[House Hearing, 107 Congress] [From the U.S. Government Publishing Office] NATIONAL SMALL BUSINESS WEEK: SMALL BUSINESS SUCCESS STORIES ======================================================================= HEARING before the COMMITTEE ON SMALL BUSINESS HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS SECOND SESSION __________ WASHINGTON, DC, MAY 8, 2002 __________ Serial No. 107-56 __________ Printed for the use of the Committee on Small Business U.S. GOVERNMENT PRINTING OFFICE 80-188 WASHINGTON : 2002 ________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON SMALL BUSINESS DONALD MANZULLO, Illinois, Chairman LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD, ROSCOE G. BARTLETT, Maryland California FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois SUE W. KELLY, New York BILL PASCRELL, Jr., New Jersey STEVE CHABOT, Ohio DONNA M. CHRISTENSEN, Virgin PATRICK J. TOOMEY, Pennsylvania Islands JIM DeMINT, South Carolina ROBERT A. BRADY, Pennsylvania JOHN R. THUNE, South Dakota TOM UDALL, New Mexico MICHAEL PENCE, Indiana STEPHANIE TUBBS JONES, Ohio MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas DARRELL E. ISSA, California DAVID D. PHELPS, Illinois SAM GRAVES, Missouri GRACE F. NAPOLITANO, California EDWARD L. SCHROCK, Virginia BRIAN BAIRD, Washington FELIX J. GRUCCI, Jr., New York MARK UDALL, Colorado TODD W. AKIN, Missouri JAMES R. LANGEVIN, Rhode Island SHELLEY MOORE CAPITO, West Virginia MIKE ROSS, Arkansas BILL SHUSTER, Pennsylvania BRAD CARSON, Oklahoma ANIBAL ACEVEDO-VILA, Puerto Rico Doug Thomas, Staff Director Phil Eskeland, Deputy Staff Director Michael Day, Minority Staff Director C O N T E N T S ---------- Page Hearing held on May 8, 2002...................................... 1 Witnesses Carroll, Richard, Digital System Resources, Inc., Falls Church, VA............................................................. 8 Berg, Gene, Austin/Westran, Byron, IL............................ 10 Espat, Roberto, Roses Southwest Papers, Inc., Albuquerque, NM.... 12 Bartoletta, John, High Street Financial Group, Tampa, FL......... 12 Francis, John, Northern Virginia Roofing, Inc., Falls Church, VA. 14 Kuntz, Donald, Fine Print of Grand Forks, Grand Forks, ND........ 15 Shore, Billy, Community Wealth Ventures, Washington, DC.......... 17 Siccardi, Frank, Coenco, Inc. Fayetteville, AR................... 18 Guadarrama, Belinda, GC Micro Corporation, Novato, CA............ 19 Burkhartsmeier, Brenda, Mountain Mudd & Mountain Manufacturing, Billings, MT................................................... 21 Appendix Opening statements: Manzullo, Hon. Donald........................................ 28 McDonald, Hon. Juanita Millender............................. 32 Christensen, Hon. Donna M.................................... 36 Ross, Hon. Mike.............................................. 39 Prepared statements: Carroll, Richard............................................. 40 Berg, Gene................................................... 46 Espat, Roberto............................................... 47 Bartoletta, John............................................. 49 Kuntz, Donald................................................ 70 Shore, Billy................................................. 74 Siccardi, Frank.............................................. 91 Guadarrama, Belinda.......................................... 92 Burkhartsmeier, Brenda....................................... 94 Additional Information: Submission by John Bollinger, Deputy Executive Director, Paralyzed Veterans of America.............................. 98 NATIONAL SMALL BUSINESS WEEK: SMALL BUSINESS SUCCESS STORIES ---------- WEDNESDAY, MAY 8, 2002 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 2:40 p.m. in room 2360, Rayburn House Office Building, Hon. Donald Manzullo presiding. Present: Representatives Velazquez, Millender-McDonald, Ross, and Thune. Chairman Manzullo. Good afternoon. This afternoon the Small Business Committee conducts a hearing in conjunction with National Small Business Week to recognize several small businesses that embody the spirit of entrepreneurship. Specifically, the Committee will receive testimony from several small businesses who have grown their businesses with the assistance of the Small Business Administration. Additionally, this hearing will enable the participants to promote their successes in the industry in which they have engaged. Each year for the past 39 years, the President of the United States has issued a proclamation calling for the celebration of Small Business Week. This year, National Small Business Week, which is sponsored by the Small Business Administration [SBA], is being held from May 5 through 11, 2002. Historically, small businesses have been the catalyst for economic growth. From 1990 to 1995, one of our nation's most impressive economic growth cycles, small businesses created three-fourths of the new jobs. Overall, small business accounts for 99.7 percent of the nation's employers, employing 53 percent of the private work force, contributing 47 percent of all sales in the country, and is responsible for 50 percent of the private gross domestic product. Small businesses also play an integral role in helping to solve some of the nation's most complex problems. For example, with the onslaught of the War on Terrorism, a number of small businesses have provided valuable technical assistance to the Department of Defense. Additionally, because small businesses are the heart of specific communities, they are also attuned to the challenges facing their community. Consequently, they often serve as the leaders to fight problems such as hunger and homelessness. Unfortunately, burdensome regulations, a complex tax code, and an inaccessible health care system are stifling small businesses. Small business owners face a tax and regulatory scheme that overburdens and demoralizes them. Government is meant to be the servant of the people, yet the existing federal tax and regulatory state unfairly acts as judge, jury, and master of honest, hard-working Americans. Fortunately, with the assistance of the Small Business Administration, our guests have managed to become successful in spite of the road blocks placed in their way. However, if small business is to continue as the nation's economic catalyst, it is imperative that fewer regulations, simpler, lower taxes, and a free market approach to health care are all implemented to ensure a competitive environment for all small businesses. While Washington has contributed to these problems in the past, I am proud to say that, along with President Bush, Congress has worked to repeal the 100 billion ergonomics rule and pass the President's Economic Growth and Tax Relief Reconciliation Act. It is my hope that in the very near future Congress can act to make health care an affordable benefit for all small businesses. I look forward to the testimony of the witnesses today and want to thank the witnesses who are testifying, especially my constituent, Mr. Gene Berg, who through some creative thinking was able to save over 200 jobs in Byron, Illinois. Additionally, I want to recognize and thank SBA Administrator Hector Baretto for his cooperation over the last year. Mr. Baretto will join us today to discuss the role his agency has played in helping to create and sustain successful small businesses. [Chairman Manzullo's statement may be found in appendix.] Ms. Velazquez. Thank you, Mr. Chairman We take time this week to recognize the huge contribution that small business makes to this country. It is absolutely incredible the work small businesses do for America. They anchor our neighborhoods and communities. They create three- fourths of all new jobs and employ half our workers. While corporate America sheds jobs and shifts production overseas, small businesses are busy hauling us out of recession. Today it is truly an honor to have the opportunity to hear from some of the leaders in the small business community. Kimberly Francis and her husband, John, own Northern Virginia Roofing in Falls Church, Virginia. When the Pentagon was attacked and burned on September 11, they worked with other roofers across the country to volunteer their services to rebuild more than over an acre of destroyed slate roofing over the Pentagon. Hard at work ever since, they aim to finish the job along with the rest of the headquarters by September 11, 2002. Belinda Guadarrama is president and CEO of GC Micro Corporation in Novato, California. She started her company more than 15 years ago with just two employees. When she tried to get a small, $5,000 loan, the bank turned her down for lack of collateral. A prime contractor told her, ``No company wants to work with a little Mexican company in Novato''. But three years later, she secured an SBA loan of $300,000 and expanded into a business park. Today, she employs 28 workers, with sales of $34 million as one of the leading suppliers of computer hardware and software to the defense and aerospace industries. Congratulations, Belinda. Ms. Guadarrama. Thank you. Ms. Velazquez. While these small businesses do so much for our nation, we should be doing more for them. And while this Committee has continued to work tirelessly to help small business, the needs still greatly outweigh the gains. On issues like tax fairness and regulatory equity most of the change has helped corporate America rather than small businesses. Many of these issues remained unresolved. It was heartening about a month ago to hear the President outline his agenda for small businesses. I am glad to hear him return to the issue that he raised during the campaign. It is my hope that there is action to follow up on these promises. Small businesses built this country. From the industrial revolution to the information age, American enterprise has shaped our economy and way of life. Since this is Small Business Week, it is appropriate that during this hearing we can learn what small businesses have done for our country and our communities. Small enterprise is not uniquely American, but Americans have harnessed small enterprise like no other nation. Alexis deTocqueville remarked two centuries ago that ``boldness of enterprise is the foremost cause of America's rapid progress, itsstrength and its greatness.'' The history of this country and the mission of this Committee has been the dogged pursuit of equal opportunity for all with the dream of a better life through commerce. That is why, Mr. Chairman, I am disappointed in the House leadership when they decided to pull two of our bills from the floor this week that would have strengthened small businesses. But