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74–458 PDF 2012

JOBS FOR WOUNDED WARRIORS: INCREASING ACCESS TO CONTRACTS FOR SERVICE DISABLED 

VETERANS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION 

POLICY, INTERGOVERNMENTAL RELATIONS AND 

PROCUREMENT REFORM 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

FEBRUARY 7, 2012 

Serial No. 112–143 

Printed for the use of the Committee on Oversight and Government Reform 

( 

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

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

DAN BURTON, Indiana 

JOHN L. MICA, Florida 

TODD RUSSELL PLATTS, Pennsylvania 

MICHAEL R. TURNER, Ohio 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

CONNIE MACK, Florida 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

ANN MARIE BUERKLE, New York 

PAUL A. GOSAR, Arizona 

RAU ́ L R. LABRADOR, Idaho 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

JOE WALSH, Illinois 

TREY GOWDY, South Carolina 

DENNIS A. ROSS, Florida 

FRANK C. GUINTA, New Hampshire 

BLAKE FARENTHOLD, Texas 

MIKE KELLY, Pennsylvania 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

EDOLPHUS TOWNS, New York 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

DENNIS J. KUCINICH, Ohio 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MIKE QUIGLEY, Illinois 

DANNY K. DAVIS, Illinois 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

JOHN A. YARMUTH, Kentucky 

CHRISTOPHER S. MURPHY, Connecticut 

JACKIE SPEIER, California 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

ROBERT BORDEN, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY, INTERGOVERNMENTAL

RELATIONS AND PROCUREMENT REFORM

JAMES LANKFORD, Oklahoma, Chairman 

MIKE KELLY, Pennsylvania, Vice Chairman 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

RAU ́ L R. LABRADOR, Idaho 

PATRICK MEEHAN, Pennsylvania 

BLAKE FARENTHOLD, Texas 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CHRISTOPHER S. MURPHY, Connecticut 

STEPHEN F. LYNCH, Massachusetts 

JACKIE SPEIER, California 

(III) 

C O N T E N T S 

Page 

Hearing held on February 7, 2012 ......................................................................... 1 

WITNESSES 

The Honorable Bill Johnson, A Representative in Congress from the State 

of Ohio 

Oral statement .................................................................................................. 4 

Written statement ............................................................................................ 6 

The Honorable Max Cleland, Former Representative in Congress from the 

State of Georgia 

Oral statement .................................................................................................. 8 

Ms. Belinda Finn, Asst. IG, Veterans Admin, OIG 

Oral statement .................................................................................................. 11 

Written statement ............................................................................................ 13 

Mr. Rick Hillman, Managing Director, Forensic Audits and Investigative 

Service, GAO 

Oral statement .................................................................................................. 22 

Written statement ............................................................................................ 24 

Mr. Rick Weidman, Exec. Dir., Vietnam Veterans Association 

Oral statement .................................................................................................. 47 

Written statement ............................................................................................ 50 

Mr. Andre Gudger, Director, Office of Small Business Programs, Dept. of 

Defense 

Oral statement .................................................................................................. 61 

Written statement ............................................................................................ 63 

Mr. Thomas Leney, Exec. Dir., Small and Veteran Owned Business Programs, 

Dept. of Veterans Affairs 

Oral statement .................................................................................................. 71 

Written statement ............................................................................................ 73 

Mr. William Puopolo, President, Verissimo Global Inc. 

Oral statement .................................................................................................. 79 

Written statement ............................................................................................ 81 

(1) 

JOBS FOR WOUNDED WARRIORS: INCREASING ACCESS TO CONTRACTS FOR SERVICE 

DISABLED VETERANS 

TUESDAY, FEBRUARY 7, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON TECHNOLOGY, INFORMATION POLICY, 

INTERGOVERNMENTAL RELATIONS AND PROCUREMENT

REFORM, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, DC. 

The subcommittee met, pursuant to call, at 11:06 a.m., in Room 

2154, Rayburn House Office Building, Hon. James Lankford [chairman of the subcommittee] presiding. 

Present: Representatives Lankford, Kelly, Chaffetz, Walberg, 

Meehan, Farenthold, Issa, and Connolly. 

Staff Present: Ali Ahmad, Majority Deputy Press Secretary; Michael R. Bebeau, Majority Assistant Clerk; Richard A. Beutel, Majority Senior Counsel; Robert Borden, Majority General Counsel; 

Molly Boyl, Majority Parliamentarian; John Cuaderes, Majority 

Deputy Staff Director; Adam P. Fromm, Majority Director of Member Liaison and Floor Operations; Linda Good, Majority Chief 

Clerk; Jaron Bourke, Minority Director of Administration; Krista 

Boyd, Minority Counsel; Adam Koshkin, Minority Staff Assistant; 

Lucinda Lessley, Minority Policy Director; Suzanne Owen, Minority 

Health Policy Advisor; Rory Sheehan, Minority New Media Press 

Secretary; and Cecelia Thomas, Minority Counsel. 

Mr. LANKFORD. The hearing on Jobs for Wounded Warriors: Increasing Access to Contracts for Service Disabled Veterans will 

come to order. 

Let me read a quick mission statement from the Oversight and 

Government Reform Committee. 

We exist to secure two fundamental principles: first, Americans 

have a right to know that the money Washington takes from them 

is well spent; second, Americans deserve an efficient, effective government that works for them. Our duty on the Oversight and Government Reform Committee is to protect these rights. 

Our solemn responsibility is to hold government accountable to 

taxpayers because taxpayers have a right to know what they get 

from their government. We will work tirelessly in partnership with 

citizen watchdogs to deliver the facts to the American people and 

bring genuine reform to the Federal bureaucracy. This is the mission of the Oversight and Government Reform Committee. 

2 

Let me make a brief opening statement, set the context for the 

day. 

The men and women of our armed forces understand that serving their Nation in the armed forces as a soldier, sailor, airmen, 

Marine, is part of what citizenship is all about. The men and 

women of the armed forces take an oath that begins with ‘‘I do solemnly swear’’ and ends with ‘‘if necessary, with my life, so help me 

God.’’ 

More than 40 million Americans have responded to that call and 

served their Country in wartime. More than 1 million Americans 

who heard that call did not come home. Millions of others have 

been gravely injured in defense of our basic freedoms. As the long 

conflicts in Iraq and Afghanistan begin to wind down, thousands of 

service-disabled veterans are coming home. Today we have one of 

those veterans, Bill Puopolo, who has served tours of duty in both 

Iraq and Afghanistan. 

As if their personal challenges are not enough, these soldiers, 

airmen, and Marines return home to hard economic times and an 

extremely tight economy. The least we can do to support our 

wounded veterans is to ensure they have access to jobs and economic opportunities. Service-disabled veterans should have a level 

playing field in obtaining economic opportunity. This is the least 

we can do to provide for them. 

This basic obligation to honor their service and support them 

upon their return from foreign fields has been recognized since at 

least 1999. At that time, Congress passed legislation directing Federal agencies to place at least 3 percent of their contract spending 

with service-disabled veterans small businesses. Unfortunately, almost no agency has come close to meeting this goal. 

The Department of Defense has a special responsibility to service-disabled veterans, but their percentage is also not close to 3 

percent. President Bush directed Executive Branch agencies to do 

better by an Executive Order in 2004. President Obama, in 2009, 

established an interagency task force to improve capital access, 

business development opportunities, and goals for service-disabled 

veterans. 

As a quick side note, as a part of our request for information and 

testimony, this Committee requested from OMB a person to testify 

about the progress of the President’s interagency task force. Mr. 

Jordan has testified on these issues in 2009 before the Veterans 

Committee, but the Administration was unwilling to allow him to 

appear today to give an update on the interagency task force 

progress and the progress of this Committee. 

This hearing is not a partisan issue or a single administration 

issue. We understand very well that the failure to strengthen and 

monitor the service-disabled veterans program is not unique to the 

current Administration, but it is well passed time to fix it. 

Agencies across the Federal Government are woefully behind in 

meeting their obligations to our wounded warriors. Several reports 

have documented an unacceptable level of waste, fraud, and abuse 

in the service-disabled veterans program. In too many instances 

disabled veterans are cynically engaged to serve as fronts so that 

companies and individuals can get access to contracts and business 

opportunities that are supposed to be going to wounded warriors. 

3 

In other instances charlatans pose as wounded warriors and steel 

valor, thereby syphoning off precious program resources. 

No honest American should stomach fraud in a program designed 

to help our wounded warriors. This waste and fraud hurts the entrepreneurship of our veterans by taking away the business opportunities available to eligible service-disabled veterans when the 

Federal Government purchases goods and services. 

The award of service-disabled veterans contracts to ineligible 

businesses reduce the funding available to eligible businesses and 

the accuracy of VA’s reported socioeconomic goal accomplishment 

data. Examples of fraud in this program are legion, but let me just 

give you one. A business received one sole-source and two set-aside 

veterans’ contracts for duct cleaning and maintenance work valued 

at $343,500. 

Although the owner had self-certified his business as being service-disabled, the military system did not have record of him and he 

had no disability rating. When the contracts were investigated, the 

disabled veteran stated he was in the Marine Corps for five weeks 

when he attended boot camp, but had injured his leg during a pickup football game, resulting in his discharge from the military. 

These frauds take precious program dollars away from servicedisabled veterans. The VA inspector general projects that VA 

awards ineligible businesses a minimum of 1,400 veteran solesource and set-aside contracts valued at $500 million annually, and 

could award a minimum of $2.5 billion to ineligible businesses over 

the next five years. Given VA’s unique and special responsibility to 

veterans, these numbers are staggering. 

Today we have three distinguished panels to address these 

issues. First we will hear from the honorable former senator from 

Georgia, Max Cleland. Senator Cleland is a distinguished Vietnam 

veterans. Senator Cleland served in the United States Army during 

the Vietnam War, attaining the rank of captain. He was awarded 

the silver star and bronze star for acts of valor in combat. Senator 

Cleland has been a tireless advocate for the veteran community 

and we welcome him here today. 

Next we have Congressman Bill Johnson from the 6th District of 

Ohio. Congressman Johnson is himself a distinguished veteran and 

is currently the chairman of the Subcommittee of Oversight and Investigations Committee on Veterans Affairs. Congressman Johnson 

has been a forceful advocate on behalf of service-disabled veterans. 

Both these gentleman will have a brief statement from them in 

a moment. We won’t field questions, necessarily, from them, to 

allow them to make a statement from the record, and we are very 

honored that you are here. 

Our second panel consists of the overseers. We have Assistant Inspector General Belinda Finn and Assistant Inspector General 

James O’Neill from the Veterans Administration Office of the Inspector General to discuss the recent report and audit on servicedisabled veterans program. We have Rick Hillman from the Government Accountability Office to discuss the recent findings on the 

scope of waste and fraud and abuse in these program. 

Our final panel consists of veterans representatives and agency 

officials. We have Mr. Andre Gudger, Director of the Office of Small 

Business Programs in the Office of the Undersecretary of Defense. 

4 

We also have Mr. Thomas Leney, who is the Executive Director for 

Small and Veteran Owned Business Programs at the Department 

of Veterans Affairs; we have Mr. Rick Weidman, the Executive Director of the Vietnam Veterans of America, representing a coalition 

of veterans groups called VET–Force; and we have Mr. Bill 

Puopolo, who is President of Verissimo Global Incorporated, a service-disabled veteran, owner of a small business. 

Thank you all for being here today. 

The second and third panel we will swear in at that time. It is 

our habit to not swear in members of Congress or former members 

of Congress, former Senators. 

Any other members will have seven days to submit opening 

statements and extraneous material for the record. 

I would now like to welcome our first panel. Mr. Bill Johnson 

represents Ohio’s 6th District, as I mentioned before. I would be 

honored to be able to receive your testimony today, Mr. Johnson. 

STATEMENT OF WITNESSES 

STATEMENT OF BILL JOHNSON 

Mr. JOHNSON. Good morning Chairman Lankford, Ranking Member Connolly, distinguished Members of the Subcommittee. I appreciate the opportunity to testify today in support of our nation’s veterans and Service-Disabled Veteran-Owned Small Businesses, or 

SDVOSBs. 

I strongly believe that veterans are the segment of society that 

most deserves our sincere gratitude and assistance, and I am grateful to the brave men and women who have and continue to serve 

our Country. As a 26-year Air Force veteran who also serves on the 

House Veterans’ Affairs Committee, I am aware of the sacrifice and 

commitment that these brave men and women, in addition to their 

families at home, endure everyday to protect the freedoms we enjoy 

as Americans. 

Due to advances in medical technology, more of our veterans 

than ever before are returning home, including many who may not 

have survived in the past. Now that is good news. But some of 

these veterans are coming home severely injured, with PTSD, TBIs, 

and sometimes with multiple limbs missing. However, you wouldn’t 

believe the positive attitudes of these veterans I have met who 

have come home with such severe injuries. These veterans want to 

use their talents to lead meaningful lives despite their condition, 

and we owe it to them to provide the rehabilitation programs and 

support they need to be successful. 

Speaker Boehner couldn’t be more clear when he stated last November, ‘‘the men and women who wear the uniform of our Armed 

Forces deserve our full support when they serve and after they 

come home, especially now in the middle of a tough economy.’’ With 

815,000 veterans unemployed, a number, by the way, that is far too 

high, our Government needs to act immediately. I am deeply troubled that nearly one in twelve of our Nation’s heroes are unable to 

find a job after sacrificing so much for our Nation. 

Contracting with Service-Disabled Veteran-Owned Small Businesses is just one way in which our Government can act now to 

support these brave warriors. Compared to other Government 

5 

agencies, the Department of Veterans Affairs is considered to have 

the best SDVOSB program. According to the Small Business 

Goaling Report for Fiscal Year 2010, approximately 20 percent of 

the VA’s contracts are going to these worthy veteran-owned businesses. However, VA contracts only account for 30 percent of Government contracting, meaning the vast majority of Government 

contracts are not affected by the VA or their SDVOSB program. 

