Good Afternoon Chairman Mitchell, Ranking Minority Member Roe, and Subcommittee Members. I greatly appreciate the opportunity to testify at this hearing regarding Acquisition Deficiencies at the Department of Veterans’ Affairs (VA), and I am honored to represent other Veteran-Owned and Service-Disabled Veteran-Owned Small Business Owners.

My name is Anthony (Tony) Jimenez and I am the President and CEO of MicroTech.  MicroTech is a Minority-Owned, certified and verified Service-Disabled Veteran-Owned Small Business (SDVOSB), and certified 8(a) Small Business providing Information Technology Systems and Services, Strategic Solutions, Audio-Visual Telecommunications Design and Installation, Product Solutions, and Consulting Services.

MicroTech Success

I retired from the Army in 2003 after serving 24 years on active duty and started MicroTech in 2004.  Today I employ over 400 great Americans — and in an era of lay-offs and job cutbacks—MicroTech has become a powerful job creation engine and force for economic development in my community, in the state of Virginia, and in a number of other locations across the nation. This year, MicroTech was named America’s Number One Fastest-Growing Hispanic-Owned Business, and just last week our success was celebrated during the NASDAQ Closing Bell ceremony. 

Since the first time I testified before Congress in 2006, MicroTech has grown almost 3000 percent in gross revenue and is now the Prime Contractor on over 100 Federal projects and 14 Contract Vehicles. MicroTech manages over half-a-million Government IT users daily and provides products and solutions to more-than-30 Government Agencies, along with every military branch.

MicroTech has been repeatedly recognized by trade groups, industry publications, and diversity organizations as a leading Small Business that has notably succeeded at supporting the Business of Government.  MicroTech’s exponential growth has led to recognition this year that includes the prestigious Inc. 500; Washington Business Journal’s Third Fastest Growing Company in the region; the Deloitte Tech Fast 500 Number One Communications–Networking Small Business in the Washington Metro Area; CRN Magazine’s Number One "Unified Communications Solutions Specialist;” Washington Technology’s Number One Information Technology 8(a) Business; and as a DiversityBusiness.com Top 25 Disabled Veteran Owned Business.

Veteran Running a Business

Like most of the Veterans who retire from active duty, initially I had no idea what I wanted to do when I left the military.  However, I knew I wanted to remain close to the fight and continue, in some way, to serve my country. 

I told BusinessWeek earlier this year in the article, “What I Learned in the Trenches,” that there is a misperception that people in the military have been trained to shoot and win battles, but when it comes to business savvy, they don’t have any. What many don’t realize is that running a military unit is just like running a business.

As an owner of a business that manages large-scale Federal projects, I have the opportunity to use my unique military skills and expertise to help the government reach its goals, as well as the ability to work with and provide jobs for other Veterans.

My small business targets contracting opportunities based not only on our core competencies, but also on the opportunity to hire Veterans and Wounded Warriors to perform the work; giving them a chance at a viable second career. However, in the short five years MicroTech has been doing business with the Federal Government, unfortunately I discovered that opportunities for Veteran-Owned Small Businesses (VOSB) and SDVOSBs were hard to find and not as abundant as I assumed they would be. In the last few years, though, the emphasis on increasing government contracting opportunities for SDVOSBs is improving but still has a ways to go. 

It’s been five years since President Bush issued Executive Order 13360 requiring Federal agencies to provide three percent of all contracting opportunities to SDVOSBs. Fewer than a handful have achieved that annual goal, notably the Environmental Protection Agency, the GSA, the Department of Labor, and the VA.

Small Business Opportunities are Improving

Through mostly the efforts of the Small Business Administration and the four agencies mentioned, small business opportunities overall are growing. In Fiscal Year 2008, small businesses won a record $93.3 billion in Federal prime contracts, an increase of almost $10 billion from 2007. SDVOSB contracts increased to about one-half (1.49 percent) of the three percent goal, from the one-third (1.01 percent) mark a year earlier, and won $6.4 billion in Federal contracts from the lower FY 2007 mark of $3.8 billion. 

Along with those gains, the Obama Administration’s American Recovery and Reinvestment Act is playing a role in increasing Federal contracting share to SDVOSBs; they have received four percent of Recovery contracting dollars, so far. The current administration has “walked the walk,” and proven their commitment to Federal contracting opportunities for Small Business.

