The Saga of the VA Supply Fund


By Hardy Stone

Vindication feels so right sometimes. But without the vengeance, it feels hollow. On May 7, the Subcommittee on Oversight & Investigations of the Committee on Veterans Affairs held an oversight hearing entitled: VA Construction Policy: Failed Plans Result in Plans That Fail. This hearing was scheduled following the release of the devastating April 4, 2013 GAO Report.
On the ‘white-hot’ seat was VA Executive Glenn Haggstrom (Principal Executive Director of the Office of Acquisition, Logistics & Construction), who was summoned to the VA Oversight Subcommittee to respond to the GAO report that uncovered shocking cost overruns and delays on four major construction projects (ranging from 59% to 144% over cost and 14 to 72 months past promised completion dates).
In the private sector, Joe Blow on the street would be fired and sued if he or she exceeded costs of that magnitude. But not in the US Government Veterans Administration—the premier agency that serves the nation’s warriors of yesterday—money is plentiful when taken from important construction projects like a new hospital, health center or hiring more contractors to clear up the disability claims backlog.
The VA’s Chief of Staff, John Gingrich, resigned over his poor performance reducing the VA’s ‘million-man’ backlog in disability claims. That’s what’s supposed to happen: A leader is responsible for all his unit does or fails to do. Period. Soldiers of all services and hierarchies of power are familiar with this battle proverb.
But not Haggstrom, Principal Executive Director of the VA Office of Acquisition, Logistics & Construction. In private sector business, Haggstrom would be frog-marched to the courthouse for embezzlement.
Remember in the mid-2000s when ‘Veterans First’ became the proud mantra of the VA? Everything for the veteran, their orphan or their spouse. This also included acquisition by the VA: SDVOSB were first in line for consideration of an RFP followed by VOSB. Several years went by (as far as I know) before the topography changed.
Enter the VA Supply Fund. I’m not sure when this policy began, but the Supply Fund is simply this (again, to my limited knowledge of the vast inner-workings of the VA) – a percentage of procurements from vendors goes directly into the supply fund. Normally, huge vendors take a place and pay enormous fees to ‘win’ VA contracts.
Different story for SDOSB/VOSB. The vast majority of our small businesses can’t afford to be on the Federal Supply Schedule (FSS), where big businesses offer huge discounts for a huge amount of products. (see diagram) SDVOSB/VOSB don’t, then, contribute to the VA Supply Fund. As a result, they win a very limited amount of VA contracts.
So as it stands the pecking order for sales opportunities runs like this: Federal Prison Industries, business chartered under the Javitts-Day-Wagner Act (industries working for people with disabilities—National Institutes for the Severely Handicapped [NISH]), vendors on the FSS, then SDVOSB, VOSB, then small business, then open market. The VA has blatantly ignored PL 109-461 “Veterans First” for years. GAO has sustained several dozen protests by SDVOSB for violations of this Public Law.
The VA Supply Fund pays for some very valuable functions within the VA—such as CVE—but it’s also been discovered that the Supply Fund also kicks in cash for Executive Bonuses and other non-veterans activities within VA. Veterans First? Eh, not so much, and that’s criminal, if not legally, at least ethically. Secretary Shinseki boasts at every Veteran Small Business Conference the Veterans are first-fully first in contracting (see VLM Editorial, edition 3.3) at the VA.
What about this Supply Fund—is it bona fide cash used to benefit veterans—or is it a ‘slush’ fund to pay huge bonuses to top brass at the VA? Congressman Tim Huelskamp (R-KS) hammered, VA Executive Glenn Haggstrom and Haggstrom admitted that Administration political appointees never told him what he did to earn an extra $55k in taxpayer money on top of his base pay. Between 2009 and 2011, Mr. Haggstrom was paid bonuses that total $54,792.
Representative Huelscamp: “Executive Director Haggstrom deserved to be demoted and/or removed. I look forward to hearing VA Secretary Shinseki’s explanation for Mr. Haggstrom’s bonuses and continued employment. The VA paid nearly $3 million in bonuses to its employees in FY 2011! The department has a pattern of paying bonuses to the very bureaucrats who waste millions…”
Huelscamp continued: “Do you think you deserve those bonuses in light of these GAO reports and these cost overruns and delays in construction? $1.5 billion in cost overruns for four projects… Apparently, they didn’t tell you then why you deserved a bonus?”
Haggstrom: No, the bonus came down in my paycheck.
Huelskamp: Just magically appeared I guess, for no reason.
This might make for a good laugh, or a vicious chortle, but that money came from somewhere, and it’s my contention that it was bled from the VA Supply Fund, an extension of taxpayer dollars.


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Hardy Stone is the editor/publisher of VetLikeMe, the nation's only publication devoted to service disabled veteran owned business.