[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
SUBCOMMITTEE ON CONTRACTING AND
TECHNOLOGY HEARING ON IMPROVING
CONTRACTING OPPORTUNITIES AND
PREVENTING FRAUD FOR SERVICE-DISABLED
VETERAN-OWNED SMALL BUSINESSES
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 15, 2010
__________
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
Small Business Committee Document Number 111-073
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA M. VELAZQUEZ, New York, Chairwoman
DENNIS MOORE, Kansas
HEATH SHULER, North Carolina
KATHY DAHLKEMPER, Pennsylvania
KURT SCHRADER, Oregon
ANN KIRKPATRICK, Arizona
GLENN NYE, Virginia
MARK CRITZ, Pennsylvania
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
DAN LIPINSKI, Illinois
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
JOE SESTAK, Pennsylvania
BOBBY BRIGHT, Alabama
DEBORAH HALVORSON, Illinois
SAM GRAVES, Missouri, Ranking Member
ROSCOE G. BARTLETT, Maryland
W. TODD AKIN, Missouri
STEVE KING, Iowa
LYNN A. WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
BLAINE LUETKEMEYER, Missouri
AARON SCHOCK, Illinois
GLENN THOMPSON, Pennsylvania
MIKE COFFMAN, Colorado
Michael Day, Majority Staff Director
Adam Minehardt, Deputy Staff Director
Tim Slattery, Chief Counsel
Karen Haas, Minority Staff Director
.........................................................
(ii)
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SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY
______
GLENN NYE, Virginia, Chairman
YVETTE CLARKE, New York AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
MARK CRITZ, Pennsylvania
(iii)
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C O N T E N T S
__________
OPENING STATEMENTS
Page
Nye, Hon. Glenn.................................................. 1
Bartlett, Hon. Roscoe............................................ 3
Ellsworth, Hon. Brad............................................. 3
Halvorson, Hon. Deborah.......................................... 4
Critz, Hon. Mark................................................. 4
WITNESSES
Oliver, Ms. Linda, Acting Director, Office of Small Business
Programs, U.S. Department of Defense........................... 5
Foreman, Mr. Tim, Executive Director, Office of Small and
Disadvantaged Business, U.S. Department of Veteran Affairs..... 6
Martoccia, Mr. Anthony, Chief Contracting Office, Director of
Acquisitions Operations Division, Office of the Chief
Procurement Officer, Mission Support Bureau, U.S. Federal
Emergency Management Agency.................................... 8
Brown, Ms. Jeanette, Director, Office of Small Business Programs,
U.S. Environmental Protection Agency........................... 9
Jordan, Mr. Jordan, Associate Administrator, Government
Contracting and Business Development, U.S. Small Business
Administration................................................. 11
Kobelski, Mr. J.H., President & CEO, Andromeda Systems
Incorporated, Virginia Beach, Virginia......................... 29
Sharpe, Mr. Joseph, Director, National Economic Commission, The
American Legion................................................ 32
Hope, Mr. Stephen, President, CIAN Inc., Peoria, Illinois........ 34
APPENDIX
Prepared Statements:
Schock, Hon. Aaron............................................... 41
Oliver, Ms. Linda, Acting Director, Office of Small Business
Programs, U.S. Department of Defense........................... 43
Foreman, Mr. Tim, Executive Director, Office of Small and
Disadvantaged Business, U.S. Department of Veteran Affairs..... 52
Martoccia, Mr. Anthony, Chief Contracting Office, Director of
Acquisitions Operations Division, Office of the Chief
Procurement Officer, Mission Support Bureau, U.S. Federal
Emergency Management Agency.................................... 56
Brown, Ms. Jeanette, Director, Office of Small Business Programs,
U.S. Environmental Protection Agency........................... 64
Jordan, Mr. Jordan, Associate Administrator, Government
Contracting and Business Development, U.S. Small Business
Administration................................................. 73
Kobelski, Mr. J.H., President & CEO, Andromeda Systems
Incorporated, Virginia Beach, Virginia......................... 76
Sharpe, Mr. Joseph, Director, National Economic Commission, The
American Legion................................................ 86
Hope, Mr. Stephen, President, CIAN Inc., Peoria, Illinois........ 98
(v)
SUBCOMMITTEE ON CONTRACTING AND
TECHNOLOGY HEARING ON IMPROVING
CONTRACTING OPPORTUNITIES AND
PREVENTING FRAUD FOR SERVICE-DISABLED
VETERAN-OWNED SMALL BUSINESSES
----------
Thursday, July 15, 2010
U.S. House of Representatives,
Committee on Small Business,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:10 a.m., in
Room 2360, Rayburn House Office Building, Hon. Glenn Nye
[chairman of the Subcommittee] presiding.
Present: Representatives Nye, Critz, Ellsworth, Halvorson,
Bartlett and Schock.
Chairman Nye. Good morning. I would like to go ahead and
call this hearing to order. I am going to present an opening
statement, and then I will offer the opportunity for other
members of the Subcommittee to present opening statements, if
they wish; then I will invite the panelists to give their
opening remarks, and then we will start with the questions.
There are currently 26 million veterans living today in
America. Nearly 100,000 of these veterans live in my district.
And after years of service in Afghanistan, Iraq, Vietnam, Korea
and across the globe, they have returned home to Hampton Roads,
Virginia, and all across our country, ready to continue
contributing to our community and to our country.
These brave men and women deserve not only our enduring
gratitude, but the opportunities and tools to build a new life.
One of the most important tools we have to accomplish this
mission is the Service-Disabled Veteran-Owned Small Business
Procurement Program.
During the last fiscal year, the initiative awarded $10
billion in contracts to service-disabled veteran small firms;
however, in 2008, the last year the SBA released its
contracting goal report, these awards accounted for only about
1.5 percent of all Federal contracts, half of the 3 percent
statutory goal established in 1999.
Fortunately, we have recently seen an uptick in contracts
with the enactment of the American Recovery and Reinvestment
Act. The Recovery Act provides veterans with new avenues and
opportunities to contract with the government. Service-disabled
veteran small firms have reportedly received $1.4 billion in
Recovery Act contracts. This totals over 4 percent of all
Recovery Act funds. And, of all the agencies testifying today,
with the exception of FEMA, all have awarded more than 3
percent of their Recovery Act contracts to service-disabled
veteran businesses.
While I am pleased with this increase in contracts, I
remain skeptical. The sad truth of the matter is that it
appears many agencies have been saying one thing, but actually
doing another. Last October, the GAO released a report finding
contracts are being diverted away from legitimate service-
disabled veteran businesses to nonveteran businesses, including
large corporations.
In May, I held a hearing in Hampton Roads to get a update
from GAO on the actions taken against these firms. There was a
bit of positive action. A janitorial service falsely
identifying as an SDVOSB in a contract with the U.S. Forest
Service did not have their option exercised, and their services
were not renewed, and their contract was terminated after the
initial performance period ended. Unfortunately, this action
was more the exception rather than the rule. The GAO found
that, since November 2009, that 10 fraudulent businesses
received over $5 million in new service-disabled veteran
business sole-source and set-aside contracts and over $10
million in other Federal contracts. The GAO also found that
over half of these firms remained in the Federal Central
Contractor Registration database, or the CCR.
This report is a frustrating indication of the deplorable
state of Federal contracting programs. It is clear that there
are no adequate controls nor consequences in place to deter
fraudulent actions. We must take action now to ensure these
abuses stop immediately. It is long past due to address the
breakdowns in the veteran contracting program system. Over 11
percent of all Iraq and Afghanistan veterans are currently
unemployed. Eleven percent. This number is unacceptable. It is
essential that all veterans' resources are significantly better
managed and better overseen.
As veterans are more likely to hire other veterans,
programs like this one being discussed today are critical to
reducing the unemployment rate in our veteran community. I
think I speak for all the Committee members here today in
saying that we will do whatever it takes to support our
service-disabled veterans and ensure that they have the tools
they need to succeed in today's economy.
I am committed to the goal of eradicating fraud in the
Federal contracting system, and I have taken the first steps to
fix this problem. Last November, I introduced the Service-
Disabled Veteran-Owned Small Business Procurement Reform Act.
This act will put in place control measures to ward against
abuses in the system; and, once law, it will finally enact
punitive consequences for those who attempt to circumvent the
law at the expense of our veterans. It will also establish a
team of representatives responsible for supporting veteran
entrepreneurship on a local level, actually working in the
field visiting these businesses and doing what we said we would
do.
Today we are honored to have a panel of service-disabled
veteran firms and advocates here to testify about their
personal experiences navigating what appears to be a rigged
system. I want to thank those witnesses and the witnesses on
both panels for appearing before our Committee this morning.
[The information is included in the appendix.]
Chairman Nye. I would like to yield now to other Members
who would like to make opening statements.
Mr. Bartlett.
Mr. Bartlett. Thank you very much.
I am now pleased to be the longest-serving Republican on
both the Small Business Committee and the Armed Services
Committee. I am honored to have been able to represent
Americans for the last 18 years in Armed Services and last 16
years on the Small Business Committee.
In a former life I was a small businessperson, and so I
know the problems that small businesspeople have. I worked for
the government, and I wrote RFPs, and then I moved out into the
private sector where I responded to RFPs. So I bought both
sides of that street.
More than half of all the employees in our country are
employees of small businesses, and way more than half of all
the creativity and innovation comes from small business because
that is a better environment for that kind of activity. Most of
our contracting is with large business, but we know in the
government that we desperately need more small businesses
because that is the source of most new creativity and
innovation. But there are huge impediments for small business
getting involved with the government. Lots of red tape.
I am very pleased with the success that we have had with
these large number of special set-aside programs encouraging
the government contractors to reach out to small businesses. It
is particularly important to reach out to our ex-service
people. Most, by the way, of our contracting is Department of
the Armed Services. It is half of all of our discretionary
spending, and way, way more than half of all of our contracting
in all of the government is in the defense area. And so these
veterans bring two things. One, they are small business people,
but they are also veterans, and they understand that
environment. And so we really need to reach out more to them.
So I am pleased to be here today.
By the way, where there is fraud, that doesn't mean that
the taxpayer didn't get something for his dollar. It just went
to the wrong person. And every dollar that goes to a business
which is not service-disabled is a dollar that didn't go to
these people who really deserve it and who earned it.
So I am pleased to be here. Thank you for holding this
meeting, and I look forward to the testimony.
Chairman Nye. Thank you.
Chairman Nye. I would like to recognize Mr. Ellsworth.
Mr. Ellsworth. Thank you, Mr. Chairman.
I think it was a year ago when we were here, at least last
year, maybe not a full year ago, that GAO and Administrator
Mills testified that this multibillion-dollar program designed
to help small businesses owned by service-disabled veterans was
being undermined by rampant fraud. I guess what was the most
shocking to us was that there were very few, if any, safeguards
built into this contracting, that they just didn't exist. And I
am proud to work with you on legislation that you introduced to
stop this type of fraud before it is ever awarded.
I know the GAO has recently released some strong proposals
for stopping fraud before the contract is awarded, monitoring
contracts to ensure continued compliance with the program
rules, and aggressively investigating and prosecuting potential
for fraud. I am hopeful we can implement these fraud
protections, but I must say that I am concerned about the lack
of progress. And, as we have seen on a lot of different fronts
here, it seems like progress is very slow, especially in these
areas. Some of our Federal agencies seem to have made an issue
since the last hearing.
I think the worst part of this failure by our government
agencies is that real service to our disabled veterans who have
struggled to start and maintain a small business have literally
been stolen from them by criminals trying to make a quick buck.
And it is despicable this fraud has gone on this long, and I
look forward to hearing real solutions from the panel today.
I would like to yield back, Mr. Chairman, but thank you.
Chairman Nye. I would now like to recognize Mrs. Halvorson.
Mrs. Halvorson. Thank you, Mr. Chairman.
First of all, I would like to say that I am strongly
supportive of the service-disabled veteran-owned small business
program. And like so many of my colleagues on this Committee, I
am proud to say that I also serve on the Veterans' Affairs
Committee. And with unemployment for Iraq and Afghanistan
veterans well above the national average, we need to support
programs to support people like this who have served our
country.
I am also very concerned that there is this fraud; and once
fraud is found, there is no requirement for termination,
suspension, disbarment, or prosecution, and there seems to be
no parity.
Under current law, when Federal contracting officers award
small business contracts, they usually and generally can choose
between the SBA's different contracting programs, including a
HUBZone and SDVOSB. But in a recent ruling, however, a Federal
Court of Claims ruled that Federal contracting officers must
favor HUBZone over other programs, including the SDVOSB. And if
this ruling is applied throughout the Federal Government, there
is going to be a significant reduction in awarding of the
SDVOSB contracts. So I think with this problem, we are also
working on legislation, which is H.R. 3729, that will clarify
this parity problem. So I continue to work together to address
fraud, to address parity, and to continue to work to make sure
we address all of these issues.
