontractors or to replace any proposed subcontractor who is not used 
for the specified subcontract with another SDVOSB or VOSB 
subcontractor. This subsection would be implemented under proposed new 
sections 815.304-70 and 852.215-71. Further, this subsection would help 
ensure that SDVOSBs and VOSBs receive subcontract awards under VA prime 
contracts, as prime contractors will be required to report only 
utilization of companies appearing in the VIP database as ``verified'' 
to be owned and controlled by eligible veterans or surviving spouses.

Section 815.304-71 Solicitation Clauses

    This section would prescribe insertion of certain contract clauses 
in acquisitions from SDVOSBs and VOSBs, including section 852.215-70, 
Service-Disabled Veteran-Owned and Veteran-Owned Small Business 
Evaluation Factors, and section 852.215-71, Evaluation Factor 
Commitments, for applicable solicitations and contracts.

Section 819.201 General Policy

    This section would authorize the Secretary to establish goals for 
each fiscal year for participation in Department contracts by SDVOSBs 
and VOSBs. Furthermore, in order to establish contracting priority for 
veteran-owned and -controlled small businesses in accordance with 
section 8128, the Secretary may decrease other status-specific small 
business goals set forth by section 15(g)(1) of the Small Business Act 
(15 U.S.C. 644(g)(1)) upon consultation with the Administrator of the 
U.S. Small Business Administration.

Section 819.307 Protests

    FAR 19.307 contains instructions for processing protests of status 
as a SDVOSB concern. Section 8127 contains additional eligibility 
criteria for VA's processing of protests and authorizes VA to conduct 
VOSB set-asides. Proposed VAAR section 819.307 would address protest 
procedures and other information specific to VA's unique acquisition 
program.

Section 819.704 Subcontracting Plan Requirements

    In accordance with section 8127, proposed section 819.704 would 
require contracting officers to include suggested subcontracting goals 
in acquisitions that may require a subcontracting plan. To receive 
subcontracting plan accomplishment credit for subcontracting with 
SDVOSBs and VOSBs, prime contractors would be

[[Page 49144]]

required to use eligible businesses identified in the VIP database.

Section 819.705 Appeals of Contracting Officer Decisions

    This section would prescribe procedures for appeals of VA 
contracting officers' SDVOSB set-aside decisions, VOSB set-aside 
decisions, and prime contractor credits for subcontracting.

Section 819.709 Contract Clause

    This section would require contracting officers to insert the 
clause in section 852.219-9, Small Business Subcontracting Plan Minimum 
Requirements, for solicitations and contracts that include the FAR 
clause at 52.219-9, Small Business Subcontracting Plan.

Subpart 819.70 Service-Disabled Veteran-Owned and Veteran-Owned Small 
Business Acquisition Program

    This subpart would establish sole source contracting procedures for 
acquisitions under $5 million and create a new set-aside program for 
SDVOSBs and VOSBs.

Subpart 819.71 VA Mentor-Prot[eacute]g[eacute] Program

    In accordance with paragraph (3)(a) of VA's Executive Order 13360 
strategic plan, we propose to establish a SDVOSB mentor-
prot[eacute]g[eacute] program within VA under new subpart 819.71, 
consisting of sections 819.7101 through 819.7115, and at sections 
852.219-71 and 852.219-72. We propose to establish this program to help 
SDVOSBs receive developmental support from VA prime contractors in 
order to increase the base of SDVOSBs eligible to perform VA prime 
contracts and to participate as subcontractors on VA prime contracts.

Sections 828.106-71, 828.106-72, and 852.228-72 Assisting Service-
Disabled Veteran-Owned and Veteran-Owned Small Businesses in Obtaining 
Bonds

    In accordance with paragraph (3)(f) of VA's Executive Order 13360 
strategic plan, we propose to add new sections 828.106-71, 828.107-72, 
and 852.228-72, to encourage prime contractors to assist SDVOSBs and 
VOSBs in obtaining subcontractor performance and payment bonds and to 
encourage mentor firms to assist prot[eacute]g[eacute] SDVOSBs and 
VOSBs in obtaining acceptable bid, payment, and performance bonds as 
prime contractors. The ability to obtain acceptable surety bonds is one 
of the major concerns for small businesses in contracting with the 
Federal government for construction.

