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



 
                  U.S. DEPARTMENT OF VETERANS AFFAIRS'

                     CENTER FOR VETERANS ENTERPRISE

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


                                HEARING

                               before the

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                                 of the

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

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 11, 2010

                               __________

                           Serial No. 111-67

                               __________

       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

                               __________

                             March 11, 2010

                                                                   Page
U.S. Department of Veterans Affairs' Center for Veterans 
  Enterprise.....................................................     1

                           OPENING STATEMENTS

Chairwoman Stephanie Herseth Sandlin.............................     1
    Prepared statement of Chairwoman Herseth Sandlin.............    27
Hon. John Boozman, Ranking Republican Member.....................     2
    Prepared statement of Congressman Boozman....................    27

                               WITNESSES

U.S. Department of Veterans Affairs, Tim J. Foreman, Executive 
  Director, Office of Small and Disadvantaged Business 
  Utilization....................................................    17
    Prepared statement of Mr. Foreman............................    37

                                 ______

American Legion, Joseph C. Sharpe, Jr., Director, National 
  Economic Commission............................................     8
    Prepared statement of Mr. Sharpe.............................    33
American Veterans (AMVETS), Christina M. Roof, National Deputy 
  Legislative Director...........................................     9
    Prepared statement of Ms. Roof...............................    35
National Veteran-Owned Business Association, Scott Denniston, 
  Director of Programs...........................................     3
    Prepared statement of Mr. Denniston..........................    28
Paralyzed Veterans of America, Richard Daley, Associate 
  Legislation Director...........................................     5
    Prepared statement of Mr. Daley..............................    30
Vietnam Veterans of America, Richard F. Weidman, Executive 
  Director for Policy and Government Affairs.....................     6
    Prepared statement of Mr. Weidman............................    31

                       SUBMISSION FOR THE RECORD

International Franchise Association, David French, Vice 
  President, Government Relations, letter........................    40

                   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 
      Scott Denniston, Director of Programs, National Veteran-
      Owned Business Association, letter dated March 22, 2010, 
      and Mr. Denniston's responses..............................    42
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Joseph C. Sharpe, Jr., Director, National Economic 
      Commission, American Legion, and response letter dated June 
      1, 2010....................................................    43
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Christina Roof, National Deputy Legislative Director, 
      AMVETS, letter dated March 22, 2010, and Ms. Roof's 
      responses..................................................    45
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunities, Committee on Veterans' Affairs, to 
      Tim J. Foreman, Executive Director, Office of Small and 
      Disadvantaged Business Utilization, U.S. Department of 
      Veterans Affairs, letter dated March 22, 2010, and VA 
      responses..................................................    48
    Hon. George J. Opfer, Inspector General, Office of Inspector 
      General, U.S. Department of Veterans Affairs, to Hon. 
      Stephanie Herseth, Chairwoman, Subcommittee on Economic 
      Opportunity, Committee on Veterans' Affairs, letter dated 
      April 8, 2010..............................................    54


  U.S. DEPARTMENT OF VETERANS AFFAIRS' CENTER FOR VETERANS ENTERPRISE

                              ----------                              


                        THURSDAY, MARCH 11, 2010

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                      Subcommittee on Economic Opportunity,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 1:47 p.m., in 
Room 334, Cannon House Office Building, Hon. Stephanie Herseth 
Sandlin [Chairwoman of the Subcommittee] presiding.
    Present: Representatives Herseth Sandlin, Adler, and 
Boozman.

        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 the U.S. Department of Veterans 
Affairs' (VA) Center for Veterans Enterprise (CVE) will come to 
order.
    I appreciate our panelists' patience in starting the 
hearing late because of a series of votes. Thank you for your 
patience.
    I now ask unanimous consent that all Members have 5 
legislative days to revise and extend their remarks and that 
written statements be made part of the record. Hearing no 
objection, so ordered.
    Today's hearing will provide veterans service organizations 
(VSOs) the opportunity to highlight issues of concern regarding 
responsibilities that fall under the Center for Veterans 
Enterprise.
    Furthermore, today's hearing will afford the recently 
appointed Executive Director of the Office of Small and 
Disadvantaged Business Utilization (OSDBU) with the opportunity 
to hear from the veterans' community and provide the 
Subcommittee an update on matters relating to the Center for 
Veterans Enterprise.
    As many of our witnesses will testify, small businesses are 
an essential component to a strong economy. This Subcommittee 
has held several hearings on the challenges faced by our 
Nation's veterans seeking to start and develop a small 
business.
    We have also heard from many members of the National Guard 
and Reserve components who find it challenging to maintain 
their small businesses when called to active duty.
    I want to assure our panelists that this Subcommittee will 
continue to work to remove barriers that prevent veterans from 
accessing services that may help them succeed in their small 
business ventures.
    Furthermore, I welcome the Department of Veterans Affairs 
incoming Executive Director who will oversee the Center for 
Veterans Enterprise. I look forward to hearing more about how 
Mr. Foreman's leadership will enforce current laws and meet the 
needs of veteran-owned small businesses in a challenging 
economy.
    I now recognize our distinguished Ranking Member, Mr. 
Boozman, for any opening remarks he may have.
    [The prepared statement of Chairwoman Herseth Sandlin 
appears on p. 27.]

                 STATEMENT OF HON. JOHN BOOZMAN

    Mr. Boozman. Thank you very much, Madam Chair.
    You and I first worked on creating additional tools for VA 
to meet and exceed the contracting goals for disabled veteran-
owned small businesses in the 109th Congress. The result of our 
efforts culminated in Sections 502 and 503 of Public Law 109-
461. I believe it is fair to say the passage of that law was 
greeted very favorably by veteran small business owners.
    Unfortunately, we have a situation where VA appears to be 
dragging its feet in implementing at least one of the very 
important provisions of that law and that is establishing a 
database of veteran and disabled veteran-owned small businesses 
whose status as a veteran-owned small business has been 
verified by the VA.
    In other words, the only companies that should be viewed by 
someone searching the database are those which have been vetted 
by VA. Unfortunately, that is not the case.
    [Slide]
    Mr. Boozman. As you can see on the monitors, we are really 
high tech today, we have accessed the VA's vendor information 
pages database of veteran-owned businesses.
    Although the law clearly limits the businesses listed in 
the database to those whose veteran-owned status has been 
validated by VA, the monitor clearly shows businesses that have 
not been validated.
    VA staff have pointed out that the little wreath logo notes 
a VA certified veteran-owned small business (VOSB). I do not 
know about you, but it does appear that it is hard to view that 
as satisfactory to separate the verified from the unverified.
    First of all, there is no legend that identifies the symbol 
as meaning the company has been verified. For example, on the 
screen shown here, seven of the ten businesses listed have not 
been verified. Additionally, it appears the database is also 
searchable for other set-aside groups such as HUBZone or 8(a).
    The intent of creating the database was to provide VA 
contracting officers and other Federal agencies seeking to 
contract with real veteran-owned businesses a source that could 
be trusted. Whether a business self-certifies it is veteran 
owned while VA is doing its homework on the business, it should 
not be listed.
    Finally, as I said, Madam Chair, we started working on this 
in 2006 and it is now over 3 years since passage of Public Law 
109-461. Literally it is taking years to comply with what the 
Congress and the President has told VA what to do.
    VA has presented Congress with four budgets since these 
provisions became law and, to my knowledge, not one of those 
budgets requested any additional resources to comply with the 
law.
    As a result, as the U.S. Government Accountability Office 
(GAO) has reported extensively, companies falsely representing 
themselves as veteran and disabled veteran-owned have stolen 
millions of dollars in contracts from real veteran-owned small 
businesses.
    I believe if VA had implemented the law expeditiously in 
accordance with the Congressional intent, those millions in 
taxpayer dollars would be in the coffers of real veteran-owned 
businesses.
    The icing on the cake is that some of the businesses 
identified as fraudulent are still doing business with VA 
despite the Secretary's authority to debar them.
    Finally, Madam Chair, I ask unanimous consent to have a 
submission by the International Franchise Association made part 
of the record.
    With that, I yield back the balance of my time. Thank you.
    [The prepared statement of Congressman Boozman appears on
p. 27. The letter from the International Franchise Association 
is included in the submissions for the record, which appear on 
p. 40.]
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    The document you referred to will be entered into the 
record as requested.
    I would ask any other Members if they have opening 
statements to submit them for the record.
    I thank Mr. Boozman for his opening remarks.
    I want to welcome our panelists testifying before the 
Subcommittee today.
    Joining us on our first panel is Mr. Scott Denniston, 
Director of Programs for the National Veteran-Owned Business 
Association (NaVOBA); Mr. Richard Daley, Associate Legislation 
Director for the Paralyzed Veterans of America (PVA); Mr. Rick 
Weidman, Executive Director for Policy and Government Affairs 
for the Vietnam Veterans of America (VVA); Mr. Joseph Sharpe, 
Director of the National Economic Commission for the American 
Legion; and Ms. Christina Roof, National Deputy Legislative 
Director for AMVETS.
    I welcome you all back to the Subcommittee.
    Mr. Denniston, we will start with you. You are recognized 
for 5 minutes.

 STATEMENTS OF SCOTT DENNISTON, DIRECTOR OF PROGRAMS, NATIONAL 
 VETERAN-OWNED BUSINESS ASSOCIATION; RICHARD DALEY, ASSOCIATE 
LEGISLATION DIRECTOR, PARALYZED VETERANS OF AMERICA; RICHARD F. 
WEIDMAN, EXECUTIVE DIRECTOR FOR POLICY AND GOVERNMENT AFFAIRS, 
 VIETNAM VETERANS OF AMERICA; JOSEPH C. SHARPE, JR., DIRECTOR, 
NATIONAL ECONOMIC COMMISSION, AMERICAN LEGION; AND CHRISTINA M. 
 ROOF, NATIONAL DEPUTY LEGISLATIVE DIRECTOR, AMERICAN VETERANS 
                            (AMVETS)

                  STATEMENT OF SCOTT DENNISTON

    Mr. Denniston. Thank you.
    Madam Chair, Ranking Member Boozman, Mr. Adler, good 
afternoon. Thank you for the opportunity to testify today on 
the Department of Veterans Affairs' Center for Veterans 
Enterprise.
    As you know, I am Scott Denniston, President of the Scott 
Group of Virginia representing one of my clients, the National 
Veteran-Owned Business Association, and its over 2,000 veteran 
small business owners across the country.
    I would ask that my formal testimony be submitted for the 
record.
    Your letter of invitation asked me to discuss CVE's 
practices, priorities, effectiveness, including VA's 
implementation of Public Law 109-461, especially the 
Department's progress in implementing the database required by 
the law as well as its methods to improve veteran-owned small 
businesses.
    In the interest of full disclosure, I must tell you that I 
had the pleasure of establishing the Center for Veterans 
Enterprise after the passage of 106-50 while the Director of 
Small Business Programs at VA.
    In my entire 38-year career with the Federal Government, I 
have never worked with a more knowledgeable, dedicated, and 
passionate group of people. The CVE is one of the most 
entrepreneurial organizations in government.
    Unfortunately, the CVE has become a victim of its own 
success and I would suggest the Veteran Entrepreneurship 
Program has not been embraced by VA from an institutional 
perspective.
    There is no doubt that VA has led the government in meeting 
the three-percent goal and should be commended for that. Much 
of VA's success, I believe, is due to the work of the Center 
for Veterans Enterprise.
    Unfortunately, as the role of CVE has expanded due to the 
demands of Public Law 109-461, the requisite resources and 
contractor support necessary to effectively carry out the 
mandates have not been forthcoming.
    CVE is funded from an internal revolving fund called the VA 
Supply Fund. The Supply Fund is controlled by a Board of 
Directors. Over 18 months ago, this group approved a 
significant expansion of the resources dedicated to CVE, but, 
unfortunately, these resources have never been forthcoming.
    Likewise, contractor support to address the verification 
process took over a year to get under contract. We believe it 
is time that the CVE became a line item in the VA budget to 
ensure appropriate resources are justified and forthcoming.
    NaVOBA differs with what we understand is the position of 
this Committee that the CVE database should only include 
verified firms. The database was established to support all 
Federal agencies and prime contractors in identifying service-
disabled vets and veteran-owned small businesses to assist them 
in achieving the three-percent goal mandated by Public Law 106-
50.
    The verification process required by P.L. 109-461 only 
applies to VA. CVE identifies in the Vendor Information Page 
(VIP) database those firms who have, in fact, been verified. If 
only verified firms appeared in the database, the number of 
firms available to government prime contractors would shrink 
from over 15,000 to around 2,500 firms. This would 
substantially hurt the government-wide service-disabled vet 
program in our opinion.
    We understand and share this Committee's concern about 
fraud, waste, and abuse in the program as identified in the 
recent GAO report and believe strongly the verification 
requirement for service-disabled veteran-owned businesses 
(SDVOBs) should be made government-wide.
    NaVOBA shares the concerns of others in the veteran small 
business community that the VA verification process is 
burdensome, overbearing, and so untimely as to cause serious 
financial strain on many service-disabled vets.
    Some of our members share stories and frustrations of the 
process taking over 6 months to complete with the veteran 
applicant never being told where his or her application is in 
the process. CVE must do a better job communicating with 
veterans.
    We understand there is some discussion at Congress of 
moving the service-disabled vet verification program to the 
Small Business Administration (SBA). NaVOBA is staunchly 
opposed to this move. Only VA can verify if an individual is a 
veteran or has a service-connected disability.
    SBA has consistently over the years been criticized by GAO 
for their administration of the 8(a) small disadvantaged 
business and HUBZone programs. Significant resources have been 
expended by VA to establish the verification program. We would 
rather work with VA to refine and improve the current process 
rather than start over at an agency with a history of 
questionable program administration.
    Our position is contingent upon VA providing CVE with 
adequate resources to administer the verification program.
    I would like my testimony to in total be submitted for the 
record because we talk about some of the interpretation issues 
within the draft rule for P.L. 109-461 that we do not agree 
with.
    But in summary, NaVOBA supports CVE, but strongly believes 
that VA must provide adequate resources commiserate with CVE's 
expanded mission, including verification in the database.
    VA must reconsider its overly restrictive interpretation 
and administration of Public Law 109-461. We also believe VA 
must be more sensitive to the needs and concerns of the veteran 
small business community.
    NaVOBA stands ready to be a partner with VA to achieve the 
intent of P.L. 109-461.
    Again, I would like to thank the Committee for holding this 
important hearing and would be happy to answer any questions.
    [The prepared statement of Mr. Denniston appears on p. 28.]
    Ms. Herseth Sandlin. Thank you, Mr. Denniston.
    Mr. Daley, you are recognized now for 5 minutes.

                   STATEMENT OF RICHARD DALEY

    Mr. Daley. Chairwoman Herseth Sandlin, Ranking Member 
Boozman, I would like to thank you for allowing PVA to testify 
today on this important issue.
    As we know, unemployment among veterans is higher than it 
is with the general population. Unemployment among disabled 
veterans is even higher. Among PVA members and veterans with 
spinal cord injury, it is about 85 percent unemployment.
    But we know that as veterans go out to start a business or 
they purchase a business and would like to do business with the 
Federal Government, when they have to increase their payroll, 
the first thing they hire is other veterans and we know that. 
So we are supporting the efforts of veteran-owned small 
businesses.
    With the current emphasis on employment for veterans coming 
from the President and directed down to the many agencies of 
the Federal Government, we hope that this message is resonating 
among the many dedicated professionals that oversee and award 
contracts that are available to the small veteran-owned 
businesses.
    To better serve the veteran-owned businesses and the 
service-disabled veteran-owned business, the Center for 
Veterans Enterprise was created. As we discuss the Center for 
Veterans Enterprise today, I would like to share with the 
Subcommittee two predominant issues that I have heard over and 
over again from veterans who would like to contract business 
with the VA and other agencies.
    As you will hear today, there are several issues with CVE, 
but two that I want to speak of are the verification process 
and a ruling that a veteran can only own one business if they 
plan to do business with the Department of Veterans Affairs.
    The verification process, as you will hear today, is facing 
a 12-month backlog. More effort and oversight has to be put 
into this program if it is going to be successful and we are 
going to get the veterans' businesses verified on time.
    The policy of owning only one business should be 
eliminated. One veteran business owner told me that his wife 
has sold Avon products for many years. Because his name is on 
their bank accounts as the primary supporter of the family, he 
is eliminated from doing business with the VA, because he owns 
two businesses. This does not make sense to me.
    The witnesses you have speaking today will help inform you 
on the shortfalls and successes of the CVE. PVA is thankful 
that you are taking this time to oversee and perhaps make some 
needed adjustments in this program
    Thank you for this opportunity to testify. I would be happy 
to answer any questions you may have.
    [The prepared statement of Mr. Daley appears on p. 30.]
    Ms. Herseth Sandlin. Thank you, Mr. Daley.
    Mr. Weidman, you are recognized.

                STATEMENT OF RICHARD F. WEIDMAN

    Mr. Weidman. Madam Chairwoman, Mr. Boozman, thank you very 
much for the opportunity to appear here today.
    The only thing worse than ignoring the needs of service-
disabled veterans is giving them a promise and a pledge that is 
not fulfilled.
    Public Law 106-50 was passed specifically to give people 
the opportunity to earn a piece of the American dream. Also 
passed because we know that veterans and service-disabled 
veterans if they get into business with assistance from the 
feds will turn around and hire other veterans and service-
disabled veterans as well as demobilized Guard and Reservists 
much more likely than the average employer.
    So it is to help solve the employment problem of veterans 
across the country as well as giving people the opportunity to 
become entrepreneurs.
    The Center for Veterans Enterprise was actually not 
mandated by Public Law 106-50, but was consonant with the 
intent of that law and established by then Secretary Tony 
Principi. And it was a move that we in the veterans' community 
applauded at the time.
    The original intent of CVE was to assist individual 
entrepreneurs, veteran entrepreneurs, and would-be 
entrepreneurs, and to serve as a clearinghouse to encourage, to 
help, to assist. And somehow within the last 15 months from the 
retirement at the end of 2008 of the previous Director of the 
Office of Small Business until now, somehow the Center for 
Veterans Enterprise became transmogrified into an entity that 
was not friendly to the average vet, that was not a forthcoming 
agency to help people find a way to get the organizational 
capacity developed to the point where they could get contracts 
and successfully perform those contracts with the Federal 
Government.
    I would associate myself with the remarks of the two 
previous speakers, and I suspect those two who will follow me, 
that we need to eliminate the requirement that you only have 
one business. It is not realistic. There are many reasons why 
people would organize their overall endeavor into more than one 
corporation.
    In fact, all of the veterans' organizations sitting here 
before you today have more than one corporation. We are 
organized primarily as a 501(c)(19), but we also have a 
501(c)(3). In VVA's case, we have three 501(c)(3)s for tax 
reasons and because money is not necessarily interchangeable. 
And many of the veterans' organizations also have a 501(c)(4), 
particularly the Veterans of Foreign Wars.
    Does that mean that the elected Commander or President is 
not in control of the entire entity? No, it does not. Do they 
have to be on the premises? That is just silly in the 
electronic age that you have to be there sitting on a stool 
behind the cash register to think that somebody is owning and 
effectively controlling a business.
    So that needs to be struck immediately in our view. It is 
incidentally not mentioned anywhere in P.L. 109-461 nor in P.L. 
108-187 nor in P.L. 106-50 nor in Executive Order 13-360. So 
that is one.
    Two is what we would suggest as a solution is that have a 
two-step process in the verification. Number one can be set up 
to happen literally automatically and can happen and we can 
eliminate the backlog.
    Before you can be listed in the VIP, the VA run that 
person's name against the databases of all disabled service-
connected veterans and of all veterans. Now that we have 
interchange between the U.S. Department of Defense (DoD) and 
VA, you can find out quickly if this person is a veteran and 
they are claiming VOB and if they are a service-connected 
disabled veteran, you can find that out by doing a simple 
query. So that would be automatic for any business to be 
listed.
    Frankly, where we hope that the VIP will go and where the 
statute will go in the future is that the ownership and 
control, which would be the next step, which also does not take 
as long as it has been taking, if you need to contract out, 
then contract out, but we need to simplify this process so that 
you do not have a thing where you have to wait a year to get 
approved.
    Let me just say something about the GAO report, if I may. 
None of the businesses cited in the GAO report that VA came 
before this Committee and testified the reason why the 
ownership and being on premises full-time occupation was to 
stop the rent-a-vet. It did not stop rent-a-vet.
    VA has not debarred a single one of those contractors who 
were specifically mentioned and at least one of them has gotten 
two major contracts from the VA and a $1.7 million contract 
from the Navy since the GAO report came out.
    It is, as I noted in my statement, akin to your kid gets 
beat up on the way to school and the bums take his lunch money. 
Instead of going after the miscreants and seeing that they are 
identified and properly punished and apply behavior 
modification, we tell the kid he is not careful enough with his 
money and put him through all kinds of rigmarole which is 
exactly what the VA is doing in the CVE.
    Instead of properly punishing, referring to the Office of 
Inspector General (OIG) and our view to the U.S. Attorney for 
those people who deliberately set out to perpetuate stolen 
valor by imitating a service-disabled veteran-owned business, 
they should be arrested, they should be tried, and they should 
be put in jail. It is only going to take one or two and all of 
a sudden, the wannabes will melt away.
    Thank you for your indulgence. I know I am over time. And 
thank you for your leadership in having this hearing, Madam 
Chairwoman.
    [The prepared statement of Mr. Weidman appears on p. 31.]
    Ms. Herseth Sandlin. Thank you, Mr. Weidman.
    Mr. Sharpe, you are now recognized for 5 minutes.

