The VA has proposed expanding its definition of the “good character” required to own or control an SDVOSB or VOSB.
The VA’s proposed rule would exclude many people convicted of felonies (including felonies unrelated to business integrity), which may raise questions about the rule’s fairness. And I have to wonder–is the VA’s proposal consistent with the Congressional directive requiring the VA to use the SBA’s SDVOSB eligibility rules?
The VA recently issued a proposed rule to eliminate its SDVOSB and VOSB ownership and control rules. Instead, as directed by Congress in the 2017 National Defense Authorization Act, the VA would defer to the SBA’s regulatory criteria when it comes to small business size, ownership, and control.
The VA’s proposed rule doesn’t seem to eliminate every SDVOSB and VOSB eligibility requirement. Instead, when it comes to two unique VA requirements, regarding “good character” and federal financial obligations, the VA’s proposed rule would actually expand the list of veterans ineligible for VA SDVOSB/VOSB verification, even though many of those same veterans would be able to self-certify their SDVOSBs under the SBA’s rules. Today, I want to focus on the good character piece of the proposal.
Under current VA law, SDVOSB and VOSB owners must have good character. The regulation, 38 C.F.R. 74.2(b), says:
(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.
Clearly, the existing rule prohibits debarred or suspended individuals from owning or controlling verified SDVOSBs and VOSBs. Fair enough. The existing rule doesn’t provide any additional guidance on what “good character” means.
The VA’s proposed rule, though, would significantly expand the current definition of good character. Here’s what the VA proposes:
(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 C.F.R. 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 § 74.22 of this part.
It’s worth noting that the VA’s proposal goes beyond the FAR’s responsibility-related certifications. FAR 52.209-5 (Certification Regarding Responsibility Matters) and FAR 52.209-7 (Information Regarding Responsibility Matters) don’t require a contractor’s “principal” to disclose all crimes, but rather those directly related to government contracts, or those that are directly relevant to business integrity–such as embezzlement, theft, forgery, bribery, and tax evasion. In contrast, the VA’s proposal would seem to apply to all felonies, regardless of the nature or circumstances.
Steven Koprince has been a regular contributor to VLM since 2014.