[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
SBA'S PROCUREMENT ASSISTANCE PROGRAMS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC, MARCH 30, 2006
__________
Serial No. 109-45
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
______
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COMMITTEE ON SMALL BUSINESS
DONALD A. MANZULLO, Illinois, Chairman
ROSCOE BARTLETT, Maryland, Vice NYDIA VELAZQUEZ, New York
Chairman JUANITA MILLENDER-McDONALD,
SUE KELLY, New York California
STEVE CHABOT, Ohio TOM UDALL, New Mexico
SAM GRAVES, Missouri DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire ED CASE, Hawaii
STEVE KING, Iowa MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan RAUL GRIJALVA, Arizona
RIC KELLER, Florida MICHAEL MICHAUD, Maine
TED POE, Texas LINDA SANCHEZ, California
MICHAEL SODREL, Indiana JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
J. Matthew Szymanski, Chief of Staff
Phil Eskeland, Deputy Chief of Staff/Policy Director
Michael Day, Minority Staff Director
SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT
W. TODD AKIN, Missouri Chairman MADELEINE BORDALLO, Guam
MICHAEL SODREL, Indiana ENI F. H. FALEOMAVAEGA, American
LYNN WESTMORELAND, Georgia Samoa
LOUIE GOHMERT, Texas DONNA CHRISTENSEN, Virgin Islands
SUE KELLY, New York ED CASE, Hawaii
STEVE KING, Iowa LINDA SANCHEZ, California
TED POE, Texas GWEN MOORE, Wisconsin
Christopher Szymanski, Professional Staff
(ii)
C O N T E N T S
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Witnesses
Page
Martoccia, Mr. Anthony, Associate Deputy Administrator, Office of
Government Contracting and Business Development, U.S. Small
Business Administration........................................ 5
Collado, Mr. Rafael, CEO & Chairman, Phacil, Inc................. 6
Heckman, Mr. Kurt, President, Sycamore US, Inc................... 9
Lopez, Mr. John, Chairman, Association for Service Disabled
Veterans....................................................... 11
Giordano, Ms. Catherine, President, Knowledge Information
Solutions, Inc................................................. 13
Schneider, Ms. Christina, Chief Financial Officer, Purcell
Contracting Corporation........................................ 15
Appendix
Opening statements:
Akin, Hon. W. Todd........................................... 24
Velazquez, Hon. Nydia (Ex Officio)........................... 25
Kelly, Hon. Sue.............................................. 28
Prepared statements:
Martoccia, Mr. Anthony, Associate Deputy Administrator,
Office of Government Contracting and Business Development,
U.S. Small Business Administration......................... 30
Collado, Mr. Rafael, CEO & Chairman, Phacil, Inc............. 34
Heckman, Mr. Kurt, President, Sycamore US, Inc............... 45
Lopez, Mr. John, Chairman, Association for Service Disabled
Veterans................................................... 47
Giordano, Ms. Catherine, President, Knowledge Information
Solutions, Inc............................................. 53
Schneider, Ms. Christina, Chief Financial Officer, Purcell
Contracting Corporation.................................... 62
Additional material:
Espinosa, Mr. Raul, President & CEO, Fitnet Purchasing
Alliance................................................... 73
(iii)
SBA'S PROCUREMENT ASSISTANCE PROGRAMS
----------
THURSDAY, MARCH 30, 2006
House of Representatives
Subcommittee on Regulatory Reformand Oversight
Committee on Small Business
Washington, DC
The Subcommittee met, pursuant to call, at 2:00 p.m., in
Room 2360 Rayburn House Office Building, Hon. W. Todd Akin
[Chairman of the Subcommittee] presiding.
Present: Representatives Akin, Bartlett, Bordallo, Moore
and Velazquez (Ex Officio).
Chairman. Akin. The Committee will come to order. Good
afternoon, everybody. I'm sorry that we had some votes and it
has made us run a little bit late. We're going to try and
redeem the time some here and so I'm going to proceed with an
opening statement and then we'll take an opening statement by
my counterpart here, the Ranking Member, and then if you'd like
to make a statement you may.
What we're going to do is run five minutes right across for
everybody. I'm going to hold everybody pretty close on time. It
is the equivalent of Friday afternoon in a school environment
and so we're going to do five minutes for everybody and then
have a time of questions. I would expect we'll be probably done
pretty close to an hour or somewhere in that vicinity, okay?
Good afternoon. Welcome to the hearing which will consider
the Small Business Administration's procurement assistance
programs. I want to especially thank those who have come some
distance to participate in the hearing.
Most of you know that small businesses are the backbone of
our economy. Most, if not all, large businesses started as
small businesses. Small businesses are often times the driver
of innovation in both products and services. The Federal
Government plays an enormous role in promoting the growth of
this sector as the consumer of goods and services that small
businesses provide.
In fact, it is the stated policy of Congress that the
Federal Government should purchase 23 percent of their goods
and services from small businesses. Furthermore, the Small
Business Administration oversees procurement assistance
programs for small businesses that owned by the disadvantaged,
women, veterans, or located in Historically Underutilized
Business Zones.
In the past, small businesses have expressed concern that
SBA and other federal agencies were not providing sufficient or
effective procurement assistance. In addition, there have been
concerns that large businesses have received the benefit of
small business contracting goals and policies. With a new
associate deputy administrator for the Office of Government
Contracting and Business Development at the SBA, this is the
time for a new review of the Government's small business
procurement policies.
This hearing will examine whether or not federal
procurement assistance programs are, in fact, helping small
businesses compete in the fiercely competitive and complex
contracting environment. Are the SBA's and other federal
agencies' programs and efforts sufficient to assist small
businesses in finding real procurement opportunities? Also, the
Subcommittee will explore innovative ideas and recommendations
to improve and enhance assistance to small firms that want to
do business with the Federal Government.
I now yield for an opening statement by my good friend and
colleague, the Ranking Member of this Subcommittee, Ms.
Bordallo of Guam.
[Chairman Akin's opening statement may be found in the
appendix.]
Ms. Bordallo. Thank you very much, Mr. Chairman, and good
afternoon, everyone.
It has been some time since this Committee has been able to
review the Small Business Administration's procurement
assistance programs. These preferential contracting programs
provide small businesses with some of the best avenues into the
federal marketplace. And it is important that this Committee
and Congress, as a whole, ensure that the SBA is administering
these programs to their full potential.
The Federal Government is the largest buyer of goods and
services in the world. During Fiscal Year 2004, the Federal
Government's purchases exceeded $330 billion. Amazingly, the
value of the federal marketplace roes by more than $100 billion
in the past five years.
Small businesses, however, may not be benefitting from this
growth in the federal marketplace to the extent that they
should. And this of great concern to me. Small businesses are
driving forces behind our economy. They are the largest creator
of jobs. They are innovators that spur new technology and
efficiencies in our economy. And they are also essential parts
of the communities in which we live.
I represent Guam. And small businesses constitute nearly 90
percent of the businesses in my district. Supporting them is a
top priority for me.
The HUBZone program on Guam, in particular, is growing in
importance to the island's small business community. Fifty-four
Guam firms have been certified as HUBZone businesses, since
August of 2005 when all of Guam was designated as a HUBZone.
And I have the Small Business Committee to thank for that. That
was a piece of legislation that we put through. This is
encouraging considering that only six Guam firms were certified
for the program prior to this legislation.
