[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]





          FEDERAL PROCUREMENT AND THE THREE-PERCENT SET ASIDE

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 12, 2007

                               __________

                           Serial No. 110-34

                               __________

       Printed for the use of the Committee on Veterans' Affairs










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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     RICHARD H. BAKER, Louisiana
Dakota                               HENRY E. BROWN, Jr., South 
HARRY E. MITCHELL, Arizona           Carolina
JOHN J. HALL, New York               JEFF MILLER, Florida
PHIL HARE, Illinois                  JOHN BOOZMAN, Arkansas
MICHAEL F. DOYLE, Pennsylvania       GINNY BROWN-WAITE, Florida
SHELLEY BERKLEY, Nevada              MICHAEL R. TURNER, Ohio
JOHN T. SALAZAR, Colorado            BRIAN P. BILBRAY, California
CIRO D. RODRIGUEZ, Texas             DOUG LAMBORN, Colorado
JOE DONNELLY, Indiana                GUS M. BILIRAKIS, Florida
JERRY McNERNEY, California           VERN BUCHANAN, Florida
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota

                   Malcom A. Shorter, Staff Director

                                 ______

                  SUBCOMMITTEE ON ECONOMIC OPPORTUNITY

          STEPHANIE HERSETH SANDLIN, South Dakota, Chairwoman

JOE DONNELLY, Indiana                JOHN BOOZMAN, Arkansas, Ranking
JERRY McNERNEY, California           RICHARD H. BAKER, Louisiana
JOHN J. HALL, New York               JERRY MORAN, Kansas

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

                               __________

                             July 12, 2007

                                                                   Page
Federal Procurement and the Three-Percent Set Aside..............     1

                           OPENING STATEMENTS

Chairwoman Stephanie Herseth Sandlin.............................     1
    Prepared statement of Chairwoman Herseth Sandlin.............    55
Hon. John Boozman, Ranking Republican Member.....................     2
    Prepared statement of Congressman Boozman....................    55

                               WITNESSES

U.S. Small Business Administration:
William D. Elmore, Associate Administrator, Office of Veterans 
  Business Development...........................................    28
    Prepared statement of Mr. Elmore.............................    76
Louis J. Celli, Jr., Chairman, Advisory Committee for Veterans 
  Business Affairs, and Chief Executive Officer, Northeast 
  Veterans Business Resource Center..............................    30
    Prepared statement of Mr. Celli..............................    77
U.S. Department of Veterans Affairs, Scott F. Denniston, 
  Director, Office of Small and Disadvantaged Business 
  Utilization and Center for Veterans Enterprise.................    33
    Prepared statement of Mr. Denniston..........................    89
Office of Management and Budget, Paul A. Denett, Administrator, 
  Office of Federal Procurement Policy...........................    35
    Prepared statement of Mr. Denett.............................    93
U.S. Department of Defense, Charles Cervantes, Special Assistant 
  to the Director, Office of Small Business Programs, Office of 
  the Under Secretary of Defense for Acquisition, Technology and 
  Logistics......................................................    38
    Prepared statement of Mr. Cervantes..........................    95

                                 ______

American Legion, Joseph C. Sharpe, Jr., Deputy Director, Economic 
  Commission.....................................................    21
    Prepared statement of Mr. Sharpe.............................    71
MCB Lighting and Electrical, Owings, MD, Charles Maurice Baker, 
  President and Chief Executive Officer, and Board of Directors, 
  Veterans Enterprise Training and Services Group, Inc. (VETS 
  Group), and Member, Veterans Entrepreneurship Task Force (VET-
  Force).........................................................     4
    Prepared statement of Mr. Baker..............................    56
MicroTech, LLC, Vienna, VA, Anthony R. Jimenez, President and 
  Chief Executive Officer........................................     7
    Prepared statement of Mr. Jimenez............................    62
Oak Grove Technologies, Raleigh, NC, Mark J. Gross, President and 
  Chief Executive Officer........................................     6
    Prepared statement of Mr. Gross..............................    60
Veterans Enterprise Training and Service Group, Inc. (VETS 
  Group), Joe Wynn, President, and Member, Veterans 
  Entrepreneurship Task Force (VET-Force), and National 
  Association for Black Veterans.................................    19
    Prepared statement of Mr. Wynn...............................    63
Veterans of Foreign Wars of the United States, Eric A. Hilleman, 
  Deputy Director, National Legislative Service..................    22
    Prepared statement of Mr. Hilleman...........................    75

                       SUBMISSIONS FOR THE RECORD

Veteran Corps of America, John R. Wheeler, Vice President, 
  statement......................................................    96
Vietnam Veterans of America, Richard F. Weidman, Executive 
  Director for Policy and Government Affairs, statement..........    98

                   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 
      Paul A. Denett, Administrator, Office of Federal 
      Procurement Policy, Office of Management and Budget, letter 
      dated August 7, 2007.......................................   104
    Hon. Stephanie Herseth Sandlin, Chairwoman, Subcommittee on 
      Economic Opportunity, Committee on Veterans' Affairs, to 
      Anthony R. Martoccia, Office of Small Business Programs, 
      U.S. Department of Defense, letter dated August 2, 2007....   105



















 
          FEDERAL PROCUREMENT AND THE THREE-PERCENT SET ASIDE

                              ----------                              


                        THURSDAY, JULY 12, 2007

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                      Subcommittee on Economic Opportunity,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:05 p.m., in 
Room 334, Cannon House Office Building, Hon. Stephanie Herseth 
Sandlin [Chairwoman of the Subcommittee] presiding.

    Present: Representatives Herseth Sandlin, Hall, Boozman.

        OPENING STATEMENT OF CHAIRWOMAN HERSETH SANDLIN

    Ms. Herseth Sandlin. Good afternoon ladies and gentlemen. 
The Veterans' Affairs Economic Opportunity Subcommittee hearing 
on Federal Procurement and the Three-Percent Set Aside will now 
come to order.
    Before I begin with my opening statement, I'd like to call 
attention to the fact that Mr. John Wheeler, Vice President of 
the Veterans Corps of America has asked to submit a written 
statement for the hearing record. If there is no objection, I 
would like to ask for unanimous consent that his statement be 
entered for the record. Hearing no objection, so entered.
    Some of the panelists may recall that we held a hearing in 
May on the subject of veterans entrepreneurship and self 
employment. During that hearing, many of our panelists 
expressed concerns over Federal procurement opportunities and 
the three-percent set aside rule for Federal agencies.
    Today's hearing will follow up on those concerns as we 
explore the current state of Federal procurement and the 
problems that are being faced by veterans.
    Veterans of our armed forces have been, and continue to be, 
vital to securing our Nation's economic prosperity and 
development. When given the opportunity to start and manage 
their own small businesses, these brave men and women add 
tremendous value to the success of our economy, as they strive 
to lead a successful life back in the civilian workforce. Time 
and again, we have seen these veterans, many disabled, return 
home to live out the American dream that they so bravely fought 
to protect.
    With over 17,000 veteran-owned small businesses back in my 
home State of South Dakota, I want to ensure that they, as well 
as all veteran entrepreneurs, are given proper assistance to 
expand their small business enterprises and are given the 
opportunities to secure more contracts with the government.
    I understand that while some agencies may be meeting the 
three-percent set aside goal, most agencies are not. I, along 
with my colleagues on this Subcommittee, am troubled by the 
lack of progress and effort on behalf of most Federal agencies.
    As you know, Public Law 106-50 was signed by President 
William J. Clinton on August 17, 1999, to increase veteran 
participation in Federal procurement. This was then followed by 
Executive Order 13360 from President George Bush on October 20, 
2004. These measures have not brought about the changes that we 
were expecting for veteran-owned businesses. While we applaud 
the Federal agencies that have met the three-percent set aside 
goal, we are concerned by the lack of progress and effort by 
others.
    I look forward to hearing from our distinguished panelists 
on how we can best overcome these hurdles. I am grateful to 
have the opportunity to work with Ranking Member Boozman and 
Members of this Subcommittee to focus our efforts on meeting 
the needs of our Nation's veterans and the challenges they 
face.
    I now recognize Mr. Boozman for any opening remarks he may 
have.
    [The prepared statement of Chairwoman Herseth Sandlin 
appears on p. 55.]

            OPENING STATEMENT OF HON. JOHN BOOZMAN,
                   RANKING REPUBLICAN MEMBER

    Mr. Boozman. Thank you, Madam Chair. It is no small secret 
that the Federal Government as a whole has done a poor job of 
meeting the requirements set forth in Public Law 106-50, 108-
183, and Executive Order 13360 in which 3 percent of all 
Federal-contract dollars are to be set aside for businesses 
owned by service-disabled veterans.
    In the fiscal year 2005, the last year for which the U.S. 
Small Business Administration (SBA) has complete data, the 
Federal Government has spent a paltry six-tenths of 1 percent 
of all procurement with service-disabled veteran-owned 
businesses (SDVOBs). This is about one-fifth of what the law 
and the Executive Order requires.
    In 2005, only the Committee for the Purchasing from Blind 
and Other Severely Handicapped, the Defense Nuclear Safety 
Agency, Federal Emergency Management Agency, and the National 
Science Foundation were in compliance.
    Notably absent were the U.S. Department of Veterans Affairs 
(VA) and U.S. Department of Defense (DoD). In VA's defense, I 
understand they exceeded the goal in fiscal year 2006, which is 
great.
    While there is no entitlement to a contract for any set 
aside group, for obvious reasons, the Federal Government plays 
a special role in promoting veterans who choose the 
entrepreneurial path for veterans who are unique and that they 
earned whatever advantage the Federal Government provides, 
unlike all the other set aside categories of small business.
    Public Law 106-50, 108-183, and 13 through 60, are fairly 
straightforward. Let us consider the requirements laid out in 
the President's directive.
    Its main features are relative to promoting disabled, 
veteran-owned businesses. Agency heads shall develop a 
strategy, report annually to the SBA, designate a senior 
official to implement the strategy, and include contracting 
with the service-disabled veteran-owned businesses in the 
performance evaluations of appropriate agency staff.
    An agency strategy must include plans to implement SDVOB 
set asides encouraging that participation, encouraging prime 
subcontracts with SDVOBs, and training agency personnel. These 
plans are important, because if you don't have a valid roadmap, 
it is difficult to achieve the three-percent goal.
    I note that Mr. Wynn's testimony states that over half the 
plans were incomplete and some were poorly developed. I hope 
Mr. Elmore will address that statement.
    The President also set very specific duties for SBA, VA, 
the General Services Administration (GSA), and the DoD. What I 
am most interested in today is learning from agency 
representatives how they are meeting the President's 
directions.
    I am especially impressed with the testimonies of Louis 
Celli and his approach to promoting service-disabled veteran-
owned business by reinvigorating the Small Business 
Administration. I think this makes eminent good sense given the 
controversy surrounding other efforts to improve Federal 
assistance to SDVOSB.
    I fully support providing SBA with the resources to improve 
their services to SDVOBs. And holding them accountable for 
meeting their mandate included in the public laws, which we 
have cited and the Executive Order.
    In an opposite vein, I do not agree with the statement in 
Mr. Cervantes' written testimony. He states that DoD could not 
strategize on reaching these goals until the passage of Public 
Law 108-183.
    The Defense Department never seems to have problems 
strategizing for other types of operational issues. In fact, 
that is what they get paid to do, figure out how to get things 
planned, including back-up plans for the back-up plan. In fact, 
DoD's failure to meet the three-percent goal is a major factor 
in the overall failure in the performance of the Federal 
Government.
    Madam Chair, also I would just note that we have a lot of 
witnesses today. And I think you and I are very familiar with 
the laws.
    So in your testimony, if you would help us in the sense 
that this is very important. It is a very important hearing. If 
you will not refrain to so much, as to what has gone on. We 
really understand that. If you will just kind of give us the 
meat of your testimony, it would be greatly appreciated.
    Thank you very much.
    [The prepared statement of Congressman Boozman appears on
p. 55.]
    Ms. Herseth Sandlin. Thank you, Mr. Boozman. I think that 
is a very good suggestion. Some of our witnesses have been 
before our Subcommittee a number of times. So if we can focus 
your opening remarks. And we too will focus our questions on 
the heart of the matter as to where we are today so that we can 
continue to do the important follow up, which is one of the 
reasons we are having this hearing today to acquire more of 
that information.
    I want to welcome our panelists testifying before this 
Subcommittee today. Joining us on our first panel, if they 
could make their way up as I am introducing them, we have Mr. 
Charles Baker, President and Chief Executive Officer (CEO) of 
MCB Lighting and Electrical; Mr. Mark Gross, President and 
Chief Executive Officer of Oak Grove Technologies; and Mr. 
Anthony Jimenez, President and Chief Executive Officer of 
MicroTech, LLC.
    Mr. Jimenez and Mr. Gross, welcome back to the 
Subcommittee. Mr. Baker, we welcome you. We will go ahead and 
start with your testimony.
    You are now recognized for 5 minutes.

   STATEMENTS OF CHARLES MAURICE BAKER, PRESIDENT AND CHIEF 
  EXECUTIVE OFFICER, MCB LIGHTING AND ELECTRICAL, OWINGS, MD, 
 BOARD OF DIRECTORS, VETERANS ENTERPRISE TRAINING AND SERVICE 
GROUP, INC. (VETS GROUP), AND MEMBER, VETERANS ENTREPRENEURSHIP 
  TASK FORCE (VET-FORCE); MARK J. GROSS, PRESIDENT AND CHIEF 
  EXECUTIVE OFFICER, OAK GROVE TECHNOLOGIES, RALEIGH, NC; AND 
  ANTHONY R. JIMENEZ, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 
                   MICROTECH, LLC, VIENNA, VA

               STATEMENT OF CHARLES MAURICE BAKER

    Mr. Baker. Thank you. Good afternoon Chairwoman Herseth 
Sandlin, and Ranking Member Boozman, and other Members of the 
Subcommittee, fellow veterans, and guests.
    I would like to thank this Subcommittee for allowing me to 
contribute my perspective and voice to this very demanding 
challenge. That is, I won't burden my testimony revisiting a 
group of problems that have been well documented over the 
last--past 8 years.
    I will focus my testimony on a set of solutions that my 
unique background as a servicemember, liaison to Federal 
employees, and businessowner qualifies me to suggest.
    A more detailed explanation of my suggested approach is 
included in my written statement, which I have included for the 
Committee record.
    From my humble perspective, we need to employ the intent of 
existing procurement laws associated with the implementation of 
the rules of procurement that are not being followed today.
    Not following the in-place rules and policies are one of 
the primary reasons why we are having problems with Federal 
procurement in not meeting the goals.
    If the current rules and policies were enforced to the 
maximum, practical utilization, SDVOB spending would 
dramatically improve.
    Many of us believe procurement needs to be overhauled to 
correct this and many other problems. Before 1984, it was 
thought contracting needed to be overhauled. So the Federal 
Acquisition Regulation (FAR) was created and the Competition in 
Contracting Act was created.
    In 1994, the Federal Acquisition Streamlined Procurement 
Act was supposed to overhaul contracting. But it created a 
bigger mess, utilizing GSA, the Defense Logistics Agency, and 
other Federal schedules. And now in 2007, everybody wants to 
fix contracting again.
    I am using my voice to suggest break this--break this cycle 
of insanity by doing things a little different this time. In 
the business world, I have heard insanity defined as doing the 
same thing over and over, while expecting a different result.
    My suggestion is that we simply follow the existing rules 
and comply with intent of existing laws and policies first. Let 
us promote a culture within Federal procurement that promotes 
creativity and innovative within the boundaries of our current 
rules.
    I suggest--I am suggesting a culture that passionately 
drives the best interest of the government first and not the 
best interest of a single individual or group, large business, 
or Federal employees seeking to find an easy way to get the job 
done. Or small business seeking a--to secure a contract they 
are not qualified to receive.
    If we want to make a humongous impact on contracting, it 
must be done where the business transformation makes the most 
sense. And that is--and that has the--I am sorry. And that has 
the most--it has the most impact on the government. We must 
address the workload issue.
    Ninety percent of all transactions in Federal procurement 
are under $100,000. Yet, they are only 10 percent of the total 
dollars spent.
    From a management agenda perspective, this must be 
addressed promptly. In my statement, I suggest an innovative 
approach to make an immediate, demonstrative impact on the 
mission. This mission impact will save money and increase our 
mission readiness to support all requirements under the 
$100,000 threshold.
    This approach would decrease costs and shorten acquisition 
time, all while making a demonstrative impact on the mission, 
and giving the majority of the work to small business as 
intended by law.
    The overall mission of government in its critical internal 
elements, are the key to good contracting. Since current 
simplified acquisition rules are having a negative--oh, I am 
sorry.
    Under the $100,000--the under $100,000 category of product 
and services, is critical for all small business to be--to 
include the SDVOB. We must make sure that FAR Part 13 and 19, 
which exclusively reserves--which was exclusively reserved for 
small business, but doesn't happen, is followed. Smaller 
contracts are the foundation or starting point for creating 
economic viability for the service-disabled vet and other small 
businesses. We must be allowed the opportunity to become a 
viable, sustainable, competitive company by getting a constant 
flow of work and get paid in a timely manner, because, yes, 
even today there are still horror stories of veterans not being 
paid for as long as 12 months. We cannot subject veterans to 
this type of financial irresponsibility.
    And in closing, I would just like to say one of the key 
parts that I see under the $100,000 threshold happens to be a 
loophole that is in the FAR. The loophole is FAR Part 8.404, 
which allows big business under GSA schedule to be able to 
compete under the $100,000 threshold.
    And I believe that this--if this was fixed and if we 
focused more on from a developmental side, letting small 
businesses to include veterans be able to compete more for 
contracts under the $100,000, as you can see which is 90 
percent of all our transactions, I believe that we would be a 
lot more successful.
    And thank you.
    [The prepared statement of Mr. Baker appears on p. 56.]
    Ms. Herseth Sandlin. Thank you, Mr. Baker.
    Mr. Baker [continuing]. Do you pronounce it Gross or 
``Grass''.
    Mr. Gross. It is ``Gross.''
    Ms. Herseth Sandlin. ``Gross.'' I remembered that from the 
last hearing. A few people referred to you as Mr. ``Grass.'' So 
I apologize. We will now recognize you for 5 minutes.

                   STATEMENT OF MARK J. GROSS

    Mr. Gross. Thank you. Good afternoon Madam Chair Herseth 
Sandlin, Ranking Member Boozman, and Members of this 
Subcommittee.
    First I want to thank you for an invitation back to--how is 
that? Is that better? I would like to thank you for the 
invitation to come back before you today and share some of my 
experiences in the veteran business community and to discuss 
the three-percent Federal procurement goal for Service-Disabled 
Veteran-Owned Small Businesses.
    As a veteran of the United States Army, I am CEO of Oak 
Grove Technologies. We are a Service-Disabled Veteran-Owned 
small business. I founded the company at my kitchen table 5 
years ago this coming August.
    Today, I am proud to say, I employ over 140 employees, over 
70 percent are veterans, 16 percent of those are service-
disabled veterans. And geographically, we are dispersed across 
16 States and support both Operation Enduring Freedom (OEF) and 
Operation Iraqi Freedom (OIF) in both Afghanistan and Iraq.
    In my opinion, the climate has changed considerably in the 
past few years. If you look at some of the trends today, you 
will see that many agencies are improving in making awards to 
service-disabled veteran-owned business. Although I believe we 
still have a way to go.
    I think that Congress has done an outstanding job in 
passing legislation such as 106-50, 108-183, and 109-461. All 
of which establish service-disabled veteran goals and mandates 
in Federal contracting.
    Public Law 109-461, and I include it as an amendment in my 
testimony, is the Veterans' Benefit Healthcare and Information 
Technology Act of 2006.
    What I believe the--what I believe some of the problems are 
today are--is really it comes down to accountability within 
agencies to meet some of these goals. I am here to offer my 
views on what I think can be done to ensure the state of 
veterans' entrepreneurship within the Federal Government.
    Some of the changes, positive changes, I think that will 
further enable agencies to meet some of these goals are 109-
461, which gives the VA special authorization in procurement to 
veteran and disabled veteran-owned businesses.
    Another is a new rule that SBA just published about two 
weeks ago. And it is a new recertification rule that requires 
any company that is--either merges or is acquired by a larger 
business, to immediately recertify their size standard.
    Now, what that also does is it does not take away the 
contract from that company. But what it does do is it does not 
allow the Federal agency to include that--those contract dollar 
numbers in their small business reporting plans.
    I offer 5 recommendations to meet this three-percent goal.
    The first is with respect to set asides and sole source, 
eliminate the ``Rule of Two'' within--wherein a contracting 
officer has to know of 2 or more service-disabled veteran-owned 
businesses before an acquisition can be set aside.
    Conversely, a service-disabled sole source award can only 
be made when there is only 1 service-disabled veteran company 
that can do the work.
    This is the only requirement of any of the 3 statutory 
programs.
    Create a level playing field between the statutory programs 
by changing the use of ``may'' to ``shall'' when using 
restricted competition for service-disabled veterans.
    Small business subcontracting plans, including all details 
of the plans required by prime contractors, should be made 
public and accessible electronically or on forms 294 and 295 
upon request.
    Mandate that contracting officers impose liquidated 
damages, as predicated in FAR Part 19.705 through 07 for large 
companies that fail to demonstrate a good faith effort to 
fulfill the requirements of the subcontracting plans.
    Close the loopholes in the GSA Schedule FAR Part 8, wherein 
large businesses are allowed to take away business intended for 
small businesses. And I believe establishing ombudsmen within 
agencies to provide procurement oversight.
    We are proud to say that we are the first disabled veteran 
company to be included in the DoD Mentor-Protege Program, as 
created by 108-183. We are equally proud to say we are the 
first company to be awarded the DoD Nunn-Perry Award this year 
in 2007.
    As an entrepreneur and a veteran, I believe the climate has 
certainly gotten better in the past 7 years. I still think we 
have a long way to go. But I am confident that both the 
Congress and the Federal agencies such as the Department of the 
Army, the Department of Veterans Affairs, and SBA are committed 
to these causes.
    I thank you for your time and your efforts to improve the 
Federal contracting climate for service-disabled veteran-owned 
business. And it is a pleasure to be back before you today.
    [The prepared statement of Mr. Gross appears on p. 60.]
    Ms. Herseth Sandlin. Thank you very much, Mr. Gross.
    Mr. Jimenez, you are now recognized.

