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Is the VA Violating the Small Business Act?




by:
Edward T. DeLisle
Maria L. Panichelli
Cohen Seglias Pallas Greenhall & Furman PC - Philadelphia Office

 
April 17, 2013

Previously published on April 15, 2013

It’s not all that surprising when contactors question the Department of Veterans Affairs’ authority, especially those who are denied SDVOSB verification.  It’s a little surprising, however, when members of Congress do it.  Late last month, two congressmen explicitly challenged the VA’s management structure, which could have an impact on how the verification process operates in the future.
 
On March 28, 2013, Reps. Richard Hanna (R-N.Y.) and Mike Coffman (R-Colo.) penned a letter to VA Secretary Eric Shinseki, arguing that the VA had violated the Small Business Act by allowing the director of the department's Office of Small and Disadvantaged Business Utilization (OSDBU), Tom Leney, to also serve as director of the VA’s Center for Veteran’s Affairs (“CVE”).  In theory, the CVE and the OSDBU are meant to carry out very different functions within the VA.  The CVE is charged with the verification of SDVOSB entities - a responsibility delegated to the CVE by the Secretary of the VA under 38 U.S.C. 8127.  In that role it is supposed to serve as an “auditor” for the agency; its job is to police the verification process.  The OSDBU, on the other hand, is meant to serve as an advocate for SDVOSB entities, facilitating their participation in the program.
 
In their letter, the Congressmen explained that Section 15(k) of the Small Business Act, which created the position of OSDBU for every federal agency, specifically requires that the director of the OSDBU “carry out exclusively the duties enumerated in this Act, and shall, while the Director, not hold any other title, position, or responsibility, except as necessary to carry out responsibilities under [Section 15].”  Given this definition, the Congressmen opined that Mr. Leney’s service as both the director of the OSBDU and head of the CVE presented a problem.  As they coined it, the dual role constitutes an “inherent conflict,” given “the advocacy role assigned to the OSDBU and the auditing function now associated with CVE."
 
This is not the first time this issue has been raised.  On March 19, 2013, Mr. Leney was questioned about his dual role during a joint subcommittee meeting.  At that hearing, Mr. Leney testified that he did not feel that he was in a position of conflict.  His explanation: “I personally do not have any issue with a conflict of interest because we are helping vets."  Apparently, members of the legislature were not convinced.  Congressmen Hanna (the chairman of the Small Business Committee's Contracting and Workforce Subcommittee) and Coffman (the chairman of the Veterans' Affairs Committee's Oversight and Investigations Subcommittee) were certainly not swayed.  In their subsequent letter, they specifically directed VA Secretary Shinseki to document how the department intends to achieve compliance with the Small Business Act.  Implicit in such a direction, of course, is the idea that the current structure is not compliant and, therefore, illegal.
 
To date, VA officials have not commented on the letter, but it is generally assumed that the VA will have to formally respond at some point soon.
 
The VA does appear to have a problem here and the problem is not going away.  When two subcommittee chairmen send a letter to follow up on an issue raised during hearing, they are expecting an answer.  Whatever the response, the real issue for SDVOSBs, and prospective SDVOSBs, is what does it all mean for them?  I hope it means that the VA uses this as an opportunity to address some of the administrative issues at CVE that have generated so much frustration amongst veterans.  While most veterans understand and appreciate the need to “police” the verification system, I have heard way too many stories from veterans who feel victimized by that system.  We will keep our eye on this one as it could result in a real shake-up at the VA.

 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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