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98–644 2016

MANIPULATION AND FRAUD IN THE REPORTING 

OF VA SMALL BUSINESS GOALS 

JOINT HEARING 

WITH

Small Business Committee 

Subcommittee on Investigations, Oversight and 

Regulations 

BEFORE THE

Subcommittee on Oversight and Investigations 

OF THE

COMMITTEE ON VETERANS’ AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

TUESDAY, JUNE 23, 2015 

Serial No. 114–27 

Printed for the use of the Committee on Veterans’ Affairs 

( 

Available via the World Wide Web: http://www.fdsys.gov 


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COMMITTEE ON VETERANS’ AFFAIRS 

JEFF MILLER, Florida, Chairman 

DOUG LAMBORN, Colorado 

GUS M. BILIRAKIS, Florida, Vice-Chairman 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

MIKE COFFMAN, Colorado 

BRAD R. WENSTRUP, Ohio 

JACKIE WALORSKI, Indiana 

RALPH ABRAHAM, Louisiana 

LEE ZELDIN, New York 

RYAN COSTELLO, Pennsylvania 

AMATA COLEMAN RADEWAGEN, American 

Samoa 

MIKE BOST, Illinois 

CORRINE BROWN, Florida, Ranking 

Minority Member 

MARK TAKANO, California 

JULIA BROWNLEY, California 

DINA TITUS, Nevada 

RAUL RUIZ, California 

ANN M. KUSTER, New Hampshire 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

JERRY MCNERNEY, California 

JON TOWERS, Staff Director 

DON PHILLIPS, Democratic Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATION 

MIKE COFFMAN, Colorado, Chairman 

DOUG LAMBORN, Colorado 

DAVID P. ROE, Tennessee 

DAN BENISHEK, Michigan 

TIM HUELSKAMP, Kansas 

JACKIE WALORSKI, Indiana 

ANN M. KUSTER, New Hampshire Ranking 

Member 

BETO O’ROURKE, Texas 

KATHLEEN RICE, New York 

TIMOTHY J. WALZ, Minnesota 

COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

TOM RICE, South Carolina 

CHRIS GIBSON,New York 

DAVE BRAT, Virginia 

AMATA COLEMAN RADEWAGEN, 

American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

MIKE BOST, Illinois 

CRESENT HARDY, Nevada 

NYDIA VELA ́ ZQUEZ, New York, Ranking 

Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, Jr, New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

MARK TAKAI, Hawaii 


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III 

KEVIN FITZPATRICK Staff Director 

STEPHEN DENNIS Deputy Staff Director for Policy 

JAN OLIVER Deputy Staff Director for Operation 

BARRY PINELES Chief Counsel 

MICHAEL DAY Minority Staff Director 

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. 


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C O N T E N T S 

Tuesday, June 23, 2015 

Page 

Manipulation and Fraud in the Reporting of VA Small Business Goals ............ 1 

OPENING STATEMENTS 

Mike Coffman, Chairman ........................................................................................ 1 

Cresent Hardy, Chairman of Subcommittee on Investigations, Oversight and 

Regulations ........................................................................................................... 2 

Ann Kuster, Ranking Member ................................................................................ 3 

Alma Adams, Ranking Member of Investigations, Oversight and Regulations . 4 

Nydia Vela ́zquez, Ranking Member of Small Business Committee .................... 5 

WITNESSES 

Mr. Jan Frye, Deputy Assistant Secretary and Senior Procurement Executive, 

Office of Acquisition and Logistics, Department of Veterans Affairs .............. 7 

Prepared Statement ......................................................................................... 31 

Mr. Thomas J. Leney, Executive Director, Office of Small and Disadvantaged 

Business Utilization, Department of Veterans Affairs ..................................... 9 

Prepared Statement ......................................................................................... 33 

Accompanied by: 

Mr. Norbert Doyle, Chief Procurement & Logistics Officer, VHA, 

Department of Veterans Affairs 

Mr. Kevin Youel Page, Deputy Commissioner, Federal Acquisition Service, 

GSA ....................................................................................................................... 11 

Prepared Statement ......................................................................................... 35 

Mr. John Shoraka, Associate Administrator, Office of Government Contracting & Business Development, SBA ............................................................. 12 

Prepared Statement ......................................................................................... 45 


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MANIPULATION AND FRAUD IN THE 

REPORTING OF VA SMALL BUSINESS GOALS 

Tuesday, June 23, 2015 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON VETERANS’ AFFAIRS, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, D.C. 

The subcommittees met, pursuant to notice, at 4:01 p.m., in 

Room 334, Cannon House Office Building, Hon. Mike Coffman 

[chairman of the Subcommittee on Oversight and Investigations, 

Committee on Veterans’ Affairs] presiding. 

OPENING STATEMENT OF CHAIRMAN MIKE COFFMAN 

Present from Subcommittee on Oversight and Investigations, 

Committee on Veterans’ Affairs: Representatives Coffman, Roe, 

Walorski, Kuster, O’Rourke, Rice of New York, and Walz. 

Present from the Subcommittee on Investigations, Oversight and 

Regulations, Committee on Small Business: Representatives Hardy, 

Rice of South Carolina, Knight, Bost, Adams, and Vela ́zquez. 

Mr. COFFMAN. Good afternoon. I’d like to welcome everyone to today’s joint hearing titled ‘‘Manipulation and Fraud in the Reporting 

of VA Small Business Goals.’’ I’m pleased to welcome Chairman 

Cresent Hardy and his fellow members of the Subcommittee on Investigations, Oversight and Regulations for the House Committee 

on Small Business for this joint hearing. 

This hearing follows two recent hearings held by this subcommittee exposing massive circumvention by VA of the Federal 

Acquisition Regulations and related procurement laws. These laws 

are designed to ensure best value to the government and to reduce 

the risk of waste, fraud, and abuse. The previous hearings revealed 

how VA has incurred billions of dollars of unauthorized commitments through its misuse of purchase cards for the procurement of 

goods and services above the micropurchase threshold without contracts and through the procurement of non-VA care without contracts. 

Due to the persistent failure of VA to enter into necessary contracts, VA has not only amassed huge liabilities, it has also seriously undermined its compliance with government-wide small business goals by grossly exaggerating the data it has provided to the 

Small Business Administration, General Services Administration, 

and the Office of Federal Procurement Policy. 

According to a letter to Secretary McDonald from VA’s Senior 

Procurement Executive, Mr. Jan Frye, who will testify today, VA 

officials at the highest levels knew that the data was false at the 


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time they submitted it. This incredible admission would be shocking but for the fact it concerns the VA. Tragically, this is the same 

Department where senior-level managers received bonuses for reporting false patient appointment wait times. Moreover, this is the 

same Department where it appears as of this date that only one 

employee has been fired for such shameful conduct. 

Perhaps, given this backdrop, where malfeasance largely goes 

unpunished, it should not be surprising that VA is cooking the 

books regarding its small business performance. Based on incorrect 

data that VA entered into the Federal Procurement Database System, FPDS, or more importantly, required data that was never entered into FPDS, VA has received an A on the Small Business Procurement Scorecard every year reported since fiscal year 2011 and 

has exceeded its goals with regard to service-disabled veteranowned small businesses. 

According to Mr. Frye, FPDS data for VA has understated this by as much as $6 billion to $10 billion annually, and as a result, 

the percentages stated in VA’s Small Business Scorecard are absolutely false given the immense inaccuracy of the denominator used 

to calculate them. 

Underreporting of required contract data undermines transparency and obscures how billions of taxpayer dollars intended for 

veterans programs may be diverted and squandered without any 

accountability. Business opportunities that should normally be reserved for service-disabled veterans are jeopardized by false data. 

By gaming the numbers, VA puts in doubt not only its own scorecard, but also the scorecard for the entire Federal Government. 

With that, I now recognize Chairman Hardy for his opening 

statement. 

OPENING STATEMENT OF SUBCOMMITTEE CHAIRMAN 

CRESENT HARDY 

Mr. HARDY. Good afternoon. Thank you, Chairman Coffman, for 

working with us on this important issue. 

In 2007, then Senator Obama said: We should do everything we 

can to ensure the American public can easily access and track how 

the Federal Government does its business, because we can’t reduce 

waste, fraud, and abuse without knowing how, where, and why the 

federal money is flowing out of the door. 

I only wish the Department of Veterans Affairs and other agencies assembled here today had taken those words to heart. Instead, 

we have a story of fraud, waste, and abuse, and the victims are our 

Nation’s veterans and small businesses. Allow me to give three examples. 

First, the allegations here today include $6 billion to $10 billion 

in VA spending be hidden from public violation of the Federal 

Funding Accountability and Transparency Act of 2006, the law the 

President himself introduced and championed through Congress. 

Second, as a candidate for President, Senator Obama promised 

to end the diversion of federal small business contracts. However, 

the allegations are the VA had ignored provisions from the Small 

Business Act to reserve all awards under $150,000 for small businesses, instead spent that money without even allowing the businesses to compete. 


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Third, I read that the government credit cards were abused and 

the transactions were sloppily hand jammed, the transactions into 

the FPDS, attempting to obtain small business credit without regard of whether the purchases had been made from large or small 

businesses and without regard for the year of obligation. 

The contracts we’re discussing are for things like medical prosthetics, medical care. If the VA had followed the law, small business, including many veteran and service-disabled veteran-owned 

small businesses, would have had an opportunity to compete and 

provide goods and services our veterans so desperately need. That 

competition would have saved money, which means more services 

could have been provided for more veterans. Instead, the VA simply ignored the law. 

Today, the committees look to investigate how deep the problem 

runs at the VA and whether it could be similar fraud by other 

agencies. I expect to hear Small Business Administration and General Services Administration and the Office of Management and 

Budget are doing to make sure that the agency cannot ignore the 

laws without consequences. And I see that, given that the OMB 

didn’t even send a witness today for the hearing, I suspect that I’m 

not going to hear the answers that I like. 

Finally, the committee needs to know that the VA employees received bonuses based on inflated small business numbers. Our veterans and our small businesses demand answers. 

Mr. Chairman, I yield back. 

Mr. COFFMAN. Thank you, Chairman Hardy. 

I now recognize Ranking Member Kuster for her opening statement. 

OPENING STATEMENT OF RANKING MEMBER ANN KUSTER 

Ms. KUSTER. Thank you very much, Chairman Coffman and 

Chairman Hardy. And I want to welcome our colleagues, Mr. Rice 

and the Ranking Member, Ms. Vela ́zquez, for joining us today. 

This afternoon marks the third hearing we have held over the 

course of the last number of weeks regarding procurement problems at the Department of Veterans Affairs. We have focused on 

the accusations made in a 35-page letter that Mr. Jan Frye, VA’s 

Deputy Assistant Secretary and Senior Procurement Executive in 

VA’s Office of Acquisition and Logistics, sent to Secretary McDonald in March. This letter paints a picture of a VA acquisition process where acquisition and procurement regulations are routinely ignored. 

Most troubling to me is that this letter highlights a problem we 

see time and time again at the VA: Broken and nonexistent processes and systems. These are necessary to ensure that policies and 

requirements are followed. These are necessary to provide accurate 

data with which to judge the effectiveness of the VA’s efforts. And 

at the end of the day, the lack of objective and realistic data means 

that managers cannot manage and resources cannot be best utilized to provide benefits and services for our veterans. 

We must get to the bottom of the allegations we’re addressing 

today, VA’s misreporting of its contracts with small businesses to 

the Small Business Administration and all of the procurement 

problems that we have been exploring over the past month. Our 


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hearings and the hearings we have held over a number of Congresses point to a VA that has lost its way, a VA that across all 

programs and departments is failing our veterans. 

This is a systemic failure. The secret waiting lists in Phoenix and 

at VA medical facilities across the country, the ensuing patient access crisis, the VA claims and appeals backlog, the current budget 

shortfall, and the VA’s inability to manage procurement, all of 

these problems are the result of VA’s failure to collect, use, and report accurate data. 

Today’s issue is no different. The VA will never be able to appropriately plan, allocate resources, request necessary funding from 

Congress, and execute its mission without accurate data and without the necessary processes, systems, and leadership in place to 

make it happen. 