                STATEMENT OF ANTHONY R. JIMENEZ

    Mr. Jimenez. Thank you. Good Afternoon, Chairwoman Herseth 
Sandlin, Ranking Member Boozman, and distinguished Members of 
the Subcommittee, and distinguished guests.
    It is a privilege to be here today. And I want to thank the 
Subcommittee for allowing me once again to share my thoughts. 
This time regarding Federal Procurement and the 3-Percent Set 
Aside. I look forward to providing my views. And hopefully they 
will be insightful.
    I am going to violate your request, somewhat, in that I 
know that everybody is familiar with the law. But I think it is 
important that you understand the mindset that goes on when 
people like myself and the rest of the folks here at the table 
are trying to consider whether to leave a good job, whether to 
leave the government, whether to actually attempt to become a 
small business, and that you understand how important these 
laws are in helping us make a decision at risk. And more 
importantly in putting us at risk as we gamble, and I use the 
word loosely, on an opportunity to obtain the American dream by 
putting everything, and I mean literally everything at risk. 
There is nobody sitting at this table that hasn't risked it all 
in an attempt to start their own business.
    The unfortunate thing is that many of us are aware of the 
Veterans Entrepreneurship and Small Business Development Act of 
1999. And that was the first true Act that got my attention.
    I was in the military at the time. And at that point in 
time, I actually started believing that the opportunity to be 
able to start my own business was there.
    When it got signed into law on August 17, 1999, it created 
a government-wide goal that 3 percent of the total value of 
prime contracts and subcontracts would be awarded to service-
disabled veterans. Knowing that when I retired, I would be a 
service-disabled veteran, that obviously, got my attention.
    But what I still was unsure of was whether or not, like 
many laws that have been passed, the government was serious 
about that law. So I thought well, I am going to kind of wait 
it out. I took a job with a large business. It was a great job. 
It was with a phenomenal company here in the Beltway that had 
been doing business with the Federal Government for many years. 
And I worked with them thinking that I would probably be there 
long enough to be able to build up a nest egg to actually 
attempt to do a small business type of operation.
    In 2003, the President signed the Veterans Benefits Act or 
P.L. 108-183. And it was at that point that I had decided I 
just couldn't wait any longer. I had been with this company for 
a whopping 8 months. But I was chomping at the bit to get out 
there and actually try my hand at running a small business.
    So I decided it was time. I resigned from what was a 
phenomenally lucrative position with great upward mobility to 
go and open my open company, MicroTech, and to pursue my dream 
of small business ownership. I did that in April of 2004. And 
my partners and I started basically leveraged just about 
everything we could, including my house.
    On May the 5th, 2004, the SBA and the Federal Acquisition 
Regulatory Council, the FAR Council, concurrently published 
interim rules implementing the procedures for the Veterans 
Benefits Act of 2003.
    And a new regulation, which permitted contracting officers 
to restrict competition on contracts or issue sole source 
contracts to service-disabled veterans within dollar 
thresholds. All of which could be done within the accordance of 
the statutory requirements.
    Importantly, the regulation also established procedures for 
protesting the status of service-disabled veterans, which I 
thought was interesting considering we have all been around 
long enough to know that sometimes there are people who are not 
what they claim to be. And that makes a unique playingfield for 
those of us who are what we claim to be.
    So like many others inside and outside the Federal 
Government, I was convinced that at last veterans and service-
disabled veterans would have a plethora of opportunities that 
we desperately needed to be successful as small business men 
and women.
    Since that date, to my astonishment, the Federal Government 
has fallen well short. So in other words, I got duped. I put it 
all into the basket, made the decision to leave the job. By the 
way, I am still not paid as well as I was in that job, as I am 
in my own business.
    Now, people will say, ``Well, Tony, you have done pretty 
well.'' And I have. But for every Tony, there are 100 people 
who haven't done well. And the fact is that as I tell people, 
and I hate to use it, because people think that I am actually 
diminishing my capabilities, but I have been very lucky. And 
luck does play an important part when the legislation is not 
working the way it is intended to work.
    Less than 10 percent of the government agencies who are 
required to meet the mandatory statutory goals have done so. 
And only a handful of agencies--when I say a ``handful,'' and I 
honestly didn't come up attempting to try and give stats. But 
the bottom line is the results are dismal.
    But what astonishes me the most, and I guess because I am a 
veteran, is the Department of Defense, which is an agency 
responsible for creating Service-Disabled Veteran--which is an 
agency responsible for creating veterans, struggles with the 
number they are struggling with.
    And I find that astonishing, particularly because I came 
out of the procurement arena. And knowing that there are people 
within the Federal Government who can mandate change. And if 
they did, it would happen.
    Right now, the Department of Defense struggles to make one-
third of the goals that were set. Right now they have yet to 
date, that I know of, accomplished even 1 percent of their set 
asides to Service-Disabled Veteran Small Businesses.
    Good news, and, yes, there is good news, is that there are 
people in the Federal Government who are doing what they can, 
both within DoD and outside of DoD, particularly within some of 
the agencies in DoD. And for one, I am extremely shocked at how 
hard these people work, and yet how dismal the numbers seem to 
be.
    And not being inside, but being outside looking in, I am 
struggling to understand how it is we can have great guys like 
Charles Cervantes, and Tracy Penson and, just a number of folks 
within Department of Defense who are working so incredibly hard 
for service-disabled veterans. Yet, we are not reaching the 
numbers.
    And the fact is, and I am speaking freely and on their 
behalf, and I didn't ask for their permission to speak on their 
behalf, but I think the bottom line is that they are speaking 
to people who aren't listening.
    And it frustrates me more than it frustrates them, because 
I see what they are trying to do for service-disabled veterans. 
It is not happening. It is just not happening, because somebody 
somewhere at the top is preventing it from happening.
    In addition to some of the great folks within the 
Department of Defense that I think are working aggressively, 
there are also people in Veteran Affairs who are doing things.
    And the good news is there are people within Veteran 
Affairs that are listening to those people. Veteran Affairs has 
done some wonderful things in the last couple of years. And I 
am absolutely amazed at where I think our capabilities as 
Service-Disabled Veteran Small Businesses will be able to go 
when we have the sponsorship that VA has allowed us to have.
    General Services Administration is another one that I 
believe has established a very aggressive Service-Disabled 
Veteran program, from the very top, Lurita Doan, Molly 
Wilkinson, down to Filipe Mendoza and his people. All of them 
understand. They are all working. John Phelps, who recently 
took over oversight of the Vets Contact, are all 100 percent in 
the corner of veterans. And are doing everything they can. And 
it is changing the opportunities for service-disabled veterans.
    Rather than go through some of this, I am going to kind of 
jump ahead to the facts that I am sure you are all aware of and 
that is that there are 13,500 service-disabled veterans 
registered right now in the Central Contractor Registry.
    Yet this morning, I was at an Army Information Technology 
(IT) conference where once again a contracting officer stood up 
and stated that they had difficulty finding service-disabled 
veterans to bid on opportunities.
    Yet when asked, ``Well, are you having problems getting 
8(a) small businesses to bid on opportunities?'' we were told, 
``No.'' And there are only 8,500 8(a)'s registered in the 
Central Contractor Registry (CCR). To fully accomplish the 
objectives of the legislation that we have talked about on this 
panel, the government agencies have to be held accountable. 
Many of those agencies have been called up to the Hill. And all 
of them have told you and other Committees Members about the 
great things they intend to do for service-disabled veterans. 
But over the last 4 years, only a few have turned those words 
into actions.
    What stops them from dusting off the last testimony they 
gave and giving the exact same testimony the next time you call 
them up? What are we, as American citizens, doing to check the 
progress of these agencies? My question is, where is their 
report card? What is their plan to get from F to A? And who is 
responsible?
    Because the responsibility shouldn't lie in the Small 
Business Office. It should lie at the very top, at the person 
who is responsible for managing the Deputy Assistant 
Secretaries, the Secretaries, the Assistant Secretaries. Those 
are the people that need to be held accountable.
    Here are my recommendations for those agencies. And here is 
how I would fix it if I was made person in charge for a day:
    One, I would protect the dollars. The last time I testified 
before this Subcommittee, it was recommended that those dollars 
be set aside. I believe it was Congressman Hall that 
recommended that. I agree with that recommendation. Make 
contracting officers have to ask for those dollars. And they 
will.
    Hold Secretaries, agency administrators, and others 
responsible for agencies responsible for the three-percent 
goal. They need to understand that P.L. 106-50 was put in 
place. And they need to understand how to reach that goal. Each 
department or agency has a director of small business. But they 
are not the people who control the acquisition process. The 
acquisition process is controlled by Assistant Secretaries for 
Acquisition, heads of contracting agencies, agency chief 
acquisitions. Have the Assistant Secretaries for Acquisition, 
the head of the contracting agencies, and those agency chiefs 
testify. And require that they present a measurable and 
realistic plan for reaching the 3 percent goal. If after a 
year, they don't meet the 3 percent goal, have them come back 
in. Only this time have them come back in with their boss. And 
I promise you, you will see a change in the numbers.
    Lock down the small business goals for large business 
contracts. Often times large businesses will fight to reduce 
the percentage. And they do that because it is dollars out of 
their pocket. Don't let that happen. Ensure that all large 
businesses develop a small business-subcontracting plan that 
mirrors the requirements in the Federal Government. And then 
ensure the large businesses are penalized when they fail to 
meet their small business subcontracting goals.
    Hold procurement officials and contracting officers 
responsible for meeting the three-percent goal for service-
disabled veterans. Make the three-percent goal for service-
disabled veterans a requirement in their performance measures 
and a condition for their performance award. If a department or 
agency does not meet their three-percent goal for service-
disabled veterans, then reduce the amount of their award by the 
percentage they failed to achieve. In other words if they only 
achieve 1 percent, 33 percent of the goal, then they only get 
33 percent of their performance award. I guarantee you will see 
a change.
    Madam Chairwoman, distinguished Subcommittee Members, thank 
you very much for this great opportunity. This concludes my 
testimony. And I will be happy to answer any questions.
    [The prepared statement of Mr. Jimenez appears on p. 62.]
    Ms. Herseth Sandlin. Thank you and thanks to all of the 
panelists. I do want to start off with a few questions before 
recognizing the Ranking Member.
    Mr. Gross, you stated that the rule of two should be 
eliminated. I want to ask Mr. Baker and Mr. Jimenez their 
thoughts on that same statement. In your opinion, if the rule 
of two were eliminated, would this reduce the contract 
availability or increase competition?
    Explain further what your understanding of the rule of two 
is intended to do, and why you suggest it be eliminated.
    Mr. Gross. Well, Madam Chair, I am not sure what the--what 
the intent of the rule is. What I believe is the outcome of the 
rule is it reduces the amount of opportunities that we have to 
compete.
    I think, you know, most of the--and I can speak for the two 
folks here, because we work together on things. And most of us 
just want the opportunity to compete. I mean, it--I mean, we 
are not looking for--and I don't know of many that have gotten 
anything given to us. So we are looking for the opportunity to 
compete for opportunities.
    The rule of two reduces the amount of opportunities that we 
have to compete for.
    Ms. Herseth Sandlin. Mr. Baker and Mr. Jimenez, would you 
agree that the rule of two should be eliminated?
    Mr. Jimenez. Yeah, I would.
    Mr. Baker. Yes.
    Ms. Herseth Sandlin. Mr. Baker, and I think possibly both 
of the other two of you reference this, but just for 
clarification, the loophole in the GSA schedule that you 
referenced for Part 8, are you all in agreement that this is 
problematic because it allows the large businesses to compete 
for the under $100,000 threshold category?
    Mr. Baker. Yes.
    Mr. Jimenez. Yes.
    Mr. Gross. Yes.
    Ms. Herseth Sandlin. Mr. Jimenez, first, you talked about 
the Department of Defense, your frustration, and disappointment 
here. What do you think is the reason why DoD can meet the 
other small business goals, like the 8(a), but it is not 
meeting the veterans set aside goal.
    Other than the folks that you referenced who are doing good 
work to address these issues, there are other folks that aren't 
listening. What efforts are they not undertaking for service-
disabled veteran-owned business as it relates to the registry 
that they are taking for 8(a) requirements?
    Mr. Jimenez. Well, it is really funny, because when I have 
talked to folks in the Department of Defense and the separate 
agencies, and the question you ask is, ``Why,'' one of the 
first answers you get is, ``Well, remember it took a long time 
for us to get to our 8(a) goals. It took a long time for us to 
be able to do a lot of things. It took a long time for us to be 
able to establish.''
    The fact of the matter is, having worked in the Secretary 
of the Army's office and having worked at the Office of the 
Secretary of Defense (OSD), things happen fast when the right 
people ask them to happen. If we get commitment from up top, if 
the right people don't write memos, but put actions behind the 
words, it will happen.
    There is nothing that the people who were appointed in the 
positions of authority in the Federal Government can't do if 
they want to do them.
    So my philosophy is I don't feel the commitment. And I 
don't think there is anybody that feels the commitment. The 
commitment is a matter of showing, not saying.
    And the fact is that we need a champion. We need somebody 
who is high up enough the food--who is high enough up in the 
food chain to be able to say, ``This will be done, because I 
said it will be done. And if it is not done, you will be in 
here explaining to me why it is not done.''
    And we have all worked for folks who are like that. And 
when they ask us to do that, it gets done. And my feeling is 
that that hasn't been done. There is nobody that I feel like I 
can stand in front of and know that they are 100 percent behind 
this initiative.
    Mr. Gross. Further on that, I think--I think what it really 
comes down to is just, you know, who is accountable? I mean, 
who is accountable. I mean, you know, the Congress can pass 
great legislation. The President can put out, you know, 
Executive Order 13360. And, you know, 3 years later, you know, 
the President says it is a mandate that 3 percent of the 
Federal dollars go to service disabled. But yet the agencies 
aren't meeting it.
    Just the same, I know--I know Dr. Finley, the Under 
Secretary of Defense for Acquisitions, is a proponent of 
service disabled, the program. I mean, the Small Business 
Program. I know Secretary Gates has sent--has sent memos to 
staff, you know, asking to or mandating that they procure 3 
percent to disabled veteran companies.
    I think what it comes down to is who is--who is that one 
person or that one office within the Federal agencies that is 
accountable. And I think that that is a little cloudy. And I 
don't think there is one to be----
    Mr. Jimenez. When I----
    Ms. Herseth Sandlin. Okay. I want to clarify what the two 
of you are identifying in terms of the accountability issue, 
because where I thought you were going, Mr. Jimenez, is the 
accountability, separate from an Executive Order from the 
President.
    That is the highest up the food chain we have gotten to. 
When it comes to the actual implementation at the agency level 
at DoD, you are saying that we need someone high enough up the 
food chain in the Pentagon as a champion to make this happen.
    I think, Mr. Gross, you are saying, ``Yeah, but the 
accountability also has to rest with one agency, say perhaps 
the SBA.'' Is that what you are saying, in terms of monitoring, 
and tracking, and reporting on all the other agencies?
    Mr. Gross. Well, or maybe the--you know, maybe the Office 
of Federal Procurement Policy (OFPP).
    Ms. Herseth Sandlin. Okay.
    Mr. Gross. You know--I mean, I don't believe I am prepared 
to answer who.
    Ms. Herseth Sandlin. No, and we are going to be hearing 
from both of those offices.
    Mr. Gross. Well, I mean, you know, I know I have seen 
memorandums coming from Secretary Gates' office, you know, 
supporting the three-percent requirement. I am sure the 
Secretary is fairly busy. And probably doesn't have a whole lot 
of time to provide a lot of oversight there.
    So I know they are--you know, the White House, the 
Congress, many of the agency heads are in support of the 
requirement. I just don't believe when it gets down to the--
maybe implementation of that policy.
    Ms. Herseth Sandlin. That there has been a clarity of 
responsibility.
    Mr. Gross. That there is--there is clearly someone 
responsible for ensuring that that happens.
    Ms. Herseth Sandlin. Okay. I will come back with some 
additional questions, but I want to recognize the Ranking 
Member for questions he has.
    Mr. Boozman. Thank you, Madam Chair. The only thing I would 
ask is that I am a little confused on the rule of two. It looks 
like if you did away with the rule of two, I understand that 
what you are arguing. But you could also argue that that is 
less opportunity for somebody that is trying to break into the 
system, because there is the textbook way that things are done. 
But the reality is there would be if you are in the system, the 
procurement officer, is more likely to go to his guy versus 
having to have to bring in other people. See what I am saying?
    Mr. Gross. I do. And I think--you know, I think what the 
rule of two adds is just another layer, another process that--
you know, our acquisition staff I believe is probably 
overworked. I mean, understaffed, and so adding an additional--
and I am sure they have an awful lot of work to do.
    So, you know, it--I believe it is human nature to sort of 
take the path of least resistance. And if you are adding more 
steps for them to do something, it is going to cause a problem. 
And I believe that is what is happening.
    Mr. Boozman. But it does create more opportunity by getting 
more people theoretically involved in----
    Mr. Gross. Well, if----
    Mr. Boozman [continuing]. The opportunity to acquire the--
--
    Mr. Gross. That is correct. But what--but understanding a 
set aside is open for competition. So, you know, what that rule 
of two is the contracting officer has to be confident there is 
two companies that can bid that particular opportunity.
    My thought is if there is 8,000 8(a) companies registered 
in CCR, and there is 10,000 service-disabled in CCR, and you 
don't have to have the rule of two for the 8(a), why have the 
rule of two for the service-disabled? You are--I can pretty 
much assure you on anything that you set aside service-
disabled, you are going to get more than two bids.
    Mr. Boozman. Okay.
    Mr. Gross. Anything.
    Mr. Jimenez. I think, sir, in honesty, what it is, is a 
risk issue. As a contracting officer, there is a tremendous 
amount of effort that goes on before it ever goes out for bid.
    And the last thing you want to have is to put a bid out and 
not have two bids, because if you don't have two bids and you 
only have one bid, you have got to go back to the drawing board 
and re-procure.
    And when you have 70 or 80 procurements lined up ready to 
be done in the next 6 months, the last thing you have time to 
do is to go back and continue to rebid, because you haven't met 
the rule of two.
    The fact of the matter is that it is a hurdle. And it is--
and what it does is it disincentivizes contracting officers to 
want to go the route that we are trying to incentivize them to 
go. It is a hurdle that is not required in any other set aside 
procurement. And it is one more thing that makes the argument 
against using a Service-Disabled Veteran-Owned small Business.
    And I have heard contracting officers say, ``You know what, 
it is tough setting things aside for a service-disabled 
veteran, because I don't have time to learn how to do it 
different than I am doing it for everybody else.''
    Mr. Boozman. Okay. Thank you very much.
    Mr. Baker. I would like to make a comment about the rule 
too.
    Mr. Boozman. Yes.
    Mr. Baker. I agree with what everybody is saying about the 
rule of two. The only thing that I see it as a problem and more 
clarification--actually every small business group has a rule 
of two.
    Okay, including the 8(a) program. The 8(a) program has a 
rule of two over the threshold. The 8(a) program, for example, 
has non-competitive procurements under the threshold. Over the 
threshold, it has the rule of two. HUBs don't have the rule of 
two. Everybody has the rule of two. If you have small business 
set aside, you have rule of two.
    What I believe needs to happen is eliminating the words 
``rule of two,'' because it is a confusion. What happened and I 
will agree with what Tony was saying earlier, what happens with 
a procurement, if you actually have--if you actually have a 
limited people--amount of people that is going to be bidding on 
a contract, the problem that you run into, if you decide to do 
a sole source on the SDVOB, the issue that you run into is you 
have to advertise that sole source, just like you do every 
other sole source.
    It has to be--you have to put it out in the Commerce 
Business Daily and the Fair Business Office to say that you 
only have one service-disabled veterans that is doing this.
    And this is what contracting officers fear. They go through 
all this work. And then you are going to get a bunch of 
service-disabled vets now saying, ``Hey, you are going to do 
that sole source. You are going to do that sole source. We can 
do it too.''
    So that is the problem. The problem is within in the 8(a) 
program. You have an--it is a non-competitive procurement 
process. It never gets advertised. So when you only have one, 
nobody every knows there is only one. So, you know, it is a 
non-competitive process.
    What I would like to see is I would like to see the 
Service-Disabled Veteran Program have a non-competitive 
vehicle. Okay. Which basically eliminates the rule of two. 
Okay. But you also--you not eliminating the rule of two, 
because over the $3.5 million and $5.5 million, you going to 
have rule of two within the service-disabled veteran community 
for everybody to be able to compete.
    So it is about the threshold. Under the threshold, $3.5 
million for services, $5.5 million for commodities. You have a 
non-compete over the threshold. You keep rule of two. And you 
compete.
    Ms. Herseth Sandlin. I see Mr. Gross nodding. Maybe the two 
of you could spend a little bit more time here to clarify a 
little bit. We are certainly going to do some followup after 
the hearing, but I want to make sure I know where there is 
unanimity of opinion among the 3 of you, given the experiences 
you bring to the table.
    Is what Mr. Baker just suggested, as it relates to under 
the threshold, and the non-competitive vehicle that would 
effectively eliminate the rule of two, a reasonable way to 
approach it given that that seems to be how all the other 
programs work? Therefore, you contracting officers wouldn't be 
doing anything different for the different set-aside programs.
    Mr. Jimenez. Correct. Streamlines the acquisition process 
and standardizes it across the board for set asides.
    Mr. Gross. Yeah. I agree. I mean, you know, my personal 
views are there shouldn't be any sole source for any of the 
programs, because it does eliminate a little bit of competition 
I believe.
    But by not having the Disabled Veteran Program in that same 
pool, you create a disadvantage for that--for that program.
    And understand, you know, contracting officers typically 
aren't sole sourcing millions and millions of dollars to these 
small businesses. It is usually not far above the threshold of 
simplified acquisition, which is 100K. And it just makes the 
process move faster.
    Ms. Herseth Sandlin. Mm-hmm.
    Mr. Gross. And it gives the contracting officer the ability 
to negotiate. And they all should be. I mean, as----
    Mr. Baker. There are $145 billion that are actually sole 
sourced in the Federal Government. But the majority of these 
dollars that are sole sourced are to big business.
    Mr. Gross. I don't believe in sole sourcing it at all.
    Ms. Herseth Sandlin. Okay. Just a couple of other quick 
questions on the contracting officers, because when we had the 
hearing in May, I think that the issue of the workload came up.
    I think, from what I sense in the written testimony and 
some of your verbal testimony today, there is agreement about 
concerns about the workload of the contracting officers that 
you have worked with.
    Once we streamline and standardize some processes here, 
there is also the issue of the number of people to do these 
jobs. Do you all agree that the workload issue is an issue that 
needs to be addressed?
    Mr. Baker. Yes.
    Ms. Herseth Sandlin. How about the training issue.
    Mr. Baker. I will tell you that it is almost--it is almost 
a comical thing. I mean, it is--when I go around and talk to a 
lot of people in the procurement community, and I don't mean to 
be negative about this, but I have had people ask me, ``What is 
8(a)? What is service-disabled vet?''
    These are people in small business positions. But yet they 
don't even understand the program. They have no knowledge of 
the program. They are--I have had agencies with policies, 
written policies, about competing, 8(a) contracts for example, 
which is illegal.
    You know, and that is--that is one of the things I am 
talking about is that there is a big misunderstanding when it 
comes to procurement officers. You--they--it is--I don't know. 
Times are changing.
    When me and Tony were, you know, working with the 
government and dealing with procurement issues, we had--we had 
that experience. But, you know, with the baby boomers coming, 
we are losing a lot of experience. And the people you getting 
in, they getting a lot of people in from private industry. And 
they just aren't familiar with, you know, terms. You know, the 
government is full of terms. And they just don't understand it.
    I think maybe if they had a one-hour training. A one-hour 
training would do amazing results. Just--let us just bust up 
the myths in procurement. I think that would go a long, long 
way.
    Ms. Herseth Sandlin. Thank you. Do either of the two of you 
have any comments to offer, relating to your experience in the 
training and the knowledge base of all of our contracting 
officers, to effectively implement these set-aside programs?
    Mr. Gross. Well, I am not a contracting officer, so I can't 
really speak to--I mean, I am not sure if like say a lawyer, 
you know, has a requirement for, you know, continuing legal 
courses per year. But I think that if contracting officers had 
something like that, a requirement where they, you know, take 
2, 3 hours a year and maybe, you know, get sort of up to speed 
on what some of the--what the agency policies are and the--you 
know, the Federal procurement policies are. That would probably 
go a long way, because I agree.
    I mean, I think many, many contracting officers have heard 
of different programs. But, you know, really aren't 100 percent 
up to speed on, you know, how do they implement that? How is 
that implemented at their level?
    Ms. Herseth Sandlin. That was one of my questions in terms 
of your experience, awareness, and full understanding of all of 
the different programs that the contracting officers are 
working with day in and day out. We will follow up with the 
third panel on some of the more specific questions about 
current training conditions and requirements.
    Mr. Jimenez. One of the----
    Ms. Herseth Sandlin. Mr. Jimenez.
    Mr. Jimenez. One of the issues for contracting officers is 
that there are standards for contracting officers and their 
DAWIA standards, Defense Acquisition Workforce Improvement Act 
is the initiative, which actually requires a significant amount 
of training to be able to become a warranted contracting 
officer, coupled with the experience.
    And the problem that I found is that once I achieved what 
was called level 3, which meant that I had gone through the 
level 1 training and the courses mandated by DAWIA, had gone 
through the level 2 training and the courses mandated by DAWIA, 
and then gone to the level 3. You go to an executive course 
that teaches you relatively new things.
    No time was it ever dictated that I needed to get what type 
of training once I reached the executive level. So what I 
struggled with was trying to find out where I could go to learn 
about new things I needed to learn about.
    What I am finding is that my peers in the government who 
are at the contracting level 3, who were warranted contracting 
officers, go to their refresher training. But often times that 
refresher training does not include training that makes them 
aware of service-disabled veterans requirements, set asides, 
public law. And that is where it fails.
    Defense Acquisition University (DAU), which has the mandate 
to ensure that contracting officers within the Department of 
Defense receive a certain amount of training, have a course. 
But the course is not a required course. And it is normally 
only provided to those people that are coming in at the very 
basic level.
    So as Charles pointed out, the important thing is that 
those people who are at the basic level aren't going to have 
warrants for 10 more years. The people at the top who are 
making the decisions in procuring the large opportunities, are 
not being required to go through that training. And 
consequently are busy and don't see that as being training they 
need.
    So what desperately needs to happen is the people who are 
mandating the dollars, the people who are signing the contracts 
as the warranted contracting officer, need to be educated on 
new initiatives, particularly when they are as significant as 
the service-disabled veterans set aside rules associated with 
giving procurements and set asides to service-disabled 
veterans.
    Mr. Baker. Can I make one quick comment about DoD? It will 
take--I promise it will take 30 seconds.
    Ms. Herseth Sandlin. Okay. We do have two more panels, but 
I appreciate your insight.
    Mr. Baker. Just----
    Ms. Herseth Sandlin. So certainly.
    Mr. Baker [continuing]. 30 seconds.
    Ms. Herseth Sandlin. Okay. That way the DoD will have an 
opportunity to respond.
    Mr. Baker. Right, exactly.
    Ms. Herseth Sandlin. Okay.
    Mr. Baker. It seems ironic to me that, you know, we as 
veterans, when it--relating to DoD, we have to go to the 
frontlines in war. But when we come home, we are going to the 
back of the line. And I don't think that is very fair. And that 
is all I would like to say.
    Ms. Herseth Sandlin. I appreciate your comment, and as we 
work very closely with the Department of Veterans Affairs, some 
of the concerns have been raised along the same lines as they 
relate to benefits and particularly healthcare.
    I think we just want to make sure, working with our 
colleagues on the Armed Services Committee, that we do have the 
accountability you are all asking for.
    We also want to make sure that once we identify and provide 
clarity for the accountability, the resources are targeted then 
appropriately, as many of you have recommended.
    I appreciate your recommendations and your testimony today, 
and thank you. We look forward to continuing to work with you.
    I would now like to invite our second panel to the witness 
table. Joining us on this panel of witnesses is Mr. Joe Wynn, 
President and Chief Executive Officer of the Veterans 
Enterprise Training and Service Group Incorporated; Mr. Joseph 
Sharpe, Deputy Director for the National Economics Commission 
of the American Legion; and Mr. Eric Hilleman, Deputy Director 
of the National Legislative Service for the Veterans of Foreign 
Wars (VFW).
    Gentlemen, welcome back to the Subcommittee. We look 
forward to your testimony.
    We will start with you Mr. Wynn. You are recognized for 5 
minutes.

STATEMENTS OF JOE WYNN, PRESIDENT, VETERANS ENTERPRISE TRAINING 
    AND SERVICE GROUP, INC. (VETS GROUP), MEMBER, VETERANS 
     ENTREPRENEURSHIP TASK FORCE (VET-FORCE), AND NATIONAL 
 ASSOCIATION FOR BLACK VETERANS; JOSEPH C. SHARPE, JR., DEPUTY 
  DIRECTOR, ECONOMIC COMMISSION, AMERICAN LEGION; AND ERIC A. 
   HILLEMAN, DEPUTY DIRECTOR, NATIONAL LEGISLATIVE SERVICE, 
         VETERANS OF FOREIGN WARS OF THE UNITED STATES

                     STATEMENT OF JOE WYNN

    Mr. Wynn. Pardon me. Good afternoon Chairwoman Herseth 
Sandlin, Ranking Member Boozman, other Members of this 
Subcommittee, fellow veterans and guests.
    Let me first thank you for the opportunity to come before 
you to share some of my views on the Veterans Federal 
Procurement Program. And why agencies still can't make the 3 
percent.
    Three primary reasons that I am kind of focusing on. One is 
the failure to comply with the Executive Order 13360. The no 
authorization to make direct awards to service-disabled 
veteran-owned business. That is relating to that rule of two 
you were speaking of. And the misinterpretation of that one 
single word ``may'' versus ``shall.''
    First, let me go over the Presidential Executive Order that 
directs agencies to implement the mandatory legal requirement 
to procure not less than 3 percent of their goods and services 
from service-disabled veteran-owned business.
    If agencies would actually adhere to the Executive Order, 
they would be much likely to achieve the mandatory minimum, 3 
percent.
    And here is why. The order calls for each agency to develop 
a written strategic plan that will provide details and guidance 
as to how they will proceed to increase contracting 
opportunities for service-disabled veterans and to make the 
plans publicly available.
    Now, that order was issued in 2004. But most agencies did 
not post their plans to the VA and SBA public websites until 
May 2006.
    A review of the plans by a special Committee of the VET-
Force, of which I was a member, revealed that over half of the 
plans were incomplete and some were poorly developed. As you 
can see from my attachment to my written statement that I 
request be submitted for the record, agencies are not only 
supposed--are not only supposed to make their plans publicly 
available, but they are also required to report annually to the 
Administrator of the SBA on the implementation of the agency's 
strategy.
    But only a few agencies have even attempted to submit an 
annual report. And partly because the SBA has not followed 
through on their part to provide proper guidance of where, 
when, and how to submit the reports.
    Each agency should now have a designated a senior-level 
official to be responsible for developing and implementing the 
agency's strategy. But most agencies never designated anyone. 
Some designated someone. But they were not a senior-level 
official. And then some had senior-level official. But they 
have since left the agency.
    Significant elements of the strategy and the agencies' 
achievements were to be incorporated in the performance plans 
of the designated senior-level official, the chief acquisition 
officer, and the agency's small business director.
    But to date, most agencies are still thinking about how to 
avoid that directive. However, the VA, under the Deputy 
Secretary Gordon Mansfield, did seem to comply.
    And oh, by the way, the VA is one of the few agencies to 
claim to have achieved the 3 percent goal for 2006.
    Now, each agency's strategic plans should include specific 
guidance on the 5 following things: How they will reserve 
agency contracts for service-disabled veterans? How they will 
encourage service-disabled vets to compete for agency 
contracts? How they will encourage the agency's large prime 
contractors to make subcontract awards to service-disabled 
vets? How they will train their agency personnel? And how they 
will disseminate information to educate service-disabled vets 
about the process?
    Most agencies have simply left these tasks to the Small 
Business Office. Many seem to rely on their websites, the Small 
Business Office, and their agency for forecast lists.
    The Defense Authorization University's online course to 
provide training on the Veterans Procurement Program does not 
seem to clarify how to apply the laws.
    Seemingly, very few agencies are doing anything to 
encourage their large prime contractors to award subcontracts 
to service-disabled vets. So very few penalties, if any, are 
being imposed on the large prime contractors for failing to 
comply with the subcontracting plans.
    The Executive Order also called for additional duties of 
the SBA Administrator, the GSA Administrator, the Secretary of 
Defense, the Secretary of the VA, and the Secretary of Labor.
    Let me just hit on particularly the one about the SBA 
Administrator, because it seems most important. The SBA 
Administrator was directed to designate an appropriate entity 
within the SBA to coordinate with the Center for Veterans 
Enterprise over at the VA, to provide service-disabled veteran-
owned business with information and assistance concerning 
participation in Federal contracting.
    The Administrator is also to advise and assist the heads of 
the agencies in the implementation of their strategic plans and 
make available to service-disabled vets training in Federal 
contracting law, procedures, and practices.
    Now even though the current Administrator started in late 
2006 with a positive attitude toward addressing the unmet needs 
of veteran business owners, and announced at a meeting of the 
Vet-Force in 2007 that the Office of Business Development would 
take the lead on this, it is seemingly SBA has dropped the ball 
and failed to comply.
    Since that meeting in March, the SBA still has not assisted 
any agencies with their strategic plans. They have not 
instructed agencies on how, when, and where to submit their 
annual reports and they have not implemented any Federal 
procurement training.
    The Office of Veterans Business Development perhaps should 
be required to submit a strategic plan demonstrating how 
present and future Congressional appropriations will be used to 
expand the assistance needed for veteran business owners for 
Federal contracting.
    GSA had a role to play with the Vets Government Wide 
Acquisition Contract (GWAC). That GWAC has now been made 
public. There are some issues concerning that, which I won't 
get into right now.
    DoD's role was to do the online training with the DAU 
University. That has happened. In addition to that, I would 
like to mention, though, just recently through the efforts of 
the VET-Force, the DoD Deputy Chief of Acquisition made a 
commitment that DoD's Strategic Plan would be compliant with 
the Executive Order and issued a directive to all of the Armed 
Forces Secretariats to complete a comprehensive and complete 
Strategic Plan also.
    The VA, as we have heard many times, has been very 
compliant with their role in this whole Federal procurement 
program. So I won't spent any time discussing that. And the 
Department of Labor is doing its Transition Assistance Program 
outreach.
    The other two things I will just mention real quick----
    Ms. Herseth Sandlin. Okay, I do need you to summarize, 
because we----
    Mr. Wynn. I will--I will do so.
    Ms. Herseth Sandlin [continuing]. Have the other panel to 
get to as well, and our questions for you.
    Mr. Wynn. The other two I will just summarize very briefly. 
The fact that contracting officers don't have the authority to 
issue direct awards creates an impediment to the Service-
Disabled Veteran Program.
    And then as I mentioned, the language of the use of the 
word ``may'' versus ``shall,'' just seems to create a bunch of 
confusion for many of the contracting personnel.
    This concludes my testimony. I request that the graphs be 
submitted for the record.
    [The prepared statement of Mr. Wynn appears on p. 63.]
    Ms. Herseth Sandlin. Thank you, and they will, as will all 
of the written statements, which we have had a chance to 
review. Thank you for your testimony. We appreciate it, Mr. 
Wynn.
    Mr. Sharpe, you are now recognized.

               STATEMENT OF JOSEPH C. SHARPE, JR.

    Mr. Sharpe. Thank you. Madam Chairman and Members of the 
Subcommittee, I appreciate this opportunity to share the views 
of the American Legion on our current state of veteran 
entrepreneurship to include the three-percent Federal 
procurement goal for service-disabled veterans.
    Public Law 106-50, the ``Veterans Federal Procurement 
Opportunity Act of 2003,'' including Public Law 108-183 and 
Executive Order 13360, were all passed by Congress with the 
intention of clearly helping veterans with hands-on business 
development training, technical, financial, and procurement 
assistance.
    However, agency compliance with Public Law 106-50 and other 
mandates have been minimal. After several years of enactment, 
hands-on veterans business development training is performed by 
only 8 poorly funded centers, 5 belonging to the Small Business 
Administration and 3 funded by the National Veterans Business 
Development Corporation.
    Technical assistance has been a patchwork of questionable 
services provided by certain organizations and Federal 
agencies.
    And in fiscal year 2005, no agency reached their minimum 3 
percent procurement goals, which the American Legion finds 
insulting.
    The American Legion is also dismayed that the only data 
available that gives a breakdown on how agencies are making 
their procurement goals is fiscal year 2005 data.
    It is amazing that we are now looking ahead to fiscal year 
2008. And that there is no sure way of ascertaining how Federal 
agencies are meeting objectives set 7 years ago.
    President Bush made it a mandate that all Federal agencies 
be judged on their ability to tie performance with outcomes. 
The Department of Veteran Affairs appears to be the only agency 
that has made an effort to fulfill those mandates by providing 
training, procurement opportunities to veterans, to include 
providing the veteran community with a realistic 10-year 
strategic plan that includes benchmarks and performance 
measures.
    The American Legion strongly supports the mandates of 
Public Law 106-50 that were designated to assist all veterans 
wishing to start, expand, or protect their business.
    Madam Chairman, this concludes my testimony. I appreciate 
the opportunity--I appreciate the opportunity to express the 
American Legion's views on these important and timely issues.
    [The prepared statement of Mr. Sharpe appears on p. 71.]
    Ms. Herseth Sandlin. I thank you, Mr. Sharpe.
    Mr. Hilleman, you are now recognized for 5 minutes.

                 STATEMENT OF ERIC A. HILLEMAN

    Mr. Hilleman. Thank you Madam Chairwoman, Ranking Member 
Boozman. Thank you very much for holding this hearing today. We 
are glad to be a participant in this hearing.
    The three-percent set aside for Service-Disabled Veteran-
Owned Small Businesses is a--is an important issue. And in the 
spirit of brevity, I will save you the history lesson. You 
probably would be better teachers than students. Thank you.
    The VFW has a resolution, 658, entitled ``Mandating the 
Three-Percent Federal Contracts for Service-Disabled Veteran-
Owned Small Businesses.'' To date, the Federal Government has 
failed to meet the 3 percent goal prescribed by the 106th 
Congress, and enhanced by the 108th, and the 109th Congress.
    We applaud this Subcommittee for exercising oversight on 
this issue. We believe the lack of adherence to this goal has 
been due to the absence in agency leadership and Congressional 
oversight. The agencies such as Department of Defense, 
Department of Veterans Affairs, the Department of Labor, Small 
Business Administration, and the General Services 
Administration must play an important role in promoting and 
meeting this 3 percent goal.
    On October 20th of 2004, President Bush issued an Executive 
Order to strengthen the opportunities in Federal contracting 
for service-disabled veteran-owned business. This Executive 
Order lays out the structure for government-wide implementation 
and the 3 percent procurement goal. It promotes agency 
accountability, training for government--training for 
government procurement officers, and agency executives 
implementing planning and cooperation. We believe this Order is 
a necessary step toward realizing the adherence to the three-
percent goal.
    The 109th Congress recognized the importance of this order 
and passed Public Law 109-461, which was an important step in 
realizing the 3 percent goal.
    We urge Congress, and specifically this Subcommittee, to 
continue to investigate Federal procurement practices. Federal 
agencies must be required to adhere to this Executive Order and 
existing law.
    Reporting standards have been outlined by the Order and 
further defined in the law. We ask that the Subcommittee 
continue to highlight this issue with the purpose of promoting 
service-disabled veterans participation in government 
contracting.
    Fair contracting practices will remain a priority of the 
VFW until Service-Disabled Veteran-Owned Small Businesses are 
given equal participation as other priority contracting groups.
    Service-disabled veterans have faced disadvantages in the 
market due to lenders' unwillingness to extend credit to 
disabled veterans and disabled individuals. Disabled veterans 
are seen as a greater credit risk by financial institutions and 
often perceived as less capable.
    The three-percent set aside for government procurement is a 
means of establishing a viable means of revenue for many of 
these businesses. It gives them greater market share and 
increases their customer base by improving access to capital.
    I thank you, Madam Chairwoman, for holding this hearing. 
And Members of this Subcommittee, thank you. This concludes the 
VFW's testimony. We would be happy to answer any of your 
questions.
    [The prepared statement of Mr. Hilleman appears on p. 75.]
    Ms. Herseth Sandlin. Thank you to all 3 of you for your 
testimony, your written statements, and your suggestions.
    I do think that we have to find ways, and I think the 
recommendations from our first panel as well as yours, serve 
that purpose. Your experiences and what you have seen suggests 
we have just to empower those ultimately responsible for 
accountability through our oversight to meet these goals.
    I will have a few questions, but I want to turn it over to 
the Ranking Member for any questions that he may have.
    Mr. Boozman. Thank you, Madam Chair. I really don't have 
any questions. But I, again, we have an awful long way to go in 
this process. But we have made some progress.
    And I want to thank you all and the groups that you 
represent. And then the other groups that are not at the table 
that also have worked very, very hard in this regard. Because, 
again, without your help, we wouldn't have gotten as far as we 
have.
    So we appreciate your advocacy. We appreciate your ideas. 
You all are out there fighting the battle. And, in the 
positions you are at now, you are not on the frontline. But you 
hear from the frontline guys all the time. And we do appreciate 
the input. And it is very helpful. So thank you very much.
    Ms. Herseth Sandlin. Mr. Hall, you are now recognized for 
any comments or questions of the panel.
    Mr. Hall. Thank you, Madam Chair, and thank you Mr. Ranking 
Member Boozman. Excuse me, please, for being late. I was double 
booked again this afternoon in two Subcommittee meetings. But I 
am glad to be here. And thank you all for your service and for 
your testimony.
    I am sorry to hear where we are now in the process after 
several years of attempting--of the different departments 
attempting, supposedly attempting, to meet this three-percent 
standard.
    And I guess I have one question to all of you, which is 
what do you think would be the result if Congress were to amend 
the laws so that that set aside was actually fenced off and was 
only available to each department, if it was contracting out to 
disabled veteran-owned businesses? Unless, perhaps, in the 
instance in which the department could show that it had gone 
through all the steps that are required in the existing law of 
appointing a person to be in charge, and doing the outreach, 
and doing the education? And they couldn't come up with a 
qualified contractor or a qualified business to award that 
contract to. At which point they could escape the fence.
    But sequestering the money and actually only allowing it to 
be used for the purpose that this law sees it dedicated to. So 
maybe a little more of a carrot out there and a stick.
    Mr. Hilleman. Congressman Hall, if I may. The VFW would not 
be very excited by fenced off funding, even with security 
triggers as you are suggesting.
    In the process of fencing money, we believe that you limit 
the hand of the agency in terms of meeting its immediate needs. 
We have seen some of that in the case of the VA, when money is 
fenced aside mandating that they have to be adherent to a 
certain compliance for the Congress. They are not able to 
respond as quickly as maybe they should, because they say it is 
mired in, triggers and approving. We have to go to the Congress 
and ask for the money. We are fearful of that.
    Am I saying it won't work? No. I am just saying that I 
don't know that we would be necessarily supportive of that.
    Mr. Hall. Can I follow up with saying what about if it were 
phased in over 5 years, so you had--the agency would have--the 
VA would have 5 years to get ready? Or a given number of years 
to prepare and to put the mechanisms in place and still have 
the escape clause where if there--if no one came forward to bid 
on a contract, then they could go ahead and use the money?
    Mr. Hilleman. Without seeing it writing, sir, I would----
    Mr. Hall. Okay.
    Mr. Hilleman [continuing]. Hesitate to comment on that.
    Mr. Hall. Well, it is not in writing yet.
    Gentlemen, anybody else want to comment?
    Mr. Wynn. Yes, sir. Congressman Hall, I am not sure how 
that would work, what you are suggesting. Some of the things 
that I will comment on and say that--with regard to trying to 
enforce and progress the program.
    We have had discussions about incentives to the contracting 
officer or the agencies when they do achieve or show 
significant progress.
    Also penalties to be imposed if--as was mentioned earlier, 
putting it in their performance evaluation of the senior level 
officials and contracting officers if they don't show any 
progress.
    Trying these kinds of mechanisms to see if this will 
improve and increase the number of contracting opportunities to 
service-disabled vets. The--I would imagine that the 
requirements that are needed within each agency are still 
needed. We don't want to impose upon the agencies to not meet 
their requirements. We just want agencies to use service-
disabled veterans more, at least at a minimum of 3 percent.
    Mr. Sharpe. As stated in our testimony, we think the VA is 
moving in the right direction. And because of that, I can't see 
why the other agencies couldn't follow suit.
    Mr. Hall. Do you think----
    Mr. Sharpe. It----
    Mr. Hall. Excuse me. I was going to say if--are there any 
specific suggestions besides what is already in law? And 
talking to them and encouraging them that that would make them 
move there faster?
    Mr. Sharpe. I believe there should be some sort of mandate 
for them to move faster. We do agree that it should be in the 
performance evaluations of those officials in the various 
agencies. I think all agencies should be required to come up 
with a strategic plan.
    SBA needs to do what they were originally designed to do. I 
think we have everything primarily in place. I am sure there is 
more tweaking we could do. But I just don't see the will on a 
lot of these agencies to do what they are supposed to do.
    And they need to be encouraged. They need to be monitored. 
And we need to continue to badger them until they do so.
    Mr. Hall. Thank you, sir. My time is expired. I yield back.
    Ms. Herseth Sandlin. Mr. Hall, did you have any followup 
questions?
    Mr. Hall. No.
    Ms. Herseth Sandlin. It is sometimes too restrictive to 
adhere to the 5-minute rule in the questioning.
    Mr. Hilleman, in your written and verbal testimonies today, 
you talked about the role that the Department of Defense, 
Department of Veterans Affairs, Department of Labor, SBA, and 
General Services Administration should be playing in promoting 
and meeting and three-percent set aside goal.
    What role should each of them be playing in your opinion? 
Asked a little bit differently, should one of those entities, 
perhaps the SBA or one that you didn't mention, the Office of 
Federal Procurement Policy be responsible for tracking the 
progress made by all of the agencies in meeting the goals? Is 
there a position that you have taken there? Or maybe you could 
just elaborate on what role you envision for each of the 5 that 
you mentioned in your testimony.
    Mr. Hilleman. Thank you, Madam Chairwoman. In the Executive 
Order, there is an outline for further reporting standards at 
senior executive levels.
    And the VFW believes that reporting by each agency would be 
a valuable step in achieving this goal. It would elevate the 
issue into the leadership and make leadership acutely aware of 
what is expected of them.
    But I will associate myself with remarks of my fellow 
panelists. Performance and evaluation standards are a great way 
to create an incentive, especially in senior leadership 
positions.
    In recent news, we have been made aware of bonuses that are 
paid to senior-level executives without the performance that 
the government, and the Congress, and the American people 
expect.
    We feel that perhaps in elevating this to a senior-
executive level issue, for them to be acutely aware of in doing 
performance evaluations, you may see greater compliance as well 
as greater attention the bottom line, if it is going to affect 
their own personal financial well-being.
    Ms. Herseth Sandlin. Mr. Sharpe, I believe you stated, 
either in your verbal testimony or your written testimony, only 
two agencies have self-reported meeting their set-aside goals, 
correct?
    Mr. Sharpe. Correct.
    Ms. Herseth Sandlin. Do you believe that these Federal 
agencies are meeting the three-percent set aside based on the 
self-report?
    Mr. Sharpe. I have no reason to doubt them. But as I stated 
earlier, I am really disappointed that that data is not out 
there.
    Again, we are heading into fiscal year 2008. And we are 
still dealing with 2005 data. And the SBA and VA has to more or 
less verbally tell us that they have met their goals. There 
shouldn't be any question. We should have had that data.
    There is no way to really monitor or really tell how well 
the Federal Government is doing unless we have some sort of 
statistics to see it.
    Ms. Herseth Sandlin. Well, I would agree in terms of the 
importance of the information being available in a timely 
manner.
    We just marked up a bill 2 weeks ago that dealt with 
reporting----
    Mr. Sharpe. Yes.
    Ms. Herseth Sandlin [continuing]. Issues, working with 
Department of Labor.
    Mr. Sharpe. Mm-hmm.
    Ms. Herseth Sandlin. Let me ask a question, to each of the 
3 of you. In addition to timely access to the information 
provided by each agency, do you also feel that there needs to 
be third-party verification of the information, either from the 
SBA, the Office of Federal Procurement Policy, or some other 
entity ultimately responsible for the monitoring? Do you think 
that should be required?
    Mr. Sharpe. We have stated before that we felt that the SBA 
should be the lead agency.
    Ms. Herseth Sandlin. The lead agency----
    Mr. Sharpe. At that----
    Ms. Herseth Sandlin [continuing]. In ensuring compliance.
    Mr. Sharpe. Yes.
    Ms. Herseth Sandlin. Okay. Not just the lead agency in 
working with strategic plans, but ultimately the lead agency?
    Mr. Sharpe. Well, we feel the SBA has the expertise. They 
have the knowledge. There is an Office of Veteran Affairs 
within the SBA. It should be properly funded. They have the 
experts, the experience there. They should be doing it.
    And there should be a partnership with VA and DoD. But 
ultimately we think that SBA should be that agency that should 
be out there with that data. Doing the--overlooking training, 
ensuring that veterans are--the other agencies are meeting 
their procurement goals. And be there instructing the contract 
officers from the various agencies.
    And if there is a problem like the rule of two or set 
asides, this is what they deal with. They deal with all those 
programs. So it just makes sense that would be more forthcoming 
in being more assertive in ensuring that veterans are taken 
care of.
    Ms. Herseth Sandlin. Thank you. Any final comments?
    Mr. Wynn. Yeah. I would like to comment on that too. It 
was--I mean, for--it has been our thought also that the SBA 
having the expertise and knowledge in small business, providing 
training, outreach, and assistance to all small business 
owners, that it made sense for them to be the lead agency to 
oversee the implementation of the strategic plans, the 
Executive Order, and so forth.
    But we are quite disappointed in the fact that it has taken 
so long for them to seem--seemingly be able to carry out their 
direction under the Executive Order.
    As I mentioned in my testimony, I was quite pleased when 
the new administrator came in and began to speak so favorably 
about complying with the Executive Order in addressing the 
unmet needs of veteran business owners.
    But once again, you know, seemingly the ball has gotten 
dropped, because it just does not seem to be happening. I am a 
firm believer that at this point in any way, if the Executive 
Order was fully complied with and carried out, that we would 
see more progress across all of the agencies.
    And if--at the moment, that is SBA's role to oversee that. 
If, however--I don't want to suggest that we change the 
government structure. But if there is another agency that, 
perhaps, would feel better assuming that role, then let them 
come forward.
    Ms. Herseth Sandlin. Well, thank you all for your testimony 
today.
    Mr. Boozman. Could I just say----
    Ms. Herseth Sandlin. Mr. Boozman, yes, your comments and 
questions.
    Mr. Boozman. We need to move on, and I don't have a 
question. But in talking to my trusted counsel here, Madam 
Chair, the--I think he makes a very good point.
    VA is doing a good job, they are working hard to do that. 
And part of the reason is that this Subcommittee has been 
working with them. And I genuinely believe that they want to 
get this done, for a number of different reasons.
    We have to do a much better job, though, of working with 
the authorizing committees of the various agencies. They have 
jurisdiction over these people, they have oversight.
    So, if Interior is not doing a good job, you all need to 
help us do this, because you have got the ability help greatly.
    But we need an oversight hearing in Interior about why the 
Department of the Interior is not conforming to the 
Presidential mandate. The same is true of Transportation. I am 
on the Transportation Committee. Congressman Hall is on 
Transportation. Congresswoman Herseth Sandlin is on 
Agriculture.
    I need to push on the Transportation Committee to have a 
hearing, an oversight hearing, as to why the Department of 
Transportation is not fulfilling the three-percent set aside. 
And so we can help with that--we will push as a Committee to 
maybe inform those other Committee staff and the Members. And 
then we ourselves can push for that.
    You all have the ability and the Veteran Service 
Organizations, the various groups that are helping us push this 
forward, you have the ability to meet with those Chairmen and 
Ranking Members. And that would be very, very helpful. Perhaps 
we can all kind of coordinate that with staff. And try and get 
some of that done.
    Thank you.
    Mr. Hilleman. Thank you, Congressman. We would be happy to 
work with your office.
    Ms. Herseth Sandlin. Thank you again. We appreciate the 
testimony and your service on behalf of our Nation's veterans 
serving as effective advocates.
    I would now like to thank all of the gentlemen for being 
here. Your written statements will be made part of the record 
today. We ask you that you keep your testimony to 5 minutes, so 
that we can get to our questions.
    Mr. Elmore, we will start with you.

