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




                  STATUS OF VETERANS SMALL BUSINESSES

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

                                HEARING

                               before the

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                                 of the

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

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 29, 2010

                               __________

                           Serial No. 111-74

                               __________

       Printed for the use of the Committee on Veterans' Affairs










                                  ______

                      U.S. GOVERNMENT PRINTING OFFICE
  57-018                   WASHINGTON : 2010
___________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer 
Contact Center, U.S. Government Printing Office. Phone 202-512-1800, or 
866-512-1800 (toll-free). E-mail, [email protected].  






                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

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

                   Malcom A. Shorter, Staff Director

                                 ______

                  Subcommittee on Economic Opportunity

          STEPHANIE HERSETH SANDLIN, South Dakota, Chairwoman

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

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






                            C O N T E N T S

                               __________

                             April 29, 2010

                                                                   Page
Status of Veterans Small Businesses..............................     1

                           OPENING STATEMENTS

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

                               WITNESSES

U.S. Government Accountability Office, William B. Shear, 
  Director, Financial Markets and Community Investment...........     2
    Prepared statement of Mr. Shear..............................    35
U.S. Small Business Administration:
    Joseph F. Sobota, Assistant Chief Counsel for Advocacy.......     3
        Prepared statement of Mr. Sobota.........................    44
    Joseph G. Jordan, Associate Administrator, Government 
      Contracting and Business Development.......................    20
        Prepared statement of Mr. Jordan.........................    75
Export-Import Bank of the United States, Diane Farrell, Director.     5
    Prepared statement of Ms. Farrell............................    59
U.S. Department of Veterans Affairs, Tim J. Foreman, Executive 
  Director, Office of Small and Disadvantaged Business 
  Utilization....................................................    22
    Prepared statement of Mr. Foreman............................    77

                                 ______

American Legion, Joseph C. Sharpe, Jr., Director, National 
  Economic Commission............................................    11
    Prepared statement of Mr. Sharpe.............................    63
International Franchise Association, VetFran Committee, Mary 
  Kennedy Thompson, Vice Chairwoman, and President, Mr. Rooter 
  Plumbing Corporation, Waco, TX.................................    14
    Prepared statement of Ms. Thompson...........................    73
Vietnam Veterans of America, Joe Wynn, Senior Advisor............    12
    Prepared statement of Mr. Wynn...............................    68

                       SUBMISSIONS FOR THE RECORD

American Veterans (AMVETS), Christina M. Roof, National Deputy 
  Legislative Director, statement................................    79
Iraq and Afghanistan Veterans of America, Tim Embree, Legislative 
  Associate, statement...........................................    83

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      William B. Shear, Director, Financial Markets and Community 
      Investment, U.S. Government Accountability Office, letter 
      dated May 4, 2010, and response letter dated June 15, 2010.    86
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Joseph F. Sobota, Assistant Chief Counsel for Advocacy, 
      U.S. Small Business Administration, letter dated May 4, 
      2010, and SBA's Office of Advocacy responses...............    87
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Diane Farrell, Director, Export-Import Bank of the United 
      States, letter dated May 4, 2010, and Ex-Im Bank's 
      responses..................................................    91
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Joseph C. Sharpe, Jr., Director, National Economic 
      Commission, American Legion, letter dated May 4, 2010, and 
      response letter dated June 22, 2010........................    92
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Joe Wynn, Senior Advisor, Vietnam Veterans of America, 
      letter dated May 4, 2010, and VVA's responses..............    95
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Mary Kennedy Thompson, President, Mr. Rooter Plumbing 
      Corporation, on behalf of International Franchise 
      Association, letter dated May 4, 2010, and Ms. Thompson's 
      responses, dated May 5, 2010...............................    96
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Joseph G. Jordan, Associate Administrator, Government 
      Contracting and Business Development, U.S. Small Business 
      Administration, letter dated May 4, 2010, and SBA's 
      responses..................................................    98
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, 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 May 4, 2010, and VA 
      responses..................................................    99

 
                  STATUS OF VETERANS SMALL BUSINESSES

                              ----------                              


                        THURSDAY, APRIL 29, 2010

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

    The Subcommittee met, pursuant to notice, at 1:42 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 Status of Veterans Small Businesses 
will come to order.
    I ask unanimous consent that all Members have 5 legislative 
days to revise and extend their remarks and that written 
statements be made part of the record. Hearing no objection, so 
ordered.
    Today's hearing will provide the U.S. Government 
Accountability Office (GAO) an opportunity to update us on the 
ongoing work on veteran-owned small businesses (VOSBs), and 
also provide the U.S. Small Business Administration's (SBA's) 
Office of Advocacy the opportunity to update us on the veteran 
small business population.
    We will also hear from the veteran's community about the 
barriers encountered by veteran-owned small business while 
providing them the opportunity to submit recommendations on how 
to improve existing programs.
    Finally, we will hear from Administration officials 
highlighting veteran small business programs within their 
respective offices. This timely hearing comes 3 days after 
President Obama authorized an Executive Order to establish an 
Interagency Task Force on Veterans Small Business Development, 
of which we would like to learn more about.
    I look forward to hearing from all of our panelists today 
on this very important topic. I thank all of our witnesses on 
each of the panels for their patience in light of the last 
series of votes and our late start today, but I don't think we 
will have any more interruptions on votes for awhile.
    I now recognize our distinguished Ranking Member, Mr. 
Boozman, for his opening remarks.
    [The prepared statement of Congresswoman Herseth Sandlin 
appears on p. 34.]
    Mr. Boozman. I think in the interest of time with our 
interruptions, what I would like to do is ask unanimous consent 
to submit my statement for the record.
    [The prepared statement of Congressman Boozman appears on 
p. 34.]
    Ms. Herseth Sandlin. Hearing no objection, so ordered.
    We will move right to our first panel then.
    Joining us on our first panel is Mr. William Shear, 
Director of Financial Markets and Community Investment for the 
U.S. Government Accountability Office, Mr. Joseph Sobota, 
Assistant Chief Counsel for the Office of Advocacy, U.S. Small 
Business Administration, and Ms. Diane Farrell, Director for 
the Export-Import (Ex-Im) Bank of the United States.
    I would like to remind all of our panelists, the witnesses 
on this panel and others, that your complete written statements 
have been made part of the hearing record, and we ask you to 
limit your remarks to 5 minutes so that we have sufficient time 
for questions for each of the witnesses on the panel after you 
provide your testimony.
    So Mr. Shear, we will start with you. You are now 
recognized for 5 minutes.

STATEMENTS OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND 
 COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; 
 JOSEPH F. SOBOTA, ASSISTANT CHIEF COUNSEL FOR ADVOCACY, U.S. 
  SMALL BUSINESS ADMINISTRATION; AND DIANE FARRELL, DIRECTOR, 
            EXPORT-IMPORT BANK OF THE UNITED STATES

                 STATEMENT OF WILLIAM B. SHEAR

    Mr. Shear. Chairwoman Herseth Sandlin, Ranking Member 
Boozman, and Members of the Subcommittee, it is a pleasure to 
be here this afternoon to discuss our evaluation of U.S. 
Department of Veterans Affairs (VA) actions to expand Federal 
contracting opportunities for veteran-owned small businesses 
and service-disabled veteran-owned small businesses.
    Our work is mandated by the Veterans Benefits Health Care 
and Information Technology Act of 2006.
    My statement today is based on preliminary observations 
from our ongoing 3-year study looking at VA's efforts to 
contract with VOSBs and service-disabled veteran-owned small 
businesses (SDVOSBs).
    As to the status of our study we have provided a draft 
report to obtain agency comments from VA. We plan to issue our 
final report by the first week of June.
    My statement discusses first the extent to which VA met its 
prime contracting goals for SDVOSBs and VOSBs in fiscal years 
2007 through 2009, and second, VA's progress in implementing 
procedures to verify the ownership, control, and veteran status 
of firms in its mandated database of SDVOSBs and VOSBs.
    As shown in my statement, VA has exceeded its contracting 
goals. The increase of awards was associated with the agency's 
use of unique veteran preference authorities established by the 
2006 Act; however, a review of interagency agreements found 
that VA lacked an effective process to ensure that interagency 
agreements include required language that the other agencies 
comply to the maximum extent feasible with VA's contracting 
goals and preferences for veteran-owned small businesses.
    With respect to verification, VA has made limited progress 
in implementing its verification program. While the 2006 Act 
requires VA to use veteran preference authorities only to award 
contracts to verified businesses, VA's regulation does not 
require that this take place until January 1st, 2012.
    To date VA has verified about 2,900 businesses or 
approximately 14 percent of businesses in its mandated database 
of veteran-owned small businesses.
    In our evaluation of VA's verification program we have 
identified a number of weaknesses. They include first, files 
missing required information and explanations of how staff 
determine that control and ownership requirements had been met. 
Second, a large and growing backlog of higher risk businesses 
awaiting site visits as required by VA procedures. And third, 
although site visit reports indicate a high level of 
misrepresentation, VA has not developed guidance for referring 
cases of misrepresentation for enforcement action.
    Here I will add that such businesses are subject to 
debarment under the 2006 Act.
    In our final report we anticipate making recommendations to 
VA addressing its verification program and other matters.
    It is a pleasure to appear before you today. I would be 
happy to answer any questions you may have.
    [The prepared statement of Mr. Shear appears on p. 35.]
    Ms. Herseth Sandlin. Thank you, Mr. Shear. Mr. Sobota, you 
are now recognized.

                 STATEMENT OF JOSEPH F. SOBOTA

    Mr. Sobota. Chairwoman Herseth Sandlin, Members of the 
Subcommittee, good afternoon, and thank you for the opportunity 
to appear before you today to update information provided to 
the Subcommittee last year and to provide new data in response 
to the questions you have posed.
    My name is Joe Sobota, and I am an Assistant Chief Counsel 
in the Office of Advocacy at the U.S. Small Business 
Administration.
    Because Advocacy was established to provide independent 
counsel to policymakers, its testimony is not circulated for 
comment through the Office of Management and Budget (OMB) or 
other Federal offices, and the views expressed by Advocacy here 
do not necessarily reflect the position of the Administration 
or of SBA.
    Economic research on all types of small business issues has 
been one of Advocacy's core missions since its inception. 
Public Law 106-50 further directed Advocacy to develop 
information about firms owned by veterans and by service-
disabled veterans and the role that they play in our economy.
    Advocacy continues a long-term research effort in this 
important area. This includes the collection and interpretation 
of data from existing sources, commissioning of special 
tabulations of unpublished data, and contract research on issue 
specific topics.
    The most important source of data on veterans in business 
remains the U.S. Census Bureau's somewhat dated 2002 Survey of 
Business Owners and Self-employed Persons, what we call the 
SBO. The Census Bureau plans to issue a new report on veterans 
in business in May 2011 using data from its 2007 SBO. Until 
then, the 2002 SBO remains our best source.
    Concerning the questions you have posed, we are pleased to 
be able to offer some very interesting information that 
Advocacy has developed by commissioning special tabulations of 
SBO data that have not been published in the Census reports. 
These special tabulations help us fill some data gaps and have 
not received wide circulation.
    Using both the new and previously available data we can 
address three of the questions that the Subcommittee posed, 
those relating to location, industry sector, and export sales.
    First, a few general statistics. The 2002 SBO indicated 
that 14.5 percent of all business owners were veterans and 
about 7 percent of these were service-disabled. The Census also 
found that 12.2 percent of all firms were veteran-owned. If 
these percentages remained the same in 2009, there would have 
been about 3.6 million veteran-owned firms last year, of which 
perhaps 250,000 were owned by service-disabled veterans.
    Caution needs to be used with this sort of extrapolation, 
and if you want we can return to that subject.
    Veteran-owned firms mirror the greater business community 
in most respects, including their distribution by size both in 
terms of revenue and number of employees; their distribution by 
industry type; the percentage of those that are home based; in 
their level of franchise ownership; in the sources of capital 
used for business startup, acquisition and expansion; in the 
types of workers they use; and in the types of their major 
customers.
    Veteran business owners are, however, much older as a group 
than other owners, and they are overwhelmingly male. These 
characteristics reflect the demographics of the underlying 
population of all veterans.
    The top 10 States for veteran business owners were 
California, Texas, Florida, New York, Pennsylvania, Illinois, 
Ohio, North Carolina, Georgia, and Michigan. Virginia and 
Washington State also appeared on the top 10 list for service-
disabled veteran owners.
    Advocacy's special tabulation also showed that 
concentrations of both veteran and service-disabled veteran 
owners were slightly higher in rural areas than those for all 
business owners. Generally speaking, about 8\1/2\ percent of 
all veteran owners were in rural areas, those being areas 
without urban core populations of 10,000 or more.
    Those industries with the largest share of veteran-owned 
firms were the same as those for all U.S. firms. Professional, 
scientific, and technical services lead at 18.7 percent of all 
veteran-owned firms; construction, 13.9 percent; other 
services, 10.2 percent; retail trade, 9.5 percent; and real 
estate and rental leasing, 9.3 percent.
    Some variations occur in these distributions between 
employers and nonemployers.
    Finally, Advocacy's special tabulation provides information 
on owners whose firms have major export customers, those 
customers accounting for 10 percent or more of a firm's sales, 
and among employer firms this is about 2 percent of all owners; 
1.8 percent of veteran owners, and 2.2 percent of service-
disabled veteran owners had major export customers. There were 
slightly lower levels among nonemployers.
    Advocacy currently has in progress two additional economic 
research projects on veteran-related issues. One is examining 
factors affecting entrepreneurship among veterans, and another 
is looking at tax and regulatory problems facing veteran 
entrepreneurs.
    This study should help us answer another question you have 
posed, and it is currently in peer review and should be ready 
this summer.
    We have only mentioned a very small fraction of the large 
amount of information in the special tabulations we have 
appended to our written testimony today. I hope that this 
additional data will be useful to the Subcommittee, and we 
stand ready to help answer any questions that arise in 
connection with its review.
    We at Advocacy very much appreciate the Subcommittee's 
interest in veteran entrepreneurship issues and Advocacy's work 
in this area. We look forward to continuing to work with the 
Subcommittee in any way we can to help advance our knowledge 
about veterans in business and to help you in your 
deliberations on how to best serve the Nation's veterans 
community.
    [The prepared statement of Mr. Sobota appears on p. 44.]
    Ms. Herseth Sandlin. Thank you, Mr. Sobota.
    Ms. Farrell, we believe it may be the first time that the 
Export-Import Bank has testified before our Subcommittee, so we 
welcome you and look forward to your testimony.

                   STATEMENT OF DIANE FARRELL

    Ms. Farrell. Thank you very much, Madam Chairwoman, and 
also thank you to Ranking Member Boozman for inviting us here 
this afternoon. We welcome the opportunity to talk about 
veterans and small business.
    I do bring greetings from our Chairman, Fred P. Hochberg, 
who I might add was the Acting Administrator of the Small 
Business Administration during a prior Administration, so he 
brings commitment and dedication to the small business area, 
especially when it comes to Ex-Im Bank.
    Because we are a small agency, I did want to take a moment 
just to share exactly that which it is that we do to provide 
support to U.S. companies, especially veterans and small 
businesses, and then talk a little bit about what we are doing 
going forward.
    We are first and foremost a jobs agency. That is how we see 
ourselves. We are dedicated to providing a level playing field 
to U.S. companies who want to compete overseas, recognizing 
that 95 percent of markets these days tend to be overseas. This 
is a particularly important moment in time for Ex-Im Bank and 
the service that it provides.
    We actually provide short-term support, which would be 
either in the form of working capital or export credit 
insurance. We also provide medium term, 3- to 5-year financing, 
as well as long term, which can run anywhere from 5 to say, 18 
years. However, the focus today is clearly on the short-term 
products.
    We are not here to compete with the banks. I think that is 
very important. We are here to provide assistance when it is 
necessary. If a market is of particular concern and it has an 
opportunity to an exporter but a bank may be somewhat hesitant 
to become involved, that is where Ex-Im can really take a role 
in providing the kind of assurance to the exporters bank in 
order to make sure that that sale can go through and that the 
exporter can be successful.
    We are a self-sustaining agency. I am always proud of 
saying that. And to the envy of some of my colleagues in this 
field we are of course chartered through the Congress. Our 
budgets are overseen by Office of Management and Budget, but we 
do have an arrangement with the U.S. Treasury, and each year we 
do actually return funds to the Federal coffers, and we are 
quite proud of that fact.
    We do not have a lot of offices. We are a small agency. We 
have six offices across the country. They are listed in your 
official testimony, but we do a lot with the SBA, a lot with 
the Department of Commerce. We have a presence in all of the 
U.S. Export Assistance Centers (USEACs) across the country.
    And to our Chairman's credit, we have embarked upon a very 
ambitious marketing program over the last year where we have 
actually held events known as ExportsLive, in a number of key 
markets, and that is continuing now to what might be considered 
secondary markets, and I offer to our Members of Congress and 
this Committee that we are happy to provide an ExportsLive 
event in any of your districts should you feel that it is an 
appropriate opportunity.
    In addition to that we are also very active with the TPCC, 
the Trade Promotion Coordinating Committee. In that regard 
again we are trying as best we can to find multipliers as it 
were to get the word out about Ex-Im and what exactly we are 
able to do.
    To date this year we know that we have positively effected 
109,000 jobs. We also know that we are on track to have another 
historic year. Last year we did $21 billion in exports, $4.4 
billion of that amount fit the SBA definition of small 
business. So again, we are seeing an uptick.
    Our Chairman has also raised the bar and wants to see us 
get to $6 billion if at all possible this year, so you can 
imagine that we are exceptionally busy.
    We also in addition to some of these broader outreach 
efforts I am pleased to say that we do work with the 
Interagency Network of Enterprise Assistant Providers (INEAP), 
as well as the Center for Veterans Enterprise (CVE).
    And I might add that while your delay may have been vexing 
to some in the audience, it did give me the opportunity to meet 
a number of key constituents who are here, and I think that we 
have begun a conversation that we are going to be able to carry 
forward in terms of outreach to members of those organizations.
    The last point that I will leave you with is really a very 
quick story, but I always think that these are the things that 
bring it home. As I always say, we are the rubber that meets 
the road, we are the actual U.S. Government facility that can 
provide help with a transaction.
    And there was a couple in 1956 in southeast Maine who were 
both veterans and decided that they wanted to start a business. 
They could see that there was an opportunity to purchase a 
lobster business, not surprising coming from Maine.
    Fast forward to 2010. The business transferred to their 
daughter and to their son-in-law who actually realized that 
given the fact that there is a glut of lobster due to 
overfishing--we can get into the science of this at a future 
date--they realized that they had tremendous opportunity to 
sell overseas, and it was through our export credit insurance 
that we were able to provide the support that they needed, and 
now their business is almost exclusively overseas. First in the 
United Kingdom and Italy, now they are looking to Spain and 
Korea. And they note that at least 20 of their lobstermen, the 
individuals who are out there in the boats who are supplying 
the lobster, are in fact veterans themselves.
    So it is a good story, one that I think again sort of 
brings all that we do down to the real, to the true, to the 
personal level and to the exporter themselves.
    Thank you again for inviting us to testify.
    [The prepared statement of Ms. Farrell appears on p. 59.]
    Ms. Herseth Sandlin. Thank you, Ms. Farrell. Let us just go 
from there then on the story. How did the daughter and son-in-
law find out about the export credit insurance program?
    Ms. Farrell. That is a wonderful question. They actually 
contacted the USEAC in Boston who put them in touch with the 
appropriate Ex-Im representative who is actually based out of 
New York, but knows enough about lobster that we were able to 
get the transaction through.
    Ms. Herseth Sandlin. Okay. What is a USEAC?
    Ms. Farrell. Oh, I am so sorry. A U.S. Export Assistance 
Center. So those are offices around the country that will have 
representatives from the U.S. Commercial Services, Department 
of Commerce----
    Ms. Herseth Sandlin. Okay.
    Ms. Farrell [continuing]. From SBA, Ex-Im, et cetera.
    Ms. Herseth Sandlin. Are there fees associated to the small 
business? What kind of fees could the business in the story 
that you described or others expect, if what we are looking at 
is veteran-owned small business----
    Ms. Farrell. Yes.
    Ms. Herseth Sandlin. They want to get in touch and learn 
about some of the programs that you provide. We know that there 
are always fees, and sometimes we try to waive those fees 
temporarily to spur utilization of the programs or the loans. 
Could you describe those for us in terms of what Export-Import 
Bank would do?
    Ms. Farrell. Well the fees are determined by our credit 
underwriters. As we like to say, every credit is a unique 
credit. They obviously have to take into account the level of 
risk that is involved with the particular market that our 
exporter wants to sell into.
    What I can say about the fees generally is that they are 
cents on the dollar when it comes to export credit insurance, 
as was the case with the lobster facility. And in fact, in many 
cases--and this is an opportunity that we actually present when 
we are talking to U.S. exporters--if you take out export credit 
insurance through Ex-Im Bank oftentimes then your buyer is not 
required to take out a letter of credit when it comes to 
procuring the funds that they need from their, you know, bank, 
the bank overseas. And so what we explain to exporters is 
number one, it gives you peace of mind that in the event of a 
nonpayment you are covered. It gives your bank peace of mind 
that in the event of a nonpayment they, you know, they have the 
expectation that they are still covered, and it can help the 
buyer. And so that helps our exporter to say, hey, I am helping 
you out as well by taking out this insurance because your bank 
is going to be more comfortable about the way the transaction 
works.
    So the fees--we have never really had a complaint about the 
amount of the fees--the fees are really there to sort of 
service what it takes for us to provide it.
    In fact as we talk about expanding more aggressively and 
from a credit underwriting perspective, we are actually 
discussing the fact that the fees may not in fact cover the 
cost of this program, but that when you look at the bank's 
transactions overall where that is a loss, there are other 
programs say in the aircraft sector, for example, that do 
provide a healthy enough return that we can cover the losses 
adequately.
    Ms. Herseth Sandlin. Then through your partnerships that 
you have with SBA, Department of Commerce, the Center for 
Veterans Enterprise, are you in a position with the resources 
that you have, or is it through these partnerships where you 
are not just sort of waiting for the business to have 
identified an export market opportunity, but you are 
aggressively looking at, through trade policies, through 
monitoring, what is happening in the global marketplace, 
particular export opportunities that would match up and in 
sharing that information with these other agencies that know of 
businesses that are out there that could take advantage of what 
is happening globally?
    Ms. Farrell. Yes, absolutely. Again, when Chairman Hochberg 
came in one of the things he did immediately was to take stock. 
And you know, we are only about 400 employees. I mean, that is 
how small a Federal agency we are, so we have to rely upon the 
SBA, Department of Commerce, and work closely also with the 
U.S. Trade Development Agency (USTDA), as well as the 
Organization of the Petroleum Exporting Countries, you know, to 
maximize our exposure and the number of impressions that we can 
make.
    But one of the things that Chairman Hochberg did initially 
was to identify key markets in strategic regions around the 
world so that we were at least, you know, placing our maximum 
efforts where we felt we were going to get the maximum return.
    We do the same thing to a degree in sectors, because we are 
required--again, as a jobs agency here to create and maintain 
jobs we have certain content requirements to ensure that the 
jobs are happening here in the U.S. as opposed to, you know, 
potentially facilitating for jobs to migrate overseas, and that 
is probably the single most complex restriction that we have 
within terms of working with companies here, but we are 
providing ways to be as expansive as possible in our support.
    So yes, I would say we rely upon the kindness of strangers 
to quote Tennessee Williams, but it works very cooperatively. 
We do trade missions with Commerce, with USTDA, we share 
information, and of course the export cabinet that was created 
as part of the National Export Initiative when President Obama 
actually rolled this at our annual conference last month, has 
been very good as well in terms of coordination and strategic 
efforts to bring good business prospects to our exporters.
    Ms. Herseth Sandlin. If the Ranking Member doesn't mind I 
will just maybe pose one more question as sort of a segue. I 
think that is an important restriction. Right, the objective is 
to create jobs here in the United States, and so that leads me 
to my question for Mr. Shear. We have, as it relates to 
contracting requirements, a goal of making sure that it is 
veteran-owned businesses that are getting these opportunities, 
just as it is in terms of the restriction Ms. Farrell 
described, but they are jobs created here as the objective.
    In your written testimony you stated that the VA had hired 
a contractor to assess the verification programs process and 
the contractor report included recommendations. I mean again, 
we are a little concerned with sort of the progress the VA is 
making on the verifications as it relates to those on the 
database who have been verified to be veteran-owned businesses 
to deal with the issue of veteran shopping that we have had 
concerns about with the Subcommittee previously.
    Can you elaborate on what recommendations were given to the 
VA?
    Mr. Shear. I will paraphrase in a way that, we have, as I 
stated, we have a draft report, and there is a need to 
implement our VA's information technology in a way that allows 
for more efficient processing of these applications.
    You also need--really it is development of people in terms 
of their ability and the guidance that they have to have in 
terms of how they verify businesses.
    So I am segueing a little bit into what, what we are 
reporting on, but basically that VA has been very slow in this 
process, and the reason we think it is very important to verify 
is because the preferences are meant to serve veterans and 
veteran-owned small businesses, and there is not an assurance 
that that is occurring, and it has been delayed for some period 
of time.
    So just the fact that the consultant study took so long 
until VA moved in that direction is of concern to us.
    Ms. Herseth Sandlin. Mr. Boozman.
    Mr. Boozman. Thank you, Madam Chair.
    Mr. Shear, Public Law 109-461 requires VA to review 
contracts for compliance with subcontracting proposals. Would 
you share GAO's view of VA's performance in implementing the 
provisions?
    Mr. Shear. Subcontracting will be contained in our final 
report. And what we observed with subcontracting requirements, 
there are certain issues as far as the date when the 
requirements become effective. But what we have observed to 
date is that with respect to subcontracting VA falls very short 
of its goals.
    Mr. Boozman. Thank you very much.
    Ms. Herseth Sandlin. One final question. Mr. Sobota, of the 
States that you listed you didn't list South Dakota or 
Arkansas. The 10 that you listed have a very high population, 
high density population States, and so did you do an analysis--
I know you gave us some--in terms of the additional materials 
to your testimony, did you do an analysis per capita by States, 
and then can you elaborate just a little bit more in terms of 
the rural nature of the businesses that you described?
    Mr. Sobota. Yes, ma'am. The top 10 States are certainly 
correlated to population. And all 50 States and the District of 
Columbia are listed in the prepared testimony.
    I must say that the way that the Census Bureau presents its 
data in terms of percentages makes it a little more difficult 
to translate that into raw numbers that would be more user-
friendly, and you have to go through a number of steps in order 
to get to an estimate, and there are some statistical problems 
involved.
    However, yesterday preparing for the hearing I decided that 
I ought to run a couple States just to see what they look like, 
and at random I just picked South Dakota and Arkansas, and so I 
will make an estimate without going through all the 
methodology, because I know that we have time constraints here.
    In 2002 it would appear that South Dakota would have had 
about 11,900 total respondent veteran owners, of which about 
800 would have been service-disabled. In Arkansas, it would be 
a little bit larger than that, and in Arkansas we figured about 
32,700 total respondent veteran owners, and about 2,200 of 
those would have been service-disabled.
    Now those are 2002 numbers, and as explained in the 
testimony, this is a bit dated, and we hope when we get the 
2007 data in 2011 that we will have some updated information 
here.
    There is a way to make an extrapolation from the 2002 data 
to 2009, but we really have more and more difficulty with 
reliability the further away you get from the base year, and 
there is a further problem with the demographics in that we 
know that there are about 25 percent more businesses now than 
there were in 2002, but the long-term trend for the veteran 
population is down as the population ages, so we actually have 
about 10 percent fewer veterans in 2009 than in 2002, and I 
just looked that up this morning on the Department of Veterans 
Affairs Web site.
    So while we have a growth in the business community as a 
whole, we have fewer veterans, and that makes the use of the 
2002 factor of 12.2 percent of all firms being owned by 
veterans problematic in 2009. That percentage could well come 
down in this next round. So we are a little hesitant to make a 
prediction at the State level for the number of veteran-owned 
firms today, but we can certainly work with staff there to try 
to flesh out more information and anything else that we can do. 
But those two overall numbers I gave you I think are reasonably 
close for 2002.
    We will have better information too after the new Census 
Bureau report comes out.
    Ms. Herseth Sandlin. Which is when?
    Mr. Sobota. May 2011 is what Census has currently 
scheduled.
    Ms. Herseth Sandlin. All right, thank you.
    Mr. Adler, did you have any questions to this panel?
    Mr. Adler. Madam Chair, I am embarrassed that I came a 
little late, so I think I am going to defer for now.
    Ms. Herseth Sandlin. I understand. Mr. Boozman and I 
covered quite a bit of ground in terms of the testimony that we 
heard and getting a little bit of clarification from the GAO 
interim report and what we can anticipate, so you can also 
submit any questions for this panel for the written record.
    Mr. Adler. And thank you for your opportunity.
    Ms. Herseth Sandlin. I want to thank each of you for 
highlighting your findings on veteran-owned small businesses, 
elaborating more on the work that your agencies are doing. Your 
feedback of course helps us to better understand the population 
that the Subcommittee and the full Committee seek to assist. We 
look forward to learning more as you receive more up-to-date 
information in the weeks, months and years ahead.
    Mr. Sobota, again we will--I think you make some good 
points in terms of how to keep up with this data effectively, 
and so again we appreciate the information on the status of our 
veteran-owned small businesses and we will look forward to 
seeing the finalized reports currently in process.
    Thank you very much.
    Mr. Shear. Thank you.
    Ms. Herseth Sandlin. I now invite the second panel to the 
witness table. Joining us on our second panel of witnesses is 
Mr. Joseph Sharpe, Director of the National Economic Commission 
for the American Legion; Mr. Joe Wynn, Senior Advisor for the 
Vietnam Veterans of America (VVA); and Ms. Mary Kennedy 
Thompson, Vice Chairwoman of the Veterans Transitioning 
Franchise Initiative, the International Franchise Association 
(IFA).
    Again your written statements have been made part of the 
hearing record. We will recognize you each for 5 minutes, and 
Mr. Sharpe we will begin with you. Welcome back to the 
Subcommittee.

    STATEMENTS OF JOSEPH C. SHARPE, JR., DIRECTOR, NATIONAL 
ECONOMIC COMMISSION, AMERICAN LEGION; JOE WYNN, SENIOR ADVISOR, 
    VIETNAM VETERANS OF AMERICA; AND MARY KENNEDY THOMPSON, 
PRESIDENT, MR. ROOTER PLUMBING CORPORATION, WACO, TX, AND VICE 
    CHAIRWOMAN, VETFRAN COMMITTEE, INTERNATIONAL FRANCHISE 
                          ASSOCIATION

               STATEMENT OF JOSEPH C. SHARPE, JR.

    Mr. Sharpe. Madam Chair, Ranking Member Boozman, and 
Members of the Subcommittee, thank you for the opportunity to 
submit the views of the American Legion's regarding the status 
of veteran businesses.
    In fiscal year 2009, Federal agencies missed their small 
business contracting goals by 2 percent. Procurement officers 
have made statements according to the Chair of the House Small 
Business Committee that those numbers are insignificant and 
nothing to be concerned about; however, while a 2 percent 
shortfall may not sound like a lot to those officers, it 
ultimately cost entrepreneurs approximately $10 billion in 
missed opportunity and employment for veterans.
    According to the Department of Labor, the present 
unemployment rate for recently discharged veterans is an 
alarming 20 percent, and for veterans between the ages of 18 to 
24 there is a 30.2 percent unemployment rate.
    Furthermore, presently one out of every four veterans who 
do find employment earns less than $25,000 per year.
    Historically small businesses have created an estimated 65 
to 75 percent of the net new jobs, therefore, providing a 
central element for strong economic growth.
    The American Legion believes that government should assist 
in the creation of new jobs by encouraging qualified 
entrepreneurs to start and expand their small businesses.
    The American Legion also knows that no group is better 
qualified or deserving of this type of assistance than 
veterans.
    Increasingly, the near term growth and stability of this 
Nation's economy is dependent on the long-term success of small 
business networks across the country.
    In conclusion, the American Legion strongly supports the 
mandates of the Veterans Entrepreneurship and Small Business 
Development Act of 1999, Public Law 106-50, that were designed 
to assist all veterans wishing to start, expand, or protect 
their business.
    Agency leadership need to be held responsible for meeting 
the 3 percent Congressionally mandated goal, and this Committee 
should schedule hearings with all Federal agencies who 
consistently do not meet their Federal procurement goals with 
the service-disabled veteran-owned business.
    Madam Chair, this concludes my statement. I will be happy 
to answer any questions you may ask.
    [The prepared statement of Mr. Sharpe appears on p. 63.]
    Ms. Herseth Sandlin. Thank you, Mr. Sharpe, appreciate your 
testimony.
    Mr. Wynn, you are now recognized.

                     STATEMENT OF JOE WYNN

    Mr. Wynn. Thank you, Madam Chairwoman. Good afternoon, and 
good afternoon to Ranking Member Boozman, Members of the 
Subcommittee.
    I am here today on behalf of the Vietnam Veterans of 
America and its members to address our views regarding the 
status of veterans small businesses and are we failing them?
    Just to quickly put it, yes, I think in many ways we 
probably are as we focus on contracting for veteran-owned 
businesses.
    I am just going to hit on a couple of points, itemize a few 
points, because I know that this Committee has been very 
supportive of veterans and veteran business opportunities.
    One of the things that hasn't been happening is still a 
lack of accountability, oversight, and enforcement. The 
agencies that have been directed to carry out the laws still 
are not being held accountable, they still--if they don't make 
the 3 percent nothing happens. There is still a lot of 
ambiguities in the laws that govern the service-disabled vet 
program.
    We have heard a lot over previous years about the word 
``may,'' as it pertains to the service-disabled vet program, 
the word ``may'' that governs this program is often interpreted 
as, ``I don't have to.'' What would be more effective is to 
change that word ``may'' to ``shall,'' and change it in all 
programs, all of the preference programs, at least the 8(a) and 
HUBZone, as well as service-disabled vet so that we would have 
some true equal parity.
    We used to have or we still have an Executive Order 13-360, 
but it has faded significantly in its significance. In that 
Executive Order it called for agencies to actually write out a 
strategic plan showing how they would increase contracting 
opportunities for service-disabled vets. That doesn't seem to 
be happening very much anymore, and instead we later came up 
with--SBA came up with a scorecard program for all small 
businesses that doesn't seem to be as effective, at least in 
terms of veteran businesses increasing.
    There is still an overuse of large prime contractors and 
bundling. This not only affects veteran-owned small businesses, 
it affects small businesses across the board. When you continue 
to lump contracts together and make them awful large, small 
businesses just can't compete.
    There is also no authorization within the service-disabled 
vet program for contracting officers to make direct awards in 
the same manner as it is within the 8(a) program. Again, if we 
are going to equalize the playing field let us make the 
activity and actions equal across the board.
    A couple of other reasons I would just like to hit on 
quickly. There is still limited business development 
assistance. We know that recently there was grant awards made 
to the SBA Office of Veteran Business Development to increase 
the number of veteran business centers, business outreach 
centers, but the amount of the funding is still woefully low. 
One hundred fifty thousand dollars per center to cover huge 
geographic areas is not acceptable.
    One other point too on the VA's Veterans First Contracting 
Program. While this has been a significant step forward, it is 
still for some reason there is a prevailing belief that SDVOB 
stands for small and disadvantaged veteran-owned businesses, 
wherein all of our veteran-owned businesses are not in that 
category. So this is a disservice to those that are capable and 
qualified of competing on the open market.
    VA contracting with Veterans First really should be a 
governmentwide model, and we would like to see this program 
improved and actually have it implemented across the 
government.
    We hear often that small business is the engine that fuels 
the economy and it creates more jobs. This is a statistical 
fact, and we would like to see more effort put into creating 
opportunities for our veteran small business owners.
    Just recently this week as a matter of fact, we listened to 
the announcement about an Executive Order to increase 
contracting opportunities for veterans. We are definitely 
appreciative that this has come forward. Although I might note 
that this Executive Order for veteran businesses actually 
mirrors the language that was in Public Law 110-186 2 years 
ago. So hopefully this will now move forward since this 
Administration is supporting it.
    Let me conclude my statement by just saying that if we are 
going to help veterans, we need to help them now. The majority 
of our veterans are Vietnam veterans. Of course we know as time 
continues to move forward our veterans are getting older, we 
want to bring more new veterans into the marketplace, but we 
don't want to--the other day we were talking about increasing 
the number of service-disabled veterans. Quite frankly, we 
really don't want to increase more veterans to have to be 
service-disabled before they can get a contract, but at any 
rate let us see if we can do more for our veterans.
    Thank you.
    [The prepared statement of Mr. Wynn appears on p. 68.]
    Ms. Herseth Sandlin. Thank you, Mr. Wynn.
    Ms. Thompson.

