FAR 19.1405—Set-aside procedures.
Plain-English Summary
FAR 19.1405 explains how contracting officers establish and administer set-asides under the Service-Disabled Veteran-Owned Small Business (SDVOSB) Program. It covers the required sequencing before choosing an SDVOSB set-aside, the market-research standard for restricting competition, the post-2024 eligibility verification rules for offerors, what happens when only one or no acceptable SDVOSB offers are received, and the procedures for handling SBA procurement center representative (PCR) recommendations and appeals. In practice, this section tells contracting officers when they may reserve an acquisition for SDVOSB concerns, how to confirm that an offeror is eligible for award, and how to respond if the market does not produce adequate SDVOSB competition. It also protects the integrity of the program by requiring fair-market-price expectations and by ensuring that only properly certified or grandfathered offerors are considered after January 1, 2024. For contractors, the section is important because it determines whether they can compete for or receive award under an SDVOSB set-aside and what documentation or certification status they must maintain in SAM and SBA systems.
Key Rules
Follow priority order first
Before setting aside an acquisition for SDVOSB concerns, the contracting officer must comply with FAR 19.203. The officer must also consider SDVOSB set-asides before looking at SDVOSB sole-source awards or general small business set-asides.
Set-aside requires market support
A contracting officer may restrict competition to SDVOSB concerns only when market research creates a reasonable expectation that at least two eligible SDVOSB concerns will submit offers and that award can be made at a fair market price. Without both conditions, the set-aside is not appropriate.
Verify eligibility before award
Effective January 1, 2024, the contracting officer must confirm that each offeror is eligible for award by checking SAM for SBA certification or, for certain legacy offerors, a timely pre-December 31, 2023 certification application. Offerors who do not meet one of these conditions must be removed from consideration.
One acceptable offer may still award
If only one acceptable offer is received from an eligible SDVOSB concern in response to a set-aside, the contracting officer should make award to that concern. The rule does not require multiple offers to proceed once the set-aside has been properly competed and one acceptable offer remains.
No acceptable offers means withdrawal
If no acceptable offers are received from eligible SDVOSB concerns, the SDVOSB set-aside must be withdrawn. If the requirement is still valid, it should then be considered for a small business set-aside as appropriate under FAR 19.203.
PCR recommendations can be appealed
The procedures in FAR 19.202-1 and, except for acquisitions not exceeding the simplified acquisition threshold, FAR 19.402 apply. If SBA intends to appeal a contracting officer’s rejection of a PCR recommendation to set aside an acquisition for SDVOSB competition, SBA must notify the contracting officer within 5 working days, and the contracting officer must suspend action unless the head of the contracting activity finds urgent and compelling circumstances.
Appeal timing is strict
After SBA notifies the contracting officer of intent to appeal, SBA must file its formal appeal within 15 working days or the agency may treat the appeal as withdrawn. The head of the contracting activity must respond within 15 working days, and that decision is final.
Responsibilities
Contracting Officer
Must follow FAR 19.203 before deciding on an SDVOSB set-aside, use market research to determine whether the two-offer/fair-market-price standard is met, verify offeror eligibility in SAM and SBA systems after January 1, 2024, remove ineligible offerors from award consideration, award to a sole acceptable eligible SDVOSB offer when appropriate, withdraw the set-aside if no acceptable eligible offers are received, and follow the PCR/appeal procedures including suspension of action unless urgent and compelling circumstances exist.
SDVOSB Offeror
Must be properly identified in SAM as an SBA-certified SDVOSB or fall within the limited legacy category with a timely certification application submitted on or before December 31, 2023. The offeror must also submit an acceptable offer to remain eligible for award under the set-aside.
SBA Procurement Center Representative
May recommend that an acquisition be set aside for SDVOSB competition and, if the contracting officer rejects that recommendation, must notify the contracting officer in writing of any intent to appeal within 5 working days of receiving the rejection notice.
Small Business Administration
Must file any formal appeal of the contracting officer’s rejection of the PCR recommendation within 15 working days of notifying the contracting officer of intent to appeal, or the appeal may be treated as withdrawn.