   STATEMENTS OF WILLIAM D. ELMORE, ASSOCIATE ADMINISTRATOR, 
 OFFICE OF VETERANS BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS 
    ADMINISTRATION; LOUIS J. CELLI, JR., CHAIRMAN, ADVISORY 
 COMMITTEE FOR VETERANS BUSINESS AFFAIRS, U.S. SMALL BUSINESS 
ADMINISTRATION, AND CHIEF EXECUTIVE OFFICER, NORTHEAST VETERANS 
BUSINESS RESOURCE CENTER; SCOTT F. DENNISTON, DIRECTOR, OFFICE 
OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION AND CENTER FOR 
VETERANS ENTERPRISE, U.S. DEPARTMENT OF VETERANS AFFAIRS; PAUL 
A. DENETT, ADMINISTRATOR, OFFICE OF FEDERAL PROCUREMENT POLICY, 
  OFFICE OF MANAGEMENT AND BUDGET; CHARLES CERVANTES, SPECIAL 
 ASSISTANT TO THE DIRECTOR, OFFICE OF SMALL BUSINESS PROGRAMS, 
   OFFICE OF THE UNDER SECRETARY OF DEFENSE FOR ACQUISITION, 
      TECHNOLOGY AND LOGISTICS, U.S. DEPARTMENT OF DEFENSE

                 STATEMENT OF WILLIAM D. ELMORE

    Mr. Elmore. Thank you. Chairwoman Herseth Sandlin, Ranking 
Member Boozman, and distinguished Members of the Subcommittee, 
thank you for the opportunity to appear before you today to 
share information on the activities of the U.S. Small Business 
Administration regarding our efforts to assist and support 
Federal procurement opportunities and success of veterans, 
including those who have incurred a service-connected 
disability.
    I am William Elmore, the Associate Administrator for 
Veterans Business Development. And I am pleased to be here 
today representing Administrator Preston and other SBA 
employees who work every day to support the small business 
success of America's veterans, reservists, and family members.
    The mission of the Office of Veterans Business Development 
is to maximize the applicability, availability, and usability 
of all Administration small business programs for veterans, 
service-disabled veterans, reserve component members of the 
U.S. Military, and for their dependents or survivors.
    SBA's efforts to support veterans entrepreneurship goes 
significantly beyond the activities of my office. Each program 
at SBA is tasked with expanding and improving their services 
specifically for veterans and service-disabled veterans.
    Thus far, the results we think, have been good. The number 
of new loans being made to veterans has increased 
significantly, growing from 4,800 in fiscal year 2000 to 
approximately 8,000 in fiscal year 2006.
    SBA business outreach, counseling, and training services 
assist more than 100,000 veterans, reservists, active 
servicemembers and spouses each year, including the growth of 
special outreach and coordination efforts through our district 
and our regional offices.
    Federal procurement opportunity for veterans is an 
important issue to SBA. I am pleased to be sharing with you 
some of the initiatives and accomplishments the SBA has made 
over the past 6 years.
    As expressed in the January 24th, 2007, Memorandum for 
Heads of Departments and Agencies, jointly issued by 
Administrator Preston and Office of Federal Procurement Policy 
Administrator Denett, the Administration is broadly committed 
to enhancing all of our entrepreneurial programs and services 
for veterans and reservists returning from duty in the Global 
War on Terror, and more specifically for those servicemembers 
injured or disabled in service to America.
    Prime contracts have a three-percent government-wide 
procurement goal, and for veterans, there is a ``best efforts'' 
clause in small business subcontracting.
    Though the Federal Government has yet to achieve the 
required 3 percent goal, it is making progress toward 
accomplishing it.
    In 2004, President Bush issued Executive Order 13360 to 
strengthen procurement opportunities in Federal contracting for 
Service-Disabled Veteran-Owned Small Businesses.
    The General Services Administration established the 
Veterans Technology Services Government-wide Acquisition 
Contract based on that order. VETS is a IT contract designed to 
help Federal agencies meet their three-percent goal by 
purchasing information technology solutions from SDVOBs.
    Preliminary data does show that both SBA and the Department 
of Veterans Affairs exceeded our three-percent goals for SDVOBs 
in fiscal year 2006, with SBA achieving more than 4 percent. 
This example demonstrates leadership by example. And represents 
a significant improvement for both agencies over our fiscal 
year 2005 achievements.
    We are currently reviewing the final fiscal year 2006 
report from the Federal Procurement Data System, and the 
preliminary data suggests significant efforts toward an 
improvement in achieving the three-percent goal.
    This reflects the ongoing SBA efforts and the efforts of 
most Federal agencies. It also demonstrates the increasing 
ability of Service-Disabled Veteran-Owned Small Businesses in 
pursuing contracting opportunities and in securing contracts.
    On July 9, 2007, the number of small businesses owned by 
service-disabled veterans expressing interest in Federal 
procurement in CCR was 9,642. The number of veteran-owned small 
businesses was 37,282.
    While SBA is analyzing what agencies are buying and 
comparing that to what SDVOSB's are selling, we are also 
strengthening the full range of SBA programs.
    In addition, we are working with the Department of Defense 
and the Department of Labor to enhance our involvement in TURBO 
TAP, in efforts to improve small business opportunity and 
employment support for returning veterans and reservists, and 
we are assisting various components of DoD in other planning 
initiatives.
    At the request of both SBA and the veterans community, the 
Census Bureau included veteran and service-disabled veteran 
questions in the 2002 survey of small business owners.
    This survey found that approximately 0.7 percent of small 
businesses in America are owned by service-disabled veterans, 
and approximately 14 percent of all small businesses are owned 
by veterans.
    The 2002 statistics recently released by the Census Bureau 
indicate that 2.6 percent of veteran-owned firms sell to the 
Federal Government, while only 2 percent of all firms take 
advantage of this Federal marketplace.
    These findings reinforce our efforts to strengthen the full 
breadth of SBA programs and services specifically for service-
disabled veterans and all veteran business owners. We are 
strongly committed to working with all of our programs and with 
all of our Federal agency counterparts to reach out to and help 
create more veteran-owned small businesses. And to make use of 
their talents and services in Federal procurement, in 
strengthening the American economy, and in strengthening 
America's involvement in the interational economy.
    This concludes my comments. And I welcome any questions. 
Thank you.
    [The prepared statement of Mr. Elmore appears on p. 76.]
    Ms. Herseth Sandlin. Thank you.
    Mr. Celli, you are now recognized for 5 minutes.

                STATEMENT OF LOUIS J. CELLI, JR.

    Mr. Celli. Thank you and good afternoon Chairwoman Herseth 
Sandlin, Ranking Member Boozman, and Members of this 
Subcommittee.
    I would especially like to thank Congressman Boozman for 
recognizing my testimony ahead of time. And for the comments 
that he made, because I would like to reinforce those comments 
now.
    And it is an honor to be here. I am not a paid participant. 
I don't get paid to be here. I am not a paid Member of the 
SBA's Committee on Veterans Affairs. I am an advocate for 
veterans. And I do that through a non-profit organization.
    So when I come here, and I represent the 15 percent--15 
percent of business owners of America. I do that, because it is 
important.
    So I thank you for holding this hearing and for continuing 
to hold these hearings. And I think it is very important.
    I will skip over most of the stuff that has already been 
said, because I know that we are going to get to questions 
afterward.
    I will introduce myself. My name is Louis Celli. I am a 22-
year retired Master Sergeant from the United States Army. I 
also serve as the Chairman of the SBA's Veterans Small Business 
Advisory Committee. And I also serve on the American Legion's 
National Small Business Task Force as the Vice Chairman.
    Again, as I have said earlier, everything that you have 
heard today, you have received all the statistics. It is common 
knowledge. As you stated ahead of time, you already understand 
the regulations the way that they have been written. You 
understand what the rules are. That is why we are here.
    The question that you are asking today is how do we fix it? 
While the agencies continue to scuff their feet, and wring 
their hands, and say ``Gee, we're trying,'' they publish 
strategic plans. And as part of my testimony, I have included 
an example of one of those strategic plans. And the strategic 
plan was implemented 5 years after the law was set into place. 
And it is a 5-year strategic plan.
    And one thing that I would like to point out, as everybody 
has copies of this, if you look within that strategic plan, 
nowhere does it say that we will meet the goal. So where is the 
emphasis?
    The real problem is that over the past 6 years, the SBA has 
been summarily disassembled. It has been whittled down to what 
is now a little more than a skeleton crew, with barely enough 
employees to handle the other parts of their mission, which is 
loan underwriting and disaster assistance.
    From an agency of 3 primary departments and more than 3,000 
employees, with an annual budget of more than a billion dollars 
to the crippled down agency that it is today having lost over a 
third of their workforce.
    Unfortunately, what didn't go away was the administrative 
duties still required on a daily basis to run the SBA and the 
real world disaster mission. What falls behind is the mission 
of training, advocacy, support, contracting oversight. And as 
we all know, in government it is true, size does matter. The 
bigger the agency you are, the more authority you have and the 
more power you have.
    I have served as a Federal employee, as a military member, 
and as an advisor to Congressional staff and a small business 
consultant. I have seen firsthand the reactionary nature of 
bureaucracies.
    And I understand why diverting funds away from the SBA 
seemd to be necessary at the time. But as I testify before you 
here today, my professional advice, my advice as a business 
consultant, is to recommit and restore these funds to the SBA 
to its full strength before it is too late.
    When the economy is robust, it is our nature to relax. This 
is how the SBA became decrepit. But as any good businessowner 
knows, they--you not only have to run your business, but you 
also have to be an economist. And you need to be able to 
predict the future trends as they are going--if you are going 
to stay in business.
    And if you, Congress, want to save or grow small businesses 
in America, service-disabled businesses, women-owned 
businesses, minority-owned businesses, socially disadvantaged, 
Hub Zone, all of them, then you are going to need to act now 
and restore the SBA to its full complement. If we wait until 
small businesses begin to decline, at that point it is going to 
be too late.
    A properly strengthened SBA can train, educate--train and 
educate contracting officers, intervene in bundling and large 
versus small business competition decisions, assist and train 
in service-disabled veteran-owned business, aggressively pursue 
agency small business correction plans, monitor and hold 
accountable prime contractor's small business and 
subcontracting plans, preside over award disputes, monitor and 
maintain the program and hold agencies accountable.
    So you will have one agency to drag onto the carpet when 
the wheels fall off the cart, rather than trying to chase down 
all the agencies individually.
    One suggestion I have is to establish a ``Veterans Small 
Business and Entrepreneurship Subcommittee'' within the 
Congress. Veterans entrepreneurship has become a project, which 
is currently being addressed by at least 4 separate Senate and 
4 separate House Committees. Much of this work is commonly 
themed. But much of it is diametrically opposed. The Veterans 
Small Business and Entrepreneurship Act of 1999 discusses at 
least 3 different Committees who have direct involvement in the 
program. Yet there is no common ground and no working 
Committee.
    I am currently working with the Veterans Administration and 
the Compensated Work Therapy Program under a special project 
called the Veterans Construction Team. The project is an 
anomaly within the VA and allows for the VA and this particular 
project to go out and get contracts with the VA, almost as a 
small business.
    The reason that I bring this up is because half the project 
is educating veterans and putting them through this progress--
through this program. But the other half of the program--the 
other half of the program or the other half of the challenge is 
educating the contracting officers as to why they need to hire 
service-disabled veterans in the first place.
    I probably had to explain Public Law 109-461 to more VA 
contracting officers as we go through this program than I have 
at veterans conferences to veterans. When I spoke with 
contracting officers at the Immigration and Border Protection, 
I was told that the education portion of contracting wasn't 
their responsibility when it came to educating their 
contracting officers. It was the responsibility of the SBA.
    So here you have agencies that take no responsibility for 
educating their own contracting staff to meet the goals of the 
Service-Disabled Veteran-Business Owner initiative and its 
agencies.
    The SBA, who is underfunded and powerless to do anything 
about it, because their resources are committed to more 
immediate matters. Yet the authority and responsibility still 
resides with the SBA. That is why they were created.
    Madame Chairwoman, Ranking Member Boozman, if you want to 
address the issue of meeting our 3 percent obligation to 
service-disabled veterans in the United States of America, you 
are going to have do it by funding it and reconstituting the 
SBA.
    I would be happy to answer any questions at the end of the 
panel's testimony. Thank you.
    [The prepared statement of Mr. Celli appears on p. 77.]
    Ms. Herseth Sandlin. Thank you. Based on your 
recommendation, we will certainly be visiting with Chairwoman 
Nydia Velazquez with the Small Business Committee. I am sure 
you have shared some of your thoughts with her as well in some 
of the hearings that have been held there in both the full 
Committee and the Subcommittees.
    Mr. Denniston, we welcome you and welcome your testimony. 
You are recognized for 5 minutes.

                STATEMENT OF SCOTT F. DENNISTON

    Mr. Denniston. Good afternoon. Thank you. Madame 
Chairwoman, Ranking Member Boozman, and Mr. Hall, thank you for 
convening this hearing.
    Ms. Herseth Sandlin. And could you pull the microphone a 
little bit closer to you.
    Mr. Denniston. Of course. How is that? Better.
    Ms. Herseth Sandlin. I think so. Make sure that that is----
    Mr. Denniston. The green light is going on.
    Much progress has been made since May 17th, 2000, where we 
had another hearing on this same subject. On June 14th, the VA 
and the Veterans Entrepreneurship Task Force conducted the 
first Veterans in Business in Accountability Conference on 
measures agencies were taking to implement Executive Order 
13360.
    Officials from 6 large Federal agencies addressed business 
owners and advocates about their progress and their future 
plans. Representatives from Northrop Grumman, IBM, and Science 
Applications International Corporation (SAIC) addressed 
corporate buying practices and offered owners marketing advice.
    Afternoon action groups focused on Federal prime 
contracting procedures, subcontracting barriers, status of 
Executive Order 13360 strategic plans, and the education needs 
for Federal officials and business owners.
    We've recognized program leaders through our Annual 
Champions of Veterans Enterprise Award Program. This year we 
had a record number of honorees. Our ceremonies were conducted 
on June 14th and June 27th. In total, 12 Federal agencies were 
recognized for their efforts, as were 5 prime contractors.
    We just returned from the Third National Veterans Small 
Business Conference held from June 25th through 28th. This 
program set an attendance record with more than 1,300 
participants.
    These events provide the community with multiple forums to 
come together to tackle issues. These issues are solvable, as 
we will address today. More importantly, the advocates, the 
government agencies, and business owners are united in support 
of our Global War on Terror heroes.
    The 3 percent goal for Service-Disabled Veteran-Owned Small 
Businesses needs to be achieved across the government. A few 
initiatives that would contribute immeasurably, in our opinion, 
include more early acquisition planning tools, such as sources 
sought notices, more pre-solicitation notices in FedBizOpps 
electronic posting system, improved acquisition planning, 
better definition of requirements, and improved evaluation 
procedures.
    Together, these actions would shorten award cycle times, 
which would help all small business owners.
    In addition, more coordinated--more coordination by Federal 
agencies and prime contractors is needed in their outreach 
efforts.
    The Procurement Technical Assistance Centers (PTAC), funded 
by the Defense Logistics Agency, are an outstanding resource 
for owner training. PTAC staffs have contacted local Federal 
offices and prime contractors. Many centers organize at least 
one procurement conference a year.
    As you know, VA exceeded the 3 percent service-disabled vet 
goal in 2006. Our procurement budget was $10.3 billion. We 
spent $346 million or 3.83 percent with service-disabled 
veterans. We spent $651 million or 6.35 percent of our total 
procurement with veteran-owned small businesses.
    Quite simply, VA met the goal, because we have the 
collective will to do so. Throughout our department of over 
230,000 employees, we do not want to simply achieve the goal. 
We expect to exceed it.
    Deputy Secretary Mansfield is the Department's Senior 
Oversight Official for the Executive Order. In his capacity, he 
directed that performance plans for key VA executives be 
modified to ensure that our leadership is meeting the 3 percent 
service-disabled vet goal.
    In addition, he requires that senior leaders personally 
report progress in supporting all small business programs 
during our monthly senior managers' meetings.
    The VA actively places sources sought pre-solicitation 
notices in service-disabled vet set-aside notices in 
FedBizOpps.
    On June 20th, 2007, VA implemented our Veterans First 
Buying Program, as authorized by Public Law 109-461. This law 
gives VA unique authority to purchase from Service-Disabled 
Veteran-Owned Small Businesses. It also provides opportunities 
for veteran-owned small businesses.
    Progress in the Service-Disabled Veteran Business Program 
is underway. Last month's Accountability Conference provided an 
opportunity for diverse groups to discuss their challenges.
    ``Hats off'' to Mr. Ron Poussard and his team at the Air 
Force Small Business Office. They stayed the entire day. They 
collaborated on problem solving with business owners and 
advocates.
    At the National Conference, Tracy Pinson, Director of the 
Army's Office of Small Business, announced that Army is 
forecasting $1.8 billion to be spent with service-disabled vets 
over the next 12 months. Ms. Pinson has asked VA's Center for 
Veterans Enterprise (CVE) to partner with her to ensure 
business owners are aware of these opportunities.
    The CVE supports Federal agencies and business owners. 
These services include free market research, collaborative 
conference sponsorship, communications with industry through 
our VetBiz.gov vendor information pages database, and other 
support as desired.
    The VA cosponsors many business conferences with other 
organizations. VA, Army, and other agencies organized the 
National Veterans Business Conference.
    On July 25th, the VA, Army and Navy will jointly support a 
Base Realignment and Closure (BRAC) conference here in the 
Nation's Capital to provide owners with advanced information 
about procurement opportunities associated with base 
realignment actions from 2008 to 2012.
    In addition, CVE maintains a help desk for business owners 
and others who have questions about the Veterans 
Entrepreneurship and Small Business Development Act.
    We also provide information about VA's unique procurement 
authority and other programs supporting entrepreneurship, such 
as our partnership with the International Franchise 
Association. CVE utilizes volunteers in Federal agencies and 
corporations as our local resources.
    The strongest sentiment expressed since we last met in May 
is a memory from the Accountability Conference. After 
participating in several hours of action group dialog, a very 
young owner said to the founders of the program, Vietnam 
generation veterans, ``I appreciate everything you have done to 
clear the way for my business.''
    This is the current state of Federal Veterans 
Entrepreneurship Programs. We have reached a moment in which we 
have some very robust businesses with good revenues and good 
experience.
    It is now time to step forward and support our Global War 
on Terror heroes as they create their futures, as employees and 
business owners.
    Madame Chair, let me say that we in the VA appreciate what 
each of you on this Subcommittee has done to improve the 
economic opportunities for all veterans.
    So on behalf of VA, thank you for your efforts. That 
concludes my comments. I would be happy to answer any 
questions.
    [The prepared statement of Mr. Denniston appears on p. 89.]
    Ms. Herseth Sandlin. Thank you, Mr. Denniston.
    Mr. Denett, we are pleased you are with us today. We look 
forward to your testimony. You are now recognized for 5 
minutes.

                  STATEMENT OF PAUL A. DENETT

    Mr. Denett. Chairwoman Sandlin and Ranking Member Boozman, 
and Members of the Subcommittee, thank you for the opportunity 
to appear before you today to discuss the current state of 
Federal procurement and opportunities for veteran-owned small 
businesses.
    My remarks will focus on government-wide efforts to improve 
opportunities for small business, including small businesses 
owned and controlled by service-disabled veterans, consistent 
with my responsibilities as Administrator for the Office of 
Federal Procurement Policy.
    Let me begin by assuring you that my office is committed to 
providing maximum opportunity for small businesses in Federal 
contracting and subcontracting.
    In January 2007, Small Business Administrator Steve Preston 
and I sent a memorandum to the heads of departments and 
agencies, highlighting some of the progress we have made and 
urging agencies to do more to create contracting opportunities 
for service-disabled veterans.
    I am well aware that small business accounts for half of 
America's overall employment. And that small business creates 
the overwhelming majority of new jobs in this country.
    As an Army veteran, one of the first actions I took upon 
becoming Administrator for Federal Procurement Policy was to 
create a Deputy Administrator position, with responsibility for 
small business contracting and all the special emphasis 
programs.
    This emphasizes the importance my office places on working 
with the Small Business Administration and Departments and 
agencies to meet the objectives of the Administration's small 
business agenda and to create an environment where small 
businesses can flourish.
    Some of the actions we are taking to achieve these results 
are described below.
    Small Business and Veteran-Owned Small Business 
Procurement:
    I am pleased to say that in fiscal year 2005, the Federal 
Government awarded $79 billion in prime contracts to small 
business. That represents a $10 billion increase from the 
previous year. Contracting opportunities increased for all 
statutory types of small business.
    In October 2004, the President signed Executive Order 
13360, requiring agencies to take several actions to 
significantly increase contracting opportunities for service-
disabled veterans.
    In fiscal year 2005, contracts to small businesses owned 
and controlled by service-disabled vets increased 
significantly, reaching $1.9 billion, up from $1.2 billion in 
fiscal year 2004. That represents an increase of 58 percent. 
Real progress has been made. But much more efforts are underway 
and more needs to be done.
    Although official government-wide small business data has 
not been released by SBA for fiscal year 2006, we understand 
that preliminary data indicates that both SBA and the 
Department of Veterans Affairs exceeded the 3 percent goal for 
contracts with Service-Disabled Veteran-Owned Small Businesses.
    The General Services Administration recently announced 
contract awards to 44 Service-Disabled Veteran-Owned Small 
Business, with a potential value of over $5 billion, under 
GSA's Veterans Technology Services government-wide acquisition 
contract.
    This week, I sent a memorandum to department and agency 
chief acquisition officers and senior procurement executives, 
urging them to review their agencies' information technology 
requirements and the services provided by service-disabled 
veterans under the VETS contract to determine if the contract 
can meet their needs.
    I recently had the privilege of speaking to service-
disabled veterans who were awarded contracts under the VETS 
GWAC, and I was impressed with their diligence and the quality 
of the service that they provide. I vowed to encourage the 
departments and agencies to use these contracts.
    We expect Federal contracting with service-disabled 
veterans to continue to increase as departments and agencies 
use the VETS contract to meet various information technology 
requirements. Agencies are also using other contracts to 
increase opportunities for service-disabled vets.
    I understand that GSA used its Streamlined Technology 
Acquisition Resource GWAC to award a $200 million contract to 
Catapult Technology, a service-disabled veteran-owned 
contractor that also is recognized under SBA's 8(a) business 
development program.
    Under that contract, Catapult will create an enterprise-
wide technology infrastructure for GSA's new Federal 
Acquisition Service. Catapult was recently awarded a contract 
under the VETS GWAC as well.
    Federal Acquisition Regulations, FAR, Small Business Team:
    On March 2, 2007, we formed a FAR Small Business Team to 
focus on small business issues and coordinate with the Small 
Business Administration on concurrent SBA and FAR rulemaking.
    Usually in the past, corresponding SBA and FAR rules were 
promulgated consecutively. This lengthened the rulemaking 
process, sometimes doubling it.
    Small Business Procurement Scorecard:
    My office has been working with SBA to develop a scorecard 
to help agencies focus on increasing opportunities. Last 
November, SBA Administrator Steve Preston and I sent letters to 
the heads of departments and major procuring agencies 
announcing the Small Business Procurement Scorecard, and 
advising agencies that their progress and status on small 
business contracting would be scored in fiscal year 2007. I 
understand that SBA plans on using the Scorecard and the data 
to score agencies on their small business procurement 
achievements this summer.
    Small Business Data:
    We rely upon data submitted by the departments and agencies 
to the Federal Procurement Data System (FPDS), the official 
repository for Federal procurement and small business contract 
information.
    Each Department and agency is responsible for submitting 
accurate data to FPDS and verifying the accuracy of such data.
    On March 9th, 2007, I sent a memorandum to the Chief 
Acquisition Officers requiring that they establish agency-wide, 
statistically-valid, procurement data verification and 
validation procedures and provide a certification of data 
accuracy and completeness to GSA and myself.
    Ms. Herseth Sandlin. Mr. Denett, I may have to ask you to 
summarize, because----
    Mr. Denett. Okay.
    Ms. Herseth Sandlin [continuing]. Mr. Boozman has to be at 
another commitment as well.
    Mr. Denett. All right.
    Ms. Herseth Sandlin. Okay.
    Mr. Denett. To help improve future small business data, SBA 
and my office developed a regulation that requires small 
businesses to recertify their size during the performance of a 
contract.
    That is all I have. And I will be willing to answer any 
questions that the panel may have for me. Thank you.
    [The prepared statement of Mr. Denett appears on p. 93.]
    Ms. Herseth Sandlin. Okay. Thank you. Your full written 
statement is made part of the record, and we appreciate the 
testimony.
    Mr. Cervantes is welcomed. You are now recognized for 5 
minutes.

                 STATEMENT OF CHARLES CERVANTES

    Mr. Cervantes. Thank you. Good afternoon Madam Chair, 
Ranking Member Boozman, service-disabled veteran-owned 
companies who testified earlier, veteran service organizations.
    You have convened all the stakeholders that are involved in 
this. And I am glad that we are all here together. I have 
worked as a team with Scott early on in developing our 
strategic plans, and certainly with Bill Elmore. And I have had 
many of these companies in the office. And I am proud to say 
that Oak Grove was our first Mentor-Protege. They were a Nunn-
Perry winner. And they are the recipient of a--I believe it is 
a $38 million DoD contract.
    There are 3 parts to my presentation. They are different 
than my written testimony. The history is, and I hope this 
clarifies for Ranking Member Boozman, the tools that we have. 
We operate in the--the acquisition community operates with FAR. 
That is the touch tone by which they make awards. Certainly the 
Executive Order is one that we took very seriously.
    We immediately developed the training program with DAU. I 
think we have had over 1,100 people take it. And we have had a 
number of training sessions with the acquisition community, 
most recently on May 22nd.
    We invited the General Services Administration to come to 
our Small Business Training Conference and trained over 100 of 
our acquisition officers on the GSA Veterans IT Set Aside.
    The plan, as had been discussed, is a 5-year plan. We look 
at it. We look at lessons learned. We look at success stories. 
And we adjust it. Now, I will get back to the adjustments on 
the third year of that plan later.
    What has happened recently, I would say in the last two 
months, are a number of senior level policy memoranda that have 
gone out. I would start out first by the letter from Secretary 
Gates to Senator Kerry. Certainly Under Secretary Krieg with 
his memorandum on participation in the GSA GWAC with vigor--
with vigor.
    The other memoranda, which we have made reference to in the 
written testimony, are from our Chief Policy Advisor for 
Procurement, and that is Shay Assad. He points out that we must 
use the set aside and sole source authority more effectively. 
And our new Director, Mr. Anthony Martoccia, has also sent out 
a memorandum to all the major commands. So we do have that 
policy push from the top.
    I would also add that in terms of commitment, Dr. Finley, 
who is the person most involved at this time at senior level 
management, has participated as a keynote speaker in our DoD 
conference in Dallas in December. Veterans doing business with 
the Department of Defense as part of our training, we posted 42 
PowerPoint presentations on our website. It is a very robust 
website. We have, for example, 3 large prime contractors who 
said this is how you can subcontract with us. They are members 
of the executive team from the corporate office. They drilled 
down to the office. The particular individual, the email 
address if you want a subcontract.
    We also have 8 video streaming videos with regard to 
Mentor-Protege, surety bonding. And why am I saying this? 
Because it is very expensive for a small business to take a 
week off and travel. It is very expensive. They have to make 
decisions. And as a former small businessowner, I know. If you 
are out of the office a week, something is going to go wrong. 
So we are trying to make distance learning on our website a lot 
more robust and a lot more to the point.
    Our new thinking. If you--our plan is transparent. We have 
submitted a copy to you. There are two areas we have met. And 
we met with various veteran service organizations. Whether it 
is Rick Weidman, or whether it is Joe Wynn, or Joe Sharpe, they 
have been in our office. We have had meetings with senior 
management on where to go. Help us. We all have to work 
together. It is something we can't do alone.
    So kind of the kernels of our new thinking are we thought 
that simply increasing the number of service-disabled veterans 
in the CCR would be a solution.
    There is a corollary. If you look at our numbers, there was 
a big spike from 2004. We did $428 million to unverified 
reports. But we are looking at $1.6 billion. So that is a very 
nice corollary.
    It is not enough. So we have changed our objection one to 
say we have got to look at more databases including Scott's, 
including a number of databases, to see if we can mine and 
bring in more into the supplier base.
    Secondly, we--and I agree with Scott that we have to do 
that market research, so that those contracts can be set aside. 
And it has to be done early enough in the process. It is too 
late by the time that solicitation is on the street, especially 
if you are going to do some teaming.
    I will leave you--I see my time is up--with what I consider 
to be a success story that hasn't been publicized. But I got a 
call last week, a company out in Washington State. He says, 
``Look, I found another service-disabled veteran to set aside a 
contract under the rule of two.'' They hadn't done it. They 
decided they were going to do it. They set it aside. He lost.
    But guess what? The other service-disabled veteran that he 
brought in that was capable of delivering the services at a 
reasonable market price got it. So he said, ``This was for the 
good of the whole.''
    And so we are all here together. And we want to work out 
what works and what doesn't. Our plan is transparent. And you 
have a copy. So thank you very much.
    [The prepared statement of Mr. Cervantes appears on p. 95.]
    Ms. Herseth Sandlin. Thank you very much. I would like to 
recognize the Ranking Member for questions for the panel.
    Mr. Boozman. Thank you, Madam Chair, very much. Again, I 
want to thank all of you for being here and testifying. The 
testimony was very helpful.
    The other thing is that I genuinely believe that you all 
are trying to do the right thing. And this is a difficult thing 
to do. And yet it is something that this Subcommittee is 
committed to. It is something that Congress is committed to. 
And it is evident that the President is committed to doing 
this.
    So it is just something that helping each other we can get 
done. So I appreciate the Chair for having the hearing today. I 
think it is excellent.
    Mr. Elmore, part of the President's directive, as I 
understand, was that there would--the agencies would list a 
senior-level official to be in charge. Can you send us over a 
copy of that list?
    Mr. Elmore. Yes, sir.
    [The following information was provided by the SBA.]

    Response: Designated Senior Level Officials list.

