Federal Contracting by Veteran-Owned Small Businesses: An

Federal Contracting by Veteran-Owned Small

Businesses: An Overview and Analysis of

Contemporary Issues

Updated June 6, 2024

Congressional Research Service

https://crsreports.congress.gov

R47226

Congressional Research Service

SUMMARY

Federal Contracting by Veteran-Owned Small

Businesses: An Overview and Analysis of

Contemporary Issues

Since the passage of P.L. 93-237 in 1974, which instructed the Small Business Administration

(SBA) to give “special consideration to veterans of the Armed Forces of the United States and

their survivors or dependents,” the agency has taken a lead in federal efforts to support veteran-

owned small businesses (VOSBs) and veterans who want to become business owners. This

statute led to outreach and technical assistance services tailored to VOSBs. Later legislation

created the Service-Disabled Veteran-Owned Small Business (SDVOSB) contracting program. That program, for eligible

service-disabled veteran-owned small businesses (SDVOSBs), is among the small handful of federal small business

contracting programs that provide contracting preferences to certain types of small businesses (e.g., the 8(a) Business

Development Program and HUBZone programs).

Congress authorized a government-wide procurement goal of awarding at least 3% of federal contract award dollars to

SDVOSBs each fiscal year through the Veterans Entrepreneurship and Small Business Development Act of 1999. The

Veterans Benefits Act of 2003 authorized contracting officers at federal agencies to limit competition for contracts for

SDVOSBs under certain circumstances, in order to help the government reach its 3% goal. Since then, the goal was increased

to 5% by P.L. 118-31, the National Defense Authorization Act for Fiscal Year 2024. No government-wide procurement goal

or preferences for nondisabled veteran-owned small businesses (VOSBs) exist, although the Department of Veterans Affairs

(VA) administers a unique program limited to its agency, known as Veterans First.

Economic data from the U.S. Bureau of Labor Statistics and U.S. Census Bureau indicate that veterans generally have lower

unemployment relative to the general population and also tend to be well represented among businesses owners and the self-

employed. However, some data suggest that younger veterans are not undertaking entrepreneurship at the same rates as prior

cohorts, which could signal fewer veteran business owners in the future. Veterans comprised approximately 5% of the overall

civilian labor force aged 18 to 64 years in 2019, comparable to their share of business owners.

Congress may consider enhancing contracting opportunities for VOSBs not only to encourage veterans’ entrepreneurship, but

to support veterans more broadly. For instance, nondisabled veterans interested in employment via business ownership

currently receive no federal benefit comparable to federal agency hiring preferences. One option for congressional

consideration includes creation of a government-wide VOSB procurement goal beyond the agency-specific program at the

VA. Alternatively, congress may determine that veterans’ relative economic circumstances do not justify contracting

preferences or that an additional small business contracting preference program would impede small businesses currently

eligible for preferences, or burden agencies implementing existing preference programs.

R47226

June 6, 2024

R. Corinne Blackford

Analyst in Small Business

and Economic

Development Policy

Federal Contracting by Veteran-Owned Small Businesses 
 
Congressional Research Service   
Contents 
Introduction ..................................................................................................................................... 1 
Veteran Workers, Business Owners, and Contractors...................................................................... 2 
Veteran-Owned Contractors and Federal Contract Awards ....................................................... 3 
Veteran-Owned Firms by Location ........................................................................................... 4 
Policy Context ................................................................................................................................. 6 
SDVOSB Program .................................................................................................................... 8 
SDVOSB Program Eligibility ............................................................................................. 8 
SDVOSB Program Contracting Goal ................................................................................. 9 
SDVOSB Program Oversight ........................................................................................... 10 
Veterans First Program ............................................................................................................. 11 
Veterans First Program Eligibility ..................................................................................... 11 
Veterans First Program Contracting Goals........................................................................ 12 
Program Oversight ............................................................................................................ 13 
Veteran Contracting Support Programs ................................................................................... 13 
SBA Programs ................................................................................................................... 13 
Other Federal Contracting Assistance ............................................................................... 15 
Nonprofit Organizations and Programs ............................................................................ 15 
Congressional Issues ..................................................................................................................... 16 
Options for Congressional Consideration ............................................................................... 17 
Considerations for Expanded Veteran Contracting Preferences ....................................... 18 
Conclusion ..................................................................................................................................... 19 
 
Figures 
Figure 1. Map of Employer Veteran-Owned Small Businesses ...................................................... 5 
Figure 2. Map of All Veteran-Owned Businesses ............................................................................ 6 
  
Tables 
Table 1. Veteran Business Ownership by Employer and Non-Employer Firm Type, 2020-
2021 .............................................................................................................................................. 2 
Table 2. Contract Awards to Service-Disabled Veteran-Owned Small Businesses by Type 
of Contracting Preference, FY2022.............................................................................................. 4 
Table 3. Key Legislation Chronology.............................................................................................. 7 
Table 4. Service-Disabled Veteran-Owned Small Business Contract Awards, FY2015-
FY2023 ....................................................................................................................................... 10 
Table 5. VA Contract Award Amounts FY2019-FY2023 .............................................................. 13 
  
Contacts 
Author Information ........................................................................................................................ 20 
Acknowledgments ......................................................................................................................... 20 
 

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 1

Introduction

Congress’s interest in promoting small business contracting dates back to the end of World War II

and the outbreak of the Korean War, when war-induced shortages of materials, coupled with an

inability to obtain defense contracts or financial assistance, threatened thousands of small

businesses.

In 1953, Congress passed, and President Dwight D. Eisenhower signed into law, the

Small Business Act (P.L. 83-163), authorizing the U.S. Small Business Administration (SBA).

The Small Business Act specifies that it is Congress’s declared policy to promote the interests of

small businesses to “preserve free competitive enterprise.”

Since 1953, Congress has imposed

requirements on the federal procurement process to help small businesses receive a fair

proportion of federal contracts and subcontracts, primarily by establishing federal procurement

goals and various contracting preferences—including restricted competitions (set-asides) and sole

source awards—for small businesses.

Several federal small business contracting programs (e.g., the 8(a) Business Development

Program and HUBZone programs) provide contracting preferences to small businesses, including

service-disabled veteran-owned small businesses (SDVOSBs).

The federal government has a

government-wide procurement goal of awarding at least 5% of federal contract award dollars to

SDVOSBs each fiscal year.

Contracting officers at federal agencies may limit competition for

contracts for SDVOSBs under certain circumstances in order to help the government reach its

goal. Although no government-wide procurement goal for nondisabled veteran-owned small

businesses (VOSBs) exists, the Department of Veterans Affairs (VA) administers a unique

program limited to its agency known as the Veterans First program, which provides contracting

preferences to VOSBs.

This report provides information on the existing landscape of federal programs supporting VOSB

contractors, including SDVOSBs. It covers the procurement goals, regulations, and contract

award priorities that apply to these businesses and offers an overview of the available data on

these firms. It discusses the oversight issues affecting the SDVOSB contracting program and the

VA’s contracting program. The final sections of the report discuss issues of congressional interest,

including considerations for the expansion of procurement preferences to VOSBs.

U.S. Congress, Senate Select Committee on Small Business, Small Business Administration, committee print, 83

Cong., 1

sess., August 10, 1953 (Washington, DC: GPO, 1953), p. iii; and U.S. Congress, House Committee on

Banking and Currency, Small Business Act of 1953, report to accompany H.R. 5141, 83

Cong., 1

sess., May 28,

1953, H.Rept. 83-494 (Washington, DC: GPO, 1953). For further information related to small business contracting, see

CRS Report R45576, An Overview of Small Business Contracting, by Robert Jay Dilger and R. Corinne Blackford.

