[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
HEARING ON EXCELLENCE IN ACTION: GOVERNMENT SUPPORT OF DISABLED
VETERAN-OWNED BUSINESSES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT & GOVERNMENT PROGRAMS
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC, JULY 15, 2004
__________
Serial No. 108-73
House Veterans' Affairs Committee, Serial No. 108-48
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
______
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COMMITTEE ON SMALL BUSINESS
DONALD A. MANZULLO, Illinois, Chairman
ROSCOE BARTLETT, Maryland, Vice NYDIA VELAZQUEZ, New York
Chairman JUANITA MILLENDER-McDONALD,
SUE KELLY, New York California
STEVE CHABOT, Ohio TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania ENI FALEOMAVAEGA, American Samoa
JIM DeMINT, South Carolina DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia GRACE NAPOLITANO, California
TODD AKIN, Missouri ANIBAL ACEVEDO-VILA, Puerto Rico
SHELLEY MOORE CAPITO, West Virginia ED CASE, Hawaii
BILL SHUSTER, Pennsylvania MADELEINE BORDALLO, Guam
MARILYN MUSGRAVE, Colorado DENISE MAJETTE, Georgia
TRENT FRANKS, Arizona JIM MARSHALL, Georgia
JIM GERLACH, Pennsylvania MICHAEL MICHAUD, Maine
JEB BRADLEY, New Hampshire LINDA SANCHEZ, California
BOB BEAUPREZ, Colorado BRAD MILLER, North Carolina
CHRIS CHOCOLA, Indiana [2 VACANCIES]
STEVE KING, Iowa
THADDEUS McCOTTER, Michigan
J. Matthew Szymanski, Chief of Staff
Phil Eskeland, Policy Director/Deputy Chief of Staff
Michael Day, Minority Staff Director
SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT AND GOVERNMENT PROGRAMS
TODD AKIN, Missouri, Chairman TOM UDALL, New Mexico
JIM DeMINT, South Carolina DANNY DAVIS, Illinois
SHELLEY MOORE CAPITO, West Virginia GRACE NAPOLITANO, California
JEB BRADLEY, New Hampshire ED CASE, Hawaii
CHRIS CHOCOLA, Indiana MADELEINE BORDALLO, Guam
STEVE KING, Iowa [VACANCY]
THADDEUS McCOTTER, Michigan
Joe Hartz, Professional Staff
(ii)
?
COMMITTEE ON VETERANS' AFFAIRS
CHRISTOPHER H. SMITH, New Jersey, Chairman
MICHAEL BILIRAKIS, Florida LANE EVANS, Illinois
TERRY EVERETT, Alabama BOB FILNER, California
STEVE BUYER, Indiana LUIS V. GUTIERREZ, Illinois
JACK QUINN, New York CORRINE BROWN, Florida
CLIFF STEARNS, Florida VIC SNYDER, Arkansas
JERRY MORAN, Kansas CIRO D. RODRIGUEZ, Texas
RICHARD H. BAKER, Louisiana MICHAEL H. MICHAUD, Maine
ROB SIMMONS, Connecticut DARLENE HOOLEY, Oregon
HENRY E. BROWN, Jr., South Carolina TED STRICKLAND, Ohio
JEFF MILLER, Florida SHELLEY BERKLEY, Nevada
JOHN BOOZMAN, Arkansas TOM UDALL, New Mexico
JEB BRADLEY, New Hampshire SUSAN A. DAVIS, California
BOB BEAUPREZ, Colorado TIM RYAN, Ohio
GINNY BROWN-WAITE, Florida STEPHANIE HERSETH, South Dakota
RICK RENZI, Arizona
TIM MURPHY, Pennsylvania
Patrick E. Ryan, Chief Counsel and Staff Director
__________
SUBCOMMITTEE ON BENEFITS
HENRY E. BROWN, Jr., South Carolina, Chairman
JACK QUINN, New York MICHAEL H. MICHAUD, Maine
JEFF MILLER, Florida SUSAN A. DAVIS, California
JEB BRADLEY, New Hampshire CORRINE BROWN, Florida
GINNY BROWN-WAITE, Florida STEPHANIE HERSETH, South Dakota
(iii)
C O N T E N T S
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Witnesses
Page
McCullough, Ms. Allegra, Associate Deputy Administrator,
Government Contracting and Business Development, U.S. Small
Business Administration........................................ 5
Ramos, Mr. Frank, Director, Office of Small and Disadvantaged
Business, Office of the Secretary of Defense................... 8
Scott, Mr. Brad, Regional Administrator, Region 6, Heartland
Region, U.S. General Services Administration................... 10
Denniston, Mr. Scott, Director, Office of Small Business and
Center for Veterans Enterprise, U.S. Department of Veterans
Affairs........................................................ 12
Hatfield, Ms. Nina Rose, Deputy Assistant Secretary, Business
Management and Wildland Fire, U.S. Department of the Interior.. 14
Lopez, Mr. John, Co-Chairman, Task Force for Veterans
Entrepreneurship............................................... 20
Schooner, Professor Steven, Co-Director of the Government
Procurement Law Program, George Washington University Law
School......................................................... 22
Hudson, Mr. James, Marketing Director, Austad Enterprises, Inc... 24
Forney, Mr. Joseph, President, Vetsource, Inc.................... 26
Weidman, Mr. Rick, Chairman, Task Force for Veterans
Entrepreneurship............................................... 28
Appendix
Prepared statements:
McCullough, Ms. Allegra, Associate Deputy Administrator,
Government Contracting and Business Development, U.S. Small
Business Administration.................................... 33
Ramos, Mr. Frank, Director, Office of Small and Disadvantaged
Business, Office of the Secretary of Defense............... 37
Denniston, Mr. Scott, Director, Office of Small Business and
Center for Veterans Enterprise, U.S. Department of Veterans
Affairs.................................................... 49
Hatfield, Ms. Nina Rose, Deputy Assistant Secretary, Business
Management and Wildland Fire, U.S. Department of the
Interior................................................... 53
Forney, Mr. Joseph, President, Vetsource, Inc................ 55
Hudson, Mr. James, Marketing Director, Austad Enterprises,
Inc........................................................ 61
Lopez, Mr. John, Co-Chairman, Task Force for Veterans
Entrepreneurship........................................... 66
Weidman, Mr. Rick, Chairman, Task Force for Veterans
Entrepreneurship........................................... 66
Submitted for the Record:
US Department of Agriculture................................. 86
Speake, Ms. Theresa, Director, Office of Small &
Disadvantaged Business Utilization, US Department of Energy 91
(iv)
HEARING ON EXCELLENCE IN ACTION: GOVERNMENT SUPPORT OF DISABLED
VETERAN-OWNED BUSINESSES
----------
THURSDAY, JULY 15, 2004
House of Representatives
Committee on Small Business
Subcommittee on Workforce, Empowerment and Government
Programsjoint hearing with the Committee on Veterans'
Affairs Subcommittee on Benefits
Washington, D.C.
The Subcommittee met, pursuant to call, at 2:05 p.m. in
Room 311, Cannon House Office Building, Hon. Todd Akin
[chairman of the Subcommittee] presiding.
Present: Representatives Akin, Brown, Velazquez, Michaud,
Udall, Herseth, Chocola
Chairman Akin. This is an interesting Committee hearing in
that we have essentially two different committees having the
same hearing at the same time. And that is a fortunate thing,
because I have got another Committee where I have got to be
scooting off, so we are going to be turning the hearing over in
a couple minutes to my colleague. Henry will handle that after
we make an opening statement and get started.
I also think we have two panels of witnesses, is that
correct? Okay.
Well, let us go ahead with an opening statement then. And
also, we will be hearing a statement from our Minority Member
from the Small Business Committee also, Mr. Udall, as well. So
that will be good.
Good afternoon, and thank you all for being here today as
we examine federal government support of disabled veteran-owned
small businesses. I would especially like to thank each of our
witnesses who has agreed to testify before our Committee today.
Before we begin I would like to welcome my friend and
colleague, Chairman Henry Brown, of the Committee on Veterans'
Affairs, Benefits Subcommittee. Mr. Chairman, welcome, and
thank you for the opportunity to work together on this issue.
And over the past three and a half years Chairman Brown has
worked tirelessly on a multitude of issues, and has been a real
champion for America's veterans. I would like to express my
gratitude to the good people of the First District of South
Carolina for sending Henry to the House, and also for the
peaches that they distributed a couple days ago.
I am very pleased to be able to co-chair this hearing with
him, and hope that this is just the first of a long line of
veteran small business concerns we can work on together. With
President Bush, this Congress has made it a priority to reach
out to all of America's entrepreneurs, especially those who
served this nation in our armed forces. We must continue this
effort to ensure that those who sacrificed and served our
nation in uniform have access to contracting opportunities with
the federal government.
As many of you know, the Veterans' Entrepreneurship and
Small Business Development Act of 1999 set a government-wide
goal of 3 percent of all federal prime contracting dollars, and
3 percent of all federal subcontracting dollars, should be
awarded to service-disabled veteran-owned small businesses.
However, for the first two fiscal years after enactment,
less than one-half of 1 percent of such contracts have been
awarded to disabled veteran-owned small businesses.
In order to provide the federal agencies with the necessary
tools to meet the 3-percent goal, Congress and President Bush
enacted the Veterans' Benefit Act of 2003 on December 16, 2002.
This law allows contracting officers to create sole-source
contracts for disabled veteran-owned small businesses.
The new law also provides contractors the discretionary
authority to restrict certain contracts for disabled veteran-
owned small businesses, if at least two such small businesses
are qualified to bid on the contract.
Today we have invited a number of federal agency officials
to testify on their progress in implementing the Veterans'
Benefit Act. Also with us today are several disabled veteran-
owned small business owners. They are here to explain their
experiences, both before and after passage of the Veterans'
Benefit Act.
I am looking forward to hearing the testimony presented
today, and hope to hear that each of the agencies represented
have taken appropriate steps to meet the 3-percent goal.
I hope that this Congress and our colleagues in the
Administration can continue to work with the veterans'
community together in order to provide our service-disabled
veteran-owned small businesses each opportunity to succeed in
the federal contracting agenda.
I now invite my friend and ranking Member, Mr. Udall, to
make an opening statement.
Mr. Udall. Thank you very much, Mr. Chairman. I appreciate
you holding this hearing. I think this is an important hearing
for veterans, and also for the small business community.
Let me first say that, along with a few other members here
today, I have the pleasure of serving on both the Small
Business and the Veterans' Committees. And it is a pleasure for
us to have our colleagues on both of the Committees here today.
