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


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      HEARING ON DEPARTMENT OF DEFENSE'S CONTRACT BUNDLING POLICY

                              ----------                              


                       THURSDAY, NOVEMBER 4, 1999

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360, Rayburn House Office Building, Hon. Jim Talent [chair of 
the Committee] Presiding.
    Chairman Talent. Good morning. Today the Committee focuses 
its attention once again on the issue of contract bundling. 
This is the second hearing we have held on this issue this year 
and it is part of a series of hearings the Committee intends to 
hold on the issue in the near future.
    The Small Business Administration recently promulgated an 
interim rule pursuant to the Reauthorization Act of 1997. I am 
sure the Committee will want to look at those in some detail. 
In addition, I am working with members of the Committee from 
both sides of the aisle and with the gentleman from Hawaii, Mr. 
Abercrombie, a member of the House Armed Services Committee, on 
procurement reform legislation over which the Committee will 
have jurisdiction.
    So there is no shortage of work to be done with respect to 
contract bundling. Contract bundling is one of the most 
important issues facing small business today. In fiscal year 
1998, the Federal Government spent approximately $181 billion 
on procurement contracts.
    Small business received just $33 billion or 18.3 percent of 
that total in prime contracts, substantially short of the 
overall prime participation goal of 22 percent. By far the 
single largest contractor within the Federal Government is the 
Department of Defense, which in fiscal 1998 accounted for $109 
billion or 60 percent of the $181 billion total.
    Clearly, the Defense Department's contract bundling 
policies have a direct and substantial impact on small 
business. Given the importance of the Department's contract 
bundling efforts, I am particularly concerned with what I see 
as an accelerating trend towards what can only be called 
``mega-bundles'' within the defense procurement community.
    We will hear testimony later today concerning contract 
bundles within the Defense Department that are so enormous in 
scope and size that they raise serious questions as to whether 
even a company the size of General Motors could successfully 
compete, let alone a small business.
    Here to try to disabuse me of them is the Honorable David 
R. Oliver, Principal Deputy Under Secretary of Defense for 
Acquisition and Technology. We invited Mr. Oliver to join us, 
because in addition to Under Secretary Jacques Gansler, he is 
responsible for developing the Pentagon's contract bundling 
position and he is in a position to address the rationale and 
justifications behind those policies. We are particularly 
grateful to Mr. Oliver for being here.
    We have asked Mr. Oliver to focus his remarks on the 
following areas. First, what is the guiding principle behind 
the Department's contract bundling policy? Specifically, we 
asked him to address whether monetary policies or benefits 
associated with procurement efficiencies have a greater impact 
on the Department's decisions to bundle contract requirements.
    We have also asked Mr. Oliver to address the long-term 
effects of contract bundling on competition and the ability of 
small businesses to win prime contracts. I am particularly 
concerned that by shutting small businesses out of prime 
contracting opportunities, the Department may be irreparably 
harming our Nation's small business defense industrial base. If 
that is the case, the policy is surely, at best, penny wise and 
pound foolish. I am not so sure how penny wise it is either.
    Finally, we asked Secretary Oliver to address how the 
Department plans to meet its small business goals and its small 
and disadvantaged business utilization goals in light of 
several mega-bundles such as the Flexible Acquisition and the 
Sustainment Tool bundle within the Air Logistics Command and 
the DTS-CE bundle within the Defense Information Technology 
Contracting Office.
    The Committee is also going to hear from several small 
business owners who will address the impact Defense Department 
contract bundling has on their businesses. We invited Ms. 
Vanessa Morganti, the owner and president of Future Solutions, 
Inc., a woman-owned 8(a) firm from Broomfield, Colorado, to be 
with us but because of other commitments she was unable to make 
it. I would ask unanimous consent that her written statement be 
included for the record.
    [The information may be found in the appendix.]
    Chairman Talent. Our first witness on the second panel is 
Mr. Paul Murphy, President of Eagle Eye Publishers in Fairfax, 
Virginia, who will discuss the results of his study on contract 
bundling which he recently completed under contract with the 
SBA's Office of Advocacy.
    We will also hear from Mr. Maurice Allain, President of 
Phoenix Scientific Corporation, a small defense electronics 
manufacturing firm in Warner Robins, Georgia, who will address 
the proposed mega-bundle known as the Flexible Acquisition and 
Sustainment Tool, FAST, bundle.
    We will also hear from Mr. Craig Brooks, President and CEO 
of Electra International Telecommunications, a small 
telecommunications company located in Bethesda, Maryland. Mr. 
Brooks will discuss the effects of large-scale bundle of 
telecommunications service within the Defense Information 
Technology Contracting Office.
    Finally we will hear from Ms. Josephine Ursini of Virginia 
Beach, Virginia. She is the outside counsel for the Society for 
Travel Agents in Government and will discuss how the Defense 
Department is shutting out smaller travel agencies from 
government travel management contracts.
    I would encourage members of the Committee to read the 
statements of these witnesses, if they haven't done so yet, to 
see the impact on bundling on small business and also to really 
begin thinking about whether bundling accomplishes what the 
government says it accomplishes.
    At this time I want to recognize the gentlelady from New 
York, Ms. Velazquez, for any remarks she may have.
    [Mr. Talent's statement may be found in the appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Chairman, we are here today because we continue to be 
concerned with the state of Federal Government contracting. We 
are here because we continue to see that our Nation's small 
businesses are being cut out of the loop. After 6 years of 
discussions, this situation is unacceptable. So I begin with a 
message to government agencies that should be evident from the 
fact of this hearing. But that bears saying: We are still 
paying attention. We are still here and we will not go away 
until the situation for small business improves.
    Now, the questions we face today might all be different if 
we knew there was a concrete benefit to bundling. For example, 
if we knew bundling saved the government money, we could 
discuss how to balance the needs of small businesses against 
taxpayers' dollars. But that just is it, we do not know if 
bundling saves money. We hear unsubstantiated claims but they 
were just that, and they have little more weight than other 
claims that bundling actually costs money.
    The fact is that we do not know, and we shouldn't pretend 
otherwise. Benjamin Franklin said, ``Being ignorant is not so 
much a shame as being unwillingly to learn.'' we need to ask 
why certain departments, like the Department of Defense, seem 
unwillingly to learn.
    One of the things I am most eager to get out of today's 
hearing is the chance to shine some daylight on the murky 
recesses of bundling practices. There is the question of the 
Warner Robbins Air Force Base contract, where we cannot even 
get a straight answer about what is or isn't in the contract. 
And what about bundling that already exists? Are we supposed to 
believe that small businesses cannot provide janitorial or 
messenger services? And we know for a fact that small 
businesses can fulfill government telecommunications and travel 
agency contracts.
    There have been some attempts to stop the blatant use of 
contract bundling, including the interim rule recently released 
by the SBA. While these changes will put teeth into requiring 
measurably substantial benefits, the rule also includes a 
loophole allowing bundling if it is critical to the agency's 
mission. It doesn't take a military genius to realize that is a 
loophole you can drive a tank through.
    We should not fool ourselves that this is merely about 
adjusting a rule or a definition. This is about keeping small 
businesses in business and in business with our government. We 
have already held a hearing looking at the proposed rule. Now, 
we need to find the courage to ask the hard questions. If DOD 
is saving so much time and money, why are there no numbers to 
support it? If DOD's aim is to keep small businesses 
contracting with their agency, why are they being put out of 
business? Small businesses are facing a crisis in Federal 
contracting, and we need significant, meaningful action if we 
are to move forward.
    I thank the panelists who took the time to be here today, 
especially those members of the small business community who 
will share their horror stories about government contracting. I 
look forward to hearing what you have to say, and I thank the 
Chairman for having this hearing today.
    Thank you.
    Chairman Talent. I thank the gentlelady for her comments 
and fully endorse them.
    Chairman Talent. All right. Our first panel consists of the 
Honorable David R. Oliver, the Principal Deputy Under Secretary 
of Defense for Acquisition and Technology.
    Mr. Oliver, we appreciate you being here and please give us 
your statement.

   STATEMENT OF HON. DAVID R. OLIVER, PRINCIPAL DEPUTY UNDER 
      SECRETARY OF DEFENSE FOR ACQUISITION AND TECHNOLOGY

    Mr. Oliver. Yes, sir, Mr. Chairman. I appreciate the 
opportunity. I have submitted a written statement, let me give 
a more general summary.
    Chairman Talent. Fine.
    Mr. Oliver. There are, in my opinion, three reasons that 
are captured rather well in a Rand study for bundling. One of 
them has to do with scale economics, and what it says--and this 
is sort of a technology-driven problem. It says that with the 
changes in information technology, it is important to recognize 
that one can get data and exchange it between parts, and that 
better communications mean that it is--that sometimes there may 
be a change in scope that is important.
    And when we get through at the end, I will talk about the 
DTS-CE contract because it sort of follows on that. So you 
essentially have scale economics, and I would maintain that 
that is driven by technology. And what we should consider is 
with technology changing so rapidly--and I would particularly 
in two areas, in information technology and also in 
transportation, which applies to some other things that this 
Committee has looked at, you have to consider whether or not 
you need to change the way you are contracting. So that is one.
    The second is in scope economies. In scope economies, what 
I am talking about is the ability to use cross-training and 
also to get efficiencies of people. Let us say we are talking 
about security on a particular installation. If I have security 
units on an installation and they are all broken up, then I 
have to maintain a certain number of reserves in order to 
respond to a problem. I have to worry about numbers of people 
who are going to report in sick at any particular time, take 
leave, et cetera.
    If I should bundle those together, choose to bundle them 
together, there are obvious savings because I can smooth out 
the rough edges in those things. And I only have to maintain 
many fewer response forces. So there is an opportunity for a 
scope economics in some areas.
    Chairman Talent. Just to clarify, you are not talking about 
the Department's own personnel in managing the contract; is 
that correct?
    Mr. Oliver. I am going to get to that. I am actually 
talking about, for example, security forces that you hire; 
where you go out and you would hire security forces to provide 
for this part of a base, this part of the base, this part of 
the base. In that case, you are obviously better if you hire 
one contractor to handle the whole thing.
    Chairman Talent. The whole base. Now you are talking about 
the contractor's resources?
    Mr. Oliver. Right.
    Chairman Talent. I am sorry.
    Mr. Oliver. Which results in less costs and more efficient 
organization to the government.
    Chairman Talent. Okay.
    Mr. Oliver. The third has to do with the delegation 
responsibility.
    Chairman Talent. I will say to the Committee, I just wanted 
to clarify--we will have plenty time for questions. I just 
wanted to clarify his statement. Believe me, the gentleman will 
have time. Go ahead.
    Mr. Oliver. The third has to do with the delegation of 
responsibility. The purpose of business--the business's core 
capabilities, particularly in some businesses, is management, 
the business management; and the purpose of the core capability 
of the Defense Department is war fighting. In those cases where 
we are requiring--using people in uniform to manage these 
various contracts and to shift assets between them and make 
lots of contracts, et cetera, we are not asking these people to 
do what the Nation expects is their core competency. And so the 
question is, do you want to transfer that core competency to 
those people who have a core competency in management of these 
people and these small businesses?
    And I think that those three general areas, in other words, 
scale economics, scope economics and delegation responsibility 
cover the primary reasons that one might choose bundling. At 
the same time, of course, just as you are, we are concerned 
with the balance that is necessarybetween these efficiencies or 
cost savings, or better government issues and needs and the interests 
of small business.
    And in the small business requirements, there are two 
critical factors that I think are important, one of which is 
that we are required to use as a source selection factor--if 
you do a bundling, you are required to use as a factor what the 
plan is for whoever wins that contract to utilize small 
business. I mean that is terribly key, because it becomes an 
important factor in an evaluation of the award.
    The problem that one, a cynic, would say is what happens if 
the person makes a great plan but then doesn't do it? And the 
other SBA rule that I think is important, there is another 
factor you specifically have to use, is you have to use what 
the past performance of that contractor is in using small 
business.
    And many of the people that I have been talking to, the 
question is, then, do you do it, do you evaluate that each 
year, do you evaluate that when the contract comes due? In 
other words--but the teeth are there to make sure that the 
people are using small business.
    Now, there are two good studies on this, one by Rand and 
one by--actually, there are several. There are a couple of 
studies from Rand and also from the Center for Naval Analysis 
on this, but I don't think there is a good study that addresses 
all of the Committee's questions.
    And I am going to commission that study. They have written 
a Statement of Work for it, and I am going to go--what I want 
to do is, I want to focus in fact on the Committee's questions. 
And I am also interested in making sure that the savings, 
whether they were fiscal savings or management savings or scope 
savings, I want to see how they were from predicted to what 
they were when the contract was initiated. So I am going to do 
that. I think that is going to take about 6 months to get that, 
because I want to make sure I get some good data. But I will 
sign that in the next 10 days, it has got to be done in a 
couple of months.
    So the Committee is correct. I am not sure there is a 
plethora of data out there that proves it one way or the other.
    The part that I think that is interesting when I looked at 
this more carefully in the last couple of weeks is that this 
has been going on for 5 or 6 years, and there is no decrement 
in the Department of Defense's use of small businesses. In 
other words, I am not sure that I--I don't have the data right 
now to say a particular contract resulted in what the people 
thought it was going to result in.
    But I am sure that when I look at the figures, that there 
hasn't been a decrement in small business in the Department of 
Defense. And, in fact, if you look, it has been remarkably 
steady and over time, over the last 10 years, the numbers have 
actually gone up. And if you particularly look at it and see 
whether it is statistically significant, I will assure you it 
is not. In other words, the changes either way are not 
statistically significant.
    So when I look at the big picture, I see it as the same; in 
other words, the same percentages going to small businesses to, 
et cetera, except we are slowly increasing that, and I 
attribute a great deal of that, to be honest with you, to Bob 
Neal who is sitting behind me, who is my deputy for that. So 
that is the big picture.
    If we want to talk about--let me establish right off, let 
us talk about DTS-CE and also let us talk about Warner Robins, 
and I will get that out in the open. The DST-CE thing I don't 
think it is a good example, and I will tell you why. When you 
look at the DST-CE bundling, they did essentially for the 
fiberoptics contracts across the United States--what you see is 
that is driven by military requirements; in other words, as you 
worry about information security and you worry about the 
ability of people to get into your system, then you decide on 
several things, one of which is a physical separation of the 
circuits, and the other is protection of those switching 
centers by which people could get in or could disrupt.
    I talked to the people from DST-CE this week, this week or 
last week. And I think that those were reasonable military 
decisions that they wanted to protect the security of those 
switching circuits, switching centers and also the physical 
security, the separation of those, and that really happens at 
the switching centers. When they decided to enforce--when they 
decided to make a specification for security, that tends to go 
to a larger company because you need a nationwide thing.
    If we are going to worry about the United States defense in 
this world, it is a national--in other words, it is a national 
exchange of communications, information, et cetera, and I think 
they made a good choice. I think that number, it ends up being 
about 2 to 3 percent of DST-CE's total budget. I looked at 
their evaluation, I thought it was valid--I don't think that is 
good impression--we ran right up against military requirements, 
and that is a tough thing to debate. And I will have to say 
that I think those military requirements are good.
    If we get into it, we are going to find that small 
businesses who have tried to compete, I am not sure that they 
were--that is a tough one.
    With respect to Warner Robbins, and the FAST contract, I am 
not sure it is timely. I think it is good the Committee is 
interested in it, because it forces me to be interested in it, 
and it forces the Department of Defense to look at this 
carefully, but they are not ready to talk. For example, when I 
talked to them yesterday, I guess, they are not ready to say to 
me precisely what safeguards they have in place. In other 
words, they have decided, for example, that what--now, this is 
technology-driven, and the question of technology-driven is the 
Air Force doesn't have the technology, some of the advanced 
technology to do the repairs, and they end up having different 
small businesses in many cases who are doing various technical 
things, such as the repair and maintenance of communications 
equipment aboard a particular aircraft.
