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


  ACHIEVING GOVERNMENT-WIDE VERIFICATION OF SERVICE-DISABLED VETERAN-
                         OWNED SMALL BUSINESSES

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

                             JOINT HEARING

                               BEFORE THE

       SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT, AND REGULATIONS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS

                                AND THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                     COMMITTEE ON VETERAN'S AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             JULY 17, 2018

                               __________
                               
 
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            Small Business Committee Document Number 115-085
             Available via the GPO Website: www.govinfo.gov
             
             
                               __________
                               

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                      RALPH NORMAN, South Carolina
                           JOHN CURTIS, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Trent Kelly.................................................     1
Hon. Alma Adams..................................................     2
Hon. Jack Bergman................................................     4
Hon. Ann McLane Kuster...........................................     5

                               WITNESSES

Mr. Thomas J. Leney, Executive Director, Small and Veteran 
  Business Programs, United States Department of Veterans 
  Affairs, Washington, DC........................................     7
Mr. Robb Wong, Associate Administrator, Office of Government 
  Contracting and Business Development, United States Small 
  Business Administration, Washington, DC, joint with Mr. William 
  Gould, Senior Advisor, Office of the Administrator, United 
  States Small Business Administration, Washington, DC...........     8
Mr. Davy G. Leghorn, Assistant Director, The American Legion, 
  Washington, DC.................................................    11

                                APPENDIX

Prepared Statements:
    Mr. Thomas J. Leney, Executive Director, Small and Veteran 
      Business Programs, United States Department of Veterans 
      Affairs, Washington, DC....................................    26
    Mr. Robb Wong, Associate Administrator, Office of Government 
      Contracting and Business Development, United States Small 
      Business Administration, Washington, DC, joint with Mr. 
      William Gould, Senior Advisor, Office of the Administrator, 
      United States Small Business Administration, Washington, DC    32
    Mr. Davy G. Leghorn, Assistant Director, The American Legion, 
      Washington, DC.............................................    34
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.