For more information about P.L. 83-163, the Small Business Act of 1953 (as amended), see https://www.govinfo.gov/

content/pkg/COMPS-1834/pdf/COMPS-1834.pdf; and 15 U.S.C. §631(a).

Set-aside is a commonly used term to refer to a contract competition in which only small businesses, or specific types

of small businesses, may compete. Set-asides can be total or partial, depending on whether the entire procurement, or

just a segment of it, is restricted. Sole source awards are noncompetitive procurements made after soliciting and

negotiating with one source.

A service-disabled veteran is defined as an individual who possesses either a valid disability rating letter issued by the

Department of Veterans Affairs, establishing a service-connected rating between 0% and 100%, or a valid disability

determination from the Department of Defense or is registered in the Beneficiary Identification and Records Locator

Subsystem maintained by Department of Veterans Affairs’ Veterans Benefits Administration as a service-disabled

veteran. Reservists or members of the National Guard disabled from a disease or injury incurred or aggravated in line

of duty or while in training status also qualify. 13 C.F.R. §128.200(b).

This goal was increased from 3% to 5% by P.L. 118-31, the National Defense Authorization Act for Fiscal Year 2024.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 2

Veteran Workers, Business Owners, and Contractors

Economic data from the U.S. Bureau of Labor Statistics and the U.S. Census Bureau indicate that

veterans generally have lower unemployment than the general population and tend to be well

represented among businesses owners and the self-employed. In February 2024, the Bureau of

Labor Statistics (BLS) reported an unemployment rate of 2.9%, compared to 4.1% for the

nonveteran civilian population.

Veterans also tend to be well represented among businesses owners and the self-employed,

although some data suggest that younger veterans are not undertaking entrepreneurship at the

same rates as prior cohorts.

According to Census Bureau datasets on veteran business ownership,

over 300,000 employer firms owned by veterans existed in 2020

and 1.3 million out of more

than 27 million non-employer firms (self-employed proprietors) were owned by veterans.

Based

on these numbers, approximately 5% of employer firms and 4.8% of non-employer firms were

owned by veterans.

Table 1 presents these data.

Table 1. Veteran Business Ownership by Employer and Non-Employer Firm Type,

2020-2021

Business Ownership

Employer Firms

Non-Employer Firms

Veteran-Owned

304,000

1,300,000

Percentage Veteran-Owned

5.0%

4.8%

Total (any ownership)

6,100,000

27,200,000

Sources: U.S. Census Bureau, “Annual Business Survey: Statistics for Employer Firms by Industry, Sex, Ethnicity,

Race and Veteran Status for the U.S., States, and Metro Areas: 2021”; U.S. Census Bureau, “Nonemployer

Statistics by Demographics series (NES-D): Statistics for Employer and Nonemployer Firms by Industry, Sex,

Ethnicity, Race, and Veteran Status for the U.S., States, and Metro Areas: 2020.”

Notes: Employer firm data are for 2021. Non-employer firm data are for 2020. The Annual Business Survey

uses the collection year (the year the survey was collected) in the survey name rather than the reference year

(the year the survey collects data on). The 2021 ABS, for example, covers reference year 2020 (see “Annual

Business Survey Methodology” at Census.gov). The Nonemployer Statistics by Demographics series utilizes

various administrative records and the Census Bureau data sources that include data from the Department of

Veterans Affairs (see “Nonemployer Statistics by Demographics Methodology” at Census.gov).

U.S. Department of Labor, Bureau of Labor Statistics, “Table A-5. Employment Status of the Civilian Population 18

Years and over by Veteran Status, Period of Service, and Sex, Not Seasonally Adjusted,” at https://www.bls.gov/

news.release/empsit.t05.htm.

Sidra Montgomery et al. Millennial Veteran Entrepreneurship: Research on the Next Generation of Veteran

Entrepreneurs, U.S. Small Business Administration (SBA), Office of Advocacy June 2021.

U.S. Census Bureau, “Annual Business Survey: Statistics for Employer Firms by Industry, Sex, Ethnicity, Race and

Veteran Status for the U.S., States, and Metro Areas: 2021.”

Employer firms are nonfarm businesses that have paid employees and annual receipts of at least $1,000.

U.S. Census Bureau, “Nonemployer Statistics by Demographics series (NES-D): Owner Characteristics of

Nonemployer Firms by Sector, Sex, Ethnicity, Race, and Veteran Status for the U.S., States, and Metro Areas: 2020.”

Non-employer firms are businesses with no paid employment or payroll, annual receipts of $1,000 or more ($1 million

or more in the construction industries), and filing IRS tax forms for sole proprietorships (Form 1040, Schedule C),

partnerships (Form 1065), or corporations (the Form 1120 series).

Firms in the following industries were excluded from the survey: Crop and Animal Production (NAICS 111 and

112); Rail Transportation (NAICS 482); Postal Service (NAICS 491); Monetary Authorities-Central Bank (NAICS

521); Funds, Trusts, and Other Financial Vehicles (NAICS 525); Religious, Grantmaking, Civic, Professional, and

Similar Organizations (NAICS 813); Private Households (NAICS 814); Public Administration (NAICS 92).

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 3

Veteran-Owned Contractors and Federal Contract Awards

The number of VOSBs interested in contracting with the government is reflected in the number of

registrations in the Federal Procurement Data System database at SAM.gov.

As of March 19,

2024, this database included over 61,000 veteran-owned firms and 36,500 firms registered as

active, service-disabled veteran-owned firms interested in doing business with federal agencies.

Federal agencies have awarded around $150 billion annually to small business contractors in

recent fiscal years.

VOSBs received more than $33 billion in contract awards in FY2022.

About $27 billion went to SDVOSBs.

The Department of Defense (DOD) and VA are by far the largest sources of federal contract

dollars for both VOSBs and SDVOSBs. DOD awards accounted for over 42% of contract dollars

to VOSBs and 39% to SDVOSBs in FY2022.

VA awards accounted for nearly 28% of contract

dollars to VOSBs and 34% to SDVOSBs in FY2022.

The Department of Homeland Security

was the next most significant contracting agency for both types of firms, accounting for about 7%

($2.4 billion) of contract dollars to VOSBs and 4% ($1.5 billion) to SDVOSBs.

Even though agencies may set-aside contracts for SDVOSBs, and the VA may do so for VOSBs

as well, not all contracts awarded to these types of firms involve competition restrictions. Both

VOSBs and SDVOSBs also receive federal contracts under full and open competition. FY2022

data show that nearly $15 billion (55%) was awarded to SDVOSBs in full and open competition,

rather than through a set-aside or sole-source award.

Table 2 presents the percentages of

SDVOSB contract award dollars made through set-asides, sole-source awards, and open

competition.

The Entity Search tool at SAM.gov, selecting for an Entity Status entry of “Active Registration” and Socio-

Economic Status entry of “Service Disabled Veteran Owned Business” or “Veteran Owned Business.”

SAM.gov Entity Search, accessed March 19, 2024.

GSA, “Federal Procurement Data System Report,” at https://www.gsa.gov/policy-regulations/policy/acquisition-

policy/small-business-reports. $144 billion was awarded to small businesses in FY2020, $149 billion in FY2021, and

nearly $155 billion in FY2022.

U.S. General Services Administration (GSA), “Small Business Goaling Report,” FY2022, at https://sam.gov/reports/

awards/static.

Ibid.

Ibid. DOD awarded over $14 billion to VOSBs in FY2022, out of a total of $33.3 billion to those firms, and $10.5

billion to SDVOSBs, out of $27 billion.

Ibid. VA awarded more than $9 billion to VOSBs, out of a total of $33.3 billion to those firms, and $9.2 billion to

SDVOSBs, out of $27 billion.