Currently, a mere 1.8 percent of Department of Defense contracts 

are with SDVOSBs. This is unacceptable. The Department of Defense trained these former warriors. They are tremendous assets to 

our Nation because of the experience gained in our armed forces. 

It is time the DOD and other Government agencies considered contracting at higher percentages with the SDVOSBs. 

The VA’s SDVOSB program is by no means perfect. As Chairman 

of the House Veterans’ Affairs Subcommittee on Oversight and Investigations, I chaired two hearings last year on this issue. However, I can say with certainty that the VA is attempting to produce 

positive results in their SDVOSB program. And be assured, I will 

be keeping track of the VA’s progress to reform the SDVOSB program and streamline the certification process to better serve our 

veterans. 

Furthermore, I would argue that instances of fraud within the 

VA’s SDVOSB program warrant a need for other Government 

agencies to also take a look at their SDVOSB contracts. The fact 

that there are fraudulent companies claiming to be veteran-owned 

underscores the need to build stronger SDVOSB programs across 

our Government to ensure that our Nation’s heroes, our veterans, 

are the ones receiving these contracts. 

I believe America would greatly benefit from contracting with 

more veteran-owned small businesses. Our service members and 

veterans are highly trained, skilled professionals with a solid work 

ethic. They have already demonstrated their abilities and dedication to our Country. Why wouldn’t our Government strive to work 

with an increased number of these upstanding men and women? 

Mr. Chairman, Ranking Member Connolly, thank you again for 

the opportunity to speak on behalf of our Nation’s veterans and the 

need to assist Service-Disabled Veteran-Owned Small Businesses. 

I am pleased to answer any questions you may have. 

[Prepared statement of Mr. Johnson follows:] 

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Mr. LANKFORD. Thank you, Mr. Johnson. 

Senator Cleland. 

STATEMENT OF THE HONORABLE MAX CLELAND 

Mr. CLELAND. Thank you, Mr. Chairman. May I say that it is 

nice to be back in the people’s house. Forty-seven years ago I was 

an intern across the street, in the Longworth House Office Building, in the summer of 1965. I am making progress; I am not across 

the street here. So we are delighted to be with all of you and my 

friend, Bill Johnson from Ohio. Thank you for focusing on this. 

I have had some time to think a little bit about what really is 

important to a disabled veteran. There are a lot of things that go 

on in your mind after the turbulence of getting wounded in war 

and then surviving it, and maybe spending the rest of your life trying to figure out why you survived. After the rehabilitation, after 

the VA services, after the voc rehab, after all that, we are dealing 

with young people who still have their lives ahead of them. 

Therefore, nothing solidifies the life of a disabled veteran like a 

job. It provides focus, it provides meaning, it provides purpose in 

living. And when one is so confused in many ways about why they 

survived, how did they survive, how did they get wounded, what 

was the war all about, then that job seems to provide the glue with 

which all of this seems to come together and make some sense and 

give some sense of direction. That is why I think a job for a disabled veteran is really the key to that successful reentry into this 

Country again. 

Now, we can’t put the toothpaste back into the tube. We can’t reverse the stream of history. We can’t rewind the war backwards. 

We have to live in the present. But our disabled veterans have to 

live in the present and the future, and dealing with the present 

and preparing for that future is what they are all about. Nothing 

does that better than a job. 

I have thought a lot about what is most important, and that is 

the glue that holds it all together. So thank you for your focus on 

this issue. Thank you, Congressman Johnson, and all of you for focusing on this. And the incredible thing that Mr. Johnson pointed 

out was that these young men and women, what I like to borrow 

the phrase from my friend, General Hal Moore, who said, ‘‘you may 

not be a member of the greatest generation, but you are the greatest of this generation.’’ 

So for the greatest of this generation, we owe all of our efforts 

toward providing them the opportunity to make sense of their lives, 

and nothing does that better than a job. And the amazing thing 

about it is that these young people, blown apart as they are, 

wounded as they are, sometimes mentally, physically, and emotionally, provide, believe it or not, tremendous leadership skills on the 

job, tremendous examples of courage and faith to other people 

around them. It just works that way. They seem to be strong at 

the broken places, to use a phrase that Ernest Hemingway, who 

was wounded in World War I, used in his great war novel. 

So I would like to conclude my remarks by just saying that in 

the words of a World War II chaplain about disabled veterans, here 

is the way I see it: out cruelty they learned compassion; from living 

in hate they have learned love; from the loss of freedom they have 

9 

learned the love of freedom. They shall return not only eager to 

create a better world, what is far more important, they shall come 

back prepared to create that world. 

Thank you, Mr. Chairman. 

Mr. LANKFORD. Thank you, Senator. You are always welcome to 

be here in the House as well. Glad to be able to have both your 

testimonies. I know we weren’t fielding any questions on that. 

Let me just make a statement to both of you. Thank for your 

service. As one of the people that has stood next to the parade clapping, very much appreciate what you have done and what you have 

given for our Nation’s service on this. In my own city of Oklahoma 

City and the surrounding areas, there are many employers that 

pursue veterans when they come back because they do not know 

how to quit and they don’t know how to stop until it is done. 

So many of these veterans that are coming home in Oklahoma 

are coming home to find employers eager to be able to hire them 

because of their leadership and their great work ethic, and thank 

you for reminding Americans that that extends also to service-disabled veterans. 

The Ranking Member, would you like to make any quick comment before I dismiss this first panel? 

Mr. CONNOLLY. Thank you, Mr. Chairman, and I do have an 

opening statement. I will hold off, with your permission, until the 

next panel. 

But I did want to thank particularly Senator Cleland and Representative Johnson for being here. Max Cleland represents the finest tradition of service to his Country and left an awful lot of himself physically back in Vietnam, but in terms of spirit he is very 

much present here and I think represents, as I said, the finest tradition of public service, both in the military and here in the Congress, to his community. We are honored with his presence. Thank 

you. 

Mr. LANKFORD. Thank you. Let’s take a short recess and allow 

the clerks to be able to reset the panel for our second panel. 

Thank you, Representative Johnson. 

[Recess.] 

Mr. LANKFORD. I am going to yield for just a moment to the 

Ranking Member, Mr. Connolly, for a quick opening statement, and 

then we will go directly to our second panel. 

Mr. CONNOLLY. Thank you, Mr. Chairman, and thank you for 

convening this very important hearing to review contracting policy 

for service-disabled veterans. I appreciate your attention to this 

issue, which is of critical importance to our Nation’s veterans. 

We have, in my view, a sacred obligation to support those who 

chose to wear the uniform. That support, however, does not end 

when veterans leave the service; we must do everything in our 

power to help veterans and their families transition back to civilian 

life. 

As the war in Iraq comes to a close and we begin to transition, 

we will see even more veterans transfer out of the service, come 

back home into our respective congressional districts. After years 

of personal and family sacrifice, combined with unique training and 

a willingness to serve, it is important to remember the desire of 

many veterans to continue to serve their Country. 

10 

In 2011, 27 percent of post-9/11 veterans worked for Federal, 

State, and local governments, compared to 14 percent of the civilian population. In 2011, I hired a veteran of the Iraq war through 

the Wounded Warrior Fellowship Program, to work in my office, 

and I would like Joe Wearing to stand and be recognized for his 

service to his Country. 

[Applause.] 

Mr. CONNOLLY. Joe is a Purple Heart recipient. His tireless work 

ethic and desire to elevate the voices of a new generation of veterans has proven an enormous asset in our community. Programs 

like the Post-9/11 GI Bill, passed by Congress in 2008 and used by 

over half a million veterans, are essential in providing veterans the 

opportunity to contribute as civilians. 

I have seen firsthand the benefits of veterans who utilize the 

Post-9/11 GI Bill at local colleges, universities, community colleges, 

and trade schools, and I know how important this benefit is, especially for younger veterans, in order to have access to educational 

opportunities and to compete in this troubled economy. 

After 10 years of war and with incredible advances in lifesaving 

technology, we are seeing many of our veterans return with 

wounds, both physical and emotional. These life-altering experiences, however, are not all created equal and should not be seen 

as a detriment to an ability to contribute in the civilian workforce. 

There is hope, however, and we know programs aimed at supporting our veterans in making an impact. 

The Administration’s efforts to lower veteran unemployment by 

providing hiring tax credits and securing private sector commitments to hire service members separating from the military are not 

only good for veterans, but actually good for our economy and for 

our respective communities. As service-disabled veterans begin to 

build their own small businesses, we must understand and improve 

their opportunity to become certified and to compete for governmental contracts. 

President Obama signed the Veterans Benefits Act of 2010 in October last year. Section 104 of that law expands the VA’s requirement to verify business status as owned and operated by veterans, 

service-disabled veterans, or eligible surviving spouses. This important piece of legislation helped ensure that no small business applicant may appear in the VA’s vendor information pages, also known 

as VetBiz, and their website database unless it has been verified 

as owned and controlled by a veteran or a service-disabled veteran. 

Furthermore, the Department of Veterans Affairs has met and exceeded goals for VA government contracts since the law was implemented in 2010. 

Although we have seen vast improvements after the VA implemented its review in 2010, some businesses found to be ineligible 

by the VA are still registering with the Federal Government in the 

Central Contractor Registration database. We must improve 

verification programs throughout the Government in order to prevent businesses from obtaining contracts after being found ineligible by the Department of Veterans Affairs, because when they do 

that they take away opportunities from those who are eligible. 

Thank you again, Mr. Chairman, for holding this hearing for veterans who have sacrificed so much for their Country. 

11 

Mr. LANKFORD. Thank you, Mr. Connolly. 

We will now welcome our second panel. Ms. Belinda Finn is the 

Assistant Inspector General of the Department of Veterans Affairs; 

Mr. James O’Neill is Assistant Inspector General for Investigations 

at the Department of Veterans Affairs; and Mr. Rick Hillman is 

Managing Director of Forensic Audits and Investigative Service 

Team at the Government Accountability Office. 

Ms. Finn and Mr. O’Neill, I understand that you all are sharing, 

you both have a written testimony that has been submitted and 

one of you will do oral testimony, but may both testify or answer 

questions, so I would ask you both to be sworn in. 

If you would all rise, as you already are. Would you raise your 

right hands? 

Do you solemnly swear or affirm that the testimony you are 

about to give this Committee to be the truth, the whole truth, and 

nothing but the truth, so help you God? 

[Witnesses respond in the affirmative.] 

Mr. LANKFORD. Let the record reflect that all witnesses answered 

in the affirmative. 

You may be seated. 

In order to allow time for discussion, please limit your testimony 

to five minutes. Your entire written statement, of course, will be 

made part of the record. You have a timer in front of you, which 

I am sure you will recognize the green, yellow, red on it, and will 

be honorable with your time, and thank you for being here. 

Ms. Finn, I recognize you first. 

STATEMENT OF BELINDA FINN 

Ms. FINN. Thank you, Chairman. Chairman Lankford, Ranking 

Member Connolly, members of the Subcommittee, thank you for 

the opportunity to testify on our audits and investigations of Veteran-Owned and Service-Disabled Veteran-Owned Small Business 

programs. Although our work focuses on the implementation of 

these programs in the Department of Veterans Affairs, our findings 

and results have significance for other Federal agencies. 

As you stated, with me today is Mr. Jim O’Neill, the Assistant 

IG for Investigations in VA. 

At the end of fiscal year 2010, the Department of Veterans Affairs reported that they had awarded about $3.5 billion through its 

Veteran-Owned Business contracting programs. Our audit of these 

programs found that 76 percent of 42 randomly selected businesses 

were ineligible for the programs and/or the specific contract 

awards. We projected these ineligible businesses received $46.5 

million in contract awards. We projected that VA annually awards 

a minimum of 1400 contracts, valued at $500 million, to ineligible 

businesses. This equates to $2.5 billion over 5 years that is awarded to ineligible businesses. 

Our results also throw VA’s reported procurement dollars awarded to veteran-owned and small disadvantaged veteran-owned businesses into question. VA reported awarding 23 and 20 percent of 

its procurement dollars to these businesses. We believe this could 

be overstated anywhere from 3 to 17 percent. 

These awards occurred because of several reasons. First, VA did 

not always review veterans’ ownership and control of businesses 

12 

thoroughly. Second, the VA contracting officers did not check the 

businesses’ eligibility at the time of award and properly assess the 

subcontracting and partnering agreements to ensure that the veteran-owned businesses met program requirements for substantial 

participation in the work. 

We recommended VA improve management and program controls, enhance verification processes, and coordinate contract monitoring to reduce the number of ineligible businesses that received 

awards. VA has taken steps to improve its verification programs, 

both during and since our audit. 

The VA OIG Office of Investigations is aggressively pursuing allegations that ineligible businesses are misrepresenting themselves 

as veteran-owned and service-disabled veteran-owned businesses to 

win contracts. We currently have 88 open investigations and, to 

date, have issued 369 subpoenas and executed 26 search warrants. 

We recently won a conviction against the CEO of a non-veteranowned business on charges of fraud against the United States, mail 

fraud, witness tampering, and making false statements. This business had received more than $16 million in VOSB and SDVOSB 

set-aside construction contracts from the Department of Veterans 

Affairs and the Department of Army. 

Three other investigations have resulted in the arrest of six individuals and we anticipate additional prosecutions in other investigations in the near future. 

Mr. Chairman, thank you for the opportunity to be here today. 

As I said earlier, we believe our findings have significance across 

the Government, especially since the Department of Veterans Affairs is the only Federal agency that validates the veteran and 

service-disabled status of a business owner, as well as attempting 

to verify the veteran ownership and control of a business. 

Mr. O’Neill and I are here to answer your questions. We would 

be pleased to respond. 

[Prepared statement of Ms. Finn follows:] 

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Mr. LANKFORD. And we look forward to those questions. 

Mr. Hillman. 