 
      ACHIEVING GOVERNMENT-WIDE VERIFICATION OF SERVICE-DISABLED 
                     VETERAN-OWNED SMALL BUSINESSES

                              ----------                              


                         TUESDAY, JULY 17, 2018

                  House of Representatives,
               Committee on Small Business,
    Subcommittee on Investigations, Oversight, and 
                                       Regulations,
                             joint with the
       Subcommittee on Oversight and Investigation,
                     Committee on Veterans Affairs,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 2:05 p.m., in 
Room 2360, Rayburn House Office Building, Hon. Trent Kelly 
[chairman of the Subcommittee on Investigations,
    Oversight, and Regulations] presiding.
    Present from Subcommittee on Investigations, Oversight, and 
Regulations: Representatives Kelly, Marshall, and Adams.
    Present from Subcommittee on Oversight and Investigation: 
Representatives Bergman, Arrington, Dunn, Poliquin, Kuster, and 
Lamb.
    Chairman KELLY. Good morning. I call this hearing to order. 
I would like to welcome everyone to today's hearing. I am 
pleased to host Chairman Bergman and his fellow members of the 
Subcommittee on Investigations and Oversight to discuss a topic 
of great importance to both of our Committees. They have been a 
great ally to our Committee over the years in discussing many 
of the issues important to veterans small business owners.
    We are here today to examine a challenge that many service-
disabled veterans small business owners face in doing work with 
the Federal Government.
    The service disabled veteran-owned small business or SDVOSB 
contracting program is crucial for veteran entrepreneurs and 
the Federal agencies they work with.
    However, there are two similar yet separate and conflicting 
verification programs at two different agencies.
    Both the Department of Veterans Affairs and the Small 
Business Administration operate procurement programs for 
SDVOSBs. There are number of differences between the two 
programs but the central issue is simple. VA proactively 
verifies SDVOSBs before they can compete for set-aside 
contracts while SBA allows SDVOSBs to simply self-certify.
    This can create inconsistent outcomes, such as a business 
qualifying as an SDVOSB for VA contracts but not other Federal 
agency contracts or vice versa. And while SBA certified 
businesses awards are subject to protest, the lack of a front 
end verification also leaves the door open for fraud and abuse.
    Since the creation of the SDVOSB preference, Congress has 
recognized the importance of streamlining the verification 
process for service-disabled veteran small business owners.
    As the title of this hearing suggests, government-wide 
verification is a viable solution to this problem. Members of 
previous Congresses recognize this, too, and they began paving 
the way.
    The National Defense Authorization Act for fiscal year 2017 
instructed SBA and VA to unify the definitions for SDVOSBs and 
begin moving regulatory responsibility from VA to SBA.
    I hope this hearing provides the opportunity to learn more 
about the progress both agencies have made.
    I was pleased to see that the administration also 
recognizes the importance of streamlining these programs.
    President Trump's reform plan for the Federal Government 
released just last month cites the need for a one-stop-shop for 
small business Federal procurement programs.
    SBA has already made a head start through the launch of 
their website Certified.SBA.Gov, and we are committed to 
working with them to see it through.
    While the concept may seem simple, we know developing a 
single government-wide verification system for SDVOSBs will 
require a lot of work on the part of the SBA, VA, and the 
congressional committees who will oversee it.
    Past joint hearings between our committees have revealed 
many critiques of VAs verification program, and we must ensure 
that those mistakes are not repeated.
    We also must make certain there is proper congressional 
oversight and that set-aside contracts are going to true 
service-disabled veterans small business owners.
    I hope we can have a productive conversation today to 
answer many of the questions that still remain.
    I am also pleased that representatives of SDVOSB community 
are here to bring their perspective into the conversation.
    I now yield to our Ranking Member, Ms. Adams, for her 
opening statement.
    Ms. ADAMS. Thank you, Mr. Chairman. Good afternoon.
    Thank you for holding this important hearing. It is my 
pleasure to be here as we discuss a critical topic that impacts 
our nation's veterans and identify ways to improve their access 
to the federal contracting marketplace and entrepreneurial 
development.
    These courageous individuals deserve not only our enduring 
gratitude, but also the opportunity to build a new life after 
their many years of military service.
    One of the most important tools we currently provide is the 
contracting preference program to ensure greater participation 
of veterans in the Federal marketplace.
    In fact, the service-disabled veteran-owned small business 
procurement program disbursed almost $18 billion through over 
170,000 contracts in fiscal year 2017.
    SDVOSB awards accounted for approximately 4.05 percent of 
Federal contracts, which exceeded the 3 percent statutory goal.
    Notably the government awarded 5.29 percent or $23.4 
billion of its prime contracts to veteran-owned small 
businesses.
    With this accomplishment, it should be applauded, but it 
should also point out that these growing numbers show an 
increasing need for higher utilization of emerging veteran-
owned small businesses throughout the government.
    It is clear that the structure and resources of the program 
have not kept pace with its growth creating concerns that the 
contracts could be diverted from legitimate service disabled 
veteran-owned firms to non-veteran businesses including large 
corporations.
    Fortunately, steps are being taken to address these 
anxieties. One step involves changing the certification 
process, specifically moving from self-certification to 
enabling SBA to certify all veteran-owned businesses alongside 
several disabled veteran-owned businesses, increases confidence 
around their certifications.
    Such a simple modification can foster more participation of 
veterans in the Federal marketplace.
    Previously, GAO has found that the less rigorous 
verification process has allowed ineligible nonservice disabled 
veteran firms to win contracts set aside for veterans through 
fraudulent front companies posing as veterans and pass-
throughs. As a result, millions of dollars were diverted away 
from legitimate small business owned by veterans.
    To prevent these abuses, VA complied with GAO's 
verification recommendations from a 2013 report, and the agency 
has seen significant improvements.
    As our committees have heard, verification times decrease 
by more than 50 percent, and the VA has increased its number of 
cite visits to 606 in fiscal year 2015.
    However, there are many areas that need work. Currently, it 
takes approximately 73 days to process certification 
applications and a sizeable backlog still exists.
    For many reasons, the VA has proposed to move verification 
and certification responsibilities to SBA. The VA has also 
suggested revising program regulations to streamline and align 
requirements to reduce the burden on contractors.
    So I look forward to discussing these changes today. 
Today's hearing will focus on the progress of the Department of 
Veteran Affairs and the Small Business Administration in 
implementing sections of fiscal year 2017, National Defense 
Authorization Act.
    It is my hope that we will also establish SBA's ability to 
take on the remaining VA verification functions and discuss the 
need to authorize a veteran specified entrepreneurial education 
program.
    Given that your entrepreneurship remains a viable career 
path for many veterans, we must ensure that they have the 
support they need to start and grow their business.
    I think I can speak for all the Members today in saying 
that we do whatever it takes to help all veterans, including 
those disabled in the line of duty to overcome the challenges 
they face in today's economy.
    And with that, Mr. Chair, I want to thank the witnesses for 
appearing before the joint subcommittees this afternoon.
    Thank you, and I yield back.
    Chairman KELLY. Thank you, Ms. Adams. I now yield to the 
Chairman of the Subcommittee of Oversight and Investigations, 
Mr. Bergman, for his opening statement.
    Chairman BERGMAN. Thank you, Chairman Kelly.
    My colleagues from the Veterans Affairs Oversight and 
Investigation Subcommittee and I are pleased to join you today 
to discuss this important topic.
    The service disabled veteran-owned small business, or 
SDVOSB, contracting preference program is a crucial element of 
the commitment of this country, of our country, and its 
government that we make to our veterans.
    At least 3 percent of contract spending at every agency is 
set aside for SDVOSBs. VA gives even greater preferences in its 
Veterans First Program and extends those preferences also to 
veteran-owned small business.
    The Veterans First Program is not without controversy. 
Chairman Kelly and Ranking Member Adams of the small business 
Committee has been a great partner for many years working to 
ensure the program lives up to its promise.
    We have before us today a confusing bureaucratic oddity 
that should not exist. SDVOSBs contracting with the VA are 
vetted, inspected and verified. SDVOSBs contracting with the 
rest of Federal Government are not. They self-certify their 
status.
    There are effectively two classes of SDVOSBs, and it can be 
hard to tell the difference. No one knows precisely how many 
self-certified SDVOSBs are fraudulent or otherwise improper, 
but all available evidence indicates that they do exist. 
Service-disabled veterans who under go VA's thorough, some 
would say, onerous screening of their small businesses deserve 
a level playing field.
    It is unfair that companies that cannot pass muster move on 
to operate in less strict areas of the contracting world. Many 
other agencies recognize this and have attempted to require 
VA's verification, but current law and regulation do not allow 
that to happen.
    The need for government-wide verification of SDVOSBs is a 
perennial issue that has existed since the SDVOSBs preferences 
were created. Achieving it has been a long-term goal of several 
VA secretaries, SBA administrators and the Congresses. It is 
high time that we made this change.
    Frankly, it makes no sense that VA should be responsible 
for the SDVOSB program, while the small business administration 
is responsible for every other small business program.
    The previous Congress recognized this and laid the ground 
work for government-wide verification.
    The fiscal year 2017 National Defense Authorization Act 
harmonized regulatory definitions between VA and SBA and began 
transferring regulatory responsibility to SBA.
    I was encouraged to see the administration highlighted this 
issue in its Government Reform and Reorganization Plan. It 
recommends, and I quote, ``a one-stop-shop within SBA for all 
Federal contracting certifications.''
    Another quote comes to mind, slightly paraphrased. 
President Reagan said that a government bureau is the nearest 
thing to eternal life that we will ever see on this earth.
    This is too often true, but maybe not in this case. I 
credit the leadership of VA for their willingness to relinquish 
the verification function and eventually abolish the Center For 
Verification and Evaluation.
    I also appreciate the leadership of SBA's receptiveness to 
take on, perhaps, the largest and most complicated small 
business certifications program.
    The concept of government-wide verification is simple, but 
there are numerous pitfalls in its implementation that we must 
avoid. As some might say, the devil is in the details.
    VA has spent years, tumultuous years working the bugs out 
of the verification system, we should not reinvent the wheel. 
At the same time, SBA will be expected to eliminate unnecessary 
differences in eligibility rules and procedures between the 
SDVOSB program and other small business programs.
    However, verifications cannot be interrupted while the 
transfer occurs. So business owners will see minimal impact.
    Also, veteran-owned small businesses, or VOSBs, should know 
that they will not be forgotten. They will continue to receive 
the same preference in the Veterans First Program and they will 
continue to have access to verification.
    My goal is to take VA's lessons learned, SBA's expertise 
and resources, and the veteran business community's perspective 
as represented by the American Legion and put them together as 
the two committees craft bipartisan legislation in the coming 
weeks.
    Is it important to start this process out in the open with 
all stakeholders represented.
    We have to create a government-wide verification system 
that stands the test of time.
    Thank you, Chairman Kelly. And I yield back.
    Chairman KELLY. Thank you, Chairman Bergman.
    I now yield to the Ranking Member of Subcommittee on 
Oversight and Investigations, Ms. Kuster, for her opening 
statement.
    Ms. KUSTER. Thank you, Chairman Kelly, and Ranking Member 
Adams for your hospitality in hosting this joint hearing.
    According to the Small Business Administration, over 2.52 
million businesses in America are majority-owned by veterans. 
Approximately 80 percent of veteran-owned businesses employ 
less than 19 employees, meaning that a majority of these small 
businesses are actually very small.
    In fact, 54 percent of all veteran-owned businesses employ 
less than four employees.
    Based on these numbers, it is clear that veteran-owned 
small businesses are crucial to a healthy and vibrant business 
community. However, due to their incredibly small sizes, 
veteran-owned small businesses are especially impacted by our 
federal rules. They often can't afford to have a dedicated 
contract officer to ensure that they are able to maximize the 
benefits offered by veteran preference programs, and therefore 
these programs must be as simple and accessible as possible.
    In an effort to simplify access to the programs, Congress 
recently expressed support for the administration's desire to 
streamline the veteran-owned small business certification 
process.
    The legislation being discussed today will prove to be a 
pragmatic next step in ensuring that both the interpretation 
and enforcement of various veteran preference programs are 
aligned.
    Currently, both the Small Business Administration and the 
Department of Veterans Affairs have various roles and 
responsibilities throughout the certification process.
    This has led to confusion and threatens the integrity of 
the service-disabled veteran-owned small business program.
    By allowing the SBA to certify these small businesses for 
inclusion in the VA veteran-owned small business programs, we 
can address confusing and conflicting issues surrounding 
certification for various programs. All businesses will be 
certified as an eligible veteran-owned small business prior to 
applying for veteran preference programs at any federal agency.
    No longer will a company have to satisfy different 
requirements just to apply for the preference. If you're 
certified, you can apply. At the end of the day, this is a 
commonsense solution and I look forward to our discussion. I am 
sure my colleagues across the aisle will agree that this is a 
viable solution to overburdensome regulation. And I appreciate 
the Small Business Committee's commitment to our nation's 
heroes. I look forward to a productive discussion, and I yield 
back.
    Chairman KELLY. Thank you, Ranking Member Kuster.
    If Committee members have an opening statement prepared, I 
ask that they be submitted for the record.
    I would like to take a moment to explain the timing lights 
for you. You will each have 5 minutes to deliver your 
testimony. All of you are familiar with this, I think. The 
light will start out as green. When you have 1 minute 
remaining, the light will turn yellow. And, finally, at the end 
of your 5 minutes, it will turn red. I ask that you try to 
adhere as closely as possible to the time limit.
    I would like to introduce our panel of witnesses today. Our 
first witness is Mr. Thomas Leney. Mr. Leney is the Executive 
Director of Small Business and Veterans Program at the 
Department of Veteran Affairs where he oversees the procurement 
programs for veteran-owned and service-disabled veteran-owned 
small businesses. He is also a veteran of the United States 
Army, having served 22 years. Thank you for your service and 
for testifying today.
    Our second witness is Mr. Rob Wong. Mr. Wong is the 
Associate Administrator for the Office of Government 
Contracting and Business Development at the Small Business 
Administration. In this role, he oversees over $500 billion in 
total government spending within the federal marketplace, and 
ensures that small businesses can compete for federal 
contracts. Thank you for testifying today, Mr. Wong.
    Our third witness is Mr. William Gould, a Senior Advisor in 
the Office of the Administration at the Small Business 
Association. Mr. Gould has been active within an interagency 
Committee between the SBA and VA, and has played a leading role 
in the effort to streamline the verification programs. Thank 
you for being here today.
    I will now yield to the Ranking Member, Ms. Adams, to 
introduce our final witness.
    Ms. ADAMS. Thank you, Mr. Chair.
    It is my pleasure to introduce Mr. Davy Leghorn, Assistant 
Director of the National Employment and Education Division for 
the American Legion, the largest veteran service organization 
in the country. In his current capacity, Mr. Leghorn oversees 
the employment and small business portfolios, and administers 
the American Legion's National Veterans Hiring Initiative. 
Prior to joining the American Legion, he served in the United 
States Army as both a mortar infantry man and a civil affairs 
specialist.
    Welcome, Mr. Leghorn, and thank you for your service.
    Chairman KELLY. I now recognize Mr. Leney for 5 minutes.