      SBA: Joanie F. Newhart, Senior Procurement Executive
       Department of Commerce: Albert Sligh, Director Office of 
Acquisition Management and Financial Assistance and Procurement 
Executive
       Smithsonian Institution: Dorothy A. Leffler, Director 
Office of Contracting
       Department of State: Rajkumar Chellaraj, Assist. 
Secretary for Administration
       Department of Treasury: Thomas Sharpe, Jr., Senior 
Procurement Officer (SPE)
       Department of Housing and Urban Development: Roy A. 
Bernardi, Deputy Secretary

    Mr. Boozman. That would be helpful. Also, Mr. Elmore, would 
you personally support and recommend to the SBA Administrator 
that SBA submit legislation to expand the small business 
provisions in section 503 and 503 of P.L. 109-461 to the entire 
Federal Government? Would you be supportive of that expansion?
    Mr. Elmore. I can tell you there is no Administration 
position on that sort of a recommendation. But I personally do 
support that recommendation. And have made that clear. And will 
make it clear once again to my administrator.
    Mr. Boozman. Good. Thank you very much.
    Mr. Denniston, thank you for being here. I was going to say 
that some of you had sacrificed by actually cutting your 
vacations short and coming from the beach. And I was going to 
say we could tell by the guy that has got the best tan. So we 
appreciate your sacrifice.
    But set-aside contracts are just part of the total VA 
purchasing. Do you feel that the VA has a good understanding of 
its total procurement?
    Mr. Denniston. I think we--I think we have a good 
understanding of our total procurement. The challenge that we 
have at the VA is, as you know, we do millions of transactions 
a year, because VA is one of the agencies that still does a lot 
of small procurement.
    The challenge that we have is ensuring that everything that 
we buy gets reported. I think that those things that get 
reported, we are very good at making sure they get categorized 
in the proper socioeconomic category.
    Again, because we work with so many, we review that on a 
monthly basis. And we do it by an exception basis. We look for 
those anomalies. And quite frankly, yep, we have situations 
where a $250,000 requirement is identified as a $2.5 billion 
requirement. Those are easy to find. And then we can make the 
corrections that are necessary.
    The challenge we have is, again, going through those 
millions of transactions that we have to make sure that they 
are accurate, that they are timely, and that all the ones that 
should be reported in by the rules that we operate under do get 
that way.
    That is a continuing challenge I would think for every 
agency.
    Mr. Boozman. Thank you very much.
    Mr. Cervantes----
    Mr. Cervantes. Yes, sir.
    Mr. Boozman. Again, I appreciate your testimony, and that 
was helpful. Let me just ask you, recently a departed official 
in DoD Small Business Office stated that during a meeting with 
veteran small business advocates that DoD did not believe the 
three-percent goal applied to each individual Federal agency. 
And that DoD was free to set its own procurement goals at a 
lesser amount. That is not your opinion or----
    Mr. Cervantes. No, no. Neither is that----
    Mr. Boozman [continuing]. DoDs or----
    Mr. Cervantes. Anything that is in writing that has been 
submitted to you from the Secretary and all of the Under 
Secretaries on down.
    Mr. Boozman. Okay. So you can assure us that that is not 
the case?
    Mr. Cervantes. Yes, absolutely.
    Mr. Boozman. Very well. I have got a number of things that 
I would like to submit in writing if that is okay. And, again, 
I appreciate you being here. And we really are committed to 
moving this forward. And we will help you any way that we can.
    You get yourselves in situations where you have 3 things 
going at the same time. And I have got another thing that I 
have just got to be at in a few minutes.
    [No questions were submitted.]
    So, again, thank you very much.
    Ms. Herseth Sandlin. Thank you, Mr. Boozman.
    I am going to submit a number of my questions in writing to 
you as well. In part, in anticipation of another hearing that I 
anticipate scheduling that--there is so much information that 
is being provided that I think we need to target even more in 
our hearings based on the information that we got back in May 
and now at this one. So that we can continue to make progress. 
And as you say, Mr. Cervantes, ``Work together to accomplish 
the goal.''
    Despite the progress that is being made, we are not meeting 
the goal. And we haven't been meeting the goal for years. I 
think that point was made by Mr. Jimenez in the first panel, 
and I think Mr. Cervantes you said you used to be a small 
businessowner, right?
    Mr. Cervantes. Yes, I was.
    Ms. Herseth Sandlin. We know how important implementing 
these laws are to the decision that our servicemembers are 
making when they choose to go into small business.
    Let me start with you, Mr. Elmore. How many agencies are at 
less than 1 percent in meeting their three-percent set aside?
    Mr. Elmore. Off the top of my head, I can't give you the 
number on the list for 2005 or 2006. I can tell you that the 
2006 data will be out within the next two weeks.
    Ms. Herseth Sandlin. Okay. You can hopefully have that by 
the end of July at the latest.
    Mr. Elmore. That is what we believe. Yes, ma'am.
    Ms. Herseth Sandlin. Okay. Will that give us a clear 
listing of the agencies that are at less than 1 percent?
    Mr. Elmore. Right.
    Ms. Herseth Sandlin. Would you then be able to provide us 
with the agencies that have been at that level, less than 1 
percent, for the past 5 years and the past 10 years? Do you 
have the data to provide us that list?
    Mr. Elmore. We can go back--we can go back the past 5 
years. We can't go back the past 10 years, because there was no 
data collection for veterans or----
    Ms. Herseth Sandlin. Right.
    Mr. Elmore [continuing]. Service-disabled veterans.
    Ms. Herseth Sandlin. Okay. Well----
    Mr. Elmore. I believe it would--I believe it was fiscal 
year 2001 when we implemented the initial rules.
    Ms. Herseth Sandlin. Well just use the past 5 years 
initially. There may be some other data we can work with in 
analyzing, but I think the past 5 years will give us a good 
start as it relates to the Ranking Member's and my desire to 
work with other Committees----
    Mr. Elmore. Okay.
    Ms. Herseth Sandlin [continuing]. To raise awareness based 
on the jurisdiction of those Committees in which agencies have 
continually fallen way short of the 3 percent goal.
    Mr. Elmore. Can I make sure I am understanding? So you want 
the list of under one percent, all the way back for 5 years?
    Ms. Herseth Sandlin. Yes.
    Mr. Elmore. Okay.
    Ms. Herseth Sandlin. Those that have been at less than 1 
percent----
    Mr. Elmore. Okay.
    Ms. Herseth Sandlin [continuing]. For the past 5 years. In 
addition to then the 2006 data you will be providing.
    Mr. Elmore. Right, okay.
    [The following information was provided by the SBA.]

    Response: Please see attached list for FY 2001 through FY 2006.

    Note that while FY 2007 FPDS data is not yet certified, preliminary 
November 27, 2007 data indicated that in FY 2007, the following 11 
agencies or departments exceeded or (nearly) achieved their 3 percent 
goal for SDVOSBs.


        VA                                                   ( 6.9009%)
        EPA                                                  ( 4.1027%)
        SBA                                                  ( 4.2710%)
        FCC                                                  ( 3.0140%)
        EEOC                                                 ( 2.9918%)
        FTC                                                  ( 9.6153%)
        RRB                                                  ( 4.1922%)
        NTSB                                                 (17.2171%)
        FEC                                                  ( 3.1164%)
        Denali Commission                                    ( 4.0236%)
        Federal Maritime Commission                          (46.7169%)

    This same FY 2007 data showed that 64 were below 1 percent.

    Ms. Herseth Sandlin. On the agencies that have self 
reported that they are meeting the three-percent set aside 
there is still some skepticism. I think there is clear 
acknowledgment that certain agencies are making more progress 
than others, and may very well be meeting and exceeding the 3 
percent.
    Do you believe that the three-percent set aside goal is 
being met by some agencies? Do we need to make any changes to 
the verification process to assure us of that?
    Mr. Elmore. I do believe there are two agencies that 
achieved the 3 percent goal in 2006. And that is VA and SBA.
    The verification is actually in the process of being 
changed now. And I think Administrator Denett referenced some 
of the work that has gone on between OFPP and SBA. The 
electronic Scorecard for example, which is going to have real-
time information available. And we are going to have not just 
the annual reports on the Executive Order, but also biannual 
reports from agencies about their progress in all of the 
various categories. And that is going to be coming live this 
summer.
    But that--putting those processes in place and in motion 
and making sure that they work is the real challenge.
    Ms. Herseth Sandlin. I would agree, and will want to work 
with you to ensure that you have what you need to make sure 
that implementation happens. I think we will also want to make 
sure, whether by using electronic scoreboard or some other 
method, that there isn't double counting.
    Mr. Elmore. Right.
    Ms. Herseth Sandlin. We need to make sure that the 
percentages achieved reflect the recertification rule.
    Mr. Elmore. I don't completely understand what is going to 
result in detail from that new rule. But I have been told by 
not only small business owners but people who have been in the 
Federal procurement arena much longer than I have that that new 
recertification rule is going to go a long way toward opening 
competition back up to small businesses with some large 
businesses who have contracts now, because they bought small 
businesses who had----
    Ms. Herseth Sandlin. Right.
    Mr. Elmore [continuing]. Contracts.
    Ms. Herseth Sandlin. Right.
    Mr. Elmore. So these are the kinds of things that the 
Administrator has put in motion to try to get done. And I might 
defer as well to Administrator Denett as OFPP, if there is 
anything in addition to what I have just said that he thinks 
might be appropriate.
    Mr. Denett. No. I think--we are very concerned about 
accuracy of data. And I am on a personal crusade to get the 
departments to look us in the eye and say this data is 
accurate. And we are having them come up with independent 
statistically valid methods to do that.
    It is really important to us, because we don't know what to 
do on the executive side. The individual departments are in a 
quandary. If we don't have accurate data, none of us can do our 
jobs.
    Ms. Herseth Sandlin. I appreciate that, and I do think we 
will want to work with you to get additional information on 
this recertification requirement. I think it is very important, 
based on what I have heard from small business owners of all 
stripes in South Dakota. It relates to their ability to compete 
with these very large companies that acquired small businesses, 
some of which may have had a contract, some of which didn't.
    Mr. Denett. Right.
    Ms. Herseth Sandlin. There is a serious unfairness, I 
think, currently in play. We will look forward to working with 
you and Chairwoman Nydia Velazquez to deal with that issue.
    Let me ask one more question, Mr. Elmore. In the first 
panel, there was the issue of the loophole in the GSA schedule, 
as it relates to the threshold. I think it is the $100,000 
threshold.
    Do you agree with the need to close that loophole as it 
relates to ensuring small businesses under that threshold are 
able to compete?
    Mr. Elmore. I----
    Ms. Herseth Sandlin. That was 404, Part 8.
    [Proper citation for 404, part 8, as referenced above, is: 
``FAR Sec. 8.404 Use of Federal Supply Schedules.'']
    Mr. Elmore. I can't speak for the Administration on that 
specific question, because I haven't asked that question inside 
the agency. I will ask that question.
    I will tell you that if there is something in the GSA 
schedule process, and I believe there is, that does allow large 
businesses to secure contracts below that threshold that should 
go to small businesses, I would support that change.
    Ms. Herseth Sandlin. Thank you.
    Mr. Elmore. So let me find that out please.
    [The following information was provided by the SBA.]

        Response: The Small Business Act (at 15 U.S.C. Sec. 644(j)) and 
        Part 19 of the Federal Acquisition Regulation (FAR) create a 
        set aside for small businesses for acquisitions up to $100,000. 
        The FAR states that the set aside applies to Federal Supply 
        Schedule contracts at the acquisition planning stage. FAR 
        Sec. 38.101(e). The FAR further provides that the set aside 
        does not apply to orders placed against Federal Supply 
        Schedules contracts. FAR Sec. 8.404(a). In response to a 
        request from the Government Accountability Office (GAO) in the 
        context of a protest, the SBA presented an argument that the 
        set aside should apply to both contracts and orders. The 
        General Services Administration (GSA) presented an argument in 
        the same protest that the FAR's application of the set aside 
        applies to contracts but not orders. The GAO did not rule on 
        this issue because the protest was dismissed on other grounds. 
        The SBA and GSA have met to discuss this issue and will 
        continue working toward a resolution.

    Ms. Herseth Sandlin. Thank you. I appreciate it.
    Mr. Celli, I appreciate your comments with regard to the 
resources necessary in light of some of the cuts that SBA has 
experienced over the last few years. But let me move to a 
couple of other areas for questions.
    You gave an example of a conversation with some contracting 
officers, I believe, with Immigration and Border Security.
    Mr. Celli. Correct.
    Ms. Herseth Sandlin. Do you think that assuming SBA is 
adequately resourced, they should be solely responsible for 
meeting the need of educating all contracting staff?
    Mr. Celli. I think that the SBA should be primarily 
responsible. I think agencies need to take responsibility 
themselves. But if the SBA has primary responsibility, they can 
then hold secondary responsibility accountable. They can hold 
the agencies responsible for--they can put in a training plan. 
And then the SBA can oversee that training plan. They can send 
down training programs. They can say, you know, here is--they 
can do similar to what the VA has done with 109461. Here is a 
PowerPoint presentation. This is what you need to do.
    But right now, I mean, aside from coming to venues like 
this, there is no accountability. As someone had mentioned 
earlier, there is no one overseeing that. The SBA was designed 
to do that. That is why the SBA was empowered with procurement 
center representatives (PCRs). Right now the--there are--the 
PCRs are the--are the people who have boots on the ground, that 
can walk into a contracting facility, to a contracting 
organization, and say, ``Wait a minute, that doesn't look 
right. Stop. Let us see what is going on.''
    And there are--there are less than one procurement 
representative per State. And South Dakota doesn't have one. 
Arkansas doesn't have one. These duties are shared by officers 
in other States.
    So there are States that just don't have any oversight 
whatsoever, because not only do they not have someone on the 
ground there, but the person who is responsible for that State 
doesn't have the funding to do--for their travel. They expire 
their travel resources before they can get to all their 
different areas.
    So, yes, I think that the SBA needs to be--you know, needs 
to be funded in such a way so that they can oversee it. Having 
primary responsibility, yes. Having the only responsibility, 
no. I think we all need to take responsibility.
    Ms. Herseth Sandlin. South Dakota and Arkansas are States 
that are less populated, and oftentimes at a disadvantage. We 
finally, with this year's budget resolution decision, got an 
SBA office, back open in western South Dakota.
    When we are talking about an ability for procurement 
officers in particular, but any SBA office to identify those 
individuals who are service-connected disabled, you must have 
folks on the ground.
    This regionalization that has happened has made it--has 
made it far more difficult in a number of respects to most 
appropriately and most effectively administer benefits, as well 
as identify entrepreneurs who can make bids on some of these 
Federal contracts.
    Mr. Denniston, you might recall that during the May 17th, 
2007, Subcommittee hearing you mentioned the outreach efforts 
that the Center for Veterans Enterprise has implemented to 
educate people on the requirements of Public Law 106-50 and 
Public Law 108-183.
    Yet, during the same hearing, Mr. Celli highlighted the 
lack of knowledge of these laws from procurement officers. Some 
of that was referenced again today.
    What is being done to ensure appropriate personnel is 
knowledgeable on existing laws and agency policies based on the 
work that you have been undertaking?
    Mr. Denniston. The vast majority of the outreach efforts 
that we have done with the Center for Veteran Enterprise has 
been to the small business community, as opposed to the Federal 
contracting community.
    Remember, under the Executive Order, the responsibility for 
training the contracting officers on the service-disabled vet 
programs rests with DoD and Defense Acquisition University.
    And to their credit, as soon as the Executive Order was 
signed, they had--they had a course up on that. And we have had 
discussions with them about improving it, so that it is more 
specific to the day-to-day issues that contracting officers 
face.
    We also have done a number of outreach sessions. As an 
example, just this week, one of my staff was in California with 
the Navy small business specialists, training them on 109-461 
and the service-disabled vet requirements. And, again, what are 
the services that we in the CVE can provide.
    The real challenge is that there are so many contracting 
officers in the government that none of us have found the magic 
bullet for how we train all these people together.
    The other challenge is that it is one of culture. 
Contracting officers have been beaten over the head for the 
last 20 years to do work with 8(a) companies, the minority 
companies. They have a good stable of 8(a) companies that they 
like to work with. Now we come in and we say we want you to 
change working with those firms. We want you now to work with 
service-disabled vets, or Hub Zones, or women, or any of the 
other small business categories that we have.
    So the real challenge, as I see it from a veteran's 
perspective, and this is personally speaking, not speaking for 
VA, is--we are talking about changing culture. And changing 
culture in large organizations does not happen overnight.
    That is why we measure as an example how many times our 
contracting office has used the authorities of Public Law 108-
183, the set asides and the sole source for a service-disabled 
vet, because that is how you change culture. You don't change 
culture by using the 8(a) program, and oh by the way, it 
happened to be a service-disabled veteran. And I think that is 
more the issue than anything else.
    Ms. Herseth Sandlin. Do you think the rule of two should be 
eliminated?
    Mr. Denniston. Again, personally, no. And the reason I say 
that is that the whole basis of Federal contracting is based on 
competition through the Competition and Contracting Act. And I 
think any category of small business, if they are going to be 
successful long term, they need to be able to compete.
    Ms. Herseth Sandlin. I wouldn't disagree. But is it 
accurate? I want to make sure we are all working on the same 
assumptions and the same information.
    Mr. Baker identified in the first panel, under the 
thresholds for products and services, there is sole sourcing 
going on. No requirements to advertise that actually allows 
some of these businesses to get a foot in the door perhaps.
    Mr. Denniston. Right.
    Ms. Herseth Sandlin. Correct? So while I agree with your 
statement, under those thresholds, to get those contracts, 
there isn't necessarily the requirement to compete for the 
contract.
    Mr. Denniston. No. I think the real issue from the service-
disabled vets standpoint is the fact that the way the laws are 
written we put--we place different responsibilities on 
contracting officers to do a sole source for a service-disabled 
vet versus an 8(a) company.
    Ms. Herseth Sandlin. Do you see a problem with that?
    Mr. Denniston. Yeah, I do.
    Ms. Herseth Sandlin. Okay.
    Mr. Denniston. I think what we should have within the small 
business community is we should have equality of programs. And 
contracting officers should have some flexibility to choose the 
program, one that meets their needs. Whatever their mission is. 
And number two, supports whatever socioeconomic category we are 
trying to support. And the challenge that contracting officers 
have with a service-disabled vet program is that we put them 
through special hurdles and hoops that we don't have in the 
8(a) program, or the Hub Zone Program.
    So I think from the veteran's perspective, all I think the 
veterans are asking for is if we are going to have sole source, 
then let us have the same rules as everybody else.
    Ms. Herseth Sandlin. Thank you.
    Mr. Denett, again, thank you for your testimony. You did 
state that the Federal Government went from $1.2 billion to 
$1.9 billion in fiscal year 2004 in contracts to the SDVOBs. 
And that that represented a 58 percent increase. So that is 
progress.
    But how much closer does it get us to meeting the three-
percent set aside goal?
    Mr. Denett. Not very. We still have a lot of work to do to 
get to the 3 percent. And we are anxiously awaiting the release 
of--from SBA--the new numbers.
    I did put out a memo heralding Administrator Doan at GSA 
and the Commissioner of the Federal Acquisition Service getting 
out that new IT GWAC for disabled vets. That has a $5 billion 
cap. That would help significantly if it was used to the 
maximum. And I am going to be pushing everybody real hard to 
use it to the max so that they can get another $5 billion 
added.
    I think it takes constant vigilance on our part. And I was 
glad to hear about some of the award and recognition programs 
that some of the people have.
    I have an award program called Shine, where I try to 
identify people that have accomplished good things in 
contracting, because we don't hear enough about the good 
things.
    And sitting here today, it occurred to me that I need to 
initiate getting an award under that Shine Program for the 
disabled vets. I think that would go a long ways toward getting 
increased recognition to contracting officers that utilize 
disabled vets and help spread the word.
    Ms. Herseth Sandlin. I agree with the award programs that 
have been put in place and with helping raise the awareness of 
these goals and the progress we need to make.
    Are there any penalties for not reaching the 3 percent? 
Have you also analyzed from past data which agencies are 
consistently under 1 percent, or consistently not making any 
progress, or substantial progress toward the 3 percent? And 
then, are there any penalties associated with that or targeted 
efforts by your office to address training or other information 
that needs to be shared with contracting officers in a 
particular agency to increase their level of progress?
    Mr. Denett. There are not currently. We are looking. You 
know, we do have requirements, mandatory training for people 
that includes being educated on this. DAU has come up with a 
good course. I think we need to review it to see if we can make 
it more practical.
    I heard today some people talking about refresher courses. 
Like even if they get exposed to it early, there is no 
requirement that it be included in refresher training. So I 
think that is something that I should take a look at and talk 
with DAU and the Federal Acquisition Institute to see if we 
could cause that to happen. I think that would be an 
improvement.
    Ms. Herseth Sandlin. Thank you.
    Mr. Cervantes, I appreciate the strategic plan that you 
have provided especially the transparency of the plan. It is a 
5-year plan, correct?
    Mr. Cervantes. Yes.
    Ms. Herseth Sandlin. Do you foresee DoD meeting the three-
percent goal within the next 5 years?
    Mr. Cervantes. We are very, very hopeful. One of the things 
we did in this hump year is we looked back 2 years to see what 
worked and what didn't. And so we adjusted and retuned 
objective 1 to say we have got to do better market research. 
And it has to be done in a timely fashion. Consistent with what 
Scott said, much more eloquently than I did in terms of the 
cycle of getting it out there early.
    And we have adjusted the part 2, which has training. But it 
really also talks about the training to increase the set 
asides. So I am talking about how we get there. We are going to 
go as hard as we can and as fast as we can to get to the 3 
percent.
    Speculating as to, you know, what numbers we are going to 
get there, I would be hesitant to say that. And only to say 
that we are going to go as fast and as hard as we can. Looking 
at what has happened in the 2\1/2\ years of the plan, there was 
a big spike from--for example, 3,250 transactions to 20,774. 
And then a spike from 428 million to 1.6 billion.
    But we are still way behind, because our budget is so big. 
We are going to try as hard as we can. But this was the bridge 
here where we said we really have to look back and see what 
worked and what didn't work.
    We also made some changes in the Mentor-Protege Program. 
Even though we went from zero to 19, and we had Oak Grove, 
which did spectacularly well, received the Nunn-Perry Award, 
those funds are flattening out. There is just a finite amount 
of funds. I think it is $26 million. And they are obligated for 
3 years.
    So we retooled that one too, I am sorry, to look at where 
we could go. For example, our analysis of the companies there 
in the CCR, there are 30 percent that are in services and 
information technology. So we are looking where are the--where 
is the supply basis. There are 15 percent in construction, 15 
percent in manufacturing. The balance are across the board.
    We are trying to drill down to the next code, the North 
American industrial classification, so that when you do the 
market research it is not just let us say in a 5,400 category, 
which would be information technology for the GSA GWAC. Because 
within that industry, you have a number of different 
classifications.
    When a solicitation goes out, it may be for 50 or dot, dot, 
dot. So we are trying--as we say in objective one, use more 
databases. And we are going to work with Scott vigorously on 
the Vet Biz, your VIP database, because they have got 
information in there and companies that we don't--that is not 
in the CCR.
    But we are going to try to do better for the set asides. 
And that is kind of the central thrust of this third year.
    Ms. Herseth Sandlin. Okay. What is the timeline that--so it 
is the third year into the plan that you anticipate completing 
the coordination with other databases? Or when do you 
anticipate that?
    Mr. Cervantes. We are starting that now. We have already 
started that. Dr. Finley signed the third year on June 23rd. I 
and he addressed the veterans conference about these new 
initiatives.
    Ms. Herseth Sandlin. Okay.
    Mr. Cervantes. So with regard to that, there is a year 
cycle to June 23rd of next year. In between there, we are going 
to look at new initiatives. I mean, it is not a static 
progress.
    Ms. Herseth Sandlin. Right.
    Mr. Cervantes. One area that we haven't looked at, which it 
could be a big boost, is transportation. If you look at our 
written testimony, we are looking at setting aside for 
cemeteries and military hospitals.
    So we are--you know, these are initiatives that in the 
course of the next year we are going to push forward. And we 
are doing that research right now.
    Ms. Herseth Sandlin. Okay. We appreciate those initiatives 
very much. As you mentioned, you do have a very large budget. 
How many DoD acquisition officials do you currently employ?
    Mr. Cervantes. I don't know that answer. I can get it back 
to you.
    Ms. Herseth Sandlin. If you could get it to me.
    Mr. Cervantes. I will do that.
    Ms. Herseth Sandlin. If you could compare it to how many 
you have employed over the last 5 years, I want to see if there 
is any change there. There has been some concern about the 
workload of different contracting officers in different 
agencies.
    I would like to see historical analysis of the number of 
contracting officials or acquisition officials that you have.
    Then, with the new initiatives that you have been 
describing, that all of your acquisition officials are getting 
the information and training, whether it is in the 
transportation sector or others, and military hospitals that 
you just described.
    Just a couple more questions for you, Mr. Cervantes.
    Mr. Cervantes. Yes.
    Ms. Herseth Sandlin. In a previous hearing we had on 
veteran entrepreneurship and self employment, we received 
testimony that prime contractors were using Service-Disabled 
Veteran-Owned Small Businesses to obtain a contract with the 
Federal agency and then dropping the veteran-owned business 
once they got their contract.
    Of the $717 million in subcontracts that were awarded to 
SDVOBs last year by DoD prime contractors, how much of this was 
actually fulfilled? Have you been able to monitor and track 
whether or not that is happening? And to what degree it is 
happening?
    This is real a concern, and this relates to, outside of 
DoD, what some large businesses are doing as it relates to the 
small businesses in the subcontracts. Again, some of the 
loopholes that we have talked about. But do you----
    Mr. Cervantes. Again, this is one of our 6 objectives, to 
increase the subcontracting with, in particular, large, prime 
contractors. And I personally would be very upset if somebody 
were using service-disabled veteran-owned small business to get 
a contract and then dropping them. That is not acceptable to 
me.
    The Defense Contract Management Agency (DCMA) is the 
subcomponent within the Department of Defense that monitors 
that. They negotiate the subcontracting plan. It is--Barbara 
English is the person who has done that. In fact, she and Scott 
and I worked on an initiative to get more service-disabled vets 
contract with the 6 large contractors.
    But I will get an answer to you. And I will have to involve 
DCMA to provide that, since that is within their purview. I 
will be more than happy to do that.
    [The information was provided by DoD in the response to 
Question #1 from the post-hearing questions for the record, 
which appear on p. 105.]
    Ms. Herseth Sandlin. I would appreciate it, because our 
concern is that the contract is awarded, and then the prime 
contractor doesn't give the subcontractor the work. And then 
there is no penalty associated with it. So, again, if----
    Mr. Cervantes. I would be very disturbed if any incident 
like that occurred.
    Ms. Herseth Sandlin. Okay. Well, given that we have had 
anecdotal----
    Mr. Cervantes. Okay.
    Ms. Herseth Sandlin [continuing]. Evidence provided to us 
in testimony in prior hearings, we would look forward to 
working with you just to get to the bottom of that issue.
    Mr. Cervantes. We will get you an answer.
    Ms. Herseth Sandlin. Let me see. I will submit some other 
questions to you in writing perhaps, Mr. Cervantes. I do want 
to ask you one more based on what you just described as 
initiatives to look at opportunities for contracts for military 
hospitals and cemeteries.
    I believe the Army recently rewarded the security contract 
for Arlington National Cemetery to a non-SDVOB firm. Do you 
think it is appropriate that a non-veteran owned firm is hired 
to guard and maintain the Nation's most sacred of national 
cemeteries?
    Mr. Cervantes. Well, we are looking into that right now. I 
think one of the issues in terms of looking at the 
opportunities in these areas. And certainly the Cemetery, 
Arlington, is very symbolic.
    Military hospitals, we believe, and I have spent time in a 
military hospital myself, are very important. And those people 
who are in there can, you know, appreciate maintaining the 
highest standards of excellence in service.
    We have--we have tasked within the Department of Defense--
individuals to prepare I guess a white paper or proposal.
    One of the problems is that if there is an incumbent, then 
how do you do that? Do you wait until the option year is up, 
which would be an opportunity to then work on a set aside so 
the--we are looking at those types of questions. If there is an 
incumbent, it is kind of hard to say we are terminating your 
contract.
    But at those points of opportunity where either the 
contract is terminated or whether there is an option year 
coming up, then that is what these individuals have been tasked 
on.
    The same with the hospitals. What are the opportunities and 
when is there going to be an option year where there could be a 
set aside or when there is a termination of a contract and a 
new one to be solicited.
    So right now inside we have tasked people that are much 
more expert than I am in the contracting field. I am not a 
contracting officer. I am just a plain old lawyer. But those 
activities are going on right now.
    Ms. Herseth Sandlin. All right. Well, thank you.
    Mr. Cervantes. Thank you.
    Ms. Herseth Sandlin. Thanks to all of you. I want to state 
on the record my appreciation of Secretary Gates for initiating 
what I think is the senior-level policy memoranda that you 
described over the last couple of months and the leadership 
from the top.
    Each of our agencies, combined with the culture of 
creativity that Mr. Baker described at the very beginning of 
his testimony as well as the importance of the Congressional 
oversight, so that we don't put anyone in a posture of 
defensiveness but rather in consultation and coordination. 
Making sure that we are sharing information and that we are 
getting different perspectives from different stakeholders here 
in the Federal contracting process.
    Also from the perspective, not just of this Committee, but 
other Committees of jurisdiction and the entire Congressional 
effort to budget appropriately, that we have adequate resources 
to meet the needs, especially if there is a shortage of 
contracting officers, given some of the concerns about workload 
that we have heard.
    We appreciate your time, your patience here. I know we have 
had a long hearing here today. We look forward working with 
both staff, minority staff and majority staff. As well as the 
folks from the previous panels.
    And continuing to make the progress that we all know is 
important in reaching these objectives that are set in law, and 
have in this case, been followed up with an Executive Order for 
clarification and setting priorities.
    I look forward to continuing to work with you to make that 
progress.
    Yes, Mr. Denett, if you have a final comment.
    Mr. Denett. Madam Chairwoman, I would like to mention, when 
you talk about the workforce, we have increased that to 28,000, 
the number of contracting officers we have. So we are 
increasing the number.
    And we have about 9 well-established intern programs that 
currently have about 1,200 new blood in there, taking in about 
500-600 new people a year. The caliber of them we are quite 
pleased with, their credentials and their education. And we are 
encouraging the departments to go ahead and fill all their 
vacancies now, because we recognize there is an increased 
workload. And even though we have increased the number of 
contracting officers over the last few years, we need to make 
that number even higher.
    Ms. Herseth Sandlin. Thank you. Let me ask you one followup 
question based on that issue. In terms of trying to address the 
workload issue, but then an increase of 28,000, is that over?
    Mr. Denett. An increase to 28,000.
    Ms. Herseth Sandlin. To 28,000.
    Mr. Denett. Right. That was up from 26,000----
    Ms. Herseth Sandlin. From 26,000.
    Mr. Denett [continuing]. A few years ago. Yeah.
    Ms. Herseth Sandlin. Okay. I am sorry I didn't ask you a 
follow up to the question I asked Mr. Denniston. Do you also 
agree with the need to streamline and standardize the 
contracting procedures for the rule of two issue? So that you 
don't have the service-disabled veteran-owned small businesses 
and that set aside operating under different rules based on the 
thresholds that were discussed versus the 8(a) program or other 
set-aside programs.
    Would you agree with the need to streamline and standardize 
that and not treat the Service-Disabled Veteran-Owned Small 
Businesses differently as it relates to the requirements of the 
contracting officers?
    Mr. Denett. I think we would have to talk with SBA and 
figure out what is the fairest thing to do. I am also 
responsible and been up here before Committees talking about 
competition. There is a lot of concern about trying to maximize 
competition. And the rule of two is driven primarily to make 
sure there is competition.
    However, I recognize what you are saying. Is that fair 
compared to what is currently done in the 8(a) program. I think 
that is something that SBA and we have to take a close look at.
    Ms. Herseth Sandlin. Okay. What are your thoughts on Mr. 
Gross' comment as it relates to sole sourcing as a bad idea. At 
least when we can verify that----
    Mr. Denett. There----
    Ms. Herseth Sandlin [continuing]. There is going to be more 
than one bid.
    Mr. Denett. I am a strong advocate for competition. If we 
know there is more than one company that can do it, then I 
favor competition, because it builds up business skills, it 
gets the taxpayer better services, better products, better 
prices.
    So I am usually the advocate for competition whenever we 
can apply it.
    Ms. Herseth Sandlin. You would acknowledge that there might 
be some cases, perhaps under certain thresholds, as is 
currently the case with some of the programs, either for 
services or products, where sole sourcing might be a good idea
    Mr. Denett. I am not rule----
    Ms. Herseth Sandlin. I am going--I am taking you down a 
road here that I wasn't anticipating taking you down. But we 
can always follow up with you on that as it relates to the 
broader procurement policies for the other programs that we 
don't have jurisdiction over.
    I would welcome any additional comment you want to make on 
the sole sourcing issue.
    Mr. Denett. Well, I am saying--all I am saying is I would 
be willing to look at that with SBA to, you know, take a look 
at it and try to make sure it is fair.
    Because what I have heard here today is it is viewed as the 
disabled vets are not having the same circumstance or advantage 
that some of the other socioeconomic programs have.
    So I think that is a fair comment and that we ought to take 
a look at it. And weigh it against the forces that harness the 
virtues of competition and come out with whatever the best 
solution is.
    Ms. Herseth Sandlin. Okay. Thank you. Mr. Celli, do you had 
a final comment?
    Mr. Celli. Yes, I do, Madam Chairwoman. Thank you. I would 
like to comment on the rule of two just really quickly. And 
that is that competition is good. You know, we are in theUnited 
States of America. And may the best person win.
    But when it comes to small businesses, sometimes they have 
to be taken care of and they have to be looked after, 
especially when it comes to now the veteran small businesses 
who don't have a level playingfield within the Federal 
acquisition arena.
    And there are rules and laws in place that specifically say 
that we want small businesses to have a leg up, because they 
don't have the advantage that the larger businesses have.
    The rule of two as it is now within the veteran procurement 
arena, it puts an unfair burden on the businessowner. And to 
prove my point, I would like to go to Mr. Cervantes' testimony 
earlier where he was championing one particular incident at the 
end of his--at the end of his testimony where he said, ``I had 
a veteran call me. And wanted this particular contract set 
aside.'' So the veteran--the veteran had to go out and find the 
veteran's own competition.
    And what does that do? What does that do to the whole 
process? The veteran shouldn't be the one going out finding the 
other person, finding the other company. It should be the 
contracting officer is they are going to set that aside.
    But that is not the way it is in the real world. And when I 
prefaced my testimony by saying, ``I am not being paid to be 
here,'' what I am trying to say is I am not here for personal 
gain. I am not a contracting officer. I am not a Federal 
procurement agency. And I am not a small businessowner that 
competes at the Federal level. But I am an advocate that helps 
business owners.
    And this is exactly what I see. I see small business owners 
going to contracting officer saying, ``We would like to have 
something set aside.'' And having the contracting officer 
looking them dead in the beak and saying, ``Great. Go out and 
find me another service-disabled vet that you can compete 
against. And I will consider setting it aside.''
    So it--all I am saying is that it puts an undue burden on 
the veteran businessowner. We are the only--we are the only 
group that has that burden placed on them.
    Ms. Herseth Sandlin. I appreciate that, and I think that is 
the point that we found the agreement in the first panel as it 
relates to the perspectives on the rule of two and how this 
particular sub-population for this particular set aside has 
that burden as you just described.
    Thank you very much. We appreciate your time and your 
insight on this very important issue and we will look forward, 
as I mentioned, to continuing our work toward the progress on 
these goals.
    With that, the hearing of the Economic Opportunity 
Subcommittee stands adjourned.
    [Whereupon, at 5:50 p.m., the Subcommittee was adjourned.]







