Audit of Veteran-Owned and Service Disabled Veteran-Owned Small Business Programs

We audited VA’s Veteran-Owned Small Business (VOSB) and Service-Disabled Veteran-Owned Small Business (SDVOSB) programs to assess whether businesses met program and contract eligibility requirements and VA provided effective management oversight. We found that VA awards ineligible businesses at least 1,400 VOSB and SDVOSB contracts valued at $500 million, annually. Moreover, VA will award $2.5 billion to ineligible businesses over the next 5 years if it does not strengthen contracting officer oversight and business verification procedures. Seventy-six percent of the reviewed businesses were ineligible to participate in the programs or to receive the contracts. They received $46.5 million in awards, including $26.7 million in Recovery Act contracts. VA’s FY 2010 socioeconomic goal accomplishment data may also be overstated by 3 to 17 percent due to awards made to ineligible businesses. We recommended VA implement comprehensive program controls to ensure awards are not made to ineligible businesses and improve adherence to Federal and VA regulations. The Under Secretary for Health, the Office of Small and Disadvantaged Business Utilization, and the Office of Acquisition, Logistics, and Construction agreed with our findings. The planned actions are acceptable, and we will follow up on their implementation.