               STATEMENT OF MARY KENNEDY THOMPSON

    Ms. Thompson. Good afternoon, Chairwoman Herseth Sandlin, 
Ranking Member Boozman, and Members of the Subcommittee.
    My name is Mary Kennedy Thompson and I am President of Mr. 
Rooter Plumbing based in Waco, Texas. Mr. Rooter is a proud 
brand of The Dwyer Group family of service enterprises, and we 
have more than 270 locations across the United States.
    As a veteran, I am truly honored to have this chance to 
speak to the Subcommittee on Economic Opportunity about veteran 
entrepreneurship.
    I appear today on behalf of the International Franchise 
Association.
    According to a 2008 study conducted by 
PricewaterhouseCoopers, there are more than 900,000 franchised 
establishments in the United States that are responsible for 
creating 21 million American jobs and generating $2.3 trillion 
in economic output.
    Today, I will talk about a program that is very near and 
dear to my heart, the Veterans Transition Franchise Initiative, 
or VetFran. I will also highlight specific legislation, H.R. 
2672, the ``Help Veterans Own Franchises Act,'' that will make 
it easier for veterans to purchase a franchise.
    But first, I would like to share the story of how I decided 
that franchising was the right path to small business ownership 
for me. Helping fellow veterans make the transition to civilian 
life and realize their dream of small business ownership is one 
of my passions. I have taught what franchising offers at 
entrepreneurship classes offered specifically to disabled 
veterans. I also serve as the Vice Chairwoman of the IFA's 
VetFran Committee.
    Franchising is the great American dream. It allows people 
to own a business, and it teaches them a system to help them be 
successful. It did just that for me.
    In 1985, I received my commission as an officer in the 
United States Marine Corps where I served for 8 years and 
achieved the rank of Captain while on active duty and later the 
rank of Major in the reserves. When I left active duty, I chose 
franchising because it provided me a framework of training and 
support to help me succeed as a small business owner.
    I became a multi-unit franchisee in the Cookies by Design 
system where I earned company awards for Top Performer and 
Outstanding Customer Service. My success lead to being asked 
that I join the corporate team. I started out as Director of 
Franchise Operations, and eventually becoming the brand's 
President.
    I joined Mr. Rooter in October of 2006 to proudly serve the 
40-year-old company as its first female President.
    The military and franchising have a lot in common.
    As a veteran from a military family I didn't know how to 
run a business, I didn't know how to get it started; however, I 
had the dream of being my own boss, and my military experience 
enabled me to lead others toward a common goal.
    The Marine Corps also trained me how to follow a system and 
successfully execute a plan.
    Members of our Armed Forces are disciplined, hard-working, 
and passionate people who understand how to work well within 
systems. They are accustomed to following standard operating 
procedures, they have strong teamwork skills, and they are 
dedicated to mission success. These are crucial attributes that 
make military veterans excellent candidates for franchise 
ownership.
    An estimated 250,000 men and women transition out of the 
military each year. Like me, many of these veterans are looking 
for a chance to be their own boss and leaders within their 
communities.
    The vision to use franchising to help military veterans 
transition to civilian life began nearly 20 years ago. Don 
Dwyer, Sr., the founder of The Dwyer Group and a veteran 
himself, conceived the plan to help our veterans achieve the 
American dream by owning their own franchised small business. 
Mr. Dwyer's plan has become the IFAs VetFran program, a 
voluntary effort of IFA member companies designed to encourage 
franchise ownership by offering financial incentives to 
honorably discharged veterans.
    Since 2002, more than 1,700 veterans have purchased their 
own franchise business from nearly 400 participating systems 
with the help of this program. What began as the idea of one 
veteran entrepreneur has today become a path to the American 
dream for thousands of veterans.
    I am proud to report that in February of this year, The 
Dwyer Group topped the $1 million mark in VetFran discounts 
awarded to veterans.
    Since 2002, The Dwyer Group has sold franchises to 233 
military veterans through this program, and Mr. Rooter Plumbing 
was recently recognized by USA Today as one of the top 50 
franchises for military veterans.
    Congress has the opportunity to make this important effort 
more effective. Legislation has been introduced to cement the 
benefits of a program like VetFran into policy and encourage 
more franchise systems to support veterans as small business 
owners.
    I strongly urge the Members of the Subcommittee to 
cosponsor and for Congress to pass H.R. 2672, the ``Help 
Veterans Own Franchises Act.'' This bill is coauthored by 
Representatives Aaron Schock and Leonard Boswell, and currently 
has more than 30 bipartisan cosponsors.
    This legislation establishes a tax credit for franchised 
businesses offering 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 capped 
at $25,000 per unit, and also provides a tax credit to the 
veteran for the remaining initial franchise fee paid.
    I want to thank Ranking Member Boozman who has already 
cosponsored this important legislation.
    Enactment of this tax credit will encourage economic growth 
and make it easier for veterans to become small business 
owners. Our veterans deserve this chance after so faithfully 
serving our country.
    Again, on behalf of the International Franchise 
Association, Mr. Rooter Plumbing, and The Dwyer Group family of 
brands, we sincerely appreciate the work of the Subcommittee. 
Thank you.
    We strongly urge you to support and pass the ``Help 
Veterans Own Franchises Act'' so that more of our veterans may 
return home and begin building a bright future for themselves, 
a bright future for their families, and for their communities 
through small business ownership.
    Thank you, and I look forward to answering any questions 
you may have.
    [The prepared statement of Ms. Thompson appears on p. 73.]
    Ms. Herseth Sandlin. Thank you, Ms. Thompson. You have an 
impressive record of military service and professional 
achievements, and we are very pleased to have you here today.
    In addition to your advocacy for H.R. 2672 and the tax 
credits to be provided, what are some of the current existing 
discounts or benefits available to veterans purchasing a 
franchise?
    Ms. Thompson. Well with the VetFran program any of the 
participating members, and we have over 400 members, any of 
those participating members are offering discounts up to about 
50 percent of the franchise fee that is offered to the veteran.
    In Mr. Rooter Plumbing we have offered that and given that 
to over 50 franchises already--veteran franchises.
    Ms. Herseth Sandlin. Can you tell us what the average cost 
is of a franchise for a perspective veteran?
    Ms. Thompson. Certainly. I can speak from my own 
experience. An average franchise especially in our system is 
going to cost about anywhere from $50,000 to $100,000, that is 
including equipment and including the franchise fee and getting 
started. They are going to probably pay about $30,000 for a 
franchise fee, so they get a 50 percent discount, which means 
that they get a $15,000 discount, and that $15,000, that is a 
truck. In the world of plumbing that is a truck. And they get 
more trucks on the road, they get their business started 
faster.
    Ms. Herseth Sandlin. That is very helpful. Can you 
elaborate on the details of the Memorandum of Understanding 
between the VA and the International Franchise Association?
    Ms. Thompson. I sure can. We do have a Memorandum of 
Understanding that--let me grab my notes really quickly. There 
it is.
    We came into that Memorandum of Understanding a few years 
ago, and it is a collaborative agreement with the VA and 
VetFran to champion free enterprise and to expand business 
opportunities for veterans.
    In 2006, we renewed our official Memorandum of 
Understanding with the VA and IFA jointly promoting the 
program.
    Ms. Herseth Sandlin. Thank you, Ms. Thompson.
    I do have a question for both Mr. Sharpe and Mr. Wynn.
    According to witness testimony for the hearing today, as 
well as phone calls from veterans to our Subcommittee staff, 
veterans have been unsuccessful when applying for the SBA's 
Patriot Express Loan. Have either of you been made aware of 
this problem or similar problems?
    Mr. Sharpe. That is probably the largest most frequent 
complaint that we receive from our business owners, that they 
are not able to access loans, and that the credit crunch in 
their viewpoint is a serious problem. That is one reason why we 
have been advocating for a direct loan program from SBA.
    Ms. Herseth Sandlin. Mr. Wynn.
    Mr. Wynn. Yes. I would have to concur with that. We were 
actually set up--we have set up a veteran business resource 
center here in DC, and one of the primary services we are 
planning to offer is how to access capital.
    In talking with some of the veterans with regard to the 
Patriot Express Loan, they are having difficulties also to 
acquire that capital.
    The rationale seems to be because the--you know, the banks 
in general seem to be tightening the credit, their lending 
practices, so that is, you know, kind of what we are hearing. 
We are not understanding though why that is affecting the SBA 
Patriot Loan Program.
    Ms. Herseth Sandlin. Ms. Thompson, I saw you nodding your 
head. Are you aware of this problem too in terms of maybe some 
of the potential veteran franchisees and how important this 
loan would be to offset some of the initial costs of getting 
the franchise?
    Ms. Thompson. Yes, ma'am, I am aware of it. While the SBA 
does have some good opportunities out there, the Patriot Loan 
is difficult to get. It is a very long process. I have had 
franchisees report to me that they have had a difficult time 
and they found better financing and better rates through other 
sources through the SBA.
    Ms. Herseth Sandlin. Mr. Boozman.
    Mr. Boozman. Thank you, Madam Chair.
    It is interesting. We have had the opportunity on several 
occasions to be at the Transition Assistance Program, the TAP 
programs where they tell about, as you separate and things. I 
can remember on several occasions as we visited with breakout 
groups that many, many of the people separating are interested 
in franchises, and so I very much support anything that we can 
be supportive of the legislation, that you mentioned.
    Another thing that we have been asked to do at times, and I 
have been interested in doing, is the GI Bill, pays for 
education, it is trying to separate out the educational 
component versus the rest of the component, on a franchise fee. 
One of the problems though has been the difficulty in doing 
that. Do you have any advice for us in that regard?
    Ms. Thompson. Well the advice I would have is that there 
are lots of ways to get an education, and our veterans 
returning back really deserve the chance to be able to use 
their educational funds in a way that they can educate 
themselves and create value for themselves and their families. 
And through franchising and through trade schools they can 
create great value for themselves.
    Our average, a Mr. Rooter plumber has a very good living, 
and a Mr. Rooter franchisee has a very good living, but he is 
going to need to go to trade schools, and he is going to need 
to go to franchise training. And when you only allow it to go 
for something like a college education you are limiting that.
    I mean, I think about the jobs that I myself, and I 
represent veteran-owned businesses everywhere, that I was able 
to create and the taxes we paid and what we brought back to the 
community, it was that--it was really that education that 
brought me to it.
    Mr. Boozman. Okay. How would you identify the cost--how 
would you separate out the cost of the education component 
versus the other?
    Ms. Thompson. I think you could delineate it as trade 
schools, or with the franchising world. We are very, very 
specific, and with our franchise disclosure documents it 
specifically states in there what the franchising is--franchise 
training is, how long it is, how much it will cost. We have a 
lot of rules and requirements and legislation that requires us 
to follow for how we franchise. And so you could go into any 
franchise disclosure document in any company and say if it is 
their training in there and it lays out how long their 
training, that is franchise training.
    For example, in Mr. Rooter our training is a week long, and 
we know it is exactly--I know it is 52.8 hours worth of 
training, and it is in writing in our franchise disclosure 
document.
    Mr. Boozman. Okay. Very good, that is very helpful.
    Well thank all of you for being here. As always, we 
appreciate your testimony.
    Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    One final question for Mr. Sharpe and Mr. Wynn, and Ms. 
Thompson if you would like to weigh in as well.
    What penalties can or should be levied against an agency 
for noncompliance with the 3-percent set-aside contracting 
goal?
    Mr. Sharpe. Well, I know we have mentioned this before, 
that there should be some sort of performance requirement in 
the valuations of agency heads.
    We have actually visited a number of agencies in the last 
couple of months, and again, there seems to be this attitude 
that we can't find veterans to work with, we can't find 
veterans that are able to perform the task that we are looking 
for, and from our experience that is not the case, because we 
have veterans that are able to build submarines and airplanes 
and those other large projects that U.S. Department of Defense 
is actually looking for. But it is not in the agency's--they 
don't seem to be really concerned in regards to going the extra 
mile and making sure that they find those veteran businesses 
and that they are treated fairly and looked at as a serious, 
competent, you know, company.
    Ms. Herseth Sandlin. But they might have an incentive to do 
so if there was a carrot or a stick. So do you have any 
suggestions on any penalties or incentives that could be 
imposed or offered if they fall short of the goal?
    Mr. Sharpe. If the Secretary or the head of that particular 
department doesn't fulfill that requirement when it comes to 
evaluation time, then it should be duly noted and documented 
and look at possibly removing that individual or they are not 
going to get the kind of bonus that they are looking for, but 
it should be an evaluation that they meet their goals, yeah.
    Ms. Herseth Sandlin. Okay. Mr. Wynn.
    Mr. Wynn. Yeah. The 3-percent minimum requirement, you 
know, should be applied and is applied to agencies as well as 
large primes, and how you handle the two of them would be 
somewhat different.
    With the large primes there could be--the penalties 
associated with not making the 3 percent would be in the 
contract evaluations factors when they come up for the next 
time they bid on a contract if they haven't been making the 3 
percent, haven't been making a good faith effort, then they 
shouldn't be viewed and allowed to participate on upcoming 
contracts in the same way they have in the past.
    We know it is difficult to look at once a contract has 
started to evaluate that particular agency or that particular 
large prime contractor and stop the contract once it has been 
started, but in future contracts going forward certainly they 
should not be allowed to continue to just continue to receive 
contracts if they are not abiding by what the laws are 
currently.
    With agencies, we have often talked about agencies to 
effect the performance of agencies is that the senior level 
managers or contracting officers, there needs to be something 
in their performance evaluation which if they are not 
demonstrating that they are moving forward in a productive 
manner in trying to achieve the minimum 3 percent then they 
shouldn't continue to get bonuses, their salaries shouldn't 
continue to increase.
    You can't just penalize the agency in general, because you 
know, we are talking about lots of people when we talk about an 
agency, but individually on the contract level perhaps we 
should look at those people who are directly responsible for 
managing and awarding these contracts. If they are not 
demonstrating that they are actively pursuing, meeting the 
required goals, then they should be held accountable.
    Ms. Thompson. I do understand that the business world is 
different from the government world. I would say that in the 
business world we pay and reward and bonus our people based on 
creating results.
    So I would ask can there be something in place that rewards 
and bonuses those who are following the system and creating the 
results that we are looking for?
    Ms. Herseth Sandlin. Thank you, Ms. Thompson.
    Mr. Boozman, any further questions for this panel?
    Well we thank all three of you for your testimony, your 
responses to our questions, the insights that you have offered, 
and we appreciate the ongoing service to our Nation's veterans. 
And again, we will follow up with you on some of the 
recommendations and suggestions that you have made to improve 
programs that are there to help veterans succeed in their small 
business ventures.
    So thank you again for your testimony today.
    Mr. Sharpe. Thank you.
    Ms. Thompson. Thank you.
    Ms. Herseth Sandlin. We now invite panel three to the 
witness table. Joining us on our third panel is Mr. Tim 
Foreman, Executive Director of the Office of Small and 
Disadvantaged Business Utilization (OSDBU), U.S. Department of 
Veterans Affairs, and Mr. Joseph Jordan, Associate 
Administrator for Government Contracting and Business 
Development at the U.S. Small Business Administration. Mr. 
Jordan is accompanied by Ms. Janet Tasker, Deputy Associate 
Administrator for Capital Access, and Mr. William Elmore, 
Assistant Administrator for Veterans Business Development, both 
within the U.S. Small Business Administration.
    Again, your written statements will be entered into the 
record.
    We will begin with you, Mr. Jordan. Welcome to the 
Subcommittee. You are now recognized.

   STATEMENTS OF JOSEPH G. JORDAN, ASSOCIATE ADMINISTRATOR, 
  GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL 
BUSINESS ADMINISTRATION; ACCOMPANIED BY JANET A. TASKER, DEPUTY 
ASSOCIATE ADMINISTRATOR FOR CAPITAL ACCESS, U.S. SMALL BUSINESS 
ADMINISTRATION; WILLIAM D. ELMORE, ASSOCIATE ADMINISTRATOR FOR 
      VETERANS BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS 
ADMINISTRATION; AND TIM J. FOREMAN, EXECUTIVE DIRECTOR, OFFICE 
     OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION, U.S. 
                 DEPARTMENT OF VETERANS AFFAIRS

                 STATEMENT OF JOSEPH G. JORDAN

    Mr. Jordan. Thank you very much, Madam Chair.
    Chairwoman Herseth Sandlin, Ranking Member Boozman, and 
Members of the Subcommittee, thank you for inviting SBA to 
testify. I am accompanied by Janet Tasker, the Deputy Associate 
Administrator for Capital Access and Bill Elmore, the Associate 
Administrator for Veterans Business Development.
    Veteran-owned small businesses have always played a key 
role in America's economy. Veterans have the leadership, the 
know-how, and the drive to succeed as entrepreneurs.
    As thousands of troops return home, the SBA has taken many 
steps to serve them as they have served us. We do that in three 
main ways: capital, counseling, and contracting.
    Capital. SBA is committed to helping veteran-owned small 
businesses get the capital they need. Under the American 
Recovery and Reinvestment Act Enhancements and Extensions to 
our top two loan programs over the past 14 months we have been 
able to provide more than $2 billion in lending support for 
veteran entrepreneurs and small business owners.
    We also have an increasingly popular loan program that is 
available not only to veterans, but also to Reservists, 
spouses, widows, and others called Patriot Express.
    This program helps address the fact that our military 
forces currently rely on Reserve components as well as support 
for military families.
    We make thousands of these loans each year, which feature 
our lowest interest rates and faster turnaround times.
    I should also mention that we provide dozens of military 
Reservists economic injury disaster loans each year to small 
businesses that need additional capital due to the fact that an 
owner or essential employee has been called to active duty in 
their role as a military Reservist.
    Now counseling. In the area of counseling each of our 68 
field offices has a designated staff member for veterans 
business development. They are engaged with hundreds of 
veterans serving organizations and reach thousands of veterans 
and Reservists each year.
    In fiscal year 2009, SBA and its resource partners trained 
or counseled about 150,000 veterans in addition to Reservists, 
Guard members, and active duty clients.
    In the future we hope to serve even more, because since 
2008 we have tripled the number of our veterans business 
outreach centers.
    These centers help veterans with business plans, 
monitoring, and much more. They also help our Office of 
Veterans Business Development provide about 60,000 SBA veteran 
and Reservist business information kits each year.
    Also, we know that veterans are heavy users of our online 
tools such as our small business training network. That is why 
we launched an online training course for veterans small 
business owners to learn how to become government contractors. 
And last November we entered into a partnership agreement to 
support the Entrepreneurship Bootcamp for Veterans with 
Disabilities consortium operating at six top universities 
across the country. We are very proud to be part of this 14-
month entrepreneurial development program for service-disabled 
veterans who were injured in Iraq or Afghanistan since 2001.
    Finally contracting. The SBA works hard to ensure that 
veteran- and service-disabled veteran-owned small businesses 
have access to opportunities and Federal contracting. We work 
across all Federal agencies to ensure that at least 3 percent 
of Federal contracting dollars go to service-disabled veteran-
owned small businesses.
    In fiscal year 2008, this group received about $6.5 
billion, or 1.5 percent of Federal prime contracts. 
Preliminarily data for fiscal 2009 indicates that both of these 
numbers are increasing.
    Today we are proud of the fact that 6.3 percent of Recovery 
Act prime contracting dollars have gone to veterans and 4.3 
percent of that has gone to service-disabled veterans thus far.
    I should also mention that this Administration supports the 
Congressional intent of equal treatment among our business 
development and contracting programs, service-disabled veteran-
owned, 8(a), HUBZone, and women-owned small businesses. 
However, in light of a recent court decision, it would be 
useful to clarify and reiterate Congress' original intent that 
there be parity among these programs.
    Finally, just a few days ago, the President signed an 
Executive Order to once again demonstrate the high priority 
that veteran-owned small businesses have in this Administration 
by establishing an Interagency Task Force on veterans small 
business development.
    The task force will be led by Administrator Karen Mills, 
and will include seven agencies and four representatives from 
the veterans community. This task force recognizes that many in 
our veteran community have chosen or will choose to step out 
and start their own business, so it will provide 
recommendations to the Administration in several key areas, 
including those I have just discussed today, capital, 
contracts, and counseling.
    An additional Executive Order to create a task force or 
small business contracting as a whole will help amplify this 
effort.
    We look forward to the recommendations that will come out 
of these task forces as we recommit ourselves to meeting the 
needs of our veteran entrepreneurs and small business owners.
    We will now be happy to take any of your questions.
    [The prepared statement of Mr. Jordan appears on p. 75.]
    Ms. Herseth Sandlin. Thank you very much, Mr. Jordan, we 
appreciate your testimony.
    Mr. Foreman, welcome back to the Subcommittee, you are now 
recognized.

                  STATEMENT OF TIM J. FOREMAN

    Mr. Foreman. It is my pleasure to return to you today again 
to testify regarding the progress of veteran-owned businesses. 
The concept of veteran-owned business providing products and 
services for veterans constructs a win-win scenario. Who better 
understands the needs of our veterans than other veterans.
    Congress seemed to recognize this when through Public Law 
109-461 it created the Veterans First Contracting Program. This 
program gives meaningful assistance to veterans seeking 
business opportunities with VA, it has a direct and positive 
impact on VA's prime contracting and subcontracting 
opportunities.
    The VA and I thank you for this legislation.
    Your hearing title asks, are we failing veterans? Madam 
Chair, we are not failing our veterans. We are leaders in many 
pro-veteran business program areas. VA has been able to focus 
on service-disabled veterans and other veteran businesses. This 
focus has achieved a tangible result and is why the VA leads 
the Federal Government in the percentage of contracting dollars 
awarded to these types of veteran-owned small business.
    Additionally, on Monday of this week, President Obama 
signed an Executive Order that energized an Interagency Task 
Force on veteran small business development. This task force 
will enhance communication among veterans, small business 
enterprises, and key organizations within the Federal 
Government. It may well serve as an instrument to help us 
identify obstacles facing perspective veteran-owned business 
owners and help them find solutions and contracts.
    Members of this Subcommittee, it would be reasonable that 
any claim to our success be linked to a measurement of 
performance.
    VA is proud to report that for fiscal year 2009, VA awarded 
19.3 percent of our dollars to veteran-owned small businesses. 
Likewise, the VA also awarded 16.3 percent to service-disabled 
veteran businesses in the same timeframe, bettering by more 
than twice the amount of our own internal goal.
    While VA has current and reliable data for performance in 
some areas, we do need to have a broader portfolio of current 
information regarding the characteristics of veteran-owned 
business.
    Useful analysis of the variables that impact success of 
veteran-owned businesses is in the U.S. Census Bureau's 
characteristics of veteran-owned businesses last published in 
2007 using data collected in 2002.
    I also note that the Small Business Administration has been 
very helpful in providing data that helps VA better understand 
the process and the impact on veteran-owned businesses by 
collecting and reporting and analyzing data in a more timely 
fashion. Because of this, we will be better able to gauge the 
performance.
    It is in this way we will better analyze the effectiveness 
of our program against a broader backdrop. We will be able to 
better shepherd our programs and optimize the results. This 
will help us to better identify obstacles associated with 
certain business sectors and their geographical locations; and, 
perhaps to also identify some solutions.
    In my written statement I address several factors that may 
impact success of veteran-owned small business. Most of the 
work needed by the VA is clustered near its facilities; 
however, the next generation of veteran-owned small businesses 
may be more heavily into use of technology and the performance 
of work remotely will most probably be one outcome. 
Geographical data then will be used in a different manner.
    I also report that some business sectors had a higher 
percentage of veteran-owned business than did others.
    For example, I will note that veterans tended to do better 
in mining, construction, manufacturing, wholesale trade, 
transportation, finance and insurance, and in the professional 
and scientific sectors. Whereas, businesses that fell below 
that or were underrepresented against the industrial average 
were in the retail trade, information and administrative 
support, waste management, education services, health care, 
arts and entertainment, and in the hotel and food industries.
    There is a significantly higher proportion in terms of 
percentages of male veterans than female veterans, and this too 
may speak to some of the differences and some of the factors.
    When the Small Business Administration's Shawne Carter 
McGibbon testified before your Subcommittee last year she 
provided an excellent overview of the program and identified 
some significant difference between service-disabled veteran 
and non-service-disabled veteran business owners.
    I believe that my time is running out so I will go ahead 
and just wrap up and say I would be happy to take any of your 
questions. Thank you.
    [The prepared statement of Mr. Foreman appears on p. 77.]
    Ms. Herseth Sandlin. Thank you, Mr. Foreman.
    Mr. Jordan, we have heard that some veterans are having 
problems securing a Patriot Express Loan. As previously asked 
to the representatives of the veterans service organizations on 
the prior panel, are you aware of any problems or complaints 
that veterans are having in accessing the Patriot Express Loan?
    Mr. Jordan. I am actually going to defer to my colleague, 
Ms. Tasker from the Office of Capital Access for that question.
    Ms. Herseth Sandlin. Okay, Ms. Tasker.
    Ms. Tasker. Thank you for the question.
    Honestly, we haven't heard specific problems about the 
Patriot Express Program itself. That program is one of our 
easiest to access programs. Our Express suite actually allows 
lenders to use their own existing processes, they don't have to 
use a separate SBA process to make those loans, so I am 
interested to get more information from you on specific 
situations so we can look into it.
    Ms. Herseth Sandlin. Well, I think given the testimony from 
the prior panel there seems to be a lot of concern and 
complaint. So I think, certainly the Subcommittee will help 
facilitate the exchange of information from some of our VSOs 
and their members and others in the small business community 
with your office.
    Ms. Tasker. And we would welcome that.
    I would just add that with the economic situation in the 
past year we saw a dramatic decline in lending generally, and 
the banks did in fact tighten credit, so I do know that it has 
been harder for small businesses to access credit.
    A lot of the actions that the Congress did in passing the 
Recovery Act have supported more lending, but specific to 
Patriot Express we will certainly work with you to find out 
more about what is going on there.
    Ms. Herseth Sandlin. I think we need to do that in light of 
the fact that this is a program intended to make accessing a 
loan through the community banking institutions easier.
    Ms. Tasker. Uh-huh.
    Ms. Herseth Sandlin. And so if they are having difficulty 
getting the guarantee, this was supposed to help address some 
of the credit crunch in good times. I mean, you know what I am 
saying.
    Ms. Tasker. I do.
    Ms. Herseth Sandlin. I am a little concerned that if you 
haven't been hearing the complaints, is there an avenue that 
can help facilitate the exchange of information.
    Because we hope that the credit markets will continue to 
improve, but we want to make sure that the programs are 
intended to sort of help give the banks the confidence that 
they need in a government backed loan that this is--and 
overcome any problems that there may be.
    Ms. Tasker. Right. And I just do want to be clear, we are 
aware that there has been a general tightening of credit, I 
just had not heard that people were having trouble with Patriot 
Express specifically, but we will work with you.
    Ms. Herseth Sandlin. Okay.
    Mr. Jordan, you had stated that veterans received $523 
million of the 7(a) loans and $176 million of the 504 
development loans, and that is in your testimony.
    Mr. Jordan. Right.
    Ms. Herseth Sandlin. Do you know how many home businesses 
these dollar amounts equate to? Ms. Tasker.
    Ms. Tasker. It is over 4,000 businesses, or approximately 
4,000.
    Ms. Herseth Sandlin. Okay.
    Ms. Tasker. I guess it is 3,980 some.
    Ms. Herseth Sandlin. Also, what is the average operating 
budget of a veteran business outreach center?
    Mr. Elmore. Yes, ma'am. The amount of funds that we have 
historically provided to a veteran business outreach center 
each year has been a maximum of $150,000. In the latest 
competition, we have now been able to grow the program to 
approximately $165,000 for some of our previously existing 
centers that were successful in competing for a second 
agreement. So that is what we provide.
    However, I should tell you that while we don't require a 
match when we go through the application and the evaluation 
process, we really push our centers to secure other sources of 
funding as well. We realize that 150 or 165 is not a lot for 
the responsibilities that they have. That has simply been 
limited by the amount of funds we have had to grant.
    Ms. Herseth Sandlin. Okay.
    Finally, Mr. Jordan, those were impressive numbers you list 
as it relates to the Recovery Act dollars. What is going on? 
How is that being overseen differently than what we do on a 
regular basis across agencies?
    Mr. Jordan. Madam Chair, are you referring to the contract 
which I think that----
    Ms. Herseth Sandlin. Yes.
    Mr. Jordan [continuing]. There are a few things going on 
there. I had the opportunity to testify in front of the 
Subcommittee almost a year ago to the day, and at the time the 
topic was primarily the contracting performance and the 3 
percent there. We have done a number of things over that year 
to try to reverse engineer success and determine what can we do 
to achieve the 3 percent. Because while it is moving in the 
right direction, we would all agree that nothing short of that 
3 percent is really acceptable.
    So we looked at the Recovery Act because it had 
individually trackable dollars and was going out over a finite 
period of time. We used that as a testing ground for some of 
the different efforts we thought could really move the needle 
for small business contracting, and yes, for service-disabled 
veterans as well as the other subgroups.
    Specifically what we did was look at both ends of the 
equation, the small businesses, and we did a lot of training 
education and outreach. We found that there is an awareness gap 
sometimes. So while there are almost 50,000 veteran-owned small 
businesses and about 17,000 or 18,000 service-disabled veteran-
owned small businesses listed in the central contract 
registration or dynamic small business search, those businesses 
are not always aware of what the opportunities are out there.
    Vice versa we worked with the agencies to say not only do 
we have to help those small businesses become aware in advance 
of these opportunities that are going out, we need to really 
step up our efforts to go out and find those qualified 
businesses and improve our market research techniques. We met 
with every single agency to discuss this.
    We had them put out a calendar of events that they were 
going to do in terms of outreach. We had them develop forward 
looking procurement plans, and then the Vice President convened 
the Cabinet and said: ``How are you doing on each of these 
areas?''
    We obviously work very closely with VA because they have 
some unique ability to set aside contracts for these groups, 
but they also have a deep passion, and a good understanding of 
the stakeholders involved. So we have key learning there, and 
we syndicated those best practices all around.
    So the next step is: How is it going to apply to the 
regular contracts? And we have now taken some of the best 
practices that we learned from this effort, some of the things 
that we thought moved the needle positively, and we are going 
around and doubling down on those things with each agency. Over 
the next 6 to 12 months you will see a series of efforts aimed 
again at both sides of the equation to try to get to that 3 
percent.
    Last year when I was here I said that our number 2,007 was 
1 percent, but it looked like it would go up. It did, it went 
up by 50 percent to 1\1/2\. This year I am saying it was 1\1/2\ 
and we think it is going to go up to around 2 percent. That 
still is not 3, and that is where we need to get.
    Ms. Herseth Sandlin. I may have some followup questions, 
but I would like to recognize the Ranking Member, Mr. Boozman, 
for his questions.
    Mr. Boozman. Thank you, Madam Chair.
    Mr. Jordan, what is the fiscal year 2011 budget proposed 
for the Veterans Business Development Office, and what 
additional initiatives with that fund, and what is the timeline 
for implementing those initiatives?
    Mr. Jordan. Mr. Ranking Member, if it is okay I would defer 
that to Mr. Elmore. Thank you.
    Mr. Boozman. Yes, that is fine. Certainly, Mr. Elmore.
    Mr. Elmore. The budget request that went forward for our 
veterans business outreach centers is steady. We received $2.5 
million from Congress this year, which allowed us to expand the 
number of centers, and the 2011 budget request is the same 
amount.
    However, internally as I expect you understand, as we move 
through the year if additional funds become available because 
of underexpenditure and other program offices we intend and we 
will compete for those funds inside the agency.
    Mr. Boozman. Okay, very good.
    Mr. Foreman, what were all of the--in regard to 
implementing P.L. 109-46, I think we hired somebody to help us 
in regard to what we needed to be doing. What were the 
recommendations, and did VA disagree with any of the 
recommendations? If so, which ones?
    Would you provide the Subcommittee with a plan outlining 
the specific dates VA will fill vacant staff positions and CVE 
and OSDBU and dates to implement the contractor's 
recommendations?
    Mr. Foreman. I would be happy to. I think we have already 
started on this. I have hired--I have my new deputy back here, 
Len Sistek, who is a service-disabled veteran, and I have hired 
about four more people in my office, and we have about three 
people going into the CVE, which is now going to be renamed. We 
are in a reorganization phase.
    One of the things that I recognize is I felt like we were 
losing focus on the verification process. I thought the process 
was a little bit bureaucratic and a lot of paperwork involved, 
so automation would really go a long way toward streamlining 
the whole process.
    And the last time I talked to you I talked about some of 
the problems that we were having in terms of the growth in the 
backlog. Well, part of that I come to find out was due to an 
error in the data system. When people would go online to apply 
for it there was a little caption you have to go on, and this 
is for verification. You know, in order to get into the data 
system you had to be verified, so that caused a spike of over 
300 businesses per month coming into the system. They have 
turned that off so a business can actually go in and just get 
into the system, and then if in fact there is a problem or 
somebody suspects there is a problem there is a protest.
    I am the guy who takes care of the protest. I have done 
five where I have sustained the protest, i.e., I found that the 
contractor was actually not a service-disabled veteran or 
lacked the status to have the contract. I have determined that 
two were in fact verifiable service-disabled veterans and were 
good.
    So far it has all involved service-disabled protests. I 
have not seen one yet on a veteran's status issue. I take that 
back. I did see one on a veteran status issue. It wasn't an 
issue. A firm objected to the firm claiming it wasn't service-
disabled, but the set-aside was a veteran set-aside. So that 
was kind of just a non-issue.
    So we are doing it. We will probably do about four to six 
more next week, and I am trying to get it over to the SBA.
    They had two issues. One issue--they had the same issue I 
had. They didn't like the idea you could only have one business 
and be a service-disabled veteran or a veteran, and I agreed 
with that. So we changed that on a policy. Of course they want 
it in writing, and I don't blame them. To make it easier on 
them I went ahead and used their regulation. I took 13 CFR 
125.9 through 13 CFR 125.13, and we also added .15 for 
ownership and control issues. And the fact that my people had 
directed the folks down there to go ahead and draft a response 
for the Federal Register saying this is our final rule and just 
go ahead and post it. When that happens you will have it and 
hopefully I will be out of that business and be able to free up 
two additional members to do verifications instead of 
supporting me in the protest process. So part of it is process 
driven.
    [The VA subsequently provided the following information:]

          Since the contractor reviewed CVE's processes, there have 
        been changes in the organization driving a more streamlined 
        focus on examinations and verifications; therefore, a few 
        initial contractor recommendations may need to be adapted to 
        meet new organizational priorities. The contractor had 
        submitted 41 recommendations in 9 general categories: (1) 
        changes to the Vendor Information Pages database; (2) changes 
        to the application form, VA Form 0877; (3) implementation of a 
        case management system; (4) additional training for CVE staff; 
        (5) changes to the Risk Management Program; (6) changes to 
        document collection; (7) changes in communication strategies 
        and content; (8) changes to internal procedures for examining 
        individual identity records; and (9) other process 
        improvements.
          VA agreed with 37 of the recommendations, noting that 13 
        required no new action as they were already in process. 
        Implementing the changes to the Vendor Information Pages (VIP) 
        database, acquiring the case management system and developing 
        the interface between it and the database will require the 
        greatest period of time to execute. On June 1, 2010, VA awarded 
        a contract to a service-disabled, veteran-owned small business 
        to update and further automate the VIP database with a 
        modification called VIP 5. Long-term changes may require up to 
        22 months to resolve as application development must occur and 
        then the software must pass certification and accreditation 
        testing. As an interim solution, VA plans to award a contract 
        by the end of FY 2010 to help clear the anticipated inventory 
        of applications awaiting timely verification not later than 
        January 1, 2012.