STATEMENT OF RICK HILLMAN 

Mr. HILLMAN. Chairman Lankford, Ranking Member Connolly, 

and members of the Subcommittee, I am pleased to be here today 

to discuss the fraud prevention controls within the Service-Disabled 

Veteran-Owned Small Business program, or the SDVOSB program. 

This program, established by the Veterans Benefit Act of 2003, 

is designed to honor disabled veterans’ service by providing them 

with exclusive contracting opportunities. This program permits contracting officers to award set-aside and sole-source contracts to 

small business concerns owned and controlled by one or more service-disabled veterans. 

In fiscal year 2010, Federal agencies awarded $10.8 billion to 

SDVOSBs, according to the Small Business Administration. Of this 

amount, the Department of Veterans Affairs awarded $3.2 billion, 

or approximately 30 percent of the government-wide awards. 

In prior work we reported on weaknesses and the fraud prevention controls in both the government-wide program and VA’s program. My testimony today summarizes the status of governmentwide fraud prevention controls over this program and discusses our 

recent assessment of fraud prevention control improvements instituted by VA as part of its verification program. 

Regarding our first objective, our prior work has shown that the 

government-wide fraud prevention control weaknesses over the 

Service-Disabled Veteran-Owned Small Business program leave it 

vulnerable to fraud and abuse. In October 2009, we reported on 10 

selected firms that misrepresented their status as SDVOSBs which 

allowed them to win approximately $100 million in SDVOSB setaside and sole-source contracts. Cases like this happen because the 

government-wide program relies on firms to self-certify annually in 

the Federal Government’s contractor registry that they are owned 

and controlled by service-disabled veterans, and most agencies do 

not validate this information. 

The firms have exploited the lack of effective government-wide 

fraud prevention programs using a variety of schemes, including 

setting up front companies to pass contracts on to larger, sometimes multinational, firms ineligible for the program. Other firms 

receive contracts even though no service-disabled veteran was associated with the firm. Or, if one was employed, he or she did not 

manage or control the business. 

The primary government-wide fraud prevention control in place 

is SBA’s bid protest process, in which interested parties can contest 

contract awards. In prior work we found that the process lacked effective controls because firms could complete contracts even after 

SBA found them ineligible, rendering the process ineffective. 

In contrast, through the limited fraud prevention controls for the 

government-wide program, the Veterans Benefits, Healthcare and 

Information Technology Act of 2006 required VA to institute controls over its SDVOSB contracts. Specifically, the Act required VA 

to verify firms’ eligibility and maintain a database, now called 

VetBiz, of the SDVOSBs it verified starting in June of 2007. 

23 

Over time, VA has made progress implementing a verification 

program for firms seeking SDVOSB contracts from VA. GAO testified, in November 2011, that VA’s program includes an initial 

verification process involving document reviews, site visits to contractor offices, and risk assessments for each applicant firm. 

In addition, VA has instituted a status protest process and a debarment committee designed to help ensure only eligible firms receive contracts and that ineligible firms face consequences for misrepresenting their status. Those improvements may help VA reduce 

the risk that ineligible firms will gain access through VA’s 

SDVOSB contract dollars. 

Nonetheless, GAO also made 13 recommendations to VA for improving its verification program and further reducing the risk of 

fraud and abuse. In particular, we noted in a November 2011 testimony that there was room for improvement in the area of 

debarments since, as of the date of that statement, only one firm 

and related individuals had been debarred by VA, but at the same 

time VA had rejected 1800 firms from further consideration as part 

of this verification process and had referred to VA’s IG’s office 70 

firms for potentially fraudulent actions. VA generally concurred 

with our recommendations and stated that they have taken numerous actions to address the identified issues. 

To improve government-wide fraud prevention controls, we recommended SBA and VA coordinate with the Office of Federal Procurement Policy in order to explore the feasibility of expanding 

VA’s verification process government-wide. However, agency officials stated that legislative changes would be necessary in order for 

Federal agencies to change the government-wide program from a 

self-certification process into using VA’s VetBiz verification program. 

We also suggested that Congress consider expanding the VA 

verification program government-wide to employ more effective 

fraud prevention controls over the billions of dollars awarded to 

SDVOSBs outside of VA’s fraud prevention control process. 

While a bill calling for this passed the Senate last fall, no legislation to address this issue has become law. 

Chairman Lankford, Ranking Member Connolly, and members of 

the Subcommittee, this completes my prepared statement. I would 

be pleased to address any questions at the appropriate time. 

[Prepared statement of Mr. Hillman follows:] 

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Mr. LANKFORD. Thank you all for your testimony. I would like to 

yield to myself for five minutes for some questions and conversation. How about that? 

Seventy-six percent was the number I think that was floated of 

potential fraud basically that is out there of service-disabled veterans that they are not complete. Talk us through the elements of 

that. I know you mention it in your testimony as well. 

Ms. FINN. Yes, sir. 

Mr. LANKFORD. If we are dealing with a number of 76 percent, 

that is a rather high percentage of potential failure in it. 

Ms. FINN. Yes, sir, it is, and we were very surprised by the results. I personally was, anyway. Some of my auditors were a little 

more skeptical going in. 

We looked at 42 businesses in clusters across the Country that 

we had selected randomly. We found 24 of those businesses weren’t 

meeting the subcontracting requirements. Some of those were legitimate veteran-owned businesses, but the veteran business 

wasn’t doing the work. 

Mr. LANKFORD. Because the requirement is if you are a servicedisabled veteran company, you have to have 51 percent ownership 

management, be in a CEO or president type position. You have to 

lead the company; you can’t just employ a service-disabled veteran. 

The service-disabled veteran is the leader of the company, is that 

correct? 

Ms. FINN. Right. 

Mr. LANKFORD. Okay. 

Ms. FINN. And any particular contract, the veteran-owned business, the business, not necessarily the veteran, has to complete 

over 50 percent of the work on that contract. In a construction contract, the veteran-owned business percentage requirement is only 

15 percent, since those businesses tend to rely a lot on subcontracting, anyway. 

Sixteen businesses in our 42 didn’t meet the eligibility requirements. Of course, in VA it is pretty unique to find the owner not 

be a veteran, except for those two you mentioned in the beginning, 

and I can speak to those. But the veteran-owner didn’t meet the 

ownership or didn’t meet the control requirements. 

Mr. LANKFORD. Is the majority, then, that you are finding, they 

don’t meet the ownership or control requirements more than they 

are a veteran but they are not service-disabled or they are not a 

veteran at all? 

Ms. FINN. We only had two in our sample that did not have service-disabled status. VA had correctly identified that those businesses were not service-disabled veterans; however, they didn’t 

take them out of their database because, at that time, there wasn’t 

a firm requirement to take them out. So the businesses were still 

in the database, still bid for a contract, and were awarded a contract. 

Mr. LANKFORD. Has that been corrected now? 

Ms. FINN. I believe that has been corrected. I know the requirement is now that they should be removed from the database. 

Mr. LANKFORD. Let me shift real quick because the VetBiz is a 

big part of this, and that database. If everyone government-wide is 

dependent on VetBiz, is that where we are at this point, that evVerDate Aug 31 2005 10:00 Jun 22, 2012 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 C:\DOCS\74458.TXT APRIL
35 

eryone kind of looks towards that, or where are we in the transition here? Because if I am in a HHS situation and I have a servicedisabled veteran that is applying, how can they verify, when VA is 

the only one that is verifying all this? What is the process? 

Mr. Hillman, do you want to address that? 

Mr. HILLMAN. Yes. Right now the Veterans Affairs Department 

is the only department that is able to rely on a verified list of eligible veterans for the program. The rest of the Federal agencies rely 

on a process that does not verify eligibility of firms and they do not 

have a process in place currently to use VA’s verified database. 

Mr. LANKFORD. So this is the self-certify. So if I go to HHS and 

say I am a service-disabled veteran and I own this company and 

I want to bid for this contract, they just check I am a service-disabled veteran, but there is no one checking with the VA that they 

are actually a veteran, that they are service-disabled, and then 

there is also no certification that they are actually the owner or 

main part of this contracting, is that correct? 

Mr. HILLMAN. Yes. In the contractor registry, the firm itself designates whether or not it qualifies for certain types of set-aside or 

sole-source contractors. This is a difference to other programs that 

have set-aside programs. Within SBA’s 8(a) program for disadvantaged businesses, as well as the HUBZone program for historically 

underutilized business areas, SBA controls the eligibility of those 

programs showing up on the contractor registry. That type of control does not exist on a government-wide basis. 

Mr. LANKFORD. So if SBA is verifying for everyone nationwide, 

all the different agencies, that this is like a female-owned business 

or a minority-owned business or an economically disadvantaged 

business ownership, is that correct? And then who else comes back 

and does that, rather than a self-certification? 

Mr. HILLMAN. That is correct. 

Mr. LANKFORD. Except for service-disabled. How do we connect 

the dots between these two, then, so that, if someone is self-certifying, there is some way to, to use a Reagan quote here, to trust 

and verify, to be able to go back and say thank you for putting that 

down, let me verify you are actually in the system somewhere? 

How can we connect that and why is it taking this long to connect 

the two? 

Mr. HILLMAN. In our earlier report we made a recommendation 

that VA, SBA, and the Office of Federal Procurement Policy get together to look at the feasibility of extending the verification program that VA has instituted on a government-wide basis. In accordance with our recommendations, agency officials did collaborate. One of the important factors that they determined was that 

they did not have sufficient authority to require verification on a 

government-wide basis and to eliminate firms that weren’t verified 

from consideration for these contracts without further congressional authority. We made a recommendation to Congress to consider implementation of VA’s verification program on a government-wide basis. There has been a bill in the Senate to make that 

law; it currently rests within the House Small Business Committee 

for their consideration. 

Mr. LANKFORD. And that is part of this conversation today. Let’s 

see what we can do to be able to resolve those issues. 

36 

Mr. Chaffetz, I recognize you for five minutes of questioning. 

Mr. CHAFFETZ. Thank you, Mr. Chairman. I think we are hitting 

on something that is troubling to me as well. Another subcommittee within the oversight jurisdiction is also looking into this 

verification problems and challenges, so I want to continue to explore that. 

It would strike me that even an individual company, should they 

want to go hire somebody, if they were to recommend or put on 

their employment application that they had served their Country, 

they had earned certain metals, maybe they were Purple Heart recipient, you would think there would be a way that they could go 

and verify that through the process, and I am unaware of something that would be crystal clear, simple to use, accurate, and swift 

in its processing. 

If you were going to apply for a job and you were saying that you 

had achieved certain metals or you had served in the military, 

maybe you were disabled, maybe you had a Purple Heart, that you 

could get that verified. Just like if you said I earned a B.A. at a 

certain university, you could call the university and get verification 

for that. I think it is inexcusable that we don’t have a system in 

place thus far. 

You mentioned some of the companies that they had pursued, 

very few of them. What is the penalty for those that have actually 

gone through the process, the adjudication process, been found to 

be wrong? What is the penalty for misrepresentation? 

Mr. O’NEILL. Sir, if we are lucky enough to conduct an investigation and get convictions, the criminal penalties can be years in 

prison for fraud, so it is depending on the charge that they are indicted on. Now, in terms of suspension and debarment, VA can, 

under virtue of 38 U.S.C., I think it is 8127, can debar these companies from doing business with VA. Under the FAR Part 9, that 

debarment could be spread across government. And that is actually 

in play now with a number of them. 

Mr. CHAFFETZ. And that is just not for the companies, but that 

would be for the individuals as well associated with that, or is that 

not the case? 

Mr. O’NEILL. The individuals are individually debarred, as well 

as the companies. 

Mr. CHAFFETZ. And how many debarments have we had so far? 

I think we said the number earlier. 

Mr. O’NEILL. I don’t know. In every instance where we got a complaint and arrest warrant, we have referred that individual and the 

company for suspension and then, upon conviction, for debarment. 

We have initiated two recently fact-based debarments, where there 

was no interest in prosecution, but we believe we made a compelling case for debarment. 

Mr. CHAFFETZ. But there are so few debarments that are actually 

happening, I think, as the Chairman pointed out, the discrepancy. 

Why is that? Mr. Hillman? 

Mr. HILLMAN. VA does have a debarment committee that they 

established in September 2010, and, to date, there have been three 

debarment actions involving 11 associated firms or individuals. 

There are also several proposed debarments that are pending. 

37 

That is in stark contrast to the nearly 1800 firms that the VA 

has rejected from their verification program and some 70 firms that 

are associated with potential fraudulent activity that have been referred to the VA’s IG’s office. 

Mr. CHAFFETZ. So why the discrepancy in the number? What is 

slowing them down? Do they meet once a quarter and they only 

have a half hour, or what is the problem? 

Mr. HILLMAN. They do meet on a regular basis. They are not fulltime staff, they are part-time staff. The historical information suggests that much more could be done from an enforcement standpoint both by VA and the Small Business Administration to better 

ensure that there are consequences associated with fraudulent activity. 

Mr. CHAFFETZ. You have looked at this a lot closer than most. 

Why are they so slow and so inept in actually following through on 

this? Statistically, I don’t think inept is a strong enough word. 

What is slowing them down? When you say they meet regularly, 

is that every week, every month, every quarter? 

Mr. HILLMAN. On a periodic basis, I believe at last monthly. 

Mr. CHAFFETZ. Monthly? What is slowing them down? Why 

aren’t we creating this database? We are having the same problem 

overseas. This continues to be a problematic theme for the Department of Defense. We go through the same process with contractors 

overseas and we see billions of dollars leave our shores to go to people who didn’t provide services that they were supposed to. And 

now we are having it happen right here. What else needs to be 

done, other than trying to do the job that they are already set up 

to do? 

Mr. O’NEILL. We have 88 cases open right now on SDVOSB 

fraud. Our template is to seek prosecution first, criminal prosecution. If that is declined, then to seek civil prosecution. And then, 

if that is declined, to refer for suspension and debarment. We believe that the penalties of imprisonment are going to deter this behavior very effectively as we get more and more prosecutions, 

which are increasing and gaining traction within DOJ. 

