[Joint House and Senate Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



                                                   S. Hrg. 102-000 deg.
 
     HOW ARE OUR VETERAN-OWNED SMALL BUSINESS OWNERS BEING SERVED?
                                   

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


                             JOINT HEARING

                               before the

 SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT & GOVERNMENT PROGRAMS and the 
                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                                 of the

   COMMITTEE ON SMALL BUSINESS and the COMMITTEE ON VETERANS' AFFAIRS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                      WASHINGTON, DC, MAY 24, 2005

                               __________

                           Serial No. 109-17
Serial No. 109-4, Committee on Veterans' Affairs of the Subcommittee on 
                          Economic Opportunity

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house



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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
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          RAUL GRIJALVA, Arizona
RIC KELLER, Florida                  MICHAEL MICHAUD, Maine
TED POE, Texas                       LINDA SANCHEZ, California
MICHAEL SODREL, Indiana              JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska           MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania    GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Deputy Chief of Staff/Policy Director

                  Michael Day, Minority Staff Director

     SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT AND GOVERNMENT PROGRAMS

MARILYN MUSGRAVE, Colorado Chairman  DANIEL LIPINSKI, Illinois
ROSCOE BARTLETT, Maryland            TOM UDALL, New Mexico
BILL SHUSTER, Pennsylvania           DANNY DAVIS, Illinois
MICHAEL FITZPATRICK, Pennsylvania    RAUL GRIJALVA, Arizona
LYNN WESTMORELAND, Georgia           MELISSA BEAN, Illinois
THADDEUS McCOTTER, Michigan          GWEN MOORE, Wisconsin
JEB BRADLEY, New Hampshire

                     Joe Hartz, Professional Staff

                                  (ii)


















                     COMMITTEE ON VETERANS' AFFAIRS

                     STEVE BUYER, Indiana, Chairman

MICHAEL BILIRAKIS, Florida           LANE EVANS, Illinois
TERRY EVERETT, Alabama               BOB FILNER, California
CLIFF STEARNS, Florida               LUIS V. GUTIERREZ, Illinois
DAN BURTON, Indiana                  CORRINE BROWN, Florida
JERRY MORAN, Kansas                  VIC SNYDER, Arkansas
RICHARD H. BAKER, Louisiana          MICHAEL H. MICHAUD, Maine
HENRY E. BROWN, Jr., South Carolina  STEPHANIE HERSETH, South Dakota
JEFF MILLER, Florida                 TED STRICKLAND, Ohio
JOHN BOOZMAN, Arkansas               DARLENE HOOLEY, Oregon
JEB BRADLEY, New Hampshire           SILVESTRE REYES, Texas
GINNY BROWN-WAITE, Florida           SHELLY BERKLEY, Nevada
MICHAEL R. TURNER, Ohio              TOM UDALL, New Mexico

                     Jim Lariveire, Staff Director

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

JOHN BOOZMAN, Arkansas Chairman      STEPHANIE HERSETH, South Dakota
RICHARD H. BAKER, Louisiana          DARLENE HOOLEY, Oregon
GINNY BROWN-WAITE, Florida, Vice     LANE EVANS, llinois
Chairwoman

              Michael Brinck, Subcommittee Staff Director

                                 (iii)




















                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Blackwell, Mr. Walter G., President and CEO, National Veterans 
  Business Development Corporation...............................     4
Salus, Mr. Arthur, President, Duluth Travel, Inc.................     6
Lopez, Mr. John K., Chairman, Association for Service Disabled 
  Veterans.......................................................     8
Ramos, Mr. Frank M., Director, OSDBU, Department of Defense......     9
Denniston, Mr. Scott F., Director, OSDBU, Department of Veterans 
  Affairs........................................................    10
Murphy, Mr. Paul, President, Eagle Eye Publishers................    12
Weidman, Mr. Rick, Director, Government Relations, Vietnam 
  Veterans of America............................................    14

                                Appendix

Opening statements:
    Musgrave, Hon. Marilyn.......................................    29
    Boozman, Hon. John...........................................    31
    Brown-Waite, Hon. Ginny......................................    32
    Herseth, Hon. Stephanie......................................    34
Prepared statements:
    Blackwell, Mr. Walter G., President and CEO, National 
      Veterans Business Development Corporation..................    35
    Salus, Mr. Arthur, President, Duluth Travel, Inc.............    90
    Lopez, Mr. John K., Chairman, Association for Service 
      Disabled Veterans..........................................    97
    Ramos, Mr. Frank M., Director, OSDBU, Department of Defense..   102
    Denniston, Mr. Scott F., Director, OSDBU, Department of 
      Veterans Affairs...........................................   112

                                  (iv)








     HOW ARE OUR VETERAN-OWNED SMALL BUSINESS OWNERS BEING SERVED?

                              ----------                              


                         TUESDAY, MAY 24, 2005

                   House of Representatives
        Subcommittee on Workforce, Empowerment and 
  Government Programs and Subcommittee on Economic 
                                        Opportunity
    Committee on Small Business and Committee on Veterans' 
                                                    Affairs
                                                     Washington, DC
    The Subcommittees met, pursuant to call, at 10:03 a.m. in 
Room 311, Cannon House Office Building, Hon. Marilyn N. 
Musgrave, [chairwoman of the Subcommittee] presiding.
    Present: Representatives Musgrave, Boozman, Brown-Waite, 
Hooley, Herseth, Lipinski and Udall. 

    Chairwoman Musgrave. I would like to call this meeting to 
order. Good morning and welcome to this joint hearing of the 
Committee on Small Business and Committee on Veterans' Affairs. 
A special welcome to those who have come long distances to 
participate and to attend this hearing.
    Almost six years ago the President signed into law the 
Veterans Entrepreneurship and Small Business Development Act. 
This act created the National Veterans Business Development 
Corporation, familiarly known as the Veterans Corporation, to 
assist veterans, including service disabled veterans, with the 
formation and expansion of small business concerns by working 
with and organizing public and private resources.
    The Veterans Corporation is presently providing services to 
veterans that include entrepreneurial training, community-based 
initiatives, credit cards, insurance, and veterans' outreach.
    September 30, 2005, marks the end of the federal funding, 
and after that date the corporation must become self-
sustaining. At this hearing we hope to learn of the steps that 
the corporation is taking to ensure that it will continue to 
provide services to veterans when funding ends, and answer the 
question ``Can the Veterans Corporation exist without federal 
funding?''
    Four years later the Veterans Benefit Act of 2003 
established a procurement program for small business concerns 
owned and controlled by service disabled veterans. This 
procurement program permits federal agencies to sole-source 
contracts and restrict competition to service disabled 
veterans.
    One of the reasons that the program was established was 
because buyers for federal agencies expressed the view that 
they needed a set aside program to meet the three percent 
statutory contracting goal for service disabled veterans 
contained in the Small Business Act. To date, no major 
department or agency of the federal government has met the 
goal, and most departments and agencies are woefully short of 
meeting the goal.
    I ask you why that has occurred. I hope this hearing will 
energize federal agencies to meet their statutory obligation.
    A major purpose of this hearing is remembering our veterans 
and the sacrifices that they have made for this nation. 
Memorial Day is the day of remembrance. I can assure you that 
we in Congress will not forget you.
    Again, welcome to this hearing. I yield to my colleague, 
Chairman John Boozman for his opening statement. Did not mean 
to rush you, sir; glad you are here. Thank you.
    [Chairman Musgrave's statement may be found in the 
appendix.]

    Mr. Boozman. Thank you, Madam Chairman, and thank you for 
inviting us to participate in this joint hearing.
    Providing opportunities for small businesses owned by 
veterans is a very important topic. We all know that small 
business is the engine that drives the economy, and we want to 
make sure that small businesses owned by America's veterans are 
not shut out of any market sector by unfair competition from 
special interest groups.
    The special assistance we can give the men and women who 
have worn the uniform has been earned as opposed to those given 
an advantage by acts of birth. There is no group in the nation 
that should have a place in line for any opportunity to succeed 
ahead of our veterans. I dare anyone who believes otherwise to 
go on the streets and alleys of Iraq with the troops, look them 
in the eye, and tell them they should take a back seat to 
someone who has never put themselves at risk for the nation.
    Madam Chairman, at a recent roundtable on veterans 
entrepreneurship, which Chairman Bradley was gracious enough to 
co-sponsor with us, I noted that veteran business owners should 
not fall into the trap of depending on federal set asides for 
their success.
    While I fully support a mandate to federal agencies to set 
aside a small portion of their contracting opportunities for 
the veteran-owned businesses, the private sector offers a 
broader and often less complex avenue to success, and I still 
believe that.
    Madam Chairman, thanks again for offering to bring us 
together today. I am eager to hear from our witnesses.
    [Chairman Boozman's statement may be found in the 
appendix.]

