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




 
 VOCATIONAL REHABILITATION EMPLOYMENT CONTRACTS FOR VETERAN COUNSELING

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

                                HEARING

                               before the

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                                 of the

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

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 30, 2009

                               __________

                           Serial No. 111-40

                               __________

       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

                               __________

                             July 30, 2009

                                                                   Page

Vocational Rehabilitation Employment Contracts for Veteran 
  Counseling.....................................................     1

                           OPENING STATEMENTS

Chairwoman Stephanie Herseth Sandlin.............................     1
    Prepared statement of Chairwoman Herseth Sandlin.............    34
Hon. John Boozman, Ranking Republican Member.....................     2
    Prepared statement of Congressman Boozman....................    34

                               WITNESSES

U.S. Department of Veterans Affairs, Ruth A. Fanning, Director, 
  Vocational Rehabilitation and Employment Service, Veterans 
  Benefits Administration........................................    21
    Prepared statement of Ms. Fanning............................    64

                                 ______

Heritage of America, LLC, Glendale, AZ, Patrick F. Chorpenning, 
  President and Chief Executive Officer..........................     4
    Prepared statement of Mr. Chorpenning........................    35
Paralyzed Veterans of America, Richard Daley, Associate 
  Legislation Director...........................................    16
    Prepared statement of Mr. Daley..............................    55
Sygnetics, Inc., Rochester Hills, MI, Anthony Tarkowski, 
  President/Chief Executive Officer..............................     5
    Prepared statement of Mr. Tarkowski..........................    50
Veterans Entrepreneurship Task Force (VET-Force), Joe Wynn, 
  Treasurer, President, Veterans Enterprise Training and Services 
  Group (VETS Group), and Legislative Liaison, National 
  Association for Black Veterans.................................    17
    Prepared statement of Mr. Wynn...............................    57

                       SUBMISSION FOR THE RECORD

Disabled American Veterans, John Wilson, Associate National 
  Legislative Director, statement................................    66

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:

    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Patrick F. Chorpenning, President and Chief Executive 
      Officer, Heritage of America LLC, letter dated July 31, 
      2009, and response letter dated September 9, 2009..........    69
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Anthony Tarkowski, President/Chief Executive Officer, 
      Sygnetics, Inc., letter dated July 31, 2009, and response 
      letter dated September 9, 2009.............................    74
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Richard Daley, Associate Legislation Director, Paralyzed 
      Veterans of America, letter dated July 31, 2009, and 
      response letter dated September 10, 2009...................    77
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Joe Wynn, Treasurer, VET-Force, letter dated July 31, 2009, 
      and Mr. Wynn's responses...................................    81
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Ruth Fanning, Director, Vocational Rehabilitation and 
      Employment Service, U.S. Department of Veterans Affairs, 
      letter dated July 31, 2009, and VA responses...............    83


 VOCATIONAL REHABILITATION EMPLOYMENT CONTRACTS FOR VETERAN COUNSELING

                              ----------                              


                        THURSDAY, JULY 30, 2009

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

    The Subcommittee met, pursuant to notice, at 2:43 p.m., in 
Room 340, Cannon House Office Building, Hon. Stephanie Herseth 
Sandlin [Chairman of the Subcommittee] presiding.

    Present: Representatives Herseth Sandlin, Perriello, Adler, 
Kirkpatrick, Teague, Boozman, Moran, and Bilirakis.

        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 Vocational Rehabilitation and 
Employment Contracts for Veteran Counseling will come to order.
    In late June of this year, Committee Members were notified 
by Heritage of America (HOA) expressing concern over the U.S. 
Department of Veterans Affairs' (VA's) Vocational 
Rehabilitation and Employment (VR&E) National Acquisition 
Strategy (NAS) for counseling services. In their letters to 
Congressman Harry Mitchell and Committee Ranking Member Steve 
Buyer, Heritage of America raised concerns that include varied 
referral, evaluation, reporting, and invoicing from regional 
office (RO) to regional office that make it difficult for 
contractors to implement the VA's National Acquisition 
Strategy; and need to improve timeliness of payment for 
services rendered and calculation of payments.
    We have been informed by Subcommittee staff that the 
Department of Veterans Affairs did not use its option to renew 
any of the eight contracts in its National Acquisition 
Strategy. Instead, the VA decided to use an interim strategy 
that will end later this year, at which point the VA plans to 
implement a new National Acquisition Strategy.
    This Subcommittee seeks to obtain feedback from prime 
contractors and stakeholders regarding areas of concern and 
their recommendations to improve VA's National Acquisition 
Strategy for counseling services. Furthermore we seek to 
understand the reasons that led to the VA not using its 1-year 
contract renewal option and highlight lessons learned from the 
previous national strategy. We want to ensure that the 
Administration is aware of all concerns to prevent the same 
pitfalls that have been experienced by recent contractors.
    I look forward to hearing from all of our witnesses here 
today as we seek to ensure our Nation's injured veterans are 
provided timely services to achieve their employment goals.
    I now recognize the Ranking Member of this Subcommittee, 
Mr. Boozman, for his opening remarks.
    [The prepared statement of Chairwoman Herseth Sandlin 
appears on p. 34.]

             OPENING STATEMENT OF HON. JOHN BOOZMAN

    Mr. Boozman. Thank you, Madam Chair.
    My agenda for this hearing is to determine that VA is 
properly administering the Vocational Rehabilitation and 
Employment Contract Counseling Program. The only measure I used 
to make that determination is whether the program is meeting 
the counseling needs of veterans. I want to make it clear that 
I have no stake in who VA selects to deliver services to 
veterans. Whether VA elects to award one contract or 50, VA 
must execute their side of the contract properly. They must 
hold their vendors accountable and we must do the same for VA.
    I am sure you are aware of the concerns expressed by some 
of the contractors regarding VA's administration of the 
recently terminated National Acquisition Strategy contracts 
issued last July. I am also sure you have heard VA's side of 
the story. For me, I believe that there have been ample 
mistakes by both sides.
    So where do we go from here? I understand that VA intends 
to award multiple short-term contracts via 19 subregions and 
will not extend the terminated contracts for a similar amount 
of time.
    It is reasonable to ask whether extending current contracts 
or issuing two sets of new contracts within 6 months is the 
better way to go. It is also reasonable to ask whether VA's--
the same contracting staff that had difficulty managing 8 
contracts can manage 50-plus contracts.
    Assuming for the moment that the contracts you assessed 
them on are reasonably accurate regarding things like 
inconsistent adherence to the terms of the contract by local VA 
officials, where does our duty lie? VA has not presented 
evidence other than anecdotal statements to staff that one or 
more contractors performed inadequately.
    Madam Chair, having reviewed the testimony, I cannot 
determine who is right. Maybe both sides are right. The 
contractors make the allegations and VA denies them and 
contends poor performance by some of the vendors.
    Therefore, I believe, there should be a complete review of 
the contract by U.S. Government Accountability Office (GAO) or 
the Inspector General (IG) since we are not staffed to conduct 
such an extensive investigation.
    In the meantime, I believe the eight prime contractors 
should continue under short contract extension until the new 
national contract is awarded.
    VA's short-term strategy that spreads contract management 
back out to 57 regional offices for a 6-month period of 
performance with all the incumbent problems doesn't seem to 
make a lot of sense.
    Regardless, we have oversight of the bigger issues, whether 
VA has learned any lessons from the failure of the NAS contract 
and what they are doing to prevent a repetition.
    What are the lessons learned? Will there be sufficient 
training for both VA staff and vendors? If inconsistency and 
administration rises, how will they enforce standardized 
administration? Does VR&E have the right people in the right 
places? Does VA have a sound acquisition strategy? How will 
contractors be evaluated on their performance? And finally, how 
shall we evaluate VA on its performance in the execution of the 
next contract counseling program?
    Madam Chair, over the years, the Veterans' Affairs 
Committee has not devoted a lot of time reviewing VA 
acquisition programs. Unlike the U.S. Department of Defense 
(DoD), VA does not develop big systems outside of information 
technology, but they do spend $15 billion of our citizens' 
taxes and I believe it is incumbent on us to oversee that 
spending to ensure veterans get value for these dollars, 
whether it is a program administered by VR&E, Education or any 
other arm of VA.
    In the end, except through legislation, we cannot force VA 
to change its short-term strategy, but the Committee can learn 
from this unfortunate situation. And as I said earlier, I look 
forward to a detailed study of this particular process. 
Hopefully, VA will, too.
    In the meantime, I guess the lesson for the Business 
Committee is that when you do business with VA or any 
Government agency, make sure all of the contractual issues are 
resolved, including, in this case, how the Government views 
your assumptions, how administrative procedures will be handled 
and how to resolve conflicts before it is too late.
    And with that, I yield back.
    [The prepared statement of Congressman Boozman appears on 
p. 34.]
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    I would like to welcome all of our panels testifying before 
the Subcommittee today, and I want to remind all of our 
panelists that your complete written statements have been made 
part of the hearing record, so I want you to limit your remarks 
to 5 minutes.
    We are going to have a series of votes and a classified 
briefing later on this afternoon. We are going do our best to 
keep everyone to their 5 minutes so that we have plenty time of 
questions. We will submit questions in writing if we run out of 
time today.
    Joining us on our first panel, if they could come up as I 
am introducing them, Mr. Patrick Chorpenning, President and 
Chief Executive Officer of Heritage of America, and Mr. Anthony 
Tarkowski, President of Sygnetics, Incorporated.
    Gentlemen, welcome to the Subcommittee. We appreciate, Mr. 
Chorpenning, that you have traveled here from Arizona to be 
with us today and, Mr. Tarkowski, I know that you flew in from 
Michigan for this important hearing. Thank you, both, for being 
here.
    Mr. Chorpenning, we will start with you. You are recognized 
for 5 minutes.

   STATEMENTS OF PATRICK F. CHORPENNING, PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, HERITAGE OF AMERICA, LLC, GLENDALE, AZ; AND 
     ANTHONY TARKOWSKI, PRESIDENT/CHIEF EXECUTIVE OFFICER, 
              SYGNETICS, INC., ROCHESTER HILLS, MI

              STATEMENT OF PATRICK F. CHORPENNING

    Mr. Chorpenning. Madam Chairman, Ranking Member Boozman, 
and Members of the Subcommittee, on behalf of Heritage of 
America, initially, I would like to just express our 
appreciation for you holding this hearing today.
    I also want to recognize Chairman Filner, as well as 
Ranking Member Buyer and other Members who have written to the 
VA about the situation faced by the prime contractors under the 
National Acquisition Strategy contract for VR&E.
    Heritage of America is one of eight of the contractors 
under the National Acquisition Strategy. We are a service-
disabled, veteran-owned small business which was awarded a 
contract to provide services in 44 States, the remainder of the 
entire Western Hemisphere, along with the Pacific rim 
countries, including the countries of Australia and New 
Zealand.
    The problems you hear about today can be traced directly 
back to an absence of leadership and direction given to the 
regional officers and the VR&E officials from the VA Central 
Office. The NAS contract has worked relatively well in many 
parts of the country as listed in my written testimony.
    In those locations, regional managers have seemingly taken 
to heart the processes and the procedures laid out in the NAS 
agreement and sincerely worked with the prime contractors to 
resolve problems, provide quality service to our veterans, 
while managing through the typical learning curve involved with 
any new business relationship.
    In those parts of the country where the NAS approach has 
not worked well, it is because local officials clearly did not 
like the idea from the start, resented their loss of power over 
the contracting process and local vendors and believed they 
could ignore the processes and the procedures laid out in the 
NAS agreement with impunity.
    Timeliness obtainment for service is so inconsistent that 
some ROs we have no delay at all, while in others, delays 
exceeding 100 days are standard with no explanation of why 
payments are not made or denied within the 30 days as required 
by the contract and in law.
    For payment tracking purposes, the contract requires the 
prime contractors to assign a number to each invoice. 
Unfortunately, the VA did not institute a corresponding 
information management system to track those invoice numbers 
within the VA. In fact, Central Office did not even require the 
ROs to use the same invoice forms.
    Heritage of America's aging accounts receivable total has 
been running approximately $1.3 million a month over the past 3 
to 4 months. As of July the 27th, it has now crept over to $1.4 
million in accounts receivable.
    A large and growing portion of these aging invoices are 
more than 90-days old. This ongoing situation has made it very 
difficult for Heritage of America to meet its responsibilities 
to subcontractors and our counselors on a timely basis.
    Toward the end of the contract base year, we had many 
counselors refusing to accept new case referrals because they 
had not been paid for work performed months earlier. On 
multiple occasions, and I underscore ``multiple occasions,'' 
this has been brought to the attention of the contracting 
officer, the Director of VR&E and even to the level of the 
Under Secretary for Benefits, but still today remains a 
critical problem.
    Another ongoing problem pertains to the RO personnel 
undermining the relationships between Heritage of America and 
its subcontractors. The NAS agreement stipulates that VA 
officials are not to communicate with subcontractors regarding 
contract matters. However, this is a very large problem, 
especially in those States where implementation of the NAS 
agreement has not gone well.
    Regional officials have even gone so far as to tell the 
contractors that Heritage of America has been paid in full for 
cases when they have no way of knowing this to be true or not. 
It has been suggested to subcontractors that if they have, just 
have a little more patience, that the base year will conclude 
and that the ROs will be able to deal directly with the 
subcontractors as they have in the past.
    Madam Chairman, in conclusion, I would just ask that the 
Subcommittee and all Members of the full Committee strongly 
urge the VA to extend the NAS prime contracts by 6 months so 
that the veterans can continue to be served with the least 
amount of disruption and that contractors in the VA can work 
out remaining difficulties in a possible fashion if we can.
    I put myself at the Subcommittee's disposal for any 
additional hearings you may decide to have and will provide any 
additional information you may need or responses for the record 
to any issues raised by the VA witnesses today.
    HOA also welcomes a thorough GAO investigation to begin as 
soon as possible for this particular contract year with the 
performance evaluations on both sides of the equation, both as 
far as the prime contractors are concerned, as well as the VA.
    I also hope the Subcommittee would accept statements for 
the record from any of the prime contractors that were not able 
to appear here today.
    Madam Chairwoman, on behalf of Heritage of America, I thank 
each and every one of you for your understanding, consideration 
and I would be happy to answer any questions from you.
    [The prepared statement of Mr. Chorpenning appears on p. 
35.]
    Ms. Herseth Sandlin. Thank you. Thank you for your 
testimony.
    Mr. Tarkowski, you are now recognized for 5 minutes.

                 STATEMENT OF ANTHONY TARKOWSKI

    Mr. Tarkowski. Thank you, Madam Chairwoman, Ranking Member, 
Mr. Boozman, and the other Representatives.
    I represent Sygnetics, Incorporated, which is a service-
disabled, veteran-owned small business. My business enjoys 
assisting people and this contract is one I was extremely proud 
of. We were performing services in 19 States under the 
Department of Veterans Affairs National Acquisition Strategy 
Vocational Rehabilitation and Employment contract.
    The Department of Veterans Affairs had litigation brought 
against it by Houck, Limited. After the outcome was decided in 
that case, VA simply made a decision to not provide the option 
years to the current eight contractors. The VA chose to not 
execute the option years, which penalizes all the businesses 
that have spent a great deal of time and effort winning and 
performing successfully under this current contract.
    While performing under the current contract, we have had to 
overcome many obstacles that the VA constructed that were not 
part of the original solicitation. This caused considerable 
financial outlays that without the continuance of this contract 
will cause severe financial harm.
    Sygnetics has worked through many of these hurdles during 
the first physical year of the contract while providing 
exceptional service to veterans.
    Now, that we are able to further increase our service to 
veterans and see a return on the investment, the VA seems 
satisfied to disrupt the entire process. The VA administration 
of this contract has been particularly unconscionable as 
applied to the companies that won this award, since most of 
them are small business and many are service-disabled, veteran-
owned businesses, which the VA should be helping succeed on 
behalf of veterans, rather than subjecting them to bureaucratic 
roadblocks.
    Some of the small businesses would have liked to have 
testified to this contract today, but my understanding is that 
there was undue hardship and financial hardship.
    We have been informed on a number of occasions by our 
counselors that the VR&E officers' intention was to make this 
contract fail. Here are some of the problems encountered.
    After award, we requested a debriefing and were told we 
would receive one. We have never been given that debrief.
    Although the background investigation process, vetting, was 
mentioned in the solicitation, no amount was provided for this 
process, nor was a time mentioned for how long this would take. 
Regional offices had little or no direction in the background 
investigation process, so we developed a seven-step process to 
get counselors approved.
    Startup costs were huge with equipment, scanning, printing, 
office spaces, et cetera, running well over $300,000 for us on 
top of labor issues.
    Timeliness of payments for services have been great in some 
areas and some areas are refusing to pay us at all.
    Calculations of payments on quoted pricing are not being 
honored and causing invoices to be returned due to 
misunderstanding by the VR&E officers.
    Travel, again, in our proposal we made very clear 
assumptions as to what would be required for travel 
reimbursement if VA were to accept our bid. Travel 
reimbursement has been resolutely denied by VA.
    There have been several areas causing slippage and 
timeliness on files being processed. Reports have been returned 
for corrections, which have been quality assured by two former 
VR&E officers. Responses from many VR&E offices have been very 
limited. Several of the offices would not provide time for 
training to us or overcome challenges that arose.
    Qualifications necessary for our counseling staff were 
different from office to office. The vetting process slowed us 
significantly due to length of approval.
    Some of the VR&E officers did not provide contact 
information and they stated that the veteran did not sign 
release forms for information and, therefore, VA could not 
release information to us, so we were held accountable for 
those files not being timely.
    Reporting has been stipulated differently by the offices. 
There are over 40 formats of these reports in our company 
alone.
    The most important issue in all of this is the veteran. 
Sygnetics, Incorporated has been providing value-added services 
by supplying self assessment of Traumatic Brain Injury on files 
only to be instructed to remove the data from the report and 
re-date our invoices because the VR&E counselor did not want to 
see that information on a report. It is hard to believe that VA 
was not interested in Traumatic Brain Injury information.
    If communication lines were open between the Contracting 
Officer's Technical Representative (COTR), the contracting 
officer and the suppliers, as well as the VR&E officers and 
reports were provided to Congress on a 6-month basis in the 
future, I believe it would serve the veteran community well.
    This contract could be modified to correct the 
difficulties, as many of them have already been corrected by 
Sygnetics, and allow these small businesses to retain what they 
have already fought to achieve. There simply is no reason to 
rebid at a great cost to small business as well as the 
Government when, in fact, this contract could serve veterans, 
VA and the small businesses with just a few modifications.
    Time is of the essence since these services have already 
been halted for veterans. We are requesting that this 
Committee, prior to departing for recess, suggest to VA that 
they extend this contract for 6 months to make certain that 
these Congressionally-mandated services are provided to 
veterans with only a 1-week break in service.
    Madam Chairwoman, we would be more than happy to provide 
answers to any questions the VA raises during its testimony. We 
will remain here to provide that information if asked.
    I would like to thank you, Madam Chairwoman and the Ranking 
Member, Mr. Boozman, and the other representatives for taking 
the time to have this hearing.
    [The prepared statement of Mr. Tarkowski appears on p. 50.]
    Ms. Herseth Sandlin. Thank you, Mr. Tarkowski.
    I would like to start with a question for both of you. How 
early did these problems begin?
    Mr. Chorpenning. Madam Chairwoman, in regard to Heritage of 
America, the problems basically began almost immediately. We 
informed the Director of VR&E at the conference we had after 
the contract was issued in August of last year, before--I mean 
in----
    Ms. Herseth Sandlin. Was that the 5-day workshop?
    Mr. Chorpenning. The 5-day workshop, as to how long it was 
going to take to get individual counselors through the security 
process that the VA had put into place in Little Rock, 
Arkansas, and we told them it would take anywhere from 2 months 
or more, based on the experience that we have had in the past.
    We were told that we didn't know what we were talking 
about, and what it would take is basically 1 week, okay, was 
the comment that was made by the Director of VR&E. In reality 
on an average, it took over 2 months.
    As a result of that, even though the contract went into 
effect on July 21st of 2008, the VA did bridge contracts with 
the existing contractors that they had prior to the contract 
being issued, and those bridge contracts in many cases carried 
all the way through to the end of December because we had to 
get the counselors through that process.
    Even after----
    Ms. Herseth Sandlin. If I may interrupt just 1 second.
    Mr. Chorpenning. Yes, ma'am.
    Ms. Herseth Sandlin. At the 5-day--I was going to ask you 
if you had brought your concerns and the many problems you have 
articulated to the attention of leadership in the Washington, 
DC, office of the VA. But what you're telling me is that at the 
5-day workshop you informed the Director of VR&E of an 
anticipated problem?
    Mr. Chorpenning. Yes, ma'am. And it started at that point. 
You know, Mr. Tarkowski, as well as Mr. Kiley with HOA, raised 
those issues at that conference and we were told that we didn't 
know what we were talking about.
    As a result of that, we really, even though that contract 
initially started the 21st of July, we didn't get our first 
case assigned to us from the VA until some time in mid-
November. We didn't start getting cases assigned to us in any 
numbers, in the sense of being able to really operate our 
business plan, until the middle to the latter part of December.
    So Heritage of America, for all practical purposes, has had 
probably 5, maybe 5\1/2\ months of business with an initial 
investment of little over $2 million, and I think what the VA 
is doing is very, very disingenuous in the way that they are 
presenting what has happened because we have asked over and 
over and over again to have questions answered. Never heard a 
single word from them.
    We turned in weekly reports that would go unread, the e-
mails that we were asked to provide, no questions, response, 
nothing.
    Ms. Herseth Sandlin. Mr. Chorpenning, do you have 
documentation? Did you submit anything in writing or by e-mail? 
Do you have anything that you can provide this Subcommittee as 
it relates to your communication?
    Mr. Chorpenning. Yes, ma'am. I literally have boxes of e-
mails that were sent to the contracting officer that had been 
sent to the Director.
    Ms. Herseth Sandlin. Director at the regional office or 
Director of VR&E?
    Mr. Chorpenning. No, Director of VR&E. I'm sorry.
    Also, e-mails and communications that have been sent to the 
Under Secretary for Benefits as far as Patrick Dunn is 
concerned, and asking, requesting for a period of months to 
have a meeting with the Under Secretary dealing with these 
issues in the sense that Heritage of America had about 80 
percent of the contract.
    Months would go by and no response. Phone calls, no 
response. I have all of that documentation. I finally sent a 
letter in reference to the accounts receivable issue to see if 
somebody could start paying, you know, for the services that 
were provided. And I got the response back 2\1/2\ months later, 
okay, on a letter that was sent on the 15th of May, back some 
time just within the past couple of weeks. And what they did is 
went through what I gave them in May and said, well, these have 
been paid. Well, you know, it's 2 months old at that point in 
time and our accounts receivable still continues to run to $1.3 
million.
    The other thing that is frightening that we have raised 
with the VA over and over again is our finance, our 
information, okay, with our subcontractors. They have shared 
that information with our subcontractors and now they expect us 
to go out and put in bids and compete with them when everybody 
knows what our pricing structure is.
    I mean, it is absolutely--it is some of the most, some of 
the most disgusting business practices I think anybody could 
possibly witness. I mean, no leadership whatsoever, zero 
leadership.
    Ms. Herseth Sandlin. My time has ended. I am going to come 
back with further questions. But before I turn it over to the 
Ranking Member, do you have anything you would like to add, Mr. 
Tarkowksi?
    Mr. Tarkowski. Well, we have essentially the same problems 
with approval of counselors. We absolutely got our first billed 
file in November and, as a matter of fact, you know, we did get 
some files during the year, but our first file was in November. 
The VR&E counselors were told not to discuss anything with us 
until the meeting that they had in August, which was the 
beginning of the entire program, essentially, after they went 
through their review of what was supposed to be presented.
    And we certainly went to that meeting. My program managers 
all attended, et cetera. Everybody was there. And, you know, we 
were told that the VR&E counselors weren't to talk with us, 
that the approval process would be very, very quick, which it 
was not. It took us at least 2 months to get people approved, 
and in some cases more time, a few cases as we progressed 
started to get better. And we shaped it up. We actually changed 
the program a little bit and set up six or seven steps 
depending on the region to allow the counselors to be approved 
much quicker and it started working much better for us after 
that point, but it did take time to resolve those issues in 
order to make that all work.
    So, you know, all in all, we had the same kind of invoicing 
issues. We have over $400,000 currently that's over 30 days 
past due. I have sent AR sheets over and I had some discussion 
with Ms. Fanning today and, you know, she said they are going 
through those sheets and we are trying to resolve those issues.
    So there are a number of issues that have come up, though, 
and we have tried to resolve a lot of those, and I have told, 
you know, my people, you know, I am more than willing to sit 
down and resolve these issues, let us work through them, let us 
figure out a way to make this work for everybody, for VA, for 
the veterans, and everybody. But, you know, instead, they just 
didn't do the option year, which just doesn't seem fair, with 
all the money we have spent.
    We have spent all of this--went out and got an office in 
San Diego because that was our biggest area that we were 
handling and we went out and tried to develop a lot of rapport 
with people and make sure that we were satisfying every need. 
Even when we weren't paid travel, we gave all the money to 
counselors so that they could go up into the areas that were 
close to the Canadian border, from the Dakotas, et cetera, only 
to have those reports rejected after the VR&E officers reviewed 
them. Our VR&E officers that are retired reviewed those 
reports.
    Those reports were still rejected. Our invoices were 
rejected, and we were made to re-date our invoicing and made to 
redo the reports, which is just absolutely ridiculous. And so 
it pushed off our money and my banking relationships are 
strained.
    Ms. Herseth Sandlin. Thank you, Mr. Tarkowski.
    Mr. Boozman.
    Mr. Boozman. Thank you very much, Madam Chair.
    In the interest of time, I want to ask you two or three 
things all at the same time and then you can think about it 
while I am asking them. And then I would really just like, 
again, if we can have a brief comment, then we cover a lot of 
ground.
    But, first of all, despite VA's legal restrictions on 
executing the option year, in your opinion does VA have the 
legal authority to issue a short-term extension to some or all 
NAS contractors? Okay. So think about that.
    Now, I would like to learn a little bit about the training 
that you received. I would like for you to describe the 
training that you and your staff received as part of the 
National Acquisition Strategy contract. And then, also, did you 
receive copies of the Acquisition Strategy Contract Manual, and 
did you find it helpful?
    And then, lastly, and I think that you touched on it just a 
few minutes ago. I would really like to know at the time you 
bid on the Strategy Contract, how many counselors did you 
employ and in how many States were they located? In other 
words, as you geared up, how did this affect you in gearing up 
and how has it affected you going forward?
    Mr. Tarkowski. All I could tell you, as far as counselors, 
we are well over 100 individual independent counselors, small 
businesses if you will, that we have employed, that we have 
gotten verification back and they are actually doing files for 
us currently. I am trying to figure out, you know, the other 
question.
    Mr. Boozman. And how about--so you added 100 or----
    Mr. Tarkowski. We brought on over 100 independent 
businesses as counselors. The majority of them are out in 
California because of the workload out in California. But we do 
have independent small businesses working for us all over the 
United States in our 19 States and we are satisfying the need 
that way.
    Mr. Boozman. How about the short-term extension?
    Mr. Tarkowski. I'm sorry?
    Mr. Boozman. The first question I asked about the short-
term extension of the contract?
    Mr. Tarkowski. Right. My legal counsel has informed me that 
as far as he is concerned, this contract certainly can be 
extended for 6 months.
    Mr. Boozman. Do you agree?
    Mr. Chorpenning. Yes, sir, I agree. Our legal counsel here 
in the Washington area, basically, has just recently dealt with 
that issue and concurs.
    Mr. Boozman. And the training you received early on?
    Mr. Chorpenning. I am sorry, sir?
    Mr. Boozman. The training that you received early on?
    Mr. Chorpenning. Training? The week that we had in--the 
thing is, the training we received in Baltimore was very good. 
The problem is, the VA, at the end of the 5 days decided they 
weren't going to implement any of them.
    Mr. Boozman. Okay.
    Mr. Chorpenning. And just let--let me just--just for a 
second, sir, if I may. I mean, it was set up in such a way that 
all the VA officials, VR&E officials, were kept in one room and 
all the contractors were kept in the other room for the entire 
5 days and we were not allowed to even get together and discuss 
anything until the morning of the last day. That is an absolute 
fact.
    The other thing is, we do have a copy of the book that was 
handed out. The workbook basically said that any form that you 
need, you in fact use it out of this book. We have gotten to a 
point that we were up to using, I think, somewhere around 11 
different types of invoices just to bill the VA. We got it down 
to two.
    Tony mentioned the fact that they had 40-some different 
reports that they had to do, different forms. We have over 50. 
And then as far as employees are concerned, part of that 
contract basically says that if it is a set aside area, you 
have to put office space in those areas, and at the same time 
by the end of the first year, 51 percent of your employees 
should be--or 51 percent of the counselors in those areas we 
need to tell them the process we are using to hire at least 51 
percent.
    Right now we have in excess of full time employees and 
subcontractors in excess of 600 counselors.
    Mr. Boozman. Six hundred additional?
    Mr. Chorpenning. Yes, sir.
    Mr. Boozman. Okay. Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    Just a few additional questions, and then I am going to 
have a number of questions that I will submit in writing. 
Again, we have gotten your written testimony, your statements, 
your responses to my first question. I want to try to delve 
down here just a little further with you.
    Mr. Chorpenning, you state that regional office staff 
requested that cases be in batches of 20 or less, correct?
    Mr. Chorpenning. Madam Chairwoman, it would depend. I mean, 
there was no consistency throughout the VA on anything.
    Ms. Herseth Sandlin. But at times were regional office 
staff requested that cases be batched in 20 or less?
    Mr. Chorpenning. That is correct. Yes, ma'am.
    Ms. Herseth Sandlin. Do you think that's because the VA 
lacked proper, adequate staff at the regional office level? 
What do you think the reason for that was?
    Mr. Chorpenning. Madam Chairwoman, I have no idea. I can 
tell you in all honestly, I cannot follow any of the rational 
reasoning over the past year of any business practice that any 
of the regional offices had where things would constantly 
change. There was no consistency throughout the entire area.
    Other than in those areas where virtually no VR&E services, 
and especially Chapter 36 services were ever located, in those 
States, as I pointed out in my written testimony, you know, we 
had great success.
    Where we had our biggest problems, and this is the reason I 
strongly, strongly encourage a GAO study, but the areas where 
we had our biggest problems are the exact same areas that the 
Inspector General and the GAO has pointed out to the VA in the 
last study that encouraged them to go to a national 
Acquisitions Strategy, they are still the exact same States and 
the VA has taken no steps whatsoever to stop it.
    And unfortunately, out of the 44 States that we have, we 
have most of those States.
    Ms. Herseth Sandlin. Okay. Mr. Chorpenning, do you have a 
copy of the letter from the Vocational Rehabilitation 
counselors in the Northwest which evidently predicted that 
Heritage of America was going to fail even before it began to 
provide contract services or counseling services?
    Mr. Chorpenning. I am sorry, ma'am. I didn't----
    Ms. Herseth Sandlin. Is there a letter, is there some sort 
of documentation to the charge that there were VR&E counselors 
in the Northwest that predicted HOA's failure before you even 
began to offer services?
    Mr. Chorpenning. Madam Chairwoman, we do have that 
documentation and it was, in fact, a VA employee, that it was. 
And it is one of those original States, okay, and that letter 
was sent to their professional association as far as the 
American Counseling Association, and in the process it was 
shared with us and it is from that area of Washington and 
Oregon which was one of the very first, one of the very first 
States.
    In the letter where we were paying for initial assessments, 
anywhere from $55 to $75 an hour, she actually refers to it as 
Walmart wages.
    Ms. Herseth Sandlin. If you could provide us a copy of the 
letter----
    Mr. Chorpenning. Yes, ma'am. I certainly can.
    Ms. Herseth Sandlin. And if you could also provide us names 
of regional office staff who refused to provide instruction to 
contractor personnel on criteria for initial evaluations?
    Mr. Chorpenning. Yes, ma'am. I certainly can do that as 
well.
    [Mr. Chorpenning subsequently provided the information, 
which is included at the end of the post-hearing questions and 
responses for the record, which appear on p. 73.]
    Ms. Herseth Sandlin. Mr. Tarkowski, I know in response to 
my earlier question, you did communicate the concerns that you 
were having to either contracting officers or regional office 
personnel. Did you----
    Mr. Tarkowski. Well, what happened, originally, my program 
managers went back to the VR&E officers and had quite a 
discussion, including my Chief Operating Officer, and tried to 
resolve most of the problems. And then what they did was they 
turned around and went back to the contracting officer and the 
COTR, et cetera, and left phone messages and tried sending a 
couple of e-mails and that with no return calls, so it was very 
difficult to communicate. It seemed like anytime after about 
January it made it very, very difficult.
    In the very beginning of the contract, we did receive a 
couple of e-mails, but you know, it was related to a couple of 
issues, but it wasn't pertinent to this information now.
    But what happened was after about January is when, in fact, 
there was no contact any further. It was like they had already 
made up their mind that they weren't going to do the option 
anyway and it would just go away.
    Ms. Herseth Sandlin. Okay. How often, Mr. Tarkowski? Do you 
have it documented where a Vocational Rehabilitation, a VR&E 
employee, gave a case to one of your counselors and did that 
violate the contract?
    Mr. Tarkowski. I'm not certain that that occurred. I would 
really have to check with my program manager to find out if 
that happened from my end. I believe it was Pat that had that 
happen where they actually gave files directly to a counselor.
    Ms. Herseth Sandlin. Okay. I will go back and review the 
written testimony we received today, but I think that may have 
been included.
    Mr. Tarkowski. Yeah. And I believe that in the beginning 
that there was what we will call an incident where that 
occurred. But I went back to my program manager and told them 
that I wanted it straightened out and that, and then after we 
went back and addressed the issue, then it did not seem to 
happen anymore.
    So you know, I think it was only one or two times right in 
the very beginning, and then after that, it was straightened 
out as I said.
    Ms. Herseth Sandlin. Okay. A final question for both of 
you, and again I will have others that I will submit to you in 
writing. As Mr. Boozman stated in his opening statement, and as 
you have reiterated in your verbal testimony, there are a lot 
of problems here that remain. So I am wondering, and I don't 
mean to sound skeptical, how this is going to unfold over the 
next 6 months. Can you explain why you are seeking to extend 
this contract when there seems that there are so many problems 
associated with it?
    Mr. Chorpenning. Madam Chairwoman, I was medically retired 
from the United States Marine Corps in 1970. I am a product of 
VR&E when it was Vocational Rehabilitation and Education. I had 
the privilege to serve on Secretary Principi's task force when 
we redid VR&E as he referred to it as the crown jewel. And the 
only reason that the VA really exists is to take care of those 
veterans that have been severely wounded and hurt, all right.
    I have had the privilege to be the Director of the Arizona 
Department of Veterans' Services for a period of 9 years, 
taking care of over 450,000, almost 500,000 veterans as the 
advocate for them before the State of Arizona.
    These veterans need an advocate.
    Ms. Herseth Sandlin. No, I understand. I understand.
    Mr. Chorpenning. And we are the advocate. We don't have to 
protect what goes on in the bureaucracy.
    Ms. Herseth Sandlin. I understand. Look, I am not 
advocating one thing or the other. I haven't predetermined 
anything. What I am trying to figure out in practice----
    Mr. Chorpenning. We can do it. We can do it, and if you 
look at----
    Ms. Herseth Sandlin. You can do it even though you are 
having all these problems with the VA? You think those are 
going to be resolved in a way that doesn't deny services to 
veterans?
    Mr. Chorpenning. We have worked through most of them. Yes, 
ma'am. We have worked through most of them, and if you look at 
my written testimony and you look at the recommendations, there 
are 11 points that are made in there how we can streamline this 
if we can get the VA to work with us. That is the issue, to get 
the VA to work with us, and if that happens, Tony, myself, the 
other six primes, are more than happy to work together.
    We have had the opportunity to talk with them, and as Tony 
pointed out, they couldn't be here today in many cases for 
various reasons. We are convinced we can make this program work 
because we are the disabled veterans.
    Stop and look at the leadership of VR&E and ask yourself 
how many of them are even veterans, let alone disabled 
veterans. You know, and so we are the group that is going to 
make it work if it is going to work. I mean that seriously.
    Ms. Herseth Sandlin. I understand what you are saying. I 
understand that we are going to get the testimony of the VA 
here in a couple of panels. I am not going to speak for Mr. 
Boozman, but you know, I have a lot of questions for them, too, 
in terms of an interim, their interim plan might work.
    Mr. Chorpenning. Yes, ma'am.
    Ms. Herseth Sandlin. But I am a little wary and I know that 
there has been a lot information exchanged making a push for 
extending this contract and I am not going to prejudge that. I 
haven't made a determination as to whether I think that is the 
right way to go yet. That is why we are having this hearing.
    I appreciate your response, but I think and what you are 
saying is, here are your recommendations and it is going to 
have to be up to someone to ensure that if this gets extended. 
Parties are really going to come together and work through 
these problems because the well has been poisoned here, it 
appears to me, versus a different strategy that I know that the 
VA is proposing in the interim, before adopting a new National 
Acquisition Strategy.
    Mr. Tarkowski, do you have anything to add? Then we have to 
move on to the second panel. Mr. Boozman's ready.
    Mr. Tarkowski. Absolutely, Madam Chairwoman.
    I really believe that an extension of the contract would be 
appropriate for us for a number of reasons. Our biggest reason, 
of course, is that we have put so much cash outlay into 
equipment and everything and because the contract started late.
    With that happening, it has really impacted us financially. 
If, in fact, that contract is extended, we have pretty much 
overcome many of the challenges. There still are a couple of 
areas where we need help, but we need communication and that is 
what, with the extension, what has to happen is a directive has 
to be given that there will be communication because if there 
is communication with Central Office and we can get somebody to 
sit down with these VR&E officers and say, look, you will train 
these people on what you want and you will work with them, then 
it will work.
    But it is only a couple of small pocket areas that are 
causing those difficulties for us. Most of our areas are very 
satisfied and, as a matter of fact, have increased our number 
of files every month because we are doing such a good job for 
them.
    So I very much feel that we can certainly excel at this 
contract and offer extra services to veterans that had not been 
offered in the past. You know, the self assessment of the 
Traumatic Brain Injury alone is phenomenal. Why wouldn't they 
want that on their reports? Why were we forced to take it off 
the reports?
    Those kind of issues need to be discussed and it needs to 
be discussed in Central Office, and somebody needs to come up 
with formats for the reports that are going to be consistent 
across the whole Nation, not just here is one little format of 
a report from my office and want it this way or I won't accept 
it. Even that would be better than not telling us what you want 
because that is what is happening in a couple of these offices.
    Travel should be picked up and things like that, but with 
these issues handled, with the communication opened up, that is 
the biggest difficulty. There is no communication.
    Ms. Herseth Sandlin. Okay.
    Mr. Chorpenning. Madam Chairwoman, just to add to what Tony 
said----
    Ms. Herseth Sandlin. Very briefly.
    Mr. Chorpenning [continuing]. And I concur--very briefly. 
Okay. We have actually had cases returned because of 
punctuation mistakes, honest to God, and I can make those 
available.
    Ms. Herseth Sandlin. I know that was raised in the 
testimony, and that is something that we are going to pursue 
here in the other panel.
    I thank you both, again, for your trouble, for the 
important questions you have raised, and your very thoughtful 
responses to our questions here today.
    Thank you. I thank you for your commitment to our Nation's 
veterans.
    Thank you. Thank very much. Thank you, Members of the 
Committee.
    Mr. Tarkowski. Thank you, Madam Chairwoman. Thank you, 
everyone.
    Ms. Herseth Sandlin. I would now like to invite our second 
panel. Joining us on the second panel today is Mr. Richard 
Daley, Associate Legislation Director of the Paralyzed Veterans 
of America (PVA), and Mr. Joe Wynn, Treasurer, Executive 
Committee for VET-Force.
    Welcome back to the Subcommittee, gentlemen.
    Mr. Daley, we will go ahead and begin with your testimony. 
You are recognized for 5 minutes.

