SDVOSB Contracts: The Verification Misconception – and Two Practical Tips

November 25, 2019
Category: Certifications

In my years as a government contracts attorney, I represented dozens of SDVOSBs and met plenty more when I spoke at events like the National Veterans Small Business Engagement. I found that many veterans have some important misconceptions about how the federal government awards SDVOSB contracts.

That’s not the veterans’ fault — the SDVOSB programs (yes, that’s programs, plural) are complex, and there is a lot of misinformation out there about how they work. So, in this article, I want to debunk one of the most pervasive misunderstandings about SDVOSB contracts and give you some practical tips about how you could use this knowledge to benefit your SDVOSB.

Here’s the misconception:

“To be awarded a federal SDVOSB contract, my company must be verified by the VA.”

As I mentioned above, Uncle Sam runs two SDVOSB programs. Only one of these programs requires a formal verification. 

By law, the VA can only award SDVOSB contracts (both set-aside and sole source) to companies that the VA has certified as meeting all the SDVOSB eligibility requirements. The VA calls this process “verification.” Thanks in part to the VA’s aggressive outreach about its program, the verification process has become well-known in the SDVOSB community. Perhaps too well-known, because veterans sometimes think that the verification applies government-wide.  

Unlike the VA, most federal agencies fall under the FAR’s SDVOSB program. And unlike the VA’s rules, the FAR allows companies to self-certify their eligibility for SDVOSB contracts. But even though most agencies follow the FAR’s self-certification process, veterans commonly believe that they must obtain a formal VA verification to be awarded, say, a DoD SDVOSB set-aside. That’s understandable, but incorrect — at least under the current law.

There is a movement afoot in Congress to broaden SDVOSB verification government-wide, but move the verification process under the SBA’s jurisdiction. This bill, called the “VA-SBA Act,” has gotten some traction, though it’s unclear as of this writing whether it will become law. Even if the bill is adopted, a government-wide certification mandate wouldn’t kick in for at least a year, meaning that self-certification will continue to be viable for some time, though perhaps not forever. 

Practical Tip #1: Get Verified Anyway

I just got through explaining that you don’t need a VA verification to pursue non-VA SDVOSB contracts. So why on Earth would I suggest that you consider getting one, even if you’re not planning to do business with the VA?  

Here’s why:

  • Other People Are Confused. Sure, you know that you don’t need verification to pursue SDVOSB contracts at most non-VA agencies. But that doesn’t mean that your potential subcontractors, suppliers, mentors, or even Contracting Officers are on the same page. (Yes, I’ve seen non-VA Contracting Officers try to mandate verification for SDVOSB set-asides, something I strongly believe is not legally permitted). Getting verified means that you don’t have to have any awkward conversations with potential partners or customers about how your self-certification really, truly is fine.
  • Convey Legitimacy. Even those who understand that SDVOSB self-certification is okay outside the VA may not necessarily like it. (And, perhaps, with good reason: a GAO report concluded that self-certification makes the FAR’s SDVOSB program “vulnerable to fraud and abuse.”) A verification helps put partners and contracting officials at ease by showing that the company has already gone under the eligibility microscope. Marketing yourself as a “verified” SDVOSB will help convey a sense of legitimacy to your status. 
  • Better Now Than Later. I’ve never had an SDVOSB client tell me that the VA verification process is fun. The truth is, getting verified takes some time and effort. But if the VA notices an eligibility problem – which is quite common, given the complex eligibility requirements – the VA ordinarily allows the applicant to withdraw the application, fix the problem and resubmit the application (or, if the problem is relatively minor, fix the problem without even withdrawing the initial application). You lose some time, and perhaps a few hairs you pull out in frustration, but that’s it. In contrast, self-certification doesn’t mean that the government will never evaluate your SDVOSB eligibility. If you’re awarded a non-VA SDVOSB contract, your competitors can file SDVOSB status protests. Then, the SBA swoops in to request the same sort of documents that you would have supplied to the VA. If that happens, and you’re out of compliance with even one tiny piece of the rules, you lose the contract – no second chances. 
  • Reduce Status Protests. Let’s say you win a non-VA SDVOSB set-aside contract, and your competitors are thinking about whether to challenge your eligibility. In my experience, a competitor is much more likely to file a protest if you’re not verified. A verification tells a potential protester that the protest probably will fail unless the VA got it wrong, or something has changed since you were verified. On the other hand, a self-certification says, “Hey, maybe nobody ever looked at these guys’ paperwork… let’s give it a shot.” Trust me – as an attorney who made recommendations about whether to file SDVOSB status protests, my first stop was always the VA verification database.
  • Get Ahead of the Curve. I don’t know if the VA-SBA Act will become law, but I think it is very likely that a mandatory government-wide SDVOSB certification requirement will take hold in the next few years. In fact, with the SBA’s proposal of a government-wide Woman-Owned Small Business certification, non-VA SDVOSB contracts will soon be the only major socioeconomic contracts (including 8(a), SDVOSB, HUBZone, and WOSB) for which self-certification is an option. If I were an SDVOSB, I’d rather get verified now – and probably grandfathered into a new government-wide system – than deal with being part of a massive group of new applicants if (or more likely, when) a mandatory certification is adopted.

