VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned Small Businesses, 64619-64638 [E9-28461]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 74, Number 234 (Tuesday, December 8, 2009)]
[Rules and Regulations]
[Pages 64619-64638]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-28461]


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DEPARTMENT OF VETERANS AFFAIRS

48 CFR Parts 802, 804, 808, 809, 810, 813, 815, 817, 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: Final rule.

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SUMMARY: This document implements portions of the Veterans Benefits, 
Health Care, and Information Technology Act of 2006 (the Act) and 
Executive Order 13360, providing opportunities for service-disabled 
veteran-owned small businesses (SDVOSB) to increase their Federal 
contracting and subcontracting. The Act and the Executive Order 
authorize the Department of Veterans Affairs (VA) to establish special 
methods for contracting with SDVOSBs and veteran-owned small businesses 
(VOSB). Under this final rule, a VA contracting officer may restrict 
competition to contracting with SDVOSBs or VOSBs under certain 
conditions. Likewise, sole source contracts with SDVOSBs or VOSBs are 
permissible under certain conditions. This final rule implements these 
special acquisition methods as a change to the VA Acquisition 
Regulation (VAAR).
    This document additionally amends SDVOSB/VOSB, Small Business 
Status Protests, where VA provided that VA would utilize the U.S. Small 
Business Administration (SBA) to consider and decide SDVOSB and VOSB 
status protests. This requires VA and SBA to execute an interagency 
agreement pursuant to the Economy Act. Negotiations of this interagency 
agreement have not yet been finalized. Therefore, VA has amended these 
regulations with an interim rule to provide that VA's Executive 
Director, Office of Small and Disadvantaged Business Utilization 
(OSDBU) shall consider and decide SDVOSB and VOSB status protests, and 
provides procedures there for, until such time as the interagency 
agreement is executed by the agencies. VA hereby solicits comments on 
this regulatory amendment only.

DATES: January 7, 2010. Comment date: Comments on the amendments 
regarding section 819.307, only, must be received on or before January 
7, 2010.

FOR FURTHER INFORMATION CONTACT: Arita Tillman, Acquisition Policy 
Division (001AL-P1A), Office of Acquisition and Logistics, Department 
of Veterans Affairs, 810 Vermont Ave., NW., Washington, DC 20420, 
telephone (202) 461-6859, or e-mail Arita.Tillman@va.gov.

SUPPLEMENTARY INFORMATION: On August 20, 2008, VA published in the 
Federal Register (73 FR 49141-49155) a proposed rule to revise the VAAR 
to implement portions of Public Law 109-461, the Veterans Benefits, 
Health Care and Information Technology Act of 2006, and Executive Order 
13360, providing opportunities for SDVOSBs and VOSBs to increase their 
federal contracting and subcontracting. Comments were solicited 
concerning the proposal for 60 days, ending October 20, 2008. VA 
received 97 comments, many of which were groups of identical responses 
in form letters. Most commenters raised more than one issue. The issues 
raised in the comments are discussed below.

1. SDVOSB and VOSB Verification

    Comment: Several comments were received regarding the validity of 
VA's Vendor Information Pages (VIP) database registration process, 
expressing concern for ``pass through'' business relationships and the 
potential for other fraudulent actions.
    Response: The regulations governing the verification of VOSB 
status, which are in 38 CFR Part 74, are not the subject of this 
rulemaking. Accordingly, we will not make any changes based upon the 
comments. In the past, vendors could register themselves in the VA 
vendor database and self certify the accuracy of the information 
provided. However, section 502 of Public Law 109-461 requires VA to 
maintain a database of SDVOSBs and VOSBs and that VA verify that 
status. Section 74.2 sets out the eligibility requirements for VIP 
verification, and 38 CFR 74.3 sets out the criteria for a VOSB. 
Further, this final rule under section 802.101, Definitions, prescribes 
that SDVOSBs

[[Page 64620]]

and VOSBs must be listed as verified in the VIP database to participate 
in the Veterans First Contracting Program. The verification process is 
set out in 38 CFR 74.20 and requires VA Center for Veteran Enterprise 
officials to verify the accuracy of information vendors provide as part 
of the VetBiz VIP Verification application process. This verification 
process should alleviate some of the commenters' concern about ``pass 
through'' business relationships since the information contained in 
applications is subject to review and verification. Section 804.1102 of 
the proposed rule requires that SDVOSBs and VOSBs must be registered in 
the VIP database, available at https://www.VetBitz.gov, in addition to 
being registered in the Central Contractor Registration (CCR), as 
required by 48 CFR subpart 4.11, to be eligible to participate in VA's 
Veteran-owned Small Business prime contracting and subcontracting 
opportunities programs. To further address the validity of the VIP 
database registration process, to clarify the requirement of this 
section, and to allow VA time to adequately verify firms, this section 
is revised to state that prior to January 1, 2012, SDVOSBs and VOSBs 
must be listed in the VIP database and registered in CCR to receive new 
contract awards under this program. After December 31, 2011, SDVOSBs 
and VOSBs must be listed as verified in the VIP database and registered 
in CCR to receive new awards under this program.

2. Clarification of Section 813.106

    Comment: One commenter stated that proposed section 813.106 in the 
SUPPLEMENTARY INFORMATION section of the Proposed Rule is confusing. 
Therein, it states that: ``contracting officers may use other than 
competitive procedures to enter into a contract with a SDVOSB or VOSB 
when the amount is less than the simplified acquisition threshold not 
to exceed $5 million.''
    Response: Proposed section 813.106 stated that ``Contracting 
officers may use other than competitive procedures to enter into a 
contract with a SDVOSB or VOSB when the amount is less than the 
simplified acquisition threshold.'' However, as noted by the commenter, 
the SUPPLEMENTARY INFORMATION section in the proposed rule addressing 
section 813.106 describes the amount as ``less than the simplified 
acquisition threshold not to exceed $5 million.'' First, 38 U.S.C. 
8127(b) provides that VA may conduct other than competitive 
procurements up to the simplified acquisition threshold. Next, 38 
U.S.C. 8127(c) provides that a VA contracting officer may award a 
contract to veteran owned small business concerns using other than 
competitive procedures if the anticipated award price including options 
will exceed the simplified acquisition threshold (as defined in the 
section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 
403) but will not exceed $5 million.
    In order to address the comment and provide clarification, proposed 
section 813.106 has been renumbered as section 813.106(a) and revised 
to state: ``Contracting officers may use other than competitive 
procedures to enter into a contract with a SDVOSB or VOSB when the 
amount exceeds the micro-purchase threshold up to $5 million.'' This 
change will provide that VA contracting officers can award any 
procurement from the micro-purchase, which is currently $3,000 for 
supplies, up to $5 million using other than competitive procedures to 
be in accordance with both sections 8127(b) and (c). Purchases under 
the micro-purchase threshold are still available for award to any 
source, large or small, to promote administrative and economic 
efficiency of internal VA operations. However, section 813.202 does 
provide that micro-purchases shall be equitably distributed among 
SDVOSBs and VOSBs to the maximum extent practical.
    Comment: A commenter recommended that in section 813.106, the word 
``may'' be changed to ``shall.''
    Response: We disagree with the commenter and believe the regulation 
clearly implements the discretion provided in 38 U.S.C. 8127(c) in 
accordance with the statute. The statutory language states a 
contracting officer may award a contract to a small business concern 
owned and controlled by veterans using other than competitive 
procedures. We believe the determination whether or not to use other 
than competitive procedures under this section is a business decision 
that is left to the discretion of the contracting officer. Therefore, 
no change is being made to the rule based on this comment.

