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

      SUGGESTIONS FOR IMPROVEMENTS IN SBA PROGRAMS: VETERANS AND DISASTER
                                  LOANS SALES
    =======================================================================

                                    HEARING

                                   before the

        SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT, AND GOVERNMENT PROGRAMS

                                     of the

                          COMMITTEE ON SMALL BUSINESS
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED SEVENTH CONGRESS

                                 SECOND SESSION

                                   __________

                          WASHINGTON, DC, MAY 21, 2002

                                   __________

                               Serial No. 107-59

                                   __________

             Printed for the use of the Committee on Small Business

                           U. S. GOVERNMENT PRINTING OFFICE
    81-797                          WASHINGTON : 2002
    ___________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800
    Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

                          COMMITTEE ON SMALL BUSINESS

                      DONALD MANZULLO, Illinois, Chairman
    LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
    JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD,
    ROSCOE G. BARTLETT, Maryland             California
    FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
    SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
    STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin
    PATRICK J. TOOMEY, Pennsylvania          Islands
    JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
    JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
    MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
    MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
    DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
    SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
    EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
    FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
    TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
    SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
    BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                         ANIBAL ACEVEDO-VILA, Puerto Rico
                          Doug Thomas, Staff Director
                      Phil Eskeland, Deputy Staff Director
                      Michael Day, Minority Staff Director
                                     ------

        Subcommittee on Workforce, Empowerment, and Government Programs

                      JIM DeMINT, South Carolina, Chairman
    FRANK A. LoBIONDO, New Jersey        JUANITA MILLENDER-McDONALD,
    MICHAEL FERGUSON, New Jersey             California
    FELIX J. GRUCCI, Jr., New York       DANNY K. DAVIS, Illinois
    DARRELL E. ISSA, California          STEPHANIE TUBBS JONES, Ohio
    EDWARD L. SCHROCK, Virginia          CHARLES A. GONZALEZ, Texas
    SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
                                         DONNA M. CHRISTENSEN, Virgin
                                             Islands
                      Nelson Crowther, Professional Staff

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on May 21, 2002.....................................     1

                                   WITNESSES

    Elmore, William, Associate Administrator, Veterans Business
      Development, U.S. Small Business Administration................     5
    Soares, Frank, Chairman, Board of Directors, National Veterans
      Business Development Corporation...............................     6
    Henry, Major General Charles, President & CEO, National Veterans
      Business Development Corporation...............................     8
    Gatewood, Wayne, President & CEO, Quality Support, Inc...........    10
    Lopez, John, President, Association of Service Disabled Veterans.    11
    Eiland, Tony, National Office of Veterans Employment, Veterans of
      Foreign Wars of the United States..............................    12
    Weidman, Rick, Director, Government Relations, Vietnam Veterans
      of America.....................................................    14
    Bew, Ronald, Associate Deputy Administrator For Capital Access,
      U.S. Small Business Administration.............................    31

                                    APPENDIX

    Opening statements:
        DeMint, Hon. Jim.............................................    35
        Millender-McDonald, Hon. Juanita.............................    37
    Prepared statements:
        Elmore, William..............................................    42
        Soares, Frank................................................    49
        Henry, Major General Charles.................................    55
        Gatewood, Wayne..............................................    65
        Lopez, John..................................................    69
        Eiland, Tony.................................................    72
        Weidman, Rick................................................    78
        Bew, Ronald..................................................    85

      SUGGESTIONS FOR IMPROVEMENTS IN SBA PROGRAMS: VETERANS AND DISASTER
                                  LOANS SALES

                                  ----------

                             TUESDAY, MAY 21, 2002

                  House of Representatives,
        Subcommittee on Workforce, Empowerment,
                               and Government Programs,
                                   Committee on Small Business,
                                                        Washington, DC.
        The Subcommittee met, pursuant to call, at 2:05 p.m., in
    Room 2360, Rayburn House Office Building, Hon. Jim DeMint
    [chairman of the Subcommittee] presiding.
        Chairman DeMint. Good afternoon, everyone. Let's get our
    hearing started again.
        Thank you, all of our witnesses, for being here.
        We will probably have a few more members come from the last
    vote. We wanted to get started, get your comments on the
    record.
        I do appreciate everyone being a part of this hearing for
    the Subcommittee on Work Force, Empowerment and Government
    Programs. Very special welcome to some of you who have come
    from very great distances. I appreciate that.
        The Small Business Administration is required by statute to
    provide special consideration to veterans in the administration
    of its programs. There have been various complaints in the past
    that SBA and other agencies were not addressing the needs of
    veterans, especially when it comes to starting, financing and
    growing small business. This hearing will provide a forum to
    evaluate the performance of SBA and the National Veterans
    Business Development Corporation.
        The Corporation was created by Public Law 106-50 and is an
    example of how this Committee can work in a bipartisan effort
    to help veterans and small businesses in this country. I am
    happy to say that special emphasis is given in the law to
    providing entrepreneurial and procurement assistance to small
    businesses owned and controlled by service disabled veterans.
        Also, this hearing will provide an opportunity to entertain
    comments concerning H.R. 3263, a bill introduced by Congressman
    Pascrell, a member of this Committee.
        A second panel will provide information concerning the sale
    of disaster loans commercially.
        Basic to the hearing is remembering our veterans and the
    sacrifices that they made for this Nation throughout our past.
    Memorial Day is a day of remembrance. I can assure you that we
    in Congress will not forget you.
        I look forward to a lively and informative discussion of
    the issues presented. Again, welcome to this hearing; and now I
    recognize the ranking member for her opening statement.
        Ms. Millender-McDonald. Thank you, Mr. Chairman.
        I, too, would like to apologize to the gentlemen who sit
    before us today who waited patiently for us to do the people's
    business on the floor. We thank you so much for your being
    here; and we thank you, Mr. Chairman, for convening this very
    needed hearing.
        Today, this Subcommittee meets in its oversight capacity to
    review two important programs and their effect on our Nation's
    entrepreneurs. Memorial Day is a time when we as a Nation take
    a break from our routine to remember, honor and thank those who
    have made the ultimate sacrifice for the freedom we enjoy.
    Therefore, it is fitting that we review the programs that work
    on behalf of our veterans who have taken the next step toward
    the American dream of starting a small business.
        Today more than 5.5 million veterans are small business
    owners. These men and women are facing new challenges. Their
    new battlefield is the American economy. To assist these
    veterans our Committee passed the Veterans Entrepreneurship and
    Small Business Development Act of 1999. This Act created the
    National Veterans Business Development Corporation to improve
    veterans' access to financial and technical assistance. This
    program is also meant to give special assistance to service
    disabled veterans. While it holds great promise in aiding a
    whole new class of entrepreneurs, its full potential has yet to
    be realized.
        The other program that we will review today is the Disaster
    Loan Program. While SBA has many successful programs, the
    Disaster Loan Program is the pinnacle. The last thing going
    through anyone's mind in the wake of a disaster should be, how
    I will ever rebuild? This program makes rebuilding a reality.
    Through the Disaster Loan Program, small businesses, homeowners
    and nonprofits can receive low-cost loans, enabling them to
    rebuild and restart their lives.
        Rebuilding from the tragic events of September 11th would
    have been impossible without the assistance of the Disaster
    Loan Program. SBA had people on the ground in New York and
    Virginia helping small businesses to start over as the fires
    still burned, allowing America to begin the healing process.
        On October 22nd, the administration took the extraordinary
    step to open the EIDIL program nationwide, ensuring recovery of
    those small businesses in the travel, air and tourism industry
    affected by the events. We should commend the administration
    and, more importantly, the SBA employees for their tireless
    work.
        In today's hearing we will look at what happens to those
    small businesses once they receive an SBA disaster loan.
    Assessing the small business recovery process to ensure their
    continued success is as important as the distribution of the
    loan in the first place. There needs to be flexibility in these
    companies meeting the conditions of the loan.
        By way of background, problems began in the late 1990s when
    SBA started selling loans to private agencies. Once the loan
    moved from SBA to the private sector, the level of small
    business assistance decreased dramatically, removing all
    flexibility. Often, these private-sector institutions engaged
    in an overly aggressive practice of the collection of those
    loans, sometimes to the point of harassment.
        While it is clear that these companies should repay their
    loans in a timely fashion, it is questionable if receiving the
    money on time for the lender is worth the bankruptcy and
    harassment those businesses experienced. It was this concern
    that led the Democrats on this Committee to introduce H.R.
    3011, the Small Business Emergency Relief Act, that, in
    addition to providing greater flexibility in the Disaster Loan
    Program, would also prohibit the sales of these loans.
        This issue was raised during our markup of H.R. 1499, the
    American Small Business Emergency Relief and Recovery Act of
    2001, when an amendment prohibiting the resale of those loans
    were offered. Today's hearing will explore this policy and look
    for ways to ensure small businesses will not face a second
    round of devastation after a disaster at the hands of
    creditors.
        Mr. Chairman, I again want to thank you for holding today's
    hearing and allowing us to investigate these very critical and
    timely issues facing our Nation's small business. I would like
    to thank the witnesses for testifying today and look forward to
    hearing their testimony. Thank you.
        Chairman DeMint. I thank the gentlelady and call on Mr.
    Pascrell, who would like to make some comments about his bill.
        Mr. Pascrell. Thank you, Mr. Chairman.
        I would like to just thank you and Ranking Member
    Millender-McDonald for holding this important hearing; and, Mr.
    Chairman, you have assembled quite a blue ribbon panel. I don't
    recall us ever having, in the larger Committee or any of the
    Subcommittees, without exception, an as outstanding panel. I
    commend you for that.
        We are going to focus on two different issues, Mr.
    Chairman, if I may, members of the Small Business Committee
    find practically relevant. That is, veterans assistance and
    disaster loan asset sales.
        Veterans issues have been a priority for a long time. As a
    former veteran myself, I know veterans have sacrificed a great
    deal to safeguard America's freedoms in our future. Just think
    about all of the men and women who are currently deployed in
    Afghanistan as we sit here today.
        I consider my own service in the Army as a life-building
    experience which has given me the necessary perspective when
    considering issues important to those who have and continue to
    serve this great Nation.
        I introduced H.R. 3263, the Veterans Small Business Relief
    Act. My legislation is pretty simple, Mr. Chairman. It would
    provide that servicemen and women who have left the military
    within 5 years would be exempt from paying any guarantee fee
    for using the 7(a) loan program, probably our most significant
    program in the Small Business Administration.
        We all know that the 7(a) loan program is one of the SBA's
    primary lending programs. It provides loans to small businesses
    that are unable to secure financing on reasonable terms through
    normal lending channels.
        However, to offset the cost of the program, SBA charges
    lenders a guarantee and a servicing fee for each loan approved.
    These fees are passed to the borrower. Currently, when a loan
    amount is $150,000 or less, the fee is 2 percent of the
    guaranteed portion. For loans between 150 and $700,000, a 3
    percent guarantee fee is charged; and for loans greater than
    700,000, a 3.5 percent guarantee fee is charged.
        While 7(a) loans are often critical to business start-ups,
    charging a fee effectively levies a tax on businesses at a time
    when they can ill afford to pay. The salaries of those in our
    Armed Forces are often less than sufficient to obtain a loan
    through normal lending channels. For example, some sergeants in
    the Air Force are making around $1,500 a month.
        Let's face it. No one signs up with Uncle Sam to become
    rich. We are indebted to those who serve, and I think my
    legislation is a small gesture that we on this Committee can
    support.
        We should permanently change the 7(a) loan program to
    ensure that recent veterans do not have to pay fees. We should
    make sure that veterans who return to civilian life, want to
    start a business, do not have to pay fees now or potentially
    increased fees in the future.
        Let's be real. The fee waiver for veterans will not bust
    the bank.
        The Congressional Budget Office has stated that the impact
    of this legislation would be, quote, unquote, absolutely
    minimal. That is different.
        In my State of New Jersey, there will be an estimated 4,000
    people returning home from active duty this year. I just think
    that we should help them any way we can. I am always up for
    suggestions not just for my legislation but for anything we
    will discuss here today; and I thank you again, Mr. Chairman,
    sincerely for bringing us together on these critical issues for
    our vets. Thank you.
        Chairman DeMint. Thank you, Mr. Pascrell.
        Now, I would like to introduce our panel, if there are not
    any additional opening remarks. I don't believe there are.
        Starting to my left, Mr. William Elmore, Associate
    Administrator, Veterans Business Development, U.S. Small
    Business Administration; Mr. Frank Soares, Chairman, Board of
    Directors, National Veterans Business Development Corporation;
    Major General Charles Henry, U.S. Army, Retired, President and
    CEO of the National Veterans Business Development Corporation;
    Mr. John Lopez, President, Association of Service Disabled
    Veterans; Mr. Tony Eiland, National Office of Veterans
    Employment, Veterans of Foreign Wars of the United States; and
    Mr. Rick Weidman, Director of Government Relations, Vietnam
    Veterans of America.
        And I think I missed Mr. Wayne Gatewood, President and CEO
    of Quality Support Incorporated.
        Now I would like to ask unanimous consent that all
    testimony will be made part of the record, and each witness
    will have 5 minutes to explain your testimony to us as well as
    to----
        We will keep those lights going on green when you are in
    good shape. When you see the yellow, you know you have only got
    a few seconds left. When it is red, we are going to start
    encouraging you to stop.
        Okay. Mr. Elmore, we will begin with you.