    Mr. Boozman. Thank you very much. Can I do one final?
    I guess my question. VA is working hard, to try and get 
this implemented. Mr. Jordan, we don't have jurisdiction over 
the other agencies, but do you have any advice on how we can 
help prod them in the right direction?
    Mr. Jordan. Well, I do think that in many ways they are, 
and because we are working collaboratively I would say in many 
cases we are moving in that right direction.
    I think that the first thing is when you look at fraud base 
and abuse overall, which I know has been a concern with these 
programs for VA and something my office looks at quite 
seriously, we are looking at it in three steps.
    We are looking at the certification, in which there were 
some specific nuances of VA that we need to look at. But then 
for the service-disabled veteran or small business program 
overall, despite the fact that it is self-certifying, there is 
no reason that we can't do things up front to dissuade any 
potentially unqualified person from saying that they are an 
SDVOSB.
    Then there is the ongoing surveillance and monitoring, 
which we already have in place. We have partnered with VA in 
the protest process for service-disabled small business 
protests (which the SBA handles) and year after year those 
numbers of protests have increased. But when you look at the 
number of protests sustained, i.e., the company that was 
awarded the contract was, in fact, not what they said they 
were, that percentage has gone down. So we are handling more, 
the percent is going down, which shows that up front 
certification and the surveillance and monitoring is improving 
because it is coupled with the last step:
    Enforcement, punishing the bad actors. During the last 
panel you spoke about incentives and other processes. We need 
to make sure that people understand that there is punishment 
for acting inappropriately.
    Mr. Boozman. Thank you, Madam Chair.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    So what is that punishment?
    Mr. Jordan. There are a range of issues. So it would start 
with referral to either our suspension debarment official for 
potential suspension debarment action proceedings, or our IG 
for further investigation.
    For example, all 10 of the firms in the GAO report on 
service-disabled veterans have been referred to SBA's Inspector 
General (IG) and they are currently under investigation. And as 
soon as I have specific outcomes to report I would be happy to 
follow up with the Committee.
    Then there are also further steps depending on the severity 
or the type fraud or abuse perpetrated in which we are working 
closely with the Department of Justice to have them take up 
some more of these cases so we can really set examples of some 
of these bad actors.
    Ms. Herseth Sandlin. Very good.
    Mr. Foreman, is the VA working then on developing guidance 
for referring cases of misrepresentation for the enforcement 
actions?
    Mr. Foreman. Yes, Madam Chairwoman. What we have done, very 
similarly, when I do a protest evaluation and I have anybody 
who I sustain the protest, they are bad actors, I refer them to 
the IG for further investigation and appropriate disposition. 
That can mean anything from I am going to refer it over to the 
Justice Department, this is so egregious that they ought to be 
investigating.
    We are also standing up, and that is still in process, 
standing up our own debarment committee. I guess we had one a 
year ago, but it has since fallen by the wayside, so we are 
standing up right now.
    We are also looking at bringing, I don't know about in-
house, but having an attorney work with our office specifically 
on small business issues, including the protest issues as well 
as others.
    Ms. Herseth Sandlin. So when you say that is in the process 
of being stood up in terms of a debarment committee and 
bringing a lawyer on, I mean, do you anticipate that that will 
then be in place to pursue enforcement actions then by this 
summer?
    Mr. Foreman. It should be in by the summer. We should have 
no problem in standing it up that soon.
    Ms. Herseth Sandlin. Okay.
    Mr. Foreman. You know, my counterpart is really doing that, 
and that is Mr. Haggstrom and Glen Frye, because it comes under 
contracting.
    Ms. Herseth Sandlin. Uh-huh.
    Mr. Foreman. And so that is where a debarment committee 
should be.
    Ms. Herseth Sandlin. Well, this may be a question maybe 
better aimed at them too, but has the VA awarded a contract to 
assist with the verification in addition to the contract that 
would provide best practices and site visits?
    Mr. Foreman. I am sorry?
    Ms. Herseth Sandlin. Has the VA awarded a contract to 
assist with the verification in addition for the contract that 
is going to provide for best practices in site visits?
    Mr. Foreman. Yes, ma'am. We have three current contracts 
going with various contractors who support us, all of which are 
service-disabled vets.
    The first one was to help us where we have a lot of the 
process, how we establish it. Two were to go out and perform 
verifications, and those two also did in-house verifications. 
Part of the problem you run into is sometimes the training is 
not quite as good, so they don't crank out as many per person 
as our own people.
    The other part is our own people. We are kind of scattered 
in some of their organization to doing other kind of outreach 
things. I am pulling them back in. I am doing a lot of 
outreach. As a matter of fact, I was down in Little Rock, 
Arkansas, this week. I flew down on Monday, flew back on 
Tuesday so I would be back at work on Wednesday. So we go 
around, we have a heck of a schedule on conferences.
    The one thing I have done is to initiate a certain amount 
of consciousness that we don't waste money. Never send two when 
one will do is one of my standard statements to them, and let 
us be efficient. I never go to a conference so I am going to 
pass out literature, but I will go if they need a keynote 
speaker and other things. And we do, by the way, have good 
relationships with Joseph.
    The question you had asked was interesting, because we were 
just talking before the hearing about me coming over and seeing 
how they are doing the verification of HUBZones and conversely 
him coming over and looking at my system, and we could pass 
back and forth some best practices.
    So sometimes these hearings are good because, you know, we 
don't get a lot of time to just talk to each other. So thank 
you for that.
    Ms. Herseth Sandlin. Well I am glad to know that some of 
the sharing of best practices across agencies is something 
helpful coming out of the hearing.
    Both of you mentioned the Interagency Task Force. Yes, I 
think we are all recognizing the importance of interagency 
coordination, cooperation. I think it is important at the 
Congressional Committee level, we do that as well. But I guess 
that raises maybe just two final questions.
    And one, Mr. Foreman, according to the GAO findings, the VA 
lacks an effective process to ensure that interagency 
agreements include language that will require other agencies to 
comply with the VA's contracting goals and preferences for 
veteran-owned small business, service-disabled veteran-owned 
small businesses.
    Why is the VA failing to include the required language to 
require other agencies to comply with these goals? Is there a 
reason that the language isn't being included?
    Mr. Foreman. You have me on that one. I am going to have to 
take that one for the record.
    Ms. Herseth Sandlin. Okay.
    Mr. Foreman. I didn't know that they were not including the 
language.
    Ms. Herseth Sandlin. Okay.
    Mr. Foreman. So when we look at P.L. 109-461 they should be 
using that information when they go over in a habit, and I 
don't know the specifics, and that would be helpful if I could 
know what partnership agreements are we not doing that in.
    Ms. Herseth Sandlin. Okay.
    Mr. Foreman. And if we have a problem we will correct it.
    Ms. Herseth Sandlin. Great. Well, we will clarify that in 
terms of the GAO findings too and work together to get the 
answer.
    Mr. Foreman. Very good.
    [The VA subsequently provided the following information:]

          In the past, this language was not included in all VA 
        interagency agreements. However the Department is taking steps 
        to ensure compliance. The requirement to include the 
        appropriate language in interagency agreements was included in 
        the Veterans First Contracting Program training sessions which 
        were accomplished from January-March 2010. This training, 
        coupled with the existing requirement that all interagency 
        agreements executed on behalf of VA require review and 
        concurrence by the Office of the General Counsel and VA Deputy 
        Senior Procurement Executive, ensures compliance with the 2006 
        Act. Additionally, virtual training is available to all 
        personnel via the VA Knowledge Network. The training schedule 
        and reference materials are available to VA employees through 
        VA's Intranet site; a copy of this Intranet page is attached 
        for reference. [The attachment is being retained in the 
        Committee files.]

    Ms. Herseth Sandlin. My last question is, as Mr. Boozman 
and I and our Subcommittee staff have looked into this issue 
for a while now, we know that there is some concern among the 
veteran service organizations about double and triple counting. 
You know, what are your thoughts on that?
    I mean, I think you know, you cited some very good 
statistics for the VA. We hope to continue to see these trends 
in terms of increases and the percentages to get to 3 percent, 
but we have heard this both for the VA and the SBA, and if 
there are concerns there with agencies that are meeting the 
goals but then those that aren't yet, what are your thoughts on 
the issue of how we factor in what is counted as it relates to 
sort of credit awarded under these multiple goal categories?
    Mr. Foreman. Madam Chair, I have pretty strong feelings. I 
have been around for a long time and I have set up databases to 
collect data and working the DD350 for the Department of 
Defense. These things are great tools in terms of identifying 
and digging into the depths of the statistics of how the firms 
operate. It is good to know of the veteran service, disabled 
veterans, et cetera, that do business, how many of them are 
HUBZones also, how many are women-owned, how many are minority-
owned, and where do they fall? And the categories are quite 
interesting.
    HUBZones for example, we got a lot of hits from the 
minority business community. Oh, they are terrible, they are 
taking away from the 8(a). Well, it turns out 50 percent of the 
dollars go to minority business concerns in historically 
underutilized business zones. If you restricted that, that 
information would be lost. And you need information even more 
important than us because you develop policy.
    And one of the things I used to do when I went out to the 
field and talked to the buying activities, tell them the 
importance of completing the DD350 correctly and how key it is. 
And nobody understood. They thought it went into a big void and 
it was never used for anything so they didn't really care about 
the quality.
    I care about the quality because you need it in order to do 
your job and I need it to do my job, to have those statistics, 
to get that baseline, to see about measurement. So it is 
incredible.
    Ms. Herseth Sandlin. I don't think we disagree the 
importance of gathering the information and what it can shed 
light on as it relates to some of the policy decisions we are 
making, but in terms of then how one that is counted two or 
three times is used to calculate the 3 percent.
    Mr. Foreman. Only if they meet those things. And they can 
only count one time for the 3 percent. They have to be a 
service-disabled veteran. They couldn't be an award in the 8(a) 
program, but we have the Veterans First Program. If anything we 
are doing less and less in 8(a) and less and less in HUBZone, 
but that is all right. The Veterans First is a priority to us. 
We wanted that.
    [The VA subsequently provided the following information:]

          Small Business is a category on its own. Awarding credit in 
        any other small business category does not result in inflating 
        credit in the small business category. The small business 
        credit is not calculated by adding up the credits awarded in 
        the various subcategories, but is calculated independently, 
        precisely to avoid double-counting.
          If a contract were awarded to an individual small business 
        owner who was a woman and a service-disabled veteran from a 
        HUBZone, they would receive only one credit under each of the 
        following categories: woman-owned, veteran, service-disabled 
        veteran, HUBZone and Small Business. The multiple categories 
        are counted in the Federal Procurement Data System (FPDS) 
        reporting required of Federal contracting officers.

    Mr. Jordan. I agree. I think that the important things are 
one, getting the data right, two, hitting the goals so it 
doesn't become inward looking between the programs or between 
the goals competition. We need to expand the pie so that we hit 
the 23 percent and the 5-5-3-3.
    Now if you are a qualified, certified, eligible business in 
multiple categories then I personally don't see anything wrong 
with that being reflected in the data. When you look at the 
numbers it doesn't seem to be taking away from one group or 
another. And should you limit or restrict the categories which 
you would count.
    I think the important thing is we need to hit all of the 
goals. And as Tim said, there is not double counting within any 
category itself, so at this point we don't see it as a major 
source of concern.
    Ms. Herseth Sandlin. Well, I appreciate both your 
perspectives on that. We may want to follow up with some 
additional questions based on the GAO findings, based on some 
of the concerns that we have heard previously and how we--to 
your point, Mr. Jordan, I think both of you made the point, how 
we accurately and honestly meet all the goals.
    So I think again, I mean important points you both just 
made are compelling, but I want to keep working through that 
issue, because I don't know that it entirely satisfies the 
concerns that have been raised over time about that.
    Mr. Foreman, a final comment?
    Mr. Foreman. One additional thought, and I thought about 
this earlier when people say, oh, we have multiple counting. 
Let us artificially turn off the switch on all these other 
areas. So if I am a woman-owned business who is a minority who 
happens to be a service-disabled veteran, et cetera, we are 
going to turn off these switches. What you are going to get is 
data that that has been changed and forever changed. I mean it 
is going to be real hard to dig that back out of the system if 
in fact we did that.
    I think you don't want to do that. You can back it out now. 
If I want to I can say okay, in every program area show me 
Hispanic Americans, show me Native Americans, and I pull that 
data, not necessarily to get awards in those areas, but where 
did they get the awards? Was it under the 8(a) program, the 
HUBZone program, the service-disabled program? I can tell you 
that.
    In terms of changing or artificially reducing something I 
think you actually lose for all time data.
    Ms. Herseth Sandlin. But I don't know that anyone is 
suggesting that.
    Mr. Foreman. Yeah.
    Ms. Herseth Sandlin. No one is suggesting losing the data. 
I think it is how you back it out, how you do your calculations 
as it relates to each of the goals.
    I hear your concern, but I don't think that is what is 
being proposed.
    Mr. Foreman. Okay.
    Ms. Herseth Sandlin. I don't think I would support that in 
light of how important that data is, but it is okay then, you 
know, don't just switch them off and lose the data, but back it 
out so we can accurately say, are we meeting all of the 
different goals independently of one another?
    Mr. Jordan. Just one comment, Madam Chair. One of the 
things that will help with the transparency and the data 
itself, is the Executive Order by the President on small 
business contracting which asks the Chief Information Officer 
and the Chief Technical Officer in conjunction with the co-
chairs of that task force to come up with a dashboard in 90 
days that will reflect the government's performance along these 
goals. So hopefully some more transparency and accountability 
will help drive some of these very important questions.
    Ms. Herseth Sandlin. Okay. Thank you very much. I 
appreciate again the testimony, your responses to your 
questions, your patience with the late start that we had today. 
I appreciate your service to our Nation's veterans, our small 
business owners, especially those owned by our veterans and 
service-connected disabled veterans.
    The Administration has had some success clearly in 
assisting our veterans develop and achieve their small business 
goals. We hope to see more as we know more opportunity exists.
    So we welcome again the opportunity to work with the 
executive branch to ensure that current laws are properly 
applied and enforced. We should also continue to re-evaluate 
laws that aren't meeting their intended purpose or need to be 
updated, and therefore, I welcome the feedback provided by all 
of our panelists today. I look forward to our continued 
dialogue, and I thank you for participating in today's hearing.
    The hearing stands adjourned.
    [Whereupon, at 3:23 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
    I ask unanimous consent that all Members have 5 legislative days to 
revise and extend their remarks and that written statements be made 
part of the record. Hearing no objection, so ordered.
    Today's hearing will provide the U.S. Government Accountability 
Office an opportunity to update us on the ongoing work on veteran-owned 
small businesses, and also provide the Small Business Administration's 
Office of Advocacy opportunity to update us on the veteran small 
business population.
    We will also hear from the veteran's community about the barriers 
encountered by veteran-owned small business while providing them the 
opportunity to submit recommendations on how to improve existing 
programs.
    Finally, we will hear from Administration officials highlighting 
veteran small business programs within their respective offices. This 
timely hearing comes 3 days after President Obama authorized an 
Executive Order to establish an Interagency Task Force on Veterans 
Small Business Development, of which I would like to learn more about.
    I look forward to hearing from all of our panelists here today. I 
now recognize our Ranking Member, Representative John Boozman for any 
opening remarks he may have.

                                 
                Prepared Statement of Hon. John Boozman,
    Ranking Republican Member, Subcommittee on Economic Opportunity
    Good afternoon.
    Madame Chair, veteran-owned businesses comprise a significant 
portion of the small business community and as long as I have the 
privilege of representing Arkansas, one of the things I will count as 
the most important is the passage of the veteran-owned small business 
provisions in Public Law 109-461. Since the passage of those 
provisions, the value of contracts awarded to veteran- and disabled 
veteran-owned small businesses increased from about $197 million in 
2005 to $2.8 billion in fiscal 2009 or a fourteenfold increase in 
spending with veteran and disabled veteran businesses. I believe that 
can only be termed a success and I congratulate VA for its efforts to 
recognize the value of doing business with our veterans.
    But as some of our witnesses will testify today, all is not well. 
More than 3 years after passage of P.L. 109-461, VA continues to lag in 
implementing the database of validated veteran businesses. This means 
that companies falsely claiming veteran- or disabled veteran-owned 
status are stealing business from valid businesses. VA also continues 
to do contract with businesses that have been identified as not meeting 
the requirements of being categorized as a veteran- or disabled 
veteran-owned small business.
    Madam Chair, as you know, GAO has provided us with a draft report 
on VA's small business program and while it would not be proper to go 
into details until the report is final, I believe it is fair to say 
that it shows both the Bush and Obama administrations have dragged 
their feet implementing some important portions of P.L. 109-461. We 
have passed legislation that will clarify the intent of the law 
regarding the VIP database, but other issues such as staffing and 
process remain for our oversight.
    Today, GAO will testify that VA is falling somewhat short in other 
set-aside categories. However, I would like to point out that unlike 
any other set-aside category, veterans have earned their place inline 
by service, not a factor of race, gender or location. In fact, the most 
admirable thing about the veteran category is that veterans largely 
represent the makeup of American society with the exception of the 
number of women in uniform, a number that is steadily increasing. So, 
when you do business with veteran-owned businesses, you do business 
with America.
    Finally, I concur with the criticisms by our witnesses of the Small 
Business Administration regarding under-resourcing the Office of 
Veterans Business Development. If there is one place in the Federal 
Government that should be properly resourced to help veteran 
entrepreneurs, the Office of Veterans Business Development is it and I 
hope that we will hear from SBA today how that office will receive the 
resources our veterans deserve. Absent significant improvement in its 
resources, perhaps we must consider where that office could best serve 
veterans.
    Madam Chair, I look forward to hearing from today's witnesses and a 
lively discussion and I yield back.

                                 

                Prepared Statement of William B. Shear,
         Director, Financial Markets and Community Investment,
                 U.S. Government Accountability Office
      DEPARTMENT OF VETERANS AFFAIRS: Preliminary Observations on
            Issues Related to Contracting Opportunities for
                     Veteran-owned Small Businesses
                             GAO Highlights

Why GAO Did This Study

    The Veterans Benefits, Health Care, and Information Technology Act 
of 2006 (the 2006 Act) requires the Department of Veterans Affairs (VA) 
to give priority to veteran-owned and service-disabled veteran-owned 
small businesses (VOSB and SDVOSB) when awarding contracts to small 
businesses. This testimony discusses preliminary views on (1) the 
extent to which VA met its prime contracting goals for SDVOSBs and 
VOSBs in fiscal years 2007-2009, and (2) VA's progress in implementing 
procedures to verify the ownership, control, and veteran status of 
firms in its mandated database. GAO obtained and analyzed data on VA's 
contracting activities, and reviewed a sample of verified businesses to 
assess VA's verification program.

What GAO Recommends

    Because this testimony is based on an ongoing engagement, it does 
not include recommendations. GAO anticipates making recommendations in 
its final report.

What GAO Found

    As shown below, VA exceeded its contracting goals with SDVOSBs and 
VOSBs for the past 3 years, but faces challenges in monitoring 
agreements with other agencies that conduct contract activity on VA's 
behalf. The increase of awards to SDVOSBs and VOSBs was associated with 
the agency's use of the unique veteran preferences authorities 
established by the 2006 Act. However, GAO's review of interagency 
agreements found that VA lacked an effective process to ensure that 
interagency agreements include required language that the other 
agencies comply to the maximum extent feasible with VA's contracting 
goals and preferences for SDVOSBs and VOSBs.
    VA has made limited progress in implementing its verification 
program. While the 2006 Act requires VA to use veteran preferences 
authorities only to award contracts to verified businesses, VA's 
regulation does not require that this take place until January 1, 2012. 
To date, VA has verified about 2,900 businesses--approximately 14 
percent of businesses in its mandated database of SDVOSBs and VOSBs. 
Among the weaknesses GAO identified in VA's verification program were 
files missing required information and explanations of how staff 
determined that control and ownership requirements had been met. VA's 
procedures call for site visits to investigate the ownership and 
control of higher-risk businesses, but the agency has a large and 
growing backlog of businesses awaiting site visits. Although site visit 
reports indicate a high rate of misrepresentation, VA has not developed 
guidance for referring cases of misrepresentation for enforcement 
action. Such businesses are subject to debarment under the 2006 Act.
   VA's Percentage of Contract Dollars to VOSBs and SDVOSBs, FY07-09







    Source: GAO Analysis of FPDS-NG data.





    

                               __________

    Madam Chairwoman and Members of the Committee:
    I am pleased to be here today to discuss issues associated with the 
Federal Government's contracting with veteran-owned and service-
disabled veteran-owned small businesses (VOSB and SDVOSB). The Federal 
Government's longstanding policy has been to use its buying power--the 
billions of dollars it spends through contracting each year--to 
maximize procurement opportunities for small businesses, including 
those owned by veterans. In fiscal year (FY) 2009, Federal agencies 
awarded $17 billion to VOSBs, including $9 billion to SDVOSBs.
    To increase contracting opportunities for SDVOSBs and VOSBs, the 
Veterans Benefits, Health Care, and Information Technology Act of 2006 
(the 2006 Act) requires the Department of Veterans Affairs (VA) to give 
priority to these two categories of small businesses when awarding 
contracts. It provides for the use of limited-competition contract 
awards (sole-source and set-aside) to achieve contracting goals VA is 
required to establish under the 2006 Act.\1\ Additionally, the law 
requires VA to maintain a database of SDVOSBs and VOSBs and verify the 
ownership, control, and veteran or service-disabled status of the 
businesses in the database. Businesses must be listed in the database, 
which VA refers to as VetBiz.gov, to receive the contracting 
preferences for SDVOSBs and VOSBs.
---------------------------------------------------------------------------
    \1\ Pub. L. No. 109-461 Sec. 502 (Dec. 22, 2006), 38 U.S.C. 
Sec. 8127.
---------------------------------------------------------------------------
    My statement today is based on preliminary observations from our 
ongoing 3-year study looking at VA's efforts to contract with VOSBs and 
SDVOSBs on which we plan to issue a report in the near future, as 
required by the 2006 Act. Specifically, this statement discusses (1) 
the extent to which VA met its prime contracting goals for SDVOSBs and 
VOSBs in fiscal years 2007 through 2009, and (2) VA's progress in 
implementing procedures to verify the ownership, control, and veteran 
status of firms in its mandated database of SDVOSBs and VOSBs.
    In conducting this work, we obtained and analyzed data on contracts 
from the Small Business Administration's (SBA) Goaling Reports and VA 
contracting data from the Federal Procurement Data System--Next 
Generation (FPDS-NG) to determine the extent to which VA met 
contracting goals for fiscal years 2007 through 2009. We reviewed VA's 
policies and procedures for administering the verification program and 
conducted a file review of a sample of verified businesses to determine 
the extent to which VA followed its procedures and to identify any 
deficiencies in VA's verification process and maintenance of the 
database of verified SDVOSBs and VOSBs. We interviewed agency officials 
and representatives of veteran service organizations to obtain 
information about VA's contracting with veteran-owned small businesses 
and administration of the verification program. Finally, we also relied 
upon recent work by our fraud investigators that examined procurement 
activities in the governmentwide SDVOSB program.\2\
---------------------------------------------------------------------------
    \2\ GAO, Service-Disabled Veteran-Owned Small Business Program: 
Case Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain 
Millions of Dollars in Contracts, GAO-10-108 (Washington, D.C.: October 
2009) and GAO, Service-Disabled Veteran-Owned Small Business Program: 
Case Studies Show Fraud Allowed Ineligible Firms to Obtain Millions of 
Dollars in Contracts, GAO-10-306T (Washington, D.C.: Dec. 16, 2009).
---------------------------------------------------------------------------
    The work on which this testimony is based was performed from 
October 2007 through April 2010, in accordance with generally accepted 
government auditing standards. Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to provide 
a reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives.
Background
    Federal agencies' contracting with private businesses is, in most 
cases, subject to goals for various types of small businesses, 
including SDVOSBs.\3\ The Small Business Act sets a governmentwide goal 
for small business participation of not less than 23 percent of the 
total value of all prime contract awards--contracts that are awarded 
directly by agencies--for each fiscal year.\4\ The Small Business Act 
also sets annual prime contracting goals for participation by four 
other types of small businesses: small disadvantaged businesses (5 
percent); women-owned (WOSB, 5 percent); service-disabled veteran-
owned, (3 percent); and businesses located in historically 
underutilized business zones (HUBZone, 3 percent). Although there is no 
governmentwide prime contracting goal for participation by all VOSBs, 
VA had voluntarily set an internal goal for many years before the 
enactment of the 2006 Act.
---------------------------------------------------------------------------
    \3\ The Small Business Act defines a small business generally as 
one that is ``independently owned and operated and that is not dominant 
in its field of operation.'' In addition, a business must meet the size 
standards published by SBA to be considered small; these standards may 
use criteria such as a business' annual revenue or its number of 
employees to determine size. 15 U.S.C. Sec. 632(a).
    \4\ 15 U.S.C. Sec. 644(g). Because agencies' activities lend 
themselves to differing contracting opportunities, SBA negotiates goals 
in annual procurement with Federal agencies to achieve the 
governmentwide goals.
---------------------------------------------------------------------------
    The Veterans Benefits Act of 2003 authorized agencies to set 
contracts aside and make sole-source awards of up to $3 million ($5 
million for manufacturing) for SDVOSBs (but not other VOSBs).\5\ 
However, an agency can make a sole-source award to an SDVOSB only if 
the contracting officer expects just one SDVOSB to submit a reasonable 
offer. By contrast, VA's authorities under the 2006 Act apply both to 
SDVOSBs and other VOSBs. The 2006 Act provides VA authorities to make 
noncompetitive (sole-source) awards and to restrict competition for 
(set-aside) awards to SDVOSBs and VOSBs. VA is required to set aside 
contracts for SDVOSBs or other VOSBs (unless a sole-source award is 
used) if the contracting officer expects two or more such firms to 
submit offers and the award can be made at a fair and reasonable price 
that offers the best value to the United States. VA may make sole-
source awards of up to $5 million.
---------------------------------------------------------------------------
    \5\ Pub. L. No. 108-183 title III Sec. 308 (Dec. 16, 2003), 15 
U.S.C. Sec. 657f.
---------------------------------------------------------------------------
    VA's Office of Small Disadvantaged Business Utilization (OSDBU) in 
conjunction with the Office of Acquisition and Logistics is responsible 
for development of policies and procedures to implement and execute the 
contracting goals and preferences under the 2006 Act. Additionally, 
OSDBU serves as VA's advocate for small business concerns; provides 
outreach and liaison support to businesses (large and small) and other 
members of the private sector for acquisition-related issues; and is 
responsible for monitoring VA's implementation of socioeconomic 
procurement programs, such as encouraging contracting with WOSBs and 
HUBZone businesses. The Center for Veterans Enterprise (CVE) within 
OSDBU seeks to help veterans interested in forming or expanding their 
own small businesses.
VA Exceeded Its Veteran Contracting Goals since FY07, but Faces 
        Challenges in Monitoring Interagency Agreements
    For FY07, VA established a contracting goal for VOSBs at 7 
percent--that is, VA's goal was to award 7 percent of its total 
procurement dollars to VOSBs. In FY07, VA exceeded this goal and 
awarded 10.4 percent of its contract dollars to VOSBs (see fig. 1). VA 
subsequently increased its VOSB contracting goals to 10 percent for 
FY08 and FY09, and exceeded those goals as well--awarding 14.7 percent 
of its contracting dollars to VOSBs in FY08 and 19.7 percent in FY09.
    Figure 1: VA's Percentage of Contract Dollars to VOSBs, FY 07-09







    Source: GAO Analysis of FPDS-NG data.

    For FY07, VA established a contracting goal for SDVOSBs equivalent 
to the governmentwide goal of 3 percent and exceeded that goal by 
awarding 7.1 percent of its contract dollars to SDVOSBs (see fig. 2). 
VA subsequently increased this goal to 7 percent for FY08 and FY09, and 
exceeded the goal in those years as well. Specifically, VA awarded 11.8 
and 16.7 percent of its contract dollars to SDVOSBs in FY08 and FY09, 
respectively.
   Figure 2: VA's Percentage of Contract Dollars to SDVOSBs, FY 07-09







    Source: GAO Analysis of FPDS-NG data.

    In nominal dollar terms, VA's contracting awards to VOSBs increased 
from $1.2 billion in FY07 to $2.8 billion in FY09, while at the same 
time, SDVOSB contracting increased from $832 million to $2.4 billion. 
The increase of awards to VOSBs and SDVOSBs largely was associated with 
the agency's greater use of the goals and preference authorities 
established by the 2006 Act. For example, veteran set-aside and sole-
source awards represented 39 percent of VA's total VOSB contracting 
dollars in FY07. But in FY09, VA's use of these preference authorities 
increased to 59 percent of all VOSB contracting dollars. In nominal 
dollar terms, VA's use of these authorities increased by $1.2 billion 
over the past 3 years.
    According to SBA's Goaling Program, a small business can qualify 
for one or more small business categories and an agency may take credit 
for a contract awarded under multiple goaling categories. For example, 
if a small business is owned and controlled by a service-disabled, 
woman veteran, the agency may take credit for awarding a contract to 
this business under the SDVOSB, VOSB, and WOSB categories. All awards 
made to SDVOSBs also count toward VOSB goal achievement. In FY09, of 
the $2.8 billion awarded to VOSBs, the majority (63 percent) applied to 
both the VOSB and SDVOSB categories and no other (see fig. 3). 
Furthermore, of the $1.7 billion awarded through the use of veteran 
preference authorities (VOSB and SDVOSB set-aside and sole-source) in 
FY09, an even greater majority (77 percent) applied both to the VOSB 
and SDVOSB categories and no other (see fig. 3).

   Figure 3: VOSB Contracting Dollars and VOSB/SDVOSB Set-aside and 
    Sole-source Contracting Dollars by Small Business Category, FY09







    Source: GAO Analysis of FPDS-NG data.

    In the Veterans' Benefits Improvement Act of 2008 (the 2008 Act) 
Congress enhanced the 2006 Act's provisions by requiring that any 
agreements VA enters with other government entities on or after January 
1, 2009, to acquire goods or services on VA's behalf, must require the 
agencies to comply, to the maximum extent feasible, with VA's 
contracting goals and preferences for SDVOSBs and VOSBs.\6\ Since 
January 1, 2009, VA has entered into three interagency agreements (see 
table 1). According to agency officials, VA entered into agreements 
with additional Federal agencies, such as the Army Corps of Engineers, 
before January 1, 2009, and therefore the provisions of the 2008 Act do 
not apply.
---------------------------------------------------------------------------
    \6\ Pub. L. No. 110-389 Sec. 806 (Oct. 10, 2008).


   Table 1: Summary of VA's Interagency Agreements With Federal Agencies, Entered On or After January 1, 2009
----------------------------------------------------------------------------------------------------------------
                         Agency                                   Description of services             Amount
----------------------------------------------------------------------------------------------------------------
General Services                                              Assisted acquisition services for    $137 million
  Administration (GSA)                                        information technology equipment,
                                                                         services, and support.
----------------------------------------------------------------------------------------------------------------
Department of the                                             Assisted acquisition services for    $2.6 million
  Interior (DOI)                                               information technology services,
                                                            research and development, supplies,
                                                              renovations and alternations, and
                                                          financial assistance and professional
                                                                                      services.
----------------------------------------------------------------------------------------------------------------
Department of the Navy,                                         Technical support for analysis,    $154 million
  Space and Naval                                                 planning, program review, and
  Warfare Systems                                          engineering services for information
  Center (SPAWAR)                                         management and information technology
                                                                                   initiatives.
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of VA documents.


    VA issued guidance to all contracting officers about managing 
interagency acquisitions in March 2009.\7\ However, the agreement with 
DOI did not include the required language addressing VA's contracting 
goals and preferences until it was amended on March 19, 2010, after we 
informed the agency the agreement did not comply with the 2008 Act. 
According to VA officials, the agency's acquisition and contracting 
attorneys are responsible for reviewing interagency agreements for 
compliance with these requirements. VA uses Office of Management and 
Budget templates to develop its interagency agreements. However, VA did 
not ensure that all interagency agreements include the 2008 Act's 
required language or monitor the extent to which agencies comply with 
the requirements. For example, agency officials could not tell us 
whether contracts awarded under these agreements met the SDVOSB and 
VOSB preferences. Without a plan or oversight activity such as 
monitoring, VA cannot be assured that agencies have made maximum 
feasible efforts to contract with SDVOSBs or VOSBs.
---------------------------------------------------------------------------
    \7\ Information Letter 001-AL-09-04, Managing Interagency 
Acquisitions, March 23, 2009.
---------------------------------------------------------------------------
VA Has Made Limited Progress in Implementing Its Verification Program 
        and Has Not Developed a Thorough and Effective Program
    In May 2008--approximately a year and a half after the 2006 Act was 
enacted and a year after the provisions discussed here became 
effective--VA began verifying businesses and published interim final 
rules in the Federal Register, which included eligibility requirements 
and examination procedures, but did not finalize the rules until 
February 2010 (see fig. 4).\8\ According to VA officials, CVE initially 
modeled its verification program on SBA's HUBZone program; however, CVE 
reconsidered verification program procedures after we reported on fraud 
and weaknesses in the HUBZone program.\9\ More recently, in December 
2009, the agency finalized changes to its acquisition regulations 
(known as VAAR) that included an order of priority (preferences) for 
contracting officers to follow when awarding contracts and trained 
contracting officers on the preferences and the VetBiz.gov database 
from January through March 2010.\10\
---------------------------------------------------------------------------
    \8\ P.L. 109-461 established a transition rule that was in effect 
for a 1-year period, which began when section 502 became effective. 
Pub. L. No. 109-461 Sec. 502(b). The effective date, defined in the Act 
as 180 days after the date on which the law was enacted, was June 20, 
2007. Pub. L. No. 109-461 Sec. 502(d). For the 1-year period, the 
transition rule established a presumption of eligibility for inclusion 
in the VA database of VOSBs and SDVOSBs covered by the Act for 
businesses that were listed in any small business database maintained 
by VA. The final rule for the verification program, with changes, 
became effective February 8, 2010. 75 Fed. Reg. 6098 (Feb. 8, 2010).
    \9\ GAO, Small Business Administration: Additional Actions Are 
Needed to Certify and Monitor HUBZone Businesses and Assess Program 
Results, GAO-08-643 (Washington, D.C.: June 2008); Small Business 
Administration: Additional Actions Are Needed to Certify and Monitor 
HUBZone Businesses and Assess Program Results, GAO-08-975T (Washington, 
D.C.: July 17, 2008); and HUBZone Program: SBA's Control Weaknesses 
Exposed the Government to Fraud and Abuse, GAO-08-964T (Washington, 
D.C.: July 17, 2008).
    \10\ 74 Fed. Reg. 64619, 64620 (Dec. 8, 2009), effective January 7, 
2010.
---------------------------------------------------------------------------
  Figure 4: Timelines of Major Events Related to Verification Program







    Source: GAO analysis of various VA documents.

    Leadership and staff vacancies plus a limited overall number of 
positions also have contributed to the slow pace of implementation. For 
approximately 1 year, leadership in VA's OSDBU was lacking because the 
former Executive Director retired and the position remained vacant from 
January 2009 until January 2010. Furthermore, one of two leadership 
positions directly below the Executive Director has been vacant since 
October 2008 and an Acting Director temporarily filled the other 
position. The agency also faced delays in obtaining contracting 
support. More than a year after the agency began verifying businesses, 
a contractor began conducting site visits (which further investigate 
control and ownership of businesses as part of the verification 
process). As of April 2010, CVE had 6.5 full-time equivalent position 
vacancies, and VA officials told us existing staff have increased 
duties and responsibilities that also contributed to slowed 
implementation.\11\
---------------------------------------------------------------------------
    \11\ In FY09, CVE was authorized 23 full-time equivalent positions, 
an increase from the 17 full-time positions authorized in FY08.
---------------------------------------------------------------------------
    The slow implementation of the program appears to have contributed 
to VA's inability to meet the requirement in the 2006 Act that it use 
its veteran preference authorities to contract only with verified 
businesses. Currently, contracting officers can use the veteran 
preference authorities with both self-certified and verified businesses 
listed in VetBiz.gov. However, in its December 2009 rule VA committed 
to awarding contracts using these authorities only to verified 
businesses as of January 1, 2012.\12\ According to our analysis of 
FPDS-NG data, in FY09 the majority of contract awards (75 percent) made 
using veteran preferences went to unverified businesses. In March 2010, 
the recently appointed Executive Director of OSDBU acknowledged in a 
Congressional hearing before this Committee how large an undertaking 
the verification program has been and some challenges associated with 
starting a new program.\13\
---------------------------------------------------------------------------
    \12\ 74 Fed. Reg. 64619, 64620 (Dec. 8, 2009).
    \13\ House Committee on Veterans Affairs, Subcommittee on Economic 
Opportunity, U.S. Department of Veterans Affairs' Center for Veteran 
Enterprise, Statement of Tim J. Foreman, Department of Veterans 
Affairs, Executive Director of the Office of Small Disadvantaged 
Business Utilization, 111th Congress, 2nd session, March 11, 2010.
---------------------------------------------------------------------------
    As of April 8, 2010, VA had verified about 2,900 businesses--
approximately 14 percent of VOSBs and SDVOSBs in the VetBiz.gov 
database. VA has been processing an additional 4,701 applications but 
the number of incoming applications continues to grow (see fig. 5). As 
of March 2010, CVE estimates it had received more than 10,000 
applications for verification since May 2008.
       Figure 5: Verification Applications Received and Finalized







    Source: GAO analysis of CVE provided data.
    Note: The ``applications finalized'' figures include applications 
approved, denied, and finalized for other reasons.

    As discussed previously, VA must maintain a database of verified 
businesses and in doing so must verify the veteran or service-
disability status, control, and ownership of each business.\14\ The 
rules that VA developed pursuant to this requirement require VOSBs and 
SDVOSBs to register in VetBiz.gov to be eligible to receive contracts 
awarded using veteran preference authorities.\15\ An applicant's 
business must qualify as ``small'' under Federal size standards and 
meet five eligibility requirements for verification: (1) be owned and 
controlled by a service-disabled veteran or veteran; (2) demonstrate 
good character (any small business that has been debarred or suspended 
is ineligible); (3) make no false statements (any small business that 
knowingly submits false information is ineligible); (4) have no Federal 
financial obligations (any small business that has failed to pay 
significant financial obligations to the Federal Government is 
ineligible); and (5) have not been found ineligible due to an SBA 
protest decision.\16\
---------------------------------------------------------------------------
    \14\ 38 U.S.C. Sec. 8127(f).
    \15\ According to VA, under full-and-open competition, SDVOSBs or 
VOSBs do not need to be listed in the VetBiz.gov database to be awarded 
a contract.
    \16\ Ownership is defined as a firm being at least 51 percent 
unconditionally and directly owned by one or more veterans or service-
disabled veterans. Control is defined as both the day-to-day management 
and the long-term decisionmaking authority. For example, an applicant's 
management and daily business operations must be conducted by one or 
more veterans or service-disabled veterans to be verified. Debarred or 
suspended business concerns are determined by checking the GSA-
maintained database known as the Excluded Parties List System (EPLS). 
See 75 Fed. Reg. at 6103-6104.
---------------------------------------------------------------------------
    VA has a two-step process to make the eligibility determinations 
for verification. CVE staff first review veteran status (and, if 
applicable, service-disability status) and publicly available, 
primarily self-reported information about control and ownership for all 
applicants. Business owners submit applications (VA Form 0877), which 
ask for basic information about ownership, through VetBiz.gov.\17\ When 
applicants submit Form 0877, they also must be able to provide upon 
request other items for review, such as financial statements; tax 
returns; articles of incorporation or organization; lease and loan 
agreements; payroll records; and bank account signature cards. 
Typically, these items are reviewed at the business during the second 
step of the review, known as the site visit.
---------------------------------------------------------------------------
    \17\ VA Form 0877 asks for information such as business name, 
owners name(s), veteran or service-disabled status, Social Security 
Number(s), and percentage of ownership in the business.
---------------------------------------------------------------------------
    Site visits further investigate control and ownership for select 
high-risk businesses. In September 2008, VA adopted risk guidelines to 
determine which businesses would merit the visits.\18\ Staff must 
conduct a risk assessment for each business and assign a risk level 
ranging from 1 to 4--with 1 being a high-risk business and 4 a low-risk 
one. The risk guidelines include criteria such as previous government 
contract dollars awarded, business license status, annual revenue, and 
percentage of veteran-ownership. For example, if a business has 
previous VA contracts totaling more than $5 million, staff must assign 
it a risk level of 1 (high). According to VA, it intends to examine all 
businesses assigned a high or elevated risk level with a site visit or 
by other means, such as extensive document reviews and phone interviews 
with the business' key personnel.
---------------------------------------------------------------------------
    \18\ Verification Program Risk Guidelines (September 2008).
---------------------------------------------------------------------------
    VA plans to refine its verification processes to address 
recommendations from an outside contractor's review of the program. VA 
hired the contractor to assess the verification program's processes, 
benchmark VA's program to other similar programs, and provide 
recommendations for improving it. VA received the contractor's report 
and recommendations in November 2009.\19\ VA officials told us that 
they plan to implement the contractor's recommendations to require 
business owners to submit additional documentation as part of their 
initial application and to upgrade their data systems.\20\
---------------------------------------------------------------------------
    \19\ Addx Corporation and Mahan Consulting Group, ``Reengineered 
Verification Processes, Verification Advisory, and Assistance 
Services,'' (Nov. 16, 2009).
    \20\ According to a CVE Memorandum, staff will identify businesses 
with current VA contracts that have not submitted VA Form 0877 and 
invite them to apply for verification. CVE will require these 
applicants to provide documentation such as business licenses, articles 
of incorporation, corporate bylaws, and operating agreements. 
Verification Change Sheet--Priority Processing (March 11, 2010).
---------------------------------------------------------------------------
    Based on our review of a random sample of the files for 112 
businesses that VA had verified by the end of FY09, an estimated 48 
percent of the files lacked required information or documentation that 
CVE staff followed key verification procedures.\21\ Specifically,
---------------------------------------------------------------------------
    \21\ We conducted a review of a random sample of 112 files on 
businesses that VA had verified by September 30, 2009, to determine the 
agency's compliance with its own application procedures. All percentage 
estimates based on this sample have 95 percent confidence intervals 
within plus or minus 10 percentage points of the estimate itself.