This systemwide failure did not happen overnight. It has been 

decades in the making. But we’re facing the results of decades of 

problems today, and we simply must begin to work on addressing 

these problems. We can no longer slap a band-aid on a problem and 

manage from crisis to crisis. 

So where do we start? What steps must we take today and tomorrow and the weeks ahead to fix VA’s failure to collect accurate 

data, provide sufficient oversight, hold managers accountable, and 

consistently execute the law? I’m focusing on accurate data systems 

and processes since I believe that these are the steps that can be 

taken to move us forward. 

This is not the end of the reform effort, but merely the beginning. The end of a reform effort must result in a VA where the 

issues that we have been addressing this past month and for many 

months and years are the exception and not the rule. That reform 

effort will need the work of all of us, and I, for one, cannot wait 

to begin. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. COFFMAN. Thank you, Ranking Member Kuster. 

I now recognize Ranking Member Adams for her opening statement. 

OPENING STATEMENT OF ALMA ADAMS, RANKING MEMBER 

OF INVESTIGATIONS, OVERSIGHT AND REGULATIONS 

Ms. ADAMS. Thank you, Mr. Chairman. Thank you for holding 

this important meeting, to our ranking members as well. 

The Veterans Administration has an important role to play in 

fostering small business growth and especially helping veteranowned small businesses succeed. When the VA meets its procurement needs by contracting with small businesses, veteran-owned 

firms, minority-owned companies, and other disadvantaged businesses, it creates a win-win situation. The taxpayer and the agency 

benefit from high-quality goods and services delivered at reasonable prices to the VA, and small businesses, especially those owned 

by veterans, secure a valuable customer, allowing them to grow 

their operations and in some cases even add employees to their 

payrolls. 

Unfortunately, we’ve seen too often with many agencies that 

fraud, waste, and abuse can interfere with this laudable goal, depriving legitimate small businesses of their fair share of federal 


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contracts. The House Veterans’ Affairs Committee has held previous meetings examining how the VA’s Purchase Card Program 

has been abused. It’s been suggested that the VA has committed 

as much as $5 billion a year in improper and unauthorized procurement expenditures for at least the last 5 years. 

The lack of control that contributed to this mismanagement and 

abuse raise a number of troubling concerns. Certainly, if the 

agency is purchasing biologics and medical supplies without contracts, there are serious patient safety issues. In addition, this lack 

of transparency means that the VA may routinely circumvent the 

terms of the Federal Acquisition Regulations. Many of these purchases may be illegally steered to vendors that do not provide the 

most competitive prices or services or may not actually be truly a 

small business or veteran-owned. 

It should be highlighted from the previous work conducted by our 

committee how easily fraud can occur in programs like the ServiceDisabled Veteran-Owned Small Business Program. Working with 

GAO, the committee found that when proper controls are not in 

place, multinational corporations often pose as veteran-owned firms 

for purposes of securing federal work. 

Likewise, given the previously documented misuse and overuse 

of the Card Purchase Program, there’s good reason to believe that 

the VA’s small business, veteran-owned, and women-owned contracting numbers are significantly inflated. Procurements that are 

made without contracts are not included in calculations to determine small business goals that were set in statute by Congress. In 

other words, because of the practice of avoiding standard regulations, the very agency charged with assisting veterans may well be 

shortchanging not only small businesses, but veteran-owned small 

businesses. 

Mr. Chairman, our two committees both have a responsibility to 

watch out for two groups, both of which have made our Nation 

great, small businesses and veterans. When there’s waste, fraud, 

and abuse at any agency, as come to light here, groups like these 

are often the ones who suffer most. It’s my hope that by working 

together we can exercise vigorous oversight and determine the extent of the problem and move forward with any necessary reforms. 

I thank the witnesses for being here this afternoon, and I look 

forward to your testimony. 

I yield back, Mr. Chairman. 

Mr. COFFMAN. Thank you, Ranking Member Adams. 

OPENING STATEMENT OF RANKING MEMBER MS. NYDIA 

Vela ́ zquez OF THE SMALL BUSINESS COMMITTEE 

I now recognize Small Business Committee Ranking Member 

Vela ́zquez, who has joined us today on the dais, for any opening 

remarks she may have. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you, Mr. Chairman and 

Ranking Members of respective subcommittees. 

It is clear that entrepreneurship is a critical path forward for our 

Nation’s veterans. In fact, according to the SBA, there is about 1 

veteran-owned firm for every 10 veterans, and veteran-owned firms 

employ 5.8 million individuals. Another study found that military 

service exhibits one of the largest effects on self-employment, and 


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veterans are 45 percent more likely to be self-employed than nonveterans. When taken together, it is not hard to see that veteranowned small businesses are an important and growing part of our 

economy. 

One way that these companies can become successful is through working with the U.S. Government, which buys nearly $500 billion 

in goods and services annually. The Department of Veterans Affairs is a large part of this equation, awarding the second-highest 

amount to small businesses, much of which are veteran-owned, behind only the Department of Defense. In 2013, the agency awarded 

$6.6 billion to small businesses, which amounted to nearly 40 percent of its contracting dollars. 

Unfortunately, these numbers have been called into question due 

to allegations of fraud, waste, and abuse at the VA. Such accusations suggest that the agency failed to use legally required contracts, did not adhere to small business set-aside requirements, 

and misused GSA schedules. In the end, we do not know what the 

total value of small business contracts at the VA is, but estimates 

suggest that small businesses lost out on between $2.8 billion and 

$3.7 billion in contracts. 

If this is true, this is a failure not just of the VA, but of the acquisition system more broadly. Time and time again we are presented with similar allegations in which opportunities were 

improperly diverted away from those that they were intended to 

reach. The truth is that we need more oversight, a better trained 

acquisition workforce, and legislative reforms that make these 

types of actions less likely. 

For the small businesses, veteran-owned or otherwise, that play 

by the rules, it is critical that we begin to clean up this mess, 

whether it is at the VA or elsewhere. Doing so will help all small 

businesses better compete for opportunities with the Federal 

Government, and that is something I hope we can all agree on. 

I want to thank all the witnesses for appearing here today, and 

I look forward to your testimony. 

Thank you, Mr. Chairman. 

Mr. COFFMAN. Thank you, Ranking Member Vela ́zquez. 

I ask all members waive their opening remarks as per the committee’s custom. Without objection, so ordered. 

Seated at the witness table, we welcome Mr. Kevin Youel Page, 

Deputy Commissioner for the Federal Acquisition Service of the 

General Services Administration, and Mr. John Shoraka, Associate 

Administrator of the Office of Government Contracting and Business Development for the Small Business Administration. 

For the Department of Veterans Affairs, we will hear from Mr. 

Thomas Leney, Executive Director of VA’s Office of Small Business 

and Disadvantaged Business Utilization. He is accompanied by Mr. 

Norbert Doyle. Norbert Doyle, Chief Procurement and Logistics 

Officer for the Veterans Health Administration. We will also hear 

separately from Mr. Jan Frye, Deputy Assistant Secretary and Senior Procurement Executive for VA’s Office of Acquisition and Logistics. 

I note that we also invited the Honorable Mrs. Anne Rung, 

Administrator of the Office of Federal Procurement Policy of the 

Office of Management and Budget. It is disappointing that she is 


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not here. It is no wonder that federal procurement is in disarray 

when the head of the office in charge of policy runs from responsibility and fails to provide necessary oversight and transparency. 

I now ask the witnesses to please stand and raise your right 

hand. 

[Witnesses sworn.] 

Mr. COFFMAN. Please be seated. All of your complete written 

statements will be made part of the hearing record. 

Mr. Frye, you are now recognized for 5 minutes. 

STATEMENT OF JAN FRYE 

Mr. FRYE. Chairman Coffman, Ranking Member Kuster, and 

members of the subcommittee, thank you for inviting me to testify 

again today. 

In a June 11, 2015, letter to VA Secretary McDonald, you invited 

me to testify as a witness on behalf of VA along with my colleagues, Messrs. Leney and Doyle. I was intentionally excluded by 

the VA leadership and do not appear before you today as a VA witness. I appear today of my own volition as a VA whistleblower representing American taxpayers and America’s military veterans. 

As you know, I alleged massive violations of acquisition and fiscal laws to Secretary McDonald in March of 2015. As you are also 

aware, I received no response from him regarding my disclosures. 

Thus, I was compelled to report them to this congressional body. 

In the first of now three joint hearings, beginning May 2015, I reported that some VA senior leaders have willfully violated the public trust, debasing federal procurement and financial laws. 

A reasonable person might conclude my disclosure of illegal acts 

would be accepted with open arms by VA’s leadership for further 

investigation. That has not been the case. My intentional removal 

as a VA witness for this hearing is irrefutable proof of continuing 

scorn for those who attempt to uphold the public trust. Further, 

these VA leadership acts can serve to cast a chill upon future potential whistleblowers. 

We have a senior leader integrity malaise in VA. Like substance 

abusers before the journey to recovery, we will not be cured until 

we admit we have a disease. 

During the June 1 hearing on these matters, you heard one of 

VA’s chief law enforcers testify emphatically that violating U.S. 

federal statutes and regulations is not ‘‘illegal,’’ quote, but just, 

quote, ‘‘improper.’’ In my opinion, parsing words in this manner is 

a stark reflection of our denial and exemplifies just how low some 

VA senior leaders will stoop to avoid culpability and protect themselves. As government servants, we did not take an oath to serve 

ourselves. 

Massive violations of public trust continue unabated. In the past 

several weeks it was disclosed that VHA officials committed 

approximately 2,000 illegal transactions for kidney dialysis from 

October 2014 to May 2015. This represents 34 percent of the transactions under these multiple award contracts. These are unauthorized commitments that require ratification before payment. However, payment has already been made, in violation of federal fiscal 

law. 


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This month, the VA Office of Inspector General reported the theft of approximately $225,000 by a VHA West Roxbury, New York, employee using a government purchase card. This theft was avoidable. 

It occurred because required internal controls in VHA and the Department are lacking. These funds will never be returned to VA to 

take care of veterans. 

Over a year ago, I personally authored a new policy that would 

vastly improve internal controls in the use of purchase cards for 

contract payment. VHA rejected the policy. It was apparently inconvenient for them to execute. 

In this hearing, we will discuss VA’s failure to accurately report 

our small business goal accomplishment. We are guilty. In doing 

so, we have deceived the veteran-owned small business community 

while violating federal laws. I have previously alleged that billions 

of dollars extended over multiple years have not been placed under 

contract as required, and thus, have not been reported in the Federal Procurement Data System as our VA total-spend denominator 

for contracting. 

Today, I’m providing this subcommittee information concerning 

one of the most deceptive schemes I have uncovered in my 41 years 

of government service. Each year VHA purchases over $1 billion in 

medical surgical products. All of these products must be procured 

in accordance with federal contracting laws. Departmental policy 

requires most be obtained through our medical/surgical prime vendors, who serve as distributors using federal supply schedules as 

underlying contracts. 

I first learned we had hatched a scheme that avoids use of FSS 

in late 2014. We pretend to use them, we have never informed 

OMB or the public we are not using them, but in fact, we are not. 

Using a convoluted ruse, we buy products off a shopping list while 

throwing federal acquisition laws to the wind. 

We are illicitly and deceptively pretending that federal supply 

schedules are being used while executing open market purchases. 

Federal supply schedules do not require small business set-asides. 

Open market purchases do require set-aside consideration. 

Our illegal behavior allows us to avoid set-asides, intentionally 

fencing these purchases from small businesses. In these acts, exceeding $1 billion annually, we are in violation of federal procurement law, as well as the Small Business and the Veterans First 

Acts. 

After learning of these shocking practices in late 2014, I attempted to rally VHA senior leaders as well as my supervisor to 

systematically cease these unlawful deeds. I have been totally 

thwarted in my efforts to get VHA to properly place their products 

on contract. 

We weave a tangled web. In previous hearings, I’ve outlined VA’s 

failure to award billions of dollars for products and services via 

contracts, which is illegal and affords potential harm to veterans. 

These failures led to massive understatements of our annual total 

spend for multiple years in Federal Procurement Data System. In 

a domino effect, this resulted in an overstatement of departmental 

small business goal accomplishments. 

