Titles of Regulations: 7VAC10-21. Regulations to Govern the Certification of Small, Women-, and Minority-Owned Businesses (repealing 7VAC10-21-10 through 7VAC10-21-610).

7VAC13-20. Regulations to Govern the Certification of Small, Women-Owned, and Minority-Owned Businesses (adding 7VAC13-20-10 through 7VAC13-20-230).

Statutory Authority: § 2.2-1606 of the Code of Virginia.

Effective Date: August 8, 2016.

Agency Contact: Reba O'Connor, Regulatory Coordinator, Department of Small Business and Supplier Diversity, 101 North 14th Street, 11th Floor, Richmond, VA 23219, telephone (804) 593-2005, or email reba.oconnor@sbsd.virginia.gov.

Background:

Chapter 482 of the 2013 Acts of Assembly abolished the Department of Minority Business Enterprise and the Department of Business Assistance effective January 1, 2014, and created the Department of Small Business and Supplier Diversity. The act transferred the regulations adopted by the Director of the Department of Minority Business Enterprise to the Department of Small Business and Supplier Diversity and provided that regulations in effect as of July 1, 2013, and that pertain to the subject of the act remain in full force and effect until altered, amended, or rescinded by the Director of the Department of Small Business and Supplier Diversity (7VAC13).

Through this action, the Department of Small Business and Supplier Diversity is repealing 7VAC10-21 adopted by the Department of Minority Business Enterprise and adopting 7VAC13-20, Regulations to Govern the Certification of Small, Women-Owned, and Minority-Owned Businesses.

Summary:

This regulatory action (i) repeals Regulations to Govern the Certification of Small, Women- and Minority-Owned Businesses (7VAC10-21) and (ii) creates a new regulation with provisions (a) establishing minimum requirements for the certification of small, women-owned, and minority-owned businesses pursuant to Chapter 16.1 (§ 2.2-1603 et seq.) of Title 2.2 of the Code of Virginia and (b) providing a process for evaluating local, state, private sector, and federal certification programs that meet those requirements.

CHAPTER 20
REGULATIONS TO GOVERN THE CERTIFICATION OF SMALL, WOMEN-OWNED, AND MINORITY-OWNED BUSINESSES

7VAC13-20-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Affiliate" means a business that is connected in some way, whether financially or legally, to a business that has applied to the department for certification as a small, women-owned, or minority-owned business (see the federal Small Business Administration regulations, 13 CFR Part 121). The following requirements, conditions, and factors are applicable:

1. Businesses are affiliates of each other when, either directly or indirectly:

a. One business controls or has the power to control the other;

b. A third party controls or has the power to control both;

c. An identity of interest between or among parties exists such that affiliation may be found; or

d. One business or company has ownership, direct or indirect, of 10% or more of the voting stock of another business. (See the Investment Company Act, 15 USC § 80a-2.)

2. In determining whether affiliation exists, it is necessary to consider all appropriate factors, including common ownership, common management, and contractual relationships. Affiliates must be considered together in determining whether a concern meets small business size criteria and the statutory cap on the participation of firms in the small, women-owned, or minority-owned business certification program.

"Agent" means a person that (i) has the authority to act on behalf of a principal in transactions with third parties; (ii) is subject to the principal's control; and (iii) does not have title to the principal's property.

"Appeal" means a written request by an applicant to reconsider a denial or revocation of certification.

"Applicant" means any business that applies to the department for certification or recertification as a small, women-owned, or minority-owned business.

"Application" means the documents the department requires the applicant to submit in the course of certification or recertification, including the application form the applicant submits under penalty of perjury, which may include any additional documentation that the department requests that the applicant submit, and any information or report that the department generates during or upon completion of an onsite visit.

"Broker" means a person who acts as an intermediary between a buyer and seller.

"Business" means any legal entity organized in the United States or a commonwealth or territory of the United States that regularly engages in lawful commercial transactions for profit.

"Certification" means the same as that term is defined in § 2.2-1604 of the Code of Virginia.

"Certified" means the status accorded to an applicant upon the department's determination that the applicant has satisfied the requirements for certification as a small, women-owned, or minority-owned business.

"Control" means the power to direct the operation and management of a business as evidenced through governance documents and actual day-to-day operation.

"Corporation" means a legal entity that is incorporated under the law of a state, the United States, or a commonwealth or territory of the United States.

"Day" means any day except Saturday, Sunday, and legal state holidays unless otherwise noted.

