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Office of Public and Intergovernmental Affairs

Remarks by Secretary Eric K. Shinseki

6th Annual National Veterans Small Business Conference & Expo
Las Vegas, NV
July 20, 2010

Tim Foreman, thank you for that kind introduction, and thanks for your leadership of VA’s Small Business Enterprise. Thanks, as well, to Tracey Pinson, Director, Office of Small and Disadvantaged Business Utilization, Office of the Secretary of the Army—congratulations on organizing another superb conference; Mayor Oscar Goodman—thanks for your hospitality in welcoming us to Las Vegas; Joe Jordan, Associate Administrator, Small Business Administration—thanks for swapping speaking slots to allow me to make my flight out; members of the Veteran Small Business Federal Interagency Council—we do important work together. Thanks for making a difference for Veteran-owned small businesses; fellow Veterans, other distinguished guests, ladies and gentlemen:

It is great to be back in Las Vegas. i was here about two weeks ago visiting the new VA Medical Center that is being constructed on the north edge of town. The construction workforce on that project will grow to about 600 jobs on-site until the planned opening in 2012—top-of-the-line, state-of-the-art medical care for our Veterans living in Las Vegas and the surrounding areas. When that medical center is up and running, it will mean about 2,200 permanent jobs for Las Vegas—950 of them new ones.

We began this trip yesterday in San Antonio and will head to Los Angeles this afternoon, but wanted to squeeze in this stop to address this influential conference for VA. Small businesses are the creative force on the American business landscape, and I wanted to be here to tell you how important you are to all of us.

As you may know, World War II Veterans played a major role in creating this most exciting city in the world. They leveraged their entitlements under the original GI Bill, which turned captains of infantry into captains of industry and engineer’s mates into entrepreneurs.

That original GI Bill only lasted 12 years, 1944 through 1956, but it profoundly transformed our country, economically, educationally, and socially, catapulting our economy to the world’s largest, and our Nation to global leader. In 12 years, it produced 450,000 trained engineers, 240,000 accountants, 238,000 teachers, 91,000 scientists, 67,000 doctors, 22,000 dentists, and more than a million other college-educated Veterans.

Well, lightning is about to strike a second time. We have just finished administering the first year of the new Post-9/11 GI Bill. Over 292,000 Veterans and family members took advantage of it this past year, pursuing their dreams of a college education. When we include the other 342,000 Veterans in school, who are attending college under the Montgomery GI Bill, the Vocational Rehabilitation Program, or one of the other VA-administered education programs, the number of Veterans in school soars to 634,000. Tough, smart, and skilled, these Veterans are poised to become a future generation of national leaders in business, education, science and engineering, government, religion, the military, and a host of other disciplines.

Why am I telling you all this? Because Veterans hire Veterans, and these graduates are going to need help entering the job market. Veterans hire Veterans because they know what they are getting. That’s not true for all businesses, by the way—not everyone makes it a point to hire those who have been entrusted with defending our way of life. But, as a rule, Veteran-owned businesses hire Veterans in numbers. We want to improve your opportunities to compete in business, in general, and for federal contracts, in particular, because that improves your opportunity to create jobs for Veterans.

We must do this, together, because the alternatives are stark. Veterans represent a disproportionate share of America’s jobless, homeless, depressed, substance abusers, and suicides. Today, 107,000 Veterans are homeless, and those at-risk of being homeless are several times that number.

We are committed to helping you so that we, together, can help Veterans avoid the glaring reality I’ve just described. At VA, we put Veterans first both in employment and in contracting, and we don’t hesitate or apologize about doing either. VA’s level of Veteran employment today is roughly 29 percent, and we intend to raise that bar.

And where procurements are concerned, VA’s small-business procurements have exceeded 30 percent each fiscal year since 2007, and our stretch goal for fiscal year 2010 is 33.5 percent, more than ten points above the federal goal of 23 percent. We are within reach of our stretch goal.

