[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                  CONTRACTS AND CONTRACTING POLICY AT

                THE U.S. DEPARTMENT OF VETERANS AFFAIRS
=======================================================================


                                HEARING

                               before the

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 23, 2009

                               __________

                           Serial No. 111-14

       Printed for the use of the Committee on Veterans' Affairs



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                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

CORRINE BROWN, Florida               STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine            JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South     HENRY E. BROWN, Jr., South 
Dakota                               Carolina
HARRY E. MITCHELL, Arizona           JEFF MILLER, Florida
JOHN J. HALL, New York               JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois       BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia      DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico             GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas             VERN BUCHANAN, Florida
JOE DONNELLY, Indiana                DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia

                   Malcom A. Shorter, Staff Director

                                 ______

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

          STEPHANIE HERSETH SANDLIN, South Dakota, Chairwoman

THOMAS S.P. PERRIELLO, Virginia      JOHN BOOZMAN, Arkansas, Ranking
JOHN H. ADLER, New Jersey            JERRY MORAN, Kansas
ANN KIRKPATRICK, Arizona             GUS M. BILIRAKIS, Florida
HARRY TEAGUE, New Mexico

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                             April 23, 2009

                                                                   Page
Contracts and Contracting Policy at the U.S. Department of 
  Veterans Affairs...............................................     1

                           OPENING STATEMENTS

Chairwoman Stephanie Herseth Sandlin.............................     1
    Prepared statement of Chairwoman Herseth Sandlin.............    40
Hon. John Boozman, Ranking Republican Member.....................     2
    Prepared statement of Congressman Boozman....................    40

                               WITNESSES

U.S. Small Business Administration:
    Shawne Carter McGibbon, Acting Chief Counsel for Advocacy, 
      Office of Advocacy.........................................    29
        Prepared statement of Ms. McGibbon.......................    71
    Joseph Jordan, Associate Administrator for Government 
      Contracting and Business Development.......................    32
        Prepared statement of Mr. Jordan.........................    87
U.S. Department of Veterans Affairs, Jan R. Frye, Deputy 
  Assistant Secretary for Acquisition and Logistics..............    33
    Prepared statement of Mr. Frye...............................    89

                                 ______

American Veterans (AMVETS), Christina M. Roof, National 
  Legislative Assistant..........................................    24
    Prepared statement of Ms. Roof...............................    69
CSSS.NET, Bellevue, NE, Lisa N. Wolford, President and Chief 
  Executive Officer..............................................    10
    Prepared statement of Ms. Wolford............................    52
Federal Sources, Inc., a Washington Management Group Company, 
  McLean, VA, Colonel Raymond C. Bjorklund, USAF (Ret.), Senior 
  Vice President and Chief Knowledge Officer.....................    18
    Prepared statement of Colonel Bjorklund......................    55
MCB Lighting and Electrical, Owings, MD, Charles Maurice Baker, 
  President and Chief Executive Officer..........................     8
    Prepared statement of Mr. Baker..............................    48
MicroTech, LLC, Vienna, VA, Anthony R. Jimenez, President and 
  Chief Executive Officer........................................     6
    Prepared statement of Mr. Jimenez............................    43
National Veteran-Owned Business Association, Coraopolis, PA, 
  Scott Denniston, Director of Programs..........................    19
    Prepared statement of Mr. Denniston..........................    60
Oak Grove Technologies, Raleigh, NC, Mark J. Gross, President and 
  Chief Executive Officer........................................     4
    Prepared statement of Mr. Gross..............................    41
Veterans Enterprise Training and Services Group, Inc. (VETS 
  Group), Joe Wynn, Chairman, President/Chief Executive Officer, 
  Member, Veterans Entrepreneurship Task Force (VET-Force), and 
  National Association for Black Veterans........................    22
    Prepared statement of Mr. Wynn...............................    62

                       SUBMISSIONS FOR THE RECORD

Greentree Environmental Services, Inc., Indianapolis, IN, John R. 
  Casey, President, letter.......................................    91
JBC Corp, Virginia Beach, VA, Brian W. Cavolt, USN (Ret.), Chief 
  Executive Officer, statement...................................    92

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Mark Gross, President and Chief Executive Officer, Oak 
      Grove Technologies, LLC, letter dated April 28, 2009, and 
      response letter dated June 5, 2009.........................    95
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Anthony R. Jimenez, President and Chief Executive Officer, 
      MicroTech, LLC, letter dated April 28, 2009, and Mr. 
      Jimenez's responses........................................    97
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Charles Baker, Chief Executive Officer, MCB Lighting and 
      Electrical, letter dated April 28, 2009, and Mr. Baker's 
      responses..................................................    98
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Ms. Lisa Wolford, President and Chief Executive Officer, 
      CSSS.NET, letter dated April 28, 2009, and Ms. Wolford's 
      responses..................................................   101
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Mr. Scott F. Denniston, President, Scott Group of VA, LLC, 
      letter dated April 28, 2009, and Mr. Denniston's responses.   104
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Mr. Joe Wynn, Chairman, President and Chief Executive 
      Officer, The Veterans Enterprise Training and Services 
      Group, letter April 28, 2009, and Mr. Wynn's responses.....   105
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      James King, Executive Director, American Veterans (AMVETS), 
      letter dated April 28, 2009, and response from Christina M. 
      Roof, National Legislative Assistant.......................   108
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Mr. Jan Frye, Deputy Assistant Secretary for Acquisition 
      and Logistics, U.S. Department Affairs, letter dated April 
      28, 2009, and VA responses.................................   111


                  CONTRACTS AND CONTRACTING POLICY AT


                THE U.S. DEPARTMENT OF VETERANS AFFAIRS

                              ----------                              


                        THURSDAY, APRIL 23, 2009

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                      Subcommittee on Economic Opportunity,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:00 p.m., in 
Room 334, Cannon House Office Building, Hon. Stephanie Herseth 
Sandlin [Chairwoman of the Subcommittee] presiding.

    Present: Representatives Herseth Sandlin, Teague, and Boozma


        OPENING STATEMENT OF CHAIRWOMAN HERSETH SANDLIN

    Ms. Herseth Sandlin. Good afternoon, ladies and gentlemen. 
The Committee on Veterans' Affairs, Subcommittee on Economic 
Opportunity, hearing on contracts and contracting policy at the 
U.S. Department of Veterans Affairs will come to order.
    Before I begin with my opening statement, I would like to 
state that Mr. John Casey, President of Greentree Environmental 
Services, Incorporated, and Mr. Brian Cavolt, Chief Executive 
Officer of JBC Corporation, have asked to submit written 
statements for the hearing record. If there is no objection I 
ask for unanimous consent that their statements be entered for 
the record. Hearing no objection, so entered.
    [The prepared statements of John Casey and Brian Cavolt 
appear on p. 89 and p. 90.]
    Ms. Herseth Sandlin. I ask unanimous consent that all 
Members have 5 legislative days to revise and extend their 
remarks, and that written statements be made part of the 
record. Hearing no objection, so ordered.
    As our Nation's veteran-owned small businesses encounter a 
challenging economic environment, it is important that we 
continue to provide oversight on small business opportunities 
for veterans and service-disabled veterans, and review laws 
that are ineffective, and consider possible solutions. During 
the 110th Congress we held 3 hearings on the subjects of 
veterans' entrepreneurship and self-employment, Federal 
procurement and the 3-percent set aside, and contract bundling. 
During these hearings, many of our panelists expressed several 
concerns, including the need to retrain Federal employees on 
existing laws and regulations; a majority of Federal agencies 
not meeting the 3-percent set aside for veteran-owned small 
business; the need to streamline existing programs; and the 
lack of enforcement of existing laws and regulations. 
Furthermore, the Subcommittee recently reviewed correspondence 
from a veteran concerned that the Small Business 
Administration's (SBA's) offices in San Antonio, Texas are 
promoting contracts with 8(a) applicants to the detriment of 
service-disabled veteran-owned small businesses (SDVOBs).
    While this and other veterans' concerns are discouraging to 
me, I am pleased that we are continuing to make progress in 
providing opportunities for our Nation's veterans. Last year we 
made progress with the enactment of Public Law 110-389, the 
Veterans Benefits Improvement Act of 2008, which contained 
language introduced by Ranking Member Boozman. This new law 
clarifies the intent of the small business provisions of Public 
Law 109-461, that these provisions apply not only to the U.S. 
Department of Veterans Affairs (VA) but also to any agency, 
entity, or person acting on its behalf. This new law requires 
that specific language be included in future agreements with 
the VA, that any agents acting on its behalf are expected to be 
in compliance with the VA's responsibilities under any laws and 
regulations promoting veteran and service-disabled veteran-
owned small businesses.
    Also, under the leadership of Chairwoman Nydia Velazquez of 
the House Small Business Committee, Congress passed Public Law 
110-186, the Military Reservist and Veteran Small Business 
Reauthorization Opportunity Act of 2008. Among several 
substantive changes this law will increase the authorization of 
the Small Business Administration's Office of Veteran Business 
Development; create an interagency task force on veteran small 
business; create a new loan initiative providing veterans with 
7(a) small business loans at 50 percent of the fees of other 
small businesses; increase the number of Veteran Business 
Outreach Centers; and provide grants to the SBA's Small 
Business Development Center to expand its outreach to veterans.
    I applaud these efforts and the work of the thousands of 
Federal employees tasked to assist our Nation's veterans. But 
more can and should be done. I look forward to exploring all 
possibilities, to work with the Interagency Task Force on 
Veteran Small Business and the veterans community on ways to 
improve existing programs.
    I now recognize our distinguished Ranking Member, 
Congressman John Boozman, for any opening remarks he may have.
    [The prepared statement of Chairwoman Herseth Sandlin 
appears on p. 40.]

             OPENING STATEMENT OF HON. JOHN BOOZMAN

    Mr. Boozman. Thank you, Madam Chair. During the 109th 
Congress we passed important small business legislations at 
sections 502 and 503 of what became Public Law 109-461 on 
December 22, 2006. Those provisions provided VA contracting 
officials with several tools to enable them to increase the 
number of contracts given to veteran and disabled veteran-owned 
small businesses. To their credit, VA has made a significant 
effort to increase veteran-owned small business share of 
contracts, and last fiscal year awarded 14.9 percent of the 
procurement contracts worth about $2.1 billion that went to 
veteran-owned small businesses, including $1.66 billion to 
disabled veteran-owned small businesses. I congratulate VA 
staff for that accomplishment and for setting the standard for 
the rest of the Federal Government.
    Public Law 109-461 had several important features that 
requires VA to set veteran-owned small businesses procurement 
goals. It requires VA to verify the subcontracting plans 
submitted in proposals, that they are carried out. It set 
thresholds for sole source and restricted competition. It 
requires that a small business seeking contracts under 
provisions of Public Law 109-461 be listed and verified in the 
database of veteran-owned small business maintained by the VA. 
The law also requires VA to verify that businesses applying for 
listing in the database are owned and controlled by veterans 
and the service connected disability status of the owner or 
owners. The law also establishes enforcement provisions, and 
how a business is treated when ownership passes due to the 
death of the veteran, and annual reporting requirements. 
Finally, the law clearly states that VA shall give priority to 
a small business owned and controlled by veterans if such 
business concern also meets the requirements of that 
contracting preference.
    However, I have concerns. While VA has done an excellent 
job in exceeding the veteran-owned small business contracting 
goal, I am very concerned about the implementation of the 
database provisions. It is my understanding that 28 months 
after the provisions became law, only 974 of the 18,368 
companies in the VA database have been verified as veteran-
owned small businesses, with another 427 pending verification. 
At that rate, it will take about 20 more years to work through 
the entire database. To me, the law states that every business 
in the database must be vetted, not just those who request 
verification. It makes no sense to me to maintain what is 
purported to be a list of veteran-owned businesses that is 
really a list of those who request verification and those who 
do not. Any business that does not desire verification of its 
veteran and ownership status is a potential protest. In the 
meantime, it is entirely possible that a non-veteran-owned 
company could be awarded a contract by a Federal agency solely 
on its presence in the database.
    The point I want to make to the VA witnesses here today is 
that the law says verify the database. And while the law did 
not specify a finishing date the foot dragging is preventing 
hard working and qualified veteran-owned companies from being 
eligible to compete for VA businesses under the provisions of 
Public Law 109-461.
    I also believe we have not received the annual report due 
to Congress by December 31st of each year. I would like to know 
when we can expect that report. Madam Chair, I feel it is 
necessary to point out that if a lack of staff, or if there 
other impediments to implementing provisions of the law we need 
to hear about it from the Department. Otherwise, it is 
perfectly reasonable for us to expect reasonable progress 
toward implementing the legislation we pass. And in the case of 
the database, I think we have got some work to do.
    So thank you very much, Madam Chair, and I yield back.
    [The prepared statement of Congressman Boozman appears on
p. 40.]
    Ms. Herseth Sandlin. Thank you very much, Mr. Boozman. I 
want to welcome our panelists testifying before the 
Subcommittee today. Joining us on the first panel is Mr. Mark 
Gross, President and Chief Executive Officer of Oak Grove 
Technologies; Mr. Anthony Jimenez, President and Chief 
Executive Officer of MicroTech, LLC; Mr. Charles Baker, 
President and Chief Executive Officer of MCB Lighting and 
Electrical; and Ms. Lisa Wolford, President and Chief Executive 
Officer of Client Service Software Solutions, Inc. Welcome back 
to the Subcommittee. We look forward to your testimony.
    In the interest of time, in light of the fact that we are 
getting a late start because of the series of votes that we had 
prior to the hearing starting this afternoon, and in courtesy 
to the panelists on the other 2 panels, we ask that you limit 
your testimony to 5 minutes today focusing your comments on 
your recommendations to the Subcommittee. Your entire written 
statement has been made a part of the hearing record. Mr. 
Gross, we will start with you. Welcome, you are recognized for 
5 minutes.

  STATEMENTS OF MARK J. GROSS, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, OAK GROVE TECHNOLOGIES, RALEIGH, NC; ANTHONY R. 
JIMENEZ, PRESIDENT AND CHIEF EXECUTIVE OFFICER, MICROTECH, LLC, 
    VIENNA, VA; CHARLES MAURICE BAKER, PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, MCB LIGHTING AND ELECTRICAL, OWINGS, MD; AND 
    LISA N. WOLFORD, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
                     CSSS.NET, BELLEVUE, NE

                   STATEMENT OF MARK J. GROSS

    Mr. Gross. Thank you, Chairwoman. Good afternoon Chairwoman 
Herseth Sandlin, Ranking Member Boozman, Members of this 
Subcommittee. First, I would like to thank you for the 
invitation to come before you again and to share some of my 
experiences and work within the veteran businessowners 
community as well as discussing contract and contracting 
policies within the VA.
    I am a veteran of the United States Army. I am Chief 
Executive Officer of Oak Grove Technologies. We are a service-
disabled veteran-owned small business. I founded the company at 
my kitchen table 6 years ago. Today, I am proud to say I employ 
over 250 employees. Over 80 percent of them are veterans, and 
22 percent are disabled veterans. Geographically we are 
disbursed across 19 States, Puerto Rico, the U.S. Virgin 
Islands, and support both Operation Enduring Freedom (OEF) and 
Operation Iraqi Freedom (OIF) in both Afghanistan and Iraq.
    I think the Department of Veterans Affairs is unique in 
that Public Law 109-461 gives the VA special authorization in 
procuring veteran disabled, veteran companies. I believe this 
is a major reason why the VA has been able to contract a 
greater percentage to both veterans and disabled-veteran 
companies. In my opinion, the climate has changed considerably 
in the past few years. If you look at some of the trends today 
you will see that many more agencies are making improvements in 
awarding to service-disabled veteran-owned businesses. Although 
I do believe they still have a long way to go.
    I think Congress has done an outstanding job in passing 
legislation, such as 106-50, 108-183, both of which established 
the disabled-veteran goals and mandates in Federal contracting. 
However, I think the problem really lies in lack of 
accountability within the agencies to meet some of these goals. 
I am here to offer my views on what can be done to ensure the 
state of veterans entrepreneurship within the Federal 
Government.
    I will offer a few recommendations to the Subcommittee. The 
first is propose legislation similar to 109-461 for all Federal 
agencies; with respect to set asides and sole source, eliminate 
the rule of 2 for service-disabled veterans, which is the only 
socioeconomic group that has that requirement; create a level 
playingfield between the statutory programs by changing some of 
the language from ``may'' to ``shall'' when restricting 
competition for disabled veteran companies; on small business 
subcontracting plans, including all details of the plans 
required by large prime contractors and making that information 
public using electronic forms 294 and 295 upon request; and 
mandate that the contracting officers impose liquidated damages 
as predicated with Federal Acquisition Regulation (FAR) part 
19.705 through 07 for large companies that fail to demonstrate 
good faith efforts in fulfilling the requirements of their 
subcontracting plan; close the loophole in the General Services 
Administration (GSA) FAR part 8 wherein large businesses 
qualify as small companies in many cases; if contracting 
bundling must be utilized for acquisition streamlining, ensure 
adequate percentages are allocated with small business plans 
and include disabled veteran and veteran-owned companies; and 
lastly, establish an ombudsman within the agencies to provide 
procurement oversight.
    To address whether or not I believe there are enough 
veteran companies to fulfill these percentages, I would say 
without question there are. A few years ago it was stated that 
there were not enough companies, veteran/disabled-veteran 
companies, registered in the Central Contractor Registration 
(CCR). But yet, CCR listed 8,000 active 8(a) companies and 
12,000 active veteran/disabled-veteran companies. Yet most 
agencies had no problem meeting their 8(a) goals, which are 
considerably higher than veteran goals.
    As an entrepreneur and a veteran, I think the climate has 
certainly gotten a lot better in the past 7 years. I think we 
do have a long way to go, still. But I am confident that 
Congress and many other Federal agencies such as the Department 
of Veterans Affairs are committed to this cause. I thank you 
for your time and your efforts to improve the Federal 
contracting climate for disabled veteran-owned companies.
    Last, I would just like to add, from my perspective we have 
done very well within the VA. We manage the VA data sharing 
program that, it is the data sharing program between the U.S. 
Department of Defense (DoD) and the VA. We have multiple e-
Learning programs, training modules that we have developed for 
the VA. As few of them, is traumatic brain injury (TBI), and it 
is the clinician's patient communications for someone that is 
suffering from post-traumatic stress disorder (PTSD) and TBI. 
We have done the suicide risk prevention training module. We 
have done the teleretinal imaging, and it allows VA physicians 
to diagnose diabetic retinopathy. We have a compensation and 
pension exam for people with TBI. We recently finished a 
program for training for reentry of incarcerated veterans who 
are suffering from a form of mental illness. And I am very 
happy to say as of yesterday we won another contract with the 
Department of Veterans Affairs, Veterans Benefits 
Administration, for the Federal Advisory Committee, supporting 
the Federal Advisory Committee that establishes disability 
ratings. So that is all I have.
    [The prepared statement of Mr. Gross appears on p. 41.]
    Ms. Herseth Sandlin. Thank you, Mr. Gross. Mr. Jimenez, you 
are recognized.

                STATEMENT OF ANTHONY R. JIMENEZ

    Mr. Jimenez. Thank you. Good afternoon Congresswoman 
Herseth Sandlin, Ranking Member Boozman, and Subcommittee 
Members. I really appreciate the opportunity to testify at this 
hearing regarding how the Department of Veterans Affairs awards 
contracts, and I am honored to represent other veterans and 
service-disabled veteran small businessowners.
    My name is Tony Jimenez and I am the President and Chief 
Executive Officer of MicroTech. We are a minority, 8(a) company 
and we are one of the verified service-disabled veteran 
companies that Congressman Boozman had spoke about earlier. We 
provide information technology (IT) network support as well as 
video teleconferencing, and a number of other things. I retired 
from the Army in 2003 after serving 24 years on active duty and 
I started MicroTech a year later after spending some time with 
large industry. Today we employ over 250 great Americans and my 
team has become a powerful job creation engine, and a force for 
economic development in not only my community and my State of 
Virginia, but in a number of other States across the Nation.
    Since the last time I testified before this Committee in 
July of 2007, MicroTech has quadrupled in size. We have added 
15 additional government contracts to our portfolio and we now 
manage over 400,000 government IT users daily providing 
products and solutions to more than 30 government agencies.
    It has been nearly 4 years since President Bush issued 
Executive Order 13360 requiring Federal agencies to provide 3 
percent of all contracting opportunities to service-disabled 
veterans and to date fewer than a handful have achieved that 
annual goal. As a former contracting officer from the Federal 
Government, I continue to be disappointed at how many agencies 
say they care but do nothing, or at best do very little, to 
ensure that organizations provide 3-percent of contracting 
opportunities.
    The good news is, is that MicroTech's experience dealing 
with the Department of Veterans Affairs on this issue has been 
very positive. From my perspective, the VA awards a greater 
percentage of contracts to veteran-owned and service-disabled 
veteran-owned small businesses than any other agency in the 
Federal Government. Veteran businesses seem to enjoy greater 
success at the VA than non-veteran-owned businesses. And this 
is happening because of the superlative efforts of the 
Committee as well as others. In addition, the VA, as one 
expects, wants to take care of our Nation's veterans. So it 
makes sense that the VA strongly supports set aside 
opportunities for veterans. The VA keeps their eyes on the 
prize and works hard to ensure veterans get their fair share of 
competitive contracts.
    The problem is that this commitment to taking care of our 
veterans is not uniform across the Federal Government. As it 
pertains to this hearing, I believe there should be, and could 
be, significant improvements made to correct the systemic 
problems in our procurement system with regards to veterans and 
service-disabled veterans, and to help the Federal Government 
achieve its 3-percent goal.
    Obviously, one of those is limiting sole source awards. 
Sole source is a way of satisfying the procurement requirement 
for VA as well as other agencies. However, sole source 
contracts really need to be used where they benefit the 
government.
    I also recommend revising contract bundling. Contract 
bundling adversely impacts competition and hurts small 
business.
    The proliferation of long-term indefinite delivery, 
indefinite quantity (IDIQ) contract vehicles has been a serious 
detriment to small businesses. IDIQs such as GSA VETS, NASA 
SEWP, a number of others that are starting to spring up, have 
been very good for veterans. However, they are still few and 
far between. There just are not enough opportunities that 
mirror what the large businesses do to allow the same type of 
opportunities for service-disabled veterans and veteran-owned 
businesses.
    What kinds of businesses are getting the majority of 
contracts? Large, small, veteran-owned? The statistics that I 
have reviewed clearly showed that larger businesses are getting 
the majority of contracts, as well as the larger more lucrative 
contracts. There is still a belief that bigger is better. But 
good, service-disabled veteran small businesses and veteran-
owned small businesses are doing great work on very large and 
visible contracts and changing the perception that only big 
systems integrators can adequately perform the work.
    You asked me some questions coming into this Committee, and 
I would like to address those. One of the questions was, 
address concerns regarding VA contracting. What needs to be 
done? Contracting with the VA can be extremely difficult for 
small businesses. It not only requires them to understand VA's 
specific contracting and complex procurement requirements, but 
it also requires understanding of the VA organization and the 
culture.
    On July 3, 2007, in regards to are there enough businesses, 
the U.S. Census Bureau released a report entitled, ``The First-
Ever Report on Veteran Entrepreneurs and Their Businesses.'' 
This report stated that veterans tend to be better educated 
before starting or acquiring their business, they are older 
than other would-be entrepreneurs, and the report also showed 
veteran businessowners comprised about 3 million, or 14.5 
percent, of the estimated 20.5 million owners of all firms who 
responded to the survey.
    In summary, what could be done to help veteran small 
businesses? I have often heard people in Washington say that we 
do not need any more laws. We just need to enforce the ones we 
have. In order to sustain or further increase VA's ability to 
contract with veteran and service-disabled veteran small 
businesses it requires vigilance, clear guidance, improved 
oversight, and effective enforcement. More will also need to be 
done to educate procurement officials about requirements and 
about the government's desire to contract with veterans. We 
need to do more to get the word out and let others know of 
procurements that provide opportunities to veteran-owned 
businesses owners, have the support of VA leadership, the 
House, the Senate, and President Obama.
    I would also ask that you please carry the message you are 
hearing today to other committees you serve on, and do 
everything you can to help educate others in Washington who do 
not recognize the value and importance of veteran 
entrepreneurs.
    Madam Chairwoman and distinguished Committee Members, I 
appreciate the time you and other Members of the Committee on 
Veterans' Affairs have spent on this and other critical topics 
affecting veteran entrepreneurship. I speak for all veteran 
entrepreneurs when I say how very proud we are of this 
Committee and the hard work that you and your staff members do 
for our Nation's veterans. Be assured we are not asking for a 
handout, just a hand up. Thank you for helping to level the 
playingfield and for believing in us and our ability to give 
back to the Nation that gave us so much.
    This concludes my testimony. Thank you.
    [The prepared statement of Mr. Jimenez appears on p. 43.]
    Ms. Herseth Sandlin. Thank you, Mr. Jimenez. Mr. Baker, you 
are recognized for 5 minutes.

               STATEMENT OF CHARLES MAURICE BAKER

    Mr. Baker. Madam Chair, Ranking Member, and Members of the 
Subcommittee. Thank you for the opportunity to appear before 
you today to discuss VA's acquisition policy, contracts, and 
veteran entrepreneurship. It is my privilege to once again come 
before this distinguished Committee as the 2009 National SBA 
Veteran Business Champion of the Year. As an advocate for 
veterans I have spent more than 4,000 hours researching 
acquisition, looking at spending trend analysis, observing 
where the most impactful changes needed to support the maximum 
practical utilization for service-disabled veterans and small 
business in general.
    Part of my research included looking at the organizational 
management structure at VA. I believe that under the new 
leadership of Mr. Jan Frye, who I believe is one of the most 
knowledgeable heads of procurement I have spoken with, will 
lead VA to new horizons.
    The needs of the veterans community are clearly defined as 
accelerated payment, is one thing that I feel very, very 
strongly about. I feel that the veteran community needs to, in 
this climate that we are in right now, we need to make sure 
that we can be paid immediately. And under accelerated 
payments, under the Prompt Payment Act, it is allowed for small 
business to be paid immediately. That is one of the things I 
would like to make sure that happens.
    Let us talk about some of the must haves. We need to close 
the loopholes in Part 8.404. And that is a big issue that has 
not been done for a long time which allows large business to be 
able to come in and take contracts that are exclusively 
reserved for small business. That is one of the things, I 
think, that we really need to make sure that we take care of.
    My biggest concern is that veterans are being taken 
advantage of. And that is, they are being taken advantage of by 
people actually paying a quarter of a percent without 
identifying the veterans as a legal pass through. Because the 
limitations of subcontracting do not apply to GSA Schedule and 
to full and open competition contracts, large primes are 
actually getting veterans and competing them to compete to do 
absolutely no work but then sub 100 percent of the work to 
large companies. And this is causing legitimate companies to 
not be able to get work. There are projects that have 60 to 70 
percent small business participation requirements that these 
large primes are meeting through the legal loophole of pass 
throughs, which is ethical and immoral, but legal.
    Another thing is, I would also like to see the non-
manufacturers rule to GSA Schedules and full and open 
competition. When we have, the way we have these rules so we 
have loopholes that allow people to be able to navigate the 
system, all you have to do is get on GSA Schedule, pay a fee, 
and you can do anything you want. The rules of small businesses 
do not apply. You know? Parts 13 and 19 of the FAR do not 
apply, so therefore limitation of subcontracting does not 
apply, the non-manufacturers rule does not apply. A lot of the 
things that benefit small business just do not apply.
    In my opinion, if we want to do things, we want to look at 
how we are going to fix small business, we have to look at how 
we can plug some of the loopholes. If we continue to put water 
in a tub and it has holes in it, if we do not look at how we 
can address and fix these issues, we are not going to have, we 
are not going to be able to develop capacity and capability. We 
are just going to keep talking about the same thing. We cannot 
find companies, they are not available, and it is because of 
the way the system is being structured and manipulated.
    It is, to me, I talk to a lot of veterans. And one of the 
things, I would like to tell one quick story. I had a veteran 
that called me about 2 weeks ago and he wanted to talk to me 
about a concern that he had with the VA about a contract, where 
he got called and asked whether he was on GSA Schedule or not. 
We later found out that the GSA Schedule price was 4 times 
higher than the price that the veteran actually gave the 
government and awarded the contract. Not the GSA Schedule, but 
they awarded the contract to the veteran. When the phone call 
was given, the question was, ``Are you on GSA Schedule because 
we want to use GSA schedule?'' The answer was, ``No, we are not 
on GSA Schedule. But you are not supposed to be using GSA 
Schedule for ammunition anyway.''
    Anyway, so when it all, it is a success story, it is not a 
horror story. Because the bottom line was the VA did take the 
consideration, they look at, and they made the procurement to 
the service-disabled vet instead of using GSA Schedule. The 
bottom line was, the original task was looking at GSA Schedule.
    So I would just like to thank the Committee for me having 
the opportunity to be able to testify today. Thank you very 
much.
    [The prepared statement of Mr. Baker appears on p. 48.]
    Ms. Herseth Sandlin. Thank you, Mr. Baker. Ms. Wolford, you 
are now recognized.

                  STATEMENT OF LISA N. WOLFORD

    Ms. Wolford. Thank you. Thank you, first of all, for having 
me, Chairwoman Herseth Sandlin, and Congressman Boozman. And by 
the way, Kathleen Piper says hello. She thinks very well of 
you. And I want to thank all of the Members of the Committee 
today, and especially to speak on such a critically important 
issue as contracting within the VA.
    We are a prime contractor in the VA and have been doing 
business there since 2005. And I have been in business for over 
12 years, and 8 years of that is exclusively in the Federal 
Government sector. I am a veteran of the Marine Corps and my 
firm is a service-disabled veteran 8(a) woman-owned business. 
And about 50 percent of our work is DoD, 50 percent is civilian 
agency. We provide IT engineering systems and solutions to the 
Federal Government nationwide. And therefore, the majority of 
my testimony is going to be regarding just contracting at the 
VA because that is the specific topic that you asked us to 
speak about today.
    We do have an excellent record of past performance, but 
even with that it is still a struggle to do business with the 
VA. And we are a current contractor with the VA. And as you all 
know, veterans have vested into their citizenship rights in a 
very unique way that no other group can claim. And we are men 
and women, and we are every race, and every ethnic background 
possible in the veteran community. And small businesses, as you 
know, do not have access or money for political action 
Committees (PACs) or lobbyists the same as the largest do. And 
we spend 180 percent of our energy just growing our businesses, 
creating opportunities for our employees. And in our current 
economic climate where there is so much job loss in the 
economy, I think it is really important that we look at small 
businesses and understand that 75 percent of new jobs in our 
economy are created by small businesses. And, you know, small 
businesses generate more than half of the private-sector 
output. So if we want to grow our economy we should be 
directing our resources toward small businesses over any other 
type of entity.
    So let me skip ahead a little bit in the interest of time. 
I would like to see an increase in subcontracting goals for 
large prime contractors winning a bundle contract. That is not 
a sufficient justification for bundling a contract but it is 
one mitigation that they could do. And there is no reason to 
say that a large business could not subcontract 50 to 75 
percent of the work to a small business. If it has to be 
bundled, and they need to have only one contractor manage the 
contract, because those contracts are typically being taken 
away from small businesses. And multiple award contracts are 
not considered contract bundling, but it is contract bundling 
by default. And it is a great way to bundle a contract but not 
call it bundled contract. So it does not even make it into the 
metrics when you measure contract bundling.
    The VA has had a lot of success in contracting to service-
disabled veterans, and I applaud that. They have done a great 
job of changing the culture overall within the VA. A lot of 
that is from the leadership of Scott Denniston who, I am sorry 
he is retired, but I am happy for him. But there is still a 
great many changes that could be made in the VA to help SDVOBs 
be more successful, and help the VA as well.
    Some of my concerns with the VA contracting is the use of 
GSA Schedules. Some of that Mr. Baker and a couple of others 
already noted. And we are an IT services firm, so our GSA 
Schedule is a Schedule 70 contract. And you can contract out on 
a Schedule 70 contract and send it out, a contractor could send 
that out to 3 SDVOBs and notify the incumbent prime, say 
Lockheed Martin, Northrop Grumman, whoever, and they can remind 
that large prime that the limitation on subcontracting does not 
apply on GSA Schedules. And therefore, they can subcontract 
out, the prime SDVOB can subcontract 100 percent of the work 
and merely be a pass through.
    That creates a lot of work for both the prime contractor 
and for the government customer. The government customer has no 
privity of contract with the subcontractor and the 
subcontractor can basically do poorly on the contract, send the 
contract down the tubes, and the prime contractor has no 
control over it because they have zero percent of the work. And 
the prime contractor is the one who would be debarred from 
government contracting not the subcontractor.
    The way to get around this is to enforce the limitation on 
subcontracting rules. And if you want to count that as a small 
business award you should only get to count the portion that 
was actually done by the small business, whether that is zero 
percent or 51 percent. So that is, again, like Charles said, it 
is legal but it is not ethical and it is not moral. It also 
means the SDVOB will not be enhancing their past performance 
and their ability to really do a better job on the next 
contract that they do, because they did not get any experience 
out of it. And so I consider that to be a huge issue.
    The next concern I have is related to the Center for 
Veterans Enterprise (CVE) and their certification of SDVOBs. 
And Congressman Boozman spoke about that. Our calculations that 
I heard about is that that is going to take them not 24 years 
but that is probably likely 7 years to get to that, just so 
current contractors are currently in the database. And that is 
if we do not create any new veterans, any new service-disabled 
veterans. But we have a factory over in Afghanistan and Iraq 
that is creating new veterans everyday. And so that is not 
feasible.
    My firm has been doing business with the VA since 2005 as a 
prime contractor, and we are not yet certified. And we have 
been in the database from the very beginning. Think about that. 
And we are very active in the community. So there are easy ways 
to get around that. I have also heard that the CVE wants to 
recertify SDVOBs every year. I am not sure what the point of 
that really is, since once you have a service-connected 
disability it is a lifetime disability. It is not something you 
need to renew every year. If they are trying to certify the 
fact that you are really running the business there are other 
ways of doing that. We are a certified woman-owned business and 
we have already gone through that process. So that is an easy 
way I could send them the same verification paper to prove that 
I am really running the company and that should be basically a 
rubber stamp.
    I would like to see the full implementation of the 
recommendations from former Secretary Gordon Mansfield. On June 
19, 2007, IL-049-07-08 was published and detailed the first 
veterans procurement program. And on the February 11, 2005, he 
published a memorandum that was addressed to all the Under 
Secretaries, Assistant Secretaries, and other Department 
officials. And in those documents he detailed a specific plan 
on how to increase the use of SDVOBs and to change the 
contracting policy within the VA for SDVOBs. And although some 
portions of that have been implemented much of it has not been. 
And I have included a copy of both of those for your purposes.
    Some of the key elements that have not been implemented 
that I am aware of is the use of sole source awards for 
service-disabled veteran-owned businesses. That gives SDVOBs 
the same rights that 8(a)s should have. And remember, SDVOBs 
have earned their seat at the table. It is not an entitlement 
program. Require a written justification for not using a 
service-disabled veteran-owned competition or sole source 
acquisition to an SDVOB. Incorporate SDVOBs in veteran-owned 
small business socioeconomic goals in the performance plans of 
executives and managers, and any employees who influence or are 
involved in the acquisition process.
    And I guess I have run out of time. So I will cut it short, 
but you have the rest of my testimony.
    [The prepared statement of Ms. Wolford appears on p. 52.]
    Ms. Herseth Sandlin. Thank you, Ms. Wolford. I appreciate 
your testimony. Let me just start with getting a little bit 
more information from both Mr. Baker and Ms. Wolford on this 
pass through issue. Do either of you have any sense of how 
often this happens? And why a small business would want to 
engage in this practice in light of the risks associated with 
it as you describe, Ms. Wolford?
    Ms. Wolford. Small businesses will, some of the small 
businesses that will do that are doing that because they are 
desperate for business. And the large businesses will do it 
because they can. And it is frequent. It is very frequent. I 
get, I will not bid on those contracts, personally, because I 
think it is unethical. But I have gotten calls about it 
frequently.
    Mr. Baker. Same thing. I probably get calls on that weekly, 
at least 6 to 7 calls a week. It is really happening a lot. And 
it is really sad. You know, a lot of, like Lisa said, the 
situation is you have a lot of veterans out there that are 
desperate. They do not have capability, they do not have 
capacity, they do not have assistance. The biggest problem in 
the community is we do not have anybody that really is out 
there to help shape and instruct you, what you need to do as a 
business to be a competitive, viable, successful business. 
Therefore, you get a lot of guys out there with one, I mean, 
they only have one employee. And those are most of the people 
that are doing pass throughs, with 1 and 2 people.
    I mean, on Base Realignment And Closure (BRAC) projects in 
Maryland. I am on the Maryland Advisory Board for Base 
Realignment And Closure for the government. There must be 60, 
70, 80 pass throughs with BRAC. I mean, it is prevalent. It is 
the way of doing business with BRAC on $100 million, $200 
million contracts.
    Ms. Herseth Sandlin. Do you agree with Ms. Wolford that the 
way to crack down on this practice is through enforcement of 
the existing limitations on subcontracting?
    Mr. Baker. No. The limitation on subcontracting does not 
apply. What needs to happen is that, as Ms. Wolford said, what 
I suggested to DoD is that we do a policy change. And with the 
policy change we invoke FAR Part 15.304 CI, which basically 
lays out the subcontracting plan. You have to tell what your 
subs are, how many dollars, you cannot bait and switch. The way 
it is done now, they put a dollar amount in. And nothing really 
happens. They do not really know or have the idea of who they 
want to subcontract with until after the fact. And then it is, 
like, let us go see we can find and who will take, I have heard 
of a quarter of a percent, what people are giving on $40 
million, $50 million contracts. I have also heard of people 
getting wine and beer.
    Ms. Herseth Sandlin. I want to see some clarification in 
just a minute, Ms. Wolford. When you stated that some of them 
do not even know who they are going to subcontract with, is it 
both a practice of large business proactively contacting small 
businesses like yours----
    Mr. Baker. Right.
    Ms. Herseth Sandlin [continuing]. Wanting to use you as a 
pass through?
    Mr. Baker. Yes.
    Ms. Herseth Sandlin. But also some small businesses 
desperate for work, even though they know they do not have the 
capability or the capacity, as you said, seeking the contract 
not knowing for sure who they are going to subcontract to? But 
knowing they have to subcontract to a larger business?
    Mr. Baker. No, what happens, ma'am, you go to outreach 
sessions. When you go to the outreach, because that is the 
requirement for good faith, that we were talking about earlier. 
As they do their requirement for good faith effort, they have 
outreach sessions. What they are doing is they are looking for 
people so they can call and figure out who is going to take the 
least amount of money so they can get service-disabled vet, 
SDV, woman, HUBZone, that is how they get their participation.
    Ms. Herseth Sandlin. Okay. Ms. Wolford and then Mr. 
Jimenez.
    Ms. Wolford. I think that there is 2 different things that 
are going on. One of the things that I am talking about is with 
GSA Schedules. That is the topic I was speaking specifically 
with. The GSA Schedules, the limitations on subcontracting does 
not apply and it needs to. That is what I am saying. That is a 
part of the FAR today and that needs to apply. That will plug 
one big loophole that is used frequently. Some of the things 
that Charles is talking about is not just to use the GSA 
Schedule. It is other ways of using firms as pass throughs. But 
plugging that loophole would go a long way toward it.
    Ms. Herseth Sandlin. Mr. Jimenez.
    Mr. Jimenez. Yes, ma'am. To caveat on what Lisa and Charles 
just said, there is actually a term amongst the veterans. It is 
called rent-a-vet. And it is, as funny as it actually sounds, 
what it is is companies shopping veterans and looking for the 
lowest price. And it is not a matter of going forward with a 
veteran partner and providing the kind of opportunities, it is 
not the intent that the law had. And that is to provide 
opportunities to veterans and allow them to grow their 
business. It is more of an opportunity to take advantage of the 
veteran. Take advantage of what they bring to the table in the 
set asides, and allow the larger companies, or even in some 
instances the smaller companies that have been in grooming the 
contracting officer or grooming the agency, and then convincing 
the agency to write the proposal in such a way as to not 
require a small business plan.
    What Charles is talking about is that many times the 
requirement is in there, but it does not require that you 
identify percentages up front. It does not require that you put 
in there who you are going to partner with, and what you are 
going to give them, and how you are going to give it to them. 
It just merely says 50 percent, 60 percent, or whatever the 
percent is, 30 percent, 20 percent. The business puts in that 
they intend to do that. They make a good faith effort at doing 
that. And then a year later when they go in and talk about it 
they say to the agency, and ma'am I can tell you every agency 
is guilty of this. They tell the agency, ``We did not meet our 
small business plan.'' And the agency slaps them on the hand 
and away they go, only to come back a year later and not meet 
it. And that is the piece I am talking about, about 
enforcement.
    There is nothing that is going to change this behavior if 
it is not enforced. We cannot convince the larger or medium-
sized business, or even some of the small businesses, to play 
fair with no advocate. And the VA has been a great, great 
organization in terms of writing their ship and doing it. But 
we are in desperate need. We veterans, and service-disabled 
veteran small business owners, are in desperate need of an 
advocate agency. And we really hope that VA will be that 
advocate agency. And that this Committee will help us fix those 
issues. Because the SBA so far has not paid particular 
attention to the things that the veterans organizations, or the 
things, rather, that the veteran small businesses, need. I 
mean, the SBA does not even have a mentor/protege program for 
service-disabled veterans, yet they have had one for 8(a)s for 
many, many years. So there just needs to be somebody somewhere. 
Hopefully, the U.S. Department of Veterans Affairs will step up 
and say, ``We understand. Times have changed. Veterans are 
truly concerned about what they are going do when they leave 
the armed services.'' And if entrepreneurship is an available 
option to them, and how and what and who is ensuring that that 
viable option is not turned into a rent-a-veteran option.
    Ms. Herseth Sandlin. Mr. Gross, did you have any comment on 
this issue? I noticed a couple of times you nodding your head 
in agreement that you are aware of the practice, and you are in 
agreement with the suggested solutions? Or manners in which to 
address?
    Mr. Gross. I am aware of it. However, we are to a point 
now, as far as a company, we are larger than a lot of the 
smaller companies, you know, these companies that they are 
discussing. So we do not partake in that practice.
    Ms. Herseth Sandlin. Mr. Boozman.
    Mr. Boozman. Thank you, Madam Chair. I really do not have 
any questions. I appreciate the testimony. I think you all have 
raised a lot of, as you know, the Chairman and I and the 
Committee really are trying to be helpful, and to try and plug 
some of the holes. But people are pretty smart and you plug one 
hole and a new one, if people would not, if they spent as much 
time working on their business plan as laying awake at night, 
trying to figure out how to skirt things we would be a lot 
better off. So I think you have really raised a lot of things 
that we need to follow up on.
    I also appreciate the staff, both staffs, for getting 
people like you here. I think we in Congress many times make 
the mistake of not having enough people on the ground. And you 
guys are out there in the real world, which is very tough right 
now, fighting the battle. And I appreciate your testimony. It 
was good to read, and I think the discussion today has been 
very helpful. Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman. Just another 
follow up, Mr. Jimenez. I think it is a different 
recommendation than the point you made there toward the end of 
your response to my prior question in regards to needing an 
advocate agency. In your written testimony you talk about 
creating a small business participation enforcement team----
    Mr. Jimenez. Yes, ma'am.
    Ms. Herseth Sandlin [continuing]. To enforce small business 
participation and in accordance with your request for a 
proposal. Can you just tell me a little bit more about your 
recommendation? For example, who would make up the team? What 
other role could they play? Is it a team that would be 
different from the current integrated product team that is 
established by the VA? Just if you could speak a bit more to 
your recommendation.
    Mr. Jimenez. Well, primarily what I was looking at when I 
made that recommendation was somebody somewhere who at least 
the large systems integrators, and some of the other 
organizations that do contracting with the Federal Government, 
know that there are people out there that are managing and 
monitoring what happens. What we find is that in most instances 
the small business advocate or the small business office is 
aware, but unfortunately they do not have the enforcement 
authority that they need. They cannot make changes. They can 
make recommendations. They can whisper in the right ears. They 
can say this is not fair. But in most instances what happens 
is, there is no bite. So consequently nothing, unfortunately, 
happens other than people get upset. And the Federal Government 
does not get what they intended to get.
    The enforcement, and truthfully, the Committee that I had 
thought about is one that is already in existence. And it is an 
appointed Committee that works at the SBA. And Mark Gross is 
actually a Member of that Committee. And I have been up to see 
the Committee in action. But the unfortunate thing is, is it is 
another example of a Committee that wants to do lots of good 
things on behalf of service-disabled veterans but unfortunately 
does not have the authority to do the things they need to do to 
make the changes they need to make, and to provide the 
oversight that needs to be made. And Mark can actually talk a 
little bit more about that organization. But that organization 
is a great organization that is made up of veterans 
entrepreneurs and other people that are actively involved in 
the veteran community. But unfortunately, it is more of a 
figurehead than it is an organization that has the ability to 
truly implement the change that needs to be implemented. Mark.
    Mr. Gross. That is correct. It is the, the Committee is the 
SBA's Committee for Veterans Business Affairs. Our role is 
really more to advise both the White House and Congress on 
veterans business issues. We provide written recommendations 
annually. And I would be more than happy to provide the last 
few years some of our recommendations to the Congress. I would 
be happy to provide that, copies of that to you.
    Ms. Herseth Sandlin. Yes, if you could provide copies of 
that to the Subcommittee's staff we would appreciate it. And 
just along the idea of some entity, whether an existing one or 
creating some board to do this kind of oversight, just a 
question to any of you if you wish to respond. If we funded the 
entity, or oversight activities, from a small percentage of all 
awarded contracts, do you think that contractors would oppose 
that idea?
    Mr. Jimenez. Ma'am, I honestly do not know. I do not want 
to sound pessimistic. But unfortunately, anything that takes 
money out of a contractor's pocket they are going to oppose. I 
mean, every time a recommendation is made to give business to a 
veteran or a woman-owned business, a HUB Zone Business, or an 
8(a) small business, it takes away from the percentage that 
goes to the large business. And as Lisa and Charles and Mark 
have all talked about, and not only this time but before, is 
that as a small business we do not have the ability to hire a 
lobbying firm, or to come in, or to talk to somebody in the 
halls. And we do not have, frankly, the time because we are out 
there trying to grow our business. So what we end up finding 
out is that many of these things die before they ever get to 
Committee. So I think they would be opposed. However, I think 
that your will would be stronger. And that if it were the right 
thing to do they would eventually realize it is the right thing 
to do and give in to doing the right thing.
    Ms. Wolford. The only comment I would like to extend is I 
can see it being as a percentage of any large business 
contracts. Because the small, the oversight is really about 
subcontracting. And so taking the percentage out of the small 
business contracts is not really necessary. It is really for 
oversight of the large contracts.
    Mr. Baker. I have a, it is a thought. The same way GSA has 
a surcharge, why cannot the SBA? And I believe the statute 
allows, and the SBA is coming up later, they can probably 
articulate this better than I. But I believe the statute allows 
the SBA, I know under the 8(a) program I think it does, if I 
remember correctly, it allows a fee to be charged just like 
GSA. If a fee was charged, what would be the difference between 
a small business participation example than a GSA Schedule? 
Matter of fact, I think if we probably did that it would be a 
lot more cost effective than GSA. Because I am not a proponent 
of GSA.
    Mr. Gross. I would not be opposed to paying a fee.
    Mr. Jimenez. I do not think I would either. But in 
truthfulness, ma'am, right now the Committee that serves does 
it pro bono. None of the individuals that I know of receive, I 
think there is a very, very small amount. And most of the 
people who sit on the Committee do not even file travel 
vouchers. It is just not worth the effort to pick up the extra 
$35 or $40 that you may end up making. And I think that the 
community is full of people who care enough to volunteer their 
time to be able to ensure that the veteran gets a fair shake.
    Mr. Baker. And we do have the American Legion Task Force 
that does proactively try to help out the veteran community, 
and the organization called VET-Force that is very, both 
organizations are very active in the procurement arena trying 
to assist.
    Mr. Jimenez. Absolutely, as well as a number of other 
veterans service organizations (VSOs). And I think that what 
you would find is that there would be a long line of people 
willing to help to ensure that it is done properly.
    Ms. Herseth Sandlin. I appreciate that sentiment. Again, 
these are good ideas, helpful ideas. The reason I posed the 
question is that if we were to try to move forward a formal 
oversight board different from what Mr. Gross is explaining 
given his service on the Committee that you had mentioned thus 
far. I think oftentimes if you have sort of a more formalized 
relationship with the authority for that kind of oversight, we 
would want to be able to provide staff and other resources to 
be able to conduct more aggressive oversight. That is the 
reason that I posed that question.
    I thank you. We are going to continue to work with you to, 
as we have over the past number of months, and really years 
here, to continue to delve into the specifics of the myriad 
issues that have come up. The pass through issue, the contract 
bundling issue, 3-percent set aside, and to continue to get 
your thoughts. And to determine sort of what is within our 
control to influence along the lines of Mr. Jimenez' testimony 
clear guidance, effective oversight, effective enforcement. 
Also what more we can be doing to work with our colleagues on 
other Committees of jurisdiction to ensure that all agencies 
are stepping up to the plate the way the VA has attempted to do 
here, particularly in recent years.
    We thank you for your testimony. We thank you for your 
service to the Nation and wish you well in your businesses. 
Thank you.
    I would now like to invite Panel Two to the witness table. 
Joining us on our second panel of witnesses is Colonel Raymond 
Bjorklund, Senior Vice President and Chief Knowledge Officer 
for Federal Sources, Inc.; Mr. Scott Denniston, Director of 
Programs for the National Veteran-Owned Business Association; 
Mr. Joe Wynn, Chairman of Veterans Enterprise Training and 
Services Group, Inc.; and Ms. Christina Roof, National 
Legislative Assistant for AMVETS.
    Colonel Bjorklund, I understand you have a power point 
presentation. We want to provide you sufficient time so that we 
can review your presentation. But we do ask that you not exceed 
10 minutes on the essence of time and other panelists. We will 
begin with you, Colonel, if you are ready.

