The 10% veteran-owned contracting goal isn’t realistic, but it can still work

SBA raises both the prime and subcontracting goals for veteran-owned small businesses

Photo by Markus Winkler on Unsplash

One year after barely reaching a 5% governmentwide contracting goal for service-disabled veteran-owned small businesses, Federal agencies now have a goal of 10% for contracting with veteran-owned small businesses, the SBA announced Monday. That’s a big stretch for most Federal agencies. And SBA recognized the scale of the new FY27 goal in its press release, calling it “historic” twice in the first three sentences.

The new 10% includes both contracts to service-disabled veteran-owned small businesses and some contracts that weren’t part of the previous 5% goal, namely contracts to companies owned by veterans without a service-connected disability. So it’s not technically a “doubling,” as SBA claims in its release. But it’s close—current data for FY26 shows 5.5% of prime contract dollars awarded to veteran-owned firms, regardless of service disability.

And that’s just prime contracts. On the subcontracting side, where SBA also raised the veteran-owned goal to 10%, the increase is even greater—and, frankly, far beyond what anyone could realistically expect in both the short term and long term. Large prime contractors awarded just 2.4% of their subcontracts to service-disabled veteran-owned small businesses in FY 2025, down from 2.6% the year before. So, compared to current spending, 10% is closer to a quadrupling .

Federal law says SBA’s goals should “realistically reflect the potential” of small businesses, including veteran-owned small businesses, to perform prime contracts and subcontracts. The 10% goal isn’t realistic.

But my experience with SBA’s goals is that they don’t need to be realistic to work.

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From VA to SBA: How veteran contracting has changed

The idea of a 10% veteran-owned goal dates back almost 30 years to a Clinton Administration report. In 1998, then-SBA Administrator Aida Alvarez commissioned an SBA Veterans Affairs Task Force to recommend changes to promote veterans entrepreneurship. The task force returned in October 1998 with a slew of recommendations, including easing loan applications and improving outreach.

One of the recommendations was to implement a 10% contracting goal for veteran-owned and service-disabled veteran-owned small businesses.

But testimony before the House Small Business Committee suggested that there weren’t enough firms to support a 5% goal, let alone a 10% goal. So, when Congress implemented a governmentwide goal in 1999, the statute put the service-disabled goal at 3%—about twice the contracting level at the time of 1.7%, according to the SBA Office of Advocacy.

Agencies didn’t meet that 3% goal, mostly because they didn’t have any mechanism to target veteran-owned firms. So, in 2003, Congress authorized contract-level set-asides for service-disabled veteran-owned small businesses A few years later, the Veterans First program at the Department of Veterans Affairs mandated SDVOSB and veteran-owned set-asides at the VA. The VA also ran a verification program for veteran-owned and service-disabled veteran-owned firms that wanted to participate in Veterans First.

It took until 2012 for the Federal government to meet the 3% governmentwide goal for the first time. The government has met that goal every year since, and then the higher 5% goal starting in 2024.

Meanwhile, though the VA continued to run its verification program, concerns abounded about pass-throughs on non-VA contracts set aside for service-disabled veterans. Congress enacted a certification requirement governmentwide, and also transferred the VA verification program into SBA’s certification process, called VetCert.

The FY 2024 legislation raised the governmentwide SDVOSB goal to 5%. It also required that only certified firms count toward the SBA scorecard, a requirement that SBA had not yet implemented. A few months ago, I found that, had SBA limited its count to only certified firms, contracting to SDVOSBs would have been only 4% in 2026.

The Real Small Business Scorecard

Will the new 10% goal include the certification requirement? The FY24 law applies both for prime contracts and subcontracts, and the FAR Overhaul already requires certification for subcontractors to count toward subcontracting plans. So I would certainly expect SBA to follow the law. I think the reason that SBA hasn’t done it yet is that it’s a challenge to code all the contract data with the awardee’s certification status—that status doesn’t come automatically with the data set. But that’s what you have those OneGov contracts for, even if Claude isn’t $1 anymore.

Can agencies actually get to 10%?

Now, 28 years after that task force report, SBA has implemented the 10% goal. Why did it take 28 years? For the most part, it’s because Congress—not SBA—sets the governmentwide goal. The President can set a higher goal, but hasn’t done so for the most part.