Since 2007, we have nearly doubled our procurements from Veteran-owned small businesses—10 percent in fiscal year 2007 and 19 percent in fiscal year 2009, and we have more than doubled our contracts with service-disabled small businesses, going from 7 percent in fiscal year 2007 to 16 percent in 2009.

Last year, one of our Veteran Integrated Service Networks, a regional headquarters within our health care administration, awarded more than 38 percent of its total procurement dollars to Veteran-owned small businesses. And our National Cemetery Administration already uses Veteran-owned small businesses for 59 percent of its procurements contracts. So, we know we can do better, and we will.

Let me turn to a sensitive topic for all of us: enforcement. We need to do more to prevent contractors from falsely claiming Veteran status, or using their Veteran status to front for non-Veteran owned corporations. Some in Congress have taken to calling such fraud “stolen valor,” and it is; but it’s also stolen opportunity—your opportunity to compete, to demonstrate that you have the skills and capacity to solve problems, and to establish yourselves as leaders in the marketplace.

VA is finally baring its teeth on this issue and taking steps to discipline both the process and the actors who stray from the rules. In May of this year, the VA inspector general arrested a contractor in New York for falsely claiming Veteran status to win a $5.7 million construction contract.

We have also established a new oversight committee, chaired by Tim Foreman, to investigate complaints and, where warranted, to expedite suspensions and debarments. Such actions are meant to protect the integrity of the federal acquisition system. As I said last year, there are rules; if you abide by them, you have my unwavering support. If you don’t, we’ll find you.

Now, let me tell you some good news about Veteran-owned small businesses contracting with VA. President Obama charged me to transform VA into a 21st century organization. Transformation is about focusing on VA’s mission first. Our mission is Veterans. Transformation is also about challenging the assumptions about what we do, how we do it, and why we do it the way we do. In challenging the assumptions, we define the new principles and processes that will serve Veterans in the decades to come—Veteran advocacy, transparency, integrity and accountability, good business models, and a trained and motivated workforce equipped with the right tools.

Let me touch on decisions most applicable to those in this audience. VA’s information technology issues are significant. Just last week, we cancelled a $400 million IT modernization project for not living up to expectations. Prior to that, last summer, we cancelled or cut back over a dozen IT projects for being over budget or behind schedule—some of which were over a year behind.

This should tell you how much IT work VA needs done, and how much opportunity there is for small businesses to exploit. We are looking to the private sector for help, seeking contractor-provided solutions, including services and hardware, for a broad range of requirements.

Given the magnitude of the requirement—the need to get everything to mesh, and the demand for accountability—we don’t think it makes sense to piecemeal contracts out to dozens, if not hundreds of contractors, as has been done in the past. We need contractors to self-select their teams, designate a lead integrator, and aggressively pursue our long-term requirements.

We’ve settled on a new acquisition strategy called Transformation Twenty-One Total Technology—T-4. And while I introduce it today as a new concept, it should not be new to most of you. Other agencies, like the Army and the Air Force, have successfully employed a similar strategy for major acquisitions for years. In fact, last year, VA hired, en masse, the Army’s experts in this strategy—not just a handful of experts, but 160 experienced acquisition specialists who became available as a result of the Department of Defense’s Base Realignment and Closure Commission.

This provided critical mass for standing up a new office to provide a full-service, one-stop shop for IT acquisitions. Almost all of these specialists have worked together for years, through three successful executions of the Army’s T-4 strategy. So there was no need for a break-in period with this “new office.” The team was already built. They knew what success looked like, and they have moved out to transform VA’s acquisition programs.

So what’s T-4? T-4 is $7 billion in VA IT procurement over the next five years, over $1 billion per year, or about 9 percent of total VA outlays.

