[Senate Hearing 107-686]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 107-686
 
                   ARE GOVERNMENT PURCHASING POLICIES
                        FAILING SMALL BUSINESS?
=======================================================================

                               ROUNDTABLE

                               BEFORE THE

            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 19, 2002

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate









                          U.S. GOVERNMENT PRINTING OFFICE
81-834                             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 AND ENTREPRENEURSHIP

        .........................................................

                      ONE HUNDRED SEVENTH CONGRESS

                              ----------                              
                 JOHN F. KERRY, Massachusetts, Chairman
CARL LEVIN, Michigan                 CHRISTOPHER S. BOND, Missouri
TOM HARKIN, Iowa                     CONRAD BURNS, Montana
JOSEPH I. LIEBERMAN, Connecticut     ROBERT F. BENNETT, Utah
PAUL D. WELLSTONE, Minnesota         OLYMPIA J. SNOWE, Maine
MAX CLELAND, Georgia                 MICHAEL ENZI, Wyoming
MARY LANDRIEU, Louisiana             PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         MIKE CRAPO, Idaho
MARIA CANTWELL, Washington           GEORGE ALLEN, Virginia
JEAN CARNAHAN, Missouri              JOHN ENSIGN, Nevada
    Patricia R. Forbes, Democratic Staff Director and Chief Counsel
               Emilia DiSanto, Republican Staff Director
               Paul H. Cooksey, Republican Chief Counsel







                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Kerry, The Honorable John F., Chairman, Committee on Small 
  Business and Entrepreneurship, and a United Sates Senator from 
  Massachusetts..................................................     1
Carnahan, The Honorable Jean, a United States Senator from 
  Missouri.......................................................    21
Bond, The Honorable Christopher S., Ranking Member, Committee on 
  Small Business and Entrepreneurship, and a United States 
  Senator from Missouri..........................................    09

                           Witness Testimony

App, Steven, deputy chief financial officer, Department of the 
  Treasury, Washington, D.C......................................     *
Armendariz, Fred, associate deputy administrator, Office of 
  Government Contracting and Business Development, U.S. Small 
  Business Administration, Washington, D.C.......................     *
Allen, Susan, president and CEO, US Pan Asian American Chamber of 
  Commerce, Washington, D.C......................................     *
Clark, Major, assistant advocate for procurement, U.S. Small 
  Business Administration, Office of Advocacy, Washington, D.C...     *
Denlinger, Stephen, president and CEO, Latin American Management 
  Association, Washington, D.C...................................     *
Henry, Major General Charles, U.S.A. (Ret.), president and CEO, 
  National Veterans Business Development Corporation, Alexandria, 
  VA.............................................................     *
Hudson, Morris, program director, Missouri Procurement Technical 
  Assistance Centers, Columbia, MO...............................     *
Kasoff, Barbara, vice president, Women Impacting Public Policy, 
  Oklahoma City, OK..............................................     *
Mazza, Pamela, senior partner, Piliero, Mazza & Pargament, 
  Washington, D.C................................................     *
Newlan, Ron, chairman, HubZone Contractors National Council, 
  Alexandria, VA.................................................     *
Parker, Patricia, president and CEO, Native American Management 
  Services, Inc., McLean, VA.....................................     *
Payne, Joann, president, Women First National Legislative 
  Committee, Washington, D.C.....................................     *
Robinson, Michael, program manager, Massachusetts Small Business 
  Development Centers, University of Massachusetts, Amherst, MA..     *
Rodriguez, Ramon, chief operating officer, U.S. Hispanic Chamber 
  of Commerce, Washington, D.C...................................     *
Styles, The Honorable Angela B., administrator for Federal 
  procurement policy, Office of Management and Budget, 
  Washington, D.C................................................     *
Thomas, Ralph III, associate administrator for OSDBU, National 
  Aeronautics and Space Administration, Washington, D.C..........     *
Turner, John, Minority Business Enterprise Legal Defense and 
  Education Fund, Washington, D.C................................     *
Turpin, James, director, Government and Industry Relations, 
  American Subcontractors Association, Inc., Alexandria, VA......     *
Wilfong, Henry, president, National Association of Small 
  Disadvantaged Businesses, Silver Spring, MD....................     *

           Prepared Testimony and Appendix Material Submitted

Kerry, The Honorable John F.
    Opening statement............................................     1
    Prepared statement...........................................    44
    Letters for the Record.......................................    87
    S. 1994 analysis and text....................................    62
    S. 2466 analysis and text....................................    68
    Analysis and Discussion draft of the ``Small and 
      Disadvantaged Business Ombudsman Act''.....................    77
Armendariz, Fred
    Prepared Testimony...........................................    96
    Report of Annual Procurement Preference Goaling Achievements.    98
Black, Ed, president and CEO, Computer & Communications Industry 
  Association, Washington, D.C., letter and comments for the 
  record.........................................................    99
Bollinger, John, deputy executive director, Paralyzed Veterans of 
  America, Washington, D.C., comments for the record.............   104
Denlinger, Stephen
    Prepared Testimony...........................................   111
Henry, Major General Charles
    Prepared Testimony...........................................   112
Hudson, Morris
    Prepared Testimony...........................................   116
Kasoff, Barbara
    Prepared Testimony...........................................   123
Newlan, Ronald
    Prepared Testimony...........................................   128
Payne, Joann
    Prepared Testimony...........................................   131
Turpin, James
    Prepared Testimony...........................................   141
Wilfong, Henry
    Prepared Testimony...........................................   155
Wilson, Don, president, Association of Small Business Development 
  Centers, Birke, VA, letter.....................................   159

* Comments, if any, are located between pages 6 and 41.


    ROUNDTABLE: ``ARE GOVERNMENT PURCHASING POLICIES FAILING SMALL 
                              BUSINESS?''

                              ----------                              


                        WEDNESDAY, JUNE 19, 2002

                              United States Senate,
          Committee on Small Business and Entrepreneurship,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 9:11 a.m., in 
room 428-A, Russell Senate Office Building, The Honorable John 
F. Kerry, (Chairman of the Committee) presiding.
    Present: Senators Kerry, Carnahan, and Bond.

  OPENING STATEMENT OF THE HONORABLE JOHN F. KERRY, CHAIRMAN, 
SENATE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP, AND A 
            UNITED STATES SENATOR FROM MASSACHUSETTS

