[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
STATUS OF VETERANS SMALL BUSINESSES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON ECONOMIC OPPORTUNITY
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
APRIL 29, 2010
__________
Serial No. 111-74
__________
Printed for the use of the Committee on Veterans' Affairs
______
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57-018 WASHINGTON : 2010
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COMMITTEE ON VETERANS' AFFAIRS
BOB FILNER, California, Chairman
CORRINE BROWN, Florida STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South HENRY E. BROWN, Jr., South
Dakota Carolina
HARRY E. MITCHELL, Arizona JEFF MILLER, Florida
JOHN J. HALL, New York JOHN BOOZMAN, Arkansas
DEBORAH L. HALVORSON, Illinois BRIAN P. BILBRAY, California
THOMAS S.P. PERRIELLO, Virginia DOUG LAMBORN, Colorado
HARRY TEAGUE, New Mexico GUS M. BILIRAKIS, Florida
CIRO D. RODRIGUEZ, Texas VERN BUCHANAN, Florida
JOE DONNELLY, Indiana DAVID P. ROE, Tennessee
JERRY McNERNEY, California
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota
JOHN H. ADLER, New Jersey
ANN KIRKPATRICK, Arizona
GLENN C. NYE, Virginia
Malcom A. Shorter, Staff Director
______
Subcommittee on Economic Opportunity
STEPHANIE HERSETH SANDLIN, South Dakota, Chairwoman
THOMAS S.P. PERRIELLO, Virginia JOHN BOOZMAN, Arkansas, Ranking
JOHN H. ADLER, New Jersey JERRY MORAN, Kansas
ANN KIRKPATRICK, Arizona GUS M. BILIRAKIS, Florida
HARRY TEAGUE, New Mexico
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
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April 29, 2010
Page
Status of Veterans Small Businesses.............................. 1
OPENING STATEMENTS
Chairwoman Stephanie Herseth Sandlin............................. 1
Prepared statement of Chairwoman Herseth Sandlin............. 34
Hon. John Boozman, Ranking Republican Member, prepared statement
of............................................................. 34
WITNESSES
U.S. Government Accountability Office, William B. Shear,
Director, Financial Markets and Community Investment........... 2
Prepared statement of Mr. Shear.............................. 35
U.S. Small Business Administration:
Joseph F. Sobota, Assistant Chief Counsel for Advocacy....... 3
Prepared statement of Mr. Sobota......................... 44
Joseph G. Jordan, Associate Administrator, Government
Contracting and Business Development....................... 20
Prepared statement of Mr. Jordan......................... 75
Export-Import Bank of the United States, Diane Farrell, Director. 5
Prepared statement of Ms. Farrell............................ 59
U.S. Department of Veterans Affairs, Tim J. Foreman, Executive
Director, Office of Small and Disadvantaged Business
Utilization.................................................... 22
Prepared statement of Mr. Foreman............................ 77
______
American Legion, Joseph C. Sharpe, Jr., Director, National
Economic Commission............................................ 11
Prepared statement of Mr. Sharpe............................. 63
International Franchise Association, VetFran Committee, Mary
Kennedy Thompson, Vice Chairwoman, and President, Mr. Rooter
Plumbing Corporation, Waco, TX................................. 14
Prepared statement of Ms. Thompson........................... 73
Vietnam Veterans of America, Joe Wynn, Senior Advisor............ 12
Prepared statement of Mr. Wynn............................... 68
SUBMISSIONS FOR THE RECORD
American Veterans (AMVETS), Christina M. Roof, National Deputy
Legislative Director, statement................................ 79
Iraq and Afghanistan Veterans of America, Tim Embree, Legislative
Associate, statement........................................... 83
MATERIAL SUBMITTED FOR THE RECORD
Post-Hearing Questions and Responses for the Record:
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
William B. Shear, Director, Financial Markets and Community
Investment, U.S. Government Accountability Office, letter
dated May 4, 2010, and response letter dated June 15, 2010. 86
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
Joseph F. Sobota, Assistant Chief Counsel for Advocacy,
U.S. Small Business Administration, letter dated May 4,
2010, and SBA's Office of Advocacy responses............... 87
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
Diane Farrell, Director, Export-Import Bank of the United
States, letter dated May 4, 2010, and Ex-Im Bank's
responses.................................................. 91
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
Joseph C. Sharpe, Jr., Director, National Economic
Commission, American Legion, letter dated May 4, 2010, and
response letter dated June 22, 2010........................ 92
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
Joe Wynn, Senior Advisor, Vietnam Veterans of America,
letter dated May 4, 2010, and VVA's responses.............. 95
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
Mary Kennedy Thompson, President, Mr. Rooter Plumbing
Corporation, on behalf of International Franchise
Association, letter dated May 4, 2010, and Ms. Thompson's
responses, dated May 5, 2010............................... 96
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
Joseph G. Jordan, Associate Administrator, Government
Contracting and Business Development, U.S. Small Business
Administration, letter dated May 4, 2010, and SBA's
responses.................................................. 98
Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on
Economic Opportunity, Committee on Veterans' Affairs, to
Tim J. Foreman, Executive Director, Office of Small and
Disadvantaged Business Utilization, U.S. Department of
Veterans Affairs, letter dated May 4, 2010, and VA
responses.................................................. 99
STATUS OF VETERANS SMALL BUSINESSES
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THURSDAY, APRIL 29, 2010
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Economic Opportunity,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:42 p.m., in
Room 334, Cannon House Office Building, Hon. Stephanie Herseth
Sandlin [Chairwoman of the Subcommittee] presiding.
Present: Representatives Herseth Sandlin, Adler, and
Boozman.
OPENING STATEMENT OF CHAIRWOMAN HERSETH SANDLIN
Ms. Herseth Sandlin. Good afternoon, ladies and gentlemen,
the Committee on Veterans' Affairs, Subcommittee on Economic
Opportunity, hearing on the Status of Veterans Small Businesses
will come to order.
I ask unanimous consent that all Members have 5 legislative
days to revise and extend their remarks and that written
statements be made part of the record. Hearing no objection, so
ordered.
Today's hearing will provide the U.S. Government
Accountability Office (GAO) an opportunity to update us on the
ongoing work on veteran-owned small businesses (VOSBs), and
also provide the U.S. Small Business Administration's (SBA's)
Office of Advocacy the opportunity to update us on the veteran
small business population.
We will also hear from the veteran's community about the
barriers encountered by veteran-owned small business while
providing them the opportunity to submit recommendations on how
to improve existing programs.
Finally, we will hear from Administration officials
highlighting veteran small business programs within their
respective offices. This timely hearing comes 3 days after
President Obama authorized an Executive Order to establish an
Interagency Task Force on Veterans Small Business Development,
of which we would like to learn more about.
I look forward to hearing from all of our panelists today
on this very important topic. I thank all of our witnesses on
each of the panels for their patience in light of the last
series of votes and our late start today, but I don't think we
will have any more interruptions on votes for awhile.
I now recognize our distinguished Ranking Member, Mr.
Boozman, for his opening remarks.
[The prepared statement of Congresswoman Herseth Sandlin
appears on p. 34.]
Mr. Boozman. I think in the interest of time with our
interruptions, what I would like to do is ask unanimous consent
to submit my statement for the record.
[The prepared statement of Congressman Boozman appears on
p. 34.]
Ms. Herseth Sandlin. Hearing no objection, so ordered.
We will move right to our first panel then.
Joining us on our first panel is Mr. William Shear,
Director of Financial Markets and Community Investment for the
U.S. Government Accountability Office, Mr. Joseph Sobota,
Assistant Chief Counsel for the Office of Advocacy, U.S. Small
Business Administration, and Ms. Diane Farrell, Director for
the Export-Import (Ex-Im) Bank of the United States.
I would like to remind all of our panelists, the witnesses
on this panel and others, that your complete written statements
have been made part of the hearing record, and we ask you to
limit your remarks to 5 minutes so that we have sufficient time
for questions for each of the witnesses on the panel after you
provide your testimony.
So Mr. Shear, we will start with you. You are now
recognized for 5 minutes.
STATEMENTS OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND
COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE;
JOSEPH F. SOBOTA, ASSISTANT CHIEF COUNSEL FOR ADVOCACY, U.S.
SMALL BUSINESS ADMINISTRATION; AND DIANE FARRELL, DIRECTOR,
EXPORT-IMPORT BANK OF THE UNITED STATES
STATEMENT OF WILLIAM B. SHEAR
Mr. Shear. Chairwoman Herseth Sandlin, Ranking Member
Boozman, and Members of the Subcommittee, it is a pleasure to
be here this afternoon to discuss our evaluation of U.S.
Department of Veterans Affairs (VA) actions to expand Federal
contracting opportunities for veteran-owned small businesses
and service-disabled veteran-owned small businesses.
Our work is mandated by the Veterans Benefits Health Care
and Information Technology Act of 2006.
My statement today is based on preliminary observations
from our ongoing 3-year study looking at VA's efforts to
contract with VOSBs and service-disabled veteran-owned small
businesses (SDVOSBs).
As to the status of our study we have provided a draft
report to obtain agency comments from VA. We plan to issue our
final report by the first week of June.
My statement discusses first the extent to which VA met its
prime contracting goals for SDVOSBs and VOSBs in fiscal years
2007 through 2009, and second, VA's progress in implementing
procedures to verify the ownership, control, and veteran status
of firms in its mandated database of SDVOSBs and VOSBs.
As shown in my statement, VA has exceeded its contracting
goals. The increase of awards was associated with the agency's
use of unique veteran preference authorities established by the
2006 Act; however, a review of interagency agreements found
that VA lacked an effective process to ensure that interagency
agreements include required language that the other agencies
comply to the maximum extent feasible with VA's contracting
goals and preferences for veteran-owned small businesses.
With respect to verification, VA has made limited progress
in implementing its verification program. While the 2006 Act
requires VA to use veteran preference authorities only to award
contracts to verified businesses, VA's regulation does not
require that this take place until January 1st, 2012.
To date VA has verified about 2,900 businesses or
approximately 14 percent of businesses in its mandated database
of veteran-owned small businesses.
In our evaluation of VA's verification program we have
identified a number of weaknesses. They include first, files
missing required information and explanations of how staff
determine that control and ownership requirements had been met.
Second, a large and growing backlog of higher risk businesses
awaiting site visits as required by VA procedures. And third,
although site visit reports indicate a high level of
misrepresentation, VA has not developed guidance for referring
cases of misrepresentation for enforcement action.
Here I will add that such businesses are subject to
debarment under the 2006 Act.
In our final report we anticipate making recommendations to
VA addressing its verification program and other matters.
It is a pleasure to appear before you today. I would be
happy to answer any questions you may have.
[The prepared statement of Mr. Shear appears on p. 35.]
Ms. Herseth Sandlin. Thank you, Mr. Shear. Mr. Sobota, you
are now recognized.
STATEMENT OF JOSEPH F. SOBOTA
Mr. Sobota. Chairwoman Herseth Sandlin, Members of the
Subcommittee, good afternoon, and thank you for the opportunity
to appear before you today to update information provided to
the Subcommittee last year and to provide new data in response
to the questions you have posed.
My name is Joe Sobota, and I am an Assistant Chief Counsel
in the Office of Advocacy at the U.S. Small Business
Administration.
Because Advocacy was established to provide independent
counsel to policymakers, its testimony is not circulated for
comment through the Office of Management and Budget (OMB) or
other Federal offices, and the views expressed by Advocacy here
do not necessarily reflect the position of the Administration
or of SBA.
Economic research on all types of small business issues has
been one of Advocacy's core missions since its inception.
Public Law 106-50 further directed Advocacy to develop
information about firms owned by veterans and by service-
disabled veterans and the role that they play in our economy.
Advocacy continues a long-term research effort in this
important area. This includes the collection and interpretation
of data from existing sources, commissioning of special
tabulations of unpublished data, and contract research on issue
specific topics.
The most important source of data on veterans in business
remains the U.S. Census Bureau's somewhat dated 2002 Survey of
Business Owners and Self-employed Persons, what we call the
SBO. The Census Bureau plans to issue a new report on veterans
in business in May 2011 using data from its 2007 SBO. Until
then, the 2002 SBO remains our best source.
Concerning the questions you have posed, we are pleased to
be able to offer some very interesting information that
Advocacy has developed by commissioning special tabulations of
SBO data that have not been published in the Census reports.
These special tabulations help us fill some data gaps and have
not received wide circulation.
Using both the new and previously available data we can
address three of the questions that the Subcommittee posed,
those relating to location, industry sector, and export sales.
First, a few general statistics. The 2002 SBO indicated
that 14.5 percent of all business owners were veterans and
about 7 percent of these were service-disabled. The Census also
found that 12.2 percent of all firms were veteran-owned. If
these percentages remained the same in 2009, there would have
been about 3.6 million veteran-owned firms last year, of which
perhaps 250,000 were owned by service-disabled veterans.
Caution needs to be used with this sort of extrapolation,
and if you want we can return to that subject.
Veteran-owned firms mirror the greater business community
in most respects, including their distribution by size both in
terms of revenue and number of employees; their distribution by
industry type; the percentage of those that are home based; in
their level of franchise ownership; in the sources of capital
used for business startup, acquisition and expansion; in the
types of workers they use; and in the types of their major
customers.
Veteran business owners are, however, much older as a group
than other owners, and they are overwhelmingly male. These
characteristics reflect the demographics of the underlying
population of all veterans.
The top 10 States for veteran business owners were
California, Texas, Florida, New York, Pennsylvania, Illinois,
Ohio, North Carolina, Georgia, and Michigan. Virginia and
Washington State also appeared on the top 10 list for service-
disabled veteran owners.
Advocacy's special tabulation also showed that
concentrations of both veteran and service-disabled veteran
owners were slightly higher in rural areas than those for all
business owners. Generally speaking, about 8\1/2\ percent of
all veteran owners were in rural areas, those being areas
without urban core populations of 10,000 or more.
Those industries with the largest share of veteran-owned
firms were the same as those for all U.S. firms. Professional,
scientific, and technical services lead at 18.7 percent of all
veteran-owned firms; construction, 13.9 percent; other
services, 10.2 percent; retail trade, 9.5 percent; and real
estate and rental leasing, 9.3 percent.
Some variations occur in these distributions between
employers and nonemployers.
Finally, Advocacy's special tabulation provides information
on owners whose firms have major export customers, those
customers accounting for 10 percent or more of a firm's sales,
and among employer firms this is about 2 percent of all owners;
1.8 percent of veteran owners, and 2.2 percent of service-
disabled veteran owners had major export customers. There were
slightly lower levels among nonemployers.
Advocacy currently has in progress two additional economic
research projects on veteran-related issues. One is examining
factors affecting entrepreneurship among veterans, and another
is looking at tax and regulatory problems facing veteran
entrepreneurs.
This study should help us answer another question you have
posed, and it is currently in peer review and should be ready
this summer.
We have only mentioned a very small fraction of the large
amount of information in the special tabulations we have
appended to our written testimony today. I hope that this
additional data will be useful to the Subcommittee, and we
stand ready to help answer any questions that arise in
connection with its review.
We at Advocacy very much appreciate the Subcommittee's
interest in veteran entrepreneurship issues and Advocacy's work
in this area. We look forward to continuing to work with the
Subcommittee in any way we can to help advance our knowledge
about veterans in business and to help you in your
deliberations on how to best serve the Nation's veterans
community.
[The prepared statement of Mr. Sobota appears on p. 44.]
Ms. Herseth Sandlin. Thank you, Mr. Sobota.
Ms. Farrell, we believe it may be the first time that the
Export-Import Bank has testified before our Subcommittee, so we
welcome you and look forward to your testimony.
STATEMENT OF DIANE FARRELL
Ms. Farrell. Thank you very much, Madam Chairwoman, and
also thank you to Ranking Member Boozman for inviting us here
this afternoon. We welcome the opportunity to talk about
veterans and small business.
I do bring greetings from our Chairman, Fred P. Hochberg,
who I might add was the Acting Administrator of the Small
Business Administration during a prior Administration, so he
brings commitment and dedication to the small business area,
especially when it comes to Ex-Im Bank.
Because we are a small agency, I did want to take a moment
just to share exactly that which it is that we do to provide
support to U.S. companies, especially veterans and small
businesses, and then talk a little bit about what we are doing
going forward.
We are first and foremost a jobs agency. That is how we see
ourselves. We are dedicated to providing a level playing field
to U.S. companies who want to compete overseas, recognizing
that 95 percent of markets these days tend to be overseas. This
is a particularly important moment in time for Ex-Im Bank and
the service that it provides.
We actually provide short-term support, which would be
either in the form of working capital or export credit
insurance. We also provide medium term, 3- to 5-year financing,
as well as long term, which can run anywhere from 5 to say, 18
years. However, the focus today is clearly on the short-term
products.
We are not here to compete with the banks. I think that is
very important. We are here to provide assistance when it is
necessary. If a market is of particular concern and it has an
opportunity to an exporter but a bank may be somewhat hesitant
to become involved, that is where Ex-Im can really take a role
in providing the kind of assurance to the exporters bank in
order to make sure that that sale can go through and that the
exporter can be successful.
We are a self-sustaining agency. I am always proud of
saying that. And to the envy of some of my colleagues in this
field we are of course chartered through the Congress. Our
budgets are overseen by Office of Management and Budget, but we
do have an arrangement with the U.S. Treasury, and each year we
do actually return funds to the Federal coffers, and we are
quite proud of that fact.
We do not have a lot of offices. We are a small agency. We
have six offices across the country. They are listed in your
official testimony, but we do a lot with the SBA, a lot with
the Department of Commerce. We have a presence in all of the
U.S. Export Assistance Centers (USEACs) across the country.
And to our Chairman's credit, we have embarked upon a very
ambitious marketing program over the last year where we have
actually held events known as ExportsLive, in a number of key
markets, and that is continuing now to what might be considered
secondary markets, and I offer to our Members of Congress and
this Committee that we are happy to provide an ExportsLive
event in any of your districts should you feel that it is an
appropriate opportunity.
In addition to that we are also very active with the TPCC,
the Trade Promotion Coordinating Committee. In that regard
again we are trying as best we can to find multipliers as it
were to get the word out about Ex-Im and what exactly we are
able to do.
To date this year we know that we have positively effected
109,000 jobs. We also know that we are on track to have another
historic year. Last year we did $21 billion in exports, $4.4
billion of that amount fit the SBA definition of small
business. So again, we are seeing an uptick.
Our Chairman has also raised the bar and wants to see us
get to $6 billion if at all possible this year, so you can
imagine that we are exceptionally busy.
We also in addition to some of these broader outreach
efforts I am pleased to say that we do work with the
Interagency Network of Enterprise Assistant Providers (INEAP),
as well as the Center for Veterans Enterprise (CVE).
And I might add that while your delay may have been vexing
to some in the audience, it did give me the opportunity to meet
a number of key constituents who are here, and I think that we
have begun a conversation that we are going to be able to carry
forward in terms of outreach to members of those organizations.
The last point that I will leave you with is really a very
quick story, but I always think that these are the things that
bring it home. As I always say, we are the rubber that meets
the road, we are the actual U.S. Government facility that can
provide help with a transaction.
And there was a couple in 1956 in southeast Maine who were
both veterans and decided that they wanted to start a business.
They could see that there was an opportunity to purchase a
lobster business, not surprising coming from Maine.
Fast forward to 2010. The business transferred to their
daughter and to their son-in-law who actually realized that
given the fact that there is a glut of lobster due to
overfishing--we can get into the science of this at a future
date--they realized that they had tremendous opportunity to
sell overseas, and it was through our export credit insurance
that we were able to provide the support that they needed, and
now their business is almost exclusively overseas. First in the
United Kingdom and Italy, now they are looking to Spain and
Korea. And they note that at least 20 of their lobstermen, the
individuals who are out there in the boats who are supplying
the lobster, are in fact veterans themselves.
So it is a good story, one that I think again sort of
brings all that we do down to the real, to the true, to the
personal level and to the exporter themselves.
Thank you again for inviting us to testify.
[The prepared statement of Ms. Farrell appears on p. 59.]
Ms. Herseth Sandlin. Thank you, Ms. Farrell. Let us just go
from there then on the story. How did the daughter and son-in-
law find out about the export credit insurance program?
Ms. Farrell. That is a wonderful question. They actually
contacted the USEAC in Boston who put them in touch with the
appropriate Ex-Im representative who is actually based out of
New York, but knows enough about lobster that we were able to
get the transaction through.
Ms. Herseth Sandlin. Okay. What is a USEAC?
Ms. Farrell. Oh, I am so sorry. A U.S. Export Assistance
Center. So those are offices around the country that will have
representatives from the U.S. Commercial Services, Department
of Commerce----
Ms. Herseth Sandlin. Okay.
Ms. Farrell [continuing]. From SBA, Ex-Im, et cetera.
Ms. Herseth Sandlin. Are there fees associated to the small
business? What kind of fees could the business in the story
that you described or others expect, if what we are looking at
is veteran-owned small business----
Ms. Farrell. Yes.
Ms. Herseth Sandlin. They want to get in touch and learn
about some of the programs that you provide. We know that there
are always fees, and sometimes we try to waive those fees
temporarily to spur utilization of the programs or the loans.
Could you describe those for us in terms of what Export-Import
Bank would do?
Ms. Farrell. Well the fees are determined by our credit
underwriters. As we like to say, every credit is a unique
credit. They obviously have to take into account the level of
risk that is involved with the particular market that our
exporter wants to sell into.
What I can say about the fees generally is that they are
cents on the dollar when it comes to export credit insurance,
as was the case with the lobster facility. And in fact, in many
cases--and this is an opportunity that we actually present when
we are talking to U.S. exporters--if you take out export credit
insurance through Ex-Im Bank oftentimes then your buyer is not
required to take out a letter of credit when it comes to
procuring the funds that they need from their, you know, bank,
the bank overseas. And so what we explain to exporters is
number one, it gives you peace of mind that in the event of a
nonpayment you are covered. It gives your bank peace of mind
that in the event of a nonpayment they, you know, they have the
expectation that they are still covered, and it can help the
buyer. And so that helps our exporter to say, hey, I am helping
you out as well by taking out this insurance because your bank
is going to be more comfortable about the way the transaction
works.
So the fees--we have never really had a complaint about the
amount of the fees--the fees are really there to sort of
service what it takes for us to provide it.
In fact as we talk about expanding more aggressively and
from a credit underwriting perspective, we are actually
discussing the fact that the fees may not in fact cover the
cost of this program, but that when you look at the bank's
transactions overall where that is a loss, there are other
programs say in the aircraft sector, for example, that do
provide a healthy enough return that we can cover the losses
adequately.
Ms. Herseth Sandlin. Then through your partnerships that
you have with SBA, Department of Commerce, the Center for
Veterans Enterprise, are you in a position with the resources
that you have, or is it through these partnerships where you
are not just sort of waiting for the business to have
identified an export market opportunity, but you are
aggressively looking at, through trade policies, through
monitoring, what is happening in the global marketplace,
particular export opportunities that would match up and in
sharing that information with these other agencies that know of
businesses that are out there that could take advantage of what
is happening globally?
Ms. Farrell. Yes, absolutely. Again, when Chairman Hochberg
came in one of the things he did immediately was to take stock.
And you know, we are only about 400 employees. I mean, that is
how small a Federal agency we are, so we have to rely upon the
SBA, Department of Commerce, and work closely also with the
U.S. Trade Development Agency (USTDA), as well as the
Organization of the Petroleum Exporting Countries, you know, to
maximize our exposure and the number of impressions that we can
make.
But one of the things that Chairman Hochberg did initially
was to identify key markets in strategic regions around the
world so that we were at least, you know, placing our maximum
efforts where we felt we were going to get the maximum return.
We do the same thing to a degree in sectors, because we are
required--again, as a jobs agency here to create and maintain
jobs we have certain content requirements to ensure that the
jobs are happening here in the U.S. as opposed to, you know,
potentially facilitating for jobs to migrate overseas, and that
is probably the single most complex restriction that we have
within terms of working with companies here, but we are
providing ways to be as expansive as possible in our support.
So yes, I would say we rely upon the kindness of strangers
to quote Tennessee Williams, but it works very cooperatively.
We do trade missions with Commerce, with USTDA, we share
information, and of course the export cabinet that was created
as part of the National Export Initiative when President Obama
actually rolled this at our annual conference last month, has
been very good as well in terms of coordination and strategic
efforts to bring good business prospects to our exporters.
Ms. Herseth Sandlin. If the Ranking Member doesn't mind I
will just maybe pose one more question as sort of a segue. I
think that is an important restriction. Right, the objective is
to create jobs here in the United States, and so that leads me
to my question for Mr. Shear. We have, as it relates to
contracting requirements, a goal of making sure that it is
veteran-owned businesses that are getting these opportunities,
just as it is in terms of the restriction Ms. Farrell
described, but they are jobs created here as the objective.
In your written testimony you stated that the VA had hired
a contractor to assess the verification programs process and
the contractor report included recommendations. I mean again,
we are a little concerned with sort of the progress the VA is
making on the verifications as it relates to those on the
database who have been verified to be veteran-owned businesses
to deal with the issue of veteran shopping that we have had
concerns about with the Subcommittee previously.
Can you elaborate on what recommendations were given to the
VA?
Mr. Shear. I will paraphrase in a way that, we have, as I
stated, we have a draft report, and there is a need to
implement our VA's information technology in a way that allows
for more efficient processing of these applications.
You also need--really it is development of people in terms
of their ability and the guidance that they have to have in
terms of how they verify businesses.
So I am segueing a little bit into what, what we are
reporting on, but basically that VA has been very slow in this
process, and the reason we think it is very important to verify
is because the preferences are meant to serve veterans and
veteran-owned small businesses, and there is not an assurance
that that is occurring, and it has been delayed for some period
of time.
So just the fact that the consultant study took so long
until VA moved in that direction is of concern to us.
Ms. Herseth Sandlin. Mr. Boozman.
Mr. Boozman. Thank you, Madam Chair.
Mr. Shear, Public Law 109-461 requires VA to review
contracts for compliance with subcontracting proposals. Would
you share GAO's view of VA's performance in implementing the
provisions?
Mr. Shear. Subcontracting will be contained in our final
report. And what we observed with subcontracting requirements,
there are certain issues as far as the date when the
requirements become effective. But what we have observed to
date is that with respect to subcontracting VA falls very short
of its goals.
Mr. Boozman. Thank you very much.
Ms. Herseth Sandlin. One final question. Mr. Sobota, of the
States that you listed you didn't list South Dakota or
Arkansas. The 10 that you listed have a very high population,
high density population States, and so did you do an analysis--
I know you gave us some--in terms of the additional materials
to your testimony, did you do an analysis per capita by States,
and then can you elaborate just a little bit more in terms of
the rural nature of the businesses that you described?
Mr. Sobota. Yes, ma'am. The top 10 States are certainly
correlated to population. And all 50 States and the District of
Columbia are listed in the prepared testimony.
I must say that the way that the Census Bureau presents its
data in terms of percentages makes it a little more difficult
to translate that into raw numbers that would be more user-
friendly, and you have to go through a number of steps in order
to get to an estimate, and there are some statistical problems
involved.
However, yesterday preparing for the hearing I decided that
I ought to run a couple States just to see what they look like,
and at random I just picked South Dakota and Arkansas, and so I
will make an estimate without going through all the
methodology, because I know that we have time constraints here.
In 2002 it would appear that South Dakota would have had
about 11,900 total respondent veteran owners, of which about
800 would have been service-disabled. In Arkansas, it would be
a little bit larger than that, and in Arkansas we figured about
32,700 total respondent veteran owners, and about 2,200 of
those would have been service-disabled.
Now those are 2002 numbers, and as explained in the
testimony, this is a bit dated, and we hope when we get the
2007 data in 2011 that we will have some updated information
here.
There is a way to make an extrapolation from the 2002 data
to 2009, but we really have more and more difficulty with
reliability the further away you get from the base year, and
there is a further problem with the demographics in that we
know that there are about 25 percent more businesses now than
there were in 2002, but the long-term trend for the veteran
population is down as the population ages, so we actually have
about 10 percent fewer veterans in 2009 than in 2002, and I
just looked that up this morning on the Department of Veterans
Affairs Web site.
So while we have a growth in the business community as a
whole, we have fewer veterans, and that makes the use of the
2002 factor of 12.2 percent of all firms being owned by
veterans problematic in 2009. That percentage could well come
down in this next round. So we are a little hesitant to make a
prediction at the State level for the number of veteran-owned
firms today, but we can certainly work with staff there to try
to flesh out more information and anything else that we can do.
But those two overall numbers I gave you I think are reasonably
close for 2002.
We will have better information too after the new Census
Bureau report comes out.
Ms. Herseth Sandlin. Which is when?
Mr. Sobota. May 2011 is what Census has currently
scheduled.
Ms. Herseth Sandlin. All right, thank you.
Mr. Adler, did you have any questions to this panel?
Mr. Adler. Madam Chair, I am embarrassed that I came a
little late, so I think I am going to defer for now.
Ms. Herseth Sandlin. I understand. Mr. Boozman and I
covered quite a bit of ground in terms of the testimony that we
heard and getting a little bit of clarification from the GAO
interim report and what we can anticipate, so you can also
submit any questions for this panel for the written record.
Mr. Adler. And thank you for your opportunity.
Ms. Herseth Sandlin. I want to thank each of you for
highlighting your findings on veteran-owned small businesses,
elaborating more on the work that your agencies are doing. Your
feedback of course helps us to better understand the population
that the Subcommittee and the full Committee seek to assist. We
look forward to learning more as you receive more up-to-date
information in the weeks, months and years ahead.
Mr. Sobota, again we will--I think you make some good
points in terms of how to keep up with this data effectively,
and so again we appreciate the information on the status of our
veteran-owned small businesses and we will look forward to
seeing the finalized reports currently in process.
Thank you very much.
Mr. Shear. Thank you.
Ms. Herseth Sandlin. I now invite the second panel to the
witness table. Joining us on our second panel of witnesses is
Mr. Joseph Sharpe, Director of the National Economic Commission
for the American Legion; Mr. Joe Wynn, Senior Advisor for the
Vietnam Veterans of America (VVA); and Ms. Mary Kennedy
Thompson, Vice Chairwoman of the Veterans Transitioning
Franchise Initiative, the International Franchise Association
(IFA).
Again your written statements have been made part of the
hearing record. We will recognize you each for 5 minutes, and
Mr. Sharpe we will begin with you. Welcome back to the
Subcommittee.
STATEMENTS OF JOSEPH C. SHARPE, JR., DIRECTOR, NATIONAL
ECONOMIC COMMISSION, AMERICAN LEGION; JOE WYNN, SENIOR ADVISOR,
VIETNAM VETERANS OF AMERICA; AND MARY KENNEDY THOMPSON,
PRESIDENT, MR. ROOTER PLUMBING CORPORATION, WACO, TX, AND VICE
CHAIRWOMAN, VETFRAN COMMITTEE, INTERNATIONAL FRANCHISE
ASSOCIATION
STATEMENT OF JOSEPH C. SHARPE, JR.
Mr. Sharpe. Madam Chair, Ranking Member Boozman, and
Members of the Subcommittee, thank you for the opportunity to
submit the views of the American Legion's regarding the status
of veteran businesses.
In fiscal year 2009, Federal agencies missed their small
business contracting goals by 2 percent. Procurement officers
have made statements according to the Chair of the House Small
Business Committee that those numbers are insignificant and
nothing to be concerned about; however, while a 2 percent
shortfall may not sound like a lot to those officers, it
ultimately cost entrepreneurs approximately $10 billion in
missed opportunity and employment for veterans.
According to the Department of Labor, the present
unemployment rate for recently discharged veterans is an
alarming 20 percent, and for veterans between the ages of 18 to
24 there is a 30.2 percent unemployment rate.
Furthermore, presently one out of every four veterans who
do find employment earns less than $25,000 per year.
Historically small businesses have created an estimated 65
to 75 percent of the net new jobs, therefore, providing a
central element for strong economic growth.
The American Legion believes that government should assist
in the creation of new jobs by encouraging qualified
entrepreneurs to start and expand their small businesses.
The American Legion also knows that no group is better
qualified or deserving of this type of assistance than
veterans.
Increasingly, the near term growth and stability of this
Nation's economy is dependent on the long-term success of small
business networks across the country.
In conclusion, the American Legion strongly supports the
mandates of the Veterans Entrepreneurship and Small Business
Development Act of 1999, Public Law 106-50, that were designed
to assist all veterans wishing to start, expand, or protect
their business.
Agency leadership need to be held responsible for meeting
the 3 percent Congressionally mandated goal, and this Committee
should schedule hearings with all Federal agencies who
consistently do not meet their Federal procurement goals with
the service-disabled veteran-owned business.
Madam Chair, this concludes my statement. I will be happy
to answer any questions you may ask.
[The prepared statement of Mr. Sharpe appears on p. 63.]
Ms. Herseth Sandlin. Thank you, Mr. Sharpe, appreciate your
testimony.
Mr. Wynn, you are now recognized.
STATEMENT OF JOE WYNN
Mr. Wynn. Thank you, Madam Chairwoman. Good afternoon, and
good afternoon to Ranking Member Boozman, Members of the
Subcommittee.
I am here today on behalf of the Vietnam Veterans of
America and its members to address our views regarding the
status of veterans small businesses and are we failing them?
Just to quickly put it, yes, I think in many ways we
probably are as we focus on contracting for veteran-owned
businesses.
I am just going to hit on a couple of points, itemize a few
points, because I know that this Committee has been very
supportive of veterans and veteran business opportunities.
One of the things that hasn't been happening is still a
lack of accountability, oversight, and enforcement. The
agencies that have been directed to carry out the laws still
are not being held accountable, they still--if they don't make
the 3 percent nothing happens. There is still a lot of
ambiguities in the laws that govern the service-disabled vet
program.
We have heard a lot over previous years about the word
``may,'' as it pertains to the service-disabled vet program,
the word ``may'' that governs this program is often interpreted
as, ``I don't have to.'' What would be more effective is to
change that word ``may'' to ``shall,'' and change it in all
programs, all of the preference programs, at least the 8(a) and
HUBZone, as well as service-disabled vet so that we would have
some true equal parity.
We used to have or we still have an Executive Order 13-360,
but it has faded significantly in its significance. In that
Executive Order it called for agencies to actually write out a
strategic plan showing how they would increase contracting
opportunities for service-disabled vets. That doesn't seem to
be happening very much anymore, and instead we later came up
with--SBA came up with a scorecard program for all small
businesses that doesn't seem to be as effective, at least in
terms of veteran businesses increasing.
There is still an overuse of large prime contractors and
bundling. This not only affects veteran-owned small businesses,
it affects small businesses across the board. When you continue
to lump contracts together and make them awful large, small
businesses just can't compete.
There is also no authorization within the service-disabled
vet program for contracting officers to make direct awards in
the same manner as it is within the 8(a) program. Again, if we
are going to equalize the playing field let us make the
activity and actions equal across the board.
A couple of other reasons I would just like to hit on
quickly. There is still limited business development
assistance. We know that recently there was grant awards made
to the SBA Office of Veteran Business Development to increase
the number of veteran business centers, business outreach
centers, but the amount of the funding is still woefully low.
One hundred fifty thousand dollars per center to cover huge
geographic areas is not acceptable.
One other point too on the VA's Veterans First Contracting
Program. While this has been a significant step forward, it is
still for some reason there is a prevailing belief that SDVOB
stands for small and disadvantaged veteran-owned businesses,
wherein all of our veteran-owned businesses are not in that
category. So this is a disservice to those that are capable and
qualified of competing on the open market.
VA contracting with Veterans First really should be a
governmentwide model, and we would like to see this program
improved and actually have it implemented across the
government.
We hear often that small business is the engine that fuels
the economy and it creates more jobs. This is a statistical
fact, and we would like to see more effort put into creating
opportunities for our veteran small business owners.
Just recently this week as a matter of fact, we listened to
the announcement about an Executive Order to increase
contracting opportunities for veterans. We are definitely
appreciative that this has come forward. Although I might note
that this Executive Order for veteran businesses actually
mirrors the language that was in Public Law 110-186 2 years
ago. So hopefully this will now move forward since this
Administration is supporting it.
Let me conclude my statement by just saying that if we are
going to help veterans, we need to help them now. The majority
of our veterans are Vietnam veterans. Of course we know as time
continues to move forward our veterans are getting older, we
want to bring more new veterans into the marketplace, but we
don't want to--the other day we were talking about increasing
the number of service-disabled veterans. Quite frankly, we
really don't want to increase more veterans to have to be
service-disabled before they can get a contract, but at any
rate let us see if we can do more for our veterans.