         STATEMENT OF THE HONORABLE WILLIAM ELMORE, ASSOCIATE
       ADMINISTRATOR, VETERANS BUSINESS DEVELOPMENT, U.S. SMALL
                        BUSINESS ADMINISTRATION

        Mr. Elmore. Thank you.
        Chairman DeMint, Ranking Member Millender-McDonald and
    members of the Subcommittee, I am William Elmore, Associate
    Administrator for Veterans Business Development at the U.S.
    Small Business Administration. On behalf of Administrator
    Barreto, I thank you for this opportunity to discuss SBA's
    accomplishments and commitment to better serving our Nation's
    veterans by helping them to start, run and grow their own small
    businesses.
        We are not only committed to increasing veterans
    participation in our programs but also to ensuring that we
    achieve better results. It is fitting that we meet today, just
    6 days before our Nation celebrates Memorial Day, to discuss
    SBA's support for our veterans.
        It was in 1866 that Henry Wells, a small business owner in
    Waterloo, New York, suggested that all the shops in town close
    for one day to honor the soldiers who were buried in the
    Waterloo Cemetery. One hundred years later, Congress and
    President Lyndon Johnson declared Waterloo, New York, the
    birthplace of Memorial Day.
        I can assure you that we are committed to improving
    veterans' access to all of our financial, technical and
    management assistance programs. SBA seeks to reach out and
    serve all of America's 25 million small businesses, including
    those owned by veterans. Though veterans are eligible and do
    use all of SBA's variety of finance, technical assistance and
    contracting programs, the administration wants to ensure active
    veteran participation in all of SBA's programs.
        In an effort to better serve our customers, including
    veterans, we have been reviewing theeffectiveness and, where
    needed, modifying all of our programs in an effort to make sure they
    keep pace with market trends, remain relevant and meet our customer's
    needs.
        There are many aspects to this much-needed effort,
    including restructuring and modernizing the agency's delivery
    system to best serve clients in the 21st century. I started
    these efforts by personally visiting with each program manager
    in the agency to discuss ways in which their particular
    programs could increase veteran participation and better serve
    the veterans who do use their programs.
        We have provided training to and enhanced the
    responsibilities of the Veterans Business Development Officers
    stationed at each SBA district office. These are the people on
    our front line who personally meet with veterans seeking
    business assistance and provide referrals to our resource
    partners.
        Additionally, SBA designated a full-time veterans
    coordinator in our Office of Government contracting and
    enhanced that office's web page to better assist veterans with
    procurement.
        We have also taken aggressive steps to partner with other
    Federal agencies and the National Veterans Business Development
    Corporation to increase resources available to veteran
    entrepreneurs. This past year we asked the Corporation and the
    Departments of Veterans Affairs and Labor to participate in our
    National Conference for Veterans Business Development Officers;
    and, in turn, DOL has asked us to make a presentation on SBA's
    veterans programs at their National Conference.
        We have also entered into discussions with both DVA and DOL
    to explore efforts to coordinate small business assistance for
    service disabled veterans participating in DVA vocational
    rehabilitation and to enhance outreach and training for DOL
    field staff regarding entrepreneurship opportunities for
    veterans. Additionally, we have worked with the Corporation on
    all of their efforts thus far and will continue to do so.
        In fiscal year 2002, SBA renewed our cooperative agreements
    with our Veterans Business Outreach Program Centers. We are
    pleased that the number of veterans served by this program
    doubled in fiscal year 2001.
        Also, in fiscal year 2001, SBA conducted special veterans
    and service disabled veteran outreach events through seven SBA
    district offices. In fiscal year 2002, SBA is increasing this
    number to a minimum of 17 district offices.
        SBA's Office of Government Contracting included veterans'
    procurement information in approximately 400 procurement
    conferences in fiscal year 2001. Every agency, including SBA,
    has been given a statutory 3 percent service disabled veteran
    Federal procurement goal for 2002. To help meet this goal,
    training was provided to all SBA government contracting staff.
    Additionally, government contracting area directors have been
    tasked to develop ongoing programs to emphasize, publicize and
    promote the 3 percent procurement goal for service disabled
    veterans.
        Before I conclude today, I would like to report some
    important information to you on the Advisory Committee on
    Veterans Business Affairs. After reviewing the backgrounds of
    over 50 highly qualified candidates, there are now seven
    candidates awaiting final clearance to serve on the Advisory
    Committee on Veterans Business Affairs.
        This concludes my testimony. Once again, thank you for this
    opportunity to discuss SBA's business development program for
    veterans. I am pleased to answer any questions you may have.
        Chairman DeMint. Thank you, Mr. Elmore.
        [Mr. Elmore's statement may be found in appendix.]
        Chairman DeMint. Mr. Soares.

       STATEMENT OF FRANK SOARES, CHAIRMAN, BOARD OF DIRECTORS,
           NATIONAL VETERANS BUSINESS DEVELOPMENT CORPORATION

        Mr. Soares. Mr. Chairman, distinguished members of the
    Subcommittee, it is a pleasure to speak before you this
    afternoon about our progress in servicing the service disabled
    veterans through The Veterans Corporation. I was privileged to
    receive one of the initial presidential appointments to our
    Board of Directors in October of 2000. For almost a year I have
    served as its chairman.
        Although Public Law 106-50 was passed in August of 1999, I
    think it was more accurate to date the Corporation's progress
    from the date it received its initial funding in 2001. Once a
    temporary staff was hired, we began an extensive search for the
    strong leadership necessary to meet and exceed the law's
    mandates to expand and improve access to technical assistance
    regarding the entrepreneurship for the Nation's veterans and to
    assist veterans, including service disabled veterans, with the
    formation and expansion of small business concerns by working
    with existing organizations.
        With that as our mission statement, we conducted a
    nationwide search identifying six high-quality, top government
    and military leaders that had the experience, skills and
    abilities to make The Veterans Corporation successful.
        We carefully considered each candidate and selected Major
    General Chuck Henry. He is absolutely the right choice to
    ensure the Corporation's success. His distinguished service to
    our Nation combined with his shrewd business sense and strong
    leadership will give our veterans a real champion they so
    richly deserve. His efforts during the short period he has
    served as the Corporation's CEO and president have been
    remarkable for the significant progress he has made in creating
    a viable business operation devoted to accomplishing the
    mission that you have given us.
        To achieve our mission, the Board of Directors and I have
    created both a vision and goals for the Corporation. Our vision
    is that The Veterans Corporation will be the premier
    organization in the world assisting American veterans,
    including service disabled veterans, in creating and expanding
    their entrepreneurial endeavors in veteran-owned small business
    enterprises by providing access to knowledge, tools and
    resources necessary for success.
        We have numerous goals which I won't recite here but I did
    include in my written testimony.
        One of my goals is to establish and oversee the
    Professional Service Advisory Board, PCAB, which is provided
    for in Public Law 106-50. The Board is intended to create
    uniform guidelines and standards for the professional
    certification of the members of the Armed Forces. This will aid
    in their efficient and orderly transition to civilian
    occupations and professions and remove potential barriers in
    the areas of licensure and certification.
        This is an extremely difficult area that involves a complex
    web of certification standards and barriers that are nationwide
    at the Federal, State and local levels. At each level there is
    a multitude of organizations and interest groups involved in
    testing, licensing and certifying a vast array of civilian
    positions from welders to medical technicians.
        Seventy percent of the Army's enlisted military
    occupational specialties have civilian job equivalents that are
    subject to licensure or certification. I am sure the other
    services have similar statistics. So you can quickly see the
    challenges the Board faces in researching, identifying and,most
    importantly, creating and attempting to implement nationwide standards
    that allow our service members to transition their skills smoothly into
    a level obtained by their civilian counterparts.
        We will attempt to fund this effort through fund-raising
    but question whether this approach will work. The President of
    the United States appointed our Board of Directors. They were
    selected on the basis of their personal achievements and for
    the knowledge and expertise they provide our organization and
    our partners. All of our board members are also veterans.
        General Henry will detail the bold initiatives he has taken
    with the creation of several strategic business units to
    generate both services for the veterans and revenue for the
    Corporation. Those business units are just the beginning of
    many more complex business arrangement to support our veterans.
        I strongly suggest that future nominations to the Board be
    individuals who have a solid background in veteran service
    organizations and/or considerable strong business experience
    that can help guide the Corporation during this dynamic and
    difficult period of growth to fiscal independence.
        I thank you for the opportunity to speak before you today,
    and I personally wish to thank the Subcommittee members and
    their staffs who were instrumental in the creation of the
    successful passage of this legislation into law to help
    veterans establish and expand small businesses. It is good for
    the Nation and well-deserved assistance for our veterans.
        Thank you. I am prepared to answer any questions.
        Chairman DeMint. Thank you, Mr. Soares.
        [Mr. Soares's statement may be found in appendix.]
        Chairman DeMint. Major General Henry.

