[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]









 LEGISLATIVE HEARING ON H.R. 2006; H.R. 2749; H.R. 2781; AND, A DRAFT 
BILL, ``TO IMPROVE THE HIRING, TRAINING, AND EFFICIENCY OF ACQUISITION 
PERSONNEL AND ORGANIZATIONS OF THE DEPARTMENT OF VETERANS AFFAIRS, AND 
                          FOR OTHER PURPOSES''

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

                                HEARING

                               before the

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 of the

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        THURSDAY, JUNE 29, 2017

                               __________

                           Serial No. 115-20

                               __________

       Printed for the use of the Committee on Veterans' Affairs





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



         Available via the World Wide Web: http://www.fdsys.gov
                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

29-688                         WASHINGTON : 2018



























                     COMMITTEE ON VETERANS' AFFAIRS

                   DAVID P. ROE, Tennessee, Chairman

GUS M. BILIRAKIS, Florida, Vice-     TIM WALZ, Minnesota, Ranking 
    Chairman                             Member
MIKE COFFMAN, Colorado               MARK TAKANO, California
BRAD R. WENSTRUP, Ohio               JULIA BROWNLEY, California
AMATA COLEMAN RADEWAGEN, American    ANN M. KUSTER, New Hampshire
    Samoa                            BETO O'ROURKE, Texas
MIKE BOST, Illinois                  KATHLEEN RICE, New York
BRUCE POLIQUIN, Maine                J. LUIS CORREA, California
NEAL DUNN, Florida                   KILILI SABLAN, Northern Mariana 
JODEY ARRINGTON, Texas                   Islands
JOHN RUTHERFORD, Florida             ELIZABETH ESTY, Connecticut
CLAY HIGGINS, Louisiana              SCOTT PETERS, California
JACK BERGMAN, Michigan
JIM BANKS, Indiana
JENNIFFER GONZALEZ-COLON, Puerto 
    Rico
                       Jon Towers, Staff Director
                 Ray Kelley, Democratic Staff Director

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                    JACK BERGMAN, Michigan, Chairman

MIKE BOST, Illinois                  ANN MCLANE KUSTER, New Hampshire, 
BRUCE POLIQUIN, Maine                    Ranking Member
NEAL DUNN, Florida                   KATHLEEN RICE, New York
JODEY ARRINGTON, Texas               SCOTT PETERS, California
JENNIFER GONZALEZ-COLON, Puerto      KILILI SABLAN, Northern Mariana 
    Rico                                 Islands

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






















                            C O N T E N T S

                              ----------                              

                        Thursday, June 29, 2017

                                                                   Page

Legislative Hearing On: H.R. 2006; H.R. 2749; H.R. 2781; and, A 
  Draft Bill, ``To Improve The Hiring, Training, And Efficiency 
  Of Acquisition Personnel And Organizations Of The Department Of 
  Veterans Affairs, And For Other Purposes''.....................     1

                           OPENING STATEMENTS

Honorable Jack Bergman, Chairman.................................     1
Honorable Ann Kuster, Ranking Member.............................     3
Honorable Mike Coffman, U.S. House of Representatives............     4
Honorable Neal Dunn, U.S. House of Representatives...............     4
Honorable Jimmy Panetta, U.S. House of Representatives...........     5
Honorable Bruce Poliquin, U.S. House of Representatives..........     6

                               WITNESSES

Mr. Thomas Burgess, Associate Deputy Assistant Secretary, Office 
  of Logistics and Supply Chain Management, U.S. Department of 
  Veterans Affairs...............................................     8
Mr. Jan Frye, Deputy Assistant Secretary, Office of of 
  Acquisition, Logistics and Construction, U.S. Department of 
  Veterans Affairs, Prepared Statement Only......................    26

        Accompanied by:

    Mr. Thomas Leney, Executive Director, Small and Veteran 
        Business Programs, Office of Small and Disadvantaged 
        Business Utilization, U.S. Department of Veterans Affairs

Mr. Patrick Murray, Associate Director, National Legislative 
  Service, Veterans of Foreign Wars of the United States.........    10
    Prepared Statement...........................................    29

Ms. Kaitlin M. Gray, Assistant Director, National Veterans 
  Employment and Education Division, The American Legion.........    12
    Prepared Statement...........................................    30

Mr. Wayne Simpson, Member, National Veterans Small Business 
  Coalition......................................................    13
    Prepared Statement...........................................    33

                        STATEMENT FOR THE RECORD

Associated General Contractors of America........................    37 
 
 LEGISLATIVE HEARING ON H.R. 2006; H.R. 2749; H.R. 2781; AND, A DRAFT 
BILL, ``TO IMPROVE THE HIRING, TRAINING, AND EFFICIENCY OF ACQUISITION 
PERSONNEL AND ORGANIZATIONS OF THE DEPARTMENT OF VETERANS AFFAIRS, AND 
                          FOR OTHER PURPOSES''

                              ----------                              


                        Thursday, June 29, 2017

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                      Subcommittee on Disability Assistance
                                      and Memorial Affairs,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 10:00 a.m., in 
Room 334, Cannon House Office Building, Hon. Jack Bergman 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Bergman, Bost, Poliquin, Dunn, 
Arrington, Kuster, Peters.
    Also present: Representatives Coffman, Panetta.

          OPENING STATEMENT OF JACK BERGMAN, CHAIRMAN

    Mr. Bergman. Good morning, everybody. This hearing will 
come to order. I want to welcome everyone to today's 
legislative hearing on H.R. 2006; H.R. 2749; H.R. 2781; and a 
draft bill to improve the hiring, training, and efficiency of 
VA acquisition personnel and organizations.
    Before I begin, I would like to ask unanimous consent for 
the previous Chairman of the Subcommittee, Representative 
Coffman, and our colleague, Representative Panetta from 
California, to sit in on the dais and speak at these 
proceedings. Without objection, so ordered.
    This morning we will discuss four bills that aim to reform 
different aspects of acquisition in the Department of Veterans 
Affairs. This Committee has held 27 oversight hearings on VA 
acquisition over the last ten years. From constructing new 
buildings, to purchasing medical supplies, to procuring IT 
systems, to operating the Choice program, acquisition underpins 
everything VA does. The outrageous scandals of recent years are 
well known. And I do not think anyone in this room today doubts 
the need for improvement. In this conversation we necessarily 
focus on medical purchasing and VHA as roughly 80 percent of 
the department's acquisition workforce either works in VHA or 
purchases on its behalf despite being employed by other 
organizations.
    It is wise to take our cues from the Choice Act independent 
assessment, the Commission on Care, and GAO. The common thread 
in their findings is while a few areas of acquisition work 
well, notably pharmaceutical purchasing, VA contracts take too 
long to award, fail to produce results because they are not 
administered closely, and do not capture all possible savings. 
They attribute the problems to confusing organizational 
structures, overly bureaucratic procedures, inefficient IT 
systems, and personnel challenges. I must point out that 
acquisition difficulties in the Federal government are hardly 
unusual. The Federal Acquisition Regulation is lengthy and 
complicated. However, all agencies operated under the FAR and 
many of them do so effectively. VA's difficulties may come from 
the fact that unlike some other agencies, it is responsible for 
all aspects of acquisition, including procurement logistics, 
and construction. Each is a somewhat different situation with 
its own needs. As the agency tasked with serving veterans, VA 
also has requirements over and above those of other agencies to 
contract with veteran owned small businesses and service 
disabled veteran owned small businesses.
    The current requirement, called the rule of two, has 
existed for over ten years. And I am sure everyone here today 
is well aware last year the Supreme Court unanimously ruled in 
the Kingdomware decision that this requirement applies at all 
times and to all VA purchasing. The issue is central to our 
discussion today.
    These legislative proposals demonstrate our bipartisan 
commitment to making this important aspect of VA's operations 
work properly. I thank the bills' sponsors as well as our 
witnesses for being with us today to present their views. To 
that end, I would like to briefly discuss the bill that I am 
proud to sponsor with Ranking Member Kuster, H.R. 2749, the 
Protecting Business Opportunities for Veterans Act of 2017.
    This bill will help ensure contracts that are set aside for 
veteran owned small business and service disabled veteran owned 
small businesses actually go to companies that abide by the 
rules instead of opportunists who are abusing the system. 
Specifically, the bill strengthens existing prohibitions on 
improper pass-throughs, which are when a company obtains a 
contract but instead of performing the required percentage of 
work subcontracts the work to another company while nonetheless 
collecting profit. Improper pass-throughs waste tax dollars by 
building in unnecessary layers of contractor profit. In VA 
contracts, improper pass-throughs also take away from small 
business owned by veterans and service disabled veterans and 
hand it to other companies. This problem has existed before the 
Kingdomware decision but since the ruling allegations of abuse 
have increased.
    H.R. 2749 requires that before any company is awarded a VA 
contract it must certify that it will perform at least the 
percentage of work required by the Small Business Act and 
acknowledge that misrepresentations are subject to criminal 
fraud penalties. The bill also directs VA to refer violations 
or suspected violations to OIG for investigation. Finally, if 
the Secretary determines after consulting with OIG that a 
company did not follow the performance requirements, and did 
not act in good faith, the company may be subjected to 
appropriate punishment.
    This bill strengthens enforcement of existing laws that are 
being ignored. It does not create any new bureaucracy and its 
mechanism, a certification when submitting a proposal, would 
only take a few minutes to read and fill out. It seeks to give 
VA a tool to make its procurement system work as intended.
    I now yield to Ranking Member Kuster for any opening 
statement and remarks on today's legislation that she may have.

        OPENING STATEMENT OF ANN KUSTER, RANKING MEMBER

    Ms. Kuster. Thank you, Chairman Bergman. I am delighted to 
be here with you today. And thank you to the witnesses who are 
here to provide us feedback and recommendations on how we can 
improve these four bipartisan bills. Most of the work we do on 
this Committee is bipartisan and I am proud to say that the 
bills before us today are examples of the bipartisan way in 
which we conduct business on the VA Committee.
    When it comes to ensuring that taxpayer dollars are spent 
to get the right supplies and services so that veterans receive 
the health care and benefits they have earned, we are proud 
that we do work together to support this goal. We all support 
changes and reforms to make government contracting more 
efficient, transparent, and fair. We are also proud to support 
our service disabled veteran owned small businesses and to 
ensure our government is giving them business opportunities. 
For these reasons I support the legislation on the agenda today 
and I am happy to be a cosponsor of two of these measures.
    Chairman Bergman and I introduced H.R. 2749, the Protecting 
Business Opportunities for Veterans Act, to close a loophole 
that some service disabled veteran owned small business 
contractors were using to bypass government contracts through 
to non-veteran owned businesses. This practice is unfair to the 
thousands of service disabled owned small businesses who follow 
the regulations and are able to do the work only to lose out on 
a contract. This bill would prevent these SDVOSBs from 
subcontracting more than 50 percent of the contract to non-
veteran owned businesses. We want our disabled veteran 
entrepreneurs to thrive and it is unfortunate that a small 
number of individuals were attempting to game the system for 
their own personal gain at the expense of disabled veteran 
business owners who should receive government contracting 
preferences.
    I also plan to introduce draft legislation to improve VA 
hiring, training, and efficiency of acquisition personnel and 
its organization with my colleague from New England, Mr. 
Poliquin, and with Chairman Bergman. This legislation will 
require VA's procurement workforce to receive training and 
certification for each general schedule pay grade. It will also 
prioritize the use of VA acquisition internships to employ 
entry level acquisition professionals at the VA. This will give 
our veterans who want good paying job opportunities to work at 
the VA as highly skilled and trained acquisition professionals. 
It will also require VA to examine the procurement organization 
and make some changes allowing it to operate in a way that will 
best serve front line employees who are providing health care 
and benefits to veterans.
    I also support H.R. 2781, Ensuring Veterans Enterprise 
Participation in Strategic Sourcing Act, which would make sure 
more of our veteran owned small businesses are able to compete 
for contracts under the Federal Strategic Sourcing Initiative; 
and H.R. 2006, the VA Procurement Efficiency and Transparency 
Act, that would require the reporting of cost savings from 
government contract competition and the use of standardized 
procurement templates VA-wide.
    I look forward to hearing from our witnesses. Thank you, 
Chairman Bergman, and I yield back the balance of my time.
    Mr. Bergman. Thank you, Ranking Member Kuster.
    To our witnesses, we will have several members providing 
statements this morning. So if at some point during the hearing 
any of you need to briefly be excused, please feel free to do 
so.
    We will now hear from Representative Coffman speaking in 
support of his bill, H.R. 2006, the Procurement Efficiency and 
Transparency Act. Mr. Coffman, you are recognized for five 
minutes.

               OPENING STATEMENT OF MIKE COFFMAN

    Mr. Coffman. Thank you, Mr. Chairman, for including my 
legislation, H.R. 2006, the Procurement Efficiency and 
Transparency Act, in today's hearing. One of the VA's top 
procurement goals is to achieve savings through competition. 
But there is no uniformity in how the savings are calculated or 
if they are reported at all. In fact, individual offices seem 
to determine these numbers according to each office's own 
policies. For example, when a VA procurement official says, we 
saved so many dollars through competition, there is no surefire 
way to judge his legitimacy. Often these numbers are based on 
inaccurate estimates or hypothetical cost avoidances. My 
legislation would mandate the use of uniform parameters for how 
to calculate these savings and allows the VA to write policy 
that fills in the specific details. Additionally, contracting 
officers rely on templates for key documents like statements of 
work and terms and conditions for their everyday duties. 
Currently the VA has templates but they are disorganized and 
not well maintained. To address this issue, my legislation 
directs the VA to organize these templates and put them in a 
central place that is accessible to all VA's procurement 
offices.
    Mr. Chairman, the VA has acknowledged the importance of 
doing this. But they continue to struggle to get this done. My 
bill gives the VA a much needed push in the right direction. 
And I encourage my colleagues to support this common sense 
measure.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Bergman. Thank you, Mr. Coffman. We will now hear from 
Representative Dunn, who will be speaking in support of his 
bill H.R. 2781, the Ensuring Veteran Enterprise Participation 
in Strategic Sourcing Act.