 STATEMENTS OF RICHARD DALEY, ASSOCIATE LEGISLATION DIRECTOR, 
    PARALYZED VETERANS OF AMERICA; AND JOE WYNN, TREASURER, 
 VETERANS ENTREPRENEURSHIP TASK FORCE (VET-FORCE), PRESIDENT, 
 VETERANS ENTERPRISE TRAINING AND SERVICES GROUP (VETS GROUP), 
    AND LEGISLATIVE LIAISON, NATIONAL ASSOCIATION FOR BLACK 
                            VETERANS

                   STATEMENT OF RICHARD DALEY

    Mr. Daley. Chairwoman Herseth Sandlin, Ranking Member 
Boozman, and Members of the Subcommittee, PVA would like to 
thank you for the opportunity to testify today concerning 
vocational rehabilitation and counseling services for veterans. 
Vocational Rehabilitation and Employment Program, VR&E, 
provides service-connected veterans with the necessary services 
to assist them to achieve maximum independence in daily living 
and, to the maximum extent feasible, to become employable and 
obtain and maintain suitable employment.
    This continued flow of new veterans into the VR&E program 
will certainly place a strain on this system that has already 
received some unfavorable criticism in recent years for its 
performance.
    Due to the fact that VR&E is limited in resources and 
staff, the VA has contracted out with private and State 
entities to provide VR&E services. This process of contracting 
to alleviate some of the burden from the VR&E regional offices 
did not produce the results that the VA anticipated.
    Without having all of the facts involved, or in this case 
any of the facts, pertaining to both parties' performance with 
regard to fulfilling their obligations of the contract, it 
would be unrealistic for PVA to make credible recommendations 
pertaining to improving those contracts.
    Whether the veterans have received all of the counseling 
and services that they should receive or they have not received 
because of performance is really not our concern. Our concern 
is, does the veteran have a job when they get out of the 
process?
    When considering the future contracts, perhaps the VA could 
develop a pilot program in their VR&E program. The VA would 
reward the contractor for making changes in the veterans' 
lives, not processing the veteran through another Government 
program.
    The Social Security Administration has had pretty good 
success with their Ticket to Work program. This program rewards 
an agency that performs vocational rehabilitation and finds the 
consumer employment if they stay employed.
    Placing a disabled veteran in a career is the goal behind 
PVA's new Vocational Rehabilitation and Employment program. Two 
years ago we started the first one in Richmond, Virginia, at 
the VA hospital. We have expanded. We have one now in 
Minneapolis, Minnesota, and San Antonio, Texas. Soon we will be 
opening the fourth location in Long Beach, California. PVA's 
goal is to have 22 of these, one in all 22 spinal cord units 
that the VA has.
    PVA's VR&E program has recently applied for and qualified 
for employer network status. Being approved as an employer 
network allows PVA to participate in Social Security 
Administration's Ticket to Work program. Social Security 
Administration will reimburse PVA up to $4,000 annually for 
each veteran that is employed and stays employed. The $4,000 
will help defray some of the costs of our program.
    PVA is an organization of veterans who are catastrophically 
disabled by spinal cord injury or disease. Our members rely on 
the services provided by the VR&E program.
    We support the Subcommittee's efforts to work with the VA 
and to improve the program.
    Chairwoman Herseth Sandlin, Ranking Member Boozman, that 
concludes my testimony. I will be happy to answer any 
questions.
    [The prepared statement of Mr. Daley appears on p. 55.]
    Ms. Herseth Sandlin. Thank you very much, Mr. Daley.
    Mr. Wynn, welcome. You are recognized for 5 minutes.

                     STATEMENT OF JOE WYNN

    Mr. Wynn. Thank you, and good afternoon, Chairwoman and 
Ranking Member Boozman, other Members of the Subcommittee.
    Today, I come before you as a representative of the 
Veterans' Entrepreneurship Task Force composed of over 200 
organizations and affiliates representing thousands of 
veterans, a high percentage of which are small businesses.
    As a Vietnam air veteran myself, President of Veterans 
Enterprise Training and Services Group and working with the 
National Association for Black Veterans, I have come to 
appreciate this Committee's steadfast support of veterans and 
the number of pieces of legislation that have passed in recent 
years.
    I have also come recently before this Committee, as you 
might very well remember, with regard to some of the issues he 
had with the Center for Veterans' Enterprises' policies that 
they have chosen to adopt that may hinder the number of small 
businesses who will be able to participate in VA contracting in 
the future.
    But now, here we are today talking about another example of 
what we believe is VA's poor judgment in making management 
decisions that not only affects service-disabled veteran 
business owners, but also affects hundreds of our service-
disabled veterans.
    I am sure you have received information detailing how the 
VR&E program works, so I won't go into that. But I would like 
to mention that in 2006 and 2007, while serving as a 
Commissioner on the Congressional Veterans' Disability Benefits 
Commission, I had the opportunity to review and discuss several 
GAO reports, VA reports, detailing recommendations and 
criticisms regarding the VR&E program.
    Some of those that came out in the report that we submitted 
was that GAO generally agreed that VR&E had not been a VA 
priority in returning disabled veterans to the workforce. VR&E 
also had a limited capacity to manage its growing workload and 
VR&E needed to be redesigned for the modern employment 
environment.
    Additionally, the Commission also agreed that VR&E needed 
to improve its process of defining, tracking and reporting on 
participants, while we found also that it was confusing and 
inconclusive in its current state.
    Our research also indicated that while the number of 
participants in VR&E program increased in recent years, the 
number of individuals rehabilitated remained constant.
    This now National Service contract, the NAS contract that 
VA has chosen to adopt, we still don't understand why it would 
be canceled in such a short time frame. I do know a little bit 
more about it today than I knew before. We have received a 
number of complaints, though, from the contractors involved, 
much of which you have heard from the witnesses before me.
    But by virtue of the fact that the VA has chosen to cancel 
the entire contract or not extend it at this time leads many of 
us to believe that the VA implemented a national strategy that 
was flawed from the start. Since the VA has not reportedly 
requested corrective measures from the contractors involved and 
has reportedly stated that it intends to reissue the contract 
later, it simply appears that the strategy was not well thought 
out in the beginning.
    This action by the VA will have an adverse effect on the 
veterans it is intended to serve. Hundreds of service-connected 
disabled veterans in need of vocational rehabilitation and 
employment will experience additional delays in receiving the 
services that they so desperately need to successfully 
transition back into their communities, and those communities 
that they have fought so hard to protect. For some, this delay 
could also be life threatening.
    Madam Chairwoman and Members of this Committee, I strongly 
urge you to compel the VA to reconsider their action to 
terminate this national contract for at least 6 months or until 
such time as their procedures can be improved or other capable 
and qualified service-disabled veteran small businesses can be 
hired. Thank you, and I appreciate the opportunity to come 
before you.
    [The prepared statement of Mr. Wynn appears on p. 57.]
    Ms. Herseth Sandlin. Thank you, Mr. Wynn.
    I am going to recognize Mr. Boozman to start us off with 
questions.
    Mr. Boozman. I am really going to yield my time to you, 
Madam Chair in the interest of time. We don't have a lot--we 
have just had a series of votes that have been called.
    But as always, I want to thank Mr. Daley and Mr. Wynn for 
taking the time and coming over and, you know, adding to the 
information that we have been presented. I appreciate your 
testimony.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    Well, I think, Mr. Wynn, it is clear what you think should 
happen next from the end of your testimony there.
    Mr. Wynn. Yes, ma'am.
    Ms. Herseth Sandlin. Mr. Daley, what is your opinion of the 
VA's National Acquisition Strategy and what do you think are 
the best next steps?
    Mr. Daley. That is a very good question. As Mr. Wynn said, 
he's fairly new to the issue, but he did have the privilege of 
sitting in for 2 years on the Veterans' Disability Benefits 
Commission that discussed in depth many of these issues. He has 
more knowledge on this than I have, so let us just do what is 
best for the veteran. I want to make sure that they don't go 
through a Government program, but they get a job at the end.
    In my written testimony, I pointed out that in the 110th 
Congress, Ranking Member Boozman introduce H.R. 3889, which 
required a 20-year study. Wouldn't it be great if we could look 
back 10 years from now and see what happened to those veterans, 
especially the young veterans that went through a VR&E program? 
Are they still employed or are they not employed? Why aren't 
they employed? Is it because of health reasons or because of a 
lack of other accommodations? But that bill didn't go anywhere, 
so maybe some you could reintroduce that bill.
    Ms. Herseth Sandlin. Now, I did want to follow up with one 
other area. In your testimony, your written testimony, you 
state that the items contracted out are areas in which VR&E 
counselors have been trained to perform and have years of 
experience. In your opinion, or is it the position of PVA that 
the Department of Veterans Affairs should be performing these 
functions instead of contracting it out?
    Mr. Daley. Yes, in my opinion, and I spoke with other 
veterans, and some disabled veterans that have been through the 
program. They said that some of that work that the VA 
professionals can do the best was contracted out and the VA 
professionals got stuck shuffling papers for 20 hours a week. 
That's the problem, I think, too much paperwork.
    Ms. Herseth Sandlin. I think that goes to my next question 
and then we will have to leave for votes. We will probably 
resume the hearing with the third panel and we may have some 
other questions for you, Mr. Wynn, in writing.
    Again, in your testimony you write that, quote, ``The 
process of contracting out to alleviate some of the burden from 
the VR&E regional office didn't produce the results that the VA 
anticipated.'' In your opinion, again, what were the results 
and why was VA unable to get the results they anticipated?
    Mr. Daley. The results were a lot of problems; that is why 
we are sitting here today--did the veteran get the job back to 
that point--and I don't think so. I also say in the testimony, 
in our program we have 356 severely injured veterans, and of 
that, we have placed 56 in career positions in 2 years.
    Ms. Herseth Sandlin. Let me delve down just one level more 
here. From the testimony of the first panel, and we will hear 
from the VA, does the PVA have a position in terms of what 
results we got out of this thing? If it was the lack of 
leadership out of Central Offices related to directing the 
regional offices and the contracting officers, or was it the 
ability of the prime contractors to deliver services at a 
national level or a combination of both?
    Mr. Daley. At this time, I can't take a position on that 
because I have heard 5 minutes or 10 minutes of testimony and I 
will hear another 5 minutes of testimony. I cannot decide who 
is right in this process, which affects veterans.
    Ms. Herseth Sandlin. Have you heard about this problem 
prior to us calling a hearing?
    Mr. Daley. Not really.
    Ms. Herseth Sandlin. Although PVA did disagree with 
contracting officers?
    Mr. Daley. No. We recognized the need for contracting out 
in the past. In testimony within the last year, it said, we 
know that they have to contract out.
    Ms. Herseth Sandlin. Okay. It just didn't alleviate the 
workload that----
    Mr. Daley. Yes.
    Mr. Wynn. Madam Chair, could I make just a quick comment 
and maybe----
    Ms. Herseth Sandlin. Yeah, and then I think we have to----
    Mr. Wynn [continuing]. Just quickly, I would just like to 
say, though, that to have eight contractors selected for a 
national contract and then all of the sudden to terminate or 
not extend their contract into the option years, if it was due 
to fault or non-performance by the contractors, it still shows 
that the VA has a very flawed process of selecting contractors 
because why would you select eight contractors in less than a 
few months if they are not performing. So----
    Ms. Herseth Sandlin. Okay. Point well taken.
    One last question before we have to go. Mr. Wynn, is VET-
Force advocating to give contracts to specific vendors or that 
VA make the best decision possible in the interest of the 
veterans that were served by the contract, regardless of who 
the vendor will be?
    Mr. Wynn. Right. We obviously support veteran small 
business, particularly, service-disabled veteran small 
business, so we support the use of them. We think that it is 
okay to contract its service out, but it does need to be 
managed more effectively.
    Ms. Herseth Sandlin. Okay. We will recess. It will be about 
a half an hour and we will resume with our third panel.
    [Recess.]
    Ms. Herseth Sandlin. Okay. Well, again, I want to thank our 
second panel for the insight that that they offered on the VR&E 
contracting issues and we look forward to following up on some 
of their suggestions from their testimony. I would now like to 
invite the third panel to the witness table.
    Joining us is Ms. Ruth Fanning, Director of Vocational 
Rehabilitation and Employment Service, Veterans Benefits 
Administration, U.S. Department of Veterans Affairs. Ms. 
Fanning is accompanied by Mr. C. Ford Heard, Executive 
Director, Center for Acquisition Innovation, Office of 
Acquisition and Logistics, U.S. Department of Veterans Affairs; 
and Mr. Philip Kauffman, Attorney, Office of Special Counsel, 
U.S. Department of Veterans Affairs.
    Thank you for being here. Ms. Fanning, you are now 
recognized.

      STATEMENTS OF RUTH A. FANNING, DIRECTOR, VOCATIONAL 
   REHABILITATION AND EMPLOYMENT SERVICE, VETERANS BENEFITS 
     ADMINISTRATION, U.S. DEPARTMENT OF VETERANS AFFAIRS; 
 ACCOMPANIED BY C. FORD HEARD, EXECUTIVE DIRECTOR, CENTER FOR 
 ACQUISITION INNOVATION, OFFICE OF ACQUISITION AND LOGISTICS, 
 U.S. DEPARTMENT OF VETERANS AFFAIRS; AND PHILIP S. KAUFFMAN, 
 DEPUTY ASSISTANT GENERAL COUNSEL, OFFICE OF GENERAL COUNSEL, 
              U.S. DEPARTMENT OF VETERANS AFFAIRS

                  STATEMENT OF RUTH A. FANNING

    Ms. Fanning. Madam Chairwoman, Ranking Member Boozman, 
Members of the Subcommittee, thank you for inviting me to 
appear before you today to discuss VA's Voc Rehab and 
Employment program.
    With me today is Mr. Ford Heard, Executive Director, Center 
for Acquisition Innovation, Office of Acquisition, Logistics 
and Construction; and Mr. Phil Kauffman, Deputy Assistant 
General Counsel.
    My testimony will provide an overview of the VR&E program 
and the services we provide, a review of contract services used 
to support our mission, issues of concern pertaining to the 
VR&E National Acquisition Strategy contracts and prime 
contractor performance, and VA's ongoing work to streamline and 
improve contracting requirements and oversight.
    The VR&E program has professional counseling and employment 
staff of over 1,100 throughout the country. They are located in 
57 regional offices and over 100 out-based offices. They are 
there to provide for the needs of veterans with disabilities to 
help them achieve their rehabilitation goals.
    While our VA staff are the primary providers of services to 
veterans in the VR&E program, VA has adopted a National 
Acquisitions Strategy. It was adopted to award and manage 
contracts at the national level. These contracts are in place 
to complement and supplement the services that we provide.
    The contracts are primarily used in areas where we have 
staffing shortages, geographic challenges or we need 
specialized services for veterans. We want to ensure that 
veterans don't have to travel long distances, that they are 
able to access services in a timely and quality manner.
    All the contracts under the NAS were awarded to small 
businesses and service-disabled, veteran-owned small businesses 
that had or asserted that they could develop a local presence 
throughout the subareas for which they were awarded.
    Post-award, a week-long kick-off meeting was conducted 
which included extensive training for the new prime 
contractors, as well as for our own VA staff. This training 
included 2 days of combined sessions with VA staff and 
contractors and it also included break-out sessions designed to 
thoroughly review our in-depth, in-the-weeds, processes with 
the contractors. In turn, the break-out sessions for VR&E staff 
were designed to go through the entire contract to ensure 
appropriate and consistent administration of the contract.
    The last day of the session included a break out 
specifically to let prime contractors and the VA staff from 
around the country they would be supporting get together and 
talk about next steps. So it was an extensive and an 
unprecedented training that we provided in order to kick off 
this new contract appropriately.
    Post-award, local offices have continued to work with prime 
contractors to provide additional training. They invited them 
in, had training sessions and they have also worked with them 
ongoing to provide performance feedback.
    Also, throughout the post-award period, VR&E Service 
management and contracting staff continued routine calls with 
VR&E officers and field contract specialists. These were done 
weekly for the first several months of the contract, and then 
at least biweekly up until the current time. We had a call this 
week.
    We have also established a contract administration board. 
This includes Voc Rehab, the Office of Acquisitions and 
Logistics staff, including the contracting officer, and General 
Counsel staff. This meeting is used, and again it meets 
routinely at least once every 2 weeks, to elevate contract 
concerns to the contracting officer to allow her to work 
proactively with the contractors.
    The current NAS contracts, unfortunately, have not met the 
needs of VR&E service in assisting us to provide timely and 
quality services to veterans. Half of the prime contractors 
have not met contract performance standards. In particular, 
prime contractors with contracts in multiple jurisdictions 
around the country have not consistently provided adequate 
staffing coverage, timely services, or the quality of services 
that are expected.
    VA has attempted, and continues to attempt, to resolve 
issues with vendors, but as the base contract year progressed, 
we became increasingly concerned about some contractors' 
failure to meet timeliness and performance standards and the 
corresponding impact on services to veterans.
    We did not exercise options to extend the NAS contracts and 
we are in the process of developing new contracts. We expect 
those to be awarded by December of this year.
    Since the National Acquisition Strategy was developed, VA's 
focus has been on continually leveraging lessons learned to 
find ways to simplify and strengthen oversight in 
administration and contracts.
    As we move forward into the temporary local contracts and 
the new national contracts, our primary concern will be in 
getting contractors on board who can meet timeliness and 
quality standards to ensure that veterans receive those 
services that they need.
    Obviously, as we go forward our main strategy will be to 
use our own professional staff to the maximum extent possible 
to provide those services, but as needed we will continue to 
use contracting as one of our primary strategies.
    Madam Chairwoman, that concludes my comments. I would be 
happy to take any questions from you or other Members of the 
Committee, as would other Members of the panel with me.
    [The prepared statement of Ms. Fanning appears on p. 64.]
    Ms. Herseth Sandlin. Thank you, Ms. Fanning.
    First, can you explain the varied forms that are used from 
regional office to regional office? One example that we are 
aware of is Georgia's Authorization for Services in the 
counseling services and that is different from any form used 
out of the regional office in Oklahoma.
    Ms. Fanning. I believe you are referring to referral forms 
for services under the contract, and our M28 Manual mandates 
that we use a 1985 form or its equivalent. I have recently 
reviewed a sample of referral forms used by regional offices, 
and our review showed that all of the required aspects from the 
1985 were on the office's local forms.
    The forms did vary. They looked different, but they were 
primarily designed to incorporate all the services under the 
contract onto one form, so that rather than writing each 
service on the form, it could be checked and I think it was 
actually done to improve clarity.
    Now, having said that, I can tell you that it is a 
complaint that I have heard in terms of using varied referral 
forms. And even though our manual allows that, as we go forward 
with new local contracts and new national contracts, we have 
already provided a standardized referral form that will be 
mandated for our regional offices.
    Ms. Herseth Sandlin. You say ``the manual provides it.'' 
What manual are you referring to, again?
    Ms. Fanning. The M28. It is our operating manual for Voc 
Rehab And Employment.
    Ms. Herseth Sandlin. When was the National Acquisition 
Strategy adopted? Not until last year, right?
    Ms. Fanning. The National Acquisition Strategy actually 
started several years ago. This is the second NAS contract that 
has been in place.
    Ms. Herseth Sandlin. Did you ever have complaints about 
varied forms previously?
    Ms. Fanning. Not that I am aware of, but I wasn't in 
Central Office at that time, as you know.
    Ms. Herseth Sandlin. Do you know how long Georgia and 
Oklahoma have been using these respective forms?
    Ms. Fanning. Well, the 1985 form has been used throughout 
my career with VA. That is not a new form. It is a standardized 
form.
    The local referral forms that were developed to simulate 
the 1985 would have been developed for this current NAS 
contract because the NAS contract had its own service packages, 
its own pricing. So the forms were developed in order to meet 
the need of the current contract.
    Ms. Herseth Sandlin. As you prepare to implement the new 
NAS? Has there been any evaluations as to whether or not there 
should be uniformity of the forms?
    Ms. Fanning. There already is. A standardized form has been 
developed. It is already in both of our contracts and it will 
be mandatory for all offices to use it.
    Ms. Herseth Sandlin. In your testimony you state that ``as 
necessary,'' VR&E officers and contract specialists were able 
to provide, or were available to provide guidance and resolve 
issues. According to one of the prime contractors, when they 
sought help from the contract specialists, they didn't provide 
any assistance or guidance. Were you ever made aware of these 
concerns?
    Ms. Fanning. No, I was not until just recently in preparing 
to come here. I had a conversation with Mr. Tarkowski early in 
the week. He referred to that. And he discussed that with me 
and I immediately went to my staff and asked them to provide me 
with any e-mails that they have received so that I could see 
what action they have taken, if they have forwarded those on to 
the contracting officer for action, what kind of feedback they 
have provided to his company.
    It concerns me anytime that communication breaks down. I 
was very grateful that he brought that issue to my attention.
    Ms. Herseth Sandlin. Do you acknowledge that there has been 
a breakdown in communication, or does that remain to be seen 
based on your request for information from your staff?
    Ms. Fanning. That remains to be seen. I haven't received 
all of the information. Two individuals were pointed out and 
only one of them has provided information to me. From review of 
his e-mails, I didn't see any problem, but I want to fully 
evaluate the situation.
    In addition, I would be happy to receive any e-mails or 
communication attempts that weren't responded to so that I 
could research those further.
    Ms. Herseth Sandlin. This may be an area that Mr. Boozman 
is interested in pursuing. He and I have been visiting some of 
our questions to the prior panels and from concerns expressed 
in opening statements.
    What assurances can you give the Subcommittee that no 
veteran is going to go without services until the new National 
Strategy is implemented?
    Ms. Fanning. Well, as I mentioned earlier, we have almost 
1,100 staff around the country. They are fully equipped and 
trained to provide services. That is our primary strategy. Now, 
we have----
    Ms. Herseth Sandlin. Let me interject. I thought the 
purpose of the National Acquisition Strategy was to relieve 
some of the workload of your 1,100 specialists?
    Ms. Fanning. The purpose of it is to supplement and 
complement our services where needed.
    Ms. Herseth Sandlin. So you have no concerns that the folks 
who you currently have on board, in addition to what they are 
doing today, will be able to provide those services to our 
veterans?
    Ms. Fanning. I am concerned and I had a little more to say, 
so I apologize that I wasn't clear from the very moment I 
began. In addition to our staff, who are very competent and 
able to provide services, our caseload is lower now than it has 
been throughout my entire career.
    We will continue to use some contracting services. That's 
necessary for a couple of reasons. First of all, if we do have 
a staffing shortage, an employee is promoted and moves on to a 
new job, we don't want to have a gap, especially in a rural 
area. It is very important that we are able to contract for 
services.
    All of our offices have access to a contracting officer. We 
have 23 of them around the country and that is a major 
enhancement that we made in our program over the last few 
years.
    Our VR&E officers, also, all have basic warrants, and they 
can also procure services on an as-needed basis. So today if 
there is a service need, even without a contract in place, we 
can go out and meet that need. We don't have to wait for a 
national contract to be awarded.
    The reason we have national contracts in place is not that 
that is the only vehicle that we have to procure services. 
National contracting is in place because we want to have a 
structured, consistent approach. We don't want to have 57 
offices doing business in 57 different ways.
    And back, you know, when I was rehabilitation counselor, 
back in the old days, we had local contracts in place. There 
was actually a task force put together on which I served that 
looked at how contracting could be strengthened. The National 
Acquisition Strategy came out of that task force.
    The purpose of that task force was to look at how could we 
come together nationally and not have 57 offices, first of all, 
taking time away from serving veterans to develop contracts, 
but second, not being experts in the field and perhaps having 
gaps in the way contracting is administered. For that reason, 
national contracts were developed.
    Now, because we are looking now at doing some local 
contracts as a bridge, that concern remains. To address that, 
we have developed a standardized acquisition package. The 
statement of work is mandatory. The technical evaluation 
criteria are outlined and are mandatory. The report forms have 
been standardized, and that is a change and a lesson learned 
from the last contract, that reports need to be clearly 
defined.
    Even though it is a performance-based contract, and in a 
performance-based contract typically you say to the person you 
are contracting with, this is what I need and they come back to 
you with a product and they have some flexibility.
    We did provide training based on the M28 and very 
structured training in terms of what we expected for each 
package.
    But some of the concerns that I have heard expressed about 
one office requiring a report format that is different from the 
State next door concerns me. So we have developed a template 
for each report that we will expect.
    So as we move into these local bridge contracts, there will 
be a great deal of structure in place, and in addition, we 
formed a governance board. The governance plan is in final 
concurrence now. As soon as my boss signs off on it, I will be 
happy to share it with you.
    That governance plan partners Voc Rehab with the Office of 
General Counsel, with the Office of Acquisition and Logistics 
and with VBA's head of contracting activity. That board will 
oversea every aspect of these local contracts from solicitation 
to award, to implementation, until the new national contracts 
are in place.
    Ms. Herseth Sandlin. Mr. Boozman.
    Mr. Boozman. I think, to follow up on that question, what 
happens to the local guy that doesn't do what he is supposed to 
do, that doesn't implement? That seems to have been the 
problem?
    Ms. Fanning. If a local officer, a VR&E officer or 
contracting officer doesn't appropriately follow the guidance, 
then when we learn of it, we take corrective action.
    Mr. Boozman. Have we ever taken corrective action?
    Ms. Fanning. I beg your pardon?
    Mr. Boozman. Like last year, did we ever take corrective 
action?
    Ms. Fanning. There was one incident mentioned earlier when 
an employee sent a letter that was inappropriate, and yes, we 
investigated that. In fact, that individual did that as a 
private citizen from their own home e-mail, but that was still 
addressed with that individual.
    Mr. Boozman. Right. If you had problems with some of the 
contractors not performing, why would you terminate the 
contract for all eight?
    Ms. Fanning. Well, partly it is a legal issue, and if I 
could, I would like to defer to Phil Kauffman to talk about 
that issue of why we did not exercise options.
    Mr. Boozman. Well, you might also comment, then, why when 
you are here in April, that VA didn't, you know, and that you 
filed documents in the U.S. Court, Federal claims, stating that 
VA would not exercise the first option year, why didn't you 
mention it in April when you were here?
    Ms. Fanning. Sir, I would need to go back and look at dates 
to know if those events, you know, how they fell before each 
other or after each other. I apologize that I can't address 
that question at this time.
    [The VA subsequently provided the following information:]

          The Order of the United States Court of Federal Claims was 
        entered April 24, 2009, in Veterans Vocational Service v. 
        United States, No. 08-589-C, approximately 1 month after the 
        April 2, 2009 HVAC hearing.

