[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
  PENTAGON'S PROCUREMENT POLICIES AND PROGRAMS WITH RESPECT TO SMALL                                 BUSINESS
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                      WASHINGTON, DC, MAY 15, 2002

                               __________

                           Serial No. 107-57

                               __________

         Printed for the use of the Committee on Small Business









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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
GELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 15, 2002.....................................     1

                               Witnesses

Aldridge, Hon. Edward C. ``Pete'', Under Secretary of Defense, 
  Acquisition, Technology & Logistics............................     3
DeGiacomo, John E., Program Director, Procurement Technical 
  Assistance Center..............................................    24
Ritter, Cathy, President, The Constellation Design Group, Inc....    25
Braden, Pamela, President, Gryphon Technologies..................    28
Tucker, Mike, President, George W. Allen Co., Inc................    31
Erwin, Frederick, Program Manager, Dimensions International, Inc.    33
Cabrera, Bill, Lord and Company, Manassas, VA....................    34

                                Appendix

Prepared statements:
    Aldridge, Hon. Edward C. ``Pete''............................    47
    DeGiacomo, John E............................................    57
    Ritter, Cathy................................................    65
    Braden, Pamela...............................................    69
    Tucker, Mike.................................................    85
    Erwin, Frederick.............................................    90
    Cabrera, Bill................................................    98
Additional Information:
    Post hearing response by Pamela Braden, Gryphon Technologies.   100
    Submission by Jerald S. Howe J., Senior Vice President and 
      General Counsel, Veridian Corporation......................   102










   PENTAGON'S PROCUREMENT POLICIES AND PROGRAM WITH RESPECT TO SMALL 
                               BUSINESSES

                              ----------                              


                        WEDNESDAY, MAY 15, 2002

                          House of Representatives,
                               Committee on Small Business,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 2:00 p.m. in room 
2360, Rayburn House Office Building, Hon. Donald Manzullo 
[Chairman of the Committee] presiding.
    Chairman Manzullo. Good afternoon and welcome to this 
hearing of the Committee on Small Business. A special welcome 
to those who have come some distance to participate and attend 
this hearing.
    Today, we welcome the Honorable Pete Aldridge, the Under 
Secretary of Defense for Acquisitions, Technology & Logistics, 
ATL.
    The Pentagon is the major buyer of goods and services from 
the private sector, accounting for approximately 65 percent of 
all Federal procurement dollars. Defense is an important 
marketplace for small businesses. Doing business with small 
business is good--Larry, we should bring you here more often. 
Did you bring half these people here with you or what? It is 
great.
    How many people came here with the Secretary? Just raise 
your hand, just for the heck of it.
    Oh, one person? Oh, yeah? That is okay. That is okay.
    Doing business with small businesses is good business. The 
number of large firms that DoD does business with has been 
steadily decreasing in recent years. A few large companies 
account for a major portion of the Pentagon procurement 
dollars, leaving little competition or choice.
    In contrast, competition is alive and well in the small 
business community providing the DoD with multiple sources and 
competitive prices.
    In addition, small businesses have been more creative than 
big businesses, accounting for more patents per employee, 
having been more productive in creating jobs, and have provided 
the economic stimulus to lead this nation out of periods of 
economic downturn. In all aspects, doing business with small 
business is good for the nation.
    Unfortunately, the use of large mega-contracts and 
consolidation or bundling by the Pentagon undermine the 
benefits that small businesses can provide for the future in 
the nation. These large, unwieldy contracts reduce competition 
and eventually would drive up the cost of procurement. It also 
stifles innovation since the free market system is built on 
risk and reward. Without reward, no one will be willing to take 
the risk of mortgaging their home and other assets to start a 
small business.
    In laying out the Administration's small business plan at 
the Women's Entrepreneur Summit, the President emphasized the 
need to ensure that small business has access to government 
contracting. He identified mega-contracts and bundling as the 
major impediment to the entry and fair participation of small 
business in the Federal marketplace.
    The President has charged each government agency with 
breaking down large contracts so that small business owners 
have a fair shot at federal contracting. We are most interested 
in how the Pentagon is implementing the President's small 
business plan.
    In this respect, I am very pleased to see that the Air 
Force's FAST contract for this fiscal year to date has attained 
a 77 percent prime contract participation by small businesses. 
This is well above the 50 percent goal, and we hope that this 
success will continue.
    I also want to thank you, Mr. Secretary, in our opening 
statements for the great participation that both the Majority 
and the Minority staffs have had with your staff in going 
through each of the five prime--each of the five big contracts 
that have been identified by Mrs. Velazquez. It has been an 
ongoing process and monitoring. Our staff is extremely excited 
over the opportunity to have input in it and to help you with 
making those decision.
    And I would then yield to our Ranking Minority Member, Mrs. 
Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Two months ago President Bush announced his small business 
agenda. Significantly, he said, and I quote, ``Whenever 
possible, we are going to insist we break down large contracts 
so that small business owners have got a fair shot at federal 
contracts.''
    That statement goes to the heart of what this committee has 
been trying to do for the past 10 years. A major determining 
factor in turning the President's rhetoric into reality will be 
the implementation of this agenda by the Department of Defense, 
the agency that is responsible for 65 percent of all government 
purchases.
    If the past is any indication, however, we have a long 
uphill climb to work on compelling the Pentagon to implement 
this agenda, and that climb is getting steeper every day. There 
is no one agency more responsible for the exclusion of small 
businesses than the Department of Defense. For the past two 
years, DoD has not met a single one of its small business 
goals, costing small businesses $3.5 billion and women-owned 
businesses $4.3 billion. This absolutely must change.
    Our committee has spent a considerable amount of time and 
energy looking at DoD's mishandling of contracting on seven 
separate occasions. It is nice to finally have the opportunity 
to hear from Mr. Aldridge.
    In the previous hearings, we always heard the words about 
how important small businesses are to the agency, but we have 
seen no evidence of any concrete action.
    In the committee Democrats' annual SCORECARD study, the DoD 
has received a failing grade for the past three years running. 
The primary reason for these failing grades is the increasing 
reliance on contract consolidation, the very thing the 
President said must stop.
    Just a few weeks ago we issued a Watch List of 10 of the 
worst contracts that rob opportunities from small businesses. 
Seven of these 10 were DoD contracts. That is disgraceful. 
Worse yet, the Pentagon continues to engage in this practice 
without being able to demonstrate one dime of savings to the 
taxpayer.
    In fact, this system has disintegrated to the point where 
this committee has taken the drastic action of reviewing these 
contracts one by one because the department is either unwilling 
or unable to manage them itself. The department puts out plans 
that do not even meet the requirements of the law, and then 
structure its contracts to make sure work will not even be 
achieved. This is just the planning stages.
    If and when a small business is lucky enough to get a 
contract, the situation only goes from bad to worse. Small 
businesses are threatened with poor performance ratings, paid 
late, and forced to perform work without proper paperwork and 
documentation that creates confusion and frustration later on. 
At that point they come to this committee because there is no 
effective advocate within the department. This is not the way 
it should be.
    Small businesses are a critical factor in the economy and 
should not be treated like second-class citizens, especially 
from a federal department that has a history of $600 hammers 
and $7,000 coffee makers, because small businesses can and do 
provide the government with a quality product, many times more 
affordable than the big corporate counterparts.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you. Mr. Secretary, we look 
forward to your testimony. Could you introduce your assistant 
with you?
    Mr. Aldridge. I plan to.
    Chairman Manzullo. Alright.

   STATEMENT OF THE HONORABLE EDWARD C ALDRIDGE, JR., UNDER 
  SECRETARY OF DEFENSE, ACQUISITION, TECHNOLOGY & LOGISTICS, 
                     DEPARTMENT OF DEFENSE