Mr. CHAFFETZ. My time has expired, but, Mr. Chairman, I would 

hope and encourage them to not only pursue, there should be concurrent pursuit of not only criminal, but also debarment. We 

should err on the side of making sure that we are giving these contracts to those who truly deserve and should be awarded those, and 

I find the statistically their follow-through on this is inadequate, at 

best. 

I yield back. Thank you. 

Mr. LANKFORD. Thank you, Mr. Chaffetz. 

I would like to recognize the Chairman of the full Committee, 

Mr. Issa, for his time of questioning. 

Mr. ISSA. Thank you, Mr. Chairman. I am sorry I missed our 

first panel. Certainly, Senator Cleland would be a good example of 

somebody who has paid the price and had a hard time getting here 

and a hard time staying here. It is not easy for veterans anywhere, 

including in Congress. 

I am concerned, as Mr. Chaffetz was, that your order is wrong. 

And let me ask a series of questions, since we are one of the committees that could change that order. 

38 

First of all, Mr. Hillman, this part-time debarment sort of question and so on, should this Committee look at reorganizing Government and how it does business to professionalize the whole question of contractors across DOD, SBA, you know, you name the 

ABCs, including veterans? Would that help if in fact we turned it 

into an efficient, effective, well staffed organization that in fact, 

like a corporate headquarters, was your go-to for I have a problem, 

their job is to quickly get the bad guys out? 

Mr. HILLMAN. I believe it is definitely a resource issue, and something to consolidate those resources and provide for the expertise 

to look on a government-wide basis, the credibility of these kinds 

of actions to ensure that there are real consequences, would be beneficial. 

Mr. ISSA. Mr. O’Neill, I appreciate the order that you gave us. 

Honest testimony is always critical to a starting point of sometimes 

disagreeing. When a police officer witnesses a crime, he doesn’t 

view conviction as the first step, does he? He views arrest as the 

first. Isn’t suspension and debarment, and particularly suspension, 

isn’t that in fact an essential first step when you have enough to 

administratively know that someone is a bad actor, whether or not 

you have the criminal? 

I mean, obviously, if you convict somebody of a felony, it ain’t no 

big thing that you managed to debar them. If anything, when you 

convict somebody of a crime, the question I have for you is when 

you convict them of a crime, shame on you if you only get the guy 

that did the crime. 

What is your procedure to debar one, ten, hundreds of people 

who were not convicted, but were conspirators, unindicted coconspirators in the effort? In other words, the executive secretary, 

is she or he being debarred because they clearly had knowledge 

and aided and abetted it, even though they are not convicted? 

That would be my question to you. If you are putting debarment, 

suspension and debarment at the end, then shouldn’t it include a 

broad group of people that wouldn’t have been picked up in the 

first round? 

Mr. O’NEILL. I think the reason for the order, sir, is frequently 

the prosecutors don’t want to have to disclose information gained 

in the investigation, and some of these investigations are conducted 

under grand jury secrecy. So the movement towards immediate 

suspension and debarment of the individuals to be indicted presents a problem in that area. In terms of—— 

Mr. ISSA. But this Committee, just a few years ago, saw a fraud 

being perpetrated in Florida, where an individual was selling 30 

year old, 35 year old 762 rounds to the American people to be put 

in the hands of, I think, the Afghan government, and thus we were 

giving them rounds that probably didn’t fire. Would you have suggested that you wait until you finished the indictment before you 

stopped the shipment or the purchase of those? 

Mr. O’NEILL. No, sir, of course not. 

Mr. ISSA. So how do you stop the bad if not for suspension? 

Mr. O’NEILL. Well, as—— 

Mr. ISSA. Do you have the tools to stop before, in fact, this other 

part, which may have significant delay? Certainly, Mr. Chaffetz 

made it pretty clear that 3 versus 1,800 sounds like debarment is 

39 

almost an irrelevant part of your tool chest, based on how often you 

use it. 

Mr. O’NEILL. Well, I believe the Department pursues debarment 

independent of us when we are not conducting the investigation 

that could lead to an indictment. So the numbers are in that arena, 

not in our 88 investigations, per se. 

Mr. ISSA. Well, back to Mr. Hillman, then. Do we have the order 

right? Do we have the tools? And how do we explain so few suspensions and debarments? 

Mr. HILLMAN. On a government-wide basis—— 

Mr. ISSA. Well, we are sort of looking at wounded warriors access. You know, this is a little bit narrow in this, but go ahead and 

answer government-wide. 

Mr. HILLMAN. Well, on a government-wide basis for a service-disabled veteran-owned small businesses, the fraud prevention framework to help deter and detect fraud and abuse is woefully inadequate. We looked at prevention controls to help to ensure that 

only eligible firms for this program are provided with these contracting opportunities, we looked at monitoring and detection controls to help to ensure the continued eligibility of firms to be within 

this program, and we looked at the enforcement and investigative 

powers to help to ensure that there were real consequences associated with individuals who claimed to be eligible but were not. In 

each of these three broad areas of the fraud prevention framework, 

the government-wide service-disabled veteran-owned contracting 

program needs serious improvement. 

Mr. ISSA. Well, my time has expired, but, Ms. Finn, if you could 

answer just one question or two questions. Well, I will answer it 

for you. You do not have subpoena authority. 

Ms. FINN. The IG does have subpoena authority. I would have to 

go to our general counsel, but we have subpoenaed documents in 

other audits. 

Mr. ISSA. Is that an effective tool for you when you are able to 

get it? 

Ms. FINN. Yes, it is an effective tool to obtain documents. The 

threat of it is also effective, that we can use a subpoena. 

Mr. ISSA. Mr. Chairman, could I ask for an additional 30 seconds? 

Mr. LANKFORD. Without objection. 

Mr. ISSA. Could you elaborate on how effective the tool of threatening, in other words, the fact that you can get a subpoena, how 

often does that cause voluntary compliance at a sufficient level to 

your satisfaction? 

Ms. FINN. To be honest, sir, I don’t have to use that very often 

in my work. As auditors, we are looking at internal controls and 

we identified fraud indicators and then we turn them over to Mr. 

O’Neill for investigations. But the IG has statutory authority to obtain information and, at the end of that, the IG can report, of 

course, to you, as Congress, that we can’t get information. Within 

the Department, that generally is enough authority. The subpoena 

comes into question when we are dealing with people outside of the 

Department of Veterans Affairs. 

Mr. ISSA. Is that the findings of all of you, that the power to get 

one is an effective tool to get compliance, in most cases? 

40 

Mr. O’NEILL. We find it an effective tool. Whether I would venture towards getting compliance, it is hard to say. It is very effective to use a subpoena. Of course, we don’t have subpoenas for testimony, but for documents and so forth, it is very useful. And, of 

course, we get search warrants from the court to gain even more 

information. 

Mr. ISSA. Thank you. 

Thank you, Mr. Chairman. 

Mr. LANKFORD. Recognize Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Mr. Hillman, in your exchange with my colleague from Utah, you 

cited inadequate resources as one of the problems we face here. 

Could you elaborate on that? What would it mean if you had more 

resources, I assume in the form of personnel, in terms of either preventing ineligibility in the first place and/or recovering assets given 

to ineligible firms in the second place? 

Mr. HILLMAN. The SBA bid protest process is one good example 

where the program itself sees itself as one of its primary responsibilities providing concrete information on the eligibility status of 

individuals. That is what they see as a material outcome from their 

efforts. What we are hoping to see is that when entities are determined to be ineligible, that there will be real consequences associated with those actions. 

In the SBA bid protest world there have been very limited to no 

suspensions or debarments associated with the decisions that they 

have made, and sometimes contractors are continued to be allowed 

to maintain those contracts through their completion. That does 

not sound like a system, to me, that affords real consequences 

when entities are determined to be ineligible. 

Mr. CONNOLLY. Wouldn’t it be fair to say that an investment in 

additional resources in this particular area actually might save taxpayers money? 

Mr. HILLMAN. Absolutely. If there is a sense that there is an aggressive posture within the program to ferret out the potential 

fraud, waste, and abuse, you are going to eliminate the interest of 

a lot of bad actors from entering the program. That is not only 

going to help to ensure that the honored service-disabled veterans 

are receiving the benefits that they are entitled to, but it will also 

help to ensure the overall control structures are operating effectively. 

Mr. CONNOLLY. Thank you. 

Ms. Finn and Mr. O’Neill, and, Mr. O’Neill, I need you to speak 

closer to that mic, please. You are a very quiet Irishman. But I 

thank you. 

What percentage of the ineligible firms you have identified could 

fall in the error rate column versus the fraud, willful fraud column? 

Mr. O’NEILL. We only pursue an investigation when fraud is indicated; errors we don’t launch an investigation. 

Mr. CONNOLLY. Okay, so 100 percent of what is on your plate are 

already in that fraud column. 

Mr. O’NEILL. Yes. Then when we discover that it is an error, 

then we end the investigation. 

Mr. CONNOLLY. Okay. And what percentage of your investigation 

ends in that kind of conclusion? 

41 

Mr. O’NEILL. Well, we have closed 25 cases to date. Twenty were 

unsubstantiated, three there was no prosecutor interested in pursuing it and then there were administrative remedies in two. So 

25, and we have 88 open investigations at this time. So 20 percent, 

perhaps, if the math is correct? 

But to the question earlier most of this fraud that we encounter 

because of VA’s controls now focus on pass-throughs or rent-a-vet 

schemes, where the work and the money goes to a non-service-disabled veteran, but there is a service-disabled veteran fronted as 

having ownership and control of the company. 

Mr. CONNOLLY. And that is willful fraud. 

Mr. O’NEILL. And that is willful fraud. 

Mr. CONNOLLY. But I guess I am trying to get at, as the Oversight and Government Reform subcommittee here, what is the extent of our problem. How much of this is error; I thought I qualified, VA thought we qualified, we didn’t have our paperwork in on 

time, you got it wrong, versus, no, I deliberately set out on a scam 

to qualify for something I most certainly am not qualified for, and 

you caught me. 

Mr. O’NEILL. I believe that Mr. Leney will testify that, if I am 

not mistaken, 1800 firms have been denied certification and that 

almost all of them are a result of perceived errors because they 

have reported the conflict—— 

Mr. CONNOLLY. But not fraud. 

Mr. O’NEILL. Yes, not a fraud. 

Mr. CONNOLLY. Right. 

Ms. Finn, Mr. O’Neill’s plate is already predetermined. 

Would the Chairman indulge me one extra minute? 

Mr. LANKFORD. Without objection. Go ahead. 

Mr. CONNOLLY. I thank the Chair, thank you for his courtesy. 

Ms. Finn, you do the presorting. What is the balance we ought 

to be thinking about in our heads about suspected willful fraud 

versus everything else at work? 

Ms. FINN. We had found 32 of our 42 businesses had issues. 

Within that 32, another 9 had circumstances that seemed suspicious enough for us to refer those to Mr. O’Neill’s organization, 

and I believe those investigations are still ongoing, I am not certain. 

Mr. CONNOLLY. But it sounds like, as the Chairman was pointing 

out in terms of suspension and debarment, and, frankly, what the 

statistics you just gave, Mr. O’Neill, in terms of the prosecution, it 

doesn’t sound like a very vigorous effort, which one of two things 

is true if that is an accurate impression: the case was so weak as 

to be a judgment call or we are not all that aggressive in making 

sure that compliance is strictly adhered to, and when we uncover 

somebody who is deliberately gaming the system illegally, we prosecute them with the full extent of the law. 

Mr. O’NEILL. Well, I can assure you that actually considerable effort is devoted to investigating these cases. 

Mr. CONNOLLY. I know, but—Mr. Chairman, forgive me—I am 

interested in the next step, Mr. O’Neill. What happens then? You 

read off a string of statistics that was not very encouraging in 

terms of what are the penalties. You said that a number of people, 

42 

I assume the Department of Justice, declined to prosecute. That 

suggests a weak case. 

Mr. O’NEILL. I think I only said that about three cases out of a 

total of approximately 115. So the numbers of declinations hasn’t 

been that high at this point, and, frankly, there is much more interest in Department of Justice in pursuing these investigations 

now because of three appellate decisions that say that the loss is 

the full value of the contract, which impacts sentencing and fines 

and so forth. So we actually are seeing it and I believe you are 

going to see an increasing number of prosecutions as early as this 

month. 

Mr. CONNOLLY. Mr. Chairman, thank you for your indulgence, 

and I want to underscore what Mr. Hillman pointed out, though. 

As we are having a political talk about let’s shrink the Federal 

Government by 5 percent or 10 percent in terms of workforce, strategic investments in certain parts of the Federal Government in 

terms of personnel can have huge return on those investments for 

the taxpayer. This is one example. 

I thank the Chair. 

Mr. LANKFORD. Thank you, Mr. Connolly. 

I now recognize Mr. Meehan. 

Mr. MEEHAN. Thank you, Mr. Chairman. 

And thank you for the work of the panel not only preparing here 

today, but the very important work you do on this issue, which I 

think is important to many. 

Mr. O’Neill, I am interested in following up a little bit on the 

practice that we currently see with regard to your investigations 

and the numbers of declinations. As a former Federal prosecutor, 

I appreciate the reality that there are many cases out there that 

oftentimes merit some measure of prosecution, but the reality is 

limited resources and so often the declination guidelines are quite 

high, and it is very frustrating for organizations like your own. 

Can you explain to me where you see those declination guidelines 

right now, what the shortcomings are in having prosecutors evaluate these cases and actually find some way to consolidate, perhaps, 

a group of them and make some kind of inroad in this area? 

Mr. O’NEILL. Well, in each case we find that we are educating 

a prosecutor who is maybe new to this particular type of set-aside 

fraud, but we are getting a lot of traction because in October of last 

year DOJ sent guidance to the supervisory AUSAs and the U.S. attorneys themselves about the issue of the full losses, the contract 

itself, and that helped gain a lot of interest. 