      STATEMENT OF MAJOR GENERAL CHARLES R. HENRY, U.S.A. (RET.),
       PRESIDENT AND CEO, NATIONAL VETERANS BUSINESS DEVELOPMENT
                              CORPORATION

        General Henry. Mr. Chairman, distinguished members of the
    Subcommittee, I want to thank you for the invitation to come
    and testify today.
        I want to also thank you for your outstanding legislation,
    Public Law 106-50. That is what brings us together. It honors
    our veterans by assisting them. It is a noble effort. It is
    deeply appreciated.
        Let me tell you a little bit, of what we have accomplished
    over the past 200 days at The Veterans Corporation. More
    detailed information is in my written testimony which is
    submitted, but I will try to summarize it, with your
    permission, Mr. Chairman.
        The law gives us five goals. One is to increase business
    opportunities for veterans and service disabled veterans. The
    second one is to raise matching funds, develop information
    centers, privatize the Corporation, get it so that it is
    successful on its own, and create the certification board for
    standards.
        Mr. Soares has spoken to you about the certification
    standards, but what I would like to do is to tell you that The
    Veterans Corporation has established itself as an umbrella for
    business development operations. Below the line we have created
    strategic business units, and we have created four of those.
    The first one is a venture capital fund called the Veterans
    Venture Capital Fund, and through the help of Mr. Elmore it is
    working its way through the SBA. We envision this to be a $120
    million venture capital fund of which The Veterans Corporation
    will have a 10 percent carried interest, 10 percent stake, if
    you will, and that will provide us the opportunity to make
    investments to veteran-owned businesses.
        The second one is an electronic marketplace for veterans
    and service disabled veterans' businesses who wish to buy and
    sell. This marketplace is operated with our strategic business
    partner eScout of Kansas City. It is up and running. It is in
    its very infancy at this point, but we have 26,000, not all
    veteran businesses, on it. Our goal is to have over 1,000
    veteran businesses posted on the electronic marketplace by the
    end of this fiscal year. This allows veterans to go from
    regional to national in scope, overnight.
        The electronic marketplace is dynamic. It is growing very
    fast. $5 billion a month is being consumed within the Internet
    marketplace as we speak.
        The third is access to capital. To provide access to
    capital, we have established relationships with banks, and we
    have two of those established to provide micro loans to
    veterans. Our goal is to have, within the next 18 months, the
    entire country covered with banks that will make loans to
    veterans, speed up the process, if you will.
        The last one is providing training for business owners with
    the Kaufman Foundation out of Kansas City, a very respected
    entrepreneurial organization. They have provided us with Entre-
    World, which is a respected web site to tell business owners
    how to deal with businesses, how to create their business
    plans, how to do the intricacies of building and running their
    own businesses.
        Additionally, the Kaufman Foundation has given The Veterans
    Corporation Fast Trac, which is a program of training. The
    statistics say that, for those who have taken it, 70 percent
    are still in business 5 years later.
        Wrapped around those two combinations we feel that we can
    provide a delivery of services that will be second to none for
    veterans in building their corporations.
        Matching funds. With the help of the Kaufman Foundation and
    with the help of pro bono work from legal services and some
    others, we report today that we have met our $2 million in
    matching funds for this fiscal year; and we project that that
    will be ongoing in the out years.
        Our efforts to privatize are making good progress. I have
    in the past 2 weeks received commitments for $550,000 in cash
    from two sources to date. Our direct mailing was launched last
    week. Our business will ramp to meet the revenue goals.
        We are now telling the story, and that story is good. We
    were featured in an article in the Chicago Tribune's Small
    Business Section. We have been reported in the American Banker.
    CBS Marketwatch, Dallas News, NBC, and Kipplinger. AOL Time
    Warner has offered us public service spots. We will shoot those
    next week. Saturday, I will be on a veteran radio talk show to
    be broadcasted in Hawaii, talking about veterans in businesses;
    and on Sunday I will be speaking with Secretary Principi at
    Rolling Thunder.
        Sir, my time is up. It is a real pleasure to come. I think
    that we are on a marathon, not a sprint. We are building the
    company around two principles: Build a solid, self-sufficient
    company on business principles and provide for the delivery of
    quality services to the veteran community.
        Subject to your questions, sir, I stand by.
        Chairman DeMint. Thank you, General Henry.
        [General Henry's statement may be found in appendix.]
        Chairman DeMint. Mr. Gatewood.

    STATEMENT OF WAYNE M. GATEWOOD, JR., PRESIDENT AND CEO, QUALITY
                             SUPPORT, INC.

        Mr. Gatewood. Good afternoon, Mr. Chairman and
    distinguished Subcommittee members.
        First of all, I am proud to be here. I am a retired Marine
    Master Sergeant who served 21 years in the Marine Corps,
    retired 15 years ago, and I receive a 20 percent disability
    from the Veterans Administration. This is what America is all
    about. I am just so proud to be here before you. Thank you so
    much.
        For the past 12 years I have owned and operated Quality
    Support, Inc., starting the business in my home with $600.
    Today Quality Support employs nearly 100 people. It was largely
    because of the SBA 8(a) program that Quality Support developed
    as a successful firm, and I thank the SBA for the opportunity
    to have been a member of the 8(a) Business Development Program.
    It is a wonderful program.
        I was very pleased to see the signing of Public Law 106-50.
    Unfortunately, I personally do not believe much progress has
    been made since the signing of this law.
        The National Veterans Business Development Corporation has
    yet to compile a concise database of veteran- and disabled-
    veteran-owned business. If the Corporation does not know who we
    are, where we are and what we do, there is little chance of
    veteran-owned firms receiving mandated assistance and guidance.
        I have seen little, if any, evidence of interaction between
    the Corporation and the average veteran-owned firm such as my
    own. Since the signing of Public Law 106-50, my firm has yet to
    be invited to any type of corporation gathering, nor have I
    received mailings that outline progress made by the corporation
    and/or discuss current services and/or opportunities available
    to my firm.
        The law requires an Advisory Committee on Veterans Business
    Affairs be established not later than 90 days after the date of
    the enactment of the Act. The duties of this Committee are very
    important, and this Committee is absolutely essential to the
    success of Public Law 106-50. However, it has been 2 and a half
    years since the signing of the Act, and the Advisory Committee
    has yet to be established.
        The law states government-wide goals for participation by
    small business concerns owned and controlled by service
    disabled veterans shall be established at not less than 3
    percent of the total value of all prime contract and
    subcontract awards for each fiscal year. Again, I have seen
    little, if any, progress in this area and do not believe any
    government agency is making the 3 percent subcontracting goal.
        I have some recommendations:
        Immediately establish the Advisory Committee on Veterans
    Business Affairs as required by law.
        Ensure the inclusion of all veteran-owned and service
    disabled veteran-owned firms in a comprehensive and current
    database to facilitate actions consistent with the spirit and
    intent of the law.
        The Corporation should identify prime contractors who are
    seeking to do business with veteran-owned firms, and a listing
    of these prime contractors should be made available to all
    veteran-owned business.
        Also, bring veteran-owned firms together with prime
    contractors and government procurement officials so these
    groups can discuss potential contracting opportunities.
        Make an assessment of the policies and procedures now in
    place at Federal Government agencies and ensure there is an
    active promotion of the 3 percent subcontracting procurement
    goal.
        Subsequent to contract award, assess and monitor the
    subcontracting progress or lack thereof made by Federal
    Government agencies and their prime contractors. Those prime
    contractors that fail to make their goals should be precluded
    from participating in further Federal Government procurements
    until such time as they have rectified their deficiencies.
        The SBA Corporation Advisory Committee and the Department
    of Veterans Affairs need to work closely with one another to
    ensure they are all working for the same goals under agreed-
    upon procedures and that turf battles do not take place at the
    expense of the American military veterans.
        Also, illegitimate, unofficial, for-profit organizations
    that promote so-called veterans rights need to be identified
    and our veterans made aware of and warned of their existence.
        Finally, and most importantly to me, sir, the Federal
    Acquisition Regulations, FAR, and similar regulations need to
    be revised to authorize set-aside procurement opportunities for
    veteran and service disabled veteran-owned firms.
        Federal law currently precludes contracting officers from
    offering veterans and disabled veteran-owned firms the same
    set-aside advantages offered socioeconomic groups, hub zone
    businesses and, to some degree, women-owned businesses. Unless
    procurement regulations are modified to include a degree of
    set-aside authority for veteran and service disabled veteran-
    owned firms, it will be extremely difficult if not impossible
    for government contracting officials to reach specified goals.
        In closing, I would like to say that Public Law 106-50 can
    only be effective when it is taken seriously by all concerned.
    Laws without clear accountability do very little to motivate
    people into action and to achieving desired results. Results
    need to be continually assessed and measured, and people in
    positions of authority and applicable Federal Government
    agencies need to be held accountable.
        Thank you, sir.
        Chairman DeMint. Thank you, Mr. Gatewood.
        [Mr. Gatewood's statement may be found in appendix.]
        Chairman DeMint. Mr. Lopez.

      STATEMENT OF JOHN LOPEZ, PRESIDENT, ASSOCIATION OF SERVICE
                           DISABLED VETERANS

        Mr. Lopez. Good afternoon, members and Chairman DeMint.
        Without objection, I shall summarize my testimony and
    submit written testimony for the record.
        I have focused my testimony on the provisions for Federal
    procurement participation by businesses owned and controlled by
    service disabled veterans.
        Although the United States Congress in its Public Law 106-
    50 findings and legislative language stated clearly that the
    intent of the Congress was to ``increase the participation of
    service disabled veterans businesses to a goal of not less than
    3 percent of the total value of all prime contracts and
    subcontract awards for each fiscal year,'' this has not
    happened. In fact, there is little credible evidence that the
    intent of the U.S. Congress was even considered. It is now
    nearly 3 years since the enactment of Public Law 106-50, and
    available data show little progress towards the goal. There is
    only the traditional bureaucratic mumbling regarding coming
    efforts and other priorities.
        America's veterans are dying at the rate of 1,200 per day,
    and the mounting frustration with broken promises and
    bureaucratic manipulation is becoming a major disgrace and
    embarrassment of our Nation's government, because
    rehabilitation assistance delayed and manipulated is
    rehabilitation assistance denied.
        The United States Congress must take action to provide to
    service disabled veterans businesses those mandatory
    requirements afforded to other special groups. The denial of
    equal assistance to those who sacrificed and enabled prosperity
    for all our citizens is an unmitigated disgrace and an
    unadulterated abuse.
        I would be pleased to answer any of your questions.
        Chairman DeMint. Thank you, Mr. Lopez.
        [Mr. Lopez's statement may be found in appendix.]
        Chairman DeMint. Mr. Eiland.

