Understanding the FAR Part 19 Rewrite: Opportunities and Compliance Risks for SDVOSBs and HubZone Firms

The Impact of FAR Part 19 on Federal Contracting

The federal contracting landscape shifted meaningfully in late 2025 when the long-anticipated rewrite of FAR Part 19 took effect. For Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) and HubZone firms — especially those operating in the logistics and supply chain space — these changes carry both new opportunities and new compliance risks worth understanding before your next bid.

Background: Why FAR Part 19 Was Rewritten

FAR Part 19 governs how federal agencies set aside contracts for small businesses, including SDVOSBs, HubZone firms, Women-Owned Small Businesses (WOSBs), and 8(a) participants. The original framework had not been comprehensively updated in decades. The accumulated patchwork of rules created confusion around priority, set-aside sequencing, and program eligibility.

The rewrite — part of the broader FAR 2.0 modernization effort — aimed to clarify the "Rule of Two" framework, streamline set-aside sequencing, and reduce friction between socioeconomic programs. Here is what actually changed.

Key Changes That Affect SDVOSB Contractors

1. Small Business Set-Asides Now Take Priority Over Socioeconomic Programs

This change is likely to affect SDVOSB and HubZone contractors the most. Under the revised Part 19, contracting officers are no longer required to prioritize socioeconomic set-asides (SDVOSB, HubZone, WOSB, 8(a)) over general small business set-asides. The new sequencing makes small business set-asides the default. This could reduce the number of contracts flowing specifically to certified socioeconomic categories.

What this means practically: If a contracting officer determines two or more small businesses can compete, they can satisfy the Rule of Two with a general small business set-aside. This means contractors who previously counted on agency preference for socioeconomic set-asides should be prepared for more open small business competition.

2. Automatic Release of 8(a) Follow-Ons to SDVOSB and HubZone Programs

On the positive side, a long-standing barrier has been removed. Previously, contracts performed under the 8(a) program were presumed to remain in the 8(a) pipeline — "once an 8(a), always an 8(a)." The new rules change this: If a follow-on requirement will be set aside under SDVOSB, HubZone, or WOSB, it is automatically released from 8(a) without a formal release request.

This creates a real path for SDVOSB and HubZone logistics firms to compete for work that was previously locked into the 8(a) program. If your company is positioned in a category where an incumbent 8(a) contract is expiring, it is worth monitoring those opportunities closely.

3. Expanded Sole Source Authority for SDVOSBs

The revised FAR eliminates a prior limitation that prevented contracting officers from awarding sole source SDVOSB contracts when the requirement was being performed by an 8(a) firm. That restriction is gone. SDVOSBs with the right capabilities, past performance, and SBA VetCert certification are now eligible for sole source consideration regardless of the previous contract vehicle.

What HubZone Contractors Need to Watch

HubZone contractors have their own set of 2025–2026 regulatory updates to track, separate from the FAR Part 19 rewrite. The SBA published final HubZone program clarifications in December 2024 that became effective in early 2025. Key points include:

• Recertification is now triennial, not annual. This reduces administrative burden but means your employee residency data needs to remain current — not just at certification time.

• Legacy employee counting rules have been clarified. The SBA issued new guidance on when employees hired before certain program changes count toward the 35% HubZone residency requirement.

• Agencies must still verify HubZone status at contract award and at recertification. The triennial schedule does not eliminate mid-period compliance obligations.

  
  

The SDVOSB Spending Goal Increase: A Real Dollar Opportunity

Separate from the FAR rewrite, the National Defense Authorization Act for FY2024 raised the federal SDVOSB spending goal from 3% to 5% of all prime and subcontract dollars. That translates to roughly $31 billion annually targeted for SDVOSB firms. In FY2025, agencies collectively awarded $28.6 billion to SDVOSBs across approximately 52,000 contract actions — evidence that agencies are pushing toward that new benchmark.

Critically, as of December 22, 2024, only SBA VetCert-certified businesses count toward agency SDVOSB goals. Self-certification is no longer sufficient. If your firm has not completed VetCert certification through the SBA, you are invisible to agency contracting officers tracking their SDVOSB spend. The good news: SBA cleared its VetCert backlog in late 2025, and processing times are now averaging around 12 days.

Compliance Red Flags: The Audit Environment in 2026

The audit climate for small business set-asides has tightened in 2026. An expanded government review of set-aside awards — initially focused on 8(a) contracts over $20 million — has broadened to cover SDVOSB, WOSB, and HubZone set-asides as well. Contractors performing on these vehicles should ensure:

• SBA certification is current and matches the work being performed.

• Joint venture agreements (if applicable) comply with SBA mentor-protégé and JV rules. OHA has recently reminded contractors that JV compliance is evaluated at the Final Proposal Revisions stage.

• Size recertification has been completed where required — particularly for contracts that have changed scope or value.

• Subcontracting plans and limitations on subcontracting are being met and documented.

  
  

What This Means for Logistics Contractors

For logistics and supply chain firms like H&C Precise Logistics, these changes reinforce a few practical priorities:

• Keep your SBA VetCert and HubZone certifications current. In an audit-heavy environment, lapsed or mismatched certification is an immediate disqualifier.

• Monitor expiring 8(a) contracts in your service areas. The automatic release rule creates real pipeline opportunities for SDVOSB and HubZone firms — but you need to be watching for them.

• Do not rely on agency preference for socioeconomic set-asides. The new FAR Part 19 sequencing means you need to make the competitive case on merit, not just program eligibility.

• Build past performance now. As competition broadens under the revised framework, documented past performance on federal logistics contracts becomes an increasingly important differentiator.

  
  

Final Thoughts

The FAR Part 19 overhaul is not a crisis for SDVOSB and HubZone contractors — but it does require adjustment. The spending goals are higher, the certification requirements are stricter, and the competitive landscape is shifting. Firms that understand the new rules and stay proactively compliant will be better positioned to capture their share of federal logistics contracts in 2026 and beyond.

H&C Precise Logistics LLC is a Service-Disabled Veteran-Owned Small Business (SDVOSB) and HubZone-certified logistics provider serving federal government clients. Contact us to learn how we can support your supply chain and logistics requirements.

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