Thank you.
[The prepared statement of Mr. Wynn appears on p. 68.]
Ms. Herseth Sandlin. Thank you, Mr. Wynn.
Ms. Thompson.
STATEMENT OF MARY KENNEDY THOMPSON
Ms. Thompson. Good afternoon, Chairwoman Herseth Sandlin,
Ranking Member Boozman, and Members of the Subcommittee.
My name is Mary Kennedy Thompson and I am President of Mr.
Rooter Plumbing based in Waco, Texas. Mr. Rooter is a proud
brand of The Dwyer Group family of service enterprises, and we
have more than 270 locations across the United States.
As a veteran, I am truly honored to have this chance to
speak to the Subcommittee on Economic Opportunity about veteran
entrepreneurship.
I appear today on behalf of the International Franchise
Association.
According to a 2008 study conducted by
PricewaterhouseCoopers, there are more than 900,000 franchised
establishments in the United States that are responsible for
creating 21 million American jobs and generating $2.3 trillion
in economic output.
Today, I will talk about a program that is very near and
dear to my heart, the Veterans Transition Franchise Initiative,
or VetFran. I will also highlight specific legislation, H.R.
2672, the ``Help Veterans Own Franchises Act,'' that will make
it easier for veterans to purchase a franchise.
But first, I would like to share the story of how I decided
that franchising was the right path to small business ownership
for me. Helping fellow veterans make the transition to civilian
life and realize their dream of small business ownership is one
of my passions. I have taught what franchising offers at
entrepreneurship classes offered specifically to disabled
veterans. I also serve as the Vice Chairwoman of the IFA's
VetFran Committee.
Franchising is the great American dream. It allows people
to own a business, and it teaches them a system to help them be
successful. It did just that for me.
In 1985, I received my commission as an officer in the
United States Marine Corps where I served for 8 years and
achieved the rank of Captain while on active duty and later the
rank of Major in the reserves. When I left active duty, I chose
franchising because it provided me a framework of training and
support to help me succeed as a small business owner.
I became a multi-unit franchisee in the Cookies by Design
system where I earned company awards for Top Performer and
Outstanding Customer Service. My success lead to being asked
that I join the corporate team. I started out as Director of
Franchise Operations, and eventually becoming the brand's
President.
I joined Mr. Rooter in October of 2006 to proudly serve the
40-year-old company as its first female President.
The military and franchising have a lot in common.
As a veteran from a military family I didn't know how to
run a business, I didn't know how to get it started; however, I
had the dream of being my own boss, and my military experience
enabled me to lead others toward a common goal.
The Marine Corps also trained me how to follow a system and
successfully execute a plan.
Members of our Armed Forces are disciplined, hard-working,
and passionate people who understand how to work well within
systems. They are accustomed to following standard operating
procedures, they have strong teamwork skills, and they are
dedicated to mission success. These are crucial attributes that
make military veterans excellent candidates for franchise
ownership.
An estimated 250,000 men and women transition out of the
military each year. Like me, many of these veterans are looking
for a chance to be their own boss and leaders within their
communities.
The vision to use franchising to help military veterans
transition to civilian life began nearly 20 years ago. Don
Dwyer, Sr., the founder of The Dwyer Group and a veteran
himself, conceived the plan to help our veterans achieve the
American dream by owning their own franchised small business.
Mr. Dwyer's plan has become the IFAs VetFran program, a
voluntary effort of IFA member companies designed to encourage
franchise ownership by offering financial incentives to
honorably discharged veterans.
Since 2002, more than 1,700 veterans have purchased their
own franchise business from nearly 400 participating systems
with the help of this program. What began as the idea of one
veteran entrepreneur has today become a path to the American
dream for thousands of veterans.
I am proud to report that in February of this year, The
Dwyer Group topped the $1 million mark in VetFran discounts
awarded to veterans.
Since 2002, The Dwyer Group has sold franchises to 233
military veterans through this program, and Mr. Rooter Plumbing
was recently recognized by USA Today as one of the top 50
franchises for military veterans.
Congress has the opportunity to make this important effort
more effective. Legislation has been introduced to cement the
benefits of a program like VetFran into policy and encourage
more franchise systems to support veterans as small business
owners.
I strongly urge the Members of the Subcommittee to
cosponsor and for Congress to pass H.R. 2672, the ``Help
Veterans Own Franchises Act.'' This bill is coauthored by
Representatives Aaron Schock and Leonard Boswell, and currently
has more than 30 bipartisan cosponsors.
This legislation establishes a tax credit for franchised
businesses offering qualified veterans a discounted initial
franchise fee. The tax credit would amount to 50 percent of the
total franchise fee discount offered by the franchisor capped
at $25,000 per unit, and also provides a tax credit to the
veteran for the remaining initial franchise fee paid.
I want to thank Ranking Member Boozman who has already
cosponsored this important legislation.
Enactment of this tax credit will encourage economic growth
and make it easier for veterans to become small business
owners. Our veterans deserve this chance after so faithfully
serving our country.
Again, on behalf of the International Franchise
Association, Mr. Rooter Plumbing, and The Dwyer Group family of
brands, we sincerely appreciate the work of the Subcommittee.
Thank you.
We strongly urge you to support and pass the ``Help
Veterans Own Franchises Act'' so that more of our veterans may
return home and begin building a bright future for themselves,
a bright future for their families, and for their communities
through small business ownership.
Thank you, and I look forward to answering any questions
you may have.
[The prepared statement of Ms. Thompson appears on p. 73.]
Ms. Herseth Sandlin. Thank you, Ms. Thompson. You have an
impressive record of military service and professional
achievements, and we are very pleased to have you here today.
In addition to your advocacy for H.R. 2672 and the tax
credits to be provided, what are some of the current existing
discounts or benefits available to veterans purchasing a
franchise?
Ms. Thompson. Well with the VetFran program any of the
participating members, and we have over 400 members, any of
those participating members are offering discounts up to about
50 percent of the franchise fee that is offered to the veteran.
In Mr. Rooter Plumbing we have offered that and given that
to over 50 franchises already--veteran franchises.
Ms. Herseth Sandlin. Can you tell us what the average cost
is of a franchise for a perspective veteran?
Ms. Thompson. Certainly. I can speak from my own
experience. An average franchise especially in our system is
going to cost about anywhere from $50,000 to $100,000, that is
including equipment and including the franchise fee and getting
started. They are going to probably pay about $30,000 for a
franchise fee, so they get a 50 percent discount, which means
that they get a $15,000 discount, and that $15,000, that is a
truck. In the world of plumbing that is a truck. And they get
more trucks on the road, they get their business started
faster.
Ms. Herseth Sandlin. That is very helpful. Can you
elaborate on the details of the Memorandum of Understanding
between the VA and the International Franchise Association?
Ms. Thompson. I sure can. We do have a Memorandum of
Understanding that--let me grab my notes really quickly. There
it is.
We came into that Memorandum of Understanding a few years
ago, and it is a collaborative agreement with the VA and
VetFran to champion free enterprise and to expand business
opportunities for veterans.
In 2006, we renewed our official Memorandum of
Understanding with the VA and IFA jointly promoting the
program.
Ms. Herseth Sandlin. Thank you, Ms. Thompson.
I do have a question for both Mr. Sharpe and Mr. Wynn.
According to witness testimony for the hearing today, as
well as phone calls from veterans to our Subcommittee staff,
veterans have been unsuccessful when applying for the SBA's
Patriot Express Loan. Have either of you been made aware of
this problem or similar problems?
Mr. Sharpe. That is probably the largest most frequent
complaint that we receive from our business owners, that they
are not able to access loans, and that the credit crunch in
their viewpoint is a serious problem. That is one reason why we
have been advocating for a direct loan program from SBA.
Ms. Herseth Sandlin. Mr. Wynn.
Mr. Wynn. Yes. I would have to concur with that. We were
actually set up--we have set up a veteran business resource
center here in DC, and one of the primary services we are
planning to offer is how to access capital.
In talking with some of the veterans with regard to the
Patriot Express Loan, they are having difficulties also to
acquire that capital.
The rationale seems to be because the--you know, the banks
in general seem to be tightening the credit, their lending
practices, so that is, you know, kind of what we are hearing.
We are not understanding though why that is affecting the SBA
Patriot Loan Program.
Ms. Herseth Sandlin. Ms. Thompson, I saw you nodding your
head. Are you aware of this problem too in terms of maybe some
of the potential veteran franchisees and how important this
loan would be to offset some of the initial costs of getting
the franchise?
Ms. Thompson. Yes, ma'am, I am aware of it. While the SBA
does have some good opportunities out there, the Patriot Loan
is difficult to get. It is a very long process. I have had
franchisees report to me that they have had a difficult time
and they found better financing and better rates through other
sources through the SBA.
Ms. Herseth Sandlin. Mr. Boozman.
Mr. Boozman. Thank you, Madam Chair.
It is interesting. We have had the opportunity on several
occasions to be at the Transition Assistance Program, the TAP
programs where they tell about, as you separate and things. I
can remember on several occasions as we visited with breakout
groups that many, many of the people separating are interested
in franchises, and so I very much support anything that we can
be supportive of the legislation, that you mentioned.
Another thing that we have been asked to do at times, and I
have been interested in doing, is the GI Bill, pays for
education, it is trying to separate out the educational
component versus the rest of the component, on a franchise fee.
One of the problems though has been the difficulty in doing
that. Do you have any advice for us in that regard?
Ms. Thompson. Well the advice I would have is that there
are lots of ways to get an education, and our veterans
returning back really deserve the chance to be able to use
their educational funds in a way that they can educate
themselves and create value for themselves and their families.
And through franchising and through trade schools they can
create great value for themselves.
Our average, a Mr. Rooter plumber has a very good living,
and a Mr. Rooter franchisee has a very good living, but he is
going to need to go to trade schools, and he is going to need
to go to franchise training. And when you only allow it to go
for something like a college education you are limiting that.
I mean, I think about the jobs that I myself, and I
represent veteran-owned businesses everywhere, that I was able
to create and the taxes we paid and what we brought back to the
community, it was that--it was really that education that
brought me to it.
Mr. Boozman. Okay. How would you identify the cost--how
would you separate out the cost of the education component
versus the other?
Ms. Thompson. I think you could delineate it as trade
schools, or with the franchising world. We are very, very
specific, and with our franchise disclosure documents it
specifically states in there what the franchising is--franchise
training is, how long it is, how much it will cost. We have a
lot of rules and requirements and legislation that requires us
to follow for how we franchise. And so you could go into any
franchise disclosure document in any company and say if it is
their training in there and it lays out how long their
training, that is franchise training.
For example, in Mr. Rooter our training is a week long, and
we know it is exactly--I know it is 52.8 hours worth of
training, and it is in writing in our franchise disclosure
document.
Mr. Boozman. Okay. Very good, that is very helpful.
Well thank all of you for being here. As always, we
appreciate your testimony.
Thank you, Madam Chair.
Ms. Herseth Sandlin. Thank you, Mr. Boozman.
One final question for Mr. Sharpe and Mr. Wynn, and Ms.
Thompson if you would like to weigh in as well.
What penalties can or should be levied against an agency
for noncompliance with the 3-percent set-aside contracting
goal?
Mr. Sharpe. Well, I know we have mentioned this before,
that there should be some sort of performance requirement in
the valuations of agency heads.
We have actually visited a number of agencies in the last
couple of months, and again, there seems to be this attitude
that we can't find veterans to work with, we can't find
veterans that are able to perform the task that we are looking
for, and from our experience that is not the case, because we
have veterans that are able to build submarines and airplanes
and those other large projects that U.S. Department of Defense
is actually looking for. But it is not in the agency's--they
don't seem to be really concerned in regards to going the extra
mile and making sure that they find those veteran businesses
and that they are treated fairly and looked at as a serious,
competent, you know, company.
Ms. Herseth Sandlin. But they might have an incentive to do
so if there was a carrot or a stick. So do you have any
suggestions on any penalties or incentives that could be
imposed or offered if they fall short of the goal?
Mr. Sharpe. If the Secretary or the head of that particular
department doesn't fulfill that requirement when it comes to
evaluation time, then it should be duly noted and documented
and look at possibly removing that individual or they are not
going to get the kind of bonus that they are looking for, but
it should be an evaluation that they meet their goals, yeah.
Ms. Herseth Sandlin. Okay. Mr. Wynn.
Mr. Wynn. Yeah. The 3-percent minimum requirement, you
know, should be applied and is applied to agencies as well as
large primes, and how you handle the two of them would be
somewhat different.
With the large primes there could be--the penalties
associated with not making the 3 percent would be in the
contract evaluations factors when they come up for the next
time they bid on a contract if they haven't been making the 3
percent, haven't been making a good faith effort, then they
shouldn't be viewed and allowed to participate on upcoming
contracts in the same way they have in the past.
We know it is difficult to look at once a contract has
started to evaluate that particular agency or that particular
large prime contractor and stop the contract once it has been
started, but in future contracts going forward certainly they
should not be allowed to continue to just continue to receive
contracts if they are not abiding by what the laws are
currently.
With agencies, we have often talked about agencies to
effect the performance of agencies is that the senior level
managers or contracting officers, there needs to be something
in their performance evaluation which if they are not
demonstrating that they are moving forward in a productive
manner in trying to achieve the minimum 3 percent then they
shouldn't continue to get bonuses, their salaries shouldn't
continue to increase.
You can't just penalize the agency in general, because you
know, we are talking about lots of people when we talk about an
agency, but individually on the contract level perhaps we
should look at those people who are directly responsible for
managing and awarding these contracts. If they are not
demonstrating that they are actively pursuing, meeting the
required goals, then they should be held accountable.
Ms. Thompson. I do understand that the business world is
different from the government world. I would say that in the
business world we pay and reward and bonus our people based on
creating results.
So I would ask can there be something in place that rewards
and bonuses those who are following the system and creating the
results that we are looking for?
Ms. Herseth Sandlin. Thank you, Ms. Thompson.
Mr. Boozman, any further questions for this panel?
Well we thank all three of you for your testimony, your
responses to our questions, the insights that you have offered,
and we appreciate the ongoing service to our Nation's veterans.
And again, we will follow up with you on some of the
recommendations and suggestions that you have made to improve
programs that are there to help veterans succeed in their small
business ventures.
So thank you again for your testimony today.
Mr. Sharpe. Thank you.
Ms. Thompson. Thank you.
Ms. Herseth Sandlin. We now invite panel three to the
witness table. Joining us on our third panel is Mr. Tim
Foreman, Executive Director of the Office of Small and
Disadvantaged Business Utilization (OSDBU), U.S. Department of
Veterans Affairs, and Mr. Joseph Jordan, Associate
Administrator for Government Contracting and Business
Development at the U.S. Small Business Administration. Mr.
Jordan is accompanied by Ms. Janet Tasker, Deputy Associate
Administrator for Capital Access, and Mr. William Elmore,
Assistant Administrator for Veterans Business Development, both
within the U.S. Small Business Administration.
Again, your written statements will be entered into the
record.
We will begin with you, Mr. Jordan. Welcome to the
Subcommittee. You are now recognized.
STATEMENTS OF JOSEPH G. JORDAN, ASSOCIATE ADMINISTRATOR,
GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL
BUSINESS ADMINISTRATION; ACCOMPANIED BY JANET A. TASKER, DEPUTY
ASSOCIATE ADMINISTRATOR FOR CAPITAL ACCESS, U.S. SMALL BUSINESS
ADMINISTRATION; WILLIAM D. ELMORE, ASSOCIATE ADMINISTRATOR FOR
VETERANS BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS
ADMINISTRATION; AND TIM J. FOREMAN, EXECUTIVE DIRECTOR, OFFICE
OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION, U.S.
DEPARTMENT OF VETERANS AFFAIRS
STATEMENT OF JOSEPH G. JORDAN
Mr. Jordan. Thank you very much, Madam Chair.
Chairwoman Herseth Sandlin, Ranking Member Boozman, and
Members of the Subcommittee, thank you for inviting SBA to
testify. I am accompanied by Janet Tasker, the Deputy Associate
Administrator for Capital Access and Bill Elmore, the Associate
Administrator for Veterans Business Development.
Veteran-owned small businesses have always played a key
role in America's economy. Veterans have the leadership, the
know-how, and the drive to succeed as entrepreneurs.
As thousands of troops return home, the SBA has taken many
steps to serve them as they have served us. We do that in three
main ways: capital, counseling, and contracting.
Capital. SBA is committed to helping veteran-owned small
businesses get the capital they need. Under the American
Recovery and Reinvestment Act Enhancements and Extensions to
our top two loan programs over the past 14 months we have been
able to provide more than $2 billion in lending support for
veteran entrepreneurs and small business owners.
We also have an increasingly popular loan program that is
available not only to veterans, but also to Reservists,
spouses, widows, and others called Patriot Express.
This program helps address the fact that our military
forces currently rely on Reserve components as well as support
for military families.
We make thousands of these loans each year, which feature
our lowest interest rates and faster turnaround times.
I should also mention that we provide dozens of military
Reservists economic injury disaster loans each year to small
businesses that need additional capital due to the fact that an
owner or essential employee has been called to active duty in
their role as a military Reservist.
Now counseling. In the area of counseling each of our 68
field offices has a designated staff member for veterans
business development. They are engaged with hundreds of
veterans serving organizations and reach thousands of veterans
and Reservists each year.
In fiscal year 2009, SBA and its resource partners trained
or counseled about 150,000 veterans in addition to Reservists,
Guard members, and active duty clients.
In the future we hope to serve even more, because since
2008 we have tripled the number of our veterans business
outreach centers.
These centers help veterans with business plans,
monitoring, and much more. They also help our Office of
Veterans Business Development provide about 60,000 SBA veteran
and Reservist business information kits each year.
Also, we know that veterans are heavy users of our online
tools such as our small business training network. That is why
we launched an online training course for veterans small
business owners to learn how to become government contractors.
And last November we entered into a partnership agreement to
support the Entrepreneurship Bootcamp for Veterans with
Disabilities consortium operating at six top universities
across the country. We are very proud to be part of this 14-
month entrepreneurial development program for service-disabled
veterans who were injured in Iraq or Afghanistan since 2001.
Finally contracting. The SBA works hard to ensure that
veteran- and service-disabled veteran-owned small businesses
have access to opportunities and Federal contracting. We work
across all Federal agencies to ensure that at least 3 percent
of Federal contracting dollars go to service-disabled veteran-
owned small businesses.
In fiscal year 2008, this group received about $6.5
billion, or 1.5 percent of Federal prime contracts.
Preliminarily data for fiscal 2009 indicates that both of these
numbers are increasing.
Today we are proud of the fact that 6.3 percent of Recovery
Act prime contracting dollars have gone to veterans and 4.3
percent of that has gone to service-disabled veterans thus far.
I should also mention that this Administration supports the
Congressional intent of equal treatment among our business
development and contracting programs, service-disabled veteran-
owned, 8(a), HUBZone, and women-owned small businesses.
However, in light of a recent court decision, it would be
useful to clarify and reiterate Congress' original intent that
there be parity among these programs.
Finally, just a few days ago, the President signed an
Executive Order to once again demonstrate the high priority
that veteran-owned small businesses have in this Administration
by establishing an Interagency Task Force on veterans small
business development.
The task force will be led by Administrator Karen Mills,
and will include seven agencies and four representatives from
the veterans community. This task force recognizes that many in
our veteran community have chosen or will choose to step out
and start their own business, so it will provide
recommendations to the Administration in several key areas,
including those I have just discussed today, capital,
contracts, and counseling.
An additional Executive Order to create a task force or
small business contracting as a whole will help amplify this
effort.
We look forward to the recommendations that will come out
of these task forces as we recommit ourselves to meeting the
needs of our veteran entrepreneurs and small business owners.
We will now be happy to take any of your questions.
[The prepared statement of Mr. Jordan appears on p. 75.]
Ms. Herseth Sandlin. Thank you very much, Mr. Jordan, we
appreciate your testimony.
Mr. Foreman, welcome back to the Subcommittee, you are now
recognized.
STATEMENT OF TIM J. FOREMAN
Mr. Foreman. It is my pleasure to return to you today again
to testify regarding the progress of veteran-owned businesses.
The concept of veteran-owned business providing products and
services for veterans constructs a win-win scenario. Who better
understands the needs of our veterans than other veterans.
Congress seemed to recognize this when through Public Law
109-461 it created the Veterans First Contracting Program. This
program gives meaningful assistance to veterans seeking
business opportunities with VA, it has a direct and positive
impact on VA's prime contracting and subcontracting
opportunities.
The VA and I thank you for this legislation.
Your hearing title asks, are we failing veterans? Madam
Chair, we are not failing our veterans. We are leaders in many
pro-veteran business program areas. VA has been able to focus
on service-disabled veterans and other veteran businesses. This
focus has achieved a tangible result and is why the VA leads
the Federal Government in the percentage of contracting dollars
awarded to these types of veteran-owned small business.
Additionally, on Monday of this week, President Obama
signed an Executive Order that energized an Interagency Task
Force on veteran small business development. This task force
will enhance communication among veterans, small business
enterprises, and key organizations within the Federal
Government. It may well serve as an instrument to help us
identify obstacles facing perspective veteran-owned business
owners and help them find solutions and contracts.
Members of this Subcommittee, it would be reasonable that
any claim to our success be linked to a measurement of
performance.
VA is proud to report that for fiscal year 2009, VA awarded
19.3 percent of our dollars to veteran-owned small businesses.
Likewise, the VA also awarded 16.3 percent to service-disabled
veteran businesses in the same timeframe, bettering by more
than twice the amount of our own internal goal.
While VA has current and reliable data for performance in
some areas, we do need to have a broader portfolio of current
information regarding the characteristics of veteran-owned
business.
Useful analysis of the variables that impact success of
veteran-owned businesses is in the U.S. Census Bureau's
characteristics of veteran-owned businesses last published in
2007 using data collected in 2002.
I also note that the Small Business Administration has been
very helpful in providing data that helps VA better understand
the process and the impact on veteran-owned businesses by
collecting and reporting and analyzing data in a more timely
fashion. Because of this, we will be better able to gauge the
performance.
It is in this way we will better analyze the effectiveness
of our program against a broader backdrop. We will be able to
better shepherd our programs and optimize the results. This
will help us to better identify obstacles associated with
certain business sectors and their geographical locations; and,
perhaps to also identify some solutions.
In my written statement I address several factors that may
impact success of veteran-owned small business. Most of the
work needed by the VA is clustered near its facilities;
however, the next generation of veteran-owned small businesses
may be more heavily into use of technology and the performance
of work remotely will most probably be one outcome.
Geographical data then will be used in a different manner.
I also report that some business sectors had a higher
percentage of veteran-owned business than did others.
For example, I will note that veterans tended to do better
in mining, construction, manufacturing, wholesale trade,
transportation, finance and insurance, and in the professional
and scientific sectors. Whereas, businesses that fell below
that or were underrepresented against the industrial average
were in the retail trade, information and administrative
support, waste management, education services, health care,
arts and entertainment, and in the hotel and food industries.
There is a significantly higher proportion in terms of
percentages of male veterans than female veterans, and this too
may speak to some of the differences and some of the factors.
When the Small Business Administration's Shawne Carter
McGibbon testified before your Subcommittee last year she
provided an excellent overview of the program and identified
some significant difference between service-disabled veteran
and non-service-disabled veteran business owners.
I believe that my time is running out so I will go ahead
and just wrap up and say I would be happy to take any of your
questions. Thank you.
[The prepared statement of Mr. Foreman appears on p. 77.]
Ms. Herseth Sandlin. Thank you, Mr. Foreman.
Mr. Jordan, we have heard that some veterans are having
problems securing a Patriot Express Loan. As previously asked
to the representatives of the veterans service organizations on
the prior panel, are you aware of any problems or complaints
that veterans are having in accessing the Patriot Express Loan?
Mr. Jordan. I am actually going to defer to my colleague,
Ms. Tasker from the Office of Capital Access for that question.
Ms. Herseth Sandlin. Okay, Ms. Tasker.
Ms. Tasker. Thank you for the question.
Honestly, we haven't heard specific problems about the
Patriot Express Program itself. That program is one of our
easiest to access programs. Our Express suite actually allows
lenders to use their own existing processes, they don't have to
use a separate SBA process to make those loans, so I am
interested to get more information from you on specific
situations so we can look into it.
Ms. Herseth Sandlin. Well, I think given the testimony from
the prior panel there seems to be a lot of concern and
complaint. So I think, certainly the Subcommittee will help
facilitate the exchange of information from some of our VSOs
and their members and others in the small business community
with your office.
Ms. Tasker. And we would welcome that.
I would just add that with the economic situation in the
past year we saw a dramatic decline in lending generally, and
the banks did in fact tighten credit, so I do know that it has
been harder for small businesses to access credit.
A lot of the actions that the Congress did in passing the
Recovery Act have supported more lending, but specific to
Patriot Express we will certainly work with you to find out
more about what is going on there.
Ms. Herseth Sandlin. I think we need to do that in light of
the fact that this is a program intended to make accessing a
loan through the community banking institutions easier.
Ms. Tasker. Uh-huh.
Ms. Herseth Sandlin. And so if they are having difficulty
getting the guarantee, this was supposed to help address some
of the credit crunch in good times. I mean, you know what I am
saying.
Ms. Tasker. I do.
Ms. Herseth Sandlin. I am a little concerned that if you
haven't been hearing the complaints, is there an avenue that
can help facilitate the exchange of information.
Because we hope that the credit markets will continue to
improve, but we want to make sure that the programs are
intended to sort of help give the banks the confidence that
they need in a government backed loan that this is--and
overcome any problems that there may be.
Ms. Tasker. Right. And I just do want to be clear, we are
aware that there has been a general tightening of credit, I
just had not heard that people were having trouble with Patriot
Express specifically, but we will work with you.
Ms. Herseth Sandlin. Okay.
Mr. Jordan, you had stated that veterans received $523
million of the 7(a) loans and $176 million of the 504
development loans, and that is in your testimony.
Mr. Jordan. Right.
Ms. Herseth Sandlin. Do you know how many home businesses
these dollar amounts equate to? Ms. Tasker.
Ms. Tasker. It is over 4,000 businesses, or approximately
4,000.
Ms. Herseth Sandlin. Okay.
Ms. Tasker. I guess it is 3,980 some.
Ms. Herseth Sandlin. Also, what is the average operating
budget of a veteran business outreach center?
Mr. Elmore. Yes, ma'am. The amount of funds that we have
historically provided to a veteran business outreach center
each year has been a maximum of $150,000. In the latest
competition, we have now been able to grow the program to
approximately $165,000 for some of our previously existing
centers that were successful in competing for a second
agreement. So that is what we provide.
However, I should tell you that while we don't require a
match when we go through the application and the evaluation
process, we really push our centers to secure other sources of
funding as well. We realize that 150 or 165 is not a lot for
the responsibilities that they have. That has simply been
limited by the amount of funds we have had to grant.
Ms. Herseth Sandlin. Okay.
Finally, Mr. Jordan, those were impressive numbers you list
as it relates to the Recovery Act dollars. What is going on?
How is that being overseen differently than what we do on a
regular basis across agencies?
Mr. Jordan. Madam Chair, are you referring to the contract
which I think that----
Ms. Herseth Sandlin. Yes.
Mr. Jordan [continuing]. There are a few things going on
there. I had the opportunity to testify in front of the
Subcommittee almost a year ago to the day, and at the time the
topic was primarily the contracting performance and the 3
percent there. We have done a number of things over that year
to try to reverse engineer success and determine what can we do
to achieve the 3 percent. Because while it is moving in the
right direction, we would all agree that nothing short of that
3 percent is really acceptable.
So we looked at the Recovery Act because it had
individually trackable dollars and was going out over a finite
period of time. We used that as a testing ground for some of
the different efforts we thought could really move the needle
for small business contracting, and yes, for service-disabled
veterans as well as the other subgroups.
Specifically what we did was look at both ends of the
equation, the small businesses, and we did a lot of training
education and outreach. We found that there is an awareness gap
sometimes. So while there are almost 50,000 veteran-owned small
businesses and about 17,000 or 18,000 service-disabled veteran-
owned small businesses listed in the central contract
registration or dynamic small business search, those businesses
are not always aware of what the opportunities are out there.
Vice versa we worked with the agencies to say not only do
we have to help those small businesses become aware in advance
of these opportunities that are going out, we need to really
step up our efforts to go out and find those qualified
businesses and improve our market research techniques. We met
with every single agency to discuss this.
We had them put out a calendar of events that they were
going to do in terms of outreach. We had them develop forward
looking procurement plans, and then the Vice President convened
the Cabinet and said: ``How are you doing on each of these
areas?''
We obviously work very closely with VA because they have
some unique ability to set aside contracts for these groups,
but they also have a deep passion, and a good understanding of
the stakeholders involved. So we have key learning there, and
we syndicated those best practices all around.
So the next step is: How is it going to apply to the
regular contracts? And we have now taken some of the best
practices that we learned from this effort, some of the things
that we thought moved the needle positively, and we are going
around and doubling down on those things with each agency. Over
the next 6 to 12 months you will see a series of efforts aimed
again at both sides of the equation to try to get to that 3
percent.
Last year when I was here I said that our number 2,007 was
1 percent, but it looked like it would go up. It did, it went
up by 50 percent to 1\1/2\. This year I am saying it was 1\1/2\
and we think it is going to go up to around 2 percent. That
still is not 3, and that is where we need to get.
Ms. Herseth Sandlin. I may have some followup questions,
but I would like to recognize the Ranking Member, Mr. Boozman,
for his questions.
Mr. Boozman. Thank you, Madam Chair.
Mr. Jordan, what is the fiscal year 2011 budget proposed
for the Veterans Business Development Office, and what
additional initiatives with that fund, and what is the timeline
for implementing those initiatives?
Mr. Jordan. Mr. Ranking Member, if it is okay I would defer
that to Mr. Elmore. Thank you.
Mr. Boozman. Yes, that is fine. Certainly, Mr. Elmore.
Mr. Elmore. The budget request that went forward for our
veterans business outreach centers is steady. We received $2.5
million from Congress this year, which allowed us to expand the
number of centers, and the 2011 budget request is the same
amount.
However, internally as I expect you understand, as we move
through the year if additional funds become available because
of underexpenditure and other program offices we intend and we
will compete for those funds inside the agency.
Mr. Boozman. Okay, very good.
Mr. Foreman, what were all of the--in regard to
implementing P.L. 109-46, I think we hired somebody to help us
in regard to what we needed to be doing. What were the
recommendations, and did VA disagree with any of the
recommendations? If so, which ones?
Would you provide the Subcommittee with a plan outlining
the specific dates VA will fill vacant staff positions and CVE
and OSDBU and dates to implement the contractor's
recommendations?
Mr. Foreman. I would be happy to. I think we have already
started on this. I have hired--I have my new deputy back here,
Len Sistek, who is a service-disabled veteran, and I have hired
about four more people in my office, and we have about three
people going into the CVE, which is now going to be renamed. We
are in a reorganization phase.
One of the things that I recognize is I felt like we were
losing focus on the verification process. I thought the process
was a little bit bureaucratic and a lot of paperwork involved,
so automation would really go a long way toward streamlining
the whole process.
And the last time I talked to you I talked about some of
the problems that we were having in terms of the growth in the
backlog. Well, part of that I come to find out was due to an
error in the data system. When people would go online to apply
for it there was a little caption you have to go on, and this
is for verification. You know, in order to get into the data
system you had to be verified, so that caused a spike of over
300 businesses per month coming into the system. They have
turned that off so a business can actually go in and just get
into the system, and then if in fact there is a problem or
somebody suspects there is a problem there is a protest.
I am the guy who takes care of the protest. I have done
five where I have sustained the protest, i.e., I found that the
contractor was actually not a service-disabled veteran or
lacked the status to have the contract. I have determined that
two were in fact verifiable service-disabled veterans and were
good.
So far it has all involved service-disabled protests. I
have not seen one yet on a veteran's status issue. I take that
back. I did see one on a veteran status issue. It wasn't an
issue. A firm objected to the firm claiming it wasn't service-
disabled, but the set-aside was a veteran set-aside. So that
was kind of just a non-issue.
So we are doing it. We will probably do about four to six
more next week, and I am trying to get it over to the SBA.
They had two issues. One issue--they had the same issue I
had. They didn't like the idea you could only have one business
and be a service-disabled veteran or a veteran, and I agreed
with that. So we changed that on a policy. Of course they want
it in writing, and I don't blame them. To make it easier on
them I went ahead and used their regulation. I took 13 CFR
125.9 through 13 CFR 125.13, and we also added .15 for
ownership and control issues. And the fact that my people had
directed the folks down there to go ahead and draft a response
for the Federal Register saying this is our final rule and just
go ahead and post it. When that happens you will have it and
hopefully I will be out of that business and be able to free up
two additional members to do verifications instead of
supporting me in the protest process. So part of it is process
driven.
[The VA subsequently provided the following information:]
Since the contractor reviewed CVE's processes, there have
been changes in the organization driving a more streamlined
focus on examinations and verifications; therefore, a few
initial contractor recommendations may need to be adapted to
meet new organizational priorities. The contractor had
submitted 41 recommendations in 9 general categories: (1)
changes to the Vendor Information Pages database; (2) changes
to the application form, VA Form 0877; (3) implementation of a
case management system; (4) additional training for CVE staff;
(5) changes to the Risk Management Program; (6) changes to
document collection; (7) changes in communication strategies
and content; (8) changes to internal procedures for examining
individual identity records; and (9) other process
improvements.
VA agreed with 37 of the recommendations, noting that 13
required no new action as they were already in process.
Implementing the changes to the Vendor Information Pages (VIP)
database, acquiring the case management system and developing
the interface between it and the database will require the
greatest period of time to execute. On June 1, 2010, VA awarded
a contract to a service-disabled, veteran-owned small business
to update and further automate the VIP database with a
modification called VIP 5. Long-term changes may require up to
22 months to resolve as application development must occur and
then the software must pass certification and accreditation
testing. As an interim solution, VA plans to award a contract
by the end of FY 2010 to help clear the anticipated inventory
of applications awaiting timely verification not later than
January 1, 2012.
Mr. Boozman. Thank you very much. Can I do one final?
I guess my question. VA is working hard, to try and get
this implemented. Mr. Jordan, we don't have jurisdiction over
the other agencies, but do you have any advice on how we can
help prod them in the right direction?
Mr. Jordan. Well, I do think that in many ways they are,
and because we are working collaboratively I would say in many
cases we are moving in that right direction.
I think that the first thing is when you look at fraud base
and abuse overall, which I know has been a concern with these
programs for VA and something my office looks at quite
seriously, we are looking at it in three steps.
We are looking at the certification, in which there were
some specific nuances of VA that we need to look at. But then
for the service-disabled veteran or small business program
overall, despite the fact that it is self-certifying, there is
no reason that we can't do things up front to dissuade any
potentially unqualified person from saying that they are an
SDVOSB.
Then there is the ongoing surveillance and monitoring,
which we already have in place. We have partnered with VA in
the protest process for service-disabled small business
protests (which the SBA handles) and year after year those
numbers of protests have increased. But when you look at the
number of protests sustained, i.e., the company that was
awarded the contract was, in fact, not what they said they
were, that percentage has gone down. So we are handling more,
the percent is going down, which shows that up front
certification and the surveillance and monitoring is improving
because it is coupled with the last step:
Enforcement, punishing the bad actors. During the last
panel you spoke about incentives and other processes. We need
to make sure that people understand that there is punishment
for acting inappropriately.
Mr. Boozman. Thank you, Madam Chair.
Ms. Herseth Sandlin. Thank you, Mr. Boozman.
So what is that punishment?
Mr. Jordan. There are a range of issues. So it would start
with referral to either our suspension debarment official for
potential suspension debarment action proceedings, or our IG
for further investigation.
For example, all 10 of the firms in the GAO report on
service-disabled veterans have been referred to SBA's Inspector
General (IG) and they are currently under investigation. And as
soon as I have specific outcomes to report I would be happy to
follow up with the Committee.
Then there are also further steps depending on the severity
or the type fraud or abuse perpetrated in which we are working
closely with the Department of Justice to have them take up
some more of these cases so we can really set examples of some
of these bad actors.
Ms. Herseth Sandlin. Very good.
Mr. Foreman, is the VA working then on developing guidance
for referring cases of misrepresentation for the enforcement
actions?
Mr. Foreman. Yes, Madam Chairwoman. What we have done, very
similarly, when I do a protest evaluation and I have anybody
who I sustain the protest, they are bad actors, I refer them to
the IG for further investigation and appropriate disposition.