    Chairman Kerry. This is the most orderly group I have ever 
had to gavel to order.
    [Laughter.]
    Chairman Kerry. Thank you all. Good morning, everybody.
    [Chorus of good mornings.]
    Chairman Kerry. Great. We are awake. I love it.
    Thank you very much. I really appreciate everybody taking 
time to come in, and thank you so much for participating in 
another roundtable and what we consider to be a very important 
one, and I thank you for taking part in this.
    We are, as you all know, here today to examine, in our 
roundtable format, which we have found extraordinarily 
effective, the question of whether or not Government purchasing 
policies are hurting small businesses. I wish the title were 
different. I wish we were here to examine how well we are doing 
and how much progress we have made, but sadly there is just a 
disconnect. We are talking a lot these days about the culture 
of the FBI and the CIA. Regrettably, there is a poor culture in 
Government surrounding procurement. There is a culture problem, 
to a large degree, an awareness problem, a caring problem, and 
I think, to some measure, my own personal opinion is it is an 
expediency problem. I think people sort of have this sense, 
well, I do not want to spend time dealing with a lot of small 
businesses or I do not think they will do it as well for us. 
Let us just get one big package, and get this off our plate. I 
mean, there is a mentality about it.
    We need to think through how we are going to deal with 
this. We cannot have the Federal Government spending billions, 
hundreds of billions of dollars, and not try to proactively 
reach out and share the pie. I mean, you just cannot do that, 
and there are so many goals contained in what we are trying to 
do, as we do this, in terms of growing small businesses, 
diversifying, allowing people to enter the business world who 
might not otherwise have easy access, particularly women-owned 
businesses.
    So I think this is imperative, and I think we have to 
acknowledge here today, I think, that one of the foundation 
premises of this discussion is that the procurement reform, as 
it was so-called of the early 1990s, simply has not adequately 
protected small business. There are actions such as contract 
bundling, increased use of GSA supply schedule cutbacks in the 
procurement personnel, as well as limitations on certain 
procurement programs in response to the Adarand decision, all 
of which have had a devastating impact, and I underscore that, 
a devastating impact on small business and their ability to do 
business with the Federal Government. I am sorry about that.
    We have some folks here particularly to sort of try to 
explain some of this from the administrative point of view, but 
we really need a major change in how we are thinking about 
this, and we have got to figure out how we are going to do 
that. Until the Federal Government, at all levels, realizes the 
importance of doing business with small business, I am afraid 
that these negative trends are going to continue, and we will 
not have the access that we seek on a national basis for a wide 
range of small business suppliers across the country, and they 
will continue to lose billions of dollars in opportunities year 
after year.
    In your packets that have been handed out by our staff, 
there are a series of charts which detail the Federal 
Government achievement on small business or lack of achievement 
on small business prime contracting goals, and you will see 
that the news is not encouraging. Most striking is the failure, 
for the second year in a row, to meet the main small business 
prime contracting goal of 23 percent. It should not be that 
hard.
    [The chart follows:]
    [GRAPHIC] [TIFF OMITTED] T1834.001
    