"Dealer" means a person or business that has the exclusive or nonexclusive authority to sell specified goods or services on behalf of another business.

"Department" means the Department of Small Business and Supplier Diversity.

"Director" means the Director of the Department of Small Business and Supplier Diversity or his designee.

"Expiration" means the date on which the director specifies that a certified business will cease to be certified.

"Franchise" means a contractual arrangement characterized by the authorization granted to someone to sell or distribute a company's goods or services in a certain area.

"Franchisee" means a business or group of businesses established or operated under a franchise agreement.

"Individual" means a natural person.

"Joint venture" means a formal association of two or more persons or businesses for the purpose of carrying out a time-limited, single business enterprise for profit, in which the associated persons or businesses combine their property, capital, efforts, skills, or knowledge, and in which the associated persons or businesses exercise control and management and share in profits and losses in proportion to their contribution to the business enterprise.

"Limited liability company" means a specific type of legal entity that is in compliance with the applicable requirements of the law of its state of formation.

"Manufacturer's representative" means an agent whose principal is a manufacturer or group of manufacturers.

"Minority individual" means the same as that term is defined in § 2.2-1604 of the Code of Virginia.

"Onsite visit" means a visit by department representatives to the applicant's physical place of business to verify the applicant's representations submitted to the department in the course of certification or recertification.

"Ownership" means an equity, a partnership, or a membership interest in a business.

"Partnership" means an association of two or more persons to carry on as co-owners a business for profit.

"Person" means a natural person or a business.

"Principal" means a person who contracts with another to act on the contracting person's behalf subject to that person's control.

"Principal place of business" means the physical business location where the business maintains its headquarters, where the business's books and records are kept, and where the natural persons who direct, control, and manage the business's day-to-day operations are located. If the offices from which management is directed and where the business records are kept are in different locations, the department will determine the principal place of business.

"Pro forma" means as a matter of form or assumed information.

"Recertification" means the process by which a business applies to the department for renewed or continued status as a certified business.

"Record" means the materials submitted in support of an application for certification or recertification, which may include the application, supporting documentation, and additional materials obtained by the department in the course of the application, certification, or recertification process.

"Sole proprietorship" means a business whose assets are wholly owned by a single person.

"Virginia-based business" means a business that has its principal place of business in Virginia.

7VAC13-20-20. Confidentiality.

A. The department shall take necessary steps to ensure the confidentiality of documents submitted in support of an application for certification that are not public records within the definition of the Virginia Freedom of Information Act (§ 2.2-3700 et seq. of the Code of Virginia).

B. Any financial records of a business, including balance sheets and financial statements, that are not generally available to the public through regulatory disclosure or otherwise, or trade secrets as defined in the Uniform Trade Secrets Act (§ 59.1-336 et seq. of the Code of Virginia), provided to the department as part of any application for certification or recertification as a small, women-owned or minority-owned business are excluded from the provisions of the Virginia Freedom of Information Act pursuant to § 2.2-3705.6 of the Code of Virginia, but may be disclosed by the department in its discretion where such disclosure is not prohibited by law.

C. In order for such financial records or trade secrets to be excluded from the Virginia Freedom of Information Act, the business shall (i) invoke such exclusion upon submission of data or other materials for which protection from disclosure is sought; (ii) identify the data or other materials for which protection is sought; and (iii) state the reason why protection is necessary.

7VAC13-20-30. False or misleading information.

A. Any applicant that knowingly provides false or misleading information on an application for certification or recertification or in supporting documentation shall be denied certification and shall not be permitted to reapply for certification.

B. In addition, the applicant may be referred to the Commonwealth's Attorney for the City of Richmond for possible criminal prosecution for a misdemeanor or a felony under § 18.2-213.1 or 18.2-498.3 of the Code of Virginia.

7VAC13-20-40. Eligible small business.

In general, a business may be certified as a small business if it meets the definition of small business provided in § 2.2-1604 of the Code of Virginia.

7VAC13-20-50. Eligible micro business.

A business may be certified as a micro business if it is first certified as a small business pursuant to 7VAC13-20-40 and, together with its affiliates, has 25 or fewer employees and average annual gross receipts of $3 million or less averaged over the previous three years.

7VAC13-20-60. Eligible women-owned business.

In general, a business may be certified as a women-owned business if it meets the definition of women-owned business as provided in § 2.2-1604 of the Code of Virginia.

