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SDVOSB Changes in the FY 2024 National Defense Authorization Act

January 11, 2024

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.