John, I am a Disabled Amercian Veteran Business Owner, certified by the VA, not the SBA (the SBA is self-certifed which makes it laughable and wrought with fraud). It takes months of investigaton to become certified by the VA, but the salvation is it is free, except for the time invested by the owner personally. I can honestly say it is very nearly worthless. I have seen minority owned have significant benefit locally. The Federal Government has a GOAL of awarding 3 percent of government contracts to Veterans. As with all government bodies, there are some within the system that try to meet the goal, but nearly across the board, purchasing agents have relationships with longtime vendors and those are very tough to break. And don't mislead yourself; even though you may be qualified to otherwise bid, you still have to be competitive in price. There are no built-in breaks.
The minority program for race and sex are clearly more advantageous, from my perspective. When a bid is advertised as such, I have seen rooms of bidders that are clearly not as experienced or qualified as we are, (some ask questions at prebids that leave me shaking my head) but the bids are specifically written to reward that classification. On a local and sometimes even at the state leve, minority owned businesses do have good success. That is the entire point of the program and it often works. At the federal level (small f ) it is a joke.
GC's advertise and seek you out on very rare occassions, but only so they can check a box on their bid form and say they offered participation, but could not find qualified vendors. They don't really have any honest intention to accept your bid. I know of one bid in California that has been open for over 2 years. It is written specifically for Disabled Veteran Owned business classification. 2 years? You have not found anyone for 2 years? You are not looking very hard.
To be equally as fair, I was offered the opportunity to bid (by several GC's) a local federal project recently (approximately 2 months). After I read the specs (which included servers running Microsoft Server 2003), I passed. I don't know which manufacturer wrote them, but the specs were a hack job. So overall, does it work, yes. If you are a minority it is worth it. If you are a veteran, no. In my case I was a contractor for 25 years before becoming certified. It was a waste of time. Is there fraud in the program, absolutely and it is rampant. The SBA certification process (again, self-certified) invites fraud. It should be eliminated.
I will also add a couple of more things. The minority owned bids are more State and local. It is ovbiously a little easier and more cost effective to market yourself locally. Federal contracts are written and awarded by Contracting authorties in major markets (DC, Atlanta etc). There are "events" if you want to call them that that are designed to put authorities together with contractors, but they are consistently hosted in larger markets where the authorities are. If you want to participate, you have to go there, they don't come to the smaller markets.
So between travel, hotels, seminar fees (and they are surprisingly steep even in comparison to ASIS fees) and perhaps even booth rental (and we all know what that cost) a "small" company can easily spend 30K to market to the "right" people. It is in no way geared towards a smaller business who either cannot, or will not pay those cost without some expectation that will be some reward on the other end. That is a very key, missing piece. We are in our 26th year and established. Startup companies that are cash strapped have virtually no chance. There are few if any meaningful ways for the local contractors in smaller markets to connect with Federal contracting authorities that write bids for local projects. They are written and contracted by someone else, somewhere else. There is a disconnect, and it is very real. I have occasional contact with people inside the system about this and they just look at me like I am speaking a foreign language. They truly do not understand or they lack any creativity to fix it.
I know of two examples and both meet the 51% illusion example you give. For the first company it was of zero advantage other than to get invited to RFPs, but that never resulted in award. The second company won some work from it, but nothing significant. There were many minority owned companies in the market so the certification provided very little advantage.
I've worked for 2 different minority companies in my career and it has NEVER been an advantage for the reasons that Mark gave. Contractors just have to say they offered it but couldn't find "qualified" minorities (a VERY subjective statement) to comply with the spec. Then they just award to thier relationship subs. I think the only time it was somewhat advantageous was the Native American owned company I worked for and that just meant we could bid Indian Reservation casino work but then you were still up against the relationships. As a matter of fact, when I started my company, we made a decision NOT to list as woman owned (which we totally would have qualified for) because we had a stronger financial position making my husband the majority owner even though he has relatively little to do with the actual running of business day to day. The MBE/WBE designation just isn't worth much in my opinion. Its another example of a government program/dictate that makes everyone feel good and deluded into thinking we're making progress in that area when in actual fact, nothing has changed.
We have been a registered Women Owned Business Enterprise for five years now and only once I feel it has helped in landing us a project and it was a small one.