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July-August, 2010 Volume 1, No. 4

VetLikeMe House Small Business Subcommittee on Contracting and Technology Hearing Jul 16, 2010 Chairman Glenn Nye (D-VA): ―There are currently 26 million veterans living in America. Nearly 100,000 of these veterans live in my district. And after years of service in Afghanistan, Iraq, Vietnam, Korea and across the globe, they have returned to Hampton Roads, Virginia ready to continue contributing to our community and country. ―These brave men and women deserve not only our enduring gratitude, but the opportunities and tools to build a new life. ―One of the most important tools we have to accomplish this mission is the Service-Disabled, Veteran -Owned Small Business (or SDVOSB) procurement program. During the last fiscal year, this initiative awarded nearly $10 billion in contracts to Service Disabled Veteran small firms. However, in 2008, the last year the SBA released its contracting goal report, these awards accounted for only about 1.5 percent of all federal contracts – half of the 3 percent statutory goal established in 1999. Fortunately, we have recently seen an uptick in contracts due to the Featured Interview: enactment of the American Recovery Tim Foreman, Director and Reinvestment VA Center for Veterans Act. The Recovery Enterprise Act provides veterLinkedIn comments on HUB- ans with new (Nye, cont. page 2) Zone priority in contracting

Proposed legislation targets abuse of veterans' small-business program Rep. Joe Courtney (D-Conn) wants to protect the government‘s small-business program for veterans by requiring federal officials to verify companies before letting them into the federal procurement program. Courtney introduced the Veteran-Owned Small Business Contracting Fairness Act (H.R. 6022) July 30, which would require federal officials to verify the companies' status to cut down on fraud. A provision states that a company cannot be included in the database of small businesses owned by service-disabled veterans until government officials determine that company executives are telling the truth about being servicedisabled veterans. The Government Accountability Office (GAO) conducted several investigations targeting the service-disabled veteran owned business set-aside. The investigations uncovered problems with verifying a company‘s eligibility. In October 2009, GAO reported $100 million in fraud or abuses of the program for service-disabled veterans, based on 10 casestudy firms. GAO auditors submitted several fake companies for inclusion in SBA setaside program and found that SBA officials didn‘t verify that the fake companies were SDVOSB. (Courtney, cont. page 3)


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“Which is more unwise: Choosing uncertainty over certainty or falsehood over truth?” Cicero, 75 BC (Nye, cont.) avenues and opportunities to work for the government. Service disabled veteran small firms have received another $1.4 billion in Recovery Act contracts – this totals over 4 percent of all Recovery Act funds. All of the agencies testifying today, with the exception of FEMA, awarded more than 3 percent of their Recovery Act contracts to SDVOSB. While I am incredibly pleased with this increase in contracts, I remain skeptical. The sad truth of the matter is that it appears many agencies have been saying one thing, but actually doing another. Last October, the GAO released a report, finding contracts are being diverted away from legitimate SDVOSBs to non-veteran businesses, including large corporations. In May, I held a hearing in Hamp“GAO found that half the (fraudulent) firms ton Roads to get an update from the GAO on the action taken against remain in the Federal Central Contractor these firms. There was a bit of posiRegistration Database, or CCR.” tive action: a janitorial service falsely identifying as an SDVOSB in a contract with the U.S. Forest Service, did not have their options exercised, their services were not renewed and their contract was terminated after their initial contract performance period ended. Unfortunately, this action was more the exception rather than the rule. The GAO found that since November 2009 the 10 fraudulent businesses received over $5 million in new SDVOSB sole-source and set-aside contracts and over $10 million in other federal contracts. The GAO also found that over half of these firms remain in the Federal Central Contractor Registration Database, or CCR. This report is a frustrating indication of the deplorable state of federal contracting programs. It is clear that there are no adequate controls nor consequences in place to deter fraudulent actions. We must take action now to ensure these abuses stop immediately. It is long past due to address the breakdowns in the veteran contracting programs system. Over 11 percent of all Iraq and Afghanistan veterans are currently unemployed. This number is unacceptable. It is essential that all veterans‘ resources are significantly better managed and overseen. As veterans are more likely to hire other veterans, programs like the one being discussed today are critical to reducing this unemployment rate. I think I speak for all of the Committee members here today in saying that we will do whatever it takes to support service disabled veterans and ensure they have the tools needed to succeed in today‘s economy. I am committed to the goal of eradicating fraud in the federal contracting system – and, I have taken the first steps to fix this problem. Last November I introduced the Service Disabled Veteran Owned Small Business Procurement Reform Act (HR 4125). This act will put in place control measures needed to ward against abuse of the system. Once law, it will finally enact punitive consequences for those who attempt to circumvent the law at the expense of our veterans. It will also establish a team of representatives responsible for supporting veteran entrepreneurship on a local level – actually working in the field, visiting these businesses and doing what we said we‘d do.‖ ~~


