Chairwoman Herseth Sandlin, Ranking member Boozman, Committee members and staff. Thank you for the opportunity to testify today on the Department of Veterans Affairs, Center for Veterans Enterprise. I am Scott Denniston; President of the Scott Group of Virginia, LLC, representing one of my clients, the National Veteran Owned Business Association (NaVOBA), and it’s over 2,000 veteran small business owners across this great country. I would ask that my formal testimony be submitted for the record.

Your letter of invitation asked me to discuss CVE’s practices, priorities, and effectiveness, including VA’s implementation of Public Law 109-461, especially the Department’s progress in implementing the database required by PL 109-461, as well as its methods to approve veteran owned small businesses.  In the interest of full disclosure, I must tell you that I had the pleasure of establishing the CVE after the passage of PL 106-50 while the Director of Small Business Programs at VA.  In my entire 38 year career with the Federal government, I have never worked with a more knowledgeable, dedicated, and passionate group of people.  CVE is one of the most “entrepreneurial” organizations in the Government.

PL 106-50 established a Government-wide goal of 3 percent of prime and subcontracts be awarded to small businesses owned and controlled by service connected disabled veterans (SDVOSB).  The law quite frankly did not provide guidance or mechanisms to achieve the goal.  We at VA, realizing that there needed to be an organization to bring service disabled veteran owned small businesses and the Federal agency and prime contracting communities together embarked on developing such an organization, and the Center for Veterans Enterprise was created. 

In the beginning we heard all the excuses from the contracting community as to why the goal could not be met: we don’t know the rules, we can’t find SDVOSBs to contract with, the firms are not knowledgeable of Federal acquisition rules, etc. The CVE addressed each excuse head on. CVE, with the help of some SDVOSBs conducted focus groups of concerned individuals in the SDVOSB community and federal and prime contracting communities. We developed program marketing material and began an aggressive outreach program.  The Vendor Information Pages (VIP) database was established to address the identification issue. VIP was established based on the needs of the identified users. The National Veterans Business Conference was established as an annual event. The conference has grown from 300 to over 3,000 participants in just 5 years!  CVE entered into agreements with the Association of Procurement and Technical Assistance Centers (PTACs) to train SDVOSBs in doing business with the Federal government.  CVE indentified “advocates” in every Federal agency and most prime contractors to help SDVOSBs connect with their organizations. CVE started the Annual Champions of Veteran Enterprise Awards program to recognize Federal agencies, prime contractors and SDVOSBs themselves for outstanding achievements.  CVE in the previous Administration worked to bring accountability to the program which resulted in Executive Order 13360. CVE was instrumental in establishing with the International Franchise Association the very success VETFRAN program which has helped over 2,000 veterans open franchises with reduced fees or additional support since 2002.  Quite frankly, CVE became the “go-to” organization for veterans wanting to establish or expand a small business in this country.

Unfortunately, the CVE has become a victim of its own success, and I would suggest the veteran entrepreneurship program has not been embraced by VA from an institutional perspective. There is no doubt that VA has lead the Government in meeting the 3 percent goal and should be commended for that! Much of VA’s success I believe is due to the work of the CVE. Unfortunately as the role of CVE has expanded due to the demands of PL 109-461, the requisite resources and contractor support necessary to effectively carry out the mandates have not been forth coming.  CVE is funded from an internal revolving fund called the VA Supply Fund. The Supply Fund is controlled by a board of directors. Over 18 months ago, this group approved a significant expansion to the resources dedicated to CVE, but unfortunately these resources have not been forthcoming.  Likewise, contractor support to address the verification process took over a year to get under contract.  It is time CVE becomes a line item in the VA budget to insure appropriate resources are justified and forthcoming.