    Chairman Kerry. Equally troubling, I mean, if you have the 
intent to do it, if you are determined to do it, you can meet 
the goal, and if you have some kind of enforcement mechanism, 
and if you care about it. If you do not care about it and you 
just kind of let it slide into the backwaters of your efforts, 
then you are where we are. It is a lack of leadership, a lack 
of effort and a lack of caring, and we have got to underscore 
this.
    You also see in the charts the near failure of the HUBZone 
and Disabled Veteran-Owned Small Business Procurement programs, 
with respect to goal attainment, as well as the lack of any 
real increase in women-owned small business participation in 
Government procurement.
    We were bragging a few years ago about the incredible 
increase of women in small business, and here we are seeing 
just sort of a casual disregard for the capacity to continue 
that, and I think it is shameful. I would also point out that 
the Administration's delay in implementing the provisions of 
the fiscal year 2000 Small Business Reauthorization Act, 
creating the Women's Procurement Program, has also played a key 
role in keeping women-owned small businesses out of the Federal 
marketplace last year. I hope some of you will talk about that 
today.
    So we have a diverse group of people here with extensive 
knowledge of Government Small Business Procurement programs. I 
am grateful Angela Styles is going to be joining us from the 
Office of Federal Procurement Policy, and we have SBA Associate 
Deputy Administrator for Government Contracting, Fred 
Armendariz, and from the program side we have a number of 
representatives of Small Business's procurement offices at 
several Federal agencies, including the Procurement Technical 
Assistance Center representatives. We also have a number of 
advocates and business owners who work with participants in 
these procurement programs.
    Now it is my hope that today's discussion will be both 
thorough and constructive. We are not here to, I mean, you have 
got to state the problem, and I am trying to be honest in 
stating the problem, but I take no pleasure out of sort of a 
berating session. I mean, it just does not get us anywhere, and 
that is not what this is about. This is an effort to sort of 
figure out how do we turn this corner, how do we set where we 
ought to be.
    It is my hope that this discussion is going to accomplish 
that, and we look forward to receiving your input on some of 
the legislation that is in front of the Committee at this point 
in time, especially the draft of the Small and Disadvantaged 
Business Ombudsman Act.
    [The legislation and analyses are located in the appendix 
on p. 77].
    Chairman Kerry. I understand that no one piece of 
legislation is going to cure all of small business's problems. 
It never could. But on the other hand, it gives you the tools 
to be able to advance the process, and I think that the 
creation of the SDB ombudsman at the SBA will put us on a 
better track, in terms of isolating and focusing on the 
procurement issues and providing a mechanism for people to be 
able to come to somebody without fear of retribution.
    One of the reasons that we have not really had an ability 
for companies to sort of fight for themselves is that the 
minute they do, they are blackballed. So you raise your voice 
and say, ``Hey, wait a minute, what is happening here?'' And 
you think that next contract down the road is gone forever 
because you were the skunk at the garden party. We all know how 
it works, and we have got to provide some kind of capacity for 
people to be able to advocate here.
    This ombudsman I think has the ability to do that, to track 
complaints, to do it on a confidential basis and to try to help 
make the process work. Of critical importance in this is the 
first statutory consequence of an agency failing to meet its 
goals. We have to have some consequence. You cannot just slide 
by and have nothing happen. So our hope is that any agency that 
fails to meet their goal will be required to submit a report, 
and there will be a visible sort of airing of their having 
missed the goal and of what they are going to do to remedy it. 
They have to specifically submit that plan to remedy and detail 
why they failed to meet their business goal so that we can 
address those concerns.
    The ombudsman will also be responsible for tracking 
compliance with Section K of the Small Business Act, which 
stipulates that the Director of the Office of Small and 
Disadvantaged Business Utilization at each Federal agency will 
report to the head or deputy head of that agency.
    Late last year, with the support of Senator Bond, the 
Ranking Member, I sent a letter to 21 Federal agencies to gauge 
compliance with this provision, and using a very lenient 
standard of compliance, we have concluded that at least nine of 
the Federal agencies we surveyed are in violation of Section K 
of the Small Business Act. That is simply unacceptable. So 
later this week, I will be forwarding those survey results to 
the GAO so that it can perform a more detailed investigation.
    [The letter can be found on page 87.]
    Chairman Kerry. One final note on the legislation is the 
conclusion of a provision to increase the Governmental Small 
Business Prime Contracting Procurement Goal from 23 percent to 
30 percent. When I first made the suggestion that the Small 
Business Procurement Goal should be increased 7 percentage 
points, my office received a number of calls, both in support 
and in opposition, but, by and large, those in opposition 
pointed to the fact that the Federal Government has never 
achieved such a level of business procurement participation, 
and while that is true, no one said it was impossible. So it is 
simply a question of what is our goal?
     Ninety-nine percent of the businesses in America are small 
business. Fifty-two percent of American workers work in what is 
defined as a small business. Are we to believe that when the 
Federal Government is spending money, we do not have the 
ability to achieve the goal of 30-percent businesses having 
access to that kind of procurement? What that does is provide 
enormous strength to the small business community, and I think 
it is a mark of the Federal Government's confidence and belief 
in the ability of these businesses to meet the standards and do 
the job.
    Obviously, we all know here, if they cannot do it, if there 
is a lack of availability, there is all the capacity in the 
procurement process to take note of that. Nobody is required to 
buy something from somebody who does not have it. Nobody is 
required to buy something that does not meet the standards. 
Nobody is required to buy something that does not do the job or 
that puts people at risk or that does anything contrary to good 
procurement policy. That is not the purpose of this.
    There is no diminution of standards or quality in what we 
are seeking to do. It is simply saying that all things being 
equal, we want the small business community to be able to 
share, and we ought to be able to do that.
    I think that that is probably the outline, as much as I 
would like to go into it at this point in time. We will discuss 
two other important pieces of legislation: S. 1994, the 
Combined 8(a) and HUBZone Priority Preference Act, and S. 2466, 
the Small Business Federal Contractor Safeguard Act. I think 
everybody understands what those bills do and what we are 
trying to do with them.
    Chairman Kerry. So, without further ado, Senator Bond is 5 
minutes away.
    Let me just run through sort of how we are going to work 
this. How many of you have taken part in one of the roundtables 
before? Several of you--OK, so you are pretty experienced and 
versed in this.
    For those of you who have not--let me just ask you, when 
you intervene, as we invite you to do, in my absence or Senator 
Bond's absence, our staffs will run the show, and they have 
done so with great ability in the past events, and we have a 
full record which is then made part of the record of the 
Committee.
    But, please, just state your name clearly. This is an 
official proceeding. There is a court reporter who is taking 
down everybody's statements, et cetera, to be part of that 
record. If you want to speak, just flip your card up on its 
side, and then they will take note of you as we go along here.
    Again, if we can try to contain the comments so there is a 
good dialogue and not long speeches, I think that is very 
helpful in terms of making this more rewarding and more of a 
dialogue, rather than sort of a long series of soliloquies.
    John DaSilva, of my staff, and Cordell Smith, of Senator 
Bond's staff, will act as the facilitators. So why do we not 
just run around very quickly. Everybody just introduce 
themselves, say who you are, and then we will sort of open up.
    Mr. Smith. Hi, I am Cordell Smith. I am with Senator Bond's 
staff.
    Mr. App. Steve App, Deputy Chief Financial Officer at 
Treasury.
    Mr. Armendariz. Fred Armendariz, Associate Deputy 
Administrator from the U.S. Small Business Administration.
    Ms. Allen. Susan Allen, president and CEO of the U.S. Pan 
Asian American Chamber of Commerce, hoping to represent the one 
million Asian-owned businesses in the country.
    Mr. Clark. Good morning. Major Clark, Office of Advocacy, 
U.S. Small Business Administration.
    Mr. Denlinger. Steve Denlinger, president of LAMA, Latin 
American Management Association.
    General Henry. Chuck Henry, president and CEO of the 
National Veterans Business Development Corporation, 
representing, hopefully, 2.4 million veteran owners.
    Mr. Hudson. Morris Hudson, program director, Missouri 
Procurement Technical Assistance Center, also president-elect 
of the Association of Government Marketing Assistance 
Specialists.
    Ms. Kasoff. Barbara Kasoff, co-founder and vice president 
of Women Impacting Public Policy.
    Ms. Mazza. I am Pam Mazza, with the law firm of Piliero, 
Mazza & Pargament. I am a Government contracts attorney, and 
our firm represents small businesses in the 8(a) program, the 
HUBZone program, women-owned businesses, graduates, and other 
small businesses.
    Mr. Newlan. Ron Newlan, chairman of the HUBZone Contractors 
National Council, representing all HUBZone firms nationwide.
    Ms. Parker. Patricia Parker. I am president and CEO of 
Native American Management Services, and I am also here 
representing the National Indian Business Association and a 
founding partner of Women Impacting Public Policy.
    Ms. Payne. I am Joann Payne. I am president of Women First 
National Legislative Committee, and I represent those women 
certified in the Disadvantaged Business Enterprise program, 
administered by the Department of Transportation, and I might 
add the most successful program we have.
    Mr. Robinson. Hi. I am Michael Robinson, program manager at 
the Massachusetts Procurement Technical Assistance Center.
    Mr. Rodriguez. Good morning, Senator. Ramon Rodriguez. I am 
the chief operating officer of the U.S. Hispanic Chamber of 
Commerce, representing approximately 1.8 million Hispanic-owned 
businesses in the country.
    Mr. Thomas. I am Ralph Thomas. I am assistant administrator 
for Small and Disadvantaged Business Utilization at NASA, and I 
am also the chairman of the Federal Small Business Directors 
Interagency Council.
    Mr. Turner. Good morning, Senator. My name is John Turner, 
Jr. I am director of Special Projects for the Minority Business 
Enterprise Legal Defense and Education Fund, an organization 
founded in 1980 by former Maryland Congressman Parren Mitchell. 
I am representing Anthony Robinson, our president, who had 
pressing family business today.
    Both Anthony Robinson and former Congressman Parren 
Mitchell asked me, as a preliminary matter, to commend your 
interest, concern and support for the minority business 
community. We have seen firsthand the work you have done in 
Massachusetts, and especially in Boston.
    Mr. Turpin. Good morning, Senator. My name is James Turpin, 
and I represent the American Subcontractors Association, a 
trade association representing subcontractors and specialty 
trade contractors in the construction industry.
    Mr. Wilfong. Good morning, Senator. My name is Hank 
Wilfong, president of the National Association of Small 
Disadvantaged Businesses. We are about 300-strong around the 
country, dealing primarily with the aerospace defense industry. 
One of the things I wanted to do was to compliment you on the 
Ombudsman bill. I think it is awesome. I have reviewed it and 
re-reviewed it, and I think it is awesome and will help do a 
lot of the things that need to be done.
    Also, I want to personally thank you for your putting that 
letter, the SDB set-aside letter that you wrote to SBA. I am 
sorry it did not come out exactly like we would have liked to 
have done, but I appreciate your having done it, and I wish we 
could send it again.
    Ms. Forbes. I am Patty Forbes. I am the Chairman's staff 
director on this Committee.
    Mr. DaSilva. I am John DaSilva. I work for Senator Kerry on 
the Committee, handling procurement issues.
    Chairman Kerry. Well, thank you all very, very much.
    Those of you who commended me will be placed high on a 
special list here.
    [Laughter.]
    Chairman Kerry. Thank you very much. Thanks for the 
comments.
    So why do we not start off. I know Senator Bond is on his 
way. We are going to interrupt when he comes, and I have a 9:30 
that I am supposed to be at, but I will stay until he gets 
here.
    Who would like to lead off? Do you have a specific----
    Ms. Allen. I would.
    Chairman Kerry. Before you do, let me try to--and we will 
come back to you, Susan, in 1 second.
    Is there something inherent--let me just sort of put this 
question on the table, if I can, as a beginning point--is there 
something inherent in the procurement process itself that is a 
stumbling block to the ability to be able to do better or, I 
mean, what would each of you say is the principal reason, if 
there is one principal reason that leaps out at you, for why we 
are not meeting this goal or not able to. Can we start there?
    Ms. Allen. I think it is lack of transparency, the 
complication of the process. Nowadays, when the small 
businesses, particularly our constituents, and we hear a lot 
from them, they were told, if you want to participate in the 
Federal contracting process, go to our website, and they hire a 
full-time staff, they hire another full-time staff, they just 
do not have enough money to hire the staff to go search on the 
website, and that is one major obstacle.
    Small businesses, and this is the point I wanted to make 
when I volunteered to start to lead this off, have been 
extolled for nearly 20 years as the backbone of the American 
economy. We created more jobs than all Fortune 500 companies 
combined. We are the risk-takers, we are the innovators, and 
yet now with the contract bundling practice, it is hurting 
them. It is bundling them out of the table, and I just want to 
bring a new perspective because I am sure later I will be 
hearing, Senator Kerry, a lot about the other issues that have 
affected why small businesses are having less and less portion 
of the contracting businesses.
    Remember, in the 1980s, how we used to hear Japan is the 
country who could say, ``no''? One very arrogant Japanese 
politician in Japan wrote a book and said, ``Japan is the 
country that could say no.''
    Well, Japan has been run by a handful of major 
corporations, mega corporations, and that is what we call 
Japan, Inc. Look at Japan today, these keiretsus, which is 
analogous to our bundled corporations, have brought Japan's 
economy to its knees, and we do not want to be the keiretsu of 
Japan. I think the lack of transparency, the lack of 
accountability, the lack of innovation in major corporations 
who no longer do as much R&D as they used to, they wait for 
their small businesses to take the risk, and invent the 
processes and products, and then the major corporations come in 
like Pac-Man, they eat them up, and with the Federal 
procurement process it is so complicated, it is like a maze. If 
we can simplify the process, do not just go to the small 
business and tell them go surf our website, that will be a 
major step.
    Chairman Kerry. So three things. You need a contact person 
that helps make it happen; you need transparency----
    Ms. Allen. Accountability.
    Chairman Kerry. And accountability.
    Ms. Allen. It is not just the major contractors, but make 
the subcontractors come up with the report, and some have even 
suggested--OMB held a public hearing last Friday and suggested 
that their future contracts be tied to their performance. Of 
course, as you said, we should award contracts according to 
merit and not for the sake of goals.
    Chairman Kerry. Good comments.
    Before we go further, and, General, we will come back to 
you, I said we would interrupt when Senator Bond got here. He 
is now here, and I would like to turn the floor over to Senator 
Bond for his opening comments.