If we had a separate group of prosecutors, say, like antitrust, 

that would be certainly, perhaps, easier in some way, because we 

wouldn’t have to go through the education process that we do when 

a prosecutor first encounters one of these types of investigations. 

Mr. MEEHAN. May I make a suggestion? There may be something 

that ought to be done. I think, as with anything, communication on 

this, in the Winston Churchill mode, to make a point and then 

make it again and make it again, and to pound it in an institution. 

There is an organization called the Attorney Generals Advisory 

Committee. It is comprised of about 16 sitting United States attorneys. They meet at least on a monthly basis and they go back and 

43 

they consider policy of the Department of Justice and then they 

take a role in implementing it. 

Now, you have 16 of the top United States attorneys sitting at 

a table, along with the leadership, the Department of Justice. They 

will generally meet for about two days, maybe even longer, and 

there is a window of time to request to get on their agenda. I think 

something that would be helpful, notwithstanding the guidance 

they send out to the field because, as a recipient of that guidance, 

we would get tons of materials each day from main justice, and 

somebody would take it and press it down. Making your case to 

this group about the importance of looking at these cases, and then 

the opportunity to do something else. The Department will consolidate cases from around the Country and then try to make a statement by doing a number that are coordinated and effectively done 

at the same time. 

It is not my place to tell DOJ what to do, but I, having been 

there, believe that you could be effective at making this internally 

appreciated and then also effective at perhaps advocating for one 

of those in which you have already done the investigations. You 

have the materials sitting on the desks of these prosecutors. It is 

not a big reach to go back and look for the best of those cases. 

Can I ask one other question of the panel? Why is the Department of Veterans Affairs doing a fairly decent job of at last meeting 

their goal, 3 percent, and some of the other critical agencies, HHS 

and others, sort of so woefully behind? What do they do well that 

the other agencies don’t do to meet their 3 percent requirement? 

Ms. FINN. I think the issue is focus. When we were looking at 

the Department’s Implementation of Recovery Act’s contracts, the 

Department had about a billion dollars to spend. They really, really 

focused on completing those contracts, which was a departure, but 

that is another hearing, and also making awards to service-disabled veteran-owned businesses. So it was a big focus and I think 

that is the key difference. 

Mr. HILLMAN. I would also add that the focus on the part of the 

Department has been tremendous in helping to ensure that the 

goal is being met or exceeded. I would also say, though, that congressional support to help to ensure that the agencies are making 

progress in this area is essential. The Veterans Affairs Committee 

required the VA Department to establish goals that were higher 

than the government-wide goal and to exceed that goal, and with 

the congressional attention in that area VA has stepped up to the 

plate, continued aggressive oversight of agencies’ actions in this 

area will also hopefully help the rest of the Federal agencies to increase their focus. 

Mr. MEEHAN. Thank you, Mr. Chairman. My time has expired. 

Mr. LANKFORD. Thank you. 

Mr. Farenthold. 

Mr. FARENTHOLD. Thank you very much, Mr. Chairman. 

I would like to ask our panel, first, we have talked a lot about 

the U.S. attorney and the Federal Government investigating and 

processing. Is there a way we can streamline this to where the private sector can do more or the veterans themselves can do more? 

It is my understanding that in most cases outside the VA, at least, 

44 

violation of these provisions, basically, your only option is a bid 

challenge. 

Is there any way we can take this off of a plate of the Federal 

Government and effectively enforce these provisions? And I will 

open that up to anybody who wants to answer it. 

Mr. HILLMAN. Well, from a government-wide service-disabled veteran-owned small business program standpoint, you are absolutely 

right, the only major control is SBA’s bid protest process, where eligible individuals can protest a decision that has been made. We 

found, though, that that process is woefully inadequate and ineffective in having real consequences associated with individuals who 

are found to be ineligible. 

One of the critical areas that I believe could help to ensure that 

the SDVOSB program has reduced amounts of vulnerability to 

fraud and abuse would be, in addition to looking at the opportunities in the investigations and prosecution areas, to look more at the 

preventative controls to help to ensure that ineligible firms do not 

enter the program in the first place. And the best preventative control that exists today are the processes underway and under development and being implemented within VA to verify the eligibility 

of firms’ participation in this program. 

Mr. FARENTHOLD. I am a little bit concerned about the speed at 

which the VA operates within any of their programs. In South 

Texas we are really facing a situation where veterans are having 

problems just getting the basic medical benefits with payment 

delays to providers of up to a year now, millions of dollars owed 

to providers. And we hear overall how the VA is trying to streamline this and streamline that, and I know, Mr. Hillman, you have 

looked at some of this from a past basis and our other witnesses 

are directly involved. 

I ask again the big broad question, What is missing there? The 

people who work for the VA ought to get up every morning proud 

that they are serving the people who served us and be just working 

their tails off to get this taken care of, but all we hear out of the 

VA is tale of delay after delay in problems getting these programs 

implemented. Would anybody like to comment on that? I didn’t 

mean to editorialize here, but I just get frustrated sometimes with 

this. 

Mr. HILLMAN. Well, you are absolutely right that the program, 

Congressman Johnson just testified in the first panel that it is far 

from perfect. There is a lot that the VA has been doing to help to 

improve its processes and there are a lot more that needs to be 

done. One of the major areas that we have seen is in human capital, the extent to which the Department has the resources, both 

full-time VA employees as well as the expertise through contractor 

resources, to deliver on the promises that they are making in establishing a verification program. 

We also see a need for more emphasis to help to ensure that once 

firms are verified, that they remain eligible for the program, and 

that additional steps need to be taken there on the part of VA to 

help to ensure the reverification of firms that were previously—— 

Mr. FARENTHOLD. Is it just personnel? Are we not implementing 

technology effectively or rapidly enough to help with some of these 

tasks? 

45 

Mr. HILLMAN. Technology is a big area as well. We currently, 

within GAO, have an engagement underway to look into the technological capabilities of the VA. They have improved a lot of the 

manual entry activities in the past, but more needs to be done. 

Mr. FARENTHOLD. Does anybody else wish to comment? 

Ms. FINN. The VA has used some technology to obtain documentation from veterans as part of the verification process. Unfortunately, what we found as we visited these businesses is it is very 

easy to make your documentation appear that the veteran owns the 

business. That is not a problem. But you have to be in the business 

there to really figure out that the veteran’s name is on the paperwork and his name is on the door, but he hasn’t been in that office 

since the business started. 

Mr. FARENTHOLD. Shame on businesses that do that. Thank you 

very much. 

I yield back. 

Mr. LANKFORD. Thank you. 

I recognize Mr. Walberg. 

Mr. WALBERG. Thank you, Mr. Chairman. I would be delighted 

to yield time to you, Mr. Chairman, for further questions. 

Mr. LANKFORD. Thank you. Let me just do some follow-up and 

some closing questions for us as well. And thank you, Mr. Walberg, 

for yielding in that. 

This is one of those things that is an idea that is a great idea, 

how do we come alongside companies run by service-disabled veterans. I think it is a great thing for our Nation to do and I am 

proud that we are doing it. It is the implementation where we are 

having the struggle. 

If we have a company that puts a service-disabled veteran on the 

list, provides documents and says this is where they are in leadership, this is where their name should be on the door, but you actually get to the company and find out that is not true. That is intentional, willful fraud that is putting a person’s name out there and 

then trying to deceive to be able to get a contract. 

If you have a person that is not a veteran that is stealing the 

valor and going through some other agency and they’re self-certifying, but it is not being checked and verified, once the word gets 

out you can get these contracts and the self-certification is not 

checked, it just starts ramping up with the bad actors in the process. So we have to figure out how to go from idea to implementation. 

This doesn’t seem to be as much of a manpower issue as it is a 

connect the dots issue, if you will allow me to make that illustration on it, in trying to figure out how do we connect the dots. So 

my calling on this would be for our CIO of the Federal Government, for OMB to start working on some coordination to how do we 

start coordinating these different agencies in technology and to find 

out how we can take the information that VA uniquely has and get 

that certification out. 

But the challenge comes to VA to say how do we certify people 

without making it such a high standard that the good folks can’t 

get in, or they wouldn’t bother to say I would love to apply for all 

those, but the red tape is so long I am not going to mess with it, 

46 

it is not worth it. So then it is only the bad actors that jump in, 

that have the processes to be able to jump in and get it. 

I know that is a unique balance that you all are going to have 

to be able to work through the process on so that we do have legitimate service-disabled veteran-owned companies to be able to get 

involved in this, but we do keep the bad actors out. As we are already finding out, there are folks that are getting through the 

cracks at this point. 

Debarment and suspension I think is a good first step. I think 

that is something that we should engage as fast as possible. That 

begins to exclude people quickly because that gets out to all agencies. While an investigation may take quite a while to happen, they 

are still continuing to pick up contracts in other agencies to get the 

word out. 

So we have to have some way to be able to get that message out 

to all agencies. That has been suspension and debarment through 

our system. So we have to figure out a way to be able to flip this 

system. I know as they are investigating they don’t want to leak 

out all the investigations that are going on before they are done, 

but there has to be some intermediate step so that we can get the 

information out and start slowing the movement of all these individuals to it. 

So this is going to take some coordination that we are going to 

count on OMB, we are going to count on other individuals from 

GAO and others that will come together and say let’s start taking 

some of these recommendations that have been made, and the good 

work that you all are doing at VA, and thank you for your service 

for all of you in this process and to figure out how to be able to 

move it from here. 

One quick statement, though. And this is just for anyone to be 

able to make a comment on. There have been several steps that 

have been made and you had mentioned earlier, Ms. Finn, about 

VA is taking steps to improve the verification process on that. I 

look forward to reading through some of those steps and seeing 

where that ends. 

What is your perception of how we start coordinating multi-agency on this, taking the certifications happening with VA and the 

steps that you are doing to improve that, and then to be able to 

move it? Because as we mentioned with suspension and debarment, 

it is not a high standard. You don’t have to prove criminal intent 

to even get to a suspension and debarment; you can do that quickly 

and start getting the word out and work on the criminal side of it. 

But it is not just the certification, but it is all of this, getting the 

suspension and debarments out there, getting the investigations, 

getting the certifications. What is the best way that you see to 

start coordinating these things? 

Ms. FINN. I think the best first step is to do whatever needs to 

be done, whether it is legislation or coordination through OMB, to 

be able to share VA’s VIP database and information on verified 

businesses with the rest of the Federal Government. Right now, as 

we have all said, the rest of the Federal Government is trusting on 

the business to self-certify their status, and that doesn’t work. 

Mr. LANKFORD. Right. We need to verify with our trust. 

Ms. FINN. Yes. 

47 

Mr. LANKFORD. Other comments there? 

Mr. HILLMAN. It is clear that the government-wide program lacks 

preventative controls, lacks detection controls, lacks enforcement 

and investigative controls. These three combine to make the program a real candidate for bad actors. The VA, SBA, and OFPP 

have gotten together to look at the possibility of expanding the 

VetBiz program on a government-wide basis. They say they need 

legislative authority to do so. Moving the VetBiz program on a government-wide basis is likely the best solution available today to ensure that eligible firms are included in the program. 

Mr. LANKFORD. Thank you for that. We will continue to progress 

with that. And, again, thank you for the work that you are doing 

and not only for this hearing, but the work you are doing all the 

time, when the cameras are off as well. So we very much appreciate your dedication to service for our Nation. 

With that, I would like to take a short break as we reset for our 

third panel. 

[Recess.] 

Mr. LANKFORD. We will now welcome our third panel. Gentlemen, are you ready? Terrific. 

Mr. Weidman is Executive Director of the Vietnam Veterans Association representing VET–Force, a coalition representing servicedisabled veterans. 

Mr. Andre Gudger is Director of the Office of Small Business 

Programs in the Office of the Undersecretary of Defense for Acquisition, Technology and Logistics 

Mr. Thomas Leney is the Executive Director of Small and Veteran Owned Business Programs at the Department of Veterans Affairs. 

Mr. William Puopolo is the President of Verissimo Global Incorporated, a service-disabled veteran-owned small business. 

Pursuant to Committee rules, all witnesses will be sworn in before they testify. If you would please rise and raise your right 

hands. Thank you, gentlemen. 

Do you solemnly swear or affirm the testimony you are about to 

give this Committee is the truth, the whole truth, and nothing but 

the truth, so help you God? 

[Witnesses respond in the affirmative.] 

Mr. LANKFORD. Thank you. Let the record reflect that all witnesses answered in the affirmative. 

You may be seated. 

In order to allow time for discussion, please limit your testimony 

to five minutes. Of course, your entire written statement will be 

made part of the record. 

Mr. Weidman, we would be honored to be able to receive your 

testimony at this time. 

STATEMENT OF RICK WEIDMAN 

Mr. WEIDMAN. Thank you, Mr. Chairman, and thank you for 

your leadership in holding this hearing. Senator Cleland put it 

right on the money, that the nexus, the central watershed event of 

the readjustment process for veterans, particularly combat veterans, is helping people get to the point where they can obtain and 

sustain meaningful work at a living wage. For many, and the 

48 

greater the disability the more likely it is that it is the only opportunity, is to become self-employed or start a micro business, for a 

variety of reasons. So the need for small business is apparent. 

It is also true that there is a direct inverse relationship between 

percentage of disability and unemployment, if in fact people are 

participating in the labor market at all. And beyond 60 percent the 

majority of veterans are out of the labor force. That is not because 

they choose by choice to live on $10,000 a year; it is because they 

can’t find work and they become a whole new thing of discouraged 

workers. 

We believe strongly at Vietnam Veterans of American, and have 

for a long time, in small business and small business development, 

and that led, in 1999, to work with former member of Congress and 

Chair of the Small Business Committee in this distinguished body, 

Jim Talent of Missouri, to work with him on developing the bill 

that became 10650, and it was virtually all the military service organizations and veteran service organizations and private business 

owners that came together and to push that. 

