Federal agencies and prime contractors have shifted their procurement strategies following the total elimination of self-certification for Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). The Small Business Administration (SBA) now requires all veteran-owned firms to undergo a formal certification process to participate in set-aside contracts and help agencies meet their socioeconomic goals.
This regulatory transition, which concluded its primary phase-in by early 2025, has fundamentally altered the competitive landscape for government contracts. Firms that previously relied on self-representation in the System for Award Management (SAM) are no longer eligible for veteran-specific opportunities or subcontracting credit.
The End of Self-Certification and the Rise of VetCert
The National Defense Authorization Act (NDAA) for Fiscal Year 2021 initiated the transfer of the veteran certification program from the Department of Veterans Affairs (VA) to the SBA. The SBA established the Veteran Small Business Certification (VetCert) program to serve as the sole authority for certifying both Veteran-Owned Small Businesses (VOSBs) and SDVOSBs government-wide.
"The new program creates a single, reliable point of entry for veteran entrepreneurs looking to do business with the federal government," said a spokesperson for the SBA. By June 2026, the grace periods that once allowed self-certified firms to compete for non-VA contracts have expired, leaving formal certification as the only path forward.
Any firm that has not secured official VetCert approval is effectively locked out of the SDVOSB set-aside market. This requirement applies not only to prime contracts but also to the subcontracting layer, where prime contractors must verify a sub's certification status before claiming credit toward their small business goals.
Expansion of Federal Spending Goals to 5 Percent
The federal government has increased its focus on veteran-owned firms by raising the statutory spending goal for SDVOSB prime and subcontracts. The NDAA for FY 2024 officially raised this target from 3 percent to 5 percent of all federal contracting dollars.
"This increase represents billions of dollars in additional opportunities specifically reserved for certified veteran-owned firms," said a procurement analyst. At current federal spending levels, this 5 percent target translates to an annual market worth approximately $31 billion.
Agencies that fail to meet these elevated benchmarks are under increasing pressure to utilize SDVOSB set-asides and sole-source awards. Consequently, certified firms often find themselves in a stronger bargaining position when negotiating with agency program offices or large prime contractors seeking to fulfill their subcontracting plans.
Changes in Teaming and Subcontracting Behavior
The elimination of self-certification has caused a significant shift in how large prime contractors select their teaming partners. After December 22, 2024, primes could no longer count self-certified SDVOSB subcontractors toward their veteran-owned small business goals.
"Primes are now performing much more rigorous due diligence on their potential small business partners," said a representative from the National Veteran Small Business Coalition. Large contractors now require formal proof of VetCert status during the proposal stage to ensure they receive the necessary goaling credit upon award.
Firms that lack current SBA certification are being removed from long-standing teaming agreements. Conversely, certified SDVOSBs are seeing an increase in outreach from primes who need reliable, compliant partners to meet the new 5 percent requirement.
Ownership and Control Rigor Under Part 128
The SBA has updated the eligibility criteria for the VetCert program under 13 C.F.R. Part 128 to ensure that benefits are reserved for firms truly owned and controlled by veterans. To qualify, a firm must be at least 51 percent unconditionally owned by one or more service-disabled veterans.
"Ownership is only half of the equation; the veteran must also demonstrate full control over both the day-to-day operations and the long-term strategic decisions of the firm," said a legal expert specializing in government contracts. This means the veteran must hold the highest officer position and have the authority to hire, fire, and set the direction of the company without interference from non-veteran investors or partners.
The SBA also scrutinizes "negative control" provisions, where minority owners might have the power to block certain corporate actions. If a non-veteran partner can veto essential business decisions, the SBA may deny or revoke the SDVOSB certification.
Maintaining Compliance on the GSA Schedule
For firms holding a GSA schedule, maintaining SDVOSB status requires constant alignment between VetCert and the SAM.gov registry. Any lapse in certification must be reported, and the firm’s socioeconomic status must be updated in SAM within two days of an adverse decision from the SBA.
"The GSA relies on the SBA's certification data to populate its e-marketplaces," said a GSA spokesperson. If a firm loses its VetCert status, its "SDVOSB" tag on GSA Advantage and other platforms will be removed, potentially making its products or services invisible to buyers searching specifically for veteran-owned vendors.
This administrative burden necessitates that veterans monitor their three-year recertification window closely. Missing a renewal deadline can result in immediate removal from set-aside eligibility, causing a disruption in revenue and potential breach of contract terms on existing veteran-reserved awards.
The Rising Risk of Status Protests
As the value of SDVOSB contracts increases, so does the frequency of status protests by competitors. Under the new SBA regime, any interested party: including competing bidders and the contracting officer: can challenge a firm’s SDVOSB status if they believe the firm does not meet the ownership or control requirements.
"Protests are becoming a standard tactical tool in the federal marketplace," said a government contracts attorney. If a protest is filed, the SBA's Office of Hearings and Appeals (OHA) reviews the firm's corporate documents, including operating agreements, bylaws, and financial records.
Firms must maintain a "protest-ready" file that includes disability verification from the VA, proof of U.S. citizenship, and clear evidence of veteran control. Failure to provide this documentation quickly during a protest can lead to decertification and the loss of a contract award.
Strategic Outlook for 2026 and Beyond
The current landscape of veterans affairs news suggests that the federal government will continue to prioritize verified small businesses over unverified entities. For SDVOSBs, the "check the box" era is over, replaced by a regime where certification is a strategic business asset.
Businesses that invest the time to understand the nuances of 13 C.F.R. Part 128 and maintain their VetCert status will find themselves in a smaller, more elite pool of qualified bidders. This reduces competition from firms that are either non-compliant or unwilling to undergo the rigorous SBA vetting process.
| Requirement Area | Old Requirement (Pre-2024) | New Requirement (2026) |
|---|---|---|
| Certification Source | Self-certification (non-VA) / CVE (VA) | SBA VetCert (All Agencies) |
| Spending Goal | 3% of total federal spend | 5% of total federal spend |
| Subcontracting | Self-certification often accepted | Only VetCert-certified counts |
| Recertification | Annual self-update in SAM | 3-year SBA VetCert cycle |
| Protest Authority | Often handled by individual agencies | SBA Office of Hearings and Appeals |
The transition to a mandatory certification model has created a more transparent and accountable system for veteran entrepreneurs. While the administrative requirements have increased, the potential for winning high-value contracts has never been higher for those who remain compliant.
For more information on staying updated with federal contracting changes, you can subscribe to our daily updates or visit our about us page to learn more about our mission.
