Veteran-owned suppliers may gain $3 billion from VA griddle fight

November 13, 2011

A dispute over the U.S. government’s attempt to buy three griddles, a food slicer and a skillet may result in as much as $3 billion in additional federal spending each year with companies owned by veterans.

The Veterans Affairs Department sought to buy the kitchen equipment from a government list of pre-selected vendors who typically offer discounts, a procedure designed to save money. Critics, including a potential bidder, say that approach violates a so-called Veterans First law that requires the VA to steer work to veteran-owned suppliers.

Both sides agree the matter will likely end up in court, and one group of disabled vets has collected money from as many as 25 businesses for a separate lawsuit.

They want to force the agency to contract with veterans instead of with vendors on the government’s “supply schedules’’ of routinely bought goods and services. The VA spent $3.26 billion that way last year.

“Something will have to be done to resolve this,’’ said Lee Dougherty, an Army veteran and lawyer who heads the government contracting division at the McLean law firm General Counsel.

“There could be protests on every schedule purchase,’’ he said.

A Gulf War vet’s complaint

The dispute began when Rodney Marshall, a disabled Persian Gulf War veteran who owns a three-person kitchen supply company called Aldevra in Portage, Mich., discovered the VA had decided to buy from the supply schedules.

Marshall estimated that the equipment, for VA medical facilities in Chicago and Wilkes-Barre, Pa., would have cost somewhere between $3,000 and $25,000.

“If this is our opportunity, it’s being denied to us,’’ Marshall, 40, said in a phone interview.

Marshall has injuries to his hips, back, shoulders and knees, as well as post-traumatic stress disorder after serving with the Marines from 1989 to 1993.

He filed a protest with the Government Accountability Office, which hears challenges to government contracting decisions.

Last month, the GAO agreed with him.


Rodney Marshall, a disabled Gulf War veteran, owns a three-person kitchen supply company called Aldevra in Portage, Mich. (Courtesy of Aldevra/COURTESY OF ALDEVRA)

GAO officials, whose decisions are nonbinding, recommended rebidding the work.

The VA argued that regulations for all agencies required it to consider using supply schedules, essentially exempting it from the Veterans First law for certain purchases.

Ralph O. White, the GAO’s managing associate general counsel for procurement law, said the GAO concluded that no such exemption exists.

The VA has until mid-December to formally respond, though it left little doubt it’s prepared to fight.

Agency officials said in a written statement released Nov. 2 that they planned to continue to use the supply schedules, which are “designed to provide access to millions of commercial products and services at volume discount prices.’’

They said they’re abiding by the law and encouraged veteran-owned companies to apply for slots on the supply schedules.

“VA will not change how it will acquire goods and services in support of its mission,’’ according to the statement.

The VA never bought the food preparation items in question because the procurement was halted when Marshall filed his protest.

Veterans First

The agency used supply-schedules for about 20.3 percent, or $3.26 billion, of its $16 billion in purchasing during the fiscal year that ended Sept. 30.

About 13 percent, or $436 million, of those supply-schedule purchases went to veteran-owned companies holding slots on the government-wide contracts.

If all the work went to veteran-owned firms, it would have resulted in $2.82 billion more in spending with them last year.

Since fiscal 2008, the first full year under Veterans First, the VA has awarded more than $11.5 billion to veteran and service-disabled veteran businesses, according to data compiled by Bloomberg Government.

That’s about 20 percent of total procurement spending by the agency during that period.

Marshall said his phone is ringing off the hook with support from the veterans’ community.

The California-based Service Disabled Veteran Owned Small Business Network is collecting donations to pay the attorney fees for a suit against the government, said Valerie Lewis, the group’s president.

She said the group was following Marshall’s case closely and was encouraged by the GAO decision.

“It just seems the VA is snubbing their nose at Congress and the GAO,’’ Lewis said in a phone interview.

It may cost taxpayers more in the long run if the VA pursues buying from veteran-owned companies over using the supply schedules, said Larry Allen, president of Allen Federal Business Partners, a procurement consulting firm.

“In any type of set-aside or preference program, as a general rule, there is less price sensitivity among buyers than a straight-up competition,’’ Allen said in a phone interview.

Dougherty said he thinks the VA is violating the law and he agrees with the GAO decision that the agency is required to prioritize veteran businesses.

He acknowledges that abiding by the law would be costly, overwhelming the contracting workforce if it had to research whether veteran-owned companies could provide the “tens or hundreds of thousands’’ of purchases the government makes through the supply schedules.

“If we followed this, it would cost us a fortune,’’ said Dougherty, who is a disabled veteran.

The companies that would lose business are those that already have slots on the supply schedules, he said.

“We’re not talking about the Lockheed Martins of the world,’’ Dougherty said. “We’re talking about companies that make furniture, desks, silverware, griddles, clipboards, the simple purchases — they will lose out to a vet-owned business.’’

Wayne Gatewood, a retired Marine master sergeant and disabled Vietnam veteran who owns a small administrative and management services company, disagreed.

“You cannot tell me you’ve saved millions through supply schedules when you haven’t even done a desk-check to see if there are veterans who own businesses that can do it cheaper,’’ said Gatewood, president of Landover-based Quality Support Inc.

— Bloomberg Government

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