We all recognize the importance of this issue before us, and I
hope that this hearing will lead to a more effective
procurement process for our veteran-owned small businesses.
The Veterans' Benefit Act is legislation built off the work
of the Small Business and the Veterans' Committee during the
105th Congress. Two Congresses ago we passed the Veterans'
Entrepreneurship and Small Business Act that created several
veterans' business development programs.
Given the sacrifices that our veterans have made and the
service they have provided to this country, it only makes sense
to provide our nation's veterans with assistance to jump-start
small businesses.
A key component for any small business to succeed, not only
veteran-owned small businesses, is access to government
contracts. That is why we must ensure that veteran-owned,
minority-owned, and all small businesses have a fair shake in
the federal marketplace.
Today, however, we are focusing more specifically in
evaluating the recent implementation of the new program
established under the Veterans' Benefits Act. On May 5, 2004,
five months after the President signed the legislation into
law, the SBA put out the regulations to carry out the
procurement program. These provisions allow agencies to set
aside contracts for service-disabled veterans.
Unfortunately, in issuing the regulations, the SBA may have
missed the mark. The regulations omit important safety and
soundness protections, such as a certification program.
In addition, I am very concerned that these regulations not
only fall short of the policy goals, but will also create
confusion that will result in lost contracting opportunities,
not only for service-disabled veterans, but for all small
businesses.
The original intent of the bill was to create a fair and
just system, to provide entrepreneurial opportunities to those
who, for various reasons, have been left behind or left out. In
order for this to be successful, we must ensure SBA programs
can operate in unison.
Mr. Chairman, we all know how important it is that we
provide assistance to all sectors of the small business
community. After all, as is repeated often in the Small
Business Committee, small businesses are the engine that drives
our nation's economy.
It is of particular importance, however, that we provide
assistance to our nation's service-disabled veteran
entrepreneurs. History has shown that they, along with other
particular segments of the population, rely most on the
programs and assistance offered through SBA. That is why it is
so important that as this new and important procurement program
be implemented, we ensure that it is implemented in a manner
that truly provides greater access to the federal marketplace
for veteran-owned small businesses.
I look forward to hearing the testimony of the witnesses on
the panels, and thank them for being here today.
Thank you, Mr. Chairman.
Chairman Akin. Thank you, Mr. Udall. And then also we have
an opening statement from Mr. Brown.
Mr. Brown. Thank you, Mr. Chairman. And I want to also
extend a warm welcome to everyone here today, Chairman Akin,
our Committee Ranking Member, Mr. Udall, for bringing us all
together.
American sons and daughters who serve in our military
indeed are engaging and resourceful individuals. In few
professions do 19- and 20-year-olds, for example, maintain
multi-billion-dollar airplanes or operate multi-billion-dollar
missile systems or nuclear-powered submarines, all in defense
of our way of life.
Those who are disabled in their service to our nation
deserve a full opportunity to participate in the economic
system that their service has sustained.
Indeed, during the Colonial era, the First Continental
Congress furnished pensions to members of our Continental Army
to empower economically after they left the military. In so
doing, the Continental Congress established one of our young
nation's core values.
Further, during the Homestead Act of 1862, veterans
received a priority for receiving parcels of land. This goes
beyond gratitude and respect; it is about using scarce public
resources in our private economy to empower those who have
served.
Mr. Chairman, fast-forward into today. A five-year profile
survey of veteran-owned businesses in Massachusetts, conducted
in the late 1980s and early 1990s, found that a pool of
approximately 2,000 veterans engaged in micro-businesses
generating $74 million for the Commonwealth of Massachusetts.
That is just for one state.
On February 5, 2003, Veterans' Affairs Committee hearing on
the state of veterans' employment took testimony from among
other current entrepreneurs who were disabled by their military
service. The body of testimony showed these are engaging
individuals who are strong and well-positioned to participate
in the economic system they fought to defend.
The outgrowth of that 2003 hearing was the bipartisan
discretionary set-aside and restricted contract authority for
disabled veteran-owned small businesses, established as Public
Law 108-183, to which I was an original co-sponsor.
I thank Congressman Renzi for introducing this important
bipartisan legislation, of which Chairman Manzullo was the
original co-sponsor.
Federal departments and agencies now have additional tools
to contract with such small businesses. These are tools that
were not available through the bipartisan enactment of Public
Law 106-50, authored primarily of former Chairman Talent of
this Committee, and Mr. Stump and Mr. Evans of the Veterans'
Affairs Committee.
Mr. Chairman, I would note the White House Conference on
Small Businesses, convened by President Carter in 1980,
recommended set-aside authority in federal contracting for
Vietnam-era disabled veterans as part of the aid program.
The 1981 expert report of the Small Business Administration
Veterans' Project, written by the Center for Community
Economics, made the same recommendation. The bipartisan
Congressional Commission on Service Members and Veterans'
Transition Assistance of 1998 made similar-type
recommendations.
Without objection, Mr. Chairman, I would like to insert
into the record the appropriate sections of these reports.
In closing, Mr. Chairman, I would note that in a broad
sense, these discretionary contracting authorities for disabled
veterans we are discussing today were some 24 years in the
making.
This is not something Congress went into lightly, so I am
very pleased we are holding this hearing.
Thank you, Mr. Chairman. I look forward to hearing today's
witnesses.
Chairman Akin. Without objection, in terms of the record.
Our next opening statement is going to be from Mr. Michaud.
Mr. Michaud. Thank you very much, Chairman Akin, Chairman
Brown, and Ranking Member Udall, for working to put this
hearing together today.
I have the privilege of serving both, as Ranking Member of
Veterans' Affairs Benefits Subcommittee, and sitting on the
Small Business Committee. I am very fortunate, and obviously
have strong interests in exploring the issues before us today
with the panels that we have, and the lengthy discussions.
So with that, Mr. Chairman, I would ask unanimous consent
to have my opening remarks submitted for the record.
Chairman Akin. Without objection, and thank you.
We will now proceed to our first panel of witnesses. And I
believe our first witness is going to be Ms. Allegra
McCullough, who is the Associate Deputy Administrator for
Government Contracting and Business Development for the USSBA.
Allegra, thank you.
Excuse me, I did not mention you have about five minutes,
standard format. Thank you.
STATEMENT OF ALLEGRA MCCULLOUGH, GOVERNMENT CONTRACTING &
BUSINESS DEVELOPMENT, US SMALL BUSINESS ADMINISTRATION
Ms. McCullough. Good afternoon, Chairman Akin, Brown, and
Ranking Members Udall, Michaud, and other distinguished Members
of the Committee.
My name is Allegra McCullough, Associate Deputy
Administrator for Government Contracting and Business
Development at the US Small Business Administration.
Thank you for inviting me to appear before you today to
speak about our efforts to reach out to service-disabled
veteran-owned small businesses, and achieve the 3-percent
federal procurement goal.
Mr. Chairman, as you are aware, the Veterans'
Entrepreneurship and Small Business Development Act of 1999
created a government-wide goal that 3 percent of the total
value of all federal prime and subcontract dollars be awarded
to service-disabled veteran-owned small business concerns.
Unfortunately, the federal government has consistently
fallen well short of the 3-percent statutory goal. By fiscal
year 2003, only three agencies met or exceeded the 3-percent
goal. The National Endowment for the Arts--
Chairman Akin. Allegra, if I could interrupt you for a
minute and just ask you to move your mic a little bit closer. I
think we will get a little bit better reception. Thank you.
Ms. McCullough. By fiscal year 2003, only three agencies
met or exceeded the 3-percent goal: the National Endowment for
the Arts, the Consumer Product Safety Commission, and the
Railroad Retirement Board. Of the large agencies, the
Department of Housing and Urban Development has been the most
successful in making progress toward the 3-percent goal.
On June 10, 2004, SBA's Office of Advocacy issued a report
indicating achievements in this area were low, but also
indicating that actual agency accomplishment may be under-
reported.
Congress and the President provided federal procurement
officials with a valuable tool: The Veterans' Benefit Act of
2003, 108-183. That was signed by the President on December 18,
2003, that authorized bills of procurement set-asides for
SDVOSB, and sole-source contracting authority for only one
SDVOSB as identified that can meet the government's
requirement.
On May 5, 2004, the SBA and the Federal Acquisition
Regulatory Council concurrently published interim final rules,
implementing the procurement provisions of the Veterans'
Benefit Act of 2003, while still providing the public with a
60-day comment period. Both SBA and the FAR Council worked hard
to expedite these regulations.
The new regulations permit contracting officers to either
restrict competition in contracts, or issue sole contracts to
SDVOSB, but then specify dollar thresholds, in accordance with
statutory requirements.
Our regulation also establishes procedures for protecting
the status of an SDVOSB.
There are some common misconceptions out there that hinder
the government's ability to reach the statutory 3-percent goal.
Since these procurements are based on a premise other than
socio-economic status, educating the federal and private sector
contracting communities is very important.
Also, some SBCs are reluctant to identify themselves as
service-disabled just to gain the status designation as an SDV.
This hinders our outreach efforts, since we are unable to
identify our clients.
So educating SDVOSBs to recognize the value added in
securing or self-identifying as disabled is very important.
S.B.A. has not achieved its annual procurement goal for
SDVOSBs since the inception of the requirement. However, as a
result of the recently-enacted legislation and published
regulation, SBA is designing an integrated effort that includes
specific steps to be taken among our various program areas to
utilize the set-asides and sole-source authorities for the
purpose of meeting the 3-percent goal.
As a part of SBA's annual acquisition planning process, the
agency will include all socio-economic goals, including SDVOSBs
in our selection strategy. SBA's Office of Administration will
also work closely with our Office of Veteran Business
Development to identify potential SDVOSBs to meet SBA's
contracting needs.
Where feasible, contracting opportunities will be posted on
our home page, as well as highlighted in our vet cassette
electronic newsletter, which reaches thousands of veterans.
The SDVOSB procurement goals will be communicated to all
program areas, and each area will be encouraged to consider
these agency goals when developing its procurement strategy for
each planned acquisition.
SBA's outreach goals over the last three years, combined
with the efforts of others, have contributed to the increase in
veteran participation between 40 to 100 percent in most SBA
programs. We have and will continue to coordinate these efforts
internally and with other federal agencies.
S.B.A. will work with the agencies' representatives today,
and with others, to conduct outreach training and other policy
program initiatives, specifically for SDVOSBs and veteran-owned
businesses. This effort will include educating procurement
officers of the new program, as well as educating service-
disabled veteran entrepreneurs on SDV status, size standards,
marketing to federal officials, information requirements in the
bid of a procurement challenge, and tools for partnering with
other SDVOSBs and veteran-owned businesses, and other agency
procurement program participants.