Practical Tip #2: If you don’t get verified, do an intense internal “self-verification.”

So you’ve decided that VA verification isn’t for you, at least not now. Fair enough, but if you’re going to rely on self-certification, you ought to get it as bulletproof as possible.

I know I sound like a broken record (or malfunctioning digital streaming service, to be more current), but the SDVOSB eligibility requirements are complex. It’s not enough that service-disabled veterans own at least 51% of the company – SDVs must also be in unconditional control. The “unconditional” part can be especially confusing, and in my experience, many self-certified SDVOSBs find themselves in hot water when their paperwork is challenged in status protests.

If you’re going to self-certify, don’t just assume that because you’re a service-disabled veteran, your company automatically qualifies. In my legal career, I don’t know how many times I wished I could hop in the DeLorean and go back in time to advise my clients to change their paperwork or shore up some other aspect of their eligibility. Once you submit a proposal, your SDVOSB eligibility for that contract is evaluated as of the proposal date. Sure, you can change your paperwork if a status protest reveals a flaw – but the changes will apply moving forward, not to the contract in question.

So, if you decide to bypass VA verification, put yourself in the SBA’s shoes and do an intense self-analysis. Evaluate your company against the eligibility criteria in 13 C.F.R. Part 125, focusing most closely on the ownership and control requirements in 13 C.F.R. 125.12 and 13 C.F.R. 125.13, respectively. Feel free to take this with a grain of salt, given my legal background, but given the complexities involved, you should strongly consider engaging some outside assistance from a government contracts lawyer or another expert.  

The Bottom Line

SDVOSB contracts can be incredible opportunities, but they come with a lot of complexities and red tape. No wonder that, with two separate SDVOSB programs on the books, there is a lot of confusion about verification requirements.

If you’re bidding VA work, you need a formal VA SDVOSB verification. If not, you probably don’t – but you might want to get one anyway.

Steven Koprince

Steven J. Koprince is the founder and former Managing Partner of Koprince Law LLC. Steven retired from the active practice of law in May 2019, but he continues to be involved in government contracting as a teacher and writer. Before his retirement, Steven’s legal practice focused exclusively on providing comprehensive legal services to federal government contractors. He is the author of The Small-Business Guide to Government Contracts (AMACOM Books, 2012) and founded the blog SmallGovCon (smallgovcon.com), where he has written more than 1,100 posts on government contracting legal issues. Steven has been quoted in several national news outlets, has appeared on numerous radio programs and podcasts, and has spoken to dozens of audiences across the country on government contracting matters.

Steven Koprince