today is less about politics than it is about reminding ourselves why we work for small businesses. In addition to the entrepreneurial drive, small companies most often embody another unique American characteristic: our patriotic obligation to give something back to the country that rewards talent and hard work with prosperity. We honor this spirit today. Small businesses are constantly giving back, just as Kimberly and John Francis envisioned during our country's darkest hour and just as Belinda Guadarrama in contributing to our nation's defense. We thank you again for all that you have given us. Welcome. Thank you, Mr. Chairman. Chairman Manzullo. Thank you. We are going to have some visiting members to the Small Business Committee introduce their constituents. Representative Lynn Woolsey, would you be kind enough to introduce us to your constituent and witness? Ms. Woolsey. Thank you very much, Mr. Chairman, and thank you, members of the Committee, for letting me come by here today to introduce one of my favorite constituents, actually. Your ranking member has mentioned Belinda Guadarrama, but I want to say a little bit more about her because I know her better. Belinda, as you have learned, is the president and CEO of GC Micro Corporation, which is based in Novato, California, which is the very center of my district across the Golden Gate Bridge from San Francisco. Belinda was the winner of this year's California Small Businessperson of the Year. She is a second-generation American and the daughter of a disabled American veteran. Belinda earned a degree in economics from Trinity University in San Antonio, Texas, and completed graduate work at the University of Texas. In 1986, investing her entire life savings, Belinda began selling software to government contractors and created GC Micro, a company with revenues of over $34 million last year. Beginning GC Micro was not easy due to both racial and gender discrimination. However, Belinda overcame the perception that minority women did not belong in the technology field or could be effective marketing to defense contractors. Now she is a strong and respected voice for minority businesses in America and has served as a small business policy adviser to the White House over the past three presidential administrations. I am proud to represent Belinda Guadarrama, and I know you will enjoy her comments today. Welcome, Belinda. Ms. Guadarrama. Thank you very much. Chairman Manzullo. Thank you very much. Congresswoman Woolsey, you can stick around as long as you want. If you would like to join our Committee, let us know. We always have need of your talent. Thank you so much. Representative Reberg from Montana would like to introduce a witness and a constituent. Mr. Reberg. Thank you, Mr. Chairman. I do feel like I am part of the Small Business Committee. Let me begin by thanking you for traveling all the way to the State of Montana and having a Small Business Committee hearing on the snowmobile issue. It was very important to my constituency, and we appreciate that. Appropriately enough, I have a constituent sitting on the far right of the panel. Her name is Brenda Burkhartsmeier, and her husband, Dennis, is somewhere in the audience. I like his name. It is easy to remember Dennis. They are a tremendous reflection of a small business in the State of Montana. We are a state of small business. We have not a lot of large business, and within Montana there are two things that are important, knowledge and capital, and the Burkhartsmeiers came up with a concept called Mountain Mud. It is a kiosk that sells coffee. As you can imagine, carts are not particularly popular in the winter in Montana selling coffee, but a drive-up kiosk is. It turned out to be a tremendous asset to the state. They now do business in many states, as you will hear in their testimony. They are the Small Business of the Year recipients within the State of Montana, and we are pretty proud of them. Unfortunately, they stole one of my good friends, moved him out of state, who was also my insurance agent. They are a growing entity in scooping up and creating jobs, and not only are they working with the Small Business Administration on the capital necessary to expand their business, but they are doing something that is very important for all of us to remember: They are sharing their knowledge with other small business people that are interested in getting into something similar, and you do not run into that when there is the proprietary interest in business. But they are willing to share their expertise, mentoring other small businesses, and my hat goes off to them, and I thank you for allowing them an opportunity to highlight their business before your Committee today. Thank you, Mr. Chairman. Chairman Manzullo. Thank you, Congressman Reberg. And we have Congressman Tom Udall, a member of our Committee, who is going to be introducing his witness, and not a constituent, but New Mexico is big enough for Tom Udall, and Mr. Espat. Mr. Udall. Thank you, Chairman Manzullo and Ranking Member Velazquez for allowing me the opportunity to offer a brief statement to welcome Roberto Espat to Washington, D.C. and to this hearing today. Roberto is the president and CEO of Roses Southwest Papers, Inc., located in Albuquerque, New Mexico. I am sure that he will go into detail about his successful business, so I will leave that to his testimony. Let me just say that he has received many honors during his illustrious career, including being named one of the Hispanic Business magazine's top 500 owned businesses in the year 2000, New Mexico Ethics in Business Award in 2001, just to name a few. And most recently, Roberto was named New Mexico's Small Businessperson of the Year and will be honored at a luncheon in Albuquerque on May 13th. So congratulations, Roberto, on that award. Mr. Espat is truly an inspiration to entrepreneurs all over the country but especially to individuals in New Mexico. Many parts of New Mexico struggle to develop economically, with high rates of unemployment, high rates of people lacking health insurance, and high rates of poverty. In that context, what he has achieved is all the more admirable. Not only do you employ more than 200 people, but you also provide these employees with a health plan, with long-term disability, tuition reimbursement for work-related training, and a 401K plan. I commend you, Roberto, for your success as a small business owner and for providing quality employment opportunities for an impoverished state such as ours. And again, let me thank you, Mr. Chairman, and Ranking Member Velazquez for this opportunity. Thank you. Chairman Manzullo. Roberto, did you come in? Where is he? Mr. Udall. I think he is arriving momentarily. Chairman Manzullo. All right. We will squeeze everybody at the table for one more. Then Representative Ross from Arkansas, who is a member of our Committee, was going to introduce Representative Boozman, also from Arkansas, who is going to introduce your constituent, but Mike is not here so please. Mr. Boozman. Thank you, Mr. Chairman, and I thank the members of your Committee forallowing me the distinct pleasure of introducing Dr. Frank J. Siccardi and his wife, Linda. Frank Siccardi, a resident of Fayetteville, Arkansas, earned his doctor of veterinary medicine degree from the University of Georgia in 1959 and served as a avian research scientist until 1983. Perceiving a need for improved air quality in poultry processing plants to enhance both environmental quality and cost efficiency, Dr. Siccardi developed the Coenco positive air system in 1983 and formed Coenco, Inc., to manufacture and sell his new product. Dr. Siccardi restructured his company in 1994 and expanded his focus to include warehouses, manufacturing facilities, and other large, open-space buildings. Since its 1994 diversification, Coenco's growth has been remarkable. Employment has grown from four to 15, and annual sales have risen from $300,000 to over one and a half million. Dr. Siccardi has been a regular Small Business Administration customer for many years. He began working with the Arkansas SBA Development Center in 1995 and obtained SBA- guaranteed loans in 1995 and 1997 to enhance cash flow and fund Coenco's rapid growth. Dr. Siccardi's recent work is defining precise ways and means of significantly reducing energy needs in large buildings. Mr. Chairman, Dr. Siccardi is a great example of the American entrepreneurial spirit that is the backbone of our nation. It is my pleasure to introduce you to a fellow Arkansan, Frank Siccardi. Thank you. Chairman Manzullo. Thank you, Congressman. Before we start, I have got a resolution here that I drew up honoring the employees of the U.S. Small Business Administration for tireless efforts in aiding, counseling, and assisting small businesses in preservation of the free-enterprise system and helping the growth of personal initiative through the creation and growth of small businesses and particularly the assistance given on September 11th. With your indulgence, it will take me about a couple of minutes to read it. ``Whereas, on September 11, 2001, terrorists hijacked and destroyed four civilian aircraft, crashing two of the planes into the towers of the World Trade Center in New York City and a third plane into the Pentagon in Northern Virginia, and resulting in the crash of a fourth plane in Somerset County, Pennsylvania, and whereas these attacks destroyed both towers of the World Trade Center as well as adjacent buildings and seriously damaged the Pentagon, and whereas thousands of innocent people were killed or injured, and businesses both large and small were destroyed, closed, or suspended for national security purposes by mandate of the federal government, many business owners were both directly and indirectly adversely affected by the terrorists' attack and were finding it increasingly more difficult or impossible to make loan payments, find access to new capital, and pay employees and vendors, and whereas the employees of the U.S. SBA have been working above and beyond the call of duty, in some instances going without proper sleep and spending time away from their families and loved ones, and have been called upon to put in extra time to assist and serve the needs of those directly and indirectly affected by the events of September 11, 2001, and, therefore, be it resolved by the chairman of the Committee on Small Business, United States House of Representatives, that the chairman commends the employees of the U.S. SBA for their tireless dedication in helping those businesses and homeowners directly and indirectly affected by the horrific