Registration and the central contract registration, and the
use of the dynamic small business search engine contained in
the CCR as a source of market research, along with other
federal databases, will be highlighted.
Further, non-SDVOSB prime contractors should also be made
aware of subcontracting opportunities and responsibilities for
the SDVOSB and veteran-owned businesses. To fully accomplish
the objectives of this legislation, SDVOSBs must be prepared to
conduct business in a manner consistent with current federal
procurement trends.
Today, a large portion of the annual federal procurement
dollars are spent through contracting actions using GSA federal
supply schedules. While not the only way to provide SDVs with
more contracting dollars, the ability of SDVOSBs to be placed
on and market their companies on the GSA federal schedule will
be a critical portion of their success in the federal market.
Through SBA procurement assistance programs, its business
development counselling and training programs, and in
partnership with other federal agencies like the ones here
today, SBA will continue to identify and work with SDVOSBs to
ensure that they have the necessary tools in place to enhance
participation on GSA schedules.
Additionally, SDVOSBs must be educated on federal
procurement trends, including using federal purchase cards to
make purchases under $2500 without competitive quotes. These
purchases amount to approximately $16 billion last fiscal year.
Mr. Chairman, the SBA will continue to work with the
Committee and with other federal agencies in any efforts to
promote programs and contracting opportunities for our
veterans.
This concludes my testimony. And I would be happy to answer
your questions.
[Ms. McCullough's statement may be found in the appendix.]
Chairman Akin. Thank you, Ms. McCullough.
I will remind the witnesses, I know Ms. McCullough went a
little bit over the five minutes. And I would caution you, if
you would, kind of keep your remarks to five minutes. All of
your prepared remarks will be entered into the record, but just
for the sake of the time line to try to work within, if you
would just contain your statements to five minutes.
The next witness is Mr. Frank Ramos, Office of Small and
Disadvantaged Business, Office of the Secretary of Defense, US
Department of Defense.
Thank you, Mr. Ramos.
STATEMENT OF FRANK RAMOS, OFFICE OF SMALL AND DISADVANTAGED
BUSINESS, OFFICE OF THE SECRETARY OF DEFENSE, US DEPARTMENT OF
DEFENSE
Mr. Ramos. Mr. Chairman, if I would, please, I have four
interns in the back. And I think there is some significant
interest in one of them. If they would stand up.
One is the granddaughter of a US Marine code talker from
World War II from the Navajo Nation. And I thought it would be
appropriate to bring them here to go through this exercise.
[Applause.]
Chairman Akin. We had a special ceremony in the Capitol, I
guess about a month or so ago, honoring the code talkers. And
they certainly played a major role in our victory in World War
II. And thank you for bringing her today. Thank you for coming,
too.
Mr. Ramos. Thank you, sir. Right behind me also, sir, is my
Deputy, Lynn Oliver, and a new person who is a special
assistant to me, a political appointee who is going to be
focusing on veterans' affairs for us. He just came on board; he
served with the Army Airborne.
I will move on with my statement here, sir.
Good afternoon, Chairman Akin and Congressman Udall; good
afternoon, Chairman Brown and Congressman Michaud.
My name is Frank Ramos. I am the Director of the Office of
Small and Disadvantaged Business Utilization, in the Office of
the Secretary of Defense.
I wish to thank you for the opportunity to testify before
this joint subcommittee hearing concerning the Department of
Defense implementation plan to execute public law 108-183. This
law has helped clarify questions of priority within the
competing small businesses' interest. This will help us.
The Defense implementation plan is our roadmap to meet the
federal government goal to award 3 percent of all contracts for
our war fighters who have become disabled in defense of our
nation.
Today I will describe the three arenas of focus to improve
our service-disabled veteran business statistics.
Number one. We are developing a strategy to increase
service-disabled veteran supplier pool on increasing contract
amounts to these businesses.
After I assumed my office, I began collecting data to
determine how and what we must do to achieve the goal. In
fiscal year 2002, the Department of Defense awarded $204.5
million in prime contract awards to service-disabled veterans,
but we only reached .13 percent of that goal.
In fiscal year 2003, we awarded $341.7 million, an increase
of $37.2 million. That only raised our goal percentage to .18
percent, a 72-percent increase that still fell short of the 3-
percent goal.
The number of DoD service-disabled veteran business
contractors grew from 408 in fiscal year 2002, to 692 in fiscal
year 2003, an increase of 70 percent.
The government-wide centralized contractor register has
only 5,600 active registrants who have identified themselves as
service-disabled veterans. This compares with around 180,000
registrants who identify themselves as small business, as of
last week.
Accretion of contract size is a challenge. Right now there
are only five firms who have contract awards in excess of $11
million. The balance of contract awards are in the lower
ranges, most frequently under $100,000. Those larger Department
of Defense awards are in research and development, engineering
services, commercial institutional and construction, security,
and boat-building.
Our primary tasks are twofold. To grow the number of
service-disabled veteran firms that will be able to compete,
and to increase the dollar value of our contracts with them,
while buying goods and services that the war fighter needs.
The second area of focus is training. In late 2002 I
recognized that small business-related training courses were
not part of the Defense Acquisition University curriculum. The
Undersecretary of Defense for Acquisition, Technology, and
Logistics and the President of the Defense Acquisition
University were quick to support our small business initiative,
to consolidate courses that military services had partially
developed for themselves.
We now have our first comprehensive Department of Defense
small business training course contracts 260 that will be
initiated at the end of August. The course is required for all
defense small business specialists, and is encouraged for all
acquisition professionals, which will include the service-
disabled veteran topics.
Another initiative is to have an electronic continuous
learning module. We expect that within 45 days of our pilot
course, the electronic course will be available to anyone over
the Internet.
We are expanding our defense community practice repository
to provide a central electronic location where all acquisition
professionals can share information relating to service-
disabled veteran-owned small businesses.
Third. In 2003 I raised the service-disabled veterans as a
heightened priority within the Department of Defense. For
emphasis, we invited two Congressional Medal of Honor
recipients--the Honorable Harvey ``Barney'' Barnum, the
Assistant Secretary of the Navy, and Rodolfo Hernandez--to
address our mentor/protege conference. The Honorable Everett
Alvarez was another keynote speaker. He is the longest-captive
prisoner of war decorated service-disabled veteran, and a
successful small business owner.
I also had the Honorable Albert Zapanta, Chairman of the
Reserve Policy Forces Board, a recipient of the Silver Star and
Purple Heart, and small business owner, who addressed the
veterans' issues.
That level attention by the distinguished heroes has never
been done before at that conference.
I am also proud to state that my support contractor is a
very competent service-disabled veteran business. And I guess
what I am saying is I practice what I preach.
We have identified our challenges, and we developed a
roadmap. We are working hard to achieve our goal.
I would like to close by expressing my appreciation for
your interest, and the collaborative effort by our sister
federal agencies, to strive toward this patriotic goal of
supporting our former war fighters. It is the right thing to
do.
I hope you can discern from my testimony that I have a real
passion to meet this challenge. Thank you, sir.
[Mr. Ramos' statement may be found in the appendix.]
Chairman Akin. Thank you very much, Mr. Ramos. I know there
is a lot of work left to do, and I thank you for your effort in
trying to reach that 3-percent goal.
Our next panel member is Mr. Brad Scott, Regional
Administrator, Region Six, Heartland Region, US General
Services Administration. Welcome.
STATEMENT OF BRAD SCOTT, US GENERAL SERVICES ADMINISTRATION
Mr. Scott. Thank you, Mr. Chairman, Ranking Member Udall,
Ranking Member Michaud.
I am pleased to report on behalf of Administrator Steve
Perry on GSA's continuing efforts to preserve the spirit of the
two respective laws enacted to promote government contracting
with service-disabled veteran-owned small businesses.
It has been my personal privilege to play a part in
developing and implementing programs designed to, first,
leverage our relationships within the federal community, to
promote achievement of socio-economic goals by our client
agencies.
Second, to help service-disabled veterans identify
opportunities to do business with the government.
And finally, to enhance GSA's ability to achieve its own
goal.
I would like to thank the Congress and the President for
providing this tool that I believe will prove to be a
meaningful enhancement in creating opportunities for service-
disabled veteran-owned small businesses.
When public law 108-183 took effect last December,
Administrator Perry challenged the GSA management team to forge
an initiative to meet the demands of this new law. In response
to this, we initiated a program that is entitled ``Operation
Fast Break.''
Operation Fast Break is a two-pronged approach aimed at
creating and improving GSA's external and internal offerings to
our federal customers, and to service-disabled veteran-owned
small businesses.
The broad goals of Operation Fast Break are first to
identify, recruit, train, and assist service-disabled veteran-
owned small business owners to get on GSA's multiple-award
schedule program. And second, it is to inform client agencies
of the new law and the opportunity contained therein to
streamline the ability to access service-disabled veteran-owned
small businesses.
G.S.A. has worked very closely with the Department of
Veterans' Affairs, DoD, the Small Business Administration, and
the Defense Logistics Agency to identify ways to expand
contracting opportunities to service-disabled veteran-owned
small businesses. This partnership has opened lines of
communication between the agencies, and enabled the involved
partners to embark on joint conferences and joint initiatives
to the benefit of all involved.
I would like to hold up for distinction the Department of
Veterans' Affairs, and Scott Denniston, who will testify next.
GSA is hosting conferences to put service-disabled veterans in
touch with federal agencies and prime vendors. Conferences have
been held in Washington, D.C. and New York already. Today there
is one being held in Denver, Colorado, and we have one being
planned for the Pacific Rim Region, Region 11 in California,
and we have one scheduled in my region for October 20.
G.S.A. has utilized the power of the world-wide web to
improve offerings to service-disabled veterans through cross-
agency coordination and links. In addition, under Operation
Fast Break, GSA created a website solely dedicated to service-
disabled veterans.
During our internal review, GSA uncovered several dead
links from other agencies to GSA. In addition, we found
erroneous and outdated information contained on our own sites,
as well as others. All of them have been fixed.
Additionally, veterans were frustrated that they were
having difficulty talking with live bodies who could provide
meaningful information. Not only have we listed points of
contact on our website, we created a 1-800 number for veterans.
When a service-disabled veteran contacts the hotline, he or she
is directed to his or her local GSA Office of Small Business
Utilization for more information on how to become a GSA
contract holder.
