VA Veteran-Owned Small Business Verification Guidelines, 6098-6108 [2010-2648]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 75, Number 25 (Monday, February 8, 2010)]
[Rules and Regulations]
[Pages 6098-6108]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-2648]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 74

RIN 2900-AM78


VA Veteran-Owned Small Business Verification Guidelines

AGENCY: Department of Veterans Affairs.

ACTION: Final rule with request for comments.

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SUMMARY: This document affirms as final, with changes, an interim final 
rule that implements portions of the Veterans Benefits, Health Care, 
and Information Technology Act of 2006. This law requires the 
Department of Veterans Affairs (VA) to verify ownership and control of 
veteran-owned small businesses, including service-disabled veteran-
owned small businesses. This final rule defines the eligibility 
requirements for businesses to obtain ``verified'' status, explains 
examination procedures, and establishes records retention and review 
processes. The final rule retains the interim final rule with changes 
based on the comments received. This document additionally implements 
new interim final requirements, that eligible owners work full-time in 
the business for which they have applied for acceptance in the 
Verification Program, changes the time period for issuance of 
reconsideration decisions from 30 to 60 days, and changes the 
distribution of profits for limited liability companies and employee 
stock ownership plans and solicits comments on these regulatory 
amendments only.

DATES: Effective Date: February 8, 2010.
    Comment Date: Comments on the interim final amendments only must be 
received on or before March 10, 2010.

ADDRESSES: Written comments may be submitted through https://www.Regulations.gov; by mail or hand delivery to the 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-AM78--``VA Veteran-Owned Small Business Verification 
Guidelines.'' Copies of comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1063B, between the hours of 8 a.m. and 4:30 p.m., Monday through Friday 
(except holidays). Please call (202) 461-4902 (this is not a toll-free 
number) for an appointment. In addition, during the comment period, 
comments may be viewed online through the Federal Docket Management 
System (FDMS) at https://www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Ms. Gail Wegner, Acting Director, 
Center for Veterans Enterprise (00VE), Department of Veterans Affairs, 
810 Vermont Ave., NW., Washington, DC 20420, phone (202) 303-3260 
x5239.

SUPPLEMENTARY INFORMATION: 
    In an interim final rule published in the Federal Register on May 
19, 2008 (73 FR 29024), we established new 38 CFR part 74 setting forth 
a mechanism for verifying ownership and control of veteran-owned small 
businesses (VOSBs), including service-disabled veteran-owned small 
businesses (SDVOSBs). We provided a 60-day comment period which ended 
on July 18, 2008. We received comments from five commenters. The issues 
raised in the comments are discussed below. Based on the rationale set 
forth in the interim final rule and in this document, we are adopting 
the provisions of the interim final rule as a final rule with changes 
explained below. Due to the nature of the changes and for the 
convenience of the reader, the regulation text portion of this document 
restates all of revised part 74.
    a. Eligibility of surviving spouses. One commenter expressed the 
opinion that a surviving spouse of a veteran who had any disability 
rating should be permitted to maintain a VOSB or a SDVOSB for as long 
as the spouse owns and controls the business.
    The rule is consistent with Congress's limitation set forth in 38 
U.S.C. 8127(h)(3), which permits the surviving spouse to maintain the 
status of a VOSB or SDVOSB only if the veteran was rated as 100 percent 
disabled or the veteran dies as a result of a service-connected 
disability. VA does not have authority under section 8127 to expand 
VOSB or SDVOSB status as the commenter suggests. We will not make any 
changes to the rule based on the comment.
    b. Yearly verification. One commenter suggested that an annual 
signed statement by the veteran business owner stating there are no 
changes in ownership or control should be sufficient to protect the 
Department's interests. If ownership or control changes, it should be 
mandated that the business owner report it immediately to

[[Page 6099]]

