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On February 7, 2022, the Small Business Administration’s (SBA) changes to the “surviving spouse” provision in its regulations on Service Disabled Veteran Owned Small Business (SDVOSB) status became effective.  SBA had issued a direct final rule covering this change, 86 FR 61670, on November 8, 2021.

In brief, SBA’s now provides for a 3-year window for a surviving spouse to maintain ownership and control of a SDVOSB in cases where the deceased veteran’s service-connected disability was rated as less than 100 percent disabling.  Prior to the change, the veteran must have died as a result of their disability or been 100 percent service disabled in order for the entity to continue to qualify as owned and controlled by a service-disabled veteran following the death of the service-disabled veteran.

The surviving spouse provision in 13 C.F.R. § 125.12(i) applies in instances where the death or disability of a service-disabled veteran causes the concern to be less than 51 percent owned by one or more service-disabled veterans.  The intent is to allow a concern to continue to qualify for SDVOSB status for a limited timeframe through the veteran’s surviving spouse so long as the surviving spouse acquires the veteran’s ownership interest.

The SBA’s regulations now provide the following two time periods dependent on the veteran’s death and service-connected disability rating:

10 Years after the death of the veteran where the veteran had a Service-connected disability rated as 100 percent disabling or who died as a result of a service-connected disability.

3 Years after the death of the veteran where the veteran had a Service-connected disability rated less than 100 percent disabling.

The change implements Section 876 of National Defense Authorization Act for Fiscal Year 2020, which amended treatment of surviving spouses with regard to the program’s ownership requirements – specifically through the creation of two eligibility time periods for the surviving spouse of a veteran.  The change prevents unfortunate and unforeseen problems in instances where a less-than 100 percent disabled veteran dies from circumstances unrelated to their disability.

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Photo of Olivia Lynch Olivia Lynch

Olivia L. Lynch is a partner in Crowell & Moring’s Government Contracts Group in the Washington, D.C. office.

General Government Contracts Counseling. Olivia advises government contractors on navigating the procurement process, compliance and ethics, commercial item contracting, accessibility, supply chain assurance, and…

Olivia L. Lynch is a partner in Crowell & Moring’s Government Contracts Group in the Washington, D.C. office.

General Government Contracts Counseling. Olivia advises government contractors on navigating the procurement process, compliance and ethics, commercial item contracting, accessibility, supply chain assurance, and various aspects of state and local procurement law.

Photo of John E. McCarthy Jr. John E. McCarthy Jr.

John E. McCarthy, Jr. is a partner in the Washington, D.C. office of Crowell & Moring and member of the firm’s Government Contracts Group. John has spent more than thirty years litigating all forms of government contracts cases for both large and small…

John E. McCarthy, Jr. is a partner in the Washington, D.C. office of Crowell & Moring and member of the firm’s Government Contracts Group. John has spent more than thirty years litigating all forms of government contracts cases for both large and small government contractors, with a particular emphasis on bid protests. Because of John’s strong engineering background, he has particular experience in technology related issues, including litigation regarding complex technology and data rights, patent and other intellectual property issues.

Photo of Zachary Schroeder Zachary Schroeder

Zachary Schroeder is an associate in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Zach represents contractors in both litigation and counseling matters. His practice focuses on representing contractors in bid protests before the Government Accountability Office…

Zachary Schroeder is an associate in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Zach represents contractors in both litigation and counseling matters. His practice focuses on representing contractors in bid protests before the Government Accountability Office (GAO), the U.S. Court of Federal Claims, and the Federal Aviation Administration’s Office of Dispute Resolution for Acquisition (ODRA). His practice also includes federal regulatory and ethics compliance, as well as various aspects of state and local procurement law, including representing contractors in size protests and affiliation matters. In the transactional context, Zach has performed government contracts diligence for government contractors in a range of industries.