               STATEMENT OF JOSEPH C. SHARPE, JR.

    Mr. Sharpe. Madam Chair, Ranking Member Boozman, and 
Members of the Subcommittee, thank you for the opportunity to 
present the American Legion's views on the Department of 
Veterans Affairs' Center of Veterans Enterprise.
    The American Legion is an ardent supporter providing 
assistance to veterans and their families. The Center for 
Veterans Enterprise has been founded to assist those very same 
veterans with business and entrepreneur assistance in starting 
their own business and providing them with access to government 
contracts.
    The American Legion believes that assistance such as this 
needs to be thorough, comprehensive so that veterans can move 
forward with their business and become a success in the 
workforce.
    The Center for Veterans Enterprise is there to assist them, 
but a few members of the American Legion Small Business Task 
Force have made a few observations of the program such as a 
lack of comprehensive technical assistance, a Web site that is 
not user friendly, long waits to register with the VA, and not 
being able to register more than one business at a time.
    The Center for Veterans Enterprise also has the 
responsibility of the implementation of Public Law 109-461 
while also supporting veteran business owners. However, the 
office empowered to oversee the program remains critically 
ineffective, understaffed, underfunded, and marginalized 
despite laws championed by this very Committee to further 
empower veterans' entrepreneurship programs.
    Furthermore, the vetbiz.gov Web site is not easily 
navigated and needs to become a more user friendly Web site. In 
addition, CVE only operates one office in Washington, DC, and 
does not cover the needs of all veteran-owned small businesses 
around the country.
    Government employees fielding phone calls about business is 
not an ideal way of conducting training and market research for 
veterans and their small businesses.
    VA and SBA should develop a comprehensive partnership to 
assist veterans who are interested in participating in Federal 
procurement with each Department utilizing their own resources 
to ensure proper implementation.
    Madam Chair and Ranking Member Boozman, this concludes my 
portion of the testimony, and I am happy to answer any 
questions you may have.
    [The prepared statement of Mr. Sharpe appears on p. 33.]
    Ms. Herseth Sandlin. Thank you, Mr. Sharpe.
    Ms. Roof, you are recognized for 5 minutes.

                 STATEMENT OF CHRISTINA M. ROOF

    Ms. Roof. Thank you.
    Madam Chair, Ranking Member Boozman, and distinguished 
Members of the Subcommittee, on behalf of AMVETS, I would like 
to extend our gratitude in being given the opportunity to share 
with you our views and ideas regarding the U.S. Department of 
Veterans Affairs' Center for Veterans Enterprise.
    Due to the recent lack of leadership at CVE, AMVETS 
believes that this hearing is a vital first step in ensuring 
the success of CVE.
    As we move through the 21st Century, during a time of war, 
the veteran-owned small business and service-disabled veteran-
owned small business population continues to rise at a rate not 
seen since the end of World War II.
    As America's war fighters transition back into the civilian 
life, many are choosing to pursue lives as entrepreneurs. Given 
the almost 30 percent influx of VOSBs and SDVOSBs, it is vital 
that CVE be ready and able to meet the growing demand for their 
services.
    However, AMVETS does not believe that CVE is serving the 
needs of those veterans it was originally designed to help. Due 
to lack of leadership over the past year, we have seen CVE 
slowly move from the role of assisting veteran-owned businesses 
to that of an information and referral agency for other Federal 
and State agencies.
    AMVETS believes the CVE must be brought back up to par to 
what it was originally tasked to do, assisting our veteran 
population in all aspects of their entrepreneurial endeavors. 
In order to effectively accomplish this, CVE must be properly 
staffed, trained, and funded.
    On February 8, 2010, the Code of Federal Regulations rules 
regarding VOSBs and SDVOSBs were published. The final rule, as 
published, claims that it defines eligibility requirements to 
obtain veteran status, explains the examination process and 
procedure, and finally establishes record retention and review 
process guidelines.
    However, AMVETS, as well as multiple other VSOs and 
military service organizations that we work with, found it to 
be abundantly clear, for lack of a better term, that the newly 
published rules fail to outline or clarify any solid changes or 
steps towards improvements to the SDVOSB verification process. 
The new rule also fails to outline or even touch upon the 
proper verification processes of SDVOSBs that should be used.
    AMVETS is very disappointed at the suggestions coming from 
the people sitting here at this table as well as the VSO 
community have seem to have fallen upon deaf ear. AMVETS 
strongly urges that this Committee and VA reexamine the final 
rules as published.
    Moreover, according to the Federal Register updates, 
SDVOSBs will only be allowed one entity to be registered in the 
Federal contracting system and that the veteran must work at 
the physical location 35 to 40 hours a week to maintain their 
status.
    AMVETS strongly disagrees with the language used in the 
final rules and believes it will undoubtedly stifle the growth 
of veteran-owned businesses due to their concerns or fears of 
not wanting to break any of the rules set forth by this new 
law, or break any of the rules regarding their contract.
    Finally, as a partner in writing the 2011 Independent 
Budget, AMVETS recommended all Federal agencies be required to 
certify their veteran status through VA's VIP Program before 
being awarded contracts.
    Our thought process in making this suggestion was that 
Congress will once and for all require the use and 
implementation of a single-source database accessible to all 
Federal agencies.
    We believe that there are many good programs out there. But 
due to lack of communication between these different programs 
and in our opinion duplication of efforts, our veteran business 
owners are the ones suffering because of this.
    AMVETS strongly believes that the VA must eliminate the 
barriers that veterans face regarding the formation and 
development in their business ventures.
    Madam Chair, this concludes my testimony and I will be 
happy to answer any questions you may have for me.
    [The prepared statement of Ms. Roof appears on p. 35.]
    Ms. Herseth Sandlin. Thank you for your testimony, Ms. 
Roof.
    Actually, something that you had stated forms the basis for 
my first question for the others on the panel as it relates to 
the Center for Veterans Enterprise shifting to an informational 
and referral agency essentially.
    Do any of the other individuals on the panel care to 
comment? Do you agree or disagree with that statement?
    Mr. Weidman. I would agree that it was a place to go 2 
years ago for an individual veteran who needed assistance, 
sometimes intensively working with the individual and sometimes 
referring them to the right person, which is not an 
inconsiderable service.
    But they do not even do that many times anymore because 
everybody is caught up with trying to play policeman as opposed 
to doing the crux of the job, which is to assist service-
connected disabled veterans as well as other veterans to be 
able to find the help they need to get a viable business going.
    Mr. Denniston. The only comment that I would add to that is 
that we knew all along in the Center for Veterans Enterprise 
you could not do business development from Washington, that 
that is a local issue, that you need to know about the local 
bankers and the accountants and the lawyers and that support 
network.
    And our goal always was to develop partnerships with 
organizations like the Small Business Development Centers, the 
Service Corps Of Retired Executives (SCORE) Chapters, the 
Procurement Technical Assistance Center, so that if a veteran 
from anywhere in the country called, we would have someone that 
we could send them to in the local area who knew what the 
economic climate was in that area. And that had always been the 
goal. We never believed that we could provide business 
development from Washington.
    Ms. Herseth Sandlin. Well, as a follow-up then, Mr. 
Denniston, during your tenure, did you emphasize the importance 
of developing those partnerships? Were many of those in place 
in certain metropolitan areas, certain regions of the country 
that have not been maintained as far as you are aware?
    Mr. Denniston. I cannot speak to the maintenance, but we 
did have formal memorandums of understanding (MOUs) with SCORE, 
with the Small Business Development Centers, with the 
Procurement Technical Assistant Centers so that there was a 
very strong recognition of the importance of the growth of the 
Veteran Small Business Program.
    I think what has happened is that CVE has been so 
overwhelmed by the verification program that some of those 
relationships may have waned.
    Ms. Herseth Sandlin. Okay. So back then to you in terms of 
some other questions I have for you, Mr. Denniston, in your 
testimony.
    If CVE becomes overwhelmed by the verification process, and 
I think others have talked in terms about resources and 
training, can you provide us more specifics about what you 
think the requisite resources need to be? What type of 
contractor support does CVE need to be successful? Finally, 
should the Office of CVE be formalized by statute?
    I think someone had testified to the importance of a 
separate line item in the budget, but this is a question for 
any of you.
    Mr. Denniston. I do not know that it needs to necessarily 
be set in statute, the office itself. I do believe that it 
needs a line item for the budget for the reasons that all of us 
on the panel have discussed.
    I think that the issue of resources in the beginning when 
we started the verification process at CVE, we knew that the 
initial challenge was going to be to take care of that first 
bubble of applicants. At that time, I think we had 12,000 
people in the database. And we always felt that we needed 
contractor support for that to help with the administration of 
the applicants themselves to do some of the site visits that we 
had planned.
    And then the goal always was to be able to maintain that 
once we got over the initial hump with VA staff. And as to the 
resources that were going to be necessary to do that, we did 
not really have a firm handle on that because this was new 
territory for all of us, but we did make some projections as to 
what they should be.
    And I think as I mentioned in my testimony, some of those 
resources were, in fact, approved about 18 months ago. To my 
knowledge, they have not been forthcoming and I cannot answer 
that.
    Ms. Herseth Sandlin. And they were approved by the Board of 
Directors for----
    Mr. Denniston. Of the Supply Fund, right.
    Ms. Herseth Sandlin [continuing]. The Supply Fund? Okay.
    Mr. Weidman. We believe that it should be enacted in the 
statute. If it is worth doing, it is worth doing formally and 
it should be a line item. And we would also suggest that while 
they may be in charge of verification, that is not their 
primary role.
    If you view the service-disabled veteran ownership program 
as a program, it needs to be built in and encouraged by VA 
vocational rehabilitation and perhaps some changes in that 
section of title 38. There is no reason why we cannot bring 
back the old Loan Fund that has still been on the books since 
1944 for startup capital if, in fact, people have a solid 
business plan.
    I mean, Mr. Buyer has, I think, introduced legislation to 
do that. And we strongly support that. And it can become a 
locus.
    I believe that Mr. Denniston is absolutely correct. You 
cannot do business development in South Dakota from Washington, 
DC, but you darn sure can find out who are the people in South 
Dakota either at the Small Business Development Center, at the 
State Economic Development, work with the County Executive 
Associations, which does have an office in Washington, DC, to 
find out who do they have in economic development that you can 
send service-disabled and other veteran-owned businesses to. 
That should be the primary purpose.
    In terms of contracting out, as I mentioned before, the 
veteran verification really only needs to be done once. You can 
double check if somebody is service-connected, but even that 
does not go away since there is no minimum threshold to be 
declared a service-connected disabled vet. Once you are 
service-connected, you are service-connected. It might go down 
to zero if your cancer goes into remission, but you are still a 
service-connected disabled vet.
    So you only need to do that once. And, frankly, you can do 
that through automated comparisons of that individual to the 
databases already that VA has or has access to DoD through the 
interagency agreement.
    The second part, in Veterans Integrated Services Network 
(VISN) 4, and we would be glad to refer the gentleman who 
actually is active in Vet Force who had the job of procurement 
in Network 4, VISN 4, and what they did was literally have 
Veterans Health Administration staff, which are all over the 
country, go out and see. They say they have X people working 
out of Y location. They would go out and see is it there, is it 
for real. And they were able to come back and, therefore, get 
about as much as you are going to get except from tax documents 
by CVE sending somebody out from Washington.
    So you do not need to do that. You can do a training 
package and train people either out of the regional office or 
out of the medical centers all across the country to perform 
that function.
    And the most important thing we would stress, however, is 
not putting small businesses, veteran-owned small businesses 
through a bunch of rigmarole, but to VA to go after the people 
who perpetuate fraud and to go after the people who often are 
knowingly complacent on the inside with somebody being a rent-
a-vet. And they should have consequences, severe negative 
consequences and the rest of them will start to listen up.
    Ms. Roof. If I may, Rick, you said something that has 
really been bothering me and a lot of our members, the 
hindrance of the recertification on the annual basis. We have 
all sat up here and said we need tougher certification 
processes in place. And we still all believe that, but this is 
not the best way to go about it.
    We already have a backlog of 9 to 12 months to get original 
certification. So when should, if I was a service-disabled 
veteran, when should I reapply for my next year's 
certification? Three months after I apply for the first one 
just so I make sure there is not a gap there?
    And also, it almost seems unfair that veterans are not 
being provided the equal protections under the law and they are 
made to do this extra work. So I am hoping that maybe the next 
panel can shed a little light on this for us of what the 
thought behind this recertification every year would do and how 
they plan on handling it because I know our membership would 
really like to know.
    Thank you.
    Ms. Herseth Sandlin. Any other comments on the issue raised 
by Mr. Weidman regarding concerns with fraud that was 
identified and noted in the GAO report?
    Mr. Denniston. The only comment I would make is one that 
has been made before, that P.L. 109-461 has penalties and that 
is the personal and the corporate debarment. And we strongly 
agree with VVA that if someone actually goes through that 
process and makes examples of people that we are going to find 
the people that do not belong in the program are going to move 
quickly to get out.
    Ms. Herseth Sandlin. Okay.
    Mr. Weidman. May I just mention one thing, ma'am? In the 
beginning, the 8(a) Program, there was no verification process 
or certifying process there. And when they put in the 
certifying process, it went from 11,000 some odd down to less 
than 3,000 in 2 months.
    Ms. Herseth Sandlin. In the 8(a) Program?
    Mr. Weidman. In the 8(a) Program. That was more than a 
decade ago. And in talking with the gentleman who was Chief of 
Staff at that time on the Small Business Committee and it 
happened just like we thought it did.
    Ms. Herseth Sandlin. Is there any recertification 
requirement in the 8(a) Program that you are aware of?
    Mr. Weidman. Is there now? Yes, ma'am. It is a very 
strenuous requirement.
    And, you know, I do not know. Is there still fraud in like 
the HUBZones or in other programs, yes, there is. But the 
sureness and swiftness of the deterrence is that if you do it, 
you are going to get caught. And if you get caught, we will 
prosecute you to the full extent of the law just like with your 
people's tax returns. People will straighten out and stop 
misrepresenting them, number one.
    Number two, it is certainly possible, we have the 
technology, if the Center for Veterans Enterprise was the place 
to go, that you knew everybody on it was at least a vet and if 
they have been verified, there was significant evidence that 
they had ownership and control.
    Before you get listed on the CCR, the Central Contracting 
Registry, or any other Federal database for procurement or on 
GSA's schedule and claim that you are a veteran-owned business 
or service-disabled veteran-owned business, you could not claim 
those two categories unless you have gone to the VIP and been 
verified first. That is easy to set up electronically.
    And if VA does not have the horses, there are lots of folks 
in this town and across the country in information technology 
who would be glad to contract with them to show them how, 
including some service-disabled veteran-owned businesses, I may 
add, ma'am.
    Ms. Herseth Sandlin. I have some additional questions for 
Mr. Daley and Mr. Sharpe, I have gone over my time, so I will 
recognize the Ranking Member for his questions.
    Mr. Boozman. Thank you, Madam Chair.
    Mr. Denniston, CVE is funded through nonappropriated funds 
from VA's Supply Fund, which gets its dollars from VA's 
franchising operations.
    Can you tell us about the process that is involved in that 
or can you expand on that?
    Mr. Denniston. The process for the CVE budget?
    Mr. Boozman. Yes, sir.
    Mr. Denniston. Once a year, at least when I was at VA, once 
a year, the Supply Fund Board would meet and the programs that 
were funded by the Supply Fund, which was the Acquisition 
Program at VA, the Inspector General's Office that deals with 
procurement fraud and the Office of Small Business would make 
presentations to the Supply Fund Board of Directors as to what 
we believed our resource level was going to be for the next 
year. And we would have an opportunity to make a presentation 
and justification and then the Board would either vote up or 
down for that.
    Mr. Boozman. Who is on the Board?
    Mr. Denniston. The Board is Chaired, at least it was, by 
the Assistant Secretary for Management. And the Office of 
Acquisition Management, Veterans Health Administration, 
Veterans Benefits Administration, National Cemetery 
Administration, and General Counsel were the voting members.
    Mr. Boozman. Okay. Very good.
    Can you expand, Rick, on the comments you made about 
regarding the arbitrary and artificial limit of allowing the 
veterans to just list one business in the database and maybe 
comment on, you know, if you can find any indication that that 
was either in the law or Congressional intent?
    Mr. Weidman. There was never any discussion of limiting it 
to only one business. It is not a business development program. 
They got this idea apparently from talking to SBA staff who run 
the 8(a) Program.
    The 8(a) Program, there is significant assistance of every 
sort to help them get contracts, to help them get organized, 
which flat does not exist for service-disabled veteran-owned 
businesses.
    And it is basically a deal you make with the SBA that I am 
willing for 10 years to put up with you, this level of actually 
seceding of control to some degree to people at SBA because I 
know that I will get these contracts and this other assistance. 
That does not exist for SDVOBs, number one.
    Number two, there is no delimiting date on being a service-
disabled veteran business owner, you know. And hopefully the 
young people who are serving in this war who go into business 
when they get back into civilian life will be SDVOBs for the 
next 40 years and that would be great. So there is no 
delimiting date. It is artificial for the reasons I named.
    Let me give you an example of one of our very active folks 
in the veterans' business community who does basically three 
different activities, his firm. They do business to business in 
the private sector. They do business with Federal agencies. 
Most of it is quote, unquote soft services and organizing, 
processing of various things. And then he does a lot of stuff 
in black ops.
    He has three separate corporations. The business to 
business stuff has different needs than the Federal stuff for 
the nonrequiring of top secret TC clearance. For the black ops, 
everybody, everybody, including the janitors, have to be top 
secret TC clearance and you have to pay those people more even 
to clean the restrooms.
    So that is why it is a whole separate company instead of 
having people basically doing the same work, getting paid 
differential amounts, working side by side which causes morale 
problems. So there is a real good reason why he has three 
separate corporations all working under the same roof.
    Incidentally, this is a very strong fellow who is a good 
manager and one tough former Marine grunt, service-connected 
combat disabled. I can assure you he is in control of all three 
businesses at all times even though he may not be on premises 
at all times.
    Mr. Boozman. Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    Mr. Daley, a quick question. In your testimony, you stated 
that when individuals call or e-mail the Center for Veterans 
Enterprise, there is sometimes no response; and, therefore, it 
becomes difficult to check the status of the application.
    In your opinion, is staffing sort of the critical problem 
here or is the office being mismanaged?
    Mr. Daley. That is a very good question. It could be 
staffing or it could be mismanaged. I really cannot say. All I 
hear is complaints from the veterans that have tried to 
communicate and there is no communication. A veteran said 
periodically somebody will accidentally pick up a phone and say 
I want to check on my verification. The veteran will but they 
cannot tell you anything about your application. I was speaking 
with somebody that sent in the application in early September 
and he called 3 months later to ask, where is it. They could 
not get information from anybody.
    He said at least if they could tell you, well, 2 more 
months we will have it done. Nobody talks to you. There is no 
communication. They do not return e-mails. And that must be 
frustrating for the business owner.
    Ms. Herseth Sandlin. Mr. Sharpe, in your testimony, you 
state that qualifications of CVE staff is questionable, and I 
think you had mentioned the lack of technical assistance that 
is available.
    Is this a comparison of folks that were there and how the 
office operated about 2 years ago versus what you are aware 
veterans are experiencing today? If you could elaborate on the 
past experience or current knowledge you have to make that 
statement.
    Mr. SHARPE. Well, currently the American Legion does not 
have a resolution on CVE, so most of our testimony is based on 
talking with many of our Business Task Force members.
    And what they have told us in the last couple of days, it 
appears that within the last year or so, but I have to tell you 
that there is a great deal of anger toward CVE. I was really 
surprised how angry a lot of these business owners are. They 
feel that it is both, that it is mismanagement and underfunding 
and training. They are complaining of the same things.
    If they have a problem, they cannot get an answer. If they 
do connect with someone, the individual does not seem to have 
the knowledge or the background to assist them. The tools that 
they need as far as the Web site are inefficient for them. They 
are really angry with the new rules as far as trying to 
register. If it takes them a year to register their business 
and then they have to be reclassified or recertified, you know, 
they just do not understand that. They are angry about the fact 
that if they have more than one business, you know, they can 
only do one at a time and they have to be at that particular 
business 24 hours or whatever. They feel that CVE is just not 
doing the job that they had hoped. If they have a problem with 
VA, they want to go to CVE and get some sort of answers.
    Now, I have personally witnessed a couple of meetings with 
VA officials in the last year or so with these individuals and 
none of their questions or concerns were cleared up. I was just 
surprised at the amount of anger and hostility that I have 
gotten from these individuals for the last couple of days.
    Ms. Herseth Sandlin. Well, thank you for your responses to 
our questions and for your testimony. And, thank you for your 
continued service on behalf of our Nation's veterans.
    We look forward to working with you as we follow-up with 
the concerns that you have expressed and the recommendations 
that you have made. Again, we will look forward to working 
closely with you to make improvements that are necessary.
    I would now like to invite panel two to the witness table. 
Joining us on our second panel of witnesses is Mr. Tim Foreman, 
Executive Director of the Office of Small and Disadvantaged 
Business Utilization in the U.S. Department of Veterans 
Affairs.
    Mr. Foreman is accompanied by Ms. Iris Cooper, Associate 
Deputy Assistant Secretary for Acquisition, Office of 
Acquisition, Logistics, and Construction, and Ms. Phillipa 
Anderson, Assistant General Counsel, Government Contracts, Real 
Property, and Environmental Law Group, Office of General 
Counsel for the U.S. Department of Veterans Affairs.
    I welcome you all to the Subcommittee.
    And we look forward to your testimony, Mr. Foreman. And 
your written statement is made part of our hearing record and 
so we will recognize you now for 5 minutes.

