The federal government has significantly increased its commitment to veteran-owned businesses by raising the statutory goal for prime contract awards. According to the fiscal year 2024 National Defense Authorization Act (NDAA), the government-wide goal for prime contracting dollars awarded to Service-Disabled Veteran-Owned Small Businesses (SDVOSB) rose from 3% to 5%. This change creates billions of dollars in new opportunities for eligible veterans.
Federal agencies are now under increased pressure to meet these higher benchmarks. The Small Business Administration (SBA) said that reaching the 5% goal requires a more focused effort on set-asides and sole-source awards. For veteran entrepreneurs, understanding the SDVOSB landscape is the first step toward securing these lucrative government contracts.
The Department of Veterans Affairs (VA) historically leads the government in veteran-focused spending. The VA reported that it awarded over $10 billion to SDVOSBs in a single fiscal year, which accounted for approximately 23% of its total prime contract dollars. These figures demonstrate that while the government-wide goal is 5%, individual agencies may offer much higher percentages of work to certified firms.
Understanding the SDVOSB Designation
To qualify as an SDVOSB, a company must meet several strict requirements regarding ownership and management. The SBA said that the business must be at least 51% owned and controlled by one or more service-disabled veterans. This ownership must be direct and unconditional to ensure that veterans are the primary beneficiaries of the program.
A service-disabled veteran is defined as an individual who served in the active military, naval, or air service and was discharged under conditions other than dishonorable. The individual must have a service-connected disability rating ranging from 0% to 100%. The VA or the Department of Defense (DoD) must provide the official disability determination to the business owner.
Control of the business is a critical factor during the certification process. One or more service-disabled veterans must manage the day-to-day operations and make long-term decisions for the firm. The SBA said that the veteran must typically hold the highest officer position and be the highest-paid individual in the company, though some exceptions apply for commercially reasonable circumstances.
The Shift to SBA VetCert Authority
Management of the veteran business certification program recently underwent a major administrative change. As of January 1, 2023, the authority to certify SDVOSBs and Veteran-Owned Small Businesses (VOSB) moved from the VA to the SBA. This transition established a single, unified certification process for all federal agencies.
The new system is known as the Veteran Small Business Certification program, or VetCert. The SBA said that this transfer was designed to streamline the experience for veterans and provide a centralized database for contracting officers. All firms previously verified by the VA were granted a one-year extension during the transition period to ensure continuity.
Contracting officers across the federal government now use the VetCert database to verify a firm's status before awarding set-aside contracts. This database serves as the official source of truth for SDVOSB eligibility. The SBA said that maintaining an accurate and active profile in this system is mandatory for businesses seeking veteran-specific opportunities.
The End of Self-Certification
A significant policy change is currently reshaping how SDVOSBs interact with the federal marketplace. The SBA said that the period for self-certification is coming to an end for almost all federal contracting purposes. Previously, firms could self-report their SDVOSB status for most non-VA agencies to receive credit toward government-wide goals.
The NDAA of 2021 mandated that all SDVOSBs must be formally certified by the SBA to compete for set-aside and sole-source contracts. A grace period exists for firms that apply for certification before December 22, 2024. The SBA said that firms with a pending application can continue to self-certify until a final decision is reached.
After the December 2024 deadline, self-certified firms will no longer be eligible for SDVOSB set-aside contracts. Furthermore, agencies will not be able to count awards to self-certified firms toward their 5% statutory goals. This policy shift makes formal SBA VetCert approval an absolute necessity for any veteran-owned business in the federal sector.
Strategic Benefits of SDVOSB Certification
Certified SDVOSBs gain access to exclusive bidding environments known as set-asides. In these competitions, the contracting officer restricts the pool of bidders to only those firms with a valid SDVOSB certification. The SBA said that these set-asides significantly reduce competition and increase the probability of a small business winning the award.
Sole-source awards represent another major advantage for certified firms. Under certain conditions, a contracting officer can award a contract directly to an SDVOSB without a full competition. For most federal agencies, the sole-source threshold for non-manufacturing contracts is $4 million. The VA has a higher threshold, allowing sole-source awards up to $5 million for certified veteran-owned firms.
Large prime contractors also actively seek SDVOSB partners to meet their subcontracting goals. Most large federal contracts require the prime contractor to have a small business subcontracting plan. The VA said that its 2024 subcontracting goals include a 5% target specifically for SDVOSBs. Being certified makes a small firm a more attractive partner for major defense and civil contractors.
Navigating the Certification Process
The path to certification begins with registration in the System for Award Management (SAM). The SBA said that the VetCert system pulls data directly from SAM, so all business information must be current and accurate before the application starts. This includes having the correct North American Industry Classification System (NAICS) codes assigned to the business profile.
Once SAM registration is active, owners must gather documentation to prove their veteran status and business control. Required documents often include the DD Form 214, VA disability rating letters, and corporate bylaws. The SBA said that applicants must also provide tax returns and payroll records to confirm that the veteran owner is in full control of the firm's financial and operational decisions.
The SBA typically completes the review of a VetCert application within 60 to 90 days. During this time, analysts may request additional information to clarify ownership structures or management roles. The SBA said that responding promptly to these requests is vital to avoiding delays or denials in the certification process.
Leveraging the GSA Schedule and VA Programs
Beyond general set-asides, SDVOSBs can find success through the General Services Administration (GSA) schedule. The GSA schedule is a long-term, government-wide contract that allows agencies to purchase products and services at pre-negotiated prices. The GSA said that having a schedule contract simplifies the buying process for federal customers and provides SDVOSBs with a stable platform for growth.
The VA’s Vets First Verification Program continues to be a cornerstone of veteran affairs news. This program gives SDVOSBs and VOSBs the highest priority in VA contracting. The VA said that it must first consider veteran-owned firms before looking at any other small business categories. This "Rule of Two" requires the VA to set aside a contract for veterans if there is a reasonable expectation that at least two eligible firms will submit offers at a fair market price.
Veteran-owned businesses are also seeing expanded opportunities at the state and local levels. The Office of Management and Budget (OMB) recently updated its Uniform Guidance to encourage the use of veteran-owned firms in federally funded grant projects. The OMB said that state and local agencies using federal funds should consider veteran-owned businesses in their procurement processes, further widening the market for certified SDVOSBs.
Best Practices for SDVOSB Success
Success in federal contracting requires more than just a certification. Experts suggest that firms should focus on a specific niche rather than trying to provide every service. The SBA said that developing a strong past performance record is the most effective way to win larger and more complex contracts over time.
Networking with agency small business specialists is another critical strategy. These individuals, known as OSDBU (Office of Small and Disadvantaged Business Utilization) officers, help small firms navigate the specific needs of their agencies. The VA said that its OSDBU offers counseling and training to help veterans understand how to bid on upcoming healthcare and construction projects.
Finally, SDVOSBs should monitor federal procurement forecasts to identify opportunities early. Agencies publish annual forecasts that list upcoming contracts before they are officially posted on SAM.gov. The SBA said that being proactive and building relationships with contracting officers before a solicitation is released can give a certified firm a significant competitive edge in the marketplace.
