Veterans First Program:

VA Needs to Address Implementation Challenges and Strengthen Oversight of Subcontracting Limitations

GAO-18-648: Published: Sep 24, 2018. Publicly Released: Oct 24, 2018.

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Contact:

Shelby S. Oakley
(202) 512-4841
oakleys@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

VA is required to give preference to veteran-owned small businesses when awarding contracts, which it does using the Veterans First program. VA changed some aspects of this program following a 2016 Supreme Court decision.

We found that VA increased obligations and awards set aside for veteran-owned small businesses following the Supreme Court decision. We also found that contracting officers faced challenges implementing some aspects of the Veterans First program.

We made six recommendations, including that VA provide more training for contracting officers on implementing this program.

Percentage of VA contracts set aside for veteran-owned small businesses, FY 2014-2017

Bar chart showing an increase in percentage of obligations for veteran-owned small businesses from 2014 (15.5%) to 2016 (25.8%).

Bar chart showing an increase in percentage of obligations for veteran-owned small businesses from 2014 (15.5%) to 2016 (25.8%).

Additional Materials:

Contact:

Shelby S. Oakley
(202) 512-4841
oakleys@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

GAO found that the percentage of Department of Veterans Affairs (VA) obligations set aside for veteran-owned small businesses under its Veterans First program was higher in 2017—the first full year following the 2016 Supreme Court decision—than in previous years. In its decision, the court clarified that VA contract competitions must be restricted to these businesses if they meet two criteria: (1) the contracting officer reasonably expects that at least two such businesses will submit offers, and (2) the award can be made at a fair and reasonable price and best value to the government. This has become known as the “VA Rule of Two.” VA created a new policy for implementing Veterans First following the 2016 decision. The percentage of obligations set aside for veteran-owned small businesses increased from fiscal years 2014 to 2017 (see figure).

VA Contract Obligations for Set-Asides and Non-Set-Asides, Fiscal Years 2014 through 2017

VA Contract Obligations for Set-Asides and Non-Set-Asides, Fiscal Years 2014 through 2017

Contracting officers face challenges implementing aspects of Veterans First, some of which VA has addressed through policy and optional training. However, 12 of the 30 contracting officers GAO interviewed cited difficulty in assessing the second criterion of the VA Rule of Two when making a set-aside decision. Eight of them stated that they sometimes lacked confidence in their fair and reasonable price determinations. VA's training, however, does not fully address these more challenging aspects of implementing the Veterans First policy. More targeted training would provide VA with greater assurance that its contracting officers have the knowledge and skills necessary to implement the policy. Additionally, assessing whether training on this policy should be mandatory would allow VA to determine if it would be beneficial for all contracting officers.

GAO found that VA conducts limited oversight of contractor compliance with limitations on subcontracting and has few mechanisms for ensuring compliance. For example, GAO found that the required clause for ensuring that veteran-owned small business contractors perform the required portion of work was either missing entirely or an outdated version was used in 11 of the 29 set-aside contract actions GAO reviewed. Without better oversight, VA is limited in its ability to detect violations and ensure that the goal of Veterans First—to promote opportunities for veteran-owned small businesses—is not undermined.

Why GAO Did This Study

VA spends billions every year to procure goods and services and is required to give preference to veteran-owned small businesses when awarding contracts—a program known as Veterans First. In turn, those firms must comply with limitations on the use of subcontracting. A 2006 statute established Veterans First, and a 2016 Supreme Court decision clarified conflicting interpretations, resulting in changes to how VA must now implement the program.

GAO was asked to review VA's implementation of Veterans First since the Supreme Court decision. Among other things, this report assesses the extent to which (1) changes occurred in procurement obligations to veteran-owned small businesses from fiscal years 2014 through 2017; (2) VA has encountered any challenges in implementing Veterans First policies; and (3) VA has mechanisms to oversee contractor compliance with subcontracting limitations.

GAO analyzed VA regulations, policies, and contracting data; conducted three site visits; and reviewed a non-generalizable sample, selected based on factors such as high dollar value, of 35 contracts and orders, 29 of which VA awarded under Veterans First.