    Mr. Aldridge. Mr. Chairman, Ranking Member Velazquez, and 
Members of the Committee, I am pleased to be here today to 
discuss the activities of the Department of Defense with regard 
to the utilization of the nation's small and disadvantaged 
businesses in support of our national security mission.
    I am accompanied by Mr. Frank Ramos, the Director of Small 
and Disadvantaged Business Utilization Office within my 
organization.
    I have prepared, Mr. Chairman, a formal statement for the 
record, but I would just like to provide a few summary points 
for my verbal testimony today.
    Chairman Manzullo. We will accept all of the formal 
statements prepared by the witnesses and by all the Members.
    Mr. Aldridge. First, it is essential for our national 
security that we have a healthy industrial base. I have made 
enhancing a healthy industrial base as one of my top five goals 
as the Under Secretary of Defense for Acquisition, Technology & 
Logistics.
    If we are to provide our nation's soldiers, sailors and 
airmen with the finest equipment in the world, this equipment 
must come from a health, innovative and competitive industrial 
base.
    Second, small businesses are a vital and an essential 
element of that industrial base. Small businesses have advanced 
technology we need, they are innovative, and the have the 
agility to rapidly respond to our needs. This past year small 
businesses received over $50 billion in DoD business with over 
54 percent of that value through prime contracts. This is the 
largest amount in the history of the Department of Defense, and 
I hope to continue this trend.
    Third, we have initiated plans to continually improve our 
utilization of small businesses and we will track our progress. 
On May 16, 2001, I implemented a new process across the 
department for establishing goals, measuring progress, and 
reporting our results.
    Fourth, we have set goals for small business utilization, 
but I will insist, as we all should, that the fiscal goals of 
all DoD contracts be met with an equally important goal of 
quality performance.
    Fifth, we are initiating training courses at the Defense 
Acquisition University to show DoD acquisition managers how to 
better utilize small businesses.
    Finally, I am serious about the utilization of small 
businesses and will take no action that will reduce the quality 
contribution of small businesses to the mission of the 
Department of Defense.
    I am proud of DoD's record on small business issues, and 
look forward to continuing to work constructively with this 
committee to make that record of achievement even better.
    This concludes my prepared remarks, and with Mr. Ramos, we 
will be happy to answer any questions that you may have.
    [Mr. Aldridge's statement may be found in the appendix.]
    Chairman Manzullo. As is our custom whenever we have 
somebody who testifies in a very technical issue, we always 
invite the resident expert from the agency to sit alongside the 
Under Secretary, and we invite your participation, Mr. Ramos, 
and thank you for coming.
    Mrs. Velazquez.
    Ms. Velazquez. Mr. Aldridge, in a memo you issued on 
January 17, 2002, you stated that, and I quote, ``When the 
department consolidates requirements, we must avoid unnecessary 
and unjustified bundling of requirements or make efforts to 
mitigate the negative impact that contract bundling has on 
small business concern.''
    This falls in line with the President's statement in March, 
in which he set out his small business agenda. In that agenda 
one item included by the President is ``avoiding unnecessary 
bundling.''
    Based on the fact that unnecessary and unjustified bundling 
violates the statute and will be prohibited anyway, would you 
please give us some insight into your understanding of the 
President's small business agenda?
    Mr. Aldridge. I think the President's agenda was very 
clear. He would like to avoid bundling of contracts. We support 
that. That is exactly what the January memo was intended to do. 
We needed make sure we establish guidelines. If any of the 
departments were wanting to bundle a contract for purposes of 
saving taxpayers' dollars, they had to justify it. And we gave 
the guidelines by which they could do that analysis that would 
imply a justification of bundling. We do not intend that that 
would be a very common practice. In fact, it should be a very 
rare practice that we would bundle contracts.
    I was noticing that in the total of the number of the 
contracts within the Department of Defense, we have only 
defined 26 of thousands of contracts as being bundled, which 
only represents less than two-tenths of one percent of the 
total DoD acquisition.
    I think bundling is a rare occurrence. We are going to make 
it rarer, and we are going to give the guidelines that when it 
can be done for the purposes of saving taxpayers' dollars, we 
give them the guidelines by which that would be accomplished.
    We have to be very clear on this to justify each one of 
those and that was the purpose of our memorandum, is to make 
sure that we have the proper rationalization and justification 
for doing so when it is proposed to make it happen.
    Ms. Velazquez. Mr. Aldridge, Democratic members of this 
committee released a report a couple of weeks ago that 
highlighted the rampant consolidation occurring with the 
department, consolidations for the convenience of the 
government without regard to small businesses.
    Are these consolidations in large part the reason that the 
department cannot achieve its 23 percent small business goal?
    Mr. Aldridge. I do not believe so. First of all, we have 
got to define the difference between consolidation and 
bundling. Consolidation clearly implies that we can consolidate 
small businesses and that consolidation can also be competed by 
small business. Bundling, I think, is when you try to--you 
bundle contracts to exclude small business. That is what we 
need to avoid. But when we have consolidation that permits 
small businesses to happen, I think that is okay.
    Now the--I forgot your question. I was getting into the 
definition rather than----
    Ms. Velazquez. I asked you, first, are you telling me that 
the consolidation of contracts that displace small businesses 
because it is bundling according to statute is okay?
    Mr. Aldridge. No, I am saying that we want to avoid 
bundling, but in some cases it may be justified. But in the 
case where it can be justified, there has to be analysis to 
prove it, and we have given them guidelines on how to prove 
that, if bundling is okay. I expect that to be a rare occasion, 
not a popular one.
    Ms. Velazquez. My previous question was, are not these 
consolidations in large part the reason that explains why your 
department did not achieve the 23 percent statutory goal?
    Mr. Aldridge. No, I do not believe--I do not believe 
bundling is the reason we are not achieving the percentages for 
our goal, our total goal versus independent ones.
    I believe the reason is that we in the proper process of 
finding qualified small businesses, we have a problem that the 
pool size to allow us to achieve those goals is not large 
enough. So the combination of taxpayer cost effectiveness and 
the quality is the reason we are not achieving goals in many of 
those cases.
    Ms. Velazquez. So let us talk about consolidation. We are 
not taking here about bundling.
    Mr. Aldridge. Consolidation----
    Ms. Velazquez. So are you telling me that when you 
consolidate, just make contracts, that we do not--you cannot 
find qualified small businesses that cannot provide the 
products and services that are required?
    Mr. Aldridge. No, no. No, I did not say that. You asked 
about bundling. Consolidation will permit small businesses to 
participate. If you consolidate contracts, small businesses can 
bid, but it is not consolidation nor bundling that I believe 
that causes the issue of not being able to achieve the goals 
precisely.
    Ms. Velazquez. Okay.
    Mr. Aldridge. It is quality of control.
    Ms. Velazquez. Mr. Aldridge, would you please submit for 
the record within the next 10 days a listing of all 
consolidated contracts by the department and the cost savings 
that have accrued to the government as a result?
    Mr. Aldridge. I will try to find that data, yes.
    Ms. Velazquez. I guess that if you cannot find it, then I 
will provide it to you. We have a list.
    Where is it? We can provide it. Here, maybe you can see it.
    Mr. Aldridge. These are the Federal Watch List. Not all 
contracts which had been--and the cost savings for each of 
them. You had asked me for a much longer----
    Ms. Velazquez. Sir, out of those 10, seven come from DoD.
    Mr. Aldridge. Understand.
    Ms. Velazquez. Okay.
    Mr. Aldridge. But I believe you asked me for all 
consolidated contracts and the cost savings across the 
Department of Defense. That would be a lot longer list than 
that.
    Ms. Velazquez. Okay. You could start with the seven that we 
have there.
    Mr. Aldridge. Okay. Thank you. I will.
    Chairman Manzullo. Mr. Hefley.
    Mr. Hefley. Thank you.
    Mr. Secretary, I am glad to hear you reiterate the policy 
again about bundling. Bundling has disturbed me for a long, 
long time, and partially because I started out in the 
construction business for a small contractor. And when I say I 
started out in the construction business, I do not want it to 
appear--I do not want it to be more grandized than it was. I 
drove a truck, and I was a carpenter's apprentice for a small 
contractor who was doing small projects at Tinker Air Force 
Base in Oklahoma City.
    And he was able to get those small contracts. He was a new 
company and he was able to get those because he could bond for 
those. And we did the refurbishing of the officer's club there, 
I remember. We did some shops in some of the hangars.
    Had they put those contracts together, we probably could 
not have qualified for it. By doing them separately, we were 
able to.
    Is that the kind of thing that you are trying to get to so 
that you can get it down to the size that a small business can 
bond for and can compete for, and then work it? We would like 
for all small businesses to become big businesses some time.
    Mr. Aldridge. We hope that all small businesses started or 
all businesses have started out being small. I am sure many----
    Mr. Hefley. Oh, sure.
    Mr. Aldridge. Boeing started out in a back yard of a 
garage.
    Yes, sir, that is the idea. Look, as I said, a healthy 
industrial base for this country, for the Department of Defense 
is absolutely essential, and we are finding with over $50 
billion of our procurement going to small businesses. These are 
people that have a lot to offer us in technology, agility of 
move, and to do things quickly. We need to encourage that, and 
that is what I am trying to do with the guidance that we have 
both in terms of avoiding the bundling as well as another 
memorandum that I issued that would try to get to get a better 
process by which we can follow, set goals for ourselves and 
follow them and make progress throughout the military 
departments.
    So the answer to your question is, yes, sir. Small 
businesses are valuable. They are part of our industrial base. 
We need to make them healthy, and hopefully get them to be big 
businesses some day in the future.
    Mr. Hefley. I am glad to hear you say that. I hope we 
continue to move in that direction.
    Another question I get an awful lot----
    Ms. Velazquez. Will the gentleman yield?
    Mr. Hefley. Yes, ma'am.
    Ms. Velazquez. You see, Mr. Aldridge, the contact, the 
number two contract, it called for the construction of seven 
barracks. If you break them down, you are building seven, so 
you could break them down to have small businesses to compete 
and build at least one.
    Mr. Aldridge. Mrs. Velazquez, I am not familiar with that 
contract. That contract level does not normally get to my 
attention.
    But it is clear that we also have a--I have an obligation 
to the taxpayers of the United States. We have to provide those 
taxpayers with the most efficient capabilities we can. And so 
there is a balancing act that goes on in everything we do 
between trying to support small business, which I clearly 
support, and I will continue to say that almost every time I 
talk before this committee, I support small business, but I 
also have the equally important obligation of ensuring the 
taxpayer is getting the maximum return for the dollar.
    Now, I am not familiar with that contract, so I do not know 
whether the two have been balanced in the right way. But 
certainly we will follow that to make sure that is going to 
occur, but I believe it is important to understand that saving 
taxpayers' dollars is also important as well as trying to 
protect small businesses.
    Mr. Hefley. If I might, I have one other question. I get a 
question a lot of times from small majority business owners, I 
guess you would call them, that all of the set asides for small 
business are taken up by minority and women-owned businesses, 
and there is all kinds of shell games being played out there so 
they can qualify as a minority or a woman-owned business.
    And it is my experience that if you are a small business 
struggling to get started and to make it,it does not much 
matter what your color or what your gender is. I mean, you may need 
these set asides.
    Can you speak to that? Are all of these or the vast 
majority of these being taken up by special categories rather 
than small business in general?
    Mr. Aldridge. Well, yes, sir. Not only do we have a small 
business goal across the department, but we have subcategories 
of small business goals within each of the categories, an 8(a) 
firm, minority-owned, women-owned firm, and of course there are 
HUB zone areas we also have goals set for.
    So yes, there are all types of different categories of 
goals.
    Do you want to say something about that, Frank?
    Mr. Ramos. Yes. What I would like to do is kind of put this 
a little bit into perspective, and I would like to share with 
Congressman Velazquez.
    Clearly, we share your concern about the appearance of this 
bundling that has taken place within DoD. I told Mr. Aldridge, 
and believe me, I am not saying this just to be patronizing, I 
have been around town a little bit. I have Mr. Aldridge and Mr. 
Michael Winn, who are my immediate directors, they have given 
me a tremendous license to roam around the Department of 
Defense looking at these issues.
    I was just describing to Mr. Aldridge that if you look at 
the metrics, and go back 10 years if you will, and all of those 
statistics are up on the board, if you look at them almost like 
a heartbeat, that heartbeat is rather consistent, whether it 
had been the past administration, this current administration. 
They have all been fairly consistent. There has only been one 
blip in terms factor in terms of that metric performance, and 
that was the Persian Gulf War.
    I kind of expect we are going to have another impact in 
this next year. We do not know because the data is not there. 
So what I am saying and what I am describing here is that we 
have been rather consistent notwithstanding the different 
directions that they have had at the Department of Defense, so 
we are taking a look at that.
    With respect to the issue on bundling, if we saw a loss in 
there across the board generically speaking, then we can say it 
is pinned to that. But the slope of dollars and the slope of 
numbers of contracts that we see for small business is rather 
consistent. It is not where we want to be, clearly it is not 
where we want to be.
    However, when we look at the bundling aspect of it, we have 
had a series of reports, whether people agree to them or not, 
we have had the General Accounting Office, we have had an 
inside contractor take a look at them, and I guess you can 
arrive at a conclusion that it is not conclusive because of a 
lot of different factors.
    The President has currently put together a task group of 
all the federal agencies to examine this. It is our expectation 
that the Department of Defense will get some clarity of 
definition of what bundling is in the real sense, and we will 
also get some cross-cut from some of the other federal agencies 
to compare it to us, to see what it is that we can use as the 
best model to penetrate this issue of bundling.
    Is nagging at us, Congressman Velazquez? It tears at us in 
terms of having to be reactive to this. We have provided to the 
staff here on this committee a listing of all the bundled 
contracts that we have had, at least under the definition.
    We have not had a chance to analyze and do the analysis as 
you request, Congressman, and we are going to do this.
    Ms. Velazquez. Sir, when you said to me that you are 
working hard, that you are trying to do your best, and that you 
are doing better, look at the numbers. Last year your 
achievement in terms of your goal of 23 percent was 21 percent 
in the year 2000. In the year 2001, it dropped to 20 percent. 
That is a big drop. It represents a lot of money for small 
businesses.
    Mr. Ramos. We are looking at a statistical issue, and I 
agree, there are some inferences there. But if you look again 
at the dollars, in terms of the units, if you will, they are 
consistent in terms of what I look at as the trend. We have to 
look at the trend in terms for us to analyze, and that is, I 
guess, my commitment to you, Congresswoman. When I first met 
you, I told you I am going to dig into it, and that is what we 
are going to do. That is the heart of it.
    Ms. Velazquez. Well, let me just say this is not a 
statistical issue.
    Mr. Ramos. It is not.
    Ms. Velazquez. With all of these small businesses that are 
here and will be testifying, this is about money and this is 
about jobs, and when they are forced to shut down their 
business or fire their employees.
    Chairman Manzullo. Okay, Mrs. Tubbs Jones.
    Ms. Tubbs Jones. Good afternoon, Secretary Aldridge, Mr. 
Ramos. Let me address my comments, first of all, or my 
questions to the Secretary, Mr. Aldridge.
    Mr. Aldridge, would you agree that as the leader of the 
Department of Defense it is you who sets the goals and 
objectives of your department.
    Mr. Aldridge. We set the policy. We try to work closely 
with our service counterparts to make sure that----
    Ms. Tubbs Jones. The short answer is yes. As the leader of 
the agency, it is your job to get the troops in line. Is that a 
fair statement?
    Mr. Aldridge. The Secretary of Defense is the leader of the 
Department of Defense.
    Ms. Tubbs Jones. Right.
    Mr. Aldridge. I simply----
    Ms. Tubbs Jones. But the department for DoD, you are in 
charge of DoD; is that a fair statement?
    Mr. Aldridge. No, the Secretary of Defense is in charge of 
the Department of Defense.
    Ms. Tubbs Jones. You are in charge of procurement, let me 
be a little clearer then.
    Mr. Aldridge. That is right.
    Ms. Tubbs Jones. So as the leader of that division, 
whatever you do, whatever you say, the troops ought to get in 
line. Is that a fair statement?
    Mr. Aldridge. That is the--we have set the policies for the 
small business goals.
    Ms. Tubbs Jones. I only have but five minutes. I need a yes 
or a no on some of these question, if you would help me, 
please.
    Mr. Aldridge. Well, I am not sure I understand exactly what 
you are asking me to agree to.
    Ms. Tubbs Jones. In other words, whoever is in charge of 
procurement or whatever the division is sets the policy for the 
people who they lead. Is that a fair statement?
    Mr. Aldridge. That is correct.
    Ms. Tubbs Jones. Okay. You have a statement that you gave 
to this committee this afternoon, sir, and nowhere in the 
statement do you mention 8(a) programs.
    Are you familiar with 8(a) programs, sir?
    Mr. Aldridge. I am.
    Ms. Tubbs Jones. Can you tell me what they are?
    Mr. Aldridge. They are--we set a goal for 8(a) programs 
that are at two percent, an internal function, for the--I think 
you are criticizing us for not having----
    Ms. Tubbs Jones. I have not started criticizing yet. I 
asked you do you know what an 8(a) program is, sir.
    Mr. Aldridge. Disadvantaged business; yes, ma'am.
    Ms. Tubbs Jones. And what is an 8(a) program? Excuse me?
    Mr. Aldridge. It is a disadvantaged business.
    Ms. Tubbs Jones. There is a program called small and 
disadvantaged business, but there is also an 8(a) program that 
is for--ask Mr. Ramos what an 8(a) program is.
    Mr. Ramos. The 8(a) program is a small and disadvantaged 
business who has suffered economic and social disadvantages 
that are certified by the Small Business Administration.
    Ms. Tubbs Jones. Included in those are minority businesses. 
