Why the VA Awards So Many Contracts to Veteran-Owned Businesses

The Department of Veterans Affairs (VA) awards a disproportionate percentage of contracts to veterans as compared to other federal agencies.

It's not because the VA is simply “friendly” to veteran-owned businesses, although many people make that assumption.

The VA is operating under a different legal framework than every other federal agency.

Under 38 U.S.C. §§ 8127–8128, the VA is required to prioritize:

• Service-Disabled Veteran-Owned Small Businesses (SDVOSBs)

• Then Veteran-Owned Small Businesses (VOSBs)

This framework is implemented through the VA Acquisition Regulation (VAAR), Part 819, Subpart 819.70 – Veterans First Contracting Program.

This is not a policy preference. This is not a small business goal.

This is a statutory requirement that directly governs how the VA conducts acquisitions.

The Mechanism: The VA’s Rule of Two

At the center of this framework is the VA’s version of the “Rule of Two” under 38 U.S.C. § 8127(d).

If a contracting officer reasonably expects that:

• At least two eligible veteran-owned firms will submit offers, and

• Award can be made at a fair and reasonable price

Then the VA must restrict the competition.

In execution, the VA follows a clear order of priority (VAAR 819.7005):

1. SDVOSBs

2. VOSBs

3. Other small business programs (e.g., 8(a), HUBZone)

4. Broader competition if necessary

Before any solicitation is issued, this analysis must occur.

If the Rule of Two is met, the acquisition is restricted. If it is not, only then can the VA move down the hierarchy.

Why This Looks Different From Other Agencies

This is where most people get confused.

Other federal agencies operate primarily under small business goals.

The VA operates under a statutory priority structure.

That distinction is everything.

It means the VA is not trying to “hit numbers.” It is required to prioritize veteran-owned firms whenever conditions allow.

This was reinforced by the U.S. Supreme Court in Kingdomware Technologies, Inc. v. United States (2016), which held that the VA must apply the Rule of Two across its procurements—not just until it meets annual targets.

What I See in Practice

When I work with service-disabled veteran-owned businesses to build their federal contracting strategy, we almost always start with the VA.

Not because it’s easy.

But because the structure of the market is fundamentally different.

In some industries, you’ll see SDVOSBs performing slightly above the SBA targets you’d expect at other agencies.

In others, you’ll see something very different.

In construction, for example, it’s common to see SDVOSBs dominate large portions of VA contract awards.

That’s the statute playing out in real acquisitions.

But (and there's always a but), it's incumbent upon companies to check the federal spending data to confirm whether or not the VA is buying what they sell and how much of it is awarded to veteran-owned businesses and service-disabled veteran-owned businesses.

This can be easily done through USA Spending .gov You can also check out our YouTube channel. Just type in at @GovClose - we have several videos on how to perform this type of research.

It’s Not Automatic

This is where a lot of companies go wrong.

They hear “VA prioritizes SDVOSBs” and assume opportunity is guaranteed.

It isn’t.

You still need to answer:

• Is there real VA demand for what you sell?

• Are there already two qualified SDVOSBs or VOSBs in that space?

• How is the VA buying—open market, schedules, IDIQs, or internal vehicles?

• Which contracting offices actually execute the work?

The Rule of Two only applies when the conditions are met.

And those conditions are highly dependent on the specific requirement and market.

One Critical Update Most People Miss

Eligibility today is tied to certification.

As of 2023, SDVOSB and VOSB certification is administered through the Small Business Administration (SBA), not the VA.

If a company is not properly certified in the SBA system, it will not qualify for these set-asides—regardless of ownership.

This has become a key gating factor in real acquisitions.

PRO TIP For Veterans: My personal experience registering my business as an SDVOSB was quick and seamless compared to some of the other certification processes - like WOSB or 8A.

Timelines can vary. It personally took me two to three weeks once the paperwork was submitted.

Bottom Line

The VA does not simply prefer veteran-owned businesses.

It operates under a statutory priority system that requires them to be considered first.

That is why you see such a high concentration of awards going to SDVOSBs and VOSBs—especially in certain industries.

And if you understand how that system actually works—where it applies, and where it doesn’t—it can completely change how you approach the federal market.

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