                            A P P E N D I X

                              ----------                              

     Prepared Statement of the Honorable Stephanie Herseth Sandlin,
            Chairwoman, Subcommittee on Economic Opportunity
    Some of the panelists may recall a hearing we held in May on the 
subject of veterans entrepreneurship and self employment. During that 
hearing, many of our panelists expressed concerns over Federal 
procurement opportunities and the three percent set aside rule for 
Federal agencies. Today's hearing will follow up on those concerns as 
we explore the current state of Federal procurement and the problems 
that are being faced by veterans.
    Veterans of our armed forces have been and continue to be a vital 
part to securing our nation's economic prosperity and development. When 
given the opportunity to start and manage their own small businesses, 
these brave men and women add tremendous value to the success of our 
economy, as they strive to lead a successful life back in the civilian 
workforce. Time and again, we have seen these veterans, many disabled, 
return home to live out this American dream that they so bravely fought 
to protect.
    With over 17,000 veteran owned small businesses back in my home 
state of South Dakota, I want to ensure that they, as well as all 
veteran entrepreneurs, are given proper assistance to expand their 
small business enterprises and are given the opportunities to secure 
more contracts with the government.
    I understand that while some agencies may be meeting the three 
percent set aside goal, most agencies are not meeting this goal. I, 
along with my colleagues on this Subcommittee are troubled by the lack 
of progress and effort on behalf of most Federal agencies. As you may 
know, Public Law 106-50 was signed by President Clinton on August 17, 
1999 to increase veteran participation in Federal procurement. This was 
then followed by Presidential Executive Order 13360 from President Bush 
on October 26, 2004. These measures have not brought about the changes 
that we were expecting for veteran owned businesses.
    While we applaud the Federal agencies that have met the three 
percent set aside goal, we are concerned by the lack of progress and 
effort. I look forward to hearing from our distinguished panelists on 
how we can best overcome these hurdles.

                                 
       Prepared Statement of the Honorable John Boozman, Ranking
        Republican Member, Subcommittee on Economic Opportunity

    Thank you Madame Chairwoman.
    It is no small secret that the Federal Government as a whole has 
done a poor job of meeting the requirements set forth in PL 106-50 and 
108-183, and Executive Order 13360 in which three percent of all 
Federal contract dollars are to be set aside for businesses owned by 
service-disabled veterans.
    In Fiscal Year 2005, the last year for which SBA has complete data, 
the Federal Government spent a paltry six-tenths of one percent of all 
procurement with service-disabled veteran-owned businesses. The is 
about one fifth of what the law and the executive order requires. In 
2005, only the Committee for Purchasing from Blind and Other Severely 
Handicapped, the Defense Nuclear Safety Agency, FEMA and the National 
Science Foundation were in compliance. Notably absent were VA and DoD. 
In VA's defense, I understand they exceeded the goal in FY 06 in great 
measure due to the efforts of Scott Denniston.
    While there is no entitlement to a contract for any set aside 
group, for obvious reasons, the Federal Government plays a special role 
is promoting veterans who choose the entrepreneurial path. For, 
veterans are unique in that they earned whatever advantage the Federal 
Government provides . . . unlike all of the other set aside categories 
of small business.
    PL 106-50 and 108-183 and 13360 were fairly straight forward. But 
let's consider the requirements laid out in the President's directive. 
Its main features are:
    Relative to promoting disabled veteran-owned businesses, Agency 
Heads shall develop a strategy, report annually to the SBA, designate a 
senior official to implement the strategy, and include contracting with 
SDVOBs in the performance evaluations of appropriate agency staff.
    An agency strategy must include plans to implement SDVOB set 
asides, encouraging SDVOB participation, encouraging primes to 
subcontract with SDVOBs, and training agency personnel. These plans are 
important because if you don't have a valid roadmap, it is difficult to 
achieve the 3 percent goal. I note that Mr. Wynn's testimony states 
that, ``. . . over half the plans were incomplete and some were poorly 
developed.'' I hope Mr. Ellmore will address that statement.
    The President also set very specific duties for SBA, VA, GSA and 
DoD. What I am most interested today is to learn from agency 
representatives how they are meeting the President's directions.
    I am especially impressed with the testimony of Louis Celli and his 
approach to promoting service-disabled veteran-owned business by 
reinvigorating the Small Business Administration. I think this makes 
eminent good sense given the controversy surrounding other efforts to 
improve Federal assistance to SDVOBs. I fully support providing SBA 
with the resources to improve their services to SDVOBs and holding them 
accountable for meeting their mandate included in PL 106-50, 108-183, 
and Executive Order 13360.
    In an opposite vein, I do not agree with a statement in Mr. 
Cervantes' written testimony. He states that DoD could not, strategize 
on reaching these goals until the passage of PL 108-183. The Defense 
Department never seems to have problems strategizing for other types of 
operational issues, in fact that is what they get paid to do--figure 
out how to do things and have back-up plans for the back-up plan. In 
fact, as the Federal Government's largest procurer of goods and 
services, DoD's failure to meet the 3 percent goal is the major factor 
in the overall failure the Federal Government.
    Madame Chairwoman, I note that we have 13 witnesses to hear from. 
To make the best use of our time, I would ask them to skip their 
descriptions of the laws and President's order and to concentrate on 
what they are observing and suggestions on how to improve Federal 
performance and yield back my time.

                                 
   Prepared Statement of Charles Maurice Baker, President and Chief 
 Executive Officer, MCB Lighting and Electrical, Owings, MD; Board of 
Directors, Veterans Enterprise Training and Services Group, Inc. (VETS 
  Group); and Member, Veterans Entrepreneurship Task Force (VET-Force)

Executive Summary
    Today, we have a unique opportunity like none other in history to 
actually create the most dynamic win/win proposition between the 
procurement community and our Service Disabled Veterans.
    Our presentation is based on a theme of unity, teamwork and sharing 
of ideas. It is not our intent to criticize, point fingers or to assess 
blame. Rather we want to share information as well as introduce viable 
approaches for making economic opportunity readily available for 
Service Disabled Veterans and at the end of the day, we hope that the 
information provided is helpful and that you agree with us and our 
methods.
Vision
    It is our vision to help educate as many people about procurement 
as possible by identifying and communicating better business practices 
and strategies which will help improve the procurement process, save 
money and greatly reduce fraud and abuse while at the same time 
achieving the true intent of procurement laws.
Mission
    Our mission is to help Service Disable Veterans while at the same 
time save billions of dollars in procurement spending. We will reach 
out to contracting officers and agency management to identify areas of 
weaknesses and work as a team to fix them. We also will reach out to 
our Service Disabled Veterans to ensure they understand how to prosper 
under the procurement rules and how to work effectively with the 
procurement professionals.
Service Disabled Veterans
    Today we have the youngest overall group of disabled veterans 
produced by war at anytime in our history. The effect of this will 
dramatically alter the lives of our soldiers and present several 
challenges for them to survive emotionally and economically in the 
future. Because this group is young, we need to come up with long-term 
solutions that fit their needs and the needs of our society.
    We believe that this group of service disabled veterans is 
intelligent and innovative. We can help compensate them for any future 
lost earnings by making it possible for them to survive on their own 
through business opportunities or providing them with the appropriate 
skills to re-enter the workforce.
    Helping this group succeed independently improves our tax base 
while at the same time saves significant money by reducing or 
eliminating any potential future burden on our social and medical 
support systems.
Department of Defense
    The Department of Defense (DoD) provides the greatest economic 
opportunity for its fallen soldiers. DoD spent approximately 70 percent 
of the Federal procurement dollars in Fiscal 2005. It should go without 
saying that DoD has the moral and ethical responsibility to create 
economic and moral justice for Service Disabled Veterans, even if the 
rest of the Federal Government fails to do so.
    DoD can and should take the necessary steps to ensure that its 
fallen soldiers are invited to the table to participate.
    We will discuss later DoD's results in achieving its service 
disabled veterans goal.
Procurement Issues and Potential Fixes
    The information that follows is either factual or our opinion and 
it is not intended to be inflammatory or adversarial.
    Federal Procurement requires the enhancement of its procurement 
programs in order to make better management decisions affecting the 
mission of operating an efficient government in a cost effective 
manner.
    We believe that the procurement system is broken and it is not 
being operated in an efficient and cost effective manner. A direct 
result of a broken procurement system is economic injustice.
    First of all let's address the lack of a trained procurement 
workforce. With the baby boomers maturing and leaving Federal 
procurement we are losing internal knowledge and expertise and there 
does not appear to be a smooth handoff of knowledge and information 
from those retiring to the new workforce. It appears at times that the 
new workforce is lost and doesn't demonstrate that they have a clue 
when it comes to procurement laws and the Federal acquisition 
regulations.
    Along with the inexperienced procurement staff, another troubling 
area is the reduction over the years of the procurement workforce. 
According to Congressman Waxman it will take 1 percent of the total 
dollars spent on the procurement system to fix this problem.
    Second, procurement is broken beyond adding trained procurement 
personnel. Bodies alone will not fix this problem totally. In order to 
fix procurement you must, and I mean must understand:

      Needs of the customer (current mistake);
      Customer's mission (second mistake);
      Contracting rules totally; and
      The industry for each type of market segment you are 
contracting.

    One way to augment the procurement knowledge base with true 
experience is with ex-government employees because of their 
understanding of how the procurement system works. From this base there 
can be a synergistic approach taken to address the issues and truly fix 
the procurement problem. It would be difficult to find this knowledge 
base at a big consulting company, but you can find this knowledge 
within the SDVOB community. There are those in the community who have 
the vision and truly understand the overall mission of government 
within the existing rules.
    The third issue in procurement is the intent of the existing 
procurement laws associated with the implementation of the rules of 
procurement is not being followed. This is why we are having problems 
with Federal procurement and are not meeting the small business goals. 
First of all if the rules were followed there would be a greater 
possibility of success in meeting the small business goals. SDVOBs, for 
example, would get closer to 3 percent if the rules were enforced to 
use the maximum practicable utilization.
    Many want us to believe that procurement needs to be overhauled. 
That was the thinking before 1984 when the Competition in Contracting 
Act (CICA) and the Federal Acquisition Regulations (FAR) were created. 
In 1994, the Federal Acquisition Streamlined Procurement Act was 
supposed to overhaul contracting and it created a bigger mess with an 
increased utilization of GSA, DLA, and Federal schedules, and now in 
2007 everybody wants to fix contracting again.
    This time we recommend approaching it differently. Rather than 
changing anything, how about following the existing rules and complying 
with the intent of the existing laws first? Be creative and innovative 
within the rules, in the best interest of the government and not in the 
best interests of personal gain. Somehow we let the people with the 
gold (money) and political influence change all the rules in their 
favor. This is why we don't have competition in contracting and sole 
source contracts have increased 115 percent over the last 5 years to 
$145B.
    Until Congressman Waxman is successful in implementing additional 
staffing through his 1 percent initiative, the procurement workforce 
needs to begin an intense training regimen, the laws and rules on the 
books today need to be followed and enforced and we need to seek out 
more inclusion of the Service Disabled community for their experience 
and expertise.
Economic Injustice
    Let's address the issue of economic injustice.
    There is no excuse for not meeting preference group's goals. 
Veterans, just like everybody else, deserve both moral and economic 
justice.
    Within Federal procurement we need a farm system (similar to 
sports). This system will grow what the system needs to increase 
competition and provide enormous saving to the taxpayers later. How are 
we going to do this? Let's look at history. For business development, 
the intent of the rules of procurement was to exclusively reserve all 
the procurements under $100K for small business (2 chapters FAR Part 13 
and 19) yet we have a two-sentence loophole which allows big business 
to circumvent and take the business utilizing FAR Part 8.404.
    What is the problem when it comes to purchases over the micro 
purchase limit of $3K not to exceed $100K in my industry? The problem 
is big business everything, they take all but the scraps for the 
preference groups to share with one another. What are the scraps? It's 
98 percent of the transactions and 95 percent of the money to the tune 
of $2B. This is siphoned out of small business programs exclusively 
reserved for small business related to Maintenance Repair and 
Operations (MRO). The customer only goes to the agency procurement 
office when these DLA prime vendors try to rake them over the hot, hot 
coals or they refuse to respond in a timely manner and then it's with a 
clinched fist. If DLA would perform without missing a beat the customer 
(my old office) would never go to contracting even though the customer 
is paying up to a 23 percent prime vendor surcharge (3.9 DLA surcharge) 
for its product or service. Are my numbers concrete? I am sharing with 
you what I experienced as a government employee who thought it was a 
waste of taxpayers' dollars, but we had no other method to accomplish 
the mission. Contracting was not a viable option or only our last 
resort for MRO materials if the contracting officers were too non-
responsive. We would have to go without water, electricity, etc. if we 
relied on the procurement system without deviation.
    We are trying to counter this economic injustice.
    Within our veterans group, we must empower the veteran community 
with the best methods to become a viable, sustainable, competitive 
company or close to 57 percent of SDVOBs will fail.
    We need to empower the Veteran community with a fully funded 
Business Development program and a vehicle that helps them overcome the 
natural challenges associated with becoming a successful Prime 
Contractor and/or participating in material Sub-Contract opportunities.
    One such vehicle would be the establishment of a Public/Private 
Partnership that includes our nation's Colleges/Universities, Leading 
Prime Contractors, Business Trade Associations, and Trade Buying 
Groups. Specifically, the Colleges/Universities could expand their 
Graduate Course Curriculum by adding an outreach component that allows 
their students to deliver a comprehensive business analysis and 
planning engagement to the Veteran Businesses within their communities. 
This academic perspective could be supplemented by the real-world 
knowledge base that could be delivered to these engagements by the 
Prime Contractor's SBLOs, in concert with their Trade Association 
Partners.
    Utilizing some of the best minds in MBA programs coupled with the 
leveraged buying power associated with national small business buying 
groups and the purchasing power of the Federal Government is a very 
powerful combination. What we have outlined above is a situation ready 
for ``prime time'' and will save the government billions of dollars. 
These groups could be galvanized into a BD support delivery system that 
leverages their Enterprise knowledge base against the holistic 
development needs of our Veteran business community. This collective 
knowledge base would empower the Veteran Community with the ability to 
formulate an ideal strategy for pursuing a business growth initiative 
that incorporates a healthy mix of Public Sector and Commercial 
Customers, irrespective of their entry approach (i.e. Prime Contractor, 
Sub-Contractor, Teaming Partner, JV Member . . . etc.).
    As part of our journey to help Service Disabled Veterans we have to 
work closely with those in the other preference groups. We call in our 
united front.
United Front
    I believe the SDVOB will create a rising tide. With that rising 
tide we should fight for enforcement and improvements to all small 
businesses programs with the theme of American flag wrapped around 
small business. Buried inside the SDVOB group, making up 58 percent of 
our number, is another preference group. Yet, even with this double, 
triple and quadruple preference the SDVOB achievement still falls far 
short of 3 percent.
    This is indicative a sub-story of that is happening in Federal 
procurement. There is infighting within the Designated Groups. We must 
not fight among the preference groups, causing a rear guard action 
within our own internal group and with other groups externally. These 
preference groups don't have the resources we need to get 3 percent of 
the contract dollars. Somehow, we must get the contract dollars, we all 
deserve according to the laws put in place to help us. In addition to 
the plan we outlined above for DoD, this is another methodology to get 
the 3 percent right away by using the existing laws to our favor while 
other laws are drafted.
Ideas/Solutions
    So far we have been talking about problems and issues. I want to 
turn our attention to some ideas, solutions and opportunities.
    How can we fix some of the procurement problems that we are facing 
today?
    We can start by making good management decisions. One decision is 
considering shifting over a taxing workload to an innovative program 
that we have.
    Over 90 percent of all procurement transactions are under the $100K 
threshold and represent only 10 percent of the total procurement 
dollars. A significant amount of time and effort is consumed by the 
procurement workforce processing small dollar transactions. We think 
this is wasting limited, valuable resources and time. These resources 
and the associated time can be better focused on the real money and the 
real acquisition issues.
    The time involved in processing smaller transactions not only is 
burdensome to the acquisition workforce but it's equally time consuming 
and a nightmare for customers also. I speak with 20 years of 
frustration of dealing with Federal procurement and trying to 
accomplish the mission as a government employee. As the ex-chief of 
facilities for Andrews AFB I can tell you horror stories of having HVAC 
units broken for weeks and sometimes months for a $5K part my people 
went and put their hands on but could not fix the units for several 
months because of the slow procurement process. After all was said and 
done the procurement rules in the name of competition cost the 
taxpayers enormously as the administrative cost would sometimes even 
exceed the cost of the parts. In addition, the cost of a temporary 
solution would sometimes triple the purchase cost of the item ordered.
Opportunities
    We have created a logical plan for DoD to use immediately to assist 
it in reaching its 3 percent goal.
    Currently DoD spending with SDVOB companies is at 0.49 percent with 
a goal of 3.0 percent. In its second year strategic plan, DoD is 
committed to meeting its statutory 3.0 target. Unfortunately DoD does 
not elaborate on the specifics of achieving the goal. Our experience is 
that this goal is similar to the analogy of ``covering the waterfront'' 
which past history has demonstrated does not work for the Federal 
Government because other preference goals have never been met because 
they never had a logical analytical plan to follow. There has to be a 
strategy with meaningful targets set with milestones and timelines 
attached.
    Our plan creates an implementation strategy based on the historical 
data of SDVOB procurements with DoD from the most current Fiscal Year 
2005 data in the Federal Procurement Data System-NG.
    Our plan is a goal attainment strategy based on actual data which 
clearly demonstrates the immediate possibility of delivering 3 percent 
using a simple logical thought process using product or service 
categories where SDVOB companies have the most potential for success. 
The process identifies product or service categories for all DoD 
procurement requirements. DoD can use this process to specifically 
target product and service categories where there is little or no 
participation currently for SDVOB companies. Our plan is very effective 
for program managers and contracting officers. Each product or service 
code is assigned a percentage target for SDVOB participation. The 
percentage target is based on dollar volume spending in Fiscal Year 
2005. There is a tiered percentage scale that is used. The scale is 
dollar volume driven with the percentage declining the higher the 
spending. The percentage scale is as follows:

      Up to $100 million--6%
      Up to $500 million--5%
      Up to $1 billion--4%
      Up to $10 billion--3%
      Over $10 billion--2.5%

    Our vision is to have DoD implement our plan immediately so that it 
can contribute to helping SDVOB companies become sustainable, 
competitive and viable businesses as well as satisfy its goal of 3 
percent.
    Our plan was created by MCB Lighting & Electrical of Owings, MD POC 
Charles Baker 301-812-2591 and Mazyck and Associates of Sacramento, CA 
POC Edward V. Mazyck, Jr. 650-465-6403. MCB INC. at the request of CEO 
Charles M. Baker worked with Mazyck & Associates to develop this goal 
attainment strategy.
    One final note. Our plan is applicable to all Departments and we 
will work with all Departments to help them realize their goals as 
well.
    Thank you for the opportunity to share some of our thoughts with 
you today and we hope that it has been informative, educational and 
helpful.

                                 
  Prepared Statement of Mark J. Gross, President and Chief Executive 
              Officer, Oak Grove Technologies, Raleigh, NC
    Good afternoon Chairman Herseth-Sandlin, Ranking Member Boozman and 
members of this Subcommittee. Thank you for the invitation to come 
before you and share my experiences and work within the veteran 
business owner community, and discuss the three-percent Federal 
procurement goal for Service Disabled Veteran Owned Small Businesses.
    I am a veteran of the United States Army, and CEO of Oak Grove 
Technologies, a Service Disabled Veteran Owned small business, founded 
at my kitchen table 5 years ago this coming August. Today, I am proud 
to say, I employ over 140 employees, over 70 percent of whom are 
veterans, and 16 percent of those are service disabled veterans. 
Geographically, we are dispersed across 16 states, and support both OEF 
and OIF in Afghanistan and Iraq.
    In my opinion the climate has changed considerably in the past few 
years. If you look at some of the trends today, you will see that many 
agencies are improving in making awards to Service Disabled Veteran 
owned businesses, although we still have a way to go. Congress has done 
an outstanding job in passing legislation such as 106-50 and 108-183, 
both of which established Service Disabled Veteran goals and mandates 
in Federal contracting. However, there still lacks accountability 
within Agencies to meet these goals. I am here to offer my views on 
what can be done to ensure the state of veteran's entrepreneurship 
within the Federal Government.
    Some positive changes that will further enable agencies to meet 
some of these goals are contained in PL 109-461, (See Amendment 1) 
which gives the VA special Authorization in procuring to Veteran and 
Disabled Veteran Owned business.
    I offer five recommendations to meet the 3 percent procurement 
goal:

      With respect to set asides and sole sources, eliminate 
the ``Rule of Two'' wherein a contracting officer
        has to know of two or more SDVOB's before an 
acquisition can be set aside.
        Conversely, an ``SDVO sole source'' award can only be 
made when there is only one SDVOSB that can satisfy the requirement.

        This is the only similar requirement for any of the statutory 
        programs.

      Create a level playing field between the statutory 
programs by changing the use of ``MAY'' to ``Shall'' when using 
restricted competition for SDVOB's.
      Small business subcontracting plans, including all 
details of the plans, required by large prime contractors, should be 
made public and accessible electronically or on forms 294/295 upon 
request. Mandate that contracting officers impose liquidated damages, 
as predicated in FAR Part 19.705-07 for those large companies that fail 
to demonstrate good faith efforts to fulfill the requirements of their 
subcontract plans.
      Close loopholes in the GSA Schedule (FAR Par 8) wherein 
large businesses are allowed to take away business intended for small 
business, or mandate that the Federal Agencies disclose the percentage 
of overall contracting dollars procured to small business' through the 
GSA Schedules.
      Establish an Ombudsman within agencies to provide 
procurement oversight.

    We are proud to say we are the first SDVO small business in the DoD 
Mentor Protege Program as created by 108-183; this year we were awarded 
the DoD Nunn-Perry Award.
    As an entrepreneur and Veteran, the climate certainly has gotten 
better over the past 7 years, but we still have a long way to go. I'm 
confident that Congress, and many of the Federal Agencies such as 
Department of the Army, and the Department of Veterans Affairs, are 
committed to this cause.
    I thank you for your time and your efforts to improve the Federal 
contracting climate for Service Disabled Veteran Businesses.
                               __________

                              Amendment 1


[GRAPHIC NOT AVAILABLE IN TIFF FORAMT]



                                 
Prepared Statement of Anthony R. Jimenez, President and Chief Executive 
                  Officer, MicroTech, LLC, Vienna, VA
    Good Afternoon, Chairwoman Herseth Sandlin, Ranking Member Boozman 
and distinguished Members of this Committee. It is a privilege to be 
here today. I want to thank the Committee for allowing me to share my 
thoughts regarding Federal Procurement and the Three Percent Set-Aside 
for Service-Disabled Veteran-Owned Small Businesses and I look forward 
to providing my views on ways to improve the Government's utilization 
of Service-Disabled Veteran-Owned Small Businesses.
    My name is Tony Jimenez and I am the Founder as well as the 
President and CEO of MicroTech, LLC, a Service-Disabled Veteran-Owned 
Small Business located in Vienna, Virginia. I retired from the Army in 
2003 after serving 24 years on active duty. I considered opening 
MicroTech immediately, but opted to wait and first went to work for a 
large and very successful Government Contractor here in the Washington 
DC area. I was aware that the Veterans Entrepreneurship and Small 
Business Development Act of 1999 (P.L. 106-50) had been signed into law 
on August 17, 1999 and that it created a Government-wide goal that 3 
percent of the total value of all Federal prime and subcontract dollars 
be awarded to Service-Disabled Veteran-Owned Small Business (SDVOSB) 
Concerns, but I thought that large business experience I would gain 
coupled with the experience I obtained as a veteran would better 
prepare me for small business ownership.
    The Veterans Benefits Act of 2003 (P.L. 108-183) was signed by the 
President on December 18, 2003. It was at that point that I decided I 
could no longer wait and that it was time to start my own company. 
Three months later, I resigned from my very lucrative position as a 
Director of Enterprise Operations to open MicroTech, LLC 
(www.microtechllc.com) and pursue my dream of small business ownership 
and in April 2004, my partners and I started MicroTech, LLC.
    On May 5, 2004 the SBA and the Federal Acquisition Regulatory (FAR) 
Council concurrently published interim final rules implementing the 
procurement provisions of the Veterans Benefits Act of 2003. The new 
regulations permitted contracting officers to either restrict 
competition on contracts or issue sole source contracts to SDVOSBs 
within specified dollar thresholds in accordance with statutory 
requirements. The regulation also establishes procedures for protesting 
the status of an SDVOSB. I and many others inside and outside the 
Federal Government were convinced that at last Veterans and Service-
Disabled Veterans would have the plethora of opportunities we so 
desperately needed to be successful.
    Since that date, the Federal Government has consistently fallen 
well short of the 3 percent statutory goal. Less than 10 percent of the 
Government agencies who are required to meet the statutory goals have 
done so and only a handful of agencies are making more than a 
negligible effort to set-aside work for SDVOSBs. The Department of 
Defense, an agency responsible for creating Service-Disabled Veterans 
continues to struggle and to date has still been unable to award even 1 
percent of its contracts to Service-Disabled Veteran-Owned Small 
Businesses yet it consistently meets its other small business goals.
    The good news (yes, there is good news) is that there are people in 
the Federal Government who are doing their part, in fact they are doing 
more than their part. The U.S. Department of Veteran Affairs (VA), The 
United States Army (U.S. ARMY), and The General Services Administration 
(GSA) have all established very aggressive SDVOSB programs that are 
designed to increase opportunities for Veteran and Service-Disabled 
Veteran Owned Small Businesses (as have many other agencies) these 
agencies have provided the resources needed, have put excellent people 
in charge of running their programs, and they have developed a winning 
strategy with measurable goals that will create opportunities for our 
nations Veterans and Service-Disabled Veterans. These small business 
champions are getting the word out, educating contracting officers, 
identifying opportunities and advocating change, but those three 
agencies and a hand full of others cannot do it by themselves. If you 
and the other law makers who truly care about our nations Veterans and 
Service-Disabled Veterans expect to see the Federal Government reach 
their 3 percent goals in our lifetime you are going to have to make 
some changes and fix how business is being done in the Federal 
Government.
    You may be aware, there are over 13,500 SDVOSBs registered in the 
Central Contractor Registration (CCR). They have done everything they 
can possibly do to position themselves for contracts with the Federal 
Government and are anxiously pursuing the opportunities they thought 
P.L. 106-50 would bring (3 percent of the total value of all Federal 
prime and subcontract dollars).
    To fully accomplish the objectives of this legislation, Government 
Agencies have to be held accountable. Many of those agencies have been 
called up to the Hill and all of them have told you and other 
committee's members about the great things they intend to do for 
SDVOSBs, but over the last four years only a few have turned those 
words into actions. What stops them from dusting off the last testimony 
they gave and giving you the exact same story about what they are going 
to do for SDVOSBs when you call to check progress? My question is where 
is their report card? What is their plan for going from F to A+? Who is 
responsible for meeting the SDVOSB goal in their agency and what are 
the consequences of not meeting the 3 percent goal?
    Here are my recommendations for helping those agencies meet their 
goals and for fixing the problems going forward:

    1.  Protect the dollars! Last time I testified before this 
Committee it was recommended that those dollars be set aside for the 
use of SDVOSBs. I agree with that recommendation.
    2.  Hold Secretaries and Agency Administrators directly responsible 
for meeting the 3 percent goal established in P.L. 106-50. Each 
Department or Agency has a Director of Small Business, but they are not 
the people who control the acquisition process. The acquisition process 
is controlled by the Assistant Secretaries for Acquisition, the Heads 
of the Contracting Agencies (HCAs), and the Agencies' Chief Acquisition 
Officers. Have Assistant Secretaries for Acquisition, the Heads of the 
Contracting Agencies (HCAs), and the Agencies' Chief Acquisition 
Officers testify and require that they present a measurable and 
realistic plan for reaching the 3 percent goal. If after a year they do 
not meet the 3 percent goal, ask them to come back--with their bosses, 
and testify. I promise you that you will see a change in the numbers!
    3.  Lock down the small business goals for all Large Business 
Contracts. Often times Large Business will fight to reduce the 
percentage of work they must give small business. Do not let that 
happen. Ensure that all large businesses develop a small business-
subcontracting plan that mirrors the requirements of the Federal 
Government and then ensures that large businesses are penalized when 
they fail to meet their small business subcontracting goals.
    4.  Hold Procurement Officials and Contracting Officers responsible 
for meeting the 3 percent goal for SDVOSBs. Make the 3 percent goal for 
SDVOSBs a requirement in their performance measures and a condition of 
their performance award. If a Department or Agency does not meet their 
3 percent goal for SDVOSBs then reduce the amount of their award by the 
percentage they failed to achieve. In other words if they only achieve 
1 percent (33 percent of the goal) then they only get 33 percent of the 
performance award they would have otherwise received.

    Madame Chairwoman and Distinguished Committee Members, thank you 
very much for this great opportunity. This concludes my testimony and I 
would be happy to answer any questions you may have.

                                 
Prepared Statement of Joe Wynn, President, Veterans Enterprise Training 
        and Services Group, Inc. (VETS Group); Member, Veterans 
 Entrepreneurship Task Force (VET-Force) and National Association for 
                             Black Veterans

                           EXECUTIVE SUMMARY

    In December 2003, Congress passed the Veterans Benefits Act of 
2003. Section 302, created the Procurement Program for Small Business 
Concerns Owned and Controlled by Service-Disabled Veterans. But it was 
Public Law 106-50, the Veterans Entrepreneurship and Small Business 
Development Act of 1999 that set the stage for veterans interested in 
starting or expanding their own small businesses.
    Congress stated in its findings of PL 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.'
    It was PL 106-50 that 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, SBA's Office of Veterans 
Business Development, the Department of Veterans Affairs' Center for 
Veterans Enterprise, and the National Veterans Business Development 
Corporation, were created.
    While PL 106-50 also established a 3 percent procurement goal for 
Federal agencies and prime contractors to purchase goods and services 
from service-disabled veteran owned businesses, it did not go far 
enough in giving contracting officials a vehicle by which to achieve 
the goals. Thus, the second major piece of legislation was enacted as 
part of the Veterans Benefits Act of 2003 (Public Law 108-183). section 
308 called for the creation of a Veterans Procurement Program and made 
it MANDATORY that Federal agencies and prime contractors procure a 
MINIMUM of 3 percent of all of their goods and services from service-
disabled veteran owned businesses.
    The insertion of that mandatory language into the legislation 
effectively created quite a stir in the Federal procurement community. 
Wherein agencies were still paying little attention to veteran owned 
small businesses, the mandatory language caused them to stop and take 
notice.
    But agencies still didn't jump into action until the President of 
the United States issued an Executive Order in October 2004, directing 
agencies to carry out the law now! Under the Order, agencies have been 
instructed to designate a senior-level official to be held accountable 
for submitting a strategic plan showing how and when they will achieve 
the 3 percent contracting goal for service-disabled veteran owned 
businesses.
    The VETS Group is proud to have been a part of the collective 
effort of those veterans' advocates who pushed for the development and 
implementation of these landmark decisions to expand veterans' 
entrepreneurship.
    But now after more than 7 years since Congress first laid the 
foundation for a veterans procurement program, two new laws and a 
Presidential Executive Order, Federal agencies and prime contractors 
are still making excuses as to why they can't make the 3 percent.
INTRO:
    Good Afternoon, Chairwoman Herseth-Sandlin, Ranking Member Boozman, 
other Members of this Subcommittee, fellow veterans, and guests.
    Let me first thank you once again for the opportunity to come 
before you to share some of my views on the Veterans Federal 
Procurement Program and Why Agencies Still Can't Make the 3 percent and 
the collective views of many Veterans and Service Disabled Veteran 
Business Owners; veterans who served with honor, and many who received 
distinguished honors for displaying valor and courage during their 
periods of military service for this country. Though my time of service 
was many years ago, as a veteran of the U.S. Air Force with the 66th 
Strategic Missile Squadron, I still have a very vivid memory of the 
military experience.
    You may recall that just a few weeks ago, I came before this same 
Committee to express my views about the three entities created under PL 
106-50 to provide veterans with business development assistance; the 
Office of Veterans Business Development (under the SBA), the Center for 
Veterans Enterprise (under the VA), and The Veterans Corporation (Non-
Governmental). The Center for Veterans Enterprise has been making 
progress with developing and maintaining a database for Veteran 
Business Owners, while the Office of Veterans Business Development has 
only been marginally successful in providing support for veteran 
business owners interested in Federal contracting. And The Veterans 
Corporation has shown even less progress in providing support for both 
Federal contracting and business development.
    As a lifetime member of the National Association for Black 
Veterans, I have spent the past 16 years assisting Veterans, and in 
recent years also serving as a Commissioner of the Congressionally 
appointed Veterans Disability Benefits Commission, Treasurer for the 
Veterans Entrepreneurship Task Force (VET-Force), Senior Advisor to the 
Vietnam Veterans of America, and President of the Veterans Enterprise 
Training and Services Group (VETS Group).
    It is primarily by being a part of both the VET-Force and the VETS 
Group that I have become so familiar with the needs of veteran business 
owners and the legislation that created the Veterans Procurement 
Program and the offices and organizations directed to assist veterans 
with achieving the American Dream they fought so hard to protect. It is 
well known that one of the best ways to get ahead is by obtaining a 
good job. But by starting or expanding your own small business, you may 
achieve financial independence.
    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 PL 106-50. PL 108-183, Executive 
Order 13-360, and now PL 109-461. The VET-Force presents a strong 
unified veterans' voice for virtually all of the major veterans groups, 
veteran entrepreneurs, serves as an advocate for veterans seeking 
assistance with their small business or self-employment.
    The VETS Group, a non-profit 501(c)3, community based organization 
that I founded in 2004, has a holistic program of services to help 
veterans achieve economic empowerment through education, employment, 
and small business ownership. The VETS Group is able to provide 
information, outreach, small business Federal procurement training and 
support to hundreds of veterans through its network of Patriot Resource 
Partners, its Coalition of Advisors, and its Technical Assistance 
Providers.
    Since the Vietnam Era, America has been involved in numerous 
conflicts, missions, and peacekeeping endeavors. And since the tragedy 
that overtook America on September 11, 2001, we have been engaged in 
the Global War on Terrorism, and even now continuing to increase the 
number of troops in Iraq and Afghanistan despite the overwhelming 
opinion to the contrary. A new generation of veterans now exists; they 
are well trained, loyal, battle-tested and under-employed. `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.' (VET-Force Report 
to the Nation 2005).
    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 3 percent. Veterans also will have to 
overcome a number of impediments: (1) The pervasive ignorance of the 
law and resistance to change across all agencies; (2) No enforcement of 
prime subcontracting plans; (3) Inaccurate agency data, miscoding, and 
double counting; (4) The perception that the procurement pie for small 
businesses is shrinking; and (5) Contract Bundling.
    Agencies and veteran small business assistance providers must 
assist in identifying and registering the capabilities of veteran 
business owners where required, demand that all large prime contractors 
comply with their subcontracting plans, 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.
Why Agencies `Can't' Make the 3 percent: Three Primary Reasons:
    First let's go over the Presidential Executive Order, #13-360 that 
was issued to direct agencies to more effectively implement the 
`mandatory' legal requirement to procure `not less than' 3 percenteir 
goods and services from Service-Disabled Veteran Owned Businesses and 
to do so by reserving more procurements exclusively for SDVOBs.
    If agencies would actually adhere to the Executive Order, as 
stated, they would be much more likely to achieve the minimum 3 
percent. Here's why.
    The Order calls for each agency to develop a `written' Strategic 
Plan that will provide details and guidance as to how they will proceed 
to increase contracting opportunities for SDVOBs and make the plans 
publicly available. The Order was issued in 2004, but most agencies did 
not post their plans to the VA and SBA public websites until May 2006.
    But a review of the plans by a special Committee of the VET-Force, 
of which I was a Member, revealed that over half of the plans were 
incomplete and some were poorly developed.
    Agencies are not only supposed to make their plans publicly 
available, but they are also required to report annually to the 
Administrator of the SBA on the implementation of the agency's 
strategy. But only a few agencies have even attempted to submit an 
annual report partly because the SBA has not followed through on their 
part and provided proper guidance of where, when, and how to submit the 
reports.
    Each agency should now have designated a Senior-Level Official to 
be responsible for developing and implementing the agency's strategy. 
But most agencies never designated anyone, some designated someone but 
they were not a Senior-Level Official, and then some had one but after 
they left the agency a new one was never appointed.
    Significant elements of the strategy and the agency's achievements 
were to be incorporated in the performance plans of the Designated 
Senior-Level Official, the Chief Acquisition Officer, and the agency's 
OSDBU Director (Office of Small and Disadvantaged Business 
Utilization). But to date, most agencies are still thinking about how 
to avoid that directive. However, the VA under the Dept. Sec., Gordon 
Mansfield, did issue an internal memo to all its department heads to 
follow the Exec. Order. And oh by the way, the VA is one of the few 
agencies that have achieved the 3 percent goal for SDVOBs.