3. Applicability to Architect-Engineering (A/E) Services

    Comment: Several commenters asked whether proposed subpart 819.70 
applies to the award of sole source VOSB and SDVOSB contracts for A/E 
contracts.
    Response: This rule does not apply to the procedures to procure A/E 
services. Pursuant to the Brooks Act (Pub. L. 92-582), A/E services 
cannot be awarded on a sole source basis. The Brooks Act requires 
Federal agencies to publicly announce all requirements for A/E 
services, and to negotiate contracts for A/E services on the basis of 
demonstrated competence and qualification for the type of professional 
services required at fair and reasonable prices. The sole source 
authority in 38 U.S.C. 8127 does not override the Brooks Act because 
under general principles of statutory interpretation the specific 
governs over general language. In this instance, A/E contracting 
statutes govern versus contracting in general. However, since the Small 
Business Competitiveness Demonstration Program in subpart 19.10 of the 
Federal Acquisition Regulation (FAR) includes A/E services as a 
designated industry group (DIG), VA contracting officers may use the 
provisions of 38 U.S.C. 8127 and this rule when procuring DIG 
requirements. Section 19.1007(b)(2) of the FAR, 48 CFR 19.1007(b)(2), 
establishes that Section 8(a), Historically Underutilized Business 
(HUB) Zone and SDVOSB set-asides, must be considered in DIG 
acquisitions. However, using the provisions of 38 U.S.C. 8127 and this 
rule, VA personnel may change the order of priority to consider SDVOSB 
and VOSB set-asides before Section 8(a) and HUB Zone set-asides when 
procuring A/E services under the Small Business Competitiveness 
Demonstration Program.
    Comment: One commenter noted that section 852.219-10(c) indicates 
that for services (except construction), at least 50 percent of the 
personnel costs must be spent for employees of the particular concern 
or for employees of other eligible SDVOSB concerns. The commenter 
stated that because A/E type services are very similar to those in the 
construction field (e.g., specialty trade), which only require 
subcontractors to perform just 25 percent of the total work, A/E 
contractors should also be permitted to perform 25 percent (versus 50 
percent) of the work.
    Response: This rule follows guidance in the generally applicable, 
government-wide U.S. Small Business Administration (SBA) regulations 
and the Federal Acquisition Regulations that set out subcontracting 
requirement limits for government-wide set-aside programs. See 13 CFR 
125.6; 48 CFR part 19. These regulations require for a services 
contract (except construction) that the small business concern will 
perform at least 50 percent of the cost of the contract incurred for 
personnel with its own employees. In the case of a contract for 
supplies or products (other than procurement from a non-manufacturer in 
such supplies or products), the concern will perform at least 50 
percent of the cost of

[[Page 64621]]

manufacturing the supplies or products (not including the costs of 
materials). In the case of a contract for general construction, the 
concern will perform at least 15 percent of the cost of the contract 
with its own employees (not including the costs of materials). VA's 
rule follows the SBA model as these percentages are commonly applied 
and accepted in government-wide set aside authorities. VA has no 
rational basis to adjust these percentages and, for administrative 
ease, does not want to have to enforce separate sets of subcontracting 
limitations for set asides with SDVOSB/VOSBs versus other socio-
economic set aside programs. Further, these subcontracting limitations 
ensure that the services will be performed by the veteran business 
owner's employees. We believe the 50 percent requirement contained in 
this rule is appropriate and consistent with generally accepted 
guidance on small business programs regarding subcontracting 
limitations. Therefore, no change will be made.

4. Definition of SDVOSB Concern and Succession of the Business

    Comment: Several commenters suggested that the definition of SDVOSB 
be amended to add the following information: ``The management and daily 
operations of the business are controlled by one or more service-
disabled veteran(s) or in the case of a veteran with a permanent and 
severe disability, the spouse or permanent caregiver of such veteran be 
authorized to participate in the program on his or her behalf.''
    Two commenters suggested the ``SDVOSB concern'' definition be 
expanded to include spouses who gain ownership of a business upon the 
death of any service-disabled veteran or a veteran regardless of the 
cause or the percent of disability. The SDVOSB status would last for a 
period of 2 years or until the spouse re-marries or sells the interest 
in the business.
    Several commenters felt that the current succession definition is 
restrictive since surviving spouses of deceased veterans may only 
succeed the business if the veteran had a 100 percent disability.
    One commenter suggested that the surviving spouse should be able to 
continue the business for at least 10 years regardless of the 
disability rating of the veteran.
    Another commenter suggested that spouses of any service-disabled 
veteran of any level of disability or a veteran who died for any reason 
should have a 2-year period to ``sunset'' the business to protect all 
employees from predatory takeovers and to safeguard the value of the 
business concern.
    Other commenters suggested that any surviving children or permanent 
care giver of the veteran also should be afforded the opportunity to 
participate in this program.
    Response: The criteria for treatment of the business after the 
death of the veteran owner are in 38 U.S.C. 8127(h). Under current law, 
the surviving spouse of a veteran with a service connected disability 
rating of 100 percent disabled or who died as a result of a service 
connected disability would maintain the SDVOSB status. The surviving 
spouse would retain this status until he or she re-marries, 
relinquishes an ownership interest in the small business, or for 10 
years after the death of the veteran, whichever occurs first. VA cannot 
interpret section 8127(h) as suggested by the commenters because the 
plain statutory language clearly prescribes the criteria for surviving 
spouse succession. There is no statutory authority to include 
participation of a spouse who is the caregiver to a living veteran 
owner, permanent caregiver of a disabled veteran or surviving children 
in the program. Furthermore, the length of participation by a surviving 
spouse is prescribed in section 8127(h). The commenter's suggestion to 
include a 2-year participation period for the spouse of a service-
disabled veteran regardless of the disability rating goes beyond the 
authority provided in the current law. The only succession of the 
business authorized for the program by Congress in section 8127(h) is 
to the surviving spouse of a veteran who had a service connected 
disability rating of 100 percent or who died as a result of a service 
connected disability. Congress has not otherwise authorized other 
categories of persons to maintain SDVOSB status for business succession 
purposes. Given that any change to the current definition would require 
revised statutory authority, no change may be made through this 
rulemaking process. The definition provided in proposed section 802.101 
for SDVOSB concerns is adequate and consistent with the criteria in 38 
U.S.C. 8127(h).