    Chairwoman Musgrave. Thank you, Mr. Boozman.
    At this time I would like to recognize the ranking member, 
Mr. Lipinski, for an opening statement.

    Mr. Lipinski. Thank you, Madam Chairman, and Mr. Chairman. 
Thank you for holding this hearing today on veterans and 
entrepreneurship.
    It is critical that we examine the unique issues that 
veterans face today in starting and running their own 
businesses. Veterans of all types and classification, whether 
having served actively in the U.S. Army, Coast Guard, Navy, or 
Air Force, are deserving of our continued support. They have 
sacrificed for our country, and have defended our freedom.
    It is important for us to show our appreciation for our 
veterans for the years they selflessly gave to serve their 
country, and for the hardships that they endured. Clearly, 
given the sacrifices these men and women have made and the 
service they have provided to our country, it only makes sense 
to provide our nation's veterans with the tools to get their 
businesses off the ground.
    We are now beginning to welcome home a new era of veterans, 
the thousands of forces that have fought and continue to 
valiantly fight in Afghanistan and Iraq. These men and women 
are seeking employment opportunities upon their return to the 
States, and are increasingly turning towards self-employment in 
small business ownership.
    Their years of service in the military have equipped many 
veterans with a host of valuable skills in areas such as 
electrical wiring, computer programming, mechanics, and other 
areas. Many also hold security clearances. They have the 
knowledge and skills to provide useful services, but may need 
assistance in launching and developing their businesses. We 
must strive to provide veterans with the resources they need to 
succeed, including access to capital, business development, 
technical assistance, procurement opportunities and affordable 
health care.
    Initiatives such as these have been designed specifically 
to assist veteran--owned businesses in achieving stability on 
the road to success.
    Unfortunately, many of the essential programs that provide 
assistance to our entrepreneurs, including veterans, are facing 
severe budget deficiencies. These programs have not been given 
sufficient support in the federal budget. Ensuring that these 
programs are adequately funded and utilized to their fullest 
potential has been and must remain one of our top priorities.
    As our economy continues to lag in job creation, it becomes 
even more important to provide substantial assistance to 
veterans in all sectors of the small business community. After 
all, it is the small businesses that are capable of pulling us 
out of this period of economic uncertainty and getting us back 
on track by creating more jobs.
    Veterans are such an important component of the small 
business sector. While often overlooked, veterans are willing 
to do their part in contributing to our national economy, and 
we must continue to do our part as well. This includes ensuring 
that our veterans' outreach goals are met by economic 
development programs, providing veterans with necessary capital 
to get their firms off the ground, and removing the regulatory 
obstacles veterans face in starting a business--all factors 
demonstrating to this community that we truly care.
    I look forward to the opportunity to hear from a variety of 
organizations and groups representing veteran-owned businesses. 
Your concerns are important to us.
    As we review the challenges that you bring before us, our 
ultimate goal should be to create a plan that will facilitate 
the success of our nation's veteran entrepreneurs. Our veterans 
deserve no less than this.
    Thank you.

    Chairwoman Musgrave. Thank you, Mr. Lipinski.
    Welcome to our witnesses. We are happy that you are coming 
today to share with us. I would like to tell you that there is 
a light there on the table that helps you deal with the five-
minute rule, and if you would please stay within the time 
constraints, it will help us with our schedule.
    The first witness that I would like to introduce is Walter 
Blackwell. He is the National Veterans Business Development 
Corporation president. Welcome, Mr. Blackwell.

 STATEMENT OF WALTER G. BLACKWELL, NATIONAL VETERANS BUSINESS 
                    DEVELOPMENT CORPORATION


    Mr. Blackwell. Madam Chairwoman, Mr. Chairman, Ranking 
Members and Members of the Subcommittee, thank you for holding 
this hearing, and for the opportunity to discuss veteran 
entrepreneurship, economic development by and for veterans.
    I would like to submit my complete written statement for 
the record.
    In your invitation to testify you asked me to answer two 
specific questions. Is the Veterans Corporation providing those 
entrepreneurial services envisioned in the act and needed by 
veterans? And will the Veterans Corporation survive without 
federal funding?
    The short answers to these questions are yes and no. The 
facts are TVC is really beginning to provide the level of 
entrepreneurial services envisioned in the original 
legislation. On the other hand, our very existence is 
threatened without some continuing support from the federal 
government.
    We believe that the veterans' needs in 2005 are far 
different from those imagined in 1999. World events and their 
impact on veterans now demand from all of us the creation of a 
new veteran community. To answer this call and be a catalyst 
for growth, TVC expanded our definition of veteran to include 
those soldiers, sailors, airmen and marines who are serving on 
active duty as well as national guard and reserve.
    The TVC's expanded definition of veterans has not changed 
our mandate outlined in P.L. 106-50. In fact, TVC is working 
harder to expand access to entrepreneurial education and 
training, entrepreneurial mentoring and counseling, access to 
capital, and other business services. We accomplish this 
through two major program initiatives: the National Veteran 
Entrepreneurial Education Initiative and the National Veteran 
Community-Based Organization Initiative.
    The TVC regional hubs show in yellow stars and our 
community-based organizational centers shown in green circles 
are the result of TVC's new business model where a grant-based 
system is used that piggybacks on existing educational and 
communication organizational infrastructure.
    We deliver these program initiatives in two way. First, 
through existing facilities that gives TVC an economic economy 
of scale, and independent 501[c][3] organizations where we have 
partner relationships.
    The result of this new model are striking. While 
enrollments in new course starts are cyclical within quarterly 
intervals, this data demonstrates 129 percent increase in the 
enrollments for traditional courses above the FY-2005 goal.
    To date, we are reaching almost three times the number of 
veterans in the first months of this new educational plan 
compared to FY-2004's annual performance.
    Building a veteran community means doing some things 
differently. I have been working with our board, staff, and 
providers to initiate the restructuring of our web presence 
into a twenty-first century format demanded of today's 
successful entrepreneurs.
    A current learning project involves active-duty military 
taking courses from Iraq, being run by our Boston hub. The 
first two classes held just last week were an enormous success. 
In fact, we had an overflowing of 42 students.
    The Veterans Corporation is truly becoming a vehicle that 
literally leap frogs over the barriers presented to veterans 
upon their return home to the U.S.
    Added to this is the creation of a new learning pilot 
beginning in June. TVC will have the ability to reach 
significant numbers of underserved veterans in VA hospitals, 
returning guard and reserve units, as well as large rural and 
minority veteran populations. Courses will range from marketing 
to applying for a business loan.
    Sites across the U.S. span Walter Reed here at home, to San 
Diego on the west coast.
    The current challenges before TVC are budget shortfall for 
2005, and future funding for FY-2006 and beyond. The reality 
TVC faces today without an immediate infusion of cash from 
Congress, high net-worth individuals, corporations and 
foundation, TVC will be forced to close its doors October 1, 
2005.
    Our future funding builds on a platform of public and 
private partnership that enhance and expand needed programs and 
services. To date, TVC has submitted foundation grants totaling 
$30 million, with another $20 million grant applications in 
process. We have initiated an outreach to high net-worth 
individuals and to public and private corporations with the 
interest of assisting veterans.
    And perhaps most importantly, TVC is in the process of 
reducing its back office costs and consolidating and 
reorganizing its staff. We are taking these steps because we 
believe when all is said and done TVC's funding is $2 million a 
quarter, or at least $8 million a year as we expand our 
programs.
    In conclusion, I want to thank the Chairwoman, the 
Chairman, Ranking Members, and both subcommittees for your past 
interest and future support on these issues. We know we cannot 
do this alone. You have our promise to work in partnership with 
each of us as we work with you to deliver the critical 
knowledge, tools, resources our veterans, their families, your 
constituents so richly deserve.
    This community, the veteran community is poised to deliver 
on the investment Congress has made in them to be a strong 
economic driver in our nation's financial future.
    Thank you, and I look forward to your questions.
    [Mr. Blackwell's statement may be found in the appendix.]

    Chairwoman Musgrave. Thank you, Mr. Blackwell, and thank 
you so much for being respectful of the time constraints. Good 
job.
    The next witness is Arthur David Salus, and he is the 
president of Duluth Travel, Incorporated. Welcome, Mr. Salus.

         STATEMENT OF ARTHUR SALUS, DULUTH TRAVEL, INC.


    Mr. Salus. Thank you. Good morning, Chairman Musgrave and 
Chairman Boozman and distinguished members.
    My name is Arthur Salus. I am founder and president of 
Duluth Travel located in Atlanta, Georgia.

    Chairwoman Musgrave. Sir, I think the audience is having 
trouble hearing. Let us pull the microphone a little closer. 
Maybe that will help. Let us know in the back if you cannot 
hear, and we will try to deal with it.

    Mr. Salus. Okay, can everybody hear me now? Okay, thank 
you.

    Chairwoman Musgrave. Thank you.

