Small businesses owned by service-disabled veterans and other veterans are supposed receive preferences in qualifying for government contracts, but glitches in the Department of Veterans Affairs’ system for verifying their qualifications are holding back the program.

The VA is required to give contracting preference to service-disabled and other veteran-owned small businesses, but it also needs to verify the ownership and control of the businesses to confirm their eligibility. However, the planning and data system for a verification program used by the VA needs improvement, according to a new report from the Government Accountability Office.

The report noted that the VA has made significant changes to its verification processes for service-disabled and other veteran-owned small businesses to improve operations and address program weaknesses, but it continues to face challenges in establishing a stable and efficient program to verify firms on a timely and consistent basis. Since December 2011, the VA has made a number of significant operational changes, including revising standard operating procedures and enhancing quality assurance protocols for its verification program.

However, the GAO found that the VA did not have a comprehensive, long-term strategic plan for the program and had prioritized addressing immediate operational challenges, contributing to inefficiencies in the program. In response to this finding, the VA's Office of Small and Disadvantaged Business Utilization took action last October to compile a strategic planning document that encompassed the verification program. The VA's OSDBU appears to have partially applied some leading strategic planning practices in its initial planning effort, the GAO acknowledged. But the plan lacks performance measures to assess whether the desired outcomes are being achieved and has a short-term focus that is not typically associated with a strategic plan.

The VA also has not shared the plan with key stakeholders, including congressional staff. In addition, the verification program's data system has shortcomings that have hindered the VA's ability to operate, oversee, and monitor the program. Among other things, the system does not collect important data and has limited reporting and workflow management capabilities.

The VA plans to modify or replace the system, but has not directly tied this effort into its long-term strategic planning efforts to ensure that the new system meets the verification program's long-term information needs.

Expanding the VA's verification program to support the government-wide contracting program for service-disabled, veteran-owned small businesses would require the VA to improve its verification process and address a number of operational and policy issues. The GAO estimated that between approximately 3,600 and 16,400 currently self-certified firms could seek verification under an expanded program, but the VA has experienced ongoing challenges verifying the volume of firms currently participating in the program.

The GAO's prior and current work indicates that the agency would need to further reduce its program's vulnerability to fraud and abuse, demonstrate whether recent operational changes have improved performance, have in place effective methods for educating applicants, and address the limitations of the program's data system in order to expand successfully.

Also, the VA has begun a process to revise the verification program's regulations, partly in response to concerns about the VA's eligibility standards being too stringent. However, any changes to the VA’s verification requirements could create or widen differences between the various government-wide small business contracting programs' requirements and VA's, a consideration that would likely be of even greater importance if VA's verification program were expanded.

Addressing these issues for its own program--or ultimately for a government-wide program-- requires weighing tradeoffs between reducing the burden of verification on eligible firms and providing reasonable assurance that contracting preferences reach their intended beneficiaries, according to the GAO.

To improve the long-term effectiveness of the program, the GAO recommended that the VA should refine and implement a strategic plan with outcome-oriented long-term goals and performance measures, and integrate its efforts to modify or replace the program's data system with a broader strategic planning effort to ensure that the system addresses the program's short- and long-term needs. The VA agreed with both recommendations.

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