Almost everything that has happened since that time, including 

two Executive Orders and several additional laws, have all been directed to try and properly implement that original law, and that 

is the problem. What we need is consistent political will at every 

level. 

Roughly 2006, several of us in VET-Force and VVA went to talk 

to then-Deputy Secretary Gordon Mansfield, and we explained to 

him that we had tried over and over and over again to reach the 

vision directors. The entire medical system of VA is 85 percent plus 

of all of their procurement, and there are 21 individuals and all the 

hospitals are controlled by those 21 individuals, effectively. And we 

asked that it be put in their performance evaluation. 

We were stuck at 1.8 percent contracts going to service-disabled 

veterans at that point at VA. It got put into the evaluations and 

I can assure you that some of them were not necessarily pleased, 

but Gordon is a great American and has stuck to his guns. We 

went, in six months, from 1.8 percent to well over 4 percent, and 

it is my understanding that DOD is considering and, in fact, has 

already partially implemented the same strategy, and I would suggest that that needs to be done in every agency and department 

across the Government. 

There is renewed interest in the OMB and in cabinet meetings, 

apparently. One of the last things that Mr. Daley did before he 

stepped down as Cabinet Secretary was to go around the room in 

a cabinet meeting and ask the head of each agency who sits on the 

Cabinet where are you at in regard to reaching the minimum of 3 

percent for service-disabled veteran-owned businesses. 

That leads us to the concern that we have. We need an accountability/quality control mechanism to make sure that people are who 

they say they are. But I will say that that sword has cut both ways 

and it has cut many legitimate businesses, some of whom have literally been put of business for reasons that we consider specious 

and arbitrary. 

For someone, as an example, from Nebraska who is a service-disabled Marine officer who is medically discharged, who has been 

successfully running their business for 12 years, for them to find 

49 

that she doesn’t have the managerial experience to run this business, this is nuts. These are people who have never even worked 

in the private sector, and certainly never tried to run a business. 

So the friendly fire, when you know you have friendly fire raining in, yes, you need to do something about the frauds that are encroaching, but when you know that your folks are getting wiped 

out by that friendly artillery, so-called friendly artillery, stop firing 

for effect and readjust to make sure you have the right coordinators. And that is the stage we are at now. We don’t see any adjustment, no matter how much we try and deal with the leadership of 

VA at every level. 

That process needs retooling, it needs better quality assurance, 

it needs clear rules that are published so veterans know what the 

rules are. They have changed dramatically over the course of the 

past year and a half. And what we need is assistance in getting to 

that point. 

It should be VA’s responsibility, probably in the Veterans Benefits Administration under the Deputy Undersecretary for Economic 

Opportunity, to have a unit that assists veterans in bringing their 

business up to speed to be able to do business with the Federal 

Government. 

Lastly, I have noted in my written statement some additional 

tools that we would find extremely useful, and I look forward to answering questions about that. 

And once again I want to thank you for this hearing. 

[Prepared statement of Mr. Weidman follows:] 

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Mr. LANKFORD. Thank you. 

Mr. Gudger. 

STATEMENT OF ANDRE GUDGER 

Mr. GUDGER. Chairman Lankford, thank you for allowing me the 

opportunity to speak today and introduce Department of Defense 

service-disabled veteran subcontracting that we have. 

My role at the Department of Defense is the Director of Office 

of Small Business Programs and to advise the Secretary of Defense 

on all matters small business. That includes policy, oversight, and 

regulation. 

When I think about the Department of Defense posture on contracting with service-disabled veterans, it is a very encouraging 

one. In 2003, when we first started this program, and look at 

where we are now, we started with about $300 million in contracts 

for service-disabled veteran-owned businesses, and last year we 

ended almost $6 billion. Since I took office, we increased our fiscal 

year 2010 number over into fiscal year 2011 about $600 million in 

one year. So when I look at that, although it is very encouraging, 

the trend, we haven’t relaxed our efforts. 

Secretary Panetta, when he joined the Department as the Secretary of Defense, he issued a memo as one of his first courses of 

action and, to show his commitment to the Department. He did 

that while he was on vacation. He took it that serious. And other 

members of the Department of Defense also issued similar memos 

encouraging the acquisition workforce to continue to look for opportunities for small business and reinforce the Department’s commitment for service-disabled veteran-owned contracting. So that was 

very encouraging. 

But it didn’t start with Secretary Panetta; it did start with Secretary Gates. So it is one good example of going from great to great 

and it is a pleasure of mine to talk about a lot of the initiatives 

that we started in fiscal year 2011 and built upon from in prior 

years. 

When I think about the Department of Defense, most people say, 

well, the Department of Defense hasn’t met its 3 percent goal, but 

we have had some major success stories. In fiscal year 2011, although the number hasn’t quite settled, we had 7 of our 24 agencies meet the 3 percent and we had, out of our major commands 

under those services and agencies, we have had almost half, about 

22 out of the 47, meet the 3 percent goal. 

So there is a strong commitment. And when I look at the trend 

it is constantly going up. It is the only socioeconomic category 

where we have never seen a decline. So that shows a commitment 

to the Department. 

And I think further on, looking at our partnerships and looking 

at our collaboration that we have with industry, we have reinforced 

and we have taken the extra step, quantum leap in the right direction in working with groups like VET–Force and National Veteran 

Small Business Coalition and gaining some of the best practices 

and ideas from industry, not just within, and, as a result of that, 

those groups have relayed messages to their folks behind them to 

help them strengthen their capabilities because we know that vets 

are very talented and we know that talented group of people have 

62 

a unique ability to continue to create capabilities to align with the 

Department’s buying and its future urgent needs. So those are very 

encouraging trends for us. 

But one of the things that we have done that I think is probably 

the most beneficial thing we have done in a very long time was to 

accelerate payments to all small businesses, which we call accelerated payments, which is where service-disabled veteran-owned 

businesses were a huge beneficiary. So we pay businesses one-third 

faster than they would normally get paid, and we know, as a result 

now, that they have put that back into creating jobs, creating additional capability, allow them to respond to request for proposals 

quicker and faster and put more resources towards that. So these 

things are very encouraging trends. 

So although we have no data to say that the numbers will definitely go up, it is a good trend and is a good behavior, and we are 

sharing this throughout my monthly meetings with all of the directors and members of the acquisition community in Department of 

Defense, but we are sharing best practices with each other and how 

to do more with veteran business and service-disabled businesses. 

So it is very encouraging to me. 

I would like to wrap up by pointing out a few success stories 

based on talking to VET–Force and talking to National Veterans 

Small Business Coalition, attending the National Veterans Conference that the VA put on, attending the conference in Reno for 

the National Veterans Coalition. These things are very beneficial 

to me and allow me to go back and meet with the directors of DLA 

and the acquisition executives 

For example, DLA, as a result, in fiscal year 2011, they looked 

for their national stock numbers, which were about 3,500, of things 

that they buy, products, and a set-aside for service-disabled and 

veteran-owned businesses, and in fiscal year 2012 they are going 

to 1,400 more. These are quantum leaps in the right direction. 

Our Defense Security Cooperation Agency had a 26 percent service-disabled veteran-owned business contracting, a goal that they 

met, and also the Department of Army awarded over $3 billion, 

which allowed them to meet the 3 percent. 

So there is positive. And they are sharing that with each other, 

with the other 21. 

So, in conclusion, I would like to thank you and the panel for allowing me to testify today. We know that the veterans hold a special place in all of our hearts and it is true for me, too, and I would 

like to welcome any questions you may have. 

[Prepared statement of Mr. Gudger follows:] 

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Mr. LANKFORD. Thank you, Mr. Gudger. 

Mr. Leney. 

STATEMENT OF THOMAS LENEY 

Mr. LENEY. Chairman Lankford, thank you for inviting me to 

testify on the implementation of the VA’s Veteran Owned Small 

Business Program. The goal of the VA’s Small and Veteran Owned 

Business Program is to help small businesses, in particular veteran-owned and service-disabled veteran-owned small businesses, 

to add value to the important mission of the VA in support of all 

veterans. 

As a veteran who came directly out of the small business community, I am particularly sensitive to the challenges faced by veteranowned small businesses, and at the direction of the Secretary have 

focused my attention over the past eight months on improving opportunities for small businesses to add value to the VA, while improving the integrity of our preference policies. 

The VA has demonstrated its commitment to veterans by far exceeding the government-wide goal of 3 percent procurement to service-disabled veteran-owned small businesses. To promote strong 

support to veteran businesses, Secretary Shinseki established additional procurement goals within the VA of 12 percent for veteran 

businesses. In fiscal year 2011, with a contracting base of about 

$17 billion, $3.5 billion went to veteran businesses. Overall, in 

2011, VA provided more than 28 percent of the total Federal procurement to service-disabled veteran-owned small businesses. 

The VA succeeded largely due to the Secretary’s strong commitment to promoting veteran businesses. Performance on small business goals is reviewed personally by the Secretary and the Deputy 

Secretary as an integral part of the Department’s monthly performance review. 

In addition to strong leadership, VA has instituted a number of 

programs that contribute to our success. We have increased direct 

access of veteran small businesses to the Department’s procurement decision makers. That program began in 2011 with the National Veterans Small Business Conference hosted by the VA in 

New Orleans. This was the largest veterans business event in the 

Country, with more than 4,300 participants. The 2011 conference 

was groundbreaking in that the VA alone brought more than 250 

program and acquisition managers to meet with small businesses. 

The VA is building on the success of this direct connection model 

piloted in New Orleans by expanding that small business conference to be held this year in Detroit in June. We will be bringing 

more decision makers from the VA, as well as encouraging other 

departments and agencies to bring procurement decision makers in 

order to expand veteran business opportunities and to help our sister agencies meet their SDVOSB goals. 

In addition to the National Veterans Small Business Conference, 

VA will sponsor focused opportunity showcases throughout the 

Country in order to enhance access for vendors who have difficulty 

participating in the large events. 

To improve veteran business capacity, we have established a 

mentor protege program to provide developmental assistance to 

72 

veteran businesses. The program began in 2010 with 25 firms. We 

added 26 in 2011 and will be adding another 50 this year. 

We have joined with other agencies to address the challenge that 

small businesses have of finding and understanding all of the programs that are out there in the Federal Government to support 

them, so we have joined with other agencies on the Business USA 

platform that was established by the Administration to consolidate 

information and services from across the Government into a single 

integrated network for American business owners and entrepreneurs. 

Subcontracting opportunities provide a valuable option for many 

veteran small businesses. The VA has established a subcontracting 

compliance review program that conducts audits and assesses 

prime contractors for compliance with their subcontracting commitments. 

An important part of the small business mission is to verify the 

eligibility of veteran-owned small businesses to participate in the 

VA’s VetsFirst program that provides procurement preferences to 

those businesses. The verification program ensures that these preferences go only to legitimate small businesses. Over the past six 

months, CVE has made major strides to address the issues raised 

by the Office of Inspector General and the General Accounting Office, who spoke before we did, as well as to make the process easier 

to navigate. We moved aggressively against the relatively small 

number of firms who would misrepresent their status in order to 

obtain benefit from our program for which they are not eligible. 

In summary, we have made major strides in improving access by 

veteran businesses to opportunities to add value to the work of the 

VA. Our journey is not complete, but progress is clear and significant. Much has been done, but there is much left to do, and we are 

committed to getting it done. 

As a result of the efforts of program and acquisition managers, 

and with the strong support of senior leadership, we far exceeded 

our procurement goals and will continue to do so. At the same 

time, we will ensure that only those who are eligible under Public 

Law 109–461 get the benefits of participating in these preference 

programs. 

Mr. Chairman, I am pleased to answer questions you may have. 

[Prepared statement of Mr. Leney follows:] 

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Mr. LANKFORD. Thank you. 

Mr. Puopolo. 

STATEMENT OF WILLIAM PUOPOLO 

Mr. PUOPOLO. Sir, I want to thank the Committee for taking the 

time to address the service-disabled veteran-owned business programs. We, as a community, are encouraged that we are having 

this discussion to improve opportunities for service-disabled veterans in Federal contracting. 

The service-disabled vet community is made up of men and 

women from all races, religions, and creeds. We view ourselves as 

we did in uniform: one is judged by rank but, more importantly, 

character. Our GWOT veterans are returning home with a sense of 

empowerment brought on by the many successful missions they 

have accomplished in some of the harshest environments in the 

world. 

We want to deliver the message that service-disabled veteranowned small businesses are capable, ethical, faster, and cheaper; 

that we want to hire our fellow brothers and sisters in arms who 

have sacrificed so much from Vietnam to the global war on terrorism. We have banded together to say this program was not designed for 20 SDVOSBs to succeed and thousands to fail. 

The approximate .45 to 1 percent of our population that has 

taken on the burden of the global war on terrorism over the last 

decade are by no means victims. We still see many returning service-disabled veterans maintaining the entrepreneurial spirit and 

starting up companies. They want to identify themselves as soldiers and vetrepreneurs. 

The Service-Disabled Veteran-Owned Business program is facing 

immense hurdles. Our disabled veterans have returned home with 

a drive to improve the economic and moral situation of the Country 

they love and defend. Many disabled veterans must overcome their 

disabilities first, and then overcome the challenges of entrepreneurship. They have the fortitude to enter an unfamiliar business 

world, learn quickly, and embrace the vision that they will be successful. 

I served at Abu Ghraib Prison, and in April of 2005 there was 

a coordinated attack launched on the base. I thought that would be 

the hardest thing I ever did in my life. I had no idea that becoming 

a vetrepreneur would be an even tougher fight. 

Unfortunately, I believe that the current SDVOSB program designed to help disabled veterans is hurting them due to hurdles, 

lack of accountability, and unnecessary bureaucracy within the 

Federal Government contracting system. There has been a disconnect between the program’s intentions and execution. Our service-disabled vets have heard thousands of reasons why they can’t 

do business with the Government or corporate America, and now 

simply want to hear one way they can. 

