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Kingdomware is Lucky 1%! Supreme Court to Hear Vets Case

“May the odds be forever in your favor.”

So goes the saying from the incredibly popular HUNGER GAMES franchise, rendered darkly amusing by the fact that for those participants in the dystopian society’s annual Hunger Games (i.e., the sacrifice of two youths from each district, save for one actual winner of the “games”), the odds are most, decidedly, not in one’s favor.

The Supreme Court is another place where the odds are not in someone’s favor. Every year, the Supreme Court receives about 10,000 writs of certiori (petitions asking it to hear a case that has been decided by a lower court). Of those, the Supreme Court decides to hear about 80. That means that each case has less than a one percent chance of being heard.

And on June 22, 2015, the Supreme Court decided that Kingdomware will be one of them.

Most veteran business owners have heard of Kingdomware, but here’s the recap:

The Kingdomware saga began with a slew of GAO rulings in 2012 that berated the VA for not following its mandate in the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the “Act”).

The Act provides that before using Federal Supply Schedule (FSS) procedures, a contracting officer must determine whether he has a reasonable expectation that: 1) two or more service-disabled veteran-owned small businesses (SDVOSBs) will submit offers; and 2) the award can be made at a fair and reasonable price. If the answer is “yes,” the award must be set aside for SDVOSBs. (38 U.S.C. 8 127(d)(2006)). The idea is to maximize awards to SDVOSBs, as a purpose of the act is to protect veteran businesses.

Long story short, the VA decided that despite this provision under the Act, it wasn’t required to set aside awards off the FSS for SDVOSBs, awarded to non-SDVOSBs, and got beaten down by the GAO (that’s a legal term). See Kingdomware Technologies, Inc., B-406507 (May 30, 2012); Aldevra, B-406331 (April 20, 2012).

The VA won the next battle, staged at the U.S. Court of Federal Claims (CoFC). In November of 2012, the CoFC ruled that the VA acted reasonably in determining that it need not set aside FSS contracts for SDVOSBs. In finding that the VA had not acted “arbitrarily, capriciously, or contrary to law” (another legal term, only this one’s real), the CoFC held that the VA had reasonably interpreted its own law in finding that it was not mandated to set aside awards to SDVOSBs. This decision was also affirmed in a federal circuit decision issued in June of 2014.

Not happy with this result, two veteran organizations – the American Legion and the National Veteran Small Business Coalition (NVSBC)  – petitioned the Supreme Court. And now, it’s official – they will be heard.

I have to wonder – does timing play a huge role in the Supreme Court’s decision? The granting of cert comes very soon after Jan Frye’s explosive memorandum (reporting billions of dollars awarded by the VA in violation of its own procurement policies/laws), the Phoenix scandal (blatant violation of wait times), and the Denver disaster (VA medical center construction plagued by delays and huge cost overruns). Among other VA scandals.

At any rate, they will be heard! Stay tuned here for updates.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran issues at: http://www.legalmeetspractical.com.

 

Rumble in the Bronx: Frye Did It!

A Bronx VA hospital is under a federal investigation after the Department of Veterans Affairs discovered some questionable purchases by the facility that can’t seem to be explained. And this is one mystery the taxpayers want solved.

As of this Monday (June 15), the VA Office of Inspector General is investigating whether Bronx VA hospital employees have abused government-issued purchase cards, or “GPCS,” which authorize purchases under the micro-purchase threshold of $3000. It is not permissible for the government to split purchases in order to avoid exceeding this threshold.

According to a recent memorandum addressed to VA Secretary Robert McDonald by Jan Frye, deputy assistant secretary for the VA, the Bronx facility engaged in this illegal splitting. It spent over $50 million on prosthetic limbs in two years through purchases made at least 2,000 times. Each purchase totaled $2,999 — just one dollar bellow the VA’s $3,000 GPC limit.

According to the Washington Post, which seems to have had the scoop on this story, when Congress learned of this practice, it demanded answers. The VA did not, however, turn over any documentation to authenticate the purchases. Instead, it claimed they were destroyed during Hurricane Sandy.

