Life after military service: Disabled vets win federal IT contracts

Jerry Demony, a retired Army colonel, suffered back and other injuries during his tour of duty that left him more than 50% disabled. Today, Demony is a partner in i3 Federal, a Fairfax Station, Va., reseller that's winning millions of dollars in federal IT contracts each year because of this disability.

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Demony and cofounder Phillip Oakley, a 22-year Army veteran who retired as a Major, formed i3 Federal in 2005 to take advantage of a government set-aside program aimed at Service-Disabled Veteran-Owned businesses, dubbed SDVOs in federal contracting parlance. Oakley is awaiting his own disability rating due to multiple injuries including skin cancer that he experienced during his military career.

"We do $8 million to $10 million in sales a year," from an SDVO contract open to all federal agencies, Oakley says. "Other companies come to us to do deals because of our SDVO status. It definitely makes a difference for us."

Since 2004, U.S. government agencies have had a statutory goal of sending 3% of their prime and subcontracts to SDVOs such as i3 Federal. Although federal agencies aren't meeting this 3% goal, they're still sending billions of dollars a year to firms with the SDVO designation.

The owners of SDVO firms have a range of disabilities, from having shrapnel in a leg to suffering from Agent Orange poisoning to having multiple artificial limbs. To qualify for SDVO set-aside contracts, firms must meet federal requirements as a small business and must be owned and controlled by one or more service-disabled veterans.

The federal SDVO program is big business. In 2008, federal agencies awarded 215,806 contracts to SDVOs (across all industries, not just IT) for a total of $6.4 billion. The SDVO sales figure represents 1.5% of all federal contracting dollars, according to the Small Business Administration.

"This program was amplified by the Bush Administration, which wanted to send more contracting dollars to small businesses whose owners were injured during active duty," explains Ray Bjorklund, senior vice president of FedSources a market research firm.

Not surprisingly, the two agencies that send the most business to SDVOs are the Department of Defense, which awarded $3.3 billion in SDVO set-aside contracts in 2008, and the Department of Veterans Affairs, which awarded $1.6 billion. The Defence Department's SDVO awards represent 1% of its overall contracting dollars, while VA's awards represent nearly 12%.

"The VA has been quite successful at this program," Bjorklund says. "The VA has had an executive agent role to ensure that programs were in place to connect disabled veteran-owned businesses with government agencies."

Many agencies purchase IT gear from SDVOs through a government-wide contract called Solutions for Enterprisewide Procurement (SEWP). SEWP has six SDVO firms, including i3 Federal, that are listed as prime contractors.

"I3 Federal's sales are almost completely off the SEWP contract," Oakley says.