HR-561-116
Became Public Law No: 116-183.
Sponsored by Jack Bergman (R-MI)
What it does
This law requires that when the Department of Veterans Affairs (VA) awards a contract to a veteran-owned or service-disabled veteran-owned small business, that business must perform a minimum share of the work itself rather than passing most of it to subcontractors. Before receiving a contract, the business must certify in writing that it will meet these performance requirements, and that certification carries criminal penalties for false statements. The VA's small business and acquisition offices must jointly monitor compliance and report violations to the VA Inspector General, who must report findings to Congress.
Who benefits
Veteran-owned and service-disabled veteran-owned small businesses that already perform substantial work in-house, as they face less competition from firms that win set-aside contracts primarily to pass work to larger non-veteran subcontractors. Taxpayers and the federal government, to the extent that contracts reach their intended recipients. The VA Inspector General's office, which gains a formal oversight and reporting mandate. Small businesses in general that compete fairly under set-aside rules.
Who is hurt
Veteran-owned small businesses that rely heavily on subcontracting arrangements to fulfill contracts — particularly newer or smaller firms that may lack the in-house capacity to meet performance thresholds. Businesses that have used pass-through subcontracting as a growth strategy may lose contract eligibility or face criminal exposure. Larger subcontractors who previously received substantial work through veteran-owned prime contractors may see that work reduced.
Supporters argue
Supporters argue that VA set-aside contracts exist specifically to channel federal spending to veterans who have built legitimate businesses, and that allowing prime contractors to subcontract most of the work to non-veteran firms defeats that purpose entirely. They contend that without enforceable performance requirements and criminal penalties for false certifications, bad actors can exploit the veteran preference label while delivering little economic benefit to the veteran community. The certification and Inspector General reporting requirements create a transparent, accountable system that protects the integrity of the program and ensures that the businesses Congress intended to help actually receive the work and the revenue.
Opponents argue
Opponents argue that rigid subcontracting limits may harm the very veteran entrepreneurs the law intends to help, particularly those who are early-stage or operating in industries — such as construction or IT — where subcontracting is a standard and necessary business practice. They contend that the threat of criminal prosecution for certification errors could deter qualified veteran-owned firms from bidding on VA contracts at all, reducing competition and potentially raising costs for the VA. Critics may also argue that existing VA oversight mechanisms were sufficient, and that adding layers of mandatory referrals and Inspector General reporting creates administrative burdens without meaningfully improving outcomes for veterans.