    Mr. Boozman. Yes, sir. I am sorry.
    Mr. Kauffman. The decision of the settlement in the Claims 
Court matter was based on the issues raised in the bid protest, 
so that was part of the--in the settlement of that case, the 
corrective action was the determination to agree not to 
exercise options on any of the contracts. So that was in 
conjunction with the Department and the Justice Department as 
to how we would resolve the matters in that Claims Court bid 
protest.
    Mr. Boozman. Okay. Well, the Chairlady is the lawyer here, 
so maybe she understands, but again I don't understand why, you 
know, if some of them are doing the job, why you get rid of all 
of them.
    But the other thing is is that the reason that we went to 
this system, or you guys went to this system was that GAO, had 
some real concerns about shoddy contract management, and I 
think at one time the counseling program contracted with over 
240 vendors.
    It seems like with this short term, that we are going back 
in that direction, and yet if we are having trouble dealing 
with eight, I guess, how can we deal with all of those?
    The other thing is, is that if we look at the GAO report of 
April 23rd, 2007, they list five things, keys challenges 
remaining to improving VA's management of VR&E Service 
contract. Specifically found, regional offices are not fully 
applying VA's contracting guidance, current training does not 
adequately prepare contracting officers to manage contracts.
    It seems like the thing that the contractors are 
complaining about are the things that are listed in the GAO 
report. So can you comment in that regard?
    Ms. Fanning. Certainly. Your first question is, if we can't 
manage eight, I think you said----
    Mr. Boozman. Yes, ma'am, how can we do it.
    Ms. FANNING [continuing]. How are we going to manage more. 
And I think part of the issue is not the number of contracts, 
but having the right contracts, including the right contract 
vehicle in place.
    Mr. Boozman. But you are the ones that determined that in 
the first place, though.
    Ms. Fanning. Absolutely. You are right. We did.
    Mr. Boozman. I mean, you did the contracts.
    Ms. Fanning. I didn't personally, but VA did develop these 
contracts.
    Mr. Boozman. I understand.
    Ms. Fanning. There was, in response to the GAO study and 
other studies, a move to attempt to lessen the number of total 
contracts that we had in order to--in an attempt to lessen the 
administrative burden. I think one thing that we learned from 
that venture is that eight may not be the right number.
    We need to ensure through our contract award process that 
any vendor who proposes to provide services to the VA is, in 
fact, able to deliver what they say that they can.
    Now, I fully believe that every vendor who proposed, 
thought they could do that but, in fact, we had vendors that 
were located in only one jurisdiction expand to cover multiple 
jurisdictions. We saw that they struggled to get staff on board 
and to develop subcontracting relationships.
    We had delays in being able to refer cases because in many 
jurisdictions they simply didn't have adequate staff in place 
that we could refer to.
    So I think, really, the issue is making sure that during 
our award process, and this is something that I have ensured, 
that our current, our new solicitation very strongly outlines 
the requirements for VA, that not only are the staffing in 
place, but the professional locations are in place, that there 
is a presence in the communities where we need the services so 
that we can know that when the contracts are awarded, we can 
move forward and refer and get the services that we need. 
That's the entire purpose of the contract.
    If I could address the second part of your question, GAO 
made three recommendations. The first was that we conduct a 
management review to assess how our regional offices are 
implementing contracting guidance and take actions to make 
improvements. We have done a number of things in response to, 
not only to that recommendation, but I can say that some of the 
actions have been implemented prior, requiring that any local 
contract that is entered into, field offices must come in and 
request a waiver.
    Use of the NAS contract has been mandatory. We do not allow 
local field offices to decide that they will go around that 
contract. They have to use the vehicle that has been nationally 
endorsed and developed.
    Quality assurance site visits have been strengthened in 
order to go out and look at the contracting activity in 
addition to other VR&E activities.
    Our officers in the field have been required to go through 
40 hours of COTR training and an additional 40 hours of 
contracting officer training. They won't usually be in a 
position of awarding any kind of contracts. The reason that 
they became contracting officers warranted to that basic level 
is to provide that basic training of the Federal Acquisition 
Regulations. They need to be cognizant of contracting 
regulations in order to provide appropriate services and 
oversight of these contracts.
    We have put 23 warranted contracting officers out in the 
field around the country. These are the same warranted officers 
that work for the Office of Acquisition and Logistics. They are 
warranted by Mr. Heard's shop. In the 1102 series, they are 
very highly trained individuals, and they provide oversight. 
They provide assistance directly with the contractors out in 
the field, as well as oversight and assistance to our VR&E 
staff. They play a very important role and that is a very 
structured managerial approach to contracting.
    The GAO also recommended that we require regional offices 
to report on the efficacy of contracting training. We have done 
that throughout this process. And in our recent conference in 
Philadelphia we did an additional formal training review. The 
purpose of that is to ensure that the training we have targeted 
through the 1-week training we did prior to kick-off and 
implementation, to the ongoing weekly and biweekly calls to the 
one-on-one consultation that is provided by the contract staff 
that we now have in VR&E service, that that is effective, that 
we are touching the correct points, and we will use the 
feedback that we got from our staff to further our training to 
address the issues where they felt uncomfortable or where they 
needed additional training.
    It is an evolving process. We want this to be very 
effective. It is something that we have been working on at the 
VR&E Service for years, and we will continue to work on even if 
we think we have it right. This go around, I think there is 
always room for improvement and that is what we will be looking 
for.
    In each aspect we will look for lessons learned and how can 
we do it better either next time and or how can we implement 
immediate improvement.
    Mr. Boozman. Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    Ms. Fanning, you said, in response to one of Mr. Boozman's 
questions that you are convinced that the contractors in their 
mind believe they could provide these services, and maybe this 
is a question for Mr. Heard. I don't know who--hopefully 
someone will be able to answer this question, but the issue 
isn't whether or not they thought they could. The issue is 
whether or not, before giving them the contract, there was an 
assessment that they could fill the contract requirements.
    Prior to awarding these contracts under the NAS, did the VA 
assess whether or not these businesses had the capabilities and 
resources to provide the services required?
    Ms. Fanning. Yes. And it is a two-part process, and so I 
will ask Mr. Heard to also comment. There were formal technical 
reviews conducted of every proposal. This was done via a very 
structured process under the contracting officer's oversight.
    We brought in almost 20 field managers, not field staff but 
senior field folks to come in and review these contract 
proposals from a technical aspect. There were separate teams 
that looked at past performance information that was provided 
by the contractors. And remember, we are evaluating what the 
contractors have provided in their proposals, their outline of 
how they will meet the requirements, how they are structured as 
a company to do so, and looking at the past performance 
recommendations that they have provided, as well as utilizing 
any experience that we have with these companies. In addition, 
that process is also overseen by the contracting officer.
    The third evaluation is the price evaluation. That was the 
sole purview of the contracting officer. VR&E Service didn't 
play a role in that evaluation and I will turn it over to you 
to comment on any of those issues.
    Mr. Heard. Sure. The awards were best value awards, so we 
are looking at a combination of the technical expertise, 
experience and price. So as Ms. Fanning was talking about, we 
did look at, heavily at credentials that weighed into their 
capability. We were also looking at, from a strategic 
standpoint, that the NAS would really look at building upon 
partnerships.
    This is a national effort. A number of contractors that are 
out there, some who are bidding on this job, would not 
necessarily win contract awards. So the intent was for them to 
build partnerships with potential prime contractors as well.
    So when we were looking at this structure, the idea was to 
get individuals, contractors who had the skill sets that were 
going to provide the best services to VA and our veterans.
    Ms. Herseth Sandlin. Ms. Fanning, where in your opinion was 
the breakdown? I mean, how do you respond? I know you had 
mentioned that there were problems with prime contractors 
struggling to develop subcontract relationships, recruit 
appropriate staff.
    For one example, how do you respond to the testimony of the 
first panel that they raised at the workshop their concern 
about the process for getting counselors approved through, I 
think, the security assessment? So they claim they anticipated 
that it was going to be 2 months or so and were somewhat 
dismissed, it sounds like, in expressing that concern.
    Help us understand from your vantage point, if their 
capabilities were assessed, what happened with the breakdown? 
Are you satisfied that all of your staff out in the local and 
regional offices were committed to fully implementing the NAS?
    Ms. Fanning. First, regarding the training, we had a formal 
session at the training that was pre--before any referral was 
made, about the security requirements and the background 
checks. We brought experts in from those areas to review step 
by step what was required and provided step-by-step guidance.
    I have to say that I was surprised to hear the comments 
earlier because those conversations, in my recollection, did 
not happen. If there was a concern with the background checks 
being expedited, I wasn't aware of it until some concerns were 
raised later when the background checks actually started being 
requested.
    At that time I personally called the Security Information 
Center in Little Rock and I learned that they put staff on 
overtime throughout the weekend in order to avoid any backlog. 
And in fact, they never experienced a backlog. All those 
security checks that were submitted were timely processed.
    So I am surprised by that, but what it points out to me is 
that we need to, as we go further, ensure that that guidance is 
crystal clear. If there is any confusion about it, we need to 
make sure that it is crystal clear. It is to our benefit as 
well as to any contractor who works with us. We don't want a 
delay. We wanted these contracts in place because we needed 
them.
    So for contractors having difficulty recruiting staff or 
getting subcontract relationships in place or getting a 
security clearance that is needed in order to start working 
with veterans, and I think you know that obviously is needed 
because of the importance of protecting private information, 
that is something that we wanted to make clear. That is why we 
brought experts in to provide that training. We will make 
doubly sure that, as we go forward, it is even more clear.
    Now, in terms of our field offices wanting the contractors 
to succeed, of course they did. This is a tool for them, and 
for our field offices to be able to use contracts as good 
tools, they want to be able to refer cases and have them 
correctly done in accordance with the contract and returned in 
a timely manner.
    Unfortunately, our field offices have been very frustrated 
throughout the last year. The contractors performance has 
affected service to veterans. It has created a huge 
administrative burden for the field offices. Their attention 
has been focused more on the contracting problems and resolving 
those, really, than it should have been.
    Their focus needs to be on veterans, ensuring that veterans 
are getting good services, not attempting to get contractors to 
return reports that are months and months overdue.
    Ms. Herseth Sandlin. So you have no concerns with regard to 
the contention in the testimony in the first panel that there 
were some in the local offices or regional offices that were 
concerned about the control they were losing with the 
implementation of NAS?
    Ms. Fanning. I am concerned any time that I hear that a 
field office is not appropriately working with anyone. We 
researched the, I believe it was two offices, that that was 
raised as an issue. We did not find that that was an issue. In 
one office I can say that they had been meeting with some of 
the contractors weekly for 5-hour meetings, 7-hour meetings, 
going over all of the past due work and trying to work 
proactively with them to get the work back in.
    I think our offices have extensive documentation on the 
outreach that they have done and the work that they have done 
to try to make these contracts a success. In fact, Madam Chair, 
these field offices didn't have control before the current NAS. 
This current NAS contract was preceded by another national 
contract. That contract was mandatory as well.
    The current NAS, attempts were made to strengthen it, to 
make it a better vehicle, but it wasn't the first National 
Acquisition Strategy, and the offices didn't have the ability 
to freely procure as they wanted.
    Now, when I came into VR&E Service almost 2 years ago now, 
one of the things that I have implemented is the requirement 
that a waiver be formally requested if the local office wants 
to do any kind of local procurement. I felt it was necessary to 
formalize that requirement to ensure that because we have this 
National Strategy, that it is being utilized, that there aren't 
any gaps so that a local office could go out and contract on 
their own.
    Ms. Herseth Sandlin. Okay.
    Mr. Boozman, did you have any further questions?
    Mr. Boozman. I guess I am a little confused. In your 
testimony you mentioned on page 6 about the improvements that 
were made or, I guess in the--the studies include the 
Secretary's 2004 VR&E Task Force, 2005 VA Inspector General's 
State of Contract, 2007 GAO State of Contract, and you list a 
number of things that have been done or are in the process of 
being done. What time frame is that? When have all of these 
been--when did you find that things were kind of in a mess 
because in doing all of that, that indicates things are kind of 
in a mess? Do you understand what I am saying?
    Ms. Fanning. I understand what you are saying, yes, sir. I 
believe so.
    Mr. Boozman. You are saying you instituted all of these 
things that you found needed to be instituted. When did you, 
when did that task force decide that this needed to be done?
    Ms. Fanning. Back when I actually was on the contracting 
task force, I know that there was just a concern that this was 
a burden on field offices to develop local expertise, to 
develop their own statement of work and award local contracts.
    The purpose of the task force was to relieve that burden 
from the field offices.
    Mr. Boozman. Right.
    Ms. Fanning. And then as that task force's work evolved, 
ultimately the Director of VR&E Service at that time determined 
that really what he wanted to put in place was a national 
Acquisition Strategy and not just have a national statement of 
work that could be used by local offices, but have a national 
contract that is awarded from a national perspective and 
implemented at the local level and monitored at the local 
level.
    Mr. Boozman. So these twelve things that somebody decided 
needed to be done, were those done as a result of, like, last 
April or this April?
    Ms. Fanning. No, sir. These have been done as a result of 
the task force that was put in a place a few years ago, 
recommendations from that 2005 IG study, the 2007 GAO study, 
ongoing program evaluation that has been done, and frankly, 
evaluation of the current NAS contract and issues that have 
arisen from it and what we need to do as we go forward into our 
new contracts.
    So a lot of work has been done over the last 2 or 3 years 
to strengthen the contracting program. Adding the Contract 
Specialists, for example, that initiative was started by Ms. 
Caden. And when I came into VR&E Service, we added additional 
contract specialists throughout the country.
    So it has been an ongoing process. Our goal is always to 
continually look at what we are doing, how can we do it better, 
where are the gaps and how can we address them.
    Mr. Boozman. Okay. Thank you very much.
    Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    Ms. Fanning, just two final questions. First, why was the 
Committee not immediately informed about the VA's Settlement 
Agreement not to exercise any of its renewal options?
    Ms. Fanning. Well, I don't have a response for that. I 
didn't--I will take the blame for not knowing that I should 
have advised you and apologize to the Committee for that.
    Ms. Herseth Sandlin. Finally, in your opinion was the 
contract failure a VA problem or a vendor problem?
    Ms. Fanning. I think that if performance was acceptable, we 
could make this contract work. I do think that we have a 
stronger contract going forward.
    There were basic issues about the contract that I think 
were problematic. The per-case definition seemed to be 
something that some of the vendors, not all, struggled with--
what does per-case mean, how long is that period. And even 
though that was clarified prior to proposals being submitted, 
it clearly continued to be an issue.
    I think making the solicitation very strong in terms of 
proposals demonstrating clearly that staff are in place, that 
the vendors have the capability to provide services throughout 
the jurisdiction they are bidding on is very important. I think 
that was a gap of the last contract. Had we had a way of really 
evaluating, based on the vendors being required to provide more 
robust information, I think we could have avoided some issues.
    So I would have to say that there are some issues with the 
contract that I think we are fixing as we go forward that 
created some of the problems that we are having. There were 
also just widespread problems with performance and timeliness 
and quality that in my role as the Director of VR&E, that is my 
biggest concern.
    We are here to serve veterans. It would be easier for us if 
we could have extended or picked up options, than going through 
an extensive process to award new contracts. But if veterans 
aren't being well served, I have to take action to correct 
that, and that is what I am working to do.
    Ms. Herseth Sandlin. Well, I thank you for your testimony 
and your responses to our questions. I do think that there is a 
lot of work to be done here and gathering some more information 
from everyone that we heard from today. I want to thank the 
staff for the work that they have already done and will 
continue to do working with Mr. Boozman and myself and the rest 
of the Members of the Subcommittee.
    I do think that it is, I would hope that in light of some 
of the testimony you heard earlier or some of the concerns 
regardless of when they were first raised, that you will look 
into those. I mean, if there are issues of timeliness to delve 
into, you know, is that just because of performance issues by 
the vendors or are certain people in your offices making it 
more difficult for them to perform in a timely manner?
    As you work to get at the heart of that we will continue to 
be looking into this issue and looking forward to working with 
you and the folks on your team and the other folks we heard 
from today.
    I thank all of our witnesses today on the panels for taking 
the time to be with us on pretty short notice. We value your 
insights and your expertise and your interest and perspective 
on the topic that we valuated today.
    The hearing now stands adjourned.
    [Whereupon, at 5:09 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

    In late June 2009, Committee Members were notified by Heritage of 
America expressing concern over the Department of Veterans Affairs' 
Vocational Rehabilitation and Employment National Acquisition Strategy 
for counseling services. In their letters to Representative Harry 
Mitchell and Committee Ranking Member Steve Buyer, Heritage of America 
raised concerns that include:

      varied referral, evaluation, reporting, and invoicing 
from regional office to regional office that make it difficult for 
contractors to implement the VA's National Acquisition Strategy; and
      need to improve timeliness of payment for services 
rendered and calculation of payments.

    We have been informed by Subcommittee staff that the Department of 
Veterans Affairs did not use its option to renew any of the eight 
contracts in its National Acquisition Strategy. Instead, the VA decided 
to use an interim strategy that will end later this year, at which 
point the VA plans to implement a new National Acquisition Strategy.
    This Subcommittee seeks to obtain feedback from prime contractors 
and stakeholders regarding areas of concern and their recommendations 
to improve VA's National Acquisition Strategy for counseling services. 
Furthermore we seek to understand the reasons that led to the VA not 
using its 1-year contract renewal option and highlight lessons learned 
from the previous national strategy. We want to ensure that the 
Administration is aware of all concerns to prevent the same pitfalls 
that have been experienced by recent contractors.
    I look forward to hearing from all of our witnesses here today as 
we seek to ensure our Nation's injured veterans are provided timely 
services to achieve their employment goals.

                                 
  Prepared Statement of Hon. John Boozman, Ranking Republican Member, 
                  Subcommittee on Economic Opportunity

    Good afternoon everyone.
    Madam Chair, my agenda for this hearing is to determine that VA is 
properly administering the vocational rehabilitation and employment 
contract counseling program. The only measure I use to make that 
determination is whether the program is meeting the counseling needs of 
veterans.
    I want to make it clear that I have no stake in who VA selects to 
deliver services to veterans. Whether VA elects to award 1 contract or 
50, VA must execute their side of the contract properly. They must hold 
their vendors accountable and we must do the same to VA.
    I'm sure you are aware of the concerns expressed by some 
contractors regarding VA's administration of the recently terminated 
National Acquisition Strategy contracts issued last July. I am also 
sure you have heard VA's side of the story. For me, I believe there 
have been ample mistakes by both sides.
    So where do we go from here? I understand VA intends to award 
multiple short-term contracts via 19 sub-regions and will not extend 
the terminated contracts for a similar amount of time. It is reasonable 
to ask whether extending current contractors or issuing two sets of new 
contacts within 6 months is the better way to go. It is also reasonable 
to ask whether VA's the same contracting staff that had difficulty 
managing eight contracts can manage 50 plus contracts.
    Assuming for the moment that the contractors' testimony is 
reasonably accurate regarding things like inconsistent adherence to the 
terms of the contract by local VA officials, where does our duty lie? 
VA has not presented evidence, other than anecdotal statements to 
staff, that one or more contractors performed inadequately.
    Madam Chair, having reviewed the testimony, I cannot determine who 
is right. Maybe both sides are right. The contractors make allegations 
and VA denies them and contends poor performance by some of the 
vendors. Therefore, I believe there should be a complete review of this 
contract by GAO or the Inspector General since we are not staffed to 
conduct such an extensive investigation. In the meantime, I believe the 
eight prime contractors should continue under a short contract 
extension until the new national contract is awarded. VA's short term 
strategy that spreads contract management back out to 57 Regional 
Offices for a 6 month period of performance with all the incumbent 
problems makes no sense to me.
    Regardless, since we have oversight of the VA, the bigger issue is 
whether VA has learned any lessons from the failure of the NAS contract 
and what are they doing to prevent a repetition? What are the lessons 
learned? Will there be sufficient training for both VA staff and 
vendors? If inconsistency in administration arises, how will they 
enforce standardized administration? Does VR&E have the right people in 
the right places? Does VA have a sound acquisition strategy? How will 
contractors be evaluated on their performance? And finally, how should 
we evaluate VA on its performance in the execution of the next contract 
counseling program?
    Madam Chair, over the years, the Veterans' Affairs Committee has 
not devoted a lot of its time reviewing VA acquisition programs. Unlike 
DoD, VA does not develop big systems outside of IT. But they do spend 
$15 billion of our citizens' taxes and I believe it is incumbent on us 
to oversee that spending to ensure veterans get value for those 
dollars, whether it is a program administered by VR&E, Education, or 
any other arm of VA.
    In the end, except through legislation, we cannot force VA to 
change its short term strategy. But the Committee can learn from this 
unfortunate situation and as I said earlier, I look forward to a 
detailed study of this particular process. Hopefully, VA will too. In 
the meantime, I guess the lesson for the business community is that 
when you do business with VA or any Government agency, make sure all of 
the contractual issues are resolved including, in this case, how the 
Government views your assumptions, how administrative procedures will 
be handled, and how to resolve conflicts before it is too late.
    I yield back.
                                 
   Prepared Statement of Patrick F. Chorpenning, President and Chief 
       Executive Officer, Heritage of America, LLC, Glendale, AZ

Executive Summary
    Heritage of America (HOA) is one of 8 prime contractors providing 
vocational rehabilitation and counseling services to disabled veterans 
under the VA's National Acquisition Strategy (NAS) Vocational 
Rehabilitation and Employment (VR&E) Contract. HOA has the largest 
territory under this contract, serving veterans in 44 States, the 
Western Hemisphere and Pacific Rim countries. HOA invested over $2 
million in this contract and has served over 16,000 veterans under this 
agreement.
    While this contract has operated well in many parts of the country 
there are a significant number of states where local VA practices 
running counter to the letter and spirit of the NAS agreement have 
resulted in it not working well at all. HOA considers this to be a 
function of varying degrees of commitment to the NAS among RO and VR&E 
officials that have been allowed to flourish due to the complete lack 
of leadership and management experience demonstrated at VA Central 
office.
    Start up problems--contract award was delayed multiple times in 
2007 and 2008 but contractors were not allowed to update pricing in 
their original bids. New security clearance procedures for counselors 
took inordinate amounts of time delaying case referrals for month, in 
some RO's cases were not referred to counselors until December or even 
January, 5 months after contract award.
    Inconsistent business practices among regions have included: means 
of case referrals; initial evaluation information requirements; invoice 
forms, formats and submission procedures; lines of communication with 
ROs; and timeliness of payments for services.
    Delays in payments for services by the VA has resulted in severe 
cash flow shortages for HOA, which in turn is unable to pay its 
subcontractor counselors on a timely basis. Prime contractors were 
required to use a new invoicing system and HOA instituted a state-of-
the-art information management system with which to track work flow and 
invoices. The VA did not establish any NAS tracking system matching the 
prime contractors' ability to track invoice numbers.
    It appears to HOA that services may have been delayed or denied to 
severely disabled veterans through VA mismanagement of this contract. 
Veterans were not served in a timely fashion during contract start up. 
As cash flow problems became more critical and counselors waited for 
payments for months at a time, cases had to be refused by HOA. Due to 
long delays in the ROs in approving HOA's report, veterans' services 
were delayed.
    VA inexplicably has declined to extend prime contracts by the 6 
months held out in papers filed in Federal Court. However, no cohesive 
plan appears to be in place to continue services to veterans and HOA 
respectfully requests that Members of the Subcommittee urge VA in the 
strongest possible terms to extend the NAS prime contracts for 6 months 
to allow for more continuity in services to veterans and better 
contract administration.

                               __________
    Madam Chairwoman, Ranking Member Boozman and Members of the 
Subcommittee, thank you for the opportunity to appear before you today, 
on behalf of Heritage of America, to testify on the Vocational 
Rehabilitation and Employment Contracts for Veteran Counseling. My 
submitted statement discusses where and why this contract has served 
veterans well in many parts of the country; where it has been extremely 
difficult to perform on this contract and why in other parts of the 
country; the lack of direction and leadership from VA Central Office 
regarding this contract; and recommendations for how to improve these 
important services for disabled veterans in the future.
Heritage of America, LLC
    A service-disabled veteran owned small business (SDVOSB), Heritage 
of America, LLC, (HOA) was awarded, on July 21, 2008, one of the eight 
prime contracts under the National Acquisition Strategy (NAS) 
Vocational Rehabilitation and Employment (VR&E) Contract. HOA invested 
$2 million to create a state-of-the-art management information system, 
incorporating a number of technical innovations to enhance performance 
and delivery of VR&E services to veterans. While a small business, HOA 
is extremely fortunate to be owned and operated by individuals with 
extensive career experience in the VA and VR&E. Additionally, HOA has 
hired managers in the field with decades of experience working within 
VR&E.
    Despite VA actions truncating the beginning and termination of the 
base year of the contract, HOA is proud to have been tasked to provide 
counseling services to over 15,000 veterans, in 44 States and other 
countries including, Central and South America, Mexico, Canada, as well 
as the Pacific Rim including Australia and New Zealand. Playing a part 
in helping veterans achieve gainful employment has given HOA personnel 
a tremendous sense of accomplishment. Unfortunately, VA's actions 
terminating the base year of this contract and summarily declining to 
exercise the first year option without any consultation or 
communication with prime contractors makes the past year's efforts very 
disheartening.

National Acquisition Strategy (NAS) Vocational Rehabilitation and 
        Employment (VR&E) Contract
    This contract ostensibly is to standardize and streamline the 
acquisition process for the required VR&E services and to provide 
timely and high-quality service to servicemembers and veterans. 
Instead, the NAS has produced delays in the provision of services to 
veterans owing to the VA's disjointed and incremental process of 
implementing the NAS.
Where NAS worked well and why
    The areas of the country where HOA has had the most success include 
those in which Regional Office (RO) staff has been cooperative and 
reasonable in their dealings with veterans and the contractor. 
Implementation of the NAS agreement at the local level required 
contractor, RO and VR&E officials to adopt different practices and 
procedures than had been the norm in previous contract arrangements, 
entered into and administered by ROs. Where local VA officials 
professionally endeavored to abide by the new processes described in 
the NAS agreement and sincerely worked with contractor personnel to 
resolve problems and disagreements, services to veterans got off to a 
good start once referrals to counselors began to be made.
    The areas where such a cooperative atmosphere has existed include 
Hawaii, Samoa, Guam, California, Arizona, Colorado, Montana, Nevada, 
Oklahoma, Minnesota, Wisconsin, Illinois, Arkansas, Alabama, Georgia, 
Florida, Michigan, Indiana, Maryland, Delaware, Virginia and West 
Virginia, New York, and the New England states. For the most part, the 
Rules from the Baltimore Post-Award Conference and the contract itself 
were followed in detail in these states. There was not too much 
divergence from the norm. The most significant procedural disparity 
among these States was in one where they have a unique demand for the 
prime contractor to deal directly with each of some 22 Vocational 
Rehabilitation Counselors (VRCs) in locations throughout the state, 
rather than dealing directly with the single VA Quality Assurance 
Manager, as stipulated in the agreement.
    Despite starting out on a good or even great footing in the above 
areas, severe cash flow problems owing to VA's lack of timely payment 
for services rendered, have strained relationships across the board. 
Without timely payment from the VA, Heritage of America has had to 
delay payments to subcontractors and counselors for months at a time. 
(This overarching problem will be described in more detail below) While 
HOA has made every effort to pay its counselors as soon as HOA received 
payment from the VA, in too many cases payments from the VA have been 
so delinquent that counselors stopped accepting referrals from ROs, 
since the counselor had not been paid for work that had been performed 
months earlier.