Is that a fair statement?
    Mr. Ramos. Minority business. It is certain protected 
groups. It could be anybody else, including a majority person 
showing economic disadvantage.
    Ms. Tubbs Jones. Let me back up. Mr. Aldridge, what is your 
policy as the leader of procurement with regard to minority 
businesses?
    Mr. Aldridge. My policy with regard to--you mean my goal 
for how much business----
    Ms. Tubbs Jones. I want your policy and your goal, sir.
    Mr. Aldridge. My policy is I am supporting small business 
activities within the Department of Defense as a----
    Ms. Tubbs Jones. And how do you represent that policy, sir?
    Mr. Aldridge. I have issued guidance to the military 
departments regarding the goals that we set----
    Ms. Tubbs Jones. Why do you not take a moment and read the 
memo that your staff just gave you, sir, so you know what it 
is?
    Chairman Manzullo. You can tell that Congresswoman Tubbs 
Jones is a former----
    Mr. Aldridge. The policy, the policy that I have set forth 
for the military departments as to what goals they need to set, 
how they are going to measure their progress, and how do they 
report them back to us has been issued to each of the military 
departments.
    Ms. Tubbs Jones. Do you know the policy, sir?
    Mr. Aldridge. Do I know the policy?
    I am searching for what----
    Ms. Tubbs Jones. It is simple. Either you know it or you do 
not know it. The question is if you do not know it, how is the 
rest of your staff know it, and the goals and the percentages 
that are represented by how many minority persons have had an 
opportunity to do a DoD show that you do not know the policy, 
and therefore you have not been able to implement it.
    Mr. Aldridge. No, if you are talking about the policy with 
regard to the goals we have set for 8(a) firms, I know that. 
That is two percent of our procurement.
    Ms. Tubbs Jones. Have you met that?
    Mr. Aldridge. No, sir--ma'am.
    Ms. Tubbs Jones. And you do not have any problem figuring 
out whether I am male or female though, are you? [Laughter.]
    Ms. Tubbs Jones. And can you tell me why it is you think 
you have not met that goal, sir?
    Mr. Aldridge. I think there is two reasons. One is we have 
to have people who are qualified to--we have to have a pool of 
people who are qualified to do the business and to compete in 
the business for in that goal, and we have not been able to do 
that. It does not mean----
    Ms. Tubbs Jones. I did not invite any of these people. Will 
all the minority folks in this room stand up, please, that have 
been trying to do business with DoD, and they have been termed 
``not qualified'' to do business? Is there anybody in the room?
    I guess they have not been invited to be here at this 
session. But let me assure you, Mr. Aldridge, Mr. Ramos, there 
are minority business people in the United States who are 
prepared and capable of doing business with you, and I would 
love to have an opportunity to present you a list of those so 
you do not have this question that everybody say we cannot find 
none, because I have got plenty for you.
    I yield the balance of my time.
    Mr. Ramos. Madam Congressman, I have not heard the question 
from inside the Department of Defense that we cannot find 
minority contracts.
    Ms. Tubbs Jones. You may not have heard it but that is what 
your leader just said, so that is the point I am trying to make 
to you gentlemen, that whoever sits at the top sets policy and 
agenda. And if they cannot articulate it, if the people cannot 
see what they are doing, then the people who are doing the job 
cannot implement it, and that is solely my point.
    Mr. Ramos. I carry out the policy for Mr. Aldridge. I know 
the policy, and we are endeavoring to carry it out. We do have 
the minority firms. We have small disadvantaged firms.
    Ms. Tubbs Jones. So you disagree with Mr. Aldridge that 
there are no minority firms qualified to do the job that he 
just said?
    Mr. Ramos. We both are saying that there are minority firms 
that are qualified, and there are minority firms who work----
    Ms. Tubbs Jones. But you cannot find them?
    Mr. Ramos. I never said that. Never said----
    Ms. Tubbs Jones. I am not going to go back through the 
record. The point that I am trying to make is, Mr. Aldridge, 
Mr. Ramos, we sit here representing people of all color, race, 
sex, religion, national origin in these United States. There is 
enough money at the governmental till for everybody to have an 
opportunity to step up to the plate, to participate, and we 
believe that DoD who does 65 percent of the procurement for the 
United States has an obligation and a duty, a moral principled 
obligation to give minorities, women opportunities to do work 
with the federal government, no matter what it takes for you to 
do that.
    Can you agree with that?
    Mr. Ramos. In principle, yes.
    Ms. Tubbs Jones. Thank you. So I am asking you to implement 
it.
    Mr. Ramos. Okay, but there are some factors in implementing 
that we are trying to share with minority firms, and all small 
businesses, as far as that goes.
    Ms. Tubbs Jones. Would you send those to me so I can share 
them with the minority firms that I know are qualified to do 
work for the federal government?
    Mr. Ramos. I would be glad to meet with them if you wish 
and explain what they are.
    Ms. Tubbs Jones. But I want you to send me what you--
whatever those principles are so I can clearly give them an 
opportunity to be prepared to respond. Can you do that?
    Mr. Ramos. Yes, ma'am.
    Ms. Tubbs Jones. Thank you.
    Chairman Manzullo. How much time do you need for that, Mr. 
Ramos?
    Ms. Tubbs Jones. If they are already prepared, I could have 
them tomorrow.
    Mr. Ramos. We could probably do it at the first of next 
week, if you wish.
    Ms. Tubbs Jones. Well, thank you very much.
    Chairman Manzullo. Within 10 days.
    Mr. Ramos. Yes.
    Chairman Manzullo. I am going to take my turn at this time.
    Mr. Secretary, the question was posed earlier as to meeting 
the small business goals. This is for all small businesses. In 
your response, and I heard it again, is that the pool is not 
large enough. We had a--Deedra Lee came out about five months 
ago, held a procurement conference in my district. Two hundred 
and forty people showed up. Several people have gone with the 
PTAC afterwards and signed up to qualify for the contracts. But 
I am finding your answer--maybe it is not clear. Maybe I 
misunderstood. I thought there were more than sufficient 
numbers of small businesspeople in line out there ready to get 
the contracts when they are being offered.
    But what did you mean by the pool is not large enough? Am I 
missing something here?
    Mr. Aldridge. Perhaps I misspoke. The idea--we are after--
the goal we have set for ourselves, this Committee and our 
office within the Pentagon are after the same objective. It is 
to increase the health of the small business community. We are 
trying to do that. We have set goals for----
    Chairman Manzullo. You have done that on FAST?
    Mr. Aldridge. We did it on FAST. We are trying to do it on 
other things as quickly as we can, but----
    Ms. Tubbs Jones. What, all those seven contracts?
    Mr. Aldridge. Well, I hope we are. I hope we are. I am not 
familiar with them, but I hope we are.
    Chairman Manzullo. But could you explain what you mean by 
the pool is not big enough?
    Mr. Aldridge. Well, I think I probably misspoke about the 
pool. The question I am getting to is performance. We want to 
achieve the objective of the national security of the 
Department of Defense. And we are not--I could meet goals by 
just passing money out. That is not the intent in which we are 
trying to achieve. We just do not pass money out to achieve a 
goal. We have to get a return, a performance on that. And in 
the process we are not able to achieve the goal because for 
some reason we are not getting the ability----
    Chairman Manzullo. Are you saying that the small 
businesspeople are--the small businesspeople are not performing 
to standard enough?
    Mr. Aldridge. No. It is when we go through the process of 
issuing the--for going through competition, we obviously are 
trying to--we are trying to achieve the goal all the time. We 
are not able to do it for some reason.
    Chairman Manzullo. Then the problem has got to be an 
internal reason or the bidding process or something because we 
have got folks back home that are stacked up like train cars 
ready and itching to get those government contracts.
    Is there a disconnect somewhere here? Mr. Ramos, could you 
help us out?
    Mr. Ramos. Let me tell you what--and this is pretty much 
generic across the Federal Government, but even more so at the 
Department of Defense because of the war fighter needs.
    What they are looking for is past performance; that is, the 
capability of being able to perform on a contract.
    Chairman Manzullo. But that would hinder the start-up 
businesses, especially minority businesses.
    Mr. Ramos. Well, there is----
    Chairman Manzullo. Is that not correct?
    Mr. Ramos. There are some other factors that go along with 
that. The 8(a) firms are certified because of their managerial 
and technical competency, and they also have financial 
capability to perform. Those are factors that the contracting 
officers look at with respect to whether or not that firm can 
perform on the contract, and including past performance.
    We are suggesting and advocating for a lot of firms, 
particularly start-up ones, and I think those are the ones that 
are raising a lot of question. In my experience at the SBA, we 
had the same experience with small businesses. They want to get 
in the door.
    The way you get in and we are advocating this to help them 
move into the system is to partner in a joint venture so they 
get that past performance.
    Chairman Manzullo. Joint venture. So the small business has 
a joint venture with a big business in----
    Mr. Ramos. They do it all the time, sir.
    Chairman Manzullo. In order to get performance?
    I mean, let me give an example. I mean, say you need 100 of 
these made up, this object here. You put out RFPs for five of 
them, award one contract, one each to five small businesses and 
see how they perform on that. I mean cannot you do that as 
opposed to forcing a small business to form a partnership with 
a large business to get a performance contract?
    Mr. Ramos. What I am saying is that it is relative in size 
based on the contract. That probably will not need a 
partnership. If you have that product and you are the only one 
that can produce it, that is not the issue.
    If you get into the more major issues and systems, that is 
where the small businesses have a harder time because of the 
managerial, technical and also the financial capabilities.
    Chairman Manzullo. Okay. Okay. All right.
    Dr. Christian-Christensen.
    Ms. Christian-Christensen. Thank you, Mr. Chairman. 
Welcome, Secretary Aldridge, and Mr. Ramos.
    I want to go back to the 8(a) question for a minute. Can 
you tell me what specifically you are doing to increase the--
you said you did not meet the goals. Our information is that 
the procurement, 8(a) procurement has been steadily declining.
    Can either of you tell me what you are doing about that? 
What specific steps are you taking to increase 8(a) 
participation?
    Mr. Ramos Well, first of all, Department of Defense did not 
participate in the 8(a) goaling in the past, and this is the 
first time that they have symmetrics in there.
    Ms. Christian-Christensen. Why?
    Mr. Ramos. Why? I cannot answer it because I was not here. 
That was the past policy. Okay? All I know is from here on out.
    It is there. If you look at an 8(a) firm, that can also be 
a small and disadvantaged firm, so they kind of blend if you 
can.
    Now, what we are going to do with the 8(a)'s is we are 
going to try and address them as--because 8(a)'s are also 
women-owned business, service disabled veterans, Native 
Americans and others.
    Ms. Christian-Christensen. Right, and I see that you plan 
to focus on that.
    Mr. Ramos. Yes.
    Ms. Christian-Christensen. I am impressed with that, but I 
want to make sure that we address this particular program which 
seems to be coming in conflict with some others.
    Mr. Ramos. Well, 8(a)'s in some cases enjoy a preference 
because they are certified. Depending upon the offering, they 
can enjoy an advantage with respect to that offering that may 
come from any of the service branches.
    Now, the question is where can they best fit into those 
opportunities, and I think this is what Mrs. Velazquez is 
saying.
    Ms. Christian-Christensen. Can I just interrupt you to 
maybe fine tune your answer?
    Do the representatives from the agency meet the Small 
Business Administration on a regular basis to identify any 
specific projects that 8(a) program participants might be 
particularly well suited for? Do you ever meet----
    Mr. Ramos. Well, let me just tell you one of the 
initiatives that I have taken up since I have been there.
    We have set up with Fred Armandotiz, he is the associate 
administrator for contracting, we are setting up periodic 
meetings with them. We set up our first meeting a little over a 
month ago to talk about common issues like that, and including 
bundling. That was the last conversation with them.
    So our intentions and our commitments to agencies is to 
discuss that very subject.
    Ms. Christian-Christensen. Have you talked about HUB zone 
versus 8(a) because that is becoming an issue?
    Mr. Ramos. We have not had the discussion with them about 
it, but we have some initiatives with respect to the HUB zones.
    Ms. Christian-Christensen. What are those initiatives?
    Mr. Ramos. Well----
    Ms. Christian-Christensen. Like using the--focusing on 
Native American reservations?
    Mr. Ramos. In part. What we are developing right now is a 
strategy on how to approach HUB zones because what we have are 
urban HUB zones and we have rural, if you will, HUB zones, and 
then you have HUB zones by definition are all Native American 
reservations.
    I am a big advocate of partnering between the different 
disadvantaged groups. The Native Americans enjoy a certain 
priority with respect to contracting, particularly the Alaskan 
tribes. By definition, as I said earlier, reservations are HUB 
zones, and we are trying to encourage partnering with the 
Native Americans in those HUB zones so that they can have an 
advantage in the contracting to get them inside the door. So we 
are developing that strategy as we speak now.
    In fact, one of my special assistants is trying to develop 
that, and we have already talked to the Navajo and to the Hopis 
in Arizona to see how we can get in the door in that respect.
    Ms. Christian-Christensen. And other than that, are you 
finding that--who gets preference between a HUB zone and an 
8(a)? Is there a priority one over the other?
    Mr. Ramos. It depends on the set of circumstances on what 
you are trying to accomplish. They each have their own 
advantages. There are preferences in the HUB zones because of 
the economic benefits of a community that gives incentives to a 
business that starts up a business or has a business within the 
HUB zone.
    An 8(a) in itself does not enjoy that, but if you couple 
the two together you have a tremendous opportunity, and that is 
what we are trying to advocate, particularly with the 
Department of Defense.
    Ms. Christian-Christensen. Why would you have a difference 
in the goals for either one?
    It seems to me--and the reason I ask the question is 
because you have a higher goal for HUB zones than you have for 
8(a). And given the fact that they come into conflict and given 
the fact that 8(a) are largely disadvantaged or women-owned or 
minority-owned businesses where HUBzone businesses do not have 
to be, there is a discrepancy there just in looking at your goals.
    Mr. Ramos. Unfortunately, I was not here when those goals 
were negotiated with the Small Business Administration. I do 
wish to--if we have another opportunity to discuss that, and 
hopefully beforehand to see how the--what the rationale was in 
establishing those goals were because as I alluded to earlier 
there is kind of a historical performance of all the federal 
agencies, and there is something that has to drive them to get 
over that hump, and that is what we are going to try and do.
    Ms. Christian-Christensen. There are so many questions. If 
I could get in one last question?
    The consolidated contract versus the bundled contract, when 
an organization combines requirements previously performed 
under separate contracts into a larger contract it is a 
consolidated contract. If the previous smaller contracts was 
suitable for award to small businesses, then the consolidated 
contract is unsuitable for award to small business, then it is 
a bundled contract.
    I am still not clear that a consolidated contract is not a 
nice word for a bundled contract. Can you help me out?
    Mr. Ramos. I will speak from the street. If you want to 
manipulate the system, you can manipulate it by using the 
bundled processed. If you really want to help out the small 
businesses, you will segment those bundled agreements to 
benefit the small businesses that we are trying to grow.
    I think the big debate right now, and the President has 
taken the incentive here to address this issue because it has 
reached his administration's attention, we have all federal 
agencies coming together, I will just say the majority, 
including the SBA, who are going to scrutinize this question 
because there is a lot of confusion with respect to definition.
    And I kind of agree with you. There is confusion. My role 
inside DoD is to attempt to diffuse and to clarify that 
confusion because we see segments that we just saw with 
Congresswoman Velazquez yesterday talking about some other 
circumstances, and you can see the lack of clarity, and that 
happens.
    Ms. Christian-Christensen. Thank you. When it is resolved 
the rate of that resolution is given towards small businesses.
    Mr. Ramos. I am with you.
    Mr. Aldridge. I think it is very clear what the President 
has told us to do.
    Chairman Manzullo. Before I recognize Mr. Bartlett, I will 
state for the record that Minority and Majority staff members 
of this committee are meeting with Mr. Ramos on a periodic 
basis on those seven contracts that are with DoD. I appreciate 
the fact that the foot is in the door, and we are there to 
help, and we will give you lists of people back home that need 
contracts and things of that nature, but I just want to 
recognize that for the record. I appreciate the effort on it.
    Mr. Ramos. Thank you, sir.
    Chairman Manzullo. Mr. Bartlett.
    Mr. Bartlett. Thank you very much.
    Our developing technology is presenting challenges for 
contracting with small business. Let me give you one example, 
and there are others. The procurement cycle in government is so 
long that by the time we procure the new information technology 
equipment it is pretty much obsolete. And so a number of our 
agencies, and one of the first that we had contact with was the 
Navy and Marine Corps, which were issuing a single contract, 
not to buy equipment, but to buy performance, so that the 
contractor could then always have the latest, best equipment 
available.
    We met with them, Mr. Crouth, and I met with them, and to 
their credit they withdrew their RFP and issued another RFP, 
assuring that 35 percent of all that business would go to small 
business and 10 percent of it would be direct pay.
    So some of the challenges we face in contracting with small 
businesses are a result of this developing technology, which 
makes it more desirable for us to go to these large contracts, 
call them consolidated or bundle, whatever you want to call 
them. In any event, you can provide opportunities for small 
business there if you wish.
    I was one of perhaps 35 people who came to this Congress 
from NFIB. I was a small businessperson in another life. I also 
worked for the government. About, I guess, 30 some years ago I 
left the government as a GS-15, and when I was in the 
government I was involved in issuing RFPs and reviewing the 
response from the business world. And then I became a small 
businessperson. First I worked for a big business like IBM, and 
responded to RFPs there, and then I had my own company.
    There are a couple of issues that I wanted to talk with you 
about very briefly that I think present challenges for better 
mobilizing the small business community so that we can 
capitalize on the greater creativity that you find in the small 
business community.
    One of those is the fact that contracting officers are 