STATEMENTS OF COLONEL RAYMOND C. BJORKLUND, USAF (RET.), SENIOR 
 VICE PRESIDENT AND CHIEF KNOWLEDGE OFFICER, FEDERAL SOURCES, 
INC., A WASHINGTON MANAGEMENT GROUP COMPANY, McLEAN, VA; SCOTT 
    DENNISTON, DIRECTOR OF PROGRAMS, NATIONAL VETERAN-OWNED 
   BUSINESS ASSOCIATION, CORAOPOLIS, PA; JOE WYNN, CHAIRMAN, 
PRESIDENT/CHIEF EXECUTIVE OFFICER, VETERANS ENTERPRISE TRAINING 
    AND SERVICES GROUP, INC. (VETS GROUP), MEMBER, VETERANS 
     ENTREPRENEURSHIP TASK FORCE (VET-FORCE), AND NATIONAL 
ASSOCIATION FOR BLACK VETERANS; AND CHRISTINA M. ROOF, NATIONAL 
       LEGISLATIVE ASSISTANT, AMERICAN VETERANS (AMVETS)

           STATEMENT OF COLONEL RAYMOND C. BJORKLUND,
                          USAF (RET.)

    Colonel Bjorklund. I am ready, Madam Chair. Madam Chair, 
Ranking Member Boozman, Mr. Lara, Mr. Brinck, other Members of 
the Committee and the staff, thank you very much for inviting 
me to appear before you today to provide my thoughts on the 
climate of veteran-owned business contracting within the 
Federal Government.
    This is a significant issue for this Committee and our 
country. In my experience as a military officer managing 
technology acquisition programs I interacted with scores of 
large, small, and disadvantaged businesses. Then retiring after 
26 years in the military I went to the other side of the 
negotiating table. Fed Sources is a public-sector market 
research firm. As an executive with the firm for the last 10 
years, I have been advising hundreds of companies on the 
available strategic courses of action in pursuing in contracts 
with the public sector.
    My bottom line in this brief presentation is that objective 
analysis of the market dimensions can help refine Federal 
outreach programs to engage more of the veteran-owned 
businesses and service-disabled veteran-owned businesses that 
may be interested in pursuing Federal contracts. An anecdote 
can set the stage here. When I was in the Defense Information 
Systems Agency, the Department of Defense asked us to take on 
the entire 5-percent woman-owned small business goal. I looked 
at that and I said, ``My intuition says we cannot do that.'' It 
was not because we did not want to. It was not because we would 
not try to do that. But the reason why we could not do it, at 
that time there were not enough qualified, woman-owned small 
business companies working in our domain, in our agency domain, 
that could actually take on 5 percent of our prime contracting 
business. Consequently, we negotiated, we justified and 
negotiated a smaller number and let some other DoD subagency 
actually pick up the difference. We took on a different goal, 
we took on HBCU, the Historically Black Colleges and 
Universities, in balance. So the point being is that this is, 
it is really a difficult environment to get your hands on how 
big of a pool of companies that there are out there.
    Now I am not suggesting at all that we change the goals for 
veteran-owned businesses or any of the other disadvantaged 
businesses. To the contrary, I am just saying analysis can help 
us find out more intelligently what the best course of action 
is.
    At Fed Sources we used Census Bureau statistics to size the 
veteran business community. Of the 2.97 million veteran-owned 
businesses out there, about 194,000 are owned by service-
disabled veterans. There could be a few more of those depending 
on how they declared themselves when they filled out the Survey 
of Business Owners, but this is our current estimate as of 
2008. Analyzing these data raised a question: are there enough 
VOBs and specifically enough SDVOBs to fulfill 3 percent of the 
U.S. government's prime contracting business? The answer is, 
probably not. And again, not because the Executive Branch is 
not trying hard enough with its outreach programs but because 
there does not appear to be enough SDVOBs out there that are 
interested in conducting business with the government or, 
probably more importantly, offer what the government is looking 
for.
    So what is the evidence for this statement? I am going to 
skip over that slide and go to this one. The evidence for this 
statement is based on the contract data to date from the 
Federal Government. government fiscal year 2008, the data 
published to date shown here shows us that only one-half of 1 
percent of that pool of 2.97 million businesses actually got 
work as prime contractors. Many economic sectors were 
unrepresented and the 5 sectors we highlighted with an icon 
here have significant potential for veteran business 
participation.
    As shown on this particular slide, you know, there is in 
our estimation about 883,000 VOBs and the subset of that about 
68,000 service-disabled veteran-owned businesses that could be 
doing business. But they do not seem to even be taking 
advantage of the registration tools through the Central 
Contractor Registration or through the VIP pages of the VetBiz 
portal.
    So in conclusion here, or to summarize, there will be 
continuing challenges in meeting the specific socioeconomic 
goals for SDVOB contracting and the general objectives for 
increasing VOB participation in government work. Going forward, 
we suggest that Federal agencies focus their limited resources 
by doing market investigations that analyze the marketplace to 
determine the types of services and products that government 
will be buying, and that also target the veteran-owned business 
sectors that are most likely positioned to fulfill those 
requirements. And all the while continuing on with all the 
other outreach programs in a more general sense.
    Thank you, Madam Chair, and Committee Members for the 
opportunity to appear before you today. I stand ready for any 
questions.
    [The prepared statement of Colonel Bjorklund appears on p. 
55.]
    Ms. Herseth Sandlin. Thank you, Colonel. Mr. Denniston, you 
are now recognized for 5 minutes.

                  STATEMENT OF SCOTT DENNISTON

    Mr. Denniston. Madam Chair, Ranking Member Boozman, and 
staff. Thank you for the opportunity to testify today on the 
issues facing veteran-owned small businesses in contracting 
with the Department of Veterans Affairs. I am Scott Denniston, 
currently Director of Programs at the National Veteran-Owned 
Business Association, NaVOBA. We are the organization that 
publishes the Vetrepreneur Magazine, which we have provided our 
latest copy, which just happens to be on the 3-percent goal 
issue. We represent over 2,000 veteran-owned small businesses 
in the United States. I have had the pleasure of testifying 
before this Committee in the past while service as the Director 
of Small Business Programs and the Center for Veteran 
Enterprise at the VA. I have always appreciated the candor and 
forthright discussion that I have experienced with the 
Committee. I would ask that my formal testimony be entered for 
the record.
    Your letter of invitation asked me to discuss how sole 
sourcing and contract bundling are affecting veteran-owned 
small businesses, my concerns regarding VA contracting, how the 
process can be improved, and whether there are enough veteran-
owned small businesses with the capacity to meet and fulfill 
contracts. I want to start off by commending VA for their 
efforts and accomplishments in contracting with veteran and 
service-disabled veteran-owned small businesses. For the past 3 
years, VA has exceeded the statutory 3-percent goal for 
service-disabled veteran-owned businesses and has also led the 
government in awards to both service-disabled and veteran-owned 
small businesses. This is a direct result of the strategic plan 
VA implemented in accordance with Executive Order 13360, the 
personal commitment of the former Deputy Secretary, and the 
accountability of decisionmakers to work with veteran and 
service-disabled vet small businesses. Results do happen with 
management interest and a plan.
    VA should also be commended for its efforts to negate the 
effects of contract bundling on veteran-owned small businesses. 
When the Office of Management and Budget (OMB) issued its 
antibundling instructions to Federal agencies, OMB required 
agencies to review all acquisitions over $2 million to ensure 
certain savings criteria were met. VA, to its credit, 
established a $1 million threshold for reviews. The VA Office 
of Small Business Programs has been very aggressive in fighting 
bundling and helping contracting officers to do good market 
research to identify capable veteran and service-disabled 
veteran-owned businesses to work with.
    There are, however, several areas of concern that I would 
like to bring to your attention that NaVOBA believes are 
impacting VA's ability to work with veteran and service-
disabled veteran-owned small businesses. The first deals with 
VA's use of other agencies to contract work for VA. This issue 
appeared about a year ago when VA entered into an agreement 
with the Army Corps of Engineers to provide contract support to 
VA. NaVOBA learned that many of the VA opportunities contracted 
by the Corps were being awarded to 8(a) and other socioeconomic 
groups rather than service-disabled vets. The veteran business 
community believes VA was sending work to the Corps to 
circumvent the requirements of Public Law 109-461 requiring VA 
to give preference to service-disabled and veteran-owned small 
businesses.
    VA also, we understand, has entered into an agreement with 
the Navy for IT contract support. These agreements, in our 
opinion, take legitimate contract opportunities away from the 
veteran business community as other agencies do not follow VA 
priorities for award. Last year Congress passed Public Law 110-
389 requiring agencies contracting for VA to follow VA's 
contracting priorities. The problem is, no one knows about the 
law. Just last week I was in Reno, Nevada, at the Corps of 
Engineers 8th Annual Veteran and Small Business Training 
Conference. There were several hundred veteran-owned small 
businesses in attendance. The very first panel consisted of the 
deputy commanders from the Sacramento, Los Angeles, San 
Francisco, and Albuquerque Corps districts. Each talked about 
the work their districts would do for VA this year. When I 
asked each of the deputy commanders if they were familiar with 
the requirements of Public Law 110-389, they all said they had 
never heard of such a law.
    The question becomes, who has the responsibility for 
informing agencies that contract for VA that there are special 
requirements to work with service-disabled and veteran-owned 
small businesses? It appears that no one is doing that now.
    The next issue we would like to address is VA's 
implementation of Public Law 109-461. The law was enacted on 
December 22, 2006, with a 180-day implementation period. To 
date, the final rules have not been published nearly 2\1/2\ 
years later. We know firsthand there is a lot of confusion in 
the VA field officers regarding the implementation of the law. 
Specifically, the use of sole source authorities for 
contracting with service-disabled and veteran-owned small 
businesses. The only guidance that VA contracting officers have 
that we know of is an information letter published June 19, 
2007. Information letters do not, in our opinion, have the same 
impact as regulations.
    Another issue regards interpretation of Public Law 109-461. 
section 508 states, ``Contracting priority, in procuring goods 
and services pursuant to a contract preference under this Title 
or any other provision of law, the Secretary shall give 
priority to a small business concern owned and controlled by 
veterans if such business concern also meets the requirements 
of that contracting preference.'' We take this to mean VA is to 
provide a priority to veteran-owned small businesses in the 
purchase of everything the VA buys. The draft rule published by 
VA to date only addresses open market procurements. The draft 
rule eliminates the millions of dollars VA spends using Federal 
supply schedules, AbilityOne, Prime Vendor, and other contract 
mechanisms from consideration for veteran-owned businesses. We 
do not believe that this was the intent of Congress.
    In the latest issue of Vetrepreneur Magazine, NaVOBA goes 
on record as firmly supporting VA's verification of veteran/
service-disabled veteran-owned small businesses as envisioned 
by Public Law 109-461. We believe the VA Center for Veterans 
Enterprise has developed a comprehensive plan to provide the 
verification of veteran status as well as address the ownership 
and control issues identified in the law. The CVE plan requires 
the hiring of some minimal additional staff as well as the use 
of contractor support to assist in developing the verification 
review process, risk analysis, and procedures for onsite 
reviews when required. The initial requests for contractor 
support were submitted to VA's Acquisition Office in May 2008, 
and to date no contract support has been provided. The CVE 
verification plan, in our opinion, will fail without contractor 
support.
    The last issue we would like to address is training of VA 
acquisition professionals on the requirements and 
responsibilities of supporting veteran and service-disabled 
veteran-owned businesses. VA is to be commended for taking the 
initiative to establish an acquisition training academy in 
Frederick, Maryland. NaVOBA also wants to encourage VA to 
ensure that all acquisition professionals are trained on the 
requirements of Public Law 109-461. This is the only way that 
we can have consistent application of the law.
    As to the Committee's questions regarding whether there are 
enough veteran-owned small businesses with the capacity to meet 
and fulfill VA's contracting needs? It is our position that 
there are more than enough businesses. We believe this is 
evident given VA's track record to date. Our Members tell us 
the biggest impediments to doing business with VA are access to 
decisionmakers to present capabilities, access to timely 
information on upcoming contact opportunities, consistent 
implementation of the provisions of Public Law 109-461, VA's 
administration of the Federal supply schedules regarding 
distributors, and VA's use of contracting vehicles such as 
Prime Vendor and standardization which limit opportunities.
    I would once again like to thank the Committee for holding 
this important hearing, and will be happy to answer any 
questions. Thank you.
    [The prepared statement of Mr. Denniston appears on p. 60.]
    Ms. Herseth Sandlin. Thank you, Mr. Denniston. Mr. Wynn, 
you are now recognized.

                     STATEMENT OF JOE WYNN

    Mr. Wynn. Thank you, Congresswoman Sandlin, and Congressman 
Boozman. Thank you for allowing me to be here and come before 
you this afternoon. And for the sake of time I would ask also 
that my statement be submitted for the record and I would just 
like to touch on just a couple of points, 2 or 3 key issues in 
my statement. I want also, I am Joe Wynn with the Veterans 
Entrepreneurship Training Group, also working with the VET-
Force, and the National Association for Black Veterans.
    As we have had some of these discussions before, a couple 
of years ago at previous hearings, there is a number of pieces 
of legislation that have been mentioned that Congress has 
passed that have helped the veterans Federal procurement 
program. And of course, we know that it also laid the 
foundation, back in 1999. We are here today, though, to kind of 
focus on the piece of legislation that Congress passed, 109-
461, and certain sections of it pertaining to the Department of 
Veterans Affairs, which directed the VA to conduct a 
verification program and a number of things that some of the 
other witnesses have mentioned. Some of that legislation, 
though, has not been implemented, as was just mentioned in Mr. 
Denniston's testimony. It has been over 2 years now and it 
still has not been implemented. So as we have Congress trying 
to come forward and support veterans and do good things, we get 
legislation that has been passed but not fully implemented. And 
in some cases folks getting it misunderstood, and in some 
instances just not complying at all.
    Now we are at a point where we hope that this program 
directed at the VA would become sort of the model program for 
other Federal agencies to look at the VA and see how we could 
increase contracting opportunities to service-disabled 
veterans. In so doing, they were going to, since they had the 
veterans small business database, they have and we have also 
been encouraging all veteran businessowners to register in that 
database for several years now. But it was not until a few 
months ago that the interim regulation came out, interim final 
rule, directing the VA to proceed with doing the verification 
process of making sure that veteran businessowners were in fact 
a veteran or service-disabled veteran, checking the status. 
Also, checking ownership and control to ensure that these 
veterans were in fact businessowners with the right percentage 
of ownership. While this is all well and good, and we had hoped 
that this would happen, already in just the beginning stages of 
this process it is getting bogged down already.
    Congressman Boozman also mentioned in his opening remarks, 
and I will mention also, that the rate at which we are being 
told that they are processing applications, it would in fact 
take several years just for the number of veterans, 17,000 we 
are being told that are registered in the database today, to 
complete all of the verifications.
    I do not want to get into a whole lot of detail about the 
process other than to hit on a couple of points that probably 
contribute to some of this. And that is after you get passed 
verifying the status of whether there is a veteran, or a 
service-disabled veteran, then there is the challenge of 
verifying the ownership, percentage of ownership by the veteran 
or group of veterans that own the company which, obviously, can 
be done. But then beyond that you have to get into determining 
the control management by the owners, and then also whether or 
not they are participating in the day to day operations. So you 
can see that they have created somewhat of a system that, to my 
knowledge, there are no experts in small business verification 
already in that VA department. So it may help to look at 
improving or bringing in some more expert persons.
    Another key piece, though, that has come up with this 
verification is also that the decision apparently has been made 
that does not seem to appear in the regulation that only one 
company, if you own more than one company only one company can 
be verified and be registered in the database. Of course, we 
know that there are many persons throughout this country that 
own more than one company and operate those companies 
effectively.
    So I would ask that this Committee take a look at that 
process. Let us see if we can correct it. Because we have now 
reached a point where there is a whole misperception out here 
in the Federal marketplace that if you are not verified by CVE 
you cannot do business with other agencies. And this whole 
verification really is directed at the VA contracting 
specifically, but other agencies getting it a little confused.
    So I will conclude my comments and just say that there are 
also, in addition to looking at the VA verification process, 
also let us not forget some of the other things that we have 
mentioned in previous discussions such as the contract bundling 
issue. It is still destroying small business in the Federal 
procurement marketplace. And also, we still need to go back and 
change that one little word from ``may'' to ``shall'' or 
something such that we will not have to allow contracting 
officers, once again, an option not to use service-disabled 
veterans. So thank you for the opportunity to share that. Thank 
you.
    [The prepared statement of Mr. Wynn appears on p. 62.]
    Ms. Herseth Sandlin. Thank you, Mr. Wynn. Ms. Roof, welcome 
to the Subcommittee. You are now recognized for 5 minutes.

                  STATEMENT OF CHRISTINA ROOF

    Ms. Roof. Chairwoman Herseth-Sandlin, Ranking Member 
Boozman, and distinguished Members of the Subcommittee, on 
behalf of AMVETS I would like to extend our great gratitude for 
being given the opportunity to discuss and share with you our 
recommendations and concerns on the VA's contracting policies.
    AMVETS applauds the efforts of VA in exceeding its 
contracting goals for service-disabled veteran-owned small 
businesses and veteran-owned small businesses over the past 2 
to 3 fiscal years. Such efforts show that VA is very capable of 
outstanding achievements in its pursuits to improving the lives 
of our veterans. These achievements come even with the staff 
shortages, lack of training resources, and high demand for 
quick and accurate application verification.
    We are, however, concerned with overall verification 
processes. Currently, only initial or precontract verification 
processes are in place for most contracts. A large number of 
contracts are being awarded on the premise of meeting the 
prerequisites set forth by VA, but then fail to conduct further 
verification to measure the compliance of these awards. Under 
current policy no proof of compliance is required, nor do 
random labor audits occur. The Office of the Inspector General 
has issued more than ten reports illustrating these 
deficiencies over the past year. We also noted that in 2008 the 
VA hired an independent consulting firm to audit the current 
contract procurements, and the firm also reported the exact 
findings.
    While we note the VA is making an effort to identify and 
improve the verification processes and policies, AMVETS most 
respectfully asks the Committee why none of these 
recommendations have been put into place?
    VA's difficulties in some areas of contract administration 
illustrate VA's challenge in monitoring performance of 
previously awarded contracts. AMVETS believes that this is due 
to VA not having a centralized and uniform contracting system 
in place.
    VA lacks reasonable assurance, at minimum, that it is 
receiving the services it has paid for and that the use of 
agreed subcontractors is occurring. We believe that this is a 
result of ineffective controls to test compliance.
    AMVETS believes strengthening control over performance 
monitoring and contract compliancy testing will result in the 
avoidance of contract fraud, more efficient verification 
processes, and an estimated savings of $47.4 million over the 
next 4 years, according to the Office of Inspector General 
(OIG).
    The VA's Office of Acquisition, Logistics, and Construction 
have tried implementing some additional policies to improve and 
better--improve their oversight in the whole VA acquisition 
program. However, overall decentralization of VA's acquisition 
program makes this task very difficult to achieve.
    Madam Chairwoman, AMVETS notes there is still no evidence 
that all the necessary resources and uniform training of 
contract officers are being furnished to VA's Office of 
Acquisition, Logistics, and Construction, or any of the other 
agencies involved in bettering the VA's procurement system.
    Further, AMVETS finds it regrettable that VA's 
decentralized system of acquisition function and contract 
procurement is resulting in inconsistent applications of policy 
and initiatives, thus resulting in loss of employment 
opportunities for veteran-owned businesses in these challenging 
economic times.
    AMVETS primary recommendations are as follows:
    Authority be given to such agencies to conduct unannounced 
and on-site visits throughout the entire term of contract, 
regardless of the size of the contract.
    Require all VA-awarded procurements to submit certified 
payrolls as evidence of complete fulfillment of their 
obligations and of their use of service-disabled veteran-owned 
small businesses and veteran-owned small businesses.
    And finally, the immediate cancellation of handwritten, 
procurements. And the adoption of the system-wide uniformed 
software program.
    Madam Chairwoman, Members of the Committee, I would like to 
thank you again for allowing me to share with you.
    [The prepared statement of Ms. Roof appears on p. 69.]
    Ms. Herseth Sandlin. Thank you, Ms. Roof. We will begin 
questioning with Mr. Boozman.
    Mr. Boozman. Thank you, Madam Chair.
    Let me ask you a couple of things, Scott. And then the rest 
of you I would like you to comment. We have got kind of the 
ongoing discussion about in general excessive use of sole 
source procurement. Is that an impediment to small business 
entering the Federal business place? So think about that. And 
we will come back to that?
    Scott, the deal with the Corps of Engineers, I have had 
some of my folks voice concern, that they were being shut out. 
And they were told that they were using a memorandum of 
understanding (MOU) going back to when they did Walter Reed or 
something. Are you familiar with that?
    Mr. Denniston. I am familiar with the MOU that the VA is 
using. And it was signed about a year ago----
    Mr. Boozman. Okay.
    Mr. Denniston [continuing]. With the Corps of Engineers. 
The challenge with it when it was first signed by both parties 
is it didn't go into the details on how the process would work. 
And our understanding is is that the VA work that went to the 
Corps, the Corps said that they didn't have the staff and the 
time to do new contract vehicles. So they basically took 
contract vehicles they already had in place with 8(a)'s and 
other groups and used those contract vehicles to make the 
awards for the VA work, which then eliminated the opportunities 
for service-disabled vets to participate.
    Mr. Boozman. So as far as you know that is going on and 
that is a problem.
    Mr. Denniston. Yes.
    Mr. Boozman. Okay.
    Mr. Denniston. And as I mentioned in my testimony, the 
thing that floored me last week in Reno was that here you had 
the upper management levels of the Corps districts who had no 
knowledge of the law. So if they have no knowledge of the law, 
obviously we know it is not being implemented.
    Mr. Boozman. It used to be one of the big dogs, over and 
did an excellent job. I think everybody wants to do what is 
fair, in implementing what we want done. And certainly that is 
not what we wanted done.
    But I hope we can figure out how to do that. And it has 
been a challenge with this Corps of Engineer thing.
    Mr. Denniston. Right.
    Mr. Boozman. Okay.
    Mr. Bjorklund, I hope I got that right. I am Boozman, 
Bozeman, whatever. He provided data to support the position 
that the SDVOB community may not be able to absorb the 3-
percent goal? Can you provide any evidence to the contrary to 
that with your position? Scott, I am sorry.
    Mr. Denniston. Yes. I think that I would say, yes. I mean, 
I think if we look at what the VA has accomplished, what the 
Environmental Protection Agency has accomplished, what the U.S. 
Department of Housing and Urban Development has accomplished, 
those agencies that are meeting the 3-percent goal. I think we 
can find that we are making progress. I think the challenge 
comes for agencies like Department of Energy, like Department 
of Defense, because of the procurement mix of what they have. 
And I think that is where the bigger challenge comes. And I 
think that is where, again, working together, not only do we 
have to identify more companies, but then I think we have got 
to figure out ways to grow the capacity of those companies that 
we identify.
    One of the things that I think is an underlying tenet of 
all this is what was the intent of 106-50 and 108-183? Was it 
to provide service-disabled vets with a contracting program, or 
was the intent of Congress to provide them with a true business 
development program like we have with 8(a)? That is why we get 
into these issues of shall versus may, the sole source, the 
mentor protege program, and some of these other challenges that 
we face.
    Mr. Boozman. Very good. Colonel, do you want to respond?
    Colonel Bjorklund. Congressman, I think that that is--I 
would agree with Scott what he is saying. The point that I am 
making is not that there are not enough companies out there. 
There are, we think, 194,000 companies out there. And about 
68,000 of them are in the service disabled could probably be 
doing business with the government. But they choose not to for 
whatever reason, or they can't make the connections, or 
somebody doesn't know how to implement public law, or, you 
know, any number of reasons why that might occur.
    But we are just saying, you know, let us take a better look 
at this environment, this group of businesses out there, and 
see if we can find ways to match them up with government 
requirements.
    Mr. Boozman. Okay. Thank you all very much. Mr. Wynn.
    Mr. Wynn. Yes, Congressman, I would just like to respond to 
that briefly. First of all, I find that a little bit 
interesting when we talk about the number of service-disabled 
veteran businesses whether there is enough when so many of the 
companies we talk with are not at their full capacity. They are 
not getting enough contracts. They are not raising their hands 
saying we have got enough. They are looking for more business.
    The other thing too though is I think I kind of understand 
what the Colonel is alluding to in the sense that some 
companies may not want to come forward and participate or be 
identified as a veteran. We know. We went through that, 
particularly with us who returned during the Vietnam era. But 
we also have to look at even with the numbers he just 
mentioned, we talked about CVE reporting 17,000 companies in 
their database. He said there is 65,000 service-disabled 
veterans that he has come across. We have identified even more 
through SBA's records. So there is a lot more out here. But 
what is the Federal agencies doing to reach out and get these 
companies to come in?
    One of the things we thought was going to help was this 
veteran's verification progress at VA that the other agencies 
would then support. But we are running into problems already. 
So if we can kind of straighten that out a little bit, get some 
things on track. Of course, there is a number of other reasons 
too why the agencies aren't meeting their goals. So it is still 
not so much so that there is not enough companies to meet the 
requirement.
    Mr. Boozman. Okay. Thank you all very much. Thank you, 
Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    Mr. Denniston, I am dismayed as well. But senior officials 
at the Army Corps of Engineers weren't even aware of the law. 
So we know that other agencies contracting to do work for the 
VA are most likely similarly unaware.
    Do you have any recommendations for this Subcommittee as to 
the best way in which to address this awareness problem? Who in 
the VA should be responsible for communicating the requirements 
based on what we have passed in Public Law 110-389?
    Mr. Denniston. My recommendation would be that all these 
MOUs with the other agencies are signed somewhere within the 
acquisition process at VA. I would assume mostly with a senior 
procurement official. I think what we have to do is make sure 
that as part of the MOU, there is an agreement on what the 
requirements of the law are, so that the agencies that are 
going to contract for VA know those up front and agree to abide 
by those.
    So I don't think it is necessarily that Congress has to do 
anything more. I think that--and, again, this was just last 
week. So I didn't have the opportunity to bring this to the 
attention of VA before the hearing. But I think that once the 
VA knows what the problem is, is I think they will take action 
and correct it.
    Ms. Herseth Sandlin. Something specific in each memoranda 
of understanding so that it leads to----
    Mr. Denniston. That it addresses the requirement.
    Ms. Herseth Sandlin [continuing]. Contracting?
    Also, Mr. Denniston, in your testimony, you mentioned that 
Public Law 109-461 was enacted December 22nd, 2006.
    Mr. Denniston. Right.
    Ms. Herseth Sandlin. That is with a 100-day implementation 
period. But to this day, final rules haven't been published. 
So, obviously, we will ask----
    Mr. Denniston. Correct.
    Ms. Herseth Sandlin [continuing]. Folks on the next panel 
about that. But part of the problem you state is that there is 
a lot of confusion in the VA field offices regarding 
implementation of the law. You repeatedly mentioned the problem 
with the confusion that has been created. What is creating the 
confusion, the information letters, the lack of regulations? 
How do we address that problem?
    Mr. Denniston. My belief is it is the lack of regulations, 
because old-time contracting officers do not see an 
informational letter as having the same force and effect as a 
regulation. And the big issue has to do with the use of the 
sole source authority, because we have VA and every other 
agency has the ability to do the competitive contracting with 
service-disabled vets and limit competition by 108-183. So the 
issue becomes how effective and how often VA uses the sole 
source authority under 109-461. And I think that is where the 
big issue comes in, because of the lack of having regulations.
    Ms. Herseth Sandlin. Mr. Wynn, has your organization 
approached other Federal agencies and Congressional Oversight 
Committees about extending Public Law 109-461?
    Mr. Wynn. Yes, we have, Congresswoman. We have talked to 
it. We had promoted it. We had hoped that other agencies would 
support it. And we believe that other agencies had a strong 
interest in kind of replicating a similar program. But they 
were waiting to see and still are waiting to see what is going 
to happen at the VA first.
    Ms. Herseth Sandlin. How recently have you been in contact 
with some of those other Federal agencies?
    Mr. Wynn. Oh, this is on an ongoing basis.
    Ms. Herseth Sandlin. Okay.
    Mr. Wynn. Yes, ma'am.
    Ms. Herseth Sandlin. Ms. Roof, in your testimony you 
mentioned that one of the biggest problems is that during the 
initial and pre-contract verification, a company is going to 
present all the required documentation, including evidence that 
they will use a veteran-owned small business as a 
subcontractor. Then you state that no proof of compliance is 
required nor do random labor audits occur. In your opinion who 
should be doing this compliance and the random labor audits, 
and how extensive should it be?
    Ms. Roof. If it is all right with you, Madam Chairwoman, I 
would like to submit my full findings after the hearing.
    Ms. Herseth Sandlin. That is fine. You can submit that 
response. I will give that to you in writing. Then you can 
respond in writing.
    Ms. Roof. Okay.
    [The information was provided in the post-hearing questions 
and responses for the record, which appear on p. 106.]
    Ms. Herseth Sandlin. Do you have any thoughts on why the VA 
doesn't have a working performance monitoring system to enforce 
compliance and avoid contract fraud? Do you think that it is a 
resource issue or something else?
    Ms. Roof. In our opinion, from the research that we have 
done, it seems that there is a lack of staff for the amount of 
veterans and applications that need to be verified. Also, I 
think there is a lack of communication between offices 
throughout the country. So, again, I think a more centralized 
training program and communication will really help.
    Ms. Herseth Sandlin. Thank you.
    I will probably have additional questions for the witnesses 
on this panel that we will submit in writing. And if you could 
respond to us just for the purpose of time with our final 
panel.
    We thank you for your testimony today. We are glad to see 
some of you back. Glad to welcome some of you newly in your 
positions, the analysis that you have provided and 
recommendations that you have made. We thank you for your 
continued service to our Nation's veterans. Thank you.
    We now invite panel 3 to the witness table. Joining us on 
our third panel is Ms. Shawne Carter McGibbon, Acting Chief 
Counsel for the Office of Advocacy, U.S. Small Business 
Administration; Mr. Joseph Jordan, Associate Administrator for 
government Contracting and Business Development, also with the 
United States Small Business Administration; and Mr. Jan Frye, 
Deputy Assistant Secretary for Acquisition and Logistics, U.S. 
Department of Veterans Affairs.
    Again, your written statements will be made part of the 
hearing record. Ms. McGibbon, welcome to the Subcommittee. I 
understand that you too have a PowerPoint or computer 
presentation. Again, we will provide you sufficient time. If 
you could keep your portion of the presentation to 10 minutes, 
we would appreciate it.
    Okay. We will recognize you first, Ms. McGibbon.

         STATEMENTS OF SHAWNE CARTER McGIBBON, ACTING 
  CHIEF COUNSEL FOR ADVOCACY, OFFICE OF ADVOCACY, U.S. SMALL 
            BUSINESS ADMINISTRATION; JOSEPH JORDAN, 
   ASSOCIATE ADMINISTRATOR FOR GOVERNMENT CONTRACT- ING AND 
 BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION; AND 
  JAN R. FRYE, DEPUTY ASSISTANT SECRETARY FOR ACQUISITION AND 
         LOGISTICS, U.S. DEPARTMENT OF VETERANS AFFAIRS

              STATEMENT OF SHAWNE CARTER McGIBBON

    Ms. McGibbon. Thank you for the opportunity to appear 
before you today to provide testimony on the composition of the 
veterans business community and problems they face.
    My name is Shawne Carter McGibbon. I am the Acting Chief 
Counsel for Advocacy at the United States Small Business 
Administration Office of Advocacy.
    My office was created in 1976 as an independent entity 
within the SBA to represent the views of small business within 
the Federal Government and to perform economic research related 
to small business and entrepreneurship.
    Advocacy does not administer contracting, loan, or other 
such programs. And on questions involving program 
implementation and oversight, we generally defer to offices 
with the expertise and responsibility for those areas.
    Because Advocacy was established to provide independent 
counsel to policymakers, its testimony is not circulated for 
comment through the Office of Management and Budget or other 
Federal agencies. The views expressed by Advocacy here do not 
necessarily reflect the position of the administration or SBA.
    In the interest of conserving time I will summarize my 
prepared statement and illustrate a few key points with slides 
and will submit my full statement for the record.
    The best source of data on veterans in business is the U.S. 
Census Bureau's 2002 Survey of Business Owners (SBO). In 2007, 
Census issued 2 major reports on veteran businessowners and 
veteran-owned firms using this SBO data. And Advocacy released 
its own report the same year interpreting the data.
    How many veteran-owned firms are there? Based on respondent 
data, Advocacy estimates that there were about 3.3 million 
veteran-owned firms in 2007, of which about 230,000 were owned 
by service-disabled veterans.
    Census found that 14.5 percent of all respondent 
businessowners were veterans. And about 7 percent of those were 
service disabled. About 12.2 percent of all businesses were 
veteran-owned. Newer data will be released by Census in 2011.
    Looking at the first slide, veteran-owned firms were 
similar to all U.S. firms in most respects except for their 
age. The distribution by size was nearly identical to all firms 
as the chart indicates. The blue line represents respondent 
firms and the red line veteran-owned firms.
    Figure 1 shows this close correspondence in terms of 
revenue. So we are looking at receipts in this particular 
slide.
    Figure 2 shows the same correspondence in terms of number 
of employees. You can see there is a big spike between--with 
firms between 1 and 4 employees.
    Figure 3, I apologize that it is a little hard to read on 
the screen, but it is available in your information packets, 
shows how veteran-owned firms are generally distributed among 
the 20 major industry groups.
    The distribution of veteran-owned firms is similar to that 
of all SBO respondent firms, the 5 largest industries for each 
group being the same, as you can see in this slide. We can see 
that construction; professional, scientific, and technical 
services; and retail trade are some of the largest industry 
groups represented.
    This correspondence between all firms and veteran-owned 
firms also was true in the percentage of firms which were home-
based; their level of franchise ownership; sources of capital 
use for business startup, acquisition, and expansion; the types 
of workers they used; and the types of their major customers.
    Chart number 4 shows us that veteran-owned firms were 
older, that more than half were home based, and that 3.3 
percent were franchises. Importantly, government customers, 
both Federal and State, were a larger share of veteran-owned 
firms' major customers than for other firms.
    Figure 5 shows us characteristics of veteran 
businessowners. It notes the single most striking demographic 
difference between veteran businessowners and all owners is 
their age. In 2002, 67.8 percent of all veteran owners were 
aged 55 and older. In contrast, only 30.9 percent of all 
businessowners were aged 55 and older.
    We also note that the 2002 SBO found veteran owners of 
respondent firms were overwhelmingly male and overwhelmingly 
white.
    Veteran businessowners tended to be better educated than 
other businessowners. In 2002, veteran businessowners were more 
likely to have post-graduate degrees and high school diplomas.
    In addition to research on demographic issues, Advocacy has 
a continuing program of economic research relating to veteran 
entrepreneurship issues. Your information package includes a 
listing of all published research. And we have 2 more projects 
currently underway.
    A few key findings from past Advocacy-sponsored research 
are listed on this slide that we are looking at now.
    About 22 percent of veterans in the U.S. household 
population were either purchasing or starting a new business, 
or considering doing so.
    Military service appeared to have provided necessary 
business skills to a significant proportion, one-third or more, 
of current veteran businessowners.
    Figure 7 shows that the self-employment rate of male 
veterans was higher than that of non-veterans from 1979 through 
2003.
    The Committee also asked us to identify problems faced by 
small business. The last study that we have, which attempted to 
identify such problems, was released in 2004. The most 
important problems identified included access to and 
affordability of healthcare, knowledge about government 
programs which could be of assistance to veterans, access to 
financing, understanding tax law, and disadvantages in 
government contracting.
    Last September, Advocacy commissioned a new study to look 
at tax and regulatory barriers faced by veteran entrepreneurs. 
We will, of course, be pleased to share this study with the 
Subcommittee as soon as it is available.
    It is very likely that the rankings of some of these 
problems in the study that I referenced earlier have changed 
due to the current economic conditions.
    For example, access to business credit is clearly more 
difficult today for most businesses. But finding quality 
employees is probably easier.
    My prepared testimony includes 2 tables from the 2004 study 
that I have just addressed. And you can consult those for 
further information on problems that veterans indicated that 
they were having.
    This concludes my prepared remarks. I will be happy to 
answer any questions that you may have. Thank you.
    [The prepared statement and referenced slides of Ms. 
McGibbon appear on p. 71.]
    Ms. Herseth Sandlin. Thank you, Ms. McGibbon.
    We will now recognize Mr. Jordan.

                   STATEMENT OF JOSEPH JORDAN

    Mr. Jordan. Chairwoman Herseth Sandlin, other distinguished 
Members of this Subcommittee, thank you for inviting me to 
testify regarding Federal Procurement and veteran and service-
disabled veteran-owned small business procurement in 
particular.
    I am Joseph Jordan, Associate Administrator for government 
Contracting and Business Development at the Small Business 
Administration.
    I appreciate the opportunity to discuss with you SBA's 
efforts to ensure that small businesses receive a fair 
opportunity to participate in the Federal procurement arena, 
especially veteran and service-disabled veteran-owned small 
businesses whose owners have given so much to their country.
    The SBA, through its government contracting function, is 
responsible for assisting all small businesses in obtaining a 
fair share of government procurement by leveraging a variety of 
programs and services.
    A key tool in this effort is SBA's statutory mandate to 
establish small business procurement goals with each agency 
prior to the beginning of the fiscal year in line with meeting 
the government-wide goals.
    The goals for prime contracting include 23 percent for 
small business in general, 5 percent for small disadvantaged 
business, 5 percent for women-owned small business, 3 percent 
for service-disabled veteran-owned small business, and 3 
percent for historically underutilized business zone certified 
small businesses.
    SBA is also required by statute and Executive Orders, 
including 13-360, to report on agency's achievements in meeting 
their goals, as well as plans to achieve any goals not met.
    SBA has established a Small Business Procurement Scorecard 
as a method of fulfilling these responsibilities. The Scorecard 
is publicly available on SBA's Web site.
    Of these goals, women, HUBZone, and service-disabled 
veteran-owned small businesses have never been met government 
wide. However, the dollars contributing to the goals in all of 
these categories have increased each year. For service-disabled 
veterans, the dollars have increased steadily from $554 million 
in fiscal year 2001 to $3.9 billion in fiscal year 2007. 
Preliminary indications are that there will be another large 
increase in dollars in fiscal year 2008.
    Although there is no government-wide goal for veteran-owned 
small businesses, Federal agencies in fiscal year 2007 awarded 
more than $10.8 billion in contracts, or 2.9 percent, to 
veteran-owned small businesses. That category includes service-
disabled veteran small businesses.
    Service-disabled veterans often are also HUBZone and/or 
8(a) certified businesses as well, offering them additional 
tools to access Federal procurement opportunities.
    The Department of Veterans Affairs has increased its goal 
achievement for service-disabled veterans to 7.9 percent in 
fiscal year 2007 from 3.6 percent in fiscal year 2006. SBA has 
highlighted VA's efforts in obtaining these results as a best 
practice for other agencies.
    VA's Center for Veterans Enterprise is dedicated to working 
exclusively with veterans who want to establish businesses, and 
partners with other Federal agencies to provide market 
research, outreach support, and conference participation for 
veteran and service-disabled veteran small businesses.
    SBA participates with VA and other agencies in such events, 
which include business matchmaking. In fact, just a couple of 
weeks ago SBA participated in the Kansas City Veterans Job Fair 
and Business Opportunity Summit in Kansas City, Missouri. This 
summit was a joint effort conducted by the SBA, Department of 
Labor, VA, and the Military Order of the Purple Heart.
    Although there have been significant increases in contract 
awards for service-disabled veterans, clearly more work is 
still needed. The SBA recognizes the need to improve small 
business government procurement efforts, both within the agency 
and externally by working with Federal procuring agencies and 
service-disabled veterans.
    Chairwoman, in your invitation letter you asked that I also 
address the use of liquidated damages. The Small Business Act 
and the implementing regulations allow the contracting officer 
to impose liquidated damages on a prime contractor that fails 
to comply with its subcontracting plan, but only if the 
contracting officer, after considering the totality of the 
circumstances, determines that the prime contractor did not 
make a good faith effort to comply with the subcontracting 
plan. The contracting officer's decision to impose liquidated 
damages is also subject to appeal under the Contract Disputes 
Act.
    Thus, the process can be time consuming and costly for the 
government. And it turns on a very subjective standard, i.e. 
whether the prime contractor made a good faith effort to comply 
with the plan.
    There are other incentives available to encourage prime 
contractors to comply with subcontracting plans, such as 
considering compliance as part of an evaluation of past 
performance or monetary awards.
    Madam Chair and other distinguished Members of this 
Subcommittee, thank you again for the opportunity to testify 
before you regarding our work to promote government contracting 
opportunities for America's small businesses. I am happy to 
answer any questions you may have.
    [The prepared statement of Mr. Jordan appears on p. 87.]
    Ms. Herseth Sandlin. Thank you, Mr. Jordan.
    Mr. Frye, you are now recognized for 5 minutes.