  STATEMENT OF TIM J. FOREMAN, EXECUTIVE DIRECTOR, OFFICE OF 
 SMALL AND DISADVANTAGED BUSINESS UTILIZATION, U.S. DEPARTMENT 
  OF VETERANS AFFAIRS; ACCOMPANIED BY IRIS COOPER, ASSOCIATE 
     DEPUTY ASSISTANT SECRETARY FOR ACQUISITION, OFFICE OF 
 ACQUISITION, LOGISTICS, AND CONSTRUCTION, U.S. DEPARTMENT OF 
  VETERANS AFFAIRS; AND PHILLIPA ANDERSON, ASSISTANT GENERAL 
COUNSEL, GOVERNMENT CONTRACTS, REAL PROPERTY, AND ENVIRONMENTAL 
   LAW GROUP, OFFICE OF GENERAL COUNSEL, U.S. DEPARTMENT OF 
                        VETERANS AFFAIRS

    Mr. Foreman. Members of the Subcommittee, good afternoon. 
Thank you for convening this hearing to discuss the issues 
pertaining to VA's Center for Veterans Enterprise, CVE.
    I am accompanied today by Ms. Cooper, the Associate Deputy 
Assistant Secretary of Acquisition to my right and Ms. 
Anderson, VA Assistant General Counsel to my left.
    We are pleased to represent Secretary Shinseki and the 
veterans that do business with VA. Our CVE has become a central 
point for agencies, contractors, and veterans for support of 
veteran business-owned programs at the VA. CVE Verification 
Program is our first line of defense to ensure the integrity of 
these efforts.
    VA is strongly committed to identifying, eliminating, and 
pursuing fraud wherever it appears in the veteran-owned small 
business program. As Director, I take personal responsibility 
for critical small business programs at the Department.
    While I am relatively new in my position, I have over 30 
years of small business program experience and over 38 years of 
government experience. I am a passionate veteran program 
supporter. I am the one belly button to push and if there are 
any problems, please come and see me.
    VA believes that legitimate veteran businesses are 
authorized under this program and they should have few barriers 
to doing business with VA. I believe that other businesses that 
use fraudulent means to garner contracts under the auspices of 
the Veteran Business Program are in effect stealing valor from 
those who have legitimately earned that veteran privilege.
    The CVE maintains the vetbiz.gov Web portal which hosts the 
Vendor Information Pages or VIP database for veteran-owned 
small businesses. The database allows VA to compile a list of 
service-disabled veteran-owned businesses.
    The core mission of CVE is to improve the business climate 
for veterans, minimize barriers to access or, as I say, 
barriers to entry, and to inform the public about the benefits 
of working with veteran-owned business, small businesses.
    Our verification program is a vital part of the Veteran 
Business First Procurement Program. VA's unique procurement 
legislation gives priority to certain veteran-owned small 
businesses over all other types of businesses within our 
Department.
    In 2009, our contractor recommended a plan to automate a 
large part of the verification process and to ensure that 
specific business documents are included in our examination to 
make better decisions and informed decisions for a 
recommendation, either approval or denial. These two 
recommendations will eliminate hundreds of staff hours and the 
data entry problems that go with that.
    Our reliance on publicly available information through 
documentation has also been a problem. This will eliminate 
that. Where we had previously only requested these documents 
when some question about the ownership and control of the 
business came into question, we will now require those 
documents to be submitted as part of the application process 
for all veteran-owned businesses.
    CVE's improvement will be phased in and affect all aspects 
of the verification program, including its application process, 
on-site visits, prioritization of applications, veteran 
contractors, offerors, and subcontractors.
    We have recently changed the priority makeup. Our concern 
is we want to have as many legitimate service-disabled veterans 
participate. So we developed a new priority.
    The first priority goes to VA contractors, service-disabled 
veterans and veterans that are currently doing business.
    Our second priority is for any service-disabled veteran-
owned small business that is in line for a contract. That goes 
second.
    Third priority would be prime contractors requesting 
assistance and verification of service-disabled veterans and 
veterans to do business as subcontractors.
    Fourth, we go back to the First-In-First Out (FIFO). I kind 
of started out in the FIFO when I first started and I put that 
in. So those are the four basic preferences for how we do 
business from now on.
    VA's action will ensure that contract awards under the 
program will only be made to eligible veteran-owned businesses. 
VA's contractors and offerors in line for contract awards will 
receive expedited processing.
    It is our current practice to remove from public view any 
business that has been determined or denied verification and to 
remove any business that is found ineligible as the result of a 
negative finding resulting from a protest decision or an 
appeal.
    Last year, VA made conforming changes to the Veterans 
Affairs' Acquisition Regulation and as we call it, the VAAR. It 
establishes that businesses may be listed in the VIP database 
until December 31st, 2011, after which they must be officially 
verified in order to be eligible for sole-source awards, set-
aside awards under the priorities authorized under Public Law 
109-461 or have a VA prime contractor receive a subcontracting 
credit for such an award.
    Our objective is to ensure that businesses that benefit 
from sole-source and set-aside awards are eligible to receive 
them. We will not compromise the quality of our exam process in 
accordance with the VAAR. Until an effective date is reached, 
it must be continued to allow businesses that have yet to be 
verified to remain in the database.
    Reducing performance fraud has several components. Raising 
awareness of the problem is a start. Providing training for the 
acquisition corps and business owners is also important.
    Certain concerns about pass-throughs and fronts are not 
limited to the VA Veterans First Program. It appears in other 
programs. As the Executive Director for the VA OSDBU Office, I 
intend to be a champion for the issue of eliminating fraud at 
every point and I will speak on it often.
    Madam Chairwoman, thank you for convening today's hearing. 
I request that my written statement be submitted for the 
record. I welcome your interest and I am prepared to answer 
your questions. Thank you.
    [The prepared statement of Mr. Foreman appears on p. 37.]
    Ms. Herseth Sandlin. Thank you, Mr. Foreman.
    When did you formally take over this position?
    Mr. Foreman. About 7 weeks ago.
    Ms. Herseth Sandlin. Were you with the Department of 
Defense before that?
    Mr. Foreman. That is correct. And I did retire from the 
Department of Defense, but people approached me before I 
retired and said are you interested. I said I have a passion 
for this program. I know the vets. I have worked with them and 
I have many friends. I am a veteran.
    Ms. Herseth Sandlin. So what are your initial thoughts 
about some of the testimony you heard in the first panel?
    Mr. Foreman. Well, some of them I happen to believe are 
true.
    Ms. Herseth Sandlin. Do you agree that there may be an 
unreasonable limit on one business being listed?
    Mr. Foreman. I am sorry?
    Ms. Herseth Sandlin. Do you agree with the general 
sentiment of the first panel that it is unduly restrictive to 
only allow one business to be listed by a service-connected 
disabled veteran?
    Mr. Foreman. You know, when I read that, before I ever 
talked to anybody, it was just by myself and I went through 
that and I questioned right then and there because I own a 
business. I inherited a business. And I have seven brothers. 
None of them want to do any business with it, so they gave it 
to me. I am 500 miles away running a golf course. I am not 
there full time, but I hire, I fire. I do policy. I work with 
the advertising. I work with the lawyers.
    Ms. Herseth Sandlin. You have effective control?
    Mr. Foreman. So I have effective control and I am not 
there. If you want me to be wearing an apron and flipping 
burgers out on the 18th hole, well, that is a different issue. 
I think that is a little bit tight. So that is just a personal 
opinion.
    I tell you I do have a great staff. I mean, the energy is 
there, the passion is there. The brains are there. What I think 
I need to do is bring some things together and I think I can 
make it happen.
    We have already started hiring three new people for the 
Center of Veterans Enterprise, so that has happened. I brought 
in one person so far. We have another one that might come in 
and I am trying to hire a third. So both sides of the house are 
growing.
    The limitation at this point is not the people, it is where 
we are going to put them. And so we are in the process of 
trying to develop a space where I can bring both the CVE and 
the OSDBU offices together. We have the 1102s. They do not have 
1102s. They have other people. We have contracting experience. 
I think that would help.
    Ms. Herseth Sandlin. Well, I think there are some 
interesting things going on. You know the position that you 
have now was not filled for over a year.
    It seems from the testimony of the first panel that some of 
the problems that people started to notice as it relates to 
expectations that had developed, or expectations of what was 
going to happen going forward, was that there was a falling 
short of those expectations during a time of transition for 
CVE.
    Could you respond to a point that I believe Mr. Weidman 
made about CVE? You commented on how dedicated and energized 
the staff you currently have is, as well as those that you hope 
to bring on and how you focus their efforts. Do you agree with 
the sense that they have become a bit overwhelmed, that the 
focus has been more on enforcement, and that everyone is 
playing the policeman versus focusing on the technical 
assistance. Should the enforcement be in the Office of the 
Inspector General as it relates to what was documented in the 
GAO report?
    Mr. Foreman. And I do believe there are certain things that 
we need to change over in that organization. It is just going 
to happen over time. Part of it is me sitting down with the 
people, picking the best brains that I can, seeing where they 
want to go.
    I believe the law of physics applies here. We want to keep 
the barriers to entry as low as possible. We want legitimate 
service-disabled veterans and veterans to be able to 
participate.
    Unfortunately, when you raise that bar high enough to 
ensure that the bad players do not play, get them out. Now, one 
of the statements made earlier was why don't we use suspension 
and debarment. We concurred in a letter recently to the General 
Counsel's Office to let us stand up our Debarment Committee 
again.
    I am not sure how that is going to play out as far as the 
contractors, the 10 that were noted in the GAO report. I have 
talked to the OIG and they tell me I am not supposed to talk 
about it. So, you know, I am kind of caught on that issue.
    We are going to turn over to the OIG anybody we turn down, 
any veteran that is fraudulent in status. In other words, there 
is a difference between status and process fraud.
    In status fraud, you are not a veteran and you claim to be. 
You are not a service-disabled veteran and you claim to be or 
you are a veteran who was dishonorably discharged and you claim 
to be eligible. Those are considered status frauds, or you did 
not own the majority of the company. That is also status fraud.
    Performance fraud is where you subcontract out 100 percent, 
sometimes not even to a U.S. firm. Those are considered the 
real fronts. It is hard to get some of those things taken care 
of and I understand there is a little bit--you are never going 
to get 100 percent, but we can certainly do better. We can 
certainly be faster.
    One of the things I suggested to CVE right away, I said why 
are you doing a hundred percent quality assurance review. Don't 
you know who the people are that are doing this that are having 
problems? Are you not logging those particular problems? They 
are doing that now. They are starting to log where the problems 
are appearing and who has them, what person within their staff 
are with the contractor.
    Ms. Herseth Sandlin. Do you anticipate other steps that you 
have started to take over the last few weeks since you have 
been on board that are going to improve the amount of time it 
takes for the applications coming in?
    Clearly it is a concern if there is a 12-month backlog as 
was stated. Any thoughts on the recertification requirement on 
an annual level or thoughts on this problem of any response or 
adequate response?
    If what is causing a lot of the anger and frustration is 
that people cannot even get answers to the status of their 
application, then that is part of the broader issue of how long 
it is taking.
    Then another question before I recognize Mr. Boozman, are 
you aware of the memorandum of understanding that Mr. Denniston 
talked about that they had developed during his tenure; is that 
still in effect?
    I know those are three different questions I just threw at 
you. But, I think it is important since you have just come on 
board to not only know where those MOUs are, if they are still 
in effect, and how to broaden the scope of those, but also to 
know this problem with lack of response. I even forgot my first 
question.
    Mr. Foreman. I think I forgot all three of them, but I will 
try as best I can to answer the ones that I know.
    One of the issues is do we have memorandum of agreements or 
partnership agreements. We do have one with the SBA through the 
Office of the Small and Disadvantaged Business Utilization.
    We do have very close relationships. Procurement Technical 
Assistance Centers (PTACs) are my friends. I spoke at their 
annual conference almost every year when I was in the Navy and 
sometimes when I was in OSD in the Small Business Program 
Office and now here. I try to speak to those. There are about 
four or five groups I try to talk to on a regular basis, one 
being the PTACs. They are funded through DoD, through Defense 
Logistics Agency, and there are about 92 to 95 of those 
throughout the country. That is good spread of information.
    The Small Business Development Centers, maybe not quite as 
high a level, at least that is what the PTACs tell me, but they 
do a good job in training businesses.
    I know the Secretary has mentioned in what we call ELB, 
Executive Leadership Board, which I am a part of, and I meet 
weekly with them, and all the key players are, but he is 
concerned that the servicemembers themselves, the men and women 
getting out of the service sometimes do not have a strategy for 
where to go. It is not that he is against that. He is concerned 
that they have a strategy, that they are trained, that they are 
given options.
    So I thought that was rather insightful. And he brings a 
certain energy of integrity, which I really enjoy. That kind 
of--I lost my train of thought. I have to get back on it. We 
are doing a lot of things, I think, to help.
    I think that taking the quality assurance people and saying 
do a statistical sample once you know what the problems are and 
who the problems are with. One of the problems is the 
contractor that is doing the reviews, they do not do as many or 
at the same quality as our own people. A lot of our people do 
telecommute. That is fine for getting stuff done. It is very 
measurable. The output is there. You can measure. It is good. 
The problem is who is there to answer the phones.
    I have also commented to the folks about the Web page. I 
was not thrilled with the Web page. I want to be able to find 
each individual's phone number, name, what they do.
    As far as being responsive, the group itself is very, very 
responsive. I have been ecstatic with the support and the 
energy. I just think there needs to be some direction.
    Ms. Herseth Sandlin. The last question I now remember is 
the recertification----
    Mr. Foreman. Oh, the----
    Ms. Herseth Sandlin [continuing]. Requirement on an annual 
basis.
    Mr. Foreman. My thought is it is similar to the CCR, the 
Centralized Contractor Registration database. They require a 
recertification every year. That can be simplified. It is not a 
resubmission. It is simply, yes, my status has not changed or, 
no, my status has changed to this and here is the information 
you need in order to recertify me. It should not be a big drawn 
out thing. And the automation part is great.
    The one thing I recommended is we develop what we call 
dashboards so when the veteran would go into our Web site, 
automatically they would do it all over the net. When they put 
in a bad Social Security, it bounced back to them red, wrong 
Social Security, or if something else was done, it would--it 
would take a while to develop, it would probably take a year, 
but--and my experience with databases has not been the 
greatest. I have been in the government too long to see them 
come out right, but I think it can really work.
    And I think in today's age, we have enough service-disabled 
vets, by the way, and, by the way, two of our contractors, the 
only contractors we have working with CVE are both service 
disabled.
    Ms. Herseth Sandlin. Thank you, Mr. Foreman.
    Mr. Boozman.
    Mr. Boozman. Thank you, Madam Chair.
    At the current rate of verification, how many years will it 
take to verify all the businesses listed in the database?
    Mr. Foreman. Probably 2 years. We have a growing backlog to 
the tune of anywhere between 400 and 500 a month, a growing 
backlog we usually get out at the current rate at about 300 a 
month. We have been getting anywhere from 800 to 700 a month. 
So it is growing.
    And I suspect with some of the new requirements on service-
disabled veterans that we have now made automatic, that will 
continue to grow. That is not a bad thing, but we have to have 
a strategy and a plan to make it work quicker.
    Mr. Boozman. So you are getting, how many did you say, 700 
or 800 a month, and then you are able to clear out 300 hundred?
    Mr. Foreman. Yes, sir.
    Mr. Boozman. So you are never going to get there.
    Mr. Foreman. Well, hopefully what is going to happen, and 
we thought about this, one of the thoughts, well, you know, 
ramp up our own production, but there is going to be a period 
when it is going to break down. We do not know where that is. 
And I would lie to you if I told you I knew because I do not 
know. But I know we can do better. I know we can do quicker. I 
think automation is part of the answer. I think being 
responsive and responsible to people calling in.
    Oh, the other thing with the automated system that I liked 
is the fact that you can go into it to see where it is just 
like the delivery when you buy something over the internet and 
you get the--now, I have never been--I have bought things over 
the internet, but I have never used it, so I do not know how it 
works.
    But they say it will tell you where, track where it is. Are 
you with a verifier? Are you with a quality assurance review? 
Has it been rejected or is it missing pieces of information? 
This should be helpful and at least provide the information our 
men and women who have gotten out of the uniform need to have.
    Mr. Boozman. It might be helpful then periodically if you 
could update us on, maybe give us a table on where we are at 
now as a baseline and then how we see that changing in the 
future we have the--it sounds like without significant 
modification that we are going to--again, we are never going to 
get there. But like I said, that would be helpful if you would 
get to our staffs kind of what is going on.
    VA has stated they have awarded about 14 percent of 
contract dollars with veteran and disabled-owned businesses. Is 
that 14 percent of all contracting dollars or just those made 
under open market purchases?
    [Chart]
    Mr. Foreman. I am glad you asked that and I did go get the 
charts before I came.
    Actually, that is total awards and it is a little bit 
more--and I just have to make sure I get to the right chart. In 
2009, service-disabled veterans received $2.3 billion or 16.3 
percent and that is of total awards. And we were up from the 
year before where we were at 12 percent and the year before 
that, we were at seven. The year before that, we were at 3.4. 
So we have been growing steady and I hope to continue. And I 
will be surprised if we do not.
    Mr. Boozman. Does that include the Federal Supply Schedule?
    Mr. Foreman. I believe it does, but I will turn to my 
acquisition professional.
    Ms. Cooper. I really do not have all the details with me, 
so I will have to take that for the record to give you a 
comprehensive answer. And I will do that.
    Mr. Boozman. What would you guess?
    Ms. Cooper. I would not think it does, but I will have to 
verify that. I hate to guess. So I will take that question.
    [The VA provided the information in the response to 
Question #3 from Mr. Boozman's Post-Hearing Questions and 
Responses for the Record,which appears on p. 52.]
    Mr. Boozman. Thank you very much.
    Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    The automation that you are referring to, how many more 
staff will the VA hire to implement the recommendations to make 
this automation for the application process and the specific 
documents that will be required? What is the plan here in terms 
of hires, training, and when will those new systems be ready?
    Mr. Foreman. The fact that the automation will probably be 
a contracted out issue, we will probably try to go to those 
service-disabled veteran firms that are pretty good in that 
field as we also need to do that in the Web site.
    I did the same thing when I worked for the Department of 
the Navy as the Director for Small Businesses. There I changed 
the Web site. I was not happy. It was not robust enough, not 
enough good information.
    And, of course, the problem with all data Web sites is 
staleness of information. If things get old, people stop 
looking. You have to make it useful and you have to stay on top 
of it. You almost need three contracts, one to evaluate your 
needs, one to develop it, and one to refresh it.
    Ms. Herseth Sandlin. So does CVE have the funds necessary 
in their----
    Mr. Foreman. Right now----
    Ms. Herseth Sandlin [continuing]. Fiscal year 2010 budget 
to do the contract that would be necessary to do the 
automation?
    Mr. Foreman. Right now, Madam Chairwoman, we have money to 
do that. We have money to go forward. I am not sure about--you 
know, when I initially walked in the job, I thought we need 
appropriations, we really do. Now I am not so sure.
    I will see how this works out. Give me a few months and I 
will come back and tell you how it is working out. I think 
things are going good. I have the right to spend money. Nobody 
has gotten in my way. I have the right to hire people and I 
need new office space.
    I would like to bring two of them together because 
physically I am about 17 blocks apart, a bit hard to walk, and 
then I have to walk to the headquarters, which is another seven 
blocks, maybe nine, so I am getting a lot of walking.
    Ms. Herseth Sandlin. Well, I think the Ranking Member would 
agree since you have been on board 7 weeks, we are more than 
happy to give you a little bit of time. I do not know if we 
want to give you a few months.
    Mr. Foreman. Yeah.
    Ms. Herseth Sandlin. We have the fiscal year 2011 budget 
and we want to be helpful. We want to work with you so that you 
have the resources in order to meet the goals that you have in 
light of the backlog that you are faced with.
    We will follow-up with our counsel and our staff as we 
delve into your taking a closer look at what you currently have 
within the 2010 dollars.
    Keep us apprised just as the Ranking Member requested, not 
necessarily through our formal hearings always, but the 
progress you are making, the timetable of dealing with the 
applications that are part of this backlog. Also, there are 
some questions that we may have as follow-up, which are more 
specific on the resources side and the timetable of contracting 
out to one of our service-connected disabled veteran-owned 
businesses who could do the automation that would facilitate a 
more efficient system.
    The first question I posed in terms of this restriction on 
only one business, that a part of this broader issue of the 
newly published verification rules.
    Based on your response to that question, you may not be 
entirely comfortable that it provides sufficient flexibility. 
Do you think that they provide sufficient guidance?
    Mr. Foreman. One more time just what the essence of the 
question was.
    Ms. Herseth Sandlin. Since you are new to this position, 
how are you going to address what I think we recognize may be 
some unduly restrictive elements of the recently published 
rule?
    Mr. Foreman. The throwing the baby out with the bath water, 
I think that is the way I would term it. I was a little taken 
aback by some of it.
    And I will have to say, and just overhearing the OIG talk 
about it, they thought that was a wonderful thing, and I kept 
in the back my mind, I kept seeing red tape being wrapped 
around this thing until you got a fence so high, you have one 
vet that makes it. We do not want that.
    Ms. Herseth Sandlin. Do you think, Mr. Foreman, that in the 
conversations that you have had or discussions you have had--in 
your thus far, short tenure in this position--anything related 
to Mr. Weidman's point? How about issues generated from these 
conversations with the SBA and how they administer the 8(a) 
Program and the different types of resources and assistance 
available there through the SBA versus what CVE was providing. 
Sort of what the mission and intent of that to be for veterans?
    Mr. Foreman. It seems to me there are two different 
agencies trying to do the same thing at the same time and some 
of them do it better or worse.
    You know, there are good people that work over in the SBA 
and I have no qualms about that at all. My people are great. 
They are trying to do everything they can.
    I just do not want to see the government go into bad 
government, wasting money following maybe a failed path of 
somebody else. I want to see things done right. I want to make 
it happen and I want to see it before I pass away. And I think 
I can.
    I think I will have a major impact. I think with your help, 
Madam Chairwoman, Mr. Boozman, that would be terrific. I look 
forward to your help and I will work with your staffs.
    Ms. Herseth Sandlin. Mr. Boozman, any final questions?
    Mr. Boozman. No. I think you covered it. I was also 
concerned about the budget, but I think that you covered that.
    So thank you all for being here very, very much.
    Mr. Foreman. Thank you.
    Ms. Herseth Sandlin. Just one last question and I know you 
are going to do some checking as it relates to the numbers that 
you gave us and the Ranking Member's question about whether or 
not those figures are included the Federal Supply Schedule.
    In your opinion, should the Federal Supply Schedule include 
set-asides?
    Mr. Foreman. In my opinion, yes.
    Ms. Herseth Sandlin. Well, Mr. Foreman, I am really glad 
you are on board. I appreciate your candor, your experience, 
the perspective that you have brought to this very important 
hearing, your response to our questions, and your desire to 
work with us, and to work closely with our dedicated counsel 
and staff of the Subcommittee.
    Clearly based on your willingness to listen and to 
recognize some of the concerns that our veterans service 
organizations raised in the first panel, I think you are going 
to have some good partnerships. Probably some of those that had 
developed in your prior capacity over with the Department of 
Defense can assist in improving the reputation of the CVE in 
the minds of the folks who have been struggling with some 
problems before you came on board and the vacancy of the lack 
of leadership at the top. That is so necessary to bring back 
the focus, the vision, and implementing the mission of the 
Center for Veterans Enterprise and the dedicated people that 
you are working with there and the leadership that they need to 
effectively allocate the resources that you have been given and 
perhaps some of the additional resources that may be necessary 
as we go forward.
    I thank you very much again for your testimony, your 
service to our country and your service to our Nation's 
veterans in your current capacity now as Executive Director of 
the Center for Veterans Enterprise.
    I am sure we can all agree that more can be done to provide 
our Nation's veterans with services and opportunities for their 
small businesses; and particularly to help their desire to 
succeed in a challenging economy and the importance of bringing 
down barriers at any time, in light of the slow economic 
recovery that we find ourselves in.
    Our Subcommittee is going to continue to focus on that 
goal. We will continue to look for opportunities to advance 
legislation that helps veterans succeed economically and to 
ensure adequate resources to the types of programs and 
initiatives that our Subcommittee and the full Committee have 
undertaken over the past number of years.
    Again, I look forward to hearing more about how the VA will 
address some of the concerns raised in today's hearing.
    I appreciate the comments of the other stakeholders who 
testified here today. There is a strong commitment among 
everyone in the room to advance the interests of our Nation's 
veterans. Again, we will work closely together. Thank you very 
much.
    The hearing stands adjourned.
    [Whereupon, at 3:09 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

