SDVOSB Federal Contracting

SDVOSB Eligibility Requirements

An SDVOSB must be a small business concern under SBA size standards for its primary NAICS code. A service-disabled veteran must own at least 51% of the company. That same veteran must control the company's daily management and long-term decisions, including the ability to make final decisions on contracts, hiring, and capital expenditure.

"Service-connected disability" means a disability determined by the VA to be connected to military service. The disability rating can be zero percent. The key fact is VA determination, not a specific percentage. A veteran with a 10% rating qualifies the same as one with a 100% rating for SDVOSB purposes.

Unconditional ownership is required. An SDVOSB cannot have arrangements that give non-veteran investors or partners effective control through board seats, approval rights over major decisions, or options that would reduce veteran ownership below 51% upon exercise.

SAM.gov Registration

All entities seeking federal contracts above the micro-purchase threshold must be registered in SAM.gov. Registration requires a Unique Entity Identifier (UEI) assigned by SAM.gov, a DUNS number (legacy, being phased out), CAGE code assignment for new registrants, and annual renewal. SDVOSB self-certification is done within SAM.gov during registration or renewal by selecting the SDVOSB designation in the business type section.

SAM.gov registration is free. Third-party companies that charge fees to register entities in SAM.gov are not authorized agents; they cannot do anything in SAM.gov that the entity cannot do for free itself. The SBA provides free registration assistance through its SBDC network.

VA CVE and VOSB/SDVOSB in VA Acquisitions

The Department of Veterans Affairs operates a separate program, the Center for Verification and Evaluation (CVE), that verifies VOSB and SDVOSB status for VA-specific acquisitions. VA acquisitions above the simplified acquisition threshold use VA-specific set-asides under the Veterans Benefits, Health Care, and Information Technology Act of 2006. For VA work, CVE verification is required in addition to SAM.gov registration.

Non-VA federal agencies use the SBA's SDVOSB self-certification in SAM.gov and do not require CVE verification. The National Defense Authorization Act for FY2021 consolidated most SDVOSB verification under SBA, though the VA CVE program continues for VA-specific contracts.

Set-Aside Thresholds and Award Types

FAR 19.1405 establishes the SDVOSB set-aside: when a contracting officer determines that at least two SDVOSBs can perform the work at a fair and reasonable price, the acquisition is set aside exclusively for SDVOSB competition. The sole-source authority under FAR 19.1406 allows awards without competition when only one SDVOSB can perform and the contract does not exceed $4.5 million for most acquisitions or $7.5 million for manufacturing.

SDVOSB set-asides take precedence over WOSB, HUBZone, and small business set-asides in the order of precedence established by SBA regulations, though 8(a) set-asides are handled separately under the 8(a) program.

Finding Federal IT Opportunities

SAM.gov is the mandatory public notification system for federal contract opportunities. Set-asides are identified by the Type of Set-Aside field in the contract notice. Useful filters for SDVOSB IT opportunities: NAICS codes in the 54151x range (custom programming, systems design, consulting), set-aside type SDVOSB or SDVOSB Sole Source, and PSC codes in the D series (ADP and Telecommunications) and R series (Professional Services).

GSA Schedules (now Multiple Award Schedules, MAS) are not set-asides by default, but contracting officers can place SDVOSB set-aside orders against MAS vehicles. Small businesses must be on the relevant MAS schedule to receive orders. Schedule 70 (IT) has been consolidated into the general MAS under Special Item Numbers 54151S and related codes.

Teaming as an SDVOSB

SDVOSBs can team with large businesses and other small businesses as subcontractors or as joint venture partners. For set-aside contracts, the SDVOSB prime must perform at least 50% of the cost of the contract (for services, not counting subcontractor labor from other small businesses). This is the "ostensible subcontractor" rule: an arrangement where the large business effectively performs the work violates the set-aside requirement.

Mentor-protégé programs (SBA, DoD) allow large business mentors to own up to 40% of a protégé joint venture. Awards to the joint venture count as SDVOSB performance. This is one of the few paths where a large business can have meaningful equity in an entity that wins SDVOSB set-asides, within the program's constraints.

Working with Prime Contractors

Many federal IT programs flow through large prime contractors who subcontract to SDVOSBs for specialized work or to meet subcontracting plan requirements. Primes with subcontracting plans above $750,000 (or $1.5 million for construction) must submit plans specifying percentages of subcontract dollars targeted to small businesses by type, including SDVOSBs.

When negotiating subcontract terms, understand the teaming agreement structure before proposal submission. Identify who holds the customer relationship, who takes delivery risk, and who controls the statement of work for your portion. Non-disclosure agreements in teaming often require disclosure of your personnel and approach to the prime before any contract is awarded. Read these carefully.

SDVOSB in Federal IT: Practical Considerations

Federal IT contracts often require cleared personnel (Secret, Top Secret, TS/SCI) depending on the system classification. SDVOSBs that need clearances must be sponsored by a prime or an agency. Facility clearances (FCLs) take 6 to 18 months to establish. For cleared work, the ability to hire cleared personnel and the existence of cleared facilities is often more limiting than the SDVOSB set-aside rules themselves.

Past performance is the highest barrier for SDVOSBs entering federal IT. Federal solicitations typically require 3 to 5 relevant past performance references within the last 3 to 5 years. A new SDVOSB can address this through teaming on a first contract, through SBIR/STTR programs that have lower past performance requirements, or through agency small business innovation programs.