graded on how well their contractors perform. And so when you 
get responses in a RFP and from a variety of contractors as a 
contracting officer you are very disposed to go with Joe 
because Joe has performed several times in the past. You know 
he will do a good job. Jim may have presented a response to the 
RFP that maybe looks at least as good, maybe a little better 
than Joe, but, gee, I never saw Jim before. I do not know 
whether he is for real, whether he can perform or not. And so 
the contract goes to Joe.
    It makes it very difficult--I have experienced this 
personally--for a new person to break in. Somehow we need to 
reward our contracting officers for reaching out. They are 
going to fail once in awhile. That should be okay. If they have 
not failed, they are not reaching out enough. And so you need 
to have some new performance guidelines, I think, that 
encourage our contracting officers to reach out and to cast a 
broader net.
    Another problem we have is that there are many small 
businesses out there that have solutions that you never issue 
an RFP for because you do not know that they are out there, so 
somehow you have to be able to issue RFPs that just say, you 
know, do you have an idea for doing something better than we 
are doing, and if you do, you respond. I know you have 
something that aims at that.
    But if you respond, you know, you have got the ball and you 
are going to carry it now, because if you can save us money and 
do it better we are going to give you the opportunity to do 
that.
    We have to do a better job of reaching out. I know we do it 
somewhat, but I think there are small businesses out there that 
still have ideas that we are not reaching with our request for 
proposals.
    And another very recent problem I have been introduced to 
that many of our contracts now provide security clearance. If 
you are a big business, it is easy to have some people around 
that you can pull together to perform on a classified job. If 
you are a small business, you cannot do that. So from the get-
go you are excluded from that process. And I know that you are 
starting to do this, we need to do it better, and let small 
business know we are doing it. We need to prequalify. They need 
to know that they can have their people prequalified so that 
when they respond to an RFP that requires classified work, that 
they will be able to complete.
    These are several things that I think that we can do to 
cast a broader net, to encourage our contracting officers to 
reach out to these others, and to have more of our companies 
prepared because there are people for classified contract.
    Could you comment?
    Mr. Aldridge. Yes, please. Let me talk about two of the--
Frank will talk about the third one. The first one you are 
talking about getting contracting officers to go after small 
businesses. That is the value of setting goals, to try to 
encourage people to do this. If there is no goals set, they are 
not incentivized to go try this. And one of them, in fact, 
October 26 we issued the largest defense contract in the 
history of the Department of Defense called the Joint Strike 
Fighter.
    We have set goals for small businesses of the Joint Strike 
Fighter at a minimum of 20 percent for small business with a 
stretch goal of 30 percent. So we have incentivized the program 
manager, General Hudson, to go after and include small 
businesses in the Joint Strike Fighter Program, which is a very 
positive thing.
    The other part of that, of trying to encourage small 
businesses to get involved, we have a thing called a broad area 
announcement. These are ideas that we have--we have a need. We 
want to find out who has ideas to meet that need. And a good 
example of that is after September 11th we created a 
counterterrorism technology task force which identified some 
areas that we felt were important to fighting terror. And I had 
been receiving phone calls from industry and from people 
wanting to help.
    So what we did is we put out a broad area announcement by 
our office out to individuals, universities, small businesses, 
big businesses, whomever wanted to reply to ideas for how to 
fight terror, counterterrorism. And we got 13,500 inputs, most 
of which were from small businesses and people who had 
innovative ideas, individuals and so forth.
    We are now going through the process of evaluating those 
with a technology team. We have got it down to about 400, and 
we will probably even contract about 20 of these ideas. But 
this is a process by which I think we get to your problem of 
when we have an idea we need something, let us see who has 
got--who can respond to it as well as getting inputs in from 
other people.
    Mr. Bartlett. What about technologies out there that are 
addressing problems that you do not even know can be addressed 
because you have no idea that technology is out there?
    Mr. Aldridge. Well, I think in that case many of the 
laboratories and the various acquisition centers throughout the 
military departments have small business advocates in their 
facilities that small businesses can come to them and present 
ideas. I believe there is a process. I think the ideas, we have 
to make sure that the small businesses know where to go to get 
their ideas evaluated.
    Mr. Bartlett. Thank you.
    We have one--I am sorry.
    Mr. Ramos. I am sorry. I just wanted to clarify. We are 
doing something, and this is aimed at the veterans. You asked a 
question about security. The best people, the people that are 
best prepared to meet security requirements are veterans 
because of their background. We are starting a veteran 
initiative to explore, and we already had a brainstorming group 
with some veterans as to develop this program. And we have had 
the National Security Agency come in and give us an outline of 
how to do this.
    So we are moving in that direction, to try to use our 
resources inside of Department of Defense so that we can inform 
and instruction our small business how to get into the security 
areas, if you will, within the Department of Defense because 
you are correct, sir, they do not know at this time by and 
large, so we are going to try and help them get through that 
threshold.
    Chairman Manzullo. Okay, thank you. Congressman.
    Mr. Vila. Thank you, Mr. Chairman.
    I will yield my time to Congresswoman Velazquez.
    Ms. Velazquez. Thank you.
    Would you please get the memo up there? But let me just 
react to what Mr. Ramos just said.
    Chairman Manzullo. Could you yield for just a second?
    Ms. Velazquez. Sure.
    Chairman Manzullo. We have about a half a dozen seats over 
there for the first six that--look at this, look at this. Look 
at all the guys go and leave the ladies behind. Okay, there 
comes one lady. We have some more room over there. Please just 
help yourself to some seats over there. There you are.
    Ms. Velazquez. Mr. Ramos, you just said in response to the 
gentleman's question that veterans are the best to handle 
security issues, right? That is what you just said?
    Mr. Ramos. I am saying because of their veteran experience 
many of them have security clearances and experience in dealing 
in secured environments, and we are trying to reach out to 
those veterans.
    Ms. Velazquez. So reach out to them for what?
    Mr. Ramos. So they can come in and have----
    Ms. Velazquez. And that explains why you did not set any 
goals for veterans?
    Mr. Ramos. Well, again, Congresswoman----
    Ms. Velazquez. Thank you. Let me go to Mr. Aldridge.
    Mr. Aldridge, your memo of March 2001 clearly shows--do you 
remember that you issued a memo? Okay. That the department--it 
clearly shows that the department does not plan on achieving 
its goals. In fact, the memo does not have the department 
meeting the small business goal until fiscal year 2003.
    Your memo does not have the department, right there, 
meeting the women-owned business goal even by 2006, does not 
even mention the service disabled veterans business goal and 
does not even mention the 8(a) program goal.
    Why did you issue a memo that shows such low goal 
achievement?
    Mr. Aldridge. These are projections which we think we can 
achieve with a reasonable outreach program. We can set goals.
    Ms. Velazquez. Sir.
    Mr. Aldridge. I could set a goal of 20 percent up there 
which I know I cannot achieve on any one of the smaller 
disadvantaged business. We are trying to put goals that we 
think we can stretch to, but that we can try to achieve.
    Ms. Velazquez. Sir, how can you explain, you control 65 
percent of federal contracting dollars. When we look at other 
smaller federal agencies, they negotiate goals that are much 
higher than the one that you negotiated for your agency.
    Mr. Aldridge. I think the issue is it is not just a 
percentage number that we have----
    Ms. Velazquez [continuing]. It is not--the issue----
    Mr. Aldridge.--It is the amount of money.
    Ms. Velazquez [continuing]. Here are, sir, statutory goals 
set by Congress. That is the law. Twenty-three percent for 
small businesses, five percent for women-owned businesses.
    And then I will ask you, why did you take until 2003, until 
fiscal year 2002 to establish an 8(a) program goal when a 
presidential executive order dated October 6, 2000, required 
the establishment of one?
    You were the only agency in the federal government. 
Everybody else set a goal for the 8(a) program. What is it? Is 
it your attitude? Is the culture of the Department of Defense?
    And let me just react to something that you just said to 
the Chairman here. You said that you do not have a pool of 
qualified small businesses out there.
    I resent that statement, and it reflects your attitude 
toward small businesses. We are not asking here for handouts 
for small businesses. We are asking here for a level playing 
field that would allow for small businesses who can provide the 
hammer, that you pay $700, or maybe you can get it from a small 
business person for $50.
    Mr. Aldridge. Madam----
    Ms. Velazquez. Or the $7,000 that you pay for coffee 
makers.
    Mr. Aldridge. I do not have to be here being insulted.
    Ms. Velazquez. No, I am not--I am not insulting you.
    Mr. Aldridge. Yes, you are.
    Ms. Velazquez. I am saying it is your attitude. You were 
the one who said here that you do not have a pool of qualified 
small businesses.
    Chairman Manzullo. Let us give----
    Ms. Velazquez. I am telling you, Mr. Chairman----
    Chairman Manzullo. Would the Gentlewoman----
    Ms. Velazquez [continuing]. This is my time here.
    Chairman Manzullo. I understand.
    Ms. Velazquez. We have people, small business people that--
--
    Chairman Manzullo. Mrs. Velazquez----
    Mr. Velazquez [continuing]. Can provide the products that 
you need.
    Chairman Manzullo. Let us give the Secretary the 
opportunity to answer----
    Mr. Aldridge. I do not have to sit here----
    Chairman Manzullo. Mr. Secretary, the issue is very 
passionate with Mrs. Velazquez, and I could attest that she is 
not trying to be insulting. She is trying her best, and I am 
sorry if you took it that way. Please proceed. Thank you.
    Ms. Velazquez. What I am saying, sir, we are not here to 
jeopardize the national security or the Department of Defense. 
We are here to ask you that you comply with statutory goals 
that are set by Congress.
    I am asking you why, of all the Federal agencies, you were 
the only one who did not set a goal for the 8(a) program 
despite the fact that an executive order was issued by the 
president of the United States in the year 2000?
    Mr. Aldridge. May I answer now?
    Ms. Velazquez. Sure.
    Mr. Aldridge. We set a goal. We set our own self-imposed 
goal because internally I arrived here in the Department of 
Defense in May of 2001. Almost immediately I issued this 
memorandum to go out to the various departments setting goals, 
setting a process, and setting a way to report upon their 
achievement of the process. We set our own internal goal 
because there was not one, there was not one in the Department 
of Defense.
    Why it was not established by the time I got here, I have 
no idea. All right?
    What is interesting is that we had the same objective yet 
we seem to be fighting each other, trying to get to the same 
goal. I am here to try to achieve those goals. I have tried to 
tell you realistically what I think we can do, and we have an 
initiative underway to make that happen. I am not against small 
business.
    Chairman Manzullo. Mr. Davis.
    Mr. Davis. Thank you very much, Mr. Chairman, and let me 
thank you for holding this hearing. And Mr. Secretary, Mr. 
Ramos, I want to thank you gentlemen for appearing.
    There is a common perception among most people that I know 
who monitor small business activity and who monitor the 
relationship of small minority, women-owned businesses to the 
federal government that the Department of Defense has the worst 
record of all agencies within the federal government, that 
there is none worse.
    How would you respond to that characterization?
    Mr. Aldridge. In December of 2000, there was a women- and 
minority-owned businesses did a vote that considered the 
Department of Defense the premier government agency promoting 
multi-cultural business opportunity. So the perception 
apparently is different from many minority and women-owned 
businesses about the role of the department.
    This year, we achieved the most funding for small 
businesses in the history of the department, $51.8 billion went 
to small businesses, of which, as I mentioned before, 54 
percent of those are prime contracts. That is not a record of 
somebody--of an agency that is against small business. We are 
promoting small business. We need small business. They are the 
innovative companies that we try to solicit.
    We have set goals, and like I said, in the Joint Strike 
Fighter, a program that could be as big as $200 billion of 
funding, for 20 to 30 percent small businesses. All of the 
activities we have are aimed at trying to promote small 
businesses as an essential part of our industrial base. It is 
not that we are against small business. We are trying to do all 
we can, but we are trying to do it by setting realistic goals 
for ourselves.
    Percentages do not mean much to me up there. The dollars 
that go into the--how much money are we giving into the small 
business is the important part, and hopefully turning small 
businesses into big businesses some day.
    Mr. Davis. I agree with you that dollars certainly are a 
better barometer. But I mean, you could also look at it in 
terms of how many dollars or how much resource one would have 
at their disposal that would determine--I mean, if I am a small 
agency and I have only got a little bit to spend, and I spend a 
good amount of that, and somebody else got a great deal more to 
spend, they are going to spend more money than I do, but it 
does not mean that they are doing a better job of spending with 
certain entities than I am.
    But let me move, and I appreciate the fact that you would 
disagree with that characterization. Do you have a program--I 
come from a historically black college and university. I went 
to a little, small school in Arkansas, as a matter of fact. And 
many of these schools have had difficulty having access to 
government resources and doing business with government, doing 
research, building research capability, interacting.
    Do you have a program that reaches out to historically 
black colleges and universities?
    Mr. Ramos. Yes, we do. Inside of Mr. Aldridge's 
organization we have the research, technology and engineering 
side. There is a gentleman by the name of Dr. John Hops, the 
former provost of Morehouse University in Georgia that is 
heading that program. He has at his disposal a substantial, let 
us say a substantial amount of funds that he has engaged with 
HBCUs and MIs.
    He has taken a hard look at that, and we have collaborated 
on that very issue. We both agree that we need to do let us say 
a more intelligent way of distributing the money so that we can 
grow those universities.
    We are engaging again through some of the initiatives we 
have across the board the use of HBCs and MIs as a transfer of 
knowledge; that is, in one of our programs called Meter-Proge 
Program, we have a fund that we try to develop small businesses 
so that they can be morecompetitive within the Department of 
Defense.
    So we are looking at how to broadcast, if you will, that 
knowledge that we are investing into HBCs and MIs, and 
including the Native Americans. It is an asset that we are 
going to clearly go after, and we have engaged some discussions 
with them already.
    Mr. Davis Thank you very much.
    Mr. Chairman, I see that the red light is on, but could I 
conclude with this question?
    You mentioned earlier that if one really wanted to deal 
effectively with the whole business of contract bundling, and 
as far as I am concerned, it is a contradiction that that it is 
a policy that will never work in terms of trying to promote 
small business development. I mean, it is like saying to me if 
you want to promote iceboxes, go out and buy a refrigerator.
    But you did mention breaking contracts up into smaller 
segments, and dispersing those in a meaningful way throughout 
an industry rather than one of two entities being able to hog 
the whole show or get the whole thing.
    Are you having experience with doing that? I mean, is DoD 
attempting to do that in compliance at the same time with 
government policy and regulation?
    I am saying if the boss is telling you, I want you to 
bundle these contracts, and at the same time is telling you, I 
want you to promote small businesses, that sounds to me sort of 
like saying make bricks with no straw.
    Mr. Aldridge Well, I think the boss has told us very 
clearly what the guidance is; the boss being President Bush. He 
says he is against bundling. I think that is a very clear 
guidance that is going to go down through the Department of 
Defense, that if somebody finds a reason to bundle, they better 
have a very, very good reason to go against what the President 
has told them to do.
    Mr. Davis Thank you, Mr. Chairman, for your----
    Chairman Manzullo. Thank you very much.
    Let me conclude this first panel with the statement that, 
Mr. Secretary, when you had just been sworn in the FAST 
contract was just coming into being at that time, and I 
remember calling you.
    Mr. Aldridge. Yes.
    Chairman Manzullo. We sent you a letter and said could you 
stop the contract. You said, ``No, I cannot, but I would be 
glad to meet with a member of your staff.'' And you did, you 
met with Nelson from my staff. And at that time you promised 
that you would work very diligently on making sure the small 
businesses were not ignored. You kept your word. The FAST 
contract, it is over 70 percent of small businesses.
    And also, you and Mr. Ramos have been of tremendous 
assistance in your openness of your department. There is a lot 
of work that has to be done, a lot of passion on both sides of 
the issue because we know this is extremely confusing. I do not 
know if I understand the difference between bundling and 
consolidation. But to the extent that it injures the small 
business person, there is no distinction on that.
    But again, I appreciate your coming here. Thank you for 
taking your time.
    Mr. Ramos, you are going to be sticking around for the rest 
of the hearing just in case there is some technical questions 
that come up you might be willing to help us out on.
    Mr. Ramos. Yes, sir.
    Chairman Manzullo. Okay, thank you, Mr. Secretary.
    Mr. Aldridge. Thank you.
    Chairman Manzullo. I appreciate that.
    [Pause.]
    Chairman Manzullo. The Committee will come to order. We 
lost half of the audience here. That is why I asked how many 
had come with the Secretary, and three people raised their 
hands, and I did not think that was the case. I did not think 
we were that popular, did you?
    In any case, we welcome the second panel. The first 
witness, it is my pleasure to welcome John DiGiacomo. John is 
my constituent in charge of the Procurement Technical 
Assistance Center at Rock Valley College, a community college 
in Rockford, Illinois. And we look forward to your testimony.
    The purpose of the lights is to give you five minutes, and 
if you go over, it goes like this. If you go too much over, 
then I get more excited and I bang the gavel.
    All of your--procurement is a very complicated, a very 
emotional issue for all of us up here. Mrs. Velazquez and I 
have spent hundreds of hours working this issue, and I share 
her passion to make sure that the small business people get 
their share of it, get their share of the contracts.
    So, Mr. DiGiacomo, we look forward to your testimony.