                    STATEMENT OF JAN R. FRYE

    Mr. Frye. Madam Chair, Members of the Subcommittee, thank 
you for the opportunity to appear before you today to discuss 
VA's acquisition operations and veteran entrepreneurship.
    VA fully embraces the letter and spirit of the 
entrepreneurial provisions of Public Law 109-461, the Veterans 
Benefits, Healthcare and Information Technology Act of 2006. As 
required, sections 502 and 503 of the Act were implemented in 
VA on June 20, 2007, as the Veterans First Contracting Program.
    As VA's Senior Procurement Executive, I am both pleased and 
proud to report the VA is using the unprecedented and 
extraordinary authorities granted by the Act to contract with 
veteran-owned small businesses at never-before-seen levels. In 
fact, VA has been and remains the Federal leader in contracting 
with veteran-owned small businesses, and veterans have the 
right to expect nothing less from us.
    In fiscal year 2006, VA was one of only 3 of the 24 CFO 
Federal agencies to exceed the service-disabled veteran-owned 
small business goal of 3 percent.
    In fiscal year 2007, VA broke obligation records on several 
fronts. For the first time, VA expenditures with all veteran-
owned small businesses exceeded $1 billion. Spending with 
veteran-owned small businesses increased 79 percent from fiscal 
year 2006. Total dollars reported for service-disabled veteran-
owned small businesses and veteran-owned small businesses were 
6.95 percent and 10.13 percent, respectively.
    For fiscal years 2008 and 2009, VA established the first-
ever socioeconomic goals required by Public Law 109-461 in 
contracting with veteran-owned companies. These goals consist 
of a 7-percent goal for service-disabled veteran-owned small 
businesses and a 10-percent goal for veteran-owned small 
businesses.
    We strive for continuous improvement each year by expanding 
upon the previous year's accomplishments. In each case, we have 
exceeded our goals. For example, in fiscal year 2008, spending 
in the service-disabled veteran-owned small business category 
increased by 99 percent. We also increased our spending by 73 
percent in the veteran-owned small business category.
    For the first time in VA history, spending with service-
disabled veteran-owned small businesses surpassed the $1 
billion mark. For all veteran-owned small businesses, VA's 
total obligations exceeded $2 billion, which is by far the 
highest amount obligated across all civilian Federal agencies.
    Total dollars reported for service-disabled veteran-owned 
small businesses and veteran-owned small businesses were 12.09 
percent and 15.27 percent, respectively.
    As VA's Senior Procurement Executive, I have taken 
affirmative steps to develop and implement policies that 
benefit small businesses and veteran entrepreneurs. For 
example, in implementing VA's contract bundling review process, 
VA set a threshold for contract bundling reviews at $1 million, 
which is one-half of the $2 million threshold established by 
civilian agencies--for civilian agencies by the Federal 
Acquisition Regulation.
    This lower threshold increases the number of acquisitions 
that receive contract bundling reviews by VA's Office of Small 
and Disadvantaged Business Utilization, thereby providing even 
more opportunities to unbundle acquisitions and make them more 
suitable for award to small businesses.
    In 2007, VA instituted a requirement that all acquisitions 
valued at $5 million or greater be conducted using an 
Integrated Product Team, commonly referred to as an IPT. A 
representative from VA's Office of Small and Disadvantaged 
Business Utilization is included as a voting member on each 
IPT.
    In other words, not only do small businesses have a seat at 
the table during this critical phase of acquisition planning, 
they also have a voice in the form of a vote by their advocate 
representatives. I am not aware of any Federal department or 
agency that has instituted such progressive measures to address 
contract bundling.
    Madam Chair, the veteran's business community has expressed 
concern that VA has not fully implemented the entrepreneurial 
provisions contained in sections 502 and 503 of Public Law 109-
461.
    I want to assure you and the Subcommittee's Members that 
this is not the case. On June 20, 2007, VA implemented the 
Veterans First Contracting Program through an agency policy 
letter consistent with the requirements of the Act. VA will 
soon publish a final rule in the Federal Register to formally 
record these requirements in the Veterans Affairs Acquisition 
Regulation.
    Veteran entrepreneurs will see no significant change in the 
use of these authorities. VA will still maintain the small 
business hierarchy set forth in the Act. In addition, to 
promote a higher standard of transparency, once the final rule 
is published, sole source acquisitions must be synopsized in 
Federal Business Opportunities System.
    At the present time, VA does not require synopsis of sole 
source awards under the Public Law. The added transparency will 
help ensure that all veteran-owned businesses are aware of the 
procurement strategies employed by VA contracting officials.
    When the Veterans First Contracting Program final rule is 
published, VA will embark on a robust and aggressive training 
effort to educate VA's acquisition workforce, purchase 
cardholders, and program managers and officials. The training 
will reinforce VA's commitment to veteran entrepreneurs, as 
well as cover the authorities granted and the hierarchy 
specified in Public Law 109-461.
    It is important to note that the unprecedented and 
extraordinary contracting authorities granted to VA under 
Public Law 109-461 are preferences in open market contracting 
for veteran entrepreneurs.
    Unlike the section 8(a) Business Development Program 
administered by the Small Business Administration, VA's 
Veterans First Contracting Program is not a business 
development program. The Veterans First Contracting Program is 
not an entitlement program, nor is it a substitute for vendors 
taking other competitive steps to be viable in the Federal 
marketplace, such as securing a Federal Supply Schedule 
contracts.
    Madam Chair, I would like to close by thanking you for the 
opportunity to discuss the implementation of Public Law 109-461 
at the VA and to reaffirm our commitment to increasing 
opportunities for veteran entrepreneurs. VA is grateful for the 
authorities and opportunities presented by our Veterans First 
Contracting Program.
    As proud as we are of VA's accomplishments, we will 
continue to work diligently to improve upon them and set a 
standard worthy of emulation throughout the Federal acquisition 
community.
    And with that, I would be pleased to respond to any 
questions you or the Subcommittee's Members may have.
    [The prepared statement of Mr. Frye appears on p. 89.]
    Ms. Herseth Sandlin. Thank you, Mr. Frye. Let us start with 
you then. The VA implemented Title 5 of P.L. 109-461 in June 
2007, right?
    Mr. Frye. Yes, ma'am.
    Ms. Herseth Sandlin. You indicated that an agency guidance 
letter was issued at about that same time?
    Mr. Frye. What is that, ma'am?
    Ms. Herseth Sandlin. You had mentioned that an agency 
letter. I can't recall if you said agency guidance letter.
    Mr. Frye. Yes. We used a information letter to implement 
it. We had 6 months to implement this policy after the law was 
passed. Six months was just too short a time period.
    Ms. Herseth Sandlin. I understand about compressed time 
periods for implementing new legislation at the VA. Now you say 
soon you are going to publish the regulations in the Federal 
Register. How soon is ``soon''?
    Mr. Frye. On April 20th, 2008, Secretary Peake signed the 
proposed rule. On April 23rd, 2008, the proposed rule of 2008--
the proposed rule was submitted to OMB. On August 20th, 2008, 
the proposed rule was published in the Federal Register. On 
October 20th, 2008, after the 60-day comment period ended, we 
received 97 comments. We were prepared to move forward. But on 
October 22nd, 2008, the White House Chief of Staff placed a 
moratorium on submitting new regulations for the remainder of 
the Administration.
    OMB said they would not accept the Veterans First rule for 
review before the end of the Bush Administration.
    In January 2009, an issue came up with our Office of Small 
and Disadvantaged Business. The issue concerned whether they 
would process protests regarding the status of veteran-owned 
and service-disabled veteran-owned small businesses if they 
materialized. That issue has been resolved.
    We have also had a change in personnel. I now have a new 
boss, Mr. Glenn Haggstrom. We briefed him on April 10th. In 
May, we are going to brief Secretary Shinseki. Also in May we 
hope to have the new rule over to OMB for their concurrence. We 
hope to have it published in 2009. And of course it takes 30 
days after publication before it becomes a final rule. And so 
hopefully in September of 2009, it will become a final rule.
    Ms. Herseth Sandlin. Thank you, Mr. Frye. You obviously 
were anticipating the question. I appreciate the clarification 
on the timeline. It makes a little bit better sense.
    Although obviously some questions were raised about what 
was happening in October of last year. But I am not going to 
waste the Subcommittee's time on trying to get answers to those 
questions.
    I appreciate that you are moving forward briefing the new 
folks that have been appointed there in the VA. We will look 
forward to getting the rule finalized.
    But in your opinion, you don't anticipate, based on what 
will be sent over to OMB for concurrence and then what happens 
after that, that it will substantially change from what was 
included in the agency guidance letter?
    Mr. Frye. We don't anticipate that it will substantially 
change.
    Ms. Herseth Sandlin. Okay. Thank you. Mr. Frye, also, from 
some of the testimony of the prior witnesses, could you address 
why it is that less than 900 businesses out of approximately 
17,000 have been verified?
    Mr. Frye. Yes. Unfortunately, that is not in my area of 
operations.
    Ms. Herseth Sandlin. Okay.
    Mr. Frye. Verification is in the Small Business Office's 
area of operations. So I can't give you a good answer there. 
But I would be willing to take that for the record and get you 
an appropriate answer.
    [The information is provided in the response to Question 10 
of the post-hearing questions and responses for the record, 
which appears on p. 111.]
    Ms. Herseth Sandlin. I would appreciate that. Thank you. 
Just a couple more questions for you, Mr. Frye. The VA has a 
draft rule for a Mentor-Protege Program; is that correct?
    Mr. Frye. That is part of the draft rule. The draft rule 
that we hope to have published this coming year----
    Ms. Herseth Sandlin. That is part of the same, okay.
    Mr. Frye [continuing]. Has Mentor-Protege provision is 
included.
    Ms. Herseth Sandlin. Okay.
    Mr. Frye. Yes, ma'am.
    Ms. Herseth Sandlin. Finally, it is our understanding that 
the Inspector General for the Department of Veterans Affairs 
has just finished a report detailing mismanagement of contracts 
that the Department's IT shop farmed out to the Space Enable 
Systems Center. Is that correct? Can you comment on those 
contracts?
    Mr. Frye. I have not seen that report.
    Ms. Herseth Sandlin. Once you have a chance to review the 
report, could you take this question for the record and get 
back to us?
    Mr. Frye. Certainly.
    [The information is provided in the post-hearing questions 
and responses for the record, which appears on p. 109.]
    Ms. Herseth Sandlin. Thank you.
    Ms. McGibbon, does your research show and I am trying to 
get at Colonel Bjorklund's research from the prior panel. Does 
your research show if veteran small businesses can meet the 3-
percent goal across the Federal Government? Are there 
sufficient such businesses that can compete in the Federal 
Government's top ten business areas?
    Ms. McGibbon. I am afraid our data does not show that.
    Ms. Herseth Sandlin. How about the relative size and growth 
of veteran-owned small businesses? In looking at those 
businesses over the past several years, are they growing? Do 
they remain the same in size? Clearly from the first panel, one 
of the gentleman who testified, even since he was here a year 
and a half ago, could see a substantial growth it sounds like 
in his business. Are you monitoring that?
    Ms. McGibbon. Are you referring to receipt size or number 
of employees?
    Ms. Herseth Sandlin. Either.
    Ms. McGibbon. We have not seen a tremendous growth pattern. 
I believe, however, it may be due to a number of factors, the 
aging of the veteran's population for instance.
    Ms. Herseth Sandlin. So you haven't seen a growth in either 
of those, either in receipts or number of employees?
    Ms. McGibbon. Not a tremendous growth, no.
    Ms. Herseth Sandlin. Mr. Jordan, in your testimony you talk 
about other incentives available to encourage--you acknowledge 
in your testimony, liquidated damages. Thank you for addressing 
that, but then you talk about other incentives that are 
available to encourage prime contractors to comply with 
subcontracting plans.
    I am wondering if you can share with the Subcommittee how 
effective those incentives have been in the past. What 
percentage of companies have complied with the subcontracting 
plans as a result of those types of incentives?
    Mr. Jordan. I don't have the exact numbers with me. What I 
can do is come back to you and your staff with that. And in 
terms of on a broader level, there are a number of different 
components, so it may be difficult to tie the specific 
incentive or penalty to the outcome. But we will give you the 
totals. And we can list all of the different incentives that I 
was referring to.
    Ms. Herseth Sandlin. Okay. That would be helpful. But you 
don't have any way to track, sort of to tie the particular 
incentive to the outcome in compliance with the contracting 
plan?
    Mr. Jordan. I can go back through all of the data. And I 
will give you everything that we have.
    [The SBA subsequently provided the following information:]
                       Subcontracting Incentives
List of Incentives In Place to Encourage Utilization of Small Business 
                       Concerns as Subcontractors
          As part of my testimony, on April 23, 2009, before the 
        Veterans' Affairs Committee, Economic Opportunity Subcommittee, 
        I discussed incentives--in addition to liquidated damages--
        available to encourage maximum use of small businesses as 
        subcontractors. Following are a number of incentives which have 
        proven effective:
          Each year, as part of the national Small Business Week 
        celebration, the U.S. Small Business Administration (SBA) 
        recognizes large prime contractors that have excelled in their 
        utilization of small businesses as suppliers and 
        subcontractors. The Dwight D. Eisenhower Award for Excellence 
        may be made in each of the following five (5) categories: 
        manufacturing; service; research and development; construction; 
        and utilities.
          The SBA employs a cadre of subcontracting professionals known 
        as Commercial Marketing Representatives (CMRs), who monitor the 
        small business subcontracting programs of the large prime 
        contractors within their assigned portfolios. The CMR's can 
        nominate those large business prime contractors with an 
        outstanding small business subcontracting program for an SBA 
        Award of Distinction. (The Award of Distinction is considered 
        as part of the judging criteria for the Eisenhower Award.)
          Large businesses and individual industry procurement 
        officials are also eligible to receive the SBA's Frances 
        Perkins Vanguard Award for their excellence in the use of 
        women-owned small businesses as subcontractors. 
        Awardees are honored during the national Small Business Week cel
        ebration.
          Large prime contractors are encouraged to nominate their 
        outstanding small business suppliers for the SBA's Small 
        Business Subcontractor of the Year award. One national winner 
        is selected from among the 10 regional awardees. The large 
        prime contractor who nominates the national (and regional) 
        winner is recognized during national Small Business Week, 
        giving the prime ``bragging'' rights as to the effectiveness of 
        its subcontracting program.
          The Department of Defense's (DoD) Defense Contract Management 
        Agency (DCMA) also performs reviews of those DoD contracts, 
        including monitoring subcontracting plans, for which it is 
        assigned administrative responsibilities. DCMA assigns 
        performance ratings to those contractors and has award 
        ceremonies to recognize those large primes that meet/exceed 
        their negotiated subcontracting goals.
          Contracting Officers can have a contract performance element 
        to reward prime contractor performance as part of any incentive 
        fee provisions as it pertains to the large firm's ability to 
        meet/exceed the small business goals stated in the contract. 
        The fee is added to the prime's overall fee (profit), thus 
        providing a monetary incentive to meet/exceed their small 
        business goals.
          As part of the government's Integrated Acquisition 
        Environment (IAE) the electronic Subcontracting Reporting 
        System (eSRS) was launched to create higher visibility and 
        introduce a more transparency into the process of gathering 
        information on Federal subcontracting accomplishments. This 
        Internet-based tool will streamline the process of reporting on 
        subcontracting plans and provide agencies with access to 
        analytical data on subcontracting performance. Information 
        contained in eSRS can be viewed by the public, so large primes 
        have an incentive to be viewed as being proactive and 
        supportive of small business.

    Ms. Herseth Sandlin. Okay. That would be helpful. Finally, 
you state that the SBA has started a campaign to reach out to 
veteran-owned small businesses. Could you elaborate on what 
that campaign will entail?
    Mr. Jordan. Well, we continuously work with both the 
agencies and the service-disabled veteran-owned small 
businesses to help the agencies develop their goals. And every 
agency that does not meet its goals in any of the socioeconomic 
programs, must give to us a plan for how they will try to 
achieve it in the future. So that is one way. And we help 
educate them as to the service-disabled veteran-owned small 
businesses who could provide the goods and services that they 
are going to be purchasing.
    Likewise, we reach out to the service-disabled veteran-
owned small businesses to help educate them on how to become 
contract ready, and become alerted to what the government is 
likely to buy going forward, and so what goods and services, 
and by category, will be procured. So it is an outreach effort 
on both the agency side and the small business side.
    Ms. Herseth Sandlin. Okay. Thank you. I may have some 
additional questions that I will submit in writing to you. I do 
appreciate your testimony today.
    I want to thank everyone who were witnesses on our panels 
this afternoon for your statements, and your valuable insight, 
and obvious interest in this topic. There is a lot of work that 
lies ahead for all of us. I do want to assure you that the 
Subcommittee will continue to work diligently with all of the 
stakeholders to ensure that the concerns and the interests of 
our veteran-owned small-businesses are being heard and 
addressed.
    Thank you again. The hearing stands adjourned.
    [Whereupon, at 4:30 p.m., the Subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              

   Prepared Statement of Hon. Stephanie Herseth Sandlin, Chairwoman, 
                  Subcommittee on Economic Opportunity
    As our Nation's veteran owned small businesses encounter a 
challenging environment, it is important that we continue to provide 
oversight on small business opportunities for veterans and service 
disabled veterans, and review laws that are ineffective and consider 
possible solutions.
    During the 110th Congress, we held three hearings on the subject 
of: veterans entrepreneurship and self employment; Federal procurement 
and the 3 percent set aside; and contract bundling. During these 
hearings, many of our panelists expressed several concerns including: 
the need to retrain Federal employees on existing laws and regulations; 
a majority of Federal agencies not meeting the 3 percent set aside for 
veteran owned small businesses; the need to streamline existing 
programs; and lack of enforcement of existing laws and regulations.
    Furthermore, the Committee recently received correspondence from a 
veteran concerned that the Small Business Administration's offices in 
San Antonio, Texas are promoting contracts with 8(a) applicants at the 
detriment of service disabled veteran owned small businesses. While 
this and other veteran's concerns are discouraging to me, I am pleased 
that we are continuing to make progress in providing more opportunities 
for out Nation's veterans.
    Last year we made progress with the enactment of Public Law 110-
389, the Veterans' Benefits Improvement Act of 2008 which contained 
language introduced by Ranking Member Boozman. This new law clarifies 
the intent of the small business provisions in Public Law 109-461 that 
these provisions apply not only to the Department of Veterans Affairs, 
but also to any agency, entity, or person acting on its behalf. This 
new law requires that specific language be included in future 
agreements between the VA and any agents acting on its behalf are 
expected to be in compliance with the VA's responsibilities under any 
laws and regulations promoting veteran and service-disabled veteran-
owned small businesses.
    Under the leadership of Chairwoman Nydia Velazquez of the House 
Small Business Committee, the Congress passed Public Law 110-186, the 
Military Reservist and Veteran Small Business Reauthorization and 
Opportunity Act of 2008. Among several substantive changes, this law 
will: increase the authorization of the Small Business Administration's 
Office of Veteran Business Development; create an Interagency Taskforce 
on Veteran Small Business; create a new loan initiative providing 
veterans with 7(a) small business loans at 50 percent of the fees of 
other small businesses; increase the number of Veterans Business 
Outreach Centers; and provides grants to the SBA's Small Business 
Development Centers to expand its outreach to veterans.
    I applaud these efforts and the work of the thousands of Federal 
employees tasked to assist our Nation's veterans, but more can and 
should be done. I look forward to exploring all possibilities to work 
with Interagency Taskforce on Veteran Small Business and the veterans 
community on ways to improve existing programs.
    I can assure you that this Subcommittee will continue to work 
diligently with all stakeholders to ensure that the interests of our 
veteran owned small businesses are being heard and addressed.
                                 
  Prepared Statement of Hon. John Boozman, Ranking Republican Member, 
                  Subcommittee on Economic Opportunity
    Good afternoon.
    Madam Chair, during the 109th Congress, we passed important small 
business legislation as sections 502 and 503 of what became Public Law 
109-461 on December 22, 2006. Those provisions provided VA contracting 
officials with several tools to enable them to increase the number of 
contracts given to veteran and disabled veteran-owned small businesses. 
To their credit, VA has made a significant effort to increase veteran-
owned small business' share of contracts and last fiscal year awarded 
14.9 percent of the procurement contracts worth about $2.1 billion went 
to veteran-owned small businesses including $1.66 billion to disabled 
vet small businesses. I congratulate VA staff for that accomplishment 
and for setting the standard for the rest of the Federal Government.
    PL 109-461 had several important features. It requires VA to set 
veteran-owned small business procurement goals. It requires VA to 
verify that subcontracting plans submitted in proposals are carried 
out. It set thresholds for sole source and restricted competition. It 
requires that a small business seeking contracts under the provisions 
of PL 109-461 be listed and verified in the database of veteran-owned 
small businesses maintained by VA. The law also requires VA to verify 
that businesses applying for listing in the database are owned and 
controlled by veterans and the service-connected disability status of 
the owner(s). The law also establishes enforcement provisions and how a 
business is treated when ownership passes due to the death of the 
veteran and annual reporting requirements. Finally, the law clearly 
states that VA, ``shall give priority to a small business owned and 
controlled by veterans if such business concern also meets the 
requirements of that contracting preference.''
    However, I have a concern. While VA has done an excellent job in 
exceeding the veteran-owned small business contracting goal, I am very 
concerned about implementation of the database provisions. It is my 
understanding that 28 months after the provisions became law, only 974 
of the 18,368 companies in the VA database have been verified as a 
veteran-owned small business with another 427 pending verification. At 
that rate, it will take about 20 more years to work through the entire 
database. To me, the law states that every business in the database 
must be vetted, not just those who request verification. It makes no 
sense to me to maintain what is purported to be a list of veteran-owned 
businesses that is really a list of those who request verification and 
those who do not. Any business that does not desire verification of its 
veteran and ownership status is a potential protest. In the meantime, 
it is entirely possible that a non-veteran-owned company could be 
awarded a contract by a Federal agency solely on its presence in the 
database.
    The point I want to make to the VA witnesses here today is that the 
law says verify the database, and while the law did not specify a 
finishing date, the foot-dragging is preventing hardworking and 
qualified veteran-owned companies from being eligible to compete for VA 
business under the provisions of PL 109-461. I also believe we have not 
received the annual report due to Congress by December 31 of each year. 
I would like to know when we can expect that report.
    Madam Chair, I feel it is necessary to point out that if a lack of 
staff or if there are other impediments to implementing provisions of 
law, we need to hear about it from the department. Otherwise, it is 
perfectly reasonable for us to expect reasonable progress toward 
implementing the legislation we pass. And in the case of the database, 
VA has dropped the ball.
    I yield back.
                                 
  Prepared Statement of Mark J. Gross, President and Chief Executive 
              Officer, Oak Grove Technologies, Raleigh, NC
    Good afternoon Chairman Herseth-Sandlin, Ranking Member Boozman and 
Members of this Subcommittee. Thank you for the invitation to come 
before you and share my experiences and work within the veteran 
businessowner community, and discuss Contracts and Contracting Policy 
at the VA.
    I am a veteran of the United States Army, and Chief Executive 
Officer of Oak Grove Technologies, a Service Disabled Veteran Owned 
small business, founded at my kitchen table 6 years ago. Today, I am 
proud to say, I employ over 250 employees, over 80 percent of whom are 
veterans, and 22 percent of those are service disabled veterans. 
Geographically, we are dispersed across 19 States, Puerto Rico, The 
U.S. Virgin Islands, and support both OEF and OIF in Afghanistan and 
Iraq.
    The Department of Veterans Affairs is unique in that PL 109-461 
gives the VA special authorization in procuring to Veteran and Disabled 
Veteran companies. I believe this is a major reason why the V A has 
been able to contract a greater percentage with Veteran and Disabled 
Veteran companies.
    In my opinion the climate has changed considerably in the past few 
years. If you look at some of the trends today, you will see that many 
agencies are improving in making awards to Service Disabled Veteran 
owned businesses, although we still have a way to go. Congress has done 
an outstanding job in passing legislation such as 106-50 and 108-183, 
both of which established Service Disabled Veteran goals and mandates 
in Federal contracting. However, there still lacks accountability 
within Agencies to meet these goals. I am here to offer my views on 
what can be done to ensure the state of veteran's entrepreneurship 
within the Federal Government.
    I'll offer a few recommendations to this Subcommittee:

          Propose legislation similar to 109-461for all Federal 
        Agencies.
          With respect to set asides and sole sources, 
        eliminate the ``Rule of Two'' wherein a contracting officer
                  Has to know of 2 or more SDVOB's before an 
                acquisition can be set aside.
                  Conversely, an ``SDVO sole source'' award can 
                only be made when there is only one SDVOSB that can 
                satisfy the requirement.

        This is the only similar requirement for any of the statutory 
        programs.

          Create a level playingfield between the statutory 
        programs by changing the use of ``MAY'' to ``Shall'' when using 
        restricted competition for SDVOB's.
          Small business subcontracting plans, including all 
        details of the plans, required by large prime contractors, 
        should be made public and accessible electronically or on 
        Standard Forms 294/295 upon request. Mandate that contracting 
        officers impose liquidated damages, as predicated in FAR Part 
        19.705-07 for those large companies that fail to demonstrate 
        good faith efforts to fulfill the requirements of their 
        subcontract plans.
          Close loopholes in the GSA Schedule (FAR Par 8) 
        wherein large businesses are allowed to take away business 
        intended for small business, or mandate that the Federal 
        Agencies disclose the percentage of overall contracting dollars 
        procured to small business' through the GSA Schedules.
          If contract bundling must be utilized for acquisition 
        streamlining, ensure adequate percentages are allocated with 
        small business plans that include service disabled veteran 
        owned small businesses
          Establish an Ombudsman within agencies Provide 
        procurement oversight.

    To address whether there are enough Veteran business' to meet and 
fulfill contracts, I would state without question. It was the same 
argument we've had a couple of years ago when it was stated there 
weren't enough veteran/service disable veteran companies to fulfill the 
3 percent contract goals, yet CCR listed 7k active 8a Companies and 12k 
veteran/disabled veteran companies-- yet most agencies had no problems 
meeting a higher percentage requirement for 8a companies.
    As an entrepreneur and Veteran, the climate certainly has gotten 
better over the past 7 years, but we still have a long way to go. I'm 
confident that Congress, and many of the Federal Agencies such as 
Department of the Army, and the Department of Veterans Affairs are 
committed to this cause.
    I thank you for your time and your efforts to improve the Federal 
contracting climate for Service Disabled Veteran Businesses.

                               __________
                              Amendment 1
                THE DEPUTY SECRETARY OF VETERANS AFFAIRS
                             WASHINGTON, DC
                             June 20, 2007
  MEMORANDUM FOR UNDER SECRETARIES, ASSISTANT SECRETARIES, OTHER KEY 
 OFFICIALS, DEPUTY ASSISTANT SECRETARIES, AND FIELD FACILITY DIRECTORS
SUBJECT: Veterans First Contracting Program
    Public Law (P.L.) 109-461. The Veterans Benefits, Healthcare and 
Information Technology Act of 2006. Sections 502 and 503 are effective 
June 20, 2007. This law provides VA with special authorities in 
contracting with service-disabled veteran-owned small businesses and 
veteran-owned small businesses.
    VA personnel involved in the acquisition process need to become 
acquainted with the authorities and their responsibilities under P.L. 
109-461. We must ensure that our advocacy of veterans extends to 
veteran entrepreneurs. I expect each of you to fully embrace the spirit 
and intent of this law and advance veteran entrepreneurial 
opportunities within VA.
    I have asked Scott Denniston, Director, Office of Small and 
Disadvantaged Business Utilization, to monitor VA's implementation and 
compliance with P.L. 109-461. Mr. Denniston will report VA's progress 
to the Secretary and me on a regular basis.
Gordon H. Mansfield
                                 
Prepared Statement of Anthony R. Jimenez, President and Chief Executive 
                  Officer, MicroTech, LLC, Vienna, VA
                           Executive Summary
Introduction
    It's been nearly 4 years since President George W. Bush issued 
Executive Order 13360 requiring Federal agencies to provide 3 percent 
(3 percent) of all contracting opportunities to Veteran Small Business. 
To date, less than a handful of agencies have been successful in 
achieving that annual mandate. Overall, contract opportunities for 
Veteran Small Business are falling short of acceptable industry goals 
despite businesses being willing, ready, and able to provide the 
necessary services and solutions.
    As President & Chief Executive Officer of SDVOSB MicroTech, and a 
former Federal Contracting Officer, it's disappointing and a major 
impediment to doing business, that many agencies make little effort to 
achieve this 3percent goal. To counter this, significant improvements 
need to be enacted to correct systemic problems in the current Veteran 
Small Business procurement system.
Possible Solutions
          Limit Sole Sourcing
          Reform Contract Bundling
          Maximize Small Business Opportunities
          Consolidate Contracts so Veteran Small Business can 
        Share in the Benefits of Bundling
          Place Orders under a Veteran Small Business-focused 
        GWAC
          Solicit Quotes for GSA Federal Supply Service Orders 
        only from Small Business, or Socioeconomic Small Business 
        groups
          Create a Small Business Participation Enforcement 
        Team
          Consider Hybrid Contract Bundling
          Establish a SBA Mentor-Protege Program Focused on 
        Veteran Small Business
          Enforce Mandatory Federal Acquisition Regulation 
        (FAR) Guidelines
Leading Issues
        1.  What types of businesses are winning the majority of 
        Federal contracts?

    The statistics clearly show that large, more established enterprise 
business are winning the majority of all Federal contracts, as well as 
the more high-dollar lucrative award amounts.

        2.  What needs to be done to improve the process?

    Federal contracts with the VA require complex, specific procurement 
requirements, and an intimate understanding of the unique VA culture, 
making it extremely difficult and cumbersome for Small Businesses to 
succeed. Clearer rules and educational efforts about the Federal 
``Veterans First Contracting Program'' would be beneficial.

        3.  Are there enough Veteran Small Businesses that have the 
        experience and resources to fulfill Federal contracts?

    In 2008, more than 15,000 Veteran-Owned Businesses were registered 
in the Central Contracting Register (CCR), the primary registrant 
database for the Federal Government. The Veteran Small Business 
community has the experience and resources necessary to adequately 
fulfill Federal contracts.

        4.  What can be done to help Veteran Small Business grow?

    In order to sustain or further increase the ability of Veteran 
Small Business to contract within the Federal arena, it will require 
more policy vigilance, clearer guidance, improved oversight, and 
effective policy enforcement.
Conclusion
    The Veteran Small Business community is not asking for a 
``handout,'' but a ``hand up.'' Keep the ``Playing Field'' level for 
businesses of all sizes. Limit Sole Sourcing. Reform Contract Bundling. 
Establish a Mentor-Protege program at the VA. Recognize the value of 
Veteran Entrepreneurs. Enforce the 3 percent Veteran Small Business 
Contract mandate.

                               __________

    Good Afternoon Chairwoman Herseth Sandlin, Ranking Member Boozman 
and Subcommittee Members. I greatly appreciate the opportunity to 
testify at this hearing regarding how the Department of Veteran Affairs 
(VA) awards contracts and am honored to represent other Veteran-Owned 
and Service-Disabled Veteran-Owned Small Business Owners.
    My name is Anthony (Tony) Jimenez and I am the President and Chief 
Executive Officer of MicroTech. MicroTech is a Minority-Owned, 8(a) and 
Service-Disabled Veteran-Owned Small Business (SDVOSB) providing 
Network and IT Enterprise Management, Information Technology Systems 
and Services, Strategic Solutions, Audio-Visual Telecommunications 
Design and Installation, Product Solutions, and Consulting Services.
    I retired from the Army in 2003 after serving 24 years on active 
duty and started MicroTech in 2004. Today I employ over 250 great 
Americans and my Team has become a powerful job creation engine and 
force for economic development in my community, in the State of 
Virginia, and in a number of other states across the Nation.
    Since the last time I testified before this Committee in July 2007, 
MicroTech has quadrupled in size and has added over 15 additional 
government contracts to its portfolio. MicroTech manages over 400,000 
government IT users daily and provides products and solutions to more 
than 30 government Agencies.
    MicroTech has been recognized by industry groups, diversity 
organizations, as well as the Federal Government, as a leading Small 
Business that has notably succeeded at supporting the Business of 
government. MicroTech's exponential growth has led to recognition such 
as the prestigious Inc. 500, ranking the Fastest Growing Private 
Companies in the U.S.; Washington Business Journal's Top 10 Fastest 
Growing Companies in the region; the HB500-as a Top 500 Hispanic-Owned 
Business; DiversityBusiness.com--as a Top 25 Disabled Veteran-Owned 
Business, and; the Washington Technology Top 25 8(a)--recognizing the 
most successful 8(a) small businesses in the government marketplace.
    Like most of the Veterans who retire from active duty, initially I 
had no idea what I wanted to do when I left the military. But, I knew I 
wanted to remain close to the fight and continue, in some way, to serve 
the country. As an owner of a business that manages Federal projects, 
MicroTech allows me to do that. I have the opportunity to use my unique 
military skills and expertise to help the government succeed, as well 
as the ability to work with and provide jobs for other Veterans.
    My small business competes for Federal projects, and targets 
contracting opportunities based not only on our core competencies, but 
also on our opportunity to hire Veterans and Wounded Warriors to 
perform the work; thus giving them a chance at a viable second career. 
However, in the short 5 years MicroTech has been doing business with 
the Federal Government, I have discovered that opportunities for 
Veteran-Owned Small Businesses (VOSB) and SDVOSBs are not as available 
as I believed they were when I started my business. The emphasis on 
increasing the use of SDVOSBs in fulfilling the government's 
contracting needs is sorely lacking.
    It's been nearly 4 years since President George W. Bush issued 
Executive Order 13360 requiring Federal agencies to provide 3 percent 
of all contracting opportunities to SDVOSBs. To date, fewer than a 
handful have achieved that annual goal. Most of the Federal Agencies 
are making slow, albeit consistent progress in attaining the mark. 
While consistent progress is commendable, my questions are these: How 
many more years will it take to achieve these goals? What is being done 
to ensure every agency meets the 3 percent goal? Finally, what are the 
consequences if an agency fails to achieve the mandate?
    As a former Contracting Officer for the Federal Government, I 
continue to be disappointed at how many agencies say they care but do 
nothing or at best, very little, to ensure their organizations provide 
3 percent of contracting opportunities to Service-Disabled Veteran-
Owned Small Business (SDVOSBs). The fact is, there currently are no 
penalties for failing to meet the Executive Order and very few 
incentives for meeting or exceeding the established standard. This lack 
of oversight in meeting policy requirements makes it extremely 
difficult for agencies to realize the advantages of contracting with 
SDVOSBs.
    The good news is that MicroTech's experience dealing with the 
Department of Veteran Affairs (VA) on this issue has been very 
positive. From my perspective, the VA awards a greater percentage of 
contracts to VOSBs and SDVOSBs than any other agency in the Federal 
Government. Veteran-Owned Small Businesses (VOSBs) seem to enjoy 
greater success at the VA than non-veteran owned. This is happening 
because of the superlative efforts of this Committee and others. In 
addition, the VA, as one expects, wants to take care of our Nation's 
Veterans, so it makes sense that the VA strongly supports set-aside 
opportunities for Veterans. The VA keeps their eyes on the prize, and 
works hard to ensure VOSBs get their fair share of competitive 
contracts.
    The problem is that this commitment to taking care of our veterans 
is not uniform across the Federal Government. As it pertains to this 
hearing, I believe there should be significant improvements made to 
correct systemic problems in the current procurement system with regard 
to SDVOSBs and the ability of agencies to achieve the 3 percent goal. I 
recommend the following steps be taken in all agencies, government-
wide:

          Limit Sole Sourcing. Sole Source Contracting is one 
        way of satisfying procurement requirements for the VA and other 
        agencies; however Sole Source contracts should only be used 
        when it benefits the Federal Government and never when more 
        than one SDVOSB can satisfy the requirement. Awarding a Sole 
        Source contract under any other circumstance can adversely 
        impact competition and require the VA and other government 
        Agencies to pay more for products and solutions.
          Revise Contract Bundling. Contract Bundling adversely 
        impacts competition and hurts all small businesses. The normal 
        procedures for Contract Bundling require agencies to provide 
        justification for bundling decisions and have the decisions 
        reviewed at higher levels. The problem with this is that the 
        decision is often made in a vacuum and the affected small 
        businesses have no means to object to a bundling decision. In 
        most of these cases, the small businesses are not even aware 
        that the decision is being made. Instead, they don't discover 
        that their contract has been bundled with a larger requirement 
        until just before the RFP is released. By then, it is too late 
        to do anything except agree with the decision and determine how 
        to stay involved in the competitive bid. The argument in 
        support of Contract Bundling and Strategic Sourcing is that it 
        saves money. That may be partially true, but not in every case. 
        While Contract Bundling may save Contracting Officers time and 
        effort and reduce government overhead, those dollar savings are 
        often offset by the higher costs associated with doing business 
        with larger organizations. This is especially true when 
        considering the added costs associated with large businesses 
        subcontracting work that is more difficult to staff or perform 
        to small businesses which regularly happens on large complex 
        contracts requiring diverse skill sets. The objective should be 
        to find ways to use the power of procurement reforms to help 
        small businesses, while at the same time seeking out ways to 
        perform services and purchase products more efficiently, and 
        for a lower price. One of the unbundling strategies calls for 
        the Small Business Administration (SBA) to collect and 
        disseminate examples of successful strategies for maximizing 
        small business opportunities. Possible ``bundling'' solutions 
        are:

                  Consolidate contracts so Small Businesses can 
                share the benefits of bundling. This allows the 
                government to continue to take advantage of cost 
                savings, price reductions, quality improvements (that 
                will save time or improve or enhance performance or 
                efficiency), reduced acquisition cycle times, and 
                better terms and conditions for both the government and 
                the contractor. Make a fair portion of these bundled 
                contracts specifically small business opportunities, 
                and don't assume that because it has been bundled, that 
                it has to be a large business focused. In most cases, 
                making the opportunity SDVOSB-focused will lead to the 
                very same team as if it was a full and open 
                opportunity, but when it is an SDVOSB opportunity, the 
                government gets a better price, more even distribution 
                of the work among the small and large businesses, 
                SDVOSBs are guaranteed a fair portion of the work, and 
                SDVOSBs have the ability to grow and someday compete at 
                the large business level.
                  Place orders under a Small Business GWAC. The 
                Veteran Technology Services (VETS) government-wide 
                Acquisition Contract (GWAC) and the NASA Solutions for 
                Enterprise-Wide Procurement (SEWP) GWAC are two 
                excellent examples of government-wide Acquisition 
                Contracts that offer multiple award contracts with 
                highly qualified VOSBs and SDVOSBs. U.S. Department of 
                Veteran Affairs has done an outstanding job of using 
                both of these GWACs. The VA's policies for using GWACs 
                with VOSBs and SDVOSB Primes (such as VETS and SEWP) 
                are an outstanding example of their commitment to VOSBs 
                and SDVOSBs. This approach should be duplicated 
                throughout the Federal Government.
                  Solicit quotes for GSA Federal Supply Service 
                orders only from Small Businesses, or Socioeconomic 
                Small Business Groups. Small Business set aside 
                programs are not authorized under a Federal Supply 
                Schedule, but it is permissible to limit consideration 
                for an order to small businesses and socio--economic 
                small businesses (SDVOSB, 8(a), WOSB, HubZone, etc.). 
                Once again, the VA has done an outstanding job using 
                GSA's Federal Supply Service and limiting consideration 
                to SDVOSBs.
                  Create a Small Business Participation 
                Enforcement Team. Consider taking a portion of the 
                savings realized through Contract Bundling to implement 
                a Small Business Plan Enforcement Team that enforces 
                small business participation in accordance with the 
                Request for Proposal (RFP).
                  Consider Hybrid Contract Bundling. Small 
                businesses could partner with larger organizations 
                using a Contractor Teaming Arrangement (CTA), similar 
                to those used by GSA. The terms and conditions of the 
                CTA are defined up front, payment goes into an escrow 
                account, and disbursements are made based on the 
                agreement in the CTA (51 percent small business; 49 
                percent large business).
                  Establish a Mentor-Protege program at the 
                Small Business Administration (SBA) for Veteran-Owned 
                and Service-Disabled Veteran-Owned Small Businesses. 
                The benefits of establishing a program at SBA that 
                mirrors the 8(a) Mentor-Protege program are:

                          A Mentor-Protege program could become 
                        a joint venture as a small business for any 
                        government procurement, including procurements 
                        less than half the size standard that 
                        corresponds to the assigned SIC code and Sole 
                        Source contracts, provided both the Mentor and 
                        the Protege qualify as small for the 
                        procurement and, for purposes of Sole Source 
                        requirements, the Protege has not reached the 
                        dollar limit.
                          Notwithstanding the requirements, in 
                        order to raise capital for the Protege firm, 
                        the Mentor could own an equity interest of up-
                        to-40 percent in the Protege firm.
                          Despite the Mentor-Protege 
                        relationship, a Protege firm could qualify for 
                        other assistance as a Small Business, including 
                        SBA financial assistance.
                          No determination of affiliation or 
                        control may be found between a Protege; firm 
                        and its Mentor based on the Mentor-Protege 
                        agreement or any assistance provided pursuant 
                        to the agreement.

                  Better FAR Enforcement. The Federal 
                Acquisition Regulation (FAR) already includes 
                provisions intended to help Small Business in the event 
                that bundling occurs. Unfortunately, the FAR does not 
                include enforcement mechanisms nor does it include a 
                reward or punishment system. If the FAR or Code of 
                Federal Regulations (CFR) were to include mandatory 
                enforcement, that would go a long way toward assisting 
                Small Business. When it comes to FAR requirements for 
                Contract Bundling, FAR makes a good start, but fails to 
                follow through with the most important aspect of the 
                system. Bundled contracts are often made so complex 
                that small businesses are precluded from competing for 
                them. FAR Part 7 only partially addresses Contract 
                Bundling and the requirements for how and when it is 
                allowed.

                          FAR 7.103 states that when 
                        considering a bundled acquisition, the head of 
                        an agency must ``[s]tructure contract 
                        requirements to facilitate competition by and 
                        among small business concerns; and [a]void 
                        unnecessary and unjustified bundling that 
                        precludes small business participation as 
                        contractors.''

                          That is much easier said than done. 
                        Any time either disparate services are bundled, 
                        or two or more requirements are combined, 
                        Contracting Officers can make it much more 
                        difficult for small businesses to compete.

                          FAR 7.107(c)(2) states that when 
                        bundling contracts, agency officials must 
                        ensure, ``[the acquisition strategy provides 
                        for maximum practicable participation by small 
                        business concerns.]'' Again, this is nice in 
                        theory, but who is guaranteeing that the 
                        strategy becomes reality?

    The proliferation of long-term Indefinite-Delivery/Indefinite-
Quantity (ID/IQ) Contract Vehicles has also been a serious deterrent to 
many small businesses. More and more Federal procurement dollars are 
being spent through pre-competed ID/IQs. These large business ID/IQs 
have the same effect as Contract Bundling.
    Other than GSA's VETS and NASA's SEWP, there have been very few 
large ID/IQ contract opportunities for SDVOSBs. The additional few that 
the government has allowed were very complex and required a very large 
investment by the small business to cover the bid and proposal costs, 
although numerous SDVOSBs still bid.
    What types of businesses are getting the majority of the contracts 
(Large, Small, Veteran-Owned)? The statistics I have reviewed, clearly 
show that larger businesses are getting the majority of contracts, as 
well as the larger, more lucrative contracts. There is still a belief 
that ``Bigger is Better,'' but good SDVOSBs and VOSBs are doing great 
work on very large and visible contracts, and changing the perception 
that only big systems integrators can adequately perform the work. How 
can we better highlight Service-Disabled Veteran-Owned Small Businesses 
and Veteran-Owned Small Business?

          Address concerns regarding VA contracting and what 
        needs to be done to improve the process. Contracting with the 
        VA can be extremely difficult for small businesses, requiring 
        them to not only understand VA-specific contracting and complex 
        procurement requirements, but also to understand the VA 
        organization and culture. At MicroTech, we must constantly 
        educate our VA customers about public policy like the 
        ``Veterans First Contracting Program'' and other initiatives 
        that are designed to help Veteran-Owned Businesses grow. There 
        are many administrators at the VA that genuinely want to do 
        business with Veteran-Owned Small Business; unfortunately 
        policies and regulations designed to make it easier to do 
        business with Veterans are either not clearly promoted, or not 
        understood.
          Emphasize that there are enough Veteran-Owned and 
        Service-Disabled Veteran-Owned Small Businesses that have the 
        experience and resources to fulfill Federal contracts. On July 
        3, 2007, the U.S. Census Bureau released a report entitled: 
        First-Ever Reports on Veteran Entrepreneurs and Their 
        Businesses. This report stated that Veterans tend to be better 
        educated before starting or acquiring their businesses, and 
        older than other would-be entrepreneurs. The report also showed 
        Veteran Business Owners comprised about 3 million, or 14.5 
        percent, of the estimated 20.5 million owners of all firms that 
        responded to the 2002 survey.