Barriers to small businesses participating in the federal
marketplace have traditionally been high. And this is one of
the reasons why Congress authorized programs such as the
Historically Underutilized Business Zone program, the 8(a)
program; the Service-Disabled Veteran Business program, the
Small Disadvantaged Business program; and, Women-Owned Business
program. Congress has also set in place mandatory minimums for
the percent of contracts that federal departments and agencies
must award to small businesses each year.
These preferential contracting programs and the mandatory
minimum contracting percentages allow for a more level playing
field for small businesses to be created in the federal
marketplace. And it is because of these initiatives that our
nation's small businesses can more successfully compete for and
be awarded Federal Government contracts.
Among other things, the SBA is responsible for ensuring
that the playing field within the federal marketplace remains
as advantageous as possible for small businesses. So it is the
responsibility of this Committee today to review SBA's
performance in achieving that goal, and to solicit ideas on how
this Committee and Congress can enhance these initiatives to
ensure that the barriers remaining between America's small
businesses and the federal marketplace can be successfully
overcome by our country's small entrepreneurs.
I look forward to your testimonies today. Thank you, Mr.
Chairman.
Chairman. Akin. Thank you and a brief statement will be
made by Ranking Member of the Full Committee, Ms. Velazquez, at
this time.
Ms. Velazquez. Thank you, Mr. Chairman, and I also to thank
the Congresslady Bordallo for allowing me to sit in on this
hearing and I want to express my appreciation for all the work,
the hard work that you do on this issue.
Over the last several years, the federal marketplace has
continued to rapidly increase and is $100 billion more than it
was at the beginning of the President's term. This growth is
attributed to spending related to the war and our involvement
in Iraq. The Department of Defense procurement volume in 2004
was bigger than the entire federal marketplace in 1999.
Based on this, you would think that small businesses are
thriving, but let me tell you nothing could be further from the
truth. From 2003 to 2005 alone, small companies lost nearly
$1.7 billion on contracting opportunities and contract actions
to small businesses' decline by 31 percent. While this
Administration claims small businesses are important, they
obviously don't think they are important enough to do business
with.
We constantly hear that SBA is doing more with less, but it
is clear entrepreneurs are not benefitting. By 2007, the agency
staff will be reduced by one third and their budget has already
been cut in half. The lack of personnel and resources causes
programs to be abused, fraud-ridden, and in some cases not
executed at all.
One of the most important roles SBA serves is to ensure
agencies comply with current contracting laws. This job falls
on the Procurement Center Representative, the front line
defense against items such as contract bundling. There were 73
PCRs when the federal marketplace was almost half of its
current size and now there are only 58.
This leaves small firms without an advocate and results in
a drop in contracting opportunities. At a time when many small
businesses are struggling to recover from Hurricane Katrina and
Rita, local entrepreneurs are receiving less than 20 percent of
FEMA's contracting dollars. To make matters worse, nothing has
been done to expand business opportunity in the Gulf region for
recovery work.
While the SBA does not think this is alarming, our nation's
small businesses are being neglected. These shortcomings are
most glaring with respect to women and minorities. The 8(a)
program, the primary program through which minority-owned
businesses enter the federal marketplace has dropped by 20
percent. What is most disappointing is that this program has
not been updated in nearly 20 years and as a result has moved
away from its core mission of minority business development.
This Administration has also done nothing to implement the
Women's Procurement Program that passed into law and signed by
the President in 2000, an initiative that allows for women-
owned businesses to access the federal marketplace. By failing
to execute this program, women business owners have lost out on
$25 billion in contracting opportunity. Small business
participation in the federal marketplace is important and
should not be viewed as an undue burden.Entrepreneurs are the
innovators, drivers of our economy. They make this economy
tick. This is not just good for small businesses, but it
creates competition in the federal marketplace, gives federal
agencies quality products and most importantly, it provides the
best value for taxpayers' dollars.
If corporate America turns to small businesses and provides
contracts for them, why can't the Federal Government do the
same? Rather than recognizing this, the Administration's sole
focus is providing big contracts to companies like Haliburton
who then turn around and overcharge the Government millions of
dollars. This is the wrong set of priorities for this nation
and it needs to change.
Thank you, Mr. Chairman.
[Full Committee Ranking Member Velazquez's opening
statement may be found in the appendix.]
Chairman. Akin. Thank you, all of our speakers so far who
have been able to stay within the five minutes here. So let's
see if we can keep it within the five minutes and that will
give us a little time for questioning as well.
Our first witness is Anthony Martoccia. Anthony is the
Associate Deputy Administrator in the Office of Government
Contracting and Business Development, U.S. Small Business
Administration, Washington, D.C., but Anthony, my understanding
is that this is your second month in the job, is that correct?
Mr. Martoccia. That's correct.
Chairman. Akin. What we're going to do is allow Mr.
Barlett, because he's on a tight time schedule, to introduce
Mr. Heckman. But I'm still going to go ahead and go straight
across to Mr. Heckman even though he isn't first. Mr. Barlett,
if you would introduce your witness, Mr. Heckman, and then we
will proceed.
Mr. Bartlett. When you come to him in the line, I'll
introduce him. Are you starting down the line? Go ahead.
Chairman. Akin. I was going to go down the line, but--
Mr. Bartlett. When you come to him, yield to me, and I'll
introduce him.
Chairman. Akin. Okay, that was what I was thinking about.
Then I'm going to continue with the introduction then of
Anthony, and your introduction is done, basically. Now your
honeymoon is over, and you've been here a month, so we look
forward to your testimony. Thank you.
STATEMENT OF ANTHONY MARTOCCIA, OFFICE OF GOVERNMENT
CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS
ADMINISTRATION
Mr. Martoccia. Chairman Akin, Ranking Member Bordallo,
Distinguish Members of the Subcommittee, I am here today to
discuss the President's FY Budget request for the Small
Business Administration and related legislative issues,
specifically those related to government contracting and
business development.
I am Anthony Martoccia, Associate Deputy Administrator for
Government Contracting and Business Development. Thank you for
allowing me to represent the SBA on behalf of Administrator
Barreto.
Since 2001, the SBA has been on a mission to deliver more
services to the nation's small businesses. We are proud of the
SBA's success in that quest, and the FY 2007 budget reflects a
continuation of this goal.
Improved methods to assist small businesses gain access to
government contracting opportunities have been implemented. By
restructuring key agency operations and re-engineering the
Agency's largest loan programs, the SBA has achieved record
program growth while operating more efficiently and reducing
its total budget by more than 37 percent since 2001. Government
contracting dollars going to small businesses have grown
significantly since Fiscal year 2000. There were $20 billion
more in small purchases, prime contracts, small businesses in
FY 2004 than in FY 2000, supporting an estimated 156,000 jobs.
In addition, subcontracting to small business has grown by
$10 billion. With improved efficiencies in Fiscal Year 2007,
SBA will be able to serve record numbers of small businesses
with a total budget request of $624 million of which $74
million will be used for government contracting and business
development.
SBA has increased the number of Procurement Center
Representatives to 58, assisting small businesses with federal
procurement. In FY 2004, small businesses received contract
awards a little over $69 billion of the approximate $300
billion in total federal prime contract awards. Additionally,
there were an estimated $45 billion in government-related
subcontracts awarded to small businesses.
