[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
PROCUREMENT PRACTICES OF NEW MEXICO DEPARTMENT OF ENERGY FACILITIES
=======================================================================
FIELD HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
SANTA FE, NEW MEXICO
__________
AUGUST 27, 2001
__________
Serial No. 107-25
__________
Printed for the use of the Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2002
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON SMALL BUSINESS
DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
ROSCOE G. BARTLETT, Maryland California
FRANK A. LoBIONDO, New Jersey DANNY K. DAVIS, Illinois
SUE W. KELLY, New York BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio DONNA M. CHRISTENSEN, Virgin
PATRICK J. TOOMEY, Pennsylvania Islands
JIM DeMINT, South Carolina ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota TOM UDALL, New Mexico
MICHAEL PENCE, Indiana STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York MARK UDALL, Colorado
TODD W. AKIN, Missouri JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania BRAD CARSON, Oklahoma
ANIBAL ACEVEDO-VILA, Puerto Rico
Doug Thomas, Staff Director
Phil Eskeland, Deputy Staff Director
Michael Day, Minority Staff Director
C O N T E N T S
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Page
Hearing held on August 27, 2001.................................. 1
Witnesses
Morales-Gurule, Michelle, CEO/Owner, CJ Enterprises, Inc......... 5
Cordova, David, Director of Planning & Economic Development,
Eight Northern Indian Pueblos Council.......................... 7
Martinez, Marlo, President/CEO, New Mexico Office Products....... 10
Montoya, Antonio, Chairman/CEO, L&M Technologies, Inc............ 11
Salazar, Abe, CEO, Computer Assets, Inc.......................... 13
Salgado, Joseph, Principal Deputy Laboratory Director, Los Alamos
National Laboratory............................................ 15
Wagner, Patty, Assistant Manager, Office of Management &
Administration, U.S. Department of Energy...................... 19
Woodard, Joan, Executive Vice President & Deputy Director, Sandia
National Laboratories.......................................... 22
Nelson, Ronald, Director for Contracts Management, University of
California..................................................... 24
Appendix
Opening statements:
Manzullo, Hon. Donald........................................ 46
Prepared statements:
Morales-Gurule, Michelle..................................... 48
Cordova, David............................................... 51
Martinez, Marlo.............................................. 54
Montoya, Antonio............................................. 55
Salazar, Abe................................................. 63
Salgado, Joseph.............................................. 67
Wagner, Patty................................................ 74
Woodard, Joan................................................ 81
Nelson, Ronald............................................... 100
PROCUREMENT PRACTICES OF NEW MEXICO DEPARTMENT OF ENERGY FACILITIES
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MONDAY, AUGUST 27, 2001
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 9:00 a.m., in room
311, New Mexico State Capitol, Santa Fe, New Mexico, Hon.
Donald A. Manzullo [chair of the Committee] presiding.
Chairman Manzullo. Okay. Well, we're going to call this
field hearing of the United States House of Representatives
Small Business Committee to order, and I want to tell you it is
so great to be in a town that knows the true meaning of a
billion dollars here and there.
Tom, I understand you're going to introduce a resolution
that's going to move the federal capital from Washington to
Santa Fe, but I don't think that you would want all that
busyness coming here and disturbing this tremendous little
city. What a joy it is.
We flew in last night and looked around, and, you know, no
giant freeways, people legally driving at 75 miles an hour.
It's just a real joy to be here. It's a double joy--actually,
it's a triple joy, not only a personal one, but to come out on
behalf of my good friend and colleague, Tom Udall.
I know, so often, you take a hometown boy for granted. Tom
has done just a tremendous job in Congress. You don't see his
name flashed all over the place. You don't see mine, you don't
even see Congressman Bartlett's. We're the workhorses of
Congress, and we go there, we get our job done, and we come
back every weekend, or every other weekend, in order to meet
with the people that sent us to Washington.
Tom is one of the people that shows up very frequently on
the Small Business Committee, and when I decided to do a field
hearing in New Mexico, I said, ``Golly, let's do one for Tom
Udall.'' This afternoon, we are going to meet with
Congresswoman Heather Wilson, just south of us. So I said,
``Tom, whatever you want to have a hearing on, it's totally up
to you. This is your area, these are your people,'' and he
decided to do it on government procurement.
So I've got an opening statement. I'm going to take a
minute to read it, then I'll yield to you, Tom.
The small business should be considered big business. The
small business people are the very core of our economy. It's
been established, by statistical facts concerning the nation's
small business community, that 99.7 percent of all employers in
the US are small businesses. More than 50 percent of the
private gross domestic product is attributable to small
businesses.
Your area here is particularly small business. I think the
only large business you have would be the labs. The area that I
represent, the northern--16th District of Illinois, which is
right across the top of the state, has a lot of agriculture, a
tremendous amount of industry, Chrysler plant, Motorola
facility, and et cetera, so it has a lot more of a mixture of
business sizes. Here in Tom's district, you're really dependent
upon the small businesses in order to create the core of the
community. I presume that's one of the reasons, Tom, that
you're devoted to spending a lot of time working on the Small
Business Committee.
A recent bill sponsored by Congressman Udall, which is the
Native American Small Business Development Act, HR 2538, is
designed to assist Native Americans who are starting or
expanding small businesses on tribal lands. It's Tom's bill. It
was unanimously approved by the committee. That means that
Republicans and Democrats agreed on it. Not much occurs in
Washington that's unanimous. Tom's bill obviously has so much
merit, the members have said this is a good bill. I anticipate
the bill will be passed by the full House of Representatives
the first or second week that we are back in session in
September.
Before I yield to Tom, I'll just give you the ground rules
for testifying. We try to limit it to a five-minute
presentation. I'm not going to throw a chair at you if you go
over five minutes, but we want to be able to let you give your
testimony. It's just an informal atmosphere. Nobody is under
oath. If you make a mistake, you don't have to worry about
saying, ``Gee, it should have been this figure, as opposed to
that figure'' here.
You've all provided written testimony, but it's not
necessary to stick to it. Speak from your heart. Tell us what's
in your heart, the things that--you know the reason that we're
here.
And so if I do like this (demonstrating), that means that
the five-minute mark is approaching soon, and if you could just
wind up within a minute or so after that.
Okay, Mr. Udall.
Mr. Udall. Great. Thank you very much, Chairman Manzullo.
It's a real pleasure to have you out here and to have the Small
Business Committee out in the Third Congressional District. I
should just tell all of you that we introduced Chairman
Manzullo, my wife and I did, last night, to green and red
chili, let him sample a little of both, and he was very
interested in all of the local food, and we had a good evening
on Santa Fe, and on the town, last night.
You should also know that as the chairman of the Small
Business Committee, he has been a real champion in Washington
of small business enterprises, of seeing that when we make
governmental decisions, we do everything we can to make sure
that small businesses are included. And as he noted earlier in
my--earlier in his statement, my district is really one of
small businesses, and we generate our job growth out of the
small business community. So that's very, very important for
us.
Here, we're today talking about the positive impact of the
Department of Energy and the management and operations
contractors and the impact that has had on New Mexico.
Combined, these are the largest employers in the state. Los
Alamos National Laboratory is in my district, and it is the
largest creator of jobs.
Well, we're here today because DOE and its M&Os have made
strides in helping small businesses; there's no doubt about
that, but we believe there's more room for improvement and more
to be done to assist enterprises here in New Mexico.
During World War II, the Manhattan Project was one part of
the huge industrial effort that depended on a broad and diverse
small business sector with the flexibility and innovation
needed for war time production.
For example, small businesses designed the town at Oak
Ridge and the first casings for the Fat Man bomb. Similarly,
during the cold war, our military and industry integrated many
small firms to provide the adaptability needed for
technological innovation and better production. American
entrepreneurs and small business firms account for 40 percent
of all federal tax revenue, 47 percent of retail sales, 51
percent of our gross domestic product, and 58 percent of all
private employment.
Small businesses provide the flexibility and innovation
sold by them to support vibrantcommunities and strong families.
DOE institutions and the labs have been an economic anchor in our
communities for over 50 years. Still, even with this longevity, pockets
of poverty remain which have not benefited from the availability of
jobs and business opportunities. Given that nearly 97 percent of all
enterprise in New Mexico is small business, the opportunity for the
federal government to find small business contractors is there.
We are here today to look for ways to tap this potential
for economic growth. One of the most troubling trends is the
drain of federal contracts out of New Mexico. Many federal
agencies are taking work projects that were once done by local
small business and combining them into contracts so large that
our small businesses can no longer compete for them. These
contracts are then given to corporations outside New Mexico.
Contracting officers inside the beltway call this
streamlining, but the result here in New Mexico is that these
practices are streamlining small businesses right out of
business. This is simply unacceptable.
Although the Department of Energy is the government's
second largest buyer of goods and services, to be very frank,
the agency's commitment to small, minority and women-owned
businesses has been suspect.
Last year, in the first ever comprehensive review of
government contracting, released by myself and the Democratic
members of the Small Business Committee, DOE was the only
agency to receive an F for contracting equity. While I'm sure
that the grade is not representative of local DOE offices or
the labs, it clearly demonstrates that, within the department,
a cultural problem exists in terms of willingness to provide
opportunities for small businesses.
The way to turn this around is by all of us working
together to make sure the opportunities exist for all our
commerce.
And with that, Mr. Chairman, I want to also get quickly to
the witnesses, so we'll look forward to hear their testimony;
and once again, thank you for coming out and for bringing the
Small Business Committee to Santa Fe, New Mexico.
Chairman Manzullo. Thank you. Let me introduce some other
people. Nelson Crowther, to my right, is an attorney. He's--on
the Small Business Committee, works on procurement issues.
Michael Day is the staff director for the minority side of the
Small Business Committee, and Tony Martinez is also with Mr.
Udall's staff.
I would like to just take a second to--Roscoe, would you
introduce yourself; give a little bit of your background,
because it's really important with regard to this hearing,
besides being vice-chairman of the Small Business Committee.
Mr. Bartlett. Thank you very much. I'm very pleased to be
here in Tom Udall's district. He and I share some of what we
think are very important issues relative to energy and energy
future in our country, and I'm very pleased to work with him in
the Congress.
I'm one of maybe 35 people in the Congress who came from
the small business world. I was a member of NFIB, and among
other things in my background, I have a PhD in science, I
worked 18 years for the military, I taught for 24 years, but I
was also a small business person for a number of years and
belonged to NFIB. There are probably about 35 of us who came
from a small business background to the Congress, so I was very
pleased when I had an opportunity, nearly eight years ago now,
to join the Small Business Committee.
I've been very much concerned about recent procurement
trends in the government, for very valid reasons. Many of our
government agencies are now moving to streamlining, as Tom
mentioned, or bundling is another way of expressing these new
moves.
One of the first examples of this was the Marine Corps and
the Navy who decided that they were no longer going to purchase
equipment for handling data and moving it. Because the
procurement cycle in government is so long, by the time you
procure this high tech equipment, it's already obsolete. So all
the equipment that you can procure is obsolete if you were
going through the government procurement cycle.
So they decided to buy function and performance rather than
equipment, and let the contractor who can buy the equipment
overnight--where it takes us forever to buy it in the
government--to let them buy the equipment. But in letting that
single contract, we were very much concerned--the Small
Business Committee was very much concerned that the small
business was going to be pushed out, so we met--and Nelson
worked with me on that--we met with the Navy and the Marine
Corps and they withdrew their RFP and issued another one,
guaranteeing 35 percent--that's a big percent of the money--35
percent of all the money would go to small business and 10
percent of that would be direct pay to small business.
The next opportunity we had to work with the government was
when NSA, National Security Agency, it was going to do the same
thing for the same very valid reasons. They could no longer
have the latest equipment, because it took them so long to buy
it; by the time they bought it, it was already obsolete. So
they were going to buy performance rather than buying the
equipment, so we met with them and they changed their
procurement practice, also, to assure 35 percent would go to
small business and 10 percent of the money would be direct pay
to small business, so they wouldn't have to wait that long for
payment.
I'd just like to mention a very significant thing in small
business, I think most people don't know, and that is the most
rapidly increasing part of the small business community is
women-owned small businesses. They are growing at twice the
rate of male-owned small businesses. They are better employers.
That doesn't surprise me. Men and women are different. Our
military is having some trouble figuring that out, but they are
different. Women are more empathetic, more compassionate. It
doesn't surprise me, at all, that they are better employers. By
the way, their companies are also better corporate citizens,
and I think, for exactly the same reasons. They are more
concerned about their community and their involvement than the
average male-owned small business.
So I'm really pleased to be here today to hear the
testimony of these witnesses. We want to make sure that small
business has every opportunity to participate, for a very
selfish reason, by the way. Most of the innovations out there
are not in big business. Not everything that's big is valuable,
which is one of reasons that you should be thankful you don't
get all the government you pay for. I don't know if you've
thought about that. But the bigger an organization gets, the
less effective it becomes. And it's stifling for creativity,
and most real entrepreneurs--most creativity is in small
business. And so we are going to get a better return for our
dollars spent in small business, in general. Now, some things,
big business has to do it, but by and large, we are going to
get a better return for our dollar when it goes to small
business than when it goes to big business.
So I'm very pleased to be here and look forward to your
presentations.
Chairman Manzullo. Thank you very much, Roscoe. Let's lead
off with Michelle Morales, CJ Enterprises, Incorporated, in Los
Alamos.
Michelle.
STATEMENT OF MICHELLE MORALES-GURULE
Ms. Morales-Gurule. My name is Michelle Morales-Gurule and
I am the CEO/owner of CJ Enterprises. I would like to take this
moment to thank you, Mr. Chairman, Congressman Udall, and the
members of the committee for allowing me, a small, woman-owned
business, the opportunity to testify based on our experience
and position with Los Alamos National Laboratory, a division of
the Department of Energy.
CJE was founded----
Chairman Manzullo. Michelle, excuse me a second. Did you
provide copies of your testimony to us?