    To manage those individuals is much better done in a matrix 
organization. It is much better done by someone, to be honest 
with you, outside the military, because as I have talked about 
before that is not the core capability of the military, that is 
the core capability of business.
    They are thinking about right now awarding three contracts 
to whoever wins it as prime and one that is specifically 
reserved for small businesses. And each of the primes, of 
course, would have to, as I said to you, one, demonstrate what 
the small business plan is for incorporating small businesses; 
and, two, what their past performance is doing. And they would 
have to periodically prove that.
    The reason I say that is not right, is they were unable to 
explain to me yesterday what their plan was, when they were 
going to review it, when they were going to check as to what 
the guy's performance was, et cetera. So I think the Committee 
is absolutely right to be interested in that and ought to watch 
us carefully. But it is a difficult one to evaluate on because 
it is not firm enough at the moment to be criticized either 
way. They are going to get back with my staff, by the way, 
before they firm up my acquisition strategy, because we had 
some questions.
    That is the end of my statement, sir, I am ready to answer 
any questions.
    [Mr. Oliver's statement may be found in the appendix.]
    Chairman Talent. Well, I appreciate very much the 
informality and candor of your statement. And what I want you 
to understand up front, and Mr. Gansler also, is that this is 
an aspect of what the Department does; that this Committee has 
not only a longstanding interest butan interest as mandated by 
what we have been told to do under the House rules. We are interested 
in the effects of procurement on small business.
    Beyond that, however, I want to repeat a point that Ms. 
Velazquez made. It is one thing if we can have some reasonable 
confidence that bundling contracts saves money to the taxpayers 
or increases quality provided to the taxpayers, then we have a 
classic kind of conflict between the desire we all feel to 
promote small business as an avenue of opportunity for 
individual entrepreneurs, and maybe the interests of the 
taxpayer in inefficiency in a particular contract.
    Where, however, we are not saving money for the taxpayers 
for a bundle, where quality is going down, and then you have 
something that everybody agrees is a bad thing to do. And I 
will just tell you, and I am working with this and Mr. 
Abercrombie on the Armed Services Committee has also worked on 
this, others have here as well. We have been presented with a 
number of instances of bundles where, when you get into it, you 
have a serious question whether it is not costing the 
government more and whether the quality isn't going down; the 
reason being that when you reduce competition for a 
particular--and this is classic economic thinking--you reduce 
competition for a particular bid, the price tends to go up. And 
the bigger an enterprise is that gets a bid, the bigger the 
bundle, the fewer the competitors, the less pressure on the 
eventual winner to maintain high-quality services, particularly 
if it is a bundle for a longer term.
    You get a contract for 2 years, 3 years, 4 years, well, 
now--maybe you have tried to discount the price to get it. 
There is tremendous pressure on you in order to make money by 
reducing the costs of that bundle. You mentioned a couple of 
things that mitigate in favor of bundling.
    Let me flip on the other side of that. You mentioned 
economies of scale. There is such a thing as diseconomies of 
scale, too, where the bigger the enterprise is the more 
overhead it has to have to manage all of its parts.
    Mr. Oliver. Right.
    Chairman Talent. You look at the rest of the American 
economy, the trend is towards smaller enterprises, and the 
bigger enterprise is trying to act like smaller enterprises. So 
I would argue that, yes, it is true there can be economies of 
scale, and particularly that is why WalMart is successful. But 
WalMart is not only purchasing from huge contractors, WalMart 
does an awful lot of business with small businesses who beat 
out big businesses.
    I ought to give you a specific instance, and Mr. Brooks is 
going to testify about this: long distance service for 
particular bases. And the point of his testimony is that when 
this was bundled, it used to be individual marketers of long 
distance servicers could bid with particular bases for services 
to handle the long distance services and network services for 
those particular bases. And then it was changed so that it was 
bundled, and only the three big--AT&T, Sprint, WorldCom--which 
is going to become two, by the way, because they are going to 
merge--was allowed to bid.
    He makes a point in his testimony that in almost every case 
where we have documented, the government ends up paying more 
for circuits from one particular base to another. Here is what 
he says: ``a particular circuit analysis is contract number,'' 
and then he gives the number, which was for a T-1 point-to-
point circuit between Robbins Air Force Base in Macon, Georgia 
and a DOD Computer Megacenter in Slidell, Louisiana. Under the 
new bundling system, AT&T charged DOD $215,000 for the life of 
that contract, while the then-current market rate for an 
identical circuit procured through the old system was about 
$125,000, $90,000 or 67 percent delta. Thousands of such 
circuits were procured under the bundled volume-discounted new 
contracting system.
    He says an agency report filed by the DOD with the GAO 
described AT&T's bundled contract as high priced, cumbersome, 
unwieldy, burdensome, sluggish, inadequate, unresponsive, 
inflexible, nightmare.
    And then they did more research and said it was not alone 
in comparing the bundled pricing to that of the old system. A 
DISA study in March of 1995 compared new bundled prices for 
comparable transmission services from three sources. The old 
system--the agency found the old system, the competitor system, 
invariably lower than the bundled system, normally by a wide 
margin.
    I will tell you personally I have encountered this over and 
over again.
    I am going to finish in a second, and you can tell me why I 
am crazy, because intuitively if you got more contractors 
bidding on the contracts, the pressure to hold the price down 
is going to be lower.
    That is just, it seems, intuitively correct. Now, tell me 
why it isn't.
    Mr. Oliver. No, I absolutely agree with you. I mean, Jack 
and I spend a great deal of time worrying about how do we 
increase competition, to be honest with you. This happens to be 
probably 40 percent of our time is worrying about increased 
competition because we know that the marketplace works, and 
that if we can increase competition, it will protect us from 
making a lot of mistakes. I mean, that is the crux of what was 
good.
    But I don't--I wasn't clear. My problem is I don't think it 
is a good example. I think there may be some other better 
examples. And what I would like to do, if I can talk to your 
counsel, is get some examples of the ones that you have heard 
where the results were not the same. I would like to make this 
specifically part of my study. I am absolutely--I want to put 
of some of this to bed and get some data, and there will be 
people who come in and talk to you where the people who lost 
the bids and people--if I go out and talk to the people who won 
the bids, they will tell me it is terrific, right? Because the 
people who win the bids don't come in and talk to you. And the 
same thing for me; we both hear from the same kind of 
constituents. So I will do that.
    Chairman Talent. Sure.
    Mr. Oliver. But let me talk about that one. The reason that 
is not--this is my opinion--the reason it is not a good example 
is because what you had was--it has been a great concern the 
last several years about hacking and about the ability of 
people to get into our network and destroy our network in times 
of war. And so what DST-CE did was decide to make a network 
specifically invulnerable. And to do that, what they did was 
they decided they would essentially separate the switching 
networks from the normal switching networks and they would also 
insist on security controls of each of the places that you 
could enter, and they would also insist that you could track 
what that switching network was doing.
    Now, you don't do that in a normal business. In other 
words, I would not deny to you that I think that is a much more 
expensive way than the way they were doing it before, which was 
bidding out to all the companies that could work it. But what I 
am saying is the problem that you run afoul here is I think 
that is a valid national security decision. And it is just like 
the fact that you tend not to do fighter work with 707s. It 
turns out that you would rather do that with fighters that it 
is specifically paid for. We pay a cost differential when we 
make those kind of decisions.
    Jack believes, as do I, it is better to keep as much in the 
commercial world as possible, and we are really trying to do 
that. And I know you are supporting us on that. But that 
example, when I looked at it, and I spent some time looking at 
it, I am not sure it is the best example. I am surethis 
Committee can find a lot better examples for which I would have much 
more trouble explaining, but that one is tough.
    Chairman Talent. Let me stick with that one for a minute, 
because Mr. Brooks also brings up the security issue. And, of 
course, from his point of view of small business, they are used 
to the fact that when they can prove to the Department that it 
actually costs more money to bundle, then the Department will 
come back and say, well, yes, but there is some special 
requirement that only the larger contractors can perform.
    So security was the reason given for this. He goes on to 
say this: Contracts for over 5,000 telecommunications service 
were awarded in using the old system. Less than 1 percent of 
those services had security network management and/or delivery 
requirements that disqualified any one of as many 50 of the 
small business competitors.
    So before the bundling occurred, there was no security 
requirement. After the bundling occurred and after they found 
out, well, it actually costs more to bundle, now there are 
security requirements, and that is the reason we have to 
bundle.
    He then goes on to make the point that many of the larger 
contractors can't meet the security requirements. They say 
special requirements are often not needed for service and 
because of the nature of some services, national carriers such 
as MCI-Worldcom, AT&T and Sprint, cannot satisfy those 
requirements regardless of their capitalization and the size of 
their national networks.
    So it increasingly appears to the small business community 
and, I have to say, to me, that bundling has become not a means 
to some other end, but an end to itself. And what I begin to 
suspect, Mr. Oliver, is that it does save, I think, time and 
frustration for the procurement officers and the people who 
have to put out these contracts. And I understand that.
    I mean, I can imagine that they are besieged. And so their 
desire to save this time becomes the end in itself for 
bundling. Why don't you answer the security issue? I mean are 
these legitimate security questions? And if they were, why 
aren't they part of the contracts before the bundling?
    Mr. Oliver. I need to go back and check, Mr. Chairman, 
because when I talked to the people, they told me they were 
there ahead of time. Now I know there are some other problems. 
For example, you said that only large contractors could bid. I 
know there were two small contractors who bid. I know, for 
example, one of them bid, and his bid was 7 percent higher. And 
it was submitted on Sprint stationery that was marked off.
    But I know these two small contractors bid. I also know 
that they put a limit that that some people had to bid at least 
for 5 percent of the business. In other words, they had to--
they were trying to get fewer than 20 contractors involved. But 
I will go back and check on whether the security was a problem 
before. But I know two of the other factors that the man will 
testify on were not true.
    Let me talk about one other thing that you mentioned, sir.
    Chairman Talent. Sure.
    Mr. Oliver. You talked about short contracts versus large 
contracts, and that is an interesting problem. The first 
bundling contract that I remember was up in Bangor, Maine when 
they bundled the base, and it was really--I mean, it was 
changed and, of course, if you think that this Congress or 
constituents don't like change, you ought to try to do change 
in the military. I will tell you that nobody wanted to do it. 
And there were lots of arguments against it. The interesting 
thing from my perspective was how much it improved the 
efficiency and the state of life on that base. In other words, 
it was much better for the military person, because you 
actually had somebody competent instead of a bunch of small 
groups of people that was not the core capability, they really 
weren't interested in it, they were not a flat organization.
    The other thing that was fascinating was that each time the 
contract was rebid, somebody else won. Because what happened 
was someone else, and in all cases--Lockheed won the first one, 
small businesses won--because what happened is thereafter, what 
happens is they would think about how to do it, and they would 
figure out a better way to do it. And they would combine trucks 
to do both leaf picking-up and also do other stuff, whereas the 
first guy had had separate vehicles for it. It was really 
interesting to watch. And the costs to the government went down 
each time.
    And more importantly in this case, because I know this is 
why this was done, the service to the service member went up 
significantly, it was much preferable to have--I can go on, to 
be honest with you, for a long time about that because that was 
interesting to watch. But the interesting part, with longer 
contracts what you see is the guys that put forward their bid 
and proposal money, they lose money in the first year, 
whatever, what you see is it takes them about 2 or 3 years in 
which they introduce process changes.
    In other words, what they do is they take it over and what 
normally happens is they take the people who have been doing it 
and just bring in new management. It takes that new management 
with those people to do a culture change and to start doing 
process changes frequently, 18 to 24, 36 months.
    So while small, short contracts may be good to make sure 
you are continually reopening this and ratcheting the price 
down, on the other hand our experiences are it is not good. And 
there are a couple of studies that say this with respect to 
getting the process changes and innovation, and so that tends 
for you to go to longer contracts, to 5 to 10 years.
    When I was in industry, it was--there was a terrific 
contract, I thought, done by IBM, in which IBM said we are 
going to give up the management of all of our facilities--and I 
was talking to the people who did the contract, the people who 
won it, and there they are then managing--IBM is managing all 
the facilities and IBM recognized that was not the core 
competency, so they went to somebody else.
    And that somebody else gave them a bid of 40 percent less 
in the first year, plus they would give them 8 percent less 
each following year, plus they would eat inflation. And the 
interesting part about it was the company that came in and bid 
that had a bunch of people who really cared about insulation. 
There is nobody in this room that cares about insulation.
    There is a group of people in Dayton, Ohio that care about 
insulation and can tell you, based on which way the building 
faces and which way the wind blows, whether you want 2 inches 
or 2-1/2 inches, and they will take that half inch of savings 
because it gives you the same stuff.
    I don't want to spend my life, but there are people that 
want to do that, that is their core competency. We are best off 
if we employ them rather than having government people putting 
4 inches of insulation on each building in accordance with the 
government spec. What I am saying, it is a balancing issue.
    Chairman Talent. I agree with that. What you just gave 
really is an argument for contracting, but not necessarily for 
bundling it seems to me. But I am going to--I know members of 
the Committee have questions so I am going to defer the rest of 
mine and recognize the gentlelady from New York.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Oliver, before we get into the questions, I ask 
unanimous consent of the Chairman to include into the record 
this letter. And----
    Chairman Talent. Sure. The gentlelady is describing a 
letter that----
    Ms. Velazquez. I will explain it.
    Chairman Talent. Oh, I am sorry. Without objection.
    Ms. Velazquez. This letter will be sent to Mr. Oliver 
today, requesting of him information regarding the Warner 
Robbins contract bundle, whether or not Warner Robbins Air 
Force Base has determined the FAST contract to be a bundle.
    This information is very important to this Committee. And 
we are requesting a clear definition of the requirement; a 
listing of all activities that will be authorized to use the 
FAST program; a list of the standard industrial classification 
codes anticipated to be included in the acquisition; an 
estimate of the number of contracts that will be replaced by 
the FAST contract at all locations; a list of contracts 
currently being performed by small businesses, names and 
contract numbers of all small businesses, minority-owned 
businesses and women-owned businesses; the expiration dates of 
contracts in place and whether or not options apply; finally, 
the dollar amount of all options that will be exercised for all 
locations.
    And I request, Mr. Chairman, that this information be 
provided to my office within the next 10 days.
    Chairman Talent. I will certainly put the letter in the 
record, and should read that it is going to be--I guess it is 
from the gentlelady from New York, and we will put it in the 
record. And the gentlelady's request for a 10-day turn around 
time is noted.
    [The information may be found in the appendix.]
    Chairman Talent. And I think this should--perhaps we should 
add this is because of the statements on the part of some of 
your people that this contract is not a bundle and therefore 
they don't have to go through the various requirements required 
under the law.
    Mr. Oliver. It is a bundle.
    Ms. Velazquez. It is a bundle.
    Mr. Oliver. It is a bundle and I will work. Ten days may be 
tough for some of the stuff, and I will also provide to you our 
rationale for why we intend to do it.
    Ms. Velazquez. Ten days, what?
    Mr. Oliver. Ten days may be tough.
    Ms. Velazquez. I know. Since 1993, you will be conducting 
the first study to determine the impact of contract bundling. 
So it has taken 6 years. I hope it will not take 6 years----
    Mr. Oliver. It will not, ma'am.
    Ms. Velazquez [continuing]. Each time around.