         STATEMENT OF TONY EILAND, NATIONAL OFFICE OF VETERANS
       EMPLOYMENT, VETERANS OF FOREIGN WARS OF THE UNITED STATES

        Mr. Eiland. Thank you, Mr. Chairman, ranking member and
    members of the Subcommittee. Thank you, Mr. Chairman, for
    inviting the Veterans of Foreign Wars here today to testify
    before the Subcommittee to comment on H.R. 3263, the Veterans
    Small Business Relief Act of 2001, and to express our
    evaluation of the Small Business Administration's programs and
    services for veterans as well as The Veterans Corporation.
        Mr. Chairman, concerning our views on H.R. 3263, the
    Veterans Small Business Relief Act of 2001, we support its
    timely enactment. We see it as a welcome measure to ensure that
    disabled veterans small business owners have an additional
    opportunity towards success in today's challenging economy.
        Mr. Chairman, when assessing and analyzing the role the SBA
    has played with assisting future as well as present veteran
    entrepreneurs, we must look at the SBA with a proper
    perspective and understand exactly what it is we as veterans
    want from them. Then we must define how we expect to hold them
    accountable for what they can control and measure those things
    that can be measured and reasonably obtained.
        We see the SBA is making headway in this process through a
    cooperative effort with both the Department of Veterans
    Affairs' Center for Veterans Enterprise and with The Veterans
    Corporation.
        The VFW has enjoyed a productive relationship with the
    Assistant Administrator for Veterans Affairs, William Elmore,
    and his staff within the SBA's Office of Business Development.
    Two staffers primarily have stood out, Mr. Ajoy Sinha and Mrs.
    Audrey Moore. They have both been very helpful providing direct
    personal assistance to veterans from our organization on a one-
    to-one basis by offering a strong hands-on approach.
        We have had members directly contact our office commenting
    on the superior service and assistance they were provided in
    either developing particular details for their business plans
    or simply looking for specific information to answer unique
    questions.
        Another item that deserves to be mentioned is the U.S.
    Business Advisor Website that has been sponsored by the SBA. It
    has been an effective tool in providing general business
    assistance that promotes small business within our membership
    and have received free assistance in expanding their business
    and removing obstacles that could lead to potential disasters.
        While the SBA has performed an adequate job with the
    funding they have been provided with, there is still more that
    can and must be done. Unfortunately, their ability is severely
    limited because of minimum funding levels that have been placed
    upon them by the Administrator. This does have a direct impact
    on the scope and quality of the veterans' programs and services
    that can be of use for outreach, be it either through mailings,
    promotional campaigns or seminars.
        Another critique is the involvement of the SBA with the
    veterans groups themselves. For example, our relationship with
    the Office of Veterans Business Development has improved. The
    VFW remembers the promise was made about wanting to expand the
    relationship with the Veterans Service Organizations.
    Unfortunately, we have only seen limited examples outside of
    the Office of Veterans Business Development. We have yet to
    meet with the Administrator, let alone speak with him directly
    to voice our desires and concerns.
        In addition, we are also disappointed in how long it has
    taken the Administrator to complete the SBA Advisory Committee
    and seeming overall lack of overall commitment towards our
    concerns for disabled veterans as a whole. The VFW is very
    disappointed that this issue has not been treated with the
    sense of urgency that it deserves. While we understand that we
    are not the only programs that the SBA oversees, we still
    desire to be treated with a balanced, even-handed approach.
        At this critical point in time, veterans' programs are
    essentially here to serve as a good-faith gesture between the
    government and the people whom they serve to be guaranteed the
    opportunity to maximize any small Business Development Program.
    The VFW does not view the programs of the SBA as simple
    entitlements to be given out but as investment in the long-term
    economic growth and stability of the U.S. Economy.
        We want to be completely frank. The VFW does not want a
    give-away program mentality or anything for that matter that
    would dilute the credibility of the veteran or disabled veteran
    business owner. Whether black, white, Hispanic or Asian, male
    or female, service disabled or economically impoverished,
    veterans have earned, through their dedicated service
    commitment to their country, the right to be offered an
    opportunity to compete on an equal playing field with every
    other group that has been provided a service by the SBA for
    long-term solutions for establishing business ventures.
        Mr. Chairman, we believe that the SBA can only be
    successful in its mission of assisting veterans if it has the
    following components: the full support of the Congress through
    maintaining strict implementation of existing laws and
    provisions that will enable the SBA to be effective and
    adequate funding of the Office of Veteran Business Development.
        There also has to be a clear understanding of where the
    veteran community belongs within SBA. Be it through a realistic
    goal-setting measurement that is obtainable, taking into
    account the service disabled veterans' individual situations or
    creating a Small Disadvantaged Business, an SDB, status for a
    disabled veteran-owned business that will allow them to compete
    on equal ground within the SBA as a disadvantaged business
    enterprises is a must.
        Mr. Chairman, the opinion of the VFW is that The Veterans
    Corporation, in its present form, has only been in effect for
    approximately 200 days, not enough time to make a credible
    assessment of their progress. Yet the VFW does see the
    potential for The Veterans Corporation and are committed to
    assisting and working with them to achieve a source of answers
    for our veterans' small business questions and also putting
    them in a position to find sources of financial revenue.
        We understand that anything worth having is worth setting
    up correctly from the beginning. Mr. Chairman, we need to
    maintain a focus that everything we are doing here today is for
    the one purpose and one purpose only, to assist veterans,
    especially disabled veterans, establishsuccessful, independent
    small businesses and become as self-sufficient as possible to add to
    the continuing economic growth of our country.
        Mr. Chairman, this concludes my statement. I would be
    pleased to answer any questions you or the members of the
    Subcommittee might have at this time.
        Chairman DeMint. Thank you, Mr. Eiland.
        [Mr. Eiland's statement may be found in appendix.]
        Chairman DeMint. Mr. Weidman.