G.S.A. is working with the Association of Procurement
Technical Assistance Centers, and has established a memorandum
of understanding to create an avenue for service-disabled
veterans to receive intensive assistance that we cannot always
provide.
G.S.A. has held internal conferences with its Office of
Small Business Utilization to coordinate efforts, create a
common customer experience, and enhance our offerings to not
only our client agencies, but to veterans.
G.S.A. maintains a permanent liaison with the Task Force
for Veteran Entrepreneurship.
While still too early to judge the impact of our
initiative, we can identify some progress. For instance, at the
end of 2003, GSA had 167 schedule-holders designated as
service-disabled veterans. In March of this year, after GSA
conducted an in-house review and contacted the businesses on
schedule to inform them of the passage of the law, that number
doubled to 332 businesses. As of June 30, we reached 351
businesses listed on schedule.
Once on schedule, GSA maintains and regularly updates the
list of service-disabled veteran-owned small businesses. This
list of businesses can be obtained from GSA service-disabled
veteran-owned small business website.
In addition to asking for more service-disabled veterans on
schedules, federal agencies have asked for a more user-friendly
method of identifying service-disabled veterans. We are working
to provide that, as well as to expand the pool.
And with that, Mr. Chairman, my time is about up, and I
would like to end within the five minutes. We thank you for the
honor and privilege of testifying before this august body.
Chairman Akin. Thank you very much, Mr. Scott.
Our next panel member is Mr. Scott Denniston, Director,
Office of Small Business and Center for Veterans' Enterprise,
US Department of Veterans' Affairs.
Welcome.
STATEMENT OF SCOTT F. DENNISTON, OFFICE OF SMALL BUSINESS &
CENTER FOR VETERANS ENTERPRISE
Mr. Denniston. Thank you. Mr. Chairman and distinguished
Members of the Committee, thank you for the opportunity to
testify on behalf of Secretary Anthony Principi on what VA has
done to implement the programs envisioned by public law 106-50
and 108-183.
In 2001, the Department created the Center for Veterans'
Enterprise. The Center's principal mission is to promote
business ownership and expansion for veterans and service-
connected disabled veterans.
The Center, which started with four employees, now has 11
employees in three functional areas: communications, business
development, and business expansion.
The mission of the Communications Unit is to ensure
awareness of the Federal Veterans' Entrepreneurship Program and
the assistance offered by our resource partners: the
Association of Small Business Development Centers, the
Association of Procurement and Technical Assistance Centers,
the Veterans' Corporation, the Veterans' Business Outreach
Centers, the Small Business Administration Development
Officers, and the Service Corps of Retired Executives.
A principal tool of the Communications Unit is the Center's
web portal, vetbiz.gov. The web portal was recognized in the
2004 Edition of the 100 Best Resources for Small Business.
The mission of CVE's Business Development Unit is to
efficiently connect veterans with community-based support, and
to assess the responsiveness and effectiveness of local
services. This unit was established in July of 2003.
A newly-developed tool of the Business Development Unit is
the VetBiz Assistance Program, which will allow providers of
business assistance services to post their program information
for veterans to easily locate. This new program will be
unveiled on August 17, 2004, on the fifth anniversary of public
law 106-50.
The mission of CVE's Business Expansion Unit is to directly
assist veterans who are seeking federal marketplace
opportunities, and to minimize access barriers, and to maximize
where possible. The principal tool of this unit is the VetBiz
Vendor Information pages.
In April, the Administrator of the US Small Business
Administration and the Acting Administrator of the Office of
Federal Procurement Policy jointly issued a memorandum to all
federal agencies encouraging the use of the VetBiz VIP
database.
The database accepts information from external sources
where veteran-owned businesses may be located, including
Department of Defense's central contact registry. For a
business to be posted on this Internet offering, the company
must answer questions regarding small business size status, and
affirm that the company is truly 51-percent owned and
controlled by veterans or service-disabled veteran-owned
businesses.
In the past 12 months, more than 59,000 calls and faxes
from veterans have been handled by the Center. The web portal
established to provide 24/7 access to veterans has received
more than 700,000 hits in the first six months of this year.
VA's CVE has joined forces with federal agencies and prime
contractors to create a corps of government and corporate
advocates for veterans' enterprise, volunteers who stand ready
and able to answer questions from entrepreneurial veterans on
how to access requirements of their organizations.
I am proud to report that the Center and the Department
have been actively sought out by federal agencies and
corporations to partner in their outreach efforts. VA has co-
sponsored outreach programs with the Air Force, Defense
Logistics Agency, Department of Health and Human Services,
Department of Housing and Urban Development, Department of
Interior, Department of Transportation, General Services
Administration, Small Business Administration, General Dynamics
and SAIC, to name a few.
Additionally, we have ongoing relationships with the DoD
Regional Small Business Councils, the DoD Procurement Technical
Assistance Centers, and the Small Business Development Centers.
The CVE has also been invited to address employees of many
other federal agencies as part of their acquisition education
program.
Last spring, Secretary Principi issued a comprehensive
report on recommendations to improve the performance of
veteran-owned small businesses. This report contains many
important changes. Perhaps the most startling and truly
sweeping is the requirement now to include performance with
veterans and service-disabled veterans in executives'
performance plans within the Department of Veterans' Affairs.
This report, coupled with the new set-aside authority which
Congress has passed, should result in significantly higher
improved achievements for both veterans and service-disabled
veterans. This report is posted on the VetBiz web portal for
anyone who is interested in using it.
Shortly before President Bush signed the Veterans' Benefit
Act of 2003 on December 16, we began receiving enthusiastic
calls from service-disabled veterans who had been closely
monitoring the legislation. The callers wanted to know how long
before the legislation would be implemented within VA and other
federal departments and agencies. Obviously, they urged
immediate implementation.
Secretary Principi, in consultation with VA's General
Counsel, determined that implementing regulations were not
necessary to implement the provisions of the law. On February
24, the VA's Office of Acquisition and Material Management
issued an information letter which implemented the set-aside
provisions of the law for VA immediately.
Thanks to the tremendous efforts and collaboration of the
Small Business Administration and the Federal Acquisition
Council, both SBA regulations and the Federal Acquisition
regulations were revised, effective May 5, to implement the
public law. As a result, we rescinded our informational letter.
What is interesting to note is that, since the time that
the implementing of regulations went into effect, there have
been 86 opportunities advertised in FedBizOps for service-
disabled veteran set-asides. And we are pleased that more than
half of those, or 48, came from the Department of Veterans'
Affairs.
We have been very active in developing and supporting
veteran-owned businesses. We think that we have put the tools
in place that will, in the near future, show the results that
Congress expects through the set-aside authority.
Thank you for the opportunity to testify, and I would be
happy to answer any questions.
[Mr. Denniston's statement may be found in the appendix.]
Chairman Akin. Thank you, Mr. Denniston.
Our next member is Ms. Nina Rose Hatfield, Deputy Assistant
Secretary for Business Management and Wildland Fire, US
Department of the Interior.
Thank you.
STATEMENT OF NINA ROSE HATFIELD, BUSINESS MANAGEMENT AND
WILDLAND FIRE, US DEPARTMENT OF THE INTERIOR
Ms. Hatfield. Thank you, Mr. Chairman.
Mr. Chairman and Members of both Committees, I appreciate
the opportunity to testify today on behalf of the Department of
the Interior in support of the strategies that will increase
small business procurement opportunities with service-disabled
veterans on businesses.
Fifty percent of the $4 billion spent by our bureaus and
offices in fiscal year 2003 were awarded to small businesses.
We have consistently been among the leaders of the government
in contracting with small and minority businesses. Nonetheless,
we recognize the need for continued progress with service-
disabled veteran-owned businesses.
Our small business theme is know your neighbor, because we
have offices located across the nation, with responsibilities
where our veterans reside and are business owners. We
understand that we need to do a good job of providing
information for those veterans about how they can contract with
Interior. And we believe that public law 108-183 will open more
doors for those veterans.
Within Interior, many positive steps have occurred in the
past two years, but more remains to be accomplished. Prior to
the recent passage of the Veterans' Benefit Act, Interior
increased SDV procurements from fiscal year 2002 to fiscal year
2003 by about 65 percent. We rank in the upper third of all
federal agencies in SDV contracting accomplishments for fiscal
year 2003, and we are confident that we can meet our share of
the 3-percent government-wide goal for fiscal year 2005, with
the additional benefits of the set-asides and sole source
authorities that are provided in public law 108-183.
The Interior Department has adopted a model, which has been
very successful for us in other areas, to reach this 3-percent
goal based on our partnerships, our advocacies, and targeted
information for service-disabled veterans. At every forum or
Chamber of Commerce opportunity, our small business leaders
continue to address our commitment to increase SDV
opportunities.
With over 14 national Small Business Associations as our
business partners, we are constantly looking for new ways that
we can work to involve SDV business owners as mentors and team
players.
We are also looking for innovative ways to reach our SDV
business owners through partnering with minority-serving
institutions business schools across the nations and our
territories.
Today, in Denver, Colorado, we are participating with the
GSA and the Small Business Administration in the Regional
Procurement Fair for service-disabled veterans. We also have
participated in other key outreach programs in Albuquerque and
Washington as a part of the larger federal commitment to open
opportunities.
Internally, we have developed and disseminated DOI guidance
within two weeks of the interim rule, for all of the
Department. We also have a detailed staff person as a primary
point of contact. We are working now with bureaus to identify
contracts. And we, too, have modified our website to provide
better and more information about getting on the Central
Contract Register, and how you do business with the Department.
Building on these efforts, we are very confident that
Interior can indeed achieve its 3-percent target of business
with SDV small businesses.
And with that, that concludes my testimony. And I will be
glad to try to answer questions. Thank you.
[Ms. Hatfield's statement may be found in the appendix.]
Chairman Akin. Thank you very much, Ms. Hatfield.
At this time we will entertain questions from the panel.
Mr. Udall, do you have a question?
Mr. Udall. Sure, Mr. Chairman, thank you. I would like to
ask Allegra McCullough about an issue here.
The SBA moved very quickly on the regulations to implement
public law 108-138. Could you talk about some of the reasons
why you moved so fast on this?
Ms. McCullough. Absolutely. Being able to give back to
those who have sacrificed so much for this country, which is
certainly a priority with this Administration. And so we tried
to, as quickly as we could, pull together our top legal and
policy people to make this a number-one priority.
Mr. Udall. Now, in the process of moving forward, you
waived the notice and comment requirements for the interim
rule. Was there a reason for doing that? I mean, do you think
it might have been a more effective rule if you had gone
through the notice and comment requirement?
Ms. McCullough. We did go through a comment requirement.