So I commend all of us coming together, and I commend the
chairman for bringing us together on this issue.
Chairman Nye. Thank you very much.
Chairman Nye. I would now like to recognize Mr. Critz.
Mr. Critz. Thank you, Mr. Chairman.
Just a couple of quick comments are that, you know, the
obligation that our country owes to our veterans is something
that we take very seriously. And to have a situation where not
only they are being veterans, but service-disabled veterans,
and they are almost being--what you could say is that they are
being overlooked, or they are being given a path that is
impossible or tough to drive. And I think it is disappointing
that we are sitting here talking about this, but the reason we
are here, though, is that we can't change what has happened,
but what we can do is look forward and look for solutions. And
I am anxious to hear what the solutions are to solve this
dilemma and how you are going to put teeth into enforcement
when we are talking about fraud.
And I yield back. Thank you.
Chairman Nye. As Mr. Ellsworth mentioned, it has been
approximately 9 months since the GAO report first came out that
uncovered a significant amount of fraud within the service-
disabled veteran-owned small business contracting program. What
we want to get to the bottom of today is what have you as
agencies been doing to fix the problem since we have discovered
those numbers back in November?
Our first panelist I would like to introduce is Ms. Linda
Oliver. Ms. Oliver is Acting Director of the Office of Small
Business Programs for the Department of Defense. In this role
she is responsible for establishing Department of Defense
policies that ensure the inclusion of small firms in defense-
related procurement actions.
Ms. Oliver, I would like to recognize you for your opening
statement.
STATEMENT OF LINDA OLIVER
Ms. Oliver. Thank you. It is a pleasure to be here,
Chairman Nye and panel members, to talk about service-disabled
veteran small businesses.
In the Department of Defense, as I know you know, the
service-disabled veteran-owned small business owners frequently
have been our colleagues either in uniform or out of uniform
before becoming small business members. So we are particularly
concerned and sympathetic with our service-disabled veteran-
owned small businesses.
This morning I will summarize the testimony--really
summarize the testimony, because there is no point in going
through with you what we have already written down.
The four areas I will quickly talk about is the Department
of Defense performance over the past 7 years, what we have done
and are doing to improve performance, what we have found about
service-disabled veteran-owned small businesses that might help
us do better. And then I will touch on the GAO study, two of
the cases in the GAO study concerning the Department of
Defense.
As in my testimony, over the past 7 years, the Department
of Defense has had a fourteenfold increase in dollars that go
to service-disabled veteran-owned small business contracts. We
have had a sevenfold increase in percentages. We have had a
fourfold increase in the number of service-disabled veteran-
owned small businesses with which we contract. And because
Chairman Nye told me he would do this when I last saw him in
October, I want to mention that the Department of Defense, as
Chairman Nye has said, has done very well with our Recovery Act
dollars to service-disabled veteran-owned small businesses to
the tune of $157 million, which is a lot of work. But we
understand we have a long way to go, and we are working to
improve our performance.
We had an effort several years ago to get more service-
disabled veteran-owned small businesses in CCR. We have done a
great deal of outreach. We have tried to put in place special
emphasis within our contracting officers on certain contracting
with service-disabled veteran-owned small businesses. We did
work with our Mentor-Protege Program. We probably, to be honest
with you, have picked the low-hanging fruit, and so now we have
turned to as much detail analysis as we can in order to
understand better the service-disabled veteran-owned small
business world so that we can take better advantage of it.
We were interested to find that the service-disabled
veteran-owned small businesses tend to cluster around three
areas of contracting. The biggest are the category which is
general, but is services; professional, scientific, and
technical services. Forty-two percent of the dollars that the
Department of Defense sees go to service-disabled veteran-owned
small businesses are in this area. Twenty-four percent of all
of our contracts with service-disabled veteran-owned small
businesses, 24 percent of the dollars, are for construction,
and 11 percent are for administration, which means--
administration meaning the sort of clerical people, for
example.
With 77 percent of our contracts with service-disabled
veteran-owned small businesses clustered in three areas, it
means that we reach a saturation point, and what we must do is
start focusing on the other areas. We are performing further
analysis right now so that we can do a better job.
We have been concerned about the Government Accountability
Office report. We have taken steps to deal with it. We don't
like fraud either, and our inspector general is doing a report
which we expect to have concluded in December. I have spoken
with the suspension and debarment people. They think it is a
good idea to have us pass the word better, and they are
interested in coming in to help. Additionally, we believe that
we need a sort of a "just in time" training for the limitations
on joint ventures, because there seems to be--the problems seem
to cluster there.
My time is up. Thank you so much for holding this hearing.
[The statement of Ms. Oliver is included in the appendix.]
Chairman Nye. I would now like to recognize our second
panelist, Mr. Tim Foreman, the Small and Disadvantaged Business
Department in the Department of Veterans Affairs. The office
provides outreach and liaison support to businesses concerning
acquisition-related issues, and also monitors the VA's
implementation of procurement programs.
And I didn't mention this at the outset, but everybody is
going to be on a 5-minute clock. If you have a couple more key
points to make at the end of the 5 minutes, I will be a little
bit lenient, but we have a lot of folks today, so we are going
to try to ask you to use that as a guideline.
Mr. Foreman.
STATEMENT OF TIMOTHY FOREMAN
Mr. Foreman. Good morning, Chairman Nye and distinguished
members of the Subcommittee. It is a pleasure to be here to
represent the Secretary of the VA, Secretary Shinseki. I feel
compelled to tell you, after being there for just 6 months--and
this is my 6-month anniversary at the organization--that the
Secretary runs a very tight meeting. He is a terrific leader. I
have been around the government for 38-plus years. I have never
met a more interested individual, especially in veterans,
veterans of all types, to include business issues. And he
continually raises things he wants to do more to ensure that
businesses stay in business when the vets come out, and he is
concerned about even people in the Armed Forces making
decisions, or not making decisions and just leaving the
military, without having a strategy. What are they going to do
when they get out? He is concerned about education, concerned
about health and welfare. And we think we are the win-win
solution.
Our first name is "Veterans," so it is only natural that we
have veterans to work for us in filling our requirements for
products and services. One of the issues that we talk about, I
want to thank Congress for the passage of 109-461. It has given
us the ability to jump, increase our dollars and percentages.
And I will give you just a quick example.
Back in 2005, we were at 1.3 percent to service-disabled
veterans. As of this year to date, we are at 18.4 percent to
service-disabled veterans, over 1 billion, 700 million. We
suspect we are going to break last year's record on dollars,
which was 2.3 billion.
Just another little hint of success. In the ARRA money, we
are at about 82 percent spend rate right now, of which small
business is 83 percent, and our veteran-owned small business
are 80.6 percent, and service-disabled veterans at 79.5, or, if
you will, 700-plus million of the 882 million. I think
significant efforts have gone.
Let me get into, if you will, some of the issues we face
over in the VA. We do have this unique legislative authority,
which I again thank you. As a veteran myself, I enjoy working
with the veterans and the veterans groups. We do look at
verification. We have a system, a database, that we use. It is
a VIP, vender information page, that we use to identify
veterans, service-disabled and regular. We have two types of
folks that appear on that database: self-certified, they come
in, they say they are, we accept them and put them on the
database; and the verified firms, those that have a special
seal. We actually go through the verification process.
When I came on board, there were some problems. I think
even in the GAO report, one of the verified firms that was
challenged and found not to be a service-disabled veteran was,
in fact, verified within our database. But we weren't calling
for complete data. So the first thing I did is I said, wait a
second, we have got to stop this. We have got to ask for all
the data we need. And it is going to slow down the process, but
in the interim it is going to be good. It is going to be good
for the government. So that is one of the things that we did.
We are actually moving the backlog around a little bit. We
are working it down. We have taken action by taking away from
CVE ancillary programs right now until we take that hill, and
we want to reduce it down to zero.
I am currently the person who makes decisions on all
protests right now. I am the adjudication official and the
final authority within the VA, and I do that. When I do it, it
has to go through general counsel.
Another issue that we want to talk about is we are standing
up a debarment committee. I volunteered to be part of that
debarment committee. I figure, since I am the top-level person
in the VA for this program, I want to make sure that nobody
steals valor from our true veteran heroes. So I am going to be
that. And not only that, they turned around and said, would you
be interested in being the chairman? We think you are the right
person. And I said yes. And the Secretary thought that was a
great idea.
I have got 30 seconds to go. I have got so many things I
want to say. But I think we have done a good job. I think we
have got a good system. Is it perfect? No. We are going to work
until we get it right. But remember, one thing we always want
to remember, I try to keep the barriers to entry low because
you don't want to keep out valid service-disabled veterans
because you raised it too high. But you have to raise it up a
little bit to keep out those that are going to steal valor, and
we want to keep it just high enough.
So, with that, thank you very much. I look forward to your
questions.
Chairman Nye. Thank you, Mr. Foreman. I will give you an
opportunity during the questions and answers to elaborate on
that committee. I would like to hear more about that.
[The statement of Mr. Foreman is included in the appendix.]
Chairman Nye. Let us go on to our next panelist. Mr.
Anthony Martoccia is the Director of Contract Operations for
the Federal Emergency Management Agency. Mr. Martoccia is
responsible for awarding and administering $2 billion in
contracts to support FEMA. He is also responsible for providing
acquisition support for all FEMA programs.
Thank you for being with us.
STATEMENT OF ANTHONY MARTOCCIA
Mr. Martoccia. Good morning, Chairman Nye and members of
the Subcommittee on Contracting and Technology for the House
Committee on Small Business. I am Tony Martoccia, chief of the
contracting office at FEMA. I appreciate the opportunity to
appear before you today to discuss FEMA's engagement with the
private sector, in particular with service-disabled veteran-
owned small businesses, and to specifically address FEMA
contracts cited by the GAO as part of its case study on
service-disabled veteran-owned small businesses in October
2009.
Today I will provide an overview of SDVOSB program data
outlining how FEMA engages small businesses owned by service-
disabled veterans, and how we worked to meet the 3 percent goal
and the award of FEMA acquisition set-asides for competition
among those companies and researching those that are not
SDVOSBs.
The SDVOSB program is intended to honor the extraordinary
service rendered to the United States by veterans with
disabilities incurred during active service with the Armed
Forces. The Veterans Benefit Act of 2003 established the SDVOSB
program to provide Federal contracting assistance to those
concerns. Contracting officers may set aside acquisitions to
any small business concern controlled and owned by one or more
disabled veterans. Executive Order 13360 requires Federal
procurement officials and prime contractors to provide
opportunities for these firms to increase their Federal prime
and subcontracting to those firms owned by service-disabled
veterans.
In order to advance FEMA's efforts with SDVOSBs, the Agency
has designated a full-time small business specialist whose
primary responsibility is to increase contract opportunities to
small businesses. We are working hard to meet the 3 percent
annual goal with SDVOSB businesses, and I am pleased to report
FEMA is currently at 2.65 percent of prime contracts awarded to
those companies. We have more work to do, but FEMA is making
strides and working with that community.
I have reviewed the October 2009 GAO report which was
undertaken by GAO to review the SDVOSB procurement program to
determine whether cases of fraud and abuse exist within the
program, and whether the program has effective fraud-prevention
controls in place. The report cites two cases in which FEMA
contracts were reviewed. FEMA takes the findings from the
report very seriously, and, as a result, FEMA is considering
many initiatives that would prevent future incidents of fraud,
including awareness training for contracting officers, contract
specialists, use of FedBiz to assist in the verification
process, and the requirement for submission of VA certification
by the successful offeror before final award.
I thank the Subcommittee for your consideration of my
opening statement, and I look forward to answering questions.
Chairman Nye. Thank you. Thank you for joining us. When we
get to the Q and A, I am going to ask you to elaborate on your
awareness training for contracting officers, because I would
like to hear about how you do that.
[The statement of Mr. Martoccia is included in the
appendix.]
Chairman Nye. Let us go ahead on to our next panelist, Ms.
Jeanette Brown, the Director of the Office of Small Business
Programs in the Environmental Protection Agency. The Office of
Small Business Programs advocates for small businesses,
socioeconomically disadvantaged businesses, and minority
academic institutions.
Ms. Brown, thank you for being here.
STATEMENT OF JEANETTE L. BROWN
Ms. Brown. Thank you.
Chairman Nye, members of the Subcommittee, thank you for
providing me the opportunity to appear before you today to
discuss the Environmental Protection Agency's performance with
service-disabled veteran-owned small businesses.
