[House Report 112-85]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     112-85

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


 
   AMENDING TITLE 38, UNITED STATES CODE, TO REVISE THE ENFORCEMENT 
   PENALTIES FOR MISREPRESENTATION OF A BUSINESS CONCERN AS A SMALL 
    BUSINESS CONCERN OWNED AND CONTROLLED BY VETERANS OR AS A SMALL 
   BUSINESS CONCERN OWNED AND CONTROLLED BY SERVICE-DISABLED VETERANS

                                _______
                                

  May 20, 2011.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Miller of Florida, from the Committee on Veterans' Affairs, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 1657]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 1657) to amend title 38, United States Code, to 
revise the enforcement penalties for misrepresentation of a 
business concern as a small business concern owned and 
controlled by veterans or as a small business concern owned and 
controlled by service-disabled veterans, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Subcommittee Consideration.......................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     3
Statement of General Performance Goals and Objectives............     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     4
Earmarks and Tax and Tariff Benefits.............................     4
Committee Cost Estimate..........................................     4
Congressional Budget Office Estimate.............................     4
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Applicability to Legislative Branch..............................     5
Section-by-Section Analysis of the Legislation...................     5
Changes in Existing Law Made by the Bill as Reported.............     6

                          Purpose and Summary

    H.R. 1657 was introduced on April 15, 2011, by 
Representative Marlin Stutzman of Indiana. H.R. 1657 would 
revise the enforcement penalties for misrepresentation of a 
business concern as a small business concern owned and 
controlled by veterans or as a small business concern owned and 
controlled by service-disabled veterans.

                  Background and Need for Legislation

    Executive Order 1336 and Public Law 106-50 established a 
goal for all Federal agencies to spend not less than three 
percent of their contract dollars with Service-Disabled 
Veteran-Owned Small Businesses (SDVOBs). According to the Small 
Business Administration (SBA), in Fiscal Year (FY) 2005, the 
Department of Veterans Affairs (VA) awarded $210,829,326 or 
2.151 percent of its total contract dollars with SDVOBs. To 
improve VA's performance, Congress enacted Public Law 109-461 
in December 2006, to provide VA with new contracting 
authorities and protections for SDVOBs. As a result, SBA 
statistics show that VA awarded twenty percent of its total 
contract dollars to SDVOBs and Veteran-Owned Small Businesses 
(VOBs) in FY 2009 and VA internal statistics show an 
improvement to approximately 23 percent for FY 2010.
    Public Law 109-461 also required VA to maintain a database 
of verified SDVOBs and VOBs, so contracting officers and other 
privately held businesses could ensure that they were, in fact, 
dealing with genuine SDVOBs and VOBs. VA was very slow in 
creating and verifying the businesses listed in this database 
and, as a result, Public Law 111-275 was enacted to clarify 
Congress's intention that only businesses that have been 
verified as SDVOBs and VOBs are allowed in the database.
    Section 8127 of title 38 United States Code, requires the 
Secretary to debar any business found to fraudulently claim 
SDVOB or VOB status from doing business with VA, ``for a 
reasonable time as determined by the Secretary.''
    A Government Accountability Office (GAO) report in 2009, 
Service-Disabled Veteran-Owned Small Business Program: Case 
Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain 
Millions of Dollars in Contracts (GAO-10-255T) and a follow up 
in 2010, Service-Disabled Veteran-Owned Small Business Program: 
Fraud Prevention Controls Needed to Improve Program Integrity 
(GAO-10-740T), studied the validation of ownership and control 
of SDVOBs and found, ``a lack of government-wide fraud 
prevention controls, a lack of validation of information 
provided by SDVOSB firms used to substantiate their eligibility 
for the program, non-existent monitoring of continued 
compliance with program requirements, and an ineffective 
process for investigating and prosecuting firms found to be 
abusing the program.''
    Of the ten firms that GAO identified as fraudulent SDVOBs, 
the Secretary has not debarred any of them. The Committee 
believes that a five-year automatic debarment required under 
H.R. 1657 would be a strong deterrent against fraudulent 
companies and would result in more contracting dollars going to 
legitimate SDVOBs. The Committee expects the Secretary to 
aggressively prosecute firms and principals found to be 
fraudulently claiming SDVOB and VOB status.

                                Hearings

    On May 3, 2011, the Subcommittee on Economic Opportunity 
conducted a legislative hearing on various bills introduced 
during the 112th Congress, including H.R. 1657. The following 
witnesses testified: Ms. Christina M. Roof, National Acting 
Legislative Director for AMVETS; Mr. Tom Tarantino, Senior 
Legislative Associate for Iraq and Afghanistan Veterans of 
America; Mr. Shane Barker, Senior Legislative Associate of the 
National Legislative Service for the Veterans of Foreign Wars 
of the United States; Mr. Robert Madden, Assistant Director of 
the National Economic Commission for The American Legion; Mr. 
Andrew Connolly of Dubuque, IA; Mr. Keith M. Wilson, Director 
of the Education Service for the Veterans Benefit 
Administration of the U.S. Department of Veterans Affairs, who 
was accompanied by Mr. Jan R. Frye, Deputy Assistant Secretary 
for Acquisitions and Logistics for the U.S. Department of 
Veterans Affairs and Mr. F. John Brizzi, Deputy Assistant 
General Counsel for the U.S. Department of Veterans Affairs.
    Those submitting statements for the record included: 
Paralyzed Veterans of America, Gold Star Wives of America, 
National Association of Veteran Program Administrators, and the 
Military Officers Association of America.