Where NAS implementation continues to be problematic
    Unfortunately, in many areas regional officials have disregarded 
the NAS agreement provisions, insisting that procedures revert back to 
previous local practices rather than working to implement the new 
strategy cooperatively. These areas include Washington, Oregon, Idaho, 
New Mexico, Wyoming, Texas, North and South Dakota, Nebraska, Iowa, 
Louisiana, Ohio, Mississippi, New Jersey, Pennsylvania, and Puerto 
Rico. All problems with regional officials have been exacerbated by the 
total absence of VACO leadership, virtual refusal to communicate with 
primes on any regular basis, and incompetence of the contracting 
officer. The National Acquisition Strategy is that in name only. 
Standardized business practices and procedures were not imposed on the 
ROs by VA Central Office (VACO) officials. There are still many VAs, 
represented by many ROs, that are being ``managed'' by regional 
directors, who have little interest in the ``national'' VR&E strategy. 
This reality became a confounding trap in time and money for prime 
contractors trying their best to abide by the NAS agreement and 
expecting ROs to do the same.

Contract start up problems
    NAS contract award was delayed multiple times during 2007 and 2008 
but prime contractors were not given a chance to update the prices bid 
from those entered in their original proposals.
    Heritage began contract performance with weekly status submissions, 
as requested by the contracting officer and national contracting 
officer technical representatives (COTRs). Each submission commented on 
progress and problems but receipt of these were acknowledged only once 
and never responded to substantively. Having noticed that some of these 
electronic submissions were even not opened by VA officials for weeks, 
HOA stopped sending them after about 4 months and never heard another 
comment about them from the officials who had requested them in the 
first place.
    New procedures for VA approval of counselors took months rather 
than a few days as touted by VA officials, notwithstanding being put on 
notice by prime contractors, experienced with the process, that a long 
time is required to complete the security initialization training and 
vetting demanded by contract add-ons.
    Therefore, individual veteran case referrals to counselors were 
thusly delayed for months but then dumped upon counselors in large 
batches by ROs.
    Counselors were then held to a 30 day timeliness criteria applied 
across the board for the first time. The RO staff in several locations, 
however, felt quite free to ask HOA not to return completed cases to 
them in batches as large as 20 or 30, even though they had been 
assigned to us in batches of 50 to 300 per week.
    Locally subjective criteria for approving initial evaluations made 
it very difficult to know what was required in the way of information 
and length or complexity of reports. While the NAS agreement stipulates 
that local ROs are to provide instruction to contractor personnel on 
such matter, many have refused to do so.
    Local attitudes in many areas were very predisposed against 
allowing the new national strategy contract to work and in some cases 
went so far as actively undermining or preventing performance by prime 
contractors. The NAS disrupted local RO regimes and the old ways of 
doing things, which had been criticized in prior IG, GAO and Secretary 
level Task Force Reports. Many RO officials simply resent losing power 
over VR&E contracting practices to the national strategy and prime 
contractors.
    Owing to 4 months delay in start up of this contract, the base year 
did not provide us with a full 12 months of work. Case work was first 
issued under this contract beginning in November 2008, following a 
``start date'' of July 21, 2008. In one State it was even worse, as the 
VR&E Officer did not begin referring cases to us until January 2009, 
giving us less than a 5-month chance to show him how HOA could improve 
on the first 300 cases he assigned in a 10-day period of January. In 
this State the ``Base Year'' was only 5 months long, and only 8 months 
long in the remainder of the 44 States in which HOA opened operations, 
spending about $2 million in startup costs. There was also an 
inordinate amount of delay in approving our counselors to accept case 
work.
    HOA had some start up problems of its own. Bringing to bear 
hundreds of new employees, subcontractors and counselors on complex 
tasks relatively quickly was not easy and not without some performance 
difficulties. In certain cases individuals performed so poorly that 
termination of employment under the contract was the appropriate 
action. Unfortunately, this is to be expected for a small number of 
cases but can be dealt with given proper management and leadership. HOA 
wonders how many of VA's employees have been terminated for their poor 
performance under this contract?

Specific problem examples
    Hundreds of cases were assigned to HOA virtually at once in Oregon, 
Washington and Ohio, months after the beginning of the contract, 
because VR&E officials in these and other states did not approve 
counselors in a timely manner. In Ohio no cases were assigned to HOA 
until nearly the end of January, almost 6 months after contract start 
up, even though HOA had approved counselors ready to provide services 
to veterans. Apparently the VR&E officer in Ohio simply did not wish to 
recognize those counselors as having been approved, and evidently VACO 
had instructed the VR&E officers not to provide the prime contractors 
with the names of their best contract counselors from prior 
arrangements until it was too late to any favorable impact on prime 
contractor operations.
    This manipulation by VACO was the result of what HOA believes to be 
the VR&E Service's intention to see that the NAS contract fail. A 
letter from the VRC in the Northwest predicted HOA was going to fail 
even before it began to provide services and it was written before any 
of HOA's counselors had been submitted for approval. Would that person 
ever have been inclined to approve any of HOA's reports? Probably not, 
nor has that person done so.
    In another part of the Northwest it was even worse. The VR&E 
officers deliberately held up reports for months and then disapproved 
them with often flimsy critiques, such as declaring the report not to 
be approved when voc/ed exploration work appearing in attachments to 
the report were not referred to in the main body, and a typo appeared 
in one of them! And they have refused to accept 93 of HOA's reports 
because these reports were sent to the Quality Assurance Manager, 
(QAM), per instructions received at the Baltimore Post-Award Conference 
to deal only with the QAMs regarding referrals and acceptances and 
other contract matters.
    In a Midwest State, where HOA has experienced the worst possible 
management of the NAS, no cases were assigned to HOA until nearly the 
end of January, almost 6 months after contract start up. Counselors had 
been approved but the VR&E Officer simply did not wish to recognize 
them as such until January. Additionally, the VR&E Officer prevented 
the QAM from moving forward with 22 of HOA's counselors who had been 
approved in November and, on that basis, refused to give HOA any cases 
until the end of January, at which time the VR&E Officer dumped over 
300 of them on HOA all at once.
Inconsistent business practices and procedures among Regional Offices
    Inconsistent business practices between the regions prevented HOA 
from effectively serving veterans in the way they deserved and in some 
veterans being constructively denied congressionally mandated benefits 
when certain ROs refused to refer veterans for counseling by VA 
personnel because the services provided by HOA were declared to be 
inadequate.
    Lack of VACO leadership allowed these inconsistencies to flourish 
and probably emboldened the most problematic ROs to ignore provisions 
of the national strategy that prime contractors were trying to follow.

Inconsistent Means of Case Referral
    The way cases are referred to contractors by each Regional Office 
(RO) varies greatly. Some ROs demand that HOA counselors attend the 
initial orientation the VA gives to veterans and pick up case files 
then (Chicago, Pittsburgh, Roanoke, several others to a lesser degree 
depending on location within the state). There are other ROs insisting 
that their Vocational Rehabilitation Counselors (VRC) assign HOA the 
cases and do the billing (Saint Petersburg). There are others that 
require us to deal only with the VR&E Officer in charge at each 
location (Cleveland and Seattle). There are a few others that follow 
the contract and have the Contract Specialist/Quality Assurance Manager 
(QAM) assign HOA the cases and submit invoices to financing for 
payment.
    Some ROs want physical pickup of files, some FedEx files, others 
are willing to email them using secure Public Key Infrastructure and 
still others are willing to fax them via HOA's secure Venali toll-free 
fax number. Faxing is preferred, as it saves the VA time, material 
costs, and labor costs in not having to put ``dummy'' files together, 
and it permits HOA to maintain the level of security required while 
permitting automation of file data entry.

Inconsistent Initial Evaluation Information Requirements
    Inconsistency among the ROs in what they require in the way of 
initial evaluation information and length/complexity of reports is a 
major issue because in some areas VA officials use this as a means of 
not approving reports and therefore not paying HOA for months. This 
``procedure'' constructively denies services to veterans during the 
months that RO staff takes to inform HOA as to the inadequacies they 
believe they have identified in reports. They usually state that 
``There is insufficient information on which to base a plan'' when 
there often is sufficient information but the VRC or the VR&E officer 
or some other VA staffer does not like how the report was written and 
does not call the veteran in to provide services until after the report 
is redone. It often takes as long as three or 4 months for the ROs to 
inform HOA that reports are not adequate, thus delaying provision of 
services to veterans for that amount of time.
    In some cases the inadequacies are not even based on content but 
rather on punctuation within the report or the fact, as in Seattle, 
that the report did not state ``See attachments for vocational and 
educational exploration results'' when the results were very briefly 
summarized in the report body, but the details were presented in 
appendixes. This phenomenon is particularly evident in Washington, 
Oregon, Texas, Ohio, Florida, Pennsylvania, Colorado, and the Dakotas. 
To complicate matters, some ROs want short reports, some want longer 
ones. Some do not tell HOA what they want, but expect HOA to figure it 
out after reports are rejected.
    The divergence in what the contract requires and what the VR&E 
Officers demand is particularly notable in Ohio. The VR&E Officer in 
Cleveland insists that HOA provide what he calls a ``Psycho-Social-
Rehab-Employment Plan'', as part of initial evaluation. This is not 
even remotely referred to in the contract and, to make things worse, he 
has refused to provide the mandated training required by the contract 
and VA regulations so HOA can determine what it is he truly wants as to 
content and forms to be used.

Inconsistent Requirements for Reporting and Invoicing Forms
    The ROs do not all want the same VA forms. Some ROs want complete 
employment surveys and labor market research as part of the Initial 
Evaluation despite their not being required or desired in the contract. 
Some ROs have even gone to the extent of not approving reports on the 
basis that it does not include HOA's own form entitled ``Vocational 
Planner,'' which is not a VA form. HOA had used it in the past and some 
ROs wanted it to be continued, though it was not part of HOA's bid for 
the current procurement.
    As for invoicing, HOA has attempted to accommodate an enormous 
divergence of invoicing requirements from around the country, though 
the contract is very specific as to what is required. HOA even went to 
the extent of pre-printing invoices with stamps the ROs need to place 
on invoices so the VA disbursing unit in Austin, TX will have the 
funding obligation numbers and other information they need to pay. HOA 
has corrected this five times now and it is still not what some ROs 
want.

Inconsistent Lines of Communication with the ROs
    This was discussed briefly in paragraph 1, above. The contract 
states that HOA counselors are to establish partnerships with the VA 
VRCs, but not involve themselves in contracting matters. Furthermore, 
the contract specifies that only the QAMs will make case referrals and 
approve invoices for payment. This is not the way it works in most ROs. 
In Seattle and Cleveland, for example, the VR&E Officers have reserved 
these rights and obligations to themselves. Other ROs, as explained 
above in the case of Florida, have the VRCs do all such work. In other 
areas, some of these duties are assumed by technicians who have no 
education or experience in such activities.

Inconsistent Timeliness of Payment for Services
    Timeliness of payment for services is so inconsistent that in some 
ROs no delay occurs, while in others, delays exceeding 100 days are 
standard with no explanation of why payment is not being made or denied 
within 30 days, as required by the contract and in law.
    There are numerous possibilities for this inconsistency: In many 
ROs there is no single person responsible for tracking payments, or 
there is a single POC who is not replaced when he or she goes on leave, 
or the report is not approved (and payment therefore is delayed) for 
any of the issues as explained above. Other possibilities include 
chances that reports and invoices are approved and forwarded by the 
local RO in a timely manner but ``there is a problem in Finance,'' or 
the VRC has given a case directly to one of HOA's counselors (in 
violation of the contract) and HOA did not know that a case had been 
assigned and therefore could not bill it even though the work had been 
satisfactorily completed, or in some cases there has been deliberate 
withholding of payment to ensure that the NAS contract fails along with 
the prime contractors.

Invoicing and aging accounts receivable
    Total current (as of July 27, 2009) accounts receivable for HOA is 
over $1.4 million, broken down as follows:

0-30 days:                                                 $  693,025.63
31-60 days:                                                   286,601.01
61-90 days:                                                   135,359.00
Over 90 days:                                                 298,079.31
  Total:                                                   $1,432,021.16


    On multiple occasions, this has been brought to the attention of 
the contracting officer, the Director of VR&E, as well as the Under 
Secretary for Benefits. Evidently, VACO is incapable of calculating 
accounts receivable using any national acquisition strategy invoice 
tracking system, as contemplated in the national contract and signed by 
the 8 prime contractors. In fact, VACO turned down HOA's offer to 
provide it with the proprietary, state-of-the-art system HOA 
established, at considerable expense, specifically for this purpose.
    In February 2005, the VA Inspector General published a report 
concerning over-pricing in Washington, DC and other areas, which had 
been tolerated for years. The recommendation to the VR&E Service then 
was to seek contractors who would be more reasonable in their pricing 
while still delivering acceptable services. HOA attempted to meet that 
requirement, but has been rebuffed at every turn.
    The critical nature of cash flow to small business is seemingly 
lost on VA officials both in Central Office and at the local level. 
This is particularly discouraging to HOA, which is a service-disabled 
veteran owned small business under the impression (apparently mistaken 
impression) that the VA considered it important, as provided in law, 
that it should help foster and support businesses owned and operated by 
service-disable veterans.
    As stated above, the inconsistency in timeliness of payment for 
services has placed extreme financial distress upon HOA and in many 
cases made it impossible for HOA to provide timely payment to its 
counselors. As a direct result of deficient payment to HOA by the VA, 
many of HOA's counselors have declined to continue accepting case 
referrals from ROs or quit employment with HOA altogether. Such denial 
of services to veterans is regrettable but absolutely should have been 
avoidable, if only VA administered and implemented the NAS competently.
    The following paragraphs outline the inconsistent nature of VA 
direction on invoicing procedures.
    Contract language from solicitation page (un-numbered) section 
B.1.4.states: ``Government Invoice Address: All invoices from the 
contractor shall be mailed to the following address: Department of 
Veterans Affairs, FMS-VA-2(101)/Certified Invoices, Financial Services 
Center, PO Box 149971, Austin, TX 78714-8971.'' This has never been 
done because the prime contractors were given instruction at the 
Baltimore Post-Award Conference and subsequently by individual ROs to 
submit invoices entirely differently.
    Also, from un-numbered page section C.2 52.212-4(g) Invoice 
Contract Terms and Conditions-Commercial Items (FEB 2007): (1) ``The 
Contractor shall submit an original and three copies (or electronic 
invoice, if authorized) to the address designated in the contract to 
receive invoices.'' No address other than the one above is designated 
in the contract.
    However, more specific instructions are provided on pages 189-190 
of the VR&E Post Award Workshop Book: ``A proper invoice shall be 
submitted to the VR&E Officer at each division and include the 
following: Date; Invoice Number; Contractor Name; IDIQ Contract Number; 
Task Order Number; Purchase Order Number (the number from VA's internal 
funding document); Case Number; Last four digits of the veterans SSN; 
Period of Performance; Service(s) provided to include Sub-Contract Line 
Item Number (SCLIN) number; Cost of services; Any travel and/or per 
diem costs and receipts (if appropriate) shall be included on a 
separate line item; Name, title and phone number of person to be 
notified in the event of a defective invoice. The VR&E Office will 
approve the invoice and forward it for payment; or The VR&E Officer 
will disapprove any invoice and return it to the Industry Partner 
within 7 calendar days.'' Prime contractors were informed that the Post 
Award Workshop Book is their ``bible'' for guidance on issues 
surrounding the NAS and all the forms and procedures contractors would 
need were included in the Workshop Book. Nothing could have been 
further from the truth.
    Unfortunately, not all ROs follow these instructions. Many do not 
assign Purchase Order Numbers or Task Order Numbers, using instead the 
veteran's name to track invoices. Others do not use the veteran's name 
for tracking purposes, instead use the proper numbers but leave off the 
HOA invoice number, which does not permit HOA to track the invoice. 
Still other ROs do not use the proper obligation number which causes 
ALAC (Austin Disbursement) to return the invoice to the issuing RO 
Finance Office for revision. None of the ROs ever return a disapproved 
invoice within the 7-day period as required above and by FAR 32.904 
(Prompt Payment). Some ROs have wanted HOA to pre-print funding 
obligation stamps on our invoices, others want them left off or 
modified in some way, thus providing more opportunity for misrouting, 
misfiling, lack of tracking consistency and rejection by the Austin 
disbursement center.
    One of the reasons for inconsistencies is the fact that the VA has 
changed its numbering system in mid-stream and the RO Finance Offices 
are not all plugged into the new Internet Payment Procedure (IPP) 
System. The IPP officials refuse to help HOA track invoices, saying 
that it is HOA's problem and needs to be taken up with the Contracting 
Officer and the local ROs.

Case Management Pricing Ambiguity
    Inexplicably, the VA has taken a position on interpretation of a 
pricing provision that assumes all eight prime contractors knowingly 
entered bids that would force them to lose money on case management 
services. VACO insists that billing for case management services should 
be for the ``life of the case'' which can be for as long as up to 63 
months in one case, instead of the more reasonable 12 month period as 
bid by HOA.
    One of the prime contractors appealed VA's interpretation for 
calculating these payments to the U.S. Civilian Board of Contract 
Appeals. The Board denied the VA's motion for summary relief, stating 
in part that . . . ``Given several requests to clarify its position 
through its solicitation, VA provided equivocal responses. When asked 
to describe the ways in which this solicitation differed from previous 
contractual instruments covering similar services, VA refused to 
provide any answer at all  . . . It is not surprising, in light of the 
agency's opaque approach to the matter at issue during the solicitation 
process, that the parties have entered into a contract with different 
understandings of an important term  . . .''
    In many other respects, as itemized throughout this statement, 
Heritage of America believes VA's administration and implementation of 
this so-called ``national acquisition strategy'' has been no better 
than its performance during the solicitation stages, as described above 
by the two judge panel of the Contract Appeals Board.
    Additionally, VACO officials seemingly have been less than 
forthcoming with the House Committee on Veterans' Affairs about 
information regarding the nature and degree of the difficulties they 
perceived with the NAS contract. HOA notes that the Director of VR&E 
testified before this Subcommittee on April 2, of this year and 
mentioned nothing of the fact that VA officials had, just days earlier, 
filed documents in the U.S. Court of Federal Claims stating that VA was 
not going to exercise the first year option on the NAS contract. If the 
VA had decided implementation of the NAS was so flawed that it 
warranted such drastic action, why wouldn't the VR&E Director even 
mention it during her appearance before the Subcommittee.

Additional discrepancies in VA calculation of prices under the NAS 
        agreement
    The calculation of payments disbursed to contractors does not 
comply with assumptions in contractor bids, as required by the RFP. 
There are three major areas of concern:

    1.  On page 51 of the RFP (Sol. No. VA-101-07-RP-0306) it states 
very clearly that, ``The Offeror shall document in its proposal any 
assumptions.'' Even though we complied by proposing a comprehensive 
list of assumptions as the basis for our bid, and even though the 
Contracting Officer accepted our bid, our assumptions have been 
completely ignored.
         This is most evident in the divergence between what was the 
understanding of all eight prime contractors as to how services for 
Case Management would be billed and how the VR&E Service payments would 
be made. HOA's position was made very clear in a letter to the 
Contracting Officer (attached). HOA is not asking that VA modify the 
contract, only that they comply with it.
    2.  Travel. Again, HOA's proposal made very clear assumptions as to 
what would be required for travel reimbursement if the VA were to 
accept the bid. Travel reimbursement has been resolutely denied by the 
VA. HOA's question to the VR&E Service has been ``How do you expect us 
to get to Guam or Korea or Okinawa to perform case work there?'' HOA 
has qualified counselors, willing to travel but the VA will not pay for 
travel from CONUS to OCONUS and HOA bid reasonable travel rates.
         They apparently expected HOA to have included these types of 
travel costs in the FFP bid, which HOA made very clear in its proposal 
assumptions were not included, and that if the VA wanted HOA counselors 
to go to remote areas, VA would have to pay for travel. None of the 
eight prime contractors is being reimbursed for travel, though the 
original QAM in Florida (who has since been replaced) indicated that 
office would be willing to pay for such in Florida if the travel was 
pre-approved.
    3.  Add-Ons for Security. The VA has required a number of add-ons 
to the contract which were not clearly defined in the RFP. Security 
issues, computer replacements, and the like were ill-defined and 
certainly not considered as part of the HOA bid or in the bids of any 
of the other prime contractors. The VA has demanded HOA comply with all 
of the new rules and regulations they have promulgated owing to their 
own security lapses but has not provided HOA with any resources for 
meeting their demands.

RO's undermining HOA relationships and reputation with subcontractors
    Instructions at Baltimore Post-Award conference stipulated that VA 
officials are not to communicate with subcontractors regarding contract 
matters but deal only with prime contractors. However, VA contact with 
HOA subcontractors and counselors is on going and extensive. In some 
cases VA officials are inaccurately stating that HOA has been paid in 
full and holding back moneys from subcontractors and counselors. Even 
more damaging, are statements by VA officials telling subcontractors to 
just hang in there until HOA can be dumped and VA can contract with 
HOA's subcontractors directly, thus cutting out the prime contractor, 
probably at higher price. Now HOA subcontractors are writing letters to 
Congressmen complaining about HOA and contemplating class action 
lawsuits. Again, HOA considers all this to be part of VACO incompetence 
and regional office malfeasance.

Recommendations for improving contract next time
    There are a number of technical innovations that Heritage of 
America (HOA) has developed during our current VR&E NAS contract 
VA101(049A3)V-0329 to enhance performance and delivery of VR&E services 
to veterans. Unfortunately, owing to the VA's decision to not exercise 
Option Year 1 of any of the current prime contractors and because the 
first 4 months of the contract were taken up with fulfillment of 
contract add-ons and security requirements, HOA has not been given 
enough time to implement its innovations sufficiently to allow the VA 
an adequate opportunity for review. These technical innovations include 
the following: I-Sight Management Information System, Venali Secure Fax 
System, Central Processing Center, Central Call Center, Paperless 
Communication, Wonderlic Protocol Correlation, OASYS and CareerScope, 
Discrete Services, Process Flow, Travel Considerations, and Case 
Management Fees. Each is discussed below, illustrating the considerable 
resources and capabilities HOA has brought to bear on NAS contract 
performance.

1. I-Sight Management Information System
    HOA officials have been told by former VACO officers, who helped in 
developing ``CWINRS'', the information management system for VR&E, that 
HOA's management information system is better than CWINRS. It is 
certainly more secure and available, operating as it does in a 128-bit 
SSL environment that emulates bank-level security with servers in a 
vault in Phoenix, AZ where they are unlikely to succumb to weather and 
climate issues and unlikely to be subject to traffic overload and other 
issues that are experienced by the CWINRS servers on a regular basis.
    HOA has informally offered access to this system several times to 
the VR&E Service as well as to the Information Service Officer people 
in VACO and RO people in numerous states. VA's accepting this HOA offer 
would enable VRCs to instantly view the status of the cases they have 
assigned to HOA.
    Accepting HOA's offer would also enable uniform tracking of cases 
throughout all ROs nationwide instead of continuing with the current VA 
``system'' wherein some ROs track cases by veteran name, some track by 
a number they assign to each case, some track by a redacted ``half-
sheet'' that represents the VA Form 28-1985 authorization, and some 
track by no recognizable means at all from our perspective because the 
VRCs hand cases directly to sub-contract counselors and HOA has no way 
of knowing that a case has even been assigned.

2. Venali Secure Fax System
    Assignment of cases via HOA's toll-free Venali secure fax system 
has been working well. It needs to be implemented in all ROs, however, 
especially in those that demand HOA counselors appear at VA 
orientations to receive case assignments only to be told there are no 
veterans who showed up that day, and in those ROs that demand their 
VRCs assign cases directly to HOA sub-contract counselors. Such 
disregard on the part of some ROs for the welfare of their ``Industry 
Partner'' Prime Contractors creates dysfunction in case assigning to 
say the least.
    Using HOA's Venali secure fax system to assign and authorize cases 
also saves the VA time and money. Staff at ROs that use HOA's Venali 
fax system no longer need to spend time and money making up ``Dummy 
Field Folders,'' no longer need to spend time and money filling up 
FedEx boxes and paying for shipping hard copies to us, no longer need 
to spend time and money on keeping extra files around that take up 
space and resources. If ROs were permitted to accept faxed reports and 
invoices from HOA, additional time and money savings would be realized 
by the VA.
    Better yet, a completely paperless communication between HOA and 
the VA would realize other savings in addition to time and money--
original documents and VA Form 28-1985 authorizations would remain in 
the custody of the VA at all times, RO staff dealing with paper 
documents could be freed up for other duties, and VRCs would be able to 
spend more valuable face-to-face time with veterans instead of 
attempting to perform administrative duties for which they are unlikely 
to be well-suited anyway. A process describing this paperless 
communication is described below.

3. Central Processing Center (CPC)
    HOA's CPC has been operating well now for about 2 months, but there 
are older cases that were not processed properly by former HOA staff 
and managers in our regional organization. These personnel have been 
terminated in order to restructure HOA operations, eliminating use of a 
regional concept and regional managers. It will take some time for 
these older cases, some of which were not referred to HOA in accordance 
with the NAS contract, to be resolved in the new system. HOA would need 
an extension of about 6 months on the NAS contract to make sure all old 
cases are resolved properly.
    All case referrals are now being directed solely to the CPC where 
they are scanned into iSight and assigned to counselors. In addition, 
the new Call Center will be contacting the veteran and making the first 
appointment within 7 days and also contacting the VRC who assigned the 
case within that same 7-day period. This will ensure that timelines are 
met in accordance with the NAS contract. There are benchmarks built 
into iSight and the CPC process to make sure that appointment-making, 
testing, counseling, report writing, invoicing, and other services are 
provided in a timely manner.
    Several ROs, particularly in Subareas 17 and 4 (Washington State 
and Ohio), are struggling with this situation. Many RO officials tell 
us that they have seen improvement during the past 2 months that the 
CPC has been operating. Those older cases are the ones giving HOA the 
greatest concern.
    The CPC, while attempting to resolve these issues, must also keep 
up with current operations. HOA has hired additional staff in the CPC 
to make this happen and anticipates that these additions, in 
conjunction with HOA's new Call Center and Process Flow, will resolve 
many of the issues that have been identified during the current NAS 
contract.

4. Central Call Center (CCC)
    The CCC has opened in an office next to HOA's CPC and is currently 
being staffed. When completed the staff will be making all of the calls 
for all NAS contract activities. This will include, within the first 7 
days following receipt of case authorization, speaking with the veteran 
and the VRC who assigned the case, and making an appointment with the 
veteran to begin work on the case. Then, Call Center personnel under 
guidance from the Quality Assurance Manager, will follow up at regular 
intervals with the HOA counselor assigned to the case as testing, 
further appointment-making, counseling, report writing, and invoicing 
benchmarks are reached. The CPC will be responsible for entering all 
communications in iSight where they will be available for use by all 
participants and stakeholders.
    The QA Manager will sit in the CCC making sure that iSight and 
other quality control mechanisms are functioning as they should. Please 
see the Process Flow discussion and chart below.

5. Paperless Communication
    The discussion above gives an indication of how paperless 
communication might work and a detailed description is made below under 
Process Flow.
    The 2004 report of the VR&E Task Force recommended that paperless 
communication be established by the VR&E Service and this was re-
emphasized in the IG report of February 2005. To date, there has been 
little accomplished toward reaching this goal.
    It is hoped that the VR&E Service will take what HOA describes to 
heart and gives HOA the chance to prove that what has been designed 
into HOA's capability is the best way to serve our veterans.
6. Wonderlic Protocol Correlation
    The Wonderlic Corp. has agreed to design for HOA an automated 
composite of results from the four test protocols of theirs that we are 
currently using, correlating these results in a narrative report that 
presents interrelationships among the tested aptitudes, interests, and 
abilities as well as work values. This composite report will be 
available as an attachment to HOA's Initial Assessment reports and 
results will be summarized in the main body of the report. The 
composite report was to have been ready from Wonderlic by the end of 
September, but has been put on hold owing to non-renewal of Option Year 

1. Development could be re-instituted upon contract extension of 6 
months.
    It can readily be seen that such a composite would be of enormous 
advantage in helping the VRCs use test results in plan development. 
Counselors would be instructed in HOA reporting as to what areas to 
emphasize, giving the VRCs an additional understanding of the veteran's 
aptitudes, interests, abilities, and work values.
    HOA is currently employing secure fax-back test results from 
Wonderlic. Any of HOA's counselors from anywhere can fax test results 
toll-free over a secure fax line to Wonderlic where the tests are 
scored and faxed back by secure Venali fax to the CPC. These test 
results are then entered in iSight by CPC staff and are available 
immediately for use by HOA counselors, and by the VRCs should the VA 
agree to let them have access to our Management Information System.
    This system also creates an additional layer of security because 
test results never leave a secure environment and are not available in 
paper form until inclusion in the final report should it be decided 
that final reports will continue to be required in hard copy.

7. Occupational Aptitude System (OASYS) and CareerScope
    OASYS and CareerScope are not HOA innovations, but HOA designed a 
potential use for them that should be attractive to the VA and 
motivated both companies responsible for developing them to produce a 
combined usage for HOA.
    The Wounded Warrior Program, as well as Chapter 36 Educational 
Vocational Counseling, requires immediate response to needs of the 
military service as well as needs of the veteran. To do so, HOA needs 
to be able to get on military bases and have access to computers with 
Internet hookups. These are usually found in libraries, non-
appropriated fund facilities, and family service centers among other 
potential locations. With such access, which HOA is currently 
negotiating with appropriate DoD agencies, HOA will be able to 
immediately respond to needs of wounded warriors and those 
transitioning out of military service.
    Results from OASYS and CareerScope are immediately available at 
completion online. They can be printed out by the military 
servicemember and be available for a counseling session by HOA 
counselor the same day.
    Outside of this potential use, which HOA has been recommending to 
specific ROs for months, HOA has begun using OASYS to develop its 
Transferable Skills Analysis and vocational and educational exploration 
on local, state, and national levels, all of which can be accomplished 
using the continually updated data bases now available within OASYS. 
HOA has found this usage to be successful, but again have not had 
sufficient time to prove to the various ROs what can be accomplished 
with it.
    A contract extension of 6 months on our current NAS contract would 
provide time to prove the value of OASYS in helping produce 
collaborative vocational and educational exploration results that can 
be used, in conjunction with testing results and the veteran's 
experience and educational and medical history, to provide the VR&E 
counselor with sufficient information about the veteran to determine 
feasibility for achieving a vocational goal, entry into suitable 
employment, or achieving maximum independence in the community based on 
a written rehabilitation plan.