  STATEMENT OF THOMAS J. LENEY, EXECUTIVE DIRECTOR, SMALL AND 
VETERAN BUSINESS PROGRAMS, UNITED STATES DEPARTMENT OF VETERANS 
AFFAIRS, WASHINGTON, D.C.; ROBB WONG, ASSOCIATE ADMINISTRATOR, 
  OFFICE OF GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, 
UNITED STATES SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C.; 
  WILLIAM GOULD, SENIOR ADVISOR, OFFICE OF THE ADMINISTRATOR, 
UNITED STATES SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C.; 
 AND DAVY G. LEGHORN, ASSISTANT DIRECTOR, THE AMERICAN LEGION, 
                        WASHINGTON, D.C.

                  STATEMENT OF THOMAS J. LENEY

    Mr. LENEY. Chairman Bergman and Chairman Kelly, Ranking 
Member Kuster, Ranking Member Adams, and members of the 
Subcommittees, thank you for inviting me to testify on the 
status of our efforts to implement a uniform standard for 
service-disabled veteran-owned small businesses in Federal 
contracting.
    In my capacity as executive director for VA Small and 
Veteran Business Programs, I oversee the Center for 
Verification and Evaluation that verifies veteran ownership and 
control of small businesses participating in VA's Veteran First 
Contracting Program, as part of the statutory mandate set forth 
by you in 38 USC 8127. This legislation directs VA to 
prioritize veteran-owned small businesses above all other 
categories when the VA seeks to buy goods and services.
    CVE carries out its mission to verify ownership and control 
of SDVOSBs and VOSBs and to maintain a database of those firms 
that is used by our contracting officers to determine whether a 
veterans' first set-aside is appropriate.
    As of June 30, there are more than 14,000 VOSBs in our VIP 
database. The growth and the number of verified VOSBs has made 
VA more likely to use the Veterans First Program as its 
principal means to provide access for small businesses. In 
fact, the VA has been able to increase its procurement award to 
VOSBs to more than $5.38 billion in fiscal year 2017.
    In response to the National Defense Authorization Act for 
fiscal year 2017, the VA and the SBA as worked together to 
create uniform standards for the VA and SBA programs for 
contracting with SDVOSBs. After extensive collaboration, these 
efforts are approaching completion. VA has published a proposed 
rule on January 10, 2018, and SBA published its proposed rule 
on January 29.
    The commencement period for both proposed rules--or the 
comment period, excuse me, for both proposed rules ended in 
March, and we anticipate publishing final rules before the end 
of the fiscal year 2018 to be fully compliant with your 
guidance to establish a joint rule.
    The NDAA also amended the statutory language to provide an 
appeal right for denied applicants and status protest of set-
aside awards to SBA's Office of Hearing and Appeals. These 
replaced appeal and protest procedures formally conducted by my 
office.
    SBA and VA, again, have collaborated to implement this 
guidance, and SBA published a final rule amending the Office of 
Hearing and Appeals rules on 30 March, 2018. This piece of the 
implementation is complete, and the new rules will take effect 
on October 1st, 2018. In addition, SBA and VA have reached an 
interagency agreement to cover the Office of Hearing and 
Appeals costs in deciding these matters for the VA.
    In addition to making the improvements mandated in NDAA 
2017, the VA is working closely with SBA to carry out the 
proposal to consolidate all business contracting program into 
the SBA. That was contained in the administration's proposal 
for reorganization of the executive branch.
    VA and SBA formed a joint Committee reporting to the 
deputies of VA and to examine how we can support the 
President's proposal by moving the VA verification program to 
the SBA as part of a government-wide certification program for 
SDVOSBs.
    The Committee meets monthly to address resource, 
technology, and process implications of such a move. We 
recognize that such an action will require authorizing 
legislation, and the VA stands ready to assist the SBA and the 
Committees in that effort. And we believe that based on the 
work that we are doing today with the SBA, we will enable us to 
implement this legislation promptly once passed.
    Mr. Chairman, I will be pleased to answer any questions you 
or the members may have.
    Chairman KELLY. Thank you, Mr. Leney. And I now recognize 
Mr. Wong for 5 minutes.

                     STATEMENT OF ROBB WONG

    Mr. WONG. Thank you, Chairmen, Ranking Members. I 
appreciate the opportunity to talk to you today about the 
service-disabled veteran-owned small businesses. There appear 
to be two aspects to today's hearings, one is SBA's progress 
with implementing NDAA provisions related to single uniform 
standards, and the other is SBA's future role in certifying 
SDVOSB businesses.
    As head of the SBA's program office for GCBD, which is 
Government Contracting and Business Development, both areas 
fall under our program office and my leadership. I will be 
speaking to the first topic this afternoon. On the second 
topic, I will yield to my colleague, Bill Gould, who will be 
leading our agency's engagement with the VA.
    As you know, the 2017 NDAA created a single uniform 
definition of service-disabled veteran-owned small business in 
the Small Business Act, and deleted the former VA provision. 
The law also directed SBA and the VA to develop a joint rule. 
Over the course of 2017, SBA collaborated with the VA, and in 
January of this year both agencies published proposed rules. 
The comment periods for both closed in March. SBA continues to 
consult with the VA and is on track to issue a final rule 
before the end of this fiscal year.
    The 2017 NDAA also provided an avenue for protests and 
appeals involving the VA, the VA's CVE program. These are now 
being decided by SBA's Office of Hearings and Appeals, or OHA. 
SBA published a final rule implementing these provisions at the 
end of March. This has an effective date to coincide with the 
SBA's anticipated issuance of the ownership and control rule 
discussed previously. With this change, the VA will reimburse 
OHA for deciding the matters related to the VA's program.
    Let me next briefly preview the second topic, 
certification. Currently, SBA certifies businesses in the 8(a) 
Business Development program and the HUBZone program. And we 
have a legislative mandate to establish the certification 
program for a third program, which is the Women-Owned Small 
Businesses. At this time we are in the exploratory phase with 
the VA of considering whether SBA should also certify the 
SDVOSBs.
    This is an idea and an opportunity that Administrator 
McMahon has discussed personally with then acting VA Secretary 
Wilkie. Through their leadership, the agencies have been 
engaged in regular discussions for which SBA has been led by my 
colleague, Bill Gould. For further detail, I will allow him to 
outline our activity and interactions with the VA. For my part, 
let me say that this is an idea that we like. We are moving 
forward, but we are also--we also need to get this one right.
    This is a huge task with new authority and responsibility 
and also potential new benefits. For the communities that we 
serve through this program, continuity of business operation is 
critical for veterans, and also their ease of use in applying. 
We also understand that we need to make this process easy for 
the government to get to a quality solution that supports our 
veterans and our government.
    Thank you for the opportunity to testify today. I look 
forward to your questions. Thank you.
    Chairman KELLY. Thank you, Mr. Wong. And I now recognize 
Mr. Gould for 5 minutes.