There’s one notable exception. You might remember that President Biden set a higher Small Disadvantaged Business goal of 15% for FY 2025. When President Trump took office in January 2025, the SBA lowered that goal to the Congressionally mandated 5%. So the 15% goal was never reflected in final data.

But that higher SDB goal was a presidential act; the White House issued several memos with the higher goal. This time—to this point—there’s no White House recognition of SBA’s higher veteran-owned goal.

SBA gets around that problem by specifying in its press release that these are “agency-level” goals. There’s no mention of a governmentwide goal. The key to SBA’s action is that the SBA has its own ability to “jointly establish” agency-specific goals with the Federal agencies, and those agency-specific goals don’t need to be the same as the governmentwide goal.

You wouldn't call these “joint” goals, though. SBA set the same 10% goal for every agency, and there’s no mention in the press release of convening the other agencies for a meeting of the minds. That said, there’s a handful of agencies that would have no concerns with the higher level. According to current SAM.gov data, four agencies exceeded 10% prime contracting with veteran-owned firms in FY 26. They are:

• Small Business Administration (27%)

• Department of Veterans Affairs (23%)

• Social Security Administration (14%)

• General Services Administration (10%)

Additionally, the Department of Justice barely missed the mark, at 9.3%.

For the other 18 Federal agencies, though, 10% isn’t at all close to their current contracting level. That includes DoD, which hasn’t even met the new 5% goal since it’s been in place.

The picture looks even worse on subcontracting. Not a single agency surpassed 10% in SDVOSB subcontracting in 2025. The closest was OPM at 8%. DoD subcontracted only 2.16% to SDVOSBs. That could be a huge opportunity for veteran-owned businesses going after subcontracts. Or it could be that, at this point, there just aren’t enough veteran-owned subcontractors available to work on government projects.

Congress actually anticipated that problem. The statute that authorizes SBA’s goals requires that the agency-level goals “realistically reflect” the potential of small businesses, including veteran-owned small businesses, to perform prime contracts and subcontracts. SBA can make a decent case that the 10% prime contracting goal is realistic—the idea has been around for almost 30 years and four agencies already meet the goal. But subcontracting is another story.

The rising-tide experience

Even if it’s not realistic—particularly on the subcontracting side—the goal can still be effective. For veteran-owned firms, an additional 4.5% of prime contracting would bring in roughly $30 billion in additional obligations. Most of that would probably come from DoD, which the current data pegs at 3.5% veteran-owned contracting for FY26. If DoD just gets to the prior goal of 5%, that’s already over $5 billion. So even meeting the prior goals puts substantially more contract dollars into the hands of veteran-owned businesses.

And that doesn’t need to come at the expense of other types of small businesses. The higher Biden-era SDB goals and the higher service-disabled veteran-owned goal in 2024 resulted in more contracting to all small businesses. Small business contracting went from 26.02% in 2020 to 28.76% four years later. Women-owned contracting went from 4.57% to 4.97% over the three-year period with higher SDB goals. And contracting with service-disabled veteran-owned firms peaked at 5.14% in 2024.

So higher SDB spending and service-disabled veteran-owned spending didn’t come at the expense of other small businesses. The small-business pie grew overall for each category. The rising tide lifted all boats. Part of that might be because agencies invested in their small-business contracting base overall, or because small-business primes subcontracted to other smalls, creating more capable competitors down the line. Matt Schoonover and I talked about this rising-tide effect in our post-election podcast last week:

I observed that more 8(a) contracting helped all small businesses; that’s based on my personal experience. I ran the goaling process and the SBA scorecard for five years. But I wouldn’t attribute the increased contracting with small businesses to the higher goals alone. We kept agencies accountable for reaching their goals with weekly emails and quarterly deputy-level meetings. We conducted trainings across the country on how firms could get certified and find set-aside opportunities. And we supported Federal agencies with outreach, market research, and best practices. It wasn’t just the goals.

Raising the goals is the easiest part, actually. SBA has done the easy part, so now comes the harder work of turning the goal into a reality.

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With over 20 years of Federal legal experience, Sam Le counsels small businesses through government contracting matters, including bid protests, contract compliance, small business certifications, and procurement disputes. His website is www.samlelaw.com. This article is for informational purposes only and does not constitute legal advice.