There have been long-standing concerns about having two U.S. Government agencies share responsibility for vetting the status and eligibility of veteran owned small businesses (VOSBs) and service disabled veteran owned small businesses (SDVOSBs) in connection with the awards of federal government contracts. As noted in my prior blogs published in early 2018, Congress began the process of eliminating inconsistent regulatory requirements at the U.S. Department of Veterans Affairs (VA) and the U.S. Small Business Administration (SBA) with certain changes that were mandated by the National Defense Authorization Act (NDAA) for Fiscal Year 2017.

Section 862 of the 2021 NDAA, as passed by both the U.S. House of Representatives and the U.S. Senate earlier this month, includes a provision that will eventually complete the transfer of responsibility for VOSB and SDVOSB certification for government contracting purposes from the VA to the SBA and eliminate any further unnecessary and burdensome duplication of efforts by the two agencies.

Ultimately, the Center for Verification and Evaluation (CVE) at VA will be abolished and its responsibilities transferred to SBA. But this will not be an immediate hand over of authority. Section 862(a) of this year’s NDAA provides that this transformation will not officially begin until two years after the official enactment of the new law (the “Transfer Date”). Even after the Transfer Date, VA will retain the limited role of verifying the veteran status of the individuals claiming ownership and control of such small business concerns.

Section 862 will also eventually eliminate the ability of veteran owned businesses to “self-certify” their VOSB or SDVOSB status. However, there is a one year “grace period” that will go into effect on the Transfer Date. During this grace period, a self-certified VOSB or SDVOSB will have one year to file an application for certification with SBA. If the application is filed within the one-year period, the veteran owned company can continue to rely on its self-certification for non-VA contracts until the SBA makes a decision on the application. However, the self-certifications of those VOSBs or SDVOSBs that fail to apply within that one year grace period will lose their VOSB or SDVOSB certifications. In addition, after the one-year grace period ends, self-certified SDVOSBs will no longer be eligible for any SDVOSB set-aside and sole source contracts. Finally, the enactment of Section 862 of the NDAA will have no effect on any ongoing certification issues, such as SDVOSB status protests.

While President Trump formally vetoed the 2021 NDAA on December 23, 2020, the House of Representatives has already voted to override the veto (by a vote of 322 to 87) and the Senate is expected to follow suit so that the President’s veto is overridden before the end of the session. In sum, official enactment of the new law is expected before the end of the year.

This is the third in a series of blog posts about the 2021 NDAA. For more information, please contact MWL Partner Peter Fish.