What are SDVOSBs?
As of the Executive Order 13360 by President George W. Bush in 2004, a Service Disabled Veteran Owned Small Business (SDVOSB) is one that meets the Small Business Administration (SBA) requirement and is a business owned and controlled by one or more service-disabled veterans (0-100% rating). The latter is the primary distinguisher between Veteran Owned Small Business (VOSBs) and SDVOSBs.
The goings-on of the SDVOSB World
On the surface, it is pretty rosy. There are 18,228 SDVOSBs and 42,217 VOSBs registered with SAM.gov. FY 2015 saw a historic high for SDVOSBs with 3.93% in eligible federal contract dollars, approximately $13.8 billion, making it the fourth consecutive year that the federal government surpassed its goals. For current Service Disabled Veteran contract holders, close to $6.5 billion dollars have been awarded, with 63% being task order activity.
The United States Department of Veterans Affairs (VA), in accordance with Public Law 109-461, titled “Veterans Benefits, Health Care, and Information Technology Act of 2006” or the Veterans Act, must give VOSBs higher priority, thus establishing a procurement hierarchy within the VA for open market procurements. This quadrupled contracting with SDVOSBs in recent years: from $830 million in FY 2007 to $3.6 billion in FY 2014.
Why should we care?
Not all that glitters is gold, unfortunately. Specifically, under section 8127 of the Act, to fill an order, the VA is mandated to restrict competition between VOSBs and then open it up to all other set asides, thus establishing a ‘rule of two’, with SDVOSBs and VOSBs getting first priority in that order. The VA, however, has set a precedent of evading this rule. This first came to light in 2011, when a Michigan based SDVOSB, Alvadera, accused the VA of breaking the law when the VA sought to buy goods and services off of the Federal Supply Schedule (FSS) without allowing SDVOSBs and VOSBs to compete first. The recipient of these complaints, the U.S. Government Accountability Office (GAO) sided with Alvadera, and stated that the VA should rescind its solicitations and re-solicit using an SDVOSB set aside. The VA refused these recommendations and stood by its decision.
It was not long before another complaint was lodged with the GAO, this time with a Maryland based SDVOSB called Kingdomware Technologies, for the same reason as before– the VA used FSS to procure medical services without restricting competition to VOSBs and SDVOSBs. The GAO, once again, sided with SDVOSB, urging the VA to re-solicit with a SDVOSB set aside. The VA refused once more. Kingdomware technologies finally took the VA to Federal court, but to no avail. The courts ruled in favor of the VA, citing that restricting competition would cause “fiscal waste” caused by “disruption, overhead, and delay.” Agencies such as the American Legion and the Iraq and Afghanistan Veterans of America (IAVA) contended that such practices divert up to $10 million away from veterans each year, in addition to slowing veteran re-integration into society due to loss of business if the VA continues to do so.
Is all lost?
As of June 16th, 2016, in a unanimous opinion, the Supreme Court ruled in favor of Kingdomware. In a monumental decision that determined the wording of section 8127, the court determined that the rule of Two “… imposes a mandatory duty” upon the VA to allow for competition between VOSBs and SDVOSBs before procurement from FSS. The Supreme Court further determined that the VA “must use the Rule of Two when awarding contracts, even when the Department will otherwise meet its annual minimum contracting goals”. The case is now remanded for further proceedings. Although the contract in dispute has long been completed, this represents a huge boon for SDVOSBs and VOSBs as it sets a precedent for future procurement by agencies while solidifying the small business’ legal agency.
One can also benefit by looking at large contract vehicles like VETS 2, a GWAC that is only set aside for SDVOSBs. With a ceiling of $5 billion and a five-year base period with one five-year add-on option, VETS2 promises to be a lifesaver for those companies who are trying to achieve their business goals. In addition, companies that sell more than $500,000 are eligible to apply for an additional 5 years. The current VETS vehicle, expiring in 2017, saw nine vendors growing out of their small business designations at the end of 2014. In addition to this, SDVOSBs, especially new companies, must be knowledgeable about market space in order to vie for the contracts that best suit its business. EZGovOpps can help there.
What does the data show?
Up until September 30th, 2016, SDVOSBs hold contracts that are collectively worth over $17 billion. They are divided as shown in the pie chart below:
In addition, the top agencies with the most total task order dollars are the VA, the Army, the EPA, the Federal Acquisition Service, and the Air Force. The largest Individual Contract/Task Order Amount for contract holders with SDVOSB as their socio-economic status is PRO-SPHERE TEK, INC., worth approximately $12 billion.