                   STATEMENT OF WILLIAM GOULD

    Mr. GOULD. Thank you for allowing me the chance to update 
you on SBA's collaboration with the VA on certification of 
service-disabled veteran-owned small businesses or SDVOSBs.
    On behalf of the agency and the SBA administrator, I have 
been leading the SBA team on our engagement with the VA. The 
SBA and VA formed a working group in December of 2017. The 
group consists of six members each from the VA and SBA from 
different parts of the organizations. We meet monthly to 
discuss progress, address questions, and plan next steps.
    Among the areas that we have been reviewing are 
certification process details, IT system discussions in and 
around compatibility and data migration, and legislative, 
regulatory, and funding implications. As Robb mentioned, this 
is a good opportunity for the Federal government and our 
customers. However, we have many items to work through before 
we get there.
    To give you a sense of the size and scale of this proposal, 
SBA processes around 3,500 applications a year for our current 
certification programs. The 8(a) program and the Historically 
Under-utilized Business Zone program, also known as the HUBZone 
program. The VA, on the other hand, is processing around 15,000 
applications per year. SBA's future lies in a single unified 
certification program with consistent terminology, similar 
documentation requirements, and the same timelines. All 
operating on a single information technology system. Each of 
the current certifications will require changes to the rules 
and regulations governing it. Some legislative, some 
regulatory, and some just procedural.
    SBA's currently in the process of unifying the full 
certifications into the newly launched Certify.SBA.gov system. 
This will have two major benefits. A simplified user 
experience, and a synchronized process and single dataset for 
SBA to manage.
    The small business owner will be able to log in and see her 
certifications and status. She will be able to apply for 
additional certifications by only having to submit the 
additional documents, not starting from scratch. For the SBA, 
this will have the major benefit of having certification data 
in a single system, allowing personnel access to small 
business's data across all its certifications. With processes 
consistent across the certifications, personnel should be able 
to analyze and process any application received rather than be 
specialized in a particular program.
    The Women-Owned Small Business or WOSB program will be the 
next certification to go into the certified system. This will 
happen during the next fiscal year. Taking advantage of the 
processes established by the previous two certifications, 
making it a government-wide--and thereby making WOSB a 
government-wide recognized certification.
    Because of the similarity between WOSB and the SDVOSBs 
certifications, we will have set the groundwork for the 
migration of the SDVOSB certification from the VA. The biggest 
factor in WOSB and SDVOSB certification is estimating the 
volume of applications, and having the personnel and system 
capability to digest the potentially huge numbers.
    Remember, 3,500 is what we are currently doing now, another 
15,000 from SDVOSBs and 15,000 WOSBs. So we are moving from 
3,500 to over 35,000 per year. When we establish the WOSB 
process and requirements, which we estimate to be a similar 
number to the VA, the VA volunteered to adjust its current 
certification process to more closely align with the SBA's 
process to help ease the transition. This is currently still 
being discussed between the organizations in our working group.
    Additionally, the working group is developing plans for 
marketing the new government-wide certification across 
government and business community to increase awareness and the 
opportunities for SDVOSBs. Government contracting officers and 
program managers need to have a solid understanding of the new 
certification in order to issue contracts to these newly 
certified entities. And small business owners need to 
understand the process and value of this new certification.
    I hope that this gives you a broad sense of the discussion 
perimeters between our two agencies as well as an appreciation 
for the scope of this project. There will be a lot of work to 
be done, but we are making good progress. We certainly welcome 
your continued interest and engagement as part of this 
progress.
    Thank you again for the opportunity to testify today, and 
we look forward to addressing any questions you may have.
    Chairman KELLY. Thank you, Mr. Gould. And we now recognize 
Mr. Leghorn for 5 minutes.