    Today's hearing will provide veteran service organizations the 
opportunity to highlight issues of concern regarding responsibilities 
that fall under the Center for Veterans Enterprise. Furthermore, 
today's hearing will afford the recently appointed executive director 
of the Office of Small and Disadvantaged Business Utilization with the 
opportunity to hear from the veterans' community and provide the 
Subcommittee an update on matters relating to the Center for Veterans 
Enterprise.
    As many of our witnesses will testify, small businesses are an 
essential component to a strong economy. This Subcommittee has held 
several hearings on the challenges faced by our Nation's veterans 
seeking to start and develop a small business. We have also heard from 
many members of the National Guard and Reserve components who find it 
challenging to maintain their small businesses when called to active 
duty.
    I want to assure our panelists that this Subcommittee will continue 
to work to remove barriers that prevent veterans from accessing the 
services that may help them succeed in their small business venture. 
Furthermore, I welcome the Department of Veterans Affairs' incoming 
executive director who will oversee the Center for Veterans Enterprise. 
I look forward to hearing more about how Mr. Foreman's leadership will 
enforce current laws and meet the needs of veteran owned small 
businesses in a challenging economy.

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

    Good afternoon.
    Madame Chair, you and I first worked on creating additional tools 
for VA to meet and exceed the contracting goals for disabled veteran-
owned small business in the 109th Congress. The result of our efforts 
culminated in sections 502 and 503 of Public Law 109-461. I believe it 
is fair to say the passage of that law was greeted very favorably by 
veteran small business owners.
    Unfortunately, VA has dragged its feet on properly implementing at 
least one very important provision of that law, and that is 
establishing a database of veteran and disabled veteran-owned small 
businesses whose status as a veteran-owned small business has been 
verified by the VA. In other words, the only companies that should be 
viewed by someone searching the database are those which have been 
vetted by VA. Unfortunately, that is not the case.
    As you can see on the monitors, we have accessed VA's Vendor 
Information Pages database of veteran-owned businesses. Although the 
law clearly limits the businesses listed in the database to those whose 
veteran-owned status has been validated by VA, the monitor clearly 
shows businesses that have not been validated.
    VA staff have pointed out that the little wreath logo notes a VA-
certified veteran-owned small business. I don't know about you, but I 
do not view that as satisfactory to separate the verified from the 
unverified. First of all there is no legend that defines the symbol as 
meaning the company has been verified. For example, on the screen shown 
here, 7 of the 10 businesses listed have not been verified. 
Additionally, it appears the database is also searchable for other set 
aside groups such as HUBZONE or 8(a).
    The intent of creating the database was to provide VA contracting 
officers and other Federal agencies seeking to contract with real 
veteran-owned businesses a source that could be trusted. Whether a 
business self-certifies that it is veteran-owned, while VA is doing its 
homework on the business, it should not be listed.
    Finally, as I said, Madame Chair, we started working on this in 
2006 and it is now over 3 years since passage of Public Law 109-461. It 
appears to me that just like everything else VA touches, it literally 
takes them years to comply with what Congress and the President has 
told them to do. VA has presented Congress with four budgets since 
these provisions became law and to my knowledge, not one of those 
budgets requested any additional resources to comply with the law.
    As a result, as GAO has reported extensively, companies falsely 
representing themselves as veteran and disabled veteran-owned have 
stolen millions of dollars in contracts from real veteran-owned small 
businesses. I believe if VA had implemented the law expeditiously and 
in accordance with Congressional intent, those millions in taxpayer 
dollars would be in the coffers of real veteran-owned businesses. And 
the icing on the cake is that some of the businesses identified as 
fraudulent are still doing business with VA despite the Secretary's 
authority to debar them. So what I want to hear from VA today is that 
they are going to get this mess cleaned up . . . yesterday.
    Finally Madam Chair, I ask unanimous consent to have a submission 
by the International Franchise Association made part of the record.
    I yield back.

                                 
      Prepared Statement of Scott Denniston, Director of Programs,
              National Veteran-Owned Business Association

    Chairwoman Herseth Sandlin, Ranking Member Boozman, Committee 
Members and staff. Thank you for the opportunity to testify today on 
the Department of Veterans Affairs, Center for Veterans Enterprise. I 
am Scott Denniston; President of the Scott Group of Virginia, LLC, 
representing one of my clients, the National Veteran Owned Business 
Association (NaVOBA), and it's over 2,000 veteran small business owners 
across this great country. I would ask that my formal testimony be 
submitted for the record.
    Your letter of invitation asked me to discuss CVE's practices, 
priorities, and effectiveness, including VA's implementation of Public 
Law 109-461, especially the Department's progress in implementing the 
database required by P.L. 109-461, as well as its methods to approve 
veteran owned small businesses. In the interest of full disclosure, I 
must tell you that I had the pleasure of establishing the CVE after the 
passage of P.L. 106-50 while the Director of Small Business Programs at 
VA. In my entire 38 year career with the Federal Government, I have 
never worked with a more knowledgeable, dedicated, and passionate group 
of people. CVE is one of the most ``entrepreneurial'' organizations in 
the Government.
    P.L. 106-50 established a Government-wide goal of 3 percent of 
prime and subcontracts be awarded to small businesses owned and 
controlled by service connected disabled veterans (SDVOSB). The law 
quite frankly did not provide guidance or mechanisms to achieve the 
goal. We at VA, realizing that there needed to be an organization to 
bring service disabled veteran owned small businesses and the Federal 
agency and prime contracting communities together embarked on 
developing such an organization, and the Center for Veterans Enterprise 
was created.
    In the beginning we heard all the excuses from the contracting 
community as to why the goal could not be met: we don't know the rules, 
we can't find SDVOSBs to contract with, the firms are not knowledgeable 
of Federal acquisition rules, etc. The CVE addressed each excuse head 
on. CVE, with the help of some SDVOSBs conducted focus groups of 
concerned individuals in the SDVOSB community and Federal and prime 
contracting communities. We developed program marketing material and 
began an aggressive outreach program. The Vendor Information Pages 
(VIP) database was established to address the identification issue. VIP 
was established based on the needs of the identified users. The 
National Veterans Business Conference was established as an annual 
event. The conference has grown from 300 to over 3,000 participants in 
just 5 years! CVE entered into agreements with the Association of 
Procurement and Technical Assistance Centers (PTACs) to train SDVOSBs 
in doing business with the Federal Government. CVE indentified 
``advocates'' in every Federal agency and most prime contractors to 
help SDVOSBs connect with their organizations. CVE started the Annual 
Champions of Veteran Enterprise Awards program to recognize Federal 
agencies, prime contractors and SDVOSBs themselves for outstanding 
achievements. CVE in the previous Administration worked to bring 
accountability to the program which resulted in Executive Order 13360. 
CVE was instrumental in establishing with the International Franchise 
Association the very success VETFRAN program which has helped over 
2,000 veterans open franchises with reduced fees or additional support 
since 2002. Quite frankly, CVE became the ``go-to'' organization for 
veterans wanting to establish or expand a small business in this 
country.
    Unfortunately, the CVE has become a victim of its own success, and 
I would suggest the veteran entrepreneurship program has not been 
embraced by VA from an institutional perspective. There is no doubt 
that VA has lead the Government in meeting the 3 percent goal and 
should be commended for that! Much of VA's success I believe is due to 
the work of the CVE. Unfortunately as the role of CVE has expanded due 
to the demands of P.L. 109-461, the requisite resources and contractor 
support necessary to effectively carry out the mandates have not been 
forth coming. CVE is funded from an internal revolving fund called the 
VA Supply Fund. The Supply Fund is controlled by a board of directors. 
Over 18 months ago, this group approved a significant expansion to the 
resources dedicated to CVE, but unfortunately these resources have not 
been forthcoming. Likewise, contractor support to address the 
verification process took over a year to get under contract. It is time 
CVE becomes a line item in the VA budget to insure appropriate 
resources are justified and forthcoming.
    NaVOBA differs with what we understand is the position of this 
Committee that the CVE database should only include ``verified'' firms. 
The database was established to support all Federal agencies and prime 
contractors in identifying SDVOSBs and veteran owned small businesses 
(VOSBs) to assist in achieving the 3 percent goal mandated in P.L. 106-
50. The verification process required by P.L. 109-461 only applies to 
VA. CVE identifies in the VIP database those firms who have in fact 
been verified. If only verified firms appear in VIP the number of firms 
available to government and prime contractors would shrink from over 
15,000 to around 2,500 firms. This would substantially hurt the 
government-wide SDVOSB program in our opinion. We understand and share 
this Committee's concern about fraud, waste and abuse in the SDVOSB 
program identified in the recent GAO report and believe strongly that 
the verification requirement for SDVOSBs and VOSBs should be made 
government-wide.
    NaVOBA shares the concerns of others in the veteran small business 
community that VA's verification process is burdensome, overbearing and 
so untimely as to cause serious financial strain on many SDVOSBs and 
VOSBs. Some of our members share stories and frustrations of the 
process taking over 6 months to complete with the veteran applicant 
never being told where his/her application is in the process. CVE must 
do a better job communicating with the veterans it was formed to serve. 
We understand there is some discussion in Congress of moving the SDVOSB 
and VOSB verification program to the Small Business Administration. 
NaVOBA is staunchly opposed to such a move. Only VA can verify if an 
individual is a veteran or has a service connected disability. SBA has 
consistently over the years been criticized by GAO for their 
administration of the 8a, small disadvantaged business, and HUB Zone 
programs. Significant resources have been expended by VA to establish 
the verification program. We would rather work with VA to refine and 
improve the current process rather than start over at an agency with a 
history of questionable program administration. Our position is 
contingent on VA providing CVE with adequate resources to administer 
the verification program.
    NaVOBA has reviewed and commented on VA's final rule implementing 
P.L. 109-461, published on February 8th, 2010. We do not support VA's 
position that verification is an annual requirement. CVE cannot keep up 
with the burdens of initial verification applications, how will they 
ever keep up with an annual requirement? This is also burdensome on the 
veteran business owner. There appears to be an opinion of guilt by VA 
against SDVOSBs and VOSBs. NaVOBA believe the vast majority of veterans 
to be honest and trustworthy. We support a requirement to notify CVE of 
ANY change in ownership within 30 days of the change becoming 
effective. We do not support VA's rule that ``an eligible owner have 
only one business in the program at one time and must work full-time in 
the business.'' These requirements do not exist, to our knowledge in 
any other government program. Why put unnecessary burdens on veterans? 
There are many good business reasons why a veteran may have one 
business line but several business entities; insurance, union, wages, 
etc. Many successful business owners have more than one business at a 
time, especially complimentary businesses. The requirement to work 
full-time in the business will eliminate many start-up businesses which 
many times cannot support full time salaries without contracts. VA is 
eliminating many worthy and deserving would be veteran entrepreneurs. 
We question whether this is the spirit and intent of P.L. 109-461.
    NaVOBA also objects to VA's overly strict and restrictive 
implementation of the contracting provisions of P.L. 109-461. We have 
consistently objected to VA's position that P.L. 109-461 only applies 
to ``open market'' purchases. We read the law to say that VA shall 
provide a preference to SDVOSBs and VOSBs for all goods and services VA 
buys. Open market is only a small percentage of total VA purchases and 
totally excludes Federal Supply Schedule buys which provide enormous 
opportunities for SDVOSBS and VOSBs. We are also frustrated by VA's 
minimal use of the sole source provisions of P.L. 109-461 as well as 
VA's burdensome requirement for synopsis of sole source opportunities. 
These VA policies make it almost impossible for new start-up firms to 
enter the VA market, which we believe, is a major goal of P.L. 109-461. 
As I have testified previously, our members tell us the biggest 
impediments to doing business with VA are access to decision makers to 
present capabilities, access to timely information on upcoming contract 
opportunities, inconsistent implementation of the provisions of P.L. 
109-461, VA's administration of the Federal Supply Schedules regarding 
distributors, and VA's use of contract vehicles such as prime vendor 
and standardized contracts.
    In summary, NaVOBA supports CVE but strongly believes VA must 
provide adequate resources commiserate with CVE's expanding mission, 
including verification and the VIP data base. VA must reconsider its 
overly restrictive interpretation and administration of P.L. 109-461. 
VA must be more sensitive to the needs/concerns of the veteran small 
business community. NaVOBA stands ready to be a partner with VA to 
achieve the intent of P.L. 109-461.
    I would like to thank the Committee once again for holding this 
important hearing and I'm happy to answer any questions.

                                 
 Prepared Statement of Richard Daley, Associate Legislation Director, 
                     Paralyzed Veterans of America

    Chairwoman Herseth Sandlin, Ranking Member Boozman, Members of the 
Subcommittee, Paralyzed Veterans of America (PVA) would like to thank 
you for the opportunity to express our views on the issue of veteran-
owned small businesses that contract with the Federal Government. PVA 
appreciates the hard work and sincere effort that this Subcommittee 
applies to their oversight efforts of business and educational programs 
that help veterans.
    Small businesses are the backbone of our economy. They drive 
employment and are responsible for the majority of new jobs in this 
country. Small businesses generate untold billions of dollars to the 
Gross Domestic Product (GDP) each year. In 2009, over half of GDP was 
generated by small businesses with 500 or fewer employees. This can be 
expected to continue in the future. Simply put, small businesses are 
the essence of the American Dream, the ability to succeed as an 
individual through hard work and dedication to a goal.
    The issue of small business ownership is important to PVA. PVA's 
members are veterans disabled by catastrophic injury or diseases. The 
many challenges still facing these individuals with disabilities as 
well as other service disabled veterans as they seek employment have 
resulted in an unemployment rate higher than any other category of 
citizens in the United States. With the employment options for veterans 
limited, many have chosen to use the skills and knowledge acquired in 
the military to create a small business with the hopes of being able to 
support themselves and their families. Small business ownership and 
self-employment is a bridge for many of these individuals. Conducting 
business with the Federal Government and specifically with the 
Department of Veterans Affairs (VA) is the goal for many of the 
veteran-owned and service disabled veteran-owned businesses.
    Since the passage of the ``Veterans Entrepreneurship and Small 
Business Development Act of 1999,'' the VA has had a responsibility to 
support the veteran who is exploring or expanding his or her business 
to include contracting with the Federal Government through the 
Department of Veterans' Affairs. In 2001 the VA created the Center for 
Veterans Enterprise (CVE) within the Office of Small and Disadvantaged 
Business Utilization program to promote business ownership and 
expansion for veterans and service-connected disabled veterans. CVE has 
worked closely with VA contracting personnel to inform them of their 
responsibilities to veterans and service-disabled veteran-owned small 
businesses.
    The VA created a verification process for veterans and service-
disabled veteran business owners who plan to conduct business with the 
VA. The verification process is the responsibility of the CVE. Although 
this was intended to ensure proof of military service or military 
service that resulted in a service connected disability of the veteran 
business owner seeking VA contracts, other agencies have often 
requested this verification to insure the business is owned by a 
veteran. This makes verification a required document for the veteran 
owned business pursuing Federal contracts.
    Obtaining this required verification has been a problem. Some 
veteran business owners have submitted the required documents and have 
been told they may wait 12 months to receive verification. This is not 
acceptable for the veteran-owned small business. When the veteran 
decides to contact the office of CVE to check on the status of their 
application, no one answers the phone. I am told by veteran business 
owners that they can not get a response by e-mail or by direct mail. It 
is frustrating for the veteran business owner to not know if they have 
one more month to wait, or six more months.
    In a recent meeting of the Veterans Entrepreneurship Task Force, 
(VET-Force) the current acting Deputy Director for CVE, Gail Wegner, 
told the organization that it would take a year to process the 
applications they currently have. We cannot understand why it should 
take a year to process these applications. Meanwhile, the veteran faces 
a decision of applying for this year and submitting an application for 
next year at the same time.
    The other issue that has veteran business owners frustrated is the 
policy of the CVE that the veteran business owner can only own one 
business. Nowhere else in the Federal Government contracting 
marketplace or small business incentive programs do such restrictions 
exist. Often a veteran-owned small business will have a second similar 
type business that compliments their primary business. For example, in 
the requirements of contracting business with the Department of 
Defense, one business may require a security clearance for its 
personnel, while the business directed to the general public would not 
require such a select workforce. This policy of owning only one 
business should be removed.
    Lastly, we remain concerned about resources for the CVE. Congress 
must provide the Department of Veterans' Affairs with dedicated funding 
to ensure the success of the Center for Veterans Enterprise so that it 
may fully staff its organization to adequately meet the increasing 
demand for timely certification of veterans' status, as legitimate 
entrepreneurial entities.
    Chairwoman Herseth Sandlin, Ranking Member Boozman, thank you for 
this opportunity to testify on this issue. I would be happy to answer 
any questions you have.