    Mr. Oliver. There are a actually a couple of decent 
studies. The Center for Naval Analysis has one and so does 
Rand. I will be happy to provide you copies.
    Ms. Velazquez. I guess it is refreshing that you come 
before this Committee today and say you will be asking for a 
study.
    Mr. Oliver, a kickoff was held for the FAST requirement at 
Warner Robbins Air Force Base in Georgia on August 24th and 
25th, 1999. Mr. Dave Burton, the head of the contracting 
activity at Warner Robbins stated at the kickoff that he had 
received a message from General Goddard that a contractor had 
claimed that FAST is a violation of law. Mr. Burton commented, 
and I quote, ``as soon as someone says we are breaking the law, 
then I know we are doing the right thing.'' .
    Mr. Burton also stated that the Air Force has been too 
concerned with following the law. He said, and I quote, ``We 
can be shortsighted and comply with the law or be longsighted 
and help small businesses.'' finally, Mr. Burton said we ought 
to have the leeway to make our own policy.
    Mr. Oliver, what is your response to the fact that the 
Department of Defense employees are not only talking about 
breaking the law, but bragging about it?
    Mr. Oliver. Ms. Congresswoman, that is obviously not right. 
If I could have a copy of that, I will get back to you.
    Ms. Velazquez. You will get back to me.
    Mr. Oliver. I will take that for the record. I would also--
--
    Ms. Velazquez. Mr. Oliver, you know what is also the point 
that I want to make this morning. There is a notion out there 
that the Department of Defense has disregard for small 
businesses, and today I am giving you an opportunity to show me 
otherwise.
    Mr. Oliver. Yes, ma'am. What I was trying to say in my 
opening statement is there is a balance that we are interested 
in doing, all right? In other words, I talked about there is a 
scope problem, there is scope reasons. There are reasons for 
management responsibility----
    Ms. Velazquez. Mr. Oliver----
    Mr. Oliver [continuing]. That has to be balanced with----
    Ms. Velazquez. I know you like to give long answers, but 
there are too many questions that we want to ask this morning. 
I am only asking you what is your reaction and your response to 
the fact of the attitudes that was exhibited by this gentleman.
    Mr. Oliver. I think it is wrong. I think it is wrong, Ms. 
Congresswoman, period.
    Ms. Velazquez. Would you talk to him?
    Mr. Oliver. That is the reason I asked you for the paper.
    Ms. Velazquez. Pardon?
    Mr. Oliver. Yes, ma'am.
    Ms. Velazquez. How many small businesses participate in DOD 
telecommunication contracts as large as the one we are talking 
about?
    Mr. Oliver. I don't know. I have to find out, ma'am.
    Ms. Velazquez. Mr. Brooks, and he knows his industry, says 
that there are around 50 firms currently able to perform 
smaller DOD contracts, but none who can perform this one. Is 
there still a place for these 50 firms to do business with DOD?
    Mr. Oliver. I think, yes, ma'am. Do you remember me 
saying----
    Ms. Velazquez. Not as subcontractor, as prime contractor.
    Mr. Oliver. Do you remember me saying this was 2 percent of 
all of DTS-CE's awards. I mean what you are talking about, that 
prime, is 2 percent of DST-CE's awards. There is 98 percent 
left that are not involved in this very specific security high 
effort. And so therefore there is obviously rooms for those 
other 50 firms to compete in a great majority of things.
    Ms. Velazquez. You will talk to your contracting officer 
and make sure of that?
    Mr. Oliver. I did this week.
    Ms. Velazquez. You did?
    Mr. Oliver. Yes, ma'am. I am supportive of this. I 
absolutely am supportive of small business.
    Ms. Velazquez. Mr. Oliver, but you are telling me that you 
spoke to your contracting officer this week.
    Mr. Oliver. Right.
    Ms. Velazquez. How long have you been in your position?
    Mr. Oliver. Sixteen months.
    Ms. Velazquez. So we are holding this hearing today and you 
are telling me this week you spoke to your contracting officer 
about practices?
    Mr. Oliver. I have a whole organization of small business, 
and the fact is that the individual in charge of small business 
reports to me; I talk to him several times a week on all sorts 
of issues and how to keep small business high. I talk to his 
people. I go over and have lunch with his people. I have more 
contact with them than I do with anyone else on my staff, 
because I want to keep them encouraged because theirs is a 
tough area.
    Ms. Velazquez. I am glad you talked to them.
    Mr. Oliver. But you are talking about one specific 
contractor, DST-CE.
    Ms. Velazquez. I am talking about practices.
    Mr. Oliver. I am telling you how much I pay attention to 
this area.
    Ms. Velazquez. As we all know, the Federal Government for 
small business participation is 23 percent. Yet the Department 
of Defense, by far the largest Federal buyer, has a goal of 
20.6 percent. The Department of Defense purchases more than all 
other agencies combined.
    Would you please explain to me why the Department of 
Defense has negotiated a lower goal than the rest of the 
Federal Government?
    Mr. Oliver. Actually, what happens is it gets set each 
year. What you will see, of course, is among other things, that 
while we are talking--you are talking primes, and as I said to 
you, the numbers indicate that there has not been a significant 
change. Our number was--we have--we adjust those numbers based 
on what the budget is and how many large-ticket items you are 
going to be buying, as opposed to those things which will go to 
small business.
    It was 23 percent in 1995 when we had more money, it is 20 
percent now. The other thing you have to consider is, it is 
over 40 percent of the subcontracts are going to small 
businesses. I don't think that is a bad record. And also what I 
am saying to you is there are no statistics for----
    Ms. Velazquez. You said 20 percent. You don't consider 20 
percent--when you have the largest budget compared to all the 
other agencies combined?
    Mr. Oliver. But I am also buying things that other agencies 
aren't buying that tend to be not small business. It is very 
difficult--there are lots of subs, for example, in the F-22 and 
the joint strike fighter that are small businesses, but there 
are not a lot of primes that are in that kind of business, 
building warships and tanks, et cetera; whereas in many other 
agencies, they are not building big-ticket items, they are not 
appropriate.
    Chairman Talent. All right. I think this is a good time. We 
will break for the vote and then come back for round two.
    Mr. Oliver. Round two is not the right way to refer to 
this.
    [Recess.]
    Chairman Talent. Okay. The Committee will come to order. 
And I will recognize the gentlelady from New York.
    Ms. Velazquez. Mr. Oliver, before we went to vote, you 
maintained that it is big-ticket items that prevent you from 
achieving the 23 percent goal. But isn't it just as plausible 
that it is all the bundling that you are doing that is reducing 
the opportunities for small businesses? We have a witness--yes, 
sir.
    Mr. Oliver. Go ahead, ma'am.
    Ms. Velazquez. We have a witness coming up on the next 
panel who will testify that bundling has a big impact on small 
business prime contracting opportunities, so----
    Mr. Oliver. And what I have said to you, I was unable to 
get data that said one way or the other and what I was left 
with was people who have said, ``This is what we think,'' and I 
don't particularly like that. And I am going to commission, as 
I said to you, a study to get some of the data, which I will be 
happy to share with the Committee as soon as I get it.
    Ms. Velazquez. Mr. Oliver, I am concerned that over the 
past several years, the Department of Defense has been 
combining its procurement goal for 8(a) and small disadvantaged 
businesses into one goal. Can we be clear that for fiscal year 
2000, these goals will in fact be separate, like they are for 
every other Federal agency?
    Mr. Oliver. To be honest with you, I have to check what the 
law says. We will do whatever the law says.
    Ms. Velazquez. Well, the law says that 8(a) is one and that 
you should not combine.
    Mr. Oliver. Let me see those charts. Yes, ma'am. I am going 
to follow along.
    Ms. Velazquez. Good.
    Mr. Oliver. Yes, ma'am, and what I think--what I need to do 
is check the law, but I think there is a different set of 
statutes that applies to us. But in my reporting that my people 
do and the reports they submit to me, they do break them out. 
So we can monitor that, but we are going to comply----
    Ms. Velazquez. You are going to comply.
    Mr. Oliver [continuing]. Whatever it is.
    Ms. Velazquez. Because I haven't seen that law that would 
allow the Department of Defense to combine.
    Mr. Oliver. Whatever is the law, we are going to comply.
    Ms. Velazquez. Very good.
    Mr. Oliver, as of the third quarter, fiscal quarter of 
fiscal year 1999, the Department of Defense did 1.5 percent of 
its procurements with women-owned businesses. It is clear that 
the Department of Defense is not going to meet its 5 percent 
goal for this year.
    Can you tell me what the Department of Defense is going to 
do differently in fiscal year 2000 than you did in fiscal year 
1999 so that we can increase the number of contracts with 
women-owned businesses?
    Mr. Oliver. Yes, ma'am, let me get back to you, please.
    [The information may be found in the appendix]
    Ms. Velazquez. Mr. Chairman, Congressman Underwood from 
Guam was here and he asked me to ask this question on his 
behalf. At the U.S. Navy base in Guam, the SBA had to intercede 
when the Navy had established a preconceived notion of small 
business participation in a bundled contract for base operating 
support services at the Navy base; essentially, the Navy has 
declared that small businesses will reap only subcontract 
awards. After intense negotiating, the Navy committed in 
principle to open both the prime contract to small businesses, 
and establish some direct small business set-asides. Out of a 
possible total contract, a $230 million contract, $60 million 
will go to the small businesses as set-asides.
    How is the Department of Defense ensuring that small 
businesses will share in prime contracts?
    Mr. Oliver. I think the SBA guidance in which the factors 
for evaluating the bids which include what the plan is for the 
inclusion of small business as a factor in evaluation, and also 
in using a fact of the past performance, a factor which has to 
do with what that organization's performance has been in using 
small business are good, safety measures which we are going to 
use.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Talent. I will recognize Mrs. Kelly from New York.
    Mrs. Kelly. Thank you very much.
    Mr. Oliver, this seems a little bit difficult for you to 
answer some of the questions we are asking you today. How long 
have you had to prepare for this testimony?
    Mr. Oliver. Let's see when I was in Russia, 10 days is when 
I was notified I was going to speak.
    Mrs. Kelly. So you have had 10 days?
    Mr. Oliver. Yes, ma'am.
    Mrs. Kelly. Okay. Do you feel that has been somewhat of an 
inhibition on your ability to respond to some of the questions 
that the----
    Mr. Oliver. No, ma'am.
    Mrs. Kelly. You do not. There are a couple of things I am 
interested in here. You said you are going to commission a 
study. Are you willing to work with us as the Small Business 
Committee to let us take a look at the specifications and to 
select a contractor to do the study or to let us take a look at 
the draft statement of scope of the work and things like that?
    Mr. Oliver. Yes, ma'am. Let me tell you what I will do. I 
will let you--I would ask for you to help me with the statement 
of work and also to look at specific contractors--or not 
contractors, at specific contracts to look at. I will select 
the contractor.
    Mrs. Kelly. You will select--will you let us have a look 
at----
    Mr. Oliver. You bet.
    Mrs. Kelly [continuing]. Who is doing that, who is in that 
running?
    Mr. Oliver. You will understand whose study it is. I will 
be happy to.
    Mrs. Kelly. I am not asking you to abrogate your 
responsibility, but I am asking that this Committee, which is 
so focused on small business and has concern for minority 
businesses and women-own businesses, in particular, to have a 
chance to take a look at what you are doing with this.
    Mr. Oliver. Let us do a couple of things. Let me get the 
statement of work over to all the Committee members, and I will 
give it to the Chairman and ask for you to get back to me in 
something like 10 days, and then we will talk about it. And the 
other part we will do is, to make sure none of us are 
surprised, I will hold meetings about every 2 months with the 
contractors to see how his progress is going and ask the 
Committee if they would like to send staff to listen to that so 
that we can all be comfortable that what is going on is 
professional.
    Mrs. Kelly. You will let us have a look at the 
specifications and perhaps have some--look at the contract, is 
that what I am hearing you saying?
    Mr. Oliver. I am going to send it to you, and I would like 
to get your comments back in 10 days. And we will resolve them. 
And I will--you know, but if we disagree, we will go with my 
favorite person.
    Mrs. Kelly. Being you?
    Mr. Oliver. Yes.
    Mrs. Kelly. I just wanted to get that on record.
    A couple of things about things that you said I need to 
understand. One of things you said here in front of us today 
was that you were talking about the process of contracting and 
putting--and bundling of the contracts. And you said even 
though contracting, unbundling the contracts might lower the 
prices, the process of putting the thing together is still more 
convenient on long-term contracts to bundle.
    So basically what I understood you to say is the process 
takes precedence over getting the price down in some cases. And 
I want you to clarify that; will you please?
    Mr. Oliver. Yes, ma'am, I would be happy to. I don't think 
I said that, and if I did, I misspoke. I think I was responding 
to the Chairman--I think the Chairman said that.
    Mrs. Kelly. Actually you did, and I copied it down here.
    Mr. Oliver. Then I misspoke. Because what I was trying to 
say is, it is not just costs that is important. It is important 
if you can get--if you can align yourself with where technology 
is going, the scope economics, if you can align yourself with 
better management, if you can provide better support to the 
people, to the field so that--say, for example, the full 
operational capability of a particular airplane increases by 15 
or 20 percent, you may well want to do that.
    Let me give you an example that I am very familiar with, 
which is moving expenses, moving people in the Services. We are 
deliberately going to spend more money to move the people in 
the Services because it is one of the great dissatisfactions 
with military life; that is, a bundled contract deliberately 
done and that we know we are going to spend more money, but we 
are going to get a much higher quality level of moving.
    Those are deliberate decisions, so you may well do that at 
some point. I do not intend to say that I think it is more 
expensive to do bundling in each case, because I don't.
    Mrs. Kelly. What you are saying, there are instances where 
you have bundled contracts deliberately, and they are more 
expensive because you have bundled them?
    Mr. Oliver. And I have gotten one helluva lot better deal.
    Mrs. Kelly. How?
    Mr. Oliver. You get much better performance.
    Mrs. Kelly. If you are getting better performance, what is 
the end yield, is it money, is it time, is it quality, what is 
the end yield?
    Mr. Oliver. Well, I think that is the problem with the 
Committee's questions, to be with you, and what I have tried to 
say to you is there has to be three things that you are 
worrying about.
    You are worrying about--you are terribly worried about 
performance. You may very well spend more money to get better 
performance for the soldiers, sailors, airmen, and Marines. I 
mean if the performance is not good, you very well may spend 
more money, more money for that. At the same time, you may be 
money neutral but want to get out of the business of managing 
something so you can take those soldiers, sailors, airmen and 
Marines and turn them into real war fighters instead of people 
who are doing non-core jobs.
    Mrs. Kelly. I am sorry, I still don't get the answer I am 
asking you; and that is when you are saying you are willing to 
pay a higher cost because of a bundled contract, what is your 
bottom yield?
    Mr. Oliver. I am willing to pay a higher cost for 
performance, into doing that, the decision is that you have to 
bundle that contract.
    Mrs. Kelly. For performance?
    Mr. Oliver. For performance.
    Mrs. Kelly. Is that measured in quality? Is that measured 
in time?
    Mr. Oliver. Quality, quality.
    Mrs. Kelly. Okay.
    Mr. Oliver. That particular one is measured in quality.
    Mrs. Kelly. Okay. I really question the efficacy of this, 
and I wish you would have given us some supporting facts and 
figures on why you feel this is better. You say you talk each 
week with your counterparts about these bundled contracts and 
so on. Apparently, the talk isn't having a whole lot of a 
effect on unbundling some of the contracts and letting some of 
these smaller contractors have a shot at some of the contracts. 
So what else can you do besides talk?