                  STATEMENT OF DAVY G. LEGHORN

    Mr. LEGHORN. Chairman Bergman, Chairman Kelly, Ranking 
Member Kuster and Adams, and distinguished members of both 
Subcommittees on behalf of our national commander, Denise 
Rohan, and the 2 million members of the American Legion, we 
thank you for the opportunity to testify this afternoon.
    We are privileged to present our position on the Small 
Business Administration's ability to assume the functions of 
the Department of Veteran Affairs, Center for Verification and 
Evaluation. Currently, 13 CFR, Part 125, and 38 CRF, Part 74, 
outline similar rules and regulations for service-disabled 
veteran-owned small businesses applying for certification.
    Earlier this year the Federal Government initiated an 
alignment of regulations governing SDVOSB definitions, however, 
as the American Legion noted in previous testimony, the 
regulations have always been similar. Problems arise from 
inconsistent enforcement between VA and SBA. Despite 
maintaining similar regulations, VA requires businesses 
applying for SDVOSB status to address size, ownership, and 
control issues prior to agency certification.
    In contrast, SBA allows businesses to self-certify that 
they meet the requisite regulatory threshold to be considered 
SDVOSBs. Self-certification permits businesses to qualify for 
all Federal contract awards with the exception of the Veterans 
First Contracting Program within VA. SBA does not have a front-
end process to verify the authenticity of SDVOSBs and relies on 
community policing and status protests to maintain programmatic 
integrity.
    The problem with having two SDVOSB identification processes 
is simple. It creates confusion for contracting officers 
seeking to award contracts to SDVOSBs, and it creates confusion 
for veteran companies attempting to gain certification. Absent 
statutory requirement, many state and federal agencies often 
inquire whether a veteran business is certified by VA-CVE, as 
such, many veteran companies acquire CVE certifications when 
they do not need it.
    Deconflicting SDVOSB certifications goes beyond the move 
towards a single set of regulations. It also requires the 
consolidation of accrediting processes to a singular certifying 
agency. The Federal Government's reevaluation of the SDVOSB 
certification will likely shift verification responsibilities 
from VA to SBA. The American Legion supports the 
administration's plans to consolidate the verification process 
to the SBA.
    SBA has a proven workflow platform that can potentially 
handle SDVOSB certifications. VA will likely continue 
validating veteran and service-connected disability status, but 
SBA will verify size, ownership, and control standards.
    The American Legion makes the following recommendations. In 
soliciting comments, SBA proposed to amend the definition in 13 
CFR, Part 125.11 by incorporating the language from VA's 
regulations, and also from SBA's 8(a) Business Development 
program regulations. Currently, the SDVOSB is a set-aside 
program and not a business development program. The alignment 
of the regulations will in essence hold SDVOSBs to the same 
standard and rigor of the BD programs, but they will receive 
none of the benefits.
    The American Legion believes the incorporation of BD 
assistance into SDVOSB program is the logical next step and 
consistent with the regulatory merging of 13 CFR, Part 125.11, 
with 8(a) language, and the perspective move of current CVE 
responsibilities to SBA.
    Lastly, the American Legion believes that moving the 
verification program is not a punitive measure. VA has done 
much to establish SDVOSBs as a credible workforce. VA invested 
in the implementation of the Vets First, and a verification 
program with agency-generated funds.
    CVE overcame many programmatic hurdles since its inception, 
and VA's investment proved to State and Federal agencies the 
value of veteran businesses as a preferred contracting group.
    However, the veteran and small business industrial base--
however, for the veteran and small business industrial base to 
grow beyond just the Vets First program, verification must 
leave the confines of the VA. With the move towards a singular 
standard for SDVOSB definition, the shifting of appellate cases 
to the SBA's Office of Hearing and Appeals, and SBA's 
successful integration of Certify.SBA.Gov, this is the right 
time to hand verification off to the SBA and sunset the system 
of self-certification.
    Chairman Bergman, Chairman Kelly, Ranking Members Kuster 
and Adams, and distinguished members of both Subcommittees, we 
thank you for the opportunity to explain the position of the 2 
million members of the American Legion.
    And I look forward to answering any questions you may have.
    Chairman KELLY. I now yield myself 5 minutes for my round 
of questions.
    And, Mr. Gould, I am going to start with you. I would like 
to start with a general question. You have been discussing the 
concept of government-wide verification with the VA for some 
time, can you give us a progress report on the problems you 
have solved and the ones that still remain, and specifically, 
one of the problems I would like for you to address is going 
from 3,500 to 35,000 verifications or processes, that is quite 
a jump.
    And so kind of tell me what you are doing to address to 
make sure there is continuity, and that we don't drop a whole 
lot or get big backlogs with that number increase so much.
    Mr. GOULD. Well, you asked for a solution, sir, and we are 
not quite there yet, to be perfectly frank. That is a huge, 
huge number. What we are doing now, as I mentioned in my 
testimony, we are trying to consolidate the certification 
programs that we have now, and unify them into a single 
certification program, so that there is consistency in the 
terminology and how we are managing our certification programs.
    So when this monster lands on our lap, we are able to--we 
are able to process this in a much more efficient way. And we 
are working with the VA to understand what their certification 
processes are so that we can incorporate some of their best 
practices into how we are managing all four of these 
certification programs that we have upcoming.
    Chairman KELLY. And what variables are you considering in 
order to fund an effective and responsible verification program 
at SBA?
    Mr. GOULD. Could you clarify?
    Chairman KELLY. Variables, I mean, that is a lot. So there 
is going to be a lot of funding. What variables are you 
considering in deciding how funding you need, or you need to 
ask for and those kind of things?
    Mr. GOULD. The variables are--the primary variable is 
number of applicants we are going to receive. That is the 
primary variable, and it is unknown. Right? We honestly don't 
know. That is the primary variable. And we just don't know how 
many people are going to want a full-blown government-wide 
certification versus a self-certification, because I think 
Chairman Bergman noted that it is an onerous process that some 
may or may not want to take on.
    Chairman KELLY. And, Mr. Wong, I understand that SBA 
intends for the service-disabled veteran-owned small business 
certification process to take place at Certify.SBA.gov, along 
with all other small business certifications. Can you walk me 
through what this would look like?
    Mr. WONG. Well, I can try. So, in general, if you want to 
look at it this way, you know--you know, as Bill said, this is 
a monster, right? So it is like the old joke right, how do you 
eat an elephant? Right? One bite at a time. Okay.
    So what we have been doing, we have actually taken this 
opportunity knowing this was coming, in our meetings we are not 
just talking about how we are going to look at the service-
disabled veteran-owned program, and the way that we are 
processing these. We are taking the opportunity to realize that 
with the staff we have, as an example, we have roughly 60 to 70 
people that do 5,000 applications.
    If we take all of these in total, we are going to need 
roughly 18 times that. Well, that isn't happening. So we have 
got to do more with the people we have.
    So really what we are doing, if you look at my wall back in 
the office, we are basically taking the 8(a) program, which is 
30 years old. We think we do that pretty well. We take the 
elements of eligibility that we have, and roughly there are 
nine of these, and then you have seven of these, I think, for 
HUBZone, and then you have four of these for WOSB, and then you 
have other elements that we can add to service-disabled 
veteran.
    What they are trying to do is eliminate one of your primary 
concerns for the government, is to make sure that truly valid 
companies are getting these contracts. And so what we are 
trying to do is we have been working in four different silos, 
and what we are trying to do now is basically to take people, 
and the concept that we are looking at right now is to take our 
staff and turn them into analysts.
    We have the initial processing, in general, get to what we 
call an initial recommendation to the agency. And then from 
that point, we have the processing of the 15,000 excuse me, the 
30,000 applications that we have, potential 30,000 applications 
we have, and then we are going to probably--you know, we are 
looking at different scenarios of where we can take the power 
of the people that we have, make them analysts of the things 
that have been processed beforehand. We are trying to find more 
efficiencies there.
    Chairman KELLY. And just--I have 30 seconds left. Is it 
possible that many of the firms that previously self-certified 
with SBA will need to learn a new process to become verified?
    Mr. WONG. I think the answer is yes. I mean, self-
certification with--you know, I have been in this industry 
before and I have seen how people do it. I think that--I would 
just say this, the more formal process I think will bring more 
order to the system.
    Chairman KELLY. Thank you. And I now yield--I yield back my 
time. And now yield to the Ranking Member, Ms. Adams, for her 
questions.
    Ms. ADAMS. Thank you, Mr. Chairman. Mr. Leghorn, previous 
witnesses have stated that generally veterans hire other 
veterans. Moreover, service-disabled veteran-owned small 
businesses are much more likely to hire other veterans with 
disabilities or join with other such businesses to compete for 
a contract.
    Can you discuss the successes of veterans hiring veterans, 
and what impact that plays to vets coming home and 
transitioning to civilian life?
    Mr. LEGHORN. Ma'am, thank you for your question. And in 
terms of--one of the main reasons why the American Legion does 
such extensive work with the veteran-owned small business 
community is because we know that veterans hire veterans, and 
we see it every day. We have an extensive small business task 
force, and we meet regularly. And one of the things that we 
always talk about is rolling all the employment initiatives 
around the stuff that they are doing.
