The Rep. Fitzpatrick Amendment To The Disadvantaged Business Enterprise (DBE) Program Should Be Opposed

Rep. Fitzpatrick has filed an amendment with the House Rules Committee that would define veteran-owned small businesses as “disadvantaged business enterprises” or “DBEs”.  While efforts to support the entrepreneurial efforts of former service members are very worthwhile, defining veteran owned firms as DBE for purposes of the programs authorized by the Drive Act is misplaced as a matter of law and policy.

  • The goal of the DBE program is to address and provide a remedial remedy for discrimination in transportation against women and minority small business owners on the basis of their gender, race, or ethnic background.
  • DBE’s are defined by statute and regulations as small for-profit firms that are owned by individuals who own at least 51% of the firm and who are “socially and economically disadvantaged”.
  • Defining veteran-owned small business as a class of DBEs without a clear showing of discrimination or of social or economic disadvantage would radically and adversely alter and undermine the purpose of the DBE program. Moreover, it would weaken the overall program and leave it vulnerable to future legal challenges.
  • As mandated by Congress and constitutional standards the DBE program is very narrowly tailored to ensure that it is not overly inclusive. Defining veteran-owned firm as DBEs without any evidence showing inequities in contracting or subcontracting weakens the program and leaves it vulnerable to future legal challenges as being overly inclusive. Moreover, and in this regard, firms that are certified go through a rigorous screening and review process as to their size, ownership and governance and the financial status of their women and minority owners. The Fitzpatrick amendment does not apply all of these standards to veteran-owned firms.  For example, the amendment would permit a publicly-owned firm to qualify as a DBE.
  • While perhaps well-meaning in its intent, it is not clear that the amendment is needed. For example, individuals beyond women and ethnic minorities, including service-disabled veterans, can also qualify as socially and economically disadvantaged on a case-by-case basis.  Further, there are many federal assistance and contracting programs specifically targeting and available to veterans including:

-Veterans Entrepreneurship and Small Business Development Act (which establishes a 3% government-wide prime and subcontracting goal for service disabled and veteran-owned businesses--“SDVOSBs”

Veterans Benefits Act of 2003 (created the SDVOSB procurement program allowing restricted competition with sole-source and set asides for SDVOBs)

The Veterans First Contracting Program (VA sole-source contracting and veterans contracting goals)

The Veteran-owned Small Business Contracting Program