That can mean anything from I am going to refer it over to the
Justice Department, this is so egregious that they ought to be
investigating.
We are also standing up, and that is still in process,
standing up our own debarment committee. I guess we had one a
year ago, but it has since fallen by the wayside, so we are
standing up right now.
We are also looking at bringing, I don't know about in-
house, but having an attorney work with our office specifically
on small business issues, including the protest issues as well
as others.
Ms. Herseth Sandlin. So when you say that is in the process
of being stood up in terms of a debarment committee and
bringing a lawyer on, I mean, do you anticipate that that will
then be in place to pursue enforcement actions then by this
summer?
Mr. Foreman. It should be in by the summer. We should have
no problem in standing it up that soon.
Ms. Herseth Sandlin. Okay.
Mr. Foreman. You know, my counterpart is really doing that,
and that is Mr. Haggstrom and Glen Frye, because it comes under
contracting.
Ms. Herseth Sandlin. Uh-huh.
Mr. Foreman. And so that is where a debarment committee
should be.
Ms. Herseth Sandlin. Well, this may be a question maybe
better aimed at them too, but has the VA awarded a contract to
assist with the verification in addition to the contract that
would provide best practices and site visits?
Mr. Foreman. I am sorry?
Ms. Herseth Sandlin. Has the VA awarded a contract to
assist with the verification in addition for the contract that
is going to provide for best practices in site visits?
Mr. Foreman. Yes, ma'am. We have three current contracts
going with various contractors who support us, all of which are
service-disabled vets.
The first one was to help us where we have a lot of the
process, how we establish it. Two were to go out and perform
verifications, and those two also did in-house verifications.
Part of the problem you run into is sometimes the training is
not quite as good, so they don't crank out as many per person
as our own people.
The other part is our own people. We are kind of scattered
in some of their organization to doing other kind of outreach
things. I am pulling them back in. I am doing a lot of
outreach. As a matter of fact, I was down in Little Rock,
Arkansas, this week. I flew down on Monday, flew back on
Tuesday so I would be back at work on Wednesday. So we go
around, we have a heck of a schedule on conferences.
The one thing I have done is to initiate a certain amount
of consciousness that we don't waste money. Never send two when
one will do is one of my standard statements to them, and let
us be efficient. I never go to a conference so I am going to
pass out literature, but I will go if they need a keynote
speaker and other things. And we do, by the way, have good
relationships with Joseph.
The question you had asked was interesting, because we were
just talking before the hearing about me coming over and seeing
how they are doing the verification of HUBZones and conversely
him coming over and looking at my system, and we could pass
back and forth some best practices.
So sometimes these hearings are good because, you know, we
don't get a lot of time to just talk to each other. So thank
you for that.
Ms. Herseth Sandlin. Well I am glad to know that some of
the sharing of best practices across agencies is something
helpful coming out of the hearing.
Both of you mentioned the Interagency Task Force. Yes, I
think we are all recognizing the importance of interagency
coordination, cooperation. I think it is important at the
Congressional Committee level, we do that as well. But I guess
that raises maybe just two final questions.
And one, Mr. Foreman, according to the GAO findings, the VA
lacks an effective process to ensure that interagency
agreements include language that will require other agencies to
comply with the VA's contracting goals and preferences for
veteran-owned small business, service-disabled veteran-owned
small businesses.
Why is the VA failing to include the required language to
require other agencies to comply with these goals? Is there a
reason that the language isn't being included?
Mr. Foreman. You have me on that one. I am going to have to
take that one for the record.
Ms. Herseth Sandlin. Okay.
Mr. Foreman. I didn't know that they were not including the
language.
Ms. Herseth Sandlin. Okay.
Mr. Foreman. So when we look at P.L. 109-461 they should be
using that information when they go over in a habit, and I
don't know the specifics, and that would be helpful if I could
know what partnership agreements are we not doing that in.
Ms. Herseth Sandlin. Okay.
Mr. Foreman. And if we have a problem we will correct it.
Ms. Herseth Sandlin. Great. Well, we will clarify that in
terms of the GAO findings too and work together to get the
answer.
Mr. Foreman. Very good.
[The VA subsequently provided the following information:]
In the past, this language was not included in all VA
interagency agreements. However the Department is taking steps
to ensure compliance. The requirement to include the
appropriate language in interagency agreements was included in
the Veterans First Contracting Program training sessions which
were accomplished from January-March 2010. This training,
coupled with the existing requirement that all interagency
agreements executed on behalf of VA require review and
concurrence by the Office of the General Counsel and VA Deputy
Senior Procurement Executive, ensures compliance with the 2006
Act. Additionally, virtual training is available to all
personnel via the VA Knowledge Network. The training schedule
and reference materials are available to VA employees through
VA's Intranet site; a copy of this Intranet page is attached
for reference. [The attachment is being retained in the
Committee files.]
Ms. Herseth Sandlin. My last question is, as Mr. Boozman
and I and our Subcommittee staff have looked into this issue
for a while now, we know that there is some concern among the
veteran service organizations about double and triple counting.
You know, what are your thoughts on that?
I mean, I think you know, you cited some very good
statistics for the VA. We hope to continue to see these trends
in terms of increases and the percentages to get to 3 percent,
but we have heard this both for the VA and the SBA, and if
there are concerns there with agencies that are meeting the
goals but then those that aren't yet, what are your thoughts on
the issue of how we factor in what is counted as it relates to
sort of credit awarded under these multiple goal categories?
Mr. Foreman. Madam Chair, I have pretty strong feelings. I
have been around for a long time and I have set up databases to
collect data and working the DD350 for the Department of
Defense. These things are great tools in terms of identifying
and digging into the depths of the statistics of how the firms
operate. It is good to know of the veteran service, disabled
veterans, et cetera, that do business, how many of them are
HUBZones also, how many are women-owned, how many are minority-
owned, and where do they fall? And the categories are quite
interesting.
HUBZones for example, we got a lot of hits from the
minority business community. Oh, they are terrible, they are
taking away from the 8(a). Well, it turns out 50 percent of the
dollars go to minority business concerns in historically
underutilized business zones. If you restricted that, that
information would be lost. And you need information even more
important than us because you develop policy.
And one of the things I used to do when I went out to the
field and talked to the buying activities, tell them the
importance of completing the DD350 correctly and how key it is.
And nobody understood. They thought it went into a big void and
it was never used for anything so they didn't really care about
the quality.
I care about the quality because you need it in order to do
your job and I need it to do my job, to have those statistics,
to get that baseline, to see about measurement. So it is
incredible.
Ms. Herseth Sandlin. I don't think we disagree the
importance of gathering the information and what it can shed
light on as it relates to some of the policy decisions we are
making, but in terms of then how one that is counted two or
three times is used to calculate the 3 percent.
Mr. Foreman. Only if they meet those things. And they can
only count one time for the 3 percent. They have to be a
service-disabled veteran. They couldn't be an award in the 8(a)
program, but we have the Veterans First Program. If anything we
are doing less and less in 8(a) and less and less in HUBZone,
but that is all right. The Veterans First is a priority to us.
We wanted that.
[The VA subsequently provided the following information:]
Small Business is a category on its own. Awarding credit in
any other small business category does not result in inflating
credit in the small business category. The small business
credit is not calculated by adding up the credits awarded in
the various subcategories, but is calculated independently,
precisely to avoid double-counting.
If a contract were awarded to an individual small business
owner who was a woman and a service-disabled veteran from a
HUBZone, they would receive only one credit under each of the
following categories: woman-owned, veteran, service-disabled
veteran, HUBZone and Small Business. The multiple categories
are counted in the Federal Procurement Data System (FPDS)
reporting required of Federal contracting officers.
Mr. Jordan. I agree. I think that the important things are
one, getting the data right, two, hitting the goals so it
doesn't become inward looking between the programs or between
the goals competition. We need to expand the pie so that we hit
the 23 percent and the 5-5-3-3.
Now if you are a qualified, certified, eligible business in
multiple categories then I personally don't see anything wrong
with that being reflected in the data. When you look at the
numbers it doesn't seem to be taking away from one group or
another. And should you limit or restrict the categories which
you would count.
I think the important thing is we need to hit all of the
goals. And as Tim said, there is not double counting within any
category itself, so at this point we don't see it as a major
source of concern.
Ms. Herseth Sandlin. Well, I appreciate both your
perspectives on that. We may want to follow up with some
additional questions based on the GAO findings, based on some
of the concerns that we have heard previously and how we--to
your point, Mr. Jordan, I think both of you made the point, how
we accurately and honestly meet all the goals.
So I think again, I mean important points you both just
made are compelling, but I want to keep working through that
issue, because I don't know that it entirely satisfies the
concerns that have been raised over time about that.
Mr. Foreman, a final comment?
Mr. Foreman. One additional thought, and I thought about
this earlier when people say, oh, we have multiple counting.
Let us artificially turn off the switch on all these other
areas. So if I am a woman-owned business who is a minority who
happens to be a service-disabled veteran, et cetera, we are
going to turn off these switches. What you are going to get is
data that that has been changed and forever changed. I mean it
is going to be real hard to dig that back out of the system if
in fact we did that.
I think you don't want to do that. You can back it out now.
If I want to I can say okay, in every program area show me
Hispanic Americans, show me Native Americans, and I pull that
data, not necessarily to get awards in those areas, but where
did they get the awards? Was it under the 8(a) program, the
HUBZone program, the service-disabled program? I can tell you
that.
In terms of changing or artificially reducing something I
think you actually lose for all time data.
Ms. Herseth Sandlin. But I don't know that anyone is
suggesting that.
Mr. Foreman. Yeah.
Ms. Herseth Sandlin. No one is suggesting losing the data.
I think it is how you back it out, how you do your calculations
as it relates to each of the goals.
I hear your concern, but I don't think that is what is
being proposed.
Mr. Foreman. Okay.
Ms. Herseth Sandlin. I don't think I would support that in
light of how important that data is, but it is okay then, you
know, don't just switch them off and lose the data, but back it
out so we can accurately say, are we meeting all of the
different goals independently of one another?
Mr. Jordan. Just one comment, Madam Chair. One of the
things that will help with the transparency and the data
itself, is the Executive Order by the President on small
business contracting which asks the Chief Information Officer
and the Chief Technical Officer in conjunction with the co-
chairs of that task force to come up with a dashboard in 90
days that will reflect the government's performance along these
goals. So hopefully some more transparency and accountability
will help drive some of these very important questions.
Ms. Herseth Sandlin. Okay. Thank you very much. I
appreciate again the testimony, your responses to your
questions, your patience with the late start that we had today.
I appreciate your service to our Nation's veterans, our small
business owners, especially those owned by our veterans and
service-connected disabled veterans.
The Administration has had some success clearly in
assisting our veterans develop and achieve their small business
goals. We hope to see more as we know more opportunity exists.
So we welcome again the opportunity to work with the
executive branch to ensure that current laws are properly
applied and enforced. We should also continue to re-evaluate
laws that aren't meeting their intended purpose or need to be
updated, and therefore, I welcome the feedback provided by all
of our panelists today. I look forward to our continued
dialogue, and I thank you for participating in today's hearing.
The hearing stands adjourned.
[Whereupon, at 3:23 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Hon. Stephanie Herseth Sandlin,
Chairwoman, Subcommittee on Economic Opportunity
I ask unanimous consent that all Members have 5 legislative days to
revise and extend their remarks and that written statements be made
part of the record. Hearing no objection, so ordered.
Today's hearing will provide the U.S. Government Accountability
Office an opportunity to update us on the ongoing work on veteran-owned
small businesses, and also provide the Small Business Administration's
Office of Advocacy opportunity to update us on the veteran small
business population.
We will also hear from the veteran's community about the barriers
encountered by veteran-owned small business while providing them the
opportunity to submit recommendations on how to improve existing
programs.
Finally, we will hear from Administration officials highlighting
veteran small business programs within their respective offices. This
timely hearing comes 3 days after President Obama authorized an
Executive Order to establish an Interagency Task Force on Veterans
Small Business Development, of which I would like to learn more about.
I look forward to hearing from all of our panelists here today. I
now recognize our Ranking Member, Representative John Boozman for any
opening remarks he may have.
Prepared Statement of Hon. John Boozman,
Ranking Republican Member, Subcommittee on Economic Opportunity
Good afternoon.
Madame Chair, veteran-owned businesses comprise a significant
portion of the small business community and as long as I have the
privilege of representing Arkansas, one of the things I will count as
the most important is the passage of the veteran-owned small business
provisions in Public Law 109-461. Since the passage of those
provisions, the value of contracts awarded to veteran- and disabled
veteran-owned small businesses increased from about $197 million in
2005 to $2.8 billion in fiscal 2009 or a fourteenfold increase in
spending with veteran and disabled veteran businesses. I believe that
can only be termed a success and I congratulate VA for its efforts to
recognize the value of doing business with our veterans.
But as some of our witnesses will testify today, all is not well.
More than 3 years after passage of P.L. 109-461, VA continues to lag in
implementing the database of validated veteran businesses. This means
that companies falsely claiming veteran- or disabled veteran-owned
status are stealing business from valid businesses. VA also continues
to do contract with businesses that have been identified as not meeting
the requirements of being categorized as a veteran- or disabled
veteran-owned small business.
Madam Chair, as you know, GAO has provided us with a draft report
on VA's small business program and while it would not be proper to go
into details until the report is final, I believe it is fair to say
that it shows both the Bush and Obama administrations have dragged
their feet implementing some important portions of P.L. 109-461. We
have passed legislation that will clarify the intent of the law
regarding the VIP database, but other issues such as staffing and
process remain for our oversight.
Today, GAO will testify that VA is falling somewhat short in other
set-aside categories. However, I would like to point out that unlike
any other set-aside category, veterans have earned their place inline
by service, not a factor of race, gender or location. In fact, the most
admirable thing about the veteran category is that veterans largely
represent the makeup of American society with the exception of the
number of women in uniform, a number that is steadily increasing. So,
when you do business with veteran-owned businesses, you do business
with America.
Finally, I concur with the criticisms by our witnesses of the Small
Business Administration regarding under-resourcing the Office of
Veterans Business Development. If there is one place in the Federal
Government that should be properly resourced to help veteran
entrepreneurs, the Office of Veterans Business Development is it and I
hope that we will hear from SBA today how that office will receive the
resources our veterans deserve. Absent significant improvement in its
resources, perhaps we must consider where that office could best serve
veterans.
Madam Chair, I look forward to hearing from today's witnesses and a
lively discussion and I yield back.
Prepared Statement of William B. Shear,
Director, Financial Markets and Community Investment,
U.S. Government Accountability Office
DEPARTMENT OF VETERANS AFFAIRS: Preliminary Observations on
Issues Related to Contracting Opportunities for
Veteran-owned Small Businesses
GAO Highlights
Why GAO Did This Study
The Veterans Benefits, Health Care, and Information Technology Act
of 2006 (the 2006 Act) requires the Department of Veterans Affairs (VA)
to give priority to veteran-owned and service-disabled veteran-owned
small businesses (VOSB and SDVOSB) when awarding contracts to small
businesses. This testimony discusses preliminary views on (1) the
extent to which VA met its prime contracting goals for SDVOSBs and
VOSBs in fiscal years 2007-2009, and (2) VA's progress in implementing
procedures to verify the ownership, control, and veteran status of
firms in its mandated database. GAO obtained and analyzed data on VA's
contracting activities, and reviewed a sample of verified businesses to
assess VA's verification program.
What GAO Recommends
Because this testimony is based on an ongoing engagement, it does
not include recommendations. GAO anticipates making recommendations in
its final report.
What GAO Found
As shown below, VA exceeded its contracting goals with SDVOSBs and
VOSBs for the past 3 years, but faces challenges in monitoring
agreements with other agencies that conduct contract activity on VA's
behalf. The increase of awards to SDVOSBs and VOSBs was associated with
the agency's use of the unique veteran preferences authorities
established by the 2006 Act. However, GAO's review of interagency
agreements found that VA lacked an effective process to ensure that
interagency agreements include required language that the other
agencies comply to the maximum extent feasible with VA's contracting
goals and preferences for SDVOSBs and VOSBs.
VA has made limited progress in implementing its verification
program. While the 2006 Act requires VA to use veteran preferences
authorities only to award contracts to verified businesses, VA's
regulation does not require that this take place until January 1, 2012.
To date, VA has verified about 2,900 businesses--approximately 14
percent of businesses in its mandated database of SDVOSBs and VOSBs.
Among the weaknesses GAO identified in VA's verification program were
files missing required information and explanations of how staff
determined that control and ownership requirements had been met. VA's
procedures call for site visits to investigate the ownership and
control of higher-risk businesses, but the agency has a large and
growing backlog of businesses awaiting site visits. Although site visit
reports indicate a high rate of misrepresentation, VA has not developed
guidance for referring cases of misrepresentation for enforcement
action. Such businesses are subject to debarment under the 2006 Act.
VA's Percentage of Contract Dollars to VOSBs and SDVOSBs, FY07-09
Source: GAO Analysis of FPDS-NG data.
__________
Madam Chairwoman and Members of the Committee:
I am pleased to be here today to discuss issues associated with the
Federal Government's contracting with veteran-owned and service-
disabled veteran-owned small businesses (VOSB and SDVOSB). The Federal
Government's longstanding policy has been to use its buying power--the
billions of dollars it spends through contracting each year--to
maximize procurement opportunities for small businesses, including
those owned by veterans. In fiscal year (FY) 2009, Federal agencies
awarded $17 billion to VOSBs, including $9 billion to SDVOSBs.
To increase contracting opportunities for SDVOSBs and VOSBs, the
Veterans Benefits, Health Care, and Information Technology Act of 2006
(the 2006 Act) requires the Department of Veterans Affairs (VA) to give
priority to these two categories of small businesses when awarding
contracts. It provides for the use of limited-competition contract
awards (sole-source and set-aside) to achieve contracting goals VA is
required to establish under the 2006 Act.\1\ Additionally, the law
requires VA to maintain a database of SDVOSBs and VOSBs and verify the
ownership, control, and veteran or service-disabled status of the
businesses in the database. Businesses must be listed in the database,
which VA refers to as VetBiz.gov, to receive the contracting
preferences for SDVOSBs and VOSBs.
---------------------------------------------------------------------------
\1\ Pub. L. No. 109-461 Sec. 502 (Dec. 22, 2006), 38 U.S.C.
Sec. 8127.
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My statement today is based on preliminary observations from our
ongoing 3-year study looking at VA's efforts to contract with VOSBs and
SDVOSBs on which we plan to issue a report in the near future, as
required by the 2006 Act. Specifically, this statement discusses (1)
the extent to which VA met its prime contracting goals for SDVOSBs and
VOSBs in fiscal years 2007 through 2009, and (2) VA's progress in
implementing procedures to verify the ownership, control, and veteran
status of firms in its mandated database of SDVOSBs and VOSBs.
In conducting this work, we obtained and analyzed data on contracts
from the Small Business Administration's (SBA) Goaling Reports and VA
contracting data from the Federal Procurement Data System--Next
Generation (FPDS-NG) to determine the extent to which VA met
contracting goals for fiscal years 2007 through 2009. We reviewed VA's
policies and procedures for administering the verification program and
conducted a file review of a sample of verified businesses to determine
the extent to which VA followed its procedures and to identify any
deficiencies in VA's verification process and maintenance of the
database of verified SDVOSBs and VOSBs. We interviewed agency officials
and representatives of veteran service organizations to obtain
information about VA's contracting with veteran-owned small businesses
and administration of the verification program. Finally, we also relied
upon recent work by our fraud investigators that examined procurement
activities in the governmentwide SDVOSB program.\2\
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\2\ GAO, Service-Disabled Veteran-Owned Small Business Program:
Case Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain
Millions of Dollars in Contracts, GAO-10-108 (Washington, D.C.: October
2009) and GAO, Service-Disabled Veteran-Owned Small Business Program:
Case Studies Show Fraud Allowed Ineligible Firms to Obtain Millions of
Dollars in Contracts, GAO-10-306T (Washington, D.C.: Dec. 16, 2009).
---------------------------------------------------------------------------
The work on which this testimony is based was performed from
October 2007 through April 2010, in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide
a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Background
Federal agencies' contracting with private businesses is, in most
cases, subject to goals for various types of small businesses,
including SDVOSBs.\3\ The Small Business Act sets a governmentwide goal
for small business participation of not less than 23 percent of the
total value of all prime contract awards--contracts that are awarded
directly by agencies--for each fiscal year.\4\ The Small Business Act
also sets annual prime contracting goals for participation by four
other types of small businesses: small disadvantaged businesses (5
percent); women-owned (WOSB, 5 percent); service-disabled veteran-
owned, (3 percent); and businesses located in historically
underutilized business zones (HUBZone, 3 percent). Although there is no
governmentwide prime contracting goal for participation by all VOSBs,
VA had voluntarily set an internal goal for many years before the
enactment of the 2006 Act.
---------------------------------------------------------------------------
\3\ The Small Business Act defines a small business generally as
one that is ``independently owned and operated and that is not dominant
in its field of operation.'' In addition, a business must meet the size
standards published by SBA to be considered small; these standards may
use criteria such as a business' annual revenue or its number of
employees to determine size. 15 U.S.C. Sec. 632(a).
\4\ 15 U.S.C. Sec. 644(g). Because agencies' activities lend
themselves to differing contracting opportunities, SBA negotiates goals
in annual procurement with Federal agencies to achieve the
governmentwide goals.
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The Veterans Benefits Act of 2003 authorized agencies to set
contracts aside and make sole-source awards of up to $3 million ($5
million for manufacturing) for SDVOSBs (but not other VOSBs).\5\
However, an agency can make a sole-source award to an SDVOSB only if
the contracting officer expects just one SDVOSB to submit a reasonable
offer. By contrast, VA's authorities under the 2006 Act apply both to
SDVOSBs and other VOSBs. The 2006 Act provides VA authorities to make
noncompetitive (sole-source) awards and to restrict competition for
(set-aside) awards to SDVOSBs and VOSBs. VA is required to set aside
contracts for SDVOSBs or other VOSBs (unless a sole-source award is
used) if the contracting officer expects two or more such firms to
submit offers and the award can be made at a fair and reasonable price
that offers the best value to the United States. VA may make sole-
source awards of up to $5 million.
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\5\ Pub. L. No. 108-183 title III Sec. 308 (Dec. 16, 2003), 15
U.S.C. Sec. 657f.
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VA's Office of Small Disadvantaged Business Utilization (OSDBU) in
conjunction with the Office of Acquisition and Logistics is responsible
for development of policies and procedures to implement and execute the
contracting goals and preferences under the 2006 Act. Additionally,
OSDBU serves as VA's advocate for small business concerns; provides
outreach and liaison support to businesses (large and small) and other
members of the private sector for acquisition-related issues; and is
responsible for monitoring VA's implementation of socioeconomic
procurement programs, such as encouraging contracting with WOSBs and
HUBZone businesses. The Center for Veterans Enterprise (CVE) within
OSDBU seeks to help veterans interested in forming or expanding their
own small businesses.
VA Exceeded Its Veteran Contracting Goals since FY07, but Faces
Challenges in Monitoring Interagency Agreements
For FY07, VA established a contracting goal for VOSBs at 7
percent--that is, VA's goal was to award 7 percent of its total
procurement dollars to VOSBs. In FY07, VA exceeded this goal and
awarded 10.4 percent of its contract dollars to VOSBs (see fig. 1). VA
subsequently increased its VOSB contracting goals to 10 percent for
FY08 and FY09, and exceeded those goals as well--awarding 14.7 percent
of its contracting dollars to VOSBs in FY08 and 19.7 percent in FY09.
Figure 1: VA's Percentage of Contract Dollars to VOSBs, FY 07-09
Source: GAO Analysis of FPDS-NG data.
For FY07, VA established a contracting goal for SDVOSBs equivalent
to the governmentwide goal of 3 percent and exceeded that goal by
awarding 7.1 percent of its contract dollars to SDVOSBs (see fig. 2).
VA subsequently increased this goal to 7 percent for FY08 and FY09, and
exceeded the goal in those years as well. Specifically, VA awarded 11.8
and 16.7 percent of its contract dollars to SDVOSBs in FY08 and FY09,
respectively.
Figure 2: VA's Percentage of Contract Dollars to SDVOSBs, FY 07-09
Source: GAO Analysis of FPDS-NG data.
In nominal dollar terms, VA's contracting awards to VOSBs increased
from $1.2 billion in FY07 to $2.8 billion in FY09, while at the same
time, SDVOSB contracting increased from $832 million to $2.4 billion.
The increase of awards to VOSBs and SDVOSBs largely was associated with
the agency's greater use of the goals and preference authorities
established by the 2006 Act. For example, veteran set-aside and sole-
source awards represented 39 percent of VA's total VOSB contracting
dollars in FY07. But in FY09, VA's use of these preference authorities
increased to 59 percent of all VOSB contracting dollars. In nominal
dollar terms, VA's use of these authorities increased by $1.2 billion
over the past 3 years.
According to SBA's Goaling Program, a small business can qualify
for one or more small business categories and an agency may take credit
for a contract awarded under multiple goaling categories. For example,
if a small business is owned and controlled by a service-disabled,
woman veteran, the agency may take credit for awarding a contract to
this business under the SDVOSB, VOSB, and WOSB categories. All awards
made to SDVOSBs also count toward VOSB goal achievement. In FY09, of
the $2.8 billion awarded to VOSBs, the majority (63 percent) applied to
both the VOSB and SDVOSB categories and no other (see fig. 3).
Furthermore, of the $1.7 billion awarded through the use of veteran
preference authorities (VOSB and SDVOSB set-aside and sole-source) in
FY09, an even greater majority (77 percent) applied both to the VOSB
and SDVOSB categories and no other (see fig. 3).
Figure 3: VOSB Contracting Dollars and VOSB/SDVOSB Set-aside and
Sole-source Contracting Dollars by Small Business Category, FY09
Source: GAO Analysis of FPDS-NG data.
In the Veterans' Benefits Improvement Act of 2008 (the 2008 Act)
Congress enhanced the 2006 Act's provisions by requiring that any
agreements VA enters with other government entities on or after January
1, 2009, to acquire goods or services on VA's behalf, must require the
agencies to comply, to the maximum extent feasible, with VA's
contracting goals and preferences for SDVOSBs and VOSBs.\6\ Since
January 1, 2009, VA has entered into three interagency agreements (see
table 1). According to agency officials, VA entered into agreements
with additional Federal agencies, such as the Army Corps of Engineers,
before January 1, 2009, and therefore the provisions of the 2008 Act do
not apply.
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\6\ Pub. L. No. 110-389 Sec. 806 (Oct. 10, 2008).
Table 1: Summary of VA's Interagency Agreements With Federal Agencies, Entered On or After January 1, 2009
----------------------------------------------------------------------------------------------------------------
Agency Description of services Amount
----------------------------------------------------------------------------------------------------------------
General Services Assisted acquisition services for $137 million
Administration (GSA) information technology equipment,
services, and support.
----------------------------------------------------------------------------------------------------------------
Department of the Assisted acquisition services for $2.6 million
Interior (DOI) information technology services,
research and development, supplies,
renovations and alternations, and
financial assistance and professional
services.
----------------------------------------------------------------------------------------------------------------
Department of the Navy, Technical support for analysis, $154 million
Space and Naval planning, program review, and
Warfare Systems engineering services for information
Center (SPAWAR) management and information technology
initiatives.
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of VA documents.
VA issued guidance to all contracting officers about managing
interagency acquisitions in March 2009.\7\ However, the agreement with
DOI did not include the required language addressing VA's contracting
goals and preferences until it was amended on March 19, 2010, after we
informed the agency the agreement did not comply with the 2008 Act.
According to VA officials, the agency's acquisition and contracting
attorneys are responsible for reviewing interagency agreements for
compliance with these requirements. VA uses Office of Management and
Budget templates to develop its interagency agreements. However, VA did
not ensure that all interagency agreements include the 2008 Act's
required language or monitor the extent to which agencies comply with
the requirements. For example, agency officials could not tell us
whether contracts awarded under these agreements met the SDVOSB and
VOSB preferences. Without a plan or oversight activity such as
monitoring, VA cannot be assured that agencies have made maximum
feasible efforts to contract with SDVOSBs or VOSBs.
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\7\ Information Letter 001-AL-09-04, Managing Interagency
Acquisitions, March 23, 2009.
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VA Has Made Limited Progress in Implementing Its Verification Program
and Has Not Developed a Thorough and Effective Program
In May 2008--approximately a year and a half after the 2006 Act was
enacted and a year after the provisions discussed here became
effective--VA began verifying businesses and published interim final
rules in the Federal Register, which included eligibility requirements
and examination procedures, but did not finalize the rules until
February 2010 (see fig. 4).\8\ According to VA officials, CVE initially
modeled its verification program on SBA's HUBZone program; however, CVE
reconsidered verification program procedures after we reported on fraud
and weaknesses in the HUBZone program.\9\ More recently, in December
2009, the agency finalized changes to its acquisition regulations
(known as VAAR) that included an order of priority (preferences) for
contracting officers to follow when awarding contracts and trained
contracting officers on the preferences and the VetBiz.gov database
from January through March 2010.\10\
---------------------------------------------------------------------------
\8\ P.L. 109-461 established a transition rule that was in effect
for a 1-year period, which began when section 502 became effective.
Pub. L. No. 109-461 Sec. 502(b). The effective date, defined in the Act
as 180 days after the date on which the law was enacted, was June 20,
2007. Pub. L. No. 109-461 Sec. 502(d). For the 1-year period, the
transition rule established a presumption of eligibility for inclusion
in the VA database of VOSBs and SDVOSBs covered by the Act for
businesses that were listed in any small business database maintained
by VA. The final rule for the verification program, with changes,
became effective February 8, 2010. 75 Fed. Reg. 6098 (Feb. 8, 2010).
\9\ GAO, Small Business Administration: Additional Actions Are
Needed to Certify and Monitor HUBZone Businesses and Assess Program
Results, GAO-08-643 (Washington, D.C.: June 2008); Small Business
Administration: Additional Actions Are Needed to Certify and Monitor
HUBZone Businesses and Assess Program Results, GAO-08-975T (Washington,
D.C.: July 17, 2008); and HUBZone Program: SBA's Control Weaknesses
Exposed the Government to Fraud and Abuse, GAO-08-964T (Washington,
D.C.: July 17, 2008).
\10\ 74 Fed. Reg. 64619, 64620 (Dec. 8, 2009), effective January 7,
2010.
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Figure 4: Timelines of Major Events Related to Verification Program
Source: GAO analysis of various VA documents.
Leadership and staff vacancies plus a limited overall number of
positions also have contributed to the slow pace of implementation. For
approximately 1 year, leadership in VA's OSDBU was lacking because the
former Executive Director retired and the position remained vacant from
January 2009 until January 2010. Furthermore, one of two leadership
positions directly below the Executive Director has been vacant since
October 2008 and an Acting Director temporarily filled the other
position. The agency also faced delays in obtaining contracting
support. More than a year after the agency began verifying businesses,
a contractor began conducting site visits (which further investigate
control and ownership of businesses as part of the verification
process). As of April 2010, CVE had 6.5 full-time equivalent position
vacancies, and VA officials told us existing staff have increased
duties and responsibilities that also contributed to slowed
implementation.\11\
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\11\ In FY09, CVE was authorized 23 full-time equivalent positions,
an increase from the 17 full-time positions authorized in FY08.
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The slow implementation of the program appears to have contributed
to VA's inability to meet the requirement in the 2006 Act that it use
its veteran preference authorities to contract only with verified
businesses. Currently, contracting officers can use the veteran
preference authorities with both self-certified and verified businesses
listed in VetBiz.gov. However, in its December 2009 rule VA committed
to awarding contracts using these authorities only to verified
businesses as of January 1, 2012.\12\ According to our analysis of
FPDS-NG data, in FY09 the majority of contract awards (75 percent) made
using veteran preferences went to unverified businesses. In March 2010,
the recently appointed Executive Director of OSDBU acknowledged in a
Congressional hearing before this Committee how large an undertaking
the verification program has been and some challenges associated with
starting a new program.\13\
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\12\ 74 Fed. Reg. 64619, 64620 (Dec. 8, 2009).
\13\ House Committee on Veterans Affairs, Subcommittee on Economic
Opportunity, U.S. Department of Veterans Affairs' Center for Veteran
Enterprise, Statement of Tim J. Foreman, Department of Veterans
Affairs, Executive Director of the Office of Small Disadvantaged
Business Utilization, 111th Congress, 2nd session, March 11, 2010.
---------------------------------------------------------------------------
As of April 8, 2010, VA had verified about 2,900 businesses--
approximately 14 percent of VOSBs and SDVOSBs in the VetBiz.gov
database. VA has been processing an additional 4,701 applications but
the number of incoming applications continues to grow (see fig. 5). As
of March 2010, CVE estimates it had received more than 10,000
applications for verification since May 2008.
Figure 5: Verification Applications Received and Finalized
Source: GAO analysis of CVE provided data.
Note: The ``applications finalized'' figures include applications
approved, denied, and finalized for other reasons.
As discussed previously, VA must maintain a database of verified
businesses and in doing so must verify the veteran or service-
disability status, control, and ownership of each business.\14\ The
rules that VA developed pursuant to this requirement require VOSBs and
SDVOSBs to register in VetBiz.gov to be eligible to receive contracts
awarded using veteran preference authorities.\15\ An applicant's
business must qualify as ``small'' under Federal size standards and
meet five eligibility requirements for verification: (1) be owned and
controlled by a service-disabled veteran or veteran; (2) demonstrate
good character (any small business that has been debarred or suspended
is ineligible); (3) make no false statements (any small business that
knowingly submits false information is ineligible); (4) have no Federal
financial obligations (any small business that has failed to pay
significant financial obligations to the Federal Government is
ineligible); and (5) have not been found ineligible due to an SBA
protest decision.\16\
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\14\ 38 U.S.C. Sec. 8127(f).
\15\ According to VA, under full-and-open competition, SDVOSBs or
VOSBs do not need to be listed in the VetBiz.gov database to be awarded
a contract.
\16\ Ownership is defined as a firm being at least 51 percent
unconditionally and directly owned by one or more veterans or service-
disabled veterans. Control is defined as both the day-to-day management
and the long-term decisionmaking authority. For example, an applicant's
management and daily business operations must be conducted by one or
more veterans or service-disabled veterans to be verified. Debarred or
suspended business concerns are determined by checking the GSA-
maintained database known as the Excluded Parties List System (EPLS).
See 75 Fed. Reg. at 6103-6104.
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VA has a two-step process to make the eligibility determinations
for verification. CVE staff first review veteran status (and, if
applicable, service-disability status) and publicly available,
primarily self-reported information about control and ownership for all
applicants. Business owners submit applications (VA Form 0877), which
ask for basic information about ownership, through VetBiz.gov.\17\ When
applicants submit Form 0877, they also must be able to provide upon
request other items for review, such as financial statements; tax
returns; articles of incorporation or organization; lease and loan
agreements; payroll records; and bank account signature cards.
Typically, these items are reviewed at the business during the second
step of the review, known as the site visit.
---------------------------------------------------------------------------
\17\ VA Form 0877 asks for information such as business name,
owners name(s), veteran or service-disabled status, Social Security
Number(s), and percentage of ownership in the business.
---------------------------------------------------------------------------
Site visits further investigate control and ownership for select
high-risk businesses. In September 2008, VA adopted risk guidelines to
determine which businesses would merit the visits.\18\ Staff must
conduct a risk assessment for each business and assign a risk level
ranging from 1 to 4--with 1 being a high-risk business and 4 a low-risk
one. The risk guidelines include criteria such as previous government
contract dollars awarded, business license status, annual revenue, and
percentage of veteran-ownership. For example, if a business has
previous VA contracts totaling more than $5 million, staff must assign
it a risk level of 1 (high). According to VA, it intends to examine all
businesses assigned a high or elevated risk level with a site visit or
by other means, such as extensive document reviews and phone interviews
with the business' key personnel.
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\18\ Verification Program Risk Guidelines (September 2008).
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VA plans to refine its verification processes to address
recommendations from an outside contractor's review of the program. VA
hired the contractor to assess the verification program's processes,
benchmark VA's program to other similar programs, and provide
recommendations for improving it. VA received the contractor's report
and recommendations in November 2009.\19\ VA officials told us that
they plan to implement the contractor's recommendations to require
business owners to submit additional documentation as part of their
initial application and to upgrade their data systems.\20\
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\19\ Addx Corporation and Mahan Consulting Group, ``Reengineered
Verification Processes, Verification Advisory, and Assistance
Services,'' (Nov. 16, 2009).
