ESOPs Eligible for DOD Pilot Program

Is your company owned under an employee stock ownership plan? If so, you need to know what’s new from the Department of Defense ― a pilot program allowing contracting officers to award sole-source follow-on contracts to contractors owned 100% by an ESOP.

Although sole-source awards already exist for certain small businesses, this program marks the government’s first authorized set-aside program for ESOPs. Like most pilot programs, however, this set-aside program is limited, with strict eligibility criteria and only nine contracts available.

Therefore, know that interested ESOPS must move quickly to determine whether they qualify and discuss participation with their contracting officer.

The National Defense Authorization Act for Fiscal Year 2022 authorized this first-of-its-kind pilot program with discrete limitations. They include limiting participation to 100% ESOP-owned contractors who received at least a satisfactory rating on a prior DOD contract for the same (or substantially similar) products or services.

Within these general guidelines, DOD’s recent memorandum explained other requirements.

First, there are strict eligibility requirements. The contractor must be a 100% ESOP and have a satisfactory Contractor Performance Assessment Reporting System rating for a similar contract to be eligible. DOD also clarified that the contractor had to be a 100%-owned ESOP during the prior contract performance period.

Second, significantly, only the CO is allowed to apply for participation.

Third, participation is restricted to only nine companies and DOD is requiring all follow-on contracts to be awarded no later than Aug. 31, 2023. In contrast, the enabling legislation imposed no such numerical limits and contemplated a five-year program lifespan.

Fourth, any program participant agrees to provide data about that contractor’s experiences as an ESOP and information about contractor performance.

Vet program update

U.S. Small Business Administration Administrator Isabella Casillas Guzman, who oversees America’s 33 million small businesses, recently announced updates to the planned launch of the SBA’s new Veteran Small Business Certification Program.

They include her intention to grant a one-year extension to firms verified by the Department of Veterans Affairs’ Vets First Verification Program through the Center for Verification and Evaluation as of the Jan. 1, 2023 transfer date.
The VSBCP will be the SBA’s primary vehicle for handling certification for veteran-owned small businesses and service-disabled veteran-owned small businesses. These are important classifications that enable those businesses to qualify for sole-source and set-aside federal contracting awards. Guzman also intends to grant a one-time, one-year extension to current veteran-owned small businesses verified by the VA’s Center for Verification and Evaluation as of Jan. 1.

Seeing veteran certification moving to the SBA and being applied across all the federal government agencies is exciting news to industry veterans like Scott Jensen, executive director at the National Veteran Small Business Coalition. “We also applaud the administrator’s decision to extend existing certifications for one year,” he said. “This decision will provide valuable relief to those already certified during a year of increased demand as other companies pursue the mandatory certification requirement.”

The certification period will extend to four years on a one-time basis for firms verified by the VA as of Jan. 1. For the latest information on the VSBCP, visit or email

Gloria Larkin is President and CEO of TargetGov, and a national expert in business development in the government markets. Email, visit or call toll-free 1-866-579-1346 x 325 for more information.


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