SBA Proposes Major Shift in Federal Small Business Contracting Priorities

The Small Business Administration (SBA) is undertaking major changes to how federal agencies are evaluated on small business contracting performance, with a new emphasis on veteran-owned businesses and anti-fraud measures.

One of the most notable shifts drawing attention is the increased focus on veterans — including both service-disabled and non-service-disabled veteran-owned firms — within federal procurement policy.

In a recently released report, the SBA stated that “America’s veterans sacrificed for the country and earned special consideration, including in federal contracting.” The report also noted that many veterans face economic barriers when transitioning back to civilian life, including challenges accessing capital and launching small businesses.

The proposed changes signal a departure from priorities emphasized during previous administrations, which placed stronger focus on diversity initiatives and demographic-based contracting goals. Under the current direction of Trump-appointed SBA leadership, the agency appears to be shifting toward policies centered on economic disadvantage, veteran participation and competition.

Among the proposed adjustments are reductions in sole-source 8(a) contracts — federal awards issued noncompetitively to certified disadvantaged small businesses. The SBA also proposes redefining the “small disadvantaged business” category under broader economic disadvantage criteria that could include both traditional SDB firms and veteran-owned businesses. 

Last year, the DOT began reevaluating its DBE (Disadvantaged Business Enterprise) program, easing requirements on various federally funded projects.

According to the report, the changes are intended to curb abuse in federal contracting programs while improving “competitive value to the taxpayer.”

The announcement comes as the federal government expands support for innovation-focused small businesses. Earlier this year, President Trump signed the Small Business Innovation and Economic Security Act, extending the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through 2031. Often described as “America’s Seed Fund,” the programs provide funding to startups and emerging technology firms.

The SBA is also proposing a revised agency scorecard system used to evaluate federal contracting performance. Under the previous formula, 50% of an agency’s score came from prime contracting achievements, 20% from subcontracting, 20% from OSDBU peer reviews tied to Section 15(k) compliance, and 10% from growth in the number of small business prime contractors across various categories.

The revised framework would allocate 50% to prime contract awards, 25% to subcontracting achievements, 15% to serving veterans, 10% to competitive value for taxpayers and 10% to collaboration with SBA anti-fraud initiatives. Observers have noted that the percentages total 110%, though the SBA has not yet clarified how the weighting system will ultimately be calculated.

Policy analysts and contractors say the timing of the proposed changes could significantly affect federal procurement strategies for small businesses, especially because the revisions are being introduced midyear.

The reforms have also drawn criticism from some lawmakers and former officials. Rep. Nydia Velázquez (D-N.Y.) called on the SBA to withdraw what she described as a “vague and ill-advised midyear update,” warning that the changes could harm small business participation in federal contracting.

George Price, former director of the Office of Small and Disadvantaged Business Utilization at the State Department, argued the revisions appear to minimize longstanding small business support requirements under Section 15(k) of the Small Business Act.

“Things like outreach, training, helping small businesses resolve invoices, and reviewing contract bundling weren’t included,” Price said. “Leaving those items out sends a message that they’re no longer priorities, and that could be damaging for small businesses.”

For startups, veteran-owned firms and federal contractors, the outcome of the proposed reforms could influence access to billions of dollars in government contracting opportunities in the years ahead.