EXECUTIVE SUMMARY

Many of us know that it was Public Law 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999 that laid the foundation for veterans interested in starting or expanding their own small businesses to get Federal assistance.  Congress even stated in its findings of P.L. 106-50 that America had not done nearly enough to ‘assist veterans, particularly service-disabled veterans, in playing a greater role in the economy of the United States by forming and expanding small business enterprises.’

P.L. 106-50 called for the creation of new entities and the restructuring of existing ones in order to assist veterans in pursuit of entrepreneurship.  Under this law, the Office of Veterans Business Development (under SBA), the Center for Veterans Enterprise (under VA), and the National Veterans Business Development Corporation (quasi independent), were created.  It also established a 3 percent procurement goal for Federal agencies and large Prime contractors to purchase goods and services from service-disabled veteran owned businesses.  But agencies did not pay much attention until 2003 when Public Law 108-183 made the 3 percent minimum MANDATORY.

And even then, it took a Presidential Executive Order (13-360) in October 2004 to really get agencies to carry out the law.  Under the Order, agencies were instructed to designate a senior-level official to be held accountable for submitting a strategic plan showing how and when they would achieve the 3 percent contracting goal for service-disabled veteran owned businesses.  But with no oversight and penalties associated with non-compliance, after a few years the effort diminished.

So Congress took another direction in 2006 and passed Public Law 109-461 which authorized ONLY the VA to implement a unique "Veterans First" approach to VA contracting. This approach would change the priorities for contracting preferences within the Department of Veterans Affairs (VA), by placing Service-Disabled Veteran Owned Small Businesses (SDVOSBs) and Veteran Owned Small Businesses (VOSBs) first and second, respectively, in satisfying VA's acquisition requirements.

Then in February 2008, Congress passed Public Law 110-186, the ‘Military Reservist and Veteran Small Business Reauthorization and Opportunity Act’ to provide additional funding to the SBA Office of Veterans Business Development to increase the number of veteran business outreach centers and to provide veteran business owners some needed assistance with business development and access to capital.   

Now after more than 10 years since Congress first laid the foundation for a veterans procurement program, veterans are returning home from active duty facing high rates of unemployment, limited contracting opportunities, and a system that values profits over people.  Yes, existing laws have made it possible for veterans to participate in the American Dream that they fought so hard to protect – ‘Owning Your Own Business’.  But what good is it for them to own their own business if the revenue from that business is insufficient to care for them and their family.  Truly more can be done for our veterans.

INTRO:

Good Afternoon, Madam Chair and members of the subcommittee.  On behalf of VVA National President John Rowan and all of our officers and members we thank you for the opportunity for Vietnam Veterans of America (VVA) to appear here today to share our views on the ”Status of Veteran Small Businesses: Are We failing Our Veterans.”  I ask that you enter our full statement in the record, and I will briefly summarize the most important points of our statement.

As you know, my time of service was many years ago, as a Vietnam Era veteran of the US Air Force with the 66th Strategic Missile Squadron.  I still have very vivid memories of that military experience.  I’m also a lifetime member of the National Association for Black Veterans, and have spent the past 10 years assisting and advocating on behalf of veterans in need of health care, housing, education, employment and especially those veterans seeking to start or expand their own small business.  While doing so, I have been serving as Senior Advisor to the Vietnam Veterans of America, Treasurer for the Veterans Entrepreneurship Task Force (VET-Force) and President of the Veterans Enterprise Training & Services Group (VETS Group).

It is primarily through developing the VETS Group and serving as a member of VET-Force, that I have become very familiar with the status of veteran business owners within the Federal market place.  I’ve also spent considerable time reviewing the legislation that created the Service Disabled Veterans Owned Business (SDVOB) Federal Procurement Program and communicate regularly with many of the agency representatives directed to assist veterans with Federal contracting. 

The VET-Force, which is composed of over 200 organizations and affiliates representing thousands of veterans throughout the United States; a high percentage of which, are small businesses; has made it their mission to monitor the implementation of the programs, agencies, and organizations referenced under P.L. 106-50. P.L. 108-183, Executive Order 13-360, P.L. 109-461, and P.L. 110-186.  The VET-Force presents a strong unified veterans’ voice for virtually all of the major veterans groups, veteran entrepreneurs, and serves as an advocate for veterans seeking assistance with their small business or self-employment.

The VETS Group, a non-profit 501(c)3, community based organization that I founded in 2004, offers a holistic program of services to help veterans achieve economic empowerment through education, employment, and entrepreneurship.  The VETS Group is able to provide information, outreach, Federal procurement training and support to hundreds of veterans by utilizing a network of Patriot Resource Partners, a Coalition of Advisors, and many Technical Assistance Providers.

