A decade ago this August, the landmark Veterans Entrepreneurship and Small Business Development Act of 1999 (Public Law 106-50) represented one of the most significant leaps forward for the veteran-owned business movement. This law established a goal for all federal agencies to spend 3 percent of procurement dollars with service-disabled veteran-owned businesses (SDVOB).
The Veteran Benefits Act of 2003 (Public Law 108-183) improved the law by adding section 308-36 which created the opportunity for contracting officers to award sole-source contracts to SDVOBs if certain criteria were met as part of the to the Procurement Program for Small Business Concerns Owned and Controlled by Service-Disabled Veterans.
In October 2004, President George W. Bush issued Executive Order 13360 to make certain federal agencies implement section 15(g) of the Small Business Act (15 U.S.C. 644(g)). EO 13360 also mandated heads of all federal agencies to develop and implement a publicly available strategic plan that outlines how each agency will achieve the 3 percent goal and to report the agency’s performance to the U.S. Small Business Administration (SBA).
EO 13360 also required the SBA to “designate an appropriate entity” within the administration to coordinate with the Veterans Affairs’ Center for Veterans Enterprise (CVE) to provide service-disabled veteran businesses information and assistance concerning participation in federal contracting and to advise and assist heads of agencies in their implementation of this order.
With all the laws and programs in place, it would seem that the federal government should have easily met and exceeded the 3 percent goal. However, this year marks the 10-year anniversary of PL 106-50 and unfortunately, as a whole, the federal government has never achieved the 3 percent benchmark. In fact, it’s never even come close.
The SBA and recently released the figures for 2007 and across 21 federal agencies with procurement budgets in excess of $500 million, a scant 1.01 percent of contract dollars were spent with SDVOBs. While there has been steady improvement over the past nine years, the three percent goal has proven unattainable.
A $15 Billion Opportunity
Since 2001, government contract spending has doubled exceeding $500 billion in 2008 alone. At just three percent, this presents an opportunity of more than $15 billion that should go to SDVOBs by law, but in 2007 only $3.8 billion went to these businesses. With the recent passing of the American Recovery & Reinvestment Act of 2009, the opportunity for conducting business in the federal marketplace is now better than ever.
With a new president at the helm, Vetrepreneur wants to tell our readers what the Obama administration will do to improve on the past decade of under-achievement. During the 2008 campaign, then Senator Obama addressed the issue and said ''I want to make sure that minority-owned businesses, small businesses, women-owned businesses, veteran-owned businesses are all being put, in fact, in positions where they can be competitive'' in terms of federal contracting.
On Feb. 17, President Obama signed the most sweeping government spending law in history designed to jumpstart the withering economy. According to the Senate Small Business and Entrepreneurship Committee, the bill increased funding for the SBA to $547 million – $47 million more than last year’s appropriation.
Obama signed a presidential memo March 4 creating new government guidelines to “govern the appropriate use and oversight of sole-source and other types of noncompetitive contracts and to maximize the use of full and open competition” to prevent fraud and open up more contracts to small businesses. But, this may be a double-edged sword for SDVOBs since PL 108-183 opened the door to many sole-source contracting opportunities. In 2008, 38 percent of federal procurement dollars were spent on no bid sole-source contracts. It’s unclear how much was spent with SDVOBs, but the total number of all sole-source contracts is bound to decline under the new guidelines.
It’s important to note that President Obama did not express intentions to eliminate sole-source contracts entirely. He did state that “…the federal government must strive for an open and competitive process. However, executive agencies must have the flexibility to tailor contracts to carry out their missions and achieve the policy goals of the government.”
Representatives from five federal agencies testified March 12 before the House Small Business Subcommittee on Contracting and Technology concerning strategies to funnel stimulus package money to veteran-owned small businesses. Subcommittee Chairman Rep. Glenn Nye, (D) from Va. said the failures must stop.