5. Synopsis Requirements

    Comment: One commenter stated that proposed section 819.7007, 
requiring synopsis of prospective sole source contracts, conflicts with 
VA Information Letter 049-07-08. The commenter further stated that the 
Small Business Administration (SBA) Section 8(a) program does not 
require a synopsis for sole source awards.
    Response: The commenter is correct that there is a difference 
between the synopsis requirement in VA Information Letter 049-07-08 and 
as proposed in this rule. The letter states that a synopsis is not 
required, but this final rule states a contracting officer may award 
contracts to SDVOSBs or VOSBs on a sole source basis provided that 
``the requirement is synopsized in accordance with the Federal 
Acquisition Regulations Part 5.'' The provisions contained in this rule 
will supersede those contained in the letter. Further, the synopsis 
requirement is changed in order to ensure that all activity under VA's 
Veterans First Contracting Program has full transparency for all 
concerns, including those of the American taxpayer. Therefore, a notice 
of intent to issue a sole source contract will be published prior to 
the award of sole source contracts. Note that VA's Veterans First 
Contracting Program, unlike SBA's Section 8(a) program, is not a 
business development program. The Section 8(a) program addresses small 
business that must be unconditionally owned and controlled by one or 
more socially and economically disadvantaged individuals who are of 
good character and citizens of the United States. This socio-economic 
program is designed to aid fledgling small businesses controlled by 
such disadvantaged individuals so that they may become familiar with 
the federal procurement process and eventually grow in size and 
capability to graduate from the Section 8(a) program. VA does not 
consider veterans to fall into the same category as Section 8(a) 
individuals. While veterans' service will entitle them to priority in 
many contracting opportunities with VA, VA finds that the goals of the 
Section 8(a) program (aiding socially disadvantaged individuals) are 
separate and distinct from those in this proposed regulation (priority 
for veteran small businesses in most procurement opportunities). As 
stated, VA desires transparency in SDVOSB/VOSB sole source procurements 
as the number of awards under this authority is likely to be 
significantly greater than Section 8(a) awards.
    In addition, section 813.106(b) has been added to the final rule to 
include a synopsis requirement for contracting actions estimated to 
exceed $25,000, which are performed under the purview of section 
813.106(a). This synopsis requirement will likewise provide for greater 
transparency within the Veterans First Contracting Program with regard 
to non-competitive procurements under this section.

[[Page 64622]]

6. Priorities of SDVOSB Contractors

    Comment: One commenter stated there should be a distinction made 
between those service-disabled veterans who were injured in combat and 
those veterans who sustained non-combat related injuries.
    Response: The criteria for priority for contracting preferences are 
prescribed in 38 U.S.C. 8127(i). Under current law, VA makes no 
distinction between combat and non-combat disabled veterans. The only 
distinction authorized by Congress in section 8127 is between small 
business concerns owned by veterans generally and those owned by 
veterans with service-connected disabilities. Congress has not 
otherwise authorized any preference for combat veterans. Given that any 
change to the current categories would require revised statutory 
authority, no changes will be made based upon the comment.

7. Change to Federal Acquisition Regulation (FAR)

    Comment: One commenter questioned why this is a change to the VA 
Acquisition Regulations (VAAR) and not the FAR. Another commenter 
stated he would like to see the same wording in the FAR or a Federal 
Acquisition Circular.
    Response: Sections 8127 and 8128 of title 38, U.S.C., contain 
provisions that authorize VA to create a VA-specific procurement 
program to provide contracting preference to SDVOSBs and VOSBs. VA is 
required to give priority in contracting to small businesses owned and 
controlled by veterans, but the program is not intended to have 
government-wide applicability under the FAR. Congress has not 
authorized a similar procurement program applicable to all federal 
agency contracting. Accordingly, this rulemaking is limited to VA and 
therefore, can only be implemented in VA's FAR supplement, the VAAR. 
This VA specific rule is a logical extension of VA's mission to care 
for and assist veterans in returning to private life. It provides VA 
with the new contracting flexibilities to assist veterans in doing 
business with VA. SDVOSBs and VOSBs will obtain valuable experience 
through this VA program that can be useful in obtaining contracts and 
subcontracts with other government agencies as well.

8. Equitable Distribution of Small Business Opportunities

    Comment: One commenter stated concern over the equitable 
distribution of procurement opportunities available to small 
businesses. As a small business owner, the commenter sees few 
opportunities for a small construction company to work with VA given 
the recent legislation authorizing set-aside and negotiated 
procurements for veterans, HUBZone contractors, woman-owned, and 
Section 8(a) firms. The commenter also stated VA is paying a premium 
for construction contracts that are awarded as small business set-
asides.
    Response: VA is required to adhere to a strict order of priority as 
prescribed in 38 U.S.C. 8127(i). Further, in accordance with both the 
Federal Acquisition Regulations (FAR) and VA Acquisition Regulations, 
contracting officers are required to conduct a thorough cost and/or 
price analysis to ensure that the government is receiving a fair and 
reasonable price. However, because the Small Business Competitiveness 
Demonstration Program in FAR subpart 19.10 includes construction as a 
designated industry group (DIG), VA contracting officers may use the 
provisions of 38 U.S.C. 8127 and this rule when procuring DIG 
requirements. FAR 19.1007(b)(2) establishes that Section 8(a), HUBZone 
and SDVOSB set-asides must be considered. However, using the provisions 
of 38 U.S.C. 8127, as implemented in this rule, VA personnel may change 
the order of priority to consider SDVOSB and VOSB set-asides before 
Section 8(a) and HUB Zone set-asides when procuring construction 
contracts under the Small Business Competitiveness Demonstration 
Program. Due to this statutorily prescribed contracting preference for 
SDVOSBs and VOSBs in VA acquisitions, other small-business owners may 
be disadvantaged by this rule in securing contracts with VA. 
Nevertheless, VA is obligated to implement the public policy set forth 
in statute that favors SDVOSBs and VOSBs over other small business 
concerns.

9. AbilityOne Program Procurement List Protection

    Comment: A comment was received stating the AbilityOne Network is 
the largest source of employment for people who are blind or have 
severe disabilities, including service-disabled veterans. The commenter 
stated that not all veterans are interested in owning a business as 
many prefer employment support, which is available through AbilityOne. 
One commenter expressed concern that this rule may adversely affect 
future AbilityOne contracts, which may result in fewer employment 
opportunities for veterans. The commenter stated the set-asides do not 
offer protection for disabled veterans who cannot or do not want to own 
their own businesses.
    Response: This rule will not negatively impact AbilityOne and its 
ability to continue to provide employment to disabled veterans. This 
rulemaking does not alter AbilityOne's status in the ordering 
preference for current or future items on the AbilityOne procurement 
list.
    Comment: Many commenters stated that the language in the rule does 
not offer sufficient protection for current AbilityOne program 
procurement list projects. The commenters request that while VA 
acquisition personnel may provide VOSB and SDVOSB with priority for new 
requirements, there should be no ``poaching'' of current AbilityOne 
projects. The commenter further stated that once a project is on the 
procurement list, the item should remain on the list unless VA receives 
consent to take the item out of the AbilityOne program.
    Response: We appreciate the comments; however, AbilityOne's 
priority status has not been changed as a result of this rule. Further, 
this rule does not impact items currently on the AbilityOne procurement 
list or items that may be added to the procurement list in the future.