    Mr. Oliver. Ms. Congresswoman, here is the problem, I have 
come before you and said that I don't have data which I am 
comfortable with that proves that bundling doesn't have an 
effect on small business, except for the general--my look at 
the general Department of Defense in which I know it, that I 
know small businesses is continuing to win the same amount of 
awards.
    Mrs. Kelly. But you have said----
    Mr. Oliver. I don't think you have data that says it is the 
other way.
    Mrs. Kelly. But you have said, sir, that the big ticket 
items, it is just too expensive to include small businesses 
and, therefore, no small businesses can be involved.
    Mr. Oliver. No, I did not say that.
    Mrs. Kelly. Again----
    Mr. Oliver. I didn't say that.
    Mrs. Kelly [continuing]. I wrote this down when you said 
this.
    Mr. Oliver. This may be a failure of the paper, because 
what I said, I hope, was in that case it is not going to be the 
prime. The absolute is going to be the sub. There are going to 
be lots of subs. But you would not expect a small business to 
be the prime in that case. And so, therefore, if you are only 
measuring it by primes in cases where you buy lots of big 
ticket items, you are going to have fewer subs-- or small 
businesses as primes. You are going to have lots of small 
businesses involved in subcontracting.
    Mrs. Kelly. Okay. Mr. Oliver, I think we have all--we are 
all kind of going at the same thing here. I think you can get 
an understanding of what we are trying to ask you. I hope you 
will be able to give us some clear answers. Thank you.
    Chairman Talent. All right. In view of the large number of 
Members who want to ask Mr. Oliver questions and the fact that 
we do have another panel, I am going to put the lights on. And 
so we will try and stick to the 5-minute rule if we can, but I 
want to recognize Mrs. Napolitano.
    Ms. Napolitano. Thank you, Mr. Chair. And I just briefly 
discussed this with you in the hallway, Mr. Oliver, is the 
Marine Corps bundling the food service contracts, they are 
going to consolidate 15 contracts into two regional cook and 
chill contracts, and they relied on a study performed by large 
business as justification for this bundling. But according to 
the small business owners being affected, this bundling--and he 
testified, I believe, at our last hearing in August--the costs 
to the government for this bundling will cost more to the 
administration for the 15 original contracts.
    I am hoping that this is going to be something that I can 
get from you, is the assurance that you would investigate and 
reevaluate the bundling and effect on this particular aspect. 
Part of it--because I did visit this particular business. I 
flew in and went in visually, and spoke to the owners and it is 
a very lean operation. I mean without a doubt, I mean I thought 
it was one of my little old businesses from 20 years ago, that 
is how lean they are.
    And one of the things they brought to my attention is that 
the quality in the new contract was not the same as called for 
in your contract. That means our servicemen are not going to 
get the top quality meat, the top quality beef, chicken, 
whatever. And I am concerned, because we have them primary in 
our mind to do the service and be sure that they are well fed. 
Well, part of this is something that I am concerned.
    Then some of the ones that are bidding on it, one is a 
foreign contractor. So I am going to take very good exception 
to this particular one, and I certainly would look forward to 
working with you on this.
    And there is many other questions that--I read a lot of the 
report last night, and it really begs a lot of questions. And I 
will go because I am on 5 minutes, I would yield to the next 
speaker, and I am sure we will try and have another round. 
Thank you, Mr. Speaker.
    Chairman Talent. We will stick to 5 minutes if I can.
    Mr. Oliver. I promise the Congresswoman I will look at that 
and get back to her.
    Chairman Talent. This is cook and chill for these men and 
women?
    Ms. Napolitano. Yes.
    Chairman Talent. I hope we don't try and justify this one 
on the basis of quality. That is airplane food, Mr. Oliver, I 
mean not cook and chill.
    Ms. Velazquez. Not quality, not quality; security, security 
reasons.
    Chairman Talent. I should tell the Members Mr. Abercrombie 
hasn't come back. Mr. Oliver is our friend, so we should be 
grateful that he is here. And I do appreciate the fact that you 
are willing to take another look at all of this and that we 
have made the point to you that you----
    Mr. Oliver. Yes, sir.
    Chairman Talent. Our next questioner is Mr. Hinojosa.
    Mr. Hinojosa. Thank you, Mr. Chairman.
    Mr. Oliver, thank you for coming to meet with us. I want to 
piggyback on Congresswoman Napolitano's questioning of food 
products. But before I do, I also want to share and associate 
myself with the frustration that Congresswoman Kelly expressed 
in that we just don't feel that we are getting real answers 
that we can go back to our constituents and discuss that we 
have had this meeting and we found some solutions.
    Honestly, I am very disappointed in what I have heard in 
this first hour of this discussion. I know that in the 
Department of Defense different Secretaries of Army and other 
Forces have told us that the goal is 5 percent, to buy 5 
percent from small businesses. And, actually, I think that the 
performance has been less than 2 percent on goods and services. 
You said that you wanted to talk about big ticket items, that 
there is no data, you said, using your words that would show 
that small businesses have negatively been impacted--let me say 
that the reality is that in the area of goods and services, I 
am going to divide my questions and stay within the 5 minutes 
on to big ticket items on food.
    I have experience on that, so I will say that on food 
products such as beef, pork, chicken and so forth, in the 
categories of raw frozen meat products, in the area of cooked 
frozen products, charbroiled frozen ready, fully cooked frozen, 
in those areas are now going to prime vendors, large national 
distributors. An example of that would be my friend Ed Cisco, 
and what they have done is they get these contracts and the 
interpretation of the law has been by the Department of Defense 
that you can bundle and that you can combine contracts for 
transportation, for janitorial supplies and janitorial 
services, and throw them in with food products, and thus show 
that you were meeting the 30 percent objective that was set out 
by the Department of Defense to satisfy the small business 
Committee.
    And that doesn't work, that doesn't work, because you have 
wiped out where we used to have over 30 small businesses 
bidding on these categories that I gave you, they have just 
been knocked out, because they cannot bid directly to you, to 
the Department of Defense. They now have to give bids to Cisco 
or any national distributor and the way that it is working now, 
you have just done away with the small businesses that we used 
to have such a hard time creating because it is capital 
intensive; and, therefore, by discontinuing to buy from them 
and take their bids directly, they are not getting it into the 
big distributors.
    Also you have done away with using domestic beef, pork and 
chicken, because a lot of those products are now imported, and 
they are being sold as just commercial product to those 
distributors; and thus our farmers and ranchers are negatively 
impacted because we are not creating the demand that we once 
had. And if our farmers and ranchers are complaining about 
commodity prices plummeting because of innocent demand dropping 
and because our Department of Defense is not using our 
products, then I think that this is proof that it is 
negatively, I am talking of bundling and prime vendors, is 
negatively impacting, not only our small businesses, but our 
ranchers who produce the chickens and produce the pork and 
produce the beef.
    All of this to say that I didn't like what you said that we 
did not have data to show that small businesses are negatively 
impacted; that is not our job, that is your job. Our job is to 
listen to our constituents who hire 10 people or 100 or 300 or 
more; and if they are telling us that they lost the Department 
of Defense contracts and friends like Solomon Ortiz, who is the 
ranking member of Armed Forces and Silvestre Reyes from El Paso 
also on Armed Forces tell us that one of the biggest concerns 
that they hear on their subcommittees is the loss of minorities 
supplying the military, then there must be some truth to what 
we are hearing in Oklahoma and in Texas that our small 
businesses are no longer supplying Department of Defense.
    There has to be truth to what we have heard these last 3 
years. I would like to hear from you what you are going to do 
about it.
    Mr. Oliver. I am going to get the data. I am going to get 
the data and determine facts. I am saying to you that when I 
looked at this in the last 10 days, I do not think there is 
adequate data at the moment.
    Mr. Hinojosa. I agree, there is no accurate data.
    Mr. Oliver. I will get it.
    Mr. Hinojosa. Can we get it by the spring?
    Mr. Oliver. That is fully my intention. And as I said, I 
will do it with you. In other words, we will work on the 
statement of work together. I would like you to have some 
people that participate in our intermittent--when we get the 
data as it goes intermittent. We ought to do this together, 
because otherwise I will just bring a report up here, and you 
will yell at me, and then that will hurt my feelings. So let us 
do it together and be comfortable with it.
    Mr. Hinojosa. I am willing to do it together. And I am 
willing to lower my volume. And I simply want to show you that 
after 3 years of listening to constituents who say you guys 
come down here and you call these meetings of business, small 
business people, and we tell you, and you do nothing. It is 
just a bunch of political rhetoric that you all come up here 
with.
    And so I am telling you, I didn't come to Congress to give 
political rhetoric to small business people. I came to try to 
find solutions that are going to create jobs.
    Mr. Oliver. And I didn't come into government to not do 
anything, so it is a nice match.
    Mr. Hinojosa. Good. I look forward to working with you, Mr. 
Chairman, and with the Ranking Member and, of course, with Mr. 
Oliver. Thank you.
    Chairman Talent. All right. I am going to recognize next on 
the list in the Democratic side is Ms. Christian-Christensen.
    Ms. Christensen. Thank you, Mr. Chairman, and thank you for 
this very, very important hearing. I have a few questions.
    As far as women, minorities, and other disadvantaged 
businesses, the process of bundling leaves much more of the 
responsibility for other subcontracting to the prime 
contractor; and, in the past, we as the Federal Government have 
had to intervene on behalf of women-owned, minority, and 
disadvantaged businesses. How has contract bundling in your 
estimation--I don't know if you were able to answer in the last 
questioning, how has it really affected the minority small 
businesses? Have they increased or decreased? Do you have 
numbers?
    Mr. Oliver. Let me say this again. I am really a fan of 
real data. And, for example--let me give you an example. There 
is an effort going forward in the Department of Defense to use 
credit cards for minor purchases. It seems to me that there is 
a logical question that if you use credit cards and you allow 
the people to use credit cards, there is a question about 
whether or not that impacts small businesses as that credit 
card limit rises.
    Right now it is $2500. There are a whole bunch of people 
who say we want to be $10,000 and above that. I won't let that 
happen, because nobody's produced the data to show me what has 
happened with respect to small businesses, you know, before we 
started and all that.
    And I have got all of these companies that are supposedly 
producing all this--have data and all of that, and they can't 
tell me where the impact is, but you guys have to pass it. But 
I won't bring that forward, because there is no data that 
enables me to come testify to you and say I am comfortable with 
it.
    I would like to say this again. I do not think there is 
sufficient data to say something either way. There are a couple 
of studies that talk very nicely about why bundling could be 
good and can be good in some circumstances. And I think we have 
to be careful about rejecting change in all areas because as I 
talked about in some technology areas, you may want to do that. 
At the same time there is a balance that we are interested in 
maintaining, it has to do with society and it has to do with 
other things that we believe in.
    I am not comfortable with this data. I will work to get 
some, Congresswoman.
    Ms. Christensen. Okay. My next question. I am also a member 
of the Travel and Tourism Caucus Steering Committee. And we are 
going to hear testimony from the Society of Travel Agents in 
Government. But while I have you here, I would like to ask you 
a question about some of the issues that they are concerned 
about.
    It appears that what the Department of Defense has done has 
made it just about impossible for small businesses to 
participate because most travel agencies are small and, on the 
other hand, it may have made it impossible for even some of the 
larger travel agencies to compete, because they already have 
very large contracts to manage. And then looking through that 
testimony also, the official travel is large in and of itself, 
but then you have attached leisure travel to those contracts 
making them more impossible.
    How do you foresee fulfilling the responsibility of the 
Department of Defense to small businesses in the travel 
industry under those circumstances?
    Mr. Oliver. Let me get back to you, Congresswoman, because 
I was looking at that this week, and I am not comfortable that 
I fully understand all of the ramifications. I will get back to 
you on that.
    [The information may be found in the appendix.]
    Ms. Christensen. Okay. I think my other questions would 
probably be repetitive, so I am going to move on, Mr. Chairman, 
and I will have some of my other colleagues to ask questions.
    Mrs. Kelly [presiding]. Next I would like to call on Mr. 
Manzullo.
    Mr. Manzullo. Thank you. I just have a couple of questions. 
And I am sorry I didn't have the opportunity to listen to your 
testimony, though I have read most of it while I have been 
waiting here.
    My question concerns itself with, how you are going to do 
this study. I mean who is going to be hired? How are we going 
to have people who have been aggrieved who have contacted us 
involved, and who is chosen to do this study? Is it going to be 
a think tank that doesn't know what small businesses are about? 
Can you give us some guidelines that you are thinking about?
    Mr. Oliver. Yes, sir. Yes, sir. What I said is that I would 
get the draft statement of work over to the Chairman and each 
member of the Committee today or by the end of this week. And I 
would like all of you to have your staffs take a look at this 
within the next 10 days, and then we will talk about it then. 
In other words I would like to do this together. I mean it is 
important, I don't want you to think----
    Mr. Manzullo. You want our input on how to do the study?
    Mr. Oliver. Yeah, I would like your input on how to do the 
study. I would like your input--I would like to get some of the 
people who have come to you and feel they have been aggrieved.
    Ms. Velazquez. Mr. Manzullo, would you yield?
    Mr. Manzullo. Of course.
    Ms. Velazquez. I would just like to suggest to the 
gentlemen that maybe he should be working with the Office of 
Advocacy so that they could help identify an independent firm 
to conduct the study. That is a suggestion.
    Mr. Oliver. Yes, ma'am. I will take that. I mean, to be 
honest with you, what I said was that I worked the Committee 
completely I think, and I will take everything on. I want to 
have somebody that I think is competent do the study. And I 
know a lot about this, okay? So what happens is that is the 
only reservation I said is if we end up with disagreements over 
who is going to do the study, I am going to choose it. Because 
I want to have somebody who I think is competent.
    But I really like to work with it and rather--and in 
addition, once we get it established, what I would like to do 
is I would like to hold--I am going to hold meetings every 2 
weeks--every couple of months and say what are you doing and 
how are you doing, because if you care about a study, that is 
what you do, and you don't wait until the end and the guy 
delivers you a piece of paper that you think they missed the 
whole point.
    I will invite your staffs to be part of that. I am willing 
to be completely cooperative, I know this is surprising, 
Congressman Manzullo.
    Mr. Manzullo. We still vote on your appropriations bill; I 
would remind you.
    Mr. Oliver. I noticed that, sir, that is the only reason I 
am here. I am just saying let us make this--let us do this 
together.
    Mr. Manzullo. We are very much concerned, because the 
little business people are going to get squashed. You are going 
to hear from four groups here today, what I would like to see--
in addition, I would like to see not only the people that you 
propose, I want to know their background; I want to know what 
studies in the past they have conducted; I want to know if they 
worked with small businesses; I want to know if the people who 
are going to do the study have any small business background 
themselves.
    Because small business people--I was raised in small 
business. We think differently than people who work in 
government, including myself, we think differently than big 
people. That is just the way we are. We are a very unusual 
breed of people and insist that--I mean, we may come down to 
the fact that you may not agree on the people to do the study, 
we will have another hearing.
    And at that time, we will have some small business people 
have the opportunity to have input on why they think that the 
people that you want to choose may not be the particular people 
who--for example, maybe somebody like the National Federation 
of Independent Businesses might be good people to contract 
with. They do something like that, because they know small 
business people.
    Mr. Oliver. Congressman, I am absolutely open and willing 
to discuss this period.
    Mr. Manzullo. I appreciate that.
    Mr. Oliver. If you don't like it, you can call me back for 
another hearing, because you guys are in charge.
    Mr. Manzullo. Thank you, I appreciate that. That is all I 
have.
    Mrs. Kelly. Thank you, Mr. Manzullo.
    Mr. Phelps.