                                 
Prepared Statement of Richard F. Weidman, Executive Director for Policy 
          and Government Affairs, Vietnam Veterans of America

    Good afternoon, Madame Chairwoman, Ranking Member Boozman and 
distinguished Members of the Subcommittee. Thank you for giving Vietnam 
Veterans of America (VVA) the opportunity to offer our written comments 
on a number of important bills here today. I also offer these brief 
comments on behalf of the Veterans Entrepreneurship Task Force (VET-
Force).
    Three years ago we began speaking to VA officials and to 
Congressional staff about the problem of ``rent-a-vet'' masquerade 
businesses that were starting to plague the veteran owned business 
(VOB)/service disabled veteran owned business (SDVOSB) community. 
Basically these were ``front companies'' that had no organizational 
criteria but were ostensibly subcontracting with large companies who 
actually did all or virtually all of the work. There was also the 
companion problem of actual businesses that listed themselves as SDVOSB 
on the Central Contract Registry (CCR) or on the Vendor Information 
Pages (VIP) of the Center for Veterans Enterprise (CVE) at the 
Department of Veterans Affairs. As there was no verification process at 
that time for the VIP at VA, and there still is no verification process 
for the CCR, there was nothing to prevent them from getting a contract 
and being counted as an SDVOSB except for the due diligence of a 
contract officer and/or a protest from a real SDVOSB who did not 
receive the contract award.
    The problem was compounded by the fact that at least some contract 
officers were overwhelmed enough that they did not check closely on 
anyone's credentials to see if they were bona fide, but took the credit 
and got on their way with other tasks.
    In response to the articulation of this problem you listened and 
put forth legislation that became Public Law 109-461 to address this 
problem and others that SDVOSB were encountering in trying to do 
business with the VA. Further, you expanded the pool of businesses 
eligible by also providing for special authorities for veterans who are 
not service disabled to bid on contracts at the VA on a more level 
playing field. We are grateful for your efforts in this regard, 
although the actual implementation of the law leaves a great deal to be 
desired.
    The idea of verification by the CVE was something that we agreed 
with, and met several times with CVE staff, bringing into the mix 
several VOSB who were already successful Federal contractors in a 
competitive environment, as well as some who had experienced the 
problems that the State of California had gone through in trying to 
fairly administer a similar law of a State level.
    The CVE at this point has made a total mess of the verification 
process. Even they admit that there is up to a 10 month backlog for a 
certification that only lasts 1 year. In other words, one may get 
approved after an inordinate delay, and then less than 60 days later 
start the process for the following year. This smacks of bureaucratic 
paperwork taken to an absurd degree, and would be funny if it was not 
so serious a matter for the veterans involved.
    Further, there is absolutely no transparency in the process so that 
a VOSB or SDVOSB can find out where their application is in the 
processing line.
    Perhaps most galling is the imposition of a restriction that a 
veteran cannot own more than one business and that the veteran must be 
full time (e.g., 5 days per week) at that business. Otherwise the CVE 
has posited that the veteran is not operating and controlling the 
business. This is just silly, and only people who have never operated a 
business would come up with such a notion. Every major veteran service 
organization has more than one legal entity in order to accomplish 
various aspects of our mission. Does that mean that the elected 
leadership is not in control? Of course it does not. I can assure you 
that VVA National President John Rowan is very much in control of our 
organization, is truly the Chief Executive Officer, even though he 
lives in New York City, and our primary office is here. Electronic 
means of communication have in fact been invented.
    The staff of the CVE has maintained that these onerous requirements 
are necessary because this is what will stop fraud in the program. That 
is just not the case, as it is just not that simple. We point out that 
these two requirements are not mentioned anywhere in the law, nor even 
hinted at in Committee reports or in testimony anywhere we can find 
when the current law was under consideration.
    We asked where they got this idea, and were told from the Small 
Business Administration. Apparently they decided to model it on the 
theoretical restrictions imposed on 8(a) businesses, where you can only 
have one 8(a) per lifetime. We would note that the 8(a) program is a 
business development program. The veterans program is not a business 
development, and neither the VA nor anyone else in the Federal 
bureaucracy offers any meaningful assistance to SDVOSB, much less to 
non disabled veterans.
    The 8(a) program is a socio-economic classification and program 
that stems from being a member of a socially or economically 
disadvantaged group.
    On the contrary, Service Disabled Veterans earn their status as a 
reward for services rendered to country and sacrifices made in that 
service in the military. It is an earned status. For any non-disabled 
veteran it is also an earned status.
    Women owned business owners are not limited to one business, nor 
are HUB zones. When we pointed this out to CVE staff the response we 
got was not a rational argument, but rather ``I'm not going to do 
anything to jeopardize my retirement.''
    We point out that reportedly none of the firms specifically named 
in the report GAO-10-306T (http://www.gao.gov/new.items/d10306t.pdf) 
dated December 16, 2009; ``Service-Disabled Veteran-Owned Small 
Business Program: Case Studies Show Fraud and Abuse Allowed Ineligible 
Firms to Obtain Millions of Dollars in Contracts'' have been debarred 
from doing business with the government.
    It is our understanding that at least one of these firms named by 
the GAO has received further contracts from the VA totaling well into 
seven figures. None of the contracting officers has been taken to task 
for a lack of due diligence, nor to our knowledge have any of the 
managers in those areas of VA been taken to task. Lastly, apparently 
not only has there been no referral to the United States Attorney to 
investigate whether there was any collusion on the part of VA personnel 
in these matters, or to prosecute these crooks who posed as SDVOSB for 
a felony violation of the United States Code, the Inspector General has 
apparently not even been called in to investigate. Talk about Stolen 
Valor!
    It is clear that the CVE has gone awry in a major way. Instead of 
being a source of encouragement to veteran entrepreneurs and would-be 
entrepreneurs, it has somehow transmogrified from an entity that 
assisted our people to one that polices our veteran entrepreneurs in a 
rather heavy handed manner. To add insult to injury, one of the key CVE 
staff members spoke on behalf of VA before major prime contractors at 
the TRIAD conference in Las Vegas last week about being committed to 
diversity in subcontracting, but did not mention the words veteran 
owned or service disabled veteran owned small business once in their 
oral presentation.
    We are pleased with the appointment of Mr. Tim Foreman as Executive 
Director for Small Business at VA, and wish him well. We stand ready to 
support him as he tries to get this program headed in the right 
direction again, after 15 months of drift and confusion. We know Mr. 
Foreman from his record at the Department of Defense and at the Navy. 
We know him to be a decent man and a good leader, who often can get 
things done despite efforts by some to either obstruct or delay, or to 
just have a penchant for complicating a one car funeral. We are hopeful 
that he will provide the leadership to get things back on track, and 
that he will have the full backing of the Secretary's office as he does 
so.
    However, this problem with the verification process must be fixed. 
It must streamlined, made user friendly, transparent so a veteran can 
see where they are in the process, and it must happen in days, not 
many, many months or years.
    When one steps back and looks at this process, you see that there 
are some nefarious folks who have taken advantage of this program. 
Instead of seeking out those culprits, inside the VA and in the private 
sector, and punishing them, VA has put a mountain of burdensome 
paperwork and bureaucratic burden on the individual veteran business 
owner. This is akin to blaming the kid who gets beat up and has his 
lunch money taken for not being careful enough, and making him go a 
much longer route each day and go through burdensome procedures instead 
of catching and punishing the bums who beat him up and stole his lunch 
money. It was SDVOSB who asked for assistance to protect our honor and 
the integrity of the program. Instead of going after the culprits, the 
VA is treating all of our veteran business owners like miscreants. This 
is just wrong.
    The overwhelming majority of the owners of VOSB and SDVOSB ore 
good, hard working, and decent citizens who have served their country 
well. They just want the opportunity to earn their piece of the 
American dream, to provide quality products and services at a decent 
price to benefit their brothers and sisters who use the VA, and to 
employ other veterans and disabled veterans in meaningful work at a 
decent wage in the process.
    We ask for the help of this distinguished body to help us reason 
with the VA in these matters.
    I will be happy to answer any questions.

                                 
         Prepared Statement of Joseph C. Sharpe, Jr., Director,
             National Economic Commission, American Legion

    Chair Herseth Sandlin, Ranking Member Boozman and Members of the 
Subcommittee:
    Thank you for the opportunity to present The American Legion's 
views on the Department of Veterans Affairs' (VA's) Center for Veterans 
Enterprise.
    The American Legion contends that the key to the Nation's economic 
recovery depends on a strong and vibrant small business agenda. Small 
business is the engine that will pull the American economy out of its 
current recession and will be responsible for American's economic 
growth in the foreseeable future. Economic data constantly points out 
that businesses with fewer than 20 employees account for 90 percent of 
all U.S. firms and are responsible for more than 97 percent of all new 
jobs, generated $993 billion in income in 2006, and employed 58.6 
million people. There are 27 million small businesses in the U.S. and 
99.7 percent of all firms are small businesses.
    In FY 2007, the Small Business Administration's (SBA's) Office of 
Government Contracting reported that of more than $378.5 billion in 
Federal contracts identified as small business eligible, small 
businesses only received a total of $83 billion in prime contract 
awards and about $64 billion in subcontracts. Service-Disabled Veteran-
Owned Businesses (SDVOBs) were recipients of $3.81 billion, or 1.01 
percent of those available contract dollars.
    America has benefited immeasurably from the service of its 23.4 
million living veterans, who have made great sacrifices in the defense 
of freedom, preservation of democracy, and the protection of the free 
enterprise system. Due to the experience veterans gain in the military, 
the success rate of veteran-owned businesses is higher than other non-
veteran-owned businesses. The current War on Terror has had a 
devastating impact on the Armed Forces and has contributed to 
exacerbating this country's veterans' unemployment problem, especially 
within the Guard and Reserve components of the military. According to 
the Department of Labor, the present unemployment rate for recently 
discharged veterans is as high as 20 percent. For example, one Reserve 
command from Wisconsin that is returning this month reports that 50 
percent of its members will be attending one of 11 Job Fairs the State 
has planned for the next 6 months. In addition, one out of every four 
veterans who do find employment earn less the $25,000 per year. 
Unfortunately, many of the thousands of servicemembers who are 
currently leaving the service are from the combat arms and non-skilled 
professions that are not readily transferable to the civilian labor 
market.
    One way of combating unemployment or underemployment is through the 
creation of new jobs. Small business creates an estimated 60 percent to 
80 percent of net jobs, therefore providing a central element for 
strong economic growth. Government should assist in the creation of new 
jobs by encouraging qualified entrepreneurs to start and expand their 
small businesses. No group is better qualified or deserving of this 
type of assistance than America's veterans.
    Increasingly, the growth and stability of this Nation's economy is 
dependent on the long-term success of the small business networks 
across the country. However, during a time of war there is much to be 
accomplished. Ironically, for too many years, the very men and women 
who served in uniform, stood ready to fight, and if necessary die in 
order to protect and preserve the free enterprise system, are summarily 
ignored by the Federal agencies responsible for meeting their small 
business needs.
                   The Center for Veterans Enterprise
    The Department of Veterans Affairs' Center for Veterans Enterprise 
(CVE) according to its Web site ``is designed to improve the business 
climate for veterans, to minimize access barriers and to inform the 
public about the benefits of working with veteran-owned small 
businesses.'' In addition, CVE provides opportunities for veteran-owned 
small businesses by collaborating with like-minded individuals and 
organizations who believe that veterans in business are still serving 
the American public. They work and link with partner organizations to 
provide local support to veteran-owned small businesses, because they 
are the face of a local economy. They also support acquisition teams 
through procurement coaching, free market research, awareness briefings 
and provide awards for noteworthy achievements. Their goal is to 
provide smart business information for those veteran-owned small 
businesses that are in search of starting their business or continuing 
to grow their business.
                              P.L. 109-461
    Former President Bush signed P.L. 109-461 on December 22, 2006, The 
Veterans Health Care, Benefits and Information Technology Act of 2006. 
This law not only pertains to important health care benefits, but also 
outlining how VA will deal with veteran-owned small businesses in the 
area of contacting opportunities. Some of the provisions contained in 
this law is as follows:

      Establishes a set-aside and sole-source award mechanism 
for Veteran-Owned Small Businesses;
      Requires the Secretary of Veterans Affairs to establish 
prime and subcontracting goals for SDVOSBs and VOSBs;
      Requires registration SDVOSB and VOSB firms in VA.
      Requires VA to verify ownership and control of the 
company and the status of veteran owners. Providing ownership and 
control information to VA is optional and veterans may continue to sell 
to VA without verifying their status. However, participation in the 
set-aside and subcontracting program is limited to eligible businesses 
registered Veterans Information Page (VIP); and
      Provides for debarment from VA acquisitions of those 
firms willfully misrepresenting their status.
               VA'S IMPLEMENTATION OF PUBLIC LAW 109-461

    In March 2007, Scott Dennision, Director of the VA's Office of 
Service-Disabled Veteran-Owned Small Business Utilization (OSDBU) is 
quoted as stating in his department's local newsletter the Small 
Business Advocate that ``a major challenge to implementing P.L. 109-461 
will be educating and training VA's workforce of the significant 
changes brought by the law. To that end, OSDBU is available to provide 
training to acquisition professionals, program officials engineering 
officers and personnel, purchase cardholders and anyone else involved 
in the acquisition process that could use this training.''
    Challenges:

      Over the past 10 years, VA has built CVE through non-
appropriated funds. CVE markets themselves as a technical training and 
assistance center that maintains a database of veteran-owned small 
businesses. With regard to CVE's technical assistance capabilities, 
this effort represents a negligible impact locally and virtually no 
impact nationally. CVE maintains one small assistance center in 
Washington, DC, where they see a small amount of clients and field 
phone calls;
      Takes anywhere from 1 month to 1 year to have a company 
registered with VA. One veteran complained after registering, he was 
deleted from the data system a few months later;
      Veterans cannot register multiple businesses at one time, 
and owners must work full time in their registered business;
      Qualifications of CVE staff questioned;
      A 10-case Government Accountability Office study proved 
approximately $100 million in SDVOSB sole-source and set-aside 
contracts through fraud and abuse of the program;
      The Web site is not user-friendly and needs to be 
improved; and,
      Not enough communicating between veteran-owned small 
businesses on the Web site.

    Observations:
    CVE's marquee program is their VIP database. As the only Federal 
database focusing strictly on veterans-owned small businesses, the VIP 
database has established itself as the premiere database for veterans 
in the country. CVE has successfully promoted this database 
commercially, as well as cross agency and has established a strong 
foundation and infrastructure that can easily be interwoven into other 
Federal databases such as the Central Contractors Registry (CCR).
    VA and the Small Business Administration (SBA) should develop a 
comprehensive partnership to assist veterans who are interested in 
participating in Federal procurement. CVE should maintain the database 
(VIP) and verify accurate veteran/service-connected disabled veterans' 
status. SBA should retain the responsibility for validating the 
business ownership, size standards, and structural integrity of the 
business. SBA should have direct reporting and input authority to the 
VIP database through the Office of Veterans Business Development once 
this information is collected. VA should maintain the eligibility 
status regarding veteran status. SBA is responsible for verifying all 
other socioeconomic categories for the purpose of Federal procurement. 
SBA already maintains the infrastructure, expertise and established 
regulatory guidance to include the veterans' population within their 
authority.
    I would like to mention that these observations have come from The 
American Legion's National Small Business Task Force. This Task Force 
is made up of veterans who are successful business owners, Federal 
agency officials and The American Legion leaders. Their mission is to 
gather information, data and research regarding the current and future 
economic status of veteran businesses. These individuals are the very 
individuals who should be using the CVE and are a part of the database 
that CVE is maintaining.
                               Conclusion
    While The American Legion applauds the Federal Government in 
setting up and implementing a program that is designed to assist 
Veteran-Owned and Service-Disabled Veteran Owned Small Business to 
start up and receive government contracts, it is our belief that this 
program could be improved. The implementation of CVE is small and does 
not necessarily provide the right assistance to veterans. The 
Vetbiz.gov Web site is not easily navigated and needs to become a more 
user-friendly Web site. In addition, CVE only operates one office in 
Washington, DC, and does not cover the needs of all the veteran-owned 
small businesses around the country. Government employees fielding 
phone calls about business is not an ideal way of conducting training 
and market research for veterans and their small businesses. VA and SBA 
should develop a comprehensive partnership to assist veterans who are 
interested in participating in Federal procurement, with each 
Department utilizing their resources to ensure proper implementation.
    The American Legion appreciates the opportunity to present this 
statement for the record. Again, thank you Madame Chair, Ranking Member 
Boozman, and Members of the Subcommittee for allowing The American 
Legion to present its views on these very important issues.

