New programs, systems, and/or requirements required of small businesses to sell goods and services to the government pop up frequently and randomly. The onus of discovering each new requirement can be overwhelming, in both time and money, any small business especially one with limited staffing.
The 2016 award for the most onerous new hoop to jump through is clearly won by the VOSB & SDVOSB Verification Program. I recently worked with a company founded 17 years ago by a career Naval Officer who served valiantly and with distinction. His organization has 32 employees and makes a modest annual profit. The retired Naval Officer has been and continues to be the only owner. Only recently due to health issues he has begun to delegate the day to day operations to one of his children. Clearly, with both his service and his small revenue, his organization should be the poster child for the VOSB program. We began the process to become certified with the VA with gusto figuring it would be easy. We could not have been more wrong. No less than 40 working hours were spent during the initial data entry and follow-up information fulfilment request before a final management decision was made to no longer continue with the process. While the government’s ultimate goal of this new verification process is to prevent fraud while making it easier for more VOSBs to be verified, I think the exact opposite has happened. To date only 190 business have been certified and listed on the VETBIZ page. This low number of “successful” applications should be an indication to the Department of Veteran Affairs of the difficultly to meet their requirements for verification.
In my opinion there are 3 major difficulties that are the biggest road blocks for the average small business to undertake and succeed:
- While the program is to certify “Veteran Owned Businesses” the Department of Veteran Affairs is overreaching by demanding that the veteran not only be the 51% owner but require the veteran to control the strategic policy setting AND the day-to-day management of business operations. Truly the name of the certification should be “Veteran Owned and Operated”. The VA defines “Day-to-Day management as supervising the executive team, formulating sound policies and setting strategic direction” and “Day-to-day operations as the marketing, production, sales, and administrative functions of the firm.” It doesn’t seem unreasonable that a veteran could operate in the management role and delegate the daily operations. The owner functioning in the management role but delegating the operations role does not make the business any less of a Veteran Owned company.
- The amount of documentation required for this certification goes above and beyond any other application process for entry into a government program. Understandably the VA is required to see the businesses Operating Agreement, Articles of Incorporation and Business License. However, the requirement to provide 3 full years of personal tax records including all schedules seemed incredibly invasive. The fact that the VA wants to know each pension, real estate holding or investment goes beyond the data necessary to make the determination if the organization is owned by a veteran. The government has no justification to see a personal joint tax return. What exactly about real estate holdings or tax deductions excludes the veteran from having the distinction or ability to function as a VOSB? One would think serving their country and owning the business would be enough to prove their status.
- Lastly and most unbelievably the VOSB distinction is only good for 1 year. Each year the process of providing all the requested documentation is required. It goes beyond the usual renewal process. Most certification or verifications average anywhere from 3 to 10 years before renewals are due. The VA does not allow renewals but instead a full new application is expected annually. That annual requirement would be enough of a burden to guarantee a deterrent for many organizations to enroll or continue in the program.
In conclusion the new VOSB and SDVOSB Verification Certification is a costly and time consuming program that is crippling our Veteran Owned Small Businesses. The entire program needs to be revamped on the government side. The application process and renewal program needs to more succinctly resemble other certification programs for the industry. Until this process is overhauled, legitimate businesses will be unable to become certified and ultimately lose contracts potentially leading to financial failure as a company.