Fed contracting opens for disabled veterans

Some veterans who own businesses are learning how they could benefit from a new set-aside program. Although the program has been taking shape for more than a year, details are only now becoming known.

The set-aside program establishes a goal of having 3 percent of federal contracts go to small businesses owned by service- disabled veterans, either as prime contractors or subcontractors. In a $59.8 billion federal information technology market, that means at least $1.8 billion should flow to qualified firms, said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc.

At least one significant area of confusion remains, however, making it difficult for some business owners to use the program. The set-aside applies only to companies owned by veterans who were disabled in military service. But veterans want to know how qualifying companies rank relative to other special business categories.

Teresa Lewis, assistant administrator of the Office of Federal Contract Assistance for Veteran Business Owners at the Small Business Administration, said contracting officers will treat the businesses the same as they treat 8(a) and Historically Underutilized Business Zone (HUBZone) firms.

Despite that clarification, however, many details about the set-aside program remain unclear, said Scott Denniston, director of the Office of Small and Disadvantaged Business Utilization at the Department of Veterans Affairs.

SBA's role is to write program rules and add them to Section 13 of the Code of Federal Regulations (CFR), Denniston said. The problem is that contracting officers do not take the section as gospel, he said. Instead, they look at the Federal Acquisition Regulation, and they find differences.

The CFR section tells contracting officers to determine first whether the contract requirements could be fulfilled by prison industries or qualified nonprofit agencies for people who are blind or severely disabled and whether an 8(a) company is already doing the work. If not, the CFR language states that the contracting officer should consider setting the contract aside for 8(a) firms, HUBZone firms or businesses owned by service-disabled veterans.

Contracting officers who use the FAR are simply told they are permitted, but not required, to set aside procurements for small businesses owned by service-disabled veterans after checking for similar exemptions, Denniston said.

"We're confusing the hell out of the vets because we're telling them one thing and SBA's telling them another," he said. But it is the contracting officer who controls the dollars.

If the FAR tells contracting officers only that they may, rather than must, give preference to businesses owned by service-disabled veterans, those companies are less likely to get the preferential treatment that the CFR calls for, said John Moliere, president of Standard Communications and a Vietnam veteran.

Denniston agreed that the potential for confusion is enough that it is unlikely to be resolved without new legislation. "Congress needs to step in," he said.

The CFR is supposed to be a compendium of all federal regulations, and the FAR is a subset, said John Chierichella, who heads the government contracting practice at Sheppard Mullin. But because of the multiple pathways by which the regulations were established, it is possible for one code section to contradict another, he said.

When that happens, agency officials first try to harmonize the interpretations to remove conflicts, Chierichella said. He could not comment on the veterans program specifically, he said.

"Ultimately, if you have an irreconcilable conflict, you take a look at the authorizing statute and try to decide if the issue is addressed" there, Chierichella said. "If you can't resolve it that way, you're going to end up with two agencies taking different paths until somebody gets a court to decide or the legislature changes the statute to make it clear."