Vets wait for the call, wait more

Despite set-aside rules and new GWAC, vets seek promised business

It has been six years since President Clinton signed legislation creating business advantages for veterans and almost two years since the Veterans Benefits Act of 2003 created additional benefits and incentives, yet the government is still not meeting its contracting goals.

In the eyes of some advocates, it's not even coming close. According to a Small Business Administration report compiled from Federal Procurement Data System information, only 0.38 percent of contracting dollars in fiscal 2004 went to businesses owned by service-disabled veterans. Worse, critics say, the report omits some contracting data that, if included, could make the share going to small businesses even smaller.

With the passage of the Veterans Entrepreneurship and Small Business Development Act of 1999, the federal government set a goal of spending 3 percent of contracting funds on such firms. If agencies failed to take note, that should have changed in the past two years, said John Moliere, an advocate for such businesses. He is president of Standard Communications and a Vietnam veteran.

In December 2003, the Veterans Benefits Act created a set-aside class for the companies. After a 2004 executive order from President Bush called for the creation of a governmentwide acquisition contract to make it easier for agencies to find qualified companies, the General Services Administration created the Veterans Technology Services GWAC in April.

Moliere said the stage is now set for companies owned by service-disabled veterans to gain a higher profile. And although agencies can take more steps to better comply with the legislation, businesses' success depends in large part on the businesses themselves, he added.

"When I speak publicly, I admonish people that I've been very successful, but every bit of business [I won] until July of this year, I've earned in a full and open competition," he said. "It's important to be qualified. There's no substitute for work, and there's no room in this or any other place for phonies. The only entitlement we have is to a fair opportunity."

Guy Timberlake, chief executive officer and chief visionary officer at the American Small Business Coalition, said some small companies have the same misunderstanding about set-asides that others do about getting on the GSA schedules. They think it's an endpoint and don't understand that it's just the beginning, he said. Companies are designated as belonging to a particular category -- such as the 8(a) designation or the business classification for companies owned by service-disabled veterans -- and they expect the contracts to roll in.

Companies are not entirely to blame for that misconception, Timberlake said. "Government still perpetuates the notion that getting 8(a) is a good way to do business with the government," he said. "They really do nothing to dispel the notion that it's a shortcut."

Larry Allen, executive vice president of the Coalition for Government Procurement, said that in creating a variety of small-business categories for special or preferential treatment, Congress has divided the pie into a growing number of slices that each get increasingly smaller. That approach forces agencies to make choices and means it is almost inevitable that some contracting goals will not be met.

However, he said, companies owned by service-disabled veterans have the best potential for increasing their business in the coming months.

"There is now a mandate to do more business with service-disabled vets," Timberlake said. "That mandate was backed up with at least one good-sized GWAC that's going to have good visibility within GSA. And all else being equal, because we have troops in the field right now, you have people who feel they should pay back those who have already been" in combat.

Government policy has a say in how agencies spend their contracting dollars, but veterans' advocates agree that much of the onus is on the companies themselves. Business strategy and an entrepreneurial attitude count at least as much as policy.

Group offers training to vets

The Veterans Corp., chartered by Congress in 1999, is a resource for veterans who want to learn how to start and run a business. It also offers some access to capital loans and other resources that can equip a motivated business owner to compete more successfully, said Walt Blackwell, TVC's president and CEO.

"TVC is there to do the things that government can't do or shouldn't do," he said. "Government shouldn't really have a role in the networking that brings companies together, shouldn't be involved in the details of education and training, and shouldn't be involved in getting companies access to capital."

Most veterans look to TVC for help in accessing funds and securing surety bonds, in which an underwriter promises to make good on any promises the company can't keep, he said.

"Without capital, no business is successful," Blackwell said. "Without the ability to get bonded, government contracting is mostly inaccessible."

TVC is working with 155 companies that provide such bonding with the goal of creating a pool of willing underwriters. Blackwell said veteran-owned small businesses are often overlooked as a potential market, so his job is to convince the underwriters that the firms represent a huge untapped opportunity.

On the funding front, TVC is launching a pilot program in October in Virginia; Delaware; Maryland; Washington, D.C.; and Florida through which lenders will provide unsecured loans of up to $300,000 each to some start-up businesses.

"This new access to a capital line is an incredible head start," Blackwell said.

TVC is adding distance-learning classes to the in-person training it provides. Recently, 46 military members stationed in Baghdad, Iraq, took advantage of one of TVC's Web-based courses. Training encompasses business and basic life skills, including adult literacy, Blackwell said. TVC is trying to add degree programs as well.

Companies must fight for business

Moliere said he finds it ironic that SBA, which is "supposed to be for all these downtrodden folk," spent no money with companies owned by service-disabled veterans in fiscal 2004. Agencies need to know more about the program for vets, he said.

"It's an education process, and the education process shouldn't be hit and miss," he said.

Bush's executive order instructed agencies to develop plans for hiring businesses owned by service-disabled veterans, and agencies are showing varying degrees of interest in meeting the goals, Moliere added.

"So all of those agency plans are there," he said. "They rank from excellent to 'Jesus, forget it.' " He ranked GSA and the Department of Veterans Affairs among those that have good plans.

"I think it's going to be an ongoing battle," Timberlake said. "Because the government is a conservative-natured organization, they're going to be risk-averse. When they have a choice between using a company that they have a relationship with -- large or small -- and giving it to a service-disabled veteran-owned company, they're going to lean toward going with the company they know."

Money for small biz trickles back

When Walt Blackwell (right) left the Navy in 1969, he had no idea what to do with the rest of his life. Through a series of acquaintances, he landed a job at IBM, where he stayed until 1993. He left the company to begin a career in managing nonprofit organizations.

Now he is president and chief executive officer of The Veterans Corp., which was chartered by an act of Congress in 1999 to help veterans gain business skills.

The environment for small businesses has changed remarkably since 1969, Blackwell said. It's changed dramatically since the late 1990s, when venture capital flowed freely to Internet and technology start-ups of all kinds.

Investors responded to the subsequent collapse of the dot-com market by holding onto their remaining cash for a while, he said.

"These days I think that cash is being loosened," Blackwell said. But he doesn't think people will ever see the kind of money that flowed then, when some deals were written on napkins. "The '90s, the dot-com era, was a little cowboy-esque," he said.

-- Michael Hardy

New rule expands HUBZone program

Historically Underutilized Business Zone firms -- defined broadly as companies located in economically depressed areas and staffed by people in those areas -- represent another category where contracting dollars don't match the goal. Agencies are supposed to spend 3 percent of their contract funds with HUBZone firms, but such businesses got only 1.6 percent of fiscal 2004 contract dollars, according to a recent Small Business Administration report.

An interim rule SBA published Aug. 30 expands the HUBZone program, as directed by the Small Business Reauthorization and Manufacturing Assistance Act of 2004. For the first time, the legislation allows up to 49 percent foreign ownership of HUBZone firms, expands the residency requirements for tribally owned HUBZone firms to allow more flexibility and designates areas around closed military bases as HUBZones for five years after final closure.

It also extends the period during which firms can continue to reap the rewards of the HUBZone designation after the areas in which they are located lose their qualifying status. Previously, the period was three years, but under the new law, it is either three years or until the public release of the 2010 census data, whichever is later.

The interim rule went into effect with publication. SBA will take comments through Oct. 31 and then issue a final rule reflecting the comments.

-- Michael Hardy


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