SDVOSB Changes in the FY 2024 National Defense Authorization Act

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The National Defense Authorization Act (NDAA) for Fiscal Year 2024, signed into law on December 22, 2023, introduces significant changes to federal contracting, focusing on Service-Disabled Veteran-Owned Small Businesses (SDVOSBs).

Highlights of the changes include:

• Prime Contracting Goal Increase: Congress has increased the prime contracting goal for SDVOSBs from 3% to 5% of total prime contract spending. Section 863 of the 2024 NDAA replaces the previous 3% goal with the new 5% target, effective immediately upon the President’s signature.
• Prohibition of Self-Certified SDVOSBs: Section 864 of the 2024 NDAA prohibits the government from counting awards to self-certified SDVOSBs towards prime and subcontracting goals. Awards must be made to SBA-certified SDVOSBs to contribute to meeting goals.
• Grace Period for Section 864: Unlike the immediate effectiveness of the goal increase, Section 864 includes a grace period. The SBA has 180 days to prepare regulations, and until October 1 of the fiscal year following the publication of these regulations, the government can continue counting awards to self-certified SDVOSBs.
• Goal Impact: The new 5% goal challenges the government to improve its SDVOSB performance. In Fiscal Year 2022, the government awarded 4.57% of prime contract dollars to SDVOSBs. Achieving the 5% goal would have meant over $2.5 billion in additional SDVOSB prime contracting.
• Clarifies Previous Legislation: Section 864 explains that, despite prior legislation and SBA regulations in 2021 that say the government could claim credit for prime contracts awarded to self-certified SDVOSBs, the new rule closes this gap and emphasizes the importance of awards going to SBA-certified SDVOSBs.

In conclusion, the 2024 NDAA brings about a substantial increase in the SDVOSB prime contracting goal, accompanied by measures to ensure that only SBA-certified SDVOSBs contribute to meeting these goals, eliminating the previous practice of counting awards to self-certified SDVOSBs.