10. AbilityOne Opportunities for Partnership

    Comment: Several commenters stated that this is an opportunity for 
VOSBs and SDVOSBs to partner with AbilityOne to increase VA procurement 
opportunities for these socioeconomic groups. Several commenters 
requested that VA modify section 819.7003(c) be modified to include 
AbilityOne-qualified Non-Profit Agencies (NPAs) who represent people 
who are blind or severely disabled be eligible to participate in a 
joint venture under VA's Veterans First Contracting Program. Several 
other commenters suggested that VA may have difficulty locating veteran 
organizations with the needed capacity and capability to fully use the 
authority contained in this rule. These commenters suggested that 
veteran businesses working with AbilityOne NPAs as subcontractors be 
given a preference priority. Some commenters suggested that VA revise 
the purchase priorities in section 808.603 to reflect the following 
order: SDVOSBs, VOSBs, then SDVOSBs or VOSBs partnering with qualified 
subcontractors to AbilityOne NPAs.
    Response: This rule adopts the SBA's Joint Venture regulations, 
which provide that a SDVOSB concern may enter into a joint venture 
agreement with one or more other small business

[[Page 64623]]

concerns for the purpose of performing a service disabled veteran owned 
contract. See 13 CFR 125.15(b)(1)(i). A joint venture of at least one 
SDVOSB concern and one or more other business concerns may submit an 
offer as a small business for a competitive service disabled veteran 
owned contract procurement so long as each concern is under the size 
standard corresponding to the North American Industrial Classification 
System (NAICS) code assigned to the contract. All companies must 
qualify under the SBA guidelines to be considered under section 
819.7003. By definition, a small business must be a for profit entity. 
AbilityOne NPA's are non-profit agencies, therefore, no change can be 
made to create a blanket joint venture relationship authority between 
AbilityOne NPAs and SDVOSBs or VOSBs. At present, there is no statutory 
authority to create an order of priority for AbilityOne contractors 
working as subcontractors to SDVOSBs or VOSBs.

11. Request for a Specific Order of Preference

    Comment: One commenter suggested revising proposed section 808.603 
to specifically define the purchase priority hierarchy for use by VA 
contracting personnel.
    Response: We disagree with the commenter and believe that this rule 
clearly implements the priority purchasing preference for SDVOSB and 
VOSB in accordance with the statute. Under section 8128(a), VA must 
give priority to small business concerns owned and controlled by 
veterans, if the business concern meets the requirements of that 
contracting preference. In this rule, VA will provide discretion to its 
contracting officers to override certain statutory priority 
preferences, such as Federal Prison Industries and Government Printing 
Office. Under section 8128, VA is implementing priority for SDVOSBs and 
VOSBs to the extent authorized by the law. Otherwise, if VA's proposed 
VAAR change does not address other priority preferences set forth in 
the FAR, then the FAR will govern. On this basis, VA has determined 
that including a specific hierarchy of priority is not required and no 
such change will be made to the rule based upon the comment.

12. Conversion of Commercial Activities to Private Sector

    Comment: One commenter stated that the proposed rule does not 
address converting commercial activities to the private sector. The 
commenter noted that the proposed rule lacks provisions that address a 
situation where an SDVOSB makes an unsolicited proposal to a VA 
facility, for example, for housekeeping services.
    Response: OMB Circular No. A-76 sets the policies and procedures 
that federal agencies must use in identifying commercial-type 
activities and determining whether these activities are best provided 
by the private sector, by government employees, or by another agency 
through a fee-for-service agreement. The determination of whether 
services should be performed by the private sector or government 
employees is outside the purview of the Veterans First Contracting 
Program. The term ``unsolicited proposal'' is defined in Federal 
Acquisition Regulation (FAR) 2.101, as a written proposal for a new or 
innovative idea that is submitted to an agency on the initiative of the 
offeror for the purpose of obtaining a contract with the government, 
and is not in response to a request for proposals, Broad Agency 
Announcement, Small Business Innovation Research topic, Small Business 
Technology Transfer Research topic, Program Research and Development 
Announcement, or any other Government-initiated solicitation or 
program. VA continues to adhere to the procedures in FAR 15.6 and VA 
Acquisition Regulation section 815.6 as adequate procedures to address 
the evaluation of unsolicited proposals. The comment is outside the 
purview of the proposed rule and VA will make no changes to the 
procedures for evaluating unsolicited proposals.

13. Non-Manufacturers Rule

    Comment: Several commenters questioned whether VA would achieve its 
SDVOSB goals if the non-manufacturer rule is not waived. One commenter 
stated most small businesses, especially SDVOSBs, are distributors and 
not manufacturers.
    Response: VA did not propose to make any changes to the Federal 
Acquisition Regulation (FAR) requirements of the non-manufacturer rule. 
Therefore, the FAR requirements of the non-manufacturer rule will 
continue to apply to SDVOSB/VOSB procurements under this authority. The 
non-manufacturers rule provides that a contractor under a small 
business set-aside contract shall be a small business that does not 
exceed 500 employees and that provides either its own product or that 
of another domestic small business manufacturing or processing concern. 
See 13 CFR 121.406(b)(1)(i)-(iii). The underlying intent of the non-
manufacturer rule is to aid small business by ensuring that the 
government only buy products under set asides that are actually 
manufactured by small businesses. Since the effective date of section 
8127, VA has met its SDVSOB and VOSB goals as established by the 
Secretary of Veterans Affairs. Therefore, no change is being made to 
the rule based on this comment.

14. Federal Prison Industries (FPI)

    Comment: One commenter stated that inclusion of the FPI in the 
proposed rule totally circumvents recent legislation amending FAR 8.601 
and 18 U.S.C. 4121-4128.
    Response: The enabling statute for the FPI is 18 U.S.C. 4121-4128. 
Federal Acquisition Regulation (FAR) subpart 8.6 implements the 
provisions of 18 U.S.C. 4121-4128. Generally, FPI is a priority source 
in federal procurement for items contained on FPI's procurement list. 
However, FPI's status as a required source for VA acquisitions will be 
changed by this rule. This rule at section 808.603 states that VA 
contracting officers may purchase supplies and services on FPI's 
procurement list from eligible SDVOSBs and VOSBs without regard to the 
FAR and other statutory priority status rules for FPI based on the 
priority provided for SDVOSBs and VOSBs without regard to any other 
provision of law in 38 U.S.C. 8128. Therefore, we will not change the 
rule based on the comment.

