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Witness Testimony of Mr. Joseph C. Sharpe, Jr., American Legion, Deputy Director, Economic Commission

The American Legion appreciates this opportunity to comment on the current state of veteran entrepreneurship.

The American Legion acknowledges that small business is the mainstay of the American economy.  It is the mobilizing force behind America’s past economic growth and will continue to be the primary factor as the nation progresses into the new millennium.  Presently, more than nine out of every ten businesses are small firms, which produce approximately half of the Gross National Product (GNP).  Currently, over one-half of the nation’s work forces are employed by small business, with the average company employing approximately 11 persons. The American Legion recognizes the benefits of American entrepreneurship, not only for the overall American economy but also for the transitioning servicemember seeking to develop their own business

America has also benefited immeasurably from the service of its 24 million living veterans, who made great sacrifices in the defense of freedom, in the preservation of democracy, and in the protection of the free enterprise system.  According to the Small Business Administration’s (SBA) Office of Veterans’ Business Development in Washington, DC, the number of small-business-owning veterans has increased to more than 4 million nationwide with more than 235,000 being service-connected disabled veteran owned.  They range from home-based sole proprietorships to high–tech global corporations.

In addition, due to the experience veterans gain in the military, the success rate of veteran owned businesses is higher than other non-veteran owned businesses.  The current War on Terror has had a devastating impact on the military and has exacerbated this country’s veteran unemployment problem, especially within the National Guard and Reserve components of our military.  The present unemployment rate for recently discharged veterans is double the national average.  Unfortunately, many of the thousands of service members who are currently leaving the service are from the combat arms and non-skilled professions that are not readily transferable to the civilian labor market.

One way of combating unemployment is through the creation of new jobs.  Small business creates by some estimates 60 percent to 80 percent of net new jobs, therefore providing a central element for strong economic growth.  Government should assist in the creation of new jobs by encouraging qualified entrepreneurs to start and expand their small businesses.  No group is better qualified or deserving of this type of assistance than the veterans of this nation.

Increasingly, the growth and stability of this nation’s economy is dependent on the long-term success of the small business networks across the country.  However, during a time of war there is much to be accomplished.  Ironically, for too many years, the very men and women who served in uniform and who stood ready to fight, and if necessary to die, in order to protect and preserve our free enterprise system, were completely ignored by the Federal agency responsible for meeting their small business needs

Reaffirm Support of the Small Business Administration’s Office of Veterans’ Business Development:

The American Legion supports increased funding of the Small Business Administration’s Office of Veterans’ Business Development in its initiatives to provide enhanced outreach and specific community-based assistance to veterans and self employed members of the Reserves and National Guard.  The American Legion also supports legislation that would permit the Office of Veterans’ Business Development to enter into contracts, grants, and cooperative agreements to further its outreach goals and develop a nationwide community-based service delivery system specifically for veterans and members of reserve components of the United States military.  For FY 2008 estimated funding for this office would be estimated to be $5 million, in FY 2009 $10 million, and FY 2010 $15 million to enable it to implement a nationwide community-based assistance program to veterans and self employed members of the Reserves and National Guard.

The National Veterans Business Development Corporation:

Congress enacted the Veterans Entrepreneurship and Small Business Development Act of 1999 (P.L. 106-50) to assist veteran and service-connected disabled veteran owned businesses by creating the National Veterans Business Development Corporation and with the assistance of the SBA.  The Veterans Corporation (TVC) created a Veterans Entrepreneurial Training (VET) Program to promote and foster successful veteran entrepreneurship within the veteran business community, but this program no longer operates.  Currently, the organization’s main efforts have been to provide distance-learning education in how to start and expand existing businesses, to include training in finance, accounting and contracting.  The Veterans Corporation indicates it has established a foundation for a 10-year plan to reach all 4-5 million veterans interested in entrepreneurship.  Its latest vision is to assist Guard/Reserve and transitioning members of the Armed Forces and their families with the establishment of their own businesses.  The American Legion is working with the Veterans Corporation to ensure the best method or methods of assisting these deserving veterans.  TVC has in the past stressed creating online education programs hosted by other third party organizations to assist veterans with obtaining basic literacy skills.  This current plan would create an online platform to match veterans with entrepreneurial education and career opportunities and to provide grants to Small Business Development Centers around the country and other business development organizations to specifically assist veterans.

