Joint Hearing of the Committee on Homeland Security and Governmental Affairs of the U.S. Senate and the Committee on Veterans’ Affairs of the U.S. House of Representatives at 1:00 p.m. CDT.
Witness Testimony of Christina M. Roof, American Veterans (AMVETS), National Deputy Legislative Director
Madam Chairwoman, Ranking Member Boozman, and distinguished members of the subcommittee, on behalf of AMVETS, I would like to extend our gratitude for being given the opportunity to further discuss and share with you our views and recommendations on Federal Contract Compliance.
AMVETS feels privileged in having been a leader, since 1944, in helping to preserve the freedoms secured by America’s Armed Forces. Today our organization prides itself on the continuation of this tradition, as well as our undaunted dedication to ensuring that every former and present member of the Armed Forces receives all of their due entitlements. These individuals, who have devoted their entire lives to upholding our values and freedoms, deserve nothing less.
AMVETS believes that the use of qualified Service Disabled Veteran Owned Small Businesses (SDVOSB), Veteran Owned Businesses (VOB) and individual veterans themselves in federal procurement activities is vital to the reintegration and business success of our veteran community. Furthermore, AMVETS believes that transparency, uniformed policies, oversight and enforcement are absolutely vital in ensuring the integrity of the federal procurement system and the laws that are designed to protect and further the entrepreneurial and employment success of our veteran community. Our testimony will address the questions the subcommittee has presented as well as other concerns AMVETS believes are hindering the Department of Veterans Affairs (VA) acquisition and procurement program.
AMVETS has many serious concerns with regards to the current state of the Department of Veterans Affairs’ (VA) acquisition controls, policies, and procedures. Even more disconcerting is the fact that VA has allowed their entire procurement program to deteriorate to such levels. The individuals VA has vowed to protect are now the ones being most negatively affected by the lack of uniform policies and procedures, lack of proper training of contracting officers, lack of a data exchange system, and the absence of enforcement of consequences to those whom chose to defraud VA.
Federal contractors are required to submit one of two reports. In some cases, an employer may even be required to submit two reports. The number of reports depends on the date of award and the dollar value of a contract.
The VETS-100 Report requires the following:
- Company Legal Name
- County in which company is located
- Address of headquarters
- Address’ of all hiring locations (if applicable)
- Name of hiring location(s) if different than company name
- Employer Identification Number (EIN)
- Company HR Dept POC Name, Phone number and Email
- Primary NAICS
- DUNS Number
- Does your firm have a CURRENT Federal contract that was awarded prior to December 1, 2003 with a value of $25k or more?
- Does your firm have a CURRENT Federal contract that was awarded on or after December 1, 2003 with a value of $100k or more?
- Number of employees in the following categories:
Special Disabled Veterans
Vietnam Era Veterans
Recently Separated Veterans
Other Protected Veterans
Title 38, United States Code, Section 4212(d).VETS-100 report is required by the Department of Labor for statistical purposes. As of March 30, 2010, the VETS-100 Report was a requirement for all contractors holding or seeking a government contract or subcontract. The report tracks the number of veterans hired by contractors.
The VETS-100 is an annual filing requirement for federal contractors that receive more than $100,000 in federal contracts per a year. The filing requirement was a result of the Jobs for Veterans Act and was meant to help veterans get additional consideration from private companies that receive contracts from the federal government. The VETS-100 was intended to fulfill some of the requirements of the Jobs for Veterans Act. The Office of Federal Contract Compliance Programs (OFCCP) has the responsibility of assuring that employers doing business with the federal government comply with the equal employment opportunity (EEO) and the affirmative action provisions of their contracts. OFCCP administers and enforces two equal employment opportunity programs that protect veterans and apply to federal contractors and subcontractors: Section 503 of the Rehabilitation Act of 1973 (as it may apply to disabled veterans) and the affirmative action provisions of the Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA) of 1974.
The Jobs for Veterans Act stipulates: *2035 "(a)(1) Any contract in the amount of $100,000 or more entered into by any department or agency of the United States for the procurement of personal property and nonpersonal services (including construction) for the United States, shall contain a provision requiring that the party contracting with the United States take affirmative action to employ and advance in employment qualified covered veterans. This section applies to any subcontract in the amount of $100,000 or more entered into by a prime contractor in carrying out any such contract.