15. Limitations on Subcontracting

    Comment: One commenter stated that the requirement for an SDVOSB to 
perform 50 percent of the labor costs should not be mandatory since 
SDVOSBs cannot typically support the labor force mandated by this 
requirement.
    Response: VA is applying the percentages that are common for all 
government set-aside programs. The current regulation regarding the 
limitation on subcontracting requirements for other set-aside programs 
is 13 CFR 125.6. The regulation requires (except construction) that the 
small business concern will perform at least 50 percent of the cost of 
the contract incurred for personnel with its own employees. In the case 
of a contract for supplies or products (other than procurement from a 
non-manufacturer in such supplies or products), the concern will 
perform at least 50 percent of the cost of manufacturing the supplies 
or products (not including the costs of materials). In the case of a 
contract for general construction, the concern will perform at least 15 
percent of the cost of the contract with its own employees (not 
including the costs of materials). The Federal Acquisition Regulation 
(FAR) clauses, which implement these

[[Page 64624]]

subcontracting limitation requirements, include FAR 52.219-4, 52.219-
14, and 52.219-27. The language included in this rule is consistent 
with these current limitations on subcontracting requirements typical 
to all manner of small business set-asides. Also, requiring SDVOSBs and 
VOSBs to perform 50 percent of the labor costs furthers the intent of 
this rule, which is to promote SDVOSBs and VOSBs. Therefore, no change 
will be made to the rule based on this comment.

16. Mentor-Prot[eacute]g[eacute] Program

    Comment: One commenter stated the SDVOSB goal to perform 50 percent 
of the cost of the contract should be removed if VA is to achieve its 
SDVOSB goal.
    Response: The VA Mentor-Prot[eacute]g[eacute] Program is designed 
to encourage mentors to provide assistance to SDVOSB and VOSB 
prot[eacute]g[eacute]s to enhance their capabilities to successfully 
perform contracts and subcontracts for VA. The program is designed to 
foster long term business relationships between SDVOSBs, VOSBs and 
prime contractors. We believe the goal to perform 50 percent of the 
work is consistent with other government-wide Mentor-
Prot[eacute]g[eacute] Programs. The rationale for the requirement that 
the SDVOSB or VOSB perform 50 percent of the cost of the contract 
relates to the limitation on subcontracting requirements previously 
discussed in response to comment 15. Therefore, no change will be made 
to the rule based on this comment.
    Comment: One commenter stated that proposed sections 815.304 and 
852.215-70 should be revised to delete participation in the VA Mentor-
Prot[eacute]g[eacute] Program as an evaluation factor when 
competitively negotiating the award of contracts, tasks, or delivery 
orders. The commenter stated that finding a mentor is a difficult and 
time consuming task that is of little value for start-up SDVOSBs. The 
commenter also stated that being in a mentor-prot[eacute]g[eacute] 
program does not provide additional competitive advantage any more than 
any other teaming arrangement, joint venture, or prime/subcontractor 
relationship. Finally, the commenter stated that the rule would give 
large businesses a back door into negotiations intended for small 
business through their prot[eacute]g[eacute].
    Response: We believe the use of participation in VA's Mentor-
Prot[eacute]g[eacute] Program as an evaluation factor is consistent 
with the government-wide practice used in similar programs. Large 
business participation in the program is encouraged to assist SDVOSBs 
and VOSBs in successfully performing VA contracts and subcontracts and 
increasing their business. VA finds that the likelihood of any abuse of 
the program by large businesses is minimal. As addressed above, in 
small business set-asides conducted under this rule, the SDVOSB or VOSB 
must perform defined percentages of work. Therefore, for example, a 
large business subcontractor mentor cannot control the performance or 
management of a VA contract awarded under this rule. In unrestricted 
acquisitions where a large business mentor may be a prime contractor, 
VA has included evaluation criteria in solicitations to provide extra 
evaluation credit to the large business offeror to encourage support 
for VOSBs and SDVOSBs. Proposed section 815.304-70(a)(4) prescribed 
that VA contracting officers shall ``consider participation in VA's 
Mentor-Prot[eacute]g[eacute] Program as an evaluation factor when 
competitively negotiating the award of contracts or task orders or 
delivery orders.'' Because VA intended in the proposed rule that 
``consider'' be mandatory, in this final rule the word ``consider'' is 
changed to ``use,'' which requires contracting officers to actively use 
a contractor's participation in the Mentor-Prot[eacute]g[eacute] 
Program as an evaluation factor and creates consistency with 
subsections (a)(2) and (a)(3) of this section. Also, the rule requires 
that VA ensure the large business actually utilizes the SDVOSB or VOSB 
that it proposes to use to ensure the integrity of the program.

17. Applicability to GSA Federal Supply Schedule (FSS) Procurements

    Comment: VA received a comment stating that the proposed rule was 
unclear whether it was intended to be applicable to task and delivery 
orders under the Federal Supply Schedule (FSS). The commenter indicated 
that although GSA has delegated to VA the authority to administer 
certain schedules, the delegation does not extend to policy 
implementation. The commenter recommended a revision stating that 
SDVOSB and VOSB set-asides and sole source provisions do not apply at 
the FSS order level.
    Response: We disagree with the commenter and reject the suggestion 
because this rule does not apply to FSS task or delivery orders. VA 
does not believe a change to the regulation is needed, and 48 CFR part 
8 procedures in the FAR will continue to apply to VA FSS task/delivery 
orders. Further, VA will continue to follow GSA guidance regarding 
applicability of 48 CFR part 19 of the FAR, Small Business Programs, 
which states that set-asides do not apply to FAR part 8 FSS 
acquisitions.
    Comment: Many commenters stated that the proposed rule should apply 
to FSS orders since VA purchases approximately 60 percent of its goods 
and services through the FSS. The commenters believed that to have the 
greatest impact, any policy designed to maximize the participation of 
SDVOSBs and VOSBs in VA's purchasing process should apply to purchases 
made pursuant to the FSS program. The commenters stated 48 CFR subpart 
8.4 governs FSS contracts. Federal Acquisition Regulation (FAR) 8.404 
states that 48 CFR parts 13, 14, 15, and 19 do not apply to blanket 
purchase agreements or orders placed against FSS contracts. The 
commenters stated that failure to apply the rule to orders made under 
FSS contracts would severely limit the rule's effectiveness.
    Response: We disagree with these commenters. FSS contracts are 
governed by policy developed by GSA, which has determined that set-
asides do not apply to FSS orders. VA has no authority to include set-
aside procedures for FSS orders under this rule; however, VA provides 
evaluation preferences for SDVOSBs and VOSBs in the proposed rule as 
follows. GSA Acquisition Letter V-05-12, dated June 6, 2005, and FAR 
8.405-1(c) provide guidance on evaluation factors that may be included 
in FSS orders when price is not the sole consideration for award. 
Socioeconomic status (meaning the type of small business) may be an 
evaluation factor for competitive delivery or task orders under the 
FSS. The rule requires inclusion of SDVOSB and VOSB status as an 
evaluation factor when competitively negotiating the award of contracts 
or task/delivery orders under FSS when price is not the sole basis for 
award. We are revising the rule to add section 808.405-2, Ordering 
procedures for services requiring a statement of work, which provides 
that when developing the statement of work and any evaluation criteria 
in addition to price the Government shall adhere to and apply the 
evaluation factor commitments in section 815.304-70.