And finally, as revealed today, we further duped the American 

public and the veteran-owned small business community with deVerDate Aug 31 2005 13:04 Oct 12, 2016 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 Y:\98-644.TXT PAT

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ception using federal supply schedules. It is my opinion these acts 

combined and separately constitute corruption and gross mismanagement. 

I conclude with this rhetorical question, which I posed to Secretary McDonald in my March report to him: Without demonstration of responsible stewardship, why would the American public 

support ever increasing and generous annual congressional appropriations to care for our Nation’s veterans. 

Mr. Chairman, this concludes my statement. I’m prepared to answer any questions this committee may have. 

[THE PREPARED STATEMENT OF MR. JAN FRYE APPEARS IN THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. Frye. 

Let’s see. Mr. Leney, you are now recognized for 5 minutes. 

MR. THOMAS J. LENEY, EXECUTIVE DIRECTOR, OFFICE OF 

SMALL AND DISADVANTAGED BUSINESS UTILIZATION, DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY MR. 

NORBERT DOYLE, CHIEF PROCUREMENT & LOGISTICS OFFICER, VETERANS HEALTH ADMINISTRATION, DEPARTMENT 

OF VETERANS AFFAIRS 

STATEMENT OF THOMAS J. LENEY 

Mr. LENEY. Good afternoon, Chairman Coffman, Chairman 

Hardy, Ranking Members Kuster and Adams, and members of the 

subcommittees. I appreciate the opportunity to address your concerns about the impact of the validity of the Department’s procurement data on our socioeconomic goal achievements. I’m joined 

today by Mr. Norbert Doyle, Chief Procurement and Logistics Officer of the Veterans Health Administration. 

VA has acknowledged in previous hearings that our approach to 

documenting procurement, such as non-VA care, prosthetics, and 

uses of purchase cards, has not been fully compliant with the Federal Acquisition Regulation. As a consequence, these transactions 

were not included in our reporting to the Federal Procurement 

Data System. 

VA’s socioeconomic goal achievements are reported based on procurement data in FPDS, the completeness and accuracy of which 

is certified annually by VA’s Senior Procurement Executive to the 

Office of Federal Procurement Policy. Achievements are then calculated in accordance with methodology established by the Small 

Business Administration. 

VA has a legal authority and a moral imperative to provide 

healthcare to eligible veterans. In fiscal year 2014, in order to provide an expedited means for ensuring that veterans had prompt access to non-VA care when needed, the VA processed approximately 

$3.2 billion in transactions for non-VA care that were not reported 

into FPDS primarily through the use of individual authorizations. 

These authorizations, though enforceable, were not FAR-compliant 

contracts, and thus, were not included in the FPDS data upon 

which our socioeconomic goal achievements are determined. 

While I cannot state how inclusion of these individual authorizations would have affected our socioeconomic goal achievement, as 

we do not know how many of these providers would have been conVerDate Aug 31 2005 13:04 Oct 12, 2016 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 Y:\98-644.TXT PAT

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sidered small businesses, I can state that the procurements in 

question were made to support the care of veterans, the funds that 

were appropriated by Congress were used for their intended purpose, and VA’s internal financial controls were used to track and 

monitor the expenditures. 

As we are increasingly reliant on non-VA care to improve the 

timeliness of care for veterans, VA has sought congressional support for its legislative proposal to authorize VA to purchase care in 

certain circumstances through agreements that are not subject to 

certain provisions of the law concerning federal contracts. 

In addition to proposed legislation, VA has taken action to procure the care through FAR-compliant contracts as part of the 

Patient-Centered Community Care Program, PC3 for short. The 

goal is to improve veteran access to care and to heighten the reporting and oversight of these transactions. After passage of the 

Veterans Choice Act legislation, VA modified the PC3 contract to 

bring the Choice program within the scope of these contracts. 

In fiscal year 2014, we only spent $15 million on non-VA care 

that was procured under these contracts. So far in 2015, over $160 

million has been spent under this program. We expect use of these 

contracts to increase over the coming months as VHA has established a hierarchy of purchase care to guide procurement of nonVA care and to minimize the use of individual authorizations moving forward. 

We recognize that the increased use of care in the community 

will have a significant negative impact on our ability to achieve our 

socioeconomic goals. Because of the need to provide extensive referral networks, these contractors are necessarily large businesses. 

Nevertheless, this is the right thing to do. Our imperative must 

be to get healthcare to veterans in a timely and effective way. To 

the extent we need to rely on the Choice program and other care 

and community programs to ensure timely care, we will do so, regardless of the impact on socioeconomic goal achievement. 

VA has also taken action to properly include prosthetics purchases in FPDS. Based on concerns raised in 2011, VA has determined that all prosthetic spend above the micropurchase threshold 

must be awarded and reported by warranted contracting officers. 

The transition under this approach was completed in October 2013. 

As of June 2015, our Electronic Contract Management System 

showed 57,047 prosthetics transactions, representing more than 

$730 million. Of these transactions, 56,884 included an appropriate 

code indicating they had been reported to FPDS. This is a 99.7 percent compliance rate with 42 percent of our prosthetics purchases 

going to small businesses. 

Where we have the opportunity to contribute to the government’s 

efforts to ensure a fair proportion of contracting dollars are awarded to small businesses, we seek to do so, consistent with our mission to provide care and benefits for veterans. While the VA has 

been deficient in reporting all spending in FPDS, in fiscal year 

2014 VA procured $6.6 billion from small businesses, $3.9 billion 

from veteran-owned small businesses, and awarded more dollars to 

service-disabled veteran-owned small businesses than all the other 

federal agencies in the government combined. 


VACREP0180 with DISTILLER
11 

We believe we’ve made progress in improving the accuracy, completeness, and reliability of our procurement data, but we also 

know we have farther to go to be fully compliant. We seek your 

support to obtain the legislative authority that will allow us to continue to meet the expectations of both veterans and taxpayers. 

Thank you, and I’m prepared to take your questions. 

[THE PREPARED STATEMENT OF MR. THOMAS J. LENEY APPEARS IN

THE APPENDIX] 

Mr. COFFMAN. Thank you, Mr. Leney. 

Mr. Youel Page, you are now recognized for 5 minutes. 

STATEMENT OF KEVIN YOUEL PAGE 

Mr. Youel Page. Good afternoon, Chairmen Coffman and Hardy, 

Ranking Members Kuster and Adams, and honorable members of 

the subcommittees. My name is Kevin Youel Page. I’m the Deputy 

Commissioner for the Federal Acquisition Service at the General 

Services Administration. 

In my current position, I lead operations, including the Federal 

Procurement Data System, known as FPDS, and the SmartPay 

purchase card program. These two programs support efficiency, 

transparency, and enable continuous monitoring and improved federal award management. I appreciate the opportunity to appear 

here today to discuss GSA’s role in providing federal contract 

award reporting capabilities and the SmartPay purchase card program. 

FPDS provides a comprehensive Web-based tool for agencies to 

report their contract actions in accordance with the Federal Acquisition Regulations. The accuracy of the information submitted is 

the responsibility of each agency to manage. As of May, there are 

more than 8 million civilian and defense actions reported to FPDS 

with reporting obligations of $262 billion for fiscal year 2015 to 

date. 

FPDS generates the Small Business Goaling Report. GSA collaborates annually with the Office of Federal Procurement Policy 

and the Small Business Administration to define the Goaling Report methodology. Procurements data entered into FPDS by agency 

contracting officials throughout the fiscal year are used to provide 

the Goaling Report, which is public information. 

GSA also manages the SmartPay government-wide commercial 

charge card program. The charge cards reduce procurement administrative processing costs, enhance transparency, and support 

streamlined acquisition of goods and services under the micropurchase threshold, freeing highly trained contracting staff to focus on 

larger, more complex acquisitions. Over the micropurchase threshold, purchase cards have been used to streamline payment under 

some procurement contracts. 

In fiscal year 2014, agencies spent approximately $17 billion 

through 20 million transactions and 263,000 cardholder accounts. 

Each agency is responsible for its system of management controls 

and overseeing cardholders’ use of the program. Agencies decide 

which employees are issued the cards, and also determine spending 

limits within specified guidelines. GSA, through its contractor 

banks, provides card account management and oversight tools, 

training, and business rules to assist them in doing so. 


VACREP0180 with DISTILLER
12 

The card management systems allow agencies to establish accounts and access information and reports on every purchase their 

cardholders transact. GSA supports agencies in effective charge 

card management through publications, training sessions, workshops, and regularly scheduled card manager meetings. Additionally, GSA has embarked on a government-wide charge card metrics 

and benchmarking program focused on CFO Act agencies. The 

metrics and benchmarks are designed to indicate potential card 

management emphasis areas for the agencies to examine. 

Thank you for the opportunity to discuss the Federal Procurement Data System and the SmartPay programs. I stand ready to 

answer any questions the committees may have. Thank you. 

[THE PREPARED STATEMENT OF MR. KEVIN YOUEL PAGE APPEARS

IN THE APPENDIX] 

Mr. COFFMAN. Mr. Page, thank you for your testimony. 

Mr. Shoraka, you are now recognized for 5 minutes. 

STATEMENT OF JOHN SHORAKA 

Mr. SHORAKA. Thank you. Chairmen Coffman and Hardy, Ranking Members Kuster and Adams, and members of the subcommittees, I am honored to be here today to discuss SBA’s methodology 

as it pertains to setting goals for and reporting on the small business procurement performance of federal agencies. 

The Small Business Act tasks the Federal Government with 

awarding at least 23 percent of federal contracting dollars to small 

businesses. Goals have also been established for awards to small 

disadvantaged businesses of 5 percent, women-owned small businesses of 5 percent, service-disabled veteran-owned small businesses of 3 percent, and firms located in historically underutilized 

business zones of 3 percent. The U.S. Small Business Administration is responsible for annually reporting on the Federal Government’s performance towards these goals and does so via the Small 

Business Procurement Scorecard. 

The Small Business Procurement Scorecard for fiscal year 2013 

revealed that for the first time since 2005, the Federal Government 

met the 23 percent goal for prime contracting dollars awarded to 

small businesses with 23.39 percent of all federal small business eligible dollars being awarded to small businesses. Additionally, the 

Federal Government exceeded the 5 percent for SDBs and also met 

the 3 percent goal for SDVOSBs. These achievements represent a 

dedication across government in improving small business access to 

the many opportunities available within the federal supply chain. 

The grading associated with the scorecard follows a publicly 

available methodology, which can be found in the contracting section of SBA.gov. Each federal agency has a different small business 

prime contracting goal, which is negotiated with the SBA annually. 

When negotiating agency small business prime contracting goals, 

SBA considers each agency’s past small business performance and 

the small business opportunity available by specific industries. 

SBA ensures that sum of all agencies’ goals exceeds the 23 percent 

target established by law. 

Although the small business prime contracting goals negotiated 

with SBA differ for each agency, as described above, each agency 

has the same goals for prime contract spending within the socioVerDate Aug 31 2005 13:04 Oct 12, 2016 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 Y:\98-644.TXT PAT

VACREP0180 with DISTILLER
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economic categories. As an example, each agency has a 5 percent 

goal for prime contracting dollars awarded to women-owned small 

businesses. 

The scorecard is based on information pulled from the Federal 

Procurement Data System, or FPDS-NG. It is a Web-based tool for 

all agencies to report contract action. This system is maintained, 

as you’ve heard, by the GSA, and governed an interagency council, 

on which SBA is a nonvoting member. The Federal Acquisition 

Regulation provides agencies with guidelines on the data that is to 

be entered into FPDS-NG, and each agency is responsible for 

inputting its own data and ensuring its accuracy. The FAR also requires that each agency certified to GSA and the Office of Management and Budget that the data that has been entered into FPDS 

is complete and accurate. 

After agencies certify this data, GSA provides this data to SBA 

for scorecard calculations. Grading is based in part on information 

provided to SBA by each federal agency to document its performance. This information is reviewed by an independent peer panel 

comprised of directors of agencies of Office of Small and Disadvantaged Business Utilization, or OSDBUs. These panelists review 

each agency’s submissions and the average score is reported on the 

agency’s scorecard. 

This administration has emphasized its commitment to ensuring 

small businesses get their fair share of federal contracts. SBA has 

made significant progress in increasing the transparency and reliability of its scorecard methodology and the reliability of the data 

provided by agencies. 