  • Up to 15 prime contracts—at least four of which will be reserved for service-disabled Veteran-owned small businesses, and at least three of which will be reserved for Veteran-owned small businesses.
  • A two-step selection process: in the first step, we will select for award without regard to the size of the business; if four service-disabled and three Veteran-owned small businesses are selected, we’re done—no step two.
  • If we don’t get four service-disabled and three Veteran-owned firms in the first step, then we eliminate the big firms and non-Veteran businesses, and select the most competitive of those remaining.
  • That’s not all; big firms selected for prime contracts must meet ambitious subcontracting goals—35 percent for small businesses, including 12 percent for Veteran-owned and 10 percent for service-disabled.
  • We will award evaluation credit to big firms based on how much they team with small firms.
  • We will closely monitor small-business subcontracting goals, with the results posted on the web for full transparency. Firms that don’t meet their goals won’t receive additional task orders.
  • We also reserve the right to set aside task orders for service-disabled and Veteran-owned small businesses so that those teaming with big firms actually get the work they have been promised.

That’s the strategy—T-4. Pretty straightforward. Now, in case you were wondering, a major difference between T-4 and set-asides is that the federal acquisition regulation requires small-business contractors to perform at least 50 percent of the work for set-asides, which could eliminate most small businesses from competing for our 15 prime contracts. If we were to use set-asides, we would have to break up our 15 contracts into many much smaller contracts, which would fragment the whole IT transformation effort, a past mistake we are determined not to repeat.

T-4 avoids the 50 percent requirement by having big and small businesses compete against each other for these prime contracts, while reserving any seven of the prime contracts for Veteran-owned small businesses. This gives small businesses a shot at up to 15 prime contracts, and ensures that qualified Veteran-owned small businesses get at least seven of them.

This presents great opportunity for Veteran-owned small businesses. With T-4, you don’t have to settle for smaller subcontracts or set-asides. You can team with other firms to compete for the 15 big contracts. It’s your chance to think big, to think like a prime, and to succeed as one.

we have briefed many of you on T-4 already. We’ve consulted one-on-one with some 240 firms, hosted a pre-solicitation conference in June for over 320 firms, and fielded over 1,000 questions about the strategy. The response has been overwhelmingly positive, with most of you welcoming the opportunity to compete. The nonprofit USA-Vet-Biz has confirmed this and given T-4 a thumbs-up, foreseeing a much larger role for Veterans in business as both prime contractors and subcontractors.

For anyone nervous about competing for reserve contracts, let me assure you—Veteran-owned businesses can compete and win. That’s a fact. Some small businesses were recently up-in-arms about the General Services Administration’s blanket purchase agreements for office products under the federal strategic sourcing initiative. VA helped shape those agreements, and despite the fears of a few, small businesses captured most of work. For example, three small businesses, including two service-disabled businesses, now provide all toner cartridges for 15 federal agencies.

One more point: T-4 could give small businesses opportunities to compete for as much as $12 billion in contracts—$7 billion with VA for IT, and another $5 billion from other federal agencies that come to VA for help in meeting their procurement requirements and small-business goals. We estimate that T-4 will mean roughly $1 billion in contracts for Veteran-owned small businesses each year.

T-4 is a win-win-win strategy: Veteran-owned businesses win by getting more contracting opportunities; VA wins by getting the contractor support it needs more quickly, with less risk, reduced costs, and in a more manageable form; and all Veterans win by getting better services and support from a transformed VA. T-4 begins with word transformation. And the Request for Proposals will be released July 26.

In closing, let me just remind all: Hire veterans, team with veterans, think big, think like the primes, but obey the rules—and I’ll work with you as you build your businesses.

I hope you enjoy your time here this week. I know it will be worth your while.

At the outset, I mentioned starting this trip in San Antonio and finishing it in Los Angeles. I went to Brooke Army Medical Center yesterday to visit our troops who have been painfully and horribly disfigured by burns. Some have lost their most precious possession, their identities, because burns have left them unrecognizable. I am going to Los Angeles from here to visit the UCLA Medical School and the Ron Katz Foundation, which have taken on giving these youngsters back their identities—their dignity, their self-confidence, their respect. There’s no quit in any of them, and there shouldn’t be in any of you, either.

We have given you opportunity, but we can’t seize the initiative for you. You have to figure this out.

God bless our men and women in uniform; God bless our Veterans; and may God continue to bless this wonderful country of ours.

Thank you.