"Today we are putting government agencies on notice: We will not accept the tired excuse that the need to move hastily and the sheer volume of contracts resulted in an 'inadvertent oversight' of veteran-owned businesses," Nye said. The White House issued a statement March 16 that emphasized the point that the “Obama administration firmly believes that economic recovery will be driven in large part by America’s small businesses…,” and outlined the measures the administration is taking in addition to the provisions in the recovery act. That same day, President Obama met with small business owners in the White House and addressed their concerns.
“Our recovery in the present and our prosperity in the future depend upon the success of America's small businesses and entrepreneurs,” Obama said. “You deserve a chance… And as president, I will continue to do everything in my power to ensure that you have the opportunity to contribute to your community, to our economy and to the future of the United States of America.”
Later that same afternoon, the president spoke at the Department of Veterans Affairs.
“Finally, in this new century, it's time to heed the lesson of history, that our returning veterans can form the backbone of our middle class,” the president said concerning revisions to the GI Bill. “…And that's how we'll show our servicemen and women that when you come home to America, America will be here for you.”
The White House failed to comment specifically addressing veteran-owned businesses after repeated attempts prior to the publication of this magazine.
Some Strong Performers
The Department of Housing and Urban Development (HUD) spent the largest oercentage of its procurement budgets out of all federal agencies in 2007 according to the SBA. HUD spent 13.09 percent of its budget with VOBs, 2.4 percent of which with SDVOBs.
The Department of Veterans Affairs came in a close second and spent 10.37 percent of its budget with VOBs, 7.09 percent of which with SDVOBs.
“The VA works very hard to award contracts to SDVOSBs and VOSBs to the maximum practicable extent that we can,” said David Canada, acting deputy director of the VA’s Office of Small and Disadvantaged Business Utilization (OSDBU).
Although the data for 2008 will not be released by the SBA until later this year, Canada said that the VA Secretary set the goal for VOB awards significantly higher than other federal agencies.
“Our fiscal year 2008 accomplishments are 15.27 percent for awards to VOBs and 12.09 percent for awards SDVOBs,” Canada said. “We are the leaders in the federal government for awarding contracts to SDVOB and VOB firms.”
According to a report released by the Government Accountability Office March 19, the “VA exceeded its prime contracting goals for SDVOSB and VOSBs in fiscal year 2007 and 2008, reflecting leadership commitment and broad-based agency efforts.”
The Environmental Protection Agency (EPA) was the only other agency besides the VA to attain the 3 percent benchmark. The EPA spent a total of 5.62 percent of its budget with VOBs, 3.99 percent of which was with SDVOBs. The General Services Administration (GSA) spent 2.34% of its procurement budget with SDVOBs and 5% with VOBs. Diane Merritt, from the GSA Press Office said it appears the agency might have finally reached the 3 percent threshold last year.
“The preliminary figures for [fiscal year] 2008 indicate that the GSA met the 3 percent goal for SDVOSBs,” Merritt said. “GSA is continuing its ongoing effort which began in 2004 to provide opportunities for the SDVOSB's through all of GSA's programs. This effort has brought over 800 SDVOSB firms to our GSA Schedules Program and provided many opportunities on GSA's VETS Governmentwide Acquisition Contract.”
Room for Improvement
Although most agencies have been inching closer to the goal, many agencies have a long way to go. The Department of Health and Human (HHS) spent 0.58 percent of its budget with SDVOBs and 1.82 percent with VOBs. Nicholas Papas, spokesman for the agency said this will increase in 2009 as the department is “committed to partnering with veteran-owned businesses and meeting the three percent goal.”
“We work closely with the Department of Veterans Affairs to ensure the VA can pass on information about contracting and procurement opportunities at HHS to veterans,” Pappas said. “Additionally, HHS conducts an annual forum every November specifically designed for veterans and other business owners. At the forum, veterans can learn about the department, meet one-on-one with acquisition and program office personnel and meet with large prime contractors for potential subcontracting opportunities.” This forum is scheduled for Nov. 10, 2009.
The Department of Defense has been steadily increasing since 2003 the actual dollars it awards to VOBs, but in 2007 it only spent 0.69 percent with SDVOBs and 1.72 percent with VOBs.