the Center for Veterans Enterprise (CVE), and the CVE may determine it 
necessary to redo the verification application process entirely. 38 CFR 
74.3(e) and 74.21(c)(10) established that a business has up to 60 days 
after a change of ownership to file a new VA Form 0877, VetBiz VIP 
Verification Program application. This timeframe was established with 
sensitivity to the needs of surviving spouses and others who may have 
significant demands due to health or medical challenges. 38 CFR 74.15 
also establishes that eligibility is limited to 1 year. VA has 
determined that annual examinations are necessary to ensure the 
integrity of the Verification Program. This is consistent with the 
annual Federal size recertification requirement in the Central 
Contractor Registry.
    c. Examination visits should concentrate on management and control 
of operations to establish that a company is truly independent and not 
a representative of a non-veteran-owned business employing the veteran 
on a commission or fee basis. Two commenters expressed concern about 
legitimate parties controlling veteran-owned small businesses. One 
commenter suggested that examination visits should examine the actual 
business relationship among the partners, to include: Individuals who 
control bank account number, terms, lines of credit, sale price of 
goods and services, contracts for purchase of goods and services, and 
acceptance of quotations from suppliers. This commenter also 
recommended reviewing records to establish that the eligible party and 
not the non-veteran is receiving funds from payments and distributing 
funds to employees and contractors and to ensure that there is no 
record of a payment, including a percentage or commission, to the 
eligible party from a non-veteran. The second commenter recommended 
that examination visits of pharmaceutical distributors include 
inspection of Pedigree or E-Pedigree filings, state-issued 
pharmaceutical licenses, and the product liability insurance policy to 
ensure that the business name and manager/owner signatures match and 
that insurance policies are current and have an aggregate value of 5 
million dollars. We make no changes to the rule based on this comment. 
38 CFR 74.3-4 address examples of ownership and control. 38 CFR 
74.20(b) establishes that the scope of examination is not limited to 
the documents identified in that section. It only establishes that 
examiners shall review those documents as a minimum and provides the 
CVE with the flexibility to examine other records. VA has determined 
for administrative purposes, it is not practical to have specific 
document review requirements for particular industries. The rule 
provides VA the discretion to review any pertinent documents necessary 
to satisfy Verification requirements.
    d. Site visits. One commenter recommended that the Department 
conduct an on-site visit at the applicant's place of business for 100 
percent of the applications found to be complete. The site visit must 
include attendance by the veteran owner(s) and executive management 
team (if applicable). The purpose of the visit would be to substantiate 
information on the application and to review business operations. Any 
conflicts would be subject to a second review. The site visit would be 
mandatory for the initial application and subsequent visits would occur 
every three years as part of the recertification process, or more 
frequently at the applicant's discretion. Such initial site visits 
would be performed within 60 days of receipt of the complete 
application package. The site visit would be at no cost to the 
business, and the government would agree that there would not be 
unscheduled site visits.
    In the interim final rule, 38 CFR 74.20(a) provided that the 
Department reserves the right to conduct random verification 
examinations of applicants. Also, the interim final rule provided at 38 
CFR 74.20(b) that VA could determine to conduct all or part of the 
verification examination at the applicant's offices. First, VA is 
revising 38 CFR 74.20(a) to clarify that its intent was that 
verification examinations, including site visits, may be random and 
unannounced. Next, in addressing the commenter, conducting 100 percent 
site visits upon receipt of complete applications is not in the best 
interests of the Department as many of the businesses that are seeking 
verification are brand new and have not yet applied for any Federal or 
VA contracts. Also VA finds that mandatory site visits could be an 
unnecessary burden to vendors when VA can adequately verify firms 
through other means, such as document review. The Department will 
monitor awards to companies in the Verification Program and make 
decisions on which companies to inspect using a combination of factors, 
including staffing and funding. VA does not have the resources to 
conduct 100 percent site visit for all applicant firms in the VIP 
database. We will not make any changes to the rule based on the 
comment.
    e. Relationship between VA's Verification Program and the 
government-wide SDVOSB protest process under the Federal Acquisition 
Regulations (FAR), 48 CFR 19.302 and 19.307. One commenter sought 
clarification on the relationship between the Department's Verification 
Program and the protest procedures contained in the FAR. Specifically, 
a question was submitted regarding the Department's intended action 
when the Small Business Administration finds a firm ineligible due to a 
protest decision.
    We agree with the commenter that clarification is needed, and Sec.  
74.2(e) has been added to include guidance in these cases. Any firm 
registered in the VA VetBiz VIP database that is found to be ineligible 
due to an SBA protest decision or other negative finding will be 
immediately removed from the VetBiz VIP database.
    f. Appeals of verification application denial or program 
cancellation decisions. One respondent recommended that the Department 
establish an appeals process for matters limited to the Verification 
Program. Requests for reconsideration of application denial decisions 
are addressed in 38 CFR 74.13, ``Can an applicant ask CVE to reconsider 
its initial decision to deny an application?'' The language has been 
revised to add the mailing address for submission of requests for 
reconsideration. The Director, CVE, shall make the decision on requests 
for reconsideration of application denials, and 38 CFR 74.13(b) has 
been revised to reflect that the timeframe for the issuance of a 
decision has changed from 30 days to 60 days to allow for a thorough 
consideration of the applicant's request. The decision of the Director, 
CVE shall be final with no further appeal rights. This document 
additionally revises the interim final requirement, for the issuance of 
a decision from 30 days to 60 days, to allow for a more thorough 
consideration of the applicant's request and solicits comments on this 
regulatory amendment.
    With regard to businesses that are already participants in the 
Verification program, the rule provides procedures for cancellation of 
verified status, as described in 38 CFR 74.22. The interim final rule 
provided that the Director, CVE would issue cancellation decisions. The 
final rule has been modified such that the Director, CVE issues a 
Notice of Verified Status Cancellation; however, a participant may 
appeal this notice to the Executive Director, Office of Small and 
Disadvantaged Business Utilization. Section 74.22(e) provides that the 
Executive Director, Office of Small and

[[Page 6100]]

Disadvantaged Business Utilization and Center for Veterans Enterprise 
shall render a decision on such an appeal within 60 days after receipt.
    g. Full-time control: One commenter suggested that the Department 
revise 38 CFR 74.4(c)(1) to require the eligible party to work full-
time in order to establish control of the firm. The commenter suggested 
that the original language which requires owners ``show sustained and 
significant time invested in the business'' is insufficient to protect 
the interests of the program and of the Department. The commenter 
offered alternate language that would ``require the veteran to devote 
the majority of his/her time to managing the concern.'' This commenter 
further recommended ``permitting the veteran to be engaged in outside 
employment/management activities only where he/she can show that doing 
so won't have a significant impact on his/her ability to run the VOSB 
or SDVOSB.''
    Based on this comment, we have revised Sec.  74.4(c)(1) to clarify 
the issue of control of a VOSB and SDVOSB. In lieu of the commenter's 
suggested language, VA has revised the interim final rule to require an 
eligible owner have only one business in the program at one time and 
must work full-time in the business. VA has determined that this 
revision will ensure the integrity of the program. In addition, VA has 
defined ``full-time'' in 38 CFR 74.1. The public is invited to comment 
on the requirement for full-time work in the business.
    h. Ownership: Profits and distributions. Two comments were received 
concerning 38 CFR 74.3. One respondent recommended revising 74.3(a) to 
adopt language from the Internal Revenue Code, 26 U.S.C. 1563(c)(2)(B), 
which states that stock in a corporation that is held by an employees' 
trust described in section 401(a) of the Code will be treated as 
``excluded stock'' if 5 or fewer persons who are individuals, estates, 
or trusts own 50 percent or more of the total combined voting power of 
the corporation. Under this proposed language, if 4 individuals own 10 
percent each and an Employee Stock Ownership Plan (ESOP) owns 60 
percent, the stock held by the ESOP would be treated as excluded stock, 
and the four individuals would be treated as owning 100 percent of the 
outstanding stock. In this example, eligible parties would be required 
to own 51 percent or more of the outstanding stock (excluding the ESOP 
stock). Conversely, if there were 10 shareholders who own 9 percent 
each and an ESOP that owns 10 percent, the ESOP stock would be treated 
as outstanding stock. In this case, eligible parties would be required 
to own 51 percent of all outstanding stock, including the ESOP stock.
    The original text required that veterans own 51 percent of the 
outstanding stock (including employee stock ownership trusts). VA 
accepts this comment and has revised 38 CFR 74.3(a). The net effect of 
this change is that a company that is closely held by veterans would 
qualify regardless of the size of the ESOP. Alternatively, a firm that 
is not closely held by veterans will find it much more difficult to 
qualify for the Verification Program. This commenter noted that there 
are a number of government programs that are designed to encourage 
employee ownership as a technique to encourage teamwork, reduce 
employee turnover, and increase productivity. Adopting this change 
affects a small number of VOSBs and SDVOSBs that have adopted ESOPs and 
is consistent with the intent and spirit of public policy objectives.
    The second commenter recommended expanding 38 CFR 74.3(d) to state 
that a veteran's ability to share in the profits of a concern should be 
commensurate with the extent of his/her ownership interest in that 
concern. Such revision would also cover limited liability companies 
(LLC) and partnership structures. For instance, if a VOSB owns 51 
percent of an LLC, he/she would be entitled to receive 51 percent of 
the profits of that LLC.
    VA accepts this comment and has revised 38 CFR 74.3(d)(3) to 
include a partnership or an LLC. Additionally, 38 CFR 74.3(d)(4) has 
been added to state that an eligible individual's ability to share in 
the profits of the concern should be commensurate with the extent of 
his/her ownership interest in that concern. This document additionally 
revises the interim final requirement for the evaluation of profits and 
distributions to determine ownership interest in ESOPs and LLCs and 
solicits comments on this regulatory amendment.

