[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
LEGISLATIVE HEARING ON H.R. 2006; H.R. 2749; H.R. 2781; AND, A DRAFT
BILL, ``TO IMPROVE THE HIRING, TRAINING, AND EFFICIENCY OF ACQUISITION
PERSONNEL AND ORGANIZATIONS OF THE DEPARTMENT OF VETERANS AFFAIRS, AND
FOR OTHER PURPOSES''
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
THURSDAY, JUNE 29, 2017
__________
Serial No. 115-20
__________
Printed for the use of the Committee on Veterans' Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.fdsys.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
29-688 WASHINGTON : 2018
COMMITTEE ON VETERANS' AFFAIRS
DAVID P. ROE, Tennessee, Chairman
GUS M. BILIRAKIS, Florida, Vice- TIM WALZ, Minnesota, Ranking
Chairman Member
MIKE COFFMAN, Colorado MARK TAKANO, California
BRAD R. WENSTRUP, Ohio JULIA BROWNLEY, California
AMATA COLEMAN RADEWAGEN, American ANN M. KUSTER, New Hampshire
Samoa BETO O'ROURKE, Texas
MIKE BOST, Illinois KATHLEEN RICE, New York
BRUCE POLIQUIN, Maine J. LUIS CORREA, California
NEAL DUNN, Florida KILILI SABLAN, Northern Mariana
JODEY ARRINGTON, Texas Islands
JOHN RUTHERFORD, Florida ELIZABETH ESTY, Connecticut
CLAY HIGGINS, Louisiana SCOTT PETERS, California
JACK BERGMAN, Michigan
JIM BANKS, Indiana
JENNIFFER GONZALEZ-COLON, Puerto
Rico
Jon Towers, Staff Director
Ray Kelley, Democratic Staff Director
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
JACK BERGMAN, Michigan, Chairman
MIKE BOST, Illinois ANN MCLANE KUSTER, New Hampshire,
BRUCE POLIQUIN, Maine Ranking Member
NEAL DUNN, Florida KATHLEEN RICE, New York
JODEY ARRINGTON, Texas SCOTT PETERS, California
JENNIFER GONZALEZ-COLON, Puerto KILILI SABLAN, Northern Mariana
Rico Islands
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
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Thursday, June 29, 2017
Page
Legislative Hearing On: H.R. 2006; H.R. 2749; H.R. 2781; and, A
Draft Bill, ``To Improve The Hiring, Training, And Efficiency
Of Acquisition Personnel And Organizations Of The Department Of
Veterans Affairs, And For Other Purposes''..................... 1
OPENING STATEMENTS
Honorable Jack Bergman, Chairman................................. 1
Honorable Ann Kuster, Ranking Member............................. 3
Honorable Mike Coffman, U.S. House of Representatives............ 4
Honorable Neal Dunn, U.S. House of Representatives............... 4
Honorable Jimmy Panetta, U.S. House of Representatives........... 5
Honorable Bruce Poliquin, U.S. House of Representatives.......... 6
WITNESSES
Mr. Thomas Burgess, Associate Deputy Assistant Secretary, Office
of Logistics and Supply Chain Management, U.S. Department of
Veterans Affairs............................................... 8
Mr. Jan Frye, Deputy Assistant Secretary, Office of of
Acquisition, Logistics and Construction, U.S. Department of
Veterans Affairs, Prepared Statement Only...................... 26
Accompanied by:
Mr. Thomas Leney, Executive Director, Small and Veteran
Business Programs, Office of Small and Disadvantaged
Business Utilization, U.S. Department of Veterans Affairs
Mr. Patrick Murray, Associate Director, National Legislative
Service, Veterans of Foreign Wars of the United States......... 10
Prepared Statement........................................... 29
Ms. Kaitlin M. Gray, Assistant Director, National Veterans
Employment and Education Division, The American Legion......... 12
Prepared Statement........................................... 30
Mr. Wayne Simpson, Member, National Veterans Small Business
Coalition...................................................... 13
Prepared Statement........................................... 33
STATEMENT FOR THE RECORD
Associated General Contractors of America........................ 37
LEGISLATIVE HEARING ON H.R. 2006; H.R. 2749; H.R. 2781; AND, A DRAFT
BILL, ``TO IMPROVE THE HIRING, TRAINING, AND EFFICIENCY OF ACQUISITION
PERSONNEL AND ORGANIZATIONS OF THE DEPARTMENT OF VETERANS AFFAIRS, AND
FOR OTHER PURPOSES''
----------
Thursday, June 29, 2017
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Disability Assistance
and Memorial Affairs,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 10:00 a.m., in
Room 334, Cannon House Office Building, Hon. Jack Bergman
[Chairman of the Subcommittee] presiding.
Present: Representatives Bergman, Bost, Poliquin, Dunn,
Arrington, Kuster, Peters.
Also present: Representatives Coffman, Panetta.
OPENING STATEMENT OF JACK BERGMAN, CHAIRMAN
Mr. Bergman. Good morning, everybody. This hearing will
come to order. I want to welcome everyone to today's
legislative hearing on H.R. 2006; H.R. 2749; H.R. 2781; and a
draft bill to improve the hiring, training, and efficiency of
VA acquisition personnel and organizations.
Before I begin, I would like to ask unanimous consent for
the previous Chairman of the Subcommittee, Representative
Coffman, and our colleague, Representative Panetta from
California, to sit in on the dais and speak at these
proceedings. Without objection, so ordered.
This morning we will discuss four bills that aim to reform
different aspects of acquisition in the Department of Veterans
Affairs. This Committee has held 27 oversight hearings on VA
acquisition over the last ten years. From constructing new
buildings, to purchasing medical supplies, to procuring IT
systems, to operating the Choice program, acquisition underpins
everything VA does. The outrageous scandals of recent years are
well known. And I do not think anyone in this room today doubts
the need for improvement. In this conversation we necessarily
focus on medical purchasing and VHA as roughly 80 percent of
the department's acquisition workforce either works in VHA or
purchases on its behalf despite being employed by other
organizations.
It is wise to take our cues from the Choice Act independent
assessment, the Commission on Care, and GAO. The common thread
in their findings is while a few areas of acquisition work
well, notably pharmaceutical purchasing, VA contracts take too
long to award, fail to produce results because they are not
administered closely, and do not capture all possible savings.
They attribute the problems to confusing organizational
structures, overly bureaucratic procedures, inefficient IT
systems, and personnel challenges. I must point out that
acquisition difficulties in the Federal government are hardly
unusual. The Federal Acquisition Regulation is lengthy and
complicated. However, all agencies operated under the FAR and
many of them do so effectively. VA's difficulties may come from
the fact that unlike some other agencies, it is responsible for
all aspects of acquisition, including procurement logistics,
and construction. Each is a somewhat different situation with
its own needs. As the agency tasked with serving veterans, VA
also has requirements over and above those of other agencies to
contract with veteran owned small businesses and service
disabled veteran owned small businesses.
The current requirement, called the rule of two, has
existed for over ten years. And I am sure everyone here today
is well aware last year the Supreme Court unanimously ruled in
the Kingdomware decision that this requirement applies at all
times and to all VA purchasing. The issue is central to our
discussion today.
These legislative proposals demonstrate our bipartisan
commitment to making this important aspect of VA's operations
work properly. I thank the bills' sponsors as well as our
witnesses for being with us today to present their views. To
that end, I would like to briefly discuss the bill that I am
proud to sponsor with Ranking Member Kuster, H.R. 2749, the
Protecting Business Opportunities for Veterans Act of 2017.
This bill will help ensure contracts that are set aside for
veteran owned small business and service disabled veteran owned
small businesses actually go to companies that abide by the
rules instead of opportunists who are abusing the system.
Specifically, the bill strengthens existing prohibitions on
improper pass-throughs, which are when a company obtains a
contract but instead of performing the required percentage of
work subcontracts the work to another company while nonetheless
collecting profit. Improper pass-throughs waste tax dollars by
building in unnecessary layers of contractor profit. In VA
contracts, improper pass-throughs also take away from small
business owned by veterans and service disabled veterans and
hand it to other companies. This problem has existed before the
Kingdomware decision but since the ruling allegations of abuse
have increased.
H.R. 2749 requires that before any company is awarded a VA
contract it must certify that it will perform at least the
percentage of work required by the Small Business Act and
acknowledge that misrepresentations are subject to criminal
fraud penalties. The bill also directs VA to refer violations
or suspected violations to OIG for investigation. Finally, if
the Secretary determines after consulting with OIG that a
company did not follow the performance requirements, and did
not act in good faith, the company may be subjected to
appropriate punishment.
This bill strengthens enforcement of existing laws that are
being ignored. It does not create any new bureaucracy and its
mechanism, a certification when submitting a proposal, would
only take a few minutes to read and fill out. It seeks to give
VA a tool to make its procurement system work as intended.
I now yield to Ranking Member Kuster for any opening
statement and remarks on today's legislation that she may have.
OPENING STATEMENT OF ANN KUSTER, RANKING MEMBER
Ms. Kuster. Thank you, Chairman Bergman. I am delighted to
be here with you today. And thank you to the witnesses who are
here to provide us feedback and recommendations on how we can
improve these four bipartisan bills. Most of the work we do on
this Committee is bipartisan and I am proud to say that the
bills before us today are examples of the bipartisan way in
which we conduct business on the VA Committee.
When it comes to ensuring that taxpayer dollars are spent
to get the right supplies and services so that veterans receive
the health care and benefits they have earned, we are proud
that we do work together to support this goal. We all support
changes and reforms to make government contracting more
efficient, transparent, and fair. We are also proud to support
our service disabled veteran owned small businesses and to
ensure our government is giving them business opportunities.
For these reasons I support the legislation on the agenda today
and I am happy to be a cosponsor of two of these measures.
Chairman Bergman and I introduced H.R. 2749, the Protecting
Business Opportunities for Veterans Act, to close a loophole
that some service disabled veteran owned small business
contractors were using to bypass government contracts through
to non-veteran owned businesses. This practice is unfair to the
thousands of service disabled owned small businesses who follow
the regulations and are able to do the work only to lose out on
a contract. This bill would prevent these SDVOSBs from
subcontracting more than 50 percent of the contract to non-
veteran owned businesses. We want our disabled veteran
entrepreneurs to thrive and it is unfortunate that a small
number of individuals were attempting to game the system for
their own personal gain at the expense of disabled veteran
business owners who should receive government contracting
preferences.
I also plan to introduce draft legislation to improve VA
hiring, training, and efficiency of acquisition personnel and
its organization with my colleague from New England, Mr.
Poliquin, and with Chairman Bergman. This legislation will
require VA's procurement workforce to receive training and
certification for each general schedule pay grade. It will also
prioritize the use of VA acquisition internships to employ
entry level acquisition professionals at the VA. This will give
our veterans who want good paying job opportunities to work at
the VA as highly skilled and trained acquisition professionals.
It will also require VA to examine the procurement organization
and make some changes allowing it to operate in a way that will
best serve front line employees who are providing health care
and benefits to veterans.
I also support H.R. 2781, Ensuring Veterans Enterprise
Participation in Strategic Sourcing Act, which would make sure
more of our veteran owned small businesses are able to compete
for contracts under the Federal Strategic Sourcing Initiative;
and H.R. 2006, the VA Procurement Efficiency and Transparency
Act, that would require the reporting of cost savings from
government contract competition and the use of standardized
procurement templates VA-wide.
I look forward to hearing from our witnesses. Thank you,
Chairman Bergman, and I yield back the balance of my time.
Mr. Bergman. Thank you, Ranking Member Kuster.
To our witnesses, we will have several members providing
statements this morning. So if at some point during the hearing
any of you need to briefly be excused, please feel free to do
so.
We will now hear from Representative Coffman speaking in
support of his bill, H.R. 2006, the Procurement Efficiency and
Transparency Act. Mr. Coffman, you are recognized for five
minutes.
OPENING STATEMENT OF MIKE COFFMAN
Mr. Coffman. Thank you, Mr. Chairman, for including my
legislation, H.R. 2006, the Procurement Efficiency and
Transparency Act, in today's hearing. One of the VA's top
procurement goals is to achieve savings through competition.
But there is no uniformity in how the savings are calculated or
if they are reported at all. In fact, individual offices seem
to determine these numbers according to each office's own
policies. For example, when a VA procurement official says, we
saved so many dollars through competition, there is no surefire
way to judge his legitimacy. Often these numbers are based on
inaccurate estimates or hypothetical cost avoidances. My
legislation would mandate the use of uniform parameters for how
to calculate these savings and allows the VA to write policy
that fills in the specific details. Additionally, contracting
officers rely on templates for key documents like statements of
work and terms and conditions for their everyday duties.
Currently the VA has templates but they are disorganized and
not well maintained. To address this issue, my legislation
directs the VA to organize these templates and put them in a
central place that is accessible to all VA's procurement
offices.
Mr. Chairman, the VA has acknowledged the importance of
doing this. But they continue to struggle to get this done. My
bill gives the VA a much needed push in the right direction.
And I encourage my colleagues to support this common sense
measure.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Mr. Bergman. Thank you, Mr. Coffman. We will now hear from
Representative Dunn, who will be speaking in support of his
bill H.R. 2781, the Ensuring Veteran Enterprise Participation
in Strategic Sourcing Act.
OPENING STATEMENT OF NEAL DUNN
Mr. Dunn. Thank you very much, Mr. Chairman.
Mr. Bergman. Dr. Dunn, you are recognized for five minutes.
Mr. Dunn. Thank you very much, Mr. Chairman. H.R. 2781, the
Ensuring Veteran Enterprise Participation in Strategic Sourcing
Act is common sense legislation, which I am honored to sponsor
with my friend and fellow Member, Mr. Panetta from California.
This bill closes a loophole which inadvertently denies veteran
owned small business and service disabled veteran owned small
businesses contracting opportunities.