      STATEMENT OF RICK WEIDMAN, DIRECTOR, GOVERNMENT RELATIONS,
                      VIETNAM VETERANS OF AMERICA

        Mr. Weidman. Thank you very much, Mr. Chairman. I would
    like to echo the sentiments of my colleagues in tremendous
    thanks to this Committee. This is where Public Law 106-50
    began, with this Committee; and we thank you for your oversight
    hearings, two of which were held last year and, of course, this
    hearing today.
        I would point out also that the impetus for the original
    legislation came from Mr. Roscoe Bartlett's Committee, a joint
    hearing he had with the House Veterans Committee, which was a
    bipartisan hearing. That got the ball rolling. So we owe you a
    great debt, sir.
        Now we have to make it a reality. The struggle over
    regulations went on for over a year before we got some
    regulations that were substantially correct, published in early
    January of 2002 after several false starts. It was the kind of
    woeful ignorance that really cannot be explained, only by
    incompetence, although I keep in my office the old saying that
    ``never attribute to malice in Washington that which can be
    explained by sloth and by incompetence.'' .
        But finally we do have regs that are fairly accurate, but
    we don't have an impetus from the executive branch overall,
    from the President, from OMB, and from the Cabinet level in
    order to make sure that the 3 percent procurement goal happens.
        Secondly, in regard to a number of comments that were
    already offered today, the Small Business Development
    Corporation or the National Veterans Business Development
    Corporation, also known as The Veteran Corporation, was created
    to fill in some blanks and not to do everything that SBA with
    its almost billion dollar budget is doing.
        Public Law 106-50, we would refer every single employee of
    the Small Business Administration back to the black letter law;
    and I would refer all of the distinguished members who have
    made it here today and your staff back to the black letter law,
    which says that veterans, particularly disabled veterans,
    service-connected disabled veterans shall be given priority and
    given a high status within every single program operated by the
    Small Business Administration.
        In fact, almost no programs at the SBA have revamped as a
    result of this law which took effect immediately and was
    enacted on August 17th of 1999. In fact, it changes everything
    right throughout the agency, or it is supposed to. That is
    clear that that is the congressional intent, not just from the
    letter--black letter law but also from the Committee report
    from the House that went forward with it.
        So we would ask the Committee to look carefully at that and
    to urge the new Administrator, Mr. Barreto, to issue an
    administrator's order and regulations, where necessary, in
    order to bring the pattern, practice and policy of SBA into
    accordance with what is in fact black letter law under Public
    Law 106-50.
        I would also just commend many of the fine activities that
    have happened at SBA. Many of the activities are, in fact, well
    done; and the only problem we have from the veterans'
    community, the 24 million veterans in this country and those
    who are disabled and their families, is that our folks are left
    out if they identify as a vet. And I think that that is just
    the key to look at throughout this thing.
        We have gotten very good cooperation, I might add, and
    tremendous leadership out of the new small business advocate.
    Mr. Sullivan has met with us and is setting up a series of
    seminars and roundtables with the Task Force on Veterans
    Entrepreneurship over the next year and a half. We are
    proceeding on that and will keep the Committee posted, sir.
        There are a number of things that we would ask you for.
        Firstly is we have not received a single official report
    since August of 1999 which was mandated in the law.
        Secondly, the study that was the mandated in the fall of
    1997, SBA has been keeping in camera ever since that time. It
    was formerly delivered to the agency in the fall of 1998, and
    we would ask that the Committee demand that it be turned over
    to the Congress. It was a major study of veterans, a $400,000
    study which has still not been supplied to the Hill nor made
    public.
        Last, but by no means least, in that regard there is a
    study that is under way now that we urge be brought forth and
    the last two annual reports of SBA.
        I have attached as an attachment to my statement, Mr.
    Chairman, a list that is the beginning of legislative goals. A
    task force which consists of all of the major veterans
    organizations participating in one way or another in the Task
    Force on Veterans Entrepreneurship will be coming together on
    June 11th.
        We ask the leave of the distinguished members of the body,
    the Chair and the ranking Democrat in order to work with staff
    to put together legislation that would fine tune the intent of
    this Committee that was expressed in Public Law 106-50 over 3
    years ago.
        There is no better time to take that step.
        I would add that I mentioned this before an oversight
    hearing, chaired by Mr. Bartlett jointly with Mr. Quinn and
    strong participation with Lane Evans, 4 years ago this week,
    and that is what started the ball rolling on this. There is no
    better time than this week to determine, as we reflect on those
    who did not come home from every war our Nation has ever
    fought, and those young men and women who will not return from
    Afghanistan, from East Africa, from Iraq or wherever they are
    defending all of us, the American people, against those who
    would do us great harm and destroy us as human beings and our
    way of life--there is no better time to take the steps in order
    to fine tune what we have learned over the last 3 years since
    enactment of 106-50 and move forward.
        Mr. Chairman, I thank you for the opportunity and for the
    privilege of presenting the views of Vietnam Veterans of
    America here today and sharing at least some of the general
    views of the task force and our distinguished and fine
    colleagues there.
        Thank you, sir.
        [Mr. Weidman's statement may be found in appendix.]
        Chairman DeMint. Thank you, Mr. Weidman. I will start with
    a few questions, and I know our committee members have some
    too.
        Mr. Elmore, I will begin with you. Just a quick question.
    Is there any reason that this veterans report that was just
    referenced cannot be delivered to this committee in the next
    week?
        Mr. Elmore. In fact, the report itself was delivered. I am
    not sure of the date. I believe it was last summer or last
    fall; I would have to check with staff. What Rick has
    referenced was a study by the SBA Commission that was a part of
    that report, but it wasn't the report itself.
        Chairman DeMint. Right. But the report does exist----
        Mr. Elmore. Yes. The report was forwarded to Congress last
    year.
        Chairman DeMint. Well, we would like the complete report,
    and if it has been delivered before, I would appreciate it if
    you would deliver it again so I can get a look at it myself.
        Mr. Elmore. We absolutely will, sir. Thank you.
        Chairman DeMint. Just a few questions.
        I know you have heard a lot expressed in appreciation of
    the SBA's role for veterans, but one of the major reasons for
    this hearing is to figure out how to improve what we are doing,
    particularly how to comply with 106-50; and you have heard a
    number of concerns expressed. The concerns that have been
    expressed that bother me the most are just the lack of
    adherence to law, the lack of the reports that were required,
    the advisory committee not being appointed, the 3 percent
    procurement mandate. These things that have been brought up
    obviously are of concern because our hope is, if we pass a law,
    that it will be implemented as we had asked.
        Do you have any comments before the members ask questions
    about what is going on?
        Mr. Elmore. I can try to address those three, sir.
        The advisory committee, I will start there. We were asked
    by Congress in--I believe this was either before or just after
    I came to the agency--in 2000, to hold off on the naming of the
    advisory committee until the nine members of the board of
    directors of the corporation had been named.
        The ninth member of the corporation was named last October
    by President Bush. Up until that point, we had gathered
    approximately 50 candidates and background information on those
    candidates; and those are the candidates that are now being
    evaluated, but we did not as an agency begin to move on that
    until after the ninth member was named.
        Now, on the reports, we did submit the 1997 report, and
    that was a report that after I came to the agency we caught up,
    we put together and we sent to Congress. The 1999 and 2000
    reports were not completed before I got there. We have
    completed those in my office and they are going through final
    clearance in the agency now. So as soon as they are cleared,
    they will be provided up here. My staff is presently working on
    the fiscal year 2001 report.
        Now, on the 3 percent goal--and I will give you my take on
    the history of this--when I came to the agency in the summer of
    2000, that goal was not being acted on by the FAR Council. As I
    dug into that, within literally the first 30 days on the job, I
    went to others in the agency, including the Administrator, and
    urged that we implement what I perceived to be a
    misinterpretation of the intent of Congress by the FAR Council
    to go ahead and establish the 3 percent goal at the prime
    contracting level and a 3 percent goal at the subcontracting
    level. But there was an interpretation by the council that
    included service-disabled veterans and veterans at the
    subcontracting level. That was not what Congress intended, I
    did not believe.
        So I worked with Congressional Affairs at the same time
    that we implemented that bad rule--and I will tell you why I
    did that and why I urged that--and the Administrator agreed was
    that if we waited until we got technical amendments from
    Congress to change that interpretation so that FAR couldn't, in
    my view, misinterpret, we would have put procurement for
    disabled veterans another year later.
        So I moved--implemented the bad rule, sought the technical
    amendment. We secured the technical amendment. We then amended
    the rule, and that's why it took until January, 2002, to
    finally get what I think is an appropriate and an accurate
    rule.
        Now, I can't speak to all the reasons why all those
    implementations and interpretations of what Congress intended
    happened. I can tell you what it is we did, though; and I moved
    as aggressively as I could, and the agency has assisted me and
    supported me in trying to do that.
        Now, I will readily admit the level of success of Federal
    procurement for service-disabled veterans--and I would point
    out, for veterans as well--in fiscal year 2001 was not good. It
    was nowhere near the 3 percent goal for service-disabled
    veterans. There is no goal for veterans, but there is a best
    efforts clause; I was disappointed in that.
        All I can say, for a variety of reasons, is that I think
    from data collection problems to perhaps lack of information
    out in the field with the thousands and thousands of
    procurement officials, et cetera, et cetera, we obviously
    didn't achieve the 3 percent goal the first year. We are going
    to do everything we can to try to get that done.
        Chairman DeMint. We would like that as well, and we would
    like to know from you if the obstacles are internal or
    external, if there are things we can do from our side of the
    desk here to help open the door to make these things happen;
    because I think everyone who is at the table has agreed today
    that we have a good law, a good law that would work if it gets
    implemented; and we need to make sure we know why it is not.
        I have got more questions, but I will allow some of the
    other members.
        Mr. Pascrell, do you have questions?
        Mr. Pascrell. Thank you, Mr. Chairman.
        The whole issue, as you know, Mr. Elmore, of procurement is
    one that bugs this committee for many, many years. We seem to
    be going backwards and not forward. We don't seem to be getting
    any action, and the chairman, the committee as a whole threw
    its arms up in the air at data that we have been presented.
        And I don't think this is any mystery; I don't think it is
    any secret that we are spinning our wheels and we want to see a
    breakthrough. I would hate to see the next set of questions
    about it go unanswered, or no improvement because we do not
    have improvement. You know that as well as I do.
        In terms of 3263, do you believe that waiving the 7(a) fee
    requirements for recent veterans would cost the SBA a
    substantial sum of money?
        Mr. Elmore. It is a difficult question to answer because we
    don't know how to determine how many veterans would have been
    discharged in the last 5 years that are 7(a) loan recipients.
    That question certainly has not been asked thus far from the--
    --
        Mr. Pascrell. We do know how many would be eligible that
    are leaving the service, and we have a good idea----
        Mr. Elmore. We know how many are discharged approximately
    each year, yes, sir. The concern from the agency's perspective
    is that under the Federal credit rules if we decrease fees for
    one group then we would have to increase fees for other groups
    of borrowers. So while I am certainly a veterans' advocate and
    will be until the day I am done, for us to turn and increase
    costs for other groups of Americans so that veterans get a
    special benefit--we have concerns about taking that approach.
        Mr. Pascrell. Why? Do you think it is unconstitutional?
        Mr. Elmore. No. I think just to extend the cost that
    veterans would save, if you will, to other Americans is not
    perhaps the appropriate way to approach it.
        Mr. Pascrell. I don't think you are going to get any
    complaints from whoever those other groups are and I would
    suspect, because I use the numbers we know of in New Jersey,
    what is going to happen over the next year.
        I think that, from what I see--and I am asking you to
    correct me if I am wrong--the SBA could afford a fee waiver for
    all veterans within the scope and within the reasonableness of
    the problems we are having with the budget at this particular
    time, because everything has become apriority and that is why
    nothing is a priority. And as far as I am concerned, and I would hope
    in your position as far as you are concerned, veterans are a priority,
    correct?
        Mr. Elmore. Veterans are certainly a priority. I can tell
    you as we go through and evaluate all of the agency's programs,
    one of the programs we are looking at is all of our lending
    initiatives and, in that context, if there are ways that fees
    can be reduced and restructured. And I think, as you are aware,
    sir, the agency is trying to move toward smaller loans in a
    number of arenas, and I think that would be important to
    veterans.
        Now, that doesn't impact the fees necessarily, but I can
    tell you that, historically, about 60 percent of the loans that
    veterans receive guarantees on from the agency are below
    $150,000. So that is obviously where the majority of the
    veterans market is in that smaller arena.
        I am not sure what else I can tell you, sir.
        Mr. Pascrell. Well, it seemed to me, first of all, we have
    to support 7(a) loan program. Right, Mr. Chairman? I think that
    would be the first step. We can't afford to have any finagling
    with that number, any reduction of that number.
        Americans have spoken out on--we pound our chests about
    veterans, and if we are not willing to step up to the plate, it
    becomes--and you heard these gentlemen say--``empty words.'' I
    am sure you don't want to be in front of the march that
    provides simply empty words, Mr. Elmore.
        You have got a big job on your hands.
        Mr. Elmore. Yes, sir.
        Mr. Pascrell. And we want to be of assistance here. We
    don't want to make things more difficult for you. I think it is
    important that we do what we have to do, and if you think we
    have to do this, you have got the support, I think, of the
    folks at this side of the table.
        One more quick question, Mr. Chairman, to Mr. Gatewood.
        Mr. Gatewood. Yes, sir.
        Mr. Pascrell. Your statement was very short and concise.
    You are obviously not a Member of Congress. But you said a lot
    in a very short period of time.
        Mr. Gatewood. Thank you, sir.
        Mr. Pascrell. When you retired from the military, what were
    the main hardships you faced while adjusting to civilian life?
        Mr. Gatewood. Other than the psychological challenges after
    21 years in the Marine Corps, it was--to start my company, was
    getting money. I could get no loans from no bank. There was no