On Line Development Programs

The current staff of the Veterans Corporation has focused on employing the use of the worldwide web to reach veterans.  According to TVC representatives a combination of services, online and distance learning will serve the largest number of veterans needing entrepreneurial services in all fifty states.  TVC expects to launch a Virtual Veterans Business Center in cooperation with SBA’s Service Corps of Retired Executives (SCORE) to provide a nation-wide, market specific, person-to-person counseling service to veterans not only in America, but deployed overseas as well.

TVC has also launched a Virtual Business Incubator with the specific aim of helping National Guard and Reservists who own businesses and are currently deployed in Afghanistan, Iraq or any place else in the world.  “Deploy Proof Your Business” is another online program specifically designed to assist members of the National Guard and Reserve components in protecting their businesses prior to deployment.

The American Legion fully supports these progressive programs aimed at the technologically astute veteran.

Small Business Development Centers

The Small Business Development Centers (SBDC) are already funded almost $90 million a year by SBA and our understanding is their written agreements with SBA provide direction for their specific creation or operation of veteran, service-connected disabled veteran and reserve component member entrepreneurial assistance.  Why does the SBDC need an additional, third party organization such as the Veterans Corporation to provide them additional funds from Congress to perform what they are already funded to deliver by SBA?  If SBDCs require additional resources to enhance, improve, develop or deliver specialized assistance to veterans and reservists that funding process should be through their normal funding channel of the SBA.  Additionally, should Congress choose to provide additional resources to SBA to enhance SBDC programs specifically for veterans and reserve component service members, the Office of Veterans Business Development should be part of the program design, selection and oversight process to ensure that the expertise of veterans, including the policy and program delivery and reporting requirements, are designed and developed by the SBA office whose responsibility by law is veterans’ business development.

Public Law 106-50

The American Legion acknowledges that the requirements of Public Law 106-50 as originally envisioned are not being met by TVC at the present time due to the scope of the mission and funding requirements.  The American Legion agrees with the view that forcing TVC to duplicate or replicate preexisting services such as those provided by the Small Business Development Centers (SBDC), Procurement Technical Assistance Centers and Department of Labor One Stop Centers does not prudently use taxpayer funds or the limited dollars given to TVC.

Therefore, The American Legion recommends that the resource-training centers (St. Louis, MO; Flint, MI; and Boston, MA) that TVC is currently providing funding for be given to the jurisdiction of the SBA veteran’s development office.

The SBA’s veterans development office is presently funding five such centers around the country and should be given the additional three.  In addition, the SBA office should take on theresponsibility of partnering with military and Veterans Affairs hospitals, Transition Assistance Programs (TAP), State Departments of Veterans Affairs, Procurement Technical Assistance Centers, Military Family Support Centers, and Veterans Service Organizations to provide employment and entrepreneurship programs along with the addition of funding and necessary senior staff to oversee the implementation and development of such a program.  TVC would operate more effectively acting as a liaison with existing associations of small business owners and, by working with SBA programs, ensure the involvement of private and successful military alumni from the business community to help support SBA’s successful (re) integration ofveteran and reserve component entrepreneurs into the private and public American marketplace.

H.R. 1712 “The Veterans Federal Procurement Opportunity Act of 2003”

The American Legion has encouraged Congress to require reasonable “set-asides” of Federal procurements and contracts for businesses owned and operated by veterans.  The American Legion supported legislation in the past that sought to add service-connected disabled veterans to the list of specified small business categories receiving 3 percent set-asides.  Public Law 106-50, “The Veterans Entrepreneurship and Small Business Development Act of 1999” included veterans small businesses within Federal contracting and subcontracting goals for small business owners and within goals for the participation of small businesses in Federal procurement contracts.  It requires the head of each Federal agency to establish agency goals for the participation, by small businesses owned and controlled by service-connected disabled veteran, in that agency’s procurement contracts. 

