and abuse of federal american taxpayer funds i hope you'll take on this issue as a top priority and that this hearing will be helpful for all of us to move forward on finding a solution to this problem it is my priority as chairman of the contracting and technology committee to ensure that contracts especially those set aside for our service disabled veterans who have served and sacrificed for our country are in fact given to small business owners at the first hearing i held in my subcommittee in march of this year before you were the administrator i addressed the federal agencies on the issue of meeting their contracting goals for service disabled veterans with recovery act funds you and i spoke a few was by nearly a full percentage point however on the basis of this report and today's testimony i'm deeply concerned that those promising numbers could come with a very large astra and i'm looking forward to hearing both of your testimony results of our investigation into allegations of fraud and abuse in this program my testimony has two parts first i will discuss cases of fraud and abuse and second i will discuss fraud prevention controls first we received over one hundred allegations of fraud and abuse for this program and i will note that we stopped counting at one hundred from these allegations we investigated ten cases which often include a number of also received over three hundred million dollars of aid and other federal contracts program eligibility requirements include first firms must be at least fifty one percent fraudulently received seven point five million dollars of contracts for hurricane katrina and rita trailer me a firm that subcontracted one hundred percent of its work to an international corporation headquartered in denver with annual revenues of twelve billion dollars that's right twelve billion with a b third a construction firm with no assets and no employee passing through work to an ineligible firm the owner of this company lived eighty miles away and managed a restaurant in another city and for another shell company with  no assets and no employees passed through a nine hundred thousand dollars contract to an ineligible firm that delivered and installed the furniture the monitor shows the shell company address which is the owner home the owner of this company was actually a full time contract employee and macdill air force base which awarded him this contract was discouraging about many of these cases as a contracting officials were actively involved for example for the macdill air force base contracting officials were aware of the shell company and that the owner was actually a full time contract employee at the base the director of business operations also told us that macdill had about fourteen million dollars of service disabled sole source and set aside contracts in two thousand and eight and that ninety percent of the firms that received these contracts were front companies for large business other contracting officials weren't quite so candid the monitor shows a picture portable toilets at fort irwin in texas as you can see the name of the non disabled firm is blocked off from the picture however it's clear that in cases like this contracting officials why about whether their service is able to receive millions of dollars of contracts the only thing resembling a control for this program is the protest process in fact for service disabled set aside and sole source contract and in no case anybody including or any other agencies that have suspended or to bar anybody for fraud and abuse in this dollar small business program has no control and no consequences for the few that are caught cheating unfortunately the victims of this fraud service disabled veterans that play by the rules when i applaud you in this committee for supporting veterans today and i look forward to working with all of you to help eliminate fraud and abuse in this important program that in my statement i would forgo your question live there before the disaster they weren't doing that so that's an example where over numerous hearings about the house and senate side after several years positive improvements were made so i think this is something that's not going to happen overnight thank you very much i just want to express my pleasure at the different attitude at this hearing than a similar hearing on then it was look at those bad guys for a bad program and let's kill the program we recognize that this is not a bad program is a program there are bad guys in it let's make sure that the bad guys on the program and i'm very pleased at the different different attitude you know you could have predicted when this program was set up that we're going to be here today with this hearing and it's partly our fault when i come to that part of the lord's prayer that says lead us not into temptation because what we did was set up this program we gave s b a nowhere near enough money to monitor this they had in place here because people are human and you know when they see an opportunity to take advantage on the take advantage of one other thing i want to point out too is that sometimes the government contractors are complicit in this because we lean on them for a goal they got to have so much of this and that the other thing and they're very happy with these pass through because they know that the service is going to be provided to pass through somehow give our contracting officers the goal of reaching out further casting a wider net they've been getting contracts to gel and does a good job they got our responses are in and sam looks like he has a better proposal i don't failure but if you don't have a failure once in a while as a contracting officer you aren't reaching out far enough are you casting a wide enough that i don't know how to to a structure that i don't know how to reward people think that they need to be very much for the for your contribution to this thank you madam chairwoman i have to admit as i know all of us on the on the on the committee are shocked and dismayed to hear from you mr cutts that you had a hundred allegations that you chose to attend from and you stopped at one hundred one hundred but there were more coming in and you stop because that's all you could process at the time clearly the scope of the problem is large and it is something that runs deep sheds a lot of