[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




    HEARING ON EXCELLENCE IN ACTION: GOVERNMENT SUPPORT OF DISABLED 
                       VETERAN-OWNED BUSINESSES

=======================================================================

                                HEARING

                               before the

      SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT & GOVERNMENT PROGRAMS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                     WASHINGTON, DC, JULY 15, 2004

                               __________

                           Serial No. 108-73
          House Veterans' Affairs Committee, Serial No. 108-48

                               __________

         Printed for the use of the Committee on Small Business


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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      ENI FALEOMAVAEGA, American Samoa
JIM DeMINT, South Carolina           DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri                 DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia             GRACE NAPOLITANO, California
TODD AKIN, Missouri                  ANIBAL ACEVEDO-VILA, Puerto Rico
SHELLEY MOORE CAPITO, West Virginia  ED CASE, Hawaii
BILL SHUSTER, Pennsylvania           MADELEINE BORDALLO, Guam
MARILYN MUSGRAVE, Colorado           DENISE MAJETTE, Georgia
TRENT FRANKS, Arizona                JIM MARSHALL, Georgia
JIM GERLACH, Pennsylvania            MICHAEL MICHAUD, Maine
JEB BRADLEY, New Hampshire           LINDA SANCHEZ, California
BOB BEAUPREZ, Colorado               BRAD MILLER, North Carolina
CHRIS CHOCOLA, Indiana               [2 VACANCIES]
STEVE KING, Iowa
THADDEUS McCOTTER, Michigan

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Policy Director/Deputy Chief of Staff

                  Michael Day, Minority Staff Director

     SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT AND GOVERNMENT PROGRAMS

TODD AKIN, Missouri, Chairman        TOM UDALL, New Mexico
JIM DeMINT, South Carolina           DANNY DAVIS, Illinois
SHELLEY MOORE CAPITO, West Virginia  GRACE NAPOLITANO, California
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
CHRIS CHOCOLA, Indiana               MADELEINE BORDALLO, Guam
STEVE KING, Iowa                     [VACANCY]
THADDEUS McCOTTER, Michigan

                     Joe Hartz, Professional Staff

                                  (ii)
?

                     COMMITTEE ON VETERANS' AFFAIRS

               CHRISTOPHER H. SMITH, New Jersey, Chairman

MICHAEL BILIRAKIS, Florida           LANE EVANS, Illinois
TERRY EVERETT, Alabama               BOB FILNER, California
STEVE BUYER, Indiana                 LUIS V. GUTIERREZ, Illinois
JACK QUINN, New York                 CORRINE BROWN, Florida
CLIFF STEARNS, Florida               VIC SNYDER, Arkansas
JERRY MORAN, Kansas                  CIRO D. RODRIGUEZ, Texas
RICHARD H. BAKER, Louisiana          MICHAEL H. MICHAUD, Maine
ROB SIMMONS, Connecticut             DARLENE HOOLEY, Oregon
HENRY E. BROWN, Jr., South Carolina  TED STRICKLAND, Ohio
JEFF MILLER, Florida                 SHELLEY BERKLEY, Nevada
JOHN BOOZMAN, Arkansas               TOM UDALL, New Mexico
JEB BRADLEY, New Hampshire           SUSAN A. DAVIS, California
BOB BEAUPREZ, Colorado               TIM RYAN, Ohio
GINNY BROWN-WAITE, Florida           STEPHANIE HERSETH, South Dakota
RICK RENZI, Arizona
TIM MURPHY, Pennsylvania

           Patrick E. Ryan, Chief Counsel and Staff Director

                               __________

                        SUBCOMMITTEE ON BENEFITS

             HENRY E. BROWN, Jr., South Carolina, Chairman

JACK QUINN, New York                 MICHAEL H. MICHAUD, Maine
JEFF MILLER, Florida                 SUSAN A. DAVIS, California
JEB BRADLEY, New Hampshire           CORRINE BROWN, Florida
GINNY BROWN-WAITE, Florida           STEPHANIE HERSETH, South Dakota

                                 (iii)


                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
McCullough, Ms. Allegra, Associate Deputy Administrator, 
  Government Contracting and Business Development, U.S. Small 
  Business Administration........................................     5
Ramos, Mr. Frank, Director, Office of Small and Disadvantaged 
  Business, Office of the Secretary of Defense...................     8
Scott, Mr. Brad, Regional Administrator, Region 6, Heartland 
  Region, U.S. General Services Administration...................    10
Denniston, Mr. Scott, Director, Office of Small Business and 
  Center for Veterans Enterprise, U.S. Department of Veterans 
  Affairs........................................................    12
Hatfield, Ms. Nina Rose, Deputy Assistant Secretary, Business 
  Management and Wildland Fire, U.S. Department of the Interior..    14
Lopez, Mr. John, Co-Chairman, Task Force for Veterans 
  Entrepreneurship...............................................    20
Schooner, Professor Steven, Co-Director of the Government 
  Procurement Law Program, George Washington University Law 
  School.........................................................    22
Hudson, Mr. James, Marketing Director, Austad Enterprises, Inc...    24
Forney, Mr. Joseph, President, Vetsource, Inc....................    26
Weidman, Mr. Rick, Chairman, Task Force for Veterans 
  Entrepreneurship...............................................    28

                                Appendix

Prepared statements:
    McCullough, Ms. Allegra, Associate Deputy Administrator, 
      Government Contracting and Business Development, U.S. Small 
      Business Administration....................................    33
    Ramos, Mr. Frank, Director, Office of Small and Disadvantaged 
      Business, Office of the Secretary of Defense...............    37
    Denniston, Mr. Scott, Director, Office of Small Business and 
      Center for Veterans Enterprise, U.S. Department of Veterans 
      Affairs....................................................    49
    Hatfield, Ms. Nina Rose, Deputy Assistant Secretary, Business 
      Management and Wildland Fire, U.S. Department of the 
      Interior...................................................    53
    Forney, Mr. Joseph, President, Vetsource, Inc................    55
    Hudson, Mr. James, Marketing Director, Austad Enterprises, 
      Inc........................................................    61
    Lopez, Mr. John, Co-Chairman, Task Force for Veterans 
      Entrepreneurship...........................................    66
    Weidman, Mr. Rick, Chairman, Task Force for Veterans 
      Entrepreneurship...........................................    66
Submitted for the Record:
    US Department of Agriculture.................................    86
    Speake, Ms. Theresa, Director, Office of Small & 
      Disadvantaged Business Utilization, US Department of Energy    91

                                  (iv)
      


