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Witness Testimony of Mr. Louis J. Celli, Jr., Northeast Veterans Business Resource Center, Chief Executive Officer, Chairman, Advisory Committee for Veterans Business Affairs, U.S. Small Business Administration

EXECUTIVE SUMMARY

Each year the federal government purchases billions of dollars in goods and services from private firms that range from paperclips to space ships. It is the policy of the United States, as stated in the Small Business Act of 1953, that all small businesses have the maximum practicable opportunity to participate in providing goods and services to the government.

To foster an equitable federal procurement policy, government-wide small business goals are established for federal agencies as percentages of annual expenditures. Each agency submits its proposed goals to the SBA which ensures that the aggregate government-wide statutory goals are met. Currently, the statutory small business goal is 23 percent, the goal for Small Disadvantaged Businesses is 5%, as well as 5% for businesses owned by Women, and 3% for businesses in HUB zones, and finally Service Disabled Veteran Owned businesses at 3% as well.

Public Law 93-400 requires the Office of Management and Budget to collect and disseminate procurement data for the needs of Congress, the Executive Branch and the public sector.  In order for SBA to track the goals and actual achievements, Federal agencies are required to provide the SBA with estimates of the total dollar amount of all prime contracts to be awarded that fiscal year and estimates of the total dollar amount of all subcontracts to be awarded by the agency's reporting prime contractors.

At the end of each fiscal year, the head of each agency is required to review its report and, if required, submit the appropriate justification to SBA for failure to meet specific goals with a plan to achieve the goals in the succeeding fiscal year.

According to the Guidance on Goal Setting Under Procurement Preference Programs which was established in 1999, Federal agencies are required to report to the SBA Final Prime Contract SF-279 and SF-281 data.  Essentially, their achievement dollar amounts and percentages for Small Business and Preference Program performance for the previous year.

As of July 9th 2007 the website which displays this data for the SBA is:  www.sba.gov/aboutsba/sbaprograms/goals.

This site contains the reporting information for FY 1998 through FY 2007.  While FY 2000, 2001 and 2002 data are missing, the most recent compliance report available is from FY 2005. 

In FY 2005 the federal government spent 80 Billion dollars with Small Businesses, roughly 25% of the 2005 fiscal budget for that year.  Of that amount, Service Disabled Veteran Owned Businesses only received slightly more than one half of one percent (0.61%).

Despite a 1999 law establishing the government-wide three percent contracting goal with service-disabled veteran-owned businesses, the Federal Government has never met this standard.  In 2005 (again, most recent data published), the Department of Defense (DoD) awarded an abysmally low 0.499 percent of contracts to service-disabled veteran-owned businesses.  DoD accounts for roughly 70 percent of all government procurement spending, yet its repeated inability to meet service-disabled veteran contracting goals makes it all but impossible for the federal government as a whole to meet the three percent goal.

Oral Testimony

Good morning Chairwoman Herseth Sandlin, Ranking Member Boozman and members of this Subcommittee.  Thank you for inviting me back to testify before your subcommittee and discuss the 3 percent federal procurement goal for Service Disabled Veterans.

When Congress passed the Veterans Entrepreneurship and Small Business Development Act of 1999 (Public Law (PL) 106-50), it stated in its findings 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.

My name is Louis Celli and as you may remember, I am a 22 year retired Master Sergeant from the United States Army, a Service Disabled Veteran and have started 2 businesses.  I am the Chairman of the SBA’s Veterans Small Business Advisory Committee and the Vice Chairman for the American Legion’s National Small Business Task Force.

You have before you the statistics, and nearly every witness here today will remind you of the lack of performance by our federal contracting activities with regard to contracting with veterans, and specifically Service Disabled Veterans.  Most of what you have heard here today is common knowledge and I am sure that most of this information you already knew.

