The rule change, which implements a provision in the 2010 Veterans Benefits Act, is the department's latest effort to prevent unqualified firms from winning small business awards.
"VA is committed to doing business with, as well as supporting and protecting, veteran-owned small businesses," Secretary of Veterans Affairs Eric Shinseki said. "Although the verification process may initially be a challenge to some small business owners and to VA, it's a necessary step to eliminate misrepresentation by firms trying to receive contracts that should go to service-disabled and other veteran-owned vendors."
The department maintains a list of qualified small and veteran-owned companies in its VetBiz.gov Vendor Information Pages database. VA contracting officials use the database to set aside contracting opportunities if two or more eligible companies submit fair and reasonable offers. The department also can use the list to award sole-source contracts worth up to $5 million.
Previously, vendors could self-certify the accuracy of the information provided. But now, officials with the Center for Veterans Enterprise must verify the data as part of the VetBiz application process. The rule applies to small businesses claiming to be owned and controlled by veterans, service-disabled veterans or eligible surviving spouses.
Between Dec. 10 and Dec. 11, 2010, VA sent mail and e-mail notices to more than 13,000 companies listed in the database informing them that they must provide certain business documents, including ownership paperwork. The firms have 90 days to submit the information.
Other companies that want to be listed in the database and be considered for future set-aside contracts also will have to submit application packages substantiating their status. VA will prioritize processing of documents for firms in line to receive set-aside contracts, those that already conduct business with the department and those that have filed an application for verification.
Veteran-owned and service-disabled veteran-owned small businesses must recertify their status annually to remain in the program. Any company that misrepresents itself in the database could face debarment from doing business with the federal government for up to five years.
In November 2009, the Government Accountability Office issued a report showing the governmentwide service-disabled, veteran-owned small business contracting program was vulnerable to waste. The watchdog audited 10 firms and found $100 million in contracts had been collected through fraud or abuse of the program.
VA awarded almost 35 percent of its fiscal 2009 contract dollars to small companies, including nearly 20 percent to veteran-owned small firms. In contrast, the government as a whole awarded 3 percent of contract dollars to veteran-owned firms.
The department plans to post additional information at VetBiz.gov in early February informing applicants how to submit their documents electronically. In the meantime, VA's notice to currently listed businesses encourages them to submit their information on CD-ROM.
CORRECTION: An earlier version of this story said there is a $5 million cap on VA set-aside contracts; there is no cap.