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SUBCOMMITTEE ON CONTRACTING AND 

TECHNOLOGY HEARING ON IMPROVING 

CONTRACTING OPPORTUNITIES AND 

PREVENTING FRAUD FOR SERVICE-DISABLED 

VETERAN-OWNED SMALL BUSINESSES 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

JULY 15, 2010 

Small Business Committee Document Number 111-073 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MARK CRITZ, Pennsylvania 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

MARK CRITZ, Pennsylvania 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Nye, Hon. Glenn ...................................................................................................... 1 

Bartlett, Hon. Roscoe ............................................................................................... 3 

Ellsworth, Hon. Brad ............................................................................................... 3 

Halvorson, Hon. Deborah ........................................................................................ 4 

Critz, Hon. Mark ...................................................................................................... 4 

WITNESSES 

Oliver, Ms. Linda, Acting Director, Office of Small Business Programs, U.S. 

Department of Defense ........................................................................................ 5 

Foreman, Mr. Tim, Executive Director, Office of Small and Disadvantaged 

Business, U.S. Department of Veteran Affairs .................................................. 6 

Martoccia, Mr. Anthony, Chief Contracting Office, Director of Acquisitions 

Operations Division, Office of the Chief Procurement Officer, Mission Support Bureau, U.S. Federal Emergency Management Agency ........................... 8 

Brown, Ms. Jeanette, Director, Office of Small Business Programs, U.S. Environmental Protection Agency .............................................................................. 9 

Jordan, Mr. Jordan, Associate Administrator, Government Contracting and 

Business Development, U.S. Small Business Administration .......................... 11 

Kobelski, Mr. J.H., President & CEO, Andromeda Systems Incorporated, Virginia Beach, Virginia ........................................................................................... 29 

Sharpe, Mr. Joseph, Director, National Economic Commission, The American 

Legion .................................................................................................................... 32 

Hope, Mr. Stephen, President, CIAN Inc., Peoria, Illinois ................................... 34 

APPENDIX 

Prepared Statements: 

Schock, Hon. Aaron ................................................................................................. 41 

Oliver, Ms. Linda, Acting Director, Office of Small Business Programs, U.S. 

Department of Defense ........................................................................................ 43 

Foreman, Mr. Tim, Executive Director, Office of Small and Disadvantaged 

Business, U.S. Department of Veteran Affairs .................................................. 52 

Martoccia, Mr. Anthony, Chief Contracting Office, Director of Acquisitions 

Operations Division, Office of the Chief Procurement Officer, Mission Support Bureau, U.S. Federal Emergency Management Agency ........................... 56 

Brown, Ms. Jeanette, Director, Office of Small Business Programs, U.S. Environmental Protection Agency .............................................................................. 64 

Jordan, Mr. Jordan, Associate Administrator, Government Contracting and 

Business Development, U.S. Small Business Administration .......................... 73 

Kobelski, Mr. J.H., President & CEO, Andromeda Systems Incorporated, Virginia Beach, Virginia ........................................................................................... 76 

Sharpe, Mr. Joseph, Director, National Economic Commission, The American 

Legion .................................................................................................................... 86 

Hope, Mr. Stephen, President, CIAN Inc., Peoria, Illinois ................................... 98 

(V) 

(1) 

SUBCOMMITTEE ON CONTRACTING AND 

TECHNOLOGY HEARING ON IMPROVING 

CONTRACTING OPPORTUNITIES AND 

PREVENTING FRAUD FOR SERVICE-DISABLED 

VETERAN-OWNED SMALL BUSINESSES 

Thursday, July 15, 2010 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:10 a.m., in Room 

2360, Rayburn House Office Building, Hon. Glenn Nye [chairman 

of the Subcommittee] presiding. 

Present: Representatives Nye, Critz, Ellsworth, Halvorson, Bartlett and Schock. 

Chairman NYE. Good morning. I would like to go ahead and call 

this hearing to order. I am going to present an opening statement, 

and then I will offer the opportunity for other members of the Subcommittee to present opening statements, if they wish; then I will 

invite the panelists to give their opening remarks, and then we will 

start with the questions. 

There are currently 26 million veterans living today in America. 

Nearly 100,000 of these veterans live in my district. And after 

years of service in Afghanistan, Iraq, Vietnam, Korea and across 

the globe, they have returned home to Hampton Roads, Virginia, 

and all across our country, ready to continue contributing to our 

community and to our country. 

These brave men and women deserve not only our enduring gratitude, but the opportunities and tools to build a new life. One of 

the most important tools we have to accomplish this mission is the 

Service-Disabled Veteran-Owned Small Business Procurement Program. 

During the last fiscal year, the initiative awarded $10 billion in 

contracts to service-disabled veteran small firms; however, in 2008, 

the last year the SBA released its contracting goal report, these 

awards accounted for only about 1.5 percent of all Federal contracts, half of the 3 percent statutory goal established in 1999. 

Fortunately, we have recently seen an uptick in contracts with 

the enactment of the American Recovery and Reinvestment Act. 

The Recovery Act provides veterans with new avenues and opportunities to contract with the government. Service-disabled veteran 

small firms have reportedly received $1.4 billion in Recovery Act 

contracts. This totals over 4 percent of all Recovery Act funds. And, 

of all the agencies testifying today, with the exception of FEMA, all 

2 

have awarded more than 3 percent of their Recovery Act contracts 

to service-disabled veteran businesses. 

While I am pleased with this increase in contracts, I remain 

skeptical. The sad truth of the matter is that it appears many 

agencies have been saying one thing, but actually doing another. 

Last October, the GAO released a report finding contracts are 

being diverted away from legitimate service-disabled veteran businesses to nonveteran businesses, including large corporations. 

In May, I held a hearing in Hampton Roads to get a update from 

GAO on the actions taken against these firms. There was a bit of 

positive action. A janitorial service falsely identifying as an 

SDVOSB in a contract with the U.S. Forest Service did not have 

their option exercised, and their services were not renewed, and 

their contract was terminated after the initial performance period 

ended. Unfortunately, this action was more the exception rather 

than the rule. The GAO found that, since November 2009, that 10 

fraudulent businesses received over $5 million in new service-disabled veteran business sole-source and set-aside contracts and over 

$10 million in other Federal contracts. The GAO also found that 

over half of these firms remained in the Federal Central Contractor 

Registration database, or the CCR. 

This report is a frustrating indication of the deplorable state of 

Federal contracting programs. It is clear that there are no adequate controls nor consequences in place to deter fraudulent actions. We must take action now to ensure these abuses stop immediately. It is long past due to address the breakdowns in the veteran contracting program system. Over 11 percent of all Iraq and 

Afghanistan veterans are currently unemployed. Eleven percent. 

This number is unacceptable. It is essential that all veterans’ resources are significantly better managed and better overseen. 

As veterans are more likely to hire other veterans, programs like 

this one being discussed today are critical to reducing the unemployment rate in our veteran community. I think I speak for all the 

Committee members here today in saying that we will do whatever 

it takes to support our service-disabled veterans and ensure that 

they have the tools they need to succeed in today’s economy. 

I am committed to the goal of eradicating fraud in the Federal 

contracting system, and I have taken the first steps to fix this 

problem. Last November, I introduced the Service-Disabled Veteran-Owned Small Business Procurement Reform Act. This act will 

put in place control measures to ward against abuses in the system; and, once law, it will finally enact punitive consequences for 

those who attempt to circumvent the law at the expense of our veterans. It will also establish a team of representatives responsible 

for supporting veteran entrepreneurship on a local level, actually 

working in the field visiting these businesses and doing what we 

said we would do. 

Today we are honored to have a panel of service-disabled veteran 

firms and advocates here to testify about their personal experiences 

navigating what appears to be a rigged system. I want to thank 

those witnesses and the witnesses on both panels for appearing before our Committee this morning. 

[The information is included in the appendix.] 

3 

Chairman NYE. I would like to yield now to other Members who 

would like to make opening statements. 

Mr. Bartlett. 

Mr. BARTLETT. Thank you very much. 

I am now pleased to be the longest-serving Republican on both 

the Small Business Committee and the Armed Services Committee. 

I am honored to have been able to represent Americans for the last 

18 years in Armed Services and last 16 years on the Small Business Committee. 

In a former life I was a small businessperson, and so I know the 

problems that small businesspeople have. I worked for the government, and I wrote RFPs, and then I moved out into the private sector where I responded to RFPs. So I bought both sides of that 

street. 

More than half of all the employees in our country are employees 

of small businesses, and way more than half of all the creativity 

and innovation comes from small business because that is a better 

environment for that kind of activity. Most of our contracting is 

with large business, but we know in the government that we desperately need more small businesses because that is the source of 

most new creativity and innovation. But there are huge impediments for small business getting involved with the government. 

Lots of red tape. 

I am very pleased with the success that we have had with these 

large number of special set-aside programs encouraging the government contractors to reach out to small businesses. It is particularly 

important to reach out to our ex-service people. Most, by the way, 

of our contracting is Department of the Armed Services. It is half 

of all of our discretionary spending, and way, way more than half 

of all of our contracting in all of the government is in the defense 

area. And so these veterans bring two things. One, they are small 

business people, but they are also veterans, and they understand 

that environment. And so we really need to reach out more to 

them. So I am pleased to be here today. 

By the way, where there is fraud, that doesn’t mean that the taxpayer didn’t get something for his dollar. It just went to the wrong 

person. And every dollar that goes to a business which is not service-disabled is a dollar that didn’t go to these people who really deserve it and who earned it. 

So I am pleased to be here. Thank you for holding this meeting, 

and I look forward to the testimony. 

Chairman NYE. Thank you. 

Chairman NYE. I would like to recognize Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Mr. Chairman. 

I think it was a year ago when we were here, at least last year, 

maybe not a full year ago, that GAO and Administrator Mills testified that this multibillion-dollar program designed to help small 

businesses owned by service-disabled veterans was being undermined by rampant fraud. I guess what was the most shocking to 

us was that there were very few, if any, safeguards built into this 

contracting, that they just didn’t exist. And I am proud to work 

with you on legislation that you introduced to stop this type of 

fraud before it is ever awarded. 

4 

I know the GAO has recently released some strong proposals for 

stopping fraud before the contract is awarded, monitoring contracts 

to ensure continued compliance with the program rules, and aggressively investigating and prosecuting potential for fraud. I am 

hopeful we can implement these fraud protections, but I must say 

that I am concerned about the lack of progress. And, as we have 

seen on a lot of different fronts here, it seems like progress is very 

slow, especially in these areas. Some of our Federal agencies seem 

to have made an issue since the last hearing. 

I think the worst part of this failure by our government agencies 

is that real service to our disabled veterans who have struggled to 

start and maintain a small business have literally been stolen from 

them by criminals trying to make a quick buck. And it is despicable 

this fraud has gone on this long, and I look forward to hearing real 

solutions from the panel today. 

I would like to yield back, Mr. Chairman, but thank you. 

Chairman NYE. I would now like to recognize Mrs. Halvorson. 

Mrs. HALVORSON. Thank you, Mr. Chairman. 

First of all, I would like to say that I am strongly supportive of 

the service-disabled veteran-owned small business program. And 

like so many of my colleagues on this Committee, I am proud to 

say that I also serve on the Veterans’ Affairs Committee. And with 

unemployment for Iraq and Afghanistan veterans well above the 

national average, we need to support programs to support people 

like this who have served our country. 

I am also very concerned that there is this fraud; and once fraud 

is found, there is no requirement for termination, suspension, disbarment, or prosecution, and there seems to be no parity. 

Under current law, when Federal contracting officers award 

small business contracts, they usually and generally can choose between the SBA’s different contracting programs, including a 

HUBZone and SDVOSB. But in a recent ruling, however, a Federal 

Court of Claims ruled that Federal contracting officers must favor 

HUBZone over other programs, including the SDVOSB. And if this 

ruling is applied throughout the Federal Government, there is 

going to be a significant reduction in awarding of the SDVOSB contracts. So I think with this problem, we are also working on legislation, which is H.R. 3729, that will clarify this parity problem. So 

I continue to work together to address fraud, to address parity, and 

to continue to work to make sure we address all of these issues. 

So I commend all of us coming together, and I commend the 

chairman for bringing us together on this issue. 

Chairman NYE. Thank you very much. 

Chairman NYE. I would now like to recognize Mr. Critz. 

Mr. CRITZ. Thank you, Mr. Chairman. 

Just a couple of quick comments are that, you know, the obligation that our country owes to our veterans is something that we 

take very seriously. And to have a situation where not only they 

are being veterans, but service-disabled veterans, and they are almost being—what you could say is that they are being overlooked, 

or they are being given a path that is impossible or tough to drive. 

And I think it is disappointing that we are sitting here talking 

about this, but the reason we are here, though, is that we can’t 

change what has happened, but what we can do is look forward 

5 

and look for solutions. And I am anxious to hear what the solutions 

are to solve this dilemma and how you are going to put teeth into 

enforcement when we are talking about fraud. 

And I yield back. Thank you. 

Chairman NYE. As Mr. Ellsworth mentioned, it has been approximately 9 months since the GAO report first came out that uncovered a significant amount of fraud within the service-disabled veteran-owned small business contracting program. What we want to 

get to the bottom of today is what have you as agencies been doing 

to fix the problem since we have discovered those numbers back in 

November? 