                                 
 Prepared Statement of Christina M. Roof, National Deputy Legislative 
                  Director, American Veterans (AMVETS)

    Chairwoman Herseth Sandlin, Ranking Member Boozman, and 
distinguished Members of the Subcommittee, on behalf of AMVETS, I would 
like to extend our gratitude for being given the opportunity to share 
with you our views and recommendations regarding the U.S. Department of 
Veterans' Affairs Center for Veteran Enterprise (CVE). Due to the 
recent lack of leadership at CVE, AMVETS believes this hearing to be 
vital in the success of CVE.
    AMVETS feels privileged in having been a leader, since 1944, in 
helping to preserve the freedoms secured by America's Armed Forces. 
Today our organization prides itself on the continuation of this 
tradition, as well as our undaunted dedication to ensuring that every 
past and present member of the Armed Forces receives all of their due 
entitlements. These individuals, who have devoted their entire lives to 
upholding our values and freedoms, deserve nothing less.
    By way of background, CVE is a subdivision of the Office of Small 
and Disadvantaged Business Utilization that extends entrepreneur 
services to veterans whom own or who want to start a small business. 
CVE also aids other Federal contracting offices in identifying veteran-
owned small businesses, in response to Executive Order 133600. In the 
past VA faced many obstacles, from lack of leadership to best practices 
with their entrepreneurship programs, which prevented the success of 
veteran owned businesses. For this reason, VA established the program 
entitled the Center for Veterans Enterprise (CVE) with the passage of 
the Veterans Entrepreneurship and Small Business Development Act of 
1999. Furthermore, on December 22, 2006, President Bush signed Public 
Law 109-461, the Veterans Benefits, Health Care, and Information 
Technology Act of 2006 in an effort to successfully identify and grant 
status to SDVOSBs. Effective June 20, 2007, this legislation authorized 
a unique ``Veterans First'' approach, specific to VA contracting.
    As we move through the 21st century, during a time of war, the VOSB 
and SDVOSB population continues to rise at a rate not seen since the 
end of World War II. As America's war fighters transition back into 
civilian life, many are choosing to pursue lives as entrepreneurs. 
Given the almost 30 percent influx of VOSB and SDVOSB, it is vital that 
the Center for Veterans Enterprise be ready and able to meet the 
growing demand for their services. However, AMVETS does not believe 
that CVE is serving the needs of those veterans it was originally 
designed to help. Due to a lack of leadership over the past year, we 
have seen CVE slowly move from the role of assisting VOSB and SDVOSBs 
to that of an information and referral agency for other Federal and 
State agencies. AMVETS believes the Center for Veteran Enterprise must 
be brought back up to par with what it was originally tasked to do: 
assisting our veteran population in all aspects for their 
entrepreneurship endeavors. In order to effectively accomplish this CVE 
must be properly staffed, trained, and funded.
    Recently, AMVETS has heard from our membership about the many 
obstacles veteran business owners are facing when working with CVE. 
Most recently, we have gotten an influx of calls on the lengthy time 
periods veteran business owners are experiencing when applying for 
their certification as SDVOSB. While AMVETS has always requested an 
accurate certification process of SDVOSB status, we do not believe that 
extensive waiting periods by SDVOSB are in the best interest of our 
membership, or any other SDVOSB. It is unclear to AMVETS the exact 
causes of this extensive waiting period, be it lack of staff or lack of 
training. However, we do ask this Committee to ensure that CVE is 
properly equipped with all necessary resources to effectively reduce 
this waiting period.
    On February 8, 2010, the final CFR rules regarding ``VA Veteran-
Owned Small Business Verification Guidelines'' were published. The 
document affirms as final, with changes, an interim final rule that 
implements portions of the Veterans Benefits, Health Care, and 
Information Technology Act of 2006. This law requires the Department of 
Veterans Affairs (VA) to verify ownership and control of veteran-owned 
small businesses, including service-disabled veteran-owned small 
businesses. This final rule declares that it defines the eligibility 
requirements for businesses to obtain verified status, explains 
examination procedures, and establishes records retention and review 
processes. However, the newly published rule fails to outline any solid 
changes or improvements to the SDVOSB verification process, and does 
not offer any clarification on how a CVE examination of SDVOSB should 
be conducted. AMVETS believes that the newly published rules focused on 
control and ownership definitions, yet provided no clarification on the 
specifics of the verification process by CVE. AMVETS believes that 
these updates to 38 CFR, Part 74 regarding P.L. 109-461 still leave the 
integrity of the SDVOSB verification system open to fraud. This 
continued lack of clarity and uninformed inconsistent status 
verification processes will cause the same unwanted results of many 
veteran owned businesses not receiving the protections they are 
entitled to under the law.
    At present, vendors desiring to do business with the Federal 
Government must register in the Central Contractor Registration (CCR) 
database, and those who indicate they are veterans or service-connected 
disabled veterans, self-certify their status without verification. P.L. 
109-461, required VA to establish a Vendor Information Page (VIP) 
database to accurately identify businesses that are 51 percent or more 
owned by veterans or service disabled veterans. This database was 
originally designed to act as a reliable, centralized database 
providing all Federal agencies a single source in the identification of 
possible SDVOSB and VOSB for consideration during their procurement 
processes. As of April 15, 2009 approximately 18,000 SDVOSB were 
registered in the CCR and Vet Biz databases, and unfortunately, an 
unknown number were still awaiting certification as a legitimate 
SDVOSB.
    Furthermore, according to the Federal Register updates of February 
2010, entrepreneurs will now be allowed only one company at a time in 
the contracting program and must work full time in the business, 
according to the new rule. AMVETS believes this change will hinder the 
overall entrepreneurship spirit of the veteran community, and unfairly 
leaves out any VOSB or SDVOSB that may have grown due to their success. 
AMVETS is in no way implying that all contracts should be awarded to 
the larger, more dominant firms, but rather should not hinder a 
veterans' business growth.
    As a part of the 2011 Independent Budget AMVETS recommended all 
Federal agencies be required to certify veteran status and ownership 
through the VA's VIP program before awarding contracts to companies 
claiming to be veteran or service-disabled veterans who own small 
businesses. We also recommended that Congress take the immediate and 
necessary actions in requiring all Federal agencies to use a single 
source database in all verifications of veteran ownership statuses, 
before unknowingly awarding contracts to companies on the basis of 
claiming SDVOSB or VOSB preference. AMVETS final recommendation 
regarding P.L. 109-461 is for the immediate internal promotion and 
education on proper usage of the database should coincide with 
implementation of database use. As the Veteran Owned and Service 
Disabled Veteran Owned Small Business population continues to rise, it 
is of the utmost importance that the Center for Veterans Enterprise be 
ready and able to meet the growing demand for their services.
    AMVETS strongly believes that VA must help eliminate the barriers 
that veterans face in regard to the formation and development of their 
business ventures. Madam Chairwoman, this concludes my testimony and I 
am happy to answer any questions you or the Committee may have for me.

                                 
       Prepared Statement of Tim J. Foreman, Executive Director,
        Office of Small and Disadvantaged Business Utilization,
                  U.S. Department of Veterans Affairs

    Madam Chairwoman and other Members of the Subcommittee, good 
afternoon. Thank you for convening this hearing to discuss issues 
pertaining to VA's Center for Veterans Enterprise (CVE). I am 
accompanied today by Ms. Iris Cooper, Associate Deputy Assistant 
Secretary for Acquisition, Office of Acquisition, Logistics, and 
Construction, and Ms. Phillipa Anderson, Assistant General Counsel, 
Government Contracts, Real Property, and Environmental Law Group, 
Office of the General Counsel. We are pleased to represent Secretary 
Shinseki and the Veterans who do business with VA.
    The Department of Veterans Affairs has a sustained tradition of 
outstanding support for small businesses with special emphasis on 
Veteran-owned small businesses, to include service-disabled Veteran-
owned small businesses (SDVOSB). Our CVE has become the central point 
for agencies, contractors and Veterans for support concerning the 
Veteran-owned business program at VA. CVE's Verification Program is 
also a first line of defense to ensure the integrity of these efforts.
    Let me assure you how strongly committed we are to identifying, 
eliminating, and pursuing fraud wherever it appears in a Veteran-owned 
small business program or in any small business program in which VA 
participates. The Government Accountability Office (GAO) reported that 
the ``SDVOSB program is vulnerable to fraud and abuse, which could 
result in legitimate service-disabled veterans' firms losing contracts 
to ineligible firms.'' Whenever an ineligible firm receives a contract 
intended for Veteran small business firms, honest firms are deprived of 
opportunities they have earned by putting their lives on the line for 
our country. It is hard to imagine anyone stealing from the heroes who 
make our way of life possible, but the potential exists. I will discuss 
actions we are taking in our Verification Program, as well as in other 
areas, to tackle this problem.
    As vital as the Verification Program is, the Center for Veterans 
Enterprise is far more than that program. The CVE opened in 2001 in 
response to Public Law 106-50 and, subsequently, its mission has 
expanded based on statutory and regulatory mandates. CVE staff provides 
business coaching support through our call center, a hallmark of our 
``service with a personal touch.'' The Center maintains the VetBiz.gov 
Web portal. This Web site hosts the Vendor Information Pages (VIP) 
database for Veteran-owned small businesses. The VetBiz.gov VIP 
database supports VA's duty in P. L. 106-50 to compile a list of 
service-disabled Veteran-owned businesses that provide products or 
services that could be procured by the United States and to deliver 
that list to each department and agency of the United States for their 
reference in identifying potential sources. This database also serves 
as the repository to dispatch information to business owners, another 
requirement of that law. In addition, under the authority of Executive 
Order 13360, the CVE provides assistance to other Federal agencies 
seeking to identify suitable contracting opportunities and the service-
disabled Veteran-owned small businesses that could provide those needs. 
The VIP database is one of many market research tools other agencies 
may consult as they seek to meet the government contracting goals.
    To advance opportunities for Veteran owned small businesses, CVE 
has numerous partnerships with other Federal agencies, large Federal 
prime contractors, support sector organizations such as the Association 
of Small Business Development Centers, the Association of Procurement 
Technical Assistance Centers, and the Manufacturing Extension 
Partnership Centers of the National Institute of Standards and 
Technology (NIST). Most recently we have begun a State outreach effort 
to assist Veteran business owners with contracting on the State level. 
With the Association of Procurement Technical Assistance Centers, we 
have developed a training program, the Federal Contractor Certification 
program, to enhance the professionalism of small business owners 
wishing to do business with the government.
    We have recently begun a pilot manufacturing program with the Naval 
Air Warfare Center and NIST's Manufacturing Extension Partnership (MEP) 
that promises to be a winning solution for extreme back-ordered parts 
for the U.S. Navy, that provides additional clients for the MEPs, and 
ultimately helps develop more Veteran-owned manufacturing concerns and 
increase Veteran employment in them. Our work with the International 
Franchise Association to develop the Veteran Franchise Program has 
nearly 400 franchisors participating. More than 1,300 Veterans have 
opened franchises through this program.
    All of these activities are part of the core mission of the CVE: to 
improve the business climate for Veterans, minimize barriers to access, 
and inform the public about the benefits of working with Veteran-owned 
small businesses. We believe that supporting Veteran-owned business 
goes beyond the Veteran business owner, as Veteran business owners 
offer greater employment opportunities for Veterans than nonVeteran 
business owners.
Verification
    The Verification Program is a vital part of VA's Veterans First 
procurement program. VA's unique procurement legislation gives priority 
to service-disabled Veteran-owned small businesses and Veteran-owned 
small businesses over all other small business types for set-aside and 
sole source contracts. The CVE realizes that there are challenging 
issues with the Verification Program. There will always be a learning 
curve with any new program, and this holds true for the verification 
process. We have continuously noted issues as they have arisen and 
updated our procedures and processes to address them given our current 
resources. In May 2008, the Department sought public comments regarding 
the structure and procedures to operate this program. Subsequently, we 
hired a contractor to study comparable programs, identify best 
practices and recommend changes to our program to enhance effectiveness 
and efficiency. In November 2009 our contractor submitted four reports 
including one on reengineering the process which contained several 
recommendations that we intend to implement. These recommendations 
include automating large parts of the process and ensuring that 
specific business documents are included so that our examiners may make 
better, more informed recommendations for approval or denial. These two 
recommendations will eliminate hundreds of man-hours of data entry and 
our reliance on publicly available documentation. Where we had 
previously only requested these documents when there was some question 
about ownership and control of the business, we will now require the 
documents to be submitted as a part of the application package for all 
businesses. To implement these recommendations VA will hire and train 
additional staff, and will develop, test, and certify the automated 
system. As a recipient of non-appropriated funds from VA's Supply Fund, 
CVE will continue to work with the Supply Fund Board of Directors to 
define and adjust its resource needs as demands indicate.
Planned Changes to the Verification Program
    The CVE reviewed the reports received from our contractor and 
decided to implement the most viable recommendations to improve the 
program. These improvements will be phased in and affect all parts of 
the Verification Program including its application process, on-site 
visits, and prioritization of applications from VA contractors, 
offerors and subcontractors.
    In December 2009 and January 2010 our staff devised an action plan 
to reengineer the process. As the current process employs many manual 
steps and extensive manual data entry, we have designed an automated 
process that will extensively revise the VIP database and create a Case 
Management System (CMS). The new version of VIP will interact with 
several other databases, including VA's Beneficiary Identification 
Records Locator Subsystem (BIRLS), for determining Veteran status and 
service-disabled status, as well as the Excluded Parties List System 
(EPLS) and LexisNexis for background checks on the owners. It will also 
be the repository where Veterans will upload their business documents 
to complete their application package. The CMS will be an interactive 
tracking system that will date-stamp each part of the process and will 
allow the Veteran to log into his or her VIP profile to obtain the 
status of the application processing in a manner similar to the way the 
shipping of a package can be tracked when ordering a product online. We 
will have the contract in place soon for the revision of the VIP 
database and the creation of the CMS and anticipate that this largest 
part of the process improvements will be ready to implement about 12 
months after the contract award.
    In order to complete an application package, a Veteran will choose 
a business type (LLC, S-Corporation, sole proprietorship, etc.) and VIP 
will then prompt the owner to submit specific business documents that 
will be examined to determine ownership and control of the firm. Once 
the package is complete, VIP will automatically run the status checks 
and populate a case file in the CMS. If there are no anomalies during 
the status check phase, the file will be moved on to CVE examiners who 
will review the uploaded documents to determine the eligibility of the 
company based on ownership and control. As a continuation of our 
current policy, a CVE Quality Reviewer will then review the entire file 
to verify the decision recommended by the examiner to complete the 
process.
    CVE has engaged a contractor to perform on site examinations at 
selected companies. We believe that this additional step will enhance 
the information we glean from the documentation and help us make a more 
informed decision in terms of the control of the business. These site 
visits have already begun, and are proving to be very valuable in 
determining whether or not the Veteran is in daily control of the 
business.
    Another change to the program will be to give priority to VA 
contractors. The Verification Program was designed to ensure that only 
eligible Veteran-owned and service-disabled Veteran-owned small 
businesses benefit from VA contract awards under the set-aside and sole 
source authorities and from subcontracting opportunities with VA's 
large prime contractors. It is important that current or potential VA 
contractors be given priority in processing applications.
    In the interim, however, we are taking actions to ensure award of 
contracts only to eligible businesses. We are establishing a priority 
system for processing applications. VA contractors and offerors in line 
for contract awards will receive expedited processing. It is our 
current practice to remove from public view any business that has been 
denied verification and to remove any business found ineligible as a 
result of a negative finding resulting from a protest decision or 
appeal. One recent change, implemented after our research into the 
GAO's report, is that we now lock the company's profile so that it 
cannot be returned to public view. This was a software anomaly which 
has been corrected. To retain a record, the profile is not deleted from 
the database, but it is not visible to public users. This eliminates 
the possibility of the company conducting further fraud by creating a 
new profile.
    We believe that these changes will substantially reduce the risk of 
verifying an ineligible firm due to fraud as to its status as not truly 
a Veteran-owned and controlled small business. However, these changes 
will not reduce fraud that comes about during subsequent contract 
performance. The Government Accountability Office's October 2009 report 
cited examples of both status and performance fraud, with the majority 
of cases representing performance fraud. A fully eligible business 
concern can still commit performance fraud by not adhering to the 
subcontracting limitations included in the contract and becoming what 
we refer to as a ``pass-through.'' CVE's Verification Program seeks to 
apply the GAO's ``fraud prevention model'' by ensuring upfront 
preventive controls, and applying lessons learned to refine those 
controls as experience indicates.
    On December 8,2009, VA made conforming changes to the Veterans 
Affairs Acquisition Regulation (VAAR). It established that businesses 
may be listed in the Vendor Information Pages database until December 
31, 2011, after which they must have been officially verified in order 
to be eligible for a sole-source or set-aside award under the authority 
of Public Law 109-461, or to have prime contractors receive 
subcontracting credit. We believe that it will take this long to 
develop and test the automated system, hire and train additional staff, 
and eliminate the inventory of aged applications. Our objective is to 
ensure that businesses that benefit from sole-source or set-aside 
awards are eligible to receive them. We will not compromise the quality 
of our examination process. In accordance with the VAAR, until the 
effective date is reached, we must continue to allow businesses that 
have yet to be verified to remain in the database.
Minimizing Opportunity for Performance Fraud
    Reducing performance fraud has several components. Raising 
awareness of the problem is a start. Providing training for the 
acquisition corps and business owners is also important. Developing 
effective tools that will enable contracting officers and technical 
representatives to identify possible performance issues early in the 
contract will also help. Concerns about ``pass-throughs'' or ``fronts'' 
are not limited to VA's Veterans First Program. The GAO report 
identified this as a problem in the Government-wide service-disabled 
Veteran-owned small business program. Similar issues have arisen 
previously in other small business programs. As the Executive Director 
of VA's Office of Small and Disadvantaged Business Utilization, I 
intend to champion this issue at the Interagency OSDBU Directors' 
Council and with my colleagues at the Small Business Administration in 
the Procurement Advisory Council. Because performance fraud is cross-
cutting a truly collaborative Government-wide approach to reducing risk 
is needed.
    VA and the SBA also have a duty to better coordinate support to 
Veterans under Public Law 109-461. We already have a working group 
developing plans for enhancing support to Veterans. One outgrowth of 
that working group is VA's intention to execute an Interagency 
Agreement with the SBA to process P.L. 109-461 protests. Reducing 
performance fraud is vitally important to the integrity of these 
programs, and we are keeping this on our agenda to continue developing 
new strategies. We must always try to stay one step ahead of the bad 
actors. Furthermore, VA intends to randomly sample business owners' 
records to determine compliance with the limitations on subcontracting 
contract requirements.
    In closing, I hope you will agree that VA has developed strategies 
to control risk and eliminate fraud in the Veterans' First procurement 
program as well as in the Verification Program managed by the CVE.
    Madam Chairwoman, thank you again for convening today's hearing. I 
request that this written statement be submitted for the record. I 
welcome your interest and I am prepared to answer any questions that 
you or the Members may have.

                                 

                                International Franchise Association
                                                    Washington, DC.
                                                     March 11, 2010



The Honorable Stephanie Herseth Sandlin                    The Honorable
U.S. House of Representatives                               John Boozman
House Subcommittee on Economic                             U.S. House of
  Opportunity                                               Representati
Washington, DC 20515                                        ves
                                                           House
                                                            Subcommittee
                                                            on Economic
                                                             Opportunity
                                                           Washington,
                                                            DC 20515



Dear Chairwoman Sandlin and Ranking Member Boozman:

    On behalf of the International Franchise Association (IFA), I write 
to support the Subcommittee's effort to foster more economic 
opportunities for America's military veterans; and in particular, those 
returning from active service who are now reentering the workforce. As 
you convene today to discuss the Department of Veterans Affairs' Center 
for Veteran Enterprise, I want to bring to your attention several 
ongoing initiatives the IFA has undertaken. I would also like to 
highlight pending legislation, H.R. 2672, the Help Veterans Own 
Franchises Act, sponsored by Reps. Leonard Boswell and Aaron Schock 
together with a bipartisan group of more than 30 other members.
    As the largest and oldest franchising trade group, the IFA's 
mission is to safeguard the business environment for franchising 
worldwide. IFA represents more than 85 industries, including more than 
12,000 franchisee, 1,100 franchisor and 500 supplier members 
nationwide. According to a 2008 study conducted by 
PricewaterhouseCoopers, there are more than 900,000 franchised 
establishments in the U.S. that are responsible for creating 21 million 
American jobs and generating $2.3 trillion in economic output.
Veterans' Transition Franchise Initiative--VetFran
    VetFran was developed to help returning active duty servicemen and 
women after the first Gulf War in 1991 and the program was reenergized 
with a new focus in 2002. The idea for this initiative was developed by 
the late Don Dwyer Sr., a veteran-entrepreneur himself; and, founder of 
The Dwyer Group. VetFran is a voluntary effort of IFA member companies 
that is designed to encourage franchise ownership by offering financial 
incentives to honorably discharged veterans. To date, nearly 400 
franchise companies participate in the program and since 2002, over 
1,500 veterans have purchased their own franchise business through the 
program. The profiles of VetFran participating companies, as well as 
the financial incentives they offer to veterans, can be viewed on the 
IFA Web site at www.franchise.org.
Cooperation with the Center for Veteran Enterprise
    For several years, the IFA continues to maintain an ongoing 
dialogue with the U.S. Department of Veterans Affairs' Center for 
Veteran Enterprise, seeking ways to improve program outreach to 
transitioning veterans. The agency is exploring new ways to help the 
association promote the program. In 2003, the agency honored the 
VetFran program with a Champion of Free Enterprise Award for expanding 
business opportunities for veterans and in 2006 renewed its official 
Memorandum of Understanding with IFA to jointly promote the program.
Help Veterans Own Franchises Act
    H.R. 2672 establishes a tax credit for franchise businesses that 
choose to offer qualified veterans a discounted initial franchise fee. 
The tax credit would amount to 50 percent of the total franchise fee 
discount offered by the franchisor to the franchisee, capped at $25,000 
per unit, and also provide a tax credit for the remaining initial 
franchise fee paid by the veteran franchisee.
    Given the current economic climate, many franchised businesses are 
finding it harder to access the capital they need to open new stores 
and recruit new investors. In order to encourage economic growth and to 
make it easier for veterans to own their business, the IFA supports 
enactment of this tax credit for those franchise systems that choose to 
offer qualified veterans a discounted franchise fee.
    In the words of Navy veteran and Dunkin' Brands franchisee Peter 
Turner: ``We're eager to begin the next chapter of our lives and take 
full advantage of the opportunities that we've helped defend while in 
uniform. Support such as these tax incentives gives us even more 
confidence to become entrepreneurs.'' Dunkin' Brands is a proud and 
active supporter of the VetFran initiative, which Peter Turner utilized 
when he selected his franchise opportunity.
    Again, the IFA appreciates the good work of this Subcommittee and 
strongly encourages its members to lend their support to the Help 
Veterans Own Franchises Act, so that our returning veterans can build a 
future for themselves, their families and their communities through 
small business ownership.
    Thank you for your consideration in this matter.

