RUNNING THE VETBIZ GAUNTLET: - PowerPoint Presentation

Slide1

RUNNING THE VETBIZ GAUNTLET: HOW TO GET OUT ALIVE (VERIFIED)

Sarah Schauerte Legal Meets Practical, LLChttp://www.legalmeetspractical.comSlide2

What is the Vets First Contracting Program?Created for VOSBs and expanded the Service-Disabled Veteran contracting program for VA procurements

Approved firms are eligible to participate in VOSB and SDVOSB set-asides issued by VAVerification is administered by the Center for Veterans EnterpriseSlide3

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 Slide4

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 Slide5

VetBiz’s Bad Rap Regulations hard to understand Repeated requests for documents by CVE Long wait Denial Rates

But…… Slide6

If You Prepare, You Won’t Do This:Slide7

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.” Slide8

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 Slide9

Before You Start Know the requirements: Your business must be owned and controlled by a (service-disabled) 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) Slide10

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 veteransSlide11

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 concernVet must work full-time during normal working hours Vet must have highest officer position Slide12

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? Slide13

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 entitiesControl of strategic policy Slide14

VetBiz Top Ten Denial ReasonsSlide15

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? Slide16

Rules to Live ByKeep 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 interestSlide17

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)Slide18

A Look at Drafting Problems Weighted Voting Requirement (38 CFR 74.4(f)) This is what % of interest is necessary to approve company actionFor 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 actionSlide19

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)Slide20

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 Slide21

Strategic Policy/Day-to-Day Operations This means supervising the marketing, production, sales, and administrative functions of the firmExamples 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

propertyVeteran operating remotely can be deal breakerSlide22

Mgmt/Full-Time RequirementThe vet who manages must devote full-time during the normal working hours of firms in the same or similar line of

businessOutside employment can be deal breakerIf vet has outside employment, must be explained clearly in a Letter of ExplanationSlide23

Community PropertyIn 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 s

tates: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin Slide24

Dependence With Other EntitiesThis 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 riskInclude being given resources necessary to operate, such as employees, equipment, office and/or warehouse space (leverage)Slide25

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”)Slide26

A Crash Course on the ProcessSlide27

Step #1: VA Form 0877The 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/Register.aspx

. CVE verifies veteran status at this pointSlide28

Step #2: Enter Business InformationMake sure this lines up with Sam.gov information! Triple-check for accuracy. Slide29

Step #3: Upload Relevant DocumentsReview necessary documents (at: https://www.vip.vetbiz.gov/Public/Register/DocumentList.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! Slide30

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 businessReason why don’t have management agreement (home-based business) Slide31

Step #4: Stand by Your EmailCVE WILL ask you for additional documentationClock doesn’t start until an application is “complete,” and if you fail to complete, CVE will remove application after 30 days Slide32

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 recordExamination – 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…..Slide33

Step #5: DeterminationNow, there are three different ways an initial application can go: Approval/Verification Pre-Decision

Pre-Determination Slide34

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)Slide35

Step #5: Determination 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/approvalSlide36

Step#5: Determination Pre-Decision This process allows businesses the opportunity to withdraw their application instead of receive a denial letter WITHDRAW. NO incentive to receive denialMust be done within 48 hours of noticeAfter withdraw, can immediately reapply (with roadmap!) Slide37

Step #5: Determination What happens if you’re denied? Slide38

Step #5: DeterminationIf 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 Slide39

CONCLUSION You CAN run the VetBiz gauntlet and escape unscathed. Remember – PREPARE, PREPARE, PREPARE! Slide40

Questions?Sarah Schauerte, Esq. Legal Meets Practical, LLC scs@legalmeetspractical.com

(703) 552-3220 http://www.legalmeetspractical.com (website and blog on veteran-related issues)