While the majority of our veteran business owners are from the Vietnam Era, a new generation of veterans now exist that are well trained, loyal, battle-tested and eager to pursue entrepreneurial opportunities.  But just as it was reported in the VET-Force 2005 Report to the Nation, that ‘as a Nation, we have been unsuccessful in providing the originally promised assistance our veterans have earned, deserved, and required so that they would have the opportunity to be as successful in their civilian pursuits as they were in their military assignments;’ evidence shows that while things have improved, we still have a way to go.

Why We Are Still Failing Our Veterans in the Federal Marketplace

If veterans and service-disabled veteran owned businesses are to succeed in the public sector, agencies will have to stop making excuses for why they can’t make the minimum3 percent procurement requirement.  The pervasive ignorance of the law and resistance to contracting with veteran owned small businesses has to change.  Agencies and large prime contractors must be held accountable for not adhering to the laws that mandate maximum practical utilization of SDVOBs as primes or subcontractors.  Inaccurate agency data, miscoding, contract bundling, and double counting must be eliminated.  And the preference for agencies to contract with large businesses most often (67 percent of the time) should shift to utilizing small businesses much more often.

In addition, the SBA and particularly its Office of Veterans Business Development, the VA’s Center for Veterans Enterprise, and other veteran small business assistance providers (SBDCs, PTACs, SCORE, Women Business Centers, VBOCs) must increase their efforts in identifying and registering the capabilities of veteran business owners where required; promote the use of veteran business owners by all large Prime contractors and monitor their compliance with their subcontracting plans.  They should also create situations that foster the development of relationships between agency procurement officers and veteran business owners, and improve the process of identifying and matching veteran businesses with procurement opportunities.

Lack of Accountability, Oversight & Enforcement

In 1999, when P.L. 106-50 was first enacted, Congress demonstrated that veterans should be an integral part in this Nation’s economic development strategy.  But the agencies directed to carry out the law were not held accountable.  There have not been any penalties associated with an agency or large Primes’ failure to comply with the laws governing small business contracting with veteran owned businesses.  Even after P.L. 108-183 was passed in 2003 making it mandatory to contract with SDVOBs, the President had to issue an Executive Order to get agencies and large Primes to realize that the use of veteran business owners in the Federal contracting process should be taken seriously.

But after the SBA, the agency directed by Executive Order to provide oversight and technical assistance to agencies in the development of their strategies to increase contracting opportunities for SDVOBs, failed to do its part to hold agencies accountable, agencies and large Primes have no incentive to meet or surpass the minimum requirements.

Agencies and large Primes have to be held accountable for not doing what the law requires them to do.  But equally important is that it must be made clear who will be the Enforcer and what penalties will be applied to those deemed to be noncompliant.

Ambiguities in the Laws that Govern the SDVOB Program

As it stands now, contracting officers ‘May’ set aside procurements for SDVOBs.  The word ‘May’ in the statute (P.L. 108-183) that governs the SDVOB Federal Procurement program, is more often interpreted as ‘I Don’t Have To.’  This one little word has probably caused the greatest harm to veteran business owners than any other provision of law.  Why, because the statue that governs the Hubzone program states that a contracting officer ‘Shall’ set aside procurements for Hubzone companies and the 8a statute states that they ‘Should’ use 8a companies. 

While changing all three statutes to ‘May’ would seem to equalize things among the two groups; it’s more likely that it would only open the door to fewer actions and less accountability.  To create true parity among all three groups, the statutes should be changed to ‘Shall’.  This way would ensure that contracting officers would be required to take actions for one or the other; notwithstanding any other provisions of law. Equal Parity = Shall, Shall, Shall (8a, Hubzone, SDVOB)

For years now, members of VET-Force have been calling for equal parity among all three preference groups – Hubzones, SDVOBs, and 8a contractors.  However, to date, equal parity does not exist even though the SBA and the Dept. of Justice believe it does.  According to a recent US Court ruling, agencies ‘must’ attempt to contract with Hubzones first.

Old Executive Order ‘A Thing of the Past’

The Presidential Executive Order, #13-360 that was issued in 2004 to direct agencies to more effectively implement the ‘mandatory’ legal requirement to procure ‘not less than’ 3 percent of their goods and services from Service-Disabled Veteran Owned Businesses and to do so by reserving more procurements exclusively for SDVOBs called for each agency to develop a ‘written’ Strategic Plan that would provide details and guidance as to how they will increase contracting opportunities for SDVOBs. 

