VA Veteran-Owned Small Business (VOSB) Verification Guidelines, 1203-1212 [2017-27715]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 83, Number 7 (Wednesday, January 10, 2018)]
[Proposed Rules]
[Pages 1203-1212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27715]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 74

RIN 2900-AP97


VA Veteran-Owned Small Business (VOSB) Verification Guidelines

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) is proposing to amend 
its regulations governing VA's Veteran-Owned Small Business (VOSB) 
Verification Program. The National Defense Authorization Act for Fiscal 
Year 2017 (``the NDAA''), Public Law 114-840, placed the responsibility 
for issuing regulations relating to ownership and control for the 
verification of VOSBs with the United States Small Business 
Administration (SBA). This proposed regulation seeks to remove all 
references to ownership and control and to add and clarify certain 
terms and references that are currently part of the verification 
process. The NDAA also provides that in certain circumstances a firm 
can qualify as VOSB or Service-Disabled Veteran Owned Small Business 
(SDVOSB) when there is a surviving spouse or an employee stock 
ownership plan (ESOP).

DATES: Comments must be received by VA on or before March 12, 2018.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, Regulation 
Policy and Management (00REG), Department of Veterans Affairs, 810 
Vermont Ave. NW, Room 1063b, Washington, DC 20420; or by fax to (202) 
273-9026. Comments should indicate that they are submitted in response 
to ``RIN 2900-AP97--VA Veteran-Owned Small Business (VOSB) Verification 
Guidelines.'' Copies of comments received will be available for public 
inspection in the Office of Regulation Policy and Management, Room 
1064, between the hours of 8:00 a.m. and 4:30 p.m., Monday through 
Friday (except holidays). Please call (202) 461-4902 for an 
appointment. (This is not a toll-free number.) In addition, during the 
comment period, comments may be viewed online through the Federal 
Docket Management System (FDMS) at www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Tom McGrath, Director, Center for 
Verification and Evaluation (00VE), Department of Veterans Affairs, 810 
Vermont Ave. NW, Washington, DC 20420, [email protected], (202) 
461-4300. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION: An Advanced Notice of Proposed Rulemaking 
was provided with a 60-day comment period which ended on July 12, 2013. 
VA received comments from numerous commenters; on November 6, 2015, a 
proposed rule was published in the Federal Register (80 FR 68795) which 
sought to amend 38 CFR part 74 to find an appropriate balance between 
preventing fraud in the Veterans First Contracting Program and 
providing a process that would make it easier for eligible VOSBs to 
become verified. VA received comments from numerous commenters. In 
drafting this proposed rule, VA has considered the issues raised by the 
comments submitted in response to both the July 12, 2013 and the 
November 6, 2015 publications. We thank all commenters for their 
participation in this process. The bases for the proposed amendments 
are as follows.
    In Public Law 114-840, the NDAA designates the SBA as the Federal 
Agency responsible for creating regulations governing ownership and 
control. As regulations relating to and clarifying ownership and 
control are no longer the responsibility of VA, VA is proposing to 
remove the six (6) definitions from Sec.  74.1 that relate to and 
clarify ownership and control. Specifically VA is proposing to remove 
the following definitions: Day-to-day management, day-to-day 
operations, immediate family member, negative control, same or similar 
line of business, and unconditional ownership. In addition, VA proposes 
to remove one additional definition, VetBiz.gov, to account for 
anticipated changes to the location of the Vendor Information Pages 
database.
    Within Sec.  74.1, VA also proposes to create three new definitions 
and amend sixteen (16) others. The new definition ``applicant'' 
clarifies the use of the term throughout the regulation. The new 
definition ``application days'' is added to clarify the manner by which 
the time period in Sec.  74.11(a) is computed. The definition https://www.va.gov/osdbu is added to identify the hosting website as VA is 
considering replacing VetBiz.gov as the host of the Vendor Information 
Pages database. The new definition will allow VA to transition to a new 
host site without requiring further amendments to 38 CFR part 74.
    VA is proposing to amend the definitions Center for Veterans 
Enterprise, joint venture, Office of Small and Disadvantaged Business 
Utilization, non-veteran, participant, primary industry classification, 
principal place of business, service-disabled veteran, service-disabled 
veteran owned small business, small business concern, surviving spouse, 
vendor information pages, verification eligibility, veteran, veterans 
affairs acquisition regulation, and veteran-owned small business. For 
consistency, VA also proposes to remove all references to VetBiz and in 
various places replace the words Center for Verification and 
Evaluation, service-disabled veteran-owned small business, the 
Department of Veterans Affairs,

[[Page 1204]]