7VAC13-20-70. Eligible minority-owned business.

A. In general, a business may be certified as a minority-owned business if:

1. It meets the definition of minority-owned business provided in § 2.2-1604 of the Code of Virginia; and

2. The minority owner is regarded as such by the community of which the person claims to be a part.

B. Being born in a country does not, by itself, define an individual as a minority individual pursuant to § 2.2-1604 of the Code of Virginia. In making the determination whether a person is a minority individual, the department may be required to determine whether the person is regarded as a minority individual by the community of which he claims to be a part. In making this determination, the department may consider whether:

1. The person regularly describes himself, in printed materials and orally, as a member of the community;

2. Whether the person historically has held himself out as a member of the community;

3. Whether the individual is a member of and actively participates in business, educational, charitable, civic, or community organizations, or activities made up of or traditionally identified with or attended by members of the community; and

4. Whether other members of the community describe the person as a fellow member of the community.

C. The department may request such additional information as it may reasonably need to support an individual's claim that he is a minority individual. In determining whether a minority individual is regarded as such by the community, the department shall consider all the facts in the record viewed as a whole.

7VAC13-20-80. Eligible out-of-state business enterprise.

The department may certify a non-Virginia-based business if:

1. It meets the applicable eligibility standards for certification as a small, women-owned, or minority-owned business; and

2. The state in which the business has its principal place of business does not deny a like certification to a Virginia-based small, women-owned, or minority-owned business or provide a preference to small, women-owned, or minority-owned firms that is not available to Virginia-based businesses.

7VAC13-20-90. General provisions.

A. In determining ownership and control, the department will consider all the facts in the record, viewed as a whole, as they appear at the time of the application.

B. An eligible applicant will not be refused certification based solely on historical information indicating a lack of 51% ownership or control of the applicant by individuals in the case of a small business or by a woman or women or by a minority individual or individuals at some time in the past if the applicant meets the ownership and control standards at the time of application. A business will not be certified, however, if it appears from the record that the business was organized or its ownership structure or control changed for the purpose of qualifying for certification as a small, women-owned, or minority-owned business.

C. An eligible applicant will not be refused certification solely on the basis that it is a newly formed business.

7VAC13-20-100. Ownership.

A. The ownership by women, minority, or individual owners (in the case of a small business) must be real, substantial, and continuing going beyond the pro forma ownership of the business.

B. Records of the applicant's business arrangements must demonstrate that the women, minority, or individual owners who the applicant claims to have ownership interests in the applicant's business share in all risks and profits in proportion to their ownership interests.

C. Women, minority, or individual owners who the applicant claims to have an ownership interest in the applicant's business as evidenced by securities must hold the securities directly or in a trust as described in subsection I of this section.

D. Contribution of capital or expertise.

1. Contribution of capital, expertise, or both by women, minority, or individual owners to acquire their ownership interest shall be real and substantial and be in proportion to the interests acquired.

2. Insufficient contributions shall include promises to contribute capital or expertise in the future; a note or notes payable to the business or its owners who are not themselves women, minority, or individual owners; or the mere participation as an employee.

E. In a sole proprietorship, the woman, minority, or individual applying for certification must own 100% of the business and its assets.

F. Corporations.

1. In a corporate form of organization, women, minority, or individual owners must own at least 51% of each class of voting stock outstanding and 51% of the aggregate of all stock outstanding.

2. Any voting agreements among the shareholders must not dilute the beneficial ownership, the rights, or the influence of the women, minority, or individual owners of the stock or classes of stock of the corporation.

3. Women, minority, or individual owners shall possess the right to all customary incidents of ownership (e.g., ability to transfer stock, title possession, enter binding agreements, etc.).

G. Partnerships.

1. General partnership. In a general partnership, women, minority, or individual owners must own at least 51% of the partnership interests.

2. Limited partnership.

a. In a limited partnership, the women, minority, or individual owners who are general partners must own at least 51% of the general partnership interest and exert at least 51% of the control among general partners. The women, minority, or individual owners who are general partners must receive at least 51% of the profits and benefits, including tax credits, deductions, and postponements distributed or allocable to the general partner.

b. In addition, the women, minority, or individual owners who are limited partners must own at least 51% of the limited partnership interests and receive at least 51% of the profits and benefits, including tax credits, deductions, and postponements distributed or allocable to the limited partners.

H. Limited liability companies.

1. In a limited liability company, women, minority, or individual owners must own at least 51% of membership interests and have at least 51% of the management and control among the members.