Other Non-Substantive Changes to the Final Rule: The Changes Below 
Serve To Clarify Particular Items From the Interim Final Rule in This 
Final Rule

    The section headings of Sec. Sec.  74.1, 74.11, 74.12, 74.15, and 
74.21 have been revised to include the word ``Program'' following 
verification.
    The definition of small business concern has been revised for 
purpose of consistency to refer to the FAR Part 2 definition of small 
business.
    The definition of surviving spouse has been revised to add ``or 
died as a direct result of a service-connected disability'' to be 
consistent with the statutory definition at 38 U.S.C. 8127(h)(3).
    The term ``in the line of duty'' in the definition of veteran has 
been changed to ``in line of duty'' to be consistent with the term of 
art as used in title 38 of the United States Code.
    The options for transmitting decisions on applications and requests 
for reconsideration have been clarified, as stated in 38 CFR 74.11(g) 
and 74.13(g), to include mail, commercial carrier, facsimile, or other 
electronic means.
    VA has revised language in 38 CFR 74.14 to clarify the time period 
for reapplication for admission to the VA VetBiz VIP Verification 
Program. ``Or participant'' has been added to address those concerns 
whose verification status is cancelled.

Administrative Procedure Act

    Regarding the new interim final amendments published within this 
final rule at 38 CFR 74.1 and 74.4(c)(1), pursuant to 5 U.S.C. 
553(b)(3)(B) and (d)(3), we find that there is good cause to dispense 
with advance public notice and opportunity to comment and with the 30-
day delayed effective date. Advance solicitation of comments on the 
additional interim final provisions would be impracticable and contrary 
to the public interest, as it could delay VA's examination and 
verification procedures. VA has good cause to publish the interim final 
provisions in light of the urgent need to ensure that business concerns 
are being properly characterized as VOSBs or SDVOSBs, which is 
accomplished through verification of ownership and control. Immediate 
implementation of these provisions is consistent with the prior interim 
final rule and permits VA to continue reviewing basic information 
necessary to the verification process. This information is necessary 
even if, as a result of any additional comments received after 
publication of this notice, VA needs to further revise any of the rules 
set forth herein. Accordingly, VA has found good cause for the 
additional interim final provisions to become effective upon 
publication.

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-
612.
    This final rule would generally be small business neutral as it 
applies only to applying for verified status in the VetBiz.gov VIP 
database. The overall impact of the final rule will be of benefit to 
small businesses owned by veterans

[[Page 6101]]

or service-disabled veterans. VA estimates the cost to an individual 
business to be less than $100.00 for 70-75 percent of the businesses 
seeking verification, and the average cost to the entire population of 
veterans seeking to become verified is less than $325.00 on average. A 
related rule describes the effect that verified businesses will have in 
the Department's acquisition regulation. This impact is discussed in 
the proposed rule modifying the VA Acquisition Regulation which was 
published in the Federal Register at 73 FR 49141 on August 20, 2008. On 
this basis, the Secretary certifies that the adoption of this final 
rule would not have a significant economic impact on a substantial 
number of small entities as they are defined in the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 605(b), 
this regulation is exempt from the initial and final regulatory 
flexibility analysis requirements of sections 603 and 604.

Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, when regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety, 
and other advantages; distributive impacts; and equity). The Executive 
Order classifies a ``significant regulatory action,'' requiring review 
by the Office of Management and Budget (OMB) unless OMB waives such 
review, as any regulatory action that is likely to result in a rule 
that may: (1) Have an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or (4) 
raise novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in the Executive 
Order.
    The economic, interagency, budgetary, legal, and policy 
implications of this rule have been examined and it has been determined 
to be a significant regulatory action under the Executive Order.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any given year. This rule would have no such effect on 
State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act

    This final rule contains provisions that constitute collections of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3521). 
OMB has approved these collections and has assigned control number 
2900-0675. VA displays this control number under the applicable 
sections of the regulations in this final rule. OMB assigns control 
numbers to collections of information it approves. VA may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless it displays a currently valid OMB control number.

Catalog of Federal Domestic Assistance

    This final rule affects the verification guidelines of veteran-
owned small businesses, for which there is no Catalog of Federal 
Domestic Assistance program number.

List of Subjects in 38 CFR Part 74

    Administrative practice and procedures, Privacy, Reporting and 
recordkeeping requirements, Small business, Veteran, Veteran-owned 
small business, Verification.

    Approved: October 5, 2009.
John R. Gingrich,
Chief of Staff, Department of Veterans Affairs.

0
Accordingly, the interim final rule adding 38 CFR Part 74, which was 
published in the Federal Register at 73 FR 29024, on May 19, 2008, is 
adopted as a final rule with changes, as follows:

PART 74--VETERANS SMALL BUSINESS REGULATIONS

General Guidelines

Sec.
74.1 What definitions are important for VetBiz Vendor Information 
Pages (VIP) Verification Program?
74.2 What are the eligibility requirements a concern must meet for 
VetBiz VIP Verification Program?
74.3 Who does the Center for Veterans Enterprise (CVE) consider to 
own a veteran-owned small business?
74.4 Who does CVE consider to control a veteran-owned small 
business?
74.5 How does CVE determine affiliation?