AMVETS believes the current VETS-100 serves no meaningful purpose to the federal contracting system. There are essentially only two required actions for companies who file a VETS-100 form: First, they must file the VETS-100 form on annual basis and second, they must list most available positions with an employment delivery system such as an online employment site such as VetJobs. Unfortunately, these mechanisms lack oversight and the information submitted is usually taken at face value with no further verification processes occurring.
AMVETS recommends the following actions regarding the VETS-100 program:
- The VETS-100 report must be made transparent and available to the public on a single source, easily searchable online format. Public transparency will likely prove to provide better oversight and accountability then what is currently in place. Furthermore, formal annual updates should be presented to Congress detailing the oversight and investigation inquiries to companies filing the VETS-100, as well as what measures were taken against contractors know to be non-compliant to the law.
- A central repository must be created. An officially recognized central repository of contractors must be created and updated on a monthly basis with data derived from the Federal Procurement Data System (www.fpds-ng.com), the Central Contract Registry (www.ccr.gov), the historical contract data from www.usaspending.gov, as well as www.defenselink.mil for Pentagon awards. This centralized data base would provide DOL, OFCCP and other agencies involved in compliance monitor all federal contractors to insure compliance of veterans’ affirmative action laws.
- VETS-100 compliance and reform needs action. At present the VETS-100 form lacks verification of the three compliance principles of ‘affirmative action in hiring’ under the Jobs For Veterans Act. First, proof of affirmative action outreach with the local LVER, second, proof of posting all job openings on a sanctioned job board and finally any proof that all sub-contractors are notified if they have sub-contracts of $100,000 or more.
- Consequences need to be set forth and enforced for non-compliance. Without comprehensive monitoring, regular auditing and enforced sanctions for non-compliance, there is little reason for businesses to comply with the current veterans employment laws.
AMVETS is aware of the fraud as reported over the past several years by VA’s Government Accountability Office (GAO) and The Office of the Inspector General (OIG) and finds it absolutely unacceptable and shameful that VA and other federal agencies have not taken actions against known “know offenders” and continue to do business with them. An example of this failure to enforce compliance is illustrated by recent site visit reports. According to these reports, approximately 40 percent of the visits resulted in evidence that control or ownership requirements had not been met, but as of April 2010, CVE had not cancelled any business’ verification status. According to these reports, evidence of misrepresentation dates to
October 2009, but VA had not taken actions against these businesses as of April 2010. According to VA’s Office of Inspector General, it has received one referral (on April 5, 2010) as a result of the verification program. AMVETS respectfully requests an answer from VA to why no authority has been exercised in debarment of these companies in order to protect the integrity of the system and to make contracts available to the veterans who need the employment?
Until companies understand that non-compliance to the law and breaches to their contracts have consequences that are actually enforced, AMVETS believes we are doomed to a system that will never function as it is intended to and will continue to waste billions in appropriations.
Regarding the current state of monitoring and oversight of contracts by federal agencies, AMVETS has several serious concerns. AMVETS believes the inexcusable lack of oversight and enforcement of compliance is resulting in lost employment opportunities for veterans. VA awards approximately $12 billion in contracts annually. Of these awards veteran owned businesses are supposed to receive 8 percent, with service-disabled veteran owned small businesses receiving another 3 percent. As of mid-2010, more than 1.3 million veterans were unemployed. Astoundingly, more veterans are unemployed than are currently serving in both Iraq and Afghanistan. This sad reality should be reason enough for VA to immediately develop and implement a program, even if only temporary, designed to identify and remove any contractor taking jobs away from our veterans. This should also be reason enough for Congress to mandate this type of program and ensure that it is being done through the strictest of monitoring. Transitioning back into civilian life is not easy even in the best of times, so you realize how difficult it currently is given the state of our economy. For returning veterans, the prospect of starting a business is appealing. A recent SBA survey found that 22 percent of veterans were either purchasing or starting a business, or considering doing so. However, for a veteran interested in entrepreneurship, the reality is quality resources are scarce or disjointed.
AMVETS believes that most people forget that one’s financial and emotional stability is often built around their abilities to provide for their families and themselves. By allowing contractors to defraud VA, AMVETS feels they are denying a veteran the sense of stability that is of the utmost importance during transition.
AMVETS finds it extremely disconcerting that VA has allowed their entire acquisitions program and related programs to deteriorate to such levels, especially during a time when this country is seeing service members return from war wounded and permanently disabled. The individuals VA has vowed to protect are now the ones being most negatively affected by the lack of compliance enforcement, proper training of contracting officers and the overall lack of VA internal data exchange systems or contracting and job opportunities for veterans. VA’s decentralized system of acquisition function and contract procurement is resulting in inconsistent applications of the policies and initiatives, thus resulting in loss of employment opportunities for veteran owned businesses in these challenging economic times.