Our first panelist I would like to introduce is Ms. Linda Oliver. 

Ms. Oliver is Acting Director of the Office of Small Business Programs for the Department of Defense. In this role she is responsible for establishing Department of Defense policies that ensure 

the inclusion of small firms in defense-related procurement actions. 

Ms. Oliver, I would like to recognize you for your opening statement. 

STATEMENT OF LINDA OLIVER 

Ms. OLIVER. Thank you. It is a pleasure to be here, Chairman 

Nye and panel members, to talk about service-disabled veteran 

small businesses. 

In the Department of Defense, as I know you know, the servicedisabled veteran-owned small business owners frequently have 

been our colleagues either in uniform or out of uniform before becoming small business members. So we are particularly concerned 

and sympathetic with our service-disabled veteran-owned small 

businesses. 

This morning I will summarize the testimony—really summarize 

the testimony, because there is no point in going through with you 

what we have already written down. 

The four areas I will quickly talk about is the Department of Defense performance over the past 7 years, what we have done and 

are doing to improve performance, what we have found about service-disabled veteran-owned small businesses that might help us do 

better. And then I will touch on the GAO study, two of the cases 

in the GAO study concerning the Department of Defense. 

As in my testimony, over the past 7 years, the Department of Defense has had a fourteenfold increase in dollars that go to servicedisabled veteran-owned small business contracts. We have had a 

sevenfold increase in percentages. We have had a fourfold increase 

in the number of service-disabled veteran-owned small businesses 

with which we contract. And because Chairman Nye told me he 

would do this when I last saw him in October, I want to mention 

that the Department of Defense, as Chairman Nye has said, has 

done very well with our Recovery Act dollars to service-disabled 

veteran-owned small businesses to the tune of $157 million, which 

is a lot of work. But we understand we have a long way to go, and 

we are working to improve our performance. 

We had an effort several years ago to get more service-disabled 

veteran-owned small businesses in CCR. We have done a great deal 

of outreach. We have tried to put in place special emphasis within 

our contracting officers on certain contracting with service-disabled 

6 

veteran-owned small businesses. We did work with our Mentor-Protege Program. We probably, to be honest with you, have picked the 

low-hanging fruit, and so now we have turned to as much detail 

analysis as we can in order to understand better the service-disabled veteran-owned small business world so that we can take better advantage of it. 

We were interested to find that the service-disabled veteranowned small businesses tend to cluster around three areas of contracting. The biggest are the category which is general, but is services; professional, scientific, and technical services. Forty-two percent of the dollars that the Department of Defense sees go to service-disabled veteran-owned small businesses are in this area. 

Twenty-four percent of all of our contracts with service-disabled 

veteran-owned small businesses, 24 percent of the dollars, are for 

construction, and 11 percent are for administration, which means— 

administration meaning the sort of clerical people, for example. 

With 77 percent of our contracts with service-disabled veteranowned small businesses clustered in three areas, it means that we 

reach a saturation point, and what we must do is start focusing on 

the other areas. We are performing further analysis right now so 

that we can do a better job. 

We have been concerned about the Government Accountability 

Office report. We have taken steps to deal with it. We don’t like 

fraud either, and our inspector general is doing a report which we 

expect to have concluded in December. I have spoken with the suspension and debarment people. They think it is a good idea to have 

us pass the word better, and they are interested in coming in to 

help. Additionally, we believe that we need a sort of a ′′just in 

time′′ training for the limitations on joint ventures, because there 

seems to be—the problems seem to cluster there. 

My time is up. Thank you so much for holding this hearing. 

[The statement of Ms. Oliver is included in the appendix.] 

Chairman NYE. I would now like to recognize our second panelist, Mr. Tim Foreman, the Small and Disadvantaged Business 

Department in the Department of Veterans Affairs. The office provides outreach and liaison support to businesses concerning acquisition-related issues, and also monitors the VA’s implementation of 

procurement programs. 

And I didn’t mention this at the outset, but everybody is going 

to be on a 5-minute clock. If you have a couple more key points to 

make at the end of the 5 minutes, I will be a little bit lenient, but 

we have a lot of folks today, so we are going to try to ask you to 

use that as a guideline. 

Mr. Foreman. 

STATEMENT OF TIMOTHY FOREMAN 

Mr. FOREMAN. Good morning, Chairman Nye and distinguished 

members of the Subcommittee. It is a pleasure to be here to represent the Secretary of the VA, Secretary Shinseki. I feel compelled 

to tell you, after being there for just 6 months—and this is my 6- 

month anniversary at the organization—that the Secretary runs a 

very tight meeting. He is a terrific leader. I have been around the 

government for 38-plus years. I have never met a more interested 

individual, especially in veterans, veterans of all types, to include 

7 

business issues. And he continually raises things he wants to do 

more to ensure that businesses stay in business when the vets 

come out, and he is concerned about even people in the Armed 

Forces making decisions, or not making decisions and just leaving 

the military, without having a strategy. What are they going to do 

when they get out? He is concerned about education, concerned 

about health and welfare. And we think we are the win-win solution. 

Our first name is ′′Veterans,′′ so it is only natural that we have 

veterans to work for us in filling our requirements for products and 

services. One of the issues that we talk about, I want to thank Congress for the passage of 109-461. It has given us the ability to 

jump, increase our dollars and percentages. And I will give you just 

a quick example. 

Back in 2005, we were at 1.3 percent to service-disabled veterans. As of this year to date, we are at 18.4 percent to servicedisabled veterans, over 1 billion, 700 million. We suspect we are 

going to break last year’s record on dollars, which was 2.3 billion. 

Just another little hint of success. In the ARRA money, we are 

at about 82 percent spend rate right now, of which small business 

is 83 percent, and our veteran-owned small business are 80.6 percent, and service-disabled veterans at 79.5, or, if you will, 700-plus 

million of the 882 million. I think significant efforts have gone. 

Let me get into, if you will, some of the issues we face over in 

the VA. We do have this unique legislative authority, which I again 

thank you. As a veteran myself, I enjoy working with the veterans 

and the veterans groups. We do look at verification. We have a system, a database, that we use. It is a VIP, vender information page, 

that we use to identify veterans, service-disabled and regular. We 

have two types of folks that appear on that database: self-certified, 

they come in, they say they are, we accept them and put them on 

the database; and the verified firms, those that have a special seal. 

We actually go through the verification process. 

When I came on board, there were some problems. I think even 

in the GAO report, one of the verified firms that was challenged 

and found not to be a service-disabled veteran was, in fact, verified 

within our database. But we weren’t calling for complete data. So 

the first thing I did is I said, wait a second, we have got to stop 

this. We have got to ask for all the data we need. And it is going 

to slow down the process, but in the interim it is going to be good. 

It is going to be good for the government. So that is one of the 

things that we did. 

We are actually moving the backlog around a little bit. We are 

working it down. We have taken action by taking away from CVE 

ancillary programs right now until we take that hill, and we want 

to reduce it down to zero. 

I am currently the person who makes decisions on all protests 

right now. I am the adjudication official and the final authority 

within the VA, and I do that. When I do it, it has to go through 

general counsel. 

Another issue that we want to talk about is we are standing up 

a debarment committee. I volunteered to be part of that debarment 

committee. I figure, since I am the top-level person in the VA for 

this program, I want to make sure that nobody steals valor from 

8 

our true veteran heroes. So I am going to be that. And not only 

that, they turned around and said, would you be interested in 

being the chairman? We think you are the right person. And I said 

yes. And the Secretary thought that was a great idea. 

I have got 30 seconds to go. I have got so many things I want 

to say. But I think we have done a good job. I think we have got 

a good system. Is it perfect? No. We are going to work until we get 

it right. But remember, one thing we always want to remember, I 

try to keep the barriers to entry low because you don’t want to 

keep out valid service-disabled veterans because you raised it too 

high. But you have to raise it up a little bit to keep out those that 

are going to steal valor, and we want to keep it just high enough. 

So, with that, thank you very much. I look forward to your questions. 

Chairman NYE. Thank you, Mr. Foreman. I will give you an opportunity during the questions and answers to elaborate on that 

committee. I would like to hear more about that. 

[The statement of Mr. Foreman is included in the appendix.] 

Chairman NYE. Let us go on to our next panelist. Mr. Anthony 

Martoccia is the Director of Contract Operations for the Federal 

Emergency Management Agency. Mr. Martoccia is responsible for 

awarding and administering $2 billion in contracts to support 

FEMA. He is also responsible for providing acquisition support for 

all FEMA programs. 

Thank you for being with us. 

STATEMENT OF ANTHONY MARTOCCIA 

Mr. MARTOCCIA. Good morning, Chairman Nye and members of 

the Subcommittee on Contracting and Technology for the House 

Committee on Small Business. I am Tony Martoccia, chief of the 

contracting office at FEMA. I appreciate the opportunity to appear 

before you today to discuss FEMA’s engagement with the private 

sector, in particular with service-disabled veteran-owned small 

businesses, and to specifically address FEMA contracts cited by the 

GAO as part of its case study on service-disabled veteran-owned 

small businesses in October 2009. 

Today I will provide an overview of SDVOSB program data outlining how FEMA engages small businesses owned by service-disabled veterans, and how we worked to meet the 3 percent goal and 

the award of FEMA acquisition set-asides for competition among 

those companies and researching those that are not SDVOSBs. 

The SDVOSB program is intended to honor the extraordinary 

service rendered to the United States by veterans with disabilities 

incurred during active service with the Armed Forces. The Veterans Benefit Act of 2003 established the SDVOSB program to provide Federal contracting assistance to those concerns. Contracting 

officers may set aside acquisitions to any small business concern 

controlled and owned by one or more disabled veterans. Executive 

Order 13360 requires Federal procurement officials and prime contractors to provide opportunities for these firms to increase their 

Federal prime and subcontracting to those firms owned by servicedisabled veterans. 

In order to advance FEMA’s efforts with SDVOSBs, the Agency 

has designated a full-time small business specialist whose primary 

9 

responsibility is to increase contract opportunities to small businesses. We are working hard to meet the 3 percent annual goal 

with SDVOSB businesses, and I am pleased to report FEMA is currently at 2.65 percent of prime contracts awarded to those companies. We have more work to do, but FEMA is making strides and 

working with that community. 

I have reviewed the October 2009 GAO report which was undertaken by GAO to review the SDVOSB procurement program to determine whether cases of fraud and abuse exist within the program, and whether the program has effective fraud-prevention controls in place. The report cites two cases in which FEMA contracts 

were reviewed. FEMA takes the findings from the report very seriously, and, as a result, FEMA is considering many initiatives that 

would prevent future incidents of fraud, including awareness training for contracting officers, contract specialists, use of FedBiz to assist in the verification process, and the requirement for submission 

of VA certification by the successful offeror before final award. 

I thank the Subcommittee for your consideration of my opening 

statement, and I look forward to answering questions. 

Chairman NYE. Thank you. Thank you for joining us. When we 

get to the Q and A, I am going to ask you to elaborate on your 

awareness training for contracting officers, because I would like to 

hear about how you do that. 

[The statement of Mr. Martoccia is included in the appendix.] 

Chairman NYE. Let us go ahead on to our next panelist, Ms. Jeanette Brown, the Director of the Office of Small Business Programs 

in the Environmental Protection Agency. The Office of Small Business Programs advocates for small businesses, socioeconomically 

disadvantaged businesses, and minority academic institutions. 

Ms. Brown, thank you for being here. 

STATEMENT OF JEANETTE L. BROWN 

Ms. BROWN. Thank you. 

Chairman Nye, members of the Subcommittee, thank you for providing me the opportunity to appear before you today to discuss the 

Environmental Protection Agency’s performance with service-disabled veteran-owned small businesses. 

At EPA, the mission of the Small Business Program, OSBP, is 

to support the protection of human health and the environment by 

advocating and advancing the business, regulatory and environmental compliance concerns of small and socioeconomically disadvantaged businesses and minority academic institutions, including efforts to ensure that the Agency meets its goals with respect 

to service-disabled veteran-owned small businesses. 

The Agency’s commitment to service-disabled veteran-owned 

small businesses is strong, very strong. The Agency’s progression 

towards meeting and exceeding the 3 percent service-disabled veteran-owned small business goal has been steady since 2003, with 

increases each year thereafter. The Agency has exceeded the 3 percent service-disabled veteran-owned small business goal for the last 

3 years and is on target to continue this pattern of success for fiscal year 2010. 

In January 2006, the EPA Office of Small Business Programs implemented a plan to manage and measure efforts to improve our 

10 

performance and meeting our small business goals in all socioeconomic categories, including service-disabled veteran-owned 

small businesses. The plan includes the following elements: a clear 

communication from the head of the Agency reinforcing the importance of meeting our small business goals; internal small business 

performance measures; consistent dissemination of data from the 

Office of Acquisition Management tracking regional and program 

offices’ progress on a quarterly basis; internal and external outreach and training by the small business program on the utilization of small businesses; and an internal recognition program 

which provides visible recognition for those offices and regions 

meeting their small business performance measures. 