                 OPENING STATEMENT OF NEAL DUNN

    Mr. Dunn. Thank you very much, Mr. Chairman.
    Mr. Bergman. Dr. Dunn, you are recognized for five minutes.
    Mr. Dunn. Thank you very much, Mr. Chairman. H.R. 2781, the 
Ensuring Veteran Enterprise Participation in Strategic Sourcing 
Act is common sense legislation, which I am honored to sponsor 
with my friend and fellow Member, Mr. Panetta from California. 
This bill closes a loophole which inadvertently denies veteran 
owned small business and service disabled veteran owned small 
businesses contracting opportunities.
    2781 concerns a group of contracts run by the General 
Services Administration known as the Federal Strategic Sourcing 
Initiative, FFSI, which enables Federal agencies to pool their 
money for buying power to common items like office supplies, 
janitorial products, building maintenance services. Each group 
of contracts under FFSI is awarded roughly ten to 20 companies. 
When an agency needs to order such products, the agency asks 
for price quotes from FFSI companies, which have already been 
selected and vetted, and picks one of those. The FSSI is a good 
and simple method of purchasing. The only problem is with some 
of the contracts in the subcategories.
    These subcategories are divided in such a manner which many 
only have a few, and in some cases none, no veteran or service 
disabled veteran owned businesses. The VA is required to look 
for veteran and service disabled veteran owned small 
businesses. But in too many cases in the FFSI contracts none of 
them are there to be found or too few to establish meaningful 
competition.
    H.R. 2781 directs the VA to implement the most logical fix, 
to examine whether there are enough veteran owned small 
businesses and service disabled owned small businesses for the 
FSSI contracts. If there are not enough veteran contractors, 
the bill directs the VA to work with GSA to add more. In no way 
does the bill force other agencies to operate differently. 
Instead it helps the Federal government meet the veteran owned 
small business and service disabled veteran owned small 
business contracting goals by giving agencies access to a 
larger pool of contractors.
    Some may ask why this legislation is necessary. The 
loophole is obvious, at least to the veterans in these 
industries who have been frustrated at being excluded from the 
business opportunities under FSSI. This Subcommittee brought 
this issue to the department's attention last year and it has 
not been resolved. This is why Mr. Panetta and I bring this 
legislation forward today. I encourage all the Members of the 
Committee to support the bill. And with that, Mr. Chairman, I 
yield back.
    Mr. Bergman. Thank you, Dr. Dunn. Next we will hear from 
Representative Panetta for his comments on H.R. 2781. Mr. 
Panetta, you are recognized for five minutes.

               OPENING STATEMENT OF JIMMY PANETTA

    Mr. Panetta. Thank you, Mr. Chairman. I appreciate this 
opportunity. It's wonderful to see you in that position, 
especially as a freshman class member. It is great. Thank you. 
And thank you to all the other Members of this Committee, 
ladies and gentlemen.
    I am proud to join my good friend and colleague, 
Representative Dunn, in sponsoring H.R. 2781. The Ensuring 
Veteran Enterprise Participation in Strategic Sourcing Act 
would protect the veterans' preference when it comes to 
awarding government contracts to veteran and service disabled 
veteran owned businesses. That protection would come from a 
common sense fix to an obvious loophole in the Department of 
Veterans Affairs rule of two.
    Currently the rule of two mandates that when the VA wants 
to buy something, it must first make a determination whether 
there is at least two other veteran or service disabled veteran 
owned small businesses that can do the work at a fair and 
reasonable price. If that determination is made, the VA then 
enters into that contract for those products with those 
businesses. Sometimes, however, when the VA purchases office, 
janitorial, and other products through the General Services 
Administration, it does not always apply the rule of two. Thus, 
that is the loophole this bill addresses and fixes.
    Under H.R. 2781 the Secretary of the VA, who Neal and I 
actually met with this morning, must work with the GSA to 
increase the number of service disabled veteran and veteran 
owned small businesses represented in the contracting process. 
By making it easier to contract with the VA, veteran and 
service disabled veteran owned small businesses will greatly 
benefit from this bill.
    As veteran, Congressman Dunn and I understand the 
challenges that our servicemembers face when transitioning from 
military to civilian life and running their own businesses. As 
Americans, we understand that we should be working to serve 
those who served us. That is why, as Members of Congress, 
Republican and Democrat, we are introducing this bipartisan 
bill that gives our veterans more opportunity to thrive and to 
serve not only the government of our country but our 
communities. And that is why both Neal and I encourage our 
colleagues to support this bill.
    Thank you, Mr. Chairman. And I yield back.
    Mr. Bergman. Thank you, Mr. Panetta. Thanks for joining us.
    Mr. Panetta. Thank you.
    Mr. Bergman. Now we will hear from Representative Poliquin 
speaking in support of the fourth piece of legislation, a draft 
bill to approve the hiring, training, and efficiency of VA 
acquisition personnel and organizations. Mr. Poliquin, you are 
recognized for five minutes.

              OPENING STATEMENT OF BRUCE POLIQUIN

    Mr. Poliquin. Thank you, Mr. Chairman, very much. I 
appreciate it. I am very proud to sponsor this bill with you, 
Mr. Chairman, and also with Ranking Member Kuster. You know, I 
am new to this Committee, but I am already very familiar, and I 
think we all are, with some of the VA contracting disasters 
that we have seen throughout the country and that continue to 
happen. And nobody knows more about constructing management 
problems than Mr. Coffman from Colorado. The new medical center 
in this district is more than $1 billion over budget and it is 
still, Mr. Chairman, it is still not complete. The Inspector 
General's report explains how this happened, and I encourage 
everybody to read it. Because everything possible that could go 
wrong did go wrong.
    Now another example was right here in Washington, D.C. at 
the VA Medical Center. The supply chain there, Mr. Chairman, 
completely broke down. There were employees at the Washington, 
D.C. Medical Center who were scrambling to borrow basic medical 
supplies from other hospitals and postponing procedures. One of 
the VA's reports about its own investigation quotes a logistics 
employee describing the state of the organization. And I do 
paraphrase here but it was something like this. The employee 
said, we do not have an actual operable inventory system. It is 
all manual or by hand. You have to remember we have people down 
here who just are put on the spot and given a credit card and 
asked to go out and buy supplies. Now that is completely 
unacceptable.
    Some of the VA's most important programs, like our Choice 
program, Mr. Chairman, are run through contracts. The VA has 
attributes these problems to early and bad contracts and are 
now trying to improve the program through better contracts. But 
my point is there always seems to be a problem with contracts. 
And so we have got to, you know, reach out and come up with a 
solution to fix this problem.
    Now my bill, Mr. Chairman, tackles two of the big problems 
that the VA has when it comes to acquisition. And a workforce 
that does not get the training it needs in the outrageous 
complicated bureaucracy that Mr. Bergman described. My bill 
directs the VA to set up, very simply, a career certification 
program for a logistics employee or for someone who is involved 
in construction or facilities management. The department gets 
to design the programs but they have to include better 
training. The employee must complete courses to achieve these 
certifications and they must achieve these certifications in 
order to advance professionally within the VA.
    Now this is not a new idea. The Department of Defense 
already does this. And the VA already has a career 
certification program for contracting employees. So it's time 
to recognize that logistical workers and construction managers 
also are important and need this training and certification.
    Now my bill also directs the VA to expand its acquisition 
intern programs. These are great programs to bring new college 
graduates and recent veterans into the VA and to train them to 
do these jobs, Mr. Chairman. We need these young people to 
replace the older employees that are retiring in greater 
numbers every year. Now it takes a long time, Mr. Chairman, for 
all, everybody in these jobs to learn how these contracting 
regulations work and how construction management and how supply 
chains operate. We need to plan for the future and grow our 
talent from within. So it is time to use these interim programs 
as best we can to the maximum extent possible.
    Finally, Mr. Chairman, my bill pays for these workforce 
improvements, these training improvements, by consolidating 
redundant acquisition bureaucratic problems. Now the bill sets 
out ten possible areas and the Secretary of the VA gets to 
decide how to do it, but it has got to happen. I encourage 
everybody at the VA not to look at the consolidation as 
threatening. The situation we have today is a mess and we have 
got to fix it.
    The Choice Act independent assessment found widespread 
concern among VA employees themselves about so many different 
contracting organizations doing the same things and failing to 
perform up to expectations. And the GAO found too many types of 
confusing policies from different places. Even the people who 
write the policies couldn't keep track of it all. So it is time 
to straighten this thing out. And if we do, everybody will 
benefit. The department needs good acquisition talent, the best 
it can get. This is not about downsizing. It is about getting 
everybody in the right places and the training they need and 
removing this blanket of bureaucracy that is stifling 
everybody.
    This bill, Mr. Chairman, is a strong first step towards 
going down the pathway of acquisition reform. And I encourage 
everybody on this Committee, Republicans and Democrats, to 
support it.
    And finally, Mr. Chairman, for the record, I would like 
this statement from Associated General Contractors of America 
in support of this bill. I yield back my time, thank you.
    Mr. Bergman. Thank you, Mr. Poliquin. I now welcome the 
Members of our panel who are seated at the witness table. 
First, VA informed us yesterday afternoon of its intention to 
substitute its lead witness so I wanted to note that in order 
to dispel any confusion about the name on VA's written 
testimony not matching that of the individual testifying for 
them today.
    With us today from VA we have Mr. Tom Burgess, Associate 
Deputy Assistant Secretary of the Office of Logistics and 
Supply Chain Management. He is accompanied by Mr. Tom Leney, 
the Executive Director for Small and Veteran Business Programs 
at VA. We have Mr. Patrick Murray, Associate Director of the 
National Legislative Service at the Veterans of Foreign Wars. 
We also have Ms. Kaitlin Gray, Assistant Director of the 
National Veterans Employment and Education Division at the 
American Legion. And welcome to your first testimony. Finally, 
we have Mr. Wayne Simpson, a member of the National Veterans 
Small Business Coalition, representing the organization. Mr. 
Burgess, you are now recognized for five minutes.

                  STATEMENT OF THOMAS BURGESS

    Mr. Burgess. Good afternoon, Chairman Bergman, Ranking 
Member Kuster, and Members of the Subcommittee. On behalf of 
Mr. Frye, who definitely intended to be at today's hearing, I 
express his regrets at his absence due to a family tragedy 
overseas yesterday.
    On Mr. Frye's behalf I appreciate the opportunity to 
address the Subcommittee regarding the four bills that affect 
department acquisitions and veteran owned small businesses. I 
am joined today by Mr. Tom Leney, Executive Director of Small 
and Veteran Owned Business Programs in the Office of Small and 
Disadvantaged Business Utilization.
    VA is a significant contributor to the government's efforts 
to ensure proportion of contracting dollars are awarded to 
small businesses. According to Federal procurement records, VA 
was the fourth largest Federal agency in terms of fiscal year 
2016 contract spend. Out of $23.1 billion in reported contract 
spend, VA awarded over 29 percent to small businesses. VA also 
reported more dollars awarded to service disabled veteran owned 
small businesses than all other Federal civilian agencies 
combined.
    Ensuring the highest quality service to veterans, improving 
our acquisition processes, and complying with laws and 
regulations impacting veteran owned small businesses are top 
priorities for the department. We would like to comment on each 
of the four bills separately.
    Respecting H.R. 2006, VA does not support the bill, which 
would require VA to calculate and record cost avoidance 
achieved through the procurement process. This process is not 
required by the Federal Acquisition Regulation, nor does it 
appear to be a requirement for any other Federal agency. VA's 
procurement process is not unique and should not be treated as 
such by imposing this requirement on the agency.
    The bill also requires development of standardized 
procurement templates. The department's contract writing system 
does store required clauses and applies standardized logic in 
the creation of contract documents. Electronic copies of these 
contracts are stored in the system and can be reused or 
modified easily to meet a future need.
    Regarding H.R. 2749, this bill would clarify the 
performance expectations for service disabled veteran owned 
small businesses and veteran owned small businesses receiving 
contracts under the Veterans First contracting program 
authorities. We recognize that awards to SDVOSBs and VOSBs can 
provide these entrepreneurs with the resources and 
opportunities they can use to develop their business according 
to their own business plans and objectives. This goal will be 
accomplished only if these firms perform a certain share of the 
work themselves and not simply pass the work through to 
others.This bill would give our regulatory action a statutory 
basis by referencing Section 46 of the Small Business Act where 
the limitations on subcontracting rules are currently 
contained.
    Finally, it would strengthen enforcement through a 
certification by the awardee that it will comply with these 
requirements and provide a role for VA to monitor and enforce 
compliance.
    With respect to H.R. 2781, VA does not support this 
legislation. This bill would require the Secretary of Veterans 
Affairs to certify whether there are sufficient numbers of 
service disabled veteran owned small businesses and veteran 
owned small businesses in each category of Federal Strategic 
Sourcing Initiative contracts managed by the Office of Federal 
Procurement Policy in the General Services Administration. VA 
does not believe that any additional legislation is required as 
proper application of the current law is sufficient to ensure 
that VA does not place orders against FSSI contracts if the 
rule of two is not satisfied.
    Finally regarding the draft bill to improve hiring, 
training, and efficiency of acquisition personnel and 
organizations of the department, VA does not support the draft 
bill. Section 1A requires VA to develop and implement a 
training and certification program. It is not entirely clear 
based on the language if this program is for more than just 
acquisition personnel.
    Section 2 would require the Secretary to develop a plan 
that achieves cost savings from the reduction in duplication 
and increased efficiency to be used to support increased 
participation in the interim program, as well as the training 
and certification programs. In an effort to achieve potential 
savings, VA would be required to centralize procurement and 
logistics employees. VA has previously provided technical 
comments on this proposed legislation and does not feel it is 
necessary.
    VA is the only civilian agency with a dedicated training 
academy. VA established a contracting intern school and a 
Warriors to Workforce program to internally supplement 
traditional procurement workforce recruitment. VA would like to 
retain existing flexibility to modify throughput of these 
programs based on evolving work load requirements. VA currently 
follows OMB and OFPP acquisition program certification 
requirements and does not see the need for legislation in this 
area.
    Thank you for the opportunity to appear before you today. 
Mr. Leney and I will be pleased to answer any questions you or 
other Members may have.
    Mr. Bergman. Thank you, Mr. Burgess. Mr. Murray, you are 
now recognized for five minutes.