terrorist attacks and helping to restore economic well being to thousands of homemakers and small businesses throughout this nation. Those who worked in cooperation with the U.S. SBA to assist victims of the terrorist attacks of September 11, 2001, particularly Administrator Hector Baretto, who had to deal with the events of September 11th only a short period of time after he was confirmed by the Senate; John Whitmore, who held the agency together during the transition between administrations; Herb Mitchell, who went well beyond the call of duty in helping small businesses virtually around the clock in the aftermath of the terrorist attacks; and Gary Jackson, who resolved complex size standards, particularly with respect to travel agencies, to all of you are sincere thanks and gratitude.'' Administrator Baretto, do you want to come up, and John Whitmore and Herb Mitchell and Gary Jackson? Folks, give these people a big round of applause for the tremendous work that they have done. [Applause.] Chairman Manzullo. John, do you want to come up? Please. Mr. Baretto is going to be sitting up here at the table, Hector. John, do you want to come on up? Let me give this to you also. [Applause.] Chairman Manzullo. Okay. Well, this is unusual. We have the administrator of the SBA sitting up here with us and for a very special purpose because, as far as we are concerned, Hector has always been one of us. He is a man of the people. He earned his oats, as we say in the Midwest, when on September 11th tirelessly he walked the streets of New York City with Ms. Velazquez and helping people personally to come through that tragedy. And Administrator Baretto, we are going to give you the opportunity to make a statement, whatever you would like to share with us, and then we can turn to the witnesses, and thank you for being here. Mr. Baretto. Thank you very much, Mr. Chairman, and Ranking Member Velazquez. Thank you so much for inviting me to be here. It truly is an honor, and today is really a day that we can celebrate so much, so many of the achievements that are represented today, and I am so anxious to hear the testimony from these great men and women small business owners. I have read some of their bios. I know how incredible they are, and they really are representative of what we know is the best of the best of our small business owners. We have so many of them in town today. I also want to acknowledge the other members that are here. I have had an opportunity to work with them, Congresswoman Tubbs-Jones and Congressman Chabot, and many of the others that sit on this dais often. I have had an opportunity to go to their districts. One of the first places I went to, as the chairman said, was to Rockford, Illinois, and then soon after that I went to Congresswoman Velazquez's district. And I have learned so much by being there in their districts and working with them and really being on the ground where the rubber meets the road, as they often tell us. And so it is a privilege to be here. Just for the record, I want to unequivocally state that I have no designs on any of the chairs that are up here on this dais. I know the very important responsibility that the members of this Committee have, and I feel honored to be the SBA administrator. I do not consider it a job; I consider it a higher purpose. I like to tell people that I was busy minding my own business literally when the call came to serve, and it is such an honor to serve this country and this administration and to work with leaders like the ones that are represented on this Committee, Chairman Manzullo and Ranking Member Velazquez. You know, National Small Business Week gives the SBA the opportunity to honor small business men and women who build the products and make the sales and create the jobs that fuel our economy, and I am so privileged to be here with all of these winners that are representing all of the states of the union. In fact, with the indulgence of the Committee, I would also like to acknowledge the regional administrators who so ably represent the SBA in all of the regions in the country. They are so proud that so many of their constituents are being acknowledged, and Iwould like to ask them also to stand, all the regional administrators of the SBA that are here today. Thank you so much. [Applause.] Mr. Baretto. Our winners represent a wide range of products and services, including a mix as diverse as American society and culture itself, from shipbuilding to outdoor furniture manufacturing to day spa and boutique services to Web design, advertising, wireless communication, restaurant owners, sandwich makers, general contractors, and everything in between. Twenty-three percent of our winning businesses are minority-owned businesses. Three percent are African-American, 14 percent are Hispanic-Americans, six percent are Asian- Americans, 21 percent are veterans, and women own 28 percent of the winning businesses, 10 percent more than last year. And I think that that is important because I think everybody in this room knows that the fastest growing segments of small business are women-owned and minority-owned small businesses who do such a great job. And the general businesses that are represented here today are really also leading the way in creating many of the opportunities that we see. Again, I want to thank the chairman and the ranking member and this Committee for all of their counsel and all of their support. It truly is a privilege to work with them, and I look forward to working with them in partnership to do all of the great things that we need to do for all of the small business owners of America. Thank you very much, Mr. Chairman. I am honored to be here with you today. Chairman Manzullo. Thank you, Administrator. We are honored to have you here. Thank you so much. We have a clock here. Try to keep your testimony to three minutes or so. I know it is a difficult thing to do. Do you want to be in charge of the clock? These things happen, you know. Some small businessman will be put to work fixing the clock, so do not worry about that. We are going to start here with Richard Carroll, the founder and CEO of Digital System Resources. Mr. Carroll, if you could keep your testimony to three to four minutes, we would appreciate it very much, and you are going to have to talk directly into that mike. STATEMENT OF RICHARD CARROLL, DIGITAL SYSTEM RESOURCES, INC., FAIRFAX, VIRGINIA Mr. Carroll. Well, thank you very much, Chairman Manzullo and Ranking Minority Member Velazquez. Members of the Subcommittee, I want to thank you for the opportunity to testify before the Committee today. My name is Richard Carroll. I am the founder and CEO of Digital System Resources. DSR was founded in 1982 with two employees. The company became incorporated as Digital System Resources, Inc., in 1985, when we had eight employees. We won our first contract, which was an SBIR contract, part of the Small Business Innovative Research Program, at which time we had 24 people working for the company. Today, we employ 480 scientists and engineers, and our annual sales are in excess of $100 million a year. D.S.R. has offices in Fairfax, Virginia; Crystal City, Virginia; Virginia Beach, Orlando, San Diego, Anaheim, and Kauai, Hawaii. Our success is directly attributable to the Small Business Innovative Research Program. Since our first SBIR contract award in 1988, we have been awarded over 80 separate Phase I, II, and III SBIR contracts. The SBIR program opened the door for DSR to prove to initially the Navy that a small business with just 40 people could design, develop, test, and provide a data processing system for a major military system. In competition with large companies, such as Lockheed Martin and Raytheon, now the first and fourth largest defense contractors in the world, our company has been very successful in providing a small business alternative. Our product was called a multipurpose processor, which is a computer that does data processing for the sonars on board our nation's submarines. The MPP, as it is known, replaced legacy sonar systems, or is to replace them, in our entire nuclear submarine fleet. And we believe it could have only been done by a small business, what we did. It has had nearly $300 million of follow-on work to provide these systems for the submarine fleet. More important than providing a small business can do the job, DSR proved that using a small business to provide a competitive alternative in this case to what was longstanding, incumbent, large businesses got innovation moving. The system we provided is much more capable, faster, and cheaper than the traditional process that was used. We adapted commercial, off- the-shelf hardware with open system software that allowed the software and the hardware to be developed independently, something that we find in our commercial world often but not in our military world. Chairman Manzullo. How are you doing on time, Richard? You have got three minutes. Mr. Carroll. Okay. I will finish up here. Chairman Manzullo. All right. Thank you. Mr. Carroll. The SBIR program--I just wanted to mention a couple of things about that. The SBIR program was recently reauthorized, and I think that the Committee made a home run in reauthorizing the SBIR program. The final step that is needed is that the directive that the SBA has to issue on the SBIR program is not issued, and I understand it is very, very close, and we really feel like that needs to be issued. Thank you. [Mr. Carroll's statement may be found in appendix.] Chairman Manzullo. Thank you very much. Our next witness is my constituent, Gene Berg. He hails from Byron, Illinois, and Gene, at the ripe, old age of 39, decided that he needed to buy a business, and after 19 trips to China, thank God, he got involved in keeping that business in Byron, Illinois, which is the nearest biggest town to my unincorporated town of Egan, Illinois, population 39. So I look forward to your testimony, Gene. STATEMENT OF GENE BERG, AUSTIN/WESTRAN, BYRON, ILLINOIS Mr. Berg. Thank you. As Don said, my name is Gene Berg, and I thank you for the opportunity to sit before you and tell my story, the story of what might not have happened without the assistance of the Small Business Administration. I am the president and owner of a small business named Austin-Westran, located in Byron, Illinois. We are a manufacturer of products that include trailer landing gear, commercial vehicle components, and a line of corn-burning stoves for residential heating. We employ 200 proud, UAW team members in our 200,000 square-foot, modern manufacturing facility. My story begins early last year, when the