\20\ According to a CVE Memorandum, staff will identify businesses
with current VA contracts that have not submitted VA Form 0877 and
invite them to apply for verification. CVE will require these
applicants to provide documentation such as business licenses, articles
of incorporation, corporate bylaws, and operating agreements.
Verification Change Sheet--Priority Processing (March 11, 2010).
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Based on our review of a random sample of the files for 112
businesses that VA had verified by the end of FY09, an estimated 48
percent of the files lacked required information or documentation that
CVE staff followed key verification procedures.\21\ Specifically,
---------------------------------------------------------------------------
\21\ We conducted a review of a random sample of 112 files on
businesses that VA had verified by September 30, 2009, to determine the
agency's compliance with its own application procedures. All percentage
estimates based on this sample have 95 percent confidence intervals
within plus or minus 10 percentage points of the estimate itself.
20 percent were missing some type of required
information, such as evidence that veteran status had been checked or a
quality review took place;
39 percent lacked information about how staff justified
determinations that control and ownership requirements were met; and
14 percent either were missing evidence that a risk
assessment had taken place or the risk assessment that occurred did not
follow guidelines.\22\
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\22\ The percentages in the three bulleted points do not sum to 48
percent because individual files may have demonstrated one or more of
the deficiencies we noted in the bullets. For example, one file may
have been missing some type of required information and the business
also may have been assigned an incorrect risk level.
Data system limitations also appear to be contributing factors to
weaknesses we identified in our file review. For example, data entry
into CVE's internal database largely is done manually, which can result
in missing information or errors. Furthermore, CVE's internal database
does not contain controls to ensure that only complete applications
that have received a quality review move forward. Internal control
standards for Federal agencies require that agencies effectively use
information technology in a useful, reliable, and continuous way.\23\
According to agency officials, two efforts are underway to enhance
CVE's data systems. For example, CVE plans systems enhancements that
would automatically check and store information obtained about veteran
status and from some public databases. Additionally, CVE plans to adopt
case management software--as recommended in the contractors' report--to
help manage its verification program files. The new system will allow
CVE to better track new and renewal verification applications and
manage the corresponding case files.
---------------------------------------------------------------------------
\23\ GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).
---------------------------------------------------------------------------
VA started verifying businesses in May 2008, but did not start
conducting site visits until October 2009. As of April 8, 2010, VA has
used contractors to conduct 71 site visits but an additional 654 high-
and elevated-risk businesses awaited visits. Because of this delay, it
currently has a large backlog of businesses awaiting site visits and
some higher-risk businesses have been verified months before their site
visits occurred or were scheduled to occur. According to VA officials,
the agency plans to use contractors to conduct an additional 200 site
visits between May and October 2010. However, the current backlog
likely will grow over future months.
According to site visits reports, approximately 40 percent of the
visits resulted in evidence that control or ownership requirements had
not been met, but as of April 2010, CVE had not canceled any business'
verification status. According to these reports, evidence of
misrepresentation dates to October 2009, but VA had not taken actions
against these businesses as of April 2010. According to VA's Office of
Inspector General, it has received one referral (on April 5, 2010) as a
result of the verification program.\24\ Staff have made no requests for
debarment as a result of verification program determinations as of
April 2010.\25\
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\24\ VA's Office of Inspector General has received referrals about
the businesses identified in our October 2009 report on the
governmentwide SDVOSB program, but these referrals were made as a
result of our work, not VA's verification program.
\25\ One business was referred to VA's committee for Federal
Acquisitions Regulations debarment. The committee requested additional
information and the case remains active. This business was identified
in our October 2009 report on the governmentwide SDVOSB program and was
found ineligible because of issues with performance (not adhering to
subcontracting limitations) which is not a verification issue.
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Under the 2006 Act, businesses determined by VA to have
misrepresented their status as VOSBs or SDVOSBs are subject to
debarment for a reasonable period of time, as determined by VA for up
to 5 years.\26\ Additionally, under the verification program rules,
whenever CVE determines that a business owner submitted false
information, the matter will be referred to the Office of Inspector
General for review and CVE will request that debarment proceedings be
initiated.\27\ However, beyond the directive to staff to make a
referral and request debarment proceeding, VA does not have detailed
guidance in place (either in the verification program procedures or the
site visit protocol) that would instruct staff under which
circumstances to make a referral or a debarment request.\28\
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\26\ 48 CFR 809.406-2. See 74 Fed. Reg. at 64630.
\27\ 38 CFR Part 74.2. See 75 Fed. Reg. at 6103-6104.
\28\ While VA contracting officers can use protests to determine if
a business misrepresented its status, CVE staff conduct verifications
on businesses that submitted applications to be reviewed and if
approved listed in the VetBiz.gov database as verified. These
businesses may not have procurements with VA and therefore CVE staff
cannot use status protests as a means to determine misrepresentation.
---------------------------------------------------------------------------
To summarize our observations concerning VA's verification efforts,
the agency has been slow to implement a comprehensive program to verify
the veteran status, ownership, and control of small businesses and
maintain a database of such businesses. The weaknesses in VA's
verification process reduce assurances that verified firms are, in
fact, veteran owned and controlled. Such verification is a vital
control to ensure that only eligible veteran-owned businesses benefit
from the preferential contracting authorities established under the
2006 Act.
These remarks are based on our ongoing work, which is exploring
these issues in more detail. As required by the 2006 Act, we will issue
a report on VA's contracting with VOSBs and SDVOSBs later this year. We
anticipate the forthcoming report will include recommendations to the
Department of Veterans Affairs to facilitate progress in meeting and
complying with the 2006 Act's requirements.
Madam Chairwoman and Members of the Subcommittee, I appreciate this
opportunity to discuss these important issues and would be happy to
answer any questions that you may have. Thank you.
GAO Contact and Acknowledgements
For further information on this testimony, please contact William
B. Shear at (202) 512-8678 or [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this statement. Individuals making key contributions
to this testimony include Harry Medina, Assistant Director; Paola
Bobadilla; Beth Ann Faraguna; Julia Kennon; John Ledford; Jonathan
Meyer; Amanda Miller; Marc Molino; Mark Ramage; Barbara Roesmann;
Kathryn Supinski; Paul Thompson; and William Woods.
Prepared Statement of Joseph F. Sobota,
Assistant Chief Counsel for Advocacy, U.S. Small Business
Administration
Executive Summary
Advocacy and veteran entrepreneurship research. Pursuant to Public
Law 106-50, SBA's Office of Advocacy began a long-term effort to
develop new information on veterans in business and related topics.
Advocacy has collected and interpreted data from existing sources,
commissioned special tabulations of unpublished data, and supported
contract research on issue-specific topics related to veteran
entrepreneurship.
Sources of data on veterans in business. The most important source
of data on veterans in business that we now have is the U.S. Census
Bureau's 2002 Survey of Business Owners and Self-Employed Persons
(SBO). In 2007, Census issued two important reports on veterans in
business based on its SBO data, and Advocacy released its own report
the same year, also using that data. Census plans to issue a new report
on veterans in business in May 2011 using data from its 2007 SBO. Until
then, the 2002 SBO remains our best source.
How many veteran-owned firms are there? Census found that in 2002,
14.5 percent of all respondent business owners were veterans, and about
7 percent of those were service-disabled. About 12.2 percent of all
businesses were veteran-owned. Advocacy estimates that there were about
29.6 million businesses in the U.S. in 2009. If the 12.2 percentage of
veteran ownership in 2002 remained true in 2009, an estimate of 3.6
million veteran-owned firms would result, of which perhaps 250,000 were
owned by service-disabled veterans.
Veteran-owned firms were similar to all U.S. firms in most
respects, except for their age. Their distribution by size was nearly
identical to all firms, both in terms of revenues and employees. This
correspondence also was true of their distribution by type of industry;
in the percentage of those which were home-based; in their level of
franchise ownership; in the sources of capital used for business
startup, acquisition and expansion; in the types of workers they used;
and in the types of their major customers.
Geographic distribution of veteran-owned firms. Although the
published 2002 SBO reports did not give us information on the
geographic distribution of veteran owners, Advocacy did commission a
special tabulation of Census data to provide this information. The top
10 States for veteran owners were: California, Texas, Florida, New
York, Pennsylvania, Illinois, Ohio, North Carolina, Georgia, and
Michigan. Virginia and Washington also appeared in the top 10 States
for service-disabled veteran (SDV) owners.
Rural/urban concentrations. Advocacy's special tabulation of 2002
SBO data also told us whether or not veteran owners were located in
areas with urban core populations of 10,000 or more, that is to say, in
urban or rural areas. The concentrations of both veteran owners and SDV
owners were slightly higher in rural areas than those for all owners.
Among employers, 7.6 percent of all owners, 8.2 percent of veteran
owners, and 8.3 percent of SDV owners were in rural areas. Among
nonemployers, 7.8 percent of all owners, and 8.8 percent of both
veteran and SDV owners were in rural areas.
Top five industries for veteran-owned firms. Those industries with
the largest shares of veteran-owned firms were the same as those for
all U.S. firms: professional, scientific, and technical services, 18.7
percent; construction, 13.9 percent; other services, 10.2 percent;
retail trade, 9.5 percent; and real estate and rental/leasing, 9.3
percent. Some variations in rankings occur between employers and
nonemployers.
Exporting. Advocacy's special tabulation provides information on
owners whose firms have ``major'' export customers (accounting for 10
percent or more of a firm's sales). Among employer firms, 2.0 percent
of all owners, 1.8 percent of veteran owners, and 2.2 percent of SDV
owners had major export customers. Among nonemployers, 1.4 percent of
all owners, 1.3 percent of veteran owners, and 1.5 percent of SDV
owners had major export customers.
__________
Chairwoman Herseth Sandlin and Members of the Subcommittee, good
afternoon and thank you for the opportunity to appear before you today
to update information provided to the Subcommittee last year and to
provide new data in response to questions you have posed. My name is
Joe Sobota, and I am an Assistant Chief Counsel in the Office of
Advocacy at the U.S. Small Business Administration (SBA). Congress
established the Office of Advocacy in 1976 as an independent entity
within SBA to represent the views of small business before Federal
agencies, to provide counsel on small business issues to the President
and the Congress, to perform economic research related to small
business and entrepreneurship, and for other purposes specified in our
statutory charter.\1\
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\1\ Title II, Public Law 94-305; June 4, 1976; 15 U.S.C. Sec. 634a
et seq.
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Because Advocacy was established to provide independent counsel to
policymakers, its testimony is not circulated for comment through the
Office of Management and Budget (OMB) or other Federal offices, and the
views expressed by Advocacy here do not necessarily reflect the
position of the Administration or of SBA.
Background on Advocacy and Veteran Entrepreneurship Research
Advocacy's mission is to be an independent voice for small business
inside the government in the formulation of public policy and to
encourage policies that support their startup, development, and growth.
Its creation was premised on the belief that small business needs
representation in the legislative, regulatory, and administrative
processes that profoundly affect them, and that good policy requires
good information.
Advocacy works with Federal regulatory agencies and OMB to ensure
agency compliance with the Regulatory Flexibility Act.\2\ We help
regulators develop smarter rules that will accomplish their objectives
while minimizing unnecessary adverse impacts on small entities. Our
activities in this area during FY 2009 saved small entities $7 billion
in foregone one-time regulatory costs and $745 million in annually
recurring costs.\3\
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\2\ Public Law 96-354; September 19, 1980; 5 U.S.C. Sec. 601 et
seq.
\3\ For full information, see Advocacy's annual report to the
President and the Congress on implementation of the Regulatory
Flexibility Act, which can be accessed at http://www.sba.gov/advo/laws/
flex/09regflx.pdf.
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Our economic research activities both support our regulatory
advocacy and develop information on a wide variety of small business
topics for use by government policymakers and other stakeholders.
Advocacy's own professional economists work with data from many
sources, including some that originate at other Federal agencies and
cannot be accessed by private sector researchers because of important
statutory privacy protections. In addition to a variety of periodic
reports and reference materials that are produced by our own staff,
Advocacy also sponsors contract research on issue-specific topics that
vary from year to year depending on current issues and problems, the
needs of stakeholders, and the availability of resources. On average,
Advocacy releases about 25 research reports and data products
annually.\4\
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\4\ See Advocacy's homepage at http://www.sba.gov/advo/ for
additional information on economic research.
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Advocacy's activities on behalf of all small firms should benefit
veteran-owned firms to the same extent they help small firms in
general, but our economic research function forms a special connection
between Advocacy and the veterans business community. Subsequent to the
enactment of the Veterans Entrepreneurship and Small Business
Development Act of 1999 (Public Law 106-50), Advocacy began a long-term
effort to develop new information on veterans in business and related
topics. This proved to be more difficult than expected, especially in
the early years, largely because most data sources and records of
routine business transactions and processes (e.g., bank loans) do not
include information on veteran or disability status, information
largely irrelevant to their purposes, if not to those with research or
policy interests. For example, there is no easy way to tell how many
veteran-owned firms, or even individual veterans, are in bankruptcy.
The forms used in this process simply don't ask for veteran status.
Gradually, Advocacy, in cooperation with our friends in other
agencies,\5\ has been able to use specialized techniques, including
surveys and the matching of administrative data from disparate sources,
to develop information on veterans in business which is not available
``off the shelf.'' All of our published reports are posted on
Advocacy's veterans economic research Web site.\6\ These include both
studies that are dedicated to veteran-specific issues and studies on
more general topics where we were able to develop and include veteran-
specific information because veteran ``markers'' were available in the
underlying data, something that we now try to do whenever possible.
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\5\ Including the Census Bureau, the Bureau of Labor Statistics,
the Internal Revenue Service, the Federal Reserve Board, the
Departments of Defense and Veterans Affairs, and others.
\6\ http://www.sba.gov/advo/research/veterans.html.
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Advocacy currently has in progress two additional economic research
projects on veteran-related issues, one examining factors affecting
entrepreneurship among veterans, and another looking at tax and
regulatory problems facing veteran entrepreneurs. These will be posted
on our Web site when complete. The study on tax and regulatory
problems, being conducted by an Advocacy contractor and now in peer
review, should address one of the questions posed in your invitation to
this hearing; and we will be pleased to provide a briefing when the
project is finished this summer.
Concerning the other questions you have posed, we have had
discussions with your staff and are pleased to be able to offer some
very interesting data on veteran and service-disabled veteran business
owners, information that Advocacy has developed by commissioning
special tabulations of U.S. Census Bureau data that have not been
published by that agency. This information has not received wide
circulation, and we are hopeful that it will help the Subcommittee in
its work. I will return to this subject in a few minutes, but first we
should put these data in context.
Small Businesses In General
Last year, Advocacy presented the Subcommittee with some key
statistics on small businesses in general before presenting data on
veterans in business. I would like to update those numbers now because
they help us understand how important the subset of firms owned by
veterans and service-disabled veterans are. Advocacy also publishes
other very popular documents loaded with more data on small firms. Our
Frequently Asked Questions, State Economic Profiles, and Quarterly
Indicators all can be downloaded from our Web site.\7\ These products
are periodically updated and written for general users. Links to many
other kinds of business data are also available at this site. Of
special interest are these three measures:
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\7\ http://www.sba.gov/advo/research/.
Number. Advocacy estimates that, in 2008, there were 29.6
million businesses in the United States.\8\ Small firms with fewer than
500 employees represent 99.9 percent of all the businesses (including
both employers and nonemployers), as the most recent data (2006) showed
only about 18,000 large businesses with 500 or more employees.\9\
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\8\ http://web.sba.gov/faqs/faqindex.cfm?areaID=24. This estimate
uses the most common definition of ``small business'' which is based on
all IRS tax returns reporting $1,000 or more in business income during
the tax year.
\9\ http://www.sba.gov/advo/research/us88_06.pdf.
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Employer/Nonemployer. The most recent available Census
data (2006) show that 22.5 percent of all firms had employees, while
the balance were nonemployers.\10\
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\10\ Ibid.
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Self-employment. Advocacy estimates that there were about
15.1 million self-employed individuals in the workforce at the end of
2009, including 5.5 million incorporated and 9.6 million unincorporated
individuals.\11\
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\11\ See http://www.sba.gov/advo/research/sbqei0904.pdf. Some
reports on self-employment exclude incorporated individuals; however,
Advocacy research usually includes both types together, including
individuals who choose to conduct their business activities as
Subchapter S corporations or other pass-through entities, very popular
types of business organization.
Source of Data for Veterans In Business
The most important primary source of data that we now have on
veterans in business remains the Census Bureau's 2002 Survey of
Business Owners and Self-Employed Persons (SBO), part of the Economic
Census the agency conducts every 5 years.\12\ In July 2007, Census
released two new reports on veterans in business, based on data
collected in the agency's 2002 SBO. These reports, Characteristics of
Veteran-Owned Businesses (CVOB) and Characteristics of Veteran Business
Owners (CVBO), are the most important data from Census on veterans in
business since an earlier report based on 1992 data. The scope of the
reports released in 2007 is also much broader than that of the 1992
report, representing the most detailed information on veterans in
business ever released by Census.\13\
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\12\ The SBO is a quinquennial survey first conducted in its
present form in 2002. The SBO incorporates many of the purposes and
survey questions of three predecessor surveys: the Survey of Minority-
Owned Business Enterprises (SMOBE), the Survey of Women-Owned Business
Enterprises (SWOBE), and the 1992 Characteristics of Business Owners
(CBO) survey. The SMOBE/SWOBE surveys continued in 1997, while the CBO
was discontinued as a separate survey after 1992, although elements of
it are included in the 2002 and 2007 SBOs.
\13\ The 2002 SBO reports, together with accompanying summaries,
press releases, and charts are all available at http://www.census.gov/
econ/sbo/index.html.
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We at Advocacy are most appreciative that the Census Bureau has
recognized the importance of veteran business data and that the agency
again included questions on veteran and service-connected disability
status in its pending 2007 SBO.\14\ The current effort is polling 2.4
million businesses about their characteristics and the characteristics
of their owners. Tabulation and analysis of their responses are now in
progress, and Census currently plans to release a special report on
veteran business data in May 2011.\15\ Some more limited preliminary
data may also be available in a report to be released in July this
year.
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\14\ Information for the 2007 SBO is based on tax year 2007, and
actual survey data collection was in 2008 and 2009.
\15\ See http://www.census.gov/econ/sbo/releaseschedule07.html for
a schedule of all planned 2007 SBO releases.
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For the present, we are limited to the 2002 SBO veteran business
data that we do have, even though it is becoming somewhat dated.
Advocacy prepared a synopsis of findings from the Census data for
publication as a chapter in the 2007 edition of our annual report to
the President and the Congress.\16\ This report, which is posted on
Advocacy's Web site,\17\ is an effort to interpret in a user-friendly
way the massive amount of information provided in the 2002 SBO reports,
which comprise nearly 200 pages of tabular data.
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\16\ Office of Advocacy, The Small Business Economy, December 2007;
Chapter 5, Characteristics of Veteran Business Owners and Veteran-owned
Businesses, pp. 119-149, hereafter referred to as SBE.
\17\ See http://www.sba.gov/advo/research/sbe_07_ch5.pdf.
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Although the published 2002 Census SBO data on veterans in business
are substantial, there is still the potential to ``mine'' the
underlying survey and associated administrative data to answer any
number of questions that the published reports do not address. Advocacy
did commission such a special tabulation of 2002 SBO data that included
a variety of breakouts of information on veteran business owners,
including service-disabled owners. Today, I will present some of our
findings from this special tabulation, including those that help
address the questions you have posed on location, industry, and export
sales. Our findings will be largely limited to veteran business owners,
not to veteran-owned firms. This is because, for the purposes of the
SBO, service-connected disability is considered a characteristic of an
owner and not of a firm. Accordingly, Census did not provide direct
information on firms owned by service-disabled veterans (SDVOBs), but
only on their owners. To compare SDVOBs and veteran-owned firms in
general, we must look to data on owners for insight. Our special
tabulation provides that data.
Appended to this testimony are four tables with the special
tabulation data we are presenting today. All of the data in these
tables are expressed in percentages. This is how most data in the
Census Bureau's SBO reports are expressed, and a word of explanation is
in order here. These percentages represent shares of all SBO survey
respondents. To be counted as a respondent, a survey recipient had to
both respond and answer certain key questions. Census did not make an
estimate of the total universe of all veteran owners or veteran-owned
firms, but did provide estimates based on respondents only. Advocacy
has estimated that the number reported for total respondent firms in
2002 understated the total number of actual firms by a factor of 1.4,
based on other widely used Census reports.\18\ We do not have an
analogous upward adjustment factor for veteran firm owners, but we know
that the reported number of respondent veteran business owners
understates the universe of all veteran owners by some factor
attributable to nonrespondents.
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\18\ See SBE, p. 123, footnote 16, for a discussion of this
problem.
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With this limitation in mind, we can report the 2002 SBO's
estimates for all respondent firm owners. These are the base numbers to
which the percentages in the attached tables can be applied. However,
it should be remembered that these base numbers: (1) are from 2002 and
now somewhat dated, and (2) understate the actual totals because of
nonrespondents. The table which follows presents more detail on Census
respondent estimates, including these basic three:
20,527,000 total respondent business owners
2,973,000 total respondent veteran business owners
194,000 total respondent service-disabled veteran
business owners
The 2002 SBO also estimated that 14.5 percent of all respondent
business owners were veterans and that 12.2 percent of all respondent
firms had one or more veterans as majority interest owners (i.e., were
veteran-owned). Nearly 7 percent of veteran business owners were
disabled as the result of injury incurred or aggravated during active
military service.\19\ Just over 66 percent of veteran owners had a
majority interest in their firms, while 26.8 percent were equal
interest owners, and 7.1 percent were minority interest owners.
---------------------------------------------------------------------------
\19\ See http://www.census.gov/econ/sbo/02/cbosof.html.
Table 5.3: Owners of Respondent Firms by Owner's Veteran Status and
Business Interest, 2002
(percent except as noted)
------------------------------------------------------------------------
Owners of Owners of
Owners of respondent respondent
respondent firms with nonemployer
firms employees firms
------------------------------------------------------------------------
All owners (number) 20,526,725 5,574,044 14,954,681
------------------------------------------------------------------------
Majority interest owners 64.1 48.6 69.9
------------------------------------------------------------------------
Equal interest owners 27.4 29.1 26.7
------------------------------------------------------------------------
Nonmajority interest 8.6 22.3 3.4
owners
------------------------------------------------------------------------
Veteran owners (number) 2,973,246 811,740 2,161,506
------------------------------------------------------------------------
Majority interest owners 66.2 55.9 70.1
------------------------------------------------------------------------
Equal interest owners 26.8 25.8 27.1
------------------------------------------------------------------------
Nonmajority interest 7.1 18.3 2.8
owners
------------------------------------------------------------------------
Service-disabled veteran 193,750 37,521 156,229
(number)
------------------------------------------------------------------------
Majority interest owners 68.8 59.2 71.1
------------------------------------------------------------------------
Equal interest owners 26.5 27.1 26.3
------------------------------------------------------------------------
Nonmajority interest 4.7 13.7 2.6
owners
------------------------------------------------------------------------
Non-service- 2,600,043 724,445 1,875,598
disabledveteran(number)
------------------------------------------------------------------------
Majority interest owners 65.8 55.5 69.8
------------------------------------------------------------------------
Equal interest owners 26.9 25.8 27.3
------------------------------------------------------------------------
Nonmajority interest 7.3 18.7 2.9
owners
------------------------------------------------------------------------
Nonveteran (number) 17,411,631 4,566,839 12,547,792
------------------------------------------------------------------------
Majority interest owners 64.1 47.7 70.1
------------------------------------------------------------------------
Equal interest owners 27.3 29.6 26.5
------------------------------------------------------------------------
Nonmajority interest 8.6 22.7 3.4
owners
------------------------------------------------------------------------
See http://www.census.gov/prod/ec0w/sb0200cscbo.pdf. Note all estimates
are based on owners of firms that responded to the 2002 Survey of
Business Owners (SBO), both firms with paid employees and firms with
no paid employees. A respondent firm is defined as a business that
returned the survey form and provided the gender, Hispanic or Latino
origin, or race characteristics for the owner(s). No detail is
provided on respondents who did not report veteran or disability
status. Percentage columns represent the percentage of owners of firms
in the designated categories.
Source: U.S. Census Bureau, 2002 Survey of Business Owners (SBO),
Characteristics of Business Owners; p. 25, Table 4.
Note that 2.1 percent of respondent owners did not answer the veteran
status question, and 6.0 percent of respondent veteran owners did not
answer the disability status question. Accordingly, the total of
veteran and non-veteran owners does not equal the number of all
owners, nor does the total of veterans with and without disabilities
equal all veterans.
Veteran Business Owner Characteristics
The special tabulations that are appended to this testimony provide
a wealth of information about the distribution of respondent veteran
business owners within 11 different reporting categories:
Employment size of firm
Receipt size of firm
Legal form of organization
Year business acquired
Owner status
Geographic concentration
State
Industry
Customers with 10 percent or more of sales
Source of startup capital
Source of expansion financing
Eight of these categories appeared in the Census reports that were
published in 2007 (with some minor variations in breakpoints and
formatting). Advocacy has previously provided the Subcommittee with
information on these characteristics. However, Advocacy's special
tabulation now gives us additional information not included in the
earlier Census reports or our previous testimony. These data relate to
geographic concentration, State location, and legal form of
organization. Using both the new and older data, we can address three
of the questions that the Subcommittee posed, those relating to
location, industry sector, and export sales.
Location. Although we have no data on location by city, Advocacy
did ask Census for data by State, and these are displayed in Table 7b
appended to this testimony. The report generated from this tabulation
shows the percentage of all respondent owners in the United States who
are located in each State and in the District of Columbia. These are
broken into two main categories for each State, employers and
nonemployers. Within each of these two main categories, a breakout is
provided on the local distribution percentage for all owners, veteran
owners, service-disabled veteran owners, and those owners under 35 and
over 65 years of age. This type of depiction makes it possible to
compare the relative concentrations of the different types of business
owners in any given State.
For example, California's share of business owners is large because
of the State's size, but there are differing concentrations among
employer owners, with all owners representing 11.6 percent of the
national total, veteran owners 10.4 percent of their national total,
and service-disabled veteran owners 9.8 percent of their national
total. In Texas, by contrast, veterans and service-disabled veterans
have larger shares than all employer owners, with all owners
representing 6.1 percent of their national total, veteran owners 6.6
percent of their total, and service-disabled veteran owners 7.8 percent
of all service-disabled veteran owners.
Following are listings of the 10 States with the most veteran or
service-disabled respondent business owners, with separate listings for
employers and nonemployers. There are differences between these two
main categories that are masked in analyses that combine them.
Analogous information is available for all States and the District of
Columbia in the appended Table 7b. We have also listed in each line
below the shares for veteran owners, service-disabled veteran owners
(SDVs), and all owners, so that each group's relative share can be
readily seen together. This helps us identify States where veteran or
service-disabled veteran owners are either under- or over-represented
relative to all owners at large. First, here are the top 10 States for
veteran owners of employer firms:
California (veterans, 10.4 percent; SDVs, 9.8 percent;
all, 11.6 percent);
Texas (veterans, 6.6 percent; SDVs, 7.8 percent; all, 6.1
percent);
Florida (veterans, 5.7 percent; SDVs, 7.8 percent; all,
6.1 percent);
New York (veterans, 5.0 percent; SDVs, 5.1 percent; all,
6.3 percent);
Pennsylvania (veterans, 4.3 percent; SDVs, 3.0 percent;
all, 4.1 percent);
Illinois (veterans, 4.2 percent; SDVs, 2.7 percent; all,
4.5 percent);
Ohio (veterans, 4.1 percent; SDVs, 2.9 percent; all, 3.9
percent);
North Carolina (veterans, 3.3 percent; SDVs, 3.5 percent;
all, 2.9 percent);
Georgia (veterans, 3.0 percent; SDVs, 3.0 percent; all,
2.7 percent);
Michigan (veterans, 3.0 percent; SDVs, 2.8 percent; all,
3.4 percent).
The same 10 States led the Nation in terms of veteran owners of
nonemployer firms:
California (veterans, 10.5 percent; SDVs, 10.2 percent;
all, 12.3 percent);
Texas (veterans, 7.7 percent; SDVs, 8.0 percent; all, 7.2
percent);
Florida (veterans, 6.5 percent; SDVs, 7.8 percent; all,
6.1 percent);
New York (veterans, 4.5 percent; SDVs, 3.9 percent; all,
6.2 percent);
Pennsylvania (veterans, 4.3 percent; SDVs, 3.3 percent;
all, 4.0 percent);
Ohio (veterans, 3.8 percent; SDVs, 2.8 percent; all, 3.8
percent);
Illinois (veterans, 3.5 percent; SDVs, 2.4 percent; all,
4.0 percent);
North Carolina (veterans, 3.2 percent; SDVs, 3.6 percent;
all, 2.9 percent);
Michigan (veterans, 3.1 percent; SDVs, 2.7 percent; all,
3.4 percent);
Georgia (veterans, 3.0 percent; SDVs, 3.6 percent; all,
2.7 percent).
While the top 10 States for veteran owners are the same for both
employers and nonemployers, new States appear on top 10 lists of States
for service-disabled owners of employer firms:
California (SDVs, 9.8 percent; veterans, 10.4 percent;
all, 11.6 percent);
Texas (SDVs, 7.8 percent; veterans, 6.6 percent; all, 6.1
percent);
Florida (SDVs, 7.8 percent; veterans, 5.7 percent; all,
6.1 percent);
New York (SDVs, 5.1 percent; veterans, 5.0 percent; all,
6.3 percent);
North Carolina (SDVs, 3.5 percent; veterans, 3.3 percent;
all, 2.9 percent);
Virginia (SDVs, 3.4 percent; veterans, 2.9 percent; all,
2.5 percent);
Pennsylvania (SDVs, 3.0 percent; veterans, 4.3 percent;
all, 4.1 percent);
Georgia (SDVs, 3.0 percent; veterans, 3.0 percent; all,
2.7 percent);
Washington (SDVs, 3.0 percent; veterans, 2.8 percent;
all, 2.6 percent);
Ohio (SDVs, 2.9 percent; veterans, 4.1 percent; 3.9
percent).
Finally, here are the top 10 States for service-disabled owners of
nonemployer firms:
California (SDVs, 10.2 percent; veterans, 10.5 percent;
all, 12.3 percent);
Texas (SDVs, 8.0 percent; veterans, 7.7 percent; all, 7.2
percent);
Florida (SDVs, 7.8 percent; veterans, 6.5 percent; all,
6.1 percent);
New York (SDVs, 3.9 percent; veterans, 4.5 percent; all,
6.2 percent);
North Carolina (SDVs, 3.6 percent; veterans, 3.2 percent;
all, 2.9 percent);
Georgia (SDVs, 3.6 percent; veterans, 3.0 percent; all,
2.7 percent);
Pennsylvania (SDVs, 3.3 percent; veterans, 4.3 percent;
all, 4.0 percent);
Virginia (SDVs, 3.2 percent; veterans, 2.7 percent; all,
2.4 percent);
Ohio (SDVs, 2.8 percent; veterans, 3.8 percent; all, 3.8
percent);
Michigan (SDVs, 2.7 percent; veterans, 3.1 percent; all,
3.4 percent).
Geographic concentration. Another new measure in Advocacy's special
tabulation was geographic concentration. We asked Census to identify
whether business owners were located within a metropolitan or
``micropolitan'' statistical area, that is to say, in areas with an
urban core population of 10,000 or more.\20\ Those not within such
areas could be described as being located in rural areas. These data
are depicted in the appended Table 7b. The tabulation shows that 7.6
percent of all employer business owners and 7.8 percent of all
nonemployer owners were located outside of metro/micro areas in 2002,
i.e., in rural areas.
---------------------------------------------------------------------------
\20\ Metropolitan statistical areas have an urban core with 50,000
or more inhabitants. Micropolitan statistical areas have an urban core
with 10,000 to 49,999 inhabitants. See definitions or maps for more
information on metropolitan and micropolitan areas.
---------------------------------------------------------------------------
Slightly higher numbers of veteran owners and service-disabled
veteran owners were located outside of metro/micro areas. Table 7b
shows that 8.2 percent of veteran employer owners and 8.3 percent of
service-disabled veteran employer owners were located in rural areas.
This trend was also true among nonemployer owners, where 7.8 percent of
all such owners were located outside of metro/micro areas, but 8.8
percent of both veteran and service-disabled veteran owners were
located in rural areas.
Industry. The Subcommittee has asked for information on veteran-
owned firms by industry type. The appended Table 7c from our special
tabulation of Census data includes data in the same format described
above for each of 20 main industry classifications (two-digit NAICS
codes). Percentage shares are set out for all owners, veteran owners,
and service-disabled veteran owners in both the employer and
nonemployer classifications. This distinction is of interest because
there are significant differences in many industries that are masked
when both employers and nonemployers are combined into a single
group.\21\
---------------------------------------------------------------------------
\21\ For a discussion of this problem, see ``Do Business Definition
Decisions Distort Small Business Research Results?'' (August 2008:
http://www.sba.gov/ADVO/research/rs330tot.pdf), an Advocacy working
paper by Brian Headd and Radwan Saade.
---------------------------------------------------------------------------
For example, 6.7 percent of all employer owners, but only 1.7
percent of all nonemployer owners, owned firms in manufacturing.
However, when we look at all firms (not owners) together, Census
reported in 2002 that 2.7 percent of all firms were manufacturers.
Similarly, 5.1 percent of all employer owners and 12.9 percent of all
nonemployers were in the real estate renting and leasing group. The
combined share for all firms in this group was 9.6 percent. To help
shed light on this phenomenon and to provide additional context for our
special tabulations, I have also appended a chart prepared by the
Census Bureau depicting firm distribution by industry for both all
firms and veteran-owned firms.\22\
---------------------------------------------------------------------------
\22\ This chart is also available at http://www2.census.gov/econ/
sbo/02/vetbuscharts.pdf.
---------------------------------------------------------------------------
To summarize from Census firm data, veteran-owned firms are
generally distributed among the 20 major industries (two-digit NAICS
codes) similarly to the distribution of all respondent firms, as
depicted in the chart appended to my testimony. The five largest
categories are the same for both groups:
Professional, scientific, and technical services
(veterans, 18.7 percent; all, 15.7 percent);
Construction (veterans, 13.9 percent; all, 11.7 percent);
Other services (veterans, 10.2 percent; all, 11.2
percent);
Retail trade (veterans, 9.5 percent; all, 11.6 percent);
and
Real estate and rental/leasing (veterans, 9.3 percent;
all, 9.6 percent).
However, when we look at employer owners instead of firms, using
Advocacy's special tabulations from Census, the top five are different:
Professional, scientific, and technical services
(veterans, 14.7 percent; all, 14.0 percent);
Construction (veterans, 13.7 percent; all, 13.7 percent);
Retail trade (veterans, 13.3 percent; all, 14.2 percent);
Health care and social assistance (veterans, 9.4 percent;
all, 8.8 percent);
Manufacturing (veterans, 7.4 percent; all, 6.7 percent).
If we shift to nonemployer owners, again using the special
tabulations, we get yet another view:
Professional, scientific, and technical services
(veterans, 17.1 percent; all, 15.5 percent);
Real estate and rental/leasing (veterans, 14.8 percent;
all, 12.9 percent);
Construction (veterans, 12.1 percent; all, 10.8 percent);
Other services (veterans, 10.9 percent; all, 12.3
percent);
Retail trade (veterans, 10.4 percent; all, 11.4 percent).
We can also rank the top five industries for service-disabled
veteran employer owners:
Professional, scientific, and technical services (SDVs,
14.8 percent; all veterans, 14.7 percent);
Construction (SDVs, 13.7 percent; all veterans, 13.7
percent);
Retail trade (SDVs, 13.6 percent; all veterans, 13.3
percent);
Other services (SDVs, 7.4 percent; all veterans, 6.4
percent);
Health care and social assistance (SDVs, 7.2 percent; all
veterans, 9.4 percent).
Finally, a ranking of the top five industries for service-disabled
nonemployer owners:
Professional, scientific, and technical services (SDVs,
16.0 percent; all veterans, 17.1 percent);
Construction (SDVs, 12.7 percent; all veterans, 12.1
percent);
Other services (SDVs, 11.9 percent; all veterans, 10.9
percent);
Retail trade (SDVs, 11.6 percent; all veterans, 10.4
percent);
Real estate and rental/leasing (SDVs, 11.1 percent; all
veterans, 14.8 percent).
We have presented these various rankings in order to show that
there are differences between employers and nonemployers that are often
missed in analyses that combine the two. The appended special
tabulations let us see these differences and avoid incorrect
generalizations.