                  STATEMENT OF PATRICK MURRAY

    Mr. Murray. Chairman Bergman, Ranking Member Kuster, and 
distinguished Members of the Subcommittee, on behalf of the men 
and women of the Veterans of Foreign Wars of the United States 
and its Auxiliary, thank you for the opportunity to present 
VFW's thoughts on these proposed bills.
    For years the Department of Veterans Affairs has not 
uniformly tracked cost savings in the competitive bidding 
process. Simple databases would allow VA to have consistent 
tracking systems that would keep track of savings and allow for 
enhancements across the entire contracting system. The savings 
provided for VA would ultimately mean a savings for the 
taxpayers and allow for money spent by VA to be better used to 
support veterans.
    The VFW supports the VA Procurement Efficiency and 
Transparency Act and does not agree with the VA's reason to 
oppose this. Everyone else not having to do it is not an 
acceptable excuse.
    This proposal would implement a database that would keep 
track of the average bids, the winning bids, and produce a cost 
savings analysis for future use. Additionally, the VFW thinks 
using standardized procurement templates across the entire 
department would only streamline the procurement process and 
help VA become more efficient across the board.
    Pass through contracts have been a problem in the veteran 
owned small business community for far too long. Hardworking 
veterans who are trying to advance their businesses are plagued 
by others who are taking advantage of loopholes and under 
scrutinizes regulations. It has been far too easy for business 
owners operating in bad faith to pass off work as their own in 
order to make a quick buck off the system. The VFW supports the 
Protecting Business Opportunities for Veterans Act, which would 
help strengthen the regulation regarding VOSBs and keep those 
who abuse the system from continuing to do so.
    VOSBs provide an integral part of our country's business 
community. They provide veterans with the outlet to start up 
their businesses and take part in our Nation's free market 
system. There are, however, some bad actors who take advantage 
of the veterans programs offered and try to abuse the system. 
This regulation would provide the veteran small businesses 
operating in good faith the opportunity to flourish by removing 
these so-called VOSBs that do not adhere to the rules and 
regulations. Removing these businesses that act as a pass 
through for larger entities will clean out the field and give 
those veterans that are doing the right thing the ability to 
grow.
    Certain contracts in the VA are only obtainable by certain 
large corporations and smaller veteran owned businesses cannot 
compete at that level. For example, contracts such as office 
supplies and janitorial equipment are written in ways that 
allow large suppliers to obtain the contracts but not smaller 
companies. Making the contracts more open would allow the 
competition and possibly more cost savings to the VA. The VFW 
feels that having certain contracts unobtainable for VOSBs is 
unfair for competitive contracting and is something that needs 
to change. That is why the VFW supports Ensuring Veteran 
Enterprise Participation and Strategic Sourcing that would help 
improve the abilities of veteran small businesses to obtain 
Federal contracts. This would help raise the number of veterans 
working under Federal contracts and help strengthen the entire 
small business community. Additionally, if the number of 
contracts awarded in certain categories in too low, giving the 
Secretary permission to order stoppage of those contracts 
awarded that are too restrictive for veterans to participate in 
is a great thing.
    Regarding the draft legislation, government agencies have 
been using the internship programs to move veterans into their 
ranks for years and they are highly successful programs. 
Thousands of veterans have joined the Federal government's 
workforce through programs such as the Warriors to Workforce 
program and the acquisition internship program. However, VA has 
been adding veterans to their workforce at a slower rate than 
some of these other programs. In recent years there have been 
roughly 20 to 30 participants in VA's AIP while other agencies 
are placing almost 100 candidates annually. Expanding the 
program to bring dozens more veterans to VA is an excellent way 
to make it a better government agency.
    The VFW strongly supports expanding the AIP and this bill 
would increase the number of participants, more than doubling 
the current amount. The Warriors to Workforce program and the 
AIP provide great pathways for veterans to join VA in 
procurement or logistics supply chain management fields. More 
veterans within the ranks of VA will only make it a stronger 
agency as these programs provide an in depth on the job 
training that results in well-rounded VA employees.
    The VFW supports developing a plan to reduce duplication 
and to increase efficiencies within the logistics and supply 
chain management programs. This effort would reduce unnecessary 
expenses for matching programs running concurrently. This cost 
savings could be better spent on improving the existing 
programs instead of being wastefully spent in similar efforts. 
Consolidating or abolishing duplicate functions of the 
Procurement and Logistics Office of the VA will help eliminate 
wasteful spending and make the entire office more efficient.
    Mr. Chairman, this concludes my testimony. I would be happy 
to answer any questions you or Members of the Subcommittee may 
have.

    [The prepared statement of Patrick Murray appears in the 
Appendix]

    Mr. Bergman. Thank you, Mr. Murray. Ms. Gray, you are now 
recognized for five minutes.

                   STATEMENT OF KAITLIN GRAY

    Ms. Gray. Thank you, Chairman Bergman, Ranking Member 
Kuster, and Members of the Subcommittee. On behalf of Charles 
E. Schmidt, National Commander of the American Legion, and over 
two million members, we thank you for the opportunity to 
testify regarding the American Legion's position on the pending 
legislation.
    The American Legion sees the legislation under review today 
as having the potential to improve the VA's acquisition systems 
and processes. Due to the allotted time available, I will only 
speak on three of the four bills listed.
    H.R. 2006, the VA Procurement Efficiency and Transparency 
Act, would require the VA to uniformly track cost savings in 
its contracting competitions and ensure the use of standardized 
contracting procedures. Currently the VA measures savings using 
inconsistent local policies and disorganized templates, leading 
to inaccurate contracting data and inefficient and costly 
procurement results. Under this practice, the VA has misspent 
billions due to its negligence and disregard for procurement 
rules.
    During the 114th Congress, the Subcommittee held hearings 
examining the VA's flawed procurement processes, identifying 
the waste of billions. The June 2016 hearing received testimony 
on the significance of consistently using a uniform template 
when procuring medical services for veterans from affiliated 
hospitals. Testimony further revealed that negotiating these 
contracts from scratch instead of using standardized contracts 
resulted in inexcusable wait times, some as long as three years 
to finalize. Consequently, these long wait times for contract 
finalization have caused significant delays for veterans in 
receiving their much needed health care.
    However, this bill falls short of giving stakeholders 
sufficient ability to clearly understand the alternative 
spending solutions and how they might produce greater utility 
for taxpayers' dollars. Specifically, this bill would only 
ensure visibility into the pricing and configurations of 
vendors who responded to a solicitation. Given that this would 
only represent a subset of the supplier community, the end 
result would be an incomplete data set, employing a strategy 
that only looks at those opportunities that were evaluated. 
Notwithstanding the concerns noted above, we see a modified 
version of this bill producing value and utility for both the 
taxpayer and the Nation's veterans. The American Legion support 
H.R. 2006, with amendments.
    H.R. 2749, Protecting Business Opportunities for Veterans 
Act of 2017, improves the oversight of contracts awarded by the 
VA to veteran owned and service disabled veteran owned small 
businesses. When a VOSB or SDVOSB is awarded a contract under 
the Vets First program, they are required to perform a certain 
percentage of work. However, there is a longstanding problem of 
improper pass throughs in that program where business profit 
from the contracts while performing little to no work while 
passing them off to other companies. This bill would require 
participants in the Vets First program to certify that they are 
performing the required percentage of work and directs the VA 
to refer suspected violators to the Office of the Inspector 
General. This is crucial, especially after the Kingdomware 
decision. Because essentially every VA small business contract 
is now set aside for the SDVOSBs and VOSBs.
    The American Legion supports legislation that will provide 
assistance and equal opportunity for veterans to start or grow 
a small business, including establishing numerical goals for 
all veterans to compete in government procurement. Therefore 
the American Legion supports H.R. 2749.
    H.R. 2781, Ensuring Veterans Enterprise Participation in 
Strategic Sourcing Act, directs the VA to certify a sufficient 
participation of veteran owned and service disabled veteran 
owned small businesses and contracts under the Federal 
Strategic Sourcing Initiative. This draft bill closes a 
loophole in 38 U.S.C. 8127, Procurement Requirements, and 
requires VA to set aside the proper amount of contracts for 
veteran businesses. Currently the VA obtains much of its supply 
through government wide strategic sourcing contracts run by the 
GSA. In some product categories, veteran owned businesses hold 
few or no contracts. VA is required to work with GSA to 
increase veteran business representation on the contracts and 
veterans must be given all available opportunities to pursue 
that three percent allotted to SDVOSBs.
    We view this draft bill as having the potential of 
producing substantial benefits for the veteran business 
community. However, the American Legion encourages Congress to 
implement a measurement that is stronger than just sufficient. 
We request that the term ``sufficient'' be changed to maximum 
extent practicable. The American Legion supports this bill, 
with amendments.
    This concludes my testimony. The American Legion 
appreciates the opportunity to comment on the bills being 
considered and I would be happy to answer any questions you may 
have. Thank you.

    [The prepared statement of Kaitlin Gray appears in the 
Appendix]

    Mr. Bergman. Thank you, Ms. Gray. And as I mentioned 
earlier, this is your first testimony. Little did we know, you 
were going to get a concert in the background there. The 
Nashville Songwriters Association is meeting with Chairman Roe 
in his office. So these rooms are not exactly soundproof. So I 
appreciate your persevering through the background, 
unintentional background accompaniment.
    Mr. Simpson, you are now recognized for five minutes.

                   STATEMENT OF WAYNE SIMPSON

    Mr. Simpson. Thank you. Good morning, Mr. Chairman, Ranking 
Kuster, Members of the Subcommittee. Thank you for all you do 
for America's veterans and their families, and providing the 
National Veterans Small Business Coalition with this 
opportunity to share its views on legislation to strengthen the 
Department of Veterans Affairs acquisitions.
    The National Veterans Small Business Coalition is the 
largest not-for-profit organization of its kind representing 
America's veteran-owned small businesses to the Federal 
Government, giving them a collective voice on legislative, 
regulatory, and policy issues affecting Federal procurement. We 
do so to enhance procurement opportunities for veteran small 
business entrepreneurs engaged in or seeking to enter the 
Federal marketplace.
    Today, I would like to start my testimony concerning the 
draft bill concerning improving hiring and training of VA 
acquisition personnel and improving the efficiency of 
acquisition organizations at VA. From our perspective, this is 
perhaps the most important bill before us here today.
    The National Veterans Small Business Coalition fully 
supports any legislation which strengthens VA acquisition 
operations, and improves the knowledge and skills of the 
Department's acquisition professionals.
    Procurement reform through legislation at VA is long 
overdue. Although VA has a robust training program worthy of 
emulation offered through the VA Acquisition Academy in 
Frederick, Maryland, we believe VA's training program could 
always be strengthened with curricula specifically designed to 
train VA acquisition and small business personnel in the area 
of socioeconomic procurement preference program goal 
development, attainment, advocacy, and the use of the Veterans 
First contracting program.
    VA's acquisition organization structure, on the other hand, 
leaves much to be desired. VA's continued decentralization 
approach to its acquisition operations creates duplication of 
efforts, redundant procurements, waste, and inefficiency. 
Multiple VA contracting activities, all seeking to prove 
themselves as value-added organizations, seek to conduct 
procurements as if to compete with other contracting activities 
as to which organization can do the best job. This is troubling 
to VA's industry partners and has an adverse effect on SDVOSBs 
and VOSBs.
    It is truly dumbfounding as to why VA allows this 
organizational structure to persist. Veterans and American 
taxpayers certainly deserve better, and this can be 
accomplished through centralizing and strengthening acquisition 
leadership and programs at the Department level. As examples, 
we offer the following:
    VA's Strategic Acquisitions Center in Fredericksburg, 
Virginia is now conducting most of VA's medical/surgical-
related procurements, these procurements having been migrated 
there from the National Acquisition Center's National 
Contracting Service in Hiles, Illinois. The SAC often uses 
open-market procurement methods to conduct its acquisitions. 
The SAC charges the Veterans Health Administration a three-
percent service level agreement fee for this privilege, as 
opposed to when VHA buys using VA Federal supply schedule 
contracts, which includes only a one half of one percent 
industrial funding fee. In other words, VHA's cost of many 
acquisitions increased from one and one half percent to three 
percent of every procurement dollar spent, a 600-percent 
increase.
    While a two-and-one-half-cent fee increase per dollar does 
not sound like it is significant, multiply this against the 
millions of dollars VA spends each year on medical/surgical and 
related items. Although buying through the Strategic 
Acquisition Center now helps to replenish VA's supply fund, it 
dramatically increases VHA's cost to use these contract 
vehicles. These fees are paid by VHA from the same funding used 
for the procurement, most often the medical care appropriation. 
Increasing the cost to buy has to come at an opportunity cost 
to VA. What is that opportunity cost?
    There are those in VA which suggest these cost savings 
resulting from procurements conducted by the SAC offset the 
increased fees to use these contract vehicles, but no empirical 
data is available to prove this assertion.
    Additionally, many within and outside of the VA's 
procurement community are left wondering what the mission of 
the VA National Acquisition Center's National Contract Service 
is now that most of its work has migrated to the SAC without a 
commensurate adjusting and staffing.
    Furthermore, open-market purchases undermine VA's Federal 
Supply Schedule program and the revenue stream generated by the 
industrial funding fee to its supply fund, which funds a large 
part of VA's acquisition operations and all of VA's Office of 
Small and Disadvantaged Business Utilization to include VA's 
Center for Verification and Evaluation.
    This is only the one of a couple of examples of the nature 
of VA's decentralized and competing acquisition program where 
one contracting element does not appear to communicate with 
another. VA must be held to account for its acquisition 
operations and demanded to improve.
    With regards to VA's organizational procurement structure's 
inefficiencies, VHA has established three Service Area Offices, 
also known as SAOs, all of which appear to be competing within 
the VA procurement community to show the value they too add.
    It is our sincere hope the draft bill will begin to address 
the long overdue overhaul necessary to VA's procurement 
structure and operations to improve efficiency accountability 
to the American taxpayers, while improving opportunities for 
service-disabled veteran-owned small businesses and veteran-
owned small businesses. It seems only legislation will resolve 
this decades-old problem.
    Lastly, for as confusing as VA's decentralized and 
dysfunctional procurement system is to even VA personnel in 
many cases, imagine the significant confusion this causes for 
SDVOSBs and VOSBs in the greater veteran business community at 
large. While the SAC appears to be moving away from the FSS 
program, VA National Acquisition Center continues to award FSS 
contracts. Throw the three SAOs into the mix, and SDVOSBs and 
VOSBs realize the duplicate and competing organizational 
efforts make contracting with VA confusing and administratively 
cumbersome.
    Additionally, how does SDVOSBs or VOSBs determine which 
contracting opportunities to pursue which will result in the 
best return on their investment?
    Fortunately, for-profit SDVOSBs and VOSBs would never 
operate their respective procurement operations the way the VA 
does. Congress must resolve this dysfunction, waste and 
inefficiency; VA continues to demonstrate it is incapable of 
doing so.
    H.R. 2781 addresses participation by SDVOSBs and VOSBs in 
contracts under the Federal Strategic Sourcing Initiative, our 
concern is how VA will implement this legislation. VA 
demonstrated in implementing its Veterans First contracting 
program under Public Law 109-461, the Veterans Benefits Health 
Care and Information Technology Act of 2006, its conservative 
and contradictory stand on legislation benefitting veteran 
small businesses. It took a Supreme Court decision to resolve 
this issue.
    In the case of H.R. 2781, we believe that Congress should 
explicitly state in its intent that this and any other 
legislation addressing VA's procurements in the context of 
veteran small businesses, whereby nothing in the legislation 
should be construed as relieving VA's obligation of applying 
the Rule of Two. Not to do so, we believe, will likely result 
in another misguided VA implementation which provides VA with a 
loophole of reporting--of using the Rule of Two.
    The coalition fully supports H.R. 2006, the VA Procurement 
Efficiency and Transparency Act, which we believe will add 
great utility in VA capturing and understanding its cost 
savings. Additionally, the use of standardized templates in the 
conduct of procurements VA-wide should improve the quality of 
VA solicitations and the contracts awarded resulting from those 
solicitations. It is clear from the quality of some of the 
solicitations currently being issued, supervisory personnel are 
not monitoring or reviewing the quality of those solicitations.
    The National Veterans Small Business Coalition supports 
H.R. 2749, the Protecting Business Opportunities for Veterans 
Act of 2017. This legislation is consistent with the U.S. Small 
Business Administration's amended regulations allowing for 
subcontracting of opportunities with similarly situated small 
business concerns without said subcontracting counting against 
the prime contractor's limitations on subcontracting.
    Similarly situated small business concerns are those with 
the same socioeconomic procurement preference program status.
    We believe H.R. 2749 would be strengthened by indicating 
the context of VA procurements conducted pursuant to the 
Veterans First Contracting Program that a similarly situated 
SDVOSB or VOSB must have been verified by VA's Center for 
Verification and Evaluation, and listed in VA's Vendor 
Information Pages database. These important distinctions will 
ensure verified SDVOSBs and VOSBs do not subcontract to non-
verified SDVOSBs and VOSBs, although these businesses are 
similarly situated.
    In closing, Mr. Chairman and Ranking Member Kuster, we 
would like to call your attention to VA has flat-lined its 
Service-Disabled Veteran-Owned Small Business and Veteran-Owned 
Small Business goals since fiscal year 2010, despite 
substantially exceeding these goals each year. We have provided 
a chart to the Subcommittee which tracks VA's goals and 
accomplishments for the last 11 fiscal years. You can 
appreciate how disturbing this chart is to veterans and the 
coalition.
    Clearly, for all intent and purposes, such low goals are 
truly meaningless and call into question the strength and the 
effectiveness, if not the legitimacy of VA's advocacy on behalf 
of veteran small businesses. VA's fiscal year 2014 goals were 
not communicated to VA personnel until there was only 38 days 
remaining in the fiscal year.
    A recent Freedom of Information Act request revealed VA's 
Secretary did not issue any goal memoranda for fiscal years 
2015 and 2016, and the fiscal year 2017 goals were only issued 
on May 25th of this year, with 128 days remaining in fiscal 
year 2017.
    We ask and hope you will use your considerable influence to 
encourage the Subcommittee on Economic Opportunity to hold a 
hearing for VA to explain and account for its goals and 
advocacy to the Subcommittee and America's veterans.
    This completes my statement and I will be happy to answer 
your questions.

