Senate-Passed 2024 NDAA set to Raise DoD Set-Aside Sole-Source Contract Threshold Limits

Through an amendment to the Senate-Passed 2024 NDAA, the Department of Defense (“DoD”) sole source threshold for many socioeconomic set-aside programs would be increased significantly under the Senate-passed version of the 2024 National Defense Authorization Act. Also a method to adjust DoD sole-source thresholds for inflation would be created.

The Senate version of the 2024 NDAA includes an amendment that would raise the sole-source caps for Department of Defense (“DoD”) manufacturing and non-manufacturing contracts awarded to 8(a) Program participants, Woman-Owned Small Businesses (“WOSB”), Economically Disadvantaged WOSB (“EDWOSB”), HUBZone Program participants, and Service-Disabled Veteran-Owned Small Businesses (“SDVOSB”).

Senator Ben Cardin of Maryland, proposed an amendment to the 2024 NDAA , that if the Senate-Passed NDAA is eventually ratified into law, would make the following changes to the sole-source thresholds for manufacturing contracts:

Set-Aside DesignationCurrent Manufacturing Sole-Source Contract ThresholdsProposed DoD specific Manufacturing Sole-Source Contract Thresholds
8(a) Program$7 Million$10 Million
HUBZone$7 Million$10 Million
WOSB$7 Million$10 Million
EDWOSB$7 Million$10 Million
SDVOSB$7 Million (non-VA); $5 Million (VA)$10 Million

As mentioned, the amendment also updates the sole-source threshold for DoD non-manufacturing contracts (basically all other contracts):

Set-Aside DesignationCurrent Non-Manufacturing Sole-Source Contract ThresholdsProposed DoD specific non-Manufacturing Sole-Source Contract Thresholds
8(a) Program$4.5 Million$8 Million
HUBZone$4.5 Million$8 Million
WOSB$4.5 Million$8 Million
EDWOSB$4.5 Million$8 Million
SDVOSB$4 Million (non-VA); $5 Million (VA)$8 Million

In addition, presumably to prevent contradictions between statutes, the amendment also updates the SDVOSB and VOSB contracting goal statute. This change would update the cap on sole-source awards found therein to change from $5 Million to “the dollar thresholds under section 36(c)(2) of the Small Business Act (15 U.S.C. 657f(c)(2))”. What that boils down to is that the contracting goal statute for SDVOSBs and VOSBs would now have it’s sole-source threshold set by the same statute that we discussed above being updated.

Of note, this amendment seems to focus only on DoD contracts. The amendment does not replace the current all-encompassing sole-source thresholds with a new number. Rather, it inserts a parenthetical phrase after the current sole-source thresholds that states: “(or [INSERT NEW THRESHOLD], in the case of a Department of Defense Contract, as adjusted for inflation by the Federal Acquisition Regulatory Council under section 1.109 of the Federal Acquisition Regulation).” This basically carves out an exception or DoD specific sole-source threshold. Consequently, the changes under this amendment would only raise sole-source thresholds for DoD manufacturing and non-manufacturing contracts.

Additionally, the parenthetical language also seems to add in the ability for the Federal Acquisition Regulatory Council to adjust these new DoD specific sole-source thresholds for inflation, under Section 1.109 of the FAR. This represents a potential new avenue for the FAR council to update DoD sole-source thresholds to compensate for inflation.

This version of the NDAA has passed the Senate, and we will have to wait and see if the final version of the NDAA includes these same threshold adjustments. However, it is possible that if fully passed and ratified, federal contractors may feel somewhat let down by these threshold increases and the inflation adjustment process, as this amendment only applies to DoD contracts. While DoD contracts certainly represent a significant chunk of federal contracts, by no means do they represent all contracts. As such, this amendment only goes so far to raise thresholds and address inflationary concerns across federal contracting.

My colleagues and I will keep you posted on the progress of the 2024 NDAA as it impacts federal contractors. You can view the Senate-passed 2024 NDAA, including its multitude of amendments here.

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