Exporting. The Subcommittee also asked for information on exporting
by veteran-owned firms. We have 2002 Census SBO data that can help us
here. The main report on veterans in business examined types of ``major
customers'' of respondent firms, those customers that accounted for 10
percent or more of a firm's sales. Included among the possible
categories of major customers was an ``export sales'' category on which
data were reported. Those firms with major export customers made up 1.4
percent of all respondent firms, 1.8 percent of respondent employers,
and 1.3 percent of respondent nonemployers.
Veteran-owned firms reported similar, but slightly smaller,
percentages of firms with major export customers: 1.3 percent of all
veteran-owned firms, 1.6 percent of veteran-owned employers, and 1.2
percent of veteran-owned nonemployers.
Advocacy's special tabulation of 2002 Census owner characteristics
also gave us information on owners whose firms had major export
customers. This data is in Table 7c appended to this testimony. Among
employer firm owners, 2.0 percent of all owners, 1.8 percent of veteran
owners, and 2.2 percent of service-disabled veteran owners had major
export customers. Among nonemployers, 1.4 percent of all owners, 1.3
percent of veteran owners, and 1.5 percent of service-disabled veteran
owners had major export customers.
Federal procurement. Advocacy does not compile the official
statistics on Federal procurement, socio-economic goaling or agency
performance on goaling targets. Data of this type are maintained by
SBA's Office of Government Contracting and by the Federal Procurement
Data System (FPDS). We will defer to the responsible offices on this
subject. Detailed data on goaling and performance are also posted on
both the SBA and FPDS Web sites.
Conclusion
This concludes my prepared testimony. While we do not have exact
answers to all the questions posed by the Subcommittee, I hope that the
information that we did provide on your questions relating to veteran
business location, industries, and exporting will be helpful. We have
only mentioned a very small fraction of the large amount of information
in the special tabulations we have appended to this testimony. I hope
that the additional data will be useful to the Subcommittee, and we
stand ready to help answer any questions that arise in connection with
its review. Also, as I mentioned earlier, we do have a research study
nearing completion that we hope will be able to address your question
on barriers to veteran entrepreneurship. Advocacy will keep the
Subcommittee's staff informed, and when this contract project is
completed, we will be pleased to provide a briefing.
We at Advocacy very much appreciate the Subcommittee's interest in
veteran entrepreneurship issues and Advocacy's work in this area. We
look forward to continuing to work with the Subcommittee in any way we
can to advance our knowledge about veterans in business, and to help
you in your deliberations on how to best serve our Nation's veterans
community.
Figure 3: Percentage Distribution of Respondent Firms by Kind of
Business for All Firms and Firms With One or More Veterans As a
Majority Interest Owners: 2009
Prepared Statement of Diane Farrell,
Director, Export-Import Bank of the United States
The Export-Import Bank of the United States (Ex-Im Bank) is the
official export credit agency of the U.S. Government.
Ex-Im Bank, which recently celebrated its 75th anniversary, is an
independent Federal agency chartered by the U.S. Congress with its
mission to sustain and increase U.S. jobs.
Ex-Im Bank provides loans, loan guarantees and insurance to help
U.S. companies export their goods and services. Ex-Im Bank products
facilitate commerce at all levels. Ex-Im Bank helps American business
reach the 95 percent of the global marketplace that is beyond our
borders. All regional offices of Ex-Im Bank, including New York, Miami,
Houston, Chicago, Los Angeles, and San Francisco are committed to small
business outreach.
Ex-Im Bank does not compete with private sector lenders but
provides export financing that fill trade financing gaps. The Bank
assumes credit and country risks that the private sector is unable or
unwilling to accept. Ex-Im Bank further levels the playing field for
U.S. exporters by matching the financing that other governments provide
to their exporters.
It is important to note--Ex-Im Bank is self-sustaining--meaning the
Bank pays for its operations from the interest and fees it collects.
As part of its mission, Ex-Im Bank is committed to providing
opportunities for all American businesses--especially Service-Disabled,
Veteran-Owned Small Business firms.
Ex-Im Bank staff continues to support meetings in connection with
the Interagency Network of Enterprise Assistance Providers. We continue
our collaboration with the Center for Veterans Enterprise, benefiting
from their partnerships with the Small Business Administration,
American Small Business Development Associations, Department of
Defense, Department of Veterans Affairs, and the Department of Labor.
Export loan authorizations by Ex-Im Bank more than doubled to $13.2
billion during the first half of the current fiscal year. That is a
125-percent increase compared to the record $5.9 billion authorized
during the same period in Fiscal Year 2009.
An estimated 109,000 American jobs have been supported by the
Bank's financing this fiscal year to date, compared to about 61,000
jobs supported during the same period last fiscal year.
Small business export loan authorizations have increased half a
billion dollars during the same period to $2.3 billion, 28 percent
greater than the first half of FY2009.
The 2010 first-half figures are the latest in a series of records
set by Ex-Im Bank while addressing tightened liquidity in the
marketplace. In FY2009, total Ex-Im Bank authorizations came to $21
billion while authorizations for small business exporters totaled $4.36
billion--both historic highs.
To assist small businesses, the Bank implemented new products and
services such as a premium rate reduction of 15 percent on our short-
term multi-buyer insurance policies and short-term small business
environmental multi-buyer insurance polices. The premium rate reduction
affects approximately half of all Ex-Im Bank insurance policyholders.
As of March 31, 2010, the self-sustaining Bank's FY2010 receipts in
excess of costs totaled $162.6 million. We are proud that we are able
to function at no expected cost to the U.S. taxpayer.
My colleagues at Ex-Im Bank and I look forward to working with the
groups testifying today to increase our support within the veteran
small business community.
__________
Chairwoman Herseth Sandlin, Ranking Member Boozman, Members of the
Subcommittee, I welcome the opportunity to testify before you on the
efforts the Export-Import Bank of the United States (Ex-Im Bank) is
undertaking to help not only our veterans, but also U.S. small
businesses, succeed in an increasingly difficult and complex
international marketplace.
Our veterans deserve all the gratitude and assistance that the
Federal Government can provide for them. I commend all our veterans for
their service and sacrifice to this country.
Chairman Hochberg wishes he could be here today, and he, along with
all my colleagues at the Bank are committed to working with this
Committee and the other groups and agencies represented here to expand
our outreach to small businesses owned by our veterans.
While the credit crunch appears to be easing, Ex-Im Bank remains
committed to filling the gaps in trade financing and supporting and
sustaining U.S. jobs, just as it has done for every economic crisis
faced by this country since the Great Depression.
A few introductory words about the Bank may be helpful. Ex-Im Bank
is the official export credit agency of the United States, and an
independent Federal agency chartered by the U.S. Congress.
Ex-Im Bank provides loans, loan guarantees and insurance to help
U.S. companies export their goods and services. We have a variety of
products to facilitate commerce at all levels. Ex-Im Bank helps
American business reach the 95 percent of the global marketplace that
is beyond our borders.
It does not compete with private sector lenders but provides export
financing that fill trade financing gaps. The Bank assumes credit and
country risks that the private sector is unable or unwilling to accept.
It also levels the playing field for U.S. exporters by matching the
financing that other governments provide to their exporters.
Importantly, the Bank is self-sustaining, meaning the Bank pays for its
operations from the interest and fees it collects. As of March 31,
2010, the self-sustaining Bank's FY2010 receipts in excess of costs
totaled $162.6 million.
For more than 75 years, the Bank's mission to grow and sustain
American jobs has remained unchanged.
Just last month at Ex-Im Bank's Annual Conference, President Obama
charged this government under his National Export Initiative with the
goal of doubling U.S. exports and creating 2 million American jobs
within the next 5 years. The Bank's support of small businesses and
veteran-owned businesses will lead the economic recovery and achieve
the President's target.
Ex-Im Bank is committed to providing opportunities for all American
businesses--especially Service-Disabled, Veteran-Owned Small Business
firms.
While I am proud to be here today to let our friends in the
veterans community know that Ex-Im Bank can help, this is not the first
outreach the Bank has done to this important community. Ex-Im Bank
staff recently attended National Veteran Small Business Conference and
Expo in July of last year. The U.S. Department of State (Office of
Small and Disadvantaged Business) requested our participation along
with the Danish Embassy and Australian Embassy on an International
Business Development Panel at the conference. Seventy veteran-owned
businesses attended the session where the Bank detailed our products
that are available to them. I am happy to report that there were
approximately 2,600 conference attendees.
Ex-Im Bank staff continues to support meetings in connection with
the Interagency Network of Enterprise Assistance Providers (INEAP).
We continue our collaboration with the Center for Veterans
Enterprise (CVE), benefiting from their partnerships with the Small
Business Administration, American Small Business Development
Associations, Department of Defense, Department of Veterans Affairs,
and the Department of Labor. Ex-Im Bank staff maintains contact through
the INEAP/Manufacturing Extension Partnership. Ex-Im Bank promotional
materials are shared with the Veterans Business Outreach. The last
meeting was in March of this year.
I would like to take a moment to highlight a veteran's success
story at Ex-Im Bank. In 1956, George and Gertrude Gascon, 10 years in
the military, sought to purchase property in Southwest Harbor, Maine on
which to settle after retirement from the U.S. Navy. Gertrude's
parents, John and Dorothy Dunbar, mentioned that Ogden's Lobster Pound
was for sale. Flash forward 54 years to January 2010, when the Gascons'
son-in-law, Anthony Pettegrow, now co-owner of the business with the
Gascons' daughter Josette, called Ex-Im's Northeast Regional Office.
The domestic market, Mr. Pettegrow explained, had become overly
competitive due to an unexpected consequence of overfishing in the
North Atlantic. There had been a virtual elimination of the Maine
lobster's natural marine predators and lobster populations had swelled,
with lobsters surviving long enough to grow to larger weights. The
resulting oversupply has significantly impacted domestic prices.
Trenton Bridge Lobster Pound recognized that American lobsters
commanded a premium overseas, and began selling abroad at healthier
margins than had been possible at home. As Mr. Pettegrow also
explained, there are costly barriers to entry to exporting lobsters,
and Trenton Bridge Lobster Pound is already set up properly to expand
its more lucrative export sales. Two existing customers in the UK and
Italy now account for most of the company's sales. Inquiries have
recently been received from new buyers in Spain, Korea, and elsewhere,
which the Pettegrows would like to pursue, but with prudent coverage.
As the company qualifies as a small business per SBA definition, Mr.
Pettegrow was directed by the Regional Office toward the risk
protection and marketing benefits of Ex-Im Bank's Small Business Short-
Term Multi-Buyer Export Credit Insurance Policy. Trenton Bridge placed
a policy application shortly after this conversation through a broker
and by early February had received and accepted a quotation from Ex-Im
Bank. Approximately 20 of the independent lobstermen supplying the
company are also veterans, who now benefit from Trenton Bridge Lobster
Pound's newly opened markets.
I would like to provide a brief review of recent financing figures
that will give you an idea of the challenges and opportunities that
abound.
Export loan authorizations by Ex-Im Bank more than doubled to $13.2
billion during the first half of the current fiscal year. That is a
125-percent increase compared to the record $5.9 billion authorized
during the same period in Fiscal Year 2009.
An estimated 109,000 American jobs have been supported by the
Bank's financing this fiscal year to date, compared to about 61,000
jobs supported during the same period last fiscal year.
Small business export loan authorizations have increased half a
billion dollars during the same period to $2.3 billion, 28 percent
greater than the first half of FY2009.
The 2010 first-half figures are the latest in a series of records
set by Ex-Im Bank while addressing tightened liquidity in the
marketplace. In FY2009, total Ex-Im Bank authorizations came to $21
billion while authorizations for small business exporters totaled $4.36
billion--both historic highs.
Export financing for buyers of U.S. goods and services sold in Asia
increased from $456 million last year to $1.9 billion so far this
fiscal year; all other regions in the world posted increases this
fiscal year except Africa where exports are roughly even.
We pay for our operations from the interest and fees collected.
This means we are able to finance our program budget, the amount we
must set aside to cover risks, as well as our administrative budget,
through the fees and payments received through our programs.
As of March 31, 2010, the self-sustaining Bank's FY2010 receipts in
excess of costs totaled $162.6 million. We are proud that we are able
to function at no expected cost to the U.S. taxpayer.
Ex-Im Bank is uniquely able to fill the current financing gap in a
number of ways.
First, is our institutional flexibility. Institutions such as Ex-Im
Bank are prepared to respond to abrupt economic changes. For instance,
prior to FY2009, most of the Bank's larger transactions, and some
smaller- and medium-sized, were financed through loan guarantees, where
Ex-Im Bank would guarantee up to 85 percent of a commercial bank loan
to a foreign buyer. But Ex-Im Bank also had the option of lending
directly to a foreign buyer. In FY2009, commercial banks lacked the
liquidity to offer loans. So, where appropriate, increasingly Ex-Im
Bank has stepped in and provided direct loans.
In our working capital program, Ex-Im Bank modified its credit
standards to help small businesses so their exports could be stimulated
and U.S. jobs sustained and created. These actions have led to a banner
year for the working capital product, eclipsing the former record for
authorizations by over $70 million. We, of course, carefully monitor
this portfolio to minimize default risks.
Also to assist small businesses, the Bank implemented new products
and services such as a premium rate reduction of 15 percent on our
short-term multi-buyer insurance policies and short-term small business
environmental multi-buyer insurance polices. The premium rate reduction
affects approximately half of all Ex-Im Bank insurance policyholders.
During this economic downturn, Ex-Im Bank has introduced a ``take-
out'' option, which allows commercial banks to sell their Ex-Im Bank
guaranteed medium- and long-term loans back to Ex-Im Bank. This enables
commercial banks to reduce their liquidity risks, lower borrowing
rates, increase their own ability to lend, and make U.S. exports more
competitive.
Looking to the future, we are seeking ways to do even more. Inter-
agency coordination and cooperation can be strengthened through the
Trade Promotion Coordinating Committee, or TPCC, which is made up of 20
U.S. Government agencies involved in trade, under the direction of the
Department of Commerce. The Secretary of Commerce, who serves as the
committee's chairman, has made a vital TPCC a strategic priority. I
look forward to working with Secretary Locke, Ex-Im Bank Chairman
Hochberg, and the TPCC to ensure that every effort is made to reach out
directly to small businesses, including our veteran-owned businesses
that either currently export or could potentially export.
Ex-Im Bank, in close cooperation with other government agencies, is
doing this through a hugely successful and widely attended
``ExportsLive'' series. These trade promotion events provided
exporters, small businesses new to exporting, and banks in New York,
Boston, Miami, Houston, Detroit, Chicago, Los Angeles, Cincinnati,
Minneapolis, Madison, WI, and Seattle areas with direct access to
agency representatives from Ex-Im Bank, SBA, Commerce, USTR, OPIC, and
TDA, along with one-on-one counseling for exporters. I look forward to
more success from our ``ExportsLive'' trade events where we plan to
visit Montana, Colorado, and Long Island, New York. I am sure that Ex-
Im Bank would welcome the chance to work with you and your Committee
colleagues in hosting such events back in your districts.
Moreover, all of the regional offices of Ex-Im Bank, including New
York, Miami, Houston, Chicago, Los Angeles, and San Francisco, are
fully devoted to small business outreach.
We host or attend over 400 conventions, seminars, or trade shows
annually, have thousands of one-on-one meetings with businesses, and
work aggressively to ensure banks and economic development agencies are
aware of Ex-Im Bank and our products and services.
We estimate that there are 259,000 actual small business exporters
in the United States. With a business development staff of less than
40, Ex-Im Bank is working incredibly hard to reach these companies.
Similar outreach efforts are necessary to get commercial banks
involved, or in many cases, re-involved as the banks are closer to
American business, and can advise business on the resources Ex-Im Bank
and other Federal agencies can offer to increase their sales and
increase employment.
Because of our limited resources, we need to use more third party
``multipliers'' in our outreach efforts. For instance, we are
refocusing our efforts to partner with Senators, Members of Congress,
Governors, Mayors, State legislators, and others to host in-State trade
seminars with local businesses. That is one of the reasons I am so
proud to be here today, and I thank you for this opportunity to inform
our veterans about the services provided by Ex-Im Bank.
We stand ready to work with you to help finance exports from
veteran-owned businesses in your States and across the country. And
while there is still much more to be done, we know how to do it and
what the goal is--to increase U.S. exports--thereby increasing U.S.
jobs and opportunities for all Americans, but especially those who have
served this country with honor and distinction.
I look forward to partnering with the other veterans groups
testifying here today in getting our message out on how to increase
exports by our veteran exporting community.
Thank you again for this opportunity and I am happy to answer your
questions.
Prepared Statement of Joseph C. Sharpe, Jr.,
Director, National Economic Commission, American Legion
EXECUTIVE SUMMARY
According to opening remarks made by Chair Nydia M. Velazquez
during a Small Business hearing in March of this year, in FY 2009
``Federal agencies missed their small business contracting goals by 2
percent. Procurement officers will tell you that number is negligible,
and no big deal. But while a 2 percent shortfall may not sound like a
lot, it ultimately cost entrepreneurs $10 billion in missed
opportunity. Or to put it another way, it cost Americans $10 billion in
lost job creation. Small contractors, like all other small firms,
create roughly 70 percent of new jobs. So when their ability to win
contracts is compromised, employment numbers are too.''
The American Legion concurs with National Veteran-Owned Business
Association's assessment in their statement submitted for this hearing
regarding the 2009 White House announcement that executive agencies
shall not engage in noncompetitive contracts. We are concerned though
that the announcement made no distinction between the thousands of sole
source awards to productive and efficient small businesses under the
SDVOSB, HUBZone or 8(a) programs and the billions of dollars awarded
sole source to large businesses such as KBR and Halliburton. Specific
guidance needs to be provided to contracting officers as to whether the
Administration is restricting the use of legitimate contracting
mechanisms to support the Nation's small businesses, or to restrict
multi-billion dollar noncompetitive awards to large prime contractors.
Therefore, The American Legion recommends:
Service-disabled, veteran-owned small businesses set-
asides should be allowed under the Federal Supply Schedule Program.
Currently, GSA schedules are exempt from Federal Acquisition
Regulations part 19. Without this change, SDVOSB will be limited in
their quest for small business opportunities to compete for Federal
contracts.
The SBA needs to emphasize Executive Order 13-360 and
establish it as a procurement priority across the Federal sector.
Federal agencies need to be held accountable by the SBA for
implementing the Executive Order and the SBA needs to establish a means
to monitor agencies progress and where appropriate, establish a report
to identify those that are not in compliance, and pursue ongoing
followup.
The American Legion believes that the majority of funding allocated
to veteran and military projects through the stimulus bill, as well as
future spending bills, should be spent exclusively with veteran-owned
firms. It was the veteran who volunteered to defend this Nation, the
veteran who continues to keep our democracy intact, and the veteran who
deserves the right to participate in rebuilding America's
infrastructure and other necessary projects. In this capacity, veterans
will continue to serve the people of the United States by building and
growing strong, reliable, dependable businesses.
__________
Chair Herseth Sandlin, Ranking Member Boozman and Members of the
Subcommittee:
Thank you for the opportunity to present The American Legion's
views on the Status of Veteran Small Businesses.
The American Legion views small business as the backbone of the
American economy. It is the mobilizing force behind America's past
economic growth and will continue to be a major factor as we move well
into the 21st century. Reports show that businesses with fewer than 20
employees account for 90 percent of all U.S. firms and are responsible
for more than 75 percent of all new jobs, generated $993 billion in
income in 2006, and employ 58.6 million people. There are 27 million
small businesses in the U.S. and 99.7 percent of all firms are small
businesses.
In FY 2007, the Small Business Administration's (SBA's) Office of
Government Contracting reported that of more than $378.5 billion in
Federal contracts identified as small business eligible, small
businesses only received a total of $83 billion in prime contract
awards and about $64 billion in subcontracts. Service-Disabled Veteran-
Owned Businesses (SDVOBs) were recipients of $3.81 billion, or 1.01
percent of those available contract dollars.
According to opening remarks made by Chair Nydia M Velazquez during
a Small Business hearing in March of this year, in FY 2009 ``Federal
agencies missed their small business contracting goals by 2 percent.
Procurement officers will tell you that number is negligible, and no
big deal. But while a 2 percent shortfall may not sound like a lot, it
ultimately cost entrepreneurs $10 billion in missed opportunity. Or to
put it another way, it cost Americans $10 billion in lost job creation.
Small contractors, like all other small firms, create roughly 70
percent of new jobs. So when their ability to win contracts is
compromised, employment numbers are too.''
America has benefited immeasurably from the service of its 23.4
million living veterans, who have made great sacrifices in the defense
of freedom, preservation of democracy, and the protection of the free
enterprise system. Due to the experience veterans gain in the military
the success rate of veteran-owned businesses is higher than other non-
veteran owned businesses. The current War on Terror has had a
devastating impact on the Armed Forces and has contributed to
exacerbating this country's veteran unemployment problem, especially
within the Guard and Reserve components of the military. According to
the Department of Labor the present unemployment rate for recently
discharged veterans is an alarming 20 percent, and for veterans between
the ages of 18 to 24 there is a 30.2 percent unemployment rate.
Furthermore, presently one out of every four veterans who do find
employment earns less than $25,000 per year. Unfortunately, many of the
thousands of servicemembers who are currently leaving the service are
from the combat arms and nonskilled professions that are not readily
transferable to the civilian labor market.
As reported earlier in this statement the best way of combating
unemployment is through the creation of new jobs. Small business
creates an estimated 65 percent to 75 percent of net new jobs,
therefore providing a central element for strong economic growth.
Government should assist in the creation of new jobs by encouraging
qualified entrepreneurs to start and expand their small businesses. The
American Legion believes no group is better qualified or deserving of
this type of assistance than veterans.
Increasingly, the growth and stability of this Nation's economy is
dependent on the long-term success of the small business networks
across the country. However, during a time of war there is much to be
accomplished. Ironically, for too many years, the very men and women
who served in uniform, stood ready to fight, and if necessary die in
order to protect and preserve America's free enterprise system, are
summarily ignored by the Federal agencies responsible for meeting their
small business needs.
The Small Business Administration has the responsibility of
supporting business owners who are military veterans, yet the office
empowered to oversee these programs remains critically understaffed,
underfunded, and still marginalized despite laws championed by the
Small Business Committee to further empower veterans' entrepreneurship
programs.
The Department of Defense (DoD), who will have the responsibility
of directing more than $6.5 billion of stimulus infrastructure,
continues to be satisfied with an embarrassing, less than 1 percent
achievement of the federally-mandated 3 percent SDVOB contracting goal.
Especially important to note is that all of the stimulus money has been
dedicated to construction and infrastructure improvement, and these are
two of the strongest areas of SDVOB ownership according to the Federal
Central Contractors Registry.
Additionally, the Army Corps of Engineers combined appropriations
to improve and construct VA hospital and medical facilities adds up to
nearly $6 billion. All totaled, there will be more than $12 billion
spent just out of the stimulus package alone. The omnibus FY2009
Appropriations Act (P.L. 111-8) increased that amount by more than $4.3
billion for the Army Corps in Construction and Maintenance, and
additional billions in DoD spending.
With the more than $20 billion being spent on veteran and military
related projects, The American Legion finds it unconscionable that
businesses owned by veterans remain at the back of the line when
competing for Federal contracts according to the Federal Acquisition
Regulation.
Veteran Small Business Training Centers
Last year, The American Legion pointed out that although the
stimulus package included a number of economic development and small
business outreach programs, not a dime was specifically targeted toward
the development of veteran-owned businesses. Veterans deserve the
finest assistance available. Year after year this Nation struggles to
maintain the operation of three Veterans Business Resource Centers
originally funded through the National Veterans Business Development
Corporation, nor has Congress increased the assistance to the five
other Centers supported by the SBA's Office of Veterans Business
Development in more than 5 years.
However, on March 31, 2010, SBA announced the award of grants to 10
local SBA Small Business Development Centers (SBDCs) to increase
entrepreneurial assistance to veterans. The grants will provide
approximately $1 million to fund programs for veterans who promote
business ownership and provide services to small businesses dealing
with the deployment of key personnel overseas. Each SBDC receiving
funds will promote increased coordination of services to veterans, and
will use multimedia tools to connect veterans through distance learning
and customized online businesses counseling by providing services to
reach the local veteran business community. The American Legion
applauds $1 million in additional funding for grants to be given out on
the behalf of veterans; nevertheless, SBA was given $10 million in
additional discretionary spending. The American Legion believes a
portion of that money needs to be directed toward the Office of
Veterans Business Development for veteran's entrepreneurial endeavors.
Currently, too many military families are suffering financial
hardship while their loved ones are recuperating in military hospitals
around the country. Spouses are leaving their jobs to be with that
disabled servicemember only to watch their family finances deteriorate.
In many cases, seamless transition is just a wishful thought; however
if business development training was offered to military members, a
small home-based business could be the answer in guaranteeing a
constant source of revenue for the family. Again, these Centers can be
a vital link toward fulfilling this need.
The American Legion strongly supports the mandates of the
``Veterans Entrepreneurship and Small Business Development Act of
1999'' (P.L. 106-50) that were designed to assist all veterans wishing
to start, expand, or protect their business. If there is a true desire
to assist veterans returning from Iraq and Afghanistan in developing
small businesses, we must work together to enforce and expand upon the
mandates of P.L. 106-50.
The Office of Veterans Business Development within the SBA remains
crippled and ineffective due to inadequate funding, and $750,000 in FY
07 and $742,000 in FY 08 is woefully short to realistically support
veteran entrepreneurship. These amounts, which are less than the office
supply budget for the SBA, are expected to support the Nation's entire
population of veteran entrepreneurs. The American Legion feels that
this is insufficient and disappointing to America's veteran business
owners and clearly undermines the spirit and intent of P.L. 106-50. The
American Legion strongly supports increased funding for SBA's Office of
Veterans Business Development so it can provide enhanced outreach and
community-based assistance to veterans and self-employed eligible
members of the Reserves and National Guard. The American Legion
recommends this office receive an additional $13 million, up from its
current level of $2 million in FY 2010, to $15 million in FY 2011 in
order to implement a nationwide community-based assistance program to
veterans and self-employed members of the Reserve and National Guard.
Small Business and the Credit Crunch
Small businesses are another casualty of the credit crunch caused
by the ongoing financial crisis. By the end of 2008, more than half of
the Nation's small businesses looking for credit were unable to obtain
a loan. This credit freeze will force many businesses to shut their
doors, while others will be unable to expand. In either case, it means
a loss of American jobs. Congress should implement current efforts to
thaw the credit market for small businesses by establishing a direct
lending program within the SBA. This program could provide loans to
small businesses that cannot otherwise find credit, thereby potentially
saving or creating tens of thousands of American jobs.
During the fourth quarter of 2008, 70 percent of banks reported
tightening their lending standards for small firms. As a consequence,
fewer than half of the small businesses that tried to get a loan in the
fourth quarter of 2008 were able to get one. Of the small businesses
that tried to obtain a new line of credit, only 3 in 10 succeeded. The
credit crisis is hitting small businesses across the board, including
those that have been current in their payments and have no ties to
high-risk sectors of the economy such as housing.
From November 2007 to November 2008, more than one quarter of small
businesses reported a decline in the number of jobs at their companies.
In December 2008, only one in eight small businesses said they planned
to hire new employees in the next 12 months, a 48 percent drop since
August 2008. In addition, the number of small businesses filing for
bankruptcy rose 54 percent from 2007 to 2008.
The 7(a) loan program is the SBA's largest and most used lending
program. Under this program, SBA provides a guaranty of up to 85
percent for loans provided by private-sector to small businesses. But
because 7(a) loans are offered through private-sector banks, which are
reeling from the current crisis, small businesses may not be able to
get the relief they need. From the first quarter of 2008 to the first
quarter of 2009, the number of loans approved by the 7(a) program
dropped 57 percent. Moreover, the SBA is expected to guarantee only
about $10 billion in loans this year, down from its historic norm of
$20 billion per year.
To help ease the credit crisis for small businesses, The American
Legion urges Congress to establish a direct lending program through the
SBA. This effort would offer low-interest loans to otherwise healthy
veteran-owned and service-disabled veteran-owned businesses that are
having trouble obtaining the credit they need for necessary operating
expenses or expansion.
Legislation and Veterans Federal Procurement Opportunity
The American Legion seeks and supports legislation to require a 5
percent goal, with set-asides and sole source authority for Federal
procurements and contracts for businesses owned and operated by
service-disabled veterans and businesses owned and controlled by
veterans. This includes those small businesses owned by Reserve
component members who have been or may be called to active duty, or may
be affected by base closings and reductions in the military forces.
The American Legion has encouraged Congress to require reasonable
``set-asides'' of Federal procurements and contracts for businesses
owned and operated by veterans. We have supported legislation in the
past that sought to add service-connected disabled veterans to the list
of specified small business categories receiving 3 percent set-asides.
The American Legion continues to support this Subcommittee's effort to
raise the priority level of Service-Disabled Veteran Business Owners in
the Federal Acquisition Regulation by changing ``may'' to ``shall'' and
further by eliminating the ``Rule of 2.''
Noncompetitive Contracts
The American Legion concurs with National Veteran-Owned Business
Association's assessment in their statement submitted for this hearing
regarding the 2009 White House announcement that executive agencies
shall not engage in noncompetitive contracts. The American Legion is
concerned though that the announcement made no distinction between the
thousands of sole source awards to productive and efficient small
businesses under the SDVOSB, HUBZone or 8(a) programs and the billions
of dollars awarded sole source to large businesses, such as KBR and
Halliburton. Specific guidance needs to be provided to contracting
officers as to whether the Administration is restricting the use of
legitimate contracting mechanisms to support the Nation's small
businesses, or to restrict multi-billion dollar noncompetitive awards
to large prime contractors.
The American Legion also agrees that pressures being exerted on the
Federal contracting community will probably result in greater use of
the General Services Administration's (GSA's) Federal Supply Schedule
Program. While this program holds a higher contracting preference
compared to the small business programs, it unfortunately does not
allow set-asides for any small business group. The American Legion
agrees that expanded use of this program will further diminish
opportunities for small businesses, especially small businesses owned
by veterans.
Therefore, The American Legion recommends:
Service-disabled, veteran-owned small businesses set-asides
should be allowed under the Federal Supply Schedule Program. Currently,
GSA schedules are exempt from Federal Acquisition Regulations part 19.
Without this change, SDVOSB will be limited in their quest for small
business opportunities to compete for Federal contracts.
Implementation of a coordinated standardized training program
for procurement staff that focuses on SDVOSB procurement strategies in
their respective agency.
President Obama should reissue Executive Order 13-360
``Providing Opportunities for Service-Disabled Veteran Businesses'' to
increase Federal contracting and subcontracting opportunities for
veterans, and require that its tenets be incorporated into SBA
Regulations and Standard Operating Procedures.
The SBA needs to emphasize Executive Order 13-360 and
establish it as a procurement priority across the Federal sector.
Federal agencies need to be held accountable by the SBA for
implementing the Executive Order. The SBA needs to establish a means to
monitor agencies progress and where appropriate, establish a report to
identify those that are not in compliance, and pursue ongoing followup.
In order to achieve the mandates of Executive Order 13-360,
the SBA must assist Federal agencies to develop a strategic plan that
is quantifiable, and will assist them in establishing realistic
reporting criteria.
The American Legion also recommends that the House Small
Business Committee embrace and promote development of stronger policy
and legislative language that champions the utilization of Veteran-
Owned Small Business (VOSB) Joint-Venturing (JV) as a ready solution to
the Small Business Spending requirements of the Stimulus Spending
initiative.
Hold the agency leadership responsible for meeting the 3
percent congressionally mandated goal. The American Legion Small
Business Task Force has proactively developed an initiative to
challenge the leadership of DoD service components that are not meeting
the 3 percent goal. We identified the Defense Logistics Agency (DLA) as
among the worst performing organizations in terms of award percentage
to SDVOBs. According to the Federal Procurement Data System--Next
Generation (FPDS-NG) dated January 21, 2010, each major supply center
fell well short of the 3 percent goal; and overall, DLA awarded only
0.70 or less than three-quarters of 1 percent of contracted dollars to
SDVOBs. More disconcerting is that the percentages of DLA awards to
SDVOBs actually decreased from 0.73 in FY 08 to 0.70 in FY 09. The
American Legion Small Business Task Force communicated their concerns
to Vice Admiral Alan S. Thompson, Director of DLA, back in January
2010, in regards to our concerns associated with his agency's dismal
record of contracting with SDVOBs. We also requested a meeting with him
and his staff to offer our assistance in developing a plan for
increasing participation within his agency. It took his office more
than 2 months to respond and agree to a meeting. As of April 27, 2010,
the meeting still has not been scheduled. Vice Admiral Thompson is a
flag officer serving as a director of a DoD agency supporting America's
war fighters; however, his organization continues to fail at meeting a
congressionally mandated goal aimed at assisting the very community
that has sacrificed so much. We recommend this Subcommittee schedule a
hearing with all Federal agencies, like DLA, who consistently do not
meet their Federal procurement goals with SDVOBs.
CONCLUSION
The American Legion believes that the majority of funding allocated
to veteran and military projects through this stimulus bill, as well as
future spending bills, should be spent exclusively with veteran-owned
firms. It was the veteran who volunteered to defend this Nation, the
veteran who continues to keep our democracy intact, and the veteran who
deserves the right to participate in rebuilding America's
infrastructure and other necessary projects. In this capacity, veterans
will continue to serve the people of the United States by building and
growing strong, reliable, dependable businesses.
The mission of The American Legion's National Economic Commission
is to take actions that affect the economic well-being of veterans,
including issues relating to veterans' employment, home loans,
vocational rehabilitation, homelessness, and small business. Small
business continues to be a primary job generator and a major trainer
for American employees. The small firm workforce includes more young
and entry-level workers than colleges and large businesses combined. It
is vital that Veteran-Owned and Service-Disabled Veteran-Owned
Businesses receive a fair and proportionate amount of Federal contracts
so these veterans can build and maintain successful businesses. The
American Legion reiterates that the Small Business Administration's
Office of Veterans Business Development should be the lead agency to
ensure that veterans returning from Iraq and Afghanistan are provided
with Entrepreneurial Development Assistance.
We look forward to continuing to work with the Committee to enhance
entrepreneurship among America's veterans. Again, thank you Chair
Herseth Sandlin and Ranking Member Boozman for allowing The American
Legion to present our views on this very important issue.
Prepared Statement of Joe Wynn,
Senior Advisor, Vietnam Veterans of America
EXECUTIVE SUMMARY
Many of us know that it was Public Law 106-50, the Veterans
Entrepreneurship and Small Business Development Act of 1999 that laid
the foundation for veterans interested in starting or expanding their
own small businesses to get Federal assistance. Congress even stated in
its findings of P.L. 106-50 that America had not done nearly enough to
``assist veterans, particularly service-disabled veterans, in playing a
greater role in the economy of the United States by forming and
expanding small business enterprises.''
P.L. 106-50 called for the creation of new entities and the
restructuring of existing ones in order to assist veterans in pursuit
of entrepreneurship. Under this law, the Office of Veterans Business
Development (under SBA), the Center for Veterans Enterprise (under VA),
and the National Veterans Business Development Corporation (quasi
independent), were created. It also established a 3 percent procurement
goal for Federal agencies and large prime contractors to purchase goods
and services from service-disabled veteran-owned businesses. But
agencies did not pay much attention until 2003 when Public Law 108-183
made the 3 percent minimum MANDATORY.
And even then, it took a Presidential Executive Order (13-360) in
October 2004 to really get agencies to carry out the law. Under the
Order, agencies were instructed to designate a senior-level official to
be held accountable for submitting a strategic plan showing how and
when they would achieve the 3 percent contracting goal for service-
disabled veteran-owned businesses. But with no oversight and penalties
associated with noncompliance, after a few years the effort diminished.
So Congress took another direction in 2006 and passed Public Law
109-461 which authorized ONLY the VA to implement a unique ``Veterans
First'' approach to VA contracting. This approach would change the
priorities for contracting preferences within the Department of
Veterans Affairs (VA), by placing Service-Disabled Veteran-Owned Small
Businesses (SDVOSBs) and Veteran-Owned Small Businesses (VOSBs) first
and second, respectively, in satisfying VA's acquisition requirements.
Then in February 2008, Congress passed Public Law 110-186, the
``Military Reservist and Veteran Small Business Reauthorization and
Opportunity Act'' to provide additional funding to the SBA Office of
Veterans Business Development to increase the number of veteran
business outreach centers and to provide veteran business owners some
needed assistance with business development and access to capital.