   OPENING STATEMENT OF THE HONORABLE CHRISTOPHER S. BOND, A 
              UNITED STATES SENATOR FROM MISSOURI

    Senator Bond. Mr. Chairman, thank you. I apologize. This is 
one of those days. This is the ``Perfect Storm,'' when I had a 
couple of items this morning and a hearing in the Health, 
Education, Labor and Pensions Committee going on all at once, 
but I commend you for taking the lead in this, Mr. Chairman, 
and I welcome our procurement roundtable. Because, as I think 
everybody knows now, this Committee has had a long-standing 
interest in ensuring that small business has the ``maximum 
practicable opportunity to participate,'' in the words of the 
Small Business Act, in government contracting, and certainly 
Susan has just given a very good reason why this small business 
participation is so important.
    First, I want to recognize my Missouri constituent, Morris 
Hudson, who has joined us today. He heads the Procurement 
Technical Assistance Center at the University of Missouri and 
is the president-elect of the national professional association 
for PTAC staff, the Association of Government Marketing 
Assistance Specialists.
    I want to say a special word of greeting, also, to Angela 
Styles, the Administrator of the Office of Federal Procurement 
Policy for President Bush. In March, the President personally 
stated his commitment to tackle the problem contract bundling, 
and Angela has been the point person in trying to convert that 
commitment into specific policy steps. Unfortunately, around 
here, when you are the point person, you are also the point 
target.
    [Laughter.]
    Senator Bond. There have been some anonymous sources making 
anonymous comments about her actions in the area, and one 
anonymous critic was dismayed that Angela bought into the 
``myth'' that bundling has hurt small business, suggesting 
Angela was pursuing this issue out of personal motives, rather 
than as an Administration initiative.
    Well, I have heard the President, in his own words, say 
from his own heart, that this is a problem. So, Angela, you 
must be doing something right. I have the analogy we used to 
use back home. If you throw a rock into a pack of dogs, you 
know the one that has been hit because that is the one that 
barks, and if they howl, you know that you must be doing 
something right.
    But we are looking forward to a good discussion today about 
bundling. We need to know the state of play on the 
Administration's initiative, as well as the reaction to the 
bill that Chairman Kerry and I have introduced. We came close 
in last year's defense authorization on agreement to tighten 
the current law, but our bill is going to build on that 
language.
    I also want to welcome Ron Newlan of the HUBZone 
Contractors National Council. Ron has some concerns about the 
bill that Chairman Kerry and I introduced to provide a super-
preference for firms that are both HUBZone and 8(a) program 
participants. I share the view that a 20-percent price 
evaluation preference, 10 percent for each program added 
together, is probably too high.
    Ron also has some concerns about some of the bill language 
from set-asides. For example, the bill says when bills are 
being sought just from HUBZone firms, a HUBZone set-aside, and 
a HUBZone firm that is also 8(a) is bidding, that firm should 
get the preference when it submits a bid comparable to one from 
a non-8(a) HUBZone firm, but ``comparable'' is the rub.
    So we need to hear these kinds of criticisms and 
suggestions. That is what we are here to do in this roundtable, 
to learn how we can make legislation better, how we can deal 
with the problems we find.
    We have draft bill language in front of us. The Chairman's 
idea is to create a Small and Disadvantaged Business Ombudsman 
at SBA. I want to hear your views on this. I want to know your 
thoughts to see which way I go. But a strong piece of the bill 
is the requirement that agencies negotiate plans to achieve the 
small business participation goals. Instead of just failing to 
meet the goals every year, let us find some way that we can get 
them done. Whether that requires a new position in SBA or 
whether the task can be handled by the Associate Deputy 
Administrator, that is one of the questions.
    The bill would also increase the small business goal from 
23 percent to 30 percent. Thirty percent sounds better than 23 
percent, but when you are not getting 23 percent done, what do 
you need to do? My view is that let us get to the first goal 
first before we worry about trying to raise the goal when we 
are not getting the performance we need.
    So these are some of the things that I hope that you will 
get out on the table, and I apologize that I am not going to be 
able to be with you today because we have got--we are going to 
be talking about ergonomics in the HELP Committee, and some of 
you in small business have spoken to us about ergonomics in the 
past. So I am going to go see if we can make sure that that 
comes out well.
    But, again, Mr. Chairman, thanks for your leadership. 
Thanks to all of you for joining us today.
    Chairman Kerry. Thank you, Senator Bond. Let me just 
acknowledge that I appreciate particularly Michael Robinson 
coming down from Massachusetts from the Procurement Technical 
Assistance Center there. I understand the skepticism, and I 
mentioned it, Senator, before you got here, about sort of 
moving the goal when we acknowledge we are not where we are, 
but it is a little bit like, if you change your culture and you 
actually put in place the kinds of tools necessary to get 
somewhere, sort of like changing a team, you know, you get a 
new coach who comes in and says, ``I do not care about your 
less-than-winning-ways last year.'' We are going to set a new 
goal, and this is how we are going to achieve it, and that is 
how you create a Super Bowl team. That is how you turn people 
around is by raising the standards and moving further.
    Senator Bond. OK. OK.
    [Laughter.]
    Senator Bond. All right, the Patriots beat the Rams, now, 
damn it, we have been getting along good.
    [Laughter.]
    Senator Bond. I mean, we have got this Democrat-Republican 
thing, we can overcome that. But if you want to rub the 
Patriots in my face, just because you got lucky----
    Chairman Kerry. I did not know----
    Senator Bond. I mean, Brady did a hell of a job, but, damn, 
do not go rubbing it in, OK?
    Chairman Kerry. Sensitive, sensitive, sensitive.
    [Laughter.]
    Senator Bond. You got a raw nerve. I will tell you what.
    Chairman Kerry. I never mentioned the name. I was thinking 
about Vince Lombardi, not Bill Belichek.
    Senator Bond. We do not speak of rope to the family of a 
man who has just been hanged.
    [Laughter.]
    Senator Bond. And you do not go giving me Super Bowl 
analogies, but outside of that we are good friends.
    Chairman Kerry. Gees, you do take it personally.
    Senator Bond. Yeah.
    Chairman Kerry. Senator, let us just try to do better.
    General you were next, and thanks for being patient.
    General Henry. Thank you.
    Chairman Kerry. We look forward to your ongoing comments.
    General Henry. Mr. Chairman, Senator Bond.
    First, Mr. Chairman, let me thank you and Senator Cleland 
for your help with our corporation on the no-year funding for 
2002. We certainly appreciate your effort in making that happen 
so that we could deal as business people, rather than being a 
little bureaucratic on it.
    I think that the answer that I would like to bring to you, 
in response to the question concerning whether or not the 
legislation and whether or not the programs that we have, what 
I see, from a standpoint of having been the Army's competition 
advocate general, and having been the senior procurement 
executive at the Defense Logistics Agency, is that the goals 
that we have can be met, but the problem is in the execution. I 
would suggest that this body look at putting some teeth into 
why you are not meeting the goals. I look at this both from the 
Federal Executive Branch and from the prime contractors.
    We all know that bundling is not working for the small 
business community, and we can sit and do a lot of jawboning on 
that particular issue. I think that what you need is that you 
hold the Executive Branch responsible. I would even advocate so 
far, if they did not meet their objectives on it, that you 
withdraw contracting authority. Angela, you may not like that. 
But nothing will get a senior executive officer's attention 
faster than realizing that he can no longer award the contract.
    So you have got a lot of contracting agencies around the 
Federal Government, and there is not a problem with finding 
somebody that can award a contract. So you have a goal, you 
have a target. If they are not meeting the goals, the answer is 
not ``why not?'' It is ``we withdraw your authority until we 
find out that you can do it.''
    Having said that, that leads me to the Ombudsman issue. 
Back in 1984, this body enacted the Competition in Contracting 
Act, and I was fortunate enough to become the Army's first 
competition advocate. I was an ombudsman for increasing 
procurement in Army procurement. I worked for two great 
gentlemen--the Secretary of the Army, John Marsh, and General 
Wickham, who was the chief of staff, and both of them granted 
to me the authority to stop a procurement if, in my opinion, it 
did not meet the Competitive Acquisition Exec.
    What we did is, in 3 years we went from 34 to 64 percent, 
and I found out that while this was a new position, four stars 
in the Army took notice when they realized that I had the ear 
of the Secretary of the Army and the chief of staff of the 
Army.