8. Discrete Services
    HOA has developed a nationwide system for delivering Discrete 
Services and has, in accordance with instructions received during the 
Baltimore Post-Award Conference, been proposing it for months to VACO 
and all of the QAMs and VR&E Officers in the 44 states in which HOA 
currently operates. HOA is capable of continuing to deliver Independent 
Living assessments, job coaching, life skills coaching, job site 
analysis, and assistive technology, as well as the other Discrete 
Services described in the attachment entitled Discrete Services under 
the guidance of HOA's National Discrete Services Director.

9. Process Flow
    An attached flowing chart shows HOA processing of case work from 
assignment through billing.
    To summarize, our process begins when the QAM or COTR at the local 
RO faxes a VA Form 28-1985 case authorization and referral documents as 
appropriate to a toll-free secure Venali fax number at our CPC. The fax 
is received and entered into iSight. That same day, or the business 
morning thereafter if the case is received late in the day or before a 
holiday, a CCC person will be assigned the case to establish initial 
contact with the veteran and the VRC assigning the case.
    A first appointment is made with the veteran and the case is 
assigned in iSight to a counselor as appropriate. Testing and an 
initial interview or other activities depending on the type of case 
authorized are completed by the counselor with the veteran. Forms are 
filled out, and the veteran is given an appointment for the second 
meeting as well as homework to complete goal-setting and vocational and 
educational exploration. The counselor faxes completed test protocols 
to Wonderlic, they are scored, and faxed back to the CPC the same day. 
The CPC Team enters the results in iSight and the counselor can have 
immediate access to the results.
    The counselor goes over the results as well as the vocational and 
educational exploration homework with the veteran at the second 
meeting. If there has not been sufficient progress made on the part of 
the veteran, a third meeting may be necessary. When all is at hand, 
including test results and school transcripts and exploration outcomes, 
the counselor and the veteran agree on a vocational and educational (if 
appropriate) goal. The counselor staffs the case with the assigning VRC 
and writes a report.
    The report is faxed to the CPC along with the counselor's bill if 
he or she is an independent subcontractor, the CPC gathers everything 
together including the invoice to the VA, and transmits or FedEx's the 
completed report and invoice to the appropriate QAM or COTR. Any 
iteration required is handled in the same expeditious manner.

10. Travel Considerations
    Heritage of America has qualified, cleared counselors who are 
willing to travel to outlying locations, including OCONUS locations, 
but the VA simply cannot continue to take the attitude that, in effect, 
HOA personnel must swim to Korea or Guam or Samoa to get the job done. 
Because the VA has insisted that only U.S. citizens can be qualified as 
counselors in foreign locations, HOA must be permitted to use 
counselors who are willing to travel.
    In HOA's NAS contract proposal dated September 6, 2007, HOA 
proposed the following for travel:

       ``Travel to outlying areas, beyond 100 miles from an established 
HOA service location, will incur a travel reimbursement fee as bid in 
Price Schedule Attachment D-1, below. No travel will be reserved or 
confirmed prior to approval of the COR at the respective VR&E office. 
Overseas pay at 20 percent differential as appropriate would be assumed 
as a reasonable incentive for counselors tasked with travel to NAS 
Foreign Area Designations.
       The firm-fixed-price bid for each Contract Line Identification 
Number and SubCLIN is an all-inclusive price based on fair and 
reasonable professional and non-professional wage scales throughout 
CONUS and OCONUS. The prices include wages, travel up to 100 miles, 
tests and supplies, office operations, insurance, G&A, contingency 
fees, overhead, and profit, but not travel beyond 100 miles one way 
from the HOA office location nearest the veteran.

    The HOA formula for travel reimbursement was bid as follows:

      For those veterans living beyond a 100-mile radius from 
an HOA office location, it is assumed that the VA will provide a travel 
voucher for the veteran unless he or she is homebound. In the case of 
homebound or IL assignments, HOA counselors will travel to the veteran 
on a pre-approved basis by privately owned vehicle where practical for 
up to 500 miles one way.
      Travel by commercial airline will be pre-approved by the 
local VR&E Officer as appropriate. Travel over 500 miles one way within 
Subareas 23, 24, 25, and 26 is bid to include airfare, per diem, and 
hazardous duty and/or overseas differential as appropriate, at 
Government rates in effect at the time of travel and as approved by the 
VR&E Officer.''

11. Case Management Fees
    No one is capable of providing Case Management services for the 
fees that VACO is insisting are permitted under the current NAS 
contract, that is for the ``life of the case,'' which apparently can be 
considered to be as long as 63 months by the VA since HOA has had at 
least one referral for that length of time. Dividing 63 months by the 
Firm Fixed Price bid per case results in about $10 per month--less than 
minimum wage for the several hours to include travel expenses 
counselors put into a Level II or Level III Case Management assignment 
per month. HOA has written a letter (attached) to the current NAS 
contracting officer outlining the legal deficiencies in the current 
VACO interpretation of how Case Management fees should be paid, but to 
date, HOA has not received a reply.
    How to bill Case Management services was not adequately defined in 
the prior 2002 NAS contract either and needs to be addressed in an 
equitable manner by the new contracting officer in the contemplated re-
bid of the current NAS contract.
    HOA has the capability of providing Case Management services if the 
upcoming RFP will require that FFP bids per case are to be proposed on 
a monthly basis, that cases are to be assigned for a specified number 
of months within a 12-month base year or option year period, and that 
fees will be paid by the VA monthly.
Recommendations for improving VR&E structure and bureaucracy:
    VA should create (alternatively Congress should legislate) a new 
Under Secretary position, titled Under Secretary for VR&E, who would 
have his or her own mandate for providing VR&E services separate from 
direction and funding and policy decisions dictated by the current 
Veterans Benefits Administration organizational structure. Veterans 
eligible for VR&E have already been adjudicated for compensation and 
pension purposes and should not have their separate VR&E benefits 
constrained by C&P criteria.
    Currently, Chapter 36 Educational/Vocational counseling is 
generally being disregarded by VA personnel in 90 percent of the ROs. 
The reason for this is that Chapter 36 is excluded from performance 
criteria and it is therefore not used in the VA's work performance 
evaluation or in potential calculation of bonuses. This disregard of 
Chapter 36 counseling by most of the ROs in our Nation is constructive 
denial of a congressionally mandated benefit to more than 300,000 
servicemembers separating from the armed forces annually.
    Because of the complexity of Independent Living (IL) evaluations, 
case management processes, and interaction between the veteran, the 
counselors, and the vendors providing supportive services, IL should be 
its own Service Group and not be relegated to inferior status under 
Discrete Services. In addition, IL is Track 5 of the VR&E process and 
is an important component of service to disabled veterans.

Conclusion
    Apparently, the VA expected the NAS prime contractors--all small 
businesses, several of them service-disabled veteran owned small 
businesses (SDVOSB), to run their businesses as the VA runs its 
business, but without providing the resources to pay for massive 
inefficiency or intending to support success.
    Madam Chairwoman, thank you allowing Heritage of America to express 
its views. I hope you will seriously consider having additional 
hearings on these important matters.
    Given the Subcommittee's awareness of the situation the VA has put 
it's eight NAS prime contractors in, some of which are service-disabled 
veteran owned small businesses, I hope you will urge VA, in the 
strongest terms, to extend the NAS contracts by 6 months to allow for 
better continuity of service to veterans and improved treatment of the 
small businesses that believed this contract was an opportunity to 
serve veterans better than in the past.
    Additionally, I hope the Subcommittee will have the Government 
Accountability Office do a thorough investigation of the administration 
and implementation of the NAS contract to determine the successes and 
failures which have occurred over the past year, so that if VA goes 
forward with another national acquisition strategy it won't again be 
fatally flawed from the start.
    VR&E should be the primary purpose for VA's existence. Nothing 
should have priority over helping severely disabled veterans regain a 
place in the nation's workforce or achieve the highest degree of 
independence possible. Sadly, VR&E has been broken for decades. Fixing 
it will take a sustained focus and strong desire to see real changes 
made. I'm now, more than ever, totally convinced the VA cannot and will 
not accomplish the necessary reforms on its own. If the VA Committees 
of the House and Senate don't take up the mission to fix VR&E once and 
for all, it will not happen and veterans desperately needing employment 
services will be stuck in the ongoing quagmire that is VR&E Services.
    Heritage of America will remain committed to the vision of a system 
that is not fragmented and dysfunctional, but cohesive from region to 
region, where veterans can receive valid evaluations and efficacious 
services, irrespective of their geographic location. Such a cohesive 
approach, however, is not possible with the old outdated model that 
features fiefdoms controlled by bureaucrats who have forgotten who we 
should be serving.
    Madam Chairwoman, this concludes my testimony. I would, of course, 
be pleased to answer questions from you or other Members of the 
Subcommittee.

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[GRAPHIC] [TIFF OMITTED] T1879A.003


                                 
  Prepared Statement of Anthony Tarkowski, President/Chief Executive 
             Officer, Sygnetics, Inc., Rochester Hills, MI

    My company is one of the prime contractors for the Department of 
Veterans Affairs National Acquisition Strategy (NAS) Vocational 
Rehabilitation and Employment (VR&E) Contract. We were notified by the 
DVA that the option years on this contract would not be executed. This 
action was not due to deficiencies on our part in providing service to 
disabled veterans. There were awards made to Service Disabled Veteran 
Owned Small Businesses (SDVOSB), which we were one. The DVA erroneously 
made an award to a company that was not a SDVOSB. Therefore the DVA 
instead of removing that company from the contract they decided to 
punish all the other companies by not continuing the contract.
    While providing services under this contract we have had to 
overcome many obstacles that the DVA constructed that were not part of 
their original solicitation. This caused considerable financial outlays 
that without the continuance of the contract will cause us severe 
financial harm. We have been able to work through these hurdles during 
the first year of the contract while providing exceptional service to 
veterans. Now that we are able to further increase our service to 
veterans and see a return on our investment the DVA seems satisfied to 
disrupt the entire process.
    The DVA administration of this contract has been particularly 
unconscionable as applied to the companies that won this award, since 
they are small businesses and many are service-disabled veteran owned 
small business, which the VA should be helping succeed on behalf of 
veterans rather than subjecting to bureaucratic roadblocks.
    We have been informed on a number of occasions by Regional 
Vocational Rehabilitation & Employment Officers that it was not their 
intention to make this contract successful. In fact they planned to do 
what ever they could to ensure failure.
    Some of the problems we encountered were:

    a.  Reports returned for corrections. Our QA staff included two 
former VA VRE officers. We had to reiterate reports multiple times even 
after reviewed by former VA employees.
    b.  Limited consistency between VA regional offices.
    c.  Reporting content--what is acceptable at one office or 
counselor is not acceptable at another office and or by another 
counselor.
    d.  Contact with VRE counselors was a challenge at best. In some 
offices the response was quick and informative. Other offices limited 
response.
    e.  Regional offices had little if any direction on background 
security process. We developed a timeline--26 steps to have one 
counselor approved.
    f.  Qualifications of staff--one regional office would accept the 
counselors' background (resume) another office in close proximity would 
reject the counselor.
    g.  Reporting--some offices accepted encrypted email others only 
wanted reports sent via a traceable mail delivery system.
    h.  Attempts to communicate with the contracting officer and COR 
have been ignored.

    Time is of the essence, as VA has already not exercised the first 
option year of this contract and has no plan in place to furnish these 
services to veterans after the end of the base year. Please take 
appropriate action to force VA to exercise the option year or at least 
extend the current contract for 6 months and to pay the invoicing at 
the rates quoted in the awards to each company in a timely manner. 
Please make sure the VA is required to fix these problems, rather than 
allowing the VA to simply escape the situation it has created.

                               __________
    My company is one of the prime contractors for the Department of 
Veterans Affairs National Acquisition Strategy (NAS) Vocational 
Rehabilitation and Employment (VR&E) Contract. We were notified by the 
DVA that the option years on this contract would not be executed. This 
action was not due to deficiencies on our part in providing service to 
disabled veterans. There were awards made to Service Disabled Veteran 
Owned Small Businesses (SDVOSB), which we were one. The DVA erroneously 
made an award to a company that was not a SDVOSB. Therefore the DVA 
instead of removing that company from the contract decided to punish 
all the other companies by not continuing the contract.
    While providing services under this contract we have had to 
overcome many obstacles that the DVA constructed that were not part of 
their original solicitation. This caused considerable financial outlays 
that without the continuance of the contract will cause us severe 
financial harm. We have been able to work through these hurdles during 
the first year of the contract while providing exceptional service to 
veterans. Now that we are able to further increase our service to 
veterans and see a return on our investment the DVA seems satisfied to 
disrupt the entire process.
    The DVA administration of this contract has been particularly 
unconscionable as applied to the companies that won this award, since 
they are small businesses and many are service-disabled veteran owned 
small business, which the VA should be helping succeed on behalf of 
veterans rather than subjecting to bureaucratic roadblocks.
    As one of the prime contractors providing vocational and education 
counseling to severely disabled veterans under the VA's National 
Acquisition Strategy (NAS) Vocational Rehabilitation and Employment 
(VR&E) Contract, I'm respectfully requesting that you immediately 
investigate nationwide difficulties with administration of this 
contract. In many cases these problems are so severe that veterans are 
denied the services they deserve. As both the VA Inspector General and 
the Government Accountability Office have previously reviewed VA 
practices in this area, I'd also request that you consider involving 
them in a new review.
    Specifically, the problems being experienced by contractors under 
this ``so-called'' National Acquisition Strategy include:

      The way cases are referred to contractors by Regional 
Offices varies greatly.
      The start up costs of this contract were huge and due to 
the fact that the contract was started late, the 6 month extension that 
can be provided within the constraints of the contract would help 
mitigate huge losses that will be experienced by small business.
      By not extending this contract that VA has cut off the 
services to veterans they so richly deserve.
      Timeliness of payment for services is so inconsistent 
that in some regions no delay occurs, while in others, delays exceeding 
100 days are standard with no explanation of why payment is not being 
made or denied within 30 days, as required by the contract and in law. 
The interest being paid by small business on the loans necessary to 
continue service to VA far exceeds anything the VA will pay, and is 
forcing huge strains on the lines of credit for these small businesses.
      Calculations of payments disbursed to contractors does 
not comply with assumptions in contractor bids, as required by the RFP. 
In many cases the VA is simply refusing to pay invoices causing large 
receivables to accumulate.

    One of the prime contractors appealed to the U.S. Civilian Board of 
Contract Appeals regarding the VA's calculation for certain payments 
under the contract. The Board recently denied the VA's motion for 
summary relief, stating in part that  . . . ``Given several requests to 
clarify its position through its solicitation, VA provided equivocal 
responses. When asked to describe the ways in which this solicitation 
differed from previous contractual instruments covering similar 
services, VA refused to provide any answer at all  . . . It is not 
surprising, in light of the agency's opaque approach to the matter at 
issue during the solicitation process, that the parties have entered 
into a contract with different understandings of an important term  . . 
.''
    In several other respects, as listed above, VA's administration of 
this contract has not been any better than its performance during the 
solicitation phase. This is particularly unconscionable as applied to 
the companies that won this award, since they are small businesses and 
many are service-disabled veteran owned small businesses, which the VA 
should be helping succeed on behalf of veterans rather than subjecting 
to bureaucratic roadblocks.
    Many Department of Veterans Affairs offices, either by omission or 
commission, have undermined the efforts of the eight prime contractors 
awarded the Vocational Rehabilitation and Employment (VR&E) Service's 
so-called ``National Acquisition Strategy'' contract, preventing these 
contractors from effectively serving our Nation's veterans. The VA has, 
in this process, constructively denied congressionally-mandated 
benefits to our veterans by actions taken and not taken.
    The most severely undermining actions include the following, which 
will be detailed in turn:

      The way cases are referred to contractors by Regional 
Offices varies greatly.
      What Regional Offices require in the way of initial 
evaluation information is not consistent and at least one Regional 
Office refuses to provide information or training on how to correct 
report submissions.
      Requirements for forms to be used in reporting and 
invoicing are not standardized.
      The process for contractor lines of communication with 
Regional Offices differs from one part of the country to another.
      Timeliness of payment for services is so inconsistent 
that in some ROs no delay occurs, while in others, delays exceeding 100 
days are standard with no explanation of why payment is not being made 
or denied within 30 days, as required by the contract and in law.
      Calculation of payments disbursed to contractors does not 
comply with assumptions in contractor bids, as required by the RFP.
      Delay in approving our counselors to work on the 
contract.
      Pre-disposed attitude on the part of local Regional 
Office employees that the NAS contract was not going to work, that they 
were not going to let it work.

1. Inconsistent Means of Case Referral
    The way cases are referred to contractors by each Regional Office 
(RO) varies greatly. Some VR&E Officers require we attend the initial 
orientation the VA gives to veterans and pick up case files. Others who 
insist that their Vocational Rehabilitation Counselors (VRC) assign us 
the cases. There are others who require us to deal only with the VR&E 
Officer in charge at each location. A few others who follow the 
contract and have the Contract Specialist/ Quality Assurance Manager 
(QAM) assign us the cases, approve the reports, and submit our invoices 
to financing for payment.
    Some VR&E Officers want physical pickup of files, some Fedex files 
to us, others are willing to email them using our secure PKI facility, 
and still others are willing to fax them to us via our secure toll-free 
fax number.

2. Inconsistent Initial Evaluation Information Requirements
    Inconsistency among the VR&E Officers in what they require in the 
way of initial evaluation information and length/complexity of reports 
is a major issue because in some areas VA officials use this as a means 
of not approving our reports and therefore not paying us for months. 
This ``procedure'' constructively denies services to veterans during 
the months that VR&E staff takes to inform us as to the inadequacies 
they believe they have identified in our reports. They usually state 
that ``There is insufficient information on which to base a plan'' when 
there often is sufficient information but the VRC or the VR&E officer 
or some other VA staffer does not like how the report was written (or 
has some other agenda) and will not/does not call the veteran in to 
provide services until after the report is redone. It often takes as 
long as 3 or 4 months for the VR&E Officer to inform us that reports 
are not adequate, thus delaying provision of services to veterans for 
that amount of time.
    In some cases the inadequacies are not even based on content but 
rather on punctuation within the report or the fact, that the report 
did not state ``See attachments for vocational and educational 
exploration results'' when the results were very briefly summarized in 
the report body, but the details were presented in appendixes. This 
phenomenon is particularly evident in Colorado, and the Dakotas. To 
complicate matters, some VR&E Officers want short reports, some want 
longer ones. Some do not tell us what they want, but expect us to 
figure it out for ourselves after they reject our reports.

3. Inconsistent Requirements for Reporting and Invoicing Forms
    The VR&E Officers do not all want the same VA forms. Some VR&E 
Officers want complete employment surveys and labor market research as 
part of the Initial Evaluation--not required or desired in the 
contract. Some have even gone to the extent of not approving our 
reports on the basis that we have not completed and included our own 
form entitled ``Vocational Planner,'' which is not a VA form.
    As for invoicing, we have attempted to accommodate an enormous 
divergence of invoicing requirements from around the country, though 
the contract is very specific as to what is required. We even went to 
the extent of pre-printing our invoices with stamps the VR&E Officers 
need to place on invoices so the VA disbursing unit in Austin, TX will 
have the funding obligation numbers and other information they need to 
pay. We have corrected this five times now and it is still not what 
some VR&E Officers want.

4. Inconsistent Lines of Communication with the VR&E Officers
    This was discussed briefly in paragraph 1, above. The contract 
states that our counselors are to establish partnerships with the VA 
VRCs, but not involve themselves in contracting matters. Furthermore, 
the contract specifies that only the QAMs will make case referrals, 
accept reports and invoices for approval, and approve invoices for 
payment. This is not the way it works in some Regional Offices.

5. Timeliness of Payment for Services
    Timeliness of payment for services is so inconsistent that in some 
Regional Offices no delay occurs, while in others, delays exceeding 100 
days are standard with no explanation of why payment is not being made 
or denied within 30 days, as required by the contract and in law.
    There are numerous possibilities for this inconsistency: In many 
Regional Offices there is no single person responsible for tracking 
payments, or there is a single POC who is not replaced when he or she 
goes on leave, or the report is not approved (and payment therefore is 
delayed) for any of the issues as explained above, or reports and 
invoices are approved and forwarded by the local Regional Office in a 
timely manner but ``there is a problem in Finance,'' or the VRC has 
given a case directly to one of our counselors (in violation of the 
contract) and we did not know that a case had been assigned and 
therefore could not bill it even though the work had been 
satisfactorily completed, or there has been deliberate withholding of 
payment to ensure that the NAS contract (and our company) fails.

6. Calculation of Payment for Services
    Calculation of payments disbursed to contractors does not comply 
with assumptions in contractor bids, as required by the RFP. There are 
three major areas of concern:

    a.  On page 51 of the RFP (Sol. No. VA-101-07-RP-0306) it states 
very clearly that
            ``The Offeror shall document in its proposal any 
        assumptions.'' Even though we complied by proposing a 
        comprehensive list of assumptions as the basis for our bid, and 
        even though the Contracting Officer accepted our bid, our 
        assumptions have been completely ignored.
            This is most evident in the divergence between what was the 
        understanding of all eight prime contractors as to how services 
        for CM cases would be billed and how the VR&E Service payments 
        would be made. Our position was made very clear in a letter 
        from us to the Contracting Officer. We are not asking that they 
        modify the contract, only that they comply with it.
    b.  Travel.  Again, in our proposal we made very clear assumptions 
as to what would be required for travel reimbursement if the VA were to 
accept our bid. Travel reimbursement has been resolutely denied by the 
VA. We have qualified counselors who are willing to travel to remote 
locations to accommodate veterans but the VA will not pay for it. They 
apparently expected us to have included these types of travel costs in 
our FFP bid, which we made very clear in our proposal assumptions we 
were not including, that if the VA wanted us to go to remote areas, 
they would have to pay for travel. None of the eight prime contractors 
is being reimbursed for travel.
    c.  Add-Ons for Security.  The VA has required a number of add-ons 
to the contract which were not clearly defined in the RFP. Security 
issues, computer replacements, and the like were ill-defined and 
certainly not considered as part of our bid or in the bids of any of 
the other prime contractors. The VA has demanded we comply with all of 
the new rules and regulations they have promulgated owing to their own 
security lapses but has not provided us with any resources for meeting 
their demands.

7. Delay in Contract Start Up
    Owing to 3 months' delay in start up of this contract, the base 
year did not provide us with a full 12 months of work. Case work was 
first issued under this contract beginning in November and December 
2008, following a ``start date'' of July 21, 2008. In fact the local 
VR&E Officers were ordered not to have any conversation with the 
contractors until August of 2008. We were hearing rumors that the VA 
decided in March 2009 not to execute the option year on this contract. 
This really gave us less than 6 months to show the DVA how we were 
continually improving our service to veterans. Our ``Base Year'' was 
only at the maximum 8 months long, in most of our 19 States in which we 
have opened operations, spending about $1 million in startup costs. 
There was also an inordinate amount of delay in approving our 
counselors to accept case work.

8. Pre-Disposed Negative Attitude at Many of the ROs
    There has been a great deal of negative attitude by VRCs and local 
VR&E Officers toward the NAS contract. One VR&E Officer stated to one 
of our subcontractors that he would only refer cases to us to satisfy 
the contract minimum, regardless of the impact on Veterans. Several 
VRCs and VR&E officials have been telling our subcontractors for 
several months that the contract would be canceled and re-bid, so they 
should not hire on with us but wait until the new RFP came out. They 
seem to have made sure this would happen.
Summary
    Apparently, the VA expected the prime contractors--all small 
businesses, several of them service-disabled veteran-owned small 
businesses (SDVOSB)--to run their businesses as the VA runs its 
business, but without providing the resources or the intent to ensure 
success.
    In February 2005, the VA Inspector General published a report 
concerning over-pricing in Washington, Ohio, and DC., which had been 
paid for years. The recommendation to the VR&E Service then was to seek 
contractors who would be more reasonable in their pricing while still 
delivering acceptable services. We attempted to meet that requirement, 
but have been rebuffed at every turn, not the least of which is the 
VA's current gambit of delaying payments to us so severely that we are 
now not able to pay our subcontractors. These subcontractors are now 
refusing to take on additional case work, exacerbating the difficult 
situation the VA has created for our service-disabled veteran-owned 
small business. A backlog in overdue payments for our company alone of 
over $400,000 has existed for months.
    Contract extension alternatives were available that would have 
allowed VA officials time to work out problems with the prime 
contractors while maintaining better continuity of service to veterans. 
We made numerous attempts to address these options with the Contracting 
Officer and the Contracting Officer's representative; however they 
would not respond to our written communication or return our telephone 
calls.
    Time is of the essence, as VA has already not exercised the first 
option year of this contract and has no plan in place to furnish these 
services to veterans after the end of the base year on July 20, 2009. 
Please take appropriate action to force VA to extend the current 
contract for 6 months and to pay the invoicing at the rates quoted in 
the awards to each company in a timely manner. Please make sure the VA 
is required to fix these problems, rather than allowing the VA to 
simply escape the situation it has created.
                                 
 Prepared Statement of Richard Daley, Associate Legislation Director, 
                     Paralyzed Veterans of America

    Chairwoman Herseth Sandlin, Ranking Member Boozman, and Members of 
the Subcommittee, PVA would like to thank you for the opportunity to 
testify today concerning vocational rehabilitation and counseling 
services for veterans. The Global War on Terror has produced a large 
number of men and women that have served the country and have returned 
to civilian life. Thousands of these new veterans will have physical 
and mental needs that will require years or a lifetime of care.
    Many of these new disabled veterans along with the existing 
veterans with disabilities will seek help from the Department of 
Veterans Affairs' Vocational Rehabilitation & Employment Program 
(VR&E). VR&E provides service-connected veterans with the necessary 
services to assist them to achieve maximum independence in daily living 
and to the maximum extent feasible, to become employable and to obtain 
and maintain suitable employment. This continued flow of new veterans 
into the VR&E program will place a strain on this system that has 
received unfavorable criticism in recent years for their performance in 
reaching its goal of helping veterans.
    In the 110th Congress this Subcommittee's Ranking Minority Member, 
John Boozman (R-AR) introduced H.R. 3889, a bill that would require the 
VA to conduct a 20 year study of veterans that enter the Vocational 
Rehabilitation and Employment (VR&E) program. PVA along with other 
veterans' service organizations supported this bill since there is 
currently little data on how the VR&E program improves the lives of our 
more seriously injured veterans. The VA has information on how long a 
veteran spends in a program, the cost related to participating in a 
program and when, or if a veteran successfully completes a program. The 
VA is not required to collect information on the earnings of the 
veteran, the promotions achieved during their career, and other long 
term employment data. This information would be essential to determine 
the effectiveness of the VR&E program and perhaps weaknesses that exist 
within this program.
    Due to the fact that VR&E is limited in resources and staff, in an 
effort to better serve all eligible veterans, the VA contracted with 
private and state entities to provide VR&E services. Much of the 
workload contracted out was facilitated and monitored by the VA's 
regional offices. The primary responsibilities of the contracts were to 
perform testing and assessment phases of the vocational rehabilitation 
process. This is one area that the VA's VR&E counselors have been 
trained to perform, and have years of experience. This initiative of 
removing an element of the one-on-one work with the disabled veteran 
did not relieve the VA counselors of the heavy paper work and 
administrative duties that they are required to perform. This process 
of contracting to alleviate some of the burden from the VR&E regional 
offices did not produce the results that the VA anticipated.
    In February 2005 the VA Inspector General made a recommendation 
that the current contracts for VR&E services be renegotiated to better 
reflect market rates for services because the VA was at risk of paying 
excessive prices for services purchased through national contracts. The 
report also noted that the VA should strengthen regional office 
oversight and management of contracts.
    A recent GAO report (GAO-07 568R, April 23, 2007) states that the 
VA has achieved some progress in implementing contract-related 
recommendations of the VA Inspector General. This report also stated 
that key challenges remain for improving VA's management of VR&E 
service contracts. Among the significant challenges that remained at 
that time were:

      Regional offices are not fully applying VA's contracting 
guidance.
      Current training does not adequately prepare contracting 
officers to manage contracts.
      Regional offices report delays in communicating with VA 
headquarters on contracting questions.
      VA's management of VR&E contracting is limited by 
inadequate reporting capabilities.