company I was working for as chief operating officer found itself in a position that required it to divest of this division, called Austin-Westran. Several suitors stepped forward, with the most likely acquirer being a competitor headquartered in Germany. Of note is that the selling of this plant to any of these suitors would result in its closure, 200 jobs lost and/or dislocated, some possibly moving outside the United States--a picture we have all seen much too often. Shortly after the decision to divest, I decided to attempt to buy Austin-Westran. As Don said, I was 39. It was time to get moving. After six months of financial wrangling, I came up short of financing, and the deal feel through. About that time, Mr. Manzullo's office called me and asked if there was anything they could do to assist me. They called me. Coming from a family of staunch conservatives, I was doubtful that the government could assist me with much of anything, at least that is what I had been taught, but I had no choice. The Byron plant would be gone and my dream of owning a manufacturing company ended, and the 200 jobs, most importantly, would not be there. Mr. Manzullo's office put me in touch with a local development corporation, assisted in numerous other ways, and we began the process of qualifying for a $1.3 million SBA 504 loan. I would never have guessed that working with the government could have been so fruitful and efficient, but in very short order we were approved. With the SBA financing secured, we closed the deal February 2nd of this year, 200 jobs in our community saved, our community left intact. We are proud of what we have been able to accomplish in our short life as Austin-Westran. We have been awarded contracts to manufacture corn-burning stoves for heating homes. In addition, we have secured a $1 million contract to produce trailer landing gear for Mexican trailer companies and have begun a program to set up an operation to serve the China market. No, this is not a case of outsourcing to low-wage countries like we hear so much about. This is Austin-Westran, located in Byron, Illinois, making products for Mexico and shipment to China. These contracts have resulted in 17 new jobs, of which 53 percent of the team members are of minority descent. Quickly, since Mr. SBA Administrator is here, since I owe you money, you will be interested in knowing we are doing well and able to pay our loan. Okay? [Applause.] Mr. Berg. You made me nervous when you showed up. In conclusion, I would just add that this Committee does important work. As it was so well stated by the Committee members, small business is critical to the growth and vitality of this country. The Small Business Administration helped save Byron, Illinois, and gave me the opportunity to pursue my dream. It is your committee that leads this country in support of small business. For that, I would like to thank you. [Mr. Berg's statement may be found in appendix.] Chairman Manzullo. Thank you very much. [Applause.] Chairman Manzullo. Congressman Mike Ross is going to give a second introduction to Mr. Siccardi. You did not realize that, did you? Okay. Mike? Mr. Ross. Thank you, Mr. Chairman. In the spirit of Small Business Week and as a fellow Arkansan, I want to welcome Frank Siccardi for being here and thank him for sharing his success story with us. I want to thank my friend and colleague, John Boozman for coming to give his introduction as well. Let me just say that as a small business owner myself with 12 employees back home in Prescott, Arkansas, I know what it is like to meet a payroll every Friday, and I understand the difficulties and challenges that someone who is trying to establish and grow a business faces. I have been there, and I appreciate the effort that you and the other witnesses today have put into making your business successful. Frank Siccardi had a vision to create a cleaner, safer, and more energy-efficient environment for poultry processing. Arkansas is home to an awful a lot of chicken and poultry processing plants. He has taken this vision and not only created the air-quality system to do it, but he has worked, even when not many people took him seriously, to turn it into a successful business that now benefits the poultry industry as well as many other types of large warehouses and manufacturing facilities. As members of Congress, we have to work to make sure that our government provides resources and opportunities to help small businesses have the chance to succeed. We need to be there for them, not against them. Small businesses truly are the engine of our nation's economy, and they create an awful a lot of economic opportunities for people from all walks of life. I want to commend you, as well as all of the guests here, for your success, and I want to personally congratulate Frank Siccardi for being Arkansas's Small Businessperson of the Year. Thank you for being here. Thanks to all of you for being here. We look forward to hearing your testimony today. Chairman Manzullo. Thank you, Congressman Ross. Our next witness is Roberto Espat. Roberto, do you want to pull that mike up closer to you there? Can you see the colors? When it gets to yellow, you have got one minute to go. Is it green now? Mr. Espat. It is green now. Chairman Manzullo. Okay. STATEMENT OF ROBERTO E. ESPAT, ROSES SOUTHWEST PAPERS, INC., ALBUQUERQUE, NEW MEXICO Mr. Espat. Thank you, Mr. Chairman. Thank you, SBA, for all you do for small business. I happen to be one of those that did not do any business through SBA. We were at one time a certified 8(a), but unfortunately it was very difficult for us to get any GSA contracts because it was difficult to penetrate GSA--no fault of the SBA. And thank you for this honor. We are proud to be here and proud to be part of SBA. I am frequently asked, because I come from the little country of Belize, am frequently asked, how did you get here? I say I canoed up the Rio Grande. Anyway, on a more serious note, we started the business. After a couple of rejections from a couple of banks, we were fortunate to find one bank that started to carry us, and we started back in 1986 doing recycled paper to produce paper products: toilet tissue, paper napkins, et cetera. We started with one machine, one line, a toilet tissue line back in 1985. The first year we had less than 12 employees, a 20,000 square- foot building, one line, and less than half a million dollars' sales. Today, I am proud to say that we have 250,000 square feet. By the end of this year we will have 17 production lines, employ 200 people, and our sales this year should reach somewhere around $55 million. None of this would be possible today if it was not for our people, our staff, our employees. We have tried to do everything we can for them. Since the second year of business we have had a profit-sharing program, and we give them all of the benefits that are available, including a 401K, health plans, et cetera. We would like to suggest that the government can help SBA by helping deregulation. There is so much paper work, so many things that are happening that really frustrate small business and sometimes make it impossible for small business to exist. Thank you for the time you have given me. [Applause.] [Mr. Espat's statement may be found in appendix.] Chairman Manzullo. Okay. Our next witness is John Bartoletta with High Street Financial Group out of Tampa, Florida. John, I look forward to your testimony. STATEMENT OF JOHN BARTOLETTA, HIGH STREET FINANCIAL GROUP, TAMPA, FLORIDA Mr. Bartoletta. Mr. Chairman, distinguished Committee members, I am honored and delighted to have this opportunity to directly address those who have jurisdiction over the Small Business Administration and the ability to advise Congress on the issues that concern small businesses. I hope my testimony regarding the High Street Financial success story will serve as inspiration and encouragement to help other small businesses achieve success. High Street Financial is an independent, registered, investment-advisory firm headquartered in Tampa, Florida. High Street is registered with the United States Securities and Exchange Commission. We offer customized investment-management services to institutions, professional associations, and high- net-worth individuals and have earned a reputation as one of the best quantitative money managers on Wall Street. We feel that we are redefining traditional institutional investment management by offering one of the most sophisticated investment-management systems ever made available to investors. This proprietary investment system is known as Dynamic Style Rotation. High Street's mission is to form a partnership with our clients and provide them with the most complete investment- management program available in the industry. At High Street we understand investing and the responsibility that goes along with prudent management. That is why all of our institutional investment experience, breadth of capabilities, and resources are focused on giving the client the best possible personalized attention, professional stature, ultimate privacy, and timely implementation of their specific investment needs, goals, and objectives. We believe it is significant that clients understand and share in our firm's long-term vision. Consistent bottom line investment success is only achieved through comprehensive planning, a multidisciplined investment strategy, and a client commitment to the overall process and patience. We continually strive to uphold the highest standards of performance, practice, and procedure in the industry. The cornerstone of the program is our documented fiduciary prudence, exceptional client service, responsive back office support, and superior institutional investment management utilizing Dynamic Style Rotation. Our mission can be quantified, and we call it I-cubed-E: image, infrastructure, implementation, and execution. In all aspects of the client relationship we strive to meet and exceed the client's expectations. High Street takes as much burden off the client as possible. The necessary paper work is filled out for the client, transfer of the assets is tracked and expedited by continuous contact with the transferring firm while the client is informed every step of the way. Communication is made to the client when we receive the paper work, when the custodian of the assets receives the paper work, and when the assets are finally transferred. It is this commitment to execution that has earned High Street the fastest-growing firm in the nation above $200 million with the least amount of internal errors among all asset-management firms that custody their assets with