2781 concerns a group of contracts run by the General
Services Administration known as the Federal Strategic Sourcing
Initiative, FFSI, which enables Federal agencies to pool their
money for buying power to common items like office supplies,
janitorial products, building maintenance services. Each group
of contracts under FFSI is awarded roughly ten to 20 companies.
When an agency needs to order such products, the agency asks
for price quotes from FFSI companies, which have already been
selected and vetted, and picks one of those. The FSSI is a good
and simple method of purchasing. The only problem is with some
of the contracts in the subcategories.
These subcategories are divided in such a manner which many
only have a few, and in some cases none, no veteran or service
disabled veteran owned businesses. The VA is required to look
for veteran and service disabled veteran owned small
businesses. But in too many cases in the FFSI contracts none of
them are there to be found or too few to establish meaningful
competition.
H.R. 2781 directs the VA to implement the most logical fix,
to examine whether there are enough veteran owned small
businesses and service disabled owned small businesses for the
FSSI contracts. If there are not enough veteran contractors,
the bill directs the VA to work with GSA to add more. In no way
does the bill force other agencies to operate differently.
Instead it helps the Federal government meet the veteran owned
small business and service disabled veteran owned small
business contracting goals by giving agencies access to a
larger pool of contractors.
Some may ask why this legislation is necessary. The
loophole is obvious, at least to the veterans in these
industries who have been frustrated at being excluded from the
business opportunities under FSSI. This Subcommittee brought
this issue to the department's attention last year and it has
not been resolved. This is why Mr. Panetta and I bring this
legislation forward today. I encourage all the Members of the
Committee to support the bill. And with that, Mr. Chairman, I
yield back.
Mr. Bergman. Thank you, Dr. Dunn. Next we will hear from
Representative Panetta for his comments on H.R. 2781. Mr.
Panetta, you are recognized for five minutes.
OPENING STATEMENT OF JIMMY PANETTA
Mr. Panetta. Thank you, Mr. Chairman. I appreciate this
opportunity. It's wonderful to see you in that position,
especially as a freshman class member. It is great. Thank you.
And thank you to all the other Members of this Committee,
ladies and gentlemen.
I am proud to join my good friend and colleague,
Representative Dunn, in sponsoring H.R. 2781. The Ensuring
Veteran Enterprise Participation in Strategic Sourcing Act
would protect the veterans' preference when it comes to
awarding government contracts to veteran and service disabled
veteran owned businesses. That protection would come from a
common sense fix to an obvious loophole in the Department of
Veterans Affairs rule of two.
Currently the rule of two mandates that when the VA wants
to buy something, it must first make a determination whether
there is at least two other veteran or service disabled veteran
owned small businesses that can do the work at a fair and
reasonable price. If that determination is made, the VA then
enters into that contract for those products with those
businesses. Sometimes, however, when the VA purchases office,
janitorial, and other products through the General Services
Administration, it does not always apply the rule of two. Thus,
that is the loophole this bill addresses and fixes.
Under H.R. 2781 the Secretary of the VA, who Neal and I
actually met with this morning, must work with the GSA to
increase the number of service disabled veteran and veteran
owned small businesses represented in the contracting process.
By making it easier to contract with the VA, veteran and
service disabled veteran owned small businesses will greatly
benefit from this bill.
As veteran, Congressman Dunn and I understand the
challenges that our servicemembers face when transitioning from
military to civilian life and running their own businesses. As
Americans, we understand that we should be working to serve
those who served us. That is why, as Members of Congress,
Republican and Democrat, we are introducing this bipartisan
bill that gives our veterans more opportunity to thrive and to
serve not only the government of our country but our
communities. And that is why both Neal and I encourage our
colleagues to support this bill.
Thank you, Mr. Chairman. And I yield back.
Mr. Bergman. Thank you, Mr. Panetta. Thanks for joining us.
Mr. Panetta. Thank you.
Mr. Bergman. Now we will hear from Representative Poliquin
speaking in support of the fourth piece of legislation, a draft
bill to approve the hiring, training, and efficiency of VA
acquisition personnel and organizations. Mr. Poliquin, you are
recognized for five minutes.
OPENING STATEMENT OF BRUCE POLIQUIN
Mr. Poliquin. Thank you, Mr. Chairman, very much. I
appreciate it. I am very proud to sponsor this bill with you,
Mr. Chairman, and also with Ranking Member Kuster. You know, I
am new to this Committee, but I am already very familiar, and I
think we all are, with some of the VA contracting disasters
that we have seen throughout the country and that continue to
happen. And nobody knows more about constructing management
problems than Mr. Coffman from Colorado. The new medical center
in this district is more than $1 billion over budget and it is
still, Mr. Chairman, it is still not complete. The Inspector
General's report explains how this happened, and I encourage
everybody to read it. Because everything possible that could go
wrong did go wrong.
Now another example was right here in Washington, D.C. at
the VA Medical Center. The supply chain there, Mr. Chairman,
completely broke down. There were employees at the Washington,
D.C. Medical Center who were scrambling to borrow basic medical
supplies from other hospitals and postponing procedures. One of
the VA's reports about its own investigation quotes a logistics
employee describing the state of the organization. And I do
paraphrase here but it was something like this. The employee
said, we do not have an actual operable inventory system. It is
all manual or by hand. You have to remember we have people down
here who just are put on the spot and given a credit card and
asked to go out and buy supplies. Now that is completely
unacceptable.
Some of the VA's most important programs, like our Choice
program, Mr. Chairman, are run through contracts. The VA has
attributes these problems to early and bad contracts and are
now trying to improve the program through better contracts. But
my point is there always seems to be a problem with contracts.
And so we have got to, you know, reach out and come up with a
solution to fix this problem.
Now my bill, Mr. Chairman, tackles two of the big problems
that the VA has when it comes to acquisition. And a workforce
that does not get the training it needs in the outrageous
complicated bureaucracy that Mr. Bergman described. My bill
directs the VA to set up, very simply, a career certification
program for a logistics employee or for someone who is involved
in construction or facilities management. The department gets
to design the programs but they have to include better
training. The employee must complete courses to achieve these
certifications and they must achieve these certifications in
order to advance professionally within the VA.
Now this is not a new idea. The Department of Defense
already does this. And the VA already has a career
certification program for contracting employees. So it's time
to recognize that logistical workers and construction managers
also are important and need this training and certification.
Now my bill also directs the VA to expand its acquisition
intern programs. These are great programs to bring new college
graduates and recent veterans into the VA and to train them to
do these jobs, Mr. Chairman. We need these young people to
replace the older employees that are retiring in greater
numbers every year. Now it takes a long time, Mr. Chairman, for
all, everybody in these jobs to learn how these contracting
regulations work and how construction management and how supply
chains operate. We need to plan for the future and grow our
talent from within. So it is time to use these interim programs
as best we can to the maximum extent possible.
Finally, Mr. Chairman, my bill pays for these workforce
improvements, these training improvements, by consolidating
redundant acquisition bureaucratic problems. Now the bill sets
out ten possible areas and the Secretary of the VA gets to
decide how to do it, but it has got to happen. I encourage
everybody at the VA not to look at the consolidation as
threatening. The situation we have today is a mess and we have
got to fix it.
The Choice Act independent assessment found widespread
concern among VA employees themselves about so many different
contracting organizations doing the same things and failing to
perform up to expectations. And the GAO found too many types of
confusing policies from different places. Even the people who
write the policies couldn't keep track of it all. So it is time
to straighten this thing out. And if we do, everybody will
benefit. The department needs good acquisition talent, the best
it can get. This is not about downsizing. It is about getting
everybody in the right places and the training they need and
removing this blanket of bureaucracy that is stifling
everybody.
This bill, Mr. Chairman, is a strong first step towards
going down the pathway of acquisition reform. And I encourage
everybody on this Committee, Republicans and Democrats, to
support it.
And finally, Mr. Chairman, for the record, I would like
this statement from Associated General Contractors of America
in support of this bill. I yield back my time, thank you.
Mr. Bergman. Thank you, Mr. Poliquin. I now welcome the
Members of our panel who are seated at the witness table.
First, VA informed us yesterday afternoon of its intention to
substitute its lead witness so I wanted to note that in order
to dispel any confusion about the name on VA's written
testimony not matching that of the individual testifying for
them today.
With us today from VA we have Mr. Tom Burgess, Associate
Deputy Assistant Secretary of the Office of Logistics and
Supply Chain Management. He is accompanied by Mr. Tom Leney,
the Executive Director for Small and Veteran Business Programs
at VA. We have Mr. Patrick Murray, Associate Director of the
National Legislative Service at the Veterans of Foreign Wars.
We also have Ms. Kaitlin Gray, Assistant Director of the
National Veterans Employment and Education Division at the
American Legion. And welcome to your first testimony. Finally,
we have Mr. Wayne Simpson, a member of the National Veterans
Small Business Coalition, representing the organization. Mr.
Burgess, you are now recognized for five minutes.
STATEMENT OF THOMAS BURGESS
Mr. Burgess. Good afternoon, Chairman Bergman, Ranking
Member Kuster, and Members of the Subcommittee. On behalf of
Mr. Frye, who definitely intended to be at today's hearing, I
express his regrets at his absence due to a family tragedy
overseas yesterday.
On Mr. Frye's behalf I appreciate the opportunity to
address the Subcommittee regarding the four bills that affect
department acquisitions and veteran owned small businesses. I
am joined today by Mr. Tom Leney, Executive Director of Small
and Veteran Owned Business Programs in the Office of Small and
Disadvantaged Business Utilization.
VA is a significant contributor to the government's efforts
to ensure proportion of contracting dollars are awarded to
small businesses. According to Federal procurement records, VA
was the fourth largest Federal agency in terms of fiscal year
2016 contract spend. Out of $23.1 billion in reported contract
spend, VA awarded over 29 percent to small businesses. VA also
reported more dollars awarded to service disabled veteran owned
small businesses than all other Federal civilian agencies
combined.
Ensuring the highest quality service to veterans, improving
our acquisition processes, and complying with laws and
regulations impacting veteran owned small businesses are top
priorities for the department. We would like to comment on each
of the four bills separately.
Respecting H.R. 2006, VA does not support the bill, which
would require VA to calculate and record cost avoidance
achieved through the procurement process. This process is not
required by the Federal Acquisition Regulation, nor does it
appear to be a requirement for any other Federal agency. VA's
procurement process is not unique and should not be treated as
such by imposing this requirement on the agency.
The bill also requires development of standardized
procurement templates. The department's contract writing system
does store required clauses and applies standardized logic in
the creation of contract documents. Electronic copies of these
contracts are stored in the system and can be reused or
modified easily to meet a future need.
Regarding H.R. 2749, this bill would clarify the
performance expectations for service disabled veteran owned
small businesses and veteran owned small businesses receiving
contracts under the Veterans First contracting program
authorities. We recognize that awards to SDVOSBs and VOSBs can
provide these entrepreneurs with the resources and
opportunities they can use to develop their business according
to their own business plans and objectives. This goal will be
accomplished only if these firms perform a certain share of the
work themselves and not simply pass the work through to
others.This bill would give our regulatory action a statutory
basis by referencing Section 46 of the Small Business Act where
the limitations on subcontracting rules are currently
contained.
Finally, it would strengthen enforcement through a
certification by the awardee that it will comply with these
requirements and provide a role for VA to monitor and enforce
compliance.
With respect to H.R. 2781, VA does not support this
legislation. This bill would require the Secretary of Veterans
Affairs to certify whether there are sufficient numbers of
service disabled veteran owned small businesses and veteran
owned small businesses in each category of Federal Strategic
Sourcing Initiative contracts managed by the Office of Federal
Procurement Policy in the General Services Administration. VA
does not believe that any additional legislation is required as
proper application of the current law is sufficient to ensure
that VA does not place orders against FSSI contracts if the
rule of two is not satisfied.
Finally regarding the draft bill to improve hiring,
training, and efficiency of acquisition personnel and
organizations of the department, VA does not support the draft
bill. Section 1A requires VA to develop and implement a
training and certification program. It is not entirely clear
based on the language if this program is for more than just
acquisition personnel.
Section 2 would require the Secretary to develop a plan
that achieves cost savings from the reduction in duplication
and increased efficiency to be used to support increased
participation in the interim program, as well as the training
and certification programs. In an effort to achieve potential
savings, VA would be required to centralize procurement and
logistics employees. VA has previously provided technical
comments on this proposed legislation and does not feel it is
necessary.
VA is the only civilian agency with a dedicated training
academy. VA established a contracting intern school and a
Warriors to Workforce program to internally supplement
traditional procurement workforce recruitment. VA would like to
retain existing flexibility to modify throughput of these
programs based on evolving work load requirements. VA currently
follows OMB and OFPP acquisition program certification
requirements and does not see the need for legislation in this
area.
Thank you for the opportunity to appear before you today.
Mr. Leney and I will be pleased to answer any questions you or
other Members may have.
Mr. Bergman. Thank you, Mr. Burgess. Mr. Murray, you are
now recognized for five minutes.
STATEMENT OF PATRICK MURRAY
Mr. Murray. Chairman Bergman, Ranking Member Kuster, and
distinguished Members of the Subcommittee, on behalf of the men
and women of the Veterans of Foreign Wars of the United States
and its Auxiliary, thank you for the opportunity to present
VFW's thoughts on these proposed bills.
For years the Department of Veterans Affairs has not
uniformly tracked cost savings in the competitive bidding
process. Simple databases would allow VA to have consistent
tracking systems that would keep track of savings and allow for
enhancements across the entire contracting system. The savings
provided for VA would ultimately mean a savings for the
taxpayers and allow for money spent by VA to be better used to
support veterans.
The VFW supports the VA Procurement Efficiency and
Transparency Act and does not agree with the VA's reason to
oppose this. Everyone else not having to do it is not an
acceptable excuse.