 
    HEARING ON EXCELLENCE IN ACTION: GOVERNMENT SUPPORT OF DISABLED 
                        VETERAN-OWNED BUSINESSES

                              ----------                              


                        THURSDAY, JULY 15, 2004

                   House of Representatives
                        Committee on Small Business
     Subcommittee on Workforce, Empowerment and Government 
     Programsjoint hearing with the Committee on Veterans' 
                           Affairs Subcommittee on Benefits
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 2:05 p.m. in 
Room 311, Cannon House Office Building, Hon. Todd Akin 
[chairman of the Subcommittee] presiding.
    Present: Representatives Akin, Brown, Velazquez, Michaud, 
Udall, Herseth, Chocola 
    Chairman Akin. This is an interesting Committee hearing in 
that we have essentially two different committees having the 
same hearing at the same time. And that is a fortunate thing, 
because I have got another Committee where I have got to be 
scooting off, so we are going to be turning the hearing over in 
a couple minutes to my colleague. Henry will handle that after 
we make an opening statement and get started.
    I also think we have two panels of witnesses, is that 
correct? Okay.
    Well, let us go ahead with an opening statement then. And 
also, we will be hearing a statement from our Minority Member 
from the Small Business Committee also, Mr. Udall, as well. So 
that will be good.
    Good afternoon, and thank you all for being here today as 
we examine federal government support of disabled veteran-owned 
small businesses. I would especially like to thank each of our 
witnesses who has agreed to testify before our Committee today.
    Before we begin I would like to welcome my friend and 
colleague, Chairman Henry Brown, of the Committee on Veterans' 
Affairs, Benefits Subcommittee. Mr. Chairman, welcome, and 
thank you for the opportunity to work together on this issue.
    And over the past three and a half years Chairman Brown has 
worked tirelessly on a multitude of issues, and has been a real 
champion for America's veterans. I would like to express my 
gratitude to the good people of the First District of South 
Carolina for sending Henry to the House, and also for the 
peaches that they distributed a couple days ago.
    I am very pleased to be able to co-chair this hearing with 
him, and hope that this is just the first of a long line of 
veteran small business concerns we can work on together. With 
President Bush, this Congress has made it a priority to reach 
out to all of America's entrepreneurs, especially those who 
served this nation in our armed forces. We must continue this 
effort to ensure that those who sacrificed and served our 
nation in uniform have access to contracting opportunities with 
the federal government.
    As many of you know, the Veterans' Entrepreneurship and 
Small Business Development Act of 1999 set a government-wide 
goal of 3 percent of all federal prime contracting dollars, and 
3 percent of all federal subcontracting dollars, should be 
awarded to service-disabled veteran-owned small businesses.
    However, for the first two fiscal years after enactment, 
less than one-half of 1 percent of such contracts have been 
awarded to disabled veteran-owned small businesses.
    In order to provide the federal agencies with the necessary 
tools to meet the 3-percent goal, Congress and President Bush 
enacted the Veterans' Benefit Act of 2003 on December 16, 2002. 
This law allows contracting officers to create sole-source 
contracts for disabled veteran-owned small businesses.
    The new law also provides contractors the discretionary 
authority to restrict certain contracts for disabled veteran-
owned small businesses, if at least two such small businesses 
are qualified to bid on the contract.
    Today we have invited a number of federal agency officials 
to testify on their progress in implementing the Veterans' 
Benefit Act. Also with us today are several disabled veteran-
owned small business owners. They are here to explain their 
experiences, both before and after passage of the Veterans' 
Benefit Act.
    I am looking forward to hearing the testimony presented 
today, and hope to hear that each of the agencies represented 
have taken appropriate steps to meet the 3-percent goal.
    I hope that this Congress and our colleagues in the 
Administration can continue to work with the veterans' 
community together in order to provide our service-disabled 
veteran-owned small businesses each opportunity to succeed in 
the federal contracting agenda.
    I now invite my friend and ranking Member, Mr. Udall, to 
make an opening statement.
    Mr. Udall. Thank you very much, Mr. Chairman. I appreciate 
you holding this hearing. I think this is an important hearing 
for veterans, and also for the small business community.
    Let me first say that, along with a few other members here 
today, I have the pleasure of serving on both the Small 
Business and the Veterans' Committees. And it is a pleasure for 
us to have our colleagues on both of the Committees here today. 
We all recognize the importance of this issue before us, and I 
hope that this hearing will lead to a more effective 
procurement process for our veteran-owned small businesses.
    The Veterans' Benefit Act is legislation built off the work 
of the Small Business and the Veterans' Committee during the 
105th Congress. Two Congresses ago we passed the Veterans' 
Entrepreneurship and Small Business Act that created several 
veterans' business development programs.
    Given the sacrifices that our veterans have made and the 
service they have provided to this country, it only makes sense 
to provide our nation's veterans with assistance to jump-start 
small businesses.
    A key component for any small business to succeed, not only 
veteran-owned small businesses, is access to government 
contracts. That is why we must ensure that veteran-owned, 
minority-owned, and all small businesses have a fair shake in 
the federal marketplace.
    Today, however, we are focusing more specifically in 
evaluating the recent implementation of the new program 
established under the Veterans' Benefits Act. On May 5, 2004, 
five months after the President signed the legislation into 
law, the SBA put out the regulations to carry out the 
procurement program. These provisions allow agencies to set 
aside contracts for service-disabled veterans.
    Unfortunately, in issuing the regulations, the SBA may have 
missed the mark. The regulations omit important safety and 
soundness protections, such as a certification program.
    In addition, I am very concerned that these regulations not 
only fall short of the policy goals, but will also create 
confusion that will result in lost contracting opportunities, 
not only for service-disabled veterans, but for all small 
businesses.
    The original intent of the bill was to create a fair and 
just system, to provide entrepreneurial opportunities to those 
who, for various reasons, have been left behind or left out. In 
order for this to be successful, we must ensure SBA programs 
can operate in unison.
    Mr. Chairman, we all know how important it is that we 
provide assistance to all sectors of the small business 
community. After all, as is repeated often in the Small 
Business Committee, small businesses are the engine that drives 
our nation's economy.
    It is of particular importance, however, that we provide 
assistance to our nation's service-disabled veteran 
entrepreneurs. History has shown that they, along with other 
particular segments of the population, rely most on the 
programs and assistance offered through SBA. That is why it is 
so important that as this new and important procurement program 
be implemented, we ensure that it is implemented in a manner 
that truly provides greater access to the federal marketplace 
for veteran-owned small businesses.
    I look forward to hearing the testimony of the witnesses on 
the panels, and thank them for being here today.
    Thank you, Mr. Chairman.
    Chairman Akin. Thank you, Mr. Udall. And then also we have 
an opening statement from Mr. Brown.
    Mr. Brown. Thank you, Mr. Chairman. And I want to also 
extend a warm welcome to everyone here today, Chairman Akin, 
our Committee Ranking Member, Mr. Udall, for bringing us all 
together.
    American sons and daughters who serve in our military 
indeed are engaging and resourceful individuals. In few 
professions do 19- and 20-year-olds, for example, maintain 
multi-billion-dollar airplanes or operate multi-billion-dollar 
missile systems or nuclear-powered submarines, all in defense 
of our way of life.
    Those who are disabled in their service to our nation 
deserve a full opportunity to participate in the economic 
system that their service has sustained.
    Indeed, during the Colonial era, the First Continental 
Congress furnished pensions to members of our Continental Army 
to empower economically after they left the military. In so 
doing, the Continental Congress established one of our young 
nation's core values.
    Further, during the Homestead Act of 1862, veterans 
received a priority for receiving parcels of land. This goes 
beyond gratitude and respect; it is about using scarce public 
resources in our private economy to empower those who have 
served.
    Mr. Chairman, fast-forward into today. A five-year profile 
survey of veteran-owned businesses in Massachusetts, conducted 
in the late 1980s and early 1990s, found that a pool of 
approximately 2,000 veterans engaged in micro-businesses 
generating $74 million for the Commonwealth of Massachusetts. 
That is just for one state.
    On February 5, 2003, Veterans' Affairs Committee hearing on 
the state of veterans' employment took testimony from among 
other current entrepreneurs who were disabled by their military 
service. The body of testimony showed these are engaging 
individuals who are strong and well-positioned to participate 
in the economic system they fought to defend.
    The outgrowth of that 2003 hearing was the bipartisan 
discretionary set-aside and restricted contract authority for 
disabled veteran-owned small businesses, established as Public 
Law 108-183, to which I was an original co-sponsor.
    I thank Congressman Renzi for introducing this important 
bipartisan legislation, of which Chairman Manzullo was the 
original co-sponsor.
    Federal departments and agencies now have additional tools 
to contract with such small businesses. These are tools that 
were not available through the bipartisan enactment of Public 
Law 106-50, authored primarily of former Chairman Talent of 
this Committee, and Mr. Stump and Mr. Evans of the Veterans' 
Affairs Committee.
    Mr. Chairman, I would note the White House Conference on 
Small Businesses, convened by President Carter in 1980, 
recommended set-aside authority in federal contracting for 
Vietnam-era disabled veterans as part of the aid program.
    The 1981 expert report of the Small Business Administration 
Veterans' Project, written by the Center for Community 
Economics, made the same recommendation. The bipartisan 
Congressional Commission on Service Members and Veterans' 
Transition Assistance of 1998 made similar-type 
recommendations.
    Without objection, Mr. Chairman, I would like to insert 
into the record the appropriate sections of these reports.
    In closing, Mr. Chairman, I would note that in a broad 
sense, these discretionary contracting authorities for disabled 
veterans we are discussing today were some 24 years in the 
making.
    This is not something Congress went into lightly, so I am 
very pleased we are holding this hearing.
    Thank you, Mr. Chairman. I look forward to hearing today's 
witnesses.
    Chairman Akin. Without objection, in terms of the record.
    Our next opening statement is going to be from Mr. Michaud.
    Mr. Michaud. Thank you very much, Chairman Akin, Chairman 
Brown, and Ranking Member Udall, for working to put this 
hearing together today.
    I have the privilege of serving both, as Ranking Member of 
Veterans' Affairs Benefits Subcommittee, and sitting on the 
Small Business Committee. I am very fortunate, and obviously 
have strong interests in exploring the issues before us today 
with the panels that we have, and the lengthy discussions.
    So with that, Mr. Chairman, I would ask unanimous consent 
to have my opening remarks submitted for the record.
    Chairman Akin. Without objection, and thank you.
    We will now proceed to our first panel of witnesses. And I 
believe our first witness is going to be Ms. Allegra 
McCullough, who is the Associate Deputy Administrator for 
Government Contracting and Business Development for the USSBA.
    Allegra, thank you.
    Excuse me, I did not mention you have about five minutes, 
standard format. Thank you.

   STATEMENT OF ALLEGRA MCCULLOUGH, GOVERNMENT CONTRACTING & 
     BUSINESS DEVELOPMENT, US SMALL BUSINESS ADMINISTRATION

    Ms. McCullough. Good afternoon, Chairman Akin, Brown, and 
Ranking Members Udall, Michaud, and other distinguished Members 
of the Committee.
    My name is Allegra McCullough, Associate Deputy 
Administrator for Government Contracting and Business 
Development at the US Small Business Administration.
    Thank you for inviting me to appear before you today to 
speak about our efforts to reach out to service-disabled 
veteran-owned small businesses, and achieve the 3-percent 
federal procurement goal.
    Mr. Chairman, as you are aware, the Veterans' 
Entrepreneurship and Small Business Development Act of 1999 
created a government-wide goal that 3 percent of the total 
value of all federal prime and subcontract dollars be awarded 
to service-disabled veteran-owned small business concerns.
    Unfortunately, the federal government has consistently 
fallen well short of the 3-percent statutory goal. By fiscal 
year 2003, only three agencies met or exceeded the 3-percent 
goal. The National Endowment for the Arts--
    Chairman Akin. Allegra, if I could interrupt you for a 
minute and just ask you to move your mic a little bit closer. I 
think we will get a little bit better reception. Thank you.
    Ms. McCullough. By fiscal year 2003, only three agencies 
met or exceeded the 3-percent goal: the National Endowment for 
the Arts, the Consumer Product Safety Commission, and the 
Railroad Retirement Board. Of the large agencies, the 
Department of Housing and Urban Development has been the most 
successful in making progress toward the 3-percent goal.
    On June 10, 2004, SBA's Office of Advocacy issued a report 
indicating achievements in this area were low, but also 
indicating that actual agency accomplishment may be under-
reported.
    Congress and the President provided federal procurement 
officials with a valuable tool: The Veterans' Benefit Act of 
2003, 108-183. That was signed by the President on December 18, 
2003, that authorized bills of procurement set-asides for 
SDVOSB, and sole-source contracting authority for only one 
SDVOSB as identified that can meet the government's 
requirement.
    On May 5, 2004, the SBA and the Federal Acquisition 
Regulatory Council concurrently published interim final rules, 
implementing the procurement provisions of the Veterans' 
Benefit Act of 2003, while still providing the public with a 
60-day comment period. Both SBA and the FAR Council worked hard 
to expedite these regulations.
    The new regulations permit contracting officers to either 
restrict competition in contracts, or issue sole contracts to 
SDVOSB, but then specify dollar thresholds, in accordance with 
statutory requirements.
    Our regulation also establishes procedures for protecting 
the status of an SDVOSB.
    There are some common misconceptions out there that hinder 
the government's ability to reach the statutory 3-percent goal. 
Since these procurements are based on a premise other than 
socio-economic status, educating the federal and private sector 
contracting communities is very important.
    Also, some SBCs are reluctant to identify themselves as 
service-disabled just to gain the status designation as an SDV. 
This hinders our outreach efforts, since we are unable to 
identify our clients.
    So educating SDVOSBs to recognize the value added in 
securing or self-identifying as disabled is very important.
    S.B.A. has not achieved its annual procurement goal for 
SDVOSBs since the inception of the requirement. However, as a 
result of the recently-enacted legislation and published 
regulation, SBA is designing an integrated effort that includes 
specific steps to be taken among our various program areas to 
utilize the set-asides and sole-source authorities for the 
purpose of meeting the 3-percent goal.
    As a part of SBA's annual acquisition planning process, the 
agency will include all socio-economic goals, including SDVOSBs 
in our selection strategy. SBA's Office of Administration will 
also work closely with our Office of Veteran Business 
Development to identify potential SDVOSBs to meet SBA's 
contracting needs.
    Where feasible, contracting opportunities will be posted on 
our home page, as well as highlighted in our vet cassette 
electronic newsletter, which reaches thousands of veterans.
    The SDVOSB procurement goals will be communicated to all 
program areas, and each area will be encouraged to consider 
these agency goals when developing its procurement strategy for 
each planned acquisition.
    SBA's outreach goals over the last three years, combined 
with the efforts of others, have contributed to the increase in 
veteran participation between 40 to 100 percent in most SBA 
programs. We have and will continue to coordinate these efforts 
internally and with other federal agencies.
    S.B.A. will work with the agencies' representatives today, 
and with others, to conduct outreach training and other policy 
program initiatives, specifically for SDVOSBs and veteran-owned 
businesses. This effort will include educating procurement 
officers of the new program, as well as educating service-
disabled veteran entrepreneurs on SDV status, size standards, 
marketing to federal officials, information requirements in the 
bid of a procurement challenge, and tools for partnering with 
other SDVOSBs and veteran-owned businesses, and other agency 
procurement program participants.
    Registration and the central contract registration, and the 
use of the dynamic small business search engine contained in 
the CCR as a source of market research, along with other 
federal databases, will be highlighted.
    Further, non-SDVOSB prime contractors should also be made 
aware of subcontracting opportunities and responsibilities for 
the SDVOSB and veteran-owned businesses. To fully accomplish 
the objectives of this legislation, SDVOSBs must be prepared to 
conduct business in a manner consistent with current federal 
procurement trends.
    Today, a large portion of the annual federal procurement 
dollars are spent through contracting actions using GSA federal 
supply schedules. While not the only way to provide SDVs with 
more contracting dollars, the ability of SDVOSBs to be placed 
on and market their companies on the GSA federal schedule will 
be a critical portion of their success in the federal market.
    Through SBA procurement assistance programs, its business 
development counselling and training programs, and in 
partnership with other federal agencies like the ones here 
today, SBA will continue to identify and work with SDVOSBs to 
ensure that they have the necessary tools in place to enhance 
participation on GSA schedules.
    Additionally, SDVOSBs must be educated on federal 
procurement trends, including using federal purchase cards to 
make purchases under $2500 without competitive quotes. These 
purchases amount to approximately $16 billion last fiscal year.
    Mr. Chairman, the SBA will continue to work with the 
Committee and with other federal agencies in any efforts to 
promote programs and contracting opportunities for our 
veterans.
    This concludes my testimony. And I would be happy to answer 
your questions.
    [Ms. McCullough's statement may be found in the appendix.]
    Chairman Akin. Thank you, Ms. McCullough.
    I will remind the witnesses, I know Ms. McCullough went a 
little bit over the five minutes. And I would caution you, if 
you would, kind of keep your remarks to five minutes. All of 
your prepared remarks will be entered into the record, but just 
for the sake of the time line to try to work within, if you 
would just contain your statements to five minutes.
    The next witness is Mr. Frank Ramos, Office of Small and 
Disadvantaged Business, Office of the Secretary of Defense, US 
Department of Defense.
    Thank you, Mr. Ramos.

