[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
   PROPOSED CHANGES TO PART 9 OF THE FEDERAL ACQUISITION REGULATION 
                 RELATING TO CONTRACTOR RESPONSIBILITY

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                    WASHINGTON, DC, OCTOBER 21, 1999

                               __________

                           Serial No. 106-37

                               __________

         Printed for the use of the Committee on Small Business







                    U.S. GOVERNMENT PRINTING OFFICE 
60-970                      WASHINGTON : 1999




                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 21, 1999.................................     1

                               WITNESSES

Davis, Hon. Thomas M., Virginia, United States Representative....     4
Lee, Hon. Deidre, Administrator, Office of Federal Procurement 
  Policy.........................................................     7
Spector, Ms. Eleanor, Director, Defense Procurement, Department 
  of Defense.....................................................     9
Ballentine, Mr. James, Acting Associate Deputy Administrator, 
  Small Business Administration..................................    11
Schooner, Mr. Steven, Professor of Law, accompanied by Kovacic, 
  William, Professor of Law, GWU Law School......................    32
Alford, Mr. Harry C., President, National Black Chamber of 
  Commerce.......................................................    36
Slater, Phyllis Hill, President, Hill Slater, Inc................    38

                                APPENDIX

Opening statements:
    Talent, Hon. James...........................................    52
    Velazquez, Hon. Nydia........................................    56
Prepared statements:
    Davis, Thomas M..............................................    60
    Lee, Deidre..................................................    66
    Spector, Eleanor.............................................    73
    Ballentine, James............................................    79
    Schooner, Steven.............................................    90
    Alford, Harry C..............................................   123
    Slater, Phyllis Hill.........................................   128
Additional material:
    Statement of Representative James P. Moran...................   133
    Statement of The Associated General Contractors of America...   136
    Letter to Chairman Talent from R. Bruce Josten, Executive 
      Vice President, U.S. Chamber of Commerce...................   149
    Letter to Chairman Talent from William T. Archey, President 
      and CEO, American Electronics Association..................   155
    Statement of LPA, Inc........................................   167
    Letter to Chairman Talent from Stanley E. Kolbe, Jr., 
      Director, Sheet Metal and Air Conditioning Contractors' 
      National Association.......................................   177
    Press Release of Mechanical-Electrical-Sheet Metal Alliance..   179
    Memorandum from Francis X. McArdle, Managing Director, The 
      General Contractors Association of New York, Inc...........   182
    Letter to Chairman Talent from Lawrence F. Skibbie, 
      President, National Defense Industrial Association.........   183
    Statement of Gary D. Engebretson, President, Contract 
      Services Association of America............................   187
    Letter to Ms. Laurie Duarte, FAR Secretariat, from Chairman 
      Talent and Ranking Member Velazquez........................   197
    Post-hearing questions submitted to Honorable Deidre Lee.....   201
    Honorable Deidre Lee's response to post-hearing questions....   203
    Post-hearing questions submitted to Mr. James Ballentine.....   239
    Mr. James Ballentine's response to post-hearing questions....   241



 THE PROPOSED CHANGES TO PART 9 OF THE FEDERAL ACQUISITION REGULATION 
                 RELATING TO CONTRACTOR RESPONSIBILITY

                              ----------                              


                       THURSDAY, OCTOBER 21, 1999

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. James M. Talent 
[chairman of the Committee] presiding.
    Chairman Talent. The hearing will come to order, please.
    I want to welcome everybody. Our hearing today is about a 
proposed rule change in the Federal Acquisition Regulations and 
how that proposed change will hurt the small businesses that 
contract with the government to provide a wide variety of goods 
and services.
    On July 9, 1999, the agencies with primary responsibility 
for developing federal procurement regulations issued a 
proposed rule that is purportedly designed to clarify the 
existing standards by which contracting officers make 
responsibility determinations prior to the award of a contract.
    In particular, the proposed rule would require that 
contracting officers find that a prospective bidder is not 
responsible if the contracting officer has persuasive evidence 
of lack of compliance with tax laws or substantial 
noncompliance with labor laws, employment laws, environmental 
laws, antitrust laws or consumer protection laws. Those are 
only examples.
    In fact, the contracting officer could find a lack of 
responsibility for violations of any of the regulations in the 
single-spaced 17 linear feet of the Code of Federal 
Regulations. Contracting officers' efforts to clarify the 
responsibility standard permits the contracting officers to 
find a business non-responsible based on persuasive evidence--a 
standard of evidence which does not currently exist in civil, 
criminal, or administrative law.
    What the federal agencies view as a clarification, small 
businesses view as a trap preventing them from being awarded 
federal government contracts. As Congress recognized when it 
enacted SBREFA, the Small Business Regulatory Enforcement 
Fairness Act, it is especially difficult for small businesses 
to stay abreast of the changes made in the Code of Federal 
Regulations, much less be experts at complying with all of 
those rules.
    Thus, a series of technical violations, such as not having 
material safety data sheets, could result in a finding of non-
responsibility. And if one contracting officer finds that the 
small business lacks appropriate business ethics and integrity, 
another contracting officer considering the same violations for 
a different contract would be hard put to reach the opposite 
conclusion.
    The end result is that a small business could be prevented 
from contracting with the government for what is the regulatory 
equivalent of a combination of parking and moving violations.
    What I find even more distressing is the contracting 
agencies' lack of concern for the potential adverse 
consequences to small businesses. The agencies determined that 
the proposed rule is ``not expected to have a significant 
economic impact on a substantial number of small entities.'' 
Well, if you are a government contractor, I can think of no 
more severe penalty than being prohibited, without appropriate 
due process procedures and by the ad hoc actions of contracting 
officers, from doing business with the government.
    And little doubt exists that small businesses represent a 
significant portion of the federal contracting community. In 
fiscal year 1998, small businesses were awarded nearly three-
quarters of all Federal Government procurements with a total 
value of more than $33 billion. Potentially adverse significant 
consequences of the proposed rule have been recognized by 
numerous small business organizations, including--and I have 
about 20 listed here. I am not going to read them all--in fact, 
more than 20--30 or 40. I will put them in the record.
    In addition, nearly 600 small business owners have already 
taken the time to file comments with the Federal Acquisition 
Regulation Secretariat opposing the proposed rule. A cursory 
review of a sample shows that these are not simply one-line 
statements but relatively detailed comments noting the 
potential consequences that the proposed rule, if implemented, 
would have on their businesses. I suspect many more small 
businesses will file comments by the November 8 deadline for 
filing comments.
    Today's hearing will investigate the legal and policy 
implications of the proposed rule. I expect to examine such 
issues as how the federal agencies plan to implement the rule 
and its impact on government procurement efficiency, while 
maintaining the mandate to increase opportunities at both the 
contractor and subcontractor level for small businesses.
    I am also interested in finding out how the federal 
agencies plan to implement the proposed rule at the contracting 
officer level and whether the safety valve of the SBA's 
Certificate of Competency Program will function in this new 
responsibility environment.
    Let me conclude by saying that I am not opposed--in fact, I 
support--a Federal Government policy refusing to do business 
with businesses, big or small, that have been convicted of 
crimes or have had major civil penalties imposed upon them, or 
for some other reason that they can understand and attempt to 
comply with, would render them ineligible to do business with 
the government.
    This rule goes far beyond that point to corral many small 
businesses within its ambit. These consequences give me great 
pause. I look forward to a lively and informative discourse on 
the issues which will begin, I am certain, with the opening 
statement of our ranking member, who I am pleased to recognize 
now.
    [Mr. Talent's statement may be found in the appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman, and welcome 
everyone.
    I am gratified that we have come together today in this 
responsible and timely fashion to consider the important issue 
of Federal Acquisition Regulation and contractor 
responsibility. Federal contracting and small businesses is one 
of the most important priorities or topics covered by our 
Committee. Today, we are here to explore an issue that most of 
us agree is a matter of common sense.
    There is nothing controversial in saying that contractors 
should abide by environmental and labor laws. We can all agree 
that contractors should pay their taxes. And there shouldn't be 
anyone in this room who is uncomfortable with using contractor 
responsibility to promote acceptable behavior.
    For the better part of this century--since the 1920s--the 
government has been concerned with the corporate responsibility 
of federal contractors. Since World War II, the government has 
instituted a formalized process to tie contract procurement 
with federal responsibility.
    And even putting aside the fact that these are questions of 
regulation and law, nobody--not in the business community and 
not in government--wants one contractor to be able to 
circumvent these regulations and create an unlevel playing 
field. Companies should not have to deal with a competitor that 
employs unscrupulous methods so that it can undercut others' 
bids, and government should do what it takes to make sure that 
doesn't happen.
    So let me say one thing at the outset. I do not consider it 
our job today to debate the importance of contractor 
responsibility, or whether or not there should be contractor 
responsibility. Our job today is to determine the best way to 
ensure contractor responsibility, because even the best idea, 
improperly implemented, can have unfortunate, unintended 
consequences.
    These regulations need to be structured in an intelligent 
and effective way. Determining a company's integrity and ethics 
will always, unavoidably, be at least in part subjective. If we 
are going to expand the definition of this criteria, we must 
provide a mechanism for responsibly putting it into practice.
    In our efforts to promote responsibility, we must not 
inadvertently deny small businesses the right to due process or 
permanently restrict small businesses from competing for 
government contracts following one or two minor accidental 
violations. And critically, we must ensure that our efforts to 
make the process more clear do not inadvertently add confusion 
and mixed messages where none existed before.
    Making sure government contractors are good corporate 
citizens is little more and little less than common sense. The 
question we face now is how we make sure we implement this goal 
with a little common sense.
    I am optimistic that we can. I commend the Chairman for 
holding this hearing today, still weeks before the end of the 
comment period. He is dealing with this in a responsible 
manner, and I am committed to doing the same.
    Thank you, Mr. Chairman.
    [Ms. Velazquez's statement may be found in the appendix.]
    Chairman Talent. All right. We will go right to our first 
witness and our first panel.
    The first witness on that panel is our colleague, the 
Honorable Thomas Davis from Virginia, who has done a lot of 
yeoman's work on this, along with Mr. Moran, who couldn't be 
here.
    And thank you for waiting, Tom. Please go ahead.

STATEMENT OF HON. THOMAS M. DAVIS, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF VIRGINIA

    Mr. Davis. Thank you very much, and I know my colleague Mr. 
Moran has put a statement in the record. And I would ask that 
my entire statement be in the record, including a statement 
from a small contractor in my district that we want placed in 
the record as well.
    Let me just say it is a pleasure to appear here with Dee 
Lee, who I have a very, very high regard for. We have worked 
together on a lot of issues. Eleanor Spector and I have shared 
podiums on procurement law through the years and is an expert. 
And my friend formerly from Mr. Wynn's office, who is part of 
their flag football team--which I think was undefeated up here 
on Capitol Hill and he still comes in. [Laughter.]
    But they are excellent people, and I think as we get 
through this today we want to try to get to the nub of what the 
issues are and our concerns.
    I spent 20 years doing procurement law before I came to the 
Congress. I was general counsel at a company--and special 
counsel at a company called PRC, which is a billion dollar a 
year government contractor out in McLean, Virginia. And before 
that I was with a startup called Advanced Technology and was 
general counsel and took it public.
    Chairman Talent. We have to get you on the Small Business 
Committee. [Laughter.]
    You think I am kidding. [Laughter.]
    Mr. Davis. If they will let me keep Commerce. Okay? 
[Laughter.]
    And let me just say, working with this administration, and 
Dee Lee in particular and Steve Kelman before her, we have made 
really tremendous progress in procurement. I don't want to lose 
sight of that. We passed FASA, FARA, the Clinger-Cohen Act.
    We developed the GSA multiple award schedules, giving 
federal agencies greater flexibility to get the products and 
services they need. And I think the overall record has been an 
A out of this administration on procurement, and I would be 
less than remiss if I didn't say that.
    We do disagree on the nature of the proposed regulations 
and how we see it, but it is only a proposed regulation. And we 
proceed to move forward, I just want to express my concerns on 
the record.
    The regulation issued on July 9th I think takes us 
backward. I think, first of all, we should do no harm. We have 
a system now that is not broken. It debars bad actors. 
Additionally, we will punish people twice if we take away 
government contracts for alleged environmental labor, consumer-
related tax, and antitrust violations--there are cases of 
double jeopardy--and particularly if these violations have 
nothing to do with their ability to deliver the best value to 
the government at the lowest cost.
    And that is really what ought to be driving government 
contracting is getting the best value for our taxpayer, not 
some incidental issues. And what bothers me the most I think 
about the proposed regulation goes to the language where it 
says normally the contracting officer should base adverse 
responsibility determinations involving violations of law or 
regulation upon a final adjudication by a competent authority 
concerning an underlying charge.
    And here is the concern. It says, ``However, in some 
circumstances, it may be appropriate for the contracting 
officer to base an adverse responsibility determination upon 
persuasive evidence of substantial noncompliance with a law or 
regulation.'' In other words, no final determinations, no 
adjudications, a subjective judgment of the contracting 
officer. And this can really make for mischief because this is 
not a predictable path, I think, for contractors to follow.
    I agree with Ms. Velazquez in her opening comment that bad 
actors ought to be put out of it. We have ways to do that now. 
If this is the goal of this, I think we can work together to do 
this. But if you are not asking for final determinations from 
the contracting officer, if you can allow the contracting 
officer a lot of steeped-up complaints, I think it empowers 
outside groups to come in, put headlines in newspapers, make 
all kinds of allegations that would never win an adjudication, 
but to create that aura that would then empower, or in some 
cases frees a contracting officer to giving that contract to 
the contractor who is basically the best qualified to do that. 
And that is our concern in this.
    Remember, contracting officers--this just gives them one 
more check they have to deal with. In some cases, this can 
delay the contracting process as they look through allegations 
to see ifthey are good allegations or not because it allows 
them to go beyond determinations by an adjudicating authority. And that 
is the concern in this case.
    Contracting officers, in my judgment, would be unable to 
award contracts because they can get blitzed with complaints. 
This is an invitation for other companies to blitz these 
contracting officers with complaints, and companies can become 
the victims of baseless accusations. It could particularly harm 
small businesses that may not be able to defend themselves 
against these accusations.
    It is already happening. Businesses are afraid to publicly 
comment for fear of retaliation by interest groups. A small 
business owner in my district was afraid to testify today for 
fear of retaliation. We have his statement in the record. He 
feels it may jeopardize his $3.5 million a year business, which 
employs eight people. And his comments, as I said before, are 
in the record.
    If we have to delineate these new criteria, let us not go 
beyond the goal of ensuring good labor practices. We are giving 
them, otherwise, the ability to force companies and to employ 
and unionize with allegations, and then going to contracting 
officers without any kind of final determinations. That is the 
concern.
    If these regulations were applied to the Federal 
Government, it would preclude them from continuing to carry out 
their functions. But yet it proposes to apply them to business. 
But the Federal Government itself is remiss with all kinds of 
complaints and adjudications against it, and yet for a small 
business here, even without a final adjudication, they are held 
at risk here.
    For example, in 1997, according to the Federal Labor 
Relations Authority, the Federal Government has 5,323 unfair 
labor practices charges filed against it. The Federal 
Government reached a collective bargaining impasse 148 times in 
1997. For fiscal year 1998, the Occupational Safety and Health 
Administration issued the Federal Government 1,153 citations. 
The EPA took 365 enforcement actions against federal facilities 
in 1996, and fully one-quarter of all federal facilities are 
not in compliance with the Clean Water and Clean Air Acts.
    Lastly, the government has 36,333 unresolved bias cases 
being investigated by the Equal Employment Opportunity 
Commission. So the Federal Government is a bad actor in this. 
They are not applying the criteria here. In many cases, these 
haven't been adjudicated and they may be groundless.
    The Federal Government procures $28 billion in information 
technology products a year. The government is the largest 
purchaser of IT products in the world, and our rapidly-growing 
economy I think could be harmed if these regulations go too 
far.
    I would like to point out the effectiveness of the 
contracting process as it currently operates. The 
administration claims that the proposed regulations clarify the 
intent of the current law. They claim, therefore, there is no 
need to be concerned about the new regulations. As an example, 
they describe a firm--Standard Tank Cleaning Corporation--that 
was denied a federal contract to clean up an environmentally 
contaminated site.
    The firm was denied the contract because they had past 
environmental violations. I would counter the administration's 
argument by noting that we don't have to complicate a process 
because it worked in this case, without these regulations, by 
adding--and we don't need to add layers of ambiguous 
regulations.
    I think all of us agree that the instance described above 
is when a company should be prohibited from performing a 
government contract; and, indeed, the current regulations 
worked in that case. If there is a nexus between the violation 
and the job the company would like to perform, that is entirely 
appropriate and they ought to be found not to be capable of 
doing the job.
    Unfortunately, these proposed regulations do not use that 
standard, and it takes to a new threshold of proof that 
encourages companies, interest groups, and disgruntled 
employees to use accusations to hurt responsible companies and 
hurt the day-to-day operation of our nation's procurement 
system.
    Let me just go, finally, and note the current standards for 
deeming a contractor irresponsible are as follows: adequate 
financial resources, the ability to meet the required 
performance schedule, a satisfactory record of performance on 
other contracts, a satisfactory record of integrity and 
business ethics, the necessary organization experience, 
accounting, and operational controls, and the necessary 
production, construction, and technical equipment and 
facilities.
    These criteria are broadly written to give a contracting 
officer the flexibility he or she needs to prevent bad actors 
from contracting with the government. These new regulations, I 
believe, could ensure that the Federal Government and our 
procurement of goods and services is set back decades.
    The proposed regulations ignore all of the streamlining 
initiatives that this administration has worked so hard to 
achieve in the past, and I am hopeful that the concerns that I 
express today will be incorporated in any kind of final 
regulations. And I appreciate the opportunity to be here today.
    [Mr. Davis' statement may be found in the appendix]
    Chairman Talent. Thank you. And I know your schedule is 
tight. If you can't stick around through the rest of the panel, 
Tom, we understand.
    Next witness is the Honorable Dee Lee, who is the 
Administrator for the Office of Federal Procurement Policy of 
the Office of Management and Budget.
    We are honored to have you here, Ms. Lee.