Regulatory Flexibility Act

    This regulation may have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the law 
provides that the Secretary shall give priority to small business 
concerns owned and controlled by veterans. Service-disabled veteran-
owned small businesses (SDVOSBs) and veteran-owned small businesses 
(VOSBs) may benefit from this regulation. Other small businesses may be 
indirectly affected if a greater portion of VA's small business 
contracts are awarded to SDVOSBs and VOSBs. However, this regulation 
may result in an increase in VA contracts awarded to the overall total 
of small businesses.
    An Initial Regulatory Flexibility Analysis (IRFA) has been prepared 
and submitted to the Chief Counsel for Advocacy of the Small Business 
Administration in accordance with 5 U.S.C. 603. Interested parties are 
invited to submit comments on VA's regulatory flexibility analysis. The 
analysis is as follows:
    1. Description of the reasons why action by the agency is being 
considered.
    These proposed changes to the Veterans Affairs Acquisition 
Regulation (VAAR) implement sections 502 and 503 of Public Law 109-461, 
the Veterans Benefits, Health Care, and Information Technology Act of 
2006 (38 U.S.C. 8127 and 8128). The changes will also implement the 
rulemaking portions of VA's Strategic Plan for Executive Order 13360, 
Providing Opportunities for Service-Disabled Veteran Businesses to 
Increase Their Federal Contracting and Subcontracting (https://
www.vetbiz.gov/fpp/fpp.htm). VA exists to serve veterans, and buying 
from SDVOSBs and VOSBs directly supports that mission. Such 
acquisitions support the socioeconomic well-being of the Nation and 
support VA's Strategic Goals. The proposed changes to the VA 
Acquisition Regulation reflect the intent of Congress that VA fulfill 
its special mission to serve veterans and enable them to realize the 
American dream that they fought to protect, especially those who became 
disabled while serving their country.
    2. Succinct statement of the objectives of, and legal basis for, 
the proposed rule.
    Sections 502 and 503 of Public Law 109-461 require VA to create a 
unique acquisition program among Federal agencies that permits 
preferences for SDVOSBs and VOSBs. This proposed rule would permit VA 
contracting officers to conduct acquisition actions with preferences 
for SDVOSBs or VOSBs. Specifically, this proposed rule will allow VA 
contracting officers to:
    a. Under certain conditions, permit non-competitive sourcing under 
the simplified acquisition threshold with SDVOSBs or VOSBs;
    b. Require set-asides for SDVOSBs or VOSBs above the simplified 
acquisition threshold when the contracting officer has a reasonable 
expectation that two or more eligible SDVOSBs or VOSBs will submit 
offers and that the award can be made at a fair and reasonable price 
that offers the best value to the United States;
    c. Under certain conditions, permit non-competitive sourcing for 
SDVOSBs or VOSBs above the simplified acquisition threshold when the 
contracting officer determines that a fair and reasonable price will be 
obtained as a result of negotiations for requirements not to exceed $5 
million;
    d. Include evaluation factors in negotiated acquisitions that give 
preference to SDVOSBs and VOSBs and preference to offerors who propose 
to include such businesses as subcontractors;
    e. Require offerors who propose to use SDVOSBs or VOSBs as 
subcontractors to utilize eligible businesses;
    f. Require VOSBs participating in the Department's acquisitions to 
register in VetBiz.gov's Vendor Information Pages (VIP) database and 
verify that the business meets eligibility requirements;
    g. Establish a VA Mentor-Prot[eacute]g[eacute] Program and give 
large businesses that participate in the program a preference in the 
award of VA prime contracts;
    h. Encourage prime contractors and mentors to assist SDVOSBs and 
VOSBs in obtaining bonding when required;
    i. Recommend debarment of any business that willfully or 
deliberately misrepresents ownership and control of the business for 
purposes of registering in the VetBiz.gov VIP database or other federal 
databases; and
    j. Under certain conditions, acquire supplies and services from 
SDVOSBs and VOSBs in lieu of FPI and GPO.
    3. Description of, and, where feasible, estimate of the number of 
small entities to which the proposed rule will apply.
    VA cannot accurately determine how many concerns would be 
participating in these SDVOSB/VOSB contract awards because there is 
insufficient data on SDVOSBs/VOSBs that are ready and able to perform 
under VA requirements to support a reasonable estimate.
    To establish the likely number of SDVOSBs or VOSBs that may benefit 
from VA's unique procurement authority there are two principal data 
sources, the Central Contractor

[[Page 49145]]

Registration (CCR) database, in which a business must be listed to 
receive a payment from a Federal agency, and VA's VetBiz.gov VIP 
database. A CCR Dynamic Small Business Search query conducted on March 
13, 2008, returned 40,163 VOSBs, including 11,465 SDVOSBs. A VIP query 
returned 10,695 VOSBs, including 6,354 SDVOSBs. The VIP database 
requires that businesses answer eligibility questions before they are 
permitted to register their business. The CCR is a self-representation 
database.
    Under this proposed rule, VA contracting teams will be required to 
give priority consideration to SDVOSBs and VOSBs when using other 
contracting programs, like set-asides for the Historically 
Underutilized Business (HUB) Zone Program or 8(a) Business Development 
Program reserved actions or the Small Business Set-aside program. A CCR 
Dynamic Small Business Search conducted on March 13, 2008, returned 
13,848 active HUBZone firms. Of this population, 2,565, or 19 percent, 
are also VOSBs. A search of active 8(a) businesses identified 9,822 
current firms, which includes 1,285 VOSBs, or 14 percent of the total 
population. There are 63,395 woman-owned small businesses (WOSBs) in 
the Central Contractor Registration, of which 4,471 appear to also be 
VOSBs. VA notes that the SBA is in the process of establishing a WOSB 
set-aside program, making the percentage of WOSBs who are also VOSB 
eligible of interest to the Department.
    There are some concerns that the proposed rule will displace 
business opportunities for non-veteran-owned businesses, based on the 
following speculations:
     Additional businesses may be opened by veterans seeking to 
participate in the sole source or set-aside procurement actions;
     Veteran-owned small businesses not currently in the 
Federal market may be expected to explore selling to VA;
     The VOSB population may increase as these businesses 
register in the VetBiz.gov VIP database;
     Public Law 109-461 procurement authority also requires 
that VA's large prime contractors use eligible businesses in order to 
receive subcontracting program credit for VOSBs and SDVOSBs; and
     On June 6, 2008, the Office of Federal Procurement Policy 
issued new guidance regarding Interagency Agreements. Under this 
policy, other Federal agencies with which VA executes such agreements 
will be governed by the procurement rules contained in this regulation. 
In FY 2007, interagency acquisitions were approximately $15,444,709.39, 
or 0.13% of total contract dollars.
    The Department of Veterans Affairs has a strong commitment to 
supporting all types of small businesses, as demonstrated in the 
procurement chart below:

----------------------------------------------------------------------------------------------------------------
                                                         FY 2006                        FY 2007
                                                   -------------------------------------------------------------
                                                           ($)            (%)             ($)            (%)
----------------------------------------------------------------------------------------------------------------
Total Procurement.................................    10,282,566,304  ...........    11,784,896,886  ...........
Total Small Business..............................     3,028,055,461        29.45     3,878,901,724        32.91
Small and Disadvantaged Business..................       507,442,123         4.93       603,502,602         5.12
8(a)..............................................       402,659,565         3.92       406,996,187         3.45
Woman-Owned Small Business........................       513,104,216         4.99       573,355,381         4.87
Veteran-Owned Small Business......................       666,825,417         6.49     1,193,853,547        10.13
Service-Disabled Veteran-Owned Small Business.....       348,077,159         3.39       818,698,785         6.95
HUBZone...........................................       336,856,889         3.28       381,875,493         3.24
----------------------------------------------------------------------------------------------------------------

    The preliminary Total Small Business procurement for FY2007 was 
$3,878,901,724.00 or 32.91%. Procurement totals for SDVOSBs and VOSBs 
were $2,012,552,332.00 or 17.08% and procurement totals for non-
veteran-owned businesses were $1,965,729,663.00 or 16.68%, a mere .40% 
difference. Although, SDVOSBs and VOSBs gained 7.2% of procurements 
from FY2006 to FY2007 and non-veteran-owned businesses lost .44% of 
procurements, the non-veteran-owned businesses still received increased 
procurement dollars totaling $205,666,870.00 from FY2006 to FY2007. 
Assuming this trend and/or this new procurement authority does increase 
procurement percentages for SDVOSBs and VOSBs and the procurement 
percentages for non-veteran-owned businesses decrease, as previously 
demonstrated from FY2006 to FY2007, the contracting dollars and/or 
opportunities for non-veteran-owned businesses were not adversely 
impacted economically. VA also estimates that it would be unrealistic 
for SDVOSBs and VOSBs to absorb the entire 16.68% of procurements that 
are currently being awarded to the non-veteran-owned businesses. The 
SDVOSBs and VOSBs are more likely to sub-contract with the non-veteran-
owned businesses with existing contracts rather than investing in 
costly business expansions. Based on prior procurement trends, VA 
believes there would not be an adverse economic impact on non-veteran-
owned businesses, but requests comment from the public on other 
possible impacts this rule may have on small entities.
    This rule also creates a Mentor-Prot[eacute]g[eacute] Program for 
SDVOSBs and VOSBs. It is the expectation that at such time as this rule 
is finalized, those Prot[eacute]g[eacute] entities would directly 
benefit from the forms of Mentoring described in this proposed rule. VA 
believes there would not be an adverse economic impact on small 
contractors or subcontractors, but requests comment from the public on 
other possible impacts this rule may have on small entities. Comments 
will be used as a factual basis upon which VA would certify that this 
rule will not have a significant economic impact on a substantial 
number of small entities.
    For the reasons outlined above, given the relatively small number 
of businesses owned and controlled by veterans in the Federal 
marketplace and with the understanding that this rule would apply only 
to VA and its large prime contractors, VA believes this rule would not 
have a major impact on small entities doing business in the Federal 
marketplace.
    VA welcomes comments concerning the potential number of small 
entities that could become eligible under this rule. VA also 
specifically requests comments concerning the rule's impact on small 
entities that are not VOSBs.
    4. Description of projected reporting, recordkeeping, and other 
compliance requirements of the proposed rule, including an estimate of 
the classes of small entities which will be subject to the requirement 
and the type of professional skills necessary for preparation of the 
report or record.