Vendor Information Pages, and veteran-owned small business and use in 
their place the respective abbreviations--CVE, SDVOSB, VA, VIP, and 
VOSB in titles and the body of the regulation.
    VA is proposing to amend the definition of Center for Veterans 
Enterprise by changing the term to Center for Verification and 
Evaluation (CVE) to reflect the name change effectuated at 78 FR 59861, 
September 30, 2013. The definition of CVE would be further amended to 
reflect the change to the functions of this office to verification 
activities. The last sentence of the definition will be removed to 
clarify CVE's function.
    VA is proposing to amend the definition joint venture to conform to 
the amendments to 13 CFR part 125 as it pertains to SDVOSB joint 
ventures. VA has also added language to clearly address the current 
policy by indicating that at least one venturer must be a VOSB.
    VA is proposing to amend the definition of Office of Small and 
Disadvantaged Business Utilization to more accurately reflect the role 
fulfilled by this office with respect to VOSB matters.
    VA is proposing to amend the definition of non-veteran to remove 
the reference to VetBiz, as VA is considering moving the site which 
hosts the Vendor Information Pages database.
    VA is proposing to amend the definition of participant to emphasize 
CVE's role in verifying status.
    VA is proposing to amend the definition of primary industry 
classification to make a technical change to use the acronym NAICS as 
it has already been defined in a parenthetical earlier in the 
definition.
    VA is proposing to amend the definition of principal place of 
business to change day to day operations to daily business operations 
in order to match the wording in 13 CFR 125.13.
    VA is proposing to amend the definition of service-disabled veteran 
as the current definition has led to confusion regarding the 
documentation necessary to establish a service-connected disability. 
This change would also help increase program efficiency by specifically 
referencing BIRLS, the system that allows CVE to quickly and accurately 
determine veteran status.
    VA is proposing to amend the definition of service-disabled 
veteran-owned small business concern to align the definition with the 
definition for `small business concern owned and controlled by service-
disabled veterans' proposed by SBA in the amendment to 13 CFR 125.11.
    VA is proposing to amend the definition of small business concern 
to align the definition with the definition for `small business 
concern' proposed by SBA in the amendment to 13 CFR 125.11.
    VA is proposing to amend the definition of surviving spouse to 
reorder existing language and incorporate additional requirements 
outlined in the NDAA. The amended definition would provide that 
immediately prior to death of the deceased veteran the concern must 
have been owned and controlled in accordance with 13 CFR part 125 and 
the concern was listed in VIP.
    VA is proposing to amend the definition of Vendor Information Pages 
to replace the reference to the website https://www.VetBiz.gov with the 
website that is the successor to VetBiz.gov and allow for CVE to make 
reasonable and necessary adjustments without the need for an amendment 
of the regulation.
    VA is proposing to remove the definition of Vetbiz.gov to account 
for anticipated changes to the location of the Vendor Information Pages 
database.
    VA is proposing to amend the definition of verification eligibility 
period to reflect the current eligibility period of 3 years, which was 
effectuated via publication in the Federal Register on February 21, 
2017 at 82 FR 11154. Additionally, a technical change would amend the 
reference to Center for Veterans Enterprise by replacing it with the 
abbreviation CVE. A final technical change would replace the word 
``year'' with ``eligibility period'' to agree with the change in the 
first sentence.
    VA is proposing to amend the definition of Veteran to add a 
reference to the Veterans Benefits Administration (VBA). This revised 
definition is meant to be inclusive of all persons who served on active 
duty and were discharged or released under conditions other than 
dishonorable. Historically, the program has had an issue wherein 
applicants who did in fact qualify as veterans under the statutory 
definition, did not meet the standards outlined in Sec.  74.1. This 
change is not intended to create a new class of veteran, but rather to 
clarify that those who are eligible under the applicable statutes will 
be found eligible for participation in this program.
    VA is proposing to amend the definition of Veterans Affairs 
Acquisition Regulation to remove the term U.S. Department of Veterans 
Affairs and replace it with the abbreviation for VA as previously 
defined in Sec.  74.1.
    VA is proposing to amend the definition of Veteran-owned small 
business, in accordance with the NDAA, to reflect that stock owned by 
ESOPs which in turn are owned by one or more veterans are not included 
in determining requisite ownership percentage, and to use the 
abbreviations that have been previously defined in Sec.  74.1.
    VA is proposing to amend Sec.  74.2 by revising paragraphs (a)-(e) 
and adding new paragraph (g). In both 2010 and 2012, GAO published 
reports tasking VA with reducing potential instances of fraud, waste, 
and abuse. VA has found in its administration of the verification 
program that the use of the procedures identified in Sec.  74.2 
protects VA acquisition integrity and diminishes ongoing exposure to 
fraud, waste, and abuse. Therefore, for such limited situations as 
identified in Sec.  74.2, and only in these limited instances, VA finds 
that immediate removal from public listing is warranted in order to 
protect the integrity of VA procurement. Accordingly, the proposed 
amendments to Sec.  74.2 would serve to more comprehensively outline 
the circumstances under which a participant would be found ineligible 
for the VOSB Verification program.
    VA is proposing to amend Sec.  74.2(a) to add the clause 
``submitted required supplemental documentation at https://www.va.gov/osdbu'' to clearly explain the key steps necessary to submit an 
application and obtain verification. Additionally, a technical change 
would be made to use the abbreviated form ``CVE'' for consistency.
    VA is proposing to amend Sec.  74.2(b) to address the impact of 
criminal activity on eligibility and thus better protect the government 
from fraud, waste, and abuse. The title would be amended to reference 
the System for Award Management (SAM), which has replaced the Excluded 
Parties List System. Additionally, the language of the first sentence 
would be amended to address the impact of 38 U.S.C. 8127(g)(3), which 
now VA authority to exclude all principals in the business concern. 
Accordingly, the language of Sec.  74.2 would be amended to specify 
that the debarment of any individual holding an ownership and control 
interest in the concern will impact the concern's eligibility.
    VA is proposing to amend Sec.  74.2(c) by adding the phrase ``false 
statements or information'' to reference the title and provide further 
clarification on the eligibility requirements. The removal provision 
would be additionally reworded to clarify that removal is immediate. 
Finally, a technical change would remove the word ``the'' before CVE in 
the last sentence.

[[Page 1205]]