Our strategy has made a tremendous difference in increasing the 

Agency’s performance in striving to meet all of our socioeconomic 

goals. Our most significant achievements are in the area of servicedisabled veteran-owned small businesses. EPA has been recognized 

by the Veteran Administration’s Center for Veteran Enterprise for 

its commitment and service to service-disabled veteran-owned 

small businesses, and EPA has a proven track record for awarding 

multimillion-dollar contracts to service-disabled veteran-owned 

small businesses. 

In October 2008, we awarded a $100 million contract to Vision 

Technologies, a service-disabled veteran-owned small business in 

Glen Burnie, Maryland. That contract supports and manages several Agency network services’ voice and data networks and information technology security. In February 2010, we awarded a $20 

million remedial action contract to Los Alamos Technical Associates, Inc., a service-disabled veteran-owned small business located 

in Ohio. Under this contract, it provides for environmental and engineering support services in EPA’s remedial planning and oversight activities in New York, New Jersey, Puerto Rico and the Virgin Islands. 

EPA’s Office of Small Business Programs follows procedures set 

forth by the FAR, Federal Acquisition Regulations, to review procurement requests to ensure that small business concerns are fairly 

considered in the procurement process. Contracting officers within 

EPA’s Office of Acquisition Management are responsible for 

verifying the status of vendors and follow FAR procedures as well 

regarding the vendors’ representations and certifications. 

A preaward review. The acquisition community relies heavily on 

the Central Contract Registration, CCR, and the online representation and search application, ORCA, to verify the status of contractors prior to making the award. The information in ORCA is updated as necessary, but at least annually, to ensure that they are 

kept current, accurate, and complete. Any business working with 

the Federal Government under the FAR are required federally to 

be registered in CCR before doing work or getting a contract. 

At time of award, an award notice is posted on EPA’s Web site 

to inform vendors and the public about the award. At this time interested parties may come forward to protest the size claimed by 

the potential awardee. These cases are then turned over to SBA to 

review and make a determination. 

11 

EPA does not utilize an Agency database that identifies servicedisabled veteran-owned small businesses; however, we do use CCR 

and ORCA. 

EPA follows the FAR with respect to misrepresentations involving contractor code of ethics, ORCA certification, and small business certification. If the contracting officer is aware of a violation, 

they are to engage the Office of Inspector General—EPA Office of 

Inspector General to report the incident and coordinate with SBA. 

EPA is proud of its support for service-disabled veteran-owned 

small businesses, and we thank you very much for allowing us to 

be here and look forward to answering your questions. Thank you. 

Chairman NYE. Thank you very much, Ms. Brown. 

[The statement of Ms. Brown is included in the appendix.] 

Chairman NYE. I would like to introduce now the final panelist 

for the first panel, Mr. Joseph Jordan, the Associate Administrator 

for Government Contracting and Business Development at the 

Small Business Administration. In this role Mr. Jordan and his 

team are responsible for implementing the contracting programs 

contained in the Small Business Act. 

Mr. Jordan, thanks for being with us. 

STATEMENT OF JOSEPH G. JORDAN 

Mr. JORDAN. Thank you. Chairman Nye, distinguished members 

of the Subcommittee, it is an honor to testify before you today on 

the SBA’s deep commitment to veteran entrepreneurs and small 

business owners. This past year our administrators made veterans 

a priority in each of the SBA’s core mission areas, the three Cs of 

capital, counseling, and contracting. 

With regards to access to capital, the SBA hit a milestone on 

July 4, with nearly half a billion dollars in SBA’s Patriot Express 

loans over just 3 years going to veterans, reservists, 

servicemembers, and their spouses. 

Within our counseling programs, the SBA has doubled the number of veterans business outreach centers to 16. In fiscal year 2009, 

we provided training to 290 contracting officials of 5 major agencies, as well as 2,000 service-disabled veteran-owned small businesses. 

Today I have been asked to focus on the steps we have taken to 

help veteran and service-disabled veteran-owned small businesses 

access contracting opportunities. 

As you know, the SBA works with Federal agencies to increase 

contracting opportunities for small businesses. Our goal is to ensure that not less than 23 percent of all eligible prime contracting 

dollars go to small businesses. Within that, the Federal Government has a number of additional subgoals, including a 3 percent 

goal for service-disabled veteran-owned small businesses. 

Agencies have made great strides in recent years. In fiscal year 

2007, 1 percent of prime contracting dollars went to service-disabled vets. That rose to 1.5 percent, or $6.5 billion, in 2008, and 

we expect that, based on preliminary data for fiscal year 2009, 

there will be yet another significant increase in both dollars and 

percentage. 

Still, we know we have work to do and are committed to ensuring that the Federal Government hits its goals for all small busiVerDate Aug 31 2005 19:00 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57285.TXT DARIEN
12 

ness groups, including service-disabled veteran-owned small businesses. 

One of the reasons we know that we can improve further is due 

to our efforts with respect to Recovery Act contracting. This time 

last year, the Vice President, Commerce Secretary Locke, and our 

Administrator made a strong interagency push to ensure that Recovery Act contracts were going to veterans, minorities, women, 

and other groups. We have been tracking this data, and I am very 

pleased to say that the Federal Government has awarded 5 percent 

of Recovery Act contracts to service-disabled veteran-owned small 

businesses, and I want to thank the other agencies represented 

here today for their contributions to that accomplishment. 

Building on our success in the Recovery Act, we are examining 

which of our actions were most effective. Ultimately we want to 

identify best practices and integrate them into our regular day-today fiscal year contracting efforts. More recently this commitment 

to veteran-owned small businesses has been renewed by the President himself. In April, he ordered the creation of two task forces, 

one on small business contracting, and another on veterans business development. Today’s discussion lies at the intersection of 

those two efforts, and Administrator Mills and I, as well as others 

throughout the administration, are working to create formal recommendations that should be delivered to the President in the 

coming weeks. 

Overall we have made progress over the past year, but, as the 

GAO reminded us last fall, there is more we can do. Our goal-related improvements must be accompanied by policies and procedures that root out fraud, waste, and abuse in this important program. That is why we have developed a comprehensive approach 

to rooting out fraud, waste, and abuse. We are collectively focused 

on all three stages of the contracting oversight continuum: certification, ongoing surveillance and monitoring, and enforcement. We 

have already made improvements in all three areas even when, 

like in the case of the service-disabled veteran-owned small business program, it operates via a self-certifying process. 

We are handling more protests than ever before, and the protest 

process is working. While the number of protests is increasing, the 

percentage of firms determined as ineligible through protests is declining. We are also working more closely than ever with the Veterans Administration, our general counsel’s office, our suspension 

and debarment official, our inspector general, the Department of 

Justice, and many other key stakeholders. 

I should also note that the President’s fiscal year 2011 budget 

submission asks for $2 million that will help us with eligibility and 

certification efforts across our contracting programs. My commitment to you today is that we will continue to move forward with 

diligence and speed in strengthening our efforts to eliminate fraud, 

waste, and abuse. 

Finally, we share the concerns of many service-disabled veteranowned small business contractors on the issue of parity, which is 

perhaps the most pressing issue facing this community. A recent 

court decision attempts to place the HUBZone set-aside program 

above SBA’s other small business contracting programs, including 

the service-disabled vets program. If this decision were applied 

13 

throughout our contracting programs, it could essentially redirect 

billions of dollars away from service-disabled veteran-owned small 

businesses as well as 8(a) and women-owned small firms. Moreover, it could create confusion within the contracting community, 

which could result in all small businesses losing opportunities for 

Federal contracts. 

That is not fair, and it wasn’t the intent of Congress. That is why 

the administration supports a legislative effort currently under way 

to make the relatively simple clarification in statutory language replacing ′′shall′′ with ′′may′′ in HUBZone’s language. We urge Congress to act on this issue as soon as possible, especially given that 

a large portion of contracting dollars are obligated in the final 

quarter of the fiscal year, and missing out on just 1 percent of contracting opportunities means $5 billion in lost revenues to small 

businesses. 

Thank you very much for your time, Mr. Chairman, and I look 

forward to your questions. 

Chairman NYE. Thank you for your testimony. 

[The statement of Mr. Jordan is included in the appendix.] 

Chairman NYE. Clearly we have got a problem here, and I am 

incensed at the fraud against our veteran business owners that 

was uncovered by this GAO report. This report was available to all 

of us 9 months ago. 

It is my assessment that agencies tend to be focused on target 

numbers and on processes. Our veteran business owners, I can tell 

you with great certainty, are concerned with outcomes, as am I. We 

owe it to the taxpayers who fund these programs to be able to say 

to them that we are sure that the money we have allocated to go 

to small business owners who are service-disabled veterans is actually going to them in fact. The GAO report showed that that is not 

the case. 

I want to drill down on exactly what you have done since 9 

months ago when we discovered this fraud in the system. And everyone here represents an agency who has contracts that were let 

out who were determined to be problematic. 

I want to ask a couple of relatively simple questions, and I will 

ask each person on the panel to respond to these. And the first 

question I have is specifically what have you done in terms of practicing better oversight over your contracting officers? We know that 

some of the instances of fraud that were uncovered involved contracting officers who were very well aware of the problem. We 

know there are cases where service-disabled veteran business owners have pointed out problems either through the SBA or directly 

to the contracting officers involved at the agencies, and essentially 

there has been no follow-up action taken against those companies. 

So what I would like to ask, and I will start with you Mr. Jordan, 

what specifically can you say from the SBA’s point of view—and I 

am going to ask all the agency representatives—has been done in 

terms of overseeing contracting officers and how they work and 

providing training that they need to do a better job? 

Mr. JORDAN. Absolutely. And let me first say that I wholeheartedly share your and the community’s focus on outcomes. I 

think policies and procedures are very important, but they have to 

14 

be aligned with the outcomes, and that is where the focus needs 

to be. 

In regards to the 10 firms that were highlighted in the GAO’s report, all 10 were referred to 1 inspector general. One of the 10 was 

referred from the inspector general to our suspension debarment 

official. They issued a show cause letter to that firm, and through 

a series of steps determined not to suspend or debar that firm. The 

remaining nine firms are under inspector general investigation, a 

combination of our inspector general and inspectors general from 

the agencies where these contracts were let out, and I am not allowed to elaborate further on those particular instances. 

But now, moving to what are we doing about this as a symptomatic issue beyond just these 10 firms. Well, first there is outreach. 

So we set up an on-line training course, free, for how veterans and 

service-disabled veteran entrepreneurs could access these opportunities, and we are also in our outreach activities promoting the protest process. Like I said, if you look at the number of protests year 

over year, they are going up every year, which would indicate the 

awareness gap is closing, that service-disabled veteran-owned small 

businesses know the procedure when they think somebody is not 

appropriately identifying themselves. As we process those, the percent that we actually determine are, in fact, ineligible is going 

down. So the awareness is going up, but the actual unscrupulous 

actors you see as a percent are going down. 

On the upfront certification, we are working closely with VA to 

utilize better data and technology tools. So despite the fact that 

this is a self-certification program, we dissuade any bad actor from 

thinking that they can get in or thinking that it is a good idea to 

try. 

Then on ongoing surveillance and monitoring, one of the things 

that came after that GAO report was we identified a potential gap. 

And once we did determine a firm to be ineligible, they have to decertify themselves in the Central Contractor Registry. That is not 

something SBA can do. We have now amended our policies to say 

that they have 30 days to do so; otherwise, we refer that action to 

the inspector general as well. 

And just to give you a little context when I talked about the protests, we conducted 136 service-disabled veteran bid protests 

through mid-June of this year already, and that compares to 94 of 

all last year. And if you look the year before, it is about a 33 to 

50 percent increase year over year again. And then it goes to rigorous enforcement. 

So I talked about the 10 firms. But we are beyond that, really 

looking at how we can work collaboratively with all law enforcement departments and mechanisms to ensure that when we do 

catch these bad actors, they are appropriately punished. 

Chairman NYE. One quick follow-up for you. I talk to service-disabled veteran-owned small businesses in my district, and they say 

that when they want to protest an award, they get referred by SBA 

back to the original contracting officer from the Agency, who then 

tells them go back to the SBA and make your complaint there, and 

they get stuck. How are you working to solve that problem? 

Mr. JORDAN. So the typical path is that the contracting officer 

who is the point of contract for that contract is who they would proVerDate Aug 31 2005 19:00 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57285.TXT DARIEN
15 

test with. The contracting officer would then fax to SBA that protest, and it would go from there. In the event that there is confusion—and I have heard this anecdotally. The problem is when I 

press for details, I have not gotten the specific instances that we 

can then reverse-engineer what happened and, in those cases, what 

went wrong. In the case that you find those, please give them to 

me personally, and I will follow up on them, because that absolutely should not be happening. We do not want them caught in 

that cycle. 

Chairman NYE. We will. We will provide them to you. 

Ms. Brown, can you please comment on oversight on contracting 

officers? 

Ms. BROWN. Yes. Thank you. 

Within the office—and I am in the Small Business office, and we 

work separately and distinct from the contracts office, but also collaboratively together in this process of the procurement process. 