STATEMENT OF HON. DEIDRE LEE, ADMINISTRATOR, OFFICE OF FEDERAL 
      PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET

    Ms. Lee. Thank you very much.
    Good morning, Mr. Chairman, and members of the Committee. I 
have been invited to appear before you today to discuss the 
administration's proposal to amend the Federal Acquisition 
Regulation, the FAR, in three areas--one, contractor 
responsibility, which is Part 9; and two changes in Part 31, 
which are regarding reimbursement of certain costs relating to 
contractor legal proceedings and costs regarding unionization 
activities.
    A proposed rule was published in the Federal Register on 
July 9th of this year, and the extended comment period--about 
120 days--closes on November 8th, in approximately two weeks. 
We will review all comments that we receive during this period, 
and we will keep you informed of the next steps following the 
comment period.
    This morning, I would like to briefly discuss the proposed 
rule. The fundamental purpose of this rule is to protect the 
taxpayer. Like any private citizen doing business in the 
commercial marketplace, we want to be assured that the 
government is doing business with individuals and entities who 
can be relied upon.
    More specifically, we hope to protect the public's interest 
by having greater assurance that the firms we deal with are 
responsible citizens--firms that have a record of compliance 
with law and not a record of repeated serious legal violations. 
The overarching theme behind the proposed ruleis the concept 
that the Federal Government ought to do business with good citizens who 
comply with the law.
    Currently, FAR 9.104, subparagraph D, concerning general 
standards of contractor qualifications, states, that to be 
considered a responsible contractor, a contractor must ``have a 
satisfactory record of integrity and business ethics.'' This 
proposed rule would clarify the existing FAR rule by adding 
examples of what would constitute an unsatisfactory record of 
integrity and business ethics for the purposes of implementing 
this long-standing general standard.
    We are not proposing to create any lists of unacceptable 
business firms. We are not proposing to change any debarment or 
suspension rule currently contained in the FAR. And we are not 
proposing to change any procedural due process rights that a 
prospective contractor currently enjoys with respect to the FAR 
responsibility criteria.
    And most importantly, we are not proposing to punish anyone 
by denying them federal contracts. What we hope to do is 
protect the public's interest by having a greater assurance 
that the firms we deal with are responsible citizens.
    In addition to the clarifications in the FAR's responsible 
contractor criteria, we are also proposing two changes to the 
contract cost principles that are contained in FAR Part 31. The 
first change would end reimbursement of contract costs incurred 
for activities designated to influence employees with respect 
to unionization, either for or against. This is not a new idea; 
for many years, a large number of federal programs, for 
example, Medicare and Medicaid, have made these types of costs 
unallowable as a matter of public policy.
    Moreover, this change is in furtherance of the government's 
long-standing policy to remain neutral with respect to the 
employer-employee labor disputes. And, of course, there is a 
great deal of information in Part 22 of the FAR that talks 
about employee and employer relationships.
    Finally, we are proposing a technical change to one of the 
FAR cost principles to close what we believe to be an existing 
loophole. At present, the government does not reimburse 
contractors for their legal expenses where, for example, in a 
criminal proceeding, there is a conviction, or where in a civil 
proceeding there is a monetary penalty imposed.
    However, there are a number of civil proceedings initiated 
by the Federal Government that do not result in the imposition 
of a monetary penalty, but that do involve a finding or 
adjudication of a violation. And we think that this would be 
appropriate, to make this change that reimbursement of the 
contractor's costs would depend on whether or not a violation 
was found, rather than the remedy imposed.
    Additionally, my written statement addresses the four 
questions posed in your invitation letter. In the interest of 
time, I will not read those responses here. But I understand 
they will become part of the record.
    Mr. Chairman, and members of the Committee, I would like to 
reiterate that we want all companies, large and small, to have 
the opportunity to do business with the government for the 
taxpayer. And we want that system to be as efficient and 
effective as possible, supported by the underpinnings of our 
national social and economic goals.
    The overarching theme of this proposed rule, doing business 
with companies that comply with the laws, is a sound one. We 
will shortly be receiving the public comments on this rule, and 
I assure you that we will be very--that they will be very 
carefully reviewed and discussed.
    I am confident there will be ideas on how to improve the 
proposal, such as the ones brought forth by the Congressman, 
and I will commit to you now that I will work with this 
Committee and others to ensure that the ideas and issues are 
considered. Working together, we can ensure we are judicious in 
exercising sound business principles in our acquisition system.
    Thank you. I am available to respond to any questions you 
may have.
    [Ms. Lee's statement may be found in the appendix.]
    Chairman Talent. Thank you very much, Ms. Lee.
    Our next witness is Ms. Eleanor Spector, the Director of 
Defense Procurement of the Department of Defense.

 STATEMENT OF ELEANOR SPECTOR, DIRECTOR, DEFENSE PROCUREMENT, 
                     DEPARTMENT OF DEFENSE

    Ms. Spector. Good morning, and thank you for the 
opportunity to appear before you as the Department of Defense 
representative to discuss proposed changes to the FAR 
concerning contractor responsibility.
    Since the proposed rule is out for public comment, nothing 
has yet been put in regulation that would change the way that 
we do business. As has been mentioned, the comment period 
closes on November 8th, and as a result of the comments we 
certainly may make changes to the rule before it goes final.
    I will try to address the questions you asked me. Your 
first question concerned how we determine contractor 
responsibility now, and if the methodology varies for contracts 
of different size. In fiscal year 1998, we conducted 6.6 
million contract actions with a value of about $129 billion in 
DOD. Of these, about 277,000 actions worth $118 billion were 
contract actions in excess of $25,000.
    We did an additional 7.5 million purchase card actions--
normally, those are under $2,500--with a total value of $3.4 
billion. As you can see, we conduct a very large number of 
purchases of greatly different amounts with the vast majority 
being of relatively low dollar value.
    The rules on how to determine contractor responsibility are 
in Part 9.1 of the FAR. They provide general standards that 
have to be met, which include adequate financial resources, 
ability to comply with the delivery schedule, satisfactory 
record of performance, satisfactory record of business ethics, 
and the organization, accounting skill, technical ability, and 
facilities to perform satisfactorily.
    For purchases under $100,000, unless the contracting 
officer is aware of a specific problem, the primary method to 
determine contractor responsibility is to check the list of 
parties excluded from federal procurement and non-procurement 
programs that is maintained by GSA and is available online. 
That contains information on firms and individuals that have 
been suspended, debarred, or otherwise excluded from doing 
business with the government.
    This suspension or debarment would generally be due to an 
indictment, conviction, or violation of a statutory 
prohibition, generally related to fraud, although some firms 
are listed due to repeated poor performance.
    Placement on the list is an automatic bar to receiving any 
contract award for the time that the firm or individual is on 
it. For larger purchases, there are many resources available to 
help determine the responsibility in addition to the suspension 
and debarment list.
    There are the contracting officer's own history files that 
may contain information on past performance. The Defense 
Logistics Agency maintains information on how companies have 
performed for DOD in the past. Another source of information is 
Dun & Bradstreet that provides detailed financial performance 
and other information on individual firms.
    The most detailed DOD resource is the preaward survey that 
is conducted by the Defense Contract Management Command. In 
'98, there were about 2,000 preaward surveys performed. These 
are generally extremely detailed reviews of a company's ability 
to perform a proposed contract, and they provide the 
contracting officer the best and most up-to-date information. 
They normally cover financial, technical production, quality 
assurance capabilities, accounting systems, property control 
systems, safety records, and compliance with other special 
interest items.
    Due to the expense and time required to perform these 
surveys, they are predominantly used when there is a real 
question of whether the selected contractor can perform the 
contract. Because these surveys are likely to remain valid for 
some time, we use preaward survey monitors who maintain files 
on contractors, and we consult those preaward survey monitors 
more often than we do a full-up survey. There were 
approximately 2,000 calls in '98.
    As you can see, the most detailed checks take place on a 
tiny fraction of the awards that we make. This is due to the 
sheer volume and that a number of our contracts are awarded to 
contractors with whom we are familiar and don't need to do 
these repeated surveys.
    Also, we award a number of ordering contracts where we 
place orders on another agency's contract, and that agency 
makes the determination of responsibility.
    If we know something negative about a firm, or if someone 
brings a contractor's responsibility into question, we 
certainly investigate the accusations thoroughly. The short 
answer to your question is there are various levels of 
responsibility reviews. Contract size is one consideration, 
though not the only one.
    You asked how the proposed rule would affect the award of 
DOD contracts and whether contracting officers could make these 
necessary determinations. Let me explain what I would propose 
as a way of implementing this.
    While contracting officers would remain the primary 
determiners of responsibility, if this rule is implemented as a 
final rule, they will need a substantial amount of assistance 
from the organizations with responsibility for the specific 
areas that we are adding. Without such support, we will not 
have readily available means of determining if a contractor is 
in substantial compliance with labor, employment, tax, 
environmental, antitrust, or consumer protection laws.
    By this, I mean we would need a single point of contact at 
each of the agencies that has cognizance for compliance with 
the particular laws. Additional training for contracting 
officers might also be helpful, but I believe that training 
would probably require some experience with a new regulation 
and might not be available when we first have to implement 
this.
    Your second question asks the effects on the award of DOD 
contracts. There might be delays, depending upon the complexity 
of the reviews required. Also, there might be litigation in 
high-profile cases, if we determine contractors to be non-
responsible based on evidence of noncompliance with the laws 
that I have mentioned. It may also be that these problems will 
occur seldom enough that there may not be disruption.
    Your third question asks whether our contracting officers 
can determine whether prospective awardees are in compliance. 
And, again, I think we would need the help of other agencies to 
do that. You asked what education and training makes 
contracting officers capable of making such decisions. I will 
work to see that we get them educated properly, so that we can 
exercise this responsibility properly.
    Your final question is how we expect contracting officers 
to handle the added responsibility, and, again, we would see 
that they have the resources they need if this becomes a final 
rule. And we certainly intend to review any and all comments 
before we implement any final rule.
    I will be pleased to answer any other questions. Thank you.
    [Ms. Spector's statement may be found in the appendix.]
    Chairman Talent. Thank you very much.
    Our next witness is Mr. James Ballentine, the Acting 
Associate Deputy Administrator for Government Contracting and 
Minority Enterprise Development of the Small Business 
Administration.
    Mr. Ballentine, it is a pleasure to have you here.

