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Service-Disabled Veteran-Owned Businesses

The Veterans Entrepreneurship and Small Business Development Act of 1999 (Public Law 106-50) established an annual government-wide goal of not less than 3% of the total value of all prime contract and subcontract awards for participation by small business concerns owned and controlled by service-disabled veterans.

On December 16, 2003, the Veterans Benefits Act of 2003 (Public Law 108-183) was passed by Congress. Section 308 of the Act (Public Law 108-183) established a procurement program for Service-Disabled Veteran-Owned Small Business Concerns (SDVOSBC). This procurement program provides that federal contracting officers may restrict competition to SDVOSBCs and award a sole source or set-aside contract where certain criteria are met.

The Small Business Administration has issued an interim final rule, establishing a Service-Disabled Veteran-Owned Small Business Concern Program. This program establishes the criteria to be used in federal contracting to determine service-disabled veteran status; business ownership and control requirements; guidelines for establishing sole source and set-aside procurement opportunities; and protest and appeal procedures for SDVOSBC procurements.

Purpose of the SDVOSBC Program

The purpose of the Service-Disabled Veteran-Owned Small Business Concern Procurement Program is to provide procuring agencies with the authority to set acquisitions aside for exclusive competition among service-disabled veteran-owned small business concerns, as well as the authority to make sole source awards to service-disabled veteran-owned small business concerns if certain conditions are met. (See Code of Federal Regulations (CFR) 13 C.F.R. § 125.8-125.10).

Eligibility

In order to be eligible for the SDVOSBC, you and your business must meet the following criteria:

  • The Service Disabled Veteran (SDV) must have a service-connected disability that has been determined by the Department of Veterans Affairs or Department of Defense

  • The SDVOSBC must be small under the North American Industry Classification System (NAICS) code assigned to the procurement

  • The SDV must unconditionally own 51% of the SDVOSBC

  • The SDVO must control the management and daily operations of the SDVOSBC

  • The SDV must hold the highest officer position in the SDVOSBC

SDVO Business Control

To be an eligible SDVOSBC the following must be met:

  • The management and daily business operations of the concern must be controlled by one or more service-disabled veterans.

    • Control by one or more service-disabled veterans means that both the long-term decision making and the day-to-day management and administration of the business operations must be conducted by one or more service-disabled veterans

    • The management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a service-disabled veterans or, in the case of a service-disabled veteran with permanent and severe disability, the spouse of permanent caregiver of such veteran

  • Service-disabled veteran means a veteran with a disability that is service-connected.

  • Ownership must be direct. Ownership by one or more service disabled veterans must be direct ownership.

    • A concern owned principally by another business entity that is in turn owned and controlled by one or more service-disabled veterans does not meet this requirement.

Set Aside Requirements and Exemptions

This section serves as information for both a SDVOSBC as well as a contracting officer representing a SDVOSBC in bidding for a government contract.

A Contracting Officer (CO) may set-aside requirements if:

  1. The requirement is not exempted from SDVO contracting, the CO considers setting aside the requirement for 8(a), HUBZone, or SDVO SBC participation before considering setting aside the requirement as a small business set-aside.

  2. There is a reasonable expectation that at least two responsible SDVO SBC will submit offers; and

  3. The award can be made at a fair market price.

A contracting activity may not make a requirement available for a SDVO contract if and be exempted if:

  1. The requirement would be fulfilled through the award of Federal Prison Industries, Inc. or Javits-Wagner-O’Day Act participating non-profit agencies for the blind and severely disabled.

  2. The requirement is currently being performed by an 8(a) participant or SBA has accepted that requirement for performance under the authority of the Section 8(a) Program.

Sole Source Contracts

A CO may award a sole source contract if:

  1. If the requirement is not exempted from SDVO contracting and cannot be set-aside.

  2. The CO does not have a reasonable expectation that at least two responsible SDVO SBCs will submit offers.

  3. The anticipated award price of the contract, including options, will not exceed:

    • $5.0M for manufacturing requirements

    • $3.0M for all other requirements

  4. Award can be made at a fair market price.

Simplified Acquisition Threshold

If the requirement is at or below the simplified acquisition threshold, the CO may set-aside the requirement for consideration among SDVOSBCs using simplified acquisition procedures or may award a sole source contract to a SDVOSBC. A sole source award is only permissible where there is only one SDVO SBC that perform the contract in accordance with Federal Acquisition Regulations § 19.406 (a)(3).

Additional Contract Requirements

There are some limitations on subcontracting that a SDVO SBC Prime or Sub-contractor can subcontract for:

  • Services Contracts (Except Construction):

    • 50% of the contract performance incurred for SDVO SBC personnel

  • Supply Contract:

    • 50% of the cost of manufacturing the supplies

  • General Construction:

    • 15% of the contract performance incurred for SDVO SBC personnel

  • Construction by Special Trade:

    • 25% of the contract performance incurred for SDVO SBC personnel

Executive Order 13360

Executive Order 13360 signed in October 2004, requires each agency to:

  • Develop a strategy to significantly increase its contracting and subcontracting with small businesses owned and controlled by service-disabled veterans;

  • Designate a senior-level official to be responsible for developing and implementing the agency's strategy; and

  • Report its progress annually to the SBA.

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