Ms. Morales-Gurule. Yes.
Chairman Manzullo. Do you want to get those for us?
Okay, go ahead.
Ms. Morales-Gurule. CJE was founded in April of 1986 with
the sole purpose of providing computer software, peripherals
and services to Los Alamos National Laboratory. During our 15-
year partnership with LANL, CJE has been awarded over $135
million in computer-related contracts. CJE was the last vendor
to receive the award for Vendor of the Year and Customer
Service Vendor of the Year presented by the LANL Business
Operation Division at the just-in-time procurement ceremony.
These awards were especially special to CJE, since they were
voted on by the LANL end-users based on their experiences with
each JIT vendor. CJE currently administers four computer-
related just-in-time contracts, which were awarded between the
years of 1992 and 1998. In 1998, CJE was granted a blanket
order agreement for computer systems repair and services
utilized by LANL end-users.
Our success, we feel, is CJE continually strives to make
each procurement most advantageous for LANL. This is done by
aggressively keeping in contact with our manufacturers, while
informing LANL of any changes in the technology industry which
might affect their direction, adjusting with the current
changes in the technology industry, a thorough comprehension of
LANL procurement processes as a whole, being innovative within
the scope of our just-in-time contracts, being involved on a
day-to-day basis with LANL end-users and procurement personnel,
developing a small business relationship within the Los Alamos
community, being consistently accessible to our customers, and
knowing that CJE has options available to us through the LANL
small business office.
The positives that we've experienced is the LANL business
operations personnel are extremely accessible and cooperative.
The LANL small business office was responsible for enabling CJE
to become board members of the Northern New Mexico Procurement
Advisory Board and the Northern New Mexico Supplier Alliance
Board.
LANL seems to be very open to new ideas, and they do share
new opportunities with us when they arrive; and if we're ever
in a difficult position, LANL has always provided assistance
towards CJ on that.
Our biggest concern with the procurement of Los Alamos is
the government purchase cards. JIT competition is typically
with Fortune 1,000 companies. Lack of LANL property labeling on
merchandise could make products unaccountable, unlike that of
the JIT policies and procedures; lack of accountability for
purchased products, such as leather goods. Some of the purchase
cards have home delivery shipments. CJE feels that there's a
shortage of LANL personnel to oversee the purchase card
procurements by end-users.
Lack of scrutiny of companies providing products, unlike
that of the JIT procedures, and add-on costs, such as shipping
and handling, are paid for by LANL, unlike that of the JIT,
with the exception of overnight freight, and also some rebates
are not taken advantage of by LANL.
So overall, on the purchase cards, what we've experienced
is, as a JIT vendor, we have certain requirements that we must
fulfill. If a product comes in and it's a certain dollar
amount, we have to warranty tag those; therefore, if the
product--once it goes up to LANL, it's traced, it has a serial
number.
When it's purchased out of state, which most of our
experience with the procurement cards are mail order, this
procedure is not done. Therefore, if you take a Palm Pilot, the
hand-held devices, we would have to warranty tag it; it's
traceable, it's accountable. If it comes in through a mail
order catalog, there's no traceability at this point, and it
could very easily get lost.
There are certain rules for a JIT vendor, unlike that,
again, of mail order. Because leather goods are not supposed to
be purchased on the JIT, because it's considered a luxury item,
we can't offer those to our end-users; however, they can
purchase those products on their government purchase cards.
As a JIT vendor, and I think with most small businesses, as
you mentioned earlier, we take a lot of pride, we take a lot of
concern over what we do, and I think we have to go through a
lot of scrutiny, as a vendor, a JIT vendor, for the laboratory,
and I just feel that these mail order companies don't have to
go through that same scrutiny that we have to go through.
My biggest competitors are companies like PC Warehouse, Max
Warehouse, even Office Max. I saw a statistic last year that
there was $35 million in purchase card procurements for Los
Alamos National Laboratory. I have four just-in-time contracts.
I did $8 million. So as a small business, I'm losing a lot of
that business to out-of-state, back east mail order companies.
The only other thing I'm concerned with is the performance
ratings are not always in the control of the vendors, such as
myself, such as back-ordered or discontinued items. I don't
feel a vendor should be penalized under these circumstances.
Also--this is just in general--I'd like to see the
difference between a small business and a small business. There
is a difference in resources and accessibility for a small
business with less than 50 people and that of a small business
with 150 people. And I think, in northern New Mexico, based on
my experience, that you're going to see a lot more small
companies with less than 25 people, versus companies with 150
people.
So in closing, the experience that CJE has gained from the
federal government procurement has, overall, been positive and
has allowed CJE growth within our corporation. CJE always looks
forward to the challenges set forth due to the changes in
technology and federal government industries. CJE looks forward
to maintaining exceptional customer service, while continuing
our long-term partnership with the federal government
customers.
[Ms. Morales-Gurule's statement may be found in appendix.]
Chairman Manzullo. Thank you very much, Michelle.
David Cordova is with the Eight Northern Indian Pueblos
Council, Incorporated.
Good morning, David, welcome here.
Mr. Cordova. Thank you.
Chairman Manzullo. The tap of the pencil means the five
minutes is about up, and you're to sort of wrap up within a
minute after that.
We look forward to your testimony.
Mr. Cordova. Okay.
STATEMENT OF DAVID CORDOVA
Mr. Cordova. My name is David Cordova, and I'm the director
of planning and economic development for the Eight Northern
Indian Pueblos Council, Incorporated. We are a noncorporate
consortium of the eight northern pueblos of New Mexico. The
consortium was established in 1967. The board of directors for
the ENIPC, which it's known as, is the current governors of the
Eight Northern Indian Pueblos Council, Eight Northern Pueblos.
The pueblos have formed the consortium in order to deal
with common issues that affect all the eight northern pueblos.
Our organization is unique in that we are the only Native
American community reuse organization in the United States.
ENIPC was designated a community reuse organization on
April 2000 by the US Department of Energy Community Transition
Office. Our mission as a CRO is to develop strategies and goals
that will increase economic development to the eight northern
pueblos. We intend to continue to provide community-based
services in the areas for which ENIPC has been chartered:
Economic development, community services, social services,
employment and training, and to assist tribal members to
implement and manage their programs.
Regretfully, the relationship between the eight northern
pueblos and the federal government, in regards to procurement,
has been minimal or almost nonexistent. Our most recent
research shows that less than $5,000 in procurements from
tribal businesses of the eight northern pueblos have happened
in the past year.
LANL has not worked directly with any pueblo government on
any initiative, to date, in 2001. The laboratory employment of
Native Americans is, as well, marginal, totaling only 139
people, or 1.8 percent of the 7,626 full-time positions
reported by the laboratory in 2001. The northern pueblos
accounted for only 59 of the 139 total positions held by Native
Americans in 2001. Of this figure, only one tribal member of
the northern pueblos held a supervisory position, and none held
managerial positions.
The employment and procurement figures show that there is a
huge disparity between the federal government procurements to
the eight northern pueblos. Improvements need to be made, and a
well-orchestrated effort needs to be put in place that will
allow the eight northern pueblos to successfully bid for
opportunities with the federal government.
This year, though, the small business office of the Los
Alamos National Laboratory is attempting to improve the eight
northern pueblos' small business presence at the labs. Several
of the representatives of the small business office have
assisted the ENIPC in learning how get our businesses
certified, 8(a) certified, et cetera.
Most recently, ENIPC was asked by the small business office
to name a representative to the Procurement Advisory Panel, of
which I was named as the eight northern pueblos'
representative. A few procurement opportunities have been
presented to the pueblos. Currently, one of our tribally-owned
businesses, TSAY Corporation, has been working with the small
business office to secure a contract for the decommissioning of
buildings. This is a step in the right direction, and TSAY is
excited about the opportunity.
Our perception of the small business office is that they
are finally stepping in the right direction, but there are
several issues to work on, such as, one, securing more
contracts for the Eight Northern Pueblos businesses; two, teach
and advise the pueblos on how to access the opportunities that
are available to them; three, opportunities need to be
presented with adequate time, and in writing, as to allow the
pueblos time to respond; four, if government contracts are
awarded to more qualified businesses, then direct that business
to employ Native Americans from the eight northern pueblos so
they can learn the tools of the trade and bring it back to the
pueblos; five, procurement red tape does not allow the small
disadvantaged businesses of the pueblos to successfully compete
for contracts.
Changes need to be made that will allow the pueblos to
successfully bid on government contracts. Modification of
requirements may be needed to assist tribal businesses in
procurement opportunities. Perhaps a probationary period, with
less stringent requirements may be needed to allow the tribal
businesses to fulfill the government requirements to secure a
procurement contract. These federal regulations have--these
federal regulations that are in place have created companies as
monopolies that are already established and exclude competition
from any newly-forming companies.
As of date, our research shows that there have been no loan
programs administered by the SBA to any northern tribe, tribal
business, or entity. Many of the local federal SBA offices have
not made an effort to assist the pueblos or introduce us to
what assistance they have to offer. The Espanola SBA office,
for example, has not contacted my department to offer any of
its services. Many tribal businesses and small business owners
do not have access to capital, and this hinders their economic
development and growth.
More needs to be done to secure procurement opportunities
for the eight northern pueblos and tribally-owned businesses.
It needs to be done immediately. Perhaps the possibility of
creating a tribal small business office that would assist not
only the eight northern pueblos, but also all the New Mexico
tribes needs to be created. This will effectively deal with the
lack of tribal procurement opportunities.
Thank you very much.
[Mr. Cordova's statement may be found in appendix.]
Chairman Manzullo. David, I really appreciate your
testimony. You know, you never realize how big our nation is
until you look at the backgrounds. Roscoe is from Maryland, I'm
from northern Illinois, and here we are in New Mexico. Each
area of this country has the most incredible opportunities, and
I really appreciate your testimony.
The next witness is Marlo Martinez. Marlo is with the New
Mexico Office Products Company. Is that your company, Marlo?
Mr. Martinez. Yes, sir.
Chairman Manzullo. We look forward to your testimony.
Mr. Martinez. Good morning to you.
Chairman Manzullo. Notice that there's Martinez, Morales,
Cordova, Montoya, and you're probably wondering what this name
is. Okay, I'll just let you keep on guessing, but my family
does have an Italian restaurant. That could be it. Sometimes
they put a tilde over the ``N,'' you know.
Marlo, please.
STATEMENT OF MARLO MARTINEZ
Mr. Martinez. Mr. Chairman, Honorable Congressman Udall,
members of the committee, thank you for the opportunity for
being here; it is an honor, and I'm here, and I'll read off of
my script, and I have my other copies here--pass those along,
please.
Because many small minority businesses are short on
resources, are undercapitalized and face cultural biases, one
has to be very organized, proficient, work hard, have self-
discipline, perseverance in all aspects of business. We have to
control costs to such an extent that while offering a
competitive, but a fair price, a reasonable profit is
constantly attained.
New Mexico Office Products has been in business for over 40
years. My father started this business in 1959, I assumed
control in 79, and I've been in business for 25 years. In 1985,
our company was selected as Minority Subcontractor of the Year
for Los Alamos National Laboratory, and subsequently, in 1986,
Small Business of the Year for Los Alamos National Laboratory,
and then, in 87, we received an award from--the SBA
Administrator's Award of Excellence.
Those were good years for myself as a young businessman,
but in the ensuing years after that, LANL changed their system
to JIT, which is just-in-time contracting. This basically is
when competitive bidding stopped in exchange more for the
principle of awarding all of the contracts to a handful of
vendors, usually those in Albuquerque with a large market area.
This change in policy has really hurt all of the micro
businesses of rural New Mexico for the last decade-and-a-half,
and doing business with Sandia National Laboratory is virtually
nonexistent in northern New Mexico.
If DOE would continue to prioritize funding to companies
such as SLS, Strategic Learning Services, or others, to serve
as a conduit or clearinghouse to the small business community,
like they had done before--I think it worked really well,
because you had an outside source really channeling information
and opportunities to small businesses and really serving as an
outreach program, which I don't believe is as strong as it was
then. So I would say to maybe take some of that funding that
they have and prioritize it, I think that disadvantaged
businesses would have better access to bids and the specific
needs of the government, at least those niches within the
government that we fail to get.
I think the time has come to reevaluate the process used by
DOE and the national laboratories by which they buy their goods
and services. I believe that breaking up the JIT contracts
would surely spread the wealth. As it is now, most of those
people continue to get those same orders over and over and year
after year. I think it's only fair that everybody gets a piece
of the action. This would mean an extra effort on behalf of
LANL and Sandia National Laboratory for the sake of really
truly supporting many of the small businesses, especially those
in rural America.
I believe that the procurement buyers and managers at LANL
have good intentions, and I personally know these folks that
run these programs at LANL, but maybe the problem isn't at that
level; I think it's probably higher up. And as I mentioned here
in my report, that people such as the technical people would
prefer, as Mrs. Morales alluded to, to go directly to these
larger firms, with the belief that these national companies
will give them a better deal or whatever--however they think.
These are technical people that make these requests that
actually get this merchandise elsewhere, which these buyers, I
don't know if they have that much control over that, but
higher-ups probably would, I think.
I think we have to break this barrier, and I think the time
is now, and for too long the small business has paid its dues.
And what I mean by that is, you know, we pay our taxes, we hire
the people. Back in the 80s, I had twice as many employees. I
don't have that many employees anymore, because when the JITs
did occur, I had to find other sources of revenue and expand my
business in other ways to offset the losses at Los Alamos. In
those years, we were doing about 250,000. To me, it's not a lot
of money, but it was manageable, and at least it was
something--better than nothing that we were getting after all
those years.
We do have one contract now, which is a paper contract,
which is really good, and it's real helpful, and that's nice.
And also, I say that our fathers and our mothers, brothers
and sisters in northern New Mexico have gotten sick and died
building infrastructure at Los Alamos and Sandia, and have had
to endure hazardous working environment, chemicals that were
being dumped at the time, where we have DOE facilities at nine
sites throughout the nation, compensating people that have
gotten sick over having worked at these sites that were not
protected back 30, 40, 50 years ago.
