Ask any vetrepreneur about veteran-owned business legislation and they’ll probably tell you about PL 106-50 or PL 108-83. These two landmark pieces of legislation are by far the most prevalent and pivotal laws pertaining to the VOB movement. But, what many vetrepreneurs don’t know is that the first VOB legislation passed was at the state level. In fact, PL 106-50 was patterned after the Disabled Veteran Business Enterprise (DVBE) Participation Program passed in California in 1989, a full decade before the federal law. Similar to the federal program, the California DVBE program established a goal of 3 percent of state contracts be set aside for SDVOBs.
While federal legislation provides excellent opportunities for VOBs – especially with the Recovery and Reinvestment Act pumping $787 billion into the ailing economy – but state and local governments provide a much greater opportunity and must not overlooked. Scott Denniston, NaVOBA’s Director of Programs and former director of the Department of Veterans Affairs Center for Veterans Enterprise (CVE) said vetrepreneurs who focus exclusively on the federal government miss out on better opportunities with state and local governments.
"There’s an incredibly untapped market at the state and local level," Denniston said. "When you add up all the state and local governments, it’s at least double the federal marketplace every year. This is an incredible market that veterans must be made aware of."
In fiscal year 2007, the federal government spent $456 billion. Of this total, $378 billion was available for contracting opportunities for small businesses. This creates $11.3 billion that should be spent with SDVOBs by law. However, according to the U.S Census Bureau, state and local governments spent more than $2.5 trillion in fiscal year 2005-06. According to the most recent edition of the National Association of State Budget Officers (NASBO) State Expenditure Report, state governments alone spent $1.5 trillion in 2008. Of this total, $689 billion was not earmarked for other expenditures and could potentially be outsourced. If 3 percent of this total were spent with VOBs, it would represent a potential opportunity $20.67 billion, nearly twice the federal opportunity. Plus, this number doesn’t even include local governments.
"The other reason that state legislation is important is that a lot of states and municipalities give preference to local companies and that limits your competition," Denniston said. "Plus, the contracts that are awarded by state and local government generally are not as large as those issued by the federal government. So state and local government, in many cases, can be a better place for a start-up company to start looking for opportunities and then progress into the federal marketplace. And, it’s also easier to market to state and local government since they are closer further reducing business development expenses."
The History of VOB Legislation
The first VOB legislation in the country was passed by Alabama in 1975 and provided exemptions for Business and Occupation License fees for disabled veterans and veterans of WW II. At this same time, John Lopez, founder of the Association for Service Disabled Veterans (ASDV) and one of the founding fathers of the veteran-owned business movement was trying to get federal legislation passed that would establish entrepreneurship programs as a rehabilitation strategy for disabled veterans returning from Vietnam. He wasn’t able to make any progress since there was no funding available for a self-employment program, even though a clause in the Vietnam Era Veterans' Readjustment Assistance Act of 1974 charged the VA with providing assistance to service-disabled veterans who had completed a vocational rehabilitation program for self-employment in a small business enterprise. After being stymied for years at the federal level, Lopez went back to California where he had numerous contacts in the state legislature.
"I went to the California Legislature and we got it through and it was the forerunner of all the others," Lopez said.
At the time of publication of this magazine, there are only twelve states that have existing legislation specifically aimed to facilitate veteran-owned businesses. Chris Hale, NaVOBA President, said the tremendous opportunity at the state and local level necessitates efforts from VOBs all over the country to advocate legislation in their states.
"Simply publicizing a comprehensive list of vetrepreneur legislation in all states will create awareness and change," Hale said. "Then our leadership, other advocates and our own membership will have a basis to encourage their state legislators to create state opportunities. Which state will want to be the one that isn’t doing right by veterans? This is how we will create opportunities at the state level."
VOB Legislation ‘on the Books’
In addition to the aforementioned programs in California and Alabama, 10 other states including Michigan, Maryland, Virginia, West Virginia, Oregon, Washington, Georgia, Wisconsin, Missouri and Florida have passed some type of legislation designed to assist VOBs. Many of the state programs mirror PL 106-50 and set aside a percentage of state contracts for SDVOBs but, unlike the federal level, states have passed a range of different types of legislation that pertain to both VOBs and SDVOBs.
For example, the state of Maryland passed the Military Reservist and Service-Disabled Veteran No Interest Loan Program in 2006 that provides 0 percent interest loans ranging from $1,000 - $50,000 to Reservists and National Guard members who are called to active duty, and SDVOBS to help with business costs associated with deployment or as a result of a disability.
But, the state also passed the Procurement - Small Business Preference Program that was passed in 2008 and gives a percentage preference to disabled veteran small businesses and veteran small businesses bidding on state contracts. Disabled veterans get 3 percent and veterans get 2 percent preference in addition to the 5 percent awarded to other small businesses.
Heidi Gerding, president and CEO of HeiTech Services Inc., and honorable mention for the Vetrepreneur of the Year said she was unaware of these programs.
"I am encouraged when I learn that there are states are passing legislation to help veterans who have served their country and especially the state in which I reside," Gerding said. "I would hope that the information were more publicly available because I don’t think that these actions are being publicized well."
Dennis DeMolet, president of DeMolet Consulting said this is always a problem with governments.
"Governments is the world’s worst marketers," DeMolet said. "They only market what they need to market quickly when the constituents raise enough devil."
In addition to including VOBs as well as SDVOBs, states have the flexibility to pass legislation targeted to the unique needs of its residents. Since Oregon has a large number of business owners serve in the National Guard and Reserve components, the state implemented the Small Business Repair Loan Program in March 2008. This legislation provides as many as two interest-free loans to military veteran business owners who return from a deployment as a way to help them repair any losses to their businesses.