GSA, “Federal Procurement Data System Report,” at https://www.gsa.gov/policy-regulations/policy/acquisition-

policy/small-business-reports.

Ibid.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 4

Table 2. Contract Awards to Service-Disabled Veteran-Owned Small Businesses by

Type of Contracting Preference, FY2022

Amount of

Federal

Contract

Award

Dollars

Percentage

Awarded with

Set-Aside

Percentage

Awarded as

Sole Source

Contract

Percentage

Awarded with

Small

Business

Preference

Percentage

Awarded in

Open

Competition

$27.1 billion

26%

12%

55%

Source: GSA, “Federal Procurement Data System Report,” FY2022, at https://www.gsa.gov/policy-regulations/

policy/acquisition-policy/small-business-reports.

Notes: Table data may not match FY2022 Small Business Procurement Scorecard data. The Federal

Procurement Data System report from the GSA reflects data on all prime contract awards made each year per

Section 15(h)(3)(A)(ii) of the Small Business Act, without the contract exclusions SBA makes when preparing the

Scorecard. Percentages do not sum to 100 because awards may have been made through other preferences.

a. Percentage Awarded with Set-Aside refers to set-aside available for the type of business ownership

indicated (Small Business set-aside or SDVOSB set-aside) and does not include any other type of set-aside

available (e.g., small business set-aside, 8(a) set-aside, women-owned small business set-aside, etc.).

b. Percentage Awarded as Sole Source Contract refers to sole source contracts available for the type of

business ownership indicated (Small Business contract or SDVOSB contract).

c. Percentage Awarded with Small Business Preference refers to contracts made with a small business

preference unrelated to veteran status (i.e., competitions restricted to small businesses in general).

Veteran-Owned Firms by Location

The following maps show the number of VOSBs by state, and their proportion relative to

nonveteran owned firms, using U.S. Census Bureau survey data. The first map, shown in Figure

1, shows the number and percentage of employer firms

owned by veterans in each state.

Employer firms have paid employees, and so exclude self-employed veterans and sole

proprietorships that do not have a payroll.

States with the largest numbers of VOSBs include those with the largest populations and number

of businesses in general, such as California, Florida, New York, and Texas. States with the highest

percentages of employer VOSBs (relative to the number of employer firms in the state) include

West Virginia (10.8%), Virginia (8.0%), Alabama (7.5%), South Carolina (7.3%), and New

Hampshire (9.3%).

Figure 2 shows the number and percentage of all (employer and non-employer) firms owned by

veterans in each state. Several of the same observations about the geography of employer VOSBs

apply to Figure 2. However, when adding the non-employer

VOSBs to the data to obtain a total

of all VOSBs, the states with the highest percentages of VOSBs become West Virginia (7.9%),

South Dakota (7.7%), South Carolina (7.7%), and Virginia (7.4%).

Employer firms are nonfarm businesses that have paid employees and annual receipts of at least $1,000.

Non-employer firms are businesses with no paid employment or payroll, annual receipts of $1,000 or more ($1

million or more in the construction industries), and filing IRS tax forms for sole proprietorships (Form 1040, Schedule

C), partnerships (Form 1065), or corporations (the Form 1120 series).

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 5

Figure 1. Map of Employer Veteran-Owned Small Businesses

2021 Counts and Percentages of Employer Firms by State

Source: U.S. Census Bureau, “Annual Business Survey: Statistics for Employer Firms by Industry, Sex, Ethnicity,

Race and Veteran Status for the U.S., States, and Metro Areas: 2021.”

Note: Data were suppressed by the Census Bureau for four states (Alaska, Connecticut, Maine, Vermont)

because the estimates do not meet publication standards due to high sampling variability, poor response quality,

or other concerns about the estimate quality.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 6

Figure 2. Map of All Veteran-Owned Businesses

2020 and 2021 Counts and Percentages of All VOSBs by State

Sources: U.S. Census Bureau, “Annual Business Survey: Statistics for Employer Firms by Industry, Sex, Ethnicity,

Race and Veteran Status for the U.S., States, and Metro Areas: 2021”; and “Nonemployer Statistics by

Demographics series (NES-D): Statistics for Employer and Nonemployer Firms by Industry, Sex, Ethnicity, Race,

and Veteran Status for the U.S., States, and Metro Areas: 2020.”

Notes: The Census Bureau suppressed data for four states (Alaska, Connecticut, Maine, Vermont) because the

estimates do not meet publication standards due to high sampling variability, poor response quality, or other

concerns about the estimate quality.

Policy Context

Among the federal small business contracting programs (e.g., the 8(a) Business Development

Program and HUBZone programs) that provide contracting preferences to small businesses, the

preference for small businesses owned by veterans is specifically for those who are service-

disabled. A service-disabled veteran is defined as

a veteran who is registered in the Beneficiary Identification and Records Locator

Subsystem or successor system, maintained by Department of Veterans Affairs’ Veterans

Benefits Administration as a service-disabled veteran.

13 C.F.R. §128.102 and 38 U.S.C. 101(2). Reservists or members of the National Guard called to federal active duty

or disabled from a disease or injury incurred or aggravated in line of duty or while in training status also qualify as

veterans.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 7

The Veterans Entrepreneurship and Small Business Development Act of 1999, P.L. 106-50,

created the federal government’s 3% government-wide annual procurement goal for SDVOSBs.

The goal was increased to 5% by P.L. 118-31, the National Defense Authorization Act (NDAA)

for Fiscal Year 2024. Federal contracting officers may limit competition for contracts for

SDVOSBs under specified circumstances in order to help the government reach its goal by

creating a “set-aside” for SDVOSBs. Eligible SDVOSBs must be at least 51% owned and

controlled by a service-disabled veteran.

VOSB status alone is insufficient to qualify for the

government-wide SDVOSB program.

The Federal Acquisition Regulation (FAR) states that agency contracting officers must set aside

“any acquisition over the simplified acquisition threshold

for small business participation,”

and “shall first consider” socioeconomic contracting programs such as the SDVOSB contracting

program before opting to use a general small business set-aside.

Although no government-wide procurement goal for VOSBs exists, the VA maintains a program

limited to its agency, which reflects its “long-standing commitment to contracting with veteran-

owned small businesses.”

The Veterans First Contracting Program was established by P.L. 109-

461 in 2006.

In addition, the SBA offers various technical assistance programs designed to promote veteran

entrepreneurship, as well as counseling and technical assistance that is also available to all small

businesses interested in competing for government contracts.

Table 3, below, provides a timeline of key legislative actions related to veterans contracting.

Table 3. Key Legislation Chronology

Year

Legislation

1974

P.L. 93-237, amending the Small Business Act, directing the SBA to give special

consideration to veterans

1999

P.L. 106-50, the Veterans Entrepreneurship and Small Business Development Act

of 1999, creating an annual 3% SDVOSB procurement goal

2003

P.L. 108-183, the Veterans Benefits Act of 2003, authorizing preferences for

SDVOSBs

2006

P.L. 109-461, the Veterans Benefits, Health Care, and Information Technology Act

of 2006, establishing the VA’s Veterans First program

2021

P.L. 116-315, Johnny Isakson and David P. Roe, M.D. Veterans Health Care and

Benefits Improvement Act of 2020, gave the VA authority to provide contracting

preferences to contractors that employ veterans on a full-time basis

2021

P.L. 116-283, the National Defense Authorization Act for Fiscal Year 2021,

required the creation of a government-wide SDVOSB certification process

13 C.F.R. §128.200(b)(2). One exception is eligibility for the surviving spouse of a deceased service-disabled veteran

small business owner (See 13 C.F.R. §128.202(i)).

