[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
ACHIEVING GOVERNMENT-WIDE VERIFICATION OF SERVICE-DISABLED VETERAN-
OWNED SMALL BUSINESSES
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT, AND REGULATIONS
OF THE
COMMITTEE ON SMALL BUSINESS
AND THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON VETERAN'S AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 17, 2018
__________
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 115-085
Available via the GPO Website: www.govinfo.gov
__________
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
TRENT KELLY, Mississippi
ROD BLUM, Iowa
JAMES COMER, Kentucky
JENNIFFER GONZALEZ-COLON, Puerto Rico
BRIAN FITZPATRICK, Pennsylvania
ROGER MARSHALL, Kansas
RALPH NORMAN, South Carolina
JOHN CURTIS, Utah
NYDIA VELAZQUEZ, New York, Ranking Member
DWIGHT EVANS, Pennsylvania
STEPHANIE MURPHY, Florida
AL LAWSON, JR., Florida
YVETTE CLARKE, New York
JUDY CHU, California
ALMA ADAMS, North Carolina
ADRIANO ESPAILLAT, New York
BRAD SCHNEIDER, Illinois
VACANT
Kevin Fitzpatrick, Majority Staff Director
Jan Oliver, Majority Deputy Staff Director and Chief Counsel
Adam Minehardt, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Trent Kelly................................................. 1
Hon. Alma Adams.................................................. 2
Hon. Jack Bergman................................................ 4
Hon. Ann McLane Kuster........................................... 5
WITNESSES
Mr. Thomas J. Leney, Executive Director, Small and Veteran
Business Programs, United States Department of Veterans
Affairs, Washington, DC........................................ 7
Mr. Robb Wong, Associate Administrator, Office of Government
Contracting and Business Development, United States Small
Business Administration, Washington, DC, joint with Mr. William
Gould, Senior Advisor, Office of the Administrator, United
States Small Business Administration, Washington, DC........... 8
Mr. Davy G. Leghorn, Assistant Director, The American Legion,
Washington, DC................................................. 11
APPENDIX
Prepared Statements:
Mr. Thomas J. Leney, Executive Director, Small and Veteran
Business Programs, United States Department of Veterans
Affairs, Washington, DC.................................... 26
Mr. Robb Wong, Associate Administrator, Office of Government
Contracting and Business Development, United States Small
Business Administration, Washington, DC, joint with Mr.
William Gould, Senior Advisor, Office of the Administrator,
United States Small Business Administration, Washington, DC 32
Mr. Davy G. Leghorn, Assistant Director, The American Legion,
Washington, DC............................................. 34
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
ACHIEVING GOVERNMENT-WIDE VERIFICATION OF SERVICE-DISABLED
VETERAN-OWNED SMALL BUSINESSES
----------
TUESDAY, JULY 17, 2018
House of Representatives,
Committee on Small Business,
Subcommittee on Investigations, Oversight, and
Regulations,
joint with the
Subcommittee on Oversight and Investigation,
Committee on Veterans Affairs,
Washington, DC.
The Subcommittees met, pursuant to call, at 2:05 p.m., in
Room 2360, Rayburn House Office Building, Hon. Trent Kelly
[chairman of the Subcommittee on Investigations,
Oversight, and Regulations] presiding.
Present from Subcommittee on Investigations, Oversight, and
Regulations: Representatives Kelly, Marshall, and Adams.
Present from Subcommittee on Oversight and Investigation:
Representatives Bergman, Arrington, Dunn, Poliquin, Kuster, and
Lamb.
Chairman KELLY. Good morning. I call this hearing to order.
I would like to welcome everyone to today's hearing. I am
pleased to host Chairman Bergman and his fellow members of the
Subcommittee on Investigations and Oversight to discuss a topic
of great importance to both of our Committees. They have been a
great ally to our Committee over the years in discussing many
of the issues important to veterans small business owners.
We are here today to examine a challenge that many service-
disabled veterans small business owners face in doing work with
the Federal Government.
The service disabled veteran-owned small business or SDVOSB
contracting program is crucial for veteran entrepreneurs and
the Federal agencies they work with.
However, there are two similar yet separate and conflicting
verification programs at two different agencies.
Both the Department of Veterans Affairs and the Small
Business Administration operate procurement programs for
SDVOSBs. There are number of differences between the two
programs but the central issue is simple. VA proactively
verifies SDVOSBs before they can compete for set-aside
contracts while SBA allows SDVOSBs to simply self-certify.
This can create inconsistent outcomes, such as a business
qualifying as an SDVOSB for VA contracts but not other Federal
agency contracts or vice versa. And while SBA certified
businesses awards are subject to protest, the lack of a front
end verification also leaves the door open for fraud and abuse.
Since the creation of the SDVOSB preference, Congress has
recognized the importance of streamlining the verification
process for service-disabled veteran small business owners.
As the title of this hearing suggests, government-wide
verification is a viable solution to this problem. Members of
previous Congresses recognize this, too, and they began paving
the way.
The National Defense Authorization Act for fiscal year 2017
instructed SBA and VA to unify the definitions for SDVOSBs and
begin moving regulatory responsibility from VA to SBA.
I hope this hearing provides the opportunity to learn more
about the progress both agencies have made.
I was pleased to see that the administration also
recognizes the importance of streamlining these programs.
President Trump's reform plan for the Federal Government
released just last month cites the need for a one-stop-shop for
small business Federal procurement programs.
SBA has already made a head start through the launch of
their website Certified.SBA.Gov, and we are committed to
working with them to see it through.
While the concept may seem simple, we know developing a
single government-wide verification system for SDVOSBs will
require a lot of work on the part of the SBA, VA, and the
congressional committees who will oversee it.
Past joint hearings between our committees have revealed
many critiques of VAs verification program, and we must ensure
that those mistakes are not repeated.
We also must make certain there is proper congressional
oversight and that set-aside contracts are going to true
service-disabled veterans small business owners.
I hope we can have a productive conversation today to
answer many of the questions that still remain.
I am also pleased that representatives of SDVOSB community
are here to bring their perspective into the conversation.
I now yield to our Ranking Member, Ms. Adams, for her
opening statement.
Ms. ADAMS. Thank you, Mr. Chairman. Good afternoon.
Thank you for holding this important hearing. It is my
pleasure to be here as we discuss a critical topic that impacts
our nation's veterans and identify ways to improve their access
to the federal contracting marketplace and entrepreneurial
development.
These courageous individuals deserve not only our enduring
gratitude, but also the opportunity to build a new life after
their many years of military service.
One of the most important tools we currently provide is the
contracting preference program to ensure greater participation
of veterans in the Federal marketplace.
In fact, the service-disabled veteran-owned small business
procurement program disbursed almost $18 billion through over
170,000 contracts in fiscal year 2017.
SDVOSB awards accounted for approximately 4.05 percent of
Federal contracts, which exceeded the 3 percent statutory goal.
Notably the government awarded 5.29 percent or $23.4
billion of its prime contracts to veteran-owned small
businesses.
With this accomplishment, it should be applauded, but it
should also point out that these growing numbers show an
increasing need for higher utilization of emerging veteran-
owned small businesses throughout the government.
It is clear that the structure and resources of the program
have not kept pace with its growth creating concerns that the
contracts could be diverted from legitimate service disabled
veteran-owned firms to non-veteran businesses including large
corporations.
Fortunately, steps are being taken to address these
anxieties. One step involves changing the certification
process, specifically moving from self-certification to
enabling SBA to certify all veteran-owned businesses alongside
several disabled veteran-owned businesses, increases confidence
around their certifications.
Such a simple modification can foster more participation of
veterans in the Federal marketplace.
Previously, GAO has found that the less rigorous
verification process has allowed ineligible nonservice disabled
veteran firms to win contracts set aside for veterans through
fraudulent front companies posing as veterans and pass-
throughs. As a result, millions of dollars were diverted away
from legitimate small business owned by veterans.