At EPA, the mission of the Small Business Program, OSBP, is
to support the protection of human health and the environment
by advocating and advancing the business, regulatory and
environmental compliance concerns of small and
socioeconomically disadvantaged businesses and minority
academic institutions, including efforts to ensure that the
Agency meets its goals with respect to service-disabled
veteran-owned small businesses.
The Agency's commitment to service-disabled veteran-owned
small businesses is strong, very strong. The Agency's
progression towards meeting and exceeding the 3 percent
service-disabled veteran-owned small business goal has been
steady since 2003, with increases each year thereafter. The
Agency has exceeded the 3 percent service-disabled veteran-
owned small business goal for the last 3 years and is on target
to continue this pattern of success for fiscal year 2010.
In January 2006, the EPA Office of Small Business Programs
implemented a plan to manage and measure efforts to improve our
performance and meeting our small business goals in all
socioeconomic categories, including service-disabled veteran-
owned small businesses. The plan includes the following
elements: a clear communication from the head of the Agency
reinforcing the importance of meeting our small business goals;
internal small business performance measures; consistent
dissemination of data from the Office of Acquisition Management
tracking regional and program offices' progress on a quarterly
basis; internal and external outreach and training by the small
business program on the utilization of small businesses; and an
internal recognition program which provides visible recognition
for those offices and regions meeting their small business
performance measures.
Our strategy has made a tremendous difference in increasing
the Agency's performance in striving to meet all of our
socioeconomic goals. Our most significant achievements are in
the area of service-disabled veteran-owned small businesses.
EPA has been recognized by the Veteran Administration's Center
for Veteran Enterprise for its commitment and service to
service-disabled veteran-owned small businesses, and EPA has a
proven track record for awarding multimillion-dollar contracts
to service-disabled veteran-owned small businesses.
In October 2008, we awarded a $100 million contract to
Vision Technologies, a service-disabled veteran-owned small
business in Glen Burnie, Maryland. That contract supports and
manages several Agency network services' voice and data
networks and information technology security. In February 2010,
we awarded a $20 million remedial action contract to Los Alamos
Technical Associates, Inc., a service-disabled veteran-owned
small business located in Ohio. Under this contract, it
provides for environmental and engineering support services in
EPA's remedial planning and oversight activities in New York,
New Jersey, Puerto Rico and the Virgin Islands.
EPA's Office of Small Business Programs follows procedures
set forth by the FAR, Federal Acquisition Regulations, to
review procurement requests to ensure that small business
concerns are fairly considered in the procurement process.
Contracting officers within EPA's Office of Acquisition
Management are responsible for verifying the status of vendors
and follow FAR procedures as well regarding the vendors'
representations and certifications.
A preaward review. The acquisition community relies heavily
on the Central Contract Registration, CCR, and the online
representation and search application, ORCA, to verify the
status of contractors prior to making the award. The
information in ORCA is updated as necessary, but at least
annually, to ensure that they are kept current, accurate, and
complete. Any business working with the Federal Government
under the FAR are required federally to be registered in CCR
before doing work or getting a contract.
At time of award, an award notice is posted on EPA's Web
site to inform vendors and the public about the award. At this
time interested parties may come forward to protest the size
claimed by the potential awardee. These cases are then turned
over to SBA to review and make a determination.
EPA does not utilize an Agency database that identifies
service-disabled veteran-owned small businesses; however, we do
use CCR and ORCA.
EPA follows the FAR with respect to misrepresentations
involving contractor code of ethics, ORCA certification, and
small business certification. If the contracting officer is
aware of a violation, they are to engage the Office of
Inspector General--EPA Office of Inspector General to report
the incident and coordinate with SBA.
EPA is proud of its support for service-disabled veteran-
owned small businesses, and we thank you very much for allowing
us to be here and look forward to answering your questions.
Thank you.
Chairman Nye. Thank you very much, Ms. Brown.
[The statement of Ms. Brown is included in the appendix.]
Chairman Nye. I would like to introduce now the final
panelist for the first panel, Mr. Joseph Jordan, the Associate
Administrator for Government Contracting and Business
Development at the Small Business Administration. In this role
Mr. Jordan and his team are responsible for implementing the
contracting programs contained in the Small Business Act.
Mr. Jordan, thanks for being with us.
STATEMENT OF JOSEPH G. JORDAN
Mr. Jordan. Thank you. Chairman Nye, distinguished members
of the Subcommittee, it is an honor to testify before you today
on the SBA's deep commitment to veteran entrepreneurs and small
business owners. This past year our administrators made
veterans a priority in each of the SBA's core mission areas,
the three Cs of capital, counseling, and contracting.
With regards to access to capital, the SBA hit a milestone
on July 4, with nearly half a billion dollars in SBA's Patriot
Express loans over just 3 years going to veterans, reservists,
servicemembers, and their spouses.
Within our counseling programs, the SBA has doubled the
number of veterans business outreach centers to 16. In fiscal
year 2009, we provided training to 290 contracting officials of
5 major agencies, as well as 2,000 service-disabled veteran-
owned small businesses.
Today I have been asked to focus on the steps we have taken
to help veteran and service-disabled veteran-owned small
businesses access contracting opportunities.
As you know, the SBA works with Federal agencies to
increase contracting opportunities for small businesses. Our
goal is to ensure that not less than 23 percent of all eligible
prime contracting dollars go to small businesses. Within that,
the Federal Government has a number of additional subgoals,
including a 3 percent goal for service-disabled veteran-owned
small businesses.
Agencies have made great strides in recent years. In fiscal
year 2007, 1 percent of prime contracting dollars went to
service-disabled vets. That rose to 1.5 percent, or $6.5
billion, in 2008, and we expect that, based on preliminary data
for fiscal year 2009, there will be yet another significant
increase in both dollars and percentage.
Still, we know we have work to do and are committed to
ensuring that the Federal Government hits its goals for all
small business groups, including service-disabled veteran-owned
small businesses.
One of the reasons we know that we can improve further is
due to our efforts with respect to Recovery Act contracting.
This time last year, the Vice President, Commerce Secretary
Locke, and our Administrator made a strong interagency push to
ensure that Recovery Act contracts were going to veterans,
minorities, women, and other groups. We have been tracking this
data, and I am very pleased to say that the Federal Government
has awarded 5 percent of Recovery Act contracts to service-
disabled veteran-owned small businesses, and I want to thank
the other agencies represented here today for their
contributions to that accomplishment.
Building on our success in the Recovery Act, we are
examining which of our actions were most effective. Ultimately
we want to identify best practices and integrate them into our
regular day-to-day fiscal year contracting efforts. More
recently this commitment to veteran-owned small businesses has
been renewed by the President himself. In April, he ordered the
creation of two task forces, one on small business contracting,
and another on veterans business development. Today's
discussion lies at the intersection of those two efforts, and
Administrator Mills and I, as well as others throughout the
administration, are working to create formal recommendations
that should be delivered to the President in the coming weeks.
Overall we have made progress over the past year, but, as
the GAO reminded us last fall, there is more we can do. Our
goal-related improvements must be accompanied by policies and
procedures that root out fraud, waste, and abuse in this
important program. That is why we have developed a
comprehensive approach to rooting out fraud, waste, and abuse.
We are collectively focused on all three stages of the
contracting oversight continuum: certification, ongoing
surveillance and monitoring, and enforcement. We have already
made improvements in all three areas even when, like in the
case of the service-disabled veteran-owned small business
program, it operates via a self-certifying process.
We are handling more protests than ever before, and the
protest process is working. While the number of protests is
increasing, the percentage of firms determined as ineligible
through protests is declining. We are also working more closely
than ever with the Veterans Administration, our general
counsel's office, our suspension and debarment official, our
inspector general, the Department of Justice, and many other
key stakeholders.
I should also note that the President's fiscal year 2011
budget submission asks for $2 million that will help us with
eligibility and certification efforts across our contracting
programs. My commitment to you today is that we will continue
to move forward with diligence and speed in strengthening our
efforts to eliminate fraud, waste, and abuse.
Finally, we share the concerns of many service-disabled
veteran-owned small business contractors on the issue of
parity, which is perhaps the most pressing issue facing this
community. A recent court decision attempts to place the
HUBZone set-aside program above SBA's other small business
contracting programs, including the service-disabled vets
program. If this decision were applied throughout our
contracting programs, it could essentially redirect billions of
dollars away from service-disabled veteran-owned small
businesses as well as 8(a) and women-owned small firms.
Moreover, it could create confusion within the contracting
community, which could result in all small businesses losing
opportunities for Federal contracts.
That is not fair, and it wasn't the intent of Congress.
That is why the administration supports a legislative effort
currently under way to make the relatively simple clarification
in statutory language replacing "shall" with "may" in HUBZone's
language. We urge Congress to act on this issue as soon as
possible, especially given that a large portion of contracting
dollars are obligated in the final quarter of the fiscal year,
and missing out on just 1 percent of contracting opportunities
means $5 billion in lost revenues to small businesses.
Thank you very much for your time, Mr. Chairman, and I look
forward to your questions.
Chairman Nye. Thank you for your testimony.
[The statement of Mr. Jordan is included in the appendix.]
Chairman Nye. Clearly we have got a problem here, and I am
incensed at the fraud against our veteran business owners that
was uncovered by this GAO report. This report was available to
all of us 9 months ago.
It is my assessment that agencies tend to be focused on
target numbers and on processes. Our veteran business owners, I
can tell you with great certainty, are concerned with outcomes,
as am I. We owe it to the taxpayers who fund these programs to
be able to say to them that we are sure that the money we have
allocated to go to small business owners who are service-
disabled veterans is actually going to them in fact. The GAO
report showed that that is not the case.
I want to drill down on exactly what you have done since 9
months ago when we discovered this fraud in the system. And
everyone here represents an agency who has contracts that were
let out who were determined to be problematic.
I want to ask a couple of relatively simple questions, and
I will ask each person on the panel to respond to these. And
the first question I have is specifically what have you done in
terms of practicing better oversight over your contracting
officers? We know that some of the instances of fraud that were
uncovered involved contracting officers who were very well
aware of the problem. We know there are cases where service-
disabled veteran business owners have pointed out problems
either through the SBA or directly to the contracting officers
involved at the agencies, and essentially there has been no
follow-up action taken against those companies.
So what I would like to ask, and I will start with you Mr.
Jordan, what specifically can you say from the SBA's point of
view--and I am going to ask all the agency representatives--has
been done in terms of overseeing contracting officers and how
they work and providing training that they need to do a better
job?
Mr. Jordan. Absolutely. And let me first say that I
wholeheartedly share your and the community's focus on
outcomes. I think policies and procedures are very important,
but they have to be aligned with the outcomes, and that is
where the focus needs to be.
In regards to the 10 firms that were highlighted in the
GAO's report, all 10 were referred to 1 inspector general. One
of the 10 was referred from the inspector general to our
suspension debarment official. They issued a show cause letter
to that firm, and through a series of steps determined not to
suspend or debar that firm. The remaining nine firms are under
inspector general investigation, a combination of our inspector
general and inspectors general from the agencies where these
contracts were let out, and I am not allowed to elaborate
further on those particular instances.
But now, moving to what are we doing about this as a
symptomatic issue beyond just these 10 firms. Well, first there
is outreach. So we set up an on-line training course, free, for
how veterans and service-disabled veteran entrepreneurs could
access these opportunities, and we are also in our outreach
activities promoting the protest process. Like I said, if you
look at the number of protests year over year, they are going
up every year, which would indicate the awareness gap is
closing, that service-disabled veteran-owned small businesses
know the procedure when they think somebody is not
appropriately identifying themselves. As we process those, the
percent that we actually determine are, in fact, ineligible is
going down. So the awareness is going up, but the actual
unscrupulous actors you see as a percent are going down.
On the upfront certification, we are working closely with
VA to utilize better data and technology tools. So despite the
fact that this is a self-certification program, we dissuade any
bad actor from thinking that they can get in or thinking that
it is a good idea to try.
Then on ongoing surveillance and monitoring, one of the
things that came after that GAO report was we identified a
potential gap. And once we did determine a firm to be
ineligible, they have to decertify themselves in the Central
Contractor Registry. That is not something SBA can do. We have
now amended our policies to say that they have 30 days to do
so; otherwise, we refer that action to the inspector general as
well.
And just to give you a little context when I talked about
the protests, we conducted 136 service-disabled veteran bid
protests through mid-June of this year already, and that
compares to 94 of all last year. And if you look the year
before, it is about a 33 to 50 percent increase year over year
again. And then it goes to rigorous enforcement.
So I talked about the 10 firms. But we are beyond that,
really looking at how we can work collaboratively with all law
enforcement departments and mechanisms to ensure that when we
do catch these bad actors, they are appropriately punished.