This proposal would implement a database that would keep
track of the average bids, the winning bids, and produce a cost
savings analysis for future use. Additionally, the VFW thinks
using standardized procurement templates across the entire
department would only streamline the procurement process and
help VA become more efficient across the board.
Pass through contracts have been a problem in the veteran
owned small business community for far too long. Hardworking
veterans who are trying to advance their businesses are plagued
by others who are taking advantage of loopholes and under
scrutinizes regulations. It has been far too easy for business
owners operating in bad faith to pass off work as their own in
order to make a quick buck off the system. The VFW supports the
Protecting Business Opportunities for Veterans Act, which would
help strengthen the regulation regarding VOSBs and keep those
who abuse the system from continuing to do so.
VOSBs provide an integral part of our country's business
community. They provide veterans with the outlet to start up
their businesses and take part in our Nation's free market
system. There are, however, some bad actors who take advantage
of the veterans programs offered and try to abuse the system.
This regulation would provide the veteran small businesses
operating in good faith the opportunity to flourish by removing
these so-called VOSBs that do not adhere to the rules and
regulations. Removing these businesses that act as a pass
through for larger entities will clean out the field and give
those veterans that are doing the right thing the ability to
grow.
Certain contracts in the VA are only obtainable by certain
large corporations and smaller veteran owned businesses cannot
compete at that level. For example, contracts such as office
supplies and janitorial equipment are written in ways that
allow large suppliers to obtain the contracts but not smaller
companies. Making the contracts more open would allow the
competition and possibly more cost savings to the VA. The VFW
feels that having certain contracts unobtainable for VOSBs is
unfair for competitive contracting and is something that needs
to change. That is why the VFW supports Ensuring Veteran
Enterprise Participation and Strategic Sourcing that would help
improve the abilities of veteran small businesses to obtain
Federal contracts. This would help raise the number of veterans
working under Federal contracts and help strengthen the entire
small business community. Additionally, if the number of
contracts awarded in certain categories in too low, giving the
Secretary permission to order stoppage of those contracts
awarded that are too restrictive for veterans to participate in
is a great thing.
Regarding the draft legislation, government agencies have
been using the internship programs to move veterans into their
ranks for years and they are highly successful programs.
Thousands of veterans have joined the Federal government's
workforce through programs such as the Warriors to Workforce
program and the acquisition internship program. However, VA has
been adding veterans to their workforce at a slower rate than
some of these other programs. In recent years there have been
roughly 20 to 30 participants in VA's AIP while other agencies
are placing almost 100 candidates annually. Expanding the
program to bring dozens more veterans to VA is an excellent way
to make it a better government agency.
The VFW strongly supports expanding the AIP and this bill
would increase the number of participants, more than doubling
the current amount. The Warriors to Workforce program and the
AIP provide great pathways for veterans to join VA in
procurement or logistics supply chain management fields. More
veterans within the ranks of VA will only make it a stronger
agency as these programs provide an in depth on the job
training that results in well-rounded VA employees.
The VFW supports developing a plan to reduce duplication
and to increase efficiencies within the logistics and supply
chain management programs. This effort would reduce unnecessary
expenses for matching programs running concurrently. This cost
savings could be better spent on improving the existing
programs instead of being wastefully spent in similar efforts.
Consolidating or abolishing duplicate functions of the
Procurement and Logistics Office of the VA will help eliminate
wasteful spending and make the entire office more efficient.
Mr. Chairman, this concludes my testimony. I would be happy
to answer any questions you or Members of the Subcommittee may
have.
[The prepared statement of Patrick Murray appears in the
Appendix]
Mr. Bergman. Thank you, Mr. Murray. Ms. Gray, you are now
recognized for five minutes.
STATEMENT OF KAITLIN GRAY
Ms. Gray. Thank you, Chairman Bergman, Ranking Member
Kuster, and Members of the Subcommittee. On behalf of Charles
E. Schmidt, National Commander of the American Legion, and over
two million members, we thank you for the opportunity to
testify regarding the American Legion's position on the pending
legislation.
The American Legion sees the legislation under review today
as having the potential to improve the VA's acquisition systems
and processes. Due to the allotted time available, I will only
speak on three of the four bills listed.
H.R. 2006, the VA Procurement Efficiency and Transparency
Act, would require the VA to uniformly track cost savings in
its contracting competitions and ensure the use of standardized
contracting procedures. Currently the VA measures savings using
inconsistent local policies and disorganized templates, leading
to inaccurate contracting data and inefficient and costly
procurement results. Under this practice, the VA has misspent
billions due to its negligence and disregard for procurement
rules.
During the 114th Congress, the Subcommittee held hearings
examining the VA's flawed procurement processes, identifying
the waste of billions. The June 2016 hearing received testimony
on the significance of consistently using a uniform template
when procuring medical services for veterans from affiliated
hospitals. Testimony further revealed that negotiating these
contracts from scratch instead of using standardized contracts
resulted in inexcusable wait times, some as long as three years
to finalize. Consequently, these long wait times for contract
finalization have caused significant delays for veterans in
receiving their much needed health care.
However, this bill falls short of giving stakeholders
sufficient ability to clearly understand the alternative
spending solutions and how they might produce greater utility
for taxpayers' dollars. Specifically, this bill would only
ensure visibility into the pricing and configurations of
vendors who responded to a solicitation. Given that this would
only represent a subset of the supplier community, the end
result would be an incomplete data set, employing a strategy
that only looks at those opportunities that were evaluated.
Notwithstanding the concerns noted above, we see a modified
version of this bill producing value and utility for both the
taxpayer and the Nation's veterans. The American Legion support
H.R. 2006, with amendments.
H.R. 2749, Protecting Business Opportunities for Veterans
Act of 2017, improves the oversight of contracts awarded by the
VA to veteran owned and service disabled veteran owned small
businesses. When a VOSB or SDVOSB is awarded a contract under
the Vets First program, they are required to perform a certain
percentage of work. However, there is a longstanding problem of
improper pass throughs in that program where business profit
from the contracts while performing little to no work while
passing them off to other companies. This bill would require
participants in the Vets First program to certify that they are
performing the required percentage of work and directs the VA
to refer suspected violators to the Office of the Inspector
General. This is crucial, especially after the Kingdomware
decision. Because essentially every VA small business contract
is now set aside for the SDVOSBs and VOSBs.
The American Legion supports legislation that will provide
assistance and equal opportunity for veterans to start or grow
a small business, including establishing numerical goals for
all veterans to compete in government procurement. Therefore
the American Legion supports H.R. 2749.
H.R. 2781, Ensuring Veterans Enterprise Participation in
Strategic Sourcing Act, directs the VA to certify a sufficient
participation of veteran owned and service disabled veteran
owned small businesses and contracts under the Federal
Strategic Sourcing Initiative. This draft bill closes a
loophole in 38 U.S.C. 8127, Procurement Requirements, and
requires VA to set aside the proper amount of contracts for
veteran businesses. Currently the VA obtains much of its supply
through government wide strategic sourcing contracts run by the
GSA. In some product categories, veteran owned businesses hold
few or no contracts. VA is required to work with GSA to
increase veteran business representation on the contracts and
veterans must be given all available opportunities to pursue
that three percent allotted to SDVOSBs.
We view this draft bill as having the potential of
producing substantial benefits for the veteran business
community. However, the American Legion encourages Congress to
implement a measurement that is stronger than just sufficient.
We request that the term ``sufficient'' be changed to maximum
extent practicable. The American Legion supports this bill,
with amendments.
This concludes my testimony. The American Legion
appreciates the opportunity to comment on the bills being
considered and I would be happy to answer any questions you may
have. Thank you.
[The prepared statement of Kaitlin Gray appears in the
Appendix]
Mr. Bergman. Thank you, Ms. Gray. And as I mentioned
earlier, this is your first testimony. Little did we know, you
were going to get a concert in the background there. The
Nashville Songwriters Association is meeting with Chairman Roe
in his office. So these rooms are not exactly soundproof. So I
appreciate your persevering through the background,
unintentional background accompaniment.
Mr. Simpson, you are now recognized for five minutes.
STATEMENT OF WAYNE SIMPSON
Mr. Simpson. Thank you. Good morning, Mr. Chairman, Ranking
Kuster, Members of the Subcommittee. Thank you for all you do
for America's veterans and their families, and providing the
National Veterans Small Business Coalition with this
opportunity to share its views on legislation to strengthen the
Department of Veterans Affairs acquisitions.
The National Veterans Small Business Coalition is the
largest not-for-profit organization of its kind representing
America's veteran-owned small businesses to the Federal
Government, giving them a collective voice on legislative,
regulatory, and policy issues affecting Federal procurement. We
do so to enhance procurement opportunities for veteran small
business entrepreneurs engaged in or seeking to enter the
Federal marketplace.
Today, I would like to start my testimony concerning the
draft bill concerning improving hiring and training of VA
acquisition personnel and improving the efficiency of
acquisition organizations at VA. From our perspective, this is
perhaps the most important bill before us here today.
The National Veterans Small Business Coalition fully
supports any legislation which strengthens VA acquisition
operations, and improves the knowledge and skills of the
Department's acquisition professionals.
Procurement reform through legislation at VA is long
overdue. Although VA has a robust training program worthy of
emulation offered through the VA Acquisition Academy in
Frederick, Maryland, we believe VA's training program could
always be strengthened with curricula specifically designed to
train VA acquisition and small business personnel in the area
of socioeconomic procurement preference program goal
development, attainment, advocacy, and the use of the Veterans
First contracting program.
VA's acquisition organization structure, on the other hand,
leaves much to be desired. VA's continued decentralization
approach to its acquisition operations creates duplication of
efforts, redundant procurements, waste, and inefficiency.
Multiple VA contracting activities, all seeking to prove
themselves as value-added organizations, seek to conduct
procurements as if to compete with other contracting activities
as to which organization can do the best job. This is troubling
to VA's industry partners and has an adverse effect on SDVOSBs
and VOSBs.
It is truly dumbfounding as to why VA allows this
organizational structure to persist. Veterans and American
taxpayers certainly deserve better, and this can be
accomplished through centralizing and strengthening acquisition
leadership and programs at the Department level. As examples,
we offer the following:
VA's Strategic Acquisitions Center in Fredericksburg,
Virginia is now conducting most of VA's medical/surgical-
related procurements, these procurements having been migrated
there from the National Acquisition Center's National
Contracting Service in Hiles, Illinois. The SAC often uses
open-market procurement methods to conduct its acquisitions.
The SAC charges the Veterans Health Administration a three-
percent service level agreement fee for this privilege, as
opposed to when VHA buys using VA Federal supply schedule
contracts, which includes only a one half of one percent
industrial funding fee. In other words, VHA's cost of many
acquisitions increased from one and one half percent to three
percent of every procurement dollar spent, a 600-percent
increase.
While a two-and-one-half-cent fee increase per dollar does
not sound like it is significant, multiply this against the
millions of dollars VA spends each year on medical/surgical and
related items. Although buying through the Strategic
Acquisition Center now helps to replenish VA's supply fund, it
dramatically increases VHA's cost to use these contract
vehicles. These fees are paid by VHA from the same funding used
for the procurement, most often the medical care appropriation.
Increasing the cost to buy has to come at an opportunity cost
to VA. What is that opportunity cost?
There are those in VA which suggest these cost savings
resulting from procurements conducted by the SAC offset the
increased fees to use these contract vehicles, but no empirical
data is available to prove this assertion.
Additionally, many within and outside of the VA's
procurement community are left wondering what the mission of
the VA National Acquisition Center's National Contract Service
is now that most of its work has migrated to the SAC without a
commensurate adjusting and staffing.
Furthermore, open-market purchases undermine VA's Federal
Supply Schedule program and the revenue stream generated by the
industrial funding fee to its supply fund, which funds a large
part of VA's acquisition operations and all of VA's Office of
Small and Disadvantaged Business Utilization to include VA's
Center for Verification and Evaluation.
This is only the one of a couple of examples of the nature
of VA's decentralized and competing acquisition program where
one contracting element does not appear to communicate with
another. VA must be held to account for its acquisition
operations and demanded to improve.
With regards to VA's organizational procurement structure's
inefficiencies, VHA has established three Service Area Offices,
also known as SAOs, all of which appear to be competing within
the VA procurement community to show the value they too add.
It is our sincere hope the draft bill will begin to address
the long overdue overhaul necessary to VA's procurement
structure and operations to improve efficiency accountability
to the American taxpayers, while improving opportunities for
service-disabled veteran-owned small businesses and veteran-
owned small businesses. It seems only legislation will resolve
this decades-old problem.
Lastly, for as confusing as VA's decentralized and
dysfunctional procurement system is to even VA personnel in
many cases, imagine the significant confusion this causes for
SDVOSBs and VOSBs in the greater veteran business community at
large. While the SAC appears to be moving away from the FSS
program, VA National Acquisition Center continues to award FSS
contracts. Throw the three SAOs into the mix, and SDVOSBs and
VOSBs realize the duplicate and competing organizational
efforts make contracting with VA confusing and administratively
cumbersome.
Additionally, how does SDVOSBs or VOSBs determine which
contracting opportunities to pursue which will result in the
best return on their investment?
Fortunately, for-profit SDVOSBs and VOSBs would never
operate their respective procurement operations the way the VA
does. Congress must resolve this dysfunction, waste and
inefficiency; VA continues to demonstrate it is incapable of
doing so.
H.R. 2781 addresses participation by SDVOSBs and VOSBs in
contracts under the Federal Strategic Sourcing Initiative, our
concern is how VA will implement this legislation. VA
demonstrated in implementing its Veterans First contracting
program under Public Law 109-461, the Veterans Benefits Health
Care and Information Technology Act of 2006, its conservative
and contradictory stand on legislation benefitting veteran
small businesses. It took a Supreme Court decision to resolve
this issue.
In the case of H.R. 2781, we believe that Congress should
explicitly state in its intent that this and any other
legislation addressing VA's procurements in the context of
veteran small businesses, whereby nothing in the legislation
should be construed as relieving VA's obligation of applying
the Rule of Two. Not to do so, we believe, will likely result
in another misguided VA implementation which provides VA with a
loophole of reporting--of using the Rule of Two.
