When I heard a Top Gun sequel was in production, I was stunned. Who in Hollywood had the audacity to green light a project so clearly destined to crash and burn? Then I saw the trailer. Fast cuts of fighter planes? Check. Tom Cruise racing an aircraft on a motorcycle? Check. Competitive pilots playing sports on the sand? Check. It conjured nostalgia for the original while establishing its own narrative.
The SBA has offered something of a preview of its changes to the Service-Disabled Veteran-Owned Small Business (“SDVOSB”) program. Like Top Gun: Maverick, it’s a new take on a familiar program. So, did the SBA nail it like the Top Gun: Maverick producers, or did its engines flame out and put it in a (proverbial) flat spin? Let’s take a look.
How Did We Get Here?
SDVOSB participants have long served two masters. While the SBA generally administered the program for federal executive agencies, the VA conducted its own eligibility and evaluation program for VA specific procurements. Unsurprisingly, this arrangement has led to substantial confusion and administrative inefficiency.
Congress has directed the SBA and VA to clean up the situation for years. The 2017 National Defense Authorization Act (“NDAA”) instructed the SBA to publish a single regulation explaining the ownership and control requirements for SDVOSBs that would be used by both the VA and SBA. The common regulations took effect in 2018.
The 2021 NDAA further consolidates the administration of the SDVOSB program in the SBA. Specifically, the SBA was directed to assume responsibility for verifying the SDVOSB eligibility of firms for all federal procurements, including the VA. In essence, the SBA will become the one-stop-shop for verification.
This week the SBA published its proposed overhaul of the SDVOSB program. This preview features many changes, both big and small. Overall objective of these changes is to incorporate the VA’s eligibility verification procedures into the SBA’s regulations.
The Big Change
Presently, SDVOSB eligibility for procurements outside the VA is done on a self-certification basis. This is to say that SDVOSB firms certify compliance with the SBA’s eligibility regulations without any third-party eligibility review. The VA, on the other hand, requires firms to go through a verification process before being eligible for VA work.
The revised regulations will bring an end to the self-certification process. Going forward, only those firms certified by the SBA as SDVOSB will be eligible to receive SDVOSB set-aside and sole-source contracts. The independent VA eligibility review process will be eliminated. The SBA will be the only agency responsible for certifying SDVOSB firms.
As envisioned by the SBA, the SDVOSB program will move onto a three-year eligibility cycle. Firms will undergo a verification review by the SBA to achieve SDVOSB certification. The certification will last three years unless ownership or control changes occur. Firms that wish to retain SDVOSB certification will need to reverify at the conclusion of their third year in the program.
With respect to size, a firm may seek SDVOSB certification if it qualifies as a small business under any North American Industry Classification System (“NAICS”) code it currently conducts business. This is a far more flexible standard than some of the SBA’s other eligibility programs. This flexibility only applies to the application process; the firm must still qualify as a small business the NAICS code assigned to each solicitation to be eligible for award.
There will be a one-year grace period where SDVOSB firms that have self-certified may file an application with the SBA. Firms that apply during the grace period will preserve their SDVOSB status until the SBA makes a final eligibility determination.
While significant for the SDVOSB program, the proposed changes mirror a larger SBA trend toward multi-year certification programs. The WOSB and HUBZone programs have recently seen similar transitions to mandatory eligibility verification with performance periods.
Impact on Other SBA Programs
While the SDVOSB program is the focus of the SBA’s overhaul, there may be impacts on other SBA programs. The most intriguing of these impacts relates to eligibility reciprocity between SBA small business programs.
While serving different populations, the SDVOSB, 8(a), and WOSB programs share similar ownership and control requirements. In recognition of this, the SBA has proposed expedited processing of SDVOSB applications for firms that have already been certified as 8(a) or WOSB. The SBA seeks comments as to whether the reciprocity should be expanded to the other programs, as well.
Practitioners have long seen the similarities between the control and ownership requirements of the SDVOSB, 8(a), and WOSB programs. Allowing firms to rely on ownership and control approvals from other programs would greatly streamline the application process for those firms seeking several certifications.
When’s the Release?
The SBA’s proposed rule-making is akin to a movie preview. The changes to the SDVOSB program are merely proposed. The SBA is currently seeking public comments on the proposed changes. The release date is still a way off.
Maverick or Goose?
The SBA’s proposed changes soar like Maverick. The SDVOSB program has long been troubled by the SBA and VA’s different approaches to oversight. The proposed changes will clear up this confusion while bringing welcome structure to the program. The prospect of eligibility reciprocity could also be a game changer for firms seeking multiple certifications.
It may not be a box office hit, but the SBA’s changes do not put the SDVOSB program in a (proverbial) flat spin.