    Each agency's Strategic Plan should include specific guidance on 
the following:

a.

How they will reserve agency contracts exclusively for SDVOBs;

b.

How they will encourage SDVOBs to compete for agency contracts;

c.

How they will encourage the agency's large prime contractors make sub-P

  

contract awards to SDVOBs and how they will monitor and evaluate their 
efforts to do;

d.

How they will train their agency personnel about the laws and policies 
related to the Veterans Federal Procurement Program; and

e.

How they will disseminate information that will educate SDVOBs to the 
agency's contracting process.

    Most agencies have simply left these tasks up to their Offices of 
Small and Disadvantaged Business Utilization. But based on the agency's 
budget, some OSDBU offices have more staff and resources than others. 
So some send out representatives to many small business conferences to 
distribute information, but many simply rely on their websites and 
hopes that veterans will contact the small business office.
    Training of agency personnel does not appear to be consistent, but 
many agencies seem to rely on the Defense Acquisition University's 
(DAU) online course to provide training on the veterans Federal 
procurement program. However, the DAU training merely restates the 
legislation and not really clarifies how to apply the laws. Nor does it 
address the specific agency policies or directives that also have an 
influence on how the laws are applied.
    And 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. So very few penalties, if any, 
are being imposed on the large prime contractors for failing to comply 
with their subcontracting plans.
    The Executive Order also called for additional duties of the SBA 
Administrator, the GSA Administrator; the Secretary of Defense; the 
Secretary of the VA; and the Secretary of Labor.

a.

The SBA Administrator was directed to designate an appropriate entity 
within the SBA to (1) coordinate with the Center for Veterans Enterprise of 
the VA and to provide SDVOBs with information and assistance concerning 
participation in Federal contracting; (2) advise and assist the heads of 
the agencies in the implementation of their strategic plans; and (3) make 
available to SDVOBs training in Federal contracting law, procedures, and 
practices that would assist such businesses in participating in Federal 
contracting.

  

  In May of 2005, under the Administrator at the time, Hector Barreto, the 
SBA started to create the Office of Federal Contracting for Veteran 
Business Owners. But the office was staffed by only one person and in less 
than one year, the SBA dismantled it. In late 2006, a new Administrator was 
appointed to SBA, Stephen Preston. Mr. Preston began his tenure with a very 
positive attitude toward addressing the unmet needs of veteran business 
owners and complying with the Executive Order.

  

  In March of 2007, at a meeting of the VET-Force, Administrator Preston, 
and his Chief of Staff, Joel Szabat, both conveyed to their staff, VET-
Force members, and guests that SBA intended to fully comply with the 
Executive Order and PL 108-183 to achieve the 3 percent mandatory minimum 
goal for SDVOBs. This time, instead of setting up a separate office and 
appointing another person, the Administrator directed Bill Elmore, the head 
of the Office of Veterans Business Development to take the lead.

  

  At that very same meeting, Bill Elmore introduced everyone to Billy 
Jenkins, as the Veterans Program Coordinator from his staff, who would be 
the point man with the experience, background, and responsibility to assist 
agencies with the implementation of their strategic plans and to assist 
veteran business owners with Federal contracting.

  

  But once again, SBA has dropped the ball and failed to comply. Since that 
meeting in March, SBA still has not assisted any agencies with their 
strategic plans, they have not instructed agencies on how, when, and where 
to submit their annual reports, and they have not implemented any Federal 
procurement training for any veteran buisness owners. And once again, they 
have only one person in the whole office assigned to assist veteran 
business owners with Federal contracting.

  

  The Office of Veterans Business Development should be required to submit 
a Strategic Plan demonstrating how present and future resources will be 
used to expand the assistance needed by veteran buisness owners for Federal 
contracting.

b.

After two and a half years, GSA finally completed the Veterans Government 
Wide Acquisition Contract (GWAC) that is designed to reserve participationP

  

for SDVOBs. Only 43 SDVOBs were awarded contracts under this contract 
vehicle. And based on the requirements, each of the SDVOBs had to team up 
with 5 or more other companies and submit a proposal of nearly 100 pages or 
more to qualify! Many companies said the proposal was the most extensive 
and expensive proposal they had ever done.

  

  Now the SDVOBs have to wait until agencies are authorized to use the Vets 
GWAC and until they receive task orders, of which they still have to 
compete for, in some cases, among all 43 teams. And what's ironic about 
this whole thing is that since some of the team members are large primes, 
an SDVOB could win the bid for a sizeable task order, but a large 
percentage of the work could legally be performed by the large prime, thus 
leaving not so much profit for the SDVOB that this GSA contract vehicle was 
intended to help.

  

  Once again, a case of work intended for small businesses going to large 
businesses. But I'm told, under this scenario, the agency would still count 
the total contract dollars allocated for this task order toward its SDVOB 
goals.

c.

According to the Executive Order, DoD has complied with its additional duty 
and created an online training module on contracting with SDVOBs and made 
it accessible to all agencies. But as was mentioned above, the online 
module has some obvious limitations.

  

  But just recently, through the efforts of the VET-Force, the DoD Deputy 
Chief of Acquisition made a commitment that DoD's Strategic Plan would be 
compliant with the Executive Order and issued a directive to all of the 
Armed Forces Secretariats to complete a comprehensive and compliant 
Strategic Plan also.

  

  Among other things, the DoD acquisition official, per request of the VET-
Force, also directed the DoD Small Business Director to organize an 
informal working group to occasionally work with and advise DoD on the 
effect of DoD directives and actions in meeting the SDVOB 3 percent goal. 
The standing Committee will include (less OSDBUs):

1.

Approximately four SDVOB buisness owners (2 IT, 1 non-IT, and 1 
construction);

2.

Two to four veteran organizations chosen by the VET-Force; and

3.

One DoD representative and one from each of the Armed Forces Secretariats.

  

  The monthly meeting will be co-chaired by one government member and one 
non-government member.

d.

VA seems to be complying with the Executive Order to the fullest. Through 
its Center for Veterans Enterprise, the VA has develops and maintains a 
database reserved exclusively for veteran and service disabled veteran 
business owners. They have made the database accessible to all agencies, 
large primes, and the general public. And since the passage of the recent 
legislation, PL 109-461, they have begun to establish a verification 
process to ensure that registrants in the database are veterans.

  

  The VA was one of the first agencies to develop a realistic Strategic 
Plan, publicly post it to its website, and designate a Senior-Level 
Official to oversee the implementation of the plan. They have also offered 
to submit an annual report to the SBA and have made appropriate revisions 
to the plan over the past two years. And as was referenced above, they are 
one of the few agencies that have exceeded the 3 percent in 2006.

e.

The Department of Labor was tasked with the additional duty of educating 
separating military servicemembers as to the benefits available to SDVOBs 
through the DoD Military Transition Assistance Program (TAP). This task was 
delegated to the Dept. of Labor's Veterans Employment and Training Service 
(DOL-VETS).

  

  Though briefings from DOL-VETS have increased, very little time is 
allocated to entrepreneurship. And the topic of entrepreneurship is 
discussed even less with members of the National Guard and Reserves 
returning from the War in Iraq or Afghanistan.

    This detailed analysis of the Executive Order and how agencies have 
or have not complied, demonstrates just one of the primary reasons why 
I believe that agencies can't make the 3 percent.

    The other two primary reasons are:
No Authorization to Make Direct Awards
    The fact that 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 
the 8a program, even if other SDVOBs are available. This has previously 
been limited in the Veterans Federal Procurement Program due to what is 
referred to as the ``Rule of Two.''
    The Rule of Two as introduced under PL 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. So even 
though that 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, this obviously would not permit a contracting officer to 
make a direct award to only one SDVOB based on their discretion if 
other SDVOBs are available to do the work.
    Meeting with and talking with Federal contracting officers, I have 
found that they are often under pressure to get certain requirements 
awarded quickly, and although there is a SDVOB that can do the job, 
they routinely go to 8(a) firms. 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 agency looses an opportunity to add to its 3 percent Goal 
under the law.
`May' versus `Shall'
    There has been enormous confusion created because of the use of the 
word ``May'' throughout the legislation (PL 108-183) and the 
implementing regulation. In reviewing the discussion points included as 
part of the implementing regulation published in the Federal Register 
on March 23, 2005, by DoD, GSA, and NASA, one can clearly discern that 
the word ``May'' is being used in a positive way to allow contracting 
officers the latitude to award contracts under either the SDVOB 
program, the Hubzone Program, or the 8a Program.
    But this use of the word ``May'' has to be changed to ``Shall'' or 
at least the term must be clarified so that contracting officers will 
stop using it as an excuse to not award contracts to SDVOBs. Many 
continue to say that the term ``May'' causes the SDVOB program to be 
placed in an order BELOW the 8a and Hubzone programs.
    I would also like to submit other recommendations that would help 
to increase contracting opportunities to SDVOBs:

     1.  Strengthen the SDVOB program by enforcing Executive Order 13-
360, increasing contract awards, adding authorization for direct awards 
non-competitively, and by correcting of wording of the governing 
regulation, without submerging SDVOBs into the 8a program. The 8a 
program was created to help alleviate the more than 100 years of 
wrongful discrimination and exclusion of minorities from the full 
benefits of American society, including the Federal marketplace. The 
SDVOB program is intended to be inclusive of any American who served in 
this country's armed forces, guard or reserves. The SDVOB program 
should retain its own identify for ``those who have borne the battle.''
     2.  Small Business Subcontracting Plans submitted by large Primes 
should be monitored more closely. Liquidated damages or the elimination 
of future contracts should be imposed for those companies that fail to 
demonstrate a good faith effort. Contracting officers should also be 
held accountable for their role in this process.
     3.  Extend the provisions of sections PL 109-461 that direct the 
Department of Veterans Affairs to prioritize contracting for SDVOBs and 
VOBs to all Federal agencies and the DoD.
     4.  Provide a Price Evaluation Preference of 10 percent for SDVOBs 
in acquisitions conducted using full and open competition.
     5.  Direct the SBA Procurement Center Representatives (PCRs) and 
Commercial Marketing Representatives (CMRs) to allocate more time 
assisting SDVOBs and oversight of agencies failing to achieve the 3 
percent.
     6.  Have the Office of Federal Procurement Policy issue a 
statement to clarify that the 23 percent Government-wide small business 
goal is only a `Minimum' and that agencies are allowed to surpass the 
23 percent.
     7.  Close the loopholes in the GSA schedule (FAR Part 8) wherein 
large businesses are allowed to take away business intended for small 
businesses.
     8.  Make it mandatory that agencies consider past experiences and 
performance of the veteran business owner and/or key personnel when 
evaluating past performance of the company.
     9.  Congress should consider adapting a program for service-
disabled veterans that would be modeled after the JWOD program. Under 
the JWOD program, a non-profit organization receives a fee from the 
contract award to serve as the facilitator to the contracting process 
between small businesses and Federal agencies and to ensure that those 
small businesses selected are adequately trained and qualified. The 
small businesses must also agree that at least 60 percent of their 
labor force will be people with severe disabilities. This could prove 
to be a win-win for the government, service disabled veteran owned 
businesses, and seriously disabled veterans.
    10.  The three organizations created under PL 106-50, The Veterans 
Corporation (TVC), the Office of Veterans Business Development (OVBD), 
and the Center for Veterans Enterprise (CVE) should establish 
partnership agreements to share small business resources and 
information that will help to increase the pool of capable and 
qualified veteran buisness owners across the country.
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 prime vendors procurement budget and other non-Federal 
procurements. Both Federal agencies and commercial vendors are faced 
with the time consuming task of identifying and screening capable and 
qualified veteran owned small businesses to meet their requirements. 
And veteran buisness owners need as much help as they can to be ready.
    Following the recent events related to the treatment of veterans at 
Walter Reed Army Medical Center, it should be abundantly clear to all 
that our service members, their families, and citizens throughout the 
United States are taking note of how this new generation of service 
members are being treated. The actual and perceived treatment of our 
Nation's Veterans, especially those returning from the War on 
Terrorism, 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.
    In the Report to the Nation, developed by members of the VET-Force, 
`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 in 
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 PL 106-50, PL 108-183, and Executive Order 13360, has provided a 
good beginning in allowing America to honor the service of Veterans who 
continue to serve by helping to build a stronger economy. More needs to 
be done.'
    Thank you for your attention to these matters. This concludes my 
statement.
                               __________

                              Attachment 1

                   STRATEGIC PLAN REVIEW RATING SHEET

            submitted by the Strategic Planning Subcommittee

                TASK FORCE FOR VETERANS ENTREPRENEURSHIP

December 2005

    The following agencies submitted Strategic Plans for 2005 in 
compliance with the Presidents Executive Order 13360. Each plan has now 
been reviewed and rated by the TFVE Strategic Planning Subcommittee. A 
summary of the ratings per agency is listed below. The Strategic Plans 
Review Summary Sheets for each agency have been forwarded via e-mail.

RATING SUMMARY: Each plan has been rated based on a scale of 0-4, with

    0 = Unacceptable, 1 = Below Average, 2 = Average, 3 = Above 
Average, and 4 = Excellent.

    Of the total 34 agencies listed below, 32 submitted Strategic 
Plans. 10 were rated Unacceptable; 10 were rated Below Average; 10 were 
rated Average; and 2 were rated Above Average. In determining the 
ratings consideration was given to: the number of completed responses 
out of a total of 12; the soundness of the approach; the level of 
detail in the responses; and the likelihood that the proposed activity 
would achieve the anticipated results.
    Other factors considered were: the use of: Forecast Lists; CCR; 
VETBIZ; Outreach Events; Websites; DAU; Accountability (Top--Down); 
Prime Contractor Preference Incentives and SDVOB Past Performance as 
Evaluation Factors.
    Copies of the agencies' plans are posted on the websites of the 
Dept. of Veterans Affairs and the Small Business Administration. To 
review, go to: www.vetbiz.gov or www.sba.gov.

 
                                                        AGENCY NAME                 STRATEGIC PLAN RATING1.                                              Department of Agriculture                                     2
2.                                              Department of Commerce                                        1
3.                                              Department of Defense                                         2
4.                                              Department of Energy                                          1
5.                                              Department of Education                   2+ (Almost Above Avg)
6.                                              Department of Health and                                      1
                                                 Human Service
7.                                              Department of Homeland                                        2
                                                 Security
8.                                              Department of Housing and                                     1
                                                 Urban Development
9.                                              Department of Interior                                        2
10.                                             Department of Justice                                         2
11.                                             Department of Labor                                           1
12.                                             Department of State                        3+ (Almost Excellent
13.                                             Department of                                                 0
                                                 Transportation
14.                                             Department of Treasury                                        2
15.                                             Department of Veterans                                        3
                                                 Affairs
16.                                             Agency for International                                      2
                                                 Development
17.                                             Defense Contract Agency                    - (No Plan Submitted
18.                                             Environmental Protection                                      2
19.                                             Equal Employment                                              1
                                                 Opportunity Commission
20.                                             Federal Election Commission                                   0
21.                                             International Broadcasting                                    1
                                                 Bureau
22.                                             General Services                                              2
                                                 Administration
23.                                             National Aeronautics and                                      1
                                                 Space Administration
24.                                             National Credit Union                                         0
                                                 Administration
25.                                             National Labor Relations                                      1
                                                 Board
26.                                             National Science Foundation                                   0
27.                                             Nuclear Regulatory                                            0
                                                 Commission
28.                                             Peace Corps                                                   0
29.                                             Railroad Retirement Board                                     0
30.                                             Security and Exchange                                         0
                                                 Commission
31.                                             Selective Service System          0 (set 1 percent goal SDVOBs)
32.                                             Small Business                                                0
                                                 Administration
33.                                             Smithsonian Institute                     - (No plan submitted)
34.                                             Social Security                        1 (good response to #11)
                                                 Administration
                  (SAMPLE STRATEGIC PLAN REVIEW FORM)

               Agency # ________________________________

                             RATING FACTORS

 0 = Unacceptable 1 = Below Average 2 = Average 3 = Above Average 4 = 
                               Excellent

------------------------------------------------------------------------
        No.                     CRITERIA                    RATING
------------------------------------------------------------------------
1                   SENIOR LEVEL OFFICIAL NAMED AND   ..................
                     CONTACT INFO--
------------------------------------------------------------------------
2                   PLAN AVAILABLE TO THE PUBLIC--    ..................
                     www.vetbiz.gov; www.sba.gov
------------------------------------------------------------------------
3                   PROGRESS REPORTS TO SBA--         ..................
                     Annually to the Office of
                     Government Contracting.
------------------------------------------------------------------------
4                   HOW CONTRACTS WILL BE RESERVED    ..................
                     FOR SDVOBs----.
------------------------------------------------------------------------
5                   HOW INFO WILL GET TO SDVOBs TO    ..................
                     ENCOURAGE PARTICIPATION----
------------------------------------------------------------------------
6                   HOW PRIMES WILL BE ENCOURAGED TO  ..................
                     SUBCONTRACT WITH SDVOBs----
------------------------------------------------------------------------
7                   HOW AGENCY PERSONNEL WILL BE      ..................
                     TRAINED----
------------------------------------------------------------------------
8                   DISSEMINATE INFO TO SDVOBs TO     ..................
                     ASSIST THEM IN GETTING
                     AWARDS----
------------------------------------------------------------------------
9                   DOES STRATEGIC PLAN COMPLY WITH   ..................
                     EXEC ORDER----
------------------------------------------------------------------------
10                  HOW WILL SENIOR LEVEL OFFICIAL,   ..................
                     CAO, AND OSDBU DIRECTOR'S.
                     PERFORMANCE PLANS BE
                     IMPLEMENTED----
------------------------------------------------------------------------
11                  HOW WILL SDVOB OPPORTUNITIES BE   ..................
                     INCREASED----
------------------------------------------------------------------------
12                  HOW WILL SUBCONTRACTING PLANS     ..................
                     WITH PRIMES BE MONITORED AND
                     EVALUATED----
------------------------------------------------------------------------
                          TFVE CONCERNS               ..................
------------------------------------------------------------------------
1                   Plan only mimics Executive Memo   ..................
------------------------------------------------------------------------
2                   Plan execution                    ..................
------------------------------------------------------------------------
3                   Plan specific or general small    ..................
                     business
------------------------------------------------------------------------

Members of the Strategic Planning Subcommittee are as follows:
    Charles Jones (Subcommittee Chair), Joe Wynn, Bob Hesser, Jim 
Hudson, Scott Golden, Mike Bradican. (Assistants: Michelle Reinecke and 
Dianna Osborne of Commercial Marking Corp.) For additional information 
or to contact the Subcommittee Members contact Charles Jones (803) 699-
4940 Charlesjon@aol.com or Joe Wynn (301) 585-4000 ext 147 
Jwynn@VVA.org.

                                 
              Prepared Statement of Joseph C. Sharpe, Jr.,
         Deputy Director, Economic Commission, American Legion
    The American Legion appreciates this opportunity to comment on the 
current state of veteran entrepreneurship.
    The American Legion acknowledges that small business is the 
mainstay of the American economy. It is the mobilizing force behind 
America's past economic growth and will continue to be the primary 
factor as the Nation progresses into the new millennium. Presently, 
more than nine out of every ten businesses are small firms, which 
produce approximately half of the Gross National Product (GNP). 
Currently, over one-half of the nation's workforces are employed by 
small business, with the average company employing approximately 11 
persons. The American Legion recognizes the benefits of American 
entrepreneurship, not only for the overall American economy but also 
for the transitioning servicemember seeking to develop their own 
business.
    America has also benefited immeasurably from the service of its 24 
million living veterans, who made great sacrifices in the defense of 
freedom, in the preservation of democracy, and in the protection of the 
free enterprise system. According to the Small Business 
Administration's (SBA) Office of Veterans' Business Development in 
Washington, DC, the number of small-business-owning veterans has 
increased to more than 4 million nationwide with more than 235,000 
being service-connected disabled veteran owned. They range from home-
based sole proprietorships to high-tech global corporations.
    In addition, 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 military and has exacerbated this country's 
veteran unemployment problem, especially within the National Guard and 
Reserve components of our military. The present unemployment rate for 
recently discharged veterans is double the national average. 
Unfortunately, many of the thousands of service members who are 
currently leaving the service are from the combat arms and non-skilled 
professions that are not readily transferable to the civilian labor 
market.
    One way of combating unemployment is through the creation of new 
jobs. Small business creates by some estimates 60 percent to 80 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. No group is better qualified or deserving of this type of 
assistance than the veterans of this Nation.
    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 and who stood ready to fight, and if necessary to 
die, in order to protect and preserve our free enterprise system, were 
completely ignored by the Federal agency responsible for meeting their 
small business needs.
Reaffirm Support of the Small Business Administration's Office of 
        Veteran's Business Development
    The American Legion supports increased funding of the Small 
Business Administration's Office of Veterans' Business Development in 
its initiatives to provide enhanced outreach and specific community-
based assistance to veterans and self employed members of the Reserves 
and National Guard. The American Legion also supports legislation that 
would permit the Office of Veterans' Business Development to enter into 
contracts, grants, and cooperative agreements to further its outreach 
goals and develop a nationwide community-based service delivery system 
specifically for veterans and members of reserve components of the 
United States military. For FY 2008 estimated funding for this office 
would be estimated to be $5 million, in FY 2009 $10 million, and FY 
2010 $15 million to enable it to implement a nationwide community-based 
assistance program to veterans and self employed members of the 
Reserves and National Guard.
The National Veterans Business Development Corporation
    Congress enacted the Veterans Entrepreneurship and Small Business 
Development Act of 1999 (P.L. 106-50) to assist veteran and service-
connected disabled veteran owned businesses by creating the National 
Veterans Business Development Corporation and with the assistance of 
the SBA. The Veterans Corporation (TVC) created a Veterans 
Entrepreneurial Training (VET) Program to promote and foster successful 
veteran entrepreneurship within the veteran business community, but 
this program no longer operates. Currently, the organization's main 
efforts have been to provide distance-learning education in how to 
start and expand existing businesses, to include training in finance, 
accounting and contracting. The Veterans Corporation indicates it has 
established a foundation for a 10-year plan to reach all 4-5 million 
veterans interested in entrepreneurship. Its latest vision is to assist 
Guard/Reserve and transitioning members of the Armed Forces and their 
families with the establishment of their own businesses. The American 
Legion is working with the Veterans Corporation to ensure the best 
method or methods of assisting these deserving veterans. TVC has in the 
past stressed creating online education programs hosted by other third 
party organizations to assist veterans with obtaining basic literacy 
skills. This current plan would create an online platform to match 
veterans with entrepreneurial education and career opportunities and to 
provide grants to Small Business Development Centers around the country 
and other business development organizations to specifically assist 
veterans.
Online Development Programs
    The current staff of the Veterans Corporation has focused on 
employing the use of the worldwide web to reach veterans. According to 
TVC representatives a combination of services, online and distance 
learning will serve the largest number of veterans needing 
entrepreneurial services in all fifty states. TVC expects to launch a 
Virtual Veterans Business Center in cooperation with SBA's Service 
Corps of Retired Executives (SCORE) to provide a nation-wide, market 
specific, person-to-person counseling service to veterans not only in 
America, but deployed overseas as well.
    TVC has also launched a Virtual Business Incubator with the 
specific aim of helping National Guard and Reservists who own 
businesses and are currently deployed in Afghanistan, Iraq or any place 
else in the world. ``Deploy Proof Your Business'' is another online 
program specifically designed to assist members of the National Guard 
and Reserve components in protecting their businesses prior to 
deployment.
    The American Legion fully supports these progressive programs aimed 
at the technologically astute veteran.
Small Business Development Centers
    The Small Business Development Centers (SBDC) are already funded 
almost $90 million a year by SBA and our understanding is their written 
agreements with SBA provide direction for their specific creation or 
operation of veteran, service-connected disabled veteran and reserve 
component member entrepreneurial assistance. Why does the SBDC need an 
additional, third party organization such as the Veterans Corporation 
to provide them additional funds from Congress to perform what they are 
already funded to deliver by SBA? If SBDCs require additional resources 
to enhance, improve, develop or deliver specialized assistance to 
veterans and reservists that funding process should be through their 
normal funding channel of the SBA. Additionally, should Congress choose 
to provide additional resources to SBA to enhance SBDC programs 
specifically for veterans and reserve component servicemembers, the 
Office of Veterans Business Development should be part of the program 
design, selection and oversight process to ensure that the expertise of 
veterans, including the policy and program delivery and reporting 
requirements, are designed and developed by the SBA office whose 
responsibility by law is veterans' business development.
Public Law 106-50
    The American Legion acknowledges that the requirements of Public 
Law 106-50 as originally envisioned are not being met by TVC at the 
present time due to the scope of the mission and funding requirements. 
The American Legion agrees with the view that forcing TVC to duplicate 
or replicate preexisting services such as those provided by the Small 
Business Development Centers (SBDC), Procurement Technical Assistance 
Centers and Department of Labor One Stop Centers does not prudently use 
taxpayer funds or the limited dollars given to TVC.
    Therefore, The American Legion recommends that the resource-
training centers (St. Louis, MO; Flint, MI; and Boston, MA) that TVC is 
currently providing funding for be given to the jurisdiction of the SBA 
veteran's development office.
    The SBA's veterans development office is presently funding five 
such centers around the country and should be given the additional 
three. In addition, the SBA office should take on the responsibility of 
partnering with military and Veterans Affairs hospitals, Transition 
Assistance Programs (TAP), State Departments of Veterans Affairs, 
Procurement Technical Assistance Centers, Military Family Support 
Centers, and Veterans Service Organizations to provide employment and 
entrepreneurship programs along with the addition of funding and 
necessary senior staff to oversee the implementation and development of 
such a program. TVC would operate more effectively acting as a liaison 
with existing associations of small buisness owners and, by working 
with SBA programs, ensure the involvement of private and successful 
military alumni from the business community to help support SBA's 
successful (re) integration of veteran and reserve component 
entrepreneurs into the private and public American marketplace.
H.R. 1712 ``The Veterans Federal Procurement Opportunity Act of 2003''
    The American Legion has encouraged Congress to require reasonable 
``set asides'' of Federal procurements and contracts for businesses 
owned and operated by veterans. The American Legion supported 
legislation in the past that sought to add service-connected disabled 
veterans to the list of specified small business categories receiving 
three-percent set asides. Public Law 106-50, ``The Veterans 
Entrepreneurship and Small Business Development Act 1999'' included 
veterans small businesses within Federal contracting and subcontracting 
goals for small buisness owners and within goals for the participation 
of small businesses in Federal procurement contracts. It requires the 
head of each Federal agency to establish agency goals for the 
participation, by small businesses owned and controlled by service-
connected disabled veteran, in that agency's procurement contracts.
    Agency compliance with P.L. 106-50 has been minimal with only two 
agencies self-reporting that they have met their goals, (the Department 
of Veterans Affairs and the Small Business Administration). Other 
agencies like the Defense Information Systems Agency only set a goal 
for .5 percent in FY 06 and .06 percent for FY 07. H.R. 1712 was 
supposed to codify the three-percent set aside and provide consequences 
for agencies not meeting these goals. The American Legion is 
disappointed with the lack of compliance with the 3 percent requirement 
mandated in P.L. 106-50 and the lack of implementation of H.R. 1712. 
The American Legion is also dismayed that the only data available that 
gives a breakdown of how agencies are making their procurement goals is 
FY 2005 data. It is amazing that as we are now looking ahead to FY 
2008, there is no sure way of ascertaining how agencies are meeting 
objectives set 7 years ago P.L. 106-50.
    According to testimony submitted by SBA during a May 2, 2007 
hearing on the status of veterans business, ``Though the Federal 
Government has yet to achieve the required three percent goal, it is 
making progress toward accomplishing it. In 2004, President Bush issued 
Executive Order 13360 to strengthen opportunities in Federal 
contracting for service-disabled veteran-owned businesses. Preliminary 
data shows that SBA and the Department of Veteran Affairs both exceed 
the three present goals for SDVO small businesses for FY 2006. Final 
data is not yet available to confirm FY 2006 accomplishments''. This is 
not and should not be acceptable; the final results for FY 2006 should 
have been published months ago along with a breakdown of the number and 
sizes of the contracts awarded to service disabled veteran companies.
Recommendations

    1.  Incorporate Executive Order 13360 into SBA Regulations and 
Standard Operating Procedures

    The American Legion endorses these recommendations given from the 
``Advisory Committee on Veterans Business Affairs'' FY 2006 SBA report.

      ``The SBA needs to reemphasize implementation of 
Executive Order 13360 and establish it as a Federal procurement 
priority across the entire Federal sector. Federal agencies need to be 
held accountable, by the SBA, for their implementing Executive Order 
13360 and their progress toward the 3 percent goal. The SBA needs to 
establish a means to monitor agencies progress and where appropriate, 
establish a vehicle to report or otherwise identify those that are not 
in compliance, and pursue ongoing followup''.
      ``To achieve the SDVOSB procurement goal contained in 
Executive Order 13360, the SBA must identify all agencies affected by 
the Executive Order under the directive of Congress. Then the SBA 
should assist these agencies to develop a demonstrable, measured 
strategic plan and establish realistic reporting criteria. Once the 
information is received, disseminate this data to all agencies, 
Veterans Organizations and post on SBA website as a bellwether of 
program progress''.

    2.  Change to Sole Source Contracting Methods

    ``To provide parity among special emphasis procurement programs the 
SBA should take immediate, appropriate steps to promulgate regulations 
to revise 13 CFR 125.20. The proposed revision would eliminate existing 
restrictions on the award of sole source contracts to SDVOSB such as 
the ``Rule of Two''. The change should mirror 13 CFR 124.508, which 
applies to 8 (a) Program participants and states . . . In order to be 
eligible to receive a sole source 8 (a) contract, a firm must be a 
current participant on the date of the award . . . Accordingly, 
adopting this language would eliminate all restrictions on sole source 
awards to SDVOSBs''.
In Conclusion
    The American Legion's National Economics Commission mission 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. The American Legion 
reinstates 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.
    Comprehensive training should be handled by the SBA and augmented 
by TVC's online training. Resource Training Centers should include DoD 
and VA faculties. Currently, many military families are suffering 
financial hardship while their loved ones are recuperating in military 
hospitals around the country. Many spouses leave their jobs to be with 
that disabled servicemember only to watch their finances deteriorate. 
Seamless transition in many cases is just a wishful thought; however, 
if business development training was offered to military members, a 
small home based business that is flexible could be the answer in 
guaranteeing a constant source of revenue for the family, in turn 
making them less dependent on the Federal Government.
    The American Legion also strongly supports the mandates of 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 the mandates of P.L. 106-
50.
    Thank you, Mr. Chairman, for allowing The American Legion to 
provide written comments on this very important issue.

                                 
   Prepared Statement of Eric A. Hilleman, Deputy Director, National 
   Legislative Service, Veterans of Foreign Wars of the United States
    MADAM CHAIRWOMAN AND MEMBERS OF THIS COMMITTEE:

    Thank you for allowing the Veterans of Foreign Wars of the U.S. 
(VFW) to testify today.
    In 1999, Public Law 106-50 established a ``Government-Wide 
Participation Goal'' for SDVOSB, requiring ``not less than three 
percent of the total value of all prime contract and subcontract awards 
for each fiscal year.'' This law was designed to provide a minimum 
standard of participation for service-disabled veterans. To date, the 
government has not met this goal.
    In 2003, Public Law 108-183 expanded government procurement to 
allow for sole-source contracting with SDVOSB. Sole-source contracting 
was made available for all fair and reasonable contracts under $5 
million for industrial and/or manufacturing, and under $3 million for 
all other contracts. The intent of this law was to grant government 
procurement officials grater flexibility when contracting with an 
SDVOSB.
    The VFW stands by its resolution, Number 658, Mandating Three 
Percent of Federal Contracts for Service-Disabled Veteran-Owned Small 
Businesses. To date, the government has failed to meet the three-
percent goal prescribed by 106th and enhanced by the 108th Congresses. 
We applaud this Subcommittee for exercising oversight on this issue. We 
believe the lack of adherence to this goal has been due to an absence 
of Agency leadership and Congressional oversight. Agencies such as the 
Department of Defense, Department of Veterans Affairs, the Department 
of Labor, Small Business Administration, and General Services 
Administration must play an important role in promoting this goal.
    On October 20, 2004, President Bush issued an Executive Order to 
strengthen opportunities in Federal contracting for service-disabled 
veteran-owned businesses. This Executive Order lays out the structure 
for government-wide implementation of the three-percent procurement 
goal. It promotes agency accountability, training for government 
procurement officers, and agency executives' implementation planning 
and cooperation. We believe this Order is a necessary step toward 
realizing adherence to the three-percent goal.
    We urge the Congress, and specifically this Committee, to continue 
to investigate Federal procurement practices. Federal agencies must be 
required to adhere to this Executive Order. Reporting standards have 
been further defined by law and outlined in the Executive Order. We ask 
that this Committee continue to highlight this issue--with the purpose 
of promoting SDVOSB participation in all government-wide prime contract 
and subcontract awards.
    Fair contracting practices will remain a priority of the VFW until 
SDVOSBs are given equal participation as other priority contracting 
groups. Service-disabled veterans have faced disadvantages in the 
market due to lenders' unwillingness to extend credit to disabled 
individuals. Disabled veterans are seen as a greater credit risk by 
finical institutions and are often perceived as less capable. The three 
percent set aside for government procurement is a means of enabling 
SDVOSBs. The set aside provides that opportunity for service-disabled 
veterans, granting empowerment within the market through increased 
customer base and access to capital.
    Madam Chairwoman and Members of the Subcommittee, this concludes 
the VFW's testimony. We again thank you for examining this issue and 
including us in this important discussion.

