The Service-Disabled Veteran-Owned Small Business program (SDVOSB) is a federal initiative designed to support veterans who have sustained disabilities in the line of duty. This program is necessary as service-disabled veterans face many challenges when transitioning to civilian life and business ownership despite their valuable skills and experience. The SDVOSB program aims to benefit veterans and increase federal procurement by creating an inclusive marketplace with diverse vendors.
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What is SDVOSB?
An SDVOSB is a federal contracting designation awarded to a service-disabled veteran who runs a small business. This designation allows veterans fair opportunities to grow. To qualify, the company must meet specific criteria, including being 51% owned by one or more service-disabled veterans who control daily and strategic operations. The business must also meet the Small Business Administration’s (SBA) size standards for its industry based on employee count or annual revenue.
Understanding Veterans and Service-Connected Disabilities
There is a specific legal definition of a veteran according to federal law (38 U.S.C. 101). This states that a veteran is someone who served in active military, naval, or air service and was discharged or released under conditions other than dishonorable. To qualify as a service-disabled veteran, the individual must meet that requirement and have a medical condition caused or aggravated during military service. The condition must have occurred “in the line of duty.” When veterans meet these definitions, they will be classified as Service-Disabled Veterans, making them eligible for participation in the SDVOSB program.
Some disabilities are exempt from this, such as misconduct that led to a disability, substance use, unauthorized absence, or pre-existing conditions.
To prove they are Service-Disabled Veterans, veterans need an adjudication letter from the Department of Veterans Affairs (VA), a Department of Defense Form 214, a Certificate of Release or Discharge from Active Duty, or a Statement of Service from the National Archives and Records Administration stating that they have a service-connected disability. Veterans can also contact their state’s relevant Veterans Affairs office to determine if their medical record or claim is on file.
Program Eligibility and Requirements
Participation in SDVOSB is based on clear criteria. See below:
- The business must be majority-owned by service-disabled veterans. (This means any veteran with a disability ranging from 1% to 100%, as determined by the Department of Veterans Affairs).
- Day-to-day management and operations must be directed by service-disabled veterans with majority ownership (more than 51%).
- If the veteran has a permanent and severe disability, their spouse or a permanent caregiver may operate the business in their place.
- SDVOSBs can also participate in joint ventures with other small businesses to perform SDVOSB contracts. These joint ventures must meet specific requirements outlined in SBA regulations.
- Nonmanufacturers can also participate in the program. They must simply comply with the SBA’s nonmanufacturer rule.
Federal Contracting Opportunities
The federal government aims to award SDVOSBs 5% of federal contracting dollars, allowing opportunities across all industries and contract sizes. While not required, contracting officers may also set aside contracts below the simplified acquisition threshold specifically for SDVOSBs, using simplified acquisition procedures. There are two main contracting methods this allows for:
Set-aside Contracts: These give SDVOSBs dedicated opportunities designed for them alone. This contract can apply if at least two qualified SDVOSBs submit offers at fair market prices.
Sole-source Contracts: If specific requirements are met, these contracts may be awarded to an SDVOSB without a competitor. These requirements could include a specialized product with no competition, a rush to get a product, or a product for a certain dollar threshold. The government is responsible for explaining why it can only buy from one company.
Verification and Protests
Under current regulations, the Small Business Administration (SBA) can verify SDVOSB eligibility for government-wide federal contracts. The SBA also has the authority to protest the awarded status of a contract given to an SDVOSB. When challenged, SDVOSBs should be prepared to provide documentation showing their service-disabled veteran ownership and control.
Applying for the SDVOSB Program
In the past, some federal agencies allowed the SDVOSB program to operate on a self-certification basis; this is no longer the case. Now, businesses must be certified by the Small Business Administration (SBA) to be eligible for SDVOSB set-aside contracts and sole-source awards. They should complete the formal SBA SDVOSB certification process via their portal, which includes providing documentation to verify eligibility. The business must also register with the System for Award Management (SAM).
Why Choose the SDVOSB Program
Understanding the SDVOSB program will help veterans achieve success in federal contracting. Service-disabled veterans considering federal contracting should see this program as part of a broader strategy. Success will ultimately depend on a strong business model and an understanding of the federal marketplace.
Bonding Requirements for SDVOSB Contracts
Under the Miller Act, federally set-aside or sole-source construction contracts exceeding $150,000 require contractors to provide performance and payment bonds. These bonds ensure project completion and guarantee that subcontractors and suppliers are paid. Even when a contract is specifically set aside for SDVOSBs, bonding remains mandatory if the contract value meets this threshold.
Examples of relevant bonds to contracts include Bid Bonds, Performance Bonds, and Payment Bonds. Understanding bonding is essential for SDVOSBs looking to compete in contracting of all kinds.
Bid Bonds guarantee a contractor will honor their bid and enter into the contract if awarded, protecting project owners from financial loss if the bidder backs out.
Performance Bonds ensure the project will be completed following the terms of the contract, which protects the project owner from non-performance.
Payment Bonds enforce the payment of subcontractors and suppliers for the work they perform and the materials they supply, even if the primary contractor defaults.
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