And I think with that, I don't know that we're deserving,
especially, to get special treatment or anything, all I do know
is that in my testimony today, here, the micro businesses
constitute most of New Mexico businesses, and I think right now
the way it's gauged is 500 employees and under, or for
instance, a construction company would be $15 million and
under, to be considered a small business. Well, if we paid more
attention to helping these businesses that are 20 employees and
under, or ten employees and under, I think, as far as set-
asides or having particular goals and fulfilling those goals,
would be appropriate.
And again, I would just emphasize that we're at the mercy
of these laboratories, and I would place some of the blame
probably on ourselves. We have to have strong, persistent
presence in those locations, as well; but even at that, we need
a better clearinghouse to find out the advantages of what is
available to us.
[Mr. Martinez's statement may be found in appendix.]
Chairman Manzullo. Marlo, thank you for your testimony. I
appreciate it very much.
The next witness is Antonio Montoya. Antonio is chairman
and CEO of L&M Technologies. We look forward to your testimony,
Antonio.
STATEMENT OF ANTONIO R. MONTOYA
Mr. Montoya. Thank you, Chairman Manzullo, Congressman
Udall, and members of the Small Business Committee.
Indeed, I consider myself fortunate to be able to express
some of my thoughts, and I'll attempt to read part of it and
just verbally summarize some of the rest of it. So if it
appears like maybe I'm a little bit unorganized, I might be.
L&M is a company that's been around since 1972, giving us
about 28 years of doing business with the laboratories,
including Los Alamos and Sandia, since 1972. However, the work
with Los Alamos has come to the point where there is none.
However, I've worked on, and sat on committees with Los Alamos
procurement, the Northern New Mexico Los Alamos Procurement
Committee, and those actions are efforts to improve small
business, particularly in the northern part of New Mexico.
There were a lot of good efforts.
However, I think it was the lack of those action items to
have taken place, and therefore, having a successful effort
from that committee.
Also, I've sat on committees with Sandia National
Laboratories, and--almost exactly the same type of committees,
to include the task force that Sandia had to bring in folks
from the community to testify. The difference there, I believe,
is just the fact that there was follow-through with the actions
stated, the actions desired; and so I think, therefore, causing
them, Sandia, to be a little more successful in those efforts
in improving small business.
I think also the fact that legislation probably is one of
the biggest things that can change those things that can help
small business, the agencies' policies and procedures,
particularly with DOE, and the Small Business Administration,
also.
You know, when an agency can't take credit for small
minority businesses or business that the prime contractors have
given and allowed them to compete for, and they've received,
when the agency can't get credit for that, then I think that's
defeating the overall purpose of promotingsmall business.
Also, the legislation of such bills as providing exclusive
and overriding advantages to the Alaskan Native tribal
contracting organizations, such as the Alaskan Native Tribal
Company that makes over a billion dollars a year and yet can
compete and take over 8(a) and small business contracts,
particularly the one they just picked up at Kirtland, and I'm
sure the Congressmen----
Chairman Manzullo. Excuse me. An Alaskan Native American
tribe just picked up a contract here in New Mexico?
Mr. Montoya. At Kirtland, yes.
Chairman Manzullo. Are there any members of the Alaskan
Native American tribe here, that are residents in this state?
Mr. Montoya. No, there are no Native American tribes in New
Mexico that have that advantage over the Alaskan Native
American tribe. They buy up small and minority 8(a), American
Native-owned companies, therefore they retain the advantages
and benefits of those organizations.
Not only do they have the economic force and just ready
cash force to keep their advantages going, that's the
legislation that I think needs to be changed.
Mr. Silva. Let me clarify that for you, please.
I'm Orlando Silva with the SBA----
Chairman Manzullo. All right. Just a second. Let me take
the testimony of the people here----
Mr. Silva. Sure.
Chairman Manzullo [continuing]. And then we can go outside
the group here, once that's done. All right?
Were you done with your testimony, Antonio?
Mr. Montoya. No, sir.
Chairman Manzullo. You've got a couple of minutes there,
and I know I interrupted you.
Mr. Montoya. That's quite all right.
I think, probably, one of the largest things that can
contribute to what I believe are honest attempts and desires of
not only the Small Business Committee, but large companies--
because I've seen them doing it commercially, also--and that's
attitudes. That's the attitude of the folks that not only are
with the prime contractors or the government agencies or the
Small Business Committee, but the attitudes that go all the way
down, and when you have outreach programs, that's great, but it
doesn't do a damn bit of good unless you have in-reach programs
where you talk to your users within the laboratory or any of
the government agencies.
I'm reaching the end of my five minutes, but I think that
probably one of the good examples one can relate to is--
particularly, in the recent three or four years--are the
efforts of Sandia National Laboratories. NASA has good
policies. Often, though, some of their areas, such as NASA
headquarters, they have attitudes and go along with their users
that just do not contribute to their ultimate desires, helping
small business.
[Mr. Montoya's statement may be found in appendix.]
Chairman Manzullo. Antonio, thank you for your testimony.
Let's go, then, to the folks at the lab. Oh, I'm sorry,
Abe. Good morning. I didn't see you come in over there.
Mr. Salazar. I apologize. It's the first day of school over
here in the valley, so I had to come in with my son. I had to
meet that commitment today, so that's a priority for me right
now.
Chairman Manzullo. Well, you've got your priorities set
straight.
Abe, you're the owner of Computer Assets, Incorporated. We
look forward to your testimony. If I go like this, that means
your five minutes are coming to an end.
STATEMENT OF ABE SALAZAR
Mr. Salazar. Okay. I will try to summarize this as best I
can, but I want to give you some historical information about
this area, and I'm going to read this portion from my
testimony.
First of all, Computer Assets is located in the beautiful
Espanola Valley. The Espanola Valley is where the first
European capital was established in what is now the continental
United States, and as a result, it was a trade center for a
very, very long time. This has been somewhat changed in the
last hundred years. In fact, development of industry in this
valley has basically stagnated, in some form, in the last
hundred years. There hasn't been a lot of development or growth
for the area.
The lab was established more than 60 years ago, and not
one, not one entity has developed, businesswise, in the valley,
and that's amazing to me. They spend billions and billions of
dollars, and you see one large corporation set forth in 15
miles away from that--from the organization. That's actually
shocking.
So what I want to cover today is really three points. First
of all, I'll give you some background about my company.
Secondly, I want to talk a little bit about the federal
programs' contributions to our company, and the third piece is
the procurement program and the policies that the DOE
facilities have in relation to our area.
Now, I cannot speak about other areas. I can only speak
about this northern section, that is what I know, and as a
result, I will try to clarify some key points.
First of all, Computer Assets was established in 1993. It
was based on a $600 loan from my father, believe it or not, and
I established the company and went forward and established
slowly, over local and state contracts.
At one point, I decided to go ahead and change that and
develop an actual real company and we started looking at
procurement opportunities with other organizations.
As of today, the company has revenues of over $10 million.
Of the $10 million, less than 5 percent is related to any type
of federal programs. We are primarily focused on state and
local business opportunities.
The federal programs and the contributions that are there,
there's a couple of organizations that we utilize as our
federal base. Of course, the SBA is one of those. They have
both lending opportunities in terms of SBA-type loans, and of
course, they have some opportunities, in terms of procurement.
Does anybody know that, if you're a small business and you
need to do business with some type of either federal agency,
you have to have some type of contract vehicle, and the
contract vehicles that have been set forth have been the 8(a)
certified and HUB zone certifications.
Our company currently has met those two criteria. We're
both 8(a) and HUB zone certified. And briefly, HUB zone
certification is, basically, if you live or if your company is
based in an area that has very low types of business
opportunities, and a high percentage of unemployment, that area
may classify as a HUB zone, where in Espanola Valley we do
classify that as a HUB zone, and we did file for that, with the
help of the SBA, and we did get certification on that.
What that basically does for us, it gives you also the
opportunity to go out there and contract with the federal
agencies directly. But unfortunately, there's been some
hesitation in having the local federal agencies contract with
our company.
In the lab's sense, there was--about three, four years ago,
there was a large RIF that happened at LANL. I don't know if
anybody remembers that or not, but it was written up in all the
papers. Well, if you look at the percentages of those RIFs, a
high percentage of those RIFs landed up impacting the valley in
some form. They had--the highest percentage of those people
RIFed were from the valley. As a result, LANL took an
aggressive move to somewhat put some programs in place to help
initiate some type of economic development. And so what they
had is, they had two programs that were initiated.
First of all, they had something called the Northern New
Mexico Procurement Initiative. That particular initiative was
targeted for the northern New Mexico region, and what the
mechanism basically allowed them to do was to go out there and
procure either services or equipment from northern New Mexico
vendors.
Originally, the scope landed up only being certain
counties, while in the second phase of that scope, it changed.
They started adding additional counties, which actually went
all the way down to Rio Rancho, which was a real surprise, and
basically what that allowed the lab to do was to do business as
usual. They could still meet the procurement obligations that
they had under the program, but they didn't necessarily have to
procure items or services from those northern regions, by
adding of the additional counties. That was definitely a
weakness in their strategy, and the logic behind that, I do not
know, but it was definitely a weakness in terms of procuring
the proper services and equipment from the north.
The second one, which is not really directly related to my
business, but is something that we have a deep interest in is
something called the Los Alamos National Labs Foundation, which
is basically an organization there set up to help fund
educational institutions, primarily high schools, elementary,
junior highs, with technology plants.
Essentially, for the last--I don't even know how long it's
been going on, but it's been going on for a long time--the Los
Alamos School District has been getting federal funds directly
into the school, itself, for technology. This was going on for
a whole number of years. So someone asked the question, a few
years back, ``Why are the other schools, locally, not getting
that same type of funding?'' So the foundation was created, and
the mechanism for the funding in that particular organization
is based on how many kids' parents are working at the
laboratory.
So, for an example, if we have 40 percent of the kids'
parents land up being--having their kids go to the Espanola
School District, well, they get essentially 40 percent of those
funds. Well, unfortunately, there are strings attached to all
this.
The schools are required to issue a proposal for that
funding, and there's always some type of strings attached. And
in my written statement here, there's an example, here, of one
of the issues that the Espanola schools were facing, and one of
those issues was the fact that they had a certain program in
place to establish technology.
Well, as you know, with any school district, there's a lot
of turnover. Well, when you have turnover, progress of certain
programs is either stalemated or they stop going at an
efficient rate--I'm sorry, sir.
Chairman Manzullo. That's okay.
Mr. Salazar. So to summarize, the foundation has put some
corrals over the school districts and required them to do
business and, therefore, not normally in the school district
form.
Thank you.
Chairman Manzullo. Thank you. We appreciate it.
Mr. Salazar. Sure.
[Mr. Salazar's statement may be found in appendix.]
Chairman Manzullo. The next witness is Joseph Salgado, who
is the principal deputy lab director at Los Alamos.
STATEMENT OF JOSEPH SALGADO
Mr. Salgado. Thank you, Mr. Chairman and members. On behalf
of John Browne, we welcome the opportunity to be here and
appreciate you taking your time and effort to come here to
northern New Mexico.
I want to just briefly outline some of the testimony that
has been submitted to the committee. Essentially, I would like
to say what we've submitted, Mr. Chairman, is a strategy as to
how to enhance our small business activities in northern New
Mexico.
I think it's important to understand that Los Alamos is
unique in the DOE complex. We're in rural northern New Mexico,
rural America. We have over 43 square miles that constitute the
laboratory, we have over 2,000 buildings, and we have over 100
miles of road, and it's important to understand that
geographical configuration and physical configuration to
understand the strategies that Dr. Browne has put into motion.
We have two prongs to address in northern New Mexico, both
in economic development and small business activity, which are
important to Director Browne. Our strategy consists both to
educate and assist small business in the process and technical
skills to meet laboratory needs and requirements; to form an
alliance with small business development organizations; to
target historically underserved areas of the supplier
community; to establish internal laboratory awareness of the
importance of increasing small business participation in
northern New Mexico; and to educate and assist small business
firms in thinking and competing globally. The importance there
is not to totally rely on the laboratory, but also to enhance
their capability to compete internationally and nationally and
globally.
Our goal this year is to place 35 percent of our base
procurement budget with small businesses, which is
approximately a billion dollars, so that equates to $335
million, and we hope to attain that goal.
The issue that has been addressed here and discussed
briefly is northern New Mexico, and there is a regional
procurement effort that we have put into place, Director Browne
has put into place, to try to enhance the economic development
in northern New Mexico, both through economic development in
our contracting and procurement, but also in the major
subcontracts that we let at the laboratory, and make those
parts of the contract.
Northern New Mexico consists of a seven-county region in
northern New Mexico. Appendix J of the contract with DOE
chartered a concerted effort for economic development,
particularly in our large subcontracting activities. This
sometimes runs contrary to small business activities we are
also engaged in.
This year, we anticipate that we will have $110 million
with 454 firms in northern New Mexico. Ironically, if you look
back over a period of years from 1996 to this year, in 1996, we
spent approximately $64 million in northern New Mexico. This
year it will be $110 million. The discrepancy that we do note
at the laboratory, and the deficiency we have to address, is
that in 1996, there were 449 firms we dealt with for that
amount of money. In the year 2001, there were 454 firms, which
means that the supplier base in New Mexico is probably not
increasing at the rate that we would anticipate.
There is a northern New Mexico preference program in
existence. We're making every attemptto try to put preferences
in northern New Mexico. This year, one of the companies we have, Abba
Technologies, was awarded a five-year, $4 million contract under this
special effort.
We've heard some of the concerns of the Native Americans.
Dr. Browne initiated, through Benny Gonzales, who heads our
small business operation, the Pueblo 2002 Program. Hopefully,
by October 1st, we'll put four contracts in place with four
pueblos, under the Cerro Grande fire restoration program; a $1
million contract for each pueblo, helping us address the Cerro
Grande damages that were impacted in northern New Mexico.