    traditional bank or institution that was ready to give us money
    at all.
        I started with $600 and received loans from my dad, and I
    think I took on about 17 credit cards at 20 percent interest;
    that was it.
        The other issue which was very difficult was to get work,
    and although the Veterans Administration is not here today, I
    would like to say that in the 12 years I have been in business
    I have had very little, if any, help from the United States
    Veterans Administration. I have been in business for 12 years,
    and I have never seen an opportunity available to firms such as
    myself in the procurement area.
        I have spoken to people at the Veterans' Administration,
    asked them to look very closely at the policies and procedures
    they have in place. Unless the people in these agencies reach
    out and touch the grunt--I call us ``the grunts''--in the
    field, us small business people, unless you reach out and
    actually touch us and tell us what you are all about, we cannot
    avail ourselves of your services.
        It is very important that there is dialogue between us
    folks out here in the field and the corporation and the SBA.
        Mr. Pascrell. Thank you Mr. Gatewood.
        Thank you, Mr. Chairman.
        Chairman DeMint. Thank you, Mr. Pascrell.
        Mr. Bartlett.
        Mr. Bartlett. Thank you very much, and I am very pleased to
    be here. As you know, I also serve on the Armed Services
    Committee, chair the panel on Morale, Welfare and Recreation
    and have been a big supporter of veterans for all of my life.
    My father was one in World War I.
        Mr. Chairman, we are now discharging our constitutional
    responsibility in oversight. We are here today some 3 years
    after enactment of law; it is unfortunate today that what we
    are hearing is that the results of this law have not been as
    anticipated, because it has really not been implemented as it
    should have been implemented.
        I thought we had in place a Chair, a position in the Office
    of Advocacy that was focused specifically on veterans' issues.
    That person or persons ought to have been telling SBA and
    whomever else is involved in compliance with the law, you
    really need to be doing this, or there is going to be a day of
    reckoning when you sit before a congressional committee; And
    they are going to be asking you, why haven't you complied with
    the law?
        I thought also that we had kind of isolated the Office of
    Advocacy from the Small Business Administration so it wouldn't
    be a case of the guard in the cabbage patch; that the Office of
    Advocacy would really be free to be advocates for small
    business people relative to the Small Business Administration,
    as well as to the other government agencies where it has a
    prime responsibility.
        Were any of you in contact with the veterans' Chair in the
    Office of Advocacy, and if so, what response did you get from
    them?
        Mr. Weidman, you mentioned the Office of Advocacy in your
    testimony.
        Mr. Weidman. I did, sir. There is not a specific person
    within the Office of Advocacy. We work most closely with Joe
    Sabota and with the new chief economist; and as I mentioned
    before, last week, we met for over an hour with Tom Sullivan,
    who is the small business advocate today, who was appointed by
    President Bush. He has committed to doing a round table
    regularly with the veterans' organizations, trying to find out
    what do we need and at least substantive--sponsoring four
    substantive events, as well as holding an event to get us
    together with NSBU, with NFIB, et cetera, the mainstream
    business organizations, to find out where we can plug together
    common ground.
        The problem has to do with the other entities within the
    SBA, the role you described, sir, as I understand the law
    anyway, is the role that the Office of the Associate
    Administrator for Veterans' Business Development plays. And
    they are supposed to have that far-ranging kind of authority,
    which is why this committee saw fit to have that person for
    Veterans' Business Development report directly to the
    Administrator.
        I have no direct knowledge of this, one way or another, but
    it would appear from the outside, those who have had a chance
    to meet the Administrator--who seems to be a very bright,
    intelligent guy--during Small Business Week last week--was that
    last week; it seems like about 2 years ago, given the pace of
    the Congress this spring--that he is not familiar and not
    involved in day-to-day running of the veterans' program.
        Perhaps it might be different if, in fact, that were the
    case. It would certainly be different if it was brought to the
    Administrator's attention, all of the things that are
    requirements--not cute ideas, requirements, legal
    requirements--of the Congress as recommended to the full body
    by this committee in regard to changing each and every program
    offered by the Small BusinessAdministration.
        So it seems to us it is not the Office of Advocacy, sir; we
    are getting good cooperation from there and from at least the
    association, ASBDC, and it looks like we are finally going to
    get some cooperation from SCOR. We would like to see more done
    by the Office of the Associate Administrator for Veterans'
    Business Development.
        It is useful to remember that thanks to the efforts of this
    committee and your distinguished colleagues on the
    Appropriations Committee, as I recall, $986 million went to
    this agency this year; and Mr. Elmore has a budget of 750,000.
        In terms of the range and impact on the rest of the agency,
    that falls with the Administrator and the Chief of Staff to
    make it happen throughout that agency, and for the
    Administrator to take it to the White House to make it happen
    in the other agencies, when it comes to procurement, as Mr.
    Pascrell so eloquently described.
        And I might add one last thing. There has been discussion
    among the veterans' group at the recent task force meeting
    about how can we work with this committee and the
    Appropriations Committee to get the attention of the heads of
    those other agencies, whether it be the Secretary of Defense or
    whether it be, you name it, from XYZ Federal entity, and
    perhaps working together with a petition or a letter that would
    be signed by every Member on a bipartisan basis from this
    committee and the Appropriations Committee to the SECDEF, that
    the particular problem that we are having is with the Secretary
    of Transportation--which is shocking to some of us, because we
    thought Mr. Mineta was a veterans' advocate when he was in the
    Congress. But the Department of Transportation, including
    hiring air marshals, has been awful; and they are terrible on
    road transportation contracts and subcontracts, and are
    basically telling veterans, that law doesn't apply to you here.
        Chairman DeMint. Excuse me. We need to cut----
        Mr. Weidman. I beg your pardon, Mr. Chairman. That was just
    the tip of the iceberg, and there is a lot of frustration out
    here because all the good you all set in place is not becoming
    a reality, and yet----
        Chairman DeMint. We have got you. Thank you.
        Mr. Weidman [continuing]. Yet they get bonuses down at the
    agency.
        Chairman DeMint. I am sure we will get back to you.
        Ms. Christian-Christensen.
        Mrs. Christensen. Thank you, Mr. Chairman.
        Most of us are up here feeling your frustration and your
    pain, and we appreciate the fact that the corporation has just
    been in effect for a short period of time. But you have a lot
    of catching up to do, a lot of catching up to do.
        Let me ask the corporation my first question. You, like SBA
    and other Federal agencies, have initiated some programs that
    involve outreach and information sharing through the Internet.
        Do you have any idea how many veterans have access to the
    Internet? In my district, I would imagine they are very few.
        General Henry. That is true.
        Mrs. Christensen. And how would you address that?
        General Henry. That is a good issue, and the question is
    the database that we have been asking for, if I may talk about
    the database, we have been through the agencies, DOD, to pick
    up the databases.
        But the question is, we have no real database in order to
    answer the question how many veterans are there? We believe
    there are 24 million veterans out there, but when I start
    looking through the Federal Government to say, where is the
    database of all veterans, where can I find it? It doesn't
    exist, ma'am.
        So what we have done is, we have gone to the VSOs, we have
    gone to the various people here. We have asked Mr. Elmore, we
    have asked VA. We are tapping into fragmented databases, and we
    are building one database as we go.
        The answer to your question will be determined, though, by
    some type of focus groups that we give those questions to.
        Now, we do know that what is happening--is this not
    working?
        Mrs. Christensen. I can hear you, but for the recorder----
        General Henry. It does appear that if we go to the focus
    groups and pick this up, we will be able to determine a little
    bit more with specificity on this line.
        What we do know is that the Internet service, though, is
    growing very rapidly and that we have tied our future to what
    we are doing by setting up the electronic marketplace, going
    out and asking veterans to register. The question is, do we
    charge veterans for it? And the answer is, no, we are not going
    to do that.
        What we want people to do is to come to our Web site, sign
    on to our Web site, become identified. We are tied into SBA, we
    are tied into VA. We will then be able to drive that
    information back to.
        Mrs. Christensen. But my concern is that if the veterans
    don't have access--and maybe to some of the vet centers as a
    beginning because we can pretty much assume that a lot of
    veterans don't have access.
        But before my time runs out, Mr. Lopez, in your statement
    you said the procurement policies of our government are like a
    Tower of Babel, unintelligible to most businesses.
        Do you have any specific suggestions as to how to quiet the
    noise?
        Mr. Lopez. I believe that the Federal Procurement Council
    and all the constituent agencies or parts of that should
    provide concise information in total. All of them should speak
    and say to the public at large, the business public at large,
    this is what we mean, this is what we intend. What you have now
    is this fragmented mess where you can go from one agency to
    another and get a different answer----
        Mrs. Christensen. You need a one-stop--like Labor is doing,
    a one-stop center with all the information----
        Mr. Lopez. That would be a fine suggestion, but the problem
    is, you would have to get them to do it.
        If I may depart for a second, Mr. Chairman, I would like to
    apologize for this, somewhat, whining that we do to you folks.
    We are talking to the choir. You folks have been great for us.
        Mrs. Christensen. But it gets on the record, and it is
    important.
        Mr. Lopez. You have always been good to us and always
    agreed with us, and you have always understood us. It is the
    bureaucracy which stands there like a big stone wall and says,
    we don't care what Congress says, we are going to do what we
    want to do.
        Mrs. Christensen. We understand, and Congressman Pascrell
    and I were saying that in three scorecards we haven't gotten
    them to respond.
        I guess this is to Mr. Gatewood. In your testimony, you
    stated that they didn't have a database. Is the ProNet system,
    did you consider that one of the questions----
        Mr. Gatewood. I have been on ProNet for some time, and I
    consider it a very viable system. I think what the corporation
    needs to do first of all is utilize ProNet to identify those
    veterans and disabled-owned veteran firms that are already in
    business; and for the most part, Iknow that many are.
        I have been on ProNet since its start.
        Mrs. Christensen. It is a good start?
        Mr. Gatewood. Yes, ma'am. And those businesses that are
    about their business will find a way to get on ProNet and make
    themselves known.
        But you had a very good point about Internet. I visited the
    corporation Web site, and it is put together well in terms of
    design, but a lot of it is just information, information
    dissemination, much of which most of us already know. I would
    like to see names, telephone numbers, progress made.
        And if I might depart from your question just briefly, back
    to the advisory committee, if you read Public Law 106-50,
    ma'am, and I am sure you are aware of it, this advisory
    committee is absolutely necessary to the operation of the
    corporation and Public Law 106-50. Without this advisory
    committee, you have no Public Law 106-50 and you don't have an
    advisory committee.
        Mrs. Christensen. Thank you. Two questions and one thanks.
        Chairman DeMint. Mrs. Capito.
        Mrs. Capito. Thank you, Mr. Chairman.
        And thank you for your testimony. I would like to go to Mr.
    Gatewood.
        In your response to the first question, asking how you got
    started, your financing, you talked about your credit cards and
    all these kinds of things. I notice that the corporation is
    going to be developing a venture capital fund. What suggestions
    would you give to them to be most effective at the frontline
    loan?
        And I will give General Henry a chance to respond to this
    as well.
        You mentioned in here that you will be using that venture
    fund for mezzanine-level businesses. Well, I remember a
    mezzanine is kind of between one and two, isn't it? Yes. So
    what is going to be on the ground floor, Mr. Gatewood, if you
    had some suggestions; and General Henry, if you want to
    respond.
        Mr. Gatewood. First of all, I think, in all honesty, the
    SBA has their job cut out for them. When I started my business
    I started as a minority firm, an SBA Section 8(a). And it took
    me a long time to get certified as an SBA firm, and one of the
    reasons I couldn't get certified was, I didn't have any capital
    or revenue from which to start a company. Well, hello, that is
    why I am coming to the SBA.
        But secondly, I think the most important thing to the
    veteran that is getting out is to be educated as to how you
    move in and about the community, particularly retirees, people
    that have been in some time, how you move in and about the
    Federal Government procurement arena. It is a very interesting
    community, and given that knowledge, then they can set about
    getting contracts through the Federal Government.
        To that end, I would like to see a set-aside program set up
    for veterans, a program that allows us to get--disabled
    veterans--3 percent of the subcontracting dollars of all the
    primes. We are talking billions of dollars that these prime
    contractors get. And I will tell you now when that law was put
    into effect, I sent out over a hundred letters to prime
    contractors and over 40 letters to Federal Government agencies
    announcing to them that the law had been signed and our company
    was available to do business with them.
        I have received two responses in 2 years.
        Mrs. Capito. Thank you.
        General Henry.
        General Henry. May I respond, Congresswoman, to his last
    point?
        Mrs. Capito. Yes.
        General Henry. In my other life, I was the senior
    procurement guy for DOD, and what you heard here today on this
    3 percent is absolutely true. You folks passed the 1984
    Competition in Contracting Act that precludes anyone from
    giving the sole source unless you had a justification and
    approval; and there are seven exceptions.
        If you really want to mandate 3 percent goals to service-
    disabled veterans, then you make it a set-aside because nothing
    else is going to work. The contracting officers out there will
    not be able to reach out and say, I have got this goal, it is a
    target; what I want to do is be a good guy, and I am going to
    do it because as soon as you do, you are going to have
    everybody else that was on that procurement list coming in and
    filing a protest, and now you have got it all messed up into
    the courts.
        The only way it will work is as a set it aside. Otherwise,
    we are wasting our time on the issue of trying to meet a goal,
    and I think it is unanimous on this panel that it is something
    that is laudable and should be achieved.
        Ms. Millender-McDonald. Will the gentlewoman yield?
        Mrs. Capito. Yes.
        Ms. Millender-McDonald. Thank you so much. The Co-Vice
    Chair of the Women's Caucus, thank you.
        When you talk about set-asides, a red flag goes up as to
    the constitutionality of that, and yet I can certainly
    sympathize, empathize with what you are saying.
        How do we get around this, given that there is no
    constitutional protection for individuals except based on race
    and gender? So how do we accomplish this and yet be within this
    constitutionally?