Performing audits and compliancy testing of federal contracts are important tools to ensure that the purpose for the agreement or the performance of the contract actually occurs. AMVETS strongly believes that preventive proactive controls are the most effective way to minimize fraud and abuse, continual monitoring is an important component in detecting and deterring fraud. Monitoring and detection within a fraud-prevention program involve actions such as data mining for fraudulent and suspicious applicants and evaluating firms to provide reasonable assurance that they continue to meet program requirements. AMVETS concerns with VA’s procurement processes is on the overall identification and verification of status and the lack of oversight on compliance of contractors claiming SDVOSB and VOSB status. AMVETS has identified a number of areas in the current verification methods that could be costing VA millions and our veteran business community their due entitled chance at competing in a fair procurement process. These include, but are not limited to:
- VA’s lack of a uniformed, single source database system to exchange information internally and across different agencies on veteran ownership and qualification statuses. Not only is SDVOSB and VOSB status verification not being performed on initial bids, but current “self verified” SDVOSB and VOSBs are also not being audited for accuracy and legitimacy. These actions are detrimental to the entire federal procurement system and lead to such injustices and untruths as the “rent a vet” for contract awarding purposes. AMVETS believes this behavior to be irreprehensible, and ultimately an act of theft and defrauding of the United States federal government, upon taking federal funds under false pretences.
- In October of 2009 GAO released there reporting stating they had uncovered more than 100 companies receiving federal procurement dollars under the status of a SDVOSB, yet none actually qualified for that status. Due to VA depending on the inefficient system of self verification of veteran status by a business owner, GAO was able to identify one company actively working on 30 federal contracts under the SDVOSB premise that did not meet the criteria.
- VA was awarded $1.4 billion in recovery act funds to aide in the employment and contracting opportunities available to SDVOSBs and VOSBs. To date $538 million has been used on awards to SDVOSBs and VOSBs, according to VA. However, AMVETS is very concerned on how much of these appropriated funds were actually awarded to legitimate SDVOSBs and VOSBs, due to the lack of verification processes in place at VA.
AMVETS is also very concerned that VA is not currently auditing existing contracts. This practice will lead to inadequate fairness in competition, hindering the success of SDVOSBs and increasing chances of fraud within VA’s acquisition system. AMVETS recommends that VA immediately implement a functional verification system that allows traceability of every system and process of VA awarded contracts, regardless of size. A functional system will allow VA to accurately process all of their interdependent and linked procedures, which at every stage, consume one or more VA resource (contracts, employees, funds) to convert the inputs into outputs. These outputs then serve as inputs for the next stage of the functional verification process until a known goal or end result is reached. It is in the opinion of AMVETS that the primary contract issuer, in this case VA, should be responsible for ensuring the integrity of the contracts they award. AMVETS recommends that since gross lack of oversight by VA continues, the Office of Federal Contract Compliance Program and/or a private audit firm immediately start conducting enforcement audits of VA contracts. In private sector construction contract audits, 8-12 percent of the total contract cost is recovered during a simple standard audit. In fact many contract grantors find that the cost of performing an audit is usually covered by the first two percent of the money recovered during that audit, this fact should help ease concerns of the costs of performing audits.
AMVETS also recommends this process begin with the examination of inchoate contracts, in order to detect any problems before these contracts are closed. Executed contracts are equally important to make sure that VA funds were properly handled and not used to perpetuate the discrimination against veterans or any wrongdoing.
AMVETS would also like to stress the vital procedure of internally auditing current procedures and employee knowledge base. These types of audits are used by every successful private sector organization, as a means of measuring quality and shortfalls within an organizational system. An organization will only be successful and run at its full potential if it is able to recognize its weaknesses. AMVETS believes that implementing a continuing training program for all persons involved in VA procurement processes, regardless of location or position, will provide a foundation of clarity and standardized education to every individual involved in VA’s procurements process. This will also aide VA in establishing an unambiguous hierarchy and establish a system of unquestionable accountability in regards to procurement. VA’s organizational alignment should be examined to ensure appropriate placement of the acquisition functions are occurring within the agency, and that employees clearly understand their individual defined roles and responsibilities. We are not questioning the ethical standards of VA or its employees, rather the structural framework currently in place regarding procurement. VA must protect the integrity of their procurement process and the authorities granted to them by closely examining their current acquisition hierarchy on every level. AMVETS also believes VA should re-examine their current oversight methods and develop a plan granting authorities to field contract officers, so that they may conduct random inspections of VA’s awards to ensure that the integrity of all VA contracts are protected and enforced.