                       Subcommittee Consideration

    On March 5, 2011, the Subcommittee on Economic Opportunity 
met in an open markup session and ordered H.R. 1657 favorably 
forwarded to the full Committee by voice vote.

                        Committee Consideration

    On May 12, 2011, the full Committee met in an open markup 
session, a quorum being present, and ordered H.R. 1657 reported 
favorably to the House of Representatives, by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the recorded 
votes on the motion to report the legislation and amendments 
thereto. There were no recorded votes taken on amendments or in 
connection with ordering H.R. 1657 reported to the House. A 
motion by Ranking Member Bob Filner of California to order H.R. 
1657 reported favorably to the House of Representatives was 
agreed to by voice vote.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                  Earmarks and Tax and Tariff Benefits

    H.R. 1657 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI of the Rules of the House of 
Representatives.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate on H.R. 
1657 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974.

               Congressional Budget Office Cost Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
for H.R. 1657 provided by the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974:

                                                      May 16, 2011.
Hon. Jeff Miller,
Chairman, Committee on Veterans' Affairs, House of Representatives, 
        Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1657, a bill to 
amend title 38, United States Code, to revise the enforcement 
penalties for misrepresentation of a business concern as a 
small business concern owned and controlled by veterans or as a 
small business concern owned and controlled by service-disabled 
veterans.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dwayne M. 
Wright.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

H.R. 1657--A bill to amend title 38, United States Code, to revise the 
        enforcement penalties for misrepresentation of a business 
        concern as a small business concern owned and controlled by 
        veterans or as a small business concern owned and controlled by 
        service-disabled veterans

    H.R. 1657 would revise the penalty for businesses that, in 
their dealings with the Department of Veterans Affairs (VA), 
misrepresent their status as small business concerns owned and 
controlled by veterans or service-disabled veterans. Under 
current law, VA is required to preclude such businesses from 
contracting with the agency for a period of time determined by 
the Secretary of Veterans Affairs to be reasonable.
    Under H.R. 1657, any small business concern--and all 
principals involved--found to be misrepresenting their status 
would be prohibited from contracting with VA for no less than 
five years. Upon determining that a business misrepresented its 
status, VA would be required to take action to bar that 
business within 90 days. Based on information from VA, CBO 
estimates that implementing H.R. 1657 would have no budgetary 
impact.
    Enacting H.R. 1657 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    H.R. 1657 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Dwayne M. 
Wright. The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates regarding H.R. 1657 prepared by the Director of the 
Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act would be created by H.R. 
1657.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Department of Veterans Affairs Enforcement Penalties for 
        Misrepresentation of a Business Concern as a Small Business 
        Concern Owned and Controlled by Veterans or as a Small Business 
        Concern Owned and Controlled by Service-Disabled Veterans

    This section would require VA to debar a company and its 
principals from contracting with VA for a period of five years, 
if it is determined that the company has fraudulently 
represented itself as a Service-Disabled Veteran-Owned Small 
Business (SDVOB). Section 1 also requires the Secretary of 
Veterans Affairs to begin such actions no later than within 30 
days of a finding on non-compliance and complete the debarment 
process no later than within 90 days of the finding of 
misrepresentation.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 38, UNITED STATES CODE

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PART VI--ACQUISITION AND DISPOSITION OF PROPERTY

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   CHAPTER 81--ACQUISITION AND OPERATION OF HOSPITAL AND DOMICILIARY 
    FACILITIES; PROCUREMENT AND SUPPLY; ENHANCED-USE LEASES OF REAL 
PROPERTY

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Subchapter II--Procurement and Supply

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Sec. 8127. Small business concerns owned and controlled by veterans: 
                    contracting goals and preferences.

    (a) * * *

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    (g) Enforcement Penalties for Misrepresentation.--[Any 
business] (1) Any business concern that is determined by the 
Secretary to have misrepresented the status of that concern as 
a small business concern owned and controlled by veterans or as 
a small business concern owned and controlled by service-
disabled veterans for purposes of this subsection shall be 
debarred from contracting with the Department for a reasonable 
period of time, as determined by the Secretary a period of not 
less than five years.
    (2) In the case of a debarment under paragraph (1), the 
Secretary shall commence debarment action against the business 
concern by not later than 30 days after determining that the 
concern misrepresented the status of the concern as described 
in paragraph (1) and shall complete debarment actions against 
such concern by not later than 90 days after such 
determination.
    (3) The debarment of a business concern under paragraph (1) 
includes the debarment of all principals in the business 
concern for a period of not less than five years.

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