    This first-ever report examining Veterans in Business shows that 
prior to establishing, purchasing or acquiring their firms, military 
veteran owners were somewhat better educated. In 2002, veterans were 
about as likely to have either bachelor or postgraduate degrees as all 
owners of the responding surveyed businesses (40.7 percent vs. 40.1 
percent). However, they were more likely to have postgraduate degrees 
(19.2 percent vs. 17.3 percent) and less likely not to have graduated 
from high school (4.3 percent vs. 6 percent).
    Sixty-eight percent of military veteran owners were age 55 or over, 
and 32 percent were 65 or older. By contrast, among all businessowners 
completing the survey, 31 percent were 55 or older.
    Beyond those facts, businesses owned by veterans tended to be 
almost virtually identical to all responding businesses in Receipts and 
in the Employment Size.
    Other highlights of the survey:

                  Nearly 7 percent of Veteran Business Owners 
                were disabled from injuries or illnesses incurred 
                during active military service.
                  About 55 percent of veteran-owned firms 
                reported having been originally established, purchased 
                or acquired before 1990, compared with 36 percent of 
                all firms responding to the survey.
                  Fifty-one point 8 percent of the veteran-
                owned businesses were home-based, compared with 49.4 
                percent of all surveyed businesses.
                  The percentage of veteran-owned firms with 
                owners that relied on personal or family assets for 
                capital, to start or acquire their businesses, was 
                nearly identical to the percentage of all surveyed 
                businesses (63.9 percent vs. 63.6 percent). Percentages 
                of businesses originally financed by banks or outside 
                investors were also nearly identical for all firms 
                responding to the survey (14.2 percent vs. 14.8 
                percent), as were the percentages financed directly by 
                government loans or government-guaranteed loans (1.3 
                percent vs. 1.6 percent).

    In 2008, more than 15,000 Veteran-Owned Businesses were registered 
in the Central Contracting Register (CCR), a requirement to do business 
with the Federal Government. The CCR is the primary registrant database 
for the government. The CCR collects, validates, stores and 
disseminates data in support of agency acquisition missions. The CCR 
showed that not only were there enough Veteran-Owned and Service-
Disabled Veteran-Owned Small Businesses that have the capacity to meet 
and fulfill contracts, the majority of those VOSBs and SDVOSBs have the 
experience and the resources necessary to fulfill the contracts, if 
awarded.
    In summary, what can be done to help Veteran Small Business grow? I 
have often heard people in Washington say that we don't need any more 
laws; we just need to enforce the ones we have. In order to sustain or 
further increase the VA's ability to contract with VOSBs and SDVOSBs, 
it will require vigilance, clearer guidance, improved oversight, and 
effective enforcement. More will also need to be done to educate 
procurement officials about requirements and about the government's 
desire to contract with Veteran-Owned Businesses. We need to do more to 
get the word out and to let others know that procurements that provide 
opportunities to Veteran-Owned Businesses have the support of the VA 
leadership, the House and the Senate, and President Obama. I would also 
ask that you carry the message you're hearing today to the other 
Committees you serve on, and do everything you can to help educate 
others in Washington who don't recognize the value and importance of 
Veteran Entrepreneurs.
    Madame Chairwoman and Distinguished Committee Members, I appreciate 
the time you and the other Members of the Committee on Veterans' 
Affairs have spent on this and other critical topics affecting Veteran 
Entrepreneurship. I speak for all Veteran Entrepreneurs when I say how 
very proud we are of this Committee and the hard work you and your 
staff members do for our Nation's Veterans. Be assured, we are not 
asking for a ``handout,'' just a ``hand up.'' Thank you for helping to 
level the Playing Field and for believing in us and our ability to give 
back to a nation that has given us so much. This concludes my testimony 
and I would be happy to answer any questions you may have.

                                 
   Prepared Statement of Charles Maurice Baker, President and Chief 
       Executive Officer, MCB Lighting and Electrical, Owings, MD
Executive Summary
    Today, we have a unique opportunity like none other in history to 
actually create the most dynamic win/win proposition between the 
procurement community and our Veterans.
    Our presentation is based on a theme of unity, teamwork and sharing 
of ideas. It is not our intent to criticize, point fingers or to assess 
blame. We strongly support the VA and its past work with veterans. We 
want to share information as well as introduce viable approaches for 
making economic opportunity readily available for Veterans and at the 
end of the day; we hope that the information provided is helpful and 
that you agree with us and our methods.
Vision
    It is our vision to help educate as many veterans about procurement 
as possible by identifying and communicating better business practices 
and strategies which will help improve the procurement process, save 
money and greatly reduce fraud and abuse while at the same time 
achieving the true intent of procurement laws.
Mission
    Our mission is to help Veterans while at the same time save 
billions of dollars in procurement spending. We will reach out to 
contracting officers and agency management to identify areas of 
weaknesses and work as a team to fix them. We also will reach out to 
our Veterans to ensure they understand how to prosper under the 
procurement rules and how to work effectively with the procurement 
professionals.
Veterans
    Today we have the youngest overall group of disabled veterans 
produced by war at anytime in our history. The effect of this will 
dramatically altered the lives of our soldiers and present several 
challenges for them to survive emotionally and economically in the 
future. Because this group is young, we need to come up with long-term 
solutions that fit their needs and the needs of our society.
    We believe that this group of Veterans is intelligent and 
innovative. We can help compensate them for any future lost earnings by 
making it possible for them to survive on their own through business 
opportunities or providing them with the appropriate skills to re-enter 
the workforce.
    Helping this group succeed independently improves our tax base 
while at the same time saves significant money by reducing or 
eliminating any potential future burden on our social and medical 
support systems.
Veteran Affairs
    The Department of Veteran Affairs (VA) provides a great economic 
and business development opportunity for soldiers. VA has the most 
transactions per dollars spent in the Federal space. It should go 
without saying that VA has the legal, moral and ethical responsibility 
to create economic and moral justice for SDVOSBs and Veterans.
    VA can and should take the necessary steps to ensure that its 
fallen soldiers are invited to the table to participate and are trained 
and primed for success. The VA needs a system to identify and provide 
assistance to businessowners who may need special assistance.
Procurement Issues and Potential Fixes
    The information that follows is either factual or our opinion and 
it is not intended to be inflammatory or adversarial.
    Federal Procurement requires the enhancement of its procurement 
programs in order to make better management decisions affecting the 
mission of operating an efficient government in a cost effective 
manner.
    We believe that the procurement system needs improving due to a 
lack of trained workforce Federal Government wide and is not being 
operated in an the most efficient and cost effective manner. We do 
strongly believe the current management starting with Mr. Jan Frye is 
more than capable of making a demonstrative impact on VA procurement 
and is going to do great things with the VA. We hope very careful 
consideration is made when selecting a new director of small business.
    First of all let's address the lack of a trained procurement 
workforce. With the baby boomers maturing and leaving Federal 
procurement we are losing internal knowledge and expertise and there 
does not appear to be a smooth handoff of knowledge and information 
from those retiring to the new workforce. It appears at times that the 
new workforce is lost and doesn't demonstrate that they have a clue 
when it comes to procurement laws and the Federal acquisition 
regulations. Using credit cards as a primary contracting vehicle 
without a better system for compliance in place is scary.
    Along with the inexperienced procurement staff, another troubling 
area is the reduction over the years of the procurement workforce. 
According to Congressman Waxman it will take 1 percent of the total 
dollars spent on the procurement system to fix this problem. Currently 
billions of dollars are being spent to fix this situation.
    Second, procurement is broken beyond adding trained procurement 
personnel. Bodies alone will not fix this problem totally. In order to 
fix procurement you must, and I mean must understand:

          Needs of the customer (current mistake);
          Customer's mission (second mistake);
          Contracting rules totally; and
          The industry for each type of market segment you are 
        contracting.

    One way to augment the procurement knowledge base with true 
experience is with ex-government employees because of their 
understanding of how the procurement system works. From this base there 
can be a synergistic approach taken to address the issues and truly fix 
the procurement problem. It would be difficult to find this knowledge 
base at a big consulting company, but you can find this knowledge 
within the SDVOB and veteran community. There are those in the 
community who have the vision and truly understand the overall mission 
of government within the existing rules.
    The third issue in procurement is the intent of the existing 
procurement laws associated with the implementation of the rules of 
procurement is not being followed. This is why we are having problems 
with Federal procurement and are not meeting the small business goals 
in other agencies.
    Many want us to believe that procurement needs to be over hauled. 
That was the thinking before 1984 when the Competition in Contracting 
Act (CICA) and the Federal Acquisition Regulations (FAR) were created. 
In 1994, the Federal Acquisition Streamlined Procurement Act was 
supposed to overhaul contracting and it created a bigger mess with an 
increased utilization of GSA, DLA, and Federal schedules, and now in 
2009 everybody wants to fix contracting again.
    This time we recommend approaching it differently. Rather than 
changing anything, how about following the existing rules and complying 
with the intent of the existing laws first. Be creative and innovative 
within the rules, in the best interest of the government and not in the 
best interests of personal gain. Somehow we let the people with the 
gold (money) and political influence change all the rules in their 
favor. This is why we don't have competition in contracting and sole 
source contracts to large business only have increased 115 percent over 
the last 5 years to $145B. Large business is getting business 
development and small business is told to compete, if more business 
development and sole source to veterans were done we would increase the 
industrial base and reduce the need for sole source contracts where it 
really hurts at the large dollars because they are the only companies 
capable of satisfying the requirement.
    Until Congressman Waxman is successful in implementing additional 
staffing through his 1 percent initiative, the procurement workforce 
needs to begin an intense training regimen, the laws and rules on the 
books today needs to be followed and enforced and we need to seek out 
more inclusion of the Service Disabled community for their experience 
and expertise.
Economic Injustice
    Within Federal procurement we need a farm system (similar to 
sports). This system will grow what the system needs to increase 
competition and provide enormous saving to the taxpayers later. We also 
need to use multi media to work together as veterans and non veterans 
to do teaming and Joint Venturing. How are we going to do this? Let's 
look at history. For business development, the intent of the rules of 
procurement was to exclusively reserve all the procurements under $100K 
for small business (2 chapters FAR Part 13 & 19) yet we have a two 
sentence loophole which allows big business to circumvent and take the 
business utilizing FAR Part 8.404.
    What is the problem when it comes to purchases over the micro 
purchase limit of $3K not to exceed $100K in my industry? The problem 
is big business everything, they take all but the scraps for the 
preference groups to share with one another. What are the scraps? It's 
70 percent of the transactions. This is siphoned out of small business 
programs exclusively reserved for small business related to Maintenance 
Repair & Operations (MRO).
    We are trying to counter this economic injustice.
    Within our veterans group, we must empower the veteran community 
with the best methods to become a viable, sustainable, competitive 
company or close to 57 percent of SDVOBs will fail.
    We need to empower the Veteran community with a fully funded 
Business Development program and a vehicle that helps them overcome the 
natural challenges associated with becoming a successful Prime 
Contractor and/or participating in material Sub-Contract opportunities.
    One such vehicle would be the establishment of a Public/Private 
Partnership that includes our Nation's Colleges/Universities, Leading 
Prime Contractors, Business Trade Associations, and Trade Buying 
Groups. Specifically, the Colleges/Universities could expand their 
Graduate Course Curriculum by adding an out reach component that allows 
their students to deliver a comprehensive business analysis and 
planning engagement to the Veteran Businesses within their communities. 
This academic perspective could be supplemented by the real-world 
knowledge base that could be delivered to these engagements by the 
Prime Contractor's SBLOs, in concert with their Trade Association 
Partners.
    Utilizing some of the best minds in MBA programs coupled with the 
leveraged buying power associated with national small business buying 
groups and the purchasing power of the Federal Government is a very 
powerful combination.
    What we have outlined above is a situation ready for ``prime time'' 
and will save the government billions of dollars. These groups could be 
galvanized into a BD support delivery system that leverages their 
Enterprise knowledge base against the holistic development needs of our 
Veteran business community. This collective knowledge base would 
empower the Veteran Community with the ability to formulate an ideal 
strategy for pursuing a business growth initiative that incorporates a 
healthy mix of Public Sector and Commercial Customers, irrespective of 
their entry approach (i.e. Prime Contractor, Sub-Contractor, Teaming 
Partner, JV Member . . . etc.).
    As part of our journey to help Veterans and Veterans we have to 
work closely with those in the other preference groups. We call in our 
united front.
United Front
    I believe the SDVOB will create a rising tide. With that rising 
tide we should fight for enforcement and improvements to all small 
businesses programs with the theme of American flag wrapped around 
small business. Buried inside the SDVOB group, making up 58 percent of 
our number, is another preference group.
    This is indicative a sub-story of that is happening in Federal 
procurement. There is infighting within the Designated Groups. We must 
not fight among the preference groups, causing a rear guard action 
within our own internal group and with other groups externally. These 
preference groups don't have the resources we need to get 3 percent of 
the contract dollars Federal Government wide. Somehow, we must get the 
contract dollars, we all deserve according to the laws put in place to 
help us.
Ideas/Solutions
    So far we have been talking about problems and issues. I want to 
turn our attention to some ideas, solutions and opportunities.
    How can we fix some of the procurement problems that we are facing 
today?
    We can start by making good management decisions. One decision is 
considering shifting over a taxing workload to an innovative program 
that we have.
    Over 90 percent of all procurement transactions are under the $100K 
threshold and represent only 10 percent of the total procurement 
dollars. A significant amount of time and effort is consumed by the 
procurement workforce processing small dollar transactions. We think 
this is wasting limited, valuable resources and time. These resources 
and the associated time can be better focused on the real money and the 
real acquisition issues.
    The time involved in processing smaller transactions not only is 
burdensome to the acquisition workforce but it's equally time consuming 
and a nightmare for customers also. I speak with 20 years of 
frustration of dealing with Federal procurement and trying to 
accomplish the mission as a government employee. As the ex-chief of 
facilities for Andrews AFB I can tell you horror stories of having HVAC 
units broken for weeks and sometimes months for a $5K part my people 
went and put their hands on but could not fix the units for several 
months because of the slow procurement process. After all was said and 
done the procurement rules in the name of competition cost the 
taxpayers enormously as the administrative cost would some times even 
exceed the cost of the parts. In addition, the cost of a temporary 
solution would some times triple the purchase cost of the item ordered.
Opportunities
    We have created a logical plan for VA to use immediately to assist 
it in reaching its goal of maximum practical utilization.
    Our experience is maximum practical utilization because they never 
had a logical analytical plan to follow. There has to be a strategy 
with meaningful targets set with milestones and timelines attached.
    Our plan creates an implementation strategy based on the historical 
data of SDVOB procurements with VA from the most current Fiscal Year 
2007 data in the Federal Procurement Data System-NG.
    Our plan is a goal attainment strategy based on actual data which 
clearly demonstrates the immediate possibility of delivering 3 percent 
using a simple logical thought process using product or service 
categories where SDVOB companies have the most potential for success. 
The process identifies product or service categories for all VA 
procurement requirements. VA can use this process to specifically 
target product and service categories where there is little or no 
participation currently for SDVOB companies. Our plan is very effective 
for program managers and contracting officers. Each product or service 
code is assigned a percentage target for SDVOB participation. The 
percentage target is based on dollar volume spending in Fiscal Year 
2007. There is a tiered percentage scale that is used. The scale is 
dollar volume driven with the percentage declining the higher the 
spending. The percentage scale is as follows:

          Up to $100 million--6 percent
          Up to $500 million--5 percent
          Up to $1 billion--4 percent
          Up to $10 billion--3 percent
          Over $10 billion--2.5 percent

    Our vision is to have VA implement our plan immediately so that it 
can contribute to helping SDVOB companies become sustainable, 
competitive and viable businesses as well as satisfy its goal of 
maximum practical utilization.
    Our plan was created by MCB Lighting & Electrical of Owings, MD POC 
Charles Baker 301-812-2591 and Mazyck and Associates of Sacramento, CA 
POC Edward V. Mazyck, Jr. 650-465-6403. MCB INC. at the request of 
Chief Executive Officer Charles M Baker worked with Mazyck & Associates 
to develop this goal attainment strategy.
    One final note. Our plan is applicable to all Departments and we 
will work with all Departments to help them realize their goals as 
well.
    Thank you for the opportunity to share some of our thoughts with 
you today and we hope that it has been informative, educational and 
helpful.

                                 
 Prepared Statement of Lisa N. Wolford, President and Chief Executive 
                    Officer, CSSS.NET, Bellevue, NE
    I would like to thank all the Members of the Committee for the 
opportunity to speak today on this critically important issue of 
``Contracts and Contraction Policy at the VA'' and it's impact on 
Department of Veterans Affairs (VA) awards contracts Businesses. I have 
been in business for over 12 years now and the last 8 years exclusively 
with the Federal Government. I am a veteran of the United States Marine 
Corps and my firm is a VO, SDVOSB, WOB, WBE and 8(a)/SDB. My firm 
provides information technology engineering systems and solutions to 
the Federal Government and therefore the majority of my testimony 
regarding ``Contracts and Contraction Policy at the VA'' will 
concentrate on that sector. My firm has an excellent record of past 
performance and yet even with this my firm has struggled to gain new 
business with the VA due to the issue of how the VA awards contracts.
    I would also like to remind you that veterans have vested into 
their citizenship rights in a way that no other group has through the 
sacrifices we have made in the service of our country. SDVOSBs are 
owned by people from both genders and any race you can think of, 
therefore we are both diverse in characteristics and united in our 
history. Small businesses do not have access or money for PACs and/or 
lobbyists. Instead we spend 180 percent of our energy in growing and 
maintaining our businesses. Consequently, many laws and modifications 
to regulations make it into the FAR and business practices of the 
government that favor large business and are harmful to small 
businesses.
    The majority of the contracts are awarded to.

      Small businesses employee over half of all private sector 
workers
      Small businesses generate more than half of private 
sector output
      Small businesses create more than two-thirds of net new 
jobs
      Information Technology services and technology purchases 
represent the largest portion of the Federal budget
      Over the past 5 years, 
total government contracting has increased by 60 percent, while the 
number of small business contracts has decreased by 55 percent (1)
      Total prime contract obligations solicited by the Federal 
Government in FY 06 88 percent obtained by large businesses
      Increasing subcontracting goals for large prime 
contractors winning a bundled contract is not a sufficient mitigation 
or solution
      Multiple Award Contracts (MAC) are a tool that are 
increasingly used to bundle contracts but are not viewed as contract 
bundling
      Use of GSA contract vehicles to use small businesses as 
pass through by Federal agencies
VA Successes in Contracting with SDVOSBs
    The VA has exceeded the goals set for contracting with SDVOSBs. The 
VA through Scott Denniston's leadership has done a great deal to change 
the culture within the VA for contracting with SDVOSB, however there is 
still a great deal that needs to be done.
Issues and Concerns with VA Contracting
Use of GSA Schedules
    One of the ways that the VA has achieved the goals that it has 
achieved is through the use of standard GSA schedules. If a contracting 
officer sends out an opportunity to be bid to only SDVOSBs on a 
Schedule 70, they can count the entire award as 100 percent to a small 
business. Now on the surface that sounds great, but since it is not a 
set aside the 51 percent rule doesn't apply. So the way the game is 
typically played is that the contracting officer sends out the 
opportunity to three to four small businesses with the schedule and the 
socioeconomic credits they want. They notify the incumbent contractor 
of who they have sent the opportunity to, they also let them know that 
it is NOT a set aside and, therefore, set aside prime contracting 
workshare rules do not apply. What then happens is the incumbent 
contractor negotiates with each of the possible bidders and gets the 
largest workshare they can, up to 100 percent, and also they set the 
rules about what type of rates can be billed to the government. This 
then sets the small business up to be used as a pass through, the small 
business can do as little as 0 percent and still the agency will get 
credit for 100 percent of the work as small business. been asked to bid 
on such opportunities by multiple Federal agencies, including the 
Veterans Administration.
    This means that the SDVOSB will not be enhancing their past 
performance record, the majority of the profit will go toward the 
subcontractors who are doing the work and finally and most importantly 
it means that the subcontractor who has no privity of contract with the 
government customer will control and affect the actual performance of 
the contract. Thereby creating risk for both the government and the 
prime contractor. If the contract goes south the firm that gets 
debarred from government contracting is the prime contractor even 
though the prime has no control over the contract and they have been 
put into a squeeze play between the incumbent large and the government. 
Is this really the way we should be treating SDVOSBs and other small 
businesses? This practice is legal (and unfortunately all too common) 
through the rules of the FAR and GSA contracting, these rules must be 
modified to prevent such atrocities.
    Therefore, I submit to you that new firms owned by SDVOSBs that 
have returned or will return from Iraq or Afghanistan will have an even 
greater struggles since they are newer in the marketplace.
Concerns related to the Center for Veterans Enterprise Certification 
        Program
    Currently the CVE is tasked with and seen as the focal point for 
verifying SDVOSB status. However, they are currently so understaffed 
that they have stated that they can only verify 50 firms per week. If 
no further veterans start businesses it will take the CVE 7 years to 
verify the veterans they have in the system. I have been in business 
for over 12 years and has been listed in the CVE for years and my 
business is not certified as a SDVOSB by the CVE. A simple solution 
would be to hire a contractor to clear the backlog of SDVOBs that are 
in the system and to hire a staff sufficient to cover the average 
number of new firms added weekly. In addition, the CVE has set a 
standard that SDVOBs status must be verified annually. This practice 
must be terminated since once a veteran has been determined to have a 
service connected disability it is a lifetime disability, and not one 
that will go away in a year. In addition such a practice will only 
further increase the current backlog. Additionally a contracting 
officer for any agency can simply request a copy of the letter from the 
VA that verifies a veterans service connected disability. It doesn't 
state the nature of the disability or discuss any health issues which 
are private in nature but rather just states that the veteran has a 
verified service connected disability. This could easily be included 
with any proposal package submitted to the agency.
Full Implementation of the Recommendations from Former Secretary Gordon 
        Mansfield
    On June 19, 2007 IL-049-07-08 was published and detailed the 
Veterans First Procurement Program and on February 11, 2005 Secretary 
Gordon Mansfield published a memorandum that was addressed to all of 
the Under Secretaries, Assistant Secretaries and other Department 
Officials. In that letter he detailed a specific plan on how to 
increase the use of SDVOBs and to change contracting policy within the 
VA for SDVOSBs. Although some portions of the memo have been 
implemented much of it has not been. (I have included a copy of both of 
these documents at the end of my testimony) In fact some of the key 
elements that have not been implemented include:

      Use of sole source awards for SDVOSBs
      Requiring written justification for not using SDVOSB 
competition or sole source acquisitions
      Incorporate SDVOSB and veteran owned small business 
(VOSB) socioeconomic goals in performance plans of executives, 
managers, and any employees who influence or are involved in the 
acquisition process;

    I have heard anecdotal stories from senior VA personnel that states 
that the acquisition office of the VA actively discourages and prevents 
sole source awards to SDVOSBs. I have never (to date) heard of any sole 
source awards to any SDVOSBs within the VA. The position that the VA 
acquisition management is using to date is that there is a rule of two 
that exists and that the effort must be competed if two or more SDVOSBs 
exist. We must get rid of the rule of two.
    Recommendation: Restate the ``Rule of Two'' wherein a contracting 
officer has to know that there ARE NOT two or more SDVOSB's before a 
sole source contract award can be made to a SDVOSB. When an 8(a) is 
considered for a ``non competitive'' award FAR Part 6.302-5 (b)(4) 
excepts the need for justification documentation. This exception should 
also apply to SDVOSB sole-source awards.
    I have also not heard of anyone's performance plan being impacted. 
This is a particularly key recommendation since I know that when you 
incent people through their salaries and bonuses you will see a 
completely different behavior and you will in fact change the culture 
of the organization.
    Recommendation: Implement a policy impacting positively or 
negatively all performance plans for all senior executive and 
acquisition personnel across the agency to ensure that the behavior of 
contracting first with veterans is done.
    Recommendation: Create a level playingfield between SDVOBs, 8a(s), 
and Hubzones by changing the use of ``May'' for SDVOBs should be 
changed to ``Shall'' under FAR Part 19.1405(a) and PL 108-183, section 
36(b) when granting contracting officers the authority to restrict or 
set-aside procurements strictly for SDVOBs. For all other references in 
the FAR and VAAR to the use of 8a and/or Hubzone companies, SDVOBs 
should also be included.
    Recommendation: Provide a Price Evaluation Preference of 10 percent 
for SDVOBs in acquisitions conducted using full and open competition.
VA Contracting going to SPAWAR and other Entities
    I have learned that a great many VA requirements are being 
contracted out of SPAWAR Charleston. The problem with this is that it 
is not subject then to VA contracting rules, including the ``Veterans 
First'' rule. My firm bid on an VETS GWAC bid for the VA and then the 
acquisition was canceled (during source selection) and re-acquired 
through Charleston, not thru VETS GWAC. We were not notified of the 
opportunity nor did we have an opportunity to bid on the effort out of 
Charleston. In fact, all of the work that was originally supposed to be 
bid on VistA VCS (a VA BPA) is going through Charleston. So all the 
bidders who spent a tremendous amount of money and effort to win the 
BPA are completely cut out of those procurements. Unfortunately my firm 
is one of those firms.
    Recommendation: Require that all contracting agencies that contract 
for VA must follow all VA procurement regulations, including the 
Veterans First Rule as well as the ability to do direct awards.
Capacity of SDVOSB Community to Fulfill Contractual Requirements
    Finally, one of the topics you have asked me to address is the 
capacity of SDVOSBs to fulfill contracts and whether they have the 
expertise and resources to meet the demand. It is worth noting that 
there are 12,700 service disabled veteran owned businesses listed on 
the VIP at VA, while there are less than 7,400 certified 8(a) 
businesses in CCR.) Many veterans were running their businesses long 
before the SDVOSB legislation was passed. In addition, I can personally 
attest to the fact that there are many SDVOSBs in both Information 
Technology and Construction (to name two industries) that have been in 
existence for decades. In addition, the reality is that SDVOSBs are 
going to team with firms that will enhance their probability of 
winning. That means they will team with incumbent firms whether they 
are large or small. There are numerous SDVOSBs that are now in a size 
where their sales are exceeding 30 million a year and more.
    I can speak most authoritatively about my own firm, but I can tell 
you we are not the only ones where this is true. My firm has been in 
business for over 12 years and our largest contracts to date are that 
we won a 23 million contract in 2005, we won a BPA in 2008 on a full 
and open contract that has a ceiling value of 900 million and we have a 
contract that is about 7 million a year with another agency that we won 
in December 2008. My firm has received numerous awards for quality and 
innovation. To name a few:

      CMMI Level II certified December 2008
      DoD Nunn Perry award in March 2009 for our Geospatial 
Information Systems Technology Transfer
      2009 Chamber of Commerce award
      2009 Chief Executive Officer named Woman of the Year for 
Engineering and Technology by National Association of Professional and 
Executive Women

    These types of awards and quality certifications are directly 
relevant to the question of expertise and quality and capacity since 
that is how you they make the decision to give you the award.
    Thank you for holding this hearing today and thank you for giving 
me the opportunity to share my knowledge and experience with you today. 
I am glad that this hearing is being held and I hope that my testimony 
will help you to develop real solutions to this critical issue. I 
appreciate your willingness to listen and receive input from the 
frontlines of small businesses that are dealing with this issue on a 
daily basis. I would be happy to answer any questions this Committee 
may have.
    [The following attachments are being retained in the Committee 
files: Memorandum from Hon. Gordon H. Mansfield, Deputy Secretary, U.S. 
Department of Veterans Affairs, entitled, ``VA Implementation Plan 
under Executive Order 13360, Contracting with Service-Disabled 
Veterans' Business,'' and attachments, dated February 11, 2005; and 
Memorandum from C. Ford Heard, Director, Acquisition Resources Service, 
Office of Acquisition and Materiel Management, U.S. Department of 
Veterans Affairs, entitled ``Veterans First Contracting Program,'' and 
attachments, June 19, 2007.]
                                 
    Prepared Statement of Colonel Raymond C. Bjorklund, USAF (Ret.),
  Senior Vice President and Chief Knowledge Officer, Federal Sources, 
                                 Inc.,
           a Washington Management Group Company, McLean, VA
                           Executive Summary
    Service-disabled veteran-owned businesses (SDVOBs) and other 
veteran-owned businesses (VOBs) have both specific and general 
competitive advantages in U.S. government contracting, due to statutory 
goals for awarding a portion of prime contracts to SDVOBs and other 
assistance programs for VOBs in general.
    There are several challenges in meeting the specific goals and 
general objectives in the assistance programs for veteran businesses: 
additional, overlapping statutory requirements to award contracts to 
other socioeconomically disadvantaged businesses; VOB firms choosing to 
not claim veteran status; lack of awareness about Federal business 
opportunities; and VOBs simply choosing to not do business with the 
government.
    Thus there may not be enough performance capacity among the 
totality of SDVOBs to meet the U.S. government's 3 percent contracting 
goal. Of some 2.97 million VOBs in the U.S., including approximately 
194,000 SDVOBs, only about 77,500 companies are registered with the 
U.S. government as VOBs and only about 20,400 firms are specifically 
registered as SDVOBs. In GFY2008 contract actions reported to date, 
only 15,340 VOBs won prime contracts from the U.S. government-0.5 
percent of the national pool of VOBs. SDVOBs were even less 
represented.
    Certain economic business sectors do show promise for veteran 
businesses: Professional, Scientific, and Technical Services; 
Construction; Healthcare and Social Assistance; Information; and 
Transportation and Warehousing. Even though there is an upside, it is 
unrealistic to expect that every VOB or SDVOB would seek to do 
contracting business with the U.S. government. We estimate that there 
are 883,000 VOBs and 68,000 SDVOBs who might be positioned to do 
Federal business.
    So while there is a large pool of VOBs and SDVOBs, relatively few 
of them are seeking business with the U.S. government. We think a 
rigorous analytical foundation can help in refining Federal outreach 
programs to engage more of the VOBs and SDVOBs.

                               __________

    The major military conflicts of this decade have resulted in a 
great number of additional veterans and--unfortunately--too many 
disabled veterans. For their service to this country, veterans are 
entitled to assistance that, in a small way, seeks to compensate them 
for the sacrifices they have made in the defense of the Nation.
    The Executive Branch, with the support of Congress, has established 
and developed a number of useful assistance programs and initiatives 
for veterans.
    One such initiative places businesses owned by service-disabled 
veterans within the category of firms classified as socioeconomically 
disadvantaged to encourage agency contracting authorities to award them 
contracts. The Small Business Act and Executive Order 13360 (October 
2004) require government agencies to award 3 percent of their prime and 
subcontract dollars to service-disabled veteran-owned businesses 
(SDVOBs). (Due to complexities in the datasets and criteria, FedSources 
cannot clearly distinguish between SDVOBs and service-disabled veteran-
owned small businesses (SDVOSBs) for purposes of this analysis.)
    There are several challenges in meeting this worthy objective.
    First, there are additional statutory requirements to award 
contracts under parallel, sometimes overlapping, socioeconomic 
programs: 23 percent of prime contracts for small businesses; 5 percent 
of prime and subcontracts for small disadvantaged businesses; 5 percent 
of prime and subcontracts for women-owned small businesses; and 3 
percent of prime and subcontracts for HubZone businesses. A VOB might 
also be a woman-owned business.
    Second, some SDVOB firms choose not to claim or invoke the 
socioeconomically disadvantaged contracting status they are entitled 
to. In other words, they choose to not label their businesses as 
veteran-owned or service disabled veteran-owned.
    Third, some VOB firms are not aware of the many opportunities to 
provide services and products to the government. We have seen the 
increasing successes in a number of the Federal outreach programs, but 
we think there is more work to be done to inform VOBs about the 
opportunities.
    And fourth, yet other VOBs and SDVOBs choose not to do business 
with the government.
    But probably the most daunting challenge is that there may not be 
enough performance capacity among SDVOBs, small and other-than-small, 
to meet the U.S. government's 3 percent goal. This is not to say that 
these firms can't do the job; rather, requirements may exceed the 
production capacities of the sum of these individual firms.
    Before we know how significant this challenge is, we need to know 
how many SDVOBs there are across the Nation. Short of a rigorous 
enumeration by the U.S. Census Bureau, in collaboration with the 
Department of Veterans Affairs (VA), we know of no straightforward 
means to measure the extent of the issue.
    Using existing statistics, we can however start to get close to a 
number that could be useful in developing SDVOB contracting strategies 
and in developing or enhancing programs and initiatives to assist 
SDVOBs in pursuing government business.
    The most recent U.S. Census Survey of Business Owners, including 
Characteristics of Veteran Business Owners which was conducted in 2002 
and published in July 2007, enable us to profile VOBs to some extent. 
Using the 2006 American Community Survey data published by the U.S. 
Census Bureau, we can also get an idea of how many service-disabled 
veterans may be in the workforce. (VA publishes Veteran statistics, 
including the number of disabled veterans, but does not delineate the 
number that are in the workforce and definitely not a comprehensive 
number that may own a controlling interest in a business.)
    Extrapolating the number of VOBs from the statistics collected in 
2002 to the year 2008, FedSources believes there are presently at least 
2.97 million VOBs in the U.S. Of that number, approximately 194,000 
businesses or 7 percent also identified themselves in the Census survey 
as being SDVOBs. Another 6 percent of the total or approximately 
179,000 businesses did not declare whether or not they were owned by a 
service-disabled veteran, so those 179,000 businesses could be 
categorized either way.
    In October 2008, VA reported the number of disabled veterans as 1.1 
million people. The 2006 American Community Survey estimates that 37.2 
percent of all disabled Americans are currently employed in the 
workforce. If we apply the 37.2 percent employment number to the number 
of service-disabled veterans, we can conservatively extrapolate that at 
least 409,000 service-disabled veterans are active in the workforce. 
(We think that the 409,000 number is conservative because the resolute 
spirit of most veterans suggests they would rather work than not. On 
the other hand, we are aware of the high unemployment rate within 
certain veteran cohorts.)
    Over 2.97 million VOBs, including some 194,000 SDVOBs, appears to 
be a comfortably large pool of companies that the U.S. government could 
draw upon in its acquisition activities.
    But the reality is different. In analyzing the Central Contractor 
Registration (CCR) files and the GFY2008 Federal Procurement Data 
System (FPDS) files as of late CY2008, we find that only about 77,500 
companies are registered as VOBs in the CCR. And only about 20,400 
firms are specifically registered in CCR as SDVOBs.
    Even though all GFY2008 contract actions have not yet been 
reported, we determined that only 15,340 VOBs (SDVOBs and otherwise) 
won prime contracts from the U.S. government in GFY2008. The 15,340 
VOBs that won contracts represent only 0.5 percent of the national pool 
of VOBs. Recognizing that SDVOBs are generally a much smaller subset of 
the 15,340 VOBs, we can easily deduce that the number of prime contract 
awards to SDVOBs was, in the aggregate, less than the statutory 3 
percent requirement.
    In our analysis, we also looked at how the VOBs categorized 
themselves according to the North American Industrial Classification 
System (NAICS). Then we mapped the VOBs who won contracts in GFY2008 to 
other companies who won contracts, using the relevant NAICS sector as a 
key. Based on the NAICS sectors chosen by VOBs, VOBs and SDVOBs are 
somewhat evenly distributed across the NAICS sectors that represent the 
universe of Federal contractors. But we also note that VOB presence 
could be expanded in five NAICS sectors: Professional, Scientific, and 
Technical Services; Construction; Healthcare and Social Assistance; 
Information (Technology); and Transportation and Warehousing. We base 
this qualitative judgment on a combination the size of the national 
pool of VOBs in each of those five sectors, what the U.S. government 
buys and will be buying, and the military skill sets of veterans.
    Some of the NAICS sectors occupied by the 2.97 million VOBs are not 
typically areas relevant to formal Federal contracting. Examples of 
businesses in these sectors include insurance brokers, fast-food 
franchisees, and agricultural producers. Consequently, it is 
unrealistic to expect that every VOB or SDVOB would seek to do 
contracting business with the U.S. government. Thus for this analysis, 
we looked at the various NAICS sectors in the context of Federal 
business opportunities and estimated that there are 883,000 VOBs who 
might be positioned to do business with the U.S. government and that 
there are 68,000 SDVOBs who might pursue Federal prime contracts.
    So while there is a large pool of VOBs and SDVOBs across the 
Nation, relatively few of them are seeking and winning business with 
the U.S. government. There is further evidence of this shortfall in the 
company registration tools available to VOBs. Being registered in the 
Central Contractor Registration (CCR) tool is an essential pre-award 
requirement in U.S. government contracting. Being registered in VA's 
Veteran Information Pages (VIP) tool at VetBiz.gov is an important step 
in self-marketing a VOB to government buyers.
    Within the population of 883,000 VOBs we think are in a position to 
do business with the U.S. government, only about 77,500 are registered 
in the CCR and only about 13,500 are currently registered in VA's VIP. 
Some VOBs are registered in CCR, but are not registered in the VetBiz 
portal. And a few are in the VetBiz portal, but not in the CCR. Within 
the population of 68,000 SDVOBs we think are likely to contract with 
the U.S. government, about 20,300 are registered in CCR and about 7,800 
are registered in the VetBiz VIP. (SDVOBs are a subset of the VOBs.)
    The good news is that since FedSources did a similar analysis of 
veterans business about 18 months ago, registrations in the CCR and the 
VetBiz VIP have essentially doubled.
    In conclusion, an analytical foundation can help in refining 
Federal outreach programs to engage more of the VOBs and SDVOBs that 
may choose to do business with the government. In this way, our country 
can begin to compensate those who selflessly gave service in defense of 
our Nation, and at the same time, capitalize on the high skills those 
veterans have to offer.
FedSource, a Washington Management Group Company
Veteran Owned Businesses
Presentation to Subcommittee on Economic Opportunity of the House 
        Committee on Veterans' Affairs
Ray Bjorklund, SVP and Chief Knowledge Officer
23 April 2009
Overview
          How big is the veteran business community?
          What makes up the community?
          How well is the Community being marketed?

    Analysis can help determine the path ahead.
Size of VOB Community

[GRAPHIC] [TIFF OMITTED] 49912A.001


    Source: FedSources analysis of U.S. Census 2002 Survey of Business 
Owners (SBO), U.S. Census Characteristics of Veteran Business Owners: 
2002 (July 2007), and U.S. Census 2006 American Community Survey; for 
this analysis, FedSources does not distinguish between SDVOB and 
SDVOSB.

Size of the SDVOB Community
          Estimated number of Service-Disabled Veterans (SDVs)
                  2002: 2.4 million
                  2008: 2.9 million

          Estimated number of SDVs in workforce
                  2008: 1.1 million
                  Based on extrapolation from 37.2 percent of 
                all disabled Americans being employed

          Estimated number of SDVOBs
                  2008: minimum 194 thousand businesses
                  Majority ownership (VOB status) thus 
                equivalent to about 1 of every 6 working SDVs

Size of VOB Prime Contractor Community
[GRAPHIC] [TIFF OMITTED] 49912A.002


    Source: FedSources analysis of U.S. Census 2002 Survey of Business 
Owners (SBO), U.S. Census Characteristics of Veteran Business Owners: 
2002 (July 2007), DLA Central Contractor Registration data, and GFY2008 
Federal Procurement Data System data (incomplete).

Profile of VOB Prime Contracting
[GRAPHIC] [TIFF OMITTED] 49912A.003


    Source: FedSources analysis of U.S. Census 2002 Survey of Business 
Owners (SBO), U.S. Census Characteristics of Veteran Business Owners: 
2002 (July 2007), Central Contractor Registration data, and Federal 
Procurement Data System data for GFY2008 (incomplete).

Potential VOB Market Players

          Unrealistic to expect that every VOB or SDVOB will do 
        contracting business with the Federal Government, examples 
        including:
                  Insurance brokers
                  Fast-food franchisees
                  Agricultural producers


------------------------------------------------------------------------
                                                         VOBs
------------------------------------------------------------------------
Est. number                                                    2,973.0K
------------------------------------------------------------------------
Est. number likely to do Federal business                        833.0K
------------------------------------------------------------------------
CCR registrants                                                   77.5K
------------------------------------------------------------------------
VetBiz VIP registrants                                            13.5K
------------------------------------------------------------------------


          Realistic to expect more VOBs should be registered to 
        do business


------------------------------------------------------------------------
                                                        SDVOBs
------------------------------------------------------------------------
Est. number                                                      193.8K
------------------------------------------------------------------------
Est. number likely to do Federal business                         68.0K
------------------------------------------------------------------------
CCR registrants                                                   20.3K
------------------------------------------------------------------------
VetBiz VIP registrants (as SDVOB)                                  7.8K
------------------------------------------------------------------------
Some registration numbers have doubled in the last 18 months.
Source: FedSources analysis of 2008 VA Stats at a Glance (http://
  www1.va.gov/vetdata/), U.S. Census Characteristics of Veteran Business
  Owners: 2002 (July 2007) by NAICS sector, U.S. Census 2006 American
  Community Survey, DLA Central Contractor Registration (CCR) data, and
  VA VetBiz portal data; for this analysis, FedSources does not
  distinguish between SDVOB and SDVOSB.


Summary

          A continuing challenge to meet socioeconomic goals If 
        only a handful of VOBs/SDVOBs choose to do business with the 
        Federal Government
          The government can still do more to reach out

    Analysis can help determine the path ahead.
    FedSources is a leading provider of actionable government market 
intelligence, enabling professional services firms, technology vendors, 
and government organizations to make better business decisions.
    For more than two decades, FedSources' market intelligence 
services, customized consulting and informative events have provided 
information and insight to industry and government decisionmakers.
    Market Intelligence Services; Custom Consulting; Informative Events
    Experience. Intelligence. Integrity.

                                 

 Prepared Statement of Scott Denniston, Director of Programs, National 
           Veteran-Owned Business Association, Coraopolis, PA
    Madam Chairwoman Sandlin, Ranking Member Boozman, Committee Members 
and staff: Thank you for the opportunity to testify today on the issues 
facing veteran--owned small businesses in contracting with the 
Department of Veterans Affairs (VA). I am Scott Denniston, currently 
Director of Programs for the National Veteran-Owned Business 
Association (NaVOBA). We represent over 2000 veteran-owned small 
businesses in the United States. I have had the pleasure of testifying 
before this Committee in the past while serving as the Director of 
Small Business Programs and the Center for Veterans Enterprise (CVE) at 
VA. I have always appreciated the candor and forthright discussion that 
I have experienced with this Committee. I would ask that my formal 
testimony be entered for the record.
    Your letter of invitation asked me to discuss how sole sourcing and 
contract bundling are affecting veteran-owned small businesses, my 
concerns regarding VA contracting, how the process can be improved, and 
whether there are enough veteran-owned small business with the capacity 
to meet and fulfill contracts.
    I want to start off by commending VA for their efforts and 
accomplishments in contracting with veteran and service-disabled 
veteran-owned small businesses. For the past 3 years VA has not only 
exceeded the statutory 3% goal for service-disabled veteran-owned small 
business, but has lead the government in awards to both service-
disabled and veteran-owned small businesses. This is a direct result of 
the strategic plan VA implemented in accordance with Executive Order 
13360, the personal commitment of the former Deputy Secretary, and the 
accountability of decisionmakers to work with veteran- and service-
disabled veteran-owned small businesses. Results do happen with 
management interest and a plan!
    VA should also be commended for its efforts to negate the effects 
of contract bundling on veteran-owned small businesses. When the Office 
of Management and Budget (OMB) issued its anti-bundling instructions to 
Federal agencies, OMB required agencies to review all acquisitions over 
$2 million to insure certain savings criteria were met. VA, to its 
credit, established a $1million threshold for reviews. The VA Office of 
Small Business Programs has been very aggressive in fighting bundling 
and helping contracting officers do good market research to identify 
capable veteran and service-disabled veteran-owned small businesses to 
work with.
    There are however, several areas of concern that I would like to 
bring to your attention that NaVOBA believes are impacting VA's ability 
to work with veteran and service-disabled veteran-owned small 
businesses. The first deals with VA's use of other agencies to contract 
work for VA. This issue appeared about a year ago when VA entered into 
an agreement with the Army Corps of Engineers to provide contract 
support to VA. NaVOBA learned that many of the VA opportunities 
contracted by the Corps were being awarded to 8a and other socio-
economic groups rather than service-disabled veteran-owned small 
businesses. The veteran business community believes VA was sending work 
to the Corps to circumvent the requirements of Public Law 109-461, 
requiring VA to give preference to service-disabled and veteran-owned 
small businesses in the awarding of contracts. VA also, we understand, 
has entered into an agreement with the Navy for IT contract support. 
These agreements, in our opinion, take legitimate contract 
opportunities away for the veteran business community as other agencies 
do not follow VA priorities for award. Last year, Congress passed 
Public Law 110-389, requiring agencies contracting for VA to follow 
VA's contracting priorities. The problem is no one knows about the law. 
Just last week I was in Reno, NV, at the Corps of Engineers, South 
Pacific Division, 8th Annual Veterans and Small Business Training and 
Outreach Conference. There were several hundred veteran-owned small 
businesses in attendance. The very first panel consisted of the Deputy 
Commanders from the Sacramento, Los Angeles, San Francisco, and 
Albuquerque Corps Districts. Each talked about the work their district 
would do for VA this year. When I asked each of the Deputy Commanders 
if they were familiar with the requirements of PL 110-389, they all 
said they had never heard of such a law. The question becomes: who has 
the responsibility for informing agencies that contract for VA that 
there are special requirements to work with service-disabled and 
veteran--owned small businesses? It appears that no one is doing this 
now.
    The next issue we would like to address is the VA's implementation 
of Public Law 109-461. PL 109-461 was enacted on December 22, 2006, 
with a 180 day implementation period. To date the final rules have not 
been published, nearly two and half years later. We know firsthand 
there is a lot of confusion in the VA field offices regarding the 
implementation of the law, specifically the use of the sole source 
authorities for contracting with service-disabled and veteran-owned 
small businesses. The only guidance provided to the VA contracting 
officers that we know of was an Information Letter published on June 
19, 2007. Information letters do not, in our opinion, have the same 
impact as regulations.
    Another issue regards the interpretation of PL109-461. section 503/
8128(a) states: Contracting Priority: In procuring goods and services 
pursuant to a contracting preference under this title or any other 
provision of law, the Secretary shall give priority to a small business 
concern owned and controlled by veterans, if such business concern also 
meets the requirements of that contracting preference. We take this to 
mean VA is to provide a priority to veteran--owned small businesses in 
the purchase of everything VA buys. The draft rules published by VA to 
date, only address ``open market's procurements. The draft rule 
eliminates the millions of dollars VA spends using the Federal Supply 
Schedules, Ability One, prime vendor and other contract mechanisms from 
consideration for veteran-owned small businesses. We do not believe 
this is the intent of Congress.
    In the latest issue of ``Vetrepreneur'' magazine, NaVOBA goes on 
record as firmly supporting VA's verification of veteran and service-
disabled veteran--owned small businesses as envisioned by PL 109-461. 
We believe the VA's Center for Veterans Enterprise has developed a 
comprehensive plan to provide the verification of veteran status, as 
well as address the ownership and control issues identified in the law. 
The CVE plan requires the hiring of some minimal additional staff as 
well as the use of contractor support to assist in developing the 
verification review process, risk analysis, and procedures for on-site 
reviews when required. The initial requests for contractor support were 
submitted to VA's Acquisition Office in May 2008 and to date no 
contractor support has been provided. The CVE verification plan will 
fail without contractor support.
    The last issue we would like to address is training of VA 
acquisition professionals on the requirements and responsibilities of 
supporting the veteran- and service-disabled veteran-owned small 
business programs. VA is to be commended for taking the initiative to 
establish an acquisition training academy in Frederick, MD. NaVOBA 
wants to encourage VA to insure ALL acquisition professionals are 
trained on the requirements of PL 109-461. This is the only way to 
insure consistent application of the law.
    As to the Committee's question regarding whether there are enough 
veteran-owned small businesses with the capacity to meet and fulfill 
VA's contracting needs, it is NaVOBA's position that there are more 
than enough businesses. We believe this is evident given VA's track 
record to date. Our Members tell us the biggest impediments to doing 
business with VA are access to decision--makers to present 
capabilities, access to timely information on upcoming contract 
opportunities, inconsistent implementation of the provisions of PL 109-
461, VA's administration of the Federal Supply Schedules regarding 
distributors, and VA's use of contract vehicles such as prime vendor 
and standardization which limit opportunities.
    I would thank the Committee once again for holding this important 
hearing and I'm happy to answer any questions.