The Agency does not have a detection and monitoring program for 

firms receiving service-disabled veteran-owned small business contracts, but we do follow the FAR. We do look at the preaward process. We put and post awards on the Internet for dissemination so 

that the public will see it. We have found that the small business 

community is a strong advocate and watchdog, and so they do call. 

EPA verifies the status of contractors using CCR and ORCA. 

In addition to that, we work within the Office of Small Business 

Programs reviewing the acquisition packages; looking at the statements of work, the recommendations; making recommendations 

back to the contracting office in terms of what we think separate 

and distinct; and also working with SBA-PCR at the local level. 

Chairman NYE. I am sorry to interrupt you. There seems to be 

a cell phone that is going off. This would be an appropriate opportunity for people to check and make sure their cell phones are on 

silent, please. 

Okay. Ms. Brown, please go ahead. 

Ms. BROWN. And for the contracts that are in question, the one 

that was cited in the report for EPA, that has been referred to the 

EPA IG office, and we are waiting for recommendations back or 

final word on that, and so I can’t discuss that in detail now. 

Chairman NYE. I will give you an opportunity to follow up with 

us after this hearing in writing with some detail about what actions your Agency is taking to solve the problem. 

[The information is included in the appendix.] 

Chairman NYE. Mr. Martoccia, please. 

Mr. MARTOCCIA. Thank you. 

We have a pretty robust review system for contracting officers. 

We go through a preaward process when procurement strategies 

are being developed. We work with our Small Business Office, a 

person like Jeanette, and we discuss what strategies to use. And 

we train. We have a good career development program and training 

program for our contract specialists and contracting officers. 

In our particular case we need to be more diligent at the time 

of solicitation award to assure ourselves that these companies who 

are certifying the particular socioeconomic program, including disabled veterans, that they are, in fact, owned by the service-disabled 

veterans. So we are making it a point, through myself and my boss 

16 

and through my branch chiefs, that at the time of solicitation and 

award, that we are thorough and deliberate review of the qualifications to make sure that those companies are, in fact, qualified to 

bid on those solicitations. 

Chairman NYE. Mr. Foreman. 

Mr. FOREMAN. One of the things I would like to caution everybody about when we think about fraud, a lot of folks that we deny 

verification is really not because of purposeful fraud. It is they 

don’t understand that it is not only the status fraud, i.e., I am a 

veteran or a service-disabled veteran, and I am not, that would be 

a status fraud; but part of status fraud, the harder part, is total 

ownership and control, and a lot of folks don’t do that with their 

paperwork. So there is—and I can term it innocent fraud, but there 

are people that make mistakes, and they do change, and they do 

reapply and get verified. So I am very hesitant to condemn everybody who runs into that problem, because there are legitimate 

service-disabled veterans who don’t understand the process and 

will do things wrong. 

In terms of what do we do, one of the things that we did when 

we first heard about it—and I think I had the pleasure—I think 

I was there about 2 weeks and had to testify on the House Veteran 

Affairs Committee, took the 10 firms, referred them over to our IG 

to see if there were other things that we could do, what kind of 

penalties can be placed on them, et cetera, if, in fact, they were 

true bad actors. 

The other things that we did, we do a lot of our own right now— 

I am trying to give it over to Joe Jordan, but the protests. So I actually do work on the protests, and I am the adjudicator for those 

kind of things. So when the protests come in, you get a file about 

that thick versus when we do a verification, that is only about that 

thick. So you are talking about 2 inches to 5 inches. We do a lot 

of background checks. We do what they call site visits, unannounced and announced, to ensure that the right things are going 

on. We get a very good report. 

We are in the process of tripling our contract support to go out 

and look at these contracts. We have also expanded our employees, 

the full-time equivalents. We are starting to fill the office with 

more folks. We are finding that it is a lot better in that regard. 

Also, teaching. Like in the old infantry days, command, control, 

communication, and intelligence. If communication doesn’t work, 

none of those work. You don’t have control if you lose communication, you don’t have command, and you don’t have intelligence. 

So part of it is me going out and talking to the veteran committees and communities, making them understand the critical but the 

most difficult part for us to judge is control of a business and total 

ownership of a business. You don’t have a board of directors that 

can outvote you. And that has been one of those little things that 

we have. 

So, again, we have to be careful of how high we ramp up to 

guard against allowing legitimate firms in, but we have to guard 

against it. I am, like I said, going to be the debarment chairperson, 

and in that role we are going to look at protecting the government’s 

interests. It is in the best government’s interests that we keep peoVerDate Aug 31 2005 19:00 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57285.TXT DARIEN
17 

ple who are not who they say they are out of doing business with 

the government, and so we will do that. 

Chairman NYE. Thank you. 

Ms. Oliver, the same question about the contracting officers. At 

least one of the cases involved an Air Force contracting officer who 

was shown to have been aware of the fraud going on. I know, as 

the DOD small business oversight person, you have to work with 

the each of the individual branch contracting folks. Can you talk 

to us about changes that are being made to prevent that from happening? 

Ms. OLIVER. Yes, I can. And let me start with the most general 

way that we are trying to prevent this sort of thing from happening. 

We need to figure out the extent of this problem and the nature 

of the problem. Tim has a really good point that at least in the 

cases—our two cases, as I started to dig through, there was some 

ignorance on the part of these service-disabled veteran-owned owners, but they weren’t—I would—it is not for me to judge, and the 

cases aren’t finished, but there is, as a minimum, another side to 

explaining all this. And we need to—that is two—I told you earlier 

that we are—in 2009, we contracted with 3,164 different servicedisabled veteran-owned small businesses. The IG has looked at 

two. 

Now, the caution, we can’t say, well, 2 out of 3,164, that is a nonexistent problem. I understand. They only looked at a few. But we 

need to see how extensive it is. And our inspector general has been 

working, gathering data, analyzing data to figure out how big is 

this problem? 

The contracting officer that you were talking about would say to 

you, as he has said to me, that there was at least a failure to clearly communicate or a certain inaccuracy. He took the spanking, 

which he would say was not completely accurate and, I am happy 

to say, moved forward to say, what can I learn from this? What can 

we do differently? And that contracting officer has instituted a system of market research which will ask pointed questions to the 

owners of the service-disabled veteran-owned small businesses so 

that they will understand better what the rules are. 

I think one of the things that comes out of this is we need to do— 

my office needs to do specific ′′just in time′′ kind of training of contracting officers and of service-disabled veteran-owned small businesses so they are very clear about what exactly are the limits of 

the joint ventures. These are pretty frequently joint venture problems. In other words, it is not veterans saying, I am disabled, when 

I am not. That appears to be the case. It is not people posing as 

service-disabled veterans. It usually involves a veteran who has, in 

the cases we have been able to look at, misunderstood. 

With me today is the poor guy who is going to get to put together 

all this training. 

Chairman NYE. Let me interrupt you for just 1 second, because 

I am not sure I understand what you are saying. 

Ms. OLIVER. Okay. 

Chairman NYE. What I am hearing is that the problem here was 

ignorance on the part of the service-disabled veteran business 

owner, and not a problem with the contracting officer, despite what 

18 

the GAO report said. So are you disputing the findings of the GAO 

report? 

Ms. OLIVER. Yes. 

Chairman NYE. Okay. Because the report found that there was 

a relationship between the contracting officer and the subcontracting business owner that received a contract. So I just want to 

make sure that we are all clear and that we are talking about the 

same case. 

Ms. OLIVER. I would be so happy to have the contracting officer— 

let us see. The most important thing is we learned from—we 

learned the lesson. And we have learned the lesson. 

Chairman NYE. I agree with that, that the most important thing 

is that we learn the lesson. But if we don’t agree on defining of the 

problem, it is difficult for us to say that we agree that we learned 

the lesson. I am going to follow up with you in just a minute— 

Ms. OLIVER. Okay. 

Chairman NYE. —because I am having a hard time internalizing 

your response on that question, because now it seems like we have 

backed up a step in terms of whether we are looking at whether 

the GAO report was actually accurate, and we can move on to solving the problem, if we agree on that or we don’t, and now it sounds 

like we are back another step. 

We are going to have to vote in a few minutes. I want to offer 

an opportunity to Mr. Schock to ask any questions before we go to 

vote, and then we are going to come back after the votes, and I 

want to reconvene with the same panel and follow up with you. 

Ms. OLIVER. Okay. 

Mr. SCHOCK. Thank you, Mr. Nye. I am actually going to yield 

my time to my good friend Dr. Bartlett, who has another commitment at 11:30, and so he will not be able to return, so he can ask 

his questions. I will be back and then take Mr. Bartlett’s time. 

So, Dr. Bartlett, please go ahead. 

Mr. BARTLETT. Thank you very much. 

We have had hearings in this Subcommittee and full Committee 

on fraud and HUBZones and this program. And the real surprise 

would have been that there were no frauds, because what we did 

here was to ask these people to self-certify. We should have had 

some pangs of conscience when we repeated the Lord’s Prayer and 

came to that part of it that said, ′′Deliver us from temptation.′′ How 

can we ask the Lord to deliver us from temptation and put this 

kind of temptation in front of these people? 

And we here at this dais should have had some pangs of conscience, too, because we didn’t give you enough money to do the policing of this that we should have given you. If you look at the 

amount of money we gave the 8(a) programs, it was enormously 

more in terms of percentage than we gave these two programs. 

So the real surprise would have been that there were no frauds. 

And I hope that there is some pangs of conscience when you repeat 

the Lord’s Prayer and you come to that part that says, ′′Lead us 

not into temptation.′′ What right have we to place these people in 

this path of temptation? 

Have we now given you enough money that you can adequately 

police these programs? Or should we still have some pangs of conscience when we repeat the Lord’s Prayer? 

19 

Mr. BARTLETT. Do you have enough money now to police the program? We didn’t give you enough money to police the program, and 

that was obviously true in the HUBZone programs, and I gather 

it was true in these programs, too. Do you now have enough money 

to police these programs? 

Mr. MARTOCCIA. Speaking from FEMA, I think we have enough 

money. I think it is making sure that the contract specialists and 

the contracting officer understand that these companies have to 

make sure that they verify their status. It is a simple thing to do. 

I think in our case, I think it was an oversight. 

Mr. BARTLETT. We have to run to vote. I just want to make sure, 

if you don’t have enough money, please let us know, because we 

don’t want to be a part of the problem. If we haven’t given you 

enough money, then we need to give you enough money so you can 

police these programs. 

Mr. JORDAN. Congressman, one thing I would add is that in the 

SBA’s fiscal year 2011 budget, the President requested an additional $2 million specifically for rooting out fraud, waste and abuse 

in the contracting programs, and that would be a very helpful funding source for us. 

Mr. BARTLETT. It would have been nice if we gave that money 

to you early on, and so we wouldn’t have had to sit hear listening 

to these cases of fraud, waste and abuse. If you had enough money 

to police the programs, we wouldn’t be here. 

Thank you very much. We have to run to vote. 

Chairman NYE. There is apparently one vote, so I will ask the 

panelists to remain in place until we return. 

[Recess.] 

Chairman NYE. I am going to reconvene this hearing. 

Ms. Oliver, I wanted to follow up with you on a conversation we 

were having before we broke. Before we recessed, you said while 

the small business owner in question in this Air Force contract 

case might not have been completely educated on the requirements 

of the program, there was no attempt by the contracting officer to 

intentionally violate the law. I want to make sure that was your 

statement? 

Ms. OLIVER. That is my statement. 

Chairman NYE. Okay. This is what the GAO report said. In the 

report it said that the base director of contracting and legal counsel 

who approved the award had a prior working relationship with the 

service-disabled vet owner on the base, and it found that the contracting officials were aware of the service-disabled veteran owner’s 

limited involvement in performing the contract. Also, when the contracting officer was deposed by the Committee staff, he confirmed 

that it was indeed a Federal employee that worked there, and that 

an entity other than the service-disabled business that was awarded the contract was going to provide the service. 

What I need to know, given the fact that agencies have an opportunity to dispute the GAO findings when they are first reported, 

and, as far as I can tell, the DOD did not, I would like to know 

if you are disputing that finding, or whether you are prepared to 

accept the finding, and then we can move forward. 

Ms. OLIVER. I need to have you tell me exactly which finding? 

20 

Chairman NYE. It is a $900,000 contract that was let under an 

Air Force contract at McDill Air Force Base. 

Ms. OLIVER. Yes, I agree with that. 

Chairman NYE. Okay. So what I need to know is are you disputing the GAO finding that was in the report? 

Ms. OLIVER. On the McDill discussion, I agree with some of the 

things that are in that discussion. I think some of the conclusions 

are conclusions that aren’t completely, at least in the report—don’t 

explain why they came to those conclusions. 

Chairman NYE. Do you know why DOD hasn’t presented an attempt to refute the GAO finding until now? Because there is an opportunity in the GAO report process for the agency to say they 

don’t agree with the finding. 

Ms. OLIVER. I don’t know whether this went to McDill, whether 

this report went to McDill before. 

Chairman NYE. The reason I am asking you, I am surprised at 

your response, and I want to make sure that I understand whether 

or not you are saying that essentially—and what I heard was the 

problem here was ignorance on the part of the service-disabled 

business owner and not responsibility on the contracting officer to 

have seen the problem and taken action to prevent this contract 

from being wrongly awarded. 