SBA's Office of Government Contracting and Business
Development also instituted enhanced practices and
technological improvements. GCBD is working with agencies to
help them meet their missions, as well as helping small
businesses to identify contracting opportunities through these
technological improvements. Technology, such as the electronic
Procurement Center Representative system create increased
efficiencies concerning governing contracting opportunities.
Strides have been made to maximize staff resources and
monitor contracting activities, as well as to improve
communication and interaction with the small business community
through the automation of many basic systems. These systems
include the Electronic Subcontracting Reporting System, 8(a)
application, HUBZone Procurement Query and Reporting System,
Central Contractor Registration, Federal Procurement Data
System Next Generation and Tech Net, among others. As
technology is ever changing and improving, so are the
efficiencies enhanced by using these E-gov systems.
The added benefit of these technological advances is
apparent in the business matchmaking efforts following the Gulf
Coast hurricane disasters. More than 500 small businesses were
registered and assisted by our Procurement Center
Representatives across the country to get over $30 million in
contract support. In other Katrina-related contracting,
approximately $1.24 billion Katrina-related contracts listed in
FPDS were awarded to small businesses. Also approximately $1.5
billion in FEMA small business awards are pending.
In addition to GCBD's traditional functions, the Office
will leverage opportunities outside of our division.
Opportunities provided by SBA's Office of Capital Access,
Entrepreneurial Development and SBA district offices outreach
to assist small businesses to be ready and able to do business
with the Federal Government.
The SBA operates like the businesses it helps to succeed by
continually meeting challenges and evaluating cost
effectiveness. The SBA has succeeded in achieving record growth
in its programs while at the same time reducing the overall
budget request through focused, practical implementation of the
President's Management Agenda and related initiatives.
Creating a better environment for small business to thrive
and compete is a priority. It is well documented that when
small businesses are thriving, the overall economy is thriving.
Thank you. I will be happy to answer any questions you
might have.
[Mr. Martoccia's testimony may be found in the appendix.]
Chairman. Akin. Thank you. I really appreciate your
testimony, Deputy. And you brought it in 30 seconds under time.
You're doing pretty good.
Mr. Martoccia. Thank you.
Chairman. Akin. Get a little extra star for that. Thank
you.
And Rafael--is that Collado?
Mr. Collado. Yes sir.
Chairman. Akin. And you're the CEO and Chairman of Phacil,
Incorporated from Camden, New Jersey.
Mr. Collado. Actually, it's Phacil, Incorporated in Camden,
New Jersey.
Chairman. Akin. Phacil?
Mr. Collado. Yes sir.
Chairman. Akin. I got half of it. Thank you, please
proceed.
STATEMENT OF RAFAEL COLLADO, PHACIL, INC.
Good Afternoon Chairman Akin, Congresswoman Bordallo,
Members of this Subcommittee, fellow panelists and guests. My
name is Rafael Collado and I am the Chairman of the Board and
CEO of Phacil, Inc. Phacil, Inc. is certified by the Small
Business Administration as a Small Disadvantaged, 8(a) and
HUBZone Business. The company provides Information Assurance/
Security, Information Technology, Logistics Support and
Engineering Services to the Federal Government and commercial
customers. Phacil is unique among 8(a) companies in that it
holds a Top Secret Facility clearance and is headquartered at
the Applied Communication and Information Networking Center in
Camden, New Jersey which is a HUBZone.
I am pleased to join this panel of industry and government
leaders to participate in a dialogue about contracting
opportunities made available as a result of the Small Business
Administration's HUBZone program. And more specifically, the
legislation reauthorizing the SBA itself. For me and my Company
Phacil, participating in procurement opportunities within the
context of the SBA have been extremely disappointing. After
four years of participating in SBA programs, Phacil's
appropriate expectations have not been realized.
Based on our experiences there is no doubt there is a bias
against small business and that the SBA has done very little to
mitigate it. I hope that forums such as this one will provide
the guidance, and more importantly, sanctions that will
transform the SBA from the bureaucratic speed bump for small
disadvantaged companies into the facilitator of newly,
reinvigorated, badly needed economic engines in urban
communities.
By way of personal background, I was born in the South
Bronx. With the support of my parents working as an electrical
engineer in the aerospace industry and my mother, a home-maker,
I did well in school. I graduated high school as both a Regents
and National Merit scholar attended Polytechnic Institute of
Brooklyn where I majored in Electrical Engineering and after
Polytech worked for several of the largest technology firms in
the United States.
Very early in my working career I knew that I wanted to
start my own business. I did not want my life to potentially be
in the hands of people who might not be fair to me. I decided
that the only way I could help myself and my community was to
build something which would directly contribute to the local
economic infrastructure. In 1983 with the assistance of some
friends I had grown up with, I founded Protocom Devices, Inc.
and at its peak we employed over 200 people. The majority of
these folks came from the local neighborhood and had been
trained by the company to a high level of technological
competence.
I since went on to found several other companies, including
Inabox Communications which was acquired by Register.com in
2000. It was at Register.com that I met my current partner at
Phacil, Sascha Mornell, who also shares the value of hard work,
education, integrity, commitment and compassion for equality.
Phacil was formed by Sascha and me, fulfilling a life long
dream of creating, nurturing and running our own business. In
2000, we formed Phacil and experienced all of the barriers that
confront most Small Disadvantaged Businesses. Primarily, we
experienced and continue to experience now what I call the
institutional corruption of convenience, people not performing
their congressionally-appointed duties because it requires them
to work a little harder and they don't pay a price if they are
not diligent.
For the sake of brevity I will limit my comments today to
the major obstacles the company historically faced so as to
illustrate the SBA's failure to effectively implement the
HUBZone program and the pervasiveness of its institutional
apathy which is most corrosive to equal opportunity. Therefore,
I begin as any small disadvantaged business wanting to develop
in the Government contracting marketplace with the SBA.
As I mentioned earlier, Phacil wanted to be a HUBZone
company because Sascha and I wanted our Company to provide jobs
to folks in economically disadvantaged neighborhoods. We had
been successful previously; we wanted to continue and extend
this success to folks in under utilized or under employed urban
settings.
The HUBZone Program was most co-incident to this purpose,
or so we thought. The program was and is, first and foremost, a
jobs-creation program. It was open to all businesses regardless
of race, ethnicity or sex--not a quota system--which appealed
to my particular idealism best expressed by Dr. Martin Luther
King when he said that he hoped one day his children would live
in a world where they were judged ``not by the color of their
skin. but by the content of their character.''
For me the decision to seek entry into the HUBZone program
was a way of making part of that dream real. My first
disappointment came, when after we had speedily filled out the
forms, hired the requisite number of people from our limited
capital resources and set up operations in Newark.the SBA said
they were ``too busy'' to process our paperwork and worse yet
had no idea as to when they could review it so that we could be
certified. Despite numerous calls, emails and personal visits,
we could not get any movement or support whatsoever from the
SBA. Upset and frustrated, we decided to reach out to our local
Congressman, the Honorable Donald M. Payne.
Mr. Robert Cottingham from Congressman Payne's office came
to visit us within a day of our call. He took the time to
listen to us, asked a few questions and then very frankly told
us that there might not be very much he could do. Thanks to the
Congressman's assistance, within three days of that meeting,
the SBA reviewed, asked a few questions and clarifications and
certified us as a HUBZone company. That was the first time, but
certainly not the last time, that aggressive and principled
congressional involvement helped balance the scales of
opportunity on our behalf and on that of the communities whose
citizens we employ.