You've heard a reference to the HUB, historically
underutilized business, HUB zone program. Currently, I believe
that we have approximately 50 firms that have been certified
with the Small Business Administration in the seven-county
area, and we're looking to increase that.
We have just recently let a contract for $1.6 million to
the first firm, Anvil Welding Company, in Espanola Valley, a
$1.6 million contract pursuant to that HUB zone certification
program.
One of the issues that has been addressed, and rightly
addressed, is the issue of not only the external component, but
the internal component. Given the geographic configuration of
200 buildings, one of the major efforts that we have undertaken
is to internally have a series of workshops and understanding
for our buyers, both our technical and our procurement buyers,
to understand the opportunities availed them in northern New
Mexico and in small businesses throughout the entire state of
activity.
In the last year, year-and-a-half, we have had two major
conferences with suppliers, both in the Espanola Valley area,
and we have had two technical presentations by which the
suppliers come to the laboratory and meet with our buyers and
our technical staff so our technical staff can understand the
opportunities that they have to purchase in the northern New
Mexico area.
We have utilized the Northern New Mexico Supplier Alliance
in helping to try to coordinate and develop those type of
activities.
We do understand that communication is one of the key
components for basically not only success of small businesses,
but our internal ability. We launched a web site that makes
available all the current information that we have for small
business in northern New Mexico, and throughout the entire
world, for that matter. We have had 7,500 hits on that web
site, which brings particularly small businesses up to speed on
what areas of opportunity there are within the laboratory.
During that course of time, Mr. Chairman, we also found out
that there were many small businesses that do not have computer
capability, particularly in northern New Mexico. One of the
areas that Representative Udall and we have discussed is the
lack of high speed fiberoptics in northern New Mexico for
interconnecting. We also put out a newsletter, monthly, so we
can bring our small businesses up to speed and communicate with
them as effectively as we can.
One of the things that we learned in our conversations and
the conferences we had is that many small businesses have
concerns, some of these concerns you've heard here today. We
have established in our ombuds office a special desk for
special programs so that the small businesses have the ability
to communicate with the laboratory, address their concerns,
with a sense of confidentiality, so we too can address the
concerns internally within the laboratory.
The two areas that do concern me, Mr. Chairman, is
essentially the Price Anderson Act that is taking place, both
in the budgetary and regulatory areas of DOE, and how that will
impact the laboratory particularly, and our small business
suppliers. That act basically will create an additional burden
on our small business activity because of the quality assurance
review dealing with our nuclear facility. That is an area, the
full impact of which we don't fully understand at this time.
Benny Gonzales is attempting to move forward aggressively to
see what we can do to help facilitate the quality assurances
necessary to meet the Price Anderson Act that is within
regulation form within DOE now that may become applicable in a
regulatory component if the legislation passes this year. We,
as a nonprofit organization, had not been subject to that for a
period of time.
We also are moving forward with our 8(a). For the first
time ever, we have created an 8(a) service set-aside in our
construction activity. We have two contracts that will be let
within the next 60 days, for approximately a total of $2\1/2\
million.
We understand, and Director Browne understands, that we
need an aggressive program to move forward. The difficulties
that we deal with, we need to create an economic base in the
northern New Mexico area, living in rural America, and Dr.
Browne is committed to a very proactive and aggressive approach
to help ensure that success.
[Mr. Salgado's statement may be found in appendix.]
Chairman Manzullo. Thank you very much. I appreciate it.
I would like to go to Patty Wagner. Patty is the assistant
manager, Office of Management and Administration.
Patty, when I examined your testimony, I took a look at the
budget here for the lab, $4.9 billion, and I know this was not
a completed function, either, but--in fact, I discussed it on
the airplane with Michael Day, on the way here, and it seems
$114 million is a pretty small amount of money, of the total
amount, that's going towards procurement.
Ms. Wagner. That's just for the Department of Energy. If
you look at the $3,676 in there, that goes to the M&Os, and
that's where their small business opportunities come from. So
you would have to get from them how much of their money goes to
small businesses, so----
Chairman Manzullo. This is the Department of Energy, Los
Alamos budget.
Ms. Wagner. Okay, let me try to explain it. This is--the
Albuquerque operations office has all of the money that's
appropriated, authorized by Congress come to its office. It
then sends it to its five M&O contractors, management and
operating contractors, which includes Los Alamos National Lab,
Sandia National Labs, and so forth. So the $3.6 million that
you see there goes to the M&O contractors, and from there, they
could respond to you as to how much of the money that comes to
them is then infused into small businesses.
So, for example, I believe that it's 1.3 or 1.2 for Los
Alamos, and similar for Sandia, of that 3.6. So the 114
represents only what is actual Department of Energy, as an
entity, as opposed to its contractors.
Does that help you?
Chairman Manzullo. I think so.
Why don't you go ahead with your testimony. You understand
this a lot better than we do. That's why we're having a
hearing.
STATEMENT OF PATTY WAGNER
Ms. Wagner. All right. And that is in my written testimony,
by the way, so I won't really be talking about it orally, but
I'd be happy to address it.
First of all, good morning. We're delighted for you to have
this in New Mexico and, especially, myself being from Santa Fe,
in my hometown. So I hope you're enjoying the city.
I am Patty Wagner. I'm the assistant manager for the Office
of Administration of the Department of Energy, National Nuclear
Security Administration, the Albuquerque Operations Office.
The majority of Albuquerque's mission is accomplished
through the use of five management and operating contractors,
also referred to as M&O contractors. They include the
University of California at Los Alamos National Laboratory;
Lockheed Martin at Sandia National Laboratories; Westinghouse,
TRU Solutions at the Waste Isolation Pilot Plant at Carlsbad,
New Mexico; Honeywell, at the Kansas City Plant, and BWXT
Pantex, at the Pantex Plant in Amarillo, Texas. Other efforts
requiring contract services or items to support DOE
Albuquerque's mission are accomplished through supply or
support service contracts.
It is my understanding that our M&O contractors at Los
Alamos National Laboratory and Sandia National Laboratories
will provide independent statements regarding their small
business programs. Therefore, my statement will focus on DOE
Albuquerque.
The mission of our small business office is to serve as an
advocate for small business to ensure they receive a portion of
the contract awards.
We have been successful in meeting our socioeconomic goals
in the past. We have a deliberate and methodical process for
establishing goals for contracting with the small business
community. Through this process, we annually examine total
available procurement dollars, excluding our M&Os, and take
into consideration funds required for existing contracts and
forecasted requirements. In fiscal year 2000, approximately 50
percent or $66 million of our total dollars obligated were
awarded to small businesses, an accomplishment we are very
proud of, and three of the last five years, our Albuquerque
office has won the Secretary of Energy's award for being
aggressive and the most successful small business contracting.
We've been able to achieve our goals due to extensive
outreach efforts. Our small business program manager and local
DOE management participate in numerous small business
conferences, educational seminars, trade fairs, matchmaker
events, and networking functions with community organizations.
Some of the activities or organizations that we have been
actively involved with include the Rio Grande Minority
Purchasing Council, including co-sponsoring the council's
annual conference and trade fair, the Small Business
Administration, the State of New Mexico Procurement Assistance
Program, the 8(a) Association, and the Air Force Research
Laboratory to provide training and educational sessions; the
SBA annual ``Dollars & Sense'' conference focusing on women-
owned businesses; also the nationwide Second Annual DOE Small
Business Conference, the Professional Aerospace Contractors
Association Annual Briefing for Industry, and the Air Force
Research Laboratory in a veteran's outreach event. And all of
those are outreach efforts for the Department of Energy.
This year, we are expanding our outreach efforts to include
historically underutilized business zones, commonly referred to
as HUB zones, which I think Abe talked about.
Recently, our small business program manager met with the
governors of the eight northern pueblos to provide an overview
of how to do business with DOE and to generate mutual interest
in doing business.
The Albuquerque operations office has many success stories
of awarding contracts to small business concerns. One example
is ATM Services, an 8(a) woman-owned small business. It's
initial contract for personnel security had an estimated value
of $5.6 million. When the contract was recompeted under 8(a)
competition, the scope was expanded to include physical and
cyber security, and ATM won the award estimated at $15.8.
Another example is Terradigm. Terradigm is an 8(a) company
that was competitively selected under an 8(a) solicitation to
provide environmental consulting at a total contract value of
$6.5 million. Terradigm received an SBA Region VI award as an
exemplary small business in July of this year.
We recently awarded a contract to Au' Authum Ki, an 8(a)
Native American, woman-owned, HUB zone company, in the amount
of $163,000. This construction work involves asbestos abatement
and lead paint removal, and the contractor has successful
experience performing similar work at military installations.
We also work closely with our M&O contractors to set annual
small business goals. The process for establishing those goals
is detailed in my written testimony. In addition, we maintain
an ongoing interaction with our contractors to encourage their
support and participation in numerous outreach activities.
In an effort to improve contracting with small businesses,
we have three suggestions for the committee. We suggest you
consider establishing a set-aside mechanism for women-owned
businesses so that we can contract directly with these
companies. We have goals for contracting with women-owned
businesses, but we don't have a set-aside mechanism providing
funding for mentor/protege programs, but we think it would be
helpful to have specific funding to incentivise that and
provide funding for monetary incentives for subcontracting with
Native American economic enterprises or organizations. FAR
regulations allow this, but it's the same issue in terms of
incentivising.
In summary, DOE Albuquerque will continue to make every
effort to award prime contracts to small businesses by
identifying potential set-asides as contracts expire, perform
outreach efforts and identify small businesses with the
capability to support our requirements, monitor progress of our
prime contractors, including our M&Os, in achieving their small
business goals, and promote the small business program to in-
house technical personnel who have upcoming contractual
requirements.
Small businesses have contributed immensely to the
accomplishment of our mission and the economy of our nation. We
will continue to tap into their unique talents, capabilities,
and expertise to successfully support our operation.
And since you said I could ad-lib a little, I will. It's
not in the statement, but I think the point on the in-reach is
very important, and I know the contractors, both LANL and
Sandia and DOE, are all working to expand their in-reach
programs, in particular making sure that all of our purchasers
and buyers are aware of New Mexico firms.
[Ms. Wagner's statement may be found in appendix.]
Chairman Manzullo. I guess--I know it's predetermined
questions, but we've heard testimony like this in Washington,
on several occasions. All the agencies are working overtime,
providing all kinds of opportunities, and yet, we get hundreds
and hundreds of letters from people like this that have been
shafted; their companies grow smaller, the opportunities grow
less, the prime contracting goes on more and more. And I've had
one person from a federal agency actually come in and say the
Small Business Committee is right, there's something seriously
wrong with the whole procurement process.
Now, I appreciate your testimony, Patty, and you're a
numbers cruncher, I know, and you'll do what you can on it.
Mr. Salgado, I appreciate yours, too, but I want to hear
some response, perhaps from Mr. Nelson or Ms. Woodard, with
regard to what these people are testifying to, and so far I see
nothing except more promises of more outreach and asking
Congress for more money in order tosit down to talk to the
Native American tribes. I don't understand that.
Why are you coming to us with a $4.9 billion budget and
asking for money, seeing as you could talk to the Native
Americans who populate this area.
Ms. Wagner. May I respond?
Chairman Manzullo. Of course. This was not directed at you
personally. This is the big ``you,''.
Ms. Wagner. That's fine. I think what we're saying is that
we think the mentor/protege partnership between large business
and small business is very successful in helping small
businesses to grow their businesses, and money to incentivise
the programs, typically speaking, have money reserved to run
their programs, and incentivising larger businesses to help
small businesses to become successful is what we're talking
about, in terms of----
Chairman Manzullo. I think they want orders. I'm going to
ask the question, here, where are you buying your pens and
paper at Los Alamos? I'm going to ask the question, what
percentage of office desks, pens and paper, computers, consumer
products used at Los Alamos are coming from New Mexico, and how
much is coming from out of state? I think that's why these
people are here.
In Washington, you know, Congress does everything we can in
order to incentivise in order to get people to come out of
poverty. And Native American tribes have had, obviously, a very
difficult time, historically, in this country, and they are
coming to us Republicans and Democrats, saying, ``Look, the
opportunities we have had in the past to contract with the
federal government are diminishing.
Well, let's go on.
Ms. Woodard, let's go to you.
STATEMENT OF JOAN B. WOODARD
Ms. Woodard. Thank you, Mr. Chairman, Mr. Vice-Chairman,
Congressman Udall. I appreciate the opportunity, on behalf of
Paul Robinson, to offer my words and his testimony. I will
attempt to summarize my written remarks, which are quite
extensive, in a way that will give you some material that will
be of use in trying to understand the issues facing Sandia.
Sandia is a national laboratory serving the country with
technology for national security. As a laboratory, we are to
meet the country's needs with the best business practices and a
strong foundation of quality. Just as the Department of
Commerce, Malcolm Baldridge's national quality award emphasizes
the importance of having a strong supplier network, we, too,
see that as an important cornerstone, and small business is a
cornerstone of our quality supplier network. We value our
suppliers and strive to have relationships with them so that
both we and the supplier community can achieve excellence.
As a federal contractor, we establish goals for small
businesses, small disadvantaged, women-owned businesses, and
8(a) businesses. In the past five years, 57 percent of our
procurement was done with small business. This past year, that
percentage was 67 percent, or $275 million. In the past five
years, an average of 50 percent of all of our procurement was
done with firms in New Mexico. In fiscal year 2000, Sandia
contracted with 1,214 firms in New Mexico, 89 percent of which
are small businesses.
Over the past five years, New Mexico companies received 93
percent of the total dollar volume of Sandia's construction and
architectural engineering projects, nearly 60 percent of that
going to small businesses. We do not practice a preference to
small business regardless of quality, however. Our strategy is
to work with small businesses so their capabilities can benefit
firms anywhere. Similarly, we do not have a policy of
preference for New Mexico firms, but find that it makes really
good business sense to have suppliers who are responsive and
knowledgeable about the laboratory, and highly competitive in
their capabilities.