MicroTech and the VA

MicroTech’s experience with the Department of Veteran Affairs (VA) regarding the three percent rule has been very positive.  The VA exceeded its SDVOSB prime contracting goals in the last two fiscal years, reflecting a commitment at the top and a broad across-the-agency effort to “do the right thing.”

Veteran-Owned Small Businesses seem to enjoy greater success at the VA than non-veteran owned.  This is happening because of the superlative efforts of the Veteran’s Affairs committee and others.  In addition, the VA, as one expects, wants to take care of our Nation’s Veterans, so it makes sense that the VA strongly supports set-aside opportunities.  The VA keeps their “eyes on the prize,” and works hard to ensure Veteran-Owned Small Businesses get their fair share of competitive contracts.

Three Percent Rule Recommendations

As for the rest of the government that has failed to make the three percent rule a priority, there are currently no penalties for failing to meet EO 13360, and very few incentives for meeting or exceeding the established standard.  This lack of oversight makes it extremely difficult for agencies to realize the advantages of contracting with a Veteran-Owned Small Business. There needs to be significant improvements made to correct systemic problems in the current procurement system and to add incentives in achieving the three percent goal. I recommend the following steps be taken in all agencies, government-wide:

Revise Contract Bundling

Contract Bundling adversely impacts competition and hurts all small businesses.  According to VET-Force’s reporting of a Rand Corp. 2008 study, for every100 bundled contracts, Small Business loses 60 contracts. The study is quoted as claiming, “More than one-half of all DoD prime contract spending is on bundled contracts.”

The standard procedures for Contract Bundling require agencies to provide justification for bundling decisions and have the decisions reviewed at higher levels. The problem with this is that the decision is often made in a vacuum and the affected small businesses have no means to object. In most of these cases, the small businesses are not even aware that the decision is being made. Instead, they don’t discover that their contract has been bundled with a larger requirement until just before the RFP is released.  By then, it is too late to do anything except determine how to stay involved in the competitive bid. Supporters say that Contract Bundling saves money.  While Contract Bundling may save Contracting Officers time and effort and reduce government overhead, those dollar savings are often offset by the higher costs associated with doing business with larger organizations. 

Consolidate Contracts so Small Businesses Share Benefits of Bundling

This tactic allows the government to continue to take advantage of cost savings, price reductions, quality improvements, reduced acquisition cycle times, and better terms and conditions for both parties. Make a fair portion of these bundled contracts specifically Small Business opportunities, and don’t assume that because it has been bundled, it has to be large business-focused. In most cases, making the opportunity SDVOSB-focused will lead to the very same team as if it was a full and open opportunity.

Place Orders under a Small Business GWAC

The Veteran Technology Services (VETS) Government-wide Acquisition Contract (GWAC) and the NASA Solutions for Enterprise-Wide Procurement (SEWP) GWAC are two excellent examples of Contract Vehicles that offer multiple award contracts with highly qualified SDVOSBs.  The VA has done an outstanding job of using both of these GWACs; another outstanding example of their commitment to SDVOSBs.  This approach should be duplicated throughout the government.

Solicit Quotes for Federal Supply Service Orders only from Small Business (or Socioeconomic Small Business Groups)

Small Business set aside programs are rarely used under the GSA Federal Supply Schedule, this most widely used contracting vehicle in the Federal Government.  This is due to a common perception that set-asides are not allowed under the schedule program.  The use of set-asides as part of the GSA schedule program should be encouraged.

Create a Small Business Participation Enforcement Team

Consider taking a portion of the savings realized through Contract Bundling to implement a Small Business Plan Enforcement Team that enforces small business participation in accordance with the Request for Proposal (RFP). 

Establish a Mentor-Protégé Program at SBA for Veteran-Owned Small Business

A Mentor-Protégé program administered by the SBA that mirrors the current 8(a) program would be a boon to SVDOSBs and allow them some of the additional advantages that 8(a) companies currently enjoy. 

In order to raise capital for the Protégé firm, the Mentor could own an equity interest of up-to-40 percent in the Protégé firm. A Protégé firm could still qualify for other assistance as a Small Business, including SBA financial assistance. And no determination of affiliation or control would be found between a Protégé firm and its Mentor based on the Mentor-Protégé agreement or any assistance provided pursuant to the agreement.

