Last week in class, Entrepreneurship for Transitioning Warriors, we discussed government contracting and its advantages and challenges. Government contracting at the local, state and Federal level can be an excellent market for military entrepreneurs. Governments buy all sorts of products and services and there are many programs at various levels of government to buy from veteran businesses. Here is a short article by StreetShares that Hardy Stone included on his site. This articles presents and reinforces several of the points we discussed in class.
StreetShares writes--Veteran business owners and entrepreneurs interested in doing business with the U.S. Government need to understand the programs and preferences that have been established to support veteran participation in federal government contracting.
Let us help you understand the preference programs established for veteran-owned businesses and explain the distinctions and differences between the Veterans First Program established by the U.S. Department of Veterans Affairs (VA) and the government-wide Service Disabled Veteran-owned Small Business Concern Program administered by the U.S. Small Business Administration (SBA).
Qualifying as a Veteran
A Veteran is a person who served on active duty with the Army, Air Force, Navy, Marine Corps, or Coast Guard for any length of time, and was discharged or released under conditions other than dishonorable. A reservist or member of the National Guard called to federal active duty, or disabled from a disease or injury incurred or aggravated in the line of duty or while training also qualifies as a Veteran.
Veterans First Contracting Program
The VA is one of the largest federal procurement organizations and each year awards contracts to veteran-owned small businesses totaling to more than $3 billion. Unlike the rest of the U.S. Government, the VA is the only agency that actually prioritizes doing business with veteran-owned businesses. The hierarchy for open market acquisitions at the VA places the highest priority on Service Disabled Veteran Owned Small Businesses (SDVOSBs), followed by Veteran Owned Small Businesses (VOSBs), putting veteran-owned business ahead of 8(a), HUBZone, Woman-owned and other small businesses.
To qualify for the Vets First Contracting Program, veteran-owned businesses must be found eligible through a verification process administered by the VA’s Center for Verification and Evaluation (CVE). The requirements for eligibility for Vets First (set forth in 38 CFR Part 74) include the following:
- The veteran owner(s) must have direct, unconditional ownership of at least 51 percent of the company and have full decision making authority;
- The veteran owner must manage the company on a full time, day-to-day basis and have the necessary managerial experience to handle the position and exercise independent business judgement;
- The veteran owner must hold the highest officer position; and
- The veteran owner generally must be the highest compensated employee (although some exceptions are allowed).
In addition, in order to be eligible for SDVOSB certification, the veteran applicant must possess a disability rating letter issued by the VA establishing a service-connected rating between 0% and 100%, or a disability determination from the U.S. Department of Defense (DoD).
CVE strongly recommends veteran applicants to connect with VA-certified Verification Assistance Counselors prior to proceeding with the certification process. Such counselors are trained and certified by the VA to provide verification assistance to SDVOSBs and VOSBs at no cost.
Service Disabled Veteran-owned Small Business Concern Program
The SDVOSBC Program provides U.S. Government agencies with the authority to set acquisitions aside for exclusive competition among SDVOSB concerns, as well as the authority to make sole source awards to SDVOSB concerns if certain conditions are met. It was developed to help agencies meet the government-wide goal that not less than 3 percent of the total value of all federal government contract awards be made to small businesses owned and controlled by service disabled veterans as stipulated by the Veterans Entrepreneurship and Small Business Development Act of 1999. In addition, each federal government agency is required by Executive Order 13360 to have a strategy to meet its SDVOSB contracting and subcontracting goals.
To qualify for the SDVOSBC Program, the following criteria must be met:
- The service disabled veteran must have a service-connected disability as determined by the VA or the DoD;
- The SDVOSBC must be small under the North American Industry Classification System (NAICS) code assigned to the procurement; and
- One or more service disabled veterans must unconditionally own 51 percent of the business, control its management (including long-term decision making and daily operations) and hold the highest officer position.
Unlike the Vets First Program, there is no formal verification process for the SDVOSBC Program. While individual contracting officers may require documentation of eligibility before awarding set-aside or sole source contracts, SDVOSB concerns may self-certify as to their status in the federal government’s System for Award Management (SAM). Nevertheless, awards under the SDVOSBC program may be subject to protest if the eligibility of the successful bidder is questioned and significant legal penalties (including prison sentences) have been imposed on contractors found to have fraudulently claimed SDVOSB status.