2005

Set-Aside Programs Fall Short of Goals

Disabled Veterans Entitled to Contracts

When retired Air Force Maj. Robert C. Sharps launched his civil construction business three years ago, he hoped to profit from a law that requires the federal government to set aside 3 percent of all contracts for firms owned by veterans, like himself, who have disabilities related to their military service.

But as of last week, Sharps said VSA Construction Services LLC in Jessup has not won a single contract even though it bids on about four a month. His firm is losing ground in an open market, he said, because contracts are not being set aside as promised.

"As a small business, sometimes we're not as competitive as larger companies. So we lose out to cheaper bids," said Sharps, 58, a Vietnam veteran who has chronic knee and back problems. "The law is not working as it was intended."

The complaint is common among veterans groups as federal agencies struggle to meet the 3 percent goal, a target missed by a substantial margin every year since the set-aside law was enacted in 1999. The federal government annually awards $250 billion to $300 billion in contracts to private companies.

The veterans' concerns have taken on added urgency during wartime, as thousands of injured personnel confront the task of rejoining the civilian workplace. President Bush recently signed an executive order meant to speed the flow of contracts to disabled veterans, but Small Business Administration rules may get in the way, veterans groups contend.

To ensure competition, the SBA has required that agencies not award "sole source" contracts to companies owned by disabled veterans if they "have a reasonable expectation" there are other veteran-owned companies qualified to bid.

The awarding of set-aside contracts "is not automatic," said William D. Elmore, head of veterans business development at the SBA. "There is no guaranteed success in this."

"It's an opportunity . . . to compete," he said.

Veterans groups say the SBA's approach is unworkable and wants contracts awarded even without competition if the company is qualified and the price is fair.

Set-aside programs, they said, are not meant to deliver the lowest price to the government, but to help fledgling firms owned by designated classes of people get a foothold in the market and become competitive in their own right.

"It's an earned benefit" to further compensate veterans for their service to the country, said Richard F. Weidman, director of government relations at Vietnam Veterans of America and chairman of the Task Force for Veterans Entrepreneurship.

The most recent surveys from the U.S. Census Bureau indicate that about 53,900 businesses with employees were owned by service-disabled veterans in 2002. That is less than 1 percent of the nation's 7.7 million businesses.

The set-aside program for disabled veterans has been controversial since its inception in 1999. Veterans have argued that they lost years of earnings potential and marketplace experience serving the country and need a boost to get their businesses off the ground. That applies even more, they say, to those with disabilities.

But supporters of other government set-aside programs worried that it would cut into contracts for businesses owned by women, ethnic minorities and other economically disadvantaged groups. The SBA is supposed to ensure that 23 percent of government contracts go to small, disadvantaged businesses each year.

Moreover, the definition of "disabled" is broad, and SBA officials say the law does not require them to verify the status of each bidder's health. To qualify, veterans do not have to have been wounded in action or have suffered crippling injuries. Sharps developed his knee and back problems from an accident suffered onboard a military plane. His partner and fellow Vietnam vet, retired Air Force Capt. Richard Vance, 56, said he suffered a 50 percent hearing loss in each ear from being in high-noise areas during his 23-year military career. He also suffered knee and back injuries while working a military construction job.

"You don't have to have lost an arm or leg to be disabled," said Wayne M. Gatewood Jr. , 55, a Vietnam veteran and owner of Landover-based Quality Support Inc., which organizes conferences and works with the federal government. "You have people who are psychologically disabled and people who have serious arm and leg injuries because of the rigors of training. You can't see those things."

Quality Support has won two contracts from the Defense Department under the set-aside program, one for about $400,000 and another for about $2.8 million, said Gatewood, who declined to reveal the nature of his disability.

Steven J. Kelman, former head of the Office of Federal Procurement Policy in the Clinton administration, said the debate over veteran set-asides is familiar.

Set-aside programs date to the 1950s, and have been "fairly controversial because by limiting competition to a certain kind of business it may have negative impact on the price and quality of what the government buys," said Kelman, now a public management professor at Harvard University. "You may be excluding a firm from bidding that may be cheaper or better suited to do the jobs."

So far, the program has fallen short of its aims: Since it was enacted in 1999, less than 1 percent of federal contracts have gone to firms owned by disabled veterans. In December 2003, President Bush signed legislation meant to invigorate the program, and a year later he issued an executive order demanding that each agency submit detailed plans for meeting the 3 percent target.

Some veterans, such as retired Navy Lt. Lani H. Rorrer, say they are seeing results. Rorrer, a former naval intelligence officer and a Naval Academy graduate, launched Fairfax-based Lanmark Technology Inc. five years ago and now employs 50 people.

Under the service-disabled set-aside program, the State Department granted her firm a five-year, $5 million contract for logistics support, and the Defense Logistics Agency awarded her a six-month, $2 million contract for logistics software development and support.

