Veteran Owned Small Business and Service Disabled Veteran Owned Businesses



Veterans Administration
- http://www.va.gov/

Veterans, you know the drill . . . . . . . .

But it is good to review the basics. So attention is required to understand how Veteran Owned Businesses can grow by leveraging your commanding position in the government procurement process.

All Veteran Owned Small Businesses are included in large corporations’ small business plans under FAR 52.219.9.  Why is that important? Ninety-five (95%) percent of all large businesses sell to the U.S. Government.  As part of the government procurement process, the large prime contractors are required to submit and negotiate a subcontracting plan that separately addresses subcontracting with small businesses specifically Veteran Owned Small Business (VOSB) and Service Disabled Veteran Owned Small Business (SDVOSB).  The Federal Acquisition Regulation (FAR) expressly states that this plan shall be included in and made a part of the resultant prime contract that the large business enters into with the U.S. Government. Failure to submit and negotiate the subcontracting plan shall make the large business offeror ineligible for award of a contract. This plan shall include goals expressed in terms of percentages of total planned subcontracting dollars. This subcontracting plan must be flowed down (incorporated in the subcontract to their subcontractors) to second tier contractors that are also large businesses if the contract from the prime contractor is in excess of $550,000 ($1 million for construction).   Remember the FAR governs all federal agencies, hence the large corporations must make a good faith effort to comply.

Another regulation, FAR 52.219-27 – Notice of Total Service Disabled Veteran-Owned Small Business Set-Aside reads more like orders, than direction.

The government “may” set aside certain contracts for SDVOSBs.  Only SDVOSBs are allowed to compete for these “set aside” contracts.  Even though the decision to make a SDVOSB set aside is discretionary (not required), the Comptroller General has given the statute a broader meaning by applying SBA regulations that direct the contracting officer (“should”) to consider the propriety of a SDVOSB set aside before proceeding with a small business set aside (13 CFR 125.19). One can safely assume that the “may” is not entirely permissive, and the Contracting Officer must consider setting an acquisition aside for SDVOSB before setting it aside for small business in general (MCS Portable Restroom Service Group, Comp. Gen. Dec.B-299291).  FAR 19.1405 further instructs the contracting officer that in order to set aside these contracts for SDVOSB companies, he must have a reasonable expectation that offers will be received from two or more SDVOSBs and the award will be made at a fair market price.  However, if the contracting officer receives only one acceptable offer from SDVOSB in response to this set-aside, the contracting officer should make an award to that firm.  The Comptroller General reaffirms the sole source award even when the contracting officer does not have a reasonable expectation that two or more SDVOSBs would submit a bid, by stating  “FAR should be read consistent with the SBA regulations” and to find otherwise would frustrate the intent of the Veteran’s Benefits Act of 2003.

FAR 19.1406 codifies sole source awards to SDVOSB with certain caveats: (1) the requirement can be satisfied only by one SDVOSB, (2) the award will be less than $3 Million ($5.5 Million for manufacturing), (3) SDVOSB is a responsible contractor (the SDVOSB can perform the contract), and (4) the price is reasonable.

The element requiring the contracting officer to determine that only one SDVOSB can fulfill the contract can be successfully established by the contracting officer by documenting the unique characteristics of the firm itself. True, this write-up is an added requirement for the Contracting Officer beyond that outlined in the 8a sole source program, but not a deal breaker!

The government buys unique parts and services all the time.  I am certain an SDVOSB business can assist the government in understanding what makes his/her company’s goods or services unique from other competitors by writing a short narrative for the file. Whenever there are set-aside contracts, there are rules. The Service Disabled Veteran Owned Small Business concern agrees that in the performance of the contract, in the case of a contract for:

  1. Services – at least 50% of the personnel cost will be spent by SDVOSB awardee or employees of another SDVOSB company.

  2. Manufactured Supplies – 50% of the cost of manufacture (excluding materials) will be performed by SDVOSB firm (awardee) or other SDVOSB firms.

  3. General Construction – 15% of SDVOSB (awardee) personnel cost or other SDVOSB firms.

  4. Special Trades – 25% of SDVOSB personal cost.

  5. Dealers, distributors, or wholesalers can offer a product manufactured 100% by a small business in the US.

  6. Joint venture rules apply equally to SDVOSB contracts and they are discussed in this newsletter.

The Veterans Administration is an agency that marches to a different drummer. The needs of their clients, the soldiers, demand that they lead in this effort. Their regulations are more inclusive of all Veteran Owned Businesses. The VA requires Veteran-Owned Business to be registered in VetBiz.  The VA’s unique regulations allow the VA buyers to sole source to SDVOSB if price is less than $5 Million, with the same requirements of responsibility and the award at a fair reasonable price as in the FAR regulations. However, if no responsible SDV is identified, the VA Buyer may sole source to a Veteran Small Business.  That is an incredible opportunity for all who served!

Dolcey E. Chaplin, Esq. Director

Teamwork, off the battlefield . . .

has a different meaning when selling to the US government. When an VOSB bids on a contract, he likes to have his friends covering his back. The soldier’s training, trust and experience ultimately effects the way he does business. The government takes this commonsense approach to surviving and turns it around, so listen-up!

When an VOSB proposes to enlist the assistance of other businesses to perform a set-aside contract, the Contracting Officer must apply the law so that one company is not in a more advantageous position.  Let’s say one VOSB would like to team with The IBM Corporation. The other VOSB who is bidding the contract is using a small business with experience, but not on the level of an IBM. That would be unfair! Remember, part of the definition of a VOSB or SDVOSB is SMALL!

The government has rules as to team members, even when the existence of a team is not obvious to all the bidders.  The Small Business Administration applies these “affiliation” rules when reviewing joint ventures, teaming agreements, or subcontracts. If the VOSB’s partner or subcontractor performs primary and vital requirements, they can be determined to be acting jointly and thus affiliated. The SBA adds both companies’ employees or revenue together to determine if they are small.  Consequently, if the above criteria is met, the Veteran Owned Small Business who teams with the large business is deemed to be affiliated and not small.

This affiliation also could  occur when there are two or more small businesses that team for a job. The government would add their revenue (service companies) or employees (manufacturing companies) together to determine if the VOSB bidder is SMALL.

But there are exceptions when two or more small businesses decide to team and the government allows them to compete as small without combining the companies’ revenue or employees.

So long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract, they will remain unaffiliated and small in the following cases:

  1. When SVOSB/SDVOSB bids with any other Small Business for a bundled contract, at any dollar value as described in 13 CFR 121.125.2(d)(1)(i).

  2. When the dollar value of a revenue-based (services) procurement (including options) is more than half the size standard associated with the NAICS code governing the procurement.  Example:  A solicitation with an estimated value of $4 M. with a NAICS code size standard of $6.5M.

  3. For manufacturers (size based on employees), if the procurement exceeds 10 M.

Sherry P. Rose, Marketing Specialist