Chairman Nye. One quick follow-up for you. I talk to
service-disabled veteran-owned small businesses in my district,
and they say that when they want to protest an award, they get
referred by SBA back to the original contracting officer from
the Agency, who then tells them go back to the SBA and make
your complaint there, and they get stuck. How are you working
to solve that problem?
Mr. Jordan. So the typical path is that the contracting
officer who is the point of contract for that contract is who
they would protest with. The contracting officer would then fax
to SBA that protest, and it would go from there. In the event
that there is confusion--and I have heard this anecdotally. The
problem is when I press for details, I have not gotten the
specific instances that we can then reverse-engineer what
happened and, in those cases, what went wrong. In the case that
you find those, please give them to me personally, and I will
follow up on them, because that absolutely should not be
happening. We do not want them caught in that cycle.
Chairman Nye. We will. We will provide them to you.
Ms. Brown, can you please comment on oversight on
contracting officers?
Ms. Brown. Yes. Thank you.
Within the office--and I am in the Small Business office,
and we work separately and distinct from the contracts office,
but also collaboratively together in this process of the
procurement process. The Agency does not have a detection and
monitoring program for firms receiving service-disabled
veteran-owned small business contracts, but we do follow the
FAR. We do look at the preaward process. We put and post awards
on the Internet for dissemination so that the public will see
it. We have found that the small business community is a strong
advocate and watchdog, and so they do call. EPA verifies the
status of contractors using CCR and ORCA.
In addition to that, we work within the Office of Small
Business Programs reviewing the acquisition packages; looking
at the statements of work, the recommendations; making
recommendations back to the contracting office in terms of what
we think separate and distinct; and also working with SBA-PCR
at the local level.
Chairman Nye. I am sorry to interrupt you. There seems to
be a cell phone that is going off. This would be an appropriate
opportunity for people to check and make sure their cell phones
are on silent, please.
Okay. Ms. Brown, please go ahead.
Ms. Brown. And for the contracts that are in question, the
one that was cited in the report for EPA, that has been
referred to the EPA IG office, and we are waiting for
recommendations back or final word on that, and so I can't
discuss that in detail now.
Chairman Nye. I will give you an opportunity to follow up
with us after this hearing in writing with some detail about
what actions your Agency is taking to solve the problem.
[The information is included in the appendix.]
Chairman Nye. Mr. Martoccia, please.
Mr. Martoccia. Thank you.
We have a pretty robust review system for contracting
officers. We go through a preaward process when procurement
strategies are being developed. We work with our Small Business
Office, a person like Jeanette, and we discuss what strategies
to use. And we train. We have a good career development program
and training program for our contract specialists and
contracting officers.
In our particular case we need to be more diligent at the
time of solicitation award to assure ourselves that these
companies who are certifying the particular socioeconomic
program, including disabled veterans, that they are, in fact,
owned by the service-disabled veterans. So we are making it a
point, through myself and my boss and through my branch chiefs,
that at the time of solicitation and award, that we are
thorough and deliberate review of the qualifications to make
sure that those companies are, in fact, qualified to bid on
those solicitations.
Chairman Nye. Mr. Foreman.
Mr. Foreman. One of the things I would like to caution
everybody about when we think about fraud, a lot of folks that
we deny verification is really not because of purposeful fraud.
It is they don't understand that it is not only the status
fraud, i.e., I am a veteran or a service-disabled veteran, and
I am not, that would be a status fraud; but part of status
fraud, the harder part, is total ownership and control, and a
lot of folks don't do that with their paperwork. So there is--
and I can term it innocent fraud, but there are people that
make mistakes, and they do change, and they do reapply and get
verified. So I am very hesitant to condemn everybody who runs
into that problem, because there are legitimate service-
disabled veterans who don't understand the process and will do
things wrong.
In terms of what do we do, one of the things that we did
when we first heard about it--and I think I had the pleasure--I
think I was there about 2 weeks and had to testify on the House
Veteran Affairs Committee, took the 10 firms, referred them
over to our IG to see if there were other things that we could
do, what kind of penalties can be placed on them, et cetera,
if, in fact, they were true bad actors.
The other things that we did, we do a lot of our own right
now--I am trying to give it over to Joe Jordan, but the
protests. So I actually do work on the protests, and I am the
adjudicator for those kind of things. So when the protests come
in, you get a file about that thick versus when we do a
verification, that is only about that thick. So you are talking
about 2 inches to 5 inches. We do a lot of background checks.
We do what they call site visits, unannounced and announced, to
ensure that the right things are going on. We get a very good
report.
We are in the process of tripling our contract support to
go out and look at these contracts. We have also expanded our
employees, the full-time equivalents. We are starting to fill
the office with more folks. We are finding that it is a lot
better in that regard.
Also, teaching. Like in the old infantry days, command,
control, communication, and intelligence. If communication
doesn't work, none of those work. You don't have control if you
lose communication, you don't have command, and you don't have
intelligence.
So part of it is me going out and talking to the veteran
committees and communities, making them understand the critical
but the most difficult part for us to judge is control of a
business and total ownership of a business. You don't have a
board of directors that can outvote you. And that has been one
of those little things that we have.
So, again, we have to be careful of how high we ramp up to
guard against allowing legitimate firms in, but we have to
guard against it. I am, like I said, going to be the debarment
chairperson, and in that role we are going to look at
protecting the government's interests. It is in the best
government's interests that we keep people who are not who they
say they are out of doing business with the government, and so
we will do that.
Chairman Nye. Thank you.
Ms. Oliver, the same question about the contracting
officers. At least one of the cases involved an Air Force
contracting officer who was shown to have been aware of the
fraud going on. I know, as the DOD small business oversight
person, you have to work with the each of the individual branch
contracting folks. Can you talk to us about changes that are
being made to prevent that from happening?
Ms. Oliver. Yes, I can. And let me start with the most
general way that we are trying to prevent this sort of thing
from happening.
We need to figure out the extent of this problem and the
nature of the problem. Tim has a really good point that at
least in the cases--our two cases, as I started to dig through,
there was some ignorance on the part of these service-disabled
veteran-owned owners, but they weren't--I would--it is not for
me to judge, and the cases aren't finished, but there is, as a
minimum, another side to explaining all this. And we need to--
that is two--I told you earlier that we are--in 2009, we
contracted with 3,164 different service-disabled veteran-owned
small businesses. The IG has looked at two.
Now, the caution, we can't say, well, 2 out of 3,164, that
is a nonexistent problem. I understand. They only looked at a
few. But we need to see how extensive it is. And our inspector
general has been working, gathering data, analyzing data to
figure out how big is this problem?
The contracting officer that you were talking about would
say to you, as he has said to me, that there was at least a
failure to clearly communicate or a certain inaccuracy. He took
the spanking, which he would say was not completely accurate
and, I am happy to say, moved forward to say, what can I learn
from this? What can we do differently? And that contracting
officer has instituted a system of market research which will
ask pointed questions to the owners of the service-disabled
veteran-owned small businesses so that they will understand
better what the rules are.
I think one of the things that comes out of this is we need
to do--my office needs to do specific "just in time" kind of
training of contracting officers and of service-disabled
veteran-owned small businesses so they are very clear about
what exactly are the limits of the joint ventures. These are
pretty frequently joint venture problems. In other words, it is
not veterans saying, I am disabled, when I am not. That appears
to be the case. It is not people posing as service-disabled
veterans. It usually involves a veteran who has, in the cases
we have been able to look at, misunderstood.
With me today is the poor guy who is going to get to put
together all this training.
Chairman Nye. Let me interrupt you for just 1 second,
because I am not sure I understand what you are saying.
Ms. Oliver. Okay.
Chairman Nye. What I am hearing is that the problem here
was ignorance on the part of the service-disabled veteran
business owner, and not a problem with the contracting officer,
despite what the GAO report said. So are you disputing the
findings of the GAO report?
Ms. Oliver. Yes.
Chairman Nye. Okay. Because the report found that there was
a relationship between the contracting officer and the
subcontracting business owner that received a contract. So I
just want to make sure that we are all clear and that we are
talking about the same case.
Ms. Oliver. I would be so happy to have the contracting
officer--let us see. The most important thing is we learned
from--we learned the lesson. And we have learned the lesson.
Chairman Nye. I agree with that, that the most important
thing is that we learn the lesson. But if we don't agree on
defining of the problem, it is difficult for us to say that we
agree that we learned the lesson. I am going to follow up with
you in just a minute--
Ms. Oliver. Okay.
Chairman Nye. --because I am having a hard time
internalizing your response on that question, because now it
seems like we have backed up a step in terms of whether we are
looking at whether the GAO report was actually accurate, and we
can move on to solving the problem, if we agree on that or we
don't, and now it sounds like we are back another step.
We are going to have to vote in a few minutes. I want to
offer an opportunity to Mr. Schock to ask any questions before
we go to vote, and then we are going to come back after the
votes, and I want to reconvene with the same panel and follow
up with you.
Ms. Oliver. Okay.
Mr. Schock. Thank you, Mr. Nye. I am actually going to
yield my time to my good friend Dr. Bartlett, who has another
commitment at 11:30, and so he will not be able to return, so
he can ask his questions. I will be back and then take Mr.
Bartlett's time.
So, Dr. Bartlett, please go ahead.
Mr. Bartlett. Thank you very much.
We have had hearings in this Subcommittee and full
Committee on fraud and HUBZones and this program. And the real
surprise would have been that there were no frauds, because
what we did here was to ask these people to self-certify. We
should have had some pangs of conscience when we repeated the
Lord's Prayer and came to that part of it that said, "Deliver
us from temptation." How can we ask the Lord to deliver us from
temptation and put this kind of temptation in front of these
people?
And we here at this dais should have had some pangs of
conscience, too, because we didn't give you enough money to do
the policing of this that we should have given you. If you look
at the amount of money we gave the 8(a) programs, it was
enormously more in terms of percentage than we gave these two
programs.
So the real surprise would have been that there were no
frauds. And I hope that there is some pangs of conscience when
you repeat the Lord's Prayer and you come to that part that
says, "Lead us not into temptation." What right have we to
place these people in this path of temptation?
Have we now given you enough money that you can adequately
police these programs? Or should we still have some pangs of
conscience when we repeat the Lord's Prayer?
Mr. Bartlett. Do you have enough money now to police the
program? We didn't give you enough money to police the program,
and that was obviously true in the HUBZone programs, and I
gather it was true in these programs, too. Do you now have
enough money to police these programs?
Mr. Martoccia. Speaking from FEMA, I think we have enough
money. I think it is making sure that the contract specialists
and the contracting officer understand that these companies
have to make sure that they verify their status. It is a simple
thing to do. I think in our case, I think it was an oversight.
Mr. Bartlett. We have to run to vote. I just want to make
sure, if you don't have enough money, please let us know,
because we don't want to be a part of the problem. If we
haven't given you enough money, then we need to give you enough
money so you can police these programs.
Mr. Jordan. Congressman, one thing I would add is that in
the SBA's fiscal year 2011 budget, the President requested an
additional $2 million specifically for rooting out fraud, waste
and abuse in the contracting programs, and that would be a very
helpful funding source for us.
Mr. Bartlett. It would have been nice if we gave that money
to you early on, and so we wouldn't have had to sit hear
listening to these cases of fraud, waste and abuse. If you had
enough money to police the programs, we wouldn't be here.
Thank you very much. We have to run to vote.
Chairman Nye. There is apparently one vote, so I will ask
the panelists to remain in place until we return.
[Recess.]
Chairman Nye. I am going to reconvene this hearing.
Ms. Oliver, I wanted to follow up with you on a
conversation we were having before we broke. Before we
recessed, you said while the small business owner in question
in this Air Force contract case might not have been completely
educated on the requirements of the program, there was no
attempt by the contracting officer to intentionally violate the
law. I want to make sure that was your statement?
Ms. Oliver. That is my statement.
Chairman Nye. Okay. This is what the GAO report said. In
the report it said that the base director of contracting and
legal counsel who approved the award had a prior working
relationship with the service-disabled vet owner on the base,
and it found that the contracting officials were aware of the
service-disabled veteran owner's limited involvement in
performing the contract. Also, when the contracting officer was
deposed by the Committee staff, he confirmed that it was indeed
a Federal employee that worked there, and that an entity other
than the service-disabled business that was awarded the
contract was going to provide the service.
What I need to know, given the fact that agencies have an
opportunity to dispute the GAO findings when they are first
reported, and, as far as I can tell, the DOD did not, I would
like to know if you are disputing that finding, or whether you
are prepared to accept the finding, and then we can move
forward.
Ms. Oliver. I need to have you tell me exactly which
finding?