18. Applicability to Interagency Agreements

    Comment: One commenter stated the rule should apply to other 
government entities that award contracting vehicles for VA. The 
commenter stated acquisition personnel may circumvent this rule by 
having interagency agreements done outside of VA.
    Response: We agree with this comment. The criteria for the 
applicability of this rule to interagency agreements are written in 
statute at 38 U.S.C. 8127(j). Under current law, any

[[Page 64625]]

contract, memorandum of understanding, agreement, or other arrangement 
with any governmental entity to acquire goods and services, shall 
include in the contract, memorandum, agreement, or other arrangement a 
requirement that the entity will comply, to the maximum extent 
feasible, with the provisions of 38 U.S.C. 8127 and 8128, as 
implemented in the VA Acquisition Regulations, when acquiring such 
goods or services. We are revising the rule to add a provision in 
section 817.502, which requires other governmental agencies performing 
purchases on behalf VA to comply with 38 U.S.C. 8127 and 8128 to the 
maximum extent feasible. The inclusion of this provision holds other 
agencies accountable to VA's order of priority for SDVOSBs and VOSBs 
when procuring services and supplies for VA pursuant to an interagency 
agreement.

19. Site Visits in the Verification Process

    Comment: One commenter stated that mandatory site visits should not 
be used to verify the SDVOSB or VOSB status of companies. Instead, the 
commenter believes VA should rely on the veteran's disability rating 
letter as confirmation of their veteran status.
    Response: Verification of VOSB status is governed by 38 CFR part 
74, VA Veteran Owned Small Business Verification Guidelines. In 
accordance with 38 CFR 74.20(b), the VA Center for Veteran Enterprise 
may perform a site visit at the contractor's site. Site visits are not 
mandatory, but may be used in determining ownership and control of a 
business for verification purposes. This rulemaking did not propose to 
alter the current verification procedures. Accordingly, no changes will 
be made based upon the comment.

20. Government Printing Office (GPO)

    Comment: One comment was received applauding the overall goals of 
the rule, but the commenter stated one section directly conflicts with 
section 501 of title 44, United States Code, which is the enabling 
statute for the GPO. The commenter stated that 38 U.S.C. 8128 allows VA 
to supersede other provisions of law concerning contracting 
preferences, but not mandates like the one contained in title 44. The 
commenter believes that VA has no authority to ignore the requirements 
of title 44 as to the expenditure of appropriated funds for printing 
through GPO. The commenter also stated that proposed section 808.803 is 
not VA's only means to implement 38 U.S.C. 8128.
    Response: VA agrees with the commenter that there are other means 
by which VA can effectively implement 38 U.S.C. 8128. Therefore, VA 
will delete section 808.803. In the alternative, VA will negotiate a 
memorandum of agreement with GPO to foster greater business 
opportunities for and stronger outreach efforts to SDVOSBs and VOSBs, 
including, but not necessarily limited to, the following. First, VA 
shall seek to enhance its ability under GPO's Simplified Purchase 
Agreement (SPA) authority whereby, for publishing and information 
products and services up to $10,000, upon executing a SPA agreement 
with GPO, VA may solicit quotations from a database of all contractors 
who have been certified to participate in the SPA program and what type 
of products that they produce. VA may select qualified SDVOSBs and 
VOSBs or include criteria providing a preference for such firms in 
these acquisitions. Based on recent information from GPO, acquisitions 
under $10,000 amount to nearly 40 percent of VA's business with GPO. In 
addition, VA will work with GPO to enhance its outreach efforts to 
SDVOSBs and VOSBs by assisting GPO in modifying its internal policy 
directive(s) to add these socio-economic categories to the list of 
small businesses with whom GPO encourages contracting. Finally, VA will 
provide GPO with information about its Vendor Information Page at 
vetbiz.gov where VA maintains a list of veteran small businesses for 
research purposes. GPO will provide information regarding qualification 
requirements for contracting with GPO that VA may publish or link to on 
VA's small business website.

21. Past Performance Is an Evaluation Factor

    Comment: One commenter recommended that any reference to past 
performance as an evaluation factor as indicated in section 815.304-70, 
not include specific past performance regarding the required services 
or goods for the agency issuing the solicitation. The commenter is 
concerned that if a contractor does not have a proven track record with 
the procuring agency, the contractor cannot effectively compete. The 
commenter suggests that if a SDVOSB or VOSB has experience with another 
government entity, then they should be allowed to compete. Further, the 
commenter expressed concern about solicitations being written in a 
manner to award projects to a known entity that has worked with the 
agency. The commenter stated this is an unfair and deceptive 
procurement practice.
    Response: VOSBs and SDVOSBs are not precluded from using their past 
performance records while under contract with another agency. VA 
evaluates past performance in accordance with Federal Acquisition 
Regulation 15.305(a)(2)(ii)-(iv). VA contracting officers are required 
to evaluate past performance information regarding an offeror's past or 
current contracts with Federal, State, or local governments for efforts 
similar to VA's advertised requirement. Further, VA contracting 
officers may consider past performance information associated with 
predecessor companies, key personnel who have relevant experience, or 
subcontractors that will perform major or critical aspects of the 
requirement when such information is relevant to the current 
acquisition. If an offeror does not have a record of relevant past 
performance or if there is no past performance information available, 
the offeror may not be evaluated favorably or unfavorably on past 
performance. See 48 CFR 15.305(a)(2)(iv). Based on the foregoing, we 
disagree with the commenter's concern that VA's consideration of past 
performance may prejudice veterans that lack a proven past performance 
record. No change will be made to the rule because we do not believe 
the provision unduly affects competition between contractors on the 
basis of past performance.

22. Subcontracting Goals

    Comment: One commenter stated that a provision should be added to 
proposed part 819, which states that the subcontracting goals must be 
higher for SDVOSBs and VOSBs than for other small business concerns. 
For example, the annual goals for SDVOSB and VOSB might be 10 percent 
and 7.5 percent respectively, followed by Section 8(a) at 5 percent and 
HubZone at 3 percent. Another commenter suggested that contracting 
officers should ensure that any subcontracting plans include a goal 
that is at least commensurate with the annual SDVOSB prime contracting 
goal for the total value of planned subcontracts.
    Response: We believe the best practice is to negotiate the 
subcontracting goals based on the requirements of each discrete 
contract. The subcontracting goals should be set based on the nature of 
the requirement. It may be unrealistic to set mandatory goals 
applicable to all types of requirements. Furthermore, the goals for all 
other socioeconomic programs are set by statute and cannot be amended 
through this rulemaking process.