The coalition fully supports H.R. 2006, the VA Procurement
Efficiency and Transparency Act, which we believe will add
great utility in VA capturing and understanding its cost
savings. Additionally, the use of standardized templates in the
conduct of procurements VA-wide should improve the quality of
VA solicitations and the contracts awarded resulting from those
solicitations. It is clear from the quality of some of the
solicitations currently being issued, supervisory personnel are
not monitoring or reviewing the quality of those solicitations.
The National Veterans Small Business Coalition supports
H.R. 2749, the Protecting Business Opportunities for Veterans
Act of 2017. This legislation is consistent with the U.S. Small
Business Administration's amended regulations allowing for
subcontracting of opportunities with similarly situated small
business concerns without said subcontracting counting against
the prime contractor's limitations on subcontracting.
Similarly situated small business concerns are those with
the same socioeconomic procurement preference program status.
We believe H.R. 2749 would be strengthened by indicating
the context of VA procurements conducted pursuant to the
Veterans First Contracting Program that a similarly situated
SDVOSB or VOSB must have been verified by VA's Center for
Verification and Evaluation, and listed in VA's Vendor
Information Pages database. These important distinctions will
ensure verified SDVOSBs and VOSBs do not subcontract to non-
verified SDVOSBs and VOSBs, although these businesses are
similarly situated.
In closing, Mr. Chairman and Ranking Member Kuster, we
would like to call your attention to VA has flat-lined its
Service-Disabled Veteran-Owned Small Business and Veteran-Owned
Small Business goals since fiscal year 2010, despite
substantially exceeding these goals each year. We have provided
a chart to the Subcommittee which tracks VA's goals and
accomplishments for the last 11 fiscal years. You can
appreciate how disturbing this chart is to veterans and the
coalition.
Clearly, for all intent and purposes, such low goals are
truly meaningless and call into question the strength and the
effectiveness, if not the legitimacy of VA's advocacy on behalf
of veteran small businesses. VA's fiscal year 2014 goals were
not communicated to VA personnel until there was only 38 days
remaining in the fiscal year.
A recent Freedom of Information Act request revealed VA's
Secretary did not issue any goal memoranda for fiscal years
2015 and 2016, and the fiscal year 2017 goals were only issued
on May 25th of this year, with 128 days remaining in fiscal
year 2017.
We ask and hope you will use your considerable influence to
encourage the Subcommittee on Economic Opportunity to hold a
hearing for VA to explain and account for its goals and
advocacy to the Subcommittee and America's veterans.
This completes my statement and I will be happy to answer
your questions.
[The prepared statement of Wayne Simpson appears in the
Appendix]
Mr. Bergman. Thank you, Mr. Simpson.
The written statements of those who have just provided oral
testimony will be entered into the hearing record.
We will now proceed with questioning and I will reserve my
time until the end.
Ranking Member Kuster is recognized for five minutes.
Ms. Kuster. Thank you.
And I will just address my questions to the panel, but I
think Mr. Burgess perhaps would be the best to answer.
Have you become aware of any small business exploiting the
non-manufacture rule and class waiver system to become pass-
throughs and sidelining veteran-owned small businesses that are
acting in good faith?
Mr. Burgess. No, ma'am, I am not personally aware.
Ms. Kuster. Would you take that back to VA--
Mr. Burgess. Oh, absolutely, ma'am, absolutely.
Ms. Kuster [continued]. --for a response on that? Thank
you.
And do you have any concerns regarding the Secretary's role
in recommending penalties such as levying of fines or criminal
prosecution when the Secretary has found that a veteran-owned
small business has violated the legislation?
Mr. Burgess. No, ma'am, we support that.
Ms. Kuster. Okay. And if a veteran-owned small business
subcontracts out 50 percent or more of the product, goods, or
services, does that have any effect on the timing and
efficiency of the procurement?
Mr. Burgess. I don't believe it does, ma'am.
Ms. Kuster. Okay.
Mr. Burgess. I don't believe it does.
Ms. Kuster. And are you aware if any veteran-owned small
businesses that manufacture high-tech medical equipment and
what is the average percentage of work that these veteran-owned
small businesses subcontract out, do you have any information
on that, on high-tech medical equipment?
Mr. Burgess. No, ma'am. I am not aware of any small
business high-tech medical equipment manufacturers, I am not
personally aware of any.
Ms. Kuster. Okay.
Mr. Burgess. Market research hasn't indicated any.
Ms. Kuster. Okay, thank you.
To the VSOs, what impact do bad-faith actors such as pass-
through contractors have on the ability of veteran-owned small
businesses to successfully bid for Federal contracts?
Mr. Murray. Ma'am, it clogs up the system. It takes the
opportunities away from those that are operating in good faith,
trying to expand their businesses that are being kind of pushed
out, that can offer lower prices to attain those contracts only
to pass them off to a larger contractor. It keeps the people
trying to do the right thing from being able to do so.
Ms. Kuster. Thank you. And do you have any concerns
regarding the Secretary's role in recommending penalties such
as levying fines or criminal prosecution when they find a
violation?
Mr. Murray. No, ma'am.
Ms. Kuster. Okay. Thank you.
I am going to turn to the other bill, H.R. 2781, the
Veteran Enterprise Participation. Again to Mr. Burgess, would
requiring the Secretary of VA to monitor, certify, and consult
with GSA regarding the participation of veteran-owned small
businesses in the Federal Strategic Sourcing Act further
promote these veteran-owned small businesses?
Mr. Burgess. Yes, ma'am. We just don't believe that a
certification process after the fact, after GSA has awarded
those contracts is going to actually fix accountability to make
the process work the way it should work.
Ms. Kuster. What would you recommend? We have concerns.
Mr. Burgess. What we do routinely, ma'am, is we are in
constant coordination/collaboration with GSA as they are
developing these solutions. We put our requirements, as all of
the departments do, into the mix. Obviously, one of our special
requirements is a need to have SDVOSBs and VOSBs available on
those contract solutions if we are going to use them.
For whatever reason, sometimes the solutions don't allow a
GSA to put those types of firms in different contract
arrangements, and when they do not, for reasons that GSA
determines, we simply do not use that portion of an FSSI; we
defer to 8127. If we are purchasing improperly, then you should
hold us accountable for that.
Ms. Kuster. And do you have some way of reporting that back
to us? We have an oversight role, we are an Oversight and
Investigation Subcommittee of VA. How are we going to know? You
said sometimes there are some reasons why it might not happen--
Mr. Burgess. Well, what VA--
Ms. Kuster [continued]. --how do we know?
Mr. Burgess [continued]. What VA would suggest is that we
affix accountability on the category managers who actually
develop and execute the solutions, okay? They receive our
requirements, okay? And they should be the certifying party
that says, we have put in place a solution that permits all
agencies, including VA, to use our solution, which is the
Federal intent to maximize the spend and leverage the spend.
For us to certify after the fact--
Ms. Kuster. My time is up, but I am just curious about how
we would find out why it didn't happen.
Mr. Burgess. I think that is a question we would have to
get with GSA on.
Ms. Kuster. Okay. Thank you.
I yield back.
Mr. Bergman. Thank you.
Mr. Poliquin, you are recognized for five minutes.
Mr. Poliquin. Thank you, Mr. Chairman. I very much
appreciate it.
Mr. Burgess, I appreciate your comments on my draft bill,
which is entitled ``The Hiring, Training, and Efficiency of VA
Acquisition Personnel and Organizations.'' And I know in your
written testimony that it reflects on an earlier version of the
bill. We have worked with your staff and made sure that there
is an updated version of the bill that you have seen.
And so my question to you is, in the earlier version
logistics personnel were being prohibited to be supervised by
the people for whom they are purchasing things, but that
language has been removed, does that satisfy your concern?
Mr. Burgess. The draft bill includes many, many subject
areas. So in general, we need flexibility to assign people--
Mr. Poliquin. Sure.
Mr. Burgess [continued]. --in the best way possible to
achieve the mission outcomes that we desire.
Mr. Poliquin. Specifically on this issue, sir, when it
comes to making sure that logistics employees are not being
supervised by the people for whom they are purchasing things,
is that okay with you?
Mr. Burgess. Logistics people--it is absolutely fine that
logistics personnel--
Mr. Poliquin. Great. Thanks.
Mr. Burgess [continued]. --can work for--
Mr. Poliquin. All right, great. Thanks. Let's move on.
Thank you.
Do you think, Mr. Burgess, that the Acquisition Intern
Program is a good program?
Mr. Burgess. It is an excellent program.
Mr. Poliquin. Great. Do you agree that the quality of
contracting officers and logistics staff and facility managers
are in high demand in government?
Mr. Burgess. Contracting personnel are very much in demand,
logistics personnel less in demand.
Mr. Poliquin. Right. Do you believe that a lot of these
folks are expected to retire in the next five years?
Mr. Burgess. There is a sizeable portion of the logistics
population that can retire.
Mr. Poliquin. Okay. Therefore, do you agree that the intern
program at the VA, when we train young talent, many of them are
veterans is a good idea to fill these vacancies?
Mr. Burgess. Yes, sir.
Mr. Poliquin. Great. All right, so far, so good.
Why don't you think anybody at the VA would fully support
expanding this internship program?
Mr. Burgess. We have over the years expanded the internship
program to the degree that we have deemed appropriate given the
workload.
Mr. Poliquin. Okay. Well, let's talk about that. How many
interns do you think are graduating this year?
Mr. Burgess. This year I think we are only graduating 30
maybe.
Mr. Poliquin. Okay, about 30. How many vacancies are there
in these associated jobs at the VA right now, roughly,
acquisition jobs?
Mr. Burgess. Contracting jobs are approximately 2500.
Mr. Poliquin. Let me make sure I understand this. Is that
you are graduating about 30 interns and you have about 2500
jobs open in this general area?
Mr. Burgess. This year we are graduating 30. That was a
reduction in what our trend has been in the past year.
Mr. Poliquin. Okay. So it seems like you need more bodies,
right?
Mr. Burgess. We always are searching for quality
contracting officers.
Mr. Poliquin. Okay.
Mr. Burgess. The interns we have graduated to date account
for about ten percent of our contracting workforce.
Mr. Poliquin. Okay. So I'm guessing that you and I agree
that it is a good idea to expand this internship program?
Mr. Burgess. It is a good idea to expand it. The objection
we have is the fixed parameters between two to four times, we
don't think that--
Mr. Poliquin. Yeah, but you just said that you are
graduating 20 or 30 interns and you have hundreds of vacancies
in the same area; is that right?
Mr. Burgess. Our turnover in the 1102 is approximately 150
to 250 a year.
Mr. Poliquin. Okay. So why in the heck wouldn't you want to
expand it to the extent that we have recommended?
Mr. Burgess. Again, the language specifies not less than
two times and not more than four times. We just think those
parameters are arbitrary and we would like to have the
flexibility to determine what that number is commensurate with
all the other department competing requirements, including
funding for such programs.
Mr. Poliquin. Okay. Let's move on a little bit.
Mr. Simpson, I know you're here somewhere.
Mr. Simpson. Yes, sir.
Mr. Poliquin. Mr. Simpson, thank you. The other thing my
bill does is it deals with career certification programs to
improve training for logistics employees and construction
managers. You worked at the VA for 35 years?
Mr. Simpson. Almost 38, yes, sir.
Mr. Poliquin. Okay. Thank you very much for your service.
And the Department of Defense has done what we are already
talking about years ago. Do you think that this is something
the VA needs to do?
Mr. Simpson. In terms of expanding their internship
program?
Mr. Poliquin. Yeah. Not only that, but also making sure
there are certification programs for logistics employees and
construction management employees?
Mr. Simpson. I don't think it would hurt.
Mr. Poliquin. Okay.
Mr. Simpson. I think the example of how construction
management handled the facility in Aurora, Colorado, perhaps if
those professionals had been trained a little bit better that
might have prevented that from happening.
Mr. Poliquin. And maybe saved a billion dollars for the
taxpayers, right?
Mr. Simpson. Possibly.
Mr. Poliquin. It's not a bad idea. Okay.
Mr. Murray, what do you think?
Mr. Murray. Having some personal experience with what is
going on in Aurora, I think that, as Mr. Simpson said, this can
absolutely help. That situation is a perfect example of ways to
improve in a lot of ways.
Mr. Poliquin. Great.
Thank you, Mr. Chairman. I yield back my time.
Mr. Bergman. Thank you, Mr. Poliquin.
Dr. Dunn, you are recognized for five minutes.
Mr. Dunn. Thank you, General.
He runs a tight ship, so let's keep our answers short.
Ms. Gray, I understand the American Legion supports my
bill, that is H.R. 2781, but wants to amend it to go even
farther beyond getting a sufficient number of Service-Disabled
and Veteran-Owned Small Businesses on the GSA contracts; the
Legion would like to see the maximum practical on the
contracts. How might we do that and what is the maximum number,
in your mind?
Ms. Gray. Sir, thank you for the question. I will have to
get back with you on the answer for that.
Mr. Dunn. That's fine.
Mr. Simpson, it is clear from your testimony that you have
some major concerns with this process. Briefly, do you want to
add to your concerns?
Mr. Simpson. No, sir, just the fact of the redundancy in
terms of the organizational structure is very, very confusing
for people who want to do business at VA.
Mr. Dunn. Thank you.
How about you, Mr. Murray, concerns on this?
Mr. Murray. Just that we would like to see it expanded as
much as possible to include as many VOSBs as we can make
happen.
Mr. Dunn. Let me say, I am grateful to the VSOs for being
here and representing the veterans, I am grateful.
Mr. Burgess, help me understand the VA's position. Your
testimony indicated that the VA already has to give veterans
veteran business preferences, and if there aren't enough of
them on the FSSI contracts, they have to go elsewhere. Do we
agree that the FSSI contracts are good contracts, easy to use?