Now after more than 10 years since Congress first laid the
foundation for a veterans procurement program, veterans are returning
home from active duty facing high rates of unemployment, limited
contracting opportunities, and a system that values profits over
people. Yes, existing laws have made it possible for veterans to
participate in the American Dream that they fought so hard to protect--
``Owning Your Own Business.'' But what good is it for them to own their
own business if the revenue from that business is insufficient to care
for them and their family. Truly more can be done for our veterans.
INTRO
Good afternoon, Madam Chair and Members of the Subcommittee. On
behalf of VVA National President John Rowan and all of our officers and
members we thank you for the opportunity for Vietnam Veterans of
America (VVA) to appear here today to share our views on the ``Status
of Veteran Small Businesses: Are We Failing Our Veterans.'' I ask that
you enter our full statement in the record, and I will briefly
summarize the most important points of our statement.
As you know, my time of service was many years ago, as a Vietnam
Era veteran of the U.S. Air Force with the 66th Strategic Missile
Squadron. I still have very vivid memories of that military experience.
I'm also a lifetime member of the National Association for Black
Veterans, and have spent the past 10 years assisting and advocating on
behalf of veterans in need of health care, housing, education,
employment and especially those veterans seeking to start or expand
their own small business. While doing so, I have been serving as Senior
Advisor to the Vietnam Veterans of America, Treasurer for the Veterans
Entrepreneurship Task Force (VET-Force) and President of the Veterans
Enterprise Training & Services Group (VETS Group).
It is primarily through developing the VETS Group and serving as a
member of VET-Force, that I have become very familiar with the status
of veteran business owners within the Federal marketplace. I've also
spent considerable time reviewing the legislation that created the
Service-Disabled Veteran-Owned Business (SDVOB) Federal Procurement
Program and communicate regularly with many of the agency
representatives directed to assist veterans with Federal contracting.
The VET-Force, which is composed of over 200 organizations and
affiliates representing thousands of veterans throughout the United
States, a high percentage of which are small businesses, has made it
their mission to monitor the implementation of the programs, agencies,
and organizations referenced under P.L. 106-50, P.L. 108-183, Executive
Order 13-360, P.L. 109-461, and P.L. 110-186. The VET-Force presents a
strong unified veterans' voice for virtually all of the major veterans
groups, veteran entrepreneurs, and serves as an advocate for veterans
seeking assistance with their small business or self-employment.
The VETS Group, a nonprofit 501(c)3, community-based organization
that I founded in 2004, offers a holistic program of services to help
veterans achieve economic empowerment through education, employment,
and entrepreneurship. The VETS Group is able to provide information,
outreach, Federal procurement training and support to hundreds of
veterans by utilizing a network of Patriot Resource Partners, a
Coalition of Advisors, and many Technical Assistance Providers.
While the majority of our veteran business owners are from the
Vietnam Era, a new generation of veterans now exist that are well
trained, loyal, battle-tested and eager to pursue entrepreneurial
opportunities. But just as it was reported in the VET-Force 2005 Report
to the Nation, that ``as a nation, we have been unsuccessful in
providing the originally promised assistance our veterans have earned,
deserved, and required so that they would have the opportunity to be as
successful in their civilian pursuits as they were in their military
assignments,'' evidence shows that while things have improved, we still
have a way to go.
Why We Are Still Failing Our Veterans in the Federal Marketplace
If veterans and service-disabled veteran-owned businesses are to
succeed in the public sector, agencies will have to stop making excuses
for why they can't make the minimum 3 percent procurement requirement.
The pervasive ignorance of the law and resistance to contracting with
veteran-owned small businesses has to change. Agencies and large prime
contractors must be held accountable for not adhering to the laws that
mandate maximum practical utilization of SDVOBs as primes or
subcontractors. Inaccurate agency data, miscoding, contract bundling,
and double counting must be eliminated. And the preference for agencies
to contract with large businesses most often (67 percent of the time)
should shift to utilizing small businesses much more often.
In addition, the SBA and particularly its Office of Veterans
Business Development, the VA's Center for Veterans Enterprise, and
other veteran small business assistance providers (SBDCs, PTACs, SCORE,
Women Business Centers, VBOCs) must increase their efforts in
identifying and registering the capabilities of veteran business owners
where required, promote the use of veteran business owners by all large
prime contractors and monitor their compliance with their
subcontracting plans. They should also create situations that foster
the development of relationships between agency procurement officers
and veteran business owners, and improve the process of identifying and
matching veteran businesses with procurement opportunities.
Lack of Accountability, Oversight and Enforcement
In 1999, when P.L. 106-50 was first enacted, Congress demonstrated
that veterans should be an integral part in this Nation's economic
development strategy. But the agencies directed to carry out the law
were not held accountable. There have not been any penalties associated
with an agency or large primes' failure to comply with the laws
governing small business contracting with veteran-owned businesses.
Even after P.L. 108-183 was passed in 2003 making it mandatory to
contract with SDVOBs, the President had to issue an Executive Order to
get agencies and large primes to realize that the use of veteran
business owners in the Federal contracting process should be taken
seriously.
But after the SBA, the agency directed by Executive Order to
provide oversight and technical assistance to agencies in the
development of their strategies to increase contracting opportunities
for SDVOBs, failed to do its part to hold agencies accountable,
agencies and large primes have no incentive to meet or surpass the
minimum requirements.
Agencies and large primes have to be held accountable for not doing
what the law requires them to do. But equally important is that it must
be made clear who will be the enforcer and what penalties will be
applied to those deemed to be noncompliant.
Ambiguities in the Laws That Govern the SDVOB Program
As it stands now, contracting officers ``may'' set aside
procurements for SDVOBs. The word ``may'' in the statute (P.L. 108-183)
that governs the SDVOB Federal procurement program, is more often
interpreted as ``I don't have to.'' This one little word has probably
caused the greatest harm to veteran business owners than any other
provision of law. Why, because the statute that governs the HUBZone
program states that a contracting officer ``shall'' set aside
procurements for HUBZone companies and the 8a statute states that they
``should'' use 8a companies.
While changing all three statutes to ``may'' would seem to equalize
things among the two groups, it's more likely that it would only open
the door to fewer actions and less accountability. To create true
parity among all three groups, the statutes should be changed to
``shall.'' This way would ensure that contracting officers would be
required to take actions for one or the other, notwithstanding any
other provisions of law. Equal Parity = Shall, Shall, Shall (8a,
HUBZone, SDVOB).
For years now, members of VET-Force have been calling for equal
parity among all three preference groups--HUBZones, SDVOBs, and 8a
contractors. However, to date, equal parity does not exist even though
the SBA and the Department of Justice believe it does. According to a
recent U.S. Court ruling, agencies ``must'' attempt to contract with
HUBZones first.
Old Executive Order ``A Thing of the Past''
The Presidential Executive Order 13-360 that was issued in 2004 to
direct agencies to more effectively implement the ``mandatory'' legal
requirement to procure ``not less than'' 3 percent of their goods and
services from Service-Disabled Veteran-Owned Businesses and to do so by
reserving more procurements exclusively for SDVOBs called for each
agency to develop a ``written'' strategic plan that would provide
details and guidance as to how they will increase contracting
opportunities for SDVOBs.
This was working for a while; agencies were posting their plans on
their Web sites and some were actually trying to achieve better
results. But by late 2007, SBA decided to move away from support for
the Executive Order and instead implement a Score Card System whereby
agencies are not required to submit a strategic plan and primarily
measured by the number of small business contracts awarded. So if an
agency meets its overall small business goals while not making all of
the individual preference group goals, it could still receive a Green
Score which means it is doing a good job. Never mind that they may be
at only 1.5 percent for SDVOBs!
Overuse of Large Prime Contractors and Bundling
Seemingly very few agencies are doing anything to encourage their
large prime contractors to award more subcontracts to SDVOBs. When you
talk to contracting officers or acquisitions personnel, they all say
that they are challenged by the enormous task of monitoring the
subcontracting plans of the agency's large primes while also having to
meet the demands of new requirements. There is a shortage of
contracting personnel governmentwide but an increase in the number of
contract actions. So very few penalties, if any, are being imposed on
the large prime contractors for failing to comply with their
subcontracting plans. It's often more convenient to place procurement
requirements into large bundles and award them as a single contract to
a large prime.
While Contract Bundling or sometimes referred to as Strategic
Sourcing may be necessary at times in order to make more efficient use
of limited contracting personnel and agency resources, it wouldn't be
so bad if large primes subcontracted significant portions of the work
to small businesses as they are required to do. However, small
businesses, including SDVOBs, are constantly reporting that large
primes often fail to subcontract with them even though they had
promised to do so before the contract was awarded. This continues to
happen time and time again because large primes are not being held
accountable and neither are contracting personnel who should be
monitoring them.
No Authorization To Make Direct Awards
Contracting officers don't have the authority to issue direct
awards to a SDVOB of their choosing under the Simplified Acquisition
Threshold as is allowed under the Small Business Act for 8a companies.
Under the SDVOB Federal Procurement Program a contracting officer must
use what is referred to as the ``Rule of Two.''
The Rule of Two as introduced under P.L. 108-183 is contained in
Part 19 FAR, and the Code of Federal Regulations (CFR) 13 CFR, Part
125. The Rule of Two states if a contracting officer knows of two or
more SDVOBs that can do the work, then the requirement must be
competed. However, the same law also states that if the contracting
officer only knows of one SDVOB that can meet the requirement, a sole
source award CAN BE made. But even when this is the case, it's reported
that this authority is seldom exercised.
So it's widely known that contracting officers who are often under
pressure to get certain requirements awarded quickly, will routinely go
to 8(a) firms even though there is an SDVOB that can do the job. Under
the SBA's 8a program, contracting officers are allowed to make direct
awards even if there are other 8a firms available to do the work. In
these cases, the government does not have time to even consider
restricted competition among SDVOBs because of time factors. Thus, the
SDVOB suffers and the government fails the veteran once again.
Other Reasons Why the System Is Failing Its Veterans
Limited Business Development Assistance. Before last year the SBA
Office of Veterans Business Development managed five Veteran Business
Outreach Centers (VBOCs) that provide services to veterans for the
entire country. Last year, the SBA made direct awards to three
independent veteran business centers in order to expand its number of
centers to eight. Then just this month, SBA awarded grants to some
existing centers and added four more centers, thus increasing its total
to twelve.
This may seem to be steps in the right direction, but the Office of
Veterans Business Development has been operating for more than 10
years! And by comparison to the number of Women Business Centers (WBCs)
funded by the SBA, veterans receive only a drop in the bucket. Each of
the VBOCs receives only $150,000 per year for a total of $1,800,000.
However, the WBCs receive over $50 million each year.
Congress needs to increase the budget for SBA and SBA needs to
direct more funding to its Office of Veterans Business Development. At
present, not only are the VBOCs underfunded, the Office has only one
staff person to provide direct assistance to thousands of veteran
business owners seeking to do Federal contracting. And that one staff
person does not even have an administrative assistant.
VA's ``Veterans First'' Approach to VA Contracting
The use of Veterans First should be applied to All VA procurements
and not just selected ones. The prevailing belief among many within the
VA that SDVOB means Small and Disadvantaged Veteran-Owned Business is a
disservice to those VOBs and SDVOBs that are perfectly capable and
qualified to handle sizable procurements including those being
considered by the VA's T-4 Acquisition Team.
This time last year, this same Subcommittee held a hearing focusing
on ``Contracts and Contracting Policy at the VA'' created by Public Law
(P.L.) 109-461. We noted then that this legislation authorized a unique
``Veterans First'' approach to VA contracting. This approach changes
the priorities for contracting preferences within the Department of
Veterans Affairs (VA) by placing Service-Disabled Veteran-Owned Small
Businesses (SDVOSBs) and Veteran-Owned Small Businesses (VOSBs) first
and second, respectively, in satisfying VA's acquisition requirements.
But in so doing, all SDVOSBs and VOSBs must register in the VA's
Vendor Information Pages (VIP), aka Veterans Small Business Database,
available at www.VetBiz.gov, and be ``VERIFIED'' by the VA's Center for
Veterans Enterprise (CVE), to be eligible for/to receive contracts
exclusively within the Department of Veterans Affairs.
Other significant sections of the law direct the VA, for SDVOSBs
and VOSBs, to: (1) Establish Contracting Goals and Review Mechanisms;
(2) Allow Noncompetitive, Sole Source, and Restricted Competition; (3)
Permit Survivorship for 10 Years, if the deceased veteran business
owner was 100 percent disabled; (4) Produce Annual Progress Reports;
and (5) Conduct a 3-Year Study.
The law was passed in 2006 and to date (more than 3 years later),
the VA is still struggling with developing policies and procedures that
will expedite the processing of more than 21,000 veteran business
owners. Rather than go back over all of the issues with the VA's
verification process of veteran business owners, I will just refer the
Committee to testimony and statements received at its hearing held here
on April 23, 2009.
However, I would like to add at this time that while the
verification or certification of veteran business owners is only
required when doing business with the VA, this requirement has created
the perception that veteran business owners must be verified by the VA
in order to do business with other agencies as well. Since the VA's
Veterans Small Business Database is open to the public, agencies and
large primes often use the database to search for capable and qualified
veteran businesses. For those veteran businesses that have not yet been
verified because of the huge backlog, their opportunities for
procurements outside of the VA are also affected because then their
status is questionable.
More resources need to be allocated to the VA's Center for
Veteran's Enterprise such that they can increase the number of staff
persons needed to complete the verification of all veteran business
owners in less than 60 days. Additional staff is also needed to assist
veteran business owners with the process of marketing to the Federal
agencies and large primes.
Close the Loopholes With the Use of FSS/GSA Schedules
Use of FSS/GSA Schedules (FAR Part 8) allow contracting officers
easy selection of large businesses by not having to adhere to small
business mandates (FAR Part 19). So the schedules are often used to
avoid the small business set-aside requirements and even to avoid the
use of Veterans First at the VA. Contracting officers at the VA are not
required to use Veterans First when selecting contractors from the
schedules.
In Summary
The Federal marketplace is a trillion dollar industry. And 3
percent of that annual budget is easily in the billions, not to mention
the billions of dollars in the budgets of large primes. Both Federal
agencies and commercial vendors owe more to the many veterans who have
sacrificed so much and deserve more than a little. It should be
abundantly clear to all that our servicemembers, their families, and
citizens throughout the United States are taking note of how this new
generation of servicemembers are being treated. The actual and
perceived treatment of our Nation's veterans, especially those
returning from the Wars in Iraq and Afghanistan, will be a symbol of
how valued their sacrifice was and a clear signal to any future
enlistees on the ultimate value of their service to the Nation.
For some time now, members of VET-Force have supported the ideal
that, ``the presence of successful and prominent veterans within and
across our Nation's business communities is a testimony of a grateful
nation--a nation that honors and respects the sacrifices made by
veterans on behalf of our country, both today and tomorrow.'' Veterans
are uniquely qualified to work as contractors to the Federal Government
because of their service experience and their dedication to providing
quality products, on time and at a reasonable cost. Effective
legislation such as P.L. 106-50, P.L. 108-183, P.L. 110-186 and
Executive Order 13-360, has provided many opportunities for America to
honor the service of veterans who continue to serve by helping to build
a stronger economy.
Hopefully the latest efforts by this Administration to improve
services to Veteran- and Service-Disabled Veteran Business Owners will
not be significantly impacted by OMB's Policy on Insourcing, whereby
Federal agencies are already eliminating contracts staffed by small
businesses.
The announcement earlier this week of the Presidential Executive
Orders to create two task forces is very promising. The first task
force will focus on improving procurement opportunities for all small
businesses and the second task force will focus exclusively on
improving contracting opportunities for small businesses owned by
veterans and service-disabled veterans. The structure of the Veterans
Small Business Interagency Task Force was extracted nearly verbatim
from a section in P.L. 110-186, the law that was passed in 2008.
Perhaps now, 2 years later, that the President and this Administration
have directed the SBA to implement it, actions will be taken.
Although some progress has been made in recent years, very few
Federal agencies have reached their small business contracting goals
for SDVOBs. Obviously, more needs to be done for our veterans so that
the system does not continue to fail them.
Thank you for allowing me to share these points of view.
This concludes my statement.
Prepared Statement of Mary Kennedy Thompson,
President, Mr. Rooter Plumbing Corporation, Waco, TX, and
Vice Chairwoman, VetFran Committee, International Franchise Association
Good afternoon Chairwoman Herseth Sandlin, Ranking Member Boozman
and Members of the Subcommittee. My name is Mary Kennedy Thompson and I
am President of Mr. Rooter Plumbing based in Waco, TX, which is a proud
brand of The Dwyer Group family of service enterprises. Mr. Rooter
currently has more than 270 locations across the United States. As a
veteran, I am honored to have the opportunity to speak to the
Subcommittee on Economic Opportunity about veteran entrepreneurship.
I appear before you today on behalf of the International Franchise
Association (IFA). As the largest and oldest franchising trade group,
the IFA's mission is to safeguard the business environment for
franchising worldwide. IFA protects, enhances and promotes franchising
by advancing the values of integrity, respect, trust, commitment to
excellence and diversity. Franchising operates in a variety of
industries; including automotive, commercial and residential services,
restaurants, lodging, real estate and business and personal services.
According to a 2008 study conducted by PricewaterhouseCoopers, there
are more than 900,000 franchised establishments in the U.S. that are
responsible for creating 21 million American jobs and generating $2.3
trillion in economic output.
Today, I will talk about a program that is very near and dear to my
heart--the Veterans Transition Franchise Initiative, or VetFran. I will
also highlight specific legislation, H.R. 2672, the Help Veterans Own
Franchises Act, that Congress can act upon to make it easier for
veterans to purchase a franchise. But first, I would like to take a
moment to share with you the story of how I decided that franchising
was the right path to small business ownership for me.
In 1985, I received my commission as an officer in the U.S. Marine
Corps where I served for 8 years and achieved the rank of Captain while
on active duty and later the rank of Major in the Reserves. During my
service, I had the honor to become the first female platoon commander
for my Beach and Port unit. When I returned home I made the decision to
go into franchising because it provided a model that would help me
succeed as a small business owner. I became a multi-unit franchisee in
the Cookies by Design system where I earned company awards for Top
Performer and Outstanding Customer Service. My success within the
Cookies by Design system created wealth and opportunity for my family.
I so impressed the corporate office that they later asked me to be
Director of Franchise Operations, eventually becoming the brand's
President. I came to Mr. Rooter in October of 2006 to proudly serve the
40-year-old company as its first female President.
The IFA and its members have long supported the efforts of this
Subcommittee and the Department of Veterans Affairs' Center for Veteran
Enterprise. For several years, the IFA has maintained an ongoing
dialogue with the U.S. Department of Veterans Affairs' Center for
Veteran Enterprise, seeking ways to improve program outreach to
transitioning veterans. The agency is exploring new ways to help the
association promote the program. In 2003, the agency honored the
VetFran program with a Champion of Free Enterprise Award for expanding
business opportunities for veterans and in 2006 renewed its official
Memorandum of Understanding with IFA to jointly promote the program.
Why Franchising?
Franchising is the American Dream. It allows people to own a
business and teaches them a system to help them be successful. It did
just that for me. Owning a franchise gives you control over what you
are doing in your life--you are your own boss. At Mr. Rooter we say the
business is the means to your dreams. I grew up in a military family
and served in the military; we were not an entrepreneurial family, and
when I started I did not know how to run a business. However, I wanted
that control--to be my own boss and lead others toward a common goal.
When I was in the Marine Corps, I became accustomed to following
military systems, and it has directly helped me succeed in franchising
where systems are the foundation of success. That is why I believe that
franchising offers significant advantages over other business models--
particularly for military veterans. Members of the military learn to
effectively work within systems and have the discipline to succeed. As
was the case with my experience, we often say that franchising allows
you to be in business for yourself, but not by yourself. By choosing
franchising, an entrepreneur has access to support, training and
expertise from the franchisor. You are also acquiring the rights to use
a valuable and recognized name brand that customers trust. The
franchisor provides the entrepreneur with a business plan and
operations manual that were developed to help guide and direct the
successful operation of the business. Franchising gives small business
owners a solid foundation to be successful and a leg up on the
competition.
As a proud veteran of the United States Marine Corps, I can attest
to the fact that members of our Armed Forces are disciplined,
hardworking and passionate people who have an ingrained trait to work
well within systems. They are accustomed to following standard
operating procedures, have strong teamwork skills and are dedicated to
mission success. That is the main reason why I believe former members
of the military make excellent candidates for franchise ownership.
An estimated 250,000 men and women transition out of the military
every year. These men and women are looking forward to rejoining their
families, going back to school or starting their own businesses. There
are more than 85 different industries that use franchising and with the
diversity of jobs in the military, veterans reenter civilian life with
the skills needed to succeed in the system of their choice. Moreover,
their Military Occupation Specialty, which is the military's way to
identify an individual's particular specialty, can help our returning
service men and women identify the best franchise system that meets
their skills and training.
Helping fellow veterans make the transition to civilian life and
realize their dream of small business ownership is one of my passions.
I have taught at the Entrepreneurship Bootcamp for Veterans with
Disabilities hosted by the Center for New Ventures and Entrepreneurship
at Texas A&M University. I also serve as the vice chairwoman of the
IFA's VetFran Committee. In this role, I work with other members of the
IFA and VetFran participating companies to encourage more systems to
offer veterans discounts and benefits when purchasing a franchise.
Veterans' Transition Franchise Initiative--VetFran
VetFran is a voluntary effort of IFA member companies designed to
encourage franchise ownership by offering financial incentives to
honorably discharged veterans. The vision to use franchising to help
military veterans transition to civilian life began nearly 20 years
ago. Watching the events of the Gulf War unfold in 1990, Don Dwyer Sr.,
the president and founder of The Dwyer Group and a veteran himself,
decided he had to do more for our service men and women. He considered
the traditional ways of support, but saw nothing that captured the
spirit on the scale he envisioned. He conceived the ideal solution:
Help our veterans achieve the American Dream by owning their own
franchised small business.
Just before Veterans Day in 1991, the program was officially
launched and soon, more than 100 franchise systems were participating
as partners in the effort, providing financial incentives for honorably
discharged veterans. Following the events of September 11, 2001, the
VetFran initiative was reenergized in 2002 and now boasts more than 400
franchise systems participating. Since 2002, over 1,700 veterans have
purchased their own franchise business with the help of the program.
What began as the idea of one entrepreneur who had served in military
uniform has today become a path to the American Dream for veterans of
the U.S. Armed Forces.
I am proud to report that in February of this year, The Dwyer Group
topped the $1 million mark in VetFran discounts awarded to veterans.
Since 2002, The Dwyer Group has sold franchises to 233 military
veterans. We have also expanded our resources to veterans through our
Department of Veterans Entrepreneurship and the introduction of the
complementary P.A.V.E. (Program for Assisting Veteran Entrepreneurship)
Program, which offers educational and financial resources to veterans
and transitioning military personnel who want to buy a franchise.
The profiles of VetFran participating companies, as well as the
financial incentives they offer to veterans, can be viewed on the IFA
Web site at www.
franchise.org.
Help Veterans Own Franchises Act
Congress has the opportunity to make this important effort even
more effective. Legislation has been introduced to cement the benefits
of a program like VetFran into policy as well as encourage more
franchise systems to support veterans as small business owners. I
strongly urge the Members of the Subcommittee to cosponsor and for
Congress to pass H.R. 2672, the Help Veterans Own Franchises Act. This
legislation is coauthored by Representatives Aaron Schock of Illinois
and Leonard Boswell of Iowa and currently has over 30 bipartisan
cosponsors. I would like to highlight and thank Members of the
Committee on Veterans' Affairs who have already agreed to cosponsor
this important legislation. They include: Representatives Michael
Michaud, Glenn Nye, Jeff Miller, Ranking Member John Boozman, Vern
Buchanan and David Roe. Additional cosponsors include Representatives
Ike Skelton and Buck McKeon, Chairman and Ranking Member of the Armed
Services Committee as well as Rep. Charlie Rangel.
The legislation establishes a tax credit for franchised businesses
that choose to offer qualified veterans a discounted initial franchise
fee. The tax credit would amount to 50 percent of the total franchise
fee discount offered by the franchisor to the franchisee, capped at
$25,000 per unit, and also provide a tax credit for the remaining
initial franchise fee paid by the veteran franchisee.
Given the current economic climate, many franchised businesses are
finding it harder to access the capital they need to open new stores
and recruit new investors. In order to encourage economic growth and to
make it easier for veterans to own their business, the IFA supports
enactment of this tax credit for those franchise systems that choose to
offer qualified veterans a discounted franchise fee. Our veterans
deserve this chance after so faithfully serving our country.
Conclusion
Again, on behalf of the International Franchise Association as well
as Mr. Rooter Plumbing and the entire Dwyer Group family of brands, we
sincerely appreciate the work of this Subcommittee. We strongly urge
you to support and pass the Help Veterans Own Franchises Act, so that
more of our veterans may return home to begin building a bright future
for themselves, their families and their communities through small
business ownership. The members of the IFA look forward to a continued
working relationship with this Subcommittee as well as supporting the
initiatives underway at the Department of Veterans Affairs and the
Small Business Administration to assist our returning men and women of
the Armed Services.
Thank you.
Prepared Statement of Joseph G. Jordan, Associate Administrator,
Government Contracting and Business Development,
U.S. Small Business Administration
Chairwoman Herseth Sandlin, Ranking Member Boozman, and Members of
the Subcommittee, thank you for inviting the Small Business
Administration to testify this morning.
With the understanding that veterans play an important role in our
economy, SBA Administrator Karen Mills has sent three representatives
from the agency to participate in today's hearing. The three of us
represent different areas within the SBA and demonstrate the SBA's
commitment to serving veteran small business owners.
We know that thousands of troops have been returning from overseas.
We also know that 18 percent of veterans are still unemployed 1 to 3
years after they return. The good news is that veterans have a higher-
than-average rate of self-employment. They have the leadership, the
know-how, and the drive to succeed as entrepreneurs.
The President and the U.S. Small Business Administration recognize
this and have made veterans a priority across all levels and programs
of the Federal Government. SBA is pleased to highlight overall veteran
and service-disabled veteran participation levels in agency financial,
management and technical assistance, and procurement programs. Though
the SBA does have an office dedicated to serving veterans (the Office
of Veterans Business Development), it is important to note that
veterans are supported throughout every component of SBA programming,
which covers capital, counseling, contracting, and disaster relief and
preparedness.
Capital
SBA is committed to assisting veteran-owned small businesses access
the capital they need. All of SBA's loan programs are available to
veterans. In FY 2009, veteran-owned small businesses received 8.00
percent of all 7(a) loans, totaling approximately $523 million, and
4.56 percent of all 504 development company loans, or $176 million.
Additionally, veteran-owned small businesses received 4.33 percent of
all microloans, totaling approximately $1.9 million. In total, SBA has
supported more than $2 billion in recovery lending to veteran-owned
small businesses.
SBA also has a loan program dedicated to the military community--
Patriot Express. This program is available not only to our veterans but
also to Reserve component members, TAP eligible servicemembers and
their spouses and widows. By making this loan program available to the
larger military community, it reflects the current composition of our
military forces which includes a significant reliance on Reserve
components and supports their families when they are called to active
duty.
It features our lowest interest rates and fastest turnaround times,
often within days. These loans have also benefited from the
enhancements under the Recovery Act. In FY 2009, we approved more than
2,300 Patriot Express loans and are on track to increase those numbers
in FY 2010.
Patriot Express loans are available up to $500,000 and qualify for
SBA's maximum guaranty of up to 85 percent for loans of $150,000 or
less and up to 75 percent for loans over $150,000 up to $500,000. (All
Patriot Express loans made under the Recovery Act are guaranteed at 90
percent.) For loans above $350,000, lenders are required to take all
available collateral.
The Patriot Express loan can be used for most business purposes,
including startup, expansion, equipment purchases, working capital,
inventory or business-occupied real estate purchases. Patriot Express
loans feature SBA's lowest interest rates for business loans, generally
2.25 percent to 4.75 percent over prime depending upon the size and
maturity of the loan. Local SBA district offices work in their
communities to promote the availability of capital to veterans.
Finally, SBA also provides loans to small businesses who need
additional capital due to the fact that the owner or an essential
employee has been called to active duty in their role as a Military
Reservist. Last year, SBA provided 25 Military Reservist Economic
Injury Disaster Loans, totaling approximately $2.4 million.
Counseling
SBA's counseling services are helping veteran small business owners
every day. Each of our 68 field offices has a designated staff member
for veteran's business development. They are engaged with hundreds of
external veterans serving organizations and reach thousands of veterans
and Reservists each year.
In FY 2009, SBA's resource partners--including about 900 Small
Business Development Centers, over 100 Women's Business Centers, and
350 chapters of our mentoring program, SCORE--trained or counseled
about 150,000 veterans and over 21,000 Reservists and Guard members, as
well as 1,000 active duty clients.
In addition, we are very proud that since 2008, we have expanded
the number of Veteran's Business Outreach Centers (VBOCs) from 5 to 15.
These centers help with business plans, feasibility studies, mentoring
and more.
Veterans are heavy users of online tools such as our Small Business
Training Network. In fact, about 62,000 veterans used this tool in
2009. Last summer, SBA launched an online training course for veteran
small business owners to learn how to become government contractors. We
will continue to strengthen our IT tools that veterans use and value.
SBA's Office of Veterans Business Development (OVBD) provided
61,087 SBA Veteran/Reservist Business Information Kits to 81 requesting
organizations and individual veterans.
Finally, in November 2009, we entered into a partnership agreement
to support the Entrepreneurship Bootcamp for Veterans with Disabilities
consortium operating at Syracuse University, the University of
Connecticut, Florida State University, Texas A&M University, the
University of California at Los Angeles, and Purdue University. This is
a 14-month entrepreneurial development program for service-disabled
veterans who were injured in Iraq or Afghanistan since 2001.
Contracting
The SBA works hard to ensure that veteran- and service-disabled
veteran-owned small businesses have access to much needed opportunities
in Federal contracting. Using tools provided by the SDVOSB, 8(a), and
HUBZone programs, SBA works with all Federal agencies toward the goal
of awarding at least 3 percent of Federal contracting dollars to
SDVOSBs. In FY 2008 SDVOSBs received $6.5 billion and 1.5 percent of
Federal prime contracts. Preliminary FY 2009 data indicates that both
the dollars and percentage of prime contracts going to SDVOSBs have
increased. Efforts we have made in collaboration with the contracting
agencies through the Recovery Act have already shown tangible progress.
Through April 23rd, 6.3 percent of Recovery Act prime contracting
dollars, or almost $1.6 billion, has gone to veteran-owned businesses.
Over that same period, 4.3%, or almost $1.1 billion, has gone to
service-disabled veteran-owned small businesses (SDVOSBs).
Veteran- and service-disabled veteran-owned small businesses also
participate in other SBA government contracting and business
development programs. In FY 2009, 1,257 veteran-owned and 597 service-
disabled veteran-owned small businesses participated in the section
8(a) Business Development Program, and 786 veteran-owned firms and 636
SDVOSBs participated in the Historically Underutilized Business Zone
(HUBZone) program.
Separately, an important issue has come up in the past few weeks
that I'd like to bring to the Committee's attention. The SBA and the
White House support the congressional intent of parity--or equal
treatment--among our contracting programs: 8(a), HUBZone, service-
disabled veteran and, soon, women-owned small businesses. However, in
light of a recent court decision [Mission Critical v. U.S., (09-864 C,
Ct. of Fed Claims, Feb. 26, 2010)], it would be useful to clarify and
reiterate Congress's original intent that there be parity among the
programs. The Administration supports legislative efforts to confirm
Congress's original intent to provide for parity.
Executive Order--Veteran-Owned Small Businesses
On April 26th, the President signed an Executive Order to once
again demonstrate the high priority that veteran-owned small businesses
have in this Administration by establishing an Interagency Task Force
on Veterans Small Business Development.
The task force, which Administrator Karen Mills will lead, includes
seven agencies (Department of Treasury, Department of Defense,
Department of Labor, Department of Veterans Affairs, Office of
Management and Budget, Small Business Administration, and General
Services Administration) and four members from a veteran's service or
military organization or association to be chosen by the Administrator.
This task force will focus on the needs of our veteran-owned small
businesses.
This task force recognizes that among our veteran community many
have chosen or will choose to step out and start their own small
business. It will provide recommendations to the Administration in
several key areas, including access to capital, expanding Federal
contracting opportunities and more robust entrepreneurial education.
An additional Executive Order to create a Task Force on small
business contracting--as a whole--will help amplify this effort. The
Interagency Task Force on Federal Contracting Opportunities for Small
Businesses will further support our goals for government contracts
going to small businesses. Through these task forces we will continue
to expand our outreach to small businesses to make sure we are
increasing their opportunities to compete for and win Federal
contracts.
We look forward to the recommendations that will come out of these
task forces as we recommit ourselves to meeting the needs of our
veteran entrepreneurs and small business owners.
I'm happy to take your questions.
Prepared Statement of Tim J. Foreman, Executive Director,
Office of Small and Disadvantaged Business Utilization,
U.S. Department of Veterans Affairs
Good afternoon, Madam Chairwoman, Ranking Member Boozman and
Members of the Subcommittee. It is privilege to return here today to
testify regarding the progress of veteran-owned enterprises both in the
United States and overseas. Your hearing title asks, ``Are We Failing
Our Veterans?'' I answer on behalf of the Department that we are not
failing our veterans. In many regards, we are excelling. We are leaders
in many veteran business areas.
VA is the recognized Federal leader in its share of contracts to
small business owners who are veterans, and the provisions of the
Veterans First Contracting Program authorized by Public Law 109-461 are
responsible for much of our recent success and growth. Throughout this
targeted expansion to service-disabled and other veteran-owned small
businesses the quality of products and services provided to our
veterans remains high. As the program grows, our veteran clients will
continue to receive quality services and products from increasing
numbers of veteran suppliers who, as fellow veterans, better understand
the needs of the community VA serves. This symbiotic aspect of VA's
program is a ``win-win.'' Like many programs of broad and comprehensive
scope, however, we can still do better.
When I testified before your Subcommittee 7 weeks ago, we discussed
the backlog of veteran-owned small business (VOSB) and service-disabled
veteran-owned small business (SDVOSB) verifications at our Center for
Veterans Enterprise (CVE) and the way ahead. Resolving this backlog
continues to be a top priority for the Office of Small and
Disadvantaged Business Utilization (OSDBU). The list of VA-verified
VOSBs and SDVOSBs will eventually constitute a database that will serve
as the backbone of VA's small business contracting efforts. Careful
review of the applications and site visits, where appropriate, will
eliminate most status fraud in small business contracts and will
streamline program administration. Resolving this backlog will be the
singular focus of OSDBU's CVE for the near future.
Madam Chairwoman, your kind letter of invitation to this hearing
requested that I focus my testimony on four general areas of interest.
I will address each area separately, but let me start by recognizing
some of the valuable sources we consulted to address your questions,
while noting some of the data limitations. VA OSDBU is most
appreciative of the effort of the U.S. Census Bureau in its report
titled, Characteristics of Veteran-Owned Businesses, published in 2007
that reports data collected in 2002. This excellent, albeit dated,
source material was useful in preparation of this statement.
Additionally, the Small Business Administration (SBA) was helpful in
providing some demographic information. I would like to specifically
attribute to the testimony of SBA's Shawne Carter McGibbon who appeared
before this Subcommittee in April 2009 and eloquently addressed many of
the same issues before us today. That testimony addressed the
demographics of, and problems facing, veteran business owners; it also
addressed the limited availability and reliability of data for analyses
of veterans in business without the support of further surveys or
samples.
Overall, readily available, current data and information is scant
in the areas in which you have expressed interest. It often requires
comparison of multiple data sets, sometimes collected under different
conditions, with different assumptions, or for different purposes. This
may adversely undercut the validity of information gleaned from such a
process. Additionally, veterans who enter the business world are not
required to report their veteran status. Reporting veteran status may
be required to win contracts or to receive certain types of electronic
funds transfer, but many veterans may embark on a business career and
not report that they are a veteran. For example, it is possible that a
veteran may own a fast food franchise--he or she is simply performing
as a small business without letting anyone know their veteran
connection.
Impact of Geography
You asked about the impact of geography on veterans' enterprises
with regard to the location of the business--for example, various types
of city or rural settings.
As most VA facilities are located in or near population centers, it
follows that contractors with VA perform much of their work in those
locations. But, in the Internet era, place specificity is not
essential. We may see an increase in the proportion of all businesses,
including SDVOSBs and VOSBs, that conduct work remotely. The next U.S.