So the question you should be asking today isn’t as much why, but how do we fix it.  While agencies continue to scuff their feet and say “Gee, were trying”, then publish 5 year strategic plans which are meaningless and don’t begin until 5 years after the law was established compelling them to comply, we continue to disarm the agency who is supposed to be monitoring this activity.  The Small Business Administration (SBA) is the oversight agency which is in place and the only agency which has the authority to work with federal agencies and force them to comply if necessary.  Additionally, the SBA has a training, outreach and advocacy mission which was designed to address and round out this mission of federal procurement and small business success in America.  The real problem is that over the past six plus years, the SBA has been summarily disassembled.  Whittled down to what is now little more than a skeleton crew, with barely enough employees left to handle the other part of their mission of loan underwriting and disaster assistance.

How did this happen?  From an agency of 3 primary departments and more than 3,000 employees, with an annual budget of more than a billion dollars to the crippled down agency it is today having lost one third of their work force.  Unfortunately, what didn’t go away was the administrative duties still required on a daily basis to run the SBA, and the real world disaster mission.  What falls behind is the mission of training, advocacy, support, and contracting oversight.  And as we all know, in government size does matter.   

Having served as a federal employee, a military member, an advisor to congressional staff and as a small business consultant, I have seen firsthand the reactionary nature of bureaucracies and understand why we diverted funding away from the SBA, but as I testify before you here today, my professional advice to this committee is to restore the SBA to its full strength and capacity before it is too late.

When the economy is robust, it is our nature to relax, this is how the SBA became decrepit.  But any good business owner knows that they also have to be an economist and need to be able to predict future trends if they are going to stay in business, and if you, congress, want to save or grow small businesses in America, Service Disabled, Women, Minority, Socially Disadvantaged, Hub Zone and all other owned small businesses, then you need to act now and restore the SBA to its full compliment.  If we wait until small businesses begin to decline, it will be too late.

A properly strengthened SBA can train and educate contracting officers, intervene in bundling and large vs. small business competition decisions, assist and train Service Disabled Veteran Owned Small businesses, aggressively pursue agency Small Business Correction Plans, monitor and hold accountable prime contractor’s small business sub contracting plans,  preside over award disputes, monitor and maintain the program and  HOLD AGENCIES ACCOUNTABLE so you will have one agency to drag onto the carpet when the wheels fall off the cart rather than trying to chase down agencies individually.  Just think of how much easier your jobs would be.

One suggestion I have is to establish a “Veterans Small Business and Entrepreneurship Subcommittee” within the Congress.  Veterans Entrepreneurship has become a project which is currently being addressed by at least 4 separate Senate and 4 separate House committees.  Much of this work is commonly themed but much of it is diametrically opposed.  The Veterans Small Business and Entrepreneurship act of 1999 discusses at least three different committees who have direct involvement in this program yet there is no common ground, no working committee.

I am currently working with the Veterans Administration and the Compensated Work Therapy program under a special project called the “Veterans Construction Team”.  This project is an anomaly within the VA and allows for this team to compete directly with the federal government for contracts with which they employ veterans who are recovering and being treated at the Edith Nourse Rogers Memorial Veterans Hospital in Bedford Massachusetts.  We are currently working with Native American Veterans and Tribal Council to bring this program to the Native American Reservations in South Dakota and I have Mr. Bernie Cournoyer with me today should you wish to hear more about this rehabilitative program.

The reason that I bring this up is because the work therapy portion of this program is only half the battle, the other half is the constant education of the contracting officers and working with them to get them to understand what the Service Disabled Veteran Owned Program is.  I have probably had to explain Public Law 109-461 to more VA contracting officers and staff than I have to veterans at conferences.  When I spoke with a contracting office at the office of Immigration and Boarder Protection, I was told that the educational portion of contracting  wasn’t their responsibility when it came to educating contracting officers regarding preference programs, that it was the responsibility of the SBA.

So here you have agencies who take no responsibility for educating their own contracting staff as to meeting the goals of the Service Disabled Veteran Business owners initiative and an agency, the SBA, who is underfunded and powerless to do anything about it because all of their resources are committed to more immediate matters, yet the authority and responsibility still resides with them.

Madame President, Ranking member Boozman, if you want to address this issue of meeting our 3 percent obligation to Service Disabled Veterans in the United States of America, you are going to have to fund it, by reconstituting the SBA.