The House Veterans Affairs Subcommittee on Oversight and Investigations didn’t buy this excuse. Led by Kathleen Rice, a New York Congresswoman, it called for an investigation during a series of hearings concerning spending practices of the VA.

“The damage caused by Superstorm Sandy was devastating and far-reaching, but the claim that all of these documents were destroyed strikes me as all too convenient and must be substantiated,” Rice said in a statement. “We need to know exactly what happened to the documents, how and why this money was spent without written contracts, and who is accountable.”

Bronx is not alone here. This case was one of several acquisition practices Frye described in his memo. According to the memorandum, the VA spends billions of dollars each year on medical supplies and services in violation of federal procurement laws. Frye’s memorandum lists not only VA facilities, but the names of VA officials.

In the months to come, expect other shakedowns like this one. Who’s next?

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran issues at: http://www.legalmeetspractical.com.

Rockin’ Orange: Contract Fraud Can Change Your Wardrobe

UPDATE: If you read my prior blog on the Jan Frye memorandum (detailing the VA’s “mockery” of spending rules resulting in $6 billion being spent improperly on an annual basis) and would like to read his memorandum, access it HERE.

Tomorrow I’m headed to Norfolk, Virginia to speak at the National Veteran Small Business Coalition’s (NVSBC) annual conference, which is designed with the same mission my company has: to help veteran-owned small businesses grow. While I’ve already blogged on this conference, a recent Department of Justice press release illustrates how important continuing education is for federal contractors.

You know why? Because if you violate the federal government’s rules, you could end up in jail. And who wants to wear orange for the next ten to twenty?

A June 3, 2015 Department of Justice press release illustrates this principle. Basically, this memorandum details an alleged “pass-through scheme” where one brother used another brother’s service-disabled veteran status in order to pursue service-disabled veteran-owned (SDVOSB) set-aside contracts.

The Puerto Rico indictment alleges that the service-disabled veteran was employed as a full-time U.S. Postal Service Carrier, and he was not in charge of the day to day operations of the SDVOSB. He was simply a figurehead or “rent-a-vet,” who was being used for his service-disabled veteran status to obtain contracts for his brother’s company. Per the indictment, as a result of the scheme the company unlawfully received set-aside and/or sole-source SDVOSB contracts from the VA, including contracts involving American Recovery and Reinvestment Act funds.

If convicted (and keep in mind that these are simply allegations; these individuals are innocent until proven guilty), the brothers face a term of 20 years in prison as to each wire fraud charge and up to ten years in prison for the charges of major fraud against the United States. Additionally, they face fines of up to $250,000 and up to three years of supervised release as to each count.

It’s true that some people set out to defraud the federal government. There are pass-through schemes, and fraud, and general unsavory activities. Then, however, there are the folks who don’t know any better. They think, “hey, my cousin/brother/father/dentist is a veteran; why not set up a company in his name and go after set-aside contracts?”

If those people do their homework – by going to a conference, inquiring on LinkedIn, contacting their local Procurement Technical Assistance Center (PTAC) – that plan will get shot down pretty fast. Or maybe they’ll find a way to ensure they meet the SDVOSB eligibility requirements. (For example, a veteran business owner can have a business listed in the VetBiz database while working full-time elsewhere. It all depends on the circumstances whether that veteran business owner still “controls” the SDVOSB and meets its “full-time” requirements). While this might not be the case here – or these folks could be completely innocent – the fact of the matter is this does happen. People get in trouble because they don’t understand how big a deal it is to certify eligibility for set-aside awards.

When you do business with the federal government, you’re held to a higher standard. If you’re certifying yourself as meeting the requirements for self-aside contacts, you’re putting yourself out there. Protect yourself by doing your homework! Otherwise you might find yourself wearing orange.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran business issues at: http://www.legalmeetspractical.com.

Calamity in Colorado: VA’s $100 Million (And Counting) Bailout

A project dubbed the “biggest construction failure” in the history of the Department of Veterans Affairs (VA) – already $1 billion over budget and more than a year behind schedule — is getting another $100 million taxpayer bailout.

