Report: Making Veteran Businesses Competitive for NYC Contracts

Report: Making Veteran Businesses Competitive for NYC Contracts

Businesses must meet certain requirements in order to compete for and win bids for contracts with NYC government, and goals have been set for increased contracts for women and minority-owned businesses. Currently veteran-owned businesses are not in a competitive category for contracting with NYC government. A total of 80.82% of respondents indicated that they view this as either essential or very important.

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NYC Government Contracts. NYC government purchases more than $13 billion in goods and services each year from businesses that register and meet requirements for doing business with the city.[1] Businesses must make competitive bids to provide the goods and services NYC agencies are looking for. Certain categories of businesses are made more competitive in order to promote fairness and to foster businesses owned by categories of persons who are otherwise under-represented in the marketplace.

Minority- and Women-Owned Business Enterprises (M/WBE). In conjunction with NY State and national efforts to foster businesses owned by minorities and women, NYC agencies have been encouraged to set goals for awarding contracts to minority- and women-owned businesses. Last year, $690 million in NYC contracts were awarded to M/WBEs, and Mayor de Blasio announced in May an overall goal for NYC government to award $16 billion to M/WBEs by 2025.[2] The city has been mandated to spend $1 million on a study that will examine ways NYC government can increase participation of and contracting with M/WBEs in the future.[3] When M/WBE legislation first passed in 1990, the City Council introduced a bill to include veteran-owned businesses in a similar effort. This bill, and other subsequent efforts to date, have not passed.[4]

Procurement Goals for Veteran-Owned Businesses. The federal government requires that at least 3% of all federal agencies’ contracting dollars go to businesses owned by service-disabled veterans, and there are also contract “set asides” for veteran-owned businesses.[5] NY State requires that at least 6% of all state contracting dollars go to businesses owned by service-disabled veterans.[6] Cities like Nashville have goals for contracting with businesses owned by service-disabled veterans, and other cities like Chicago, Miami, and San Antonio have goals for contracting with veteran-owned businesses.[7] Cities like Orlando and Las Vegas give other preferences for veteran-owned businesses in city contracting.[8] NYC currently has no mandated goal or preference in place for contracting with veteran-owned businesses.

NYC Small Business Services (SBS) Veteran Procurement Study. Last year, $200,000 was allocated in the city budget for a study by SBS to determine the viability of procurement goals for veteran-owned businesses in NYC.[9] SBS contracted with PricewaterhouseCoopers (PwC) to conduct the study. PwC surveyed 150 veteran-owned businesses in NYC and estimated that only 15,400 veteran-owned businesses exist in NYC, an estimated 700 of which are owned by service-disabled veterans, and only 6,200 of those businesses were estimated to meet requirements for doing business with the city. The study was released in December 2014 by SBS and MOVA,[10] and concluded that a goals program for NYC government to contract with veteran-owned businesses was not recommended at that time because of the number of veteran-owned businesses was too small.[11]

Responses to the SBS Veteran Procurement Study. A hearing on the report in January 2015 included the following responses:

  • Then-Chair of the VAB, Vincent McGowan testified that data from the U.S. Census 2007 Survey of Business Owners showed that there are 39,236 veteran-owned businesses in NYC, not including Staten Island due to insufficient data.[12] U.S. Census data for NYC shows more than double the number of veteran-owned businesses estimated in the report.
  • Scott Davidson, president and CEO of Vets GSA LLC, a NYC-based, disabled veteran owned business, reviewed the SBS M/WBE certified database and observed that nearly 10% of M/WBEs certified to do business with NYC government were located outside of NYC. He further reviewed the federal government’s System of Award Management[13] to observe that 908 NYC-based service-disabled veteran owned businesses are registered to do business with the federal government. Added together with those registered in NJ and CT, he observed that there are currently 1,908 eligible service-disabled veteran owned businesses in the tri-state area. Davidson stated that if NYC’s M/WBE program accepts businesses from out-of-state, then estimates of businesses owned by service-disabled veterans should take this into consideration as well.

NYC Assistance for Veteran-Owned Businesses. NYC SBS provides a robust program for assisting any small business owner with training and access to information and laws relating to starting and operating a small business in NYC. Veteran-owned businesses have been among the small businesses assisted by SBS. Since the release of the report in December, SBS has stated that it is assisting veteran-owned businesses wishing to do business with the city by identifying them as veteran-owned businesses when they register on the Payee Information Portal (PIP)[14] used by businesses desiring to bid on city contracts. This identification does not, however, give the veteran-owned business any formal advantage in winning contract bids. As of the release of this report, there is also no information available on the SBS website about specific resources for or identifying as a veteran-owned business in NYC.

Benefits of Veteran-Owned Businesses. Veterans are 45% more likely than their civilian counterparts to be self-employed,[15] and veterans also come to business enterprises with training and experience with leadership, working in teams, planning and executing complex plans, and other critical competencies that relate directly to starting and succeeding in small business. Veteran-owned businesses also succeed at a higher rate than their civilian counterparts.[16] Additionally, veterans are increasingly diverse in economic background, race, gender, sexual orientation, and other categories that have been less represented in small business ownership. Incentivizing and bolstering businesses owned by individuals of diverse backgrounds who have sacrificed for their country sends the clear message that military service is valued and prioritized by government.

Respondent Comment. One respondent offered a dissenting comment on this subject:

  • I do not agree that veteran run business should get preferential treatment in the choosing of government contracts. The best team for the job should get the contract. Hopefully veterans will be the best of their own merit; not because of special preference.

Recommendations. NYC government currently has contracting goals for M/WBEs, and has made important efforts toward both improving the viability of these businesses and increasing the number of M/WBEs that NYC agencies contract with. Any failure to meet goals is considered a matter for NYC government to improve upon rather than simply too small a pool of viable businesses to matter. NYC government must take a similar approach to veteran-owned businesses when it comes to city contracts. Last year’s report from SBS and MOVA surveyed too small a pool of veteran-owned businesses and estimated less than half of the number of veteran-owned businesses stated in 2007 U.S. Census figures for NYC—thereby invalidating the report’s conclusion that there are too few veteran-owned businesses in NYC for contracting goals to be implemented. We therefore make the following recommendations:

  1. NYC government should set a goal of 3% for contracts with service-disabled veterans—the mandated minimum for federal contracting—and work toward reaching that goal as it currently does with M/WBEs. If service-disabled veterans do not currently own businesses, or their business is not viable to contract with the city, then outreach can and should be made by SBS and MOVA to increase the number of viable businesses owned by service-disabled veterans. It should not be assumed that service-disabled veterans do not wish to own viable businesses that benefit from city purchases. 
  2. NYC government should commit to working toward an overall goal of 6% for contracts with all veteran-owned businesses, to encompass the goal of 3% for service-disabled veterans. Veteran-owned businesses are proven to have higher success rates, and are worthy investments for NYC government to establish and work toward contracting goals.
  3. The NYC SBS website and other outreach materials must include information specific to businesses owned by service-disabled veterans and veterans in general. 

 


[9] Page 2362, “The City of New York Schedules Supporting the Adopted Expense Budget for Fiscal Year 2015,” http://www.nyc.gov/html/omb/downloads/pdf/ss6_14.pdf

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