Rorrer, 29, said she qualifies for other set-asides, including those for women-owned and socially and economically disadvantaged firms. But those are saturated markets, she said, unlike the relatively new market for service-disabled veterans.

Having the service-disabled status "adds another feather to my cap," Rorrer said. "I've grown the company because other companies that are not eligible for set-asides now want to team up with me for the opportunities they could not go after."

Megan Gamse, a senior analyst at research firm Input in Reston, said she expects more success stories in the future. Gamse, who tracks the information technology sector, predicted that the government will reach its 3 percent goal in the next few fiscal years. She estimated that by 2009 service-disabled veterans in the IT sector may win as much as $2.7 billion in annual contracts.

But Gatewood, the Vietnam veteran in Landover, maintained that the success stories are the exception for now and not the rule.

"Veterans deserve consideration above and beyond anyone else in America," he said.


By Dina ElBoghdady Washington Post Staff Writer Monday, February 28, 2005; Page E01

2005 Rising Stars

In technology, the pace of change gets faster every year. That's why we've added a category to recognize technology companies that are quickly making a name for themselves. They have met the same criteria as the Fast 500, except they have been in business a minimum of three years, but less than five years. We expect to see these Rising Stars on the Fast 500 very soon.

2005 Rising Stars

Rank
 
Company
 
3-Year Percent Growth
 
CEO Name
 
City
 
State
 
 
1
 
Performance Assessment Network, Inc (pan) www.panpowered.com
 
5,441%
 
David T. Pfenninger, Ph.D.
 
Carmel
 
IN
 
 
2
 
i4Commerce Inc. www.i4commerce.com
 
4,922%
 
Gary Marino
 
Timonium
 
MD
 
 
3
 
Troux Technologies www.troux.com
 
4,198%
 
Hank Weghorst
 
Austin
 
TX
 
 
4
 
Masergy www.masergy.com
 
3,976%
 
Barry Nalls
 
Plano
 
TX
 
 
5
 
OpSource, Inc. www.opsource.net
 
3,946%
 
Treb Ryan
 
Santa Clara
 
CA
 
 
6
 
Boingo Wireless, Inc. www.boingo.com
 
3,549%
 
David Hagan
 
Santa Monica
 
CA
 
 
7
 
nLight Corporation www.nlight.net
 
2,902%
 
Scott Keeney
 
Vancouver
 
WA
 
 
8
 
Wave7 Optics, Inc. www.wave7optics.com
 
2,744%
 
Tom Tighe
 
Alpharetta
 
GA
 
 
9
 
JackBe Corporation www.jackbe.com
 
2,386%
 
Luis Derechin
 
Bethesda
 
MD
 
 
10
 
eSilicon Corporation www.esilicon.com
 
2,319%
 
Jack Harding
 
Sunnyvale
 
CA
 
 
11
 
Spatial Data Analytics Corporation (SPADAC) www.spadac.com
 
2,146%
 
Mark Dumas
 
Vienna
 
VA
 
 
12
 
StillSecure www.stillsecure.com
 
2,111%
 
Rajat Bhargava
 
Louisville
 
CO
 
 
13
 
Lanmark Technology, Inc. www.lmt-inc.com
 
1,807%
 
Lani H. Rorrer
 
Fairfax
 
VA
 
 
14
 
Digital Management, Inc. www.digitalmanagement.com
 
1,743%
 
Jay Sunny Bajaj
 
Bethesda
 
MD
 
 
15
 
Metreo, Inc. www.metreo.com
 
1,686%
 
Daphne Carmeli
 
Plao Alto
 
CA
 
 
16
 
Accuvant www.accuvant.com
 
1,571%
 
Scott Walker
 
Denver
 
CO
 
 
17
 
Valere Power www.valerepower.com
 
1,480%
 
Andy Marsh
 
Plano
 
TX
 
 
18
 
BancIntelligence.com, Inc. www.bancintelligence.com
 
1,410%
 
Steven C. Cotton
 
Atlanta
 
GA
 
 
19
 
Language Weaver, Inc. www.langaugeweaver.com
 
1,323%
 
C. Bryce Benjamin
 
Marina del Rey
 
CA
 
 
20
 
Quintessence Photonics Corporation www.qpc.cc
 
1,081%
 
Jeffrey Ungar, Ph.D.
 
Sylmar
 
CA
 
 
21
 
Achieve 3000, Inc. www.achieve3000.com
 
843%
 
Saki Dodelson
 
Lakewood
 
NJ
 
 
22
 
DKW Communications, Inc. www.dkwcommunications.com
 
838%
 
Darryl K. Washington
 
Silver Spring
 
MD
 
 
23
 
Sourcefire, Inc. www.sourcefire.com
 
796%
 
Wayne Jackson
 
Columbia
 
MD
 
 
24
 
Mobile 365 www.mobile365.com
 
727%
 
Neville Street
 
Chantilly
 
VA
 
 
25
 
Abraxas Corporation www.abraxascorp.com
 
714%
 
Richard H. Helms
 
McLean
 
VA