 STATEMENT OF JOHN E. DiGIACOMO, PROGRAM DIRECTOR, PROCUREMENT 
                  TECHNICAL ASSISTANCE CENTER

    Mr. DiGiacomo. Thank you.
    Chairman Manzullo. You have to put the microphone real 
close to you, John. It has got to be closer than that.
    Mr. DiGiacomo. Closer than that.
    Chairman Manzullo. There you are.
    Mr. DiGiacomo. Is that better? Thank you.
    Mr. Chairman, Ranking Member, Members of the Committee, my 
name is John DiGiacomo, and I am with the Procurement Technical 
Assistance Center at Rock Valley College.
    We assistant small business in doing business----
    Chairman Manzullo. Could you suspend a second?
    Phil, would you go get Mr. Ramos, maybe rescue him from 
outside so he can have the opportunity to sit and listen to the 
testimony? I think that was his plan. If you would suspend just 
a second.
    Mr. DiGiacomo. Sure.
    [Pause.]
    Chairman Manzullo. Please go ahead.
    Mr. DiGiacomo. Myself and my other colleagues at the 88 
other procurement programs around the country work closely with 
small. minority, women-owned and veteran-owned businesses to do 
business with the Department of Defense and other government 
agencies. We see on a daily basis all the obstacles, all the 
problems, and all the successes that small business has in 
doing business with the government.
    I am grateful for the opportunity to share our experience 
and our clients' experiences with you today.
    How important are small businesses to our nation's health 
and economic welfare? In 1984, Congress addressed this very 
issue that we are discussing today, how to expand small 
business participation, and created the PTAC Program. At that 
time----
    Chairman Manzullo. Hang on just a second.
    Mr. DiGiacomo. Okay.
    [Pause.]
    Chairman Manzullo. Would you proceed?
    Mr. DiGiacomo. Thank you, Mr. Chairman.
    Chairman Manzullo. I appreciate that.
    Mr. DiGiacomo. We assist small businesses in doing business 
with the government. In 1999, the most recent year that we have 
procurement figures nationwide, we have assisted in bringing to 
the small businesses over $6.8 billion in contract awards. 
These award figures are based on letters that we have received 
from our clients voluntarily that they send to us on a monthly 
basis telling us what they are doing with the government from 
the assistance that we provide.
    I have here over 100 copies or 100 letters of--award 
letters from my clients that they have given to us, and this is 
just from my one small center. You can imagine the impact of 
the rest of the country with all 88 procurement centers.
    The PTAC continually draws new companies in. You mention 
the ProCon Conference. We had over 240 attendees to that 
conference. Over 100 of those companies signed up to do 
business with the government. Those were small minority, women-
owned businesses that are in the process now of becoming 
qualified to do business with the government.
    The results that we have had with the Department of Defense 
have been mixed. For the most part in dealing with the 
government agencies, the contracting officers, they have been 
positive. But we have had some systematic problems: Contract 
bundling, there has been a sharp decrease in the amount of 
total contracts that we have seen going to our small business; 
rule manipulation that have eliminated small business from 
being able to bid on contract; credit card micro purchases 
where we cannot--we cannot get the list of credit card holders 
to be able to market to them.
    The procurement centers are there to assist small business. 
We have been around for about 17 years, and in my area alone I 
cover 13 counties with over 6,000 businesses in it. We do this 
on a daily basis. We are professionals in doing business with 
the government, and we provide these services to our small 
businesses daily. We are there to help the Department of 
Defense and Congress to achieve the goals that they wish to 
achieve.
    If you have any questions, I would be more than happy to 
answer them.
    [Mr. DiGiacomo's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your testimony.
    Our next witness is Cathy Ritter representing the American 
Council of Engineering Companies. Look forward to your 
testimony.

  STATEMENT OF CATHY S. RITTER, PRESIDENT, THE CONSTELLATION 
                       DESIGN GROUP, INC.

    Ms. Ritter. Thank you. Good afternoon, Chairman Manzullo 
and Ranking Member Velazquez, and Member of the Committee.
    My name is Cathy Ritter, and I am a registered professional 
engineer, and president of The Constellation Design Group, a 
small woman-owned engineering firm in Maryland. Today, I come 
before the committee representing the American Council of 
Engineering Companies, which is a business association of 
America's engineering industry, and we represent more than 
5,800 private engineering firms.
    The ACED members deliver vital infrastructure services to 
the American public and to the military, including the design 
of roads, airports, power plants, waste water treatment 
facilities, the safe disposal of unexploded ordnance, the 
clean-up of Super Fund sites, and most recently,the clean-up of 
Anthrax from the Hart Senate Office Building.
    More than 60 percent of ACEC members, or 4,000 firms, are 
small businesses, and I mean very small businesses because we 
have fewer than 30 employees.
    The Department of Defense procures over $2.1 billion in 
engineering services annually, which is a significant potential 
market for our membership who operate as both primes and 
subconsultants.
    As a small business owner myself, I am extremely pleased 
with President Bush's agenda for small business, which speaks 
to many of the obstacles that hinder us from contracting with 
federal agencies, and specifically, the Department of Defense.
    The firms of ACEC are pleased with the President's comments 
on two matters that are of concern to small private engineering 
firms: contract bundling and the practice of government 
agencies performing work that is readily available in the 
private sector.
    The federal government's practice of consolidating projects 
into one large contract, or contract bundling, is a major 
obstacle to small engineering firms attempting to do business 
with federal agencies. DoD's practice of bundling or 
consolidating contracts makes it almost impossible for small 
business to compete as we often lack the range of disciplines 
and geographical reach which is necessary to successfully 
fulfill the parameters of these contracts. As a result, we 
believe that DoD is eliminating many of the most qualified 
competitors.
    In many cases the designer best qualified to handle a 
project is a firm that is located close to the project site. A 
local firm's knowledge of such details as the soil 
characteristics, the climate, the permitting process and local 
construction practices results in the purchasing agent 
receiving the best quality service for the best value.
    Bundled projects, however, are often awarded to a firm 
which is half a continent away. At best, the local firm becomes 
a sub. DoD should not trade the quality and innovation of small 
businesses for administrative convenience.
    For similar reasons, ACEC is concerned about the increased 
use of large indefinite quantity contracts. Several years ago a 
number of federal agencies began to use ID/IQ contracts for a 
certain base period with an option of additional years. 
Specific projects are not identified, but are usually small and 
do not seem to the agency to warrant advertising and selection 
of a design firm on a specific project basis.
    However, DoD is increasingly relying on ID/IQs as a primary 
contract vehicle and is pricing these contracts in such a way 
that small firms cannot compete. We are effectively shut out 
from much of this work when the contracts call for multiple 
year, multi-million dollar awards with no specific projects or 
facilities in mind.
    One such example of an ID/IQ contract comes from a NAVFAC 
solicitation from 2001. The solicitation states, and I quote, 
``The majority of work will be located within the Commonwealth 
of Virginia, the State of West Virginia, the Commonwealth of 
Puerto Rico, Western Europe, and may include the State of North 
Carolina, the States of Delaware, Pennsylvania, New Jersey, New 
York, Rhode Island, Massachusetts, Maine, Vermont, New 
Hampshire, Maryland, the District of Columbia, or at locations 
under the cognizance of engineering field activity in the 
Mediterranean----
    Chairman Manzullo. Could you suspend?
    Ms. Ritter. I sure will.
    Chairman Manzullo. Is this type of contact language still 
going on?
    Ms. Ritter. This is from 2001.
    Chairman Manzullo. If you have something that is more 
recent, could you get that to me personally?
    Ms. Ritter. Yes.
    Chairman Manzullo. And I will talk to the Secretary 
personally and Mr. Ramos.
    Ms. Ritter. Be happy to.
    Chairman Manzullo. And put an end to nonsense like this. I 
mean, I am serious. This is the reason--this is the reason we 
are having this hearing, because I want the exact, the right 
thing to do, and we will take small businessperson by small 
businessperson, clause by clause until we help the secretary 
stop the bundling that is going on. It is obvious that this 
clause is intended for big guys and to smoke the little people 
like yourself.
    So if you could give me something that is later than that, 
then I want to find out who got the contract, and maybe we will 
try to end the contract by saying it was illegal.
    Okay, go ahead. I took some of your time, but it is going 
to be yours. Thank you.
    Ms. Ritter. I am almost finished anyway.
    Well, my obvious next point is that such a large 
geographical region excludes all small engineering firms.
    It is ACEC's hope that all DoD contracting agencies will 
properly evaluate proposed work associated with the ID/IQ 
contracts such as this, and refrain from bundling projects that 
span such a large geographical area, or entail numerous 
disciplines and solicit professional services based on the 
specific services required.
    The debate that is currently taking place regarding the 
outsourcing of government commercial activities occurs at a 
critical time. As federal agencies face tighter budgets and a 
looming human capital crisis, the need to efficiently allocate 
resources has become increasingly important.
    ACEC is pleased with DoD's commitment to outsource work 
that is not inherently government, but is deeply concerned 
about several attempts by lawmakers to stop outsourcing in its 
tracks.
    Over the past two years amendments were offered to the DoD 
authorization bill that aimed to restrict DoD's ability to 
contract services with private industry. These amendments would 
have required that all DoD contracts go through a lengthy 
public/private competition process commonly known as A-76. The 
amendments will increase the time and expense for design firms 
seeking to provide services to DoD, and would put many small 
firms out of business before they ever received the contract.
    Perhaps most importantly, these efforts tie the hands of 
the DoD and prevent it from procuring the best services 
available to fulfill its national security mission. We ask each 
member of this committee to oppose any type of amendment or 
bill that would seek to restrict the federal government from 
contracting with private industry.
    Finally, I would like to thank the committee for inviting 
ACEC to testify today. We appreciate your efforts on behalf of 
the small business community, and thanks again for this 
opportunity.
    [Ms. Ritter's statement may be found in appendix.]
    Chairman Manzullo. Thank you very much.
    The next witness is Ms. Pamela--is it Braden?
    Ms. Braden. Yes.
    Chairman Manzullo. President of Gryphon Technologies in 
Arlington, and look forward to your testimony.