13 C.F.R. §128.101.

48 C.F.R. §2.101(b). Generally, the simplified acquisition threshold is $250,000 though under certain circumstances

it may increase.

48 C.F.R. §19.502-2(b).

48 C.F.R. §19.203(c).

U.S. Department of Veterans Affairs (VA), at https://www.va.gov/OSDBU/entrepreneur/vetsFirst.asp.

For additional information and analysis of SBA’s management and training programs for veterans, see CRS Report

R42695, SBA Veterans Assistance Programs: An Analysis of Contemporary Issues.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 8

Year

Legislation

2023

P.L. 118-31, the National Defense Authorization Act for Fiscal Year 2024,

increased the SDVOSB contracting goal to 5% and eliminated the ability of

agencies to count contract awards to self-certified SDVOSB towards their

SDVOSB procurement goals.

SDVOSB Program

The SDVOSB program is the only government-wide procurement preference program for small

businesses owned by service-disabled veterans. The program allows federal contracting officers

to set aside federal contracts for SDVOSBs in order to reach the statutory 5% contracting goal.

Under specified circumstances, contracting officers may also award sole-source contracts without

competition to an SDVOSB.

When considering a set-aside to an SDVOB, an agency’s contracting officer must “(1) Have a

reasonable expectation that at least two responsible SDVOSBs will submit offers and (2)

Determine that the award can be made at fair market price.”

This general requirement within

various contracting programs is known as the Rule of Two. If at least two SDVOSBs are not

expected to submit offers, the contracting officer may award a sole source contract to an

SDVOSB as long as the responsible contractor is able to perform the contract; the award can be

made at a “fair and reasonable price”; and the anticipated award price of the contract, including

option periods, will not exceed $4 million, or $7 million in the case of a manufacturing contract.

SDVOSB Program Eligibility

SDVOSBs are eligible for contract set asides and sole-source contract awards when they meet the

following business size and ownership criteria: they must be small, as defined in Section 3(q) of

the Small Business Act

and the SBA’s implementing regulations;

be at least 51%

unconditionally and directly owned and controlled by one or more service-disabled veterans; have

one or more service-disabled veterans manage day-to-day operations and make long-term

decisions; and be owned by one or more eligible veterans that have a service-connected disability

as determined by the VA.

In cases where a veteran has a permanent and severe disability, a veteran’s spouse may qualify as

an eligible SDVOSB owner.

In addition, some eligible SDVOSBs may be owned and controlled

by a deceased veteran’s surviving spouse.

Apart from these instances, the program eligibility

status of a veteran does not transfer to a veteran’s spouse.

13 C.F.R. §128.404(c)(1).

13 C.F.R. §128.405.

15 U.S.C. §632(q).

13 C.F.R. §128. Per 13 C.F.R. §121.406(b), a business may “qualify as a small business to provide manufactured

products as a nonmanufacturer under specified conditions, but that firm must use a small business manufacturer as its

supplier. Per 13 C.F.R. §121.1202(a), waivers of this rule “will be granted when there are no small business

manufacturers or processors available for that class of products.”

13 C.F.R. §128.200(b); 13 C.F.R. §128.202-§128.203.

13 C.F.R. 128.202(i); 48 C.F.R. §802.101. The veteran must have had a 100% service-connected disability rating.

48 C.F.R. §802.101; 15 U.S.C. §632(q). The veteran must have died as a direct result of a service-connected

disability. Surviving spouse means “an individual who has been listed in the Department of Veterans Affairs’ (VA)

Veterans Benefits Administration (VBA) database of veterans and family members.” The surviving spouse is treated as

(continued...)

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 9

Section 862 of the FY2021 NDAA (P.L. 116-283) required the creation of a government-wide

SDVOSB certification process, and the end of SDVOSB self-certification.

Prior to the SBA

certification requirement, there was no government-wide SDVOSB certification program,

and

firms seeking SDVOSB contract set-asides or sole-source awards with agencies other than the VA

only needed to self-certify their status; to be eligible for VA contracts, VOSBs and SDVOSBs had

to be verified by the VA’s Center for Verification and Evaluation, per 38 U.S.C. §8127.

The SBA

certification system’s establishment involved the transfer of the VA’s Center for Verification and

Evaluation, although the VA continues to determine whether an individual qualifies as a veteran

or service-disabled veteran.

SDVOSB Program Contracting Goal

The SDVOSB program aims to help federal agencies reach a government-wide goal of awarding

not less than 5% of the total value of all prime contract and subcontract awards for each fiscal

year to SDVOSBs.

Section 502 of P.L. 106-50 established an original goal of 3%. The Veterans

Benefits Act of 2003 (P.L. 108-183) authorizes federal agencies to use set-asides and sole source

awards to help them meet the goal. The dollar amount of SDVOSB contract awards has increased

each year since FY2003, and the 3% goal was met for the first time in FY2012.

Federal

agencies have continued to meet the 3% goal since then.

In FY2023, federal agencies made 5.07% of eligible awards

to SDVOSBs. The contract award

amounts for each fiscal year, 2015-2023, are shown below in Table 4.

if the spouse were the deceased veteran for the purpose of maintaining the status of the small business concern as a

service-disabled veteran-owned small business, but only for a certain period of time, until the surviving spouse

remarries, relinquishes ownership interest, or until 10 years after the date of the veteran’s death. “In the case of a

surviving spouse of a veteran with a service-connected disability rated as less than 100 percent disabling who does not

die as a result of a service-connected disability,” the spouse no longer qualifies after three years following the date of

the death of the veteran.

SBA regulations around VOSB and SDVOSB certification are available at 13 C.F.R. §128.300-§128.310. The SBA

was required to establish a new SDVOSB certification process by January 1, 2023, but provided a one-year grace

period to businesses so that SDVOSBs were allowed to continue to self-certify during the period ending January 1,

2024. Some firms effectively have a longer grace period before needing SBA certification. According to the final

rule implementing the new process, firms that had been “verified” by the VA’s former certification system for VOSBs

prior to January 1, 2023, could be deemed “certified by SBA during the time that remains in the firm’s three-year term

of [program] eligibility.” Small Business Administration, “Veteran-Owned Small Business and Service-Disabled

Veteran-Owned Small Business-Certification,” 87 Federal Register 73400, November 29, 2022.

Small Business Administration, “Veteran-Owned Small Business and Service-Disabled Veteran-Owned Small

Business-Certification,” 87 Federal Register 73400, November 29, 2022.

Ibid. Requirements for SDVOSB certification and the certification process are codified at 15 U.S.C. §657f.

Small Business Administration, “Veteran-Owned Small Business and Service-Disabled Veteran-Owned Small

Business-Certification,” 87 Federal Register 73400, November 29, 2022.

In order for agencies to count a contract with a SDVOSB toward their annual procurement goal, the award must be

made to a certified SDVOSB (per Section 864 of the National Defense Authorization Act for Fiscal Year 2024 (P.L.

118-31)). Subcontract awards by prime contractors to SDVOSBs must also be made to certified firms in order for them

to be counted toward agency SDVOSB subcontracting goals. SBA issued a direct final rule implementing these

requirements that is effective August 5, 2024. Small Business Administration, “Eliminating Self-Certification for

Service-Disabled Veteran-Owned Small Businesses,” 89 Federal Register 48266, June 6, 2024.

GSA, “Sam.Gov Data Bank, Ad Hoc report,” at https://sam.gov/reports/awards/adhoc.

“Eligible awards” refers to a small business eligible baseline, which “excludes certain contracts that the SBA has

determined do not realistically reflect the potential for small business participation in federal procurement.” Excluded

contracts include those funded mainly by agency-generated sources (nonappropriated funds), those not covered by the

Federal Acquisition Regulation, and those not reported in the Federal Procurement Data System (e.g., contracts valued

(continued...)