After a Republican-led cash infusion approved by President Obama this week, construction will continue on a new veterans medical center near Denver that is expected to serve 400,000 former military service members and their families. Ahead of Memorial Day, contractors had prepared to stop work on the project as approved funding dried up after repeated overruns and delays.

The $100 million fix is only a stop-gap measure: it funds just three more weeks of work.

The costs to taxpayers for the project have already ballooned from an initial $328 million price tag in 2005 to $1.73 billion (a 427% increase), with years more construction to go, according to an April Government Accountability Office Report (the “Report”).

Also, the VA does not even have an estimate for when construction will be complete. It used to be February 2014, and now it is “unknown.” Reasons documented for the cost overruns and delays include a change in project scope (decisions to change plans from a shared university/VA medical center to a standalone VA medical center); and unanticipated events such as a need to eradicate asbestos and replace faulty electrical systems.

House Veterans’ Affairs Committee chairman Jeff Miller, R-Fla., has called the agency’s entire construction program “a disaster” and the Denver project its “biggest construction failure.”

Congress had imposed an $880 million spending cap on the program, but the agency has repeatedly lobbied lawmakers to lift the cap and provide more funds.

Because after all, what happens if the money stops pouring in? No one wants to walk away from such an important project…especially since hundreds of millions of taxpayer dollars are already invested.

For more information about the Denver overruns (and others), access the Report here.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on timely veterans issues at legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

Public Shaming Over VA Waste Prompts Investigation

In a 35-page memorandum addressed to VA Secretary, Robert McDonald, the VA’s senior official for procurement, Jan Frye, accuses other agency leaders of “gross mismanagement” and making a “mockery” of federal acquisition laws that require competitive bidding and proper contracts.

The result: the wasting of at least $6 billion a year in the federal contract arena. Note that this is $6 billion a year, not $6 billion, period.

“Doors are swung wide open for fraud, waste and abuse,” Frye writes in the March memo, which was obtained by D.C.’s The Washington Post. He adds, “I can state without reservation that VA has and continues to waste millions of dollars by paying excessive prices for goods and services due to breaches of Federal laws.”

In the memorandum, Frye describes in detail a series of practices that he says run afoul of federal rules, including the widespread use of government purchase cards, which are usually meant as a convenience for minor purchases of up to $3,000, to buy billions of dollars worth of medical supplies without contracts. In one example, he says that up to $1.2 billion in prosthetics were bought using purchase cards without contracts during an 18-month period that ended in 2014.

Frye also explains how VA has failed to engage in competitive bidding or sign contracts with outside hospital and health-care providers that offer medical care for veterans that the agency cannot provide, such as specialized tests and surgeries and other procedures. Frye says the VA has paid at least $5 billion in such fees, in violation of federal rules that the agency’s own general counsel has said since 2009 must be followed.

Frye alleges further violations in the agency’s purchase of billions of dollars worth of prosthetics and in the acquisition of a wide range of daily medical and surgical supplies. He says many products are bought without the competitive bidding and contracts essential to ensure quality care, effective use of tight dollars and proper government oversight.

After the memorandum was leaked to the press (which raises an interesting question – who leaked it?), members of the House Veterans’ Committee held a two-hour hearing to address the issues it raised. This is the first of three hearings scheduled for the Spring, during which the Committee Chair, Mr. Jeff Miller, remarked, “To let this continue and not be furious about it defies anybody’s rational thinking.”

Following the hearing, Secretary McDonald issued a response to the memorandum. Frye says this is the first time the VA has responded to the memorandum, which means that the VA did not acknowledge it until public release and public shaming.

Secretary McDonald said he has asked the inspector general’s office to review the letter. “Any findings of wrongdoing or evidence of harm to Veterans” will be referred to the Justice Department, he wrote.

Which, of course, means that some VA folk will be “redistributed.” After an investigation. And a memorandum with “recommendation.”

Good to know the situation’s being handled.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veterans issues at: http://www.legalmeetspractical.com.

What Are You Doing June 8th through the 11th?

