The Veteran-Owned Small Business (VOSB) Program has long held a sort of unheralded position in SBA and federal contracting. Unlike its much more expansive counterpart, the Service-Disabled Veteran-Owned Small Business (SDVOSB) Program, the VOSB Program only allows for set asides for VOSBs for VA procurements (and even within VA SDVOSB companies are in a higher tier than VOSBs). In contrast, all agencies can set aside contracts for SDVOSBs. This has limited the desirability of admission to the program for many veteran owners, many of whom do not do work, that the VA needs. But things might be changing, as Congress has proposed a big step towards expanding what agencies can set-aside contracts for VOSBs.
As noted above, at the present time, only the VA can set aside prime contracts for VOSBs. VOSB status can be helpful when it comes to subcontracting in some situations, but otherwise, the program is very limited in its scope. Considering that the VA is quite a small agency compared to some of the behemoths like the Department of Defense (DoD) and Department of Health and Human Services, the VOSB program often is overlooked by contractors, and, to a degree, one can’t blame them.
However, on June 14, 2024, the House of Representatives approved language for the upcoming 2025 National Defense Authorization Act that would change things if it becomes law. This language, located at Section 861, would allow DoD to set aside contracts for VOSBs:
“…a contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.”
This new provision would also set up a VOSB contracting goal for DoD. On top of this, it also would allow DoD contracting officers to sole source contracts to VOSBs if the contracts are below certain dollar thresholds. All that would be required for such sole source awards is that the contracting officer determines the VOSB is a responsible source and that the award can be made at a fair reasonable price that offers best value to the United States.
Steven Koprince (retired founder of SmallGovCon), made a great observation about this sole source rule over on his LinkedIn page:
“To me, what’s most striking about the VOSB sole source authority under Section 861 is what’s missing: a ‘rule of two’ restriction. For example, FAR 19.1405, for SDVOSBs, provides that sole source awards are permitted only where ‘[t]he contracting officer does not have a reasonable expectation that offers would be received from two or more service-disabled veteran-owned small business concerns.’ Similar restrictions exist for HUBZone sole source contracts and women-owned small business sole source contracts. Section 861 would create a sole source authority much closer to that available under the 8(a) Program, which omits a “rule of two” requirement…”
In other words, VOSB sole sourcing (for DoD) would be far easier for contracting officers to do than sole sourcing for SDVOSBs, woman-owned small businesses, and HUBZone businesses. As Steven notes, it would be more like the 8(a) program’s system. This is quite expansive authority, and it should give a major boost to the VOSB program, if it becomes law. Further, since an SDVOSB is necessarily also a VOSB, it basically helps SDVOSBs too.
It is very important to clarify here that the above all only would apply to DoD contracts. Non-VA or DoD agencies still would not be able to set aside contracts for VOSBs, let alone sole source contracts to VOSBs. So, the VOSB program would still not be as expansive as its SDVOSB counterpart or the other socioeconomic programs. It’s also important to note that while the VA must give preference to VOSBs first (after SDVOSBs), there is no such requirement with the DoD.
That all said, this should be very welcome news to VOSBs. For a long time, the VOSB program has essentially been neglected by the federal government, and while it is nice that the VA can set aside contracts for VOSBs, the program has been heavily overshadowed by the SDVOSB program and, considering again the VA’s size relative to the rest of the government, the effect is that the VOSB program has been limited to the point that many veteran owners have found the program unhelpful. We think this move makes sense considering the natural connection between the Department of Defense and our veterans, and should make the program far more advantageous for veteran owners to get into. That said, it is not yet a law. We will provide updates as the bill proceeds through Congress.
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