Census report on the characteristics of veteran-owned businesses may
reflect an increase for information, education, and certain management
sectors that are not venue-based. VA will work with the U.S. Census
Bureau to assure that useful veterans' business information is
collected in future surveys and other data collection efforts. The next
U.S. Census report on the Characteristics of Veteran-Owned Businesses
is due in June 2011.
Business Sector Influence
You also asked how veterans' enterprises are doing in the different
business sectors, illustrating your point with examples that included
manufacturing, retail, Internet and others.
Using U.S. Census Bureau data from the Characteristics of Veteran-
Owned Businesses published in July 2007, it is possible to disaggregate
the 2002 data used in the report to make some general comparisons
between veteran-owned businesses and all responding businesses.
According to this report, veteran-owned businesses had a higher
percentage of several business sectors than did the typical respondent.
Veteran-owned businesses outrepresented the industry average in mining,
construction, manufacturing, wholesale trade, transportation, finance
and insurance, and in the professional and scientific sectors. Veteran
business owners underrepresented the industry average in retail trade,
information, administrative support and waste management, educational
services, health care, arts and entertainment, and in the accommodation
and food industry sectors.
The 2002 data also indicate that veteran businesses have
proportionally greater representation at 51.7 percent in the 1-4
employee size grouping than are other respondents at 47.3 percent. In
all other organizational size groupings, responding veterans tend to
represent a smaller share than non-veteran owners.
Identification of Obstacles
You asked me to identify any obstacles that these enterprises may
face when doing business with the Federal Government--asking if
veterans are more successful in contracting with some Federal agencies
than others.
I would associate myself with Ms. McGibbon's April 2009 testimony
before this Subcommittee in that, except for age and gender, service-
disabled and other veteran-owned small businesses mirror the business
community at large, not only demographically, but for the problems that
they face. She presented measures of service-disabled and non-service-
disabled business problems ranked in order of importance. Some
differences and anomalies were apparent.
For example, the highest ``critical'' problem facing non-service-
disabled veterans was, by a wide margin, the affordability of health
insurance. This compares to a fifth-place ranking for this problem
among service-disabled veterans, who may have health care provided by
TriCare or by VA. However, other critical problems identified were
generally similar between the two cohorts. Both cohorts ranked
knowledge of programs for small business in general, attaining
government resources, and knowledge of veteran small business program
opportunities very highly.
VA OSDBU is addressing these identified critical problem areas
through counseling programs and partnerships. Counselors at OSDBU and
CVE assist veterans seeking small business contracts, mostly under the
Veterans First Contracting Program. Additionally, OSDBU has
partnerships with the Procurement Technical Assistance Centers (PTACs)
that leverage VA's information outreach and help prospective veteran
business owners get the information they most need to pursue a
contract. As the survey of veteran business owner problems referenced
by Ms. McGibbon predates both the establishment of the Veterans First
Contracting Program and VA's redoubled outreach effort through
counseling and partnerships, it would be valuable to repeat this survey
and see where we stand today.
Additionally, when the U.S. Census Bureau releases new data
regarding veteran-owned businesses in June of 2011, VA and OSDBU will
be ready to use these data to identify new areas where veterans may
seek business opportunities. Most military skills translate well into
the private sector. This Administration is taking steps to assure that
every soldier, sailor, airman and marine will have skills and
opportunities that translate well into the business world.
One characteristic that needs to receive universal appreciation is
the work ethic, dedication, and ingenuity of America's veterans. Not
only did they serve, they also carry a determination to succeed that
will buttress any business effort. Others in the business world need to
understand and value that characteristic. Unfortunately, sometimes our
veterans do not get to take those first steps because of bias by the
uninformed in the business community. VA and all partners in the
business world must get the word out regarding the value of veteran-
owned businesses.
Earlier this week, President Obama gave us another tool to help
identify obstacles facing service-disabled and other veteran-owned
small businesses. By Executive Order, he energized provisions of the
Military Reservist and Veteran Small Business Reauthorization and
Opportunity Act of 2008 and established an interagency task force to
coordinate the efforts of Federal agencies to improve capital, business
development opportunities, and pre-established Federal contracting
goals for small business concerns owned and controlled by veterans and
service-disabled veterans. Not only will this task force allow us to
identify obstacles, it will also facilitate solutions.
Veterans in Overseas Business Endeavors
Finally, you asked how veteran enterprises are doing business
abroad.
U.S. veterans often engage various types of business in or near
U.S. posts and installations globally. We also have some businesses
that reach across international borders and seek work on foreign soil.
The Department of Commerce and the SBA both maintain U.S. Export
Assistance Centers to provide technical assistance to small- and
medium-sized businesses looking to do business abroad. Every veteran
interested in such commerce should take full advantage of these
resources.
Madam Chairwoman, Ranking Member Boozman, and Members of this
Subcommittee, VA is proud to be a leader in government for contracting
with veteran and service-disabled veteran small businesses. We are a
steadfast advocate for the value of veteran entrepreneurship. Secretary
Shinseki has reached out to fellow Members of the President's Cabinet
seeking support for veteran-owned small businesses in government. The
charge and the challenge are clear--and the VA is ready to do what is
necessary to continue serving veterans seeking business opportunities.
I would be pleased to answer the Subcommittee's questions.
Statement of Christina M. Roof,
National Deputy Legislative Director, American Veterans (AMVETS)
Madam Chair, Ranking Member Boozman, and distinguished Committee
Members, on behalf of AMVETS, I would like to extend our gratitude for
being given the opportunity to share with you our views and
recommendations regarding veteran's small businesses.
AMVETS feels privileged in having been a leader, since 1944, in
helping to preserve the freedoms secured by America's Armed Forces.
Today our organization prides itself on the continuation of this
tradition, as well as our undaunted dedication to ensuring that every
past and present member of the Armed Forces receives all of their due
entitlements. These individuals, who have devoted their entire lives to
upholding our values and freedoms, deserve nothing less.
By way of background, The Veterans Benefits, Health Care, and
Information Technology Act of 2006 requires the Department of Veterans
Affairs (VA) to give priority to veteran-owned small businesses (VOSB)
and service-disabled veteran-owned small businesses (SDVOSB) when
awarding contracts, and also in establishing a certain number set-aside
contracts for SDVOSBs. Furthermore, in December 2009 the final rule
regarding VA Acquisition Regulation entitled Supporting Veteran-Owned
and Service-Disabled Veteran-Owned Small Businesses, 48 Code of Federal
Regulations (CFR) Parts 802, 804, 808, 809, 810, 813, 815, 817, 819,
828, and 852, was updated to reflect veterans' small business
preference in the Federal procurement process. The newly published CFR
states:
This document implements portions of the Veterans Benefits,
Health Care, and Information Technology Act of 2006 (the Act)
and Executive Order 13-360, providing opportunities for
service-disabled veteran-owned small businesses (SDVOSB) to
increase their Federal contracting and subcontracting. The Act
and the Executive Order authorize the Department of Veterans
Affairs (VA) to establish special methods for contracting with
SDVOSBs and veteran-owned small businesses (VOSB). Under this
final rule, a VA contracting officer may restrict competition
to contracting with SDVOSBs or VOSBs under certain conditions.
Likewise, sole source contracts with SDVOSBs or VOSBs are
permissible under certain conditions. This final rule
implements these special acquisition methods as a change to the
VA Acquisition Regulation (VAAR). This document additionally
amends SDVOSB/VOSB, Small Business Status Protests, where VA
provided that VA would utilize the U.S. Small Business
Administration (SBA) to consider and decide SDVOSB and VOSB
status protests. This requires VA and SBA to execute an
interagency agreement pursuant to the Economy Act. Negotiations
of this interagency agreement have not yet been finalized.
Therefore, VA has amended these regulations with an interim
rule to provide that VA's Executive Director, Office of Small
and Disadvantaged Business Utilization (OSDBU) shall consider
and decide SDVOSB and VOSB status protests, and provides
procedures there for, until such time as the interagency
agreement is executed by the agencies.
Although VA has reportedly exceeded its contracting goals with
SDVOSBs and VOSBs for the past 3 years, AMVETS believes that due to the
lack of internal oversight and the self-reporting verification
processes within VA's procurement offices, that realistically the 3
percent goal has not been met. The Government Accountability Office
(GAO) also voiced the same concern in a hearing held in December 2009,
Acquisition Deficiencies at the U.S. Department of Veterans Affairs.
During this hearing GAO stated they found that the SDVOSB program is
vulnerable to fraud and abuse, which could result in legitimate
service-disabled veterans' firms losing contracts to ineligible firms.
In fact, their 10-case study found firms that GAO investigated
previously had received approximately $100 million in SDVOSB sole-
source and set-aside contracts through fraud, abuse of the program, or
both.
Now, in April of 2010, GAO's most recent review of interagency
agreements found that VA is still lacking an effective process to
ensure that interagency agreements include required language that the
other agencies comply to the maximum extent feasible with VA's
contracting goals and preferences for SDVOSBs and VOSBs. And just as
disturbing is the fact GAO reports VA has made limited progress in
implementing its verification program. While the 2006 Act requires VA
to use veteran preferences authorities only to award contracts to
verified businesses, VA's regulation does not require that this take
place until January 1, 2012. To date, VA has verified about 2,900
businesses, approximately 14 percent of businesses in its mandated
database of SDVOSBs and VOSBs. Respectfully, Madam Chair, AMVETS finds
there to be absolutely no acceptable justifications on why VA has
repeatedly ignored or not taken the necessary actions to end such
blatant examples of fraud and abuse of funds.
VA issued guidance to all contracting officers about managing
interagency acquisitions in March 2009. However, numerous interagency
agreements did not even include the required language addressing VA's
contracting goals and preferences until it was amended on March 19,
2010. This serves as just another example of how VA not having an
established hierarchy or clear delegation of duties in oversight
activities, that VA cannot be assured that agencies have made maximum
feasible efforts to contract with SDVOSBs or VOSBs. AMVETS is led to
believe that many are forgetting that this is not just data or monetary
figures we are continually discussing, but rather thousands of veterans
lives and the failure to protect those lives and the entire VOSB and
SDVOSB communities. AMVETS has dedicated themselves to protecting the
due entitlements of those who currently serve and those who have
honorably served in the past. AMVETS does not believe that all possible
measures have been, nor are currently being taken, to end this never-
ending cycle of fraud and untruths occurring within VA's VOSB and
SDVOSB procurement systems. AMVETS respectfully asks the Committee and
those involved at VA, how much longer are we going to allow these
behaviors to unfairly and negatively impact the entrepreneurial
livelihoods of those veterans we have all promised to protect?
AMVETS recommends the following actions as a way of getting the VA
procurement system back on track regarding our VOSB and SDVOSBs:
1. AMVETS believes that implementing a centralized and uniform
training program for all persons involved in VA procurement processes,
regardless of location or position, will provide a foundation of
clarity and standardized education to every individual involved in VA's
procurements process. This will also aide VA in establishing an
unambiguous hierarchy and establish a system of unquestionable
accountability in regards to procurement. VA's organizational alignment
should be examined to ensure appropriate placement of the acquisition
functions are occurring within the agency, and that employees clearly
understand their individual defined roles and responsibilities. AMVETS
is not questioning the ethical standards of VA or its employees, rather
the structural framework currently in place regarding procurements. VA
must protect the integrity of their procurement process and the
authorities granted to them by closely examining their current
acquisition hierarchy on every level.
2. AMVETS also believes VA should re-examine their current oversight
methods and develop a plan granting authorities to field contract
officers, so that they may conduct random inspections of VA's awards to
ensure that the integrity of all VA contracts are protected and
enforced. VA must steer away from such a ``reactive'' way of conducting
contracting oversight and move toward a more ``pro-active'' approach of
procurement processes.
3. AMVETS is very concerned by the fact that VA is not currently
auditing their contracts. AMVETS recommends that VA immediately put
into place a functional verification system that allows traceability of
every system and process VA currently uses non-uniformly. Even a very
simple system will allow VA, as well as the Subcommittee if need be, to
have a single centralized source. A functional system will allow VA to
accurately process all of their interdependent and linked procedures,
which at every stage, consume one or more VA resource (contracts,
employees, funds) to convert the inputs into outputs. These outputs
then serve as inputs for the next stage of the functional verification
process until a known goal or end result is reached.
4. AMVETS strongly believes that, the often overlooked process, of
internally auditing an organization's or agency's current policies,
procedures and employee knowledge is often key in overcoming any
hurdles an organization may face when implementing successful internal
systems and policies. Internal audits are regularly used by most
successful organizations and agencies, as a means of measuring internal
successes, quality controls and shortfalls within an organizational
system.
5. An organization will only be successful and run at its full
potential if it is able to recognize its weaknesses and any unnecessary
duplication of efforts.
6. Finally, AMVETS believes it is necessary to discuss traceability
when discussing the current state of the VA's procurement systems. VA
has clearly demonstrated that they possess little to no assurances they
are receiving the services they have paid for or that all contract
criteria they are setting forth is being met, on any level. We must not
forget that many of the larger or prime contracts have very specific
clauses outlining the use of SDVOSB or VOSBs as subcontractors. AMVETS
believes that an unimaginable number of SDVOSB and VOSB have lost the
opportunity to conduct business with the Federal Government, as
outlined by law, due to VA not having any solid systems of traceability
on their awards granted.
From an accounting standpoint, traceability is vital for any
organization to have the ability to track a specific piece of financial
information by means of recorded data. Equally important is
traceability in cost accounting. VA should already have a system of
cost accounting in place to assign a cost directly to an activity or
cost of an object on the basis of cause-and-effect contractual
relationships. These measures offer VA a uniformed auditing process
tool when reviewing that all terms of an award have been met. This
should also include the review of certified payroll records to ensure
the VOSB and SDVOSB clauses of larger awards are being met. Certified
payroll records should include all payments made as 1099 financial
exchanges between the prime and subcontractors.
The last part of traceability, vital to the stability of any
acquisitions program, is in that of quality control traceability. This
is the ability to track system requirements from a system function to
all those elements that individually or collectively perform that
function. Most importantly traceability gives VA the tool necessary to
ensure that SDVOSB and VOSBs are indeed being awarded the Federal
awards that have been set-aside for them by law.
AMVETS is optimistic that the Executive Order signed on April 26,
2010, by President Barack Obama, will bring more attention to this much
overlooked, yet very important issue, regarding the stability and
financial wellbeing of our veteran entrepreneurship community. AMVETS
is also hopeful that Veterans Small Business Interagency Task Force
will finally be able to provide the necessary measures needed for the
implementation and execution of a consistent and nondiscretionary
system of oversight within the VOSB and SDVOSB Federal procurement
system.
Madam Chair, AMVETS again thanks you and the Subcommittee for being
given the opportunity to share with you our concerns and
recommendations on veteran small business matters. AMVETS applauds this
Subcommittee for their unwavering dedication to improving the lives of
our veteran entrepreneur community. This concludes my testimony and I
will be happy to answer any questions the Subcommittee may have for
me.*
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* Accompanying this testimony you will find the data requested
pertaining to VOSB and SDVOSB industry locations, the 2009 top 10
earners per NAICS code for VOSB and SDVOSB, as well as other relevant
data. Please note this data was supplied to AMVETS by several Federal
agencies upon our requests.
---------------------------------------------------------------------------
SBA: Top 10 States for VOSB Employer Firms:
California (veterans, 10.4 percent; SDVs, 9.8 percent;
all, 11.6 percent);
Texas (veterans, 6.6 percent; SDVs, 7.8 percent; all, 6.1
percent);
Florida (veterans, 5.7 percent; SDVs, 7.8 percent; all,
6.1 percent);
New York (veterans, 5.0 percent; SDVs, 5.1 percent; all,
6.3 percent);
Pennsylvania (veterans, 4.3 percent; SDVs, 3.0 percent;
all, 4.1 percent);
Illinois (veterans, 4.2 percent; SDVs, 2.7 percent; all,
4.5 percent);
Ohio (veterans, 4.1 percent; SDVs, 2.9 percent; all, 3.9
percent);
North Carolina (veterans, 3.3 percent; SDVs, 3.5 percent;
all, 2.9 percent);
Georgia (veterans, 3.0 percent; SDVs, 3.0 percent; all,
2.7 percent);
Michigan (veterans, 3.0 percent; SDVs, 2.8 percent; all,
3.4 percent).
SBA: Top 10 States for SDVOSB Employer Firms:
California (SDVs, 9.8 percent; veterans, 10.4 percent;
all, 11.6 percent);
Texas (SDVs, 7.8 percent; veterans, 6.6 percent; all, 6.1
percent);
Florida (SDVs, 7.8 percent; veterans, 5.7 percent; all,
6.1 percent);
New York (SDVs, 5.1 percent; veterans, 5.0 percent; all,
6.3 percent);
North Carolina (SDVs, 3.5 percent; veterans, 3.3 percent;
all, 2.9 percent);
Virginia (SDVs, 3.4 percent; veterans, 2.9 percent; all,
2.5 percent);
Pennsylvania (SDVs, 3.0 percent; veterans, 4.3 percent;
all, 4.1 percent);
Georgia (SDVs, 3.0 percent; veterans, 3.0 percent; all,
2.7 percent);
Washington (SDVs, 3.0 percent; veterans, 2.8 percent;
all, 2.6 percent);
Ohio (SDVs, 2.9 percent; veterans, 4.1 percent; 3.9
percent).
SBA: Top 10 States for VOSB Non-Employer Firms:
California (veterans, 10.5 percent; SDVs, 10.2 percent;
all, 12.3 percent);
Texas (veterans, 7.7 percent; SDVs, 8.0 percent; all, 7.2
percent);
Florida (veterans, 6.5 percent; SDVs, 7.8 percent; all,
6.1 percent);
New York (veterans, 4.5 percent; SDVs, 3.9 percent; all,
6.2 percent);
Pennsylvania (veterans, 4.3 percent; SDVs, 3.3 percent;
all, 4.0 percent);
Ohio (veterans, 3.8 percent; SDVs, 2.8 percent; all, 3.8
percent);
Illinois (veterans, 3.5 percent; SDVs, 2.4 percent; all,
4.0 percent);
North Carolina (veterans, 3.2 percent; SDVs, 3.6 percent;
all, 2.9 percent);
Michigan (veterans, 3.1 percent; SDVs, 2.7 percent; all,
3.4 percent);
Georgia (veterans, 3.0 percent; SDVs, 3.6 percent; all,
2.7 percent).
SBA: Top 10 States for SDVOSB Non-Employer Firms:
California (SDVs, 10.2 percent; veterans, 10.5 percent;
all, 12.3 percent);
Texas (SDVs, 8.0 percent; veterans, 7.7 percent; all, 7.2
percent);
Florida (SDVs, 7.8 percent; veterans, 6.5 percent; all,
6.1 percent);
New York (SDVs, 3.9 percent; veterans, 4.5 percent; all,
6.2 percent);
North Carolina (SDVs, 3.6 percent; veterans, 3.2 percent;
all, 2.9 percent);
Georgia (SDVs, 3.6 percent; veterans, 3.0 percent; all,
2.7 percent);
Pennsylvania (SDVs, 3.3 percent; veterans, 4.3 percent;
all, 4.0 percent);
Virginia (SDVs, 3.2 percent; veterans, 2.7 percent; all,
2.4 percent);
Ohio (SDVs, 2.8 percent; veterans, 3.8 percent; all, 3.8
percent);
Michigan (SDVs, 2.7 percent; veterans, 3.1 percent; all,
3.4 percent).
----------------------------------------------------------------------------------------------------------------
2009 SDVOSB & VOSB Top Industry Revenues by NAICS Codes
-----------------------------------------------------------------------------------------------------------------
Service-Disabled Veteran-Owned Small Business Veteran-Owned Small Business
----------------------------------------------------------------------------------------------------------------
Industry Dollars Industry 2 Dollars 2
----------------------------------------------------------------------------------------------------------------
21--Mining $660,084 21--Mining $2,304,692
----------------------------------------------------------------------------------------------------------------
71--Arts & Entertainment $3,064,940 71--Arts & Entertainment $5,901,901
----------------------------------------------------------------------------------------------------------------
22--Utilities $6,489,831 22--Utilities $9,059,826
----------------------------------------------------------------------------------------------------------------
11--Agriculture $7,857,769 72--Food Services $20,572,500
----------------------------------------------------------------------------------------------------------------
72--Food Services $10,215,892 92--Public Administration $21,039,303
----------------------------------------------------------------------------------------------------------------
92--Public Administration $10,872,755 52--Finance & Insurance $24,109,640
----------------------------------------------------------------------------------------------------------------
53--Real Estate $13,349,528 11--Agriculture $35,033,632
----------------------------------------------------------------------------------------------------------------
44-45--Retail Trade $56,943,623 53--Real Estate $190,758,521
----------------------------------------------------------------------------------------------------------------
52--Finance & Insurance $109,877,162 81--Other Services $191,264,308
----------------------------------------------------------------------------------------------------------------
81--Other Services $121,499,673 51--Information $287,178,976
----------------------------------------------------------------------------------------------------------------
42--Wholesale Trade $157,823,490 61--Education Services $314,894,004
----------------------------------------------------------------------------------------------------------------
61--Education Services $168,613,703 44-45--Retail Trade $359,708,172
----------------------------------------------------------------------------------------------------------------
51--Information $169,425,337 62--Health Care $399,073,692
----------------------------------------------------------------------------------------------------------------
62--Health Care $178,948,601 48-49--Transportation $427,002,663
----------------------------------------------------------------------------------------------------------------
48-49--Transportation $186,786,673 42--Wholesale Trade $464,114,994
----------------------------------------------------------------------------------------------------------------
31-33--Manufacturing $602,925,471 56-Administrative Services $2,117,492,276
----------------------------------------------------------------------------------------------------------------
56--Administrative Services $1,303,562,860 31-33--Manufacturing $2,216,749,205
----------------------------------------------------------------------------------------------------------------
23--Construction $2,782,820,953 23--Construction $3,800,840,932
----------------------------------------------------------------------------------------------------------------
54--Professional Services $3,209,455,436 54--Professional Services $6,289,580,239
----------------------------------------------------------------------------------------------------------------
Statement of Tim Embree,
Legislative Associate, Iraq and Afghanistan Veterans of America
Madam Chairwoman, Ranking Member, and Members of the Subcommittee,
on behalf of Iraq and Afghanistan Veterans of America's 180,000 members
and supporters, I would like to thank you for allowing us to submit
written testimony to your Subcommittee. The ``Status of Veterans Small
Business'' is an important issue facing many Iraq and Afghanistan
veterans and IAVA welcomes the opportunity to discuss this issue at
length with you.
KFC, founded by Army veteran Harland Sanders, FedEx, founded by
Marine veteran Fred Smith, and EDS, founded by Navy veteran Ross Perot
are just three examples of the many highly recognizable businesses that
have been started by veterans. Today, on military installations around
the world, our service men and women are conjuring up small business
ideas. Whether it's starting up a local lawnmower service, building a
new restaurant or inventing a better mousetrap, veterans are always
dreaming big dreams. What better way to stay awake while pulling guard
duty at ``0-dark-thirty'' in a far-off country then mentally putting
the finishing touches on your new small business pitch. When these
veterans return home from Iraq and Afghanistan, many are taking those
refined business pitches and starting their own small business.
Veterans represent 14.5 percent of small business owners nationally \1\
and their military wisdom to adapt, innovate and overcome serves them
well as entrepreneurs.
---------------------------------------------------------------------------
\1\ Characteristics of Veteran Business Owners and Veteran-owned
Businesses, Chapter 5 of The Small Business Economy for Data
Year 2006, A Report to the President, http://www.sba.gov/ advo/
research/sbe_07_ch5.pdf.
---------------------------------------------------------------------------
Repeated deployments and a tough economy have made the dream of
successfully running a small business all the more difficult for our
Nation's veterans. Strong programs for veteran small business owners do
exist but, IAVA recommends the following steps to ensure that veterans
have every opportunity to turn those dreams into a reality:
Develop pre- and post-deployment training modules
specifically for small business owners (incorporating SBA's Balancing
Business & Deployment guide).
Provide National Guard and Reserves additional access to
capital, insurance and bonding.
Offer grants to returning small business owners to help
jump-start their struggling businesses.
Ensure future stimulus programs maintain veterans'
preference protections.
Repeated Deployments Take Their Toll
``I had to totally shutter the doors on my construction business.
It put my family in a very difficult position.''--IAVA Vet
National Guard and Reservist small business owners often suffer the
brunt of multiple deployments; Clients leave, new competitors move in
and revenues dry up.
``My business was shut down for approximately 18 months.
Rightfully so, most of my clients moved on to other attorneys.''--IAVA
Vet
Many Guard and Reservists feel that current deployment training
materials are not geared for the self-employed. IAVA recommends that
pre- and post-deployment training modules are developed specifically
for small business owners and incorporate SBA's Balancing Business &
Deployment guide.
``People tell me `don't worry, USERRA protects you' . . .
against what, myself?''--IAVA Vet
Short notice deployments are particularly hard on small business
owners. IAVA believes that the military must continue to do everything
it can to develop predictability in its deployment cycles so veteran
National Guard and Reserve owned businesses are given a fighting chance
for success.
``Attempted to train a replacement, but lead up time was not
sufficient.
The other employees and subsequently the customers of the business
suffered.
Business was terminated by the middle of deployment.''--IAVA Vet
Last, when veterans return home many feel like they are starting
from scratch with their business, and they need our help. One
suggestion we heard was, ``I need help getting advertising. It costs a
lot to get going again.'' This is why IAVA recommends offering grants
to returning small business owners to help jump-start their fledgling
businesses.
Small Business Help
Navigating through the maze of red tape to (A) start a business and (B)
get it
registered as a Disabled Veteran-Owned Business. . . . A small business
owner
wears a lot of hats, and the soft skills acquired through military
experience
are not enough, I needed some real hands-on experience or time with a
mentor to help create a successful enterprise.''--IAVA Vet
For Reservist and veteran business owners looking for technical or
financial assistance, support is available through the Small Business
Administration (SBA) and the Department of Veterans Affairs. Last year,
the SBA assisted more than 180,000 veterans, Reservists, active
servicemembers and spouses through its entrepreneurial counseling and
training services.\2\
---------------------------------------------------------------------------
\2\ Small Business Administration, FY 2009 Performance Report, page
66, http://www.sba.gov/idc/groups/public/documents/sba_homepage/
fy_2011_cbj_09_apr.pdf.
---------------------------------------------------------------------------
The agency offers low-interest capital through the new Patriot
Express Pilot Loan Program. The SBA Office of Veterans Business
Development also operates five veteran-specific business outreach
centers and provides Federal contracting assistance to veterans,
although it has relatively limited resources to accomplish these goals.
``The SBA can preach `Patriot Express' all day long but find a single
person that's ever managed to get this loan and I'll buy you lunch!''--
IAVA Vet
In addition, the SBA has teamed up with the VA and the
International Franchise Association to create the Veterans Transition
Franchise Initiative, which offers 30 percent off franchising fees for
veterans on nearly 400 businesses including Dunkin Donuts, ExxonMobil,
and Gold's Gym. To date VetFran has helped more than 1,700 veterans
become small business owners.
Veterans can also turn to the VA's Center for Veterans Enterprise
(CVE) for assistance with starting or expanding their businesses.
However, since this Committee recently held a hearing on this
particular issue we would like to associate our comments with the
testimony of Joe Sharpe, from the American Legion when he concluded,
``The implementation of CVE is small and does not necessarily provide
the right assistance to veterans. The VetBiz.gov Web site is not easily
navigated and needs to become a more user-friendly Web site.''
``During my deployment I had to totally shutter the doors on my construc
tion business.
It put my family in a very difficult position''--IAVA Vet
IAVA believes that the VA must work to mitigate the effect of
frequent and lengthy deployments by providing small businesses owners
in the National Guard and Reserves with additional access to capital,
insurance, and bonding via the VA's Center for Veterans Enterprise. The
Center for Veterans Enterprise should receive appropriate funding and
resources to achieve this goal.
Federal Contracting
The Federal Government is the world's largest buyer of goods and
services, with purchases totaling over $425 billion each year.\3\ IAVA
was troubled to learn the Troubled Asset Relief Program (TARP),
authorizing up to $770 billion to bail out banks, exempted banks
receiving Federal bailouts from veterans hiring requirements, while
protections for minorities, women and disabled individuals were still
included. IAVA believes that TARP should be amended to force compliance
with veterans' preference rules and that all future stimulus programs
should not overlook veterans' hiring preferences.
---------------------------------------------------------------------------
\3\ http://www.sba.gov/contractingopportunities/index.html.
---------------------------------------------------------------------------
Conclusion
On April 26, 2010, President Obama took a critical first step at
evaluating what needs to be done for veteran small business owners. The
new Executive Order will create a veteran-owned small business task
force that ``will recommend specific improvements in how small
businesses are created, including expanded access to capital, advice on
how to cash in on lucrative Federal contracts and better counseling so
that businesses remain on a strong economic footing.'' \4\ IAVA
applauds this effort, and we urge the Administration to include new
veterans in this process.
---------------------------------------------------------------------------
\4\ http://www.armytimes.com/news/2010/04/
military_smallbusiness_veterans_042610w/.
---------------------------------------------------------------------------
However, more must be done. IAVA looks forward to working with this
Subcommittee to improve the ``Status of Veteran Small Business,'' and
create the next Greatest Generation of veteran-owned small businesses.
Thank you.
POST-HEARING QUESTIONS AND RESPONSES FOR THE RECORD
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Mr. William B. Shear
Director, Financial Markets and Community Investment
U.S. Government Accountability Office
441 G Street, NW, Room 2440B
Washington, DC 20548
Dear Mr. Shear:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
U.S. Government Accountability Office
Washington, DC.
June 15, 2010
The Honorable Stephanie Herseth Sandlin
Chairwoman
Subcommittee on Economic Opportunity
Committee on Veterans' Affairs
House of Representatives
Washington, DC
Dear Chairwoman Herseth Sandlin:
I am pleased to provide the following answers in response to
questions that you posed, in conjunction with the hearing entitled
``Status of Veteran Small Businesses: Are We Failing Our Veterans?''
held by the Subcommittee on Economic Opportunity on Tuesday, April 29,
2010. Please do not hesitate to contact me at (202) 512-8678 or
[email protected] if you have additional questions or want further
information.
Sincerely yours,
William B. Shear
Director, Financial Markets and Community Investment
Enclosure
__________
Question 1: You state that VA is exceeding its veteran contracting
goals as an agency. Are there any subdivisions that are not doing well?
Response: In fiscal year (FY) 2009, VA exceeded its veteran-owned
small business (VOSB) contracting goals of 10 percent of its
contracting dollars--awarding 19.7 percent to VOSBs. Additionally, VA
exceeded its service-disabled veteran-owned small business (SDVOSB)
goal of 7 percent--awarding 16.7 percent of contracting dollars to
SDVOSBs. According to data compiled by VA's Office of Small and
Disadvantaged Business Utilization, eight VA subdivisions (within the
Veterans Health Administration) did not meet the contracting goals for
VOSBs and SDVOSBs in FY09--seven were mail-out pharmacy units and one
was the Health Eligibility Center in Atlanta, Georgia. One staff
organization within VA failed to meet its veteran contracting goals--
VA's Office of Inspector General.
Question 2: At its current rate, how much time will it take VA to
verify all the veteran-owned small businesses in its Vendor Information
Pages database?
Response: As of April 2010, VA had verified about 2,900
businesses--approximately 14 percent of VOSBs and SDVOSBs in the
VetBiz.gov Vendor Information Pages database. According to VA, the
agency uses the VetBiz.gov database to fulfill multiple statutory
requirements. For example, VA uses the database to fulfill Pub. L. No.
109-461's requirement to have a database of verified businesses, but it
also uses the database to fulfill Pub. L. 106-50's requirement to
provide notices about services to veteran-owned small businesses each
year. While there are over 20,000 businesses listed in VA's VetBiz.gov
database, not all businesses have applied for verification.
According to VA, as of May 1, 2010, the backlog of applications
grew to over 5,000. VA plans to hire all vacant positions within the
Center for Veterans Enterprise by the end of July 2010, request
additional full-time-equivalent positions between May and August 2010
to support the verification program, and shift the workload of its
staff to focus more directly on verifications. According to VA, the
agency's current goal is to examine at least 6,000 applications by
December 31, 2011. However, it is unclear if VA will be able to meet
its goal at its current pace of verification.
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Mr. Joseph F. Sobota
Assistant Chief Counsel
Office of Advocacy
U.S. Small Business Administration
409 3rd Street, SW, Suite 7800
Washington, DC 20416
Dear Mr. Sobota:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
Office of Advocacy, U.S. Small Business Administration
Responses to Questions for the Record Submitted by the
House Committee on Veterans Affairs,
Subcommittee on Economic Opportunity
Hearing Conducted on April 29, 2010:
Status of Veteran Small Businesses: Are We Failing Our Veterans? \1\
Question 1: Other than the large population of veterans in
California, to your knowledge is California doing something unique to
make it the number one ranking State with veteran or service-disabled
business owners? Does it have anything to do with economic development
plans that the State of California has or small business State tax
credits?
---------------------------------------------------------------------------
\1\ Because the Office of Advocacy was established to provide
independent counsel to policymakers, its testimony is not circulated
for comment through the Office of Management and Budget (OMB) or other
Federal offices, and the views expressed by Advocacy here do not
necessarily reflect the position of the Administration or of SBA.
Response: The Office of Advocacy has no information on the effects
of California's veteran-related programs or tax law on business
formation or survival. California does have a Department of Veterans
Affairs that is responsible for administering a variety of specialized
services and conducting outreach to the State's sizable veteran
community.\2\ California was also a pioneer in establishing a 3 percent
goal for service-disabled veterans in State government procurement. The
State is home to many nonprofit veteran service providers, not to
mention the extensive network of Federal offices providing services of
all types to veterans. However, Advocacy has no way to link the
statistical data presented in our testimony to any of these programs or
services.
---------------------------------------------------------------------------
\2\ See http://www.cdva.ca.gov/newhome.aspx for more information.
---------------------------------------------------------------------------
It is safe to say that California's standing as the State with the
most veteran business owners is correlated to its ranking as the State
with the largest population. As Chairwoman Herseth Sandlin pointed out
during the hearing, the top 10 States in terms of their numbers of
veteran business owners were all high population States. She also asked
whether Advocacy had more information on smaller States and on veteran
business ownership on a per capita basis.
In order to answer such a question, it is necessary to control for
the tremendous variation in State populations. One way to do this is to
examine the percentage of all business owners nationwide who are
located in each State, and then compare this factor with the percentage
of all veteran business owners nationwide who are located in those
States. Comparing these percentages helps show where firms owned by
veterans or service-disabled veterans are over-represented or under-
represented in each State, relative to all business owners in that
State.
Advocacy commissioned a special tabulation of Census Bureau data
that allows us to make such a comparison. The special tabulation
answers questions on veteran business ownership that were not addressed
in previously published Census reports, including data on veteran
business owners by State. These data were included in Advocacy's
testimony and are expressed in terms of each State's percentage of all
owners nationwide. The table below depicts these percentages as shares
of all business owners, all veteran business owners, and all service-
disabled veteran business owners. These data are presented for both
employer owners and nonemployer owners.\3\
---------------------------------------------------------------------------
\3\ The data presented here and in Advocacy's prepared testimony
come from a special tabulation commissioned by Advocacy of data from
the Census Bureau's 2002 Survey of Business Owners and Self-Employed
Persons (SBO). The SBO's methodology is explained at http://
www.census.gov/econ/sbo/methodology.html. Data on veteran business
owners is based on SBO respondents only. Caution should be used with
data on service-disabled veteran owners, particularly with employer
owners in smaller States, due to the relatively small numbers of such
owners--only 0.67 percent of all respondent employer owners nationwide
were service-disabled.