Chairman Nye. It is a $900,000 contract that was let under
an Air Force contract at McDill Air Force Base.
Ms. Oliver. Yes, I agree with that.
Chairman Nye. Okay. So what I need to know is are you
disputing the GAO finding that was in the report?
Ms. Oliver. On the McDill discussion, I agree with some of
the things that are in that discussion. I think some of the
conclusions are conclusions that aren't completely, at least in
the report--don't explain why they came to those conclusions.
Chairman Nye. Do you know why DOD hasn't presented an
attempt to refute the GAO finding until now? Because there is
an opportunity in the GAO report process for the agency to say
they don't agree with the finding.
Ms. Oliver. I don't know whether this went to McDill,
whether this report went to McDill before.
Chairman Nye. The reason I am asking you, I am surprised at
your response, and I want to make sure that I understand
whether or not you are saying that essentially--and what I
heard was the problem here was ignorance on the part of the
service-disabled business owner and not responsibility on the
contracting officer to have seen the problem and taken action
to prevent this contract from being wrongly awarded.
Ms. Oliver. Here is what the contracting officer would
probably say to you: I didn't know enough to ask enough
questions; I didn't know enough about joint ventures with
service-disabled veteran-owned small businesses to ask the
questions which would have made that potential contracting
officer give me the information that would have kept this whole
thing from happening.
That is the reason I said earlier he has put into place a
system to make sure--the head of contracts--to make sure he and
other contracting officers ask the questions that would have
brought the facts out that would have prevented awarding a
contract to a joint venture which--where, in fact, the service-
disabled veteran-owned small business owner didn't have
control.
Chairman Nye. The reason I am pressing you on this point is
because in this case it was the contracting officer who saw the
paperwork and the plans submitted that clearly showed there was
a problem, and went ahead and issued the contract anyway. That
is what the GAO report found. Now, rather than relitigate that
today--and the reason I raise this is because I want to make a
couple of key points. I don't agree with your assertion that
essentially the essence of the problem is ignorance on the part
of the service-disabled veteran business owner. I don't agree
with your assertion that the fact that there were a small
number of cases total investigated by the GAO implies that
there is a relatively small problem out there. To my mind, it
implies that there is a much larger problem we have barely
scratched the surface on.
So if we can agree on those points, I will tell you one
thing I do agree with that you said. You concluded by saying
your office needed to do a training program, better oversight
over the contracting officers to make sure that they understand
the importance of why we ask for a goal for service-disabled
veteran-owned businesses and how to make sure that happens in
fact and not just on paper. I agree with that assessment. What
I am disappointed in is the fact that 9 months after the GAO
showed fraud, we are still back at the same place we were 9
months ago saying we need to do more going forward.
Ms. Oliver. I don't think we are.
Chairman Nye. Okay. This is your opportunity to show me
what you have done in the last 9 months to help solve that
problem.
Ms. Oliver. Our inspector general has worked, and we hoped
this would be--when I heard about this hearing, I said, is
there any way you can move this through faster, because our
inspector general has spent a lot of hours, I have talked to
the people involved, in looking at the extent of the problem
and what can be done about the problem.
You may very well be correct that this is the tip of an
iceberg. I don't know. But I do think that there is a whole
bunch of failure to understand in all of this, because I just
hardly ever meet a contracting officer who wants to disregard
the rules. More frequently they, DOD contracting officers, are
very knowledgeable, but when it comes to small business, it is
an area that they need to know more. We work on that all of the
time. I think most contracting officers would say that to you.
Chairman Nye. I think I agree with your assessment that
there is a failure to understand among many contracting
officers of how to stop fraud in the system. What I don't feel
satisfied with is that we are not further down that chain, as
we ought to be, given the fact that we have known about this
for almost a year.
Let me move on to another question, and I want to talk to
you about consequences. We recognize, as Mr. Foreman pointed
out, that there is a challenge in trying to ensure that
contract dollars are awarded appropriately; that business is
done and transacted in a way that gets done, the business of
the government is done on behalf of the taxpayer, and at the
same time there are appropriate protections to ensure at the
front end that we know who signed up and said they are a
service-disabled veteran, and we can certify that they really
are; that there is a process in the middle to check and hear
complaints and follow up on them; and that there is a
consequence at the end of the day for someone who commits
fraud. I am not satisfied that that system works, and the
reason I am not satisfied is because of what the GAO report
showed.
We have to figure out how to solve this, and this is what
we are asking you to do. I am going to start with Mr. Foreman,
because you mentioned you set up a special commission for
debarment within the Veterans Administration, and I would like
you to describe succinctly, please, how your committee works
and how do you think this will solve the problem in terms of
presenting consequences which will change the system and change
the calculus for those who would defraud our veteran business
people?
Mr. Foreman. Chairman Nye, you really nailed it on the
issue of consequences. What we will look at is every denial,
where we deny a verification to a veteran-owned firm. We will
forward that both through the IG for the VA and to the
committee which I am the chairperson of. We will look to see if
it is just a knowledge factor where somebody made a mistake,
and usually it happens in the ownership and control arena, what
we call the status fraud arena.
And if it is a simple thing, we can push it off and say,
you can resubmit. If we find that there is actual fraud where
they are working with somebody's brother, or they are not even
at the facility--we have had that happen. You would be
surprised how many people come in, sit down, and this is the
veteran, the president and CEO, and the other guy or lady talks
to you. You really want to have the fraud barometer very low.
You don't want to have it high. When they get around 49 to 51
percent ownership, that drives us into what we call a risk
factor.
What we need to do is, of course, really get into the
debarring mode. Once that happens, I think you are going to see
a lot of the fraud fall away. We want to make sure that we
capture the guilty, not the innocent, and that is going to
happen. We have already processed--we have 57 in house. I have
already administered 23 of those, most of which we sustained
the protest; i.e. we found there was fraud. So all of those go
to the IG automatically, and it is automatically going to go
over to the committee for the debarment.
Chairman Nye. I appreciate your explanation on that. I want
to ask, voluntarily are there any other agency representatives
who would like to describe similar actions that their agencies
have taken in terms of pursuing debarments since the GAO report
came out in November?
Mr. Jordan. If I can respond.
Chairman Nye. I want to offer the other agencies an
opportunity to respond.
Noting none, Mr. Jordan from SBA.
Mr. Jordan. I had the opportunity to speak with an SBA
suspension/debarment official during the short break, and one
of the things that he suggested I highlight is since this
report we have developed regulations which are now going
through the process that would allow SBA, when we receive
credible information that a service-disabled veteran-owned
small business may not be who or what they say they are, SBA
can demand that that firm prove its eligibility. And if we find
them ineligible, then we remove them from CCR and pursue those
enforcement actions, as opposed to the process now, which I
outlined before, which does originate with the contracting
officer as the point of contact for a contract. We hope that
will further allow us to do that.
You talked about the continuum, to add another tool into
that continuum. One other thing on the back end that SBA has
been pushing, you talked about enforcement and consequences, is
that currently, as Dr. Bartlett mentioned, the government
contracts for 100 chairs, gets 100 chairs for the price it
paid, and so the Department of Justice, when we ask them to
prosecute, will say there was no harm to the government. There
is legislation that has been discussed that would remove the
value to the government from the equation when the contract or
procurement was received or awarded under fraudulent
circumstances.
So those are things that we are aggressively trying to
think proactively beyond the tools that we already have at our
disposal.
Chairman Nye. One more question before I yield to Mr.
Schock.
I would like to know, again voluntarily, if any agencies
can tell me, 9 month point since the GAO report showed evidence
of fraud in this program, which agencies have suspended active
contracts, suspended businesses that were found to be
fraudulent underneath that program?
Mr. Foreman.
Mr. Foreman. Through the protest process, we have
suspended, in terms of the debarment--not debarment, but in
terms of the protest, if we have found that they are not
verified, we refer them to the IG and to the debarment
committee. The debarment committee is brand new, but it is
going to happen. There are a lot of other little issues that
get involved.
We also do--in just the straight verification, we do
denials. Every time we do a denial, that goes through our
general counsel's office. So when we deny, probably in the
neighborhood of maybe a couple hundred we have denied over the
course of the years.
Chairman Nye. My question is more about suspension. I
understand that debarment is a tool, and it does take time to
go through a process. Suspension can be done quickly. Have any
of these cases resulted in a suspension? Has this GAO report
resulted in a suspension of any of the immediate contracts?
Mr. Foreman. Not to my knowledge. In fact, the statute for
109-461 mentions the debarment committee, but it doesn't
mention suspension.
Chairman Nye. Thank you.
I note no one else has raised their hand as well. I have to
admit, I am disappointed to hear that. The reason why I wrote
the law I wrote, which provides for criminal penalties, is
because we have to have consequences in place. I think one of
the first consequences ought to be a suspension of the
contract.
I yield to Mr. Schock.
Mr. Schock. Thank you, Chairman Nye. Again, I appreciate
you holding this hearing. I would ask unanimous consent that my
opening remarks be submitted for the record.
Chairman Nye. Without objection, so ordered.
[The statement of Mr. Schock is included in the appendix.]
Mr. Schock. The GAO report focused on a lot of things. One
of the things that was of concern to me was the whole purpose
of these preferences is to try and help out the specific
demographic that we are trying to help out. One of the things
that the GAO highlighted that I think raises an additional
concern, in addition to the fact that we are not meeting the
threshold, is that the percent that are supposedly being helped
oftentimes are a front man, if you will, or a front lady for
basically garnering that set-aside only for the money, the
business. The contract can then be handed off or subcontracted
to much larger entities.
So I guess my question is we rely right now--or the way the
rules are written are that we rely on other small businesses to
cry foul, other small businesses to somehow know about the
unfairness of those practices, to report. And I guess my
question would be perhaps the agencies themselves who are
awarding the contracts to these small business set-aside
preferences should be the ones to follow up and verify that, in
fact, it is small business people who are doing the work
because your agencies are the ones who know what work is to be
provided. Your agencies, your folks letting the contracts and
awarding the contracts are the ones who have the relationship
with the small business, so doesn't it make sense that your
agency verify that, in fact, the work is all being done by
these set-aside contractors as opposed to saying, well, we are
going to award the contract, close your eyes and not open until
someone screams foul?
As a small business person myself, I will tell you that
unless I catch wind of it somehow, I don't know when another
small business person in my community gets awarded one of these
contracts. And so if they go out and are basically a shill and
sub it out to a bunch of large corporations, I am not going to
know, first of all, that it happened and, second of all, who to
contact within your agency to let you know that there is a
problem, and that they are skating the system.
So the point is my question is why don't you within your
respective agencies take it upon yourself to be responsible for
policing these efforts? Any of you? All of you?
Mr. Foreman. I will give it a little bit of a shot here. We
call that process fraud, and process fraud is one of the harder
ones to catch because, as you noted, it is after contract
award. It is postaward. The contractor promises up front here
are the deliverables; here is how I am going to do it. You
actually do preawards, and you actually do postawards when you
are talking to the contractor: Remember, you have this that you
have promised that you are going to do. It is called the
subcontracting limitation, and the contractor doesn't live up
to it, but they don't tell you that. If they did, you know, the
show would be over right then. I am sorry, we are going to have
to pull this award back and resolicit. But that doesn't happen.
Generally the business will say--and, again, it is a hard one
to catch because it is after award--how many contractors and
contracting officers do you have, where are the businesses
located, and how do you trace it down?
I am not making excuses for them, but it would cost a lot
to really police that. And the more that I have learned from
this last 6 months here in my job, I look back, it could be a
HUBZone problem, it can be a small business problem, it can be
a woman-owned business, or an 8(a) problem. As a matter of
fact, the first time it came to me in my career, it was an 8(a)
problem. It wasn't even the 8(a) company was shipping the
products. And the only reason we found out about it, the 8(a)
stopped paying the subcontractor, and he complained to us. That
is when I worked for DOD. It was a defense construction supply
agency issue.
That has happened, and I guess, to me, it is probably the
dirty, lingering area, how do you catch it all. We have 40
people, but my people are physically in D.C. What you need to
do is have some sort of a centralized process where we can go
out and verify small businesses. Where are they? If they do
progress payments, it is fairly easy, by the way. I used to be
a price analyst, and you can really challenge it, because you
go to the engineer, they will tell you how much is done, where
it is and who is doing what. But if it falls out of that realm,
it is tough.
I probably left more questions than answers.
Mr. Schock. I asked two follow-ups. Any of you can answer.
First, beyond them guaranteeing the deliverables that they
are signing up for that you are awarding them for, specifically
what do you have in that contract that then they are--in
addition to signing that they are going to be doing
deliverables, but they are also signing that they are, in fact,
going to be the ones producing the product?