[[Page 49146]]

    There are two categories of coverage in this proposed rule that 
could potentially require the collection of information from 
contractors. VA will collect information from prime contractors seeking 
a preference for subcontracting with SDVOSBs or VOSBs. That information 
would include identity of the SDVOSBs or VOSBs, the approximate dollar 
value of the proposed subcontracts, and confirmation that the proposed 
subcontractors are eligible SDVOSBs or VOSBs as verified by the 
VetBiz.gov VIP database. VA estimates the cost to an individual 
business to be less than $100.00 for 70-75% 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. VA also 
will collect information in conjunction with preferences associated 
with the VA Mentor-Prot[eacute]g[eacute] Program. That information 
would include the program agreement, developmental plan, and reports on 
the success of the program.
    5. Identification, to the extent practicable, of all relevant 
Federal rules which may duplicate, overlap, or conflict with the 
proposed rule.
    The VAAR (48 CFR chapter 8) supplements the FAR (48 CFR chapter 1). 
This proposed rule would affect 48 CFR parts 802, 804, 808, 809, 810, 
813, 815, 819, 828, and 852 and corresponding parts of the FAR.
    6. Description of any significant alternatives to the proposed rule 
which would accomplish the stated objectives of applicable statutes and 
which would minimize any significant economic impact of the proposed 
rule on small entities. This proposed rule is designed to benefit 
SDVOSBs and VOSBs. There are no alternatives which would accomplish the 
stated objectives of sections 502 and 503 of Public Law 109-461 to give 
contracting priority to SDVOSBs and VOSBs.

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 proposed rule have been examined, and it has been 
determined to be a significant regulatory action under Executive Order 
12866 because it is likely to result in a rule that may raise novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or principles set forth in 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 developing any rule that may result in an expenditure 
by State, local, or tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This proposed rule would have no such 
effect on State, local, or tribal governments, or the private sector.

Paperwork Reduction Act

    Under the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-
3521), collections of information are contained in this proposed rule. 
These collections are contained in new sections that were not 
previously contained in the VAAR. This notice is to obtain an OMB 
control number for these new sections. As required under section 
3507(d) of the Act, VA has submitted a copy of this rulemaking action 
to OMB for its review of the collection of information.
    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.
    Comments on the collection of information should be submitted to 
OMB, Attention: Desk Officer for the Department of Veterans Affairs, 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Washington, DC 20503, with copies to the Director, Regulations 
Management (00REG), Department of Veterans Affairs, 810 Vermont Ave., 
NW., Washington, DC 20420. Comments should indicate that they are 
submitted in response to ``RIN 2900-AM92.''
    There are categories of coverage in this proposed rule that could 
potentially require the collection of information from contractors: (1) 
Section 852.215-70, Veteran-Owned Small Business Evaluation Factors; 
and (2) subpart 819.71, VA Mentor-Prot[eacute]g[eacute] Program, 
specifically sections 819.7101 through 819.7115 and the related clauses 
at sections 852.219-71 and 852.219-72. There is no information 
available upon which to judge the impact of these PRA requirements, but 
since the provisions are limited to SDVOSBs and VOSBs, rather than to 
all small businesses, collection efforts are estimated to be minimal.
    Title and section number: 852.215-70, Veteran-Owned Small Business 
Evaluation Factors.
    Summary of collection of information: VA is proposing to give 
preference to prime contractors who offer to subcontract with SDVOSBs 
or VOSBs. VA must collect information from offerors regarding: (1) 
Proposed SDVOSB and VOSB subcontractors; (2) the approximate dollar 
value of the proposed subcontracts; and (3) eligibility of the proposed 
subcontractors as verified in VetBiz.gov VIP database (https://
www.VetBiz.gov).
    Description of need for information and proposed use of 
information: The information is submitted on a voluntary basis by those 
offerors who wish to qualify for this evaluation factor. The 
information will be used by the contracting officer to determine 
whether or not the offeror qualifies for extra credit in the selection 
of the contract awardee. Those offerors who qualify will be afforded a 
preference in the selection.
    Description of likely respondents: Any offeror, on a negotiated 
solicitation that includes the applicable evaluation factor, who 
intends to subcontract with one or more SDVOSBs or VOSBs and who wishes 
to obtain a preference in the award selection.
    Estimated number of respondents: 125.
    Estimated frequency of responses: 1 response for each solicitation.
    Estimated average burden per collection: 5 minutes.
    Estimated total annual reporting and recordkeeping burden: 10 
hours.

    Title and section number: Subpart 819.71, VA Mentor-
Prot[eacute]g[eacute] Program, subpart 819.71's related sections

[[Page 49147]]

