SDVOSB Set-Aside Requirements: Eligibility, VetCert and Dollar Thresholds (2026)
Quick answer: To compete for an SDVOSB set-aside or sole-source contract, a small business must be at least 51% owned and controlled by service-disabled veterans and certified by the SBA (VetCert, which replaced VA CVE on January 1, 2023). FAR 19.14 sets the rule of two for set-asides and sole-source ceilings of $8.5 million (manufacturing) or $5 million (other).
Service-disabled veteran-owned small business (SDVOSB) status can open restricted federal competitions, but the rules come from three places: SBA's 13 CFR Part 128, the Federal Acquisition Regulation, and SBA's limits on subcontracting. This guide pulls the eligibility test, the certification rule, the set-aside and sole-source conditions and the dollar thresholds into one place, using the regulation text and SBA.gov rather than secondhand summaries.
Who qualifies as an SDVOSB under SBA rules?
The eligibility test is in 13 CFR Part 128, the SBA's Veteran Small Business Certification rule. Under 13 CFR 128.200(b), a business qualifies as an SDVOSB when it is:
- A small business under the size standard for any NAICS code listed in its SAM profile (13 CFR Part 121); and
- Not less than 51 percent owned and controlled by one or more service-disabled veterans who reside in the United States. For a veteran with a VA-rated permanent and total service-connected disability who is unable to manage daily business operations, the rule allows the spouse or permanent caregiver (who resides in the United States) to hold that ownership and control role.
The rule defines a "service-disabled veteran" as a veteran registered in VA's Veterans Benefits Administration records as service-disabled. In practice that means a VA service-connection determination is the starting point. If you do not have one yet, see our guide to how to file a VA disability claim.
| Requirement | What the rule says | Where |
|---|---|---|
| Size | Small under the size standard for a NAICS code in your SAM profile | 13 CFR 128.200(b)(1) |
| Ownership | At least 51% unconditionally and directly owned by qualifying service-disabled veterans | 13 CFR 128.200, 128.202 |
| Control | Qualifying veteran controls long-term decisions and day-to-day operations; holds the highest officer position | 13 CFR 128.203 |
| Residency | Qualifying veteran resides in the United States | 13 CFR 128.200(b)(2) |
| Certification | Certified by SBA to receive an SDVOSB set-aside or sole-source award | 13 CFR 128.200(c); FAR 19.1403 |
What does "owned and controlled" actually mean?
Many applications turn on these two tests, so it helps to read the rule text closely.
Ownership (13 CFR 128.202)
- Direct. The qualifying veteran must hold the 51 percent directly, not through another business entity or a trust such as an ESOP. A revocable living trust can count as direct ownership if the qualifying veterans are the grantors, trustees and current beneficiaries.
- Unconditional. Ownership cannot be subject to conditions, executory agreements, voting trusts or arrangements that send ownership benefits to someone else. Pledging shares as collateral on normal commercial terms does not by itself defeat this test, and SBA disregards unexercised stock options held by the qualifying veteran (but treats options held by non-veterans as exercised).
Control (13 CFR 128.203)
- A qualifying veteran must hold the highest officer position (usually President or CEO) and have managerial experience of the extent and complexity needed to run the company.
- The veteran does not need the technical expertise or license if they can show ultimate managerial and supervisory control over the people who do.
- In a partnership, qualifying veterans must be general partners with control over all decisions. In an LLC, they must be managing members.
Why it matters: SBA can examine a certified firm after the fact. A change in ownership, structure or control has to be reported to SBA within 30 calendar days (13 CFR 128.307), and a failure to report can lead to decertification.
What is SBA VetCert, and what happened to VA CVE?
Until 2023, VA's Center for Verification and Evaluation (CVE) verified veteran-owned businesses. The National Defense Authorization Act for Fiscal Year 2021 moved that function to SBA, effective January 1, 2023. SBA's veteran contracting assistance page describes the change, and the implementing rule was published in the Federal Register on November 29, 2022 (87 FR 73412).
Key points once you are in the program:
- SAM designation. Since January 1, 2024, a contracting officer must verify that an offeror is designated in SAM as an SBA-certified SDVOSB before an SDVOSB set-aside or sole-source award (FAR 19.1403(b)). A firm that represented SDVOSB status in SAM and applied to SBA on or before December 31, 2023 was treated as eligible while its application was pending.
- Three-year term. You must recertify every three years. You may recertify within the 90 days before your eligibility period ends, and a firm that recertifies within 30 days after it lapses can be reinstated (13 CFR 128.306).
- Program examinations. SBA can examine a participant on a random basis or on specific information (13 CFR 128.308).
For the application walk-through (documents, denial reasons, timeline), use our step-by-step SDVOSB certification guide. This article stays on what the certification lets you compete for.
How do SDVOSB set-aside contracts work?
The set-aside rules for most federal agencies are in FAR Subpart 19.14. Under FAR 19.1405:
- A contracting officer may set aside an acquisition above the micro-purchase threshold for SDVOSBs when market research supports a reasonable expectation that two or more eligible SDVOSBs will submit offers and that award can be made at a fair market price. This is often called the "rule of two."
- The contracting officer must consider SDVOSB set-asides before considering SDVOSB sole-source awards or ordinary small business set-asides.
- If only one acceptable SDVOSB offer comes in, the contracting officer should award to that firm. If none comes in, the SDVOSB set-aside is withdrawn and, if the requirement is still valid, set aside for small businesses as appropriate.
Set-aside status is eligibility, not an award. Certification lets you compete in restricted competitions. It does not mean a requirement will be set aside or that your offer will be selected.