    Mr. Phelps. Thank you, Madam Chairman. I just have really a 
general question, and this can't be a new thing that has been 
brought to your attention, the idea and the mentality of women-
owned and minority-owned businesses getting a piece of the 
action of the Defense contracts.
    So I guess my question is, none of this came up in the 
August hearing. Do you have any policies set forth for your 
people to say, your people to say I would like for us to meet 
this goal, that goal, to make sure we are active? And I guess 
in that I would follow up to Nydia's questions and concerned 
working with the Advocacy Office and people in small business 
in every aspect to try to improve the atmosphere.
    You would think you would want to come before us, and say I 
have got good news to report to you before you ask the 
questions that are haunting us, this is what we would like to 
say we have improved on; is that coming about?
    Mr. Oliver. Yes, sir. We have policies, which I think are 
very explicit about the importance of small business, minority-
owned business signed by the Deputy Secretary of Defense.
    Mr. Phelps. Are these new policies, or have they always 
been there?
    Mr. Oliver. They have been there for years. I think the 
first one, the one that is currently--anyway they have been 
there for years. We are tracking to--I get reports like this 
every quarter about how we are doing with respect to our goals. 
I talk--how often do I talk to you, Bob? I talk to Bob 2 or 3 
times a week. I know where we are in the goals, that is the 
reason I said at the beginning, I don't have data on how 
bundling is affecting specific things, but I do have data on 
the overall picture, and in the overall picture there has been 
no significant change since bundling started, okay?
    And we have met our goals in most years, eight out of the 
last ten, the goals have essentially been increasing. And I 
think the amount that is going to--and in my indications 
statistically isan amount that is going to small business is 
increasing over the years. I think there is a good story there, but I 
am not sure that is the issue of this hearing. But I want to tell you 
that I understand there is a good story.
    Mr. Phelps. I understand. It is my understanding, of course 
I am not a new member, that I guess this issue is somewhat 
focused, but it involves many things that are not described as 
probably the agenda.
    Mr. Oliver. Yes, sir.
    Mr. Phelps. I am just interested in knowing if this has 
been such a policy that has been in the record, and it is part 
of the format and it is--and you are pushing to get these goals 
met, if they haven't been met, someone needs to answer why and 
then maybe we can play a part, instead of blaming everybody, we 
are just trying to help.
    Mr. Oliver. Yes, sir. And----
    Mr. Phelps. But I know the data is maybe the key.
    Mr. Oliver. We have not met our goals in 2 years, I mean I 
know----
    Mr. Phelps. Has anyone stepped forward and said perhaps 
this is a reason why or why not?
    Mr. Oliver. Not meeting the goals in 2 years out of 17 to 
meet? We have met our goals in 15 out of 17 years and every 
time you meet the goal, what you tend to do is ratchet the goal 
up because this is an important issue.
    Mr. Phelps. Raises the standard, I understand.
    Mr. Oliver. Yes. So we met our goal in 15 out of 17 years, 
what I am saying is----
    Mr. Phelps. But the goal of minority-owned business is my 
specific question. You are saying you met that goal and you are 
pretty much satisfied; is that what you are saying?
    Mr. Oliver. No, no, I am saying that----
    Mr. Phelps. You made the goals specifically.
    Mr. Oliver. I will tell you what I was thinking about with 
this hearing. I may have interrupted. Instead of coming forward 
and giving you a general thing that says--in fact, this is what 
my staff said, they said, look, what you go over and do is, you 
say, look, we met the goals 8 of the last 10, 15 out of the 
last 17, et cetera, et cetera.
    And you can talk about the changes in government 
procurement and the changes and the money, where it goes to, I 
don't think that is the issue. This is me. I think your issue 
is what does bundling have to do with what is going to happen 
to small business?
    In other words, you are thinking about, you are doing in 
some limited cases bundling of contracts. What is the impact of 
that on small business, and what do you expect it to be? Do you 
understand what I am saying? I am not giving you platitudes in 
how we are meeting this in 15 out of the 17, 8 out of the last 
10. I am trying to address what I think is the Committee's 
questions.
    Mr. Phelps. For a new Member, maybe I am out of place, you 
keep referring to bundling as if it is already understood what 
it is, and then part of the questions we have is can you define 
bundling.
    Mr. Oliver. Yes, sir. There is a very specific definition 
of bundling which is in the legislation or the SBA regulations 
that says it is two or more contracts of $10 million which are 
put together, which are currently out as smaller contracts. I 
think there is pretty good guidance, which is good, because it 
means I have got thousands of people in the field that have a 
feel for what bundling is and therefore then what small 
business restrictions they have to make.
    Mr. Phelps. Thank you very much, sir.
    Mrs. Kelly. Thank you, Mr. Phelps.
    Mr. Davis.
    Mr. Davis. Thank you very much, Madam Chairman.
    Mr. Oliver, we were talking about the Office of Advocacy a 
moment ago. It is my understanding that they have developed 
statistics which show that for every $1 of bundling that small 
businesses lose $1, but every time a contract is bundled, the 
dollar amount is just the reverse for small business 
opportunity and small business development. How would you 
respond to that?
    Mr. Oliver. Congressman, I will get that data and review, 
and I will give you an answer. I need to review it.
    [The information may be found in the appendix.]
    Mr. Davis. Just a moment ago when there was a discussion 
relative to the meeting of goals, which goals were you talking 
about?
    Mr. Oliver. I was talking about small business prime 
contract. As you know, there are a whole bunch of goals. I was 
just looking down at small business primes.
    Mr. Davis. So you are saying that DOD has been meeting 
those rather consistently?
    Mr. Oliver. Yes, sir. Absolutely.
    Mr. Davis. As an example of what is being met, having been 
met, would you share--let us take it year to year.
    Mr. Oliver. Yes, let us take 1997, the goal was that you 
have--21.7 percent of the primes would go to small businesses, 
we were at 22.9 percent. Let me give you a year we don't make 
it. 1998, the goal was 21 percent, which is $23 billion and--or 
the goal was 22 percent, we made 21 percent. Eleven months this 
year, we are at 19.9 and the goal is 20.6. And I don't know 
whether we are going to make it. But I mean that is an example 
what I was looking at.
    Ms. Velazquez. Mr. Davis?
    Mr. Davis. Yes.
    Ms. Velazquez. Would the gentleman yield? But he doesn't 
say to you that the goal for every other Federal agency has 
been set at 23 percent, even though they have the largest 
budget of all the Federal agencies combined.
    Mr. Davis. I think--and that comes back to actually----
    Mr. Oliver. What you are buying.
    Mr. Davis [continuing]. What you are buying. And the 
question is, is there anything about the Department of Defense 
in terms of structure or in terms of what it uses that makes it 
more difficult to use small minority-owned business in 
procurement? Is it more difficult for Defense to do it than 
somebody else?
    Mr. Oliver. I don't know if it is more difficult, because 
we have really good contracting officers, and whether or not 
members of the Committee believe this, they really are pure of 
heart of people, I mean that are interested in doing good 
government. And so the people I have seen work really, really 
hard to do what roles are set down by this body that are of the 
interests to the country.
    Now with respect to--there are some questions, and I 
haven't explained it well and I need to try better, but what 
happens is if you are buying services or if you are buying 
things for the General Services Administration that are 
relatively small items, and you are buying aircraft carriers, 
there is a difference in the number of small businesses that 
can be primes.
    And I am telling you that we do--out of the money that we 
spend, approximately $60 billion a year goes to what I was 
referring to as big ticket items, really complex items that 
take a great deal of experience, a great deal of experience, 
that is more difficult for a small business to be prime on it, 
and at the same time when I look at the numbers, I have got 
small businesses as subs for more than 40 percent of what we 
are doing. And I don't know if it is the right number or not, 
but it hasn't decreased. So I think there are some special 
things about the Department of Defense.
    Mr. Davis. Has the Department given any thought to looking 
at other kinds of items and perhaps targeting or skewing those 
numbers towards small business?
    Mr. Oliver. Those numbers towards that.
    Mr. Davis. Yes.
    Mr. Oliver. Yes, sir. And we have different goals in 
different areas. And I will have to get them to you, but I know 
it is going on, because in the construction business, for 
example, this is an area specifically that you can go after.
    Mr. Davis. Yes.
    Mr. Oliver. I will get back to you.
    [The information may be found in the appendix.]
    Mr. Davis. I appreciate that, because it seems to me there 
would be just the opportunity to try and compensate or make up 
for the inability to compete as effectively on the big ticket 
items that you might make up on some others.
    Mr. Oliver. Yes, sir.
    Mr. Davis. Thank you very much.
    Mr. Oliver. That is a good point.
    Mrs. Kelly. Ms. Millender-McDonald.
    Ms. Millender-McDonald. Thank you, Madam Chair. Good 
morning, Mr. Oliver. It is good to see you here. I hear you 
have been in your position just for 18 months; am I correct in 
that?
    Mr. Oliver. Eighteen months, June of last year, whatever 
that works out.
    Ms. Millender-McDonald. That is about 18 months. Madam 
Chair, I do have a statement for the record. But I would just 
like to just read excerpts from that statement, Mr. Oliver. And 
it states here that the proposed Air Force bundle known as the 
Flexibility Acquisition and Sustainment Tool which is FAST, 
bundle would consolidate thousands of contract requirements 
into as few as three prime contracts, for three out of five Air 
Force Bases. The estimated value of this bundle ranges from a 
high of $18 billion over 15 years to $3 billion over 5 years.
    And this is a type of bundling because of its size that 
would exclude small business from prime contract opportunities. 
Given that and given my position as Ranking Member on this 
Committee's empowerment subcommittee, I am determined to ensure 
that small businesses are empowered.
    Now from that premise, we recognize that small businesses 
will be the engine that drives the economy in the year 2000. I 
have voted for the DOD budget because of the jobs that are in 
my district from the Defense budget. But by the year 2000 small 
businesses will be creating more of those jobs.
    Given all of this, I have now read the GAO report that 
indicates that you were asked, or the DOD, you were not there, 
that is why I asked if you were there, but I need you to follow 
up onthis. April of 1994, the GAO report said that Congress to 
the DOD, in terms of your contracting, that Congress had expressed 
concerns that small businesses are losing opportunities to contract 
with the Federal Government because contracting agencies are packaging 
contract requirements into acquisitions that effectively may preclude 
small businesses. This practice is known as contract bundling.
    It goes on to say that DOD advised us it could not provide 
any historical data from which we could have accessed or 
assessed, I am sorry, the extent and impact of bundling. That 
was 1994.
    Someone has done some type of empirical data, hopefully, to 
suggest why contract bundling has not been effective for DOD. 
This is 1994.
    I would suggest that you go back and look at whomever was 
there, because this GAO report suggests that someone should 
have been looking into the impact, the negative impact of 
bundling as it relates to small businesses in DOD.
    I further call your attention to the fact that DOD 
officials and others believe bundling could have a negative 
impact on small businesses that want to compete for government 
contracts. I am just reading excerpts from this, because it is 
important that you understand this issue has been raised by a 
GAO report to DOD. And there has to be some empirical data 
someplace that we can draw from to see why is it that if your 
policy continues to be a bundling policy, then we need to go 
back and revisit that, because it is important that, again, 
small businesses get those contracts from DOD; or I will have 
to reassess my position when it comes time to being on the 
floor.
    Now, the other thing I want to know is that if you are 
looking at the reports from your contracting officers and you 
are evaluating that, do you not see that disparity between 
those contracts vis-a-vis prime, sub, small businesses, large 
contractors; and if you haven't, I really firmly suggest that 
you do that and report back to this Member. And I am sure all 
other Members want it, because we all have small businesses, 
but it is important that you go back and see why is it that 
this was raised in the GAO report in 1994, and yet you are 
saying that you do not have--I am thinking I hear you saying--
empirical data. Thank you, Madam Chair.
    Mr. Oliver. Congresswoman, there are a couple of things you 
might want to have your staff look into. One is with respect to 
FAST, the people told me that they are specifically including 
three contracts and a contract which has to be awarded to a 
small business association. One of the primes has to be a small 
business, okay?
    Ms. Millender-McDonald. Okay.
    Mr. Oliver. And secondly, the other criteria they are 
looking at very carefully----
    Ms. Millender-McDonald. One of the three.
    Mr. Oliver. I think it is three in one. And I think they 
are going to--they intend to award 4 contracts, one has to be a 
small contract.
    Ms. Millender-McDonald. One in four, okay.
    Mr. Oliver. The other part is they have--they are looking 
at very specific criteria to insist that the other three--the 
three primes are not small businesses, have significant small 
business inclusion. So somebody--there may be a data flaw 
there.
    Ms. Millender-McDonald. Would you double-check that and 
then get back to me on that?
    Mr. Oliver. Yes, ma'am I am.
    [The information may be found in the appendix]
    Ms. Millender-McDonald. I am also understanding your prime 
gets paid within 10 days, and your subs that are related to the 
primes have a much longer wait for their money, which is 
absolutely unacceptable.
    Mr. Oliver. It is a separate issue. And I will take it Ms. 
Congresswoman. As you know it is a separate issue, but I will 
get back to you.
    Ms. Millender-McDonald. Please do.
    [The information may be found in the appendix.]
    Mr. Oliver. Let me--there is another--something you said 
and--anyway, if my staff--I mean all the people who work this 
work for Jack Gansler and me, they have been unable in 10 days 
to locate any data. I don't think the data exists.
    Ms. Millender-McDonald. Someone has just given you a blue 
note.
    Mr. Oliver. I will read it to you verbatim just to show how 
much I share with the Committee. I hope it doesn't say anything 
about my laundry. All 8(a) contracts will remain. What he is 
trying to tell me is that the 8(a) contracts--that currently 
all the stuff that FAST is going to do with this, the 8(a)s are 
going to be exempted from it. Do you understand what I mean? 
They are not going to be bound up in the bundles that is 
besides the point.
    Ms. Millender-McDonald. That is a different program 
altogether?
    Mr. Oliver. Yes, ma'am. We will get back to you.
    Ms. Millender-McDonald. I understand that.
    Mr. Oliver. What I am pledging is to go out and get data in 
cooperation with the Committee so the Committee can see all of 
this. And we will determine that. And that is it.
    Ms. Millender-McDonald. All I am saying is, sir, we need to 
have you go back and look at this 1994 report as to why data 
was not collected at that time, given the question raised on 
the GAO report. Thank you.
    Mr. Oliver. Yes, ma'am.
    Mrs. Kelly. Thank you, Ms. Millender-McDonald.
    Ms. Millender-McDonald. Thank you.
    Chairman Talent. Mr. Oliver, I just want to ask two quick 
questions here. I would like to know what effect, what the 
effect of this change will be on the small business primes? How 
many of them are likely to be wiped out?
    And the other thing is that they may be able to bid on--the 
small businesses may be in the initial contract, but when that 
contract then is reupped, they are going to be out.
    Mr. Oliver. Yes.
    Mrs. Kelly. So we want to make sure that doesn't happen, 
and I want to go on record as saying that.
    And now I am going to call on Ms. Tubbs Jones so that she 
can quickly ask some questions here.
    Ms. Jones. So you won't have to be here after the break.
    Mr. Oliver. Yes, ma'am.
    Ms. Jones. Mr. Oliver, I am reading from your statement on 
page 6, and it says, in the DTS-CE program for example we were 
unable to award prime contracts to small business. We required 
the successful contractors to commit a 20 percent business 
subcontracting goal.
    My question is, how did they do?
    Mr. Oliver. I will find out, ma'am.
    [The information may be found in the appendix.]