Application Guidelines

74.10 Where must an application be filed?
74.11 How does CVE process applications for VetBiz VIP Verification 
Program?
74.12 What must a concern submit to apply for VetBiz VIP 
Verification Program?
74.13 Can an applicant ask CVE to reconsider its initial decision to 
deny an application?
74.14 Can an applicant or participant reapply for admission to the 
VetBiz VIP Verification Program?
74.15 What length of time may a business participate in VetBiz VIP 
Verification Program?

Oversight Guidelines

74.20 What is a verification examination and what will CVE examine?
74.21 What are the ways a business may exit VetBiz VIP Verification 
Program status?
74.22 What are the procedures for cancellation?

Records Management

74.25 What types of personally identifiable information will VA 
collect?
74.26 What types of business information will VA collect?
74.27 How will VA store information?
74.28 Who may examine records?
74.29 When will VA dispose of records?

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

General Guidelines


Sec.  74.1  What definitions are important for VetBiz Vendor 
Information Pages (VIP) Verification Program?

    For the purposes of part 74, the following definitions apply.
    Center for Veterans Enterprise (CVE) is an office within the U.S. 
Department of Veterans Affairs (VA) and is a subdivision of VA's Office 
of Small and Disadvantaged Business Utilization. The CVE helps veterans 
interested in forming or expanding their own small businesses. It also 
helps VA contracting offices identify veteran-owned small businesses 
and works with the Small Business Administration's Veterans Business 
Development Officers and Small Business Development Centers nationwide 
regarding veterans' business financing, management, and technical 
assistance needs.
    Days are calendar days. In computing any period of time described 
in part 74, the day from which the period begins to run is not counted, 
and when the last day of the period is a Saturday, Sunday, or Federal 
holiday, the period extends to the next day that is not a Saturday, 
Sunday, or Federal holiday. Similarly, in circumstances where CVE is 
closed for all or part of the last day, the period extends to the next 
day on which the agency is open.

[[Page 6102]]

    Day-to-day management means supervising the executive team, 
formulating sound policies and setting strategic direction.
    Day-to-day operations mean the marketing, production, sales, and 
administrative functions of the firm.
    Eligible individual means a veteran, service-disabled veteran or 
surviving spouse, as defined in this section.
    Full-time means working at the business during the normal working 
hours, which equate to Monday through Friday, approximately 9 a.m. to 5 
p.m.
    Immediate family member means father, mother, husband, wife, son, 
daughter, brother, sister, grandfather, grandmother, grandson, 
granddaughter, father-in-law, and mother-in-law.
    Joint venture is an association of two or more small business 
concerns to engage in and carry out a single, specific business venture 
for joint profit, for which purpose they combine their efforts, 
property, money, skill, or knowledge, but not on a continuing or 
permanent basis for conducting business generally. For VA contracts, a 
joint venture must be in the form of a separate legal entity.
    Negative control includes, but is not limited to, instances where a 
minority shareholder has the ability, under the concern's chapter, by-
laws, or shareholder's agreement, to prevent a quorum or otherwise 
block action by the board of directors or shareholders.
    Non-veteran means any individual who does not claim veteran status, 
or upon whose status an applicant or participant does not rely in 
qualifying for VetBiz Vendor Information Pages (VIP) Verification 
Program participation.
    Office of Small and Disadvantaged Business Utilization is the 
office within the Department of Veterans Affairs that establishes and 
monitors small business program goals at the prime and subcontract 
levels and which functions as the ombudsman for veterans and service-
disabled veterans seeking procurement opportunities with the 
Department.
    Participant means a veteran-owned small business concern that has 
verified status in the VetBiz Vendor Information Pages database.
    Primary industry classification means the six-digit North American 
Industry Classification System (NAICS) code designation which best 
describes the primary business activity of the participant. The NAICS 
code designations are described in the North American Industry 
Classification System (NAICS) Manual published by the U.S. Office of 
Management and Budget.
    Principal place of business means the business location where the 
individuals who manage the concern's day-to-day operations spend most 
working hours and where top management's current business records are 
kept. If the office from which management is directed and where the 
current business records are kept are in different locations, CVE will 
determine the principal place of business for program purposes.
    Same or similar line of business means business activities within 
the same three-digit ``Major Group'' of the NAICS Manual as the primary 
industry classification of the applicant or participant. The phrase 
``same business area'' is synonymous with this definition.
    Service-disabled veteran is a veteran who possesses either a 
disability rating letter issued by the Department of Veterans Affairs, 
establishing a service-connected rating between 0 and 100 percent, or a 
disability determination from the Department of Defense.
    Service-disabled veteran-owned small business concern is a business 
not less than 51 percent of which is owned by one or more service-
disabled veterans, or in the case of any publicly owned business, not 
less than 51 percent of the stock of which is owned by one or more 
service-disabled veterans; the management and daily business operations 
of which are controlled by one or more service-disabled veterans, or in 
the case of a veteran with a permanent and severe disability, a spouse 
or permanent caregiver of such veteran. In addition, some businesses 
may be owned and operated by an eligible surviving spouse. Reservists 
or members of the National Guard disabled from a disease or injury 
incurred or aggravated in line of duty or while in training status also 
qualify.
    Small business concern is--CVE applies the small business concern 
definition established by 48 CFR 2.101.
    Surviving spouse is any individual identified as such by VA's 
Veterans Benefits Administration and listed in its database of veterans 
and family members. To be eligible for VetBiz VIP Verification, the 
following conditions must apply:
    (1) If the death of the veteran causes the small business concern 
to be less than 51 percent owned by one or more veterans, the surviving 
spouse of such veteran who acquires ownership rights in such small 
business shall, for the period described in paragraph (2) of this 
definition, be treated as if the surviving spouse were that veteran for 
the purpose of maintaining the status of the small business concern as 
a service-disabled veteran-owned small business.
    (2) The period referred to in paragraph (1) of this definition is 
the period beginning on the date on which the veteran dies and ending 
on the earliest of the following dates:
    (i) The date on which the surviving spouse remarries;
    (ii) The date on which the surviving spouse relinquishes an 
ownership interest in the small business concern;
    (iii) The date that is 10 years after the date of the veteran's 
death; or
    (iv) The date on which the business concern is no longer small 
under Federal small business size standards.
    (3) The veteran must have had a 100 percent service-connected 
disability or died as a direct result of a service-connected 
disability.