    Current legislation introduced in the 111th Congress would improve 
access to the VR&E program. Senate bill S. 514, the ``Veterans 
Rehabilitation and Training Improvement Act of 2009,'' will increase 
the amount of subsistence allowed for veterans enrolled in the VR&E 
program. On the House side, H.R. 1821, the ``Equity for Injured 
Veterans Act of 2009,'' also pays a monthly subsistence to enrolled 
veterans. This will attract some disabled veterans that should be using 
the VR&E program, but otherwise would choose to enroll in the Post-9/11 
GI Bill for the increased living allowances that program provides. When 
faced with the decision of selecting the recommended path for ones 
future career, or selecting the option that will help provide basic 
living necessities for the veteran and their family, many veterans 
chose the basic living option. This legislation will correct that 
inequity.
    Senate bill S. 514 would also remove the enrollment cap of 2600 
veterans per year for the VR&E, Independent Living Program (IL). This 
meaningless cap, established during peacetime, may be prohibiting 
veterans from receiving the treatment they need. The VA VR&E program 
would never deny services to the severely injured veteran, but, place 
that veteran in another program until they could accommodate the 
veteran in the IL program.
    With the influx of veterans into the VR&E program, the VA will 
continue contracting VR&E services. Instead of contracting out a 
portion of the vocational rehabilitation process, such as testing, 
perhaps they should contract out a segment of that consumer population. 
The Social Security Administration (SSA) has found success with its 
Ticket to Work (TTW) program. This program rewards the agency that 
performs the vocational rehabilitation when the consumer is 
successfully employed, and remains employed.
    Without having all of the facts involved, or, in this case, any of 
the facts pertaining to both parties performance with regard to 
fulfilling their obligations as defined in individual contracts to 
perform a needed service for America's veterans, it would be 
unrealistic for PVA to make credible recommendations pertaining to 
improving those contracts.
    When considering future contracts, perhaps the VA could develop a 
demonstration project in their VR&E program. The VA would reward the 
contractor for making changes in the veterans' lives, not for 
processing veterans through another government program.
    PVA has recognized some basic facts that are important in the 
preparation of a disabled veteran for employment. We know that smaller 
caseloads are absolutely essential. The counselor must know and 
understand the veteran they are trying to help. They must be able to 
explain to the employer that veteran's needs for certain accommodations 
that will enable the veteran to perform the necessary work.
    A veteran can advise a veteran, in most cases, with better results 
that a non-veteran. A veteran will have a common bond with another 
veteran that a non-veteran can never have. The fact that a counselor 
has served three, four, or 10 years in the military, two decades ago, 
is not an achievement that goes on the top of ones resume. But it can 
indicate that person has a unique perspective to understand and be 
sensitive to the needs of that disabled veteran that was not achieved 
in a college classroom.
    The goal of the VR&E process is to prepare the disabled veteran 
with the skills needed to find and maintain meaningful employment. 
Perhaps the entities that receive contracts for this role should be 
paid for performance. Basic funding must be awarded to enable an 
organization to function on the day-to-day basis. Funds beyond basic 
functioning would be paid (rewarded) to the contractor in the form of 
bonuses paid for placing and keeping the veteran in a career position.
    Placing a disabled veteran in a career is the goal behind PVA's new 
vocational rehabilitation employment program. We first spoke of this 
program with this Subcommittee during the 110th Congress when PVA 
opened its first program in the Richmond, Virginia VA hospital 2 years 
ago. PVA has since expanded that program in Minneapolis, Minnesota and 
San Antonio, Texas VA hospitals. Soon we will open a fourth location in 
Long Beach, California. PVA's goal is to some day have twenty-two 
employment counselors, one in each VA spinal cord unit. This expansion 
of the program will depend on obtaining corporate sponsorship, or other 
funding sources for each location.
    PVA is providing vocational rehabilitation employment service to 
the segment of VR consumer population that is severely disabled, those 
veterans that are paraplegic or quadriplegic. Our success rate for 
placement of this population far exceeds the average placement rate in 
the vocational rehabilitation field. The three locations have a 
combined caseload of 356 veterans. Of that total, 56 have entered the 
workforce, most in career positions with two veterans earning over 
$100,000 per year.
    An important fact that contributes to our success is the smaller 
caseload each counselor maintains. This allows the counselor to better 
understand each disabled veteran, their needs, and their abilities, as 
they develop a one-on-one relationship with the veteran while 
discussing plans for their future.
    PVA's counselors, each having years of VR experience, use their 
knowledge to explore all available resources to help the veteran. These 
resources start at the Federal level with each VR office being in the 
VA hospital. Working in that environment, our counselors build a 
relationship with the medical staff and start the disabled veteran 
thinking about their future early in the rehabilitation process.
    The PVA counselors also learn and access any State program that is 
available. There may be State grant funds available to purchase items 
needed for accessibility or possible employment opportunities within 
the State government with a preference for disabled workers or disabled 
veterans who want to return to the workforce.
    Local governments, non profit organizations, and corporations in 
the community all are aware of the employment needs of disabled 
veterans. In the Richmond, Virginia PVA Voc Rehab office a non-service 
connected paralyzed veteran completed employment training and was ready 
for that first job he would execute from his wheelchair. The employer 
was waiting for the veteran to start at the work location, but, 
transportation was a problem. The veteran did not own a vehicle, and 
public transportation was not available. The counselor arranged for the 
veteran to receive a van, with hand controls, free of charge from a 
corporate sponsor that was willing to help the veteran return to work.
    PVA's VR&E program has recently applied for and qualified as an 
approved Employer Network (EN). Being an approved EN allows PVA to 
participate in the Social Security Administrations' (SSA) Ticket to 
Work (TTW) program. SSA will reimburse PVA up to $4,000 annually for 
each veteran that succeeds in returning to the workforce and earns an 
income that is above the Substantially Gainfully Employed benchmark, 
which is approximately $650 per month. This $4,000 per year will help 
defray some of the cost involved with operating this program.
    This PVA program is one example of how non-profits can use various 
resources to provide support to disabled veterans. If the VA made 
similar funding programs available to nonprofits, perhaps those 
organizations that currently work with these special populations, 
Traumatic Brain Injury, Post-traumatic stress disorder, or visually 
impaired, could use their expertise to help veterans.
    PVA is an organization of veterans who are catastrophically 
disabled by spinal cord injury or disease. Our members rely on the 
services provided by the VR&E program. We support the Subcommittee's 
effort as it works with the VA to improve this program. Chairwoman 
Herseth Sandlin, Ranking Member Boozman that concludes my testimony, I 
would be happy to answer any questions you may have.

                                 
          Prepared Statement of Joe Wynn, Treasurer, Veterans
Entrepreneurship Task Force (VET-Force), President, Veterans Enterprise
   Training and Services Group (VETS Group), and Legislative Liaison,
                National Association for Black Veterans

    Due to the growing demand of VR&E services beyond VA's current 
capacity, the VA implemented a national program called the National 
Acquisition Strategy (NAS) for Vocational Rehabilitation and Employment 
(VR&E) Services. Perhaps this strategy is an attempt by the VA to 
respond to findings and recommendations made in recent years to improve 
the VR& E program by GAO, the VA Task Force, the President's Commission 
on the Care of America's Wounded Warriors, and the Veterans Disability 
Benefits Commission.
    The VA's objective for NAS is to use Contractor assistance to both 
supplement and complement the services provided to veterans and 
servicemembers under Title 38 USC Chapter 31 and individuals under 
Chapters 18, 35 and 36, Title 38 United States Code, by VA's regional 
Vocational Rehabilitation and Employment Service (VR&E) offices within 
VBA.
    Under this National Acquisition Strategy (NAS), the VA issued a 
contract in July 2008 (#VA-101-07-RP-0306-00 1rfp) to use Contractor 
assistance to supplement and complement vocational rehabilitation and 
employment services in the following service groups:

    Service Group A: Initial Assessment/Evaluation
    Service Group B: Case Management/Rehabilitative Services
    Service Group C: Employment Services
    Service Group D: Educational and Vocational Counseling
    Service Group E: Discrete Services

    Services to be provided under this requirement included educational 
and vocational counseling and a major rehabilitation track for those 
Veterans whose primary rehabilitative objectives include: (1) training 
and/or employment services resulting in suitable employment which is 
compatible with the individual's aptitudes, abilities, and interests; 
or (2) achievement of independence in daily living.
    But for reasons still yet to be known, the VA has announced that 
it's NAS contract was canceled as of July 20, 2009. This cancelation 
takes place at the 1-year mark since its official start date; but 
actually occurs in less than 1-year since the operational phases of the 
contract were delayed. Now the eight prime contractors selected to 
perform the services are out of work and have incurred significant 
losses of time, money, capital, and other resources.
    Since the VA has not requested corrective measures of the 
contractors involved, and has reportedly stated that it intends to 
reissue the NAS contract later, it appears that the strategy was not 
well thought out before being implemented.
    This action by the VA will have an adverse impact on the veterans 
it is intended to serve. Hundreds of service-connected disabled 
veterans in need of vocational rehabilitation and employment will 
experience additional delays in receiving the services that they so 
desperately need to successfully transition back into the communities 
that they fought so hard to protect. For some, this delay could be life 
threatening.

                               __________
INTRO:

       Good Afternoon, Chairwoman Herseth Sandlin, Ranking Member 
Boozman, other Members of this Subcommittee, fellow veterans, and 
guests.
       Let me thank you for your prompt response for convening this 
hearing to review the issues related to VA's National Acquisition 
Strategy (NAS) to provide vocational rehabilitation and employment 
counseling services for all qualified service-connected disabled 
veterans.
       Today I come before you as a representative of the Veterans 
Entrepreneurship Task Force (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; who have 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.
       And as a Vietnam-era Veteran of the U.S. Air Force, President of 
the Veterans Enterprise Training and Services Group, and the 
Legislative Liaison for the National Association for Black Veterans, I 
spend a great deal of my time advocating for the rights and benefits of 
veterans. As such, I have come to appreciate the steadfast support that 
veterans have received from this Subcommittee and the HVAC under the 
leadership of Congressman Bob Filner, where in the past few years, a 
number of significant pieces of legislation for veterans have been 
passed in the areas of health care, mental health, veterans benefits, 
compensation and VA small business procurement.
       Madam Chairwoman, you may recall that I recently came before 
this Subcommittee to discuss the issues related to the VA's Veteran 
Small Business Verification Program (see appendix A). At that time I 
expressed concerns over the VA's nearly 2-year delay in fully 
implementing the regulations that would prioritize contracting with the 
VA for service-disabled and veteran business owners. I also expressed 
concerns regarding the VA's inefficient verification process and its 
verification policies of veteran business owners that are being 
utilized by the Center for Veterans Enterprise (CVE).
       Under CVE's existing verification procedures and policies, in 9 
months only 1300 veteran business owners have been verified out of more 
than 17,000. Veterans who own more than one company are only allowed to 
have one company verified and the company will not be verified by CVE 
if the owner cannot demonstrate that they are in the primary office on 
a daily basis in order to show that they are participating in the day-
to-day operations of the company.
       Having attended the 5th Annual National Veterans Small Business 
Expo in Las Vegas last week, I heard firsthand, that CVE considers its 
policies to be in good standing and seemingly have no intentions of 
making any changes unless otherwise directed by a higher authority to 
do so. Now, before that matter can be resolved, we are here today to 
discuss another example of VA's poor judgment in making management 
decisions that not only affect service-disabled and veteran business 
owners, but also affect hundreds of service-connected disabled 
veterans.
VA's Vocational Rehabilitation and Employment Program
    The Department of Veterans Affairs (VA) has authority, pursuant to 
Title 38 USC Chapters 18, 31, 35 and 36, to provide all services and 
assistance necessary to enable eligible veterans with service-connected 
disabilities to obtain and maintain suitable employment and, if not 
employable, achieve independence in daily living to the maximum extent 
feasible. In the discharge of this responsibility, each Vocational 
Rehabilitation and Employment Service Division (VR&E) within the 
Veterans Benefit Administration (VBA) Regional Office undertakes an 
initial evaluation of the veteran to determine his or her eligibility 
and entitlement for these services and assistance; develops, in 
cooperation with the veteran, an Individualized Written Rehabilitation 
Plan (IWRP); provides the veteran with employment placement under an 
Individualized Employment Assistance Plan (IEAP); or if employment is 
not possible, services to enhance the veteran's independence in daily 
living under an Individualized Independent Living Plan (IILP).
VR&E Background--VDBC Findings
    Over the past several years, criticisms and recommendations were 
made concerning the VA's less than adequate oversight of contracting, 
improving uniformity of benefits delivery nationwide, and VA's ability 
to obtain better pricing from contractors through a national approach. 
References to this statement can be found in the VA Secretary's report 
on `The Vocational Rehabilitation and Employment Program for the 21st 
Century', completed in March 2004; GAO's report entitled, `Vocational 
Rehabilitation: VA Has Opportunities to Improve Services, but Faces 
Significant Challenges,' completed in April 2005; and in a report 
presented by the President's Commission on Care of America's Returning 
Wounded Warriors, completed in July 2007.
    In 2006-07, while serving as a Commissioner on the Congressional 
Veterans Disability Benefits Commission (VDBC), I had the opportunity 
to review and discuss these and other reports related to the operation 
of the VR&E Program. In the published report we submitted to Congress 
in October 2007, Chapter 6 on the Appropriateness of the Benefits, the 
VA's Vocational Rehabilitation and Employment Program (VR&E) is 
discussed. In that chapter, we noted that GAO generally agreed that (1) 
VR&E had not been a VA priority in returning disabled veterans to the 
workforce; (2) VR&E had a limited capacity to manage its growing 
workload; and (3) VR&E needed to be redesigned for the modern 
employment environment.
    The Commission also agreed that VR&E needed to improve its process 
of defining, tracking, and reporting on participants, which we found 
was confusing and inconclusive in its current state. Our research 
indicated that while the number of participants in the VR&E program 
increased in recent years, the number of individuals rehabilitated (as 
measured by obtaining a job or achieving independent living) had 
remained constant. As a result of our findings, our recommendation 
number 6.12--called for the administration of the VR&E program to be 
enhanced by increased staffing and resources, tracking employment 
success beyond 60 days, and conducting satisfaction surveys of 
participants and employers. And our recommendation number 6.13--called 
for VA to explore incentives that would encourage disabled veterans to 
complete their rehabilitation plan.
VA's National Acquisition Strategy (NAS)
    Due to the growing demand of VR&E services beyond VA's current 
capacity, the VA implemented a national program called the National 
Acquisition Strategy (NAS) for Vocational Rehabilitation and Employment 
(VR&E) Services. Perhaps this strategy is an attempt by the VA to 
respond to the findings referenced above. The VA's objective for NAS is 
to use Contractor assistance to both supplement and complement the 
services provided to veterans and servicemembers under Title 38 USC 
Chapter 31 and individuals under Chapters 18, 35 and 36, Title 38 
United States Code, by VA's regional Vocational Rehabilitation and 
Employment Service (VR&E) offices within VBA.
    Under this National Acquisition Strategy (NAS), the VA issued a 
contract in July 2008 (#VA-101-07-RP-0306-00 1rfp) to use Contractor 
assistance to supplement and complement vocational rehabilitation and 
employment services in the following service groups:

    Service Group A: Initial Assessment/Evaluation
    Service Group B: Case Management/Rehabilitative Services
    Service Group C: Employment Services
    Service Group D: Educational and Vocational Counseling
    Service Group E: Discrete Services

    Services to be provided under this requirement included educational 
and vocational counseling and a major rehabilitation track for those 
Veterans whose primary rehabilitative objectives include: (1) training 
and/or employment services resulting in suitable employment which is 
compatible with the individual's aptitudes, abilities, and interests; 
or (2) achievement of independence in daily living.
NAS Contract Canceled in First Year
    For reasons still yet to be known, the VA has announced that it's 
NAS contract was canceled as of July 20, 2009. This cancelation takes 
place at the 1-year mark since its official start date; but actually 
occurs in less than 1-year since the operational phases of the contract 
were delayed. Now the eight prime contractors selected to perform the 
services are out of work and have incurred significant losses of time, 
money, capital, and other resources.
    It's reported that of the 8 prime contractors, most were small 
businesses, including 3 that were service-disabled veteran owned small 
businesses (SDVOSBs) and one was a service-disabled veteran owned 
business that is now considered to be large. Having interviewed 
representatives from 3 of the SDVOSBs, I have collected a list of 
complaints regarding VA's inefficiency in managing this NAS contract. 
Such complaints included but not limited to: (1) VA contracting 
officers being non-responsive to contractor's operational concerns of 
inconsistency of VA reporting requirements across States and regions; 
(2) delays in receiving payments; (3) background investigation 
procedures paid for by contractors is unfairly administered; and (4) 
complicated procedures.
    By virtue of the fact that VA has chosen to cancel the entire 
contract is such a short period of time leads many to believe that the 
VA implemented a national strategy that was flawed from the start. 
Since the VA has not reportedly requested corrective measures of the 
contractors involved, and has reportedly stated that it intends to 
reissue the contract later, it appears that the strategy was not well 
thought out before being implemented.
    This action by the VA will have an adverse impact on the veterans 
it is intended to serve. Hundreds of service-connected disabled 
veterans in need of vocational rehabilitation and employment will 
experience additional delays in receiving the services that they so 
desperately need to successfully transition back into the communities 
that they fought so hard to protect. For some, this delay could be life 
threatening.
    This action by the VA will also contradict the VA's policy created 
by Public Law (PL) 109-461, the Veterans Benefits, Health Care, and 
Information Technology Act of 2006, Title V, Sections 502 and 503 that 
authorized a unique ``Veterans First'' approach to VA contracting. This 
approach was to 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.
Recommendations:
       Madam Chairwoman and Members of this Subcommittee, I strongly 
urge you to compel the VA to reconsider their action to cancel the 
above referenced contract until such time as their procedures can be 
improved or other capable and qualified SDVOSBs can be hired.
       I further urge you to consider appointing a non-partisan Task 
Force to review the issues, goals, and accomplishments related to the 
above referenced VA NAS contract for VR&E program services.

    This concludes my statement.

                               __________
                               Appendix A
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 
business owners 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 business owners, and improve the process of identifying and 
matching veteran businesses with procurement opportunities.
VA's `Veteran's First' Approach to VA Contracting
    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 business owner was 100 
percent disabled; (4) Produce Annual Progress Reports; and (5) Conduct 
a 3-Year Study.
    For more than 2 years, veteran business owners 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 business owners who have registered in the 
Veterans Small Business Database.
       Veterans Status. The documents needed are to verify that the 
business owner 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 & 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 Co., 
or a Corp.; 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 
decision-making authority. CVE must verify that the service disabled 
veteran or veteran business owner 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 Chief Executive Officer. 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 Co., 
or Corp.. 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 Co. per Owner. A number of veterans 
have questioned CVE's position to verify only one company per veteran 
business owner. 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 business owners. 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 it's not hard to determine how this misperception came 
about.
       For several years now, CVE, other organizations, including the 
VET-Force, have been encouraging veteran business owners 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 business 
owners. 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--whether the business 
owner 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.

                               __________
                               Appendix 2
                      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 business owners.
    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 [email protected].

                                 
            Prepared Statement of Ruth A. Fanning, Director,
  Vocational Rehabilitation and Employment Service, Veterans Benefits
          Administration, U.S. Department of Veterans Affairs

    Madam Chairwoman and Members of the Subcommittee, thank you for 
inviting me to appear before you today to discuss VA's Vocational 
Rehabilitation and Employment (VR&E) program. My testimony will provide 
an overview of the VR&E Program and the services we provide, a review 
of contract services used to support our mission, issues of concern 
pertaining to VR&E National Acquisition Strategy (NAS) contracts and 
prime contractor performance, and VA's plans to streamline and improve 
contracting requirements and oversight. In addition, I will discuss how 
VR&E is meeting, and will continue to meet, the needs of veterans with 
disabilities to achieve their employment and independent living goals.
Overview of VR&E
    VR&E provides career and independent living services to Veterans 
and Servicemembers through two programs, Coming Home to Work (CHTW) and 
VetSuccess. Approximately 1,100 employees in 57 regional offices and 
over 100 out-based offices provide services to Servicemembers and 
Veterans with disabilities resulting from their military service, as 
well as to certain family members. Servicemembers and Veterans are 
assisted in obtaining and maintaining suitable careers and living as 
independently as possible in their homes and communities.
    Through the VR&E Coming Home to Work program, VA provides 
interested Servicemembers and Veterans career and adjustment counseling 
during their transition from active duty and throughout their 
enrollment in VA sponsored education programs. VR&E's VetSuccess 
program assists Veterans to prepare for and enter careers, and live as 
independently as possible at home and in their communities. Counseling 
and employment staffs assist Veterans to plan for their future careers, 
receive necessary training or education, and successfully compete for 
careers. For those Veterans whose disabilities are too severe to make 
employment feasible, VR&E provides a wide range of independent living 
services, including volunteer work placement, assistance using public 
transportation, life skills coaching, counseling, and other services.
    VR&E services are tailored to meet each individual Veteran's needs 
and are provided within five general ``tracks'' or types of services. 
These tracks include re-employment with a previous employer; rapid 
access to employment through job-readiness preparation and incidental 
training; self-employment, for those who wish to own their own 
businesses; employment through long-term services that include formal 
training and education programs leading to suitable employment; and 
services to maximize independence in daily living, for veterans who are 
currently unable to work or participate in other programs of vocational 
rehabilitation.
Overview of VR&E National Acquisition Strategy
Background
    VA adopted the NAS to award contracts at the national level to 
complement and supplement services provided by VA and ensure that 
veterans have access to the same quality and types of VR&E services 
across all regional offices. The NAS contracts were developed using a 
sub-area approach to reduce the total number of contracts awarded and 
correspondingly reduce the administrative burden to oversee 
contractors.
    Training was provided during the solicitation phase to assist small 
businesses to partner together and/or to develop subcontracting 
relationships. All contracts were awarded to small businesses and 
service-disabled veteran-owned small businesses. Large companies were 
unsuccessful in competing for awards. NAS contracts were awarded to 
eight prime contractors in regional sub-areas who had, or asserted that 
they could develop, a local presence throughout the sub-area(s).
    NAS contracts were awarded on July 21, 2008. A 1-week pre-
performance training session was held in August 2008 in Baltimore, MD. 
The training session was attended by VR&E Central Office staff; 
regional office staff, including contract specialists and VR&E officers 
who serve as contracting officer technical representatives (COTRs); the 
procuring contracting officer (PCO/OA&L); and principals from the eight 
prime contractors. Training covered implementation and administration 
of the entire contract for all parties.
    Throughout the post-award period, VR&E Service management and 
contracting staff regularly held calls with VR&E officers and field 
contract specialists to provide ongoing training and ensure consistency 
of contract implementation and administration. A contract 
administration board comprised of VR&E Service, Office of Acquisitions 
and Logistics (OA&L) staff, and General Counsel staff also met 
routinely post-award to provide a mechanism for VR&E to elevate 
contract concerns and obtain advice and guidance in the administration 
phase of the contract. At the local level, VR&E officers and contract 
specialists worked closely with prime contractors to implement 
contracts and monitor performance. As necessary, officials from OA&L 
and VR&E Service worked directly with prime contractors to provide 
guidance and resolve issues.
Current Status of NAS Contracts
    Services delivered by approximately half of the prime contractors 
have not met contract performance standards. Prime contractors with 
contracts in multiple jurisdictions around the country have struggled 
to develop subcontract relationships, to successfully recruit 
appropriate staff, and to deliver timely and high quality services to 
Veterans throughout areas for which contracts were awarded.
    During the base year of the contract, VA experienced significant 
contractor performance issues, specifically in the areas of quality and 
timeliness of counseling and case management, compliance with contract 
terms, appropriate invoicing, and contractor refusal of referrals. In 
one instance, a vendor did not comply with the contract terms and 
conditions, despite direction provided by the Contracting Officer (CO). 
VA attempted to resolve issues with vendors, but as the contract year 
progressed, we became increasingly concerned about some contractors' 
failure to meet timeliness and performance standards and the 
corresponding impact on services to Veterans.
    In accordance with a settlement agreement entered into between the 
Department of Justice and an unsuccessful offeror who filed a protest 
before the U.S. Court of Federal Claims, VA agreed not to exercise the 
four option years remaining on the contract after expiration of the 
base year. Instead of exercising the options, VA agreed to revisit its 
requirements and acquisition strategy and solicit new contracts in the 
fall of 2009. The Court dismissed the protest without prejudice on 
April 24, 2009, in Veterans Vocational Services v. United States, No. 
08-589C, based on the protester's representation in its motion to 
dismiss based on VA's intent to solicit new contracts. Work on cases 
that have already been awarded by task order under the current NAS 
contract will continue through the end of the performance period 
identified in those task orders.
VR&E Service Contracting Improvements
    VR&E Service has utilized feedback from field staff and from 
various studies to improve support, administration, and oversight of 
contracting activities. Studies include the Secretary's 2004 VR&E Task 
Force, the 2005 VA Inspector General study of contracting, and the 2007 
GAO study of contracting.
    Improvements made include the addition of contract specialist staff 
in the VA Central VR&E office, who serve as a resource at both the 
national and local level; new VBA contract specialist positions 
throughout the country to provide contracting support in the field 
offices; national training for VR&E contract staff prior to contract 
implementation; standardization of contract procedures; evaluation of 
contract training for VR&E staff; strengthening of contract oversight 
reviews, including site visit and management review protocols; 
enhancement of information systems used to track contract expenditures; 
requirement for VR&E staff administering contracts during performance 
period to be warranted and trained as COTRs, and to complete training 
for the proper completion of task orders; and increased collaboration 
with the Office of General Counsel and the Office of Acquisitions and 
Logistics during all phases of the solicitation, award, and 
implementation process.
    A draft governance structure has been developed for future 
contracts to further strengthen oversight of contracting activities. 
This structure focuses on a continual improvement model, designed to 
identify and address gaps in training, implementation, oversight, 
communication, and administration. In order to maximize selection of 
vendors that understand and can readily respond to VA's service needs, 
a thorough analysis has been conducted of the current NAS contract to 
ensure that the upcoming solicitation clearly outlines VA's 
requirements. The solicitation for the new VR&E contracts is being 
developed to ensure administrative items such as referrals, invoicing, 
and reporting are clearly defined and to ensure clear requirements and 
performance expectations are outlined in order to obtain timely and 
quality services. Also, under the revised national contracting 
strategy, delegations of authority in contract administration will flow 
from the PCO to the administrative contracting officers and COTRs to 
ensure maximum compliance with regulatory and contracting requirements.
Future VR&E Contracting Services
    In order to support VR&E's continued contracting needs for services 
that supplement and complement rehabilitation counseling, case 
management, and employment assistance provided by VR&E counselors, VA 
is developing a new national solicitation for service contracts. These 
contracts are designed to ensure that new contractors are capable and 
staffed to provide timely and professional services for Veterans 
throughout awarded jurisdictions.
    The solicitation for the new national contracts is anticipated to 
be released during the last quarter of 2009, with awards expected 
during the first quarter of fiscal year 2010. In the interim, VR&E 
offices will procure services locally as needed. Local contract 
performance period(s) will be linked to the forthcoming national 
replacement contract and will, therefore, be for short duration that 
allows sufficient lead-time for an orderly transfer. Local procurements 
will be awarded based on standardized requirements and processes to 
ensure consistency of contract awards and implementation. Working in 
collaboration with the Office of General Counsel, and OA&L, VR&E 
Service is developing a governance plan to ensure both local and new 
national contracts are consistently and effectively implemented and 
monitored.
Conclusion
    VR&E has taken action to significantly improve the administrative 
oversight and implementation of contract services. We significantly 
strengthened oversight by adding acquisition professionals throughout 
the country; focused on continual training both at the beginning of the 
contract and throughout the administration cycle; provided contracting 
and COTR training to all VR&E managers; and strengthened policy and 
guidelines. We will continue to focus on effective governance of 
contracts to ensure consistency of contract administration.
    The current NAS contracts were developed in an effort to decrease 
the administrative burden of managing a large number of national 
contracts. Implementation of this strategy has demonstrated that a 
larger number of qualified service providers across the Nation are 
required to ensure timely delivery of quality services to Veterans. As 
we move forward with the interim contracts and new national contracts, 
VA's contracting strategy will continue to encourage maximum 
participation by Veteran-owned businesses. Above all, our contracting 
strategy will emphasize selection and management of vendors who can 
provide timely and high quality services to Veterans participating in 
the VR&E program.
    Madam Chairwoman, this concludes my statement. I would be pleased 
to answer questions from you or any of the other Members of the 
Subcommittee.

                                 
  Statement of John Wilson, Associate National Legislative Director, 
                       Disabled American Veterans

Madam Chairwoman, Ranking Member and Members of the Committee:

    On behalf of the 1.2 million members of the Disabled American 
Veterans (DAV), I am honored to present this testimony to address the 
Department of Veterans Affairs, Veterans Benefits Administration, 
Vocational Rehabilitation and Employment (VR&E) contracts for veteran 
counseling. In accordance with our congressional charter, the DAV's 
mission is to ``advance the interests, and work for the betterment of 
all wounded, injured, and disabled American veterans.'' We are 
therefore pleased to discuss VR&E contracts insofar as they fall within 
that scope.
    DAV and our Independent Budget co-authors and endorsers have 
presented this Congress with our perspective regarding the VR&E. 
Specifically, success in the transition of disabled veterans to 
meaningful employment relies heavily upon VA's ability to provide 
vocational rehabilitation and employment services in a timely and 
effective manner.
    Unfortunately, the demands and expectations being placed on the 
VR&E are exceeding the organization's current capacity to effectively 
deliver a full continuum of comprehensive programs. The Service 
continues to experience a shortage of staff nationwide, and as 
consequence, has little option but to purchase program services on a 
contractual basis.
    To increase emphasis on employment, the VR&E has begun an 
initiative titled ``Coming Home to Work'' as an early outreach effort 
to provide VR&E services to eligible servicemembers pending medical 
separation from active duty at military treatment facilities. This and 
other new services will require additional staff to maintain efforts 
nationwide. We must stress the point again, that VA must increase VR&E 
staffing levels to meet the increasing demand our Nation's veterans 
have for services.
    Absent unique geographical barriers, disabled veterans apply for 
services from the VR&E and frequently vent disappointment when services 
are subsequently contracted to third parties, which, in some cases, 
subcontract the services again to a fourth party. It is a shame that 
the second largest Federal agency in America can't adequately staff the 
VR&E Service with Certified Rehabilitation Counselors to ensure the 
post service rehabilitation of those who become disabled while in 
service to our country.
    The DAV currently has two legislative resolutions (Resolution Nos. 
223 and 245) that solidify our belief that if contracting is deemed 
necessary by the VR&E service, then service-disabled veteran-owned 
business should be given priority as set forth by law (P.L. 109-461) 
and consistent with VA Information Letter 049-07-08, dated June 19, 
2007:

          38 U.S.C. Sec. 8128. Small business concerns owned and 
        controlled by veterans: contracting priority. (a) 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.

    The VR&E utilizes contractors to supplement and complement the 
services to veterans participating in the various programs. A National 
Acquisition Strategy (NAS) was instituted in order to standardize and 
streamline the acquisition procedures used by VR&E staff to obtain 
contractors who provide these services to veterans.
    VR&E established the NAS, effective October 1, 2002, to develop a 
more cost-effective approach to providing services to disabled veterans 
participating in rehabilitation programs. The NAS has undergone several 
changes based on staffing, experience and quality assurance oversight 
by the Office of the Inspector General (OIG). The changes that were 
necessary are noted in the report referenced below:

          Extract from, Evaluation of VBA Vocational Rehabilitation and 
        Employment Contracts (OIG Report No. 04-01271-74). We 
        identified significant vulnerabilities upon evaluating the pre-
        award and award phases of VA's contracting process. 
        Consequently, VA is at risk of paying excessive prices on all 
        of the 241 VR&E contracts. To illustrate:

            There was no evidence that VA conducted price 
        reasonableness determinations to ensure the best prices had 
        been obtained.
            Key clauses and references designed to protect the 
        interest of the government were not included in contract 
        specifications and the Statement of Work (SOW). In addition, 
        information contained in the contract specifications and SOW 
        was vague and subject to multiple interpretations.
            VA did not adequately document contract award 
        actions and decisions.
            Technical evaluations and assessments were 
        incomplete.

    The NAS includes a national acquisition contract. As stated in M28-
1: Vocational Rehabilitation and Counseling Procedures Under 38 U.S.C. 
Chapter 31: Part II, Chapter 3, section A. The NAS contract was 
designed to (1) increase consistency among regional offices, and (2) 
allow for local customization of contracting to accommodate specific 
regional needs within each regional office's jurisdiction. In addition, 
the overall limit of NAS contracts is much higher than one approved by 
regional office personnel. NAS contracts standardize services and 
prices over many States, allow negotiation of a fixed price, and 
eliminate local negotiations for the same services at different prices.
    The VA's problem with managing contracts in general is not new, as 
seen in another report from the OIG.