Mr. Burgess. FSSI is a good Federal-wide program.
Mr. Dunn. Good, good. So wouldn't the best solution be to
make sure that we have enough veteran businesses on those so
that you can satisfy your veteran contracting requirements and
continue to use those?
Mr. Burgess. That would be a good solution.
Mr. Dunn. Okay, great. The Secretary apparently issued a
memo on May 25th exempting certain VA contracts from small
business participation, I understand large-dollar, major
construction contracts. Another one was for delivery services
specifically mentioned UPS and FedEx.
Can you assure me that there are no other FSSI contracts
that are included in the exemption that was granted on May
25th?
Mr. Burgess. I will have to get back and check on that,
sir.
Mr. Dunn. We would like to have that, we want to be clear.
We don't want to sort of paint with a broad brush. We would
like to know if there are exceptions, we need to know that for
our veterans, if we could, please.
So, Mr. Burgess again, how can we work this out so that the
VA can continue to use the major contractors that they want,
but in the small business area we really are including the
veteran-owned businesses?
Mr. Burgess. We certainly will continue our collaboration
with GSA and the various category and subcategory managers that
are putting these solutions in place, we work regularly with
them. And we do not award or administer those contracts, and we
are not necessarily part of the evaluation process that awards
those contracts, but we will continue to make our desires known
that an adequate representation--
Mr. Dunn. See, you just got to a good point, you are not
really part of that process. Let's go into that. Do I
understand that the VA holds a position that it cannot work
with the GSA to increase the number of veteran businesses in
the contracts?
Mr. Burgess. We can certainly work with GSA to do that.
Mr. Dunn. Okay, so that is a misunderstanding. You are
willing to work with the GSA--
Mr. Burgess. Absolutely. We work with them all the time.
Mr. Dunn [continued]. --in order to grow the number, the
universe of veteran-owned businesses that participate?
Mr. Burgess. That is our aim, yes.
Mr. Dunn. All right. Finally, in our last minute here, can
you convince us on the panel and the VSOs who are present with
you that the VA would solve this problem without being directed
to by legislation?
Mr. Burgess. VA is not in a position to unilaterally solve
the problem. We need the cooperation of the category managers
and, frankly, some of the solutions that are in place today
where we don't have access to SDVOSBs and VOSBs is simply a
reflection that the SDVOSBs or VOSBs do not have the
capabilities in the areas that GSA has solicited for. Some of
those are geographic restrictions. Some of the solutions like
the building maintenance operations, they have multiple
categories ranging from elevator maintenance, HVAC repairs, and
when they solicit, they make awards against these categories,
and sometimes the VOSBs and SDVOSBs have either not
participated or for some reason or another have not been
awarded.
Mr. Dunn. We are in our last ten seconds, so let me just, I
guess, close before we yield by saying that I would really
like--I mean, it sounds like we are gumming up the works with
all these requirements and you have a bunch of good veteran-
owned businesses, good businessmen who want to provide good
service at a reasonable price, and I would ask you to reach out
and do everything we possibly could to work with them.
Thank you, Mr. Chairman. I yield back.
Mr. Bergman. Thank you, Dr. Dunn.
I guess I am last. It has been certainly an interesting
morning of unique sounds through the system, so we will try to
get through this here without any other issues with that.
Mr. Burgess, I would like to start with your testimony
about H.R. 2749. You noted the VA has some concerns that it
would like to address, though it apparently does not oppose the
bill. Would you like to elaborate now?
Mr. Burgess. Do you want to take that?
Mr. Leney. Mr. Chairman, it is not a case of we don't
support the bill. We share the chair's commitment to ensuring
that we eliminate pass-throughs from VOSBs who are not doing
the work.
Our concern about this bill is you would be locking into
place a situation, particularly on our supply contracts, where
VOSBs who are pass-throughs are not required to do any work at
all on a procurement and could pass the entire amount of the
procurement through, and we don't believe that that is your
intent.
Mr. Bergman. So, Mr. Simpson, would you like to comment on
that?
Mr. Simpson. I think that one of the things, as long as the
VA, what they do is consistent with what the SBA regulations
are. As a matter of fact, the National Defense Authorization
Act of 2017 tied the Secretary of Veterans Affairs' hands a
little bit about how they administer the veterans program over
there in terms of procurement, using the same definitions and
things. So since they are starting to go in the direction the
way SBA is doing things, I don't think that they should have a
definite inconsistency with what the SBA regulations are.
If you look at what SBA allows for contracting with
similarly situated firms, our concern is that an SDVOSB or VOSB
would subcontract out to a non-verified VA firm under a VA set-
aside.
Mr. Bergman. Mr. Burgess or Mr. Leney, if this bill is
enacted, how will VA use company certifications that they are
not improperly passing through the work to do a better job of
enforcing the pass-through rules?
Mr. Leney. We would apply the certification provided by the
offeror and we have mechanisms to--we have a subcontracting
review program whereby we go out and look at the actual
performance of prime contractors to make sure they are
complying with limitations on subcontracting.
Mr. Bergman. Okay.
Mr. Burgess. So we would have the ability to enforce it.
However, I would say again, on many of our contracts there
would be no requirement for the prime contractor to do any work
on the contract.
Mr. Bergman. Okay. Ms. Gray, any thoughts on that?
Ms. Gray. As far as this bill goes, sir, anything that
bolsters service-disabled veteran-owned small business or
veteran business in general the American Legion supports.
I have heard anecdotal evidence of veterans having problems
with the pass-through and if there is anything that can be done
to minimize the pass-throughs, but also keep regulations simple
for veterans who are really trying to just get into the
contracting role, I think that is all I could ask for, that is
all the American Legion could ask for.
Mr. Bergman. Thank you.
Mr. Murray, any comments?
Mr. Murray. Sir, thank you. Having some personal knowledge
of this, I think that it's things that can always be fixed,
always made better, and I think this legislation will only
continue to do that.
Mr. Bergman. Okay. Thanks.
Mr. Burgess, I was reviewing the VA's Small Business
Contracting Scorecard for fiscal year 2016. It actually got
worse from 2015; the grade is still a B, but the overall score
is down. Compared to 2014, the scores are significantly worse
in every category. Now, this is in spite of the Kingdomware
Supreme Court decision being issued in 2016, toward the end of
the fiscal year when VA, you know, was awarding many of its
contracts.
Why is VA's small business performance lagging?
Mr. Leney. Mr. Chairman, I'll answer that for you, if you
wouldn't mind. Mainly it is due to changes in our mix of
products and services.
For example, in 2016 our use of the Patient-Centered
Community Care Program went from about $1.6 billion to $2.4
billion. We have had huge increases in programs that have not
lent themselves to the use of small businesses.
Mr. Burgess. But overall, I'd like to add, I think the
number of actions has actually risen, although the absolute
dollar value has not.
Mr. Bergman. Thank you.
I see my time is about to expire here, and our colleague
and fellow Committee Member Mr. Arrington arrived right on
time.
Mr. Arrington. You know, better late than never.
Mr. Bergman. You are recognized for five minutes.
Mr. Arrington. Thank you, Mr. Chairman. And thank you,
panelists, and I apologize for being late. I would have liked
to have heard the testimony, but I have one question for Mr.
Burgess about H.R. 2006, that is Mr. Coffman's bill.
The VA, it seems to me, doesn't think it is important to
calculate the amount of money it saves by competing contracts
and recording that information. Certainly, it is possible to
pay more for better quality, I don't think anybody is going to
penalize you for doing that. So I would like to see how much
money the VA is saving through competition. Why wouldn't we
want that--
Mr. Burgess. Sir, we just don't believe that the approach
to calculating the savings provides any data that is useful in
the procurement process. It does provide a data point, but the
prices are compared during the evaluation process.
If we are going to look at savings, okay, GAO and OMB have
consistently provided guidance that says we should try to
calculate savings or cost avoidance against specific
benchmarks, so that we can have a little bit more confidence
that there are actual cost avoidance and savings, rather than
just represented by an instant competitive action, that's all.
Something like what is the lowest commercial price known and
what do we award against, that might be a more meaningful
number than just the difference of the awarded amount and an
average or median of all the offers submitted.
Mr. Arrington. So do you do that now where you provide
benchmarks, so that you can have some reference for--
Mr. Burgess. We do not do it across the board, sir, just
because we haven't seen the value in that. There are specific
categories of procurements that we look at and we report to OMB
on.
Mr. Arrington. Do you think it would be a good idea to do
it across the board? You said you didn't see any value in that.
Mr. Burgess. No, sir, I don't, because each contracting
action stands on its own. Offers are requested, bids or
proposals are submitted, and an evaluation process takes place,
and it may be a low-price award, it may be a best-value award.
The resulting number is just as I indicated, a data point, it
is not a useful reference point in terms of the procurement
process. It may be useful for future program managers to try to
determine what their budgets might want to be, but from a
contracting perspective it doesn't add any value to our
process.
Mr. Arrington. Okay.
Mr. Burgess. This is a fundamental problem that everybody
assumes that the contract is everything. Some of the problems
are that programs don't have as good of a grasp on programs
across government as they should be and that gets reflected in
a contract, but again, these data points don't add value to the
procurement process.
Mr. Arrington. Thank you, Mr. Burgess.
Mr. Chairman, I yield back.
Mr. Bergman. Thank you very much.
Well, thank you to the witnesses for your thoughtful input
today. The panel is now excused.
The testimony provided today is an important contribution
as this Subcommittee moves forward with the legislation. I
appreciate the witnesses' expertise, it is valuable to help us
refine and improve the bill texts. We can all agree that
acquisition must work properly in the VA.
I appreciate the bipartisan cooperation of all the sponsors
and cosponsors of these pieces of legislation to pursue that
end.
I ask unanimous consent that all Members have five
legislative days to revise and extend their remarks, and
include extraneous material.
Without objection, so ordered.
I would like to once again thank all of you, the witnesses,
the fellow Committee Members, and the audience members for
joining us here this morning.
This hearing is adjourned.
[Whereupon, at 11:16 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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Prepared Statement of Mr. Jan Frye
DEPUTY ASSISTANT SECRETARY
OFFICE OF ACQUISITION, LOGISTICS, AND CONSTRUCTION
DEPARTMENT OF VETERANS AFFAIRS
Good afternoon, Chairman Bergman, Ranking Member Kuster, and
Members of the Subcommittee. I appreciate the opportunity to address
the Subcommittee regarding the four bills that affect the Department of
Veterans Affairs' (VA) acquisitions and Veteran-Owned Small Businesses
(VOSBs). I am joined today by Mr. Tom Leney, Executive Director, Small
and Veteran Business Programs, Office of Small and Disadvantaged
Business Utilization.
VA is a significant contributor to the Government's efforts to
ensure a fair proportion of contracting dollars are awarded to small
businesses. According to the Federal Procurement Data System (FPDS), in
Fiscal Year (FY) 2016, VA was the fourth-largest Federal agency in
terms of contract spend. Out of $23.1 billion in FY 2016 reported
contract spend for the Department, FPDS indicates VA awarded over 29
percent to small businesses. VA also reported more dollars awarded to
Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) than all
other Federal civilian agencies combined.
These are results that translate into real dollars and real
opportunities in the hands of small businesses and Veteran
entrepreneurs. Ensuring the highest quality service to Veterans,
improving our acquisition processes, and protecting Veteran-owned small
businesses are our highest priorities. We'd like to comment on each of
the four bills separately.
H.R. 2006 - VA Procurement Efficiency and Transparency Act
VA does not support the bill. H.R. 2006 would require VA to
calculate and record cost avoidance achieved through the procurement
process. This process is not required by the Federal Acquisition
Regulation nor does it appear to be a requirement for any other Federal
agency. VA's procurement process is not unique, and should not be
treated as such by imposing this requirement on the agency.
VA's current system does not support this function, so this will
only add to the extensive documentation of the procurement process. VA
is also in the process of replacing its current contract writing
system. Based on current knowledge of the new system, and the limited
utility of adding this capability, it does not support recording this
data.
VA does not see how the historical information will be of use. The
pricing data is part of the evaluation/decision process. Once the
contractor is selected, the value of the difference between the bids is
not considered valuable to managerial decision-making. Additionally, a
difference in the awarded price and the average of offers received may
not accurately reflect an actual savings, but may be an indication that
the contractor provided an offer that significantly decreased the
company's profit in order to secure the award.
Furthermore, the reported ``savings'' derived from the calculation
methods outlined in the proposed legislation are simply a reference
point. Such a reference point might be useful in the development of
future independent government cost estimates, but are not genuine
savings because they are not being computed against any established
baseline such as most recent prior price paid, independent government
price estimate, best commercial catalog price, etc. We note that both
the Office of Management and Budget (OMB) and the Government
Accountability Office (GAO) always seek to validate claimed savings
against these types of baselines.
The bill also requires development of standardized procurement
templates. VA does not see the need for this provision. VA attempts to
standardize the procurement process as much as possible. Contracts are
written in accordance with government-wide Federal Acquisition
Regulations as supplemented by Department-wide VA Acquisition
Regulations (VAAR). These regulations standardize the overall approach
to soliciting and awarding contracts.
The Department's contract writing system stores required clauses
and applies standardized logic in the creation of contract documents.
Electronic copies of the contracts are stored in the system and can be
reused or modified to meet a future need. It is for these reasons that
we feel VA is adequately addressing the issue of standardization.
VA also seeks to leverage our buying power with National or
regional contracts. This is also a form of standardization, allowing
multiple locations to use the same contract for like needs. VA has also
been a proponent of the Federal Strategic Sourcing Initiatives. Again,
this is a form of standardization by requiring multiple locations to
use the single government solution.