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Featured Interview Tim Foreman, Director, Center for Veterans Enterprise (CVE) VLM interviewed Tim Foreman in March.

VLM: The recently released rule December 2009 for VA procurements indicates that prime contractors can benefit from the tightened procurement rules if they „propose’ to use servicedisabled vets in their contract bids. How is this different from the former “good faith” requirement that primes claimed to attain VA contracts? (Courtney, cont.) For one of the companies, GAO auditors told SBA its office was in the Alamo in Texas, according to the report. ―A simple Internet search by SBA could have revealed these as phony applications,‖ states a report by Gregory Kutz, GAO‘s managing director of forensic audits and special investigations. "The GAO report confirmed what I heard from veteran-owned businesses in eastern Connecticut — that there was no effective process in place for validating whether businesses that claimed to be veteran-owned were actually so," Courtney said. He also tackles the issue of preferences for certain small-business programs, but he goes about it differently from other small-business advocates. Most advocates have worked to eliminate the requirement to give first preference to companies in SBA‘s Historically Underutilized Business Zone program. The law states that contracting officers ―shall‖ consider the HUBZone businesses for set-aside contracts. After doing that, contracting officers ―may‖ then consider the other programs for service-disabled veterans and other types of small businesses. The difference is a single word. Recent attempts to equalize the programs have sought to switch the HUBZone‘s ―shall‖ to a ―may‖ in the statute. It would allow the contracting officer the choice of giving first preference to any of the programs by making them all equal under the law. But Courtney's bill would change the ―may‖ to a ―shall‖ for all contracting set-asides. In other words, it would raise the veterans program to the same level as the HUBZone program‘s preference. The bill has been sent to the House's Small Business and Veterans' Affairs committees for consideration.~~

Tim Foreman: ―P.L. 109-461 establishes a reporting mechanism that enables VA to track prime contractors‘ utilization of Veteran-owned and service-disabled Veteran-owned subcontractors. ―The primes are required to name the businesses they intend to use in their technical proposal. If they cannot use the named business, they must replace them with another VOSB or SDVOSB. ―VA will follow-up with the businesses identified by the primes and ensure they received the dollars reported.‖ VLM: The new VA rule also states that companies found in violation will be ―debarred‖ from the CVE program. What does that mean? Do you think that this is sufficient penalty for fraudulent companies? Tim Foreman: ―The rule states that companies found in violation may be debarred from VA contracting. If they are in violation, either for verification purposes or a negative finding from an SBA protest is reported, they are removed from the program. Debarment prohibits a firm from receiving future business from our Department. Our objective is to ensure only eligible concerns benefit from this legislation.‖ Foreman, cont. pg 5