A few of the major hurdles we are facing are contract bundling, 

no level playing field between SDVOSBs and 8(a)s, double counting 

of contract awards, credit for SDVOSB awards that were actually 

granted through 8(a) or HUBZone vehicles, and a CVE certification 

process that has set the bar too high or too low and is not certifying legitimate SDVOSBs. 

80 

The SDVOSB program is complex, and no one action will overcome the hurdles and issues we face. The SDVOSB community is 

prepared not only to identify the problems, but provide solutions. 

The two overarching measures that we need to take are close legislative loopholes that allow the SDVOSB program to not be on a 

level playing field with other small businesses and, more importantly, we must gain the will of the Federal departments and agencies in word and deed to take down the hurdles, work with 

SDVOSBs, and to find innovative and concrete solutions and make 

their SDVOSB programs inclusive, not exclusive. 

Today I have addressed only a fraction of the hurdles that we 

face in the SDVOSB community, but I have met so many great people in this movement that I feel honored just to stand next to them. 

The SDVOSB community will work to ensure that those servicedisabled veterans who have the will to continue to contribute to our 

national defense and infrastructure will have ample assistance and 

opportunity. We hope the Federal departments and agencies and 

large prime contractors will do the same. 

Mr. Chairman, thank you for your time, and I can answer any 

questions. 

[Prepared statement of Mr. Puopolo follows:] 

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Mr. LANKFORD. Thank you. I yield to myself as much time as I 

desire, apparently. 

Let’s talk for a moment about some of this and let’s try to clear 

up all that we can. Gentlemen, thank you for being here and 

thanks for your service to the Nation and what you are doing. And 

being here, I know that it is an intimidating thing to come and prepare a statement and be able to do this. Let’s just have a conversation about this, shall we? 

Let’s see what we can do to be able to solve, because I want to 

identify as much as we can what is stopping this, what is in the 

way. I appreciate some of the success stories, I really do. But let’s 

find the things that are in the way and let’s try to figure out how 

do we start resolving this. Otherwise, ten years from now, someone 

else is going to do a hearing and we will still be talking about this 

same issue. 

Mr. Puopolo, you mentioned there were some hurdles there. In 

your statement, thousands of reasons why we can’t do business. 

You just want to know a few ways that we can on it. And you identified some of those hurdles. If I got your top two there, you listed 

several: closing the legislative loopholes, which that is being pursued right now and we will continue to work on that, looking at 

the Senate legislation that is coming over and other options that 

are here; and the second one, the will of the agencies to do it. 

I found that very interesting. Can you illuminate that more for 

me? 

Mr. PUOPOLO. Yes, sir. I think the message we got from the last 

hearing in December from the VA was that we are fighting for the 

crumbs off the table and that is where we are going to be because 

it seems like there is an unwillingness to really embrace the 

VetsFirst law and implement that. 

Mr. LANKFORD. Are the service-disabled veterans doing lesser 

work, and so they are, down the table, saying, well, if we have to 

use them, we will? Or are you saying they are both great companies, these are two people, we have a higher platform because we 

have that 3 percent on it? Which one would you say it is? Are you 

doing lesser work or doing equal or better work? 

Mr. PUOPOLO. Well, sir, I think the disconnect is we have thousands of service-disabled veterans marketing to the VA and going 

to the VA and saying we are here. Unfortunately, the message you 

hear back from the VA is that we can’t find these capable servicedisabled vets. And myself and others in the community have approached these agencies and said, well, why don’t you come to us 

and we will work with you? And that kind of falls on deaf ears. I 

don’t know if it is because of bureaucracy or just lack of will that 

they don’t want to work with us. I wish I could get a candid answer 

of why, when we come to them and say we will help you meet your 

goals or we will help you find capable SDVOSBs, that they are unwilling to work with us. 

Mr. LANKFORD. Okay. That is interesting. 

Mr. Leney, I have a question. Thank you, as well, for connecting 

the small business side and for doing the training and the coordination and the reach-out on it. I find a couple things very interesting in this. One is the goals that we were talking about before. 

86 

In the previous testimony, it sounds like you disagree on some 

of the testimony that was given earlier, and let me give you a highlight on that. You talk about the progress of small—we have had 

progress in these areas and the small numbers of firms that don’t 

qualify. They are giving numbers as high as 76 percent. 

You are saying, no, there is a smaller number that don’t qualify; 

the majority do. Can you give me a feeling of where you land on 

that? Because it sounds like you are saying, no, I think you disagree with the IG’s report on that. 

Mr. LENEY. It is not so much that I disagree, but I think we have 

to distinguish eligibility for a particular government program, in 

this case the Veterans First program, and the commitment of 

fraud. I have personally reviewed hundreds of applications for 

verification. 

In 2011, we denied 60 percent of all applicants, and in reviewing 

those denials over the last eight months, it is my judgment that 

the vast majority of the firms that we are unable to declare eligible 

are not committing fraud; they are not willfully misrepresenting 

their status. 

Nobody goes to the police station and tells the cop, hi, I am here 

and I want to show you the documentation that shows you I am 

committing a felony. Ninety-eight percent of the people that we 

identify to be ineligible self-report. To me, that is a very powerful 

statement. And I think one of the disservices that we have done to 

the thousands of veteran business owners that are out there operating with integrity is to imply that lack of eligibility for a VA program equates to fraud. 

When we find someone we think is willfully misrepresenting or 

has consciously misrepresented, we refer them to the IG, as you 

heard from the previous panel. If we think they are conducting 

themselves in a way that is worthy of debarment, we have referred 

them to the debarment committee. 

I will tell you, in respect to the previous panel, we have focused 

more on identifying those where we believe there is fraud, pushing 

them over to the IG for further investigation, because my organization is not in the business of criminal investigation. 

Mr. LANKFORD. Right. 

Mr. LENEY. But I think it is—yes, we deny a lot of firms, but 

they are not fraudulent; they just have a business model that does 

not fit the requirements of Veterans First. 

Mr. LANKFORD. Then I guess I will ask the question how do we 

resolve that, then? Because either the word is not getting out to 

them, they are applying and going through a process without the 

clear stipulations, because it is fairly clear to me you have to have 

51 percent, you have to be in the executive office here, you have 

to lead that company; you have to have 51 percent ownership; you 

have to have the majority of how you are putting out your subs. 

That is pretty clear. You have to be a service-disabled veteran. 

So the standards seem to be pretty clear. Why are we getting so 

many people that are applying for something that the standards 

seem to be not clear? Or is it the hurdles of going through the process that you don’t have the right paperwork? Which is it? 

Mr. LENEY. I think there is a degree of ignorance regarding what 

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tion to their individual company. You have heard anecdotal evidence where a person says I have been running this business for 

12 years, but they don’t meet the requirements of the regulation 

to demonstrate that they have 100 percent control of the business. 

And that is the kind of thing we encounter. 

The good news is we have spent some time and energy over the 

last few months publishing what we call a verification assistance 

brief, identifying those things that have precluded firms from becoming verified, trying to explain them in plain language to help 

firms that are going through the process or getting ready to go 

through the process to understand does my business model fit. So 

what we have seen is a reduction. In 2011, as I said, we denied 61 

percent of the firms that we evaluated. So far, this year, we are 

at about 48 percent denials or more than half now we are verifying. 

Mr. LANKFORD. All right, you are talking about a simple two-step 

process? It sounds like you are putting the information out, but are 

you suggesting something is a two-stage process from VA that, 

when they are going through certification, if they express an interest, instead of getting this big, fat packet saying, fill out all of this, 

they get a simple sheet that says here are the standard criteria, 

check off if you apply to all of this, if all of these apply to you, a 

simple page, then we will send you the big, fat packet? Is that 

what you are recommending there? 

Mr. LENEY. Well, we don’t send them a big, fat packet, we ask 

them to send us a big, fat packet. 

Mr. LANKFORD. Right. But they have a big set of instructions 

saying if you are going to qualify, here is all the stuff; you have 

to prove you are a manager, you have to prove you are qualified, 

you have to prove your ownership, send us your SEC reports, send 

us everything. There is an enormous amount of information that 

has to be sent back. 

Mr. LENEY. What we have determined is because of, as we evaluated failures to be verified, we have tried to go out with these simple little briefs, and I think currently our verification assistance 

brief probably covers 95 percent of the reasons for denial. I think 

we have to be clear. Very seldom do we have a situation where the 

person is not a vet. All of those people have gone away, at least 

from our program. 

Mr. LANKFORD. Now, that is VA only, that is not necessarily saying other agencies? 

Mr. LENEY. I can only speak to VA, sir. 

Mr. LANKFORD. Right. 

Mr. LENEY. I am only speaking to the VA, the VetsFirst program, 

our responsibilities. There was that issue before; now people have 

gotten the message you are not going to be verified, you are going 

to be investigated if you come in and say you are a vet when you 

are not. 

Secondly, ownership. A very small number of firms are denied 

because of ownership. Most people can add up to 51 percent. 

The major issue comes as an issue of control, and the requirements of the regulation are for 100 percent control by the veteranowner or the veteran-owners. And that is a high standard. 

Mr. LANKFORD. So you are saying currently the standard is 51 

percent ownership, but 100 percent control. 

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Mr. LENEY. Owner. One hundred percent control. 

Mr. LANKFORD. So you have to have somebody that is 49 percent 

fairly compliant with your company with you. They don’t care if 

you control everything, but they actually own 49 percent. 

Mr. LENEY. That means somebody who is 49 percent doesn’t care 

how you control the company. That means if someone has an equity stake in your company, they have given you their money with 

no influence over what you do with it. That is a very high standard. And I don’t know very many people in this room that would 

invest a million dollars in a company and have no control over, but 

that is the standard of the regulation. 

Mr. LANKFORD. Okay. How are we trying to verify that? How are 

we verifying currently? What documents are we using to show that 

you have 51 percent ownership and 100 percent control? How are 

we making them prove that? 

Mr. LENEY. One of the tremendous improvements that has occurred in the verification program was as a result of what the Congress did in the passage of Public Law 111–275, which gave the 

Secretary the authority to call in the documents that were necessary to determine if a firm was actually owned and controlled, 

and that has made a huge difference. 

Mr. LANKFORD. That has become the hurdle, as well, as we discussed before, the big, fat packet of information coming back in. 

Now it is such an enormous amount of information that you have 

to be able to bring to bear on it. I am trying to weed through this 

on this. 

Are you saying that is a benefit or that is a detriment? Because 

all that documentation now makes it prove that then you are also 

disqualified because you can’t prove 100 percent control of a company you only own 51 percent of. 

Mr. LENEY. Well, to the 7,900 firms that are currently verified, 

it is a huge benefit. To the contracting officials who are expected 

to ensure that, when they are setting business aside for veteranowned firms, that those firms are in fact owned and controlled by 

veterans, it is a huge benefit. 

You heard the GAO, you heard the IG. I am pleased to report 

that the kind of issues that they laid out in their reports we have 

dealt with, and I am very comfortable that they will not find firms 

that are ineligible for the Veterans First program, not if, but when 

they come back, because we have made great strides in ensuring 

that that doesn’t happen. 

The price of that is diligence. We have gone from 147 site visits 

in 2010 to over 1,000 in 2011. Is that a hurdle? It certainly is a 

hurdle for those firms that we determine are not in fact eligible. 

And sometimes that is what it takes, is a site visit. 

Mr. LANKFORD. Give me a quick statement; I know we have to 

move on. But just give me a ballpark. To fill out the forms to go 

through all that, to gather the data to be able to send it back in 

for certification, how many man-hours do you think it takes to complete that, the process? Take it for a small business. A medium to 

large business, where everything is in a filing cabinet, it is easy to 

pull. For a small business. 

Mr. LENEY. Actually, the difference, Mr. Chairman, is a function 

of the complexity of the business. For a two-person business it is 

89 

relatively straightforward and, as a result, those businesses get 

verified pretty quickly. For more complex businesses, where an 

owner is an owner of more than one business, he is living in one 

State, he is doing operations in another State, that becomes increasingly complex. But it is substantial; you don’t do it in 20 minutes, absolutely. 

Mr. LANKFORD. So give me a ballpark, how much time? 

Mr. LENEY. Well, when I sat down and did it myself, it took me 

about 9 hours. 

Mr. LANKFORD. I would assume veterans get a tremendous 

amount of mail in their box related to just about everything. Is 

there anything going to a recent veteran, as they are leaving out 

from Iraq or Afghanistan, wherever it may be, as they are stepping 

away, are they getting mail saying if you want to start a business, 

we will help you do that? Here are the standards that you need to 

do. 

We are doing preferences in every single agency. If you have an 

interest in any of these items and would like to start your own 

business, call us, and we will go through the process. Who is sending that piece of mail to them? Mr. Puopolo? 

Mr. PUOPOLO. Sir, I guess during the demobilization process, the 

guys coming back, they get briefings and they hear this, but I think 

the main marketing tool they are getting is from either the VA in 

their benefits package or sometimes an SBA rep will reach out during a mobilization process. 

The unfortunate part, and this is why I say this program is hurting people right now, is because they are being told that the Government has a 3 percent goal and they are not meeting that. So 

in the mind of the veteran is if I can work hard and really start 

a capable company, I have more than ample opportunity to build 

a business, hire veterans, become financially stable. 

The problem is the Federal Government doesn’t care to meet that 

goal, and that is why we are having the problem, so that is why 

it is hurting people. And to start a small business it takes a lot of 

time and financing, and you are away from your family and it is 

a sacrifice that is supposedly going to pay off later, but because of 

the system there is really no payoff the way we have it set up now. 

So my fear, and I am sure other people at the table would disagree with me, is unless we are going to fix it, then stop it for our 

younger vets coming back, because some of them are in bad places 

looking to improve their life, and if we throw them into a program 

that is broken and bureaucratic and just going to get them broke 

and depressed, then we shouldn’t be doing that. 

Mr. LANKFORD. No, let’s fix it. 