    [The prepared statement of Wayne Simpson appears in the 
Appendix]

    Mr. Bergman. Thank you, Mr. Simpson.
    The written statements of those who have just provided oral 
testimony will be entered into the hearing record.
    We will now proceed with questioning and I will reserve my 
time until the end.
    Ranking Member Kuster is recognized for five minutes.
    Ms. Kuster. Thank you.
    And I will just address my questions to the panel, but I 
think Mr. Burgess perhaps would be the best to answer.
    Have you become aware of any small business exploiting the 
non-manufacture rule and class waiver system to become pass-
throughs and sidelining veteran-owned small businesses that are 
acting in good faith?
    Mr. Burgess. No, ma'am, I am not personally aware.
    Ms. Kuster. Would you take that back to VA--
    Mr. Burgess. Oh, absolutely, ma'am, absolutely.
    Ms. Kuster [continued]. --for a response on that? Thank 
you.
    And do you have any concerns regarding the Secretary's role 
in recommending penalties such as levying of fines or criminal 
prosecution when the Secretary has found that a veteran-owned 
small business has violated the legislation?
    Mr. Burgess. No, ma'am, we support that.
    Ms. Kuster. Okay. And if a veteran-owned small business 
subcontracts out 50 percent or more of the product, goods, or 
services, does that have any effect on the timing and 
efficiency of the procurement?
    Mr. Burgess. I don't believe it does, ma'am.
    Ms. Kuster. Okay.
    Mr. Burgess. I don't believe it does.
    Ms. Kuster. And are you aware if any veteran-owned small 
businesses that manufacture high-tech medical equipment and 
what is the average percentage of work that these veteran-owned 
small businesses subcontract out, do you have any information 
on that, on high-tech medical equipment?
    Mr. Burgess. No, ma'am. I am not aware of any small 
business high-tech medical equipment manufacturers, I am not 
personally aware of any.
    Ms. Kuster. Okay.
    Mr. Burgess. Market research hasn't indicated any.
    Ms. Kuster. Okay, thank you.
    To the VSOs, what impact do bad-faith actors such as pass-
through contractors have on the ability of veteran-owned small 
businesses to successfully bid for Federal contracts?
    Mr. Murray. Ma'am, it clogs up the system. It takes the 
opportunities away from those that are operating in good faith, 
trying to expand their businesses that are being kind of pushed 
out, that can offer lower prices to attain those contracts only 
to pass them off to a larger contractor. It keeps the people 
trying to do the right thing from being able to do so.
    Ms. Kuster. Thank you. And do you have any concerns 
regarding the Secretary's role in recommending penalties such 
as levying fines or criminal prosecution when they find a 
violation?
    Mr. Murray. No, ma'am.
    Ms. Kuster. Okay. Thank you.
    I am going to turn to the other bill, H.R. 2781, the 
Veteran Enterprise Participation. Again to Mr. Burgess, would 
requiring the Secretary of VA to monitor, certify, and consult 
with GSA regarding the participation of veteran-owned small 
businesses in the Federal Strategic Sourcing Act further 
promote these veteran-owned small businesses?
    Mr. Burgess. Yes, ma'am. We just don't believe that a 
certification process after the fact, after GSA has awarded 
those contracts is going to actually fix accountability to make 
the process work the way it should work.
    Ms. Kuster. What would you recommend? We have concerns.
    Mr. Burgess. What we do routinely, ma'am, is we are in 
constant coordination/collaboration with GSA as they are 
developing these solutions. We put our requirements, as all of 
the departments do, into the mix. Obviously, one of our special 
requirements is a need to have SDVOSBs and VOSBs available on 
those contract solutions if we are going to use them.
    For whatever reason, sometimes the solutions don't allow a 
GSA to put those types of firms in different contract 
arrangements, and when they do not, for reasons that GSA 
determines, we simply do not use that portion of an FSSI; we 
defer to 8127. If we are purchasing improperly, then you should 
hold us accountable for that.
    Ms. Kuster. And do you have some way of reporting that back 
to us? We have an oversight role, we are an Oversight and 
Investigation Subcommittee of VA. How are we going to know? You 
said sometimes there are some reasons why it might not happen--
    Mr. Burgess. Well, what VA--
    Ms. Kuster [continued]. --how do we know?
    Mr. Burgess [continued]. What VA would suggest is that we 
affix accountability on the category managers who actually 
develop and execute the solutions, okay? They receive our 
requirements, okay? And they should be the certifying party 
that says, we have put in place a solution that permits all 
agencies, including VA, to use our solution, which is the 
Federal intent to maximize the spend and leverage the spend.
    For us to certify after the fact--
    Ms. Kuster. My time is up, but I am just curious about how 
we would find out why it didn't happen.
    Mr. Burgess. I think that is a question we would have to 
get with GSA on.
    Ms. Kuster. Okay. Thank you.
    I yield back.
    Mr. Bergman. Thank you.
    Mr. Poliquin, you are recognized for five minutes.
    Mr. Poliquin. Thank you, Mr. Chairman. I very much 
appreciate it.
    Mr. Burgess, I appreciate your comments on my draft bill, 
which is entitled ``The Hiring, Training, and Efficiency of VA 
Acquisition Personnel and Organizations.'' And I know in your 
written testimony that it reflects on an earlier version of the 
bill. We have worked with your staff and made sure that there 
is an updated version of the bill that you have seen.
    And so my question to you is, in the earlier version 
logistics personnel were being prohibited to be supervised by 
the people for whom they are purchasing things, but that 
language has been removed, does that satisfy your concern?
    Mr. Burgess. The draft bill includes many, many subject 
areas. So in general, we need flexibility to assign people--
    Mr. Poliquin. Sure.
    Mr. Burgess [continued]. --in the best way possible to 
achieve the mission outcomes that we desire.
    Mr. Poliquin. Specifically on this issue, sir, when it 
comes to making sure that logistics employees are not being 
supervised by the people for whom they are purchasing things, 
is that okay with you?
    Mr. Burgess. Logistics people--it is absolutely fine that 
logistics personnel--
    Mr. Poliquin. Great. Thanks.
    Mr. Burgess [continued]. --can work for--
    Mr. Poliquin. All right, great. Thanks. Let's move on. 
Thank you.
    Do you think, Mr. Burgess, that the Acquisition Intern 
Program is a good program?
    Mr. Burgess. It is an excellent program.
    Mr. Poliquin. Great. Do you agree that the quality of 
contracting officers and logistics staff and facility managers 
are in high demand in government?
    Mr. Burgess. Contracting personnel are very much in demand, 
logistics personnel less in demand.
    Mr. Poliquin. Right. Do you believe that a lot of these 
folks are expected to retire in the next five years?
    Mr. Burgess. There is a sizeable portion of the logistics 
population that can retire.
    Mr. Poliquin. Okay. Therefore, do you agree that the intern 
program at the VA, when we train young talent, many of them are 
veterans is a good idea to fill these vacancies?
    Mr. Burgess. Yes, sir.
    Mr. Poliquin. Great. All right, so far, so good.
    Why don't you think anybody at the VA would fully support 
expanding this internship program?
    Mr. Burgess. We have over the years expanded the internship 
program to the degree that we have deemed appropriate given the 
workload.
    Mr. Poliquin. Okay. Well, let's talk about that. How many 
interns do you think are graduating this year?
    Mr. Burgess. This year I think we are only graduating 30 
maybe.
    Mr. Poliquin. Okay, about 30. How many vacancies are there 
in these associated jobs at the VA right now, roughly, 
acquisition jobs?
    Mr. Burgess. Contracting jobs are approximately 2500.
    Mr. Poliquin. Let me make sure I understand this. Is that 
you are graduating about 30 interns and you have about 2500 
jobs open in this general area?
    Mr. Burgess. This year we are graduating 30. That was a 
reduction in what our trend has been in the past year.
    Mr. Poliquin. Okay. So it seems like you need more bodies, 
right?
    Mr. Burgess. We always are searching for quality 
contracting officers.
    Mr. Poliquin. Okay.
    Mr. Burgess. The interns we have graduated to date account 
for about ten percent of our contracting workforce.
    Mr. Poliquin. Okay. So I'm guessing that you and I agree 
that it is a good idea to expand this internship program?
    Mr. Burgess. It is a good idea to expand it. The objection 
we have is the fixed parameters between two to four times, we 
don't think that--
    Mr. Poliquin. Yeah, but you just said that you are 
graduating 20 or 30 interns and you have hundreds of vacancies 
in the same area; is that right?
    Mr. Burgess. Our turnover in the 1102 is approximately 150 
to 250 a year.
    Mr. Poliquin. Okay. So why in the heck wouldn't you want to 
expand it to the extent that we have recommended?
    Mr. Burgess. Again, the language specifies not less than 
two times and not more than four times. We just think those 
parameters are arbitrary and we would like to have the 
flexibility to determine what that number is commensurate with 
all the other department competing requirements, including 
funding for such programs.
    Mr. Poliquin. Okay. Let's move on a little bit.
    Mr. Simpson, I know you're here somewhere.
    Mr. Simpson. Yes, sir.
    Mr. Poliquin. Mr. Simpson, thank you. The other thing my 
bill does is it deals with career certification programs to 
improve training for logistics employees and construction 
managers. You worked at the VA for 35 years?
    Mr. Simpson. Almost 38, yes, sir.
    Mr. Poliquin. Okay. Thank you very much for your service. 
And the Department of Defense has done what we are already 
talking about years ago. Do you think that this is something 
the VA needs to do?
    Mr. Simpson. In terms of expanding their internship 
program?
    Mr. Poliquin. Yeah. Not only that, but also making sure 
there are certification programs for logistics employees and 
construction management employees?
    Mr. Simpson. I don't think it would hurt.
    Mr. Poliquin. Okay.
    Mr. Simpson. I think the example of how construction 
management handled the facility in Aurora, Colorado, perhaps if 
those professionals had been trained a little bit better that 
might have prevented that from happening.
    Mr. Poliquin. And maybe saved a billion dollars for the 
taxpayers, right?
    Mr. Simpson. Possibly.
    Mr. Poliquin. It's not a bad idea. Okay.
    Mr. Murray, what do you think?
    Mr. Murray. Having some personal experience with what is 
going on in Aurora, I think that, as Mr. Simpson said, this can 
absolutely help. That situation is a perfect example of ways to 
improve in a lot of ways.
    Mr. Poliquin. Great.
    Thank you, Mr. Chairman. I yield back my time.
    Mr. Bergman. Thank you, Mr. Poliquin.
    Dr. Dunn, you are recognized for five minutes.
    Mr. Dunn. Thank you, General.
    He runs a tight ship, so let's keep our answers short.
    Ms. Gray, I understand the American Legion supports my 
bill, that is H.R. 2781, but wants to amend it to go even 
farther beyond getting a sufficient number of Service-Disabled 
and Veteran-Owned Small Businesses on the GSA contracts; the 
Legion would like to see the maximum practical on the 
contracts. How might we do that and what is the maximum number, 
in your mind?
    Ms. Gray. Sir, thank you for the question. I will have to 
get back with you on the answer for that.
    Mr. Dunn. That's fine.
    Mr. Simpson, it is clear from your testimony that you have 
some major concerns with this process. Briefly, do you want to 
add to your concerns?
    Mr. Simpson. No, sir, just the fact of the redundancy in 
terms of the organizational structure is very, very confusing 
for people who want to do business at VA.
    Mr. Dunn. Thank you.
    How about you, Mr. Murray, concerns on this?
    Mr. Murray. Just that we would like to see it expanded as 
much as possible to include as many VOSBs as we can make 
happen.
    Mr. Dunn. Let me say, I am grateful to the VSOs for being 
here and representing the veterans, I am grateful.
    Mr. Burgess, help me understand the VA's position. Your 
testimony indicated that the VA already has to give veterans 
veteran business preferences, and if there aren't enough of 
them on the FSSI contracts, they have to go elsewhere. Do we 
agree that the FSSI contracts are good contracts, easy to use?
    Mr. Burgess. FSSI is a good Federal-wide program.
    Mr. Dunn. Good, good. So wouldn't the best solution be to 
make sure that we have enough veteran businesses on those so 
that you can satisfy your veteran contracting requirements and 
continue to use those?
    Mr. Burgess. That would be a good solution.
    Mr. Dunn. Okay, great. The Secretary apparently issued a 
memo on May 25th exempting certain VA contracts from small 
business participation, I understand large-dollar, major 
construction contracts. Another one was for delivery services 
specifically mentioned UPS and FedEx.
    Can you assure me that there are no other FSSI contracts 
that are included in the exemption that was granted on May 
25th?
    Mr. Burgess. I will have to get back and check on that, 
sir.
    Mr. Dunn. We would like to have that, we want to be clear. 
We don't want to sort of paint with a broad brush. We would 
like to know if there are exceptions, we need to know that for 
our veterans, if we could, please.
    So, Mr. Burgess again, how can we work this out so that the 
VA can continue to use the major contractors that they want, 
but in the small business area we really are including the 
veteran-owned businesses?
    Mr. Burgess. We certainly will continue our collaboration 
with GSA and the various category and subcategory managers that 
are putting these solutions in place, we work regularly with 
them. And we do not award or administer those contracts, and we 
are not necessarily part of the evaluation process that awards 
those contracts, but we will continue to make our desires known 
that an adequate representation--
    Mr. Dunn. See, you just got to a good point, you are not 
really part of that process. Let's go into that. Do I 
understand that the VA holds a position that it cannot work 
with the GSA to increase the number of veteran businesses in 
the contracts?
    Mr. Burgess. We can certainly work with GSA to do that.
    Mr. Dunn. Okay, so that is a misunderstanding. You are 
willing to work with the GSA--
    Mr. Burgess. Absolutely. We work with them all the time.
    Mr. Dunn [continued]. --in order to grow the number, the 
universe of veteran-owned businesses that participate?
    Mr. Burgess. That is our aim, yes.
    Mr. Dunn. All right. Finally, in our last minute here, can 
you convince us on the panel and the VSOs who are present with 
you that the VA would solve this problem without being directed 
to by legislation?
    Mr. Burgess. VA is not in a position to unilaterally solve 
the problem. We need the cooperation of the category managers 
and, frankly, some of the solutions that are in place today 
where we don't have access to SDVOSBs and VOSBs is simply a 
reflection that the SDVOSBs or VOSBs do not have the 
capabilities in the areas that GSA has solicited for. Some of 
those are geographic restrictions. Some of the solutions like 
the building maintenance operations, they have multiple 
categories ranging from elevator maintenance, HVAC repairs, and 
when they solicit, they make awards against these categories, 
and sometimes the VOSBs and SDVOSBs have either not 
participated or for some reason or another have not been 
awarded.
    Mr. Dunn. We are in our last ten seconds, so let me just, I 
guess, close before we yield by saying that I would really 
like--I mean, it sounds like we are gumming up the works with 
all these requirements and you have a bunch of good veteran-
owned businesses, good businessmen who want to provide good 
service at a reasonable price, and I would ask you to reach out 
and do everything we possibly could to work with them.
    Thank you, Mr. Chairman. I yield back.
    Mr. Bergman. Thank you, Dr. Dunn.
    I guess I am last. It has been certainly an interesting 
morning of unique sounds through the system, so we will try to 
get through this here without any other issues with that.
    Mr. Burgess, I would like to start with your testimony 
about H.R. 2749. You noted the VA has some concerns that it 
would like to address, though it apparently does not oppose the 
bill. Would you like to elaborate now?
    Mr. Burgess. Do you want to take that?
    Mr. Leney. Mr. Chairman, it is not a case of we don't 
support the bill. We share the chair's commitment to ensuring 
that we eliminate pass-throughs from VOSBs who are not doing 
the work.
    Our concern about this bill is you would be locking into 
place a situation, particularly on our supply contracts, where 
VOSBs who are pass-throughs are not required to do any work at 
all on a procurement and could pass the entire amount of the 
procurement through, and we don't believe that that is your 
intent.
    Mr. Bergman. So, Mr. Simpson, would you like to comment on 
that?
    Mr. Simpson. I think that one of the things, as long as the 
VA, what they do is consistent with what the SBA regulations 
are. As a matter of fact, the National Defense Authorization 
Act of 2017 tied the Secretary of Veterans Affairs' hands a 
little bit about how they administer the veterans program over 
there in terms of procurement, using the same definitions and 
things. So since they are starting to go in the direction the 
way SBA is doing things, I don't think that they should have a 
definite inconsistency with what the SBA regulations are.
    If you look at what SBA allows for contracting with 
similarly situated firms, our concern is that an SDVOSB or VOSB 
would subcontract out to a non-verified VA firm under a VA set-
aside.
    Mr. Bergman. Mr. Burgess or Mr. Leney, if this bill is 
enacted, how will VA use company certifications that they are 
not improperly passing through the work to do a better job of 
enforcing the pass-through rules?
    Mr. Leney. We would apply the certification provided by the 
offeror and we have mechanisms to--we have a subcontracting 
review program whereby we go out and look at the actual 
performance of prime contractors to make sure they are 
complying with limitations on subcontracting.
    Mr. Bergman. Okay.
    Mr. Burgess. So we would have the ability to enforce it. 
However, I would say again, on many of our contracts there 
would be no requirement for the prime contractor to do any work 
on the contract.
    Mr. Bergman. Okay. Ms. Gray, any thoughts on that?
    Ms. Gray. As far as this bill goes, sir, anything that 
bolsters service-disabled veteran-owned small business or 
veteran business in general the American Legion supports.
    I have heard anecdotal evidence of veterans having problems 
with the pass-through and if there is anything that can be done 
to minimize the pass-throughs, but also keep regulations simple 
for veterans who are really trying to just get into the 
contracting role, I think that is all I could ask for, that is 
all the American Legion could ask for.
    Mr. Bergman. Thank you.
    Mr. Murray, any comments?
    Mr. Murray. Sir, thank you. Having some personal knowledge 
of this, I think that it's things that can always be fixed, 
always made better, and I think this legislation will only 
continue to do that.
    Mr. Bergman. Okay. Thanks.
    Mr. Burgess, I was reviewing the VA's Small Business 
Contracting Scorecard for fiscal year 2016. It actually got 
worse from 2015; the grade is still a B, but the overall score 
is down. Compared to 2014, the scores are significantly worse 
in every category. Now, this is in spite of the Kingdomware 
Supreme Court decision being issued in 2016, toward the end of 
the fiscal year when VA, you know, was awarding many of its 
contracts.
    Why is VA's small business performance lagging?
    Mr. Leney. Mr. Chairman, I'll answer that for you, if you 
wouldn't mind. Mainly it is due to changes in our mix of 
products and services.
    For example, in 2016 our use of the Patient-Centered 
Community Care Program went from about $1.6 billion to $2.4 
billion. We have had huge increases in programs that have not 
lent themselves to the use of small businesses.
    Mr. Burgess. But overall, I'd like to add, I think the 
number of actions has actually risen, although the absolute 
dollar value has not.
    Mr. Bergman. Thank you.
    I see my time is about to expire here, and our colleague 
and fellow Committee Member Mr. Arrington arrived right on 
time.
    Mr. Arrington. You know, better late than never.
    Mr. Bergman. You are recognized for five minutes.
    Mr. Arrington. Thank you, Mr. Chairman. And thank you, 
panelists, and I apologize for being late. I would have liked 
to have heard the testimony, but I have one question for Mr. 
Burgess about H.R. 2006, that is Mr. Coffman's bill.
    The VA, it seems to me, doesn't think it is important to 
calculate the amount of money it saves by competing contracts 
and recording that information. Certainly, it is possible to 
pay more for better quality, I don't think anybody is going to 
penalize you for doing that. So I would like to see how much 
money the VA is saving through competition. Why wouldn't we 
want that--
    Mr. Burgess. Sir, we just don't believe that the approach 
to calculating the savings provides any data that is useful in 
the procurement process. It does provide a data point, but the 
prices are compared during the evaluation process.
    If we are going to look at savings, okay, GAO and OMB have 
consistently provided guidance that says we should try to 
calculate savings or cost avoidance against specific 
benchmarks, so that we can have a little bit more confidence 
that there are actual cost avoidance and savings, rather than 
just represented by an instant competitive action, that's all. 
Something like what is the lowest commercial price known and 
what do we award against, that might be a more meaningful 
number than just the difference of the awarded amount and an 
average or median of all the offers submitted.
    Mr. Arrington. So do you do that now where you provide 
benchmarks, so that you can have some reference for--
    Mr. Burgess. We do not do it across the board, sir, just 
because we haven't seen the value in that. There are specific 
categories of procurements that we look at and we report to OMB 
on.
    Mr. Arrington. Do you think it would be a good idea to do 
it across the board? You said you didn't see any value in that.
    Mr. Burgess. No, sir, I don't, because each contracting 
action stands on its own. Offers are requested, bids or 
proposals are submitted, and an evaluation process takes place, 
and it may be a low-price award, it may be a best-value award. 
The resulting number is just as I indicated, a data point, it 
is not a useful reference point in terms of the procurement 
process. It may be useful for future program managers to try to 
determine what their budgets might want to be, but from a 
contracting perspective it doesn't add any value to our 
process.
    Mr. Arrington. Okay.
    Mr. Burgess. This is a fundamental problem that everybody 
assumes that the contract is everything. Some of the problems 
are that programs don't have as good of a grasp on programs 
across government as they should be and that gets reflected in 
a contract, but again, these data points don't add value to the 
procurement process.
    Mr. Arrington. Thank you, Mr. Burgess.
    Mr. Chairman, I yield back.
    Mr. Bergman. Thank you very much.
    Well, thank you to the witnesses for your thoughtful input 
today. The panel is now excused.
    The testimony provided today is an important contribution 
as this Subcommittee moves forward with the legislation. I 
appreciate the witnesses' expertise, it is valuable to help us 
refine and improve the bill texts. We can all agree that 
acquisition must work properly in the VA.
    I appreciate the bipartisan cooperation of all the sponsors 
and cosponsors of these pieces of legislation to pursue that 
end.
    I ask unanimous consent that all Members have five 
legislative days to revise and extend their remarks, and 
include extraneous material.
    Without objection, so ordered.
    I would like to once again thank all of you, the witnesses, 
the fellow Committee Members, and the audience members for 
joining us here this morning.
    This hearing is adjourned.

