- CONTRACTS AND CONTRACTING POLICY AT THE U.S. DEPARTMENT OF VETERANS AFFAIRS

[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\
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.

---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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.

---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\18\ See http://www.census.gov/econ/sbo/02/cbosof.html.
---------------------------------------------------------------------------
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:

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:

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:

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.