doubt on our efforts to date obviously something's not going right and we need to fix this problem and what i want to make sure that we going ahead of boyd is simply taking punitive action on these particular fraudulent businesses and then moving on and not fixing the system so we've got a big responsibility that we all share now like to make sure that that i understand is what you see the role in ensuring that short of a g a o study we have mechanisms in place contracting agencies who actually go out in the field and do the day to day contracting and how do you fit in the end with those contracting officers and practicing the oversight to make sure that going forward we have ways extremely proactive in terms of dealing with the federal agencies on our small business contracting to help ensure that this kind of problem doesn't happen and what i want to avoid and i intend to hold additional hearings in my subcommittee on this particular topic about our service disabled veteran business what i want to avoid is a situation where we look back a year from now recognize that we had a problem a year ago and still find ourselves pointing fingers at the other saying well it was really kind of more responsibility than ours and you know they're the one that didn't do their job and i think clearly the is in a position i think to take a leadership role here and help us solve this problem so i'm looking forward to being at the position a year from now where we look back and can say we did it right and we really fix this problem so i want to thank you for your comments mr cutts i just want to ask you i noted in your report that contracting officers from some federal agencies seem to suggest and acknowledge that they really didn't care much about the details of the execution of contracting to service disabled better known companies and that they were really just more concerned with making sure that contracting got done  expediently i would like to know what your thoughts on how we can solve that problem as a training issue with the contracting officers how can we change that culture because to my mind this problem can large solved with professional contracting officers that buy into the reason behind why we have these targets for contracting out to our service disabled on veterans i think you've heard from all the members of this committee how much we care about the mission and from our panelist today but what where the rubber meets the road out in the field the contracting officers doing the day to day contracting if they don't care about this program and if they don't care about the effect on employment for veterans it's going to be very hard for us to get this right and so i'd like to have your ideas about how we can fix that part of the problem i think mr barlow made some very insightful comments on that the contracting officers have kind of a perverse set of incentives out there they are trying to reach he's going requirements they want to get the work done with companies they already know the new company shows up at the service is able that company you know they're not necessarily as comfortable with that so they have a lot of competing interests and this is going to be a difficult issue to solve and maybe we have to work on the golan requirements but they should also be held accountable for making sure you don't have you i appreciate your ideas again it is heartening to realize the depth of this problem but thank you for doing the job of putting this report together to highlight the challenges we face the fact that we've got to start today on solving this major problem we have service disabled veterans who have put on the country this uniform put their life on the line overseas for us returned home made the decision to again take a risk to get into starting a small business applying their skills and playing by the rules doing the best they can to compete honestly for contracts getting put on the sidelines because there are those who decided to take the system and we haven't done enough to catch them and prevent them from being able to sideline our vets clear i think we understand the scope of the problem we know we've got marching orders going forward i want to make sure that today marks the beginning of the end of this problem i will be very disappointed if we look back a year from now and don't up this this is a big deal i mean this is a big big deal we're trying to get businesses back on track small businesses in particular we'd like the small business administration be part of that effort these types of things make it very my question and there's been many other questions asked that have to do with facts and functionality but mine is one of my business alive there were times when i thought working with people that were cheaper was a better business deal and what i came to their conclusion was i have to work with honorable people people that i can trust people that have a culture within their company of having the integrity of knowing where the lines are not crossing the line and that's something that i would certainly  generation and always to work with ethical people so there's something within the culture of individuals and companies that tells them that somehow they can rationalize or justify presentation to investigations but it showed up in one category there was one hundred percent fraud in a single category and when i confronted the agency with that they said well we are analysts we would have to be analysts to know what this is what caused it what to do about it  example one of them was doing trailer maintenance for katrina relief piano mississippi and we came across them potentially doing false billings for trailer inspections and so we were for those cases to another organization raided their office in march of this year briefly do so i would like to think that in the operations that i run today and the operations i've run in my business lifetime that i had people in place that would identify that at the most local level and send that up the chain with the strongest recommendation that there's any authority  throughout the networks of veterans that they had a lot of our allegations came from veterans so we had veterans organizations working with us to feed those allegations into our hotline they have separate hotline process so when you get it in your hotline what do you do