But we wanted to also make certain that very little time passed
before SDVs were able to take advantage of the benefits of the
rule.
Mr. Udall. Do we have any idea how many businesses fit the
category that we are talking about here?
Ms. McCullough. No, we do not. And to be perfectly honest,
we must work with all of our agencies, making certain that we
are using every possible instrument and outreach effort to
identify our service-disabled veterans.
Mr. Udall. Is there anybody else on the panel that has an
idea of how many service-disabled veteran-owned businesses
there are? I mean, wouldn't it be helpful to have that kind of
information to target what we are trying to do here? Any
comments?
Mr. Denniston. Mr. Udall, the best numbers that we have on
the number of service-disabled veteran-owned businesses come
from some statistical samples that have been done by the
Department of Commerce, Bureau of Census. And they range
anywhere from about 350,000 to 500,000. That is about the best
number that we have been able to come up with.
Mr. Udall. Three hundred and fifty to 500 thousand. Okay. I
think that is good for me here, Mr. Chairman. Thank you, and I
yield back.
Chairman Akin. Thank you, Mr. Udall.
Do you have a question? Welcome to the panel.
Ms. Herseth. Thank you very much, Mr. Chairman, and thank
you for your testimony here today.
Just maybe a little bit of a follow-up on Congressman
Udall's question there. It seems that maybe there has been some
trouble in identifying and reaching these businesses that meet
the eligibility requirements for those veterans that have
service-connected disabilities.
So it leads me to question, under the new tool that we have
here, the authority to sole-source or restrict certain
contracts, your ability to use those new tools may be somewhat
limited until we make more effort or make sure you have the
resources, not just financial resources, but information
network resources, to best identify the businesses that
qualify. Right? I get the sense that there might be a consensus
just in some nodding of the heads here.
Ms. McCullough. If I may speak, yes and no. Yes, there has
been difficulty identifying. And I think I speak for everyone
that we are determined to make an all-out effort to use every
tool necessary to identify and to outreach to every segment of
America to make certain that we are articulating this rule,
that we are letting service-disabled veterans know about the
goals that the federal agencies would like to achieve,
educating them on how to contract with the federal government.
Ms. Herseth. I just want maybe to point out, as you go
forward, that while we want to move forward to the 3-percent
goal as best possible, and now have some authority that has
been granted to help us achieve that goal, I do not want any
businesses for veterans who have the service-connected
disabilities to be at a disadvantage when someone is making a
determination that they can sole-source if there is no
reasonable expectation that bids are going to be offered. But
yet if there are businesses out there that would be in a
position to offer, but they are just not as familiar with this
program because they have not been identified, we have not
effectively reached out to them.
I am just pointing out maybe this inherent tension a little
bit, and to be cognizant of that moving forward, that we do not
start putting certain businesses at a disadvantage because we
have not done enough at the outset to identify them.
Mr. Denniston. I think there are two issues here. Number
one, going back to Congressman Udall's question about how many
service-disabled veterans are there in the United States. And
if we look at the number that are participating in federal
contracting, it is a very small percentage. So I think that is
issue number one, how do we get more businesses involved in the
federal procurement process.
I think Mr. Ramos hit the other nail on the head. The fact
that those we have identified have been working in the small
contract area, and what this authority will allow us to do will
be to grow those businesses that we have identified now as part
of the process.
Ms. Herseth. Thank you. And the last question I will pose
is, from your testimony I do not get the sense from any of you
that you feel the 3-percent goal is unattainable.
Ms. Hatfield. I think we agree that we can reach the goal.
I would agree, though, with the rest of the panel members and
the issues that you have raised. It is very important in terms
of doing the outreach to the veterans so they are aware of what
those opportunities are, and help us in terms of identifying
who may be available to do business.
Mr. Brown. Thank you very much. And I know that we must
have a benchmark to work towards, and maybe we might not reach
that 3 percent. But if we keep working together, maybe we will
find some folks that they will be interested and we can help
along the way.
We are very privileged today to have joined with us the
Ranking Member of the Small Business Committee, Ms. Velazquez.
Any questions?
Ms. Velazquez. I do.
Mr. Brown. I have some questions myself, but I am going to
submit those in writing to you later, just for the sake of
time.
Ms. Velazquez. Thank you, Mr. Chairman. And I am really
happy that you are conducting this joint hearing.
I think this provides for the Committee and Subcommittee to
fulfill its duty of oversight. And conducting these types of
hearings will help us fix some of the problems that we are
having with the legislation that we passed.
My personal opinion is that we made some mistakes, and this
is an opportunity now to fix out the mistakes that were made.
Ms. Allegra McCullough, I am curious about your
interpretation of the statute in the promulgation of the
implementing regulations, allowing agency contracting officers
to choose whether to use the 8(a) program or the Hub Zone
program or the new SDV program. In light of the mandatory
language contained in both the 8(a) program and the Hub Zone,
why has the SBA chosen to allow the permissive language, the
so-called ``may'' language, to take a priority?
Ms. McCullough. That is the language that was actually
passed in the statute. We did not really have the discretion to
change that language.
However, we would be happy to revisit that language.
Ms. Velazquez. Can you speak up, please?
Ms. McCullough. You were talking about the use of the word
``may'' rather than ``shall,'' in terms of sole-sourcing?
Ms. Velazquez. No. I am talking about you, the agency
allowing contracting officers giving parity, when we have the
statutory language that says that the 8(a) program or the Hub
Zone program, that they have priority over the SDV program.
Ms. McCullough. Well, the language, I mean, there is parity
between the 8(a) and the other programs. But the language in
the statute indicates ``shall,'' which clearly indicates a
mandate.
In the statutes for the SDV, it indicates ``may,'' which
indicates that it is up to the discretion of that federal
contracting officer. This is certainly language that, if
Congress wishes to revisit, we would be more than happy to
revisit that issue with you.
Ms. Velazquez. The service-disabled veteran on business
procurement programs has discretionary language. A contracting
officer may use the program.
Under the SBA implementing regulation for PL 108-183, I see
that it allows the SBA to release a requirement under the 8(a)
program.
Would you please describe in what circumstances the SBA
will agree to such a release?
Ms. McCullough. Releasing the contracting officer from
sole-sourcing? Is that what you are asking? I am not quite sure
that I understand your question.
Ms. Velazquez. It would allow for releasing the requirement
of the 8(a) program, specifically the 8(a) program.
Ms. McCullough. If I am understanding you correctly, what
it articulates is that there would have to be, if they cannot
find more than one 8(a) participant, then they could sole-
source it. But that is something that they must consider.
I hope I am answering your question. If not, I would be
more than happy to answer it for you at a later time, when I am
sure about--
Ms. Velazquez. I will allow you to answer me at another
time.
Ms. McCullough. Okay, I will be happy to.
Ms. Velazquez. You will be able to send a written
submission to the Committee?
Ms. McCullough. I would love to. Thank you.
Ms. Velazquez. Ms. McCullough, on May 24 the SBA published
a final rule to the Hub Zone program. In this regulation, the
SBA proposal to provide parity for the 8(a) and the Hub Zone
program was not finalized. Am I correct?
Ms. McCullough. On parity with the 8(a) program, that it
was not finalized?
Ms. Velazquez. Yes. On May 24?
Ms. McCullough. Yes.
Ms. Velazquez. Okay. In fact, the SBA said it will further
examine issues raised, and will not amend the rule at that
time. Is that correct?
Ms. McCullough. That is correct.
Ms. Velazquez. But on May 5, the SBA seems to imply, with
the regulations for the service-disabled veteran-owned business
procurement program, that, except for existing 8(a) contracts,
contracting officers can pick and choose whether they will use
either the 8(a) program, the Hub Zone program, or the newest
program.
My question to you is, what is the priority among these
programs, in light of the fact that 13 CFR 126.607 has not been
modified?
Ms. McCullough. We are making certain that we articulate to
our federal partners that it is extremely important that they
consider meeting the goals of all of these programs, as best as
they can.
Ms. Velazquez. The problem that I have is that you are not
allowed to pick and choose, in terms of the regulation. You
cannot pick over one or the other, unless you modify the
regulation. Did you modify the regulation?
You answered to me that on May 24, when I asked you, that
the regulation was not finalized. You said that I am correct.
Ms. McCullough. That is correct.
Ms. Velazquez. Yes. But then on May 5, the SBA seems to
imply, with the regulation that you issued, that for the
service-disabled veteran-owned business procurement program,
that except for existing 8(a) contracts, contracting officers
can pick and choose whether they will use either the 8(a)
program, the Hub Zone, or the newest program. But you did not
finalize the rule, the regulation.
Ms. McCullough. We really wanted to make certain that very
little time passed before SDVs were able to take advantage of
the rule.
Ms. Velazquez. Based on the May 5, can you tell me which of
the programs has the priority? When a contracting officer is
going to decide how they are going to do it.
Ms. McCullough. SBA does not have the discretion to
actually make that rule. And it is something that we would
certainly like to revisit with Congress on. But we do not have
that discretion.
Ms. Velazquez. Okay, you do not have it. So tell me, who
created this priority? The current priority listing for 8(a)
and Hub Zone companies, located at 13 CFR 126.607(e), 8(a)
companies located in a Hub Zone; two, 8(a) company; third, Hub
Zone competitive procedures; and fourth, Hub Zone sole-source
procedures.
Ms. McCullough. You are saying who established that?
Ms. Velazquez. Yes. Do you have the legal counsel from SBA?
Ms. McCullough. We will have to get back to you on that.
Ms. Velazquez. Who issued this regulation?
Ms. McCullough. Excuse me?
Ms. Velazquez. Who issued? Who issued this regulation that
established this order?
Ms. McCullough. The original issuer?
Ms. Velazquez. The one that I just read. Was it SBA?
Ms. McCullough. SBA issued that rule.
Ms. Velazquez. Ms. McCullough, in the fourth pages of your
testimony, you say not one word regarding how the SBA is going
to police this new procurement program. These are the
parameters for a joint venture program in the new rule that is
different than for any other SBA program. The ownership
requirements for this program are different than for any other
SBA program. The percentage of work requirements are different
than for any other SBA program.
And yet, you have not said one word in your testimony about
how the SBA is going to ensure this program is not abused. Can
you please comment on this?
Ms. McCullough. I will be happy to. With all due respect,
SBA has and never has had the power to police any procurement
program offered throughout the federal government.
We do, however, intend to, through our relationships with
our federal partners and combined outreach and marketing
efforts.
Ms. Velazquez. So how are you going to make sure that the
program is not abused?