    Note to definition of surviving spouse:  For program eligibility 
purposes, the surviving spouse has the same rights and entitlements 
of the service-disabled veteran who transferred ownership upon his 
or her death.

    Unconditional ownership means ownership that is not subject to 
conditions precedent, conditions subsequent, executory agreements, 
voting trusts, restrictions on or assignments of voting rights, or 
other arrangements causing or potentially causing ownership benefits to 
go to another (other than after death or incapacity). The pledge or 
encumbrance of stock or other ownership interest as collateral, 
including seller-financed transactions, does not affect the 
unconditional nature of ownership if the terms follow normal commercial 
practices and the owner retains control absent violations of the terms.
    VA is the U.S. Department of Veterans Affairs.
    Vendor Information Pages (VIP) is a database of businesses eligible 
to participate in VA's Veteran-owned Small Business Program. The online 
database may be accessed at no charge via the Internet at https://www.VetBiz.gov.
    Verification eligibility period is a 12-month period that begins on 
the date the Center for Veterans Enterprise issues the approval letter 
establishing verified status. The participant must submit a new 
application each year to continue eligibility.
    VetBiz.gov (VetBiz) is a Web portal VA maintains at https://www.VetBiz.gov. It hosts the Vendor Information Pages database.
    Veteran is a person who served on active duty with the U.S. Army, 
Air Force, Navy, Marine Corps or Coast Guard, for any length of time 
and at any place and who was discharged or released under conditions 
other than dishonorable. Reservists or members of

[[Page 6103]]

the National Guard called to Federal active duty or disabled from a 
disease or injury incurred or aggravated in line of duty or while in 
training status also qualify as a veteran.
    Veteran-owned small business concern (VOSB) is a small business 
concern that is not less than 51 percent owned by one or more veterans, 
or in the case of any publicly owned business, not less than 51 percent 
of the stock of which is owned by one or more veterans; the management 
and daily business operations of which are controlled by one or more 
veterans and qualifies as ``small'' for Federal business size standard 
purposes. All service-disabled veteran-owned small business concerns 
(SDVOSBs) are also, by definition, veteran-owned small business 
concerns. When used in these guidelines, the term ``VOSB'' includes 
SDVOSBs.
    Veterans Affairs Acquisition Regulation (VAAR) is the set of rules 
that specifically govern requirements exclusive to the U.S. Department 
of Veterans Affairs (VA) prime and subcontracting actions. The VAAR is 
chapter 8 of title 48, Code of Federal Regulations, and supplements the 
Federal Acquisition Regulation (FAR), which contains guidance 
applicable to most Federal agencies.


Sec.  74.2  What are the eligibility requirements a concern must meet 
for VetBiz VIP Verification Program?

    (a) Ownership and control. A small business concern must be 
unconditionally owned and controlled by one or more eligible veterans, 
service-disabled veterans or surviving spouses, have completed the 
online Vendor Information Pages database forms at https://www.VetBiz.gov, and has been examined by VA's Center for Veterans 
Enterprise. Such businesses appear in the VIP database as ``verified.''
    (b) Good character. Veterans, service-disabled veterans and 
surviving spouses with ownership interests in VetBiz verified 
businesses must have good character. Debarred or suspended concerns or 
concerns owned or controlled by debarred or suspended persons are 
ineligible for VetBiz VIP Verification.
    (c) False Statements. If, during the processing of an application, 
CVE determines that an applicant has knowingly submitted false 
information, regardless of whether correct information would cause CVE 
to deny the application, and regardless of whether correct information 
was given to CVE in accompanying documents, CVE will deny the 
application. If, after verifying the Participant's eligibility, CVE 
discovers that false information has been knowingly submitted by a 
firm, CVE will remove the ``verified'' status from the VIP database and 
notify the business by phone and mail. Whenever CVE determines that the 
applicant submitted false information, the matter will be referred to 
the Office of Inspector General for review. In addition, the CVE will 
request that debarment proceedings be initiated by the Department.
    (d) Federal financial obligations. Neither a firm nor any of its 
eligible individuals that fails to pay significant financial 
obligations owed to the Federal Government, including unresolved tax 
liens and defaults on Federal loans or other Federally assisted 
financing, is eligible for VetBiz VIP Verification.
    (e) U.S. Small Business Administration (SBA) Protest Decisions. Any 
firm registered in the VetBiz VIP database that is found to be 
ineligible due to an SBA protest decision or other negative finding 
will be immediately removed from the VetBiz VIP database. Until such 
time as CVE receives official notification that the firm has proven 
that it has successfully overcome the grounds for the determination or 
that the SBA decision is overturned on appeal, the firm will not be 
eligible to participate in the 38 U.S.C. 8127 program.


Sec.  74.3  Who does the Center for Veterans Enterprise (CVE) consider 
to own a veteran-owned small business?

    An applicant or participant must be at least 51 percent 
unconditionally and directly owned by one or more veterans or service-
disabled veterans.
    (a) Ownership must be direct. Ownership by one or more veterans or 
service-disabled veterans must be direct ownership. An applicant or 
participant owned principally by another business entity or by a trust 
(including employee stock ownership plans [ESOP]) that is in turn owned 
by one or more veterans or service-disabled veterans does not meet this 
requirement. However, ownership by a trust, such as a living trust, may 
be treated as the functional equivalent of ownership by a veteran or 
service-disabled veteran where the trust is revocable, and the veteran 
or service-disabled veteran is the grantor, a trustee, and the sole 
current beneficiary of the trust. For employee stock ownership plans 
where 5 or fewer persons who are individuals, estates, or trusts own 50 
percent or more of the total combined voting power of the corporation, 
the employee plan will be determined to be ``excluded stock'' and 
eligible parties must control 51 percent or more of the combined voting 
power of the corporation. For employee stock ownership plans where 
greater than 5 persons who are individuals, estates, or trusts own 50 
percent or more of the total stock, eligible parties must control 51 
percent or more of the combined voting power of the corporation, 
including the ESOP stock.
    (b) Ownership must be unconditional. Ownership by one or more 
veterans or service-disabled veterans must be unconditional ownership. 
Ownership must not be subject to conditions precedent, conditions 
subsequent, executory agreements, voting trusts, restrictions on 
assignments of voting rights, or other arrangements causing or 
potentially causing ownership benefits to go to another (other than 
after death or incapacity). The pledge or encumbrance of stock or other 
ownership interest as collateral, including seller-financed 
transactions, does not affect the unconditional nature of ownership if 
the terms follow normal commercial practices and the owner retains 
control absent violations of the terms. In particular, CVE will 
evaluate ownership according to the following criteria for specific 
types of small business concerns.
    (1) Ownership of a partnership. In the case of a concern that is a 
partnership, at least 51 percent of every class of partnership interest 
must be unconditionally owned by one or more veterans or service-
disabled veterans. The ownership must be reflected in the concern's 
partnership agreement.
    (2) Ownership of a limited liability company. In the case of a 
concern that is a limited liability company, at least 51 percent of 
each class of member interest must be unconditionally owned by one or 
more veterans or service-disabled veterans.
    (3) Ownership of a corporation. In the case of a concern that is a 
corporation, at least 51 percent of each class of voting stock 
outstanding and 51 percent of the aggregate of all stock outstanding 
must be unconditionally owned by one or more veterans or service-
disabled veterans.
    (c) Stock options' effect on ownership. In determining 
unconditional ownership, CVE will disregard any unexercised stock 
options or similar agreements held by veterans or service-disabled 
veterans. However, any unexercised stock options or similar agreements 
(including rights to convert non-voting stock or debentures into voting 
stock) held by non-veterans will be treated as exercised, except for 
any ownership interests that are held by investment companies licensed 
under