Our experience with the HUBZone program caused us to become
very concerned that other potential beneficiaries in Newark
were being underserved by the SBA. Sascha and I, with
assistance from--
Chairman. Akin. Mr. Collado, we're already out of time. We
have actually quite a lengthy record that is part of our record
for the Committee that you've submitted. Do you want to just
sort of summarize in one sentence?
Mr. Collado. Surely. In closing, I would like to remind the
Members of this Committee that Phacil has depended on the
active, aggressive support of our elected representatives in
leveling the playing field in dealing with Federal Government
acquisition and contracting. Borrowing in a bipartisan manner
from the words of two great American Presidents I say as
President Kennedy did, ``always remember that sincerity is
always subject to proof.'' In that same vein, another great
American President, Ronald Reagan warned us ``to trust and
verify.''
I would again want to thank the Members of the Committee
for this opportunity to share my perspective and I'd like my
comments entered into the record. Thank you.
[Mr. Collado's testimony may be found in the appendix.]
Chairman. Akin. Without objection, and thank you for
sharing and obviously an exciting personal journey and all. I
think people have some questions for you.
I would call on Mr. Bartlett to introduce our next witness.
I'm sorry they didn't arrange the name tags on the table in the
same order they did in our notes, so we're going to jump over
to Mr. Heckman, but I'd like to recognize Roscoe Bartlett, my
esteemed colleague.
Mr. Bartlett. My honor. Kurt Heckman is a resident of
Hagerstown, Maryland. He is the President of Sycamore US which
is based in Frederick and McHenry, Maryland. He has a
mathematics degree from Eastern Nazarene College and has 22
years' experience in the U.S. intelligence community. He has
primarily served as a systems engineer and has designed mission
planning software for large, aerospace applications. However,
he is most proud, as he well should be, of his beautiful wife
of 23 years and his 5 children.
In 1996, Mr. Heckman founded a small business to support
the intelligence and aerospace communities with engineering
services. Kurt and his business partner, Jim Lockwood, named
the company and I really like this, named the company Sycamore
Associates because Zaccheus, from the Bible, climbed up a
Sycamore tree as a dishonest businessman and came down from the
tree an honest businessman.
Since 1996, Mr. Heckman and his team have led the company
from a single contract with a few engineers, to numerous
contracts with the US intelligence community, HUD, Fannie Mae,
Freddie Mac, Ginnie Mae, Lockheed Martin and Orbital Systems
employing a staff of over 100 people.
I am honored to know him. He is both a friend and a
constituent. He has brought really high-paying jobs to a
HUBZone in a really depressed part of our district, a city
that--a county that until a few years ago had 14 percent
unemployment. And I think his employees there get what, four
times the average income? HUBZones are really, really working
in his district and thanks to Kurt Heckman, we had a lot of
employees now in HUBZones.
Thank you for coming as a witness, and I'm honored to be
here.
Chairman. Akin. Roscoe, thank you for that great
introduction, and Kurt, you can proceed. Thank you.
STATEMENT OF KURT HECKMAN, SYCAMORE US, INC.
Mr. Heckman. Congressman, thank you for your kind
introduction. It's an honor to be here in front of this
subcommittee today. On behalf of the 100 employees at Sycamore,
please accept my thanks for creating the HUBZone program and
maintaining it through these years.
In my ten years at Sycamore, I've discovered that there is
really only one inherent virtue to being a small business, and
that virtue is that the stockholders know the employees on a
first name basis. It's impossible to work side by side with
your employees for any length of time and coldly refer to them
as ``labor.'' In a small business, employees are your partners.
In a small business like Sycamore, they become owners where 20
of my 100 employees own part of my company. Small business is
where humanity truly intersects with economics and frankly, a
lot of America's business problems today can be traced to
dehumanization of our workers.
Sycamore has been a delight to me for the last 10 years,
but with the delight comes a burden regarding the care of a
growing number of individuals and families. We've worked to
create the employee-centric company that I always wanted to
work for, and the net result is that we have top-performing men
and women and virtually no attrition. People come to Sycamore
and stay, and in the Intelligence Community, that is virtually
almost unheard of. For moral and ethical reasons, we keep the
respect for our employees at the top of our priorities, but it
is also good business. A stable and motivated workforce is a
powerful thing. If your employees know that you will do
everything in your power to take care of them, they won't bolt
at the first sign of bad news; couple that with honesty and
transparency, and you will overcome great hurdles.
You should know that Sycamore was a successful business
prior to the HUBZone program. We were five years old, had 30
people, were doing about $3 million in annual revenue, but with
the exception of some small contracts with Fannie Mae, Freddie
Mac and Ginnie Mae, the vast majority of our business was as a
subcontractor. That was fine, but as a sub you typically don't
get credit for your success, you rarely get project management
experience and in general, leadership opportunities are scarce.
Often you can't even cite the good work you've done as a sub on
proposals. Furthermore, as a sub, the prime's add-on cost
creates a lower ceiling for what you can pay your employees and
what benefits you can provide. The funny part is that even
though the primes skim their G&A and profit off of the top of
our bill rates, my employees are typically higher paid than
their prime contractor peers, and certainly have better
benefits, and that's because as a small business we've had to
be efficient.
In our five years as a HUBZone certified company, we've
gone from a good little company, to a leader in the small
business arena. We've more than tripled in size, and have five
significant prime contracts because of the HUBZone program. The
HUBZone requirements on the agencies have given us a chance to
perform and I am happy to say that we have executed. Our
performance grades are excellent across the board, and on our
largest prime contract, which is a multimillion dollar HUBZone
IT contract in the Intelligence Community, we have received our
fourth straight 100 percent award fee for outstanding
performance. Instead of viewing HUBZone regulations as a burden
and a mandate to do work with inferior businesses, our
customers see it as an efficient and simplified way to do
business with an excellent company.
I must confess that I love how the HUBZone program isn't
geared to make rich men and women richer, but sends dollars to
communities with statistically proven needs. It was very easy
for Sycamore to extend its practices of excellence to our
customers and employees to include our community. All three of
our offices are in HUBZones. Sycamore is required to have 35
percent of our staff be residents of a HUBZone. We have over 50
percent. Our investment in the HUBZone community in 2005 was
over $2.5 million.
In closing, one our first HUBZone employees is a smart
young man that was literally working in a coal mine in the
Appalachian region of Western Maryland. Today, through his own
efforts and with the help of tuition assistance, part-time
work, benefits and technical training from Sycamore, that young
man has a bachelor's degree in mathematics, has some of the
highest security clearances in the land, and has a full-time
job making over $45K straight out of college and is on his way
to a terrific career and a bright future, all because of the
HUBZone program. On his behalf and the others in Sycamore,
thank you for creating the HUBZone program.
[Mr. Heckman's testimony may be found in the appendix.]
Chairman. Akin. Thank you so much for your testimony and
the story as well.
Our next witness is John Lopez. He's Chairman of the
Association for Service Disabled Veterans from Washington, D.C.
John?
STATEMENT OF JOHN LOPEZ, ASSOCIATION FOR SERVICE DISABLED
VETERANS
Mr. Lopez. Good morning Mr. Chairman, Ranking Member and
Members of the Committee.
Thank you for your attention and without objection, I shall
submit a written statement for the record and summarize my
testimony for the Committee.
