Early this month, the U.S. Government Accountability Office (GAO) issued a report that told us something we already knew: that the service-disabled veteran-owned small business program (SDVOSB) remains vulnerable to fraud and abuse. In its 59-page report, GAO concluded that this vulnerability is the result of a lack of inventory controls and the listing of potentially ineligible firms in the VetBiz Vendor Information Pages (VIP) Program (the VetBiz Program). (This recent GAO report can be accessed at: http://www.gao.gov/assets/600/593238.pdf).
As many veteran business owners can attest, certification through the VetBiz Program is a bit like hazing. On LinkedIn discussions, I have read many laments about the intrusive nature of certification and complaints about the Center for Veterans Enterprises (CVE), the entity charged with implementing and administering the VetBiz Program. At one point, the VetBiz website was down for a significant period of time and the extensions granted for on-line re-verification insufficient.
Despite the inconveniences caused to veteran business owners, it appears that the VetBiz Program, which is relatively new, is not meeting the expectations of the Government as it relates to preventing fraud and abuse. As the GAO report found, the Department of Veterans Affairs (VA) has made inconsistent statements about its progress in verifying firms listed in VetBiz by using the more stringent process the VA implemented in response to the Veterans Small Business Verification Act (2010 Act). For example, in one communication, the VA stated that as of February 2011, all new verifications would apply the requirements of the 2010 Act. However, as of April of this year, one year after this VA-set deadline, only forty percent of the firms listed in VetBiz had been verified under this process. Of the sixty percent remaining, 134 firms received a total of $90 million in new VA SDVOSB set-asides or sole-source contract obligations from November 30, 2011 to April 1, 2012.
It may very well be that these firms are eligible to participate in the SDVOSB program. After all, they have undergone a verification process, and they have self-certified their status by holding themselves out as such. At the same time, however, the VA has not applied the standards to these firms that were found necessary in order to ensure true eligibility to receive SDVOSB set-asides and sole source contracts. Because of this, ineligible firms may have slipped through the cracks. That risk exists relating to sixty percent of all firms listed in VetBiz.
At least the VA is taking steps to address this issue of poor controls and vulnerability to fraud and abuse. In October of 2011, the GAO issued a series of recommendations to the VA to enhance its fraud prevention efforts. The VA has established processes in response to six of the thirteen recommendations. These include conducting unannounced site visits to high-risk firms and developing procedures for referring suspicious SDVOSB applications to the VA’s Office of the Inspector General (OIG).
Only time will tell what impact the VetBiz Program will have on combating the fraud and abuse that necessitated its establishment. With the exception of Alaska Native Corporations (ANCs), the SDVOSB small business program has received perhaps the most criticism as it relates to awarding contracts to ineligible firms. Especially with the growing number of veteran-owned businesses and the need to support those veterans returning to civilian life, it is crucial that this program is able to serve the purpose for which it is intended.