H.R. 2749 - Protecting Business Opportunities for Veterans Act of 2017
This bill would clarify the performance expectations for Service-
Disabled Veteran-Owned Small Businesses (SDVOSBs) and Veteran-Owned
Small Businesses (VOSBs) receiving contracts under the Veterans First
Contracting Program authorities. While VA's program is not a ``business
development'' program in the same sense as, say, the Small Business
Administration's (SBA) 8(a) program, we recognize that awards to
SDVOSBs and VOSBs can provide these entrepreneurs with the resources
and opportunities they can use to develop their business according to
their own business plans and objectives. This goal will be accomplished
only if these firms perform a certain share of the work themselves and
not simply pass the work through to others.
Accordingly, VA incorporated the Limitations on Subcontracting into
its Veterans First Contracting Program (Veterans First) from the very
beginning. The initial implementation of Veterans First, through a June
2007 information letter issued by the Office of Acquisition &
Logistics, contained contract clause language modeled on language
applicable to SBA's small business programs. VA later incorporated the
contract clause language into the VAAR. When VA issued a package of
class deviations to the VAAR to implement changes necessary to comply
with the decision issued last summer in Kingdomware Technologies, Inc.
v. United States (Kingdomware), we included new language to incorporate
SBA's current regulation by reference, since SBA had revised its rule
based on new legislation.
This bill would give our regulatory action a statutory basis by
referencing section 46 of the Small Business Act, where the Limitations
on Subcontracting are currently contained. Finally, it would strengthen
enforcement through a certification by the awardee that it will comply
with these requirements, and provide a role for VA to monitor and
enforce compliance. Instances of suspected noncompliance would be
referred to the Office of the Inspector General (OIG) for further
action. We defer to the OIG for comment on matters within their
jurisdiction.
Section 46 of the Small Business Act, as written and as implemented
by SBA regulation, requires a contract to be classified either as
services or as supplies, based on which constitutes the greatest
percentage of the dollar value. For supply contracts, a small business
either provides products without paying more than 50 percent of the
contract value to its own suppliers or, if an eligible nonmanufacturer,
agrees to provide the product of another small business. This latter
requirement, referred to as the nonmanufacturer rule, can be waived by
SBA if there are no small business manufacturers available.
In VA's case, some of our supply contracts involve items
manufactured solely by large firms but the main benefit to be provided
by the small business awardee would be the ancillary services. These
would nevertheless be classified as supply contracts because of the
large dollar value of the items. However, since they are manufactured
by large firms, and SBA has waived the nonmanufacturer performance
requirement, these supply contracts have effectively no performance
requirement at all for the SDVOSB or VOSB awardee. Their main
competitive advantage is the services they have to offer along with
providing the items, but they have no obligation to provide any.
As an example, consider our High-Tech Medical Equipment contracts
for radiological imaging and similar devices. The dollar value of these
products is by far the dominant share of the contract value, so these
would be classified as supply contracts. SBA has already provided a
class waiver of the nonmanufacturer rule for these items, since no
small business manufacturers exist. If these were set-aside for SDVOSB
or VOSB distributors, these firms would pass-through the dominant share
of the contract value to the large business manufacturer. There would
be no requirement for them even to perform any ancillary services,
since the performance requirement for services would not apply to a
supply contract. Potentially they would collect an administrative
overhead cost and pass the entire contract value to others for
performance.
VA and SBA appreciate the bill's aim of preventing pass-throughs,
but have concerns that we would like to address with the Committee.
H.R. 2781 - Ensuring Veteran Enterprise Participation in Strategic
Sourcing Act
VA cannot support this legislation, and would like to discuss these
concerns with the Committee. This bill would require the Secretary of
Veterans Affairs certify whether there are sufficient numbers of
Service-Disabled Veteran Owned Small Businesses (SDVOSB) and Veteran-
Owned Small Businesses (VOSB) in each category of Federal Strategic
Sourcing Initiative (FSSI) contracts managed by the Office of Federal
Procurement Policy. Insufficient representation within a category would
require the Secretary to consult with the Administrator of the General
Services Administration on increasing the number of such concerns or
require VA to abstain from orders under the specific category with
insufficient representation. As such, VA does not believe that any
additional legislation is required as proper application of the current
law is sufficient to achieve the desired outcome. In other words, the
existing law does not allow VA to place orders against FSSI contracts
if the Rule of Two is not satisfied.
Furthermore, the draft legislative requirement for the Secretary of
the Department of Veterans Affairs to make certain certifications
related to the efficacy of OFPP, the General Services Administration
(GSA), and various Category Manager efforts to streamline Federal
buying practices and improve Federal business outcomes is misdirected.
If Congress desires some type of certification that VA is or is not in
a position to leverage such solutions, we believe it would be more
prudent and appropriate to have the OFPP designated Category Managers
make such a certification. This approach would properly fix
accountability on the appropriate acquisition officials for ensuring
that the solutions they develop are accessible by all potential Federal
customers. Customers, including VA, should not be critiquing the work
of category managers or contracting officers from organizations
supporting category managers after the fact. Rather, quality should be
built into the solutions up front, and solutions should be developed
that optimize Federal business outcomes.
VA, like any other Federal agency, provides our requirements,
including our unique requirements traceable to Sec. 8127, to Category
Managers, program managers and contracting officers as solutions are
developed. VA requirements are considered, but should not necessarily
drive Federal solutions. FSSI and other similar program officials build
solutions that optimize business outcomes at the Federal level. When
such solutions permit VA to participate, we actively do so. In fact,
OMB has historically and consistently rated VA as one of the top
supporters of FSSI. As an example, VA is the single largest user of the
Federal Domestic Delivery Service (DDS) strategic sourcing solution.
When, for whatever business reasons, a particular Federal solution will
not permit VA compliance with Sec. 8127, we cannot use that particular
solution.
H.R. ---- - To improve the hiring, training, and efficiency of
acquisition personnel and organizations of the Department of
Veterans Affairs, and for other purposes
VA does not support this bill. Section 1(a) requires VA to develop
and implement a training and certification program. It is not entirely
clear based on the language if this program is for more than just
acquisition personnel. Other parts of the bill reference acquisition,
supply chain and construction personnel. The training and certification
programs are to be established as quickly as practicable.
Section 1(b) of the proposed draft legislation would require VA to
prioritize use of internship programs to hire employees for entry level
positions. It does this by prescribing the number of participants VA
must matriculate through the intern schools. The goal is for VA to meet
its hiring/attrition needs with the graduating interns. Once VA
achieves this goal, the SECVA would need to certify to Congress that
the number of interns coming through the program is adequate to meet
its needs. At that time VA would be able to set the number of interns
to maintain sufficient capacity to meet hiring/attrition demand.
Section 2 would require the Secretary to develop a plan that
achieves cost savings from the reduction in duplication and increased
efficiency to be used to support the increased participation in the
intern program as well as the training and certification programs. In
an effort to achieve potential savings, VA is required to centralize
procurement and logistics employees. Under this section, VA must not
allow an acquisition or logistics employee to be in the customer's
supervisory chain of command. This would require VA to remove logistics
personnel, mostly from hospitals (approximately 5K), from their current
supervisory chains. Much of VA's acquisition personnel already report
through an acquisition supervisory chain of command, but some small
number in the Veterans Benefits Administration (VBA) and the National
Cemetery Administration (NCA) may still be reporting though their
customers chain of command.
Section 2(a)(3) requires that VA must achieve these changes through
attrition or redistribution. Under Section 2(a)(4), demotions,
furloughs, or liquidations are not allowed in order to achieve cost
savings.
VA has previously provided technical comments on this proposed
legislation and does not feel it is necessary. VA takes training,
hiring and certification of its workforce very seriously. VA is the
only civilian agency with a dedicated training academy. It established
a contracting intern school and a warriors-to-workforce program to
internally supplement traditional procurement workforce recruitment.
With regard to the number of training cohorts, VA would like to retain
existing flexibility to modify throughput of these programs based on
evolving workload requirements. VA currently follows OMB and OFPP
acquisition program certification requirements and does not see the
need for legislation in this area.
Thank you for the opportunity to appear before you today. My
colleague and I will be pleased to answer any questions you or other
Members may have.
Prepared Statement of Patrick Murray
H.R. 2006, H.R. 2749, H.R. 2781, and DRAFT LEGISLATION
Chairman Bergman, Ranking Member Kuster, and distinguished members
of the Subcommittee, on behalf of the men and women of the Veterans of
Foreign Wars of the United States (VFW) and its Auxiliary, thank you
for the opportunity to present the VFW's thoughts on these proposed
bills.
H.R. 2006, VA Procurement Efficiency and Transparency Act
For years, the Department of Veterans Affairs (VA) has not properly
tracked cost savings in the competitive bidding process. Simple
databases would allow VA to have a uniform tracking system that would
keep track of savings and allow for enhancements across the entire
contracting system. The savings provided for VA would ultimately mean a
savings for the taxpayers, and allow for money spent by VA to be better
used to support veterans.
The VFW supports this bill which would calculate and track cost
savings from competitive bidding. This proposal would implement a
database that could track the cost of the average bids, and the winning
bid, and produce a cost savings analysis for future use. Having the
ability to track cost savings is an essential tool VA can use to award
contracts more efficiently, providing more potential savings for VA in
the long run. Additionally, the VFW thinks using standardizing
procurement templates across the entire department would only
streamline the procurement process and help VA become more efficient
across the board.
H.R. 2749, Protecting Business Opportunities for Veterans Act of 2017
Pass-through contracts have been a problem in the Veteran Owned
Small Business (VOSB) community for far too long. Hard working veterans
who are trying to advance their businesses are plagued by others who
are taking advantage of loopholes and under-scrutinized regulations. It
has been far too easy for business owners operating in bad faith to
pass off work as their own in order to make a quick buck off the
system.
The VFW supports this legislation which would help strengthen the
regulations regarding VOSBs, and keep those who abuse the system from
continuing to do so. VOSBs provide an integral part of our country's
business community. They provide veterans with the outlet to start up
their businesses and take part in our Nation's free market system.
There are, however, some bad actors who take advantage of the VOSB
programs offered and try to abuse the system. This legislation would
provide the VOSBs operating in good faith the opportunity to flourish,
by removing those so-called VOSBs that do not adhere to the rules and
regulations. Removing VOSBs that act as a pass-through for larger
entities will clean out the field and give those VOSBs that are doing
the right thing the ability to grow.
H.R. 2781 Ensuring Veteran Enterprise Participation in Strategic
Sourcing Act
Certain contracts in VA are only attainable by certain larger
corporations, and smaller VOSBs cannot compete at that level. For
example, contracts for items such as office supplies and janitorial
equipment are written in ways that allow large suppliers to attain the
contracts, but not smaller companies. Making the contracts more open
would allow competition and possibly more cost savings. The VFW feels
that having certain contracts unattainable for VOSBs is unfair for
competitive contracting and this is something that needs to change.
The VFW supports this legislation that would help improve the
abilities of VOSBs to attain federal contracts. If the Department of
Veterans Affairs Secretary deems the number of VOSBs awarded contracts
under the Federal Strategic Sourcing Initiative to be insufficient, the
secretary can consult the Administrator of the General Services
Administration to increase the number of awarded contracts. This would
help raise the number of VOSBs working under federal contracts and help
strengthen the VOSB community. Additionally, if the number of contracts
awarded in certain categories is too low, the secretary can order the
stoppage of contracts awarded in that category if it is too restrictive
for VOSBs to participate.
Draft Legislation
Government agencies have been using internship programs to move
veterans into their ranks for years and they are highly successful
programs. Thousands of veterans have joined the federal government's
workforce through programs such as the Warriors to Workforce Program
and the Acquisition Internship Program (AIP). However, VA has been
adding veterans to their workforce at a slower rate through these
programs. In recent years there have been roughly twenty to thirty
participants in VA's AIP, while other agencies are placing almost one
hundred candidates annually. Expanding the program to bring in dozens
of more veterans is an excellent way to make VA a better government
agency.
The VFW strongly supports expanding the AIP. This bill would
increase the number of participants in the AIP, more than doubling the
current amount. The Warriors to Workforce Program and the AIP provide
great pathways for veterans to join VA in procurement or logistics
supply chain management fields. More veterans within the ranks of VA
will only make it a stronger agency within the federal government.
These programs provide in depth on-the-job training that results in
well-rounded VA employees at the completion of these two programs. The
VFW strongly supports increasing the number of personnel taking part in
the AIP.
The VFW supports developing a plan to reduce duplication and to
increase efficiencies within the logistics and supply chain management
programs within VA. This effort would reduce unnecessary expenses from
matching programs running concurrently. This cost savings could be
better spent on improving the existing programs instead of being
wastefully spent on similar efforts. Consolidating or abolishing
duplicate functions of the Procurement and Logistics Office of VA will
help eliminate wasteful spending and make the entire office more
efficient.
Mr. Chairman, this concludes my testimony. I will be happy to
answer any questions you or the subcommittee members may have.
Prepared Statement of Kaitlin M. Gray
EXECUTIVE SUMMARY
H.R.2006 - VA Procurement Efficiency and Support
Transparency Act
H.R. 2749 - Protecting Business Opportunities Support
for Veterans Act of 2017
H.R. 2781 - Ensuring Veteran Enterprise Support with amendments
Participation in Strategic Sourcing Act
Draft Bill - To improve the hiring, training, Support
and efficiency of acquisition personnel and
organizations of the Department of Veterans
Affairs, and for other purposes.
``PENDING LEGISLATION''
Chairman Bergman, Ranking Member Kuster, and distinguished members
of the Subcommittee, on behalf of Charles E. Schmidt, National
Commander of The American Legion, the country's largest patriotic
wartime service organization for veterans, comprising over 2 million
members and serving every man and woman who has worn the uniform for
this country; we thank you for the opportunity to testify regarding The
American Legion's position on the pending and draft legislation.
The American Legion knows that small business as the backbone of
the American economy. Small business is the mobilizing force behind
America's past economic growth and has given the United States a
competitive advantage in the global economy. Small business development
will continue to be a major factor in our nation's economic and
national security well-being as we move further into the 21st Century.