    STATEMENT OF JAMES BALLENTINE, ACTING ASSOCIATE DEPUTY 
     ADMINISTRATOR FOR GOVERNMENT CONTRACTING AND MINORITY 
   ENTERPRISE DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Ballentine. Thank you.
    Good morning, Mr. Chairman, and members of the Committee. 
As the Chairman mentioned, my name is James Ballentine, Acting 
Associate Deputy Administrator for the Office of Government 
Contracting and Minority Enterprise Development. I am appearing 
on behalf of SBA Administrator Aida Alvarez, whose schedule 
does not permit her to be with us today.
    It is my pleasure to testify before you today on the SBA's 
Certificate of Competency (COC) Program as it relates to the 
proposed changes to Subpart 9.1 of the Federal Acquisition 
Regulation affecting contractor responsibility. We understand 
the Committee's interest in this proposed regulation and its 
potential effect on America's small businesses.
    The purpose of the COC program is to ensure that small 
businesses, especially new firms in the federal marketplace, 
receive a fair share of government contracts. The COC program, 
authorized under Section 8(b)(7) of the Small Business Act, 
affords a small business the right to appeal a contracting 
officer's responsibility determination.
    Where SBA issues a COC, the Small Business Act directs the 
contracting officers to accept the certification as conclusive 
and precludes the contracting officer from requiring the firm 
to meet any other requirements of responsibility.
    In the beginning, the COC program was limited to areas of 
responsibility dealing with capacity and credit. In 1977, 
Congress significantly enhanced the COC program, authorizing 
SBA to issue COCs with respect to all elements of 
responsibility, including perseverance, integrity, and 
tenacity. Tenacity and perseverance are those qualities of 
persistence and steadfast pursuit of an undertaking with the 
aim to do an acceptable job.
    In 1984, Congress further refined the program by requiring 
SBA to accept COC referrals regardless of the dollar value. 
Previously, there were no COC referrals for procurements below 
$10,000.
    Mr. Chairman, in your letter of invitation, you asked 
several questions. Your first question pertained to how SBA's 
current COC program works, and to what extent does the program 
cover general compliance. Upon determining that the apparently 
successful small business offer is non-responsible for a 
proposed contract, the contracting officer is required to refer 
that firm to SBA for a COC determination.
    Once SBA receives an acceptable COC referral, SBA contacts 
the small business, apprises the firm of the reasons 
surrounding the referral, and offers the firm an opportunity to 
apply for a COC. SBA gives the small business six working days 
to submit its COC application and notifiesthe contracting 
officer of the date for the COC decision.
    The COC application consists of, among other things, 
written documentation and information to support the firm's 
ability to perform the proposed contract. The COC specialist 
reviews the information provided by the contracting officer and 
the small business. Also, a financial specialist reviews the 
financial information to determine the applicant's financial 
capability.
    The COC committee, chaired by the COC program supervisor, 
consists of a COC specialist, a financial specialist, and an 
attorney. They review the findings and they make 
recommendations to either issue or deny a COC. An attorney 
attests to the legal sufficiency of the committee's findings 
and the supporting information.
    The SBA area director for government contracting makes the 
actual decision to issue or deny a COC based on COC committee's 
recommendations. Upon receipt of the SBA area office's decision 
to issue a COC, the contracting officer can, among other 
things, appeal within 10 working days the decision to SBA 
headquarters offices of government contracting. On appeal, SBA 
headquarters can confirm or overturn an area director's 
decision to issue a COC.
    You also asked whether or not the program covers compliance 
with legal requirements outside the procurement process. SBA 
has processed some COC referrals where violations of labor laws 
and tax laws are alleged, such as violations pertaining to 
prevailing wage rates under the Davis--Bacon Act. In these 
cases, SBA reviews the totality of circumstances, court-imposed 
fines, or sentences, weighs the severity of violations, and 
makes the decision.
    SBA also handles COC referrals based on non-responsibility 
determinations where a small business is unable to meet 
regulatory requirements imposed on them by other agencies.
    SBA tracks the COC process very closely. We track the COC 
issuance, contract award, and contractor's performance. More 
than 95 percent of small businesses that receive a COC have 
successful contract performance with delivery of goods and 
services on time.
    In the second question you asked whether the appeal process 
under the COC program delays the award of contracts. SBA is 
required to process a COC referral within 15 working days. 
Typically, SBA meets this requirement unless there is an appeal 
of the SBA area director's decision to issue a COC to 
headquarters.
    We believe the COC appeals process is necessary to ensure a 
level playing field for small businesses in federal 
procurement.
    You asked two or three other questions, which in lieu of 
time I will surpass. And actually I will submit my written 
statement for the record, so that we may get to the questions.
    Thank you.
    [Mr. Ballentine's statement may be found in the appendix.]
    Mrs. Kelly [presiding]. Thank you very much, Mr. 
Ballentine.
    As you all have heard, we have been called for a vote. I 
think we are going to take a short 15-minute break until we can 
go and vote, and then come back to begin the questioning.
    Thank you for your indulgence.
    [Recess.]
    Chairman Talent [presiding]. Let me reconvene the hearing. 
We have another panel, so I am going to go ahead and open it up 
with my questions. And as members file in, I will recognize 
them.
    Ms. Lee, let me get your opinion of what is now happening, 
and, Ms. Spector, you may want to--in fact, Mr. Ballentine, you 
may want to chime in, too. Now, what I am told is that the way 
the law is now interpreted, a bidder would get excluded for 
being non-responsible if they have a record of violations or 
false statements or dishonesty going to the bidding process.
    So, in other words, if the government can't trust the 
statements that they are making in the context of a bid, 
violations going to honesty that affects your ability to judge 
the rest of their qualifications, or if they have violations 
that indicate they are not capable of doing the contract that 
they are bidding on.
    So if they have a history of environmental violations, and 
they are bidding to do environmental cleanup, that is obviously 
relevant to that. And those are the two bases on which 
contractors are declared non-responsible for the purposes of 
the requirement that they have a satisfactory record of 
integrity and business ethics. Is that a fair summary of what 
you now do?
    Ms. Spector. Essentially, that is correct. The kinds of 
things that we look at, related to integrity, right now would 
be things like commission of a fraud or a criminal offense, 
related generally to performing or attempting to obtain a 
contract.
    While we look at other compliance's, generally that is what 
we consider when we say someone is not responsible.
    Chairman Talent. And that makes sense because if they are 
not--if they have committed violations that undermine the 
integrity of the bidding process itself, you can't trust 
anything else they are doing. That certainly would make sense.
    Now, is it your interpretation of what you are doing here 
that you intend to reach out--and maybe I will direct this to 
Ms. Lee, and the others may want to comment--you intend to 
reach out so that procurement officers would have the 
discretion and I guess the responsibility to declare somebody 
non-responsible for legal violations that--let us start with 
legal violations for a second and not get to things that fall 
short of that. But legal violations that either don't--that 
don't go to the honesty of that person as a bidder, and also 
are not related to that particular contract.
    So, for example, they were found by the IRS to have not 
paid their taxes. It was not a criminal violation, let us say, 
but it is a serious civil violation. They paid the interest. 
They paid the penalties. Now they are bidding to do 
shipbuilding for the Navy, or whatever. Is it your intention 
with this that the contracting officer would look at that 
history of tax violations and consider whether to declare them 
non-responsible?
    Ms. Lee. Mr. Talent, one of the thrusts behind this is that 
each contract needs to be looked at individually. And one of 
the most important things I think of acquisition reform, as 
Congressman Davis mentioned, is one of the things that we've 
emphasized to our contracting officers is talk to each other. 
Don't have this mysterious passing papers back and forth.
    So what we are asking the contracting officers to do--and 
by the way, it is usually a team, their legal team, their 
technical team. Generally, unless it is very small, it is not 
an individual. But the team needs to look at that individual 
circumstance. They need to see what do we have here. They 
should ask the contractor what is going on here, get the 
relevant information from others on their team, and discuss it 
and make a decision that is relevant to that particular issue.
    Chairman Talent. Okay. But what--in your mind, as your 
agency has issued this, in your mind what is it they are asking 
questions to determine? Are they asking questions to determine, 
yes, we did have this IRS problem, we did owe the back taxes? 
Are they asking questions to determine, look, did you 
intentionally not do something? Are they asking questions, how 
big it was, how many times it occurred? And this is the 
uncertainty that is out there in the small business community 
that is the problem.
    You seem to think--well, go ahead and answer that. What is 
the purpose of the questions?What are they trying to find out?
    Ms. Lee. Well, they would want to find out what the issue 
was, and, just as you mentioned, the severity, the 
repetitiveness, and the corrective action. Has it been 
remedied, and is that remedy--what we are trying to do is 
protect the taxpayer.
    Chairman Talent. Okay. From what?
    Ms. Lee. So if it has been remedied, you need to consider 
that and say, ``Okay, what do I do with this information?''
    Chairman Talent. From somebody who seems to be a 
recalcitrant repeated violator of federal law--so are you 
trying to get at people who intentionally violate federal laws?
    Ms. Lee. Yes.
    Chairman Talent. Okay. What about people----
    Ms. Lee. Pattern, substantial, repetitive, yes.
    Chairman Talent. Intentional violation of any federal laws. 
Okay. So the question, if it was a tax case, would go to 
whether they knew they were violating the--law or knew what 
they were doing--that they intended to do what they did, or 
they intended to violate the law.
    I am trying to make this difficult for you. I am trying to 
go through if I was a counsel advising a potential contractor, 
and they had had some tax problems, I would want to give them 
advice about how much this might put them in jeopardy in terms 
of the contracting process.
    So are you trying to get at people who take an action 
knowing it is in violation of federal law?
    Ms. Lee. Yes. As well as those who have repeated 
violations, and then we would ask, ``What have you done to 
remedy that?'' If no remedy has been taken, then we need to 
say, ``Okay. What is the risk involved behind this?'' If a 
remedy has been taken, then we need to look at it and say, 
``Okay. Now where are we, given the facts and circumstances?''
    Chairman Talent. Okay. Now here would be my problem with 
that. The Federal Government, of course, and state governments 
as well, regulate the activities of business people and small 
business people pretty extensively. Now, we all have a sense 
that some of those regulations are designed to prevent things 
which all of us would say, even apart from the regulations, you 
ought not to do. I mean, there is a class of things:
    You know, you ought not to fire people because of their 
race. You ought not to have unguarded buzz saws in your 
workplace. Even if there wasn't an OSHA, you ought not to have 
that. And there is a class of things that go to things that 
even apart from the regulations you ought not to do.
    Then, there is a class of things which are pretty technical 
in nature. That doesn't mean that they are not important. But 
the reasonable person, absent the regulation, might not do 
them, such as the material safety data sheets, the cash versus 
accrual method in the IRS. Don't you think--it is unfair, isn't 
it, to say to somebody because they have committed a series of 
technical violations like that, therefore, you can't bid on a 
federal contract?
    Ms. Lee. Just patently saying, ``Therefore, you can't 
bid,'' I do think would--is not the objective or the end result 
we are trying to achieve. What we are trying to do is get 
enough information and really look at it and say, ``What does 
it tell us? How does it relate to this issue?'' And that is the 
goal. Do we or do we not have a problem or an issue here? 
Whether that even ends up in a non-responsibility 
determination, it could just end up being--we have got some 
concerns here. We would like to see you correct them. It is a 
learning experience for all of us.
    Chairman Talent. Because sometimes people will settle with 
the IRS or OSHA or something when they really haven't----
    Ms. Lee. Right.
    Chairman Talent [continuing]. In their own mind done 
anything wrong, because it is cheaper than fighting it. And you 
would admit, wouldn't you, that it would be wrong to say to 
somebody, ``You are non-responsible,'' in that kind of an 
instance, right?
    Ms. Lee. I think we would have to look at those 
circumstances. If there are----
    Chairman Talent. Well, now wait a minute. Can't you just 
tell me it would be wrong to say somebody is non-responsible?
    Ms. Lee. On a one-time issue, yes.
    Chairman Talent. Yet I will just get at another point, and 
this comes before the Committee a lot. You have got to put 
yourself in the position not of the enforcer of the law, which 
you are now--and you are a fair person, and I think most people 
who work for you are fair people, and most procurement officers 
are fair people.
    But put yourself in the position of the person who has an 
awful lot riding on being in compliance with the law. And 
really, what you have told me is you can't tell me what the law 
is. You told me that it is going to be up to each set of 
contracting officers.
    And, yes, they are going to be trained, Ms. Spector, and, 
yes, they will have Mr. Valentine to advise them and 
everything. But, I mean, these are--if you do a lot of business 
with the government, and you depend on that, and you have all 
of these regulations out there you have got to comply with. You 
don't want to be in a situation where, oh, my gosh, I settled 
that tax case, and now this contracting officer thinks I am 
non-responsible.
    Do you see what I am saying? It is an arbitrariness that 
introduces into the law that is alien to our jurisprudence, to 
sound like a lawyer or that guy from Green Acres, Oliver 
Wendell, what is his name? [Laughter.]
    But, I mean, you have got to look at it from the business 
owner perspective--that is why you are getting all of these 
comments from people.
    Ms. Lee. Right.
    Chairman Talent. You understand that.
    Ms. Lee. Right.
    Chairman Talent. A couple of other points I have got to get 
in before I let the Committee ask you questions. One of them 
is, let me read the relevant sentence. And it is really a 
sentence, so members who haven't read it may want to. It says, 
``Examples of an unsatisfactory record may include persuasive 
evidence of the prospective contractor's lack of compliance 
with tax laws or substantial noncompliance with labor laws, 
employment laws, environmental laws.''
    Here is why people are concerned. All right? What is----
    Ms. Lee. Mr. Chairman, where are you reading from, so I can 
follow along.
    Chairman Talent. I am sorry. From Part 9, 9.104-1(d). It is 
from the Federal Register notice. This is the relevant 
provision. ``Examples of an unsatisfactory record may include 
persuasive evidence of the prospective contractor's lack of 
compliance with tax law or substantial noncompliance with labor 
laws.''
    Now, first of all, what is persuasive evidence? That is 
not, as I said in my opening statement, that is not a term of 
art in the law. It is not like substantial evidence. What would 
persuasive evidence be?
    Ms. Lee. Well, what we were aiming at was, as we have 
mentioned, was of patterned, substantial, substantive evidence 
there. We are looking for comments. Our language is notperfect, 
and I know there have been some people that have actually suggested 
some improvements in that language. And I think we will get those from 
the comments, and we will be working to improve that.
    But the thrust behind it, again, is that--to use 
Congressman Davis' term--if you have a bad actor, you need to 
be aware of it and take the appropriate action.
    Chairman Talent. Okay. Well, then, it seems to be two 
different standards here. One of them, it is enough if there is 
a lack of compliance with tax laws, but there must be 
substantial noncompliance with labor laws, employment laws, 
environmental laws, antitrust laws, or consumer protection. Is 
that intended to be two different standards?
    Ms. Lee. I don't believe so. The intention was to make sure 
that people didn't know it was a one-time trivial issue that 
said, gee, as you mentioned, one time I didn't fill out my 
forms. Therefore, I am not eligible. That is not what we are 
trying to do.
    Chairman Talent. Well, I am going to defer to the other 
members. But let me just say something to you, and I--you 
really have to adopt a perspective of people--of the small 
business people, and particularly small business people who 
have been trying to break into this system and haven't been 
able to, or have maybe broken into it and are concerned about 
getting pushed out.
    It is fine to say that contracting officers are going to do 
this, and we are going to train them, and they are going to be 
fair and all of that stuff, but subjective decision making has 
been a means for excluding groups that you have wanted to 
exclude for other reasons for a long time.
    I am not saying at all that that is what you intend. But 
that is why there is a lot of sensitivity out there. We are 
going to have a representative from the National Black Chamber 
and the National Association of Women's Business Owners testify 
about their concerns about this. And so it is always the more 
subjective things are, the more somehow it seems like it is the 
old network that has always gotten things, that continues to 
get things, and just the new people somehow never seem to be 
able to comply.
    And that is a major concern that I have. I don't know if 
you would want to comment on it or not.
    Ms. Lee. Just that we do not want to exclude--small 
business is very important. As you know, we have got our small 
business goals. We have got a lot of activities trying to 
increase small business participation. The last thing we want 
to do is put out a rule that has the opposite effect.
    Chairman Talent. Okay. Well, I will recognize the 
distinguished ranking member for her questions.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Ms. Lee, as you have heard, and I guess by the number of 
individuals that are here, there is a lot of confusion out 
there, and small business people are really concerned about 
this. And we have got to work together to make sure that we 
have a mechanism in place that will prevent small businesses 
from being punished--and, of course, that is not the intention 
of this rule--but at the same time protecting taxpayers' money 
as you said.
    Let me ask some questions. With the proposed clarification 
of the definition of integrity and ethics, it appears that the 
goal is to have every contracting officer determine contractor 
responsibility the same way. If this is so, and a business is 
determined non-responsible by one contracting officer, logic 
says that every other contracting officer would also determine 
the firm non-responsible.
    Explain to me why this wouldn't result in de facto 
debarment.
    Ms. Lee. I think you expressed it quite well in your 
statement, in that what we are looking at is responsibility 
determination on that action at that time. You are very 
familiar with debarment, which is a different procedure but 