819.7101 through 819.7115, and the related clauses at section 852.219-
71, VA Mentor-Prot[eacute]g[eacute] Program, and section 852.219-72, 
Evaluation Factor for Participation in the VA Mentor-
Prot[eacute]g[eacute] Program.
    Summary of collection of information: VA is proposing to institute 
a Mentor-Prot[eacute]g[eacute] Program, whereby a large business agrees 
to provide developmental support to a VOSB or SDVOSB. VA must approve 
the Mentor-Prot[eacute]g[eacute] Agreement entered into by the two 
parties, and VA requires both parties to report on the success of the 
program. Mentors can qualify for additional preference on negotiated 
solicitations by furnishing evidence of participation in the program 
with their offer.
    Description of need for information and proposed use of 
information: The information is needed for the review and evaluation of 
mentor applications for realism, validity, and accuracy of provided 
information and for conducting a mid-term evaluation at the mid-point 
interval to measure prot[eacute]g[eacute] progress against the 
developmental plan contained in the approved agreement. The information 
will also be used to evaluate the status of a business as a participant 
in VA's Mentor-Prot[eacute]g[eacute] Program for possible credit in 
negotiated contracts.
    Description of likely respondents: Large business prime contractors 
and SDVOSBs or VOSBs.
    Estimated number of respondents: 50.
    Estimated frequency of responses: Each prot[eacute]g[eacute] 
program participant will be required to submit 3 sets of data 
consisting of the application and the mid- and end-term reports. Each 
mentor program participant will be required to submit 4 sets of data 
consisting of the application, the mid- and end-term reports, and, when 
submitting an offer, information to verify their participation in the 
program in order to receive evaluation credit.
    Estimated average burden per collection: 1 hour weighted average 
per data submission.
    Estimated total annual reporting and recordkeeping burden: 200 
hours (4 data submissions @ 1 hour each times 50 program participants).
    The Department considers comments by the public on collections of 
information in--
     Evaluating whether the collections of information are 
necessary for the proper performance of the functions of the 
Department, including whether the information will have practical 
utility;
     Evaluating the accuracy of the Department's estimate of 
the burden of the collections of information, including the validity of 
the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of the collections of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    OMB is required to make a final decision concerning the collection 
of information contained in this proposed rule between 30 and 60 days 
after publication of this document in the Federal Register. Therefore, 
a comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment on the proposed rule.

List of Subjects

48 CFR Parts 802, 804, 809, 810, 813, and 815

    Government procurement, Reporting and recordkeeping requirements.

48 CFR Part 819

    Administrative practice and procedure, Government procurement, 
Reporting and recordkeeping requirements, Small business, Veterans.

48 CFR Part 828

    Government procurement, Insurance, Surety bonds.

48 CFR Part 852

    Government procurement, Reporting and recordkeeping requirements.

    Approved: April 21, 2008.
James B. Peake,
Secretary of Veterans Affairs.

    Editorial Note: This document was received at the Office of the 
Federal Register on August 15, 2008.

    For the reasons set out in the preamble, the Department of Veterans 
Affairs proposes to amend 48 CFR Chapter 8 as follows:

CHAPTER 8--DEPARTMENT OF VETERANS AFFAIRS

Subchapter A--General

PART 802--DEFINITIONS OF WORDS AND TERMS

    1. The authority citation for part 802 is revised to read as 
follows:

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c) and (d); 
and 48 CFR 1.301-1.304.

    2. Section 802.101 is amended by adding in alphabetical order the 
following terms:


802.101  Definitions.

* * * * *
    Service-disabled veteran-owned small business concern (SDVOSB) has 
the same meaning as defined in FAR Part 2.101, except for businesses 
participating in set-asides or subcontracts authorized by VAAR subpart 
819.70. These businesses must be listed as verified on the Vendor 
Information Pages (VIP) at https://www.vetbiz.gov. In addition, some 
businesses may be owned and controlled by a surviving spouse.
* * * * *
    Surviving Spouse means an individual who has been listed in the 
Department of Veterans Affairs' (VA) Veterans Benefits Administration 
(VBA) database of veterans and family members. To be eligible for 
inclusion in the VetBiz.gov VIP database, 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 service-disabled 
veterans, the surviving spouse of such veteran who acquires ownership 
rights in such small business shall, for the period described below, 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 above 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 rating or the veteran died as a direct result of a service-
connected disability.
* * * * *
    Vendor Information Pages (VIP) means the VetBiz.gov Vendor 
Information Pages at https://www.vetbiz.gov.
    Veteran-owned small business concern (VOSB) has the same meaning as 
defined in FAR Part 2.101, except for businesses participating in set-
asides or subcontracts authorized by VAAR Part 819.7001. These 
businesses must be

[[Page 49148]]

listed as verified on the VetBiz.gov VIP database.
* * * * *

PART 804--ADMINISTRATIVE MATTERS

    3. The authority citation for part 804 is revised to read as 
follows:

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c) and (d); 
and 48 CFR 1.301-1.304.

    4. Section 804.1102 is added to read as follows:


804.1102  Vendor Information Pages (VIP) Database.

    In addition to registering in the Central Contractor Registration 
(CCR), all VOSBs, including SDVOSBs, must register in the VIP database, 
available at https://www.VetBiz.gov, to be eligible to participate in 
VA's Veteran-owned Small Business prime contracting and subcontracting 
opportunities programs.

PART 808--REQUIRED SOURCES OF SUPPLIES AND SERVICES

    5. The authority citation for part 808 is revised to read as 
follows:

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c) and (d); 
and 48 CFR 1.301-1.304.

    6. Subpart 808.6 and section 808.603 are added to read as follows:

Subpart 808.6--Acquisition From Federal Prison Industries, Inc. 
(FPI)


808.603  Purchase priorities.

    Contracting officers may purchase supplies and services produced or 
provided by FPI from eligible service-disabled veteran-owned small 
businesses and veteran-owned small businesses, in accordance with 
procedures set forth in VAAR subpart 819.70, without seeking a waiver 
from FPI, in accordance with 38 U.S.C. 8128, Small business concerns 
owned and controlled by veterans: Contracting priority.