The American Legion views the legislation under review today as
having the potential to improve the Department of Veterans Affairs'
acquisition systems and processes. What follows is The American Legions
strategic perspective on the bills under consideration.
H.R.2006 - VA Procurement Efficiency and Transparency Act
To amend title 38, United States Code, to improve the procurement
practices of the Department of Veterans Affairs, and for other
purposes.
This bill would require the Department of Veterans Affairs (VA) to
uniformly track cost savings in its contracting competitions and ensure
the use of standardized contracting procedures. Currently, VA
procurement officials measure savings using inconsistent local policies
and disorganized templates, leading to inaccurate contracting data and
inefficient and costly procurement results. Under this practice, the VA
has misspent billions of dollars due to its negligence and disregard
for procurement rules. This is why it is essential to pass legislation
streamlining and modernizing VA's procurement process.
During the 114th Congress, then-Chairman of the House Veterans'
Affairs Subcommittee on Oversight and Investigations Representative
Mike Coffman, held a series of hearings examining the VA's flawed
procurement processes, identifying the waste of billions of dollars. In
March 2015, VA's Senior Procurement Executive, Jan Frye, sent a memo
addressed to then-VA Secretary Robert McDonald accusing the agency of
spending at least $6 billion a year on improper and unauthorized
procurement expenditures. In testimony given at a May 2015 House
Veterans' Affairs Committee hearing, Frye followed up by saying, ``Over
the past five years, some senior VA acquisition and finance officials
have willfully violated the public trust while Federal procurement and
financial laws were debased. Their overt actions and dereliction of
duties combined have resulted in billions of taxpayer dollars being
spent without regard to Federal laws and regulations, making a mockery
of Federal Statutes.''
The Committee's June 2016 hearing, ``VA and Academic Affiliates:
Who's Benefiting Now?,'' reviewing VA's academic affiliations with
university hospitals, received testimony on the significance of
consistently using a uniformed template when procuring medical services
for veterans from affiliated hospitals. Testimony further revealed that
negotiating these contracts from scratch instead of using standardized
contracts resulted in inexcusable wait times - some as long as three
years to finalize. Consequently, these long wait times for contract
finalization have caused delays for veterans in receiving much needed
healthcare.
The VA Procurement Efficiency and Transparency Act, as currently
written, sets out a methodology for VA to calculate and report cost
savings generated by competitive contracting. Such numbers are
calculated and recorded inconsistently now, often based on local
practices. This bill encourages the Secretary of Veterans Affairs to
make available the use of a Department-wide, standardized procurement
templates used by Veteran Affairs Central Office, the Veterans Health
Administration, the Veterans Benefits Administration, and the National
Cemetery Administration.
However, this bill falls short of giving stakeholders, like The
American Legion, sufficient ability to clearly understand the
alternative spending solutions, and how those alternatives might have
produced greater utility for taxpayer's dollars.
Specifically, this bill would only ensure visibility into the
pricing and configurations of vendors who responded to a solicitation
or quote. Given this would only represent a subset of the supplier
community (i.e., all suppliers are not contractors), the end result
would be an incomplete data set, employing a strategy that only looks
at those opportunities that were evaluated.
Additionally, this bill does not take into consideration those
interdependent solutions that are employed as a unit - but are
purchased as a standalone. For example; high-tech medical equipment and
services are procured separately by the VA - when it has long been a
commercial best practice to combine the purchase - thus producing the
cost efficiency opportunity that results from the `total-lifecycle-
solution-management' approach this acquisition strategy affords.
Furthermore, this bill does not take into consideration the fact
there may be both tangible and intangible benefits associated with VA
paying a higher price for products or services sourced through Veteran-
Owned Small Business (VOSB) or Service-Disabled Veteran-Owned Small
Businesses (SDVOSBs). Therefore, the resulting numbers would be unduly
skewed and not reflect actionable data (i.e., should VA adopt such a
social contracting/pricing practice in the future.).
According to Resolution No. 154, ``The American Legion will support
development and passage of federal, state, and local veteran business
development legislation to provide assistance to all veterans,
including disabled veterans and members of Reserve Components of the
United States military to ensure equal opportunity for veterans to
start or grow a small business, including establishing numerical goals
for all veterans to compete in government procurement.'' \1\ The
American Legion supports legislation to ensure equal parity for all
veterans in all small business government contracting programs, thus
ensuring no veteran procurement program is at a disadvantage.
---------------------------------------------------------------------------
\1\ The American Legion Resolution No. 154 (2016): Support
Reasonable Set-Aside of Federal Procurements and Contracts for
Businesses Owned and Operated by Veterans
---------------------------------------------------------------------------
Notwithstanding the concerns noted above, we see a modified version
of this bill producing value and utility for both the taxpayer and this
nation's veterans.
The American Legion supports H.R.2006 with amendments.
H.R. 2749 - Protecting Business Opportunities for Veterans Act of 2017
To amend title 38, United States Code, to improve the oversight of
contracts awarded by the Secretary of Veterans Affairs to small
business concerns owned and controlled by veterans, and for other
purposes.
When a Service-Disabled Veteran-Owned Small Business or Veteran-
Owned Small Business (VOSB) is awarded a contract under VA's Vets First
Program, they are required to perform a certain percentage of the work.
However, there is a longstanding problem of improper ``pass-throughs''
in the program where businesses profit from the contracts while
performing little or no work while passing them off to other companies
to complete.
H.R. 2749 would require participants in the Vets First Program to
certify that they are performing the required percentage of work and
directs VA to refer suspected violators to the Office of the Inspector
General (OIG) for investigation. Making this a more explicit part of
OIG's mission should encourage them to devote more resources to it.
This is crucial (after Kingdomware) because essentially every VA small
business contract is now set aside for VOSBs/SDVOSBs. \2\
---------------------------------------------------------------------------
\2\ Kingdomware Technologies, Inc. v. United States, 579 US --
(2016).
---------------------------------------------------------------------------
The bill also directs the VA Secretary to consider whether existing
administrative and criminal penalties for fraudulent representation
would apply in each case. By protecting VOSBs and SDVOSBs that play by
the rules from bad actors that are abusing the system, this bill would
improve opportunities for our nation's veterans. Resolution No. 154:
Support Reasonable Set-Aside of Federal Procurements and Contracts for
Businesses Owned and Operated by Veterans, supports legislation that
will provide assistance to all veterans, including disabled veterans
and members of Reserve Components of the United States military to
ensure equal opportunity for veterans to start or grow a small
business, including establishing numerical goals for all veterans to
compete in government procurement. \3\
---------------------------------------------------------------------------
\3\ The American Legion Resolution No. 154 (2016): Support
Reasonable Set-Aside of Federal Procurements and Contracts for
Businesses Owned and Operated by Veterans
The American Legion supports H.R. 2749.
H.R. 2781 - Ensuring Veteran Enterprise Participation in Strategic
Sourcing Act
To direct the Secretary of Veterans Affairs to certify the sufficient
participation of small business concerns owned and controlled by
veterans and small business concerns owned by veterans with service-
connected disabilities in contracts under the Federal Strategic
Sourcing Initiative, and for other purposes.
The American Legion recognizes the contribution small businesses
make to the American economy, which is why we are committed to working
with the Small Business Administration's Office of Veterans Business
Development to support and foster the community of veteran small
business owners. The American Legion stands behind the concept that to
have successful partnerships between the Small Business
Administration's Office of Veterans Business Development and small
businesses owned by veterans, the following three criteria are
paramount.
Ensuring all federal agencies meet the 3 percent standard
Service Disabled Veteran Owned Small Business utilization;
Ensuring there are effective programs in place that allow
responsible Access to Capital; and
Igniting the entrepreneurial spirit within the veteran's
community and to educate them.
This bill closes a loophole in 38 USC 8127 procurement requirements
and requires VA to set aside the proper amount of contracts for VOSBs/
SDVOSBs. Currently, VA obtains its office supplies, janitorial
products, and other commodities through government-wide strategic
sourcing contracts run by the General Services Administration (GSA). In
some categories of these products, VOSBs/SDVOSBs hold few or no
contracts. VA is required to work with GSA to increase VOSB/SDVOSB
representation on the contracts and veterans must be given all
available opportunities to actively pursue the 3 percent standard
allotted to SDVOSBs.
We view this bill as having the potential of producing substantial
benefits for the VOSB and SDVOSB community. However, The American
Legion encourages Congress to implement a measurement that is stronger
than ``sufficient.'' We request that term ``sufficient'' be changed to
``maximum extent practicable.''
Resolution No. 154: Support Reasonable Set-Aside of Federal
Procurements and Contracts for Businesses Owned and Operated by
Veterans, supports legislation that will provide assistance to all
veterans, including disabled veterans and members of Reserve Components
of the United States military to ensure equal opportunity for veterans
to start or grow a small business, including establishing numerical
goals for all veterans to compete in government procurement. \4\
---------------------------------------------------------------------------
\4\ The American Legion Resolution No. 154 (2016): Support
Reasonable Set-Aside of Federal Procurements and Contracts for
Businesses Owned and Operated by Veterans
The American Legion supports this H.R. 2781 with amendments.
Draft Bill
To improve the hiring, training, and efficiency of acquisition
personnel and organizations of the Department of Veterans Affairs, and
for other purposes.
This draft bill will direct VA to expand its acquisition intern
programs and increase training for facility management and logistics/
supply chain employees. Many other agencies receive the majority of
their entry-level acquisition employees from their intern programs
which include a full-time developmental job for recent graduates or
veterans. This program also benefits from veterans' preference and
direct hiring authorities. Additionally, the graduate's sign continuing
service agreements which offer the VA a stable workforce. Although the
VA has other intern programs, they usually produce only 20-30 graduates
annually.
The American Legion supports legislation that will increase the
employee capabilities at the VA. We feel that recent graduates and
veterans bring much needed new talent into the VA. These intern
programs will only help strengthen the VA with talented new employees,
which will help veterans in the long run.
Resolution No. 305: Support the Development of Veterans On-The-Job
Training Opportunities, supports any legislations that increase
training programs for eligible veterans in the public and private
sectors. \5\
---------------------------------------------------------------------------
\5\ The American Legion Resolution No. 305 (2016): Support the
Development of Veterans On-The-Job Training Opportunities
The American Legion supports this draft bill.
Conclusion
As always, The American Legion thanks this subcommittee for the
opportunity to explain the position of the over 2 million veteran
members of this organization. For additional information regarding this
testimony, please contact Mr. Larry Lohmann at The American Legion's
Legislative Division at (202) 861-2700 or [email protected].
Prepared Statement of Wayne A. Simpson
Mr. Chairman, Ranking Member Kuster, Members of the Subcommittee,
thank you for all you do for America's Veterans and their families, and
for providing the National Veterans Small Business Coalition with this
opportunity to share its views on legislation to strengthen U.S.
Department of Veterans Affairs (VA) Acquisitions.
The National Veterans Small Business Coalition is the largest not-
for-profit organization of its kind representing America's Veteran-
owned small businesses to the Federal government, giving a collective
voice to these businesses on legislative, regulatory, and policy issues
affecting Federal procurement. We do so to enhance procurement
opportunities for veteran small business entrepreneurs engaged in, or
seeking to enter, the Federal Marketplace.
Today, I would like to start my testimony discussing the draft bill
concerning improving hiring and training of VA Acquisition Personnel
and improving the efficiency of acquisition organizations in VA. From
our perspective, this is perhaps the most important bill before us
today.
The National Veterans Small Business Coalition fully supports any
legislation which strengthens VA's acquisition operations and improves
the knowledge and skills of the department's acquisition professionals.
Procurement reform through legislation at VA is long overdue. Although
VA has a robust training program worthy of emulation offered through
the VA Acquisition Academy in Frederick, MD, we believe VA's training
program could always be strengthened with curricula specifically
designed to train VA acquisition and small business personnel in the
area of socioeconomic procurement preference program goal development,
attainment, advocacy, and use of the Veterans First Contracting
Program.
VA's acquisition organizational structure on the other hand, leaves
much to be desired. VA's continued decentralized approach to its
acquisition operations creates duplication of efforts, redundant
procurements, waste and inefficiency. Multiple VA contracting
activities, all seeking to prove themselves as value-added
organizations seek to conduct procurements as if to compete with other
contracting activities as to which organization can do the best job.
This is troubling to VA's industry partners and has an adverse effect
on SDVOSBs and VOSBs. It is dumbfounding as to why VA allows this
organizational structure to persist. Veterans and the American
taxpayers certainly deserve better, and this can be accomplished
through centralizing and strengthening acquisition leadership and
programs at the department level. As examples, we offer the following:
VA's Strategic Acquisition Center (SAC) in Fredericksburg, VA, is
now conducting most of VA's medical/surgical related procurements,
these procurements having migrated there from VA's National Acquisition
Center's National Contract Service in Hines, IL. The SAC often using
open market procurement methods to conduct its acquisitions.
The SAC charges the Veterans Health Administration (VHA) a three
percent Service Level Agreement Fee for this privilege, as opposed to
when VHA buys using VA's Federal Supply Schedule Contracts, which
includes only a one-half of one percent Industrial Funding Fee. In
other words, VHA's cost on many acquisitions increased from one-half of
one percent to three percent of every procurement dollar spent, an
increase of 600%. While a two and one-half cent fee increase per dollar
spent does not sound significant, multiply this against the billion
plus dollars VHA spends each year on medical/surgical and related
items.
Although buying through the SAC now helps replenish VA's Supply
Fund (38 U.S.C. Sec. 8121) it dramatically increases VHA's costs to
use these contract vehicles. These fees are paid by VHA from the same
funding used for the procurement, most often the Medical Care
Appropriation. Increasing its costs to buy has to increase VHA's
opportunity costs-what does VHA give up in terms of its opportunity
costs? There are those at VA which suggests the costs savings resulting
from procurements conducted by the SAC off-set the increased fees to
use these contract vehicles, but no empirical data is available to
prove this assertion.