    So I would say to you that the Ombudsman should never be 
below the senior level, reporting directly to the senior person 
in the organization, and you give the ombudsman the teeth to 
stop a procurement if, in his opinion, it does not meet the 
goals and objectives going forward. I believe that if you do 
that, you will see some very, very substantial advantages.
    I have spoken too long.
    Mr. DaSilva [presiding]. Thank you.
    Hank, you were up next.
    Mr. Wilfong. To me, John, it is simple, and to the Senator. 
Monitoring, compliance and enforcement. I hold the Ombudsman 
Act very highly, and a number of that 95-507, 99-661, 101-560, 
101-510, all of them are great acts and great laws, but if they 
are not monitored and enforced, what good is it to pass another 
law?
    So my thing here today, the one note that I came here today 
is to monitor compliance and enforcement.
    Mr. DaSilva. Ron, you had yours up next?
    Mr. Newlan. Thank you, John. It is too bad the Chairman 
left, because I come from a background similar to his, active 
duty Navy and then came to the private sector. The general, and 
others around the table, I am sure have a--I know the general 
does--and others have a military background.
    Basic training in the military is you do not give 
responsibility for a function unless you also give them the 
authority to carry out that function. We see too few people in 
the Federal procurement business that have both the 
responsibility and the authority to change a procurement, make 
it a small business set-aside and to assist towards the 23-
percent minimum floor, which I prefer to call it, other than 
the goal.
    So I would look around and see who in the departments and 
agencies has the authority and has the responsibility. I think 
the Secretary, Secretary of Transportation, Secretary of HUD, 
Secretary of Defense, clearly, has the authority and the 
responsibility, but as you go down the organization, I do not 
see many people, and none of them are held accountable.
    The OSDBUs might have a responsibility, but they do not 
have the authority, in most agencies, to change something. They 
recommend; they do not dictate. I think we have got to focus on 
giving somebody, in all of these departments, who is close 
enough to the action both the total authority and total 
responsibility to hit the 23- or 30-percent minimum.
    Thank you.
    Mr. DaSilva. Steve.
    Mr. Denlinger. Thanks, John.
    The Senator asked the question: Why is it so difficult to 
participate in the Federal market? Just as one example, I have 
a meeting at 1:30 p.m. with a Member of ours, a high-end 
security services firm in the computer side of security 
services, who is working on the upgraded security at the 
Pentagon after the September 11th situation. We have got a 
situation where the impact of bundling is being felt beyond the 
initial bundled contract. There is a very, very large 
contractor there that is performing work all across the entity, 
and our company is performing an 8(a) contract, and what is 
happening is the pieces of work that our company is doing are 
now being carved out and being lateralled over to this giant, 
huge contractor. There are some provisions, as you know, that 
provide safeguards for 8(a). You cannot take away work from an 
8(a) company if that work was formerly 8(a).
    I think those same kinds of safeguards need to be put in 
place with respect to whether it is HUBZone or veteran- or 
woman-owned and so forth. So it is not only the bundling of the 
contract to begin with, but it is the tendency of the agencies 
to funnel work into that bundled contract work that is being 
performed by other small businesses.
    I want to commend you for the other pieces of legislation 
that you have put together. They are really terrific. The 
Ombudsman Act, I have got a couple of pieces that I want to 
suggest to improve that.
    The combined HUBZone parity, 8(a) parity situation, brings 
to my mind something that I think we are all going to have to 
face, and that is that it is getting to the point where we need 
to reconcile how all of these programs work together or do not 
work together. We have some programs like 8(a) that has a 
procurement mechanism and no goal.
    We have the women's procurement program that has a goal and 
no procurement mechanism and SBA is finding it difficult to 
implement that procurement mechanism legislation which was put 
in place a couple of years ago.
    HUBZone has a goal and a procurement mechanism. Veterans 
has a goal, but no procurement mechanism. Some of these 
programs have price preferences, some of them do not. I sat 
down a couple of months ago, and I read guidance in one of the 
agencies to contracting officers as to how to deal with these 
preferences. I have been involved in this work for 30 years, 
and I have never been so confused in my life. We are going to 
have to reconcile all of these programs so they are all treated 
equally, so they are uniform, so contracting officers can 
understand exactly how to proceed and give them the 
responsibility to meet the goal.
    I commend you for the 30-percent goal. That is a big, 
important step forward. If you give agencies a minimum goal, 
they will achieve it, and they will stay right there. So it is 
time to move forward to a more aggressive role.
    Thank you.
    Mr. DaSilva. Thank you. I will pass it on to the Chairman.
    If I could just make a couple more housekeeping remarks. 
When you are recognized to speak, if you could take the 
microphone nearest to you and put it by you so that we are sure 
that everybody can hear. The acoustics in here are fairly good, 
but this will help a bit. If I fail to state your full name, 
which is a little habit of mine, if you could state that so the 
court reporter can take that down.
    James Turpin.
    Mr. Turpin. Yes, just a quick point. Getting the contract 
on the front end is only part of the problem. I think we need 
to look at the other end of the process and getting paid in a 
timely way and the payment protections under the Prompt Payment 
Act, you can get paid on Federal work, but if it is a Federal 
grant, then it falls under the State payment protections, and 
in a State like Massachusetts, you could very easily be working 
in six or eight different States in a very small radius, each 
of whom have a different payment law, and you do not know when 
or how you are going to get paid.
    Also, back in 1988, we experimented with direct 
disbursement, and that was very quickly abandoned. But I think 
with technology being what it is today, we should be able to do 
direct disbursement because if you do not get the cash flow on 
your contract, then you may not be in business to finish the 
contract. So getting the contract is only the first step. You 
need to get paid in a timely way so you can be there to do the 
next contract.
    Mr. Smith. John, may I jump in with a question?
    Mr. DaSilva. Certainly.
    Mr. Smith. James, what do you observe in terms of prompt 
payment and a difference between prime contractors and 
subcontractors in dealing with the Federal Government? Our 
impression is you at least have a Federal law that provides 
some protection for the primes, but what sort of flow-down is 
there to make sure that subcontractors get paid promptly?
    Mr. Turpin. Well, there are certain protections in the 
Prompt Payment Act for construction, but it depends a lot on 
the general contractor and how they pass that on through to 
their subs. That is one of the reasons we are advocating for 
direct disbursement, where it will not have to go through the 
general to get to the sub. If you have completed your work in a 
timely way, the general signs off on it, then you would get 
your payment, instead of it going through the general and you 
having to get it through the general. You can shorten the 
process if it just goes directly to the person who has 
completed their work and is entitled to be paid.
    Mr. Smith. Does the law currently provide for a time frame 
that says once the sub has submitted the invoice, the clock is 
ticking, and you have this many days, that is comparable to 
what the Federal relationship with the primes is? Is there any 
kind of time line for subs or is it when they get around to it?
    Mr. Turpin. There is, but it is not always enforced.
    Mr. Smith. Not as robust?
    Mr. Turpin. Or consistent. It is not consistent.
    Mr. Smith. Thank you.
    Mr. DaSilva. John Turner next.
    Mr. Turner. Yes. We do support the Ombudsman bill, and we 
are encouraged by the comments that have been made around the 
table concerning the importance of monitoring, and compliance, 
enforcement, and the ability to stop procurement. We also are 
encouraged by the acknowledgement that bundling can have an 
adverse effect on procurement.
    We strongly urge, on behalf of the Minority Business 
Enterprise Legal Defense and Education Fund, that we not go all 
the way down the road in analyzing the Ombudsman Act without 
taking into account the report of the Commercial Activities 
Panel, which has endorsed the use of best value.
    Our organization has taken the approach that the best-value 
approach to contracting is a Trojan horse designed to kill that 
small and minority business person.
    We had a case in point, when we were retained by the 
Department of Energy to do a ``lessons learned'' piece of the 
Superconducting Super Collider Project from many years ago. One 
of the things we learned was--and I was project director of 
that, so I am speaking firsthand--the people there said we have 
got a project to build. We do not have time to pay attention to 
goals for minority, women and small businesses.