2. The women, minority, or individual owners must also participate in all risks and profits of the organization at a rate commensurate with their membership interests.

I. Trusts. In order to be counted as owned by women, minority, or individual owners, securities held in a trust must meet the following requirements, as applicable:

1. Irrevocable trusts. The beneficial owner of securities held in an irrevocable trust is a woman, a minority individual, or an individual who is not a minor and all the trustees are women, minority individuals, or individuals provided that a financial institution may act as trustee.

2. Revocable trusts. The beneficial owner of securities held in a revocable trust is a woman, a minority individual, or an individual who is not a minor; all the grantors are women, minority individuals, or individuals; and all the trustees are women, minority individuals, or individuals provided that a financial institution may act as trustee.

3. Employee stock ownership plans (ESOPs). Securities owned by women, minority individuals, or individuals who are participants in an employee stock ownership plan qualified under 26 USC § 401, Internal Revenue Code, 1986, as amended, and held in a trust where all or at least 51% or more of the trustees are women, minority individuals, or individuals provided that a financial institution may act as trustee.

4. Other requirements. Businesses whose securities are owned in whole or part in a trust are not thereby exempt from the other requirements of this chapter.

J. Joint venture. In a joint venture, the women, minority, or individual owners must own at least 51% of the business venture, exert at least 51% of the control of the venture, and have made at least 51% of the total investment.

7VAC13-20-110. Control.

The applicant must show evidence that the women, minority, or individual owners have control of the business. The following factors will be examined in determining who controls an applicant's business:

1. Governance.

a. The organizational and governing documents of an applicant (e.g., limited liability company operating agreements, partnership agreements, or articles of incorporation and bylaws) must not contain any provision that restricts the ability of the women, minority, or individual owners from exercising managerial control and operational authority of the business.

b. In reviewing governance documents and issues, special attention shall be given to:

(1) The composition of the business's governing body (e.g., board of directors or management committee);

(2) The functioning of the governing body;

(3) The content of shareholder's agreements, bylaws, or state incorporation statutes, and the extent to which such agreements, bylaws, or statutes affect the ability of the women, minority, or individual owners to direct the management and policy of the business; and

(4) In a business seeking certification as a women-owned or minority-owned business, a woman or a minority owner must hold the highest executive officer position in the company by whatever title.

2. Operation and management.

a. The women, minority, or individual owners must possess the power to direct or cause the direction of the management and policies of the business and to make the day-to-day decisions as well as major decisions on matters of management, policy, and operations. The business must not be subject to any formal or informal restrictions that limit the customary discretion of the women, minority, or individual business owners.

b. A previous or continuing employer-employee relationship between or among present owners shall be carefully reviewed to ensure that the woman, minority, or individual employee-owner has management responsibilities and capabilities.

c. In the event that the actual management of the business is contracted or carried out by individuals other than the women, minority, or individual owners, those persons who have the ultimate power and expertise to hire and fire the managers can for this purpose be considered as controlling the business.

d. The applicants must show evidence that the women, minority, or individual owners have operational authority and managerial control of the applicant.

(1) Operational authority. For purposes of this section, "operational authority" means the extent to which the women, minority, or individual owners actually operate the day-to-day business. Assessments of operational control will rest upon the peculiarities of the industry of which the business is a part. In order to ascertain the level of operational control of the women, minority, or individual owners, the following will be considered:

(a) Experience. The women, minority, or individual owners shall have education, demonstrable working knowledge, or experience in the area of specialty or industry claimed in the certification application.

(b) Responsibility for decision making. The women, minority, or individual owners shall be able to demonstrate a role in making basic decisions pertaining to the daily operation of the business.

(c) Technical competence. The women, minority, or individual owners shall have technical competence in the industry or specialty of the applicant business or a working knowledge of the technical requirements of the business sufficient enough to critically evaluate the work of subordinates.

(2) Managerial control. For purposes of this section, "managerial control" is the demonstrated ability to make independent and unilateral business decisions necessary to guide the future and destiny of the business. Managerial control may be demonstrated in a number of ways. For women, minority, or individual owners to demonstrate the extent of their managerial control, the department will consider the following (not intended to be all inclusive) areas of routine business activity:

(a) The women, minority, or individual owners must produce documents that clearly indicate control of basic business functions (e.g., authority to sign payroll checks and letters of credit, signature responsibility for insurance or bonds, authority to negotiate and execute contracts and financial services).