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 10

Table 4. Service-Disabled Veteran-Owned Small Business Contract Awards,

FY2015-FY2023

($ in billions)

Fiscal Year

Amount of Federal

Contract Award

Dollars

Percentage of Small

Business Eligible

Awards

Percentage of

Subcontract Awards

2023

$31.9

5.07%

2.63%

2022

$27.0

4.45%

2.16%

2021

$25.0

4.41%

2.14%

2020

$23.7

4.23%

2.14%

2019

$21.8

4.34%

1.95%

2018

$20.6

4.27%

2.10%

2017

$17.9

4.05%

1.90%

2016

$16.3

3.98%

1.60%

2015

$13.8

3.93%

1.80%

Source: Small Business Administration (SBA), “Small Business Procurement Scorecard [FY2015-FY2023],” at

https://www.sba.gov/document/support-small-business-procurement-scorecard-overview.

Notes: The small business eligible baseline excludes certain contracts that the U.S. Small Business

Administration (SBA) has determined do not realistically reflect the potential for small business participation in

federal procurement (such as those awarded to mandatory and directed sources), contracts funded

predominately from agency-generated sources (i.e., nonappropriated funds), contracts not covered by the

Federal Acquisition Regulations, acquisitions on behalf of foreign governments, and contracts not reported in the

GSA’s Federal Procurement Data System—Next Generation (such as government procurement card purchases

and contracts valued less than $10,000). Achievements include DOE M&O first-tier subcontracts, and double-

credit for local-area set-asides, Puerto Rico, and territory awards.

SDVOSB Program Oversight

In part because SDVOSBs were, for a time, self-certified, oversight concerns have included the

potential for agencies to award contracts intended for SDVOSBs to businesses that do not meet

SDVOSB eligibility requirements. A 2020 DOD Inspector General audit found that contracting

activities had awarded 27 contracts valued at $827.8 million to 16 contractors that were not

eligible for classification as SDVOSBs.

Section 862 of P.L. 116-283 (NDAA 2021) required the SBA to establish a government-wide

SDVOSB certification and periodic recertification process by January 1, 2023. This transition

will required VA to (1) abolish its Center for Verification and Evaluation and transfer the center’s

functions to SBA, and (2) relinquish maintenance of its database of SDVOSBs to SBA and

provide compensation to SBA for taking on this function.

While VA continues to determine

whether an individual qualifies as a veteran or service-disabled veteran, SBA now certifies firm

at less than $10,000). For more information, see CRS Report R45576, An Overview of Small Business Contracting, by

Robert Jay Dilger and R. Corinne Blackford.

U.S. Department of Defense, Office of the Inspector General, Audit of DoD Service-Disabled Veteran-Owned Small

Business Contract Awards, February 18, 2020, p. 7.

The SBA assumed ownership of the Center for Verification and Evaluation (CVE). Once transferred to the SBA, this

function will integrate the process of all small business certification programs. The SBA budget request includes $20

million to manage this transition and maintain the program. U.S. Small Business Administration, FY 2023

Congressional Justification and FY 2021 Annual Performance Report, pp. 4-5.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 11

eligibility for contracting preferences.

SBA has implemented the Veterans Certification Program

in regulations at 13 C.F.R. Part 128.

Veterans First Program

The VA has established its own SDVOSB and VOSB contracting preferences, known as the

Veterans First program. According to this program’s regulations, VA contracting officers must set

aside contracts for SDVOSBs and VOSBs where the Rule of Two is met,

granting priority

consideration to SDVOSBs.

Both SDVOSBs and VOSBs receive priority consideration before

any other type of small business.

The complete order of priority is as follows: (1) SDVOSB, (2)

VOSB, (3) 8(a) or HUBZone small business,

and (4) other small businesses with preference of

some kind, “with due deference to the priority for awarding to women-owned small businesses.”

The prioritization of certain types of small business concerns is not a feature of government-wide

small business contract preference programs and is unique to the VA.

In addition to setting aside contracts for SDVOSBs and VOSBs, contracting officers may also

award contracts on a sole source basis through noncompetitive procedures, as long as the contract

award will not exceed $5 million (including options) and the award can be made at a fair and

reasonable price; again prioritizing SDVOSBs first, officers can only make sole source awards to

a VOSB if no responsible SDVOSB has been identified.

The contracting officer’s determination

whether to make a sole source award is a business decision wholly within the discretion of the

contracting officer. A determination that only one SDVOSB concern is available to meet the

requirement is not required.

Veterans First Program Eligibility

SDVOSB eligibility requirements under the Veteran First program mirror those for the

government-wide SDVOSB program, which is governed by SBA regulations.

Surviving spouses

are eligible for the program and are defined in the same way as the SBA’s government-wide

SDVOSB program defines them.

Section 862 of P.L. 116-283; Small Business Administration, “Veteran-Owned Small Business and Service-Disabled

Veteran-Owned Small Business-Certification,” 87 Federal Register 73400, November 29, 2022.

Ibid.

38 U.S.C. §8127(d).

38 U.S.C. 8127(h); 48 C.F.R. §819.7005.

48 C.F.R. §819.7005.

The 8(a) and HUBZone programs are government-wide contracting preference programs that fall under the banner of

socioeconomic contracting programs for small businesses. There are government-wide procurement goals associated

with both programs. For additional information, see CRS Report R45576, An Overview of Small Business Contracting.

48 C.F.R. §819.7005. The VA proposed to amend the hierarchy of small business preferences to explicitly mention

of WOSBs, in the agency “Proposed Legislation Summary” as part of its FY2025 Budget Submission. The change

would mean referencing the WOSB program as part of the third tier in the hierarchy, and stating that preferences in that

tier have parity.

48 C.F.R. §819.7007 and 48 C.F.R. §819.7008; 38 U.S.C. §8127(c).

48 C.F.R. §819.7007.

13 C.F.R. §128.

48 C.F.R. §819.7005; 48 C.F.R. §802.101 “Surviving spouse.”

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 12

VOSBs are eligible under the Veterans First program when at least 51% of the business is owned

by one or more veterans and both management and daily business operations are controlled by

one or more veterans.

Unlike the government-wide SDVOSB contracting program, the VA’s Veterans First program has

long required firms to obtain “verification” of their status as an SDVOSB in order to compete for

set-asides and sole source contracts. Prior to the creation of an SBA certification process, the VA’s

Center for Verification and Evaluation verified SDVOSBs and VOSBs for the Veterans First

program.

SBA established a new certification process as required by the NDAA 2021, and

implementing regulations are available at 13 C.F.R. §128.300-§128.310.

Veterans First Program Contracting Goals

Since implementing the Veterans Benefits, Health Care, and Information Technology Act of 2006

(P.L. 109-461), the VA has set a VOSB contracting goal annually for the percentage of its total

procurement that it awards to VOSBs. The VA’s FY2023 VOSB goal was 17% and the agency

reports that it attained 19.6%.

The agency awarded 17.3% of its total procurement to VOSBs in

FY2022 and 17.2% in FY2021.

All federal agencies contract with veteran-owned businesses but the share of federal procurement

dollars flowing through VA is substantial because of its VOSB and SDVOSB programs. Only the

DOD awards more contract dollars to veteran-owned businesses than the VA, which awarded

more than a quarter of estimated VOSB federal government contract dollars, and a third of

SDVOSB contract dollars (see “Veteran-Owned Contractors and Federal Contract Awards”).

Table 5 presents the percentages of “small business eligible” contract dollars awarded to VOSBs

and SDVOSBs, used by the GSA for its annual Small Business Goaling Reports and by SBA for

its Small Business Procurement Scorecards.