    [Whereupon, at 11:16 a.m., the Subcommittee was adjourned.]




                            A P P E N D I X

                              ----------                              

                   Prepared Statement of Mr. Jan Frye
                       DEPUTY ASSISTANT SECRETARY
           OFFICE OF ACQUISITION, LOGISTICS, AND CONSTRUCTION
                     DEPARTMENT OF VETERANS AFFAIRS
    Good afternoon, Chairman Bergman, Ranking Member Kuster, and 
Members of the Subcommittee. I appreciate the opportunity to address 
the Subcommittee regarding the four bills that affect the Department of 
Veterans Affairs' (VA) acquisitions and Veteran-Owned Small Businesses 
(VOSBs). I am joined today by Mr. Tom Leney, Executive Director, Small 
and Veteran Business Programs, Office of Small and Disadvantaged 
Business Utilization.
    VA is a significant contributor to the Government's efforts to 
ensure a fair proportion of contracting dollars are awarded to small 
businesses. According to the Federal Procurement Data System (FPDS), in 
Fiscal Year (FY) 2016, VA was the fourth-largest Federal agency in 
terms of contract spend. Out of $23.1 billion in FY 2016 reported 
contract spend for the Department, FPDS indicates VA awarded over 29 
percent to small businesses. VA also reported more dollars awarded to 
Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) than all 
other Federal civilian agencies combined.
    These are results that translate into real dollars and real 
opportunities in the hands of small businesses and Veteran 
entrepreneurs. Ensuring the highest quality service to Veterans, 
improving our acquisition processes, and protecting Veteran-owned small 
businesses are our highest priorities. We'd like to comment on each of 
the four bills separately.

H.R. 2006 - VA Procurement Efficiency and Transparency Act

    VA does not support the bill. H.R. 2006 would require VA to 
calculate and record cost avoidance achieved through the procurement 
process. This process is not required by the Federal Acquisition 
Regulation nor does it appear to be a requirement for any other Federal 
agency. VA's procurement process is not unique, and should not be 
treated as such by imposing this requirement on the agency.
    VA's current system does not support this function, so this will 
only add to the extensive documentation of the procurement process. VA 
is also in the process of replacing its current contract writing 
system. Based on current knowledge of the new system, and the limited 
utility of adding this capability, it does not support recording this 
data.
    VA does not see how the historical information will be of use. The 
pricing data is part of the evaluation/decision process. Once the 
contractor is selected, the value of the difference between the bids is 
not considered valuable to managerial decision-making. Additionally, a 
difference in the awarded price and the average of offers received may 
not accurately reflect an actual savings, but may be an indication that 
the contractor provided an offer that significantly decreased the 
company's profit in order to secure the award.
    Furthermore, the reported ``savings'' derived from the calculation 
methods outlined in the proposed legislation are simply a reference 
point. Such a reference point might be useful in the development of 
future independent government cost estimates, but are not genuine 
savings because they are not being computed against any established 
baseline such as most recent prior price paid, independent government 
price estimate, best commercial catalog price, etc. We note that both 
the Office of Management and Budget (OMB) and the Government 
Accountability Office (GAO) always seek to validate claimed savings 
against these types of baselines.
    The bill also requires development of standardized procurement 
templates. VA does not see the need for this provision. VA attempts to 
standardize the procurement process as much as possible. Contracts are 
written in accordance with government-wide Federal Acquisition 
Regulations as supplemented by Department-wide VA Acquisition 
Regulations (VAAR). These regulations standardize the overall approach 
to soliciting and awarding contracts.
    The Department's contract writing system stores required clauses 
and applies standardized logic in the creation of contract documents. 
Electronic copies of the contracts are stored in the system and can be 
reused or modified to meet a future need. It is for these reasons that 
we feel VA is adequately addressing the issue of standardization.
    VA also seeks to leverage our buying power with National or 
regional contracts. This is also a form of standardization, allowing 
multiple locations to use the same contract for like needs. VA has also 
been a proponent of the Federal Strategic Sourcing Initiatives. Again, 
this is a form of standardization by requiring multiple locations to 
use the single government solution.