                                 
Prepared Statement of Joe Wynn, Chairman, President/Chief Executive Of-
  ficer, Veterans Enterprise Training and Services Group, Inc. (VETS 
                                Group),
     Member, Veterans Entrepreneurship Task Force (VET-Force), and
                National Association for Black Veterans
                           EXECUTIVE SUMMARY
    Congress passed Public Law (PL) 109-461, the Veterans Benefits, 
Health Care, and Information Technology Act of 2006. While this 
legislation provided a number of benefits for veterans; what's of 
particular importance for the purposes of this hearing today, is that 
Title V, sections 502 and 503 of this legislation, authorized a unique 
``Veterans First'' approach to VA contracting. This approach would 
change the priorities for contracting preferences within the Department 
of Veterans Affairs (VA), by placing Service-Disabled Veteran Owned 
Small Businesses (SDVOSBs) and Veteran Owned Small Businesses (VOSBs) 
first and second, respectively, in satisfying VA's acquisition 
requirements.
    In so doing, it required that certain conditions must be met. All 
SDVOSBs and VOSBs, must register in the VA's Vendor Information Pages 
(VIP), aka Veterans Small Business Database, available at 
www.VetBiz.gov, and be `VERIFIED' by the VA's Center for Veterans 
Enterprise (CVE), to be eligible for award of a contract exclusively 
within the Department of Veterans Affairs. Once registered in the 
database, the veterans' status, ownership, and control would be 
verified and penalties would be assessed for misrepresentation.
    Unfortunately, after more than 2 years, VA's acquisition officials, 
their General Counsel, and/or the Office of Management and Budget still 
have not come to an agreement to publish the regulations to fully 
implement the portion of the law that pertains to VA contracting for 
veteran businessowners. Thus veteran and service-disabled veteran 
businessowners are continuing to be deprived of millions of dollars in 
contracting opportunities that could benefit them, their families, and 
their communities.
    There are thousands of capable and qualified veteran and service 
disabled veteran owned businesses registered in the VA's Veteran Small 
Business Database. Yet, we often here from contracting officers and 
Large Primes that they cannot be found. Veteran businessowners 
represent America. They are all races, Black, White, Hispanic, Asian, 
Jewish, they are Male, Female, Old, and Young. Their preference is due 
to service in defense of this country and not because they are 
disadvantaged.
    VA must fully implement this program now and implement it 
correctly.
INTRO:
    Good Afternoon, Chairwoman Herseth-Sandlin, Ranking Member Boozman, 
other Members of this Subcommittee, fellow veterans, and guests.
    Let me first thank you for your service and the steadfast support 
you have shown for veterans during your term on this Subcommittee. I 
also want to thank you for the opportunity to come before you to share 
some of my views on the Department of Veterans Affairs (VA) `Veterans 
First' Contracting Policy and how this Subcommittee can help to 
increase contracting opportunities for Veteran and Service-Disabled 
Veteran Owned Businesses.
    As a Veterans Advocate, I share the collective views of many 
veterans and service disabled veteran businessowners; veterans who 
served with honor, and many who received distinguished honors for 
displaying valor and courage during their periods of military service 
for this country. Though my time of service was many years ago, as a 
veteran of the U.S. Air Force with the 66th Strategic Missile Squadron, 
I still have vivid memories of the military experience.
    Madam Chairwoman, you may recall that not so long ago, I came 
before this same Committee to express my views about the three entities 
created under PL 106-50 to provide veterans with business development 
assistance. At that time, the Center for Veterans Enterprise had been 
making progress with developing and maintaining a database for Veteran 
Business Owners, the SBA Office of Veterans Business Development was 
only marginally successful in providing support for veteran 
businessowners interested in Federal contracting, and the Veterans 
Corporation was showing very little progress at all. To date, not much 
has improved, and in many ways, things have either stalled or declined.
    By managing the VETS Group and being a member of the Veterans 
Entrepreneurship Task Force (VET-Force), I have become familiar with 
the needs of veteran businessowners, the legislation that created the 
Veterans Federal Procurement Program and the offices and organizations 
directed to assist veterans with achieving the American Dream they 
fought so hard to protect. It is well known that one of the best ways 
to get ahead is by obtaining a good job; but by starting or expanding 
your own small business, you may achieve financial independence.
Overcoming Barriers to Federal Contracting for Veteran Business Owners
    If veterans and service-disabled veteran owned businesses are to 
succeed in the public sector agencies will have to stop making excuses 
for why they can't make the 3 percent mandatory minimum SDVOSB 
contracting requirement. Veterans also will have to overcome a number 
of impediments: (1) The pervasive ignorance of the law and resistance 
to change across all agencies; (2) No enforcement of Large Prime 
subcontracting plans; (3) Inaccurate agency data, miscoding, and double 
counting; (4) The perception that the procurement pie for small 
businesses is shrinking or limited to 23 percent; and (5) The over use 
of Contract Bundling.
    Agencies and veteran small business assistance providers must 
assist in identifying and registering the capabilities of veteran 
businessowners where required, demand that all Large Prime contractors 
comply with their subcontracting plans, create situations that foster 
the development of relationships between agency procurement officers 
and veteran businessowners, and improve the process of identifying and 
matching veteran businesses with procurement opportunities.
VA's `Veteran's First' Approach to VA Contracting
    Today we are focusing on ``Contracts and Contracting Policy at the 
VA;'' created by Public Law (PL) 109-461, the Veterans Benefits, Health 
Care, and Information Technology Act of 2006. While this legislation 
provided a number of benefits for veterans; what's of particular 
importance for the purposes of this hearing today, is that Title V, 
sections 502 and 503 of this legislation, authorized a unique 
``Veterans First'' approach to VA contracting. This approach would 
change the priorities for contracting preferences within the Department 
of Veterans Affairs (VA), by placing Service-Disabled Veteran Owned 
Small Businesses (SDVOSBs) and Veteran Owned Small Businesses (VOSBs) 
first and second, respectively, in satisfying VA's acquisition 
requirements.
    In so doing, it required that certain conditions must be met. All 
SDVOSBs and VOSBs, must register in the VA's Vendor Information Pages 
(VIP), aka Veterans Small Business Database, available at 
www.VetBiz.gov, and be `VERIFIED' by the VA's Center for Veterans 
Enterprise (CVE), to be eligible for award of a contract exclusively 
within the Department of Veterans Affairs.
    It further directed the VA, for SDVOSBs and VOSBs, to: (1) 
Establish Contracting Goals & Review Mechanisms; (2) Allow Non-
competitive, Sole Source, & Restricted Competition; (3) Permit 
Survivorship for 10 yrs, if the deceased veteran businessowner was 100 
percent disabled; (4) Produce Annual Progress Reports; and (5) Conduct 
a 3-Year Study.
    For more than 2 years, veteran businessowners have been anxiously 
awaiting the publishing of the governing regulations needed to carry 
out Title V of PL 109-461; but for some reason, VA's Acquisition 
Officials, their General Counsel, and/or the Office of Management and 
Budget still have not come to an agreement on a start date. But on May 
19, 2008, the VA issued an interim final rule (38 CFR Part 74) to 
immediately implement procedures to assure that a business concern is 
`VERIFIED' in their Veterans Business Database as a SDVOSB or VOSB.
    Since the VA has been developing and populating its Veterans Small 
Business Database for several years, the interim final rule required 
the VA to complete the examination of all 13,380 businesses that were 
already registered, by June 19, 2008; then all new registrants would 
follow.
    However, at the March 10, 2009 meeting of the Veterans 
Entrepreneurship Task Force (VET-Force), a representative for CVE 
reported that there have only been 868 businesses verified and 491 in 
process out of a total of approximately 17,000 registered businesses. 
It was also reported at the meeting that CVE is processing only 50 
applications per week. At that rate, it could take 6 or 7 years just to 
verify the businesses currently registered.
Major Issues Affecting the VA's Veterans Business Verification Process
    There are a number of issues that have surfaced regarding the 
verification process undertaken by CVE to ensure that a business 
concern is a SDVOSB or VOSB; here are just a few:

    I. Verification of Veterans Status, Ownership & Control. CVE is 
either understaffed or lack a sufficient number of staff persons 
qualified to conduct the veteran business verification procedures as 
defined by 38 CFR Part 74. It's CVE's task to collect the necessary 
documents from veteran businessowners who have registered in the 
Veterans Small Business Database.
    Veterans Status. The documents needed are to verify that the 
businessowner is a veteran who was discharged under conditions other 
than dishonorable or is a service disabled veteran who possesses either 
a disability rating letter issued by DoD or the VA.
    Ownership, Control and Management. Additional documents are needed 
to establish if the veteran(s) or service disabled veteran(s), or in 
the case of a veteran with a permanent or severe disability, the spouse 
or permanent caregiver of such veteran, meet the majority ownership 
requirement, and that they have Control of the company and participate 
in the Day-to-Day operations.
    Verifying Ownership. Verifying the status of the veteran seems to 
be the easiest part; particularly since the VA already maintains or has 
access to the records of veteran and service disabled veterans. 
Verifying Ownership is somewhat more challenging because CVE must 
verify if the Ownership is direct and unconditional. It must verify if 
the type of Ownership is that of a Partnership, Limited Liability 
Company, or a Corporation; and if stock is involved, it must verify the 
stock options' effect on the Ownership. There's also the matter of 
determining Ownership interests when an owner resides in any of the 
community property States or territories of the United States.
    Verifying Control. According to 38 CFR 74.4, Control is not the 
same as Ownership, even though both may reside in the same person. 
Control means management of the Day-to-Day operations and long-term 
decisionmaking authority. CVE must verify that the service disabled 
veteran or veteran businessowner has both. But where this gets more 
involved, is when control is sometimes contingent on who has the 
expertise or licenses to run the operation. An owner who is a computer 
engineer may not be the best CEO. But according to CVE's verification 
requirements, the owner must hold the highest officer position in the 
company.
    Then there is also the somewhat conflicting view that owners need 
not work in the company full-time but must show sustained and 
significant time invested in the business. But there is also the 
requirement that one or more veteran or service disabled veterans who 
manage the company must devote full-time to the business during normal 
working hours. And even though the veteran owner has an unexercised 
right to cause a change in the management quickly or easily, use of a 
non-veteran manager may disqualify the company as being veteran owned.
    In addition, all of these control issues have to be verified in the 
context of the type of company--Partnership, Limited Liability Company, 
or Corporation. And it must be determined to what extent do non-
veterans have the power to influence or control the company-either 
directly or indirectly via critical financial or bonding support, Board 
actions, etc.

    II. Verification of Only One Company per Owner. A number of 
veterans have questioned CVE's position to verify only one company per 
veteran businessowner. This ruling is not clearly listed in 38 CFR Part 
74. All throughout the Nation, there are people who own more than one 
company. When CVE representatives were asked about this issue at the 
March 10, 2009 meeting of the VET-Force, which CVE hosted at the VA 
Small Business Office; they reported that verifying only one company 
per owner would prevent the VA from potential harm that could be caused 
by a veteran or service disabled veteran business under performing or 
defaulting on a contract.
    It was further reported that more stringent verification 
requirements were implemented by CVE following a recent GAO report that 
exposed flaws in the verification process previously being utilized by 
the SBA to verify HUBzone businessowners. Thus CVE reportedly does not 
want to increase the chances of error by allowing one owner to have 
multiple companies.

    III. Misperception of CVE's `VERIFIED' status. Many if not all 
Federal agency contracting personnel believe that SDVOSBs and VOSBs 
must or soon will have to first be registered in the VA's Veteran Small 
Business Database and produce a document stamped with a `VERIFIED' seal 
of approval by CVE in order to be recognized as a genuine SDVOSB or 
VOSB. And its not hard to determine how this misperception came about.
    For several years now, CVE, other organizations, including the VET-
Force, have been encouraging veteran businessowners to register in the 
Veterans Small Business Database and for Federal agencies and Large 
Primes to use the Veterans Small Business Database as the 
`Authoritative Place' to locate capable and qualified veteran 
businessowners. However, this was before the actual verification 
standards and procedures had begun.
    According to Public Law 108-183, the Veterans Federal Procurement 
Program, a veteran is only required to SELF-CERTIFY as a SDVOSB, in 
order to do business under this small business preference group. There 
is no formal certification by SBA or any other entity required. 
However, under Public Law 109-461, in order to do business with the VA, 
a veteran or service disabled veteran owned business must successfully 
complete VA's verification process and register in the same database 
that's open for use by all Federal agencies, Large Primes, and the 
public.
    While these issues listed above may be considered to be the major 
ones creating controversy about the VA's Veterans Verification Process, 
there may be others considered to be equally as important.
Recommendations to Address the Major Issues.
        1.  For now, separate the verification process into two phases. 
        Phase One: Verify Veteran Status Only for all registrants in 
        the database. Continue Self-Certification of Ownership as 
        allowed under Public Laws 106-50 and PL 108-183 while verifying 
        09 whether the businessowner is a veteran or service disabled 
        veteran. CVE should complete Phase One for all veterans 
        currently registered in the database and for all newly 
        registered veterans. However, this will still require an 
        expedited process so as not to cause a veteran to have to wait 
        as long as 6 years for their status to be verified. Once the 
        status has been verified, it does not have to be re-verified 
        each year. The status will seldom, if ever, change.
                  Phase Two: Verify Ownership and Control. Review of 
                documents for ownership starting with SDVOBs and then 
                VOSBs seeking to perform contracts with the VA. Later, 
                other registrants in the database can be reviewed for 
                Ownership, since PL 109-461 only pertains to 
                contracting with the VA.
                  It should be noted however, that verification of 
                Control should only be to the extent necessary to 
                support the Ownership and to ensure that the company is 
                not being used as a `Rent-A-Vet' or a pass through 
                company.
        2.  Allow the verification of more than one company owned by 
        the same veteran(s). Entrepreneurship should not be stifled for 
        the sake of convenience. Each company should be evaluated and 
        verified on its own merit. Any agency will always have the 
        right to determine the select criteria to satisfy contract 
        requirements.
        3.  Immediately direct the SBA and the VA to conduct 
        promotional campaigns to inform all Federal agencies, including 
        all military departments, Large Primes, and the public about 
        the VA's Verification Process being exclusively for contracting 
        with the VA. However, Congress should consider extending the 
        provisions of sections PL 109-461 to all Federal agencies and 
        the DoD military departments; and authorize sufficient 
        resources to perform the verification process efficiently and 
        timely.
Other Recommendations for this Subcommittee to Consider with regard to 
        Improving the Veterans Federal Procurement and/or Increasing 
        Contracting Opportunities for Veteran and Service Disabled 
        Veteran Owned Businesses
I. `May' versus `Shall'
    One of the most significant actions that this Congress can do to 
advance the SDVOSB Federal Procurement Program is to change, clarify or 
remove the word `May' from the legislation governing the program. There 
has been enormous confusion created because of the use of the word 
``May'' throughout the legislation (PL 108-183) and the implementing 
regulation. In reviewing the discussion points included as part of the 
implementing regulation published in the Federal Register on March 23, 
2005, by DoD, GSA, and NASA, one can clearly discern that the word 
``May'' is being used in a positive way to allow contracting officers 
the latitude to award contracts under either the SDVOSB program, the 
Hubzone Program, or the 8a Program.
    But this use of the word ``May'' has to be clarified so that 
contracting officers will stop using it as an excuse to not award 
contracts to SDVOSBs. Many continue to say that the term ``May'' causes 
the SDVOSB program to be placed in an order BELOW the 8a and Hubzone 
programs. And recent decisions by GAO supported this view.
II. Authorization to Make Direct Awards to SDVOSBs
    Contracting officers don't have the authority to issue direct 
awards to a SDVOSB of their choosing, under the Simplified Acquisition 
Threshold as is allowed under the Small Business Act for the 8a 
program. At present, contracting officers must always refer to the Rule 
of Two as introduced under PL 108-183 and contained in Part 19 FAR, and 
the Code of Federal Regulations (CFR) 13 CFR, Part 125. The Rule of Two 
states if a contracting officer knows of two or more SDVOBs that can do 
the work, then the requirement must be competed. But the law also 
states that if the contracting officer only knows of one SDVOB that can 
meet the requirement, a sole source award CAN BE Made. Yet without the 
authority to make direct awards to SDVOSBs, contracting officers are 
reluctant to even use the Sole Source authority permitted under the 
law.
    Meeting with and talking with Federal contracting officers, I have 
found that they are often under pressure to get certain requirements 
awarded quickly, and although there is a SDVOB that can do the job, 
they routinely go to 8(a) firms. Under the SBA's 8a program, 
contracting officers are allowed to make direct awards even if there 
are other 8a firms available to do the work. In these cases, the 
government does not have to take time to consider restricted 
competition. Thus, the SDVOB suffers and the government agency looses 
an opportunity to add to its 3 percent Goal under the law.
III. All Agencies Should Be Compelled to Comply with Executive Order 
        13-360
    First let's go over the Presidential Executive Order, #13-360 that 
was issued to direct agencies to more effectively implement the 
`mandatory' legal requirement to procure `not less than' 3 percent of 
their goods and services from Service-Disabled Veteran Owned Businesses 
and to do so by reserving more procurements exclusively for SDVOBs.
    If agencies would actually adhere to the Executive Order, as 
stated, they would be much more likely to achieve the minimum 3 
percent. Here's why.
    The Order calls for each agency to develop a `written' Strategic 
Plan that will provide details and guidance as to how they will proceed 
to increase contracting opportunities for SDVOBs and make the plans 
publicly available. The Order was issued in 2004, but when some 
agencies made their plans public in May 2006, over half of the plans 
were incomplete and some were poorly developed.
    Agencies are not only supposed to make their plans publicly 
available, but they are also required to report annually to the 
Administrator of the SBA on how well they did or did not do each year. 
But only a few agencies have even attempted to submit an annual report 
partly because the SBA has not followed through on their part and 
provided proper guidance of where, when, and how to submit the reports.
    Each agency should now have designated a Senior-Level Official to 
be responsible for developing and implementing the agency's strategy. 
But most agencies never designated anyone, some designated someone but 
they were not a Senior-Level Official, and then some had one but after 
they left the agency a new one was never appointed.
    Significant elements of the strategy and the agency's achievements 
were to be incorporated in the performance plans of the Designated 
Senior-Level Official, the Chief Acquisition Officer, and the agency's 
OSDBU Director (Office of Small and Disadvantaged Business 
Utilization). But to date, most agencies are still thinking about how 
to avoid that directive. The VA under the former Dept. Secretary, 
Gordon Mansfield, issued an internal memo to all department heads to 
follow the Executive Order. And oh by the way, the VA is one of the few 
agencies that have achieved the 3 percent goal for more than 1 year.
    Each agency's Strategic Plan should include specific guidance on 
the following:

        a.  How they will reserve agency contracts exclusively for 
        SDVOBs;
        b.  How they will encourage SDVOBs to compete for agency 
        contracts;
        c.  How they will encourage the agency's large prime 
        contractors make subcontract awards to SDVOBs and how they will 
        monitor and evaluate their efforts to do;
        d.  How they will train their agency personnel about the laws 
        and policies related to the Veterans Federal Procurement 
        Program; and
        e.  How they will disseminate information that will educate 
        SDVOBs to the agency's contracting process.

    Most agencies have simply left these tasks up to their Offices of 
Small and Disadvantaged Business Utilization. But based on the agency's 
budget, some OSDBU offices have more staff and resources than others. 
Some send out representatives to small business conferences to 
distribute information, but many simply rely on their websites and 
hopes that veterans will contact the small business office.
    Training of agency personnel does not appear to be consistent, but 
many agencies rely on the Defense Acquisition University's (DAU) online 
course to provide training on the veterans Federal procurement program. 
However, the DAU training merely restates the legislation and not 
really clarifies how to apply the laws. Nor does it address the 
specific agency policies or directives that also have an influence on 
how the laws are applied.
    And seemingly, very few agencies are doing anything to encourage 
their Large Prime contractors to award more subcontracts to SDVOBs. 
When you talk to contracting officers or acquisitions personnel, they 
all say that they are challenged by the enormous task of monitoring the 
subcontracting plans of the agency's large primes while also having to 
meet the demands of new requirements. So very few penalties, if any, 
are being imposed on the Large Prime contractors for failing to comply 
with their subcontracting plans.
IV. Stop the Misuse of Contract Bundling
    Its been noted in a number of research reports that `when bundling 
occurs, small business loses'. It is expected that the number of 
bundled contracts will increase over the next few years. The effects of 
bundling are obvious. If an agency has 5 requirements--each could be 
done separately by a small business. But if those same 5 requirements 
are bundled together as one--it will probably take a much larger 
company to perform all 5 together. Thus one large company gains, and 5 
small companies lose.
    Over the past 15 years, the number of contracting personnel has 
declined, while the number of contract actions has increased. The 
Federal budget also continues to increase and now we are confronted 
with the additional burden of contracting out trillions of dollars to 
repair an economy torn apart by the unscrupulous practices of Wall 
Street Bankers and Investment Brokers. So its easy to see why bundling 
is continuing to be such a widely use practice.
    But while we try to repair our economy we should also rebuild its 
integrity. If small business is the engine that fuels our economy then 
we must strengthen it rather than to continue to weaken it. If contract 
bundling is allowed to continue--unregulated--even the Department of 
Defense with its huge budget, will not be able to even achieve the 23 
percent minimum small business goals.
    Contract Bundling must not be allowed to continue in this 
unregulated manner.
Additional Recommendations to Consider
    In addition to strengthening the SDVOSB program by enforcing 
Executive Order 13-360, discontinuing the misuse of Contract Bundling, 
adding authorization for direct awards non-competitively, and by 
clarifying the wording of `May' in the governing regulation, here are 
some additional recommendations to consider:

        1.  Small Business Subcontracting Plans submitted by Large 
        Primes should be monitored more closely. Liquidated damages or 
        the elimination of future contracts should be imposed for those 
        Large Primes that fail to use the small businesses that were 
        included in their subcontracting plans at the time of contract 
        award unless they have a valid reason. Contracting officers 
        should be held accountable for their lack of participating in 
        this process.
        2.  Provide a Price Evaluation Preference of 10 percent for 
        SDVOBs in acquisitions conducted using full and open 
        competition.
        3.  Direct the SBA Procurement Center Representatives (PCRs) 
        and Commercial Marketing Representatives (CMRs) to allocate 
        more time assisting SDVOBs and oversight of agencies failing to 
        achieve the 3 percent.
        4.  Have the Office of Federal Procurement Policy issue a 
        statement to clarify that the 23 percent government-wide small 
        business goal is only a `Minimum' and that agencies are allowed 
        to surpass the 23 percent.
        5.  Close the loopholes in the GSA schedule (FAR Part 8) 
        wherein large businesses are allowed to take away business 
        intended for small businesses.
In Summary:
    I look forward to the opportunity to meet with Members of the 
Subcommittee to discuss these issues and recommendations listed herein 
at your earliest convenience.
    In the Report to the Nation, developed by members of the VET-Force, 
`the presence of successful and prominent veterans within and across 
our Nation's business communities is a testimony of a grateful Nation--
a Nation that honors and respects the sacrifices made by Veterans on 
behalf of our country, both today and tomorrow. Veterans are uniquely 
qualified to work as contractors to the Federal Government because of 
their service experience of attention to detail and leadership and 
their dedication to providing quality products, on time and at a 
reasonable cost.
    Congress had the wisdom and foresight to pass effective legislation 
such as PL 106-50, PL 108-183, PL 109-461, and PL 110-186 to create and 
develop a procurement program for veterans. But unless agencies are 
compelled to comply, SDVOSBs and VOSBs will continue to gather only the 
crumbs from the procurement pie. The American Dream of Owning Your Own 
Business, can become a reality for Veterans!
    Thank you for your attention to these matters. This concludes my 
statement.

                               __________
                              Attachment 1
                      VET-FORCE MISSION STATEMENT
    The Veterans Entrepreneurship Task Force (VET-Force), organized in 
1998, to advocate for the development and passage of Public Law 106-50, 
the Veterans Entrepreneurship and Small Business Development Act 1999, 
wherein Congress realized that the United States must provide 
additional assistance to veterans, particularly service disabled 
veterans, with forming and expanding their own small businesses, and 
thereby enabling them to ``realize the American dream that they fought 
so hard to protect.''
    The VET-Force, which is composed of over 200 organizations and 
affiliates representing thousands of veterans throughout the United 
States; a high percentage of which, are small businesses; has made it 
their mission to monitor the implementation of the programs, agencies, 
and organizations referenced under the law and to present a strong 
unified veterans' voice for virtually all of the major veterans groups, 
as well as, veteran entrepreneurs; and to advocate for opportunities 
for veterans, particularly disabled veterans, seeking assistance to 
succeed in small business and self-employment.
    Though PL 106-50 did much to establish the infrastructure and goals 
for Federal and prime contracting for veterans and service disabled 
veterans, evidence shows that the agencies did little to get contracts 
to veterans; and with no accountability required, government agencies, 
and especially their prime contractors, failed to ever meet the minimum 
3 percent goals for service disabled veteran businessowners.
    Thus the VET-Force continues to advocate for additional 
legislation, as in October 2003, when Congress and members of the 
Administration passed legislation that was signed into law by the 
President. Under that Public Law, 108-183, a Veterans Procurement 
Program for Service Disabled Veteran Business Owners was created. 
Contracting officers were authorized more ``tools to work with'' to 
achieve the mandatory minimum 3 percent requirements of the law. Now 
procurement officials can restrict or sole source contracts exclusively 
for Service Disabled Veteran Owned Businesses (SDVOBs). Though the 
veterans' community has had a great deal of optimism surrounding this 
piece of legislation, there is still a lack of urgency within many of 
the agencies to implement the program.
    Therefore, the VET-Force will continue its vigilant oversight of 
legislation and continue its advocacy of ideas in the areas of 
acquisition, planning, marketing, and outreach to ensure that veterans 
and service disabled veterans receive the full benefits of this program 
as promised to them by Congress, and that the language of the law is 
implemented ``expeditiously and transparently,'' now as opposed to 
later!
    For additional info about the Task Force and the Veterans 
Procurement Program and other initiatives Go to: www.VET-Force.org, 
www.VVA.org or www.ASDV.org.
    Note: VET-Force meets monthly in the Nations Capitol to discuss the 
issues pertinent to the success of Veteran Business Owners. For more 
information contact Joe Wynn at JoeWynnVetsGroup.org.
                               __________
                              Attachment 2
 The VETS Group Inc.--The Veterans Enterprise Training & Services Group
    (A non-profit Community Based Organization serving military 
veterans, members of the Guard, Reserves, their families, disabled 
veterans and those veterans of limited means)
   The VETS Group offers a Holistic Program for Veterans to Achieve 
  Economic Empowerment through Education, Employment, Entrepreneurship
    Services: Federal & Small Business Training--Classes, Seminars & 
Forums, Employment Assistance--Job Fairs, Resume Workshops, Procurement 
Opportunities--Conferences, Databases, Technical Assistance--Financial 
Literacy, Education
    Other Services: Disability Claims Assistance, Counseling, Advocacy, 
Managed Employment, and Community Outreach
    Coordination of Resources for: Transition Assistance, Affordable 
Housing, Family Strengthening, Health Rehabilitation, Business 
Development
    Resource Network: Patriot Resource Partners, Advisors, Mentors
    Planned Facility: State-of-the-Art Enterprise Training & Services 
Center, Incubators
    All to Lessen the Burdens of government, Improve Quality of Life, 
Alleviate Discrimination, Remove Barriers, especially in the Federal 
Marketplace for Veterans, their Families, and their Community!

                               __________
                              Attachment 3
        The Veterans Enterprise Training & Services Group, Inc.
           (Veterans helping Veterans to Succeed in Business)
                  Federal Procurement Training Series
                          Session Descriptions
Session I:
    Detailed analysis of the legislation passed by Congress to create 
the Veterans Entrepreneurship and Small Business Development Act 
(Public Law 106-50) and the section of the Veterans Benefits Act of 
2003 (Public Law 108-183) that created the Veterans Procurement 
Program. Also discussed is Executive Order 13-360 issued by the White 
House in October 2004, that reinforces the legislation by directing 
that each Federal agency and their prime contractors procure a minimum 
of 3 percent of all of their goods and services from Service Disabled 
Veteran Owned Businesses (SDVOSB) and further directs each agency to 
implement strategic plans to increase contracting opportunities for 
SDVOSB.
Session II:
    How to Get Started; Understand the Federal Acquisition Process and 
Sales Cycle; How to access Federal procurement market data for 
effective Marketing; Strategies to market to government 
representatives; Decode the laws and rules, i.e. the Federal 
Acquisition Regulations (FAR); and identify the Federal Government 
Contract Vehicles i.e. GSA Schedules, Task Orders, GWACs, and Purchase 
Orders. Analyze and discuss Socio Economic programs and how to utilize 
them for marketing purposes. Introduce the purpose for and elements of 
the Contractor's Capability Statement.
Session III:
    Analyze Federal Government Solicitation types--the Request for 
Quote (RFQ), the Request for Proposal (RFP), and the Invitation for Bid 
(IFB). Identify Contract Types; the Federal Uniform Contract Format 
(UCF); the Statement of Work and Evaluation Factors; the Business and 
Technical Proposals; What does the Federal Government say a Responsible 
Contractor is; Past Performance; Subcontract plans, Teaming and Joint 
Ventures.
Session IV:
    Examine the use of simplified acquisition procedures including task 
and delivery order contracts, in particular multiple award contracts. 
Discuss the use of the purchase cards, oral solicitations, and other 
simplified acquisition procedures as defined by FAR Part 13--Simplified 
Acquisition Procedures.
Session V:
    Discuss pricing strategies based on contract type (Fixed Price and 
Cost Reimbursement Contracts). Discuss the element of the Pre Award 
Accounting survey and understand the basics of establishing an 
Acceptable federally Approved Accounting System. Discuss Federal 
Government Procurement Audit or Review Categories (Indirect Rate 
Review, Invoice Reviews, Floor Checks, and Incurred Cost Review). 
Provide an overview of Contract Administration.
Session VI:
    Receive information on how to effectively conduct presentations of 
your company capabilities to key government Contracts and Program 
staff. Learn to manage question and answer sessions during critical 
government negotiations. Define your personal and professional image 
and learn to present from the customers point of view. Receive a video 
tape in order to see how others view you during your presentation.

                                 
     Prepared Statement of Christina M. Roof, National Legislative 
                 Assistant, American Veterans (AMVETS)
    Madam Chairwoman, Ranking Member Boozman, and distinguished Members 
of the Subcommittee, on behalf of AMVETS, I would like to extend our 
gratitude for being given the opportunity to discuss and share with you 
our views and recommendations on Veterans Affairs contracting policies. 
By way of background, AMVETS strongly agrees with the 1999 statements, 
of then Chairman Smith, that the set-aside program accords a full 
opportunity for veterans to participate in the American economy 
sustained by their service.
    AMVETS feels privileged in having been a leader, since 1944, in 
helping to preserve the freedoms secured by the United States Armed 
Forces. Today our organization prides itself on the continuation of 
this tradition, as well as our undaunted dedication to ensuring that 
every past and present member of the armed forces receives all of their 
due entitlements. These individuals, who have devoted their entire 
lives to upholding our values and freedoms, deserve nothing less, if 
not more.
    AMVETS applauds the efforts of VA in exceeding its contracting 
goals for Service Disabled Veteran Owned Small Businesses (SDVOSB) and 
Veteran Owned Small Businesses (VOSB) over the past two fiscal years. 
AMVETS believes it is important to recognize the leadership efforts of 
several VA agencies in contributing to this success: The U.S. 
Department of Veterans Affairs Office of Small and Disadvantaged 
Business Utilization (OSBDU), The Center for Veterans Enterprise (CVE), 
and the multiple other agencies that provided evaluations and 
recommendations addressing shortfalls within the program. Such efforts 
show that VA is capable of outstanding achievements in their pursuit of 
improving the lives of veterans. This achievement in itself is a great 
feat in light of staff shortages, lack of training resources and 
centralized reporting, as well as the high demand for quick and 
accurate application verification. Based on the information available 
to AMVETS in regards to the Committee's inquiry on the affects of sole 
sourcing and bundling, our research found insufficient data available 
to accurately address our concerns.
    Our primary concern is on the overall verification processes. 
Presently under the ``Veterans Benefits, Health Care, and Information 
Technology Act,'' VA possesses the authority to make noncompetitive 
(sole-source) awards and to restrict competition for ``set-aside'' 
awards to SDVOSBs and VOSBs. This authority is only granted to VA, and 
no other Federal agency or department. Specifically, the Veterans 
Benefit Act of 2003 authorizes agencies to set contracts aside and make 
sole-source awards of up to $3 million for SDVOSBs, but not VOSB. By 
contrast, VA's authorities under the ``Veterans Benefits, Health Care, 
and Information Technology Act'' apply to both. Also, through use of 
set-aside authority, it is voluntary to other agencies, whereas VA is 
required to set-aside contracts for both (unless a sole-source award is 
used) if the contracting officer expects two or more firms to submit 
offers. The award can be made at a fair and reasonable price that 
offers the best value for the government. VA may make sole-source 
awards of up to $5 million, with no restrictions on the number of 
SDVOSBs or VOSBs expected to submit offers. Given this authority, VA 
must protect its vital role in supplying more veteran-owned businesses 
with contracts by designing and enforcing stricter contract compliancy 
regulations and uniformed verification processes.
    Currently, only initial or pre-contract verification processes are 
in place for most contracts. During the initial (and often only) review 
of a company's bid, the company will present all required 
documentation, including evidence that they will use SDVOSBs and VOSBs 
as subcontractors to fulfill terms, and then will be granted the award. 
After being awarded contracts on the premise of using SDVOSB and VOSBs 
as subcontractors, the verification that the contractor continues to 
stay compliant if these stipulations fails to occur. Under current 
policy, no proof of compliance is required, nor do random labor audits 
occur. AMVETS was unable to determine why this occurs when The Office 
of the Inspector General for the Department of Veterans Affairs (OIG) 
has continually identified the same deficiencies in the VA's 
procurement process, including the solicitation, award, and 
administration of its contracts. From March 2008 to March 2009 OIG has 
issued more than 10 reports illustrating these deficiencies. It is also 
important to point out that in 2008, VA hired an independent consulting 
firm to audit the current contract procurements, and the firm also 
reported the same findings as VA's OIG. While we note that VA is making 
an effort to identify and improve the verification processes and 
policies, AMVETS most respectfully asks the Committee why none of the 
recommendations have been put into place?
    VA's difficulties in some areas of contract administration 
illustrates that VA's major challenge lies in monitoring performance of 
previously awarded contracts. AMVETS believes that this is due to VA 
not having a centralized and uniform contracting system in place. VA 
lacks reasonable assurance, at minimum, that it is receiving the 
services it paid for and that use of agreed subcontractors is 
occurring. We believe this to be a result of ineffective controls to 
test compliance. It is in the opinion of AMVETS that strengthening 
controls over performance monitoring and contract compliancy testing 
will result in the avoidance of contract fraud, more efficient 
verification processes, and an estimated savings of $47.4 million* \1\ 
over the next 5 years, according to OIG.
---------------------------------------------------------------------------
    \1\ Office of Inspector General, Department of Veterans Affairs 
Statement before the Subcommittee on Military Construction, Veterans 
Affairs, and Related Agencies. Committee on Appropriations United 
States House of Representatives. Hearing on Department of Veteran 
Affairs Challenges; March 12, 2009
---------------------------------------------------------------------------
    It is noted that VA's Office of Acquisition, Logistics, and 
Construction has tried implementing some and proposed other additional 
policies to improve and provide better oversight of the VA acquisition 
program. This includes, but is not limited to, the improvement of large 
dollar procurements prior to award, increased oversight of field 
procurement activities by conducting onsite reviews, and the training 
of Regional Counsel attorneys' to provide advice and guidance to local 
contracting entities. However, the overall decentralization of VA's 
acquisition program makes this task very difficult to accomplish. 
AMVETS is very concerned there is still no evidence that all the 
necessary resources and uniform training of contract officers are being 
furnished to VA's Office of Acquisition, Logistics, and Construction, 
or any of the other agencies involved in the VA's procurements.
    AMVETS finds it unacceptable that the VA's decentralized system of 
acquisition function and contract procurement is resulting in 
inconsistent applications of the policies and initiatives, thus 
resulting in loss of employment opportunities for veteran owned 
businesses in these challenging economic times. It is AMVETS opinion 
that immediate action should be taken to prevent fraud and unethical 
practices that hurt our veterans' community of small businessowners. 
Once again AMVETS respectfully asks the Committee what VA currently has 
in place to uphold the legally binding terms set forth by these awards.
    AMVETS recommends the following for the overall improvement to VA's 
contracting policy:

        1.  A centralized and uniform training program for all contract 
        officers throughout the country.
        2.  Authority to such agencies to conduct unannounced on-site 
        visits throughout the entire term of the contract, regardless 
        of the size of the contract.
        3.  Require all VA awarded procurements to submit certified 
        payrolls as evidence of complete fulfillment in their 
        obligations to use SDVOSB and VOSBs.
        4.  A substantial nationwide increase of qualified contract 
        officers and outreach staff.
        5.  The immediate cancelation of handwritten, mailed 
        procurements that delay the process, and the adoption of a 
        system-wide uniform contracting software program.
        6.  The implementation of a system to quickly and accurately 
        verify the SDVOSBs and VOSBs in the current VetBiz database, so 
        more veterans will have access to the bidding process.

    AMVETS strongly believes that with the growing number of VOSBs and 
the changes in technology that it is vital for VA to grow and change as 
well.
    Madam Chairwoman, this concludes my testimony. I thank you again 
for the privilege to present AMVETS' views, and I would be pleased to 
answer any questions you might have.

                                 
Prepared Statement of Shawne Carter McGibbon, Acting Chief Counsel for 
    Advocacy, Office of Advocacy, U.S. Small Business Administration
    Created by Congress in 1976, the Office of Advocacy of the U.S. 
Small Business Administration (SBA) is an independent voice for small 
business within the Federal Government. The Chief Counsel for Advocacy, 
who is appointed by the President and confirmed by the U.S. Senate, 
directs the office. The Chief Counsel advances the views, concerns, and 
interests of small business before Congress, the White House, Federal 
agencies, Federal Courts, and State policy makers. Issues are 
identified through economic research, policy analyses, and small 
business outreach. The Chief Counsel's efforts are supported by offices 
in Washington, D.C., and by Regional Advocates. For more information 
about the Office of Advocacy, visit http://www.sba.gov/advo, or call 
(202) 205-6533.
                           Executive Summary
    Sources of data on veterans in business. The best source of data on 
veterans in business that we now have is the U.S. Census Bureau's 2002 
Survey of Business Owners and Self-Employed Persons (SBO). In 2007, 
Census issued two important reports on veterans in business based on 
its SBO data, and Advocacy released its own report the same year also 
using this data.
    How many veteran-owned firms are there? Subject to caveats 
explained in the testimony, Advocacy estimates that there were about 
3.3 million veteran-owned firms in 2007, of which about 230,000 were 
owned by service-disabled veterans. Census found that 14.5 percent of 
all respondent businessowners were veterans, and about 7 percent of 
those were service-disabled. About 12.2 percent of all businesses were 
veteran-owned.
    Veteran-owned firms were similar to all U.S. firms in most 
respects, except for their age. Their distribution by size was nearly 
identical to all firms, both in terms of revenues and employees. This 
correspondence also was true of their distribution by type of industry; 
in the percentage of those which were home-based; in their level of 
franchise ownership; in the sources of capital used for business 
startup, acquisition and expansion; in the types of workers they used; 
and in the types of their major customers.
    Top five industries for veteran-owned firms. Veteran-owned firms 
had the largest shares of firms in the same five major industry groups 
(two-digit NAICS codes) as all U.S. firms: professional, scientific, 
and technical services, 18.7 percent; construction, 13.9 percent; other 
services, 10.2 percent; retail trade, 9.5 percent; and real estate and 
rental/leasing, 9.3 percent.
    Government customers are a larger share of veteran-owned firms' 
major customers than for other firms. Among veteran-owned firms, 2.6 
percent reported that the Federal Government was a ``major customer'' 
(one accounting for 10 percent or more of a firm's sales), while the 
corresponding percentage for all firms was 2.0 percent. State and local 
governments were major customers for 6.0 percent of veteran-owned 
firms, and 5.3 percent of all firms.
    Owner demographics. Veteran businessowners are much older than 
other owners; 67.8 percent were age 55 or older in 2002, compared to 
30.9 percent of all owners. Veteran owners were also 97.3 percent male. 
Both the age and gender of veteran owners reflect the characteristics 
of the underlying veteran population. With respect to race and 
ethnicity, in 2002, 95.5 percent of veteran businessowners were White; 
3.2 percent were Black; 2.3 percent Hispanic; 1.0 percent Native 
American; and 0.9 percent Asian. Veteran owners were better educated 
than other owners. Among veteran businessowners, income from their 
businesses was the primary source of personal income for 69 percent of 
employers, but only 39 percent of non-employers.
    Additional findings from Advocacy research. Advocacy-sponsored 
research found that about 22 percent of veterans were either acquiring 
a business or considering starting one; that military service provided 
necessary business skills to at least one-third of both current veteran 
businessowners and those planning to become owners; and the self-
employment rate of male veterans was higher than that of non-veterans 
through the entire 25-year period (1979-2003) of the study.
    Problems affecting veteran entrepreneurs. The most current research 
Advocacy has on this subject was released in 2004, although new work is 
underway now on this subject. The older research indicated that the 
most important problems included access to and affordability of health 
insurance, knowledge about programs which could be of assistance, 
access to financing, understanding tax law, and disadvantages in 
government contracting. In today's economic environment, access to 
financing is probably near the top of all firms' concerns.

                               __________

    Chairwoman Herseth-Sandlin and Members of the Subcommittee, good 
afternoon and thank you for the opportunity to appear before you today. 
My name is Shawne Carter McGibbon, and I am the Acting Chief Counsel 
for Advocacy at the U.S. Small Business Administration (SBA). Congress 
established the Office of Advocacy in 1976 as an independent entity 
within SBA to represent the views of small business before Federal 
agencies, to provide counsel on small business issues to the President 
and the Congress, to perform economic research related to small 
business and entrepreneurship, and for other purposes specified in our 
statutory charter.\1\
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    \1\ Title II, Public Law 94-305; June 4, 1976; 15 U.S.C. Sec. 634a 
et seq.
---------------------------------------------------------------------------
    Because Advocacy was established to provide independent counsel to 
policymakers, its testimony is not circulated for comment through the 
Office of Management and Budget (OMB) or other Federal offices, and the 
views expressed by Advocacy here do not necessarily reflect the 
position of the Administration or
of SBA.