    Ms. Jones. Okay. Secondly, I keep hearing you say that we 
can continue to meet 20, 21 percent with small businesses. My 
question is, in light of the fact that we are in a bull economy 
and the economy is supposed to be doing so well, why would it 
not be that you are exceeding the 20, 21 percent for small 
business so that small business enjoys in the fruitful--in the 
fruit of this great booming economy? Because what it would 
suggest to me if you are still at 20--at that level, that small 
business may not be really----
    Mr. Oliver. My economy isn't increasing. My economy is 
dependent upon you guys completely, and you guys are reducing 
my economy.
    Ms. Jones. Not you guys, because I have only been here 11 
months, so it is not me yet, but if you don't continue to deal 
with small business, I will move to reduce it.
    Mr. Oliver. You will help to reduce that.
    Ms. Jones. Yes, sir. Thank you. But I want to associate 
myself with the comments of my other colleagues, and only 
because we are short of time, but it is clear to me that we 
need to be sure and understand the impact that bundling has on 
small business and for me particularly minority and women 
businesses and to understand if it is not doing what we need it 
to do, then we need to figure out bundling is not what 
government needs to do.
    I would like that to be my statement for the record. I am 
done.
    Mrs. Kelly. Would you like me to hold the hearing open so 
you can continue?
    Ms. Jones. No, I don't want to be accused of that. No, no, 
I associate myself with the rest of my colleagues.
    Mrs. Kelly. Mr. Oliver, I am going to hold the hearing 
record open for a certain period of time because there are 
written questions and there are people who were not able to be 
here to ask their questions, so you should expect that.
    At this time I am going to--we are going to adjourn just 
simply to go and vote for a certain space of time and then we 
will be back. Ten, 15 minutes. When we come back, I am going to 
impanel the second panel.
    [Recess.]
    Chairman Talent. All right. If the witnesses for the second 
panel will come forward, please, we will get that part of the 
hearing going. And I want to thank these witnesses, many of 
whom came a distance for being willing to do that. When we get 
to--we can turn that down when we get--when we need it I think.
    Our first witness on the second panel is Mr. Paul Murphy, 
who is the President of Eagle Eye Publishers of Fairfax, 
Virginia. We will have members of the Committee coming back in, 
but I want to get going because we are a little behind time, 
Mr. Murphy.

 STATEMENT OF PAUL MURPHY, PRESIDENT EAGLE EYE PUBLISHERS, INC.

    Mr. Murphy. Good morning, Mr. Talent, members of the House 
Committee on Small Business, thank you for the opportunity to 
testify today about the impacts of contract bundling. As you 
may be aware, Eagle Eye is currently under contract with the 
Office of Advocacy at the U.S. Small Business Administration to 
update our 1997 study about the impacts of contract bundling on 
small businesses.
    Our new study is in the final stages of completion. And I 
am sharing with you today several of our key findings that will 
be incorporated into the final analysis, and the final report 
should be available later this month.
    According to our latest figures, contract consolidation in 
general and bundling in particular are at their highest levels 
since the start of year-by-year measures in fiscal 1992. The 
share of all contracts that are bundled reached a new high of 
12.9 percent in fiscal 1998, up from 11.6 percent in 1992.
    The annual share of bundled contracts bottomed out in 
fiscal 1995 at 10 percent and has risen steadily since. I 
reference table 1 at the back of the testimony there. The 
increasing tendency towards bundled contracts has occurred 
during a period of overall contract consolidation. Since fiscal 
1992, accounts of prime contracts valued at least $25,000 have 
declined at least 16 percent from 200,198 to 167,255 in fiscal 
1998.
    Total prime contract dollars remained a relatively stable 
$184 billion in fiscal 1998 leading to a growth in average 
contract size from $915,000 to $1.1 million. Although the 
number of large contracts valued at least a million dollars 
declined with the overall decrease in the number of contracts, 
the share of large contracts; that is, contracts greater than 
$1 million grew from 18 to 21 percent. At the same time, the 
share of small contracts valued less than $1 million dropped 
from 80 to 79 percent.
    During this 10-year period, the average size of a large 
contract became smaller, while the average size of a smaller 
contract became larger. Now as the average prime contract grew 
in size, the number of individual contractors as measured by 
unique DUNS numbers shrank 16 percent from 83,915 in fiscal 
1992 to 70,755 in fiscal 1998. In fiscal 1992, small businesses 
represented 69 percent of all contractors but constituted only 
66 percent by fiscal 1998.
    So in other words, our data show that larger and larger 
contracts are being awarded to a shrinking number of prime 
contractors, a growing percentage of which are large 
businesses.
    Let me talk a little bit about our methodology in analyzing 
bundled contracts. Our study captures only a portion of the 
bundling that actually occurs. And there are a number of 
reasons for this. The first has to do with how we define a 
bundled contract. As we did in our first analysis, Eagle Eye 
still considers as bundled those contracts exhibiting 
dissimilar standard industrial classification or SIC codes, 
contract type, and place of performance codes.
    Differing product service codes, another market indicator, 
are also a potential sign of bundling as they would show 
differences in the type of work being performed on a contract, 
similar to differences in SIC codes.
    Chairman Talent. Mr. Murphy, let me ask you a question to 
clarify this section of it. So you only consider contracts as 
bundled if the bids that are put together have dissimilar SIC 
codes?
    Mr. Murphy. Yes.
    Chairman Talent. So they are different kinds of work?
    Mr. Murphy. Yes.
    Chairman Talent. I mean I don't understand the logic of 
that, because let us take the travel agent-type of contracts, 
they wouldn't have dissimilar SIC codes, but if they put 
together all the different travel agent bids for several bases, 
that certainly is a bundle isn't it? Or would they have 
different SIC codes?
    Mr. Murphy. You anticipate my third paragraph there.
    Chairman Talent. Okay, all right. Go ahead, then I will 
probably ask about that later then.
    Mr. Murphy. Okay. Differing product service codes are a 
potential indicator of bundling as they would show differences 
in the type of work being performed on a contract similar to 
differences in SIC codes as we said. However, we found many 
differences in PSCs to be spurious as a result of changes in 
the PSC coding system over time. Also some differences in PSCs 
are subtle and need further study before we treat them as 
indicators of bundling.
    For instance, I am thinking there in terms of R&D codes 
which show different stages of R&D which can sometimes be very 
subtle differences and we didn't necessarily think that was an 
indication of bundling. Had we included the 72,749 contracts 
fiscal 1989 to 1998 that exhibited differences in PSCs in our 
assessment of bundling, the bundled contracts share we are 
measuring likely would have jumped to well over 20 percent a 
year.
    A second reason our measure of bundling is understated is 
that in this analysis, we altered our methodology to include a 
4-year lookback period in determining instances of bundling on 
each contract. In our year-by-year measure of bundling that is 
fiscal 1992, 1993, 1994 we began in fiscal 1992, in our year-
by-year measure, we flag a contract as being bundled only if it 
exhibits differences in SIC, contract type and place of 
performance code up to and including the year being measured.
    This controls for the tendency of older contracts to show 
increased signs of bundling over time. Am I----
    Chairman Talent. Now, you go ahead.
    Mr. Murphy [continuing]. To rush? This controls for the 
tendency of older contracts to show increased signs of bundling 
over time which has the effect of boosting bundled contract 
rates in the later years of the analysis. We estimate as much 
as 1/3 of all bundling that eventually occurs over the life of 
longer contracts is missed using this lookback strategy.
    A third reason the study understates bundling is that, by 
definition, a bundled contract requires a modification. If a 
contract shows no mods in the database; that is, only one 
action, then it cannot be considered bundled.
    A fourth source of understatement is the fact that 
bundling, and here is your point, Mr. Talent, is the fact that 
bundling can occur within the same SIC contract type and place 
performance codes. If modifications occur on a contract that 
show no differences in these codes, then again the contract 
cannot be considered bundled according to our methodology.
    Still another source of understatement is that our measure 
relies on contract officers who are willing to go to the 
trouble of reclassifying contracts as the work performed under 
a contract changes over the contract's life. Given the 
increased workload COs must perform, we must assume that many 
bundled actions go undetected because COs are simply trying to 
push work off their desk as quickly as possible.
    Finally our bundled contract measure is understated because 
our methodology only captures 62 percent of all dollars on 
contracts worth at least a billion dollars. Most people would 
agree that contracts this large are by definition bundled.
    Distribution of bundled distributions. Bundled contracts 
are distributed disproportionately to large businesses. Our 
data show that between fiscal 1992 and 1998 small businesses 
received a total of 784,427 contracts or 62 percent of all 
prime contracts awarded during this period. However, small 
businesses receive only 53 percent of the bundled contracts. In 
terms of dollars, the $310 billion small businesses received in 
the 10-year period constituted 17 percent of all prime contract 
dollars, yet their $106 billion share of bundled contracts 
constituted only 10.8 percent of all bundled dollars. That is 
referenced in table 3.
    So in conclusion, contract bundling and contract 
consolidation are occurring. And it is working to the detriment 
of the small Federal contractors. Average contract sizes and 
rates of contract bundling are at their highest levels since 
fiscal 1992, having grown steadily since the mid-1990s.
    The trend toward contract consolidation benefits large 
businesses at the expense of small businesses, because large 
firms are better able to position themselves as recipients of 
contracts of increasing size and complexity. Overall declines 
in the numbers of small businesses may be linked to recent 
declines in small business Federal market dollar shares. Plans 
for further bundling and contract consolidation by DOD and 
other agencies will only exacerbate these trends.
    I brought along our database if we have time to take a look 
at it. RPTS SEBO
    Chairman Talent. Yes, please.
    Mr. Murphy. Ms. Velazquez had asked some questions about 
Warner Robbins. Eagle Eye has the Federal Procurement Data 
Center's database on CD-ROM, and about 3 years ago we put it 
all on Windows to enable quick, interactive reporting. And the 
database, as you know, is a database of all the prime 
contracts, $25,000 and up. It is a database of all the 
transactions, which is all the task and delivery orders on the 
contracts. But we have taken the data and presented a top-down 
view, basically a view 10,000 feet, if you will, to show key 
trends very quickly.
    We are looking at contract transactions that occurred on 
contracts that were active between fiscal 1994 and fiscal 1998. 
And we present eight screens with which to view the data. You 
can view the same selection of data by agency, by claimant 
area, contract number, company, place performance, product 
performance, SIC codes and weapon codes. Right now we are 
looking at the agency screen with no filter set.
    I am going to switch to the place of performance screen to 
show you the same set of data, ranked by place. And as we 
scroll down, obviously we see California is ranked first. 
California received $130 billion over this 5-year period. These 
are contractors doing business in California, not just with 
street addresses in California.
    Then comes Virginia, Texas, Maryland, and so forth, until 
you get down to 11, which is Georgia. And they received----
    Ms. Jones. Can you blow it up?
    Mr. Murphy. That is what I am going to exactly.
    So you get down in Georgia here in the lower window here, 
you see all the cities in Georgia ranked by their 5-year dollar 
totals of the Federal prime contracts that were received by all 
agencies, DOD, DOE, NASA, etc.
    Now, what I did before coming here to save time was--let me 
just jump here to the company screen and show you again the 
same information by company, Lockheed, Boeing, Raytheon; and as 
you scroll down in the top window, you see all the subsidiaries 
and the divisions of those companies change.
    And the same thing with contract. You have contract numbers 
up here, and down below you have all the mods on those 
contracts, and you can tap this data around and see who 
received the contract, who awarded it, the Air Force, 
headquarters, what work was done, the contract, product 
service, SIC code, where it was performed--this one happens to 
have been an area--and various terms and conditions of the 
contract until we get back to the mod record itself.
    Prior to coming here, I set a filter--since I knew somebody 
was going to be talking about the Warner Robbins situation 
here, I set a filter on place of performance Robbins Air Force 
Base or Warner Robbins. There were actually two place 
performance designations for Robbins in the database. If you 
are familiar with the data, you also know there is a code 
called the type ofbusiness code that starts with ABC and goes 
down to JK and L. Type A represents all the SDBs, all the minority-
owned businesses 8As and so forth. And business type B are all the 
other types of small businesses.
    When you set this filter on the data and then you look at 
the Agency screen, we can see not surprisingly that DOD spent 
99 percent of the money at Warner Robbins in the 5-year period.
    But when we go to the company screen now, Ms. Velazquez, 
here is an answer to one of your questions. Here are the small 
businesses, ranked in dollar order by the work that they are 
doing at Warner Robbins. And this number up here tells you 
these companies--these small businesses received a total of 
$398 million over the 5-year period. A total of 347 contractors 
received that $398 million.
    And I did another analysis without the type A and business 
type A and B filter set. And I know the total amount of money 
spent at Warner Robbins was over $900 million over the 5-year 
period. These dollars represent about 41 percent of that total. 
If you want to know what kind of work they are doing on these 
contracts, you can just go to the SIC codes and see that there 
is a lot of 1542 work, nonresidential construction, that was a 
significant part of it, 102 million; 42 million of it was 
engineering services; 37 million plumbing, heating and air 
conditioning; a lot of the kinds of services that small 
businesses provide.
    If you go to the contract screen, you can see the same 
data, sorted, totaled and ranked by contractor. Here we see 
that small businesses received 712 contracts; that is what this 
712 number represents, 712 contracts at Warner Robbins over the 
5-year period, the largest one being $16 million total, and 
then followed by 11 million, 9 million, 9 million.
    So, the question that arises as far as bundling at Warner 
Robbins goes is--is it too much of a burden to ask the 
government to maintain this group of contracts and these 300 or 
so small business vendors or; is it better, more efficient, 
better value to consolidate under one contract?
    There are a lot of considerations that arise, but you are 
talking about eliminating as many as 712 contracts and a total 
of 347 companies. So this gives us a sense of the scope of the 
impact of the proposal to bundle the contract.
    Chairman Talent. Very briefly. We want to go to the other 
witnesses. Show us how many of those are just SDBs, small and 
disadvantaged businesses. Which was it, filter A? Let us just 
see how many there were.
    Mr. Murphy. Yes. Now it is just going to be filtered by 
Warner.
    Chairman Talent. Just how many at Warner are small and 
disadvantaged businesses?
    Mr. Murphy. I have to go back in and set business type A. 
It will take a few seconds. It is actually pulling over 2 
million records of data and setting these filters. So we go 
into the contract fields. And there is a field down here called 
``Business Type.'' Let's see if I can pull it out here quickly. 
You just go in here, enter, filter, add business type A.
    It is actually doing a subselect of all the business type A 
contracts over the 5-year period, and then when I click okay, 
it will merge it with Warner. Also, I might point out that 
Eagle Eye, my firm, is the company that developed the Federal 
Funds Express Website for the House, and you have some 
capability to do this on your Federal Funds Website.
    We didn't--we weren't asked to provide all of the fields 
like business type fields that you see here to select the data, 
because there was a limited number of fields that the House 
Information Resources felt that they needed to provide to 
fulfill their mandate. But the system that we have on-line for 
you is built in a modular fashion and can readily be modified.
    Okay. We should see--it should come up here momentarily. 
There we go. Over 5 years there were 328,000 actions with the 
SDBs. I am going to click okay. And it is going to merge that 
with Warner. As you can see the filter says business type A and 
then place performance, Robbins and Warner Robbins. So now we 
are in the contract screen. We are looking at a total of $118 
million, 117.5 million worth of contract over 5 years, 179 
contracts. And now I am switching to company. Here we see that 
we are talking about 93 minority-owned firms, SDBs.
    Chairman Talent. These are as primes?
    Mr. Murphy. These are the just the primes, working on 
contracts worth $25,000 and up, unclassified work being 
performed.
    Chairman Talent. The minute you bundle all of these, they 
are just gone?
    Mr. Murphy. They go away.
    Chairman Talent. Okay. Thank you for your testimony, Mr. 
Murphy.