(b) Agreements for support services that do not impair the woman, minority, or individual owner's control of the company are permitted as long as the owner's power to manage the company is not restricted or impaired as determined by the department in its sole administrative discretion.

3. Independence.

a. Performance.

(1) The woman, minority, or individual owner's expertise must be indispensable to the business's potential success.

(2) The woman, minority, or individual owner shall have the ability to perform in the applicant's area of specialty or expertise without substantial reliance upon finances and resources (e.g., equipment, automobiles, facilities, etc.) of businesses that are not eligible for certification.

b. Test of independence. Recognition of the applicant as a separate and distinct entity by governmental taxing authorities shall not be a sole determinant of any applicant's assertions of independence. Test criteria include the following:

(1) Applicant's use of employees, equipment, expertise, facilities, etc., "shared" with or obtained from a company not eligible for certification.

(2) Financial transactions, such as accounts receivable, accounts payable, billing, order processing, are performed by a business that is not eligible for certification.

(3) Applicant's relationship with a business that is not eligible for certification that involves any long-term contract or lease agreements.

(4) Applicant's status as a party to any contract or lease agreement on terms at variance with industry standards or prudent business practices.

(5) Interlocking ownership of the applicant and a business not eligible for certification in the same industry.

(6) Common directors, officers, or members between the applicant and a business not eligible for certification.

(7) Receipt by the business not eligible for certification of financial benefits (i.e., profits, wages, etc.) that are not commensurate with the duties performed.

(8) Dependence on licenses, permits, insurance, or all three held by a business not eligible for certification in order to operate; failure to possess all legal requirements necessary to legally conduct business.

c. An agent, broker, dealer, or manufacturer's representative, unless it is the standard for the industry, generally does not qualify for certification.

d. A business that adds no material value or does not perform a commercially useful function in the provision of the products or services being supplied; has no ownership, financial responsibility, or legal liability; or does not possess or handle the item being procured with its own employees, equipment, or facilities generally does not qualify for certification, unless the business structure is the standard in the industry.

7VAC13-20-120. Certifying franchises.

A business operating under a franchise or license agreement may be certified if it meets the eligibility requirements. In addition:

1. The franchise agreement between the franchisor and the franchisee seeking certification must not contain any provision that unreasonably restricts the ability of the women, minority, or individual owners from exercising managerial control and operational authority of the business.

2. In reviewing the franchise agreement, special attention shall be given to circumstances that, for certification purposes, shall be considered as restricting control and authority of the women, minority, or individual owners. These include:

a. Termination of the franchise agreement by the franchisor without cause;

b. Lack of ownership of receivables by the franchisee;

c. Exclusive ownership of account receivables, contracts, or both by the franchisor;

d. Restrictions on the sale of the business below market value;

e. Terms and conditions not related to the brand or systems that can be altered without franchisee's notification, approval, or both;

f. Contracts are prepared and approved by the franchisor;

g. Management decisions cannot be made independently by the franchisee;

h. No financial risk is borne by the franchisee;

i. Hiring and firing decisions cannot be made independently by the franchisee; or

j. Equity interest in the franchise is owned by the franchisor.

3. Where there are inconsistencies between the standards and procedures in this section and other sections within this regulation, this section will prevail.

7VAC13-20-130. General provisions.

A. Applications for certification or recertification and other forms are available from and should be submitted to the Virginia Department of Small Business and Supplier Diversity at its principal place of business or through the department's website if available.

B. A business may withdraw its application for certification or recertification without prejudice at any time prior to the department's determination. The request to withdraw the application must be in writing and addressed to the director. An application for certification or recertification may be administratively closed or placed in inactive status by the department when:

1. The applicant has submitted insufficient information or failed to submit information in response to a written request for information by the department;

2. The applicant has voluntarily withdrawn its application; or

3. The business has been closed or is no longer operating.

7VAC13-20-140. Procedures for initial certification of businesses previously certified by other qualifying local, state, private sector, or federal certification programs.

A. A business certified by the department under this section shall be certified for a period of up to three years unless:

1. The certification is revoked by the department or the program issuing the original certification;

2. The business is no longer in business; or

3. The business is no longer eligible as a small, women-owned, or minority-owned business.

B. A business certified under this section is responsible for notifying the department of any change in legal structure, ownership, control, management, or status of the business or its certification within 30 calendar days of such change. Failure to do so may be grounds for revocation of certification.

