The Department of Veterans Affairs is reviewing its decision to strip a retired Navy SEAL’s small business of the ability to bid on contracts reserved for veteran owners.

Last month, a VA employee visited Syncon, the Chesapeake, Va.-based construction firm owned by Mark Lilly, a 23-year veteran who was shot in Afghanistan and has a Purple Heart, a Silver Star and five Bronze Stars.

The VA denied the business veteran-owned status in June, saying Lilly’s partner, who isn’t a veteran, had more construction experience. The VA questioned whether Lilly, 47, who has a Virginia contractor’s license, was in charge of daily operations as agency rules require.

“Our review of the documentation in this case reveals an apparent lack of understanding of the requirements of the regulations,’’ Jo Schuda, an agency spokeswoman, said in an e-mail. “The site visit is part of a total new review of the company, and allows for interviews of the owners and staff to get a better picture of how the business is operated and controlled.’’

The VA’s July 26 visit to Syncon followed a Bloomberg story on its rejection of Lilly. It came a week before two congressional subcommittees held a joint hearing on the agency’s new verification system, which has drawn complaints from veteran owners turned down during the process.

The visit to Syncon was part of the agency’s response to Lilly’s request for reconsideration, Schuda said.“VA officials are ready to assist Mr. Lilly and other veteran entrepreneurs to correct all deficiencies in their applications and become eligible for participation,’’ she said.

Lilly said he had been asking the VA since January to visit his company.

More than 4,000 companies, or almost two-thirds of all those that applied, have been rejected by the VA since the agency stepped up efforts last year to prevent fraud, according to March data from the VA. The department didn’t make more recent data available.

“There’s a lot of overreaching by the agency,’’ said Lee Dougherty, an attorney for Syncon who was present at the site visit. “We’ve seen veterans denied because of things they put on LinkedIn or Facebook.’’

Dougherty said he advises about 25 clients on issues with the VA’s verification process. He said he has provided informal guidance and pro bono assistance to hundreds of companies going through the system, which now requires the small businesses to prove that they’re owned, controlled and managed by veterans if they want preferential s bidding tatus.

Syncon has provided documents that show Lilly is a veteran and the majority owner and that he “is in control of the company,’’ Dougherty said in a phone interview. “I’m confident that is exactly what the site visit will show,’’ he said.

The lack of certification has cost the company the chance to compete for as much as $5 million in contracts since late March, said Lilly, who is in Yemen doing security and project consulting for an oil company to make up for the loss.

“My hope is that I get reverified, I’m able to make up for lost VA work and stop the overseas consulting,’’ Lilly said in an e-mail July 26. He has daily conference calls with his staff while he is out of the country, he said.

Lilly said he received an e-mail in the past week from Tom Leney, head of the VA certification office, saying the VA would conduct a site visit.

The agency’s office of general counsel will make the final decision on Lilly’s request for reconsideration, Schuda said in the e-mail. She would not estimate when the review will be done.

A 2010 law requires the VA to do more to ensure that veterans are in control of a company after reports of fraud in the program, including cases in which veterans are “fronting’’ or claiming to manage companies run by other people.

U.S. Rep. Bill Johnson (R-Ohio), and Rep. Marlin A. Stutzman (R-Ind.), sent a July 11 letter to Eric Shinseki, the VA’s secretary, saying the department’s “regulations too often fall outside a reasonable interpretation’’ of the law that gave the agency power to certify veteran-owned businesses.

The congressmen head the two House subcommittees that plan to hold the Aug. 2 hearing on the verification program.

“Staff base decisions on a suspicion that an applicant’s documentation does not qualify, rather than clear evidence of disqualification,’’ they said in the letter.

—Bloomberg Government