Mr. Foreman. It is called the subcontract limitation
clause. That clause requires any small business preference
program, that they have to do 50 percent construction. There
are two types of construction. It is either they have to do 15
percent or 25. All other programs are 50 percent or more.
The uniqueness to service-disabled veterans, they can make
that subcontracting limitation working with other veterans. So
if two veterans get together, one is a sub and one is a prime,
and they do over 50 percent of the effort, that is legal. That
is also true of the HUBZone program, a HUBZone or any other
HUBZone program. The rest of the government, that firm has to
do that percentage.
Mr. Schock. My second question would be, you know, each
agency is different. I know one of the concerns at the
Department of Defense I always hear, a lot of our products we
need manufactured, small businesses themselves can't produce.
They don't have the capital. What we need, small businesses by
nature can't produce in volume.
Aside from being a veteran, aside from being one of these
demographic qualities that then qualify you to apply for that
set-aside contract, what do your respective agencies do to
verify that, in fact, it is a company that can produce the
product that they say they are competing for? In other words,
if I am a woman, or I am a minority, or I am a veteran, and I
can show proof that I am an X-owned company by virtue of me
filling that category, and I say that I produce weapons, or I
produce whatever the deliverable is for the Federal Government,
beyond showing proof that I am the owner and, therefore,
qualified to compete for the contract, what do you do to verify
that, in fact, they build a product, that the product is
actually of the quality of your respective agency? And I would
think through whatever process that is, you would verify that,
in fact, they can produce it in house, and that they are not a
shill corporation and, you know, simply a front person with
nothing more than a P.O. box and a 1,000-square-foot office
competing for Federal contracts.
Mr. Foreman. At least what happened when I was in the
field, which was over 30 years ago, we used to have DCMA,
Defense Contract Management Agency. And I worked for that
agency, and part of my job was to postaward reviews and
preawards. During the preaward phase, you judge the financial
capability, the engineering capability, the manufacturing
capability, the equipment, the site, transportation and
shipping of the products. You would look at all parts. You
would go back and adjust, and you would get together as a group
and either accept or deny that firm as the right firm when you
do a preaward.
Over the years they have moved away from doing preawards.
They have made it very limited as the years have gone on, so I
don't know that is being done now. But that was one way you
could handle it.
The other issue was in the postaward at DCMA, and I would
get involved in that where you would go out and sit down and
talk to the contractor after they received award. You would
again go through the clauses so that they understand. It is an
educational issue; it is a communication issue. We have to do
that. I don't know so much. It has been like 30-plus years now
that I have been out of that organization, but that is one of
the ways that I felt very comfortable about what we were doing.
Mr. Jordan. If I can build on that, Congressman, going back
to Chairman Nye's point regarding outcomes, we need to hit
these goals, and we need to do so absent waste, fraud and
abuse. I would divide it into three sections. One is do we have
these right policies and procedures when you are looking at
determinations of responsibility and doing your market
research, and during the contract operation is the contracting
officer appropriately looking at subcontracting plans and
subcontracting performance?
Then in the second phase it is training. And I spoke a
little bit about the President's Small Business Contracting
Task Force that he has set up, which has to deliver
recommendations to him late next month. I chair one of the five
workings groups of that, and it is on workforce training and
agency accountability. One of the big things that we are trying
to push is closing any awareness gap on the contracting officer
front to make sure that not only do we have the right policies
and procedures in place, but they know what those are.
The third thing I would say, you mentioned these
preferences are aimed at helping these specific groups, and we
are not meeting the thresholds. To that I would only implore
you, one of the key things that we can do overall to help
service-disabled veterans is ensuring parity between all of
these different programs and replacing that "shall" in the
HUBZone language with "may" so we get the contracts, and so the
contracting officers don't, during this training, don't become
confused as to what they can or cannot do.
Mr. Schock. Anyone else?
Mr. Foreman. That is except for VA. We like to have the
program we have. We want to continue with 109-461. Thank you.
Mr. Schock. Well, to that point, when I spoke with the SBA
Administrator, my first point to her was: Why don't we make
them all "shall" as opposed to all "may"? But apparently
legally then you would have to qualify for every one of them,
which would be kind of difficult.
But my point to her was, look, we are failing. We are
failing on all of them. And so what are you doing to make it so
we are not failing on all of them?
Her point to me was that, in her opinion, it was a lot to
do with the leadership; that it takes the agency heads as high
as up as the Secretary at each one of these departments to say,
you know what, it is going to be a mission. It is a directive
of mine to the folks letting these contracts that we are going
to meet these goals, and people are going to be held
accountable for it.
My question to all of you would be have you to this date
heard from any of your respective heads; you know, has
Secretary Gates ever mentioned the set-asides and the need to
meet those goals as specified by Congress really? I am sure
Shinseki wants the veterans set-aside met.
I am curious. I think the leadership of each respective
agency is very key to what the goals are. I know within our
organizations, if we say, well, this is kind of a goal, but if
we don't meet it, gee, you all tried, too bad, so sad, we will
do it again next year. But if it is this is a key goal, and if
we don't meet it, there are going to be consequences, I think
you have a different outcome.
I am just curious what directives and what message you have
heard, if anything, from your respective heads about meeting
those set-aside goals?
Ms. Oliver. I would need to go back and get the specific
letters, but our leadership has put a great deal of emphasis on
service-disabled veteran-owned small business achievements. The
Secretary has discussed it. Dr. Carter, I think, has signed out
a letter. Our leadership really is behind; it is just behind
getting the--
Mr. Schock. How long have you been at the Defense
Department?
Ms. Oliver. Working with small business issues?
Mr. Schock. Yes.
Ms. Oliver. Eleven years, 12 years.
Mr. Schock. Okay. So you have been there under several
Secretary of Defenses?
Ms. Oliver. I have.
Mr. Schock. Is the directive any different now than it was
5 years ago, 10 years ago?
Ms. Oliver. Yes. It is not a directive, meaning a directive
as a specific.
Mr. Schock. I guess my question is on the part of us
policymakers who are responsible to our electorate, should we
be able to tell our electorate and the folks we are claiming we
are helping that we should expect any different outcome this
year as opposed to 5 years ago, 10 years ago based on the
leadership of your respective department?
Ms. Oliver. There has been a difference. It is in my
testimony. Think about the size of the Department of Defense. I
mean, I think it is fantastic that since we got a tool where we
could make progress, that the progress has gone in the
direction that it has. It has been 7 years.
Mr. Schock. Do you think that the 3 percent set-aside is
too high?
Ms. Oliver. I think for the Department of Defense, given
our product mix, it is a challenge; but I think it is one that
we can meet. I think we have to think every single year of
another way to find the less low-hanging fruit. And we keep
working at it. I think we will make it.
Mr. Schock. How about the other agencies?
Mr. Martoccia. Secretary Napolitano as well as our
Administrator Fugate have made it a priority for us to provide
opportunities for all small businesses, including service-
disabled veteran-owned small businesses. So we are doing good.
Our goals are high. We exceed at FEMA the 23 percent. We are
about at 32 percent, and they continue to move up our goals.
Our trend has been good over the last few years.
Ms. Brown. At EPA, Administrator Jackson has made it very
clear that she is very supportive of the program. She had a
conversation with me when she first came and said, I want these
numbers to go up on my watch and not down.
We do have a good story at EPA when you look at our
numbers. Our small business numbers, we hit over 40 percent for
small service-disabled veteran-owned last year, in fiscal year
2009; 8.93 percent was what we accomplished. We are on track
now as of the third quarter with 5.6 percent, and we don't see
that going down. We anticipate that we will exceed the 3
percent.
So Administrator Jackson has--I report to the Deputy
Administrator. I sit in with senior staff. She has made it very
clear. She asked during senior staff, what are my small
business numbers looking like? And she has signed a memo out to
the Agency saying that the administration--and she is
supportive of the small business program and wants to continue
its success.
We have incentive programs where we recognize our regions.
We give out the Crystal Duck Award, and it is very competitive
within the Agency amongst the program officers and the regions
competing for that recognition for our small business program
as a whole.
Mr. Foreman. In VA I have the pleasure of working closely
with Secretary Shinseki. He is very committed not only to the
service-disabled or the veteran business goals, but to the SDV
goal, to the HUBZone goal, and he personally sends out those
goal letters. I have with me a copy of the goal letter that he
sent out, and given his druthers, he would probably rather push
them up. But I will have to say sometimes the staff says, wait
a second, you are going too aggressive. But we have aggressive
goals.
We have done some things. This year to date we are at 18.4
percent with service-disabled. With veterans we are at 21
percent of our total spend as of the 10 months.
With HUBZones, this is where we fall behind. We are 2
percent. Of course, we are only trying to get to 3, but we are
not just trying to get to 3, we are trying to blow past those
goals. Those are minimums, they are not where we should go.
In terms of small business, we are at 35.4 percent right
now. So this is the highest level except for the year 2008; we
did finish at 36 percent for small business. So, I mean, we are
committed. I think the management team is committed. I have
never been in so many what they call ELB, executive leadership
board, meetings where we talk to each other about where we are
going, and how we are going to get there, and what are the
problems. And it is not one you can just sit there and listen
to. They go around the room, and you have to speak on your
issues, what are your problems and what are your fixes.
Mr. Schock. Well, I think, based on your own testimony and
numbers, you represent some of our better-performing agencies,
and perhaps we will have to have a hearing in the future with
some of those that are not meeting the goal and are bringing
down our average. I appreciate you answering the questions.
With that, I yield back to Chairman Nye.
Chairman Nye. I am going to wrap up this panel and move on
to the next panel, noting the time.
In summary, as I said in my opening statement, I am also
pleased to note that your small business contracting goals, the
numbers are looking better and better. I am pleased to note
that service-disabled veteran and small business contracting
goals are looking better and better. That is good. However,
when the GAO report shows that some significant portion of that
contracting pool was fraudulent, there is a big asterisk next
to that number now for me. The only way I can be confident that
we are actually meeting those goals, the only way, more
importantly, that the taxpayers that we all work for can be
confident that you are actually using that money in a way that
it was designed to be used, and it is going to the correct end
user, and, most importantly, the only way that our veteran
business owners can be confident that the program that we set
out to provide them with tools to improve their lives and show
them that we care about their service to our country is if you
find instances of fraud and take action to root them out.
I am going to release you so you can go back to work on
doing that. I have expressed some disappointment today because
I feel we have not moved far enough along in a demonstrable
way. I am asking you to redouble your efforts on this. We owe
it to our veterans, and we owe it to the taxpayers.
Thank you for your time.
Chairman Nye. I would like to go ahead to invite the second
panel to the table, and we will start right away.
I want to go ahead and thank the witnesses on our second
panel for taking the time to be with us today. I know some of
you have traveled from across the country to join us. It is
important that you are here with us.
You were here and had an opportunity to listen to
representatives of the executive agencies talk about their
approach to solving the problem, the fraud problem, that was
uncovered by the GAO report last year. You have had an
opportunity to understand, I think, where I am coming from on
this and how I feel the agencies have responded to it. But I
think what is even more important is to hear from you, those
who are out there in the trenches of the economy every day, the
ones who are responsible for competing for these contracts, and
the ones who create the jobs and represent those veterans
businesses that do that, and hear your thoughts on where the
rubber meets the road, and what it is like to be with dealing
with the government contracting officers, and what it feels
like for you to have to engage with that system, and does it
work. That is what we are trying to get to at the end of the
day here: where is it not working, and how can we make it work
better for you.
I would like to go ahead and introduce our first panelist,
Mr. John Kobelski, president and CEO of Andromeda Systems
Incorporated, from my district in Virginia Beach, Virginia.
Andromeda Systems Incorporated provides technical and
contractor support services in both the government and
commercial sectors and is a service-disabled veteran-owned
small business.
We will have a 5-minute clock.
Mr. Kobelski, thank you for being with us.
STATEMENT OF JOHN H. KOBELSKI
Mr. Kobelski. Good afternoon, Chairman Nye and members of
the Committee. My name is John Kobelski, and I am president and
CEO of Andromeda Systems Incorporated. I am pleased to be
before the Committee today testifying on behalf of the service-
disabled veteran business owners. I have submitted my full
statement, which I ask be made part of the hearing record.
I am a small business owner and a service-disabled veteran,
who proudly served my country as an enlisted member of the
United States Air Force from 1967 through 1971, serving in
Vietnam from October 1968 through September 1969; and as a
naval flight officer and an aeronautical engineering duty
officer with the United States Navy from 1974 to 1990. I am a
graduate of Louisiana Tech University, with a B.S. In 1973 on
the GI bill, and the naval postgraduate school, MSEE 1980.