    [Mr. Murphy's statement may be found in the appendix.]
    Chairman Talent. Next, Mr. Brooks will be next, if we can 
have your testimony. Again, thank you for coming. I have 
already gone over some of it in your questions. I found your 
testimony very helpful, Mr. Brooks.
    Mr. Brooks. Thank you so much. I appreciate that. I have 
basically summed up my written testimony in a brief prepared 
statement.
    Chairman Talent. Go ahead.

      STATEMENT OF CRAIG BROOKS, PRESIDENT, ELECTRA INT'L 
                       TELECOMMUNICATIONS

    Mr. Brooks. Thank you. Good afternoon, Chairman Talent and 
distinguished members of the Committee. I appreciate the 
opportunity to speak before you today. My name is Craig Brooks. 
I am president of Electra, a small business that provides 
telecommunications services to the Department of Defense. I 
appreciate this opportunity to describe how arbitrary, 
unjustified and what I believe to be illegal bundling has had a 
devastating impact on my company.
    In 1989, Electra began to participate in the DOD's open 
competitive market for telecommunications services. Since then, 
Electra and as many as 50 other vendors, including other small 
businesses, have competed vigorously for contracts. Although 
the market was successful for both participating vendors and 
DOD agencies, it has now been all but eliminated by a single 
bundled contract, and that is the DISN Transmission Services-
CONUS Extension. We know it as DTS-CE.
    I will cite a few specific ways in which contract bundling 
severely harms small businesses and follow each with examples 
from the DTS-CE contract. First contract bundling favors the 
largest market participants. With respect to the DTS-CE, the 
DOD claimed to have structured a contract for as many as six 
awardees, including one small business; however, the contract 
went to three industry giants, AT&T, MCI-Worldcom and Sprint.
    The Small Businesses Reauthorization Act defines contract 
bundling as consolidating two or more procurement requirements 
into a single contract unlikely for award to a small business. 
The DTS-CE contract bundled 600 services and special 
requirements into essentially a single bundled contract that 
then became what I consider a large business set-aside.
    Second, the decision to bundle services is often arbitrary, 
unjustified and without supporting market research, as required 
by the SBRA. With respect to the DTS-CE, SBR required the DOD 
to conduct market research to determine whether consolidation 
of contract requirements was necessary and justified. I am 
unaware of any type of research in this area that has been 
conducted at all by DOD.
    SBRA further states that DOD should identify benefits of 
such bundling, as well as impediments caused to small 
businesses. Once again, I am unaware of any study that DOD has 
done prior to, as opposed to after the fact, taking a look at 
that. And I think what we just heard from Eagle Eye supports 
that.
    Third, small businesses lack the capital, facilities, 
geographic diversity and ability to assume risks inherent in 
large bundled contracts. With respect to DTS-CE using the SBRA 
definition of bundling, the contract, DTS-CE, employed 
diversity and size of performance elements. This made it all 
but impossible for small businesses to provide multiple diverse 
services within the required delivery intervals.
    It employed geographical dispersion of contract performance 
sites. This placed small businesses at a significant 
disadvantage to companies with large national networks. And, 
third, it employed specialized performance elements. These 
elements in the DTS-CE were unjustified, discriminatory, and 
they added unnecessary risk.
    I am going to stray for one moment, and maybe you and I are 
on the same wavelength, but security requirements fall right in 
here.
    Chairman Talent. Before you get into this, because I think 
your testimony is particularly good, Mr. Brooks, is step back, 
we are all lay people in terms of procurement and 
telecommunications.
    Mr. Brooks. I understand.
    Chairman Talent. Tell us what kind of services we are 
talking about here for lay people, how they used to do it and 
procure, how and how they do it now. I think you can do this in 
a minute or two.
    Mr. Brooks. Right. I can give you a very simplified answer. 
And I will keep it low on the acronyms. Essentially, let us 
take an example local to us here. Let us say we have Andrews 
Air Force Base in Maryland, and we have--for some reason they 
need to talk to Fort Belvoir in Virginia, that communications--
the DOD would specify that we need a fiber-optic communications 
line to go between those two sites.
    And the way they used to do it is they had an electronic 
bid bulletin board, and essentially this became--I am sure you 
are familiar with the concept of an IFQ, an invitation for 
quote, or an invitation for bid. And they put out this with 
very simple specs, here is where one side is, it is this 
building at Andrews Air Force Base, the other side is this 
other building is at Fort Belvoir, we need a fiber-optic line 
between there.
    There are a variety of folks that can bid on this, and on 
average, on this electronic bulletin board, you would have 7, 8 
and as many as 50 people registered to bid under this bulletin 
board by putting in essentially a BOA, to be able to put in a 
bid. So you put in a bid, and the government selects based on 
various very basic criteria we are all familiar with; meeting 
the technical specs, meeting the delivery requirements, and a 
price at that point.
    Now, if security is in the technical specs, then you have 
to meet it, it is that simple. The examples that I had given in 
my written testimony, Mr. Chairman, that particular one that 
you read to the gentleman from DOD was one of those 
specifications. How is the government--and I think this speaks 
to really the heart of what I consider kind of some back and 
forth and somemisrepresentation of some of the facts. How does 
the government achieve security on that type of situation?
    Well, it is very simple: Encryption devices on each side, 
and the government equipment is in a government-owned and 
government-controlled facility, so they are asking for a COTS 
solution, commercial off-the-shelf solution. They need a fiber 
line that is available from the commercial carriers in the 
area, Bell Atlantic, MFS Telecom, Winstar, go down the list. 
Some are large businesses, some are small businesses. They need 
that service. We bid. Those services are awarded. We install. 
The government controls security of the data across that line 
to prevent hacking by encrypting the data and ensuring that the 
access to get the data into that line is controlled through 
their own people in their own facilities.
    That is what most of these contracts involved, and over 
5,000 of them my company was involved in. We won over 20 
percent, we beat AT&T, Sprint, MCI, and now basically we are 
locked out because of this bundling.
    Chairman Talent. A crude but accurate comparison. This is 
like we in our homes buy long distance telephone service.
    Mr. Brooks. Yes, exactly.
    Chairman Talent. It is as if we decided--and probably most 
people have the larger carriers, but you can buy the longer 
carriers if you want for your own home.
    Mr. Brooks. Correct, correct.
    Chairman Talent. Go ahead.
    Mr. Brooks. I will just briefly continue here. Anyway, that 
does describe accurately the special performance elements that 
were in this contract.
    My personal opinion is I believe that those were added in 
by the large contractors in my discussion with them. 
Unfortunately, I can't get anything in writing, as you know, 
through some discovery process to find that out. That is just 
my personal belief.
    There is another worst aspect to bundling even beyond what 
we have heard with these contracts that are let and then the 
winners walk away with this large money and the small 
businesses are left to the side, and that is something that we 
consider the gatekeeping aspects of bundling.
    Bundled contracts function as market gatekeepers, 
preventing all noncontract awardees from competing for future 
business. Now this is business that wasn't included in the 
original contract. In terms of DTS-CE, the DOD without 
contractual requirement made the arbitrary and unjustified 
decision to allow DTS-CE contractors to split bids for future 
requirements. In essence, the DOD created a bundled contract 
that only the largest companies could compete on and now uses 
that contract to prevent small businesses from competing on any 
future requirements.
    Mr. Chairman, in my opinion, the problem can be summed up 
in one statement, and that is Federal agencies are not in 
compliance with the SBRA. I know that this hearing is focused 
on the DOD, but I could speak for hours about situations that 
are going on with GSA, with FTS2001, DOJ, et cetera. Bundling 
should be used only in those rare instances when it is properly 
justified and its impact on small business is minimal.
    What small businesses really need is an environment that 
stimulates full and open competition. With that respect, I 
would just like to offer just very three brief suggestions. The 
first is that telecom services could be offered on the GSA's 
Federal supply schedule. Right now, believe it or not, the GSA 
doesn't allow a vendor like myself to submit a schedule for 
telecom services. It says right in the schedule solicitation, 
don't submit, because this interferes with FTS2001, so if I 
wanted to go to the DOD and say, I have my telecom services on 
GSA schedule, you are not allowed to.
    Secondly, our experience has showed that these electronic 
bid bulletin boards are very helpful for small businesses. They 
allow for rapid turnaround, and I believe that they decrease 
the administration burden on the government, and I think that 
those are some recommendations that the Committee should look 
at as far as stimulating small business participation.
    And, third, agencies and departments should be empowered to 
encourage competition, not forced to use these bundled 
contracts that we have seen here today.
    In conclusion, you can tell I am a little passionate about 
this. I am very frustrated about the impact that the bundling 
situation has had on my business. All I am really asking for is 
an opportunity to continue to be able to compete in this 
marketplace.
    Thank you very much. I appreciate your time.
    Chairman Talent. Thank you, Mr. Brooks.
    [Mr. Brooks' statement may be found in the appendix.]
    Chairman Talent. I would encourage Members to have their 
staff--if they don't have time to read Mr. Brooks whole 
statement, have their staff pull for them those portions of his 
statement showing how much more the government is paying per 
line under the bundled contract than it used to pay.
    Mr. Brooks. Absolutely.
    Chairman Talent. Our next witness is Ms. Josephine Ursini--
--
    Ms. Ursini. That is correct.
    Chairman Talent [continuing]. Who is here on behalf of the 
Society for Travel Agents in Government.

 STATEMENT OF JOSEPHINE L. URSINI, COUNSEL, SOCIETY FOR TRAVEL 
                      AGENTS IN GOVERNMENT

    Ms. Ursini. Thank you. On behalf of Society of the Travel 
Agents in Government, which we refer to as STAG, I want to 
express our appreciation for allowing us to come forward. It is 
something that we have wanted to do for quite some time.
    STAG is comprised of organizations who currently have or 
are seeking contracts with the government. Seventy percent of 
travel agencies are women-owned, and all four officers of STAG 
are women. So we are acutely aware of not only the small, but 
the women-owned aspects of the industry.
    I would like to echo Mr. Brooks' comments that we are 
concentrating on DOD, but most of what I will have to say today 
has relevance to the GSA travel contracts as well. I would like 
to summarize the points from our written submission there. 
There are a number of items I would like to amplify on from our 
written submission.
    There are three aspects of bundling that I want to address, 
the first of which is not unique, the second of which is unique 
to travel, and the third affects all of government contracting.
    The first is the bundling of like requirements. I provided 
as an attachment to our testimony the recent Department of 
Defense travel procurement that was issued last week on-line. 
It contains the workload data's for each of the regions that 
DOD has now designated. As in any other industry, the 
unnecessary consolidation of requirements will reduce the 
opportunities for small and small-disadvantaged businesses to 
participate.
    The DOD is in the process of reengineering its travel 
acquisition requirements and started with the award of what was 
referred to as the Defense Travel Region 6 or DTR6. This 1,300-
page RFP, request for proposal, is what all businesses are to 
face. Of the 1,300 pages in this RFP that was issued, I guess 
about 2 years ago, only 30 have to do with travel services. The 
rest have to do with the technology associated with travel 
services.
    But that is what the travel contractors have to face, small 
and large. For a small business in travel, the small business-
size standard for travel agencies is far different than the 
size standard for everyone else. It is based on revenue 
received and works out to about 14 to 16 people, employees, 
rather than the 500 employee standard for other industries. You 
can see how a small travel agency with 15 employees would take 
one look at a request for proposal of this magnitude and just 
sort of shake their heads. It should not be necessary to have a 
1,300-page RFP to make travel reservations. So that is obstacle 
number one.
    But the bundling of the requirements into procurements of 
even $20 million as in the new RFP that was issued last week is 
still too large. If you look at the breakdown, there is one 
aspect that is not reflected in the written testimony. If you 
look at the set-asides in the DOD RFP which is the second page 
of the attachment to the testimony, all of those set-asides are 
Air Force set-asides. The Air Force is the one service 
department within DOD that does not use the DOD credit card, 
which means that the travel agency has to float the government, 
that the travel agency pays for the travel, for the airline 
travel, and then has to bill the government for payment.
    The other service departments do use the travel credit 
card. This means that, ironically, it is the small businesses 
that have to have the lines of credit to float the government 
and not the large businesses. So although the Air Force may 
seem magnanimous in its set-asides for these small businesses--
for small businesses, it is actually more of a burden for a 
small business to perform an Air Force contract than it is to 
perform a contract for any of the other service departments, 
and that is something that is not reflected in the testimony.
    One other thing to point out about the workload data in the 
attachment is that they don't include leisure travel. That is 
the second aspect of the bundling of travel contracts that is 
unique to travel, and that is the bundling of leisure and 
official travel into one single procurement.
    We fought this hard and long; finally got a circuit court 
of appeals to agree that bundling of official and leisure was 
improper, and DOD turned around and snuck in a provision in 
last year's DOD authorization bill to allow them to do that. 
This is as ridiculous a situation as bundling a mess attendant 
services contract with a McDonald's concession.
    That is all there is to it. It is ridiculous to combine the 
leisure travel and the official travel procurements. There is 
no excuse. They are very, very different. In official travel 
you have agents that really have no discretion with the 
arrangements that are made. The airfares are set by the city 
pair contracts that are negotiated by the General Services 
Administration. If you have to be at a meeting tomorrow 2 
o'clock in San Diego, then the applicable city-pair is used. 
But with leisure travel, it is far more labor-intensive. I 
mean, many of us know that you go into a travel agency, you may 
sit with a travel agent, look through brochures and really 
never order anything, never make reservations.
    So the discretionary travel is much more labor-intensive 
and requires different skills, which, to be perfectly honest, 
the small businesses are better at providing than the large 
businesses. So we have the traditional bundling of requirements 
that don't need to be bundled. The DOD accounts have been going 
along very nicely for about 20 years now unbundled.
    We have the nontraditional bundling, which is the bundling 
of leisure and official travel, which makes no sense at all. 
The Navy, which accounts for about a third of all DOD travel, 
has not combined leisure with official at all and doesn't want 
to do it. But the Navy is going to be forced to bundle because 
Navy will now come under the overall DOD--the new reengineered 
defense travel system, and now the Navy will be forced to 
bundle a procurement that they didn't want to in the first 
place.
    Then we have the third. The third area is the area that I 
think should be of most concern to this Committee, and that is 
how the subcontracting, the small business, SDB, whatever, is 
being reported to SBA and to Congress. The travel agencies are 
not being paid by the government for the services that they 
perform. Zero procurement dollars are going to the travel 
agencies. The money goes to the airlines, but DOD is reporting 
it as dollars--they are reporting it on a gross volume basis, 
and they are reporting it as dollars that go to the travel 
agencies. And because of that, they are inflating their 
compliance figures to this Committee, to SBA and to Congress.
    I could use an example of real estate agents. If you sell a 
house for $300,000, and the real estate agent makes a 
commission of $18,000, DOD would report it as $300,000 going to 
the real estate agent, and that is assuming that procurement 
dollars were involved in the purchase of that house. But no 
procurement dollars are involved in the travel services 
contracts. These are no-cost contracts.
    So if no procurement dollars are going to the travel 
agencies, how can anything be reported back as being small 
business subcontracting? And on the volume of travel that is 
involved within DOD, that accounts for a lot of money. So when 
Mr. Oliver says he likes clean data, you better be sure you are 
getting clean data because we don't believe that you are.
    Ms. Velazquez [presiding]. Sure.
    Ms. Ursini. Basically those are the three points I wanted 
to cover. So I would be happy to answer any questions.
    [Ms. Ursini's statement may be found in the appendix]
    Ms. Velazquez. Are you telling us that they are cooking the 
books?