Ms. McCullough. We will certainly have to make certain that
this is articulated to our federal partners, that, by all means
necessary, the integrity of this program must be obtained.
But again, we do not have the authority to police any of
our programs throughout the federal agencies.
Ms. Velazquez. With all due respect, you are wrong. You are
totally wrong. And legal counsel is there behind you, and they
can tell you that you are wrong.
Thank you, Mr. Chairman.
Chairman Akin. Okay. Thank you, Ms. Velazquez.
Members of the panel, thank you very much for coming and
enlighten us on these regulations. And we will now proceed to
the second panel.
[Recess.]
Chairman Akin. Let me extend a warm welcome to our second
panel. And we are pleased to have you come and testify on such
an important issue.
Our first two members, participating members, one will
testify and the other will not. Is that correct, Mr. Lopez? As
Co-Chairman of the Task Force on Veterans' Entrepreneurship,
and Mr. Rick Weidman is the Chairman of the Task Force on
Veterans' Entrepreneurship. So which will testify?
Mr. Weidman. Mr. Lopez. We decided to give the kid his shot
at it, Mr. Chairman.
Chairman Akin. Okay. Welcome, Mr. Lopez.
STATEMENT OF JOHN K. LOPEZ, TASK FORCE FOR VETERANS
ENTREPRENEURSHIP
Mr. Lopez. Good afternoon, gentlepersons. I believe there
is a lady remaining.
Thank you for your kind invitation to testify before the
distinguished Committees regarding government support of
service-disabled veteran-owned businesses.
My name is John Lopez. I am Chairman of the Association for
Service-Disabled Veterans, and I am Co-Chairman of the Task
Force for Veterans' Entrepreneurship. I am here with my
colleague, Rick Weidman, who is the Chairman of the Task Force,
as well as the Director of Government Relations for the Vietnam
Veterans of America.
Without objection, I would ask to submit our testimony for
the record, and summarize our observations for the Members, in
respect for your time and indulgence. No objections.
On behalf of the nation's over 60-million-person veteran
community, and especially the disabled-in-military-service and
prisoner-of-war veteran businesses, I would like to express the
appreciation of the veterans' community for the exemplary
accomplishments of your committees, on behalf of America's
service-disabled and prisoner-of-war veterans.
The Members have demonstrated the highest level of
commitment, concern, and service to our nation's veterans. It
is a privilege to address the Members of these two Committees.
In the four years since the enactment of public law 106-50,
and the year since the enactment of public law 108-183, the
impact of the legislation has been negligible. Since March,
2003 few agency acquisition and contracting officials have
demonstrated an increased interest in the legislative direction
to assist service-disabled veterans to maintain their
rehabilitation through self-employment, as federal prime and
subcontractors.
The United States Small Business Administration has
minimally increased the integration of service-disabled
veterans into some of the special assistance effort of that
agency. Outreach materials, standard publications, and routine
announcements now mention support and assistance for service-
disabled-veteran enterprises. The level of effort and outreach
in early 2003 had implied to the procurement community that
there is no commitment by the federal government to assist
service-disabled veterans.
To urge government outreach, and as a stakeholder in the
outcome, the Association for Service-Disabled Veterans, a
member of the Task Force for Veterans' Entrepreneurship has
financed and expanded a previous certified disabled veteran
interactive database, containing more than 20,000 service-
disabled-veteran enterprises that is a follow-on of a
certification process started in 1989. The intent was if they
were unable to find service-disabled veterans, there was a
database that had been developed since 1982, starting in
California, which has over 20,000 vetted by the legislative
directive of the California Legislature service-disabled
veterans.
The second year, the yearly release of data pertinent to
agency small business procurements, the summary, what is called
the Summary of Actions and Dollars Reported on SF279 and SF281
by Agency, continues to report minimal progress to the 3-
percent legislative goal for disabled-veteran participation.
A telephone sample by ASDV of that method of calculation of
that report, of the method of calculation of the data in those
reports, reveals no increased accuracy of dollars, action, or
appropriate categorization in those reports. Inevitably, the
erroneous information misleads the US Congress, and subverts
the intent of public law 106-50 and public law 108-183.
Sadly, a perceived lack of commitment has also been
repeatedly voiced to service-disabled-veteran enterprises by
off-the-record comments of procurement officials. Such as,
service-disabled veteran assistance is just a goal. If the
Congress had been serious about helping service-disabled
veterans, they would have legislated mandatory requirements,
not unaccountable goals.
While the Task Force firmly believes that the Congress is
serious about service-disabled veterans, the perception
advanced by procurement officials contrasts sharply with the
legislative intent of public law 106-50 and public law 108-183.
The commitment of the private sector prime contractor is
even more abysmal. Service-disabled-veteran enterprise requests
to participate as subcontractors has been met with negative
responses and disinterest.
As a routine response to service-disabled-veteran
enterprise requests for procurement participation, prime
contractors initially profess ignorance, and protest that
government procurement officials never mentioned service-
disabled-veteran enterprises. This is followed by subsequent
protestation that prime contractors are exempted from
participation by variously-invoked parsing of the regulatory
language, special procurement official dispensation, or that
they are not performing contracts that are subject to
regulation.
There are no clear villains in the failure to assist the
service-disabled veterans of our nation. Rather, there is a
need for more specific direction from the United States
Congress, even at the risk of cries of Congressional micro-
management by the federal bureaucracy.
It is imperative that your Committee takes initiative in
establishing the legislative requirements that will permit our
nation's disabled-in-service and prisoner-of-war veterans to
participate more fully in the economic system they sacrificed
to preserve.
It is respectfully requested that public law 106-50 and
public law 108-183 be amended and expanded to provide
authorized, directed, specific, and mandatory participation by
service-disabled veterans and prisoner-of-war veterans, in all
federal procurement, whether through inclusion in the various
set-aside provisions of the Small Business Act, as amended, or
in the newly-included sections of that Act.
Only the active application of this Committee's authority
will ensure that entrepreneurship is an available
rehabilitation alternative to those that sacrificed for the
security and prosperity of our nation.
Thank you. I would be pleased to respond to any questions,
as would my colleague, Mr. Weidman.
[Mr. Lopez's statement may be found in the appendix.]
Mr. Brown. [presiding] Thank you very much, Mr. Lopez. And
we will have questions at the very end.
Next is Professor Steven L. Schooner, Co-Director of the
Government Procurement Law Program, George Washington
University Law School. Welcome.
STATEMENT OF PROFESSOR STEVEN L. SCHOONER, GOVERNMENT
PROCUREMENT LAW PROGRAM, GEORGE WASHINGTON UNIVERSITY LAW
SCHOOL
Mr. Schooner. Chairman Brown, Congressman Michaud, Chairman
Akin, Congressman Udall, and members of the Subcommittee, thank
you. I appreciate this opportunity.
Let me begin by joining the chorus of those who recognize
that service-disabled veterans deserve our respect and
attention for their lasting sacrifices. Having spent my entire
life affiliated with the United States Army, these issues
strike particularly close to home.
While this program was intended to benefit a deserving
class of businesspeople, however, I fear that the rush to
implement the program risks inefficiency in the procurement
system, and at worst, potential abuse.
My primary concerns are, first, empirically it is unclear
that the program is the most efficient tool to achieve the
desired end.
Second, rather than creating new business opportunities,
the program merely escalates infighting within the small
business community.
Third, certain aspects of the program raise troubling
issues of accountability and oversight.
And fourth, the program further burdens an already-thin
federal acquisition work force.
For example, the initial regulatory flexibility analysis
and SBA's analysis makes clear we do not know how many and what
type of service-disabled veteran-owned small businesses exist.
A survey or study, possibly a joint effort of the SBA, the VA,
and the Commerce Department, might be immensely valuable.
If, for example, a significant percentage of these firms
fall into the comp demo categories, the set-aside provisions
would be deemed ineffective. As this Committee well
understands, the small business competitiveness demonstration
program bars agencies from setting aside contracts for small
businesses in certain industries where small businesses
historically have proven themselves competitive.
A better understanding of the SDVOSB market and its
capabilities, the industries in which the capacity exists, the
extent to which the capacity is utilized by the federal
government will permit a much more targeted and effective
outreach, and hopefully business development, program.
Further, the program creates no new opportunities for small
business; it merely redistributes opportunities. The program
further subdivides the existing small business piece of the
government's procurement pie by pitting small businesses
against each other.
Similarly, government-wide goals may not be the most
effective tools if your purpose is to broadly distribute
contract opportunities to emerging firms.
Experience suggests that once an aggressive goal is in
place, it favors the most successful or strongest existing
firms. Because the goal focuses upon the percentage of dollars
in contract awards, contracting officers have an incentive to
award the largest possible contract to the smallest number of
eligible firms. So the chief beneficiary tends to be robust
small- to mid-sized firms, many of which strategically avoid
formal growth by subcontracting or outsourcing tasks.
In addition, the system will be very difficult to police.
First, self-certification opens the door for abuse. That is why
both the SDV and the Hub Zone programs require certification,
and I think that is appropriate here.
In addition, sole-source contracting contradicts one of the
fundamental premises upon which our system is based:
competition. And we are all familiar with the Competition in
Contracting Act, and why it is in place.
In addition, sole-source contracting presents significant
risks to emerging veteran-owned firms. Small firms that may not
fully understand the contractual obligations are all too eager
to assume their appropriate risks. When those firms fail, it
disrupts the government operations. But in addition, because
the government increasingly relies on past performance
evaluations, this can prove potentially fatal, a professional
death knell, to an emerging small business in the government
marketplace.
Finally, further proliferation of set-asides in small
business programs adds complexity and inefficiency in the
procurement system, and that is problematic because throughout
the 1990s, Congress mandated acquisition work force reductions.
There is an insufficient number of qualified federal
acquisition professionals left to conduct appropriate market
research, plan acquisitions, maximize competition, comply with
Congressionally-imposed social policies, administer contracts
to assure quality control and compliance, resolve protests and
disputes, and close out contracts.
I remain disappointed by Congressional unwillingness to
intervene on behalf of the acquisition work force, particularly
in light of the recent experience in Iraq, where, for example,
our Program Management Office outsourced its management of its
contractors. The acquisition work force crisis is exacerbated
by the Administration's emphasis on competitive sourcing, and
it will get worse before it gets better. So asking this work
force, without additional resources, to cater to special
interest groups is unrealistic, and arguably fiscally
irresponsible.
The bottom line is in attempting to balance these competing
concerns, providing good opportunity to veterans and small
businesses, while obtaining supplies in an economically-
efficient manner, patience seems to be an appropriate response.