To prevent these abuses, VA complied with GAO's
verification recommendations from a 2013 report, and the agency
has seen significant improvements.
As our committees have heard, verification times decrease
by more than 50 percent, and the VA has increased its number of
cite visits to 606 in fiscal year 2015.
However, there are many areas that need work. Currently, it
takes approximately 73 days to process certification
applications and a sizeable backlog still exists.
For many reasons, the VA has proposed to move verification
and certification responsibilities to SBA. The VA has also
suggested revising program regulations to streamline and align
requirements to reduce the burden on contractors.
So I look forward to discussing these changes today.
Today's hearing will focus on the progress of the Department of
Veteran Affairs and the Small Business Administration in
implementing sections of fiscal year 2017, National Defense
Authorization Act.
It is my hope that we will also establish SBA's ability to
take on the remaining VA verification functions and discuss the
need to authorize a veteran specified entrepreneurial education
program.
Given that your entrepreneurship remains a viable career
path for many veterans, we must ensure that they have the
support they need to start and grow their business.
I think I can speak for all the Members today in saying
that we do whatever it takes to help all veterans, including
those disabled in the line of duty to overcome the challenges
they face in today's economy.
And with that, Mr. Chair, I want to thank the witnesses for
appearing before the joint subcommittees this afternoon.
Thank you, and I yield back.
Chairman KELLY. Thank you, Ms. Adams. I now yield to the
Chairman of the Subcommittee of Oversight and Investigations,
Mr. Bergman, for his opening statement.
Chairman BERGMAN. Thank you, Chairman Kelly.
My colleagues from the Veterans Affairs Oversight and
Investigation Subcommittee and I are pleased to join you today
to discuss this important topic.
The service disabled veteran-owned small business, or
SDVOSB, contracting preference program is a crucial element of
the commitment of this country, of our country, and its
government that we make to our veterans.
At least 3 percent of contract spending at every agency is
set aside for SDVOSBs. VA gives even greater preferences in its
Veterans First Program and extends those preferences also to
veteran-owned small business.
The Veterans First Program is not without controversy.
Chairman Kelly and Ranking Member Adams of the small business
Committee has been a great partner for many years working to
ensure the program lives up to its promise.
We have before us today a confusing bureaucratic oddity
that should not exist. SDVOSBs contracting with the VA are
vetted, inspected and verified. SDVOSBs contracting with the
rest of Federal Government are not. They self-certify their
status.
There are effectively two classes of SDVOSBs, and it can be
hard to tell the difference. No one knows precisely how many
self-certified SDVOSBs are fraudulent or otherwise improper,
but all available evidence indicates that they do exist.
Service-disabled veterans who under go VA's thorough, some
would say, onerous screening of their small businesses deserve
a level playing field.
It is unfair that companies that cannot pass muster move on
to operate in less strict areas of the contracting world. Many
other agencies recognize this and have attempted to require
VA's verification, but current law and regulation do not allow
that to happen.
The need for government-wide verification of SDVOSBs is a
perennial issue that has existed since the SDVOSBs preferences
were created. Achieving it has been a long-term goal of several
VA secretaries, SBA administrators and the Congresses. It is
high time that we made this change.
Frankly, it makes no sense that VA should be responsible
for the SDVOSB program, while the small business administration
is responsible for every other small business program.
The previous Congress recognized this and laid the ground
work for government-wide verification.
The fiscal year 2017 National Defense Authorization Act
harmonized regulatory definitions between VA and SBA and began
transferring regulatory responsibility to SBA.
I was encouraged to see the administration highlighted this
issue in its Government Reform and Reorganization Plan. It
recommends, and I quote, ``a one-stop-shop within SBA for all
Federal contracting certifications.''
Another quote comes to mind, slightly paraphrased.
President Reagan said that a government bureau is the nearest
thing to eternal life that we will ever see on this earth.
This is too often true, but maybe not in this case. I
credit the leadership of VA for their willingness to relinquish
the verification function and eventually abolish the Center For
Verification and Evaluation.
I also appreciate the leadership of SBA's receptiveness to
take on, perhaps, the largest and most complicated small
business certifications program.
The concept of government-wide verification is simple, but
there are numerous pitfalls in its implementation that we must
avoid. As some might say, the devil is in the details.
VA has spent years, tumultuous years working the bugs out
of the verification system, we should not reinvent the wheel.
At the same time, SBA will be expected to eliminate unnecessary
differences in eligibility rules and procedures between the
SDVOSB program and other small business programs.
However, verifications cannot be interrupted while the
transfer occurs. So business owners will see minimal impact.
Also, veteran-owned small businesses, or VOSBs, should know
that they will not be forgotten. They will continue to receive
the same preference in the Veterans First Program and they will
continue to have access to verification.
My goal is to take VA's lessons learned, SBA's expertise
and resources, and the veteran business community's perspective
as represented by the American Legion and put them together as
the two committees craft bipartisan legislation in the coming
weeks.
Is it important to start this process out in the open with
all stakeholders represented.
We have to create a government-wide verification system
that stands the test of time.
Thank you, Chairman Kelly. And I yield back.
Chairman KELLY. Thank you, Chairman Bergman.
I now yield to the Ranking Member of Subcommittee on
Oversight and Investigations, Ms. Kuster, for her opening
statement.
Ms. KUSTER. Thank you, Chairman Kelly, and Ranking Member
Adams for your hospitality in hosting this joint hearing.
According to the Small Business Administration, over 2.52
million businesses in America are majority-owned by veterans.
Approximately 80 percent of veteran-owned businesses employ
less than 19 employees, meaning that a majority of these small
businesses are actually very small.
In fact, 54 percent of all veteran-owned businesses employ
less than four employees.
Based on these numbers, it is clear that veteran-owned
small businesses are crucial to a healthy and vibrant business
community. However, due to their incredibly small sizes,
veteran-owned small businesses are especially impacted by our
federal rules. They often can't afford to have a dedicated
contract officer to ensure that they are able to maximize the
benefits offered by veteran preference programs, and therefore
these programs must be as simple and accessible as possible.
In an effort to simplify access to the programs, Congress
recently expressed support for the administration's desire to
streamline the veteran-owned small business certification
process.
The legislation being discussed today will prove to be a
pragmatic next step in ensuring that both the interpretation
and enforcement of various veteran preference programs are
aligned.
Currently, both the Small Business Administration and the
Department of Veterans Affairs have various roles and
responsibilities throughout the certification process.
This has led to confusion and threatens the integrity of
the service-disabled veteran-owned small business program.
By allowing the SBA to certify these small businesses for
inclusion in the VA veteran-owned small business programs, we
can address confusing and conflicting issues surrounding
certification for various programs. All businesses will be
certified as an eligible veteran-owned small business prior to
applying for veteran preference programs at any federal agency.
No longer will a company have to satisfy different
requirements just to apply for the preference. If you're
certified, you can apply. At the end of the day, this is a
commonsense solution and I look forward to our discussion. I am
sure my colleagues across the aisle will agree that this is a
viable solution to overburdensome regulation. And I appreciate
the Small Business Committee's commitment to our nation's
heroes. I look forward to a productive discussion, and I yield
back.
Chairman KELLY. Thank you, Ranking Member Kuster.
If Committee members have an opening statement prepared, I
ask that they be submitted for the record.
I would like to take a moment to explain the timing lights
for you. You will each have 5 minutes to deliver your
testimony. All of you are familiar with this, I think. The
light will start out as green. When you have 1 minute
remaining, the light will turn yellow. And, finally, at the end
of your 5 minutes, it will turn red. I ask that you try to
adhere as closely as possible to the time limit.
I would like to introduce our panel of witnesses today. Our
first witness is Mr. Thomas Leney. Mr. Leney is the Executive
Director of Small Business and Veterans Program at the
Department of Veteran Affairs where he oversees the procurement
programs for veteran-owned and service-disabled veteran-owned
small businesses. He is also a veteran of the United States
Army, having served 22 years. Thank you for your service and
for testifying today.