Fidelity. Chairman Manzullo. How are you doing on time, John? Mr. Bartoletta. I have got 14 over. Chairman Manzullo. All right. Mr. Bartoletta. Everyone at High Street takes great pride in providing our services that help to secure the financial well being of numerous small businesses not much different than our own. The bulk of our asset base is comprised of pension plans, profit-sharing plans of small businesses, physicians, dentists, and chiropractors nationwide. America's small business community provides the entrepreneurial engine for America's future economic growth. The leaders of America's small businesses are people whose motto is, ``the difficult we do immediately; the impossible takes a little longer.'' Mr. Chairman, I would like to close by saying again how honored I am to be invited to speak at this hearing. My entire staff at High Street is also honored and humbled, and I would like to congratulate you on the excellent job you are doing in instilling and nurturing the entrepreneurial spirit for small business. The entrepreneurial spirit embodied by small business has played a critical role in the development of the United States as the leading world economic power, and we commend your efforts to deliver that message to the American public. Thank you. [Mr. Bartoletta's statement may be found in appendix.] Chairman Manzullo. John, thank you very much. Another example of a little guy that got involved in big finance and made it successful. Thank you for your testimony. Mr. Bartoletta. Thank you. Chairman Manzullo. I wonder if we should show the video at this time. We can do that. All right. John Francis is with the Northern Virginia Roofing Association out of Falls Church, and in lieu of his testimony you have got a video for us. Is that right? Mr. Francis. That is correct. Chairman Manzullo. All right. How long is the video? Is it four minutes? Mr. Francis. Or so. Could I make just a brief opening statement? Chairman Manzullo. You bet. Mr. Francis. Thank you. Chairman Manzullo---- Chairman Manzullo. Make it brief if you have got a video. Okay? STATEMENT OF JOHN FRANCIS, NORTHERN VIRGINIA ROOFING, INC., FALLS CHURCH, VIRGINIA Mr. Francis. It will be very brief. My name is John Francis, and this is my wife, Kimberly. We own and operate Northern Virginia Roofing, a small business, and appreciate the opportunity to testify on behalf of the National Roofing Contractors Association, or the NRCA. Kimberly and I are here today for reasons other than the great work done by the Small Business Administration. We are here to discuss the NRCA's small business volunteer effort to reroof the Pentagon and have brought a short videotape for you to view. We would be happy to answer any questions. Thank you. Chairman Manzullo. Okay. If you want to turn that video so that the folks here can see it. I think we have time for the video. Why don't you turn it more towards the audience? We can move over there to catch it ourselves, just a little bit there. [The video was played.] [Applause.] Chairman Manzullo. This Committee will be in recess while we go and vote, but just continue watching the video. [Mr. Francis' statement may be found in appendix.] [Whereupon, at 3:30 p.m., a brief recess was taken.] Chairman Manzullo. Congressman Pomeroy, do you want to come on up? Congressman Earl Pomeroy is from North Dakota, and we advised him that one of his constituents was coming, and so we asked him to come and introduce his constituent, Mr. Kuntz. Earl? Mr. Pomeroy. Thank you for your accommodation. I want to briefly tell you about these folks because like all of the representatives of small business, America's engine, testifying today, there is really quite an extraordinary story behind North Dakota's winners of the Small Business of the Year Award. Five years ago, Grand Forks, North Dakota went under the water of the Red River. Incalculable damage all across the town and a family-owned print shop contemplating expansion found themselves stopped dead in their tracks as the facility got inundated, the town got decimated, and they were out of business for a period of better than six months. They estimate they took it on the chin to the tune of $800,000 to $1,000,000 in terms of lost opportunity--a hell of a hit for a family- owned business. But with the small business assistance disaster support, they were able to get the capital they needed to build back, and build back they did. Now, Mr. and Mrs. Kuntz, along with their son, Kevin, who is part of the business, and their other son, who while at the university is also part of the business, have built back to more than double where they were before the flood. This shows, I think, an extraordinary story of personal resilience, business acumen, entrepreneurial spirit, but there is even another chapter to the story I just found out about. As they looked at the total shutdown of their business for the foreseeable future, as they slogged through the muck of what remained of their business, they knew that they had employees that were suddenly without a pay check, suddenly totally without support, and they made a decision, Mr. and Mrs. Kuntz, that they were going to keep health insurance in place for their work force even while they worked to get a business up and running again. And so they did. They paid the premiums, and they kept health insurance absolutely in force for their work force until they could get the shop up and running. And each of those employees, not surprising, is still with that business today. It is an outfit that we are really proud of, people that I am proud to know, and I just wanted you to know that about them. Mr. Chairman, I appreciate you having them testify today. Chairman Manzullo. Thank you, Congressman, for taking the time. You can stick around here as long as you like. Let us do this. Let us skip to Mr. Kuntz, and then we will come back to Mr. Shore while your congressman is here. I look forward to your testimony. Mr. Pomeroy. Thank you, Mr. Chairman. Mr. Kuntz. Thank you, Chairman Manzullo, and thank you---- Chairman Manzullo. You want to slide the mike up closer. STATEMENT OF DONALD KUNTZ, FINE PRINT OF GRAND FORKS, GRAND FORKS, NORTH DAKOTA Mr. Kuntz. Thank you, Chairman Manzullo, and thank you, Representative Pomeroy. Your greeting was outstanding. Thank you. Fine Print of Grand Forks is a full-service commercial print shop. We specialize in high-quality, four-color printing. We produce printed products, such as posters, calendars, books, promotional materials, brochures, along with other common things such as business cards and envelopes. Today, we employ 23 full-time employees at our locations in both Grand Forks, North Dakota, and Thief River Falls, Minnesota. We had to overcome countless challenges over the years to make Fine Print a success. Our first challenge began back in October of 1984, when we took over a failing business form shop. The previous owner had left bad credit, worn-out machinery, and unqualified employees. With hard work and determination, we made Fine Print a successful printing company, specializing in high-end, four-color-process printing. Our greatest challenge began on Friday, April 18, 1997, when the dikes gave way to downtown Grand Forks, allowing the ice-cold flood waters of the Red River to engulf the city. My son and I had to wade through the flood waters to salvage the company's financial records before they fell victim to the flood. The business was a complete loss, while our home sustained extensive damage and was unlivable until major repairs could be completed. At that point, we joined the 50,000 other residents of Grand Forks as flood refugees. During the flood, we visited our bank to make arrangements for the company's payroll. They told us not to bother. They said we are in over our heads, and we will never succeed. Because of a business loan secured by a second mortgage on our house, they told us the bank was going to take our home. We were so shocked at what we had heard from our bank that we decided to tell our story to our congressional delegation. That afternoon their staffs made some phone calls, put us in touch with the SBA, and by that evening our loan was verbally confirmed. We received approximately $971,000 in disaster assistance loans. This allowed us to pay our bills, make payroll, and open our doors to a new building six months later. Since that time, we have doubled our sales and added several new full-time positions. We have a digital prepress system on the cutting edge of technology, followed up by up-to- date production equipment, including a brand-new, four-color press. Our employees are highly skilled and well motivated. Countless overtime hours have been worked by my family and staff to make Fine Print a success. At this point, we have drawn up plans to add onto the building and purchase a larger, faster press. The addition will result in further growth for the company. We were also very fortunate to have our loans managed by the people in the North Dakota SBA office. Since our disaster assistance loans were not managed by the centralized service center in Fresno, they were not sold as part of the SBA asset sales. Because our loans are still being managed by the SBA, we are able to finance the upcoming additions to our building and continue to grow. Other Grand Forks businesses are not so fortunate as we were, as their loans have been sold to a third party and their recovery hampered by this arrangement. These third-party financial institutions will not subordinate to other lenders like the SBA does, further restricting growth for these companies. The SBA has proven to be a beneficial partner in disaster recovery. On behalf of all of the businesses in Grand Forks, North Dakota, I would like to extend a thanks to the SBA for all of their assistance after the devastating flood. Without your help, a small business like ours would not exist today. Thank you very much. [Applause.] [Mr. Kuntz's statement may be found in appendix.] Chairman Manzullo. Our next witness will be Billy Shore. He is chairman of Community Wealth Ventures. When I became chairman of the Small Business Committee, we sort of expanded the jurisdictional scope of the definition of a small business to include municipalities, faith-based organizations, not-for- profits, churches, and the reason we did that is that all of these organizations have the same problems as small businesses except they do not pay taxes. AndBilly Shore brings a very interesting twist on what he is doing with the charities, and we look forward to your testimony, Mr. Shore. STATEMENT OF BILLY SHORE, COMMUNITY WEALTH VENTURES, WASHINGTON, D.C. Mr. Shore. Thank