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Purchasing preferences for veteran-owned businesses on the rise

As the unemployment rate for Iraq- and Afghanistan-era veterans continues to climb, more states and localities are establishing purchasing preferences for veteran-owned businesses (VOBs). Current-war veteran unemployment is more than four percentage points higher than the national average of 8.5 percent. According to the Bureau of Labor Statistics, 13.1 percent (248,000) of current-war veterans were without a job as of December 2011. This figure is up from November’s 12.1 percent, and sharp rise from 2007 (6.1 percent), 2009 (10.2 percent), and 2010 (11.5 percent).
Results of the 2007 Survey of Business Owners (SBO), as part of the U.S. Census Bureau, show that 9 percent of businesses were owned by U.S. military veterans. These 2.4 million businesses employed approximately 5.8 million people and accounted for 4.1 percent of all business receipts nationwide, totaling $1.2 trillion. California, Texas and Florida reported having the most veteran-owned businesses across the states, and Los Angeles County, Calif., had more VOBs than any other county (62,667). Additionally, survey figures reported 32.5 percent, or one-third, of VOBs fell under the professional, scientific, technical services and construction fields.
Eleven states currently have legislation in place that gives some sort of preference to VOBs or service-disabled veteran-owned businesses (SDVOBs) in state procurement, according the National Veteran-Owned Business Association. These states include:
  • Alaska
  • Louisiana
  • Michigan
  • Minnesota
  • Missouri
  • Nevada
  • New Jersey
  • Oregon
  • Washington
  • West Virginia
  • Wisconsin
Furthermore, four states have laws that set aside at least 3 percent of spending for SDVOBs and VOBs: Arkansas, California, Illinois and Maryland.
Last month, New Jersey became the latest state to establish purchasing preferences for veteran-owned businesses. As part of the new Veteran-Owned Business Assistance Act, the New Jersey Department of Treasury will take special consideration of VOBs when awarding state contracts. The department is also required consult with the Economic Development Authority and the Department of Military Veterans Affairs (DMAVA) in an effort to rally more VOB participation in bidding processes.
Originally, the bill introduced by Ocean County, N.J., legislators proposed a mandated 3-percent set-aside for awarding contracts to VOBs. However, Gov. Christie vetoed the proposition, citing concerns regarding the overall needs of VOBs and the state’s ability to hire contractors.
Christie has been knee-deep in reviewing New Jersey’s procurement activity as of late. He just ordered a comprehensive review of all state purchasing laws and public contracting processes after a report revealed one in five multimillion dollar contracts, or 126 out of 553 purchases, violated state procurement laws. He attributes negligence to a majority of the infringements, though admits corruption probably plays a small part. Christie said he aims to simplify purchasing processes and better educate departments on best practices. He anticipates much of the procurement overhaul will be tackled by year’s end.  
Lastly, it looks like Hawaii will be the next state aboard the VOB-preference train. The state’s House Republican Caucus recently introduced a bill requesting that 3 percent of all state contacts – approximately $33 million a year – be awarded to Hawaii-based VOBs. If passed, the bill would authorize a 4.5 percent preference for VOBs and a 5 preference for SDVOBs. The state currently has an estimated 10,300 VOBs and would become only the fifth state to establish a procurement-percentage mandate for VOBs.
Military preference in state contracting is sure to rise as more veterans return home amid an economic downfall. In November, President Obama signed the Veterans Opportunity to Work (VOW) to Hire Heroes Act into law. The act establishes tax incentives for businesses that hire veterans who have been unemployed for at least a month, with even greater tax credits granted to businesses who hire veterans out of work for at least six months. Additionally, the tax break doubles for disabled-veteran hiring.
The VOW act is yet another example in the nationwide effort to acknowledge and protect veterans after they’ve completed their service. From a national, state, and local level, more government entities are reviewing current practices in an attempt to better recognize veteran workers and their businesses. While it may draw criticism from those who oppose preference policies, it is anticipated that more veterans will see an uptick in contracting and employment as states try to bridge the gap between military service and getting back to work. Therefore, vendors outside of the preferential base should consider teaming or partnering with veteran-owned businesses to give their solutions a leg up in the market.


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