Department of Veterans Affairs:

Agency Has Exceeded Contracting Goals for Veteran-Owned Small Businesses, but It Faces Challenges with Its Verification Program

GAO-10-458: Published: May 28, 2010. Publicly Released: May 28, 2010.

Additional Materials:

Contact:

William B. Shear
(202) 512-4325
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

The Veterans Benefits, Health Care, and Information Technology Act of 2006 (the 2006 Act) requires the Department of Veterans Affairs (VA) to give priority to veteran-owned and service-disabled veteran-owned small businesses (VOSB and SDVOSB) when awarding contracts to small businesses. The 2006 Act also requires GAO to conduct a 3-year study of VA's implementation of the act. GAO evaluated (1) the extent to which VA met its prime contracting goals for VOSBs and SDVOSBs in fiscal years 2007-2009; (2) VA's progress in implementing procedures to verify the ownership, control, and status of VOSBs and SDVOSBs in its mandated database; and (3) VA's progress in establishing a review mechanism of prime contractors' subcontracts with VOSBs and SDVOSBs. GAO obtained and analyzed data on VA's prime and subcontracting accomplishments, and reviewed a sample of verified businesses to identify any deficiencies in VA's verification program.

While VA exceeded its contracting goals with VOSBs and SDVOSBs for the past 3 years, it faces challenges in continuing to meet its other small business contracting goals and monitoring agreements with other agencies that conduct contract activity on VA's behalf. While VA was able to exceed its contracting goals for VOSBs and SDVOSBs, its contracting with women-owned small businesses and HUBZone firms fell short of its goals during this period. In addition, GAO's review of interagency agreements found that VA lacked an effective process to ensure that interagency agreements include required language that the other agency comply, to the maximum extent feasible, with VA's contracting goals and preferences for VOSBs and SDVOSBsand to monitor the extent to which agencies comply with the requirements. VA has made limited progress in implementing an effective verification program. While the 2006 Act requires VA to use the veteran preferences authorities only to award contracts to verified businesses, VA's regulation does not require that this take place until January 1, 2012. In fiscal year 2009, 25 percent of the contracts awarded using veteran preferences authorities went to verified businesses. To date, VA has verified about 2,900 businesses--approximately 14 percent of businesses in its mandated database of VOSBs and SDVOSBs. Among the weaknesses GAO identified in VA's verification program were files missing required information and explanations of how staff determined that control and ownership requirements had been met. In addition, VA's procedures call for site visits to further investigate the ownership and control of higher-risk businesses, but the agency has a large and growing backlog of businesses awaiting site visits. Furthermore, VA contracting officers awarded contracts to businesses that had been denied verification. Finally, although site visit reports indicate a high rate of misrepresentation, VA has not developed guidance for referring cases of misrepresentation for investigation and enforcement action. Such businesses would be subject to debarment under the 2006 Act. To ensure a thorough and effective verification program, VA needs robust procedures for reviewing businesses, an effective system to ensure that contracting officers do not use veteran preferences authorities with denied businesses, and clear guidance for referring businesses potentially abusing the program. VA has developed a mechanism to review prime contractors' subcontracts with VOSBs and SDVOSBs, but the agency has not yet implemented it. For the past 3 years, VA fell substantially short of achieving subcontracting goals for VOSBs and SDVOSBs. The agency acknowledged shortcomings in this area and intends to use a review mechanism to confirm all subcontracting activities by prime contractors with approved subcontracting plans for a sampling of contracts awarded in fiscal year 2010. VA expects increased performance for subcontracting goal attainment as a result. It is too soon to assess the effectiveness of VA's subcontracting efforts.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To facilitate the Department of Veterans Affairs' progress in meeting and complying with the requirements of the 2006 Act, and to better ensure that VA meets the requirement to use veteran preferences authorities with verified businesses only, as required by the 2006 Act, the Secretary of Veterans Affairs should develop a more effective system to ensure that contracting officers do not use veteran preferences authorities to award contracts to businesses that have been denied verification, and provide additional guidance and training to contracting officers as necessary.