which excludes everyone from all government activities, not 
only procurement activities but personal loans, mortgages, 
etcetera, if they are through the Federal Government.
    So they are two different procedures--the debarment being 
you are excluded from all, the responsibility being looking at 
this particular activity at this particular time, and does that 
contractor have the capability to perform that action.
    Ms. Velazquez. So how do you respond to the contention that 
the proposed change is a way to circumvent the current 
debarment regulations? What separates non-responsibility from 
debarment?
    Ms. Lee. Well, currently, we do have a responsibility 
determination, and we do have business ethics and integrity 
that are a required determination.
    Ms. Velazquez. Ms. Lee, the reason I ask this is that there 
appears to be some confusion about an apparent discrepancy 
regarding antitrust law violation. If you look at Part 9 of the 
Federal Acquisition Regulation, at 9.406-2, it refers to 
violation of federal or state antitrust statutes relating to 
the submission of offers.
    Yet, antitrust law violation has been included in the 
examples in the proposed regulation. If a firm has a violation 
of an antitrust statute, wouldn't that firm automatically be 
eligible for debarment?
    Ms. Lee. I believe the answer is yes, but I would like to 
research that further and give you the specifics.
    Ms. Velazquez. So why, then, did you put it in the proposed 
rule?
    Ms. Lee. As an example. We certainly can take that as a 
comment and see whether that needs to be corrected or changed.
    Ms. Velazquez. Would you get back to me on that?
    Ms. Lee. Absolutely.
    Ms. Velazquez. I am concerned about the way these 
regulations will be implemented in the field. Are you going to 
suggest to OSHA and other enforcing agencies that they define 
the threshold of what is considered substantial and communicate 
this threshold to federal procurement officials?
    Ms. Lee. That is not our current plan. We----
    Ms. Velazquez. Why not?
    Ms. Lee. Because what we are asking for is information on 
the individual activity, and then the contracting officer would 
consult based on that information. They may end up going back 
to OSHA and saying, ``This is what we have. Help us interpret 
what this means and what we should do with this information.''
    Ms. Velazquez. So once you do all of this process, and you 
come up with a final rule, then what will be the next step, in 
terms of enforcing agencies? For example, OSHA.
    Ms. Lee. Once we go through the process and the comments 
and put out, say, for example, a final rule, we will certainly 
do the education process to explain to the contracting officers 
how we will do that. We also need to have an outreach program 
to the agencies that have and will provide some information and 
see how we can make that the most accessible and the best 
resources to make sure we have correct information.
    Ms. Velazquez. Regulatory flexibility, Executive Order 
12866, is triggered by persuasive evidence of impact on small 
businesses. It seems to me that the proposed regulations will 
be covered by this. Why wasn't reg flex triggered?
    Ms. Lee. We did the analysis that this was the 
parenthetical. However, in line with your concerns, we 
specifically put in the rule and asked people to comment 
whether they felt that was different, and actually gave them 
the site and said they can comment back. So I expect to see 
something in the comments regarding that.
    Ms. Velazquez. Would you consider going back and having at 
least the implementation portion reviewed by----
    Ms. Lee. Absolutely. We will do a review and see where we 
should go with that.
    Ms. Velazquez. Okay. Ms. Lee, we are going to hear from 
Steven Schooner, who used to work for the Office of Federal 
Procurement Policy, who says that the proposed regulation is a 
significant departure from current procedure, and he believes 
that reg flex does apply. So how do you respond to this?
    Ms. Lee. That we will be happy to look at it, not only hear 
his opinions, but also look at the public comments and see how 
other people responded.
    Ms. Velazquez. In your interpretation of the proposed rule, 
if a complaint is filed with National Labor Relations Board, or 
if a complaint was filed with EPA, would that be enough grounds 
for a determination of non-responsibility?
    Ms. Lee. In my interpretation, a complaint, no.
    Ms. Velazquez. Ms. Spector, in your opinion, if an 
accusation alone can be used as grounds for a determination of 
non-responsibility, how would you train your contracting 
officers to evaluate accusations?
    Ms. Spector. As I have said, Ms. Velazquez, my preference 
would be for the responsible agencies who administer those laws 
to advise us if they believe there was substantial 
noncompliance to prevent disparate interpretations of what was 
substantial noncompliance.
    Short of that, we would have to try to educate our 
contracting officers. But my preference is that they get the 
advice from the responsible agency.
    Ms. Velazquez. Ms. Spector, do you think that contracting 
officers or even the SBA's Certificate of Competency specialist 
are equipped at all to decipher the national labor relations 
law and tax law, for example?
    Ms. Spector. Not now, they are not. At least I can speak 
for generally contracting officers.
    Ms. Velazquez. Can COC specialists make judgments about 
what is persuasive evidence?
    Ms. Spector. That I don't know. I believe you would have to 
ask the COC specialist. I can speak for contracting officers, 
and, indeed, they are not generally educated in the intricacies 
of all of the laws.
    Ms. Velazquez. If the contracting officer is required to 
make a thorough review of the record, must he or she review 
every previous contract and every type of law that may be 
violated?
    Ms. Spector. It is not clear precisely what would be 
involved yet. Again, I would have to say my preference would be 
for there to be a database at each of the relevant agencies 
that one could call or check because it is not clear precisely 
how the contracting officer could go about doing this.
    Ms. Velazquez. Does your agency have the resources to start 
doing this?
    Ms. Spector. If it became policy, we would implement it, of 
course.
    Ms. Velazquez. Ms. Spector, your testimony does not address 
how your agency determines whether a firm has violated laws. 
You referred to what you do when firms have previously been 
evaluated. But what about a new bidder to the Department of 
Defense?
    Ms. Spector. Generally, if it is a new bidder about whom we 
have concerns, we would do a check on the bidder or a 
responsibility determination. The way we check now, we check to 
see that he is not on the suspended or debarred list, the list 
of parties excluded from federal procurement.
    Generally, if he is not, unless we are aware of other 
violations of the law, we will generally consider that our 
check. So we check if he is suspended or debarred for fraud or 
the other factors listed under suspension and debarment. If a 
company is not on that list, we will check to see if there is 
any other information we have, and then generally look at his 
ability to perform the contract.
    Ms. Velazquez. Ms. Lee, you stated--no, I am sorry. Yes. 
You stated when I asked you--I just want for you to clarify 
something that you stated. That an accusation will not trigger 
a finding of non-responsibility. What about several?
    Ms. Lee. I am sorry?
    Ms. Velazquez. That one accusation--that an accusation will 
not trigger a finding of non-responsible. What about several 
accusations?
    Ms. Lee. That could be. It depends what they are, what the 
degree is, the relevancy to that procurement. There is--as you 
mentioned, there is subjectivity to this, and that is why we 
want the people to get the information, to get as accurate 
information as they can, and then they are going to look at 
that as a team and do some analysis.
    Ms. Velazquez. Okay. Mr. Ballentine, I just have some 
questions for you. One of the first things that I did was to 
look at the Certificate of Competency process. And I know that 
you are new in your job, but is there any way that the COC 
process can be streamlined?
    Mr. Ballentine. Well, one thing I have learned is that they 
don't allow being new as an excuse for anything. [Laughter.]
    We are always looking at ways to streamline the process, 
and we have done so over the past four to five years. There is 
a 15-day period right now for us to respond back to a 
contracting officer. And if that process could in any way be 
streamlined, we would look into it.
    Ms. Velazquez. When we started preparing for this hearing, 
one of the things I did was to look at the current process. And 
I have got to tell you, it seems to me that this application, 
along with the attachments, will be very difficult to complete 
in only six days. If there is any way that that could be 
changed?
    Mr. Ballentine. As I mentioned, we are mandated to respond 
within 15 days. The small business has six days to respond. We 
have nine days to respond. Sometimes that takes a little longer 
for the small business. We try not to let it go past one or two 
days, which will take away from our nine-day period. But within 
that 15 days we get a response out.
    Ms. Velazquez. What I am saying is, not looking at the 
responses but at the whole process and the application itself, 
can that be streamlined?
    Mr. Ballentine. We can look at that. We are happy to work 
with you on that, if that is possible.
    Ms. Velazquez. Because you understand that now this process 
is going to be more important in light of the new rule.
    Mr. Ballentine. Agreed.
    Ms. Velazquez. And so that we make sure that it--make it 
more user-friendly.
    Mr. Ballentine. Agreed. We are happy to look at that.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mrs. Kelly is next.
    Mrs. Kelly. Thank you, Mr. Chairman.
    Ms. Lee, can you provide me with the number of small 
business contractors who were found to be non-responsible 
because of a lack of integrity and business ethics?
    Ms. Lee. I cannot, but I believe it is in Mr. Ballentine's 
statistics. I would be just quoting his statistics.
    Mrs. Kelly. Do you have that, Mr. Ballentine?
    Mr. Ballentine. Could you repeat the question, please?
    Mrs. Kelly. Can you provide me with the number of small 
business contractors who were found to be non-responsible 
because of a lack of integrity and business ethics? Do you have 
that number?
    Mr. Ballentine. Over the past three fiscal years, we have 
had 16 referrals.
    Mrs. Kelly. Sixteen?
    Mr. Ballentine. Just 16 from our end.
    Mrs. Kelly. Okay.
    Mr. Ballentine. And only three of those which we sent 
forward to COC.
    Chairman Talent. And if the gentlelady would yield just to 
clarify. That is only that you have seen.
    Mr. Ballentine. That is what we have seen.
    Chairman Talent. There could be a whole lot more out there 
that you have not seen.
    Mr. Ballentine. That is correct.
    Chairman Talent. So we know the number is 16. But if they 
didn't appeal to them, they wouldn't know about it.
    Mr. Ballentine. We don't get every referral.
    Chairman Talent. So I guess the answer is they don't know, 
beyond his 16.
    Mrs. Kelly. Is that a correct answer, Ms. Lee?
    Ms. Lee. If it is a small business and the non-
responsibility determination is made, the contracting officer 
must notify SBA. SBA, working with some--some small businesses 
accept that and say, ``I saw it. I''--I don't know that they 
agree, but they accept it and they don't pursue the 
certificate. So there it is different. But if it a small 
business-
    Mrs. Kelly. So you don't have any statistics on this, is 
that what----
    Ms. Lee. I have statistics government-wide. We have the 
small business referrals, but we don't keep specific records of 
other--say, large business non-responsibility determination.
    Mrs. Kelly. But your rule would apply to all businesses, 
wouldn't it?
    Ms. Lee. It does now, yes.
    Mr. Ballentine. Congresswoman, if I may correct that. The 
16, that is outside of issues unrelated to capability, and 
financial. These are related to environmental, tax laws, 
anything that may be outside of our general purview.
    Mrs. Kelly. But you don't, Ms. Lee, have statistics even on 
large business, is that correct?
    Ms. Lee. No, I do not.
    Mrs. Kelly. You have no statistics at all?
    Ms. Lee. Correct. We keep statistics on the contracts that 
we are awarded. We do not keep statistics on the unsuccessful 
bidders, whether that be responsibility or they just weren't 
the best proposal, or they just weren't the best price.
    Mrs. Kelly. Could you venture a guess based on what you 
know? Or do you want to give me any kind of number you may have 
on any of the numbers that you do know, on how many people were 
found non-responsible because of prior criminal violations? Or 
were they suspended or debarred--I mean, were they suspended or 
debarred because of a criminal violation? Would you have 
statistics on that?
    Ms. Lee. I do have a copy, although it is online; it is 
easier. This is a copy of the debarred, suspended, and 
ineligible. There are a good number of people on the debarred 
list.
    Mrs. Kelly. But what about the debarred for criminal 
activities is what I am asking.
    Ms. Lee. I would venture a guess that is predominant of 
these, but each individual is different. But that is debarred 
versus responsibility.
    Mrs. Kelly. I want to ask you another question, Ms. Lee. 
Coming out of a small business background, I recognize that 
some of these procurement contracts are given to a large 
contractor who has--who is coming in with a group of bids from 
subcontractors. Does your rule apply to the subcontractors 
equally as well as to the large contractor?
    Ms. Lee. The Federal Acquisition Regulation currently 
requires that the prime contractor do the responsibility 
determinations on their subcontractors. There is some 
instruction in Part 9 in some instances where, if there is an 
issue with a subcontractor, the prime would notify the 
government in some cases.
    Mrs. Kelly. How would you envision the prime contractor 
vouching for the responsibility of the subcontractor without 
investigating their tax records or something like that? I mean, 
the prime contractor under the law is responsible for the 
subcontractors. And how would you envision the subcontractor 
under your new proposed rule as finding out information--the 
prime contractor finding out information about the 
subcontractor?
    Ms. Lee. I don't have a crisp answer for you. We need to 
certainly do some more of that, but they currently do make that 
responsibility determination as far as----
    Mrs. Kelly. Well, how do they do that?
    Ms. Lee [continuing]. Probably more capability----
    Mrs. Kelly. How can they do that? If I were a 
subcontractor, and I were involved in a bid with a prime 
contractor, and the prime comes to me and says, ``I have got to 
verify that you are okay. Give me your tax records. Show me 
your books''--I am not so sure I would like to have that happen 
to me. That is what I am asking you.
    Ms. Lee. That we are going to ask--that we are asking for 
compliance, not necessarily the data behind it. We currently 
have a certificate that is put in all contracts over $100,000 
that asks people, and they certify, whether or not they are 
under indictment or whether or not they are on the debarred 
list. So----
    Mrs. Kelly. I am going to run out of time here, and I want 
to--I just want to ask my question again. And that is, as a 
prime contractor, I don't want to have a subcontractor who is--
who could be or has been disbarred or something. But on the 
other hand, you are not providing me, as I understand it, with 
this rule the means of effectively establishing that with my 
subs.
    You are making me responsible for people that I may--that I 
am afraid that you are going to make me look in their books and 
things like that. I don't want to do that as a subcontractor. I 
don't want to show my books to the prime contractor. And I 
don't want to see the primecontractor held to that high 
responsibility with the subs, absent something that you are going to 
give me in that rule to protect my subcontractors and me.
    Ms. Lee. Okay.
    Mrs. Kelly. And I think that that is something I would like 
to see you give--I don't know if I am being clear here, but I 
think it is really--absent some kind of a certified statement--
--
    Ms. Millender-McDonald. Would the gentlewoman yield?
    Mrs. Kelly. What kind of liability do you think is going to 
hit the prime contractor?
    Ms. Millender-McDonald. Will the gentlewoman yield? Because 
you are making sense. And I certainly would like to see----
    Mrs. Kelly. I don't have any time to yield, but----
    [Laughter.]
    Ms. Millender-McDonald. That is why I am trying to go very 
fast.
    Chairman Talent. If the gentlelady wants to, go ahead. You 
can run over a little.
    Ms. Millender-McDonald. Because she is really right on 
point here with the question that is very ambiguous at this 
time, or not very clear--I suppose may not be too ambiguous, 
but it is not clear. If you have--the onerous provisions here 
will be on the part of the prime contractor, and yet the 
subcontractor--the prime contractor is asking the sub to 
present papers that will clear him or her of any wrongdoings, 
or to see whether or not they are in compliance.
    Where does the--who falls prey to this law, if they are out 
of compliance? Is it with the subcontractor or the prime, if 
they are not complying with this Certification of Competency?
    Ms. Lee. It is performance-related, so certainly there is a 
combination thereof. I think it is a very good point, and we 
need to do----
    Ms. Millender-McDonald. I think it is an excellent point 
she made, and I think you should follow up on it to get her an 
answer. And please give me an answer when she gives it to you.
    Mrs. Kelly. Thank you very much.
    Ms. Lee, if this law is supposed to clarify--all I am 
seeing is a lot of obscure possibilities--I think you are going 
to have to really come back to us with some information about--
--
    Ms. Lee. Well, certainly, as we get the comments in, we 
will be up here discussing them and telling you what we have 
got.
    Mrs. Kelly. Well, I am worried about one thing. After you 
get the comments in, can you get--are you going to be talking 
with us before this rule becomes an actual fact or after?
    Ms. Lee. No. Before.
    Mrs. Kelly. Thank you.
    Chairman Talent. Ms. Christian-Christensen is next.
    Ms. Christian-Christensen. Thank you, Mr. Chairman, and 
thank you for holding this hearing. Just based on the questions 
that have been asked, this is an issue of great concern to us, 
and I share some of those concerns because our small 
businesses, our rural businesses, our minority businesses, have 
a lot of difficulty as it is getting the contracts. And this 
almost seems as though it is going to make it more difficult.
    When Congressman Davis was speaking, he was saying 
basically the way it exists now, the responsibility exists now, 
should be satisfactory. It is a good program. The rule as it 
exists is good. And if it is not broken, why should we be 
fixing it? I am wondering, what was the impetus to change the 
rule? I hope this question hasn't been asked. What was 
happening? What was the experience of the Federal Government 
with regarding to contracting that caused us to feel that we 
must change and expand the rule?
    Ms. Lee. It certainly was intended to be a clarification. I 
think there have been some good points made here today that we 
didn't--it isn't as clear to everyone as we had intended it to 
be. And I am looking forward to the comments because I know--
and people have informally talked to me, even suggesting 
changes to language or more specific citings. And so we will 
work through that.
    But the intent is to make it clear to our contracting 
officers that we--that that is part of their decision making 
process, to make sure that the contractor is responsible.
    Ms. Christian-Christensen. But it is not just 
clarification. This is an expansion to include other areas of 
responsibility that were never included, that have nothing to 
do with contracting and the work to be done. So what was the 
impetus to include the environmental, the other areas that are 
now going to be included as you look for the responsibility in 
the contractor? For what reason are we doing this?
    Ms. Lee. We are doing it truly to say we want to make sure 
that contracting officers look at these issues and to reiterate 
that those are the kind of things that can be considered as 
part of business ethics and integrity.
    Ms. Christian-Christensen. Was a study done that showed 
that businesses, large or small, were not compliant with 
environmental or labor relations or OSHA or any of the other 