[[Page 6104]]

part 107 of title 13, Code of Federal Regulations.
    (d) Profits and distributions. One or more veterans or service-
disabled veterans must be entitled to receive:
    (1) At least 51 percent of the annual distribution of profits paid 
to the owners of a corporate, partnership, or LLC applicant concern;
    (2) 100 percent of the value of each share of stock owned by them 
in the event that the stock is sold; and
    (3) At least 51 percent of the retained earnings of the concern and 
100 percent of the unencumbered value of each share of stock owned in 
the event of dissolution of the corporation, partnership, or LLC.
    (4) An eligible individual's ability to share in the profits of the 
concern should be commensurate with the extent of his/her ownership 
interest in that concern.
    (e) Change of ownership. (1) A participant may remain eligible 
after a change in its ownership or business structure, so long as one 
or more veterans or service-disabled veterans own and control it after 
the change and the participant files a new application identifying the 
new veteran owners or their new business interest.
    (2) Any participant that is performing contracts and desires to 
substitute one veteran owner for another shall submit a proposed 
novation agreement and supporting documentation in accordance with FAR 
Subpart 42.12 to the contracting officer prior to the substitution or 
change of ownership for approval.
    (3) Where the transfer results from the death or incapacity due to 
a serious, long-term illness or injury of an eligible principal, prior 
approval is not required, but the concern must file a new application 
with contracting officer and CVE within 60 days of the change. Existing 
contracts may be performed to the end of the instant term. However, no 
options may be exercised.
    (4) Continued eligibility of the participant with new ownership and 
the award of any new contracts require that CVE verify all eligibility 
requirements are met by the concern and the new owners.
    (f) Community property laws given effect. In determining ownership 
interests when an owner resides in any of the community property States 
or territories of the United States, CVE considers applicable State 
community property laws. If only one spouse claims veteran status, that 
spouse's ownership interest will be considered unconditionally held 
only to the extent it is vested by the community property laws.


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

    (a) Control means both the day-to-day management and long-term 
decision-making authority for the VOSB. Many persons share control of a 
concern, including each of those occupying the following positions: 
Officer, director, general partner, managing partner, managing member 
and manager. In addition, key employees who possess expertise or 
responsibilities related to the concern's primary economic activity may 
share significant control of the concern. CVE will consider the control 
potential of such key employees on a case-by-case basis.
    (b) Control is not the same as ownership, although both may reside 
in the same person. CVE regards control as including both the strategic 
policy setting exercised by boards of directors and the day-to-day 
management and administration of business operations. An applicant or 
participant's management and daily business operations must be 
conducted by one or more veterans or service-disabled veterans. 
Individuals managing the concern must have managerial experience of the 
extent and complexity needed to run the concern. A veteran need not 
have the technical expertise or possess a required license to be found 
to control an applicant or participant if he or she can demonstrate 
that he or she has ultimate managerial and supervisory control over 
those who possess the required licenses or technical expertise. 
However, where a critical license is held by a non-veteran having an 
equity interest in the applicant or participant firm, the non-veteran 
may be found to control the firm.
    (c)(1) An applicant or participant must be controlled by one or 
more veterans or service-disabled veterans who possess requisite 
management capabilities. With the exception of joint-venture 
agreements, an eligible owner may only have one business participating 
in the Verification Program at one time and must work full-time in the 
business as defined in Sec.  74.1.
    (2) An eligible full-time manager must hold the highest officer 
position (usually President or Chief Executive Officer) in the 
applicant or participant.
    (3) One or more veterans or service-disabled veteran owners who 
manage the applicant or participant must devote full-time to the 
business during the normal working hours of firms in the same or 
similar line of business. Work in a wholly-owned subsidiary of the 
applicant or participant may be considered to meet the requirement of 
full-time devotion. This applies only to a subsidiary owned by the VOSB 
itself, and not to firms in which the veteran has a mere ownership 
interest.
    (4) Except as provided in paragraph (d)(1) of this section, a 
veteran owner's unexercised right to cause a change in the management 
of the applicant concern does not in itself constitute veteran control, 
regardless of how quickly or easily the right could be exercised.
    (d) In the case of a partnership, one or more veterans or service-
disabled veterans must serve as general partners, with control over all 
partnership decisions. A partnership in which no veteran is a general 
partner will be ineligible for participation.
    (e) In the case of a limited liability company, one or more 
veterans or service-disabled veterans must serve as management members, 
with control over all decisions of the limited liability company.
    (f) One or more veterans or service-disabled veterans must control 
the board of directors of a corporate applicant or participant.
    (1) CVE will deem veterans or service-disabled veterans to control 
the board of directors where:
    (i) A single veteran owns 100 percent of all voting stock of an 
applicant or participant concern;
    (ii) A single veteran owns at least 51 percent of all voting stock 
of an applicant or participant, the individual is on the board of 
directors and no super majority voting requirements exist for 
shareholders to approve corporation actions. Where supermajority voting 
requirements are provided for in the concern's articles of 
incorporation, its by-laws, or by State law, the veteran must own at 
least the percent of the voting stock needed to overcome any such 
supermajority voting requirements; or
    (iii) No single veteran owns 51 percent of all voting stock but 
multiple veterans in combination do own at least 51 percent of all 
voting stock, each such veteran is on the board of directors, no 
supermajority voting requirements exist, and the veteran shareholders 
can demonstrate that they have made enforceable arrangements to permit 
one of them to vote the stock of all as a block without a shareholder 
meeting. Where the concern has supermajority voting requirements, the 
veteran shareholders must own at least that percentage of voting stock 
needed to overcome any such supermajority ownership requirements.
    (2) Where an applicant or participant does not meet the 
requirements set forth in paragraph (d)(1) of this section, the 
veteran(s) upon whom eligibility is based must control the board of