We measure success in many ways. First, successful delivery
to our customers of our technology products. To achieve the
goals that I have mentioned above, we conduct surveys of our
suppliers to understand problems that they face with our
practices, and we look at awards and citations that the
laboratory has received.
In 2000, the Small Business Administration awarded Sandia
the Dwight D. Eisenhower Award for Excellence in Use of Small
Business, and in 2000, DOE named Sandia the management and
operating contractor of the year, in recognition of our
outreach activities to encourage small businesses to work with
the laboratory. Sandia received additional recognition when the
United States Hispanic Chamber of Commerce named Sandia the
southwest region business advocate of the year for 2000. Also
personnel in the laboratory, like Ms. Cynthia Schneeberger, and
Ms. Corina Gallegos have been recognized for their hard work on
behalf of small business. Sandia's success in contracting
opportunities for small businesses is the result of an
intentional strategy.
In 1999, the laboratory director, Paul Robinson,
established a procurement council to oversee and provide
executive ownership of our strategy and the small-business
responsibilities. As a best business practice, it is important
to develop a team relationship with suppliers, which can help
us learn where we must fix problems. A good example of that, in
action, was with our staff augmentation contractors. Some years
ago, listening to our contractors, we learned of the problems
with our practices and made substantial changes, and we look
forward to continuous improvement and teamwork with our staff
augmentation contractors to help improve our practices.
There is a trend in global commerce today toward a highly
competitive customer-supplier relationship. Large companies
often invest significant effort in helping with guidance and
expertise to their suppliers. We have four fundamental parts in
our small business program. The first is teamwork and
communication. Through our supplier community advisory council,
we establish a mutual understanding, corporation and trust with
our executives. Many of us participate on boards and chamber
boards and panels in the community, working with small
business. We have a business partner program that provides
outreach.
Second, we create knowledge both ways. We have conducted
small business orientation programs where we help the community
businesses learn about the opportunities at the laboratory. We
also have an office of small business advocacy, with the
responsibility to raise awareness of small business
capabilities within our internal organizations at the
laboratory.
Third, we offer support to our suppliers for development of
their business practices. Included in that is business training
and ISO 9000 certification training, both of which were done in
collaboration with Los Alamos and other entities in this state.
Sandia also offers workshops in the areas of lean manufacturing
and patent application principles and procedures.
Fourth, we offer technical assistance to suppliers. We have
had a successful program through small business technical
assistance, funded by DOE Defense Programs. We're at the end of
that program. We now have a new program with the help of the
state legislature.
In 2000, the New Mexico state legislature passed the
Laboratory Partnership with Small Business Tax Credit Act. With
limited gross receipts tax rebates, Sandia is now able to
provide technical assistance to small businesses in New Mexico.
Within one month of the establishment of this law, we
started our program. To date, we have 400 inquiries, 300 from
outside of Albuquerque, completed 145 projects, 112 of which
are from nonmetropolitan areas. We recognize that a large
percent of our business is with New Mexico firms in the
Albuquerque area, and hopefully, through this program, we will
develop a relationship, as well as help, working with these
rural companies, to improve their capabilities so they can be
quality suppliers.
Sandia is also a catalyst for regional development. We have
an entrepreneurial program called New Ventures for employees to
leave the laboratories and spin off small companies based on
laboratory technology, personnel, or activities.
So, in conclusion, Sandia Laboratories is committed to
enhancing the opportunities for small businesses. It makes good
sense. At the same time that we promote regional economic
development, we will strive to emulate best business practices
and emerging trends in industrial customer-supplier
relationships and realize the management efficiencies that our
sponsors expect of us. We see no conflict in these goals. Our
desire is to work with small businesses to improve their level
of quality. We are partners with our small business suppliers
for mutual excellence.
Thank you.
[Ms. Woodard's statement may be found in appendix.]
Chairman Manzullo. Thank you very much.
Our last witness is Ronald Nelson, who is Director for
Contracts Management, University of California Office of the
President, Vice President for Laboratory Management. We look
forward to your testimony.
STATEMENT OF RONALD A. NELSON
Mr. Nelson. Thank you, Mr. Chairman, Mr. Vice-Chairman, and
Congressman Udall.
As you've indicated, I am the contracts manager for the
University of California. In listening to the various people
who have talked this morning, I thought I would depart a little
bit from my written statement, simply to try to be more
responsive to a lot of the comments made.
One of the questions that you seemed to have raised, Mr.
Chairman, is what is the role of the contractor in a region
such as northern New Mexico, particularly as alluded to by Abe,
the 60-year experience that the contractors have here, and the
impact on the community.
I would like to bring to your attention the Time of
Communities Act in 1955, which was legislation which targeted
various specific areas such as Los Alamos, Washington, Oak
Ridge, et cetera. So during the period that this act was in
place, that was a congressional statement of the role of the
federal government in helping those communities in areas where
the government predominated. And so, for many years, the role
of contractors was somewhat secondary to the role of the
federal government in that area.
With the expiration of that act in the early 90s, this
changed, and from that point forward, the Department of Energy
has encouraged its contractors, including the University of
California, to develop programs that would help step into the
breach, as these federal dollars were removed, that there would
be ways in which economic development could occur in those
areas where the contractors helped out, and that's really the
context in which--in my written statement, I talk about the
four-part initiative that the University of California
developed with regional leaders in 1996, in response to this.
And those four part areas involve the regional procurement
program, which has been alluded to already, where it focuses
its efforts on improving awards to northern New Mexico business
enterprises, the majority of which, of course, are small
businesses. We've done so through a preference program, as
mentioned by Deputy Director Salgado, approved by the
Department of Energy, and is documented in our procurement
system at Los Alamos.
We have encouraged major suppliers, such as Johnson
Controls, which is the on-site contractor, and Protective Force
Technologies of Los Alamos, which is our large security
supplier, to purchase regionally, as well. The University and
Los Alamos have also established a procurement advisory group,
which Tony alluded to in his participation, which involves
regional business representatives to discuss evolving
purchasing practices at Los Alamos and to share their business
concerns.
The second part involves corporate citizenship. We opened a
northern New Mexico office in 1996, as a means of being better
engaged locally. The University and Los Alamos also established
a foundation, which has been mentioned, that provides funds to
regional education and community efforts.
Let me say, for a moment, the Los Alamos National
Laboratory Foundation and the provisions that talk about how
funds are distributed within the region represent a significant
diversion from the prior history where the educational funds
were focused in the Los Alamos community, and based upon the
formulation that was agreed to with the Department of Energy, a
process was established whereby schools in the region, with
children of Los Alamos employees, would have an opportunity to
enhance educational funding. If you so desire, we'd be happy to
provide you with additional details about those procedures.
The University and Los Alamos also participates in the
Northern New Mexico Supplier Alliance, an organization of major
suppliers to the laboratories that looks for ways to further
the goal of regional economic diversification.
The third part involves education and research. The
University and Los Alamos established the Northern New Mexico
Council on Excellence in Education to enhance the intellectual
capital of the region, the place from which we draw the work
force of tomorrow. The council includes educators drawn from
northern New Mexico K through 12 schools, colleges, businesses,
and the New Mexico Department of Education. The University and
Los Alamos also sponsor a variety of research activities at New
Mexico colleges and universities with funds derived from the
management fee in Los Alamos.
The fourth part involves commercialization of Los Alamos-
developed technologies, with an emphasis on creating new
businesses in the region. The University and Los Alamos have an
entrepreneurial leave program approved by the Department of
Energy that encourages technologists at the laboratory to
establish new businesses. The University and Los Alamos also
license technologies to regional businesses, provide some basic
training in business skills, and offer technological assistance
to regional enterprises at a lower cost than that charged to
other businesses.
The University and Los Alamos have created an MBA
fellowship program to bring MBA candidates from business
schools, such as UC-Berkeley, Stanford and the University of
New Mexico to Los Alamos to look at opportunities to establish
businesses based upon Los Alamos technologies and to provide
assistance to regional enterprises in need of business advice.
You can see that our four-part strategy directly involves
small business enterprises both in our regional purchasing and
our technology commercialization. Our four-part strategy also
benefits the regional small business community indirectly
through our community and education efforts.
To summarize, we understand that small business
enterprises, as you have indicated, Mr. Chairman, and
particularly those in northern New Mexico, are important to the
Los Alamos National Laboratory, both as a high quality supplier
base, and as a place for future employees. For these reasons,
the University sees itself as having a stake in the success of
its small businesses.
Earlier, you heard testimony from Deputy Director Salgado
regarding the statistical information about the success of the
program thus far, and some of the plans for the future.
I thank you very much.
[Mr. Nelson's statement may be found in appendix.]
Chairman Manzullo. Thank you very much.
Mr. Udall.
Mr. Udall. Thank you, Mr. Chairman. The issue here--and the
chairman has hit on it a little bit, and I want to ask some of
the second panel members about that--the business people that
are here today are not unusual, in northern New Mexico, in
their statements and complaints, and saying how we could
improve. In fact, I met with the chamber group in Los Alamos
recently where business people who had been in business a long
time, right in Los Alamos, feel they're being ignored by the
Los Alamos National Laboratory, that they aren't consulted on
major changes that occur that impact their businesses.
The one example that they gave me is there's been a whole
change in the work schedule at Los Alamos where there are now
Fridays--Fridays end up being a free day, and with the work
schedule, the way it works--and you know, Mr. Salgado, more
than I do about this work schedule change, but this has had a
dramatic impact on every business in Los Alamos, and their
position--I don't know whether it was true or not, but their
position was, they weren't consulted, they weren't asked to
come in and say, ``Is there some way we can work through this
so that it is better for Los Alamos businesses?''
And so, when I hear these things over and over again, I
have to believe that there's some--where there's smoke, there's
also got to be fire. And I was wondering how you measure--how
you really measure your success, in terms of engaging small
businesses, increasing contracts, trying to do everything you
can to improve the economic situation in northern New Mexico.
Many of us know that two of the surrounding counties have
had very, very high unemployment rates since the Great
Depression. I mean, for all of the good words and intentions
and everything else, we still, in Rio Arriba County and Taos
County, have real problems in terms of getting people jobs, and
those of you that are administering these, as the chairman
said, billions of dollars, have an opportunity to open the door
to many of these people to get jobs.
So my first question is, you know, how are we measuring
success? Are we talking dollars to small businesses? Are we
talking about an increase in contract numbers? Are we talking
about an increase of jobs in these communities? I mean, how are
we measuring our success, and can you point out for me, over
the last five years, how you've--whatever measure you're
using--how you're increasing and making progress in those
areas.
And Mr. Salgado, why don't we start with you, since you put
in your testimony that your goal is to place 35 percent with
small businesses, $335 million, and you're on track to see that
goal. I'm wondering, are these prime or subcontractors? Who are
we talking about?
Mr. Salgado. We are talking about dealing with the world of
small businesses that we deal with in our procurement. We put a
35 percent goal on an estimated $1 billion procurement base.
As you're well aware, Mr. Congressman, there are large
contracts up there with the guard force, or Johnson Control, so
a substantial amount of our procurement dollars are tied into
basically some major contractors and some unique circumstances,
such as the fire department and things, given our geographical
configuration and our location. So that 35 percent, the $350
million, is for small business. Those were the goals negotiated
and accepted by the Department of Energy that we, as a
laboratory, need to meet in order to fulfill those obligations.
I would indicate to you--you mentioned the Friday program
at Los Alamos that has Los Alamos County concerned. That is a
program by which the work force, over a period of two to three
years, decided they would like to be able to have every other
Friday off in some type of sequence. There was a lack of
communication with the small business community in Los Alamos.
It has negatively impacted some of the restaurants and other
businesses in Los Alamos County, and we have made every effort
to try to continue and enhance the dialogue with Los Alamos
County so that type of situation does not increase itself.
Mr. Udall. Are we talking about prime contractors, or are
we talking about subcontractors?
Mr. Salgado. We are talking about prime contractors that
essentially tie into the supply designed into those areas that
are dealing with providing services and supplies to Los Alamos
National Laboratory. The prime contractors, we do not have
the--Johnson Controls, the prime contractor, they have some
subcontracts that they basically put into place, as well as
some of the major construction.
Chairman Manzullo. Would you be willing to furnish a list
of those subcontracts?
Mr. Salgado. Yes, sir.
Mr. Udall. So on these prime contracts, then, Los Alamos
really isn't doing any of the work, you're passing this on to
the contractors, basically, the prime contractors.
Mr. Salgado. There are prime contractors such as Hanzel-
Phelps, which is building the new supercomputer building up
there, they have subcontracts with a minority firm. Those are
not included in our numbers. There is a long list of what I
would call prime contractors. Johnson Controls, the Protective
Guard Force, those are prime contracts that may have in and of
themselves other subcontracts contracting with small business
firms and minority firms. I do not have the numbers for you.
The numbers provided here are our prime contracts for supplies
and services at Los Alamos National Laboratory, providing
services to us as a laboratory, and that's the 35 percent
number.
Chairman Manzullo. If you will, what is--the $335 million
at Los Alamos, is that going to people like these people here?
Mr. Salgado. That is going to all the small business
activity both here and across the nation that basically supply
goods and services to Los Alamos.
Chairman Manzullo. But that's the prime contractors.
Mr. Bartlett. No.
Mr. Salgado. No, that is with Los Alamos.
Our prime contractor, Johnson Controls, they have a $135
million general contract. They also buy goods and services.
They are not included in the 35 percent goal objectives.
Chairman Manzullo. This $335 million, none of this is
represented by these prime contractors.
Mr. Salgado. None of that is represented by the prime
contractors.
Chairman Manzullo. Can I ask you a question? Where do you
buy your stationery?
Mr. Salgado. Our stationery is bought through just-in-time
services. I don't have the names of the businesses.
