The Government Accountability Office has denied a protest from a service-disabled veteran-owned small business joint venture that lost its status mid-procurement, upholding the Department of Veterans Affairs' authority to require SDVOSB eligibility at the moment of contract award rather than only at proposal submission.
Background
Potomac Valor Healthcare-2, LLC (PVH2), a joint venture between Potomac Healthcare Solutions and Valor Healthcare, submitted a proposal in December 2023 for VA solicitation No. 36C25623R0002, a requirement for outpatient primary care and mental health clinic services. At the time of submission, PVH2 was a certified service-disabled veteran-owned small business. The VA originally awarded the contract to Primary Care Solutions, LLC of Dallas in October 2024.
The dispute turned on a corporate transaction that happened well after PVH2 submitted its bid. On Jan. 5, 2026, Valor Healthcare acquired 100 percent of the equity in its own joint-venture partner, Potomac Healthcare Solutions. The VA contracting officer discovered the acquisition on Feb. 2, 2026. On March 6, 2026, she searched the SBA's VetCert database and found Potomac Healthcare Solutions still certified as an SDVOSB but listed as ineligible for small business size under NAICS code 621498. On that basis, the VA declared PVH2 ineligible for award on May 1, 2026, and reaffirmed the award to Primary Care Solutions on May 6, 2026. PVH2 filed a protest challenging that ineligibility determination along with several evaluation-related objections.
Key Details
PVH2 argued that SDVOSB eligibility should be locked in at the moment a firm submits its offer, pointing to 13 C.F.R. § 128.402(e), an SBA regulation. The stakes drew in the Small Business Administration itself, which intervened in the protest on PVH2's side, telling GAO that the VA lacked the authority to impose an award-time eligibility requirement that went beyond SBA's own offer-time standard.
GAO rejected that argument. The decision holds that VAAR 819.7003(b) and (c) must be read together, and that doing so requires SDVOSB status at both proposal submission and "at the time of award," not merely at the time of offer as PVH2 and SBA argued. GAO found that reading the regulation to require offer-time certification only would improperly render the award-time language superfluous, since VAAR 819.7003(c) directs joint ventures to make the same representations required of individual offerors under subsection (b).
More significantly, GAO held that the VA's Veterans First statutory authority is independent of, and can be more stringent than, SBA's general small-business regulations. That reasoning traces to GAO's earlier decision in Millbrook Support Services (B-424107, decided Feb. 23, 2026), which GAO cited directly in the PVH2 ruling for the principle that a separate programmatic authorization like Vets First may impose requirements more stringent than SBA's own. Together, the two decisions establish that VA contracting officers may apply agency-specific eligibility timing rules for veteran-owned set-asides even where SBA's parallel governmentwide framework would allow a looser standard.
Because PVH2's ineligibility removed it from the competitive range entirely rather than simply flagging a technical weakness in its proposal, GAO also dismissed the joint venture's remaining evaluation challenges. An offeror that is ineligible for award lacks the "interested party" standing needed to challenge how the agency scored technical factors, so those arguments never reached the merits. GAO's decision, covering protest numbers B-423195.2 and B-423195.3, was issued Aug. 12, 2026.
The SBA's intervention on PVH2's behalf underscores how much was riding on the outcome beyond this single VA clinic award. Had GAO accepted SBA's position that offer-time certification governs across the government, VA contracting officers would have lost the ability to catch ownership or structural changes that occur between proposal submission and award — a gap that, as this case shows, can run well over a year on larger requirements. By anchoring its ruling in VAAR's own text rather than SBA's general small-business rules, GAO left the two agencies' frameworks to operate on separate, and in this instance stricter, tracks for VA-specific set-asides.
What It Means for Contractors
The ruling puts SDVOSB and veteran-owned joint ventures on notice that a corporate change of control inside a joint venture — even one between the JV's own named partners — can strip the entire entity of eligibility for a VA set-aside contract, regardless of how strong its proposal was at submission. A venture that consolidates ownership among its partners during a live procurement needs to check VetCert status before, not after, the change closes. In PVH2's case, Valor Healthcare's acquisition of full equity in Potomac Healthcare Solutions collapsed the two-firm ownership structure that VetCert had certified, and the resulting single-owner entity no longer met the small-business standard under NAICS 621498, even though nothing about the underlying proposal or the venture's veteran ownership had changed on paper.
Contracting officers now have clear GAO-backed authority to run an eligibility check at the point of award, not just accept the offeror's status as of proposal date. Firms bidding on VA Veterans First set-asides should treat award-time eligibility as a live requirement that must be maintained through the entire procurement cycle, not a box checked once at submission. The VA's practice of re-verifying VetCert status when it learns of a change in ownership, demonstrated here by the contracting officer's March 6 database search, should be expected as standard due diligence going forward, particularly for procurements with a long gap between proposal submission and award. The roughly ten-month span between PVH2's December 2023 proposal and the October 2024 award, followed by more than a year of post-award activity before the ownership change surfaced, illustrates how much can shift inside a joint venture over a typical VA procurement timeline.
The decision also narrows what a disqualified offeror can still contest. Once GAO or the agency determines a firm is ineligible for award, that determination generally forecloses any further review of the technical or price evaluation, because an ineligible offeror has no standing as an interested party. Joint ventures facing a late-breaking eligibility dispute should prioritize resolving the eligibility question first, since losing on eligibility effectively ends the protest regardless of the underlying evaluation record.
For the broader VA SDVOSB and Veterans First set-aside marketplace, the decision confirms that VA-specific regulations can impose stricter requirements than SBA's governmentwide small-business rules, and that GAO will defer to the VA's own regulatory text when the two frameworks diverge. Firms structuring joint ventures for VA work should build in eligibility monitoring through award, not just through proposal submission, and should treat any acquisition or restructuring among JV partners as an event requiring an immediate VetCert eligibility check.