[[Page 6105]]

directors through actual numbers of voting directors or, where 
permitted by state law, through weighted voting (e.g., in a concern 
having a two-person board of directors where one individual on the 
board is a veteran and one is not, the veteran vote must be weighted--
worth more than one vote--in order for the concern to be eligible for 
VetBiz VIP Verification). Where a concern seeks to comply with this 
paragraph:
    (i) Provisions for the establishment of a quorum cannot permit non-
veteran directors to control the board of directors, directly or 
indirectly;
    (ii) Any executive committee of the board of directors must be 
controlled by veteran directors unless the executive committee can only 
make recommendations to and cannot independently exercise the authority 
of the board of directors.
    (3) Non-voting, advisory, or honorary directors may be appointed 
without affecting veterans' or service-disabled veterans' control of 
the board of directors.
    (4) Arrangements regarding the structure and voting rights of the 
board of directors must comply with applicable state law.
    (g) Non-veterans may be involved in the management of an applicant 
or participant, and may be stockholders, partners, limited liability 
members, officers, or directors of the applicant or participant. With 
the exception of a spouse or personal caregiver who represents a 
severely disabled veteran owner, no such non-veteran or immediate 
family member may:
    (1) Exercise actual control or have the power to control the 
applicant or participant;
    (2) Be a former employer or a principal of a former employer of any 
affiliated business of the applicant or participant, unless it is 
determined by the CVE that the relationship between the former employer 
or principal and the eligible individual or applicant concern does not 
give the former employer actual control or the potential to control the 
applicant or participant and such relationship is in the best interests 
of the participant firm; or
    (3) Receive compensation from the applicant or participant in any 
form as directors, officers or employees, including dividends, that 
exceeds the compensation to be received by the highest officer (usually 
chief executive officer or president). The highest ranking officer may 
elect to take a lower salary than a non-veteran only upon demonstrating 
that it helps the applicant or participant.
    (h) Non-veterans who transfer majority stock ownership or control 
of the firm to an immediate family member within 2 years prior to the 
application and remain involved in the firm as a stockholder, officer, 
director, or key employee of the firm are presumed to control the firm. 
The presumption may be rebutted by showing that the transferee has 
independent management experience necessary to control the operation of 
the firm, and indeed is participating in the management of the firm.
    (i) Non-veterans or entities may be found to control or have the 
power to control in any of the following circumstances, which are 
illustrative only and not all inclusive:
    (1) Non-veterans control the board of directors of the applicant or 
participant, either directly through majority voting membership, or 
indirectly, where the by-laws allow non-veterans effectively to prevent 
a quorum or block actions proposed by the veterans or service-disabled 
veterans.
    (2) A non-veteran or entity, having an equity interest in the 
applicant or participant, provides critical financial or bonding 
support or a critical license to the applicant or participant which 
directly or indirectly allows the non-veteran significantly to 
influence business decisions of the participant, unless an exception is 
authorized by the Office of Small and Disadvantaged Business 
Utilization.
    (3) A non-veteran or entity controls the applicant or participant 
or an individual veteran owner through loan arrangements. Providing a 
loan guaranty on commercially reasonable terms does not, by itself, 
give a non-veteran or entity the power to control a firm.
    (4) Business relationships exist with non-veterans or entities 
which cause such dependence that the applicant or participant cannot 
exercise independent business judgment without great economic risk.


Sec.  74.5  How does CVE determine affiliation?

    The Center for Veterans Enterprise applies the affiliation rules 
established by the Small Business Administration in 13 CFR part 121.

Application Guidelines


Sec.  74.10  Where must an application be filed?

    An application for VetBiz VIP Verification status must be 
electronically filed in the Vendor Information Pages database located 
in the Center for Veterans Enterprise's Web portal, https://www.VetBiz.gov. Guidelines and forms are located on the Web portal. 
Upon receipt of the applicant's electronic submission, an 
acknowledgment message will be dispatched to the concern, containing 
estimated processing time and other information. Address information 
for the CVE is also contained on the Web portal. Correspondence may be 
dispatched to: Director, Center for Veterans Enterprise (00VE), U.S. 
Department of Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 
20420.
    (The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)


Sec.  74.11  How does CVE process applications for VetBiz VIP 
Verification Program?

    (a) The Director, Center for Veterans Enterprise, is authorized to 
approve or deny applications for VetBiz VIP Verification. The CVE will 
receive, review and evaluate all VetBiz VIP Verification applications. 
CVE will advise each applicant within 30 days, when practicable, after 
the receipt of an application whether the application is complete and 
suitable for evaluation and, if not, what additional information or 
clarification is required to complete the application. CVE will process 
an application for VetBiz VIP Verification status within 60 days, when 
practicable, of receipt of a complete application package. Incomplete 
application packages will not be processed.
    (b) CVE, in its sole discretion, may request clarification of 
information contained in the application at any time in the eligibility 
determination process. CVE will take into account any clarifications 
made by an applicant in response to a request for such by CVE.
    (c) An applicant's eligibility will be based on circumstances 
existing on the date of application, except where clarification is made 
pursuant to paragraph (b) of this section or as provided in paragraph 
(d) of this section.
    (d) Changed circumstances for an applicant occurring subsequent to 
its application and which adversely affect eligibility will be 
considered and may constitute grounds for denial of the application. 
The applicant must inform CVE of any changed circumstances that could 
adversely affect its eligibility for the program (i.e., ownership or 
control changes) during its application review. Failure to inform CVE 
of any such changed circumstances constitutes good cause for which CVE 
may withdraw verified status for the participant if non-compliance is 
discovered after a participant has been verified.
    (e) The decision of the Director, CVE, to approve or deny an 
application will

