Transcript navoba_vetbiz - Legal Meets Practical

RUNNING THE VETBIZ GAUNTLET:
HOW TO GET OUT ALIVE (VERIFIED)
Sarah Schauerte
Legal Meets Practical, LLC
http://www.legalmeetspractical.com
What is the Vets First Contracting Program?
• Created for VOSBs and expanded the ServiceDisabled Veteran contracting program for VA
procurements
• Approved firms are eligible to participate in
VOSB and SDVOSB set-asides issued by VA
• Verification is administered by the Center for
Veterans Enterprise
What does the future hold for VetBiz?
• Intent is to go government-wide (apply to all
federal contracts, not just VA contracts)
– GAO report shows won’t happen soon
– Aug. House bill proposed to take VetBiz Program
from the VA, give to SBA
• When VetBiz Program is “ready,” SBA will take
over
Why Should I Verify?
• You MUST be verified for VA VOSB and
SDVOSB set-asides
• It’s a free self-audit (CVE will tell you what
eligibility requirements you don’t meet)
• Minimizes chance of protest
• It makes you a more attractive teaming
partner for big businesses
• Marketing purposes
VetBiz’s Bad Rap
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Regulations hard to understand
Repeated requests for documents by CVE
Long wait
Denial Rates
But……
If You Prepare, You Won’t Do This:
Preparation Is Rewarded
This is a direct quote from a vet business owner who was
verified on the first try:
“The best tip is to be prepared. Make an entire file - read
it twice and then again and go over it with [your] attorney
who knows this stuff. The operating agreement/by-laws
must be very precise in voting and control. If there are
investors involved as you know they cannot have
control. If I remember correctly the CVE focused on me
not drawing a salary. So I composed a letter explaining
why not drawing a salary was beneficial to
the business. They actually sent me a response saying
that they never received a letter like that. So you gotta fill
all the holes.”
Before You Start
• Preparation is KEY!
– Look at the required documents
– Make a folder
– Think about Letters of Explanation
• Use the resources available to you
– Verification self-assessment tool
– Verification assistance briefs
– Other veterans
Before You Start
• Know the requirements: Your business must
be owned and controlled by a (servicedisabled) veteran
• Ownership is covered in 38 CFR 74.3:
(http://www.law.cornell.edu/cfr/text/38/74.3)
• Control is covered in 38 CFR 74.4:
(http://www.law.cornell.edu/cfr/text/38/74.4)
What Does Veteran-Owned Mean?
An applicant or participant must be at least 51
percent unconditionally and directly owned by
one or more veterans or service-disabled
veterans
What Does Veteran-Controlled Mean?
• Control means both the day-to-day
management and long-term decision-making
authority
• Individuals managing the concern must have
managerial experience of the extent and
complexity needed to run the concern
• Vet must work full-time during normal
working hours
• Vet must have highest officer position
Before You Start
• Know the red flags:
– Does the veteran have outside employment?
– Does a non-veteran contribute resources to the
business?
– Does the veteran have experience in the line of
business?
– Is the business a franchise?
The 10 Big Reasons for Denial
• Problems with corporate documents cover FOUR of the
top ten reasons (more next…)
• Day-to-day operations
• Mgmt. of daily business and full-time devotion during
normal working hours
• Community property
• Unfinished application
• Dependence with other entities
• Control of strategic policy
VetBiz Top Ten Denial Reasons
Denial Reason #1: Bad Drafting
• Bad drafting in corporate documents accounts
for SEVENTY-FIVE PERCENT of denials!
• There are many opportunities in corporate
documents to make mistakes costing you
verification
So what do you do?
Rules to Live By
• Keep your corporate documents simple
– Know what they say
– Avoid thirty-page documents
• Don’t take boilerplate documents off the
Internet
• Triple-check the “problem” sections, including
voting, officers, and interest
A Look at Drafting Problems
Quorum Restrictions (38 CFR 74.4(f))
• Quorum – This is what % of interest is
necessary to conduct company business
• This provision MUST read so no company
action/voting can happen without the vet!
• This is the #1 reason for denial (by a landslide)
A Look at Drafting Problems
Weighted Voting Requirement (38 CFR 74.4(f))
• This is what % of interest is necessary to
approve company action
• For VetBiz purposes, provision will generally
be the same as the quorum provision
• If veteran has 51% interest, a 51% interest
must be necessary to approve company action
A Look at Drafting Problems
Highest Officer Position (38 CFR 74.4(g))
• Veteran must be identified as someone who
manages the company
• Veteran must be the highest-ranked officer
(President, CEO)
A Look at Drafting Problems
Unconditional Ownership (38 CFR 74.3)
• Veteran must own at least 51% of the
business, no strings attached
• Veteran’s interest cannot be involuntarily
terminated
• Veteran must not be restricted in how he
transfers his interest
Strategic Policy/Day-to-Day Operations
• This means supervising the marketing,
production, sales, and administrative functions of
the firm
• Examples of day-to-day operations of the
company include assigning of check signing
authority, the hiring and firing of employees, and
assignment of ownership rights of company
property
• Veteran operating remotely can be deal breaker
Mgmt/Full-Time Requirement
• The vet who manages must devote full-time
during the normal working hours of firms in
the same or similar line of business
• Outside employment can be deal breaker
• If vet has outside employment, must be
explained clearly in a Letter of Explanation
Community Property
• In community property states, a vet’s spouse
automatically has half of what’s his. This
means the spouse has to give up enough to
make sure the vet owns 51% or more.