      20 percent were missing some type of required 
information, such as evidence that veteran status had been checked or a 
quality review took place;
      39 percent lacked information about how staff justified 
determinations that control and ownership requirements were met; and
      14 percent either were missing evidence that a risk 
assessment had taken place or the risk assessment that occurred did not 
follow guidelines.\22\
---------------------------------------------------------------------------
    \22\ The percentages in the three bulleted points do not sum to 48 
percent because individual files may have demonstrated one or more of 
the deficiencies we noted in the bullets. For example, one file may 
have been missing some type of required information and the business 
also may have been assigned an incorrect risk level.

    Data system limitations also appear to be contributing factors to 
weaknesses we identified in our file review. For example, data entry 
into CVE's internal database largely is done manually, which can result 
in missing information or errors. Furthermore, CVE's internal database 
does not contain controls to ensure that only complete applications 
that have received a quality review move forward. Internal control 
standards for Federal agencies require that agencies effectively use 
information technology in a useful, reliable, and continuous way.\23\ 
According to agency officials, two efforts are underway to enhance 
CVE's data systems. For example, CVE plans systems enhancements that 
would automatically check and store information obtained about veteran 
status and from some public databases. Additionally, CVE plans to adopt 
case management software--as recommended in the contractors' report--to 
help manage its verification program files. The new system will allow 
CVE to better track new and renewal verification applications and 
manage the corresponding case files.
---------------------------------------------------------------------------
    \23\ GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
---------------------------------------------------------------------------
    VA started verifying businesses in May 2008, but did not start 
conducting site visits until October 2009. As of April 8, 2010, VA has 
used contractors to conduct 71 site visits but an additional 654 high- 
and elevated-risk businesses awaited visits. Because of this delay, it 
currently has a large backlog of businesses awaiting site visits and 
some higher-risk businesses have been verified months before their site 
visits occurred or were scheduled to occur. According to VA officials, 
the agency plans to use contractors to conduct an additional 200 site 
visits between May and October 2010. However, the current backlog 
likely will grow over future months.
    According to site visits reports, approximately 40 percent of the 
visits resulted in evidence that control or ownership requirements had 
not been met, but as of April 2010, CVE had not canceled any business' 
verification status. According to these reports, evidence of 
misrepresentation dates to October 2009, but VA had not taken actions 
against these businesses as of April 2010. According to VA's Office of 
Inspector General, it has received one referral (on April 5, 2010) as a 
result of the verification program.\24\ Staff have made no requests for 
debarment as a result of verification program determinations as of 
April 2010.\25\
---------------------------------------------------------------------------
    \24\ VA's Office of Inspector General has received referrals about 
the businesses identified in our October 2009 report on the 
governmentwide SDVOSB program, but these referrals were made as a 
result of our work, not VA's verification program.
    \25\ One business was referred to VA's committee for Federal 
Acquisitions Regulations debarment. The committee requested additional 
information and the case remains active. This business was identified 
in our October 2009 report on the governmentwide SDVOSB program and was 
found ineligible because of issues with performance (not adhering to 
subcontracting limitations) which is not a verification issue.
---------------------------------------------------------------------------
    Under the 2006 Act, businesses determined by VA to have 
misrepresented their status as VOSBs or SDVOSBs are subject to 
debarment for a reasonable period of time, as determined by VA for up 
to 5 years.\26\ Additionally, under the verification program rules, 
whenever CVE determines that a business owner submitted false 
information, the matter will be referred to the Office of Inspector 
General for review and CVE will request that debarment proceedings be 
initiated.\27\ However, beyond the directive to staff to make a 
referral and request debarment proceeding, VA does not have detailed 
guidance in place (either in the verification program procedures or the 
site visit protocol) that would instruct staff under which 
circumstances to make a referral or a debarment request.\28\
---------------------------------------------------------------------------
    \26\ 48 CFR 809.406-2. See 74 Fed. Reg. at 64630.
    \27\ 38 CFR Part 74.2. See 75 Fed. Reg. at 6103-6104.
    \28\ While VA contracting officers can use protests to determine if 
a business misrepresented its status, CVE staff conduct verifications 
on businesses that submitted applications to be reviewed and if 
approved listed in the VetBiz.gov database as verified. These 
businesses may not have procurements with VA and therefore CVE staff 
cannot use status protests as a means to determine misrepresentation.
---------------------------------------------------------------------------
    To summarize our observations concerning VA's verification efforts, 
the agency has been slow to implement a comprehensive program to verify 
the veteran status, ownership, and control of small businesses and 
maintain a database of such businesses. The weaknesses in VA's 
verification process reduce assurances that verified firms are, in 
fact, veteran owned and controlled. Such verification is a vital 
control to ensure that only eligible veteran-owned businesses benefit 
from the preferential contracting authorities established under the 
2006 Act.
    These remarks are based on our ongoing work, which is exploring 
these issues in more detail. As required by the 2006 Act, we will issue 
a report on VA's contracting with VOSBs and SDVOSBs later this year. We 
anticipate the forthcoming report will include recommendations to the 
Department of Veterans Affairs to facilitate progress in meeting and 
complying with the 2006 Act's requirements.
    Madam Chairwoman and Members of the Subcommittee, I appreciate this 
opportunity to discuss these important issues and would be happy to 
answer any questions that you may have. Thank you.
GAO Contact and Acknowledgements
    For further information on this testimony, please contact William 
B. Shear at (202) 512-8678 or [email protected]. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this statement. Individuals making key contributions 
to this testimony include Harry Medina, Assistant Director; Paola 
Bobadilla; Beth Ann Faraguna; Julia Kennon; John Ledford; Jonathan 
Meyer; Amanda Miller; Marc Molino; Mark Ramage; Barbara Roesmann; 
Kathryn Supinski; Paul Thompson; and William Woods.

                                 
                Prepared Statement of Joseph F. Sobota,
       Assistant Chief Counsel for Advocacy, U.S. Small Business 
                             Administration
                           Executive Summary
    Advocacy and veteran entrepreneurship research. Pursuant to Public 
Law 106-50, SBA's Office of Advocacy began a long-term effort to 
develop new information on veterans in business and related topics. 
Advocacy has collected and interpreted data from existing sources, 
commissioned special tabulations of unpublished data, and supported 
contract research on issue-specific topics related to veteran 
entrepreneurship.
    Sources of data on veterans in business. The most important source 
of data on veterans in business that we now have is the U.S. Census 
Bureau's 2002 Survey of Business Owners and Self-Employed Persons 
(SBO). In 2007, Census issued two important reports on veterans in 
business based on its SBO data, and Advocacy released its own report 
the same year, also using that data. Census plans to issue a new report 
on veterans in business in May 2011 using data from its 2007 SBO. Until 
then, the 2002 SBO remains our best source.
    How many veteran-owned firms are there? Census found that in 2002, 
14.5 percent of all respondent business owners were veterans, and about 
7 percent of those were service-disabled. About 12.2 percent of all 
businesses were veteran-owned. Advocacy estimates that there were about 
29.6 million businesses in the U.S. in 2009. If the 12.2 percentage of 
veteran ownership in 2002 remained true in 2009, an estimate of 3.6 
million veteran-owned firms would result, of which perhaps 250,000 were 
owned by service-disabled veterans.
    Veteran-owned firms were similar to all U.S. firms in most 
respects, except for their age. Their distribution by size was nearly 
identical to all firms, both in terms of revenues and employees. This 
correspondence also was true of their distribution by type of industry; 
in the percentage of those which were home-based; in their level of 
franchise ownership; in the sources of capital used for business 
startup, acquisition and expansion; in the types of workers they used; 
and in the types of their major customers.
    Geographic distribution of veteran-owned firms. Although the 
published 2002 SBO reports did not give us information on the 
geographic distribution of veteran owners, Advocacy did commission a 
special tabulation of Census data to provide this information. The top 
10 States for veteran owners were: California, Texas, Florida, New 
York, Pennsylvania, Illinois, Ohio, North Carolina, Georgia, and 
Michigan. Virginia and Washington also appeared in the top 10 States 
for service-disabled veteran (SDV) owners.
    Rural/urban concentrations. Advocacy's special tabulation of 2002 
SBO data also told us whether or not veteran owners were located in 
areas with urban core populations of 10,000 or more, that is to say, in 
urban or rural areas. The concentrations of both veteran owners and SDV 
owners were slightly higher in rural areas than those for all owners. 
Among employers, 7.6 percent of all owners, 8.2 percent of veteran 
owners, and 8.3 percent of SDV owners were in rural areas. Among 
nonemployers, 7.8 percent of all owners, and 8.8 percent of both 
veteran and SDV owners were in rural areas.
    Top five industries for veteran-owned firms. Those industries with 
the largest shares of veteran-owned firms were the same as those for 
all U.S. firms: professional, scientific, and technical services, 18.7 
percent; construction, 13.9 percent; other services, 10.2 percent; 
retail trade, 9.5 percent; and real estate and rental/leasing, 9.3 
percent. Some variations in rankings occur between employers and 
nonemployers.
    Exporting. Advocacy's special tabulation provides information on 
owners whose firms have ``major'' export customers (accounting for 10 
percent or more of a firm's sales). Among employer firms, 2.0 percent 
of all owners, 1.8 percent of veteran owners, and 2.2 percent of SDV 
owners had major export customers. Among nonemployers, 1.4 percent of 
all owners, 1.3 percent of veteran owners, and 1.5 percent of SDV 
owners had major export customers.

                               __________

    Chairwoman Herseth Sandlin and Members of the Subcommittee, good 
afternoon and thank you for the opportunity to appear before you today 
to update information provided to the Subcommittee last year and to 
provide new data in response to questions you have posed. My name is 
Joe Sobota, and I am an Assistant Chief Counsel in the Office of 
Advocacy at the U.S. Small Business Administration (SBA). Congress 
established the Office of Advocacy in 1976 as an independent entity 
within SBA to represent the views of small business before Federal 
agencies, to provide counsel on small business issues to the President 
and the Congress, to perform economic research related to small 
business and entrepreneurship, and for other purposes specified in our 
statutory charter.\1\
---------------------------------------------------------------------------
    \1\ Title II, Public Law 94-305; June 4, 1976; 15 U.S.C. Sec. 634a 
et seq.
---------------------------------------------------------------------------
    Because Advocacy was established to provide independent counsel to 
policymakers, its testimony is not circulated for comment through the 
Office of Management and Budget (OMB) or other Federal offices, and the 
views expressed by Advocacy here do not necessarily reflect the 
position of the Administration or of SBA.
Background on Advocacy and Veteran Entrepreneurship Research
    Advocacy's mission is to be an independent voice for small business 
inside the government in the formulation of public policy and to 
encourage policies that support their startup, development, and growth. 
Its creation was premised on the belief that small business needs 
representation in the legislative, regulatory, and administrative 
processes that profoundly affect them, and that good policy requires 
good information.
    Advocacy works with Federal regulatory agencies and OMB to ensure 
agency compliance with the Regulatory Flexibility Act.\2\ We help 
regulators develop smarter rules that will accomplish their objectives 
while minimizing unnecessary adverse impacts on small entities. Our 
activities in this area during FY 2009 saved small entities $7 billion 
in foregone one-time regulatory costs and $745 million in annually 
recurring costs.\3\
---------------------------------------------------------------------------
    \2\ Public Law 96-354; September 19, 1980; 5 U.S.C. Sec. 601 et 
seq.
    \3\ For full information, see Advocacy's annual report to the 
President and the Congress on implementation of the Regulatory 
Flexibility Act, which can be accessed at http://www.sba.gov/advo/laws/
flex/09regflx.pdf.
---------------------------------------------------------------------------
    Our economic research activities both support our regulatory 
advocacy and develop information on a wide variety of small business 
topics for use by government policymakers and other stakeholders. 
Advocacy's own professional economists work with data from many 
sources, including some that originate at other Federal agencies and 
cannot be accessed by private sector researchers because of important 
statutory privacy protections. In addition to a variety of periodic 
reports and reference materials that are produced by our own staff, 
Advocacy also sponsors contract research on issue-specific topics that 
vary from year to year depending on current issues and problems, the 
needs of stakeholders, and the availability of resources. On average, 
Advocacy releases about 25 research reports and data products 
annually.\4\
---------------------------------------------------------------------------
    \4\ See Advocacy's homepage at http://www.sba.gov/advo/ for 
additional information on economic research.
---------------------------------------------------------------------------
    Advocacy's activities on behalf of all small firms should benefit 
veteran-owned firms to the same extent they help small firms in 
general, but our economic research function forms a special connection 
between Advocacy and the veterans business community. Subsequent to the 
enactment of the Veterans Entrepreneurship and Small Business 
Development Act of 1999 (Public Law 106-50), Advocacy began a long-term 
effort to develop new information on veterans in business and related 
topics. This proved to be more difficult than expected, especially in 
the early years, largely because most data sources and records of 
routine business transactions and processes (e.g., bank loans) do not 
include information on veteran or disability status, information 
largely irrelevant to their purposes, if not to those with research or 
policy interests. For example, there is no easy way to tell how many 
veteran-owned firms, or even individual veterans, are in bankruptcy. 
The forms used in this process simply don't ask for veteran status.
    Gradually, Advocacy, in cooperation with our friends in other 
agencies,\5\ has been able to use specialized techniques, including 
surveys and the matching of administrative data from disparate sources, 
to develop information on veterans in business which is not available 
``off the shelf.'' All of our published reports are posted on 
Advocacy's veterans economic research Web site.\6\ These include both 
studies that are dedicated to veteran-specific issues and studies on 
more general topics where we were able to develop and include veteran-
specific information because veteran ``markers'' were available in the 
underlying data, something that we now try to do whenever possible.
---------------------------------------------------------------------------
    \5\ Including the Census Bureau, the Bureau of Labor Statistics, 
the Internal Revenue Service, the Federal Reserve Board, the 
Departments of Defense and Veterans Affairs, and others.
    \6\ http://www.sba.gov/advo/research/veterans.html.
---------------------------------------------------------------------------
    Advocacy currently has in progress two additional economic research 
projects on veteran-related issues, one examining factors affecting 
entrepreneurship among veterans, and another looking at tax and 
regulatory problems facing veteran entrepreneurs. These will be posted 
on our Web site when complete. The study on tax and regulatory 
problems, being conducted by an Advocacy contractor and now in peer 
review, should address one of the questions posed in your invitation to 
this hearing; and we will be pleased to provide a briefing when the 
project is finished this summer.
    Concerning the other questions you have posed, we have had 
discussions with your staff and are pleased to be able to offer some 
very interesting data on veteran and service-disabled veteran business 
owners, information that Advocacy has developed by commissioning 
special tabulations of U.S. Census Bureau data that have not been 
published by that agency. This information has not received wide 
circulation, and we are hopeful that it will help the Subcommittee in 
its work. I will return to this subject in a few minutes, but first we 
should put these data in context.
Small Businesses In General
    Last year, Advocacy presented the Subcommittee with some key 
statistics on small businesses in general before presenting data on 
veterans in business. I would like to update those numbers now because 
they help us understand how important the subset of firms owned by 
veterans and service-disabled veterans are. Advocacy also publishes 
other very popular documents loaded with more data on small firms. Our 
Frequently Asked Questions, State Economic Profiles, and Quarterly 
Indicators all can be downloaded from our Web site.\7\ These products 
are periodically updated and written for general users. Links to many 
other kinds of business data are also available at this site. Of 
special interest are these three measures:
---------------------------------------------------------------------------
    \7\ http://www.sba.gov/advo/research/.

      Number. Advocacy estimates that, in 2008, there were 29.6 
million businesses in the United States.\8\ Small firms with fewer than 
500 employees represent 99.9 percent of all the businesses (including 
both employers and nonemployers), as the most recent data (2006) showed 
only about 18,000 large businesses with 500 or more employees.\9\
---------------------------------------------------------------------------
    \8\ http://web.sba.gov/faqs/faqindex.cfm?areaID=24. This estimate 
uses the most common definition of ``small business'' which is based on 
all IRS tax returns reporting $1,000 or more in business income during 
the tax year.
    \9\ http://www.sba.gov/advo/research/us88_06.pdf.
---------------------------------------------------------------------------
      Employer/Nonemployer. The most recent available Census 
data (2006) show that 22.5 percent of all firms had employees, while 
the balance were nonemployers.\10\
---------------------------------------------------------------------------
    \10\ Ibid.
---------------------------------------------------------------------------
      Self-employment. Advocacy estimates that there were about 
15.1 million self-employed individuals in the workforce at the end of 
2009, including 5.5 million incorporated and 9.6 million unincorporated 
individuals.\11\
---------------------------------------------------------------------------
    \11\ See http://www.sba.gov/advo/research/sbqei0904.pdf. Some 
reports on self-employment exclude incorporated individuals; however, 
Advocacy research usually includes both types together, including 
individuals who choose to conduct their business activities as 
Subchapter S corporations or other pass-through entities, very popular 
types of business organization.

Source of Data for Veterans In Business
    The most important primary source of data that we now have on 
veterans in business remains the Census Bureau's 2002 Survey of 
Business Owners and Self-Employed Persons (SBO), part of the Economic 
Census the agency conducts every 5 years.\12\ In July 2007, Census 
released two new reports on veterans in business, based on data 
collected in the agency's 2002 SBO. These reports, Characteristics of 
Veteran-Owned Businesses (CVOB) and Characteristics of Veteran Business 
Owners (CVBO), are the most important data from Census on veterans in 
business since an earlier report based on 1992 data. The scope of the 
reports released in 2007 is also much broader than that of the 1992 
report, representing the most detailed information on veterans in 
business ever released by Census.\13\
---------------------------------------------------------------------------
    \12\ The SBO is a quinquennial survey first conducted in its 
present form in 2002. The SBO incorporates many of the purposes and 
survey questions of three predecessor surveys: the Survey of Minority-
Owned Business Enterprises (SMOBE), the Survey of Women-Owned Business 
Enterprises (SWOBE), and the 1992 Characteristics of Business Owners 
(CBO) survey. The SMOBE/SWOBE surveys continued in 1997, while the CBO 
was discontinued as a separate survey after 1992, although elements of 
it are included in the 2002 and 2007 SBOs.
    \13\ The 2002 SBO reports, together with accompanying summaries, 
press releases, and charts are all available at http://www.census.gov/
econ/sbo/index.html.
---------------------------------------------------------------------------
    We at Advocacy are most appreciative that the Census Bureau has 
recognized the importance of veteran business data and that the agency 
again included questions on veteran and service-connected disability 
status in its pending 2007 SBO.\14\ The current effort is polling 2.4 
million businesses about their characteristics and the characteristics 
of their owners. Tabulation and analysis of their responses are now in 
progress, and Census currently plans to release a special report on 
veteran business data in May 2011.\15\ Some more limited preliminary 
data may also be available in a report to be released in July this 
year.
---------------------------------------------------------------------------
    \14\ Information for the 2007 SBO is based on tax year 2007, and 
actual survey data collection was in 2008 and 2009.
    \15\ See http://www.census.gov/econ/sbo/releaseschedule07.html for 
a schedule of all planned 2007 SBO releases.
---------------------------------------------------------------------------
    For the present, we are limited to the 2002 SBO veteran business 
data that we do have, even though it is becoming somewhat dated. 
Advocacy prepared a synopsis of findings from the Census data for 
publication as a chapter in the 2007 edition of our annual report to 
the President and the Congress.\16\ This report, which is posted on 
Advocacy's Web site,\17\ is an effort to interpret in a user-friendly 
way the massive amount of information provided in the 2002 SBO reports, 
which comprise nearly 200 pages of tabular data.
---------------------------------------------------------------------------
    \16\ Office of Advocacy, The Small Business Economy, December 2007; 
Chapter 5, Characteristics of Veteran Business Owners and Veteran-owned 
Businesses, pp. 119-149, hereafter referred to as SBE.
    \17\ See http://www.sba.gov/advo/research/sbe_07_ch5.pdf.
---------------------------------------------------------------------------
    Although the published 2002 Census SBO data on veterans in business 
are substantial, there is still the potential to ``mine'' the 
underlying survey and associated administrative data to answer any 
number of questions that the published reports do not address. Advocacy 
did commission such a special tabulation of 2002 SBO data that included 
a variety of breakouts of information on veteran business owners, 
including service-disabled owners. Today, I will present some of our 
findings from this special tabulation, including those that help 
address the questions you have posed on location, industry, and export 
sales. Our findings will be largely limited to veteran business owners, 
not to veteran-owned firms. This is because, for the purposes of the 
SBO, service-connected disability is considered a characteristic of an 
owner and not of a firm. Accordingly, Census did not provide direct 
information on firms owned by service-disabled veterans (SDVOBs), but 
only on their owners. To compare SDVOBs and veteran-owned firms in 
general, we must look to data on owners for insight. Our special 
tabulation provides that data.
    Appended to this testimony are four tables with the special 
tabulation data we are presenting today. All of the data in these 
tables are expressed in percentages. This is how most data in the 
Census Bureau's SBO reports are expressed, and a word of explanation is 
in order here. These percentages represent shares of all SBO survey 
respondents. To be counted as a respondent, a survey recipient had to 
both respond and answer certain key questions. Census did not make an 
estimate of the total universe of all veteran owners or veteran-owned 
firms, but did provide estimates based on respondents only. Advocacy 
has estimated that the number reported for total respondent firms in 
2002 understated the total number of actual firms by a factor of 1.4, 
based on other widely used Census reports.\18\ We do not have an 
analogous upward adjustment factor for veteran firm owners, but we know 
that the reported number of respondent veteran business owners 
understates the universe of all veteran owners by some factor 
attributable to nonrespondents.
---------------------------------------------------------------------------
    \18\ See SBE, p. 123, footnote 16, for a discussion of this 
problem.
---------------------------------------------------------------------------
    With this limitation in mind, we can report the 2002 SBO's 
estimates for all respondent firm owners. These are the base numbers to 
which the percentages in the attached tables can be applied. However, 
it should be remembered that these base numbers: (1) are from 2002 and 
now somewhat dated, and (2) understate the actual totals because of 
nonrespondents. The table which follows presents more detail on Census 
respondent estimates, including these basic three:

      20,527,000 total respondent business owners
      2,973,000 total respondent veteran business owners
      194,000 total respondent service-disabled veteran 
business owners

    The 2002 SBO also estimated that 14.5 percent of all respondent 
business owners were veterans and that 12.2 percent of all respondent 
firms had one or more veterans as majority interest owners (i.e., were 
veteran-owned). Nearly 7 percent of veteran business owners were 
disabled as the result of injury incurred or aggravated during active 
military service.\19\ Just over 66 percent of veteran owners had a 
majority interest in their firms, while 26.8 percent were equal 
interest owners, and 7.1 percent were minority interest owners.
---------------------------------------------------------------------------
    \19\ See http://www.census.gov/econ/sbo/02/cbosof.html.


   Table 5.3: Owners of Respondent Firms by Owner's Veteran Status and
                         Business Interest, 2002
                        (percent except as noted)
------------------------------------------------------------------------
                                              Owners of      Owners of
                                Owners of    respondent     respondent
                               respondent    firms with     nonemployer
                                  firms       employees        firms
------------------------------------------------------------------------
All owners (number)            20,526,725     5,574,044      14,954,681
------------------------------------------------------------------------
  Majority interest owners           64.1          48.6            69.9
------------------------------------------------------------------------
  Equal interest owners              27.4          29.1            26.7
------------------------------------------------------------------------
  Nonmajority interest                8.6          22.3             3.4
 owners
------------------------------------------------------------------------
Veteran owners (number)         2,973,246       811,740       2,161,506
------------------------------------------------------------------------
  Majority interest owners           66.2          55.9            70.1
------------------------------------------------------------------------
  Equal interest owners              26.8          25.8            27.1
------------------------------------------------------------------------
  Nonmajority interest                7.1          18.3             2.8
 owners
------------------------------------------------------------------------
Service-disabled veteran          193,750        37,521         156,229
 (number)
------------------------------------------------------------------------
  Majority interest owners           68.8          59.2            71.1
------------------------------------------------------------------------
  Equal interest owners              26.5          27.1            26.3
------------------------------------------------------------------------
  Nonmajority interest                4.7          13.7             2.6
 owners
------------------------------------------------------------------------
Non-service-                    2,600,043       724,445       1,875,598
 disabledveteran(number)
------------------------------------------------------------------------
  Majority interest owners           65.8          55.5            69.8
------------------------------------------------------------------------
  Equal interest owners              26.9          25.8            27.3
------------------------------------------------------------------------
  Nonmajority interest                7.3          18.7             2.9
 owners
------------------------------------------------------------------------
Nonveteran (number)            17,411,631     4,566,839      12,547,792
------------------------------------------------------------------------
  Majority interest owners           64.1          47.7            70.1
------------------------------------------------------------------------
  Equal interest owners              27.3          29.6            26.5
------------------------------------------------------------------------
  Nonmajority interest                8.6          22.7             3.4
 owners
------------------------------------------------------------------------
See http://www.census.gov/prod/ec0w/sb0200cscbo.pdf. Note all estimates
  are based on owners of firms that responded to the 2002 Survey of
  Business Owners (SBO), both firms with paid employees and firms with
  no paid employees. A respondent firm is defined as a business that
  returned the survey form and provided the gender, Hispanic or Latino
  origin, or race characteristics for the owner(s). No detail is
  provided on respondents who did not report veteran or disability
  status. Percentage columns represent the percentage of owners of firms
  in the designated categories.
Source: U.S. Census Bureau, 2002 Survey of Business Owners (SBO),
  Characteristics of Business Owners; p. 25, Table 4.
Note that 2.1 percent of respondent owners did not answer the veteran
  status question, and 6.0 percent of respondent veteran owners did not
  answer the disability status question. Accordingly, the total of
  veteran and non-veteran owners does not equal the number of all
  owners, nor does the total of veterans with and without disabilities
  equal all veterans.


Veteran Business Owner Characteristics
    The special tabulations that are appended to this testimony provide 
a wealth of information about the distribution of respondent veteran 
business owners within 11 different reporting categories:

      Employment size of firm
      Receipt size of firm
      Legal form of organization
      Year business acquired
      Owner status
      Geographic concentration
      State
      Industry
      Customers with 10 percent or more of sales
      Source of startup capital
      Source of expansion financing

    Eight of these categories appeared in the Census reports that were 
published in 2007 (with some minor variations in breakpoints and 
formatting). Advocacy has previously provided the Subcommittee with 
information on these characteristics. However, Advocacy's special 
tabulation now gives us additional information not included in the 
earlier Census reports or our previous testimony. These data relate to 
geographic concentration, State location, and legal form of 
organization. Using both the new and older data, we can address three 
of the questions that the Subcommittee posed, those relating to 
location, industry sector, and export sales.
    Location. Although we have no data on location by city, Advocacy 
did ask Census for data by State, and these are displayed in Table 7b 
appended to this testimony. The report generated from this tabulation 
shows the percentage of all respondent owners in the United States who 
are located in each State and in the District of Columbia. These are 
broken into two main categories for each State, employers and 
nonemployers. Within each of these two main categories, a breakout is 
provided on the local distribution percentage for all owners, veteran 
owners, service-disabled veteran owners, and those owners under 35 and 
over 65 years of age. This type of depiction makes it possible to 
compare the relative concentrations of the different types of business 
owners in any given State.
    For example, California's share of business owners is large because 
of the State's size, but there are differing concentrations among 
employer owners, with all owners representing 11.6 percent of the 
national total, veteran owners 10.4 percent of their national total, 
and service-disabled veteran owners 9.8 percent of their national 
total. In Texas, by contrast, veterans and service-disabled veterans 
have larger shares than all employer owners, with all owners 
representing 6.1 percent of their national total, veteran owners 6.6 
percent of their total, and service-disabled veteran owners 7.8 percent 
of all service-disabled veteran owners.
    Following are listings of the 10 States with the most veteran or 
service-disabled respondent business owners, with separate listings for 
employers and nonemployers. There are differences between these two 
main categories that are masked in analyses that combine them. 
Analogous information is available for all States and the District of 
Columbia in the appended Table 7b. We have also listed in each line 
below the shares for veteran owners, service-disabled veteran owners 
(SDVs), and all owners, so that each group's relative share can be 
readily seen together. This helps us identify States where veteran or 
service-disabled veteran owners are either under- or over-represented 
relative to all owners at large. First, here are the top 10 States for 
veteran owners of employer firms:

      California (veterans, 10.4 percent; SDVs, 9.8 percent; 
all, 11.6 percent);
      Texas (veterans, 6.6 percent; SDVs, 7.8 percent; all, 6.1 
percent);
      Florida (veterans, 5.7 percent; SDVs, 7.8 percent; all, 
6.1 percent);
      New York (veterans, 5.0 percent; SDVs, 5.1 percent; all, 
6.3 percent);
      Pennsylvania (veterans, 4.3 percent; SDVs, 3.0 percent; 
all, 4.1 percent);
      Illinois (veterans, 4.2 percent; SDVs, 2.7 percent; all, 
4.5 percent);
      Ohio (veterans, 4.1 percent; SDVs, 2.9 percent; all, 3.9 
percent);
      North Carolina (veterans, 3.3 percent; SDVs, 3.5 percent; 
all, 2.9 percent);
      Georgia (veterans, 3.0 percent; SDVs, 3.0 percent; all, 
2.7 percent);
      Michigan (veterans, 3.0 percent; SDVs, 2.8 percent; all, 
3.4 percent).

    The same 10 States led the Nation in terms of veteran owners of 
nonemployer firms:

      California (veterans, 10.5 percent; SDVs, 10.2 percent; 
all, 12.3 percent);
      Texas (veterans, 7.7 percent; SDVs, 8.0 percent; all, 7.2 
percent);
      Florida (veterans, 6.5 percent; SDVs, 7.8 percent; all, 
6.1 percent);
      New York (veterans, 4.5 percent; SDVs, 3.9 percent; all, 
6.2 percent);
      Pennsylvania (veterans, 4.3 percent; SDVs, 3.3 percent; 
all, 4.0 percent);
      Ohio (veterans, 3.8 percent; SDVs, 2.8 percent; all, 3.8 
percent);
      Illinois (veterans, 3.5 percent; SDVs, 2.4 percent; all, 
4.0 percent);
      North Carolina (veterans, 3.2 percent; SDVs, 3.6 percent; 
all, 2.9 percent);
      Michigan (veterans, 3.1 percent; SDVs, 2.7 percent; all, 
3.4 percent);
      Georgia (veterans, 3.0 percent; SDVs, 3.6 percent; all, 
2.7 percent).

    While the top 10 States for veteran owners are the same for both 
employers and nonemployers, new States appear on top 10 lists of States 
for service-disabled owners of employer firms:

      California (SDVs, 9.8 percent; veterans, 10.4 percent; 
all, 11.6 percent);
      Texas (SDVs, 7.8 percent; veterans, 6.6 percent; all, 6.1 
percent);
      Florida (SDVs, 7.8 percent; veterans, 5.7 percent; all, 
6.1 percent);
      New York (SDVs, 5.1 percent; veterans, 5.0 percent; all, 
6.3 percent);
      North Carolina (SDVs, 3.5 percent; veterans, 3.3 percent; 
all, 2.9 percent);
      Virginia (SDVs, 3.4 percent; veterans, 2.9 percent; all, 
2.5 percent);
      Pennsylvania (SDVs, 3.0 percent; veterans, 4.3 percent; 
all, 4.1 percent);
      Georgia (SDVs, 3.0 percent; veterans, 3.0 percent; all, 
2.7 percent);
      Washington (SDVs, 3.0 percent; veterans, 2.8 percent; 
all, 2.6 percent);
      Ohio (SDVs, 2.9 percent; veterans, 4.1 percent; 3.9 
percent).

    Finally, here are the top 10 States for service-disabled owners of 
nonemployer firms:

      California (SDVs, 10.2 percent; veterans, 10.5 percent; 
all, 12.3 percent);
      Texas (SDVs, 8.0 percent; veterans, 7.7 percent; all, 7.2 
percent);
      Florida (SDVs, 7.8 percent; veterans, 6.5 percent; all, 
6.1 percent);
      New York (SDVs, 3.9 percent; veterans, 4.5 percent; all, 
6.2 percent);
      North Carolina (SDVs, 3.6 percent; veterans, 3.2 percent; 
all, 2.9 percent);
      Georgia (SDVs, 3.6 percent; veterans, 3.0 percent; all, 
2.7 percent);
      Pennsylvania (SDVs, 3.3 percent; veterans, 4.3 percent; 
all, 4.0 percent);
      Virginia (SDVs, 3.2 percent; veterans, 2.7 percent; all, 
2.4 percent);
      Ohio (SDVs, 2.8 percent; veterans, 3.8 percent; all, 3.8 
percent);
      Michigan (SDVs, 2.7 percent; veterans, 3.1 percent; all, 
3.4 percent).

    Geographic concentration. Another new measure in Advocacy's special 
tabulation was geographic concentration. We asked Census to identify 
whether business owners were located within a metropolitan or 
``micropolitan'' statistical area, that is to say, in areas with an 
urban core population of 10,000 or more.\20\ Those not within such 
areas could be described as being located in rural areas. These data 
are depicted in the appended Table 7b. The tabulation shows that 7.6 
percent of all employer business owners and 7.8 percent of all 
nonemployer owners were located outside of metro/micro areas in 2002, 
i.e., in rural areas.
---------------------------------------------------------------------------
    \20\ Metropolitan statistical areas have an urban core with 50,000 
or more inhabitants. Micropolitan statistical areas have an urban core 
with 10,000 to 49,999 inhabitants. See definitions or maps for more 
information on metropolitan and micropolitan areas.
---------------------------------------------------------------------------
    Slightly higher numbers of veteran owners and service-disabled 
veteran owners were located outside of metro/micro areas. Table 7b 
shows that 8.2 percent of veteran employer owners and 8.3 percent of 
service-disabled veteran employer owners were located in rural areas. 
This trend was also true among nonemployer owners, where 7.8 percent of 
all such owners were located outside of metro/micro areas, but 8.8 
percent of both veteran and service-disabled veteran owners were 
located in rural areas.
    Industry. The Subcommittee has asked for information on veteran-
owned firms by industry type. The appended Table 7c from our special 
tabulation of Census data includes data in the same format described 
above for each of 20 main industry classifications (two-digit NAICS 
codes). Percentage shares are set out for all owners, veteran owners, 
and service-disabled veteran owners in both the employer and 
nonemployer classifications. This distinction is of interest because 
there are significant differences in many industries that are masked 
when both employers and nonemployers are combined into a single 
group.\21\
---------------------------------------------------------------------------
    \21\ For a discussion of this problem, see ``Do Business Definition 
Decisions Distort Small Business Research Results?'' (August 2008: 
http://www.sba.gov/ADVO/research/rs330tot.pdf), an Advocacy working 
paper by Brian Headd and Radwan Saade.
---------------------------------------------------------------------------
    For example, 6.7 percent of all employer owners, but only 1.7 
percent of all nonemployer owners, owned firms in manufacturing. 
However, when we look at all firms (not owners) together, Census 
reported in 2002 that 2.7 percent of all firms were manufacturers. 
Similarly, 5.1 percent of all employer owners and 12.9 percent of all 
nonemployers were in the real estate renting and leasing group. The 
combined share for all firms in this group was 9.6 percent. To help 
shed light on this phenomenon and to provide additional context for our 
special tabulations, I have also appended a chart prepared by the 
Census Bureau depicting firm distribution by industry for both all 
firms and veteran-owned firms.\22\
---------------------------------------------------------------------------
    \22\ This chart is also available at http://www2.census.gov/econ/
sbo/02/vetbuscharts.pdf.
---------------------------------------------------------------------------
    To summarize from Census firm data, veteran-owned firms are 
generally distributed among the 20 major industries (two-digit NAICS 
codes) similarly to the distribution of all respondent firms, as 
depicted in the chart appended to my testimony. The five largest 
categories are the same for both groups:

      Professional, scientific, and technical services 
(veterans, 18.7 percent; all, 15.7 percent);
      Construction (veterans, 13.9 percent; all, 11.7 percent);
      Other services (veterans, 10.2 percent; all, 11.2 
percent);
      Retail trade (veterans, 9.5 percent; all, 11.6 percent); 
and
      Real estate and rental/leasing (veterans, 9.3 percent; 
all, 9.6 percent).