  STATEMENT OF FRANK RAMOS, OFFICE OF SMALL AND DISADVANTAGED 
BUSINESS, OFFICE OF THE SECRETARY OF DEFENSE, US DEPARTMENT OF 
                            DEFENSE

    Mr. Ramos. Mr. Chairman, if I would, please, I have four 
interns in the back. And I think there is some significant 
interest in one of them. If they would stand up.
    One is the granddaughter of a US Marine code talker from 
World War II from the Navajo Nation. And I thought it would be 
appropriate to bring them here to go through this exercise.
    [Applause.]

    Chairman Akin. We had a special ceremony in the Capitol, I 
guess about a month or so ago, honoring the code talkers. And 
they certainly played a major role in our victory in World War 
II. And thank you for bringing her today. Thank you for coming, 
too.
    Mr. Ramos. Thank you, sir. Right behind me also, sir, is my 
Deputy, Lynn Oliver, and a new person who is a special 
assistant to me, a political appointee who is going to be 
focusing on veterans' affairs for us. He just came on board; he 
served with the Army Airborne.
    I will move on with my statement here, sir.
    Good afternoon, Chairman Akin and Congressman Udall; good 
afternoon, Chairman Brown and Congressman Michaud.
    My name is Frank Ramos. I am the Director of the Office of 
Small and Disadvantaged Business Utilization, in the Office of 
the Secretary of Defense.
    I wish to thank you for the opportunity to testify before 
this joint subcommittee hearing concerning the Department of 
Defense implementation plan to execute public law 108-183. This 
law has helped clarify questions of priority within the 
competing small businesses' interest. This will help us.
    The Defense implementation plan is our roadmap to meet the 
federal government goal to award 3 percent of all contracts for 
our war fighters who have become disabled in defense of our 
nation.
    Today I will describe the three arenas of focus to improve 
our service-disabled veteran business statistics.
    Number one. We are developing a strategy to increase 
service-disabled veteran supplier pool on increasing contract 
amounts to these businesses.
    After I assumed my office, I began collecting data to 
determine how and what we must do to achieve the goal. In 
fiscal year 2002, the Department of Defense awarded $204.5 
million in prime contract awards to service-disabled veterans, 
but we only reached .13 percent of that goal.
    In fiscal year 2003, we awarded $341.7 million, an increase 
of $37.2 million. That only raised our goal percentage to .18 
percent, a 72-percent increase that still fell short of the 3-
percent goal.
    The number of DoD service-disabled veteran business 
contractors grew from 408 in fiscal year 2002, to 692 in fiscal 
year 2003, an increase of 70 percent.
    The government-wide centralized contractor register has 
only 5,600 active registrants who have identified themselves as 
service-disabled veterans. This compares with around 180,000 
registrants who identify themselves as small business, as of 
last week.
    Accretion of contract size is a challenge. Right now there 
are only five firms who have contract awards in excess of $11 
million. The balance of contract awards are in the lower 
ranges, most frequently under $100,000. Those larger Department 
of Defense awards are in research and development, engineering 
services, commercial institutional and construction, security, 
and boat-building.
    Our primary tasks are twofold. To grow the number of 
service-disabled veteran firms that will be able to compete, 
and to increase the dollar value of our contracts with them, 
while buying goods and services that the war fighter needs.
    The second area of focus is training. In late 2002 I 
recognized that small business-related training courses were 
not part of the Defense Acquisition University curriculum. The 
Undersecretary of Defense for Acquisition, Technology, and 
Logistics and the President of the Defense Acquisition 
University were quick to support our small business initiative, 
to consolidate courses that military services had partially 
developed for themselves.
    We now have our first comprehensive Department of Defense 
small business training course contracts 260 that will be 
initiated at the end of August. The course is required for all 
defense small business specialists, and is encouraged for all 
acquisition professionals, which will include the service-
disabled veteran topics.
    Another initiative is to have an electronic continuous 
learning module. We expect that within 45 days of our pilot 
course, the electronic course will be available to anyone over 
the Internet.
    We are expanding our defense community practice repository 
to provide a central electronic location where all acquisition 
professionals can share information relating to service-
disabled veteran-owned small businesses.
    Third. In 2003 I raised the service-disabled veterans as a 
heightened priority within the Department of Defense. For 
emphasis, we invited two Congressional Medal of Honor 
recipients--the Honorable Harvey ``Barney'' Barnum, the 
Assistant Secretary of the Navy, and Rodolfo Hernandez--to 
address our mentor/protege conference. The Honorable Everett 
Alvarez was another keynote speaker. He is the longest-captive 
prisoner of war decorated service-disabled veteran, and a 
successful small business owner.
    I also had the Honorable Albert Zapanta, Chairman of the 
Reserve Policy Forces Board, a recipient of the Silver Star and 
Purple Heart, and small business owner, who addressed the 
veterans' issues.
    That level attention by the distinguished heroes has never 
been done before at that conference.
    I am also proud to state that my support contractor is a 
very competent service-disabled veteran business. And I guess 
what I am saying is I practice what I preach.
    We have identified our challenges, and we developed a 
roadmap. We are working hard to achieve our goal.
    I would like to close by expressing my appreciation for 
your interest, and the collaborative effort by our sister 
federal agencies, to strive toward this patriotic goal of 
supporting our former war fighters. It is the right thing to 
do.
    I hope you can discern from my testimony that I have a real 
passion to meet this challenge. Thank you, sir.
    [Mr. Ramos' statement may be found in the appendix.]
    Chairman Akin. Thank you very much, Mr. Ramos. I know there 
is a lot of work left to do, and I thank you for your effort in 
trying to reach that 3-percent goal.
    Our next panel member is Mr. Brad Scott, Regional 
Administrator, Region Six, Heartland Region, US General 
Services Administration. Welcome.

  STATEMENT OF BRAD SCOTT, US GENERAL SERVICES ADMINISTRATION

    Mr. Scott. Thank you, Mr. Chairman, Ranking Member Udall, 
Ranking Member Michaud.
    I am pleased to report on behalf of Administrator Steve 
Perry on GSA's continuing efforts to preserve the spirit of the 
two respective laws enacted to promote government contracting 
with service-disabled veteran-owned small businesses.
    It has been my personal privilege to play a part in 
developing and implementing programs designed to, first, 
leverage our relationships within the federal community, to 
promote achievement of socio-economic goals by our client 
agencies.
    Second, to help service-disabled veterans identify 
opportunities to do business with the government.
    And finally, to enhance GSA's ability to achieve its own 
goal.
    I would like to thank the Congress and the President for 
providing this tool that I believe will prove to be a 
meaningful enhancement in creating opportunities for service-
disabled veteran-owned small businesses.
    When public law 108-183 took effect last December, 
Administrator Perry challenged the GSA management team to forge 
an initiative to meet the demands of this new law. In response 
to this, we initiated a program that is entitled ``Operation 
Fast Break.''
    Operation Fast Break is a two-pronged approach aimed at 
creating and improving GSA's external and internal offerings to 
our federal customers, and to service-disabled veteran-owned 
small businesses.
    The broad goals of Operation Fast Break are first to 
identify, recruit, train, and assist service-disabled veteran-
owned small business owners to get on GSA's multiple-award 
schedule program. And second, it is to inform client agencies 
of the new law and the opportunity contained therein to 
streamline the ability to access service-disabled veteran-owned 
small businesses.
    G.S.A. has worked very closely with the Department of 
Veterans' Affairs, DoD, the Small Business Administration, and 
the Defense Logistics Agency to identify ways to expand 
contracting opportunities to service-disabled veteran-owned 
small businesses. This partnership has opened lines of 
communication between the agencies, and enabled the involved 
partners to embark on joint conferences and joint initiatives 
to the benefit of all involved.
    I would like to hold up for distinction the Department of 
Veterans' Affairs, and Scott Denniston, who will testify next. 
GSA is hosting conferences to put service-disabled veterans in 
touch with federal agencies and prime vendors. Conferences have 
been held in Washington, D.C. and New York already. Today there 
is one being held in Denver, Colorado, and we have one being 
planned for the Pacific Rim Region, Region 11 in California, 
and we have one scheduled in my region for October 20.
    G.S.A. has utilized the power of the world-wide web to 
improve offerings to service-disabled veterans through cross-
agency coordination and links. In addition, under Operation 
Fast Break, GSA created a website solely dedicated to service-
disabled veterans.
    During our internal review, GSA uncovered several dead 
links from other agencies to GSA. In addition, we found 
erroneous and outdated information contained on our own sites, 
as well as others. All of them have been fixed.
    Additionally, veterans were frustrated that they were 
having difficulty talking with live bodies who could provide 
meaningful information. Not only have we listed points of 
contact on our website, we created a 1-800 number for veterans. 
When a service-disabled veteran contacts the hotline, he or she 
is directed to his or her local GSA Office of Small Business 
Utilization for more information on how to become a GSA 
contract holder.
    G.S.A. is working with the Association of Procurement 
Technical Assistance Centers, and has established a memorandum 
of understanding to create an avenue for service-disabled 
veterans to receive intensive assistance that we cannot always 
provide.
    G.S.A. has held internal conferences with its Office of 
Small Business Utilization to coordinate efforts, create a 
common customer experience, and enhance our offerings to not 
only our client agencies, but to veterans.
    G.S.A. maintains a permanent liaison with the Task Force 
for Veteran Entrepreneurship.
    While still too early to judge the impact of our 
initiative, we can identify some progress. For instance, at the 
end of 2003, GSA had 167 schedule-holders designated as 
service-disabled veterans. In March of this year, after GSA 
conducted an in-house review and contacted the businesses on 
schedule to inform them of the passage of the law, that number 
doubled to 332 businesses. As of June 30, we reached 351 
businesses listed on schedule.
    Once on schedule, GSA maintains and regularly updates the 
list of service-disabled veteran-owned small businesses. This 
list of businesses can be obtained from GSA service-disabled 
veteran-owned small business website.
    In addition to asking for more service-disabled veterans on 
schedules, federal agencies have asked for a more user-friendly 
method of identifying service-disabled veterans. We are working 
to provide that, as well as to expand the pool.
    And with that, Mr. Chairman, my time is about up, and I 
would like to end within the five minutes. We thank you for the 
honor and privilege of testifying before this august body.
    Chairman Akin. Thank you very much, Mr. Scott.
    Our next panel member is Mr. Scott Denniston, Director, 
Office of Small Business and Center for Veterans' Enterprise, 
US Department of Veterans' Affairs.
    Welcome.