[[Page 64626]]

23. Eligibility for Participants in VA Mentor-Prot[eacute]g[eacute] 
Program

    Comment: One commenter stated the rule should clarify the 
eligibility of mentors and prot[eacute]g[eacute]s pursuant to the VA 
Mentor-Prot[eacute]g[eacute] Program. It is unclear whether a 
participating Mentor must be a prime contractor to its 
prot[eacute]g[eacute]. In proposed section 819.7102, a mentor is 
defined as a prime contractor that elects to promote and develop SDVOSB 
and/or VOSB subcontractors by providing developmental assistance 
designed to enhance the business success of the prot[eacute]g[eacute]. 
As defined in section 802.101, a prot[eacute]g[eacute] is defined as a 
SDVOSB or VOSB, which meets federal small business size standards in 
its primary NAICS code and is the recipient of developmental assistance 
pursuant to a mentor-prot[eacute]g[eacute] agreement. These definitions 
indicate the mentor must be the prime contractor and the 
prot[eacute]g[eacute] must be the subcontractor in an eligible mentor-
prot[eacute]g[eacute] relationship. However, proposed section 819.7106 
stated that prot[eacute]g[eacute]s may participate in the program in 
pursuit of a prime contract or as a subcontractor under the mentor's 
prime contract with VA, but are not required to be a subcontractor to a 
VA prime contractor or be a VA prime contractor. The commenter states 
that the proposed rule should clarify that eligible mentors are not 
limited to act as prime contractors and eligible prot[eacute]g[eacute]s 
are not limited to act as subcontractors.
    Response: We concur with these comments and have made changes to 
clarify this matter. The word ``prime'' has been deleted from the 
definition of mentor in sections 819.7102 and 852.219-71(b)(1). In 
section 819.7102, ``SDVOSB and/or VOSB subcontractors'' is revised to 
indicate ``SDVOSBs and/or VOSBs.'' Section 819.7106(a), Eligibility, 
has been revised to state that a mentor may be either a large or small 
business entity or either a prime contractor or subcontractor.

24. Mentor-Prot[eacute]g[eacute] Agreement Approval

    Comment: One commenter stated that VA's Office of Small and 
Disadvantaged Business Utilization (OSDBU) should have the approval 
authority for VA Mentor-Prot[eacute]g[eacute] Agreements. The commenter 
stated that OSDBU is genuinely suited to meet this initiative.
    Response: We agree with this comment and note that section 819.7108 
clearly indicates that VA Mentor-Prot[eacute]g[eacute] Agreements must 
be submitted to VA OSDBU for review and approval.

25. Training and Guidance to VA Contracting Officers

    Comment: Several commenters suggested that VA contracting officers 
receive training and specific guidance regarding implementation of VA's 
Veterans First Contracting Program to ensure it is implemented 
effectively. Some commenters wanted to ensure that contracting officers 
at the local level are accountable for implementing the rule. Others 
voiced concern about the use of the Prime Vendor Program instead of 
SDVOSBs and VOSBs.
    Response: VA provides extensive training to acquisition 
professionals, program managers/officials, and purchase card holders. 
In addition, VA's OSDBU enhances this training by serving as expert 
advisors for any questions about the process and expends significant 
effort to market the statutory changes to VA contracting officers as 
well as VA's industry partners. VA will continue to provide ongoing 
training to its acquisition professionals to ensure that VA's Veterans 
First Contracting Program is fully understood. No change to the rule is 
required based on this comment.

26. Determination of Affiliation

    Comment: One commenter stated that unless specified, SBA may 
classify participants in a Mentor-Prot[eacute]g[eacute] Program as a 
joint venture. The commenter notes that SBA states on its website that 
it excludes its Section 8(a) program from joint ventures. The commenter 
stated that if the affiliation definition is not clarified, VA's 
Veterans First Contracting Program would be negatively impacted.
    Response: We do not believe that this needs to be addressed any 
further in the rule. Section 819.7103 states that a 
prot[eacute]g[eacute] firm is not considered an affiliate of a mentor 
firm based solely on the fact the prot[eacute]g[eacute] firm is 
receiving developmental assistance from the mentor firm under the VA 
Mentor-Prot[eacute]g[eacute] Program. The determination of affiliation 
is a SBA function; therefore, no clarification will be made to the 
rule.

27. Mentor Prot[eacute]g[eacute] Relationships Subject to Joint Venture 
Restrictions

    Comment: One commenter stated given the SBA's definition of joint 
venture, it could be argued that participants in the Mentor-
Prot[eacute]g[eacute] Program that are classified as a joint venture, 
either by their own agreement or by the SBA, would fall into the joint 
venture restrictions such as three bids in 2 years and the 51 percent 
to 49 percent work and investment. The commenter stated further that it 
is not the intent of the Mentor-Prot[eacute]g[eacute] Program to be 
restricted by the joint venture guidelines.
    Response: A joint venture is an association of individuals and/or 
concerns with interests in any degree or proportion by way of contract, 
express or implied, for which purpose they combine their efforts, 
property, money, skill, or knowledge, but not on a continuing or 
permanent basis for conducting business generally. 38 CFR 74.1. First, 
section 819.7003 provides that a prot[eacute]g[eacute] firm will not be 
considered an affiliate of the mentor solely on the basis that the 
prot[eacute]g[eacute] is receiving assistance from the mentor under 
VA's Mentor-Prot[eacute]g[eacute] program. Further, SBA regulations on 
mentor-prot[eacute]g[eacute] arrangements also provide that a 
prot[eacute]g[eacute] firm is not an affiliate of a mentor firm solely 
because the prot[eacute]g[eacute] firm receives assistance from the 
mentor firm under other Federal Mentor-Prot[eacute]g[eacute] programs. 
See 13 CFR 121.103(b)(6). Affiliation is an important issue because it 
means that the size status of the two or more businesses included in 
the joint venture arrangement are combined to determine small business 
size status of the vendor. Since section 819.7003 provides that mentor-
prot[eacute]g[eacute] participants will not be subject to a size status 
determination that combines the joint ventures' size solely on the 
basis of the mentor-prot[eacute]g[eacute] relationship they have 
established, the commenter's concern is unfounded. No change will be 
made to the final rule based on this comment. VA has noted that on 
October 28, 2009, SBA published in the Federal Register a proposed rule 
to amend Sec.  121.103(b)(6) to limit the exclusion from affiliation to 
``a Federal Mentor-Prot[eacute]g[eacute] program where an exception to 
affiliation is specifically authorized by statute or by SBA under 
procedures set forth in Sec.  121.903.'' 74 FR 55694.

28. Debarment Time Limits

    Comment: One commenter recommended a minimum of 2 years and a 
maximum of 5 years debarment for 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.
    Response: Debarment time periods are inherently discretionary in 
nature. In accordance with guidance in Federal Acquisition Regulation 
9.406, debarment shall be for a period commensurate with the 
seriousness of the cause(s) but generally not to exceed 3 years. VA has 
taken a harder stance in this proposed rule. For example, 
misrepresenting veteran small business

[[Page 64627]]

status could result in debarment for up to a maximum of 5 years. 
However, we believe imposing a mandatory minimum debarment period in 
this rule would diminish VA's discretion because the period of 
debarment should be commensurate with the violation based upon findings 
in administrative proceedings required for debarment actions. 
Therefore, no change will be made to the rule based on the comment.