Our second witness is Mr. Rob Wong. Mr. Wong is the
Associate Administrator for the Office of Government
Contracting and Business Development at the Small Business
Administration. In this role, he oversees over $500 billion in
total government spending within the federal marketplace, and
ensures that small businesses can compete for federal
contracts. Thank you for testifying today, Mr. Wong.
Our third witness is Mr. William Gould, a Senior Advisor in
the Office of the Administration at the Small Business
Association. Mr. Gould has been active within an interagency
Committee between the SBA and VA, and has played a leading role
in the effort to streamline the verification programs. Thank
you for being here today.
I will now yield to the Ranking Member, Ms. Adams, to
introduce our final witness.
Ms. ADAMS. Thank you, Mr. Chair.
It is my pleasure to introduce Mr. Davy Leghorn, Assistant
Director of the National Employment and Education Division for
the American Legion, the largest veteran service organization
in the country. In his current capacity, Mr. Leghorn oversees
the employment and small business portfolios, and administers
the American Legion's National Veterans Hiring Initiative.
Prior to joining the American Legion, he served in the United
States Army as both a mortar infantry man and a civil affairs
specialist.
Welcome, Mr. Leghorn, and thank you for your service.
Chairman KELLY. I now recognize Mr. Leney for 5 minutes.
STATEMENT OF THOMAS J. LENEY, EXECUTIVE DIRECTOR, SMALL AND
VETERAN BUSINESS PROGRAMS, UNITED STATES DEPARTMENT OF VETERANS
AFFAIRS, WASHINGTON, D.C.; ROBB WONG, ASSOCIATE ADMINISTRATOR,
OFFICE OF GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT,
UNITED STATES SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C.;
WILLIAM GOULD, SENIOR ADVISOR, OFFICE OF THE ADMINISTRATOR,
UNITED STATES SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C.;
AND DAVY G. LEGHORN, ASSISTANT DIRECTOR, THE AMERICAN LEGION,
WASHINGTON, D.C.
STATEMENT OF THOMAS J. LENEY
Mr. LENEY. Chairman Bergman and Chairman Kelly, Ranking
Member Kuster, Ranking Member Adams, and members of the
Subcommittees, thank you for inviting me to testify on the
status of our efforts to implement a uniform standard for
service-disabled veteran-owned small businesses in Federal
contracting.
In my capacity as executive director for VA Small and
Veteran Business Programs, I oversee the Center for
Verification and Evaluation that verifies veteran ownership and
control of small businesses participating in VA's Veteran First
Contracting Program, as part of the statutory mandate set forth
by you in 38 USC 8127. This legislation directs VA to
prioritize veteran-owned small businesses above all other
categories when the VA seeks to buy goods and services.
CVE carries out its mission to verify ownership and control
of SDVOSBs and VOSBs and to maintain a database of those firms
that is used by our contracting officers to determine whether a
veterans' first set-aside is appropriate.
As of June 30, there are more than 14,000 VOSBs in our VIP
database. The growth and the number of verified VOSBs has made
VA more likely to use the Veterans First Program as its
principal means to provide access for small businesses. In
fact, the VA has been able to increase its procurement award to
VOSBs to more than $5.38 billion in fiscal year 2017.
In response to the National Defense Authorization Act for
fiscal year 2017, the VA and the SBA as worked together to
create uniform standards for the VA and SBA programs for
contracting with SDVOSBs. After extensive collaboration, these
efforts are approaching completion. VA has published a proposed
rule on January 10, 2018, and SBA published its proposed rule
on January 29.
The commencement period for both proposed rules--or the
comment period, excuse me, for both proposed rules ended in
March, and we anticipate publishing final rules before the end
of the fiscal year 2018 to be fully compliant with your
guidance to establish a joint rule.
The NDAA also amended the statutory language to provide an
appeal right for denied applicants and status protest of set-
aside awards to SBA's Office of Hearing and Appeals. These
replaced appeal and protest procedures formally conducted by my
office.
SBA and VA, again, have collaborated to implement this
guidance, and SBA published a final rule amending the Office of
Hearing and Appeals rules on 30 March, 2018. This piece of the
implementation is complete, and the new rules will take effect
on October 1st, 2018. In addition, SBA and VA have reached an
interagency agreement to cover the Office of Hearing and
Appeals costs in deciding these matters for the VA.
In addition to making the improvements mandated in NDAA
2017, the VA is working closely with SBA to carry out the
proposal to consolidate all business contracting program into
the SBA. That was contained in the administration's proposal
for reorganization of the executive branch.
VA and SBA formed a joint Committee reporting to the
deputies of VA and to examine how we can support the
President's proposal by moving the VA verification program to
the SBA as part of a government-wide certification program for
SDVOSBs.
The Committee meets monthly to address resource,
technology, and process implications of such a move. We
recognize that such an action will require authorizing
legislation, and the VA stands ready to assist the SBA and the
Committees in that effort. And we believe that based on the
work that we are doing today with the SBA, we will enable us to
implement this legislation promptly once passed.
Mr. Chairman, I will be pleased to answer any questions you
or the members may have.
Chairman KELLY. Thank you, Mr. Leney. And I now recognize
Mr. Wong for 5 minutes.
STATEMENT OF ROBB WONG
Mr. WONG. Thank you, Chairmen, Ranking Members. I
appreciate the opportunity to talk to you today about the
service-disabled veteran-owned small businesses. There appear
to be two aspects to today's hearings, one is SBA's progress
with implementing NDAA provisions related to single uniform
standards, and the other is SBA's future role in certifying
SDVOSB businesses.
As head of the SBA's program office for GCBD, which is
Government Contracting and Business Development, both areas
fall under our program office and my leadership. I will be
speaking to the first topic this afternoon. On the second
topic, I will yield to my colleague, Bill Gould, who will be
leading our agency's engagement with the VA.
As you know, the 2017 NDAA created a single uniform
definition of service-disabled veteran-owned small business in
the Small Business Act, and deleted the former VA provision.
The law also directed SBA and the VA to develop a joint rule.
Over the course of 2017, SBA collaborated with the VA, and in
January of this year both agencies published proposed rules.
The comment periods for both closed in March. SBA continues to
consult with the VA and is on track to issue a final rule
before the end of this fiscal year.
The 2017 NDAA also provided an avenue for protests and
appeals involving the VA, the VA's CVE program. These are now
being decided by SBA's Office of Hearings and Appeals, or OHA.
SBA published a final rule implementing these provisions at the
end of March. This has an effective date to coincide with the
SBA's anticipated issuance of the ownership and control rule
discussed previously. With this change, the VA will reimburse
OHA for deciding the matters related to the VA's program.
Let me next briefly preview the second topic,
certification. Currently, SBA certifies businesses in the 8(a)
Business Development program and the HUBZone program. And we
have a legislative mandate to establish the certification
program for a third program, which is the Women-Owned Small
Businesses. At this time we are in the exploratory phase with
the VA of considering whether SBA should also certify the
SDVOSBs.
This is an idea and an opportunity that Administrator
McMahon has discussed personally with then acting VA Secretary
Wilkie. Through their leadership, the agencies have been
engaged in regular discussions for which SBA has been led by my
colleague, Bill Gould. For further detail, I will allow him to
outline our activity and interactions with the VA. For my part,
let me say that this is an idea that we like. We are moving
forward, but we are also--we also need to get this one right.
This is a huge task with new authority and responsibility
and also potential new benefits. For the communities that we
serve through this program, continuity of business operation is
critical for veterans, and also their ease of use in applying.
We also understand that we need to make this process easy for
the government to get to a quality solution that supports our
veterans and our government.
Thank you for the opportunity to testify today. I look
forward to your questions. Thank you.
Chairman KELLY. Thank you, Mr. Wong. And I now recognize
Mr. Gould for 5 minutes.
STATEMENT OF WILLIAM GOULD
Mr. GOULD. Thank you for allowing me the chance to update
you on SBA's collaboration with the VA on certification of
service-disabled veteran-owned small businesses or SDVOSBs.