Ms. OLIVER. Here is what the contracting officer would probably 

say to you: I didn’t know enough to ask enough questions; I didn’t 

know enough about joint ventures with service-disabled veteranowned small businesses to ask the questions which would have 

made that potential contracting officer give me the information 

that would have kept this whole thing from happening. 

That is the reason I said earlier he has put into place a system 

to make sure—the head of contracts—to make sure he and other 

contracting officers ask the questions that would have brought the 

facts out that would have prevented awarding a contract to a joint 

venture which—where, in fact, the service-disabled veteran-owned 

small business owner didn’t have control. 

Chairman NYE. The reason I am pressing you on this point is because in this case it was the contracting officer who saw the paperwork and the plans submitted that clearly showed there was a 

problem, and went ahead and issued the contract anyway. That is 

what the GAO report found. Now, rather than relitigate that 

today—and the reason I raise this is because I want to make a couple of key points. I don’t agree with your assertion that essentially 

the essence of the problem is ignorance on the part of the servicedisabled veteran business owner. I don’t agree with your assertion 

that the fact that there were a small number of cases total investigated by the GAO implies that there is a relatively small problem 

out there. To my mind, it implies that there is a much larger problem we have barely scratched the surface on. 

So if we can agree on those points, I will tell you one thing I do 

agree with that you said. You concluded by saying your office needed to do a training program, better oversight over the contracting 

officers to make sure that they understand the importance of why 

we ask for a goal for service-disabled veteran-owned businesses and 

how to make sure that happens in fact and not just on paper. I 

agree with that assessment. What I am disappointed in is the fact 

21 

that 9 months after the GAO showed fraud, we are still back at the 

same place we were 9 months ago saying we need to do more going 

forward. 

Ms. OLIVER. I don’t think we are. 

Chairman NYE. Okay. This is your opportunity to show me what 

you have done in the last 9 months to help solve that problem. 

Ms. OLIVER. Our inspector general has worked, and we hoped 

this would be—when I heard about this hearing, I said, is there 

any way you can move this through faster, because our inspector 

general has spent a lot of hours, I have talked to the people involved, in looking at the extent of the problem and what can be 

done about the problem. 

You may very well be correct that this is the tip of an iceberg. 

I don’t know. But I do think that there is a whole bunch of failure 

to understand in all of this, because I just hardly ever meet a contracting officer who wants to disregard the rules. More frequently 

they, DOD contracting officers, are very knowledgeable, but when 

it comes to small business, it is an area that they need to know 

more. We work on that all of the time. I think most contracting officers would say that to you. 

Chairman NYE. I think I agree with your assessment that there 

is a failure to understand among many contracting officers of how 

to stop fraud in the system. What I don’t feel satisfied with is that 

we are not further down that chain, as we ought to be, given the 

fact that we have known about this for almost a year. 

Let me move on to another question, and I want to talk to you 

about consequences. We recognize, as Mr. Foreman pointed out, 

that there is a challenge in trying to ensure that contract dollars 

are awarded appropriately; that business is done and transacted in 

a way that gets done, the business of the government is done on 

behalf of the taxpayer, and at the same time there are appropriate 

protections to ensure at the front end that we know who signed up 

and said they are a service-disabled veteran, and we can certify 

that they really are; that there is a process in the middle to check 

and hear complaints and follow up on them; and that there is a 

consequence at the end of the day for someone who commits fraud. 

I am not satisfied that that system works, and the reason I am not 

satisfied is because of what the GAO report showed. 

We have to figure out how to solve this, and this is what we are 

asking you to do. I am going to start with Mr. Foreman, because 

you mentioned you set up a special commission for debarment 

within the Veterans Administration, and I would like you to describe succinctly, please, how your committee works and how do 

you think this will solve the problem in terms of presenting consequences which will change the system and change the calculus 

for those who would defraud our veteran business people? 

Mr. FOREMAN. Chairman Nye, you really nailed it on the issue 

of consequences. What we will look at is every denial, where we 

deny a verification to a veteran-owned firm. We will forward that 

both through the IG for the VA and to the committee which I am 

the chairperson of. We will look to see if it is just a knowledge factor where somebody made a mistake, and usually it happens in the 

ownership and control arena, what we call the status fraud arena. 

22 

And if it is a simple thing, we can push it off and say, you can 

resubmit. If we find that there is actual fraud where they are 

working with somebody’s brother, or they are not even at the facility—we have had that happen. You would be surprised how many 

people come in, sit down, and this is the veteran, the president and 

CEO, and the other guy or lady talks to you. You really want to 

have the fraud barometer very low. You don’t want to have it high. 

When they get around 49 to 51 percent ownership, that drives us 

into what we call a risk factor. 

What we need to do is, of course, really get into the debarring 

mode. Once that happens, I think you are going to see a lot of the 

fraud fall away. We want to make sure that we capture the guilty, 

not the innocent, and that is going to happen. We have already 

processed—we have 57 in house. I have already administered 23 of 

those, most of which we sustained the protest; i.e. we found there 

was fraud. So all of those go to the IG automatically, and it is automatically going to go over to the committee for the debarment. 

Chairman NYE. I appreciate your explanation on that. I want to 

ask, voluntarily are there any other agency representatives who 

would like to describe similar actions that their agencies have 

taken in terms of pursuing debarments since the GAO report came 

out in November? 

Mr. JORDAN. If I can respond. 

Chairman NYE. I want to offer the other agencies an opportunity 

to respond. 

Noting none, Mr. Jordan from SBA. 

Mr. JORDAN. I had the opportunity to speak with an SBA suspension/debarment official during the short break, and one of the 

things that he suggested I highlight is since this report we have 

developed regulations which are now going through the process 

that would allow SBA, when we receive credible information that 

a service-disabled veteran-owned small business may not be who or 

what they say they are, SBA can demand that that firm prove its 

eligibility. And if we find them ineligible, then we remove them 

from CCR and pursue those enforcement actions, as opposed to the 

process now, which I outlined before, which does originate with the 

contracting officer as the point of contact for a contract. We hope 

that will further allow us to do that. 

You talked about the continuum, to add another tool into that 

continuum. One other thing on the back end that SBA has been 

pushing, you talked about enforcement and consequences, is that 

currently, as Dr. Bartlett mentioned, the government contracts for 

100 chairs, gets 100 chairs for the price it paid, and so the Department of Justice, when we ask them to prosecute, will say there was 

no harm to the government. There is legislation that has been discussed that would remove the value to the government from the 

equation when the contract or procurement was received or awarded under fraudulent circumstances. 

So those are things that we are aggressively trying to think 

proactively beyond the tools that we already have at our disposal. 

Chairman NYE. One more question before I yield to Mr. Schock. 

I would like to know, again voluntarily, if any agencies can tell 

me, 9 month point since the GAO report showed evidence of fraud 

in this program, which agencies have suspended active contracts, 

23 

suspended businesses that were found to be fraudulent underneath 

that program? 

Mr. Foreman. 

Mr. FOREMAN. Through the protest process, we have suspended, 

in terms of the debarment—not debarment, but in terms of the protest, if we have found that they are not verified, we refer them to 

the IG and to the debarment committee. The debarment committee 

is brand new, but it is going to happen. There are a lot of other 

little issues that get involved. 

We also do—in just the straight verification, we do denials. 

Every time we do a denial, that goes through our general counsel’s 

office. So when we deny, probably in the neighborhood of maybe a 

couple hundred we have denied over the course of the years. 

Chairman NYE. My question is more about suspension. I understand that debarment is a tool, and it does take time to go through 

a process. Suspension can be done quickly. Have any of these cases 

resulted in a suspension? Has this GAO report resulted in a suspension of any of the immediate contracts? 

Mr. FOREMAN. Not to my knowledge. In fact, the statute for 109- 

461 mentions the debarment committee, but it doesn’t mention suspension. 

Chairman NYE. Thank you. 

I note no one else has raised their hand as well. I have to admit, 

I am disappointed to hear that. The reason why I wrote the law 

I wrote, which provides for criminal penalties, is because we have 

to have consequences in place. I think one of the first consequences 

ought to be a suspension of the contract. 

I yield to Mr. Schock. 

Mr. SCHOCK. Thank you, Chairman Nye. Again, I appreciate you 

holding this hearing. I would ask unanimous consent that my opening remarks be submitted for the record. 

Chairman NYE. Without objection, so ordered. 

[The statement of Mr. Schock is included in the appendix.] 

Mr. SCHOCK. The GAO report focused on a lot of things. One of 

the things that was of concern to me was the whole purpose of 

these preferences is to try and help out the specific demographic 

that we are trying to help out. One of the things that the GAO 

highlighted that I think raises an additional concern, in addition 

to the fact that we are not meeting the threshold, is that the percent that are supposedly being helped oftentimes are a front man, 

if you will, or a front lady for basically garnering that set-aside 

only for the money, the business. The contract can then be handed 

off or subcontracted to much larger entities. 

So I guess my question is we rely right now—or the way the 

rules are written are that we rely on other small businesses to cry 

foul, other small businesses to somehow know about the unfairness 

of those practices, to report. And I guess my question would be perhaps the agencies themselves who are awarding the contracts to 

these small business set-aside preferences should be the ones to follow up and verify that, in fact, it is small business people who are 

doing the work because your agencies are the ones who know what 

work is to be provided. Your agencies, your folks letting the contracts and awarding the contracts are the ones who have the relationship with the small business, so doesn’t it make sense that 

24 

your agency verify that, in fact, the work is all being done by these 

set-aside contractors as opposed to saying, well, we are going to 

award the contract, close your eyes and not open until someone 

screams foul? 

As a small business person myself, I will tell you that unless I 

catch wind of it somehow, I don’t know when another small business person in my community gets awarded one of these contracts. 

And so if they go out and are basically a shill and sub it out to 

a bunch of large corporations, I am not going to know, first of all, 

that it happened and, second of all, who to contact within your 

agency to let you know that there is a problem, and that they are 

skating the system. 

So the point is my question is why don’t you within your respective agencies take it upon yourself to be responsible for policing 

these efforts? Any of you? All of you? 

Mr. FOREMAN. I will give it a little bit of a shot here. We call 

that process fraud, and process fraud is one of the harder ones to 

catch because, as you noted, it is after contract award. It is 

postaward. The contractor promises up front here are the 

deliverables; here is how I am going to do it. You actually do 

preawards, and you actually do postawards when you are talking 

to the contractor: Remember, you have this that you have promised 

that you are going to do. It is called the subcontracting limitation, 

and the contractor doesn’t live up to it, but they don’t tell you that. 

If they did, you know, the show would be over right then. I am 

sorry, we are going to have to pull this award back and resolicit. 

But that doesn’t happen. Generally the business will say—and, 

again, it is a hard one to catch because it is after award—how 

many contractors and contracting officers do you have, where are 

the businesses located, and how do you trace it down? 

I am not making excuses for them, but it would cost a lot to really police that. And the more that I have learned from this last 6 

months here in my job, I look back, it could be a HUBZone problem, it can be a small business problem, it can be a woman-owned 

business, or an 8(a) problem. As a matter of fact, the first time it 

came to me in my career, it was an 8(a) problem. It wasn’t even 

the 8(a) company was shipping the products. And the only reason 

we found out about it, the 8(a) stopped paying the subcontractor, 

and he complained to us. That is when I worked for DOD. It was 

a defense construction supply agency issue. 

That has happened, and I guess, to me, it is probably the dirty, 

lingering area, how do you catch it all. We have 40 people, but my 

people are physically in D.C. What you need to do is have some 

sort of a centralized process where we can go out and verify small 

businesses. Where are they? If they do progress payments, it is 

fairly easy, by the way. I used to be a price analyst, and you can 

really challenge it, because you go to the engineer, they will tell 

you how much is done, where it is and who is doing what. But if 

it falls out of that realm, it is tough. 

I probably left more questions than answers. 

Mr. SCHOCK. I asked two follow-ups. Any of you can answer. 

First, beyond them guaranteeing the deliverables that they are 

signing up for that you are awarding them for, specifically what do 

you have in that contract that then they are—in addition to signing 

25 

that they are going to be doing deliverables, but they are also signing that they are, in fact, going to be the ones producing the product? 

Mr. FOREMAN. It is called the subcontract limitation clause. That 

clause requires any small business preference program, that they 

have to do 50 percent construction. There are two types of construction. It is either they have to do 15 percent or 25. All other programs are 50 percent or more. 

The uniqueness to service-disabled veterans, they can make that 

subcontracting limitation working with other veterans. So if two 

veterans get together, one is a sub and one is a prime, and they 

do over 50 percent of the effort, that is legal. That is also true of 

the HUBZone program, a HUBZone or any other HUBZone program. The rest of the government, that firm has to do that percentage. 

Mr. SCHOCK. My second question would be, you know, each agency is different. I know one of the concerns at the Department of Defense I always hear, a lot of our products we need manufactured, 

small businesses themselves can’t produce. They don’t have the 

capital. What we need, small businesses by nature can’t produce in 

volume. 