Subpart 808.8--Acquisition of Printing and Related Supplies

    7. Section 808.803 is added to read as follows:


808.803  Priority for acquisition of printing and related supplies.

    Contracting officers may acquire government printing from eligible 
service-disabled veteran-owned small businesses and veteran-owned small 
businesses, in accordance with procedures set forth in VAAR subpart 
819.70, in lieu of the Government Printing Office (GPO), in accordance 
with 38 U.S.C. 8128, small business concerns owned and controlled by 
veterans: Contracting priority (See FAR 8.802(a)(4)).

PART 809--CONTRACTOR QUALIFICATIONS

    8. The authority citation for part 809 is revised to read as 
follows:

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c) and (d); 
and 48 CFR 1.301-1.304.

    9. Section 809.406-2 is added to read as follows:


809.406-2  Cause for debarment.

    Misrepresentations of VOSB or SDVOSB eligibility may result in 
action taken by VA officials to debar the business concern for a period 
not to exceed 5 years from contracting with VA as a prime contractor or 
a subcontractor.
    10. Part 810 is added to read as follows:

PART 810--MARKET RESEARCH

Sec.
810.001 Market research policy.
810.002 Market research procedures.

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c) and (d); 
and 48 CFR 1.301-1.304.


810.001  Market research policy.

    When conducting market research, VA contracting teams shall use the 
VIP database, at https://www.VetBiz.gov, in addition to other sources of 
information.


810.002  Market research procedures.

    Contracting officers shall record VIP queries in the solicitation 
file by printing the results of the search(es) along with specific 
query used to generate the search(es).

PART 813--SIMPLIFIED ACQUISITION PROCEDURES

    11. The authority citation for part 813 is revised to read as 
follows:

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c) and (d); 
and 48 CFR 1.301-1.304.

    12. Section 813.106 is revised to read as follows:


813.106  Soliciting competition, evaluation of quotations or offers, 
award and documentation.

    Contracting officers may use other than competitive procedures to 
enter into a contract with an SDVOSB or VOSB when the amount is less 
than the simplified acquisition threshold. Contracting officers shall 
give first consideration to SDVOSBs.
    13. Section 813.202 is added to read as follows:


813.202  Purchase guidelines.

    Open market micro-purchases shall be equitably distributed among 
all qualified SDVOSBs or VOSBs, respectively, to the maximum extent 
practicable.

PART 815--CONTRACTING BY NEGOTIATION

    14. The authority citation for part 815 is revised to read as 
follows:

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c); and 48 CFR 
1.301-1.304.

    15. Section 815.304 is added to read as follows:


815.304  Evaluation factors and significant subfactors.

    (a) In an effort to assist SDVOSBs and VOSBs, contracting officers 
shall include evaluation factors in competitively negotiated 
solicitations that are not set aside for SDVOSBs or VOSBs.
    (b) Additional consideration shall also be given to any offeror, 
regardless of size status, that proposes to subcontract with SDVOSBs or 
VOSBs.
    16. Section 815.304-70 is added to read as follows:


815.304-70  Evaluation factor commitments.

    (a) VA contracting officers shall:
    (1) Include provisions in negotiated solicitations giving 
preference to offers received from VOSBs and additional preference to 
offers received from SDVOSBs;
    (2) Use past performance in meeting SDVOSB subcontracting goals as 
a non-price evaluation factor in selecting offers for award;
    (3) Use the proposed inclusion of SDVOSBs or VOSBs as 
subcontractors as an evaluation factor when competitively negotiating 
the award of contracts or task or delivery orders; and
    (4) Consider participation in VA's Mentor-Prot[eacute]g[eacute] 
Program as an evaluation factor when competitively negotiating the 
award of contracts or task or delivery orders.
    (b) If an offeror proposes to use an SDVOSB or VOSB subcontractor 
in accordance with the clause at 852.215-70, Service-Disabled Veteran-
owned and Veteran-owned Small Business Evaluation Factors, the 
contracting officer shall ensure that the offeror, if awarded the 
contract, actually does use the proposed subcontractor or another 
SDVOSB or VOSB subcontractor for that subcontract or for work of 
similar value.
    17. Section 815.304-71 is added to read as follows:

[[Page 49149]]

815.304-71  Solicitation provision and clause.

    (a) The contracting officer shall insert the provision at 852.215-
70, Service-Disabled Veteran-owned and Veteran-owned Small Business 
Evaluation Factors, in competitively negotiated solicitations that are 
not set aside for SDVOSBs or VOSBs.
    (b) The contracting officer shall insert the clause at 852.215-71, 
Evaluation Factor Commitments, in solicitations and contracts that 
include the clause at 852.215-70, Service-Disabled Veteran-owned and 
Veteran-owned Small Business Evaluation Factors.

PART 819--SMALL BUSINESS PROGRAMS

    18. The authority citation for part 819 is revised to read as 
follows:

    Authority: 38 U.S.C. 8127 and 8128; 40 U.S.C. 121(c) and (d); 48 
CFR 1.301-1.304; and 15 U.S.C. 637(d)(4)(E).