  STATEMENT OF PAMELA BRANDON, PRESIDENT, GRYPHON TECHNOLOGIES

    Ms. Braden. Thank you. Mr. Chairman, Ranking Member 
Velazquez, and Members of the Committee.
    My name is Pam Braden. I am the president of Gryphon 
Technologies, a woman-owned 8(a) certified small business. My 
firm performs a wide range of engineering services for the 
federal government, principally the Navy. Prior to forming 
Gryphon, I worked for over 20 years in marketing and contracts 
for three different government contractors.
    I am here today on behalf of the Professional Services 
Council. I serve on PSC's board of directors, and PSC serves as 
a leading policy advocate for our industry, commenting on the 
impact of legislation and regulations on both our industry as a 
whole and on PSC members specifically.
    Some firms such as mine prefer to be prime contractors. 
Others prefer to be subcontractors. Still others prefer just to 
get business. Small business is getting a share of the federal 
government procurement market, although it is not clear that we 
are getting a fair share. I do not believe that the creation of 
additional small, minority, veteran and women-owned set asides 
would solve this problem. I believe we need to enforce the 
regulations that are currently in place.
    The federal procurement process is complex and is 
constantly evolving. There has been a significant growth in the 
use of large multiple award contracts, task orders and blanket 
purchase agreements, replacing the more traditional requests 
for proposal, the RFP process.
    These consolidated contracts, BPAs, have significantly 
higher ceiling values than the previous issued RFPs. In some 
instances the contract values are measured in billions rather 
than millions. When these contracts have been consolidated, the 
small business contracts, and sometimes the 8(a) contracts get 
rolled into the MAC/BPAs. When they are competed, it's under an 
open MAC/BPA competition, and the quotas under prime/sub 
agreements are not enforced.
    In addition, in evaluating the proposals submitted, 
procurement officers are not required to give any preferential 
treatment to small or minority businesses. Therefore, we are 
forced to compete head to head against large contractors, such 
as Lockheed Martin and Northrop Grumman for these contracts, 
for the same contracts that were awarded to us previously as 
small business.
    Changes focusing on only one element of the procurement 
system often have unintended consequences in other areas. 
Therefore, it is appropriate that this committee and other 
specialists in the federal procurement process look carefully 
at how small businesses are approaching the federal 
marketplace, and how the federal government is responding to 
small business needs.
    I would like to focus my remarks on three major issues: 
federal sourcing policy, contract bundling and contract 
finances and payment.
    Over the past decade the government has made significant 
strides in sourcing policies. The advent of best value 
contracting and increasing awareness of and desire for 
innovative solutions have helped the government access cutting-
edge capabilities to better serve its many constituents and 
customers. At the same time these and other trends have also 
helped hundreds of small businesses develop and thrive.
    Today, however, there are unprecedented threats to growth 
and development of small businesses in the federal marketplace, 
including H.R. 721, the so-called TRAC Act, a radical and 
devastating piece of legislation. It would do nothing to 
improve the quality of government contracting while forcing 
scores of companies, particularly small businesses, out of the 
federal marketplace.
    My messages to this committee is to do all you can to 
ensure that the TRAC Act, or any part of it, or any variation 
of it, never sees the light of day.
    There is no question that small businesses are deeply 
concerned about the impact of contractbundling for prime 
contract opportunities. This committee has initiated legislation that 
provides a solid foundation for addressing the issue in a balanced and 
fair manner.
    In the Small Business Reauthorization Act of 1997, Congress 
authorized contract bundling only if it is necessary and 
justified based on the benefit analysis.
    The PSC is concerned that precious little guidance or 
training has been provided to the acquisition workforce to 
enable them to understand and follow the bundling rules. We 
compliment the DoD Office of Small and Disadvantaged Business 
Utilization for its January 2002 benefit analysis guidebook. 
Acquisition teams can use this in assessing elements of 
bundling laws and regulations, analyzing the substantial 
benefits standards required by the law, and in describing ways 
to mitigate the impact of bundling on small businesses.
    Overall, the guidebook is reasonable, and will be useful to 
procurement officials, even though it does not address BPA 
contracts or small business set asides within the MAC and BPA 
process. However, it does not appear that procurement officials 
have had an opportunity to implement or enforce this since it 
was released in January of 2002.
    Therein lies what we believe to be the most important 
issue--the need for more aggressive and focused guidance and 
training so that the statutes are actually put into practice.
    Chairman Manzullo. Conclusion.
    Ms. Braden. Contract financing and payment issues. 
Contractors should be paid on time for work performed according 
to a contract. All government service contractors face the 
issue of late payments, but for obvious reasons it is an issue 
of special concern to small businesses that do not have the 
resources and reserves to cover expenses when payments from 
government customers are late.
    Payment has improved because of the changes to the Prompt 
Payment Act. In addition, there have been special payment 
challenges for service contractors.
    The Department of Defense is now subject to interest under 
prompt payment rules. Businesses providing services to the 
civilian agencies do not receive the benefits of this law. PSC 
encourages Congress to extend government-wide the benefits of 
the interim payment provisions that are now applicable only to 
DoD.
    In conclusion, thank you again for the invitation to PSC 
and for myself, and allowing me to present my views in these 
important matters. Thanks.
    [Ms. Braden's statement may be found in the appendix.]
    Chairman Manzullo. Appreciate your comments. Thank you.
    Our next witness is Mike Tucker, owner of George W. Allen 
Company. Oh, okay, our next witness will be introduced by his 
Congressman, Mr. Bartlett. Forgive me.
    Mr. Bartlett. Thank you very much. We have two Maryland 
witnesses here; one, my constituent; the other in the state 
that I represent. Welcome to both of you.
    Mike has a degree in business administration at the 
University of Maryland, 1972. That was exactly 20 years after I 
got my doctorate at the University of Maryland. Mike and his 
wife Cheryl are life-long residents of the State of Maryland, 
and have resided in Howard County in West Friendship for the 
past five years. Mike and Cheryl have five children: Kay is 23; 
Katie, 19; Haley, 16; Anna, 12; Brian, 6.
    His career in the office products industry spans 28 years 
with 15 years spent with a manufacturer, one year with a 
national chain, and most recently 12 years as an independent 
dealer. Mike is the president and owner of GWA located in 
Beltsville, Maryland, and has a staff of 45 employees, a number 
of which also live in my district. Thank you very much. He has 
been a member of National Office Products Association board of 
directors for the past three years and has chaired the 
Government Advisory Council since its inception three years 
ago. Mike has been a member of the Independent Stationeries, a 
buying group supporting independent dealers all across the 
country for the past five years. Mike has been a member of the 
General Services Administration's Vendor Steering Committee for 
the past two years, and currently serves as Chairman----
    Chairman Manzullo. Are you always----
    Mr. Bartlett [continuing]. Of its Small Business Committee.
    Chairman Manzullo. Thank you very much. Well, we expect 
some great testimony from the introduction.
    Mr. Tucker. I think I have been set up. [Laughter.]
    Chairman Manzullo. If you want to flip the microphone 
around. Oh, you got it right there, okay. We look forward to 
your testimony.
    Mr. Tucker. One is more than enough. Thank you.

 STATEMENT OF MIKE TUCKER, PRESIDENT, GEORGE W. ALLEN CO., INC.

    Mr. Tucker. Well, thank you, Congressman, for that very 
kind introduction.
    Mr. Chairman, Ranking Member, and Members of the Committee, 
I appreciate the opportunity to testify before the committee 
today to address the issue of the procurement policy and its 
impact on small businesses.
    My name is Mike Tucker, and I am the owner of George Allen 
Company, an office supply dealership located in Beltsville, 
Maryland.
    George Allen is a family-owned business, and the company 
was founded in 1948 by a gentleman named George Allen, no 
relation to our former football coach.
    As an independent office supply dealer, this hearing is 
important because it will shed light, I hope, on the problems 
plaguing small businesses in their attempts to do business with 
the government.
    My company has gone from doing 80 percent of our business 
with the federal government to down to 65 percent just in the 
past three years. There is a reason for that. The federal 
government is simply failing to meet its small business 
contracting goals. This loss of business is significant to a 
company like mine.
    I estimate this loss cost my company in excess of $1 
million annually. This is business that I once had with 
longtime government customers.
    During the six years since the Federal Acquisition 
Streamlining Act became law, my company has not been able to 
compete for contracts that we once successfully bid for. Big 
office supply companies, such as Office Depot and Boise-
Cascade, have stepped in to take huge sole-source contracts 
mostly because of the desk-top delivery requirement which 
requires a company to provide overnight delivery to at least 90 
percent of the country on one of these contracts. This 
requirement alone limits competition from local companies like 
mine.
    Agencies such as IRS, NASA Goddard, Harry Diamond 
Laboratories, and the U.S. Postal Service had been George Allen 
customers for years. Now the only time we get a call from these 
agencies is for something discontinued or back-ordered by one 
of their sole-source vendors.
    These blanket contracts are negotiated behind the scenes 
without any small business input or competition. The national 
chains have convinced many agencies that small office supply 
companies like mine are not competitive. We are even told by 
one official at the United States Postal Service, at a time 
when we were looking at one of their sole-source contracts that 
independent dealers were irrelevant.
    This is simply not true. We belong to buying cooperatives 
that allow us to leverage our purchasing with several thousand 
other independent dealers. With $12 billion in buying power, we 
certainly can compete on price.
    The federal government tells a good story of how they reach 
out to small businesses. Agencies host conferences and meetings 
where hopeful vendors are given lists of contracts and told how 
many millions and billions of dollars are spent on their 
products each year. Unfortunately, most of us find out the hard 
way, that the customers they are trying to land have already 
been told what large company they must buy from for the next 
several years. Prime contractors play the same game with their 
subcontracting plans.
    I had the opportunity to see a proposal sent to the Postal 
Service indicating that the prime contractor was a stocking 
dealer for 83 small and minority companies. When the final 
catalogue was issued, only 11 small businesses and 34 items 
made the cut out of 1500 items. Many of the items listed were 
products like thermal fax paper and spring-lock metal tab 
holders. These may be antiques, but they are certainly not big 
sellers. Again, the plan is designed to sound good but creates 
minuscule opportunity for small business.
    I use the Postal Service as an example, although they are 
quasi-government entity, they exemplify the current problems we 
are facing with federal agencies, not just the Postal Service 
or the Department of Defense.
    Mr. Chairman, as you know, the Department of Army recently 
sent out a solicitation on a $100 million blanket purchase 
agreement for office products. Initially, independent dealers 
were not even considered in the bidding process even though 
some of us fit the criteria. It was only after you and Ms. 
Velazquez got involved that independent dealers were able to 
submit bids.
    Mr. Chairman, it took your help to make this happen, and at 
the end of the day I am told some nine to 10 independent 
dealers were able to meet the very short deadline and submitted 
bid.
    My company was one of them, and it is my hope that our bids 
will be reviewed and given the same consideration as our large 
corporate competitors. If they are, the Department of Army will 
find that our price is competitive, our service is very good, 
and our time of delivery will meet their needs. I am hopeful 
that at least a couple independent dealers will be awarded some 
of this business.
    If we get the opportunity, we can use this contract as a 
stepping stone to show other agencies that we can meet their 
needs.
    Let me state we appreciate the Army's willingness to do 
what they did and hope the other branches of military will 
follow their lead.
    I have recently become aware that the Department of Air 
Force is also planning a similar procurement. Independent 
dealers would like the opportunity and we hope you will give us 
some help with that. We just want the same considerations. I am 
hoping this hearing will help change attitudes and agencies 
will begin to utilize more small business. Given the chance, we 
can compete.
    Mr. Chairman, to save on time, I have just given you a 
sampling of the real problems that exist for our industry and 
small businesses in general when trying to do business with our 
government. I'm hoping to have the opportunity during any 
questioning to delve deeper and in more detail to these 
problems.
    Thank you for the opportunity today, and I would be happy 
to answer any follow-up questions.
    [Mr. Tucker's statement may be found in the appendix.]
    Chairman Manzullo. Thank you very much.
    Our next witness is Frederick Erwin who is an attorney, an 
expert on these affairs, and we look forward to your testimony. 
Thank you, Mr. Erwin.

    STATEMENT OF FREDERICK ERWIN, PROGRAM MANAGER, CAMP INC.

    Mr. Erwin. Thank you, Chairman Manzullo, Ranking Member 
Velazquez, Member of the Committee.
    My name is Frederick Erwin, although my mother never used 
that unless was mad at me. She called me ``Deane.'' Thank you 
for giving me an opportunity not to talk so much about a 
procurement issue directly, but one that is involved with 
procurement, and that is electronic commerce training and 
assistance to the small business by the federal government. In 
doing so, I would like to discuss this important issue that you 
recognize by virtue of calling these hearings from the 
prospective of a program that provides invaluable assistance to 
small business.
    The program I am referring to is the recently suspended 
Electronic Commerce Resource Center Program, which was funded 
by Congress and operated under a contract through the Defense 
Logistics Agency.
    The ECRC Program was to provide education, training, 
technical support to small businesses and enable them to learn 
about and more effectively participate in e-government. I would 
like to acknowledge that small businesses do have greater 
visibility and access to some federal procurements since 
October of last year through the government-wide single point 
of entry called FedBizOpps, which I believe you were briefed on 
recently.
    However, as helpful as the FedBizOpps internet site is, it 
does not resolve all of the challenges facing small businesses 
today in the electronic business environment. This fact is 
highlighted by the recently released SCORECARD III, the GAO 
report to the Senate Small Business Committee which was issued 
last fall, and the University of Scranton survey conducted in 
January and April of this year.
    Such reports and surveys support the need for small 
businesses to become electronically enabled. It is critical not 
only to the success of the small business, but also the success 
of any e-government initiatives. Existing public resources 
should be leveraged to enable small businesses to seize their 
electronic commerce opportunities, meet the new generation of 
electronic challenges, and enable small businesses to 
participate in government contracting as stated by the 
President and members of this committee.
    The ECRC Program has assisted over 400,000 small businesses 
in the past five years, and only recently been discontinued. 
Many of the relationships, personnel, infrastructure, tools, 
training programs and support capabilities are still in place. 
This valuable resource represents many years of government 
investment and is still available to provide assistance to 
small businesses. However, urgent action is required as these 
resources will quickly erode, and are on the verge of being 
lost. We cannot and should not allow this resource to be 
obliterated.
    I am not proposing a continuation of the ECRC Program as 
they currently existed, but in its place I am recommending the 
establishment of a new program that uses the former ECRC 
Program as a springboard that will offer a more advanced level 
of assistance. I am proposing that you take action to leverage 
the infrastructure and knowledge gained through the ECRC 
Program and establish a program that focuses that knowledge 
towards serving the needs of small business through existing 
program such as the Procurement Technical Assistance Program 
mentioned earlier by another witnexx.
    The new program would focus on using contacts, skills and 
lessons learned to assist small businesses in becoming 
electronically enabled from an integrated business standpoint. 
No other program exists today that will meet the small business 
needs. Such a program would have the availability to build an 
``arcade'' of small businesses to support many government 
procurement. More specifics are provided in my prepared 
statement, which I have provided to this Committee.
    In closing, I would like to urge you to recognize the 
valuable government assets that exists today in the ECRC 
Program and that is about to be disseminated. Small businesses 
have a need for such a program and these needs have been 
documented in several independent reports. Please do not let 
the needs of small businesses go unanswered.
    Again I wish to thank the Chairman and the members of the 
committee for permitting me to come before you today. I would 
be pleased to answer any questions the committee may have.
    [Mr. Erwin's statement may be found in the appendix.]
    [Pause.]
    Chairman Manzullo. Sorry about that; just got your 
testimony.
    Our next witness is Mr. Bill Cabrera, President of Lord and 
Company in Manassas, Virginia, and we look forward to your 
testimony.

