Davy Leghorn, assistant director of the Legion's Economic Division, testified before a joint congressional subcommittee hearing on challenges to veteran-owned small business and service-disabled veteran-owned small business. (Photo by Craig Roberts)

Legion: VA needs to relax vet business rules

On March 19, during a congressional hearing, The American Legion called for changes in what it considers a small business killing practice by the Department of Veterans Affairs (VA). At issue is the VA's lengthy and complex process by which it verifies the eligibility of a veteran-owned small business (VOSB) or service-disabled veteran-owned small business (SDVOSB) to be awarded government work contracts.

Davy Leghorn, assistant director of the Legion’s Economic Division, was among those testifying before a joint session of the House Committee on Veterans Affairs’ Oversight & Investigations Subcommittee and the House Small Business Contracting & Workforce Subcommittee.

Leghorn began his remarks with an anecdote illustrating the pitfalls of the current system. "A few months ago, 20 full-time employees were laid off in Wisconsin when a service-disabled veteran-owned construction firm lost $1.7 million worth of work and the ability to bid on future contracts," he said. "This was due to VA’s lengthy verification process. This is a real shame because the whole point of VA verification is to make these businesses eligible to compete for VA contracts.

"The bottom line is that many veterans find this process to be overly burdensome, distracting and not worth the effort. The American Legion wants these businesses to be successful, not hamstrung, which is why The American Legion passed Resolution 108, ‘Support Verification Improvements for Veterans’ Businesses within the Department of Veterans Affairs.’"

Leghorn assured the congressmen that the Legion appreciates the need for verification and supports the practice to assure the government that it is contracting with legitimate, properly run veteran-owned and operated businesses.

"The American Legion has been involved with VA verification since the program’s inception," Leghorn said. "We participate in VA’s Verification Assistance Counseling Program, (but) all too often we see businesses loose vital contracting opportunities due to the lengthy verification process. In some cases, businesses lose previously awarded contracts, resulting in layoffs and furloughs of their employees. The American Legion cannot stress enough how detrimental the current process can be to these veterans whose lives and family incomes are tied to their small businesses.

"The main challenge with the verification program seems to us to be VA’s inability to strike the appropriate balance between the requisite government oversight to protect the integrity of the program and the impact and cost to veteran small businesses."

In his Legion prepared testimony, Leghorn characterized the VA’s current rules regarding "unconditional" veteran ownership and control requirements as "overzealous and unrealistic." He advised a relaxation of the overly complex rules without compromising the necessary integrity of the verification process. Leghorn intimated that understanding and applying the rules as currently enforced by VA requires legal and business practice knowledge that’s not readily or affordably available to many veteran-owned small businesses, especially startups and those with small corporate structures that do not include legal counsels. Failure to relax the rules or make them more "user friendly," in the Legion’s view, will continue to discourage veteran-owned small business startups from entering the government contract arena, threaten the fiscal health of other businesses as they seek expensive legal assistance and/or spend inordinate amounts of time navigating the verification process, and favor larger businesses at the expense of smaller entities. According to Leghorn, these consequences harm not only the veteran-owned small businesses, but also the government as it searches for the best providers for a particular need.

When interviewed prior to his subcommittee testimony, Leghorn outlined specific steps the Legion believes VA can take to streamline the verification process. These include, "Better training of examiners to review cases based upon a totality of circumstances and not to solely look for single points of failures," Leghorn said, as well as giving applicants "the benefit of a doubt" if less than serious deficiencies exist in the application. Leghorn also suggests that the strict VA interpretations of veteran ownership and control should be modified.

"Their (VA) definition of ‘managing day to day operations’ should not be interpreted as hands on involvement of operational tasks. It could include investment strategies, managing staff and determining which contracts to pursue," he said. "These things could also demonstrate ownership and control. Further, a veteran’s maintenance of a business partner or employee(s) with more experience or certifications than he or she should not be interpreted as giving up control of the business. Some veteran-owned businesses have been denied verification because of this.

"The American Legion will continue to work with the SBA (Small Business Administration) and VA to improve the verification process and provide counseling services to our veteran entrepreneurs. The VA verification program is still in its relative infancy; this is the time to make the necessary changes."

VA is aware of the problems posed by its current business verification process. The agency announced recently that it is speeding up eligibility determinations of veteran-owned small businesses for its "Veterans First" contracts by allowing applicants to correct minor deficiencies on their paperwork before an initial denial is issued. This new policy begins May 1.

For several years now, the Legion has maintained a Small Business Task Force as an active advocate on behalf of veteran-owned small businesses on Capitol Hill and offers free training sessions to veteran business owners and would-be owners wishing to do business with the U.S. government.