    However, when we look at employer owners instead of firms, using 
Advocacy's special tabulations from Census, the top five are different:

      Professional, scientific, and technical services 
(veterans, 14.7 percent; all, 14.0 percent);
      Construction (veterans, 13.7 percent; all, 13.7 percent);
      Retail trade (veterans, 13.3 percent; all, 14.2 percent);
      Health care and social assistance (veterans, 9.4 percent; 
all, 8.8 percent);
      Manufacturing (veterans, 7.4 percent; all, 6.7 percent).

    If we shift to nonemployer owners, again using the special 
tabulations, we get yet another view:

      Professional, scientific, and technical services 
(veterans, 17.1 percent; all, 15.5 percent);
      Real estate and rental/leasing (veterans, 14.8 percent; 
all, 12.9 percent);
      Construction (veterans, 12.1 percent; all, 10.8 percent);
      Other services (veterans, 10.9 percent; all, 12.3 
percent);
      Retail trade (veterans, 10.4 percent; all, 11.4 percent).

    We can also rank the top five industries for service-disabled 
veteran employer owners:

      Professional, scientific, and technical services (SDVs, 
14.8 percent; all veterans, 14.7 percent);
      Construction (SDVs, 13.7 percent; all veterans, 13.7 
percent);
      Retail trade (SDVs, 13.6 percent; all veterans, 13.3 
percent);
      Other services (SDVs, 7.4 percent; all veterans, 6.4 
percent);
      Health care and social assistance (SDVs, 7.2 percent; all 
veterans, 9.4 percent).

    Finally, a ranking of the top five industries for service-disabled 
nonemployer owners:

      Professional, scientific, and technical services (SDVs, 
16.0 percent; all veterans, 17.1 percent);
      Construction (SDVs, 12.7 percent; all veterans, 12.1 
percent);
      Other services (SDVs, 11.9 percent; all veterans, 10.9 
percent);
      Retail trade (SDVs, 11.6 percent; all veterans, 10.4 
percent);
      Real estate and rental/leasing (SDVs, 11.1 percent; all 
veterans, 14.8 percent).

    We have presented these various rankings in order to show that 
there are differences between employers and nonemployers that are often 
missed in analyses that combine the two. The appended special 
tabulations let us see these differences and avoid incorrect 
generalizations.
    Exporting. The Subcommittee also asked for information on exporting 
by veteran-owned firms. We have 2002 Census SBO data that can help us 
here. The main report on veterans in business examined types of ``major 
customers'' of respondent firms, those customers that accounted for 10 
percent or more of a firm's sales. Included among the possible 
categories of major customers was an ``export sales'' category on which 
data were reported. Those firms with major export customers made up 1.4 
percent of all respondent firms, 1.8 percent of respondent employers, 
and 1.3 percent of respondent nonemployers.
    Veteran-owned firms reported similar, but slightly smaller, 
percentages of firms with major export customers: 1.3 percent of all 
veteran-owned firms, 1.6 percent of veteran-owned employers, and 1.2 
percent of veteran-owned nonemployers.
    Advocacy's special tabulation of 2002 Census owner characteristics 
also gave us information on owners whose firms had major export 
customers. This data is in Table 7c appended to this testimony. Among 
employer firm owners, 2.0 percent of all owners, 1.8 percent of veteran 
owners, and 2.2 percent of service-disabled veteran owners had major 
export customers. Among nonemployers, 1.4 percent of all owners, 1.3 
percent of veteran owners, and 1.5 percent of service-disabled veteran 
owners had major export customers.
    Federal procurement. Advocacy does not compile the official 
statistics on Federal procurement, socio-economic goaling or agency 
performance on goaling targets. Data of this type are maintained by 
SBA's Office of Government Contracting and by the Federal Procurement 
Data System (FPDS). We will defer to the responsible offices on this 
subject. Detailed data on goaling and performance are also posted on 
both the SBA and FPDS Web sites.
Conclusion
    This concludes my prepared testimony. While we do not have exact 
answers to all the questions posed by the Subcommittee, I hope that the 
information that we did provide on your questions relating to veteran 
business location, industries, and exporting will be helpful. We have 
only mentioned a very small fraction of the large amount of information 
in the special tabulations we have appended to this testimony. I hope 
that the additional data will be useful to the Subcommittee, and we 
stand ready to help answer any questions that arise in connection with 
its review. Also, as I mentioned earlier, we do have a research study 
nearing completion that we hope will be able to address your question 
on barriers to veteran entrepreneurship. Advocacy will keep the 
Subcommittee's staff informed, and when this contract project is 
completed, we will be pleased to provide a briefing.
    We at Advocacy very much appreciate the Subcommittee's interest in 
veteran entrepreneurship issues and Advocacy's work in this area. We 
look forward to continuing to work with the Subcommittee in any way we 
can to advance our knowledge about veterans in business, and to help 
you in your deliberations on how to best serve our Nation's veterans 
community.





   Figure 3: Percentage Distribution of Respondent Firms by Kind of 
    Business for All Firms and Firms With One or More Veterans As a 
                     Majority Interest Owners: 2009







                                 
                  Prepared Statement of Diane Farrell,
           Director, Export-Import Bank of the United States
    The Export-Import Bank of the United States (Ex-Im Bank) is the 
official export credit agency of the U.S. Government.
    Ex-Im Bank, which recently celebrated its 75th anniversary, is an 
independent Federal agency chartered by the U.S. Congress with its 
mission to sustain and increase U.S. jobs.
    Ex-Im Bank provides loans, loan guarantees and insurance to help 
U.S. companies export their goods and services. Ex-Im Bank products 
facilitate commerce at all levels. Ex-Im Bank helps American business 
reach the 95 percent of the global marketplace that is beyond our 
borders. All regional offices of Ex-Im Bank, including New York, Miami, 
Houston, Chicago, Los Angeles, and San Francisco are committed to small 
business outreach.
    Ex-Im Bank does not compete with private sector lenders but 
provides export financing that fill trade financing gaps. The Bank 
assumes credit and country risks that the private sector is unable or 
unwilling to accept. Ex-Im Bank further levels the playing field for 
U.S. exporters by matching the financing that other governments provide 
to their exporters.
    It is important to note--Ex-Im Bank is self-sustaining--meaning the 
Bank pays for its operations from the interest and fees it collects.
    As part of its mission, Ex-Im Bank is committed to providing 
opportunities for all American businesses--especially Service-Disabled, 
Veteran-Owned Small Business firms.
    Ex-Im Bank staff continues to support meetings in connection with 
the Interagency Network of Enterprise Assistance Providers. We continue 
our collaboration with the Center for Veterans Enterprise, benefiting 
from their partnerships with the Small Business Administration, 
American Small Business Development Associations, Department of 
Defense, Department of Veterans Affairs, and the Department of Labor.
    Export loan authorizations by Ex-Im Bank more than doubled to $13.2 
billion during the first half of the current fiscal year. That is a 
125-percent increase compared to the record $5.9 billion authorized 
during the same period in Fiscal Year 2009.
    An estimated 109,000 American jobs have been supported by the 
Bank's financing this fiscal year to date, compared to about 61,000 
jobs supported during the same period last fiscal year.
    Small business export loan authorizations have increased half a 
billion dollars during the same period to $2.3 billion, 28 percent 
greater than the first half of FY2009.
    The 2010 first-half figures are the latest in a series of records 
set by Ex-Im Bank while addressing tightened liquidity in the 
marketplace. In FY2009, total Ex-Im Bank authorizations came to $21 
billion while authorizations for small business exporters totaled $4.36 
billion--both historic highs.
    To assist small businesses, the Bank implemented new products and 
services such as a premium rate reduction of 15 percent on our short-
term multi-buyer insurance policies and short-term small business 
environmental multi-buyer insurance polices. The premium rate reduction 
affects approximately half of all Ex-Im Bank insurance policyholders.
    As of March 31, 2010, the self-sustaining Bank's FY2010 receipts in 
excess of costs totaled $162.6 million. We are proud that we are able 
to function at no expected cost to the U.S. taxpayer.
    My colleagues at Ex-Im Bank and I look forward to working with the 
groups testifying today to increase our support within the veteran 
small business community.

                               __________

    Chairwoman Herseth Sandlin, Ranking Member Boozman, Members of the 
Subcommittee, I welcome the opportunity to testify before you on the 
efforts the Export-Import Bank of the United States (Ex-Im Bank) is 
undertaking to help not only our veterans, but also U.S. small 
businesses, succeed in an increasingly difficult and complex 
international marketplace.
    Our veterans deserve all the gratitude and assistance that the 
Federal Government can provide for them. I commend all our veterans for 
their service and sacrifice to this country.
    Chairman Hochberg wishes he could be here today, and he, along with 
all my colleagues at the Bank are committed to working with this 
Committee and the other groups and agencies represented here to expand 
our outreach to small businesses owned by our veterans.
    While the credit crunch appears to be easing, Ex-Im Bank remains 
committed to filling the gaps in trade financing and supporting and 
sustaining U.S. jobs, just as it has done for every economic crisis 
faced by this country since the Great Depression.
    A few introductory words about the Bank may be helpful. Ex-Im Bank 
is the official export credit agency of the United States, and an 
independent Federal agency chartered by the U.S. Congress.
    Ex-Im Bank provides loans, loan guarantees and insurance to help 
U.S. companies export their goods and services. We have a variety of 
products to facilitate commerce at all levels. Ex-Im Bank helps 
American business reach the 95 percent of the global marketplace that 
is beyond our borders.
    It does not compete with private sector lenders but provides export 
financing that fill trade financing gaps. The Bank assumes credit and 
country risks that the private sector is unable or unwilling to accept. 
It also levels the playing field for U.S. exporters by matching the 
financing that other governments provide to their exporters. 
Importantly, the Bank is self-sustaining, meaning the Bank pays for its 
operations from the interest and fees it collects. As of March 31, 
2010, the self-sustaining Bank's FY2010 receipts in excess of costs 
totaled $162.6 million.
    For more than 75 years, the Bank's mission to grow and sustain 
American jobs has remained unchanged.
    Just last month at Ex-Im Bank's Annual Conference, President Obama 
charged this government under his National Export Initiative with the 
goal of doubling U.S. exports and creating 2 million American jobs 
within the next 5 years. The Bank's support of small businesses and 
veteran-owned businesses will lead the economic recovery and achieve 
the President's target.
    Ex-Im Bank is committed to providing opportunities for all American 
businesses--especially Service-Disabled, Veteran-Owned Small Business 
firms.
    While I am proud to be here today to let our friends in the 
veterans community know that Ex-Im Bank can help, this is not the first 
outreach the Bank has done to this important community. Ex-Im Bank 
staff recently attended National Veteran Small Business Conference and 
Expo in July of last year. The U.S. Department of State (Office of 
Small and Disadvantaged Business) requested our participation along 
with the Danish Embassy and Australian Embassy on an International 
Business Development Panel at the conference. Seventy veteran-owned 
businesses attended the session where the Bank detailed our products 
that are available to them. I am happy to report that there were 
approximately 2,600 conference attendees.
    Ex-Im Bank staff continues to support meetings in connection with 
the Interagency Network of Enterprise Assistance Providers (INEAP).
    We continue our collaboration with the Center for Veterans 
Enterprise (CVE), benefiting from their partnerships with the Small 
Business Administration, American Small Business Development 
Associations, Department of Defense, Department of Veterans Affairs, 
and the Department of Labor. Ex-Im Bank staff maintains contact through 
the INEAP/Manufacturing Extension Partnership. Ex-Im Bank promotional 
materials are shared with the Veterans Business Outreach. The last 
meeting was in March of this year.
    I would like to take a moment to highlight a veteran's success 
story at Ex-Im Bank. In 1956, George and Gertrude Gascon, 10 years in 
the military, sought to purchase property in Southwest Harbor, Maine on 
which to settle after retirement from the U.S. Navy. Gertrude's 
parents, John and Dorothy Dunbar, mentioned that Ogden's Lobster Pound 
was for sale. Flash forward 54 years to January 2010, when the Gascons' 
son-in-law, Anthony Pettegrow, now co-owner of the business with the 
Gascons' daughter Josette, called Ex-Im's Northeast Regional Office. 
The domestic market, Mr. Pettegrow explained, had become overly 
competitive due to an unexpected consequence of overfishing in the 
North Atlantic. There had been a virtual elimination of the Maine 
lobster's natural marine predators and lobster populations had swelled, 
with lobsters surviving long enough to grow to larger weights. The 
resulting oversupply has significantly impacted domestic prices. 
Trenton Bridge Lobster Pound recognized that American lobsters 
commanded a premium overseas, and began selling abroad at healthier 
margins than had been possible at home. As Mr. Pettegrow also 
explained, there are costly barriers to entry to exporting lobsters, 
and Trenton Bridge Lobster Pound is already set up properly to expand 
its more lucrative export sales. Two existing customers in the UK and 
Italy now account for most of the company's sales. Inquiries have 
recently been received from new buyers in Spain, Korea, and elsewhere, 
which the Pettegrows would like to pursue, but with prudent coverage. 
As the company qualifies as a small business per SBA definition, Mr. 
Pettegrow was directed by the Regional Office toward the risk 
protection and marketing benefits of Ex-Im Bank's Small Business Short-
Term Multi-Buyer Export Credit Insurance Policy. Trenton Bridge placed 
a policy application shortly after this conversation through a broker 
and by early February had received and accepted a quotation from Ex-Im 
Bank. Approximately 20 of the independent lobstermen supplying the 
company are also veterans, who now benefit from Trenton Bridge Lobster 
Pound's newly opened markets.
    I would like to provide a brief review of recent financing figures 
that will give you an idea of the challenges and opportunities that 
abound.
    Export loan authorizations by Ex-Im Bank more than doubled to $13.2 
billion during the first half of the current fiscal year. That is a 
125-percent increase compared to the record $5.9 billion authorized 
during the same period in Fiscal Year 2009.
    An estimated 109,000 American jobs have been supported by the 
Bank's financing this fiscal year to date, compared to about 61,000 
jobs supported during the same period last fiscal year.
    Small business export loan authorizations have increased half a 
billion dollars during the same period to $2.3 billion, 28 percent 
greater than the first half of FY2009.
    The 2010 first-half figures are the latest in a series of records 
set by Ex-Im Bank while addressing tightened liquidity in the 
marketplace. In FY2009, total Ex-Im Bank authorizations came to $21 
billion while authorizations for small business exporters totaled $4.36 
billion--both historic highs.
    Export financing for buyers of U.S. goods and services sold in Asia 
increased from $456 million last year to $1.9 billion so far this 
fiscal year; all other regions in the world posted increases this 
fiscal year except Africa where exports are roughly even.
    We pay for our operations from the interest and fees collected. 
This means we are able to finance our program budget, the amount we 
must set aside to cover risks, as well as our administrative budget, 
through the fees and payments received through our programs.
    As of March 31, 2010, the self-sustaining Bank's FY2010 receipts in 
excess of costs totaled $162.6 million. We are proud that we are able 
to function at no expected cost to the U.S. taxpayer.
    Ex-Im Bank is uniquely able to fill the current financing gap in a 
number of ways.
    First, is our institutional flexibility. Institutions such as Ex-Im 
Bank are prepared to respond to abrupt economic changes. For instance, 
prior to FY2009, most of the Bank's larger transactions, and some 
smaller- and medium-sized, were financed through loan guarantees, where 
Ex-Im Bank would guarantee up to 85 percent of a commercial bank loan 
to a foreign buyer. But Ex-Im Bank also had the option of lending 
directly to a foreign buyer. In FY2009, commercial banks lacked the 
liquidity to offer loans. So, where appropriate, increasingly Ex-Im 
Bank has stepped in and provided direct loans.
    In our working capital program, Ex-Im Bank modified its credit 
standards to help small businesses so their exports could be stimulated 
and U.S. jobs sustained and created. These actions have led to a banner 
year for the working capital product, eclipsing the former record for 
authorizations by over $70 million. We, of course, carefully monitor 
this portfolio to minimize default risks.
    Also to assist small businesses, the Bank implemented new products 
and services such as a premium rate reduction of 15 percent on our 
short-term multi-buyer insurance policies and short-term small business 
environmental multi-buyer insurance polices. The premium rate reduction 
affects approximately half of all Ex-Im Bank insurance policyholders.
    During this economic downturn, Ex-Im Bank has introduced a ``take-
out'' option, which allows commercial banks to sell their Ex-Im Bank 
guaranteed medium- and long-term loans back to Ex-Im Bank. This enables 
commercial banks to reduce their liquidity risks, lower borrowing 
rates, increase their own ability to lend, and make U.S. exports more 
competitive.
    Looking to the future, we are seeking ways to do even more. Inter-
agency coordination and cooperation can be strengthened through the 
Trade Promotion Coordinating Committee, or TPCC, which is made up of 20 
U.S. Government agencies involved in trade, under the direction of the 
Department of Commerce. The Secretary of Commerce, who serves as the 
committee's chairman, has made a vital TPCC a strategic priority. I 
look forward to working with Secretary Locke, Ex-Im Bank Chairman 
Hochberg, and the TPCC to ensure that every effort is made to reach out 
directly to small businesses, including our veteran-owned businesses 
that either currently export or could potentially export.
    Ex-Im Bank, in close cooperation with other government agencies, is 
doing this through a hugely successful and widely attended 
``ExportsLive'' series. These trade promotion events provided 
exporters, small businesses new to exporting, and banks in New York, 
Boston, Miami, Houston, Detroit, Chicago, Los Angeles, Cincinnati, 
Minneapolis, Madison, WI, and Seattle areas with direct access to 
agency representatives from Ex-Im Bank, SBA, Commerce, USTR, OPIC, and 
TDA, along with one-on-one counseling for exporters. I look forward to 
more success from our ``ExportsLive'' trade events where we plan to 
visit Montana, Colorado, and Long Island, New York. I am sure that Ex-
Im Bank would welcome the chance to work with you and your Committee 
colleagues in hosting such events back in your districts.
    Moreover, all of the regional offices of Ex-Im Bank, including New 
York, Miami, Houston, Chicago, Los Angeles, and San Francisco, are 
fully devoted to small business outreach.
    We host or attend over 400 conventions, seminars, or trade shows 
annually, have thousands of one-on-one meetings with businesses, and 
work aggressively to ensure banks and economic development agencies are 
aware of Ex-Im Bank and our products and services.
    We estimate that there are 259,000 actual small business exporters 
in the United States. With a business development staff of less than 
40, Ex-Im Bank is working incredibly hard to reach these companies.
    Similar outreach efforts are necessary to get commercial banks 
involved, or in many cases, re-involved as the banks are closer to 
American business, and can advise business on the resources Ex-Im Bank 
and other Federal agencies can offer to increase their sales and 
increase employment.
    Because of our limited resources, we need to use more third party 
``multipliers'' in our outreach efforts. For instance, we are 
refocusing our efforts to partner with Senators, Members of Congress, 
Governors, Mayors, State legislators, and others to host in-State trade 
seminars with local businesses. That is one of the reasons I am so 
proud to be here today, and I thank you for this opportunity to inform 
our veterans about the services provided by Ex-Im Bank.
    We stand ready to work with you to help finance exports from 
veteran-owned businesses in your States and across the country. And 
while there is still much more to be done, we know how to do it and 
what the goal is--to increase U.S. exports--thereby increasing U.S. 
jobs and opportunities for all Americans, but especially those who have 
served this country with honor and distinction.
    I look forward to partnering with the other veterans groups 
testifying here today in getting our message out on how to increase 
exports by our veteran exporting community.
    Thank you again for this opportunity and I am happy to answer your 
questions.

                                 
              Prepared Statement of Joseph C. Sharpe, Jr.,
        Director, National Economic Commission, American Legion
                           EXECUTIVE SUMMARY
    According to opening remarks made by Chair Nydia M. Velazquez 
during a Small Business hearing in March of this year, in FY 2009 
``Federal agencies missed their small business contracting goals by 2 
percent. Procurement officers will tell you that number is negligible, 
and no big deal. But while a 2 percent shortfall may not sound like a 
lot, it ultimately cost entrepreneurs $10 billion in missed 
opportunity. Or to put it another way, it cost Americans $10 billion in 
lost job creation. Small contractors, like all other small firms, 
create roughly 70 percent of new jobs. So when their ability to win 
contracts is compromised, employment numbers are too.''
    The American Legion concurs with National Veteran-Owned Business 
Association's assessment in their statement submitted for this hearing 
regarding the 2009 White House announcement that executive agencies 
shall not engage in noncompetitive contracts. We are concerned though 
that the announcement made no distinction between the thousands of sole 
source awards to productive and efficient small businesses under the 
SDVOSB, HUBZone or 8(a) programs and the billions of dollars awarded 
sole source to large businesses such as KBR and Halliburton. Specific 
guidance needs to be provided to contracting officers as to whether the 
Administration is restricting the use of legitimate contracting 
mechanisms to support the Nation's small businesses, or to restrict 
multi-billion dollar noncompetitive awards to large prime contractors.
    Therefore, The American Legion recommends:

      Service-disabled, veteran-owned small businesses set-
asides should be allowed under the Federal Supply Schedule Program. 
Currently, GSA schedules are exempt from Federal Acquisition 
Regulations part 19. Without this change, SDVOSB will be limited in 
their quest for small business opportunities to compete for Federal 
contracts.
      The SBA needs to emphasize Executive Order 13-360 and 
establish it as a procurement priority across the Federal sector. 
Federal agencies need to be held accountable by the SBA for 
implementing the Executive Order and the SBA needs to establish a means 
to monitor agencies progress and where appropriate, establish a report 
to identify those that are not in compliance, and pursue ongoing 
followup.

    The American Legion believes that the majority of funding allocated 
to veteran and military projects through the stimulus bill, as well as 
future spending bills, should be spent exclusively with veteran-owned 
firms. It was the veteran who volunteered to defend this Nation, the 
veteran who continues to keep our democracy intact, and the veteran who 
deserves the right to participate in rebuilding America's 
infrastructure and other necessary projects. In this capacity, veterans 
will continue to serve the people of the United States by building and 
growing strong, reliable, dependable businesses.

                               __________

    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 Status of Veteran Small Businesses.
    The American Legion views small business as the backbone of the 
American economy. It is the mobilizing force behind America's past 
economic growth and will continue to be a major factor as we move well 
into the 21st century. Reports show that businesses with fewer than 20 
employees account for 90 percent of all U.S. firms and are responsible 
for more than 75 percent of all new jobs, generated $993 billion in 
income in 2006, and employ 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.
    According to opening remarks made by Chair Nydia M Velazquez during 
a Small Business hearing in March of this year, in FY 2009 ``Federal 
agencies missed their small business contracting goals by 2 percent. 
Procurement officers will tell you that number is negligible, and no 
big deal. But while a 2 percent shortfall may not sound like a lot, it 
ultimately cost entrepreneurs $10 billion in missed opportunity. Or to 
put it another way, it cost Americans $10 billion in lost job creation. 
Small contractors, like all other small firms, create roughly 70 
percent of new jobs. So when their ability to win contracts is 
compromised, employment numbers are too.''
    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 veteran 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 an alarming 20 percent, and for veterans between 
the ages of 18 to 24 there is a 30.2 percent unemployment rate. 
Furthermore, presently one out of every four veterans who do find 
employment earns less than $25,000 per year. Unfortunately, many of the 
thousands of servicemembers who are currently leaving the service are 
from the combat arms and nonskilled professions that are not readily 
transferable to the civilian labor market.
    As reported earlier in this statement the best way of combating 
unemployment is through the creation of new jobs. Small business 
creates an estimated 65 percent to 75 percent of net new 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. The 
American Legion believes no group is better qualified or deserving of 
this type of assistance than 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 America's free enterprise system, are 
summarily ignored by the Federal agencies responsible for meeting their 
small business needs.
    The Small Business Administration has the responsibility of 
supporting business owners who are military veterans, yet the office 
empowered to oversee these programs remains critically understaffed, 
underfunded, and still marginalized despite laws championed by the 
Small Business Committee to further empower veterans' entrepreneurship 
programs.
    The Department of Defense (DoD), who will have the responsibility 
of directing more than $6.5 billion of stimulus infrastructure, 
continues to be satisfied with an embarrassing, less than 1 percent 
achievement of the federally-mandated 3 percent SDVOB contracting goal. 
Especially important to note is that all of the stimulus money has been 
dedicated to construction and infrastructure improvement, and these are 
two of the strongest areas of SDVOB ownership according to the Federal 
Central Contractors Registry.
    Additionally, the Army Corps of Engineers combined appropriations 
to improve and construct VA hospital and medical facilities adds up to 
nearly $6 billion. All totaled, there will be more than $12 billion 
spent just out of the stimulus package alone. The omnibus FY2009 
Appropriations Act (P.L. 111-8) increased that amount by more than $4.3 
billion for the Army Corps in Construction and Maintenance, and 
additional billions in DoD spending.
    With the more than $20 billion being spent on veteran and military 
related projects, The American Legion finds it unconscionable that 
businesses owned by veterans remain at the back of the line when 
competing for Federal contracts according to the Federal Acquisition 
Regulation.
Veteran Small Business Training Centers
    Last year, The American Legion pointed out that although the 
stimulus package included a number of economic development and small 
business outreach programs, not a dime was specifically targeted toward 
the development of veteran-owned businesses. Veterans deserve the 
finest assistance available. Year after year this Nation struggles to 
maintain the operation of three Veterans Business Resource Centers 
originally funded through the National Veterans Business Development 
Corporation, nor has Congress increased the assistance to the five 
other Centers supported by the SBA's Office of Veterans Business 
Development in more than 5 years.
    However, on March 31, 2010, SBA announced the award of grants to 10 
local SBA Small Business Development Centers (SBDCs) to increase 
entrepreneurial assistance to veterans. The grants will provide 
approximately $1 million to fund programs for veterans who promote 
business ownership and provide services to small businesses dealing 
with the deployment of key personnel overseas. Each SBDC receiving 
funds will promote increased coordination of services to veterans, and 
will use multimedia tools to connect veterans through distance learning 
and customized online businesses counseling by providing services to 
reach the local veteran business community. The American Legion 
applauds $1 million in additional funding for grants to be given out on 
the behalf of veterans; nevertheless, SBA was given $10 million in 
additional discretionary spending. The American Legion believes a 
portion of that money needs to be directed toward the Office of 
Veterans Business Development for veteran's entrepreneurial endeavors.
    Currently, too many military families are suffering financial 
hardship while their loved ones are recuperating in military hospitals 
around the country. Spouses are leaving their jobs to be with that 
disabled servicemember only to watch their family finances deteriorate. 
In many cases, seamless transition is just a wishful thought; however 
if business development training was offered to military members, a 
small home-based business could be the answer in guaranteeing a 
constant source of revenue for the family. Again, these Centers can be 
a vital link toward fulfilling this need.
    The American Legion strongly supports the mandates of the 
``Veterans Entrepreneurship and Small Business Development Act of 
1999'' (P.L. 106-50) that were designed to assist all veterans wishing 
to start, expand, or protect their business. If there is a true desire 
to assist veterans returning from Iraq and Afghanistan in developing 
small businesses, we must work together to enforce and expand upon the 
mandates of P.L. 106-50.
    The Office of Veterans Business Development within the SBA remains 
crippled and ineffective due to inadequate funding, and $750,000 in FY 
07 and $742,000 in FY 08 is woefully short to realistically support 
veteran entrepreneurship. These amounts, which are less than the office 
supply budget for the SBA, are expected to support the Nation's entire 
population of veteran entrepreneurs. The American Legion feels that 
this is insufficient and disappointing to America's veteran business 
owners and clearly undermines the spirit and intent of P.L. 106-50. The 
American Legion strongly supports increased funding for SBA's Office of 
Veterans Business Development so it can provide enhanced outreach and 
community-based assistance to veterans and self-employed eligible 
members of the Reserves and National Guard. The American Legion 
recommends this office receive an additional $13 million, up from its 
current level of $2 million in FY 2010, to $15 million in FY 2011 in 
order to implement a nationwide community-based assistance program to 
veterans and self-employed members of the Reserve and National Guard.
Small Business and the Credit Crunch
    Small businesses are another casualty of the credit crunch caused 
by the ongoing financial crisis. By the end of 2008, more than half of 
the Nation's small businesses looking for credit were unable to obtain 
a loan. This credit freeze will force many businesses to shut their 
doors, while others will be unable to expand. In either case, it means 
a loss of American jobs. Congress should implement current efforts to 
thaw the credit market for small businesses by establishing a direct 
lending program within the SBA. This program could provide loans to 
small businesses that cannot otherwise find credit, thereby potentially 
saving or creating tens of thousands of American jobs.
    During the fourth quarter of 2008, 70 percent of banks reported 
tightening their lending standards for small firms. As a consequence, 
fewer than half of the small businesses that tried to get a loan in the 
fourth quarter of 2008 were able to get one. Of the small businesses 
that tried to obtain a new line of credit, only 3 in 10 succeeded. The 
credit crisis is hitting small businesses across the board, including 
those that have been current in their payments and have no ties to 
high-risk sectors of the economy such as housing.
    From November 2007 to November 2008, more than one quarter of small 
businesses reported a decline in the number of jobs at their companies. 
In December 2008, only one in eight small businesses said they planned 
to hire new employees in the next 12 months, a 48 percent drop since 
August 2008. In addition, the number of small businesses filing for 
bankruptcy rose 54 percent from 2007 to 2008.
    The 7(a) loan program is the SBA's largest and most used lending 
program. Under this program, SBA provides a guaranty of up to 85 
percent for loans provided by private-sector to small businesses. But 
because 7(a) loans are offered through private-sector banks, which are 
reeling from the current crisis, small businesses may not be able to 
get the relief they need. From the first quarter of 2008 to the first 
quarter of 2009, the number of loans approved by the 7(a) program 
dropped 57 percent. Moreover, the SBA is expected to guarantee only 
about $10 billion in loans this year, down from its historic norm of 
$20 billion per year.
    To help ease the credit crisis for small businesses, The American 
Legion urges Congress to establish a direct lending program through the 
SBA. This effort would offer low-interest loans to otherwise healthy 
veteran-owned and service-disabled veteran-owned businesses that are 
having trouble obtaining the credit they need for necessary operating 
expenses or expansion.
Legislation and Veterans Federal Procurement Opportunity
    The American Legion seeks and supports legislation to require a 5 
percent goal, with set-asides and sole source authority for Federal 
procurements and contracts for businesses owned and operated by 
service-disabled veterans and businesses owned and controlled by 
veterans. This includes those small businesses owned by Reserve 
component members who have been or may be called to active duty, or may 
be affected by base closings and reductions in the military forces.
    The American Legion has encouraged Congress to require reasonable 
``set-asides'' of Federal procurements and contracts for businesses 
owned and operated by veterans. We have supported legislation in the 
past that sought to add service-connected disabled veterans to the list 
of specified small business categories receiving 3 percent set-asides. 
The American Legion continues to support this Subcommittee's effort to 
raise the priority level of Service-Disabled Veteran Business Owners in 
the Federal Acquisition Regulation by changing ``may'' to ``shall'' and 
further by eliminating the ``Rule of 2.''
Noncompetitive Contracts
    The American Legion concurs with National Veteran-Owned Business 
Association's assessment in their statement submitted for this hearing 
regarding the 2009 White House announcement that executive agencies 
shall not engage in noncompetitive contracts. The American Legion is 
concerned though that the announcement made no distinction between the 
thousands of sole source awards to productive and efficient small 
businesses under the SDVOSB, HUBZone or 8(a) programs and the billions 
of dollars awarded sole source to large businesses, such as KBR and 
Halliburton. Specific guidance needs to be provided to contracting 
officers as to whether the Administration is restricting the use of 
legitimate contracting mechanisms to support the Nation's small 
businesses, or to restrict multi-billion dollar noncompetitive awards 
to large prime contractors.
    The American Legion also agrees that pressures being exerted on the 
Federal contracting community will probably result in greater use of 
the General Services Administration's (GSA's) Federal Supply Schedule 
Program. While this program holds a higher contracting preference 
compared to the small business programs, it unfortunately does not 
allow set-asides for any small business group. The American Legion 
agrees that expanded use of this program will further diminish 
opportunities for small businesses, especially small businesses owned 
by veterans.
    Therefore, The American Legion recommends:

  Service-disabled, veteran-owned small businesses set-asides 
should be allowed under the Federal Supply Schedule Program. Currently, 
GSA schedules are exempt from Federal Acquisition Regulations part 19. 
Without this change, SDVOSB will be limited in their quest for small 
business opportunities to compete for Federal contracts.
  Implementation of a coordinated standardized training program 
for procurement staff that focuses on SDVOSB procurement strategies in 
their respective agency.
  President Obama should reissue Executive Order 13-360 
``Providing Opportunities for Service-Disabled Veteran Businesses'' to 
increase Federal contracting and subcontracting opportunities for 
veterans, and require that its tenets be incorporated into SBA 
Regulations and Standard Operating Procedures.
  The SBA needs to emphasize Executive Order 13-360 and 
establish it as a procurement priority across the Federal sector. 
Federal agencies need to be held accountable by the SBA for 
implementing the Executive Order. The SBA needs to establish a means to 
monitor agencies progress and where appropriate, establish a report to 
identify those that are not in compliance, and pursue ongoing followup.
  In order to achieve the mandates of Executive Order 13-360, 
the SBA must assist Federal agencies to develop a strategic plan that 
is quantifiable, and will assist them in establishing realistic 
reporting criteria.
  The American Legion also recommends that the House Small 
Business Committee embrace and promote development of stronger policy 
and legislative language that champions the utilization of Veteran-
Owned Small Business (VOSB) Joint-Venturing (JV) as a ready solution to 
the Small Business Spending requirements of the Stimulus Spending 
initiative.
  Hold the agency leadership responsible for meeting the 3 
percent congressionally mandated goal. The American Legion Small 
Business Task Force has proactively developed an initiative to 
challenge the leadership of DoD service components that are not meeting 
the 3 percent goal. We identified the Defense Logistics Agency (DLA) as 
among the worst performing organizations in terms of award percentage 
to SDVOBs. According to the Federal Procurement Data System--Next 
Generation (FPDS-NG) dated January 21, 2010, each major supply center 
fell well short of the 3 percent goal; and overall, DLA awarded only 
0.70 or less than three-quarters of 1 percent of contracted dollars to 
SDVOBs. More disconcerting is that the percentages of DLA awards to 
SDVOBs actually decreased from 0.73 in FY 08 to 0.70 in FY 09. The 
American Legion Small Business Task Force communicated their concerns 
to Vice Admiral Alan S. Thompson, Director of DLA, back in January 
2010, in regards to our concerns associated with his agency's dismal 
record of contracting with SDVOBs. We also requested a meeting with him 
and his staff to offer our assistance in developing a plan for 
increasing participation within his agency. It took his office more 
than 2 months to respond and agree to a meeting. As of April 27, 2010, 
the meeting still has not been scheduled. Vice Admiral Thompson is a 
flag officer serving as a director of a DoD agency supporting America's 
war fighters; however, his organization continues to fail at meeting a 
congressionally mandated goal aimed at assisting the very community 
that has sacrificed so much. We recommend this Subcommittee schedule a 
hearing with all Federal agencies, like DLA, who consistently do not 
meet their Federal procurement goals with SDVOBs.
                               CONCLUSION
    The American Legion believes that the majority of funding allocated 
to veteran and military projects through this stimulus bill, as well as 
future spending bills, should be spent exclusively with veteran-owned 
firms. It was the veteran who volunteered to defend this Nation, the 
veteran who continues to keep our democracy intact, and the veteran who 
deserves the right to participate in rebuilding America's 
infrastructure and other necessary projects. In this capacity, veterans 
will continue to serve the people of the United States by building and 
growing strong, reliable, dependable businesses.
    The mission of The American Legion's National Economic Commission 
is to take actions that affect the economic well-being of veterans, 
including issues relating to veterans' employment, home loans, 
vocational rehabilitation, homelessness, and small business. Small 
business continues to be a primary job generator and a major trainer 
for American employees. The small firm workforce includes more young 
and entry-level workers than colleges and large businesses combined. It 
is vital that Veteran-Owned and Service-Disabled Veteran-Owned 
Businesses receive a fair and proportionate amount of Federal contracts 
so these veterans can build and maintain successful businesses. The 
American Legion reiterates that the Small Business Administration's 
Office of Veterans Business Development should be the lead agency to 
ensure that veterans returning from Iraq and Afghanistan are provided 
with Entrepreneurial Development Assistance.
    We look forward to continuing to work with the Committee to enhance 
entrepreneurship among America's veterans. Again, thank you Chair 
Herseth Sandlin and Ranking Member Boozman for allowing The American 
Legion to present our views on this very important issue.