Aside from being a veteran, aside from being one of these demographic qualities that then qualify you to apply for that set-aside 

contract, what do your respective agencies do to verify that, in fact, 

it is a company that can produce the product that they say they 

are competing for? In other words, if I am a woman, or I am a minority, or I am a veteran, and I can show proof that I am an Xowned company by virtue of me filling that category, and I say that 

I produce weapons, or I produce whatever the deliverable is for the 

Federal Government, beyond showing proof that I am the owner 

and, therefore, qualified to compete for the contract, what do you 

do to verify that, in fact, they build a product, that the product is 

actually of the quality of your respective agency? And I would think 

through whatever process that is, you would verify that, in fact, 

they can produce it in house, and that they are not a shill corporation and, you know, simply a front person with nothing more than 

a P.O. box and a 1,000-square-foot office competing for Federal contracts. 

Mr. FOREMAN. At least what happened when I was in the field, 

which was over 30 years ago, we used to have DCMA, Defense Contract Management Agency. And I worked for that agency, and part 

of my job was to postaward reviews and preawards. During the 

preaward phase, you judge the financial capability, the engineering 

capability, the manufacturing capability, the equipment, the site, 

transportation and shipping of the products. You would look at all 

parts. You would go back and adjust, and you would get together 

as a group and either accept or deny that firm as the right firm 

when you do a preaward. 

Over the years they have moved away from doing preawards. 

They have made it very limited as the years have gone on, so I 

don’t know that is being done now. But that was one way you could 

handle it. 

The other issue was in the postaward at DCMA, and I would get 

involved in that where you would go out and sit down and talk to 

26 

the contractor after they received award. You would again go 

through the clauses so that they understand. It is an educational 

issue; it is a communication issue. We have to do that. I don’t know 

so much. It has been like 30-plus years now that I have been out 

of that organization, but that is one of the ways that I felt very 

comfortable about what we were doing. 

Mr. JORDAN. If I can build on that, Congressman, going back to 

Chairman Nye’s point regarding outcomes, we need to hit these 

goals, and we need to do so absent waste, fraud and abuse. I would 

divide it into three sections. One is do we have these right policies 

and procedures when you are looking at determinations of responsibility and doing your market research, and during the contract 

operation is the contracting officer appropriately looking at subcontracting plans and subcontracting performance? 

Then in the second phase it is training. And I spoke a little bit 

about the President’s Small Business Contracting Task Force that 

he has set up, which has to deliver recommendations to him late 

next month. I chair one of the five workings groups of that, and 

it is on workforce training and agency accountability. One of the 

big things that we are trying to push is closing any awareness gap 

on the contracting officer front to make sure that not only do we 

have the right policies and procedures in place, but they know 

what those are. 

The third thing I would say, you mentioned these preferences are 

aimed at helping these specific groups, and we are not meeting the 

thresholds. To that I would only implore you, one of the key things 

that we can do overall to help service-disabled veterans is ensuring 

parity between all of these different programs and replacing that 

′′shall′′ in the HUBZone language with ′′may′′ so we get the contracts, and so the contracting officers don’t, during this training, 

don’t become confused as to what they can or cannot do. 

Mr. SCHOCK. Anyone else? 

Mr. FOREMAN. That is except for VA. We like to have the program we have. We want to continue with 109-461. Thank you. 

Mr. SCHOCK. Well, to that point, when I spoke with the SBA Administrator, my first point to her was: Why don’t we make them 

all ′′shall′′ as opposed to all ′′may′′? But apparently legally then you 

would have to qualify for every one of them, which would be kind 

of difficult. 

But my point to her was, look, we are failing. We are failing on 

all of them. And so what are you doing to make it so we are not 

failing on all of them? 

Her point to me was that, in her opinion, it was a lot to do with 

the leadership; that it takes the agency heads as high as up as the 

Secretary at each one of these departments to say, you know what, 

it is going to be a mission. It is a directive of mine to the folks letting these contracts that we are going to meet these goals, and people are going to be held accountable for it. 

My question to all of you would be have you to this date heard 

from any of your respective heads; you know, has Secretary Gates 

ever mentioned the set-asides and the need to meet those goals as 

specified by Congress really? I am sure Shinseki wants the veterans set-aside met. 

27 

I am curious. I think the leadership of each respective agency is 

very key to what the goals are. I know within our organizations, 

if we say, well, this is kind of a goal, but if we don’t meet it, gee, 

you all tried, too bad, so sad, we will do it again next year. But 

if it is this is a key goal, and if we don’t meet it, there are going 

to be consequences, I think you have a different outcome. 

I am just curious what directives and what message you have 

heard, if anything, from your respective heads about meeting those 

set-aside goals? 

Ms. OLIVER. I would need to go back and get the specific letters, 

but our leadership has put a great deal of emphasis on service-disabled veteran-owned small business achievements. The Secretary 

has discussed it. Dr. Carter, I think, has signed out a letter. Our 

leadership really is behind; it is just behind getting the— 

Mr. SCHOCK. How long have you been at the Defense Department? 

Ms. OLIVER. Working with small business issues? 

Mr. SCHOCK. Yes. 

Ms. OLIVER. Eleven years, 12 years. 

Mr. SCHOCK. Okay. So you have been there under several Secretary of Defenses? 

Ms. OLIVER. I have. 

Mr. SCHOCK. Is the directive any different now than it was 5 

years ago, 10 years ago? 

Ms. OLIVER. Yes. It is not a directive, meaning a directive as a 

specific. 

Mr. SCHOCK. I guess my question is on the part of us policymakers who are responsible to our electorate, should we be able to 

tell our electorate and the folks we are claiming we are helping 

that we should expect any different outcome this year as opposed 

to 5 years ago, 10 years ago based on the leadership of your respective department? 

Ms. OLIVER. There has been a difference. It is in my testimony. 

Think about the size of the Department of Defense. I mean, I think 

it is fantastic that since we got a tool where we could make 

progress, that the progress has gone in the direction that it has. 

It has been 7 years. 

Mr. SCHOCK. Do you think that the 3 percent set-aside is too 

high? 

Ms. OLIVER. I think for the Department of Defense, given our 

product mix, it is a challenge; but I think it is one that we can 

meet. I think we have to think every single year of another way 

to find the less low-hanging fruit. And we keep working at it. I 

think we will make it. 

Mr. SCHOCK. How about the other agencies? 

Mr. MARTOCCIA. Secretary Napolitano as well as our Administrator Fugate have made it a priority for us to provide opportunities for all small businesses, including service-disabled veteranowned small businesses. So we are doing good. Our goals are high. 

We exceed at FEMA the 23 percent. We are about at 32 percent, 

and they continue to move up our goals. Our trend has been good 

over the last few years. 

Ms. BROWN. At EPA, Administrator Jackson has made it very 

clear that she is very supportive of the program. She had a conVerDate Aug 31 2005 19:00 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57285.TXT DARIEN
28 

versation with me when she first came and said, I want these numbers to go up on my watch and not down. 

We do have a good story at EPA when you look at our numbers. 

Our small business numbers, we hit over 40 percent for small service-disabled veteran-owned last year, in fiscal year 2009; 8.93 percent was what we accomplished. We are on track now as of the 

third quarter with 5.6 percent, and we don’t see that going down. 

We anticipate that we will exceed the 3 percent. 

So Administrator Jackson has—I report to the Deputy Administrator. I sit in with senior staff. She has made it very clear. She 

asked during senior staff, what are my small business numbers 

looking like? And she has signed a memo out to the Agency saying 

that the administration—and she is supportive of the small business program and wants to continue its success. 

We have incentive programs where we recognize our regions. We 

give out the Crystal Duck Award, and it is very competitive within 

the Agency amongst the program officers and the regions competing for that recognition for our small business program as a 

whole. 

Mr. FOREMAN. In VA I have the pleasure of working closely with 

Secretary Shinseki. He is very committed not only to the servicedisabled or the veteran business goals, but to the SDV goal, to the 

HUBZone goal, and he personally sends out those goal letters. I 

have with me a copy of the goal letter that he sent out, and given 

his druthers, he would probably rather push them up. But I will 

have to say sometimes the staff says, wait a second, you are going 

too aggressive. But we have aggressive goals. 

We have done some things. This year to date we are at 18.4 percent with service-disabled. With veterans we are at 21 percent of 

our total spend as of the 10 months. 

With HUBZones, this is where we fall behind. We are 2 percent. 

Of course, we are only trying to get to 3, but we are not just trying 

to get to 3, we are trying to blow past those goals. Those are minimums, they are not where we should go. 

In terms of small business, we are at 35.4 percent right now. So 

this is the highest level except for the year 2008; we did finish at 

36 percent for small business. So, I mean, we are committed. I 

think the management team is committed. I have never been in so 

many what they call ELB, executive leadership board, meetings 

where we talk to each other about where we are going, and how 

we are going to get there, and what are the problems. And it is not 

one you can just sit there and listen to. They go around the room, 

and you have to speak on your issues, what are your problems and 

what are your fixes. 

Mr. SCHOCK. Well, I think, based on your own testimony and 

numbers, you represent some of our better-performing agencies, 

and perhaps we will have to have a hearing in the future with 

some of those that are not meeting the goal and are bringing down 

our average. I appreciate you answering the questions. 

With that, I yield back to Chairman Nye. 

Chairman NYE. I am going to wrap up this panel and move on 

to the next panel, noting the time. 

In summary, as I said in my opening statement, I am also 

pleased to note that your small business contracting goals, the 

29 

numbers are looking better and better. I am pleased to note that 

service-disabled veteran and small business contracting goals are 

looking better and better. That is good. However, when the GAO 

report shows that some significant portion of that contracting pool 

was fraudulent, there is a big asterisk next to that number now for 

me. The only way I can be confident that we are actually meeting 

those goals, the only way, more importantly, that the taxpayers 

that we all work for can be confident that you are actually using 

that money in a way that it was designed to be used, and it is 

going to the correct end user, and, most importantly, the only way 

that our veteran business owners can be confident that the program that we set out to provide them with tools to improve their 

lives and show them that we care about their service to our country 

is if you find instances of fraud and take action to root them out. 

I am going to release you so you can go back to work on doing 

that. I have expressed some disappointment today because I feel 

we have not moved far enough along in a demonstrable way. I am 

asking you to redouble your efforts on this. We owe it to our veterans, and we owe it to the taxpayers. 

Thank you for your time. 

Chairman NYE. I would like to go ahead to invite the second 

panel to the table, and we will start right away. 

I want to go ahead and thank the witnesses on our second panel 

for taking the time to be with us today. I know some of you have 

traveled from across the country to join us. It is important that you 

are here with us. 

You were here and had an opportunity to listen to representatives of the executive agencies talk about their approach to solving 

the problem, the fraud problem, that was uncovered by the GAO 

report last year. You have had an opportunity to understand, I 

think, where I am coming from on this and how I feel the agencies 

have responded to it. But I think what is even more important is 

to hear from you, those who are out there in the trenches of the 

economy every day, the ones who are responsible for competing for 

these contracts, and the ones who create the jobs and represent 

those veterans businesses that do that, and hear your thoughts on 

where the rubber meets the road, and what it is like to be with 

dealing with the government contracting officers, and what it feels 

like for you to have to engage with that system, and does it work. 

That is what we are trying to get to at the end of the day here: 

where is it not working, and how can we make it work better for 

you. 

I would like to go ahead and introduce our first panelist, Mr. 

John Kobelski, president and CEO of Andromeda Systems Incorporated, from my district in Virginia Beach, Virginia. Andromeda 

Systems Incorporated provides technical and contractor support 

services in both the government and commercial sectors and is a 

service-disabled veteran-owned small business. 

We will have a 5-minute clock. 

Mr. Kobelski, thank you for being with us. 

STATEMENT OF JOHN H. KOBELSKI 

Mr. KOBELSKI. Good afternoon, Chairman Nye and members of 

the Committee. My name is John Kobelski, and I am president and 

30 

CEO of Andromeda Systems Incorporated. I am pleased to be before the Committee today testifying on behalf of the service-disabled veteran business owners. I have submitted my full statement, which I ask be made part of the hearing record. 

I am a small business owner and a service-disabled veteran, who 

proudly served my country as an enlisted member of the United 

States Air Force from 1967 through 1971, serving in Vietnam from 

October 1968 through September 1969; and as a naval flight officer 

and an aeronautical engineering duty officer with the United 

States Navy from 1974 to 1990. I am a graduate of Louisiana Tech 

University, with a B.S. In 1973 on the GI bill, and the naval postgraduate school, MSEE 1980. Since my retirement in 1990, I have 

been employed by several government service contractors, both 

large and small, and in 2005 I established Andromeda Systems Incorporated along with my partner John W. Henson, a fellow Vietnam veteran. I am also currently the vice president of the ServiceDisabled Veteran-Owned Small Business Council out of Virginia 

Beach, Virginia, working exclusively for the promotion of servicedisabled veteran-owned small businesses. 

Drawing from my experience as a service contractor, I have seen 

numerous obstacles placed before SDVOSBs seeking to gain the 

share of government contract opportunities outlined in Executive 

Order 13360 and have been made aware of incidents of fraud and 

abuse in the community. In my written statement I have detailed 

my experience in these matters and have given several examples 

and possible solutions. 