This was working for awhile; agencies were posting their plans on their websites and some were actually trying to achieve better results.  But by late 2007, SBA decided to move away from support for the Executive Order and instead implement a Score Card System whereby agencies are not required to submit a strategic plan and primarily measured by the number of small business contracts awarded.  So if an agency meets its overall small business goals while not making all of the individual preference group goals, it could still receive a Green Score which means it is doing a good job.  Never mind that they may be at only 1.5 percent for SDVOBs!

Overuse of Large Prime Contractors and Bundling

Seemingly very few agencies are doing anything to encourage their large Prime contractors to award more subcontracts to SDVOBs.  When you talk to contracting officers or acquisitions personnel, they all say that they are challenged by the enormous task of monitoring the subcontracting plans of the agency’s large primes while also having to meet the demands of new requirements.  There is a shortage of contracting personnel government-wide but an increase in the number of contract actions.  So very few penalties, if any, are being imposed on the large Prime contractors for failing to comply with their subcontracting plans.  It’s often more convenient to place procurement requirements into large bundles and award them as a single contract to a large Prime. 

While Contract Bundling or sometimes referred to as Strategic Sourcing may be necessary at times in order to make more efficient use of limited contracting personnel and agency resources, it wouldn’t be so bad if large Primes subcontracted significant portions of the work to small businesses as they are required to do.  However, small businesses, including SDVOBs are constantly reporting that large Primes often fail to subcontract with them even though they had promised to do so before the contract was awarded.  This continues to happen time and time again because large Primes are not being held accountable and neither are contracting personnel who should be monitoring them.

No Authorization to Make Direct Awards

Contracting officers don’t have the authority to issue direct awards to a SDVOB of their choosing under the Simplified Acquisition Threshold as is allowed under the Small Business Act for 8a companies.  Under the SDVOB Federal Procurement Program a contracting officer must use what is referred to as the “Rule of Two.”

The Rule of Two as introduced under P.L. 108-183 is contained in Part 19 FAR, and the Code of Federal Regulations (CFR) 13 CFR, Part 125.  The Rule of Two states if a contracting officer knows of two or more SDVOBs that can do the work, then the requirement must be competed.  However, the same law also states that if the contracting officer only knows of one SDVOB that can meet the requirement, a sole source award CAN BE Made.  But even when this is the case, it’s reported that this authority is seldom exercised.

So it’s widely known that contracting officers who are often under pressure to get certain requirements awarded quickly, will routinely go to 8(a) firms even though there is a SDVOB that can do the job.  Under the SBA’s 8a program, contracting officers are allowed to make direct awards even if there are other 8a firms available to do the work.  In these cases, the Government does not have time to even consider restricted competition among SDVOBs because of time factors. Thus, the SDVOB suffers and the government fails the veteran once again.

Other Reasons Why the System is Failing its Veterans

Limited Business Development Assistance.  Before last year the SBA Office of Veterans Business Development managed 5 Veteran Business Outreach Centers (VBOCs) that provide services to veterans for the entire country.  Last year, the SBA made direct awards to 3 independent veteran business centers in order to expand its number of centers to 8.  Then just this month, SBA awarded grants to some existing centers and added 4 more centers, thus increasing its total to 12. 

This may seem to be steps in the right direction, but the Office of Veterans Business Development has been operating for more than 10 years!  And by comparison to the number of Women Business Centers (WBCs) funded by the SBA, veterans receive only a drop in the bucket.  Each of the VBOCs receives only $150,000 per year for a total of $1,800,000.  However, the WBCs receive over $50 million dollars each year. 

Congress needs to increase the budget for SBA and SBA needs to direct more funding to its Office of Veterans Business Development.  At present, not only are the VBOCs underfunded, the Office has only one staff person to provide direct assistance to thousands of veteran business owners seeking to do for Federal contracting.  And that one staff person does not even have an administrative assistant.

VA’s ‘Veteran’s First’ Approach to VA Contracting

The use of Veterans First should be applied to All VA procurements and not just selected ones.  The prevailing belief among many within the VA that SDVOB means Small & Disadvantaged Veteran Owned Business is a disservice to those VOBs and SDVOBs that are perfectly capable and qualified to handle sizable procurements including those being considered by the VA’s T-4 Acquisition Team.

This time last year, this same subcommittee held a hearing focusing on “Contracts and Contracting Policy at the VA” created by Public Law (P.L.) 109-461.  We noted then that this legislation authorized a unique "Veterans First" approach to VA contracting. This approach changes the priorities for contracting preferences within the Department of Veterans Affairs (VA), by placing Service-Disabled Veteran Owned Small Businesses (SDVOSBs) and Veteran Owned Small Businesses (VOSBs) first and second, respectively, in satisfying VA's acquisition requirements.