    Our fear is that best value will become, in 2002, what 
bundling was about to become before the turn of the century.
    Mr. DaSilva. Thank you. I want to point out that this is an 
issue that has been raised to the Chairman. We were actually 
trying to help a firm that should have been awarded a contract, 
but when it became apparent that it was going to go to that 
small business, they changed the best value makeup so that they 
wound up losing that contract.
    Mr. Turner. If I may, one of the fears that we have is that 
the rampant use of best value will take away the effective 
ability of the agency to monitor and to stop a procurement 
because there will be no staff on the Government agency that 
would be in regular contact with the people, with the big 
companies that are designing, and building, and carrying out 
that procurement. So--well, point made.
    Mr. DaSilva. Ralph Thomas, next.
    Mr. Thomas. Thank you.
    One thing I want to say is that, and I think I am the only 
Government agency here, other than, of course, Angela----
    Mr. DaSilva. SBA is here.
    Mr. Thomas. Oh, I am sorry, Fred, not on purpose, believe 
me, and, Steve, just ignore it.
    [Laughter.]
    Mr. DaSilva. We have two PTACs, as well.
    [Laughter.]
    Mr. Thomas. I want to say that if a Government agency wants 
to meet a goal, I mean, furiously wants to meet a goal, it is 
definitely possible. Congress required NASA in a bill in 1990 
to award at least 8 percent of its prime and subcontract 
dollars to small disadvantaged businesses, and we embarked on a 
plan, on an aggressive plan utilizing the law very 
aggressively, and we went up, and up, and up and now we are at 
19.3 percent.
    We have gotten awards from virtually every trade 
association in here, including the National Association of 
Small Disadvantaged Businesses, the U.S. Pan Asian American 
Chamber of Commerce. We recently got the award for women, and 
others, if I missed you, I am sorry. So, if you can please that 
many entities at the same time, you must be doing something 
right.
    Having said that, I think that we understate the progress 
of small businesses and procurement dollars when we do not 
count at all for subcontracting. Subcontracts are very 
important to NASA. Recently, when an astronaut was putting the 
robotic arm on the space station, what kept that astronaut 
alive were batteries manufactured by a small minority business. 
The device that they used to communicate with the inside of the 
shuttle and Houston is a device manufactured by a woman-owned 
business on a subcontract, both of those things on 
subcontracts. So I think, with NASA, with the emphasis that we 
have on subcontracting and not to count it all, recognize it 
all, I think understates progress.
    Having said that, in terms of prime contracts and 30 
percent, I think some recognition has to be done about the 
budget makeup of all of the agencies. NASA does not have 30 
percent of prime contracts left over, after large contracts 
are--the space station, the space shuttle, the Jet Propulsion 
Laboratory. So I think we have to talk in terms of what the 
budget makeup of the agencies are. I mean, all agencies are not 
the same.
    We have consistently met all of the goals we negotiate with 
the SBA, but in terms of across-the-board goals, certainly, 
what applies to the Department of Interior does not apply to 
NASA.
    Mr. DaSilva. I am going to turn it over to Cordell in a 
second. I am just anxious to speak to this.
    Just a couple of points. One, the Ombudsman Act does not 
require every agency to meet a 30-percent goal. It requires a 
governmentwide goal, and I know Cordell really wants to speak 
on the topic of the prime and subcontracting, so I am going to 
let him do so.
    Mr. Thomas. I know that is not what you require, but 
sometimes that is the way it is implemented across the board. I 
think that that does not set all agencies on a level playing 
field.
    Mr. Smith. Ralph, you mentioned you had an 8-percent goal 
that was set in, what, 1992?
    Mr. Thomas. No, it was set in 1990.
    Mr. Smith. That is a unique goal for the SDB program for 
NASA?
    Mr. Thomas. Right.
    Mr. Smith. That does combine prime and sub; is that right?
    Mr. Thomas. Right, yes, it does.
    Mr. Smith. But the governmentwide 23-percent, possibly 30-
percent, goal currently is prime contract dollars.
    Mr. Thomas. Right. What I am saying is other people never 
meet a 23- or 30-percent goal as an Agency because of the way 
our structure is.
    Mr. Smith. It is just also the nature of what you buy, and 
I know the Department of Energy is similarly situated.
    Mr. Thomas. Right.
    Mr. Smith. I know the OSDBU Council has been trying to kick 
this around back and forth trying to figure out a way to handle 
this. Have you come up with something other than, I hope, 
adding the numbers together? Because I think my main concern 
about the approach of taking prime dollars and subcontract 
dollars and adding them together and saying, X plus Y equals 
the number of dollars we gave to small business, is, for 
example, we had the discussion with Mr. Turpin a moment ago 
about there being a substantive difference between subs and 
prime contracts and their value to small business. I am afraid 
you add apples and oranges together when you do that.
    Mr. Thomas. Well, they may or may not be. A prime contract 
may or may not be more important than a sub. On the space 
station, where you have--what is more important? A million-
dollar subcontract or having the $2.2 billion prime contract? 
Certainly, in that situation, the subcontract----
    Mr. Smith. Have you all--I am sorry--have you all come to 
any kind of discussion or any kind of conclusion on what you 
are recommending on this front?
    Mr. Thomas. Not yet, but prime contracts should count as 
prime contracts and subcontracts as subcontracts. Yes, 
sometimes we add them, but always distinguishing it. We may say 
we are doing 32-percent total dollars with a certain amount 
prime and a certain amount sub. I think that being done, I do 
not see any problem with that.
    Mr. Smith. Another way to tackle this that I find quite 
interesting is Pete Aldridge's memo, the Under Secretary of the 
DoD, he did the attempt to create a report card for the 
executive branch--he had a grade for prime, and a grade for 
sub, and a grade for this goal and that goal, and then came up 
with an overall assessment.
    Mr. Thomas. Right.
    Mr. Smith. I think that that is a good approach to come up 
with an overall grade, but without taking the prime and sub and 
adding them together, which I think is potentially misleading.
    Have you all any thoughts on that approach?
    Mr. Thomas. Well, I have seen Mr. Aldridge's formula and 
like it very much. The OSDBU Council has been working on 
setting standards, coming to a consensus on setting standards 
for grading Federal small business programs. Whatever the 
formula is, it has to recognize what my problem is.
    Today, subcontracting is not recognized whatsoever at all. 
The scorecard does not recognize it at all, when putting goals, 
overall goals into place, whether it be 23 percent or 30 
percent. There is no recognition of subcontracting at all, when 
it is very important, extremely important to the future of 
small businesses.
    Mr. Smith. When you report your data to FPDS, just to--I 
think you are saying this, but just to be clear--when you 
report your data to FPDS, the Federal Procurement Data System, 
and you say we had X prime contract dollars, it is prime 
contract dollars.
    Mr. Thomas. Right, absolutely.
    Mr. Smith. There is no mixing of the two.
    Mr. Thomas. Absolutely. Whenever we talk about it, we 
distinguish what is what, but it does not matter because we 
have gone way up in prime contract dollars too. In fact, we 
have the fastest rate of increase of any other agency in the 
last 7 years. Just because we are strong in subcontracting, we 
do not stop prime contracting. That is extremely important, but 
we can only do what we have left. We cannot create something 
that is not there.
    Mr. Smith. Thank you.
    Mr. DaSilva. Ms. Styles, I believe you are next.
    Administrator Styles. Thank you very much. I just want to 
let you know how much I appreciate the opportunity to be here 
today and how much this Administration appreciates the support 
of this Committee as we move forward assessing some very 
difficult problems that we have.
    I categorize them into four categories as we look at the 
task that we have ahead of us, where we are looking at 
addressing the issues of access of small businesses, we are 
looking at contract bundling, we are looking at the 
transparency of our contracting system, and we are looking at 
accountability. If there is one thing I can focus on, it is: 
governmentwide we are really looking at accountability.
    I consider my job to be one to ensure that our procurement 
system allows small businesses to flourish, and I can tell you 
that has not been the commitment of my office over the past 8 
to 10 years. We are really taking a very hard look, I think, at 
what has been created through the past 8 years of acquisition 
reform and the situation of small businesses as a result.
    I think it is really antithetical and something of an 
anathema to the President to have small businesses come in and 
say we have to hire a lobbyist in Washington in order to get a 
contract, we have to go and knock on the door of every agency. 
We have to be a prequalified contractor and then go knock on 
doors. We have created, I think, a system that you have to get 
the inside track on procurements at different departments and 
agencies. We have created, I think, a system that is favoring 