                                 
                    Prepared Statement of Joe Wynn,
              Senior Advisor, Vietnam Veterans of America
                           EXECUTIVE SUMMARY
    Many of us know that it was Public Law 106-50, the Veterans 
Entrepreneurship and Small Business Development Act of 1999 that laid 
the foundation for veterans interested in starting or expanding their 
own small businesses to get Federal assistance. Congress even stated in 
its findings of P.L. 106-50 that America had not done nearly enough to 
``assist veterans, particularly service-disabled veterans, in playing a 
greater role in the economy of the United States by forming and 
expanding small business enterprises.''
    P.L. 106-50 called for the creation of new entities and the 
restructuring of existing ones in order to assist veterans in pursuit 
of entrepreneurship. Under this law, the Office of Veterans Business 
Development (under SBA), the Center for Veterans Enterprise (under VA), 
and the National Veterans Business Development Corporation (quasi 
independent), were created. It also established a 3 percent procurement 
goal for Federal agencies and large prime contractors to purchase goods 
and services from service-disabled veteran-owned businesses. But 
agencies did not pay much attention until 2003 when Public Law 108-183 
made the 3 percent minimum MANDATORY.
    And even then, it took a Presidential Executive Order (13-360) in 
October 2004 to really get agencies to carry out the law. Under the 
Order, agencies were instructed to designate a senior-level official to 
be held accountable for submitting a strategic plan showing how and 
when they would achieve the 3 percent contracting goal for service-
disabled veteran-owned businesses. But with no oversight and penalties 
associated with noncompliance, after a few years the effort diminished.
    So Congress took another direction in 2006 and passed Public Law 
109-461 which authorized ONLY the VA to implement a unique ``Veterans 
First'' approach to VA contracting. This approach would change the 
priorities for contracting preferences within the Department of 
Veterans Affairs (VA), by placing Service-Disabled Veteran-Owned Small 
Businesses (SDVOSBs) and Veteran-Owned Small Businesses (VOSBs) first 
and second, respectively, in satisfying VA's acquisition requirements.
    Then in February 2008, Congress passed Public Law 110-186, the 
``Military Reservist and Veteran Small Business Reauthorization and 
Opportunity Act'' to provide additional funding to the SBA Office of 
Veterans Business Development to increase the number of veteran 
business outreach centers and to provide veteran business owners some 
needed assistance with business development and access to capital.
    Now after more than 10 years since Congress first laid the 
foundation for a veterans procurement program, veterans are returning 
home from active duty facing high rates of unemployment, limited 
contracting opportunities, and a system that values profits over 
people. Yes, existing laws have made it possible for veterans to 
participate in the American Dream that they fought so hard to protect--
``Owning Your Own Business.'' But what good is it for them to own their 
own business if the revenue from that business is insufficient to care 
for them and their family. Truly more can be done for our veterans.
INTRO
    Good afternoon, Madam Chair and Members of the Subcommittee. On 
behalf of VVA National President John Rowan and all of our officers and 
members we thank you for the opportunity for Vietnam Veterans of 
America (VVA) to appear here today to share our views on the ``Status 
of Veteran Small Businesses: Are We Failing Our Veterans.'' I ask that 
you enter our full statement in the record, and I will briefly 
summarize the most important points of our statement.
    As you know, my time of service was many years ago, as a Vietnam 
Era veteran of the U.S. Air Force with the 66th Strategic Missile 
Squadron. I still have very vivid memories of that military experience. 
I'm also a lifetime member of the National Association for Black 
Veterans, and have spent the past 10 years assisting and advocating on 
behalf of veterans in need of health care, housing, education, 
employment and especially those veterans seeking to start or expand 
their own small business. While doing so, I have been serving as Senior 
Advisor to the Vietnam Veterans of America, Treasurer for the Veterans 
Entrepreneurship Task Force (VET-Force) and President of the Veterans 
Enterprise Training & Services Group (VETS Group).
    It is primarily through developing the VETS Group and serving as a 
member of VET-Force, that I have become very familiar with the status 
of veteran business owners within the Federal marketplace. I've also 
spent considerable time reviewing the legislation that created the 
Service-Disabled Veteran-Owned Business (SDVOB) Federal Procurement 
Program and communicate regularly with many of the agency 
representatives directed to assist veterans with Federal contracting.
    The VET-Force, which is composed of over 200 organizations and 
affiliates representing thousands of veterans throughout the United 
States, a high percentage of which are small businesses, has made it 
their mission to monitor the implementation of the programs, agencies, 
and organizations referenced under P.L. 106-50, P.L. 108-183, Executive 
Order 13-360, P.L. 109-461, and P.L. 110-186. The VET-Force presents a 
strong unified veterans' voice for virtually all of the major veterans 
groups, veteran entrepreneurs, and serves as an advocate for veterans 
seeking assistance with their small business or self-employment.
    The VETS Group, a nonprofit 501(c)3, community-based organization 
that I founded in 2004, offers a holistic program of services to help 
veterans achieve economic empowerment through education, employment, 
and entrepreneurship. The VETS Group is able to provide information, 
outreach, Federal procurement training and support to hundreds of 
veterans by utilizing a network of Patriot Resource Partners, a 
Coalition of Advisors, and many Technical Assistance Providers.
    While the majority of our veteran business owners are from the 
Vietnam Era, a new generation of veterans now exist that are well 
trained, loyal, battle-tested and eager to pursue entrepreneurial 
opportunities. But just as it was reported in the VET-Force 2005 Report 
to the Nation, that ``as a nation, we have been unsuccessful in 
providing the originally promised assistance our veterans have earned, 
deserved, and required so that they would have the opportunity to be as 
successful in their civilian pursuits as they were in their military 
assignments,'' evidence shows that while things have improved, we still 
have a way to go.
Why We Are Still Failing Our Veterans in the Federal Marketplace
    If veterans and service-disabled veteran-owned businesses are to 
succeed in the public sector, agencies will have to stop making excuses 
for why they can't make the minimum 3 percent procurement requirement. 
The pervasive ignorance of the law and resistance to contracting with 
veteran-owned small businesses has to change. Agencies and large prime 
contractors must be held accountable for not adhering to the laws that 
mandate maximum practical utilization of SDVOBs as primes or 
subcontractors. Inaccurate agency data, miscoding, contract bundling, 
and double counting must be eliminated. And the preference for agencies 
to contract with large businesses most often (67 percent of the time) 
should shift to utilizing small businesses much more often.
    In addition, the SBA and particularly its Office of Veterans 
Business Development, the VA's Center for Veterans Enterprise, and 
other veteran small business assistance providers (SBDCs, PTACs, SCORE, 
Women Business Centers, VBOCs) must increase their efforts in 
identifying and registering the capabilities of veteran business owners 
where required, promote the use of veteran business owners by all large 
prime contractors and monitor their compliance with their 
subcontracting plans. They should also create situations that foster 
the development of relationships between agency procurement officers 
and veteran business owners, and improve the process of identifying and 
matching veteran businesses with procurement opportunities.
Lack of Accountability, Oversight and Enforcement
    In 1999, when P.L. 106-50 was first enacted, Congress demonstrated 
that veterans should be an integral part in this Nation's economic 
development strategy. But the agencies directed to carry out the law 
were not held accountable. There have not been any penalties associated 
with an agency or large primes' failure to comply with the laws 
governing small business contracting with veteran-owned businesses. 
Even after P.L. 108-183 was passed in 2003 making it mandatory to 
contract with SDVOBs, the President had to issue an Executive Order to 
get agencies and large primes to realize that the use of veteran 
business owners in the Federal contracting process should be taken 
seriously.
    But after the SBA, the agency directed by Executive Order to 
provide oversight and technical assistance to agencies in the 
development of their strategies to increase contracting opportunities 
for SDVOBs, failed to do its part to hold agencies accountable, 
agencies and large primes have no incentive to meet or surpass the 
minimum requirements.
    Agencies and large primes have to be held accountable for not doing 
what the law requires them to do. But equally important is that it must 
be made clear who will be the enforcer and what penalties will be 
applied to those deemed to be noncompliant.
Ambiguities in the Laws That Govern the SDVOB Program
    As it stands now, contracting officers ``may'' set aside 
procurements for SDVOBs. The word ``may'' in the statute (P.L. 108-183) 
that governs the SDVOB Federal procurement program, is more often 
interpreted as ``I don't have to.'' This one little word has probably 
caused the greatest harm to veteran business owners than any other 
provision of law. Why, because the statute that governs the HUBZone 
program states that a contracting officer ``shall'' set aside 
procurements for HUBZone companies and the 8a statute states that they 
``should'' use 8a companies.
    While changing all three statutes to ``may'' would seem to equalize 
things among the two groups, it's more likely that it would only open 
the door to fewer actions and less accountability. To create true 
parity among all three groups, the statutes should be changed to 
``shall.'' This way would ensure that contracting officers would be 
required to take actions for one or the other, notwithstanding any 
other provisions of law. Equal Parity = Shall, Shall, Shall (8a, 
HUBZone, SDVOB).
    For years now, members of VET-Force have been calling for equal 
parity among all three preference groups--HUBZones, SDVOBs, and 8a 
contractors. However, to date, equal parity does not exist even though 
the SBA and the Department of Justice believe it does. According to a 
recent U.S. Court ruling, agencies ``must'' attempt to contract with 
HUBZones first.
Old Executive Order ``A Thing of the Past''
    The Presidential Executive Order 13-360 that was issued in 2004 to 
direct agencies to more effectively implement the ``mandatory'' legal 
requirement to procure ``not less than'' 3 percent of their goods and 
services from Service-Disabled Veteran-Owned Businesses and to do so by 
reserving more procurements exclusively for SDVOBs called for each 
agency to develop a ``written'' strategic plan that would provide 
details and guidance as to how they will increase contracting 
opportunities for SDVOBs.
    This was working for a while; agencies were posting their plans on 
their Web sites and some were actually trying to achieve better 
results. But by late 2007, SBA decided to move away from support for 
the Executive Order and instead implement a Score Card System whereby 
agencies are not required to submit a strategic plan and primarily 
measured by the number of small business contracts awarded. So if an 
agency meets its overall small business goals while not making all of 
the individual preference group goals, it could still receive a Green 
Score which means it is doing a good job. Never mind that they may be 
at only 1.5 percent for SDVOBs!
Overuse of Large Prime Contractors and Bundling
    Seemingly very few agencies are doing anything to encourage their 
large prime contractors to award more subcontracts to SDVOBs. When you 
talk to contracting officers or acquisitions personnel, they all say 
that they are challenged by the enormous task of monitoring the 
subcontracting plans of the agency's large primes while also having to 
meet the demands of new requirements. There is a shortage of 
contracting personnel governmentwide but an increase in the number of 
contract actions. So very few penalties, if any, are being imposed on 
the large prime contractors for failing to comply with their 
subcontracting plans. It's often more convenient to place procurement 
requirements into large bundles and award them as a single contract to 
a large prime.
    While Contract Bundling or sometimes referred to as Strategic 
Sourcing may be necessary at times in order to make more efficient use 
of limited contracting personnel and agency resources, it wouldn't be 
so bad if large primes subcontracted significant portions of the work 
to small businesses as they are required to do. However, small 
businesses, including SDVOBs, are constantly reporting that large 
primes often fail to subcontract with them even though they had 
promised to do so before the contract was awarded. This continues to 
happen time and time again because large primes are not being held 
accountable and neither are contracting personnel who should be 
monitoring them.
No Authorization To Make Direct Awards
    Contracting officers don't have the authority to issue direct 
awards to a SDVOB of their choosing under the Simplified Acquisition 
Threshold as is allowed under the Small Business Act for 8a companies. 
Under the SDVOB Federal Procurement Program a contracting officer must 
use what is referred to as the ``Rule of Two.''
    The Rule of Two as introduced under P.L. 108-183 is contained in 
Part 19 FAR, and the Code of Federal Regulations (CFR) 13 CFR, Part 
125. The Rule of Two states if a contracting officer knows of two or 
more SDVOBs that can do the work, then the requirement must be 
competed. However, the same law also states that if the contracting 
officer only knows of one SDVOB that can meet the requirement, a sole 
source award CAN BE made. But even when this is the case, it's reported 
that this authority is seldom exercised.
    So it's widely known that contracting officers who are often under 
pressure to get certain requirements awarded quickly, will routinely go 
to 8(a) firms even though there is an SDVOB that can do the job. Under 
the SBA's 8a program, contracting officers are allowed to make direct 
awards even if there are other 8a firms available to do the work. In 
these cases, the government does not have time to even consider 
restricted competition among SDVOBs because of time factors. Thus, the 
SDVOB suffers and the government fails the veteran once again.
Other Reasons Why the System Is Failing Its Veterans
    Limited Business Development Assistance. Before last year the SBA 
Office of Veterans Business Development managed five Veteran Business 
Outreach Centers (VBOCs) that provide services to veterans for the 
entire country. Last year, the SBA made direct awards to three 
independent veteran business centers in order to expand its number of 
centers to eight. Then just this month, SBA awarded grants to some 
existing centers and added four more centers, thus increasing its total 
to twelve.
    This may seem to be steps in the right direction, but the Office of 
Veterans Business Development has been operating for more than 10 
years! And by comparison to the number of Women Business Centers (WBCs) 
funded by the SBA, veterans receive only a drop in the bucket. Each of 
the VBOCs receives only $150,000 per year for a total of $1,800,000. 
However, the WBCs receive over $50 million each year.
    Congress needs to increase the budget for SBA and SBA needs to 
direct more funding to its Office of Veterans Business Development. At 
present, not only are the VBOCs underfunded, the Office has only one 
staff person to provide direct assistance to thousands of veteran 
business owners seeking to do Federal contracting. And that one staff 
person does not even have an administrative assistant.
VA's ``Veterans First'' Approach to VA Contracting
    The use of Veterans First should be applied to All VA procurements 
and not just selected ones. The prevailing belief among many within the 
VA that SDVOB means Small and Disadvantaged Veteran-Owned Business is a 
disservice to those VOBs and SDVOBs that are perfectly capable and 
qualified to handle sizable procurements including those being 
considered by the VA's T-4 Acquisition Team.
    This time last year, this same Subcommittee held a hearing focusing 
on ``Contracts and Contracting Policy at the VA'' created by Public Law 
(P.L.) 109-461. We noted then that this legislation authorized a unique 
``Veterans First'' approach to VA contracting. This approach changes 
the priorities for contracting preferences within the Department of 
Veterans Affairs (VA) by placing Service-Disabled Veteran-Owned Small 
Businesses (SDVOSBs) and Veteran-Owned Small Businesses (VOSBs) first 
and second, respectively, in satisfying VA's acquisition requirements.
    But in so doing, all SDVOSBs and VOSBs must register in the VA's 
Vendor Information Pages (VIP), aka Veterans Small Business Database, 
available at www.VetBiz.gov, and be ``VERIFIED'' by the VA's Center for 
Veterans Enterprise (CVE), to be eligible for/to receive contracts 
exclusively within the Department of Veterans Affairs.
    Other significant sections of the law direct the VA, for SDVOSBs 
and VOSBs, to: (1) Establish Contracting Goals and Review Mechanisms; 
(2) Allow Noncompetitive, Sole Source, and Restricted Competition; (3) 
Permit Survivorship for 10 Years, if the deceased veteran business 
owner was 100 percent disabled; (4) Produce Annual Progress Reports; 
and (5) Conduct a 3-Year Study.
    The law was passed in 2006 and to date (more than 3 years later), 
the VA is still struggling with developing policies and procedures that 
will expedite the processing of more than 21,000 veteran business 
owners. Rather than go back over all of the issues with the VA's 
verification process of veteran business owners, I will just refer the 
Committee to testimony and statements received at its hearing held here 
on April 23, 2009.
    However, I would like to add at this time that while the 
verification or certification of veteran business owners is only 
required when doing business with the VA, this requirement has created 
the perception that veteran business owners must be verified by the VA 
in order to do business with other agencies as well. Since the VA's 
Veterans Small Business Database is open to the public, agencies and 
large primes often use the database to search for capable and qualified 
veteran businesses. For those veteran businesses that have not yet been 
verified because of the huge backlog, their opportunities for 
procurements outside of the VA are also affected because then their 
status is questionable.
    More resources need to be allocated to the VA's Center for 
Veteran's Enterprise such that they can increase the number of staff 
persons needed to complete the verification of all veteran business 
owners in less than 60 days. Additional staff is also needed to assist 
veteran business owners with the process of marketing to the Federal 
agencies and large primes.

Close the Loopholes With the Use of FSS/GSA Schedules

    Use of FSS/GSA Schedules (FAR Part 8) allow contracting officers 
easy selection of large businesses by not having to adhere to small 
business mandates (FAR Part 19). So the schedules are often used to 
avoid the small business set-aside requirements and even to avoid the 
use of Veterans First at the VA. Contracting officers at the VA are not 
required to use Veterans First when selecting contractors from the 
schedules.

In Summary

    The Federal marketplace is a trillion dollar industry. And 3 
percent of that annual budget is easily in the billions, not to mention 
the billions of dollars in the budgets of large primes. Both Federal 
agencies and commercial vendors owe more to the many veterans who have 
sacrificed so much and deserve more than a little. It should be 
abundantly clear to all that our servicemembers, their families, and 
citizens throughout the United States are taking note of how this new 
generation of servicemembers are being treated. The actual and 
perceived treatment of our Nation's veterans, especially those 
returning from the Wars in Iraq and Afghanistan, will be a symbol of 
how valued their sacrifice was and a clear signal to any future 
enlistees on the ultimate value of their service to the Nation.
    For some time now, members of VET-Force have supported the ideal 
that, ``the presence of successful and prominent veterans within and 
across our Nation's business communities is a testimony of a grateful 
nation--a nation that honors and respects the sacrifices made by 
veterans on behalf of our country, both today and tomorrow.'' Veterans 
are uniquely qualified to work as contractors to the Federal Government 
because of their service experience and their dedication to providing 
quality products, on time and at a reasonable cost. Effective 
legislation such as P.L. 106-50, P.L. 108-183, P.L. 110-186 and 
Executive Order 13-360, has provided many opportunities for America to 
honor the service of veterans who continue to serve by helping to build 
a stronger economy.
    Hopefully the latest efforts by this Administration to improve 
services to Veteran- and Service-Disabled Veteran Business Owners will 
not be significantly impacted by OMB's Policy on Insourcing, whereby 
Federal agencies are already eliminating contracts staffed by small 
businesses.
    The announcement earlier this week of the Presidential Executive 
Orders to create two task forces is very promising. The first task 
force will focus on improving procurement opportunities for all small 
businesses and the second task force will focus exclusively on 
improving contracting opportunities for small businesses owned by 
veterans and service-disabled veterans. The structure of the Veterans 
Small Business Interagency Task Force was extracted nearly verbatim 
from a section in P.L. 110-186, the law that was passed in 2008. 
Perhaps now, 2 years later, that the President and this Administration 
have directed the SBA to implement it, actions will be taken.
    Although some progress has been made in recent years, very few 
Federal agencies have reached their small business contracting goals 
for SDVOBs. Obviously, more needs to be done for our veterans so that 
the system does not continue to fail them.
    Thank you for allowing me to share these points of view.
    This concludes my statement.

                                 
              Prepared Statement of Mary Kennedy Thompson,
       President, Mr. Rooter Plumbing Corporation, Waco, TX, and
Vice Chairwoman, VetFran Committee, International Franchise Association
    Good afternoon Chairwoman Herseth Sandlin, Ranking Member Boozman 
and Members of the Subcommittee. My name is Mary Kennedy Thompson and I 
am President of Mr. Rooter Plumbing based in Waco, TX, which is a proud 
brand of The Dwyer Group family of service enterprises. Mr. Rooter 
currently has more than 270 locations across the United States. As a 
veteran, I am honored to have the opportunity to speak to the 
Subcommittee on Economic Opportunity about veteran entrepreneurship.
    I appear before you today on behalf of the International Franchise 
Association (IFA). As the largest and oldest franchising trade group, 
the IFA's mission is to safeguard the business environment for 
franchising worldwide. IFA protects, enhances and promotes franchising 
by advancing the values of integrity, respect, trust, commitment to 
excellence and diversity. Franchising operates in a variety of 
industries; including automotive, commercial and residential services, 
restaurants, lodging, real estate and business and personal services. 
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.
    Today, I will talk about a program that is very near and dear to my 
heart--the Veterans Transition Franchise Initiative, or VetFran. I will 
also highlight specific legislation, H.R. 2672, the Help Veterans Own 
Franchises Act, that Congress can act upon to make it easier for 
veterans to purchase a franchise. But first, I would like to take a 
moment to share with you the story of how I decided that franchising 
was the right path to small business ownership for me.
    In 1985, I received my commission as an officer in the U.S. Marine 
Corps where I served for 8 years and achieved the rank of Captain while 
on active duty and later the rank of Major in the Reserves. During my 
service, I had the honor to become the first female platoon commander 
for my Beach and Port unit. When I returned home I made the decision to 
go into franchising because it provided a model that would help me 
succeed as a small business owner. I became a multi-unit franchisee in 
the Cookies by Design system where I earned company awards for Top 
Performer and Outstanding Customer Service. My success within the 
Cookies by Design system created wealth and opportunity for my family. 
I so impressed the corporate office that they later asked me to be 
Director of Franchise Operations, eventually becoming the brand's 
President. I came to Mr. Rooter in October of 2006 to proudly serve the 
40-year-old company as its first female President.
    The IFA and its members have long supported the efforts of this 
Subcommittee and the Department of Veterans Affairs' Center for Veteran 
Enterprise. For several years, the IFA has maintained 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.
Why Franchising?
    Franchising is the American Dream. It allows people to own a 
business and teaches them a system to help them be successful. It did 
just that for me. Owning a franchise gives you control over what you 
are doing in your life--you are your own boss. At Mr. Rooter we say the 
business is the means to your dreams. I grew up in a military family 
and served in the military; we were not an entrepreneurial family, and 
when I started I did not know how to run a business. However, I wanted 
that control--to be my own boss and lead others toward a common goal.
    When I was in the Marine Corps, I became accustomed to following 
military systems, and it has directly helped me succeed in franchising 
where systems are the foundation of success. That is why I believe that 
franchising offers significant advantages over other business models--
particularly for military veterans. Members of the military learn to 
effectively work within systems and have the discipline to succeed. As 
was the case with my experience, we often say that franchising allows 
you to be in business for yourself, but not by yourself. By choosing 
franchising, an entrepreneur has access to support, training and 
expertise from the franchisor. You are also acquiring the rights to use 
a valuable and recognized name brand that customers trust. The 
franchisor provides the entrepreneur with a business plan and 
operations manual that were developed to help guide and direct the 
successful operation of the business. Franchising gives small business 
owners a solid foundation to be successful and a leg up on the 
competition.
    As a proud veteran of the United States Marine Corps, I can attest 
to the fact that members of our Armed Forces are disciplined, 
hardworking and passionate people who have an ingrained trait to work 
well within systems. They are accustomed to following standard 
operating procedures, have strong teamwork skills and are dedicated to 
mission success. That is the main reason why I believe former members 
of the military make excellent candidates for franchise ownership.
    An estimated 250,000 men and women transition out of the military 
every year. These men and women are looking forward to rejoining their 
families, going back to school or starting their own businesses. There 
are more than 85 different industries that use franchising and with the 
diversity of jobs in the military, veterans reenter civilian life with 
the skills needed to succeed in the system of their choice. Moreover, 
their Military Occupation Specialty, which is the military's way to 
identify an individual's particular specialty, can help our returning 
service men and women identify the best franchise system that meets 
their skills and training.
    Helping fellow veterans make the transition to civilian life and 
realize their dream of small business ownership is one of my passions. 
I have taught at the Entrepreneurship Bootcamp for Veterans with 
Disabilities hosted by the Center for New Ventures and Entrepreneurship 
at Texas A&M University. I also serve as the vice chairwoman of the 
IFA's VetFran Committee. In this role, I work with other members of the 
IFA and VetFran participating companies to encourage more systems to 
offer veterans discounts and benefits when purchasing a franchise.
Veterans' Transition Franchise Initiative--VetFran
    VetFran is a voluntary effort of IFA member companies designed to 
encourage franchise ownership by offering financial incentives to 
honorably discharged veterans. The vision to use franchising to help 
military veterans transition to civilian life began nearly 20 years 
ago. Watching the events of the Gulf War unfold in 1990, Don Dwyer Sr., 
the president and founder of The Dwyer Group and a veteran himself, 
decided he had to do more for our service men and women. He considered 
the traditional ways of support, but saw nothing that captured the 
spirit on the scale he envisioned. He conceived the ideal solution: 
Help our veterans achieve the American Dream by owning their own 
franchised small business.
    Just before Veterans Day in 1991, the program was officially 
launched and soon, more than 100 franchise systems were participating 
as partners in the effort, providing financial incentives for honorably 
discharged veterans. Following the events of September 11, 2001, the 
VetFran initiative was reenergized in 2002 and now boasts more than 400 
franchise systems participating. Since 2002, over 1,700 veterans have 
purchased their own franchise business with the help of the program. 
What began as the idea of one entrepreneur who had served in military 
uniform has today become a path to the American Dream for veterans of 
the U.S. Armed Forces.
    I am proud to report that in February of this year, The Dwyer Group 
topped the $1 million mark in VetFran discounts awarded to veterans. 
Since 2002, The Dwyer Group has sold franchises to 233 military 
veterans. We have also expanded our resources to veterans through our 
Department of Veterans Entrepreneurship and the introduction of the 
complementary P.A.V.E. (Program for Assisting Veteran Entrepreneurship) 
Program, which offers educational and financial resources to veterans 
and transitioning military personnel who want to buy a franchise.
    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.
Help Veterans Own Franchises Act
    Congress has the opportunity to make this important effort even 
more effective. Legislation has been introduced to cement the benefits 
of a program like VetFran into policy as well as encourage more 
franchise systems to support veterans as small business owners. I 
strongly urge the Members of the Subcommittee to cosponsor and for 
Congress to pass H.R. 2672, the Help Veterans Own Franchises Act. This 
legislation is coauthored by Representatives Aaron Schock of Illinois 
and Leonard Boswell of Iowa and currently has over 30 bipartisan 
cosponsors. I would like to highlight and thank Members of the 
Committee on Veterans' Affairs who have already agreed to cosponsor 
this important legislation. They include: Representatives Michael 
Michaud, Glenn Nye, Jeff Miller, Ranking Member John Boozman, Vern 
Buchanan and David Roe. Additional cosponsors include Representatives 
Ike Skelton and Buck McKeon, Chairman and Ranking Member of the Armed 
Services Committee as well as Rep. Charlie Rangel.
    The legislation establishes a tax credit for franchised 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. Our veterans 
deserve this chance after so faithfully serving our country.
Conclusion
    Again, on behalf of the International Franchise Association as well 
as Mr. Rooter Plumbing and the entire Dwyer Group family of brands, we 
sincerely appreciate the work of this Subcommittee. We strongly urge 
you to support and pass the Help Veterans Own Franchises Act, so that 
more of our veterans may return home to begin building a bright future 
for themselves, their families and their communities through small 
business ownership. The members of the IFA look forward to a continued 
working relationship with this Subcommittee as well as supporting the 
initiatives underway at the Department of Veterans Affairs and the 
Small Business Administration to assist our returning men and women of 
the Armed Services.
    Thank you.

                                 
    Prepared Statement of Joseph G. Jordan, Associate Administrator,
            Government Contracting and Business Development,
                   U.S. Small Business Administration
    Chairwoman Herseth Sandlin, Ranking Member Boozman, and Members of 
the Subcommittee, thank you for inviting the Small Business 
Administration to testify this morning.
    With the understanding that veterans play an important role in our 
economy, SBA Administrator Karen Mills has sent three representatives 
from the agency to participate in today's hearing. The three of us 
represent different areas within the SBA and demonstrate the SBA's 
commitment to serving veteran small business owners.
    We know that thousands of troops have been returning from overseas. 
We also know that 18 percent of veterans are still unemployed 1 to 3 
years after they return. The good news is that veterans have a higher-
than-average rate of self-employment. They have the leadership, the 
know-how, and the drive to succeed as entrepreneurs.
    The President and the U.S. Small Business Administration recognize 
this and have made veterans a priority across all levels and programs 
of the Federal Government. SBA is pleased to highlight overall veteran 
and service-disabled veteran participation levels in agency financial, 
management and technical assistance, and procurement programs. Though 
the SBA does have an office dedicated to serving veterans (the Office 
of Veterans Business Development), it is important to note that 
veterans are supported throughout every component of SBA programming, 
which covers capital, counseling, contracting, and disaster relief and 
preparedness.
Capital
    SBA is committed to assisting veteran-owned small businesses access 
the capital they need. All of SBA's loan programs are available to 
veterans. In FY 2009, veteran-owned small businesses received 8.00 
percent of all 7(a) loans, totaling approximately $523 million, and 
4.56 percent of all 504 development company loans, or $176 million. 
Additionally, veteran-owned small businesses received 4.33 percent of 
all microloans, totaling approximately $1.9 million. In total, SBA has 
supported more than $2 billion in recovery lending to veteran-owned 
small businesses.
    SBA also has a loan program dedicated to the military community--
Patriot Express. This program is available not only to our veterans but 
also to Reserve component members, TAP eligible servicemembers and 
their spouses and widows. By making this loan program available to the 
larger military community, it reflects the current composition of our 
military forces which includes a significant reliance on Reserve 
components and supports their families when they are called to active 
duty.
    It features our lowest interest rates and fastest turnaround times, 
often within days. These loans have also benefited from the 
enhancements under the Recovery Act. In FY 2009, we approved more than 
2,300 Patriot Express loans and are on track to increase those numbers 
in FY 2010.
    Patriot Express loans are available up to $500,000 and qualify for 
SBA's maximum guaranty of up to 85 percent for loans of $150,000 or 
less and up to 75 percent for loans over $150,000 up to $500,000. (All 
Patriot Express loans made under the Recovery Act are guaranteed at 90 
percent.) For loans above $350,000, lenders are required to take all 
available collateral.
    The Patriot Express loan can be used for most business purposes, 
including startup, expansion, equipment purchases, working capital, 
inventory or business-occupied real estate purchases. Patriot Express 
loans feature SBA's lowest interest rates for business loans, generally 
2.25 percent to 4.75 percent over prime depending upon the size and 
maturity of the loan. Local SBA district offices work in their 
communities to promote the availability of capital to veterans.
    Finally, SBA also provides loans to small businesses who need 
additional capital due to the fact that the owner or an essential 
employee has been called to active duty in their role as a Military 
Reservist. Last year, SBA provided 25 Military Reservist Economic 
Injury Disaster Loans, totaling approximately $2.4 million.
Counseling
    SBA's counseling services are helping veteran small business owners 
every day. Each of our 68 field offices has a designated staff member 
for veteran's business development. They are engaged with hundreds of 
external veterans serving organizations and reach thousands of veterans 
and Reservists each year.
    In FY 2009, SBA's resource partners--including about 900 Small 
Business Development Centers, over 100 Women's Business Centers, and 
350 chapters of our mentoring program, SCORE--trained or counseled 
about 150,000 veterans and over 21,000 Reservists and Guard members, as 
well as 1,000 active duty clients.
    In addition, we are very proud that since 2008, we have expanded 
the number of Veteran's Business Outreach Centers (VBOCs) from 5 to 15. 
These centers help with business plans, feasibility studies, mentoring 
and more.
    Veterans are heavy users of online tools such as our Small Business 
Training Network. In fact, about 62,000 veterans used this tool in 
2009. Last summer, SBA launched an online training course for veteran 
small business owners to learn how to become government contractors. We 
will continue to strengthen our IT tools that veterans use and value.
    SBA's Office of Veterans Business Development (OVBD) provided 
61,087 SBA Veteran/Reservist Business Information Kits to 81 requesting 
organizations and individual veterans.
    Finally, in November 2009, we entered into a partnership agreement 
to support the Entrepreneurship Bootcamp for Veterans with Disabilities 
consortium operating at Syracuse University, the University of 
Connecticut, Florida State University, Texas A&M University, the 
University of California at Los Angeles, and Purdue University. This is 
a 14-month entrepreneurial development program for service-disabled 
veterans who were injured in Iraq or Afghanistan since 2001.
Contracting
    The SBA works hard to ensure that veteran- and service-disabled 
veteran-owned small businesses have access to much needed opportunities 
in Federal contracting. Using tools provided by the SDVOSB, 8(a), and 
HUBZone programs, SBA works with all Federal agencies toward the goal 
of awarding at least 3 percent of Federal contracting dollars to 
SDVOSBs. In FY 2008 SDVOSBs received $6.5 billion and 1.5 percent of 
Federal prime contracts. Preliminary FY 2009 data indicates that both 
the dollars and percentage of prime contracts going to SDVOSBs have 
increased. Efforts we have made in collaboration with the contracting 
agencies through the Recovery Act have already shown tangible progress. 
Through April 23rd, 6.3 percent of Recovery Act prime contracting 
dollars, or almost $1.6 billion, has gone to veteran-owned businesses. 
Over that same period, 4.3%, or almost $1.1 billion, has gone to 
service-disabled veteran-owned small businesses (SDVOSBs).
    Veteran- and service-disabled veteran-owned small businesses also 
participate in other SBA government contracting and business 
development programs. In FY 2009, 1,257 veteran-owned and 597 service-
disabled veteran-owned small businesses participated in the section 
8(a) Business Development Program, and 786 veteran-owned firms and 636 
SDVOSBs participated in the Historically Underutilized Business Zone 
(HUBZone) program.
    Separately, an important issue has come up in the past few weeks 
that I'd like to bring to the Committee's attention. The SBA and the 
White House support the congressional intent of parity--or equal 
treatment--among our contracting programs: 8(a), HUBZone, service-
disabled veteran and, soon, women-owned small businesses. However, in 
light of a recent court decision [Mission Critical v. U.S., (09-864 C, 
Ct. of Fed Claims, Feb. 26, 2010)], it would be useful to clarify and 
reiterate Congress's original intent that there be parity among the 
programs. The Administration supports legislative efforts to confirm 
Congress's original intent to provide for parity.
Executive Order--Veteran-Owned Small Businesses
    On April 26th, the President signed an Executive Order to once 
again demonstrate the high priority that veteran-owned small businesses 
have in this Administration by establishing an Interagency Task Force 
on Veterans Small Business Development.
    The task force, which Administrator Karen Mills will lead, includes 
seven agencies (Department of Treasury, Department of Defense, 
Department of Labor, Department of Veterans Affairs, Office of 
Management and Budget, Small Business Administration, and General 
Services Administration) and four members from a veteran's service or 
military organization or association to be chosen by the Administrator. 
This task force will focus on the needs of our veteran-owned small 
businesses.
    This task force recognizes that among our veteran community many 
have chosen or will choose to step out and start their own small 
business. It will provide recommendations to the Administration in 
several key areas, including access to capital, expanding Federal 
contracting opportunities and more robust entrepreneurial education.
    An additional Executive Order to create a Task Force on small 
business contracting--as a whole--will help amplify this effort. The 
Interagency Task Force on Federal Contracting Opportunities for Small 
Businesses will further support our goals for government contracts 
going to small businesses. Through these task forces we will continue 
to expand our outreach to small businesses to make sure we are 
increasing their opportunities to compete for and win Federal 
contracts.
    We look forward to the recommendations that will come out of these 
task forces as we recommit ourselves to meeting the needs of our 
veteran entrepreneurs and small business owners.
    I'm happy to take your questions.

