Service-Connected Disability Preference

Service-connected disability preference in federal contracting refers to the procurement advantages and set-aside programs available to businesses owned and controlled by veterans who have a disability that was incurred or aggravated during military service and formally rated as service-connected by the Department of Veterans Affairs.

What is Service-Connected Disability Preference in Contracting?

Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) are eligible for set-aside contracts across all federal agencies and for special programs at the Department of Veterans Affairs under the Veterans First Contracting Program. An SDVOSB must be at least 51% owned and controlled by one or more service-disabled veterans whose disability has been determined by VA to be service-connected (rating of 0% or higher). SDVOSBs that meet additional criteria may also qualify as Veteran-Owned Small Businesses (VOSBs), which have a broader designation without the disability requirement. For VA contracts specifically, the Veterans First Contracting Program creates a mandatory procurement hierarchy: VA contracting officers must first consider SDVOSB set-asides, then VOSB set-asides, before considering other small business set-asides or full and open competition. This hierarchy makes VA one of the most significant contracting markets for SDVOSBs, with billions of dollars in annual SDVOSB awards. SDVOSBs must now register through SBA's certification program (following the VA-SBA Interagency Agreement and NDAA FY2021 changes) to be recognized for all federal SDVOSB set-asides.

Why SDVOSB status matters for government contractors

SDVOSB set-asides exist at all federal agencies, providing a market segment where qualifying businesses face competition only from other SDVOSBs rather than the full range of government contractors. For VA contracts, the Veterans First preference makes SDVOSB status exceptionally valuable given VA's mission alignment with veteran-owned businesses.

Example

A veteran who separated from military service with a 30% service-connected disability rating for a knee injury forms a cybersecurity consulting firm. He obtains SDVOSB certification from SBA. When VA's Office of Information Technology posts a requirement for cybersecurity assessment services as an SDVOSB set-aside, he competes only against other SDVOSBs rather than the full universe of cybersecurity contractors. His company wins the contract, and the SDVOSB certification proves to be a significant business differentiator.

Frequently Asked Questions

What disability rating is required for SDVOSB eligibility?

The veteran's service-connected disability can be rated as low as 0% by VA and the business can still qualify as an SDVOSB. The key is that VA has formally determined there is a nexus between the disability and the veteran's military service, not that the rating reaches a certain severity threshold.

How do SDVOSBs get certified today?

Under changes implemented pursuant to NDAA FY2021, SBA now administers SDVOSB certification for all federal contracting purposes. Businesses apply to SBA's certification system (SBA.gov) with documentation of the veteran's service, VA disability rating, and business ownership/control. VA previously operated its own certification system (CVE), but this has transitioned to SBA for joint administration.

Do SDVOSB set-asides require the veteran to actively run the company?

Yes. The SDVOSB eligibility criteria require that one or more service-disabled veterans own at least 51% of the business AND manage the company's day-to-day operations and long-term decision-making. A business where a service-disabled veteran owns the majority but a non-veteran runs day-to-day operations does not qualify. The management control requirement is strictly enforced.

Can an SDVOSB also hold other small business certifications?

Yes. Many SDVOSBs also hold 8(a) certification (if they meet additional disadvantaged business criteria), WOSB certification (if the owner is a woman veteran), HUBZone certification, and/or state-level MWBE/SDVBE certifications. Each certification opens different set-aside opportunities, and holding multiple certifications maximizes access to the full range of small business procurement programs.