On behalf of the agency and the SBA administrator, I have
been leading the SBA team on our engagement with the VA. The
SBA and VA formed a working group in December of 2017. The
group consists of six members each from the VA and SBA from
different parts of the organizations. We meet monthly to
discuss progress, address questions, and plan next steps.
Among the areas that we have been reviewing are
certification process details, IT system discussions in and
around compatibility and data migration, and legislative,
regulatory, and funding implications. As Robb mentioned, this
is a good opportunity for the Federal government and our
customers. However, we have many items to work through before
we get there.
To give you a sense of the size and scale of this proposal,
SBA processes around 3,500 applications a year for our current
certification programs. The 8(a) program and the Historically
Under-utilized Business Zone program, also known as the HUBZone
program. The VA, on the other hand, is processing around 15,000
applications per year. SBA's future lies in a single unified
certification program with consistent terminology, similar
documentation requirements, and the same timelines. All
operating on a single information technology system. Each of
the current certifications will require changes to the rules
and regulations governing it. Some legislative, some
regulatory, and some just procedural.
SBA's currently in the process of unifying the full
certifications into the newly launched Certify.SBA.gov system.
This will have two major benefits. A simplified user
experience, and a synchronized process and single dataset for
SBA to manage.
The small business owner will be able to log in and see her
certifications and status. She will be able to apply for
additional certifications by only having to submit the
additional documents, not starting from scratch. For the SBA,
this will have the major benefit of having certification data
in a single system, allowing personnel access to small
business's data across all its certifications. With processes
consistent across the certifications, personnel should be able
to analyze and process any application received rather than be
specialized in a particular program.
The Women-Owned Small Business or WOSB program will be the
next certification to go into the certified system. This will
happen during the next fiscal year. Taking advantage of the
processes established by the previous two certifications,
making it a government-wide--and thereby making WOSB a
government-wide recognized certification.
Because of the similarity between WOSB and the SDVOSBs
certifications, we will have set the groundwork for the
migration of the SDVOSB certification from the VA. The biggest
factor in WOSB and SDVOSB certification is estimating the
volume of applications, and having the personnel and system
capability to digest the potentially huge numbers.
Remember, 3,500 is what we are currently doing now, another
15,000 from SDVOSBs and 15,000 WOSBs. So we are moving from
3,500 to over 35,000 per year. When we establish the WOSB
process and requirements, which we estimate to be a similar
number to the VA, the VA volunteered to adjust its current
certification process to more closely align with the SBA's
process to help ease the transition. This is currently still
being discussed between the organizations in our working group.
Additionally, the working group is developing plans for
marketing the new government-wide certification across
government and business community to increase awareness and the
opportunities for SDVOSBs. Government contracting officers and
program managers need to have a solid understanding of the new
certification in order to issue contracts to these newly
certified entities. And small business owners need to
understand the process and value of this new certification.
I hope that this gives you a broad sense of the discussion
perimeters between our two agencies as well as an appreciation
for the scope of this project. There will be a lot of work to
be done, but we are making good progress. We certainly welcome
your continued interest and engagement as part of this
progress.
Thank you again for the opportunity to testify today, and
we look forward to addressing any questions you may have.
Chairman KELLY. Thank you, Mr. Gould. And we now recognize
Mr. Leghorn for 5 minutes.
STATEMENT OF DAVY G. LEGHORN
Mr. LEGHORN. Chairman Bergman, Chairman Kelly, Ranking
Member Kuster and Adams, and distinguished members of both
Subcommittees on behalf of our national commander, Denise
Rohan, and the 2 million members of the American Legion, we
thank you for the opportunity to testify this afternoon.
We are privileged to present our position on the Small
Business Administration's ability to assume the functions of
the Department of Veteran Affairs, Center for Verification and
Evaluation. Currently, 13 CFR, Part 125, and 38 CRF, Part 74,
outline similar rules and regulations for service-disabled
veteran-owned small businesses applying for certification.
Earlier this year the Federal Government initiated an
alignment of regulations governing SDVOSB definitions, however,
as the American Legion noted in previous testimony, the
regulations have always been similar. Problems arise from
inconsistent enforcement between VA and SBA. Despite
maintaining similar regulations, VA requires businesses
applying for SDVOSB status to address size, ownership, and
control issues prior to agency certification.
In contrast, SBA allows businesses to self-certify that
they meet the requisite regulatory threshold to be considered
SDVOSBs. Self-certification permits businesses to qualify for
all Federal contract awards with the exception of the Veterans
First Contracting Program within VA. SBA does not have a front-
end process to verify the authenticity of SDVOSBs and relies on
community policing and status protests to maintain programmatic
integrity.
The problem with having two SDVOSB identification processes
is simple. It creates confusion for contracting officers
seeking to award contracts to SDVOSBs, and it creates confusion
for veteran companies attempting to gain certification. Absent
statutory requirement, many state and federal agencies often
inquire whether a veteran business is certified by VA-CVE, as
such, many veteran companies acquire CVE certifications when
they do not need it.
Deconflicting SDVOSB certifications goes beyond the move
towards a single set of regulations. It also requires the
consolidation of accrediting processes to a singular certifying
agency. The Federal Government's reevaluation of the SDVOSB
certification will likely shift verification responsibilities
from VA to SBA. The American Legion supports the
administration's plans to consolidate the verification process
to the SBA.
SBA has a proven workflow platform that can potentially
handle SDVOSB certifications. VA will likely continue
validating veteran and service-connected disability status, but
SBA will verify size, ownership, and control standards.
The American Legion makes the following recommendations. In
soliciting comments, SBA proposed to amend the definition in 13
CFR, Part 125.11 by incorporating the language from VA's
regulations, and also from SBA's 8(a) Business Development
program regulations. Currently, the SDVOSB is a set-aside
program and not a business development program. The alignment
of the regulations will in essence hold SDVOSBs to the same
standard and rigor of the BD programs, but they will receive
none of the benefits.
The American Legion believes the incorporation of BD
assistance into SDVOSB program is the logical next step and
consistent with the regulatory merging of 13 CFR, Part 125.11,
with 8(a) language, and the perspective move of current CVE
responsibilities to SBA.
Lastly, the American Legion believes that moving the
verification program is not a punitive measure. VA has done
much to establish SDVOSBs as a credible workforce. VA invested
in the implementation of the Vets First, and a verification
program with agency-generated funds.
CVE overcame many programmatic hurdles since its inception,
and VA's investment proved to State and Federal agencies the
value of veteran businesses as a preferred contracting group.
However, the veteran and small business industrial base--
however, for the veteran and small business industrial base to
grow beyond just the Vets First program, verification must
leave the confines of the VA. With the move towards a singular
standard for SDVOSB definition, the shifting of appellate cases
to the SBA's Office of Hearing and Appeals, and SBA's
successful integration of Certify.SBA.Gov, this is the right
time to hand verification off to the SBA and sunset the system
of self-certification.
Chairman Bergman, Chairman Kelly, Ranking Members Kuster
and Adams, and distinguished members of both Subcommittees, we
thank you for the opportunity to explain the position of the 2
million members of the American Legion.
And I look forward to answering any questions you may have.
Chairman KELLY. I now yield myself 5 minutes for my round
of questions.
And, Mr. Gould, I am going to start with you. I would like
to start with a general question. You have been discussing the
concept of government-wide verification with the VA for some
time, can you give us a progress report on the problems you
have solved and the ones that still remain, and specifically,
one of the problems I would like for you to address is going
from 3,500 to 35,000 verifications or processes, that is quite
a jump.
And so kind of tell me what you are doing to address to
make sure there is continuity, and that we don't drop a whole
lot or get big backlogs with that number increase so much.
Mr. GOULD. Well, you asked for a solution, sir, and we are
not quite there yet, to be perfectly frank. That is a huge,
huge number. What we are doing now, as I mentioned in my
testimony, we are trying to consolidate the certification
programs that we have now, and unify them into a single
certification program, so that there is consistency in the
terminology and how we are managing our certification programs.
