Chairman Mitchell, Ranking Member Roe, Committee Members and staff.  Thank you for the opportunity to testify today on the Department of Veterans Affairs acquisition program.  I am Scott Denniston, President of the Scott Group of Virginia, LLC, representing one of my clients, The National Veteran Owned Business Association and its over 2,000 veteran small business owners across the country.  I would ask that my formal testimony be submitted for the record.

Your letter of invitation asked me to discuss “Acquisition Deficiencies at the U.S. Department of Veterans Affairs”.   I will respond to your invitation through the experiences of veteran owned small businesses in dealing with the vast bureaucracy of the VA. 

Within the past week I was contacted by a veteran owned small business in Arizona providing vinyl banners to VA’s Vocational Rehabilitation Service.   Shipment to 58 regional offices was completed October 20, 2009.  The veteran is unable to be paid as VA regulations require a “receiving report” be completed.  The veteran business owner when inquiring as to being paid is bounced between the contracting officer and the program officer as to who is responsible for completing the receiving report. All the veteran knows is he fulfilled the contract requirements and now suffers.  The interest the veteran is paying for operating capital will negate all profit the he expected to earn on the contract. He has stated he will never do business with VA again if this is the way they treat their vendors.

Another veteran doing business with VA is frustrated as he is currently working on 2 contracts with expiration dates of December 31, 2009. The two contracts represent approximately $6 million per year in revenue.   To date he has not been told whether VA intends to exercise the options.  As you can imagine this causes great angst for the firm and its employees. Will they have jobs on January 1st?  When the business owner inquires of the contracting office he is told the contracts have been “transferred” to another contracting office.  When he inquires of the new contracting office he is told there is no contracting officer assigned and no knowledge of who the program office is.  When the veteran business owner inquires to VA’s Central Office he is told the policy is to notify contractors within 60 days of expiration of VA’s intent.  Nice policy but who follows it and where does a veteran small business owner go for assistance?

Another common practice at VA which frustrates veteran small business owners is VA’s practice of advertizing an RFP, having vendors incur substantial costs to submit proposals then VA cancels the opportunity and procures through an existing contract vehicle or enters into an agreement with another Federal agency to award a contract for the same services. The small businesses who submitted the original offers did so in vain as now, because of VA’s “change of mind”, they cannot bid on the opportunity.

NaVOBA members continue to be concerned about VA’s overly restrictive interpretation of Public Law 109-461, commonly referred to as the “Veterans First Contracting Program.”  NAVOBA believes the provisions of PL109-461 require VA to provide a preference to service disabled veteran and veteran owned small businesses for all goods and services VA purchases.  VA interprets the law’s provisions to apply only to “open market” acquisitions.  As you know VA spends a large percentage of its acquisition dollars using the Federal Supply Schedules, therefore service disabled veteran and veteran owned small businesses are not provided a preference for much of what VA purchases. This in addition to VA’s efforts to eliminate distributors and resellers from VA’s Federal Supply Schedules as well as VA’s efforts to consolidate contracting opportunities under the guise of “Strategic Sourcing” makes selling to VA difficult for a veteran owned small business.  NaVOBA understands that FSS is the preferred method of purchasing in the Federal government but we also believe PL 109-461 gives VA responsibility to provide maximum practicable opportunity to service disabled and veteran owned small businesses first!  If a veteran owned business can supply the same product with the same terms and conditions VA can get using FSS, VA should buy from the veteran.  Why should VA buy from a large foreign firm using FSS when an American veteran owned small business can provide the same product?

As I testified before the Subcommittee on Economic Opportunity on April 23, 2009, 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 standardization opportunities.

On August 13, 2009, VA Deputy Secretary Scott Gould hosted a “Supplier Relationship Transformation Forum”.  The Deputy Secretary is to be commended for hosting this event. The purpose was to hear from large and small vendors to the VA on what issues and impediments exist in doing business with VA. The forum was attended by over 100 people representing 82 vendors from most industries doing business with VA.  There were several common themes expressed:

1. Participants were generally frustrated, and hopeful but skeptical that change will occur.
2. Vendors perceive the acquisition process to be unclear, not applied in a standardized manner and not communicated well.
3. VA does a poor job of matching contract types and terms and conditions to the acquisitions.
4. Similar contracts are managed differently within and across programs.
5. Many contracts are not launched with kickoff meetings; none end with closeouts. Few contain a discovery period, but many require project plans, work breakdown structures, etc. within 5 to 10 days of award.
6. VA is often unclear and unfamiliar with what it is procuring-unclear requirements, cut and paste solicitations, expired dates in solicitations, Questions & Answers that do not clarify, independent government cost estimates that are very soft, etc.
7. Contracting officers and contracting officers technical representatives are often risk adverse and say no to possible solutions without considering them.
8. Contractors broker communications and problem solving between VA COs, COTRs and project managers.
9. Partnering means sharing risks, but VA puts all risk on the contractor.
10. In reality, best value means lowest cost. VA wants contractor “A’ teams but will only pay for “B’ or “C” teams.
11. Contract mods- even no cost period of performance extensions can take months to complete, putting contractors and projects at risk.

This list comes from the Executive Summary of the forum prepared by Ambit Group, LLC for VA, and is very consistent with comments expressed by NaVOBA members.

The vendor community today is dynamic, enterprising and inventive. VA cannot as a normal course of operating maintain ongoing operations and also evaluate new technologies and opportunities to use new products and services to improve care to veterans.  The vendor community is frustrated as VA is reluctant to change.  VA is, in our opinion, missing opportunities as there is no mechanism to test new products in the VA environment.  We propose VA establish an organization, independent of day to day operations, to test new products and services through trials, test programs, field demonstrations to more rapidly bring new technologies and solutions to VA operations. Such an organization could pay huge dividends in caring for our Nation’s veterans.

In summary, VA must be more sensitive to the needs/concerns of the vendor community, especially the veteran owned small business community.  Every VA employee should work in a small business for a while and understand the impact of their decisions and inactions on cash flow, retention of employees, bank lines of credit, and the myriad of issues faced by veteran entrepreneurs on a daily basis.

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