    Mr. Salus. Good morning, Chairman Musgrave and Chairman 
Boozman and distinguished members.
    My name is Arthur Salus, and I am founder and president of 
Duluth Travel located in Atlanta, Georgia. I am an adjunct 
professor at Gwinnett Technical College in Atlanta where I 
teach entrepreneurship and travel courses. I am frequently 
called upon by local and national media for my comments and 
travel expertise.
    I am grateful for the opportunity to appear before you 
regarding the Veterans Benefit Act of 2003, and the President's 
Executive Order 13360, matters that concerns tens of thousands 
of small business owners and veterans across our great country.
    As a member of the American Society of Travel Agents and 
the Society of Government Travel Professionals, I am honored to 
present this statement with their support and encouragement.
    Today, Duluth Travel provides travel services for numerous 
businesses as well as the state and local government in 
Georgia. Duluth Travel is currently a federal management, 
travel management company, a subcontractor to a subcontractor 
for the Environmental Protection Agency and the U.S. Department 
of Agriculture.
    As a business owner, I began to focus on other 
possibilities to become a prime contract with the federal 
government. I did not think the status of a service disabled 
veteran would one day be of any importance, nor did I think it 
would lead me to the Department of Veteran Affairs for 
assistance three years ago in my quest to become a prime 
contractor.
    I quickly found out federal procurement opportunities for 
small business in travel were dismal at best. Add to the mix of 
service disabled veteran with a small business, the 
opportunities seemed nonexistent.
    I promptly became an active advocate for small business 
veterans. As an entrepreneur, I am a strong believer that tax-
paying small businesses deserve a chance to provide goods and 
services to the federal government. The Department of Veteran 
Affairs and the House Committee on Small Business and Veterans' 
Affairs were instrumental in getting to key issues 
accomplished. One was the passage of the Veterans Benefit Act 
of 2003, now Public Law 108-83, which provides authority for 
federal agencies to create sole-source contracts to qualified 
small business concerns owned and controlled by service 
disabled veterans.
    Current federal regulations called for federal agencies to 
contract 23 percent of their prime contracting dollars to small 
businesses, a figure that goes unheeded and rarely sees the 
light of day.
    The Small Business Administration, Office of Advocacy, 
found that the federal contracts awarded to small businesses in 
2002 were overstated by $2 billion. That is because 44 of the 
top thousand business contractors were actually large 
businesses.
    The Department of Defense and the GSA accounted for 79 
percent of their misdirected $2 billion. The National 
Association of Government Contractor's website reported this in 
February 28, 2005.
    To my knowledge, only a few federal agencies have met the 
sole-source goal for service disabled veteran-owned businesses. 
And why is this happening?
    I can only relate to my own experience. It took me eight 
months to the day for Duluth Travel to be approved on the GSA 
schedule. In my opinion, GSA moves entirely too slow in the 
approval process. Small businesses can ill afford to spend 
valuable time in accomplishing the simple act of registering 
with the federal government.
    After Duluth Travel was registered with the federal 
government, I was directed to take advantage of marketing my 
own company's services to the federal agencies, and that is 
exactly what I did. I e-mailed, sent letters, called each of 
the designated contracting officers at the various federal 
agencies provided by GSA. The e-mails, letters or calls 
introduced my company and noted that I was a service disabled 
veteran, and these are my results.
    Out of the 35 e-mails I sent, letters, to the contracting 
offices, I was stunned to receive only four replies. I received 
no call-backs, and I was only referred back to their websites. 
To date, I have had no contracting officer contact me at all 
regarding sole-source contracts or as an SDVOB set asides for 
travel procurement.
    Here is my observation. The procurement contracting offices 
seem to be unwilling to use small business firms for the fear 
that they will fail and thus award process go to the large 
companies. Procurement contractors avoid making changes to the 
new process despite the law.
    With a 95 percent performance rating from Dun & Bradstreet 
that GSA required, Duluth Travel surely had the credentials to 
receive these contracts.
    In closing, Congress must take the necessary steps towards 
strengthening the laws, making it mandatory that federal 
agencies shall award, not may award, government contracts to 
small business. We must make sure that small business set aside 
and sole-sourcing contracts are available and awarded 
appropriately.
    Small business can do the work while providing cost savings 
to the government.
    I also would like to thank you for this opportunity to 
testify. I look forward to answering any questions you may 
have.
    [Mr. Salus's statement may be found in the appendix.]

    Chairwoman Musgrave. Thank you, Mr. Salus, very much.
    Our next witness is John Lopez. And Mr. Lopez, I would 
mention, is the Chairman of the Association for Service 
Disabled Veterans. Welcome to the committee hearing today.

 STATEMENT OF JOHN K. LOPEZ, ASSOCIATION FOR SERVICE DISABLED 
                            VETERANS


    Mr. Lopez. Thank you. Good morning, Chairman Musgrave, and 
Chairman Boozman, and distinguished members of the committees.
    Without objection, I will summarize my testimony, and 
submit full written testimony for the record.

    Chairwoman Musgrave. Without objection

    Mr. Lopez. Okay. It has been five years since the 
initiative to assist disabled in-service military veterans to 
participate in self-employment entrepreneurship as a means of 
supplementing their rehabilitation. During that period of time 
that initiative, Public Law 106-50, has been a source of 
extreme frustration and disappointment to the over 2 million 
adjudicated service disabled veterans attempting to access 
Public Law 106-50 benefits.
    And the present direction bode ill for the latest 
generation of America's heroes, the Iraqi and Afghanistan 
service disabled veterans.
    In spite of the intent of the U.S. Congress and the 
executive direction of the President of the United States of 
America, a vested bureaucracy and special interest groups have 
made the going very difficult. They have inhibited the promise 
of assisted vocational rehabilitation for those who 
specifically and individually sacrificed to ensure the 
prosperity and security of our nation.
    It is imperative that the U.S. Congress and the U.S. 
Federal Administration take action to closely monitor and 
review the direction previously specified in Public Law 106-50, 
and Section 3 of 108-183, and the President's Executive Order 
13360.
    To ensure the implementation and progress of the 
initiative, we ask the U.S. Congress to emphasize by resolution 
and legislation that the service disabled veteran initiatives 
are not economic policies that will redirect the world economy, 
and they are not cultural compensation that will resolve the 
nation's social controversies. Service disabled veteran 
entrepreneurship initiatives are a moral, ethical, and security 
imperative that must be absolutely implemented. Otherwise, the 
basic compact to defend the nation will soon lose its 
commitment, and we will perish in a babble of political 
recrimination.
    I would be pleased to answer your questions.
    [Mr. Lopez's statement may be found in the appendix.]

    Chairwoman Musgrave. Thank you, Mr. Lopez.
    The next witness is Frank Ramos, and he is the Director of 
the Office of Small Business and Disadvantaged Business 
Utilization, and we would welcome you today, and look forward 
to your testimony.

   STATEMENT OF FRANK M. RAMOS, OFFICE OF SMALL BUSINESS AND 
   DISADVANTAGED BUSINESS UTILIZATION, DEPARTMENT OF DEFENSE


    Mr. Ramos. Thank you. Chairman Musgrave and Chairman 
Boozman, and members of both committees, good morning to all.
    Thank you for inviting me to testify on behalf of the 
Department of Defense on our progress to achieve the service-
disabled veteran-owned small business goals.
    The subject of service-disabled veterans is a topic of high 
interest that I take very seriously. It is my time to serve our 
country in this capacity, and return the effort of the ultimate 
sacrifice endured by my members--members of my family and other 
veterans in the service of our country.
    It is of paramount importance to us to recognize the 
leadership and support of the President and the Congress. The 
President, through his executive order, demonstrated his 
leadership and commitment to service-disabled veterans. You, 
through the congressional leadership, enacted enabling 
legislation to facilitate policy that will help the service-
disabled veteran-owned small businesses. I want to acknowledge 
the help of the veterans' service organizations that support 
our working groups with invaluable insight to support and 
execute the Department of Defense strategic plan.
    I will begin with excerpts from our official testimony to 
describe our performance metrics and elements of the plan.
    The first step in our plan was to establish a benchmark of 
those firms for the Department of Defense industrial base 
supplier pool. In fiscal year 2003, we had 2,200 firms 
registered in the central contractor registry, which we refer 
to as CCR. We recognized then that 2,200 firms are insufficient 
in our supplier pool to meet the goal.
    Our first objective is to identify and register more of 
these firms, a critical first step toward meeting the goal. Our 
aggressive CCR registration outreach efforts derived from our 
first objective resulted in an increase to 7,000 firms 
registered as of May 2005, a 218 percent improvement.
    We observe from the empirical data that there is a nexus in 
the increase in firms registered to a commensurate improvement 
of the Department of Defense contract awards from $149 million 
in fiscal year 2001 to an estimated $514 million in fiscal year 
2004, a net growth of contract dollars of 247 percent over a 
three-year period.
    Our second objective is to publicize and train our 
acquisition personnel and the firm owners. Defense Acquisition 
University is our partner in this initiative to help train the 
acquisition and business communities.
    Our third objective is to include firms in the Department 
of Defense Mentor-Protege Program. We expect to have some 
mentor-protege agreements this fiscal year, and as of this 
morning in the Federal Register there is an interim rule which 
will facilitate that.
    Our fourth objective is to increase the subcontracting 
opportunities for target firms, working with prime contractors. 
Defense Contracting Management Agency is our lead component for 
this initiative.
    Our fifth objective will evaluate the effect that bonding 
has on the target businesses in the construction and 
environmental cleanup industries. The Corps of Engineers is our 
lead in this initiative.
    The last objective fosters teaming agreements and joint 
ventures to enable the firms to increase their capability and 
their capacity to receive larger and more complex contracts 
with larger dollar values.
    The department has developed an ambitious plan as a road 
map to meet the goal over time. The early performance 
indicators show that we are on the right path. We must first 
establish a robust supplier pool of industry-capable firms. I 
am convinced that the key to success is our synergistic 
relationship with the administration and with you, the 
Congress, our sister federal partners, other governmental 
organizations, and the business community.
    I will be pleased to take questions when it is appropriate. 
Thank you.
    [Mr. Ramos' statement may be found in the appendix.]

