Despite federal cuts, it’s a good time to be an SDVOSB

July 7, 2013

Given major federal budget cuts over the past three years, it’s no surprise that contractor growth rates are down. One class of small business, however, is resisting the trend.

Service-disabled, veteran-owned small-business contracting has increased from $8.2 billion in 2008 to $14.5 billion in 2012 — achieving a compound annual growth rate of 15 percent.

The federal government is still falling short of the goal to award 3 percent of contract dollars to these types of businesses; it currently hits about 2.5 percent. But SDVOSBs are the only socioeconomic class where the government is consistently making year-over-year progress.

This progress has made a remarkable difference to some of the firms in this category.

In 2011, the Department of Veterans Affairs awarded a set of contracts called Transformation Twenty-One Total Technology — or T4 — for IT services to several such firms. One of these, Syracuse, N.Y.-based Systems Made Simple, which has a McLean office, had earned $22 million in prime contract spending in 2009. In 2012, in large part because of its success on the T4 contract, it recorded over $170 million.

The recent success stories of these veteran-owned businesses are based on more than just contract spending at the VA. The vast majority of federal agencies have increased their SDVOSB contracting. Even the hard-hit Army increased its prime contracting for service-disabled, veteran-owned small businesses from $3.4 billion in 2010 to nearly $5 billion in 2012.

It’s difficult to explain why the government has had more success trying to reach its goals for this area than it has achieving targets for other socioeconomic groups. But whatever the reason, SDVOSB contracting is one of the few promising markets in this environment.

The experience of these firms contrasts with others in the current budget environment. Large companies affected by the cuts tend to blame smaller companies, pointing out how much work has been moved to small-business set-asides.

Small contractors point the finger right back, citing the government’s continued failure to meet its own small-business contracting goals.

The truth — based on Deltek research — is that companies of all sizes have been hit almost equally in recent months.

Kevin Plexico is vice president of federal information solutions at Herndon-based Deltek, which conducts research on the government contracting market.

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