Background on Advocacy and veteran entrepreneurship research

    Advocacy's mission is to be an independent voice for small business 
inside the government in the formulation of public policy and to 
encourage policies that support their startup, development and growth. 
Its creation was premised on the belief that small business needs 
representation in the legislative, regulatory, and administrative 
processes that profoundly affect them, and that good policy requires 
good information. We are perhaps best known for our regulatory advocacy 
and our economic research.
    Advocacy works every day with Federal regulatory agencies and OMB 
to ensure agency compliance with the Federal Regulatory Flexibility 
Act.\2\ We help regulators develop smarter rules that will accomplish 
their objectives while minimizing unnecessary adverse impacts on small 
entities. Our activities in this area during FY 2008 saved small 
entities nearly $11 billion in foregone regulatory costs, without 
undermining agencies' missions.\3\
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    \2\ Public Law 96-354; September 19, 1980; 5 U.S.C. Sec. 601 et 
seq.
    \3\ For full information, see Advocacy's annual report to the 
President and the Congress on implementation of the Regulatory 
Flexibility Act, which can be accessed at http://www.sba.gov/advo/
research/rs291.pdf.
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    Our economic research activities both support our regulatory 
advocacy and develop information on a wide variety of small business 
topics for use by government policymakers and other stakeholders. 
Advocacy has a small staff of eight professional economists who work 
with data from many sources, including some that originate at other 
Federal agencies and cannot be accessed by private sector researchers 
because of important statutory privacy protections. In addition to a 
variety of periodic reports and reference materials that are produced 
by our own staff, Advocacy also sponsors contract research on issue-
specific topics that vary from year to year depending on current issues 
and problems, the needs of stakeholders, and the availability of 
resources. On average, Advocacy releases about 25 research reports and 
data products annually.\4\
---------------------------------------------------------------------------
    \4\ See Advocacy's homepage at http://www.sba.gov/advo/ for 
additional information on economic research.
---------------------------------------------------------------------------
    Although Advocacy's activities on behalf of all small firms should 
benefit veteran-owned firms to the same extent they help small firms in 
general, our economic research function forms a special nexus between 
Advocacy and the veterans business community. Subsequent to the 
enactment of the Veterans Entrepreneurship and Small Business 
Development Act 1999 (Public Law 106-50), Advocacy began a long-term 
effort to develop new information on veterans in business and related 
topics. This proved to be more difficult than expected, especially in 
the early years, largely because most data sources and records of 
routine business transactions and processes (e.g., bank loans) do not 
include information on veteran or disability status, information 
largely irrelevant to their purposes, if not to those with research or 
policy interests. For example, even today, there is no easy way to tell 
how many veteran-owned firms, or even individual veterans, are in 
bankruptcy. The forms used in this process simply don't ask for veteran 
status.
    Gradually, Advocacy, in cooperation with our friends in other 
agencies,\5\ has been able to use specialized techniques, including 
surveys and the matching of administrative data from disparate sources, 
to develop information on veterans in business which is not available 
``off the shelf.'' All of the reports that have been completed are 
posted on Advocacy's veterans economic research Web site,\6\ and I have 
included a listing in your information package. These include both 
studies that were dedicated to veteran-specific issues, and studies on 
more general topics where we were able to develop and include veteran-
specific information because veteran ``markers'' were available in the 
underlying data, something that we now try to do whenever possible.
---------------------------------------------------------------------------
    \5\ Including the Census Bureau, the Bureau of Labor Statistics, 
the Internal Revenue Service, the Department of Defense, the Federal 
Reserve Board and others.
    \6\ http://www.sba.gov/advo/research/veterans.html
---------------------------------------------------------------------------
    Advocacy currently has in progress two additional economic research 
projects on veteran-related issues, one looking at the impact of 
national defense reserve component activation on employers, and one on 
tax and regulatory problems facing veteran entrepreneurs. These will be 
posted on our Web site when complete.
    Advocacy has also used the service-disabled veteran-owned business 
(SDVOB) set-aside authority pioneered by this Committee to reserve 
competition for research projects to SDVOBs. I am pleased to report 
that our use of this authority in 2005 was the first at SBA, and that 
it resulted in a very successful competition from which an award was 
made and excellent original research resulted.\7\ We will be using the 
SDVOB set-aside authority again.
---------------------------------------------------------------------------
    \7\ Self-Employment in the Veteran and Service-Disabled Veteran 
Population; Open Blue Solutions, Chapel Hill, NC; 2007. For the full 
report, see http://www.sba.gov/advo/research/rs291tot.pdf.

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Small businesses in general

    Before presenting data on veterans in business, I would like to 
give the Committee a few important statistics on small businesses in 
general. These numbers help us understand how important the subset of 
firms owned by veterans and service-disabled veterans are. Your 
information package also includes two documents loaded with more data 
on small firms, the most recent editions of our Frequently Asked 
Questions and of our Quarterly Indicators.

          Number. Advocacy estimates that, in 2007, there were 
        27.2 million businesses in the United States.\8\ Small firms 
        with fewer than 500 employees represent 99.9 percent of the 
        27.2 million businesses (including both employers and non-
        employers), as the most recent data (2006) showed only about 
        18,000 large businesses (500 or more employees).\9\
---------------------------------------------------------------------------
    \8\ http://web.sba.gov/faqs/faqindex.cfm?areaID=24. This estimate 
uses the most common definition of ``small business'' which is based on 
all IRS tax returns reporting $1,000 or more in business income during 
the tax year.
    \9\ http://www.sba.gov/advo/research/us88_06.pdf.
---------------------------------------------------------------------------
          Employer/Non-employer. The most recent available 
        Census data (2006) show that 22.5 percent of all firms had 
        employees, while the balance were non-employers.\10\
---------------------------------------------------------------------------
    \10\ Ibid.
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          Self-employment. Advocacy estimates that there were 
        about 15.4 million self-employed in the workforce at the end of 
        2008, including 5.8 million incorporated and 9.6 million non-
        incorporated individuals.\11\
---------------------------------------------------------------------------
    \11\ See 4http://www.sba.gov/advo/research/sbqei0804.pdf. Some 
reports on self-employment exclude incorporated individuals; however, 
Advocacy research usually includes both types together, including 
individuals who chose to conduct their business activities as 
Subchapter S corporations, a very popular type of business 
organization.

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Data for veterans in business

    The most important primary source of data that we now have on 
veterans in business is the Census Bureau's 2002 Survey of Business 
Owners and Self-Employed Persons (SBO), part of the Economic Census the 
agency conducts every 5 years.\12\ In July 2007, Census released two 
new reports on veterans in business, based on data collected in the 
agency's 2002 SBO. These reports, Characteristics of Veteran-Owned 
Businesses (CVOB) and Characteristics of Veteran Business Owners 
(CVBO), are the most important data from Census on veterans in business 
since an earlier report based on 1992 data. The scope of the new 
reports is also much broader than that of the 1992 report, representing 
the most detailed information on veterans in business ever released by 
Census.\13\
---------------------------------------------------------------------------
    \12\ The SBO is a quinquennial survey first conducted in its 
present form in 2002. The SBO incorporates many of the purposes and 
survey questions of three predecessor surveys: the Survey of Minority-
Owned Business Enterprises (SMOBE), the Survey of Women-Owned Business 
Enterprises (SWOBE), and the 1992 Characteristics of Business Owners 
(CBO) survey. The SMOBE/SWOBE surveys continued in 1997, while the CBO 
was discontinued as a separate survey after 1992, although elements of 
it are included in the 2002 and 2007 SBOs.
    \13\ The 2002 SBO reports, together with accompanying summaries, 
press releases, and charts are all available at http://www.census.gov/
econ/sbo/index.html.
---------------------------------------------------------------------------
    We at Advocacy are most appreciative that the Census Bureau has 
recognized the importance of veterans business data and that the agency 
again included questions on veteran and service-connected disability 
status in its pending 2007 SBO.\14\ The current effort is polling 2.4 
million businesses about their characteristics and the characteristics 
of their owners. Tabulation and analysis of their responses are 
underway now, and Census currently plans to release reports on veterans 
business data in June 2011.\15\
---------------------------------------------------------------------------
    \14\ Information for the 2007 SBO is based on tax year 2007, and 
actual survey data collection is in 2008 and 2009.
    \15\ See http://www.census.gov/econ/sbo/releaseschedule07.html for 
a schedule of all planned 2007 SBO releases.
---------------------------------------------------------------------------
    Returning to the 2002 SBO veterans business data that we now have, 
Advocacy prepared a synopsis of findings from the Census data for 
publication as a chapter in the 2007 edition of our annual report to 
the President and the Congress. An off-print of this chapter is 
included in your information package.\16\ This report, which is also 
posted on Advocacy's Web site,\17\ is an effort to interpret in a user-
friendly way the massive amount of information provided in the 2002 SBO 
reports, which comprise nearly 200 pages of tabular data.
---------------------------------------------------------------------------
    \16\ Office of Advocacy, The Small Business Economy, December 2007; 
Chapter 5, Characteristics of Veteran Business Owners and Veteran-owned 
Businesses, pp. 119-149, hereafter referred to as SBE.
    \17\ See http://www.sba.gov/advo/research/sbe_07_ch5.pdf.
---------------------------------------------------------------------------
    Advocacy and its contract researchers have also used data from a 
variety of other sources in its veteran entrepreneurship research 
program, but the demographic data we will present here today come 
primarily from the Census Bureau's 2002 SBO.

Veteran business demographics

    Number of veteran-owned businesses. Census did not make an estimate 
of the total universe of veteran-owned firms. Most of the SBO data is 
expressed in terms of percentages of respondent businessowners, and 
those number estimates that Census did make are estimates of respondent 
firms and owners only, not the total population of all veteran-owned 
firms. The 2002 SBO did, however, estimate that 14.5 percent of all 
respondent businessowners were veterans and that 12.2 percent of all 
respondent firms had one or more veterans as majority interest owners 
(i.e., were veteran-owned).\18\
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    \18\ See http://www.census.gov/econ/sbo/02/cbosof.html.
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    Without discussing the statistical difficulties involved, we must 
say at the outset that to make an estimate of the total number of 
veteran-owned firms, assumptions must be made that we do not know to be 
true without further sampling and polling. These include assumptions 
that:

          SBO non-respondents had the same characteristics as 
        respondents; and
          The veteran-ownership percentages reported in the 
        2002 SBO remain valid in 2007, the last year for which we have 
        data on all firms.

    If these assumptions are reliable, then we can make an estimate 
that in 2007, there were about 3.3 million veteran-owned firms in which 
veterans held a majority ownership interest.\19\
---------------------------------------------------------------------------
    \19\ The 2002 SBO found that 12.2 percent of all respondent firms 
were veteran-owned. The estimate of 3.3 million veteran-owned firms is 
obtained by applying that percentage to the estimated 27.2 million 
estimated number of total firms in 2007.

    Number of service-disabled veteran-owned firms. The SBO regards 
service-connected disability as a characteristic of an owner and not of 
a firm, so it did not provide direct data on SDVOBs, but only on the 
service-disabled veterans themselves. Accordingly, another assumption 
must be made to estimate the number of SDVOBs: namely, that the SBO-
reported percentage of service-disabled veteran businessowners within 
the population of all respondent veteran businessowners, about 7 
percent,\20\ holds true for firms as well as owners. If this is true, 
an estimate of about 230,000 SDVOBs in 2007 could be made.\21\
---------------------------------------------------------------------------
    \20\ See http://www.census.gov/econ/sbo/02/cbosof.html.
    \21\ The 2002 SBO percent of service-disabled veteran 
businessowners, 7 percent, multiplied by the estimated 3.3 million 
veteran-owned firms in 2007. This further assumes that the 2002 
percentage is reliable in 2007.
---------------------------------------------------------------------------
    Because of the assumptions made in these estimates, the possibility 
of normal sampling and non-sampling errors in the underlying datasets, 
and known long-term demographic trends in the veteran population in 
general that could operate to invalidate the assumption that 2002 
findings still work in 2007,\22\ these estimates should be thought of 
as midpoints in a range of possible estimates, with a bias toward the 
downside due to the aging of the veteran population. We await findings 
from the 2007 SBO for more current data.
---------------------------------------------------------------------------
    \22\ E.g., Aging and gradual reduction in the numbers of the total 
veteran population, but increased numbers of service-disabled veterans 
in recent years.

    Size of veteran-owned firms by receipts. Firms owned by veterans 
are nearly identical to all firms in their distribution by size in 
terms of sales/receipts. Figure 1 attached to this testimony depicts 
this relationship. The underlying data show this correspondence for 
both firms with and without employees. For example, in 2002 about 11 
percent of both all firms and veteran-owned firms had receipts in the 
range of $100,000 to $249,999; about 6 percent had receipts from 
$250,000 to $499,999; 4 percent had receipts from $500,000 to $999,000, 
while 6 percent of all firms and 5 percent of veteran-owned firms had 
receipts of $1 million or more.\23\
---------------------------------------------------------------------------
    \23\ SBE, Table 5.11, p. 140.
---------------------------------------------------------------------------
    As would be expected, employer firms tended to have greater 
receipts than firms without employees, and larger shares of employers 
are found in the higher receipts size classes. More than 20 percent of 
both all employer firms and veteran-owned employer firms had receipts 
of $1 million or more. The opposite was the case for firms without 
employees, with smaller shares in the higher receipt categories. When 
employers and non-employers are taken together, as they are in Figure 
1, the proportions of both all firms and veteran-owned firms in each 
receipt class generally decrease as the receipt class increased.\24\
---------------------------------------------------------------------------
    \24\ Ibid.

    Size of veteran-owned firms by number of employees. Among firms 
with employees, businesses owned by veterans tend to be very similar to 
all firms in their employment sizes, as depicted in Figure 2 attached 
to my testimony. More than half (51.7 percent) of all respondent 
veteran-owned employers in 2002 had from 1 to 4 employees, while 47.3 
percent of all respondent employers were in this employment size 
category. More than 99 percent of all employers had fewer than 500 
employees, whether owned by veterans or not.\25\
---------------------------------------------------------------------------
    \25\ SBE, Table 5.12, p.141. Note that these numbers refer to 
employers only, and not to non-employers. The seemingly anomalous 
category of an employer having ``no employees'' refers to firms that 
have employment some time during the survey year, but not during the 
specific March 12th pay period on which survey data is based.

    Percentage distribution of firms by kind of business, 2002. 
Veteran-owned firms are generally distributed among the 20 major 
industries (two-digit NAICS codes) similarly to the distribution of all 
respondent firms, as depicted in Figure 3 attached to my testimony. The 
---------------------------------------------------------------------------
five largest categories are the same for both groups:

          Professional, scientific, and technical services 
        (veterans, 18.7 percent; all, 15.7 percent);
          Construction (veterans, 13.9 percent; all, 11.7 
        percent);
          Other services (veterans, 10.2 percent; all, 11.2 
        percent);
          Retail trade (veterans, 9.5 percent; all, 11.6 
        percent); and
          Real estate and rental/leasing (veterans, 9.3 
        percent; all, 9.6 percent).\26\
---------------------------------------------------------------------------
    \26\ SBE, Table 5.17, pp. 147-148.

    Age of veteran-owned firms. As noted on Figure 4 attached to my 
testimony, veteran-owned businesses are generally older than all U.S. 
firms. In 2002, 54.6 percent of veteran-owned firms with employees and 
33.1 percent of those without employees reported that their business 
was started or acquired before 1990. In contrast, 35.7 percent of all 
respondent employers and 20.8 percent of non-employers were in business 
before 1990.\27\
---------------------------------------------------------------------------
    \27\ SBE, Table 5.10, p. 139.
---------------------------------------------------------------------------
    On the other end of the scale, smaller percentages of veteran-owned 
firms were started or acquired after 1999, that is, were less than 3 
years old relative to the survey year of 2002. About 8.6 percent of 
veteran-owned employers and 19.1 percent of veteran-owned non-employers 
reported that their firms were acquired after 1999, compared with 14.6 
percent of all employers and 26.6 percent of all non-employers.\28\
---------------------------------------------------------------------------
    \28\ Ibid.

    Home-based veteran-owned businesses. In 2002, more than half (51.8 
percent) of veteran-owned SBO respondent firms reported that they were 
operating from the owner's home, as noted on Figure 4, compared with 
49.4 percent of all respondent firms. As expected, veteran-owned 
businesses without employees were more likely to be home-based than 
those with employees, 60.8 percent and 22.9 percent, respectively. 
Percentages of home-based veteran-owned firms varied by kind of 
business, employer/non-employer status, and size of firm in proportions 
similar to those of all home-based firms.\29\
---------------------------------------------------------------------------
    \29\ SBE, Table 5.13, p. 142.
---------------------------------------------------------------------------
    The largest proportions of home-based veteran-owned firms by kind 
of business were in the construction industry (72.6 percent for 
veteran-owned firms, compared to 67.9 percent for all firms) and in the 
administrative/support and waste management/remediation services 
industries (63.1 percent for veteran-owned firms, compared to 60.0 
percent for all firms).\30\
---------------------------------------------------------------------------
    \30\ SBE, pp. 141-142.

    Franchised veteran-owned firms. In 2002, 1.6 percent of all SBO-
respondent veteran-owned firms (employers and non-employers together) 
were operated as franchises. Among veteran-owned employers, franchised 
businesses represented 3.3 percent of respondents, as noted on Figure 
4. Among veteran-owned firms with 50-99 employees, 10.7 percent were 
franchises; 13.0 percent of veteran-owned firms with 100-499 employees 
were franchises; and 8.9 percent of veteran-owned firms with 500 or 
more employees were franchises.\31\
---------------------------------------------------------------------------
    \31\ SBE, p. 143.

    Capital requirements for veteran-owned firms. Figure 4 also notes 
that the sources of capital were nearly the same for veteran-owned 
respondent businesses and other firms. Of veteran-owned firms, 63.9 
percent reported using personal or family assets for capital to start 
or acquire their businesses, basically the same as the 63.6 percent 
reported by all SBO-respondent firms.\32\
---------------------------------------------------------------------------
    \32\ SBE, Table 5.14, p. 144.
---------------------------------------------------------------------------
    Use of a personal/business credit card as a source of capital was 
reported by 7.4 percent of veteran-owned firms and by 8.8 percent of 
all firms. Percentages of veteran-owned firms and all firms originally 
financed by banks were also nearly identical (11.5 percent and 11.4 
percent, respectively), as were the percentages of those using 
government loans or government-guaranteed bank loans (1.3 percent and 
1.6 percent, respectively).\33\
---------------------------------------------------------------------------
    \33\ Ibid.
---------------------------------------------------------------------------
    Of SBO-respondent veteran-owned businesses, 28.1 percent reported 
that they did not need capital to start or acquire their business. 
Outside investors provided capital to 2.1 percent of veteran-owned 
firms compared with 2.7 percent of all firms. Veteran-owned businesses 
and all businesses also reported comparable access to the capital used 
to finance expansion or capital improvements.\34\
---------------------------------------------------------------------------
    \34\ Ibid.

    Workforce used by veteran-owned firms. The types of workers used by 
veteran-owned firms and all firms responding to the SBO differed only 
slightly in 2002, as noted on Figure 4. Almost 83 percent of both all 
employers and veteran-owned employers reported using their own full- 
and part-time paid employees in their firm; 7.3 percent used temporary 
staff from a temporary help service; and 1.3 percent leased employees 
from a leasing service or professional organization.\35\
---------------------------------------------------------------------------
    \35\ SBE, Table 5.16, p.146.
---------------------------------------------------------------------------
    Nearly 32 percent of veteran-owned employers, compared with 34.1 
percent of all respondent employers, used contractors, subcontractors, 
or outside consultants; and 5.4 percent of veteran-owned employers, 
compared with 5.8 percent of all respondent employers, used paid day 
laborers to supplement their workforce.\36\
---------------------------------------------------------------------------
    \36\ Ibid.

    Types of customers for veteran-owned firms. The 2002 SBO asked 
respondents to identify types of customers from which 10 percent or 
more of firm sales were attributable. These customer types were 
---------------------------------------------------------------------------
generally similar for both veteran-owned and all firms.

          Federal Government (veterans, 2.6 percent; all, 2.0 
        percent);
          State and local government (veterans, 6.0 percent; 
        all, 5.3 percent);
          Export sales (veterans, 1.3 percent; all, 1.4 
        percent);
          Other businesses & organizations (veterans, 36.0 
        percent; all, 32.0 percent);
          Household consumers & individuals (veterans, 46.1 
        percent; all 49.2 percent);
          All others (veterans, 20.4 percent; all, 18.7 
        percent).\37\
---------------------------------------------------------------------------
    \37\ SBE, Table 5.15, p. 145.

    These findings are of special interest as policymakers look at 
government contracting opportunities for veteran-owned firms. Based on 
2002 data, the percentage of veteran-owned firms that identified the 
Federal Government as a major customer (10 percent or more of sales) 
exceeded the percentage of all firms in that respect by a factor of 30 
percent (As noted in Figure 4, 2.6 percent vs. 2.0 percent). The amount 
of dollars going to firms owned by veterans and service-disabled 
veterans has increased since then, but we do not now know whether 
veterans are still outperforming the general population of firms in 
terms of this ``major customer'' measure. This will be an important 
metric to look at when the 2007 SBO data becomes available.
    It is also interesting to note that more than twice as many firms 
identified state and local government as major customers than those who 
so identified the Federal Government. This was true for both all firms 
and veteran-owned firms. Regardless of what this means for Federal 
contracting policy, it does tell us that opportunities at the state and 
local level should play an important part in the strategy of firms 
wishing to do business with government. This is another important 
metric to watch in the 2007 SBO.
Veteran owner demographics
    One of the two veterans reports that Census compiled from its 2002 
SBO data gave us information on firms; the other dealt with 
businessowners themselves. The Census report on veteran businessowners 
included information on owners with service-connected disabilities, and 
this report is the primary source of the data presented in this 
section, as it was summarized in Advocacy's special veterans report 
from 2007. Key points on veteran businessowners are also noted on 
Figure 5 attached to my testimony.

    Race, ethnicity and gender of veteran businessowners. The 2002 SBO 
found that veteran owners of respondent firms were overwhelmingly male 
(97.3 percent) and White (95.5 percent). Black veteran firm owners 
represented 3.2 percent of veteran firm owners; Hispanic veteran 
owners, 2.3 percent; \38\ American Indian and Alaska Native veteran 
owners, 1.0 percent; and Asian veteran firm owners, 0.9 percent.\39\
---------------------------------------------------------------------------
    \38\ In Census tabulations, Hispanic or Latino origin can be of any 
race.
    \39\ SBE, Table 5.4, p. 128.

    Age of veteran businessowners. The single most striking demographic 
difference between veteran businessowners and all owners, veteran and 
non-veteran alike, is that veteran owners were markedly older, as noted 
on Figure 5. In 2002, 67.8 percent of veteran businessowners were age 
55 and over, with 35.7 percent between 55 and 64, and 32.1 percent age 
65 and older.\40\
---------------------------------------------------------------------------
    \40\ SBE, Table 5.5, p. 130.
---------------------------------------------------------------------------
    Among service-disabled veteran businessowners, 57.2 percent were 
age 55 and over in 2002, with 30.7 percent ages 55 through 64, and 26.5 
percent age 65 and older.\41\
---------------------------------------------------------------------------
    \41\ Ibid.
---------------------------------------------------------------------------
    In contrast, only 30.9 percent of all businessowners were age 55 
and over in 2002, with 20 percent ages 55 through 64, and 10.9 percent 
age 65 and older.\42\
---------------------------------------------------------------------------
    \42\ Ibid.
---------------------------------------------------------------------------
    As with all SBO data, these estimates are now somewhat dated, and 
Advocacy will be watching closely the owner age variable, and other 
correlated variables such as firm age, when the 2007 SBO data becomes 
available.

    Education of veteran businessowners. Veteran businessowners tend to 
be better educated than other businessowners, as noted on Figure 5. In 
2002, veteran firm owners were about as likely as all owners of 
respondent firms to have either bachelor or postgraduate degrees 
(veterans, 40.7 percent; all, 40.1 percent). But veteran businessowners 
were more likely to have post-graduate degrees (veterans, 19.2 percent; 
all, 17.3 percent) and less likely not to have graduated from high 
school (veterans, 4.3 percent; all, 6.0 percent).\43\
---------------------------------------------------------------------------
    \43\ SBE, Table 5.6, p.131.
---------------------------------------------------------------------------
    The 2002 SBO found that among respondent service-disabled veteran 
businessowners, 69.7 percent had at least some college education at the 
time they started or acquired their business. Over 25 percent had some 
college, but not a degree; 8.5 percent had an associate's degree; 17.9 
percent had earned a bachelor's degree; and 18.2 percent had a 
master's, doctorate, or professional degree.\44\
---------------------------------------------------------------------------
    \44\ Ibid.
---------------------------------------------------------------------------
    In contrast, 63.9 percent of all owners of respondent businesses 
(veterans and non-veterans together) had at least some college 
education. Over 18 percent had some college, but no degree; 22.8 
percent had earned a bachelor's degree; and 17.3 percent had a 
master's, doctorate, or professional degree.\45\
---------------------------------------------------------------------------
    \45\ Ibid.

    Hours worked in business by owners. More than half (50.8 percent) 
of the veteran owners of employer respondent firms reported working an 
average of 41 hours or more per week in 2002. Similar percentages were 
reported for service-disabled veteran owners of employer firms (53.9 
percent) and all owners of employer firms (50.5 percent).\46\
---------------------------------------------------------------------------
    \46\ SBE, Table 5.7, p. 133.

    Primary source of income for owners. Respondents to the 2002 SBO 
reported that the business was the owner's primary source of personal 
income for 50.9 percent of all owners, 47.5 percent of all veteran 
owners, and 44.1 percent of all service-disabled veteran owners.\47\ 
However, Figure 5 notes differences in this metric between employers 
and non-employers.
---------------------------------------------------------------------------
    \47\ SBE, Table 5.9, p. 135.
---------------------------------------------------------------------------
    Among owners of employer firms, these percentages were somewhat 
higher, with 69.5 percent of all owners, 69.1 percent of veteran 
owners, and 66.0 percent of service-disabled veteran owners reporting 
their business income was their primary source of personal income.\48\
---------------------------------------------------------------------------
    \48\ Ibid.
---------------------------------------------------------------------------
    Owners of non-employer businesses reported somewhat lower reliance 
on their business income, with 43.9 percent of all owners, 39.4 percent 
of veteran owners, and 38.9 percent of service-disabled veteran owners 
indicating that it was their primary source of personal income.\49\
---------------------------------------------------------------------------
    \49\ Ibid.
---------------------------------------------------------------------------
Advocacy-sponsored research on veteran entrepreneurship issues
    As I noted earlier, Advocacy has a continuing program of economic 
research relating to veteran entrepreneurship issues. Your information 
package includes a listing of all published research, and we have two 
additional projects underway now. I also anticipate that we will 
commission additional studies in the future, subject to the 
availability of resources. Figure 6 lists a few key findings from past 
Advocacy-sponsored research in this area. These include:

          About 22 percent of veterans in the U.S. household 
        population were either purchasing or starting a new business, 
        or considering doing so.\50\
---------------------------------------------------------------------------
    \50\ Waldman Associates, 2004; Entrepreneurship and Business 
Ownership in the Veteran Population; research summary at http://
www.sba.gov/advo/research/rs242.pdf.
---------------------------------------------------------------------------
          Almost 72 percent of these new veteran entrepreneurs 
        planned to employ at least one person at the outset of their 
        venture.\51\
---------------------------------------------------------------------------
    \51\ Ibid.
---------------------------------------------------------------------------
          About 23 percent of current veteran businessowners, 
        and 32 percent of those planning or in the process of starting 
        a new business, indicated that their venture would be 50 
        percent or more Internet-dependent.\52\
---------------------------------------------------------------------------
    \52\ Ibid.
---------------------------------------------------------------------------
          Military service appeared to have provided necessary 
        business skills to a significant proportion (one-third or more) 
        of both current veteran businessowners and those planning to 
        become owners.\53\
---------------------------------------------------------------------------
    \53\ Ibid.
---------------------------------------------------------------------------
          The self-employment rate of male veterans was higher 
        than that of non-veterans from 1979 through 2003 (the last year 
        covered in the study), at which time it was 13.7 percent 
        (including both non-incorporated and incorporated 
        individuals).\54\ See Figure 7.
---------------------------------------------------------------------------
    \54\ Fairlie, Robert W., 2004; Self-Employed Business Ownership 
Rates in the United States: 1979-2003; research summary at http://
www.sba.gov/advo/research/rs243.pdf.
---------------------------------------------------------------------------
          Veterans with service-connected disabilities are 
        self-employed at lower rates than veterans without such 
        disabilities, when all veterans, including those not in the 
        active labor force, are included in the calculation. Most of 
        this rate differential is attributable to service-disabled 
        veterans not working due to their disabilities.\55\
---------------------------------------------------------------------------
    \55\ Open Blue Solutions, 2007; Self-Employment in the Veteran and 
Service-Disabled Veteran Population; research summary at http://
www.sba.gov/advo/research/rs291.pdf.
---------------------------------------------------------------------------
          Computer use is correlated with higher self-
        employment rates among all veterans.\56\
---------------------------------------------------------------------------
    \56\ Ibid.

    Other Advocacy-sponsored research found that both the number and 
dollar amount of Federal contracts to small businesses owned by 
service-disabled veterans were being understated in the official 
government reporting system during the study period,\57\ and that 
better efforts were needed to improve the quality of data on veteran-
owned firms, both to capture unidentified veteran-ownership status and 
to ensure the accuracy of the veteran status markers in existing data 
sources.\58\ This research also recommended that surveys conducted by 
both government agencies and private sector organizations should 
include identifiers for veteran status and service-disabled veteran 
status in their survey instruments.\59\
---------------------------------------------------------------------------
    \57\ Eagle Eye Publishers Inc., 2004; Characteristics of Federal 
Government Procurement Spending With Veteran-Owned Businesses: FY 2000-
FY 2003 (3Q); research summary at http://www.sba.gov/advo/research/
rs239.pdf.
    \58\ Office of Advocacy, 2004; Evaluating Veteran Business Owner 
Data; research summary at http://www.sba.gov/advo/research/rs244.pdf.
    \59\ Ibid.
---------------------------------------------------------------------------
    Because the main focus of this hearing is on government contracting 
issues, I should note that Advocacy did commission a study on the 
characteristics of Federal procurement from veteran-owned firms which 
was released in 2004. This study was part of a group of studies that 
examined problems in miscoding procurement information in the official 
government reporting system, and it used data from FY 2000 through FY 
2003(3Q). Our findings that there was (at that time) serious under-
measurement of Federal contract numbers and dollars going to veteran-
owned firms were presented to the appropriate officials responsible for 
Federal procurement policy and management of the Federal data system. 
Since then, improvements have been made in the government's redesigned 
data tracking system, now called the Federal Procurement Data System--
Next Generation. Hopefully, our research findings proved useful in this 
process.
    The 2004 Advocacy veterans procurement study was a snapshot 
analysis at that time, as are any of our research endeavors that 
reference program implementation as part of looking at broader policy 
issues. Advocacy does not have the resources or expertise to conduct 
ongoing program oversight, and we generally defer on such programmatic 
issues to the offices with the responsibility for such oversight.
Problems faced by veteran businessowners
    You have asked that we provide testimony on the problems that 
veteran businessowners face. The data that we have just presented shows 
over and over that in most respects veteran-owned businesses mirror the 
business community at large. The major exceptions to this are in the 
age and gender of veteran businessowners, who are overwhelmingly male 
and much older than all businessowners at large. This reflects these 
demographic differences in the veteran population itself.
    Last September, Advocacy commissioned a study to look at tax and 
regulatory barriers faced by veteran entrepreneurs, and we hope to have 
results from this project by the end of this year. We will, of course, 
be pleased to share the study with the Committee as soon as it becomes 
available. For now, the last study we have which attempted to identify 
the problems of veteran businessowners was released in 2004.\60\ It is 
very likely that the rankings of some problems identified in the study 
will have changed in today's economic environment. For example, access 
to business credit is clearly more difficult today for most businesses, 
but finding quality employees is probably easier. Below are two tables 
from the 2004 study which identify and rank the top problems reported 
by veteran and service-disabled veteran businessowners who responded to 
the study's survey.
---------------------------------------------------------------------------
    \60\ Waldman, op. cit.

     Measures of Veteran Business Owner Problem Importance: Non Service-Disabled Veteran Business Owners\61\
----------------------------------------------------------------------------------------------------------------
                                  Problem                                      Rank       Mean    % ``Critical''
----------------------------------------------------------------------------------------------------------------
Affordability of health insurance                                                  1      3.443           46.9%
----------------------------------------------------------------------------------------------------------------
Knowledge or programs for small business-
  owners in general                                                                2      3.171           26.0%
----------------------------------------------------------------------------------------------------------------
Obtaining resources from the government                                            3      3.137           30.3%
----------------------------------------------------------------------------------------------------------------
Knowledge of programs for veteran small
  businessowners                                                                   4      3.018           30.5%
----------------------------------------------------------------------------------------------------------------
Finding qualified employees                                                        5      2.975           22.2%
----------------------------------------------------------------------------------------------------------------
Access to health insurance                                                         6      2.895           34.7%
----------------------------------------------------------------------------------------------------------------
Understanding tax law                                                              7      2.488           17.5%
----------------------------------------------------------------------------------------------------------------
Access to financing                                                                8      2.423           15.8%
----------------------------------------------------------------------------------------------------------------
Disadvantages in government contracting                                            9      2.353           18.5%
----------------------------------------------------------------------------------------------------------------
Managing time                                                                     10      2.326           10.4%
----------------------------------------------------------------------------------------------------------------
Understanding regulations                                                         11      2.239           10.4%
----------------------------------------------------------------------------------------------------------------
Retaining qualified employees                                                     12      2.175            8.8%
----------------------------------------------------------------------------------------------------------------
\61\ Ibid., Table 48, p. 59.


       Measures of Veteran Business Owner Problem Importance: Service-Disabled Veteran Business Owners\62\
----------------------------------------------------------------------------------------------------------------
                                  Problem                                      Rank       Mean    % ``Critical``
----------------------------------------------------------------------------------------------------------------
Obtaining resources from the government                                            1      3.391           37.1%
----------------------------------------------------------------------------------------------------------------
Knowledge or programs for veteran small
  businessowners                                                                   2      3.237           31.7%
----------------------------------------------------------------------------------------------------------------
Knowledge of programs for small business-
  owners in general                                                                3      3.192           28.3%
----------------------------------------------------------------------------------------------------------------
Disadvantages in government contracting                                            4      2.875           35.4%
----------------------------------------------------------------------------------------------------------------
Affordability of health insurance                                                  5      2.803           31.6%
----------------------------------------------------------------------------------------------------------------
Finding qualified employees                                                        6      2.800           26.0%
----------------------------------------------------------------------------------------------------------------
Access to financing                                                                7      2.790           26.3%
----------------------------------------------------------------------------------------------------------------
Understanding tax law                                                              8      2.693           18.1%
----------------------------------------------------------------------------------------------------------------
Access to health insurance                                                         9      2.539           24.9%
----------------------------------------------------------------------------------------------------------------
Retaining qualified employees                                                     10      2.338           14.0%
----------------------------------------------------------------------------------------------------------------
My disability                                                                     11      2.304           16.6%
----------------------------------------------------------------------------------------------------------------
Understanding regulations                                                         12      2.292           10.2%
----------------------------------------------------------------------------------------------------------------
\62\ Ibid., Table 49, p. 60.

    This study also found that investment in entrepreneurship programs 
for veterans and service disabled veterans is economically justifiable, 
that special attention should be paid to initiatives focused on home-
based business and Internet usage, and that special attention should be 
given to developing business skills among service-disabled veterans.
Conclusion
    This concludes my prepared testimony. I have tried to summarize 
some of the main findings from the most recent available data from the 
Census Bureau's 2002 Survey of Business Owners, currently our best 
source of data on veterans in business. I have also shared with you a 
few findings from Advocacy's own veteran entrepreneurship research. In 
both cases, there is much more information in the underlying source 
materials, and these materials are available online from both Census 
and Advocacy.
    I appreciate the Committee's interest in veteran entrepreneurship 
issues and Advocacy's work in this area. Both your majority and 
minority staff have been regular attendees at our roundtables on 
veteran business research. We look forward to continuing to work with 
the Committee in any way we can to advance our knowledge about veterans 
in business, an extremely important part of the small business 
community.
Characteristics of Veteran Business Owners and Veteran-Owned Businesses
                         SBA Office of Advocacy
Figure 1. Percentage distribution of Respondent Firms by Receipts Size 
for All Firms and Firms with One or More Veterans as Majority Interest 
                              Owners: 2002
[GRAPHIC] [TIFF OMITTED] 49912A.004


  Figure 2. Percentage Distribution of Respondent Firms by Employment 
    Size for All Employer Firms and Employer Firms With One or More 
               Veterans as Majority Interest Owners: 2002
[GRAPHIC] [TIFF OMITTED] 49912A.005

   Figure 3. Percentage Distribution of Respondent Firms by Kind of 
Business for All Firms and Firms With One or More Veterans as Majority 
                         Interest Owners: 2002
[GRAPHIC] [TIFF OMITTED] 49912A.006

                 Figure 4. Veteran-owned firms in 2002
          Older than all firms
          More than half (51.8 percent) were home-based
          3.3 percent of employers were franchises
          Capital obtained from same sources as others
          Workforce similar to that of other firms
          Major customers are similar to other firms, but 
        higher percent of major customers are government, 2.6 percent 
        Federal and 6.0 percent state and local govt.
                    Figure 5. Veteran owners in 2002
          Older than other owners (67.8 percent age 55 or 
        older, compared to 30.9 percent for all owners)
          97.3 percent male; 95.5 percent white; 3.2 percent 
        Black; 2.3 percent Hispanic; 1.0 percent Native American; 0.9 
        percent Asian
          Better educated than other businessowners
          Business is primary source of income for 69 percent 
        of employer owners, 39 percent of non-employer owners

                Figure 6. Advocacy research found that:
          About 22 percent of veterans were either starting a 
        new business or considering doing so
          Military service appeared to have provided necessary 
        business skills to one-third or more of current veteran 
        businessowners
          Veterans with service-connected disabilities are 
        self-employed at lower rates than those veterans without such 
        disabilities
          The self-employment rate of male veterans was 
        consistently higher than that of non-veterans

            Figure 7. Self-Employment Rates for Working Men
  Current Population Survey, Outgoing Rotation Group Files (1979-2003)
[GRAPHIC] [TIFF OMITTED] 49912A.007

                               __________
              United States Small Business Administration
                           Office of Advocacy
 The voice for small business in the Federal Government and the source 
                     for small business statistics
             http://www.sba.gov/advo/research/veterans.html
                       Veterans Economic Research
    August 2008--Do Business Definition Decisions Distort Small 
Business Research Results? [PDF file] an Office of Advocacy Working 
Paper by Brian Headd and Radwan Saade, Office of Advocacy, Research 
Summary [PDF File]
    December 2007--Educational Attainment and Other Characteristics of 
the Self-Employed: An Examination using Data from the Panel Study of 
Income Dynamics [PDF File] a working paper by Chad Moutray, U.S. Small 
Business Administration, Office of Advocacy, Research Summary. [PDF 
File]
    December 2007--Characteristics of Veteran Business Owners and 
Veteran-owned Businesses [PDF File] Chapter 5 of The Small Business 
Economy for Data Year 2006, A Report to the President
    October 2007--Income and Wealth of Veteran Business Owners, 1989-
2004 [PDF File] submitted by George W. Haynes, Research Summary. [PDF 
File]
    January 2007--Self-Employment in the Veteran and Service-Disabled 
Veteran Population [PDF File] submitted by Open Blue Solutions, 
Research Summary. [PDF File] December 2004--Research Study [PDF file], 
Evaluating Veteran Business Owner Data, an Advocacy report prepared in 
collaboration with Jack Faucett Associates, Inc., Eagle Eye Publishers, 
Inc., Waldman Associates, and REDA International, Inc., Research 
Summary.
    December 2005--Entrepreneurship and Business Ownership in the 
Veteran and Service-Disabled Veteran Community [PDF file], submitted by 
Waldman Associates
    December 2004--Research Study [PDF file], Self-Employed Business 
Ownership Rates in the United States: 1979-2003, submitted by Robert W. 
Fairlie Research Summary.
    November 2004--Research Study [PDF file], Entrepreneurship and 
Business Ownership In the Veteran Population, Waldman Associates 
Research Summary.
    June 2004 Research Study [PDF file], Characteristics of Federal 
Government Procurement Spending With Veteran-Owned Businesses: FY 2000-
FY 2003 (3Q), submitted by Eagle Eye Publishers, Inc., Research 
Summary.
    December 1986--Research Study [PDF file], Differences Between 
Veteran-Owned and Non-Veteran-Owned Businesses, submitted by David 
Rothenberg Research Summary.
    November 1986--Research Study [PDF file], Financial Success and 
Business Ownership Among Vietnam and Other Veterans, submitted by 
Steven Lustgarten Associates, Inc., Research Summary.
    1984-1986--[PDF file] Profiling Entrepreneurial Veterans (Vol.III) 
(Vol.II) (Vol.I), submitted by Mid-Atlantic Research Inc., Research 
Summary.
    May 1985--Research Study [PDF file], A Study of Department of 
Defense Procurement from Veterans, submitted by KCA Research, Inc 
Research Summary.
    May 1985--Research Study [PDF file], Viable Loan Categories for 
Veterans, submitted by Joel Popkin & Company, Research Summary.
    May 1985--Research Study [PDF file], Entrepreneurial Choice and 
Success, submitted by David S. Evans.
    March 1985--Research Study [PDF file], Vietnam-Era Veterans and 
Entrepreneurship, submitted by Jerry F. Booren, Research Summary.
    [The following attachments are being retained in the Committee 
files: SBA Office of Advocacy, Frequently Asked Questions, Updated 
September 2008; SBA Office of Advocacy, Quarterly Indicators, Fourth 
Quarter 2008: The Economy and Small Business, Released February 9, 
2009; The Small Business Economy, for Data Year 2006, a Report to the 
President, Chapter 5, Characteristics of Veteran Business Owners and 
Veteran-owned Businesses, December 2007; and Brochure for The Office of 
Advocacy, The Voice for Small Business in government, U.S. Small 
Business Administration.]

                                 
    Prepared Statement of Joseph Jordan, Associate Administrator for
            Government Contracting and Business Development,
                   U.S. Small Business Administration
    Chairwoman Sandlin and other distinguished Members of this 
Subcommittee, thank you for inviting me to testify about Federal 
procurement and veteran and service disabled veteran owned small 
businesses.
    I am Joseph Jordan, Associate Administrator for the Office of 
government Contracting and Business Development. I appreciate the 
opportunity to discuss with you SBA's efforts to ensure that small 
businesses receive a fair opportunity to participate in the Federal 
procurement arena, including veteran and service disabled veteran owned 
small businesses whose owners have given so much to their country.
    Section 2 (a) of the Small Business Act states that the ``... 
Security and well-being of our Nation cannot be realized unless the 
actual and potential capacity of small business is encouraged and 
developed.'' Included in SBA's mission is the mandate to increase 
Federal prime and subcontracting opportunities for small businesses in 
general, as well as specifically women-owned small businesses, service-
disabled veteran-owned small businesses, small businesses owned by 
socially and economically disadvantaged individuals, and small 
businesses located in Historically Underutilized Business Zones 
(HUBZone).
    Through SBA's various government prime contracting and 
subcontracting programs, the SBA provides policy direction and guidance 
to Federal procuring agencies and works with them to develop 
acquisition strategies that will help to increase opportunities for 
small businesses in Federal procurement. The SBA facilitates this 
working relationship with the Federal procuring agencies by serving as 
an active member of the Chief Acquisition Officers Council and chairing 
the Small Business Working Group. The SBA also chairs the Committee of 
the Directors of Small and Disadvantage Programs.
    During the period of Fiscal Year (FY) 2000 through FY 2007, total 
Federal procurement increased from approximately $200 billion to more 
than $378 billion. The small business share almost doubled, increasing 
from $44.7 billion to $83.3 billion.
    For that same period, contract awards to small disadvantaged 
business increased from $7.3 billion to $24.9 billion, women-owned 
small business from $4.6 billion to $12.9 billion, HUBZone certified 
business from $663 million to $8.5 billion, and service-disabled 
veteran-owned small business from $554 million (FY 2001) to $3.8 
billion.
    Although these are significant increases in contract awards for 
small business, Federal procuring agencies have met only one goal 
consistently over the same period. Clearly, more work is still needed. 
SBA recognizes the need to improve small business government 
procurement programs, both within the Agency and externally by working 
with Federal procuring agencies.
    Chairwoman Sandlin, you asked specifically that I discuss 
strategies the SBA is using to assist veterans and service-disabled 
veteran-owned small businesses to obtain government contracts.
    The SBA, through its government contracting function, is 
responsible for assisting small businesses in obtaining a fair share of 
government procurement through a variety of programs and services. A 
key tool in this effort is SBA's statutory mandate to establish small 
business procurement goals with each agency prior to the beginning of 
the fiscal year in line with meeting the government-wide goals. The 
goals for prime contracting include 23 percent for small business, 5 
percent for small disadvantaged business, 5 percent for women-owned 
small business, 3 percent for service-disabled veteran-owned small 
business, and 3 percent for HUBZone certified small business. SBA is 
also required to report on agency's achievements in meeting their goals 
and plans to achieve goals not met. SBA has established a Small 
Business Procurement Scorecard to this end and it is publicly available 
on SBA's website. Although there is no government-wide goal for veteran 
owned small businesses, Federal agencies in Fiscal Year 2007 awarded 
more than $10.8 billion in contracts, or 2.9 percent, to veteran owned 
small businesses.
    As you are aware, Public Law 106-50, enacted in 1999, established a 
3 percent service-disabled veteran-owned small business goal for 
Federal prime contracting and subcontracting respectively. Public Law 
108-183 established a procurement program for service-disabled veteran-
owned small businesses, which allowed for:

          Competitive set-asides where two or more service-
        disabled veteran-owned small businesses can meet the 
        requirements of the procurement.
          Sole source awards where only one service-disabled 
        veteran-owned small business can meet the requirements of the 
        procurement.