As mentioned previously, the scorecard methodology is publicly 

available, as is the FPDS-NG data, in real time. Although SBA 

cannot change the data in FPDS-NG nor enter it on behalf of agencies, SBA does conduct data anomaly reviews and shares these 

findings with agencies prior to the data certification date to allow 

agencies to correct any potential errors. 

SBA initiated these practices in fiscal year 2011, and in fiscal 

year 2013 SBA worked with GSA to develop a standard anomaly 

reporting process that can be run by agencies at any time. SBA encourages agencies to run the standard anomaly reports quarterly 

and correct errors as they are discovered. SBA has continued to 

identify anomalies through other forms of analysis and shares 

those findings with agencies to correct as well. Additionally, SBA 

has allocated new staffing resources to improve data quality and 

provide training to agencies. 

Finally, data quality best practices are incorporated into the 

scorecard so SBA can score agencies on their internal practices. 

SBA continues to work with OMB’s Office of Federal Procurement 

Policy and each federal agency to ensure that effective policies and 

practices are in place to provide maximum practicable opportunity 

to small businesses. 

Thank you again, and I look forward to your questions. 

[THE PREPARED STATEMENT OF MR. JOHN SHORAKA APPEARS IN

THE APPENDIX] 

Mr. COFFMAN. Mr. Shoraka, thank you so much for your testimony. 


VACREP0180 with DISTILLER
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Mr. Frye, in reference to the testimony given by Mr. Leney, who 

in a sense justifies breaking the law in terms of the regulations regarding contracts by saying that it was for the veterans, it’s okay 

that we violated the law because we did it for the veterans, but in 

violating the law, don’t you believe it makes it more costly? In 

other words, it’s not done on a competitive bid basis. Go ahead. 

Mr. FRYE. Certainly. By violating the law, by not putting our requirements on contract as required by law, we do several things. 

First, we put veterans at risk. If we buy products, for instance, that 

aren’t on a contract, terms and conditions aren’t included in that 

purchase. So, for instance, Buy American, Trade Agreement Act, 

safety, and efficacy are thrown out the window. 

On top of that, only a contracting officer can determine a fair and 

reasonable price. So if no contract exists, no fair and reasonable 

price determination has been made, and that’s by definition. 

There’s no way around it. 

Mr. COFFMAN. So I think it’s pretty easy to say that in Mr. 

Leney’s testimony and based on his leadership, that we’re not helping veterans, we’re hurting veterans, wasting American taxpayer 

dollars by going around the procurement system. 

Mr. FRYE. We’re doing all of that. We’re hurting veterans, perhaps, you know, with efficacy and safety issues. But we’re also 

hurting veterans because every dollar we waste is a dollar we can’t 

spend on the veterans of America, who so richly deserve it. So, you 

know, to say that buying something and paying 20 percent more 

for it doesn’t hurt veterans is just not an accurate statement. It 

does hurt veterans. 

Mr. COFFMAN. Mr. Frye, I think Mr. Leney mentioned something 

about a PC3 agreement. I don’t understand how that fits in what 

we’re talking about today. Could you—— 

Mr. FRYE. I do not know how that fits into what we’re talking 

about today either. 

Mr. COFFMAN. Mr. Leney, could you speak to that? 

Mr. LENEY. Yes, sir. What we have attempted to do, what we are 

doing, is moving more of our procurements into FAR-compliant contracts. So that the PC3 program has two contracts whereby when 

people seek non-VA care, they’re able to do it via these health networks, VA FAR-compliant contract. And what you’re seeing is an 

order of magnitude increase in the use of this, and we expect to see 

the use of it to continue to climb as procurements that were done 

outside of FAR-compliant contracts now come into FAR-compliant 

contracts. So I think it has everything to do with what we’re talking about today. 

Mr. COFFMAN. Mr. Frye. 

Mr. FRYE. Again, I would focus on what we haven’t done in this 

case instead of trying to—if I were on the VA panel, I would not 

personally agree with a strategy that tries to convince you what we 

have done right. 

In this case, I think we need to do the mea culpa. We’ve done 

wrong. We screwed up. What’s wrong with just coming in front of 

this body and saying that and finally admitting that we’ve got a 

problem and saying we’re going to fix the problem? 

Again, it goes back to the first hearing, the hearing that took 

place over a month ago, where I said obfuscation is our game. We 


VACREP0180 with DISTILLER
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come here and hope we can give you an answer that will lead you 

to a question that we can quickly extinguish that won’t lead you 

to a question that we can’t answer. And I think that’s what we’re 

doing here. That’s my personal opinion. 

Mr. COFFMAN. Mr. Leney, I think that the allegations are pretty 

profound. They’re really about fraud. It’s about the fact that there 

are SBA requirements dealing with veteran-owned small businesses, among others, and the way the VA has done its contracting. 

The numbers aren’t real. And yet, people got bonuses based on 

those numbers. I mean, tell me, don’t you think that’s a problem? 

Mr. LENEY. I’m not prepared to say this is an issue of fraud. This 

is an issue of improper accounting. We did not account, as I acknowledged in my statement, as the VA has acknowledged in two 

previous hearings, we have not properly accounted for all of our 

non-VA care purchases. 

Mr. COFFMAN. But you went around the law. I mean, these are 

interesting semantics you have. I don’t understand how the VA is 

ever going to reform itself when they never acknowledge that they 

have problems and the extent of those problems. 

And the fact is, I mean, that you’ve grossly violated the law 

when it comes to contracting, compromised the safety in terms of 

public health of our veterans in doing so, paid more than we should 

for those products by not doing it in a competitive manner. And 

then the subject today is, in doing so, the numbers were also 

fudged for meeting the SBA requirements in terms of contracting. 

So I don’t have any confidence in your leadership, certainly, and 

in the senior leadership of the VA to clean up this mess because 

you all never come forward here and are able to define the problem. 

I will now turn the gavel over to Chairman Hardy for his questions and to preside over the remainder of this hearing. 

Mr. HARDY [presiding]. Thank you, Mr. Chairman. 

I’d first like to start off by asking all of you, all four of you except 

Mr. Frye, if you believe that you dropped the ball, and if so, how 

did you drop the ball on making sure that you ensure that contracting requirements are met? Start with you, Mr. Shoraka. 

Mr. SHORAKA. I’m happy to go first. Thank you, sir. 

I think on our part, we are entirely reliant when we report on 

the scorecard and small business spend on what is entered into 

FPDS-NG as the system of record. So when we pull from that data, 

we rely on the certifications from the agencies to the accuracy of 

that data. 

What I would add in addition to that is that it’s not clear that 

the entire impact of this, it would have been negative to small businesses. Right? We’re not sure if that money—not saying that it 

should not have been in FPDS, because clearly the discussion has 

been that that should have been in FPDS—but we’re not clear if 

those funds went toward small businesses, went toward large businesses, and what the potential impact could have been on the overall score of the agency. That has to be analyzed and determined if 

it would have been negative, significantly negative, or even potentially positive. 


VACREP0180 with DISTILLER
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Mr. HARDY. I guess I’d like to ask, doesn’t the SBA have the responsibility to make sure that these actions are moving in the right 

direction? 

Mr. SHORAKA. So we have responsibility above the $3,000 card 

limit. We certainly have responsibility in ensuring that what we report out of FPDS is reported accurately. But we do rely on the 

agencies to certify their numbers to OMB and OFPP, which is what 

GSA pulls and gives us for analysis and reporting purposes. 

Mr. HARDY. I’d like to continue that line of questioning. Who 

dropped the ball? Or did you think you dropped the ball? 

Mr. LENEY. VA dropped the ball. VA dropped the ball because we 

didn’t properly account for all of our procurement actions. We’ve acknowledged that. We’re not trying to obfuscate it. We’re not trying 

to deny it. 

But I disagree with Mr. Frye, and I think what you need to hear 

from us is what are we doing about that ball. And I think Mr. Frye 

underestimates the impact of his efforts on the VA. He alleges that 

no one has paid any attention, no one has done anything. And I 

assert that we have done a great deal since many of these allegations were made. 

We’ve pulled back all purchase cards with the capacity to go over $3,000 for everybody who is not warranted. We’re using contracts. 

We are using the PC3 n dialysis contracts to deal and with obtaining care that previously was not under contract. Prosthetics, we’ve 

gotten prosthetics under control. We’ve done a lot of stuff here. 

Mr. HARDY. Let me stop you there. 

Mr. LENEY. Okay. 

Mr. HARDY. There’s a law. You knew there was a law, right, that 

you’re supposed to act and follow and track certain things, certain 

items within procurement? Do you believe you’re above the law to 

just go on by yourself to do these things? 

Mr. LENEY. No. 

Mr. HARDY. Is that the nature of what this body wants to hear? 

Or would it be better to come to this hearing and say: You know, 

legislature, you need to fix this problem we have. Why have we 

waited to do that? That would be my question. 

I guess before I run out of time here, were any of you aware of 

bonuses that were given or awarded based on meeting and exceeding the acquirement of these goals? And if so, do you believe these 

bonuses were deserved? And should they be paid back possibility? 

There’s four of you sitting there. 

Mr. LENEY. I can’t speak to the way performance awards were 

provided in the VA beyond my own. I did not receive a bonus this 

year. We didn’t meet our small business goals. 

Mr. HARDY. In 2013 did you get a goal? 

Mr. LENEY. I received a performance award in 2013. My focus is 

on the numerator, my focus is on proving access to economic opportunity for small businesses, and we did that. Again, we can argue 

about the percentages, and the percentages are incorrect, but 

the—— 

Mr. HARDY. Is it your responsibility to ensure that small businesses are being awarded contracts and purchasing between $3,000 

and $150,000? And did you not notice that these number of contracts awards were severely decreased? 


VACREP0180 with DISTILLER
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Mr. LENEY. The requirement is that procurements under 

$150,000 and over $3,000 are provided to small businesses or contracting officers have to justify their actions as part of the procurement process. 

Mr. HARDY. Thank you. My time has expired. 

I’d like to recognize the gentlelady, Ranking Member Kuster. 

Ms. KUSTER. Thank you very much, Mr. Chair. 

I wanted to focus on where we are and where we’re headed. So 

these questions are to either Mr. Frye or to Mr. Leney. 

What actions did the Office of Acquisitions, Logistics, and Construction take to ensure VA compliance, and in particular, in the 

last month since the hearing when Mr. Frye came forward as a 

whistleblower? Can you be very specific, Mr. Frye, if you’ve had a 

rule in responding to that? And in particular, have you been certifying data that’s been going to the SBA at this point? What steps 

have you taken to ensure at this point that we have accurate data? 

Mr. FRYE. I certify the data on a yearly basis. The Chief Acquisition Officer has delegated that to me. This year, as I stated in a 

previous hearing, I certified right at $19 billion. 

I can only certify what is on contract. For instance, let’s take fee 

basis. If we have $5 billion worth of fee basis care that wasn’t put 

on a contract, I can’t certify that on FPDS. In other words, I can’t 

certify a mirage. So it’s incumbent upon the respective organizations, administrations, if you will, in VA to ensure that they put 

all the requirements, all their requirements on contract as required 

by the Federal Acquisition Regulation. 

Ms. KUSTER. Do you have confidence now, since you’ve come forward, in that data going forward? Do you have confidence for the 

next year’s certification that you will be in a position to provide accurate assessments? 

Mr. FRYE. It’s too early for me to tell you that I have confidence 

in 30 days’ time. As I just reported to you, I was just informed that 

there are approximately 2,000 unauthorized commitments for dialysis, and that’s just been reported to me in the last 21 days. So 

again, I don’t know where we’re at with accuracy. 

Ms. KUSTER. What steps, Mr. Leney, you started to tick off a few 

of these, what steps are being taken so that we will have confidence in the data going forward? 

Mr. LENEY. Specifically, the simplified the acquisition threshold, 

at the last meeting of the Senior Procurement Council we discussed 

reinforcing our focus on simplified acquisition threshold purchases. 

My office now reviews purchases under $150,000 that don’t go to 

small businesses, so we’ve put a process and strengthen that process. We’re establishing goals for our component organizations for 

their simplified acquisition threshold purchases. We’re continuing 

to press non-VA care authorizations into our PC3 contracts. While 

I can’t speak to Mr. Frye’s statement about dialysis ratifications, 

we have increased the number of dollars going through our national dialysis contracts by over 25 percent. 