    So, you know, this is something that is very important to 
us, and we constantly talk about it, and we are hoping to make 
a dent in veterans' employment through our advocacy in veterans 
small business.
    Ms. ADAMS. Okay. So do you feel that breakdowns that 
individual agencies have impeded the ability of veterans to 
enter the Federal marketplace?
    Mr. LEGHORN. I am sorry. Can you repeat that question?
    Ms. ADAMS. Do you feel that breakdowns at individual 
agencies have impeded the ability of veterans to enter the 
federal marketplace?
    Mr. LEGHORN. You know--and that is one of the issues that I 
think SBA verification will solve, because right now with self-
certification a lot of contracting offices are unsure about 
veteran-owned small businesses, and their risk averse, and they 
are less likely to award contracts to a veteran firm that is 
self-certified.
    So--and a lot of agencies outside of VA, what--they are 
asking for CVE certification, when statutorily they are not 
supposed to. So that does impede federal contracting.
    Ms. ADAMS. Okay. Let me move to Mr. Leney. VA has made 
major achievements in small business contracting, particularly 
with the dollars awarded to SDVOSBs, however, this Committee 
has heard that small businesses were deprived of billions in 
contracting dollars prior to the Kingdomware decision. So have 
you seen improvements and solicitations for veteran-owned and 
SDVOSBs at the VA and other agencies since then?
    Mr. LENEY. Yes, ma'am. In fact, as we look at the 
difference between 2016, which is the year of the Supreme Court 
decision, and--or 2015, before the Supreme Court decision, and 
2017, the year after the Supreme Court decision, we saw a 50 
percent increase in the award of procurement awards to SDVOSBs 
and a 43 percent increase to veteran-owned small businesses.
    Ms. ADAMS. Okay. Thank you. So given the verification of 
veteran small business contracting programs will be moving to 
the SBA, how can our Committee--both of our Committees--help 
ensure that there is an increase in technical assistance 
provided to the VOSBs and SDVOSBs by the VA, now that this 
function will be transitioned?
    And that is for any person on the panel, all of you may 
answer.
    Mr. LENEY. Let me take a stab at that. As we transfer the 
verification program to SBA certification, SBA still takes the 
lead in the development of small businesses and we support the 
SBA program in that regard, and it won't change really what we 
do in that arena. What it merely does is helps consolidate and 
gain efficiencies to the certification program.
    Ms. ADAMS. Okay. Mr. Wong?
    Mr. WONG. Yes, ma'am. In a word, funding. Just to make sure 
that we have that and we that have the support, and also to 
make sure we go government-wide I think would be the most 
helpful.
    Ms. ADAMS. All right. Mr. Gould?
    Mr. GOULD. Just to echo what they both said. I think we 
need the funding, and your support to make it successful.
    Ms. ADAMS. Okay. Mr. Leghorn, you have got the last leg up.
    Mr. LEGHORN. So one thing I would say is that I think there 
is still a reason why VA needs to stay in the process, they 
still have to verify veteran status, and also service-connected 
disability status.
    Ms. ADAMS. Great. Thank you, gentlemen.
    Yield back.
    Chairman BERGMAN. [Presiding.] Thank you, Ranking Member 
Adams.
    Dr. Marshall, you are now recognize for 5 minutes.
    Dr. MARSHALL. Okay. Thank you, General Bergman.
    Tell you what, following this conversation is worse than 
neural anatomy was in medical school, trying to understand 
this. I have never seen such a thing. So the first thing we got 
to do is find out a simpler acronym. SDVOSBs is too much. Okay?
    So I am going to give each 30 to 45 seconds. What can we do 
to make this simpler? If you were king, what would you do to 
make all this simpler, keeping in mind our goals here and 
maybe, you know, what we can do to help you make it simpler.
    Mr. Leney, you go first, and we will go down the row.
    Mr. LENEY. I think we are taking those actions, Dr. 
Marshall, by consolidating the verification process into an SBA 
certification process across the entire Federal Government, we 
will make it much simpler for small businesses, particularly 
those who are eligible for more than one program.
    We consciously make the process rigorous so that a 
contracting officer or a program manager can be very, very 
confident that a service-able veteran owns and controls a 
business. That raises the probability that they are going to be 
willing to set stuff aside. So we make no apologies about the 
rigor of the process. We have done a lot to simplify and 
streamline it. We have reduced the processing time. We made it 
much more applicant friendly. And I think as we move it to the 
SBA, they have the same commitment, and I am confident that 
that will be done.
    Dr. MARSHALL. Great. Thanks.
    Mr. Wong, anything else?
    Mr. WONG. No. I would just like to echo that--one of the 
things that is kind of cool is that we all know each other, 
right? We have been working together as a team for the last 
couple of months. And with your support, I think we can 
actually make this thing go.
    My main drive when I came into to run GCBD was pretty 
simple. Make it easier for businesses to get our certifications 
and make money with them. But more importantly, you know, with 
those certifications, that is one thing. But we are also 
focusing mostly on the government supply of contracts, right? 
It is great to have a certification, but if you don't make 
money from it, right, you have a situation where somebody has a 
product that they don't like, right? If they have something 
that they like, they might tell somebody. If they have 
something that they don't like, they will tell everybody.
    So what I want to make sure is to focus to make the 
contracting officer's job easier. I would like them eventually 
to look at--I want them to look at small business first, and I 
want them to look for SBA certified companies to accomplish 
that.
    Mr. MARSHALL. Great. Thanks.
    Mr. Gould, anything else to add there?
    Mr. GOULD. Just real quick. I think we are stuck with the 
acronym SDVOSB.
    Mr. MARSHALL. Okay.
    Mr. GOULD. I apologize. But as I noted earlier, we are 
looking to streamline the application process at the SBA, 
right? When you log in--when a small business owner logs into 
certify at SBA.gov, name, address, what certifications are you 
interested in, right? A checkbox. That will generate questions 
depending on which checkbox you chose, right? And just making 
it simple and very straightforward for the user, that is my 
goal of unifying all these certifications under SBA.
    Dr. MARSHALL. Mr. Leghorn, what else can we do?
    Mr. LEGHORN. I think we are already doing it. I would like 
to just echo what Mr. Gould said. One of the biggest problems 
that we had in the past was that two different agencies were 
doing it. So a lot of our veterans are not only exclusively in 
one group, they are either 8A and vet owned or they are women 
owned and vet owned. To move to a singular agency and a 
singular platform and one time where they could just enter in 
all their paperwork, that is the best possible outcome that can 
come from all this.
    Dr. MARSHALL. Okay. Thanks.
    I yield back my time.
    Chairman BERGMAN. Thank you Dr. Marshall.
    Ranking Member Kuster, you are recognized for 5 minutes.
    Ms. KUSTER. Thank you, General Bergman.
    I want to start with you, Mr. Leghorn, because there is one 
piece of this in terms of getting rid of the sort of 
overburdensome government regulation.
    If the certification is transferred to the SBA, should the 
SBA also eliminate the self-certification program? In other 
words, I am a little confused by the discussion, and we can let 
others respond after you do, but whether there is still going 
to exist the duplicative programs.
    Mr. LEGHORN. I think that, with the move, self-
certification should go away because it causes just a lot of a 
confusion across the board, not only for contracting officers 
but for veterans seeking certification as well. And it is not 
only the contracting officers at the federal level but at the 
state level as well, because a lot of the States are--think 
that some of the certifications are reciprocal.
    Ms. KUSTER. So, Mr. Gould, would you agree? And do you have 
the resources necessary for--to streamlining and not having the 
duplicative programs?
    Mr. GOULD. Tricky question. Currently, we do not have the 
resources. But there is talk about keeping the self-
certification program for subcontracting, right? The full-blown 
certification program, which we are taking from the VA, would 
be for prime contracts. But there is a need for a subcontractor 
to be an SDVOSB on occasion. And he or she may not have gone 
through the full-blown certification process, so we are still 
analyzing whether there is a true need for the self-
certification program.
    Ms. KUSTER. And, Mr. Wong, any comment on that?
    Mr. WONG. Yes. Just a complement to what Mr. Gould has said 
and Mr. Leghorn has said.
    You know, the balance that you have is between getting it 
right and also continuity of operation. We are trying to do the 
best because, again, the goal is to make sure that, when people 
get our certification, they go to work. Because when they go to 
work, they put Americans to work. And I think that is what 
everybody wants.
    By the same token, we don't want it so fast so that there 
is fraud, waste, and abuse. But so as long as there is a 
balance, I think that--you know, I think, in theory, having one 
certification would be a good idea. But I think that it is not 
an easy answer, right? But, again, it is--just as long as we 
can hit that right balance between prime and sub about 
subcontracting and also the speed at which someone can get to 
work accurately and reliably is what we were striving for.
    Ms. KUSTER. And how about you, Mr. Leney?
    Mr. LENEY. Our goal is to do away with self-certification. 
We don't see any further needed for it. We think once the 
program is federal wide we will then put the veterans on a 
level playing field and in a good place relative to the other 
socioeconomic groups.
    I also want to say that we have got the capacity. It is a 
case of funding. It is going to be important for the Congress 
to fund the SBA to do this. We have funded a verification 
program. This program can ramp up within 6 months. And I expect 
that, within a year, we will be verifying every eligible 
SDVOSB.
    Because the SDVOSB community is very smart. Once they 
realize that the Congress intends to move toward federal wide 
verification, I expect, over the course of the next year, we 
will have most, if not all, of the SDVOSBs who want to play 
with the Federal Government are going to come to CVE and they 
are going to get verified. So we will be eliminating the 
uncertainty in that regard. We can't do much about the women-
