By contrast,  VA’s authorities under the 2006 Act apply both to SDVOSBs and other  VOSBs. VA Exceeded Its Veteran Contracting Goals since FY07, but Faces Challenges in Monitoring Interagency Agreements

For FY07, VA established a contracting goal for VOSBs at 7 percent––that  is, VA’s goal was to award 7 percent of its total procurement dollars to  VOSBs. 2). The  increase of awards to VOSBs and SDVOSBs largely was associated with  the agency’s greater use of the goals and preference authorities  established by the 2006 Act. 3). In the Veterans’ Benefits Improvement Act of 2008 (the 2008 Act) Congress  enhanced the 2006 Act’s provisions by requiring that any agreements VA  enters with other government entities on or after January 1, 2009, to  acquire goods or services on VA’s behalf, must require the agencies to  comply, to the maximum extent feasible, with VA’s contracting goals and  preferences for SDVOSBs and VOSBs. However, VA did not ensure that all  interagency agreements include the 2008 Act’s required language or  monitor the extent to which agencies comply with the requirements. VA Has Made Limited Progress in Implementing Its Verification Program and Has Not Developed a Thorough and Effective Program

In May 2008—approximately a year and a half after the 2006 Act was  enacted and a year after the provisions discussed here became effective— VA began verifying businesses and published interim final rules in the  Federal Register, which included eligibility requirements and examination  procedures, but did not finalize the rules until February 2010 (see fig. The slow implementation of the program appears to have contributed to  VA’s inability to meet the requirement in the 2006 Act that it use its veteran  preference authorities to contract only with verified businesses. However, in its  December 2009 rule VA committed to awarding contracts using these  authorities only to verified businesses as of January 1, 2012. As of April 8, 2010, VA had verified about 2,900 businesses––approximately  14 percent of VOSBs and SDVOSBs in the VetBiz.gov database. Site visits further investigate control and ownership for select high-risk  businesses. Because of this delay, it currently has a large  backlog of businesses awaiting site visits and some higher-risk businesses  have been verified months before their site visits occurred or were  scheduled to occur. To summarize our observations concerning VA’s verification efforts, the  agency has been slow to implement a comprehensive program to verify the  veteran status, ownership, and control of small businesses and maintain a  database of such businesses. The weaknesses in VA’s verification process  reduce assurances that verified firms are, in fact, veteran owned and  controlled.
Why GAO Did This Study

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 veteranowned and service-disabled veteran-owned small businesses (VOSB and SDVOSB) when awarding contracts to small businesses. This testimony discusses preliminary views on (1) the extent to which VA met its prime contracting goals for SDVOSBs and VOSBs in fiscal years 2007-2009, and (2) VA's progress in implementing procedures to verify the ownership, control, and veteran status of firms in its mandated database. GAO obtained and analyzed data on VA's contracting activities, and reviewed a sample of verified businesses to assess VA's verification program.

What GAO Found

VA exceeded its contracting goals with SDVOSBs and VOSBs for the past 3 years, but faces challenges in monitoring agreements with other agencies that conduct contract activity on VA's behalf. The increase of awards to SDVOSBs and VOSBs was associated with the agency's use of the unique veteran preferences authorities established by the 2006 Act. However, GAO's review of interagency agreements found that VA lacked an effective process to ensure that interagency agreements include required language that the other agencies comply to the maximum extent feasible with VA's contracting goals and preferences for SDVOSBs and VOSBs. VA has made limited progress in implementing its verification program. While the 2006 Act requires VA to use veteran preferences authorities only to award contracts to verified businesses, VA's regulation does not require that this take place until January 1, 2012. To date, VA has verified about 2,900 businesses-- approximately 14 percent of businesses in its mandated database of SDVOSBs and VOSBs. 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. VA's procedures call for site visits to investigate the ownership and control of higher-risk businesses, but the agency has a large and growing backlog of businesses awaiting site visits. Although site visit reports indicate a high rate of misrepresentation, VA has not developed guidance for referring cases of misrepresentation for enforcement action. Such businesses are subject to debarment under the 2006 Act.