Head of the Contracting Activity
Must decide whether urgent and compelling circumstances justify continuing the acquisition despite an SBA appeal, and must issue a final written decision on the appeal within 15 working days of receiving it.
Agency/Contracting Activity
Must apply the related procedures in FAR 19.202-1 and, where applicable, FAR 19.402, and must honor the suspension of acquisition action when SBA appeals unless the required urgent-and-compelling determination is made.
Practical Implications
Contracting officers need solid market research before choosing an SDVOSB set-aside; weak or outdated research is a common reason the set-aside decision fails. The file should support both expected competition and fair-market-price expectations.
After January 1, 2024, eligibility is not just a representation issue. COs must check SAM and SBA certification status, and offerors without the required status or timely legacy application must be excluded from award.
A set-aside does not automatically fail if only one acceptable SDVOSB offer is received. The key is whether the offer is acceptable and the offeror is eligible; if so, award should generally proceed.
If no acceptable SDVOSB offers are received, the contracting officer must withdraw the SDVOSB set-aside rather than simply award outside the set-aside without adjustment. The requirement may then need to be re-solicited as a small business set-aside if still valid.
PCR and SBA appeal timelines are short and procedural missteps matter. Contracting officers should track notice dates carefully, document any urgent-and-compelling determination, and avoid moving forward during a valid appeal unless authorized to do so.
Official Regulatory Text
(a) The contracting officer- (1) Shall comply with 19.203 before deciding to set aside an acquisition under the SDVOSB Program; (2) May set-aside acquisitions exceeding the micro-purchase threshold for competition restricted to SDVOSB concerns when the requirements of paragraph (b) of this section can be satisfied; and (3) Shall consider SDVOSB set-asides before considering SDVOSB sole source awards (see 19.1406 ) or small business set-asides (see subpart 19.5 ). (b) A contracting officer may restrict competition to SDVOSB concerns eligible under the SDVOSB Program if there is a reasonable expectation based on market research that— (1) Two or more SDVOSB concerns eligible under the SDVOSB Program will submit offers; and (2) Award will be made at a fair market price. (c) Effective January 1, 2024, the contracting officer shall— (1) Verify that offers received are eligible for consideration for award by checking if the offeror— (i) Is designated in SAM as an SDVOSB concern certified by SBA; or (ii) Has represented that it is an SDVOSB concern in SAM and submitted an application for certification to SBA on or before December 31, 2023. Pending applications for certification are in the SBA Veteran Small Business Certification database at https://veterans.certify.sba.gov ; (2) Proceed with the offer evaluation, if the offeror meets the criteria in paragraph (c)(1)(i) or (ii) of this section; or (3) Remove the offeror from consideration, if the offeror does not meet the criteria in paragraph (c)(1)(i) or (ii) of this section, as the offeror is not eligible for award. (d) If the contracting officer receives only one acceptable offer from an SDVOSB concern eligible under the SDVOSB Program 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 SDVOSB concerns eligible under the SDVOSB Program, the SDVOSB set-aside shall be withdrawn and the requirement, if still valid, set aside for small business concerns, as appropriate (see 19.203 ). (e) The procedures at 19.202-1 and, except for acquisitions not exceeding the simplified acquisition threshold, at 19.402 apply to this section. When the SBA intends to appeal a contracting officer’s decision to reject a recommendation of the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402 (a)) to set aside an acquisition for competition restricted to SDVOSB concerns, the SBA procurement center representative shall notify the contracting officer, in writing, of its intent within 5 working days of receiving the contracting officer’s notice of rejection. Upon receipt of notice of SBA’s intent to appeal, the contracting officer shall suspend action on the acquisition unless the head of the contracting activity makes a written determination that urgent and compelling circumstances, which significantly affect the interests of the Government, exist. Within 15 working days of SBA’s notification to the contracting officer, SBA shall file its formal appeal with the head of the contracting activity, or that agency may consider the appeal withdrawn. The head of the contracting activity shall reply to SBA within 15 working days of receiving the appeal. The decision of the head of the contracting activity shall be final.