rules and regulations? Was there a study done? And was it found 
that businesses were not compliant, and so now it is decided 
that we must include these as we review the contractors?
    Ms. Lee. A separate study, as far as behind this rule, no. 
There certainly is a lot of information that for other reasons 
accumulates and summarizes our compliance with other laws. So I 
would not--there is not a specific study behind this.
    Ms. Christian-Christensen. Okay. I am not sure that the 
question was answered really to my satisfaction. Let me ask 
another question. One of the concerns is the vagueness and the 
subjectivity of the process. What can you tell me to--and the 
Committee--to show that it is not a subjective and vague 
process that would leave some companies vulnerable just based 
on the individual contracting officer--what assurances are 
there in the rule as it is proposed that take vagueness and 
subjectivity out of it? What----
    Ms. Lee. Vagueness--we certainly don't want to have that 
issue. There will be--as Ms. Velazquez said, there is some 
subjectivity. I don't know that we can make it purely objective 
that says two of these, three of those, equals this. We really 
do want an analysis and a meaningful analysis of the 
information and the relativity. We need to work on the 
vagueness. I believe there still will remain some subjectivity.
    Ms. Christian-Christensen. Okay. Just one--let me ask the 
first question a different way. What was wrong with the current 
process?
    Ms. Lee. My personal opinion is under the current process 
you can consider these issues. There were some people that said 
you cannot, so we said, ``Let us make it very clear that you 
can.''
    Ms. Christian-Christensen. Well, I am looking forward to 
hearing--to seeing what the comments are during the comment 
period. And I am going to have my contractors make sure to get 
their comments in, and my district as well, before we make a 
decision as to whether we can support this or not.
    Thank you, Mr. Chairman.
    Chairman Talent. Ms. Millender-McDonald?
    Ms. Millender-McDonald. Mr. Chairman, thank you, and let me 
thank you for bringing this very important issue to this 
Committee. We have been back and forth and have not had a 
chance to really get wrapped into it until just recently.
    Now, what I would like to say, though, is there is a lot of 
subjectivity to this criteria that you are outlining here. And 
especially the area that speaks to satisfactory record of 
integrity and business ethics. And this will all rely on your 
contracting officer to make this determination. Am I correct?
    Ms. Lee. The contracting officer, with their counsel and 
team, yes.
    Ms. Millender-McDonald. All right. Now, first of all, the 
contracting officers, what kind of education do they have?
    Ms. Lee. Certainly, that is varied and different. In fact, 
that is one of my personal initiatives. I would like to see us 
have an affirmative education requirement. We are working with 
the Office of Personnel Management on that.
    Ms. Millender-McDonald. You mean you don't have one?
    Ms. Lee. DOD has a very specific----
    Ms. Millender-McDonald. But, I mean, when you have got to 
put someone in this type of subjective position, you should 
certainly be able to discern whether or not these folks are 
capable of making the decision unbiased. And given that 
criteria, it is inconceivable to me that you would even come 
here with these types of recommendations when you are not 
familiar with, or any one of you, with the contracting 
officers' background and education.
    Ms. Lee. Well, we can certainly give you statistics on 
that. I just can't give you an ``everyone is like this.'' There 
is a broad range of----
    Ms. Millender-McDonald. But there should be a certain 
criteria that needs to be met----
    Ms. Lee. Yes.
    Ms. Millender-McDonald [continuing]. With reference to----
    Ms. Lee. And there is a very formal training program as 
well.
    Ms. Millender-McDonald. And is there an orientation given 
somewhere along this continuum that will help small businesses 
to know that they are going to be under these types of 
subjective criteria--a subjective criteria process?
    Ms. Lee. Yes. SBA really has quite an aggressive outreach 
program that they do deal with small businesses and explain to 
them how to do business with the government. And I think they 
cover these areas----
    Ms. Millender-McDonald. That has nothing to do with, 
though, if they get caught in a tuck, like Mrs. Kelly 
mentioned, where whose responsibility it is to ensure that a 
subcontractor is in compliance, whereby the prime contractor is 
not thrown on a blacklist because he or she was not able to 
clearly get this information from a subcontractor.
    So, there are a lot of things here that we need to look at 
before we put pawprints on this as law. It is entirely too 
ambiguous, and small businesses already have problems with 
trying to clear some of the ambiguity of the law as it is. And 
then you are going to come up with anything--something like 
satisfactory record of integrity. My God, that is absolutely 
open to interpretation by anyone who perhaps might have a 
biased streak in him or her.
    And so this right here becomes extremely problematic for me 
with your proposed changes. So I wanted to put on record that 
before anything happens here, I hope we have the opportunity of 
coming back to talk with you about the comments that have been 
submitted to you and other factors that you will factor in, 
given the comments of the members of this Committee, because it 
is very unclear why we should have this, given the ambiguity of 
the nature of this outline that you have given to us.
    Ms. Lee. I would be happy to work with you and your staff, 
as I will with--have had and will continue to have many 
discussions on this.
    Ms. Millender-McDonald. Mr. Chairman, I regret that I am 
going to have to leave for schedules that we just find to be 
almost impossible to keep. But nonetheless, we have made these 
schedules--because I would be interested in listening to Mr. 
Alford, Ms. Hill Slater, and--is it Schooner--as to your feel 
of this particular proposed set of criteria.
    So if I can ask Mr. Chairman to get a transcript of this 
hearing, because I do want to see what they have to say and 
regret that I will not be here to listen to you.
    Thank you, Mr. Chairman.
    Chairman Talent. We would be more than happy to do that. 
And everybody understands the conflicting schedules of members, 
and let me say that----
    Ms. Millender-McDonald. Thank you, Mr. Chairman.
    Chairman Talent [continuing]. The gentlelady from 
California is punctual in her attendance in this Committee, and 
I appreciate it. She represents her constituents well in doing 
that. I thank you for your questions.
    Ms. Tubbs Jones is next.
    Mrs. Jones. Thank you, Mr. Chairman. I am sighing like this 
because I used to be the Equal Employment Opportunity Officer 
for the Northeast Ohio Regional Sewer District and reviewed 
compliance for EEO issues with the county, with the sewer 
district. And my background is in the law, and so the concepts 
that you are talking about don't sound so strange to me, 
substantial compliance and the like, because those are terms 
that are actually used by the EEOC in much of what they do.
    But I hear the frustration of my colleagues, and probably 
the people that are coming to speak after them, in the fact 
that because it has not been clear in the past--the criteria 
upon which someone is judged for integrity or the like--that 
now when you make it clear what it is you are using to judge 
the integrity, it raises all kinds of flags because there are 
numerous businesses in this country who have been denied 
opportunities to do business with the government.
    And we couldn't clearly state for them why they were denied 
the opportunity--be they black, white, men, women, urban, 
suburban, or whatever. I don't really have any questions much 
different than what my colleagues have already put to you. But 
what I would suggest to you is that in detailing what will be 
the criteria or determiners for how someone does business with 
the government, and in training your compliance officers for 
determining who will do business with the government, that many 
factors need to be taken into consideration. And many people 
need to have the opportunity to comment on the issue.
    I hope I don't sound like I am talking around, but I am 
really saying is these are issues that have always been 
considered but nobody knew you were considering them. And now, 
as you open the box to let them know, you are going to get 
issues. But also, I think that it is the right thing to do to 
let people know upon what you are basing your determination for 
compliance and then letting people comment.
    With regard to the contractor/subcontractor, I think that 
is in any situation. We talk about agency and the law. And if 
you are the prime, you are responsible for the sub. And it 
doesn't only go to these issues; it goes to many, many other 
issues. And it is the law. Well, it is the law. I mean, it is 
the law in any other circumstance, not just in compliance.
    So I would just encourage you to give everybody an 
opportunity to comment and be clear on the basis upon which you 
are making your determination with regard to either having the 
ability to do business or not do business with government.
    Chairman Talent. I thank the gentlelady. I have been 
looking forward to her comments because I wanted to see what 
she thought from a legal standpoint. Let me just ask a couple 
more things before we go to our next panel, and they have been 
waiting very patiently.
    And I won't take much time, I will say to the gentlelady.
    We have aired this issue, and it is pretty clear to me that 
there is an awful lot missing from this proposed regulation. 
What I want to focus on is SBREFA, Small Business Regulatory 
Enforcement Fairness Act, because I have been trying over and 
over again to get agencies to understand that if they will 
really look at that and really try and implement it, that 
avoids a lot of these problems.
    So you certify that this would not have a substantial 
impact on a significant number of small businesses. But the 
truth is, as we have seen here, Ms. Lee, your agency isn't sure 
why you are doing this, and you are not even sure what you are 
doing. And there is no way you could have been certain it 
wouldn't have an impact on a substantial number of small 
businesses.
    Isn't that correct?
    Ms. Lee. Mr. Talent, we made the assumption that small 
businesses are in compliance with the law and that this would 
not change their compliance requirements. It would just make it 
clearer to them that we were looking at those requirements, and 
that we did consider them.
    Chairman Talent. Okay. And I am trying to grant you the 
benefit of good faith because we have had dealings with you and 
your agency before, and both under you and Mr. Kelman. I think 
you act that way.
    But you can't stand here and say that this is going to vest 
in procurement officers or their teams. The ability to declare 
somebody not responsible, based on at least more than one civil 
violation--which may not even have had to have been adjudicated 
a civil violation--and then it is not going to change the law. 
I mean, it is going to change the law.
    Ms. Lee. It certainly is going to change the process and 
highlight this to the contracting officers. They will pay more 
attention. Absolutely.
    Chairman Talent. If what you want to say is the law always 
should have been interpreted this way, okay, fine. It hasn't 
been interpreted that way. That was my first question to you. 
If I asked Ms. Spector this question, she would tell me, ``No, 
we do not, by and large''--well, tell me. Do you go out and--
[laughter]--as an agency declare people non-responsible for 
civil violations that aren't related to the contract that they 
are bidding for?
    Ms. Spector.  Well, we do look at things like embezzlement 
or things that are----
    Chairman Talent. Right.
    Ms. Spector.  Have we looked routinely at this broad array? 
I would say routinely we do not, except perhaps in egregious 
situations.
    Chairman Talent. Now maybe they should. And if you could 
come before the Committee and say, ``Look, we found after doing 
an audit that there were these 15 people who got these big 
contracts,'' and they had been guilty of violations of Title 
VII, or violations of the tax laws or something--a number of 
them were intentional--I don't want those people doing business 
with the government either.
    But we don't know that that has happened, do we? I mean, do 
we know that we have given contracts to people who committed a 
lot of intentional violations of these laws, we don't know that 
that has happened. I would be surprised that that has happened, 
and Mr. Kelman tolerated it for years. I mean, I don't think 
that that has happened. Certainly, we don't know it has 
happened, do we?
    Ms. Lee. No, we do not.
    Chairman Talent. So we may suspect that is out there, and 
we don't really know the extent of the problem if there is one. 
We do know we are vesting these contracting officers an awful 
lot of authority to go further than they now go. That must have 
an impact on the three-quarters of the people who get contracts 
who are small businesses, mustn't it not?
    Ms. Lee. Like I said, we didn't look at it that way. We did 
offer and ask for comments on that specific activity, and 
certainly we will look at those. And I feel like I have an 
action on that from this Committee.
    Chairman Talent. Yes, and I understand. What I want to get 
home to you is had you done the regulatory flexibility 
analysis, which is an analysis of the actual impact and then 
other ways of accomplishing what you want to accomplish, that 
is part of what they are supposed to be able to comment on.
    And this is, by the way, the law. This is not a suggestion 
from the Congress. It is the law. It subjects this whole 
process to a tremendous legal flaw. And in my opinion, I mean, 
if you went ahead with this and did promulgate a final rule, I 
think the court would throw it out overnight.
    And by the way, if you think about it, if that is true, Ms. 
Lee, it makes you and your agency a violator of the law. You 
understand. So, I mean, and I have seen a substantial pattern 
of noncompliance with SBREFA throughout a lot of federal 
agencies. I don't suspect you have a lack of integrity here. 
Okay? I just know you are not used to this. Had you done that, 
you would have, I think, explored a lot of these issues in the 
course of doing that regulatory flexibility analysis, and we 
wouldn't have had to be here telling you about these things. 
You see?
    So what you may want to--what I want to suggest you do is 
consider pulling this back, doing that analysis, really looking 
at the impacts this is going to have on small business, doing 
that analysis. That is going to cause you, I think, to amend 
your proposed rule, and then resubmit it for comment. And then 
I think you will begin to focus on the things that we all agree 
contractors ought not to do.
    I mean, I have no problem with saying if there is somebody 
out there who is recklessly or intentionally violating some set 
of federal laws over and over again, I want them to change 
their management or something before they come to do----
    Ms. Lee.  Right.
    Chairman Talent. So I agree with you on that. But I am 
really seriously concerned. And this is the other point on it. 
Small businesses are particularly concerned because they don't 
have batteries of lawyers and accountants, and they could get 
audited a couple of times by the IRS--I mean, I know people in 
this situation.
    Right now, we are having a big fight with the IRS about 
whether they are going to change their cash accrual method with 
regard to contracts. And the IRS has taken the position that if 
you are a painting contractor or something, the paint that you 
keep on hand to paint people's houses is an inventory. And, 
therefore, you have to use the accrual method of figuring out 
how much money you owe. And by the way, they are going to go 
back in time.
    Now, this is a huge controversy. They are probably wrong in 
doing it. But you could get acouple of contractors who settle a 
couple of those things and have some violations, and then they can't go 
paint houses at the Department of Defense anymore. And these are the 
small business people.
    And if I may say, in particular, probably 
disproportionately the newer ones who don't have a lot of 
government contract experience--which is disproportionately the 
women-owned and minority-owned small businesses. And that is 
why they are here complaining.
    So I know I am the fifth person to lecture to you. I don't 
like to do that. But this should not have come here in this 
condition before us. So I hope that--yes, I hope that, as 
others have said, that we get this process into a more 
constructive pattern. Are we in agreement on that, that we want 
to do that?
    Ms. Lee. Yes, I certainly have an action on this one.
    Chairman Talent. Okay. Good.
    And Mrs. Kelly wanted to ask one more question, and I will 
recognize her and then go to the next panel.
    Mrs. Kelly.  Thank you, Mr. Chairman.
    I just would like to go to Ms. Spector for a minute. I 
really appreciate your insightful testimony, but I would like 
your opinion of this rule. Do you think that this proposed 
rule, if it is implemented, is going to harm our efforts to try 
to make the government procurement process more efficient?
    Ms. Spector. This rule is one of many that we implement via 
the FAR that is considered by the administration to be aimed at 
a higher good than efficiency of the contracting process.
    The more things we must do and look at, in performing 
contracts and responsibility determinations, the more time and 
personnel it will take. Now, there are many higher goods that 
we implement via our contracts. If the administration 
determines that this is something we do need to do to a greater 
extent than we have already been doing it, we will certainly do 
that and implement it.
    Mrs. Kelly. Thank you, Ms. Spector.
    I just wanted to say to Ms. Lee, you hear Ms. Spector 
raising the issue of it costing more time and money. Have you 
thought about the cost of this rule to the agencies and in 
terms of efficiencies? You don't have to answer that now. But 
when you come back, I would like an answer.
    Thank you, Mr. Chairman.
    Mrs. Jones. Mr. Chairman, I would like to reclaim some of 
my time because I don't think----
    Chairman Talent. We recognize the gentlelady.
    Mrs. Jones.  Thank you.
    I want to ask a question. Currently, someone applies for a 
contract, and the contract--for purposes of determining a 
contractor's eligibility or compliance, you could consider 
their integrity and ethics, right?
    Ms. Lee. Yes.
    Mrs. Jones. But right now, no one really understood what 
you were included and what integrity and ethics were. Some 
people understood, but some people are saying to you, ``Well, 
just what does integrity and ethics mean,'' right?
    Ms. Lee. Yes.
    Mrs. Jones. Or am I wrong? Am I----
    Ms. Lee. You are correct. That is what we are trying to do 
is put this parenthetical below----
    Mrs. Jones. There is a guy that I am hoping is going to 
testify because he is back there shaking his head, and he is 
right in front of my eye, so eventually I will ask him the same 
question. But, in fact, people did not understand what 
integrity and ethics meant. And so for purposes of trying to be 
a little clearer on what integrity and ethics meant, you 
decided that you would set forth compliance with tax, labor, 
employment, right?
    Ms. Lee. That was certainly our intent.
    Mrs. Jones. Okay. Thank you. That is all I was asking.
    Chairman Talent. Okay. I thank these witnesses, and we will 
continue following this issue. And, Mr. Ballentine, if you have 
suggestions for streamlining the COC process, we are in the 
middle of reauthorizing and we would be happy to talk with you. 
Ms. Velazquez took a particular interest in that, so----
    Mr. Ballentine. Thank you, Mr. Chairman.
    Chairman Talent [continuing]. Now would be the time to talk 
with staff and let us know what your interests are along those 
lines. Thank you.
    Maybe we can speed up a little bit some of that 
streamlining you are trying to do.
    Now I would ask the second panel to come forward. Thank you 
for your patience, and, indeed, for being willing to be here. 
And we will begin with the testimony right away of Mr. Steven 
Schooner, Esquire, who is a professor of law at George 
Washington University Law School.
    Mr. Schooner? And I am going to skip the extensive 
achievements of all of these witnesses here. We will just 
stipulate that they are all people of great achievements and 
excellencies in their fields.
    Mr. Schooner.

