Bill would elevate disabled-veteran firms

Veterans Entrepreneurship and Benefits Improvement Act of 2003

Agencies would have to give more consideration to small businesses owned by veterans with disabilities in awarding contracts if legislation that recently passed the House becomes law.

The Veterans Entrepreneurship and Benefits Improvement Act would allow businesses owned by veterans disabled in service to get sole-source contracts of up to $5 million for manufacturing or up to $3 million for any other procurement. It would also allow agencies to limit some competitions to those businesses.

Agencies already had a goal of awarding 3 percent of their contracting dollars to businesses owned by veterans with disabilities, but they have not been close to meeting that mark, said Phil Eskeland, policy director for the House Small Business Committee.

"We've seen that, generally, performance in achieving goals for veterans has been abysmal," he said. "It's the worst out of all the categories, even worse than [Historically Underutilized Business Zone] and woman-owned" businesses. The goal is 3 percent, but the the achievement is about 0.3 percent, he added.

Veterans who own businesses say they are at a disadvantage equal to firms owned by women or those in impoverished inner-city areas.

"There will be many contracting opportunities for the truly service-disabled veteran small business" if the bill passes, said Robert Bell, president and chief executive officer of Space Systems Development Inc. in Colorado Springs, Colo.

"There's not one agency across the government that's hitting the goals, and it's a paltry 3 percent," said Mark Gross, vice president of sales and business development for Oak Grove Software in Raleigh, N.C. "There's a target, but there's really no teeth to enforce it."

His 68-person company has had success in the commercial market. Now he's working through BAE Systems and Science Applications International Corp. to try to gain federal business. Oak Grove has signed the Department of the Army and the Defense Intelligence Agency as customers, he said.

"In the [Defense Department] space, they are more small-business friendly and certainly more friendly to veteran-owned companies," he said.

The potential new set-aside, however, is raising eyebrows among small business leaders and federal procurement consultants. Originally designed to give certain small businesses an edge when competing, set-asides now span enough categories that in many cases they lead to fierce competition among qualifying businesses.

Rather than give those companies an edge, some critics say, the set-asides have created a new realm of cut-throat maneuvering.

Gross, who dislocated both shoulders while serving in the Army in 1987, characterized the designation as a competitive edge. "I think it's crucial for the companies to really compete with the 8(a)s, the HUBZones and all of the other statutorily required classifications by the government," he said. "Without a set-aside, it's hard for us to win prime deals. We've tried, and we've gotten nowhere."

"These are all socioeconomic programs that have their own perceived benefits, and they can be helpful to small firms," said Larry Allen, executive vice president of the Coalition for Government Procurement. "However, the smaller you slice the pieces of the pie, the more chance you have that things will crumble at the edges."

Each of the programs serves an important purpose, Allen said. "The problem is that Congress' approach is piecemeal," he said. "No one's taking a look at the whole picture to see how all these individual programs affect the larger procurement landscape."

Small businesses need to learn how to compete against large firms, said Phil McAlister, director of space and telecommunications at Futron Corp., an analysis firm in Bethesda, Md. Competing with one another, he said, should not be an issue.

"It's not so much of a problem because the designation is finite," he said. "You only get a real head-to-head competition for a number of years, a short period of time. You do end up competing against other small businesses. Eventually, you do have to prepare yourself to compete against larger business."

Set-asides raise questions of quality, said Paul Brubaker, a founder and partner at ICG Government. "It implies that you wouldn't be able to compete otherwise," he said, "which raises the question of, 'Is the government getting the best bang for the buck, or are we using the system to try to right a bunch of societal wrongs?'"

"We call it 'set-aside soup,'" said Chip Mather, senior vice president of Acquisition Solutions Inc. "There are so many differing plans, different programs, differing techniques, we just feel sorry for the contracting officer."

The key question, Allen says, is if the groups intended to benefit from the programs really do.

"It creates a lot of frustration for a lot of small businesses," he said. "Congress does these things in an effort to give certain groups a leg up. But if everybody's got a leg up, then you're back to the level playing field."