Since my retirement in 1990, I have been employed by several
government service contractors, both large and small, and in
2005 I established Andromeda Systems Incorporated along with my
partner John W. Henson, a fellow Vietnam veteran. I am also
currently the vice president of the Service-Disabled Veteran-
Owned Small Business Council out of Virginia Beach, Virginia,
working exclusively for the promotion of service-disabled
veteran-owned small businesses.
Drawing from my experience as a service contractor, I have
seen numerous obstacles placed before SDVOSBs seeking to gain
the share of government contract opportunities outlined in
Executive Order 13360 and have been made aware of incidents of
fraud and abuse in the community. In my written statement I
have detailed my experience in these matters and have given
several examples and possible solutions.
It is my opinion that the major reason the 3 percent goal
is not being met is because agencies claim they cannot find
enough qualified companies in their searches to justify
contract set-aside competition. I find it hard to believe that
out of over 17,000 SDVOSBs--and I heard today there are about
24,000 of them now--listed in the CCR, an agency can't find two
qualified to perform most any contract. Are they really trying?
Really? The requirement should be made into law and not just an
Executive Order.
Another reason given by agencies for not setting aside a
contract is that the magnitude of the procurement disqualifies
or increases the performance risk for several RFI responders.
This again is disheartening to SDVOSBs, and I address this in
more detail in my written statement.
The 8(a) quotas are apparently being met by government
agencies. Why isn't it the same for SDVOSBs? Is it because the
5 percent set-aside quota for section 8(a)-certified companies
is law and not an Executive Order?
A third reason, and probably the most compelling, is the
political climate that surrounds all procurements. I am not
sure how one combats cronyism, favoritism, or the "good old
boy" network, but highly qualified SDVOSBs, as well as plenty
of other small businesses, have been denied contracts as a
result of it.
One major way to improve prime contract opportunities for
SDVOSBs would be to streamline the sources sought in RFI
processes and use other search criteria.
A major reason why we established the council in Virginia
Beach in 2009 was to provide qualified sources to Federal
agencies for competitive set-asides. All they have to do is ask
us, and we will go out and search for them.
On the subcontracting side, unrestricted companies are not
being held accountable for adhering to their small business
subcontracting plans. Small business teammates on an awarded
unrestricted contract see very little, if any, of the contract
percentage promised them by the prime. Without oversight and
penalties for large prime contractors, the practice of ignoring
SDVOSBs will continue.
Bundling, or the combining of many contracts into one, has
hurt many small businesses, and in particular the SDVOSBs.
Bundled contracts are usually competed as unrestricted and won
by large companies, and, as mentioned earlier, the large
prime's small business subcontracting plans are hardly ever
enforced, and very little, if any, work flows down to the
SDVOSBs.
In order for SDVOSBs to reach parity with the other set-
aside programs, laws must be enacted similar to that in the
8(a) community. Executive Orders are important, but in no way
do they carry the weight of law. We understand that Congressman
Wittman of Virginia has introduced legislation that makes
Executive Order 13360 into law and even strengthens it.
On the issue of fraud and abuse, there must be an official
SBA certification process. It should be made mandatory for all
businesses claiming to be SDVOSBs, with severe penalties for
those that falsify their representation. We also understand
that Congressman Nye is preparing legislation in this area.
In summary, laws are the key. Everyone jumps to the mention
of the Federal Acquisition Regulations, and everything else is
a "nice to have." It is a shame that some of our best and
brightest, especially those coming home from Iraq and
Afghanistan, who have given so much to this country and have so
much more to offer, have to play second fiddle to the rest of
the set-aside community. Those veterans know the sacrifices,
hard work and determination as much, or even more, than anyone.
It is my opinion that all veteran small business owners
should be given parity, at least when it comes to DOD
contracts. Veterans can make a difference, and like the 8(a)
program, there should be a formal SBA process for certification
and parity among set-asides.
Thank you, Chairman Nye and Committee members, for the
opportunity to appear before you today. I stand ready to answer
any questions you might have.
Chairman Nye. Thank you, Mr. Kobelski.
[The statement of Mr. Kobelski is included in the
appendix.]
Chairman Nye. I am aware of your work with the Service-
Disabled Veteran-Owned Small Business Council in Virginia
Beach, and appreciate your leadership on that. You are doing a
lot of good in the community.
I would like to introduce Mr. Joseph Sharpe, the director
of the National Economic Commission for the American Legion.
The American Legion's economic division focuses on veterans
education, employment, business development and assistance. The
National Economic Commission was formed to ensure that veterans
receive ample opportunities for success once they leave the
military.
Mr. Sharpe, welcome.
STATEMENT OF JOSEPH C. SHARPE, JR.
Mr. Sharpe. Thank you, Chairman Nye, Ranking Member Schock
and members of the Subcommittee. Thank you for the opportunity
to present the American Legion's views on improving contracting
opportunities and preventing fraud for service-disabled
veteran-owned 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 progress through this unstable economy.
The American Legion supported legislation in the past that
sought to add service-connected disabled veterans to a list of
specific small business categories receiving 3 percent set-
asides. The American Legion understands that by raising the
priority level of service-disabled veteran business owners in
the Federal Acquisition Regulation by changing "may" to
"shall," they would be awarded more contracts within the
Federal system.
The American Legion seeks to support legislation that
supports and develops service-disabled veteran-owned small
businesses, while providing them equal opportunity to start and
grow a small business, including establishing numerical goals
for all veterans to compete in the government procurement.
Also, the American Legion is concerned about the
administration's direction towards end sourcing and how that is
affecting small businesses. We believe the push to end-source
thousands of contractor positions could have severe
repercussions for small businesses, particularly service-
disabled veteran-owned businesses, across the Nation, and force
small businesses to scale back decisions or to go out of
business.
Concerning the prevention of fraud, the Veterans Affairs
and the Small Business Administration should develop a
comprehensive partnership to assist veterans who are interested
in participating in Federal procurements. The Center of
Veterans Enterprise should maintain the database and verify
accurate veteran/service-connected disabled veterans' status.
SBA should retain the responsibility for validating the
business ownership, size, standards and structural integrity of
the business. SBA should have direct reporting and import
authority to the VIP database through the Office of Veterans
Business Development once this information is collected. VA
should maintain the eligibility status regarding veteran
status. SBA is responsible for verifying all other
socioeconomic categories for the purpose of Federal
procurement. SBA already maintains the infrastructure, the
expertise and established regulatory guidance to include the
veterans population within that authority.
To boost the Federal Government procurement numbers within
the veteran business community, the American Legion recommends:
One, currently GSA schedules are exempt from small business
regulations. Without this change, SDVOSBs will be limited in
their quest to expand business opportunities.
Two, implementation of a coordinated, standardized training
program for procurement staff that focuses on SDVOSB
procurement strategies in their respective agencies.
Three, President Obama should reissue Executive Order
13360, providing opportunities for service-disabled veteran-
owned businesses to increase Federal contracting and
subcontracting opportunities for veterans, and require that its
tenets be incorporated into SBA regulations and standard
operating procedures.
Four, the SBA needs to emphasize Executive Order 13360
again and establish it as a procurement priority across the
Federal sector. Federal agencies need to be held accountable by
SBA for implementing the Executive Order, and SBA needs to
establish a means to monitor agencies' progress and, where
appropriate, establish a report to identify those that are not
compliant and pursue ongoing follow-up.
Five, in order to achieve the mandates of Executive Order
13360, the SBA must assist Federal agencies to develop a
strategic plan that is quantifiable and will assist them in
establishing realistic reporting criteria.
Six, 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 Joint-Venturing as
a ready solution to the small business spending requirements of
the Stimulus Spending Initiative.
And, seven, hold those agency leaderships responsible for
meeting the 3 percent congressional mandate goal. We recommend
the Committee schedule a hearing with all Federal agencies who
consistently do not meet their Federal procurement goals.
This concludes my portion of the testimony. We look forward
to continuing working with the Committee to enhance
entrepreneurship among American veterans. The American Legion
appreciates this opportunity to present this statement for the
record. Again, thank you, Chairman Nye and Ranking Member
Schock for allowing the American Legion to present our views on
this very important issue.
Chairman Nye. Thank you, Mr. Sharpe, and thank you for your
work for our veterans.
[The statement of Mr. Sharpe is included in the appendix.]
Chairman Nye. I now yield to Mr. Schock.
Mr. Schock. Thank you, Chairman Nye.
I am pleased to introduce Stephen J. Hope, the president
and CEO of Office Automations Systems, Limited, also known as
CIAN, Inc., a service-disabled veteran-owned small business.
Mr. Hope is a 20-year veteran of the United States Navy.
With a background in cryptologic computer programming and
systems engineering, Mr. Hope's diverse framework centers on
the military and national intelligence area. He attended
postgraduate studies at the Defense Intelligence College and
holds a B.A. in business management with a concentration in
information systems from the University of Maryland.
With over 30 years of experience in the computer industry,
Mr. Hope has become an expert on microcomputer networks,
computer security, computer forensics, and industry compliance
matters. His company, CIAN, Inc., specializes in computer
network security and employs 40 people, over 50 percent of whom
are veterans, in my hometown of Peoria.
CIAN, which provides, determines, and ensures the
confidentiality, integrity and availability of your network,
that is their mission, is to provide remote and on-site
computer network security to include access control, forensics,
intrusion and vulnerability detection, risk assessment,
auditing, and incident response to government and corporate
networks.
Last year in 2009, Mr. Hope started the first-ever
Businesses Back to Basics in Peoria, recognizing that budgets
were tight, and information technology is crucial to a
company's continuation of operations and success. CIAN launched
this service to assist local businesses with their IT concerns.
Beginning February 23, 2009, and still continuing, CIAN offers
free support to any IT-related issue a business may have.
Additionally, seats in this call center are being filled by IT
professionals in a community currently seeking full-time
positions with benefits.
Given his diverse background and his work with the Federal
Government, I know Mr. Hope has several ideas for how Congress
can work to improve the service-disabled veteran-owned small
business program.
With that, I am happy to yield 5 minutes to Stephen Hope of
Office Automation Systems.
Welcome, Mr. Hope.
STATEMENT OF STEPHEN J. HOPE
Mr. Hope. Thank you and good afternoon, Chairman Nye,
Ranking Member Schock, and members of the Committee. Thank you
for inviting me to testify today.
My name is Steve Hope. I retired over 21 years ago after 20
years of Active Duty honorable service in the Navy. 1990, I
started my own company, a small commuter consulting firm, with
offices now in Peoria, Illinois, and Bowie, Maryland. I have a
service-connected disability, and run the day-to-day operations
of my company.
I am the president and CEO of Office Automation Systems,
Limited. We do business as OASYS and CIAN, Incorporated. We are
a C-corporation, registered with the Small Business
Administration as a Vietnam-era veteran-owned and service-
disabled veteran-owned small business concern. We are
registered with the CCR, ORCA, Small Business Association, and
VetBiz. We are an information technology firm specializing in
computer network security, including penetration tests,
forensics incident response and information assurance.
Basically we keep the bad guys off your networks. Over 50
percent of my employees are veterans, and nearly every one of
my employees carry a certified industry certification.
I offer this background on my company because I want to
emphasize that I have done my homework. I have followed the
rules and regulations, and I have complied with 8(a) agency
mandates. The issue before the Committee has deeply affected
the growth of my company and pursuit of my doing business with
the government. To date, we have yet to receive one single
government prime contract nor any service-disabled veteran-
owned small business concern set-aside contract.
I have read every word of the GAO reports that have been
submitted to the Committee, and while I have no firsthand
knowledge of waste, fraud or abuse of SDVOSBs contracts, it
doesn't surprise me. I have witnessed it in other Small
Business Administration business development programs, but I
have chalked up our inability to get a primary SDVO contract to
the typical government red tape, the "good old boy" network,
and Federal regulations. One such regulation puts the onus on
the losing contractor to protest a bid to prove any wrongdoing
in terms of an SDVO status by the winner. I see other evidence
of the problems all the time.
I am not here to add any more confusions or problems to the
Committee. Actually, I have solutions. I think I have four very
viable, realistic solutions that could be put into place now.
Number one, the implementation of a business rules
management system, sophisticated artificial intelligence
software that will capture, analyze, test and execute the rules
and regulations of numerous sources. Capturing, collating and
analyzing agency databases will indeed yield the intended
results to confirm the eligibility, the industry, and the
possible involvement of the day-to-day operations by the
owners. That is all required by current regulations.
Number two, it should be imperative that the contracting
officers interview the bidding finalist and ascertain the
particulars of how the operations will be run, and review their
SDVO eligibility. I also highly recommend site visits.
Currently many contracts require a contractor site visit
precontract award. This additional requirement to visit the
finalist's site should be added to every SDVO awarded contract.