“We are not where we want to be but we are making good progress; better than in any other category,” said Chris Isleib, spokesman for the Office of the Secretary of Defense. “We believe that the final 2008 achievement in dollars will be well above $3 billion and that the percent will be approximately 0.98. In comparison, in 2003 we awarded $.3 billion or .18 percent of contract prime dollars to SDVOBs. We cautiously predict that our achievements will be even higher in 2009 but we do not expect to achieve the government-wide goal of 3 percent.”
The Social Security Administration (SSA) spent 1.24 percent of its budget with SDVOBs and an additional 3.48 percent with VOBs and plans to increase these numbers.
“For [fiscal year] 2009, SSA contracting officers will reserve for SDVOSBs all of the acquisition actions that were awarded to SDVOSBs in 2008,” said Kia Green from the SSA National Press Office. “Additionally, SSA will send all of its FedBizOpps notices of solicitation to at least one SDVOSB. Finally, SSA will work with the SBA Office of Veterans Business Development to provide training on the SDVOSB program to SSA’s acquisition workforce.”
In 2007 the Department of Homeland Security (DHS) spent 1.42% of its procurement budget with SDVOBs and 5.45% with VOBs. Larry Orluskie, director of communication, undersecretary for management at DHS outlined the plans for 2009.
“We are currently reviewing Phase 2 proposals for our DHS-wide 100 percent SDVOSB set-aside multiple award project for Program management, Administrative, Clerical, and Technical Services (PACTS), and anticipate it will be available for task order competition prior to the end of fiscal year 2009,” Orluskie said. “Additionally, the Coast Guard is working on a regional construction/design/build multiple award project in which three of the regions have been designated as SDVOSB set-asides (see map). These Coast Guard contracts will be available for all DHS components.”
How Can Agencies Achieve the Goal?
Gerardo (Jerry) Franco, chief of the Procurement Assistance Division Office of Small and Disadvantaged Business Utilization for U.S Department of Transportation (DOT) said his agency is trying to improve on the 2.66 and 2.34 percent it spent with VOBs and SDVOBs respectively by continuing “to increase awareness within the agency, create an advocacy environment, provide training and report accountability.”
Scott Denniston, director of programs for NaVOBA and former director of the OSDBU and the CVE at the VA, attributed the VA’s success to individual accountability.
“Accountability to me is the key ingredient,” Denniston said. “One of the reasons that we were successful at VA is that after [EO] 13360, meeting that 3 percent goal was part of the performance plan for anybody who touched the procurement process. So we got their attention. That’s what I mean by accountability because it gets down to the individual level.”
The SBA is charged with the management and oversight of the small business procurement process across the federal government by negotiating with federal departments concerning prime contracting goals to ensure that small businesses have the maximum practicable opportunity to do business with the federal government.
The SBA released the second annual small business procurement scorecard in October last year to report its findings to the public. A record $83.2 billion in federal prime contracts were awarded to small businesses in the 2007 fiscal year, nearly $6 billion more than in 2006. Karen Hontz, the director of government contracting for the SBA said the scorecard is a method for the SBA to hold agencies accountable for achieving their goals.
“If they have not met their goals, part of the scorecard requires them to provide reasons why they haven’t met them and what they’re going to do to reach them,” Hontz said. William Elmore, associate administrator for veterans business development at the SBA said part of the process involves the SBA reviewing the individual strategic plans from each agency and using that to evaluate the performance.
“We try to work with individual agencies and with individual service-disabled veterans and veteran small business owners to help them understand the steps in the process for somebody to successfully compete in the federal marketplace.”
All agencies insisted that VOBs should learn as much as they can about what government agencies need in order to do business with the government.
“Do the market research so they understand who’s buying the products or services that they want to sell,” Denniston said. “You need a good marketing plan and you’ve got to be persistent.”
Isleib said understanding the customer is the most important aspect to landing a contract.
“Veterans have a natural advantage with DoD because of their military experience,” Isleib said. “They hear the language and they speak the language. They can (and do) enhance their advantage even more by targeting their study of the particular customer.”