[[Page 6106]]

be in writing. A decision to deny verification status will state the 
specific reasons for denial, and will inform the applicant of any 
appeal rights.
    (f) If the Director, CVE, approves the application, the date of the 
approval letter is the date of participant verification for purposes of 
determining the participant's verification eligibility term.
    (g) The decision may be sent by mail, commercial carrier, facsimile 
transmission, or other electronic means.
    (The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)


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

    Each VetBiz VIP Verification applicant must submit the electronic 
forms and attachments CVE requires. All electronic forms are available 
on the VetBiz.gov Vendor Information Pages database Web pages. At the 
time the applicant dispatches the electronic forms, the applicant must 
also retain on file at the principal place of business a completed copy 
of the electronic forms supplemented by manual records that will be 
used in verification examinations. These forms and attachments will 
include, but not be limited to, financial statements, Federal personal 
and business tax returns, payroll records and personal history 
statements. An applicant must also retain in the application file IRS 
Form 4506, Request for Copy or Transcript of Tax Form. These materials 
shall be filed together to maximize efficiency of verification 
examination visits. Together with the electronic documents, these 
manual records will provide the CVE verification examiner with 
sufficient information to establish the management, control and 
operating status of the business on the date of submission.
    (The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)


Sec.  74.13  Can an applicant ask CVE to reconsider its initial 
decision to deny an application?

    (a) An applicant may request that the Director, CVE, reconsider his 
or her decision to deny an application by filing a request for 
reconsideration with CVE within 30 days of receipt of CVE's denial 
decision. ``Filing'' means a document is received by CVE by 5:30 p.m., 
eastern time, on that day. Documents may be filed by hand delivery, 
mail, commercial carrier, or facsimile transmission. Hand delivery and 
other means of delivery may not be practicable during certain periods 
due, for example, to security concerns or equipment failures. The 
filing party bears the risk that the delivery method chosen will not 
result in timely receipt at CVE. Submit requests for reconsideration 
to: Director, Center for Veterans Enterprise (00VE), U.S. Department of 
Veterans Affairs, 810 Vermont Avenue, NW., Washington, DC 20420. A 
formal decision will be issued within 60 days after receipt.
    (b) The Director, CVE, will issue a written decision within 60 
days, when practicable, of receipt of the applicant's request. The 
Director, CVE, may either approve the application, deny it on the same 
grounds as the original decision, or deny it on other grounds. If 
denied, the Director, CVE, will explain why the applicant is not 
eligible for the VetBiz VIP Verification and give specific reasons for 
the denial.
    (c) If the Director, CVE, denies the application solely on issues 
not raised in the initial denial, the applicant may ask for 
reconsideration as if it were an initial denial.
    (d) If CVE determines that a concern may not qualify as small, they 
may directly deny an application for VetBiz VIP Verification or may 
request a formal size determination from the U.S. Small Business 
Administration (SBA). A concern whose application is denied because it 
is other than a small business concern by CVE may request a formal size 
determination from the SBA Associate Administrator, Office of 
Government Contracting (ATTN: Director, Office of Size Standards), 409 
3rd Street, SW., Washington, DC 20416. A favorable determination by SBA 
will enable the firm to immediately submit a new VetBiz VIP 
Verification.
    (e) A denial decision that is based on the failure to meet any 
veteran or service-disabled veteran eligibility criteria is not subject 
to a request for reconsideration and is the final decision of CVE.
    (f) Except as provided in paragraph (c) of this section, the 
decision on the request for reconsideration shall be final.
    (g) The decision may be sent by mail, commercial carrier, facsimile 
transmission, or other electronic means.


Sec.  74.14  Can an applicant or participant reapply for admission to 
the VetBiz VIP Verification Program?

    Once an application, a request for reconsideration, or an appeal to 
a cancellation notice, as applicable, has been denied, the applicant or 
participant shall be required to wait for a period of 6 months before a 
new application will be processed by CVE.


Sec.  74.15  What length of time may a business participate in VetBiz 
VIP Verification Program?

    (a) A participant receives an eligibility term of 1 year from the 
date of CVE's approval letter establishing verified status. The 
participant must maintain its eligibility during its tenure and must 
inform CVE of any changes that would adversely affect its eligibility. 
The eligibility term may be shortened by cancellation by CVE or 
voluntary withdrawal by the participant (i.e., no longer eligible as a 
small business concern), as provided for in this subpart.
    (b) When at least 50 percent of the assets of a concern are the 
same as those of an affiliated business, the concern will not be 
eligible for verification.
    (c) CVE may initiate a verification examination whenever it 
receives credible information calling into the question a participant's 
eligibility as a VOSB. Upon its completion of the examination, CVE will 
issue a written decision regarding the continued eligibility status of 
the questioned participant.
    (d) If CVE finds that the participant does not qualify as a VOSB, 
the procedures at Sec.  74.22 will apply.
    (e) If CVE finds that the participant continues to qualify as a 
VOSB, the program term remains in effect.

Oversight Guidelines


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

    (a) General. A verification examination is an investigation by CVE 
officials, which verifies the accuracy of any statement or information 
provided as part of the VetBiz VIP Verification application process. 
Thus, examiners may verify that the concern currently meets the 
eligibility requirements, and that it met such requirements at the time 
of its application or its most recent size recertification. An 
examination may be conducted on a random, unannounced basis, or upon 
receipt of specific and credible information alleging that a 
participant no longer meets eligibility requirements.
    (b) Scope of examination. CVE may conduct the examination, or parts 
of the program examination, at one or all of the participant's offices. 
CVE will determine the location of the examination. Examiners may 
review any information related to the concern's eligibility 
requirements including, but not limited to, documentation related to 
the legal structure, ownership and control of the concern. As a 
minimum,

[[Page 6107]]

examiners shall review all documents supporting the application, as 
described in Sec.  74.12. These include: Financial statements; Federal 
personal and business tax returns; personal history statements; and 
Request for Copy or Transcript of Tax Form (IRS Form 4506) for up to 3 
years. Other documents, which may be reviewed include (if applicable): 
Articles of Incorporation/Organization; corporate by-laws or operating 
agreements; organizational, annual and board/member meeting records; 
stock ledgers and certificates; State-issued Certificates of Good 
Standing; contract, lease and loan