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Law offers business opportunity to service-disabled veterans

May 27, 2016
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To be as successful in business as they were in the military, Michigan veterans should take advantage of federal, state and local laws that provide "procurement preferences" for service-disabled veterans.

A procurement preference, whether federal, state or local, is designed to give service-disabled veterans a leg-up on the competition in securing government procurement contracts. The Michigan laws are intended to promote service-disabled veteran-owned businesses, or SDVOB.

Our nation has a history of taking care of its veterans as they transition from the military to civilian life. Thus, the government provides veteran-specific financial and employment opportunities through programs like the Montgomery G.I. Bill and through hiring preferences in government jobs.

A procurement preference is a similar benefit.

Under Michigan's procurement preference statute, the state "shall give a preference of up to 10 percent of the amount of the contract." This applies to all solicitations for procurement contracts, including state expenditures for goods, services and construction. This is a huge incentive for qualifying businesses.

How the SDVOB preference works in Michigan

Are procurement preferences advantageous to veterans? The proof is in the percentage. Although the statute governing SDVOB preferences is rather vague in terms of its application, the way that it works in practice is straightforward.

For larger procurement contracts in Michigan, there is a two-step bidding process. First, a bidder must submit a written bid proposal. At this initial stage, pricing is not considered. A written bid proposal is scored on how the prospective contractor plans to fulfill the bid request and whether they have the experience level necessary to accomplish the task.

At this stage of the process, all bids are on a level playing field, meaning no SDVOB preference is taken into account. However, if the SDVOB receives a passing score regarding the written portion of the bid proposal, then it will proceed to step two.

The major focus of the second step is on pricing, and this is where the SDVOB "preference" kicks in. As mentioned, there is up to a 10 percent preference in pricing for SDVOB submitted bids. This preference — when applied to an SDVOB bid — effectively lowers its overall cost when compared to other bidders.   

What does this mean for the SDVOB from a business standpoint?

First, the SDVOB is obviously more competitive, from a pricing standpoint. Once an SDVOB passes the initial written evaluation stage, there is a high likelihood that its contract will end up being selected. Statistics from the state of Michigan reveal that, in fiscal year 2014, SDVOBs were successful in winning over 88 percent of the 414 procurement contracts they bid on.

Second, an SDVOB can increase potential profit margins. All things being equal, the other contractors' bids will have their profit expectations built into them. As an SDVOB, you can place bids in excess of other bidders and still know that your bid amount will be lowered as a result of the preference. This equates to potential for a higher profit margin.

How does one qualify as an SDVOB?

Surprisingly, the process is rather simple and has minimal requirements.

First, you must be a veteran. When you submit your initial proposal to the state, you must do so with a copy of your DD214 or equivalent proof of service. If you lack this paperwork, you can contact the Veterans Administration for a replacement copy.

Next, you must submit proof of your service-connected disability. This includes a disability that was incurred or aggravated in line of duty in the active military, naval or air service. If you were medically discharged from the service, this information is likely located on your DD214.

If you received a disability rating from the Veterans Administration subsequent to leaving the service, then you must submit a rating decision letter or other equivalent paperwork. Once again, if you do not have this paperwork on hand, the Veterans Administration will be able to provide you with the necessary documents.

Finally, your business must be an entity that is 51 percent or more owned by veterans with a service-connected disability. The good news here is that the Michigan statute permits multiple veterans with service-connected disabilities to add up their ownership interests in a company in order to meet this requirement.

Once you compile documents that satisfy the aforementioned requirements, they will be submitted for consideration with your initial bid paperwork. Unlike federal preferences, there is no pre-qualifying process. All properly submitted bids will be considered.

Michigan is actively seeking SDVOB submissions

If you are a qualifying service-disabled veteran-owned businesses, this opportunity is too good to pass up. According to the statute that authorizes procurement preferences, Michigan's goal is to spend at least 5 percent of its overall procurement budget on SDVOBs.

This figure may sound small but, in fiscal year 2014, Michigan spent more than $64 million on SDVOB contracts. Moreover, the state has yet to reach its 5 percent spending goal in any particular year.

Michigan also has launched significant efforts aimed at meeting the state's 5 percent spending goal. Along with construction procurement contracts, the state hopes to award large contracts in the areas of information technology, commodity purchases, and other technology-based services.

One of these contracts could be yours. The key is to leverage your veteran status in order to maximize your business opportunities. 

William L. Thompson is an associate in the law firm of Varnum LLP.  He focuses his practice on general litigation matters. Thompson is also a veteran, having served in the United States Marine Corps. He can be reached at

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