So when this monster lands on our lap, we are able to--we
are able to process this in a much more efficient way. And we
are working with the VA to understand what their certification
processes are so that we can incorporate some of their best
practices into how we are managing all four of these
certification programs that we have upcoming.
Chairman KELLY. And what variables are you considering in
order to fund an effective and responsible verification program
at SBA?
Mr. GOULD. Could you clarify?
Chairman KELLY. Variables, I mean, that is a lot. So there
is going to be a lot of funding. What variables are you
considering in deciding how funding you need, or you need to
ask for and those kind of things?
Mr. GOULD. The variables are--the primary variable is
number of applicants we are going to receive. That is the
primary variable, and it is unknown. Right? We honestly don't
know. That is the primary variable. And we just don't know how
many people are going to want a full-blown government-wide
certification versus a self-certification, because I think
Chairman Bergman noted that it is an onerous process that some
may or may not want to take on.
Chairman KELLY. And, Mr. Wong, I understand that SBA
intends for the service-disabled veteran-owned small business
certification process to take place at Certify.SBA.gov, along
with all other small business certifications. Can you walk me
through what this would look like?
Mr. WONG. Well, I can try. So, in general, if you want to
look at it this way, you know--you know, as Bill said, this is
a monster, right? So it is like the old joke right, how do you
eat an elephant? Right? One bite at a time. Okay.
So what we have been doing, we have actually taken this
opportunity knowing this was coming, in our meetings we are not
just talking about how we are going to look at the service-
disabled veteran-owned program, and the way that we are
processing these. We are taking the opportunity to realize that
with the staff we have, as an example, we have roughly 60 to 70
people that do 5,000 applications.
If we take all of these in total, we are going to need
roughly 18 times that. Well, that isn't happening. So we have
got to do more with the people we have.
So really what we are doing, if you look at my wall back in
the office, we are basically taking the 8(a) program, which is
30 years old. We think we do that pretty well. We take the
elements of eligibility that we have, and roughly there are
nine of these, and then you have seven of these, I think, for
HUBZone, and then you have four of these for WOSB, and then you
have other elements that we can add to service-disabled
veteran.
What they are trying to do is eliminate one of your primary
concerns for the government, is to make sure that truly valid
companies are getting these contracts. And so what we are
trying to do is we have been working in four different silos,
and what we are trying to do now is basically to take people,
and the concept that we are looking at right now is to take our
staff and turn them into analysts.
We have the initial processing, in general, get to what we
call an initial recommendation to the agency. And then from
that point, we have the processing of the 15,000 excuse me, the
30,000 applications that we have, potential 30,000 applications
we have, and then we are going to probably--you know, we are
looking at different scenarios of where we can take the power
of the people that we have, make them analysts of the things
that have been processed beforehand. We are trying to find more
efficiencies there.
Chairman KELLY. And just--I have 30 seconds left. Is it
possible that many of the firms that previously self-certified
with SBA will need to learn a new process to become verified?
Mr. WONG. I think the answer is yes. I mean, self-
certification with--you know, I have been in this industry
before and I have seen how people do it. I think that--I would
just say this, the more formal process I think will bring more
order to the system.
Chairman KELLY. Thank you. And I now yield--I yield back my
time. And now yield to the Ranking Member, Ms. Adams, for her
questions.
Ms. ADAMS. Thank you, Mr. Chairman. Mr. Leghorn, previous
witnesses have stated that generally veterans hire other
veterans. Moreover, service-disabled veteran-owned small
businesses are much more likely to hire other veterans with
disabilities or join with other such businesses to compete for
a contract.
Can you discuss the successes of veterans hiring veterans,
and what impact that plays to vets coming home and
transitioning to civilian life?
Mr. LEGHORN. Ma'am, thank you for your question. And in
terms of--one of the main reasons why the American Legion does
such extensive work with the veteran-owned small business
community is because we know that veterans hire veterans, and
we see it every day. We have an extensive small business task
force, and we meet regularly. And one of the things that we
always talk about is rolling all the employment initiatives
around the stuff that they are doing.
So, you know, this is something that is very important to
us, and we constantly talk about it, and we are hoping to make
a dent in veterans' employment through our advocacy in veterans
small business.
Ms. ADAMS. Okay. So do you feel that breakdowns that
individual agencies have impeded the ability of veterans to
enter the Federal marketplace?
Mr. LEGHORN. I am sorry. Can you repeat that question?
Ms. ADAMS. Do you feel that breakdowns at individual
agencies have impeded the ability of veterans to enter the
federal marketplace?
Mr. LEGHORN. You know--and that is one of the issues that I
think SBA verification will solve, because right now with self-
certification a lot of contracting offices are unsure about
veteran-owned small businesses, and their risk averse, and they
are less likely to award contracts to a veteran firm that is
self-certified.
So--and a lot of agencies outside of VA, what--they are
asking for CVE certification, when statutorily they are not
supposed to. So that does impede federal contracting.
Ms. ADAMS. Okay. Let me move to Mr. Leney. VA has made
major achievements in small business contracting, particularly
with the dollars awarded to SDVOSBs, however, this Committee
has heard that small businesses were deprived of billions in
contracting dollars prior to the Kingdomware decision. So have
you seen improvements and solicitations for veteran-owned and
SDVOSBs at the VA and other agencies since then?
Mr. LENEY. Yes, ma'am. In fact, as we look at the
difference between 2016, which is the year of the Supreme Court
decision, and--or 2015, before the Supreme Court decision, and
2017, the year after the Supreme Court decision, we saw a 50
percent increase in the award of procurement awards to SDVOSBs
and a 43 percent increase to veteran-owned small businesses.
Ms. ADAMS. Okay. Thank you. So given the verification of
veteran small business contracting programs will be moving to
the SBA, how can our Committee--both of our Committees--help
ensure that there is an increase in technical assistance
provided to the VOSBs and SDVOSBs by the VA, now that this
function will be transitioned?
And that is for any person on the panel, all of you may
answer.
Mr. LENEY. Let me take a stab at that. As we transfer the
verification program to SBA certification, SBA still takes the
lead in the development of small businesses and we support the
SBA program in that regard, and it won't change really what we
do in that arena. What it merely does is helps consolidate and
gain efficiencies to the certification program.
Ms. ADAMS. Okay. Mr. Wong?
Mr. WONG. Yes, ma'am. In a word, funding. Just to make sure
that we have that and we that have the support, and also to
make sure we go government-wide I think would be the most
helpful.
Ms. ADAMS. All right. Mr. Gould?
Mr. GOULD. Just to echo what they both said. I think we
need the funding, and your support to make it successful.
Ms. ADAMS. Okay. Mr. Leghorn, you have got the last leg up.
Mr. LEGHORN. So one thing I would say is that I think there
is still a reason why VA needs to stay in the process, they
still have to verify veteran status, and also service-connected
disability status.
Ms. ADAMS. Great. Thank you, gentlemen.
Yield back.
Chairman BERGMAN. [Presiding.] Thank you, Ranking Member
Adams.
Dr. Marshall, you are now recognize for 5 minutes.
Dr. MARSHALL. Okay. Thank you, General Bergman.
Tell you what, following this conversation is worse than
neural anatomy was in medical school, trying to understand
this. I have never seen such a thing. So the first thing we got
to do is find out a simpler acronym. SDVOSBs is too much. Okay?
So I am going to give each 30 to 45 seconds. What can we do
to make this simpler? If you were king, what would you do to
make all this simpler, keeping in mind our goals here and
maybe, you know, what we can do to help you make it simpler.
Mr. Leney, you go first, and we will go down the row.
Mr. LENEY. I think we are taking those actions, Dr.
Marshall, by consolidating the verification process into an SBA
certification process across the entire Federal Government, we
will make it much simpler for small businesses, particularly
those who are eligible for more than one program.