  STATEMENT OF SCOTT F. DENNISTON, OFFICE OF SMALL BUSINESS & 
                 CENTER FOR VETERANS ENTERPRISE

    Mr. Denniston. Thank you. Mr. Chairman and distinguished 
Members of the Committee, thank you for the opportunity to 
testify on behalf of Secretary Anthony Principi on what VA has 
done to implement the programs envisioned by public law 106-50 
and 108-183.
    In 2001, the Department created the Center for Veterans' 
Enterprise. The Center's principal mission is to promote 
business ownership and expansion for veterans and service-
connected disabled veterans.
    The Center, which started with four employees, now has 11 
employees in three functional areas: communications, business 
development, and business expansion.
    The mission of the Communications Unit is to ensure 
awareness of the Federal Veterans' Entrepreneurship Program and 
the assistance offered by our resource partners: the 
Association of Small Business Development Centers, the 
Association of Procurement and Technical Assistance Centers, 
the Veterans' Corporation, the Veterans' Business Outreach 
Centers, the Small Business Administration Development 
Officers, and the Service Corps of Retired Executives.
    A principal tool of the Communications Unit is the Center's 
web portal, vetbiz.gov. The web portal was recognized in the 
2004 Edition of the 100 Best Resources for Small Business.
    The mission of CVE's Business Development Unit is to 
efficiently connect veterans with community-based support, and 
to assess the responsiveness and effectiveness of local 
services. This unit was established in July of 2003.
    A newly-developed tool of the Business Development Unit is 
the VetBiz Assistance Program, which will allow providers of 
business assistance services to post their program information 
for veterans to easily locate. This new program will be 
unveiled on August 17, 2004, on the fifth anniversary of public 
law 106-50.
    The mission of CVE's Business Expansion Unit is to directly 
assist veterans who are seeking federal marketplace 
opportunities, and to minimize access barriers, and to maximize 
where possible. The principal tool of this unit is the VetBiz 
Vendor Information pages.
    In April, the Administrator of the US Small Business 
Administration and the Acting Administrator of the Office of 
Federal Procurement Policy jointly issued a memorandum to all 
federal agencies encouraging the use of the VetBiz VIP 
database.
    The database accepts information from external sources 
where veteran-owned businesses may be located, including 
Department of Defense's central contact registry. For a 
business to be posted on this Internet offering, the company 
must answer questions regarding small business size status, and 
affirm that the company is truly 51-percent owned and 
controlled by veterans or service-disabled veteran-owned 
businesses.
    In the past 12 months, more than 59,000 calls and faxes 
from veterans have been handled by the Center. The web portal 
established to provide 24/7 access to veterans has received 
more than 700,000 hits in the first six months of this year.
    VA's CVE has joined forces with federal agencies and prime 
contractors to create a corps of government and corporate 
advocates for veterans' enterprise, volunteers who stand ready 
and able to answer questions from entrepreneurial veterans on 
how to access requirements of their organizations.
    I am proud to report that the Center and the Department 
have been actively sought out by federal agencies and 
corporations to partner in their outreach efforts. VA has co-
sponsored outreach programs with the Air Force, Defense 
Logistics Agency, Department of Health and Human Services, 
Department of Housing and Urban Development, Department of 
Interior, Department of Transportation, General Services 
Administration, Small Business Administration, General Dynamics 
and SAIC, to name a few.
    Additionally, we have ongoing relationships with the DoD 
Regional Small Business Councils, the DoD Procurement Technical 
Assistance Centers, and the Small Business Development Centers.
    The CVE has also been invited to address employees of many 
other federal agencies as part of their acquisition education 
program.
    Last spring, Secretary Principi issued a comprehensive 
report on recommendations to improve the performance of 
veteran-owned small businesses. This report contains many 
important changes. Perhaps the most startling and truly 
sweeping is the requirement now to include performance with 
veterans and service-disabled veterans in executives' 
performance plans within the Department of Veterans' Affairs. 
This report, coupled with the new set-aside authority which 
Congress has passed, should result in significantly higher 
improved achievements for both veterans and service-disabled 
veterans. This report is posted on the VetBiz web portal for 
anyone who is interested in using it.
    Shortly before President Bush signed the Veterans' Benefit 
Act of 2003 on December 16, we began receiving enthusiastic 
calls from service-disabled veterans who had been closely 
monitoring the legislation. The callers wanted to know how long 
before the legislation would be implemented within VA and other 
federal departments and agencies. Obviously, they urged 
immediate implementation.
    Secretary Principi, in consultation with VA's General 
Counsel, determined that implementing regulations were not 
necessary to implement the provisions of the law. On February 
24, the VA's Office of Acquisition and Material Management 
issued an information letter which implemented the set-aside 
provisions of the law for VA immediately.
    Thanks to the tremendous efforts and collaboration of the 
Small Business Administration and the Federal Acquisition 
Council, both SBA regulations and the Federal Acquisition 
regulations were revised, effective May 5, to implement the 
public law. As a result, we rescinded our informational letter.
    What is interesting to note is that, since the time that 
the implementing of regulations went into effect, there have 
been 86 opportunities advertised in FedBizOps for service-
disabled veteran set-asides. And we are pleased that more than 
half of those, or 48, came from the Department of Veterans' 
Affairs.
    We have been very active in developing and supporting 
veteran-owned businesses. We think that we have put the tools 
in place that will, in the near future, show the results that 
Congress expects through the set-aside authority.
    Thank you for the opportunity to testify, and I would be 
happy to answer any questions.
    [Mr. Denniston's statement may be found in the appendix.]
    Chairman Akin. Thank you, Mr. Denniston.
    Our next member is Ms. Nina Rose Hatfield, Deputy Assistant 
Secretary for Business Management and Wildland Fire, US 
Department of the Interior.
    Thank you.

