No. 239

June 2004

SMALL BUSINESS

RESEARCH

SUMMARY

Characteristics of Federal Government Procurement Spending With

Veteran-Owned Businesses: FY 2000 – FY 2003 (3Q)

by Eagle Eye Publishers, Inc.

2004. [39] pages. Fairfax, Va. 22030

under contract no. SBAHQ-02-M0465 (Part 1)

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Public Law 106-50, enacted in 1999, established a

statutory goal that 3 percent of all federal contract

dollars should be awarded to firms owned and controlled by service-disabled veterans. To track progress

toward this goal, the General Services Administration

(GSA) has introduced codes into its Federal

Procurement Data System (FPDS) indicating ownership by veterans or by service-disabled veterans.

Overall Findings

The authors created a new database of prime contracts to veteran-owned firms to compare with the

GSA’s official database. Through a careful recoding

procedure and analysis, they found that the coding in

the FPDS substantially understated the number of

veteran-owned businesses and the level of procurement going to them. Federal agencies are actually

providing far more contracts and dollars to veteranowned firms than they are reporting. An improved

strategy to identify and include in the FPDS those

veteran-owned firms identified by the authors could

triple the contract dollars now being recorded.

Although the number of veteran-owned firms recognized in the FPDS is steadily increasing, better education and marketing by both agencies and veterans

themselves is needed to remedy the underutilization

of these firms.

Highlights

• Official statistics on procurement awards to

veteran-owned businesses indicate that federal agencies awarded 0.6 percent of their total prime contract

dollars to veteran-owned firms in FY 2002 and 0.4

percent in FY 2001.

• Official statistics show that the share of prime

contract awards going to service-disabled veteranowned businesses in FY 2002 was 0.12 percent,

down from 0.22 percent in FY 2001.

• Official statistics show a reversal from FY 2001

to FY 2002 in the number of federal contractors

owned by service-disabled veterans and those owned

by other veterans. The former fell by 58 percent,

while the latter rose by 147 percent. Given how

recently agencies began using the veteran ownership

code, this dramatic change may be the result of a

reclassification of service-disabled firms to veteranowned firms in FY 2002.

• Including the veteran-owned businesses identified by the authors’ recoding procedure, the authors

found that the value of contracts awarded to veteranowned firms was triple the officially reported level in

FY 2001 and double the level reported in FY 2002.

• The combined prime contract revenues of

veteran-owned firms recognized by GSA and those

identified by the authors together accounted for 1.7

percent of all federal prime contract revenues in FY

2002 and 1.6 percent in FY 2001.
• Status codes indicating veteran ownership in the

FPDS are assigned inconsistently. Around 3 percent

of veteran-owned firms in the database showed multiple veteran-owned status codes.

• Based on total prime contract revenues between

FY 2000 and FY 2003, revenue to veteran-owned

businesses on average was 27 percent smaller than

that for the average small business federal contractor.

• The average size of a small business federal contract in FY 2002 was $392,931. The average size of

a veteran-owned business prime contract recognized

by the government (including those to service-disabled veterans) was $345,758, or 12 percent less

than the average small business contract. 

• Businesses owned by service-disabled veterans

are receiving smaller contracts than other veteranowned businesses and small businesses generally.

The average contract to a business owned by a

service-disabled veteran, and recognized as such by

the government, was for $340,028, or approximately

13.5 percent less than the average contract to a small

prime contractor, and 1.7 percent less than the average contract to a veteran-owned firm. 

• In contrast, the average size of contracts to firms

which the authors identified as veteran-owned was

$465,944, 34.8 percent larger than shown in the

FPDS.

• Veteran-owned business procurement spending is

highly concentrated among agencies. The top three

agencies contracting with veteran-owned businesses

accounted for 76 percent of the total value of all

prime contracts to veteran-owned firms; the top 10

agencies accounted for 93 percent. 

• One hundred veteran-owned businesses accounted for 43 percent of all prime contract dollars to veteran-owned businesses in FY 2002.

• In FY 2002, the average GSA Schedule contract

to a veteran-owned business was worth $948,000,

nearly three times more than the average veteranowned business contract.

• Between FY 2000 and the third quarter of FY

2003, 50 percent of all contracts awarded to veteranowned business were classified as small purchases.

These small purchases accounted for just 6.7 percent

of total veteran-owned business revenue.

• Approximately 81 percent of all contract dollars

to veteran-owned business were spent on services in

FY 2002; 19 percent were spent in manufacturing.

Data Sources and Methodology

The authors created their own procurement database

of prime contracts to veteran-owned firms by combining four data sources: (1) GSA’s FPDS database

of Individual Contract Action Reports; (2) firms listed as veteran-owned by Dun & Bradstreet; (3) the

Department of Defense’s Central Contractor Registry;

and (4) the Small Business Administration’s ProNet

small business file. Through a careful recoding procedure and analysis, Eagle Eye found the coding in

the FPDS substantially understated the number of

veteran-owned businesses and the level of procurement actually going to veteran-owned businesses.

Ordering Information

The full text of this report and summaries of other

studies performed under contract to the U.S. Small

Business Administration’s Office of Advocacy are

available at www.sba.gov/advo/research. Copies are

also available from:

National Technical Information Service

U.S. Department of Commerce

5285 Port Royal Road

Springfield, VA 22161

(800) 553-6847 or (703) 605-6000

(703) 487-4639 (TDD)

www.ntis.gov

NTIS order number: PB2004-104383

Pricing information:

Paper copy and CD-ROM, A04 ($29.50)

Microfiche, A01 ($14.00)

Electronic download, A00 ($ 8.95)

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