    Chairwoman Musgrave. Thank you very much, Mr. Ramos.
    Our next witness is Scott Denniston. Mr. Denniston is the 
Director of the Office of Small Disadvantaged Business 
Utilization. Welcome to the committee.

STATEMENT OF SCOTT F. DENNISTON, OFFICE OF SMALL DISADVANTAGED 
      BUSINESS UTILIZATION, DEPARTMENT OF VETERANS AFFAIRS


    Mr. Denniston. Thank you. Madam Chair, Chairman Boozman, 
Committee Members, I greatly appreciate the opportunity to 
testify at this joint committee hearing. Your oversight is 
exactly what the Federal Veterans Entrepreneurship Program 
needs at this critical juncture of its growth.
    In 1999, you directed federal agencies and the Veterans 
Corporation to organize public and private partnership, to 
promote formation and expansion of veteran-owned businesses. 
This mission has been fulfilled. DOD, SBA and VA have fully 
supported the Veterans Corporation.
    Turnover within the corporation has impeded our efforts 
somewhat. As a result, federal agencies, contractors and 
service providers have organized into areas of expertise. We 
continue to offer the corporation our full support.
    The President's executive order requires agencies to create 
and publish comprehensive strategic plans. The majority have 
done this. These plans are easily located on our VetBiz.gov web 
portal as well as on SBA's website. Now it is time to measure 
performance against those plans.
    I believe that formal score cards would be very useful. 
Since November, VA has hosted meetings of volunteers from 
federal agencies committed to increasing access for disabled 
veterans in the federal marketplace. The Honorable David 
Safavian, Administrator of the Office of Federal Procurement 
Policy, has been generous in his support of our group. He has 
actively encouraged the free exchange of visions and ideas. We 
have shared best practices. We are coordinating outreach 
conferences. We have identified impediments both real and 
perceived.
    The VA's plan adopts the best practices and tackles some of 
the impediments. Our target plan has five improvement areas.
    Step one is employee awareness and training. This involves 
all employees. We kickoff our internal campaign on June 14 at 
our annual Champions of Veterans Enterprise Award Ceremony, and 
at this time, with the assistance of Mr. Crowder, I would like 
to present to the committee members and staff our first 
internal workings that we are going to use as part of our 
campaign.
    Our objective in all of this is to significantly increase 
our accomplishments with veterans and service disabled veteran-
owned businesses. In fiscal year 2004, VA achieved 1.25 percent 
of total procurement dollars for disabled veterans. While this 
performance was higher than many federal agencies, it is still 
unacceptable.
    Step two is information sharing. Veterans registered on 
VetBiz vendor information page does now automatically receive 
FedBiz ops notices that match the company's industry or product 
service codes. However, small businesses also need access to 
decision-makers well in advance of requirements that appear in 
electronic postings.
    Our plan requires local facilities to conduct annual vendor 
conferences. These sessions will include procurement technical 
personnel who will explain buying rules and announce 
opportunities.
    The VA now requires formal local procedures that ensure 
equitable access for small business owners to decision-makers. 
We are structuring a monthly video conferencing program to 
begin in October. This program will show-case buying rules and 
industry's comment to several agencies. We will invite senior 
VA leadership to conduct periodic town hall meetings with 
owners. Deputy Secretary Mansfield did this as one of his first 
actions after accepting his position last year. The VA's video 
conferencing centers will be available for owners to view these 
information session.
    Step three is sourcing support. Buyers need to easily 
locate vendors who will perform reliably. The VetBiz 
information page now offers video streaming. This is an option 
an owner may post a three-minute film clip to the database. 
Because of different computers throughout the government, we 
have learned that many employees do not visit websites because 
pages are often loaded slowly.
    By posing video clips to the VIP database, our visitors do 
not need to go anywhere else to get detailed information on 
veterans in business.
    Step four is partnering with prime contractors to create 
subcontracting opportunities for veterans and disabled 
veterans. We have dispatched letters to large federal 
contractors inviting them to identify a veteran business 
advocate to work with VA Center for VA Enterprise. Some prime 
contractors have responded with enthusiasm. General Dynamics, 
SAIC, and Boeing are several large contractors who we have 
formal agreements with.
    We are working with the Defense Contract Management Agency 
to develop a model for contractors to improve outreach, 
mentorship, contract opportunities and direct employment of 
veterans.
    On June 14, we formally recognized federal prime 
contractors who are leading the way in utilizing service 
disabled veterans in business. As an example, Anteon is the 
only large business that we are aware of that made the three 
percent goal last year.
    Step five is modifying acquisition protocols to make it 
easier to do business with the federal government.
    I am excited about the potential for progress and the new 
framework established by the executive order. Never before have 
I witnessed such a confluence of legislation, creative 
rulemaking, openness of agency information, and passionate 
commitment by advocate.
    In closing, it is my privilege to work with leaders such as 
Secretary Principi, Deputy Secretary Mackay and now Secretary 
Nicholson and Deputy Secretary Mansfield and are going to make 
this program work.
    Thank you.
    [Mr. Denniston's statement may be found in the appendix.]

    Chairwoman Musgrave. Thank you very much.
    Our next witness is Paul Murphy, President of Eagle Eye 
Publishers. Welcome.