    VA is proposing to amend Sec.  74.2(d) by including tax liens and 
unresolved debts owed to various governmental entities outside of the 
Federal Government as financial obligations that would disqualify an 
applicant for inclusion in the VIP database. The title would be 
additionally amended to reflect this change. If after verifying the 
participant's eligibility, CVE discovers that the participant no longer 
satisfies this requirement, CVE will remove the participant from the 
VIP database in accordance with Sec.  74.22. Finally, a technical 
change would remove the word ``VetBiz'' before verification in the last 
sentence.
    VA is proposing to amend Sec.  74.2(e) to clarify the consequences 
of SBA protest decisions and other negative findings. ``Other negative 
findings'' will additionally be clarified by specifically referencing 
status protest decisions. A technical change would remove the word 
``VetBiz'' before verification throughout. The title of this section 
would additionally be amended to clarify this section is not limited to 
SBA decisions. In order to properly capture the impact of negative 
findings, Sec.  74.2(e) would continue to clarify removal is immediate. 
The second sentence would be amended to take into account ``other 
negative findings''.
    VA is proposing to amend Sec.  74.2(f) to specifically reference 
the System for Award Management (SAM) registration. SAM is a 
consolidated listing of previous databases and was not in existence at 
the time the original regulation was created and therefore was not 
referenced. Registration through SAM is required by 48 CFR 4.1200 as 
supplemented by 48 CFR 804.1102.
    VA is proposing to amend Sec.  74.3(a) to reflect that ownership is 
determined in accordance with 13 CFR part 125 as the result of the 
amendments to Title 38 of the United States Code as set forth in the 
NDAA.
    VA is proposing to amend Sec.  74.3(e) to redesignate this 
paragraph as Sec.  74.3(b) to account for the removal of paragraphs 
(a)-(d). VA is proposing to amend Sec.  74.3(b)(1) by a technical 
change to replace ``application'' with ``VA Form 0877'' in order to 
clarify the requirement and conform language to the rest of the 
regulation. VA is proposing to amend Sec.  74.3(b)(1) to add a 30-day 
time period for submission of a new application after a change in 
ownership. This change would provide CVE the ability to definitively 
and accurately track changes of ownership. Further, by adding a time 
period for a new application, the program would be better able to 
comply with its statutory mandate to verify that all concerns listed in 
the VIP Database meet the prescribed ownership and control requirements 
of the verification program.
    VA is proposing to amend Sec.  74.3(b)(3) by a technical change to 
replace ``application'' with ``VA Form 0877'' in order to clarify the 
requirement and conform language to the rest of the regulation.
    VA is proposing to amend Sec.  74.4(a) to state that control is 
determined in accordance with 13 CFR part 125 pursuant to the NDAA. 
Paragraphs (b)-(i) would be removed.
    VA is proposing to amend Sec.  74.5 to include joint ventures. The 
paragraph would additionally be reworded to clearly establish that 38 
CFR part 74 does not supersede 13 CFR part 121 with respect to size 
determinations. VA is proposing to add paragraph (b) to specifically 
address eligibility of joint ventures. Subparagraphs (b)(1) and (b)(2) 
would be added to provide notice of applicable requirements outlined 
elsewhere in VA regulation.
    VA is proposing to amend Sec.  74.10 to remove reference to the 
physical address for CVE. Addresses or methods for submission may 
change over time, and this change allows CVE to make reasonable and 
necessary adjustments without the need for an amendment to the 
regulation. This section would be further amended to remove the word 
``VetBiz'' before verification, and change ``located'' to ``contained'' 
in the last sentence for better clarity. Finally, a technical change 
would remove the word ``the'' before CVE in the last sentence.
    VA is proposing to amend Sec.  74.11 to redesignate paragraphs (c)-
(g) to account for addition of new paragraph (c). VA is proposing to 
amend Sec.  74.11(a) to accommodate a more veteran-friendly, customer 
service centric approach to processing applications. ``Center for 
Veterans Enterprise'' would be changed to ``CVE'' and ``[t]he CVE'' 
would be changed to ``CVE''. Additionally, VA is proposing to amend 
Sec.  74.11(a) to incorporate the term `application days' and to 
increase the review period to 90 application days, when practicable, to 
accommodate time spent between registering for verification and the 
time that all required documentation is received and the application is 
deemed complete.
    VA is proposing to amend Sec.  74.11(c) to address instances where 
CVE does not receive all requested documentation. VA must verify 
applicants prior to admission in the database. In order to comply with 
the statute, VA requests documentation to demonstrate eligibility. This 
proposed revision would notify the public that failure to adequately 
respond to document requests may render CVE unable to verify the 
eligibility of a concern and therefore may result in a denial or 
administrative removal.
    VA is proposing to amend Sec.  74.11(c) to be redesignated as Sec.  
74.11(d) and to make a technical change to insert a reference to the 
newly added paragraph (c). Additionally, the reference to paragraph (d) 
would be changed to paragraph (e) to account for the redesignation. VA 
is proposing to add the term ``totality of circumstances'' to clarify 
long standing CVE interpretation and procedure. References to Sec.  
74.11(b) and Sec.  74.13(a) would be added to highlight all applicable 
exceptions. Finally, a last sentence would be added to clarify the 
longstanding policy that the applicant bears the burden of establishing 
VOSB status.
    VA is proposing to amend Sec.  74.11(d) to be redesignated as Sec.  
74.11(e). The first and second sentences would be amended by removing 
the word ``adversely.'' The third sentence would be removed as it 
refers to withdrawal or removal of verified status. This scenario will 
be addressed in Sec.  74.21, which specifically deals with how 
participants can exit the VIP database. Therefore, the removal would 
help to eliminate redundancy and reduce the likelihood of confusion. 
Additionally, VA is proposing to add Sec.  74.11(e)(1) to specifically 
address bankruptcy as a changed circumstance. Subparagraphs (a)-(c) 
would be added to outline requirements applicable to firms undergoing 
the bankruptcy process.
    VA is proposing to amend Sec.  74.11(e) to be redesignated as Sec.  
74.11(f).
    VA is proposing to amend Sec.  74.11(f) to be redesignated as Sec.  
74.11(g).
    VA is proposing to amend Sec.  74.11(g) to be redesignated as Sec.  
74.11(h). A second sentence would be added to increase program 
efficiency by requiring firms to provide updated contact information. 
This would allow the program to use the most efficient methods to 
dispatch determinations and ensure that applicants will receive 
determinations in a timely manner.
    VA is proposing to amend Sec.  74.12 to expand the list of required 
documentation in order to provide the public notice of documentation 
that is routinely requested by CVE. This amended list would include 
documents previously referenced by Sec.  74.20(b). While the documents 
would still be required for examination as described in Sec.  74.20(b), 
they also are initially required for the application. As the 
application is a concern's first exposure with the process, VA finds 
this list

[[Page 1206]]

