Cover: Improving Federal and Department of Defense Use of Service-Disabled Veteran-Owned Businesses

Improving Federal and Department of Defense Use of Service-Disabled Veteran-Owned Businesses

Published Feb 4, 2014

by Amy G. Cox, Nancy Young Moore


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Research Question

  1. What barriers do service-disabled veteran-owned small businesses (SDVOSBs) face when trying to contract with the federal government?

The report investigates the barriers that service-disabled veteran-owned small businesses (SDVOSBs) may face when attempting to contract with the federal government and the Department of Defense. The government and DoD goals are to award 3 percent of prime-contract dollars to SDVOSBs but current contracting falls below that level. The authors assess the characteristics of service-disabled veterans that support successful business ownership and identify possible barriers to meeting the 3 percent goals.

Key Findings

SDVOSBs Appear to Face Unique Barriers as Well as Barriers Faced by Other Non-Traditional Suppliers and Small Businesses

  • Service-disabled veterans have lower self-employment than veterans in general and than non-veterans, and the number of SDVOSBs is unlikely to increase.
  • The level of priority placed on the program faces several challenges. As with other programs, the policy lays out goals rather than requirements, competing goals from other programs may limit set-asides for SDVOSBs, and limited oversight of subcontracting goals means that prime contractors do not have to include SDVOSBs in awarded work.
  • SDVOSBs, especially new ones, may also confront the barriers faced by small businesses in general and non-traditional suppliers.
  • Although some sources of support for dealing with these barriers exist, they are limited.
  • Given these barriers, many SDVOSBs interviewed are disillusioned with the program. If widespread across SDVOSBs in general, this disillusionment may limit federal contracting rates further.


  • Increase the priority of the SDVOSB program by informing federal contracting staff of recent changes to the Federal Acquisition Regulation; identifying industries with ample numbers of SDVOSBs; informing federal agencies and contracting staff of those industries; and giving contracting officers the information, tools, and resources to review SDVOSB subcontracting and to publish results.
  • Strengthen education and training opportunities for SDVOSBs by informing SDVOSBs of competition by industry and providing training or information about where to obtain more advanced training on the Federal Acquisition Regulation and the federal bidding process.
  • Continue eforts to remove barriers to non-traditional suppliers and other small businesses by continuing to streamline administrative requirements of the bidding process and remove inefficiencies in the process; improving communication between government and suppliers, including regarding the performance or incumbent contractors; and helping identify suppliers in emerging industries not clearly specified in the current industry classification.

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted within the RAND National Defense Research Institute, a federally funded research and development center sponsored by OSD, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

This report is part of the RAND research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

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