          STATEMENT OF BILL CABRERA, LORD AND COMPANY

    Mr. Cabrera. Thank you, Mr. Chairman, and thank you, 
Ranking Member Velazquez, for the opportunity to testify before 
you today.
    My name is Bill Cabrera. I am president of Lord and 
Company, a graduated 8(a) construction firm out of Manassas, 
Virginia. I have worked in this industry for 28 years; 20 years 
with Lord and Company. I am pleased to share with you my 
experience as a contractor with one federal agency in order to 
bring awareness to some aspects of the procurement process 
which may need your attention.
    I would like to talk about two incidents which I believe 
are examples of how the government can unfairly harm small 
companies enough to put them out of business.
    First, through the ID/IQ, indefinite delivery/indefinite 
quantity procurement program: Under this program an agency 
often maintains a stable of three or four companies under 
contract with the flexibility to negotiate a project with one 
company or solicit bids from selected companies. When the 
contractor receives an order he is under increased pressure not 
to question or upset the government representative for if yogi 
do you will simply not get any additional opportunities to do 
work under the contract, and you face the strong probability of 
a bad past performance rating, which affects your entire future 
in government contracting.
    The threat of this occurring puts small companies 
practically at the mercy of government inspectors who are aware 
of their power over the small company who can then change 
requirements and conduct themselves in any manner whatsoever.
    This was my experience with an ID/IQ contract at Walter 
Reed Medical Center. Specifically, we received a fast-track 
delivery order to convert a large barn into a sports facility. 
Although we met about the project some four months before its 
completion, it took seven weeks to get us preliminary drawings 
and three additional weeks to give us pricing drawings. As 
required by contract, we priced the project in five days. After 
negotiating the price as much as they could, the government 
reduced the price even farther by deleting items from the scope 
of work.
    Within a week after negotiations and after receiving the 
firm-fixed price delivery order, we were given a new set of 
drawings which not only included the items which they had 
deleted during the negotiations, but added a significant amount 
of work to the project.
    With six weeks left to complete the job and based on 
implied commitments made during a recent partnering session 
with the government, we proceeded with the work as required. 
During the course of the project we received several new 
directives and sketches to address unforeseen conditions, such 
as extensive termite damage, which required us to replace the 
siding and several structural members on the facility. The 
government representative insisted without flexibility in 
special order items like light fixtures would have to be 
imported from Denmark at a cost of $1800 each and 16-week 
delivery.
    Chairman Manzullo. What was the name of that government 
officer?
    Mr. Cabrera. The government officer was----
    Chairman Manzullo. The person who wanted you to import that 
stuff from overseas?
    Mr. Cabrera It is Mr. Fleri, Mr. Neno Fleri.
    Chairman Manzullo. Would you spell his name, last name, 
please?
    Mr. Cabrera F-L-E-R-I.
    Chairman Manzullo. And what department is he with?
    Mr. Cabrera He's with the JOC branch of the Walter Reed 
Army Medical Center.
    Chairman Manzullo. What is the JOC branch? What is that?
    Mr. Cabrera Job Order Contract.
    Chairman Manzullo. So he is an Army employee?
    Mr. Cabrera. He is a Walter Reed employee.
    Chairman Manzullo. He is a Walter Reed employee?
    Mr. Cabrera. Which falls under the Army, yes, sir.
    Chairman Manzullo. Is he still there at that position?
    Mr. Cabrera. Yes, sir.
    Chairman Manzullo. Can you give me the purchase orders of 
the stuff coming in from overseas that go into American 
facilities?
    Mr. Cabrera I will be more than happy to.
    Chairman Manzullo. Has it been delivered yet?
    Mr. Cabrera. It has been delivered and installed, sir.
    Chairman Manzullo. And you installed it?
    Mr. Cabrera. Yes, sir.
    Chairman Manzullo. Alright, because I want those orders. I 
am going to have him here before this Committee. He apparently 
is in violation of the Barry Act. I do not think the Barry Act 
applies to this, but I want to find out why he is buying stuff 
from foreign countries for installation in American facilities.
    Mr. Cabrera. These are light fixtures, very simple.
    Chairman Manzullo. These are light fixtures. Would you work 
with Mrs. Velazquez and me in preparing the letter?
    Mr. Cabrera. I would be happy to.
    Chairman Manzullo. Because we are going to prepare the 
letter, we are going to send it to him. We are going to ask him 
to meet with us in our office. If anybody is here that is in 
charge of him, if he does not meet with us, I am going to issue 
a subpoena duces tecum, take his testimony under oath.
    This stuff is going to stop. Anybody here in the service 
that does that, you will personally come into my office. I will 
put you under oath, and I will have your job if this nonsense 
continues in the United States of America.
    Please continue, Mr. Cabrera.
    Mr. Cabrera.  Thank you, Mr. Chairman, and thank you for 
your comments.
    They were not the only things we had to order. We ordered 
some thoracic shower basins, also high cost, long-lead item.
    The government representative also required us to change 
the color of bathroom tiles after we had already purchased and 
had the tile delivered and on site. He made us change the color 
of the ceiling paint after it had been painted, all the while 
we were denied a place to put a construction trailer or a 
storage trailer, having no place to store our material, having 
to store it outside under tarps where petty thefts would 
constantly run off with our material.
    Never did it occur to us that in the end of--at the end 
this new partner of ours would refuse to issue a change order 
to cover the cost of the new directives.
    In another delivery order under the same contract we were 
asked to revise our previously submitted quote for 
miscellaneous work at the commissary. We were to include a 
quote for automatic doors which the government had received 
from a contractor who had been servicing the old doors. We were 
just the middlemen.
    In September 2000, six months after we had revised our 
proposal, we were notified that they had received the funding 
for the project, and at a meeting with the client the door 
contractor and the job branch representative, we were told we 
were to complete the project prior to Thanksgiving. The door 
contractor felt he could meet this schedule if we ordered the 
doors immediately.
    So we issued him a purchase order. When the delivery order 
was received some six weeks later, it did not include the cost 
of the doors. Immediate inquiries led us to believe that this 
was being corrected, but it never happened. What followed was 
countless meetings, phone calls, letters, and over the next 
year twice we thought the problem was resolved, only to watch 
months go by without receiving a delivery order.
    In October 2001, I was sued by the door contractor which 
forced me to seek legal counsel and pursue a claim. Recently, 
as a result of the claim, the government has again committed to 
buy these doors. Maybe this time it will happen.
    In two and a half years at Walter Reed, we were always 
denied a place for office trailer and office to work out of, 
not a place to put a filing cabinet or a fax machine, no place 
for a dumpster to get rid of the trash or a place to store 
materials. Payment problems were endemic, taking as much as 
eight months to get paid, and often asked to resubmit invoices 
with new dates just so they will not have to pay the interest. 
Our award fees that were to be processed every six months were 
taking well over a year to process.
    Mr. Chairman, small companies like mine do not have the 
financial cushion that major corporations do that allow them to 
sit back and wait for federal checks, nor do we have the legal 
budget to challenge agencies on issues as they come up. These 
practices will continue to discourage, even bankrupt small 
businesses that do a good job and often cheaper than our large 
competition.
    I hope my testimony will give you a better idea of some of 
the serious problems that face small businesses, and, frankly, 
we have no place to go to. Legal action or elevating problems 
to this level cannot be the only way for a small company to be 
heard. We need to craft solutions so that small businesses are 
not sidelined or ruined by federal government.
    Thank you, Mr. Chairman.
    [Mr. Cabrera's statement may be found in appendix.]
    Chairman Manzullo. Mr. Cabrera, I want to work with you on 
this. I also want to know the name of the person that told you 
to submit new invoices so that they did not have to pay 
interest. I think that is fraudulent. That could be a criminal 
referral to the Department of Justice. I also want to let you 
know that in your continued dealings with the federal 
government that should you notice anything unusual that you are 
being punished for testifying here today, bring that to my 
attention immediately.
    Mr. Cabrera. Thank you, Mr. Chairman.
    Chairman Manzullo. I will contact the Department of 
Justice, and that has happened in the past to people who have 
testified before this committee, that they have been punished. 
They have not been given contracts that should have happened, 
and I am just shocked at how far this has gotten out of 
control.
    Nydia, will you go first, give me an opportunity to have 
some water, please?
    Ms. Velazquez. Mr. Tucker, Ms. Braden testified in her 
remarks that there is no reason for new laws regarding 
contracting bundling. She states in her testimony that the 
problem is simply a lack of training and understanding by 
government acquisition personnel.
    Do you agree with this assessment?
    Mr. Tucker. Not in our industry, that is not the case at 
all. Thank you.
    Before FASA was passed five--six years ago, small 
businesses like ours competed very successfully in the federal 
government market alongside large companies like Office Depot, 
and Staples. When FASA was passed, it created a couple of new 
legislative situations, one in particular, the micro purchase 
procedures, which required no competition for orders under 
$2500. You did not have to do any type of formal procurement 
procedures. You could buy from a small business or a large 
business. For our industry that is probably 95 percent of the 
purchases, so it hurt us dramatically.
    And now instead of those procedures we have goals, and 
those goals, as we hear from DoD, can be arbitrary, may not be 
enforced. They change from agency to agency, year to year. And 
without some kind of consequence or accountability on these 
issues, I do not see how it is going to change. I think there 
needs to be some type of a legislative solution.
    Ms. Velazquez. Thank you, Mr. Tucker.
    Ms. DiGiacomo, in your testimony you state that there has 
been a sharp decrease in contract opportunities appropriate for 
small businesses as the department relies increasingly on 
consolidated mega-contracts. Yet Mr. Aldridge testified that 
bundling only accounts for .2 percent of defense contracts.
    How do you explain the differences in what you are seeing 
and what Mr. Aldridge has testified to?
    Mr. DiGiacomo. Well, in the nineties, the federal 
government wrote approximately 15 to 18 million contracts per 
year. Last year our government wrote about 10.5 million. That 
is a significant decrease to me. I do not know if all of those 
are being bundled. We have no figures on that to be able to 
verify it. We know that some of these are being bundled, but 
there has been a decrease, and we are seeing it. Our small 
businesses are not able to compete.
    Ms. Velazquez. Thank you.
    Mr. Tucker, I would like to highlight a point you make in 
your testimony. Your government sales have gone done from 80 
percent three years ago to 60 percent. That is not because your 
prices were not competitive, is it?
    Mr. Tucker. No, not at all. As I mentioned, we belong to 
buying cooperatives that have enormous buying power, more than 
any of the large companies that I mentioned individually, and 
the contracts that we are not given the opportunity to quote on 
or the agencies were not allowed to sell, it has nothing to do 
with the price. They are awarding these blanket purchase 
agreements for convenience. I realize agencies have smaller 
procurement staffs and things like that, but they are using 
that as an excuse to bundle or consolidate the procurement 
process. You get into a situation where the pricing, the 
management level of these agencies is being shown is very low 
on high visibility items. Very much like a grocery store 
pricing, the lesser known items are priced much higher. And 
then when the contract is awarded, and most of these are five-
year contracts with one year renewals, these contracts go on 
for a long, long time, and believe me, those preliminary low 
prices are made up long before those contracts are over.
    But it is not the pricing issue that is keeping us out at 
all.
    Ms. Velazquez. Thank you.
    Ms. Ritter, how do you believe that the President's small 
business agenda will help small businesses?
    Ms. Ritter. Well, I think the words that he spoke and the 
directives that he gave to the federal agencies were that they 
needed to pay more attention to small businesses. I think that 
gives us an opportunity to come and speak. You know, there have 
been years in the past when we could not even get the 
opportunity to come in and speak. So I think at least attention 
has been focused on small businesses, and I think small 
businesses across the United States, small business owners 
feel--oh, gosh, I hate to use this word--empowered a little 
more to speak up and feel like that they can, and that they 
will finally make a difference.
    Ms. Velazquez. Ms. Braden, how many members of the 
Professional Services Council have less than 500 employees?
    Ms. Braden. Thirty-five, I think.
    Ms. Velazquez. Thirty-five.
    Ms. Braden. Yes.
    Ms. Velazquez. How many of those companies have contracts 
with the Department of Defense as prime contractors?
    Ms. Braden. A large number.
    Ms. Velazquez. Does the Professional Services Council 
support Representative Tom Davis' service acquisition format? 
Do you have a position on that? You do?
    Ms. Braden. Yes.
    Ms. Velazquez. Thank you.
    Ms. Braden. We have been supportive.
    Ms. Velazquez. Thank you. No more questions, Mr. Chairman.
    Ms. Braden. Thank you.
    Mr. Bartlett. Thank you very much. From the testimony of at 
least two of our witnesses, I gather that we have a problem 
with justify bundling or consolidation, and I agree that those 
two words might be interchanged. One person's consolidation may 
be another person's bundling.
    The example I referred to, I do not think you can 
criticize. When our agencies cannot procure up-to-date 
equipment because the government procurement cycle is so long 
that by the time we get the equipment it is already obsolete, 
that they are then forced to go to a performance contract. If 
you are going to do a performance contract, it is necessarily a 
big contract. But the Marine Corps and Navy did reissue the 
RFP, and giving 35 percent of all of those contract dollars to 
small business and 10 percent of it direct pay.
    We also had a similar discussion with the NSA, with 
reasonably the same outcome and expectations. NSA, exactly the 
same problem; they just could not keep current with their 
equipment because our procurement cycle is too long.
    But other industries do not have that kind of a problem. 
For instance, Mike, your sales of office equipment reminded me 
very much of the problem that movers had when DoD decided to 
issue a single contract for moving household goods. Now, 
obviously, there is nobody in the world who can move all of the 
military's household goods in the world.
    What we used to do is have an RFP and companies compete, 
and somebody won, and the person who won could deliver as 
many--you know, could do as much as he could do, which 
obviously was a tiny percentage of the total work to be done. 
Then any other contractor could come in and deliver household 
goods at the same rate. I would think that that would be a 
reasonable analogy for the problem that you all have.
    Why do you think they have to go to these big single-source 
blanket contracts rather than doing what our moving people used 
to do? Simply issue an RFP, have a lot of people like you 
compete, somebody is going to win. They are going to, you know, 
bid to deliver it better and at lower cost. And then anybody 
else who wants to can compete at those same levels. Why would 
that not be a reasonable way to let small businesses 
participate here?
    Mr. Tucker. I think it is a very reasonable way. I cannot 
answer a question why they would not pursue that path. But 
there seems to be a thing here where once a contract like this 
has been negotiated, there seems to be a need or a desire on 
the part of the people that negotiate it to defend their 
position, what they have done. They have done this to save the 
agency money and time and so on and so forth.
    And as I said before, if you ask people in some of these 
agencies at the headquarters level what they think of these new 
negotiated, sole-source contracts, the people at the management 
level will tell you this is great, it is saving us lots of time 
and money, and manhours, and all the rest of it. Then you talk 
