Topic:
SMALL BUSINESSES; CONTRACTORS; HANDICAPPED; VETERANS' AFFAIRS; MINORITIES; ADMINISTRATIVE SERVICES DEPARTMENT;
Location:
CONTRACTORS; VETERANS;

OLR Research Report


January 18, 2007

 

2007-R-0061

SET-ASIDE PROGRAMS FOR DISABLED VETERANS

By: Jennifer Moody, Legislative Fellow

You asked whether (1) Connecticut's minority set-aside law covers disabled veterans, (2) set-aside laws in other states specifically cite disabled veterans, and (3) federal set-aside programs exist for such people.

SUMMARY

Connecticut's set-aside law for small business owners, including minority business enterprises, covers people with disabilities, but not specifically disabled veterans. Thus, the law covers disabled veterans.

We reviewed state set-aside laws in 19 states. Unlike Connecticut, 14 of the 19 states examined do not incorporate people with disabilities into their set-aside programs. Of the five (26%) states that include people with disabilities in their set-aside laws, California is the only one that establishes a set-aside goal exclusively for disabled veterans. As a result, we limit our discussion of other states set-aside programs to California.

There are several federal programs specifically designated to assisting service-disabled veteran-owned small businesses. These programs include established overall set-aside goals and the methodology for each agency to achieve those goals.

CONNECTICUT SUPPLIER DIVERSITY PROGRAM

Connecticut's Supplier Diversity Program, formerly the Set-Aside Program, was established to ensure that state agencies set-aside 25% of their construction, housing rehabilitation, and supply and service contracts for certified small businesses each fiscal year, with 25% of this amount (6. 25% of the total) going to Minority Business Enterprises (MBE) (CGS 4a-60g).

To participate as a MBE, the business must register with the Department of Administrative Services and meet certain requirements. A MBE is as any business that:

1. has been doing business under the same ownership and management and has maintained, its principal place of business in Connecticut for at least one year immediately prior to the date of the application;

2. had gross revenues of $10 million of less for the most recently; and

3. is owned (at least 51% of ownership) by at least one member of a minority or a person with a disability who exercises operational authority over daily affairs of the business, has the power to direct policies and management, and receives beneficial interests from the business.

Once certified, companies can bid on contracts covered by the program as well as all other state contracts. More information about the program can be found at: http://www.das.state.ct.us/Purchase/ SetAside/default.asp.

SURVEY OF OTHER STATES SET-ASIDE PROGRAM

Of the 19 states examined, only five incorporate people with disabilities into their set-aside programs. Table 1 shows each of the examined states, those that cover people with disabilities, and the statutory citation for those states. The table also shows that California is the only state that establishes a set-aside goal exclusively for disabled veterans.

Table 1: State Set-Aside Laws For the Disabled

State

Disabled Covered

Disabled Veterans Specifically Mentioned

California

Title 2, 1898.61(f)

Yes

Yes

Florida

No

No

Illinois

30 ILCS 575

Yes

No

Indiana

4-13-16.5-1

No

No

Kansas

No

No

Maryland

Yes

No

Massachusetts

No

No

Minnesota

1230.1600

Yes

No

Mississippi

No

No

Missouri

No

No

New Jersey

No

No

New York

No

No

North Carolina

136-2.4

Yes

No

Ohio

No

No

Pennsylvania

No

No

South Carolina

No

No

Virginia

No

No

Washington

No

No

Wisconsin

No

No

CALIFORNIA DISABLED VETERAN BUSINESS ENTERPRISE PROGRAM SUMMARY

California requires each state agency that contracts for goods and services and school districts using state construction funds to try to award at least 3% of their contracts to businesses owned by disabled veterans. Every year, each state agency must report to the governor and the legislature their total participation in the Disabled Veteran Business Enterprise (DVBE) program.  Any state agency that does not achieve the 3% goal must explain its reasons for failing to do so and submit a plan for future attainment. The agency may also have to explain its results and efforts to a legislative panel.