AMVETS is also concerned that VA is not using any type of centralized contract management software system. By implementing the use of contract management software will greatly benefit VA’s current acquisitions system.Having a centralized electronic monitoring and data recording system in place will help eliminate many problems for VA in their acquisitions procurement processes. VA’s use of contract management system will streamline processes through their entire lifecycles, covering the stages of planning, negotiation, analysis, storage, and maintenance.A contract management system will benefit VA by lessening the time it takes to create and administer contracts, workloads related to manual processes, and the contracting officers’ administration/transaction processing time from procurement to payment. An electronic system will also enhance process efficiency throughout the contract lifecycle, reporting, contract visibility and access, and financial tracking of transactions based on contracts. This will provide VA with the necessary tools to automate workflow, standard processes and contract request processing, and merge and secure contract repositories or databases. AMVETS believes that an electronic contracting system will also provide a reliable and accurate source that will provide an effective system of traceability. From a contractual accounting standpoint it will allow VA to better track and assign cost directly to an activity or cost object on the basis of cause-and-effect relationship. VA will also have the ability to accurately monitor quality control, thus giving them the ability to trace the application, locations, and/or history of contractual activities by means of a recorded data system. Finally, the use of an electronic contracting system will provide VA with a functional verification process that will ensure products, services, and activities conform and meet all performance and material requirements set forth by contractual agreements. VA will be able to manage and exchange information internally and externally with greater ease, and eliminate the lack of communication within the acquisitions system, which seems to be the root of many of their problems.
Finally, when discussing the current state of the VA’s acquisition and compliancy systems, AMVETS believes it is necessary to discuss traceability. As stated earlier VA has no way of knowing if they are actually receiving the services they paid and if the proper veterans preference clauses of their contracts are being met. AMVETS believes this is due to VA not utilizing a solid system of traceability. From an accounting standpoint it is absolutely essential for an organization to have the ability to track a specific piece of financial information by means of recorded data. Equally important is traceability in cost accounting. Although VA should already have a system of cost accounting in place to assign a cost directly to an activity or cost object on the basis of cause-and-effect contractual relationships, they are yet to demonstrate the proper use of such a system. Traceability is vital to the stability of any acquisitions program is in that of quality control traceability. This ability to track system requirements from a system function to all those elements that individually or collectively perform that function. VA must have the necessary trained staff and accounting systems in place to accurately assess the cost and quality of their awards. Furthermore, VA must be able to ensure that all of the terms of their contracts are being met regarding veterans. Simply implying or stating that a contractor must meet the criteria of being a veteran is one thing, actually holding the contracts accountable and enforcing compliancy is another. VA must use all of their authorities to protect our veteran community against those whom wish to de-fraud the system and take jobs away from actual SDVOSBs and VOBs.
AMVETS emphasizes the importance of VA and all federal agency procurement personnel being held accountable for not implementing directives and laws passed by this congress or handed down from the executive branch. Respectfully, if there continues to be lack of accountability on the part of VA regarding important procurement processes and lack of a system to holding contractors accountable, AMVETS believes that VA's system of acquisitions will be stuck in this vicious cycle of hearings and recommendations with no real actions taking place, proving unnecessarily detrimental to our veterans. Incorporating a clear accountability matrix into the VA’s procurement processes will help to ensure that every contract element is properly assigned. This will eliminate any question on the expectations and/or tasks that is required by each individual involved in VA’s procurement processes. Accountability matrixes ensure every duty within the procurement process is satisfactorily preformed according to law and standards, and which has consequent penalty for failure.
Again, AMVETS urges swift and appropriate actions be taken in protecting our SDVOSB and VOSB rights and entitlements in all federal procurement practices. VA must protect and improve its vital role in supplying more veteran-owned businesses with contracts by designing and enforcing stricter contract compliancy regulations and uniformed verification processes.
This concludes are statement on federal contract compliance, and we will be happy to answer any questions the committee may have for us. AMVETS thanks the committee for the invitation to share or concerns and recommendation today on such an important, often overlooked issue.