48 C.F.R. §2.101 “Veteran owned small business concern”; per 38 U.S.C. §101(2), “The term veteran means a

person who served in the active military, naval, air, or space service, and who was discharged or released therefrom

under conditions other than dishonorable.”

Small Business Administration, “Veteran-Owned Small Business and Service-Disabled Veteran-Owned Small

Business-Certification,” 87 Federal Register 73400, November 29, 2022.

The agency aimed to award 10% of new contracts to VOSBs using a set-aside preference and did so for 16%. VA,

FY 2025 Budget Submission: Supplemental Information and Appendices, Volume 1 of 4, March 2024, p. 132. Note that

the figures provided by the VA in its budget submission refer to percentages of total procurement, rather than “small

business eligible contracts,” which are used in Small Business Goaling Reports and by the SBA to create annual agency

Procurement Scorecards.

VA, FY 2024 Budget Submission: Supplemental Information and Appendices, Volume 1 of 4, March 2023,

Supplemental Information, p. 18. Note that the figures provided by the VA in its budget submission refer to

percentages of total procurement, rather than “small business eligible contracts,” which are used in Small Business

Goaling Reports and by the SBA to create annual agency Procurement Scorecards.

U.S. General Services Administration (GSA), “Small Business Goaling Report,” FY2022, at https://sam.gov/reports/

awards/static.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 13

Table 5. VA Contract Award Amounts FY2019-FY2023

Fiscal Year

Small Business Eligible

Dollars

Percentage of Agency

Contract Award

Dollars to VOSBs

Percentage of Agency

Contract Award

Dollars to SDVOSBs

2023

$62.6 billion

17%

16.7%

2022

$56.2 billion

16.5%

16.3%

2021

$34.6 billion

24.2%

23.8%

2020

$36.9 billion

20.4%

20.2%

2019

$27.5 billion

23.7%

23.4%

Sources: U.S. General Services Administration, “Sam.Gov Data Bank, Static: Small Business Goaling Report

[FY2019-FY2023],” at https://sam.gov/reports/awards/static.

Notes: The data for the Small Business Goaling Reports is from SAM.gov dynamic database. Updates to contract

data, including new contract actions, modifications, and corrections are made on a regular basis and such updates

could result in changes to contract data on actions for current and/or prior fiscal years. Table data may not

match SBA Small Business Procurement Scorecard data.

Program Oversight

Implementation of the VA’s Veterans First program, like government-wide contracting programs,

has raised questions about management and federal agencies’ approaches to mitigating risk

associated with contracting. VA’s acquisition management (beyond the Veterans First program)

has remained a GAO-designated “high risk area” since 2019, partly because “VA has among the

highest obligations and number of contract actions in the federal government.”

In response to

GAO recommendations, the agency issued an initial “action plan to address acquisition

management challenges” in March 2021 and updated it in September 2022; it also “continues to

make progress in building capacity,” such as by implementing training and developing guidance

for contracting staff, and developing a “knowledge portal” with tools for acquisition personnel.

Veteran Contracting Support Programs

A network of SBA programs, public-private partnerships, and nongovernmental organizations

supports veteran entrepreneurs, including federal contractors. Although SDVOSBs are the only

VOSBs eligible for federal government-wide contracting preferences, the SBA, along with other

federal agencies and nonfederal entities, collaborate to serve the entire VOSB community.

SBA Programs

The SBA provides management and technical assistance services to veterans through its Veterans

Business Outreach Centers (VBOCs) and various management and technical assistance training

partners (e.g., Small Business Development Centers, Women’s Business Centers, and SCORE

The SBA’s Office of Veterans Business Development (OVBD) supports the following veteran-

specific entrepreneurship training programs: the Boots to Business and Boots to Business Reboot

programs; the Service-Disabled Veteran Entrepreneurship Training Program (SDVETP), which is

GAO’s “High Risk” list, updated at the start of each new Congress, includes programs and operations that are

vulnerable to waste, fraud, abuse, or mismanagement, or in need of transformation. The current list with explanations

of why an area is deemed high risk is available at https://www.gao.gov/high-risk-list.

Ibid.

Formerly known as the Service Corps of Retired Executives.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 14

delivered through higher education partners; the Veteran Federal Procurement Entrepreneurship

Training Program (VFPETP), which is provided through a public-private partnership known as

the Veteran Institute for Procurement (VIP); and programing for women veterans, female military

spouses/partners, and Native American, Alaska Native, and Native Hawaiian entrepreneurs.

The SBA implements Boots to Business (B2B) within the DOD’s Transition Assistance Program

(TAP) for servicemembers as they prepare to leave military service.

The SBA collaborates with

various resource partners, the DOD, other federal agencies, and local military installations to

provide this introductory training on how to start a business. Transitioning active-duty

servicemembers (including National Guard and Reserve members) and their spouses are eligible

to participate in the program; the curriculum focuses on business ownership and other self-

employment opportunities, including learning how to access start-up capital resources, technical

assistance, and contracting opportunities.

Boots to Business Reboot (B2BR) extends the Boots

to Business program to veterans “of all eras” (beyond actively transitioning servicemembers),

National Guard and Reserve members, and military spouses.

Select SBA Partnerships Supporting VOSB Programming

“VIP” Partnership

The Veteran Institute for Procurement (VIP) was founded in 2009 as a regional initiative in

Maryland. Funded by the Montgomery County Chamber of Commerce Foundation, VIP is also

underwritten by corporate sponsorships from Lockheed Martin and JPMorgan Chase & Co., and

receives grants from SBA and the state of Maryland.

During the program, “veteran-owned

company executives receive 27 hours of instruction on how to accelerate their federal government

contracting business skills,” from experts from both industry and government.

VIP has trained

thousands of veteran-owned and service-disabled veteran-owned businesses across all 50 states,

Washington, DC, Puerto Rico, and Guam, and VIP graduates have received billions in federal

prime contract awards.

Entrepreneurship Bootcamp for Veterans

Founded at Syracuse University in 2007, the Entrepreneurship Bootcamp for Veterans (EBV)

program has since expanded to additional universities across the country. EBV offers online and

in-person instruction in three phases, followed by 12 months of ongoing support that helps

VOSBs with all of the steps associated with “creating and sustaining an entrepreneurial

SBA, Office of Veterans Business Development, “Veteran-owned businesses,” at https://www.sba.gov/business-

guide/grow-your-business/veteran-owned-businesses.

https://www.dodtap.mil/dodtap/app/home. There are “mandatory components of TAP that are applicable for all

service members who have at least 180 continuous days or more on active duty”; including members of the National

Guard and Reserve.

Ibid.

Veteran Institute for Procurement, “National Center for VIP,” available at https://nationalvip.org/about/; Veteran

Institute for Procurement, “VIP Fast Facts,” at https://nationalvip.org/wp-content/uploads/2022/05/2022-VIP-Fast-

Facts-1.pdf.

“VIP Fast Facts,” at https://nationalvip.org/wp-content/uploads/2022/05/2022-VIP-Fast-Facts-1.pdf.

Ibid.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 15

venture.”

Post-9/11 veterans with an honorable discharge are eligible to apply, and the program

is offered to participants free of charge, including travel and lodging.

ONABEN

ONABEN serves veterans as well as active duty servicemembers in underserved Tribal and Rural

communities. Program offerings cover financial literacy and asset management, start-up planning

and succession planning for established businesses, business expansion, and procurement and

government contracting assistance.

Services are available that cover “all stages of a business life

cycle, from start-up business plan completion to succession planning for established

businesses.”