          Extract from, Audit of VA Electronic Contract Management 
        System (OIG Report No. 08-00921-181 of July 30, 2009). The 
        Office of Inspector General (OIG) performed an audit to 
        evaluate the effectiveness of the Electronic Contract 
        Management System (eCMS), which was designed to improve VA's 
        contract management. The audit objective was to determine if 
        information in eCMS enables VA to use the system as a 
        comprehensive management tool to improve the procurement 
        process and the effectiveness of the system for oversight of VA 
        procurements.
          The audit revealed that eCMS is not used effectively and 
        procurement information in eCMS is incomplete. VA cannot 
        achieve the expected benefits of eCMS, including the ability to 
        integrate and standardize procurement processes, reduce 
        workload, and improve communications without complete 
        information. In addition, because procurement information in 
        eCMS is incomplete, reports generated by the system cannot be 
        relied upon when making procurement management decisions. VA 
        expends about $10 billion annually on supplies and services. 
        Until management enforces compliance for the mandatory use of 
        the system, VA cannot benefit from the full capabilities of the 
        system including the ability to integrate and standardize 
        procurement processes, reduce workload, and improve 
        communications.
          Integrating eCMS with IFCAP or FMS would provide VA with 
        improved acquisition efficiency, reporting, and control over 
        spending. This will help ensure increased management visibility 
        and transparency needed to manage acquisitions nationwide and 
        make good procurement decisions.

    In closing, I wish to reaffirm DAV's positions:

    (1)  VA must increase VR&E staffing levels to meet the increasing 
demand our Nation's veterans have for services.
    (2)  Service-disabled veteran-owned businesses should be given 
priority as set forth by law (P.L. 109-461), and consistent with VA 
Information Letter 049-07-08, dated June 19, 2007.
    (3)  An effective NAS must provide for:
         (a)  Clear lines of authority and oversight;
         (b)  Standards of accountability;
         (c)  Detailed guidance regarding the scope of contracts and 
        the SOW;
         (d)  Contracting officers of technical responsibility 
        maintaining open and well documented communication with vendors 
        to provide timely resolution of concern;
         (e)  Prompt payments so as not to interfere with services 
        being rendered; and
    (4)  Oversight and quality assurance must be mandatory to ensure 
veterans are well served.

    Madam Chairwoman, this concludes DAV's testimony. We appreciate the 
opportunity to have provided our views on this important issue. I will 
be pleased to respond to any questions that you or other Members of the 
Committee may have.
                   MATERIAL SUBMITTED FOR THE RECORD
                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                      July 31, 2009

Mr. Patrick F. Chorpenning
President and Chief Executive Officer
Heritage of America, LLC
17505 North 79th Ave, Suite 102
Glendale, AZ 85308

Dear Mr. Chorpenning:

    I would like to request your response to the enclosed questions for 
the record and deliverable I am submitting in reference to our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
Hearing on ``Vocational Rehabilitation and Employment Contracts for 
Veteran Counseling'' on July 30, 2009. Please answer the enclosed 
hearing questions by no later than Friday, September 11, 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

JL/ot
                               __________
                                          Heritage of America, LLC.
                                                       Glendale, AZ
                                                  September 9, 2009

The Honorable Stephanie Herseth Sandlin
Chairwoman
Subcommittee on Economic Opportunity
Committee on Veterans' Affairs
U.S. House of Representatives
335 Cannon House Office Building
Washington, DC 20515

Dear Chairwoman Herseth Sandlin:

    On behalf of everyone connected with Heritage of America (HOA) and 
the veterans we are privileged to serve, I want thank you for holding 
the July 30th hearing on VR&E contracts for veteran counseling. Despite 
a very challenging afternoon schedule, interrupted by several floor 
votes, you managed to conduct a very useful hearing, highlighting many 
of the problems surrounding implementation of this contract.
    While the enclosed pages answer the Subcommittee's questions for 
the record, it occurs to me there are so many issues that need to be 
thoroughly reviewed in regard to VA's implementation of this contracts, 
as well as contractor performance, that the Subcommittee might need 
additional resources. I would respectfully suggest and hope you will 
seriously consider having the Government Accountability Office conduct 
an investigation into all the issues presented during the 
Subcommittee's hearing. HOA would welcome such an investigation and I 
personally guarantee our full cooperation.

            Sincerely,

                                             Patrick F. Chorpenning
                              President and Chief Executive Officer
                               __________
    Question 1: What should the VA have done to correct the problems in 
the States you listed as problematic?

    Response: The Under Secretary for Benefits and the Director of VR&E 
should have insisted on frequent and regular communications between 
Central Office, contractors and VA regional managers to identify 
problems early on. Unfortunately, the total absence of such 
communications exacerbated all the problems that arose. Unbelievably, 
the Under Secretary for Benefits refused to meet with the Chief 
Executive Officer of the largest NAS prime contractor, providing 
services to veterans in 44 States and much of the rest of the world.
    The Director of VR&E should have mandated that all regional 
managers and personnel abide by and implement the provisions of the NAS 
contract, as signed by the VA, as well as all other applicable 
provisions of law and Federal acquisition regulations. Central Office 
personnel at the highest levels don't seem to have understood that VA's 
signing the NAS contract transformed NAS goals from policy objectives 
to legally binding obligations of the VA.
    Abiding by those NAS contract provisions within all regions and 
subareas would have provided for uniform processes across regional 
offices nationally, as applied to:

    a.  the way cases were referred to contractors by Regional offices;
    b.  requirements for initial evaluation information;
    c.  Regional Office training obligations to contractors;
    d.  standardization of format for forms used for reporting and 
invoicing;
    e.  delineation of lines of communication between contractors and 
Regional Office and VR&E personnel;
    f.  VA payment for services complying with legal timeliness 
requirements;
    g.  approval of contractor counselors to provide services; and
    h.  VA establishing an IT system to track cases and invoices;

    When the VA's interpretation of contract pricing under Case 
Management did not prevail in the case of Houck Limited vs. the 
Department of Veterans Affairs, before the Civilian Board of Contract 
Appeals, the VA should have stopped imposing its pricing interpretation 
for such cases on the remaining seven prime contractors.
    Additionally, the Director of VR&E should have taken disciplinary 
action against personnel refusing to abide by the provisions and 
policies of the NAS contract. Employment should have been terminated 
for those VA employees actively working to undermine performance of the 
NAS contract. Heritage of America (HOA) terminated the employment of a 
number of its personnel, whose performance was inadequate. VA should 
have done the same.
    Basically, the NAS failed because VA Central Office could not get 
all its own local and regional offices to cooperate. Many in these 
offices resented losing power and control over the contracts for 
counseling services. Some of them actively subverted the program and 
hindered performance.
    Additionally, while HOA established a very sophisticated 
information management system, capable of tracking work flow, invoices 
and VA payments for services performed, the VA failed to set up a 
corresponding tracking system.
    One of the primary motivations for undermining the NAS would seem 
to be the fear of many in the bureaucracy that non-governmental third 
party entities would be able to track VA performance and timeliness of 
service to disabled veterans better than the VA itself. With control 
over these contracts back at the local level and little oversight from 
Central Office, local officials would not be under such potentially 
critical, objective scrutiny.
    The above listed items only scratch the surface of the ways in 
which the conduct of VA employees in certain regions delayed, impeded 
or disrupted HOA's contract performance, interfered with HOA's 
subcontractor relationships, or ultimately caused HOA to incur 
increased costs of performance on the NAS contract.
    Heritage of America truly appreciates the Subcommittee's time and 
interest in this matter but believes the best way to achieve a thorough 
and impartial inquiry into the NAS Contract for VR&E services debacle 
is through a formal GAO investigation.
    Such an investigation might be able to determine if VA leadership 
sincerely tried to implement a national acquisition strategy or simply 
gave it lip service while actually intending to demonstrate that such a 
strategy would not work, in order to justify going back to local/
regional control over these contracts. While the contract called for a 
national process implementation, VACO actions would indicate the VA 
never intended to honor that commitment to its prime contractors, as 
those officials did nothing to ensure consistency between regions in 
processes or procedures. These problems were pointed out to VACO 
officials early on in the contract in weekly reports from HOA that 
never received any response.

    Question 2: Who are these regional directors who you claim that 
have little interest in the national VR&E strategy?

    Response: Unfortunately, in many areas regional officials have 
disregarded the NAS agreement provisions, insisting that procedures 
revert back to previous local practices rather than working to 
implement the new strategy cooperatively. These areas include 
Washington, Oregon, Idaho, New Mexico, Wyoming, Texas, North and South 
Dakota, Nebraska, Iowa, Louisiana, Ohio, Mississippi, New Jersey, 
Pennsylvania, and Puerto Rico. All problems with regional officials 
have been exacerbated by the total absence of VACO leadership, virtual 
refusal to communicate with primes on any regular basis, and 
incompetence of the contracting officer. The National Acquisition 
Strategy is that in name only. Standardized business practices and 
procedures were not imposed on the ROs by VA Central Office (VACO) 
officials. There are still many VAs, represented by many ROs, that are 
being ``managed'' by regional directors, who have little interest in 
the ``national'' VR&E strategy. This reality became a confounding trap 
in time and money for prime contractors trying their best to abide by 
the NAS agreement and expecting ROs to do the same.
    Due to the behavior of local officials in certain regions 
throughout the short life of this contact, it can be assumed that in 
all of the Subareas where Heritage of America (HOA) experienced the 
most problems, the Regional Directors enabled the destructive attitudes 
and processes put forth by the VR&E Officers who worked for them. These 
locations included Subarea 4 (Ohio, Indiana, and Michigan), Subarea 17 
(Washington and Oregon), Subarea 10 (Texas), Subarea 12 (North and 
South Dakota), and Subarea 6 (Florida and Puerto Rico).
    For example, Carol Filman was the Regional Director in Seattle. In 
the presence of an HOA manager and former VR&E employees, she stated 
that she did not approve of the NAS Contract and had less than good 
things to say about HOA's operation.
    Heritage of America believes a thorough investigation by the 
government Accountability Office would provide more evidence of 
disinterest in the NAS strategy on the part of local VA officials.

    Question 3: What did the security procedures entail and how long 
should they have taken to be approved by the VA?

    Response: The background procedure entails:

    a.  Getting entered into the background system by the VA. Heritage 
of America (HOA) asked to be allowed to enter these for the VA to save 
time but it was denied.
    b.  Completing the Declaration of Federal Employment (OF306) and 
Questionnaire for Non Sensitive Positions (SF85). A copy of each is 
attached to these answers.
    c.  Getting fingerprinted at a local Law Enforcement center.
    d.  Sending the original paperwork to HOA to be screened prior to 
sending to Little Rock.
    e.  Sending all copies stapled together to Little Rock. (In the 
beginning HOA paper clipped all paperwork together but Little Rock 
would send it back stating pages were missing. Once we started stapling 
it, the problem was alleviated)

    This process should have taken about one work week. The biggest 
issue in Little Rock was the backlog of paperwork. The staff there 
stated many times that they were weeks or up to a month behind. There 
is also an academy or training facility at their location and they 
pulled the trainees in to assist and screen the paperwork and enter it 
in the system. Unfortunately, many times the paperwork and data entry 
were incorrect and HOA would have to contact Little Rock by phone or in 
writing to correct the errors.
    The other delays in approvals for the counselors included getting 
them entered into the Learning Management System (LMS) training system 
to complete their online classes. The VA had an unknown procedure to do 
this which was faulty in many areas and the VA never entered the 
counselors. HOA had to resort to the Employee Education System (EES) 
training Web site to complete the online training. The EES site allowed 
the counselor to create their own user name and password to complete 
the training, but many ROs insisted we use the LMS because that ``would 
help them track the training.''
    In the startup phase of performance, HOA set up a trained ``Rapid 
Response Team'' to travel to any location to provide services, while 
permanent personnel were being put in place. HOA had to spend time and 
money and effort getting that team trained and retrained for each RO 
location--not anybody's idea of a national training program. 
Unfortunately, only the LMS supervisor at each location could track the 
training (the Quality Assurance Manager, who was the one that needed 
the information, could not do so) and the LMS supervisor could only 
track his or her own location--not nationwide as should have been 
established by the VA.

    Question 4: Can you give us the names of regional office staff who 
refused to provide instruction to contractor personnel on criteria for 
initial evaluation?

    Response: James Jacobs, Assistant VR&E Officer in Cleveland, 
refused to provide training even though in Ohio they required something 
they characterized as a ``Psychological/Vocational/Social/
Rehabilitation'' Assessment instead of the contracted-for Initial 
Assessment. Though Heritage of America (HOA) tried to obtain 
information concerning their special requirements via telephone, email, 
and personal visits by two of its middle managers to his location, (and 
at one point it looked like they were going to tell HOA what they 
wanted in the way of this special assessment that was clearly not part 
of the contract), at the last minute Mr. Jacobs, upon instruction from 
his supervisor, Mr. Kolin Van Winkle (VR&E Officer in Ohio), canceled 
the training and subsequently canceled all HOA case referrals in Ohio.

    Question 5: Who in the VA Central Office ``instructed the VR&E 
officers not to provide the prime contractors with the names of their 
best contract counselors from prior arrangements until it was too late 
to [have] any favorable impact on the prime contractor operations''?

    Response: Ms. Ruth Fanning, Director, VR&E her assistant 
Marguerita Cocker; the Contracting Officers, Rosa Asencio and Belinda 
Thomas-Wright; and the Contracting Officers Technical Representatives, 
Carolyn Thomas and Emmanuel McKeever, maintained dysfunctional, 
resistant attitudes toward Heritage of America (HOA) throughout the 
procurement, preventing optimal performance.
    HOA's initial approach to this NAS program was to set up HOA 
regional offices managed by former VR&E Officers, who we thought would 
be able to interact with their former colleagues in a productive, 
cooperative way, enabling quick and efficient recruitment and retention 
of the best counselors in each area. On July 21, 2008, the same day HOA 
was awarded the contract, HOA tasked its regional managers with 
contacting VR&E Officers in each of the 44 states where HOA was awarded 
a contract to begin this process. By 9:00 the next morning, HOA's 
managers were being told by VR&E Officers that VACO had instructed them 
not to talk with HOA until further notice and under no circumstances 
was HOA to be given names of the counselors preferred by those VR&E 
Officers. This was changed later, and HOA was able to obtain some such 
name lists, but by that time it was too late to have any favorable 
impact on operations.

    Question 6: Who is the VR&E officer in Cleveland who refused to 
provide the mandated training required by the contract and VA 
regulations?

    Response: Mr. Kolin Van Winkle. See response to question number 4, 
above.

    The contract was clear in how and when the VR&E offices were to 
provide training. Most of them complied sooner or later, but Mr. Van 
Winkle, refused to do so as explained above in number 4.
Deliverable:
    1)  Can you provide us with a copy of the letter from the 
Vocational Rehabilitation Counselor in the Northwest which predicted 
Heritage of America was going to fail even before it began to provide 
services?

           Mr. David Kaplan, Chief Professional Officer at the American 
        Counseling Association, received this email from ACA member, 
        and Medford, Oregon VRC, Janice Stevens on August 14, 2008, 
        while contract awardees were still attending the post-award 
        conference in Baltimore. Ms. Stevens could not possibly have 
        any legitimate knowledge at that point as to how HOA was going 
        to perform or even how much we were going to pay our counselors 
        because VACO had not yet promulgated our pricing to the ROs:

        [GRAPHIC] [TIFF OMITTED] T1879A.004
        

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                      July 31, 2009

Mr. Anthony Tarkowski
President/Chief Executive Officer
Sygnetics, Inc.
2514 S. Rochester Road
Rochester Hills, MI 48307-3817

Dear Mr. Tarkowski:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity Hearing on 
``Vocational Rehabilitation and Employment Contracts for Veteran 
Counseling'' on July 30, 2009. Please answer the enclosed hearing 
questions by no later than Friday, September 11, 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

JL/ot
                               __________
                                             Sygnetics Incorporated
                                                Rochester Hills, MI
                                                  September 9, 2009

Chairwoman Stephanie Herseth Sandlin
U.S. House of Representatives
Committee on Veterans' Affairs
One Hundred Eleventh Congress
335 Cannon House Office Building
Washington, DC 20515

Dear Chairwoman Sandlin:

    I am submitting the answers to the hearing questions that were 
submitted to me on July 31, 2009 from the House Committee on Veterans' 
Affairs Subcommittee on Economic Opportunity Hearing on Subcommittee on 
Economic Opportunity ``Vocational Rehabilitation and Employment 
Contracts for Veteran Counseling''.
    I have provided as detailed answers as possible to assist the 
Committee in understanding the impact this contract will have on the 
well-being of Sygnetics, Inc. and it's many sub-contractors. I have 
made certain to provide both the questions and the answers in single 
spaced form as requested.
    Should there be any additional information you might need please do 

not hesitate to contact me via email, or by phone. My email address is 
[email protected] and my phones are (248) 844-1900 ext 1220 
or cell at (248) 709-4100.
    I sincerely hope this helps bring a quick resolution to the 
difficulties that have been caused by VA and now are impacting my 
business negatively due to my testimony in July. I appreciate the 
attention Congress has directed to this matter.

            Sincerely,

                                                     Tony Tarkowski
                                  President/Chief Executive Officer

                               __________
       Deliverable from the House Committee on Veterans' Affairs
                  Subcommittee on Economic Opportunity
                Hearing on Vocational Rehabilitation and
              Employment Contracts for Veteran Counseling
                             July 30, 2009
                       Questions for the Record:

    Question 1: One of the concerns you mentioned in your testimony was 
that the startup cost of the contract was ``huge due to the fact that 
the contract started late.'' Did the VA ever mention the potential high 
cost of the startup of the contract?

    Response: The VA did not mention there were going to be high start 
up costs. Although we knew there were start up costs involved the fact 
that we did not get our first file until October when the contract 
actually started in July did not allow sufficient time to obtain enough 
work to support the outlay. We also signed a lease late because we did 
not know what areas were being awarded until July and then couldn't get 
Counselors approved so there was a delay in opening the office. Since 
no direct numbers of files were provided in the proposal it was 
impossible to project where we would be awarded and what would be 
necessary to start and operate in any certain area. We were led to 
believe that if we did a good job, this contract was a 5 year contract 
and therefore in order to keep costs down, signed a multi year lease to 
handle the volume in San Diego. We also bought new Accounting software 
and new I.T. equipment, desks, phone system, etc. We even wrote a case 
management system to provide the best in service.

    Question 2: After attending the 5 day workshop for the awarded 
contract, did any of the Regional Offices provide any follow-up 
training?

    Response: There was only minimal training provided by the Regional 
office in Los Angeles and Oakland. These sessions provided training on 
security and contract issues. The Oakland office did briefly discuss 
the report requirements for their office only. Most of the offices 
continually failed to respond to our requests for assistance. This was 
one of the most important issues when it came to learning what was 
required on the reports.

    Question 3: In your written testimony you state that VA created 
additional obstacles for you. What additional obstacles did VA create 
that were not part of the contract?

    Response: By not allowing us to be trained, and not utilizing a 
standard form for invoices, as well as many of the VR&E Officers not 
working as a team, we could not ascertain what was desired in many 
cases and therefore could not complete reports on a timely basis. There 
were so many different invoices that were requested and forms for 
reports by each individual office that it caused significant delays in 
getting the reports and invoicing in on a timely basis. Each office had 
its own way of doing business and we had to adjust to each.

    Question 4: How has VA's administration of this contract been 
unconscionable?

    Response: I believe that it is unconscionable because no reasonable 
person would expect VA to not communicate, not train, not have standard 
documents that must be used by all offices, not pay invoices on time, 
reject reports based on punctuation, not care about Traumatic Brain 
Injury and request it be removed from reports, not understand that when 
a person lives several hundred miles away travel should be paid to the 
Counselor. The most unconscionable conduct was from the VA central 
office. They instructed the Regional offices not to communicate with 
the contractors and consistently ignored our requests for meetings and 
dialog with the contracting officer and COTR. Our detailed rates, and 
several other companies rates, were released to the competitors by VA 
and are causing unfair competition. The VA is holding the fact that we 
cooperated with your Committee against us. It has already been used 
against us in California. We have been told that our chances of winning 
a new national contract will be slim due to our testimony. To take away 
our livelihood because we told the truth is by far the most 
unconscionable event yet.

    Question 5: Can you give examples of when veterans were denied 
services?

    Response: Anytime a file is not accepted once turned in for a 
disabled veteran that file cannot be processed for claims. We have had 
many files rejected after being QA'D by two retired VR&E Officers and 
veteran Counselors that have worked with VA for years. It is difficult 
to believe that these people don't know what is expected on a report. 
In the meantime the veteran waits for services he deserves and 
potentially gets rejected for TBI since we were instructed to remove it 
from reports.

    Question 6: You state that, ``Many Department of Veterans Affairs 
offices, either by omission or commission, have undermined the efforts 
of the eight prime contractors . . .'' that were providing services. 
Who were these individuals and what were the omissions and commissions?

    Response: The VR&E officers in Missouri, North Dakota, South 
Dakota, Maine, Washington and Alabama made statements from time to time 
that they only wanted to work with local contractors. They provided 
incomplete cases, no contact information for veterans and refused to 
approve cases that were properly completed.

    Question 7: Who specifically had a predisposed attitude not make 
the contract work and who specifically was not going to let it work?

    Response: See answer to question 6. With no communication from the 
Contracting Officer, or Director there was no direction on how to 
resolve these issues and it continues on today even though Congress has 
had testimony given and seems to have shown great interest in making a 
national contract work, the Contracting Officer will not assist in 
getting invoicing issues resolved. This is especially true with level 
II case management.

    Question 8: How big was your small business before the contract, 
and how much did it grow after the contract?

    Response: When Sygnetics turned in the proposal we were at an 
annual 3 year average of $5,767,468 and our current 3 year average is 
$10,296,843. Part of this growth was due to a large contract we had for 
1 year only primarily in 2006 with the Army under our HR Solutions 
contract. Our contract for VA Vocational Rehabilitation brought in over 
$2,800,000 this past year with a large portion of this being in 2009 
sales. We added 7 people in San Diego, 1 in Oakland CA, 6 in Michigan, 
a sub-contract office in VA with 6 people and hundreds of sub-contract 
companies all over the United States to handle the volume of files that 
were provided after award. Much of this growth happened in November 
through December 2008 and January 2009.

    Question 9: How often did a Vocational Rehabilitation Counselor 
give a case to one of your counselors and how did that violate the 
contract?

    Response: All cases were to be given directly to our company for 
assignment to counselors. On approximately 10 to 12 occasions files 
were provided directly to a counselor.

    Question 10: To your knowledge how often was there a deliberate 
withholding of payment to ensure that the National Acquisition Strategy 
and your company failed?

    Response: Anytime a VR&E Officer returns files on a continual basis 
and will not work with us to train on how they want the reports done, 
or conveyed why it was returned it seems deliberate that they do not 
want us to succeed. There also were instances where we were not 
provided the 1985 (authorization for services) on a timely basis and 
therefore were delayed on our invoicing and payment. This delay is 
partly responsible for my bank increasing my interest level on loans by 
1.25 percent.

    Question 11: If security issues were ``ill defined'' is this 
something that a prudent contractor doing due diligence should have 
requested clarity on?

    Response: When it was mentioned at the 5 day workshop that it would 
take several months to get counselors approved, all the contract 
companies were told that was not true and that approval would happen 
within days. That was proven wrong when we attempted to get approval 
through. The process was not defined as to length and all that was 
needed to finish this process. This delay in processing information 
caused a group of files to be lost in California as an example because 
we did not have counselors approved to work the files that were given 
to us prior to those personnel leaving for home. Cost was not mentioned 
in the solicitation for the ``vetting'' (security) process. This cost 
was passed on to us and we had to pay whatever they dictated.

    Question 12: Who directed local VR&E officers not to have any 
conversations with contractors until August 2008 and what impact did it 
have on your company?

    Response: Ruth Fanning and since we couldn't have discussions we 
could not have any idea of what they expected to be done. This caused 
great delays in getting the necessary forms in place for the reports, 
and invoicing.

    Question 13: Why should the VA be concerned about any business 
start-up costs? Don't most enterprises consider it a cost of doing 
business with a Federal agency?

    Response: Although it is correct to assume a business knows the 
start up cost, it was very difficult to project since there were no 
actual numbers of files that would be provided in each area. The other 
difficulty is that if you were provided a full year to amortize cost it 
would work. We were only provided at best 9 months with a very slow 
ramp up since there were other contracts still in place with local 
contractors.
    We also were not told what the fee would be for getting counselors 
approved and how much work it would be from our end. On top of this, 
instead of accepting reports in electronic form to save trees and mail 
service costs they insisted on having FedEx services for tracking 
numbers. Even after using these services, we still have one office in 
particular that says they did not receive files when we can prove they 
received the envelope and we sent a backup email.
    Additionally to try and overcome the resistance of some of the VR&E 
offices we expended considerable funds to establish a local presence in 
their area. After our testimony we have been treated differently across 
the board and not been awarded contracts. This means the start up cost 
including our office rent etc are all to be paid from other revenues 
putting a large strain on a small business that has performed well and 
even provided value added services with TBI self assessment. Counselors 
that we have paid for the vetting of, are now being picked up by the 
competition with no cost involved for them.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                      July 31, 2009

Mr. Richard Daley
Associate Legislative Director
Paralyzed Veterans of America
801 18th Street, NW
Washington, DC 20006

Dear Mr. Daley:

    I would like to request your response to the enclosed questions for 
the record and deliverable I am submitting in reference to our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
Hearing on ``Vocational Rehabilitation and Employment Contracts for 
Veteran Counseling'' on July 30, 2009. Please answer the enclosed 
hearing questions by no later than Friday, September 11, 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

JL/ot
                               __________
                                      Paralyzed Veterans of America
                                                    Washington, DC.
                                                 September 10, 2009

Honorable Stephanie Herseth Sandlin
Chairwoman
House Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
335 Cannon House Office Building
Washington, DC 20515

Dear Chairwoman Herseth Sandlin:

    On behalf of Paralyzed Veterans of America (PVA), I would like to 
thank you again for the opportunity to testify before the House 
Committee on Veterans' Affairs, Subcommittee on Economic Opportunity on 
July 30, 2009.
    Following the hearing, you submitted additional questions with 
regards to the issue of ``Vocational Rehabilitation and Employment 
Contracts for Veteran Counseling.'' The attached document provides 
PVA's response to your further inquiry about our testimony.
    PVA looks forward to working with you in the future to ensure that 
the VR&E program continues to provide the best serve for our veterans. 
Thank you again.

            Sincerely,

                                                      Richard Daley
                                     Associate Legislation Director

                               __________
                        Questions for the record
    Question 1: You cite the GAO report 07568R, dated April 2007. In 
your estimation do you think that the same challenges remain today as 
noted in that GAO report?

    Response: Since that GAO report (April 23, 2007) the VA has taken 
aggressive measures with respect to providing VR&E services through 
contractors. Each Regional Office has added to their staff contract 
specialists. This individual has the knowledge and authorization to 
facilitate contracts for the Federal Government which could include 
contract amounts of several million dollars. In the past the personnel 
performing this role did not have this background or authorization.
    The VA has provided specific annual VR&E contract training and 
contract training to Regional Office staff. The VA has also made 
modifications to their case management system ``Corporate WINRS'' that 
will provide additional controls and reporting capabilities for 
contract management.

    Question 2: Should the Department of Veterans Affairs continue to 
contract out for counseling services?

    Response: The Department of Veterans Affairs will continue to 
contract out for counseling services in some situations. We do 
recognize the importance of contract services to the function of VR&E. 
Due to the fact that VR&E is limited in resources and staff, it is 
often forced to contract vocational rehabilitation services to private 
and State entities. Contracting for services is necessary when the 
veteran requiring VR&E services is living in a geographic area where 
VR&E has no representation. Contracting for services with a local 
provider would be in the best interest for the veteran.
    However, we have a concern that we maintain when dealing with 
contract services of any kind. PVA believes that contract services are 
often more expensive than services provided directly by the VA. We also 
do not think that contractors necessarily have the best interest of the 
veteran in mind. We urge Congress to make available adequate resources 
so that VR&E services can be provided by the VA directly to all 
veterans seeking help.

    Question 3: You state in your testimony that the Department of 
Veterans Affairs should develop a demonstration project where a 
contractor is rewarded for making changes in the life of the veteran. 
How would this work and how much would a contractor be compensated?

    Response: The VR&E program currently works with veterans as they 
prepare for employment and their transition to the workplace. The 
statement of ``changes in the veteran's life'' refers to continued 
employment over many years with advances in a veteran's career along 
with increases in income. In the current program, after the veteran 
completes a period of 60 days of employment, or, achieves their VR&E 
goals, they are declared rehabilitated and VA's role is complete.
    When a veteran returns to work after sustaining a disabling medical 
condition, or in the case of PVA members, a severely disabling 
condition, there is a likelihood that the stringent and uncompromising 
demands of full time employment could soon, or eventually, conflict 
with the veteran's emotional and/or physical well-being. In these 
situations the veteran would simply drop out of the workforce, 
convinced that they could no longer hold a job.
    A contractor performing this role for the VA would be required to 
perform continued follow-up of 6 months, 12 months, and up to a minimum 
of 24 months. The contractor, the employer and the veteran would be 
working close together for this extended period. The VR&E counselor, 
working with the employer, and the veteran could discus and arrange for 
needed accommodations in the work place, or modifications in the work 
schedule. Perhaps the veteran could be retrained to perform another 
function within the organization. The contractor providing the VR&E 
counseling in this situation would have a vested interest in the 
continued employment of the veteran, and a satisfactory outcome with 
the employer.
    The amount the contractor should be paid would depend on the 
current rate for providing the services, plus a substantial yearly 
bonus for ensuring the veteran remains employed. This bonus could be 
paid for 3 or 4 years. Receiving this bonus amount should naturally be 
projected and accounted for in the contracted entities business plan 
for the next 4 years, or the agencies projected budget. Therefore, 
keeping the veteran employed is in their best interest. This would 
allow the entity to plan their resources based on a multi-year 
relationship working with the veteran. It would also facilitate the 
contractor in developing multi-year relationships with the local 
business community and local government employers.

    Question 4: You write in your testimony that a veteran can advise a 
veteran, in most cases better than a non-veteran. First are there 
enough counselors who are veterans to fill the needs and can a non-
veteran help a veteran?

    Response: PVA has known for 60 years that there is no work 
experience or educational courses that can take the place of having 
served the Nation in the military service when advising another 
veteran, or counseling a veteran during their rehabilitation. There is 
often a shared experience that veterans have that cannot be duplicated 
in a college class. That bond can be greater when veterans have served 
in the same military campaign or era. All of PVA's service officers are 
veterans, disabled veterans, or veterans with a spinal cord injury. PVA 
provides the knowledge for a man or woman to become a service officer 
and work with veterans during their 16 months of paid training. But, 
the experience of serving in the Nation's defense cannot be taught. In 
addition, each of PVA's thirty-four Chapters have volunteer members 
that visit the VA hospital regularly to inform newly paralyzed veterans 
about some options for their future. PVA knows that the newly injured 
veteran will be more receptive to another veteran who was once in that 
hospital bed, and now living a productive life.
    There may not be enough VA counselors that have served in the 
military.
    There may be many veterans working in civilian counseling 
positions, but hiring veterans to work with veterans has never been a 
priority for the VA. Military experience or combat experience means 
nothing more than the standard five-point preference added to one's 
application score. This insignificant five-point preference does not 
ensure that a qualified veteran will receive an interview for any 
position applied for in the VA. If these positions were set aside for 
veterans only, this message would be shared in the educational 
community and veterans enrolled in social studies could direct their 
education toward helping veterans. Within a few years, with new 
counseling positions restricted to veterans and with replacement as 
current staff retires, a majority of VA counselors could be veterans.
    Professional staff members that are non-veterans can function well 
in the VR&E program. Non-veterans currently serve in every capacity of 
the VA's VR&E program. Every person hired has the appropriate education 
and required work experience. Non-veterans are currently working with 
veterans in counseling positions. This suggestion is to perhaps provide 
more than qualified help for the veteran. It is also to provide the 
``best'' help for the men and women that have been injured serving this 
nation.