It is my opinion that the major reason the 3 percent goal is not 

being met is because agencies claim they cannot find enough qualified companies in their searches to justify contract set-aside competition. I find it hard to believe that out of over 17,000 

SDVOSBs—and I heard today there are about 24,000 of them 

now—listed in the CCR, an agency can’t find two qualified to perform most any contract. Are they really trying? Really? The requirement should be made into law and not just an Executive 

Order. 

Another reason given by agencies for not setting aside a contract 

is that the magnitude of the procurement disqualifies or increases 

the performance risk for several RFI responders. This again is disheartening to SDVOSBs, and I address this in more detail in my 

written statement. 

The 8(a) quotas are apparently being met by government agencies. Why isn’t it the same for SDVOSBs? Is it because the 5 percent set-aside quota for section 8(a)-certified companies is law and 

not an Executive Order? 

A third reason, and probably the most compelling, is the political 

climate that surrounds all procurements. I am not sure how one 

combats cronyism, favoritism, or the ′′good old boy′′ network, but 

highly qualified SDVOSBs, as well as plenty of other small businesses, have been denied contracts as a result of it. 

One major way to improve prime contract opportunities for 

SDVOSBs would be to streamline the sources sought in RFI processes and use other search criteria. 

A major reason why we established the council in Virginia Beach 

in 2009 was to provide qualified sources to Federal agencies for 

31 

competitive set-asides. All they have to do is ask us, and we will 

go out and search for them. 

On the subcontracting side, unrestricted companies are not being 

held accountable for adhering to their small business subcontracting plans. Small business teammates on an awarded unrestricted contract see very little, if any, of the contract percentage 

promised them by the prime. Without oversight and penalties for 

large prime contractors, the practice of ignoring SDVOSBs will continue. 

Bundling, or the combining of many contracts into one, has hurt 

many small businesses, and in particular the SDVOSBs. Bundled 

contracts are usually competed as unrestricted and won by large 

companies, and, as mentioned earlier, the large prime’s small business subcontracting plans are hardly ever enforced, and very little, 

if any, work flows down to the SDVOSBs. 

In order for SDVOSBs to reach parity with the other set-aside 

programs, laws must be enacted similar to that in the 8(a) community. Executive Orders are important, but in no way do they carry 

the weight of law. We understand that Congressman Wittman of 

Virginia has introduced legislation that makes Executive Order 

13360 into law and even strengthens it. 

On the issue of fraud and abuse, there must be an official SBA 

certification process. It should be made mandatory for all businesses claiming to be SDVOSBs, with severe penalties for those 

that falsify their representation. We also understand that Congressman Nye is preparing legislation in this area. 

In summary, laws are the key. Everyone jumps to the mention 

of the Federal Acquisition Regulations, and everything else is a 

′′nice to have.′′ It is a shame that some of our best and brightest, 

especially those coming home from Iraq and Afghanistan, who have 

given so much to this country and have so much more to offer, have 

to play second fiddle to the rest of the set-aside community. Those 

veterans know the sacrifices, hard work and determination as 

much, or even more, than anyone. 

It is my opinion that all veteran small business owners should 

be given parity, at least when it comes to DOD contracts. Veterans 

can make a difference, and like the 8(a) program, there should be 

a formal SBA process for certification and parity among set-asides. 

Thank you, Chairman Nye and Committee members, for the opportunity to appear before you today. I stand ready to answer any 

questions you might have. 

Chairman NYE. Thank you, Mr. Kobelski. 

[The statement of Mr. Kobelski is included in the appendix.] 

Chairman NYE. I am aware of your work with the Service-Disabled Veteran-Owned Small Business Council in Virginia Beach, 

and appreciate your leadership on that. You are doing a lot of good 

in the community. 

I would like to introduce Mr. Joseph Sharpe, the director of the 

National Economic Commission for the American Legion. The 

American Legion’s economic division focuses on veterans education, 

employment, business development and assistance. The National 

Economic Commission was formed to ensure that veterans receive 

ample opportunities for success once they leave the military. 

Mr. Sharpe, welcome. 

32 

STATEMENT OF JOSEPH C. SHARPE, JR. 

Mr. SHARPE. Thank you, Chairman Nye, Ranking Member 

Schock and members of the Subcommittee. Thank you for the opportunity to present the American Legion’s views on improving contracting opportunities and preventing fraud for service-disabled 

veteran-owned small businesses. 

The American Legion views small business as the backbone of 

the American economy. It is the mobilizing force behind America’s 

past economic growth and will continue to be a major factor as we 

progress through this unstable economy. 

The American Legion supported legislation in the past that 

sought to add service-connected disabled veterans to a list of specific small business categories receiving 3 percent set-asides. The 

American Legion understands that by raising the priority level of 

service-disabled veteran business owners in the Federal Acquisition 

Regulation by changing ′′may′′ to ′′shall,′′ they would be awarded 

more contracts within the Federal system. 

The American Legion seeks to support legislation that supports 

and develops service-disabled veteran-owned small businesses, 

while providing them equal opportunity to start and grow a small 

business, including establishing numerical goals for all veterans to 

compete in the government procurement. 

Also, the American Legion is concerned about the administration’s direction towards end sourcing and how that is affecting 

small businesses. We believe the push to end-source thousands of 

contractor positions could have severe repercussions for small businesses, particularly service-disabled veteran-owned businesses, 

across the Nation, and force small businesses to scale back decisions or to go out of business. 

Concerning the prevention of fraud, the Veterans Affairs and the 

Small Business Administration should develop a comprehensive 

partnership to assist veterans who are interested in participating 

in Federal procurements. The Center of Veterans Enterprise should 

maintain the database and verify accurate veteran/service-connected disabled veterans’ status. SBA should retain the responsibility for validating the business ownership, size, standards and 

structural integrity of the business. SBA should have direct reporting and import authority to the VIP database through the Office 

of Veterans Business Development once this information is collected. VA should maintain the eligibility status regarding veteran 

status. SBA is responsible for verifying all other socioeconomic categories for the purpose of Federal procurement. SBA already maintains the infrastructure, the expertise and established regulatory 

guidance to include the veterans population within that authority. 

To boost the Federal Government procurement numbers within 

the veteran business community, the American Legion recommends: One, currently GSA schedules are exempt from small 

business regulations. Without this change, SDVOSBs will be limited in their quest to expand business opportunities. 

Two, implementation of a coordinated, standardized training program for procurement staff that focuses on SDVOSB procurement 

strategies in their respective agencies. 

Three, President Obama should reissue Executive Order 13360, 

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nesses to increase Federal contracting and subcontracting opportunities for veterans, and require that its tenets be incorporated into 

SBA regulations and standard operating procedures. 

Four, the SBA needs to emphasize Executive Order 13360 again 

and establish it as a procurement priority across the Federal sector. Federal agencies need to be held accountable by SBA for implementing the Executive Order, and SBA needs to establish a means 

to monitor agencies’ progress and, where appropriate, establish a 

report to identify those that are not compliant and pursue ongoing 

follow-up. 

Five, in order to achieve the mandates of Executive Order 13360, 

the SBA must assist Federal agencies to develop a strategic plan 

that is quantifiable and will assist them in establishing realistic reporting criteria. 

Six, the American Legion also recommends that the House Small 

Business Committee embrace and promote development of stronger 

policy and legislative language that champions the utilization of 

Veteran-Owned Small Business Joint-Venturing as a ready solution 

to the small business spending requirements of the Stimulus 

Spending Initiative. 

And, seven, hold those agency leaderships responsible for meeting the 3 percent congressional mandate goal. We recommend the 

Committee schedule a hearing with all Federal agencies who consistently do not meet their Federal procurement goals. 

This concludes my portion of the testimony. We look forward to 

continuing working with the Committee to enhance entrepreneurship among American veterans. The American Legion appreciates 

this opportunity to present this statement for the record. Again, 

thank you, Chairman Nye and Ranking Member Schock for allowing the American Legion to present our views on this very important issue. 

Chairman NYE. Thank you, Mr. Sharpe, and thank you for your 

work for our veterans. 

[The statement of Mr. Sharpe is included in the appendix.] 

Chairman NYE. I now yield to Mr. Schock. 

Mr. SCHOCK. Thank you, Chairman Nye. 

I am pleased to introduce Stephen J. Hope, the president and 

CEO of Office Automations Systems, Limited, also known as CIAN, 

Inc., a service-disabled veteran-owned small business. 

Mr. Hope is a 20-year veteran of the United States Navy. With 

a background in cryptologic computer programming and systems 

engineering, Mr. Hope’s diverse framework centers on the military 

and national intelligence area. He attended postgraduate studies at 

the Defense Intelligence College and holds a B.A. in business management with a concentration in information systems from the University of Maryland. 

With over 30 years of experience in the computer industry, Mr. 

Hope has become an expert on microcomputer networks, computer 

security, computer forensics, and industry compliance matters. His 

company, CIAN, Inc., specializes in computer network security and 

employs 40 people, over 50 percent of whom are veterans, in my 

hometown of Peoria. 

CIAN, which provides, determines, and ensures the confidentiality, integrity and availability of your network, that is their misVerDate Aug 31 2005 19:00 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57285.TXT DARIEN
34 

sion, is to provide remote and on-site computer network security to 

include access control, forensics, intrusion and vulnerability detection, risk assessment, auditing, and incident response to government and corporate networks. 

Last year in 2009, Mr. Hope started the first-ever Businesses 

Back to Basics in Peoria, recognizing that budgets were tight, and 

information technology is crucial to a company’s continuation of operations and success. CIAN launched this service to assist local 

businesses with their IT concerns. Beginning February 23, 2009, 

and still continuing, CIAN offers free support to any IT-related 

issue a business may have. Additionally, seats in this call center 

are being filled by IT professionals in a community currently seeking full-time positions with benefits. 

Given his diverse background and his work with the Federal 

Government, I know Mr. Hope has several ideas for how Congress 

can work to improve the service-disabled veteran-owned small business program. 

With that, I am happy to yield 5 minutes to Stephen Hope of Office Automation Systems. 

Welcome, Mr. Hope. 

STATEMENT OF STEPHEN J. HOPE 

Mr. HOPE. Thank you and good afternoon, Chairman Nye, Ranking Member Schock, and members of the Committee. Thank you for 

inviting me to testify today. 

My name is Steve Hope. I retired over 21 years ago after 20 

years of Active Duty honorable service in the Navy. 1990, I started 

my own company, a small commuter consulting firm, with offices 

now in Peoria, Illinois, and Bowie, Maryland. I have a service-connected disability, and run the day-to-day operations of my company. 

I am the president and CEO of Office Automation Systems, Limited. We do business as OASYS and CIAN, Incorporated. We are 

a C-corporation, registered with the Small Business Administration 

as a Vietnam-era veteran-owned and service-disabled veteranowned small business concern. We are registered with the CCR, 

ORCA, Small Business Association, and VetBiz. We are an information technology firm specializing in computer network security, 

including penetration tests, forensics incident response and information assurance. Basically we keep the bad guys off your networks. Over 50 percent of my employees are veterans, and nearly 

every one of my employees carry a certified industry certification. 

I offer this background on my company because I want to emphasize that I have done my homework. I have followed the rules and 

regulations, and I have complied with 8(a) agency mandates. The 

issue before the Committee has deeply affected the growth of my 

company and pursuit of my doing business with the government. 

To date, we have yet to receive one single government prime contract nor any service-disabled veteran-owned small business concern set-aside contract. 

I have read every word of the GAO reports that have been submitted to the Committee, and while I have no firsthand knowledge 

of waste, fraud or abuse of SDVOSBs contracts, it doesn’t surprise 

me. I have witnessed it in other Small Business Administration 

35 

business development programs, but I have chalked up our inability to get a primary SDVO contract to the typical government red 

tape, the ′′good old boy′′ network, and Federal regulations. One 

such regulation puts the onus on the losing contractor to protest a 

bid to prove any wrongdoing in terms of an SDVO status by the 

winner. I see other evidence of the problems all the time. 

I am not here to add any more confusions or problems to the 

Committee. Actually, I have solutions. I think I have four very viable, realistic solutions that could be put into place now. 

Number one, the implementation of a business rules management system, sophisticated artificial intelligence software that will 

capture, analyze, test and execute the rules and regulations of numerous sources. Capturing, collating and analyzing agency databases will indeed yield the intended results to confirm the eligibility, the industry, and the possible involvement of the day-to-day 

operations by the owners. That is all required by current regulations. 

Number two, it should be imperative that the contracting officers 

interview the bidding finalist and ascertain the particulars of how 

the operations will be run, and review their SDVO eligibility. I also 

highly recommend site visits. Currently many contracts require a 

contractor site visit precontract award. This additional requirement 

to visit the finalist’s site should be added to every SDVO awarded 

contract. 

Number three, something needs to be done to reverse the SBA 

regulation that makes it imperative that 8(a) minority status contracts remain an 8(a) contract. The ′′once an 8(a) contract, always 

an 8(a) contract′′ CFR 125.504 fights the effort to allow existing 

contracts to be realigned into the SDVO initiative. Although well 

intended, the ′′forever an 8(a) contract′′ clause was introduced when 

information technology was experiencing exponential growth. The 

unintended consequence has arisen that 8(a) contract set-asides 

have a virtual lock on many IT support contracts at many and dozens of Federal agencies. 