                                 
   Prepared Statement of William D. Elmore, Associate Administrator, 
     Office of Veterans Business Development, U.S. Small Business 
                             Administration
    Chairwoman Herseth Sandlin, Ranking Member Boozman and 
distinguished Members of the Committee, thank you for the opportunity 
to appear before you today to share information on the activities of 
the U.S. Small Business Administration (SBA) regarding our efforts to 
assist and support Federal procurement opportunities and success of 
veterans, including those who have incurred a service-connected 
disability.
    I am William Elmore, the Associate Administrator for Veterans 
Business Development, and I am pleased to be here today representing 
Administrator Preston and other SBA employees who work every day to 
support the small business success of America's veterans, reservists, 
and family members. The mission of the Office of Veterans Business 
Development is to maximize the availability, applicability and 
usability of all Administration small business programs for Veterans, 
Service-Disabled Veterans, Reserve Component members of the U.S. 
Military, and for their Dependents or Survivors.
    It is important to note that SBA' s efforts to support veteran 
entrepreneurs go significantly beyond the activities of SBA's Office of 
VBD. Each program at SBA is tasked with expanding and improving their 
services specifically for veterans and service-disabled veterans. This 
includes our Capital Access (loan) programs, our business counseling 
and training programs, our procurement programs, our field offices and 
our Disaster Assistance program. Thus far, the results have been good; 
the number of new loans being made to veterans has increased 
significantly. The number of new loans to veterans has grown from 4,800 
in FY 2000 to approximately 8,000 in FY 2006. Additionally, loans to 
startup businesses owned by veterans continues to see considerable 
growth-nearly doubling the 1,300 7(a) loans in FY 2000 to almost 2,500 
in FY 2006. SBA Business outreach, counseling and training services 
assist more than 100,000 veterans, reservists, active service members 
and spouses each year, including the growth of special outreach and 
coordination efforts through our district and Regional offices.
    Federal procurement opportunity for veterans is an important issue 
to SBA, to the emerging veteran business community, and to the 
government's ability to secure the goods and services it needs, 
especially during this period of mobilization for the Global War on 
Terror. SBA understands the critical skills that military members and 
reservists bring to this international effort. In this context, I am 
pleased to be sharing with you some of the initiatives and 
accomplishments the SBA has made over the past 6 years.
    As expressed in the January 24, 2007 Memorandum For Heads of 
Departments and Agencies jointly issued by Administrator Preston and 
Office of Federal Procurement Policy Administrator Dennet, the 
Administration is broadly committed to enhancing all of our 
entrepreneurial programs and services for veterans and reservists 
returning from duty in the Global War on Terror, and more specifically 
for those service members injured or disabled in service to America.
    Prime contracts have a three percent government-wide Federal 
procurement goal established by Public Law (PL) 106-50 for small 
businesses owned and controlled by service-disabled veterans. In 
addition, PL 106-50 established a ``best efforts'' clause for veterans 
in Federal procurement at the subcontracting level. Though the Federal 
Government has yet to achieve the required three percent goal, it is 
making progress toward accomplishing it. As you know, in 2004, 
President Bush issued Executive Order 13360 to strengthen procurement 
opportunities in Federal contracting for service disabled veteran-owned 
small businesses (SDVOSBs). As mandated by E.O. 13360, the General 
Services Administration (GSA) established the Veterans Technology 
Services (VETS) Government-wide Acquisition Contract (GWAC). VETS is a 
IT contract designed to help Federal agencies meet their three percent 
goal by purchasing information technology solutions from SDVOSBs. GSA 
also offers opportunities for Federal agencies to contract with SDVOSBs 
for other services and supplies through the use of multiple GSA 
Multiple Award Schedule program. Preliminary data shows that both SBA 
and the Department of Veteran Affairs (VA) exceeded our three percent 
goals for SDVO small businesses in FY 2006, with SBA achieving more 
than four percent. This example demonstrates leadership by example, and 
represents a significant improvement for both agencies over our 
achievement in FY 2005.
    SBA is currently reviewing the final FY 2006 reports from the 
Federal Procurement Data System. The preliminary data suggests 
significant efforts toward an improvement in achieving the three 
percent goal. This improvement reflects the ongoing SBA efforts, and 
the efforts of most Federal agencies. It also demonstrates the 
increasing ability of service disabled veteran-owned small businesses 
(SDVOSBs) in pursuing contracting opportunities and in securing 
contracts.
    On July 9, 2007, the number of small businesses owned by service 
disabled veterans (SDVs) expressing interest in Federal procurement by 
registering in the Government's Central Contractor Registration (CCR) 
was 9,642 and the number of Veterans Owned Small Businesses was 37,282. 
While SBA is analyzing what agencies are buying and comparing that to 
what SDVOSBs are selling, we are also strengthening the full range of 
SBA programs for: veterans, service-disabled veterans, reservists, 
discharging service members and the spouses and widows of service 
members. Improvements include strengthening our written agreements with 
our Small Business Development Centers, growing SCORE's online 
assistance for veterans and reservists, funding Veterans Business 
Outreach Centers, growing our District Office-Veterans Outreach 
initiative, targeting veterans and veteran reservists in our Community 
Express Loan program, establishing the new Patriot Express Loan, 
improving our Surety Bond program, developing a public/private 
Matchmaking program specifically for veterans, focusing more PCR/CMR 
activity on veterans, establishing the electronic Scorecard for Federal 
agencies and working to reconcile the differences between the SBA 
procurement rules for veterans and the Federal Acquisition Regulation 
procurement rules for veterans. We are also working with the Department 
of Defense (DoD), and the Department of Labor (DOL) to enhance our 
involvement in TURBO TAP (Transition Assistance Program), in efforts to 
improve small business opportunity and employment support for returning 
veterans and reservists, and assisting various components of DoD in 
various planning initiatives.
    At the request of both SBA and the veterans' advocacy community, 
the U.S. Census Bureau included veteran and SDV status questions in 
their 2002 survey of small buisness owners. These questions mark the 
first time we have an accurate count of the number of veteran and SDV 
small buisness owners in the American small business marketplace. This 
Census survey found that approximately 0.7 percent of small businesses 
in America are owned by SDVs, and approximately 14 percent of all small 
businesses are owned by veterans. The 2002 statistics released by the 
Census Bureau indicate that 2.6 percent of veteran owned firms sell to 
the Federal Government, while only 2 percent of all firms take 
advantage of the Federal market place. These findings reinforce our 
efforts to strengthen the full breath of SBA programs and services 
specifically for SDV and all veteran buisness owners. SBA is strongly 
committed to working with all of our programs and with all of our 
Federal agency counterparts to reach out to and help create more 
veteran-owned small businesses, and to make use of their talents and 
services in Federal procurement, in strengthening the American economy 
and in strengthening America's involvement in the International 
economy.
    This concludes my comments, and I welcome any questions you might 
have.

                                 
Prepared Statement of Louis J. Celli, Jr., Chairman, Advisory Committee 
for Veterans Business Affairs, U.S. Small Business Administration, and 
  Chief Executive Officer, Northeast Veterans Business Resource Center

                           EXECUTIVE SUMMARY

    Each year the Federal Government purchases billions of dollars in 
goods and services from private firms that range from paperclips to 
space ships. It is the policy of the United States, as stated in the 
Small Business Act 1953, that all small businesses have the maximum 
practicable opportunity to participate in providing goods and services 
to the government.
    To foster an equitable Federal procurement policy, government-wide 
small business goals are established for Federal agencies as 
percentages of annual expenditures. Each agency submits its proposed 
goals to the SBA which ensures that the aggregate government-wide 
statutory goals are met. Currently, the statutory small business goal 
is 23 percent, the goal for Small Disadvantaged Businesses is 5 
percent, as well as 5 percent for businesses owned by Women, and 3 
percent for businesses in HUB zones, and finally Service Disabled 
Veteran Owned businesses at 3 percent as well.
    Public Law 93-400 requires the Office of Management and Budget to 
collect and disseminate procurement data for the needs of Congress, the 
Executive Branch and the public sector. In order for SBA to track the 
goals and actual achievements, Federal agencies are required to provide 
the SBA with estimates of the total dollar amount of all prime 
contracts to be awarded that fiscal year and estimates of the total 
dollar amount of all subcontracts to be awarded by the agency's 
reporting prime contractors.
    At the end of each fiscal year, the head of each agency is required 
to review its report and, if required, submit the appropriate 
justification to SBA for failure to meet specific goals with a plan to 
achieve the goals in the succeeding fiscal year.
    According to the Guidance on Goal Setting Under Procurement 
Preference Programs which was established in 1999, Federal agencies are 
required to report to the SBA Final Prime Contract SF-279 and SF-281 
data. Essentially, their achievement dollar amounts and percentages for 
Small Business and Preference Program performance for the previous 
year.
    As of July 9th 2007 the website which displays this data for the 
SBA is: www.sba.gov/aboutsba/sbaprograms/goals.
    This site contains the reporting information for FY 1998 through FY 
2007. While FY 2000, 2001 and 2002 data are missing, the most recent 
compliance report available is from FY 2005.
    In FY 2005 the Federal Government spent 80 Billion dollars with 
Small Businesses, roughly 25 percent of the 2005 fiscal budget for that 
year. Of that amount, Service Disabled Veteran Owned Businesses only 
received slightly more than one-half of one percent (0.61 percent).
    Despite a 1999 law establishing the government-wide three percent 
contracting goal with service-disabled veteran-owned businesses, the 
Federal Government has never met this standard. In 2005 (again, most 
recent data published), the Department of Defense (DoD) awarded an 
abysmally low 0.499 percent of contracts to service-disabled veteran-
owned businesses. DoD accounts for roughly 70 percent of all government 
procurement spending, yet its repeated inability to meet service-
disabled veteran contracting goals makes it all but impossible for the 
Federal Government as a whole to meet the three percent goal.

                             Oral Testimony

    Good morning Chairwoman Herseth Sandlin, Ranking Member Boozman and 
members of this Subcommittee. Thank you for inviting me back to testify 
before your subcommittee and discuss the 3 percent Federal procurement 
goal for Service Disabled Veterans.
    When Congress passed the Veterans Entrepreneurship and Small 
Business Development Act 1999 (Public Law (PL) 106-50), it stated in 
its findings 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. '
    My name is Louis Celli and as you may remember, I am a 22 year 
retired Master Sergeant from the United States Army, a Service Disabled 
Veteran and have started 2 businesses. I am the Chairman of the SBA's 
Veterans Small Business Advisory Committee and the Vice Chairman for 
the American Legion's National Small Business Task Force.
    You have before you the statistics, and nearly every witness here 
today will remind you of the lack of performance by our Federal 
contracting activities with regard to contracting with veterans, and 
specifically Service Disabled Veterans. Most of what you have heard 
here today is common knowledge and I am sure that most of this 
information you already knew.
    So the question you should be asking today isn't as much why, but 
how do we fix it. While agencies continue to scuff their feet and say 
``Gee, we're trying'', then publish 5 year strategic plans which are 
meaningless and don't begin until 5 years after the law was established 
compelling them to comply, we continue to disarm the agency who is 
supposed to be monitoring this activity. The Small Business 
Administration (SBA) is the oversight agency which is in place and the 
only agency which has the authority to work with Federal agencies and 
force them to comply if necessary. Additionally, the SBA has a 
training, outreach and advocacy mission which was designed to address 
and round out this mission of Federal procurement and small business 
success in America. The real problem is that over the past six plus 
years, the SBA has been summarily disassembled. Whittled down to what 
is now little more than a skeleton crew, with barely enough employees 
left to handle the other part of their mission of loan underwriting and 
disaster assistance.
    How did this happen? From an agency of 3 primary departments and 
more than 3,000 employees, with an annual budget of more than a billion 
dollars to the crippled down agency it is today having lost one third 
of their workforce. Unfortunately, what didn't go away was the 
administrative duties still required on a daily basis to run the SBA, 
and the real world disaster mission. What falls behind is the mission 
of training, advocacy, support, and contracting oversight. And as we 
all know, in government size does matter.
    Having served as a Federal employee, a military member, an advisor 
to congressional staff and as a small business consultant, I have seen 
firsthand the reactionary nature of bureaucracies and understand why we 
diverted funding away from the SBA, but as I testify before you here 
today, my professional advice to this committee is to restore the SBA 
to its full strength and capacity before it is too late.
    When the economy is robust, it is our nature to relax, this is how 
the SBA became decrepit. But any good businessowner knows that they 
also have to be an economist and need to be able to predict future 
trends if they are going to stay in business, and if you, congress, 
want to save or grow small businesses in America, Service Disabled, 
Women, Minority, Socially Disadvantaged, Hub Zone and all other owned 
small businesses, then you need to act now and restore the SBA to its 
full compliment. If we wait until small businesses begin to decline, it 
will be too late.
    A properly strengthened SBA can train and educate contracting 
officers, intervene in bundling and large vs. small business 
competition decisions, assist and train Service Disabled Veteran Owned 
Small businesses, aggressively pursue agency Small Business Correction 
Plans, monitor and hold accountable prime contractor's small business 
sub contracting plans, preside over award disputes, monitor and 
maintain the program and HOLD AGENCIES ACCOUNTABLE so you will have one 
agency to drag onto the carpet when the wheels fall off the cart rather 
than trying to chase down agencies individually. Just think of how much 
easier your jobs would be.
    One suggestion I have is to establish a ``Veterans Small Business 
and Entrepreneurship Subcommittee'' within the Congress. Veterans 
Entrepreneurship has become a project which is currently being 
addressed by at least 4 separate Senate and 4 separate House 
committees. Much of this work is commonly themed but much of it is 
diametrically opposed. The Veterans Small Business and Entrepreneurship 
act of 1999 discusses at least three different Committees who have 
direct involvement in this program yet there is no common ground, no 
working committee.
    I am currently working with the Veterans Administration and the 
Compensated Work Therapy program under a special project called the 
``Veterans Construction Team''. This project is an anomaly within the 
VA and allows for this team to compete directly with the Federal 
Government for contracts with which they employ veterans who are 
recovering and being treated at the Edith Nourse Rogers Memorial 
Veterans Hospital in Bedford, Massachusetts. We are currently working 
with Native American Veterans and Tribal Council to bring this program 
to the Native American Reservations in South Dakota and I have Mr. 
Bernie Cournoyer with me today should you wish to hear more about this 
rehabilitative program.
    The reason that I bring this up is because the work therapy portion 
of this program is only half the battle, the other half is the constant 
education of the contracting officers and working with them to get them 
to understand what the Service Disabled Veteran Owned Program is. I 
have probably had to explain Public Law 109-461 to more VA contracting 
officers and staff than I have to veterans at conferences. When I spoke 
with a contracting office at the office of Immigration and Boarder 
Protection, I was told that the educational portion of contracting 
wasn't their responsibility when it came to educating contracting 
officers regarding preference programs, that it was the responsibility 
of the SBA.
    So here you have agencies who take no responsibility for educating 
their own contracting staff as to meeting the goals of the Service 
Disabled Veteran Buisness owners initiative and an agency, the SBA, who 
is underfunded and powerless to do anything about it because all of 
their resources are committed to more immediate matters, yet the 
authority and responsibility still resides with them.
    Madame President, Ranking Member Boozman, if you want to address 
this issue of meeting our 3 percent obligation to Service Disabled 
Veterans in the United States of America, you are going to have to fund 
it, by reconstituting the SBA.
                               __________
The attached is correspondence is between Senator Kerry and the 
        Department of Defense, and a sample of the DoD 5 year plan. The 
        complete plan can be found at the provided link in the 
        reference section below;

                                                       U.S. Senate,
                                                     Washington, DC
                                                       May 15, 2007

Hon. Robert Gates
U.S. Department of Defense
The Pentagon
Room 3E880
Washington, DC 20301-1000

Dear Secretary Gates:

    I am writing concerning the Department of Defense's policy with 
respect to contracting with service-disabled veteran owned businesses 
(SDVOBs). Although Congress enacted a government-wide procurement goal 
of three percent for service-disabled veteran owned businesses, every 
year since that law has been in place the Department of Defense has 
failed to meet that contracting goal. In light of the honorable 
sacrifices that service-disabled veterans have made for our country, I 
urge you to do everything in your power to meet and exceed the three 
percent goal required by law.
    As you know, in 1999, Congress enacted Public Law 106-50 which set 
the government-wide procurement goal of three percent with SDVOBs. The 
law also called on each agency to determine the ``maximum practicable 
opportunity'' for these firms (Title 15 Chapter 14A section 644 (g) 
(1)).
    The Department of Defense accounts for nearly 70 percent of all 
Federal procurement spending, totaling an estimated $219 billion in FY 
2005. Given that reality, it is virtually impossible for the entire 
Federal Government to meet the law's three percent goal for SDVOBs 
without the Department of Defense. However, in 2005, the Department of 
Defense awarded a mere .499 percent of contracts to service-disabled 
owned firms. It is hard to believe that less than one half of one 
percent of all defense contracts is the ``maximum practicable 
opportunity'' for the Defense Department to do business with SDVOBs.
    I am especially disturbed by reports that Department of Defense 
personnel are telling veterans that the agency is not bound by the 
three percent goal for contracting with SDVOBs. Given these reports and 
the lack of progress in meeting the SDVOB goal, I would like an 
immediate explanation of the Department's policy for contracting with 
SDVOBs. Please provide a clear statement as to whether the agency 
intends to meet the three percent contracting goal. If the Department 
of Defense is not attempting to meet the three percent contracting 
goal, has the agency formally established its own contracting goal for 
service-disabled veterans? And if so, what is that goal? Specifically, 
what is the Department of Defense doing to improve its record on 
contracting with service-disabled veteran owned businesses?
    In another matter, on January 31, the Committee on Small Business 
and Entrepreneurship held a hearing entitled, ``Assessing Federal Small 
Business Assistance Programs for Veterans and Reservists.'' One of the 
witnesses at that hearing was Ms. Linda Oliver, Interim Acting Director 
of the Office of Small Business. A number of Senators submitted 
questions to Ms. Oliver to answer in writing for the record, but it has 
been over three months, and we still have not received her responses. 
Enclosed, please find a copy of those questions. I respectfully request 
responses to them within one week of the receipt of this letter.
    Please provide me with all other information requested by June 1, 
2007. Thank you for your attention to this matter of critical 
importance to me as a veteran, and to the millions of service-disabled 
veterans who continue to honorably serve their country by contributing 
to the economy as successful entrepreneurs. If you have any questions 
please do not hesitate to contact me or have a member of your staff 
contact Gregory Willis or Karen Radermacher at 202-224-5175. I look 
forward to hearing from you soon.

            Sincerely,
                                                      John F. Kerry


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                            References Used

    1.  Small Business Administration Programs page. This page links to 
the agency reports: www.sba.gov/aboutsba/sbaprograms/goals
    2.  SBA Goal setting and reporting Guidance (1999 guidance policy 
letter): www.sba.gov/idc/groups/public/documents/sba _ program _ 
office/goals _ fy00 _ guidance.pdf
    3.  Year 2 of DoD's 5 year strategic plan: www.acq.osd.mil/osbp/
programs/veterans/ 
SDVOSB%20Strategic%20Plan%202nd%20Year%20(signed).pdf
    4.  2002 Survey of Veteran Business Owners, released July 3rd, 
2007: www.census.gov/csd/sbo/veteran2002.htm
    5.  PL 109-461: http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=109_ cong_public_laws&docid=f:publ461.109.pdf
       Center for Veteran Enterprise (CVE) version (easier to read) 
www.vetbiz.gov/library/PL109-461.htm

                                 
Prepared Statement of Scott F. Denniston, Director, Office of Small and 
    Disadvantaged Business Utilization and the Center for Veterans 
            Enterprise, U.S. Department of Veterans Affairs
    Madame Chairwoman and Committee Members, thank you for convening 
this hearing to examine the current state of the Federal Veterans' 
Entrepreneurship Program. I am honored to represent Secretary 
Nicholson, Deputy Secretary Mansfield and the dedicated employees 
throughout the Department of Veterans Affairs who serve our veterans 
daily.
    Much progress has been made since the May 17, 2007, hearing on this 
program. On June 14, VA and the Veterans Entrepreneurship Task Force 
conducted the First Veterans' Business Program Accountability 
Conference to measure agency progress in implementing Executive Order 
(EO) 13360. In this conference, key officials from six large Federal 
agencies addressed buisness owners and advocates about their progress 
and future plans for improving opportunities for service-disabled 
veterans. In a plenary session, the Chief of Staff for the U.S. Small 
Business Administration (SBA) announced details of SBA's new Patriot 
Express Loan program. Representatives from Northrop Grumman, IBM and 
SAIC addressed corporate buying practices and offered owners marketing 
advice. Afternoon action groups focused on Federal prime contracting 
procedures; subcontracting barriers; status of EO 13360 strategic 
plans; and education needs for Federal officials and business owners. 
To demonstrate their commitment, the program listed email addresses and 
full contact information for the speakers to encourage followup 
discussion. We hope this will become an annual event. A copy of the 
program is attached to my statement.
    We've recognized program leaders through our Annual Champions of 
Veterans Enterprise Awards' Program. This year we had a record number 
of honorees. Our ceremonies were conducted on June 14 and 27. In total, 
12 Federal agencies were recognized: VA, Agriculture, Air Force, Army, 
the Defense Logistics Agency, Energy, the Environmental Protection 
Agency, the General Services Administration, Labor, NASA, State and 
Transportation. Five contractors were honored: BAE, Booz Allen 
Hamilton, EDS, SAIC and TetraTech.
    On June 20, 2007, VA implemented our ``Veterans First!'' buying 
program, as authorized by Public Law 109-461. This law gives VA unique 
authority to purchase from service-disabled veteran-owned small 
businesses (SDVOSBs). It also provides opportunities for veteran-owned 
small businesses (VOSBs). For example, VA contracting officers now have 
the ability to conduct veteran-owned small business set-asides.
    We just returned from the 3rd National Veterans' Business 
Conference held from June 25-28, 2007. This program set an attendance 
record with more than 1,300 participants. These events provided the 
community with multiple forums to come together to tackle issues. These 
issues are solvable, as we will address today. More importantly, the 
advocates, agency officials and buisness owners are united in support 
of our Global War on Terror heroes.
    In 1999, Congress legislated the Veterans Entrepreneurship and 
Small Business Development Act. For the first time, SDVOSBs had a place 
in the Federal marketplace. The law established a 3 percent prime 
contract procurement goal. Since then, service-disabled veterans have 
demonstrated superior performance in some of our Nation's most 
demanding situations. A 2-year old business, Valador, won NASA's 
Columbia Space Shuttle Investigation contract, perhaps NASA's most 
visible contract in recent history. Excalibur Associates organized the 
largest civilian airlift in our Nation's history to assist citizens 
harmed by Hurricane Katrina. A 2-month old business, Horizontal 
Oilfield Supplies and Services, re-tooled its equipment to remove the 
water from New Orleans after Hurricane Katrina. They accomplished this 
in just 12 days even though some government estimates said it would 
take 12 months. The Department of State awarded a contract to process 
visa applications from foreign nationals to an SDVOSB, Quality Support. 
In this era of heightened security, veterans deliver.
    The 3 percent goal for service-disabled veteran-owned small 
businesses needs to be achieved across government. A few initiatives 
that would contribute immeasurably include: more early acquisition 
planning tools such as sources sought notices and more pre-solicitation 
notices in the FedBizOpps electronic posting system; improved 
acquisition planning; better definition of requirements; and improved 
evaluation procedures. Together, these actions would shorten award 
cycle time. These actions will help all buisness owners.
    In addition, more coordination by Federal agencies and prime 
contractors in their outreach to veteran entrepreneurs would benefit 
everyone. The Procurement Technical Assistance Centers (PTACs) funded 
by the Defense Logistics Agency are an outstanding resource for owner 
training. PTAC staffs have contact with local Federal offices and prime 
contractors. Many centers organize at least one procurement conference 
yearly. In our experience, every dollar invested in the PTAC program 
provides an outstanding return to the taxpayer through businesses that 
are better prepared to be successful in the Federal marketplace.
    As you know, VA exceeded the 3 percent SDVOSB goal last year. Our 
procurement budget was $10.3 billion. We spent $346 million with 
SDVOSBs, or 3.38 percent. We spent 6.35 percent of our total 
procurement dollars with VOSBs, or approximately $651 million.
    Our success is based on leadership focus. With this direction, our 
executives and acquisition personnel are using the tools available to 
help them to locate new suppliers: sources sought notices, pre-
solicitation notices, industry days and set asides. FedBizOpps is the 
electronic posting system used by Federal agencies to announce 
procurement opportunities. A query of this system for the period July 
1, 2006 through June 30, 2007 shows that VA contracting personnel were 
very active in placing sources sought, pre-solicitation and SDVOSB set-
aside notices. We absolutely believe that advance planning is critical 
to success.
    Quite simply, VA met the goal because we have the collective will 
to do so. Throughout our department of over 230,000 employees, we do 
not want to simply achieve the goal, we expect to exceed it. VA's 
Deputy Secretary Gordon H. Mansfield personally supported our Champions 
of Veterans Enterprise Programs and the National Veterans Business 
Conference. His presence at these events solidified VA senior 
leadership's commitment to veterans in business.
    Deputy Secretary Mansfield is the Department's Senior Oversight 
Official for EO 13360. In this capacity, he directed that performance 
plans for key VA executives be modified to ensure that our leadership 
is meeting the 3 percent SDVOSB goal. In addition, he requires that the 
senior leaders personally report progress in supporting all small 
business programs during monthly senior managers' meetings.
    On June 20, 2007, VA implemented our new buying authority, the 
Veterans First Program. On that day, Deputy Secretary Mansfield 
distributed a letter to all employees that clearly establishes his 
expectation that every VA employee will personally embrace this new 
program. One short and simple letter can deliver a powerful message 
which directly translates to dollars in the pockets of America's 
veterans in business. A copy of this letter is attached to the 
testimony.
    Progress in the service-disabled veterans' business program is 
underway. Last month's Accountability Conference provided an 
opportunity for diverse groups to discuss their challenges. ``Hats 
off'' to Mr. Ron Poussard and his team at the Air Force Small Business 
Office. They stayed the entire day. They collaborated on problem-
solving with the buisness owners and advocates. Believe me, there were 
no holds barred. This was a tough and challenging dialogue. They 
promised to continue the conversation at the National Conference in Las 
Vegas, just 2 weeks ago. They were true to their word.
    Also at the conference, Ms. Tracy Pinson, Director of the Army's 
Office of Small Business Programs, announced that Army is forecasting 
$1.8 billion to be spent with SDVOSBs over the next 12 months. Ms. 
Pinson has asked VA's Center for Veterans Enterprise (CVE), to partner 
with her to ensure buisness owners are aware of these opportunities. 
The CVE supports Federal agencies and buisness owners. These services 
include free market research, collaborative conference sponsorship, 
communications with industry through our VetBiz.gov Vendor Information 
Pages database and other support as desired. VA co-sponsors many 
business conferences with other organizations. VA, Army and other 
agencies organized the National Veterans Business Conference. On July 
25, VA, the Army and the Navy will jointly support a BRAC conference 
here in the Nation's capital to provide owners with advance information 
about procurement opportunities associated with base realignment action 
from 2008 to 2012. In addition, CVE maintains a help desk for business 
owners and others who have questions about the Veterans 
Entrepreneurship and Small Business Development Act. We also provide 
information about VA's unique procurement authority and other programs 
supporting entrepreneurship, such as our partnership with the 
International Franchise Association. CVE utilizes volunteers in Federal 
agencies and corporations as our local resources.
    The strongest sentiment expressed since we last met in May is a 
memory from the Accountability Conference. After participating in 
several hours of Action Group dialogue, a very young owner said to the 
founders of this program, Vietnam generation veterans, ``I appreciate 
everything you have done to clear the way for my business.'' This is 
the current state of the Federal Veterans Entrepreneurship Program. We 
have reached a moment in which we have some very robust businesses with 
good revenues and good experience. It is time to step forward and 
support our Global War on Terror heroes as they create their futures, 
as employees or buisness owners.
    Madame Chairwoman, let me say that I appreciate what each of you on 
this Subcommittee is doing to improve economic opportunities for all 
veterans. On behalf of so many who would have liked to address you 
today, ``Thank you.'' Thank you again for convening today's hearing and 
for your judicious oversight of this important program. I welcome your 
interest and I am prepared to answer any questions that you or the 
Members may have.


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Prepared Statement of Paul A. Denett, Administrator, Office of Federal 
          Procurement Policy, Office of Management and Budget
    Chairwoman Sandlin and Members of the Subcommittee, thank you for 
the opportunity to appear before you today to discuss the current state 
of Federal procurement and opportunities for veteran-owned small 
businesses. My remarks will focus on government-wide efforts to improve 
opportunities for small businesses, including small businesses owned 
and controlled by service-disabled veterans, consistent with my 
responsibilities as Administrator for the Office of Federal Procurement 
Policy (OFPP).
    Let me begin by assuring you that my office is committed to 
providing maximum opportunities for small businesses in Federal 
contracting and subcontracting. In January 2007, Small Business 
Administration Administrator Steve Preston and I sent a memorandum to 
the heads of Departments and agencies, highlighting some of the 
progress we have made and urging agencies to do more to create 
contracting opportunities for service-disabled veterans. I am well 
aware that small businesses account for nearly half of America's 
overall employment and that small businesses create the overwhelming 
majority of new jobs in this country. As an Army veteran, one of the 
first actions I took upon becoming Administrator for Federal 
Procurement Policy was to create a Deputy Administrator position, with 
responsibility for small business contracting. This emphasizes the 
importance my office places on working with the Small Business 
Administration (SBA), Departments, and agencies to meet the objectives 
of the Administration's small business agenda and to create an 
environment where small businesses can flourish. Some of the actions we 
are taking to achieve these results are described below.
Small Business and Veteran-Owned Small Business Procurement
    I am pleased to say that in fiscal year 2005 the Federal Government 
awarded a record $79 billion in prime contracts to small businesses. 
That represents a $10 billion increase from the previous fiscal year. 
Contracting opportunities increased for all statutory types of small 
businesses.
    In October 2004, the President signed Executive Order 13360, 
requiring agencies to take several actions to significantly increase 
contracting opportunities for service-disabled veterans. In fiscal year 
2005, contracts to small businesses owned and controlled by service-
disabled veterans (SDVOSBs) increased significantly, reaching $1.9 
billion, up from $1.2 billion in fiscal year 2004. That represents an 
increase of 58 percent. Real progress has been made and more efforts 
are underway. Although official government-wide small business data has 
not been released by SBA for fiscal year 2006, we understand that 
preliminary data indicates that both SBA and the Department of Veterans 
Affairs exceeded the three percent goal for contracting with SDVOSBs.
    The General Services Administration (GSA) recently announced 
contract awards to forty-four SDVOSBs, with a potential value of over 
$5 billion, under GSA's Veterans Technology Services (VETS) government-
wide acquisition contract. This week, I sent a memorandum to Department 
and agency chief acquisition officers and senior procurement executives 
(copy attached), urging them to review their agencies' information 
technology requirements and the services provided by service-disabled 
veterans under the VETS contract to determine if the contract can meet 
their needs. I recently had the privilege of speaking to service-
disabled veterans who were awarded contracts under the VETS GWAC and I 
was impressed with their diligence and the quality of the services that 
they provide. I vowed to encourage Departments and agencies to use 
these contracts. I am particularly pleased that the VETS GWAC promotes 
the development of new and emerging SDVOSBs by encouraging SDVOSBs to 
form teams and joint ventures that enable them to pool their resources 
and capabilities to perform larger and more complex tasks. I understand 
that six of the VETS GWAC contractors have formed joint ventures while 
others have developed prime/subcontractor relationships. VETS GWAC 
contractors can add additional SDVOSB team partners during the life of 
their contracts.
    We expect Federal contracting with service-disabled veterans to 
continue to increase as Departments and agencies use the VETS contract 
to meet various information technology requirements. Agencies are also 
using other contracts to increase opportunities for service-disabled 
veterans. I understand that GSA used its Streamlined Technology 
Acquisition Resources (STARS) GWAC to award a $200 million contract to 
Catapult Technology, a service-disabled veteran-owned contractor that 
also is recognized under SBA's ``8(a)'' business development program. 
Under that contract, Catapult will create an enterprise-wide technology 
infrastructure for GSA's new Federal Acquisition Service. Catapult was 
recently awarded a contract under the VETS GWAC as well.
Federal Acquisition Regulation (FAR) Small Business Team
    On March 2, 2007, we formed a FAR Small Business Team to focus on 
small business issues and coordinate with SBA on concurrent SBA and FAR 
rulemaking. Changes to small business procurement rules oftentimes 
require amending two sets of regulations (i.e., SBA's rules in Title 13 
of the Code of Federal Regulations (CFR) and the FAR, which is codified 
in Title 48 of the CFR). This is necessary because SBA has jurisdiction 
over various small business programs under the Small Business Act, and 
the FAR Council has statutory jurisdiction over the FAR. Even though 
SBA implements small business policy in its regulations, small business 
procurement policy is not ultimately effective until issuance of a 
corresponding FAR amendment. Usually, in the past, corresponding SBA 
and FAR rules were promulgated consecutively. This lengthened the 
rulemaking process, sometimes doubling it.
    We created the FAR Small Business Team to reduce the time necessary 
to issue a FAR final rule, thus effectively implementing both SBA and 
FAR policy. We expect the FAR Small Business Team to work on all 
significant small business procurement regulations. SBA will work with 
the Team to identify, as early as possible in the regulatory process, 
any SBA regulations that may require simultaneous implementation in the 
FAR.
Small Business Procurement Scorecard
    My office has been working with SBA to develop a scorecard to help 
agencies focus on increasing small business opportunities. Last 
November, SBA Administrator Steve Preston and I sent letters to the 
heads of Departments and major procuring agencies--announcing the Small 
Business Procurement Scorecard, and advising agencies that their 
progress and status on small business contracting would be scored in 
fiscal year 2007. Since that time, SBA has been working with various 
Departments and agencies to improve small business procurement data 
accuracy, prior to using the data to help ``score'' agencies. I worked 
with Administrator Preston to increase the number of SBA's procurement 
center representatives (PCRs). This should give agencies more 
opportunities to improve their scoring, since PCRs help agencies to 
create and develop more small business opportunities. I understand that 
SBA plans on using the Scorecard and data to ``score'' agencies on 
their small business procurement achievements this summer.
Small Business Data
    We rely upon data submitted by Departments and agencies to the 
Federal Procurement Data System (FPDS), the official repository for 
Federal procurement and small business contracting information. Each 
Department and agency is responsible for submitting accurate data to 
FPDS and verifying the accuracy of such data. On March 9, 2007, I sent 
a memorandum to agency Chief Acquisition Officers requiring that they 
establish agency-wide, statistically valid, procurement data 
verification and validation procedures and provide a certification of 
data accuracy and completeness to GSA each year. To further emphasize 
the importance of data integrity, I asked agencies to send their first 
annual statements of data verification and validation to OFPP by 
December 15, 2007. We are currently working to place this new 
certification requirement in the FAR.
    Additionally, SBA Administrator Stephen Preston and I issued a 
memorandum to the heads of Departments and agencies on September 26, 
2006 asking that they work closely with SBA to correct or reconcile 
apparent data inaccuracies and reporting discrepancies. To help improve 
future small business data, SBA and my office developed a regulation 
that requires small businesses to recertify their size status during 
the performance of a contract (SBA's recertification regulation).
SBA's Recertification Regulation
    SBA's recertification regulation was published in the Federal 
Register on November 15, 2006, with an effective date of June 30, 2007. 
Historically, SBA's regulations called for determination of small 
business size status when firms submitted their initial offers. Firms 
maintained their size status for the duration of contracts. However, 
agencies are increasingly using long-term contracts that, with options, 
can extend for up to twenty years. SBA's recertification regulation 
applies to these long-term contracts. The regulation requires a small 
business holding a contract over five years to recertify its size 
status after the fifth year and any option extensions thereafter. If a 
business becomes large at the time of recertification, the firm does 
not lose the contract. However, the contracting agency no longer 
receives small business credit for that contract. The SBA regulation 
also requires that small businesses--regardless of the length of their 
contracts--recertify their size status if the small businesses are 
merged with, or are acquired by, other businesses.
Conclusion
    Madam Chairwoman and Members of the Subcommittee, the 
Administration is committed to providing maximum opportunities for 
small businesses in Federal contracting and subcontracting. The Federal 
Government awarded a record $79 billion to small businesses, with $1.9 
billion awarded to small businesses owned by service-disabled veterans. 
While this is a significant increase, we know that more needs to be 
done. We will continue to work with Departments and agencies to ensure 
that they increase their contracting with small businesses, including 
businesses owned by service-disabled veterans. This concludes my 
prepared remarks. I am happy to answer any questions you might have.