What GAO Recommends

GAO is making six recommendations, including that VA provide more targeted training for contracting officers, assess whether training should be mandatory, ensure required clauses are included in contracts, and improve oversight of compliance with subcontracting limitations. VA agreed with GAO's recommendations.

For more information, contact Shelby S. Oakley at (202) 512-4841 or oakleys@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: VA concurred with this recommendation and is taking steps to implement it. In August 2020, VA reported that it was beginning a process to update its contracting system to automate the inclusion of documentation of Vendor Information Pages searches in contract files. VA is also now tracking compliance rates. VA plans to provide GAO an update in fall 2020.

    Recommendation: The Secretary of Veterans Affairs should ensure that VA's Director of the Office of Acquisition and Logistics, in consultation with VA's Office of Small and Disadvantaged Business Utilization, takes measures to ensure that VA contracting staff adhere to the requirements for documenting the required Vendor Information Pages searches in contract files. (Recommendation 1)

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Implemented

    Comments: VA concurred with this recommendation and in October 2019, VA offered mandatory training addressing challenging aspects of implementing the Veterans First program. As of March 2020, VA reported that 90 percent of contracting officers had completed the training.

    Recommendation: The Secretary of Veterans Affairs should ensure that the Director of VA's Office of Acquisition and Logistics directs the VA Acquisition Academy to provide more targeted training for the more challenging components of implementing the Veterans First policy, such as making fair and reasonable price determinations. (Recommendation 2)

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: VA concurred with this recommendation. In October 2019, VA notified all contracting officers via the Federal Acquisition Institute Training Application System of its additional mandatory Veterans First training. As of March 2020, VA reported that 90 percent of contracting officers had completed the training.

    Recommendation: The Secretary of Veterans Affairs should, in consultation with VA's Office of Human Resources and Administration, and the Director of VA's Office of Acquisition and Logistics, assess whether training on the Veterans First policy should be designated as mandatory and take appropriate action based on the assessment results. (Recommendation 3)

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Implemented

    Comments: VA concurred with this recommendation and in August 2019, VA reported that it made changes to its contract writing system to ensure that clauses relating to subcontracting limitations are consistently included in contracts that are set aside. In September 2019, VA reported that its compliance review had found that 88 percent of contracts that were set aside contained the required subcontracting limitation clauses.

    Recommendation: The Secretary of Veterans Affairs should ensure that the Director of the Office of Acquisition and Logistics establishes a mechanism to ensure that mandatory clauses relating to subcontracting limitations are consistently incorporated in all contracts that are set aside for Service-Disabled Veteran-Owned Small Businesses or Veteran-Owned Small Businesses. (Recommendation 4)

    Agency Affected: Department of Veterans Affairs

  5. Status: Open

    Comments: VA concurred with this recommendation and is taking steps to implement it. In August 2020, VA provided GAO with a draft fraud risk assessment, and also reported that it is developing measures to mitigate identified risks. VA has not yet provided a date by which it plans to finalize its risk assessment and risk mitigation measures.

    Recommendation: The Secretary of Veterans Affairs should ensure that the Director of the Office of Acquisition and Logistics conducts a fraud risk assessment for the Veterans First program. (Recommendation 5)

    Agency Affected: Department of Veterans Affairs

  6. Status: Open

    Comments: VA concurred with this recommendation and is taking steps to implement it. In August 2020, VA provided draft lists of subcontracting limitations risks, as well as draft monitoring guidance and tools. After these items are finalized, VA plans to post them on a portal accessible to all VA contracting staff, but has yet to provide a date by which it expects to take this step.

    Recommendation: The Secretary of Veterans Affairs should ensure that the Director of the Office of Acquisition and Logistics directs the Risk Management and Compliance Service to share, through guidance, training, or other methods, subcontracting limitation risks and monitoring practices with contracting officers and their management. (Recommendation 6)

    Agency Affected: Department of Veterans Affairs

 

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