    Agency Affected: Department of Veterans Affairs

    Status: Open

    Comments: VA officials reported the agency has required verification prior to contract award since October 1, 2010 by virtue of having adopted a class deviation to its Veterans Affairs Acquisition Regulation (VAAR). According to VA, the deviation provides an expedited 21-day process for verifying apparent awardees. VA officials reported that verification will be required at the time a firm submits an offer (i.e., not at the point of award) beginning January 1, 2012. VA officials said they notified contracting staff of this change on September 17, 2010 with an Acquisition Policy Flash.

    Recommendation: To facilitate the Department of Veterans Affairs' progress in meeting and complying with the requirements of the 2006 Act, and to help address the requirement in the 2006 Act to maintain a database of verified veteran-owned businesses, the Secretary of Veterans Affairs should develop and implement a plan that ensures a more thorough and effective verification program. Specifically, the plan should address actions and milestone dates for achieving the following: (1) promptly filling vacant positions within OSDBU, including the two leadership positions, and hiring additional staff positions as necessary; (2) improving its verification processes and procedures to ensure greater completeness, accuracy, and consistency in verification reviews, including updating data systems to reduce the amount of manual data entry by staff and revising the verification procedures to include additional guidance for staff on maintaining the appropriate documentation, requesting documentation from business owners or third parties under specific circumstances, and conducting an assessment that addresses each eligibility requirement; and (3) conducting timely site visits at businesses identified as higher risk and taking actions based on site visit findings, including taking prompt action to cancel business' verification status as necessary.

    Agency Affected: Department of Veterans Affairs

    Status: Open

    Comments: As of July 2011, VA officials reported that the Office of Small Disadvantaged Business Utilization (OSDBU) filled vacant leadership positions. They also reported that CVE updated its verification program data systems in May 2011 to provide it with more automated capabilities. Also, VA reported it had updated its online application system to indicate their adoption of a systematic process for requesting documents establishing an applicnant's ownership and control. Furthermore, VA reported it has updated its guidelines as of July 15, 2011 addressing how staff should assess applicants in recommending to grant/deny verification and maintain documentation. Finally, VA reported a large increase in the number of site visits conducted in fiscal year 2011, but did not provide information on the size of the backlog of site visits or the timeliness with which visits have been conducted.

    Recommendation: To facilitate the Department of Veterans Affairs' progress in meeting and complying with the requirements of the 2006 Act, and to ensure compliance with the 2006 Act, as its provisions were amended by the 2008 Act (Pub. L. No. 110-389), the Secretary of Veterans Affairs should develop an effective process to ensure that agreements it enters into with other federal agencies for contracting on its behalf to acquire goods or services include the required language and monitor other agencies' contracting performance under those agreements.

    Agency Affected: Department of Veterans Affairs

    Status: Open

    Comments: According to the 60-day letter, VA conducted training sessions between January and March 2010 on topics related to this recommendation. Additionally, the letter stated VA has a requirement in place that all interagency agreements are reviewed and require concurrence by OGC to ensure compliance with Pub. L. No 110-389.

    Recommendation: To facilitate the Department of Veterans Affairs' progress in meeting and complying with the requirements of the 2006 Act, and to ensure that VA takes enforcement actions against businesses that have misrepresented themselves, as required by the 2006 Act, the Secretary of Veterans Affairs should develop detailed guidance that would instruct staff under which circumstances to make a referral or a debarment request as a result of the verification program.

    Agency Affected: Department of Veterans Affairs

    Status: Open

    Comments: VA officials reported in March 2011 that procedures had not been developed for referring applicants for debarment, but said efforts were underway to develop ground rules for these referrals. They said the routine involvement of general counsel in revewing applicant documentation would serve to alert the debarment committee of potential cases for action, since the general counsel that review applicants are the same that serve on VA's debarment committee for firms that misrepresent their veteran status.

    Apr 9, 2014

    Mar 25, 2014

    Mar 5, 2014

    Feb 27, 2014

    Jan 15, 2014

    Jan 14, 2014

    Jan 13, 2014

    Dec 3, 2013

    Nov 13, 2013

    Oct 31, 2013

    Looking for more? Browse all our products here