                                 
       Prepared Statement of Tim J. Foreman, Executive Director,
        Office of Small and Disadvantaged Business Utilization,
                  U.S. Department of Veterans Affairs
    Good afternoon, Madam Chairwoman, Ranking Member Boozman and 
Members of the Subcommittee. It is privilege to return here today to 
testify regarding the progress of veteran-owned enterprises both in the 
United States and overseas. Your hearing title asks, ``Are We Failing 
Our Veterans?'' I answer on behalf of the Department that we are not 
failing our veterans. In many regards, we are excelling. We are leaders 
in many veteran business areas.
    VA is the recognized Federal leader in its share of contracts to 
small business owners who are veterans, and the provisions of the 
Veterans First Contracting Program authorized by Public Law 109-461 are 
responsible for much of our recent success and growth. Throughout this 
targeted expansion to service-disabled and other veteran-owned small 
businesses the quality of products and services provided to our 
veterans remains high. As the program grows, our veteran clients will 
continue to receive quality services and products from increasing 
numbers of veteran suppliers who, as fellow veterans, better understand 
the needs of the community VA serves. This symbiotic aspect of VA's 
program is a ``win-win.'' Like many programs of broad and comprehensive 
scope, however, we can still do better.
    When I testified before your Subcommittee 7 weeks ago, we discussed 
the backlog of veteran-owned small business (VOSB) and service-disabled 
veteran-owned small business (SDVOSB) verifications at our Center for 
Veterans Enterprise (CVE) and the way ahead. Resolving this backlog 
continues to be a top priority for the Office of Small and 
Disadvantaged Business Utilization (OSDBU). The list of VA-verified 
VOSBs and SDVOSBs will eventually constitute a database that will serve 
as the backbone of VA's small business contracting efforts. Careful 
review of the applications and site visits, where appropriate, will 
eliminate most status fraud in small business contracts and will 
streamline program administration. Resolving this backlog will be the 
singular focus of OSDBU's CVE for the near future.
    Madam Chairwoman, your kind letter of invitation to this hearing 
requested that I focus my testimony on four general areas of interest. 
I will address each area separately, but let me start by recognizing 
some of the valuable sources we consulted to address your questions, 
while noting some of the data limitations. VA OSDBU is most 
appreciative of the effort of the U.S. Census Bureau in its report 
titled, Characteristics of Veteran-Owned Businesses, published in 2007 
that reports data collected in 2002. This excellent, albeit dated, 
source material was useful in preparation of this statement. 
Additionally, the Small Business Administration (SBA) was helpful in 
providing some demographic information. I would like to specifically 
attribute to the testimony of SBA's Shawne Carter McGibbon who appeared 
before this Subcommittee in April 2009 and eloquently addressed many of 
the same issues before us today. That testimony addressed the 
demographics of, and problems facing, veteran business owners; it also 
addressed the limited availability and reliability of data for analyses 
of veterans in business without the support of further surveys or 
samples.
    Overall, readily available, current data and information is scant 
in the areas in which you have expressed interest. It often requires 
comparison of multiple data sets, sometimes collected under different 
conditions, with different assumptions, or for different purposes. This 
may adversely undercut the validity of information gleaned from such a 
process. Additionally, veterans who enter the business world are not 
required to report their veteran status. Reporting veteran status may 
be required to win contracts or to receive certain types of electronic 
funds transfer, but many veterans may embark on a business career and 
not report that they are a veteran. For example, it is possible that a 
veteran may own a fast food franchise--he or she is simply performing 
as a small business without letting anyone know their veteran 
connection.
Impact of Geography
    You asked about the impact of geography on veterans' enterprises 
with regard to the location of the business--for example, various types 
of city or rural settings.
    As most VA facilities are located in or near population centers, it 
follows that contractors with VA perform much of their work in those 
locations. But, in the Internet era, place specificity is not 
essential. We may see an increase in the proportion of all businesses, 
including SDVOSBs and VOSBs, that conduct work remotely. The next U.S. 
Census report on the characteristics of veteran-owned businesses may 
reflect an increase for information, education, and certain management 
sectors that are not venue-based. VA will work with the U.S. Census 
Bureau to assure that useful veterans' business information is 
collected in future surveys and other data collection efforts. The next 
U.S. Census report on the Characteristics of Veteran-Owned Businesses 
is due in June 2011.
Business Sector Influence
    You also asked how veterans' enterprises are doing in the different 
business sectors, illustrating your point with examples that included 
manufacturing, retail, Internet and others.
    Using U.S. Census Bureau data from the Characteristics of Veteran-
Owned Businesses published in July 2007, it is possible to disaggregate 
the 2002 data used in the report to make some general comparisons 
between veteran-owned businesses and all responding businesses. 
According to this report, veteran-owned businesses had a higher 
percentage of several business sectors than did the typical respondent. 
Veteran-owned businesses outrepresented the industry average in mining, 
construction, manufacturing, wholesale trade, transportation, finance 
and insurance, and in the professional and scientific sectors. Veteran 
business owners underrepresented the industry average in retail trade, 
information, administrative support and waste management, educational 
services, health care, arts and entertainment, and in the accommodation 
and food industry sectors.
    The 2002 data also indicate that veteran businesses have 
proportionally greater representation at 51.7 percent in the 1-4 
employee size grouping than are other respondents at 47.3 percent. In 
all other organizational size groupings, responding veterans tend to 
represent a smaller share than non-veteran owners.
Identification of Obstacles
    You asked me to identify any obstacles that these enterprises may 
face when doing business with the Federal Government--asking if 
veterans are more successful in contracting with some Federal agencies 
than others.
    I would associate myself with Ms. McGibbon's April 2009 testimony 
before this Subcommittee in that, except for age and gender, service-
disabled and other veteran-owned small businesses mirror the business 
community at large, not only demographically, but for the problems that 
they face. She presented measures of service-disabled and non-service-
disabled business problems ranked in order of importance. Some 
differences and anomalies were apparent.
    For example, the highest ``critical'' problem facing non-service-
disabled veterans was, by a wide margin, the affordability of health 
insurance. This compares to a fifth-place ranking for this problem 
among service-disabled veterans, who may have health care provided by 
TriCare or by VA. However, other critical problems identified were 
generally similar between the two cohorts. Both cohorts ranked 
knowledge of programs for small business in general, attaining 
government resources, and knowledge of veteran small business program 
opportunities very highly.
    VA OSDBU is addressing these identified critical problem areas 
through counseling programs and partnerships. Counselors at OSDBU and 
CVE assist veterans seeking small business contracts, mostly under the 
Veterans First Contracting Program. Additionally, OSDBU has 
partnerships with the Procurement Technical Assistance Centers (PTACs) 
that leverage VA's information outreach and help prospective veteran 
business owners get the information they most need to pursue a 
contract. As the survey of veteran business owner problems referenced 
by Ms. McGibbon predates both the establishment of the Veterans First 
Contracting Program and VA's redoubled outreach effort through 
counseling and partnerships, it would be valuable to repeat this survey 
and see where we stand today.
    Additionally, when the U.S. Census Bureau releases new data 
regarding veteran-owned businesses in June of 2011, VA and OSDBU will 
be ready to use these data to identify new areas where veterans may 
seek business opportunities. Most military skills translate well into 
the private sector. This Administration is taking steps to assure that 
every soldier, sailor, airman and marine will have skills and 
opportunities that translate well into the business world.
    One characteristic that needs to receive universal appreciation is 
the work ethic, dedication, and ingenuity of America's veterans. Not 
only did they serve, they also carry a determination to succeed that 
will buttress any business effort. Others in the business world need to 
understand and value that characteristic. Unfortunately, sometimes our 
veterans do not get to take those first steps because of bias by the 
uninformed in the business community. VA and all partners in the 
business world must get the word out regarding the value of veteran-
owned businesses.
    Earlier this week, President Obama gave us another tool to help 
identify obstacles facing service-disabled and other veteran-owned 
small businesses. By Executive Order, he energized provisions of the 
Military Reservist and Veteran Small Business Reauthorization and 
Opportunity Act of 2008 and established an interagency task force to 
coordinate the efforts of Federal agencies to improve capital, business 
development opportunities, and pre-established Federal contracting 
goals for small business concerns owned and controlled by veterans and 
service-disabled veterans. Not only will this task force allow us to 
identify obstacles, it will also facilitate solutions.
Veterans in Overseas Business Endeavors
    Finally, you asked how veteran enterprises are doing business 
abroad.
    U.S. veterans often engage various types of business in or near 
U.S. posts and installations globally. We also have some businesses 
that reach across international borders and seek work on foreign soil. 
The Department of Commerce and the SBA both maintain U.S. Export 
Assistance Centers to provide technical assistance to small- and 
medium-sized businesses looking to do business abroad. Every veteran 
interested in such commerce should take full advantage of these 
resources.
    Madam Chairwoman, Ranking Member Boozman, and Members of this 
Subcommittee, VA is proud to be a leader in government for contracting 
with veteran and service-disabled veteran small businesses. We are a 
steadfast advocate for the value of veteran entrepreneurship. Secretary 
Shinseki has reached out to fellow Members of the President's Cabinet 
seeking support for veteran-owned small businesses in government. The 
charge and the challenge are clear--and the VA is ready to do what is 
necessary to continue serving veterans seeking business opportunities.
    I would be pleased to answer the Subcommittee's questions.

                                 
                    Statement of Christina M. Roof,
    National Deputy Legislative Director, American Veterans (AMVETS)
    Madam Chair, Ranking Member Boozman, and distinguished Committee 
Members, 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 veteran's small businesses.
    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, The Veterans Benefits, Health Care, and 
Information Technology Act of 2006 requires the Department of Veterans 
Affairs (VA) to give priority to veteran-owned small businesses (VOSB) 
and service-disabled veteran-owned small businesses (SDVOSB) when 
awarding contracts, and also in establishing a certain number set-aside 
contracts for SDVOSBs. Furthermore, in December 2009 the final rule 
regarding VA Acquisition Regulation entitled Supporting Veteran-Owned 
and Service-Disabled Veteran-Owned Small Businesses, 48 Code of Federal 
Regulations (CFR) Parts 802, 804, 808, 809, 810, 813, 815, 817, 819, 
828, and 852, was updated to reflect veterans' small business 
preference in the Federal procurement process. The newly published CFR 
states:

          This document implements portions of the Veterans Benefits, 
        Health Care, and Information Technology Act of 2006 (the Act) 
        and Executive Order 13-360, providing opportunities for 
        service-disabled veteran-owned small businesses (SDVOSB) to 
        increase their Federal contracting and subcontracting. The Act 
        and the Executive Order authorize the Department of Veterans 
        Affairs (VA) to establish special methods for contracting with 
        SDVOSBs and veteran-owned small businesses (VOSB). Under this 
        final rule, a VA contracting officer may restrict competition 
        to contracting with SDVOSBs or VOSBs under certain conditions. 
        Likewise, sole source contracts with SDVOSBs or VOSBs are 
        permissible under certain conditions. This final rule 
        implements these special acquisition methods as a change to the 
        VA Acquisition Regulation (VAAR). This document additionally 
        amends SDVOSB/VOSB, Small Business Status Protests, where VA 
        provided that VA would utilize the U.S. Small Business 
        Administration (SBA) to consider and decide SDVOSB and VOSB 
        status protests. This requires VA and SBA to execute an 
        interagency agreement pursuant to the Economy Act. Negotiations 
        of this interagency agreement have not yet been finalized. 
        Therefore, VA has amended these regulations with an interim 
        rule to provide that VA's Executive Director, Office of Small 
        and Disadvantaged Business Utilization (OSDBU) shall consider 
        and decide SDVOSB and VOSB status protests, and provides 
        procedures there for, until such time as the interagency 
        agreement is executed by the agencies.

    Although VA has reportedly exceeded its contracting goals with 
SDVOSBs and VOSBs for the past 3 years, AMVETS believes that due to the 
lack of internal oversight and the self-reporting verification 
processes within VA's procurement offices, that realistically the 3 
percent goal has not been met. The Government Accountability Office 
(GAO) also voiced the same concern in a hearing held in December 2009, 
Acquisition Deficiencies at the U.S. Department of Veterans Affairs. 
During this hearing GAO stated they 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 fact, their 10-case study found firms that GAO investigated 
previously had received approximately $100 million in SDVOSB sole-
source and set-aside contracts through fraud, abuse of the program, or 
both.
    Now, in April of 2010, GAO's most recent review of interagency 
agreements found that VA is still lacking an effective process to 
ensure that interagency agreements include required language that the 
other agencies comply to the maximum extent feasible with VA's 
contracting goals and preferences for SDVOSBs and VOSBs. And just as 
disturbing is the fact GAO reports VA has made limited progress in 
implementing its verification program. While the 2006 Act requires VA 
to use veteran preferences authorities only to award contracts to 
verified businesses, VA's regulation does not require that this take 
place until January 1, 2012. To date, VA has verified about 2,900 
businesses, approximately 14 percent of businesses in its mandated 
database of SDVOSBs and VOSBs. Respectfully, Madam Chair, AMVETS finds 
there to be absolutely no acceptable justifications on why VA has 
repeatedly ignored or not taken the necessary actions to end such 
blatant examples of fraud and abuse of funds.
    VA issued guidance to all contracting officers about managing 
interagency acquisitions in March 2009. However, numerous interagency 
agreements did not even include the required language addressing VA's 
contracting goals and preferences until it was amended on March 19, 
2010. This serves as just another example of how VA not having an 
established hierarchy or clear delegation of duties in oversight 
activities, that VA cannot be assured that agencies have made maximum 
feasible efforts to contract with SDVOSBs or VOSBs. AMVETS is led to 
believe that many are forgetting that this is not just data or monetary 
figures we are continually discussing, but rather thousands of veterans 
lives and the failure to protect those lives and the entire VOSB and 
SDVOSB communities. AMVETS has dedicated themselves to protecting the 
due entitlements of those who currently serve and those who have 
honorably served in the past. AMVETS does not believe that all possible 
measures have been, nor are currently being taken, to end this never-
ending cycle of fraud and untruths occurring within VA's VOSB and 
SDVOSB procurement systems. AMVETS respectfully asks the Committee and 
those involved at VA, how much longer are we going to allow these 
behaviors to unfairly and negatively impact the entrepreneurial 
livelihoods of those veterans we have all promised to protect?
    AMVETS recommends the following actions as a way of getting the VA 
procurement system back on track regarding our VOSB and SDVOSBs:

1.  AMVETS believes that implementing a centralized and uniform 
training program for all persons involved in VA procurement processes, 
regardless of location or position, will provide a foundation of 
clarity and standardized education to every individual involved in VA's 
procurements process. This will also aide VA in establishing an 
unambiguous hierarchy and establish a system of unquestionable 
accountability in regards to procurement. VA's organizational alignment 
should be examined to ensure appropriate placement of the acquisition 
functions are occurring within the agency, and that employees clearly 
understand their individual defined roles and responsibilities. AMVETS 
is not questioning the ethical standards of VA or its employees, rather 
the structural framework currently in place regarding procurements. VA 
must protect the integrity of their procurement process and the 
authorities granted to them by closely examining their current 
acquisition hierarchy on every level.
2.  AMVETS also believes VA should re-examine their current oversight 
methods and develop a plan granting authorities to field contract 
officers, so that they may conduct random inspections of VA's awards to 
ensure that the integrity of all VA contracts are protected and 
enforced. VA must steer away from such a ``reactive'' way of conducting 
contracting oversight and move toward a more ``pro-active'' approach of 
procurement processes.
3.  AMVETS is very concerned by the fact that VA is not currently 
auditing their contracts. AMVETS recommends that VA immediately put 
into place a functional verification system that allows traceability of 
every system and process VA currently uses non-uniformly. Even a very 
simple system will allow VA, as well as the Subcommittee if need be, to 
have a single centralized source. A functional system will allow VA to 
accurately process all of their interdependent and linked procedures, 
which at every stage, consume one or more VA resource (contracts, 
employees, funds) to convert the inputs into outputs. These outputs 
then serve as inputs for the next stage of the functional verification 
process until a known goal or end result is reached.
4.  AMVETS strongly believes that, the often overlooked process, of 
internally auditing an organization's or agency's current policies, 
procedures and employee knowledge is often key in overcoming any 
hurdles an organization may face when implementing successful internal 
systems and policies. Internal audits are regularly used by most 
successful organizations and agencies, as a means of measuring internal 
successes, quality controls and shortfalls within an organizational 
system.
5.  An organization will only be successful and run at its full 
potential if it is able to recognize its weaknesses and any unnecessary 
duplication of efforts.
6.  Finally, AMVETS believes it is necessary to discuss traceability 
when discussing the current state of the VA's procurement systems. VA 
has clearly demonstrated that they possess little to no assurances they 
are receiving the services they have paid for or that all contract 
criteria they are setting forth is being met, on any level. We must not 
forget that many of the larger or prime contracts have very specific 
clauses outlining the use of SDVOSB or VOSBs as subcontractors. AMVETS 
believes that an unimaginable number of SDVOSB and VOSB have lost the 
opportunity to conduct business with the Federal Government, as 
outlined by law, due to VA not having any solid systems of traceability 
on their awards granted.
     From an accounting standpoint, traceability is vital for any 
organization to have the ability to track a specific piece of financial 
information by means of recorded data. Equally important is 
traceability in cost accounting. VA should already have a system of 
cost accounting in place to assign a cost directly to an activity or 
cost of an object on the basis of cause-and-effect contractual 
relationships. These measures offer VA a uniformed auditing process 
tool when reviewing that all terms of an award have been met. This 
should also include the review of certified payroll records to ensure 
the VOSB and SDVOSB clauses of larger awards are being met. Certified 
payroll records should include all payments made as 1099 financial 
exchanges between the prime and subcontractors.
     The last part of traceability, vital to the stability of any 
acquisitions program, is in that of quality control traceability. This 
is the ability to track system requirements from a system function to 
all those elements that individually or collectively perform that 
function. Most importantly traceability gives VA the tool necessary to 
ensure that SDVOSB and VOSBs are indeed being awarded the Federal 
awards that have been set-aside for them by law.

    AMVETS is optimistic that the Executive Order signed on April 26, 
2010, by President Barack Obama, will bring more attention to this much 
overlooked, yet very important issue, regarding the stability and 
financial wellbeing of our veteran entrepreneurship community. AMVETS 
is also hopeful that Veterans Small Business Interagency Task Force 
will finally be able to provide the necessary measures needed for the 
implementation and execution of a consistent and nondiscretionary 
system of oversight within the VOSB and SDVOSB Federal procurement 
system.
    Madam Chair, AMVETS again thanks you and the Subcommittee for being 
given the opportunity to share with you our concerns and 
recommendations on veteran small business matters. AMVETS applauds this 
Subcommittee for their unwavering dedication to improving the lives of 
our veteran entrepreneur community. This concludes my testimony and I 
will be happy to answer any questions the Subcommittee may have for 
me.*
---------------------------------------------------------------------------
    * Accompanying this testimony you will find the data requested 
pertaining to VOSB and SDVOSB industry locations, the 2009 top 10 
earners per NAICS code for VOSB and SDVOSB, as well as other relevant 
data. Please note this data was supplied to AMVETS by several Federal 
agencies upon our requests.
---------------------------------------------------------------------------
SBA: Top 10 States for VOSB Employer Firms:
      California (veterans, 10.4 percent; SDVs, 9.8 percent; 
all, 11.6 percent);
      Texas (veterans, 6.6 percent; SDVs, 7.8 percent; all, 6.1 
percent);
      Florida (veterans, 5.7 percent; SDVs, 7.8 percent; all, 
6.1 percent);
      New York (veterans, 5.0 percent; SDVs, 5.1 percent; all, 
6.3 percent);
      Pennsylvania (veterans, 4.3 percent; SDVs, 3.0 percent; 
all, 4.1 percent);
      Illinois (veterans, 4.2 percent; SDVs, 2.7 percent; all, 
4.5 percent);
      Ohio (veterans, 4.1 percent; SDVs, 2.9 percent; all, 3.9 
percent);
      North Carolina (veterans, 3.3 percent; SDVs, 3.5 percent; 
all, 2.9 percent);
      Georgia (veterans, 3.0 percent; SDVs, 3.0 percent; all, 
2.7 percent);
      Michigan (veterans, 3.0 percent; SDVs, 2.8 percent; all, 
3.4 percent).
SBA: Top 10 States for SDVOSB Employer Firms:
      California (SDVs, 9.8 percent; veterans, 10.4 percent; 
all, 11.6 percent);
      Texas (SDVs, 7.8 percent; veterans, 6.6 percent; all, 6.1 
percent);
      Florida (SDVs, 7.8 percent; veterans, 5.7 percent; all, 
6.1 percent);
      New York (SDVs, 5.1 percent; veterans, 5.0 percent; all, 
6.3 percent);
      North Carolina (SDVs, 3.5 percent; veterans, 3.3 percent; 
all, 2.9 percent);
      Virginia (SDVs, 3.4 percent; veterans, 2.9 percent; all, 
2.5 percent);
      Pennsylvania (SDVs, 3.0 percent; veterans, 4.3 percent; 
all, 4.1 percent);
      Georgia (SDVs, 3.0 percent; veterans, 3.0 percent; all, 
2.7 percent);
      Washington (SDVs, 3.0 percent; veterans, 2.8 percent; 
all, 2.6 percent);
      Ohio (SDVs, 2.9 percent; veterans, 4.1 percent; 3.9 
percent).
SBA: Top 10 States for VOSB Non-Employer Firms:
      California (veterans, 10.5 percent; SDVs, 10.2 percent; 
all, 12.3 percent);
      Texas (veterans, 7.7 percent; SDVs, 8.0 percent; all, 7.2 
percent);
      Florida (veterans, 6.5 percent; SDVs, 7.8 percent; all, 
6.1 percent);
      New York (veterans, 4.5 percent; SDVs, 3.9 percent; all, 
6.2 percent);
      Pennsylvania (veterans, 4.3 percent; SDVs, 3.3 percent; 
all, 4.0 percent);
      Ohio (veterans, 3.8 percent; SDVs, 2.8 percent; all, 3.8 
percent);
      Illinois (veterans, 3.5 percent; SDVs, 2.4 percent; all, 
4.0 percent);
      North Carolina (veterans, 3.2 percent; SDVs, 3.6 percent; 
all, 2.9 percent);
      Michigan (veterans, 3.1 percent; SDVs, 2.7 percent; all, 
3.4 percent);
      Georgia (veterans, 3.0 percent; SDVs, 3.6 percent; all, 
2.7 percent).
SBA: Top 10 States for SDVOSB Non-Employer Firms:
      California (SDVs, 10.2 percent; veterans, 10.5 percent; 
all, 12.3 percent);
      Texas (SDVs, 8.0 percent; veterans, 7.7 percent; all, 7.2 
percent);
      Florida (SDVs, 7.8 percent; veterans, 6.5 percent; all, 
6.1 percent);
      New York (SDVs, 3.9 percent; veterans, 4.5 percent; all, 
6.2 percent);
      North Carolina (SDVs, 3.6 percent; veterans, 3.2 percent; 
all, 2.9 percent);
      Georgia (SDVs, 3.6 percent; veterans, 3.0 percent; all, 
2.7 percent);
      Pennsylvania (SDVs, 3.3 percent; veterans, 4.3 percent; 
all, 4.0 percent);
      Virginia (SDVs, 3.2 percent; veterans, 2.7 percent; all, 
2.4 percent);
      Ohio (SDVs, 2.8 percent; veterans, 3.8 percent; all, 3.8 
percent);
      Michigan (SDVs, 2.7 percent; veterans, 3.1 percent; all, 
3.4 percent).
      

----------------------------------------------------------------------------------------------------------------
                             2009 SDVOSB & VOSB Top Industry Revenues by NAICS Codes
-----------------------------------------------------------------------------------------------------------------
           Service-Disabled Veteran-Owned Small Business                    Veteran-Owned Small Business
----------------------------------------------------------------------------------------------------------------
                     Industry                          Dollars               Industry 2             Dollars 2
----------------------------------------------------------------------------------------------------------------
21--Mining                                                $660,084                  21--Mining        $2,304,692
----------------------------------------------------------------------------------------------------------------
71--Arts & Entertainment                                $3,064,940    71--Arts & Entertainment        $5,901,901
----------------------------------------------------------------------------------------------------------------
22--Utilities                                           $6,489,831               22--Utilities        $9,059,826
----------------------------------------------------------------------------------------------------------------
11--Agriculture                                         $7,857,769           72--Food Services       $20,572,500
----------------------------------------------------------------------------------------------------------------
72--Food Services                                      $10,215,892   92--Public Administration       $21,039,303
----------------------------------------------------------------------------------------------------------------
92--Public Administration                              $10,872,755     52--Finance & Insurance       $24,109,640
----------------------------------------------------------------------------------------------------------------
53--Real Estate                                        $13,349,528             11--Agriculture       $35,033,632
----------------------------------------------------------------------------------------------------------------
44-45--Retail Trade                                    $56,943,623             53--Real Estate      $190,758,521
----------------------------------------------------------------------------------------------------------------
52--Finance & Insurance                               $109,877,162          81--Other Services      $191,264,308
----------------------------------------------------------------------------------------------------------------
81--Other Services                                    $121,499,673             51--Information      $287,178,976
----------------------------------------------------------------------------------------------------------------
42--Wholesale Trade                                   $157,823,490      61--Education Services      $314,894,004
----------------------------------------------------------------------------------------------------------------
61--Education Services                                $168,613,703         44-45--Retail Trade      $359,708,172
----------------------------------------------------------------------------------------------------------------
51--Information                                       $169,425,337             62--Health Care      $399,073,692
----------------------------------------------------------------------------------------------------------------
62--Health Care                                       $178,948,601       48-49--Transportation      $427,002,663
----------------------------------------------------------------------------------------------------------------
48-49--Transportation                                 $186,786,673         42--Wholesale Trade      $464,114,994
----------------------------------------------------------------------------------------------------------------
31-33--Manufacturing                                  $602,925,471  56-Administrative Services    $2,117,492,276
----------------------------------------------------------------------------------------------------------------
56--Administrative Services                         $1,303,562,860        31-33--Manufacturing    $2,216,749,205
----------------------------------------------------------------------------------------------------------------
23--Construction                                    $2,782,820,953            23--Construction    $3,800,840,932
----------------------------------------------------------------------------------------------------------------
54--Professional Services                           $3,209,455,436   54--Professional Services    $6,289,580,239
----------------------------------------------------------------------------------------------------------------


                                 
                        Statement of Tim Embree,
    Legislative Associate, Iraq and Afghanistan Veterans of America
    Madam Chairwoman, Ranking Member, and Members of the Subcommittee, 
on behalf of Iraq and Afghanistan Veterans of America's 180,000 members 
and supporters, I would like to thank you for allowing us to submit 
written testimony to your Subcommittee. The ``Status of Veterans Small 
Business'' is an important issue facing many Iraq and Afghanistan 
veterans and IAVA welcomes the opportunity to discuss this issue at 
length with you.
    KFC, founded by Army veteran Harland Sanders, FedEx, founded by 
Marine veteran Fred Smith, and EDS, founded by Navy veteran Ross Perot 
are just three examples of the many highly recognizable businesses that 
have been started by veterans. Today, on military installations around 
the world, our service men and women are conjuring up small business 
ideas. Whether it's starting up a local lawnmower service, building a 
new restaurant or inventing a better mousetrap, veterans are always 
dreaming big dreams. What better way to stay awake while pulling guard 
duty at ``0-dark-thirty'' in a far-off country then mentally putting 
the finishing touches on your new small business pitch. When these 
veterans return home from Iraq and Afghanistan, many are taking those 
refined business pitches and starting their own small business. 
Veterans represent 14.5 percent of small business owners nationally \1\ 
and their military wisdom to adapt, innovate and overcome serves them 
well as entrepreneurs.
---------------------------------------------------------------------------
    \1\ Characteristics of Veteran Business Owners and Veteran-owned 
Businesses, Chapter 5 of The Small Business Economy for Data 
Year 2006, A Report to the President, http://www.sba.gov/ advo/
research/sbe_07_ch5.pdf.
---------------------------------------------------------------------------
    Repeated deployments and a tough economy have made the dream of 
successfully running a small business all the more difficult for our 
Nation's veterans. Strong programs for veteran small business owners do 
exist but, IAVA recommends the following steps to ensure that veterans 
have every opportunity to turn those dreams into a reality:

      Develop pre- and post-deployment training modules 
specifically for small business owners (incorporating SBA's Balancing 
Business & Deployment guide).
      Provide National Guard and Reserves additional access to 
capital, insurance and bonding.
      Offer grants to returning small business owners to help 
jump-start their struggling businesses.
      Ensure future stimulus programs maintain veterans' 
preference protections.

Repeated Deployments Take Their Toll
   ``I had to totally shutter the doors on my construction business.
       It put my family in a very difficult position.''--IAVA Vet
    National Guard and Reservist small business owners often suffer the 
brunt of multiple deployments; Clients leave, new competitors move in 
and revenues dry up.
        ``My business was shut down for approximately 18 months.
Rightfully so, most of my clients moved on to other attorneys.''--IAVA 
                                  Vet
    Many Guard and Reservists feel that current deployment training 
materials are not geared for the self-employed. IAVA recommends that 
pre- and post-deployment training modules are developed specifically 
for small business owners and incorporate SBA's Balancing Business & 
Deployment guide.
       ``People tell me `don't worry, USERRA protects you' . . .
                   against what, myself?''--IAVA Vet
    Short notice deployments are particularly hard on small business 
owners. IAVA believes that the military must continue to do everything 
it can to develop predictability in its deployment cycles so veteran 
National Guard and Reserve owned businesses are given a fighting chance 
for success.
     ``Attempted to train a replacement, but lead up time was not 
                              sufficient.
  The other employees and subsequently the customers of the business 
                               suffered.
    Business was terminated by the middle of deployment.''--IAVA Vet
    Last, when veterans return home many feel like they are starting 
from scratch with their business, and they need our help. One 
suggestion we heard was, ``I need help getting advertising. It costs a 
lot to get going again.'' This is why IAVA recommends offering grants 
to returning small business owners to help jump-start their fledgling 
businesses.
Small Business Help
Navigating through the maze of red tape to (A) start a business and (B) 
                                 get it
registered as a Disabled Veteran-Owned Business. . . . A small business 
                                 owner
  wears a lot of hats, and the soft skills acquired through military 
                               experience
 are not enough, I needed some real hands-on experience or time with a
       mentor to help create a successful enterprise.''--IAVA Vet
    For Reservist and veteran business owners looking for technical or 
financial assistance, support is available through the Small Business 
Administration (SBA) and the Department of Veterans Affairs. Last year, 
the SBA assisted more than 180,000 veterans, Reservists, active 
servicemembers and spouses through its entrepreneurial counseling and 
training services.\2\
---------------------------------------------------------------------------
    \2\ Small Business Administration, FY 2009 Performance Report, page 
66, http://www.sba.gov/idc/groups/public/documents/sba_homepage/
fy_2011_cbj_09_apr.pdf.
---------------------------------------------------------------------------
    The agency offers low-interest capital through the new Patriot 
Express Pilot Loan Program. The SBA Office of Veterans Business 
Development also operates five veteran-specific business outreach 
centers and provides Federal contracting assistance to veterans, 
although it has relatively limited resources to accomplish these goals.
 ``The SBA can preach `Patriot Express' all day long but find a single 
person that's ever managed to get this loan and I'll buy you lunch!''--
                                IAVA Vet
    In addition, the SBA has teamed up with the VA and the 
International Franchise Association to create the Veterans Transition 
Franchise Initiative, which offers 30 percent off franchising fees for 
veterans on nearly 400 businesses including Dunkin Donuts, ExxonMobil, 
and Gold's Gym. To date VetFran has helped more than 1,700 veterans 
become small business owners.
    Veterans can also turn to the VA's Center for Veterans Enterprise 
(CVE) for assistance with starting or expanding their businesses. 
However, since this Committee recently held a hearing on this 
particular issue we would like to associate our comments with the 
testimony of Joe Sharpe, from the American Legion when he concluded, 
``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.''
``During my deployment I had to totally shutter the doors on my construc
                             tion business.
       It put my family in a very difficult position''--IAVA Vet
    IAVA believes that the VA must work to mitigate the effect of 
frequent and lengthy deployments by providing small businesses owners 
in the National Guard and Reserves with additional access to capital, 
insurance, and bonding via the VA's Center for Veterans Enterprise. The 
Center for Veterans Enterprise should receive appropriate funding and 
resources to achieve this goal.
Federal Contracting
    The Federal Government is the world's largest buyer of goods and 
services, with purchases totaling over $425 billion each year.\3\ IAVA 
was troubled to learn the Troubled Asset Relief Program (TARP), 
authorizing up to $770 billion to bail out banks, exempted banks 
receiving Federal bailouts from veterans hiring requirements, while 
protections for minorities, women and disabled individuals were still 
included. IAVA believes that TARP should be amended to force compliance 
with veterans' preference rules and that all future stimulus programs 
should not overlook veterans' hiring preferences.
---------------------------------------------------------------------------
    \3\ http://www.sba.gov/contractingopportunities/index.html.
---------------------------------------------------------------------------
Conclusion
    On April 26, 2010, President Obama took a critical first step at 
evaluating what needs to be done for veteran small business owners. The 
new Executive Order will create a veteran-owned small business task 
force that ``will recommend specific improvements in how small 
businesses are created, including expanded access to capital, advice on 
how to cash in on lucrative Federal contracts and better counseling so 
that businesses remain on a strong economic footing.'' \4\ IAVA 
applauds this effort, and we urge the Administration to include new 
veterans in this process.
---------------------------------------------------------------------------
    \4\ http://www.armytimes.com/news/2010/04/
military_smallbusiness_veterans_042610w/.
---------------------------------------------------------------------------
    However, more must be done. IAVA looks forward to working with this 
Subcommittee to improve the ``Status of Veteran Small Business,'' and 
create the next Greatest Generation of veteran-owned small businesses. 
Thank you.
          POST-HEARING QUESTIONS AND RESPONSES FOR THE RECORD

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                        May 4, 2010

Mr. William B. Shear
Director, Financial Markets and Community Investment
U.S. Government Accountability Office
441 G Street, NW, Room 2440B
Washington, DC 20548

Dear Mr. Shear:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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

                               __________

                              U.S. Government Accountability Office
                                                    Washington, DC.
                                                      June 15, 2010

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

Dear Chairwoman Herseth Sandlin:

    I am pleased to provide the following answers in response to 
questions that you posed, in conjunction with the hearing entitled 
``Status of Veteran Small Businesses: Are We Failing Our Veterans?'' 
held by the Subcommittee on Economic Opportunity on Tuesday, April 29, 
2010. Please do not hesitate to contact me at (202) 512-8678 or 
[email protected] if you have additional questions or want further 
information.

            Sincerely yours,

                                                   William B. Shear
               Director, Financial Markets and Community Investment
Enclosure

                               __________

    Question 1: You state that VA is exceeding its veteran contracting 
goals as an agency. Are there any subdivisions that are not doing well?

    Response: In fiscal year (FY) 2009, VA exceeded its veteran-owned 
small business (VOSB) contracting goals of 10 percent of its 
contracting dollars--awarding 19.7 percent to VOSBs. Additionally, VA 
exceeded its service-disabled veteran-owned small business (SDVOSB) 
goal of 7 percent--awarding 16.7 percent of contracting dollars to 
SDVOSBs. According to data compiled by VA's Office of Small and 
Disadvantaged Business Utilization, eight VA subdivisions (within the 
Veterans Health Administration) did not meet the contracting goals for 
VOSBs and SDVOSBs in FY09--seven were mail-out pharmacy units and one 
was the Health Eligibility Center in Atlanta, Georgia. One staff 
organization within VA failed to meet its veteran contracting goals--
VA's Office of Inspector General.

    Question 2: At its current rate, how much time will it take VA to 
verify all the veteran-owned small businesses in its Vendor Information 
Pages database?

    Response: As of April 2010, VA had verified about 2,900 
businesses--approximately 14 percent of VOSBs and SDVOSBs in the 
VetBiz.gov Vendor Information Pages database. According to VA, the 
agency uses the VetBiz.gov database to fulfill multiple statutory 
requirements. For example, VA uses the database to fulfill Pub. L. No. 
109-461's requirement to have a database of verified businesses, but it 
also uses the database to fulfill Pub. L. 106-50's requirement to 
provide notices about services to veteran-owned small businesses each 
year. While there are over 20,000 businesses listed in VA's VetBiz.gov 
database, not all businesses have applied for verification.
    According to VA, as of May 1, 2010, the backlog of applications 
grew to over 5,000. VA plans to hire all vacant positions within the 
Center for Veterans Enterprise by the end of July 2010, request 
additional full-time-equivalent positions between May and August 2010 
to support the verification program, and shift the workload of its 
staff to focus more directly on verifications. According to VA, the 
agency's current goal is to examine at least 6,000 applications by 
December 31, 2011. However, it is unclear if VA will be able to meet 
its goal at its current pace of verification.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                        May 4, 2010

Mr. Joseph F. Sobota
Assistant Chief Counsel
Office of Advocacy
U.S. Small Business Administration
409 3rd Street, SW, Suite 7800
Washington, DC 20416

Dear Mr. Sobota:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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

                               __________
         Office of Advocacy, U.S. Small Business Administration
         Responses to Questions for the Record Submitted by the
                  House Committee on Veterans Affairs,
                  Subcommittee on Economic Opportunity
                  Hearing Conducted on April 29, 2010:
  Status of Veteran Small Businesses: Are We Failing Our Veterans? \1\
    Question 1: Other than the large population of veterans in 
California, to your knowledge is California doing something unique to 
make it the number one ranking State with veteran or service-disabled 
business owners? Does it have anything to do with economic development 
plans that the State of California has or small business State tax 
credits?
---------------------------------------------------------------------------
    \1\ Because the Office of Advocacy was established to provide 
independent counsel to policymakers, its testimony is not circulated 
for comment through the Office of Management and Budget (OMB) or other 
Federal offices, and the views expressed by Advocacy here do not 
necessarily reflect the position of the Administration or of SBA.

    Response: The Office of Advocacy has no information on the effects 
of California's veteran-related programs or tax law on business 
formation or survival. California does have a Department of Veterans 
Affairs that is responsible for administering a variety of specialized 
services and conducting outreach to the State's sizable veteran 
community.\2\ California was also a pioneer in establishing a 3 percent 
goal for service-disabled veterans in State government procurement. The 
State is home to many nonprofit veteran service providers, not to 
mention the extensive network of Federal offices providing services of 
all types to veterans. However, Advocacy has no way to link the 
statistical data presented in our testimony to any of these programs or 
services.
---------------------------------------------------------------------------
    \2\ See http://www.cdva.ca.gov/newhome.aspx for more information.
---------------------------------------------------------------------------
    It is safe to say that California's standing as the State with the 
most veteran business owners is correlated to its ranking as the State 
with the largest population. As Chairwoman Herseth Sandlin pointed out 
during the hearing, the top 10 States in terms of their numbers of 
veteran business owners were all high population States. She also asked 
whether Advocacy had more information on smaller States and on veteran 
business ownership on a per capita basis.
    In order to answer such a question, it is necessary to control for 
the tremendous variation in State populations. One way to do this is to 
examine the percentage of all business owners nationwide who are 
located in each State, and then compare this factor with the percentage 
of all veteran business owners nationwide who are located in those 
States. Comparing these percentages helps show where firms owned by 
veterans or service-disabled veterans are over-represented or under-
represented in each State, relative to all business owners in that 
State.
    Advocacy commissioned a special tabulation of Census Bureau data 
that allows us to make such a comparison. The special tabulation 
answers questions on veteran business ownership that were not addressed 
in previously published Census reports, including data on veteran 
business owners by State. These data were included in Advocacy's 
testimony and are expressed in terms of each State's percentage of all 
owners nationwide. The table below depicts these percentages as shares 
of all business owners, all veteran business owners, and all service-
disabled veteran business owners. These data are presented for both 
employer owners and nonemployer owners.\3\
---------------------------------------------------------------------------
    \3\ The data presented here and in Advocacy's prepared testimony 
come from a special tabulation commissioned by Advocacy of data from 
the Census Bureau's 2002 Survey of Business Owners and Self-Employed 
Persons (SBO). The SBO's methodology is explained at http://
www.census.gov/econ/sbo/methodology.html. Data on veteran business 
owners is based on SBO respondents only. Caution should be used with 
data on service-disabled veteran owners, particularly with employer 
owners in smaller States, due to the relatively small numbers of such 
owners--only 0.67 percent of all respondent employer owners nationwide 
were service-disabled.