NaVOBA differs with what we understand is the position of this Committee that the CVE database should only include “verified” firms. The database was established to support all Federal agencies and prime contractors in identifying SDVOSBs and veteran owned small businesses (VOSBs) to assist in achieving the 3 percent goal mandated in PL 106-50. The verification process required by PL 109-461 only applies to VA. CVE identifies in the VIP database those firms who have in fact been verified. If only verified firms appear in VIP the number of firms available to government and prime contractors would shrink from over 15,000 to around 2,500 firms.  This would substantially hurt the government-wide SDVOSB program in our opinion.  We understand and share this Committee’s concern about fraud, waste and abuse in the SDVOSB program identified in the recent GAO report and believe strongly that the verification requirement for SDVOSBs and VOSBs should be made government-wide.

NaVOBA shares the concerns of others in the veteran small business community that VA’s verification process is burdensome, overbearing and so untimely as to cause serious financial strain on many SDVOSBs and VOSBs. Some of our members share stories and frustrations of the process taking over 6 months to complete with the veteran applicant never being told where his/her application is in the process.  CVE  must do a better job communicating with the veterans it was formed to serve.  We understand there is some discussion in Congress of moving the SDVOSB and VOSB verification program to the Small Business Administration.  NaVOBA is staunchly opposed to such a move.  Only VA can verify if an individual is a veteran or has a service connected disability. SBA has consistently over the years been criticized by GAO for their administration of the 8a, small disadvantaged business, and HUB Zone programs. Significant resources have been expended by VA to establish the verification program. We would rather work with VA to refine and improve the current process rather than start over at an agency with a history of questionable program administration. Our position is contingent on VA providing CVE with adequate resources to administer the verification program.

NaVOBA has reviewed and commented on VA’s final rule implementing PL 109-461, published on February 8th, 2010.  We do not support VA’s position that verification is an annual requirement. CVE cannot keep up with the burdens of initial verification applications, how will they ever keep up with an annual requirement?  This is also burdensome on the veteran business owner. There appears to be an opinion of guilt by VA against SDVOSBs and VOSBs. NaVOBA believe the vast majority of veterans to be honest and trustworthy. We support a requirement to notify CVE of ANY change in ownership within 30 days of the change becoming effective. We do not support VA’s rule that “an eligible owner have only one business in the program at one time and must work full-time in the business.”  These requirements do not exist, to our knowledge in any other government program. Why put unnecessary burdens on veterans?  There are many good business reasons why a veteran may have one business line but several business entities; insurance, union, wages, etc.  Many successful business owners have more than one business at a time, especially complimentary businesses.  The requirement to work full-time in the business will eliminate many start- up businesses which many times cannot support full time salaries without contracts.  VA is eliminating many worthy and deserving would be veteran entrepreneurs. We question whether this is the spirit and intent of PL 109-461.

NaVOBA also objects to VA’s overly strict and restrictive implementation of the contracting provisions of PL 109-461.   We have consistently objected to VA’s position that PL 109-461 only applies to “open market” purchases. We read the law to say that VA shall provide a preference to SDVOSBs and VOSBs for all goods and services VA buys. Open market is only a small percentage of total VA purchases and totally excludes Federal Supply Schedule buys which provide enormous opportunities for SDVOSBS and VOSBs. We are also frustrated by VA’s minimal use of the sole source provisions of PL 109-461 as well as VA’s burdensome requirement for synopsis of sole source opportunities. These VA policies make it almost impossible for new start-up firms to enter the VA market, which we believe, is a major goal of PL 109-461.  As I have testified previously, our members tell us the biggest impediments to doing business with VA are access to decision makers to present capabilities, access to timely information on upcoming contract opportunities, inconsistent implementation of the provisions of PL 109-461, VA’s administration of the Federal Supply Schedules regarding distributors, and VA’s use of contract vehicles such as prime vendor and standardized contracts.

In summary, NaVOBA supports CVE but strongly believes VA must provide adequate resources commiserate with CVE’s expanding mission, including verification and the VIP data base.  VA must reconsider its overly restrictive interpretation and administration of PL 109-461. VA must be more sensitive to the needs/concerns of the veteran small business community.  NaVOBA stands ready to be a partner with VA to achieve the intent of PL 109-461.

I would like to thank the Committee once again for holding this important hearing and I’m happy to answer any questions.