owned small business arena.
    The capacity we have now has the ability to scale up. Once 
we get to complete the transition of EMs and the model we have, 
I think we have an efficient and effective program.
    It is our intent, and We are in the discussion with the SBA 
to transfer that program potentially lock, stock, and barrel to 
the SBA so they don't have to reinvent the wheel. And we are 
working closely with them to refine our programs to make sure 
we will plug in effectively to Certify.gov, et cetera.
    So I think that while there is always risk associated with 
what we are doing, I think those risks--we are taking action to 
mitigate those risks. And when we are done, this program will 
be highly effective.
    Ms. KUSTER. So back to you Mr. Leghorn. The question about 
the subcontractors and the contractors. Do you think this might 
engender confusion and, again, just this duplicative process? 
Do you think we should streamline and get down to one, as Mr. 
Leney has said?
    Mr. LEGHORN. Well, I think, as an organization, we 
absolutely think that Mr. Leney is right on this in terms of we 
need to get to one standard, and we need to get there quick, 
because having a rigorous process makes contracting officers 
sure--like, our veteran-owned small business are who they say 
they are and, you know, they control the purse strings. So we 
want what is best for our veteran-owned small businesses.
    Ms. KUSTER. Great. As do I.
    I yield back.
    Chairman BERGMAN. Thank you, Ranking Member Kuster.
    Dr. Dunn, you are recognized for 5 minutes.
    Mr. DUNN. Thank you very much General Bergman.
    Mr. Leney, please walk me through a little statistics. How 
many companies do you verify in a typical month? And what is 
the budget, annual budget?
    Mr. LENEY. We run about 1,100 to 1,200 a month right now. 
We have a little over 14,000 firms as of June 30 in the 
program. We expect, in 2018, to deal with about 15,000 
applications.
    The current budget for verification in 2017 for the core 
element of the verification process was about $12 million. If 
you add in some of the other attributes we have in our program, 
we do a rigorous audit program that was mentioned by one of the 
members to make sure that firms that have verified stay 
verified, and that runs about $16 million.
    Mr. DUNN. On top of?
    Mr. LENEY. No. No. That is about $4 million----
    Mr. DUNN. Altogether.
    Mr. LENEY. So all in about 16 million. We expect, when we 
go to the higher level, and, again, I think within a year we 
will know what that is, probably running about $20 million.
    Mr. DUNN. How long do you think it takes you to do 18,000 
currently self-certified SDVOSBs?
    Mr. LENEY. Self-certification is one click of a button on--
--
    Mr. DUNN. Yeah. But, now, you are going to certify them. So 
how long do you think you get them processed?
    Mr. LENEY. Right now our goal is--we verify firms under 60 
application days from the time they start, initiate, their 
application, to the time they receive a determination. The only 
time we stop the clock is when we are waiting on----
    Mr. DUNN. One year? 2 years? To get all those?
    Mr. LENEY. How will it take us to get to 18,000?
    Mr. DUNN. Eighteen thousand, you know, additional. This is 
new business, right?
    Mr. LENEY. I think the total will be around 21,000.
    Mr. DUNN. Okay.
    Mr. LENEY. Okay.
    We are also verifying 4,000 veteran-owned small businesses. 
So that process will also move to the SBA. We will have to pay 
for that. It will be appropriate for the VA to pay for that 
because that is----
    Mr. DUNN. Yeah. And I am getting at the budget questions.
    Mr. LENEY. We are probably looking at $20 million, I think.
    Mr. DUNN. Okay. Good.
    So, Mr. Wong, how much does it cost the SBA to run through 
all the other small business certifications? So what is your 
annual budget?
    Mr. WONG. Let me defer that to Mr. Gould. He keeps----
    Mr. DUNN. I am sorry.
    Mr. WONG. If I could defer that answer to Mr. Gould.
    Mr. DUNN. Sure.
    Mr. Gould, annual budget on that?
    Mr. GOULD. So the annual budget currently for the 
certifications, it is a tricky question, because we run--we 
have one pot of money that we use for the certification 
programs and the business development programs which----
    Mr. DUNN. Okay. So not the development programs but----
    Mr. GOULD. Right.
    So, again, it is a tricky question, because those two 
programs are blended so closely together.
    Mr. DUNN. Give me your best shot. I am trying--you know, 
you have asked for resources. I am working my way towards--how 
much resources do you need?
    Mr. GOULD. An analysis I did was trying to figure out how 
much it is going to cost us to process 33,000 applications a 
year. I came up with $115 million.
    Mr. DUNN. So higher than what I was expecting.
    Now, SBA has a network of field offices. Mr. Wong, I think 
this is you.
    Mr. WONG. Yep.
    Mr. DUNN. A network of field offices. The VA doesn't really 
have that. Does this create some great efficiencies for the 
program?
    Mr. WONG. So in terms of servicing, yes. We have 68 
different field offices. And generally happens is, when you 
apply to Certify.gov, the headquarters function is the one that 
certifies the business. Once it is certified, it is assigned to 
the district office in which they reside.
    Presently those BOSes, the business opportunity 
specialists, who work for our staff in the field, are only 
statutorily authorized to provide business development 
assistance for 8A. So there would be some additional--there 
would be some additional legislation, I suppose, that is 
required. But in general, we do have 68 different offices 
around the country that----
    Mr. DUNN. So let's make--put a pin in that. You need 
additional legislation. You need to talk to us about that. Not 
in this meeting, but----
    Mr. WONG. Yes, sir.
    Mr. DUNN. So I want to get back to Mr. Gould. The number 
you gave me confused me a little.
    Was that an all out budget including the prior--the 115 
million, was that including the current SBA?
    Mr. GOULD. That is all in.
    Mr. DUNN. Okay. Plus the VA.
    Mr. GOULD. Including the VA. Not plus, including the VA.
    Mr. DUNN. All right.
    Thank you, Mr. Chairman. I yield back.
    Chairman BERGMAN. Thank you, Mr. Dunn.
    Mr. Poliquin, you are recognized for 5 minutes.
    Mr. POLIQUIN. Thank you, Mr. Chairman, very much. Thank 
you, gentlemen, for being here.
    It is always a good idea to find efficiencies and save 
money throughout the Federal Government, or the State or local 
government, whenever you can.
    What I found at the VA, sometimes this becomes difficult 
when you have an organization of 385,000 people that have, many 
cases, been there for quite some time. And in many regards 
there aren't performance metrics, so we know how these folks 
are performing and you see the budget is doubled over the last 
8 years, roughly.
    So you folks are coming before us now asking to do 
something which, to me, seems like commonsense. But I have also 
heard a couple times here, Well, you need more money.
    We spend a lot of our time talking to people that need more 
money. I would think, and this may not be the case, but if you 
are taking two functions, same function, really, or close to 
the same function, right, at the VA and at the SBA, and you 
combine the two of them, and the SBA has all kinds of regional 
offices around the country, so forth and so on, and you are 
putting them together, you think you would save money. That is 
not what I am hearing. And you are shaking your hand Mr. Leney.
    So I am going to give you a shot at telling me Why it is 
going to cost us money instead of saving money. Let's start 
with that, and then I have a couple other follow-up questions.
    Go ahead, sir.
    Mr. LENEY. Simple response to that is the expansion of the 
program. What we expect, if we were to move this to the SBA, do 
a federal wide certification program, we will run from about 
14,000 firms to about 21,000 firms in the program. So you are 
talking about a 50 percent increase in the size of the program, 
just volume.
    Mr. POLIQUIN. Just not veterans that own small businesses. 
Everybody else who wants a contract with the government. Is 
that what you mean?
    Mr. LENEY. Well, I am only speaking to the veteran piece. 
And as Mr. Gould mentioned, they are going to go from 3,500 
that they deal with. We deal with 15,000 applications a year 
right now. I want expect that would go up over 20,000. So it is 
just an increase in volume.
    In fact, the cost per application----
    Mr. POLIQUIN. That is because you are going to do away with 
the self-certification. Is that what you mean?
    Mr. LENEY. Self-certification doesn't have an explicit 
cost, because we don't run that. People self-certify. The cost 
is in the back side. The cost is the real veterans owned small 
businesses.
    Mr. POLIQUIN. Yeah. I was just talking earlier today 
someone who owns 22 McDonald's franchises. He is saying the 
cost of labor is going up so much now, he is finding technology 
to save--head count to save money so his business can make it.
    Is there a possibility of that happening here?
    Mr. LENEY. Yes.
    Mr. POLIQUIN. Tell me about it.
    Mr. LENEY. With the implementation of our veteran 
engagement management system, we expect to reduce the amount of 
labor involved that we just--in fact, we just deployed it. We 
are going----
    Mr. POLIQUIN. Then why are you asking for more money?
    Mr. LENEY. Because we are going to increase the program by 
50 percent.
    Mr. POLIQUIN. Okay. One of the things we have run into at 
the VA is--and this was a real eye-opener for me. I come from 
the business community, but I have a tremendous amount of 
respect for our veterans. That is why I lobbied to get on this 
committee. And my goal is the same, I think, as everybody else 
down the path here.
    We have 7 million veterans, and we need to take care of 
them. That is the deal. That is the contract we have with the 
folks who gave us our country. It is pretty simple to me.
    But at the same time, you look at the VA. And over the 
past, I don't know, Neal, how long, they have--I won't get this 
exactly right. They have a hundred different legacy computer 
systems. A hundred of them. And one can't talk to the other, so 
you have a veteran that is in Maine, and he needs healthcare, 
and he traveled down to Florida to see his kids. And all of a 
sudden they can't exchange medical records, and all this other 
stuff. It is getting better, I understand that. One of the 
reasons is that we now allocated what? $10 billion dollars for 
them to fix this mess so the computer systems can talk to each 
other. Can you imagine running a business like this?
    And what I found, what I believe, and I think it has been 
verified, I think it has been said publicly, is that the reason 
we have this problem is a lot of these folks build up their own 
systems to protect their jobs and what they do with these 