Ms. KUSTER. Prosthetics has been in the news quite a bit VARO. 

We have an allegation of over $1.2 billion in prosthetics purchased 

without contracts. First of all, is that allegation true, and what 

steps are being taken to address the situation with prosthetics? 


VACREP0180 with DISTILLER
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Mr. LENEY. In 2011 there was a large number of prosthetics purchases that were done not under contract. But as I said before, if 

you look at 2015, where we are today, our prosthetics purchases 

are made under contract. We have $730 million of prosthetics purchases under contract, 42 percent went to small businesses, and we 

feel confident that we have captured the vast majority of all those 

purchases. 

Can you find somebody in some medical center somewhere doing 

something wrong? Yes. Guaranteed. But is there a pervasive situation of prosthetics in the VA currently? Absolutely not. We have 

fixed the problem. 

Ms. KUSTER. What’s the oversight in place to make sure that, if 

the statement is correct that you’re making, that we don’t run into 

this problem again? What’s the oversight currently on the prosthetics purchasing? 

Mr. LENEY. Well, I think the best person to give you that answer 

is Mr. Doyle, who oversees that process and has been a big part 

of fixing it. 

Ms. KUSTER. Thank you. 

Mr. Doyle, could you give some reassurance, both to the Members of Congress, but more importantly, to the veterans at home 

and to small businesses that you have a system of assessment in 

place such that we won’t run into this problem again? 

Mr. DOYLE. Yes, ma’am, I will do that. We started a path in 2011 

on prosthetics transfers. The interpretations at the time were that 

prosthetics was not required to be bought by a warranted contracting officer. We started that process in 2011. My office has received an additional 211 FTEs from the Department to help put 

that process in place. We completed that transfer on October 1 of 

2013. Since that time, all prosthetic purchases above $3,000 are 

done by a warranted contract officer using a contract. 

Internally, in my office, we have audits that we do. Again, they 

are done by warranted contracting officers. And then Mr. Frye’s office runs an A–123 review of the procurement aspects of things, 

and they provide another level of oversight in how we’re doing it. 

I am confident, though, that everything we are doing through my 

contracting officers does properly flow through eCMS, our Electronic Contract Management System, into the FPDS system and 

accurately reflects. 

Ms. KUSTER. Thank you. My time is up. 

Mr. HARDY. Thank you. 

The chair will now recognize Ranking Member Adams. 

Ms. ADAMS. Thank you, Mr. Chair. And thank you, gentlemen, 

for your testimony. 

Mr. Frye, you’ve been forthcoming with your superiors and peers 

regarding the legality of their actions. However, you claim that 

they’re still engaged in illegal contracting actions. Why do you believe they continue to do so? 

Mr. FRYE. I’m sorry. I wear hearing aids, and I’m having trouble 

understanding. 

Ms. ADAMS. Okay. You’ve been forthcoming with your superiors 

and peers regarding the legality of their actions. However, you 

claim that they’re still engaged in illegal contracting actions. Why 

do you believe that that’s the case, that they’re still doing it? 


VACREP0180 with DISTILLER
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Mr. FRYE. Well, again, in the last 21 days, it was reported that— 

to me that since October of 2014 to May 2015 generally 2,000 unauthorized commitments, which are illegal transactions, have 

taken place with the dialysis alone. 

Ms. ADAMS. Why do you think that’s happening? 

Mr. FRYE. I believe that it’s a lack of leadership. 

Ms. ADAMS. Okay. You contend that rather than use the schedules as required, that staff at the VHA were ordering products 

from a shopping list of almost 400,000 items. Do you know how 

items or vendors from this list were selected? 

Mr. FRYE. Yeah. That’s a great question. Let me see if I can answer you sufficiently. What is supposed to take place is we’re supposed to use the Federal supplies schedules which were put if place 

by our national acquisition center in Hines, Illinois, and we’re supposed to utilize those Federal supply schedules by competing schedule holders against each other at a strategic level and putting competitive blanket purchase agreements in place. In this way, we can 

use ordering officers versus contracting officers simply to place orders against these contracts that are put in place. That makes for 

ease of use in our supply chain. 

Instead of those requirements being put in place, VHA is simply 

using a 400,000-item list as a shopping list and placing orders 

against those using our prime vendor and the prime vendor delivers. We’re clearly in violation of FAR 8.4 which requires us to compete. 

In addition, we have hoodwinked the American public, we’ve 

hoodwinked anybody that knows anything about this business, by 

stating that they’re Federal supply schedule purchases when 

they’re not. They’re open market purchases. 

Ms. ADAMS. Okay. Could you speak to the impact that these allegations of misconduct have on minority-owned small businesses 

looking for Federal procurement opportunities? And, to your knowledge, have any minority-owned firms been shut out of the Federal 

procurement programs at the VA as a result of these allegations? 

Mr. FRYE. I can’t speak specifically to minority-owned firms, but 

I can speak specifically to veteran-owned businesses. If we are not 

using Federal supply schedules which don’t require set-asides, if we 

are buying use in open market purchases, we must consider setasides. So we’ve spent over a billion dollars a year for a number 

of years for these medical/surgical items, and given that we aren’t 

correctly using—we’re illegally stating that these are Federal supply schedule buys when in fact they’re open market buys, we 

shouldn’t consider set-asides for small businesses. 

Ms. ADAMS. Mr. Leney, your office is charged with ensuring that 

provisions meant to ensure small business participation at the 

agency like the small business reserve are followed by contracting 

officers. However, Mr. Frye’s allegations seem to indicate that this 

rule was routinely not observed. 

What have you observed at the VA regarding contracting actions 

that are valued below this threshold? 

Mr. LENEY. I’m sorry. I’m not sure I understand the question. 

Are you talking about contracting action below the simplified acquisition threshold? 

Ms. ADAMS. Yes. 


VACREP0180 with DISTILLER
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Mr. LENEY. Contract actions below the simplified acquisition 

threshold by law are supposed to be 100 percent to small businesses unless a contracting officer is able to justify why that’s an 

inappropriate action. We do not provide 100 percent of our acquisitions below $150,000 to small businesses. 

I don’t have visibility with regards to how the contracting officers 

make those justifications. In fact, Mr. Frye’s office does a audit of 

contracts, and his office has the capacity to look into particular acquisitions and determine whether or not a contracting officer’s done 

the job correctly. I have not heard from Mr. Frye’s office that this 

is a particular problem in the VA, but I can’t speak to it because 

it’s his office that makes those investigations, not mine. 

Ms. ADAMS. Thank you, sir. I believe I’m just about out of time. 

I yield back. 

Mr. HARDY [presiding]. Thank the gentlelady. 

The chair will now recognize Mr. Bost. 

Mr. BOST. Thank you, Mr. Chairman. And, Mr. Leney, I need to 

know, and I’m going to go in a different direction here, if you know 

how involved like top level management for individual VA facilities 

and to ensure compliance with this particular law, the Federal Acquisition Regulations, that I’m talking about individual managers 

at our VAs, are they the ones that choose to have the oversight, 

or is that accurate? 

Mr. LENEY. Our medical center directors, our network directors, 

are, at the end of the day, responsible for what their organizations 

do or fail to do. 

Mr. BOST. Okay. 

Mr. LENEY. It is the approach at the VA that rather than just 

passing this off to staff members, we keep it within the chain of 

authority. 

Mr. BOST. Okay. And that leads to my second question because 

of some information I found out recently. Does the lack of permanent directors at some and many of our facilities create an opportunity for those below them to falsify the number of contracts 

awarded to small business? 

Mr. LENEY. I’m not sure that it creates an opportunity for people 

to falsify. When you have half of your medical center directors in 

an acting capacity and you’re missing a large number of senior 

managers, it puts additional stress on the people who are in those 

positions. So their ability to fully manage, fully lead is compromised. So does that mean that somebody that works with them 

can do something wrong? Absolutely. 

Mr. BOST. Okay. That’s the concern I have. And that’s why I 

went down this path. We found out and we have a situation in a 

VA near my district and then another one in my district that the 

facility manager, in a two-year period there’ve been seven. Every 

120 days, because that’s what the rule is, they don’t serve longer 

than 120 days, and I don’t know how anyone in a capacity of 120 

days can be an overseer to a level that they can manage to, one, 

even if they want to, and I don’t want to say some of them don’t 

want to. I mean, if they want to, they can’t possibly in 120 days 

figure out who that’s been there for a long time that is actually 

doing this and find it and correct it. 


VACREP0180 with DISTILLER
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So it still stems down to a problem with the VA and the overall 

management of each facility and the larger picture of trying to 

make sure that the law is followed. And then to find the person 

who’s responsible for following that law. Do you see the problem 

with that? 

Mr. LENEY. I think you’ve pointed out a very serious problem 

that the agency confronts. No one is here trying to say that we 

don’t have a problem when we’re missing such a large number of 

senior executives. 

The challenge is a medical center director has to follow many, 

many, many laws. And at the end of the day, I will tell you in 

every single medical center director’s performance plan is the ability to achieve small business goals. But I would be remiss if I were 

to try to tell you that that is the number one priority for a medical 

center director, nor as the small business advocate within the VA 

would I say that it should be. Because what is their priority? To 

make sure that patients are safer and well cared for. 

You all are very familiar with the challenges we’ve gone through. 

And so, yes, we are trying to follow human resources laws and 

small business laws, and at the end of the day, it’s not about getting performance awards or bonuses, it’s about doing your job 

which is to take care of veterans that walk through the door of 

your medical center. And we don’t do that in every case, but that 

has been the focus of the senior leadership of the VA. You’ve asked 

me to focus on small business. 

Mr. BOST. And that should be the focus. But that focus should 

never—let me tell you that I want every time for the veteran to be 

taken care of—and everybody on this committee, everybody in this 

Congress, wants that to happen. But that still doesn’t make law 

suggestion. It’s still law. 

Mr. LENEY. We agree. 

Mr. BOST. I yield back. 

Mr. HARDY. Gentleman yields back. 

We now recognize the ranking member Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Mr. Frye, all government purchase card holders must receive 

training prior to the issuance of their cards. Was this training occurring at VA? 

Mr. FRYE. I don’t run the government purchase card program. 

That’s run by the chief financial officer. I will go out on a limb and 

say that training was provided. I think it was. I would state that 

the micro purchase piece and the use of the government purchase 

card, the micro purchase program, that is $3,000 and below, is run 

very well from everything I know in the VA. It’s the use of the purchase card for payment of contracts above $3,000 where we have 

had our problems. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. Doyle, the VA’s office of inspector general has substantiated 

some of Mr. Frye’s claims regarding illegal use of government purchase cards, including some cards held by VHA employees. Have 

you identified the responsible individuals and have their purchase 

cards been rescinded? 

Mr. DOYLE. I don’t know exactly the names that are involved, but 

generally when something like that happens, their cards are reVerDate Aug 31 2005 13:04 Oct 12, 2016 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 Y:\98-644.TXT PAT

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scinded or their dollar values are reduced to one dollar so they can 

no longer use the card. 

Ms. VELA ́ ZQUEZ. But are you aware that it has taken place? 

Mr. DOYLE. I know that has happened in some cases, yes. I don’t 

know to what extent it has happened, though. 

Ms. VELA ́ ZQUEZ. Mr. Leney, if Mr. Frye’s allegation prove true, 

the VA will have deprived small businesses of billions of dollars in 

contracting dollars. So the issue here is not that you didn’t account 

properly, the issue is that you didn’t follow the law. And don’t come 

back to me and say that you are committed and your mission is to 

provide the best quality care to veterans, because I agree with that. 

But there should not be a contradiction between providing the best 

quality care that they need and deserve and following the law. So 

isn’t the failure to properly account fraud? I’m asking you. 

Mr. LENEY. I’m not clear on what the question is. Does the failure to properly account constitute fraud? 

Ms. VELA ́ ZQUEZ. Yes. 

Mr. LENEY. I’m not a lawyer, but I’m not aware that that’s the 

case. 

Ms. VELA ́ ZQUEZ,. Well, I guess that at some point once the investigation is concluded, those will determine whether or not it’s 

fraud. Because you resist to call it what it is. When you fail to 

properly account, that is fraud. And you’re providing misinformation. 

