March 7 (Bloomberg) -- The U.S. Department of Veterans Affairs is violating a 2006 law that directs the agency to favor small businesses led by disabled veterans, two company owners said, adding to criticism of the agency’s compliance with the measure.
The executives, disabled veterans who both run medical-supply companies, said the VA improperly ordered medical gloves from suppliers affiliated with a program for the blind without allowing their businesses to compete for the work.
The Government Accountability Office, Congress’s investigative arm, ruled in October that the VA disregarded the law by trying to order griddles and other kitchen supplies from vendors without researching whether disabled veterans might provide the same goods. Veteran-owned businesses may benefit from as much as $3 billion in additional spending if the VA changes its interpretation of the law, according to data compiled by Bloomberg.
“I’ve got nothing against the government helping the blind, but there’s a law that says veteran businesses are supposed to be considered first at the VA,” Chet McLendon, president of Pierce First Medical of Phoenixville, Pennsylvania, said in an interview before a GAO hearing yesterday in Washington. McLendon, 41, is an Air Force veteran who said he has had two back surgeries because of service-related injuries.
The VA favors a preselected group of companies that often offer the government discounts for bulk purchases, before turning to companies owned by disabled veterans, according to the department. For some orders, it also gives preference to a program called AbilityOne, which seeks to boost employment among the blind and disabled.
The department is allowed to determine how to interpret the law, Dennis Foley, a VA attorney, said during the hearing. It prefers veteran-owned companies over other small businesses, including those owned by women or minorities, when awarding special contracts reserved for small companies. The work must be done at a reasonable price, he said.
“We believe we have implemented not only the letter, but the spirit of the law,” said Foley. The agency awarded more than $3 billion to companies owned by disabled veterans during the fiscal year that ended Sept. 30, he said.
The law requires the agency to research whether items can be bought from veteran-owned companies before turning to other vendors, U.S. Representative Bill Johnson, an Ohio Republican, said at a hearing last year.
“With straightforward language such as ‘the Secretary shall give priority to a small business concern owned and controlled by veterans,’ it is difficult to understand the VA’s failure to correctly interpret this law,” Johnson said during a November joint hearing of two House Veterans’ Affairs subcommittees.
McLendon and Louis Leon-Guerrero, a 49-year-old disabled Air Force veteran who owns Alternative Contracting Enterprises LLC of Tucson, Arizona, declined an opportunity to comment during the GAO hearing. Both had protested the VA’s order of gloves from Bosma Industries for the Blind Inc., an AbilityOne participant.
The VA spent about $1.6 million in fiscal 2011 with Bosma, according to data compiled by Bloomberg Government.
Tricia Leminger, an attorney representing Bosma, asked the GAO at the hearing to “be mindful of the negative impact” a change in VA ordering policy might have on the company and “the 111 people who are blind and visually impaired who work there.”
The VA ordered about $76 million in goods and services from suppliers in the AbilityOne program during the last fiscal year, Foley, the VA attorney, said during the hearing.
It also spent $3.26 billion last year with so-called “supply-schedule” vendors, a group of preselected companies that often provide bulk purchasing discounts, according to an October department review. About $436 million of those purchases went to veteran-owned companies that were part of the supply-schedule program.
The GAO will issue its written decision on the medical-gloves protest by April 2, said Paula Haurilesko, a senior staff attorney for the watchdog agency who led yesterday’s hearing. The decision is nonbinding and intended to provide guidance to the VA.
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