29. Causes for Debarment

    Comment: Several comments recommended adding to proposed section 
809.406-2, Causes for Debarment, misrepresentation of status as an 
SDVOSB/VOSB, debarment of large businesses that are used as a 
subcontractor that actually do more than 50 percent of the labor, 
including supervision of the project, as well as any SDVOSB that is a 
party to such action.
    Response: We appreciate the comments and believe that expansion of 
the proposed debarment actions for violating subcontracting limitations 
is viable. Accordingly, we will revise the rule to add that violations 
of the limitation on subcontracting requirements under subpart 819.70 
may result in the debarment of any large business concern and SDVOSB or 
VOSB concern that deliberately violates the small business 
subcontracting clause.

30. Market Research

    Comment: One commenter stated that proposed section 810.001 should 
be revised to require VA contracting teams to use the VIP database as 
their first means of performing market research, in addition to other 
sources of information.
    Response: We believe the existing language in proposed section 
810.001 satisfies the commenter's suggestion and makes clear that VA 
contracting teams will utilize the VIP database, as well as other 
sources of information. Therefore, no change will be made to the rule.

31. Requirement for Mentors To Submit Subcontracting Plan

    Comment: One commenter was concerned that under the Mentor-
Prot[eacute]g[eacute] Program, mentors would be excused from the 
requirement to submit subcontracting plans for its largest federal 
procurement opportunities with VA or other agencies, citing the VA 
Mentor Prot[eacute]g[eacute] Program as its reason for noncompliance.
    Response: We believe that the existing language in section 819.7105 
indicates that mentors must continue to file subcontracting plans. No 
change will be made to the rule based on the comment.

32. SDVOSB/VOSB Small Business Status Protests

    At section 819.307 of the proposed rule, VA included a provision 
that VA would utilize SBA to consider and decide SDVOSB and VOSB status 
protests. This requires VA and SBA to execute an interagency agreement 
pursuant to the Economy Act, 31 U.S.C. 1535. Negotiations of this 
interagency agreement have not yet been finalized. Therefore, VA has 
amended section 819.307 with an interim rule to provide that VA's 
Executive Director, OSDBU shall consider and decide SDVOSB and VOSB 
status protests, and provides procedures there for, until such time as 
the interagency agreement is executed by the agencies. VA hereby 
solicits comments on this regulatory amendment only. Furthermore, 
819.307 is also revised to clarify that VA regulations at 38 CFR Part 
74, regarding the issues of ownership and control of SDVOSB and VOSBs, 
shall apply to status protests for procurements under Subpart 819.70 
and that, otherwise, the procedures of FAR Part 19.307 shall apply to 
both VOSB and SDVOSB status protests; however, VA contracting officers 
shall be solely responsible for ensuring SDVOSB and VOSB compliance 
with the requirement to be listed on the Vendor Information Pages at 
VetBiz.gov in accordance with section 804.1102. Lastly, 819.307 is 
clarified to explain that if a SDVOSB or VOSB status protest is 
granted, if contract award has already been made, VA will not be 
required to terminate the award but will not be able to count that 
award towards its small business accomplishments, which is consistent 
with current Government Accountability Office protest decisions on 
similar matters.

Administrative Procedure Act

    This document additionally revises section 819.307, SDVOSB/VOSB 
Small Business Status Protests, of the proposed rule, where VA provided 
that VA would utilize the SBA to consider and decide SDVOSB and VOSB 
status protests. This requires VA and SBA to execute an interagency 
agreement pursuant to the Economy Act, 31 U.S.C. 1535. Negotiations of 
this interagency agreement have not yet been finalized. Therefore, VA 
has amended section 819.307 with an interim rule to provide that VA's 
Executive Director, OSDBU shall consider and decide SDVOSB and VOSB 
status protests, and provides procedures there for, until such time as 
the interagency agreement is executed by the agencies. Good cause 
exists for the agency to include this change as an interim rule because 
it is essential for this contracting program to function. Without a 
SDVOSB/VOSB status protest resolution process in place for acquisitions 
under this authority, performance of any contract award so challenged 
would be suspended thus depriving VA and veterans of necessary services 
and/or supplies. VA hereby solicits comments on this regulatory 
amendment only.

Other Non-Substantive Changes

    The changes below serve to clarify particular items from the 
proposed rule in this final rule.
    Section 802.101 has been revised to state that the term ``small 
business concern'' has the same meaning as in Federal Acquisition 
Regulation 2.101.
    The proposed rule contained a provision at sections 819.7007(b) and 
819.7008(b) indicating 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 SDVOSB or VOSB, respectively, is available to 
meet the requirement. In the proposed rule, VA sought to remove this 
question as an issue subject to protest. Upon further consideration, VA 
has determined that it is not legally proper to affect protest 
jurisdiction established by 31 U.S.C. 3551 et seq. or 28 U.S.C. 1491 by 
this rule. In addition, these provisions are being removed in the final 
rule to provide the added benefit of transparency of the procurement 
process.
    In the proposed rule it was stated in section 819.7109(b) that 
OSBDU would forward copies of approved Mentor-Prot[eacute]g[eacute] 
Agreements to the VA contracting officer for any VA contracts affected 
by that Agreement. Section 819.7109(b) is revised in the final rule to 
state that approved Mentor-Prot[eacute]g[eacute] Agreements will be 
posted on a VA Web site, which will be accessible to VA contracting 
officers for their review. This change is being made to more 
efficiently use the resources that are available and to increase the 
transparency of VA's procurement process. Electronic posting of 
agreements obviates the need to forward paper copies of the agreements 
to VA contracting officers and makes the agreements more accessible to 
contracting officers.

Regulatory Flexibility Act

    VA has determined that this rule establishing priority to small 
business concerns owned and controlled by veterans may have a 
significant economic impact on a substantial number of small entities 
within the

[[Page 64628]]

meaning of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq. 
Accordingly, VA prepared an Initial Regulatory Flexibility Analysis 
(IRFA) addressing the impact of the proposed rule in accordance with 5 
U.S.C. 603. The IRFA examined the objectives and legal basis for the 
proposed rule; the kind and number of small entities that may be 
affected; the projected recordkeeping, reporting, and other 
requirements; whether there were any federal rules that may duplicate, 
overlap, or conflict with the proposed rule; and whether there were any 
significant alternatives to the proposed rule.
    VA's Final Regulatory Flexibility Analysis (FRFA) is set forth 
below:
    1. What are the reasons for, and objectives of, this final 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 final rule will permit VA 
contracting officers to conduct acquisition actions with preferences 
for SDVOSBs or VOSBs. Specifically, this final rule will allow VA 
contracting officers to:
    a. Under certain conditions, permit other than competitive 
procedures under the simplified acquisition threshold with S