Other Federal Contracting Assistance

DOD’s Under Secretary of Defense for Acquisition and Sustainment oversees the APEX

Accelerators program for contractors. Formerly known as Procurement Technical Assistance

Centers (PTACs), APEX Accelerators help small businesses “determine whether they are ready

for government opportunities,” complete necessary registration processes, network with

procurement staff and other contractors, “navigate solicitations,” and even “resolve [contract]

performance issues.”

The program “focuses on building a [sic] strong, sustainable, and resilient

U.S. supply chains by assisting a wide range of businesses that pursue and perform under

contracts with the DoD, other federal agencies, state and local governments and with government

prime contractors.”

Manufacturing Extension Partnership National Network Centers (MEP Centers) also assist small

business contractors, specifically in the manufacturing sector. MEP Centers are located in all 50

states and Puerto Rico. MEP is based at the National Institute of Standards and Technology

(NIST), which provides funding for the MEP National Network.

Nonprofit Organizations and Programs

Another element of the support system for VOSBs is the network of nonprofit organizations

supporting VOSBs and veteran contractors. Some organizations specialize in hands-on support to

individual business owners while others convene VOSBs to build up veteran business

communities or do both. Examples of these organizations include The Veteran Women’s

Enterprise Center (VWEC), Bunker Labs, and the National Veteran Small Business Coalition.

While VWEC is an organization providing resources to women veteran clients and women

military spouses, based in Dallas, TX,

Bunker Labs supports VOSBs and veteran spouses

through start-up education, business mentoring, and building connections.

The National Veteran

Institute for Veterans and Military Families at Syracuse University, “About IVMF,” at https://ivmf.syracuse.edu/

programs/entrepreneurship/start-up/ebv/.

Ibid.

ONABEN, “Beyond the Boots: A Veteran and Service Member Initiative,” at https://onaben.org/what-we-do/

signature-programs/.

Ibid.

APEX Accelerators, “What We Do,” https://www.apexaccelerators.us/#/about-us.

Ibid.

U.S. Department of Commerce, National Institute of Standards and Technology, Manufacturing Extension

Partnership (MEP), “About NIST MEP,” accessed March 11, 2024.

Veteran Women’s Enterprise Center, “About Us,” available at https://veteranwomensec.org/about/about-us.

Bunker Labs, “Our Programs,” available at https://bunkerlabs.org/programs/.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 16

Small Business Coalition is mainly a networking and advocacy organization for veteran small

business entrepreneurs in the federal market, “to ensure they are procurement ready and have

enhanced access to opportunities” to work with federal agencies and other government

contractors.

Congressional Issues

Both legislative and executive action on veteran entrepreneurship has created programming and

supportive services through the SBA. Since the enactment of P.L. 93-237 in 1974, instructing the

SBA to give “special consideration to veterans of the Armed Forces of the United States and their

survivors or dependents,” the agency has led federal efforts to support VOSBs and veterans who

want to become business owners. This statute spurred outreach and technical assistance services

tailored for VOSBs but no contracting program. Advocates for SDVOSBs argued, unsuccessfully,

to make SDVOSBs eligible for the SBA’s 8(a) contracting program.

Years later, in its 1998 report to the SBA, the Veterans Affairs Task Force for Entrepreneurship

recommended a government-wide goal of awarding 10% of agency procurement for VOSBs and

SDVOSBs collectively.

In addition, the Task Force recommended legislation establishing a 10%

subcontracting procurement goal and preference for VOSBs.

Both recommendations were

assigned a “high priority” in the Task Force’s report.

Following the Task Force’s findings, Congress authorized the existing government-wide

SDVOSB procurement goal of 3% of federal contract award dollars, through the Veterans

Entrepreneurship and Small Business Development Act of 1999.

Federal procurement preferences followed the creation of the SDVOSB procurement goal,

through the development of the SDVOSB program in 2003.

That year, congress authorized

SDVOSB contracting preferences to enable the government to reach its 3% SDVOSB

procurement goal, and the House Committee on Veterans’ Affairs highlighted the following

statements, drafted by the Congressional Commission on Servicemembers and Veterans

Transition Assistance: “As a matter of fundamental fairness, Congress should accord veterans a

full opportunity to participate in the economic system that their service sustains”; and, “Disabled-

veteran entrepreneurs require additional assistance because these business owners encounter costs

and impediments that are not factors for their non-disabled competitors.”

This development may

have resulted in part because, after September 11, 2001, government leaders emphasized support

for the significant surge in new servicemembers, especially those disabled during their service.

National Veteran Small Business Coalition, “Mission,” available at https://nvsbc.org/mission/.

U.S. Congress, House Committee on Veterans’ Affairs, Subcommittee on Education, Training, Employment and

Housing and House Committee on Small Business, Subcommittee on Government Procurement, SBA Programs to

Assist Veterans in Readjusting to Civilian Life, joint hearing, 104

Cong., 2

sess., July 31, 1996, SBC Serial No. 104-

91 and VAC Serial No. 104-28, pp. 4-15.

U.S. Congress, House Committee on Small Business, Veterans Entrepreneurship and Small Business Development

Act of 1999, hearing on H.R. 1568, 106

Cong. 1

sess., H.Rept. 106-20, June 23, 1999, p. 172.

Ibid.

P.L. 108-183

U.S. Congress, House Committee on Veterans’ Affairs, Veterans Entrepreneurship and Benefits Improvement Act of

2003, report to accompany H.R. 1460, 108

Cong., 1

sess., June 5, 2003, H.Rept. 108-142, part 1 (Washington, DC:

GPO, 2003), p. 6.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 17

More recently, P.L. 116-315 in the 116

Congress expanded VA’s authority, to provide contracting

preference to contractors that employ veterans on a full-time basis, with the preference based on

the percentage of the contractor’s full-time employees that are veterans. H.R. 3065, introduced in

the 117

Congress, would increase the sole source limit for SDVOSBs to $10 million for

manufacturing contracts and $8 million for other contracts.

Continued congressional interest in promoting opportunities for VOSBs is demonstrated by

recently introduced and enacted legislation. Proposed amendments to the Infrastructure

Investment and Jobs Act (P.L. 117-58) would have increased the government-wide procurement

goal for SDVOSBs to 5%, a goal revision legislated through P.L. 118-31, the National Defense

Authorization Act for Fiscal Year 2024.

As younger generations of veterans are not starting businesses at the same rates as those from

earlier periods,

Congress may wish to consider incentives and policies that promote veteran

business ownership further, such as by revisiting the above proposed legislation or the

recommendations of the 1998 Task Force.

Options for Congressional Consideration

Congress might consider federal contracting preferences that bolster opportunities for VOSBs

through an additional government-wide contracting program. Options could include revisiting the

10% VOSB procurement goal recommendation or developing some other VOSB contracting

goal, for the government as a whole or for select agencies beyond the VA.

One rationale for creating additional VOSB contracting preferences is to provide a more

substantial entrepreneurial path for separating servicemembers as a parallel policy to federal

hiring preferences for veterans. Veterans’ hiring preference provides special consideration for

qualified former servicemembers pursuing civilian employment with the federal government; it

gives qualified veterans certain advantages in the assessment and selection procedures in the

federal hiring process.

Under this preference program, even “veterans who do not have a

service-connected disability can qualify for preference on the basis of serving during a qualified

time period or in a qualified military campaign.”

Veterans completing post-military service

training for employment via business ownership currently have no federal benefit that is

comparable to the federal hiring preference. Still, entrepreneurship is deemed a pathway for

returning servicemembers worthy of federal support, as evidenced by programs such as B2B, VIP,

and EBV.