            Sincerely,

                                                       David French
                               Vice President, Government Relations
                   MATERIAL SUBMITTED FOR THE RECORD

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     March 22, 2010

Mr. Scott Denniston
Director of Programs
National Veteran-Owned Business Association
429 Mill Street
Coraopolis, PA 15108

Dear Mr. Denniston:

    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 The Department of Veterans Affairs' Center for Veterans 
Enterprise on March 11, 2010. Please answer the enclosed hearing 
questions by no later than Monday, April 19, 2010.
    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) 226-5491.

            Sincerely,

                                          Stephanie Herseth Sandlin
                                                         Chairwoman

JL/ot

                               __________

        RESPONSE TO HEARING QUESTIONS: HEARING OF MARCH 11, 2010
      Submitted By: Scott Denniston, Director of Programs, NaVOBA

    Question 1: In your testimony you write that verification should 
not be an annual requirement. How often should businesses be verified?

    Answer: We believe annual verification is burdensome for both the 
veteran owned small business as well as CVE! We offer two options; one, 
that firms must be verified ANY time there is a change in ownership or 
management. Firms should be required to notify CVE of any change in 
ownership or management within 30 days of the event. Second, if there 
is going to be a time certain verification requirement we would suggest 
a 3-year verification requirement. We also believe contracting 
officers, prior to award, and as part of their responsibility 
determinations should be required to check the firm's verification 
status in the CVE database.

    Question 2: Should the Federal Supply Schedules have a set aside 
requirement?

    Answer: Yes, NaVOBA supports set asides using FSS schedules for two 
reasons. First; contracting officers can already use socio-economic 
status of firms as an evaluation factor for award using FSS. Set aside 
authority is a natural extension of this and would expand the 
importance of FSS to contracting officers. Second, as FSS is a higher 
priority than small business programs in the Federal acquisition 
process thru FAR Part 8, allowing set asides under FSS would provide 
contracting officers a much more effective tool to direct contract 
opportunities to veteran owned small businesses. One only has to look 
at VA's implementation of P.L. 109-461 to see how agencies currently 
avoid veteran small businesses using FSS.

    Question 3: Going forward, how can the Center for Veterans 
Enterprise best help veterans and new startups enter the market?

    Answer: First and foremost, develop an effective verification 
process so veterans do not have to wait months for answers. Also, 
publish clear guidance on the rules, requirements and process. Next, 
NaVOBA believes business development is a local challenge that cannot 
be done from Washington, DC. CVE used to be a very effective clearing 
house of information on local resources that were available to help 
veterans across the country. That along with CVE business coaches was 
the best avenues to provide help to beginning veteran entrepreneurs. 
CVE also can be very effective in education agencies and large prime 
contractors on the value of using the CVE database of verified firms as 
well as establishing ``MOUs'' with these organizations to support 
veteran owned small businesses. We also believe CVE and the database of 
veteran owned small businesses can play a vital role in the process of 
hiring veterans. Who better to hire veterans than other veterans? 
According to all reports, small business is the employment engine for 
job creation so why not harness the 15,000 veteran owned businesses in 
the CVE database?

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     March 22, 2010

Mr. Joseph C. Sharpe, Jr.
Director, Economic Division
The American Legion
1608 K Street, NW
Washington, DC 20006

Dear Mr. Sharpe:

    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 The Department of Veterans Affairs' Center for Veterans 
Enterprise on March 11, 2010. Please answer the enclosed hearing 
questions by no later than Monday, April 19, 2010.
    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) 226-5491.

            Sincerely,

                                          Stephanie Herseth Sandlin
                                                         Chairwoman

JL/ot

                               __________
                                                The American Legion
                                                    Washington, DC.
                                                       June 1, 2010

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

Dear Chair Herseth Sandlin:

    Thank you for allowing The American Legion to participate in the 
Subcommittee on The Department of Veterans Affairs' Center for Veterans 
Enterprise on March 11, 2010. I respectfully submit the following in 
response to your additional questions:
    1. In your testimony you refer to the challenges faced by members 
of the National Guard and Reserves. In your estimation how many have 
businesses and how many currently do business with the Federal 
Government.
    SBA, DoD and CBO Research and reports indicate that between 6 and 7 
percent of the Reserve component members are self employed or small 
business owners. 6 percent of the 860,000 Ready Reserve equates to 
51,600 veteran business owners. According to SBA and GSA 
representatives, there is currently ``no way to know'' how many 
Reservists do business with the Federal Government. Neither CCR nor 
FPDSNG request Reserve or Guard status. Also, the Community 
Reinvestment Act (CRA) does not inquire about veterans, or Reservist or 
military member/family status for loans.

    2. How can the government encourage qualified entrepreneurs to 
start and expand their small businesses?
    The best method for the government to encourage qualified 
entrepreneurs is to start and expand their small businesses by ensuring 
there is a robust network of entrepreneur training and business 
mentoring networks in place solely dedicated to helping veterans go 
through the exploratory and implementation stages in starting and/or 
expanding their businesses. Ultimately, veteran business owner's 
success or failure will rest primarily on his/her abilities, energies 
and commitments.

    3. Are veterans around the country looking for technical assistance 
from the Center for Veterans Enterprise or are they concentrated in the 
DC metro area?
    Other than presentations at public events, legion members from 
around the country have reported that they are seeking guidance from 
CVE that is more specific to contracting opportunities and processes 
internal to VA. It is a challenge for Federal employees to (try to) 
provide distanced business counseling to entrepreneurs, as most Federal 
employees have not been successful entrepreneurs themselves. Veterans 
should be referred to SBA or other State and local small business 
development assistance programs that operate in the markets where the 
veteran lives. Uninformed or bad business advice can be very 
detrimental to any entrepreneur.
    CVE should also take on the role of encouraging the development of 
a robust Mentor-Protege program. For example, a program that includes 
providing veteran companies with sound business techniques, such as the 
maintenance of organizational stability, financial resources, and 
bonding requirements.

    4. In your testimony you suggest that the Department of Veterans 
and the Small Business Administration develop a partnership to assist 
veterans who are interested in participating in Federal procurement.
    VA and DoD can and should determine veteran status of any veteran 
registering in CCR. SBA should provide the business counseling, 
training, financing and (external to VA) government procurement 
programs as that are their authority and responsibility. The issue for 
veteran's entrepreneurship is a lack of adequate resources allocation 
to the SBA veterans programs. SBA and VA should develop a local 
collaborative relationship so VA can refer veterans to SBA services in 
the local area. Congress could push for that collaboration, and provide 
adequate resources to SBA Veterans to support a nationwide 
collaborative service delivery system.

    5. How should the government determine if a servicemember is 
qualified?
    Veterans and Reserve component members and TAP eligible 
servicemembers should be eligible for veteran specific small business 
support programs. A goal should be established for veteran and 
reservist owned small businesses in the Federal marketplace, and 
Congress should consider the inclusion of veterans/Reservist/families 
in the CRA. Congress could also fund the still authorized Veterans 
direct loan program from SBA, and have SBA coordinate outreach and 
verification of that program with VA. Direct loan program could also be 
outsourced as not needing to hired huge numbers of employees.

    6. How can VA's Web site be improved to be more helpful to 
veterans?
    VA's Web site should more easily direct veterans to local VISN 
resources that would help veterans who are looking to do business with 
their local VA hospital or clinic.
    Thank you for your continued commitment to America's veterans and 
their families

            Sincerely,

                                              Joseph C. Sharpe, Jr.
                             Director, National Economic Commission

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     March 22, 2010

Ms. Christina Roof
National Deputy Legislative Director
AMVETS
4647 Forbes Boulevard
Lanham, MD 20706

Dear Ms. Roof:

    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 The Department of Veterans Affairs' Center for Veterans 
Enterprise on March 11, 2010. Please answer the enclosed hearing 
questions by no later than Monday, April 19, 2010.
    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) 226-5491.

            Sincerely,

                                          Stephanie Herseth Sandlin
                                                         Chairwoman

JL/ot

                               __________
               Response to Deliverable Questions from the
                  House Committee on Veterans' Affairs
          Subcommittee on Economic Opportunity: Hearing on CVE
     Christina M. Roof, AMVETS National Deputy Legislative Director

    Question 1: In your written testimony you stated that the Center 
for Veterans Enterprise needs to be properly staffed, trained and 
funded. What staff is CVE lacking, what training is needed and what 
level of funding is needed?

    Response: The Center for Veterans Enterprise promotes business 
ownership and expansion for veterans and service-connected disabled 
veterans to increase participation in the Federal marketplace, with 
emphasis on the U.S. Department of Veterans Affairs. That being said, 
AMVETS feels that the staff currently employed have been taken away 
from their primary mission (as stated above) and tasked to act as a 
inner-governmental agency referral agency. While promoting the use of 
Veteran Owned Small Businesses (VOSB) and Service disabled Veteran 
Owned Small Businesses (SDVOSB) is a crucial role in the development of 
small businesses, it should not be the primary focus of CVE.

    In regards to the kind of initial training or continued education, 
CVE staff needs to equipped with industry specific knowledge or at 
minimum differences in the varying industry specific needs, entity 
establishment rules, or be able to provide referral to a lawyer or 
advisor with experience/knowledge on how to incorporate a VOSB or 
SDVOSB, and finally all of the other basics that are vital to either 
establishing a solid foundation for a new business or to help ensure 
success of already established small businesses. Most private sector 
small business consultants are trained in handling most aspects of 
setting up or maintaining compliancy to all Federal and State 
regulations, thus CVE may find it more cost and time effective to 
partner with their individual State agencies or local experienced small 
business advisors to avoid the need for hiring more staff. This is not 
to imply that CVE staff should totally outsource all of these 
responsibilities, as CVE may find it more cost effective to build and 
utilize these strong partnerships until they feel prepared to bring all 
of required knowledge and duties ``in-house.'' The following is a 
partial list of the basic services and educational information I 
provided to my clients when assisting in the establishment or 
development of their small businesses, defined as under 50 employees. 
Again, this is a partial list and is not necessarily in chronological 
order:

      Application and filing of form SS-4 to acquire their 
Federal EIN number. This number can be instantly assigned if the CVE 
staff shows the veteran how to apply online.
      After receiving their Employer Identification Number 
(EIN) from the Internal Revenue Service (IRS), the veteran needs to be 
informed and made aware of all the applicable State and local tax 
identification numbers that are required for owning and conducting 
business in said State. This information is maintained by the IRS and 
all state agencies, is updated annually and is free and easily 
accessible through use of the internet or automatic annual printed 
materials being provided to whomever requests. This simple, free 
process should be used by all CVE locations.
      Application process to get approval and registered into 
the Federal Governments required procurement system database, the CCR. 
This process can often be confusing and a bit daunting to the first 
time user, however if staff is given a simple directive with 
instructions on how to use the CCR or simply practices ``dummy 
applications'' it would take no longer than 1 hour to be trained/
practiced and ready to assist others with the application process.
      Applying for DUNS identification number to be able to bid 
on Federal contracts.
      Provide a simple list of experienced, licensed & bonded, 
and veteran friendly companies or individuals to assist the veteran 
business owner with the required and extremely important aspects of 
their businesses. These included, but were not limited to, Certified 
Public Accountants, attorneys, payroll service providers, insurance 
providers, such as workers comp, liability, and health. I would also 
suggest they use a service, if staff not available, in the development 
and immediate implementation of OSHA regulations, ADA compliancy plan, 
accident and incident response plans, and any other industry specifics 
that need to be in place for a small business to bid on Federal 
contracts. Again these will vary greatly by industry and size of 
business. If the CVE staff is not able to personally provide referrals 
to the VOSB and SDVOSB for these provisions, a list should be provided 
to staff for distribution to business owners. It is also important to 
remember that VA and CVE are not personally vouching for performance or 
outcomes achieved by other service providers, they are just simply 
supplying a list of possible choices that can either be used or not by 
the VOSB or SDVOSB.

    CVE has a very unique opportunity in acting solely in the best 
interest of the VOSB and SDVOSB when compared to other private and 
government sector small business assistance agencies. CVE has been 
granted the authority and appropriated funds to serve as advocates and 
educators to our veteran business owner community. The integrity and 
authority of this program must be protected and be allowed to serve the 
VOSB and SDVOSB it was established to serve. Respectfully, with regards 
to the financial aspect of the question AMVETS believes any answer we 
provide will be based purely on speculations due to not having current 
intra-agency distributions of appropriations spending data. AMVETS will 
gladly provide feedback should the data become accessible.

    Question 2: What role should the Small Business Administration be 
playing in the veteran business certification?

    Response: Although AMVETS strongly believes that preventive 
proactive controls are the most effective way to minimize fraud and 
abuse, continual monitoring is an important component in detecting and 
deterring fraud. Monitoring and detection within a fraud-prevention 
program involve actions such as data mining for fraudulent and 
suspicious applicants and evaluating firms to provide reasonable 
assurance that they continue to meet program requirements. Currently, 
the only process in place that can detect fraud and abuse in this 
program is the bid-protest process administered by SBA. Through the 
bid-protest process, interested parties self-police the SDVOSB program 
by exercising their right to challenge an SDVOSB award that is 
suspected to have been awarded to an ineligible firm. This is an in-
effective control measure to handle oversight. Furthermore, although 
SBA's regulations state that firms misrepresenting themselves as SDVOSB 
concerns may be suspended or debarred from government contracting and 
may suffer civil and criminal penalties for knowingly making false 
statements to the SBA, to-date, the SBA program office has never 
referred any firms for debarment or suspension proceedings, or both, 
based on SBA findings from its program-eligibility reviews. GAO 
reported that when asked about its bid protest process, SBA officials 
have stated numerous times that the bid protest process focuses on 
determining the eligibility of a firm for a specific contract and 
providing details on why a firm was found to be eligible or ineligible. 
This clearly illustrates the need for clearer delegations of 
responsibilities and oversight accountabilities. According to the GAO 
report, SBA officials also stated that bid protest decisions do not 
include recommendations for suspension and debarment, further proving a 
lack of understanding and oversight of the validity of the businesses 
receiving awards from VA's Procurement Department. AMVETS strongly 
urges the re-writing and overall design of all of the responsibilities 
each individual agency is responsible for in the SDVOSB verification 
system. This will prevent fraud, prevent duplications of efforts, and 
protect the SDVOSB community, as well as the overall integrity of the 
program.

    Question 3: Do you have any concerns regarding fraud in the veteran 
program as was recently reported by GAO report 10-108 on the Service 
Disabled Veteran Owned Small Business Program?

    Response: Yes. AMVETS has been extremely concerned with the status 
and operating procedures currently being used by VA regarding 
procurement procedures. In fiscal year 2007, the Small Business 
Administration (SBA) reported $4 billion in government wide sole source 
and set aside SDVOSB contract awards. The GAO report did not come as a 
surprise at all to us.

    GAO found that the SDVOSB program is vulnerable to fraud and abuse, 
which could result in legitimate service-disabled veterans' firms 
losing contracts to ineligible firms. In just the 10 cases GAO 
investigated, they showed the consequences of this lack of control 
include approximately $100 million of sole source and set aside SDVOSB 
contracts to companies that have figured out how to manipulate the 
current system. AMVETS has voiced numerous concerns prior to this GAO 
report (GAO 10-108). We have always believed these types of fraudulent 
activities and untruths were unavoidable and likely given VA's lack of 
oversight and uniformed operating policies and procedures within their 
acquisitions system AMVETS believes that in all likelihood the GAO 
report was only the tip of the iceberg in illustrating and providing 
proof of the losses that VA and the VOSB and SDVOSB communities are 
sustaining in money, time, and resources due to contracts being misused 
or awarded under false pretenses. Furthermore, AMVETS finds it to be 
even more disturbing than the GAO report findings, is that VA is still 
allowing many of these companies to continue to work on VA property and 
receive funds that were originally allocated to the set-aside program 
for SDVOSB, even after the GAO report gave exact names, locations, 
award/contract details and even pictures of these companies. Yet, to 
the shock and outrage of the veteran community, VA has not acted or 
even sought to terminate these openly fraudulent contracts and/or 
impose any fines or legal measures in an attempt to start to recover 
lost funds. It is absolutely vital to the entire Federal acquisitions 
system that VA act immediately on ending these contracts to clearly 
illustrate that VA, or any other Federal agency, does not tolerate nor 
do they condone fraud in their procurement processes or any other part 
of their department and immediately re-award these contracts and much 
needed jobs to SDVOSB.
    How can we expect fraudulent procurement activities to cease if the 
Department of Veterans Affairs is publicly allowing fraud and pilfering 
of Federal awards specifically set-aside for veterans by simply not 
condemning it and standing by as it continues to occur? Why would we 
expect a company or individual whom has already lied about their 
veteran status, defrauded VA out of millions of dollars, and has 
knowingly taken away job opportunities from our disabled veterans to 
simply cease on their own accord? An effective fraud prevention system 
is the aggressive investigation and prosecution of individuals who 
commit fraud against the Federal Government. The SBA, through the bid-
protest process, makes determinations of eligibility status in the 
SDVOSB program. However, there is still not an effective process for 
prosecution, suspension, or debarment of program abusers. AMVETS finds 
this to be completely unacceptable. Until VA starts to enforce and put 
``teeth'' to their current accountability measures, the fraud will 
continue in the same vicious and rapacious cycle, with the VOSB and the 
SDVOSB paying the price.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                     March 22, 2010

Mr. Tim J. Foreman
Executive Director
Office of Small and Disadvantaged Business Utilization
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, D.C. 20420

Dear Mr. Foreman:

    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 The Department of Veterans Affairs' Center for Veterans 
Enterprise on March 11, 2010. Please answer the enclosed hearing 
questions by no later than Monday, April 19, 2010.
    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) 226-5491.

            Sincerely,

                                          Stephanie Herseth Sandlin
                                                         Chairwoman

JL/ot

                               __________
                        Questions for the Record
                     U.S. House of Representatives
                     Committee on Veterans' Affairs
                  Subcommittee on Economic Opportunity
 ``U.S. Department of Veterans Affairs Center for Veterans Enterprise''
                             March 11, 2010

    Question 1: How many other agencies have a division similar in 
scope to the Center for Veterans Enterprise?

    Response: The Center for Veterans Enterprise (CVE) is unique in the 
Federal Government. To our knowledge, no other agencies have a division 
similar in scope. While all Federal agencies have an Office of Small 
and Disadvantaged Business Utilization (OSDBU), only VA's OSDBU has a 
reporting organization that concentrates solely on Veterans' business 
programs. The CVE mandate, based on Public Law (P.L.) 106-50, and 
beginning when established in 2001, is to assist Veterans who wish to 
start or expand a small business and to work with other Federal 
agencies and corporations to expand the use of Veteran- and service-
disabled Veteran-owned small businesses (VOSBs and SDVOSBs). Subsequent 
legislation (P.L. 108-183, P.L. 109-461) and Executive Order (EO) 13360 
expanded and strengthened both the Veterans' business program as well 
as the mission of the CVE. The Verification program, launched in May 
2008, added an entirely new aspect to CVE's mission.

    CVE's staff, which consists primarily of Veterans, all have a 
passion for the mission. This may be one of the most entrepreneurial 
organizations throughout the Federal Government. In reaching out to 
other agencies, large corporations and support sector organizations, 
CVE formed several partnerships and launched various programs to assist 
Veterans and VOSBs. These include the VetFran program, the Federal 
Contractor Certification (FCC) program and the VetBiz Initiative for 
National Sustainment (VINS) pilot. Additionally, each year CVE formally 
recognizes agencies and corporations who meet or exceed the 3 percent 
goal for SDVOSBs at our Champions of Veterans Enterprise awards 
ceremony.

    Question 2: Is the VA or VA Office of the Inspector General looking 
into the fraud that was reported by the GAO report 10-108 on the 
Service Disabled Veteran Owned Small Business Program?

    Response: Under 38 CFR 1.201 VA employees are obligated to report 
possible violations of criminal laws to management or directly to the 
OIG; and under 38B CFR 1.204 certain criminal matters involving 
felonies must be reported to the OIG. On April 8, 2010, the VA Office 
of the Inspector General (OIG) furnished the reply directly to the 
Subcommittee. See response from the Hon. George J. Opfer, Inspector 
General, Department of Veterans Affairs, letter dated April 8, 2010, on 
p. 54.