STATEMENT OF STEVEN SCHOONER, ESQUIRE, PROFESSOR OF LAW, GEORGE 
                WASHINGTON UNIVERSITY LAW SCHOOL

    Mr. Schooner. Thank you, Mr. Chairman. We appreciate the 
opportunity to appear for you today, and I will work on the 
assumption that my written comments will become part of the 
record. I will try to move through the five questions that you 
posed as briefly as possible.
    First, you had asked with regard to the current state of 
the law, and I think there are a few brief points that are 
important. First, as this Committee understands, the statutory 
requirement is only that contracts be awarded to responsible 
bidders, offerors, or sources, and as a result the contracting 
officer, by regulation, must assess each contractor who is 
potentially to receive an award, their abilities and resources, 
to determine whether they can complete a contract on time and 
in a satisfactory manner.
    But one of the concerns that was referred to earlier is 
that a firm's repeated failure to be found non-responsible may, 
at a certain point, suggest a de facto debarment. And that will 
become extremely important when we talk about the nexus issue 
in just a moment.
    It is also very important to keep in mind, because a number 
of people used the term ``discretion'' earlier, that the 
contracting officer has significant, arguably almost unfettered 
discretion in determining responsibility.
    But if we look at the law, not so much in terms of what the 
regulations say but what the courts have decided, it appears 
that historically if a contracting officer is to deny a 
contractor the opportunity for a contract, to find them non-
responsible, they are entitled to a higher standard of due 
process if it deals specifically with integrity. And it appears 
here what the regulation isprimarily speaking to is issues 
relating to contractor integrity.
    The second question you asked was with regard----
    Chairman Talent. Is that a constitutional holding that they 
have a higher--that the right to due process is greater in that 
instance? Is that constitutional or statutory? It is not clear.
    Mr. Schooner. It is in the courts. I think you could make 
an argument that it derives from the Constitution because you 
are being deprived the opportunity, your liberty interests, and 
the like. But this is not something that we find in the 
regulations per se.
    The second question that you asked is with regard to the 
need for a nexus between the responsibility determination and 
the goods or services that the government is actually buying. 
Now, if we look at what the preaward survey is intended to do, 
the goal there is to disclose whether this contractor will 
place the government at risk of eventual default, late 
delivery, poor quality, or cost overruns.
    And so, therefore, we generally do see a very specific 
nexus there. And you have not heard a lot of talking today, but 
you have seen in a lot of the literature this loose use of the 
term ``blacklisting.'' And it seems to me that if that term has 
any applicability here, it is most applicable if the government 
is unable to articulate a nexus between the contractor's 
likelihood of providing the government with customer 
satisfaction on the one hand and the reason upon which the 
contracting officer could use to deny them the opportunity to 
perform that contract.
    And it seems to me that if the government cannot, as a 
matter of regulation, establish that nexus then the regulation 
has failed.
    The third question you asked was whether, in fact, this is 
an extension of already-existing law or whether it breaks new 
ground. As you have heard, a fair amount of discussion earlier 
and I think the FAR drafters have not been persuasive in 
establishing this as a simple extension.
    And I do agree with you, as I indicated in my written 
comments, that this should have been deemed a significant 
regulatory action pursuant to the Executive Order. It should 
have been deemed a major rule. And, clearly, there is a need 
for regulatory flexibility analysis.
    If we simply look at the numbers under the Federal 
Procurement Data System, basically, we are talking in the 
neighborhood of $200 billion a year being awarded in Federal 
Government contracts. Small businesses are taking approximately 
23 percent of those dollars. One-twentieth of one percent of 
those gets us over the $100 million threshold, and I think that 
basically makes the case thereby itself.
    So I think that overall it is not very persuasive that this 
is basically clarifying coverage and adding examples. This is a 
new significant rule.
    The fourth question you asked was how the rule would affect 
government procurement law. And I think the main issue there is 
that it shifts the underlying focus of the contracting 
officer's responsibility determination from a threshold 
examination of a contractor's resources and abilities and 
willingness to perform a contract for one purpose and one 
purpose only--to ensure that a chosen contractor exhibits what 
they have, what they need, what they should have, to perform 
the contract, and whether they have sufficient integrity.
    And it shifts it from that to basically demanding 
prospective government contractors a broader and, in my 
opinion, higher standard of corporate ethics, integrity, and 
compliance, with a host of laws, regulations, and norms.
    And I think that the risk therein is important because, 
basically, we are working with this amorphous concept of a 
satisfactory record of integrity and business ethics defined 
solely by the use of examples and juxtaposing that with an 
absence of clear thresholds or standards, which leads me to the 
fifth question, which dealt with persuasive evidence.
    Your fifth question with regard to the concept of 
persuasive evidence--as you recognize, Mr. Chairman, this is 
not a commonly recognized evidentiary standard, threshold, or 
burden. And it is unequivocally vague. The obvious concern here 
is that the only time we see persuasive evidence is in the 
absence of a final adjudication by a competent authority which 
would, of course, raise your antenna.
    The confusion is unnecessary, and it will result in non-
productive and inefficient litigation. It seems to me, as a 
matter of law, you can take the phrase and interpret it in one 
of two ways. It is susceptible to two basic interpretations. 
One is that what the term ``persuasive evidence'' should mean 
is that you need so much evidence that the contracting officer 
is literally bowled over by the tsunami of evidence, indicating 
that we have a bad actor.
    In that case, the term should be replaced with the clear 
and convincing standard which the legal community is familiar 
with. In the alternative, it suggests an inappropriately low 
standard, something potentially even below a preponderance 
standard, which is fundamentally ill-suited to denying a 
contractor an opportunity to perform a government contract. So 
in my opinion, the term ``persuasive evidence'' should be 
replaced.
    I would also like to echo Congressman Davis' concerns 
earlier that the proposal is fundamentally inconsistent with a 
lot of the goals and, more importantly, the achievements of 
acquisition reform and acquisition streamlining that we have 
experienced in the 1990s.
    Mr. Chairman, that concludes my statement. But I would like 
to permit my colleague, Mr. Kovacic, Bill Kovacic, to address a 
couple of related points. And, of course, we would both be 
pleased to answer any questions you may have.
    [Mr. Schooner's statement may be found in the appendix.]
    Chairman Talent. Sure. Our next witness is William Kovacic, 
Esquire, also a professor of law at George Washington 
University Law School.

STATEMENT OF WILLIAM KOVACIC, ESQUIRE, PROFESSOR OF LAW, GEORGE 
                WASHINGTON UNIVERSITY LAW SCHOOL

    Mr. Kovacic. Thank you, Mr. Chairman.
    I would like to simply underscore two questions that have 
been raised already by members of the Committee in the first 
panel session. The first is what strikes me in reading the 
proposed notice and the proposed rule itself is there is 
absolutely no discussion of the empirical basis for this change 
in the law.
    The rule mentions no accumulated experience that would show 
that there is a link between bad procurement outcomes and the 
existing FAR provision. I think the drafters should be pressed 
to show in what respects the existing responsibility criteria 
have not only allowed bad actors to routinely play in the 
process but also to provide goods and services in ways that 
hurt taxpayers.
    That is absolutely no proof in the record--and I noticed 
during the discussions earlier today, when members of the 
Committee pressed the witnesses on these points, that there 
were no direct answers to those questions. In short, a basic 
regulatory change should not be adopted without that type of 
empirical basis.
    My second and final point is that I think the rule, as 
drafted, does create extraordinary opportunities for injecting 
uncertainty into the process. And what is the cost of 
uncertainty? Greater cost and compliance for affected business 
people and for the agencies implementing thelaws themselves.
    Let me focus only on the term ``substantial 
noncompliance,'' which is the key ingredient of the 
responsibility feature.
    One asks, ``Which jurisdiction's laws will apply? Is it 
simply federal law? What about state law? What about local 
laws?'' To the extent that all of these, in some sense, deal 
with integrity, and a failure to abide by the law might be a 
benchmark of poor integrity. I suspect we ought to be 
interested in all of them.
    What types of laws should be covered? Why doesn't the rule 
mention, for example, securities law? Export controls? Campaign 
finance? That is, why shouldn't we go through the U.S. Code and 
identify all laws to the extent that we equate a failure to 
abide by the law as an indication of poor integrity?
    Last, which events trigger noncompliance? Is it the mere 
accusation that the law has been broken? Is it the mere 
commencement of an investigation? Is it the mere filing of a 
complaint? Is it a settlement of an existing complaint? Or is 
it an adjudicated violation found by either an administrative 
or judicial tribunal?
    Is it a complaint initiated by the government as plaintiff? 
Or for most of the laws we are talking about, there are private 
rights of action. Is every instance in which a private party 
initiatives the private right of action a safeguard that 
Congress created to prevent default by federal enforcement 
officials? Or are all private rights of action exercised 
through complaints also triggering events?
    In short, when I read the rule and listen to the comments 
this morning, I have the image of a contracting officer who is 
going to be compelled in order to comply fully with the spirit 
of this measure, to do a comprehensive audit of the firm's 
recent legal history, that identifies all violations, 
identifies all complaints, potentially all accusations, all 
settlements, and develops from that a composite picture of what 
kind of legal citizen the firm has been.
    If they are not going to do this, what is the point of this 
measure? The danger to some is that this means greater costs. 
And if there has been any major theme of modern procurement 
reform in this decade, it is that a failure to take account of 
those costs can lead to an increase in barriers to entry into 
the market. It is the lack of firms coming into the market and 
competing aggressively that ultimately is the biggest threat to 
taxpayer interest.
    This measure at best is an early first draft and would 
require considerable refinement in order to be suitable for 
adoption, if at all.
    Thank you.
    Chairman Talent. Thank you, Mr. Kovacic.
    I look at it from the standpoint--and I think it is quite 
appropriate to look at it from the standpoint of the taxpayer 
or the procurement officer. I am looking at it from the 
standpoint of the average small business person who is 
considering whether to bid and has yet another series of 
uncertainties, or perhaps may confront an audit of everything 
like this, and it might deter them from bidding in the first 
place.
    We have witnesses here who can testify on that issue, and 
two witnesses with whom the Committee is very familiar and to 
whom the Committee is grateful for their input over the years 
and their advocacy on behalf of, on the one hand, the Black 
Chamber, and on the other hand NAWBO.
    So our first witness here is Mr. Harry C. Alford, who is 
the President of the National Black Chamber of Commerce. Harry, 
thank you for coming.