   STATEMENT OF NINA ROSE HATFIELD, BUSINESS MANAGEMENT AND 
          WILDLAND FIRE, US DEPARTMENT OF THE INTERIOR

    Ms. Hatfield. Thank you, Mr. Chairman.
    Mr. Chairman and Members of both Committees, I appreciate 
the opportunity to testify today on behalf of the Department of 
the Interior in support of the strategies that will increase 
small business procurement opportunities with service-disabled 
veterans on businesses.
    Fifty percent of the $4 billion spent by our bureaus and 
offices in fiscal year 2003 were awarded to small businesses. 
We have consistently been among the leaders of the government 
in contracting with small and minority businesses. Nonetheless, 
we recognize the need for continued progress with service-
disabled veteran-owned businesses.
    Our small business theme is know your neighbor, because we 
have offices located across the nation, with responsibilities 
where our veterans reside and are business owners. We 
understand that we need to do a good job of providing 
information for those veterans about how they can contract with 
Interior. And we believe that public law 108-183 will open more 
doors for those veterans.
    Within Interior, many positive steps have occurred in the 
past two years, but more remains to be accomplished. Prior to 
the recent passage of the Veterans' Benefit Act, Interior 
increased SDV procurements from fiscal year 2002 to fiscal year 
2003 by about 65 percent. We rank in the upper third of all 
federal agencies in SDV contracting accomplishments for fiscal 
year 2003, and we are confident that we can meet our share of 
the 3-percent government-wide goal for fiscal year 2005, with 
the additional benefits of the set-asides and sole source 
authorities that are provided in public law 108-183.
    The Interior Department has adopted a model, which has been 
very successful for us in other areas, to reach this 3-percent 
goal based on our partnerships, our advocacies, and targeted 
information for service-disabled veterans. At every forum or 
Chamber of Commerce opportunity, our small business leaders 
continue to address our commitment to increase SDV 
opportunities.
    With over 14 national Small Business Associations as our 
business partners, we are constantly looking for new ways that 
we can work to involve SDV business owners as mentors and team 
players.
    We are also looking for innovative ways to reach our SDV 
business owners through partnering with minority-serving 
institutions business schools across the nations and our 
territories.
    Today, in Denver, Colorado, we are participating with the 
GSA and the Small Business Administration in the Regional 
Procurement Fair for service-disabled veterans. We also have 
participated in other key outreach programs in Albuquerque and 
Washington as a part of the larger federal commitment to open 
opportunities.
    Internally, we have developed and disseminated DOI guidance 
within two weeks of the interim rule, for all of the 
Department. We also have a detailed staff person as a primary 
point of contact. We are working now with bureaus to identify 
contracts. And we, too, have modified our website to provide 
better and more information about getting on the Central 
Contract Register, and how you do business with the Department.
    Building on these efforts, we are very confident that 
Interior can indeed achieve its 3-percent target of business 
with SDV small businesses.
    And with that, that concludes my testimony. And I will be 
glad to try to answer questions. Thank you.
    [Ms. Hatfield's statement may be found in the appendix.]
    Chairman Akin. Thank you very much, Ms. Hatfield.
    At this time we will entertain questions from the panel. 
Mr. Udall, do you have a question?
    Mr. Udall. Sure, Mr. Chairman, thank you. I would like to 
ask Allegra McCullough about an issue here.
    The SBA moved very quickly on the regulations to implement 
public law 108-138. Could you talk about some of the reasons 
why you moved so fast on this?
    Ms. McCullough. Absolutely. Being able to give back to 
those who have sacrificed so much for this country, which is 
certainly a priority with this Administration. And so we tried 
to, as quickly as we could, pull together our top legal and 
policy people to make this a number-one priority.
    Mr. Udall. Now, in the process of moving forward, you 
waived the notice and comment requirements for the interim 
rule. Was there a reason for doing that? I mean, do you think 
it might have been a more effective rule if you had gone 
through the notice and comment requirement?
    Ms. McCullough. We did go through a comment requirement. 
But we wanted to also make certain that very little time passed 
before SDVs were able to take advantage of the benefits of the 
rule.
    Mr. Udall. Do we have any idea how many businesses fit the 
category that we are talking about here?
    Ms. McCullough. No, we do not. And to be perfectly honest, 
we must work with all of our agencies, making certain that we 
are using every possible instrument and outreach effort to 
identify our service-disabled veterans.
    Mr. Udall. Is there anybody else on the panel that has an 
idea of how many service-disabled veteran-owned businesses 
there are? I mean, wouldn't it be helpful to have that kind of 
information to target what we are trying to do here? Any 
comments?
    Mr. Denniston. Mr. Udall, the best numbers that we have on 
the number of service-disabled veteran-owned businesses come 
from some statistical samples that have been done by the 
Department of Commerce, Bureau of Census. And they range 
anywhere from about 350,000 to 500,000. That is about the best 
number that we have been able to come up with.
    Mr. Udall. Three hundred and fifty to 500 thousand. Okay. I 
think that is good for me here, Mr. Chairman. Thank you, and I 
yield back.
    Chairman Akin. Thank you, Mr. Udall.
    Do you have a question? Welcome to the panel.
    Ms. Herseth. Thank you very much, Mr. Chairman, and thank 
you for your testimony here today.
    Just maybe a little bit of a follow-up on Congressman 
Udall's question there. It seems that maybe there has been some 
trouble in identifying and reaching these businesses that meet 
the eligibility requirements for those veterans that have 
service-connected disabilities.
    So it leads me to question, under the new tool that we have 
here, the authority to sole-source or restrict certain 
contracts, your ability to use those new tools may be somewhat 
limited until we make more effort or make sure you have the 
resources, not just financial resources, but information 
network resources, to best identify the businesses that 
qualify. Right? I get the sense that there might be a consensus 
just in some nodding of the heads here.
    Ms. McCullough. If I may speak, yes and no. Yes, there has 
been difficulty identifying. And I think I speak for everyone 
that we are determined to make an all-out effort to use every 
tool necessary to identify and to outreach to every segment of 
America to make certain that we are articulating this rule, 
that we are letting service-disabled veterans know about the 
goals that the federal agencies would like to achieve, 
educating them on how to contract with the federal government.
    Ms. Herseth. I just want maybe to point out, as you go 
forward, that while we want to move forward to the 3-percent 
goal as best possible, and now have some authority that has 
been granted to help us achieve that goal, I do not want any 
businesses for veterans who have the service-connected 
disabilities to be at a disadvantage when someone is making a 
determination that they can sole-source if there is no 
reasonable expectation that bids are going to be offered. But 
yet if there are businesses out there that would be in a 
position to offer, but they are just not as familiar with this 
program because they have not been identified, we have not 
effectively reached out to them.
    I am just pointing out maybe this inherent tension a little 
bit, and to be cognizant of that moving forward, that we do not 
start putting certain businesses at a disadvantage because we 
have not done enough at the outset to identify them.
    Mr. Denniston. I think there are two issues here. Number 
one, going back to Congressman Udall's question about how many 
service-disabled veterans are there in the United States. And 
if we look at the number that are participating in federal 
contracting, it is a very small percentage. So I think that is 
issue number one, how do we get more businesses involved in the 
federal procurement process.
    I think Mr. Ramos hit the other nail on the head. The fact 
that those we have identified have been working in the small 
contract area, and what this authority will allow us to do will 
be to grow those businesses that we have identified now as part 
of the process.
    Ms. Herseth. Thank you. And the last question I will pose 
is, from your testimony I do not get the sense from any of you 
that you feel the 3-percent goal is unattainable.
    Ms. Hatfield. I think we agree that we can reach the goal. 
I would agree, though, with the rest of the panel members and 
the issues that you have raised. It is very important in terms 
of doing the outreach to the veterans so they are aware of what 
those opportunities are, and help us in terms of identifying 
who may be available to do business.
    Mr. Brown. Thank you very much. And I know that we must 
have a benchmark to work towards, and maybe we might not reach 
that 3 percent. But if we keep working together, maybe we will 
find some folks that they will be interested and we can help 
along the way.
    We are very privileged today to have joined with us the 
Ranking Member of the Small Business Committee, Ms. Velazquez. 
Any questions?
    Ms. Velazquez. I do.
    Mr. Brown. I have some questions myself, but I am going to 
submit those in writing to you later, just for the sake of 
time.
    Ms. Velazquez. Thank you, Mr. Chairman. And I am really 
happy that you are conducting this joint hearing.
    I think this provides for the Committee and Subcommittee to 
fulfill its duty of oversight. And conducting these types of 
hearings will help us fix some of the problems that we are 
having with the legislation that we passed.
    My personal opinion is that we made some mistakes, and this 
is an opportunity now to fix out the mistakes that were made.
    Ms. Allegra McCullough, I am curious about your 
interpretation of the statute in the promulgation of the 
implementing regulations, allowing agency contracting officers 
to choose whether to use the 8(a) program or the Hub Zone 
program or the new SDV program. In light of the mandatory 
language contained in both the 8(a) program and the Hub Zone, 
why has the SBA chosen to allow the permissive language, the 
so-called ``may'' language, to take a priority?
    Ms. McCullough. That is the language that was actually 
passed in the statute. We did not really have the discretion to 
change that language.
    However, we would be happy to revisit that language.
    Ms. Velazquez. Can you speak up, please?
    Ms. McCullough. You were talking about the use of the word 
``may'' rather than ``shall,'' in terms of sole-sourcing?
    Ms. Velazquez. No. I am talking about you, the agency 
allowing contracting officers giving parity, when we have the 
statutory language that says that the 8(a) program or the Hub 
Zone program, that they have priority over the SDV program.
    Ms. McCullough. Well, the language, I mean, there is parity 
between the 8(a) and the other programs. But the language in 
the statute indicates ``shall,'' which clearly indicates a 
mandate.
    In the statutes for the SDV, it indicates ``may,'' which 
indicates that it is up to the discretion of that federal 
contracting officer. This is certainly language that, if 
Congress wishes to revisit, we would be more than happy to 
revisit that issue with you.
    Ms. Velazquez. The service-disabled veteran on business 
procurement programs has discretionary language. A contracting 
officer may use the program.
    Under the SBA implementing regulation for PL 108-183, I see 
that it allows the SBA to release a requirement under the 8(a) 
program.
    Would you please describe in what circumstances the SBA 
will agree to such a release?
    Ms. McCullough. Releasing the contracting officer from 
sole-sourcing? Is that what you are asking? I am not quite sure 
that I understand your question.
    Ms. Velazquez. It would allow for releasing the requirement 
of the 8(a) program, specifically the 8(a) program.
    Ms. McCullough. If I am understanding you correctly, what 
it articulates is that there would have to be, if they cannot 
find more than one 8(a) participant, then they could sole-
source it. But that is something that they must consider.
    I hope I am answering your question. If not, I would be 
more than happy to answer it for you at a later time, when I am 
sure about--
    Ms. Velazquez. I will allow you to answer me at another 
time.
    Ms. McCullough. Okay, I will be happy to.
    Ms. Velazquez. You will be able to send a written 
submission to the Committee?
    Ms. McCullough. I would love to. Thank you.
    Ms. Velazquez. Ms. McCullough, on May 24 the SBA published 
a final rule to the Hub Zone program. In this regulation, the 
SBA proposal to provide parity for the 8(a) and the Hub Zone 
program was not finalized. Am I correct?
    Ms. McCullough. On parity with the 8(a) program, that it 
was not finalized?
    Ms. Velazquez. Yes. On May 24?
    Ms. McCullough. Yes.
    Ms. Velazquez. Okay. In fact, the SBA said it will further 
examine issues raised, and will not amend the rule at that 
time. Is that correct?
    Ms. McCullough. That is correct.
    Ms. Velazquez. But on May 5, the SBA seems to imply, with 
the regulations for the service-disabled veteran-owned business 
procurement program, that, except for existing 8(a) contracts, 
contracting officers can pick and choose whether they will use 
either the 8(a) program, the Hub Zone program, or the newest 
program.
    My question to you is, what is the priority among these 
programs, in light of the fact that 13 CFR 126.607 has not been 
modified?
    Ms. McCullough. We are making certain that we articulate to 
our federal partners that it is extremely important that they 
consider meeting the goals of all of these programs, as best as 
they can.
    Ms. Velazquez. The problem that I have is that you are not 
allowed to pick and choose, in terms of the regulation. You 
cannot pick over one or the other, unless you modify the 
regulation. Did you modify the regulation?
    You answered to me that on May 24, when I asked you, that 
the regulation was not finalized. You said that I am correct.
    Ms. McCullough. That is correct.
    Ms. Velazquez. Yes. But then on May 5, the SBA seems to 
imply, with the regulation that you issued, that for the 
service-disabled veteran-owned business procurement program, 
that except for existing 8(a) contracts, contracting officers 
can pick and choose whether they will use either the 8(a) 
program, the Hub Zone, or the newest program. But you did not 
finalize the rule, the regulation.
    Ms. McCullough. We really wanted to make certain that very 
little time passed before SDVs were able to take advantage of 
the rule.
    Ms. Velazquez. Based on the May 5, can you tell me which of 
the programs has the priority? When a contracting officer is 
going to decide how they are going to do it.
    Ms. McCullough. SBA does not have the discretion to 
actually make that rule. And it is something that we would 
certainly like to revisit with Congress on. But we do not have 
that discretion.
    Ms. Velazquez. Okay, you do not have it. So tell me, who 
created this priority? The current priority listing for 8(a) 
and Hub Zone companies, located at 13 CFR 126.607(e), 8(a) 
companies located in a Hub Zone; two, 8(a) company; third, Hub 
Zone competitive procedures; and fourth, Hub Zone sole-source 
procedures.
    Ms. McCullough. You are saying who established that?
    Ms. Velazquez. Yes. Do you have the legal counsel from SBA?
    Ms. McCullough. We will have to get back to you on that.
    Ms. Velazquez. Who issued this regulation?
    Ms. McCullough. Excuse me?
    Ms. Velazquez. Who issued? Who issued this regulation that 
established this order?
    Ms. McCullough. The original issuer?
    Ms. Velazquez. The one that I just read. Was it SBA?
    Ms. McCullough. SBA issued that rule.
    Ms. Velazquez. Ms. McCullough, in the fourth pages of your 
testimony, you say not one word regarding how the SBA is going 
to police this new procurement program. These are the 
parameters for a joint venture program in the new rule that is 
different than for any other SBA program. The ownership 
requirements for this program are different than for any other 
SBA program. The percentage of work requirements are different 
than for any other SBA program.
    And yet, you have not said one word in your testimony about 
how the SBA is going to ensure this program is not abused. Can 
you please comment on this?
    Ms. McCullough. I will be happy to. With all due respect, 
SBA has and never has had the power to police any procurement 
program offered throughout the federal government.
    We do, however, intend to, through our relationships with 
our federal partners and combined outreach and marketing 
efforts.
    Ms. Velazquez. So how are you going to make sure that the 
program is not abused?
    Ms. McCullough. We will certainly have to make certain that 
this is articulated to our federal partners, that, by all means 
necessary, the integrity of this program must be obtained.
    But again, we do not have the authority to police any of 
our programs throughout the federal agencies.
    Ms. Velazquez. With all due respect, you are wrong. You are 
totally wrong. And legal counsel is there behind you, and they 
can tell you that you are wrong.
    Thank you, Mr. Chairman.
    Chairman Akin. Okay. Thank you, Ms. Velazquez.
    Members of the panel, thank you very much for coming and 
enlighten us on these regulations. And we will now proceed to 
the second panel.
    [Recess.]
    Chairman Akin. Let me extend a warm welcome to our second 
panel. And we are pleased to have you come and testify on such 
an important issue.
    Our first two members, participating members, one will 
testify and the other will not. Is that correct, Mr. Lopez? As 
Co-Chairman of the Task Force on Veterans' Entrepreneurship, 
and Mr. Rick Weidman is the Chairman of the Task Force on 
Veterans' Entrepreneurship. So which will testify?
    Mr. Weidman. Mr. Lopez. We decided to give the kid his shot 
at it, Mr. Chairman.
    Chairman Akin. Okay. Welcome, Mr. Lopez.