Number four, all disabled veteran-owned companies are issued a 

separate identification card, as I am holding up now, by the Department of Veterans Affairs. For veterans indicating that they 

own and operate a business, and they desire to operate within the 

SDVO initiative, additional information should be included on this 

card either on a microchip or other means of doing it, even with 

a bar code; that this card should be presented when contracts are 

awarded and they are signed. 

My overall goal in addressing the Committee today is to make 

myself available, my experiences known to the Committee members, and I hope to illustrate how the President’s SDVO directive 

actually affects the business owners attempting to do work with 

the Federal Government. I respectfully request that you consider 

my recommendations and you help us improve the opportunities for 

SDVO initiatives. 

I would thank the Committee for inviting me. Thank you for the 

opportunity to testify, and I would like to answer any questions. 

[The statement of Mr. Hope is included in the appendix.] 

Chairman NYE. Thank you very much. I appreciate all of our 

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ful solutions, ideas that would actually help government agencies 

increase their contracting to service-disabled veteran-owned businesses and increase efficiency in the system. 

I just have a couple quick questions, and then I am going to defer 

to our ranking member. 

But I heard from a number of service-disabled business owners 

complaints about the process whereby when they make a complaint 

about an award, they protest to the SBA and they are sent back 

to the original contracting officer, who then either tells them to go 

back to the SBA, or they are concerned that complaining to that 

contracting officer kind of muddies the waters for them for any future contracts. 

What I want to hear from you are any thoughts about—and also 

from Mr. Sharpe about the people you represent—Any thoughts 

about your approach, how you see your relationship with those contracting officers. And are there things that we can do from the Congressional side that can make it easier for you in terms of your 

ability to relate openly with contracting officers, but also be able 

to point out problems when they exist without suffering repercussions? 

Mr. KOBELSKI. Yes, sir. I think the contracting officers are not 

well trained. The ones that have been in business for a while are. 

And we approach contracting officers, we don’t go to the SBA to 

protest, we go directly to the contracting officer. And the contracting officer comes back with a few excuses and says, well, this, 

that, and another thing. 

But what we have talked with—for instance, this morning, we 

had my contracts person contact a contract officer in NAVSEA and 

he—wondering why this contract is being put out unrestricted vice 

small business or even SDVOSB. The contractor replied that he 

was—Seaport told them—this is on the Seaport contract—told him 

that he would have to put it out to small business, but he was able 

to have them change that to go unrestricted. Now, it is a 15-manyear contract, it is about a $1.5 million a year contract for 5 years. 

And what has happened, he told my contract representative that 

he—well, she asked him whether he did market research or not, 

and what kind of market research did he do on making this unrestricted. And she was replied to with the comment: I don’t do market research. 

I mean, I think the FAR states that you have to do market research. I am not sure, but I think that is the case. But I think it 

all lies with the contracting officer. I think if the contracting officers are really trained well or at least abide by the FAR, I think 

you will get more out of it, really. 

Chairman NYE. Thanks. Anybody else? Mr. Sharpe. 

Mr. SHARPE. I have also been told that the contracting officers 

are poorly trained, and I have also participated with some of our 

business owners as they had meetings with various contracting officers, and it appears that there is a lack of knowledge. And my 

opinion is that, basically, the process is pretty dishonest. 

I just don’t think our veterans need to come back when they are 

working with these contracting officers, that they have to do certain things by providing them dinners and taking them out and all 

these other little things that all seem to be included in this process. 

37 

And I really think that there needs to be stricter oversight to this, 

because it gets to the point where it is really pretty dishonest for 

our veterans to have to more or less pimp themselves to get a contract. 

Chairman NYE. Mr. Hope. 

Mr. HOPE. Personally, I have never protested an SDBO contract 

award to another person because of the issue that you mentioned 

there, retaliation, or just not wanting to muddy the waters with 

any agency. 

I think that if we stick to the four issues that I brought up, 

precontract award homework has to be done. We don’t need the losers to step forward and try to protest if it has been confirmed by 

the SBA or others. 

Chairman NYE. I think that is a good point. We obviously want 

to take the onus off of our service-disabled business owners from 

having to do all the protesting and all the heavy lifting when they 

have got very little extra time, when they are trying to focus on 

doing their business. I appreciate that. 

I want to give the opportunity to any of our panelists to comment 

on anything they heard from the first panel. You have brought prepared statements, but you also have had a chance to listen to testimony provided by the agencies about how they look at contracting. 

And this is just an open-ended opportunity, if there are any comments you want to make on what you have heard. Yes, Mr. 

Kobelski. 

Mr. KOBELSKI. Yes, I really admire the VA. They have really 

gone above and beyond in meeting their goals. They are really 

doing a fantastic job. 

As far as the rest of the agencies, I am not sure about the other 

two; but DOD, I think they are not getting the information up top. 

I think the information is not flowing up. I think there are a lot 

of excuses being made from the contracting officer and even the 

small business advocates in the commands, and I think they need 

to investigate it a little bit more. 

Chairman NYE. Mr. Sharpe. 

Mr. SHARPE. We have actually visited a number of these agencies, and one part of the conversation that came out earlier today 

was that a lot of these agencies, if it is not coming from the head, 

that it is definitely not getting down to the procurement officers 

and there is just not enough buy-in. We were even told by one particular agency that they are not getting that. And since their agency is the client that generally, when a company wants to do business with them, they will do anything that that agency says that 

needs to be done prior to receiving the contract. 

So if an agency is saying that in order to do business with us, 

you will work with our veteran-owned businesses, that will generally happen. If that is not being said, then they will not do it. 

And they will use the excuse, ′′Well, I don’t need to do business 

with you. The regulations state that I ′′may′′ do business with you.′′ 

And a lot of our veterans see that as saying no. 

So those agencies where there is oversight, where the Secretary 

and the Administrator is telling them, giving them a directive that 

you will deal with veterans, generally you see their percentages 

rise. And then when you witness some of the meetings, you don’t 

38 

see all the other shenanigans that are going on, and then the fear 

of a protest, and then having to do other things than to do what 

they are supposed to do. 

Mr. HOPE. The only comment I have is more general. And that 

is, we have been hearing this same thing for all the Small Business 

Administration business development programs, the same type of 

chatter, the same type of thing. We don’t see anything being done, 

we don’t see anything being implemented. There is no realistic approach by any one of the agencies that they have mentioned. It is 

more of a ′′We will try to do better. Our numbers will go up and 

things will get done.′′ But there has got to be something tangible. 

We don’t see it. We just don’t see it. 

Chairman NYE. Thank you. I will yield to our ranking member, 

Mr. Schock. 

Mr. SCHOCK. Thank you, Mr. Chairman. To follow up on that, 

Mr. Hope, I would give the opportunity for you and the other panelists to respond to that. What barriers do you see for yourself trying to go after contracts with these Federal agencies? Are there certain barriers that are in place? Is there a difficulty getting the information? What would you like to see as a possible competitor for 

providing services or a provider of services to the Federal Government—what barriers are in place as someone who is in the Midwest or someone who is on the East Coast, but not in Washington, 

D.C., trying to compete for business with these respective agencies 

that you just heard from and others are there? 

In other words, if you are up here and you could get them to provide different information or do things differently, what would it be 

to make it easier for you to compete and be awarded contracts at 

the Federal Government? 

Mr. KOBELSKI. As far as set-asides go, SDVOSB set-asides, 

again, the agencies are not out there looking. They are not seeking 

other ways to find those companies out there. I think anybody can 

do any work across the Nation. I do work in California. I am out 

of Virginia Beach, Virginia. I also do it in Jacksonville, and we do 

it well, and we do it on naval aircraft mostly. 

I don’t see any barrier at all for us to get work, or at least qualify 

for work along with a couple other small businesses, SDVOSBs 

that I know of that can do the work. Now, I would love to compete 

it, I would love to compete the work, but I would like to compete 

it within the SDVOSB community. And there are enough of us out 

there to do that engineering work in Naval aviation or in Air Force 

aviation, wherever it is. 

Again, I see no barriers except for the agencies not looking for 

us, even though we are going through the small business offices 

and we are sending documents out and everything, but it seems to 

be going to deaf ears. 

Chairman NYE. Mr. Hope or Mr. Sharpe. 

Mr. SHARPE. The barriers that we see are that many of our business owners would prefer to have an office here in Washington so 

they have access not only to the Hill, to be able to provide complaints or concerns—complaints or concerns to you—but also they 

like to be closer to the head, the heads of the various agencies here. 

I mean the offices, where they are able to talk to someone with 

some sort of authority. They feel like if they are out in the Midwest 

39 

somewhere, that they are at a disadvantage. And also, there is a 

feeling that some of the Federal representatives that are in those 

areas really don’t pay too much attention to them. 

It is like they need to come to Washington, talk to the Representatives, come to hearings like this, provide information for testimony before they are actually heard, because they just feel like it 

is not really coming from the heads of the various agencies, it is 

not getting out to the rural areas, and there appears to be some 

disadvantage to that. 

Mr. HOPE. I would say our number one barrier is the resources 

internal to the organization, that we cannot afford to, number one, 

protest after the fact. And we don’t have enough resources to bid 

on every possible contract in hopes of getting one. 

I would like to offer a real-day situation that we are confronted 

with today. Six weeks ago, a government agency went out with us, 

SDBO set-aside RFQ, request for quote, on a product and services, 

of which my organization spent numerous days, 6 weeks, of three 

engineers learning, making sure we understood everything inside 

out. Our executive assistant spent many hours getting the RFQ 

prepared. 

We submitted it on time on Tuesday night of this week. It was 

due today. Last night or the night before, they came out with an 

amendment to the RFQ saying that this is no longer an SDBO setaside and it has been opened to small business industrywide. 

That number of resources we just spent, we can’t just continue 

that way, so we need to find out why these SDBO set-aside contracts are being rescinded at the last minute. That is number one. 

I mean, there are lots of issues like that, that I have talked to 

many SDBO presidents that have the same issues, the same concerns about expending resources to get nowhere. 

Mr. SCHOCK. Mr. Kobelski, you mentioned that you didn’t feel 

like the agencies themselves are even looking for you, or aren’t 

really making a sincere effort to try and maybe fill their quotas. 

What leads you to believe that? 

Mr. KOBELSKI. Several sources sought RFIs—they are trying 

through RFIs and sources sought. But it appears that they are not 

making it—the RFI or the sources sought is not the way to really 

go, to really get the attention of the SDVOSBs. Most of the companies are small, they are under $5 million, $3 million companies, 

and they don’t have the resources to answer 10-page requirements 

and listing all the information they have. 

Why can’t we have just a one-page sources sought document, go 

out to the community and go to organizations like the SDVOSB 

Council out of Virginia Beach, Virginia, go to the American Legion, 

go to a few other places to find these sources? And I think you will 

get a lot more responses to these things. 

And I think most of the agencies are doing it via RFIs. They are 

trying to get the information out, they are abiding by the FAR and 

getting information out there, but it is not hitting home. 

Mr. SCHOCK. Anyone else? 

With that, before I yield back, I will just give you the opportunity 

once again, if you have any other closing remarks for me as far as 

if you were up here and had the ability to effect change, what 

changes you would like to see that would be most helpful to you 

40 

to be awarded these contracts or to be able to better compete for 

them? 

Mr. KOBELSKI. I would put some more teeth into 13360, executive order. I would make it law, just like the 8(a). Put it on parity 

with the 8(a) companies—or program. 

Mr. SCHOCK. Fair enough. 

Mr. SHARPE. More legislation, changing ′′may′′ to ′′shall.′′ Having 

joint hearings, bringing in the agency heads. The last thing they 

want to do is have you ask, ′′Why, Secretary, your veterans aren’t 

being taken care of,′′ and letting a roomful of veterans hear his answer. 

Mr. KOBELSKI. I have one more comment. I think the idea that 

Chairman Nye had about putting an SBA rep in every location 

would really help the program unbelievably. I think that is the 

greatest idea I think I have heard. And making sure that all 

SDVOSBs are certified by the SBA. 

Mr. SCHOCK. Thank you very much. I appreciate your time. 

Chairman NYE. Just let me say again how much I appreciate you 

taking the time to be here, and let us hear directly from the folks 

who are out on the front lines every day. We got to hear from the 

agency representatives, that is useful; but we need to juxtapose 

their comments with what you are seeing from your end. 

So, again, I appreciate you taking the time and making the effort 

to travel to Washington to be here with us. 

Let me also thank and note that there are some agency folks who 

remained to listen to the testimony provided by the business owners. So thank you for being here to listen to what these folks had 

to say today. 

With that, I will ask unanimous consent that all members have 

5 legislative days to submit materials for the record. Hearing no 

objection, this hearing is now adjourned. 

[Whereupon, at 12:15 p.m., the subcommittee was adjourned.] 

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91 


57285.051
92 


57285.052
93 


57285.053
94 


57285.054
95 


57285.055
96 


57285.054
97 


57285.055
98 


57285.056
99 


57285.057
100 


57285.058
101 


57285.059
102 

Æ