By: Edward T. DeLisle

On April 26, 2010, President Obama issued an executive order to study the way in which the government provides assistance to veteran-owned and service-disabled, veteran-owned businesses. This executive order could not have come at a better time. It appears that the government has a two-fold problem: achieving federally mandated goals for veteran-owned and service-disabled companies and eliminating fraud in its small business programs, generally.

On April 30, 2010, the Government Accountability Office issued a report to the House of Representatives, Small Business Committee concluding that fraud continues to run rampant in the government’s small business programs. In an investigation conducted between October of 2008 and January of 2010, the GAO identified fourteen (14) companies that falsely held themselves out as 8(a) eligible and secured work through the government’s set-aside programs.  The work obtained by their companies totaled $325 million. This report was issued less than six (6) months after the GAO issued a similar report that focused on fraud relating to contracts set-aside for veterans and service-disabled veterans.

As revealed by the GAO reports, fraud in the federal small business programs is wide-spread and, undoubtedly, has been exacerbated by the economic slowdown. The once robust private sector has run dry. As a result, more and more contractors have become interested in entering the federal marketplace. That has resulted in many more contractors bidding on federal work. This increased competition has generated much interest in small business set-asides, where the field is not nearly as crowded. Unfortunately, not all contractors have entered the small business world consistent with the Federal Acquisition Regulations or the Small Business Administration’s regulatory framework.

If fraud was not enough, legitimate small businesses, including veteran-owned and service-disabled, veteran-owned firms, are also being hurt by the failure of the government to hit its contracting goals. As reported by, the Department of Defense represents but one prominent government agency that has fallen short. In recent testimony before the House of Representatives, Veterans’ Affairs Subcommittee on Economic Opportunity, a representative of the American Legion cited statistics indicating that less than one percent of DoD’s contracts were awarded to service-disabled, veteran-owned companies last year, far less than the Congressionally-mandated three percent goal. While such numbers sound insignificant, they account for billions of dollars government-wide.

President Obama’s executive order is aimed at addressing at least some of these issues. The executive order requires the Administrator of the SBA to serve as the chairperson of a government-wide task force designed to do the following, among other things:

* Ensure achievement of the pre-established federal contracting goals for small business concerns owned and controlled by veterans and service-disabled veterans through expanded mentor-protégé assistance and matching small business concerns with contracting opportunities; and
* Increasing the integrity of certifications of status as a small business concern owned and controlled by a veteran or service-disabled veteran.

The task force must issue a formal report to President Obama within one year. After back to back GAO reports depicting systemic problems in the government’s small business programs, one can only hope that this administration says “Yes We Can” to small business reform. Lip service to reform is no longer an option.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.