The U.S. Small Business Administration (SBA) on June 6, 2024, published a Final Rule (the Rule) to eliminate self-certification for Service-Disabled Veteran-Owned Small Businesses (SDVOSB) whose federal government contracts or subcontracts count toward agency or subcontracting goals.
As a reminder, as of Jan. 1, 2024, offerors are required to be SBA-certified SDVOSBs and veteran-owned small businesses (VOSBs) through the Veteran Small Business Certification (VetCert) Program in order to compete for sole source and SDVOSB set-aside awards. See 13 C.F.R. § 128.401(a). If the Rule is finalized, self-certification for SDVOSBs essentially will be eliminated. This means that SDVOSB self-certification no longer will be acceptable for prime contract SDVOSB set-aside awards. Similarly, self-certified SDVOSBs will no longer count toward agency contracting goals or a prime contractor's subcontracting goals.
We summarize key takeaways for the Final Rule below.
When Will the Rule Become Effective?
The Rule becomes effective on Aug. 5, 2024, unless the SBA receives significant adverse comments by July 8, 2024, and chooses to withdraw the rule.
What Type of SDVOSB Self-Certification Is Currently Allowed Under SBA Regulations?
Under current SBA regulations, firms that do not seek SDVOSB set-aside or sole source contracts but meet the SBA's VetCert Program eligibility requirements may self-certify their SDVOSB status and can 1) receive prime contract or subcontract awards that are not SDVOSB set-aside or sole source contracts, and 2) be counted toward an agency's SDVOSB small business goals or a prime contractor's subcontracting goal for SDVOSB awards.
What Is Changing in the New Rule?
The Rule implements Section 864 of the National Defense Authorization Act for Fiscal Year 2024 and amends the SDVOSB requirements as follows:
- Effective Oct. 1, 2024, each prime contract and subcontract counted for the purpose of meeting the goals for participation by SDVOSBs in contracts for federal agencies or federal prime contractors shall be entered into with firms certified by VetCert under Section 36 of the Small Business Act (15 U.S.C. 657f).
- The Rule includes a grace period for firms that file an application for SBA SDVOSB certification by Dec. 22, 2024, to continue to self-certify for such federal government contracts and subcontracts until SBA makes a final decision on the firm's application.
- SDVOSBs that do not file an application for certification with SBA by Dec. 22, 2024, or are not certified by SBA's VetCert program and do not file an application by the deadline will not be eligible to self-certify for such federal government contracts or subcontracts after Dec. 22, 2024.
The Rule also requires SBA SDVOSB certification for subcontracting assistance. Under the existing system, the burden of SDVOSB compliance for subcontract goal purposes is placed upon the awarding contracting officer. The Rule transfers this burden to the SBA. The contracting officer's responsibilities would be reduced to confirming that the awardee is certified SDVOSB in SBA's certification database.
How We Can Help
The impact of the Rule may extend beyond the plain language changes. For example, combating small business set-aside program fraud remains a priority for the government. These changing rule regimes should be carefully followed to ensure contractors do not submit false claims by misrepresenting their SDVOSB or VOSB status. Holland & Knight's Government Contracts Group will continue to closely monitor developments in SBA's SDVOSB and VOSB programs. For questions about SBA's Final Rule and specific impacts on your company, please contact the authors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.