January 2025 marked the most significant shift in federal supplier diversity policy in decades. A series of executive orders, regulatory changes, and enforcement actions have fundamentally altered the landscape for diverse businesses seeking federal contracts.
For diverse suppliers, this moment requires clear-eyed assessment: understanding what has actually changed, what remains intact, and how to position your business for success in this new environment.
Executive Order 14173: "Ending Illegal Discrimination and Restoring Merit-Based Opportunity"
Signed on January 21, 2025, this executive order revoked Executive Order 11246. For 60 years, EO 11246 required federal contractors to maintain affirmative action programs for women and minorities. That requirement ended on April 21, 2025.
Federal contractors are no longer required to establish numerical goals for workforce diversity, maintain written affirmative action programs, or file annual EEO-1 reports related to affirmative action compliance.
Contracting Goal ChangesThe federal government's Small Disadvantaged Business (SDB) contracting goal has been reset:
- SDB: 15% → 5% (statutory floor)
- Small Business: 23% (unchanged)
- WOSB: 5% (unchanged)
- SDVOSB: 5% (increased from 3%)
- HUBZone: 3% (unchanged)
Here's what many commentators get wrong: the core legal frameworks for small business contracting remain intact.
The Small Business Act: The statutory basis for small business contracting preferences—including set-asides for 8(a), HUBZone, WOSB, and SDVOSB firms—was created by Congress, not executive order. These programs continue to operate with full legal authority.
All SBA Certification Programs Continue: 8(a), WOSB, SDVOSB, and HUBZone programs are still operational and accepting applications.
FAR Subcontracting Requirements: Prime contractors on contracts exceeding $750,000 must still submit subcontracting plans with small business goals.
Impact on Certified Small BusinessesThe Good News:
- Your certification remains valid
- Set-aside contracts continue to be awarded
- Sole-source authority remains (though under increased scrutiny for 8(a))
- The programs have statutory backing that executive orders cannot eliminate
The Challenges:
- Increased compliance scrutiny
- Enhanced documentation requirements
- Potential reduction in total contract opportunities as agencies adjust to lower goals
1. Focus on Capability, Not Just Certification
In an environment where certification alone provides less advantage, your competitive position depends on demonstrating clear capability.
2. Maintain Impeccable Compliance
Enforcement is intensifying. Ensure your certification eligibility remains current and documentation is organized.
3. Diversify Your Customer Base
Consider expanding to state and local government contracts and corporate supplier diversity programs.
4. Leverage SDVOSB Opportunities
The SDVOSB goal increased from 3% to 5%—the only goal that went up.
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