STATEMENT OF HARRY C. ALFORD, PRESIDENT, NATIONAL BLACK CHAMBER 
                          OF COMMERCE

    Mr. Alford. Thank you very much, Mr. Chairman, honorable 
members of the Committee.
    Thank you for giving the National Black Chamber of Commerce 
the opportunity voice our opinion on the important topic of 
rule changes to Part 9 of the Federal Acquisition Regulation, 
a.k.a. blacklisting.
    As we understand it, under the proposed changes a 
contracting officer must consider a contractor's overall 
compliance with a wide variety of federal laws unrelated to 
government procurement, including, but not limited to, tax, 
environmental, worker safety, antitrust, and consumer 
protection.
    A contracting officer that is found in substantial 
compliance with any of these laws, or similar federal legal 
requirements, would be required to find the prospective 
contractor non-responsible. As we understand it, allegations 
can be filed against an employee without their knowledge and 
the ability for them to refute or appeal the contracting 
officer's initial decision to blacklist the contractor.
    This highly subjective responsibility determination, based 
on the vague nature of the proposed standards, would 
effectively deny contractors due process by making any bid 
protest to the determination impractical, if not impossible.
    The terms ``integrity'' and ``business ethics'' seem to 
come into play in this matter. These terms are purely 
subjective and are in the eyes of the beholder. What we have 
here is the possibility of allegation and subjectivity 
replacing fact and objective measurement in the future of a 
company doing business with the Federal Government.
    Certainly, we believe that anyone doing business with the 
Federal Government should abide by the existing laws and 
perform due diligence. We also believe that the FAR provides 
such guidelines and ensures that business is done with a 
standard of high integrity and business ethics. The proposed 
changes open the door to more abuse and increase the chances 
for successful ill-advised actions and manipulation of 
contractual outcomes.
    In essence, it may allow reckless behavior by the 
contracting officer and releases him or her from any control or 
non-biased judgment. There is already enough abuse in the 
system. We use the term ``constructive debarment,'' which is a 
process that contracting officers use to prevent certain 
contractors, for whatever reason, from doing business with the 
Federal Government.
    If the contracting officer is adverse to the involvement of 
a contractor, protests are raised and eventual COCs--
Certificates of Competency--are processed in the attempt to 
block the contractor or to make his or her efforts in doing 
business with the Federal Government very costly and 
excruciating.
    There are contracting officers who use the current system 
to block contractors from doing legal and ethical business. The 
proposed changes could turn the current road of abuse into a 
freeway of abuse. We say enough of the abuse. We will contest 
the protest and eventually will through the COC process.
    The proposed changes would allow a permanent ban on 
participating in the federal procurement process without 
recourse. We have enough problems with bias in the procurement 
process, but at least there is still recourse. The proposed 
changes amount to a silver bullet to the business, regardless 
of guilt or innocence.
    There is also a question of a double standard. While it 
would be simple to evoke such penalties on small businesses, 
how could punishment be met on larger contractors? For example, 
McDonnell-Douglas, now owned by Boeing, has recently been 
indicted. Should this giant be permanently barred from federal 
procurement? Of course not. Such a debarment would negatively 
affect our national security.
    What about the recently convicted Archer Midland Daniels, 
ADM? Should they now be barred forever? We doubt if this would 
become a fact?
    Chairman Talent. Harry, will you suspend for a minute? You 
know, you make a really good point. The only ones they could 
afford to debar would be the smaller businesses because they 
don't--McDonnell-Douglas, whom I am pleased to represent, by 
the way----
    Mr. Alford. Yes, sir. [Laughter.]
    Chairman Talent. And I am certain that they are innocent of 
these charges.
    Mr. Alford. I am sure, too.
    Chairman Talent. But in any event, they make the tactical 
aircraft for the Navy.
    Mr. Alford. That is right.
    Chairman Talent. If you debar them, the Navy has no tac 
air.
    Mr. Alford. Would we go to Brazil?
    Chairman Talent. That is right. On the other hand, if you 
were doing business with them, your contract is going to be 
small enough that, well, somebody else can pick that up and do 
it. I hadn't even thought of that aspect of it.
    Mr. Alford. They were gone.
    The small businesses cannot show such indispensability. 
Also, other giant mainstays as IBM, AT&T, Lockheed, etcetera, 
will also have the luxury of the exemption from effective 
expulsion per national security as opposed to small businesses.
    A recent example of abuse of the present system that would 
be accelerated by the proposed changes can be found in 
Indianapolis. A member of ours was awarded a HUD procurement 
and elected to comply with Section 3 of the HUD Act, which 
allows a contractor to contract up to 30 percent HUD-funded 
jobs to people living in public housing and under the poverty 
level.
    This perfect welfare-to-work law has been on the books 
since 1968, but it meets strong resistance from labor unions. 
Unfortunately, because of the resistance, only eight cities in 
this nation abide by this law.
    Our member was very successful to the disdain of local 
unions, and put many people into the workforce for the first 
time. Meddling from union activists led to our member being 
officially cited by HUD for employing too many unskilled 
workers. That was all right, in that we could take the bad 
publicity for being cited, and challenge the unfair 
accusations. Under the proposed changes, however, this 
admirable contractor would face debarment from federal work 
forever.
    Again, we say that the proposed changes allow too much 
judgment to the eyes of the beholder. The term ``integrity and 
business ethics'' are too debatable and too indefinite. Any 
fifth grader can reasonably debate that our current Commander 
in Chief is void of integrity and business ethics.
    On another front, our admiration and former Senator 
Honorable Carolyn Mosley-Braun is having her ambassador 
appointment being held up because of an applicable Committee 
member's attack on her ethics. Subjectivity has no place here, 
and certainly not in the federal procurement.
    We see the changes promoting union activity, which all 
correlation indicates would be detrimental to the utilization 
of small businesses. Also, such activity would have great 
negative affect on the utilization of minority businesses, and, 
even more so, minority workers.
    Thank you very much for this opportunity. We hope the 
current legislation is vigorously enforced and the proposed 
changes quashed from further progress.
    [Mr. Alford's statement may be found in the appendix.]
    Chairman Talent. Thank you, Harry, for your comments.
    And our next witness is Phyllis Hill Slater, of Hill 
Slater, Inc., who is testifying on behalf of the National 
Association of Women Business Owners.
    Phyllis, again, we are grateful to you for taking time out 
to come down here and testify to us. Thank you.