Mr. LENEY. I don’t know. 

Ms. VELA ́ ZQUEZ. Mr. Leney, the management system of the 

SmartPay program allows agencies to establish accounts and access 

information on every purchase their card holders transact. There 

are even standard reports to identify instances of attempts to circumvent spending limits. Mr. Leney, do you have access to these 

reports? 

Mr. LENEY. No, I don’t. I’d have to defer to my colleague Mr. 

Doyle. 

Ms. VELA ́ ZQUEZ. Mr. Doyle? 

Mr. DOYLE. I have people who run the government purchase card 

program within my organization for VHA, and they have access, I 

believe, to that account. 

Ms. VELA ́ ZQUEZ. And if they have access, they haven’t seen— 

well, I guess that if I ask you this question you’re going to say that 

you don’t know. Have you seen those reports? 

Mr. DOYLE. I do not see the reports, no. 

Ms. VELA ́ ZQUEZ. And, Mr. Shoraka, do procurement center representatives have access to this information? 

Mr. SHORAKA. The SBA doesn’t have authority to manage or 

have oversight over the Smart Card program. So in our surveillance reviews, our focus—— 

Ms. VELA ́ ZQUEZ. Okay. You don’t have the authority. That’s it. 

Mr. Shoraka, if the agency was in fact underreporting contracting dollars by $6 to $10 billion, does your agency plan on going 

back to review these numbers so that we have a more accurate accounting of the government’s small business contracting dollars? 

Mr. SHORAKA. As I indicated before, if it’s not an FPDS, or the 

Federal Procurement Data System, we have no record of that. So 

it would be—we would unable to determine what the impact would 


VACREP0180 with DISTILLER
23 

have been on the small business performance. Some of those funds 

could have indeed gone to—other than small, some of them could 

have gone to small. But as long as it’s not within FPDS, we will 

not have the opportunity to analyze that data. 

Ms. VELA ́ ZQUEZ. Okay. Mr. Shoraka, in your testimony you noted 

that each agency’s submission for the scorecard is peer reviewed by 

a panel of three OSDBUs. Do you know if any questions were 

raised by this panel when reviewing the VA’s fiscal year 2013 submission? 

Mr. SHORAKA. I’m sorry. The question was do I know if they’ve 

reviewed—— 

Ms. VELA ́ ZQUEZ. If they raised any questions by the panel? 

Mr. SHORAKA. I’m not aware that they’ve raised particular questions around this particular issue in the peer panel review—— 

Ms. VELA ́ ZQUEZ. That’s it, Mr. Chairman. I yield back. 

Mr. HARDY. Thank you. 

The chair will now recognize Dr. Roe. 

Dr. ROE. I thank the chairman. 

I guess I’m going to start out by just saying to Mr. Frye, are you 

just the—you’ve been here several times. Are you just the oddball 

uncle that every family’s got that tries to hide out when the family 

gets together, or are you really a patriotic whistle blower that’s trying to correct serious problems in this great organization? Because 

you’ve become a gigantic pain in the VA’s gluteus maximums. And 

I think without you doing that we would never have known a lot 

of these things, and I think it’d still been going on. So which are 

you? 

Mr. FRYE. Well, again, I didn’t expect when I wrote this 35-page 

document, which took me a few hours to write, by the way. 

Dr. ROE. I suspect it did. 

Mr. FRYE. I did not expect it would reach this level. I sent it to 

Secretary McDonald hoping it would entice him to instigate an investigation. You know, what I made were allegations. I didn’t do 

the investigation for them. I’ve got names. I’ve got documents. But 

I’d hoped to entice the Department to do an investigation. Unfortunately, that didn’t work. So it ended up at this level because I 

thought it needed to be known. 

So, you know, I can’t tell you that I’m a patriotic American, but 

I am a retired Army officer, and, you know, duty, honor, country 

does enter into my equation. 

Dr. ROE. That makes you patriotic for me. 

A couple things, just a couple of questions briefly. Why did it 

take the IG to find this $225,000 or so theft in Roxbury? Why 

wouldn’t internal controls? That’s a big number. Why? 

Mr. FRYE. That is a very good question. Internal controls will— 

we’re supposed to have separation of duties. First of all, you issue 

someone a purchase card, they’re not supposed to be able to order 

and receive and pay for that product. There has to be a separation 

of duties to keep this from happening. This individual could have 

ordered big screen TV’s for his house and apparently no one would 

have known any different. 

These are internal controls, basic—basic—to any financial system, and they were not stood up, or if they were, they weren’t complied with. 


VACREP0180 with DISTILLER
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Dr. ROE. I guess the other question I’d have for Mr. Leney, I 

think why—the VA clearly didn’t obey the Federal procurement 

policy and why didn’t they? And the other question I have is: If you 

don’t, if you just ignore a statute, and I think it just became slowly 

the way the VA did business, if you ignore that statute, is there 

a penalty for ignoring it? 

In other words, if I just decide I’m going to ignore this statute, 

that was clearly done, is there any penalty that that person that’s 

ignoring it all the way up to the top where you sit endures? 

Mr. LENEY. The VA failed to comply with statutes. That’s clear. 

I guess the—my only comment would be we’re talking about things 

that we discovered, and we took action to deal with them. 

So in terms of did we decide that we didn’t have to follow the 

law? I don’t think so. I’m not the person who’s familiar with each 

of these details, but I have the opportunity to watch my colleagues 

work these issues very hard, and over the course of the last 3 

years, like I say, a lot of these issues that Mr. Frye has noted the 

VA has discovered, the VA is dealing with them, and the VA has 

made progress. 

Dr. ROE. Well, I mean, my question is, is there a penalty? You 

didn’t answer that question. Is there a penalty? Because if I go too 

fast at home, there is a penalty. So is there a penalty in the statutes? In other words, can you just—can members of the VA just ignore these and there’s no teeth to it so there’s no penalty. People 

got bonuses apparently. Is there? 

Mr. LENEY. I can’t speak to that. 

Dr. ROE. So you made an emphatic statement a minute ago that 

said that this problem has been solved. And I guess if it’s been 

solved—if you say it’s been solved, are you willing say: If it hadn’t 

been solved, I resign? 

Mr. LENEY. No. I’m not willing to say that because that’s not my 

solution. I’m reporting to you what the VA—— 

Dr. ROE. It is your responsibility. Not solution, but is that your 

responsibility to oversee that? 

Mr. LENEY. No. It’s not my responsibility—— 

Dr. ROE. Well, whose is it? Whose responsibility? That’s what 

we’ve been having a problem finding out whose responsible. Let me 

tell you, for 30 years I knew who was responsible when I went in 

the operating room. Me. Nobody else. 

So who’s responsible for this so we can say: You are responsible, 

and then there’s a penalty if you don’t correct this problem. Because you made a very emphatic statement just a second ago. 

Mr. LENEY. Well, I would say Dr. Lucille Beck heads the VA 

prosthetics program, and she’s responsible for a lot of the improvements that have been made in the program. 

Dr. ROE. So we don’t know who’s responsible. Okay. 

Mr. LENEY. No. I just told you, Congressman. 

Dr. ROE. I’m not going to ask any more there. 

Mr. Page, I’ve got a question for you, sir. If—how much—what 

percent of, and you may not know this, and it was hard—we have 

263,000 of these purchase cards? Did I hear you say that correctly? 


VACREP0180 with DISTILLER
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What percent of the purchases are made with these cards of the 

VA—what VA purchases? Does that make sense? 

Mr. PAGE. It does. I’m not sure I do have that specific number. 

I believe there are some numbers in the written testimony that VA 

certified to a large number in FPDS, and we do know that transactions through—— 

Dr. ROE. Do you know the total number? I think I heard you say 

that in your testimony. 

Mr. PAGE. Well, I know the total number in Federal-wide is what 

I spoke to. I mean, I—— 

Dr. ROE. Well, you don’t have to get it. My time is expired, and 

I don’t want to be—I’ll get that from you afterwards. Thank you. 

Mr. PAGE. The Veteran’s Administration is a very large user of 

the purchase card program, sir. 

Dr. ROE. Thank you, Mr. Page. 

Mr. HARDY. Thank you. 

The Chair will now recognize Mr. Rice. 

Mr. RICE of South Carolina. Mr. Leney, you said earlier that the 

problem with acquisition in the prosthetics had been corrected. Is 

that right? 

Mr. LENEY. Yes. 

Mr. RICE of South Carolina. Mr. Frye, has it been corrected? 

Mr. FRYE. Well, I was interested to hear that Mr. Leney went 

back to 2011. Let me go back to 2012. In 2012, actually, in December of 2011, the Secretary sent a letter to Mr. Donnelly, now Senator Donnelly, and stated that we had quit violating the law with 

regards to purchases of pharmaceuticals. From December of 2011 

until August of 2012, self-reported by VHA, they violated the law 

9,700 times. And that was self-reported. It may be much higher 

than that. 

So when we dip all the way back to 2011 and then say that we 

fixed it from then forward, we clearly didn’t. Because we violated 

the law with regard to pharmaceuticals in the period that I just indicated. 

Mr. RICE of South Carolina. Okay. We agree there was a problem 

before 2011, and there’s a little dispute about whether there’s one 

after. With respect to the problem before 2011, Mr. Leney, did anybody get fired? 

Mr. LENEY. I don’t know the answer to that, Congressman. 

Mr. RICE of South Carolina. And this—— 

Mr. LENEY. By the way, no one here is saying that the problem 

was solved in 2012. What I’m saying is in 2015 we have addressed 

the problem. 

Mr. RICE of South Carolina. All right. And then with respect to 

this prepared card, somebody mischarged $200,000, did that person 

get fired? 

Mr. LENEY. I don’t know the answer to that. The IG is investigating that. 

Mr. RICE of South Carolina. I read that Mr. McDonald said earlier that he needs to fire 1,000 people in the VA. Did anybody get 

fired? 

Mr. LENEY. I don’t know the answer to that. I presume he’s following the various laws he has to with human resources. 


VACREP0180 with DISTILLER
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Mr. RICE of South Carolina. The people that got—the veterans 

that were killed in Phoenix, 80 of them, and then the ones that 

were killed in Columbia, did anybody get fired for that? 

Mr. LENEY. I’m not in a position to answer that, Congressman. 

Mr. RICE of South Carolina. Does anyone else know? Did anybody get fired for that? I mean, the problems with the ignoring the 

law with respect to small business acquisition, and you said you 

got a bonus and other people got bonuses, apparently incorrectly, 

is there any movement to go back and retake those bonuses? 

Mr. LENEY. I don’t know the answer to that question. 

Mr. RICE of South Carolina. So it appears to me that there is an 

absolute lack of accountability. That, you know, we screw up, we 

admit we screw up. Well, so what. We’re going to go to work the 

next day and we may continue to do it the way we were doing it 

or we may not, and nobody gets fired and nobody loses their bonus, 

and there’s no consequence. 

So by what rationale would you change your behavior? My question is this. Mr. Frye, I’m curious. Is the VA fixable? I mean, really. 

It’s grown to be such a monolithic, bureaucratic web. I hear all you 

guys talking about your processes and your accountability and this 

and that and the other, but it’s clearly not working. None of it is. 

It’s a tangled web that’s not working. Is this mess fixable? 

Mr. FRYE. We currently have a moniker in the VA called I Care. 

The I stands for integrity. In my opinion, these five elements are 

the bedrock that we build a foundation upon. Right now that bedrock is—or these footings are not reaching all the way to bedrock. 

Mr. RICE of South Carolina. Well, I think, you know, I think with 

respect to entities and the way they function, this is the core, this 

is the fundamental reason why a governmental entity will never 

ever perform as efficiently as a private entity. Because with a private entity, you’re dealing with your own money. In a governmental entity somebody can charge $200,000 on a prepaid card and 

nobody will even notice. It’s not their money. Their bonus won’t get 

affected, and their job’s not on the line. There’s so many protections 

built in for Federal employees, that they could do anything and not 

get fired for it. Hell, these 80 people died and Mr. Shinseki held 

on for months before he finally resigned. 