Despite the potential congressional interest in a procurement goal for VOSBs, some might argue

that an additional preference is unwarranted. Economic data show that, generally, veterans have

relatively secure economic status. As mentioned, veterans tend to have relatively low

unemployment in addition to being well represented among business owners and the self-

employed. Estimated veteran unemployment below the rate for the nonveteran civilian

Millennial veterans are less likely to be entrepreneurs than their nonveteran peers and Vietnam veterans are

continuing to age out of the workforce. See Sidra Montgomery, Zoe Jacobson, Breanna Wakar, and Scott Cody,

Millennial Veteran Entrepreneurship: Research on the Next Generation of Veteran Entrepreneurs, Office of Advocacy,

U.S. Small Business Administration, June 2021.

For more information, see CRS Report R44652, Federal Government Employment: Veterans’ Preference in

Competitive Examination, by Benjamin Collins.

Ibid.

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 18

population

and the estimated numbers of firms owned by veterans

could suggest that

nondisabled veterans are not a group that economically requires contracting preferences.

Considerations for Expanded Veteran Contracting Preferences

Were Congress to establish a goal for contracting with VOSBs, it could be accompanied by the

creation of a preference program for VOSBs similar to the program established by the Veterans

Benefits Act of 2003 for SDVOSBs. VOSB contracting rates in recent years may be of interest

when considering potential VOSB contracting goals. These data are not currently reported in the

GSA Small Business Goaling Reports or SBA Procurement Scorecards because there is no VOSB

goal; however, it may be requested from the Federal Procurement Data System.

Some or all of the authorities that VA contracting officers may use to help the department meet its

SDVOSB annual contracting goal, such as noncompetitive procedures, set-asides, and sole source

contracts, could be incorporated into legislation regarding VOSBs.

One option would be to

provide contracting officers the authority to set aside and offer sole-source awards to VOSBs.

Providing that authority proved important for the attainment of the SDVOSB procurement goal.

The Veterans Benefits Act of 2003 authorized contracting officers to award a sole source contract

to SDVOSBs but limited this authority to contracts of up to $5 million for manufacturing firms

and $3 million for non-manufacturing firms.

Procurement Stakeholder Considerations

Resistance to the establishment of an additional federal procurement goal could come from

several stakeholders: other types of small businesses currently eligible for contracting

preferences, federal agencies themselves, and those concerned about potential impacts on

procurement costs to the government. While small businesses that already receive contracting

preferences might perceive an additional federal procurement goal as threatening to contract

competition, agencies responsible for procurement might raise the implementation challenges of

dividing contracting dollars into more small business categories. General cost concerns may arise

despite that there exists a fair and reasonable price requirement for contracting agencies, to

prevent adverse effects of contracting preferences to agencies letting contracts.

Moreover, the

example of the Veterans Benefits Act of 2003 indicates that legislation can further stipulate that

set-asides and sole-source awards may only be made if the contract award can be made at a fair

and reasonable price.

U.S. Department of Labor, Bureau of Labor Statistics, “Table A-5. Employment status of the civilian population 18

years and over by veteran status, period of service, and sex, not seasonally adjusted,” at https://www.bls.gov/

news.release/empsit.t05.htm.

U.S. Census Bureau, “Annual Business Survey: Statistics for Employer Firms by Industry, Sex, Ethnicity, Race and

Veteran Status for the U.S., States, and Metro Areas: 2021”; U.S. Census Bureau, “Nonemployer Statistics by

Demographics series (NES-D): Statistics for Employer and Nonemployer Firms by Industry, Sex, Ethnicity, Race, and

Veteran Status for the U.S., States, and Metro Areas: 2020.” Employer firms are nonfarm businesses that have paid

employees and annual receipts of at least $1,000. Non-employer firms are businesses with no paid employment or

payroll, annual receipts of $1,000 or more ($1 million or more in the construction industries), and filing IRS tax forms

for sole proprietorships (Form 1040, Schedule C), partnerships (Form 1065), or corporations (the Form 1120 series).

Federal procurement policy permitting the use of noncompetitive procedures is codified at 41 U.S.C. §3304.

48 C.F.R. §15.404-1. The Federal Acquisition Streamlining Act (FASA) of 1994 required additional directives

around the types of information used to assess price reasonableness. Section 1206 of P.L. 103-355 requires the FAR to

“contain provisions concerning the types of information that offerors must submit for a contracting officer to consider

in determining whether the price of a procurement ... is fair and reasonable when certified cost or pricing data are not

required to be submitted because the price of the procurement ... is not expected to exceed the applicable threshold

amount” (Section 1206 of P.L. 103-355).

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service 19

Legal Considerations

One consideration for Congress, when considering new contracting goals and preferences, might

be to specify if contracting authority extends to all types of federal contracts, including orders

placed under GSA’s Federal Supply Schedule (FSS).

Any future legislation on contracting preferences for VOSBs could benefit from consideration of

the Supreme Court’s ruling in Kingdomware Technologies, Inc. v. United States (2016). Prior to

the Kingdomware decision, VA , like other federal agencies, maintained that it could legally make

purchases using the FSS without creating set-asides for VOSBs, even when a contracting officer

could reasonably expect bids from at least two VOSBs at a fair market price (i.e., when the

contracting “Rule of Two” is satisfied). The court held that the text of the Veterans Benefits,

Health Care, and Information Technology Act of 2006 requires the VA “to apply the Rule of Two

to all contracting determinations and to award contracts to veteran-owned small businesses,” and

“does not allow the Department to evade the Rule of Two on the ground it has already met its

contracting goals or on the ground that the Department has placed an order through the FSS.”

This decision applied only to the VA and its contracting practices and resulted in the agency’s

discontinued use of the FSS without considering set-asides for VOSBs.

Conclusion

Since 1953, Congress has imposed requirements on the federal procurement process to help small

businesses receive a fair proportion of federal contracts and subcontracts, primarily by

establishing federal procurement goals and various contracting preferences.

Currently, the federal government has several small business procurement programs, including

one for SDVOSBs that is designed to help federal agencies achieve the government-wide 3%

SDVOSB procurement goal.

Advocates for expanding support to veteran-owned small business more generally have suggested

establishing a government-wide VOSB procurement goal and providing federal agencies the

authority to set aside and award sole source contracts to VOSBs. Advocates might argue that the

federal government should (1) provide more VOSB contracting opportunities in recognition of

veterans’ service to the nation; (2) encourage business ownership among younger generations of

veterans; and (3) provide veterans interested in employment via business ownership a type of

benefit comparable to the veteran federal hiring preference.

Opponents of adding a government-wide VOSB procurement goal and related set-aside and sole

source contracting authorities could argue that (1) veterans do not need contracting preferences

because their economic circumstances are at least as good as, if not better than, the circumstances

of the general civilian population; and (2) creating another small business preference program

could threaten small businesses currently eligible for preferences and burden agencies

implementing preference programs.

These schedules are lists of goods and services provided by General Services Administration-selected vendors at

varying prices and are also known as multiple award schedules (MAS). They provide convenience to agencies

procuring commonly required products or services.

Kingdomware Technologies, Inc. v. United States, 579 U.S. 1, 8 (2016).

Federal Contracting by Veteran-Owned Small Businesses

Congressional Research Service R47226 · VERSION 11 · UPDATED 20

Author Information

R. Corinne Blackford

Analyst in Small Business and Economic

Development Policy

Acknowledgments

Robert Jay Dilger, Senior Specialist in American National Government

Elaine Halchin, Specialist in American National Government

Daniela Lacalle, Research Assistant

Disclaimer

This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan

shared staff to congressional committees and Members of Congress. It operates solely at the behest of and

under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other

than public understanding of information that has been provided by CRS to Members of Congress in

connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not

subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in

its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or

material from a third party, you may need to obtain the permission of the copyright holder if you wish to