 STATEMENT OF PHYLLIS HILL SLATER, HILL SLATER, INC., NATIONAL 
              ASSOCIATION OF WOMEN BUSINESS OWNERS

    Ms. Slater. Thank you.
    It is no longer good morning but good afternoon to all of 
the members of the Committee. I thank you for this opportunity 
to appear before you today----
    Chairman Talent. Make sure the mike is close to you, 
Phyllis, so we can hear you.
    Ms. Slater [continuing]. To discuss the proposed rule to 
expand the scope of the responsibility determination of 
contracting officers.
    My name is Phyllis Hill Slater, and I am President of Hill 
Slater, Inc., an engineering and architectural firm located in 
Great Neck, New York. I am also past president of the National 
Association of Women Business Owners, NAWBO, the only 
nationwide organization representing the interests of women-
owned businesses. NAWBO currently has nearly 80 chapters across 
the U.S., representing 7,000 members, many of which are 
classified as small business.
    This year we are celebrating our 25th anniversary. The 
inclusion of women- and minority-owned businesses in the 
federal procurement process has been a major focus of our 
organization since its inception. As of this year, there are a 
total of 9.1 million women business owners in the U.S., 
generated $3.6 trillion in sales. This group employs over 27.5 
million people.
    In 1997, however, only 5,622 women-owned businesses were 
involved in federal procurement contract actions, amounting to 
$3.3 billion or 2.1 percent of contract awards--a figure that 
is still far--too far below the five percent goal established 
by the Federal Acquisition Streamlining Act of 1994.
    I will speak more about this goal and how we might achieve 
success at the conclusion of my remarks here today.
    It is NAWBO's position that the proposed rule to expand the 
scope of the responsibility determination of contracting 
officers to consider compliance of federal, statutory, and 
regulatory requirements, constitutes a substantial change in 
government procurement policy and could impose a great burden 
on women-owned businesses.
    We believe this proposed rule would, number one, increase 
the cost of doing business with the Federal Government. It is 
our concern that small businesses may be required to provide 
assurances and evidence of compliance and responsibility on a 
broad range of federal policy issues that may not pertain to 
their business at all.
    Many small businesses do not have the financial or legal 
resources to provide that evidence.Not only would proof of 
compliance cost more than most companies could afford, the time 
necessary to research, confirm, document, and whatever else may be 
required would be an unfair burden on small business.
    In addition, the amount of paperwork required to document 
total responsibility and compliance would be enormous and in 
direct conflict with NAWBO's position on the Federal Paperwork 
Reduction Act. Not only would small business be affected, we 
believe the proposed regulation would impose a tremendously 
increased burden on the Small Business Administration to 
provide Certificates of Competency for small businesses for 
every federal regulation.
    Number two, women-owned businesses are frequently included 
in the proposals submitted by prime contractors to help meet 
the prime's need to include women and minority firms. However, 
the women-owned company is often eliminated from the 
procurement once the contract is let. This is a whole other 
story.
    This proposed rule could create an environment where women-
owned firms would be required by prime contractors to provide 
proof of responsibility or compliance, that they might even be 
able to afford, but could also require disclosure of 
proprietary information that would, in fact, diminish the 
firm's competitiveness in the marketplace.
    Number three, the proposed rule, we believe, expands the 
capability of federal contracting offices to ultimately decide, 
capriciously and arbitrarily, the future of small business. I 
want to read to you a quote from a recent testimony given by 
Karen Hastie Williams, Esquire, who was with the Office of 
Federal Procurement Policy during the Carter administration.
    ``The proposed regulations are inconsistent and 
affirmatively harmful to the procurement reform trends of the 
last decade.''
    In conclusion, I want to emphasize that we believe the 
interests of women-owned businesses and the Federal Government 
would be much better served if contract offices and procurement 
officials were held accountable for their role in increasing 
the access to procurement opportunities for women.
    We would like more emphasis on concrete solutions to 
meeting the five percent goal, rather than devising new layers 
of costly bureaucratic procedures to further discourage women-
owned businesses from participating in government contracting.
    Thank you.
    [Ms. Slater's statement may be found in the appendix.]
    Chairman Talent. Thank you, Phyllis. And, I should have 
said this to Ms. Lee when she was here. There does seem to be a 
trend on when they do the streamlining, why that tends to hurt 
small business. And then when they add new requirements, that 
tends to hurt small business as well.
    I haven't been as big a fan of the streamlining as some 
other people here. That, as you said, Phyllis, is another 
issue.
    I am going to ask one question and then defer to Ms. Tubbs 
Jones for her questions. And let me play a little bit--I don't 
want to say the devil's advocate--but I see a clue of what they 
are aiming at here, assuming that they are aiming at what it 
appears they are aiming at. There is no ulterior agenda here. 
And I think I agree with that, and I want you to tell me 
whether I am right or wrong in agreeing with it.
    I don't have a problem. In fact, I kind of want the 
government, in determining the integrity of the people it is 
doing business with, to be a little broader than my 
understanding is that they have been today. So, in other words, 
just--right now it seems that they say, ``Look, if you are not 
an embezzler, or you haven't made a false statement on the bid, 
then we are only going to look at any violations that are in 
the context of this contract that we are awarding.'' So we 
don't care if you have been a felon in a tax case or something.
    First of all, is that true? This is just for the 
professors. And to what extent do they look beyond those kind 
of narrow considerations? And would you have a problem with a 
narrowly written rule that said, ``Look, if you have a pattern 
of adjudicated violations of a serious and substantial nature 
in certain areas, we are going to declare you non-
responsible''? Tell me what you think about that.
    Of course, the other two witnesses can comment if they 
want.
    Mr. Schooner. Mr. Chairman, first let me say that in the 
discussion earlier and the questions that went to Ms. Lee and 
Ms. Spector, I believe that given the breadth of the questions 
they may not have been as accurate in their responses in the 
context that you actually are referring to.
    First, when we talk about that absence or the concern with 
regard to business integrity and ethics, it is not just that 
you have to have been convicted of a fraud related to the bid. 
The nexus that we are looking for is generally related business 
ethics.
    So, for example, if you have a history of basically 
business-related ethical-type problems, that is enough. And 
those are the kind of things that come up all the time. So, for 
example, particularly with concern to the small business 
community, there are former federal contractors in the federal 
penitentiary today who had improperly certified their small 
business size status.
    There are other firms who had had numerous problems with 
regard to be they defective products, product substitution, 
false claims, improper certifications, representations. The 
question generally, though, is: does this regulation bring into 
the mix relevant issues of business ethics?
    And I think the point that concerns me--and it also is the 
point that my colleague Professor Kovacic spoke to--is given 
the small number of examples they gave, they haven't given us a 
very good box to work with, and they haven't demonstrated a 
nexus that those actual items or laws or norms or regulations 
are the kind of things we need to focus on in determining who 
is a proper business partner for the government.
    Chairman Talent. Okay. Well, let me throw the eggs in the 
fire. I am basically in agreement with what you all have been 
saying. But let us suppose somebody applied for a contract, let 
us say with the Department of Defense. And they had been 
adjudicated and maybe in civil actions, over a period of years, 
of a number, a pattern of violations, let us say, of Title VII.
    So they were just found to have been--they had a policy of 
just saying, ``Well, I don't think there are a lot of these 
firms out there, but there are some. We just don't like hiring 
women. And we have got this old boy network, and we are not 
comfortable with women. We don't think they can act 
professionally, and we don't hire them.''
    And there is a lot of adjudicated civil violations of that. 
I don't have a problem with the government saying, ``You know, 
we would really--if you are going to be that flagrant in terms 
of your violation of an important public policy, we don't want 
to do business with you.''
    And I talked to Ms. Lee afterwards, and she said, ``Well, 
yeah, but they may be able to remedy that by getting rid of the 
HR vice president who was in charge of that policy and getting 
somebody new,'' and so on. We can do that, can't we, without 
opening up all of these uncertainties in these other areas?
    Mr. Schooner. I think that the other blurring that took 
place in the questions going back andforth is there a 
distinction today between individual responsibility determinations and 
what leads to suspensions and debarments. Repeated violations, as you 
indicate, in which we have final adjudications that demonstrate 
problems are the kind of things that would lead a contractor to 
eventually be suspended or debarred.
    The concern here is that with no nexus to how we perform or 
whether you are actually a good citizen, I believe was the term 
used earlier, you may have a number of allegations where it has 
been suggested that you have problems, but they haven't reached 
the final adjudications.
    I suggest to you, under the regulatory and statutory scheme 
today any contractor who has repeatedly been nailed in final 
adjudications by competent authorities, they will show up on 
the debarred and suspended list today.
    Chairman Talent. Today. Is that your feeling, Mr. Kovacic?
    Mr. Kovacic. I agree, and I think that the circumstance 
that you described before, Mr. Chairman, in fact, gets picked 
up today in existing practice. And the concern that I would 
have with the measure as presented now is that it sweeps in a 
host of activities that fall well short of that adjudicated 
violation by an administrative authority or a judicial 
authority, that it picks up all kinds of events that aren't 
necessarily good proxies for a lack of integrity.
    Chairman Talent. Yes. And see, I agree very much with what 
Harry said, and I think Phyllis was saying also. And you all 
may want to comment on this. I believe that there is, in a lot 
of agencies, an established network, and they just typically 
give the contracts to the same set of people. And they resist 
anybody breaking into that.
    Now, whether that network exists because of just that is 
the way they have always done it, or whether it is just because 
of some bias that is a little bit less defensible, or both, I 
think it does exist in a lot of agencies. And this really would 
be, wouldn't it, Harry, another excuse for them to use in 
keeping out the people that they don't want to let in for other 
reasons?
    Mr. Alford. Sir, let me first say that the National Black 
Chamber of Commerce has a very good relationship with Boeing 
and with Texaco. They have had some serious Title VII problems. 
Still, we stand by them, and they have taken care of their 
Title VII problems at great expense.
    There is one member of ours--Pyrocap--that is a fire 
suppressant, trying to sell to the Department of Interior for 
use in forests. The career path of buyers in the Department of 
Interior is that they retire and then go to work for Monsanto, 
the chief competitor of Pyrocap. Even though they are superior 
in tests and lower in price, Pyrocap cannot sell to the 
Department. Guess why? It is there. So this would be another 
reason that it could find out where Pyrocap did not cross a T 
or dot an I. Get rid of them.
    Chairman Talent. Yes. Monsanto is another fine company 
headquartered in my district. [Laughter.]
    But, Harry, I don't know if you are doing this 
deliberately, but--[laughter]--the point is very well taken. I 
am on the Armed Services Committee, and I have seen this--when 
they leave the service and then they retire and they become a 
consultant for, and then the company they become a consultant 
for gets a lot of the business. I am not even saying that is 
necessarily wrong.
    But the problem that--what I really want to drive home to 
him, the way I think your testimony has done, is that she is 
not going to be supervising each one of these contract awards. 
They are going to be made by people who have complex sets of 
reasons for doing what they are going to do. And it is fine to 
say, ``Oh, yes, we are just going to root out all of these bad 
actors,'' but you can also use it to say, ``Oh, we really 
question that person's ethnics.''
    One of the things I really like about small business, small 
business is a way--one of the few ways left for people who 
maybe have had some problems in their background but have that 
old entrepreneurial spirit to turn things around and get their 
lives going. But they have got a few things in their background 
that you could use if you wanted to in denying them contracts.
    Mr. Alford. Sure.
    Chairman Talent. Do you know what I mean? I mean, what else 
are they going to do? If you have got some problems in your 
background, maybe a suspended sentence for something--when you 
were a kid, for drug use or you went joyriding with a car, you 
are not going to get into MIT and get a Ph.D. Do you know what 
I mean?
    But you can start a small business and become successful, 
and then apply to the government. And all of a sudden, you 
don't have the integrity now to do the contract. And I just 
don't think they are sensitive enough to the fact that that is 
going to happen out there. Or if the government doesn't do it, 
the prime uses it as the excuse for never using the woman 
contractor that they listed in order to get the contract in the 
first place.
    Mr. Alford. One of our biggest fan clubs are people who are 
incarcerated, and we get letters daily from various 
correctional facilities, people saying, ``I am going to get 
out, and the only thing I can do with my life is become an 
entrepreneur. I can't find a job. Help me become an 
entrepreneur.'' We are developing a division for ex-offenders.
    Chairman Talent. Yes. Phyllis, please, go ahead.
    Ms. Slater. Yes. I just wanted to--Deidre Lee kept talking 
about the fact that she is going to have this hearing; she is 
waiting for the comments. I would like--I don't know whether it 
is possible or not, but I would like the testimony here today, 
and all of the comments made today, be made part of the 
comments for her hearing because I would hate for any of them 
not to get on part of the record. I don't know if that is 
possible.
    Chairman Talent. That is a good suggestion. I was going to 
talk to Ms. Velazquez about trying to submit a joint letter 
with some comments from members of the Committee who wish to 
sign on about our concerns in this regard. I think she got the 
message. I want to work with her on it.
    And as I said, I think there is some room--a real desire to 
clarify the existing system, which is certainly not a model of 
clarity, is probably a good idea. But I don't know when she has 
gone too far.
    Mrs. Tubbs Jones, I took longer than I wanted to. I want to 
recognize you.
    Mrs. Jones. Thank you, Mr. Chairman.
    Professor Schooner, are you suggesting that integrity and 
ethics is not already in the regulation currently for someone 
who provides review--a contract compliance person to consider?
    Mr. Schooner. Let me----
    Mrs. Jones. Yes or no.
    Mr. Schooner. I am not sure I understood exactly what you 
were saying, but let me----
    Mrs. Jones. Then let me ask it again, so we can be specific 
as to what I am asking you. I am asking you, is the term 
``integrity and ethics'' as a requirement used by contract 
compliance persons to determine whether someone can be 
compliant for purposes of government contracts?
    Mr. Schooner. Yes. The correct term in the regulation today 
is satisfactory record of integrity and business ethnics.
    Mrs. Jones. Thank you. So that is there.
    Mr. Schooner. Right. And let me also say----
    Mrs. Jones. Let me take to the next question, and then you 
can say whatever else you want to say, because what I am trying 
to suggest to you and Mr. Kovacic and Mr. Alford and Ms. Hill 
Slater, not necessarily that this piece is the best piece of 
change in regulation, but that currently you have contract 
officers who review and consider integrity and business ethics 
without anything to help them make the determination of what 
integrity and business ethics are.
    So, therefore, before you just throw the baby out with the 
bath water, that you should also consider whether or not there 
is room for trying to be clearer to the people who you vest 
with this discretion. And it is all subjective. I don't care 
what anybody in this room says. If you put a person and you 
give them something to say, something to review, whatever, 
there is subjectivity that comes into the process. That there 
may be room at least for some consideration.
    Now you can tell me what you wanted to say.
    Mr. Schooner. I just want to be unequivocally clear, to the 
extent that we are on the record, that I----
    Mrs. Jones. We are on the record.
    Mr. Schooner. I believe that integrity is one of the single 
most important and defining characteristics of the United 
States federal procurement system. I have spoken to dignitaries 
in foreign countries, and I have represented the United States 
outside of the country in talking about the federal procurement 
system.
    And let me also mention that if you speak to any of my 
students in my classes, they will tell you that I say that our 
entire system runs on three basic bulwarks. First, there is----
    Mrs. Jones. Well, define ``integrity.''
    Mr. Schooner. Wait. First is competition, second is 
transparency, and third is integrity.
    Mrs. Jones. Define ``integrity.''
    Mr. Schooner. Integrity, as it affects us in our federal 
procurement system, there is a front end and a back end. In 
terms of the front end, it is a fundamental threshold with 
regard to the contracting officer through a preaward survey's 
determination of whether this contractor will basically fulfill 
the promise in which they enter into.
    But more importantly, what is very important to keep in 
mind in our procurement system, our procurement system is 
layered very deeply with a staggering array of statutory and 
regulatory requirements that define what integrity means. It is 
compliance with a host of specific regulations, some of which 
are mentioned here, some of which are not, some of which are 
more important and some of which are less important.
    But just so you know, in government contracts today, every 
major government contractor in the country has a compliance 
program. And people like ourselves go into these companies to 
train them what compliance means. And so let there be no doubt 
in your mind that government contractors do have an idea as to 
what integrity means in terms of compliance with the 
appropriate laws and rules. The----
    Mrs. Jones. There is no doubt in my mind.
    Mr. Schooner. Okay.
    Mrs. Jones. What I am suggesting to you, sir, is that 
because integrity and ethics may not be any more specifically 
delineated, in some instances it leaves opportunity for the 
compliance officer to consider whatever he or she would want to 
consider in the determination. And that perhaps it may not be a 
bad idea to delineate a little more. Do you disagree with that 
statement?
    Mr. Schooner. I believe that I do not disagree with you 
that integrity is something important for the contracting 
officer to determine when awarding a contract. The only concern 
that I have tried to voice with regard to the proposed 
regulation is that it is vague. For example, I would sense 
that----
    Mrs. Jones. Is it any more vague than what it already is, 
though?
    Mr. Schooner. Much more vague, ma'am. I believe that you 
might----
    Mrs. Jones. If you don't define ``integrity and ethics,'' 
how could integrity and ethics be more vague than when it is 
defined?
    Mr. Schooner. When I speak to the vagueness, what I 
specifically refer to, for example, is we were talking 
earlier--I believe that a final adjudication by a competent 
authority is a very good benchmark as to whether someone has 
broken the law; whereas, I personally believe, as a matter of 
law, that an allegation by a competitor is not. And I believe 
that is where the vagueness----
    Mrs. Jones. And you think that because it goes on to speak 
to--and I don't have the language in front of me--that that 
includes an allegation and that a compliance officer with good 
experience would include just the allegation? Where is my piece 
of paper?
    Mr. Schooner. Specifically, as I suggested in my testimony, 
the main concern that I have is that they distinguish in the 
supplemental information, they say that, normally, the 
contracting officer should base adverse responsibility 
determinations involving violations of law or regulation upon a 
final adjudication by a competent authority concerning the 
underlying charge. And I agree with that.
    My concern begins when they go on to say, ``However, in 
some circumstances, it may be appropriate for the contracting 
officer to base an adverse responsibility determination upon 
persuasive evidence, which is meaningless, of substantial 
noncompliance, which is meaningless, with the law or 
regulation.'' And then they go on to say here, but not in the 
regulation, that it can't be isolated or trivial. That is where 
my concerns with regard to the vagueness of this regulation 
lies.
    Mrs. Jones. And I want to back up and say that right now 
you don't believe that compliance officers do that without it 
being delineated.
    Mr. Schooner. Under the standards today, they cannot 
basically just pick something out of the air, because there are 
due process rights. If, in fact, you----
    Mrs. Jones. You are still in a classroom, if you don't 
believe it happens. And that is why these two people seated 
here, Mr. Alford and Ms. Slater, are suggesting that the issue 
be--or pushing the issue as well is because based on their 
experience of being women and African-American doing business 
with the country that has happened. And they still insist, you 
can't--it is----
    Mr. Schooner. I believe I am agreeing with you, ma'am, but 
I guess the point that I am trying to make--as I said at the 
beginning, the contracting officer has a staggering amount of 
discretion to, if they want to, take advantage of a contractor 
based on these allegations.
    Mrs. Jones. No question.
    Mr. Schooner. This broadens the contracting officer's right 
to disenfranchise a small business, a small disadvantaged 
business, or someone else----
    Mrs. Jones. I suppose we disagree on whether or not when 
you give a compliance officer greater--more instruction, it 
expands or detracts. I think it distracts from their ability--
you have so much discretion versus expands. But I guess that is 
why we are disagreeing on this point.
    Let me hear from Mr. Alford and Ms. Slater real quickly, 
and then--because Mr. Kovacic isyour colleague, and I have been 
having someone sit in my office for an hour and 15 minutes because it 
was so important for me to be here that I am going to run out--Mr. 
Alford, Ms. Slater, actually, I am speaking to the Chamber in Las Vegas 
in a couple of weeks.
    Mr. Alford. Good.
    Mrs. Jones. Yes. Go ahead.
    Mr. Alford. I will make sure they treat you right.
    Mrs. Jones. I would appreciate it, because I don't have 
Monsanto or any of these other places in Cleveland, Ohio. 
[Laughter.]
    Chairman Talent. Next time you meet in Las Vegas you may 
want to consider asking the Chairman to accompany you. 
[Laughter.]
    Mr. Alford. We have a convention there in June, sir, and 
perhaps you can----
    Chairman Talent. Thank you. [Laughter.]
    If I can stay away from the tables, I will be fine.
    Mrs. Jones. Okay. Go ahead. I want to give you a chance to 
comment or--and my legal background forces me to cross examine. 
My husband says I cross examine. But anyway--son says it, too. 
Any commentary you want to add or comment that you haven't 
already made before I leave--I hate I have to leave, but at 
least I did stay. Everybody else left. Okay. Go ahead.
    Mr. Alford. Well, ma'am, it is certainly a struggle out 
there, and your predecessor has stepped in on behalf of these 
constituents in a very admirable way. I think Congressman 
Stokes was basically one of the founders of the National 
Association of Minority Contractors.
    Mrs. Jones. I was at your event where you gave an award 
last year, I think.
    Mr. Alford. And Dominick Ozanne, when he had contractors. 
And Dominick would tell you that it is just literally hell for 
a small business to do work with the Federal Government on a 
consistent basis.
    Now, one thing I am finding out as we try to branch out 
internationally, that when we take our businesses to Brazil, to 
Ghana, to other places, one comment I constantly hear is that, 
``Hey, if I am qualified and capable, I am going to get this 
job.'' What a concept. It is different. And I think the racial 
animus and the way we do business in this country still exists. 
And having instruments that could be misused in that animus is 
very dangerous for us.
    Mrs. Jones. And so the bottom line is you say, no matter 
what, you believe this empowers a contract compliance officer 
to misuse it more than it does to require him to set forth or 
have identifiable means of either saying you comply or don't 
comply, if I have said that question right.
    Mr. Alford. It takes him to want to be very powerful, to 
want to be----
    Mrs. Jones. More powerful than he or she already is?
    Mr. Alford. Yes, ma'am. Lord and God. You have got--I have 
got a contractor in Jersey with $3 million in bondable--
bondable $3 million, $1\1/2\ million cash money in the bank, 20 
years track record outstanding work, and he has to go through 
the COC process for a $100,000 job, to do a little roof at a 
naval installation.
    Mrs. Jones. But this is in--the COC is in place with regard 
to--regardless of this regulation.
    Mr. Alford. He can always come back and win his case 
through the COC process. Once he is debarred forever, it is 
over.
    Mrs. Jones. Okay.
    Mr. Alford. There is no recourse.
    Ms. Slater. I agree also that there is always--the weakest 
link in the whole procurement chain is personal bias, and we 
are under that gun all the time. I think that this just gives 
more ammunition, just different ways to get at whomever they 
want to get at. And it is very costly for the small business 
person to have to be able to comply with some of the things 
that they will be asking for.
    At best now, the whole procurement process is not set up 
for--to be user-friendly to women, minorities, or a small 
business in general. I think it is just--it is just going to be 
even more onerous with the rules as it states.
    The other thing I wanted to talk about was the SBREFA. I 
have been on SBREFA Enforcement Board now since they first put 
people out there. It is about two years now I think I have been 
serving on the SBREFA Board for Region 2. And what I don't 
understand is how things like this get this far with SBREFA in 
place. I thought that we are supposed to have some kind of a 
watchdog----
    Chairman Talent. If the gentlelady--I am sorry.
    Ms. Slater. Well, no. I was going to say I can't answer the 
question.
    Chairman Talent. If the gentlelady would yield, they get--
the enforcement mechanism of SBREFA is ultimately--the real 
hammer is an appeal in court from the final regulation. And 
then, of course, such oversight as we provide here, which 
really is a nicer word for ``harassment,'' that we provide 
here, to try and make sure that they do what they are supposed 
to be doing.
    So at this proposed stage, they get around having to 
conduct the analysis of the impact on small business by 
certifying up front, as they have done here. They just certify 
it is not going to have a substantial impact on small business. 
So if you certify that, then you don't have to go through the 
analysis.
    Now, that makes the whole rule very vulnerable in court. In 
my judgment, if they went ahead and promulgated this, apart 
from the Administrative Procedure Act challenges, which the 
professors know more than I--this thing is just dead in court 
because a judge is going to look at this and say, ``What do you 
mean it doesn't have a substantial impact?''
    So that is one of the reasons I make this point to the 
agencies. You are going to get this thing knocked out 
eventually. But in the meantime, we all go through this, which 
we could avoid if they would just do the analysis in the first 
place and hear these concerns.
    And so the short of it is, yes, this process--I think there 
is a good chance that they will pull this thing and redo it. I 
don't want to put words in her mouth, but I hope that they do, 
and largely because--in part, because of SBREFA. So it is out 
there and it is helping, but it would help more if they would 
follow it. I mean, it really would.
    Mrs. Jones. Mr. Kovacic, before I run out the door, I don't 
want to think----
    Mr. Kovacic. Yes, ma'am.
    Mrs. Jones [continuing]. Want you to think that I didn't 
give you a chance to tell me whatever you wanted to tell me. I 
saw you hurriedly making notes or whatever, so please be heard.
    Mr. Kovacic. I would just echo Steve's comment that I do 
believe that this, rather than providing guidance, adds murk. 
And my concern would be that, in particular, by potentially 
widening the orbit of events that could trigger a 
disqualification, it increases discretion rather than limits 
it. But I would completely share your suggestion that 
clarifying regulatory provisions is generally a desirable end. 
My fear is that this one doesn't do it.
    Mrs. Jones. Let me ask you, if this were--this regulation 
specifically was a clarifier and didnot lead to the disbarment 
or whatever else, would it be something that you could be--what would 
be a guide for the officer? Would you have----
    Mr. Kovacic. A true clarification, I think, would be 
helpful, though I would, as a couple of your colleagues were 
asking before--and I don't recall her name, but your----
    Mrs. Jones. Juanita Millender-McDonald.
    Mr. Kovacic. As your colleague put it so well, I think; 
that is, what was the inspiration for this? Is OFPP actually 
getting feedback from its contracting officers who say, ``We 
are adrift''? And I would like to know how often, how 
frequently, they have gotten that. And my intuition in 
listening to the previous panel is that kind of feedback hasn't 
been received.
    Mrs. Jones. I want to, Mr. Chairman, thank you very much 
for the opportunity to be a part of this discussion and to each 
of you, Professor, Professor--I used to be afraid of professors 
when I was in law school. It is good not to be afraid of----
    [Laughter.]
    Mr. Schooner. We are friendly.
    Mrs. Jones. I am kidding. Mr. Alford, Ms. Slater, thank you 
very much for the opportunity to----
    Chairman Talent. Mrs. Tubbs Jones, I am sure the professors 
find it hard to believe that you were ever afraid of anybody.
     Mrs. Jones. Oh, I was. I was. [Laughter.]
    Chairman Talent. I thank you for sticking around and for 
your comments. I was looking forward to them. I think they were 
really good.
    Unless anybody else has anything to add, I think we have 
vetted the issue pretty well. I am going to, without objection, 
have the record left open for 10 days for written questions 
that members of the Committee may wish to make, and I want to 
thank everybody for their attendance and their comments.
    The hearing is adjourned.
    [Whereupon, at 2:08 p.m., the Committee was adjourned.]
                            A P P E N D I X

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