would be more appropriately placed in this Sec.  74.12 to notify the 
public of the documentary requirements. Additionally, ``electronic 
form'' would be changed to ``VA Form 0877'' throughout for clarity. 
Similarly, ``attachments'' would be changed to ``supplemental 
documentation'' throughout. Finally, the last two sentences would be 
removed for clarity.
    VA is proposing to amend Sec.  74.13 to modify the title and to 
remove references to the previous reconsideration process, to include 
removing paragraphs (b)-(d). In accordance with the NDAA, appeals of 
initial denials on the grounds of ownership and control will be 
adjudicated by SBA's Office of Hearings and Appeals (OHA) in accordance 
with 13 CFR part 134. Accordingly, Section 74.13 (a) would be amended 
to refer to the appeal process set forth in 13 CFR part 134.
    VA is proposing to amend Sec.  74.13(e) to be redesignated as Sec.  
74.13(b). VA is further proposing to modify this section to reflect the 
removal of the reconsideration process and to remove the phrase 
`service-disabled veteran' as the term veteran is now used to refer to 
both veterans and service-disabled veterans throughout. VA is proposing 
to delete paragraphs (f) and (g) as they are no longer relevant to the 
process.
    VA is proposing to amend Sec.  74.14 to remove references to 
requests for reconsideration and to include notices of verified status 
cancellation and denials of appeals in the list of determinations that 
trigger a waiting period before a concern may submit a new verification 
application. Including denial of appeals takes into consideration any 
appeal filed with OHA that sustains the initial denial letter issued by 
CVE. The program has instituted several procedures through policy to 
assist applicants to identify and address easily correctable issues 
that render the applicant ineligible. Therefore, the class of notices 
listed in Sec.  74.14 are issued to applicants with substantial issues 
in their business structure or underlying documentation that result in 
ineligibility.
    VA is proposing to further amend Sec.  74.14 to be redesignated as 
Sec.  74.14(a). A new paragraph Sec.  74.14(b) would be added to 
clarify that a finding of ineligibility during a reapplication will 
result in the immediate removal of the participant. VA only intends, to 
the extent practicable, to list as verified in the VIP database 
concerns which currently meet verification requirements. This proposed 
change would clarify current policy and serve the important purpose of 
assisting contracting officers in the procurement process by ensuring 
the database only includes concerns that are eligible for award of set 
aside procurements. A final technical change removes the word 
``VetBiz'' before verification throughout.
    VA is proposing to amend Sec.  74.15(a) by splitting the paragraph 
into paragraphs (a), (b), and (c). A technical change would be made to 
what would be redesignated as Sec.  74.15(a) to improve specificity. A 
change would be made to what would be redesignated as Sec.  74.15(b) to 
require participants to inform CVE within 30 days of changes affecting 
eligibility, consistent with Sec.  74.3(f)(1). A substantive change 
would be made to the list that would be redesignated as Sec.  74.15(c), 
which would be expanded to include all situations in which the 
eligibility period may be shortened. VA is proposing to remove Sec.  
74.15(b) because it deals with affiliation and would therefore be 
addressed in Sec.  74.5. Therefore, any shortening of the eligibility 
period due to an affiliation determination would result from an SBA 
determination. This scenario would be addressed by Sec.  74.2(e) and is 
referenced appropriately at what would be designated Sec.  74.15(c). A 
technical change would remove the word ``VetBiz'' before verification 
throughout. Finally, paragraphs (c), (d), and (e) would be redesignated 
as (d), (e), and (f) respectively. The redesignated Sec.  74.15(e) will 
be amended to reference immediate removals pursuant to Sec.  74.2.
    VA is proposing to amend the first three sentences of Sec.  
74.20(b) for simplicity and clarification. In the first sentence, the 
phrase, ``or parts of the program examination'' would be removed. In 
the second sentence, ``location'' would be changed to ``location(s)''. 
In the third sentence, the word ``[e]xaminers'' is changed to ``CVE''. 
As the proposed revisions to Sec.  74.12 would fully address the 
required documentation necessary for verification the complete list 
would be removed from Sec.  74.20 in order to avoid redundancy and 
confusion. A final technical change removes the word ``VetBiz'' before 
verification throughout.
    VA is proposing to amend Sec.  74.21 to reorder for clarity and to 
conform with changes made to other sections of this Part. VA is 
proposing to amend Sec.  74.21(a) by a technical change to remove 
reference to the `` `verified' status button'' in order to reflect the 
current graphical user interface of the VIP database. Additionally, 
``Vendor Information Pages'' would be changed to ``VIP.'' VA is 
proposing to amend Sec.  74.21(b) by changing ``Vendor Information 
Pages'' to ``VIP.'' VA is proposing to amend Sec.  74.21(c) by 
referencing the immediate removal provisions established by and 
clarified in Sec.  74.2. VA is proposing to amend Sec.  74.21(c) and 
associated subparagraphs to be redesignated as Sec.  74.21(d) and 
associated subparagraphs. Additionally, reference to the `` `verified' 
status button'' would be removed to reflect the current graphical user 
interface of the database. VA is proposing to remove Sec.  74.21(c)(5) 
as involuntary exclusions would now be addressed in Sec.  74.2. VA is 
proposing to amend Sec.  74.21(c)(6) to be redesignated as Section 
74.21(d)(5) to account for deletion of Sec.  74.21(c)(5). Additionally, 
the phrase ``or its agents'' would be added to clarify who may request 
documents, and the words ``a pattern of '' will be deleted to clarify 
the requirements necessary to remove a company for failure to provide 
requested information. In the past, establishing a pattern of failure 
has led to ineligible firms maintaining verified status for an extended 
period of time by failing to provide requested documentation. This 
change would help CVE protect the integrity of the procurement process 
while still providing firms notice and opportunity to be heard prior to 
cancellation. VA is proposing to amend Sec.  74.21(c)(7) to be 
redesignated as Sec.  74.21(d)(6) to account for deletion of Sec.  
74.21(c)(5). VA is proposing to remove Sec.  74.21(c)(8) as the action 
addressed by that provision would now be addressed in Sec.  74.2. VA is 
proposing to amend Sec.  74.21(c)(10) to be redesignated as Sec.  
74.21(d)(7). The term ``application'' would be removed as VA Form 0877 
reflects current program requirements. The phrase `60 days' would be 
changed to `30 days' to conform with revised Sec.  74.3(f)(1) of this 
part. VA is proposing to add Sec.  74.21(d)(8) to notify the public 
that failure to report changed circumstances within 30 days is in and 
of itself good cause to initiate cancellation proceedings. VA is 
proposing to amend Sec.  74.21(d) to be redesignated as Sec.  74.21(e).
    VA is proposing to amend Sec.  74.22(a) to begin the relevant 30-
day time period on the date on which CVE sends notice of proposed 
cancellation of verified status. This change would provide the agency 
the ability to definitively and accurately track the cancellation 
proceedings. Additionally, this change would provide the agency the 
ability to control the regulatory time period and consistently apply 
the subsequent provisions of the paragraph. VA is proposing to amend 
Sec.  74.22(e) to implement the new appeals procedure to OHA prescribed 
in the NDAA.
    VA is proposing to amend Sec.  74.25 to replace ``the Department'' 
with ``VA''.

[[Page 1207]]

    VA is proposing to amend Sec.  74.26 to reflect the amended title 
of Sec.  74.12.
    VA is proposing to amend Sec.  74.27 to reword the first sentence 
to specify that all documents submitted to the program, not only those 
used to complete applications, will be stored electronically. 
Additionally, the ``Vendor Information Pages'' would be changed to 
``CVE'' in order to clearly denote who will be in possession of the 
documents and responsible for their retention. The location reference 
would be removed due to the electronic nature of the records to be 
maintained by the program. The second sentence would be revised to 
indicate that any owner information provided will be compared to any 
available records. Finally, references to records management procedures 
to be followed and procedures governing data breaches would be added.
    VA is proposing to amend Sec.  74.28 to replace `Department of 
Veterans Affairs' and `Center for Veterans Enterprises' VA and CVE 
respectively.
    VA is proposing to amend Sec.  74.29 to refer to VA's records 
management procedures, which would govern, absent a timely written 
request from the Government Accountability Office.