Anyone else want to make a comment about that? Mr. Weidman? 

Mr. WEIDMAN. The SBA is supposed to be part, and is part, of 

the Transition Assistance Program, or TAP, but there isn’t anything from VA because, frankly, there is no place where it is veteran friendly. CVE, now known as the Center for Verification and 

Evaluation, three years ago was the Center for Veterans Enterprise 

under Secretary Principe. It was known as a place where you went 

for help. 

Nobody goes to CVE now for help. And with all due respect, the 

directions that are on the website and with the application, I printVerDate Aug 31 2005 10:00 Jun 22, 2012 Jkt 000000 PO 00000 Frm 00093 Fmt 6633 Sfmt 6633 C:\DOCS\74458.TXT APRIL
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ed them all out, it was 40-some-odd pages. It was not clear even 

to me, and I participated in the process for the last 15 years. So 

there isn’t what we would call in the military a simple, straightforward, by the numbers direction. If you put that in, you wouldn’t 

have the high failure rate. 

If I am a teacher, and I have taught in my life when I first came 

back from Vietnam, and 60 percent of my kids fail, am I a bad 

teacher or are they bad kids? I would suggest that I am a lousy 

teacher. And it is not that I need to make the test easier; I need 

to make the directions more clear. I need to help them find the 

next rung on the ladder in order to climb up that ladder, and that 

doesn’t exist right now. 

Mr. LANKFORD. Any other comments on that? 

Mr. LENEY. I would like to mention, as part of the Transition Assistance Program currently there is very little emphasis on entrepreneurship. However, Mr. Gudger and I sit on the Interagency 

Task Force on Veteran Employment that was directed by the President back in September and we have proposed the addition of a 

two-day program as part of the Transition Assistance Program that 

will introduce all departing service members to veteran entrepreneurship, and we will be piloting that program in June in Detroit 

with recent veterans who are reaching out to participate. 

Mr. LANKFORD. Mr. Gudger? 

Mr. GUDGER. Yes, I would like to build on Mr. Leney’s comment. 

I personally sit on the SBA-led Interagency Task Force, as well as 

the DOD–VA Joint Task Force for Veteran employment; I co-lead 

the entrepreneurship track of what we are going to introduce. In 

addition to that, I also am on the Business USA Task Force. And 

I mention all that to talk about the Department’s commitment to 

connecting the dots. We have been very aggressive. I met with 

VET–Force, Rick, Bob, Joe, Scott, and got information from them 

about the things that they would recommend that we should do, 

and we are implementing a lot of those things as part of our recommendation. 

So I think that, again, we are taking a quantum leap in the right 

direction. Time will show that. But when we look at what do the 

veterans get when they return, it is more important now than ever, 

with the young men and women coming back from Afghanistan and 

Iraq, to put even more emphasis on it, and we have taken our efforts that we did in fiscal year 2011 and now we are even making 

them even greater, and it is so visible that the front office of the 

Department is looking at this biweekly, saying what are we doing 

and what are we doing to make it easier for veterans not only to 

transition back into good jobs because they are very talented, but 

to transition into being successful entrepreneurs. 

Mr. LANKFORD. I am sure you all know very well the fastest 

growing segment of the job market is going to be brand new startup businesses. 

Mr. GUDGER. Correct. 

Mr. LANKFORD. Brand new start-up businesses, they hire new 

people, they expend capital, they take off much more than a large 

business does. So both economically and also just doing the right 

thing for our veterans, it is a great thing to be able to encourage 

veterans coming back to say start a company. You saved us as a 

91 

Nation, you saved freedom for what is happening; come home and 

save our economy. As you start a new business and you hire a couple of your brothers there, you are reestablishing a stable economy 

back in the United States as well as you do that. 

Now, we should do everything that we can to clear the path in 

front of them, rather than to add hurdles into the middle of it, and 

obviously we have been talking about already what do we do with 

agencies that slow-walk this process. So we have to find where we 

are missing here. I see a couple elements on it, but as each agency 

looks up and says what are we going to do, but I think one of the 

elements is we need to sit in front of veterans, as they are coming 

home, start a company; you have great skills. 

I mentioned earlier in my opening statement that companies in 

Oklahoma love hiring veterans because they don’t know when to 

quit. They don’t know how to work a 40-hour week. That is not an 

issue for them. In fact, if you come to Oklahoma, I will show you 

companies that do energy drilling that they want to hire former 

tank drivers to run their drill rigs because they know how to run 

things blind. They know how to look at the scope and be able to 

operate it, and they have the patience to be able to do it well. 

And they will go hire as many former tank drivers as they can 

find to be able to do their drilling equipment because they are good 

at it. Well, those are skills that are transferrable both in that job 

market, but also in every single aspect of what they have done. 

So if we can do anything as a Nation, as well, to be able to tell 

returning vets start a company and we will help you, and it actually, as Mr. Puopolo mentioned before, they actually get to do it, 

rather than just start a company and it becomes a false hope, if 

they get to start a company and know here are all the places of 

engagement and they can do it both in the public sector and the 

private sector, I think it is a great asset to be able to come back. 

Mr. Gudger. 

Mr. GUDGER. I agree with you. As a matter of fact, myself and 

Tom and Farouk, who is behind me, we believe that encouraging 

the young men and women to become entrepreneurs start prior to 

them coming back, it starts when they almost first go in, we are 

looking at things that we can do to get them information in the 

hand earlier to make that assessment and have them aspire to be 

more so. 

One of the studies I commissioned when I first became the Director in this job was a study on service-disabled veteran-owned business barrier reduction, to figure out how we can reduce the barriers. I came from industry. I am the first director in DOD to come 

from industry, so I was very familiar with a lot of the barriers. I 

reached out in my second week to all of our directors, small business directors and specialists, many of them are here before me 

today to show their support and their commitment to veterans as 

well. I took all of that feedback, said here is what we need to do 

to start reducing the red tape and barriers, and we moved out on 

that pretty quick. 

By June of last year I signed a joint memo for the first time, myself and the head of the Defense Procurement and Acquisition Policy, to encourage market research. Market research, we believe, is 

the cornerstone of creating competition. Competition opens the 

92 

doors for service-disabled veteran-owned businesses to compete on 

future opportunities. 

Then, in addition to that, we had a peer review process where 

all of the directors, out of my office we do a billion or more, and 

then the rest of the directors do the services and component agencies at 500 million or more. They sit on every single peer review 

before any plan acquisition to look for opportunities for small business, whether we require set-asides and subcontracting agreements 

or we look at pieces that can be broken out for them as prime contractors. And that is an aggressive move we are doing as a Department and we are fully committed to that. 

Mr. LANKFORD. Great. You realize if you can do this well you will 

be a good example for a lot of other agencies. So we hope for your 

success on that one, so continue pressing forward. Yes, sir. 

Mr. WEIDMAN. Mr. Chairman, we need a mechanism that works 

for verification of SDVOSBs, but we also need a verification and 

evaluation process of large primes. Most of the large primes do not 

do the things that are contained in their boilerplate. They do not 

list a Vets 100 report; they do not make any effort to go out and 

hire any of the protected groups, principally disabled veterans and 

wartime veterans. If they do, it is quite separate and apart from 

that requirement in the law of all Federal contractors; and they do 

not do the subcontracting aggressively that they say they are going 

to do. The situation now is it is a let’s not and say we did of here 

is our subcontracting plan, but nobody comes back and checks it. 

Mr. LANKFORD. Whose responsibility is that to check that? 

Mr. WEIDMAN. The agency. 

Mr. LANKFORD. So it is left to the contracting officer; it is somebody else after that. Correct or not correct on that? 

Mr. WEIDMAN. I don’t know. 

Mr. LENEY. I can speak for the VA. The VA established, in late 

2011, a subcontracting compliance review program where the chief 

acquisition officer is taking on the responsibility to look at prime 

contractors who have subcontracting plans, and we have begun 

doing audits, site visits of those prime contracts to determine 

whether or not they are in fact delivering on their promises, because, yes, historically that has been a challenge. 

And for contracting officers it has been a particular challenge to 

unravel that at a time when what they are focused on is completing the contract, it is a standard, getting the medical center 

built on time, on budget. So we have, at the VA, just initiated a 

program that just started this year, where we are going out and 

assisting them by auditing these prime contractors. 

Mr. GUDGER. Yes, I would like to speak. So in the Department 

of Defense, this is a good example, Chairman Lankford, of reducing 

barriers. We decided not to solve this problem with people, but 

with technology. In our past performance or our source selection 

criteria, we are no longer, on many of our acquisitions, putting out 

a goal in subcontracting; it has become a requirement as a part of 

our response. 

We track that through our performance database, and large companies who do not meet what they say they are going to deliver to 

us, as we are tracking it going forward, if all things remain equal 

93 

in a future competition, we do take that in consideration, have they 

met their small business goals. 

Mr. LANKFORD. So in the previous contracts, if they meet the 

small business goals; if they didn’t, then they are marked down for 

the next contract. 

Mr. GUDGER. Correct. That is a way of accountability and adding 

more visibility into, one, do we get what we are buying and, two, 

are the companies doing the right things for our economy and 

spending taxpayer dollars correctly. So I think those are steps we 

have taken in the Department in fiscal year 2011, and we are going 

to continue those in fiscal year 2012. 

Mr. LANKFORD. Okay. Thank you. 

Mr. Puopolo, do you want to make a final statement? 

Mr. PUOPOLO. Yes, sir. Thank you. To that point, we hear a lot 

of this talk and hopefully it will become a reality, but we still see 

that a lot of the contracts are coming out bundled, a lot of them 

are not going to small business. And it is a small business problem. 

Mr. LANKFORD. You are saying the contractor is giving it to one 

company that handles a lot of the other subs, rather than going 

through a company that would be a service-disabled veteran that 

would take it at that point? 

Mr. PUOPOLO. Yes, sir. And the Air Force has NETCENTS contracts that are billions of dollars that lock everybody out, and this 

is the message that the veterans get when they do talk to the SBA 

or they do talk to the VA, is the Government buys everything, 

which is pretty much true, they buy everything from pencils to airplanes. What they don’t tell you is how they buy it. And when you 

look at how the Government buys it, it buys it through bundled 

contracts, national acquisition contracts. 

I sat down with a VA contracting officer that told me he was 

forced to buy off a national acquisition contract and he bought 

trash bags that cost more and didn’t fit his trash cans. So that just 

was apparent to me that this system is not working. 

So from the veteran community, we would like to see that broken 

down more small businesses—— 

Mr. LANKFORD. So are you getting instructions that all of that, 

okay, if you are not getting the prime contract, how to get the sub? 

And is there any follow-up on that? 

Mr. PUOPOLO. Yes, sir, but we face the same hurdles. We approach large businesses and they go to these conventions and they 

say, oh, we want to increase spending with veterans, we want to 

do more. When you approach them, you go through their small 

business people, it is a gatekeeper; you don’t hear back from them, 

they tell you to follow up, you send emails and calls and calls and 

calls upon calls, and you never hear back. 

Mr. LANKFORD. Right. But that means some agency is not following up on them. We are back to that. 

Mr. Gudger? 

Mr. GUDGER. Yes. In the example of NETCENTS, not only do we 

have a large business component, it is a multiple work contract for 

multiple winners, one portion of it is a small business set-aside 

multiple work contract and the other is large. In addition to the 

large business side, they have a requirement in their portion of it 

of over 30 percent, roughly, small business subcontracting they 

94 

must do, and it will be a highly weighted factor for that particular 

opportunity. 

So we are doing things in the Department. In 2011, together, our 

prime and subcontracting dollars was the highest it has ever been 

in small business on both sides. It didn’t increase, it was the highest number in our history. So I think we are making a quantum 

leap in the right direction. 

Mr. LANKFORD. Well, gentlemen, thank you. 

Mr. Weidman, did you have another comment? 

Mr. WEIDMAN. Yes, a last point, if I may. We have talked a lot 

about enforcement of the law today and about the sanctions in one 

way or another, either on individuals or on the agency. But one of 

the most effective things at DOD prior, and, incidentally, Andre 

has been a breath of fresh air over there since he got there. 

But there were folks in the previous administration, Dr. James 

Findley in particular, who was terrific on SDVOSB, and under his 

guidance they started an awards program. Unfortunately, 2008 

was the last year that was done, and it focused attention within 

DOD on the positive aspects and recognizing both the Federal 

workers who had gone above and beyond, companies, private and 

large contractors that had gone above and beyond, and outstanding 

small service-disabled veteran businesses who had materially contributed to innovation and products that will better serve our men 

and women in the field. That is something that can be done in virtually every agency. 

Last is a concern, and I was glad to see Chairman Johnson here 

this morning, but we have been talking with the Veterans Affairs 

Committee and with Chairman Graves’ people, and one of the 

things that we need to look at very hard is standardization of definitions between what SBA defines as control, what SBA defines as 

a small business, and what VA does. 

Frankly, it is on this control issue where we have had all the 

problems and there has been discussion, and I think Chairman 

Graves thinks that the control issue ought to be moved back to 

SBA because it is settled law, including case law, over at SBA and 

it is not anywhere near settled over at the VA yet. So it is an area 

where a good deal of cooperation between the three jurisdictions 

and in-house can really lead to a productive solution. 

Mr. LANKFORD. Terrific. I am only slightly past my five minutes 

of questioning time, but I do appreciate very much the conversation 

on it. This allows us to have a dialogue to be able to work through 

and try to get this stuff in the record. 

As you know well, we will have staff that will go through this 

and start trying to determine, okay, which direction can we go with 

this and which agency do we do the follow-up questions on. So getting these things in the record and getting this kind of colloquy is 

very helpful to us in the days to come as we do the follow-up on 

it. 

I appreciate, again, your service and your work, and for staying 

here even a little bit longer to be able to go through this. 

With that, this hearing is adjourned. 

[Whereupon, at 12:26 p.m., the subcommittee was adjourned.] 

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