If you are a veteran-owned small business doing business with the federal government, you should consider attending the National Veteran Small Business Coalition’s (NVSBC) conference in Norfolk, Virginia this year from June 8th through June 11th. The NVSBC is a veteran-run, D.C. based organization with a mission of transitioning veterans into business owners servicing the federal government.

Every year, the NVSBC hosts its conference, VETS 15, towards the ends of: connecting business owners with procurement officials and prospective teaming partners, educating contractors on important procurement topics, and providing the opportunity to network. It is the largest annual conference hosted by veterans, for veterans.

While the conference is traditionally in Reno, Nevada, it moved to Norfolk this year in order to attract more federal agencies, large contractors, and speakers. It appears this goal has been met given its exhibitors posted, to include BAE, General Dynamics, the NASA Office of Small Business Programs, Northrop Grumman, and Raytheon. The announced keynote speakers are Michael Hayden, former director of the Central Intelligence Agency; and Thomas Kolditz, a retired Brigadier General who is a professor in the Practice of Leadership and Management and Director of the Leadership Development Program at the Yale School of Management.

In addition – and importantly- the conference offers a range of learning sessions taught by industry professionals and experts. The agenda includes sessions on VetBiz verification, financing options for veteran-owned small businesses, how to manage a federal contract effectively and profitably, how to write a technical proposal, and updates on the small business proposed rules. As noted by NVSBC President, Scott Denniston, “We are expecting a much larger crowd and have specifically tailored the workshops to be of interest to novice businesses in the federal space as well as the mature veteran-owned small businesses.”

If you are a non-member of the NVSBC, the registration rate is currently $399. Also, know that Norfolk Waterside Marriott, which is where the conference is held, gave NVSBC a group rate of $87 per room that is good only through May 18. You can access more information about registration and the hotel on the conference’s website.

I will be at this conference, presenting on the VA’s VetBiz verification process on Tuesday, June 9th with former Civilian Board of Contract Appeals Judge, Mr. Bill Thomas. We will also be distributing my VetBiz handbook, which gives the nitty gritty on how to get through the verification process. I hope to see you there!

*Access the full conference website at: http://www.veterantrainingsymposium.com. Also, if you are interested in joining the NVSBC, or are a member who wants to see what the NVSBC has planned for the upcoming year, attend the Board meeting that will be held on Monday, June 8th, from 3:00 PM to 5:00 PM.

 

Chaos at the CVE: Nobody Panic!

The Center for Verification’s (CVE) help desk line is going to be blowing up today.

The long and the short of it – some kind of technical error happened with the VetBiz registry, which is the database used to house and list all of the information of 7,157 veteran-owned businesses. If you are in that database, and you have received a message that looks like this, ignore it.

Basically, this message says that your business has expired and has been removed from the VetBiz database, which means that you are not eligible to compete for contracts issued by the United States Department of Veterans’ Affairs as a veteran-owned small business (VOSB) or service-disabled veteran-owned small business (SDOVSB) set-aside.

If you have gone through the verification process and suddenly think your verification status has been taken away from you, this is, of course, a very big, very bad deal. But please don’t panic! It appears that this message has been sent to everyone in the database (or if not everyone, at least a large percentage); when I checked my email and voicemail this morning, I had a number of messages from panicked veterans.

In sum, don’t call the CVE, don’t do anything – this is a terrible error, but nothing has actually happened to your business’ status. If you should be verified, you are still verified, I assure you!

As a last note, it appears that a few different problems have been at play ever since a system upgrade went into effect in late April. I have seen a few truly strange things happen with applications since that time; and I know of one business that received a notice to change their password…but the link provided was broken. Accordingly, now they cannot access their account to make any necessary changes.

“Someone needs to be held accountable,” that veteran business owner said to me. “This isn’t a system problem, it’s a person problem. It shouldn’t be my job to stay on hold with the help desk for an hour.”

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran business issues at: http://www.legalmeetspractical.com.

 

Served! House Demands Answers From VA in Philadelphia Probe

Late April marked the third time in the House Veterans Affairs Committee’s 69-year history that it voted to issue a subpoena to mandate release of information.