----------------------------------------------------------------------------------------------------------------
Percentage of All Veteran Business Owners Nationwide by State--2002
-----------------------------------------------------------------------------------------------------------------
Employer firm owners Nonemployer firm owners
-----------------------------------------------------------------------
Service- Service-
Location All owners Veteran disabled All owners Veteran disabled
owners veteran owners veteran
owners owners
----------------------------------------------------------------------------------------------------------------
Alabama 1.3 1.6 1.6 1.3 1.5 2.0
----------------------------------------------------------------------------------------------------------------
Alaska 0.3 0.3 0.7 0.3 0.4 0.8
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Percentage of All Veteran Business Owners Nationwide by State--2002--Continued
-----------------------------------------------------------------------------------------------------------------
Employer firm owners Nonemployer firm owners
-----------------------------------------------------------------------
Service- Service-
Location All owners Veteran disabled All owners Veteran disabled
owners veteran owners veteran
owners owners
----------------------------------------------------------------------------------------------------------------
Arizona 1.8 1.8 2.2 1.7 1.9 1.8
----------------------------------------------------------------------------------------------------------------
Arkansas 1.0 1.1 1.3 0.9 1.1 1.1
----------------------------------------------------------------------------------------------------------------
California 11.6 10.4 9.8 12.3 10.5 10.2
----------------------------------------------------------------------------------------------------------------
Colorado 2.4 2.2 2.4 2.2 2.3 2.4
----------------------------------------------------------------------------------------------------------------
Connecticut 1.4 1.3 1.2 1.3 1.3 1.0
----------------------------------------------------------------------------------------------------------------
Delaware 0.3 0.3 0.3 0.3 0.3 0.2
----------------------------------------------------------------------------------------------------------------
District of Columbia 0.2 0.1 0.1 0.2 0.1 0.1
----------------------------------------------------------------------------------------------------------------
Florida 6.1 5.7 7.8 6.1 6.5 7.8
----------------------------------------------------------------------------------------------------------------
Georgia 2.7 3.0 3.0 2.7 3.0 3.6
----------------------------------------------------------------------------------------------------------------
Hawaii 0.4 0.4 0.7 0.5 0.5 0.7
----------------------------------------------------------------------------------------------------------------
Idaho 0.7 0.7 0.8 0.6 0.6 0.8
----------------------------------------------------------------------------------------------------------------
Illinois 4.5 4.2 2.7 4.0 3.5 2.4
----------------------------------------------------------------------------------------------------------------
Indiana 2.2 2.3 2.0 2.1 2.0 1.8
----------------------------------------------------------------------------------------------------------------
Iowa 1.3 1.4 0.8 1.2 1.2 1.0
----------------------------------------------------------------------------------------------------------------
Kansas 1.2 1.2 1.3 1.0 1.1 1.2
----------------------------------------------------------------------------------------------------------------
Kentucky 1.3 1.4 1.0 1.4 1.3 1.4
----------------------------------------------------------------------------------------------------------------
Louisiana 1.4 1.6 1.3 1.4 1.5 1.4
----------------------------------------------------------------------------------------------------------------
Maine 0.6 0.7 1.1 0.6 0.7 0.8
----------------------------------------------------------------------------------------------------------------
Maryland 1.8 1.8 1.5 2.0 2.1 2.3
----------------------------------------------------------------------------------------------------------------
Massachusetts 2.4 2.4 2.6 2.4 2.2 2.4
----------------------------------------------------------------------------------------------------------------
Michigan 3.4 3.0 2.8 3.4 3.1 2.7
----------------------------------------------------------------------------------------------------------------
Minnesota 2.3 2.3 2.7 2.2 2.1 1.8
----------------------------------------------------------------------------------------------------------------
Mississippi 0.8 0.9 0.8 0.8 0.9 0.9
----------------------------------------------------------------------------------------------------------------
Missouri 2.2 2.4 1.8 2.1 2.2 1.9
----------------------------------------------------------------------------------------------------------------
Montana 0.6 0.7 0.7 0.5 0.6 0.6
----------------------------------------------------------------------------------------------------------------
Nebraska 0.8 0.9 0.9 0.7 0.8 1.1
----------------------------------------------------------------------------------------------------------------
Nevada 0.7 0.8 0.7 0.7 0.8 1.1
----------------------------------------------------------------------------------------------------------------
New Hampshire 0.6 0.7 0.6 0.6 0.7 0.8
----------------------------------------------------------------------------------------------------------------
New Jersey 3.4 2.9 2.4 2.8 2.3 1.8
----------------------------------------------------------------------------------------------------------------
New Mexico 0.6 0.7 1.2 0.6 0.7 1.1
----------------------------------------------------------------------------------------------------------------
New York 6.3 5.0 5.1 6.2 4.5 3.9
----------------------------------------------------------------------------------------------------------------
North Carolina 2.9 3.3 3.5 2.9 3.2 3.6
----------------------------------------------------------------------------------------------------------------
North Dakota 0.3 0.4 0.4 0.3 0.3 0.3
----------------------------------------------------------------------------------------------------------------
Ohio 3.9 4.1 2.9 3.8 3.8 2.8
----------------------------------------------------------------------------------------------------------------
Oklahoma 1.3 1.5 1.9 1.4 1.6 2.2
----------------------------------------------------------------------------------------------------------------
Oregon 1.7 1.8 1.8 1.4 1.5 1.5
----------------------------------------------------------------------------------------------------------------
Pennsylvania 4.1 4.3 3.0 4.0 4.3 3.3
----------------------------------------------------------------------------------------------------------------
Rhode Island 0.4 0.4 0.3 0.4 0.4 0.2
----------------------------------------------------------------------------------------------------------------
South Carolina 1.3 1.7 1.6 1.2 1.6 1.6
----------------------------------------------------------------------------------------------------------------
South Dakota 0.4 0.4 0.5 0.3 0.4 0.4
----------------------------------------------------------------------------------------------------------------
Tennessee 1.8 2.0 1.6 2.0 2.1 2.2
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Percentage of All Veteran Business Owners Nationwide by State--2002--Continued
-----------------------------------------------------------------------------------------------------------------
Employer firm owners Nonemployer firm owners
-----------------------------------------------------------------------
Service- Service-
Location All owners Veteran disabled All owners Veteran disabled
owners veteran owners veteran
owners owners
----------------------------------------------------------------------------------------------------------------
Texas 6.1 6.6 7.8 7.2 7.7 8.0
----------------------------------------------------------------------------------------------------------------
Utah 1.0 0.7 0.5 0.9 0.7 0.7
----------------------------------------------------------------------------------------------------------------
Vermont 0.3 0.3 0.4 0.3 0.3 0.3
----------------------------------------------------------------------------------------------------------------
Virginia 2.5 2.9 3.4 2.4 2.7 3.2
----------------------------------------------------------------------------------------------------------------
Washington 2.6 2.8 3.0 2.2 2.3 2.7
----------------------------------------------------------------------------------------------------------------
West Virginia 0.6 0.6 0.6 0.5 0.5 0.5
----------------------------------------------------------------------------------------------------------------
Wisconsin 2.3 2.2 1.5 1.9 1.9 1.3
----------------------------------------------------------------------------------------------------------------
Wyoming 0.3 0.3 0.5 0.2 0.3 0.1
----------------------------------------------------------------------------------------------------------------
Source: SBA Office of Advocacy special tabulation of U.S. Census Bureau data from its 2002 Survey of Business
Owners and Self-Employed Persons. Data based on survey respondent owners only.
As can be readily seen, the percentages of veteran business
ownership in any given State are not always the same as those for
business ownership in general. In some States veterans may be
underrepresented in terms of business ownership relative to all
business owners, while in other States veterans may be overrepresented.
For example, California has the largest number of both veteran and
all business owners nationwide because of the State's size, but the
concentrations among the State's employer owners differ between all
owners and veteran owners, with all owners representing 11.6 percent of
the national total, veteran owners 10.4 percent of their national
total, and service-disabled veteran owners 9.8 percent of their
national total. So despite the fact that California has the largest
number of veteran business owners, they are actually underrepresented,
relative to all firm owners. In Texas, by contrast, veterans and
service-disabled veterans have larger shares of their national totals
of employer owners than do all Texas employer owners, with all owners
representing 6.1 percent of their national total, veteran owners 6.6
percent of their national total, and service-disabled veteran owners
7.8 percent of their national total.
Question 2: In your testimony you mentioned two ongoing research
projects that the Office of Advocacy is working on, when do you plan on
publishing your findings? Can you elaborate on what these projects will
include?
Response: Advocacy does have two separate contract research
projects now underway that relate to veteran entrepreneurship issues.
One project is examining whether there may be tax or regulatory
barriers to veteran business ownership or that otherwise have a
disproportionate effect on veteran business owners. A draft of this
study has been undergoing peer review, and Advocacy hopes to release
the finished study by the end of summer. Advocacy's contractor on this
project is Microeconomic Applications, Inc. in Washington, DC.
The second contract project on veteran-related issues is looking at
factors affecting veteran entrepreneurship. This project is being
conducted by the SAG Corporation, a service-disabled veteran-owned firm
in Annandale, VA. Advocacy expects this project to be completed before
the end of the year.
The reports on both projects must complete peer review and meet
Advocacy and governmentwide data quality standards before they are
released.
Question 3: From the numbers you have available, in general, have
veteran business owners been increasing or decreasing?
Response: The Census Bureau's 2002 Survey of Business Owners and
Self-Employed Persons (SBO) estimated that, in 2002, 14.5 percent of
all business owners were veterans, of which about 7 percent were
service-disabled.
The SBO is conducted once every 5 years, and Census has scheduled
the release of new information from its 2007 SBO on July 13, 2010. This
will be a preliminary report with summary information, to be followed
by 10 more detailed reports, including a special report on veteran-
owned businesses, now scheduled to be released in May 2011.\4\
---------------------------------------------------------------------------
\4\ See http://www.census.gov/econ/sbo/releaseschedule07.html for
updates on the 2007 SBO report release schedule.
---------------------------------------------------------------------------
The preliminary SBO report should help us identify trends in
veteran business ownership since the 2002 SBO and provide an answer to
the Subcommittee's question. However, we already have some indications
that the number of veteran business owners is probably going down.
Advocacy estimates that, from 2002 to 2008, the total
number of all firms has gone up by 25 percent, while the total number
of veterans has gone down by about 10 percent.
A separate Census data source indicates that 13.0 percent
of all business owners were veterans in early 2006, and 12.5 percent
were veterans in early 2009.\5\
---------------------------------------------------------------------------
\5\ U.S. Census Bureau, Survey of Income and Program Participation
(http://www. census.gov/sipp/index.html).
---------------------------------------------------------------------------
Census data from 1992 showed that 24.2 percent of all
firm owners were veterans then.\6\
---------------------------------------------------------------------------
\6\ See http://www2.census.gov/econ/sbo/92/cbo-9201.pdf, U.S.
Census Bureau, 1992 Characteristics of Business Owners, pp. 62-69, for
more information. This report was one of three predecessor reports to
the 2002 SBO.
---------------------------------------------------------------------------
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Ms. Diane Farrell
Director
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, DC 20571
Dear Ms. Farrell:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
Questions for the Record for the House Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Diane Farrell, Director, Export-Import Bank of the United States
April 29, 2010
Hearing on
Status of Veteran Small Businesses: Are We Failing Our Veterans?
Question 1: How big does a business need to be to seek Export-
Import Bank services?
Answer: The Export-Import Bank (Ex-Im Bank) is capable of helping
all U.S. companies, regardless of size, turn export opportunities into
real sales that help maintain and create American jobs and contribute
to a stronger national economy. The export value of Ex-Im Bank
financing has supported deals ranging from a few hundred dollars to
several millions of dollars. All of our Ex-Im Bank products are
available to small businesses, including short-term insurance, although
the product most widely used by small business exporters tends to be
the Working Capital Guarantee.
Ex-Im Bank understands that exporting is a challenge for many small
businesses, so Ex-Im Bank has five regional State offices (New York,
Florida, California, Illinois, and Texas), and three satellite offices
(San Diego, San Francisco, Dallas), and staff in Washington, DC,
devoted to providing American small businesses with the tools they need
to finance exports. Approximately 80 percent of staff time is spent on
small business.
Question 2: Does Export-Import Bank look for specific businesses
that could export goods and services?
Answer: Ex-Im Bank will support the export of any good or service
meeting its underwriting, content, environmental and other
requirements. That said, as part of Ex-Im Bank's recent strategic
initiative, it has identified several industries where the United
States may have a comparative advantage, including agricultural
machinery; construction equipment and services; medical equipment and
related services; aircraft and avionics; and power-generation equipment
and related services. Additionally, Ex-Im Bank identified nine
countries [Mexico, Brazil, Colombia, Nigeria, South Africa, Turkey,
India, Indonesia, Vietnam] having growing economies and infrastructure
needs.
In reaching these markets and others around the world, Ex-Im Bank
has partnered with other export interested entities such as the: Small
Business Administration; U.S. Department of Commerce; Trade and
Development Agency; Overseas Private Investment Corporation; and City/
State Development Offices through a successful and widely attended
``Exports Live!'' series. These trade promotion events have provided
exporters, small businesses new to exporting, and banks in New York,
Boston, Miami, Houston, Detroit, Chicago, Los Angeles, Cincinnati,
Minneapolis, Madison, WI, and Seattle areas with direct access to
aforementioned agency representatives. There are also opportunities for
one-on-one counseling for the attending exporters. Building on the
momentum and success of these ``Exports Live!'' trade events, two more
events were recently held just this month in Montana and Colorado.
It is an important point to remember that all of the regional
offices of Ex-Im Bank, including New York, Miami, Houston, Chicago, Los
Angeles, and San Francisco, are fully devoted to small business
outreach and that any small business exporter likely is eligible for
Ex-Im Bank financing.
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Mr. Joseph Sharpe, Jr.
Director, National Economic Commission
The American Legion
1608 K Street, NW
Washington, DC 20006
Dear Mr. Sharpe:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
American Legion
Washington, DC.
June 22, 2010
Honorable Stephanie Herseth Sandlin, Chair
Subcommittee on Economic Opportunity
Committee on Veterans' Affairs
U.S. House of Representatives
335 Cannon House Office Building
Washington, DC 20515
Dear Chair Herseth Sandlin:
Thank you for allowing The American Legion to participate in the
Subcommittee hearing on the Status of Veteran Small Businesses: Are We
Failing Our Veterans? on April 29, 2010. I respectfully submit the
following in response to your additional questions:
Question 1: Your recommendations to help Veteran-Owned Small
Businesses and Service-Disabled Veteran-Owned Small Businesses include
establishing a direct lending program within the SBA, and allowing
veteran-owned small businesses set-asides under the Federal Supply
Schedule Program. Since most of your recommendations are out of our
jurisdictions, have you spoken to the appropriate committee regarding
your recommendations?
Response: Yes, The American Legion has been communicating our
recommendations and agenda to the appropriate committee concerning the
plight of veteran and service-disabled veteran business owners. In
addition, The American Legion Small Business Task Force has proactively
developed an initiative to challenge Federal agencies that are not
meeting the 3 percent goal. We're meeting with individual Federal
agencies, particularly the ones with very low procurement numbers, to
develop plans that would enable them to boost their service-disabled
veteran procurement numbers. It is very disturbing that Federal
agencies continue to fail at meeting a congressionally mandated goal
aimed at assisting the very community that has sacrificed so much.
Question 2: You state that Federal agencies should be held
accountable by SBA for implementing existing Executive Orders. How can
SBA hold other agencies accountable?
Response: Currently, SBA cannot be held accountable as they have no
authority over various agencies. However, SBA could provide to the
Administration clear information and statistics relative to the
failures of agencies that do not reach their mandated goals. The SBA
has a Veterans Committee in place, but SBA has yet to be able to fully
act under P.L. 106-50. Technically, this Veterans Committee could call
in agency representatives to answer for their failures in meeting the
procurement goal. Also, this group is supposed to work with SBA to
ensure that stats/reports are being made to the agency heads and the
Administration. Furthermore, there could be language included in the
specific Executive Order(s) to report directly to the White House and/
or OMB could fine any agency that fails to implement these Executive
Order(s). Historically, when the White House takes the lead on veteran
services coordination across agencies, a more coordinated and
cooperative approach occurs.
Question 3: When veterans separate from the military do some
veterans take time off before looking for employment or going to
school?
Question 3(a): If so, how can we account for them?
Response: Yes, some veterans do take time to process out of the
military before immediately starting school and/or searching for
employment. It would be beneficial if the Transition Assistance Program
(TAP) could provide better followup with those who attend. Also, more
resources should be allocated to communicate and market veterans'
benefits within the Federal Government along with opportunities that
await them in the civilian workforce. You have a better chance of
accounting for veterans if they (along with their families) were aware
of education, training, employment and business opportunities both in
the public and private sector.
Question 4: What is a qualified entrepreneur?
Response: A qualified entrepreneur is one that has marketable
skills, a business idea or plan, and a vision to succeed. It also
includes an individual who has an idea and acts on it in such a manner
that he/she creates work opportunities for themselves and others.
Question 5: What more would the SBA's Office of Veterans Business
Development do with an additional $13 million you propose?
Response: The additional funding would support the establishment of
more Regional Veterans Small Business Resource Centers, while providing
better support for those currently in existence. In addition, SBA could
re-establish the 1980s/1990s successful Veterans Entrepreneurship
Training Program at colleges, universities and other training
institutions with updated elements that include the Entrepreneurship
Bootcamp for Veterans with Disabilities (EBV).
Question 6: In your written testimony, you stated that the number
of small businesses bankruptcy rose 54 percent from 2007 to 2008. Do
you know how many were veteran enterprises?
Response: To our knowledge, IRS does not keep data on veterans'
bankruptcy. We also note that the Community Reinvestment Act (CRA) does
not require or collect data on servicemembers, veterans, Reservists or
military family status for their reporting of access to credit (homes
or small businesses). Revising CRA could move us to a position of
knowing about access to credit for the entire military community.
Question 7: For recently separated veterans are there differences
in employment between the combat arms veteran and the non-combat arms
veterans?
Response: In most occasions, both the combat and non-combat veteran
would need additional training after active-duty service to hone their
skills as well as learn new skills to aggressively compete in today's
marketplace. However, the combat veteran would require more specialized
training that readily fits into a professional setting. Technological
skills, soft skills and networking skills are critical ingredients in
succeeding into the civilian workforce. The American Legion's goal is
to see combat and non-combat veterans receive training, retraining, and
support services that lead to long-term and high-wage career jobs.
Please note: Whether a combat arms veteran or non-combat arms veteran,
the major factor in acquiring employment after transitioning from the
military is skill sets and experience obtained before entering the
Armed Forces.
Question 8: In reviewing Office of Advocacy testimony on the
predominant business industries that Veteran-Owned Small Businesses and
Service-Disabled Veteran-Owned Small Businesses are part of, can we
surmise that these small businesses may only cater to certain Federal
agencies or business sectors?
Response: The American Legion believes that it would be incorrect
to surmise that position. VOBs and SDVOSBs are adept at taking
opportunities and adding to them once their foot is in the door. These
businesses are not restricted to one agency per se, but can provide
services to almost every agency within the government and to prime
contractors. Administration, IT, Management, Construction and Logistics
is needed by every agency, which VOBs and SDVOSBs can fulfill when
awarded these opportunities.
Question 9: Currently what can be done to penalize a large prime
who fails to provide subcontracts to veteran enterprises?
Response: The American Legion believes the most effective penalty
would be a financial one; however, the Federal Acquisition Regulation
(FAR) is a barrier here since it states the prime must make a good
faith effort in identifying a qualified subcontractor. This policy
makes it almost impossible to prove that the prime has purposely
neglected to identify a qualified subcontractor. The large primes
should be required to establish a subcontracting program, not just a
plan. SBA could work with DOL, VA and DoD to review the programs. If
the primes do not perform to established standards for all the goal
groups, penalize their profits. In addition, another consequence for
large primes could be disqualification from doing business with the
Federal Government for a specific amount of time.
Thank you for your continued commitment to America's veterans and
their families.
Sincerely,
Joseph C. Sharpe, Jr., Director
National Economic Commission
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Mr. Joe Wynn
Senior Advisor
Vietnam Veterans of America
8719 Colesville Road
Silver Spring, MD 20910
Dear Mr. Wynn:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
Joe Wynn, Senior Advisor, Vietnam Veterans of America
President, Vets Group, Inc.
Per your request, here are my responses to the questions for the
record from the House Committee on Veterans' Affairs Subcommittee on
Economic Opportunity regarding the hearing on ``Status of Veteran Small
Businesses: Are We Failing Our Veterans?''
Question 1: If set-asides were allowed in the Federal Supply
Schedule what would be the impact?
Answer: More small businesses would be selected and the Federal
Government would have a better chance of meeting the 23 percent small-
business-mandated goal. Recent SBA data shows that the 23 percent goal
was not achieved in FY2009.
Question 2: How reliable and useful is the Score Card System?
Answer: The current SBA score card system is supposed to draw
attention to an agency's small business goals achievement. However, it
is not specific to any one small business preference group. It is based
on their overall percentage. So if an agency does exceptionally well in
one small business category and poorly in the others, the agency would
still receive a favorable score of Green. The SBA should still be
requiring agencies to follow Executive Order 13-360 which called for
each agency to develop a written strategic plan showing how they would
increase contracting opportunities to SDVOBs.
Question 3: Currently what can be done to penalize a large prime
who fails to provide subcontracts to veteran enterprises?
Answer: There are several things that can be done to large primes
who fail to provide subcontracts to VOBs/SDVOBs: (1) Points could be
deducted from their next proposal evaluation; (2) They could be denied
consideration to continue the contract in option years; (3) Their names
could be added to a public list detailing their failure to comply; (4)
They could be required to pay a fine; and (5) They could be exempted
from receiving future contracts.
Question 4: In your view, is SBA really in a position to
effectively help small businesses and veterans based on their staff
size and budget?
Answer: The SBA is in a position to help small businesses and VOBs
by utilizing the staff they have. However, to be more effective, the
number of staff persons must be increased. The Office of Veterans
Business Development has only one Veterans Federal Procurement Liaison
Officer to assist thousands of veteran business owners. The SBA has
about 67 Procurement Center Representatives to monitor thousands of
contract actions throughout the Federal Government. In addition, the
SBA oversees the operation of 13 Veteran Business Resource Centers,
each with a budget of $150,000 per year to provide services to
thousands of veteran business owners around the country.
Question 5: Should the SBA go back to having agencies post plans on
their Web sites?
Answer: Yes, the SBA should go back to complying with Executive
Order 13-360 which required Federal agencies to develop a written
strategic plan demonstrating how they would increase contracting
opportunities for SDVOBs each year and to publicly display those plans
via their Web sites.
Question 6: Who is responsible for enforcing Public Law 106-50 and
Public Law 108-183?
Answer: According to Executive Order 13-360, the SBA should be
responsible for overseeing the implementation of Public Laws 106-50 and
108-183. However, they still have not been granted any real authority
to compel Federal agencies to comply with the laws. Ultimately,
Congress should provide oversight and ensure that penalties are applied
to agencies that do not comply with their laws.
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Ms. Mary Kennedy Thompson
President
Mr. Rooter Plumbing Corporation
International Franchise Association
P.O. Box 3146
1010 N. University Parks Drive
Waco, TX 76707-0146
Dear Ms. Thompson:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
Hearing on
Status of Veteran Small Businesses: Are We Failing Our Veterans?
Hearing Date: April 29, 2010:
Mary Kennedy Thompson, President, Mr. Rooter Plumbing Corporation
Representing the International Franchise Association
May 5, 2010
Question 1: Can you tell us more about the Entrepreneurship
Bootcamp for Veterans with Disabilities that is hosted by the Center
for New Ventures and Entrepreneurship?
Response: In Summer 2009 I was honored to present the basics of
franchising to a class at the Entrepreneurship Bootcamp for Veterans
with Disabilities hosted by Texas A&M University. The class was filled
with eager, smart, and disciplined disabled veterans planning to go
into business for themselves.
The ``Entrepreneurship Bootcamp for Veterans with Disabilities''
(EBV) at Texas A&M University in College Station, Texas represents a
significant collaboration on the campus between the Center for New
Ventures and Entrepreneurship, Center for Executive Development and the
Mays Business School. The EBV initiative offers cutting-edge,
experiential training in entrepreneurship and small business management
to soldiers, sailors, airmen, and marines disabled as a result of their
service supporting operations Enduring Freedom and Iraqi Freedom. The
intent of the EBV is to open the door to entrepreneurial opportunity
and small business ownership to those veterans, by developing their
competencies in the many steps and activities associated with creating
and sustaining an entrepreneurial venture, and also by helping disabled
veterans coordinate their efforts with programs and services for
veterans and others with disabilities.
The EBV was first introduced by the Whitman School of Management at
Syracuse University in 2007. In 2008, the EBV Consortium of Schools was
launched, a national partnership with the Mays Business School at Texas
A&M University, UCLA Anderson School of Management, and Florida State
University's College of Business. Each of these business schools
offered EBV on their campuses in summer 2008. The Krannert School of
Management at Purdue University also joined the EBV consortium, and all
five schools offered the EBV on their campuses in summer 2009.
Like the bootcamp, this program is intense, rigorous, and
challenging. Building upon the university's unique culture and
resources, the bootcamp in College Station Texas consists of a series
of training modules designed to assist the veteran in growing
businesses successfully and profitably. A team of experienced faculty
and successful entrepreneurs will work with them, providing a fun,
interactive, and informative experience. They will introduce
entrepreneurship ideas and concepts, and show how to apply them to a
current or potential business. The EBV program is offered entirely free
to qualified veterans accepted into the program.
Estimated program dates for the 2010 EBV sessions are as follows:
Texas A&M University, August
Florida State University, June
University of California, Los Angeles, August
Syracuse University, August
Purdue University, August
To see more online about this great program for disabled veterans
you can go to http://wehner.tamu.edu/ebv/. If I may provide additional
information you are most welcome to email me at
[email protected].
Question 2: Can the military discharge be a General Discharge to
qualify for financial incentives?
Response: Currently the International Franchise Association (IFA)
VetFran program only offers the discount incentive to honorably
discharged veterans. The same holds true for veterans applying for
scholarship awards from the IFA.
However in H.R. 2672, The Help Veterans Own Franchises Act, an
eligible veteran is defined as found in 38 USC Sec. 101, the term
``veteran'' means a person who served in the active military, naval, or
air service, and who was discharged or released there from under
conditions other than dishonorable.
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Mr. Joseph G. Jordan
Associate Administrator
Government Contracting and Business Development
U.S. Small Business Administration
409 3rd Street, SW
Washington, DC 20416
Dear Mr. Jordan:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
U.S. Small Business Administration
Responses to Questions for the Record from the
House Committee on Veterans Affairs,
Subcommittee on Economic Opportunity
Hearing on
Status of Veteran Small Businesses: Are We Failing Our Veterans?
Question 1: Does SBA have any partnerships with the private sector?
Response: The SBA helps Americans start, build and grow businesses.
Through an extensive network of field offices and partnerships with
public and private organizations, SBA delivers its services to people
throughout the United States, Puerto Rico, the U.S. Virgin Islands and
Guam.
Question 2: Many VSOs complain that Executive Order 13-360 is not
being followed by Federal agencies. What assurances can you give us
that the new Executive Orders will be followed by Federal agencies?
Response: SBA works with other Federal agencies to ensure that
small businesses are receiving maximum opportunities in government
contracting. As Associate Administrator Jordan mentioned in his
testimony before the Committee, SBA is working in several ways with the
other agencies to increase contracting participation for Service-
Disabled Veteran-Owned Small Businesses. The two Executive Orders
referenced in the question are critical to this mission.
Over the last year, the SBA has taken several steps to improve the
contracting opportunities for SDVOSBs and to ensure that we effectively
oversee and administer this critical program as thousands of veterans
return from combat. In addition to the Executive Order signed by the
President that created the Interagency Task Force on Veterans Small
Business Development, the SBA has been:
Improving outreach: SBA has been providing targeted
outreach to make the Federal contracting market less confusing and more
accessible to the SDVOSB community. In fiscal year 2010 and succeeding
fiscal years we are focusing on enhancing Office of Veterans Business
Development (OVBD) outreach, counseling and training to all veterans,
especially service-disabled veterans. This is happening in our VBOC
program (Veterans Business Outreach Program) which grew from 8 centers
in FY09 to 16 centers in FY10. In addition, we continue to grow local
outreach initiatives developed and implemented by SBA district offices,
as well as ``online'' services;
Working collaboratively with VA: This includes better
data and better access to that data for both the SBA and the VA. Teams
from both agencies have met several times in the last few months to
discuss a wide range of important issues that touch both agencies,
including the SDVOSB program. Administrator Mills has met with
Secretary Shinseki and his Deputy Secretary as well; and
Enhancing oversight to eliminate fraud, waste and abuse:
We have enhanced our SDVOSB bid protest process by implementing
stricter terms for those firms found ineligible. For example, we have
instituted a new policy where firms that are found ineligible must de-
certify themselves in CCR within 30 days of our determination or they
will be referred to our IG. We have conducted 111 SDVOSB bid protest
reviews YTD in FY 2010. In all of FY 2009, we conducted 94 SDVOSB bid
protests. We will continue to explore new ways, given our resources, to
make our surveillance of the program more robust.
Question 3: In your opinion what is the average rate of failure for
regular businesses and veteran businesses?
Response: SBA does not track the average rate of failure for either
of these categories, and thus cannot provide an opinion.
Committee on Veterans' Affairs
Subcommittee on Economic Opportunity
Washington, DC.
May 4, 2010
Mr. Tim J. Foreman
Executive Director
Office of Small and Disadvantaged Business Utilization
U.S. Department of Veterans Affairs
810 Vermont Avenue, N.W.
Washington, D.C. 20420
Dear Mr. Foreman:
I would like to request your response to the enclosed questions for
the record I am submitting in reference to our House Committee on
Veterans' Affairs Subcommittee on Economic Opportunity hearing on the
Status of Veteran Small Businesses: Are We Failing Our Veterans? on
April 29, 2010. Please answer the enclosed hearing questions by no
later than Tuesday, June 22, 2010.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for material for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively on letter size paper,
single-spaced. In addition, please restate the question in its entirety
before the answer.
Due to the delay in receiving mail, please provide your response to
Ms. Orfa Torres by fax at (202) 225-2034. If you have any questions,
please call (202) 226-5491.
Sincerely,
Stephanie Herseth Sandlin
Chairwoman
JL/ot
__________
Questions for the Record
House Committee on Veterans Affairs,
Subcommittee on Economic Opportunity
Chairwoman Stephanie Herseth Sandlin
Hearing on
``Status of Veteran Small Businesses: Are We Failing Our Veterans?''
April 29, 2010
Question 1: In your written testimony you stated that you generally
agree with Shawne Carter McGibbon's testimony who testified on behalf
of the Small Business Administration in a 2009 hearing. In her
testimony she identified problems reported by Veteran-Owned Small
Businesses and Service-Disabled Veteran-Owned Small Businesses. Three
of those problems were knowledge of programs for small business owners
in general, obtaining resources from the government, and knowledge of
programs for veteran small business owners. How is the VA working to
help veteran small business owners obtain resources?
Question 1(a): How is the VA working to improve knowledge of
existing programs for veteran small business owners?
Response: The Department of Veterans Affairs (VA) Office of Small
and Disadvantaged Business Utilization (OSDBU) provides counseling to
Service-Disabled Veteran-Owned Small Business (SDVOSB) and Veteran-
Owned Small Business (VOSB) firms through various means. We provide a
Vendor Day Counseling Session once each month in our office. These
sessions give an overview of VA's organization and the applicable
procurement offices within the Department. The counseling sessions
provide information on how to sell to VA specifically and how to sell
to the Federal Government in general. As many VA requirements are
filled via the General Services Administration's (GSA) Federal Supply
Schedule (FSS) contracts, we have partnered with GSA to have them take
part in these Vendor Day sessions. They provide an overview to our
attendees on how to obtain FSS contracts. Since many SDVOSB and VOSB
firms are not located within the Washington, DC area, VA OSDBU also
takes part in many small business conferences throughout the country,
including the Annual National Veterans Small Business Conference.
Overall, we participated in 61 conferences in fiscal year (FY) 2009 and
70 thus far in FY 2010.
VA OSDBU's travel schedule allows us to provide additional
counseling to SDVOSB and VOSB firms in person, all over the country.
Many events are associated with small business conferences and provide
optimal ways to reach our stakeholders. VA OSDBU also participates in
matchmaking events throughout the country. These events are one-on-one
sessions specific to the needs of the small business owner, especially
SDVOSB and VOSB. The aim is to provide participants with a real sense
of upcoming procurements in the locales where the matchmaking events
are held. VA OSDBU also responds to numerous telephone, e-mail, and
hard copy correspondence inquiries and requests for assistance each
day.
VA OSDBU maintains a Web page (www.va.gov/osdbu) that provides
comprehensive information, small business resource tools, and links to
many other Web sites that are valuable to SDVOSB and VOSB firms seeking
to do business with the Federal Government. Among other items, the Web
page includes a contact listing of all the VA Small Business Liaisons
located at the various VA contracting activities throughout the Nation
and a Forecast of Contracting Opportunities database, a listing of
small business conferences scheduled throughout the country that offer
valuable insight and networking opportunities for small firms. The Web
page also links to our partner organizations (Procurement Technical
Assistance Centers (PTAC), Small Business Development Centers, etc.)
who share our mission of providing maximum practicable opportunities to
SDVOSB and VOSB firms.
VA OSDBU works with numerous outside organizations to ensure SDVOSB
and VOSB firms are made aware of training, counseling, and resource
opportunities that are offered in the geographic areas where the SDVOSB
and VOSB firms are located. The PTAC (http://www.aptac-us.org/new/) and
the Small Business Development Centers (http://www.sba.gov/aboutsba/
sbaprograms/sbdc/sbdclocator/SBDC_LOCATOR. html) are particularly close
partners of VA OSDBU in providing training to SDVOSB and VOSB firms
that need counseling regarding starting and growing their small
businesses. VA OSDBU participates with many of the local branches of
these organizations and takes part in their conferences to provide
presentations, training sessions, matchmaking participants, and
counselors. VA OSDBU realizes small businesses are not always capable
of performing on large VA contracts. All small business firms,
especially SDVOSB and VOSB, are encouraged to examine the
Subcontracting Directory. This directory lists all prime contract
holders with VA. Small businesses can research these firms and market
their respective products and services to these prime contractors.
VA has partnered with the Small Business Administration (SBA) on a
working group to coordinate on issues of specific interest to SDVOSB
and VOSB firms. This effort will be further expanded with the recent
(April 26, 2010) issuance of the President's Executive Order on the
Interagency Task Force on Veterans Business Development. VA will work
with SBA, the Department of Defense, Department of Labor, Office of
Management and Budget, GSA, and representatives of Veterans Services
Organizations to coordinate administrative and regulatory activities
and develop proposals relating to:
Improving capital access and capacity of small business
concerns owned and controlled by veterans and service-disabled veterans
through loans, surety bonding, and franchising;
Ensuring achievement of the pre-established Federal
contracting goals for small business concerns owned and controlled by
veterans and service-disabled veterans through expanded mentor-protege
assistance and matching such small business concerns with contracting
opportunities;
Increasing the integrity of certifications of status as a
small business concern owned and controlled by a veteran or service-
disabled veteran;
Reducing paperwork and administrative burdens on veterans
in accessing business development and entrepreneurship opportunities;
Increasing and improving training and counseling services
provided to small business concerns owned and controlled by veterans;
and,
Making other improvements relating to the support for
veterans business development by the Federal Government.
VA OSDBU will implement a Mentor Protege Program (MPP) this fiscal
year. Under the VA MPP, protege firms must be SDVOSB or VOSB. The
program is designed as a developmental program to provide vital
business expertise to veteran-owned enterprises. The MPP will serve as
a tool for veterans who are business owners to become viable and/or
more competitive in the small business community.
Question 2: In your written testimony you said that the ``VA will
work with the U.S. Census Bureau to assure that useful veterans'
business information is collected in future surveys and other data
collection efforts.'' Have you spoken to the U.S. Census Bureau about
this?
Question 2(b): What additional data would be helpful to collect?
Response: Yes. OSDBU's Executive Director has established a
dialogue with the Chief, Small Business Programs Administrator,
Acquisition Systems, Planning and Policy Branch, Acquisitions Division,
U.S. Census Bureau. The initial focus is on capturing information in
three new areas:
1. Number of service-disabled, veteran-owned businesses by
business category;
2. Number of woman-owned businesses who are also veterans by
business category; and,
3. The number of veteran-owned businesses that have gone out of
business since the last survey.
Future areas for discussion involve how to define and capture
virtual organizations controlled by veterans.
Question 3: Where is VA on the verification program for the Vendor
Information Pages database?
Response: On June 1, 2010, VA awarded a contract for the
modernization of the Vendor Information Pages (VIP) database with a
modification called VIP5. In July 2010, VA plans to publish a Request
for Proposal (RFP) to process applications for vendor verification for
the VIP database by making case-by-case recommendations to VA OSDBU
regarding the veteran-status of putative owners and business control of
applicants. VA plans to award this second contract in September 2010.
The VA's goal is to assure that by January 1, 2012, a timely
verification decision has been made for all applicants.