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Veteran-owned businesses face problems with VA

Nov. 30, 2011 - 03:38PM   |   Last Updated: Nov. 30, 2011 - 03:38PM  |  
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Lawmakers grilled Veterans Affairs Department officials Wednesday about why veteran-owned businesses ranked eighth in priority for government contracts despite laws and regulations that are supposed to put veterans first.

The answers provided at House Veterans' Affairs Committee hearing were murky.

Thomas Leney, executive director of VA's office of small and disadvantaged business utilization, said veteran-owned businesses "have priority in open market purchases."

When asked what that meant, he said he was not an expert on government contracting and couldn't really explain it. "I am not the person to answer that question directly," he said as he appeared before a joint hearing of the veterans' affairs committee's economic opportunity panel and oversight and investigations panel.

Disabled Navy veteran Bob Hesser, owner of Vetrepreneur, a Virginia-based small business, said the veterans-first policy looks like "vets last" to many small businesses looking for contracts from VA.

Both business owners and VA contracting personnel find the "convoluted" priority list hard to understand, Hesser said in a written statement for the record. If VA needs something, the top priority is to search its current inventory, followed by looking in the inventory of other agencies. The third priority is buying from Federal Prison Industries, fourth is buying from blind or severely disabled people who may or may not be veterans, fifth is purchasing from wholesale suppliers, sixth is buying from mandatory federal supply schedules and seventh is buying from optional federal supply schedules.

"Finally, we arrive to the bottom, last category on the VA purchasing priority list commercial sources and open market," Hesser said.

Getting contracts is only half the battle facing veterans-owned businesses. The other, equally large problem, is certifying the ownership and operational control of a company.

After longstanding complaints of fraud and deception among businesses falsely claiming to be veteran-owned, VA has been verifying companies, a process that resulted in about 1,800 being removed from the approved vendor list. About 8,000 companies are approved and applications are pending for about 1,700 others.

Leney said the process was very slow in the beginning, lasting an average of 127 days, but has been cut to an average of 75 days now. But speed may not make everyone happy; in the past two months, 60 percent of companies denied certification as veteran-owned businesses have appealed, he said, requiring a shifting of resources.

VA's testimony was unsatisfying to lawmakers.

"We need to get this right," said Rep. Bill Johnson, R-Ohio, chairman of the veterans' oversight and investigations subcommittee.

The certification process needs to be efficient, he said, and approved businesses must be "able to compete for the appropriate contracts. Otherwise, there is no point in having these businesses in the system if VA is going to ignore them."

For some businesses, delays are causing major problems, said Rep. Marlin Stutzman, R-Ind., the veterans economic opportunity subcommittee chairman. He said he and his staff are hearing "with increasing frequency" from legitimate veteran-owned businesses that "are having an extremely difficult time being validated. Several have even had to close down as a result."

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