Officials with the Department of Veterans Affairs got an ear-full from two House subcommittees last Wednesday who accused the agency of failure to comply with a law requiring Veteran-owned Small Businesses to receive priority for contract awards.
Lawmakers charged VA Officials with failure to timely and effectively process certifications for Veteran-owned Small Businesses (VOSM) and Service-disabled, Veteran-owned Small Businesses (SDVOSB) to bid on set-aside contracts, claiming that inefficiency at the VA was excluding legitimate veteran-owned businesses from applying.
Lawmakers pointed to companies like Government Contracting Services LLC (GCS), which lost a bid for a set-aside contract because the VA had not approved its verification until after it submitted the bid. GSC was initially denied verification of that status and filed a request for reconsideration which, according to the law, was supposed to be completed within 60 days. Backlogs at the VA caused the reconsideration to take far longer and GSC’s request was still pending during the period of the solicitation. The request was finally granted six days after the contract had been awarded to another company.
According to VA Officials, the backlog stems from new rules, which this year started requiring verification of the veteran status of all small businesses before they can bid on opportunities reserved for veterans. This was in response to a GAO report issued in 2009 that showed the government-wide SDVOSB contracting program was vulnerable to waste. The GAO audited 10 firms and found $100 million in contracts had been collected through fraud or abuse of the program.
According to critics in Congress, the new verification rules have unintended consequences for legitimate small businesses that get frozen out. “Our veteran businesses are having to scrap. They shouldn’t be the ones having to fight so hard.” said Rep. Marlin Stuzman, R-Ind.
Tom Leney, executive director of the VA’s small and veteran business programs defended the tighter rules, citing the results of an internal audit released in July 2011 that found approximately $500 million per year in contracts were being allocated to ineligible businesses. And it projected that $2.5 billion will be awarded in set-asides to ineligible businesses over the next five years if the VA does not strengthen oversight and verification procedures. “Our goal is to reduce fraud and ensure set-aside dollars land in the hands of rightful recipients,” he said.
The verification requirements for set-asides currently apply only to businesses seeking contracts from the VA. A bill was passed by the Senate last year that would extend these requirements throughout the government, but has not yet been passed by the House.
Learn more about this topic by taking the following webinar: Preferential Contracts for Veterans: Qualifications and Implications for Industry and Government.