C. It shall be the responsibility of the certified business to notify the department of any change of name, address, or contact information and to keep the department informed of its current address and contact information. Changes of name and address must be reported to the department in writing within 30 calendar days of such change. Failure to do so may be grounds for revocation of certification. The department shall not be liable or responsible if a certified business fails to receive notices, communications, or correspondence based upon the certified business's failure to notify the department of any change of address or to provide correct address and contact information.

7VAC13-20-150. Procedures for initial certification.

A. Any business that meets the criteria for certification may file an official application with the department.

B. The application will be reviewed initially for completeness. The department may conduct an onsite visit of the business to obtain or clarify any information. The onsite visit may be scheduled or unannounced.

C. The department may request the applicant to provide additional information or documentation to provide clarification and substantiation of certain criteria or to resolve any ambiguities or inconsistencies in an application.

D. The department may impose a time limit in which the applicant must provide the requested information. A reasonable extension may be given by the department for good cause shown by the applicant. Requests for time extensions must be made to the department in writing and should specify the length of time for which the extension is being requested and the reasons for the request. Failure to provide such information or documentation shall render the application administratively closed.

E. After reviewing the application, the department shall issue either a notice of certification or a notice of denial of certification stating the reasons for denial and offering the applicant the opportunity for an informal hearing pursuant to § 2.2-4019 of the Code of Virginia.

F. A business certified by the department under this section shall be certified for a period of three years unless (i) the certification is revoked before the end of the three-year period, (ii) the business is no longer in business, or (iii) the business is no longer eligible as a small, women-owned, or minority-owned business.

G. The applicant shall be responsible for notifying the department immediately of any change in legal structure, ownership, control, management, or status of the business within 30 calendar days of such change. Failure to do so may be grounds for revocation of certification.

H. It shall be the responsibility of the applicant, the certified business, or both to notify the department of any change of name, address, or contact information and to keep the department informed of the current address and contact information. Changes of name and address must be reported to the department in writing within 30 calendar days of such change. Failure to do so within 30 calendar days of such change may be grounds for revocation of certification. The department shall not be liable or responsible if a certified business fails to receive notices, communications, or correspondence based upon the certified business's failure to notify the department of any change of address or to provide correct address and contact information.

7VAC13-20-160. Procedures for renewal of certification or recertification.

A. To maintain its certification status, a certified business must apply to renew its certification prior to the end of the three-year certification period using the forms and procedures specified by the department.

B. The certification of a business that fails to apply for renewal or recertification prior to the end of the three-year certification period shall terminate automatically on the expiration of the certification.

C. The department may, but in no event shall be required to, notify the business of the pending expiration of its certification prior to the certification expiration.

7VAC13-20-170. Department-initiated evaluation.

The department may at its discretion evaluate any local, state, private sector, or federal certification program to determine whether it meets the minimum eligibility, ownership, and control requirements for certification of small, women-owned, and minority-owned businesses as set forth in this chapter.

7VAC13-20-180. Denial of certification.

The department may deny an application for certification or recertification for any of the following reasons:

1. The department determines that the applicant fails to meet the eligibility, ownership, or control standards for certification;

2. The applicant fails to furnish the department with requested information within the allotted time; or

3. The applicant knowingly provides false or misleading information to the department.

7VAC13-20-190. Notice of denial.

The department shall notify the applicant of the denial of its application for certification or recertification in writing no later than 15 days from the date of the decision by the department. The notice shall state the reasons for the denial of certification or recertification and offer the applicant the opportunity to appeal the decision as provided in the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

7VAC13-20-200. Criteria for revocation of certification.

The department may revoke the certification of a business that it finds no longer qualifies as a small, women-owned, or minority-owned business. Grounds for revocation of certification may include the following:

1. The organization, structure, management, or control of the certified women-owned or minority-owned business has changed to the extent that it no longer satisfies the requirement of ownership, control, and active management of the business by women or minority individuals.

2. The number of employees or revenues exceeds the requirements for certification of a small business or the small business no longer satisfies the requirements to be independently owned and operated.

3. The business fails to submit the required documentation or to comply with a reasonable request from the department for records or information within the allotted time.

4. The business knowingly provides false or misleading information in support of its initial application or its application for recertification or in response to the department's request for records or information.

5. The business is based in a state that denies like certifications to Virginia-based small, women-owned, or minority-owned businesses or that provides a preference for small, women-owned, or minority-owned businesses that is not available to Virginia-based businesses.