• Community property states: Arizona,
California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington, and Wisconsin
Dependence With Other Entities
• This is a CONTROL issue
• “…[W]hen [b]usiness relationships exist with
non-Veterans or entities which cause such
dependence that the…business cannot
exercise independent business judgment
without great economic risk
• Include being given resources necessary to
operate, such as employees, equipment, office
and/or warehouse space (leverage)
Remember!
• Denial or verification is fact-specific
• Read the VA’s definition of ownership (38 CFR
74.3) and control (38 CFR 74.4) and
verification assistance briefs to identify any
issues
• Submit detailed Letters of Explanation using
buzzwords (ex, “day-to-day management,”
“long-term decision-making”)
A Crash Course on the Process
Step #1: VA Form 0877
• The Veteran applies to have a company
verified by entering ownership information
into VIP and signs VA Form 0877 electronically
in the VIP registration section.
• Access the registration page here:
https://www.vip.vetbiz.gov/Public/Register/Re
gister.aspx.
• CVE verifies veteran status at this point
Step #2: Enter Business Information
• Make sure this lines up with Sam.gov
information!
• Triple-check for accuracy.
Step #3: Upload Relevant Documents
• Review necessary documents (at:
https://www.vip.vetbiz.gov/Public/Register/D
ocumentList.aspx)
• Clearly label documents to avoid confusion
• Understand where you need to clarify/explain,
and draft Letters of Explanation.
• DO NOT HIT “SUBMIT” UNTIL YOU ARE READY!
Letters of Explanation
• Outside employment
• Resources provided by non-veteran member
• Reason why non-veteran signs contracts/on bank
signature cards
• How non-veteran holding necessary license
doesn’t take control from the veteran
• Reason why veteran not being highest
compensated is good for the business
• Reason why don’t have management agreement
(home-based business)
Step #4: Stand by Your Email
• CVE WILL ask you for additional
documentation
• Clock doesn’t start until an application is
“complete,” and if you fail to complete, CVE
will remove application after 30 days
Step #4 Contd: Application Status
Phases
• Initiation – CVE will verify basic company information. The staff may take
a more in depth look at your company profile. They may also perform
other background checks on your business and/or business owners,
uploaded documents, and make recommendations on your verification
record
• Examination – CVE will validate various attributes of your business, (such
as your company website, or the number of Government contracts you
reported in your business profile, etc.). They may also perform other
background checks on your business and/or business owners, uploaded
documents, and make recommendations before moving your business
profile to the Evaluation phase.
• Evaluation - CVE is reviewing the additions to your Verification record. The
staff may contact you about the status of your business, contacting one of
your business representatives and/or visit your business site in order to
collect further information. At this time an approval/denial determination
will be made regarding your business profile.
And then…..
Step #5: Determination
Now, there are three different ways an initial
application can go:
• Approval/Verification
• Pre-Decision
• Pre-Determination
Step #5: Determination
Approval
• Listing in VetBiz database
• Verification good for two years
• Continuing obligation to report changes to
CVE (changes in ownership, NAICS codes)
Step #5: Determination
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Pre-Determination
Gives businesses the opportunity to fix errors
in their corporate documents (rather than
receive an automatic denial)
These are called “correctable findings”
Business has 48 hours to tell CVE it plans on
making the corrections, then 5 business days
to do so
ONE SHOT DEAL, then denial/approval
Step#5: Determination
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Pre-Decision
This process allows businesses the
opportunity to withdraw their application
instead of receive a denial letter
WITHDRAW. NO incentive to receive denial
Must be done within 48 hours of notice
After withdraw, can immediately reapply (with
roadmap!)
Step #5: Determination
What happens if you’re denied?
Step #5: Determination
• If you’re denied, you have two options: a
request for reconsideration, or wait six
months to reapply
• Request for reconsideration – Fix errors that
resulted in denial and ask to reconsider (must
be done within 30 days). CVE will re-review
the entire application, can take months
• Reapply – Allowed to reapply after six months
CONCLUSION
• You CAN run the VetBiz gauntlet and escape
unscathed.
• Remember – PREPARE, PREPARE, PREPARE!
Questions?
Sarah Schauerte, Esq.
Legal Meets Practical, LLC
[email protected]
(703) 552-3220
http://www.legalmeetspractical.com
(website and blog on veteran-related issues)