VA won't certify retired SEAL's company as veteran-owned
WASHINGTON — Mark Lilly retired from the Navy SEALs with a Purple Heart, a Silver Star and five Bronze Stars after 23 years of service that included combat in Iraq and Afghanistan.
Lilly, who said he oversaw development of military bases overseas, decided to make construction his next career. His company, Chesapeake, Va.-based Syncon, has attracted both commercial and U.S. government work since its start in 2009.
It wasn't enough to get Syncon certified as a veteran-owned business after the Department of Veterans Affairs questioned whether he had enough experience. His firm is one of thousands of small businesses rejected by the VA since the agency stepped up efforts last year to prevent fraud. Lilly, 47, said his case shows the process may be hurting veterans even as the government seeks to boost opportunities for returning troops.
"It's really disheartening," Lilly, who said he was shot twice during the same incident while serving in Afghanistan, said in a telephone interview. "As you go through military retirement, the VA says they encourage you to be an entrepreneur and that they'll support you the entire time. Now I find out the VA could very well be my demise."
The lack of VA certification has cost Syncon the opportunity to compete for as much as $5 million in contracts since late March, said Lilly, who is a licensed general contractor in Virginia.
He said he'd hoped to double Syncon's staff to 10 employees this year, and instead is working on a multiweek contract providing security and project-management services for an oil company in the Middle East to cover his company's existing overhead costs.
"I should be ensuring my projects are on schedule and on budget," said Lilly, who is married and has a 4-year-old daughter. "You can't do that if you are in the Middle East doing a consulting assignment."
The agency's rejection of veterans is drawing scrutiny from lawmakers. The leaders of two House veterans subcommittees have asked VA Secretary Eric Shinseki to fix the verification process so decisions conform with "existing case law."
The agency's staff seems to "base decisions on a suspicion that an applicant's documentation does not qualify, rather than clear evidence of disqualification," Reps. Bill Johnson, R-Ohio, and Marlin Stutzman, R-Ind., said in a July 11 letter to Shinseki.
Sens. Jim Webb and Mark Warner, both Virginia Democrats, have also inquired about Lilly's case, according to their staffs. Webb sent Shinseki a letter Thursday saying he has had a "significant number" of complaints from constituents about the verification process. He urged the VA to "continue to evaluate" the program.
Rep. Jeff Miller, chairman of the House Committee on Veterans Affairs, said VA officials need to create a system that balances fraud-policing with fair treatment of veterans.
When the department "erroneously denies" qualified applicants, "it negatively affects our veterans who have worked hard to start a business," the Florida Republican said in an email. His committee has inquired about Lilly's situation, he said.
Almost two-thirds of the more than 7,200 companies seeking status as being owned by veterans or disabled veterans have been turned down by the VA under a new verification program, according to March data from the agency. The department didn't provide more recent data.
In one case this year, a veteran owner was initially turned down because he had been paid by the Department of Health and Human Services for two weeks of emergency relief work in Haiti. The VA initially said the stint made Kevin Treiber ineligible for the program that gives preference to veteran-owned small businesses as they compete for some contracts. It reversed its decision after Bloomberg reported on the case.
Other veterans have been rejected because of agency concerns about laws in California and eight other states where a spouse might be entitled to half a veteran owner's share in a business.
The VA told Lilly last month he wasn't eligible because his minority partner, who isn't a veteran, has more construction experience. It noted that his partner's resume said he was responsible for Syncon's daily operations, in violation of the agency's rules.
"You are attempting to use your limited experience in construction gained while serving in the military to state that you have enough experience to run the concern," the Center for Veterans Enterprise, the VA office that grants the certification, wrote in a letter to Lilly.
The agency's rejection was based on "statements in the applicants' submissions related to responsibility for day-to-day management of the company, coupled with the vast disparity in construction experience," Josh Taylor, a VA spokesman, said in an emailed statement.
Lilly said he manages the day-to-day operations and is responsible for the company's long-term strategy.
His partner, Scott Turner, said his expertise is in the company's residential and commercial business. While he handles some oversight of daily operations, he reports to Lilly, Turner said.
"He's got the government construction experience, the connections and he leads the company," he said. The two have known each other for 18 years, after meeting during martial-arts training, Turner said.
The agency began its new verification process after President Barack Obama signed a 2010 law requiring the VA to do more to certify businesses receiving the preference are legitimately run by veterans. The agency's inspector general estimated last July that as much as $500 million in contracts were awarded annually to companies ineligible for status as veteran-owned businesses.
The report found several cases in which veterans owned and controlled business "on paper" while non-veterans were running the business. It encouraged the VA to seek additional documentation such as resumes or conduct interviews to identify who controls the company.
The crackdown is occurring even as the Obama administration seeks to curb high jobless rates for returning troops. In June, the unemployment rate was 9.5 percent for Iraq and Afghanistan veterans, according to Labor Department data. That compared with 8.1 percent for non-veterans.
Lilly said he invited the VA to visit his work sites or interview business associates if they doubted whether he was the one managing and controlling the company. The department hasn't taken him up on his offer, he said.
The VA told Lilly that although his resume "shows some experience in construction, it appears minimal in comparison" to his partner, the agency said in its letter.
Lilly's business relationship with the partner "indicates such dependence that you cannot exercise independent business judgment without great economic risk," it said. Turner, his partner, has more than 12 years of construction experience, according to the company's website.
It was the third time the office turned him down, Lilly said. He had previously corrected other problems the department spotted in his company's operating agreements to the agency's satisfaction, according to the VA's letter.
During his time in the military, Lilly said he supervised the development of military bases in Afghanistan and provided recommendations and guidance on construction projects. He retired in January 2010 as a master chief in the SEALs.
Lilly's company has won several federal contracts already, including work redesigning and renovating Naval office buildings. He has also won VA contracts that included a project at a Fayetteville, North Carolina, veterans hospital.
Lilly has asked the agency to reconsider, as have more than 1,000 businesses rejected during the past year, Jo Schuda, an agency spokeswoman, said in March.
The agency's verification process may be too aggressive considering the relatively small number of veterans found to be fronting companies run by non-veterans, said Ramsey Sulayman, the legislative associate for Iraq and Afghanistan Veterans of America, a New York-based advocacy group.
"You have to balance how much fraud was occurring and the goals of the program," he said in a telephone interview. "If you're going to make it hard for 50 percent or more of the businesses out there to get certified for contracts, then you might have to look at what's a better process."
The VA is the only U.S. agency that reviews whether companies that seek special bidding preference are legitimately owned, controlled and managed by veterans or disabled veterans. Other federal agencies allow businesses to operate on an honor system.
Congress passed legislation this month that makes it easier for returning troops to use skills gained in the armed forces to find work at home. It would require U.S. agencies to consider military experience when issuing federal occupational licenses.
The VA could do a better job of working with veterans during the application process, said Devon Hewitt, an attorney with Protorae Law in Tysons Corner, Va.
"There's no dialogue before you submit the application, there's no dialogue while it's being reviewed," she said in a phone interview. "And then there's a knee-jerk kick-out of the program on the very first thing they see."
Hewitt, who specializes in government contracting law, said she has received eight calls from veterans in the past three months seeking legal assistance after being rejected during the verification process.
Veterans don't have to possess any specific licenses or experience if they can demonstrate their capability to run a firm, she said.
There's no "complete consensus" yet at the agency about how an individual's experience should factor into an ability to run a company, said Marc Goldschmitt, a Reston, Va.-based consultant who has worked with veterans seeking help during the certification process.
"Just to say someone has more experience doesn't make them a better decision-maker, a better leader or anything like that," he said.