That concludes my testimony. Thank you for the opportunity,
and I would be pleased to answer any questions.
Mr. Brown. Thank you very much, Mr. Schooner.
Gentlemen, I am going to skip over you and go to Mr.
Hudson, if that is in order. And Mr. James Hudson is the
Marketing Director of Austad Enterprise, Inc.
And thank you, Mr. Hudson.
STATEMENT OF JAMES C. HUDSON, AUSTAD ENTERPRISES, INC.
Mr. Hudson. Good afternoon, Chairman Brown, Chairman Akin,
other distinguished members of the subcommittees, dedicated
members of the respective staff, my colleagues both in and out
of the government today.
I am a service-disabled Vietnam veteran. My wife Fran, also
a service-disabled veteran, and I work together in a
corporation which publishes the Veterans' Business Newswire, an
e-newsletter disseminated to more than 25,000 service-disabled
and other veterans in small business.
We also publish a directory for small business owners,
called ``Purchasing Contacts in Major US Corporations.'' And we
own a video and audio conferencing company, whose customers
include federal agencies.
I have worked in the field of veterans' affairs and
disability rights since my discharge from the Army in 1970. My
testimony today is based largely on my own experience, but also
on the experience of our readers, and their emails to us and
their phone calls. Also, we have published a brochure
immediately after the passage of public law 108-183. Joseph
Forney, myself, and my wife made that a downloadable Microsoft
Publisher and .pdf file. And we have had more than 500
downloads since February, when that was made available to
service-disabled veterans in small business. And so we have
gotten feedback from them, as well.
And I can tell you that we have also had efforts over the
last three years to market to federal agencies and prime
contractors, and that is the basis of my testimony today.
We have attended conferences in Colorado, New Mexico,
Washington, D.C., other states, at the urging of small business
officials. We have traveled to other states to meet with
federal buyers. As a result of those efforts, we have had sales
of $10,000 in the last, with federal agencies.
We have corresponded and spoken with literally 1500
veterans, and most of them non-service-connected, but I would
say approximately three or four hundred service-disabled
veterans in the last several years. We personally know just a
few who describe themselves as being successful in the federal
arena.
I would urge the Committees to study the issue of how many
new service-disabled veterans are contracting with federal
agencies. The Federal Procurement Data Center can pull that
information from their data.
For example, the Veterans' Administration in fiscal year
2002 was contracting with, on average, three to four new
service-disabled veterans per month. Those are companies that
did not have previous contracts with that agency, or any other
federal agency, prior to those months. That gives you a better
picture of how public law 106-50 has been implemented.
This fiscal year, fiscal year 2003, service-disabled
veterans should have earned a gross revenue of $7.5 billion.
Instead, they brought in $549 million, two-tenths of 1 percent
of the procurement budget, instead of the 3-percent goal that
was set. And that total is actually $5 million less than the
$554 million that was targeted, or that was actually earned two
years earlier, in fiscal year 2001.
This is especially hurtful to our nation's service-disabled
veterans in small business, to know that more than half of all
federal agencies, more than half of the 60 federal agencies
spent zero percent of their budgets with service-disabled
veterans. That includes the Office of the White House, the
Executive Office of the President, the Small Business
Administration, the Department of Labor; agencies that you
would expect to lead, not bring up the rear in procurement
spending. SBA, for three years straight, has spent zero dollars
with service-disabled veterans.
It was, as you recall, Angela Styles, the top federal
procurement official, that came to this Committee last year and
said that the federal government was doing an abysmal job in
procurement spending for service-disabled and other veterans.
And that helped to spur the Committee to take the action with
respect to public law 108-183. And we appreciate that effort
very much. This gives new hope to service-disabled veterans.
But I have to say that we would be mistaken if we thought
that thousands of service-disabled veterans have not dropped
out of the system. In talking to them, we have learned that
many veterans just are not going to come back one more time.
Over the last 20, 30 years since the Vietnam War ended, the
treatment that they received by the SBA and other resource
partners of the government has been poor, and they are just not
going to come back and try one more time. And these zeroes that
have been piling up in the federal agencies over the last five
years, you cannot knock on those doors over and over again and
not, in some cases, drop out. So we have lost many service-
disabled veterans from the system. That is just a reality.
We were encouraged with the brochure download, so we know
some are still in the fight. And the outreach efforts of the
government have brought in new service-disabled veterans. So we
have to respond to their needs, and I know the Committees are
willing to do that and are making their effort.
The focus of your Committee today is to talk about outreach
efforts, and whether they are making a difference since the
passage of this new law. I wish I could say it has been more
positive. Joseph and I have been out knocking on doors, and you
will learn from Joseph his response. But I can tell you that my
own has not been positive.
I will tell you that--is the time almost expired? I am
sorry.
Mr. Brown. You are 1:18 over already, so--and I am just
waiting on Joseph, so go ahead.
Mr. Hudson. I am waiting on him, too. Let me just wrap up
by saying that though the outreach efforts have not been
positive, I believe that one of the actions that the Committees
may take that would be beneficial would be to accept the fact
that we are not going to see much positive action by the
federal agencies until they have a program in place that will
give more of a case-managed approach to service-disabled
veterans. Especially veterans with more severe disabilities.
They need more follow-along, they need more intensive service.
And the idea of handing them a brochure referring them to an
SBA or a small business development center is not going to be
sufficient. They need follow-along perhaps for years.
The 8(a) program for some businesses has been successful,
but they do not need to be referred to the 8(a) program, God
forbid. But they do need that kind of intensive, sustained
effort.
[Mr. Hudson's statement may be found in the appendix.]
Mr. Brown. Thank you, Mr. Hudson. And now we have got the
wrap-up member of the panel, Mr. Joseph Forney, President of
VetSource, Inc. Welcome.
STATEMENT OF JOSEPH K. FORNEY, VETSOURCE, INC.
Mr. Forney. Mr. Chairman, Members of the Committee who have
stayed, I appreciate the opportunity to testify in front of
you. I was hoping that Chairman Akin would stay. I am from his
home state of Missouri. And what we say in Missouri, show me.
Mr. Brown. Well, you know, he cannot be in two places at
one time. And I guess he is on the Armed Services Committee,
and the mark-up over there has taken priority. But all of this
will be recorded, and he will have access to those minutes.
Mr. Forney. I just wanted to hear him say ``show me.''
Because that is what I am telling you is I ain't seen much yet.
And my eyes are wide open, sir. We have been out in the field,
as Jim mentioned, trying to sell our goods and services. And to
hear over and over again that this is just a goal.
I have a signed letter from Department of Agriculture where
they stated, from their Office of Procurement Policy, that it
is discretionary, and not mandatory. And so therefore, they are
not going to participate.
I was a little bit leery sitting behind the young lady from
SBA after the way that Ms. Velazquez took to her. But as Jim
mentioned, their participation is zero.
Department of Defense was up here. The Army is at .02, two
one-hundredths of 1 percent. At this rate--I am sorry, and I do
not want to confuse you with facts and figures and fancy
ciphering--.04. At this rate it would take them 300 years to
get to the 3-percent goal.
Now, I do not know about me, but I do not think Mr. Lopez
is going to make it.
The reasons that they claim, there are not enough of us, we
are not capable, is ludicrous. I sell air conditioning filters
along with the food items that I sell to states, prisons,
school districts back in California. I sell them to utility
companies; namely, Semper Utility, which is San Diego Gas and
Electric and Southern California Gas. I have proven myself in
the public sector.
Just for a little drill, I checked the GSA schedule. Their
best price for the standard air conditioning filter was $1.73.
I would have trouble sleeping at night if I sold them to you
for a dollar. That is just one example of how we can provide
goods and services.
We have all been trained. We have the experience, the time,
the knowledge within the private sector. Yet when I tried to
sell these same air conditioning filters to the VA, I could not
even get a call back.
I have been to two different VISNs, VISN 22, my local one,
VISN 19 up in Denver. And I have been there numerous times. All
I wanted them to do was find out how they buy air conditioning
filters. I could not even get a response. I had to go to the VA
mothership over here and get the Head of Acquisitions, Mr.
Derr, and he is going to check into it. But not everyone is
going to have the capability to come to Washington to go to VA
headquarters to find out how they buy air conditioning filters.
Because what if it is something more complicated, like pencils?
I am glad to see the Ranking Member come back. I love that,
with the SBA, because while you were gone, we pointed out that
their participation was zero. So at this rate, it would take
never?
I will submit my testimony. If I can answer any questions,
I would be glad to.
[Mr. Forney's statement may be found in the appendix.]
Mr. Brown. Thank you very much, Mr. Forney.
This has been a real eye-opener. We pass regulations and
laws; we do not know how they are being perceived or
implemented through the process. This was real eye-opening for
me.
I have some questions; I will submit them for a written
response. But do we have any questions from the panel? Mr.
Udall?
Mr. Udall. Thank you, Mr. Chairman.
Mr. Lopez, in your testimony you talk about the integration
of service-disabled veteran-owned businesses and the SBA's
efforts. And also about the SBA's inclusion of SDVBs in the
agencies' publications and outreach materials. And yet you also
express a concern about ``the lack of effort and outreach in
2003.''
What kind of outreach have you been expecting to see?
Mr. Lopez. I make that distinction because they have a
policy of using all of their old materials first in respect to
government efficiency.
If you read their old materials, including some that were
recently printed, you will find out they do not even mention
service-disabled veterans. It is only their new literature that
is just coming out now, after the effort of these Committees,
that they begin to talk about service-disabled veterans.
What I expect, I expect activity on the part of the staff.
I expect seminars in training their personnel, so the personnel
knows what a veteran is. I expect them to be very cognizant of
the fact that you have a peculiar type of population here. You
do not have the normal population. They have limited energy.
They have a great deal of cerebral capacity. But you have to be
able to get to them, not wait for them to come to Washington,
D.C., or any of the other regional offices.
Mr. Udall. Go ahead, please.
Mr. Weidman. If I may, please, Mr. Udall. There was a
question today about how many veteran entrepreneurs there are.
In the first session of the 105th Congress, the Congress
mandated that there be a study done of how many people are
there. That was 1997.
That report was finished--it was delayed because of OMB
delays, and because of SBA--but it was finally completed and
accepted in 1999, just before Veterans' Day. No, excuse me,
1998.
It has still not been officially delivered to the Congress.
I know that Chairman Smith and Ranking Member Lane Evans
wrote to Mr. Pereto over a year ago, about a year and a half
ago. It still has not been received.
May I suggest, if at all possible, with the Chairman, that
that be included somehow in this record? Or at least some kind
of reference to a website when it is posted.