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The Shall/May Difference? It’s Huge... By Hardy Stone Much has been discussed about terminology and its critical nature within the federal contracting community. This matter, however, is more critical than most realize. The SBA/FAR spells out three set-aside groups in the federal marketplace that have ‗special‘ preference. But they‘re not all equal. The small disadvantaged, minority or woman-owned businesses – 8(a) – enjoy special consideration for contract awards if the contracting officer chooses to consider the 8(a) contract vehicle. In order for this to be the case, there must be two or more qualified 8(a) companies. The service-disabled veteran owned small business (SDVOSB) is also a contract set-aside receiving ‗special‘ consideration by contracting officers (CO) under the same bidding conditions as 8(a) companies. If the CO chooses. The last set-aside group is HUBZone businesses located and operated in economically depressed locations of an urban area. Sounds simple for the CO, right? We have these three set asides that have priority over other bidders if there are two or more qualified businesses in a set-aside group. Here‘s where the system breaks down. The HUBZone businesses have a critical addition to the regulation. A small twist in the FAR has monstrous effects on 8 (a) and SDVOSB. According to the regulations, a HUBZone (HZ) business SHALL be considered for a contract if there are two or more qualified businesses to do the work. COs SHALL award the contract to a HZ if it is qualified to do the work. As for the 8(a) and SDVOSB, the CO ‗MAY‘ choose to use these two set-asides to award the contract if there are two or more businesses that can do the work. Everybody knows the federal contracting is a mammoth undertaking, filled with obtuse, sometimes outdated regulations, potholes and exceptions that makes the head spin. COs have one of the most difficult jobs in the federal government, constantly hustling on to the next agency procurement need while keeping an eye on the progress and stages of other contracts. The easier a contract procedure can get off the ground, the easier their workload. The CO‘s performance evaluation more times than not is determined by the quality of the work done by his vendors, the speed that COs can turnaround contracts and the number of contracts awarded without protest. This ‗may award a contract‘ to 8(a) or SDVOSB? Give me a break. COs can choose these set-aside category if they‘re so inclined; there is no regulation forcing them to use 8(a) and SDVOSB. Being an SDBVOSB, I have my personal biases on the set-asides, but I may go into those in a later editorial. Suffice to say that I believe that VOB/SDVOSB get the mission done and are likely to hire veterans to join their team.

Senator Olympia Snowe (R-ME)

Elevate the 8(a) and the SDVOSB to the SHALL status and give COs more reason to select SDVOSB. Parity among the three set-asides has been suggested in legislation passed around in Congress, and no Congressional member has been more persistent than Senator Olympia Snowe (R-ME). But so far, no dice.~~

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Foreman, cont. VLM: fraud?

There is no statutory mandate for CVE. Do you think it needs one to police the system and prevent

Tim Foreman: ―CVE was not created as a policing agency. Our mandate is to assist veterans with starting or expanding a small business and to assist all the other Federal agencies in expanding their opportunities for SDVOSBs.‖ VLM: If removal from the database of VOB/SDVOB is the extent of the penalty for getting caught falsifying qualifications, what is to prevent companies from falsifying on all bids? Shouldn‘t a more substantial penalty imposed? If caught falsifying qualifications for set-asides, do you think criminal procedures should be assessed? Tim Foreman: ―Removal from the database is the initial step required after identifying an ineligible party. As mentioned, other, more punitive steps require coordination within VA and sometimes with the Department of Justice. Rest assured that VA is serious about the integrity of this program and is focused on stopping ineligible parties from scheming the system and depriving legitimate business owners of awards.‖~~

Additional Shall/May/HUBZone Web Coverage: US Court of Federal Claims Ruling over other federal set-aside contracts: The U.S. Court of Federal Claims determined that the Small Business Act requires contracting officers to consider companies in the Small Business Administration‘s Historically Underutilized Business Zone (HUBZone) program before opening contracts to firms in the 8(a) and service-disabled, veteran-owned small business setaside programs. Official Court Ruling:

http://tinyurl.com/26h6ttl -

“Uncertainty looms over procurement parity dispute”

http://tinyurl.com/24gh6w9

“Court puts HUBZone firms at top of small business pecking order” http://tinyurl.com/23oawgt “Disabled Veteran Small Businesses Losing Parity”

http://tinyurl.com/2f6hnf8


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Short Takes —Recovery funds brought DOD finally within sight of the mandated 3%. http://tinyurl.com/3yvabo6 —DOD‘s Last Recovery Funds Go to SDVOSB? Or big contractors? http://tinyurl.com/237dmpe —HR bill 4125: To amend the Small Business Act to improve services concerns owned and controlled by service-disabled veterans... http://tinyurl.com/2cf2lbn —Vice President