Effect of Rulemaking

    The Code of Federal Regulations, as proposed to be revised by this 
rulemaking, would represent the exclusive legal authority on this 
subject. No contrary rules or procedures would be authorized. All VA 
guidance would be read to conform with the rule finally adopted if 
possible or, if not possible, such guidance would be superseded.

Paperwork Reduction Act

    This proposed rule contains no provision constituting a collection 
of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3521).

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as 
amended, requires Federal agencies to consider the potential impact of 
regulations on small entities during rulemaking. Small entities include 
small businesses, small not-for-profit organizations, and small 
governmental jurisdictions. Section 605 of the RFA allows an agency to 
certify a rule, in lieu of preparing an analysis, if the rulemaking is 
not expected to have a significant economic impact on a substantial 
number of small entities.
    This rule making has an average cost to the small business of $803, 
and it would apply only to applying for verified status in the Vendor 
Information Pages (VIP) database. The proposed regulation would merely 
seek to clarify and streamline the existing rule and would add no 
additional burdens or restrictions on applicants or participants with 
regard to VA's VOSB Verification Program. The overall impact of the 
proposed rule would be of benefit to small businesses owned by veterans 
or service-disabled veterans.
    The overall impact of the proposed rule will not affect small 
businesses owned and controlled by veterans and service-disabled 
veterans. The proposed rule removes ownership and control from 38 CFR 
part 74 which will be assumed under a separate set of regulations 
promulgated by SBA. The proposed rule also refines and clarifies 
process steps and removes post examination review. Post examination 
review will also be assumed under a separate set of regulations.
    Examination of businesses seeking verification as veteran-owned 
small businesses or service-disabled veteran owned small businesses 
seeking VA set aside contract opportunities is through the MyVA 
examination model. The MyVA examination model revises the verification 
process by assigning dedicated case analysts and providing applicants 
with additional access to VA staffers during verification.
    From December 2016 through February 2017, 352 small businesses that 
completed the MyVA process and received determination letters 
participated in a follow-up survey detailing their costs and the 
attribution of the costs. Seventy-three (73) percent of participating 
businesses had either $0 costs or responded not applicable; 14 percent 
estimated costs between $1 and $1,000; 3 percent responded with a cost 
estimate between $1,001 and $2,000; 3 percent responded with a cost 
estimate between $2,001 and $3,000; 2 percent responded with a cost 
estimate between $3,001 and $4,000; 2 percent responded with a cost 
estimate between $4,001 and $5,000; and 4 percent responded with a cost 
estimate over $5,000. The average cost of all businesses providing 
survey responses was $803 per business. The largest cost categories 
were employee costs, attorney costs, travel/printing, consultants, and 
accountants. As of the end of April 2017, there were 10,088 verified 
companies in VA's database and 3,254 companies with applications in 
process. On this basis, the Secretary certifies that the adoption of 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities as they are defined in the 
Regulatory Flexibility Act. Therefore, under 5 U.S.C. 605(b), this 
rulemaking is exempt from the initial and final regulatory flexibility 
analysis requirements of Sec. Sec.  603 and 604.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
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 effects, and other advantages, distributive impacts 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 12866 (Regulatory Planning and Review) defines a 
``significant regulatory action,'' which requires review by the Office 
of Management and Budget (OMB), 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 
this Executive Order.''
    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined, and it has 
been determined not to be a significant regulatory action under 
Executive Order 12866.

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 one year. This proposed rule would have no such 
effect on State, local, and tribal governments, or on the private 
sector.

[[Page 1208]]

Catalog of Federal Domestic Assistance

    This proposed rule would affect 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 procedure; Definitions; Appeals; 
Eligibility requirements; Ownership requirements; Control requirements; 
Affiliation; Application guidelines; Request for reconsideration; 
Reapplication; Eligibility term; Verification examination; Procedures 
for cancellation; Records management.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Gina S. 
Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, 
approved this document on October 13, 2017, for publication.

    Dated: October 13, 2017.
Jeffrey Martin,
Office Program Manager, Office of Regulation Policy & Management, 
Office of the Secretary, Department of Veterans Affairs.

    For the reasons set forth in the preamble, we propose to amend 38 
CFR part 74 as follows:

PART 74--VETERANS SMALL BUSINESS REGULATIONS

0
1. The authority citation for Part 74 continues to read as follows:

    Authority: 38 U.S.C. 501 and 513, unless otherwise noted.

0
2. Revise Sec.  74.1 to read as follows:


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

    For the purpose of part 74, the following definitions apply.
    Applicant means a firm applying for inclusion in the VIP database.
    Application days means the time period from when a veteran 
registers for verification to the time of a determination, excluding 
any days in which CVE is waiting for the firm to submit information or 
documentation necessary for the office to continue processing the 
application.
    Center for Verification and Evaluation (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. CVE 
receives and reviews all applications for eligibility under this part 
and maintains the VIP database. CVE assists VA contracting offices to 
identify veteran-owned small businesses and communicates with the Small 
Business Administration (SBA) with regard to small business status.
    Days are calendar days unless otherwise specified. 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.
    Eligible individual means a veteran, service-disabled veteran, or 
surviving spouse, as defined in this section.
    Joint venture is an association of two or more business concerns 
for which purpose they combine their efforts, property, money, skill, 
or knowledge in accordance with 13 CFR part 125. A joint venture must 
be comprised of at least one veteran-owned small business. For VA 
contracts, a joint venture must be in the form of a separate legal 
entity.
    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 the VIP Verification Program participation.
    Office of Small and Disadvantaged Business Utilization (OSDBU) is 
the office within VA that establishes and monitors small business 
program goals at the prime and subcontract levels. OSDBU works with VA 
Acquisitions to ensure the creation and expansion of small businesses 
opportunities by promoting the use of set-aside contracting vehicles 
within VA procurement. OSDBU connects and enables veterans to gain 
access to these Federal procurement opportunities. The Executive 
Director, OSDBU, is the VA liaison with the SBA. Information copies of 
correspondence sent to the SBA seeking a certificate of competency 
determination must be concurrently provided to the Director, OSDBU. 
Before appealing a certificate of competency, the Head of Contracting 
Activity must seek concurrence from the Director, OSDBU.
    Participant means a veteran-owned small business concern which CVE 
has verified and deemed eligible to participate in VA's veteran-owned 
small business program.
    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 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 daily business 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.
    Service-disabled veteran is a veteran who possesses a service-
connected disability rating between 0 and 100 percent. For the purposes 
of VA's veteran-owned small business program, the service-connected 
disability can be established by either registration in the Beneficiary 
Identification and Records Locator Subsystem (BIRLS) maintained by the 
Veterans Benefits Administration (VBA), a disability rating letter 
issued by VA, or a disability determination from the Department of 
Defense.
    Service-disabled veteran-owned small business concern (SDVOSB) 
means any of the following:
    (1) A small business concern--
    (i) 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 (not including any 
stock owned by an ESOP) of which is owned by one or more service-
disabled veterans; and
    (ii) 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 permanent and severe disability, the spouse or permanent 
caregiver of such veteran;
    (2) A small business concern--
    (i) Not less than 51 percent of which is owned by one or more 
service-disabled veterans with a disability that is rated by the 
Secretary of Veterans Affairs as a permanent and total disability who 
are unable to manage the daily business operations of such concern; or
    (ii) In the case of a publicly owned business, not less than 51 
percent of the stock (not including any stock owned by an ESOP) of 
which is owned by one or more such veterans.
    Small business concern (SBC) means a concern that satisfies the 
definition of concern in FAR 19.001 and, with its affiliates, meets the 
size standard for its