But I think the key thing is this. What you seem to be
suggesting, sir, is that the SBA is heavily weighted towards
doing this outreach for veterans. No other agency, as long as
SBA has zero, zero contracts with service-disabled veterans, is
likely to pay them a whit of attention.
Similarly, how many service-disabled veteran business
owners do you think are going to trust an agency that, even by
accident, ought to have a few contracts with service-disabled
veterans, but which has none, sir?
Mr. Udall. Thank you. And thank you, Mr. Lopez, for your
expectations. At least for me, I believe we should be pushing
on this front.
Professor Schooner, in your testimony you speak of the need
for a study or survey to gain a better understanding of the
SDVB market and its capabilities. Can you talk a little bit
more about what impact proceeding without knowledge of the
market can have?
Mr. Schooner. Well, if you do not mind, let me--
Mr. Udall. And go ahead, if you want to elaborate a little
bit.
Mr. Schooner. Let me speak to the importance of a study. At
a minimum, whether you begin with the process that was already
done and get that completed and updated, until we know how many
potential businesspeople there are, and much more importantly,
in what industries they pursue government business or want
government business, we are shooting in the dark. It is the
most inefficient way in the world to proceed by shotgunning out
in the world.
Let us find out where the strengths are, and target those
businesses directly. It is exactly what you have heard the
others say. Information here is power. And without information,
what we are doing is we are putting a burden on everyone that
is not going to get you a return on investment.
The best precedential example I can give you on this was
after Aderand, when we went through the promulgation of the
rules for the revised SDV program, the Department of Commerce,
in conjunction with the Justice Department, and later the
Council on Economic Advisors, spent years working with the
SMOBY and the SWOBY data, trying to get this data. It is very,
very difficult to find out which industries are important. And
we may or may not come back to comp demo. But it is
tremendously important to know where you are going, and where
you are going to get return on investment.
Mr. Udall. Thank you. Thank you. And Mr. Forney, given your
recognition as a veterans' advocate, have you been approached
by a federal agency to assist agencies in identifying qualified
veteran-owned companies? And I can submit that one for the
record.
Mr. Brown. Mr. Udall, if you would. I would just like to
make an announcement, as we just got an email that we might
have votes within the next 10 minutes.
And so, just to give the other members of the panel a
chance to--
Mr. Udall. Okay. I will submit that one for the record, and
let the other members of the panel question.
Mr. Brown. Thank you very much.
Ms. Herseth. If Mr. Udall is going to submit that in
written form, I would like that same question, if you would
provide an answer there. Because my concern--not a concern, but
a hope--is that you, as a veterans' advocate, other
organizations that serve as advocates for veterans, are
involved. You are being asked by federal agencies. Because it
is sort of information both ways that we are lacking. It is
information of the qualified businesses having the information
of what the program is, but it is also a lack of information
for the agencies of the implementation of the program.
Mr. Forney. Exactly. And in Los Angeles we have the LA Area
Service-Disabled Veteran Business Network that we started, just
as an ad hoc group. We try to outreach through public service
announcements for veterans who are either in business or
starting a business.
I know Mr. Weidman and myself have gone over to Walter
Reid. And one of the most important questions these young men
and women returning home wounded and forever changed is, will I
still be able to go to school? And what if school is not the
best approach for their rehabilitation? What if it is
entrepreneurship, because they are unemployable? This is
something that we try to outreach as much as possible.
To get to both questions, there is a state program, as Mr.
Lopez mentioned, in California. There is over 1,000 identified
state-certified service-disabled veteran-owned firms. And the
state estimates that there is over 10,000.
But with such hollow promises, why should we bring them
out? A lot of people are reluctant to participate.
Ms. Herseth. The only other thing I want to add, just so
that it is a comment reflect in the record, based on the study,
Mr. Weidman, that you said was authorized, we think was
completed but has not yet been delivered. And then--go ahead.
Mr. Weidman. We have a copy, and I have it on cd/rom,
Madame. And I will have it to your office before tomorrow
morning.
Ms. Herseth. Okay. The only comment I want to add, though,
is that I do think it needs to be updated. Because in South
Dakota we have a significant number of National Guard
reservists that are currently serving, that are going to be
coming back, that are concerned, because they are small
business owners, about the effect that that has had on their
small business during a deployment of 12 to 18 months. And I
think that we should see that, but also recognize the need for
an update of that study.
Mr. Weidman. The Task Force on Veterans' Entrepreneurship
is engaged in preparing now a report to the nation that will be
delivered this coming October.
The principal investigator is the same gentleman, Dr. Paul
R. Comacho from the William Joyner Center for War, the study of
war and its social consequences, at the University of
Massachusetts at Boston. The steering committee is chaired by
Major General Chuck Henry, and co-chaired by Wayne Gatewood,
who is a successful business entrepreneur, and a small
businessperson veterans' advocate of the year last year for the
District of Columbia.
We will be glad to brief you, and we would welcome any
academic input from George Washington Law or anyone else, as we
prepare this report and essentially update that material,
ma'am.
Mr. Brown. That is the vote, but we still have got a few
minutes.
Ms. Velazquez, did you have any questions?
Ms. Velazquez. Thank you, Mr. Chairman. First I would like
for the record to reflect the fact that in the House-passed
version of the bill that established this program, Democrats
from the Small Business Committee insisted on such a study.
But I would like to ask Professor Schooner, you questioned
the credibility of this 3-percent goal. What do you think a
reasonable goal should be?
Mr. Schooner. In any situation like this, the most
reasonable goal is what the empirical evidence suggests is
feasible. But we also have precedent for better ways of
approaching this.
For example, the Hub Zone program was a classic example,
where you ended up with a very similar goal, but at least you
staggered the goal.
All I am saying is, if you are already in a situation where
you know you need the information, do not set the goal until
you have the information. If the information suggests that you
could have a 5- or 10-percent goal, so be it. But do not set
the goal arbitrarily. I think that is a pretty simple point.
Ms. Velazquez. Professor, you appeared to indicate that
there are structural problems with the underlying statute. The
House-passed version of the bill that established this program
initially had a number of provisions pushed by the Small
Business Committee Democrats. These provisions were intended to
process the program, and to ensure the safety and soundness of
the program.
The House-passed version included, first, a certification
program administered by the SBA. The final bill did not include
that. A study to identify how many service-disabled veterans
own businesses; and of those, what is the primary industry of
the businesses. The final underlying statute does not contain
this.
And third, an order of precedence, so that contracting
officers can identify clearly what the priorities of Congress
are. The final statute does not have this.
All three of these provisions were kept out of the final
product. My question to you is, what is your view of the
underlying statute missing these?
Mr. Schooner. Well, I think we are all in agreement that
the study would be a good thing, and we have already spoken
about that.
I cannot argue strongly enough for a certification in a
program like this. We saw in the SDV program, we saw in the Hub
Zone program, how important it is to inject credibility into
the system. And I am assuming that the gentleman sitting at the
table with me fully recognizes the worst thing that can happen
in a program like this is if individuals fraudulently represent
themselves and get these contracts. So they should have no
concern whatsoever with an open and credible certification
system.
As for the order of precedence, I think it is pretty clear,
based on the questions you asked earlier, that we have now
created in the regulations a conflict between the 8(a) program,
the Hub Zone program, and the others. And this type of
confusion serves no one. It will not help veterans, but it
impacts the entire procurement process. And I think an order of
precedence would be a step in the right direction.
Ms. Velazquez. Thank you, Professor. Mr. Lopez, in your
comments on the interim rule implementing PL 108-183, you
suggest that contracting officers should be allowed to use
service-disabled veteran-owned businesses for requirements that
are currently being performed by 8(a) companies. Why do you
believe that contracts that are currently performed should be
taken away from 8(a)?
Mr. Lopez. Do I say that, or is it in our task force
report? I did not make any such comment.
Ms. Velazquez. In the task force, yes.
Mr. Lopez. Ah, okay. Then you have to direct that to the
task force in writing. I did not make that comment.
Ms. Velazquez. But do you agree with that assessment?
Mr. Lopez. I beg your pardon?
Ms. Velazquez. Do you agree with that?
Mr. Lopez. No. I do not even address that. I do not think
that is an issue.
But if I may, with permission, Congresswoman, I would like
to address something that Mr. Schooner has said, and I take a
great deal of objection to.
And that is that academic inertia is not an option. This is
a unique population. The intent of Congress is to assist
service-disabled veterans, not lighten the workload of
government officials, nor create information for government
archives.
We have already cheated the world's greatest population,
the World War II veterans. They are not participants in this
program because they were never given assistance. We will not
go through that again for our Vietnam veterans, our Bosnia
veterans, our Gulf veterans, or our Iraq veterans.
Ms. Velazquez. I do not think that that is what the
professor--
Mr. Lopez. That is the intent and direction of these
recommendations. And that is to further delay. And we will not
have further delay.
Ms. Velazquez. I do not know what you are talking about,
but let me tell you this.
We will do everything possible to help disabled veterans.
Mr. Lopez. Madame--
Ms. Velazquez. Excuse me, sir, I am talking here. We will
do everything that we can.
But the pie is too small. We cannot rob Peter to pay Paul.
And what we need to do is to expand the program and the
resources so that we could allow disabled veterans to
participate, but it cannot be at the expense of the 8(a)
program.
Mr. Lopez. May I respond to that?
Ms. Velazquez. No, you do not have to respond. I am not
asking you a question, I am making a statement.
Thank you very much.
Mr. Lopez. May I make a statement? Mr. Chairman, may I make
a statement?
Mr. Brown. You have got 30 seconds.
Mr. Lopez. I agree with you. I agree with you. But first of
all, your first premise is wrong; there is no size to the pie.
That is an imaginary creation of dominant corporations
restricting the size of the contracts available to those
disadvantaged populations. There is no size to the pie.
Let me add, if I may, Mr. Chairman.
Mr. Brown. Okay.
Mr. Lopez. Our comrades are dying at the rate of 1100 a
day. We do not have time for these machinations, academic
machinations. The world is passing us by. We have a closing
window of opportunity, not an opening window of opportunity. We
must move quickly, or we will be passed.
Mr. Brown. Let me see. I do not think there is any
misunderstanding in this panel that we want to be absolutely
sure that we address the problem that will allow more input,
more involvement in the procurement process.
We do not want to get tied up with the mire of all the red
tape. We want to try to solve that. That is the purpose of this
hearing.
And I appreciate you all coming, but we must go vote. Thank
you very much.
[Whereupon, at 3:52 p.m., the Subcommittee meeting was
adjourned.]
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