    Our field staff, which is another key tool in our delivery of small 
business procurement assistance, is organized into six Area Offices 
located at: Area One-Boston, Area Two-Philadelphia, Area Three-Atlanta, 
Area Four-Chicago, Area Five-Dallas, and Area Six-San Francisco. These 
offices are responsible for overseeing and directing the activities of 
our Procurement Center Representatives, Commercial Marketing 
Representatives, Small Business Size Specialists, Industrial 
Specialists and Natural Resources Sales Specialists.
    Procurement Center Representatives (PCR) are stationed at major 
Federal procuring activities and are responsible for increasing small 
business opportunities in the Federal procuring process. It is 
important to note that PCRs review all proposed major unrestricted 
procurements and bundled requirements, and recommend procurement 
strategies that will maximize opportunity for small business to 
participate as prime contractors. PCRs also review contract bundling 
requirements to determine if they are necessary and justified. The SBA 
encourages small business to team together and to establish strategic 
alliances and joint venture, to better position themselves for 
increased procurement opportunities.
    Commercial Marketing Representatives ensure that small businesses 
receive a fair share of subcontracting opportunities from the Federal 
Government's large prime contractors. When awarded a contract valued at 
$550,000 or higher, these large prime contractors are required to 
establish a subcontract plan for small business participation. The SBA, 
along with the procuring agency, evaluates the large prime contractor's 
effort against their subcontracting plan.
    Small Business Size Specialists determine individual firms' small 
business size status when such firms' size is questioned vis-à-
vis a specific procurement. The size status reviews are the result of 
protest filed by another small business, the contracting office, or 
other interested party.
    Industrial Specialists assist small businesses by issuing 
certificates of competency, if appropriate, for small businesses that 
are the apparent successful low-bidder on government procurement, but 
whose ability to perform is questioned by the contracting officer.
    Natural Resources Sales Specialists ensure that small businesses 
obtain a fair share of Federal real and personal property authorized 
for sale or other competitive disposal actions. The program includes: 
sale of timber and related forest products; royalty oil sales, mineral, 
coal, oil and gas leasing; strategic and critical stockpile materials 
disposal; and real and personal property sales.
    In response to your specific request regarding use of liquidated 
damages:
    The Small Business Act and the implementing regulations (FAR 
19.705) allow the contracting officer to impose liquidated damages on a 
prime contractor that fails to comply with its subcontracting plan, but 
only if the contracting officer, after considering the totality of the 
circumstances, determines that the prime contractor did not make a good 
faith effort to comply with the subcontracting plan. The contracting 
officer's decision to impose liquidated damages is subject to appeal 
under the Contract Disputes Act. Thus, the process can be time-
consuming and costly for the government, and turns on a very subjective 
standard, i.e., whether the prime contractor made a good faith effort 
to comply with the plan. There are other incentives available to 
encourage prime contractors to comply with subcontracting plans, such 
as considering compliance as part of an evaluation of past performance 
(FAR 15.304) or monetary awards (FAR 52.219-10).
    I would also like to inform you of some of the actions SBA has 
undertaken to help small businesses obtain contracts resulting from the 
Recovery Act. I would like to report that the SBA has appointed a 
Stimulus Bill Coordinator to ensure that all of the Agency's programs 
(lending, procurement, and business development) are moving 
aggressively to assist small businesses. As it relates to contracting, 
we have begun a campaign to reach out to small businesses informing 
them of procurement opportunities available at the Federal level and 
advising them how to get involved in the state and local government 
procurement actions that are likely to result from the Recovery Act. We 
are also posting and updating procurement information on our Web site 
to make it easier for small businesses to locate agencies procuring 
products and services to support the stimulus efforts. In addition, we 
are working with the Office of Federal Procurement Policy and General 
Services Administration in their role as project manager for the 
Federal Procurement Data System-Next Generation to ensure timely and 
accurate reporting of small business participation, including service-
disabled veteran-owned small businesses.
    Chairwoman Sandlin and other distinguished Members of this 
Subcommittee; thank you again for the opportunity to testify before you 
regarding our work to promote government contracting programs for 
America's small business, and I am happy to answer any questions you 
may have.

                                 
   Prepared Statement of Jan R. Frye, Deputy Assistant Secretary for 
     Acquisition and Logistics, U.S. Department of Veterans Affairs
    Madam Chair, Members of the Subcommittee, thank you for the 
opportunity to appear before you today to discuss VA's acquisition 
operations and Veteran entrepreneurship. It is a privilege for me to 
represent the many dedicated and hardworking acquisition and logistics 
professionals throughout the department that provide mission-critical 
support everyday to ensure quality care and benefit delivery for some 
of our Nation's most valuable citizens: our Veterans.
    As a service-disabled Veteran and long-time acquisition 
professional myself, I certainly understand and appreciate that 
contracting with Veteran-Owned Small Businesses is a logical extension 
of VA's mission. Veteran entrepreneurship should be a viable career 
path for America's heroes to support themselves, their families, and to 
be productive members of their communities.
    VA fully embraces the letter and spirit of the entrepreneurial 
provisions of Public Law 109-461, the ``Veterans Benefits, Healthcare 
and Information Technology Act of 2006.'' As required, sections 502 and 
503 of the Act were implemented in VA on June 20, 2007, as the 
``Veterans First Contracting Program.'' As VA's senior procurement 
executive, I am both pleased and proud to report VA is using the 
unprecedented and extraordinary authorities granted by the Act to 
contract with Veteran-Owned Small Businesses at never-before-seen 
levels. In fact, VA has been and remains the Federal leader in 
contracting with Veteran-Owned Small Businesses and Veterans have the 
right to expect nothing less from us.
    In fiscal year 2006, VA was one of only three of the 24 CFO Federal 
agencies to exceed the Service-Disabled Veteran-Owned Small Business 
goal of 3 percent. Contracts awarded to Service-Disabled Veteran-Owned 
Small Businesses accounted for 3.39 percent of the total dollars 
reported by VA. VA has exceeded this goal each year since with 
continued improvement.
    In fiscal year 2007, VA broke obligation records on several fronts. 
For the first time, VA expenditures with all Veteran-Owned Small 
Businesses exceeded $1 billion. VA is becoming increasingly focused on 
contracting with Veteran-Owned Small Businesses. Consider that, for the 
first time, spending with Veteran-Owned Small Businesses surpassed 
spending with all other subcategories of small businesses. Spending 
with Veteran-Owned Small Businesses increased 79 percent from fiscal 
year 2006. Total dollars reported for Service-Disabled Veteran-Owned 
Small Businesses and Veteran-Owned Small Businesses were 6.95 percent 
and 10.13 percent, respectively.
    For fiscal years 2008 and 2009, VA established the first-ever 
socioeconomic goals required by Public Law 109-461 in contracting with 
Veteran-Owned companies. These goals consist of a 7 percent goal for 
Service-Disabled Veteran-Owned Small Businesses and a 10 percent goal 
for Veteran-Owned Small Businesses. These ambitious goals, coupled with 
the authorities of Public Law 109-461, have been very beneficial for 
Veteran entrepreneurs.
    We strive for continuous improvement each year by expanding upon 
the previous year's accomplishments. In each case, we have exceeded our 
goals. For example, in fiscal year 2008, spending in the Service-
Disabled Veteran-Owned Small Business category increased by 99 percent. 
We also increased our spending by 73 percent in the Veteran-Owned Small 
Business category. For the first time in VA history, spending with 
Service-Disabled Veteran-Owned Small Businesses surpassed the $1 
billion mark. For all Veteran-Owned Small Businesses VA's total 
obligations exceeded $2 billion, which is by far the highest amount 
obligated across all civilian Federal agencies. Total dollars reported 
for Service-Disabled Veteran-Owned Small Businesses and Veteran-Owned 
Small Businesses were 12.09 percent and 15.27 percent, respectively. I 
would note that fiscal year 2008 numbers are preliminary pending the 
Small Business Administration's review.
    For fiscal year 2009, we project another successful and perhaps 
record year. As of March 31, 2009, with over $3.6 billion in total 
acquisitions reported, VA's Office of Small and Disadvantaged Business 
Utilization reports remarkable accomplishments in contracting with 
Service-Disabled Veteran-Owned and Veteran-Owned Small Businesses. VA's 
accomplishments have been aided by the authorities granted to VA by 
Public Law 109-461 as shown by our increased ability to exceed 
contracting goals with Service-Disabled and Veteran-Owned Small 
Businesses.
    As VA's senior procurement executive, I have taken affirmative 
steps to develop and implement policies that benefit small businesses 
and Veteran entrepreneurs. For example, in implementing VA's contract 
bundling review process, VA set a threshold for contract bundling 
reviews at $1 million--which is one-half of the $2 million threshold 
established for civilian agencies by the Federal Acquisition 
Regulation. This lower threshold increases the number of acquisitions 
that receive contract bundling reviews by VA's Office of Small and 
Disadvantaged Business Utilization, thereby providing even more 
opportunities to unbundle acquisitions and make them more suitable for 
award to small businesses.
    In 2007, VA instituted a requirement that all acquisitions valued 
at $5 million or greater be conducted using an ``Integrated Product 
Team''--commonly referred to as an IPT. IPTs consist of a cross-section 
of personnel from various disciplines that develop a comprehensive 
acquisition strategy. A representative from VA's Office of Small and 
Disadvantaged Business Utilization is included as a voting member on 
each IPT. In other words, not only do small businesses have a seat at 
the table during this critical phase of acquisition planning, they also 
have a voice in the form of a vote by their advocate representatives. I 
am not aware of any Federal department or agency that has instituted 
such progressive measures to address contract bundling.
    Madam Chair, the Veteran business community has expressed concern 
that VA has not fully implemented the entrepreneurial provisions 
contained in sections 502 and 503 of Public Law 109-461. I want to 
assure you and the Subcommittee's Members that this is not the case. On 
June 20, 2007, VA implemented the ``Veterans First Contracting 
Program'' through an agency policy letter consistent with the 
requirements of the Act. VA will soon publish a final rule in the 
Federal Register to formally record these requirements in the Veterans 
Affairs Acquisition Regulation.
    Veteran entrepreneurs will see no significant change in the use of 
these authorities. VA will still maintain the small business hierarchy 
set forth in the Act. In addition, to promote a higher standard of 
transparency, once the final rule is published, sole source 
acquisitions must be synopsized in the Federal Business Opportunities 
System. At the present time, VA does not require synopsis of sole 
source awards under the Public Law. The added transparency will help 
ensure that all Veteran-Owned Businesses are aware of the procurement 
strategies employed by VA contracting officials.
    When the ``Veterans First Contracting Program'' final rule is 
published, VA will embark on a robust and aggressive training effort to 
educate VA's acquisition workforce, purchase cardholders and program 
managers and officials. The training will reinforce VA's commitment to 
Veteran entrepreneurs as well as cover the authorities granted and 
hierarchy specified by Public Law 109-461, as implemented in the 
Veterans Affairs Acquisition Regulation.
    It is important to note that the unprecedented and extraordinary 
contracting authorities granted to VA under Public Law 109-461 are 
preferences in open market contracting for Veteran entrepreneurs. 
Unlike the section 8(a) Business Development Program administered by 
the Small Business Administration, VA's ``Veterans First Contracting 
Program'' is not a business development program. The ``Veterans First 
Contracting Program'' is not an entitlement program, nor is it a 
substitute for vendors taking other competitive steps to be viable in 
the Federal marketplace, such as securing a Federal Supply Schedule 
contract. The ``Veterans First Contracting Program'' is an important 
tool at the disposal of our acquisition professionals to create 
opportunities for Veteran entrepreneurs, consistent with the best value 
continuum for our Veteran clients and the American taxpayer.
    Madam Chair, I would like to close by thanking you for the 
opportunity to discuss the implementation of Public Law 109-461 at VA 
and to reaffirm our commitment to increasing opportunities for Veteran 
entrepreneurs. VA is grateful for the authorities and opportunities 
presented by our ``Veterans First Contracting Program.'' As proud as we 
are of VA's accomplishments, we will continue to work diligently to 
improve upon them and set a standard worthy of emulation throughout the 
Federal acquisition community.
    I would be pleased to respond to any questions you or the 
Subcommittee's Members may have.

                                 

                                   Greentree Environmental Services
                                                   Indianapolis, IN
                                                     April 21, 2009
Stephanie Herseth Sandlin
House Committee on Veterans Affairs
335 Cannon House Office Building
Washington, D.C. 20515

RE: 8(a) Status for Veterans

    Honorable Chairwoman, U.S. Representative Herseth Sandlin and 
Members of the Committee,
    My name is John Casey and I am a Vietnam era veteran, with veteran-
owned status. I would like to thank you for your attention to the 
matters of your Committee and express my thanks for your consideration 
in listening to the concerns of veterans like myself.
    I own and operate a veteran-owned small business. We are a 12-year 
old company that is prohibited from bidding on a HUD contract in our 
field because we do not hold 8(a) status. Other than 8(a) status, alone 
we can and do meet all the requirements of the contract, to include a 
51 percent labor capacity requirement that has never been met by any 
contract awardee. Unfortunately, this makes us a sub-contractor, which 
gives us no guarantee of payment for any work performed. This fact cost 
us over $40,000 the last time the contract was let out. As we approach 
this contract term, we have in excess of $350,000 in receivables from 
two 8(a) companies at risk.
    As a veteran-owned company who has watched from the sidelines, I 
see 8(a) companies cropping up to meet set-aside contract requirements, 
to include partnership agreements for management services and to meet 
experience requirements, which to me questions the whole intent of the 
set-aside. When I am faced as a veteran-owned company being denied 
bidding opportunities over a company owned and operated by someone who 
is not even a U.S. citizen, but is an 8(a), I have to legitimately 
question if the intent of these set-asides are being met.
    As a veteran looking at only a 7 percent award of all government 
contracts to veterans, I become less concerned for my own company's 
welfare as I do for my nephew who just finished marine boot camp, or 
for his brother who still receives counseling after an IED hit his 
vehicle in Iraq.
    I believe that denying a veteran the right to bid on a contract 
offered by his country after honorable service is simply, by any 
reasonable definition, wrong, particularly in his or her field, when he 
or she can perform cheaper and better. The men and women who take the 
oath to protect this country show their courage by signature alone. 
Given a fair chance and contract opportunity from our government, these 
are the entrepreneurs of tomorrow who will repeatedly show some of the 
same courage needed to fight for our country as to start a business and 
make it through the tough times where failure is not an option. With 
the veterans' efforts, once again, we can see our economy stabilize and 
more jobs created, while at the same time using set-asides for the 
purpose they were created.
    I pray this Committee will hear our calls and move to give the 
veteran minority its due; that no veteran should be denied the ability 
to bid on government work in their field when qualified. If government 
agencies are directed to increase the percentage of veteran contracts, 
this action would work to meet these goals, as well as to level a 
playingfield long ignored.
    To further discuss this matter, please feel free to contact me at 
(219) 406-8031 or at [email protected]. Thank you in advance for your 
consideration.

            Regards,

                                              John R. Casey
                                                          President

                                 
   Statement of Brian W. Cavolt, USN (Ret.), Chief Executive Officer,
                      JBC Corp, Virginia Beach, VA
    My name is Brian Cavolt, I am the owner of a Service Disabled 
Veteran Owned Small Business that manufacturers products that are used 
by the Federal Government. I appreciate the opportunity to provide this 
statement to the Committee and request it be entered into the record.
    I retired as a Master Chief after serving 29 years of active duty 
in the U.S. Navy. I am a 100 percent rated Service Disabled Veteran. 
Since 2006, I have owned and operated JBC Corp, a Service Disabled 
Veteran Owned Small Business with my wife Janice Cavolt.
    JBC Corp is a provider of medical trauma kits for the military. Our 
kits are custom designed and packed as specified by the government for 
use by the warfighter. My military service and experience as a Navy 
SEAL and hospital corpsman inspired and enabled me to continue to serve 
the active duty warfighter by providing medical kits designed 
specifically for administering Combat Casualty Care.
    As my business has grown, the medical kits I make have become 
specialized and very much in demand. However, in order to sell in the 
quantity that is being requested, I must go through a Medical Prime 
Vendor. My experience in working with Prime Vendors leads me to believe 
that being a Prime Vendor means having ``Prime Advantage''. The Prime 
Vendor makes the rules, goes around agreements when convenient and uses 
their power to benefit only themselves at the expense of the government 
and the subcontractors who fulfill their obligations. The Prime Vendor 
gets the past performance credit (rather than the subcontractor) and 
then uses it to solicit business for trauma medical bags; products that 
they have no experience with or qualification to serve the customer. 
Ultimately, the Prime Vendor holds the power; power given to them by 
the current Contracting System. Further, the power that is granted to 
the Prime Vendor System creates waste, abuse and compromises 
expediency. They control the money, often making bigger profits than 
the manufacturer, just for being the middle man.
Expediency
    Our medical kits are made for a specific use. They are carried by 
our troops so that lives can be saved when injury prevails. My company 
makes these bags to specification as determined through testing and 
evaluation. Because these are custom kits that contain costly products, 
we do not start production until we receive a purchase order. Many 
times the purchase order is not received from the Prime Vendor until 
weeks after they received it.
Waste
    My company does all the work to manufacture our products. We design 
the bags, we make the bag, we deliver the bag and take care of the end 
user. So why then should the Prime Vendor, who never even has to touch 
the product or talk to the customer make a profit just because they 
hold an exclusive position as a middle man. There is an order that we 
are currently working on that is costing the government nearly $2 
million dollars more than what they would have paid if they could have 
come directly to us.
Abusive Practices
    The Prime Vendor exercises great power over the small business who 
is trying to get their product to market. A small business may take 
years to develop a product, show it to an interested party, and then 
find that their only recourse to sell in any large volume requires a 
Prime Vendor be involved. Negotiating with a Prime Vendor is rarely a 
negotiation. Refusal to accept the terms of business from a Prime 
Vendor is a no win option, as to do so puts your product at risk as it 
is not uncommon for the Prime Vendor to take your product and actively 
pursue manufacturers that will produce it for them.
Capability
    There is an argument that attempts to justify the use of Prime 
Vendors for many purchases by saying that Small Business lacks the 
capability to execute larger contracts. It is a flawed argument because 
with consideration from the government, Small Businesses are quite 
capable of managing larger orders. In the public sector, for orders 
greater than $250,000 we require a deposit. The deposit is more than 
earnest money; it is the capital we use to help fund the first phase of 
work. Once the first phase is completed, and we are paid in accordance 
with the terms of an agreement, we are able to self fund the next 
purchase of materials. Once the process is set in motion, there is a 
steady flow of goods coming in and of orders shipping out until the 
order is complete. Everyone can win using this process; the end user 
receives a custom built product expediently, our suppliers can rely on 
steady payment, the government Saves money by not paying a middle man a 
fee that may range from 25% to 55%, and the independent Small Business 
is doing business in a productive environment. Successful Small 
Businesses are masters at making a small amount of money (deposit) work 
for them by strategizing and orchestrating the flow of work. It is a 
process we have used successfully in the past for large orders.
    Government policies of payment on delivery do not favor small 
companies with little capital to expend; particularly with larger 
orders. Allowing deposits and progress payments would do much to help 
the Small Business compete for larger orders.
    Currently, my company has been forced into a precarious position 
that will cause the failure of my business if not resolved. We are 
engaged with a Medical Prime Vendor who is not honoring their 
agreement. Specifically, they owe us a significant amount of money for 
orders we have shipped. This Medical Prime Vendor will give different 
reasons for why they can't pay us now; but none of them are valid 
because their claims either lack truth or are based on terms completely 
outside of any agreement or understanding we ever had. Do I feel the 
government has some responsibility here? Absolutely, the government 
empowers the Prime Vendor but does not have a method to manage a 
situation like ours when it arises. There has been correspondence and 
conversations with different individuals within DoD, SBA and our local 
Congressman, Glen Nye (Virginia-2nd) has been assisting by monitoring 
the situation. Still, no one seems to know who should address this 
situation to seek resolution. It is incomprehensible that a system that 
is responsible for administering government contracts and awarding 
billions of dollars does not have a protocol to remedy this type of 
situation. Meanwhile, my business is failing and others that depend on 
me are doing the same. Additionally, we recently learned that their 
Medical Prime Vendor contract was renewed. Whose watch was that on?
    It seems that the Prime Vendor benefits far more than the 
government or the end user. I think the government would receive much 
more value for their money if they held the Prime Vendor to a higher 
standard of service. That higher standard should include accountability 
for the reasonable treatment of subcontractors; that is, working with 
the subcontractor in a manner that serves to promote expedience in 
order fulfillment, ensure timely payment to subcontractors, and 
generally commit to upholding ethical business practices. In other 
words, they would have to work for their money. Currently 
subcontractors are not asked to give a review of their experience with 
a given Prime Vendor; nor are there protocol for subcontractors to ask 
for relief or be heard when they are treated unfairly by the Prime 
Vendor.
    There are procurement methods in place and available that with 
modification could significantly elevate the opportunity for small 
businesses to compete. It is the incumbent duty of our Legislators to 
demand a review of Contracts and Contracting Policy and effect change 
that serves all of us.

            Respectfully submitted.
                   MATERIAL SUBMITTED FOR THE RECORD

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009
Mr. Mark Gross
President and Chief Executive Officer
Oak Grove Technologies, LLC
7200 Stonehenge Road
Suite 301
Raleigh, NC 27613

Dear Mr. Gross:

    I would like to request your response to the enclosed deliverables 
and questions for the record I am submitting in reference to a hearing 
from our House Committee on Veterans' Affairs Subcommittee on Economic 
Opportunity hearing on Contracting and Contracting Policy at the 
Department of Veterans Affairs on April 23, 2009. Please answer the 
enclosed hearing questions by no later than Tuesday, June 9, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,

                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
                                             Oak Grove Technologies
                                                       Raleigh, NC.
                                                       June 5, 2009
The Honorable Stephanie Herseth Sandlin
Congress of the United States
Committee on Veteran Affairs
335 Cannon House Office Building
Washington, DC 20515

SUBJECT: Contracting and Contracting Policy at the Department of 
Veterans Affairs

Dear Chairwoman Sandlin:

    I am pleased to respond to the questions for the record provided in 
your letter dated April 28th, 2009. For ease of review, the question 
for the record is restated followed by my reply.

    Question 1: Does the rule of two apply to other purchases or is it 
only applicable to veteran enterprises?

    Response: The language relating to HUBZone procurements is similar 
to the language relating SDVO procurements. The significant advantage 
is to 8(a). Simply changing the language to match that on 8(a) 
procurements, to include ``shall'' instead of ``may'' would alleviate 
the unequal playingfield.

    Question 2: What is the best way to close the loop holes in the GSA 
Schedule (FAR Part 8)?

    Response: Contracting Officers have agency requirements to report 
procurements by contract and business size. These reports also include 
and identify special socioeconomic contract awards. In the case of 
Federal Supply Schedule, the procurement dollars are disclosed but the 
small business data is not (GSA awards falls under this category). Not 
disclosing this information was not an oversight. Initially it was to 
insure procurement dollars were not counted twice. Since GSA ``owns'' 
the contract, and Contracting Officers are only issuing delivery 
orders, GSA would track the dollars. This practice unwittingly created 
a loophole for the Contracting Officers. The statistical data reported 
no longer reflects directly on the Contracting Officer, thus removing 
since of responsibility and accountability.

    Question 3: In your testimony you mentioned that we should mandate 
that contracting offices impose liquidated damages. Agency officials 
assert that imposing liquidated damages is a time consuming endeavor 
using a very subjective standard, (good faith) and essentially not a 
good use of government time. Do you agree with the assertion?

    Response: Yes, imposing liquidated damages is a time consuming 
endeavor, and agency officials resist using resources this way. 
However, 15 U.S.C. 637(d)(4)(f) (a) directs otherwise. It is recognized 
that this is a matter of national interest with both social and 
economic benefits. The Federal Acquisition Regulation, Part 19.705-7 
provides the following:
    ``Maximum practical utilization of small business, veteran-owned 
small business, service-disabled veteran-owned small business, HUBZone 
small business, small disadvantaged business, and women-owned small 
business concerns as subcontractors in government contracts is a matter 
of national interest with both social and economic benefits. When a 
contractor fails to make a good faith effort to comply with a 
subcontracting plan, these objectives are not achieved, and 15 U.S.C. 
637(d)(4)(f) directs that liquidated damages shall be paid by the 
contractor.''
    Three other suggestions may help insure small business plans are 
achieved: Require Large Business procurements to provide their small 
business plan as part of their proposal. Direct contracting officers 
evaluate small business achievements before allowing the exercise of 
contract option periods. Provide large business with incentives for 
achieving small business goals similar to awards using a cost-plus-
incentive-fee format.

    Question 4: In your testimony you mentioned that the Central 
Contracting Register has listed 7,000 active 8(a) companies and 12,000 
veterans/disabled veteran companies, yet most agencies are meeting the 
percentage requirement for 8(a) companies. Why are agencies able to 
meet the 8(a) percentage requirement and not the service disabled 
veteran owned small businesses?

    Response: I personally feel that program emphasis and education of 
the procurement community has not been optimized. The HUBZone, SDB and 
8(a) programs are all mature in that they have been in existence longer 
and are better understood. Contracting Officers must attain 80 hours of 
continuous learning credits every 24 months. Insuring that one of the 
available training topics available included SDVO procurement may help 
level the playingfield with the more mature socioeconomic programs.

    Question 4(a): Is it company readiness or is it the path of least 
resistance?

    Response: It can be a path of least resistance. Once a contract is 
ever awarded 8(a), it is difficult for a contracting officer to ever 
offer that effort to another socio-economic sector. But, from my 
perspective that is fine. We do not seek to take opportunities away 
from other small business sectors, only to provide equality in 
opportunity.

    Question 4(b): Are there more benefits for meeting the 8(a) 
percentage, in that many are double or triple counted?

    Response: By virtue of a company having 8(a) status they 
automatically have SDB status in that 8(a) is a subset of the SDB 
program. Both programs together create an advantage.

    Again, thank you for the opportunity to testify before your 
Committee. We sincerely value your commitment to the needs of the small 
businessowners within the Veteran Affairs community. Please feel free 
to contact me at the address and phone listed above or via email at 
[email protected].

            Sincerely,

                                                         Mark Gross
                              President and Chief Executive Officer

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009
Mr. Anthony R. Jimenez
President and Chief Executive Officer
MicroTech, LLC
8330 Boone Blvd.
Suite 310
Vienna, VA 22182

Dear Mr. Jimenez:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to a hearing from our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
hearing on Contracting and Contracting Policy at the Department of 
Veterans Affairs on April 23, 2009. Please answer the enclosed hearing 
questions by no later than Tuesday, June 9, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,
                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
       Deliverable from the House Committee on Veterans' Affairs,
                 Subcommittee on Economic Opportunity,
          Hearing on Contracting and Contracting Policy at the
                     Department of Veterans Affairs
                             April 23, 2009
    Question 1: In your testimony you say that clearer rules and 
education efforts on the VA Federal contracting would be beneficial for 
veteran businesses, are there currently no education efforts underway?

    Response: The Department of Veterans Affairs does what it can to 
educate their procurement officials with their limited recourses. But 
more can always be done to provide continuous education to their 
procurement officials to ensure that they remain current and informed 
of the new laws and regulations effecting veteran business.

    Question 2: According to your testimony, there are currently no 
penalties for failing to meet Executive Order 13360. What penalties do 
you recommend the Obama Administration put in place that would not have 
an adverse affect on the agency?

    Response: For agencies and departments that do not meet the their 
goal congress can make appropriations within the agency's budget which 
would be restricted to expenditures on veteran businesses.

    Question 3: Do you think Federal agencies are overwhelmed with the 
number of laws in place to help veteran small businesses?

    Response: No, there are very few laws in place to help veteran 
owned small businesses.

    Question 3(a): Is there a need for more legislation or is there a 
need for clarity?

    Response: The additional legislation I would suggest, is that 
Congress make these set asides requirements as opposed to goals. Once 
that has been done, enforcement is the key.

    Question 3(b): Should Congress focus more on enforcement or passing 
more legislation?

    Response: At this point enforcement would be the most efficient use 
of the Congress' time. As it stands, there are no penalties for not 
meeting the goals and no one is designated as the party responsible for 
enforcement with a means to enforce the goals

    Question 4: On average do large businesses get more sole source 
awards than small businesses?

    Response: I don't have enough information to answer that.

    Question 5: Can you give us an example of how bundled contracts are 
often made so complex that small businesses are precluded from 
competing for them?

    Response: There are requirements that have been bundled that are so 
large in scope that and required past performance that a small business 
simply is not able to meet the entire depth and breadth of the 
requirements. One such program is the A76 program which small 
businesses simply don't have the depth to compete for. Other 
requirements that have been bundled that are so large that small 
businesses cannot realistically compete include contracts such as NAVY 
MARINE CORPS INTRANET AND NEXT GENERATION ENTERPRISE NETWORK PROGRAM 
OFFICE SUPPORT SERVICES (NMCI NGEN).

    Question 6: How should the Federal Acquisition Regulation (FAR) 
Part 7 be rewritten to address contract bundling?

    Response: FAR Part 7 adequately addresses contract bundling and 
does not need to be re-written. Enforcement and training on the effects 
of contract bundling on small businesses would be a better use of time 
and money than new rules.

    Question 7: You state that Federal agencies should make a fair 
portion of bundled contracts small business opportunities. How can 
small businesses compete, regardless of the targeting, when they are 
having difficulty competing for them today?

    Response: Established quality small businesses can compete on 
bundled contracts where the subject matter of the contract is 
sufficiently confined. Additionally the current size standards for what 
determines what it means to be a small business should be revised to 
reflect a 21st century understanding of small business in today's 
global environment.

    Question 8: In your opinion what is the most commonly used 
contracting vehicle by Federal agencies?

    Response: The GSA schedules and government wide acquisition 
contracts (GWAC) are clearly the most used contracting vehicle by the 
Federal Government.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009

Mr. Charles Baker
Chief Executive Officer
MCB Lighting and Electrical
3540 Chaneyville Rd.
Owings, MD 20736

Dear Mr. Baker:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to a hearing from our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
hearing on Contracting and Contracting Policy at the Department of 
Veterans Affairs on April 23, 2009. Please answer the enclosed hearing 
questions by no later than Tuesday, June 9, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,

                                          Stephanie Herseth Sandlin
                                                         Chairwoman

                               __________

       Deliverable from the House Committee on Veterans' Affairs,
                 Subcommittee on Economic Opportunity,
          Hearing on Contracting and Contracting Policy at the
                     Department of Veterans Affairs
                             April 23, 2009
    Question 1: Is the VA not providing the proper tools to the 
procurement personnel to help them understand the procurement process?

    Response: I really think the VA is doing their best with the assets 
they have currently in place. If the VA were to deploy Goal Attainment 
Solutions (GAS) and a procurement process checklist until they can get 
their staff trained on Small Business, they would get better results. 
The dollars in the VA represent a great effort. The dollars are skewed 
by large contracts on the GSA schedule without any limitation on 
subcontracting or requirement of having to be a regular dealer. If you 
look at the number of transactions awarded and compare of times or 
percentage of times SDVOSB or veterans contracts were awarded even on 
small orders, is not the same picture of a good system. GAS will 
shorten the procurement cycle, shorten the market research timeframe, 
and assist with strategic sourcing and provide immediate feedback 
within each industry sector at the time of award. This will increase 
the participation of all social economic groups in that industry 
because the data is available in seconds. GAS was created for the 
SDVSOB community to help obtain the 3 percent goal Federal Government 
wide. There is no agency or department goal, so 7-10 percent is not 
good enough until 3 percent is achieved Federal Government wide, and 
the VA is funded an additional $2M to do this at CVE without any 
demonstrative impact on the other agencies. The VA does not provide 
maximum practical utilization while performing market research, nor do 
they provide open access to the program office to highly qualified 
small businesses like myself who has marketed the department for 7 
years. As a known lighting expert who spearheaded energy efficient 
lighting into the Federal sector in the nineties, and now with 
nationwide installations capabilities, I have yet to sell the VA one 
lightbulb to date and I am 20-30 percent below GSA and DLA prices.

    Question 2: In your testimony you mentioned that part of the 
problem is the intent of the existing procurement laws associated with 
the implementation of the rules of procurement not being followed. If 
part of the problem is that laws are not being interpreted properly how 
do we resolve the issue?

    Response: Training is the obvious way to fix this problem but the 
spirit of the community is not supportive of doing anything other than 
what they want to do. The statue gives the contracting officer the 
discretion and latitude to do whatever they desire, most of the time. 
This is not a bad thing if the CO is applying a business case analysis 
to these procurements and their decisionmaking IAW is in the best 
interest of the government in creating a larger industrial base to 
support our national defense domestically in a time of need. Once 
again, the GAS tool will provide the transparency and oversight along 
with providing the contacting officer the information needed to make a 
decision based on real data which will reduce fraud, waste and abuse of 
vital funds.

    Question 3: How often do large enterprises get sole source awards 
or contracts where they do not have to truly compete?

    Response: In DoD alone the 10 largest firms get 40 percent of the 
total money spent and over 35 percent is sole sourced. All but only 1 
of the 10 firms has less than 50 percent sole sourced to them.

    Question 4: Do you have any concerns with regards to large 
businesses that we should be aware of?

    Response: The lack of a limitation of subcontracting is causing 
small companies to be put at risk for other large companies as a pass-
through. Hence, small business dollars are not going to small 
businesses. This practice of not performing large contracts and subbing 
100 percent to another large business legally is preventing small 
businesses from getting bonding if needed because they are at risk for 
projects they are not performing any real business on. This is a 
twisted approach to helping small business develop because it prevents 
growth and creates an illusion small business participation is really 
happening.

    Question 5: In your testimony you write that large businesses get 
business development and small businesses are told to compete. Can you 
explain your statement?

    Response: Of the top ten businesses in DoD, most are awarded sole 
source contracts which allow them a constant flow of work, which in 
turn allows them to expand and purchase the small business competition. 
They also reduce their expenses associated with bidding work and having 
to market for work. They have significant cost over runs and record 
profits and we can not do anything but continue to let it happen or it 
will affect our National defense. The model is upside down . . . sole 
source contracts are needed for business development at the lower more 
manageable levels to mitigate the number of sole source contracts at 
the upper level. This is also more importantly about how we increase 
our domestic industrial base because small business rules require 
domestic manufactured products which is vital to us protecting our 
Nation. There is very little true business development in the small 
business community. We are told to compete so we can become competitive 
with the larger companies yet we never get to medium or large companies 
because we are put out of business. The reason we are put out of 
business is because of almost no margin or very small margins (1-2 
percent) to become a viable, competitive, sustainable business and then 
they will not pay in a timely manner. If the desired result of 
competition is to yield the best value to the government, then this is 
often not achieved with the current acquisition strategies. Here is a 
classic example: as a government employee in the nineties I was forced 
to purchase from DLA because it was a mandatory source. Strategic 
sourcing was used along with the total buying power of the Department 
of Defense to leverage this competition. DLA made the requirement full 
and open to get the best price and more than 7 manufacturers submitted 
a price direct to the government. This was perceived as maximum 
competition and the best deal available. As a government employee I 
challenged this model and lowered the price on over 700 energy 
efficient products no less than 20 percent and up to 70 percent. This 
had such a demonstrative impact on the industry it allowed the energy 
efficient lighting systems to become viable contracts with great 
savings to investment ratios saving billions of dollars. I purchased 
better equipment from the same manufacturers using a cost analysis and 
market research approach as a lighting expert using negotiated 
procurements instead of a competitive open market process. This is the 
same approach I would use as a participant in the business development 
program. In an open market competitive environment the price would be 
higher; resulting in a very different outcome and the cost of energy 
efficient lighting would most likely still be higher. Small business 
would only be a cost adder with no real value in the competitive 
scenario which currently is used. The real problem is multiplied 
because most of the procurements, over 3 million are small purchases 
under $100K. Most contracting officers don't know how to do cost 
analysis of these broad industries because they don't know the 
industries and the program office just shops the bids before the 
procurement to create the independent government estimate which is not 
done properly. Business development would work if it was performed 
properly. All the while, the large business has no competition and is 
charging record profits because the government has not developed any 
competition for the larger firm who is getting the sole source 
contracts because they are the only companies who can accomplish the 
work. This system is upside down and we need competition at the upper 
levels where the large dollars are being spent and noncompetitive 
contracts at the lower level so smaller companies can develop in order 
to compete for the real profit at the high dollar contract which is 
restricted to a few. This is a threat to our National defense, in my 
humble opinion.

    Question 6: You stated in your testimony that we have a two 
sentence loophole which allows big business to circumvent and take 
business utilizing FAR Part 8.404. Can you explain this statement?

    Response: In the FAR, we have two small business sections Part 13 
and Part 19. Part 19 says all procurements under $100K are exclusively 
reserved for small business. This is a great concept since almost 85-90 
percent of almost all transactions; over 3.5M are under $100K. The 
loophole is if a big business gets on GSA schedule, Parts 13 & 19 don't 
apply. So if you are a big business GSA tells you get on the schedule 
and you can go after all contracts including those reserved for small 
business. All of the rules that protect small business don't apply once 
you have a GSA schedule ether i.e. the limitations on subcontracting 
doesn't apply which requires small business to perform a percentage of 
the work or the Non Manufacturer Rule which requires all products of a 
small business must be made in the United States and made by a small 
business. The rules are manipulated to favor large business and hamper 
small business growth. We have to change our mindset from compliance 
which cost money to growth strategies which make or save money. If you 
can get GSA schedule you can do almost anything you want if you know 
the rules and the government is not getting the best price either. Most 
of the time they are being overcharged for the items or services on 
GSA. The CO takes the least path of resistance, not because they are 
short staffed, but because this was happening before 1994 when the 
workforce was huge. This is human nature. COs are just like 
electricity... they take the least path of resistance in order to get 
on to the next crisis.

    Question 7: What exactly is a business development program and how 
would it benefit small veteran enterprises?

    Response: Business development means the government cultivates 
small business through the use of noncompetitive and restricted 
competition contracts which often times can produce a lower cost and 
will no doubt pay large dividends in the future. Contract financing is 
another key. The government can provide credit lines, up front payments 
of 20 percent, immediate payment upon approved receipt of product or 
services, this is how we develop companies. The rules for small 
business are different than the rules for large business for payment. 
The problem is, we are made to play the large business rules and they 
get our rules so we go out of business and they prosper. They get 
contracts, financing, and sole source contracts. We don't (when you 
don't count Alaskan firms and white women). Dollars to minority groups 
is inversely proportional to the increase in Federal spending, since a 
base line of 2000. Business development has been coined a social 
program instead of a critical need to support our National defense by 
increasing our industrial base. Of course, this has to be fair and 
reasonably priced and not fraud, waste, and abuse.

                                 

                                    Committee on Veterans' Affairs,
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009
Ms. Lisa Wolford
President and Chief Executive Officer
CSSS.NET
729 15th Street NW
Suite 600
Washington, DC 20005

Dear Ms. Wolford:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to a hearing from our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
hearing on Contracting and Contracting Policy at the Department of 
Veterans Affairs on April 23, 2009. Please answer the enclosed hearing 
questions by no later than Tuesday, June 9, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,
                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
       Deliverable from the House Committee on Veterans' Affairs,
                 Subcommittee on Economic Opportunity,
          Hearing on Contracting and Contracting Policy at the
                     Department of Veterans Affairs
                             April 23, 2009
    Question 1: In your testimony you mentioned that even after 12 
years of being in business with an excellent record, you still struggle 
to gain new business with the VA due to the issue of how the VA awards 
contracts. Can you explain how the way VA awards contracts makes it 
difficult for you and potentially to other veteran small businesses?

    Response: There are many things that VA does and doesn't do that 
impact how difficult it is to work with the VA. I will list some of the 
most egregious:

        a.  The use of other contracting entities that aren't required 
        to use the Veterans First Procurement ruling, ie: Corps of 
        Engineers, SPAWAR, GSA, etc. The solution is that if the VA 
        must use an outside entity to do their contracting then they 
        should be required to follow VA procurement regulations, 
        especially and including Veterans First.
        b.  The VA does not allow contracting officers to do direct 
        awards with SDVOSB. This is in direct opposition to executive 
        orders and VA's own procurement policy that specifically allows 
        for this ty4pe of procurement. VA has only been able to meet 
        and surpass its SDVOSB goal through its extensive use of GSA 
        schedules. Only SDVOSBs with GSA schedules have been 
        benefactors of VA's SDVOSB major procurements. Unless a SDVOSB 
        has a GSA schedule, his/her business will not receive anything 
        like the sole source and set aside flexibility clearly 
        mentioned and authorized under public law 109-461.
        c.  The VA does not set up SDVOSBs to meet with Program 
        personnel to allow the SB to present their capabilities. Other 
        agencies do this all the time. HUD for instance does this 
        regularly and they achieve greater than 50 percent of their 
        prime work with SB.
        d.  Large businesses have a VA contractor access to the 
        buildings and therefore can schedule meetings quite easily with 
        the VA personnel whereas many SDVOSBs do not have contractor 
        access badges for the building. This allows the business 
        development professional to meet directly with decisionmakers. 
        Solution, give SDVOSBs the same access.

    Question 2: In your testimony you recommend implementing a policy 
impacting positively or negatively all performance plans for all senior 
executive and acquisition personnel at the VA. What incentives or 
penalties would you recommend?

    Response:

        a.  I would recommend that their promotion ability and bonuses 
        be positively or negatively impacted by their achievement of 
        awarding contracts to SDVOSBs as primes.
        b.  Contracting Officers should also be held responsible for 
        ensuring that all major large Prime contractors meet their 3 
        percent subcontract goals.

    Question 3: In you testimony you state that 88 percent of total 
prime contract obligations solicited by the Federal Government was 
secured by large businesses. Why is this number so high and why is that 
we are focused on small business where there is only 22 percent of the 
contracts?

    Response:

        a.  Small businesses do not get their fair share of the 
        government economic pie. That is what those numbers illustrate. 
        Contract bundling is rampant in DoD and the Intelligence 
        agencies.
        b.  Since small businesses create 75 percent of new jobs in our 
        country we should be ensuring that small businesses get a 
        commensurate share of the Federal contracting pie in order to 
        grow our economy and jobs.

        Question 4: Does the rule of two apply to veteran owned 
        enterprises only or where else does it apply?

    Response:

        a.  It also applies to the HUB Zone Program
        b.  It doesn't apply to 8(a) firms and SDVOSBs should be at 
        least on par with 8(a) firms.

                  119.1306 HUBZone sole source awards.

          (a) A participating agency contracting officer may award 
        contracts to HUBZone small business concerns on a sole source 
        basis without considering small business set-asides (see 
        Subpart 19.5), provided----

                  (1) Only one HUBZone small business concern can 
                satisfy the requirement;

                  (2) Except as provided in paragraph (c) of this 
                section, the anticipated price of the contract, 
                including options, will not exceed----

                     (i) $5.5 million for a requirement within the 
                North American Industry Classification System (NAICS) 
                codes for manufacturing; or

                     (ii) $3.5 million for a requirement within any 
                other NAICS code;

                  (3) The requirement is not currently being performed 
                by a non-HUBZone small business concern;

                  (4) The acquisition is greater than the simplified 
                acquisition threshold (see Part 13);

                  (5) The HUBZone small business concern has been 
                determined to be a responsible contractor with respect 
                to performance; and

                  (6) Award can be made at a fair and reasonable price.

          (b) The SBA has the right to appeal the contracting officer's 
        decision not to make a HUBZone sole source award.

    Question 5: In your testimony you write that a small business can 
be used as a pass through and do as little as zero percent of the work, 
yet the agency will get a 100 percent credit for small business work.

    Question 5(a): How can correct the GSA schedule and the FAR to 
prevent this from happening?

    Response: This occurs when it is not a set aside contract but is 
primed by a small business. Therefore, if the contract is not a set 
aside the FAR and GSA acquisition regulations should require that a SB 
prime of a non set aside contract must do 51 percent of the work. This 
is a loophole that must be closed.

    Question 5(b): Is it your assertion that all Federal agencies are 
aware of problem?

    Response: Yes, they are all aware that if a full and open 
requirement is awarded to a small business that small business prime 
contracting rules do not apply.

    Question 6: If SPAWAR contracts for VA, but does not have to adhere 
to procurement regulations and Veterans First rule, how has this 
affected veteran small business?

    Response: SDVOSB firms are not being given an opportunity to even 
bid on these opportunities.

    Question 6(a): How much contracting for VA do they do?

    Response: I am not sure how widespread it is, I do know that my 
firm bid on an opportunity from the VA in Chicago for the Medical 
facility and after the opportunity was in source selection it was 
canceled and reacquired through SPAWAR and we were not notified or 
given an opportunity to even bid on an opportunity that we had spent 
substantial B&P dollars on. Anecdotally, I have heard of other 
opportunities of VA procurements going through SPAWAR. I have heard 
that all of the work that was to go to the VistA VCS BPA is going 
through SPAWAR and even though we won a prime award on the VistA VCS 
BPA we have not been given an opportunity to bid on any of these 
opportunities.

    Question 6(b): Does that mean that most of the contracts awarded 
through SPAWAR are not going to veterans small businesses?

