VA Scrubs Its Contractor List The Department of Veterans Affairs has dropped more than 8,000 companies from its database of veteran-owned and service-disabled veteran-owned businesses because they did not verify their eligibility. Another 1,600 firms have failed to meet verification requirements, according to the department’s OSDBU director. In all, more than 80% of the companies that claimed to be veteran- or SDV-owned were stricken from the database, making them ineligible for set-aside contracts with VA. The shrinking pool of verified SDV businesses could make it more difficult for agencies to meet the 3% statutory goal for contracting with those firms. The government has never come close to that goal. However, some of the problems may be laid at VA’s feet. One army veteran who owns a contracting business said he applied for verification, but was told VA could not find his service records and he would have to produce his discharge papers—more than 40 years after he left the army. After revelations of fraud in the service-disabled veteran-owned contracting program, Congress ended the practice of having companies self-certify their eligibility for veteran-owned or SDV status in VA’s Vendor Information Pages, www.vip.vetbiz.gov. The database is the only official source for SDV businesses; however, other agencies can continue to accept self-certification. Congress required VA to verify the eligibility of all companies listed in the database. In testimony prepared for the House Veterans Affairs Committee’s Subcommittee on Oversight and Investigations, VA OSDBU director Tom Leney said 8,100 companies that had self-certified were removed from VIP after they did not respond to requests for documentation. He said 2,000 companies have been verified as either SDV-owned or veteran-owned, while 1,600 applications have been denied. In 2009 and 2010 the Government Accountability Office identified 10 ineligible SDV businesses that had received $100 million in federal contracts. A recent audit by VA’s inspector general reviewed 42 veteran-owned or SDV businesses that had been awarded contracts and found 32 of them were ineligible. “Our interviews and observations often showed that business managers or nonveteran family members managed, operated and controlled the day-to-day business operations,” Assistant Inspector General Belinda Finn testified at the July 28 subcommittee hearing. “We concluded that online document reviews were insufficient to establish program eligibility and ensure businesses meet federal ownership and control requirements. Instead, we believe interviews with veteran owners and business managers and the review of documents such as corporate bylaws, stock certificates, tax returns, resumes and negotiated checks during onsite visits are critical to establishing a veteran’s ownership and control of a business.” To qualify for veteran- or SDV-owned set-asides, VA rules require that the veteran own at least 51% of the business, manage its operations and work full-time on the premises. VA says those restrictions help protect against “rent-a-vet” front companies, but many veterans organizations have complained that the rules are too strict. Finn told the subcommittee that the IG has opened numerous investigations of alleged “pass-throughs” by veteran or SDV contractors. Leney said VA is implementing a new program to increase scrutiny of subcontracting by SDV and veteran-owned businesses. “VA will be conducting subcontracting compliance reviews, and is in the process of including third-party access language in its contracts that will allow access to VA contractors’ records,” he testified. ”Once the access language is incorporated into VA contracts, VA will begin randomly accessing prime contractors for subcontracting compliance.” VA is the only agency that can set aside contracts for veteran-owned companies as well as SDVs. By law, those companies have first claim on all the department’s contracts. In 2010 VA awarded 23% of its prime contract dollars to veteran-owned firms and 20% to SDVs.