Alert
06.12.24
On June 6, 2024, Small Business Administration (SBA) issued a direct final rule affecting Service-Disabled Veteran-Owned Small Business (SDVOSB) credit. Under this new rule, agencies and prime contractors will not be able to receive credit towards their socio-economic contracting goals and subcontracting plan goals for SDVOSBs that are not certified by SBA’s Veteran Small Business Certification (VetCert) program. The rule includes a grace period. Self-certified SDVOSBs will continue to generate such credit until SBA acts on their application for VetCert certification, so long as they submit their VetCert application by December 22, 2024.
The new rule does not change the requirements for a company to be awarded an SDVOSB set-aside or sole source contract. Based on a rule change in 2022, companies now must be certified through VetCert to receive such an award. Consequently, the new rule does not affect eligibility for SDVOSB set-aside or sole source contracts. Rather, the new rule affects the ability of agencies and prime contractors to receive credit toward their SDVOSB contracting and subcontracting goals for awards made to self-certified concerns.
Under the new rule, if a self-certified SDVOSB submits an offer for an unrestricted contract on or after August 5, 2024, and is awarded a contract, the agency making that award will be unable to count that contract as an SDVOSB award towards its socio-economic contracting goals, unless that SDVOSB has already applied for VetCert certification.
SBA established VetCert in 2022, in response to requirements of Section 862 of the National Defense Authorization Act (NDAA) for Fiscal Year 2021. The 2022 rule change required that SDVOSBs be certified by VetCert to be eligible for contracts set aside for SDVOSBs but did not affect the ability of agencies and prime contractors to claim SDVOSB credit for awards made to self-certified SDVOSBs on an unrestricted basis. SDVOSBs certified by VetCert must renew their certifications every three years. Once the grace period expires and the VetCert certification program is fully implemented, a business concern will not be eligible for any federal government contracts benefits meant for SDVOSBs unless that concern is certified by VetCert.
While it increases the administrative burden on contractors, the elimination of self-certification from the SDVOSB program ultimately benefits both contractors and agencies. Contractors will benefit because certification by VetCert reduces the risk of inadvertent noncompliance with increasingly complex SBA regulations concerning eligibility for SDVOSB status. Agencies will benefit because SBA certification provides greater assurance that offerors actually meet SBA eligibility requirements.
Because of the rule change in 2022, many SDVOSBs already have submitted their applications for VetCert certification. However, evidently there is a significant number of SDVOSBs that have not applied for VetCert certification. SBA estimates that there are as many as 20,408 SDVOSBs that are registered in SAM.gov but have not yet applied for VetCert certification. SBA expects that approximately 70%, or approximately 14,285, of these firms will apply for VetCert certification as a result of this new direct final rule.
SDVOSBs that have not applied for VetCert certification should submit their applications as soon as possible, given the apparent likelihood that SBA will receive increasing numbers of applications as the December 22, 2024, deadline approaches. Applicants can increase the likelihood that their applications will be processed more quickly by submitting their applications early and ensuring that the application contains all required information and documentation.
This direct final rule implements the mandate of the NDAA for Fiscal Year 2024 to eliminate self-certification from the SDVOSB program. Interested parties may submit comments by July 8, 2024.