Colorado audit finds veteran-owned contracting program far below 3% goal, with flawed state reports

Colorado’s program to steer state contracts to service-disabled veteran-owned small businesses has stayed below one-half of 1% of contract spending despite a 3% goal in state law, and state auditors told lawmakers June 15 that the agency overseeing the reports also issued inaccurate and sometimes late annual updates.

At the Legislative Audit Committee hearing, auditors said Colorado has never come close to the service-disabled veteran-owned small business, or SDVOSB, target since the goal was created in 2014. They also said the Department of Personnel and Administration’s reports for the years reviewed included contracts that should have been excluded, had calculation problems, were late in two of the three years examined and were not sent to all of the recipients required under the program.

The audit hearing put new scrutiny on the program because, auditors said, the state’s own reports on its progress could not be fully relied on.

Auditor Vicki Heller told lawmakers they may need to change statute if they want the annual report to be more than a filing requirement, because no office is clearly charged with reviewing it and requiring action when the state misses the goal. Auditors also raised broader policy options for lawmakers to consider, including clarifying DPA’s and state agencies’ responsibilities, examining whether agencies should face stronger accountability for using the preference, and reconsidering whether the current goal can be met without structural changes such as set-asides, sole-source options or subcontract counting.

The Polis administration signaled support for at least some clarifying changes. DPA Deputy Executive Director Tobin Fallenweider said at the hearing that the department supports efforts to clarify accountability and would work on “better reporting, better processes, and more effective engagements,” along with continued training, outreach and analysis.

DPA’s explanation for the reporting failures was administrative, according to the hearing discussion. Department officials said the written procedure for producing the annual report was difficult to follow and that the law and agency process left unclear who should send the report, when it should go out and how the information should be verified. Auditors also said DPA had not consistently verified report information with agencies and had not been giving agencies updates on how much they were actually contracting with SDVOSBs.

The official state reports illustrate how far the program has lagged even before the audit corrections. The 2024 report said SDVOSB firms received $3.18 million of $3.8 billion in state contract dollars in fiscal year 2023-24, or 0.08%. The 2025 report put the following year at $6.97 million, or 0.31%. Auditors said even those reports contained errors and should not be treated as fully reliable measures of progress.

Colorado’s SDVOSB results also compare poorly with other supplier-diversity benchmarks the state has published. A 2020 statewide disparity study found that minority- and women-owned firms received about 8% of state contract dollars, still below their estimated 28% availability in the market. The same study found firms owned by people with disabilities received less than 1% of contract dollars. Those figures are not directly comparable to the SDVOSB program, which has a separate statutory goal, but they show the state has documented broader participation gaps across supplier-diversity efforts.

It remains unclear whether lawmakers will pursue legislation next session or whether DPA will try to make significant changes under existing authority first. The June 15 hearing produced discussion of specific options, but no committee vote on legislation and no finalized timeline for administrative changes.