Since the beginnings of our nation, the people of the
United States of America have placed great confidence in that
interpretation of the United States Constitution that permits
our Government to conscript or seduce our citizens to be
killed, disabled and tortured in military service, for the
security and prosperity of the total population.
Complicit in that application, has been presumption that
our nation, through its Government, would provide
rehabilitation for our service disabled veteran survivors of
the resulting horror.
This has not been the case when service disabled veterans
have attempted to maintain their rehabilitation as owners and
operators of smaller businesses.
It has been nearly six years since the U.S. Congress first
provided support for the service disabled and prisoner of war
veteran enterprise initiative, by enacting Public Law 106-50
and Public Law 108-183.
The Administration followed that direction by invoking
Presidential Executive Order 13360, directing aggressive and
immediate implementation of those laws and specifying actions
to be taken.
Those activities took place in October 2004 and since that
time frustration has continued and subsequently the legislated
intent of the United States Congress has been variously
interpreted by regulators, due to the necessity for inserting
and parsing of the required language, statements and references
to existing regulations and laws.
This bureaucratic abuse has had the effect of confusing and
impeding the effort to increase the participation of the
service disabled veteran in government procurement and
contracting opportunities.
The policy of the nation and the intent of the Government
has been ignored and the congressional compact for our nation's
security has been violated.
Consequently, it is imperative that the Congress enact H.R.
3082 ``The Veterans Owned Small Business Promotion Act'' which
clarifies and reemphasizes the intent of the U.S. Congress. The
intent is a splendid example of the concern and focus of the
congressional response to the veteran's need for rehabilitation
and transition assistance.
H.R. 3082 gives specific authority to the Department of
Veterans Affairs to confirm the eligibility of service disabled
veteran businesses and to accept direct responsibility for the
provision of benefit to the veteran, especially, the service
disabled veteran. It puts the task to that agency specifically
established for the purpose of serving ``those who have borne
the battle.''
H.R. 3082 also clarifies the misconception that Veterans
Entrepreneurship, and the proposed act, are a socioeconomic
development initiative or a cultural inequity panacea.
H.R. 3082 is a specified contribution to that continuing
obligation of our nation to rehabilitate those veterans that
sacrifice for our nation's security and prosperity.
The service disabled veterans government service incurred
misery, is unique. There is no justification for requiring that
service disabled veteran indemnification and rehabilitation be
adjusted to the conduct of any other socio-economic program.
H.R. 3082 only addresses the symptoms of the Government's
neglect of responsibility for our nation's disabled veteran.
To finally and accurately respond to that responsibility,
the U.S. Congress is urged to amend the Small Business Act by
adding a new section, the service disabled veteran
comprehensive eligibility amendment as follows:``The U.S.
Congress hereby authorizes businesses owned and operated by
veterans with service connected disabilities, adjudicated by
the United States Department of Veterans Affairs, to enter into
contracts with the United States Government and any department,
agency, officer or government contractor, thereof having
procurement powers obligating the entity to furnish articles,
equipment, supplies, services, or materials to the Government
or to perform construction work for the Government. In any case
in which the procurement officers certify to any officer of the
Government having procurement powers, that the service disabled
veteran business is competent and responsible to perform any
specific government procurement contract to be let by any such
officer, such officer shall be authorized and directed to let
such procurement contract to the service disabled veteran owned
business upon such terms and conditions as may be agreed upon
between the service disabled veteran owned business and the
procurement officer. Whenever the procurement officers and
service disabled veteran owned business fail to agree, the
matter shall be submitted for determination to the Secretary or
the head of the appropriate department or agency by the
procurement officers.''
Chairman. Akin. Mr. Lopez, your out of time here. Did you
want to have one concluding sentence?
Mr. Lopez. I have one concluding sentence already. It would
be appropriate to recall the words of the first President of
the United States of America, George Washington, who stated
that ``the willingness with which our young people are likely
to serve in any war, no matter how justified, is directly
proportional to how they perceive the veterans of early warn,
were treated and appreciated.''
I would be pleased to answer any questions of the
Committee.
[Mr. Lopez's testimony may be found in the appendix.]
Chairman. Akin. Thank you very much for your statement and
for your concern about the service people that are overseas,
particularly, and who have served our country.
Our next witness is Catherine Giordano. And you're the
President of Knowledge Information Solutions from Virginia
Beach.
Thank you. Please, and Ms. Giordano, please proceed.
STATEMENT OF CATHERINE GIORDANO, KNOWLEDGE INFORMATION
SOLUTIONS, INC.
Ms. Giordano.
Mr. Chairman and Members of the Subcommittee, my name is
Catherine Giordano. I am CEO of Knowledge Information
Solutions, located in Virginia Beach, an 8(a) certified firm. I
am testifying today on behalf of Women Impacting Public Policy,
a bipartisan organization representing 39 small business groups
with a combined membership of over 535,000 women in business
nationwide.
Procurement programs are near and dear to my heart. Our
company has several contracts with Department of Defense and a
number of other government agencies and holds six Government
Wide Acquisitions Contracts. Due to our success in the federal
marketplace, our company has grown from $9 million in annual
revenues to $27.5 million in the last five years. So, it is
possible for a small company to penetrate the federal
marketplace.
I ask that the written testimony be made part of the
record.
Chairman. Akin. Without objection.
Ms. Giordano. Rather than read the testimony, I will try to
come to seven points of interest to the Subcommittee.
Number one, adequate funding for SBA staff that can provide
procurement assistance. The number one issue for small
businesses who want to enter the federal market is an
understanding of how the federal buying system works and the
ability to respond to a federal sales opportunity. The SBA
regional offices should be prepared to provide this assistance,
but the reality is that there is inadequate staff to provide
procurement expertise to small businesses. Members report that
the assistance from SBA regions is inconsistent. We believe
this to be largely due to whether or not the Procurement Center
Representatives are located at that facility and whether or not
the SBA staffer is properly trained to under the government
procurement.
WIPP urges the Committee to work with the Appropriations
Committee to ensure adequate funding for additional PCRs beyond
the six requested in the FY07 President's Budget.
Number two, implement the law. Restricted competition for
women-owned businesses is key to meeting the congressional goal
of five percent. Putting aside any philosophical discussion on
whether competition should be restricted to minority, women-
owned, HUBZone certified or veteran, the practical reality is
that unless federal agencies are required to do so, it will not
happen. The most recent statistics show that only 3 percent of
all federal business is awarded to women-owned businesses. As
long as there is no penalty to the agencies, nor the federal
employees, that the agency fails to meet the women-owned goal,
it's just nice to have.
Number three, why is the 8(a) certification so difficult to
obtain? In the absence of restricted competition for women-
owned businesses, the tool most often cited by the federal
agencies is go get your certification for 8(a). And yet, it is
abundantly clear to WIPP that SBA presumes that women business
owners are not really socially and economically disadvantaged.
One only needs to go through the tedious process of assembling
reams of financial documents, personal stories dating back
decades to be awarded an 8(a). In the past, clear and
convincing evidence was the standard which made it almost
impossible for women-owned businesses to get into the 8(a)
program. In the late 90s, that standard changed to the
preponderance of evidence in order to facilitate the entrance
of women-owned businesses into the program.