Better FAR Enforcement

The Federal Acquisition Regulation (FAR) already includes provisions intended to help Small Business in the event that bundling occurs.  Unfortunately, the FAR does not include enforcement mechanisms, nor does it include a reward or punishment system. If the FAR or Code of Federal Regulations (CFR) were to include mandatory enforcement, it would go a long way toward assisting Small Business. When it comes to FAR requirements for Contract Bundling, they are a good start, but fail to follow through with the most important aspect of the system.  Bundled contracts are often made so complex that small businesses are precluded from competing for them. 

How to Better Highlight SDVOSBs

Address VA Contracting Concerns and How to Improve the Process

Contracting with the VA can be extremely difficult for small businesses, requiring them to not only understand VA-specific contracting and complex procurement requirements, but also to understand the VA organization and culture. At MicroTech, we must constantly educate our customers about public policy like the “Veterans First Contracting Program,” and other initiatives that are designed to help Veteran-Owned Small Business grow. We also have to emphasize that there are enough capable SDVOSBs that have the experience and resources to adequately and competently fulfill Federal contracts.  There are many contracting officers at the VA that genuinely want to do business with a Veteran-Owned Small Business; unfortunately policies and regulations designed to make it easier to do business with Veterans are either not clearly promoted, or not understood.

GAO SDVOSB Fraud Report 

The October 2009, GAO report on the SDVOSB Program (Case Studies Show Fraud and Abuse Allowed; Ineligible Firms to Obtain Millions of Dollars in Contracts) is a telling indictment  of the fraud in the program highlighting test cases of ineligible and uncertified businesses that are giving legitimate SDVOSBs a black eye.

The enforcement issues are clear. For example, the SBA is only allowed to investigate suspected SDVOSB fraud if a formal protest is filed questioning the bid process. Even if the SBA finds that a contract was awarded to a fraudulent company, they are not required to restart the bidding process. And because no documentation proving eligibility is required, the SBA has no proven way to confirm status.

In 2008, more than 15,000 Veteran-Owned Businesses were registered in the Central Contracting Register (CCR), a requirement to do business with the Federal Government.  The CCR collects, validates, stores and disseminates data in support of agency acquisition missions.  Unfortunately the CCR does not call for proof that companies are legitimate Veteran-Owned Businesses.

SDVOSB Enforcement Recommendations

Additional requirements are needed to prove legitimate SDVOSB status. Take the handcuffs off the SBA and allow them to rigidly enforce eligibility. The GAO recommended that the SBA work to develop penalties that would prohibit companies from obtaining Federal work if they are found to knowingly misrepresent their status as a Veteran-Owned Small Business. It also urged the VA to expand its database of validated Veteran-Owned Small Businesses, so that the SBA and other Federal contracting officials across the government can access it to verify eligibility.

I applaud Representative Hall for his recent decisive action on the issue, and back his reported recommendations of completing the VetBiz database for a truer, more comprehensive picture of all qualified small businesses; to insist on more SDVOSB qualifying documentation; and to share the database with the rest of the government.  

SUMMARY

How to Help Veteran-Owned Small Business Grow 

I have often heard people in Washington say that we don’t need any more laws; we just need to enforce the ones we have.  In order to sustain or further increase the VA’s ability to contract with VOSBs and SDVOSBs, it will require vigilance, clearer guidance, improved oversight, and effective enforcement.  More will also need to be done to educate procurement officials about requirements and about the government’s desire to contract with Veteran-Owned Businesses.  We need to do more to get the word out and to let others know procurements that provide opportunities to Veteran-Owned Businesses have the support of the VA leadership, the House and the Senate, and President Obama.  I would also ask that you carry the message you’re hearing today to the other committees you serve on, and do everything you can to help educate others in Washington who don’t recognize the value and importance of Veteran Entrepreneurs.

Mr. Chairman and Distinguished Committee Members – I appreciate the time you and the other members of the subcommittee on Oversight and Investigations have spent on this and other critical topics affecting Veteran Entrepreneurship.  Pride means a lot to our Nation’s Veterans. We’re proud to have served the Nation in wartime, and proud that we can continue to serve our country through supporting the government’s goals. I speak for all Veteran Entrepreneurs when I say thank you for insisting on a level Playing Field for those who have sacrificed so much, and for recognizing their value to Federal Government service.  This concludes my testimony. I would be happy to answer any questions you may have.