Newly Enacted NDAA Brings Change and Opportunity

In a rare display of solidarity, the United States Senate voted on New Year’s Day 2021 to override President Trump’s veto of the Fiscal Year 2021 National Defense Authorization Act (“FY21 NDAA”). After a December 23rd veto by President Trump, both houses of Congress voted the bill into law with overwhelming support, perpetuating the appropriation bill’s reputation as one of the last remaining must-pass pieces of legislation. The FY21 NDAA authorizes the expenditure of $740 billion for national defense and includes multiple provisions important to small- and medium-sized government contractors. This alert highlights three significant such provisions.

I.  SEC. 861. INITIATIVES TO SUPPORT SMALL BUSINESSES IN THE NATIONAL TECHNOLOGY AND INDUSTRIAL BASE

Section 861 directs the Secretary of Defense (“SECDEF”) and other defense officials to establish multiple initiatives aimed at growing the number of small businesses in the National Technology and Industrial Base (“NTIB”). The section requires SECDEF to update its small business strategy and develop biennial plans implementing the same. Importantly, the section also directs SECDEF to analyze how it might “assess the financial status of critical small businesses” and “provide direct financial support” to critical small businesses requiring such assistance. While Section 861 does not establish any specific policies or procedures, developments following this analysis could become quite significant for small business contractors in critical technology sectors.

II.  SEC. 862. TRANSFER OF VERIFICATION OF SMALL BUSINESS CONCERNS OWNED AND CONTROLLED BY VETERANS OR SERVICE-DISABLED VETERANS TO THE SMALL BUSINESS ADMINISTRATION.

Section 862 consolidates two previously redundant programs for certifying service-disabled, veteran-owned small businesses (“SDVOSB”). Prior processes required SDVOSBs to certify their status through the Department of Veterans Affairs (“VA”) Center for Verification and Evaluation, as well as the Small Business Administration (“SBA”). Section 862 eliminates the VA’s verification process, requiring that veteran-owned small businesses (“VOSBs”) and SDVOSBs now certify through the SBA, alone. This policy follows SBA’s recent establishment of a set of uniform regulations governing SDVOSBs. While the VA remains responsible for verifying an individual’s status as a veteran or a service-disabled veteran, SBA will assume sole responsibility for entity certification. Both agencies are charged with completing the transfer of these responsibilities (and related infrastructure) by January 1, 2023 (the “transfer date”).

This transition has unique implications for currently self-certified SDVOSBs, as those entities must apply for a formal certification from the SBA within one year following the transfer date. However, self-certified SDVOSBs competing for prime contracts with the VA (or subcontracts issued thereunder) must be formally certified by the transfer date.

III.  SEC. 868. PAST PERFORMANCE RATINGS OF CERTAIN SMALL BUSINESS CONCERNS.

One of the FY21 NDAA’s most significant provisions for small businesses appears in Section 868. That section modifies portions of the Small Business Act to expand the means by which a small business contractor can establish past performance. When competing for prime government contracts, small businesses may now reference experience obtained:

1. Through participation in a joint venture (“JV”), regardless of the size of the other joint venturer; or
2. As a first-tier subcontractor on any prime contract for which the prime contractor was required to develop a subcontracting plan.

A small business contractor may only use its participation in a JV to demonstrate past performance if the small business has no relevant past performance of its own. In such cases, the contractor must describe, among other things, the duties and responsibilities it performed as part of the JV in its proposal material. Importantly, Section 868 places the responsibility of developing past performance ratings for first-tier subcontractors on the prime contractor. This is a welcomed provision for many small businesses looking to establish or expand their footprint in the government market. Conversely, prime contractors normally required to develop subcontracting plans will likely experience an increase in costs and administrative burden due to the added responsibility of conducting first-tier subcontract past performance evaluations. Contractors should anticipate SBA’s issuance of one or more proposed rules implementing the provisions of this section in the first half of 2021.

If you are a Veteran with a business and have questions about your upcoming bid submission and the rules, please contact the experienced attorneys at Veterans Advocacy Law Group at or complete an online contact form.