         STATEMENT OF PAUL MURPHY, EAGLE EYE PUBLISHERS


    Mr. Murphy. Chairwoman Musgrave, Chairman Boozman, Ranking 
Members Lipinski and Herseth. Thank you for the opportunity to 
address your subcommittees this morning on the issue of service 
disabled veteran-owned business procurement.
    The status of SDVOBs in the federal marketplace remains 
weak. According to the latest procurement statistics from the 
U.S. General Services Administration, in fiscal 2004, federal 
agencies awarded 877 million to SDVOBs, just 2.8 percent of the 
reported $313 billion federal procurement total.
    Public Law 106-50 signed into law in 1999 by President 
Clinton stipulated that SDVOBs should receive three percent of 
all prime contract dollars annually.
    In fiscal 2004, this would have translated to $9.4 billion. 
In other words, federal agencies missed their SDVOB contracting 
goals by $8.5 billion, or over 90 percent. SDVOB spending 
amounts to less than one-tenth of the established SDVOB 
procurement goal.
    The positive news is that SDVOB prime contract spending is 
up 68 percent, from $523 million in fiscal 2003. The total 
number of active declared SDVOBs grew 50 percent, from 906 to 
1,355. In fiscal 2003, an average SDVOB received $577,965. In 
fiscal 2004, this figure rose 12 percent, to $647,000.
    However, we should not draw too many conclusions from these 
growth statistics yet. With overall numbers so small, small 
dollar increase in spending translate into large percentage 
gains. Real trends need a longer time to emerge. We also 
understand that there will be some additions and corrections to 
the FPDS data originally reported this past February which will 
alter dollar totals and percentages.
    In Eagle Eye's 2004 study of SDVOBs for the U.S. Small 
Business Administration's Office of Advocacy, we found a 
significant discrepancy between the number of active veteran-
owned vendors listed in the DOD's central contractor registry 
and the number of active VOB vendors reported in the GSA's 
procurement database. We will attempt to recreate this 
measurement as we process the corrections and enhancements of 
the GSA data over the next several weeks.
    Looking at these SDVOB numbers from another perspective, 
each of the 1,355 officially recognized SDVOBs would have had 
to receive $6.95 million in total revenues for agencies to meet 
their fiscal year 2004 procurement goals. Alternately, it would 
have taken 14,540 SDVOBs receiving the current average 
procurement total to achieve the same goal. That is nearly 
eleven times the current number of SDVOBs, and I provide a 
series of charts and tables in my presentation, which I hope 
you will review.
    I was encouraged to note that my numbers, I actually came 
up with 7,000 VOBs in fiscal 2004, which seems to closely match 
and track the numbers that Mr. Ramos is also measuring.
    But we also found 1,355 SDVOBs that were not coded as VOBs, 
bringing our fiscal 2004 combined total of SDVOBs and VOBs to 
over 8,000.
    Service disabled veterans' spending is highly concentrated 
by vendor. The top ten SDVOBs receive 27.1 percent of all SDVOB 
dollars. The top 25 received 56 percent of the total. An 
average SDVOB received $647,000 in fiscal 2004, approximately 
10 percent less than the $709,560 received by an average small 
business.
    The SDVOB contract spending is not just concentrated by 
company, it is also highly concentrated by agency. Just five 
agencies accounted for over 80 percent of all SDVOB contract 
spending. Together, the Departments of Defense, Veterans 
Affairs, State, NASA, and General Services Administration spent 
82.4 percent of that $877 million total.
    The high degree of spending concentration by vendors and 
agencies suggests that government buyers are not yet aware of 
the availability of qualified SDVOB vendors, and SDVOBs may not 
be taking full advantage of available avenues to market their 
goods and services to the government.
    In conclusion, steps to raise vendor awareness about the 
importance of certifying their firms as SDVOBs in the CCR need 
to intensify, particularly as we prepare for the eventual 
return of U.S. forces stationed throughout the Middle East. 
Easing the ability of government buyers to use SDVOBs, as with 
the new veterans GWAC are to the good but the agencies have 
significant ground to makeup to fill the government's 
established three percent goal.
    We need clarification about the priority of any assigned to 
small firms in any given procurement, to avoid unnecessary 
competition between socio-economic groups while set aside goals 
remain so significantly unfulfilled, and lawmakers, small 
business and procurement officials must also realistically 
assess whether the industrial base has the capacity to fulfill 
the government's current $9 billion goal for SDVOB procurement.
    The rapid rate of increase in the identification of SDVOBs 
over the most recent three years will level off and deficits 
inevitably will drive further cuts in agency spending. it may 
not be realistic to expect that an average SDVOB can grown nine 
times larger than the average small firm given the numbers we 
have today.

    Chairwoman Musgrave. Mr. Murphy, if you would please wrap 
up, your time has expired.

    Mr. Murphy. Thank you. If you have any questions, I will be 
happy to answer them.

    Chairwoman Musgrave. Thank you very much.
    Our final witness is Rick Weidman. Mr. Weidman is the 
Director of Government Relations for the Vietnam Veterans of 
America. Welcome to the committee.

     STATEMENT OF RICK WEIDMAN, VIETNAM VETERANS OF AMERICA


    Mr. Weidman. Thank you, Madam Chairwoman and Mr. Chairman, 
and all the distinguished members of the committee. I also 
serve, ma'am, as chairman of the Task Force for Veterans 
Entrepreneurship.
    The right to, and we would suggest, to an earned benefit of 
the three percent in all federal procurement derives from the 
Fourteenth Amendment to the Constitution which certifies 
veterans' pensions and set aside. It was originally put in 
there following the Civil War, having to do with the famous 48 
acres and a mule. There are no longer land grants that can be 
given to veterans, but a ceratin percentage of federal 
procurement, and yet it has not happened.
    In regards to Vietnam Veterans of America, and everyone who 
has looked at this who anticipates in the Task Force for 
Veterans Entrepreneurship, the best darn readjustment program 
we can ever provide to a returning man or woman from Operation 
Iraqi Freedom or Operation Enduring Freedom is meaningful work 
at a living wage. For many, that will mean taking a job working 
for someone else, but for many others, not only the best option 
but often the only option for profoundly disabled veterans is 
self-employment and/or mini-business or micro business.
    In regard to helping them get to that point, it is not just 
the procurement aspects of Public Law 106-50 or Public Law 108-
183 that are important. There was originally, and Mr. Talon's 
draft bill, H.R. 5668, a provision that would have been similar 
to the Jobs for Veterans Act that would have given veterans 
priority in every single program offered by the Small Business 
Administration and other programs funded through the Small 
Business Administration. We would suggest that the committees 
revisit that particular proposal.
    In regard to the problems outlined this morning having to 
do with getting on a GSA schedule and actually getting business 
once one is on there, changing the word ``may'' to ``shall'' in 
the law, and making sure that the original intent, which we 
believed, and in talking to the people who actually drafted to 
the members anyway, not the staff, the intent was, we know, to 
provide both sole-source and a disabled veteran competitive 
reserve in Public Law 108-183, and all of those things need to 
be clarified in the law in order to move forward.
    Two other things of note--three other things of note if we 
may. First is that the mentor-protege needs to be expanded 
beyond DOD, and require agencies to fund it.
    Secondly, everyone is looking for some leadership by 
example from the Small Business Administration, which has been 
sorely lacking. Quite simply put, currently, to our knowledge, 
there is not a single service disabled veteran contract with 
the Small Business Administration. They simply have no moral 
standing to go to the Department of Transportation or the 
Department of Defense or anyone else and say you have to do a 
better job because you are not doing a good enough job when 
they have none themselves, and that has been true the last 
three fiscal years.
    Similarly, in terms of leadership within the agency of 
concentrating on veterans, particularly service disabled 
veterans, while we are at war, while we are at war and have 
troops in the field, it is not too much to ask for both--for 
the Small Business Administration to concentrate on reaching 
out to those returning home to Walter Reed and to the other 24 
military medical facilities around the country, and yet it is 
not happening.
    Recently, and in response, we believe, to the scheduling of 
this oversight there finally was an individual appointed to 
assist with federal procurement in the Office of Procurement 
Compliance within the Small Business Administration, but she 
has no staff. She is very fine, and a veteran herself, air 
force veteran, but without even any administrative help there 
is going to be a very limited amount that she will be able to 
do.
    We believe that would only happen because of this oversight 
hearing. One of our long-term members have suggested that 
perhaps every other month this committee, these two fine 
committees should schedule an oversight hearing in order to 
keep it on a roll, to have SBA to perform the duties that they 
are paid to do on a daily basis, and I know that that is not 
possible, Mr. Chairman and Madam Chairwoman, but something on 
that order in terms of continuous oversight is needed.
    Part of that continuous oversight, we would bring to your 
attention a bill that has been brought by Senator Snowe and co-
sponsored by colleagues on the other side of the aisle in the 
Senate that would re-authorize and mandate the Small Business 
Administration to have the advisory committee on veterans' 
business development rechartered and continued as a way of 
continuing that oversight and pressing within the SBA itself.
    I see my time is up, and I would be pleased to answer any 
questions that I may. In regard to the Veterans Corporation, if 
I may have one final note.
    It has been a very checkered history since August of 1999 
in regard to the Veterans Corporation. It seemed like the fates 
and the forces raid against this corporation, this semi-public 
corporation, were something straight out of Odysseus, and yet 
somehow it has survived to this day. It is something that has 
caused great controversy within the veterans community, and 
within the task force as to whether or not it should be 
supported or non-supported.
    The only comment that I would make at this time on behalf 
of VVA and of the task force is that somehow, some way, if they 
can succeed, we wish them all the best, and would support them 
in that. There are too few hands and too few minds and too few 
resources trying to assist veteran business owners and disabled 
veteran business owners for any dissention within the community 
now, whether partisan or otherwise, and therefore anything that 
you can do to assist that corporation to succeed and assist the 
community to pull together would be most welcome.
    And then one last thing is we suggest, we have suggested in 
the past a convocation to deal with returning veterans. Perhaps 
a convocation, if you will, to deal with both the work aspects 
and self-employment/min-business is for returning veterans in 
particular, but for other disabled veterans as well, but 
particularly for the young men and women who are in the field 
today is needed so that we are prepared to make sure that, 
frankly speaking, as a Vietnam vet, they do not get all scared 
up like we did when we came home.
    Thank you very much, Madam Chairwoman and Mr. Chairman.

    Chairwoman Musgrave. Thank you for your testimony.
    Ms. Hooley, do you have any questions at this time?

    Ms. Hooley. I do. Thank you very much. First of all, I 
indicated that none of our witnesses were holding back or not 
being able to state exactly what they think, as I look at this 
map where you have got the research centers and educational 
centers, I will make maybe one small comment.
    They are not in--excuse me, and when you look at what 
happened on the west coast, if you live in Washington and you 
need to deal with anything on the west coast, you are traveling 
somewhere between 15 and 1800 miles, so it is a fair distance 
to any of these centers, and I hope that we could eventually 
change that.
    The question I have, Mr. Blackwell, in your testimony you 
focus on training opportunities for the Veterans Corporation 
provides to small businesses and the assistance you give them 
in getting off the ground.
    What kind of assistance does the Veterans Corporation 
provide with any training or assistance specifically on 
securing government contracts and navigating the procurement 
process?
    I mean, I am really worried that it is--I think it is, as 
we had one witness talk about, that it is very difficult to get 
through the procurement process, and how much training do we do 
with them?