Biden‘s Summer Speech on

Recovery Funds and Veterans (video) http://tinyurl.com/29bs42u —Training for contracting officers. COs need training on setasides. Introduced by Senator Olympia Snowe. Currently in the Senate Committee of Small Business and Entrepreneurship (Senator Mary Landrieu, Chair). http://tinyurl.com/2b5njsu —GAO report on VA‘s formidable task: http://tinyurl.com/27mbm4a —Sole Source language of FAR final rule comments: http://tinyurl.com/29uoysg —State Activity for SDVOSB: Pennsylvania http://tinyurl.com/35kma3f North Carolina: http://tinyurl.com/3xw8ee7 New Jersey: http://tinyurl.com/3y9ma3u

for small business


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Other Voices VLM receives emails and comments from members of the SDVOSB community that provide perspective and a sense of political urgency to the status of our interest group. Comments, criticism and suggestions are encouraged. Email: bluepoint1@comcast.net Identifying information from these forums is redacted. “How about just getting parity across the board, with all of the other Programs, and yes it is needed because we didn't spend the prior 20 years making the business contacts or building a company up. We were laying our collective a$$$$$$ on the line. So we start out at a distinct disadvantage. In addition, when we do finally get back to the civilian world it is 10 x as difficult to get a company going.” “Should the SDVOSB community have a competitive advantage over all other federal contractors...OF COURSE! But neither you nor I or anyone else out there is going to cause that to happen in the short-term, it will take political will to effect that change.” “Comparing one program to another is really futile because it's apples and oranges. I think that a much more useful discussion would center on how to educate and motivate federal contracting officers to use the SDVOSB program to an extent that allows them to hit their 3% annual goal.” “Beating on [contracting officers] doesn't seem to do it and arguing with them about the merits of "Shall" verses "May" is pointless so long as the SDVOSB legislation says "May". So let's go fight the battles that can be fought and get ready for those yet to come.” “Our country owes a tremendous debt to the Vietnam Era Vets. But even with all their sacrifice, we cannot say there was a government sanctioned effort to exclude them from owning and setting up a business due to just being a vet. That is what minority groups faced. They are not the same thing. If you believe that they are; then that is fine, but to have a reasoned debate about whether SDVOB are getting all they deserve in regards to the other programs will take more factual evidence that vets are impeded from having a successful business by the market place or federal government because of their service.” “Discussions like this one is what needs to continue to occur. I believe we all make decisions based on the level of information we garner. Sometimes we are well informed and not so well informed.” “As Veterans, we are no stranger in collecting intel. As my XO use to say, don't be a Lt with a secret. It is imperative that we all give an extra effort in sharing what we know …” "Everyone is trying to enter markets and take advantage of opportunity to advance their business. Set-asides provide that opportunity. What makes one more important than the other? Quite frankly, I am not sure that anything does. ALL have made contributions to this country. Many of these folks are veterans, living in HUBZONES -- homeless and unemployed. Many of these folks are veterans, holding 8(a) status who too have fought for this country and made sacrifices. Many of these folks are veterans who are women (and still fighting to get recognized) after many, many years. I am thankful for any small opening to allow me to enter a saturated, highly competitive market -- to give me an opportunity to get my foot in the door. Even after six years of business, it is a great challenge.”

VetLikeMe is published bi-monthly by BluePoint Productions Editor and publisher: Hardy Stone Copyright BluePoint Productions, August 2010 bluepoint1@comcast.net www.bluepointgov.net Interview credit: Jo Shutta, Public Affairs, Veterans Administration


VetLikeMe Summer 2010 Volume 1, No.4