----------------------------------------------------------------------------------------------------------------
                       Percentage of All Veteran Business Owners Nationwide by State--2002
-----------------------------------------------------------------------------------------------------------------
                                                 Employer firm owners               Nonemployer firm owners
                                         -----------------------------------------------------------------------
                                                                   Service-                            Service-
                Location                  All owners    Veteran    disabled   All owners    Veteran    disabled
                                                        owners      veteran                 owners      veteran
                                                                    owners                              owners
----------------------------------------------------------------------------------------------------------------
Alabama                                         1.3         1.6         1.6         1.3         1.5         2.0
----------------------------------------------------------------------------------------------------------------
Alaska                                          0.3         0.3         0.7         0.3         0.4         0.8
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                 Percentage of All Veteran Business Owners Nationwide by State--2002--Continued
-----------------------------------------------------------------------------------------------------------------
                                                 Employer firm owners               Nonemployer firm owners
                                         -----------------------------------------------------------------------
                                                                   Service-                            Service-
                Location                  All owners    Veteran    disabled   All owners    Veteran    disabled
                                                        owners      veteran                 owners      veteran
                                                                    owners                              owners
----------------------------------------------------------------------------------------------------------------
Arizona                                         1.8         1.8         2.2         1.7         1.9         1.8
----------------------------------------------------------------------------------------------------------------
Arkansas                                        1.0         1.1         1.3         0.9         1.1         1.1
----------------------------------------------------------------------------------------------------------------
California                                     11.6        10.4         9.8        12.3        10.5        10.2
----------------------------------------------------------------------------------------------------------------
Colorado                                        2.4         2.2         2.4         2.2         2.3         2.4
----------------------------------------------------------------------------------------------------------------
Connecticut                                     1.4         1.3         1.2         1.3         1.3         1.0
----------------------------------------------------------------------------------------------------------------
Delaware                                        0.3         0.3         0.3         0.3         0.3         0.2
----------------------------------------------------------------------------------------------------------------
District of Columbia                            0.2         0.1         0.1         0.2         0.1         0.1
----------------------------------------------------------------------------------------------------------------
Florida                                         6.1         5.7         7.8         6.1         6.5         7.8
----------------------------------------------------------------------------------------------------------------
Georgia                                         2.7         3.0         3.0         2.7         3.0         3.6
----------------------------------------------------------------------------------------------------------------
Hawaii                                          0.4         0.4         0.7         0.5         0.5         0.7
----------------------------------------------------------------------------------------------------------------
Idaho                                           0.7         0.7         0.8         0.6         0.6         0.8
----------------------------------------------------------------------------------------------------------------
Illinois                                        4.5         4.2         2.7         4.0         3.5         2.4
----------------------------------------------------------------------------------------------------------------
Indiana                                         2.2         2.3         2.0         2.1         2.0         1.8
----------------------------------------------------------------------------------------------------------------
Iowa                                            1.3         1.4         0.8         1.2         1.2         1.0
----------------------------------------------------------------------------------------------------------------
Kansas                                          1.2         1.2         1.3         1.0         1.1         1.2
----------------------------------------------------------------------------------------------------------------
Kentucky                                        1.3         1.4         1.0         1.4         1.3         1.4
----------------------------------------------------------------------------------------------------------------
Louisiana                                       1.4         1.6         1.3         1.4         1.5         1.4
----------------------------------------------------------------------------------------------------------------
Maine                                           0.6         0.7         1.1         0.6         0.7         0.8
----------------------------------------------------------------------------------------------------------------
Maryland                                        1.8         1.8         1.5         2.0         2.1         2.3
----------------------------------------------------------------------------------------------------------------
Massachusetts                                   2.4         2.4         2.6         2.4         2.2         2.4
----------------------------------------------------------------------------------------------------------------
Michigan                                        3.4         3.0         2.8         3.4         3.1         2.7
----------------------------------------------------------------------------------------------------------------
Minnesota                                       2.3         2.3         2.7         2.2         2.1         1.8
----------------------------------------------------------------------------------------------------------------
Mississippi                                     0.8         0.9         0.8         0.8         0.9         0.9
----------------------------------------------------------------------------------------------------------------
Missouri                                        2.2         2.4         1.8         2.1         2.2         1.9
----------------------------------------------------------------------------------------------------------------
Montana                                         0.6         0.7         0.7         0.5         0.6         0.6
----------------------------------------------------------------------------------------------------------------
Nebraska                                        0.8         0.9         0.9         0.7         0.8         1.1
----------------------------------------------------------------------------------------------------------------
Nevada                                          0.7         0.8         0.7         0.7         0.8         1.1
----------------------------------------------------------------------------------------------------------------
New Hampshire                                   0.6         0.7         0.6         0.6         0.7         0.8
----------------------------------------------------------------------------------------------------------------
New Jersey                                      3.4         2.9         2.4         2.8         2.3         1.8
----------------------------------------------------------------------------------------------------------------
New Mexico                                      0.6         0.7         1.2         0.6         0.7         1.1
----------------------------------------------------------------------------------------------------------------
New York                                        6.3         5.0         5.1         6.2         4.5         3.9
----------------------------------------------------------------------------------------------------------------
North Carolina                                  2.9         3.3         3.5         2.9         3.2         3.6
----------------------------------------------------------------------------------------------------------------
North Dakota                                    0.3         0.4         0.4         0.3         0.3         0.3
----------------------------------------------------------------------------------------------------------------
Ohio                                            3.9         4.1         2.9         3.8         3.8         2.8
----------------------------------------------------------------------------------------------------------------
Oklahoma                                        1.3         1.5         1.9         1.4         1.6         2.2
----------------------------------------------------------------------------------------------------------------
Oregon                                          1.7         1.8         1.8         1.4         1.5         1.5
----------------------------------------------------------------------------------------------------------------
Pennsylvania                                    4.1         4.3         3.0         4.0         4.3         3.3
----------------------------------------------------------------------------------------------------------------
Rhode Island                                    0.4         0.4         0.3         0.4         0.4         0.2
----------------------------------------------------------------------------------------------------------------
South Carolina                                  1.3         1.7         1.6         1.2         1.6         1.6
----------------------------------------------------------------------------------------------------------------
South Dakota                                    0.4         0.4         0.5         0.3         0.4         0.4
----------------------------------------------------------------------------------------------------------------
Tennessee                                       1.8         2.0         1.6         2.0         2.1         2.2
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                 Percentage of All Veteran Business Owners Nationwide by State--2002--Continued
-----------------------------------------------------------------------------------------------------------------
                                                 Employer firm owners               Nonemployer firm owners
                                         -----------------------------------------------------------------------
                                                                   Service-                            Service-
                Location                  All owners    Veteran    disabled   All owners    Veteran    disabled
                                                        owners      veteran                 owners      veteran
                                                                    owners                              owners
----------------------------------------------------------------------------------------------------------------
Texas                                           6.1         6.6         7.8         7.2         7.7         8.0
----------------------------------------------------------------------------------------------------------------
Utah                                            1.0         0.7         0.5         0.9         0.7         0.7
----------------------------------------------------------------------------------------------------------------
Vermont                                         0.3         0.3         0.4         0.3         0.3         0.3
----------------------------------------------------------------------------------------------------------------
Virginia                                        2.5         2.9         3.4         2.4         2.7         3.2
----------------------------------------------------------------------------------------------------------------
Washington                                      2.6         2.8         3.0         2.2         2.3         2.7
----------------------------------------------------------------------------------------------------------------
West Virginia                                   0.6         0.6         0.6         0.5         0.5         0.5
----------------------------------------------------------------------------------------------------------------
Wisconsin                                       2.3         2.2         1.5         1.9         1.9         1.3
----------------------------------------------------------------------------------------------------------------
Wyoming                                         0.3         0.3         0.5         0.2         0.3         0.1
----------------------------------------------------------------------------------------------------------------
Source: SBA Office of Advocacy special tabulation of U.S. Census Bureau data from its 2002 Survey of Business
  Owners and Self-Employed Persons. Data based on survey respondent owners only.


    As can be readily seen, the percentages of veteran business 
ownership in any given State are not always the same as those for 
business ownership in general. In some States veterans may be 
underrepresented in terms of business ownership relative to all 
business owners, while in other States veterans may be overrepresented.
    For example, California has the largest number of both veteran and 
all business owners nationwide because of the State's size, but the 
concentrations among the State's employer owners differ between all 
owners and veteran owners, with all owners representing 11.6 percent of 
the national total, veteran owners 10.4 percent of their national 
total, and service-disabled veteran owners 9.8 percent of their 
national total. So despite the fact that California has the largest 
number of veteran business owners, they are actually underrepresented, 
relative to all firm owners. In Texas, by contrast, veterans and 
service-disabled veterans have larger shares of their national totals 
of employer owners than do all Texas employer owners, with all owners 
representing 6.1 percent of their national total, veteran owners 6.6 
percent of their national total, and service-disabled veteran owners 
7.8 percent of their national total.

    Question 2: In your testimony you mentioned two ongoing research 
projects that the Office of Advocacy is working on, when do you plan on 
publishing your findings? Can you elaborate on what these projects will 
include?

    Response: Advocacy does have two separate contract research 
projects now underway that relate to veteran entrepreneurship issues. 
One project is examining whether there may be tax or regulatory 
barriers to veteran business ownership or that otherwise have a 
disproportionate effect on veteran business owners. A draft of this 
study has been undergoing peer review, and Advocacy hopes to release 
the finished study by the end of summer. Advocacy's contractor on this 
project is Microeconomic Applications, Inc. in Washington, DC.
    The second contract project on veteran-related issues is looking at 
factors affecting veteran entrepreneurship. This project is being 
conducted by the SAG Corporation, a service-disabled veteran-owned firm 
in Annandale, VA. Advocacy expects this project to be completed before 
the end of the year.
    The reports on both projects must complete peer review and meet 
Advocacy and governmentwide data quality standards before they are 
released.

    Question 3: From the numbers you have available, in general, have 
veteran business owners been increasing or decreasing?

    Response: The Census Bureau's 2002 Survey of Business Owners and 
Self-Employed Persons (SBO) estimated that, in 2002, 14.5 percent of 
all business owners were veterans, of which about 7 percent were 
service-disabled.
    The SBO is conducted once every 5 years, and Census has scheduled 
the release of new information from its 2007 SBO on July 13, 2010. This 
will be a preliminary report with summary information, to be followed 
by 10 more detailed reports, including a special report on veteran-
owned businesses, now scheduled to be released in May 2011.\4\
---------------------------------------------------------------------------
    \4\ See http://www.census.gov/econ/sbo/releaseschedule07.html for 
updates on the 2007 SBO report release schedule.
---------------------------------------------------------------------------
    The preliminary SBO report should help us identify trends in 
veteran business ownership since the 2002 SBO and provide an answer to 
the Subcommittee's question. However, we already have some indications 
that the number of veteran business owners is probably going down.

      Advocacy estimates that, from 2002 to 2008, the total 
number of all firms has gone up by 25 percent, while the total number 
of veterans has gone down by about 10 percent.
      A separate Census data source indicates that 13.0 percent 
of all business owners were veterans in early 2006, and 12.5 percent 
were veterans in early 2009.\5\
---------------------------------------------------------------------------
    \5\ U.S. Census Bureau, Survey of Income and Program Participation 
(http://www. census.gov/sipp/index.html).
---------------------------------------------------------------------------
      Census data from 1992 showed that 24.2 percent of all 
firm owners were veterans then.\6\
---------------------------------------------------------------------------
    \6\ See http://www2.census.gov/econ/sbo/92/cbo-9201.pdf, U.S. 
Census Bureau, 1992 Characteristics of Business Owners, pp. 62-69, for 
more information. This report was one of three predecessor reports to 
the 2002 SBO.

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

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                        May 4, 2010

Ms. Diane Farrell
Director
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571

Dear Ms. Farrell:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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 for the House Committee on Veterans' Affairs
                  Subcommittee on Economic Opportunity
    Diane Farrell, Director, Export-Import Bank of the United States
                             April 29, 2010
                               Hearing on
    Status of Veteran Small Businesses: Are We Failing Our Veterans?

    Question 1: How big does a business need to be to seek Export-
Import Bank services?

    Answer: The Export-Import Bank (Ex-Im Bank) is capable of helping 
all U.S. companies, regardless of size, turn export opportunities into 
real sales that help maintain and create American jobs and contribute 
to a stronger national economy. The export value of Ex-Im Bank 
financing has supported deals ranging from a few hundred dollars to 
several millions of dollars. All of our Ex-Im Bank products are 
available to small businesses, including short-term insurance, although 
the product most widely used by small business exporters tends to be 
the Working Capital Guarantee.
    Ex-Im Bank understands that exporting is a challenge for many small 
businesses, so Ex-Im Bank has five regional State offices (New York, 
Florida, California, Illinois, and Texas), and three satellite offices 
(San Diego, San Francisco, Dallas), and staff in Washington, DC, 
devoted to providing American small businesses with the tools they need 
to finance exports. Approximately 80 percent of staff time is spent on 
small business.

    Question 2: Does Export-Import Bank look for specific businesses 
that could export goods and services?

    Answer: Ex-Im Bank will support the export of any good or service 
meeting its underwriting, content, environmental and other 
requirements. That said, as part of Ex-Im Bank's recent strategic 
initiative, it has identified several industries where the United 
States may have a comparative advantage, including agricultural 
machinery; construction equipment and services; medical equipment and 
related services; aircraft and avionics; and power-generation equipment 
and related services. Additionally, Ex-Im Bank identified nine 
countries [Mexico, Brazil, Colombia, Nigeria, South Africa, Turkey, 
India, Indonesia, Vietnam] having growing economies and infrastructure 
needs.
    In reaching these markets and others around the world, Ex-Im Bank 
has partnered with other export interested entities such as the: Small 
Business Administration; U.S. Department of Commerce; Trade and 
Development Agency; Overseas Private Investment Corporation; and City/
State Development Offices through a successful and widely attended 
``Exports Live!'' series. These trade promotion events have provided 
exporters, small businesses new to exporting, and banks in New York, 
Boston, Miami, Houston, Detroit, Chicago, Los Angeles, Cincinnati, 
Minneapolis, Madison, WI, and Seattle areas with direct access to 
aforementioned agency representatives. There are also opportunities for 
one-on-one counseling for the attending exporters. Building on the 
momentum and success of these ``Exports Live!'' trade events, two more 
events were recently held just this month in Montana and Colorado.
    It is an important point to remember that all of the regional 
offices of Ex-Im Bank, including New York, Miami, Houston, Chicago, Los 
Angeles, and San Francisco, are fully devoted to small business 
outreach and that any small business exporter likely is eligible for 
Ex-Im Bank financing.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                        May 4, 2010

Mr. Joseph Sharpe, Jr.
Director, National Economic Commission
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 I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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
                               __________
                                                    American Legion
                                                    Washington, DC.
                                                      June 22, 2010

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

Dear Chair Herseth Sandlin:

    Thank you for allowing The American Legion to participate in the 
Subcommittee hearing on the Status of Veteran Small Businesses: Are We 
Failing Our Veterans? on April 29, 2010. I respectfully submit the 
following in response to your additional questions:

    Question 1: Your recommendations to help Veteran-Owned Small 
Businesses and Service-Disabled Veteran-Owned Small Businesses include 
establishing a direct lending program within the SBA, and allowing 
veteran-owned small businesses set-asides under the Federal Supply 
Schedule Program. Since most of your recommendations are out of our 
jurisdictions, have you spoken to the appropriate committee regarding 
your recommendations?

    Response: Yes, The American Legion has been communicating our 
recommendations and agenda to the appropriate committee concerning the 
plight of veteran and service-disabled veteran business owners. In 
addition, The American Legion Small Business Task Force has proactively 
developed an initiative to challenge Federal agencies that are not 
meeting the 3 percent goal. We're meeting with individual Federal 
agencies, particularly the ones with very low procurement numbers, to 
develop plans that would enable them to boost their service-disabled 
veteran procurement numbers. It is very disturbing that Federal 
agencies continue to fail at meeting a congressionally mandated goal 
aimed at assisting the very community that has sacrificed so much.

    Question 2: You state that Federal agencies should be held 
accountable by SBA for implementing existing Executive Orders. How can 
SBA hold other agencies accountable?

    Response: Currently, SBA cannot be held accountable as they have no 
authority over various agencies. However, SBA could provide to the 
Administration clear information and statistics relative to the 
failures of agencies that do not reach their mandated goals. The SBA 
has a Veterans Committee in place, but SBA has yet to be able to fully 
act under P.L. 106-50. Technically, this Veterans Committee could call 
in agency representatives to answer for their failures in meeting the 
procurement goal. Also, this group is supposed to work with SBA to 
ensure that stats/reports are being made to the agency heads and the 
Administration. Furthermore, there could be language included in the 
specific Executive Order(s) to report directly to the White House and/
or OMB could fine any agency that fails to implement these Executive 
Order(s). Historically, when the White House takes the lead on veteran 
services coordination across agencies, a more coordinated and 
cooperative approach occurs.

    Question 3: When veterans separate from the military do some 
veterans take time off before looking for employment or going to 
school?

    Question 3(a): If so, how can we account for them?

    Response: Yes, some veterans do take time to process out of the 
military before immediately starting school and/or searching for 
employment. It would be beneficial if the Transition Assistance Program 
(TAP) could provide better followup with those who attend. Also, more 
resources should be allocated to communicate and market veterans' 
benefits within the Federal Government along with opportunities that 
await them in the civilian workforce. You have a better chance of 
accounting for veterans if they (along with their families) were aware 
of education, training, employment and business opportunities both in 
the public and private sector.

    Question 4: What is a qualified entrepreneur?

    Response: A qualified entrepreneur is one that has marketable 
skills, a business idea or plan, and a vision to succeed. It also 
includes an individual who has an idea and acts on it in such a manner 
that he/she creates work opportunities for themselves and others.

    Question 5: What more would the SBA's Office of Veterans Business 
Development do with an additional $13 million you propose?

    Response: The additional funding would support the establishment of 
more Regional Veterans Small Business Resource Centers, while providing 
better support for those currently in existence. In addition, SBA could 
re-establish the 1980s/1990s successful Veterans Entrepreneurship 
Training Program at colleges, universities and other training 
institutions with updated elements that include the Entrepreneurship 
Bootcamp for Veterans with Disabilities (EBV).

    Question 6: In your written testimony, you stated that the number 
of small businesses bankruptcy rose 54 percent from 2007 to 2008. Do 
you know how many were veteran enterprises?

    Response: To our knowledge, IRS does not keep data on veterans' 
bankruptcy. We also note that the Community Reinvestment Act (CRA) does 
not require or collect data on servicemembers, veterans, Reservists or 
military family status for their reporting of access to credit (homes 
or small businesses). Revising CRA could move us to a position of 
knowing about access to credit for the entire military community.

    Question 7: For recently separated veterans are there differences 
in employment between the combat arms veteran and the non-combat arms 
veterans?

    Response: In most occasions, both the combat and non-combat veteran 
would need additional training after active-duty service to hone their 
skills as well as learn new skills to aggressively compete in today's 
marketplace. However, the combat veteran would require more specialized 
training that readily fits into a professional setting. Technological 
skills, soft skills and networking skills are critical ingredients in 
succeeding into the civilian workforce. The American Legion's goal is 
to see combat and non-combat veterans receive training, retraining, and 
support services that lead to long-term and high-wage career jobs. 
Please note: Whether a combat arms veteran or non-combat arms veteran, 
the major factor in acquiring employment after transitioning from the 
military is skill sets and experience obtained before entering the 
Armed Forces.

    Question 8: In reviewing Office of Advocacy testimony on the 
predominant business industries that Veteran-Owned Small Businesses and 
Service-Disabled Veteran-Owned Small Businesses are part of, can we 
surmise that these small businesses may only cater to certain Federal 
agencies or business sectors?

    Response: The American Legion believes that it would be incorrect 
to surmise that position. VOBs and SDVOSBs are adept at taking 
opportunities and adding to them once their foot is in the door. These 
businesses are not restricted to one agency per se, but can provide 
services to almost every agency within the government and to prime 
contractors. Administration, IT, Management, Construction and Logistics 
is needed by every agency, which VOBs and SDVOSBs can fulfill when 
awarded these opportunities.

    Question 9: Currently what can be done to penalize a large prime 
who fails to provide subcontracts to veteran enterprises?

    Response: The American Legion believes the most effective penalty 
would be a financial one; however, the Federal Acquisition Regulation 
(FAR) is a barrier here since it states the prime must make a good 
faith effort in identifying a qualified subcontractor. This policy 
makes it almost impossible to prove that the prime has purposely 
neglected to identify a qualified subcontractor. The large primes 
should be required to establish a subcontracting program, not just a 
plan. SBA could work with DOL, VA and DoD to review the programs. If 
the primes do not perform to established standards for all the goal 
groups, penalize their profits. In addition, another consequence for 
large primes could be disqualification from doing business with the 
Federal Government for a specific amount of time.

    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.
                                                        May 4, 2010

Mr. Joe Wynn
Senior Advisor
Vietnam Veterans of America
8719 Colesville Road
Silver Spring, MD 20910

Dear Mr. Wynn:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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
                               __________
         Joe Wynn, Senior Advisor, Vietnam Veterans of America
                      President, Vets Group, Inc.
    Per your request, here are my responses to the questions for the 
record from the House Committee on Veterans' Affairs Subcommittee on 
Economic Opportunity regarding the hearing on ``Status of Veteran Small 
Businesses: Are We Failing Our Veterans?''

    Question 1: If set-asides were allowed in the Federal Supply 
Schedule what would be the impact?

    Answer: More small businesses would be selected and the Federal 
Government would have a better chance of meeting the 23 percent small-
business-mandated goal. Recent SBA data shows that the 23 percent goal 
was not achieved in FY2009.

    Question 2: How reliable and useful is the Score Card System?

    Answer: The current SBA score card system is supposed to draw 
attention to an agency's small business goals achievement. However, it 
is not specific to any one small business preference group. It is based 
on their overall percentage. So if an agency does exceptionally well in 
one small business category and poorly in the others, the agency would 
still receive a favorable score of Green. The SBA should still be 
requiring agencies to follow Executive Order 13-360 which called for 
each agency to develop a written strategic plan showing how they would 
increase contracting opportunities to SDVOBs.

    Question 3: Currently what can be done to penalize a large prime 
who fails to provide subcontracts to veteran enterprises?

    Answer: There are several things that can be done to large primes 
who fail to provide subcontracts to VOBs/SDVOBs: (1) Points could be 
deducted from their next proposal evaluation; (2) They could be denied 
consideration to continue the contract in option years; (3) Their names 
could be added to a public list detailing their failure to comply; (4) 
They could be required to pay a fine; and (5) They could be exempted 
from receiving future contracts.

    Question 4: In your view, is SBA really in a position to 
effectively help small businesses and veterans based on their staff 
size and budget?

    Answer: The SBA is in a position to help small businesses and VOBs 
by utilizing the staff they have. However, to be more effective, the 
number of staff persons must be increased. The Office of Veterans 
Business Development has only one Veterans Federal Procurement Liaison 
Officer to assist thousands of veteran business owners. The SBA has 
about 67 Procurement Center Representatives to monitor thousands of 
contract actions throughout the Federal Government. In addition, the 
SBA oversees the operation of 13 Veteran Business Resource Centers, 
each with a budget of $150,000 per year to provide services to 
thousands of veteran business owners around the country.

    Question 5: Should the SBA go back to having agencies post plans on 
their Web sites?

    Answer: Yes, the SBA should go back to complying with Executive 
Order 13-360 which required Federal agencies to develop a written 
strategic plan demonstrating how they would increase contracting 
opportunities for SDVOBs each year and to publicly display those plans 
via their Web sites.

    Question 6: Who is responsible for enforcing Public Law 106-50 and 
Public Law 108-183?

    Answer: According to Executive Order 13-360, the SBA should be 
responsible for overseeing the implementation of Public Laws 106-50 and 
108-183. However, they still have not been granted any real authority 
to compel Federal agencies to comply with the laws. Ultimately, 
Congress should provide oversight and ensure that penalties are applied 
to agencies that do not comply with their laws.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                        May 4, 2010

Ms. Mary Kennedy Thompson
President
Mr. Rooter Plumbing Corporation
International Franchise Association
P.O. Box 3146
1010 N. University Parks Drive
Waco, TX 76707-0146

Dear Ms. Thompson:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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
                               __________
                               Hearing on
    Status of Veteran Small Businesses: Are We Failing Our Veterans?
                     Hearing Date: April 29, 2010:
   Mary Kennedy Thompson, President, Mr. Rooter Plumbing Corporation
          Representing the International Franchise Association
                              May 5, 2010
    Question 1: Can you tell us more about the Entrepreneurship 
Bootcamp for Veterans with Disabilities that is hosted by the Center 
for New Ventures and Entrepreneurship?

    Response: In Summer 2009 I was honored to present the basics of 
franchising to a class at the Entrepreneurship Bootcamp for Veterans 
with Disabilities hosted by Texas A&M University. The class was filled 
with eager, smart, and disciplined disabled veterans planning to go 
into business for themselves.
    The ``Entrepreneurship Bootcamp for Veterans with Disabilities'' 
(EBV) at Texas A&M University in College Station, Texas represents a 
significant collaboration on the campus between the Center for New 
Ventures and Entrepreneurship, Center for Executive Development and the 
Mays Business School. The EBV initiative offers cutting-edge, 
experiential training in entrepreneurship and small business management 
to soldiers, sailors, airmen, and marines disabled as a result of their 
service supporting operations Enduring Freedom and Iraqi Freedom. The 
intent of the EBV is to open the door to entrepreneurial opportunity 
and small business ownership to those veterans, by developing their 
competencies in the many steps and activities associated with creating 
and sustaining an entrepreneurial venture, and also by helping disabled 
veterans coordinate their efforts with programs and services for 
veterans and others with disabilities.
    The EBV was first introduced by the Whitman School of Management at 
Syracuse University in 2007. In 2008, the EBV Consortium of Schools was 
launched, a national partnership with the Mays Business School at Texas 
A&M University, UCLA Anderson School of Management, and Florida State 
University's College of Business. Each of these business schools 
offered EBV on their campuses in summer 2008. The Krannert School of 
Management at Purdue University also joined the EBV consortium, and all 
five schools offered the EBV on their campuses in summer 2009.
    Like the bootcamp, this program is intense, rigorous, and 
challenging. Building upon the university's unique culture and 
resources, the bootcamp in College Station Texas consists of a series 
of training modules designed to assist the veteran in growing 
businesses successfully and profitably. A team of experienced faculty 
and successful entrepreneurs will work with them, providing a fun, 
interactive, and informative experience. They will introduce 
entrepreneurship ideas and concepts, and show how to apply them to a 
current or potential business. The EBV program is offered entirely free 
to qualified veterans accepted into the program.
    Estimated program dates for the 2010 EBV sessions are as follows:

      Texas A&M University, August
      Florida State University, June
      University of California, Los Angeles, August
      Syracuse University, August
      Purdue University, August

    To see more online about this great program for disabled veterans 
you can go to http://wehner.tamu.edu/ebv/. If I may provide additional 
information you are most welcome to email me at 
[email protected].

    Question 2: Can the military discharge be a General Discharge to 
qualify for financial incentives?

    Response: Currently the International Franchise Association (IFA) 
VetFran program only offers the discount incentive to honorably 
discharged veterans. The same holds true for veterans applying for 
scholarship awards from the IFA.
    However in H.R. 2672, The Help Veterans Own Franchises Act, an 
eligible veteran is defined as found in 38 USC Sec. 101, the term 
``veteran'' means a person who served in the active military, naval, or 
air service, and who was discharged or released there from under 
conditions other than dishonorable.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                        May 4, 2010

Mr. Joseph G. Jordan
Associate Administrator
Government Contracting and Business Development
U.S. Small Business Administration
409 3rd Street, SW
Washington, DC 20416

Dear Mr. Jordan:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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
                               __________
                   U.S. Small Business Administration
             Responses to Questions for the Record from the
                  House Committee on Veterans Affairs,
                  Subcommittee on Economic Opportunity
                               Hearing on
    Status of Veteran Small Businesses: Are We Failing Our Veterans?
    Question 1: Does SBA have any partnerships with the private sector?

    Response: The SBA helps Americans start, build and grow businesses. 
Through an extensive network of field offices and partnerships with 
public and private organizations, SBA delivers its services to people 
throughout the United States, Puerto Rico, the U.S. Virgin Islands and 
Guam.

    Question 2: Many VSOs complain that Executive Order 13-360 is not 
being followed by Federal agencies. What assurances can you give us 
that the new Executive Orders will be followed by Federal agencies?

    Response: SBA works with other Federal agencies to ensure that 
small businesses are receiving maximum opportunities in government 
contracting. As Associate Administrator Jordan mentioned in his 
testimony before the Committee, SBA is working in several ways with the 
other agencies to increase contracting participation for Service-
Disabled Veteran-Owned Small Businesses. The two Executive Orders 
referenced in the question are critical to this mission.
    Over the last year, the SBA has taken several steps to improve the 
contracting opportunities for SDVOSBs and to ensure that we effectively 
oversee and administer this critical program as thousands of veterans 
return from combat. In addition to the Executive Order signed by the 
President that created the Interagency Task Force on Veterans Small 
Business Development, the SBA has been:

      Improving outreach: SBA has been providing targeted 
outreach to make the Federal contracting market less confusing and more 
accessible to the SDVOSB community. In fiscal year 2010 and succeeding 
fiscal years we are focusing on enhancing Office of Veterans Business 
Development (OVBD) outreach, counseling and training to all veterans, 
especially service-disabled veterans. This is happening in our VBOC 
program (Veterans Business Outreach Program) which grew from 8 centers 
in FY09 to 16 centers in FY10. In addition, we continue to grow local 
outreach initiatives developed and implemented by SBA district offices, 
as well as ``online'' services;
      Working collaboratively with VA: This includes better 
data and better access to that data for both the SBA and the VA. Teams 
from both agencies have met several times in the last few months to 
discuss a wide range of important issues that touch both agencies, 
including the SDVOSB program. Administrator Mills has met with 
Secretary Shinseki and his Deputy Secretary as well; and
      Enhancing oversight to eliminate fraud, waste and abuse: 
We have enhanced our SDVOSB bid protest process by implementing 
stricter terms for those firms found ineligible. For example, we have 
instituted a new policy where firms that are found ineligible must de-
certify themselves in CCR within 30 days of our determination or they 
will be referred to our IG. We have conducted 111 SDVOSB bid protest 
reviews YTD in FY 2010. In all of FY 2009, we conducted 94 SDVOSB bid 
protests. We will continue to explore new ways, given our resources, to 
make our surveillance of the program more robust.

    Question 3: In your opinion what is the average rate of failure for 
regular businesses and veteran businesses?

    Response: SBA does not track the average rate of failure for either 
of these categories, and thus cannot provide an opinion.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                    Washington, DC.
                                                        May 4, 2010
Mr. Tim J. Foreman
Executive Director
Office of Small and Disadvantaged Business Utilization
U.S. Department of Veterans Affairs
810 Vermont Avenue, N.W.
Washington, D.C. 20420

Dear Mr. Foreman:

    I would like to request your response to the enclosed questions for 
the record I am submitting in reference to our House Committee on 
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the 
Status of Veteran Small Businesses: Are We Failing Our Veterans? on 
April 29, 2010. Please answer the enclosed hearing questions by no 
later than Tuesday, June 22, 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
                  House Committee on Veterans Affairs,
                  Subcommittee on Economic Opportunity
                  Chairwoman Stephanie Herseth Sandlin
                               Hearing on
  ``Status of Veteran Small Businesses: Are We Failing Our Veterans?''
                             April 29, 2010
    Question 1: In your written testimony you stated that you generally 
agree with Shawne Carter McGibbon's testimony who testified on behalf 
of the Small Business Administration in a 2009 hearing. In her 
testimony she identified problems reported by Veteran-Owned Small 
Businesses and Service-Disabled Veteran-Owned Small Businesses. Three 
of those problems were knowledge of programs for small business owners 
in general, obtaining resources from the government, and knowledge of 
programs for veteran small business owners. How is the VA working to 
help veteran small business owners obtain resources?

    Question 1(a): How is the VA working to improve knowledge of 
existing programs for veteran small business owners?

    Response: The Department of Veterans Affairs (VA) Office of Small 
and Disadvantaged Business Utilization (OSDBU) provides counseling to 
Service-Disabled Veteran-Owned Small Business (SDVOSB) and Veteran-
Owned Small Business (VOSB) firms through various means. We provide a 
Vendor Day Counseling Session once each month in our office. These 
sessions give an overview of VA's organization and the applicable 
procurement offices within the Department. The counseling sessions 
provide information on how to sell to VA specifically and how to sell 
to the Federal Government in general. As many VA requirements are 
filled via the General Services Administration's (GSA) Federal Supply 
Schedule (FSS) contracts, we have partnered with GSA to have them take 
part in these Vendor Day sessions. They provide an overview to our 
attendees on how to obtain FSS contracts. Since many SDVOSB and VOSB 
firms are not located within the Washington, DC area, VA OSDBU also 
takes part in many small business conferences throughout the country, 
including the Annual National Veterans Small Business Conference. 
Overall, we participated in 61 conferences in fiscal year (FY) 2009 and 
70 thus far in FY 2010.
    VA OSDBU's travel schedule allows us to provide additional 
counseling to SDVOSB and VOSB firms in person, all over the country. 
Many events are associated with small business conferences and provide 
optimal ways to reach our stakeholders. VA OSDBU also participates in 
matchmaking events throughout the country. These events are one-on-one 
sessions specific to the needs of the small business owner, especially 
SDVOSB and VOSB. The aim is to provide participants with a real sense 
of upcoming procurements in the locales where the matchmaking events 
are held. VA OSDBU also responds to numerous telephone, e-mail, and 
hard copy correspondence inquiries and requests for assistance each 
day.
    VA OSDBU maintains a Web page (www.va.gov/osdbu) that provides 
comprehensive information, small business resource tools, and links to 
many other Web sites that are valuable to SDVOSB and VOSB firms seeking 
to do business with the Federal Government. Among other items, the Web 
page includes a contact listing of all the VA Small Business Liaisons 
located at the various VA contracting activities throughout the Nation 
and a Forecast of Contracting Opportunities database, a listing of 
small business conferences scheduled throughout the country that offer 
valuable insight and networking opportunities for small firms. The Web 
page also links to our partner organizations (Procurement Technical 
Assistance Centers (PTAC), Small Business Development Centers, etc.) 
who share our mission of providing maximum practicable opportunities to 
SDVOSB and VOSB firms.
    VA OSDBU works with numerous outside organizations to ensure SDVOSB 
and VOSB firms are made aware of training, counseling, and resource 
opportunities that are offered in the geographic areas where the SDVOSB 
and VOSB firms are located. The PTAC (http://www.aptac-us.org/new/) and 
the Small Business Development Centers (http://www.sba.gov/aboutsba/
sbaprograms/sbdc/sbdclocator/SBDC_LOCATOR. html) are particularly close 
partners of VA OSDBU in providing training to SDVOSB and VOSB firms 
that need counseling regarding starting and growing their small 
businesses. VA OSDBU participates with many of the local branches of 
these organizations and takes part in their conferences to provide 
presentations, training sessions, matchmaking participants, and 
counselors. VA OSDBU realizes small businesses are not always capable 
of performing on large VA contracts. All small business firms, 
especially SDVOSB and VOSB, are encouraged to examine the 
Subcontracting Directory. This directory lists all prime contract 
holders with VA. Small businesses can research these firms and market 
their respective products and services to these prime contractors.
    VA has partnered with the Small Business Administration (SBA) on a 
working group to coordinate on issues of specific interest to SDVOSB 
and VOSB firms. This effort will be further expanded with the recent 
(April 26, 2010) issuance of the President's Executive Order on the 
Interagency Task Force on Veterans Business Development. VA will work 
with SBA, the Department of Defense, Department of Labor, Office of 
Management and Budget, GSA, and representatives of Veterans Services 
Organizations to coordinate administrative and regulatory activities 
and develop proposals relating to:

      Improving capital access and capacity of small business 
concerns owned and controlled by veterans and service-disabled veterans 
through loans, surety bonding, and franchising;
      Ensuring achievement of the pre-established Federal 
contracting goals for small business concerns owned and controlled by 
veterans and service-disabled veterans through expanded mentor-protege 
assistance and matching such small business concerns with contracting 
opportunities;
      Increasing the integrity of certifications of status as a 
small business concern owned and controlled by a veteran or service-
disabled veteran;
      Reducing paperwork and administrative burdens on veterans 
in accessing business development and entrepreneurship opportunities;
      Increasing and improving training and counseling services 
provided to small business concerns owned and controlled by veterans; 
and,
      Making other improvements relating to the support for 
veterans business development by the Federal Government.

    VA OSDBU will implement a Mentor Protege Program (MPP) this fiscal 
year. Under the VA MPP, protege firms must be SDVOSB or VOSB. The 
program is designed as a developmental program to provide vital 
business expertise to veteran-owned enterprises. The MPP will serve as 
a tool for veterans who are business owners to become viable and/or 
more competitive in the small business community.

    Question 2: In your written testimony you said that the ``VA will 
work with the U.S. Census Bureau to assure that useful veterans' 
business information is collected in future surveys and other data 
collection efforts.'' Have you spoken to the U.S. Census Bureau about 
this?

    Question 2(b): What additional data would be helpful to collect?

    Response: Yes. OSDBU's Executive Director has established a 
dialogue with the Chief, Small Business Programs Administrator, 
Acquisition Systems, Planning and Policy Branch, Acquisitions Division, 
U.S. Census Bureau. The initial focus is on capturing information in 
three new areas:

    1.  Number of service-disabled, veteran-owned businesses by 
business category;
    2.  Number of woman-owned businesses who are also veterans by 
business category; and,
    3.  The number of veteran-owned businesses that have gone out of 
business since the last survey.

    Future areas for discussion involve how to define and capture 
virtual organizations controlled by veterans.

    Question 3: Where is VA on the verification program for the Vendor 
Information Pages database?

    Response: On June 1, 2010, VA awarded a contract for the 
modernization of the Vendor Information Pages (VIP) database with a 
modification called VIP5. In July 2010, VA plans to publish a Request 
for Proposal (RFP) to process applications for vendor verification for 
the VIP database by making case-by-case recommendations to VA OSDBU 
regarding the veteran-status of putative owners and business control of 
applicants. VA plans to award this second contract in September 2010. 
The VA's goal is to assure that by January 1, 2012, a timely 
verification decision has been made for all applicants.

                                 