A business seeking consideration as a DVBE must meet certification requirements. For certification purposes, California defines a qualified disabled veteran as a “United States military, naval, or air service veteran with a service-related disability of at least 10% and who is a resident of the State of California,” (Military and Veterans Code 999(f)). A business qualifies if its principal place of business is in the U.S. and it is a:

1. sole proprietorship or partnership at least 51% owned by one or more disabled veterans or, in the case of a publicly owned business, with at least 51% of its stock owned by one or more disabled veterans;

2. subsidiary that is wholly owned by a corporation in which at least 51% of the parent company's voting stock is owned by one or more disabled veterans; or

3. joint venture in which at least 51% of the joint venture's management, control and earnings are held by one or more disabled veterans (Title 2, 1896.61(f)).

At least one disabled veteran must control the business' management and daily operations. He does not need to be the same disabled veteran(s) who own the firm. More information about the program can be found at: http://www.pd.dgs.ca.gov/smbus/dvbecert.htm.

RELATIONSHIP WITH OTHER CALIFORNIA SET-ASIDE PROGRAMS

The primary difference between the DVBE and Small Business (SB) certification programs are the eligibility requirements.  Participation in the SB program is based primarily on size standards (average gross annual receipts and number of employees), while DVBE's eligibility focuses on the firm's disabled veteran owner(s). 

A second difference between the two is what each type of certification, once obtained, provides.  DVBE certification enables the certified business to participate in the state's DVBE program of at least 3% of all state contracts.  Comparatively, participants in the SB program annually compete for 25% of all state contracts.  SB certification also entitles the certified business to a 5% bid preference on applicable state contracts.  The 5% bid preference is only used for computational purposes to determine a contract award.  SBs also have prompt payment benefits and DVBEs do not.

Some similarities between the two programs are that both programs consider the business' structure, its principal office location, the type of business, and the owners and their state of residence.

A business can be certified as both a SB and a DVBE if it meets all eligibility and compliance requirements.  Businesses that have dual certification are able to experience the benefits of both certifications.

FEDERAL SET-ASIDE PROGRAMS FOR DISABLED VETERANS

Service Disabled Veteran-Owned Small Business

The Small Business Development Act of 1999 amended the Small Business Act by adding small businesses owned and controlled by service-disabled veterans to the categories of small businesses for which federal agencies develop contract goals. The act is designed to serve the veteran entrepreneur by formulating, executing, and promoting policies and programs that assist veterans seeking to start and develop small businesses.

There is no formal certification process. The veteran self certifies his veteran status when he registers with the Small Business Administration and by responding to a government solicitation. A service disability can be evidenced by a DD Form 214 and a Veteran's Administration certified letter of disability.

Veteran's Entrepreneurship and Small Business Development Act of 1999 (PL 106-50)

The purpose of this act is to provide additional, technical, financial, and procurement assistance to veteran-owned small businesses, to expand existing assistance programs and to establish new ones for veterans who own or operate small businesses. The act established an annual goal for no less than 3% of all contract and subcontract to be awarded to small businesses owned and controlled by service disabled veterans. It does not contain a provision to restrict or set-aside contracting opportunities for service-disabled veterans.

The Veterans Benefit Act of 2003 (PL 108-183) added a contracting mechanism to enable agencies to reach the 3% prime contracting goal established in 1999. Effective 2005, the Veterans Benefits Act established a sole source and set-aside procurement program for service-disabled veteran-owned small business concerns. More information can be found at: http://www.sba.gov/GC/FAQs-mar2005.pdf.

A service-disabled veteran is a person who served in the active military, naval, or air service and who was discharged or released under conditions other than dishonorable, and whose disability was incurred or aggravated in line of duty (38 U.S.C. 101(2) and (16)). More information can be found at: http://www.sba.gov/GC/FAQs-mar2005.pdf and http://www.sba.gov/GC/veteran-ifr.pdf.

JM:ro