      STATEMENT OF JOHN K. LOPEZ, TASK FORCE FOR VETERANS 
                        ENTREPRENEURSHIP

    Mr. Lopez. Good afternoon, gentlepersons. I believe there 
is a lady remaining.
    Thank you for your kind invitation to testify before the 
distinguished Committees regarding government support of 
service-disabled veteran-owned businesses.
    My name is John Lopez. I am Chairman of the Association for 
Service-Disabled Veterans, and I am Co-Chairman of the Task 
Force for Veterans' Entrepreneurship. I am here with my 
colleague, Rick Weidman, who is the Chairman of the Task Force, 
as well as the Director of Government Relations for the Vietnam 
Veterans of America.
    Without objection, I would ask to submit our testimony for 
the record, and summarize our observations for the Members, in 
respect for your time and indulgence. No objections.
    On behalf of the nation's over 60-million-person veteran 
community, and especially the disabled-in-military-service and 
prisoner-of-war veteran businesses, I would like to express the 
appreciation of the veterans' community for the exemplary 
accomplishments of your committees, on behalf of America's 
service-disabled and prisoner-of-war veterans.
    The Members have demonstrated the highest level of 
commitment, concern, and service to our nation's veterans. It 
is a privilege to address the Members of these two Committees.
    In the four years since the enactment of public law 106-50, 
and the year since the enactment of public law 108-183, the 
impact of the legislation has been negligible. Since March, 
2003 few agency acquisition and contracting officials have 
demonstrated an increased interest in the legislative direction 
to assist service-disabled veterans to maintain their 
rehabilitation through self-employment, as federal prime and 
subcontractors.
    The United States Small Business Administration has 
minimally increased the integration of service-disabled 
veterans into some of the special assistance effort of that 
agency. Outreach materials, standard publications, and routine 
announcements now mention support and assistance for service-
disabled-veteran enterprises. The level of effort and outreach 
in early 2003 had implied to the procurement community that 
there is no commitment by the federal government to assist 
service-disabled veterans.
    To urge government outreach, and as a stakeholder in the 
outcome, the Association for Service-Disabled Veterans, a 
member of the Task Force for Veterans' Entrepreneurship has 
financed and expanded a previous certified disabled veteran 
interactive database, containing more than 20,000 service-
disabled-veteran enterprises that is a follow-on of a 
certification process started in 1989. The intent was if they 
were unable to find service-disabled veterans, there was a 
database that had been developed since 1982, starting in 
California, which has over 20,000 vetted by the legislative 
directive of the California Legislature service-disabled 
veterans.
    The second year, the yearly release of data pertinent to 
agency small business procurements, the summary, what is called 
the Summary of Actions and Dollars Reported on SF279 and SF281 
by Agency, continues to report minimal progress to the 3-
percent legislative goal for disabled-veteran participation.
    A telephone sample by ASDV of that method of calculation of 
that report, of the method of calculation of the data in those 
reports, reveals no increased accuracy of dollars, action, or 
appropriate categorization in those reports. Inevitably, the 
erroneous information misleads the US Congress, and subverts 
the intent of public law 106-50 and public law 108-183.
    Sadly, a perceived lack of commitment has also been 
repeatedly voiced to service-disabled-veteran enterprises by 
off-the-record comments of procurement officials. Such as, 
service-disabled veteran assistance is just a goal. If the 
Congress had been serious about helping service-disabled 
veterans, they would have legislated mandatory requirements, 
not unaccountable goals.
    While the Task Force firmly believes that the Congress is 
serious about service-disabled veterans, the perception 
advanced by procurement officials contrasts sharply with the 
legislative intent of public law 106-50 and public law 108-183.
    The commitment of the private sector prime contractor is 
even more abysmal. Service-disabled-veteran enterprise requests 
to participate as subcontractors has been met with negative 
responses and disinterest.
    As a routine response to service-disabled-veteran 
enterprise requests for procurement participation, prime 
contractors initially profess ignorance, and protest that 
government procurement officials never mentioned service-
disabled-veteran enterprises. This is followed by subsequent 
protestation that prime contractors are exempted from 
participation by variously-invoked parsing of the regulatory 
language, special procurement official dispensation, or that 
they are not performing contracts that are subject to 
regulation.
    There are no clear villains in the failure to assist the 
service-disabled veterans of our nation. Rather, there is a 
need for more specific direction from the United States 
Congress, even at the risk of cries of Congressional micro-
management by the federal bureaucracy.
    It is imperative that your Committee takes initiative in 
establishing the legislative requirements that will permit our 
nation's disabled-in-service and prisoner-of-war veterans to 
participate more fully in the economic system they sacrificed 
to preserve.
    It is respectfully requested that public law 106-50 and 
public law 108-183 be amended and expanded to provide 
authorized, directed, specific, and mandatory participation by 
service-disabled veterans and prisoner-of-war veterans, in all 
federal procurement, whether through inclusion in the various 
set-aside provisions of the Small Business Act, as amended, or 
in the newly-included sections of that Act.
    Only the active application of this Committee's authority 
will ensure that entrepreneurship is an available 
rehabilitation alternative to those that sacrificed for the 
security and prosperity of our nation.
    Thank you. I would be pleased to respond to any questions, 
as would my colleague, Mr. Weidman.
    [Mr. Lopez's statement may be found in the appendix.]
    Mr. Brown. [presiding] Thank you very much, Mr. Lopez. And 
we will have questions at the very end.
    Next is Professor Steven L. Schooner, Co-Director of the 
Government Procurement Law Program, George Washington 
University Law School. Welcome.

     STATEMENT OF PROFESSOR STEVEN L. SCHOONER, GOVERNMENT 
   PROCUREMENT LAW PROGRAM, GEORGE WASHINGTON UNIVERSITY LAW 
                             SCHOOL

    Mr. Schooner. Chairman Brown, Congressman Michaud, Chairman 
Akin, Congressman Udall, and members of the Subcommittee, thank 
you. I appreciate this opportunity.
    Let me begin by joining the chorus of those who recognize 
that service-disabled veterans deserve our respect and 
attention for their lasting sacrifices. Having spent my entire 
life affiliated with the United States Army, these issues 
strike particularly close to home.
    While this program was intended to benefit a deserving 
class of businesspeople, however, I fear that the rush to 
implement the program risks inefficiency in the procurement 
system, and at worst, potential abuse.
    My primary concerns are, first, empirically it is unclear 
that the program is the most efficient tool to achieve the 
desired end.
    Second, rather than creating new business opportunities, 
the program merely escalates infighting within the small 
business community.
    Third, certain aspects of the program raise troubling 
issues of accountability and oversight.
    And fourth, the program further burdens an already-thin 
federal acquisition work force.
    For example, the initial regulatory flexibility analysis 
and SBA's analysis makes clear we do not know how many and what 
type of service-disabled veteran-owned small businesses exist. 
A survey or study, possibly a joint effort of the SBA, the VA, 
and the Commerce Department, might be immensely valuable.
    If, for example, a significant percentage of these firms 
fall into the comp demo categories, the set-aside provisions 
would be deemed ineffective. As this Committee well 
understands, the small business competitiveness demonstration 
program bars agencies from setting aside contracts for small 
businesses in certain industries where small businesses 
historically have proven themselves competitive.
    A better understanding of the SDVOSB market and its 
capabilities, the industries in which the capacity exists, the 
extent to which the capacity is utilized by the federal 
government will permit a much more targeted and effective 
outreach, and hopefully business development, program.
    Further, the program creates no new opportunities for small 
business; it merely redistributes opportunities. The program 
further subdivides the existing small business piece of the 
government's procurement pie by pitting small businesses 
against each other.
    Similarly, government-wide goals may not be the most 
effective tools if your purpose is to broadly distribute 
contract opportunities to emerging firms.
    Experience suggests that once an aggressive goal is in 
place, it favors the most successful or strongest existing 
firms. Because the goal focuses upon the percentage of dollars 
in contract awards, contracting officers have an incentive to 
award the largest possible contract to the smallest number of 
eligible firms. So the chief beneficiary tends to be robust 
small- to mid-sized firms, many of which strategically avoid 
formal growth by subcontracting or outsourcing tasks.
    In addition, the system will be very difficult to police. 
First, self-certification opens the door for abuse. That is why 
both the SDV and the Hub Zone programs require certification, 
and I think that is appropriate here.
    In addition, sole-source contracting contradicts one of the 
fundamental premises upon which our system is based: 
competition. And we are all familiar with the Competition in 
Contracting Act, and why it is in place.
    In addition, sole-source contracting presents significant 
risks to emerging veteran-owned firms. Small firms that may not 
fully understand the contractual obligations are all too eager 
to assume their appropriate risks. When those firms fail, it 
disrupts the government operations. But in addition, because 
the government increasingly relies on past performance 
evaluations, this can prove potentially fatal, a professional 
death knell, to an emerging small business in the government 
marketplace.
    Finally, further proliferation of set-asides in small 
business programs adds complexity and inefficiency in the 
procurement system, and that is problematic because throughout 
the 1990s, Congress mandated acquisition work force reductions.
    There is an insufficient number of qualified federal 
acquisition professionals left to conduct appropriate market 
research, plan acquisitions, maximize competition, comply with 
Congressionally-imposed social policies, administer contracts 
to assure quality control and compliance, resolve protests and 
disputes, and close out contracts.
    I remain disappointed by Congressional unwillingness to 
intervene on behalf of the acquisition work force, particularly 
in light of the recent experience in Iraq, where, for example, 
our Program Management Office outsourced its management of its 
contractors. The acquisition work force crisis is exacerbated 
by the Administration's emphasis on competitive sourcing, and 
it will get worse before it gets better. So asking this work 
force, without additional resources, to cater to special 
interest groups is unrealistic, and arguably fiscally 
irresponsible.
    The bottom line is in attempting to balance these competing 
concerns, providing good opportunity to veterans and small 
businesses, while obtaining supplies in an economically-
efficient manner, patience seems to be an appropriate response.
    That concludes my testimony. Thank you for the opportunity, 
and I would be pleased to answer any questions.
    Mr. Brown. Thank you very much, Mr. Schooner.
    Gentlemen, I am going to skip over you and go to Mr. 
Hudson, if that is in order. And Mr. James Hudson is the 
Marketing Director of Austad Enterprise, Inc.
    And thank you, Mr. Hudson.