We consciously make the process rigorous so that a
contracting officer or a program manager can be very, very
confident that a service-able veteran owns and controls a
business. That raises the probability that they are going to be
willing to set stuff aside. So we make no apologies about the
rigor of the process. We have done a lot to simplify and
streamline it. We have reduced the processing time. We made it
much more applicant friendly. And I think as we move it to the
SBA, they have the same commitment, and I am confident that
that will be done.
Dr. MARSHALL. Great. Thanks.
Mr. Wong, anything else?
Mr. WONG. No. I would just like to echo that--one of the
things that is kind of cool is that we all know each other,
right? We have been working together as a team for the last
couple of months. And with your support, I think we can
actually make this thing go.
My main drive when I came into to run GCBD was pretty
simple. Make it easier for businesses to get our certifications
and make money with them. But more importantly, you know, with
those certifications, that is one thing. But we are also
focusing mostly on the government supply of contracts, right?
It is great to have a certification, but if you don't make
money from it, right, you have a situation where somebody has a
product that they don't like, right? If they have something
that they like, they might tell somebody. If they have
something that they don't like, they will tell everybody.
So what I want to make sure is to focus to make the
contracting officer's job easier. I would like them eventually
to look at--I want them to look at small business first, and I
want them to look for SBA certified companies to accomplish
that.
Mr. MARSHALL. Great. Thanks.
Mr. Gould, anything else to add there?
Mr. GOULD. Just real quick. I think we are stuck with the
acronym SDVOSB.
Mr. MARSHALL. Okay.
Mr. GOULD. I apologize. But as I noted earlier, we are
looking to streamline the application process at the SBA,
right? When you log in--when a small business owner logs into
certify at SBA.gov, name, address, what certifications are you
interested in, right? A checkbox. That will generate questions
depending on which checkbox you chose, right? And just making
it simple and very straightforward for the user, that is my
goal of unifying all these certifications under SBA.
Dr. MARSHALL. Mr. Leghorn, what else can we do?
Mr. LEGHORN. I think we are already doing it. I would like
to just echo what Mr. Gould said. One of the biggest problems
that we had in the past was that two different agencies were
doing it. So a lot of our veterans are not only exclusively in
one group, they are either 8A and vet owned or they are women
owned and vet owned. To move to a singular agency and a
singular platform and one time where they could just enter in
all their paperwork, that is the best possible outcome that can
come from all this.
Dr. MARSHALL. Okay. Thanks.
I yield back my time.
Chairman BERGMAN. Thank you Dr. Marshall.
Ranking Member Kuster, you are recognized for 5 minutes.
Ms. KUSTER. Thank you, General Bergman.
I want to start with you, Mr. Leghorn, because there is one
piece of this in terms of getting rid of the sort of
overburdensome government regulation.
If the certification is transferred to the SBA, should the
SBA also eliminate the self-certification program? In other
words, I am a little confused by the discussion, and we can let
others respond after you do, but whether there is still going
to exist the duplicative programs.
Mr. LEGHORN. I think that, with the move, self-
certification should go away because it causes just a lot of a
confusion across the board, not only for contracting officers
but for veterans seeking certification as well. And it is not
only the contracting officers at the federal level but at the
state level as well, because a lot of the States are--think
that some of the certifications are reciprocal.
Ms. KUSTER. So, Mr. Gould, would you agree? And do you have
the resources necessary for--to streamlining and not having the
duplicative programs?
Mr. GOULD. Tricky question. Currently, we do not have the
resources. But there is talk about keeping the self-
certification program for subcontracting, right? The full-blown
certification program, which we are taking from the VA, would
be for prime contracts. But there is a need for a subcontractor
to be an SDVOSB on occasion. And he or she may not have gone
through the full-blown certification process, so we are still
analyzing whether there is a true need for the self-
certification program.
Ms. KUSTER. And, Mr. Wong, any comment on that?
Mr. WONG. Yes. Just a complement to what Mr. Gould has said
and Mr. Leghorn has said.
You know, the balance that you have is between getting it
right and also continuity of operation. We are trying to do the
best because, again, the goal is to make sure that, when people
get our certification, they go to work. Because when they go to
work, they put Americans to work. And I think that is what
everybody wants.
By the same token, we don't want it so fast so that there
is fraud, waste, and abuse. But so as long as there is a
balance, I think that--you know, I think, in theory, having one
certification would be a good idea. But I think that it is not
an easy answer, right? But, again, it is--just as long as we
can hit that right balance between prime and sub about
subcontracting and also the speed at which someone can get to
work accurately and reliably is what we were striving for.
Ms. KUSTER. And how about you, Mr. Leney?
Mr. LENEY. Our goal is to do away with self-certification.
We don't see any further needed for it. We think once the
program is federal wide we will then put the veterans on a
level playing field and in a good place relative to the other
socioeconomic groups.
I also want to say that we have got the capacity. It is a
case of funding. It is going to be important for the Congress
to fund the SBA to do this. We have funded a verification
program. This program can ramp up within 6 months. And I expect
that, within a year, we will be verifying every eligible
SDVOSB.
Because the SDVOSB community is very smart. Once they
realize that the Congress intends to move toward federal wide
verification, I expect, over the course of the next year, we
will have most, if not all, of the SDVOSBs who want to play
with the Federal Government are going to come to CVE and they
are going to get verified. So we will be eliminating the
uncertainty in that regard. We can't do much about the women-
owned small business arena.
The capacity we have now has the ability to scale up. Once
we get to complete the transition of EMs and the model we have,
I think we have an efficient and effective program.
It is our intent, and We are in the discussion with the SBA
to transfer that program potentially lock, stock, and barrel to
the SBA so they don't have to reinvent the wheel. And we are
working closely with them to refine our programs to make sure
we will plug in effectively to Certify.gov, et cetera.
So I think that while there is always risk associated with
what we are doing, I think those risks--we are taking action to
mitigate those risks. And when we are done, this program will
be highly effective.
Ms. KUSTER. So back to you Mr. Leghorn. The question about
the subcontractors and the contractors. Do you think this might
engender confusion and, again, just this duplicative process?
Do you think we should streamline and get down to one, as Mr.
Leney has said?
Mr. LEGHORN. Well, I think, as an organization, we
absolutely think that Mr. Leney is right on this in terms of we
need to get to one standard, and we need to get there quick,
because having a rigorous process makes contracting officers
sure--like, our veteran-owned small business are who they say
they are and, you know, they control the purse strings. So we
want what is best for our veteran-owned small businesses.
Ms. KUSTER. Great. As do I.
I yield back.
Chairman BERGMAN. Thank you, Ranking Member Kuster.
Dr. Dunn, you are recognized for 5 minutes.
Mr. DUNN. Thank you very much General Bergman.
Mr. Leney, please walk me through a little statistics. How
many companies do you verify in a typical month? And what is
the budget, annual budget?
Mr. LENEY. We run about 1,100 to 1,200 a month right now.
We have a little over 14,000 firms as of June 30 in the
program. We expect, in 2018, to deal with about 15,000
applications.
The current budget for verification in 2017 for the core
element of the verification process was about $12 million. If
you add in some of the other attributes we have in our program,
we do a rigorous audit program that was mentioned by one of the
members to make sure that firms that have verified stay
verified, and that runs about $16 million.
Mr. DUNN. On top of?
Mr. LENEY. No. No. That is about $4 million----
Mr. DUNN. Altogether.
Mr. LENEY. So all in about 16 million. We expect, when we
go to the higher level, and, again, I think within a year we
will know what that is, probably running about $20 million.
Mr. DUNN. How long do you think it takes you to do 18,000
currently self-certified SDVOSBs?
Mr. LENEY. Self-certification is one click of a button on--
--
Mr. DUNN. Yeah. But, now, you are going to certify them. So
how long do you think you get them processed?