        General Henry. I believe this body could pass legislation
    that would require the Federal acquisition regulation to set
    aside 3 percent of Federal procurements for the support of
    service-disabled veterans.
        Ms. Millender-McDonald. Will you be the first in line to
    help us advocate for that?
        General Henry. Yes, ma'am, I will.
        Ms. Millender-McDonald. Thank you.
        Mr. Lopez. Congresswoman, may I, with your permission?
        Mrs. Capito. Yes.
        Mr. Lopez. Supreme Court Justice Rehnquist has already
    stated that veterans and especially service-disabled veterans,
    who are essentially workmen's compensation cases of this
    government, are entitled to special consideration in all legal
    applications; and this was made in reference to a challenge
    relating to Public Law 209 and--I am sorry, with the
    constitutional change 209 in California, which you are familiar
    with. That is why they exempted service-disabled veterans from
    209 because the Supreme Court had already spoken.
        We consider these people to be unique and our direct----
        Ms. Millender-McDonald. Indeed----
        Mr. Lopez [continuing]. Direct responsibility--not
    theoretical, not philosophical, but direct. We did this to them
    and we have to fix it.
        Ms. Millender-McDonald. Mr. Chairman, you and I have
    legislation to introduce. Thank you.
        Chairman DeMint. We do.
        Mrs. Capito, do you have any more questions?
        General Henry. Can I go back and address----
        Mrs. Capito. Venture capital, yes.
        General Henry. The venture capital at the mezzanine area,
    you are absolutely right. It is those start-ups who have run
    out of capital, but who still have a good product which the
    venture capital world would see as moving forward. And either
    we are dealing specifically with a veteran who is at that
    mezzanine area or we have imparted into that the requirements
    that they subcontract to veteran businesses.
        It has a larger element on it, but I think more to your
    issue what we are looking for, as in the case of Mr. Gatewood,
    is for those small businesses who come out, who need to get the
    micro loans, that would allow him to get into business--$600.
        We have set up an operation with Southern Financial Bank.
    This came on the heels of September 11. The mayor of the city
    went to them and said, we need a process that will speed up the
    loan process. Now, to those that were otherwise creditworthy,
    when we came along with Southern Financial, we said, if we can
    do that for September the 11th victims, we can do that for
    veterans. We took that and we put together the plan with
    Southern Financial. We hit the news wires on it with Bloomberg.
        Our phones have been ringing off the hook. We have got
    about eight proposals that we are evaluating at the present
    time. That is why I am saying our goal is to blanket the
    country so that any person similarly situated with Mr. Gatewood
    in the future will be able to walk in, under our sponsorship,
    to the bank and say, I need a loan, and get that loan timely
    processed and granted.
        Mrs. Capito. Thank you.
        I would like to make one closing statement, and I will use
    Mr. Gatewood's term about who gets to see the grunts. We see
    the grunts as Members of Congress. I have folks coming into my
    office all the time trying to find seed money for small
    businesses, veterans, disabled veterans and anybody. And it is
    difficult for us to know how to direct if we, even as Members
    of Congress, are not sure what is really out there. So you can
    imagine the next layer down, the difficulties.
        So I think it is important that while you are blanketing
    the veterans, you blanket us as well with all of the
    information, your venture capital initiative and the rest of
    the things, so that we know how best to direct our
    constituents. Thank you.
        General Henry. We will be happy to. May I make one other
    comment on it?
        I think your legislation, the reception--that is, being out
    in the public--is well received; and for veterans, maybe it is
    because of the time right now, we have an opportunity that if
    we can leverage the combined effects of what this body can give
    to us with what we have been able to do and the members on this
    panel, I think that we can create some very nice things for the
    veterans of this country.
        Chairman DeMint. Thank you very much.
        Mrs. Tubbs Jones.
        Mrs. Jones. Thank you, Mr. Chairman.
        Associate Administrator Elmore, how many of the groups that
    are seated at the table this morning have you or your designee
    met with?
        Mr. Elmore. I think all of them, numerous times. Not only
    have I known and worked with the gentlemen to my left, all of
    them--some for better than 20 years--there have been ongoing
    meetings.
        I participate in most of the Task Force meetings, for
    example. When it comes to the Corporation, SBA put together and
    hosted their first board meeting at SBA headquarters in
    September, 2000, and I have been involved, I believe, in every
    board meeting representing the Administrator since then, and
    virtually all of the strategic planning and many of the
    initiatives that, in fact, they are working on and moving
    forward on.
        Mrs. Jones. So what is the holdup?
        Mr. Elmore. What is the holdup?
        Mrs. Jones. Usually it is that you are not communicating
    with the people that you ought to be dealing with. Here you
    just told me that you spent 20 years working with these
    organizations.
        What is the holdup?
        Mr. Elmore. I don't know that there is a holdup per se.
    There are certainly some parts of the law that have not been
    completely enacted yet. The Advisory Committee is one of those,
    and we talked about that earlier.
        I can tell you that in fiscal year 2001 the number of
    veterans that received services from the SBA exceeded 100,000.
    Now, in my review of SBA data, all the way back to 1990, we
    never exceeded 100,000 veterans receiving services from the
    agency in at least the last 11 years.
        I am proud of the fact that we went over 100,000. It
    reflects the good work of my office, my friends in the veterans
    community, the Corporation and lots of dedicated SBA employees
    who have done their best to ensure that veterans----
        Mrs. Jones. Is it that you don't have enough staff?
        Mr. Elmore. My new office was created in January of last
    year, and we had a 75 percent increase in staff since that
    office was created. So we have moved on virtually every
    initiative----
        Mrs. Jones. Mr. Elmore, don't take it so personally. I am
    talking about SBA as an agency. These gentlemen have sat here--
    and I was late, but I sat here for 45 minutes and listened to a
    dilemma that these veterans claim they are having; and I have
    sat here and listened to you say what a great job SBA is doing.
    But the links aren't quite making it; they are not linking
    together.
        There is a problem here, and versus a slap at one another
    on the back saying how great we have done, what else can we do?
    What is the next step? What is the problem?
        Mr. Elmore. I don't know that I can tell you exactly what
    the problem is. I think my responsibility at the agency is to
    increase outreach and encourage veterans to participate.
        Mrs. Jones. And how you are going to do that?
        Mr. Elmore. I have already been doing that through a number
    of initiatives, as detailed in my testimony, including this
    outreach poster.
        Mr. Gatewood----
        Mrs. Jones. Let me suggest this, seeing how you have such a
    wonderful relationship with these fine gentlemen at the table,
    and you have met with them on more than one occasion, and we
    have sat here for 2 hours listening to dilemmas that are
    presented: that you call together a meeting very soon with
    these gentlemen.
        And maybe you would get a hold of their mailing list and
    their meeting dates. And you send a person from SBA out to
    their places, as well as send a communication to the members of
    their organization to get something going. That is what I
    suggest.
        Mr. Elmore. I will do that, ma'am.
        Mrs. Jones. I appreciate it very, very much.
        Have you got a suggestion, Mr. Lopez, Mr. Gatewood, Mr.
    Eiland, Mr. Weidman, of what else we could do? It is nothing
    personal, but I am about getting it done.
        Am I out of time already? No. Okay.
        Mr. Lopez. Congresswoman Jones, you are so perceptive. The
    record should state very clearly, what SBA has done for
    veterans, the task force and this body made them do. None of it
    was offered; none of it was their initiative. We had to
    pressure, and you had to pressure with us to get everything
    that we have accomplished to date, which is woefully little.
        And you are very, very accurate and very perceptive; that
    is precisely the problem. They can talk about services to
    veterans, but what is a service? A man comes in one door, you
    give them a piece of paper and shove them out the other door,
    that is recorded as a service; and then they play number games,
    but our particular position in this society does not change.
    That is the evaluation, not how many noses you count.
        Mrs. Jones. Mr. Weidman.
        Mr. Weidman. Yes.
        Bill doesn't have the power, and he is proactive, but the
    Associate Deputy for Management, the Associate Deputy for
    Capital Formation, on and on, don't work for him. And so what
    is the Administrator doing, what is the Chief of Staff doing?
        It is not that we are against the current administrator.
    Most of them have met him only at a cocktail party during Small
    Business Week, because we have never been brought in to talk
    turkey. And we are certainly willing to do that. General Henry
    has brought us in. He meets with us regularly, and we offer him
    suggestions and offer him help.
        We will do the same with Mr. Elmore, but the problem is,
    you have this little $750,000 operation over here on the side
    and you have got a billion-dollar agency where nobody who can
    make anything else happen in that agency is willing to meet
    with us or willing to meet with this committee and follow
    through on implementing the law.
        So the problem with the rest of the agency, with that
    proactive stuff, reminds me, Ms. Jones, when my dad was in
    Korea and we lived with my grandparents and we didn't have very
    much money. We used to have those old gas stoves with the
    painted ceramic thing that looked like a flame----
        Mrs. Jones. I understand.
        Mr. Weidman. But if you didn't run any gas over it, there
    was no heat. So all I am saying is that SBA, despite the fact
    that 25 of those folks got bonuses to the tune of $400,000 a
    year last year, those SES folks--you guys turn off the gas, and
    there ain't no fire down there.
        Mrs. Jones. Mr. Elmore, I want to come back to you and this
    is not a personal attack; this is just encouragement.
        I would appreciate--and maybe the better move is to ask my
    staffer to send a letter to Mr. Baretta detailing some of the
    things that we have talked about today to encourage that the
    agency and other departments make it a priority.
        I always make the discussion, when they talk about minority
    and women's events, that it is a second thought versus when all
    the big planning is done, versus being at the table when
    everything else is being done; and then all of a sudden, by the
    way, we have got to get those veterans, by the way, we have got
    to get those women, by the way, we have got to get those other
    minorities.
        Can that be part and parcel of the overall discussion, and
    accomplishments of the agency; and that other SBA procurement
    officers, or in other departments, that would be a goal they
    would have to reach in order to get the bonuses that are being
    considered by Mr. Weidman.
        I guess I am out of time, Mr. Chairman.
        Gentlemen, thank you for your testimony. We just did a
    small business conference with the Federal Reserve on Monday,
    but my next one, I am going to do veterans. So maybe I will
    have to call upon you.
        General Henry. I would like to----
        Mrs. Jones. You would like to come?
        General Henry. I would.
        Mrs. Jones. Oh, get that note, Patrice. Very good.
        Mr. Lopez. We will all come.
        Mrs. Jones. You will all come? Cleveland, Ohio. I promise,
    it will be warm by the time you get there.
        Chairman DeMint. Thank you. Thank you Ms. Tubbs-Jones.
        Ms. Millender-McDonald.
        Ms. Millender-McDonald. Thank you, Mr. Chairman, and again
    thank you for convening such an impressive panel today.
        I have read part of your testimony, having to run out to
    put a bill on the floor and come back. I think what you said
    and what I am going to say is clear.
        H.R. 3011, I think, the Small Business Emergency Relief Act
    that was introduced by Congressman Pascrell, and H.R. 1499, the
    American Small Business Emergency Relief and Recovery Act of
    2001 that was introduced by Congresswoman Donna Christian-
    Christensen were pieces of legislation that we thought would
    move things. They have not, and so if we cannot identify the
    problem, then we need an inspector general to come in and look
    at this department and see just what is impeding the forward
    motion; and I am going to, as the ranking member, make that
    happen. I think it is time for us to do the due diligence for
    our veterans that is sorely needed.
        And, Mr. Chairman, with that, thank you very much. I think
    you and I have a lot of work cut us out for us.
        Chairman DeMint. We do.
        This is great information, and I think we have some very
    specific ideas to follow up on. I am going to dismiss this
    panel, and if the members who are still here can stay for one
    statement from an additional witness, that will be wonderful.
    We are running out of time, but I think we can still----
        Ms. Millender-McDonald. I am here for the long haul.
        Chairman DeMint. Thank you and thank all of our witnesses
    for coming forward.
        Mr. Bew, we need to move ahead so we won't lose your
    statement, and there are very specific questions I think we
    have; and I apologize for the lack of members, but we have been
    pulled away. Believe me, you will be on the record and we will
    be responding to your comments.
        But this is Mr. Ronald Bew, Associate Deputy Director for
    Capital Access for the U.S. Small Business Administration. And
    before we allow your testimony, I would like to allow Ms.
    Christian-Christensen to make an opening statement.
        Mrs. Christensen. Thank you, Mr. Chairman. I am going to be
    very brief, but this is an issue that is of critical importance
    to my district, and it has been brought to our attention, to
    other districts as well.
        When the disaster loans began, when the program began in
    1998, my constituents came running to me. They were very
    concerned about their loans being sold. At that time, we were
    assured by SBA that the terms of the loan would not change; and
    with some hesitation, I think my constituents decided to accept
    and trust in that.
        And in August of 2000 the loans were bought by Beal Bank of
    Texas, and this happened a little over a year after my
    community rejected an agreement that the governor made with the
    owner of Beal Bank to build a rocket company. So you can
    imagine the alarm in our community when we found out that over
    3,000 loans were bought by Beal, with whom we had just had a
    bitter battle, and of those, 605 were business loans, about
    2,500 were home loans. But 605 business loans in a small
    community like the U.S. Virgin islands is a lot, and we
    attempted to have SBA buy backthe loans.
        They looked into it and investigated how the bid was made
    and found that it was done fairly and equitably, and they
    didn't feel they had any recourse to do that. We have tried to
    have them put on hold. That has, to date, not happened, but we
    continue to get complaints from companies because the
    flexibility that we could have with the SBA does not pertain.
        One issue is the subordination of the loans and the fact
    that Beal Bank just does not subordinate the loan. It has
    created problems with companies wishing to expand and that has
    happened in several instances.
        So I know we are really strapped for time, but I want to
    stress the importance of this issue and I especially, in light
    of the fact of the new disaster loan program following
    September 11, where businesses across the country are now able
    to access these loans, but they are accessing them with the
    understanding that SBA is making these loans, that they are
    coming under certain terms, that there is some flexibility--not
    in terms of paying back the loans, but in terms of working out
    issues with SBA when their circumstances change, in reaching
    equitable agreements that do not occur when you are working
    with a for-profit bank.
        So with that, Mr. Chairman, I will yield.
        Chairman DeMint. Thank you very much.
        Mr. Bew, we will turn to you for a 5-minute testimony