the access of a few, to the detriment of many, including small 
businesses.
    In March, the President made a real commitment to move 
forward on many small business issues, but in particular he 
focused on several of the government contracting issues related 
to small businesses and has asked my office to make 
recommendations to him. I think our working groups have been 
working very hard moving forward.
    I think we will have recommendations ready this fall on two 
of the key issues: one is contract bundling and the other one 
is the state of our system in terms of access, the openness of 
the system and the transparency of the system. But the group we 
have put together is a good group. I think they are really 
people at the departments and agencies that are committed to 
small business, and I think the recommendations that come out 
will be good recommendations.
    Thank you.
    Mr. DaSilva. If I could just ask one quick follow-up 
question on the President's proposal. One of the things, though 
we are thrilled to see the level of attention this is 
receiving, one of the things that has come to the Committee's 
attention, the concerns that have been raised to us, are the 
consequences of going to complete, full and open competition 
and what that means for small business--set-asides, for 
reserving contracts for 8(a), for HUBZones and for the 
individual small business programs.
    Can you sort of elaborate a little on what is envisioned by 
full and open competition?
    Administrator Styles. It is not a move back to CICA, in 
terms of full and open competition for everything in any 
respect. The problem I think we are seeing is that you can have 
a thousand people on a schedule, and a department or agency 
only has to go to three. So small businesses simply never find 
out about the opportunities, and we have to make sure that 
those task and delivery orders are transparent, that they are 
open, that people know what the needs of the departments and 
agencies are.
    That does not mean that we are getting rid of the many good 
things that were created during acquisition reform and the many 
different contracting vehicles. It is not to remove a focus 
from other statutory requirements, it is just a recognition 
that there is a real problem here with the procurement system, 
in terms of us telling people what our needs are, and us 
continuing to contract with large contractors, and departments 
and agencies continually going back to the same contractors and 
never telling the public what their needs are.
    Mr. DaSilva. Joann Payne.
    Ms. Payne. Thank you.
    I wanted to basically discuss, first of all, the proposed 
bill by the Senator, where I think it would necessarily 
advocate for small, disadvantaged businesses. Women are left 
out of there, so it would be nice to sort of take that 
Executive Order and legislate that, as well, as part of this--
    Mr. DaSilva. Just a clarification, it is small and 
disadvantaged business ombudsman, and the legislation itself 
within the text does cite gender issues.
    Ms. Payne. Yes, but women are not considered disadvantaged 
in these programs, so the bottom line is I think you really 
have to take the Executive Order that was signed by the 
President and sort of legislate that and make that a law and 
include them in here.
    You talk about gender issues. What does that mean, in all 
honesty?
    There are a couple of other issues I wanted to address, and 
since I do women's, I would like to do that, if I may. I 
believe it is important that SBA develops MOUs with all of the 
Federal agencies. SBA has one with the Department of 
Transportation and has streamlined the certification process, 
even though women have to jump an additional hoop to do so, and 
that is another completely different issue.
    I think it is also important to strengthen, and I think 
Ralph Thomas is right on the nose here, to strengthen the 
Federal subcontracting program by eliminating sub--I, 
personally, would like to see the elimination of most, as we 
know it today, subcontracting plans. I think it is so much 
easier to just have direct goals on our contracts and for 
subcontracts and just get it done. I mean, that is just the 
bottom line. If you want to make it work, that is the way you 
make it work.
    Develop a program, which I just said, sort of a women's 
contract program, which I think is on hold right now because 
they cannot figure out how to make it work.
    Strengthen all of the certification programs and streamline 
or consolidate the certification process amongst all of the 
agencies; adjust the accounting and tracking procedures for 
contracting goal achievements. Minority women get counted four 
times, sometimes five, as far as the goals are concerned, 
counting the goals. Minority men can get counted three or four 
times. Women can be counted twice. So, when you see a goal of 
23 percent or being reached at 22, whatever it is, fiscal year 
2001, the chances are it is probably closer to 18 and 20 than 
it is the 22 or 23, just simply the way they count and track 
the goal.
    Legislate enforcement procedures for prime and 
subcontracting goals. I think that is extremely important. The 
other thing I want to stress, something that John said, is best 
value. It seems to me, from my experience, best value 
procurement can create a good ol' boy system within the Federal 
contracting community. I mean, it just makes sense to me that 
if you are going to go with best value and you are not going to 
take into consideration the contributions that women, and 
minorities, and small businesses make to this country, to this 
Government, what is going to happen is that it is going to be a 
lot easier for contracting officers to just sort of give it to 
the Microsofts of the world. I mean, for goodness sake, that 
makes common sense.
    The other thing that John said, also, that I thought was 
important is that our talking about taking the goal of 8 
percent for NASA, combining the subcontracts and the prime 
contracts, my women that I represent in the Disadvantaged 
Business Enterprise Program, basically, they do some prime 
work, but basically they are subcontracting. They do about $2 
billion a year or something like that. Together, women and 
minorities do about $3 billion a year. I do not think it 
matters if it is flowing from a prime contract--or if money 
flows from a prime contract or a subcontract. It is money, and 
it is going into the hands of small businesses. I think that is 
extremely important.
    I mean, I do not get the argument. I am sorry, Mr. Smith, I 
do not get the argument of separating--counting them, but 
adding them together and reaching that goal. You could reach a 
goal of 30 percent by combining both.
    I just wanted to say that, as far as the proposed 
legislation, it just seems to me that with powers to report, 
review, analyze and coordinate, without the agencies' authority 
to enforce, will simply establish another person or entity that 
celebrates the problem, but we do not solve it. I think that is 
really, really important.
    Mr. Smith. I guess the question that I would have for you, 
and perhaps you have heard from your Members on this or perhaps 
they have not run into this problem, but we have heard it from 
other associations, that once a firm gets relegated to a 
subcontract level, they tend not to come back, basically, 
because their chances for exposure to the contracting officer 
are reduced, their interaction directly with the agency, their 
opportunity to hear about upcoming opportunities. So once we 
say there is no distinction between the two, then basically 
they get permanently at that status for subcontracting 
opportunities and not to get their foot in the door to hear 
about the prime contracting opportunities.
    The reason that I think that that is important is for 
establishing past performance history--dealing directly with 
the Government agencies, managing the contract themselves and 
getting that experience--and I think there is a value-added 
there. That is what we have heard. Perhaps, you are hearing 
differently from some of your members or have you heard that 
concern?
    Ms. Payne. I think we are talking about, at the end of the 
day--
    Mr. Smith. The money, yeah.
    Ms. Payne. The money. Ralph Thomas, at his desk, putting 
the two together. I think that is totally different than out in 
the field and contracting as prime or subcontract.
    However, I will tell you, in the construction industry, and 
the subcontracting association can speak to this, a lot of 
subcontractors do prime work, and a lot of prime subcontractors 
do subcontracting work. I mean, a lot of that gets done. So I 
really----
    Mr. Smith. I certainly can see your point, and I agree that 
a dollar is a dollar, however it comes to you. The question is 
whether it gets to you and whether you get the contract 
opportunity in the first place. I think that is the concern 
that we have.
    Ms. Payne. I think that is where you start with getting rid 
of these subcontracting plans, No. 1, and not moving towards 
the best value procurement kind of thing. Of course, the 
bundling. Thank you so much for addressing that issue. That is 
extremely important because it devastated small businesses, and 
I appreciate that.
    But the bottom line is that, without enforcement and 
without direct subcontracting procurement, with goals on actual 
contracts that have got to be met, if not, the prime contractor 
just does not get the job. That is absolutely the way to go if 
you really want to make this work.
    Mr. DaSilva. Thank you. I am going to turn it over to 
Senator Carnahan so that she can make some remarks.