you, Mr. Chairman. Thank you for those introductory remarks and for this opportunity to share information about one of the fastest growing but least recognized areas of small business, the increasingly successful entrepreneurship of America's nonprofit sector. I am also honored to have the audience of Mr. Barreto here today. Thank you for being here. It may surprise you to learn that I am speaking of the nonprofit sector, the chairman's comments notwithstanding, but this is the sector that is capitalizing on business opportunities to create a new kind of wealth. We call it community wealth, nonprofit organizations that are generating profit to help them reduce or eliminate their dependence on government and foundation funding. It is perhaps the best untapped market for new revenues, jobs, economic growth-- everything that the SBA seeks to develop. The responsibilities of nonprofit organizations have increased dramatically as growth in government funding and social services has slowed. Nonprofits have come to realize, as government has in recent years, that redistributing wealth by itself cannot solve our social and economic problems. Only creating new wealth can do that. In growing numbers, nonprofit organizations, such as rehabilitation centers, homeless shelters, youth groups, and community development corporations, are addressing the challenge by creating community wealth enterprises. They are starting small businesses, such as auto repair shops, catering businesses, printing and packaging operations, and Web site development firms. In addition to competing in the for-profit marketplace, these mission-driven businesses often provide job training. One of these, for example, is Seattle-based Pioneer Human Services, which helps more than 5,000 ex-convicts, homeless, and drug- addicted individuals find jobs and rebuild their lives. They have a large business, which is a precision light-metal fabricator, that has become the principal supplier to Boeing Aircraft for their sheet-metal cargo bay liners. Each year more than 700,000 501(c)(3) and 501(c)(4) organizations deliver critical services to communities across the United States, but they do not have the resources to get to scale or to be sustainable. In 1984, we started Share Our Strength, an antihunger organization, and as a grant maker we did not want to redistribute wealth; we wanted to create new wealth. So we worked with corporate partners like American Express, Evian, Calphalon, Tyson Foods and others not in philanthropic relationships but in marketing partnerships that create new wealth. And then we created Community Wealth Ventures four years ago to help nonprofits improve their bottom line through the design and implementation of business ventures. Organizations that run a business also start to impart business thinking in their organization, and this impacts a nonprofit organization's accountability and program delivery. We are proposing that Congress authorize the SBA to create a pilot demonstration program to provide technical assistance and consulting to nonprofit organizations that receive federal funding and to help them establish for-profit ventures. This is not for every organization, and for organizations that choose to do it must compete fairly. But we believe that this entrepreneurship is for more nonprofit organizations than are currently doing it. This Committee has a proud legacy, Mr. Chairman, as you know, of helping organizations innovate and helping organizations break through to new areas. We believe the nonprofit sector is ripe for this now and able to create the kind of community wealth that we have described. Thank you very much for bringing and introducing this idea into the Congress. [Mr. Shore's statement may be found in appendix.] Chairman Manzullo. Thank you, Mr. Shore. You have got the right man here, who is looking at all of you and listening to these great ideas. Mr. Siccardi, you have had two introductions by two members of Congress. Mr. Siccardi. It is going to be hard to follow those gentlemen. Chairman Manzullo. There it is, one a Republican and one a Democrat. You want to pull the mike close to you there. Okay. I look forward to your testimony. STATEMENT OF FRANK J. SICCARDI, COENCO, INC., FAYETTEVILLE, ARKANSAS Mr. Siccardi. Mr. Chairman, Ranking Member, and other members of the Committee, I am happy to be here to discuss with you today my work for the past 30 or 40 years. My name is Frank Siccardi. I am the president of a company called Coenco. That stands for Coordinated Environmental Control. Forty years of university, government, private independent research in many areas all can be generalized as looking for the cause, not the effect. I am not interested in the Band-Aid, and what that generally means is original thought. So one is not going along with the crowd. That means change, and most people do not like change or the people that propose change. It ain't easy, in plain language. I believe you will all agree that energy use and conservation and the related pollution problems are of a major concern to our society today in many, many ways. The work I am reporting on today potentially has a really significant impact on the total energy use of our country and the pollution problem. Basically, big buildings are energy hogs. We have a basketball arena at the university, and it only uses $30,000 worth of gas and electric a month, which turns out to be 350 to $400,000 a year. That is a lot of energy for a building that is only used about 10 times a year. About eight years ago, my interest shifted to large buildings from the poultry industry. Basically, I am a veterinarian by training, but after a lot of good schooling and exposure overseas with USAID and other programs, I have had the opportunity to be able to look at things as basically a problem solver. About eight years ago, my interest shifted to large buildings: warehouses, factories, food plants, gymnasiums, coliseums, and so forth. Getting to the point, I have developed a totally new and different approach to big buildings. In its simplest sense, it is a unique air mover that shoots a bullet of air, and the net result is a series of these units allows us to create in a big building a uniform temperature and humidity, and now the big thing is the building and its contents becomes a thermal bank. For instance, there is a little company in Arkansas I work with, and they have a number of good-sized warehouses, 1.2 million square feet, to be precise. We have a number of these under my control, and what we have found recently, and I might say that right now our knowledge and growth just continues to expand. To make a long story short, a 1.2 million-square-foot building, if it is under 80 and above 25 degrees, the energy use for that building to maintain 70 degrees is exactly $13.52 a day at six-cent electricity. I see my time is up, but that is a measure of what we are talking about, and I have here a number of examples that I could go into that are just unbelievable what the opportunity is because we create a uniform temperature and humidity on a pulsing basis, very preciselycontrolled, and now the building and its contents does not want to go anywhere. Thank you. [Applause.] [Mr. Siccardi's statement may be found in appendix.] Chairman Manzullo. I see Gene Berg over here definitely wants to talk to you. His corn burner heats a 2,000 square-foot house on a bushel of corn a day, so that is quite efficient. Our next witness is Belinda Guadarrama from GC Micro Corporation, and if you could pull the mike up closer to you, I look forward to your testimony. STATEMENT OF BELINDA GUADARRAMA, GC MICRO CORP., NOVATO, CALIFORNIA Ms. Guadarrama. Thank you. It is an honor to speak before the House of Representatives Committee on Small Business today. My name is Belinda Guadarrama, and my company is GC Micro. We have been providing personal computer hardware and software to the federal government and Fortune 1,000 customers across the nation since 1986. As a small business, GC Micro faced a number of challenges that are common to most small businesses. The lack of capital was a serious problem until I was able to obtain an SBA- guaranteed loan. As a woman and a minority, it has been difficult breaking into the established network. However, the federal contracting goals that have been established for small businesses have provided numerous opportunities for us. G.C. Micro is a proud participant of the SBA 8(a) program, and we will be graduating in August. I would like to thank the Small Business Administration for the opportunity to participate in Small Business Week. I am honored to be the Businessperson of the Year for California and delighted to be chosen as the second runner up for the national award. And, of course, it was also very exciting to meet President Bush and his dogs on Monday. However, I am concerned that some of Congress' original intentions under the Small Business Act are eroding over the years. There are three areas of concern that I would like to highlight. As an example, it is my understanding that the Lockheed Joint Strike Fighter contract has been awarded with no apparent small or minority business goals. Ten years ago, the House investigated the Lockheed F-22 fighter contract when it was discovered that the contract had been awarded with a one one-hundredth of 1 percent minority business goal and a sixteen one-hundredths small business goal. As a result of the investigation, the Air Force and Lockheed allocated an additional $500 million for small business. I would pose the question, how can a DoD contract be awarded without small and minority business goals being set in the contract? Unfortunately, there is also no strong mechanism to enforce small business goals. Federal law requires any contractor failing to make a good-faith effort to achieve their small business goals to pay liquidated damages back to the government. However, no contractor has ever been penalized with liquidated damages for failing to reach these easily achievable small business goals. And additional concern I have is the comprehensive test program for reporting subcontracting goals. This program was established to increase small business subcontracting by eliminating the requirement to report small business contracting performance on individual contracts. Eliminating individual contract reporting is similar to trying to improve the scholastic performance of students by eliminating report cards. I believe this allows contractors to circumvent accurately reporting their small business subcontracting performance. I believe that an inquiry into this program would show that in