    STATEMENT OF RONALD E. BEW, ASSOCIATE DEPUTY ADMINISTRATOR FOR
           CAPITAL ACCESS, U.S. SMALL BUSINESS ADMINISTRATION

        Mr. Bew. Thank you, Mr. Chairman, ranking member, and
    members of the subcommittee for inviting me here today.
        SBA's Asset Sales Program was initiated in fiscal year
    1998. It is designed to sell loans by SBA to private sector
    investors, and is part of an effort to more efficiently manage
    the government's credit portfolios. Since the first of five
    sales in August of 1999, SBA has sold over 111,000 loans for
    over $2.5 billion. SBA plans to continue to conduct the program
    with two to three asset sales per year.
        Through the program, SBA has maximized sales proceeds of
    selling loans to the private sector at a value that exceeds the
    agency's expected hold value. The program helps future
    borrowers by freeing up scarce resources to be used for loan
    subsidy and frontline delivery of services. The purpose is to
    allow SBA to focus on inherently governmental functions, i.e.,
    making the loans rather than servicing loans.
        By selling these loans and freeing servicing staff to
    perform other functions, such as loan origination, lender
    monitoring and risk management, the program has provided SBA
    much-needed flexibility in an ever-tightening budget
    environment. In addition, the sale of assets has allowed the
    agency to continue providing essential loan servicing while
    maintaining capacity for future major disasters. This is in
    spite of staff loss through attrition in the servicing centers
    and field offices.
        Bidders in these sales have included Wall Street investment
    banks, large national banks, regional banks, loan servicing
    companies and small investment companies. SBA has provided
    these bidders abundant, accurate and easily accessible loan
    information by remote access over the Internet at a nominal
    cost in order to expand the potential bidding community and
    maximize gross proceeds.
        Doing so particularly assists small bidders who frequently
    do not have the resources to invest the time and expense in
    traveling to a central location to view the due diligence
    materials. SBA includes small businesses in its assets sales
    program management by using the services of small minority-
    owned and women-owned businesses to perform some of the work.
        SBA will also continue to apply the lessons it learns from
    each individual sale, and it requires its contractors during
    each sale to note and record all policy and process
    improvements.
        Another benefit of the program is that SBA has been able to
    reduce its outstanding loan portfolio. For a variety of
    reasons, many borrowers pay off their loans or enter into
    compromise agreements when SBA informs them that their loans
    have been selected for sale.
        While undertaking the program, SBA has been able to protect
    borrowers both before and after sales. Disaster loans are held
    for at least 2 years and thereafter SBA gives special
    consideration before selling loans when another disaster occurs
    in the same area. Additionally, terms and conditions remain the
    same unless the borrower chooses to change them.
        SBA has recently changed its borrower notification process
    to ensure that all borrowers with a loan scheduled for an asset
    sale are fully aware of the pending actions and their options.
    The written notice of the sale is sent to the borrower
    approximately 4 months before each scheduled sale and includes
    a series of frequently asked questions based on previous issues
    raised by borrowers, including questions regarding the types of
    servicing actions the sale process might affect.
        SBA also frequently updates the field offices and servicing
    centers regarding the status of each sale so that these offices
    can work with any borrower who has a situation that requires
    special handling.
        SBA has managed the program while successfully limiting
    customer complaints. Of the approximately 111,000 loans sold
    since the first asset sale, SBA has received less than 300
    complaints. However, when SBA does receive a complaint, SBA
    acts upon its commitment to follow up on each complaint by
    contacting the loan purchaser and asking the purchaser to
    attempt to resolve the borrower's concerns.
        Thank you for the opportunity to appear here. I will be
    happy to answer your questions.
        [Mr. Bew's statement may be found in appendix.]
        Chairman DeMint. Thank you, Mr. Bew.
        Ms. Christensen, would you like to ask a question?
        Mrs. Christensen. Thank you.
        That notice time doesn't really help a community that has a
    very low income level. They are not able to buy out. You can
    give them a year's advanced notice, and they will not be able
    to buy the loans before you can sell them; and I guess that is
    when they come to complain to us.
        When the loans are sold, do you give the purchaser any
    notice or guidelines if the loans are different or should not
    be viewed as a conventional loan, or is that how you look----
        Mr. Bew. In 2001, we started putting notice in the loan
    agreement to make borrowers aware that their loans are subject
    to sale.
        Mrs. Christensen. For example, does Beal Bank get any kind
    of a notice or guidelines that this loan is different from
    their conventional loans and should be in keeping with the
    original terms that SBA provided at the time the loan was taken
    out?
        Mr. Bew. Yes. Beal Bank is a 7(a) lender and knows the
    program very well. And we go through a bidders' qualification
    process.
        Mrs. Christensen. And we are talking about the disaster
    loans--I mean when a person loses their business and has no
    place else to turn but to SBA, and is continuing to make
    payments, sometimes struggling, because our economy is not
    good; and then it is being sold,they can't buy out the loan and
    the terms of the loan now change.
        Mr. Bew. Beal, as any other purchaser, would have to adhere
    to the note. It cannot change unless the borrower requests a
    change, such as subordination, et cetera. They have to adhere
    to the terms of the note.
        Mrs. Christensen. Do I have time for more questions?
        Chairman DeMint. Go ahead.
        Mrs. Christensen. You had said that through the asset sales
    you are able to deploy staff that would otherwise be used for
    portfolio management. Would the bulk of loan execution for the
    7(a) and 504 loan regulation be lending, monitoring and risk
    management, which are already done by the private sector? What
    other areas do you deploy those people to?
        Mr. Bew. What has happened as the loans were sold and the
    loan volume and the servicing centers declined, attrition took
    hold, so it was able to equal--to have an equal balance of
    people and servicing.
        What we have done since, I might add, is that there was an
    emphasis--and someone else, earlier, mentioned that--on small
    loans. What we are doing now is proposing increasing the SBA
    express loan, to increase that from 150 to 250, and open it up
    to many banks. Particular emphasis is on that program for the
    50,000-and-under loan, to touch more small businesses in the
    smaller loans.
        Mrs. Christensen. I am--Mr. Chairman, I would like to
    submit some questions in writing and, if I could, ask one more
    question.
        The mission of the Disaster Loan Program is to assist the
    borrower to return to predisaster conditions. Doesn't this
    conflict with the profit-driven mission of a financial
    institution, making it impossible to really service the loans?
        Mr. Bew. We do give a 2-year waiting period before we sell
    a disaster loan. That recognizes that most changes occur in the
    first 2-year period after a loan is made. It allows these
    businesses to get back up on their feet.
        Mrs. Christensen. Unless you get hit with a hurricane the
    next year.
        Mr. Bew. If it does, we can pull those loans out of that
    sale if there is a disaster in that same area.
        Mrs. Christensen. Within what period of time?
        Mr. Bew. Two years.
        Mrs. Christensen. Not as long as the loan is in effect?
        Mr. Bew. No. Because many disaster loans have maturities of
    25 to 30 years.
        Mrs. Christensen. I would just like, through the Chair, to
    submit further questions in writing.
        Chairman DeMint. And I would like to suggest, if you can,
    if Mr. Bew is agreeable, to perhaps meet with the Congresswoman
    in her office to come up with specific suggestions that the
    committee can follow up on, whether it be legislation or
    regulatory, if that is possible. Because I know that is her
    particular interest.
        Mr. Bew. I read some of your earlier correspondence. I hear
    you. I understand exactly where you are coming from. I would be
    happy to meet with you.
        Chairman DeMint. We would very much like to hear from that.
        Ms. Millender-McDonald.
        Ms. Millender-McDonald. Mr. Bew, what I would like to ask
    is, what are the specific procedures or criteria for the
    repurchase of loans, especially disaster loans you have put in
    place, if at all--any?
        Mr. Bew. For the repurchase?
        Ms. Millender-McDonald. For the repurchase of loans,
    especially disaster loans.
        Mr. Bew. Let's see. I am not sure that I can answer that.
        Ms. Millender-McDonald. I will tell you what. I will submit
    that question to you and perhaps you can research that, along
    with those questions that Ms. Christensen----
        Mr. Bew. If you are talking about SBA repurchasing sold
    loans, we could repurchase them during the first 6 months after
    the sale--we could only do this, however, if there is something
    faulty in the documentation, something we warranted and it is
    not true. That is basically it, because once we have sold that
    loan, it belongs to private sector investors.
        Ms. Millender-McDonald. I do understand that.
        Thank you, Mr. Chairman.
        Chairman DeMint. Thank you. And thank you, Mr. Bew. I
    appreciate your comments and look forward to some additional
    recommendations.
        This meeting is adjourned.
        [Whereupon, at 4:25 p.m., the subcommittee was adjourned.]

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