Mr. Roybal. That is Boise Cascade. They currently hold the
Just-in-Time (JIT) contract.
Chairman Manzullo. And Boise Cascade holds the contracts
for the post offices cross the nation.
Mr. Roybal. Sierra Vista was a small business, minority
disadvantaged business here in Albuquerque, that had the JIT
contract in Los Alamos, and they were purchased by Boise
Cascade.
Chairman Manzullo. Could you identify yourself.
Mr. Salgado. This is Dennis Roybal, head of procurement at
Los Alamos.
Mr. Manzullo. Would you spell your last name for the
record.
Mr. Roybal. R-O-Y-B-A-L.
Chairman Manzullo. So Boise Cascade is--you're going to
them for your office supply products?
Mr. Salgado. Mr. Chairman, we had a contract with a small
business in Albuquerque. Boise Cascade bought that business,
and we had to honor that contract for a period of time. It's
still under that contract.
Mr. Roybal. That's correct.
Mr. Salgado. They bought out a small business, and the
contract was with the small business, and so that contract has
stayed in place.
Chairman Manzullo. So they bought out that small business.
The amount of procurement from that small business, did that
increase once they bought them out?
Mr. Salgado. Did the amount increase after Boise Cascade
bought out the small business?
Mr. Roybal. Probably not. But it's based on demand, so it's
relatively the same dollar amount.
Chairman Manzullo. Do you know where the stuff is coming
from?
Mr. Roybal. That Boise Cascade purchases?
Chairman Manzullo. Yes.
Mr. Roybal. No, I don't. I imagine that Boise Cascade has
several suppliers for different products.
Chairman Manzullo. Do you know if any of those suppliers
are local?
Mr. Roybal. I do not know, sir.
Chairman Manzullo. This is the problem.
Mr. Salgado. Mr. Chairman, I agree with you it's a problem.
The problem we have is with the contract negotiated with the
small business in Albuquerque which was bought by Boise
Cascade. That contract has not expired, as far as I know, and
has not been renewed. It's still the same existing contract; is
that correct?
Chairman Manzullo. So you contracted with a small business
company for all your office supplies?
Mr. Salgado. Or a portion thereof, yes.
Chairman Manzullo. Is that correct?
Mr. Salgado. Yes, that's correct.
Chairman Manzullo. Did you contract with any other small
businesses, besides the one that was bought out?
Mr. Roybal. We have 38 just-in-time contracts, such as with
Ms. Morales, contracts that provide goods and services to the
laboratory. Of the 38, 33 are awarded to small businesses, and
20 of those 33 are women-owned businesses.
Chairman Manzullo. How does Boise Cascade figure into this?
They are, obviously, not a small business.
Mr. Salgado. They just bought the contract, and the
contract remained in full force and effect.
Chairman Manzullo. I think that DOE--we're here as the
Small Business Committee--is representing that Boise Cascade
could come in and buy up a company that you're under obligation
with, that the government's certified as a small business
provider----
Mr. Salgado. That's correct.
Chairman Manzullo [continuing]. At some point, either in
the amount of the value of the total company, or the assets of
the individual owner--in most cases, that's $750,000. Now we've
got Boise Cascade who, incidentally, has a contract with all
the US post offices, supplies them their pens and paper
nationwide, to the exclusion of local supply stores, such as
Mr. Martinez', that comes in; even though we passed these goals
in Congress. This is not what we had in mind. This is not what
we want.
So what I would like to see from the lab is a list of the
small businesses that you're dealing with. I want to know who
they are. I want to know who the owners are. I want to know how
much they're worth.
How do you answer Mr. Martinez, who's laid off half of his
people that used to sell pens and pencils and paper supplies?
Is that right, Mr. Martinez?
Mr. Martinez. Yes, Mr. Chairman. On top of that, when the
JIT was formed in the 80s, they still went to the their local
office supply store in Los Alamos and purchased about $1
million in goods and services over the ensuing five years. I
couldn't go and open a store in Los Alamos, because my overhead
would have increased twice what it was, and I couldn't have
been competitive, with a double overhead.
Chairman Manzullo. Mr. Montoya, do you have a statement?
Mr. Montoya. Yes, sir, Mr. Chairman. Thank you.
I think we're going back to attitudes again, and the
attitudes are reflected in the way the numbers are expressed,
and I assure you those numbers are developed, and as I say,
statistically, you can get them to say whatever you want.
Now, as far as the University of California, I see them as
being the prime contractor. Johnson Controls, PTLA are subs,
and they keep referring to them as subcontractors. Now, when
you talk about subcontractors and prime contractors, well,
where do those goals apply, the goals set forth by the Small
Business Administration, by the Small Business Committee?
Now, how does that get down to us? That's where the problem
starts, is with the attitudes. How can they represent and say
that they feel good with what they're doing, if part of their
multibillion dollar budget, one point some million of it goes
to a contractor like Johnson Controls?
Now, when they say 35 percent, 35 percent of what? Of the
procurement dollars they have set a aside for procurement, or
35 percent of the total budget for Los Alamos, as the
University of California being the prime contractor?
Now, if you take 35 percent of the total budget, then
you're talking about the way NASA does it when they release
these large multibillion dollar contracts, and they say okay,
35 percent must go to small, minority, 8(a), women-owned
businesses.
Chairman Manzullo. I think the problem here is----
Mr. Montoya. How we play with numbers.
Chairman Manzullo. You are the prime contractor, here.
Mr. Nelson. Yes, we are the prime contractor. Johnson
Controls and PTLA are major subcontractors.
Chairman Manzullo. To you?
Mr. Nelson. To us, that is correct. And then they, in turn,
I believe--and Dennis can address this more specifically, but
when we have major subcontractors, such as PTLA and Johnson
Controls, they have flowed down to them the various subcontract
requirements associated with small business.
Chairman Manzullo. But where are the companies they are
contracting with?
Mr. Nelson. Where are they?
Chairman Manzullo. Yes. Where are they coming from?
Mr. Nelson. A number of them are in northern New Mexico,
and some of them are elsewhere.
Chairman Manzullo. How many are in northern New Mexico, and
how many are not?
Mr. Nelson. I wouldn't have that information.
Chairman Manzullo. I think you should know that. I mean,
the reason we are here is because of the tremendous amount of
unemployment in this congressman's district, and when I see
Native American councils that are here begging for work, and
then you, as the prime contractor, don't even know where this
work is going, I think there's an obligation to keep it here as
long as it's certified and it's competent.
Mr. Salgado. Mr. Chairman, if I could just add, part of the
issue of what I will call the major subcontract, whatever
terminology we use, part of those, under appendix J, when they
negotiate the contract, there are economic development
provisions in those contracts and commitments made by those
subcontractors, such as Johnson Controls, or Day & Zimmerman,
which owns PTLA. They have committed to create jobs in the
valley, number one, and to create a financial structure to help
the infrastructure, economically, in the valley. So at the same
time we are looking for subcontractors, there are commitments
they have made, pursuant to those subcontracts, for economic
development.
Chairman Manzullo. So you're going to a subprime contractor
who doesn't have a base here; is that correct?
Mr. Salgado. Johnson Controls, that's correct--I'm sorry
for interrupting. They have established--as a tax base, they
have established corporate offices, as I said, in northern New
Mexico.
Chairman Manzullo. Well, that means you're bringing in out-
of-state companies to sit down and advise you on how they are
going to develop the local people economically. That's what
your subcontract does.
Mr. Salgado. That's part of their requirements under that
contract.
Chairman Manzullo. No, I understand that, but obviously,
it's not working. Abe?
Mr. Salazar. Yes. Let me give you some insight, because
I've been in the valley, I've been on a lot of committees. I've
seen Los Alamos come in and out of the valley, and they have a
lack of commitment; bottom line, a lack of commitment.
Some of the examples of these initiatives was, again, when
they renegotiated what they call the prime contracts. What they
did in their contracts was to implement a little subsection in
there, stating within their contract, within those five years,
you have to have some type of economic development in the
northern New Mexico section. It doesn't say how you do it. It
doesn't give you specifics. It doesn't even say you have to
purchase anything. It just says you have to have some type of
economic impact.
Chairman Manzullo. And what did they do?
Mr. Salazar. At the end of the day, two years went by and
these primes didn't have to do anything; just met and met and
met, and wasted a lot these business people's time, my time,
over meeting after meeting, just to have another meeting, and
at the end of the day, two-and-a-half years after this,
halfways in their contract, then they build a building and say,
``That's our economic impact.''
Chairman Manzullo. For their corporate offices?
Mr. Salazar. Not even their corporate offices. Supposedly,
they were going to move some resources down to the valley. That
never happened. And the one contractor that did commit, Lou
Ganal--they were the only contractor that committed to the
valley--they established themselves.
Chairman Manzullo. Did you get an award for that?
Mr. Salazar. I sure did. I got a contract. They spent over
$100,000 with my company the first year out, and then what do
they do? They cut the contract. Talk about backwards. That's a
little backwards, in my book.
On top of that, this is the game they play with numbers.
You've got to be very careful what they are stating in the
numbers. When they issue a contract, it doesn't mean they have
to purchase. That's the reality.
Chairman Manzullo. Could you, Mr. Salgado, get us copies of
those contracts with Johnson Controls and Boise Cascade?
Mr. Salgado. Yes.
Chairman Manzullo. What other subs does the university
have?
Mr. Salgado. The other major sub would be Day & Zimmerman,
that has the protective guard force there.
Chairman Manzullo. That's the other major sub.
Mr. Salgado. Yes. It's a uniformed guard and security
service for the entire facility.
Chairman Manzullo. Any other subs?
Mr. Salgado. We have a whole list. Some are construction
subs, that are basically building the computer center. As I've
indicated, Hanzel-Phelps is another major contractor. They are
completing construction----
Mr. Salazar. Excuse me. More about the contract vehicle.
Currently, we do have a contract with Los Alamos for
$100,000. They write this up in the paper and say, ``We just
awarded another local vendor a contract.''
David, how much have they spent to date?
Unidentified Speaker. Zero.
Mr. Salazar. Zero. They don't have to purchase, but they
can write it up in the paper that they awarded another
contract.
Mr. Montoya. Mr. Chairman, if I could make a point on how
they have been doing it for many, many years, and that is, the
prime contractor, as it flows down to their subs, they set
goals. They then write a business plan for providing--or
contracting with small minority businesses. In that business
plan, it states what they are going to contract for and what
that goal is. The goal could be as low as 5 percent. However,
there are no penalties to that sub or prime contractor if they
don't meet their goals. The penalties should be, and we've been
asking Congress to make that mandatory, is they should suffer
at the award fee level. If you don't meet that requirement,
then pull a certain amount of the award fee. Johnson Controls
and PTLA both have failed miserably in the plans they provided
Los Alamos on how to develop contracts with small businesses.
Chairman Manzullo. What doesn't make sense is this: I was
raised in business myself, and back in Illinois, we have a lot
of manufacturing, for example, Caterpillar. Caterpillar,
itself, deals with hundreds of subs for parts, for services, et
cetera. Why is the lab contracting this out to a prime
contractor and not doing their own procurement? Why don't you
do your own?
Mr. Salgado. Well, we do our own procurement, Mr. Chairman.
It goes back many decades, I believe. The fact of the matter
is, for basically the maintenance and smaller construction
activity, there's been one general contractor for the entire
laboratory because of 43 square miles, 200 different buildings.
So it has been thought to be extremely cost-effective to be
able to have one contractor to come in and to manage that large
work force for the maintenance and on-going infrastructure
activity that the institution needs. That is the reason why
they have gone to one contractor.
Chairman Manzullo. That's for maintenance and
infrastructure. Here we're talking about computers and paper
and related services.
Mr. Salgado. Many of those things, Mr. Chairman, are not
under a major contractor. When I talk about Johnson Controls
has to buy goods and services, they have to buy pens and paper,
they have that within their purview to handle, under the terms
and conditions of their contract. The laboratory is saying this
35 percent of the $1 billion procurement that will be put out
in FY01, that that's what goes to the goods and services people
around the table.
Chairman Manzullo. Doesn't it concern you that you'll enter
into a contract with a prime contractor that will bring in
items from halfway across the country, to the exclusion of
people right across the street, that have the very same items,
to be competitive? Doesn't that bother you?
Mr. Salgado. Absolutely.
Chairman Manzullo. What are you going to do about it?
Mr. Salgado. First of all, there's an assumption, and I
don't have the information, that Johnson Controls,
hypothetically using them as an example, is bringing in those
goods and services, is not buying locally. I'm not quite sure
of that, because----
Chairman Manzullo. I would think you wouldn't have this
high rate of unemployment if the local resources of this area
were used, with the amount of taxpayers' dollars that are
flowing into New Mexico.
I mean, when Congressman Udall and I first discussed this
issue, about what was happening here, I had no idea it was as
grave, until I came to this hearing and listened to these
people over here, and then I heard you say the solution is more
money from Washington, to set up more outreach programs.
I'll tell you what the solution is. The solution is to get
away from prime contracting and to do the work yourselves, to
have your own procurement officers, because prime contracting
does not save money.
The Department of Defense, Inspector General's report
showed that prime contracting actually costs the taxpayers more
money, and it destroys local jobs.
Mr. Salgado. Can I respond?
Chairman Manzullo. Of course.
Mr. Salgado. The majority of the Johnson Controls
personnel--and I don't have the exact numbers--are all local
residents--there may be one-half of 1 percent, possibly, that
are not local residents--so those jobs and those employment
jobs are staying here within the community.
Chairman Manzullo. You're talking about supplies for the
jobs.
Mr. Salgado. Then, on the supply side, I don't have the
numbers for you; I really don't.
Chairman Manzullo. Can you get those for us?
Mr. Salgado. Yes, we will get those for you. We will take a
look at our top five what I call prime or major
subcontractors----
Chairman Manzullo. I want to see all of them. I want to see
the pattern here. I want to know where these supplies are
coming from.
Mr. Salgado. We will gather that information.