    Question 3: Can you give us a brief overview of the partnerships 
that you stated in your testimony and the benefits of these 
partnerships?

    Response: From its inception, CVE has fostered both formal and 
informal partnerships with other Federal agencies, large corporations 
and support sector organizations. Some of these partnerships are 
formalized in Memoranda of Understanding (MOU) or Interagency 
Agreements (IAA). Others are collaborative efforts that have either 
extended beyond the terms of current MOUs or are part of larger grass-
roots efforts by agencies to assist small businesses. Many of our most 
forward-looking initiatives and programs depend heavily on the 
collaboration with our partners.

    Our partnership with the Small Business Administration (SBA) 
creates an easy path for Veterans to start their businesses through 
referrals to the Small Business Development Centers (SBDCs) and the 
Veteran Business Outreach Centers (VBOCs). In addition, we have a 
pending Interagency Agreement with SBA that is specific to protest 
adjudication.
    At the 2009 National Veterans Small Business Conference, Secretary 
Shinseki stated, ``I also need your help in carrying these program 
efforts forward into every State and municipality. Not all States have 
established, or have pending, Veterans programs for small business 
ownership.'' In response to this call for State-level business 
opportunity programs for Veterans we have begun an outreach program to 
the States. Our pending agreements with the States of Washington, 
Louisiana and Maryland help to create opportunities for VOSBs and 
SDVOSBs in contracting on the State level, through assistance in 
drafting legislation and the use of the VIP database for State and 
local contracting officers.
    Our participation in the Interagency Network of Enterprise 
Assistance Providers (INEAP) helps to provide Veterans with current 
resources and programs of all the participating agencies through 
collaborative efforts and communications.
    We are working to renew our formal MOU with the Association of 
Procurement Technical Assistance Centers. The centerpiece of this 
partnership is the development of the Federal Contractor Certification 
(FCC) Program. This jointly developed training program offers 
interested Veteran business owners thorough knowledge in four graduated 
levels that require a comprehensive exam to earn the certification at 
each level. When fully developed, a Veteran who holds the Level 4 
certification will have a thorough knowledge of Federal contracting and 
be able to write competent responses to solicitations and perform 
successfully on contract awards.
    Our VetBiz Initiative for National Sustainment (VINS) is a new 
program being piloted in South Carolina and Colorado for Veteran 
manufacturers. This program involves Interagency Agreements with both 
Naval Air Systems Command (NAVAIR) and the National Institutes of 
Standards and Technology (NIST) Manufacturing Extension Partnership 
(MEP) programs. It is a business development pilot that provides 
business and technical assistance to Veteran manufacturers to become 
qualified sources for extreme backorder parts for the Navy's legacy 
weapons systems. By leveraging and slightly modifying existing 
government programs, we will expand opportunities for Veteran 
manufacturers, expand employment opportunities for Veterans, begin to 
solve the problem of keeping the legacy systems running and expand the 
footprint of the Manufacturing Extension Partnership.
    CVE established a formal MOU in early 2002 with the International 
Franchise Association (IFA) to help increase participation of our 
Nation's Veterans with franchising opportunities and ownership; 
utilizing the IFA's program called the Veteran Transition Franchise 
Initiative (VetFran) program. With the cooperation of the CVE and the 
IFA, the program continues to expand. More than 350 participating 
franchisors, representing more than 100 different franchise categories, 
have agreed to help qualified Veterans acquire franchise businesses by 
providing incentives not otherwise available to other franchise 
investors. Veterans will get the ``best deal'' from these companies. As 
of March 1, 2010, more than 1,500 Veterans have participated in the 
VetFran program.
    CVE established the Corporate Partnership Program to provide direct 
assistance to Federal primes in support of VOSBs and SDVOSBs. The CVE 
accomplishes this goal through the development and implementation of 
the Corporate MOU Partnership Program. By partnering with large prime 
contractors we are able to create win-win situations for both the 
primes and the VOSBs and SDVOSBs. Our first step is to create a working 
relationship between the prime and Veteran-owned business. We do the 
majority of this through various outreach methods and events to bring 
the two together. Then we help the potential subcontractor identify 
ways they can provide a service to a prime that will benefit that 
company--thus creating a win-win situation. The Veteran-owned business 
gains a subcontracting opportunity and the prime gets a product or 
service that enhances their company's ability to perform well, and 
complete the contract in the most effective manner. These 
subcontracting opportunities often pave the way for a VOSB to one day 
become a prime itself, through the experience of working with a prime 
and the ability to show past performance on future contracting 
opportunities.
    A MOU between VA and General Services Administration (GSA) was 
signed in September 2005. The MOU identified a number of partnering 
activities to further the mutual interests of VA, GSA, and the VOSBs, 
including:

      establishing relationships in the GSA regions and VA 
Veterans Integrated Service Networks (VISNs);
      sponsoring regional small business conferences;
      collaborating to educate contracting officers and 
business owners;
      collaborating to enhance internet capabilities; and
      developing and sharing best practices and lessons 
learned.

    OSDBU's CVE partnered with the GSA to launch a number of 
initiatives to support Veteran-owned and Service-disabled Veteran-owned 
small businesses in the Federal market place.

      CVE assisted GSA in the development and award of the GSA 
VETS IT Government Wide Acquisition Contract (GWAC) and remains the 
largest user of this acquisition vehicle.
      GSA and CVE worked together to upgrade CVE's Business 
Owners ToolKit and make it into a professionally-produced GSA product. 
The co-branded ToolKit was released in May 2006, and contained 22 files 
educating business owners about the SDVOSB contracting program, how to 
sell to Federal customers, and giving points of contact in the major 
Federal agencies.
      CVE and GSA co-authored this GSA publication (ToolKit) 
marketing GSA contracts as an efficient method of contracting with 
Veteran-owned businesses.
      GSA and CVE co-sponsored regional small business 
conferences in partnership with other Federal agencies. These are an 
effective vehicle to establish closer relationships at the regional 
level. Twelve CVE/GSA regional conferences were held in FY 2006 and FY 
2007.

    Question 4: What penalties can VA impose on firms that commit 
fraud?

    Response: Questions 4 and 5 were considered in the context of firms 
that fall under the auspices of P.L. 109-461.

    Penalties include removal from public view in the VIP database and 
referral to the Office of the Inspector General (OIG). While not 
technically considered a penalty, VA has authority to debar businesses 
for misrepresentation of VOSB or SDVOSB eligibility for a period not to 
exceed 5 years from contracting with VA as a prime contractor or a 
subcontractor. Further, any deliberate violation of the limitation on 
subcontracting clause requirements for acquisitions under VAAR Subpart 
819.70 may result in action taken by VA officials to debar any service-
disabled veteran-owned, veteran-owned small business concern or any 
large business concern involved in such action.

    Question 5: How many companies have been punished for committing 
fraud in the previous 2 years?

    Response: As of April 5, 2010, no firms or individuals have been 
suspended or debarred from doing business with VA under P.L. 109-461. 
The government takes suspension and debarment actions against firms or 
individuals not to be punitive, but to protect the government's 
interests in future business transactions. Suspension and debarment are 
remedies available to the government for fraud, in addition to the 
imposition of criminal fines. VA's Office of Inspector General 
investigates allegations of fraud and makes recommendations to the 
Department of Justice for prosecution.

    Question 6: What exactly is the Case Management System that you 
refer to in your testimony?

    Response: The Case Management System is being developed to 
efficiently handle Veteran business owners' applications for 
Verification. The new system will improve CVE's internal business 
process by reducing the manual data entry and improving the management 
of applications. The system would also allow Veteran business owners to 
electronically check the status of their applications and provide 
detail information on the current status of the application and the 
level in which it is being processed. CVE is developing a simplified 
version of the Case Management System (CMS) as an interim step, and 
hopes to have that implemented during the third quarter of FY 2010. The 
full version of the CMS will be developed in concert with the new 
version of the Vendor Information Pages (VIP) database, and is a part 
of that solicitation. The solicitation is currently out on the GSA e-
buy system. We anticipate that this full version will be implemented 
about 8 months after the contract is awarded.

                       The Honorable John Boozman
    Question 1: The intent of the small business database provisions in 
P.L. 109-461 was to provide a database that government contracting 
officers as well as the private sector could use to easily identify 
small businesses that are owned and controlled by Veterans and disabled 
Veterans. In establishing the database of Veteran-owned small business, 
Section 8127 states, ``. . . the Secretary shall maintain a database of 
small business concerns owned and controlled by veterans and the 
veteran owners of such business concerns . . . '' and, ``in maintaining 
the database, the Secretary shall carry out at least the following two 
verification functions: (A) Verification that each small business 
concern listed in the database is owned and controlled by veterans. (B) 
In the case of a Veteran who indicated a service-connected disability, 
verification of the service-disabled status of such Veteran.'' Given 
that language, how do you justify displaying non-verified businesses?

    Response: The database satisfies several functions. In addition to 
the requirements of Public Law 109-461, the database serves as the 
communication mechanism to reach businesses in non-Federal markets. 
These businesses answer 5 basic eligibility questions. Businesses 
seeking to benefit from P.L. 109-461 contract awards must provide 
additional information.
    If a yet-to-be verified business is challenged, an interested party 
may protest the status, and if it meets the requirements, will be 
adjudicated by the Executive Director of the VA OSDBU or the SBA. To 
date, we have received no VOSB protests.

    Question 2: In your written testimony you mentioned several things 
that will happen in the future to improve operations at CVE. When do 
you plan fully implementing the following:

    Question 2(a): Increasing the resources for CVE;

    Response: CVE is currently staffed at 16.5 employees with an 
authorized ceiling level of 23 employees. CVE is presently using 
several recruitment options to gain additional staff to meet the 
ceiling level. We have recently selected the Deputy Director position 
and have posted Team Leader and Program Specialist positions through 
Merit Promotion procedures. Additionally, we are recruiting under VA's 
direct hire authority for Veterans. Although we are aggressively 
recruiting for additional staff, adequate space continues to be an 
issue as CVE's current work space can only accommodate a total of 17 
employees. As an interim solution, CVE has located an alternate work 
site sufficient to house the additional employees.
    CVE will continue to expedite the hiring process while using 
several recruitment methods and expects to be fully staffed at the 
authorized ceiling level no later than the summer of 2010. Additional 
staff above the current ceiling will be required to efficiently and 
effectively run the verification program.

    Question 2(b): Assisting Veteran owners contracting with states;

    Response: CVE has recently begun a State outreach program to assist 
State level organizations, typically the State-level Department of 
Veterans Affairs, in suggesting Veteran-business-friendly legislation. 
To that end, we have developed sample legislative language that can be 
used to develop State legislation. Pending partnership agreements are 
with Washington, Louisiana and Maryland, and we hope to expand to 
several more States in the near future with the goal to provide VOSBs 
and SDVOSBs enhanced opportunities to market their products and 
services at the State level.

    Question 2(c): The NIST/MEP initiative;

    Response: The NIST/MEP initiative is called the VetBiz Initiative 
for National Sustainment (VINS). The pilot has just launched in South 
Carolina, and we expect that the second pilot site of Colorado will be 
launched by May 2010.

    Question 2(d): Require business documents to be submitted with the 
application;

    Response: The business documents that will be called in with each 
application vary according to the business structure, i.e. sole 
proprietorship, chapter S corporation, Limited Liability Corporation, 
etc. At a minimum, business licenses, Articles of Incorporation or 
Operating Agreements, payroll records and business and personal tax 
returns will be required. Please see Attachment A for a list of 
documents by business type. Our examiners will have to be trained to 
examine these documents in a consistent manner.

    We plan to phase in the implementation beginning immediately with 
limited document review for VA offerors. As staff members are hired and 
trained, and as the infrastructure needed is put into place, the 
document review will be expanded to all priority groups.

    Question 2(e): When will you award the contract for the new Case 
Management System; and

    Response: CVE is developing a simplified version of the Case 
Management System (CMS) as an interim step, and hopes to have that 
implemented during the third quarter of FY 2010. The full version of 
the CMS will be developed in concert with the new version of the Vendor 
Information Pages (VIP) database, and is a part of that solicitation. 
The solicitation is currently out on the GSA e-buy system. We 
anticipate that this full version will be implemented about 8 months 
after the contract is awarded.

    Question 2(f): Randomly sampling requirements.

    Response: CVE is currently tracking the results of the quality 
review of the contractor's examinations of applications for the 
Verification Program. This will continue for a 60-day period. Upon 
completion of the 60-day review and collection of results, CVE will 
analyze them to determine whether random sampling of the quality review 
process can effectively be initiated. If implemented, the random 
sampling should expedite the processing of Verification applications 
and will allow CVE to shift current Quality Review Staff to other 
critical functions within the Verification program.

    Question 3: The Department of Veterans Affairs has stated that it 
awarded about 14 percent of contract dollars with Veteran and service-
disabled Veteran-owned small businesses. Is that 14 percent of all 
contracting dollars or just those made under open market purchases?

    Question 3(a): If only those made under open market purchases, what 
would the percentage be if all other sources such as the Federal Supply 
Schedule were included?

    Response: There is no distinction in goals between open market and 
non-open market purchases. The goals apply to VA's total spend. Even 
though FSS contracts are awarded by GSA (VA in the case of FSS Groups 
65 and 66), the agency that spends against them may take the 
socioeconomic credit that accrues from those expenditures. VA's 
performance with regard to contracting with Veteran and service- 
disabled Veteran-owned small businesses has increased over the last 
several years. At the end of FY 2009, service-disabled, Veterans-owned, 
small businesses received approximately 16.3 percent of VA contracting 
dollars and Veteran-owned, small businesses received approximately 19.3 
percent of contracting dollars.
                              Attachment A
                  List of Documentation to be Produced
    Below is a listing of documents that should be made available to 
the Center for Veteran's Enterprise. For organizational purposes, 
documents should be provided in sequential order as identified to the 
list below.

                       Center For Veterans Enterprise (CVE) Application Document Checklist
 Due to the size of the company or the length of time that it has been in existence, the following documents may
     or may not exist or may not be applicable (N/A) for the company. In addition, some documents may not be
 ``readily'' available for review. If the latter, these documents may be forwarded to CVE for review within one
      (1) business day. Documents that may be reviewed are established under 38 CFR 74.12 and 38 CFR 74.20.
----------------------------------------------------------------------------------------------------------------
                                                                               Sole                       Corp S
              Documents to be Produced at time of Application                  Prop      Part   LLC/LLP    or C
----------------------------------------------------------------------------------------------------------------
General Information:
----------------------------------------------------------------------------------------------------------------
Business and/or personal professional, industry, and/or other licenses,            X        X        X        X
 permits or accreditations held by Applicant and/or its employees which are
 required for Applicant to do business
----------------------------------------------------------------------------------------------------------------
Resumes of all owners, directors, partners, officers and other key                 X        X        X        X
 personnel, which include: education and training received; former
 employers, dates of employment, position titles and responsibilities;
 present employer, date of hire, position title and responsibilities
----------------------------------------------------------------------------------------------------------------
Financial Information:
----------------------------------------------------------------------------------------------------------------
For Sole Proprietor's, IRS Federal tax form 1040 first page as well as the         X
 Schedule C for the past 3 years
----------------------------------------------------------------------------------------------------------------
For partnerships, IRS Federal Tax Form 1065 and corresponding K-1 for past                  X
 3 years.
----------------------------------------------------------------------------------------------------------------
For both LLC's and LLP, they may elect to file as Sole Proprietorship                                X
 (Schedule C), partnership (Federal tax form 1065) K-1; or S Corporation
 (1120S) K-1. Please provide corresponding Federal tax documentation
 corresponding K-1 documentation for the past 3 years.
----------------------------------------------------------------------------------------------------------------
For S Corporations, Federal tax form 1120S (plus K-1(s)) (S corporations);                                    X
 For C Corporations, Federal tax form 1120
----------------------------------------------------------------------------------------------------------------
Payroll Distribution Ledger Summary or W-2's for preceding year                    X        X        X        X
----------------------------------------------------------------------------------------------------------------
Signature cards authenticated by financial institutions (Banks/Credit              X        X        X        X
 Unions/etc.) and approximately 20 checks from operating account
----------------------------------------------------------------------------------------------------------------
Copies of last 5 contracts and proposals                                           X        X        X        X
----------------------------------------------------------------------------------------------------------------
Management Information:
----------------------------------------------------------------------------------------------------------------
Management and Services agreements, to include Lease agreements and                X        X        X        X
 negotiated checks or instruments supporting payment of the agreements
----------------------------------------------------------------------------------------------------------------
Operating Agreement including all amendments                                       X        X        X        X
----------------------------------------------------------------------------------------------------------------
Legal Structure:
----------------------------------------------------------------------------------------------------------------
Ownership voting (i.e. proxies and voting trust agreements)                                 X        X        X
----------------------------------------------------------------------------------------------------------------
Partnership Agreement, including all amendments                                             X
----------------------------------------------------------------------------------------------------------------
Shareholders Agreement, including all amendments                                                     X        X
----------------------------------------------------------------------------------------------------------------
Equity participation or equity plans, restricted stock or ownership                         X        X        X
 interests or options for stock or ownership interest or plans therefore
 (If necessary, in attached notes section, identify all holders of options
 and/or participants in such plans)
----------------------------------------------------------------------------------------------------------------
Official Certificate of Formation and Operating Agreement with any                 X        X        X        X
 amendments
----------------------------------------------------------------------------------------------------------------
Minutes of first and most recent stockholder and Board of Directors                         X        X        X
 meetings
----------------------------------------------------------------------------------------------------------------
All corporate bylaws and all amendments                                                     X        X        X
----------------------------------------------------------------------------------------------------------------
Articles of Organization, including all amendments                                                   X
----------------------------------------------------------------------------------------------------------------
Articles of certificate or incorporation filed with the Secretary of State                                    X
 including all amendments
----------------------------------------------------------------------------------------------------------------
Stock registers for Applicant or stock ledgers showing listing all shares                   X        X        X
 of issuance.
----------------------------------------------------------------------------------------------------------------


                                 

                                U.S. Department of Veterans Affairs
                                        Office of Inspector General
                                                    Washington, DC.
                                                      April 8, 2010

The Honorable Stephanie Herseth Sandlin
Chairwoman
Subcommittee on Economic Opportunity
Committee on Veterans' Affairs
United States House of Representatives
Washington, DC 20515

Dear Madam Chairwoman:

    This is in response to your March 22, 2010, letter to Mr. Tim J. 
Foreman, Executive Director, Office of Small and Disadvantaged Business 
Utilization, Department of Veterans Affairs, following the March 11, 
2010, Subcommittee's hearing on The Department of Veterans Affairs' 
Center for Veterans Enterprise. VA forwarded one of your questions to 
the Office of Inspector General (OIG) since it requested information on 
OIG activities related to Government Accountability Office report, 
Service-Disabled Veteran-Owned Small Business Program--Case Studies 
Show Fraud and Abuse Allowed Ineligible Firms to Obtain Millions of 
Dollars in Contracts. Enclosed is our response.
    Thank you for your interest in the Department of Veterans Affairs.

            Sincerely,

                                       /s/by Richard J. Griffin for
                                                    GEORGE J. OPFER
Enclosure

                               __________
                  Office of Inspector General Response
       To Questions from the Subcommittee on Economic Opportunity
                     Committee on Veterans' Affairs
                 United States House of Representatives
             Hearing on the Department of Veterans Affairs'
                     Center for Veterans Enterprise

    Question: Is the VA or VA Office of Inspector General looking into 
the fraud that was reported by the GAO report 10-108 on the Service-
Disabled Veteran-Owned Small Business program?

    Response: The VA Office of Inspector General (OIG) is investigating 
a number of Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) 
based on allegations received from a variety of sources. OIG's 
investigations include the matters referred to in the Government 
Accountability Office's report, Service-Disabled Veteran-Owned Small 
Business Program--Case Studies Show Fraud and Abuse Allowed Ineligible 
Firms to Obtain Millions of Dollars in Contracts. Although we cannot 
discuss the specifics of ongoing criminal investigations, SDVOSB cases 
typically involve allegations of (1) ineligibility, such as a company 
associating with a service-disabled veteran (SDV) solely for purposes 
of obtaining the contract award noncompetitively where the SDV does not 
meet the ownership and control requirements for eligibility; and/or (2) 
improper performance, which usually involves subcontracting out more 
than the permissible portion of the contract work to non-SDVOSB firms. 
We will report on the results of arrests, indictments, prosecutions, 
and sentencing involving SDVOSB investigations, should such actions 
occur, through press releases and the OIG Semiannual Report to 
Congress.

                                  
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