reality it has dramatically reduced business opportunities for both small and small, disadvantaged businesses. In closing, I believe Small Business Week is a celebration that demonstrates to major government contractors and federal agencies that when you embrace the nation's small business programs, you are expanding our country's economy and stimulating the economic engine that generates a major portion of the tax dollars that fund the government contracts. Chairman, Administrator, members, I thank you very much for the support and hard work that you do on behalf of small businesses. [Applause.] [Ms. Guadarrama's statement may be found in appendix.] Chairman Manzullo. Thank you. [Applause.] Chairman Manzullo. Our next witness comes from the State of Montana, where we had a very interesting time out there in West Yellowstone National Park, Brenda Burkhartsmeier. I look forward to your testimony, Brenda. STATEMENT OF BRENDA BURKHARTSMEIER, MOUNTAIN MUDD & MOUNTAIN MANUFACTURING, BILLINGS, MONTANA Ms. Burkhartsmeier. Thank you very much. Small Business Week is a great celebration for all of us here, and small businesses come in all shapes and sizes, and our size is certainly one of the smaller ones. We started out in an eight- by-eight, drive-through, coffee kiosk in Billings, Montana, of all places. After attending the luncheon we had previous to this meeting, I am very proud and honored that we have someone such as yourself, Chairman Manzullo, with such a great fighting experience, and thank you very much for your dedication in fighting for us and the rest of the Committee. Like many small business owners, we had a vision back in 1994, my sister-in-law and I, of starting a little coffee company. And probably the most frequent question I have been asked since I have been to Washington is not about the business but how did you come up with a name like Mountain Mudd. Well, I have to tell you that it was between Two Dumb Blondes Espresso or Mountain Mudd, so I am sure glad we chose the latter. As we pursued our idea, we wanted to do something different, and if you have been to West Yellowstone, you know that we can have a lot of snow. If you listened to the news this morning, we had over eight inches of snow just yesterday, and, well, we probably get two nice days out of the year, so we knew we could not do a sidewalk cafe like Starbucks. So we did a drive-through coffee kiosk with an enclosed environment, and it has really been the secret to our success. My husband and I, Dennis, built that first coffee kiosk in our friend's garage. It took us over four months to build it, and we had no idea what we were doing. But now our little company produces one building every other day, and we have a 20,000 square-foot manufacturing plant. We have sold our coffee kiosks to 150 other individual people just like myself and my husband, and we impact over 400 hard-working individuals. The ideas, though, come with rules and regulations, and you touched on that in your speech. Not only federal government red tape and rules and regulations can hinder small businesses like ourselves from growing and prospering. When we go into a city or a community, we must deal with misconceptions and people not knowing exactly what our business is. It is a small, portable, little business on wheels. So we have to go through many local agencies, zoning issues, signpermits, planned urban development permits. I could go on and on and on. So I would urge you to definitely look into the red tape in small business because a small business can grow from a really small little dream into a big company, and thank you. [Applause.] [Ms. Burkhartsmeier's statement may be found in appendix.] Chairman Manzullo. Thank you. I am sorry. I am so tired. Ms. Millender-McDonald. That is all right, Mr. Chairman. Take a coffee break. Chairman Manzullo. I need that very much. Please go ahead. Ms. Millender-McDonald. Thank you, Mr. Chairman. Thank you so much for bringing these outstanding small business folks to us today. Given the National Small Business Week, we are so grateful to all of you and the work that you have done, and especially having the administrator sit on the dais with us, I tell you, this is really good news and hot stuff. To have him here, representing California and all others, and you, young woman, is it---- Ms. Guadarrama. Guadarrama. Ms. Millender-McDonald [continuing]. Guadarrama, congratulations to you for California's best in small business. But I say to you, Mr. Chairman, that this is just a reflection of what can be done once you get a team of folks and people like these outstanding folks with your team behind you and your respective businesses working together and trying to be as efficient as you can. This as a ranking member on this Committee, and I applaud you and the young woman in the orange dress out there, your spirit is what has been the driving force. The energy that you brought in your presentation certainly is indicative of why you are successful. And so I have nothing else to say. What can you say to success but thank you? Thank you, Mr. Chairman. I turn it back to you with my statement for the record. [Ms. Millender-McDonald's statement may be found in appendix.] Chairman Manzullo. Thank you. Your statement will be included in the record. Congressman Thune? Mr. Thune. Thank you, Mr. Chairman. I cannot add anything to that except to say thank you and congratulations to all of you. You are what the entrepreneurial spirit is all about, and I had the opportunity earlier--I just came from a meeting in my office with our Small Business of the Year award winner in the State of South Dakota. In South Dakota, I think every business is by definition small with a couple of exceptions, but they are really the job-creating engine, and we want to do everything we can to make sure that you have at your disposal the freedoms, the lack of regulatory and tax barriers in order to succeed, and if there are things that we can do with the programs that SBA administers, fine tune those to make those more workable to add to your success, we certainly want to be available to do that, and just appreciate the great job that you are doing out there creating jobs in this economy. Thank you very much for being here. It is wonderful to hear these powerful testimonies and success stories. It is kind of inspiring, actually. We might have to go try something else for a living, huh, guys? Ms. Millender-McDonald. Of course, you will. Chairman Manzullo. I have got just a couple of questions. I cannot ask a question of everybody, but I am fascinated by the power conversion to which you referred Mr. Siccardi. Would you explain this again? Mr. Siccardi. Basically, in a big building you have got a monstrous heater or air conditioner that makes cold air or hot air, and it comes in just like a mushroom, and then it goes out, and the air is not really distributed. In our building what we have been able to do is distribute the air effectively. For 30 seconds, 60 seconds our air movers are on, and then they sit there, and this monstrous building is 70 degrees, and it does not want to go anywhere. So consequently, the building and all its contents becomes a stable, uniform mass. I will give you another example. We work at a company in Arkansas that does canning of vegetables. Here is a 100,000 square-foot warehouse full of canned goods, and we circulate the air, and in the wintertime these canned goods, 70 degrees, ceiling to floor. Right next door is another warehouse, 100,000 feet, full of canned goods, and heaters are in the ceiling like in a regular building. A hundred and five on the ceiling. The temperature is 47 on the floor. That heat as it is going through the roof is taking all the heat of the building out. And the difference is when we do it our way, the building and all its stuff becomes the same temperature, and it does not go anywhere, and it just needs pulsing, very efficient pulsing. It is that simple. Another point. Chairman Manzullo. Go ahead. Mr. Siccardi. Oftentimes, in a large building the thermostat is over there against the wall. It has no relationship with the air of the building. In my presentation there is a very good demonstration of how when the system is on, we can go from 55 to 70 degrees just like that using 100,000 BTUs, for instance. Without the circulation it takes, like, three hours and 800,000 BTUs for that thermostat to get satisfied. And the net result is in the regular building the temperature is going up and down. We are plus or minus one degree constantly. It is so simple it is ridiculous. The unique thing is, as a friend of mine with a large, major control company said, it is unbelievable, but what you did is about what is up there, which we do not pay attention to in regular-- -- Chairman Manzullo. So you take and you jet--what is the word?--jet streams of air---- Mr. Siccardi. Boulevair. Chairman Manzullo [continuing]. Boulevair, and that breaks up the mass. Mr. Siccardi. And it goes to the wall and gets all the air in the building moving. Chairman Manzullo. So what normally would cost how much for a regular gas bill for a building, how much would you save by using that method? Mr. Siccardi. Depending on the geography and the circumstances, it can be as much as, depending on what is really going on, it could be 50, 75 or more percent. Hopefully, you will read my report. Chairman Manzullo. I will. The complete statements of the witnesses and members of Congress will be made part of the record. Gene, would you tell us how you came across that corn burner? I think you were looking at an ad in Forbes Junior, or what was it? Mr. Berg [continuing]. Fortune magazine had an advertisement about a small company in Hutchinson, Minnesota. Chairman Manzullo. It was an article, not an advertisement. Mr. Berg. Article. I am sorry. Chairman Manzullo. Go ahead. Mr. Berg [continuing]. In Hutchinson, Minnesota, that had developed a very efficient way to burn corn and other fuels, but corn being the primary fuel, as an alternative to wood burning, wood being not a very efficient fuel and also a dirty fuel. In fact, there are cities in areas in this country that are beginning to outlaw wood burning because of the pollution factor. So he developed this corn-burning technology. Literally, a bushel of corn goes into the hopper, and as Don mentioned earlier, that will heat a 2,000 square-foot home easily for a day, and so abushel of corn is, I do not know, a couple of bucks, Don knows---- Chairman Manzullo. It is a dollar eighty-one. Mr. Berg. So it literally is that simple. There is a thermostat so it pulses the corn in there a few kernels at a time and