Chairman Manzullo. There are areas of this country, around
Chicago and around the beltway in Washington, D.C., around San
Francisco, around Los Angeles, that are just thriving
commercially. It's incredible. Unemployment is at 1 and 2
percent. Then you have pockets, such as New Mexico, with
incredibly high unemployment and vendors that are crying out,
looking for work, and with the people in charge of procurement,
not knowing where the supplies are coming from, I don't know
about that.
Mr. Bartlett.
Mr. Bartlett. Thank you very much. I, in a past life,
worked on both sides of this issue. I worked for government and
was involved with procurement on a technical level, and I also
was a small business owner and did business with the
government. One of the problems that I saw, both in working
with the government and working for the government as a
subcontractor, was the tendency of the buyers to award
contracts to suppliers, subcontractors that they were familiar
with, that had performed well in the past. And I understand how
you get there, because if you're a buyer in the government, you
are rated on the basis of how well your contractors perform.
And so, if you issue an RFP, and you get half a dozen
responses, and two of those are from companies you have dealt
with in the past, and if they are responsive proposals, you're
very prone to go with them.
And in this arena, the rich tend to get richer and the
poorer to get poorer. And I understand how that happens,
because the buyer rests easy at night. If he has let his
contract to somebody he's familiar with, that's performed well
in the past, the probability is they are going to perform well
in the future.
How can we incentivize our buyers so that they are reaching
out to the kinds of small businesses that have testified here
today, so that they can be rewarded, so that they can--their
appraisal can include reaching out? There are some risks when
you reach out. There are certainly some risks. A new small
business may, in all honesty, present themselves as being
qualified in an area; on paper, they may appear qualified in
the area, but they may not be able to perform as well as they
anticipated, or as well as the buyer anticipated that they
would perform. So there's some element of risk there.
How can we incentivize our buyers to assume this risk so
that they can reach out to firms like these involved here? We
recognize that there are going to be some work performance
issues. You can't be reaching out to everybody and not have
some contracts that are not going to be performed as well as
others.
How can we incentivize them to reach out so we can bring
more of these people on board? I've been concerned with this
and interested in this now, for, oh, 40 years, I guess, a long
time, working with the government and working as a part of
government.
What suggestions do you have?
Mr. Salgado. I think probably the key, number one, is to
establish some matrix by which we can see that there is a
reachout and maybe there is an infusion of new opportunity for
small business, putting those in a performance matrix,
basically, and holding people accountable forthat component.
The second component that we have, that I addressed in my
oral statement, is, essentially, we need to basically educate
our buyers; and not just our buyers, but we need to educate the
technical staff, because many times our problems rest in the
fact that our buyers are merely getting information from
technical staff members that require very specific parameters
for whatever they're attempting to buy, not just paper and
pens, but other issues that have technical requirements.
One of the issues that Benny has tried is going forward
aggressively and educating the technical staff on the
opportunity that small businesses can bring to the laboratory,
and that follows Dr. Browne's directive that we need to
increase this activity.
So it's a three-prong approach: The matrix for performance
appraisals, holding people accountable, and setting standards.
Number two, education of the procurement staff and
education of the technical staff, because we have found that is
also a major problem. And you've indicated, rightly so, there's
a comfort level and a comfort zone, and if they go to A,
they'll go to A and A again, no matter what. And I think that
is a problem we have to address, and that is an institutional
culture issue to deal with, particularly with an institution
like Los Alamos that has been doing this for an extended period
of time, with a limited supply source.
Mr. Bartlett. You used the word ``culture.'' I personally
think this is probably the biggest challenge we have. It's how
to change the culture, and I don't know how to do that. If
you're reaching out, if you're pushing the envelope, there's
going to be some failures, and I think that that needs to be
anticipated and built into the appraisal. As a matter of fact,
if a buyer does not, once in a while, let a subcontract to
somebody who doesn't perform as well as might be expected, he's
not really reaching out.
Mr. Salgado. That's very true.
Mr. Bartlett. Somehow we have to build into--we have to
anticipate that if you're really pushing the envelope, there's
going to be some failures out there.
Mr. Salgado. You're absolutely correct, because if you play
in the soft comfort zone, you're never going to break out of
that.
Mr. Bartlett. Yes, and that's where you're playing. And I
understand the incentive for doing that, because I've worked on
both sides of that. I can remember, in small business, I began
going through the small business contract area--I guess you can
do that now on the internet and--not look at that every day;
subscribing to that, it wasn't cheap for small business--then I
would read things in there that I thought I could respond to,
but, you know, I really didn't have a chance, because they
didn't know me and there were going to be several people
respond, that they did know, that had worked for them before,
and my proposal might have been just as good as theirs, but
they didn't have any comfort level dealing with me, but they
had a comfort level dealing with someone else.
I think, Mr. Chairman, this is major problem we have in the
area, that we somehow need to change the culture. I think there
are good intentions from the top down. People really believe
that we have programs that are reaching out, but I think
there's a comfort level for that buyer, and he's not going to
let a contract to somebody that might make him look bad, if he
doesn't know them. They may look good on paper, but he knows
Joe, and Joe has performed for the last 15 years, and you know,
Joe is going to perform well now, and this other guy looks just
as good as Joe, but, you know, he's comfortable with Joe, so
that's where he's going. How do we broaden this field?
Mr. Salgado. Well, we've talked about the areas to do it,
and ironically, many procurements are basically driven by the
technical staff. They come to a procurement and they say they
need this widget with these parameters. Again, it's the
technical staff, and then, the buyer, he's caught between the
institutional goals and the objectives, and the technical staff
is sitting there, saying, ``Wait a minute, I don't want to go
off in this strange land. I want to make sure I get my widget
built the way I want to.'' That's a dichotomy, and the culture
has to change. We need interaction in introducing the small
business and minority firms, in New Mexico particularly, to the
technical staff, so they have the comfort level to know the
professional cadre and suppliers out there to meet their needs.
That is one of the first things to try to get in this cultural
change.
Mr. Bartlett. Do you have seminars that are generic in
nature, where you let the local small business people know the
kinds of goods and services that you need? There may be people
out there that could meet some of your needs, and you don't
even know they exist out there, and they don't know that they
have the capability of meeting your needs, because they don't
know what your needs are.
Do you have these generic kinds of seminars that just lay
out the kinds of things you do and the kinds of support that
you might contract for?
Mr. Salgado. Yes, sir. In the last 18 months, we have had
two major conferences dealing with basically bringing the
suppliers together and talking to the suppliers about what we
at the lab need in those areas.
We also had two separate distinct conferences where we had
the technical staff come in and meet with the suppliers so the
suppliers had an opportunity to talk to the technical staff and
indicate what their capabilities are in providing goods and
services, and we're having--our third conference is scheduled
in the next--in October, again, for bringing them together,
because what has happened, of course, the lab, given our own
geographical configuration, is a difficult place to do business
with, spread over 43 miles, being very decentralized between
divisions and directorates, so, the answer is yes, we have
had--we're having our third one, and we have had two others
where we've offered for the suppliers to come in and present to
the technical staff what their capabilities are. So we are
trying to create those lines of communications and comfort.
Chairman Manzullo. Ms. Morales.
Ms. Morales-Gurule. I just had a response to that.
Once again, I'm going to address the purchase cards. To me,
we've always referred to them as what we call ``power cards'',
because end-users can receive those purchase cards, and I
believe they're anywhere from--your limit is $2,500 per
purchase card user. So therefore, you have Los Alamos getting
bombarded with mail order catalogs left and right. You have a
technical user who has to get the job done, and get it done
quickly. I think they're well aware of CJ and the JIT process,
but it's much easier, I believe, to pick up that purchase card,
call the 800 number and get it in here.
The problem I see with that is, I can sell a product for
$10 on the JIT, and a mail order outfit can sell it for $10.
Well, they'll advertise for $10, when it actually gets into the
laboratory, after the shipping and the freight, that little $10
item might have turned into a $15 purchase that it costs the
laboratory.
In the past, that division has picked up that shipping cost
for the purchase card person, but yet they won't pick that up
for me, as a local JIT vendor. And I think Abe hit it real
good----
Chairman Manzullo. Wait a second. You're saying the lab
pays for the shipping forsomething done on a purchase card for
an out-of-state vendor, but if you have it shipped to them, they don't
pay for your shipping?
Ms. Morales-Gurule. That's how I've always understood it
works in the Bus division.
Chairman Manzullo. What division?
Ms. Morales-Gurule. Bus, Business Operations Division. The
laboratory pays for the freight charges for those credit card
purchases, whereas on the JIT--this is just recollection--
ground shipping. If anything comes in overnight, then the end-
users are charged for that. But what happens is, I, as a JIT
vendor, have to absorb that shipping and handling cost, whereas
a purchase card mail order, that's picked up by the Bus
division, and the bottom line is, they're still going out of
state. We are both providing the same service.
Chairman Manzullo. Is that correct?
Mr. Roybal. That could be correct. What happens is, when
we're issuing a contract or a purchase order, we negotiate the
terms, we negotiate delivery terms, and it can either be FOB
point destination or FOB point delivery. So when a purchase
card places an order, the buyer will negotiate the terms and
conditions, and sometimes it may be FOB point destination.
There are times it could be FOB delivery point.
When the contract was negotiated with CJ Enterprises, they
had the same opportunity to quote FOB, either destination or
delivery. Apparently, it was negotiated FOB point destination.
So therefore, she's responsible for paying for all delivery to
the destination.
Ms. Morales-Gurule. But when has a buyer gone out and
negotiated with the mail orders?
Chairman Manzullo. What you're doing is, you've got one
contract with her, whereby she negotiates--it's pretty tough
for small business people to negotiate with the government, in
the first place--whereby she negotiates to pay her own
shipping, then you issue these purchase cards, and people could
just take those and go outside the contract with her and buy
whatever they want, and the shipping--then you pay for your own
shipping. Is that correct?
Mr. Roybal. Again, that's partially correct. When she
received her contract and she bid FOB point destination, she
could--her price could have been based on those shipping costs
built into the price already. And so, again, many times, when
you negotiate a contract, a lot of those shipping charges are
built into the price of the product, and so it's not quite that
clear.
Chairman Manzullo. I know, but with these purchase cards,
that's not competitive, is it?
Mr. Roybal. No, they are not competitive because they're
usually under $2500, and most of them----
Chairman Manzullo. That's a lot of money for a small
business, per transaction.
Ms. Morales-Gurule. Per transaction.
Chairman Manzullo. According to Patty's figure, what, $3.5
million, last year, was done on credit cards.
Ms. Morales-Gurule. No. I had said that.
Ms. Wagner. I didn't provide that figure.
Ms. Morales-Gurule. The number was $35 million was done on
procurement cards.
Mr. Udall. Is that the figure?
Chairman Manzullo. Was it $35 million?
Mr. Roybal. Yes.
Chairman Manzullo. Was that on purchase cards?
Mr. Roybal. Approximately, yes.
Chairman Manzullo. So that's all done without competitive
bidding, the $35 million.
Mr. Roybal. Yes, that's correct.
Chairman Manzullo. That's not very efficient.
Mr. Roybal. Well, when you consider the number of buyers
that we have and the costs that would go into preparing
solicitations and doing all that paperwork, it is.
Chairman Manzullo. What types of things can these cards
buy?
Mr. Roybal. They could buy computers, they could certainly
buy office supplies, they could buy other products. We
certainly encourage them to go to northern New Mexico, in our
web site. When they go in to place a purchase card order, they
go in through the web site, and it encourages northern New
Mexico firms as where they ought to go.
Chairman Manzullo. You encourage your employees to buy from
northern New Mexico?
Mr. Roybal. Oh, certainly.
Chairman Manzullo. But they can go outside the state and
pay even more, to the exclusion of the home-grown folks here.
Mr. Montoya. If I could address that, Mr. Roybal. You
encourage them, because you ask them to. Do you encourage them
by saying ``This will affect your performance evaluation''?
Mr. Roybal. I'm sorry, Mr. Montoya, we really can't do
that, because these are federal dollars that are being spent.
For us to go ahead and tell them to go to northern New Mexico,
another firm, in Maine, can call up and say, ``I want to be
able to compete for that project.'' We must open it up. These
are federal dollars, so therefore----
Mr. Montoya. I understand totally; however, unless there is
an in-reach program that really has teeth to it, none of these
things we are talking about, and the reason we're here, are
going to work, including those prime contractors that set goals
where they're going to subcontract to small, minority, women-
owned businesses. But if they don't meet their goals, what's
the consequence? Nothing.
Now, if you set their goals and they don't meet their
goals, and they got hit on their award fee, I think there would
be a little more incentive.
Chairman Manzullo. Mr. Udall, do you have some more
questions?
Mr. Udall. I want to go back to this 35 percent figure on
procurements. I mean, are we talking about 35 percent of that
is New Mexico businesses? It's your figure, Mr. Salgado. The
goal is to place 35 percent, or $335 million, with small
businesses. Are you on track to reach that goal?
Mr. Salgado. That's correct.
Mr. Udall. Are these all New Mexico businesses, the 35
percent?
Mr. Salgado. No, sir, they are not all New Mexico
businesses.
Mr. Udall. Do you know what the percentages are?
Mr. Salgado. Do you know the percentage of the 35?
Mr. Gonzales. Sir, I'm Bennie Gonzales, I'm with the small
business office.
Mr. Udall. You bet.
Mr. Gonzales. There is no specific goal for northern New
Mexico.
Mr. Salgado. Do you know what the percentage is, the
percentage of that 35 percent? Do you know what has been--if we
do the 35 percent of $350 million, do you know what the
percentage for northern New Mexico or New Mexico businesses is?
Mr. Gonzales. Yes, of the $110 million--and I'm going to be
talking about the $110 million, sir, that we did in FY 00--of
the $110 million--I'm sorry, of the percentage goal that we had
for small business in FY 00, we did $110 million in northern
New Mexico, which is approximately one-third of the particular
goal in 00. And we have it also broken down, in terms of data,
interms of how much we did in the seven northern counties.