In a scathing audit released in early April, the VA Inspector General confirmed a litany of problems first raised by whistleblowers at the Philadelphia Regional Office (RO), involving such claims such as manipulation of dates to make old claims look new. Many of these whistleblowers were VA employees who alleged they had been subject to retaliation for attempting to report these issues.

To further investigation into this issue, the subpoena will demand that the VA provide its personnel and complaint files at the Philadelphia office. According to Jeff Miller, who has chaired the Committee since 2011, this information has been repeatedly asked for during the last few months with little success.

“There are serious issues plaguing the Philadelphia RO,” he said. “We can no longer let the VA stonewall [on providing the information].” Miller added that documents the Committee has received have been so heavily redacted that they provide little or no information.

“There is a growing list of examples of the VA attempting to impede our congressional oversight and limit their transparency,” said Miller, who is now seeking records going back to December 2008.

After the vote to subpoena the records, VA Secretary Bob McDonald quickly responded with a letter to Miller, pointing out that the department has already provided “nearly 9,000 pages of material … with more to follow.” The letter also noted that the VA had offered to make available the full, un-redacted information sought by the Committee, noting that this had not been done due to Committee staff members’ failure to agree to “certain reasonable privacy conditions.” Secretary McDonald concluded by reiterating the VA’s commitment to providing the files.

While we can’t know what types of records were provided by the VA and the substance of the redacted (private) information, I note that this is only the third subpoena issued in the Committee’s history – surely this isn’t something that is taken lightly.

But still, despite the Committee members’ cognizance of a subpoena as a “last resort” type of measure, consider the political and emotional climate here – our veterans are suffering, and given the litany of recent scandals, the Committee is willing to use more forceful measures.

Then there’s the point that a subpoena is something the Committee actually can do. Allison Hickey, the VA’s undersecretary for benefits, said the top manager and employee who altered the quality reviews have been reassigned pending an internal review. That’s right – reassigned, not fired. (The VA can’t do anything about this – government employees have ironclad property rights in their jobs, so it’s incredibly hard to fire one. We learned that last year).

A subpoena, however, forces the VA to respond. Not only that, but this action is public, and drastic, and if you Google this issue you’ll find a number of military organizations and publications reporting on the matter. And guess whose side they’re on?

My guess is the Committee has a bunch of records coming its way.

 

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veterans issues at legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

VetBiz Changes That May Affect You

*As I know this information does not impact every veteran following my blog, later this week I will also blog on a veteran topic similar to the scathing Philadelphia Regional Office audit or the Elf on the Shelf scandal. Stay tuned!

For those veteran-owned small businesses (VOSBs) that are either verified with the VA’s Center for Verification and Evaluation (CVE), or going through the verification process, please note that as of April 27, 2015, some substantive changes to the VetBiz registry may affect you. The following is the “quick and dirty” summary of the changes, in case you don’t have time to watch the video recording the CVE sent to you:

  • The Landing Page – The VetBiz landing page has been revamped to include additional information, including links to additional resources and pertinent contact information. Also note that it provides a new email for those seeking a status update on their Vetbiz application: verificationfollowup@va.gov.
  • Login Changes – When you log in after April 27th, you will be required to choose and answer three security questions, as well as choose a new password (with specific new parameters to prevent you from choosing a password that could be easily hacked). You will also now be required to change your password every 90 days (which in my opinion is a bit of a headache, but it only takes a minute or two). This requirement reflects a VA-wide change that also includes the VA’s internal email system.
  • Public Listing – The “last modified” field of your posted listing will now be changed to the last date your business was verified, and the date it will expire. Also, the owner’s (veteran’s) information will be removed from the public search.
  • 0877 Changes – You will now be prevented from moving forward from the 0877 form if the veteran’s ownership listing is not 51% or more, as this is a basic eligibility criterion.
  • Additional Business Designations – On your profile, you are now allowed to select additional socioeconomic categories (such as HUBZone, WOSB, or 8a). This is a “self-certification” only; by allowing this listing, the CVE is not confirming that a business meets the applicable criteria.
  • Document Uploads– When uploading documents to the VetBiz profile, “upload successful” will appear in green to confirm that a document was successfully uploaded.
  • Withdrawing a Firm – This is a great change – finally! Now, when a business receives a Pre-Decision letter, it can withdraw itself by clicking on the “withdraw” button on its account. Previously, a business had to click this button and then call the CVE help desk to complete the process. This eliminates that extra step, and a confirmation email will let a business owner know that a withdrawal is complete.
  • Session Timeout – Now, once a veteran logs into his VetBiz portal, an automatic logout will occur in 60 minutes, not 15. (Lengthening the time for automatic logout for security purposes does, however, seem to conflict with the requirement that one must change his password every 90 days as a means to protecting information).