Number three, something needs to be done to reverse the SBA
regulation that makes it imperative that 8(a) minority status
contracts remain an 8(a) contract. The "once an 8(a) contract,
always an 8(a) contract" CFR 125.504 fights the effort to allow
existing contracts to be realigned into the SDVO initiative.
Although well intended, the "forever an 8(a) contract" clause
was introduced when information technology was experiencing
exponential growth. The unintended consequence has arisen that
8(a) contract set-asides have a virtual lock on many IT support
contracts at many and dozens of Federal agencies.
Number four, all disabled veteran-owned companies are
issued a separate identification card, as I am holding up now,
by the Department of Veterans Affairs. For veterans indicating
that they own and operate a business, and they desire to
operate within the SDVO initiative, additional information
should be included on this card either on a microchip or other
means of doing it, even with a bar code; that this card should
be presented when contracts are awarded and they are signed.
My overall goal in addressing the Committee today is to
make myself available, my experiences known to the Committee
members, and I hope to illustrate how the President's SDVO
directive actually affects the business owners attempting to do
work with the Federal Government. I respectfully request that
you consider my recommendations and you help us improve the
opportunities for SDVO initiatives.
I would thank the Committee for inviting me. Thank you for
the opportunity to testify, and I would like to answer any
questions.
[The statement of Mr. Hope is included in the appendix.]
Chairman Nye. Thank you very much. I appreciate all of our
panelists having proposed some succinct and I think very
thoughtful solutions, ideas that would actually help government
agencies increase their contracting to service-disabled
veteran-owned businesses and increase efficiency in the system.
I just have a couple quick questions, and then I am going
to defer to our ranking member.
But I heard from a number of service-disabled business
owners complaints about the process whereby when they make a
complaint about an award, they protest to the SBA and they are
sent back to the original contracting officer, who then either
tells them to go back to the SBA, or they are concerned that
complaining to that contracting officer kind of muddies the
waters for them for any future contracts.
What I want to hear from you are any thoughts about--and
also from Mr. Sharpe about the people you represent--Any
thoughts about your approach, how you see your relationship
with those contracting officers. And are there things that we
can do from the Congressional side that can make it easier for
you in terms of your ability to relate openly with contracting
officers, but also be able to point out problems when they
exist without suffering repercussions?
Mr. Kobelski. Yes, sir. I think the contracting officers
are not well trained. The ones that have been in business for a
while are. And we approach contracting officers, we don't go to
the SBA to protest, we go directly to the contracting officer.
And the contracting officer comes back with a few excuses and
says, well, this, that, and another thing.
But what we have talked with--for instance, this morning,
we had my contracts person contact a contract officer in NAVSEA
and he--wondering why this contract is being put out
unrestricted vice small business or even SDVOSB. The contractor
replied that he was--Seaport told them--this is on the Seaport
contract--told him that he would have to put it out to small
business, but he was able to have them change that to go
unrestricted. Now, it is a 15-man-year contract, it is about a
$1.5 million a year contract for 5 years. And what has
happened, he told my contract representative that he--well, she
asked him whether he did market research or not, and what kind
of market research did he do on making this unrestricted. And
she was replied to with the comment: I don't do market
research.
I mean, I think the FAR states that you have to do market
research. I am not sure, but I think that is the case. But I
think it all lies with the contracting officer. I think if the
contracting officers are really trained well or at least abide
by the FAR, I think you will get more out of it, really.
Chairman Nye. Thanks. Anybody else? Mr. Sharpe.
Mr. Sharpe. I have also been told that the contracting
officers are poorly trained, and I have also participated with
some of our business owners as they had meetings with various
contracting officers, and it appears that there is a lack of
knowledge. And my opinion is that, basically, the process is
pretty dishonest.
I just don't think our veterans need to come back when they
are working with these contracting officers, that they have to
do certain things by providing them dinners and taking them out
and all these other little things that all seem to be included
in this process. And I really think that there needs to be
stricter oversight to this, because it gets to the point where
it is really pretty dishonest for our veterans to have to more
or less pimp themselves to get a contract.
Chairman Nye. Mr. Hope.
Mr. Hope. Personally, I have never protested an SDBO
contract award to another person because of the issue that you
mentioned there, retaliation, or just not wanting to muddy the
waters with any agency.
I think that if we stick to the four issues that I brought
up, precontract award homework has to be done. We don't need
the losers to step forward and try to protest if it has been
confirmed by the SBA or others.
Chairman Nye. I think that is a good point. We obviously
want to take the onus off of our service-disabled business
owners from having to do all the protesting and all the heavy
lifting when they have got very little extra time, when they
are trying to focus on doing their business. I appreciate that.
I want to give the opportunity to any of our panelists to
comment on anything they heard from the first panel. You have
brought prepared statements, but you also have had a chance to
listen to testimony provided by the agencies about how they
look at contracting. And this is just an open-ended
opportunity, if there are any comments you want to make on what
you have heard. Yes, Mr. Kobelski.
Mr. Kobelski. Yes, I really admire the VA. They have really
gone above and beyond in meeting their goals. They are really
doing a fantastic job.
As far as the rest of the agencies, I am not sure about the
other two; but DOD, I think they are not getting the
information up top. I think the information is not flowing up.
I think there are a lot of excuses being made from the
contracting officer and even the small business advocates in
the commands, and I think they need to investigate it a little
bit more.
Chairman Nye. Mr. Sharpe.
Mr. Sharpe. We have actually visited a number of these
agencies, and one part of the conversation that came out
earlier today was that a lot of these agencies, if it is not
coming from the head, that it is definitely not getting down to
the procurement officers and there is just not enough buy-in.
We were even told by one particular agency that they are not
getting that. And since their agency is the client that
generally, when a company wants to do business with them, they
will do anything that that agency says that needs to be done
prior to receiving the contract.
So if an agency is saying that in order to do business with
us, you will work with our veteran-owned businesses, that will
generally happen. If that is not being said, then they will not
do it. And they will use the excuse, "Well, I don't need to do
business with you. The regulations state that I "may" do
business with you." And a lot of our veterans see that as
saying no.
So those agencies where there is oversight, where the
Secretary and the Administrator is telling them, giving them a
directive that you will deal with veterans, generally you see
their percentages rise. And then when you witness some of the
meetings, you don't see all the other shenanigans that are
going on, and then the fear of a protest, and then having to do
other things than to do what they are supposed to do.
Mr. Hope. The only comment I have is more general. And that
is, we have been hearing this same thing for all the Small
Business Administration business development programs, the same
type of chatter, the same type of thing. We don't see anything
being done, we don't see anything being implemented. There is
no realistic approach by any one of the agencies that they have
mentioned. It is more of a "We will try to do better. Our
numbers will go up and things will get done." But there has got
to be something tangible. We don't see it. We just don't see
it.
Chairman Nye. Thank you. I will yield to our ranking
member, Mr. Schock.
Mr. Schock. Thank you, Mr. Chairman. To follow up on that,
Mr. Hope, I would give the opportunity for you and the other
panelists to respond to that. What barriers do you see for
yourself trying to go after contracts with these Federal
agencies? Are there certain barriers that are in place? Is
there a difficulty getting the information? What would you like
to see as a possible competitor for providing services or a
provider of services to the Federal Government--what barriers
are in place as someone who is in the Midwest or someone who is
on the East Coast, but not in Washington, D.C., trying to
compete for business with these respective agencies that you
just heard from and others are there?
In other words, if you are up here and you could get them
to provide different information or do things differently, what
would it be to make it easier for you to compete and be awarded
contracts at the Federal Government?
Mr. Kobelski. As far as set-asides go, SDVOSB set-asides,
again, the agencies are not out there looking. They are not
seeking other ways to find those companies out there. I think
anybody can do any work across the Nation. I do work in
California. I am out of Virginia Beach, Virginia. I also do it
in Jacksonville, and we do it well, and we do it on naval
aircraft mostly.
I don't see any barrier at all for us to get work, or at
least qualify for work along with a couple other small
businesses, SDVOSBs that I know of that can do the work. Now, I
would love to compete it, I would love to compete the work, but
I would like to compete it within the SDVOSB community. And
there are enough of us out there to do that engineering work in
Naval aviation or in Air Force aviation, wherever it is.
Again, I see no barriers except for the agencies not
looking for us, even though we are going through the small
business offices and we are sending documents out and
everything, but it seems to be going to deaf ears.
Chairman Nye. Mr. Hope or Mr. Sharpe.
Mr. Sharpe. The barriers that we see are that many of our
business owners would prefer to have an office here in
Washington so they have access not only to the Hill, to be able
to provide complaints or concerns--complaints or concerns to
you--but also they like to be closer to the head, the heads of
the various agencies here. I mean the offices, where they are
able to talk to someone with some sort of authority. They feel
like if they are out in the Midwest somewhere, that they are at
a disadvantage. And also, there is a feeling that some of the
Federal representatives that are in those areas really don't
pay too much attention to them.
It is like they need to come to Washington, talk to the
Representatives, come to hearings like this, provide
information for testimony before they are actually heard,
because they just feel like it is not really coming from the
heads of the various agencies, it is not getting out to the
rural areas, and there appears to be some disadvantage to that.
Mr. Hope. I would say our number one barrier is the
resources internal to the organization, that we cannot afford
to, number one, protest after the fact. And we don't have
enough resources to bid on every possible contract in hopes of
getting one.
I would like to offer a real-day situation that we are
confronted with today. Six weeks ago, a government agency went
out with us, SDBO set-aside RFQ, request for quote, on a
product and services, of which my organization spent numerous
days, 6 weeks, of three engineers learning, making sure we
understood everything inside out. Our executive assistant spent
many hours getting the RFQ prepared.
We submitted it on time on Tuesday night of this week. It
was due today. Last night or the night before, they came out
with an amendment to the RFQ saying that this is no longer an
SDBO set-aside and it has been opened to small business
industrywide.
That number of resources we just spent, we can't just
continue that way, so we need to find out why these SDBO set-
aside contracts are being rescinded at the last minute. That is
number one. I mean, there are lots of issues like that, that I
have talked to many SDBO presidents that have the same issues,
the same concerns about expending resources to get nowhere.
Mr. Schock. Mr. Kobelski, you mentioned that you didn't
feel like the agencies themselves are even looking for you, or
aren't really making a sincere effort to try and maybe fill
their quotas. What leads you to believe that?
Mr. Kobelski. Several sources sought RFIs--they are trying
through RFIs and sources sought. But it appears that they are
not making it--the RFI or the sources sought is not the way to
really go, to really get the attention of the SDVOSBs. Most of
the companies are small, they are under $5 million, $3 million
companies, and they don't have the resources to answer 10-page
requirements and listing all the information they have.
Why can't we have just a one-page sources sought document,
go out to the community and go to organizations like the SDVOSB
Council out of Virginia Beach, Virginia, go to the American
Legion, go to a few other places to find these sources? And I
think you will get a lot more responses to these things.
And I think most of the agencies are doing it via RFIs.
They are trying to get the information out, they are abiding by
the FAR and getting information out there, but it is not
hitting home.
Mr. Schock. Anyone else?
With that, before I yield back, I will just give you the
opportunity once again, if you have any other closing remarks
for me as far as if you were up here and had the ability to
effect change, what changes you would like to see that would be
most helpful to you to be awarded these contracts or to be able
to better compete for them?
Mr. Kobelski. I would put some more teeth into 13360,
executive order. I would make it law, just like the 8(a). Put
it on parity with the 8(a) companies--or program.
Mr. Schock. Fair enough.
Mr. Sharpe. More legislation, changing "may" to "shall."
Having joint hearings, bringing in the agency heads. The last
thing they want to do is have you ask, "Why, Secretary, your
veterans aren't being taken care of," and letting a roomful of
veterans hear his answer.
Mr. Kobelski. I have one more comment. I think the idea
that Chairman Nye had about putting an SBA rep in every
location would really help the program unbelievably. I think
that is the greatest idea I think I have heard. And making sure
that all SDVOSBs are certified by the SBA.
Mr. Schock. Thank you very much. I appreciate your time.
Chairman Nye. Just let me say again how much I appreciate
you taking the time to be here, and let us hear directly from
the folks who are out on the front lines every day. We got to
hear from the agency representatives, that is useful; but we
need to juxtapose their comments with what you are seeing from
your end.
So, again, I appreciate you taking the time and making the
effort to travel to Washington to be here with us.
Let me also thank and note that there are some agency folks
who remained to listen to the testimony provided by the
business owners. So thank you for being here to listen to what
these folks had to say today.
With that, I will ask unanimous consent that all members
have 5 legislative days to submit materials for the record.
Hearing no objection, this hearing is now adjourned.
[Whereupon, at 12:15 p.m., the subcommittee was adjourned.]
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