H.R. 2749 - Protecting Business Opportunities for Veterans Act of 2017

    This bill would clarify the performance expectations for Service-
Disabled Veteran-Owned Small Businesses (SDVOSBs) and Veteran-Owned 
Small Businesses (VOSBs) receiving contracts under the Veterans First 
Contracting Program authorities. While VA's program is not a ``business 
development'' program in the same sense as, say, the Small Business 
Administration's (SBA) 8(a) program, we recognize that awards to 
SDVOSBs and VOSBs can provide these entrepreneurs with the resources 
and opportunities they can use to develop their business according to 
their own business plans and objectives. This goal will be accomplished 
only if these firms perform a certain share of the work themselves and 
not simply pass the work through to others.
    Accordingly, VA incorporated the Limitations on Subcontracting into 
its Veterans First Contracting Program (Veterans First) from the very 
beginning. The initial implementation of Veterans First, through a June 
2007 information letter issued by the Office of Acquisition & 
Logistics, contained contract clause language modeled on language 
applicable to SBA's small business programs. VA later incorporated the 
contract clause language into the VAAR. When VA issued a package of 
class deviations to the VAAR to implement changes necessary to comply 
with the decision issued last summer in Kingdomware Technologies, Inc. 
v. United States (Kingdomware), we included new language to incorporate 
SBA's current regulation by reference, since SBA had revised its rule 
based on new legislation.
    This bill would give our regulatory action a statutory basis by 
referencing section 46 of the Small Business Act, where the Limitations 
on Subcontracting are currently contained. Finally, it would strengthen 
enforcement through a certification by the awardee that it will comply 
with these requirements, and provide a role for VA to monitor and 
enforce compliance. Instances of suspected noncompliance would be 
referred to the Office of the Inspector General (OIG) for further 
action. We defer to the OIG for comment on matters within their 
jurisdiction.
    Section 46 of the Small Business Act, as written and as implemented 
by SBA regulation, requires a contract to be classified either as 
services or as supplies, based on which constitutes the greatest 
percentage of the dollar value. For supply contracts, a small business 
either provides products without paying more than 50 percent of the 
contract value to its own suppliers or, if an eligible nonmanufacturer, 
agrees to provide the product of another small business. This latter 
requirement, referred to as the nonmanufacturer rule, can be waived by 
SBA if there are no small business manufacturers available.
    In VA's case, some of our supply contracts involve items 
manufactured solely by large firms but the main benefit to be provided 
by the small business awardee would be the ancillary services. These 
would nevertheless be classified as supply contracts because of the 
large dollar value of the items. However, since they are manufactured 
by large firms, and SBA has waived the nonmanufacturer performance 
requirement, these supply contracts have effectively no performance 
requirement at all for the SDVOSB or VOSB awardee. Their main 
competitive advantage is the services they have to offer along with 
providing the items, but they have no obligation to provide any.
    As an example, consider our High-Tech Medical Equipment contracts 
for radiological imaging and similar devices. The dollar value of these 
products is by far the dominant share of the contract value, so these 
would be classified as supply contracts. SBA has already provided a 
class waiver of the nonmanufacturer rule for these items, since no 
small business manufacturers exist. If these were set-aside for SDVOSB 
or VOSB distributors, these firms would pass-through the dominant share 
of the contract value to the large business manufacturer. There would 
be no requirement for them even to perform any ancillary services, 
since the performance requirement for services would not apply to a 
supply contract. Potentially they would collect an administrative 
overhead cost and pass the entire contract value to others for 
performance.
    VA and SBA appreciate the bill's aim of preventing pass-throughs, 
but have concerns that we would like to address with the Committee.

H.R. 2781 - Ensuring Veteran Enterprise Participation in Strategic 
    Sourcing Act

    VA cannot support this legislation, and would like to discuss these 
concerns with the Committee. This bill would require the Secretary of 
Veterans Affairs certify whether there are sufficient numbers of 
Service-Disabled Veteran Owned Small Businesses (SDVOSB) and Veteran-
Owned Small Businesses (VOSB) in each category of Federal Strategic 
Sourcing Initiative (FSSI) contracts managed by the Office of Federal 
Procurement Policy. Insufficient representation within a category would 
require the Secretary to consult with the Administrator of the General 
Services Administration on increasing the number of such concerns or 
require VA to abstain from orders under the specific category with 
insufficient representation. As such, VA does not believe that any 
additional legislation is required as proper application of the current 
law is sufficient to achieve the desired outcome. In other words, the 
existing law does not allow VA to place orders against FSSI contracts 
if the Rule of Two is not satisfied.
    Furthermore, the draft legislative requirement for the Secretary of 
the Department of Veterans Affairs to make certain certifications 
related to the efficacy of OFPP, the General Services Administration 
(GSA), and various Category Manager efforts to streamline Federal 
buying practices and improve Federal business outcomes is misdirected. 
If Congress desires some type of certification that VA is or is not in 
a position to leverage such solutions, we believe it would be more 
prudent and appropriate to have the OFPP designated Category Managers 
make such a certification. This approach would properly fix 
accountability on the appropriate acquisition officials for ensuring 
that the solutions they develop are accessible by all potential Federal 
customers. Customers, including VA, should not be critiquing the work 
of category managers or contracting officers from organizations 
supporting category managers after the fact. Rather, quality should be 
built into the solutions up front, and solutions should be developed 
that optimize Federal business outcomes.
    VA, like any other Federal agency, provides our requirements, 
including our unique requirements traceable to Sec.  8127, to Category 
Managers, program managers and contracting officers as solutions are 
developed. VA requirements are considered, but should not necessarily 
drive Federal solutions. FSSI and other similar program officials build 
solutions that optimize business outcomes at the Federal level. When 
such solutions permit VA to participate, we actively do so. In fact, 
OMB has historically and consistently rated VA as one of the top 
supporters of FSSI. As an example, VA is the single largest user of the 
Federal Domestic Delivery Service (DDS) strategic sourcing solution. 
When, for whatever business reasons, a particular Federal solution will 
not permit VA compliance with Sec.  8127, we cannot use that particular 
solution.

H.R. ---- - To improve the hiring, training, and efficiency of 
    acquisition personnel and organizations of the Department of 
    Veterans Affairs, and for other purposes

    VA does not support this bill. Section 1(a) requires VA to develop 
and implement a training and certification program. It is not entirely 
clear based on the language if this program is for more than just 
acquisition personnel. Other parts of the bill reference acquisition, 
supply chain and construction personnel. The training and certification 
programs are to be established as quickly as practicable.
    Section 1(b) of the proposed draft legislation would require VA to 
prioritize use of internship programs to hire employees for entry level 
positions. It does this by prescribing the number of participants VA 
must matriculate through the intern schools. The goal is for VA to meet 
its hiring/attrition needs with the graduating interns. Once VA 
achieves this goal, the SECVA would need to certify to Congress that 
the number of interns coming through the program is adequate to meet 
its needs. At that time VA would be able to set the number of interns 
to maintain sufficient capacity to meet hiring/attrition demand.
    Section 2 would require the Secretary to develop a plan that 
achieves cost savings from the reduction in duplication and increased 
efficiency to be used to support the increased participation in the 
intern program as well as the training and certification programs. In 
an effort to achieve potential savings, VA is required to centralize 
procurement and logistics employees. Under this section, VA must not 
allow an acquisition or logistics employee to be in the customer's 
supervisory chain of command. This would require VA to remove logistics 
personnel, mostly from hospitals (approximately 5K), from their current 
supervisory chains. Much of VA's acquisition personnel already report 
through an acquisition supervisory chain of command, but some small 
number in the Veterans Benefits Administration (VBA) and the National 
Cemetery Administration (NCA) may still be reporting though their 
customers chain of command.
    Section 2(a)(3) requires that VA must achieve these changes through 
attrition or redistribution. Under Section 2(a)(4), demotions, 
furloughs, or liquidations are not allowed in order to achieve cost 
savings.
    VA has previously provided technical comments on this proposed 
legislation and does not feel it is necessary. VA takes training, 
hiring and certification of its workforce very seriously. VA is the 
only civilian agency with a dedicated training academy. It established 
a contracting intern school and a warriors-to-workforce program to 
internally supplement traditional procurement workforce recruitment. 
With regard to the number of training cohorts, VA would like to retain 
existing flexibility to modify throughput of these programs based on 
evolving workload requirements. VA currently follows OMB and OFPP 
acquisition program certification requirements and does not see the 
need for legislation in this area.
    Thank you for the opportunity to appear before you today. My 
colleague and I will be pleased to answer any questions you or other 
Members may have.

                                 
                  Prepared Statement of Patrick Murray
         H.R. 2006, H.R. 2749, H.R. 2781, and DRAFT LEGISLATION
    Chairman Bergman, Ranking Member Kuster, and distinguished members 
of the Subcommittee, on behalf of the men and women of the Veterans of 
Foreign Wars of the United States (VFW) and its Auxiliary, thank you 
for the opportunity to present the VFW's thoughts on these proposed 
bills.

H.R. 2006, VA Procurement Efficiency and Transparency Act

    For years, the Department of Veterans Affairs (VA) has not properly 
tracked cost savings in the competitive bidding process. Simple 
databases would allow VA to have a uniform tracking system that would 
keep track of savings and allow for enhancements across the entire 
contracting system. The savings provided for VA would ultimately mean a 
savings for the taxpayers, and allow for money spent by VA to be better 
used to support veterans.
    The VFW supports this bill which would calculate and track cost 
savings from competitive bidding. This proposal would implement a 
database that could track the cost of the average bids, and the winning 
bid, and produce a cost savings analysis for future use. Having the 
ability to track cost savings is an essential tool VA can use to award 
contracts more efficiently, providing more potential savings for VA in 
the long run. Additionally, the VFW thinks using standardizing 
procurement templates across the entire department would only 
streamline the procurement process and help VA become more efficient 
across the board.

H.R. 2749, Protecting Business Opportunities for Veterans Act of 2017

    Pass-through contracts have been a problem in the Veteran Owned 
Small Business (VOSB) community for far too long. Hard working veterans 
who are trying to advance their businesses are plagued by others who 
are taking advantage of loopholes and under-scrutinized regulations. It 
has been far too easy for business owners operating in bad faith to 
pass off work as their own in order to make a quick buck off the 
system.
    The VFW supports this legislation which would help strengthen the 
regulations regarding VOSBs, and keep those who abuse the system from 
continuing to do so. VOSBs provide an integral part of our country's 
business community. They provide veterans with the outlet to start up 
their businesses and take part in our Nation's free market system. 
There are, however, some bad actors who take advantage of the VOSB 
programs offered and try to abuse the system. This legislation would 
provide the VOSBs operating in good faith the opportunity to flourish, 
by removing those so-called VOSBs that do not adhere to the rules and 
regulations. Removing VOSBs that act as a pass-through for larger 
entities will clean out the field and give those VOSBs that are doing 
the right thing the ability to grow.

H.R. 2781 Ensuring Veteran Enterprise Participation in Strategic 
    Sourcing Act

    Certain contracts in VA are only attainable by certain larger 
corporations, and smaller VOSBs cannot compete at that level. For 
example, contracts for items such as office supplies and janitorial 
equipment are written in ways that allow large suppliers to attain the 
contracts, but not smaller companies. Making the contracts more open 
would allow competition and possibly more cost savings. The VFW feels 
that having certain contracts unattainable for VOSBs is unfair for 
competitive contracting and this is something that needs to change.
    The VFW supports this legislation that would help improve the 
abilities of VOSBs to attain federal contracts. If the Department of 
Veterans Affairs Secretary deems the number of VOSBs awarded contracts 
under the Federal Strategic Sourcing Initiative to be insufficient, the 
secretary can consult the Administrator of the General Services 
Administration to increase the number of awarded contracts. This would 
help raise the number of VOSBs working under federal contracts and help 
strengthen the VOSB community. Additionally, if the number of contracts 
awarded in certain categories is too low, the secretary can order the 
stoppage of contracts awarded in that category if it is too restrictive 
for VOSBs to participate.

Draft Legislation

    Government agencies have been using internship programs to move 
veterans into their ranks for years and they are highly successful 
programs. Thousands of veterans have joined the federal government's 
workforce through programs such as the Warriors to Workforce Program 
and the Acquisition Internship Program (AIP). However, VA has been 
adding veterans to their workforce at a slower rate through these 
programs. In recent years there have been roughly twenty to thirty 
participants in VA's AIP, while other agencies are placing almost one 
hundred candidates annually. Expanding the program to bring in dozens 
of more veterans is an excellent way to make VA a better government 
agency.
    The VFW strongly supports expanding the AIP. This bill would 
increase the number of participants in the AIP, more than doubling the 
current amount. The Warriors to Workforce Program and the AIP provide 
great pathways for veterans to join VA in procurement or logistics 
supply chain management fields. More veterans within the ranks of VA 
will only make it a stronger agency within the federal government. 
These programs provide in depth on-the-job training that results in 
well-rounded VA employees at the completion of these two programs. The 
VFW strongly supports increasing the number of personnel taking part in 
the AIP.
    The VFW supports developing a plan to reduce duplication and to 
increase efficiencies within the logistics and supply chain management 
programs within VA. This effort would reduce unnecessary expenses from 
matching programs running concurrently. This cost savings could be 
better spent on improving the existing programs instead of being 
wastefully spent on similar efforts. Consolidating or abolishing 
duplicate functions of the Procurement and Logistics Office of VA will 
help eliminate wasteful spending and make the entire office more 
efficient.
    Mr. Chairman, this concludes my testimony. I will be happy to 
answer any questions you or the subcommittee members may have.

                                 
                 Prepared Statement of Kaitlin M. Gray

                            EXECUTIVE SUMMARY
 
 
 
     H.R.2006 - VA Procurement Efficiency and                   Support
                              Transparency Act
H.R. 2749 - Protecting Business Opportunities                   Support
                      for Veterans Act of 2017
      H.R. 2781 - Ensuring Veteran Enterprise   Support with amendments
       Participation in Strategic Sourcing Act
Draft Bill - To improve the hiring, training,                   Support
   and efficiency of acquisition personnel and
   organizations of the Department of Veterans
              Affairs, and for other purposes.
 

                        ``PENDING LEGISLATION''
    Chairman Bergman, Ranking Member Kuster, and distinguished members 
of the Subcommittee, on behalf of Charles E. Schmidt, National 
Commander of The American Legion, the country's largest patriotic 
wartime service organization for veterans, comprising over 2 million 
members and serving every man and woman who has worn the uniform for 
this country; we thank you for the opportunity to testify regarding The 
American Legion's position on the pending and draft legislation.
    The American Legion knows that small business as the backbone of 
the American economy. Small business is the mobilizing force behind 
America's past economic growth and has given the United States a 
competitive advantage in the global economy. Small business development 
will continue to be a major factor in our nation's economic and 
national security well-being as we move further into the 21st Century.
    The American Legion views the legislation under review today as 
having the potential to improve the Department of Veterans Affairs' 
acquisition systems and processes. What follows is The American Legions 
strategic perspective on the bills under consideration.