     STATEMENT OF JAMES C. HUDSON, AUSTAD ENTERPRISES, INC.

    Mr. Hudson. Good afternoon, Chairman Brown, Chairman Akin, 
other distinguished members of the subcommittees, dedicated 
members of the respective staff, my colleagues both in and out 
of the government today.
    I am a service-disabled Vietnam veteran. My wife Fran, also 
a service-disabled veteran, and I work together in a 
corporation which publishes the Veterans' Business Newswire, an 
e-newsletter disseminated to more than 25,000 service-disabled 
and other veterans in small business.
    We also publish a directory for small business owners, 
called ``Purchasing Contacts in Major US Corporations.'' And we 
own a video and audio conferencing company, whose customers 
include federal agencies.
    I have worked in the field of veterans' affairs and 
disability rights since my discharge from the Army in 1970. My 
testimony today is based largely on my own experience, but also 
on the experience of our readers, and their emails to us and 
their phone calls. Also, we have published a brochure 
immediately after the passage of public law 108-183. Joseph 
Forney, myself, and my wife made that a downloadable Microsoft 
Publisher and .pdf file. And we have had more than 500 
downloads since February, when that was made available to 
service-disabled veterans in small business. And so we have 
gotten feedback from them, as well.
    And I can tell you that we have also had efforts over the 
last three years to market to federal agencies and prime 
contractors, and that is the basis of my testimony today.
    We have attended conferences in Colorado, New Mexico, 
Washington, D.C., other states, at the urging of small business 
officials. We have traveled to other states to meet with 
federal buyers. As a result of those efforts, we have had sales 
of $10,000 in the last, with federal agencies.
    We have corresponded and spoken with literally 1500 
veterans, and most of them non-service-connected, but I would 
say approximately three or four hundred service-disabled 
veterans in the last several years. We personally know just a 
few who describe themselves as being successful in the federal 
arena.
    I would urge the Committees to study the issue of how many 
new service-disabled veterans are contracting with federal 
agencies. The Federal Procurement Data Center can pull that 
information from their data.
    For example, the Veterans' Administration in fiscal year 
2002 was contracting with, on average, three to four new 
service-disabled veterans per month. Those are companies that 
did not have previous contracts with that agency, or any other 
federal agency, prior to those months. That gives you a better 
picture of how public law 106-50 has been implemented.
    This fiscal year, fiscal year 2003, service-disabled 
veterans should have earned a gross revenue of $7.5 billion. 
Instead, they brought in $549 million, two-tenths of 1 percent 
of the procurement budget, instead of the 3-percent goal that 
was set. And that total is actually $5 million less than the 
$554 million that was targeted, or that was actually earned two 
years earlier, in fiscal year 2001.
    This is especially hurtful to our nation's service-disabled 
veterans in small business, to know that more than half of all 
federal agencies, more than half of the 60 federal agencies 
spent zero percent of their budgets with service-disabled 
veterans. That includes the Office of the White House, the 
Executive Office of the President, the Small Business 
Administration, the Department of Labor; agencies that you 
would expect to lead, not bring up the rear in procurement 
spending. SBA, for three years straight, has spent zero dollars 
with service-disabled veterans.
    It was, as you recall, Angela Styles, the top federal 
procurement official, that came to this Committee last year and 
said that the federal government was doing an abysmal job in 
procurement spending for service-disabled and other veterans. 
And that helped to spur the Committee to take the action with 
respect to public law 108-183. And we appreciate that effort 
very much. This gives new hope to service-disabled veterans.
    But I have to say that we would be mistaken if we thought 
that thousands of service-disabled veterans have not dropped 
out of the system. In talking to them, we have learned that 
many veterans just are not going to come back one more time.
    Over the last 20, 30 years since the Vietnam War ended, the 
treatment that they received by the SBA and other resource 
partners of the government has been poor, and they are just not 
going to come back and try one more time. And these zeroes that 
have been piling up in the federal agencies over the last five 
years, you cannot knock on those doors over and over again and 
not, in some cases, drop out. So we have lost many service-
disabled veterans from the system. That is just a reality.
    We were encouraged with the brochure download, so we know 
some are still in the fight. And the outreach efforts of the 
government have brought in new service-disabled veterans. So we 
have to respond to their needs, and I know the Committees are 
willing to do that and are making their effort.
    The focus of your Committee today is to talk about outreach 
efforts, and whether they are making a difference since the 
passage of this new law. I wish I could say it has been more 
positive. Joseph and I have been out knocking on doors, and you 
will learn from Joseph his response. But I can tell you that my 
own has not been positive.
    I will tell you that--is the time almost expired? I am 
sorry.
    Mr. Brown. You are 1:18 over already, so--and I am just 
waiting on Joseph, so go ahead.
    Mr. Hudson. I am waiting on him, too. Let me just wrap up 
by saying that though the outreach efforts have not been 
positive, I believe that one of the actions that the Committees 
may take that would be beneficial would be to accept the fact 
that we are not going to see much positive action by the 
federal agencies until they have a program in place that will 
give more of a case-managed approach to service-disabled 
veterans. Especially veterans with more severe disabilities. 
They need more follow-along, they need more intensive service. 
And the idea of handing them a brochure referring them to an 
SBA or a small business development center is not going to be 
sufficient. They need follow-along perhaps for years.
    The 8(a) program for some businesses has been successful, 
but they do not need to be referred to the 8(a) program, God 
forbid. But they do need that kind of intensive, sustained 
effort.
    [Mr. Hudson's statement may be found in the appendix.]
    Mr. Brown. Thank you, Mr. Hudson. And now we have got the 
wrap-up member of the panel, Mr. Joseph Forney, President of 
VetSource, Inc. Welcome.

         STATEMENT OF JOSEPH K. FORNEY, VETSOURCE, INC.

    Mr. Forney. Mr. Chairman, Members of the Committee who have 
stayed, I appreciate the opportunity to testify in front of 
you. I was hoping that Chairman Akin would stay. I am from his 
home state of Missouri. And what we say in Missouri, show me.
    Mr. Brown. Well, you know, he cannot be in two places at 
one time. And I guess he is on the Armed Services Committee, 
and the mark-up over there has taken priority. But all of this 
will be recorded, and he will have access to those minutes.
    Mr. Forney. I just wanted to hear him say ``show me.'' 
Because that is what I am telling you is I ain't seen much yet. 
And my eyes are wide open, sir. We have been out in the field, 
as Jim mentioned, trying to sell our goods and services. And to 
hear over and over again that this is just a goal.
    I have a signed letter from Department of Agriculture where 
they stated, from their Office of Procurement Policy, that it 
is discretionary, and not mandatory. And so therefore, they are 
not going to participate.
    I was a little bit leery sitting behind the young lady from 
SBA after the way that Ms. Velazquez took to her. But as Jim 
mentioned, their participation is zero.
    Department of Defense was up here. The Army is at .02, two 
one-hundredths of 1 percent. At this rate--I am sorry, and I do 
not want to confuse you with facts and figures and fancy 
ciphering--.04. At this rate it would take them 300 years to 
get to the 3-percent goal.
    Now, I do not know about me, but I do not think Mr. Lopez 
is going to make it.
    The reasons that they claim, there are not enough of us, we 
are not capable, is ludicrous. I sell air conditioning filters 
along with the food items that I sell to states, prisons, 
school districts back in California. I sell them to utility 
companies; namely, Semper Utility, which is San Diego Gas and 
Electric and Southern California Gas. I have proven myself in 
the public sector.
    Just for a little drill, I checked the GSA schedule. Their 
best price for the standard air conditioning filter was $1.73. 
I would have trouble sleeping at night if I sold them to you 
for a dollar. That is just one example of how we can provide 
goods and services.
    We have all been trained. We have the experience, the time, 
the knowledge within the private sector. Yet when I tried to 
sell these same air conditioning filters to the VA, I could not 
even get a call back.
    I have been to two different VISNs, VISN 22, my local one, 
VISN 19 up in Denver. And I have been there numerous times. All 
I wanted them to do was find out how they buy air conditioning 
filters. I could not even get a response. I had to go to the VA 
mothership over here and get the Head of Acquisitions, Mr. 
Derr, and he is going to check into it. But not everyone is 
going to have the capability to come to Washington to go to VA 
headquarters to find out how they buy air conditioning filters. 
Because what if it is something more complicated, like pencils?
    I am glad to see the Ranking Member come back. I love that, 
with the SBA, because while you were gone, we pointed out that 
their participation was zero. So at this rate, it would take 
never?
    I will submit my testimony. If I can answer any questions, 
I would be glad to.
    [Mr. Forney's statement may be found in the appendix.]
    Mr. Brown. Thank you very much, Mr. Forney.
    This has been a real eye-opener. We pass regulations and 
laws; we do not know how they are being perceived or 
implemented through the process. This was real eye-opening for 
me.
    I have some questions; I will submit them for a written 
response. But do we have any questions from the panel? Mr. 
Udall?
    Mr. Udall. Thank you, Mr. Chairman.
    Mr. Lopez, in your testimony you talk about the integration 
of service-disabled veteran-owned businesses and the SBA's 
efforts. And also about the SBA's inclusion of SDVBs in the 
agencies' publications and outreach materials. And yet you also 
express a concern about ``the lack of effort and outreach in 
2003.''
    What kind of outreach have you been expecting to see?
    Mr. Lopez. I make that distinction because they have a 
policy of using all of their old materials first in respect to 
government efficiency.
    If you read their old materials, including some that were 
recently printed, you will find out they do not even mention 
service-disabled veterans. It is only their new literature that 
is just coming out now, after the effort of these Committees, 
that they begin to talk about service-disabled veterans.
    What I expect, I expect activity on the part of the staff. 
I expect seminars in training their personnel, so the personnel 
knows what a veteran is. I expect them to be very cognizant of 
the fact that you have a peculiar type of population here. You 
do not have the normal population. They have limited energy. 
They have a great deal of cerebral capacity. But you have to be 
able to get to them, not wait for them to come to Washington, 
D.C., or any of the other regional offices.
    Mr. Udall. Go ahead, please.
    Mr. Weidman. If I may, please, Mr. Udall. There was a 
question today about how many veteran entrepreneurs there are.
    In the first session of the 105th Congress, the Congress 
mandated that there be a study done of how many people are 
there. That was 1997.
    That report was finished--it was delayed because of OMB 
delays, and because of SBA--but it was finally completed and 
accepted in 1999, just before Veterans' Day. No, excuse me, 
1998.
    It has still not been officially delivered to the Congress.
    I know that Chairman Smith and Ranking Member Lane Evans 
wrote to Mr. Pereto over a year ago, about a year and a half 
ago. It still has not been received.
    May I suggest, if at all possible, with the Chairman, that 
that be included somehow in this record? Or at least some kind 
of reference to a website when it is posted.
    But I think the key thing is this. What you seem to be 
suggesting, sir, is that the SBA is heavily weighted towards 
doing this outreach for veterans. No other agency, as long as 
SBA has zero, zero contracts with service-disabled veterans, is 
likely to pay them a whit of attention.
    Similarly, how many service-disabled veteran business 
owners do you think are going to trust an agency that, even by 
accident, ought to have a few contracts with service-disabled 
veterans, but which has none, sir?
    Mr. Udall. Thank you. And thank you, Mr. Lopez, for your 
expectations. At least for me, I believe we should be pushing 
on this front.
    Professor Schooner, in your testimony you speak of the need 
for a study or survey to gain a better understanding of the 
SDVB market and its capabilities. Can you talk a little bit 
more about what impact proceeding without knowledge of the 
market can have?
    Mr. Schooner. Well, if you do not mind, let me--
    Mr. Udall. And go ahead, if you want to elaborate a little 
bit.
    Mr. Schooner. Let me speak to the importance of a study. At 
a minimum, whether you begin with the process that was already 
done and get that completed and updated, until we know how many 
potential businesspeople there are, and much more importantly, 
in what industries they pursue government business or want 
government business, we are shooting in the dark. It is the 
most inefficient way in the world to proceed by shotgunning out 
in the world.
    Let us find out where the strengths are, and target those 
businesses directly. It is exactly what you have heard the 
others say. Information here is power. And without information, 
what we are doing is we are putting a burden on everyone that 
is not going to get you a return on investment.
    The best precedential example I can give you on this was 
after Aderand, when we went through the promulgation of the 
rules for the revised SDV program, the Department of Commerce, 
in conjunction with the Justice Department, and later the 
Council on Economic Advisors, spent years working with the 
SMOBY and the SWOBY data, trying to get this data. It is very, 
very difficult to find out which industries are important. And 
we may or may not come back to comp demo. But it is 
tremendously important to know where you are going, and where 
you are going to get return on investment.
    Mr. Udall. Thank you. Thank you. And Mr. Forney, given your 
recognition as a veterans' advocate, have you been approached 
by a federal agency to assist agencies in identifying qualified 
veteran-owned companies? And I can submit that one for the 
record.
    Mr. Brown. Mr. Udall, if you would. I would just like to 
make an announcement, as we just got an email that we might 
have votes within the next 10 minutes.
    And so, just to give the other members of the panel a 
chance to--
    Mr. Udall. Okay. I will submit that one for the record, and 
let the other members of the panel question.
    Mr. Brown. Thank you very much.
    Ms. Herseth. If Mr. Udall is going to submit that in 
written form, I would like that same question, if you would 
provide an answer there. Because my concern--not a concern, but 
a hope--is that you, as a veterans' advocate, other 
organizations that serve as advocates for veterans, are 
involved. You are being asked by federal agencies. Because it 
is sort of information both ways that we are lacking. It is 
information of the qualified businesses having the information 
of what the program is, but it is also a lack of information 
for the agencies of the implementation of the program.