Mr. LENEY. Right now our goal is--we verify firms under 60
application days from the time they start, initiate, their
application, to the time they receive a determination. The only
time we stop the clock is when we are waiting on----
Mr. DUNN. One year? 2 years? To get all those?
Mr. LENEY. How will it take us to get to 18,000?
Mr. DUNN. Eighteen thousand, you know, additional. This is
new business, right?
Mr. LENEY. I think the total will be around 21,000.
Mr. DUNN. Okay.
Mr. LENEY. Okay.
We are also verifying 4,000 veteran-owned small businesses.
So that process will also move to the SBA. We will have to pay
for that. It will be appropriate for the VA to pay for that
because that is----
Mr. DUNN. Yeah. And I am getting at the budget questions.
Mr. LENEY. We are probably looking at $20 million, I think.
Mr. DUNN. Okay. Good.
So, Mr. Wong, how much does it cost the SBA to run through
all the other small business certifications? So what is your
annual budget?
Mr. WONG. Let me defer that to Mr. Gould. He keeps----
Mr. DUNN. I am sorry.
Mr. WONG. If I could defer that answer to Mr. Gould.
Mr. DUNN. Sure.
Mr. Gould, annual budget on that?
Mr. GOULD. So the annual budget currently for the
certifications, it is a tricky question, because we run--we
have one pot of money that we use for the certification
programs and the business development programs which----
Mr. DUNN. Okay. So not the development programs but----
Mr. GOULD. Right.
So, again, it is a tricky question, because those two
programs are blended so closely together.
Mr. DUNN. Give me your best shot. I am trying--you know,
you have asked for resources. I am working my way towards--how
much resources do you need?
Mr. GOULD. An analysis I did was trying to figure out how
much it is going to cost us to process 33,000 applications a
year. I came up with $115 million.
Mr. DUNN. So higher than what I was expecting.
Now, SBA has a network of field offices. Mr. Wong, I think
this is you.
Mr. WONG. Yep.
Mr. DUNN. A network of field offices. The VA doesn't really
have that. Does this create some great efficiencies for the
program?
Mr. WONG. So in terms of servicing, yes. We have 68
different field offices. And generally happens is, when you
apply to Certify.gov, the headquarters function is the one that
certifies the business. Once it is certified, it is assigned to
the district office in which they reside.
Presently those BOSes, the business opportunity
specialists, who work for our staff in the field, are only
statutorily authorized to provide business development
assistance for 8A. So there would be some additional--there
would be some additional legislation, I suppose, that is
required. But in general, we do have 68 different offices
around the country that----
Mr. DUNN. So let's make--put a pin in that. You need
additional legislation. You need to talk to us about that. Not
in this meeting, but----
Mr. WONG. Yes, sir.
Mr. DUNN. So I want to get back to Mr. Gould. The number
you gave me confused me a little.
Was that an all out budget including the prior--the 115
million, was that including the current SBA?
Mr. GOULD. That is all in.
Mr. DUNN. Okay. Plus the VA.
Mr. GOULD. Including the VA. Not plus, including the VA.
Mr. DUNN. All right.
Thank you, Mr. Chairman. I yield back.
Chairman BERGMAN. Thank you, Mr. Dunn.
Mr. Poliquin, you are recognized for 5 minutes.
Mr. POLIQUIN. Thank you, Mr. Chairman, very much. Thank
you, gentlemen, for being here.
It is always a good idea to find efficiencies and save
money throughout the Federal Government, or the State or local
government, whenever you can.
What I found at the VA, sometimes this becomes difficult
when you have an organization of 385,000 people that have, many
cases, been there for quite some time. And in many regards
there aren't performance metrics, so we know how these folks
are performing and you see the budget is doubled over the last
8 years, roughly.
So you folks are coming before us now asking to do
something which, to me, seems like commonsense. But I have also
heard a couple times here, Well, you need more money.
We spend a lot of our time talking to people that need more
money. I would think, and this may not be the case, but if you
are taking two functions, same function, really, or close to
the same function, right, at the VA and at the SBA, and you
combine the two of them, and the SBA has all kinds of regional
offices around the country, so forth and so on, and you are
putting them together, you think you would save money. That is
not what I am hearing. And you are shaking your hand Mr. Leney.
So I am going to give you a shot at telling me Why it is
going to cost us money instead of saving money. Let's start
with that, and then I have a couple other follow-up questions.
Go ahead, sir.
Mr. LENEY. Simple response to that is the expansion of the
program. What we expect, if we were to move this to the SBA, do
a federal wide certification program, we will run from about
14,000 firms to about 21,000 firms in the program. So you are
talking about a 50 percent increase in the size of the program,
just volume.
Mr. POLIQUIN. Just not veterans that own small businesses.
Everybody else who wants a contract with the government. Is
that what you mean?
Mr. LENEY. Well, I am only speaking to the veteran piece.
And as Mr. Gould mentioned, they are going to go from 3,500
that they deal with. We deal with 15,000 applications a year
right now. I want expect that would go up over 20,000. So it is
just an increase in volume.
In fact, the cost per application----
Mr. POLIQUIN. That is because you are going to do away with
the self-certification. Is that what you mean?
Mr. LENEY. Self-certification doesn't have an explicit
cost, because we don't run that. People self-certify. The cost
is in the back side. The cost is the real veterans owned small
businesses.
Mr. POLIQUIN. Yeah. I was just talking earlier today
someone who owns 22 McDonald's franchises. He is saying the
cost of labor is going up so much now, he is finding technology
to save--head count to save money so his business can make it.
Is there a possibility of that happening here?
Mr. LENEY. Yes.
Mr. POLIQUIN. Tell me about it.
Mr. LENEY. With the implementation of our veteran
engagement management system, we expect to reduce the amount of
labor involved that we just--in fact, we just deployed it. We
are going----
Mr. POLIQUIN. Then why are you asking for more money?
Mr. LENEY. Because we are going to increase the program by
50 percent.
Mr. POLIQUIN. Okay. One of the things we have run into at
the VA is--and this was a real eye-opener for me. I come from
the business community, but I have a tremendous amount of
respect for our veterans. That is why I lobbied to get on this
committee. And my goal is the same, I think, as everybody else
down the path here.
We have 7 million veterans, and we need to take care of
them. That is the deal. That is the contract we have with the
folks who gave us our country. It is pretty simple to me.
But at the same time, you look at the VA. And over the
past, I don't know, Neal, how long, they have--I won't get this
exactly right. They have a hundred different legacy computer
systems. A hundred of them. And one can't talk to the other, so
you have a veteran that is in Maine, and he needs healthcare,
and he traveled down to Florida to see his kids. And all of a
sudden they can't exchange medical records, and all this other
stuff. It is getting better, I understand that. One of the
reasons is that we now allocated what? $10 billion dollars for
them to fix this mess so the computer systems can talk to each
other. Can you imagine running a business like this?
And what I found, what I believe, and I think it has been
verified, I think it has been said publicly, is that the reason
we have this problem is a lot of these folks build up their own
systems to protect their jobs and what they do with these
organizations, and they don't talk to each other, so the people
that get screwed are the taxpayers and the veterans that we
should be taking care of, using that money to take care of
them.
So you have two computer systems here, I am guessing. They
talk to each other? What are you going to do about that?
Mr. LENEY. We are happy to offer--in fact, we have offered
our system up, if they determine that is a better system. If it
is not, we will use their system. Our system goes away.
Mr. POLIQUIN. Yeah. Who makes that decision?
Mr. LENEY. They will.
Mr. POLIQUIN. Okay.
Mr. LENEY. We will defer to the SBA, because they are going
to take the mission. I have no interest in keeping my
organization alive in this regard. That is why we are proposing
to move the entire organization. We think it is efficient and
effective.
Mr. POLIQUIN. I appreciate that.
I know I have a little bit of time here, Mr. Chairman. If I
may.
Mr. Leghorn, you represent the Legion. Great folks. We love
them.
Have the other VSOs weighed in here? And if they have, I
missed it.
What do the rest of the VSOs feels about this issue?