[[Page 1209]]

primary industry, pursuant to part 121 of chapter 13.
    Surviving spouse is any individual identified as such by VBA and 
listed in its database of veterans and family members in accordance 
with 101(3) of title 38, United States Code. For a concern whose 
eligibility for the VIP database is based on the ownership of a 
surviving spouse, the concern must have been owned and controlled in 
accordance with 13 CFR part 125 immediately prior to the death of the 
deceased veteran; and
    (1) The service-disabled veteran's death causes the concern to be 
owned by less than 51 percent by one or more service-disabled 
veteran(s);
    (2) The surviving spouse of such deceased veteran acquires such 
veteran's ownership in the concern;
    (3) The deceased veteran had a service-connected disability rated 
as 100 percent disabling under the laws administered by the Secretary 
of Veterans Affairs or such died as a result of a service-connected 
disability; and
    (4) Immediately prior to the death of such, and, to the extent 
applicable, during the earlier of the periods described in paragraphs 
(i) through (iii) of this definition, the concern was included in VIP:
    (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; or
    (iii) The date that is 10 years after the date of the death of the 
veteran.
    (iv) The date on which the business concern is no longer small 
under Federal small business size standards.

    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.

    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.va.gov/osdbu.
    Verification eligibility period is a 3-year period that begins on 
the date CVE issues its approval letter establishing verified status. 
The participant must submit a new application for each eligibility 
period to continue eligibility.
    Veteran has the meaning given the term in section 101(2) of title 
38, United States Code, as interpreted through Title 38 of the CFR. In 
addition, any person having a determination of veteran status from VBA, 
and who was discharged or released under conditions other than 
dishonorable will be deemed to be a veteran for the purposes of this 
program.
    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 (not including 
any stock owned by an ESOP 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 (SDVOSB) are also, by definition, veteran-owned small 
business concerns. When used in these guidelines, the term ``VOSB'' 
includes SDVOSB.
    Veterans Affairs Acquisition Regulation (VAAR) is the set of rules 
that specifically govern requirements exclusive to 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.
0
3. Revise Sec.  74.2 to read as follows:


Sec.  74.2  What are the eligibility requirements a concern must meet 
for the 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 VIP database forms, submitted required supplemental 
documentation at https://www.va.gov/osdbu, and have been examined by 
VA's CVE. Such businesses appear in the VIP database as ``verified''.
    (b) Good character and exclusions in System for Award Management 
(SAM). Individuals having an ownership or control interest in verified 
businesses must have good character. Debarred or suspended concerns or 
concerns owned or controlled by debarred or suspended persons are 
ineligible for VIP Verification. Concerns owned or controlled by a 
person(s) who is currently incarcerated, or on parole or probation 
(pursuant to a pre-trial diversion or following conviction for a felony 
or any crime involving business integrity) are ineligible for VIP 
Verification. Concerns owned or controlled by a person(s) who is 
formally convicted of a crime set forth in 48 CFR 9.406-2(b)(3) are 
ineligible for VIP Verification during the pendency of any subsequent 
legal proceedings. If, after verifying a participant's eligibility, the 
person(s) controlling the participant is found to lack good character, 
CVE will immediately remove the participant from the VIP database, 
notwithstanding the provisions of Sec.  74.22 of this part.
    (c) False statements. If, during the processing of an application, 
CVE determines, by a preponderance of the evidence standard, 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 
statements or information have been submitted by a firm, CVE will 
remove the participant from the VIP database immediately, 
notwithstanding the provisions of Sec.  74.22 of this part. Whenever 
CVE determines that the applicant submitted false information, the 
matter will be referred to the VA Office of Inspector General for 
review. In addition, CVE will request that debarment proceedings be 
initiated by the Department.
    (d) Financial obligations. Neither an applicant firm nor any of its 
eligible individuals that fails to pay significant financial 
obligations, including unresolved tax liens and defaults on Federal 
loans or State or other government assisted financing, owed to the 
federal government, the District of Columbia or any state, district, or 
territorial government of the United States, is eligible for VIP 
Verification. If after verifying the participant's eligibility CVE 
discovers that the participant no longer satisfies this requirement, 
CVE will remove the participant from the VIP database in accordance 
with Sec.  74.22 of this part.
    (e) Protest decisions or other negative findings. Any firm verified 
in the VIP database that is found to be ineligible by a SDVOSB/VOSB 
status protest decision will be immediately removed from the VIP 
database, notwithstanding the provisions of Sec.  74.22 of this part. 
Any firm verified in the VIP database that is found to be ineligible 
due to a U.S. Small Business Administration (SBA) protest decision or 
other negative finding may be immediately removed from the VIP 
database, notwithstanding the provisions of Sec.  74.22 of this part. 
Until such time as CVE receives official notification that the firm has 
proven that it has successfully overcome the

[[Page 1210]]

grounds for the determination, that the decision is overturned on 
appeal, or the firm applies for and receives verified status from CVE, 
the firm will not be eligible to participate in the 38 U.S.C. 8127 
program.
    (f) System for Award Management (SAM) registration. All applicants 
for VIP Verification must be registered in SAM at https://www.sam.gov, 
or its successor prior to application submission.
0
4. Revise Sec.  74.3 to read as follows:


Sec.  74.3  Who does CVE consider to own a veteran-owned small 
business?