Mr. Udall. The other two-thirds is not New Mexico, then?
Mr. Gonzales. That is correct, sir.
Mr. Udall. So it's outside of New Mexico completely?
Mr. Gonzales. Outside of northern New Mexico.
Mr. Udall. So when we've got this figure here, 35 percent
small businesses, $335 million, we're talking two-thirds of
that money is going out of state, and a third of it is here in
New Mexico?
Mr. Gonzales. No, sir. Two-thirds of that is outside the
seven-county area. So in terms of how much goes to the state,
we don't have those particular--that particular data with us,
sir. We can provide that, but two-thirds goes outside of the
northern New Mexico area.
Mr. Udall. So can you break it down into New Mexico
figures?
Mr. Gonzales. We can give you that information, yes.
Mr. Udall. Do you have it on you now?
Mr. Gonzales. I don't have it with me, sir.
Mr. Udall. Okay. And the seven-county area includes Rio
Arriba and Taos, I assume.
Mr. Gonzales. Yes, sir.
Mr. Salgado. Yes, sir.
Mr. Udall. You all would agree that it's important in those
counties, I mean, in terms of unemployment and the businesses
that are there, to try to do everything we can to remedy that
unemployment situation, which has been long-standing there, and
these businesses are struggling to survive there?
Mr. Gonzales. Absolutely, sir.
Mr. Roybal. That's correct.
Mr. Udall. And of the 335, Boise Cascade, it came out
clearly, that can't be included as a small business. Somebody
that comes in and purchases a contract, I mean, you're not
going to include that in your figures next year; right?
Mr. Roybal. No, sir.
Mr. Udall. Because that was a small business contract, and
then this big national company comes in and purchases the
contract. So you wouldn't use that next year to say to us, when
we come back, you wouldn't say, ``Oh, well, yeah, this was a
small business contract, because they bought the contract''?
Mr. Roybal. That's correct.
Mr. Udall. And when you're talking about contracts like
this, we're not talking about a repeat of this Boise Cascade,
where there are existing small contracts where big companies
come in and buy them out.
Mr. Roybal. That is correct. To the best of my knowledge,
that has been an isolated case.
Mr. Udall. Okay. Now, one of the issues, Mr. Salgado,
that's been raised here is this issue with Johnson Controls, of
putting provisions in the contract so you can measure progress,
and what is the provision that--what is Johnson Controls told
about dealing--are you dealing with percentages, or is it just
as Mr. Salazar says, it just says, you know, ``work with small
business''?
Mr. Salgado. I think there are two issues here. Number one,
there is a socioeconomic component of the contract where
specifics were laid out--just as indicated--were laid out for
the creation of, I believe, 600 jobs in the northern New Mexico
area, and there were additional other terms and conditions
specifically laid out, as far as their contributions to both
public and civic activities in the northern New Mexico area.
That's in the economic incentive component under the contract,
in appendix J.
Under the other component, which would be the
subcontracting goals and objectives, I am not sure as to the
specifics that we have, if we have specific percentages that
are required under that contract. And I'll have to submit that,
for the record, to you, sir.
Mr. Udall. Well, wouldn't you agree that for us to measure
the progress you're making, you would be a lot better off
having some targets in there, some goals as to what we're
trying to achieve when we're dealing with a contractor, so we
try to move towards those, rather than using general language
which, if it's true, and I have no reason to believe it
wouldn't be, that as Mr. Salazar said, you know, they hold
meetings and meetings and take up these folks' time, and then
there's no real business coming out of it. So shouldn't we have
goals?
Mr. Salgado. You're absolutely right, and I'm not sure we
don't have those in that contract. I don't know. I know we have
the economic development side, but you're absolutely correct.
That contract is coming up for extension--I think it's been in
place for about four years, and it's coming back up, so we can
revisit that entire contract. But you're absolutely correct,
Congressman, that there should be goals and a matrix in that,
on subcontracting in northern New Mexico with small businesses.
Mr. Udall. Okay. And I would hope you would look at that
when the subcontract comes up.
And the final question, and to get it in on this round, is,
you talked about a security company. Is that a New Mexico
company, the security company?
Mr. Salgado. No--well, Day & Zimmerman is the corporate
parent. It was established as a subsidiary in northern New
Mexico. The PTLA guard force is in northern New Mexico, but it
is owned by Day & Zimmerman, which is a large corporate
company, I believe, in Ohio or in Philadelphia, and that was
through a competitive process.
Mr. Udall. And there are other security companies. I mean,
we have a local security company, AKAL Security, that provides
security for all of the US courthouses in the state. I mean,
there are security companies that are here that provide those
services, and that was done through a competitive process.
Mr. Salgado. That predates me, sir, but, yes, it was
through a competitive process.
Mr. Roybal. Yes, it was; and, also, it was one of the
bidders on that contract.
Mr. Udall. Okay. And do you put any incentive in your
competitive bidding to try to bring in companies that are going
to look at employment in northern New Mexico, and look at job
opportunities, and look at opportunities for businesses in that
competitive bidding process, and in your RFP say, you know,
``We want you to do these kinds of things.''
Mr. Roybal. That's correct, yes, we do, and that's what Mr.
Salgado was talking about with regard to the northern New
Mexico initiative portion of our request for proposals, and
they must submit a proposal addressing job creation and
educational opportunities, outreach, and just civic outreach
activities.
Mr. Salazar. Can I clarify something? I think I need to
clarify these initiatives, because what they have on paper
sounds great, they look good, but in all reality, that is not
the way it works.
When they did the initiatives, what you saw--and correct me
if I'm wrong, when they initiated these initiatives, what you
found was, you found a lot of what we call phantom companies.
They establish themselves, so-called, in northern New Mexico;
they get a small office, put it some place in Espanola, or in
Santa Fe, or wherever, and they man it with maybe one person,
they meet the criteria on paper, but there is no real economic
development put there. They still dobusiness the old way. They
still get shipped from someplace, they still deliver the services from
someplace else. Those are not real numbers that you can actually look
at. The real numbers are, you find the companies that are really
established here, then you ask the question ``How much have they
purchased from you,'' ``How much have they purchased from you and
you?'' These are real. These other numbers are not real; those are
phantom numbers. You've got to be very careful what they put down on
paper and what you're seeing.
Again, this is a stats playing game.
Chairman Manzullo. This is the beginning of the hearing. I
am very upset over what I've heard today. I think that what the
labs are doing is that they are disregarding, in their own
testimony, their responsibility, and just pandering it out to
prime contractors, just to get rid of it, relying upon them to
come up with your stats.
I mean, for example, you could take the purchase cards, and
you could encourage the employees, and you could monitor where
they're buying supplies from, whether they are coming from
small businesses. You could use that as part of the compliance
with small business set-asides. There's so much money going out
of here, so many phantom companies, if Mr. Salazar is right.
All we know is this, if what you are doing is correct, these
people wouldn't be here. You wouldn't have the high
unemployment in the surrounding areas of Santa Fe that are Mr.
Udall's district. If what you are doing is correct, you
wouldn't have these giant companies coming from the outside
that are being the prime contractors and buying things to the
exclusion of the local people.
There's a disconnect. There's something terribly wrong
here, and that is the fact that you don't have to do prime
contracting with small businesses. That's the lazy way out.
That's the lazy man's way out, is to do prime contracting. You
enter into a contract and say, ``You do this and, by the way,
come in here and do some good for the local people.'' And, by
the way, establish some goals. Don't give this man a contract
worth $100,000 and give him no business.
So I think this should come to an end, and I'm going to ask
the Department of Energy--which, by the way, got an F for small
business set-asides, and I can see why now--I want to see a
radical change in what's going on with these labs, and I want
to know how much the University of California is getting for
its prime contract. I mean, you're sending people out here with
MBAs from the University of California, people coming from
California, or wherever they are coming from, coming to this
area to figure out how you're going to do local economic
development, and that's nothing less than ludicrous. These
people here know how to do it, with the eight tribes. The
people are here, the expertise is here. I mean, California
created an MBA program for economic development, and here's a
man representing eight tribes.
How many generations has your family been here, David?
Mr. Cordova. Many, many years.
Chairman Manzullo. Many years. So people come in from the
outside.
Mr. Cordova. Mr. Chairman----
Chairman Manzullo. Before we do that, there was a gentleman
from the SBA, and I wanted to get your name. Would you stand up
and give your name.
Mr. Silva. Orlando Silva is my name, and I head the SBA
program for----
Chairman Manzullo. Spell your last name.
Mr. Silva. S-I-L-V-A.
Chairman Manzullo. Your first name is?
Mr. Silva. Orlando.
Chairman Manzullo. You're with the SBA?
Mr. Silva. That's correct.
Chairman Manzullo. And your official title?
Mr. Silva. I'm assistant district director for business
development.
Chairman Manzullo. That would include----
Mr. Silva. New Mexico.
Chairman Manzullo. Go ahead, please.
Mr. Silva. Well, what I wanted to clarify, a little bit,
was the Alaskan Native Corporation coming into New Mexico. What
it did was, it proposed under the A76, to take over a program
at the Air Force research lab, and it happened to be civil
engineering. The result of that was that civil engineering does
all of the design for the Air Force Research Lab, for
contracting, general construction, for example. And since the
Alaskan Native Corporation is an 8(a) certified firm, and
they're tribally owned, they are not subject to the acquisitive
threshold. So any project that they design is--they give it to
themselves, and they exclude New Mexico firms. And since
they're not subject to providing subcontracting goals, because
they are disadvantaged, the New Mexico firms are not receiving
any of that work. And that's what I was trying to clarify.
Chairman Manzullo. Maybe we should take a look at that.
Mr. Silva. I think so.
Chairman Manzullo. Okay.
Mr. Cordova. Mr. Chairman, real quick.
Chairman Manzullo. Okay, David, and then, let's conclude
here.
Mr. Cordova. You know, one final thing. With me, it's hard
not to get angry about, statistically, how Rio Arriba, where I
live, is doing. We are angry, we're upset, we're concerned, we
want to move forward in the right direction. We don't seem like
we are getting quite the answers we need. We are not getting
any accountability. Just like Mr. Salazar said, we are having
meetings, but there's nothing coming out of the meetings, but
you can put down on paper that you had a meeting with us.
The eight northern pueblo governors are expecting some sort
of accountability for some of the issues going on here. We
really feel that this is a huge misuse of some of the land and
some of the things we've treasured for so years, and we
definitely want to move forward.
We have the businesses right now, and if we don't have the
businesses, we don't want a handout, but what we definitely
want to do is to work with you to have you show us what we need
to do so we can go after those contracts, and we're definitely
here and we want to do that.
And if we need training, put us in the position where we
can be trained. We want to learn, we want to learn and we want
to learn now. If it doesn't happen now, then give us a five-
year goal, give us a three-year goal, give us a ten-year, long-
term goal. That's what the governors want. And we really are
looking forward to working with Los Alamos, and we want to
change some of these figures, because the bottom line is, it's
going to help the people, and that's all we want to do is help
the people.
We're all in this picture together; and if we can all
coordinate and work together, I think it's really going to help
everyone out here, and we are all going to live a better life
being neighbors to each other.
Chairman Manzullo. We're having the same problem with the
delivered healthcare services as we are witnessing today. The
Healthcare Finance Administration has 5,000 employees. They
contracted 71 medical providers for the providing of Medicare/
Medicaid across the nation--that's sort of like the prime
contractor--and there's no accountability. There's zero. I
don't think there's ever going to be any accountability as long
as you have the prime contractor system set up the way it is
now.
We're going to continue these hearings in Washington to
find a way so that DOE will rise above an F. I mean, this is
disgraceful, it's disgraceful, disgraceful to everybody. These
small business people come here and find out that you have
shirked your responsibilities simply by hiring a prime
contractor, that promises in writing to do something about
economic development, instead of subcontracting to small
business. That's not why the SBA was set up. It was set up to
encourage small businesses.
Mr. Roybal. Mr. Chairman----
Chairman Manzullo. Okay, we're going to leave this record
open for 21 days--is that sufficient? Let's make it 28 days.
We'll leave the record open for 28 days for any member of the
small business community to submit questions in writing, which
we would like answered in the corresponding period of time of
28 days. Anybody in the audience that wishes to make a
statement in writing, you'll also have 28 days, and I would
suggest you get that to Mr. Udall's office. Could you
facilitate that, Tom?
Mr. Udall. Sure, you bet.
Chairman Manzullo. Do you want to give the address.
Mr. Udall. Michelle, will you give us the--Michelle is my
district director here--for facilitating the statements through
my office, and they should get them--what's the address?
Unidentified Speaker. It's 811 St. Michael's Drive, Suite
104, 87505. They haven't changed the zip code on us.
Chairman Manzullo. Okay. Thank you for coming. All of the
written testimony of the members of Congress and the witnesses
will be made a part of the record--I'm sorry, Mr. Bartlett.
Mr. Bartlett. I just have two real quick questions. These
phantom companies that I read about before I came here, and now
they have been brought up again, can you, in your regulations--
I know you want to be dealing with real local small businesses,
you don't want to be dealing with phantom companies. Can you,
in your regulations, do something to correct this, or do you
need something from us, in terms of legislation?
Mr. Salgado. I think, under our help and procurement
issues, we can address that issue.
Mr. Bartlett. The second thing is, something very
intimidating to small businesses is all of the legalese and the
regulations, the hoops you have to jump through. Do you have
translators and somebody to help these people?
Mr. Salgado. We have had continuing training seminars
dealing with that. That was part of the reason for the
conferences we held in the Espanola Valley. We are instituting
a process by which we'll have coaches to help people move
through the maze, because it's intimidating and rather
overwhelming.
Mr. Bartlett. Thank you. Thank you very much, Mr. Chairman.
Chairman Manzullo. Okay, this committee is adjourned.
[Whereupon, at 11:29 a.m., the committee was adjourned.]
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