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Opening Statement of Hon. Marlin Stutzman, Chairman, Subcommittee on Economic Opportunity

Thank you Chairman Johnson.  First, let me express my appreciation for offering to join forces on enabling  service disabled veteran-owned small businesses to compete for contracts with the Department of Veterans Affairs.

Let me begin by adding some context to why we are here today.  In 1999, the President signed legislation that became Public Law 106-50, which established a government-wide goal for all federal agencies to award three percent of their contract dollars to small businesses owned and controlled by service-disabled veterans.  Until that time, there was no goal for Service Disabled Veteran Owned Small Businesses or SDVOB’s.

Since then, there have been several laws and an Executive Order that make it clear that federal agencies are to make every effort to award at least three percent of their acquisition dollars to service disabled veteran-owned small businesses. 

This legislative effort has continued with the passage of two laws that established and reinforced section 8127 of title 38 to provide VA with special tools and priorities to meet, and hopefully exceed, the three percent goal.  By most indicators, the intent of section 8127 has been met.  But meeting the three percent goal is not the sole intent of section 8127.  Another goal is to establish a database of validated veteran and service disabled veteran-owned businesses that any government agency can access as part of their efforts to meet the three percent goal.  And that is where there are still significant problems.

Today, VA data shows contract awards exceeding 20 percent and I congratulate them for that effort.  However, the process in achieving those numbers has been painful at best.  Until recently, implementation of the database of validated veteran and service disabled veteran-owned small businesses required by PL 109-461has been less than professional, to put it kindly.

VA is still recovering from its initial reluctance to implement the law.  Its policy of allowing self-certification of ownership and control status instead of actively performing the validation function prescribed in the law was frankly, a disaster.  As a result, as we will hear today, millions of contract dollars went to businesses that did not meet veteran or disabled veteran-owned and controlled status.

I also find VA’s recent decision to ignore GAO’s finding in favor of a protest by Aldevra, a service disabled veteran-owned small business, as evidence of a continuing reluctance to fully embrace the clear requirements of section 8127.  The law does not require VA to set aside all contracts for SDVOSBs or award all contracts to SDVOSBs.  More importantly, nowhere in section 8127 is there a provision exempting acquisitions using the Federal Supply Schedule.  If nothing else, setting aside contracts using the FSS will provide VA contracting officers additional flexibility in meeting the SDVOSB goals.

Let’s assume for the moment that those who believe the provisions of section 8127 go too far and that they give too much advantage to SDVOSBs are correct.  To those I would point out the literally dozens of federal agencies who continue to fail miserably to meet even the three percent goal.  For example, DoD, the largest Department in the Federal government, awarded only 1.82 percent to SDVOSBs in FY 2010.  I suspect DoD could do better if they limited janitorial awards to those SDVOSBs in that business.  So, if VA is picking up part of the slack for the rest of the federal government, so be it.

Finally, my staff and I have been hearing with increasing frequency that many legitimate SDVOSB’s are having an extremely difficult time being validated and several have even has to close down as a result. While I understand that verification rules must be enforced to ensure non-SDVOSB are kept out there must be a balance.  I am interested to hear from Mr. Leney about how he can better strike this balance and expedite re-consideration for many of these small businesses.  I am also concerned about what appears to be very dubious arbitrary decisions to deny status to businesses by contractors hired to validate the ownership and control status and I suggest that may be as a result of a lack of clear regulations on things like survivorship and conflicts with state laws.

I yield back.