Mr. LEGHORN. I am really hesitant to speak for other VSOs,
but there are several out there that are also on our small
business task force. And through our small business task force,
I know that we are all locking in step with the proposal to
move verification from VA to SBA.
Mr. POLIQUIN. Okay. Do you have any concerns? What will be
the top two concerns you would have and the other folks at the
other VSOs have about doing this?
It is going cost more money. You come to us. We don't have
the money. Is that one of them?
Mr. LEGHORN. Cost is definitely an issue.
Mr. POLIQUIN. Yeah.
Mr. LEGHORN. You know, VA, to their credit, has been
funding the CVE on their own agency generated money. So cost is
an issue when we move that to the SBA, because I don't think
VA's going to just give that money over to the SBA.
Mr. POLIQUIN. No? You are kidding? You mean to tell me a
federal agency here in Washington not wanting to cut their
budget--you don't mean that, do you, Mr. Leghorn?
I think my time is up. Thank you very much for being
candid. Thank you, sir.
Yield back.
Chairman BERGMAN. Thank you, Mr. Poliquin.
Mr. Leney, a persistent complaint about the SDVOSB--and, by
the way, I agree with Dr. Marshall that either we come up with
a better acronym or figure out a pronunciation of it. But
anyway, the verification program is that bad actors
misrepresent ownership of companies. In fact, there is a term
used, the storefront veteran, in some cases. That is--for those
of you who have delved into this a little bit. And in a
previous life, I did do some pro bono work with SDVOSBs trying
to get themselves certified.
But sometimes they are caught, the bad actors are caught,
and the companies are eliminated. But too often these same
entities, kind of like Whack-A-Mole, remedy the non-compliance
on paper but not in reality. And then they get reverified and
they are back in the game.
In what we are looking at going forward, what are we doing
to end this? And how would you recommend the SBA solve the
problem once and for all and, and basically, you know, use the
tech term, close the back doors?
Mr. LENEY. Bottom line up front, Mr. Chairman, we are not
going to solve the problem of criminals. We haven't solved in
any other sector of society. They will continue to be criminals
who seek to take advantage of a government program. However, we
have taken a number of actions that I think have been very
helpful.
Here in the VA we have an audit program, a no notice man
from--one of our people shows up on-site to confirm that a
veteran-owned small business continues to be owned or
controlled by a veteran. That does not solve the storefront
problems in terms--another term called pastors. That is a
contracting issue.
But I think we have largely addressed the issue of are you
really owned and controlled by a veteran? Yes. There are some
that can paper it over. There are some that commit fraud. We
have referred those to the IG. I have a risk manager who works
very closely with the IG. And we have seen a decline in the
number of those firms.
If you do business with the VA in any reasonable capacity,
you will get visited, no notice, by an auditor. And that has
made a major difference in terms of veteran-owned small
businesses realizing that we are serious to the program.
Chairman BERGMAN. Good. Well, speaking of audits, you know,
Mr. Gould, you know, VA audits SDVOSBs after they have been
verified, as we just heard Mr. Leney say.
What level of auditing or ongoing oversight does SBA
currently exercise in other small business programs? And have
we got a plan going forward, or is that Mr. Wong?
Okay.
Mr. WONG. So we have some safeguards. They are not perfect.
We are making progress. But it is not perfect. But we have
things like size protests.
In some regards, I think that in order to reduce the number
of back doors, in order--as we call them, fronts, I think
having a more solid process in the front door is going to be
one of the safeguards that we can have. Additionally----
Chairman BERGMAN. So let me ask the question.
So do you believe that--if I am not hearing that you are
saying audits are useful going forward. Did I misinterpret what
you said?
Mr. WONG. I don't want to say that you didn't do anything.
I would just say that I did not say that.
Chairman BERGMAN. Okay. But that was kind of getting from--
you were talking about front doors, back doors.
Mr. WONG. Yes.
Chairman BERGMAN. I didn't hear about--are we going to use
the audits to do this, or are we going to do this through our
processes and designing the system to able update, or do we
have to physically audit?
Mr. WONG. So we can do that. What SBA has right now, with
all of our certification programs, we have a--we ostensibly
have a strong entrance barrier. And once that is through, then
we have annual reporting requirements. And then we have
analysts that look at these annual reviews or this continuing
eligibility.
We also have the public and competitors--I mean,
competitors are great for policing things. And they have
protests. So we even have protests. And a mechanism by which,
if somebody protests size and they are untimely, because I am a
lawyer by trade, but sometimes lawyers play games, and if they
are obviated because of time, SBA even has its own ability to--
--
Chairman BERGMAN. And I hate to cut you off here, because
now I know you are a lawyer, I know you would run out my time
if I let you.
But the point is the audit verification process that you
just articulated by, in other words, letting those affected
parties, those negatively affected parties, basically take care
of those bad actors by letting you know who they are, kind of--
it is kind of a team effort on it. That is to get everybody
invested in the program going forward, especially those honest,
you know, business-minded veterans who want to build a small
business. They will feel included.
Mr. Leghorn, you get the last word here as far as your
thoughts on, you know, how about the audits. Will they be
helpful? Hindrance? What are you thinking?
Mr. LEGHORN. So the issue with the audits is that it really
cuts into a small business's time and effort in their capacity
to make money when you show up for a site visit. That has
always been the problem. And, you know, what is the right level
of government intrusion necessary to verify that you are who
you say you are versus, you know, if you are who you say you
are, let's let you go on and go about your business.
Chairman BERGMAN. So going forward, then, if the SBA is
they take over the program, look at the audit as a tool that,
if properly applied and doesn't require small business to,
let's say, to add compliance people or add other, you know,
limited resources that you have as a small business to then
apply those resources towards successfully passing an audit.
So, again, it is working together to make sure it doesn't
stay onerous, any part of it stays onerous. Is that a fair
assessment?
Mr. LEGHORN. Correct. And if I could add one more thing
real quick. I think there is a great avenue for SBA or VA to do
something along the lines of improving community policing and,
in fact, promoting it. And also, just as Mr. Wong said, there
are still status protests that could be levied through the GAO.
Chairman BERGMAN. Okay. Well, thank you very much.
So I see no further questions from the dais up here. If
there are no further questions, then the panel is now excused.
Thank you again to Chairman Kelly and Ranking Member Adams
for hosting this hearing. Do either you, Ms. Adams or Ranking
Member Kuster, have any final remarks before I close?
Ms. ADAMS. No, sir. I just want to thank all of the
panelists for being here and all the members of the committee.
Chairman BERGMAN. Thank you.
A couple of thoughts. Based upon what Dr. Marshall said
about, you know, simplifying, getting a new name. I would
suggest to you we love, you know, acronyms and words and
whatever. But, you know, personally, alliteration helps me
figure out what it is we are trying to do that I would suggest,
you know, if we stratify, we simplify, and then especially from
VA as you transition out and SBA as you transition in, you
support one another in the lessons learned that you have
already learned in VA.
Don't go, you know, a year from now over a cup of coffee
saying, Oh, yeah, we could have told you that a year ago, you
know, type of thing. So support one another so in the end we
support the veterans and their efforts to become successful
small business owners.
Small business programs and contracting reform are
important to all of us. And I know that Ranking Member Kuster
shares this view, because we have been a good team here for 18
months on the VA O&I Committee. We have prioritized these
issues on the Oversight and Investigations Subcommittee
hearings. We devote as much time as we can. But the reality is
that the Small Business Committee is dedicated to these issues
now full-time. We welcome the opportunity to work with you.
Thank you to our witnesses for sharing your knowledge, your
perspectives, and for continuing to highlight the need for
government-wide verification. I look forward to working with
all of you to craft such legislation.
I would be remiss in saying the 115 million is--that is an
interesting figure. We are going to have to talk about that.
I ask unanimous consent that all members have 5 legislative
days to revise and extend their remarks and include extraneous
material.
Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 3:20 p.m., the subcommittees were
adjourned.]
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