Why It Matters

Service-disabled veteran-owned small businesses (SDVOSBs) have surpassed the government-wide prime contract procurement goal for the third consecutive year, but subcontractor awards remain stuck below their statutory benchmark.

Congress increased the prime contract goal from 3% to 5% through the National Defense Authorization Act for fiscal year 2024, according to a new Congressional Research Service (CRS) report, raising pressure on federal agencies to deliver results across both prime and subcontract awards.

The Big Picture

Federal prime contract awards to SDVOSBs reached $32.5 billion in fiscal year 2025, representing 5.01% of eligible prime awards. This marks the third consecutive year the government has surpassed the 5% prime contract goal, a threshold established by the 2024 defense authorization bill. By contrast, subcontractor awards remained stuck at 2.42% in fiscal year 2025, well below the 3% statutory benchmark and part of a persistent shortfall across all recent fiscal years.

The Department of Veterans Affairs has awarded SDVOSBs a growing share of its budget, reaching $10.1 billion or 21.6% of VA prime awards in fiscal year 2025. The Department of Defense has awarded a little more than 3% of contract dollars to SDVOSBs in recent fiscal years, leaving significant room for growth.

Section 862 of the National Defense Authorization Act for Fiscal Year 2021 required the creation of a government-wide SDVOSB certification process through the Small Business Administration by January 1, 2023, ending self-certification. Business owners seeking to remain certified must recertify their eligibility every three years.

Pending legislation in the 119th Congress would address these gaps. H.R. 865 and S. 2510 would establish agency training requirements aimed at increasing awards to SDVOSBs. H.R. 7401 from the 118th Congress would create statutory contracting goals for the Department of Defense and establish a hierarchy among small business programs that prioritizes service-disabled veteran-owned and veteran-owned firms.

The Bottom Line

Congress appears poised to move toward enforcement mechanisms and agency-specific accountability, signaling frustration with incremental progress on subcontract awards and the need for stronger Department of Defense participation in the SDVOSB program.

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