    (a) Ownership is determined in accordance with 13 CFR part 125. 
However, where 13 CFR part 125 is limited to SDVOSBs, CVE applies the 
same ownership criteria to firms seeking verified VOSB status.
    (b) 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 own and control it after the change. The participant 
must file an updated VA Form 0877 and supporting documentation 
identifying the new veteran owners or the new business interest within 
30 days of the change.
    (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 an updated VA Form 
0877 with 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 
requires that CVE verify that all eligibility requirements are met by 
the concern and the new owners.
0
5. Revise Sec.  74.4 to read as follows:


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

    Control is determined in accordance with 13 CFR part 125. However, 
where 13 CFR part 125 is limited to SDVOSBs, CVE applies the same 
control criteria to firms seeking verified VOSB status.

(Authority: 38 U.S.C. 501, 513 and 8127)


0
6. Revise Sec.  74.5 to read as follows:


Sec.  74.5  How does CVE determine affiliation?

    (a) CVE does not determine affiliation. Affiliation is determined 
by the SBA in accordance with 13 CFR part 121.
    (b) Joint ventures may apply for inclusion in the VIP Verification 
Program. To be eligible for inclusion in the VIP Verification Program, 
a joint venture must demonstrate that:
    (1) The underlying VOSB upon which eligibility is based is verified 
in accordance with this part;
    (2) The joint venture agreement complies with the requirements set 
forth in 13 CFR part 125 for SDVOSBs. However, while 13 CFR part 125 is 
limited to SDVOSBs, CVE will apply the same requirements to joint 
venture firms seeking verified VOSB status.
0
7. Revise Sec.  74.10 to read as follows:


Sec.  74.10  Where must an application be filed?

    An application for VIP Verification status must be electronically 
filed in the Vendor Information Pages database located on the CVE's web 
portal, https://www.va.gov/osdbu. 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 CVE is also located on the web portal.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)

0
8. Revise Sec.  74.11 to read as follows:


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

    (a) The Director, CVE, is authorized to approve or deny 
applications for VIP Verification. CVE will receive, review, and 
examine all VIP Verification applications. Once an applicant registers, 
CVE will contact the applicant within 30 days to initiate the process. 
If CVE is unsuccessful in its attempts to contact the applicant, the 
application will be administratively removed. If CVE is successful in 
initiating contact with the applicant, CVE will advise the applicant of 
required documents and the timeline for submission. If the applicant 
would be unable to provide conforming documentation, the applicant will 
be given the option to withdraw its application. CVE will process an 
application for VIP Verification status within 90 application days, 
when practicable, of receipt of a registration. Incomplete application 
packages will not be processed.
    (b) CVE, in its sole discretion, may request clarification of 
information relating to eligibility 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) CVE, in its sole discretion, may request additional 
documentation at any time in the eligibility determination process. 
Failure to adequately respond to the documentation request shall 
constitute grounds for a denial or administrative removal.
    (d) An applicant's eligibility will be based on the totality of 
circumstances existing on the date of application, except where 
clarification is made pursuant to paragraph (b) of this section, 
additional documentation is submitted pursuant to paragraph (c) of this 
section, as provided in paragraph (e) of this section or in the case of 
amended documentation submitted pursuant to section 74.13(a) of this 
part. The applicant bears the burden to establish its status as a VOSB.
    (e) Changed circumstances for an applicant occurring subsequent to 
its application and which 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 affect its 
eligibility for the program (i.e., ownership or control changes) during 
its application review.
    (1) Bankruptcy. Bankruptcy is a change in circumstance requiring 
additional protection for the agency. Should a VOSB enter into 
bankruptcy the participant must:
    (i) Inform CVE of the filing event within 30 days;
    (ii) Specify to CVE whether the concern has filed Chapter 7, 11, or 
13 under U.S. Bankruptcy code; and
    (iii) Any participant that is performing contracts must assure 
performance to the contracting officer(s) prior to any reorganization 
or change if necessary including such contracts in the debtor's estate 
and reorganization plan in the bankruptcy.
    (f) The decision of the Director, CVE, to approve or deny an 
application will 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.
    (g) 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.
    (h) The decision may be sent by mail, commercial carrier, facsimile 
transmission, or other electronic means.

[[Page 1211]]

It is the responsibility of the applicant to ensure all contact 
information is current in the applicant's profile.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)

0
9. Revise Sec.  74.12 to read as follows:


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

    Each VIP Verification applicant must submit VA Form 0877 and 
supplemental documentation as CVE requires. All electronic forms are 
available on the VIP database web pages. From the time the applicant 
dispatches the VA Form 0877, the applicant must also retain on file, at 
the principal place of business, a complete copy of all supplemental 
documentation required by, and provided to, CVE for use in verification 
examinations. The documentation to be submitted to CVE includes, but is 
not limited to: Articles of Incorporation/Organization; corporate by-
laws or operating agreements; shareholder agreements; voting records 
and voting agreements; trust agreements; franchise agreements, 
organizational, annual, and board/member meeting records; stock ledgers 
and certificates; State-issued Certificates of Good Standing; contract, 
lease and loan agreements; payroll records; bank account signature 
cards; financial statements; Federal personal and business tax returns 
for up to 3 years; and licenses.

(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 2900-
0675.)

0
10. Amend Sec.  74.13 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  74.13  Can an applicant appeal CVE's initial decision to deny an 
application?