    Ms. Ursini. Yes, I am, in major numbers, because the 
numbers are just so large on travel that--you know, I gave some 
examples in the written testimony. If you use the figures from 
just the RFP that was issued last week, you are talking in the 
neighborhood of $145 million that is phantom money, and it is 
not accurate.
    Ms. Velazquez. Thank you, Ms. Ursini.
    And then our next witness is Mr. Maurice Allain. Thank you. 
Welcome.

    STATEMENT OF MAURICE ALLAIN, PRESIDENT AND CEO, PHOENIX 
                     SCIENTIFIC CORPORATION

    Mr. Allain. Good afternoon, Madam Chairman and members of 
the Committee and staff. This has been--it has gotten kind of 
late in the day, so I am not going to read everything that I 
have already prepared and sent to you.
    What I would like to say is there is a lot of confusion 
that is being passed around about what it is that hopefully we 
are doing. In 1953, right after the Second World War, your 
predecessor Committee decided that there should be a fair 
portion of the budget that procurements that go out from the 
Federal Government should go to small business. Fairness is a 
distributive justice issue, and it was based on a period of 
time when we were a heavy manufacturing, mining, extracting, in 
other words, material-based society.
    Mr. Oliver was correct in pointing out that the revolution 
that has occurred in information has created another type of 
economy. This economy, however, is basically driven by small 
business, because you have a situation where you can get rid of 
a lot of middle management by going to these new communication 
processes. Big companies, like General Electric, decided to 
reduce the size of their work force from 400,000 down to 
212,000. I believe that is a figure that I got from the Office 
of Advocacy. And that is typical, so what you are seeing is a 
different kind of organization; however, because of the change 
in our defense posture, instead of the 100 businesses that 
control 67 percent of the economy in 1946, you have got about 
three really large ones, giant ones.
    Now, what does this mean? If you talk about just the 
distributive justice issue, that is important to society. But 
now if you go away from the static dynamics, static economics 
of mass production society to the dynamic conditions in an 
information economy, where a small business that might have 
been suboptimal in reaching the scales necessary to do the 
manufacturing is not suboptimal in that field, in fact, they 
would be preferred.
    If you look at the differences in our economic performances 
compared to Europe, compared to Japan, we are doing a lot 
better than they are. But our new business formation is a lot 
higher as one of the keys. Now, Dr. Gansler, besides being an 
excellent, a very good civil servant, is also--has contributed 
very heavily to the literature on defense contracting in three 
principal books.
    He said in his earlier book, I believe, The Defense 
Industry, which came out in the early 1980s, in order to 
understand the economic operation of the U.S. Defense industry, 
and I am quoting him, it is first absolutely essential to 
recognize that there is no free market at work in this area, 
and there likely cannot be one because of the dominant role 
played by the Federal Government. The combination of a single 
buyer and few large firms in each segment of the industry and a 
small number of extremely expensive weapons programs that 
constitute a unique structure for doing business have created 
large barriers to entry and exit, and these barriers result in 
each firm managing to keep its share of the business even in a 
shrinking market.
    The history of American military technology indicates that 
it has often been the small inventor-led firms that have made 
the qualitative breakthrough so critical to military 
superiority. Thus their disappearance affects our long-range 
future as well. If these small, lower-tier firms are so 
critical, why does the Congress and the Department of Defense 
think only in terms of the giants--these are Dr. Gansler's 
words--such as Lockheed, Boeing, McDonnell-Douglas, and assume 
there is uniformity across the overall defense industry?
    In his later book, the next one, which is Affording 
Defense, he says, many have attempted to describe the very 
special buyer/seller relationship that exists in the realm of 
defense. The economist Walter Adams called it a closed system 
of buyer and seller, interrelated for common interest, that 
defies analysis by conventional economic tools. The economist 
James McKee said that it is a relationship of participation in 
which the large buyer has a direct influence on the policies 
and decisions of the large sellers, and that what we observe is 
the kind of behavior that is not adequately described by any of 
the commonly employed models of market relationships and 
economics.
    And now I will quote, that is what Dr. Gansler said. 
Further in his book he says that the Department of Defense 
operates--the defense market is a dual market at the top level 
of the market's plan. I am going to buy an F-22, I am going to 
buy an Arleigh Burke class destroyer or any of the other large 
weapons systems.
    Here he is correct. You need a large organization, but 60 
percent often of those procurements are done on the subtier 
level by small businesses, by small disadvantaged business, 
women-owned business, what have you. He said in that book that 
it is going to be real hard to get competition. We have 
superrivalries, et cetera, et cetera, in the first tier.
    He says the DOD can save more money by coming up with more 
competition at the lower end, the subcontractor level, 
component level, parts level. That is where the true savings 
come.
    Now, it is very interesting that if the American industry 
in general has looked at the gains to be made through 
information technology and how they organize their businesses 
and firms, we are looking at a trend that is just the opposite, 
stronger and stronger vertical integration, and now we are down 
to the point there is no more money to give them, let us get 
some from small businesses.
    If you look at what is being asked for under FAST, this 
procurement--this is government data, this is off their Web 
page--FAST will establish the means for procurement of services 
to include advisory and assistance, modifications, spares, 
repairs and systems acquisition. The program will include, but 
will not be limited to, direct support for design, integration, 
testing, modification, maintenance, configuration management, 
quality assurance, system safety, hazardous materials 
management and technical and engineering data, support and 
analysis, and packing, handling--I mean, I can go on. What is 
left? Everything will be under FAST. And you have had various 
estimates of the size of the contract and its duration.
    Another problem that underlies this whole issue, you have a 
lot of goal displacement. Everybody counts numbers. Well, we 
are giving the small business these many numbers, it is the 
quality of these numbers that are important as well.
    The Office of Advocacy found, for instance, that it greatly 
enhances the chance of a small business growing up to be a big 
business or staying in business if it has a Federal contract. 
We are talking major significance of about 30 percent--I am 
sorry.
    Ms. Velazquez. Would you please summarize, because there is 
a vote, and we need to recess.
    Mr. Allain. The bottom line to a lot of this is I would 
urge you to consider legislation that would tighten up this 
whole notion of what the values we are buying when we do a 
bundle to something that is measurable. The ABA recommended 20 
percent as a minimum in difference of value, however you want 
to measure it.
    I would also urge the Committee not to allow the projected 
savings to be the determinant of whether or not something 
should be bundled or represents a substantial advantage to the 
government.
    I don't have to tell you the basis, you know, the kind of 
estimates and projections that have not panned out in the past. 
This is a major effort that will be copied, by the way; if this 
goes through, this will be copied by other services.
    Ms. Velazquez. Thank you.
    [Mr. Allain's statement may be found in the appendix.]
    Ms. Velazquez. We are going to take--we will be back in the 
next--we have got to go to the floor and vote, so we will rush 
back as soon as we can. Okay.
    [Recess.]
    Chairman Talent [presiding]. Okay. If we can reconvene the 
hearing. And I again appreciate your patience and thank the 
Ranking Member for chairing the Committee while I was gone.
    I wanted to ask Ms. Ursini a couple of questions because I 
think she can respond to one of the points that Mr. Oliver made 
about one of the advantages of bundling. He talked--you may 
have already done this, and I am sorry if you have, but he 
mentioned that one of the advantages of bundling is because he 
is assuming that the bigger contractors have more flexibility 
in terms of their ability to meet the needs of the Department, 
so they have more people. He was talking about the security 
officers at a particular base.
    If you get one big contractor handling everything, they 
have more people, they are more flexible. You made a point in 
your written statement anyway that I thought addressed this 
very well, to the extent that they--I am not trying to put 
words in your mouth, was that--when the Department's bundling 
contracts in a business like yours where all the contractors 
are relatively small, and one contractor does bid and get a 
bundled contract, that is everything that they can do? In other 
words, they don't have any capacity then left over to bid on 
another contract? They don't have a lot of extra capacity; is 
that correct?
    Ms. Ursini. That is correct. If you are limiting it to the 
big--the big three are really the only ones right now that can 
do the large size contracts. I mean--I don't want to exclude 
anybody, but let us talk about the big three. AMEX was awarded 
the contract for the DTR6, May of 1998. They still haven't 
implemented. They are having problems. And also, unless the 
Department of Defense changes its compensation policies, AMEX 
may not be interested in the next batch anyway. But that is 
another issue.
    But if each time you go out for one of these larger-sized 
procurements, you are eliminating one of the big companies, 
then you keep restricting competition for the subsequent--or at 
least the closely followed-on subsequent procurements because 
they are too busy doing the implementation of the earlier one.
    The other problem that there is on the small business side 
even is that, because of the way the small business-size 
standard is established for travel agencies, once they get one, 
they are now large, so they can't even bid on the next small 
procurement. So that is one thing that the Committee might want 
to look at is possibly changing the size standard for travel 
agents, which is much different than the size standards for 
everybody else, so that small businesses can continue to even 
compete for the--for what few pieces of small travel business 
there are out there.
    Chairman Talent. And as to the economies of scale issue, 
wouldn't you expect that if in a particular segment of the 
economy, there are very significant economies of scale, 
wouldn't you expect to see the private market organize itself 
so that there were just, you know, a few large contractors? In 
other words, if there are economies of scale in the travel 
agency business, why are there so many small travel agencies? 
Why wouldn't they just in response to the market resolve 
themselves into a few big or merged companies?
    Ms. Ursini. I think you are correct. I think what happens 
with the small travel agencies is they develop specialties, 
particularly on the leisure travel side. You have the larger 
companies, the American Expresses and the Carlsons, having 
large corporate accounts, for example, that the smaller 
companies can not handle, they leave the smaller accounts and 
leisure travel to the smaller businesses. That is one of the 
reasons--I think I point out in the testimony about another 
reason why the bundling of leisure and official is ridiculous, 
because the smaller businesses can really handle the leisure 
much better than the large ones.
    Chairman Talent. So they are making an argument based 
supposedly on economic efficiency, but it flies in the face of 
what the private market has organized itself?
    Ms. Ursini. That is absolutely correct.
    Chairman Talent. And really the best indicator of 
efficiencies in a market is how it has organized itself?
    Ms. Ursini. That is correct.
    Chairman Talent. And I have seen this same thing with the 
kinds of issues that Ms. Napolitano was raising, food service 
and private service. If you look around the country, they tend 
to be--these businesses tend to be dominated, these segments of 
the economy, by smaller businesses, which tells us that in the 
real nongovernmental world, those are--that is the most 
efficient way of organizing a business in that area.
    Ms. Ursini. Yes.
    There is one aspect of--one excuse that DOD has given for 
bundling that I don't think holds water that I haven't 
addressed. And there is a valid objective behind it, but it 
doesn't require the bundling of the travel. And that is that 
DOD would like, and we applaud their decision to try to get, 
more valid across-the-board departmental data about their 
travel so that if they can have an accounting system that 
accounts for all of the travel on a DOD-wide basis, they can 
get better data, maybe better data to negotiate fares with the 
airlines, et cetera.
    But consolidating the accounting requirements or the 
computer fields, et cetera, because all of the service 
departments have different formats doesn't require that you 
bundle the travel services contract requirements themselves; it 
just requires that the individual contractors meet the various 
technological requirements. But it doesn't require that you 
have--that you have $79 million or $300 million contracts.
    Chairman Talent. This is what I have encountered over and 
over again. And this is what I think is at the heart of this 
bundling. Mr. Oliver talked about core competencies. And I 
think that the DOD is having difficulty managing and 
administering its various functions. And so it turns to 
bundling really as a way of not managing and not administering. 
It is easier for them.
    We just have a couple of big companies who do everything, 
and it may not save money, it may not be better quality, but it 
is easier for them. And the problem is you still have to manage 
the enterprise, even if you are contracting out particular 
functions.
    Mr. Allain, the Warner Robbins thing, and we are having a 
hearing on it, it is really more of an issue whether they are 
going to privatize base management----
    Mr. Allain [continuing]. Yes, sir.
    Chairman Talent. As opposed to bundling, and clearly they 
don't feel they can manage the bases anymore. The thing is if 
you get--suppose you get a huge contractor in like a property 
management company might. They now are going to run Warner 
Robbins Air Force Base. You still have to tell them what goals 
you want them to achieve in management. You still have to 
manage that. And my concern is they will get somebody in big 
and not tell them what they want them to manage the base to 
achieve, and so, in effect, they are hiring a private 
contractor to tell them what they want and tell them how to 
manage the base, and you are just going to be sent into chaos.
    Mr. Allain. You know, carry that point further, Mr. 
Chairman. What you are having here is a complete blurring of 
accountability. I mean you, the people's representatives, 
delegate to the administration to perform certain missions. 
They subdelegate it to an agency. In the case of, well, we are 
going to have small business get larger shares of these 
contracts as subcontractors, you now have changed my due 
process, which I could appeal; say to the contracting official 
who has to operate under the laws that you have passed, now it 
is a private matter between me and this large contractor. That 
is very dangerous.
    And unless Congress wants this to occur and explicitly 
tells them to do it, then fine. They shouldn't be allowed to go 
and do this on their own.
    Chairman Talent. And here is the other thing. I pointed 
this out in the context of household goods and moving services 
with regard to the departments, which I know the travel agents 
know about as well, when you bundle up huge kinds of contracts 
and then say, well, small business will be subcontracted out 
into the process. Now think about this for a minute. What you 
are basically saying is since one of the points of bundling is 
supposedly to save money, let us suppose you actually get some 
kind of discounted bundled price, knowing they are going to 
have to subcontract it out. Now you have got two layers of 
businesses which have to survive on one squeezed profit margin. 
What is that going to do in terms of the quality that has been 
given to our service people?
    So I have no--I have no doubt that they are going to do 
with--what do they call it, chill and serve, what was it--cook 
and chill.
    Ms. Ursini. I would like to respond. I am glad you brought 
up household goods. In my alter ego, I am a Navy wife, we have 
had to contend with four moves in the last 2 years, none of 
which, thank God, did I use the military movers. We chose to 
use movers selected on our own. It cost us about a third of 
what the government would have spent had they moved us. DOD has 
a pilot--in fact, I think it is the Navy's pilot program--that 
allows service members to contract on their own with local 
companies. It is only a pilot program, but it has proven to be 
very effective, from what I understand, and certainly in our 
experience. Every time we said that we were going to do it on 
our own, the response that we would get is, well, you know, if 
something gets broken, put in a claim. I don't want my 
household goods to--I don't want my crystal shattered. I don't 
want my furniture chipped. I want to be able to control what is 
going on.
    Chairman Talent. Yes. So I mean the point I think they have 
to confront, and I have some hopes Mr. Oliver is going to do 
it, is, yes, whether it is within their core competency or not, 
they have to manage their assets. Now, managing may entail 
contracting, may entail contracting out certain functions, but 
they still have to tell the contractor, big or small, what it 
is they want that contract to achieve; what you are going to 
achieve when you, Warner Robbins--what goals you are going to 
have.
    So they still have to put the effort into identifying the 
goals and managing the enterprise. And my concern about this 
whole trend is just really simply an intent to abdicate a 
certain function, whether they call it a core function or not, 
and just sort of spew it out to other contractors in the guise 
of reforms. And we are going to continue looking at it.
    The Ranking Member wants to ask a few questions.
    Ms. Velazquez. No. Mr. Chairman, basically you covered most 
of the questions that I had. I just wanted to thank you, and I 
look forward to continuing to working with all of you.
    Chairman Talent. All right. We are not going to make you 
wait through another vote here. I do appreciate your all being 
here. I hope you will be available in the future as we need 
you, because we are going to follow up on this issue. I believe 
we already kept the record open for 10 days for written 
questions so the Committee hearing is adjourned.
    [Whereupon, at 1:55 p.m., the committee was adjourned.]
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