Agency compliance with P.L. 106-50 has been minimal with only two agencies self-reporting that they have met their goals, (the Department of Veterans Affairs and the Small Business Administration).  Other agencies like the Defense Information Systems Agency only set a goal for .5% in FY 06 and  .06% for FY 07.  H.R. 1712 was supposed to  codify the 3 percent set-aside and provide consequences for agencies not meeting these goals.  The American Legion is disappointed with the lack of compliance with the 3 percent requirement mandated in P.L. 106-50 and the lack of implementation of H.R. 1712.  The American Legion is also dismayed that the only data available that gives a breakdown of how agencies are making their procurement goals is FY 2005 data.  It is amazing that as we are now looking ahead to FY 2008, there is no sure way of ascertaining how agencies are meeting objectives set seven years ago P.L. 106-50. 

According to testimony submitted by SBA during a May 2, 2007 hearing on the status of veterans business, “Though the Federal Government has yet to achieve the required three percent goal, it is making progress towards accomplishing it.  In 2004, President Bush issued Executive Order 13360 to strengthen opportunities in Federal contracting for service-disabled veteran-owned businesses.  Preliminary data shows that SBA and the Department of Veteran Affairs both exceed the three present goals for SDVO small businesses for FY 2006.  Final data is not yet available to confirm FY 2006 accomplishments”.  This is not and should not be acceptable; the final results for FY 2006 should have been published months ago along with a breakdown of the number and sizes of the contracts awarded to service disabled veteran companies. 

Recommendations

  1. Incorporate Executive Order 13360 into SBA Regulations and Standard Operating Procedures

The American Legion endorses these recommendations given from the “Advisory Committee on Veterans Business Affairs” FY 2006 SBA report.

  • “The SBA needs to reemphasize implementation of Executive Order 13360 and establish it as a Federal procurement priority across the entire Federal sector.  Federal agencies need to be held accountable, by the SBA, for their implementing Executive Order 13360 and their progress toward the 3 percent goal.  The SBA needs to establish a means to monitor agencies progress and where appropriate, establish a vehicle to report or otherwise identify those that are not in compliance, and pursue ongoing follow-up”.
  • “To achieve the SDVOSB procurement goal contained in Executive Order 13360, the SBA must identify all agencies affected by the Executive Order under the directive of Congress.  Then the SBA should assist these agencies to develop a demonstrable, measured strategic plan and establish realistic reporting criteria.  Once the information is received, disseminate this data to all agencies, Veterans Organizations and post on SBA website as a bellwether of program progress”.
  1. Change to Sole Source Contracting Methods:

“To provide parity among special emphasis procurement programs the SBA should take immediate, appropriate steps to promulgate regulations to revise 13 CFR 125.20.  The proposed revision would eliminate existing restrictions on the award of sole source contracts to SDVOSB such as the “Rule of Two”.  The change should mirror 13 CFR 124.508 , which applies to 8 (a) Program participants and states…In order to be eligible to receive a sole source 8 (a) contract, a firm must be a current participant on the date of the award…Accordingly, adopting this language would eliminate all restrictions on sole source awards to SDVOSBs”. 

In Conclusion

The American Legion’s National Economics Commission mission is to take actions that affect the economic well being of veterans, including issues relating to veterans’ employment, home loans, vocational rehabilitation, homelessness and small business. The American Legion reinstates the Small Business Administration’s office of Veterans’ Business Development should be the lead agency to ensure that veterans returning from Iraq and Afghanistan are provided with Entrepreneurial Development Assistance.

Comprehensive training should be handled by the SBA and augmented by TVC’s on-line training.  Resource Training Centers should include DOD and VA faculties.  Currently, many military families are suffering financial hardship while their loved ones are recuperating in military hospitals around the country.  Many spouses leave their jobs to be with that disabled service member only to watch their finances deteriorate.  Seamless transition in many cases is just a wishful thought; however, if business development training was offered to military members, a small home based business that is flexible could be the answer in guaranteeing a constant source of revenue for the family, in turn making them less dependent on the Federal government.

The American Legion also strongly supports the mandates of P.L. 106-50 that were designed to assist all veterans wishing to start, expand or protect their business.  If there is a true desire to assist veterans returning from Iraq and Afghanistan in developing small businesses we must work together to enforce the mandates of P.L. 106-50.

Thank you, Mr. Chairman, for allowing The American Legion to provide written comments on this very important issue.