The Veterans Benefits Act of 2003 – Public Law No. 108-183 – created the procurement set aside designation (SDVOSB) Service Disabled Veteran owned small Business. This enables federal contracting officers to meet a mandated 3% annual procurement from these companies by utilizing the following rules & definitions:

FAR 19.1405 Service-disabled veteran-owned small business set-aside procedures.

(a) The contracting officer may set-aside acquisitions exceeding the micro-purchase threshold for competition restricted to service-disabled veteran-owned small business concerns when the requirements of paragraph (b) of this section can be satisfied. The contracting officer shall consider service-disabled veteran-owned small business set-asides before considering service-disabled veteran-owned small business sole source awards (see 19.1406).

(b) To set aside an acquisition for competition restricted to service-disabled veteran-owned small business concerns, the contracting officer must have a reasonable expectation that— (1) Offers will be received from two or more service-disabled veteran-owned small business concerns; and (2) Award will be made at a fair market price.

(c) If the contracting officer receives only one acceptable offer from a service-disabled veteran-owned small business concern in response to a set-aside, the contracting officer should make an award to that concern. If the contracting officer receives no acceptable offers from service-disabled veteran-owned small business concerns, the service-disabled veteran-owned set-aside shall be withdrawn and the requirement, if still valid, set aside for small business concerns, as appropriate (see Subpart 19.5).

(d) The procedures at 19.202-1 and, except for acquisitions not exceeding the simplified acquisition threshold, at 19.402 apply to this section.

FAR 19.1406 Sole source awards to service-disabled veteran-owned small business concerns.

(a) A contracting officer may award contracts to service-disabled veteran-owned small business concerns on a sole source basis (see 19.501(d) and 6.302-5), provided—

(1) Only one service-disabled veteran-owned small business concern can satisfy the requirement;

(2) The anticipated award price of the contract (including options) will not exceed— (i) $5.5 million for a requirement within the NAICS codes for manufacturing; or (ii) $3 million for a requirement within any other NAICS code;

(3) The service-disabled veteran-owned small business concern has been determined to be a responsible contractor with respect to performance;

(4) Award can be made at a fair and reasonable price.

(b) The SBA has the right to appeal the contracting officer’s decision not to make a service-disabled veteran-owned small business sole source award.

Parity Among 8(a), HUBZone, or SDVOSB Programs

The FAR Council issued an interim rule implementing Section 1347 of the Small Business Jobs Act of 2010 (Pub. L. 111-240) and clarifying that there is parity when a contracting officer selects among small businesses participating in the 8(a), HUBZone and SDVOSB programs. Under the interim rule, contracting officers will have the discretion to determine whether an acquisition will be restricted to one of these three programs. The full text of the rule is available here: Socioeconomic Program Parity 03.16.2011.