Fed Spending With Disabled Vet-Owned Businesses To Boom, Study Says

According to Input, a Chantilly, Va.-based research firm, spending through these companies, officially known as service disabled veteran-owned businesses (SDVOB), will grow to $2.8 billion annually from the $103.7 million that was set aside for these companies in 2003.

Each year, the federal government allocates certain monies for specific would-be suppliers, including companies owned by minorities, women, SDVOBs and others. These funds are, of course, "set asides." The government has a mandate to set aside at least 3 percent of its IT budget for these SDVOBs. Until now federal agencies have fallen short, which means that those solution providers who stand to gain from the expected windfall may only see the benefits if the government changes its ways.

According to a study by Input, the average success rate for meeting the SDVOB category's mandate in 2001, 2002 and 2003 was 6 percent; that's compared with 142 percent for the small disadvantaged business category, 123 percent for the 8(a) category and 57 percent for the woman-owned business category. Furthermore, 74 percent of the $103.7 million awarded in fiscal year 2003 went to the same top 20 contractors.

"The onus of finding business today rests with the companies themselves," says Mark Martinez, president of San Antonio, Texas-based M2 Technologies. The government VAR is a small, veteran minority-owned business. Agencies used to go to the SBA seeking out minority firms, he says, but those circumstances are fewer and far between. "I'm a firm believer that no company -- mine included -- should be entitled to business just because it's a diversity play," Martinez adds. "What you need to do is self market yourself and your capabilities to clients, and then use the program to facilitate the contractual piece."

Among the market challenges cited in the report are identification of capable SDVOBs, implementation methods and resistance to change. While the burden of finding fitting contracts rests, to some degree, with the companies themselves, government agencies need to be more innovative in meeting the mandate.

"A government agency can't just put out a bid saying, 'We need disabled veteran business participation,' because, generally speaking, it will not happen," says Donald Parks, president of Sacramento, Calif.-based Applied Technology, which was the first certified SDVOB in the country. "A disabled veteran-owned business, which is generally smaller, won't have a shot at competing with other companies -- even other minority businesses."

Rather than shoulder the mandate all their own, agencies can pass the buck -- so to speak -- by requiring disabled veteran participation goals of subcontractors.

"The federal government doesn't preclude itself from requiring subcontract participants, but agencies just don't seem to be doing it," Parks says. California government, on the other hand, regularly writes the requirement into subcontracts to meet state mandates.

Along with such agency efforts, SDVOBs can approach contracts better armed by forming alliances with larger companies that have complementary skill sets.

"The promise is there, but time alone will not work," Parks says. "Agencies need to decide to do something to see success for this particular category, and disabled veteran-owned businesses need to get themselves noticed."