    Question 5: How similar is VA's VR&E program to the Social Security 
Administration's (SSA) Ticket to Work program that we can draw from 
their experiences?

    Response: Perhaps this is an area that could be explored further. 
Has the VA's VR&E staff studied the SSA's Ticket to Work (TTW) program? 
What similarities can they learn from examining this program?
    One similarity of the VR&E's program to the Ticket to Work program 
is that the consumer, whom the program is designed for, has been out of 
the workplace for an extended period of time. The lack of current work 
experience for the TTW consumer would create a similar problem as that 
of the disabled veteran enrolled in the VA's VR&E program. In the TTW 
program much of the ``risk'' is with the contractor providing the 
service. Since the financial reward for service performed is extended 
out for 5 years, the contractor performing the service has a goal of 
helping the individual reenter the workplace, and remain in the 
workplace.
    Another way that should be explored is to allow VA to implement a 
program similar to the TTW program. For example, Paralyzed Veterans of 
America has our own Vocational Rehabilitation Program for severely 
disabled veterans. We maintain a contract with the SSA TTW program and 
are an approved ``Employer Network''. As a non-profit VSO, we are able 
to recoup some of our costs of providing employment services to the 
severely disabled population through the SSA. There is no logical 
reason that VA could not provide similar reimbursement to a program 
such as ours that would serve as an adjunct team member in providing 
customized services to a specific, severely disabled population.

    Question 6: In your written testimony you write that regional 
offices are not fully applying VA's contracting guidance. How are the 
Regional Offices not applying VA's contracting Guidance?

    Response: One of the major complaints that VSOs' have heard from 
contractors is that payment for services provided has been late. It 
would be in the Regional Offices best interest to ensure that the 
contractors providing services to the veterans in their region are paid 
on time. Neither an existing contractor, nor a contractor expanding 
into a new geographic area can function without being paid. We do not 
know if this is the fault of the VA Regional Office, or the VA Central 
Office, or the contractor. The Regional Office could have played a key 
role in ensuring the contractors were paid on time. Not paying 
contractors for performing their work is not the standard procedure for 
VA contracting.

    Question 7: In your written testimony you write that ``current 
training does not adequately prepare contracting officers to manage 
contracts.'' What problems have occurred in the past that leads you to 
make this statement?

    Response: In the past, the contracting officers had not received 
adequate training and certification. This was noted in the GAO report 
(April 2007), that the contracting officers said VA's training has not 
prepared them to adequately manage contracts. The lack of training and 
available training in the past, did not fully prepare the VR&E employee 
for their role as a contract administrator. The technical, 
administrative, and legal requirements of the role of a contract 
administrator require a professionally trained and certified 
administrator. As I understand, the contracting responsibility was 
placed on existing members of the VR&E program. Recently the VA has 
placed this responsibility with a trained Federal Government contract 
administrator in each Regional Office.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                      July 31, 2009

Mr. Joe Wynn
VET-Force
1200 18th St., NW
Suite #LL-100
Washington, DC 20036

Dear Mr. Wynn:

    I would like to request your response to the enclosed questions for 
the record and deliverable I am submitting in reference to our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
Hearing on ``Vocational Rehabilitation and Employment Contracts for 
Veteran Counseling'' on July 30, 2009. Please answer the enclosed 
hearing questions by no later than Friday, September 11, 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

JL/ot
                               __________
       Deliverable from the House Committee on Veterans' Affairs
                  Subcommittee on Economic Opportunity
                Hearing on Vocational Rehabilitation and
              Employment Contracts for Veteran Counseling
                             July 30, 2009

                       Questions for the Record:

    Question 1: Why would you want Congress to compel VA to extend a 
contract that according to your testimony had so many problems?

    Response: My recommendation for extending the contract was in light 
of the fact that the problems were primarily due to logistical 
limitations, inconsistent reporting requirements, and inadequate 
communications on the part of the VA contracting officers. From the 
testimonies provided by the witnesses, it did not appear that the VA 
was dissatisfied with the services being provided to the service 
disabled veterans. Therefore, the veteran and service disabled veteran 
contractors should not be penalized for the VA's failure to manage the 
contract efficiently. Most of the contractors who were awarded 
contracts had to incur significant costs to prepare for the contract. 
By extending the contract, the technical issues could be resolved while 
disabled veterans are still receiving services and the contractors are 
still receiving payments.

    Question 2: How will VA's action to cancel the contract contradict 
VA's ``Veterans First'' approach to contracting when no subsequent 
contract has been awarded and the same contractors can re-compete?

    Response: It's not solely VA's action to cancel the contract that 
contradicts VA's ``Veterans First'' approach to contracting. It's the 
action by the VA to cancel the contract within the first year and 
promote the intent of reissuing the contract and allowing the very same 
businesses to re-compete. The concept of the ``Veterans First'' 
approach incorporates not only the priority of using service disabled 
veteran and veteran business owners but also because of the care and 
concern for the well-being and success of those veterans who are now 
trying to succeed in business after having served their country 
honorably and some having incurred injuries and disabilities while 
doing so.
    It's actually insulting to these veteran business owners for the VA 
to cancel the contract and then state that they will reissue the same 
contract on some future uncertain date and allow the same businesses to 
re-compete after causing them a disservice and an undue hardship. These 
business owners are also employing other veterans who will no longer 
have jobs as a result of the VA's termination of the contract.

    Question 3: In your written testimony you state that VR&E has 
``limited capacity to manage its growing workload,'' but according to 
the VA the ratio of veterans to counselors is one counselor for 133 
veterans. Can you comment on this point?

    Response: I do not have the most recent totals for the number of 
VR&E Counselors. But as I stated in my written testimony, we do know 
that VA's National Acquisition Strategy was implemented due to the 
growing demand of VR&E services beyond VA's current capacity. In VR&E's 
discussion of this topic prior to contract award, it's stated that VA's 
objective for this national strategy is to use Contractor assistance to 
both supplement and complement the services provided to veterans and 
servicemembers receiving services by VA's regional VR&E offices within 
VBA.
    I also pointed out in my testimony that while serving on the 
Veterans Disability Benefits Commission, research reports revealed that 
while the number of participants in the VR&E program had increased in 
recent years, the number of individuals rehabilitated had remained 
constant. The Commission's research also revealed that VR&E needed to 
improve its process of defining, tracking, and reporting on 
participants because their process was found to be confusing and 
inconclusive in its current state. As a result of the Commission's 
findings, it was recommended that the VR&E staffing and resources be 
increased in order to enhance the program.

    Question 4: In your written testimony you said that you spoke with 
representatives of three of the Service Disabled Veteran Owned Small 
Businesses. In your opinion, did they have the capacity to provide 
services nationwide?

    Response: Probably none of the Service Disabled Veteran Owned 
Businesses participating in this VR&E NAS contract have the capacity to 
provide services nationwide. But none of them were required to do so. 
The purpose of making multiple contract awards for the same services 
was so that no one company would be tasked with providing services in 
each State throughout the country. The use of multiple companies to 
provide the services on a nationwide basis is a good strategy. However, 
it appears that VA's managing of the multiple contracts is where the 
problems have occurred.
ADDITIONAL COMMENTS:
    The original contracts were awarded in July 2008, but due to delays 
on the part of the VA, contractors were not allowed to begin processing 
work for a couple of months later. Then right after the very start of 
the contract, it was revealed in testimony by Ruth Fanning of VR&E, 
that the VA had made a Court Settlement Agreement to discontinue the 
contract after the first year due to a protest filed by another small 
business. So with termination after the first year as a mandate, it's 
no wonder that VA managed the contract poorly in the first 12 months. 
They had no intention of going forward with the contract beyond 1 year. 
YET THEY NEVER NOTIFIED THE EXISTING SDVOBs THAT THE CONTRACT WOULD BE 
WITHDRAWN AT THE END OF THE FIRST YEAR.
    While this hearing mostly revealed testimonies and discussions of 
why the SDVOB contractors were now dissatisfied with the VA's sudden 
termination of the contract, how SDVOB contractors were misguided with 
regard to contract process and procedures, and VR&E's vague notion of 
why they ended the contract--the hearing should have been questioning 
why VR&E (VA) was allowed to deceive SDVOBs who they are supposed to 
consider has their highest priority. To let these SDVOB contractors 
spend their own money and resources and employ people to perform 
services that the VA knew they were not going to use nor pay for--is 
just down-right wrong and it should be corrected.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                      July 31, 2009

Ms. Ruth Fanning
Director
Vocational Rehabilitation and Employment Service
U.S. Department of Veterans Affairs
810 Vermont Ave., NW
Washington, DC 20420

Dear Ms. Fanning:

    I would like to request your response to the enclosed questions for 
the record and deliverable I am submitting in reference to our House 
Committee on Veterans' Affairs Subcommittee on Economic Opportunity 
Hearing on ``Vocational Rehabilitation and Employment Contracts for 
Veteran Counseling'' on July 30, 2009. Please answer the enclosed 
hearing questions by no later than Friday, September 11, 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

JL/ot
                               __________
                        Questions for the Record
          The Honorable Stephanie Herseth Sandlin, Chairwoman
                  Subcommittee on Economic Opportunity
                  House Committee on Veterans' Affairs
                             July 30, 2009
                Vocational Rehabilitation and Employment
                   Contracts for Veterans Counseling

    Question 1: Can you explain how VA determines contractor quality?

    Response: The primary method for determining contractor quality in 
the national acquisition strategy (NAS) contract was to review the 
completed work to determine if the contractor complied with performance 
requirements outlined in the NAS performance work statement. The 
quality assurance surveillance plan (see attached) also outlined 
expectations for compliance with the performance standards, including 
timeliness and quality of services and reports. This plan established 
the process use to evaluate the level of services provided by 
contractors. In addition, quality was assessed based on Veteran 
feedback.

    Question 2: Do you think that some of the problems from the 
National Acquisition Strategy contracts were due to the fact that it 
was awarded to small businesses that went from providing local services 
to immediately providing services nationwide?

    Response: Yes, although research by an integrated project team 
consisting of Vocational Rehabilitation and Employment (VR&E), Office 
of Acquisition Logistics and Construction (OALC), and Office of General 
Counsel (OGC), along with support from the Office of Small and 
Disadvantaged Business Utilization (OSDBU), indicated that there were 
adequate service-disabled Veteran owned small businesses and Veteran 
owned small businesses available to provide the required services. 
These firms also asserted that they could provide the services 
nationally. However, the performance of NAS contractors demonstrated 
that vendors overestimated their ability to expand staffing and 
locations.

    Question 3: In your written testimony, you state the training was 
provided during the solicitation phase to assist the small businesses. 
Did any of the small businesses feel that the training was 
insufficient?

    Response: No, the feedback from small business participants 
attending the pre-solicitation training was positive. In addition, as a 
follow-up to the pre-solicitation training, firms were able to submit 
questions for any clarification needed. OSDBU offered additional 
guidance to assist firms in setting up joint ventures and team 
arrangements if needed.

    Question 4: You mentioned in your testimony that prime contractors 
have struggled to: develop subcontract relationships; to recruit 
appropriate staff; and deliver timely and high quality services. Can 
you elaborate and provide examples?

    Response: Many jurisdictions complained that contractors were 
refusing referrals or not contacting Veterans referred to them due a 
lack of subcontract relationships, ineffective subcontractor 
relationships, or a lack of prime contractor staff. This directly 
impacted timeliness and quality of services. When VR&E offices 
inquired, contractors replied they were unable to recruit qualified 
staff and/or subcontractors. In some jurisdictions the Department of 
Veterans Affairs (VA) was unable to refer cases for several months 
after award due to the vendors' inability to perform. In other 
jurisdictions, vendors flew in staff from other States to provide 
coverage. Complaints from VR&E offices and Veterans indicated that 
Veterans were asked to meet with contract staff at non-professional 
locations such as hotel rooms and fast food restaurants.
    As a result of the complaints from Veterans and field offices, VR&E 
conducted a gap analysis in January 2009. VR&E field offices also 
completed past performance evaluations of contractors in April and 
August of 2009. Below are examples of problems identified:

      Untimely services/deliverables or lack of Veteran contact 
by contractor:

          The Portland Regional Office (RO) reported 16 
        Veterans complained about the length of time contractors took 
        to contact them.
          The Seattle RO reported Veterans complained about 
        timeliness, travel burdens, and that no contact information was 
        provided.
          The Washington RO received 25 Veterans complaints 
        mostly involving untimely services.
          The Pittsburgh RO made 146 referrals for case 
        management, and 54 Veterans were not contacted. The contractor 
        told VA that the referrals were overlooked and/or misplaced. 
        Out of all 178 referred cases, VA only received timely reports 
        for 21 cases.
          The Muskogee RO received untimely reports for 14 of 
        22 initial assessments and 203 of 215 educational vocational 
        counseling reports.
          The Seattle RO received one timely report out of 
        1,072, and 151 cases were returned for which no service was 
        provided.
          The Buffalo RO only received 74 timely reports out of 
        219 while an additional 255 reports were still outstanding.

      Unacceptable quality/timeliness:

          The Portland RO counselors complained about 
        incomplete and poorly performed work. There was an ongoing 
        request for extensions on submitting reports. No reports were 
        received.
          The St. Petersburg RO referred 928 cases. Only 112 
        met quality expectations and 696 had to be reworked.
          The Cleveland RO referred 741 cases. Only five timely 
        reports were received, and 478 did not meet quality 
        expectations. The contractors were not responsive to VR&E 
        contacts to resolve issues.
          The Salt Lake City RO received two timely reports out 
        of 78 referred cases. Less than half met quality expectations. 
        Contractor held the cases for up to 3 weeks at a time prior to 
        starting work on the cases.

      Lack of qualified staff:

          No qualified or approved providers available in 
        Delaware, San Juan, Canada, Guam, and American Samoa.
          The Pittsburgh RO worked with a contractor who was 
        unable to acquire qualified counselors for Veterans in Erie 
        throughout the entire base period.
          The Buffalo RO reported five out of seven contract 
        staff members were unfamiliar with VR&E services.
          One subcontractor covered the entire State of Utah 
        and Eastern Idaho and was not properly staffed to respond to 
        the referrals made under the contract.

    Question 5: You mention in your testimony that prime contractors 
did not deliver services in a timely fashion. According to some of the 
contractors, this is because of the varied requirements each regional 
office had and due to contracting officers requiring information and 
forms that prime contractors did not know were required. Can you 
explain what happened?

    Response: The NAS contracts were standardized in order to ensure 
that services provided in each regional office were delivered and 
administered in a consistent manner. In order to facilitate effective 
working relationships between new contractors and VR&E staff, and in 
order to provide consistent training to both contractors and VR&E staff 
regarding the contract and standardized expectations, a 1-week pre-
performance training session was held. All VA contracting officers' 
technical representatives (COTR), contract specialists, and prime 
contractors were invited to Baltimore in August 2009 for this training, 
which included specific training on each service group, deliverables, 
resources, and performance expectations. All prime contractors sent 
representatives to the training. Contractors received information on 
reporting requirements, and a Web site for access to all forms in the 
contract. In addition, training was provided to explain performance 
expectations, contract incentives for exceeding performance 
expectations, rights of the VA for non- or poor-performance, and rights 
of contractors to bring any issues of concern to the contracting 
officer (CO) for resolution. The CO attended the training to respond to 
contractor and VR&E staff questions and provided a ``kick-off'' session 
to provide an overview of the roles and responsibilities of the 
contractors, COTRs and the CO.
    Because individual Veterans' needs vary and each rehabilitation 
plan is tailored to those needs, services differ somewhat from Veteran 
to Veteran. The performance-based contract provided for contractors to 
use their expertise in providing individualized services while working 
collaboratively with the involved VR&E office to ensure consistency 
with VA regulations and policy and with contract specifications. In 
providing oversight to field offices through VA's site visit program, 
quality assurance process, and through routine oversight of field 
contracting activities, VR&E found that VR&E offices were compliant 
with contract specifications. In addition, routine calls were held with 
field offices to address questions and concerns and provide any 
training or clarification needed to ensure consistent administration of 
contracts.

    Question 6: When were the contractors informed about the settlement 
not to exercise any of the 1-year renewal options?

    Response: Contractors were notified by certified mail and e-mail on 
June 11, 2009, of VA's decision not to exercise the option to renew the 
VR&E NAS contract.

    Question 7: What areas did the National Acquisition Strategy work 
well and what areas did the National Acquisition Strategy not work 
well?

    Response: The NAS contract was developed collaboratively by VR&E 
OALC; and OGC. The integrated project team leveraged members' expertise 
to evaluate programmatic needs, market conditions, and methods to gain 
efficiencies in the contracting process while focusing on developing a 
strategy that would best serve Veterans. The strategy worked well in 
the following areas:

          Development of a national performance work statement 
        to include a full scope of VR&E requirements, freeing local 
        offices from the burden of developing local contracts and 
        ensuring a more standardized approach to contracting.
          The national oversight of local contract 
        implementation that allowed for direct interaction between 
        local RO and prime contractor staff in the execution of local 
        services.
          A pre-proposal conference and use of Webinar 
        technology that increased the number of participants.
          Use of contract review and contract administration 
        boards. Both boards provide quality assurance in the pre- and 
        post-award areas helping to resolve concerns in a proactive 
        manner.
          The national training approach provided pre-
        implementation training to VA and prime contract staff and 
        provided on-going implementation oversight of field offices.
          Use of an integrated project team that enabled all 
        stakeholders to participate in designing the best product while 
        streamlining the acquisition process and eliminating piecemeal 
        reviews.

    The integrated project team used the best information available to 
craft a strategy that would reduce the number of total contracts, 
target small business, and assist vendors to partner and subcontract. 
In this process, OSDBU provided training to potential bidders to assist 
them in developing joint ventures and subcontracting relationships. 
Despite the market research and training, small companies were not able 
to successfully expand their businesses. In addition, pricing variances 
and confusion about pricing by vendors presented challenges. Challenges 
occurred in the following areas:

          The approach did not leverage the familiarity of 
        small local rehabilitation providers with local labor market 
        and community resources.
          The approach required small vendors to partner or 
        develop subcontracting relationships. Some vendors 
        overestimated their capacity to successfully partner with other 
        companies and were not able to deliver services in accordance 
        with contract requirements.
          Some contractors interpreted unit pricing in 
        accordance with past experience instead of contract 
        specifications, resulting in inappropriate pricing. VA pricing 
        evaluations neither adequately controlled for pricing variation 
        nor evaluated contractors' professional compensation plans.
          Awarding a single contract in multiple jurisdictions 
        resulted in lack of alternate coverage when certain contractors 
        failed to provide timely or quality services.

    Question 8: Why was there a delay in assigning cases in some 
states?

    Response: VA was delayed in its ability to order services according 
to our needs due to inadequately staffed prime contractors. However, 
once contractors were able to stand up all or part of their operations, 
VA was not under any obligation to order services except in accordance 
with VA needs. The NAS contracts were indefinite delivery/indefinite 
quantity contracts, requiring VA to contract for services only when 
needed. The only guarantees made regarding when and how many cases 
would be referred were contract minimums, which could be ordered at any 
time during the base year. VA ordered at least the quantity of services 
designated in the schedule as the ``minimum.'' When ordered, the 
contractor was required to furnish services specified in the schedule 
up to and including the quantity designated as the ``maximum.''

    Question 9: You state that the VA attempted to resolve issues with 
vendors. Are you confident all VA employees made a good faith effort to 
work out the problems?

    Response: VA is confident that offices worked diligently to resolve 
issues related to the NAS contracts and that procedures were in place 
for contractors to obtain assistance if they perceived an office was 
not working effectively. Routine weekly or bi-weekly calls took place 
with VR&E staff around the nation, and numerous calls were made from 
individual VR&E offices to discuss strategies for working effectively 
with NAS. If a specific contractor had difficulty working effectively 
with any VR&E staff member or office, VR&E worked with the involved 
office to address the issue of concern, and, as necessary, coordinated 
with the CO to provide assistance to the contractor. In addition, VR&E 
held weekly contract administration board meetings with the OALC CO and 
OGC. The purpose of these meetings was to elevate issues of concern to 
the CO for assistance in working with the contractor to resolve 
questions or concerns and to obtain legal or contract guidance for 
field staff working directly with contractors. To strengthen this 
process for future contracts, VR&E has collaborated with OALC and OGC 
to develop a governance board that oversees and provides guidance in 
resolving contract issues throughout the contract life cycle. In 
addition, OALC has determined that field contract specialists will be 
delegated some CO responsibilities in order to proactively resolve 
concerns or performance issues.

    Question 10: You recently had eight contractors. How many do you 
expect to have under the new contract?

    Response: VA cannot predict the exact number of contractors. If a 
vendor has adequate staff, professional office space, an appropriate 
compensation plan, and professional relationships with subcontractors, 
then a vendor may be awarded contracts in more than one jurisdiction.

    Question 11: You will be using local procurement in the new 
contract. Why is that the better way to go?

    Response: Local procurement will be used for services at the local 
level during the interim period while the new national contract is 
being developed and awarded. The local procurement package mirrors the 
national procurement. Local contracts will allow VA to gain experience 
with the revised contract. This experience will ensure that new 
national contracts are clear and adequately meet the needs of local 
VR&E offices and provide timely and quality services to Veterans. New 
national contracts will be procured by the national OALC acquisition 
team and will be administered from the national level by a centralized 
CO. Based on lessons learned from the NAS contracts, local contract 
specialists will be provided limited authority to deal with emerging 
performance issues. In addition, local COTRs will provide subject 
matter expertise and work with contractors as they provide direct 
community-based services. To ensure consistency, overall oversight of 
the contract will continue to be provided nationally by the CO, with 
technical oversight provided by VR&E. A governance board will be 
implemented post award to allow VR&E to continue to benefit from the 
expertise and guidance of OALC and OGC staff to resolve legal and 
contracting issues in a proactive manner.

    Question 12: Can the recent eight contractors compete again for the 
local contracts?

    Response: Yes, all vendors may compete for local contracts. No 
performance actions were taken prohibiting their competition. All 
vendor proposals will be evaluated based on technical capability, 
appropriateness of prices, and past performance.

                               __________
                               ATTACHMENT
                     VOCATIONAL REHABILITATION AND
                   EMPLOYMENT QUALITY ASSURANCE PLAN

    I. Purpose. The quality assurance plan (QAP) establishes the 
principles, procedures, and criteria for quality assurance (QA) of the 
Vocational Rehabilitation and Employment (VR&E) services administered 
by VR&E contractors through field station staff.

    a.  Quality validation will begin after contractor has performed 
services under the contract for a 60-day period. The baseline will be 
updated on a monthly basis.
    b.  Rating Issues, Quality Criteria, And Scoring--
    c.  Rating issues and quality criteria are contained in the 
attached QAP (attachment 2). Each criterion contains several factors. 
VR&E staff reviewers will assign a rating score of Yes or No for each 
criterion. A rating of Yes on a criterion indicates that all 
appropriate issues, are, by definition, rated Yes. For every 
unacceptable performance (No) in a criterion, the reviewer will provide 
a narrative comment on the unacceptable performance and the steps the 
Contractor must take to resolve the problem. The rating scores are 
based on the following standards:
    d.  Rating Score Yes. The score of Yes means all actions and 
decisions meet each of the following:
         1.  The intent of law;
         2.  Established National VR&E policy; and
         3.  Generally accepted professional standards recognized by 
        professional rehabilitation counseling licensing boards or 
        authorities.
         4.  The requirements of this contract.
    e.  Rating Score No. A score of No means the actions and decisions 
did not meet all the requirements for a Yes score under subparagraph 
3.1.b.
II. Contracting Officer's Technical Representative (COTR) 
        Responsibilities
    a.  The Veterans Benefits Administration (VBA) will assign a VBA 
liason (on the national level) for the overall project. This person 
will assist the contracting officer (CO) in administering the contract 
within the limits of their delegation.
    b.  The local VR&E officer will submit a list of COTR's for that 
particular site to the CO, who will officially delegate the COTR 
writing. The COTR is responsible for contract monitoring, conducting 
quality assurance reviews, and serves as the primary point of contact 
for the contractor. He/she reports directly to the CO on issues related 
to the contract. The COTR or his/her designee is responsible for the 
certification and payment of invoices from the contractor. Finally, the 
COTR will perform all other duties specifically defined in this 
contract.
    c.   Quality Sources. The COTR may obtain information on the 
quality of work of the contractor through regular site visits, periodic 
spot checks, and other sources. COTR's may not rely solely on formal 
case reviews or interviews with the Veteran. Other readily available 
sources of information are; reviews of audio or video taped counseling, 
evaluation sessions, and site visits; congressional correspondence 
reviews; complaint and compliment mail or other communications from 
Veterans; and service organizations inquiries or contacts from other 
VR&E staff. The CO is the only individual authorized to make changes to 
the contract.
III. Case Selection for Quality Assurance
    a.  Types of Cases. The Department of Veterans Affairs (VA) will 
perform quality assurance reviews on cases referred under this contract 
as part of its ongoing review of quality program. The criteria for the 
ratings are contained in attachment 2, the Review of Quality Manual 
(ROQ).
    b.  Sampling Procedures. Under the VR&E review of quality process, 
cases are randomly selected each month. Ratings of each case selected 
for that review will also consider any services provided under this 
contract. Copies of the review sheets for services provided under this 
contract will be maintained in the contractor's file.
    c.   Identification of Problem Areas. If QA reviews reveal a 
problem area that warrants a more detailed examination, the COTR will 
initiate a systematic analysis of operations (SAO) appropriate to the 
issue. SAO requires a close examination and analysis of each program 
action under review and is a vital element in the VR&E QA system. The 
SAO is a systematic examination of a process or operation conducted by 
the; its purpose is to identify problem areas, and take corrective 
action. This process was designed to assure efficiency and 
effectiveness in an activity.
    d.  Review Results. If the contractor does not agree with the 
casework review, a written request for clarification may be filed with 
the COTR. If the contractor disagrees with the decision of the COTR the 
issue will be addressed in accordance with the ``Disputes Clause'' 
located in section IV, Item 2(d) (Contract Clauses, Terms & Conditions) 
of this document.
   ATTACHMENT D-IIIa QUALITY ASSURANCE SURVEILLANCE PLAN ASSESSMENT/
                            EVALUATION CHART

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                 Service Group A--Initial Assessment/Evaluation
----------------------------------------------------------------------------------------------------------------
             Performance                     Performance               Method Of                Incentive
              Standards                         Target                Surveillance
----------------------------------------------------------------------------------------------------------------
The complete assessment in a written   The performance target   Electronic mail date
 report shall be delivered to the       t for Initial            stamp by the receiving
 referring VR&E Officer within 30       Assessment/Evaluation    official
 calendar days after receipt of the     is for the contractor
 referral package by VA as identified   to submit complete
 in section IV Performance              assessment within 12
 Requirements--Service Group A of the   days after receipt of
 PWS.                                   referral and no
                                        revisions are required

                                                                                         10% of the cost of the
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                        Service Group B--Case Management
----------------------------------------------------------------------------------------------------------------
             Performance                     Performance               Method Of                Incentive
              Standards                         Target                Surveillance
----------------------------------------------------------------------------------------------------------------
Within thirty (30) calendar days       The performance target   Counselor review of
 after receipt of the referral for      for Case Management is   files
 case management services, the          for contractor to
 Contractor shall conduct the initial   conduct the initial
 orientation meeting with the           orientation meeting
 individual veteran as identified in    with the veteran
 Section IV Performance Requirements--  within 12 days after
 Service Group B of the PWS.            receipt of referral.
                                                                                         10% of the cost of the
----------------------------------------------------------------------------------------------------------------
                                      Service Group C--Employment Services
----------------------------------------------------------------------------------------------------------------
             Performance                     Performance               Method Of                Incentive
              Standards                         Target                Surveillance
----------------------------------------------------------------------------------------------------------------
Level I & II Employment Services       The performance target   Counselor review of
Job placement services are performed    t for employment         files
 to meet the goals of the               services is 90% of the
 rehabilitation plan and to conduct     referrals are placed
 placement follow-up services to        into suitable
 assist with a smooth transition into   employment for a
 the job market, and to ensure that     minimum of 60 days and
 the veteran has the best possible      within 150 days from
 chance for continued employment        the date of the
 success consistent with the goals of   referral.
 the rehabilitation plan; and to make
 recommendations to VR&E for the
 supplies and services specifically
 required for the veteran to secure
 and maintain suitable employment as
 identified in section IV.
 Performance Requirements--Service
 Group C of the PWS

                                                                                         Additional 10% of the
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------
                                 Service Group C--Employment Services--Continued
----------------------------------------------------------------------------------------------------------------
             Performance                     Performance               Method Of                Incentive
              Standards                         Target                Surveillance
----------------------------------------------------------------------------------------------------------------
Level III Employment Services--Job     The performance target   Counselor review of
 placement services are performed to    for employment           files
 meet the goals of the rehabilitation   services is 90% of the
 plan and to conduct placement follow-  referrals are placed
 up services to assist with a smooth    in suitable employment
 transition into the job market, and    for a minimum of 60
 to ensure that the veteran has the     days and within 210
 best possible chance for continued     days from the date of
 employment success consistent with     the referral.
 the goals of the rehabilitation
 plan; and to make recommendations to
 VR&E for the supplies and services
 specifically required for the
 veteran to secure and maintain
 suitable employment as identified in
 section IV. Performance
 Requirements--Service Group C of the
 PWS

                                                                                         Additional 10% of the
----------------------------------------------------------------------------------------------------------------
                             Service Group D--Educational and Vocational Counseling
----------------------------------------------------------------------------------------------------------------
             Performance                     Performance               Method Of                Incentive
              Standards                         Target                Surveillance
----------------------------------------------------------------------------------------------------------------
The educational and vocational         The performance target   Electronic mail date
 counseling assessment shall be         for Educational and      stamp by receiving
 delivered to the referring VR&E        Vocational Counseling    official
 Officer within 30 calendar days        is for contractor to
 after receipt of the educational and   submit assessment
 vocational counseling referral         within 12 days after
 package by VA as identified in         receipt of referral
 section IV. Performance                and no revisions are
 Requirements--Service Group D of the   required
 PWS

                                                                                         10% of the cost of the
----------------------------------------------------------------------------------------------------------------

                                 
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