to the people with the credit cards that are placing the small 
purchase orders, and they are just the opposite--they hate it. 
It is dreadful, they have service problems, they cannot get 
their bills straightened out, they get substitutions.
    So to address your point, I would love to see something 
along those lines offered. You know, that would certainly be a 
way to do it and to, you know, possibly break this up, or have 
it renegotiated.
    Mr. Bartlett. Mr. DiGiacomo, do you think that there is a 
possibility of requiring a justification for these 
consolidated--I know that you now have to justify bundling. But 
you know, consolidation could be bundling. If we had to justify 
that, I do not think in the case of moving and in the case of 
office furniture that it is easy to justify a single contract 
for the whole world. I would think what we used to do for 
moving is a reasonable thing to do, because to make it more 
convenient for the government purchasers to just let a single 
contract, you know, that really now is denying access to many 
small businesses.
    If everybody had that kind of an attitude, Bill Gates, 
working out of his garage or was it his basement, would never 
have become Microsoft. You know, we just have to give an 
opportunity to these small businesses. We have to find a way to 
meet the government's needs while still not excluding small 
businesses from competing.
    Do you think that by regulatory reform that we could reach 
this objective, or do we need some legislative reform from 
committees like this?
    Mr. DiGiacomo. I firmly believe that there has to be some 
kind of justification for bundling contracts of any type. It 
hurts my small businesses. They are not able to compete. We 
have situations where small businesses just--they do not even 
bother to try anymore.
    We, in Rockford, are trying to set up a coalition of small 
businesses that can bid on some of the larger contracts, and it 
is very difficult to get these small businesses to work 
together because they are very entrepreneurial and independent-
minded. I hope that answered your question.
    Mr. Bartlett. Thank you, Mr. Chairman. Everybody is for 
efficiency, but when that efficiency eliminates competition 
that brings the skills and entrepreneurship to the government, 
you know, that is moving in the wrong direction, and maybe we 
can be a factor in changing these regulations so that small 
businesses can continue to contribute as they have in the past.
    Chairman Manzullo. Well, I think we are making an impact. I 
think somebody at Walter Reed is not going to be very happy 
with me today, but that is tough.
    Congresswoman Millender-McDonald.
    Ms. Millender-McDonald. That is alright, Mr. Chairman, we 
are happy with you, and you have my vote of confidence on your 
actions today. I agree with you that something needs to be done 
to get to the bottom of the inability for small businesses to 
have contracts by the federal government, and I am appalled at 
the inconsistency of the Department of Defense and their 
inability to meet the goals that are set forth through 
legislation.
    Mr. Tucker, as I read parts of your statement with some 
interest, and the others, you are all talking about the same 
thing that our congressional hearing that was held in my 
district just a couple of weeks ago spoke about. That is e-
commerce. And it is so important for small businesses to get up 
and going, and get to be a part of this technology that is 
going to really drive the economy, so to speak.
    But you stated that the federal government is simply 
failing to meet its small business contracting goals. That is 
hurting to me sitting here representing the federal government. 
That particular statement goes through the veins of all of your 
statements that you have said today, in essence, and you have 
tried several times to try to seek these contracts. Some of you 
have gotten them. I have read where others have been met with 
subcontracting from an Army Corps of Engineer, which in fact 
that contractor did not pay, and so consequently you sued.
    But small businesses should not have to go through with 
that. Now, maybe that is not some of the statements that I have 
read here, but I have read it someplace else.
    Mr. Chairman, first of all, I would like to suggest to us 
as the small business committee, and I as a ranking member, 
that we call into play every department head, secretary, 
whatever, to this committee to see just how well they are 
faring on meeting the goals for small business contracts with 
them.
    The DoD was your first. I applaud you and the ranking 
member on this, but I think every department should come before 
us so that we can get a clear understanding of whether they are 
meeting the goals of small businesses, because we all know that 
small businesses are what make the economy really move. You are 
the ones who create the jobs, and you are the one that is 
really the engine.
    I would like for you to talk with me, some of you, to tell 
me just whether or not--how many DoD contracts do you have. I 
have not read all of your testimonies. And how many of you have 
sought to get the contracts of DoD and have not gotten them 
yet.
    So can I start from this gentleman here and go all the way 
down?
    Mr. DiGiacomo. I am actually----
    Ms. Millender-McDonald. I am sorry. I was not here. I had 
other markups and other committee meetings I had to go to.
    Mr. DiGiacomo. I assist businesses that want to do business 
with the government. I work under a Department of Defense grant 
to help small minority women-owned and veteran-owned 
businesses. I have a----
    Ms. Millender-McDonald. What success have you met with?
    Mr. DiGiacomo. I have 741 clients at this time. Of them, 
about one-third of them actually bid on an ongoing basis, and 
about one-third of them have been awarded contracts.
    Ms. Millender-McDonald. And that is with the DoD or with 
all of them across the board?
    Mr. DiGiacomo. Actually, it is across all the agencies with 
the majority going to the Department of Defense.
    Ms. Millender-McDonald. Okay.
    Mr. DiGiacomo. I brought a sampling of 100 contract award 
letters that we received from our clients, and we do cover an 
extremely large area. I cover 13 counties or 6,000 businesses 
in my counties. That is a lot of businesses to be able to 
cover, and be able to do an adequate job. But we are doing that 
every day, and we do see a lot of success. And success to a 
small business is not just getting the million dollar 
contracts. Success to a lot of my clients is getting the 
$50,000 a year contract that keeps the environmental consultant 
working, or the technical writer.
    Ms. Millender-McDonald. And how many of those have you been 
successful in getting?
    Mr. DiGiacomo. A number of them. I have environmental 
consultants and technical writers who do get government awards.
    Ms. Millender-McDonald. And the lady to your left?
    Ms. Ritter. At the present time I do not have any DoD work. 
I was trying to wrack my brain. I do not think I have any 
federal work right now, frankly, and that has been a decision, 
a business decision made over the last seven or eight years. 
The red tape got to be too much, and the difficulties in 
attempting to meet all of the parameters. I am a civil engineer 
by trade. We design roads and bridges, and that sort of thing, 
and we are able to keep ourselves busy without getting into the 
federal market. And to a certain extent, that is sad.
    I have been in business 20 years, and I just sort of--the 
last five or seven years, maybe in my old age I have just 
gotten tired of trying to do it, and I have kind of written it 
off.
    Ms. Millender-McDonald. That speaks volumes of why we are 
here today.
    Ms. Braden, is it?
    Ms. Braden. Yes, Ms. Braden.
    I have--we are a $17 million company, five years old, and I 
would say 95 percent of our contracts come from the Navy.
    Ms. Millender-McDonald. Okay. Mr. Chairman, I see the red 
light, but can we have Mr. Tucker speak?
    Chairman Manzullo. Go ahead.
    Ms. Millender-McDonald. Okay, fine.
    Mr. Tucker. Mine requires a little explanation. The way the 
military used to buy their office products was at supply stores 
on military bases across the country. Even the Pentagon, used 
to its own large supply stores. With the company I used to work 
for, I traveled around the country and called on those bases, 
and had large opportunities to sell supplies.
    And then as the process the GSA was using changed, and the 
warehouses started to be eliminated or these stores started to 
close up, and they were buying more of these products from some 
of the big GSA warehouses. Our company was fortunate enough to 
have some GSA contracts to sell supplies to the warehouses, 
which in turn serviced the military bases.
    But since contract, bundling and federal acquisition 
streamlining happened, whole branches of the military are now 
being awarded to one company. The Department of Army is 
negotiating a contract right now, which I mentioned in my 
testimony, for $100 million to service all the Army bases in 
the country. The Department of Navy in San Diego for the last 
four or five years has had a bundled contract where that whole 
Southern California Navy complex is served by one dealer, 
Corporate Express.
    Ms. Millender-McDonald. So you cannot get anything there 
through an RFP?
    Mr. Tucker. No. I walk in and I might as well be selling 
cheese cakes. I mean, they do not want to--and now, as we 
understand, there is this same situation going on with the Air 
Force, and we have been trying to contact Wright-Patterson Air 
Force Base to get some insight on that, and we cannot get the 
rep to return our phone calls.
    Ms. Millender-McDonald. So, in other words, the 
infrastructure that we----
    Chairman Manzullo. Excuse me.
    Ms. Millender-McDonald [continuing]. Put into place for 
small businesses to go after contracts has been absolutely cut 
from under you, and a whole new dynamics has been put into 
place is what you are saying.
    Mr. Tucker. Exactly.
    Chairman Manzullo. Would you yield a second?
    Ms. Millender-McDonald. Yes. Of course, Mr. Chairman.
    Chairman Manzullo. What is the name of the person you are 
trying to call? What is his name?
    Mr. Tucker. Well, I can get----
    Chairman Manzullo. Mr. Ramos said?
    Mr. Ramos. Have him contact me. I will look into it.
    Chairman Manzullo. Thank you. All right?
    Ms. Millender-McDonald. Thank you, Mr. Ramos.
    Chairman Manzullo. Thank you.
    Ms. Millender-McDonald. Thank you, Mr. Chairman.
    Mr. Tucker. Thank you.
    Ms. Millender-McDonald. This is so telling, this is 
absolutely so telling. We tend to think that once we pass 
legislation things are in place. We have a lot to do here, 
folks, so we go on to the next hurtle, not knowing that some of 
these others that we put into place has absolutely been taken 
from under us, and from you.
    And so I am--I do not think I need to go to the other two. 
Mr. Cabrera, I certainly heard about--I heard from you. And it 
is true that you need to be electronically enabled, and yet you 
cannot even get to first base with that.
    Mr. Chairman, I will again ask that we bring every 
department head into accountability here by having them come 
before us to suggest what types of contracts, if any, they are 
awarding to small businesses, and I am very much interested in 
that.
    Again, thank you so much for this hearing. Though I have 
not been here on all of it, I have read little excerpts from 
all of the testimony to see that we are in a big problem. Thank 
you, Mr. Chairman.
    Chairman Manzullo. Thank you. We have asked the GAO to do a 
study as to the contract bundling of Boise-Cascade. That is B-
O-I-S-E dash C-A-S-C-A-D-E, which is sort of a big company, as 
to the efficiency of it.
    And I guess what bothers me is why would the Department of 
Army want a $100 million blanket purchase agreement for office 
supplies. Why cannot they go to the local stores? I mean, this 
is--Mr. Ramos, this is the policy issue. This is where we 
start. It is not a matter of just the big boys being able to 
bid on this and people like Mike Tucker and a few others who 
havenationwide catalogues are able to get into it. But what is 
going on here is this smokes hundreds, if not thousands, of small mom 
and pop stationery stores across the country. For years they supply 
office supplies to the Department of Army, and all of a sudden some 
lazy officer--whatever--procurement officer for a matter of convenience 
says, ``Well, let us just have one big contract.'' And, oh, that is a 
great idea.
    How many procurement office positions are eliminated at the 
Department of Army? I bet none are. I mean, this is a matter--
if this is a matter of saving money, you can take a look at it. 
But there is a policy statement here that contracts for pencils 
and staples and things of that nature, there should not even be 
any consideration for a large contract.
    And what I would like to do, Mr. Ramos, is let us--has this 
contract been let out yet?
    Mike, it has not been let out yet?
    Mr. Tucker. Not that I am aware of.
    Chairman Manzullo. And you are bidding on it?
    Mr. Tucker. Yes, they have had it in their hands for about 
six weeks now, and we have had a little dialogue, a couple of 
technical questions.
    Chairman Manzullo. What I would like to do is I would like 
to write a letter and ask the Department of Army to justify 
before this contract is let out that it is going to be any 
cheaper to have a--now this is a bundle. This is a classic 
bundle, and this is how small people get mistreated in this 
country, because there are what, 17,000 procurement officers at 
DoD? Is there that many? Does anybody know? Is there more? 
More? Does anybody have a guess because I know there are folks 
here from DoD?
    Mr. Ramos. I think it was around 15,000.
    Chairman Manzullo. There are 15,000.
    Ms. Ritter. Fifty-eight thousand, 58,000.
    Chairman Manzullo. Oh, 58,000?
    Mr. Ramos. That is somewhere in terms of the acquisition 
staff broken down.
    Chairman Manzullo. Okay. But in any case, and I think we 
have somebody here from Department of Army? Somebody here from 
Army?
    Mr. Ramos. She just left.
    Chairman Manzullo. She just left. What I would like to do 
is--perhaps this is interfering in the awarding of a contract. 
That is great. We are good at interference in this Committee. 
But I want to see, and I think the taxpayers have a right to 
know. There should be a letter in writing by the Army 
justifying this bungle--bundle--bungle.
    And Nelson, if you would prepare that letter immediately so 
that Mrs. Velazquez--yes.
    [Pause.]
    Chairman Manzullo. All right, but in any case I understand 
where negotiations are, but I just do not think this contract 
should be awarded.
    Ms. Velazquez. Mr. Chairman?
    Chairman Manzullo. Yes.
    Ms. Velazquez. I will propose that we send a letter to 
Secretary Aldridge, and I requested him, when I was questioning 
him, to send to us an analysis of the cost saving that the 
seven mega-contracts will represent.
    Chairman Manzullo. Okay. Well, let us do this then. Let us 
do a separate letter for each contract. That way it is easier 
to get it through the agencies. And I think it is time we come 
to an understanding.
    This committee will not rest, we will not rest, we will 
continue with these hearings. I will do everything I can to 
bust up this contract bundling.
    Now, does anybody know, does it violate some law for this 
Committee to request the Department of Army to make a cost 
justification of the bundled contract? And is the Department of 
Army obligated by law to grant that contract? Can anybody 
answer me that?
    Would you know the answer to that, Mr. Ramos? That is a 
legal question. I do not know if you----
    Mr. Ramos. I would rather defer answering that. I would 
rather find out for you, sir.
    Chairman Manzullo. Okay.
    Mr. Ramos. Because we have been having some discussions 
with the Army on some of these issues, and I would rather 
prefer to get them to respond.
    Chairman Manzullo. I appreciate that very much. So we 
will--Mr. Crowther, if you could prepare that letter. Let us 
start with this one, okay? And we are going to make a statement 
of this committee that we are going to do everything we can to 
break this $100 million contract into as many pieces are there 
are stationery stores that surround every single Army base in 
the country. That is where we are going to start to unbundle. 
And I want, and I am going to instruct the Department of Army 
in a letter, and I want that answered within 10 days, to give a 
cost justification for this contract.
    If that cost justification is not here within 10 days, we 
will have another hearing here, and I will continue these 
hearings until we find out why somebody came up with that 
brilliant idea to bundle the contract to put thousands of small 
businesses out of business in this country.
    So we look forward to working with Mr. Ramos. I remember 
the conversation we had with Deedra Lee. ``Mr. Chairman,'' she 
said, ``there is so much money involved in these contracts that 
we cannot stay on top of them, and we depend upon members of 
Congress to bring these abuses to our attention, so that we can 
move on them.''
    And I just want to again thank you, Mr. Ramos, for coming, 
for bringing your staff, listen to the testimony. I want to 
thank the witnesses for persevering. If anybody here, again, 
has any indication in your course of doing business with the 
federal government, if for some reason you are not getting the 
contracts because of your testimony here, you let me know about 
that immediately.
    Okay, this hearing is adjourned.
    [Whereupon, at 4:30 p.m., the committee was adjourned.]






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