Rule change to provide more contracting opportunities for vets

The Veterans Affairs Department wants to put companies owned by veterans at the top of the pecking order for agency contracting opportunities.

VA published a proposed rule change on Wednesday in the Federal Register that would establish a set-aside program for veteran-owned and service-disabled veteran-owned small businesses.

"Supporting service-disabled veterans who own businesses contributes significantly in restoring their quality of life while enhancing transition from active duty to civilian life," the rule stated. "Such acquisitions maintain the socioeconomic well-being of the nation and carry out VA's strategic goals."

The proposed rule builds off a 2004 executive order issued by President Bush that mandated increased contracting and subcontracting opportunities for veteran-owned and service-disabled veteran-owned small businesses.

In 2006, Congress passed the Veterans Benefits, Health Care and Information Technology Act, which authorized the department to set aside and award sole-source contracts to service-disabled veteran-owned small businesses. No similar authorization was provided at the time for nonservice-disabled veteran-owned small businesses.

The rule change, which has been in the works for more than a year, would implement and expand on the 2006 law.

The proposal outlines 11 changes to the VA Acquisition Regulation, most notably requiring contracting officers to set aside procurements worth more than $100,000 if there is a realistic expectation that two or more eligible veteran-owned or service-disabled veteran-owned small businesses would submit a reasonable offer. Service-disabled veteran-owned small businesses, however, will be given first priority.

To participate, companies would first have to register on VetBiz.gov's vendor information pages database to verify that they meet all eligibility requirements. Any company that misrepresents itself in the database would face debarment.

VA contracting officers also will be allowed to let sole-source contracts to veteran-owned and service-disabled veteran-owned small businesses for awards worth less than $100,000. For contracts greater than $100,000 but less than $5 million, the contracting officer only needs to determine that "a fair and reasonable price will be obtained as a result of negotiations for requirements."

In what is likely to be one of the most controversial provisions of the rule change, veteran-owned and service-disabled veteran-owned small businesses would be given preference over contractors in other small business subcategories such as HUBZone small businesses or 8(a) certified firms. The rule also would allow the VA administrator, after first consulting with the Small Business Administration, to "decrease other status specific small business goals."

In addition, contracting officers would be permitted, without first seeking a waiver, to purchase supplies and services from veteran-owned and service-disabled veteran-owned small businesses that in the past were produced and provided by Federal Prison Industries or the Government Printing Office.

"Other small businesses may be indirectly affected if a greater portion of VA's small business contracts are awarded to" veteran-owned and service-disabled veteran-owned small businesses," the rule stated. "However, this regulation may result in an increase in VA contracts awarded to the overall total of small businesses."

VA already is one of the government's leaders in awarding contracts to veteran-owned firms. In 2007, the agency awarded more than $2 billion in combined contracts to veteran-owned and service-disabled veteran-owned small businesses. Of the nearly $3.9 billion VA awarded to small business in 2007, more than 10 percent went to contractors owned by vets and nearly 7 percent went to firms owned by service-disabled veterans. The governmentwide goal in both categories is 3 percent.

That's far greater than the government as a whole. In 2006 -- the last year that governmentwide data is available -- agencies awarded about 2.5 percent of their contracts to veteran-owned small businesses and less than 1 percent to service-disabled veteran-owned small businesses.

The proposed rule also would likely increase subcontracting opportunities for veteran-owned vendors. Prime contractors that agree to use such firms as subcontractors would receive extra credit in their offer. Award preference also would be added to large businesses that participate in a new mentor-protégé program.

If a prime contractor proposes using a veteran-owned firm in its offer, however, the agency would hold it accountable to using those firms.

VA also proposed revising the eligibility definition for service-disabled veteran-owned small business concerns to include a spouse who obtains ownership of the company as a result of the death of a service-disabled veteran or a veteran who died as a direct result of a service-connected injury.

The department will accept comments on the proposed rule until Oct. 20.