    (a) An applicant may appeal CVE's decision to deny an application 
by filing an appeal with the United States Small Business 
Administration (SBA) Office of Hearings and Appeals (OHA) after the 
applicant receives the denial in accordance with 13 CFR part 134. The 
filing party bears the risk that the delivery method chosen will not 
result in timely receipt by OHA.
    (b) A denial decision that is based on the failure to meet any 
veteran eligibility criteria is not subject to appeal and is the final 
decision of CVE.
* * * * *
0
11. Revise Sec.  74.14 to read as follows:


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

    (a) Once an application, an appeal of a denial of an application, 
or an appeal of a verified status cancellation has been denied, or a 
verified status cancellation which was not appealed has been issued, 
the applicant or participant shall be required to wait for a period of 
6 months before a new application will be processed by CVE.
    (b) Participants may reapply prior to the termination of their 
eligibility period. If a participant is found to be ineligible, the 
participant will forfeit any time remaining on their eligibility period 
and will be immediately removed from the VIP Verification database. An 
applicant removed pursuant to this section may appeal the decision to 
OHA in accordance with section 74.13 of this part. The date of a new 
determination letter verifying an applicant will be the beginning of 
the next 3-year eligibility period.
0
12. Revise Sec.  74.15 to read as follows:


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

    (a) A participant receives an eligibility term of 3 years from the 
date of CVE's approval letter establishing verified status.
    (b) The participant must maintain its eligibility during its tenure 
and must inform CVE of any changes that would affect its eligibility 
within 30 days.
    (c) The eligibility term may be shortened by removal pursuant to 
Sec.  74.2 of this part, application pursuant to Sec.  74.14(b) of this 
part, voluntary withdrawal by the participant pursuant to Sec.  74.21 
of this part, or cancellation pursuant to Sec.  74.22 of this part.
    (d) CVE may initiate a verification examination whenever it 
receives credible information concerning 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.
    (e) If CVE finds that the participant does not qualify as a VOSB, 
the procedures at Sec.  74.22 of this part will apply, except as 
provided in Sec.  74.2 of this part.
    (f) If CVE finds that the participant continues to qualify as a 
VOSB, the original eligibility period remains in effect.
0
13. Revise Sec.  74.20 to read as follows:


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 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 at one or 
all of the participant's offices or work sites. CVE will determine the 
location(s) of the examination. CVE 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. Examiners may review any or all of the organizing documents, 
financial documents, and publicly available information as well as any 
information identified in Sec.  74.12 of this part.
0
14. Revise Sec.  74.21 to read as follows:


Sec.  74.21  What are the ways a business may exit VIP Verification 
Program status?

    A participant may:
    (a) Voluntarily cancel its status by submitting a written request 
to CVE requesting that the concern be removed from public listing in 
the VIP database; or
    (b) Delete its record entirely from the VIP database; or
    (c) CVE may remove a participant immediately pursuant to Sec.  
74.2; or
    (d) CVE may remove a participant from public listing in the VIP 
database for good cause upon formal notice to the participant in 
accordance with Sec.  74.22. Examples of good cause include, but are 
not limited to, the following:
    (1) Submission of false information in the participant's VIP 
Verification application.
    (2) Failure by the participant to maintain its eligibility for 
program participation.
    (3) Failure by the participant for any reason, including the death 
of an individual upon whom eligibility was based, to maintain 
ownership, management, and control by veterans, service-disabled 
veterans, or surviving spouses.
    (4) Failure by the concern to disclose to CVE the extent to which 
non-veteran persons or firms participate in the management of the 
participant.
    (5) Failure to make required submissions or responses to CVE or its 
agents, including a failure to make

[[Page 1212]]

available financial statements, requested tax returns, reports, 
information requested by CVE or VA's Office of Inspector General, or 
other requested information or data within 30 days of the date of 
request.
    (6) Cessation of the participant's business operations.
    (7) Failure by the concern to provide an updated VA Form 0877 
within 30 days of any change in ownership, except as provided in 
paragraph 74.3(f)(3) of this part.
    (8) Failure to inform CVE of any such changed circumstances, as 
outlined in paragraphs (c) and (d) of this section.
    (9) Failure by the concern to obtain and keep current any and all 
required permits, licenses, and charters, including suspension or 
revocation of any professional license required to operate the 
business.
    (e) The examples of good cause listed in paragraph (c) of this 
section are intended to be illustrative only. Other grounds for 
canceling a participant's verified status include any other cause of so 
serious or compelling a nature that it affects the present 
responsibility of the participant.
0
15. Amend Sec.  74.22 by revising paragraphs (a) and (e) to read as 
follows:


Sec.  74.22  What are the procedures for cancellation?

    (a) General. When CVE believes that a participant's verified status 
should be cancelled prior to the expiration of its eligibility term, 
CVE will notify the participant in writing. The Notice of Proposed 
Cancellation Letter will set forth the specific facts and reasons for 
CVE's findings and will notify the participant that it has 30 days from 
the date CVE sent the notice to submit a written response to CVE 
explaining why the proposed ground(s) should not justify cancellation.
* * * * *
    (e) Appeals. A participant may file an appeal with OHA concerning 
the Notice of Verified Status Cancellation decision in accordance with 
13 CFR part 134. The decision on the appeal shall be final.
0
16. Revise Sec.  74.25 to read as follows:


Sec.  74.25  What types of personally identifiable information will VA 
collect?

    In order to establish owner eligibility, VA will collect individual 
names and social security numbers for veterans, service-disabled 
veterans, and surviving spouses who represent themselves as having 
ownership interests in a specific business seeking to obtain verified 
status.
0
17. Revise Sec.  74.26 to read as follows:


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

    VA will examine a variety of business records. See Sec.  74.12, 
``What must a concern submit to apply for VIP Verification Program?''
0
18. Revise Sec.  74.27 to read as follows:


Sec.  74.27  How will VA store information?

    VA stores records provided to CVE fully electronically on the VA's 
secure servers. CVE personnel will compare information provided 
concerning owners against any available records. Any records collected 
in association with the VIP verification program will be stored and 
fully secured in accordance with all VA records management procedures. 
Any data breaches will be addressed in accordance with the VA 
information security program.

(Authority: 38 U.S.C. 501 and 8127)


0
19. Revise Sec.  74.28 to read as follows:


Sec.  74.28  Who may examine records?

    Personnel from VA, CVE, and its agents, including personnel from 
the SBA, may examine records to ascertain the ownership and control of 
the applicant or participant.

(Authority: 38 U.S.C. 5, 13, and 8127)


0
20. Revise section 74.29 to read as follows:


Sec.  74.29  When will VA dispose of records?

    The records, including those pertaining to businesses not 
determined to be eligible for the program, will be kept intact and in 
good condition and retained in accordance with VA records management 
procedures following a program examination or the date of the last 
Notice of Verified Status Approval letter. Longer retention will not be 
required unless a written request is received from the Government 
Accountability Office not later than 30 days prior to the end of the 
retention period.

[FR Doc. 2017-27715 Filed 1-9-18; 8:45 am]
BILLING CODE 8320-01-P