Subpart 819.2--Policies

    19. Section 819.201 is revised to read as follows:


819.201  General policy.

    The Secretary shall establish goals for each fiscal year for 
participation in Department contracts by SDVOSBs and VOSBs. In order to 
establish contracting priority for veteran owned and controlled small 
businesses in accordance with 38 U.S.C. 8128, the Secretary may 
decrease other status-specific small business goals set forth by 
section 15(g)(1) of the Small Business Act (15 U.S.C. 644(g)(1)) upon 
consultation with the Administrator of the U.S. Small Business 
Administration.
    20. Section 819.307 is added to read as follows:


819.307  Protests.

    For acquisitions under the authority of VAAR part 819.70, regarding 
eligibility of SDVOSB and VOSB concerns, contracting officers shall 
forward all protests to the Associate Administrator for Government 
Contracting AA/GC, U.S. Small Business Administration (ATTN: Veterans 
Business Program Protest), 409 3rd Street, SW., Washington, DC 20416, 
for disposition.
    21. Section 819.704 is added to read as follows:


819.704.  Subcontracting plan requirements.

    (a) The contracting officer shall ensure that any subcontracting 
plans submitted by offerors include a goal that is at least 
commensurate with the annual VA SDVOSB prime contracting goal for the 
total value of planned subcontracts.
    (b) The contracting officer shall ensure that any subcontracting 
plans submitted by offerors include a goal that is at least 
commensurate with the annual VA VOSB prime contracting goal for the 
total value of all planned subcontracts.
    (c) VA's Office of Small and Disadvantaged Business Utilization 
(OSDBU) shall review all prime contractors' subcontracting plan 
achievement reports to ensure that, in the case of a subcontract that 
is counted for purposes of meeting a goal in accordance with 
subparagraphs (a) and (b) above, the subcontract was actually awarded 
to a business concern that is eligible to be counted toward meeting the 
goal, as provided in VAAR 804.1102.
    22. Section 819.705 is added as follows:


819.705  Appeal of Contracting Officer Decisions.

    (a) Acquisitions not exceeding the SAT and sections 819.7007 and 
819.7008 are excluded from this section.
    (b) When an interested party intends to appeal a contracting 
officer's decision to not use the set-aside authority contained in VAAR 
819.70, the party shall notify the contracting officer, in writing, of 
its intent to challenge the decision. The contracting officer has 5 
working days to reply to the challenge by either revising the strategy 
or indicating the rationale for not setting-aside the requirement. Upon 
receipt of the decision, the interested party may appeal to the Head of 
the Contracting Activity (HCA). Such appeal shall be filed within 5 
working days of receipt of the contracting officer's decision. The HCA 
has 5 working days to respond to the appeal. The contracting officer 
shall suspend action on the acquisition unless the HCA makes a written 
determination that urgent circumstances exist which would significantly 
affect the interests of the Government. The decision of the HCA shall 
be final.
    (c) Prime contractors submitting businesses declared ineligible for 
credit in SDVOSB and/or VOSB subcontracting plans may appeal to the 
Director, Office of Small and Disadvantaged Business Utilization 
(OSDBU), within 5 working days of receipt of information declaring 
their subcontractor ineligible. The Director, OSDBU, shall have 5 
working days to respond. The decision of the Director, OSDBU, may be 
appealed to the Senior Procurement Executive (SPE) within 5 working 
days. The SPE shall have 15 working days to respond and that decision 
shall be final.
    23. Section 819.709 is added to read as follows:


819.709  Contract clause.

    The contracting officer shall insert the clause at 852.219-9, Small 
Business Subcontracting Plan Minimum Requirements, in solicitations and 
contracts that include the FAR clause at 52.219-9, Small Business 
Subcontracting Plan.
    24. Subpart 819.70 is revised to read as follows:

Subpart 819.70--Service-Disabled Veteran-Owned and Veteran-Owned 
Small Business Acquisition Program


819.7001  General.

    (a) The Veterans Benefits, Health Care, and Information Technology 
Act of 2006 (38 U.S.C. 8127) created an acquisition program for small 
business concerns owned and controlled by service-disabled veterans and 
those owned and controlled by veterans for VA.
    (b) The purpose of the program is to provide contracting assistance 
to SDVOSBs and VOSBs.


819.7002  Applicability.

    This subpart applies to VA contracting activities and to its prime 
contractors.