    Mr. Blackwell. The direct answer to your question is 
absolutely none. Our charter is entrepreneurial education and 
training, although I have been speaking with our 
representatives, or ex-officio members of our board at DOD, VA, 
and SBA on how we might assist them, particularly as we move 
into an electronic format with the availability of courses that 
relate to getting folks ready to participate in government 
procurement contracts. But we do not provide any direct 
training or education in that area.

    Ms. Hooley. Let me ask a question of any of the witnesses. 
Do we do--I mean, we have got this law that says we have to 
have three percent procurement for small business, we say 23 
percent, what kind of training do we do of our procurement 
officers so that they understand that they need to look at 
small businesses and small veteran businesses? Anyone want to 
answer that question?

    Mr. Ramos. Yes, ma'am. In the Department of Defense, we 
anticipated the enactment of the statute and the regulation, 
and also the President's executive order. And we have already 
included a first-ever course at the Defense Acquisition 
University that incorporates the information relative to 
service disabled veterans and veterans across the board. That 
course is available to all of our contracting officer, program 
managers, and we are also planning, if we have not done this 
already, is making it virtual so that they can be accessed, and 
we have already had veterans with the Veterans Corporation.
    Because if you would look at our demographics where our 
veterans are spread, they are pretty much spread-out through 
the southwest, California, the south, the southeast, and they 
are clustered right around this area because of obvious 
reasons. So I think if we were to focus our attention, it would 
be where that population of veterans are in the CCR that are 
currently performing contracts which has a close relationship 
to where our industrial base is located throughout the country, 
and it is also, by the way, we have a good share located in 
Colorado and in Washington.

    Ms. Hooley. Mr. Denniston, how long do you believe it will 
be before the VA has fully implemented their strategic plan, 
and have you see any benefits or results from the steps that 
the VA has already taken?

    Mr. Denniston. The strategic plans are relatively new. I 
think we need some time to implement that. As I said before, I 
am optimistic. I believe that with the steps that we have taken 
with the strategic plan, that we will make the three percent 
goal within the next year. I fully believe that.
    Back to the question that Frank responded to, your question 
about training. The best resource, in my opinion, for training 
small businesses, particularly service disabled veterans, in 
doing business with the federal government is the Procurement 
Technical Assistance Centers that are funded by DOD, about 100 
of them around the country, and we work very closely with them.
    We have had outreach conferences in 35 of the 50 states 
over the past three years to reach out to service disabled 
veterans, to get them excited about doing business with the 
federal government. Quite frankly, there is fear, if you will, 
of doing business with the federal government and being wrapped 
up in the bureaucracy.

    Ms. Hooley. Right.

    Mr. Denniston. And the red tape, and somehow we have to 
overcome that, and have veterans understand that working with 
the federal government, yes, we are a large organization, but 
if you take the right steps you can be successful, and we have 
found that the Procurement Technical Assistance Centers to be 
very beneficial in doing that.

    Ms. Hooley. Thank you. Thank you all for testifying today. 
Yes, Mr. Weidman?

    Mr. Weidman. There are a number of testimonies here today, 
including the one having to do with the meager number of 
disabled veteran business owners, it is really the number of 
identified service disabled veteran business owners. Many do 
not self-identify, particularly to the federal government.
    Their experience is they do not know about this program, 
they do not know about the law, and basically they do not want 
anything to do with the government. They went into small 
business because they did not want to answer to folks, and they 
wanted as few bureaucratic things that they had to go through 
as possible.
    The clusters that Mr. Ramos talks about, I agree that that 
is probably where they are identified, but that does not mean 
that is where the veteran-owned and service disabled veteran-
owned businesses are. They are all over the country, and the 
veterans demographic is broadly reflective of the demographics 
of the country at large, by age, and therefore those who are in 
business and most likely to be in business, they are spread 
throughout the 50 states and other three jurisdictions.
    If you have the contracts the veterans will come. Let me 
say that again. If you have the contracts and a realistic 
expectation without going to conference after conference, 
educational session after educational session, and spending 
that money and coming up still with no realistic expectation of 
getting a contract or a subcontract, which I can tell you many 
service disabled veterans are complaining hard to me and to 
others of us in the leadership of the task force that that is 
what has happened to them--

    Chairwoman Musgrave. Mr. Weidman.

    Mr. Weidman. --fewer and fewer people will identify.

    Ms. Hooley. Thank you very much.

    Chairwoman Musgrave. Thank you. Mr. Lipinski, before we 
need to go, would you like to ask questions?

    Mr. Lipinski. Thank you. The first question is for Mr. 
Blackwell. We--all of us here, not just myself--are concerned, 
and want to give help to veterans who are seeking to be 
entrepreneurial and start small businesses. But I am sure you 
would admit that the TVC has had problems getting going over 
the years. The five years are running out now.
    Do you see--in your testimony, you suggest that you are 
looking for funding for four years. Do you see funding for only 
four more years, or do you see it going on into the future, or 
do you think there will be a time when TVC will be able to 
survive on its own without getting the direct funding from the 
federal government?

    Mr. Blackwell. I think your question is really the future 
of TVC as you look at a funding arm. I see it has a long-term 
partnership. I would like over time for the Congress to have 
less involvement in that. And if you look at the charts that I 
furnished you, one of the charts outlines on the left-hand side 
a number of foundations that w e are already receiving money 
for or have worked with. MOT is the current group that we look 
for in June.
    The corporations on the right are corporations I am 
currently approaching for major grants, for short-term funding 
before September of $1.5 million, and long-term funding for 
$2.25 million.
    If we are successful in our high net-worth individual 
contributions, the partnership for individuals, partnership for 
corporations and foundation, I think the burden that has been 
placed on the Congress will be lessened. But I do believe a 
long-term partnership with the Congress is an essential one for 
providing services to veterans long term.

    Mr. Lipinski. Do you think that--I know that you have not 
been there very long, but do you believe you have a plan that 
is different from previous plans in terms of getting this--
being able to get this outside funding, which seems to be--has 
been the plan all along, but has not really succeeded up to 
this point?

    Mr. Blackwell. Yes, you are right. I have only been there 
almost 12 weeks, so I guess I am the new-be in the room. I do 
believe we have a strong plan. I believe the plan that Chairman 
Lewis put forth in December is a good plan. The strategy of 
getting out now and meeting with individuals and corporations 
is an active process that I am very committed to, and frankly, 
hope to have very positive results in the next 60 to 90 days.

    Mr. Lipinski. Thank you. A quick question for Mr. Ramos. 
This could go on for a long time, I hope you can answer 
quickly. In terms of--what does, in general, force small 
businesses--what does the Department of Defense do to ensure 
that large contractors actually achieve their small business 
goals? And do you really see this being done efficiently, being 
done well? If you can answer it in two minutes or less.

    Mr. Ramos. Sure. Let me just get to the point of your 
question. A year ago--a little over two years ago when I 
first--no, when I came here, we had problems with that issue. 
We put on probation one of the major prime contractors of this 
country for not meeting their subcontracting goals with small 
business.
    We now have at least six prime contractors that have 
stepped forward with Defense Contracting Management Agency to 
work on an initiative where we will identify service disabled 
firms that are already in our active contracting database, and 
we are going to share for the first time ever a cross-listing 
of all those firms for all the prime contractors to consider in 
part of their subcontracting plan because if you have 
industries that you are successful in Department of Defense, 
the big topic is joint inter-operation ability, and these are 
the lessons learned out of Afghanistan and Iraq.
    So we are pushing our veterans who have that experience so 
they can cross-cut into the other subcontractors--contracting 
opportunities with these primes.

    Chairwoman Musgrave. Thank you. We will break now to go 
vote, and we thank you for your patience. We will come back and 
continue our questions after we are finished voting. Thank you.
    [Recess.]

    Chairwoman Musgrave. I have been a school teacher, and once 
you let the kids go, it is hard to get them back. At any rate, 
I am happy that we have been joined by my colleague from 
Florida, Ms. Brown-Waite, and Ms. Brown-Waite, do you have 
questions at this time?

    Ms. Brown-Waite. Yes, I do. Thank you very much, first of 
all, for holding this hearing. I think it is a very, very 
important issue.
    I have a question for Mr. Lopez.

    Chairwoman Musgrave. He is not here.

    Ms. Brown-Waite. Okay. Well, I know he is not voting.

    Mr. Weidman. Madam Chairwoman, I am sorry. Mr. Lopez had to 
step out to the men's room. He will be right back.