    Response: Yes, it does in regard to VA contracts.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009

Mr. Scott F. Denniston
President
Scott Group of VA, LLC
14408 Chantilly Crossing Lane, #704
Chantilly, VA 20151

Dear Mr. Denniston:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to a hearing from our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
hearing on Contracting and Contracting Policy at the Department of 
Veterans Affairs on April 23, 2009. Please answer the enclosed hearing 
questions by no later than Tuesday, June 9, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,

                                          Stephanie Herseth Sandlin
                                                         Chairwoman

                               __________

     Hearing Questions on Contracting and Contracting Policy at the
                     Department of Veterans Affairs
          National Veteran-Owned Business Association (NaVOBA)
                 Scott Denniston, Director of Programs

    Question 1: How can we help the VA make agencies, doing contract 
work for the VA, aware of Public Law 110-389, which require agencies 
contracting for VA to follow VA's contracting policies?

    Response: I believe the best position for Congress at this point is 
to require that each agreement VA enters into specifically spell out 
the requirements of Public Law 110-389. If this suggestion is 
implemented no agency can say they were not aware of the requirements 
and if there were questions, VA would be able to address the questions 
prior to implementation of the agreement. If Congress later finds that 
veteran and service-disabled veteran-owned small businesses are still 
losing opportunities, Congress should hold hearings to learn why.

    Question 2: You state that VA has only published draft rules to 
address ``open market'' procurements. What other procurements does VA 
need to address and why is this costing VA firms millions of dollars 
annually?

    Response: VA spends millions of dollars annually through various 
acquisition methods such as GSA Federal Supply Schedules, Prime Vendor, 
Standardization, Ability One Program, and government Wide Acquisition 
Contracts (GWACs). When using these acquisition methods service-
disabled and veteran-owned small businesses are not given a 
``priority'' as required by section 503/8128(a) of Public Law 109-461. 
Until such time as VA's regulations address all methods of acquisition 
employed by VA, we do not believe, VA is complying with section 503.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009
Mr. Joe Wynn
Chairman, President, and Chief Executive Officer
The Veterans Enterprise Training and Services Group
5055 5th St., NW, Suite #301
Washington, DC 20011

    Dear Mr. Wynn:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to a hearing from our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
hearing on Contracting and Contracting Policy at the Department of 
Veterans Affairs on April 23, 2009. Please answer the enclosed hearing 
questions by no later than Tuesday, June 9. 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,
                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
    Followup to Hearing on Contracting and Contracting Policy at the
               Dept. of Veterans Affairs--April 23, 2009
    Question 1: Since our Committee has jurisdiction over the VA, how 
do you recommend that we affect change over all the Federal agencies?

    Response: At present the VA's Center for Veterans Enterprise is 
conducting the verification process for all veteran and service 
disabled veteran businessowners that do business with the VA. Once the 
regulations under PL 109-461 are finalized, contracting at the VA will 
be prioritized to service disabled veteran, then veteran owned 
businesses. If the verification and contracting process for veteran 
businessowners can be implemented correctly, all Federal agencies will 
be more inclined to replicate them.
    The HVAC needs to provide close oversight of this process because 
of its huge importance to contracting throughout the Federal 
marketplace. At present, the verification process is off track and the 
full implementation of the regulations has been delayed for nearly 2 
years. Veteran businessowners are being penalized for owning more than 
one business and for not being at the worksite each day.

    Question 2: Can you elaborate on a statement in your testimony, 
``Inaccurate agency data, miscoding, and double counting?''

    Response: According to the SBA, the Washington Post, and other 
information sources, millions of dollars allocated for small businesses 
have been awarded to large businesses. The Federal Procurement Data 
System used for tracking Federal procurements within each agency, shows 
that in the past few years, a number of large businesses were coded as 
small businesses.
    In addition, Federal agencies are allowed to count one small 
business toward multiple small business goals. Agencies are allowed to 
count a small business that is SDVOB, 8a, and Women Owned toward 3 
goals even though the contract was only issued for one type of small 
business. This practice gives a false picture of small business 
contracting practices.

    Question 3: How should large prime subcontracting plans be 
enforced?

    Response: Small business subcontracting plans submitted by large 
prime contractors should be monitored more closely. Small business 
subcontracting plans, including all details of the plans, required by 
large prime contractors, shall be made public and fully accessible 
either electronically or on forms 294 and 295, immediately upon 
request. Large companies not meeting the mandatory 3 percent 
subcontracting goals should not be allowed to repeat the same poor 
performance on re-competes and new competes.
    When an incumbent has NOT met the 3 percent goal and is re-
competing for a renewal, their proposed price should be levied a 10-
percent increase. When a large business does not have a combined 3 
percent SDVOSB average recorded on a Fiscal Year's submission of all 
294 and 295 forms; all proposed prices submitted for any contract 
should be levied an increase. The price increase for not meeting the 
SDVOSB goal the first year should be 5 percent and should increase 5 
percent each subsequent year the goal is not met.

    Question 4: In your opinion, are any veteran businesses unable to 
secure contracts because they have difficulty securing bonds or 
insurance?

    Response: Some veteran owned small businesses may lack the capacity 
and credit to secure the needed bonding or insurance for certain 
contracts. And unfortunately, even though some veteran owned small 
businesses may be able to obtain a teaming partner, the government will 
not recognize the capability of the partner with regard to bonding for 
the entire job.

    Question 5: In your testimony you state that the Center for 
Veterans Enterprise is understaffed. Should the Center for Veterans 
Enterprise use a contractor to fulfill the requirements of Title V of 
Public Law 109-461?

    Response: At present only a few CVE staff members have been 
assigned to conduct verifications of veteran businessowners and not all 
of them are allocating full time to the process. As a result, the 
process is moving very slowly. After 6 months only 868 businesses had 
been verified and 491 were in process out of a total of approximately 
17,000 registered businesses. CVE reported that it was only processing 
50 applications per week. At that rate, it could take 6 or 7 years just 
to verify the businesses currently registered.
    CVE should consider hiring more staff or devoting more staff 
fulltime to the process. It may also be more efficient to use a 
contractor with experience to conduct the verification process. 
However, CVE may also consider separating the verification process into 
two phases to expedite the process. Phase One would be to verify the 
status of the owner as a veteran or service disabled veteran and the 
percentage of ownership. Phase Two would be implemented to verify more 
details such as joint ventures, site visits, management and control of 
day-to-day operations.
    It should be noted however, that verification of Control should 
only be to the extent necessary to support the Ownership and to ensure 
that the company is not being used as a `Rent-A-Vet' or a pass through 
company

    Question 6: Are the current verification requirements being used by 
CVE adequate?

    Response: The verification requirements being used by CVE are 
adequate, however, their interpretation of the requirements are flawed. 
CVE has been reluctant to publish a procedures guide for verifying 
veteran businessowners. But the guidelines stated in the statue are 
adequate to determine veteran ownership. It's CVE's decision to not 
verify veterans who own more than one company and owners who do not 
operate out of the principal office every day that is in question. 
Also, CVE admittedly does not have the personnel to conduct site visits 
of each veteran businessowners principal place of business. Site visits 
often could clear up questions of ownership.

    Question 7: In your testimony you state that verification of 
control should be to the extent necessary to support ownership and 
ensure the company is not a pass through company. What is the extent 
necessary to verify ownership?

    Response: As I stated in previous responses, verification should 
confirm that the businessowner is a veteran or service disabled veteran 
and that the owner or owners have the majority ownership of the 
company. To ensure that the company is not a pass through company, 
verification of the owner's participation in the operations of the 
company is necessary.
    However, participation by the owner should not be limited to 
whether or not the owner is physically working out of the principal 
office each day. In this day of advanced telecommunications, management 
and participation in the day-to-day operations can be demonstrated via 
video conferencing, use of Black Berry's, e-mail and Internet 
communications, and phone conferencing. Control can be verified in 
other ways also.

    Question 8: In your testimony you state that ``may'' versus 
``shall'' is an obstacle but DoD, GSA, and NASA are still able to award 
contracts. Why is it that those agencies seem to make it work and not 
VA?

    Response: In the contrary, VA is statistically doing better under 
existing laws than DoD, GSA and NASA. VA has exceeded the 3 percent 
mandatory contracting requirement for SDVOBs for the past 2 years, 
while DoD, GSA, and NASA have not. But the issue with ``may'' versus 
``shall'' is that contracting officers have been using it as a loophole 
or reason not to set contracts aside for SDVOBs.
    Last year, SBA issued public notices intending to clarify the 
meaning and application of the word ``may'' in the statutes. But now, 
DoD has issued a memorandum to all of its military departments to 
prioritize contracts to Hubzone companies because ``shall'' is stated 
in the Hubzone statutes and not in the SDVOB statutes. The effect of 
this action is causing enormous harm to not only SDVOBs but also to 8a 
and Women Owned companies as well.

    Question 9: In your testimony you state that VA gives work 
routinely to 8(a) firms. How much more business are 8(a) firms getting 
than veteran owned enterprises?

    Response: It's a known fact that contracting officers routinely 
award contracts to 8a firms more frequently and in greater volume than 
to SDVOBs. The actual number of 8a contract awards can be obtained from 
the Federal Procurement Data System and the SBA. Since 8a statutes 
allow a contracting officer to make direct awards to an 8a company 
without regard to other 8a firms who may be equally qualified, this 
contracting authority is used quite often near the end of the fiscal 
year for procurements under the simplified acquisition threshold of 
$3.5 million for services and $5.5 million for construction.

    Question 10: In your testimony you talk about sole source awards. 
How often are sole source awards made to large businesses?

    Response: The Federal Procurement Data System is the source to 
obtain the number of sole source awards made to large businesses. A 
review of the large Prime sole source contracts will help to better 
understand the effects of bundling of contracts into very large 
procurements. Small businesses cannot compete when the contract is so 
large that only a large business could possibly qualify.

    Question 11: While much of our focus has been on veteran small 
business what should we be looking at in regards to large business?

    Response: The issues with regard to large business is the danger of 
the U.S. government becoming overly reliant on just a few companies. 
This over reliance on just a few large companies poses enormous risks 
to our financial system like with the issue with AIG, Fannie Mae, 
Freddie Mac, etc. being too big to fail. Also when a few large DoD 
primes continue to control most of the contracts for the defense of our 
Nation, our security can be easily compromised. Often, many of these 
large DoD primes are hiring foreign labor and contracting services out 
to foreign countries. This ultimately creates gaps and vulnerabilities 
in the supply chain.

    Question 12: Some advocate for limiting sole source awards because 
it will limit competition and increase costs to the Federal Government. 
Do you think this will be the case?

    Response: For years, contracting officers have had the authority to 
make direct awards to 8a firms with in a certain dollar limit. This 
practice has not increased costs to the Federal Government because 
contracting officers are still required to do market research to ensure 
that services and products are offered to the government at a fair and 
reasonable price. Contracting officers should be allowed the same 
authority to increase contracting opportunities with SDVOBs.
    This concludes my responses. However, I welcome the opportunity to 
have further discussions with the HVAC members and staff regarding 
these matters. I would also recommend that the HVAC consider convening 
a Task Force to oversee the implementation of the regulations governing 
the CVE Veterans Small Business Verification Process and VA Small 
Business Contracting to prevent the situation from having an adverse 
effect on the veterans it was intended to help.

            Thank you.
                                                Joe Wynn, President
                                                         VETS Group
                                                  Member, VET-Force

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009
Mr. James King
Executive Director AMVETS
4647 Forbes Boulevard
Lanham, MD 20706

Dear Mr. King:

    I would like to request that AMVETS respond to the enclosed 
deliverable and questions for the record I am submitting in reference 
to a hearing from our House Committee on Veterans' Affairs Subcommittee 
on Economic Opportunity hearing on Contracting and Contracting Policy 
at the Department of Veterans Affairs on April 23, 2009. Please answer 
the enclosed hearing questions by no later than Tuesday, June 9, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,
                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
                    Statement of Christina M. Roof,
              AMVETS National Legislative Deputy Director,
                   In Response to Questions Asked by
              Subcommittee on Economic Opportunity of the
                  House Committee on Veterans' Affairs
                               Concerning
   Federal Contracting Policy at the Department of Veterans Affairs 
                                Hearing
                         Held on April 23, 2009
Deliverable:
    Deliverable 1: In your testimony you mentioned that one of the 
biggest problems is that during initial or pre-contract verification a 
company will present all required documentation, including evidence 
that they will use veteran-owned small businesses as subcontractors. 
You state that no proof of compliance is required, nor do random labor 
audits occur. Who should be doing this compliance and random labor 
audits and how extensive should it be?

    Response: It is in the opinion of AMVETS that the primary contract 
issuer, in this case VA, should be responsible for ensuring the 
integrity of the contracts they award. To AMVETS knowledge VA currently 
lacks a sufficient number of employees with the applicable knowledge on 
compliance law to conduct said audits. AMVETS recommends that since 
gross lack of oversight by VA has been allowed to continue to occur, 
that the Office of Federal Contract Compliance Program and/or a private 
audit firm immediately start conducting enforcement audits of VA's 
contracts. VA shall provide any additional funding needed from their 
funds, as to not penalize OFFCP. In non-government construction 
contract audits, 8-12 percent of the total contract cost is recovered 
during a simple standard audit. In fact many contract grantors find 
that the cost of performing an audit is usually covered by the first 2 
percent of the money recovered during that audit, this fact should help 
ease concerns of the costs of performing audits. Also as part of this 
audit process, AMVETS insists VA be required to report all findings, 
gathered up to said time, to VA's Office of Acquisitions, Madam 
Chairwoman and the Subcommittee no later than thirty business days 
following initial findings or thirty business days after initial 
contact with the party being audited occurs. This will hold true 
regardless of what stage of the audit VA is conducting at said time. 
AMVETS recommends that this process begin with the examination of 
inchoate contracts, in order to detect any problems before these 
contracts are closed. Executed contracts are equally important to make 
sure that VA funds were properly handled and not used to perpetuate the 
discrimination against veterans or any wrong doings. AMVETS also asks 
that the Committee hold VA accountable to meeting this timeline, by 
whatever means the Committee deems necessary. Although this type of 
reporting seems harsh, AMVETS believes that due to lack of 
accountability by VA, that is method of reporting findings is more than 
reasonable. VA is on record multiple times stating that they are 
unaware of any non-compliance issues on any of their procurements over 
the last 4 years. If this statement is true, then the audit process 
will prove to be very straightforward task to complete in a timely 
manner. Madam Chairwoman I must be forthright with you and the 
Subcommittee when I say that AMVETS is more than disappointed that the 
most basic of contracting procedures have not been occurring within the 
VA procurement system, and that the Subcommittee has not held VA 
accountable. AMVETS has been made aware of these gross negligence's for 
quite some time and has brought their concerns to the Committee in the 
past. So it is not a lack of knowledge on anyone's behalf, yet a lack 
of action from all. AMVETS also believes that VA should start hiring 
contract officers or start outsourcing to veteran owned auditing firms 
whose primary functions include compliance audits of all VA contracts. 
DoD is able to ensure integrity of the contracts they issue in the 
Middle East, so VA should have no problems doing the same for the 
contracts they issue stateside. Concerning the extensiveness of audits, 
AMVETS believes normal DOL or OFCCP protocol is sufficient and will 
meet and exceed all criteria for a thorough audit in regards to 
compliance.
Questions for the Record:
    Question 1: According to some of our witnesses, the VA does not use 
their authority to make noncompetitive sole source award. Why do you 
think the VA does not use this authority?

    Response: AMVETS can only speculate on why VA does not always use 
their authority to make noncompetitive sole source awards. The primary 
cause of concern of AMVETS is that that lack of knowledge or lack of 
training on the part of VA's contract officers. AMVETS does not feel 
that VA's contract officers are purposefully making errors in the sole 
source contract process, but that they have not been provided 
sufficient training on the contracting process. VA has failed to 
provide their contracting officers with the required skill set to 
successfully carryout VA's contracting award process. Although AMVETS 
notes that VA has attempted to improve training by providing a new 
school to educate their staff, however after researching the curriculum 
AMVETS finds that the system does not provide all the applicable skills 
needed to successfully fill contracting officer positions, and it does 
not currently address the skill set of current contracting officers. We 
also feel that job dependent testing should also be used for candidates 
in all 21 VISNs applying to these positions to ensure all contracting 
competencies are in place.

    Question 2: In your testimony you state that the VA lacks at a 
minimum reasonable assurance that they are receiving the services it 
paid for. Then what is the VA receiving and how confident are you that 
the VA is doing any contract properly?

    Response: Unfortunately AMVETS is not able to provide the 
Subcommittee with reliable or accurate data on whether or not VA is 
receiving the services it is paying for, due to the lack of centralized 
databases or trackers maintained by VA. This is according to previous 
VA acknowledgements and testimonies that such reliable systems are not 
currently in place. Due to this lack of oversight and documentation by 
VA regarding their contracts and awards AMVETS is unable to provide the 
Committee with any type of response, other than recommendations based 
on speculations. AMVETS is very concerned by the fact that VA is not 
currently auditing their contracts. AMVETS recommends that VA 
immediately put in to place a functional verification system that 
allows traceability of every system and process VA currently uses non-
uniformly. Even a very simple system will allow VA, as well as the 
Subcommittee if need be, to have a single centralized source. A 
functional system will allow VA to accurately process all of their 
interdependent and linked procedures, which at every stage, consume one 
or more VA resource (contracts, employees, funds) to convert the inputs 
into outputs. These outputs then serve as inputs for the next stage of 
the functional verification process until a known goal or end result is 
reached. AMVETS would also like to stress the often overlooked process 
of internally auditing current procedures and employees. These types of 
audits are used by every successful organization, as a means of 
measuring quality and shortfalls within an organizational system. An 
organization will only be successful and run at its full potential if 
it is able to recognize its weaknesses. Finally, when discussing the 
current state of the VA's acquisition systems, AMVETS believes it is 
necessary to discuss traceability. As stated in our testimony VA has 
little assurance that it is receiving the services it paid for. AMVETS 
believes this is due to VA not having a solid system of traceability. 
From an accounting standpoint it is absolutely essential for an 
organization to have the ability to track a specific piece of financial 
information by means of recorded data. Equally important is 
traceability in cost accounting. VA should already have a system of 
cost accounting in place to assign a cost directly to an activity or 
cost object on the basis of cause-and-effect contractual relationships. 
The last part of traceability vital to the stability of any 
acquisitions program is in that of quality control traceability. This 
ability to track system requirements from a system function to all 
those elements that individually or collectively perform that function. 
Simply stated, VA should have the trained staff and accounting systems 
in place to accurately assess cost and quality of their awards. And 
more importantly VA should be held accountable for not implementing 
directives given to them and not meeting deadlines. Respectfully, if 
there continues to be lack of accountability on the part of VA and lack 
of a system to hold them accountable, we feel that the VA system of 
acquisitions will be stuck in this vicious cycle of hearings and 
recommendations with no real actions taking place.

    Question 3: Do you thing that the VA would benefit from an 
electronic contract software system to monitor and track all contracts?

    Response: AMVETS believes implementing the use of contract 
management software will greatly benefit VA's current acquisitions 
system. Having a centralized electronic monitoring and data recording 
system in place will help eliminate many problems for VA in their 
acquisitions procurement processes. VA's use of contract management 
software/systems will streamline processes through their entire 
lifecycles--covering the stages of planning, negotiation, analysis, 
storage, and maintenance.
    A contract management system will benefit VA by lessening the time 
it takes to create and administer contracts, workloads related to 
manual processes, and the contracting officers' administration/
transaction processing time from procurement to payment. An electronic 
system will also enhance process efficiency throughout the contract 
lifecycle, reporting, contract visibility and access, and financial 
tracking of transactions based on contracts. This will provide VA with 
the necessary tools to automate workflow, standard processes and 
contract request processing, and merge and secure contract repositories 
or databases.
    AMVETS believes that an electronic contracting system will also 
provide a reliable and accurate source that will provide an effective 
system of traceability. From a contractual accounting standpoint it 
will allow VA to better track and assign cost directly to an activity 
or cost object on the basis of cause-and-affect relationship. VA will 
also have the ability to accurately monitor quality control, thus 
giving them the ability to trace the application, locations, and/or 
history of contractual activities by means of a recorded data system. 
Finally, the use of an electronic contracting system will provide VA 
with a functional verification process that will ensure products, 
services, and activities conform and meet all performance and material 
requirements set fourth by contractual agreements.
    VA will be able to manage and exchange information internally and 
externally with greater ease, and eliminate the lack of communication 
within the acquisitions system, which seems to be the root of many of 
their problems. AMVETS also find it extremely important to store all 
documents and data are so that they are protected by multiple levels of 
security, allowing VA to share and exchange proprietary materials for 
collaboration and development, but still protecting the integrity of 
all VA documents.

    Question 4: In your testimony you state that a substantial 
nationwide increase of qualified contract officers and outreach staff 
is needed. How many do we need of each?

    Response: Regrettably, due to the lack of accessible data of 
current VA staff and training procedures AMVETS finds themselves unable 
to provide the subcommittee with a solid plan of action or unwavering 
answer. However, we can make a comparison to the closet government 
agencies we found to have the same contracting concerns as VA. By 
comparing the overall contracting requirements of VA to several 
different agencies, on the basis of number of contracts, multiple 
locations, and tools available for use or development, AMVETS found 
that The Department of Defense most closely matched VA in their 
contracting requisites. This being said AMVETS believes that DoD's 
current contracting process has many functional processes that VA could 
implement with equal, if not more, success than DoD. For example, DoD 
and their contract officers are able to monitor all stages of their 
awards for compliance and timeliness, regardless of location. This is 
due to DoD having a larger number of contracting officers as well as a 
stricter training process. AMVETS recommends VA immediately start to 
hire more contracting officers and begin training or re-training all 
contracting officers in accordance with FAR System, as well as the 
specific internal agency guideline within VA. Incorporating a clear 
accountability matrix into the VA's procurement processes will help to 
ensure that every project/contract element is properly assigned. This 
will eliminate any question on the expectations and/or tasks that is 
required by each individual involved in VA's procurement processes. 
Accountability matrixes ensure every duty within the procurement 
process is satisfactorily preformed according to law and standards, and 
which has consequent penalty for failure.

    Question 5: In your opinion do we need to reorganize the 
procurement/acquisition hierarchy at VA?

    Response: AMVETS believes that implementing a centralized and 
uniform training program for all persons involved in VA procurement 
processes, regardless of location or position, will provide a 
foundation of clarity and standardized education to every individual 
involved in VA's procurements process. This will also aide VA in 
establishing an unambiguous hierarchy and establish a system of 
unquestionable accountability in regards to procurement. VA's 
organizational alignment should be examined to ensure appropriate 
placement of the acquisition functions are occurring within the agency, 
and that employees clearly understand their individual defined roles 
and responsibilities. We are not questioning the ethical standards of 
VA or its employees, rather the structural framework currently in place 
regarding procurements. VA must protect the integrity of their 
procurement process and the authorities granted to them by closely 
examining their current acquisition hierarchy on every level. AMVETS 
also believes VA should re-examine their current oversight methods and 
develop a plan granting authorities to field contract officers, so that 
they may conduct random inspections of VA's awards to ensure that the 
integrity of all VA contracts are protected and enforced.
    AMVETS applauds the Committees' commitment to solving these 
problems, and offers are services in any way possible to ensure our 
veterans are receiving their due entitlements. Committed leadership 
enables officials to make strategic decisions that achieve agency wide 
acquisition outcomes more effectively and efficiently.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     April 28, 2009
Mr. Jan Frye
Deputy Assistant Secretary for Acquisition and Logistics
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420

Dear Mr. Frye:

    I would like to request that the U.S. Department of Veterans 
Affairs respond to the enclosed deliverables and questions for the 
record I am submitting in reference to a hearing from our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
hearing on Contracting and Contracting Policy at the Department of 
Veterans Affairs on April 23, 2009. Please answer the enclosed hearing 
questions by no later than Tuesday, June 9, 2009.
    In an effort to reduce printing costs, the Committee on Veterans' 
Affairs, in cooperation with the Joint Committee on Printing, is 
implementing some formatting changes for material for all Full 
Committee and Subcommittee hearings. Therefore, it would be appreciated 
if you could provide your answers consecutively on letter size paper, 
single-spaced. In addition, please restate the question in its entirety 
before the answer.
    Due to the delay in receiving mail, please provide your response to 
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions, 
please call (202) 226-4150.

            Sincerely,
                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
                        Questions for the Record
          The Honorable Stephanie Herseth Sandlin, Chairwoman,
                 Subcommittee on Economic Opportunity,
                  House Committee on Veterans' Affairs
                             April 23, 2009
   Contracting and Contracting Policy at the Department of Veterans 
                                Affairs
    Question 1: Public Law 109-461 required VA to review prime 
contracts to ensure compliance with subcontracting plans submitted in 
proposals. How many contracts has VA reviewed and what are the results 
of those reviews?

    Response: Implementation of 38 United States Code (U.S.C.) 
Sec. 8127(a)(4) is dependent upon finalizing the change to the 
Department of Veterans Affairs (VA) Acquisition Regulation (VAAR) which 
will require prime contractors to comply with this new reporting 
requirement. That VAAR change is expected to be published as a final 
rule later this year. At this time, VA has not completed any reviews. 
VA's Office of Small and Disadvantage Business Utilization (OSDBU) has 
established a mechanism to review subcontracting plans and to follow-up 
with service-disabled Veteran-owned small businesses (SDVOSB) and 
Veteran-owned small businesses (VOSB) to ensure the accuracy of the 
prime contractor's reported information. OSDBU has designed a form to 
gather this data and is seeking approval for its use from the Office of 
Management and Budget (OMB), in accordance with the Paper Work 
Reduction Act. In addition, public comments will be sought through a 
notice in the Federal Register. OSDBU adjusted its current 
subcontracting plan model to address the issue of having the prime 
contractors include details concerning the SDVOSBs and VOSBs they 
intend to use.

    Question 2: When VA awards a contract to a small business under an 
8(a) or other set aside and the business also qualifies as Veteran-
Owned, how does VA account for the dollars toward more than one small 
business goal and how is that award counted toward VA's small business 
total?

    Response: In accordance with subparagraph 6(f) of the Office of 
Federal Procurement Policy's (OFPP) October 8, 1999 letter number 99-1, 
Small Business Procurement Goals, agencies may count prime contract 
awards to small businesses toward more than one goal. Prime contract 
awards to subset small business goals all count toward the government-
wide small business goal. For example, an award to a Veteran-owned, 
woman-owned small business will be credited to three goals: (1) small 
business; (2) VOSB; and (3) woman-owned small business.

    Question 3: Witnesses have expressed concern about the effect on 
small businesses by increasing the use of contract bundling. VA 
testified that it reviews all potential bundles worth $1 million. How 
many proposed bundles were rejected during FY 08?

    Response: In fiscal year (FY) 2008, 222 contract bundling reviews 
were completed with 3 determined to be unjustified.

    Question 4: Does the total value of a contract awarded to a 
veteran-owned small business prime who has subcontractors count toward 
the 3 percent goal or just the amount earned by the veteran-owned 
business?

    Response: The entire value of the contract awarded to a Veteran-
owned small business prime counts toward VA's VOSB goal and SDVOSB 
goal, if applicable. Small businesses are not required to have 
subcontracting plans.

    Question 5: Who is the final decision on accepting or rejecting a 
company's application for verification as a veteran-owned small 
business enrolled in the CVE VIP database and what is the source of 
that authority?

    Response: As identified in 38 U.S.C. Sec. 74.11(e), the Director, 
Center for Veterans Enterprise, is responsible for decisions to accept 
or deny an application.

    Question 6: How many prime contractors have been penalized in the 
past two fiscal years for failure to comply with proposed 
subcontracting plans?

    Response: Contractors are not directly penalized for non-compliance 
with its subcontracting plans. The impact on the vendor would come in 
the form of poor past performance evaluations, which may affect future 
awards. VA evaluates the plan submitted by the contractor as part of 
the solicitation and determines if it complies with VA requirements 
prior to award. After award, if a contractor is found to be deficient 
in compliance with their proposed plan, the contracting officer, as 
part of the contract administration process, could document the 
deficiency. Since there are many contract award evaluation criteria it 
would be difficult to determine if poor past performance resulted from 
them not adhering to their subcontracting plan, subsequently affecting 
future awards.

    Question 7: There seems to be very diverse opinions on the use of 
veteran-owned small businesses--sometimes called rent-a-vet--as prime 
contractors where the veteran business subcontracts all or nearly all 
work to a large subcontractor. Anecdotally, this is becoming a more 
frequent occurrence. How would the Department propose to regulate this 
practice?

    Response: Education, oversight and enforcement are the key to 
minimizing the opportunity for this type of performance problem. 
Contracts awarded using Federal Supply Schedule or full and open 
competition do not contain limitations on subcontracting; however, 
contracts awarded using set-aside requirements do impose restrictions 
on subcontracting. Education will ensure that all parties understand 
the nature of the acquisition and the limitations on subcontracting 
imposed.
    Oversight will ensure compliance with subcontracting limitations. 
Oversight is easy in construction contracts since contracting officers 
receive certified payrolls by the general contractor and all 
subcontractors. Oversight is more challenging in other contracts 
because contracting officers must rely upon the technical 
representative who is responsible for interacting with the contractor 
on a day to day basis. Additional education for these technical 
representatives would go a long way in overcoming this performance 
problem. Once contracting officers receive information about possible 
non-compliance with subcontracting limitation, they have several 
enforcement tools available. The keys to changing this trend rely 
heavily upon vigilant oversight.

    Question 8: Would the Department be in favor of establishing a 
mentor-protege program and would such a program need legislative 
authority?

    Response: On August 20, 2008, VA published in the Federal Register 
a proposed rule adding a new section to the VAAR (819.71) which 
introduces VA's Mentor-Protege Program. The program is designed to help 
SDVOSBs and VOSBs enhance its capabilities to compete for and perform 
under contracts and subcontracts for VA. VA's authority for this 
program arises from its Executive Order 13360, 38 U.S.C. Sec. 8128, and 
15 U.S.C. Sec. 637(d)(4)(E).

    Question 9: Please review Fiscal Year 2008, and send us a report 
showing the contracting mechanisms used for all SDVOSB and VOSB awards.

    Response: The following contracting mechanisms were used in FY 2008 
to makeSDVOSB and VOSB awards.

          VOSB set-aside
          VOSB sole source
          SDVOSB set-aside
          SDVOSB sole source
          HUBZones set-aside
          Small business set-aside (full and partial)
          8(a) program
          Emerging small business set-aside
          Federal Supply Schedule
          Full and open competition

    Question 10: How many of the awardees were verified by CVE at time 
of award for 2007 and 2008?

    Response: The data to answer this question is not available. 
Currently, to be awarded a contract VA requires that Veteran-owned or 
service-disabled Veteran-owned small businesses be registered in the 
VetBiz VIP database, in accordance with Information Letter 049-07-08. 
VAAR changes implementing the procurement provisions of Public Law 
(P.L.) 109-461 will change this process. All business will be required 
to be verified prior to award. VA is currently working on verifying the 
vendors in the VetBiz VIP database.

    Question 11: Do you believe that veteran owned businesses and 
service disabled veteran owned business have the capacity to compete 
and deliver goods and services?

    Response: VA's record of performance with SDVOSBs and VOSBs 
indicates these firms have both the capability and capacity to support 
prime contract requirements awarded by VA. OSDBU is aware of some 
industries in which SDVOSBs and VOSBs are under-represented, making it 
challenging for some Federal buying activities to achieve their 
procurement goals. In addition, some large prime contractors report 
that the population of SDVOSBs and VOSBs who have the necessary 
certifications to be qualified suppliers in its manufacturing concerns 
is also limited.

    Question 12: How many sole source contracts have been done for non-
veteran small businesses, veteran businesses, and large businesses?

    Response: VA reported 2,038 contract actions reports (CAR) to non-
Veteran-owned small businesses; 1,179 actions to VOSBs; and 4,429 to 
other than small business in FY 2008.

    Question 13: Do you support sole source or should contracts be 
competed?

    Response: The intent of P.L. 109-461 was to provide contracting 
officers flexibility in determining when competitive or noncompetitive 
sourcing with SDVOSBs or VOSBs is in the best interests of VA. In 
general, competition is the best way to ensure the government achieves 
the best value for the American taxpayer. While the solicitation phase 
may be slightly shorter for a sole source versus a competitively 
solicited proposal, the evaluation and negotiation phases for a sole 
source proposal may be significantly longer. Under a sole source, it 
may take more time and effort to negotiate price and determine price 
reasonableness. One situation comes to mind in which noncompetitive 
sourcing may be beneficial to the Veterans' business community and VA. 
For businesses new to the Federal marketplace, obtaining a first 
contract is a huge step forward. Federal buying teams want to see past 
performance with a Federal agency. In this case, noncompetitive 
sourcing for smaller requirements would be beneficial to both VA and 
the company.

    Question 14: In your testimony you state that sole source 
acquisitions must be synopsized in the Federal Business Opportunities 
System. Do all other acquisition authorities have the same requirement 
that they be synopsized as well?

    Response: As required by the Small Business Act (15 U.S.C. 
Sec. 637(e) and the OFPP Act (41 U.S.C. 416), contracting officers must 
synopsize proposed contract actions expected to exceed $25,000 in the 
government-wide point of entry at www.fedbizopps.gov. The Federal 
Acquisition Regulation (FAR) provides that contracting officers need 
not synopsize proposed contract actions that are expressly authorized 
from a specified source (FAR 5.202(a)(4)). These include sole source 
awards under the section 8(a) Program (15 U.S.C. Sec. 637); the HUBZone 
Act 1997 (15 U.S.C. Sec. 657a); the Veterans Benefits Act of 2003 (15 
U.S.C. Sec. 657f); and, by VA's interpretation, the Veterans Benefits, 
Health, and Information Technology Act of 2006 (38 U.S.C. Sec. 8127(b), 
(c)). See generally, FAR 6.302-5. However, VA has determined, as a 
policy matter, that synopsis of proposed sole source awards pursuant to 
38 U.S.C. Sec. 8127 for information purposes affords the American 
taxpayer full transparency into the Federal acquisition process. 
Further, it allows other contractors to provide feedback on the 
acquisition strategy. This policy will be adopted in VA's proposed VAAR 
change to implement 38 U.S.C. Sec. Sec. 8127-8128 currently reviewable 
at 73 Federal Register 49141-01 (August 20, 2008).

    Question 15: Some VSOs have the concern that requiring sole source 
acquisitions to be synopsized effectively eliminates sole source from 
use due to the work and time involved. Do you agree or disagree with 
this assertion?

    Response: VA disagrees with this assertion. In general terms, the 
affect on the total acquisition cycle should be negligible since the 
notices will serve as ``information'' as opposed to a ``solicitation 
for proposals.'' VA believes synopsizing sole source requirements 
affords the American taxpayer full transparency into the acquisition 
process. Further, it allows other contractors to provide feedback on 
the acquisition strategy so similar acquisitions in the future can be 
conducted competitively.

    Question 16: In a joint venture why are the Veteran-owned small 
businesses required to meet the small business definition together 
while others like the 8(a) do not? Is this a situation that can be 
fixed by amending the rules instead of by statute?

    Response: VA believes any changes must be done by statute. In the 
joint venture programs defined under the authorities of P.L. 109-461 
and the Small Business Administration, all parties in the venture must 
be classified as a small business. By statute, if an affiliation exists 
between the partners, the revenue/employees must be combined.

    Question 17: In the contracting process how do VA regulations 
differ from General Services Administration regulations? Essentially 
are VA regulations more stringent than GSA's when it comes to 
contracting?

    Response: This question is general in nature and is difficult to 
respond to with specifics regarding the stringency of each agency's 
regulations. If this question is referring to the General Service 
Administration (GSA) Federal Supply Schedules, VA operates under the 
authority delegated to it by GSA. As per GSA's rules, no agency is 
allowed to modify the terms and conditions in the schedules without 
authorization from GSA. Therefore, in general terms, VA's regulations 
are neither more nor less stringent than GSA's.

    Question 18: Can you explain the difference in having: a fair and 
reasonable price, best value and a competitive price? Which view does 
VA currently have in place and does GSA view differ from the VA?

    Response: VA cannot speak to GSA's views on these issues. However, 
VA follows the guidance in FAR Part 15, Contracting by Negotiation, 
which states obtaining adequate price competition is the best way to 
ensure the government receives the most reasonable price. Best value is 
a technique used by the contracting officer to determine which proposal 
provides the best overall solution to the government based on a 
combination of pricing and technical (non-price related) evaluation 
factors.

    Question 19: What kind of contract does VA have with SPAWAR 
regarding the G.I. Bill and are you satisfied that the contract was 
properly awarded?

    Response: VA does not have a contract with SPAWAR, but rather an 
interagency agreement (IAA), consistent with FAR Subpart 17.5, 
Interagency Acquisitions under the Economy Act, for information 
technology (IT) program management and acquisition support. The purpose 
for the SPAWAR IAA is to obtain support for VA program IT enhancements 
in addition to the requirements of the Post 9/11 G.I. Bill. The IAA has 
been issued pursuant to the Economy Act 31 U.S.C. Sec. 1535 and VA 
regulations, including an economy act determination and a review of the 
requirements. A follow on IAA is being issued pursuant to the OFPP 
guidance entitled Improving the Management and Use of Interagency 
Acquisition, dated June 6, 2008. Both IAAs were properly awarded 
consistent with applicable regulation.

    Question 20: We commend the VA for exceeding the three percent set 
aside. Are there any divisions in VA that have not awarded any 
contracts to a Veteran enterprise?

    Response: A search of FY 2008 data shows every VA contracting 
activity supported contracting with VOSBs.

    Question 21: How many sole source awards were given to large 
businesses versus small businesses in the past 2 years?

    Response: In FY 2007, VA reported 4,243 non-competitive CARs to 
other than small businesses and 3,460 non competitive awards to small 
businesses. In FY 2008, VA reported 5,339 non-competitive awards to 
other than small businesses and 3,215 noncompetitive CARs to small 
businesses. VA obtained this data from the Federal procurement data 
system on July 2, 2009.

    Question 22: Many VOSBs assert that ``may'' versus ``shall'' is a 
problem. Do you agree with their assertion?

    Response: VA does not interpret the P.L. 109-461 as requiring that 
all contracts below $5 million be sole sourced. In the language in the 
proposed rule which implements P.L. 109-461, contracting officers may 
use other than competitive procedures to enter into a contract with a 
SDVOSB or VOSB when the amount does not exceed $5 million. By using the 
word ``may,'' contracting officers are afforded maximum flexibility.

    Question 23: What is the status of the electronic contract 
management system?

    Response: VA's electronic contract management system (eCMS) is 
fully operational and changes are in process to improve the data mining 
capability. VA contracting officers are mandated to use this system.

    Question 24: How much does VA use Indefinite Delivery/Indefinite 
Quantity (ID/IQ) as a contract vehicle?

    Response: In FY 2008, VA awarded a total of 1,119,972 contract 
actions valued at $8,779,888,482 against all IDIQ contracts. VA awarded 
981,997 delivery/task orders against VA IDIQ contracts for a total of 
$6,671,831,510.

    Question 25: Can the contracting process be streamlined?

    Response: VA implemented processes to streamline the acquisition 
process to the extent that the FAR dictates. However, based on laws 
governing the acquisition process, contracting officers are required to 
follow certain processes and procedures. VA encourages contracting 
officers to be innovative and creative within the bounds of the FAR.

    Question 26: Has Congress made contracting more cumbersome?

    Response: The enactment of P.L. 109-461 has not made contracting 
more cumbersome. P.L. 109-461 provides VA extraordinary contracting 
authorities with SDVOSB and VOSB.

    Question 27: If we were to create an oversight team funded from a 
small percentage of all awarded contracts do you think the VA and 
private contractors would oppose the idea?

    Response: VA does not believe the creation of an oversight team 
regardless of funding source would significantly improve the 
acquisition process. It is also unlikely that business entities would 
welcome additional oversight of their operations. VA currently funds 25 
contract auditors for the purpose of conducting pre and post-award 
audits of VA contracts. Additional oversight is provided by VA's Office 
of Inspector General (OIG) and the government Accountability Office.
    While oversight is certainly a necessary element of government 
acquisition, a larger, better trained workforce is the key to long-term 
improvements. Since 2002, VA's procurement spend has increased by 
approximately 500 percent. However, during the same time span the 
procurement workforce has only increased by approximately 65 percent, 
thus reflecting a distinct imbalance with regard to numbers of 
contracting professionals employed at VA in relation to the ever 
burgeoning procurement workload.

    Question 28: Is SPAWAR a formal contractor for VA or is it an agent 
of VA, spending VA dollars funneled via task orders? (Is SPAWAR a true 
contractor that bid on a contract or is SPAWAR providing contracting/
spending assistance like the Army Corps of Engineers.)

    Response: SPAWAR is not a contractor as it receives work 
authorizations through the IAA process. SPAWAR has not prepared 
proposals or competed for VA IAA work. In this regard, SPAWAR provides 
assistance in support of Office of Information and Technology programs. 
SPAWAR is another Federal agency who performs services on behalf of VA. 
Dollars are not ``funneled'' via task order to SPAWAR, but funding is 
transferred to SPAWAR under the IAA to perform specific tasks.

    Question 29: The Office of the Inspector General for the VA has 
continually identified the same deficiencies in the VA's procurement 
process, including solicitation, award and contract administration. 
From March 2008 to March 2009 OIG has issued 10 reports. How is VA 
dealing with these deficiencies that keep cropping up?

    Response: Secretary Shinseki is transforming the VA into a 21st 
Century organization which includes significant improvements in VA 
procurement. Through this transformation effort and the establishment 
of the Office of Acquisition Logistics and Construction, VA's goal is 
to correct the deficiencies in the procurement process. The 
establishment of the Office of Acquisition, Logistics and Construction 
as an individual office allows for the Chief Acquisition Officer to 
devote full-time oversight of more than $14 billion spent each year on 
products, services, and construction. Additionally, the transformation 
focuses on five strategic areas: 1) personnel, 2) training, 3) 
technology, 4) structure and 5) processes. In the area of personnel, VA 
is increasing its acquisition and engineering workforce to meet the 
increased contracting and construction workload. VA has opened a new 
Technology Acquisition Center (TAC) located in Ft. Monmouth, NJ. The 
TAC is comprised of experienced information technology acquisition 
professionals. Many issues associated with contract award and 
administration often center on poor requirements definition. The Office 
of Acquisition and Logistics has realigned its functions to better 
serve its internal customers in executing contracting requirements and 
will be instituting a program advocacy group which will assist program 
offices with requirements definition and planning. The TAC also 
contains an Acquisition Rapid Response Office, available to assist 
customers the requirements development. VA anticipates regionalizing 
construction facilities and management execution to place the expertise 
where the workload is located. In the area of training, in August 2008, 
VA opened the first acquisition academy outside of the Department of 
Defense (DoD) to train VA acquisition professionals in three areas. The 
training programs include: (1) contracting intern program; (2) 
acquisition certification in contracting, and program/project 
management; and (3) contracting officer's technical representatives 
training. In the area of technology, VA recently implemented eCMS that 
is fully operational and mandated for use by all contracting officers 
for solicitation, award, and contract administration. VA is also 
deploying data mining and business intelligence capabilities to: 
improve transparency, measure on-time completion, support decision-
making and promote acquisition initiatives such as strategic sourcing. 
In addition, VA has already undertaken initiatives to implement within 
eCMS many of the recommendations of the OIG reports. These changes 
enhance accountability and ensure that key processes are standardized 
across the VA. VA has made changes to its organization and acquisition 
models. These changes include streamlining the contracting functions, 
implementation of contract review boards, integrated product teams, and 
OMB Circular A-123 business reviews. While VA faces many challenges, 
the Office of Acquisition, Logistics, and Construction is working 
diligently with its customers to streamline the procurement processes, 
identify gaps and resolve those in a collaborative manner. Concurrently 
the process to refine acquisition policy and oversight processes is 
ongoing.

    Question 30: The VA OIG and an independent consulting firm (2008) 
have found the same problems. Why have none of the recommendations 
regarding: solicitation, award and contract administration been 
enacted?

    Response: VA conducted a review of its OIG reports with procurement 
related recommendations. In 2009, OIG issued 8 reports with 22 
recommendations relating to procurements, of which 14 are still open. 
In 2008, OIG issued 12 reports with 54 recommendations relating to 
procurements, of which 15 are still open. In 2007, 7 reports were 
issued with 19 reports of which 2 are still open. The summary of these 
results indicate that VA is implementing and monitoring recommendations 
and will do so until they are resolved. VA has also implemented within 
eCMS many features to enforce procurement recommendations contained 
within the OIG reports, and will continue to pursue implementation of 
more systematic policy enforcement methods allowing for centralized 
oversight of all contract actions.
    Due in part to these findings, we are currently making significant 
changes to procurement processes across the VA. For instance, for the 
first time beginning this year, VA is conducting OMB Circular A-123 
reviews of all procurement organizations across the enterprise. These 
bi-annual reviews will provide a strategic view of training, personnel 
and organizational shortfalls that must be addressed to improve the 
total VA procurement mission. Concurrently, procurement management 
reviews will be conducted for the purpose of enforcing compliance with 
applicable procurement laws and regulations. VA is also improving 
procurement training, with the standup of the acquisition academy in 
Frederick, MD. This academy will train contracting officers, program 
managers and contracting officer technical representatives. The academy 
is the first of its kind outside of DoD. Last, we have restructured 
procurement authority across the VA, reducing the numbers of heads of 
contracting activity from 33 to 6, which we believe will significantly 
improve command and control of the procurement workforce across the VA.

                                 
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