    Mr. Forney. Exactly. And in Los Angeles we have the LA Area 
Service-Disabled Veteran Business Network that we started, just 
as an ad hoc group. We try to outreach through public service 
announcements for veterans who are either in business or 
starting a business.
    I know Mr. Weidman and myself have gone over to Walter 
Reid. And one of the most important questions these young men 
and women returning home wounded and forever changed is, will I 
still be able to go to school? And what if school is not the 
best approach for their rehabilitation? What if it is 
entrepreneurship, because they are unemployable? This is 
something that we try to outreach as much as possible.
    To get to both questions, there is a state program, as Mr. 
Lopez mentioned, in California. There is over 1,000 identified 
state-certified service-disabled veteran-owned firms. And the 
state estimates that there is over 10,000.
    But with such hollow promises, why should we bring them 
out? A lot of people are reluctant to participate.
    Ms. Herseth. The only other thing I want to add, just so 
that it is a comment reflect in the record, based on the study, 
Mr. Weidman, that you said was authorized, we think was 
completed but has not yet been delivered. And then--go ahead.
    Mr. Weidman. We have a copy, and I have it on cd/rom, 
Madame. And I will have it to your office before tomorrow 
morning.
    Ms. Herseth. Okay. The only comment I want to add, though, 
is that I do think it needs to be updated. Because in South 
Dakota we have a significant number of National Guard 
reservists that are currently serving, that are going to be 
coming back, that are concerned, because they are small 
business owners, about the effect that that has had on their 
small business during a deployment of 12 to 18 months. And I 
think that we should see that, but also recognize the need for 
an update of that study.
    Mr. Weidman. The Task Force on Veterans' Entrepreneurship 
is engaged in preparing now a report to the nation that will be 
delivered this coming October.
    The principal investigator is the same gentleman, Dr. Paul 
R. Comacho from the William Joyner Center for War, the study of 
war and its social consequences, at the University of 
Massachusetts at Boston. The steering committee is chaired by 
Major General Chuck Henry, and co-chaired by Wayne Gatewood, 
who is a successful business entrepreneur, and a small 
businessperson veterans' advocate of the year last year for the 
District of Columbia.
    We will be glad to brief you, and we would welcome any 
academic input from George Washington Law or anyone else, as we 
prepare this report and essentially update that material, 
ma'am.
    Mr. Brown. That is the vote, but we still have got a few 
minutes.
    Ms. Velazquez, did you have any questions?
    Ms. Velazquez. Thank you, Mr. Chairman. First I would like 
for the record to reflect the fact that in the House-passed 
version of the bill that established this program, Democrats 
from the Small Business Committee insisted on such a study.
    But I would like to ask Professor Schooner, you questioned 
the credibility of this 3-percent goal. What do you think a 
reasonable goal should be?
    Mr. Schooner. In any situation like this, the most 
reasonable goal is what the empirical evidence suggests is 
feasible. But we also have precedent for better ways of 
approaching this.
    For example, the Hub Zone program was a classic example, 
where you ended up with a very similar goal, but at least you 
staggered the goal.
    All I am saying is, if you are already in a situation where 
you know you need the information, do not set the goal until 
you have the information. If the information suggests that you 
could have a 5- or 10-percent goal, so be it. But do not set 
the goal arbitrarily. I think that is a pretty simple point.
    Ms. Velazquez. Professor, you appeared to indicate that 
there are structural problems with the underlying statute. The 
House-passed version of the bill that established this program 
initially had a number of provisions pushed by the Small 
Business Committee Democrats. These provisions were intended to 
process the program, and to ensure the safety and soundness of 
the program.
    The House-passed version included, first, a certification 
program administered by the SBA. The final bill did not include 
that. A study to identify how many service-disabled veterans 
own businesses; and of those, what is the primary industry of 
the businesses. The final underlying statute does not contain 
this.
    And third, an order of precedence, so that contracting 
officers can identify clearly what the priorities of Congress 
are. The final statute does not have this.
    All three of these provisions were kept out of the final 
product. My question to you is, what is your view of the 
underlying statute missing these?
    Mr. Schooner. Well, I think we are all in agreement that 
the study would be a good thing, and we have already spoken 
about that.
    I cannot argue strongly enough for a certification in a 
program like this. We saw in the SDV program, we saw in the Hub 
Zone program, how important it is to inject credibility into 
the system. And I am assuming that the gentleman sitting at the 
table with me fully recognizes the worst thing that can happen 
in a program like this is if individuals fraudulently represent 
themselves and get these contracts. So they should have no 
concern whatsoever with an open and credible certification 
system.
    As for the order of precedence, I think it is pretty clear, 
based on the questions you asked earlier, that we have now 
created in the regulations a conflict between the 8(a) program, 
the Hub Zone program, and the others. And this type of 
confusion serves no one. It will not help veterans, but it 
impacts the entire procurement process. And I think an order of 
precedence would be a step in the right direction.
    Ms. Velazquez. Thank you, Professor. Mr. Lopez, in your 
comments on the interim rule implementing PL 108-183, you 
suggest that contracting officers should be allowed to use 
service-disabled veteran-owned businesses for requirements that 
are currently being performed by 8(a) companies. Why do you 
believe that contracts that are currently performed should be 
taken away from 8(a)?
    Mr. Lopez. Do I say that, or is it in our task force 
report? I did not make any such comment.
    Ms. Velazquez. In the task force, yes.
    Mr. Lopez. Ah, okay. Then you have to direct that to the 
task force in writing. I did not make that comment.
    Ms. Velazquez. But do you agree with that assessment?
    Mr. Lopez. I beg your pardon?
    Ms. Velazquez. Do you agree with that?
    Mr. Lopez. No. I do not even address that. I do not think 
that is an issue.
    But if I may, with permission, Congresswoman, I would like 
to address something that Mr. Schooner has said, and I take a 
great deal of objection to.
    And that is that academic inertia is not an option. This is 
a unique population. The intent of Congress is to assist 
service-disabled veterans, not lighten the workload of 
government officials, nor create information for government 
archives.
    We have already cheated the world's greatest population, 
the World War II veterans. They are not participants in this 
program because they were never given assistance. We will not 
go through that again for our Vietnam veterans, our Bosnia 
veterans, our Gulf veterans, or our Iraq veterans.
    Ms. Velazquez. I do not think that that is what the 
professor--
    Mr. Lopez. That is the intent and direction of these 
recommendations. And that is to further delay. And we will not 
have further delay.
    Ms. Velazquez. I do not know what you are talking about, 
but let me tell you this.
    We will do everything possible to help disabled veterans.
    Mr. Lopez. Madame--
    Ms. Velazquez. Excuse me, sir, I am talking here. We will 
do everything that we can.
    But the pie is too small. We cannot rob Peter to pay Paul. 
And what we need to do is to expand the program and the 
resources so that we could allow disabled veterans to 
participate, but it cannot be at the expense of the 8(a) 
program.
    Mr. Lopez. May I respond to that?
    Ms. Velazquez. No, you do not have to respond. I am not 
asking you a question, I am making a statement.
    Thank you very much.
    Mr. Lopez. May I make a statement? Mr. Chairman, may I make 
a statement?
    Mr. Brown. You have got 30 seconds.
    Mr. Lopez. I agree with you. I agree with you. But first of 
all, your first premise is wrong; there is no size to the pie. 
That is an imaginary creation of dominant corporations 
restricting the size of the contracts available to those 
disadvantaged populations. There is no size to the pie.
    Let me add, if I may, Mr. Chairman.
    Mr. Brown. Okay.
    Mr. Lopez. Our comrades are dying at the rate of 1100 a 
day. We do not have time for these machinations, academic 
machinations. The world is passing us by. We have a closing 
window of opportunity, not an opening window of opportunity. We 
must move quickly, or we will be passed.
    Mr. Brown. Let me see. I do not think there is any 
misunderstanding in this panel that we want to be absolutely 
sure that we address the problem that will allow more input, 
more involvement in the procurement process.
    We do not want to get tied up with the mire of all the red 
tape. We want to try to solve that. That is the purpose of this 
hearing.
    And I appreciate you all coming, but we must go vote. Thank 
you very much.
    [Whereupon, at 3:52 p.m., the Subcommittee meeting was 
adjourned.]

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