It seems to our members that SBA has reverted back to the
old standard for women-owned businesses. If the SBA believes
that women who are not minorities should not qualify, then they
should just say so. It would save our members hundreds of hours
of paperwork and valuable dollars.
Number three, increase in income thresholds for 8(a)
certification. Income thresholds have not been updated since
1998. The present and real problem for the program thresholds
are so low in 2006 dollars that the program is really set up to
fail. If the business owner does not have assets on which to
draw the business is likely not to succeed.
Four, reverse the trend toward contract bundling. Despite
the President's initiative in 2002 which clearly stated that
unbundling of contracts was a priority of the Administration.
I will try to come to the others quickly.
OMB reported for every $100 awarded, only $33 go to small
business.
Number five, Congress should closely monitor strategic
sourcing which in most cases means bundling. Strategic sourcing
basically means that a very large contract will have only one
source and that company can sell to the Government as opposed
to any award or multiple vendors. Small businesses can be
harmed in two ways: one, by structuring a procurement so that
even a large team of small businesses can never win a contract.
Basically, if the small business does not align itself with the
winner, they are out of luck.
Chairman. Akin. Your time is expired. We may be able to get
to some of your points with the questioning later on.
Ms. Giordano. Thank you.
Chairman. Akin. We have taken your statement for the
record, I believe.
Ms. Giordano. Thank you.
[Ms. Giordano's testimony may be found in the appendix.]
Chairman. Akin. Our next witness is going to be Christina
Schneider, Chief Financial Officer of Purcell Contracting
Corporation from Watertown, New York. Is that right, Ms.
Schneider?
Ms. Schneider. Yes.
Chairman. Akin. Proceed, please. Thank you.
STATEMENT OF CHRISTINA SCHNEIDER, PURCELL CONTRACTING
CORPORATION
Ms. Schneider. My name is Christina Schneider and I am
testifying on behalf of the Associated General Contractors, the
nation's largest and oldest construction trade association. We
represent more than 32,000 construction firms nationwide. Our
firm derives much of its work from Department of Defense
construction contracts. Our main office is in upstate New York
near Fort Drum, the home of the 10th Mountain Division. We were
a HUBZone contractor. We've since grown out of the program. We
have graduated the HUBZone program. We have now sales slightly
more than $31 million average. We wouldn't describe ourselves
as large business. We're more medium size, but we're considered
large business according to the SBA standards.
AGC is pleased to share our thoughts for this year's
upcoming reauthorization of the Small Business Act. I am going
to focus on the changes that we recommend for the HUBZone
program, the impact of contract bundling and the growing
concern over large construction contract awards to Alaska
Native Corporations.
Regarding the HUBZone program, we suggest that you limit
the program to construction projects in or near HUBZones within
150-mile radius of the HUBZone contractor's principal place of
business. Only those projects can offer employment to a
significant number of HUBZone residents and only those projects
can promise to make a lasting change on their economic
circumstance. Extending the HUBZone program to distant projects
only encourages brokering, merely acting as an agent to get
someone else to perform the work. While the HUBZone concept may
have merit encouraging economic development within HUBZones,
the concept does not transfer appropriately to the construction
industry. Since a HUBZone contractor can perform work outside
the zone, this does not economically benefit the zone.
The HUBZone concept is designed to encourage employment in
the HUBZone and is suited for manufacturing and other
industries where the majority of employees are working in the
HUBZone.
Our second point is that Congress should authorize and
require a smaller price preference applied to the construction
industry. While Congress may want to give HUBZone contractor's
an advantage, it should be an advantage that reflects the
realities of the market. At most, Congress should give the
construction contractors in the HUBZone a 5 percent bid
preference. Such a bid preference would still exceed the profit
margin in the vast majority of federal construction contracts.
As a HUBZone contractor, our firm was once awarded a
construction contract that was nearly $1 million over the
lowest bidder when the 10 percent preference was applied. As a
small business we were thrilled. As a taxpayer, we were
embarrassed.
While Congress may want to give HUBZone contractors an
advantage, a 10 percent preference for the construction
industry is a windfall, not an advantage.
Regarding contract bundling, it's been a concern in the
construction industry for several years. It's still going on.
Small contracts are being bundled to result in large dollar
volume solicitations and HUBZone preferences are being applied
to large dollar volume solicitations.
I'm going to skip through this. I'm running out of time.
Regarding the Alaskan Native contracting issue. AGC has
continued to hear complaints about the ANC. Speaking on behalf
of my firm, we have been directly impacted by a $400 million
sole source award to Alaskan Native corporations at Fort Drum,
New York. We've met with SBA Headquarters and we determined
that SBA believes in their statistics to you that ANCs are
small businesses. And we don't believe that.
In other words, awarding large dollar volume contracts to
ANCs, large and small, helps the SBA and contracting agencies
meet their utilization goals.
We understand the ANC matter is currently under
investigation by the GAO. And we look forward to their
findings. We hope we'll be resource for information for the
Committee as it reviews the findings of this report.
Thank you for the opportunity to testify.
[Ms. Schneider's testimony may be found in the appendix.]
Chairman. Akin. Thank you very much, Ms. Schneider. You
came in 30 seconds under, pretty good there. You get your star
here too.
What I'm going to do is I'm going to allow the Ranking
Member, Ms. Bordallo, she has five minutes to ask questions.
And I'll let her proceed first.
Ms. Bordallo. Thank you very much, Mr. Chairman. I have
three quick questions for Mr. Martoccia.
First of all, I know you're very new in your position, but
what are your initial impressions about SBA's procurement
assistance programs and what new thinking do you feel you bring
to the table?
Mr. Martoccia. I bring a perspective--I've been a
contracting officer all my life in the Federal Government. So I
bring that perspective. I know we need to communicate, train
and provide outreach to the procuring community. And we have to
use the resources that the procuring activities have. They have
small business specialists. Each procuring activity typically
has a small business specialist and I think with our PCRs and
our new electronic system that we should be able to get
involved in the procurement strategy before decisions are being
made to give those small companies a fair opportunity.
Ms. Bordallo. So you do see inadequacies in things that you
will be changing?
Mr. Martoccia. I see improvements that can be made. I don't
see any inadequacies.
Ms. Bordallo. Do you believe that the SBA has all the
authority necessary to promote the development of small
business and improve their access to the federal marketplace?Or
should Congress be providing more, in your opinion?
Mr. Martoccia. I believe that we're providing the
opportunities needed. You know, as far as the dollars, our
dollars have improved every year since President Bush took
office and they're going up. I know the total dollars have gone
up, but the percentages, especially in the women-owned
businesses and other areas have been moving up significantly in
the last few years.
Ms. Bordallo. Weren't there cuts made at SBA?
Mr. Martoccia. There have been cuts, but I think, you know,
they're operating smarter with better technology and I think we
have the adequate resources necessary to perform our job.
Ms. Bordallo. But really then you can't say funds have
been, you know--
Mr. Martoccia. I know funds have been cut 37 percent over
the last five years.
Ms. Bordallo. That's correct, yes. By your comments, I
understood that things were--funds were becoming larger and
larger as each year goes by?
Mr. Martoccia. No, I say the results of the small business
program have been pretty successful since President Bush took
office. The dollars go into small businesses in prime as well
as subcontracts. It's gone up significantly since the Year
2000.
Ms. Bordallo. Now one last question I have for you. Can you
describe the SBA's efforts to combat contract bundling?
How can SBA's record on this be improved?