While none of these changes are earth-shattering, it’s important to be aware of them if you’re listed in the VetBiz registry. And it’s important to know they reflect an effort to make the verification process less painful. Now, if the CVE tech team could fix the glitch that’s made it impossible to view documents uploaded in response to a Document Request, we’d be in business!

*Did you find this article informative? If so, sign up for Sarah Schauerte’s blog covering veteran business issues at: http://www.legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

SBA OHA Decision Shows No Finish Line At End of Verification Process

A recent Small Business Administration Office of Hearings and Appeals (SBA OHA) decision illustrates that VetBiz verification does not give you a free pass in size protests. In fact, if you shouldn’t have been verified for one reason or another, and a size protest is sustained, you might find yourself out of a contract and also un-verified.

In Size Appeals of G&C Fab-Con, LLC, SBA No. SIZ-5649 (2015), G&C Fab Con, LLC (G&C) was the successful offeror for three VA Requests for Proposals for construction projects at national cemeteries, all of which were SDVOSB set-asides. After the award was announced, multiple disappointed bidders protested G&C’s status to the SBA Area Office.

Although G&C was 51% owned by a service-disabled veteran, three non-veterans owned the remaining 49% and also managed other companies. The SBA Area Office found G&C affiliated with these other companies under the “common management” rule, meaning that the non-veterans were managers of both G&C and the non-veteran companies (which gave them the ability to substantively control G&C). Since affiliated companies will be lumped together for size purposes, and because their aggregate revenues exceeded the applicable size standard, G&C was “other than small” and therefore ineligible for the award.

G&C filed a size appeal with OHA. Among its arguments, G&C contended that the Area Office’s holding was inconsistent with the findings of the CVE. G&C noted that, under the VA’s regulations, a company cannot be verified as a SDVOSB unless the CVE finds that service-disabled veterans “unconditionally control” the company. Because the CVE had verified G&C as a SDVOSB, the verification meant that the veteran controlled the company–necessarily meaning that the non-veterans did not exercise control.

The SBA OHA rejected this argument. “VA reviews eligibility for VA’s programs, not questions of size or affiliation,” it wrote. “Accordingly, VA’s determinations have no bearing on the Area Office’s analysis.”

While technically this is true, I think there’s an important qualifier that should be made. In assessing eligibility, the VA (CVE) also looks at whether a veteran truly controls his business, or whether circumstances exist that might compromise his ability to make independent business decisions (such as reliance on another company for equipment, employees, contracts, etc).

Accordingly, when G&C went through the verification process, even though the CVE wasn’t looking at size issues, it would have looked into common management (affiliation) concerns to make sure no non-veteran asserted undue influence over it. The CVE apparently found no issue with the non-veterans holding officer positions in G&C, likely because these officer positions were lower-ranking positions than that of the veteran and did not afford them control over company decisions. (Such a finding would be in keeping with its regulations).

Not only that, but these non-veterans only owned 49% of the company’s ownership interest, and voting provisions may have provided that company actions required a 51% vote. (This is standard; not providing that generally results in a verification denial from the CVE). This would effectively have put the veteran in charge of making every decision. At least on paper.

One thing is for certain here. VetBiz verification does not give you a free pass in size protests. Not only that, but given the results of this size protest, G&C’s verified status may be in jeopardy.

Access the full decision here.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran business issues at http://www.legalmeetspractical.com.

 

 

 

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