keeps a very, very hot fire. I think corn burns at 1,100 degrees, wood at three or 400 degrees, and so it gives you a feeling for being a much better fuel, and it is clean. It does not smell. You have seen it, Don. Chairman Manzullo. I have seen it. I asked you to bring the machine here. Mr. Berg. Security would not let me. Chairman Manzullo. Security would not let you bring it in. But this was a frustrated inventor. There was an article written by him in Fortune magazine, and then you read about him. Mr. Berg. Yeah. I did not fully answer your question. I read about him in Fortune magazine. He said he could have sold 50,000 of these in the winter of 2000 had he been able to build them. But he had a relatively small shop, more of an inventor than he was a manufacturer, and that is the kind of work that we do and do well. So we went and met him, introduced ourselves, and said that we would like to make those stoves for you, and so he awarded us the contract late last year, and we have been making those stoves since right around Christmas time. Chairman Manzullo. Now what is unique about this corn burner is the fact that it is 100 percent corn. Mr. Berg. Correct. Chairman Manzullo. You do not have to integrate any other fuels in it. Mr. Berg. Correct. Chairman Manzullo. And then what is it about this burner that has very little residue, no odor, and very little smoke? Mr. Berg. He will not tell me. Chairman Manzullo. It is efficiency---- Mr. Berg. It is efficiency. It is the way he moves the air. It is also the fact that in the burning pot, the burning chamber, he stirs the corn as it burns, which does not allow a buildup of the residue that you would get from burning corn if it were just idle or sitting in the chamber. So it is a combination of its design, the way he brings the air in, and the fact that he stirs the corn with a computer algorithm that allows him to not have the buildup and do such a great job of heating. Chairman Manzullo. Does this corn have to be totally dry before it goes into the hopper? Mr. Berg. You can go to, you know, 13, 14 percent moisture. Standard corn. You do not have to have any special drying. One of our employees, the team members, bought one at a substantial discount that you can have, Don. He bought one of these, and he literally brings his pickup truck to the farmer down the street, dumps it into his pickup truck. He takes it home and puts them into 55-gallon drums that we give him. Chairman Manzullo. So this corn is dried in the field, or does the farmer have to dry it in the elevator? Mr. Berg. Yes. Chairman Manzullo. It has to be in the elevator. Mr. Berg. Correct. Chairman Manzullo. Okay. I just want to let you know that there is a company out there that is working on a genetically modified, a GMO corn product that will dry in the field. I have not told you about that yet. Mr. Berg. No. I am interested in knowing about that. Chairman Manzullo. I told them about that machine that you are working with. And the goal there is if it is possible to dry the corn in the field, then you can go directly from the field to the hopper---- Mr. Berg. Right. Chairman Manzullo [continuing]. Which would revolutionize heating in this country by making it a totally renewable energy without having to use gas in order to dry the kernel before it goes in. Plus what I noticed when I was there in Byron is that corn is not totally dry. Mr. Berg. No. Chairman Manzullo. It still had a lot of moisture content in it. So very good. Congresswoman Velazquez. Ms. Velazquez. Thank you, Mr. Chairman, and I want to thank all of you again for being here. I am sorry I was not able to stay, but I had two more meetings back in my office. I think it is appropriate that during this week we celebrate small business to talk about the role that the Small Business Administration plays in helping small businesses. Brenda, I saw that in your testimony you said that your initial startup financing came from a cashing of a life insurance policy and a 401K. At the time, were you aware of the SBA financing products? Ms. Burkhartsmeier. We certainly were aware that the products were out there, but like a lot of entrepreneurial type of people we were so excited about the idea and the end result that we did not take the time to do a very good business plan, or we did not take the time to do a well-executed strategy of how we were going to do the business. When we went into our local economic development company, we were a bit put off by the approach. When we went in, we were told, well, you have got to have a business plan. You have got to have this. You have got to have that. We really thought naively that, gee, we were nice and cute, and we thought we would go in and waltz in and get the money. Well, it does not happen in business. So really we did know about it. The information is out there, and it really takes other people, other business people trying to help other business people to know where the information is. I think the Web had certainly helped because now people, without getting embarrassed going into that local economic development person and being told what you need and kind of intimidated, they can preliminarily look at that site and qualify themselves before they go in. But still, we could not have gotten the loan because there was no business like ours, and so we had to establish the track record, and now our businesses that we sell to, the 150 other people, do have a track record to follow. We would not have gotten the loan--well, we maybe would have, but there certainly was not anyone in our industry at that time. Ms. Velazquez. So how do you think an SBA loan would have benefited you when you started your business? Ms. Burkhartsmeier. Well, we certainly would have not had to have sold our car. We certainly would not have had to maybe ruin your credit going along the way because you are robbing Peter to pay Paul. All small business people do that when they are starting out. We would have had the capital, and maybe we would have had some more mentoring and some tutoring along the way to teach us. But as small business people, we do need to make mistakes, and we certainly made lots of them, and now we teach other people how not to make those same mistakes. Ms. Velazquez. Can any of the other members of the panel who have used any of the SBA products talk to us about how you benefited or how your business would have done much better if you had the opportunity to use any of those products like loans? Yes? Ms. Guadarrama. When I originally started GC Micro, the startup capital that I had to work with was from the sale of my house back in Texas. That was $20,000, and I went throughthat very quickly. I would not have been able to grow the company if a number of years later I had not been able to receive a bank loan that was SBA guaranteed, and that was a $300,000 loan, and that made all the difference in the world to us. Once we had that first loan in place and were able to pay it off, then at that point the other banks became interested in working with us, and it just made a tremendous difference. The other part of the SBA that we have worked with is with the 8(a) program, and while we probably only do maybe 15 to 20 percent of our business under the 8(a) program, the first large contract that we received was through the 8(a) program. In trying to put that contract together, we also went to the Minority Business Development Agency to actually help us put together the contract language because we had not worked with it before. So working both with the MBDA and through the 8(a) program, we were able to put our first really large contract in place, then had the experience to start looking at other contracts. So it made a big difference in my company. Ms. Velazquez. Thank you, Belinda. Any other person who would like to comment? Thank you, Mr. Chairman. Chairman Manzullo. Could you yield for a second? Ms. Velazquez. Sure. Chairman Manzullo. Didn't one of the witnesses have an SBIR loan? The SBIR program; did anybody participate in that? You did, didn't you, Frank? Mr. Siccardi. No. I need to in the worst way from this point on. Chairman Manzullo. First, I want to thank you all for coming today. Administrator Baretto, thank you for participating. I wanted you up here to sort of get a different perspective. I wanted you to look at the people that have come here especially to thank you for the great work that the Small Business Administration has done. You know, Mr. Baretto was sworn in--was it August? Mr. Baretto. It was July 25th. Chairman Manzullo. And then within what, five weeks, five six weeks, September 11th came along and really turned this town upside down. But to all of you people here, you represent such a great cross-section of America. You are from everywhere. We have got Montana and Illinois and California. But what is important is the fact that these programs exist in the SBA only to the extent that people know about them, and that is the biggest problem that we have. We still struggle with 9/11 in New York with the small businesses up there because the SBA only has unfortunately very limited authority with the distribution of the help, and we are going to be having a hearing in New York City on why the big companies are getting all the money, and the small businesses are being hurt in a dramatic way. We would like to give the SBA more authority over how to use that money because they are the experts at it. They know what a disaster is, nothing like 9/11. So, again, I want to thank you all for coming out here. Mr. Baretto, did you want to have a closing comment? Mr. Baretto. I just want to thank you, Mr. Chairman, and Ranking Member Velazquez. I have appreciated the working relationship we have had. I very much look forward to continue working with you. You told me early on that this committee is a bipartisan committee, and there are only business solutions, not partisan solutions, and you have proven that, and it has been a pleasure to work with you. I also want to recognize a couple of the other individuals that do great work for us. A lot of the questions were on regulations. The chief counsel of advocacy of the SBA is here, Tom Sullivan, and also Michael Barrera, the national ombudsman. Any of you who are having any issues with regulations, I invite you to get to know them. And thank you so much again for all your leadership and everything that you do to make American small business strong. We appreciate it very, very much. Can we give the congressmen and the ranking member a round of applause? [Applause.] Chairman Manzullo. This hearing is adjourned. 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