Glen Brown, owner of GlenMar Construction said he and members of his staff worked diligently to get legislation passed. Oregon SB 479 was passed unanimously by the Oregon House May 21 and awaits the governor’s signature.
"An amendment was added stating the bill falls under emergency legislation and will become law upon signature and not have to wait until the following year to be implemented by all state contracting agencies," Brown said.
Some other states’ programs aren’t nearly as complex. For instance, the Florida Service-Disabled Veteran Business Enterprise Opportunity Act took effect on Veterans Day 2008 and provides a preference to SDVOBs for state contracts. There is no goal established for a percentage of contracts awarded to SDVOBs. Basically, if there are two equal bids in terms of quality and price and one of the bidders happens to be an SDVOB, then the SDVOB is given preference.
Kevin Connelly, president of Apollo Sunguard Systems in Sarasota Fla. said he is familiar with the legislation but doesn’t expect it to have a significant impact for his business.
"It’s not going to do a whole lot," said Connelly, an Army veteran who served two tours in Vietnam. "This law basically serves as a tiebreaker. What we need is legislation that mirrors the California program. And even then the only way these programs are going to be effective is at the contracting officer level. There must be accountability for achieving these goals."
West Virginia has a similar program that took effect in May 2006 and provides a preference for West Virginia resident veterans in procuring state contracts. With all other aspects being equal, veterans will be awarded a contract when competing with out-of-state vendors as long as the bid does not exceed of 3.5 percent of the competing bid.
Harry Siegel, CEO of HMS Technologies, said he applauds the state government for being "very veteran-centric" although the program hasn’t had an impact on his business.
"I believe for those veteran-owned companies that provide the products and services that are bought at the state level, this has done great thing for them," said Siegel who is a 1973 Naval Academy graduate and Vietnam veteran. "We are an IT and health services company and the state of West Virginia has not utilized much of that type of service."
Siegel said while West Virginia has made a great step forward, the state could do more. He favors a set-aside program for all veteran-owned businesses, not only SDVOBs.
"The legislation should be buttoned down a little tighter than the federal legislation," Siegel said. "Instead of proposing legislation that simply sets a goal, there has o be some type of mechanism that holds contracting officers and purchasing agents accountable for achieving the goal."
Lopez agreed abut the notion of accountability as a pivotal facet of legislation. "State governments are already legally bound by [PL] 106-50 to spend the three percent of the federal money they receive in the form of grants and other federal funding with service-disabled veterans," Lopez said. "State governments should pass legislation that acknowledges that they are aware that they need to abide by the federal law and hold contracting officers accountable."
Now is the Time to Act
DeMolet said that the overwhelming majority of states across the country have established programs to assist small businesses owned by women and minorities. These programs, plus the VOB legislation already on the books in the twelve aforementioned states provide a precedent and an access point for vetrepreneurs to propose legislation in their states.
Denniston agreed.
"Tip O’Neill, former Speaker of the House, said ‘all politics is local,’" Denniston said. "Start with your local representatives. Find out what other states have done. The thing that’s important is to let state legislatures know that there are very effective models out there. They’re not doing this alone. They’re not reinventing the wheel."
Tim Wheeler, president of the Alaska Veterans Business Alliance (AVBA) introduced legislation for the state of Alaska that originally included a 10 percent price preference for VOBs competing for state contracts and would establish a state registry. The bill was amended by eliminating the registry and placing cap of $5,000 on the preference. Wheeler will testify before the state senate in July to find out why the legislation was so heavily modified.
"I’m going to ask the senators ‘why are you punishing us veterans here in Alaska for our service for the freedoms you enjoy,’" Wheeler said. "Why cap it? Why isn’t there a cap on the women? Why isn’t there a cap on the minorities? Why does it always have to be the veterans? Why are we always getting thrown under the bus?"
The continued success of the VOB movement is dependent upon successful creation and passage of legislation, according to Denniston.
"The government sector will continue to serve as the foundation for the veteran business community because of its ability to set mandates," Denniston said. "Within the government marketplace, the veteran movement and the veteran goals are the ones that are getting the most attention. I firmly believe that they should. I think veterans should be front and center of everything that we do in the government. And I think that veterans should be front and center of everything that’s done outside of the government in the commercial world."
Denniston also said unifying all vetrepreneurs under one flag is the key to furthering the VOB movement.
"I think the most beneficial legislation would include provisions for all veterans instead of just service-disabled veterans and take it a step further than what we’ve done at the federal level. We know we’ve got an awful lot of capable veteran-owned businesses that are trying to break into new markets."
We’ve provided a list of all the legislation that has been passed across the country. We will continue to update the map as new legislation is passed. We have compiled a list of Web sites that makes it easy for vetrepreneurs to find their local legislators as well as a sample letter to urge legislators to do the right thing not only for the states’ veterans, but also for the state. In addition, it’s important to make the case that legislation shouldn’t be passed as a handout. Governments will benefit from doing business with VOBs because they are great business owners.
"Veterans are proven leaders and problem-solvers," said Rocky Bleier, NaVOBA national spokesman. "One in seven small-business owners are veterans. The same attributes that make these people so vital to defending our freedom are the same hard-earned intangibles that make them exceptional at running their businesses. State and local governments benefit greatly from using veteran-owned businesses because VOBs understand their needs and provide the highest level of quality products and services. The country needs as many productive small businesses as possible and VOBs are an integral facet of small-business job creation."