What is excluded?
FAR 19.1404 says the subpart does not apply to requirements that can be filled through Federal Prison Industries or AbilityOne participating non-profit agencies, to orders under indefinite-delivery contracts and Federal Supply Schedules (although the FAR allows discretionary set-asides of those orders), or to requirements an 8(a) participant is currently performing, unless SBA has released them.
When can an agency award an SDVOSB sole-source contract?
FAR 19.1406 lets a contracting officer award directly to an SDVOSB, without competition, only when all of these are true:
- The contracting officer does not reasonably expect offers from two or more SDVOSBs.
- The anticipated award price, including options, stays within the dollar ceiling below.
- The requirement is not being performed by an 8(a) participant and has not been accepted into the 8(a) program.
- The SDVOSB has been determined responsible with respect to performance.
- Award can be made at a fair and reasonable price.
The contracting officer may only award to a firm designated in SAM as SBA-certified (or one that applied by December 31, 2023). SBA also has the right to appeal a decision not to make an SDVOSB sole-source award.
What are the dollar thresholds?
The sole-source ceilings are the figures that matter most. As published in FAR 19.1406 on acquisition.gov when this article was written (October 2026):
| Tool | Dollar line | Source |
|---|---|---|
| SDVOSB set-aside | Above the micro-purchase threshold; no upper cap stated in FAR 19.1405 | FAR 19.1405(a)(2) |
| Sole source, manufacturing NAICS | Up to $8.5 million, including options | FAR 19.1406(a)(2)(i) |
| Sole source, all other NAICS | Up to $5 million, including options | FAR 19.1406(a)(2)(ii) |
| Subcontracting limits apply | Contracts above the simplified acquisition threshold | 13 CFR 125.6(a) |
These dollar figures are adjusted for inflation from time to time, so confirm the current numbers on acquisition.gov before you rely on them for a specific bid.
What are the limits on subcontracting?
To be awarded an SDVOSB contract above the simplified acquisition threshold, a firm must agree to limits on how much it passes to companies that are not "similarly situated" (13 CFR 125.6). For services (other than construction), the prime may not pay more than 50 percent of the amount the government pays it to non-similarly-situated firms. For supply contracts, the same 50 percent cap applies, with the cost of materials excluded. Other rules apply to construction and to non-manufacturers, so read the full section and the clause in your solicitation (FAR 52.219-14).
How is an SDVOSB different from a VOSB?
A veteran-owned small business (VOSB) must be at least 51 percent owned and controlled by veterans, with no service-connected disability required. Under 13 CFR 128.400, VOSB contracts are exclusively VA procurement actions under 38 U.S.C. 8127. SDVOSB contracts are available more broadly, through sole-source awards, set-asides, reserves in multiple-award contracts and set-aside orders. SBA's page notes that certified VOSBs have added opportunities at VA under the Vets First program, while certified SDVOSBs can compete for federal sole-source and set-aside contracts across the government.
What should you check before you bid?
- Your ownership and control match 13 CFR 128.202 and 128.203 (direct, unconditional, highest officer position).
- Your SAM profile lists the NAICS code you plan to bid under, and your firm is small under that code's size standard.
- Your SBA certification is active and your three-year recertification date is on your calendar.
- The solicitation says it is an SDVOSB set-aside or sole-source (look for FAR clause 52.219-27).
- You can meet the limitations on subcontracting for the contract's value.
Our SBA Veteran Programs hub lists the training, loan and certification resources in one place. For related tools, see the SAM registration guide, the NAICS code finder and veteran contracting resources. If you need financing alongside contracting, read our VA and SBA business loan guide.
Frequently Asked Questions
At least 51 percent. Under 13 CFR 128.200 and 128.202, one or more service-disabled veterans must unconditionally and directly own at least 51 percent of the business, and must also control its management and daily operations.
The Small Business Administration. The certification function moved from the VA's Center for Verification and Evaluation to SBA as of January 1, 2023, under the National Defense Authorization Act for Fiscal Year 2021. SBA runs it as the Veteran Small Business Certification (VetCert) program.
FAR 19.1406 currently lists $8.5 million for requirements in manufacturing NAICS codes and $5 million for requirements in any other NAICS code, including options. These figures are adjusted for inflation periodically, so confirm them on acquisition.gov.
The contracting officer may set aside an acquisition above the micro-purchase threshold when there is a reasonable expectation, based on market research, that two or more eligible SDVOSBs will submit offers and that award can be made at a fair market price (FAR 19.1405). If only one acceptable offer arrives, the contracting officer should award to that firm.
Three years. A certified firm must recertify every three years, may do so within the 90 days before its eligibility period ends, and can be reinstated if it recertifies within 30 days after the period ends (13 CFR 128.306).
No. Certification makes a firm eligible to compete for set-aside and sole-source awards. Whether a requirement is set aside, and who wins, is up to the contracting officer and the evaluation.
In one case. For a veteran with a VA-rated permanent and total service-connected disability who is unable to manage the daily business operations, the spouse or permanent caregiver who resides in the United States can be the qualifying owner and controller (13 CFR 128.200(b)(2)).
Official Sources
- 13 CFR Part 128: Veteran Small Business Certification Program (eCFR)
- 13 CFR 125.6: Limitations on subcontracting (eCFR)
- FAR Subpart 19.14: Service-Disabled Veteran-Owned Small Business Program (acquisition.gov)
- FAR 19.1406: Sole source awards (acquisition.gov)
- SBA: Veteran contracting assistance programs and the VetCert program
- SBA: VetCert Frequently Asked Questions