New analysis:

Vets who are not service-disabled get shrinking share of US contracts

While service-disabled veterans have experienced a surge in federal contracting in recent years, that’s not the case for veterans without service-related disabilities.

Government contract awards to small firms owned by service-disabled veterans more than tripled, rising sharply from $3.8 billion to $13.5 billion, from fiscal 2007 to fiscal 2014, according to new research by Set-Aside Alert.

But the trend for small firms owned by veterans without service-connected disabilities was downward.

Their awards have decreased by 22%, from $7.1 billion down to $5.5 billion, during the same period, Set-Aside Alert has found.

The drop in contract awards for the non-service-disabled veteran small business owners has been sharpest in the last four years:

• $7.1 billion in fiscal 2007;
• $7.3 billion in fiscal 2008;
• $7.7 billion in fiscal 2009;
• $7.8 billion in fiscal 2010;
• $7.2 billion in fiscal 2011;
• $6.5 billion in fiscal 2012;
• $5.8 billion in fiscal 2013; and
• $5.5 billion in fiscal 2014.

The findings are based on data from the Small Business Administration’s annual Procurement Scorecards, as displayed on the Federal Procurement Data System website.

Disparate trends in contracting

There are sharply different trends in federal contract small business awards for veterans: Upward for service-disabled vets, and downward or mostly flat for the non-service-disabled. Those trends may raise questions about whether current laws make too sharp a distinction between service-disabled veteran-owned small businesses (SDVOSBs) and non-service-disabled VOSBs.

“The distinction between the small business concerns is problematic,” Kelly McGann, an assistant state’s attorney in Montgomery County, MD, wrote in a recent article in the Veterans Law Review.

“In government procurement the consequences of distinguishing, and ultimately favoring, SDVOSBs over (veterans) unintentionally undermines the overall effectiveness of veteran preference procurement initiatives.

Current laws

Under a 1999 law, the government set a 3% goal for contracting with SDVOSBs. In addition, under a 2010 law, all federal agencies are allowed to create set-aside contracts for SDVOSBs, and to award sole-source contracts to SDVOSBs.

However, at most federal agencies those advantages--goals, set-asides and sole sourcing--are not available to small firms owned by non-service-disabled veterans. The only exception is the Veterans Affairs Department. VA veteran contracting

Under a 2006 law, the VA must put SDVOSBs first in line for contracts, and VOSBs, second in line. Both categories are eligible for set-asides and sole-source contracts. A complicating factor is that the VOSB category includes service-disabled VOSBs and non-service-disabled VOSBs.

In practice, while VA contracting with SDVOSBs has more than quadrupled from fiscal 2007 to fiscal 2014, from $832 million to $3.6 billion, VA contracting with non-service-disabled VOSBs has risen only 11% in seven years:

• $385 million in fiscal 2007;
• $438 million in fiscal 2008;
• $440 million in fiscal 2009;
• $485 million in fiscal 2010;
• $401 million in fiscal 2011;
• $441 million in fiscal 2012;
• $414 million in fiscal 2013; and
• $426 million in fiscal 2014.

VA officials said they have no authority to create set-asides for VOSBs that are not also available to SDVOSBs.

“If a contracting officer does a VOSB set-aside, he or she cannot exclude SDVOSBs...since a service-disabled veteran is, by definition and by law, a veteran,” VA spokeswoman Chanel Bankston-Carter told Set-Aside Alert. Further comment on non-SD VOSBs was not immediately available.

DOD veteran contracting

At the Defense Department, awards to SDVOSBs have tripled from $1.9 billion to $7 billion, from fiscal 2007 to fiscal 2014, while awards to such firms owned by non-service-disabled veterans have decreased by 22%, our research showed.

The DOD awards to non-service disabled veteran-owned small businesses were:

• $4.6 billion in fiscal 2007;
• $4.8 billion in fiscal 2008;
• $5.2 billion in fiscal 2009;
• $5.3 billion in fiscal 2010;
• $5.0 billion in fiscal 2011;
• $4.5 billion in fiscal 2012;
• $3.9 billion in fiscal 2013; and
• $3.6 billion in fiscal 2014.

Downward trend

Overall, aside from the VA, the trend for non-service-disabled VOSB contracting has been negative in recent years, and McGann blames it on the lack of access to set-asides and sole-source contracts at nearly all agencies. As a result, those veterans have been largely “neglected” in federal contracting, McGann wrote in his article.

Also problematic is the reliance on service-related disabilities as the key differentiator in determining eligibility for the strongest veteran preferences, McGann added. He believes many more veterans may be disabled but have not obtained official certifications of their disabilities for various reasons. It also seems unfair in principle that veterans who are certified 10% disabled get the same preferences as those who are certified 60% or more disabled, he pointed out.

McGann urged Congress to modify the laws to broaden opportunities for all veterans. He also wants Congress to expand the VA’s veteran preferences to all agencies.

Set-Aside Alert’s research

Set-Aside Alert used data from the Federal Procurement Data System, via SBA’s annual scorecards.

SDVOSBs are counted twice, as SDVOSBs and as VOSBs. To obtain figures for non-SD VOSBs, we subtracted SDVOSBs from VOSBs.

Currently there are 49,000 VOSBs in SAM.gov, including 19,000 SDVOSBs.

More information: Veterans Law Review article: http://goo.gl/YLyQPa

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