Additionally, many within and outside of VA's procurement community
are left wondering what the mission of the VA National Acquisition
Center's National Contracts Service is now that most of its work has
migrated to the SAC, without a commensurate adjustment in staffing.
Furthermore, open market procurements undermine VA's Federal Supply
Schedule Program and the revenue stream generated by the Industrial
Funding Fee to its Supply Fund, which funds a large part of VA's
Acquisition operations, and all of VA's Office of Small and
Disadvantaged Business Utilization, to include VA's Center for
Verification and Evaluation.
This is but only a couple of examples of the nature of VA's
decentralized and competing acquisition program, where one contracting
element does not appear to communicate with another. VA must be held to
account for its acquisition operations, and demanded to improve.
With regards to VA's organizational procurement structure's
inefficiencies, VHA has established three ``Service Area Offices'' also
known as ``SAOs'' all of which appear to be competing within the
greater VA procurement community to show the ``value'' they, too, add.
It is our sincere hope the draft bill will begin to address the long
overdue overhaul necessary of VA's procurement structure and
operations, to improve efficiency, accountability to the American
taxpayers, while improving opportunities for SDVOSBs and VOSBs. It
would seem only legislation will resolve this decades-old problem.
Lastly, for as confusing as VA's decentralized and dysfunctional
procurement structure is to even VA personnel in many cases, imagine
the significant confusion this causes for the SDVOSB and VOSB community
at large. While the SAC appears to be moving away from the FSS Program,
VA NAC continues to award FSS contracts. Throw the SAOs into the mix,
SDVOSBs and VOSBs realize the duplicative and competing organizational
efforts make contracting with VA confusing and administratively
cumbersome. Additionally, how does a SDVOSB or VOSB determine which
contracting opportunities to pursue which will result in the best
return on their investment? Fortunately, a for-profit SDVOSB or VOSB
would never operate their respective procurement operations the way VA
does. Congress must resolve this dysfunction, waste and inefficiency,
as VA continues to demonstrate it is incapable of doing so.
H.R. 2781 addresses participation by service-disabled veteran-owned
and veteran owned small business in contracts under the Federal
Strategic Sourcing Initiative. Our concern is how VA will implement
this legislation. VA demonstrated in implementing its Veterans First
Contracting Program under Public Law 109-461, the Veterans Benefits,
Healthcare and Information Technology Act of 2006, its conservative and
contradictory stand on legislation benefiting Veteran small businesses.
It took the Supreme Court of the United States to resolve this issue.
In the case of H.R. 2871, we believe the Congress should explicitly
state its intent in this and any other legislation addressing VA
procurements in the context of Veteran small businesses, whereby
nothing in the legislation should be construed as relieving VA's
obligation of applying the ``Rule of Two'' consistent with the court's
decision to all competitive VA procurements. Not to do so, we believe,
will likely result in another misguided VA implementation which
provides VA with a loophole in applying the ``Rule of Two.''
The coalition fully supports H.R. 2006, the ``VA Procurement
Efficiency and Transparency Act,'' which we believe will add great
utility in VA capturing and understanding its cost savings.
Additionally, the use of standardized templates in the conduct of
procurements VA-wide should improve the quality of VA solicitations and
the contracts awarded resulting from those solicitations. It is clear
from the quality of some solicitation issued, supervisory personnel are
not monitoring or reviewing the quality of solicitations issued.
The National Veterans Small Business Coalition supports H.R. 2749,
the ``Protecting Business Opportunities for Veterans Act of 2017.''
This legislation is consistent with the U.S. Small Business
Administration's amended regulations allowing for subcontracting of
opportunities with ``similarly situated'' small business concerns,
without said subcontracting counting against the prime contractor's
limitation on subcontracting. ``Similarly situated'' small business
concerns are those with the same socioeconomic procurement preference
program status, i.e., SDVOSB to SDVOSB, WOSB to WOSB, SDB to SDB, etc.
We believe; however, H.R. 2749 would be strengthened by indicating in
the context of VA procurements conducted pursuant to VA's Veterans
First Contracting Program (38 U.S.C. Sec. 8127) that a ``Similarly
situated'' SDVOSB or VOSB must have been verified by VA's Center for
Verification and Evaluation and listed in VA's Vendor Information Pages
(VIP) Database to be truly ``similarly situated''. This important
distinction will ensure verified SDVOSBs and VOSBs do not subcontract
to non-verified SDVOSBs and VOSBs, although those businesses are
``similarly situated'' in they have the same socioeconomic procurement
preference program status. Under VA's program, an SDVOSB or VOSB is not
recognized by VA as such, at the prime or subcontracting level, until
the firm undergoes verification by VA's Center for Verification and
Evaluation.
In closing, Mr. Chairman and Ranking Member Kuster, we would like
to call to your attention VA has flatlined its SDVOSB and VOSB goals
since Fiscal Year 2010, despite substantially exceeding these goals
each year. We have provided a chart to the subcommittee which tracks
VA's goals and accomplishments for the last 11 fiscal years. You can
appreciate how disturbing this chart is to Veteran entrepreneurs and
the coalition.
Clearly, for all intent of purposes, such low goals are truly
meaningless and call into question the strength and effectiveness, if
not legitimacy, of VA's advocacy on behalf of Veteran small businesses.
VA's Fiscal Year 2014 goals were not communicated to VA personnel until
only 38 days remained in the fiscal year. A recent Freedom of
Information Act Request revealed VA's Secretary did not issue any
goaling memoranda for Fiscal Years 2015 and 2016, and the Fiscal Year
2017 goals were not issued until May 25, 2017, with only 128 days
remaining in Fiscal Year 2017. We ask and hope you will use your
considerable influence to encourage the Subcommittee on Economic
Opportunity to hold a hearing for VA to explain and account for its
goals and advocacy to the subcommittee and America's Veterans.
This completes my statement and I will be happy to answer any
questions you may have.
Note: The chart detailing VA's SDVOSB and VOSB Goals and
Accomplishments for Fiscal Years 2005 through 2016 referenced in this
testimony is incorporated by attachment and made a part of this
statement.
[GRAPHIC] [TIFF OMITTED] T9688.001
Statements For The Record
The Associated General Contractors of America
The Associated General Contractors of America (AGC) is the largest
and oldest national construction trade association in the United
States. AGC represents more than 26,000 firms, including America's
leading general contractors and specialty-contracting firms. Many of
the nation's service providers and suppliers are associated with AGC
through a nationwide network of chapters. AGC contractors are engaged
in the construction of the nation's commercial buildings, shopping
centers, factories, warehouses, highways, bridges, tunnels, airports,
waterworks facilities, waste treatment facilities, dams, water
conservation projects, defense facilities, multi-family housing
projects, site preparation/utilities installation for housing
development, and more.
2300 Wilson Boulevard, Suite 300 Arlington, VA 22201, Phone: (703)
548-3118
AGC is a national association of more than 26,000 businesses
involved in every aspect of construction, with 92 chapters representing
member companies in every state. The construction industry has
historically supported and provided opportunities for our nation's
veterans. For years, AGC has worked with the U.S. House Veterans'
Affairs Committee to establish more protections and better governing
policies for America's veteran owned businesses. AGC appreciates and
thanks the committee for its continued efforts to help our nation's
veterans, veteran owned businesses, and service-disabled veteran owned-
small businesses.
The primary mission of the U.S. Department of Veterans Affairs (VA)
is to dutifully care for the health of our nation's veterans. To
support that mission, the VA has over 1,800 facilities ranging from
large hospitals to small out-patient clinics and office buildings
throughout the country. Within the VA, the Office of Construction and
Facilities Management (CFM) and a system of 23 separate Veterans
Integrated Service Networks (VISNs) under the Veterans Health
Administration (VHA) support construction and maintenance needs of the
agency's facilities. As mandated by law, CFM executes projects valued
$10 to $100 million and the VISNs execute projects equal to or less
than $10 million. CFM does not have authority over the VISNs
construction program and there appears to be little coordination
between the two entities. It is clear that the mission of the VA is
broad and therefore it is essential to delivering a construction
project in a safe, efficient and timely manner. Thus, it is critical
that the VA is adequately prepared to meet the real challenges of
delivering high-quality facilities and infrastructure worthy of our
nation's veterans. A significant impediment to meeting this complex
challenge is the quality of training within the VA.
The VA does have several qualified experts when it comes to
designing and constructing medical facility projects and is taking
steps at CFM to train their resident engineers more effectively.
However, not all VA construction representatives and, especially,
contracting officers have such requisite expertise or the ongoing
training requirements necessary to deliver high-quality health care
facilities that the nation's veterans deserve. As such, to the extent
previous reforms have not already done so, the VA should require its
construction representatives and especially contracting officers that
oversee construction contracts to receive sufficient training on topics
including but not limited to contract administration and management,
the Federal Acquisition Regulation, and project management. Such
training should apply to both the major and minor construction
programs. At least a portion of the construction management-side of
this training must be administered through industry-recognized and
well-qualified private construction management training organizations
or institutions. The draft bill to ``improve the hiring, training, and
efficiency of VA acquisition personnel and organizations'' initiates
important steps to improve training for the VA personnel. AGC supports
this draft bill and urges the committee's support it in its entirety.
The problem for many construction businesses contracting with the
VA is not that they cannot adjust to meet the changes required to
complete the project as the VA desires. Rather, the issue is that many
at the VA lack proper training, and this lack of training creates a
flow down of problems that affect the construction project. For
example, the VA, along with other federal agencies, take months and
sometimes a year or more to issue a formal change order notice that a
contractor should perform work to address the change-making the agency
liable for payment for the work performed. Even after the decision to
issue a change order is made, a small business contractor may not
actually receive payment for that change order work for a considerable
period of time. This is a problem can involve not only the VA
construction field representatives, but also contracting officers.
Because of schedule requirements under the contract, some construction
contractors perform this change order work without waiting for the
formal change order notice from the federal agency. These problems were
most recently publicized on the Department of Veterans Affairs' Aurora
Hospital project outside Denver, Colorado.
On the VA Aurora Hospital project, the inability of the VA to
process contract modifications left the general contractor and its
subcontractors without payment for extended periods of time with severe
consequences. For example, between September 2011 and September 2012,
the VA stopped processing change orders tied to the southern clinic
building then under construction. \1\ Construction companies rely on
prompt payments to meet payroll and expenses, often unable to cover
those costs for very long. \2\ Many rely on bank loans and lines of
credit to bridge the gap, but on the Aurora project some banks balked
at letting small business clients rely on its money to continue work.
\3\ According to the Colorado SBA, at least 33 small businesses were
not paid for work in a timely fashion, and some were waiting more than
a year after work was completed for payment. \4\ Of those 33 companies,
at least two filed for bankruptcy. \5\ The prime contractor even paid
subcontractors several million dollars out of its own pockets while
waiting for payment from the VA, which was highly unusual. \6\
---------------------------------------------------------------------------
\1\ David Migoya & Mark Matthews, Aurora VA Hospital Project
Spooked Subcontractors, Causing Cost Hikes, DENV. POST, May 15, 2015
available at http://www.denverpost.com/ news/ci--28125325/ aurora-va-
hospital-project-spooked-subcontractors-causing-cost
\2\ Id.
\3\ Id.
\4\ Cathy Proctor, SBA: Progress being made on Helping Unpaid VA
Hospital Subcontractors, DENV. BUS. J., April 4, 2013 available at
http://www.bizjournals.com/ denver/news/2013/04/04/ sba-urges-va-to-
speed-payments-for.html
\5\ Id.
\6\ Id.
---------------------------------------------------------------------------
While the project in Aurora is a recent and, unfortunately, well-
known example, problems with processing change orders happen in every
federal construction agency on a regular basis. The problem is that
those change order delays are happening on projects worth $5 million,
$10 million and $100 million, on which Congress does not ordinarily
conduct oversight. The issue is that when the dollar amount is not
high, and media attention is not existent, meaning that there's a lack
of public outrage, the problems persist but go unnoticed by everyone
except the small business that may have to close its doors.
AGC has found that recently, there have been some signs of an
improving culture at the VA, particularly at CFM. AGC members note that
there has been noticeable difference in VA's attitude on at least some
large project construction sites. As opposed to the past, the right
parties in the VA are beginning to coming to the table to better guide
design and construction decisions. There is noted faith in the
leadership of the VA and its construction leadership that they can and
are having some success influencing positive change. These positive
changes have been identified on major construction program projects-
governing projects above $10 million-overseen by the VA's CFM.
Small business AGC members, including service-disabled, veteran-
owned small businesses, have not seen much, if any, relief. These
contractors preform most of their work through the minor construction
program-governing projects at or below $10 million-at the VA. Generally
speaking, a $5 to $10 million project is significant for small
businesses and is a significant construction project on its own. The
minor program is generally overseen on a regional basis through the
Veterans Health Administration and its 23 individual offices, called
VISNs. Small business AGC members find that the VISN offices have
little or no construction training or expertise. Similarly, there
appears to be little or no accountability for VISNs when it comes to
delivering construction projects on time and on budget. The well-
documented problems large construction businesses had at the various
major VA hospital projects continue to happen in the minor construction
program to small businesses, which have fewer resources available to
handle long change order payment delays and protracted litigation with
a federal agency.
As such, AGC strongly encourages this committee to work with the
construction industry to improve training at the VA, especially for the
minor construction program. Through such better training, we hope
reform can be implemented that will help the VA, the construction
industry, and our nation's veterans.
Thank you again for inviting AGC to testify on these important
topics to America's veterans. We look forward to following up with you
on several items, including:
Improving Training for VA Construction Employees;
Improving VA Design and Construction Standards/
Specifications;
Conducting oversight on VA delays with issuing change
orders on business construction contracts; and
Addressing problems in the VA's Minor Construction
Program.
Thank you for your time and consideration.
[all]