Mr. Martoccia. Well, we're working with the agencies to
make it a priority. We share your concern that bundling in
large contracts do provide less opportunities for small
business. So we're working with the agencies to communicate, to
train, to talk to the program managers and the contracting
officers and the senior level officials to find best practices
to improve opportunities for small businesses.
Ms. Bordallo. So you do consider this a priority?
Mr. Martoccia. Yes, I do.
Ms. Bordallo. Thank you. Thank you. Thank you, Mr.
Chairman.
Chairman. Akin. Thank you for your questions and being
right on point with some very good questions.
I'm next going to recognize Ms. Velazquez who is not just a
Member of the Committee, but also is the Ranking Member of the
Full Committee. So if you would please proceed.
Ms. Velazquez. Thank you, Mr. Chairman. Mr. Martoccia,
look, I know you have been there, what, a month now, two
months?
Mr. Martoccia. Five weeks.
Ms. Velazquez. Well, welcome and I'm sorry.
Mr. Martoccia. I'm enjoying the job.
Ms. Velazquez. I'm sorry. Sir, I know that you read the
papers, don't you?
Mr. Martoccia. Yes, I do.
Ms. Velazquez. USA Today, Washington Post, New York Times.
If you look at the SBA disaster loan response to Katrina, I
don't think that it has been good. And you know why? Eighty
percent decline rate on disaster loan for Katrina victims
because you don't have the resources. In five years, the budget
has been cut by 50 percent, so and then later on we are going
to discuss PCR.
But let's go to the question. In 2003, the SBA's Inspector
General conducted an audit of the HUBZone program. The result
was that the program was vulnerable to contracting fraud. Then
there were almost 7,500 companies in the program and SBA did
nothing. Now there are nearly 13,700 companies and SBA has
still done nothing.
Why have you allowed this time bomb to continue ticking?
Mr. Martoccia. I'm not aware of any fraud involved in the
program. I know that the marketplace polices itself pretty well
and if a procurement is set aside for HUBZone companies, that
any interested party can protest that to the contracting
officer who would fully investigate with SBA whether a company
falsified their status.
Ms. Velazquez. Well, the thing is that you have 13,700 and
you have not conducted the audits and even if SBA reviewed 500
companies per year, you will never keep up with the incoming
businesses.
My second question, the number one problem facing small
businesses in their attempt to get Government contracts is
contract bundling. A report for SBA's Office of Advocacy has
estimated that bundles represent nearly 10 percent of all
government contracting dollars and have reduced small business
contract opportunities by more than half, yet for the past two
and a half years, SBA has filed four appears on bundled
contracts. Why isn't the SBA challenging agencies when they are
taking opportunities away from small businesses?
Mr. Martoccia. We do challenge agencies when they're taking
business away from small businesses and we have PCRs in the
field who are working with the agencies to assure that these
contracts are not restricting small business participation. We
are communicating to the senior levels of the agency. We're
talking to the small business specialists. We're talking to the
contracting officers. We're trying to train contracting
officers. We want them to justify when they have to have a
large contractor or a bundled contractor, what the benefits
are, what the efficiencies are. So we are proactive in trying
to assure the contracts are not being bundled.
Ms. Velazquez. I can see that proactive when you challenge
on four contracts. Four appeals.
Mr. Martoccia. Well--
Ms. Velazquez. The witnesses here are telling us that is a
big issue for them. The President, in 2002, issued his small
business agenda. And in that agenda he said my number one
priority is going to be contract bundling. We need to tackle
it. And in two and a half years, you're going to tell me that
only four appeals?
Mr. Martoccia. Those are four formal appeals.
Ms. Velazquez. Let's go to the next question.
Mr. Martoccia. But we have discussed and made many changes
to the contracts that are to be bundled and made many changes
to the procuring activities to break up these contracts into
smaller parts that small business can participate in.
Ms. Velazquez. Thank you. In your testimony, you spent a
lot of time talking about the small business goal being
achieved. In reality, the goal has been achieved because SBA
counts large businesses' awards as going to small companies.
The Office of Advocacy has said that SBA is counting $2 billion
in award to large businesses. This is the number one management
challenge to the office, according to the Inspector General.
The General Accounting Office has also confirmed this problem.
So can you please explain to us why it is appropriate for
the SBA to claim that the government-wide small business goal
has been met, when you are counting large businesses to do
that?
Mr. Martoccia. I don't think--
Chairman. Akin. Time has expired. You can go ahead and
answer her question.
Mr. Martoccia. I don't think the problem is as widespread
as some people think. I think what happens is that small
companies, successful small companies are being purchased by
large companies. If they have a five-year contract, the company
is being purchased and we do have--we just instituted a rule on
novations. And in addition to that we have rulemaking which
will require small businesses to recertify if they're being
bought off.
Ms. Velazquez. I'm sorry. You just can't come here and
inform to the small business people that are here to say to
them that $2 billion is nothing. $2 billion. You can do better
than that.
Chairman. Akin. Thank you. The next questioner would be
Congresswoman Moore. We're trying to stick to five minutes.
Ms. Moore. Thank you, Mr. Chair. I would be offended, Mr.
Martoccia, that you were new, except that I'm new too.
But I am concerned about whether or not you've realized
that we have an 8(a) program, an 8(a) procurement program which
has not been redesigned since it was started. And it has really
cost billions of dollars in contracting opportunities to those
small and disadvantaged businesses.
The Federal Government purchases--is the largest buyer of
goods and services in the entire world. And during the '90s,
there were so-called reforms that allowed Government buyers to
use a number of expedited contracting options with the
exception of the 8(a) program which meant that 8(a) programs
and minority businesses have been left behind.
And you know, one of the things, one of the SBA programs is
the HUBZone program which operates in distressed areas, but you
don't have to be a minority business or a disadvantaged
business to take advantage of that. Again, women-owned
businesses, the Women's Procurement Program never implemented.
There is a bill that I am co-sponsoring, along with our Ranking
Member, Representative Barrow, called the MOVE Act, which would
really modernize the 8(a) program so that minority businesses
won't lose billions of dollars by what Congressman Barrow calls
a repeal by neglect in terms of how this program operates.
And I'm wondering if we could depend on your stewardship to
move this initiative forward and bring it before the
Administration's attention?
Mr. Martoccia. Are you speaking of the women-owned program?
Ms. Moore. The 8(a) program modernization, the women's
initiative, yes.
Mr. Martoccia. We'll be working on all the programs to--
Ms. Moore. To modernize them so that minority businesses
can, in fact, take advantage of some of the contracting
opportunities. We can't, because these programs are stagnant.
Would you stipulate to that being true?
Mr. Martoccia. No. What I would I would say is we're
complying with the law and I think the laws are flexible enough
for us to deal with the agencies to improve the opportunities--
Ms. Moore. In 1990, the Government buyers used an expedited
means to get contracts. The exception was that 8(a) programs
couldn't do it.
Mr. Martoccia. Well--
Ms. Moore. Would you stipulate--you said you're following
the law.
Mr. Martoccia. Right.
Ms. Moore. But the law is stagnant is what we're saying.
So we're asking for a commitment from you that you will
look at the need to initiate reforms of the 8(a) program.
Mr. Martoccia. We'll try to reform the 8(a) program when
it's necessary.
Ms. Moore. It's necessary now. We've lost tens of billions
of dollars in contracting opportunities.