7VAC13-20-210. Revocation procedure.

A. Initiation of the revocation process.

1. The department may, at the request of any state agency or at its own discretion, examine any certified business to verify that it continues to meet the applicable eligibility requirements for certification as a small, women-owned, or minority-owned business.

2. Any individual or firm that believes that a business certified by the department does not qualify under the standards of eligibility for certification may request that the department undertake a review to verify that the certified business continues to meet the eligibility requirements for certification. Such requests must be written and signed and must contain specific identification of the affected business and the basis for the belief that the business does not meet the eligibility standards. After reviewing the request, the department shall determine whether to conduct a review of the business. The department's decision may not be appealed by the party seeking such verification. Written requests for verification of continued eligibility of a certified business for certification should be sent to the Virginia Department of Small Business and Supplier Diversity at its principal place of business.

B. Review procedure.

1. If the department determines to conduct a review of a business's certification, the department shall notify the business in writing that the department is reviewing its certification, explaining the basis for its decision to conduct a review.

2. The department may request records or other documentation from the business, may conduct an onsite visit of the business facilities, and may question other parties during its review.

3. The department may impose a time limit of not less than 15 days in which the business must respond to a request for records or other documentation. A reasonable extension may be given by the department for good cause shown by the business. Requests for time extensions should be made in writing to the department and should specify the length of time for which the extension is being requested and the reason for the request. If the business fails to provide the information in the time requested, the department shall issue a notice of intent to revoke the certification.

4. Upon completion of the review, a written report shall be prepared, which shall include:

a. A statement of the facts leading to the review;

b. A description of the process followed in the review;

c. The findings of the review; and

d. A conclusion that contains a recommendation for disposition of the matter.

7VAC13-20-220. Reapplication.

A. A business whose application for certification has been denied may reapply for the same category of certification 12 months after the date on which the business receives the notice of denial if no appeal is filed or 12 months after the appeal is exhausted. An applicant denied certification as a women-owned or minority-owned business may reapply for certification as a small business without delay if otherwise eligible.

B. The applicant may request a waiver of the 12-month reapplication period from the department director by submitting a written request for reconsideration and providing a reasonable basis for the waiver. The director or his designee, in his discretion, shall render a final decision regarding the request for reconsideration and waiver within 30 days, which determination shall not constitute a case decision subject to appeal.

C. A business whose certification has been revoked may not reapply for certification in the same classification.

7VAC13-20-230. Appeals from a denial of recertification or revocation of certification.

A. An applicant whose application for recertification has been denied by the department, or a certified business whose certification has been revoked by the department (complainant), shall have the right to an informal fact-finding proceeding before the designated representative of the department to present the grounds upon which the complainant believes the denial of certification should be reconsidered. A decision of the department will only be reconsidered if the complainant can demonstrate that a material mistake of fact formed the basis for the department's review of the application or other relevant record, or if the department's decision was not in accordance with applicable laws or regulations.

B. Any request for an informal fact-finding proceeding pursuant to subsection A of this section must be submitted in writing to the department within 10 days of the date on which the notice of denial of recertification or the notice of revocation was sent by the department. The request for an informal fact-finding proceeding shall include a clear, brief summary of all factual errors and legal grounds upon which the complainant intends to rely. Within 30 days of the receipt of a timely request for an informal fact-finding proceeding, the department shall issue a notice stating the date and time of the informal fact-finding proceeding. The informal fact-finding proceeding will not be scheduled less than seven and not more than 45 days from the date of the notice. Within 60 days from the date on which the informal fact-finding proceeding was held, the department shall issue a notice, in writing, stating the final decision of the department.

C. Either party to the informal fact-finding proceeding is entitled to have counsel present, but no party shall be required to be represented by counsel at or in connection with the informal fact-finding proceeding.

FORMS (7VAC13-20)

Documents Required for All Certification Applicants (rev. 3/2016)

Online Certification Application - complete online at https://egov1.virginia.gov/mbe_cert/cgi-bin/intro.cgi

Owner Title Sheet - SWaM and Micro Business Certification Program (rev. 1/2015)

Third Party Challenges or Complaints - Form A: Preliminary Information (undated)

Request for Informal Hearing (rev. 7/2015)

Notice of Change of Contact Information (rev. 1/2016)

Request for Additional Certified SWaM Type (undated)

Virginia Employment Service Organization Certification Application (rev. 7/2015)