Now, I think we need to do some real fundamental soul searching about the way this entity is organized, or I don’t know that it 

can be fixed. I think maybe we should be looking at the cost of this 

overall entity versus the cost of just buying—you know, you were 

saying that the Choice program would violate the socioeconomic 

goals. Well, if the socioeconomic goals of the VA and VHA include 

keeping veterans alive, I think the Choice program’s probably pretty important and maybe we ought to look at expanding the Choice 

program to the ultimate detriment of a large part of the VHA. 

Thank you very much. 

Mr. HARDY. Thank you. 

The chair will now recognize Mr. Knight. 

Mr. KNIGHT. Thank you, Mr. Chair. 

I think a lot of the questions have been asked today, but I got 

just a couple that will still follow the same lead, I think, as Congressman Rice was talking about. 


VACREP0180 with DISTILLER
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I’d like to talk about the performance awards and how that happens. I mean, I’m a government guy right now, and, you know, I 

get a performance award or I get a performance demotion every 2 

years. That’s about it. 

Can you explain how performance awards happen? Is there a 

yearly or is there a biannual kind of look at your performance? Can 

you explain this to us? I mean, Mr. Leney? 

Mr. LENEY. Yes. The process is annually the employee establishes a performance plan with objectives, and we seek to have, you 

know, the term smart objectives, and then he or she is evaluated 

on the basis of their performance against that plan. And that’s in 

accordance with OPM guidance. We try to do that in accordance 

with how the Federal Government tells us to do it. 

Performance awards are provided at the end of that period if a 

person has performed in an exceptional manner and exceeded their 

goals. 

I am not fully—read any of this, but I don’t believe any senior 

executive in VHA received a performance award this year, but I 

may be wrong. 

Mr. KNIGHT. Okay. But we’ve been having serious problems with 

the VA for several years now. This isn’t a 2015 issue or 2014 issue. 

We’ve had severe issues. And there has been performance awards 

previously in the last 5 years with several staff, several leadership. 

Again, can you tell me is this something that we have written— 

this isn’t something in statute. This is something that is by performance goals written in a MOU, in some sort of an understanding by the department? Can you kind of—— 

Mr. LENEY. It’s written into a thing called a performance plan, 

which is between the employee and their supervisor. So it’s not— 

I don’t believe it’s in statute, but, again, I hesitate to hold forth on 

this because I’m not a human resources expert. I just know how 

my performance plan was done. 

Mr. KNIGHT. I’m not going to beat this too much, but the performance awards, how do we budget that? How does the VA budget 

performance awards? Do they have a certain amount that is put 

into performance awards in a yearly basis and we can use them for 

people who have achieved their goals or exceeded their goals? 

Mr. LENEY. I could only speak to my own organization. I was 

given nine-tenths of one percent of the salary base in my organization for performance awards. So if everybody in my organization 

was great, they would get nine-tenths of one percent of their salary 

in a performance award. 

Mr. KNIGHT. Okay. Or someone could get a much bigger bonus 

if only one or two exceeded their goals. 

Mr. LENEY. If only one or two exceeded their goals, they could 

get a bigger bonus, yes, sir. 

Mr. KNIGHT. Okay. I think that the main question that a lot of 

us want answered is over the last 2 or 3 years, what has been the 

leadership change in the VA? What can we kind of look to and say: 

Well, I know we’ve had these serious problems and we’ve all talked 

about what’s happened in Phoenix, we’ve all talked about what’s 

happened on these death lists and things of this nature, and then 

can we point a serious leadership change? Because I can tell you 

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lems like this, the organization would look differently the next 

year, and it would look differently from top down. Can we look at 

that and say that these are the people that have been changed? 

These are the reasons why we don’t expect this to happen over the 

next couple of years? 

Mr. LENEY. When I was a senior executive in a commercial company, I had the opportunity and the authority to change out people 

at will. I don’t have that authority. The Secretary doesn’t have that 

authority. I think Secretary McDonald has made enormous changes 

both—attempted to make changes in the culture of the organization and in the people while doing so within the parameters and 

constraints that he operates under. 

I think there are probably days he wishes he was king for a day 

and could do everything he wanted to do. But he doesn’t get to operate that way. I am not responsible for many of these actions. 

However, I have had the opportunity to participate in many of the 

discussions and see people who are responsible operate. And I got 

to tell you, there’s a lot of people in the VA that work very hard 

on behalf of veterans. Are they all perfect? No. Do we make mistakes? Yes. Did we fail to comply with the law in reporting all of 

our procurements? That is correct. Are we fixing it? Yes. Have we 

fixed it? No. 

Mr. KNIGHT. And I agree with you. I think that there are a lot 

of great people in the VA, and I think that most of them are looking out for the betterment of our veterans. But the problem is, is 

when you have problems like this and these problems get rampant 

or out of control in a certain regard and no one is there to say that 

these are the problems and we have corrected them because we 

have fired some people, we have changed what we’re going to do, 

the procedures are different, then it makes us all kind of look and 

say: Has anything really changed? 

And, Mr. Chair, I yield back. 

Mr. HARDY. Thank you. 

I’m going to go with a second round of questions, and I’d like to 

recognize Chairman Coffman if I could. 

Mr. COFFMAN. All right. Thank you, Mr. Chairman. 

Mr. Leney, I think you said that we failed to report, but when 

we’re referring to procurement law, but it’s failure to adhere to by 

virtue of going around the system and using multiple credit card 

purchases in violation of the limit that would have required contracting. I mean, that’s adhere. That’s not a reporting issue. Why 

did you say report? 

Mr. LENEY. We have both issues. There are people who have 

failed to adhere to the law. There are people who have divided contracts. All of those things have happened in our agency. We have 

failed to adhere to the law in terms of accounting for all of our procurements. Mr. Frye said an interesting thing. The VHA self-reported 9,600 incidents of that. So—— 

Mr. COFFMAN. Okay. Mr. Leney, under the Small Business Act 

you are required to ensure contracts are being properly set aside 

for small businesses. However, there’s at least $6 to $10 billion 

awarded in amounts subject to the small business reserve but not 

set aside for small business. So did you fail to review these because 


VACREP0180 with DISTILLER
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of your verification distractions, or did you simply concur with the 

decision to illegally bypass small businesses? 

Mr. LENEY. I did not fail to review these because of distractions 

from verification. We do review procurements, as I said. And Mr. 

Frye’s office also audits procurements to make sure that contracting officers are doing it in accordance with the law. 

I must say I don’t find anywhere in the Small Business Act 

where it’s my responsibility to ensure the execution of contracts. 

That’s not my role. 

Mr. COFFMAN. Mr. Frye. 

Mr. FRYE. This afternoon I met with my—or earlier today, I 

should say, I met with my staff regarding these A123 reviews that 

we conduct of contracting across VA. The number one issue out 

there is lack of compliance, and it’s ubiquitous. 

We open contracts, of course they’re electronic, we find a almost 

total lack of compliance in many areas. I don’t blame the contracting officers that are out in the field. What I’m looking for is 

leadership starting with the senior leaders of each of the administrations and down to their heads of contracting activity is their responsibility to run their procurement organizations in accordance 

with the law. And it’s not being done in all cases. Obviously, in 

many cases it’s not being conducted properly. So it’s a leadership 

issue. 

Mr. COFFMAN. Mr. Leney, I think you said that you’re correcting 

these issues—you’re taking the initiative to correct these issues. 

But isn’t that—didn’t that corrective action only occur after Mr. 

Frye, a whistle blower, brought the issue forward? 

Mr. LENEY. At the time Mr. Frye brought a number of these 

issues forward, he wasn’t a whistle blower, to my knowledge. He 

was a senior procurement executive. 

Mr. COFFMAN. But, you know, and the reason why I bring this 

up is because it just seems like from—VA senior leadership never 

identifies these problems. They’re always identified by whistle 

blowers within the organization. I mean, every problem that’s 

brought before this committee has never been identified by—selfreported by the leadership of the VA. It’s always by others within 

the organization that fundamentally care about what this organization is doing and whether or not it’s meeting it’s obligations to our 

Nation’s veterans. 

So I just want to, again, express my disappointment in the senior 

leadership of the VA. And it just—and I don’t feel—I mean, what 

I feel from you is the same with others that testify on behalf of the 

VA, VA’s leadership, is a sense of indignation that, you know, we’re 

disappointed we got caught. We don’t feel like we did anything 

wrong, and we’ll just say the right things here, but we’ll continue 

doing what we’ve always done. 

Mr. Chairman, I yield back. 

Mr. HARDY. Thank you. The chair will now recognize ranking 

member Ms. Adams. 

Ms. ADAMS. Thank you, Mr. Chair. I just have one question. 

Mr. Leney, would it be fair to say that there is a necessity for 

an overhaul to the way the VA approaches small business contracting starting with an increase in transparency to acquisitions 

as a whole? 


VACREP0180 with DISTILLER
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Mr. LENEY. I believe we are transparent with respect to our FAR 

complaint acquisitions. We have less transparency with respect to 

those things that are operating under other controls. 

Ms. ADAMS. So you don’t think transparency is an issue? 

Mr. LENEY. I don’t think transparency’s a very large issue with respect to the $19 billion that we put into FPDS. We have acknowledged, we have admitted, we’ve come to this committee and stated 

where we’ve had problems on things like purchase cards, where 

we’ve had problems on non-VA care, and I’m stating that again 

today. I’m not trying to hide that we have a problem $3.2 billion 

was spent on non-VA care outside of the FAR. We accept that. And 

it’s our responsibility to get it fixed. 

And much of what Mr. Frye has done was done when he was a 

senior procurement executive which he still was prior to him declaring himself a whistle blower. And a great deal of action has 

been taken on much of what he has spoken to. 

Ms. ADAMS. Thank you, Mr. Chair. 

Mr. HARDY. Thank you. I’ll now recognize myself for 5 minutes. 

Mr. Leney, since 1978 the small business director was required 

to make sure that the VA awarded contracts under the simplified 

acquisition threshold to small businesses. This is a statutory procurement, 15 U.S.C. 64–K–4. Are you trying to say that you just 

now started this in 2015 and this has been around since 1978? 

Mr. LENEY. No. We didn’t just start it in 2015, Mr. Chairman. 

Mr. HARDY. Try that again. 

Mr. LENEY. No. We did not just start it in 2015. 

Mr. HARDY. Okay. A discussion was just held just a minute ago 

about whose responsibility it was, and it says: When the small 

business act says that the director of the small business is disadvantage utilized, it shall be the responsibility for implementation 

and the execution of the functions and duties under Section 8 and 

15 of the act related to such agencies. That’s talking of you. Aren’t 

you responsible for that? 

Mr. LENEY. I think under 15 U.S.C. 644 on the paragraph you’re 

talking about I’m responsible for the implementation and execution 

of the functions and duties under that section. 

Mr. HARDY. Okay. June 26 of 2012, a memo was sent to you by 

Mr. Frye, and it talks about actions required, and this is for approvals are required as below. COs have to sign off. The acquisition 

officer director, the customer, consumer SES level, and the contracting officer has to sign off. Basically did you send that letter 

off to your folks? 

Mr. LENEY. Mr. Chairman, I was the origin of that letter. 

Mr. HARDY. And you did not send that review out to your folks? 

Mr. LENEY. That review was sent by the deputy secretary to 

under secretaries and assistant secretaries and key officials. It was 

sent to Mr. Frye to all the contracting officials. My folks received 

it. 

Mr. HARDY. Okay. And the other question I have for you, it says 

here on your evaluation for 2012 and 2013, it says: Tom has led 

the VA efforts to achieve socioeconomic procurement goals to increase small business access to the VA procurement opportunities. 

Do you remember what your bonus was for that year? For 2013—— 

Mr. LENEY. No, I don’t. 


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Mr. HARDY. Almost $9,000. And with now understanding what 

we do, it would probably put you at an F rating rather than an A 

based on the way things have been evaluated. Do you believe that 

the staff was entitled to those kind of bonuses? And yourself? 

Mr. LENEY. My focus and my mission has been to work on the 

numerator of that number and to make sure that we provided access to economic opportunity to small businesses, and I believe we 

did that. 

Mr. HARDY. Okay. I’ll yield back. And we got anybody left? 

Okay. We’re going to close here. I have a closing statement, and 

I’d like to thank the panel for being here. I know it wasn’t all fun 

and games for you, and I don’t think any of us here meant it to 

be fun and games. 