       H.R.2006 - VA Procurement Efficiency and Transparency Act
   To amend title 38, United States Code, to improve the procurement 
    practices of the Department of Veterans Affairs, and for other 
                               purposes.
    This bill would require the Department of Veterans Affairs (VA) to 
uniformly track cost savings in its contracting competitions and ensure 
the use of standardized contracting procedures. Currently, VA 
procurement officials measure savings using inconsistent local policies 
and disorganized templates, leading to inaccurate contracting data and 
inefficient and costly procurement results. Under this practice, the VA 
has misspent billions of dollars due to its negligence and disregard 
for procurement rules. This is why it is essential to pass legislation 
streamlining and modernizing VA's procurement process.
    During the 114th Congress, then-Chairman of the House Veterans' 
Affairs Subcommittee on Oversight and Investigations Representative 
Mike Coffman, held a series of hearings examining the VA's flawed 
procurement processes, identifying the waste of billions of dollars. In 
March 2015, VA's Senior Procurement Executive, Jan Frye, sent a memo 
addressed to then-VA Secretary Robert McDonald accusing the agency of 
spending at least $6 billion a year on improper and unauthorized 
procurement expenditures. In testimony given at a May 2015 House 
Veterans' Affairs Committee hearing, Frye followed up by saying, ``Over 
the past five years, some senior VA acquisition and finance officials 
have willfully violated the public trust while Federal procurement and 
financial laws were debased. Their overt actions and dereliction of 
duties combined have resulted in billions of taxpayer dollars being 
spent without regard to Federal laws and regulations, making a mockery 
of Federal Statutes.''
    The Committee's June 2016 hearing, ``VA and Academic Affiliates: 
Who's Benefiting Now?,'' reviewing VA's academic affiliations with 
university hospitals, received testimony on the significance of 
consistently using a uniformed template when procuring medical services 
for veterans from affiliated hospitals. Testimony further revealed that 
negotiating these contracts from scratch instead of using standardized 
contracts resulted in inexcusable wait times - some as long as three 
years to finalize. Consequently, these long wait times for contract 
finalization have caused delays for veterans in receiving much needed 
healthcare.
    The VA Procurement Efficiency and Transparency Act, as currently 
written, sets out a methodology for VA to calculate and report cost 
savings generated by competitive contracting. Such numbers are 
calculated and recorded inconsistently now, often based on local 
practices. This bill encourages the Secretary of Veterans Affairs to 
make available the use of a Department-wide, standardized procurement 
templates used by Veteran Affairs Central Office, the Veterans Health 
Administration, the Veterans Benefits Administration, and the National 
Cemetery Administration.
    However, this bill falls short of giving stakeholders, like The 
American Legion, sufficient ability to clearly understand the 
alternative spending solutions, and how those alternatives might have 
produced greater utility for taxpayer's dollars.
    Specifically, this bill would only ensure visibility into the 
pricing and configurations of vendors who responded to a solicitation 
or quote. Given this would only represent a subset of the supplier 
community (i.e., all suppliers are not contractors), the end result 
would be an incomplete data set, employing a strategy that only looks 
at those opportunities that were evaluated.
    Additionally, this bill does not take into consideration those 
interdependent solutions that are employed as a unit - but are 
purchased as a standalone. For example; high-tech medical equipment and 
services are procured separately by the VA - when it has long been a 
commercial best practice to combine the purchase - thus producing the 
cost efficiency opportunity that results from the `total-lifecycle-
solution-management' approach this acquisition strategy affords.
    Furthermore, this bill does not take into consideration the fact 
there may be both tangible and intangible benefits associated with VA 
paying a higher price for products or services sourced through Veteran-
Owned Small Business (VOSB) or Service-Disabled Veteran-Owned Small 
Businesses (SDVOSBs). Therefore, the resulting numbers would be unduly 
skewed and not reflect actionable data (i.e., should VA adopt such a 
social contracting/pricing practice in the future.).
    According to Resolution No. 154, ``The American Legion will support 
development and passage of federal, state, and local veteran business 
development legislation to provide assistance to all veterans, 
including disabled veterans and members of Reserve Components of the 
United States military to ensure equal opportunity for veterans to 
start or grow a small business, including establishing numerical goals 
for all veterans to compete in government procurement.'' \1\ The 
American Legion supports legislation to ensure equal parity for all 
veterans in all small business government contracting programs, thus 
ensuring no veteran procurement program is at a disadvantage.
---------------------------------------------------------------------------
    \1\ The American Legion Resolution No. 154 (2016): Support 
Reasonable Set-Aside of Federal Procurements and Contracts for 
Businesses Owned and Operated by Veterans
---------------------------------------------------------------------------
    Notwithstanding the concerns noted above, we see a modified version 
of this bill producing value and utility for both the taxpayer and this 
nation's veterans.

The American Legion supports H.R.2006 with amendments.

 H.R. 2749 - Protecting Business Opportunities for Veterans Act of 2017
  To amend title 38, United States Code, to improve the oversight of 
    contracts awarded by the Secretary of Veterans Affairs to small 
   business concerns owned and controlled by veterans, and for other 
                               purposes.
    When a Service-Disabled Veteran-Owned Small Business or Veteran-
Owned Small Business (VOSB) is awarded a contract under VA's Vets First 
Program, they are required to perform a certain percentage of the work. 
However, there is a longstanding problem of improper ``pass-throughs'' 
in the program where businesses profit from the contracts while 
performing little or no work while passing them off to other companies 
to complete.
    H.R. 2749 would require participants in the Vets First Program to 
certify that they are performing the required percentage of work and 
directs VA to refer suspected violators to the Office of the Inspector 
General (OIG) for investigation. Making this a more explicit part of 
OIG's mission should encourage them to devote more resources to it. 
This is crucial (after Kingdomware) because essentially every VA small 
business contract is now set aside for VOSBs/SDVOSBs. \2\
---------------------------------------------------------------------------
    \2\ Kingdomware Technologies, Inc. v. United States, 579 US -- 
(2016).
---------------------------------------------------------------------------
    The bill also directs the VA Secretary to consider whether existing 
administrative and criminal penalties for fraudulent representation 
would apply in each case. By protecting VOSBs and SDVOSBs that play by 
the rules from bad actors that are abusing the system, this bill would 
improve opportunities for our nation's veterans. Resolution No. 154: 
Support Reasonable Set-Aside of Federal Procurements and Contracts for 
Businesses Owned and Operated by Veterans, supports legislation that 
will provide assistance to all veterans, including disabled veterans 
and members of Reserve Components of the United States military to 
ensure equal opportunity for veterans to start or grow a small 
business, including establishing numerical goals for all veterans to 
compete in government procurement. \3\
---------------------------------------------------------------------------
    \3\ The American Legion Resolution No. 154 (2016): Support 
Reasonable Set-Aside of Federal Procurements and Contracts for 
Businesses Owned and Operated by Veterans

The American Legion supports H.R. 2749.
  H.R. 2781 - Ensuring Veteran Enterprise Participation in Strategic 
                              Sourcing Act
 To direct the Secretary of Veterans Affairs to certify the sufficient 
   participation of small business concerns owned and controlled by 
  veterans and small business concerns owned by veterans with service-
    connected disabilities in contracts under the Federal Strategic 
              Sourcing Initiative, and for other purposes.
    The American Legion recognizes the contribution small businesses 
make to the American economy, which is why we are committed to working 
with the Small Business Administration's Office of Veterans Business 
Development to support and foster the community of veteran small 
business owners. The American Legion stands behind the concept that to 
have successful partnerships between the Small Business 
Administration's Office of Veterans Business Development and small 
businesses owned by veterans, the following three criteria are 
paramount.

      Ensuring all federal agencies meet the 3 percent standard 
Service Disabled Veteran Owned Small Business utilization;
      Ensuring there are effective programs in place that allow 
responsible Access to Capital; and
      Igniting the entrepreneurial spirit within the veteran's 
community and to educate them.

    This bill closes a loophole in 38 USC 8127 procurement requirements 
and requires VA to set aside the proper amount of contracts for VOSBs/
SDVOSBs. Currently, VA obtains its office supplies, janitorial 
products, and other commodities through government-wide strategic 
sourcing contracts run by the General Services Administration (GSA). In 
some categories of these products, VOSBs/SDVOSBs hold few or no 
contracts. VA is required to work with GSA to increase VOSB/SDVOSB 
representation on the contracts and veterans must be given all 
available opportunities to actively pursue the 3 percent standard 
allotted to SDVOSBs.
    We view this bill as having the potential of producing substantial 
benefits for the VOSB and SDVOSB community. However, The American 
Legion encourages Congress to implement a measurement that is stronger 
than ``sufficient.'' We request that term ``sufficient'' be changed to 
``maximum extent practicable.''
    Resolution No. 154: Support Reasonable Set-Aside of Federal 
Procurements and Contracts for Businesses Owned and Operated by 
Veterans, supports legislation that will provide assistance to all 
veterans, including disabled veterans and members of Reserve Components 
of the United States military to ensure equal opportunity for veterans 
to start or grow a small business, including establishing numerical 
goals for all veterans to compete in government procurement. \4\
---------------------------------------------------------------------------
    \4\ The American Legion Resolution No. 154 (2016): Support 
Reasonable Set-Aside of Federal Procurements and Contracts for 
Businesses Owned and Operated by Veterans

The American Legion supports this H.R. 2781 with amendments.
                               Draft Bill
    To improve the hiring, training, and efficiency of acquisition 
personnel and organizations of the Department of Veterans Affairs, and 
                          for other purposes.
    This draft bill will direct VA to expand its acquisition intern 
programs and increase training for facility management and logistics/
supply chain employees. Many other agencies receive the majority of 
their entry-level acquisition employees from their intern programs 
which include a full-time developmental job for recent graduates or 
veterans. This program also benefits from veterans' preference and 
direct hiring authorities. Additionally, the graduate's sign continuing 
service agreements which offer the VA a stable workforce. Although the 
VA has other intern programs, they usually produce only 20-30 graduates 
annually.
    The American Legion supports legislation that will increase the 
employee capabilities at the VA. We feel that recent graduates and 
veterans bring much needed new talent into the VA. These intern 
programs will only help strengthen the VA with talented new employees, 
which will help veterans in the long run.
    Resolution No. 305: Support the Development of Veterans On-The-Job 
Training Opportunities, supports any legislations that increase 
training programs for eligible veterans in the public and private 
sectors. \5\
---------------------------------------------------------------------------
    \5\ The American Legion Resolution No. 305 (2016): Support the 
Development of Veterans On-The-Job Training Opportunities

The American Legion supports this draft bill.
                               Conclusion
    As always, The American Legion thanks this subcommittee for the 
opportunity to explain the position of the over 2 million veteran 
members of this organization. For additional information regarding this 
testimony, please contact Mr. Larry Lohmann at The American Legion's 
Legislative Division at (202) 861-2700 or [email protected].

