Veteran-owned businesses call for more accountability in state contracting process

A program designed to give veteran-owned businesses in Wisconsin a bid preference for doing state work lacks fairness, accountability and oversight. That’s according to several veteran business owners who have tried largely unsuccessfully to work within the confines of the program created for them by the Legislature about a decade ago.

The Legislature created a 1 percent annual goal for state agencies to award contracts to veteran-owned businesses each year. The goal was put in place in 2014, four years after veteran-owned businesses were added by the Legislature to the Wisconsin Supplier Diversity Program.

The initial program was put in place by the Legislature in 1983 for minority-owned businesses. The goal has been for state agencies to award 5 percent of contacts annually to minority-owned businesses. Women-owned businesses were added in 2006, though women-owned businesses have never had their own goal and the work they’re awarded by the state is accounted for with minority-owned businesses. State government has only met the goal for minority-owned businesses four times in 38 years.

It has never met the 1 percent goal for veteran-owned businesses.

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“I think the first thing they need to do is audit the program and audit the participation and report correctly because right now what they’re doing is lumping us together with the mbe’s (minority-business enterprises) and they aren’t splitting it out,” said Tom Middleton, president of Middleton Construction Consulting, LLC of Hartland.

“The legislation is 5 percent for mbe’s, 1 percent for dvb’s (disabled veteran businesses) and they keep sticking their head in the sand and saying, ‘Well, we’re making 5 or 6 percent.’ But the reality is they are making one-tenth of 1 percent in the dvb program. I think that’s step one,” Middleton said. “They need to audit it and actually ensure what’s being reported is accurate because it’s never been accurate.”

Middleton Construction provides general contracting and architectural construction management services. Middleton said his company has been certified as a veteran-owned business from the start with the state and in fiscal year ’20 received about a dozen contracts with different architectural firms to provide cost estimating for the state Department of Facilities Development and Management.

He said while his business worked as a subcontractor on construction projects valued at more than $7.5 million and his company earned about $450,000, the annual report on the Supplier Diversity Program for FY ’20 shows subcontractors from veteran-owned businesses were only paid $15,000. He said a discrepancy that big should at least warrant an internal audit of the program.

“It seems to me like they are measuring their success by the number of companies that sign up to be in the program. Not the companies that participate,” Middleton said.

This summer, the front page of a state website describing the Supplier Diversity Program stated there were more than 1,300 minority- and women-owned businesses and 45 veteran-owned businesses certified to be in the program. Those details have since been removed. As of mid-October, a Department of Administration spokesperson said 49 veteran-owned businesses were certified in the program.

One veteran business owner said in 2014, when state lawmakers added the 1 percent goal in the state budget process, it also eliminated his ability to get a state contract. At the time, legislators gave a preference to larger general contractors with more resources to win bids, a move that shut out smaller subcontractors like his business from winning a bid on a state project.[[{“fid”:”1598726″,”view_mode”:”embed_portrait”,”fields”:{“format”:”embed_portrait”,”alignment”:”right”,”field_image_caption[und][0][value]”:”%3Cp%3EScott%20Flaugher%20in%201984%2C%20age%2020%2C%20at%20Chanute%20Air%20Force%20Base%20in%20Illinois.%20%3Cem%3EPhoto%20courtesy%20of%20Scott%20Flaugher%3C%2Fem%3E%3C%2Fp%3E%0A”,”field_image_caption[und][0][format]”:”full_html”,”field_file_image_alt_text[und][0][value]”:”Scott Flaugher”,”field_file_image_title_text[und][0][value]”:”Scott Flaugher”},”type”:”media”,”field_deltas”:{“2”:{“format”:”embed_portrait”,”alignment”:”right”,”field_image_caption[und][0][value]”:”%3Cp%3EScott%20Flaugher%20in%201984%2C%20age%2020%2C%20at%20Chanute%20Air%20Force%20Base%20in%20Illinois.%20%3Cem%3EPhoto%20courtesy%20of%20Scott%20Flaugher%3C%2Fem%3E%3C%2Fp%3E%0A”,”field_image_caption[und][0][format]”:”full_html”,”field_file_image_alt_text[und][0][value]”:”Scott Flaugher”,”field_file_image_title_text[und][0][value]”:”Scott Flaugher”}},”link_text”:false,”attributes”:{“alt”:”Scott Flaugher”,”title”:”Scott Flaugher”,”class”:”media-element file-embed-portrait media-wysiwyg-align-right”,”data-delta”:”2″}}]]

“Veteran’s Electric got into the program in 2010 as an electrical and general contractor,” said Scott Flaugher, owner of Veterans Electric LLC in Colgate. “We initially were successful in one, possibly two state projects before they made the change in the (state) budget in 2014 which eliminated our ability to participate.”

WPR reached out to all state lawmakers through leadership, looking for someone to react to the state of the Suppler Diversity Program, but no one was willing to respond. This is a response many veteran-owned businesses are familiar with.

“Since (lawmakers) snuck some of these changes in the budget process (in 2014), a number of state senators and representatives I’ve spoken to are completely oblivious to the fact that the program has been blocked,” Flaugher said. “They argue with me, ‘Oh, it’s in place we passed a law, it has to be working.’ No, it’s not.”

Flaugher is no longer certified in the program. When WPR talked to the veteran-owned businesses owners, they said unlike minority-owned businesses, they faced a fee of $150 to maintain certification with the state of Wisconsin for three years. A Department of Administration spokesperson has since said the fee now applies to anyone certified in the program.

Veteran businesses said being charged a fee for a program that doesn’t benefit them is unfair. They also said it’s much easier to become certified to do work with the federal government and other states including Texas and Minnesota.

They also feel general contractors have used their veteran business status to win a state bid only to never work with them or be paid for the state job. Vets said they are willing to serve on a task force to improve the program if one was created.

Flaugher said the lack of state support comes at a time when his business could use the work.

“We employ a number of disabled veteran electricians. These are people the state could take credit for working on state projects. But the door is closed for us because they’ve eliminated the whole bidder’s preference for all subcontractors,” he said. “We’ve actually had to significantly reduce our workforce here recently because of the entire COVID slowdown. I could have more disabled veterans working if we could do state work.”

The Gov. Tony Evers and his administration asked to expand the Supplier Diversity Program to include disabled and LGBTQ-owned businesses in the most recent state budget proposal, but the Republican-controlled Legislature wrote its own budget and chose to leave the program as is.

“The things that we want to do in terms of growing the program, we can’t really do it without the Legislature,” said Tondra Davis, the program’s director. “We need them to help and to invest in this program. We also need them to help us expand the access of this program.”