    Ms. Brown-Waite. That is fine. I have a question for both 
VA and Department of Defense, perhaps Mr. Denniston and Mr. 
Ramos.
    What mechanism is actually in place for monitoring national 
and local procurement actions to determine progress toward some 
of the set aside goals that Congress has mandated?

    Mr. Denniston. The first mechanism, which unfortunately is 
after the fact, is the Federal Procurement Data System where 
all contracts over $25,000 are input. I think the issue is one 
of market research and one of acquisition planning, and what we 
are trying to do is put in place mechanisms beforehand.
    So as an example, one of the things that are Deputy 
Secretary, Mr. Mansfield did very recently was we sent a memo 
directing all acquisition offices to identify all of their 
procurements between now and the end of the fiscal year, and 
identify those that were good candidates based on the 
capabilities of the service disabled vet community in the area 
to identify using the mechanisms, the service disabled vets set 
aside, and we are still in the process of gathering those. But 
that is probably the best mechanism.
    The other one, obviously, is awareness of the program from 
the standpoint of management responsibility and commitment.

    Ms. Brown-Waite. Just as a follow up, what percentage of 
veterans who could qualify for this do you believe actually 
know about the program? Is it well known in the veterans 
community, or is it one of those things that you continuously 
try to educate on?

    Mr. Denniston. I think it is both. I think we continuously 
try. I think we have all had difficulty identifying service 
disabled vet businesses or service disabled vets that want to 
start businesses.
    One of the things that we do every year, as you know, if 
you are on the rolls of VA as a service disabled vet you get a 
letter in January telling you what your disability compensation 
is going to be, because that goes up with the inflation factor, 
for the last four years in those letters we have had a 
paragraph that says if you are a service disabled vet business 
or if you are a service disabled vet thinking about starting a 
business, contact us in the Center for Veterans Enterprise, and 
that is probably the best mechanism that we have to get the 
word out to the entire community of service disabled vets.
    Now, what happens is we get inundated with calls of people 
that want to have an issue, a veterans benefit issue, and want 
to get their disability compensation raised, and that is 
obviously not our area, but it is the best way we found to 
identify these 2.5 million service disabled vets.

    Ms. Brown-Waite. Must be because they could not get through 
to my line first.
    [Laughter.]

    Ms. Brown-Waite. Just being facetious.
    One of the other questions is the use of subcontractors by 
prime contractors. Tell me how you all, first of all, encourage 
it, and track it.

    Mr. Denniston. Each agency in the way that we encourage it 
is going to be a little bit different. Obviously, we have got 
the requirements of Public Law 95-507 which requires a 
subcontracting plan.
    The most effective mechanism, we believe, is having 
performance of past plans and goals, and a forward-looking plan 
as part of the evaluation criteria, because if large businesses 
know that their use of small businesses is going to impact on 
their ability for an award, they are much more serious about 
it.
    What we have found in all of the subcontracting area is 
that the prime contractors do it, it is important to their 
customer. So we in the VA had a concerted effort to make sure 
that our prime contractors know that this is important to us, 
and it is the reason, in my opinion, that companies like 
Johnson & Johnson, like SAIC, are coming to us and asking for 
our help in identifying service disabled vets that they can use 
as subcontractors.

    Ms. Brown-Waite. Madam Chair, just a follow-up question.

    Chairwoman Musgrave. Yes, go ahead.

    Ms. Brown-Waite. If you were to quantify that, what 
percentage of subcontractors would you say actually are 
disabled veteran-owned subcontractors? Could you give me like 
just a rough estimate even?

    Mr. Denniston. As far as dollars or as number of companies?

    Ms. Brown-Waite. Number of companies.

    Mr. Denniston. Number of companies, I could not. Now, as 
dollars go, we are finding that our prime contractors pretty 
much mirror what we have done in the VA, which is about one 
percent of the total dollars. And it is interesting because 
what we find is it depends on the industry that we are talking 
about.
    As an example, the information technology area where we 
know that we have got a lot of service disabled vets that can 
do that type of work, we get good participation. Contrast that 
with the pharmaceutical industry as an example where we know 
that pharmaceuticals is not even a small business arena because 
of the FDA requirements and the R&D costs and the timing 
involved. So we know as an example that that is an industry 
where we are going to have a real difficult time meeting our 
three percent goal.

    Ms. Brown-Waite. Thank you. I see my time is up.
    [The Honorable Brown-Waite's statement may be found in the 
appendix.]

    Chairwoman Musgrave. Thank you. Ms. Herseth, do you have 
questions?

    Ms. Herseth. Thank you, Madam Chair, and I would like to 
submit my opening statement for the record and just move to 
some questions for our witnesses today.
    [The Honorable Herseth's statement may be found in the 
appendix.]

    Ms. Herseth. Mr. Blackwell, I understand you are new to 
your position and I appreciate your testimony today, and I 
could not agree more that the needs that we face today for 
veterans and service-connected disabled veterans are far 
different today than they were in 1999, and I know that we have 
had one-year extension in terms of the federal component of the 
funding for the Veterans Corporation.
    And just to follow up on Mr. Lipinski's line of 
questioning, in anticipating after that one-year extension 
where the private money was going to come from other funds, in 
the event that we are not able to make some legislative changes 
pursuant to your request or your sense that an additional four 
years or some sort of permanent partnership with the federal 
government funding for services that you provide, in that 
event, whether through federal or private purses, would you 
recommend that certain of the Veterans Corporation activities 
be incorporated into the SBA, or the VA Center for Veterans 
Enterprise?

    Mr. Blackwell. I guess I would go to Mark Twain, the event 
of my death has been--I think there are two answers.
    The first piece is I really see a long-term partnership 
with the Congress as really an important, if you will, stamp of 
approval for this program, that Congress and private industry 
are involved.
    In my meetings with private industry so far, the private 
corporations, one of the first questions they ask me is why is 
funding stopping for this important program, and why are we now 
being asked to pick up this mantle.
    I think having Congress as a partner really says that 
Congress is very concerned about what is happening to veterans; 
that Congress is interested in these programs. So it makes the, 
if you will, funding sale to corporates and to high net-worth 
individuals a lot easier.
    If this were just allowed to be a survival on our own with 
high net-worth individuals, corporations and foundations, the 
question is going to keep coming up, does not Congress care.
    So even if it is a small amount of money, I think the 
imprimatur of Congress being an active partner and participant 
in the programs that we are providing is a very key piece.

    Ms. Herseth. Well, I appreciate that, and I tend to agree. 
I am not one who believes that just because certain programs 
are offering certain services that may be similar, that we 
should all of a sudden consolidate all of those programs 
because you are oftentimes serving different constituencies and 
different needs in ways that are effective that not all 
programs can do.
    But along that line, is there some collaboration, some 
communication, you know, when I receive through the materials 
that we received today--

    Mr. Blackwell. Right.

    Ms. Herseth. --and I received, you know, this handout, I 
have to imagine that given the constituency that you are 
serving, that there hopefully is some communication going on 
that would at least make the resources that are limited go even 
further if that communication exists.

    Mr. Blackwell. I think if you look at what we have been 
trying to do over the last 12 plus weeks, we are really looking 
at where there are synergies, where there are matches of 
service. Working with both Scott and Frank's organization, we 
are combining a lot of the materials that can be combined into 
our entrepreneurial education training.
    As regarding moving what we do into other arenas if we are 
not able to survive in our funding, I think the issue is that 
we focused on very veteranized modules to our education pieces, 
that sense of community that I talked about building is very, 
very important to the veterans who go through programs.
    If you look at traditional courses offered by SBA, about 10 
to 12 percent of the people taking those courses are veterans 
who did not identify themselves as veterans on the onset of 
that course. Having them go through a program with someone else 
going through SBA is valuable. Having them go through a program 
with other veterans is more valuable. The key to success in 
what we are doing now is veterans helping veterans, veterans 
mentoring who have additional skills in business, who have the 
ability to long-term reflect on what it was like to start a 
business, the obstacles they overcame, the venues they pursued, 
and the avenues for success are all very key to helping 
veterans succeed in business.

    Ms. Herseth. Thank you, Mr. Blackwell. I appreciate your 
insights and your testimony.
    Madam Chairwoman, could I follow up with a different 
question for a different member of the panel?

    Chairwoman Musgrave. Yes. As a matter of fact, I am going 
to offer another round, and I will just continue with you, 
please.

    Mr. Lopez. Oh, great.

    Chairwoman Musgrave. For the two ladies that bothered to 
show up, we are going to give them a little more opportunity. 
Go ahead.

    Ms. Herseth. Thank you.
    Mr. Salus, am I pronouncing that correctly?

    Mr. Salus. Yes, ma'am.

    Ms. Herseth. Okay. Could you explain the e-travel contract 
issues you are facing as a small business trying to compete for 
federal travel contracts?