But in so doing, all SDVOSBs and VOSBs, must register in the VA’s Vendor Information Pages (VIP), aka Veterans Small Business Database, available at www.VetBiz.gov, and be ‘VERIFIED’ by the VA’s Center for Veterans Enterprise (CVE), to be eligible for to receive contracts exclusively within the Department of Veterans Affairs. 

Other significant sections of the law direct the VA, for SDVOSBs and VOSBs, to: (1) Establish Contracting Goals & Review Mechanisms; (2) Allow Non-competitive, Sole Source, & Restricted Competition; (3) Permit Survivorship for 10 yrs, if the deceased veteran business owner was 100 percent disabled; (4) Produce Annual Progress Reports; and (5) Conduct a 3-Year Study.

The law was passed in 2006 and to date (more than 3 years later), the VA is still struggling with developing policies and procedures that will expedite the processing of more than 21,000 veteran business owners.  Rather than go back over all of the issues with the VA’s verification process of veteran business owners, I will just refer the Committee to testimony and statements received at its hearing held here on April 23, 2009.

However, I would like to add at this time that while the verification or certification of veteran business owners is only required when doing business with the VA, this requirement has created the perception that veteran business owners must be verified by the VA in order to do business with other agencies as well.  Since the VA’s Veterans Small Business Database is open to the public, agencies and large Primes often use the database to search for capable and qualified veteran businesses.  For those veteran businesses that have not yet been verified because of the huge backlog, their opportunities for procurements outside of the VA are also affected because then their status is questionable.

More resources need to be allocated to the VA’s Center for Veteran’s Enterprise such that they can increase the number of staff persons needed to complete the verification of all veteran business owners in less than 60 days.  Additional staff is also needed to assist veteran business owners with the process of marketing to the Federal agencies and large Primes.

Close the Loopholes with the use of FSS/GSA Schedules

Use of FSS/GSA Schedules (FAR Part 8) allow contracting officers easy selection of large businesses by not having to adhere to small business mandates (FAR Part 19).  So the schedules are often used to avoid the small business set aside requirements and even to avoid the use of Veterans First at the VA.  Contracting officers at the VA are not required to use Veterans First when selecting contractors from the schedules.

In Summary:

The Federal marketplace is a trillion dollar industry.  And 3 percent of that annual budget is easily in the billions.  Not to mention the billions of dollars in the budgets of large Primes.  Both Federal agencies and commercial vendors owe more to the many veterans who have sacrificed so much and deserve more than a little.  It should be abundantly clear to all that our service members, their families, and citizens throughout the United States are taking note of how this new generation of service members are being treated.  The actual and perceived treatment of our Nation’s veterans, especially those returning from the Wars in Iraq and Afghanistan, will be a symbol of how valued their sacrifice was and a clear signal to any future enlistees on the ultimate value of their service to the Nation.

For some time now, members of VET-Force have supported the ideal that, ‘the presence of successful and prominent veterans within and across our nation’s business communities is a testimony of a grateful nation - a nation that honors and respects the sacrifices made by Veterans on behalf of our country, both today and tomorrow’.  Veterans are uniquely qualified to work as contractors to the Federal Government because of their service experience and their dedication to providing quality products, on time and at a reasonable cost. Effective legislation such as P.L. 106-50, P.L. 108-183, P.L. 110-186 and Executive Order 13360, has provided many opportunities for America to honor the service of Veterans who continue to serve by helping to build a stronger economy.

Hopefully the latest efforts by this Administration to improve services to Veteran and Service Disabled Veteran Business Owners will not be significantly impacted by OMB’s Policy on Insourcing, whereby Federal agencies are already eliminating contracts staffed by small businesses.

The announcement earlier this week of the Presidential Executive Orders to create two task forces is very promising.  The first task force will focus on improving procurement opportunities for all small businesses and the second task force will focus exclusively on improving contracting opportunities for small businesses owned by veterans and service-disabled veterans.  The structure of the Veterans Small Business Interagency Task Force was extracted nearly verbatim from a section in P.L. 110-186, the law that was passed in 2008.  Perhaps now, 2 years later, that the President and this Administration have directed the SBA to implement it, actions will be taken.

Although some progress has been made in recent years, very few Federal agencies have reached their small business contracting goals for SDVOBs. Obviously, more needs to be done for our veterans so that the system does not continue to fail them.

Thank you for allowing me to share these points of view.

This concludes my statement.