I wish I could say that I’ll be leaving here today confident that 

the practices detailed by Mr. Frye on March 2015 letter to the Secretary McDonald are being addressed and that the American veterans and small businesses are being well served. Unfortunately, 

everyone seems happy to say how much they value these communities, but neither the VA, the SBA, or the GSA, nor the OMB 

seem to be willing to be responsible or take responsibility for fixing 

the problem. Even though what I have heard today appears to be 

a serious and massive violation of Antideficiency Act, the Small 

Business Act, the Veteran’s First Law and the Federal Funding Accountability Transparency Act. No one being held accountable. 

Based on what we’ve heard here today, it is evident to me that 

the VA and the Obama administration have failed our veterans, 

small business owners, and American taxpayer. For this I give 

these agencies and this administration an F. When the executive 

branch fails to act responsibly, we in Congress need to revisit the 

authorities provided to those agencies, and I look forward to working with my colleague Chairman Coffman and all the other members, respective committees, to ensure that our Nation’s laws are 

upheld, our veterans are honored, and our small businesses 

thrive—until our small businesses thrive. 

I would like to recognize Chairman Coffman if—he’s not here. 

With that being said, I’d like for unanimous consent that all 

members have 5 legislative days to revise and extend their remarks and include extraneous materials. Without objection, so ordered. 

I’d like to once again thank you all for being here, and all the 

witnesses and members who have joined us today on this conversation. With that, the hearing is adjourned. 

[Whereupon, at 5:44 p.m., the subcommittees were adjourned.] 

APPENDIX 

PREPARED STATEMENT OF JAN R. FRYE

Chairman Coffman, Ranking Member Kuster, and Members of the Subcommittee, 

thank you for inviting me to testify today. 

In a June 11, 2015 letter to VA Secretary McDonald, you invited me to testify 

as a witness on behalf of VA, along with my colleagues Messrs. Leney and Doyle. 

I was intentionally excluded by the VA leadership, and do not appear before you 

today as a VA witness. I appear today of my own volition, as a VA whistleblower, 

representing American taxpayers and America’s military veterans. 

As you know, I alleged massive violations of acquisition and fiscal laws to Secretary McDonald in March 2015. As you are also aware, I received no response from 


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him regarding my disclosures. Thus, I was compelled to report them to this Congressional body. In the first of now three joint hearings, beginning May 2015, I reported that some VA senior leaders have willfully violated the public trust, debasing 

Federal procurement and financial laws. 

A reasonable person might conclude my disclosure of illegal acts would be accepted with open arms by VA’s leadership for further investigation. That has not been 

the case. My intentional removal as a VA witness for this hearing is irrefutable 

proof of continuing scorn for those who attempt to uphold the public trust. Further, 

these VA leadership actions serve to cast a chill upon future potential whistle blowers. 

We have a senior-leader integrity malaise in VA. Like substance abusers before 

the journey to recovery, we will not be cured until we admit we have a disease. During the June 1 hearing on these matters, you heard one of VA’s chief law enforcers 

testify emphatically, that violating U.S. Federal statutes and regulations is not ‘‘illegal’’ but just ‘‘improper.’’ In my opinion, parsing words in this manner is a stark 

reflection of our denial, and exemplifies just how low some VA senior leaders will 

stoop to avoid culpability and protect themselves. As Government servants, we did 

not take an oath to serve ourselves. 

Massive violations of public trust continue unabated. In the past several weeks, 

it was disclosed that VHA officials committed approximately 2000 illegal transactions for kidney dialysis from October 2014 to May 2015. This represents 34 percent of the transactions under these multiple-award contracts. These are unauthorized commitments that require ratification before payment. However, payments 

have already been made, in violation of Federal fiscal law. 

This month, the VA Office of Inspector General reported theft of approximately 

$225,000 by a VHA, West Roxbury, NY employee, using a government purchase 

card. This theft was avoidable, and occurred because required internal controls in 

VHA and the Department are lacking. These funds will never be returned to VA 

to take care of veterans. Over a year ago, I personally authored a new policy that 

would vastly improve internal controls in use of purchase cards for contract payment. VHA rejected the policy. It was apparently ‘‘inconvenient’’ for them to execute. 

In this hearing we will discuss VA’s failure to accurately report our small-business goal accomplishment. We are guilty. In doing so, we have deceived the veteran 

owned small-business community, while violating federal laws. I have previously alleged that billions of dollars, extended over multiple years, have not been placed 

under contract as required, and thus have not been reported in the Federal Procurement Data System as our VA total-spend denominator for contracting. 

Today, I am providing this subcommittee information concerning one of the most 

deceptive schemes I have uncovered in my 41 years of government service. Each 

year VHA purchases over $1B in medical/surgical products. All of these products 

must be procured in accordance with Federal contracting laws. Departmental policy 

requires most be obtained through our medical/surgical prime vendors, who serve 

as distributors, using Federal Supply Schedules (FSS) as underlying contracts. I 

first learned we had hatched a scheme that avoids use of FSS in late 2014. We pretend to use them; we have never informed OMB or the public we are not using 

them; but in fact, we are not. Using a convoluted ruse, we buy products off a ‘‘shopping list’’ while throwing Federal acquisition laws to the wind. 

We are illicitly and deceptively pretending that Federal Supply Schedules are 

being used while executing open-market purchases. Federal Supply Schedules do 

not require small business set-asides. Open-market purchases do require set-aside 

consideration. Our illegal behavior allows us to avoid set asides, intentionally fencing these purchases from small businesses. In these acts, exceeding $1B annually, 

we are in violation of Federal procurement law, as well as the Small Business and 

the Veterans First Acts. 

After learning of these shocking practices in late 2014, I attempted to rally VHA 

senior leaders, as well as my supervisor, to systematically cease these unlawful 

deeds. I have been totally thwarted in my efforts to get VHA to properly place their 

products on contract. 

We weave a tangled web. In previous hearings I have outlined VA’s failure to 

award billions of dollars for products and services via contracts, which is illegal and 

affords potential harm to veterans. These failures led to massive understatements 

of our annual total spend for multiple years in Federal Procurement Data System. 

In a domino effect, this resulted in overstatement of Departmental small-business 

goal accomplishments. And finally, as revealed today, we further duped the American public and the veteran-owned small-business community with deception using 

Federal Supply Schedules. It is my opinion these acts combined and separately constitute corruption and gross mismanagement. 


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I conclude with this rhetorical question, which I posed to Secretary McDonald in 

my March report to him: Without demonstration of responsible stewardship, why 

would the American public support ever-increasing and generous annual Congressional appropriations, to care for our nations veterans? 

Mr. Chairman, this concludes my statement, and I am prepared to answer any 

questions this Committee may have. 

f 

PREPARED STATEMENT OF MR. THOMAS J. LENEY

Good afternoon, Chairmen Coffman and Hardy, Ranking Members Kuster and 

Adams, and Members of the Subcommittees. I appreciate the opportunity to address 

your concerns about the validity of the Department’s data on our small business 

goals. I am joined today by Mr. Norbert Doyle, Chief Procurement and Logistics Officer of the Veterans Health Administration (VHA). 

The Department of Veterans Affairs (VA) is a significant contributor to the Government’s efforts to ensure a fair proportion of contracting dollars are awarded to 

small business. According to the Federal Procurement Data System (FPDS), in Fiscal Year (FY) 2013, VA was the fourth-largest Federal agency in terms of contract 

spend. Out of $18.3 billion in FY 2013 reported contract spend, FPDS indicates VA 

awarded over 36 percent to small businesses. VA also reported more dollars awarded to service-disabled Veteran-owned small businesses 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 these metrics accurately and completely report the Department’s commitments to small business is important. 

The Small Business Administration (SBA) issues the official agency scorecard. 

SBA receives a data extract of small business prime contracting performance from 

FPDS–NG, which is an extract of all of the contracting data entered by the various 

agencies. 

The Federal Acquisition Regulation (FAR) places the responsibility for reporting 

contract actions to FPDS on the contracting officer. The contracting officer reports 

contract actions on FPDS by completing contract action reports. A contract action 

report is required for contract actions which are ‘‘any oral or written action that results in the purchase, rent, or lease of supplies or equipment, services, or construction using appropriated dollars over the micro-purchase threshold [generally, 

$3,000], or modifications to these actions regardless of dollar value’’ (FAR 4.601). 

The Senior Procurement Executive and the Head of the Contracting Activity are collectively responsible for ‘‘developing and monitoring a process to ensure timely and 

accurate reporting of contractual actions to FPDS’’ (FAR 4.604 (a)). Annually, the 

VA certifies its data in FPDS to the General Services Administration (GSA) and Office of Management and Budget (OMB) that the data it has entered into FPDS is 

complete and accurate. After which, SBA uses the FPDS data to formulate VA’s, 

and other agencies, Scorecard. 

VA’s Office of Acquisition and Logistics (OAL), headed by the Senior Procurement 

Executive, has a data system that facilitates the timely and accurate reporting of 

contract actions The Electronic Contract Management System (eCMS), VA’s contract-writing system, provides a range of functionality to support contract actions 

above the micropurchase threshold, including award of definitive contracts, modifications and options, and orders against the Federal Supply Schedules. eCMS currently enables a program office to plan and transmit requirements to an acquisition 

office, and for the contracting staff to execute the transaction all the way to award 

and retain source documents electronically. Before eCMS will allow the contracting 

officer to make the award, he or she must submit a contract action report to FPDS. 

This system has significantly strengthened VA’s compliance with the FAR reporting 

requirement. 

VA still encounters risk in FPDS reporting associated with actions performed outside of eCMS. The FAR allows for ‘‘express’’ reporting of batches of transactions 

from the same vendor, when separate reporting of each individual transaction would 

be burdensome (FAR 4.606(a)(3)). If this method is utilized, the express reporting 

should be performed on at least a monthly basis. For example, VA’s Consolidated 

Mail Outpatient Pharmacies provide a monthly report on the amount of pharmaceuticals purchased against the Pharmaceutical Prime Vendor contract to provide 

outpatient medicines to Veterans. VA has improved its timeliness of aggregating 

and submitting these express reports to FPDS. 


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1Prosthetic transactions reported in eCMS are for purchases above the $3000.00 micro-purchase threshold, e.g., artificial limbs, surgical implants, specialized custom wheelchairs and 

home adaptations. 

VA formerly reported its prosthetic spend similarly, using this express report 

function to ‘‘batch’’ reports of prosthetics buys conducted through the Graphical 

User Interface in the Veterans Health Information Systems and Technology Architecture. However, VA re-examined its interpretation of the FAR requirements and 

determined that all prosthetics spend above the micropurchase threshold must be 

awarded and reported by warranted contracting officers. As of October 1, 2013, all 

VHA prosthetic procurements are in compliance. We believe this issue now has been 

addressed adequately. As of June 15, 2015, eCMS showed 57,047 prosthetics transactions,1 representing $730.6 million in spend. Of these transactions, 56,884 records 

included an appropriate code indicating they had been reported to FPDS. This is 

a 99.7% compliance rate. These prosthetics transactions are and will continue to be 

included in analysis of VA’s small business achievements based on FPDS data. 

VA will continue to redress identified concerns with our procurement process and 

address new issues as they arise. For example, VHA has been implementing the 

Veterans Access, Choice, and Accountability Act of 2014. This will have policy and 

data reporting consequences which we are beginning to address. Although we will 

continue to work through these issues, we do not know how these transactions will 

ultimately affect our small business achievements. 

Additionally, OAL is seeking to improve infrastructure to better support efficient 

transactions to eCMS that will improve interfaces with VA’s legacy systems and improve our ability to provide an enterprise-wide view of VA procurement. I appreciate 

that OAL has included my office as an active participant in this effort. Small business goal forecasting and reporting is a cross-cutting requirement that affects numerous other business processes across the Department. 

Continued improvements in our data systems, consistent use of eCMS, and timely 

reporting of express reports will heighten the Department’s ability to report accurate and complete procurement data for SBA to use in determining small business 

goal outcomes. In an environment of quick and continuous change, we have worked 

to resolve identified concerns, anticipate future needs and address new issues as 

they arise. We welcome the input of our Congressional partners as we work to better serve Veterans in achieving the Department’s small business goals. 

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. 


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