organizations, and they don't talk to each other, so the people 
that get screwed are the taxpayers and the veterans that we 
should be taking care of, using that money to take care of 
them.
    So you have two computer systems here, I am guessing. They 
talk to each other? What are you going to do about that?
    Mr. LENEY. We are happy to offer--in fact, we have offered 
our system up, if they determine that is a better system. If it 
is not, we will use their system. Our system goes away.
    Mr. POLIQUIN. Yeah. Who makes that decision?
    Mr. LENEY. They will.
    Mr. POLIQUIN. Okay.
    Mr. LENEY. We will defer to the SBA, because they are going 
to take the mission. I have no interest in keeping my 
organization alive in this regard. That is why we are proposing 
to move the entire organization. We think it is efficient and 
effective.
    Mr. POLIQUIN. I appreciate that.
    I know I have a little bit of time here, Mr. Chairman. If I 
may.
    Mr. Leghorn, you represent the Legion. Great folks. We love 
them.
    Have the other VSOs weighed in here? And if they have, I 
missed it.
    What do the rest of the VSOs feels about this issue?
    Mr. LEGHORN. I am really hesitant to speak for other VSOs, 
but there are several out there that are also on our small 
business task force. And through our small business task force, 
I know that we are all locking in step with the proposal to 
move verification from VA to SBA.
    Mr. POLIQUIN. Okay. Do you have any concerns? What will be 
the top two concerns you would have and the other folks at the 
other VSOs have about doing this?
    It is going cost more money. You come to us. We don't have 
the money. Is that one of them?
    Mr. LEGHORN. Cost is definitely an issue.
    Mr. POLIQUIN. Yeah.
    Mr. LEGHORN. You know, VA, to their credit, has been 
funding the CVE on their own agency generated money. So cost is 
an issue when we move that to the SBA, because I don't think 
VA's going to just give that money over to the SBA.
    Mr. POLIQUIN. No? You are kidding? You mean to tell me a 
federal agency here in Washington not wanting to cut their 
budget--you don't mean that, do you, Mr. Leghorn?
    I think my time is up. Thank you very much for being 
candid. Thank you, sir.
    Yield back.
    Chairman BERGMAN. Thank you, Mr. Poliquin.
    Mr. Leney, a persistent complaint about the SDVOSB--and, by 
the way, I agree with Dr. Marshall that either we come up with 
a better acronym or figure out a pronunciation of it. But 
anyway, the verification program is that bad actors 
misrepresent ownership of companies. In fact, there is a term 
used, the storefront veteran, in some cases. That is--for those 
of you who have delved into this a little bit. And in a 
previous life, I did do some pro bono work with SDVOSBs trying 
to get themselves certified.
    But sometimes they are caught, the bad actors are caught, 
and the companies are eliminated. But too often these same 
entities, kind of like Whack-A-Mole, remedy the non-compliance 
on paper but not in reality. And then they get reverified and 
they are back in the game.
    In what we are looking at going forward, what are we doing 
to end this? And how would you recommend the SBA solve the 
problem once and for all and, and basically, you know, use the 
tech term, close the back doors?
    Mr. LENEY. Bottom line up front, Mr. Chairman, we are not 
going to solve the problem of criminals. We haven't solved in 
any other sector of society. They will continue to be criminals 
who seek to take advantage of a government program. However, we 
have taken a number of actions that I think have been very 
helpful.
    Here in the VA we have an audit program, a no notice man 
from--one of our people shows up on-site to confirm that a 
veteran-owned small business continues to be owned or 
controlled by a veteran. That does not solve the storefront 
problems in terms--another term called pastors. That is a 
contracting issue.
    But I think we have largely addressed the issue of are you 
really owned and controlled by a veteran? Yes. There are some 
that can paper it over. There are some that commit fraud. We 
have referred those to the IG. I have a risk manager who works 
very closely with the IG. And we have seen a decline in the 
number of those firms.
    If you do business with the VA in any reasonable capacity, 
you will get visited, no notice, by an auditor. And that has 
made a major difference in terms of veteran-owned small 
businesses realizing that we are serious to the program.
    Chairman BERGMAN. Good. Well, speaking of audits, you know, 
Mr. Gould, you know, VA audits SDVOSBs after they have been 
verified, as we just heard Mr. Leney say.
    What level of auditing or ongoing oversight does SBA 
currently exercise in other small business programs? And have 
we got a plan going forward, or is that Mr. Wong?
    Okay.
    Mr. WONG. So we have some safeguards. They are not perfect. 
We are making progress. But it is not perfect. But we have 
things like size protests.
    In some regards, I think that in order to reduce the number 
of back doors, in order--as we call them, fronts, I think 
having a more solid process in the front door is going to be 
one of the safeguards that we can have. Additionally----
    Chairman BERGMAN. So let me ask the question.
    So do you believe that--if I am not hearing that you are 
saying audits are useful going forward. Did I misinterpret what 
you said?
    Mr. WONG. I don't want to say that you didn't do anything. 
I would just say that I did not say that.
    Chairman BERGMAN. Okay. But that was kind of getting from--
you were talking about front doors, back doors.
    Mr. WONG. Yes.
    Chairman BERGMAN. I didn't hear about--are we going to use 
the audits to do this, or are we going to do this through our 
processes and designing the system to able update, or do we 
have to physically audit?
    Mr. WONG. So we can do that. What SBA has right now, with 
all of our certification programs, we have a--we ostensibly 
have a strong entrance barrier. And once that is through, then 
we have annual reporting requirements. And then we have 
analysts that look at these annual reviews or this continuing 
eligibility.
    We also have the public and competitors--I mean, 
competitors are great for policing things. And they have 
protests. So we even have protests. And a mechanism by which, 
if somebody protests size and they are untimely, because I am a 
lawyer by trade, but sometimes lawyers play games, and if they 
are obviated because of time, SBA even has its own ability to--
--
    Chairman BERGMAN. And I hate to cut you off here, because 
now I know you are a lawyer, I know you would run out my time 
if I let you.
    But the point is the audit verification process that you 
just articulated by, in other words, letting those affected 
parties, those negatively affected parties, basically take care 
of those bad actors by letting you know who they are, kind of--
it is kind of a team effort on it. That is to get everybody 
invested in the program going forward, especially those honest, 
you know, business-minded veterans who want to build a small 
business. They will feel included.
    Mr. Leghorn, you get the last word here as far as your 
thoughts on, you know, how about the audits. Will they be 
helpful? Hindrance? What are you thinking?
    Mr. LEGHORN. So the issue with the audits is that it really 
cuts into a small business's time and effort in their capacity 
to make money when you show up for a site visit. That has 
always been the problem. And, you know, what is the right level 
of government intrusion necessary to verify that you are who 
you say you are versus, you know, if you are who you say you 
are, let's let you go on and go about your business.
    Chairman BERGMAN. So going forward, then, if the SBA is 
they take over the program, look at the audit as a tool that, 
if properly applied and doesn't require small business to, 
let's say, to add compliance people or add other, you know, 
limited resources that you have as a small business to then 
apply those resources towards successfully passing an audit.
    So, again, it is working together to make sure it doesn't 
stay onerous, any part of it stays onerous. Is that a fair 
assessment?
    Mr. LEGHORN. Correct. And if I could add one more thing 
real quick. I think there is a great avenue for SBA or VA to do 
something along the lines of improving community policing and, 
in fact, promoting it. And also, just as Mr. Wong said, there 
are still status protests that could be levied through the GAO.
    Chairman BERGMAN. Okay. Well, thank you very much.
    So I see no further questions from the dais up here. If 
there are no further questions, then the panel is now excused.
    Thank you again to Chairman Kelly and Ranking Member Adams 
for hosting this hearing. Do either you, Ms. Adams or Ranking 
Member Kuster, have any final remarks before I close?
    Ms. ADAMS. No, sir. I just want to thank all of the 
panelists for being here and all the members of the committee.
    Chairman BERGMAN. Thank you.
    A couple of thoughts. Based upon what Dr. Marshall said 
about, you know, simplifying, getting a new name. I would 
suggest to you we love, you know, acronyms and words and 
whatever. But, you know, personally, alliteration helps me 
figure out what it is we are trying to do that I would suggest, 
you know, if we stratify, we simplify, and then especially from 
VA as you transition out and SBA as you transition in, you 
support one another in the lessons learned that you have 
already learned in VA.
    Don't go, you know, a year from now over a cup of coffee 
saying, Oh, yeah, we could have told you that a year ago, you 
know, type of thing. So support one another so in the end we 
support the veterans and their efforts to become successful 
small business owners.
    Small business programs and contracting reform are 
important to all of us. And I know that Ranking Member Kuster 
shares this view, because we have been a good team here for 18 
months on the VA O&I Committee. We have prioritized these 
issues on the Oversight and Investigations Subcommittee 
hearings. We devote as much time as we can. But the reality is 
that the Small Business Committee is dedicated to these issues 
now full-time. We welcome the opportunity to work with you.
    Thank you to our witnesses for sharing your knowledge, your 
perspectives, and for continuing to highlight the need for 
government-wide verification. I look forward to working with 
all of you to craft such legislation.
    I would be remiss in saying the 115 million is--that is an 
interesting figure. We are going to have to talk about that.
    I ask unanimous consent that all members have 5 legislative 
days to revise and extend their remarks and include extraneous 
material.
    Without objection, so ordered.
    This hearing is now adjourned.
    [Whereupon, at 3:20 p.m., the subcommittees were 
adjourned.]
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