    Mr. Salus. Yes, ma'am. The federal government spends $20 
billion in travel. There are three prime contractors in e-
travel, and that is IDS, Northrup Grumman, and Carlson-
Wagonlite.
    Of the three prime contractors, only one understands the 
travel business because they are in the travel business. My 
frustration is that Northrup Grumman knows how to send up 
missiles, IDS knows IT work, but they do not understand the 
travel business.
    It is my frustration that these prime contractors are not 
looking at small businesses. I, myself, am a sub for a 
subcontractor. As a sub for a subcontractor, I have no--I do 
not get any credit with GSA. So taking eight months for me to 
be on the GSA schedule, I have no worth under GSA scheduling.
    So the bundling effect, what we call bundling, is that 
these three prime contractors, they still work with the top 
large agencies for the travel. So the subcontractors, me being 
a sub for a sub, we have no credit. Yet we are still doing the 
work.

    Ms. Herseth. Thank you for providing an answer that I 
anticipated, I guess, but I wanted to make it for the record, 
and that is, and especially your experience, knowing the travel 
business and identifying what happens when you have these three 
prime contractors, and the services they are providing are 
outside of their sort of primary business. Then what happens 
when you do not have certain prime contractors that are either 
as familiar with the law, is willing to do what they could do 
in this case under the programs that we have established. So I 
appreciate you being here today.

    Mr. Salus. Thank you.

    Ms. Herseth. And your responses. Thank you.

    Mr. Salus. Thank you.

    Chairwoman Musgrave. Thank you, Ms. Herseth.
    Ms. Brown-Waite.

    Ms. Brown-Waite. Thank you, Madam Chairman.
    This question, I think, is for Mr. Lopez. Mr. Lopez, in 
your testimony you state that the original Veterans Corporation 
Board of Directors did not appear to be adequately experienced 
to execute the corporation's mission.
    In your opinion, has this changed, and could you describe 
the necessary attributes, skills, and abilities of future 
corporation leaders?

    Mr. Lopez. Thank you. No, I do not believe the original--
the veterans organizations proposed three of the leading 
executives in the country to be members of the board of the 
original Veterans Corporation. They were all rejected by the 
present administration has not being adequate, which kind of 
stunned us because we could not think of anybody more adequate.
    One of the characteristics you are looking for if you are 
going to go to the private sector for money is you are going to 
look for people who have it, and people who can generate it. If 
you have a board of individuals who subscribe to the 
principles, but do not have the experience and do not know how 
and where to find money, which is what the Veterans Corporation 
did, you have a bunch of people who are working very, very 
hard, and getting nowhere.
    Looking at the present board, I do not believe that the 
statute of the board is still sufficient to enable them to 
generate the necessary support from the private sector. It has 
to be a very, very high-level support in order to generate the 
type of money they need to make this program a success.

    Ms. Brown-Waite. Just a follow-up question. Other than 
being rejected by the administration, were there reasons given 
and were the people who eventually were appointed, were they 
alternates? Tell me how we got into this situation, and let me 
just preface that with I know having served on boards, it is 
sometimes a very difficult situation to raise money regardless 
how great the cause is. And so I want to make sure that it is 
not just a situation of being unhappy with who was appointed.
    So if you could give me some specifics in this area, it 
really would help me.

    Mr. Lopez. Surely.

    Ms. Brown-Waite. Thank you.

    Mr. Lopez. The board was finally realized, the major part 
of the board, during the end of the Clinton Administration, and 
the President, President Clinton at that time took the position 
and made the statement that he felt that any advice he would 
get from the Congress in the legislation was ``precatory'', one 
of those words you never heard before and you had to run to the 
dictionary and find out what does that mean.
    What it meant was I can accept it or I can reject it. I can 
listen or I do not listen, so I will do what I want to do.
    Consequently, a lot of the individuals who were appointed 
to the board, in my opinion, were individuals who had perhaps 
been well meaning, but lacked those attributes that I referred 
to, and that is, they did not have access to the nation's 
philanthropy, or even to the nation's veteran leadership. So I 
felt those two things were missing. It would be almost 
impossible to carry the message forth. I am not a seer, but 
that is what I feel happened.
    The message was not communicated, and it is a very, very 
difficult responsibility for this gentleman to try and pick up 
four years of flurry, and inability to connect. And now to try 
to restore it again, I do not know. I say in my remarks that I 
submitted that with some intense--let us say commission-type 
effort on the part of the Congress, perhaps, perhaps they can 
restate the message again, and with the fact that we have now a 
part of a tragic part of our history, and that is the war in 
Iraq and Afghanistan, this might be sufficient now to change 
the circumstances and perhaps make them able to reach that 
philanthropic community.

    Chairwoman Musgrave. Thank you, Ms. Brown-Waite. I 
especially appreciate you coming when Mr. Boozman could not 
return for the latter part of the hearing.
    I just want to challenge the witnesses to tell me what you 
think is the most single important initiative for assisting the 
service veterans veteran-owned small businesses in federal 
contracting if I could just toss that out. Maybe you need to 
look at each other. What would you say it is?

    Mr. Lopez. I think we looked at each other many times 
before.
    [Laughter.]

    Mr. Lopez. If I may.

    Chairwoman Musgrave. Yes.

    Mr. Lopez. I believe we are in the battle for the--as I say 
in my written comments--for the hearts and minds of the 
contracting officers. They have developed a mindset that 
responds to what they believe the Congress has authorized them 
to do, and they are very risk-adverse, and they feel 
comfortable with that particular mindset.
    And getting them to change is very, very difficult, 
especially if it puts them into a population which, if you take 
a look, they have never served before. This is service disabled 
individuals who use a very word ``disabled''. You have an 
implication there that these people are not competent. This 
frightens the contracting official.
    The procurement executive in the agencies, and as the 
President did in his executive order, must be very, very firm 
and say I want this done, I want it done now, and the Congress 
must repeat that. We want this done. We are serious about it. 
We want it done now.
    Our guys are dying at the rate of 1,100 a day. Before long 
the window of opportunity is going to close on its own, and you 
will have a program that may reach the successes that these 
gentlemen refer to in terms of form and substance, but there 
will not be any takers.

    Mr. Ramos. If I may from the Department of Defense. I 
differ a little bit with Mr. Lopez. I think the contracting 
officers in the Department of Defense are attempting to do the 
so-called right thing.
    We are different in many respects from the civilian 
agencies because we have a different mission, and that is to 
make acquisitions for the warfighter. So that contracting 
officer has to consider all of the offers or considerations 
that may be before them, including veterans and service-
disabled veterans.
    Ultimately in their market analysis in making a 
consideration, they will consider the best opportunity for the 
warfighter in terms of that acquisition decision.
    Now, the other thing that we have in the Department of 
Defense that again is different from the civilian agencies is 
that we try to look and find the firms that fit into the 
industries.
    I think if you look at what Mr. Lopez is saying we are 
losing 1,000 a day, I understand, of veterans, we kind of think 
those are the World War II veterans. We think we are looking 
at--in terms of our supplier base, the Vietnam-era veterans, 
and from that period on.
    What is really interesting, and Congressman Lipinski who 
just left touched on something that I think we should--we are 
beginning to focus on, and that is the transformation of the 
Department of Defense in terms of its requirements from lessons 
learned in Afghanistan and Iraq.
    The veterans that we see coming from Iraq and Afghanistan 
will have a different knowledge base, particularly in the 
technology area that we are seeking. And things have changed 
since 9/11, and it does not affect the veterans so much, but I 
think it is a commodity that they can sell. They have an 
ability to sell their security clearances. I believe this is 
what Congressman Lipinski said. That is a valuable commodity 
that we are trying to build upon with respect to their 
experience base.
    We are having a conference on June 20, which is the first 
one for the Secretary of Defense, along with the other military 
components, where we are sold out, we have 500 registrants and 
they are already sold out. And we are bringing individuals from 
the Veterans Administration, Secretary Perry from GSA, the 
ethics officer from inside of the Department of Defense, and a 
number of keynote speakers. We are having Everett Alvarez, one 
of our longest captive prisoners of war, to talk to them 
because he is a successful businessman, and we want him to talk 
with candor about what it is to be a successful businessman in 
the Department of Defense.
    So again, that is just a quick perspective of what we are 
trying to do.

    Chairwoman Musgrave. Well, I thank you. I have a son who is 
serving in the military right now, and in a matter of weeks we 
will add a son-in-law to the family that recently got home from 
Afghanistan. So as we approach Memorial Day, I just want to 
express my love and appreciation to veterans. We have a couple 
of World War II veterans in the family as well.
    You know, we lose about a thousand a day. Those in my 
family are heroes to all of us, and Korean War veterans too, 
the forgotten war, if you will. So these veterans' issues are 
very near and dear to my heart, and I thank you gentlemen for 
your excellent testimony today, and I thank my colleagues for 
their participation, and this meeting is adjourned.
    [Whereupon, at 11:46 a.m., the subcommittees were 
adjourned.]





                                 



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