VA said to fall behind on verifying veteran-owned businesses

Through April, the VA had verified only 14 percent of companies in Vetbiz.gov, a database of companies able to get set-aside contracts.

The backlog is increasing despite a large number of business-owners lying, claiming to be veteran-owned to get special treatment. GAO has said. GAO exposed fraud in several of the Small Business Administration’s small-business programs, including the program that sets aside contracts for small companies owned by service-disabled veterans.

The Veterans Affairs Department is struggling to verify the ownership of a growing number of small businesses supposedly owned by veterans, a new report says.

To date, the VA has verified roughly 2,900 businesses in its Vetbiz.gov database of companies described as veteran-owned or service-disabled veteran-owned small businesses. That's about 14 percent of businesses in the database, according to a Government Accountability Office report released May 28.

In response, VA officials wrote the backlog has reached more than 5,000, but the VA has verified 3,000 companies as of May 1.


Related stories:

Fake firms rip off SBA set-aside program for $100M

House panel told of abuses in VA set-aside program


In 2009, GAO said at least 10 fake service-disabled veteran-owned small businesses had swindled roughly $100 million from SBA’s set-aside contracts. For example, one company wasn’t owned by a service-disabled veteran, and another subcontracted all of its work to a large foreign company, GAO said last November.

In its new report on the VA, GAO pinpointed a several specific problems with the VA’s verifications. Department officials were missing files of required information and explanations of how staff members determined that the companies were owned and controlled by veterans.

In addition, officials have an increasing backlog of site visits, as called for in the VA’s procedures. The VA has denied verification to more than 150 businesses but lacks a way to make sure contracting officers don’t award those companies contracts under veteran preferences authorities, according to the report.

The Veterans Benefits, Health Care, and Information Technology Act of 2006 requires the VA to give priority to small businesses owned by veterans when awarding contracts to small businesses. However, VA officials only finalized rules on verification procedures in February. GAO's report states that leadership vacancies and the overall number of employees are major reasons for the delays.

Meanwhile, VA officials said during a congressional hearing that they have placed a lot of pressure on the department to award contracts only to veteran-owned companies that it has verified, the report states.

GAO recommends that VA officials lay out a way to overcome the backlog of verifications and then set up procedures for barring companies that failed their verification from getting any special preferences.

VA officials agreed with the recommendations. In a letter to GAO, officials said the department is increasing its number of employees, both in overall leadership positions and in jobs to help the verification process. To avoid awarding contracts to companies that failed verifications, the VA has begun removing its Vendor Information Page from public view. By not seeing the name as an option, the contracting officers are less likely to consider the company for an award, the VA's letter states. The VA is also training contracting officers about the preference authority, according to the letter.

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