                                 
   Prepared Statement of Charles Cervantes, Special Assistant to the 
   Director, Office of Small Business Programs, Office of the Under 
 Secretary of Defense for Acquisition, Technology and Logistics, U.S. 
                         Department of Defense
    Good afternoon Chairwoman Sandlin and Members of the Committee on 
Veterans' Affairs.
    Since my appointment some three years ago, I have been the Program 
Manager for the Service-Disabled Veteran-Owned Small Business Program 
(SDVOSBP). I am pleased to be here and present the Department of 
Defense's (DoD) views on the SDVOSB Programs.
    The DoD reiterates our support for the government-wide goal of 
three percent of all prime contract awards and subcontract awards for 
SDVOSBs. The initial legislation was without certain tools to 
accelerate the process. It was not until 2003 when Public Law 108-183 
provided the set-aside authority that DoD could begin to strategize on 
reaching these goals. These goals are stated in correspondence dated 
June 7, 2007 from Secretary Gates to Senator John Kerry and affirmed in 
several policy memoranda from DoD acquisition officials. The most 
recent statements have been made by the Under Secretary for 
Acquisition, Technology & Logistics, Kenneth Krieg on April 12, 2007, 
the Director, Defense Procurement and Acquisition Policy, Shay Assad on 
May 18, 2007 and the Director, Office of Small Business Programs, 
Anthony Martoccia on May 22, 2007. Since his appointment as the new 
Director of Small Business Programs, Mr. Martoccia has focused his 
attention on the Service-Disabled Veteran-Owned Small Business Program 
to provide greater opportunities to SDVOSBs.
    The Office of Small Business Programs (OSBP) in the DoD provides a 
Strategic Plan with six objectives in support of achieving the 
government-wide goals for the SDVOSB. Those six objectives are 
summarized as:

      More effective use of data and databases to perform 
market research for potential SDVOSBs
      Training of acquisition community to increase use of 
restricted competition and sole source awards to SDVOSBs
      Focus on SDVOSB firms that can bring innovative 
technology to meet the needs of the warfighter
      Increase prime subcontracting with SDVOSBs
      Leave surety bonding solutions to the marketplace
      Use teaming and joint ventures to increase capacity and 
enhance capabilities of SDVOSBs

    The OSBP Strategic Plan is transmitted to the Small Business 
Administration and published on the OSBP website at www.acq.osd.mil/
osbp/programs/veterans.
    The third year edition of the Strategic Plan was signed on June 23, 
2007 and incorporates the successes and lessons learned from previous 
years. For example, the number of SDVOSBs in the Central Contractor 
Registration (the CCR) data base has increased from 4,005 in FY 04 to 
nearly 10,000 today. The amount of awards has increased from 
$428Million in FY 04 to $1.6Billion in FY 06. To facilitate further 
growth for SDVOSBs, additional data bases will be utilized, such as the 
Center for Veterans Enterprise VIP at www.vetbiz.gov, the 
TVCbusinessdirectory and the veteransbiznetworks reachable through 
www.veteranscorp.org. Market research reflects the use of these 
additional data bases will improve the procurement process for DoD 
acquisition officials.
    DoD plans to increase the utilization of the set aside and sole 
source authorities provided by Public Law 108-183, as codified at 48 
CFR 19.14. This will allow a contracting official to set-aside 
procurements if there is a reasonable expectation that there are two or 
more capable SDVOSBs who can provide the goods or services at a fair 
market price. DoD is exploring the use of the set-aside authority for 
military hospitals and military cemeteries for SDVOSBs.
    Under Secretary Krieg, in his April 12, 2007 memorandum, requests 
that the DoD acquisition community participate in the General Services 
Administration Veterans Information Technology Government-wide 
Acquisition Contract (GWAC) ``with vigor''. See www.gsa.gov/vetsgwac. 
DoD participation in the Vets GWAC will be implemented in concert with 
the Department's Memorandum of May 18, 2007 by Shay Assad, the Director 
of Defense Procurement and Acquisition Policy, which requires 
justification of the use of non-DoD contracts. In advancing this 
participation, GSA trained 100 DoD acquisition officials on May 22, 
2007 on how to implement the GSA Vets GWAC at the annual Small Business 
Training Conference.
    With regard to other training, the Defense Acquisition University, 
has upgraded the original 2004 online SDVOSB training module this year. 
More than 1,100 acquisition officials have taken one or the other of 
these courses. In addition, DoD has posted 42 power point training 
modules from its December 2006 conference, ``Veterans Doing Business 
with DoD'' and in concert with DAU and the Veterans Corporation has 
posted eight video streaming modules for training. This creates a 
robust website for distance learning at no cost to the user.
    Along with the above training, senior DoD officials have made a 
concerted effort to publicize the commitment for continued performance 
improvement throughout the DoD acquisition community and related 
conferences that included DoD acquisition officials, SDVOSBs and 
industry. Most recently, the Deputy Under Secretary for Acquisition & 
Technology, the Honorable James I. Finley, addressed the Third Annual 
Veterans Small Business Conference on June 26, 2007. There were some 
1,350 attendees who heard Dr. Finley's address. Over the course of the 
last three years since the inception of the Strategic Plan, DoD has 
participated in some 50-60 conferences either as a sponsor, speaker, 
panelist, moderator or attendees describing the SDVOSB program.
    Additionally, in an effort to monitor the progress made toward 
reaching the three percent goal, the Deputy Under Secretary for 
Acquisition & Technology, will meet on a quarterly basis with senior 
acquisition executives of the Military Departments.
    Increasing the amount of subcontract awards made by large DoD prime 
contractors is another key objective of the DoD/OSBP Strategic Plan. 
Substantial progress has been made and last year some $717 Million in 
subcontracts was awarded to SDVOSBs by DoD prime contractors. In 
December of 2006, DoD participated in a conference entitled ``Veterans 
Doing Business with DoD'', which was keynoted by Deputy Under Secretary 
Finley that had a panel of three large DoD prime contractors. The prime 
contractor executives each made informative presentations on how 
SDVOSBs could contract with them with detailed presentations. These 
presentations are posted on the OSBP website for SDVOSBs to pursue 
subcontracting opportunities. At the June, 2007 conference, three 
different large DoD prime contractors made similar presentations on how 
SDVOSBs can subcontract with them.
    DoD is considering the establishment of an award that will 
acknowledge the DoD personnel who have performed best under objective 
criteria to reach or surpass the three percent goal. This award will 
provide an incentive for DoD acquisition personnel to reach or exceed 
the three percent goal within their command.
    The Five Year SDVOSB Strategic Plan is a framework by which DoD 
seeks to reach the three percent goal. DoD will continue to seek 
initiatives that can accelerate the increase in prime contract and 
subcontract awards to SDVOSBs and will continue to review, analyze and 
adjust the plan on an annual basis. Rather than paraphrase the 
elements, we are attaching the plan.
    We have attached copies of the policy memoranda mentioned above and 
the most recent edition of the Strategic Plan for your review. I will 
be pleased to answer any questions you might have during my oral 
presentation.
    Thank you.
    Attachments as stated.

                                 
 Statement of John R. Wheeler, Executive Vice President, Veteran Corps 
                               of America
    Chairwoman Sandlin and distinguished Members of the Subcommittee, I 
am pleased to have the opportunity to make this statement of support 
for the efforts of the U.S. Army to meet and exceed the 3 percent 
procurement goal for contracting with Service Disabled Veteran Owned, 
or SDVO, small businesses. In particular, we recognize the efforts of 
the U.S. Army Office of Small Business Programs led by Ms. Tracey 
Pinson and LTC James Blanco. They are the face of the Army to small 
businesses, always showing up to answer our questions, making 
themselves accessible, and often forced to address tough issues on the 
spot. I am here to tell you if you do not already know that they do so 
with passion, day-in and day-out.
    My brother, Captain Bill Wheeler, was medically retired from the 
Air Force in 1995 after a traumatic brain injury ended his dream of a 
thirty-year military career some twenty years and a few days earlier 
than planned. Our Grandfather, Air Force Colonel William M. Long, was a 
thirty-three year veteran who flew thirty-one bombing missions over 
Europe in a B-24 Liberator and later numerous successful missions as a 
P-51 fighter pilot. In fact, a plane he flew hangs today at the 
Smithsonian's Air and Space Museum not so far from here. Our family's 
military heritage includes over a dozen decorated veterans of the Army, 
Air Force, Marine Corps and Navy. This legacy of military service led 
to our founding of the Veteran Corps of America with the primary 
mission to create jobs for veterans, with particular focus on disabled 
veterans.
    In the short time since our incorporation on January 21, 2005, the 
Veteran Corps of America has provided supplies and services to over 
twenty Federal, State and Local Government agencies as well as a 
growing number of their prime contractors. We were fortunate to be a 
winner of both functional areas of the new GSA Veterans Technology 
Services Government-Wide Acquisition Contract, or VETS GWAC, and now 
hold several GSA schedules. This month we delivered our tenth small 
order to the Army, matching the ten Air Force bases we have supported 
thus far. As of the end of June, the Veteran Corps has booked 2007 
sales of nearly $1.5M, up from only $15,025 in all of 2005.
    We are exclusively partnered with the Purple Heart's Veterans 
Business Training Center to hire home-bound combat wounded and service 
disabled veterans they recruit and train to support Government 
contracts. This training is fully accredited and made available to 
veterans as part of the VA's Vocational Rehabilitation and Employment 
Service. Together with the Purple Heart's Veterans Call Center, we are 
able to provide robust call center capability utilizing home-bound 
veterans located throughout the United States, and indeed all over the 
world. Today, some 150 disabled veterans have been trained, 75 are in 
training and nearly 3,000 have registered for future classes, a number 
of which are Wounded Warriors injured in combat after 9/11. Every 
dollar paid to them either in training or employment compensation 
multiplies many times over as many of these Patriots transition back 
into fully productive lives as workers, consumers and taxpayers, 
leaving unemployment and disability in their wake. We are currently 
pursuing a number of call center opportunities within the Army that we 
appreciate have been set aside by Army procurement officers for 
competition limited to service disabled veteran owned small businesses.
    As one of the leading purchasers in the Federal Government, the 
Army is the largest market for our goods and services. Correspondingly, 
they have the toughest assignment when it comes to meeting procurement 
goals for all types of small businesses. In ``failure,'' the Army 
spends more money with service disabled veteran and veteran owned small 
businesses than any organization on Earth. While they have not yet 
reached the minimum 3 percent standard, their identification of over 
$1.7B of upcoming opportunities for service disabled veteran owned 
small business is unprecedented for any small business contracting 
program. However, now more than ever, their contracting community needs 
your assistance to be successful on the scale necessary to achieve and 
exceed the 3 percent standard.
    On June 20, 2007 Public Law 109-461, the Veterans Benefits, Health 
Care and Information Technology Act of 2006 became effective. This 
legislation gave the Department of Veterans Affairs additional 
procurement tools to enable them to much more easily contract with 
service disabled veterans. Simply stated, at the VA service disabled 
and veteran owned companies are now at the top of the contracting 
ladder. Now, if an SDVO can perform a requirement under $5M it can 
easily be sole sourced to them if they are a responsible contractor and 
propose a fair and reasonable price. Moreover, for requirements over 
$5M where one or more SDVO companies are identified as capable, the VA 
contracting officer now ``shall'' set aside that contract for SDVOs and 
as he or she is no longer encumbered by the more nebulous direction 
``may.''
    The point today is simple. Give these same tools to the United 
States Army. Reauthorize the Army exactly the same way you reauthorized 
the Department of Veterans Affairs. Do not wait to make these critical 
changes until consensus can be reached on every topic related to the 
Small Business Act that will then take another year or more to be 
implemented. Make these small, simple changes to the Army and DoD's 
procurement authority and enable the same sweeping culture change you 
have enabled within the Department of Veterans Affairs.
    My Grandfather, General Earle G. Wheeler, started his Army career 
in 1932 upon graduation from West Point. Thirty-eight years later he 
retired after serving as Chairman of the Joint Chiefs of Staff for an 
unprecedented six years under Presidents Kennedy, Johnson and Nixon. 
Personally, my brother and I have ridden in the family car to a funeral 
at Arlington National Cemetery eight times. This heritage of service 
requires that we accept nothing less than the full commitment of the 
U.S. Army to support service disabled veterans. We applaud the Army's 
Office of Small Business Programs for their years of hard work and the 
measurable success they have achieved over the past two fiscal years. 
We are convinced the simple changes we encourage you to make will 
provide the final push--the right tools if you will-- to enable the 
Army to meet and exceed the SDVO contracting mandate. A goal to which I 
know through experience they are fully committed.
    In closing, I paraphrase something I heard at the National Veterans 
Small Business Conference a few weeks ago by saying that veterans are 
the faces of America. No other group is more diverse, more accepting of 
that diversity, nor more able to function effectively together because 
of it. You and I know it, the American public knows it and the Army 
knows it and thrives because of it. Helping veterans succeed in 
business helps all of America and makes all Americans proud. Please 
assist the Army in their ongoing efforts to support service disabled 
veteran owned small businesses.
    I thank you again for this opportunity to appear before you today. 
This concludes my testimony and I welcome your questions today or in 
the future.

                                 
  Statement of Richard F. Weidman, Executive Director for Policy and 
            Government Affairs, Vietnam Veterans of America
          ``The willingness with which our young people are likely to 
        serve in any war, no matter how justified, shall be directly 
        proportional as to how they perceive the Veterans of earlier 
        wars were treated and appreciated by their Nation.'' --George 
        Washington

    Good afternoon, Madam Chairwoman, Ranking Member Boozman and 
distinguished Members of the Subcommittee. Thank you for giving Vietnam 
Veterans of America (VVA) the opportunity to offer our comments for the 
record regarding veteran owned small business and service disabled 
veteran owned small businesses and procurement by the Federal 
Government.
    Madam Chairwoman, overall the executive branch has done a very 
uneven job thus far of carrying out their responsibilities under Public 
Law 106-50 in regard to all of the efforts they are supposed to be 
making under all three laws enacted since this time in 1999. SBA also 
can and must do a better job of meeting their responsibilities pursuant 
to the terms of Executive Order (E.O.) 13-360 (issued in October or 
2004).
    While the situation is somewhat better today than a year ago 
despite some recent gestures made by the current SBA Administrator, and 
his apparently more open attitude toward proper treatment of veterans 
on the part of the Honorable Steve Preston. In my statement to you on 
May 17th, almost two months ago, I set forth a number of 
recommendations. Those recommendations were:

    1.  Create a dedicated section in the contracts office with at 
least the same number of contract specialists devoted to 8(a) 
contracting. (It is worthy noting that there are 12,700 service 
disabled veteran owned businesses listed on the VIP at VA, while there 
are less than 7,400 certified 8(a) businesses. Since there are many 
more SDVOSB than 8(a), having the same number of contract specialists 
does not seem to be too much to ask.)
    2.  The Administrator should take steps to create a capital 
formation program specifically for VOB, with an emphasis on SDVOSB. 
This should not be just for ``start up capital'' but also for so-called 
``mezzanine funding'' to help businesses expand to a sustainable phase 
beyond the first few years of the small start phase.
    3.  As noted below, the $25 million dollars that The Veterans' 
Corporation people have been running all over Capitol Hill seeking 
should be added to the budget of the Veterans Business Development 
Office for use primarily as grants to localities to operate projects 
and expand existing services to better reach veteran entrepreneurs and 
would-be entrepreneurs. These grants should go to expand services of 
particularly effective Small Business Development Centers, to ensure 
that there is continued funding for such efforts as the fine project in 
St. Louis operated by Pat Heavey, and for special projects reaching out 
to wounded servicemembers or to veterans for purposes of helping them 
become self-employed or to start micro businesses.
    4.  The Administrator should issue a long overdue Administrator's 
Order implementing all of the statues that have been enacted in the 
past eight years, plus putting more teeth into Executive Order 13-360 
in regard to services delivered by SBA or funded through SBA.
    5.  The Administrator should undertake a review of all SBA programs 
to ensure that veterans, particularly disabled veterans, are receiving 
full and proper access and maximum services from each of the SBA 
services and programs for which those individuals would otherwise be 
eligible. In other words, for example, this internal review, and 
appropriate corrective action as needed, would determine if women 
veterans were being properly reached in numbers commensurate with their 
incidence in the population and given the full range of services 
available to the maximum extent legally permitted.
    6.  The Administrator should specifically review all that is being 
done for those citizens serving in the National Guard or Reserves who 
activated, and determine what more can be done under existing law to 
better assist these individuals, and work with the Congress and The 
White House to determine what else can and should be done by changing 
the law or by Executive Order.
    7.  Closely related to the above point, but slightly different, is 
that we as a Nation have to figure out how we can better support those 
businesses who have National Guard and Reserves members as employees 
who are now subject to frequent deployments for longer periods of time. 
This is a matter of national defense, but it is also a veterans re-
employment and employment issue because the negative side of hiring and 
employing those who serve in the National Guard and Reserves is being 
disproportionately borne by a relatively small segment of the employer 
community. It is also having a negative impact on veterans' employment 
and on the advancement of those who are employed within their company. 
This is the real world, where the bottom line must be addressed, and 
not the ideal world of what is fair, so we must find practical ways to 
solve this problem.
    8.  The Associate Administrator for Veterans Business Development 
and all other officials of the SBA (and other agencies for that matter) 
should by this point know better than to keep saying in public and in 
private that ``there are not enough service disabled veterans to do the 
3 percent contracting, they are not sophisticated enough to do the 
work, and we have to teach these poor old veterans how to compete'' 
before we can move forward on contracting and sub-contracting goals, or 
with other programs that would better enable veterans to have access to 
capital or international markets. Frankly, none of this is true, and 
these negative stereotype ``straw men'' set up by those who continue to 
say these things are a manifestation of ``VETism'' or an ugly set of 
prejudices and stereotypes that is every bit as ugly and inappropriate 
as sexism or racism.

    To the credit of Administrator Preston, he has moved to create a 
capital formation program for veterans and their spouses, as 
recommended, albeit only a pilot program at this point. The mere fact 
that he has created the ``Patriot Express'' loans speaks well of his 
sincerity and intent to do a better job for veterans. However, he must 
not stop there, but undertake, a review of all SBA programs to see how 
SBA can do a better job for veterans, and issue an Administrator's 
order that will implement many of the things that will help which can 
be accomplished under existing law. Further, issuing an Administrator's 
order that implements all aspects of P.L. 106-50, P.L. 108-183, and 
P.L. 109-461 that either fall under SBA purview or in which SBA can 
assist, and which incorporates other worthwhile changes as well as 
meets his responsibilities more fully under the Executive Order 13-360 
is very much needed.
    Of all of the things that need to be done, for the purposes here 
today there are two things that can and must be accomplished soon if we 
are to make real progress toward stepping up the pace of achieving a 
government wide ``floor'' of 3 percent of all contracts and 3 percent 
of all subcontracts going to SDVOSB. The first is that either SBA 
should do the thorough analysis need of the procurement plans submitted 
as required by the Executive Order and see that said plans are 
complete, viable, and publicly available as required or seek assistance 
from the Center for Veterans Enterprise at VA to do the analysis for 
them. The plans were due in February and it is now July and they still 
are not available to the public. It is time for SBA either lead, follow 
VA, or get out of the way and seek changes with the Office of Federal 
Procurement Policy give the whole responsibility over to VA to get it 
done. The second thing that must be done is, as was promised many 
months ago by the SBA, the information contained in the SF 294s and SF 
295s pertaining to subcontracting plans and actual results of said 
subcontracting by major prime contractors needs to be available to the 
public. This involves where public taxpayer dollars are spent, and it 
must be made public now. There is no longer any excuse for delay.
    The simple and clear conclusion of any observer is that the law 
which states that 3 percent of all contracts and 3 percent of all 
subcontracts issued by the Federal Government are intended to go to 
service disabled veteran owned small businesses (SDVOSBs) has thus far 
not proven to be effective as originally envisioned.
    I refer you to the fine statement of my fine colleague, Joe Wynn of 
the VETS Group here today for many of the details of the analysis and 
hard work of the participants in the Veterans Entrepreneurship Task 
Force regarding the 3 percent procurement requirement and actual 
performance of the Federal agencies. You will note that there has been 
much work on the part of many determined advocates to work 
cooperatively with the governmental entities.
Centralized Source and Certification
    VVA strongly recommends that there be one centralized data base 
that is THE place to go for Federal contract officers and other Federal 
decision-makers to find qualified Veteran Owned businesses and SDVOSBs 
that are owned and operated by veterans or service disabled veterans 
respectively. We urge that this one place be the Vendor Information 
pages (VIP) at vetbiz.gov at the Center for Veterans Enterprise (CVE) 
at the VA.
    There is need for this to be a strong, well run, and easily 
accessible site so that not only Federal officials can access it, but 
also that large prime contractors can find SDVOSBs and that VOBs and 
SDVOSBs can find each other to do business where appropriate. This site 
is also needed so that private sector corporations can also both easily 
access it, and rely on the certification of authenticity. Many would 
use SDVOSB if they knew where to find such companies.
    We urge that this be the one place and the only place for such 
certification in the Federal Government. It is puzzling that SBA does 
not even have a link to VIP on their Web site, which causes us to think 
that there may be some at SBA who are still more interested in ``turf'' 
issues than in getting the job done. We urge Administrator Preston to 
correct this problem immediately.
    It would also be helpful if VA were authorized to allow VOBs and 
SDVOSBs who list on the VIP to also list the profile of their 
employment practices. In other words, how many service disabled 
veterans they have as employees, how many veterans, how many VOB or 
SDVOSB or active duty spouse, etc. out of their total workforce. If a 
VOB or SDVOSB wants to list this information, then CVE should be 
authorized to verify this data, just as they verify veteran status and 
ownership and control of the business.
    It is, by the way, imperative that VA acts quickly to issue 
complete and strong regulations to implement all aspects of P.L. 109-
461. While we have great confidence in the intent and determination of 
Secretary R. James Nicholson, and Deputy Secretary Mansfield, VA is a 
large and complex organization. Therefore the regulations must be 
strong, complete, and have accountability measures built into them that 
holds all within that VA structure accountable for meeting or exceeding 
the intent of the law, as well as the letter of the law. Perhaps either 
a bi-partisan letter toward that end or even a meeting would be in 
order to help move along this process.
Additional Tools
    Government wide adoption of legislation analogous to the VOB and 
SDVOSB procurement provisions of P.L. 109-461 are needed through every 
authorizing committee in the congress. The Veterans Entrepreneurship 
Task Force has made this a major goal, and will be concentrating on 
this, beginning with the Department of Defense, to accomplish this for 
each aspect of the Federal Government before the end of the 110th 
Congress.
    This would get rid of the rule of two, give officials the tools 
they need to achieve results, and give veterans our level playing field 
we have been seeking. Of course, we probably won't get the pecking 
order that VA has established but we will have a real sole source 
program and a better chance of penetrating these agencies.
Department of Defense
    The Department of Defense controls more than half of all Federal 
procurement, and until this year has not been as determined as was 
needed to meet the requirements of the law and of the president's 
Executive Order. To be fair, they have had many conferences, workshops, 
and provided tools such as mentoring for some that have been useful, 
but until now did not really seem to be serious about this issue.
    The Deputy Undersecretary of Acquisition & Technology, the 
Honorable James Finley, has now taken the lead, and with the apparent 
full support of Secretary Gates, is moving ahead with a seven plus one 
plan to move DoD into compliance with the 3 percent minimum. (See 
attached) Both VVA and the VET-Force salute Mr. Finley for stepping up 
to the plate and providing the sorely needed strong leadership needed 
to get DoD moving in the right direction. The recent DoD-VA Veterans 
Small Business Conference in Las Vegas was a sold out and very 
successful conference run by Ms. Tracey Pinson of the United States 
Army and Mr. Scott Denniston of the VA. Mr. Finley's address there 
signaled that it is a new day at DoD, and one that is heading in the 
right direction. Although all of us will certainly keep up the 
pressure, hopefully we can now spend more time working cooperatively 
with all officials on how best to achieve earliest results as opposed 
to whether to move forward.
    Many thanks for allowing us to share our views for the record, and 
for the strong bi-partisan leadership that this Subcommittee continues 
to exert.
                               __________
[The attached report addressed to Members of Congress from the Small 
        Business Administration's Advisory Committee on Veterans 
        Business Affairs, is being retained in the Committee files.]
                               __________


[GRAPHICS NOT AVAILABLE IN TIFF FORAMT]



          POST-HEARING QUESTIONS AND RESPONSES FOR THE RECORD
                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                     August 7, 2007

Mr. Paul A. Denett
Administrator
Office of Procurement Policy
Office of Management and Budget
725 17th Street, NW
Washington, DC 20503

Dear Mr. Denett:

    In reference to our House Committee on Veterans' Affairs 
Subcommittee on Economic Opportunity hearing on Federal Procurement and 
the Three Percent Set Aside on July 12, 2007, I would appreciate it if 
you could answer the enclosed hearing questions by the close of 
business on September 3, 2007.
    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 materials 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.
    Please provide your response to Orfa Torres by fax at 202-225-2034. 
If you have any questions, please call 202-225-9756.

            Sincerely,
                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
                  Question for Paul A. Denett From the
            Honorable Stephanie Herseth Sandlin, Chairwoman,
                  Subcommittee on Economic Opportunity

 Hearing on Federal Procurement and the Three Percent Set Aside, July 
                                12, 2007
    1. Please provide any background information available on the SBA 
recertification regulation implemented June 30, 2007.
    The Small Business Administration (SBA) coordinates implementation 
of statutory small business procurement goals, including the goal of 
achieving 23 percent Federal Government contracting with small 
businesses. For many years, SBA regulations allowed Federal agencies to 
count contracts awarded to small businesses as ``small'' for the 
duration of the contract, even if the small business grew to be large 
or was subsequently purchased by a large business. This policy worked 
well when contracts typically had a short duration, generally from one 
to five years. But, today some contracts have performance periods of up 
to twenty years. The accurate counting of almost $12 billion in Federal 
contracting with small businesses has been questioned. The vast 
majority of questioned contracts are a result of small businesses being 
purchased by larger businesses, small businesses growing larger during 
the contract, or errors in data entry.
    SBA worked closely with my office, the Office of Federal 
Procurement Policy, to issue regulations that increase the accuracy of 
data on Federal contracting with small businesses. The regulations 
consist of a regulation issued by SBA and published in the Federal 
Register on November 15, 2006 and an interim rule amendment to the 
Federal Acquisition Regulation (FAR) published in the Federal Register 
on July 5, 2007. The purpose of the SBA regulation is to address 
situations where a small business was ``small'' at the time of contract 
award but, over the course of the contract, has become other than a 
small business. SBA's regulation requires a small business that 
represented itself as ``small'' at the time of contract award to 
represent its size status again for: 1) contracts regardless of 
duration--within 30 days after a merger with, or acquisition by, 
another business; and 2) contracts over five years in duration--within 
60 to 120 days prior to the end of the fifth year of the contract and 
within 60 to 120 days prior to exercise of a contract option. Necessary 
changes were made to the FAR to implement SBA's regulation.

                                 

                                     Committee on Veterans' Affairs
                               Subcommittee on Economic Opportunity
                                                     August 2, 2007

Mr. Anthony R. Martoccia
Office of Small Business Programs
U.S. Department of Defense
Crystal Gateway North
Suite 406--West Tower
201 12th St. South
Arlington, VA 22202

Dear Mr. Martoccia:

    In reference to our House Committee on Veterans' Affairs 
Subcommittee on Economic Opportunity hearing on Federal Procurement and 
the Three Percent Set Aside on July 12, 2007, I would appreciate it if 
you could answer the enclosed hearing questions by the close of 
business on September 3, 2007.
    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 materials 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.
    Please provide your response to Orfa Torres by fax at 202-225-2034. 
If you have any questions, please call 202-225-9756.

            Sincerely,
                                          Stephanie Herseth Sandlin
                                                         Chairwoman
                               __________
                      Hearing Date: July 12, 2007
                             Committee: HVA
                 Member: Congresswoman Herseth Sandlin
                         Witness: Mr. Cervantes

    Question #1: What percent of the targeted three percent goals has 
the Department of Defense awarded to Service-Disabled Veteran-Owned 
Small Businesses?

    Answer: Preliminary data for Fiscal Year 2006 indicates 
approximately $1,587,554,573 or .67 percent of eligible total 
Department of Defense (DoD) prime contract dollars to U.S. firms have 
been awarded to service-disabled veteran-owned small businesses.
    In addition, approximately $718.8M or .7 percent of subcontracted 
dollars under DoD contracts has been awarded to service-disabled 
veteran-owned small businesses.

    Question #2: How many DoD acquisition officials do you employ and 
how many have been educated on existing laws and agency policies?

    Answer: Within the Department of Defense (DoD), the occupational 
series ``acquisition'' encompasses fifteen individual career fields. I 
assume by use of the term ``acquisition official'' you are referring to 
the contracting career field, which includes both contracting officers 
and contract specialists. As of September 30, 2006 there were 27,742 
contracting officers and contract specialists under the employment of 
DoD.
    With the enactment of Public Law 101-510, the Defense Acquisition 
Workforce Improvement Act in Fiscal Year 1992 (10 U.S.C. 1701 et seq.), 
DoD contracting officers and specialists must generally meet minimum 
education and training requirements. To that end, the DoD Office of 
Small Business Programs has worked with the Defense Acquisition 
University to develop several on-line courses pertaining to contracting 
with small business. In addition, representatives from the DoD Office 
of Small Business Programs have participated in two very well-received 
Web casts concerning contract bundling and subcontracting policies and 
procedures.

    Question #3: You state that the Deputy Under Secretary for 
Acquisition & Technology will be meeting with senior executives of the 
military departments to ensure progress of the three percent set aside. 
Has the Under Secretary met with these officials in the past and what 
has been the result?

    Answer: Deputy Under Secretary Finley met with the Service 
Acquisition Executives (SAE) for the Army and the Navy on July 17, 2007 
and August 21, 2007, respectively. The SAEs for the Army and the Navy 
both agreed to place even greater emphasis on contracting with service-
disabled veteran-owned small business.
    On September 5, 2007 Dr. Finley is scheduled to meet with the SAE 
for the Air Force. Dr. Finley anticipates the same level of commitment 
from the Air Force as he has already received from the Army and the 
Navy.

    Question #4: Do prime contractors normally meet the details of 
their small business contracting plans?

    Answer: Generally, yes.

    Question #5: What prevents prime contractors from meeting the small 
business contracting plans and how is DoD working to change that?

    Answer: The challenge for prime contractors is the need to balance 
the requirement to increase small business subcontracting with the 
efficient performance of the contract. Increasing small business 
participation may require the prime contractor to forego making an item 
or performing a service in-house, or reduce reliance on favorable 
existing supplier agreements.
    The Department of Defense (DoD) uses several techniques to 
encourage prime contractors to assist in developing small business 
firms and increasing subcontracting opportunities. The Defense Federal 
Acquisition Regulation Supplement requires contracting officers to 
evaluate prime contractor subcontracting performance in acquisitions 
when contract award is based on best value and a subcontract plan is 
required. Also, the prime contractor's past performance in meeting the 
requirements of small business subcontracting plans is documented in 
the DoD past performance information system and utilized during source 
selection. Additionally, when contracts offer performance incentives, 
DoD encourages inclusion of small business participation as a criterion 
for earning the incentive award. Moreover, the DoD Pilot Mentor-Protege 
Program and the Small Business Innovative Research and Small Business 
Technology Transfer Programs (SBIR/STTR) are utilized to assist and 
develop small and disadvantaged business concerns.

    Question #6: What is the normal penalty in failing to meet the 
small business contracting plans?

    Answer: The mere fact that a prime contractor was not able to meet 
its subcontracting goals does not give rise to sanctions. However, 
section 8(d) of the Small Business Act provides for liquidated damages 
to be paid by a prime contractor when the prime contractor fails to 
make a good faith effort to comply with the requirements of the small 
business subcontracting plan.

    Question #7: Do you think that the ``Rule of Two'' should be 
eliminated?

    Answer: No. We believe the ``Rule of Two'' is an important and 
workable acquisition tool.

    Question #8: Are there any loopholes in the GSA schedule that need 
to be fixed as noted by the veteran buisness owners?

    Answer: I am unaware of any loopholes in any General Services 
Administration schedule.

    Question #9: In your testimony you write that, the ``Five Year 
SDVOSB Strategic Plan'' is a framework by which DoD seeks to reach the 
three percent goal? When do you foresee DoD meeting the three percent 
goal?

    Answer: The Secretary of Defense has made achievement of the 
service-disabled veteran-owned small business (SDVOSB) goal one of his 
highest priorities. The Director of the Department's Office of Small 
Business Programs is working within the ranks of the Defense Department 
and with the Department of Veterans Affairs to develop innovative 
strategies to move us toward achievement of the service-disabled 
veteran-owned small business goal. Given the uncertainties associated 
with Defense procurement however, I cannot predict when the 3 percent 
goal will be reached.

    Question #10: You have been an ex-officio member of TVC's Board of 
Directors for three years. You mention that TVC is handling the 
important role of Bonding in your statement. It has been alleged in a 
previous hearing that TVC is not following the law as outlined in P.L. 
106-50, is that your belief of what is happening?

    Answer: I have attended quarterly and annual meetings of the 
National Veterans Business Development Corporation (TVC) for the 
Department of Defense for the past three years. I did not observe 
anything at those meetings that would indicate to me that the TVC was 
not following P.L. 106-50.

    Question #11: How critical is TVC to the future of DoD's Bonding 
initiatives for Disabled Veterans?

    Answer: The Department discontinued its own initiative to develop a 
program to increase surety bonding coverage to Service-Disabled 
Veteran-Owned Small Businesses because the National Veterans Business 
Development Corporation (TVC) has a very similar initiative that is 
achieving the same objective. Hence, the TVC is essential to increasing 
the number of service-disabled veteran-owned small businesses that are 
able to obtain bonding.

    Question #12: In your opinion, is a public/private partnership with 
the Bonding community the only answer to finding bonding for Service-
Disabled Veteran-Owned Businesses?

    Answer: My answer assumes that ``public/private partnership'' 
refers to the National Veterans Business Development Corporation's 
(TVC) work with bonding companies. In my opinion, the TVC has proven 
very effective in obtaining bonding for Service-Disabled Veteran-Owned 
Small Businesses. However, I also consider the Small Business 
Administration's Surety Bond Guarantee Program to be another good 
source of information for small businesses that are trying to locate a 
surety.