819.7003  Eligibility.

    (a) Eligibility of SDVOSBs and VOSBs continues to be governed by 
the Small Business Administration regulations, 13 CFR subparts 125.8 
through 125.13, as well as the FAR, except where expressly directed 
otherwise by the VAAR, and 38 CFR verification regulations for SDVOSBs 
and VOSBs.
    (b) At the time of submission of offer, the offeror must represent 
to the contracting officer that it is a--
    (1) Service-disabled veteran-owned small business concern or 
veteran-owned small business concern;
    (2) Small business concern under the North American Industry 
Classification System (NAICS) code assigned to the acquisition; and
    (3) Verified for eligibility in the Vendor Information Pages 
database.
    (c) A joint venture may be considered an SDVOSB or VOSB concern 
if--
    (1) At least one member of the joint venture is an SDVOSB or VOSB 
concern, and makes the representations in paragraph (b) of this 
section;
    (2) Each other concern is small under the size standard 
corresponding to the NAICS code assigned to the procurement;

[[Page 49150]]

    (3) The joint venture meets the requirements of paragraph 7 of the 
size standard explanation of Affiliates in FAR 19.101; and
    (4) The joint venture meets the requirements of 13 CFR 125.15(b), 
modified to include veteran-owned small businesses where this CFR 
section refers to SDVOSB concerns.
    (d) Any SDVOSB or VOSB concern (nonmanufacturer) must meet the 
requirements in FAR 19.102(f) to receive a benefit under this program.


819.7004  Contracting order of priority.

    In determining the acquisition strategy applicable to an 
acquisition, the contracting officer shall consider, in the following 
order of priority, contracting preferences that ensure contracts will 
be awarded:
    (a) To SDVOSBs;
    (b) To VOSB, including but not limited to SDVOSBs;
    (c) Pursuant to--
    (1) Section 8(a) of the Small Business Act (15 U.S.C. 637(a)); or
    (2) The Historically-Underutilized Business Zone (HUBZone) Program 
(15 U.S.C. 657a); and
    (d) Pursuant to any other small business contracting preference.


819.7005  Service-disabled veteran-owned small business set-aside 
procedures.

    (a) The contracting officer shall consider SDVOSB set-asides before 
considering VOSB set-asides. Except as authorized by 819.7007 and 
819.7008, the contracting officer shall set-aside an acquisition for 
competition restricted to SDVOSB concerns upon a reasonable expectation 
that--
    (1) Offers will be received from two or more eligible SDVOSB 
concerns; and
    (2) Award will be made at a fair and reasonable price.
    (b) When conducting SDVOSB set-asides, the contracting officer 
shall ensure--
    (1) Eligibility is extended to businesses owned and operated by 
surviving spouses; and
    (2) Businesses are registered and verified as eligible in Vendor 
Information Pages prior to making an award.
    (c) If the contracting officer receives only one acceptable offer 
at a fair and reasonable price from an eligible SDVOSB concern in 
response to a SDVOSB set-aside, the contracting officer should make an 
award to that concern. If the contracting officer receives no 
acceptable offers from eligible SDVOSB concerns, the set-aside shall be 
withdrawn and the requirement, if still valid, set aside for VOSB 
competition, if appropriate.


819.7006  Veteran-owned small business set-aside procedures.

    (a) The contracting officer shall consider SDVOSB set-asides before 
considering VOSB set-asides. Except as authorized by 819.7007 and 
819.7008, the contracting officer shall set aside an acquisition for 
competition restricted to VOSB concerns upon a reasonable expectation 
that--
    (1) Offers will be received from two or more eligible VOSB 
concerns; and
    (2) Award will be made at a fair and reasonable price.
    (b) If the contracting officer receives only one acceptable offer 
at a fair and reasonable price from an eligible VOSB concern in 
response to a VOSB set-aside, the contracting officer should make an 
award to that concern. If the contracting officer receives no 
acceptable offers from eligible VOSB concerns, the set-aside shall be 
withdrawn and the requirement, if still valid, set aside for other 
small business programs, as appropriate.
    (c) When conducting VOSB set-asides, the contracting officer shall 
ensure the business is registered and verified as eligible in the 
Vendor Information Pages prior to making an award.


819.7007.  Sole source awards to service-disabled veteran-owned small 
business concerns.

    (a) A contracting officer may award contracts to SDVOSB concerns on 
a sole source basis provided--
    (1) The anticipated award price of the contract (including options) 
will not exceed $5 million;
    (2) The requirement is synopsized in accordance with FAR part 5;
    (3) The SDVOSB concern has been determined to be a responsible 
contractor with respect to performance; and
    (4) Award can be made at a fair and reasonable price.
    (b) The contracting officer's determination whether to make a sole 
source award is a business decision wholly within the discretion of the 
contracting officer. A determination that only one service-disabled 
veteran-owned small business concern is available to meet the 
requirement is not required. No protest is authorized in connection 
with the issuance or proposed issuance of a contract under this 
section, on the basis that more than one service-disabled veteran-owned 
small business concern is available to meet the requirement.
    (c) When conducting a SDVOSB sole source acquisition, the 
contracting officer shall ensure businesses are registered and verified 
as eligible in the Vendor Information Pages prior to making an award.


819.7008  Sole source awards to veteran-owned small business concerns.

    (a) A contracting officer may award contracts to VOSB concerns on a 
sole source basis provided--
    (1) The anticipated award price of the contract (including options) 
will not exceed $5 million;
    (2) The requirement is synopsized in accordance with FAR part 5;
    (3) The VOSB concern has been determined to be a responsible 
contractor with respect to performance;
    (4) Award can be made at a fair and reasonable price; and
    (5) No responsible SDVOSB concern has been identified.
    (b) The contracting officer's determination whether to make a sole 
source award is a business decision wholly within the