The attached is correspondence is between Senator Kerry and the Department of Defense, and a sample of the DoD 5 year plan.  The complete plan can be found at the provided link in the reference section below;

United States Senate,
Washington, DC
May 15, 2007

The Honorable Robert Gates
US. Department of Defense
The Pentagon
Room 3E880
Washington, DC 20301-1000

Dear Secretary Gates:

I am writing concerning the Department of Defense’s policy with respect to contracting with service-disabled veteran owned businesses (SDVOBs).  Although Congress enacted a government-wide procurement goal of three percent for service-disabled veteran owned businesses, every year since that law has been in place the Department of Defense has failed to meet that contracting goal.  In light of the honorable sacrifices that service-disabled veterans have made for our country, I urge you to do everything in your power to meet and exceed the three percent goal required by law.   

As you know, in 1999, Congress enacted Public Law 106-50 which set the government-wide procurement goal of three percent with SDVOBs. The law also called on each agency to determine the “maximum practicable opportunity” for these firms (Title 15 Chapter 14A section 644 (g) (1)).

The Department of Defense accounts for nearly 70 percent of all federal procurement spending, totaling an estimated $219 billion in FY2005.  Given that reality, it is virtually impossible for the entire federal government to meet the law’s three percent goal for SDVOBs without the Department of Defense.  However, in 2005, the Department of Defense awarded a mere .499 percent of contracts to service-disabled owned firms. It is hard to believe that less than one half of one percent of all defense contracts is the “maximum practicable opportunity” for the Defense Department to do business with SDVOBs.

I am especially disturbed by reports that Department of Defense personnel are telling veterans that the agency is not bound by the three percent goal for contracting with SDVOBs.  Given these reports and the lack of progress in meeting the SDVOB goal, I would like an immediate explanation of the Department’s policy for contracting with SDVOBs.  Please provide a clear statement as to whether the agency intends to meet the three percent contracting goal.  If the Department of Defense is not attempting to meet the three percent contracting goal, has the agency formally established its own contracting goal for service-disabled veterans? And if so, what is that goal?  Specifically, what is the Department of Defense doing to improve its record on contracting with service-disabled veteran owned businesses? 

In another matter, on January 31, the Committee on Small Business and Entrepreneurship held a hearing entitled, “Assessing Federal Small Business Assistance Programs for Veterans and Reservists.”  One of the witnesses at that hearing was Ms. Linda Oliver, Interim Acting Director of the Office of Small Business.  A number of Senators submitted questions to Ms. Oliver to answer in writing for the record, but it has been over three months, and we still have not received her responses.  Enclosed, please find a copy of those questions. I respectfully request responses to them within one week of the receipt of this letter.

Please provide me with all other information requested by June 1, 2007.  Thank you for your attention to this matter of critical importance to me as a veteran, and to the millions of service-disabled veterans who continue to honorably serve their country by contributing to the economy as successful entrepreneurs.  If you have any questions please do not hesitate to contact me or have a member of your staff contact Gregory Willis or Karen Radermacher at 202-224-5175.  I look forward to hearing from you soon.  

Sincerely,

John F. Kerry
 


 

 







References Used

  1. Small Business Administration Programs page.  This page links to the agency reports:  www.sba.gov/aboutsba/sbaprograms/goals
  1. SBA Goal setting and reporting Guidance (1999 guidance policy letter):
     www.sba.gov/idc/groups/public/documents/sba_program_office/
    goals_fy00_guidance.pdf
  1. Year 2 of DoD’s 5 year strategic plan:  www.acq.osd.mil/osbp/programs/veterans/SDVOSB%20Strategic%20Plan%202nd%20Year%20(signed).pdf
  1. 2002 Survey of Veteran Business Owners, released July 3rd, 2007:  www.census.gov/csd/sbo/veteran2002.htm
  1. PL 109-461:

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_public_laws&docid=f:publ461.109.pdf

Center for Veteran Enterprise (CVE) version (easier to read) www.vetbiz.gov/library/PL109-461.htm