Mr. Martoccia. The 8(a) program provides the most expedited
method of contracting of all the set aside programs.
Ms. Moore. Okay, Mr. Chair, I'd like to yield the balance
of my time to the Ranking Member.
Chairman. Akin. Yes, you can do that and I believe Ms.
Velazquez said she had a question also, so why don't you
proceed.
Ms. Bordallo. Go right ahead.
Ms. Velazquez. Mr. Martoccia, since Mr. Giordano raised the
issue of the women's procurement program, it is appropriate for
me to ask this final question. I understand that the Rand
Corporation is conducting the study for the SBA to identify
industries that are under represented by women and
entrepreneurs in order to get this program up and running. Rand
was subject to a class action lawsuit by several of its own
female employees on a pay disparity issue.
Can you explain to this Committee how SBA could contract
with a company that was sued by its own female employees on a
study designed to implement a program to halt women business
owners?
Mr. Martoccia. I'm not familiar with that lawsuit. The way
the Government works is that if a company--
Ms. Velazquez. No, no, no. I'm not asking you--
Mr. Martoccia. I have to answer the question.
Ms. Velazquez. Look, how could the Federal Government give
out a contract, we love to lecture people here about you know,
playing by the rules, and you have a company that has been sued
by their female employees and they are the company that is
going to do a study about women being under represented? That's
bizarre.
Mr. Martoccia. Well, the Government has a process called
the debarred list and when a company is not responsible to
perform Government contracting work, they're not allowed to
receive contracts. To that extent, if they're not on the
debarred list--
Ms. Velazquez. My last question. In your testimony you
state that the current number of SBA Procurement Center
Representatives is 58.
Mr. Martoccia. Correct.
Ms. Velazquez. When the federal marketplace was half this
size that it is now--
Chairman. Akin. Congresswoman, this is your last question,
right?
Ms. Velazquez. Okay. My last. How do you expect 58 people
to do twice the work that 73 did?
Mr. Martoccia. Since President Bush took office, he moved--
we moved the number of PCRs from 35 to 58 and they cover
approximately three quarters of the buying activities in the
Federal Government.
In addition to that, we're instituting an electronic
Procurement Center Representative system which will be very
effective and efficient and productive in providing those
requirements at a sooner date so the PCRs can get involved from
their desk, on their computer to talk to the procuring agencies
and officers about their procurement strategies with regard to
small business participation.
Chairman. Akin. Thank you for responding. Now it is my
turn. I only have five minutes as well.
I'm going to ask you for short answers. I'm trying to give
you a few short-answer questions.
The first one is, because the only person who got into play
here was Anthony and I want everybody else to have a chance
too.
And so what I'd like you to do first of all would be to
state how would you rate the SBA's performance on procurement
assistance contracting? You've got a choice of good or medium
or bad and I want to go straight across. Good, medium or bad.
This is report card. Some of you are technical people and I'm
one of the very few engineers that they allowed to get into
politics which tells you I wasn't much of an engineer.
Rafael, I'm going to let you go first.
Mr. Collado. Bad.
Chairman. Akin. Bad, okay.
Mr. Lopez. Worse than bad.
Chairman. Akin. Worse than bad. That wasn't an alternative,
but I know what it means.
Mr. Lopez. Bad.
Chairman. Akin. Kurt?
Mr. Heckman. They've had some successes. I would say
medium.
Chairman. Akin. Medium, okay. Catherine?
Ms. Giordano. Other.
Chairman. Akin. Other. Do you have a little short other?
Ms. Giordano. It would be below medium and just above bad.
Chairman. Akin. Okay. Christina.
Ms. Schneider. Bad.
Chairman. Akin. Okay. That being the case, now I'm going to
give you a chance for a little bit longer answer, okay?
We've got a guy in here, Anthony, who is a brand new guy on
the block. Now it used to be when Harvard Business School would
do cases, they wouldn't want to know your second or your third
piece of advice. They want to know your very best shot.
So what I'm going to ask for those of you who, if you have
one piece of advice--let me ask one other question--well, I
don't have time for that.
Here's just one shot. You have a piece of advice to give to
the SBA, you've got a brand new guy. He's got an open mind for
the moment anyway. What's your best piece of advice to him on
how we try to do a better job here, because we're all on the
same team. We really want to make this work.
Rafael, you're an innovative guy. What's your best shot?
Mr. Collado. Best piece of advice is force the unbundling
of contracts and audit, audit, audit prime contractors at their
meeting--and agencies--at their meeting their goals. Make sure
they're not lying about their numbers.
Chairman. Akin. That was short and very much to the point.
Thank you.
John?
Mr. Lopez. I'm Stanford Business School and we don't do
that.
Chairman. Akin. I already got in trouble politically,
didn't I? I applied there too, but they didn't take me.
Mr. Lopez. I would suggest to Mr. Martoccia that he demand
accountability from his workforce and demand reports.
Documentation. Documentation goes a long way to steering
decisions and making certain those decisions are the correct
ones.
Chairman. Akin. Thank you.
Mr. Heckman. I would say in speaking from the HUBZone
program side where I am, I would recommend that they would do
an automatic audit of the HUBZone requirements and they can't
do them for all the HUBZone allocations, there's just too many.
But I would recommend they automatically do it for any HUBZone
contract that is awarded above some reasonable threshold, $10,
$12, $15 million something like that, so that at least the big
ticket items that go out there, it's just carte blanche. If you
win a HUBZone contract above that threshold, you're going to be
audited.
Chairman. Akin. Okay, good. Thank you.
Catherine?
Ms. Giordano. I think first and foremost is implement the
women-owned rule. I think if we were having children based on
how long it takes to gestate, this would be a twin, quadruple--
elephants, because it takes you that long to have elephants.
I think it's an over-abused process on our part to be last
in line, waiting for something that was passed in 2000.
Chairman. Akin. Thank you.
Ms. Schneider. My advice isn't necessary to the SBA, it's
to Congress and my advice is to look hard at the utilization
reports that you're getting because I don't believe they're
accurate. I believe they're flawed. I believe the statistics we
heard today are fraught with large dollar volume contracts
awarded to Alaskan Native Corporations under the guise of small
business. I believe that large volume HUBZone contract awards
are being--HUBZones are fronting for large businesses in those
large dollar volume awards. There's no way a small business can
bid $100 million HUBZone contract in the construction business.
There's really nasty stuff going on out there and when the
SBA sits at this table and tells you that they've doubled their
utilization volume, I'm sitting here and--
Chairman. Akin. Christine, I'm down to 10 seconds. What I'd
like to ask you to do, all of you that had recommendations, if
you don't mind writing them up and shooting them over to the
SBA to Mr. Martoccia so that he can hear what you have to say.
I think that would be helpful just for starting places.
I will take, Christina, what you were saying, and see if we
can factor that into what we're doing. I was going to ask
another question which I don't have time to do.
Ms. Velazquez. Mr. Chairman, we would like to receive a
copy of those recommendations.
Chairman. Akin. If you could send those to the Committee,
that would be good, too.
I was going to also ask you, being a conservative
Republican, my question would be can the Government really do
this or not? I mean I have some skepticism about that, but I'm
not going to ask that question. And with that, I'll make this
informal, let people chat as they have time to this afternoon.
The hearing is adjourned.
(Whereupon, at 3:54 p.m., the hearing was adjourned.)
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