                                 
                 Prepared Statement of Wayne A. Simpson
    Mr. Chairman, Ranking Member Kuster, Members of the Subcommittee, 
thank you for all you do for America's Veterans and their families, and 
for providing the National Veterans Small Business Coalition with this 
opportunity to share its views on legislation to strengthen U.S. 
Department of Veterans Affairs (VA) Acquisitions.
    The National Veterans Small Business Coalition is the largest not-
for-profit organization of its kind representing America's Veteran-
owned small businesses to the Federal government, giving a collective 
voice to these businesses on legislative, regulatory, and policy issues 
affecting Federal procurement. We do so to enhance procurement 
opportunities for veteran small business entrepreneurs engaged in, or 
seeking to enter, the Federal Marketplace.
    Today, I would like to start my testimony discussing the draft bill 
concerning improving hiring and training of VA Acquisition Personnel 
and improving the efficiency of acquisition organizations in VA. From 
our perspective, this is perhaps the most important bill before us 
today.
    The National Veterans Small Business Coalition fully supports any 
legislation which strengthens VA's acquisition operations and improves 
the knowledge and skills of the department's acquisition professionals. 
Procurement reform through legislation at VA is long overdue. Although 
VA has a robust training program worthy of emulation offered through 
the VA Acquisition Academy in Frederick, MD, we believe VA's training 
program could always be strengthened with curricula specifically 
designed to train VA acquisition and small business personnel in the 
area of socioeconomic procurement preference program goal development, 
attainment, advocacy, and use of the Veterans First Contracting 
Program.
    VA's acquisition organizational structure on the other hand, leaves 
much to be desired. VA's continued decentralized approach to its 
acquisition operations creates duplication of efforts, redundant 
procurements, waste and inefficiency. Multiple VA contracting 
activities, all seeking to prove themselves as value-added 
organizations seek to conduct procurements as if to compete with other 
contracting activities as to which organization can do the best job. 
This is troubling to VA's industry partners and has an adverse effect 
on SDVOSBs and VOSBs. It is dumbfounding as to why VA allows this 
organizational structure to persist. Veterans and the American 
taxpayers certainly deserve better, and this can be accomplished 
through centralizing and strengthening acquisition leadership and 
programs at the department level. As examples, we offer the following:
    VA's Strategic Acquisition Center (SAC) in Fredericksburg, VA, is 
now conducting most of VA's medical/surgical related procurements, 
these procurements having migrated there from VA's National Acquisition 
Center's National Contract Service in Hines, IL. The SAC often using 
open market procurement methods to conduct its acquisitions.
    The SAC charges the Veterans Health Administration (VHA) a three 
percent Service Level Agreement Fee for this privilege, as opposed to 
when VHA buys using VA's Federal Supply Schedule Contracts, which 
includes only a one-half of one percent Industrial Funding Fee. In 
other words, VHA's cost on many acquisitions increased from one-half of 
one percent to three percent of every procurement dollar spent, an 
increase of 600%. While a two and one-half cent fee increase per dollar 
spent does not sound significant, multiply this against the billion 
plus dollars VHA spends each year on medical/surgical and related 
items.
    Although buying through the SAC now helps replenish VA's Supply 
Fund (38 U.S.C. Sec.  8121) it dramatically increases VHA's costs to 
use these contract vehicles. These fees are paid by VHA from the same 
funding used for the procurement, most often the Medical Care 
Appropriation. Increasing its costs to buy has to increase VHA's 
opportunity costs-what does VHA give up in terms of its opportunity 
costs? There are those at VA which suggests the costs savings resulting 
from procurements conducted by the SAC off-set the increased fees to 
use these contract vehicles, but no empirical data is available to 
prove this assertion.
    Additionally, many within and outside of VA's procurement community 
are left wondering what the mission of the VA National Acquisition 
Center's National Contracts Service is now that most of its work has 
migrated to the SAC, without a commensurate adjustment in staffing. 
Furthermore, open market procurements undermine VA's Federal Supply 
Schedule Program and the revenue stream generated by the Industrial 
Funding Fee to its Supply Fund, which funds a large part of VA's 
Acquisition operations, and all of VA's Office of Small and 
Disadvantaged Business Utilization, to include VA's Center for 
Verification and Evaluation.
    This is but only a couple of examples of the nature of VA's 
decentralized and competing acquisition program, where one contracting 
element does not appear to communicate with another. VA must be held to 
account for its acquisition operations, and demanded to improve.
    With regards to VA's organizational procurement structure's 
inefficiencies, VHA has established three ``Service Area Offices'' also 
known as ``SAOs'' all of which appear to be competing within the 
greater VA procurement community to show the ``value'' they, too, add. 
It is our sincere hope the draft bill will begin to address the long 
overdue overhaul necessary of VA's procurement structure and 
operations, to improve efficiency, accountability to the American 
taxpayers, while improving opportunities for SDVOSBs and VOSBs. It 
would seem only legislation will resolve this decades-old problem.
    Lastly, for as confusing as VA's decentralized and dysfunctional 
procurement structure is to even VA personnel in many cases, imagine 
the significant confusion this causes for the SDVOSB and VOSB community 
at large. While the SAC appears to be moving away from the FSS Program, 
VA NAC continues to award FSS contracts. Throw the SAOs into the mix, 
SDVOSBs and VOSBs realize the duplicative and competing organizational 
efforts make contracting with VA confusing and administratively 
cumbersome. Additionally, how does a SDVOSB or VOSB determine which 
contracting opportunities to pursue which will result in the best 
return on their investment? Fortunately, a for-profit SDVOSB or VOSB 
would never operate their respective procurement operations the way VA 
does. Congress must resolve this dysfunction, waste and inefficiency, 
as VA continues to demonstrate it is incapable of doing so.
    H.R. 2781 addresses participation by service-disabled veteran-owned 
and veteran owned small business in contracts under the Federal 
Strategic Sourcing Initiative. Our concern is how VA will implement 
this legislation. VA demonstrated in implementing its Veterans First 
Contracting Program under Public Law 109-461, the Veterans Benefits, 
Healthcare and Information Technology Act of 2006, its conservative and 
contradictory stand on legislation benefiting Veteran small businesses. 
It took the Supreme Court of the United States to resolve this issue. 
In the case of H.R. 2871, we believe the Congress should explicitly 
state its intent in this and any other legislation addressing VA 
procurements in the context of Veteran small businesses, whereby 
nothing in the legislation should be construed as relieving VA's 
obligation of applying the ``Rule of Two'' consistent with the court's 
decision to all competitive VA procurements. Not to do so, we believe, 
will likely result in another misguided VA implementation which 
provides VA with a loophole in applying the ``Rule of Two.''
    The coalition fully supports H.R. 2006, the ``VA Procurement 
Efficiency and Transparency Act,'' which we believe will add great 
utility in VA capturing and understanding its cost savings. 
Additionally, the use of standardized templates in the conduct of 
procurements VA-wide should improve the quality of VA solicitations and 
the contracts awarded resulting from those solicitations. It is clear 
from the quality of some solicitation issued, supervisory personnel are 
not monitoring or reviewing the quality of solicitations issued.
    The National Veterans Small Business Coalition supports H.R. 2749, 
the ``Protecting Business Opportunities for Veterans Act of 2017.'' 
This legislation is consistent with the U.S. Small Business 
Administration's amended regulations allowing for subcontracting of 
opportunities with ``similarly situated'' small business concerns, 
without said subcontracting counting against the prime contractor's 
limitation on subcontracting. ``Similarly situated'' small business 
concerns are those with the same socioeconomic procurement preference 
program status, i.e., SDVOSB to SDVOSB, WOSB to WOSB, SDB to SDB, etc. 
We believe; however, H.R. 2749 would be strengthened by indicating in 
the context of VA procurements conducted pursuant to VA's Veterans 
First Contracting Program (38 U.S.C. Sec.  8127) that a ``Similarly 
situated'' SDVOSB or VOSB must have been verified by VA's Center for 
Verification and Evaluation and listed in VA's Vendor Information Pages 
(VIP) Database to be truly ``similarly situated''. This important 
distinction will ensure verified SDVOSBs and VOSBs do not subcontract 
to non-verified SDVOSBs and VOSBs, although those businesses are 
``similarly situated'' in they have the same socioeconomic procurement 
preference program status. Under VA's program, an SDVOSB or VOSB is not 
recognized by VA as such, at the prime or subcontracting level, until 
the firm undergoes verification by VA's Center for Verification and 
Evaluation.
    In closing, Mr. Chairman and Ranking Member Kuster, we would like 
to call to your attention VA has flatlined its SDVOSB and VOSB goals 
since Fiscal Year 2010, despite substantially exceeding these goals 
each year. We have provided a chart to the subcommittee which tracks 
VA's goals and accomplishments for the last 11 fiscal years. You can 
appreciate how disturbing this chart is to Veteran entrepreneurs and 
the coalition.
    Clearly, for all intent of purposes, such low goals are truly 
meaningless and call into question the strength and effectiveness, if 
not legitimacy, of VA's advocacy on behalf of Veteran small businesses. 
VA's Fiscal Year 2014 goals were not communicated to VA personnel until 
only 38 days remained in the fiscal year. A recent Freedom of 
Information Act Request revealed VA's Secretary did not issue any 
goaling memoranda for Fiscal Years 2015 and 2016, and the Fiscal Year 
2017 goals were not issued until May 25, 2017, with only 128 days 
remaining in Fiscal Year 2017. We ask and hope you will use your 
considerable influence to encourage the Subcommittee on Economic 
Opportunity to hold a hearing for VA to explain and account for its 
goals and advocacy to the subcommittee and America's Veterans.
    This completes my statement and I will be happy to answer any 
questions you may have.

    Note: The chart detailing VA's SDVOSB and VOSB Goals and 
Accomplishments for Fiscal Years 2005 through 2016 referenced in this 
testimony is incorporated by attachment and made a part of this 
statement.

[GRAPHIC] [TIFF OMITTED] T9688.001


                                 
                       Statements For The Record

             The Associated General Contractors of America
    The Associated General Contractors of America (AGC) is the largest 
and oldest national construction trade association in the United 
States. AGC represents more than 26,000 firms, including America's 
leading general contractors and specialty-contracting firms. Many of 
the nation's service providers and suppliers are associated with AGC 
through a nationwide network of chapters. AGC contractors are engaged 
in the construction of the nation's commercial buildings, shopping 
centers, factories, warehouses, highways, bridges, tunnels, airports, 
waterworks facilities, waste treatment facilities, dams, water 
conservation projects, defense facilities, multi-family housing 
projects, site preparation/utilities installation for housing 
development, and more.
    2300 Wilson Boulevard, Suite 300 Arlington, VA 22201, Phone: (703) 
548-3118
    AGC is a national association of more than 26,000 businesses 
involved in every aspect of construction, with 92 chapters representing 
member companies in every state. The construction industry has 
historically supported and provided opportunities for our nation's 
veterans. For years, AGC has worked with the U.S. House Veterans' 
Affairs Committee to establish more protections and better governing 
policies for America's veteran owned businesses. AGC appreciates and 
thanks the committee for its continued efforts to help our nation's 
veterans, veteran owned businesses, and service-disabled veteran owned-
small businesses.
    The primary mission of the U.S. Department of Veterans Affairs (VA) 
is to dutifully care for the health of our nation's veterans. To 
support that mission, the VA has over 1,800 facilities ranging from 
large hospitals to small out-patient clinics and office buildings 
throughout the country. Within the VA, the Office of Construction and 
Facilities Management (CFM) and a system of 23 separate Veterans 
Integrated Service Networks (VISNs) under the Veterans Health 
Administration (VHA) support construction and maintenance needs of the 
agency's facilities. As mandated by law, CFM executes projects valued 
$10 to $100 million and the VISNs execute projects equal to or less 
than $10 million. CFM does not have authority over the VISNs 
construction program and there appears to be little coordination 
between the two entities. It is clear that the mission of the VA is 
broad and therefore it is essential to delivering a construction 
project in a safe, efficient and timely manner. Thus, it is critical 
that the VA is adequately prepared to meet the real challenges of 
delivering high-quality facilities and infrastructure worthy of our 
nation's veterans. A significant impediment to meeting this complex 
challenge is the quality of training within the VA.
    The VA does have several qualified experts when it comes to 
designing and constructing medical facility projects and is taking 
steps at CFM to train their resident engineers more effectively. 
However, not all VA construction representatives and, especially, 
contracting officers have such requisite expertise or the ongoing 
training requirements necessary to deliver high-quality health care 
facilities that the nation's veterans deserve. As such, to the extent 
previous reforms have not already done so, the VA should require its 
construction representatives and especially contracting officers that 
oversee construction contracts to receive sufficient training on topics 
including but not limited to contract administration and management, 
the Federal Acquisition Regulation, and project management. Such 
training should apply to both the major and minor construction 
programs. At least a portion of the construction management-side of 
this training must be administered through industry-recognized and 
well-qualified private construction management training organizations 
or institutions. The draft bill to ``improve the hiring, training, and 
efficiency of VA acquisition personnel and organizations'' initiates 
important steps to improve training for the VA personnel. AGC supports 
this draft bill and urges the committee's support it in its entirety.
    The problem for many construction businesses contracting with the 
VA is not that they cannot adjust to meet the changes required to 
complete the project as the VA desires. Rather, the issue is that many 
at the VA lack proper training, and this lack of training creates a 
flow down of problems that affect the construction project. For 
example, the VA, along with other federal agencies, take months and 
sometimes a year or more to issue a formal change order notice that a 
contractor should perform work to address the change-making the agency 
liable for payment for the work performed. Even after the decision to 
issue a change order is made, a small business contractor may not 
actually receive payment for that change order work for a considerable 
period of time. This is a problem can involve not only the VA 
construction field representatives, but also contracting officers. 
Because of schedule requirements under the contract, some construction 
contractors perform this change order work without waiting for the 
formal change order notice from the federal agency. These problems were 
most recently publicized on the Department of Veterans Affairs' Aurora 
Hospital project outside Denver, Colorado.
    On the VA Aurora Hospital project, the inability of the VA to 
process contract modifications left the general contractor and its 
subcontractors without payment for extended periods of time with severe 
consequences. For example, between September 2011 and September 2012, 
the VA stopped processing change orders tied to the southern clinic 
building then under construction. \1\ Construction companies rely on 
prompt payments to meet payroll and expenses, often unable to cover 
those costs for very long. \2\ Many rely on bank loans and lines of 
credit to bridge the gap, but on the Aurora project some banks balked 
at letting small business clients rely on its money to continue work. 
\3\ According to the Colorado SBA, at least 33 small businesses were 
not paid for work in a timely fashion, and some were waiting more than 
a year after work was completed for payment. \4\ Of those 33 companies, 
at least two filed for bankruptcy. \5\ The prime contractor even paid 
subcontractors several million dollars out of its own pockets while 
waiting for payment from the VA, which was highly unusual. \6\
---------------------------------------------------------------------------
    \1\ David Migoya & Mark Matthews, Aurora VA Hospital Project 
Spooked Subcontractors, Causing Cost Hikes, DENV. POST, May 15, 2015 
available at http://www.denverpost.com/ news/ci--28125325/ aurora-va-
hospital-project-spooked-subcontractors-causing-cost
    \2\ Id.
    \3\ Id.
    \4\ Cathy Proctor, SBA: Progress being made on Helping Unpaid VA 
Hospital Subcontractors, DENV. BUS. J., April 4, 2013 available at 
http://www.bizjournals.com/ denver/news/2013/04/04/ sba-urges-va-to-
speed-payments-for.html
    \5\ Id.
    \6\ Id.
---------------------------------------------------------------------------
    While the project in Aurora is a recent and, unfortunately, well-
known example, problems with processing change orders happen in every 
federal construction agency on a regular basis. The problem is that 
those change order delays are happening on projects worth $5 million, 
$10 million and $100 million, on which Congress does not ordinarily 
conduct oversight. The issue is that when the dollar amount is not 
high, and media attention is not existent, meaning that there's a lack 
of public outrage, the problems persist but go unnoticed by everyone 
except the small business that may have to close its doors.
    AGC has found that recently, there have been some signs of an 
improving culture at the VA, particularly at CFM. AGC members note that 
there has been noticeable difference in VA's attitude on at least some 
large project construction sites. As opposed to the past, the right 
parties in the VA are beginning to coming to the table to better guide 
design and construction decisions. There is noted faith in the 
leadership of the VA and its construction leadership that they can and 
are having some success influencing positive change. These positive 
changes have been identified on major construction program projects-
governing projects above $10 million-overseen by the VA's CFM.
    Small business AGC members, including service-disabled, veteran-
owned small businesses, have not seen much, if any, relief. These 
contractors preform most of their work through the minor construction 
program-governing projects at or below $10 million-at the VA. Generally 
speaking, a $5 to $10 million project is significant for small 
businesses and is a significant construction project on its own. The 
minor program is generally overseen on a regional basis through the 
Veterans Health Administration and its 23 individual offices, called 
VISNs. Small business AGC members find that the VISN offices have 
little or no construction training or expertise. Similarly, there 
appears to be little or no accountability for VISNs when it comes to 
delivering construction projects on time and on budget. The well-
documented problems large construction businesses had at the various 
major VA hospital projects continue to happen in the minor construction 
program to small businesses, which have fewer resources available to 
handle long change order payment delays and protracted litigation with 
a federal agency.
    As such, AGC strongly encourages this committee to work with the 
construction industry to improve training at the VA, especially for the 
minor construction program. Through such better training, we hope 
reform can be implemented that will help the VA, the construction 
industry, and our nation's veterans.
    Thank you again for inviting AGC to testify on these important 
topics to America's veterans. We look forward to following up with you 
on several items, including:

      Improving Training for VA Construction Employees;
      Improving VA Design and Construction Standards/
Specifications;
      Conducting oversight on VA delays with issuing change 
orders on business construction contracts; and
      Addressing problems in the VA's Minor Construction 
Program.

    Thank you for your time and consideration.

                                 [all]