  OPENING STATEMENT OF THE HONORABLE JEAN CARNAHAN, A UNITED 
                  STATES SENATOR FROM MISSOURI

    Senator Carnahan [presiding]. Thank you very much, John. I 
want to thank all of you for being here this morning and 
participating in this roundtable. I particularly want to thank 
Morris Hudson for being here. I have worked with him. He has 
worked with our office, and we have been helpful in getting 
some funds for Procurement Technical Assistance Centers. So it 
is good to have had that opportunity.
    I hope that today's discussion will lead to some 
substantial improvements in our understanding of the 
shortcomings of Government procurement policies. Certainly, 
having all of you here is a very impressive collection of 
experts, and we look forward to learning from your comments.
    I believe this Committee will benefit from hearing about 
all of your ideas on how we can expand procurement 
opportunities for small businesses, especially among minority- 
and women-owned businesses. I have met with many small business 
owners throughout Missouri, and I have always been impressed 
with their dedication to their dreams. They are people who 
actually put some fire to their dreams and work for the things 
that are so meaningful in their lives and in their communities.
    Small businesses have become really the engines of our 
economy, and the Federal Government should be able to play an 
important role in promoting their growth and their success. 
Last year, the Federal Government spent more than $600 million 
purchasing products and services from small businesses in my 
home State of Missouri. This is an impressive figure, and it is 
certainly a testimony to the many hardworking business owners 
in our State. But it is less than 10 percent of the total 
Federal procurement dollars spent in Missouri, and that, 
indeed, is disappointing.
    I look forward to working with my colleagues to improve 
Federal purchasing policies to provide even greater 
opportunities to small businesses. One of the first steps we 
can take in this process is to address the problem of the so-
called bundled contracts. I am very pleased to be an original 
co-sponsor of the Small Business Federal Contractor Safeguard 
Act. This legislation will ensure that Federal agencies do not 
consolidate different procurement requirements into such large 
contracts that small businesses can no longer effectively 
compete.
    Congress tried, at one point, to remedy this problem, but, 
unfortunately, agencies have abused this and found loopholes in 
the current law. So I hope that we will act this year to close 
some of those loopholes and increase the opportunities that are 
available to small businesses.
    I am also looking forward to hosting a procurement 
conference later this summer in Missouri. As Morris knows, the 
Science and Technology Conference will be held at Fort Leonard 
Wood, and it will provide small businesses an opportunity to 
meet with some of the top officials from the Defense 
Department. They will be able to demonstrate their products and 
learn about the procurement needs of the military.
    I hope that business owners and procurement officials will 
take the opportunity to establish relationships that can lead, 
ultimately, to greater contracting opportunities for small 
businesses.
    So I look forward to hearing from you. Certainly, I will be 
reading your testimony and reviewing the transcripts that you 
leave today.
    Again, I thank you for being here and for the opportunity 
that you give us to hear and to learn from you.
    Thank you.
    I would like, at this time, to turn the microphone over to 
Pat Parker and to hear from her.
    Pat.
    Ms. Parker. Thank you. Good morning, Senator, John, 
Cordell. My name is Patricia Parker.
    First of all, I want to take a little different perspective 
and view on contract bundling, and I want to come from a point 
where--because I used to be a Federal employee, and I have 
worked in program, and I have worked in contracting. Now I am a 
Native American woman-owned small business contractor here in 
the area and also with the National Indian Business Association 
and Women Impacting Public Policy.
    I understand that sometimes enforcement and accountability, 
and I agree with that, and I think there is not anyone at the 
table that would not agree that we need to do that when it 
comes to procurement, especially with contract bundling, but 
sometimes when people are forced to do something, they are a 
little less enthusiastic about carrying out the process. I find 
that when people are more willing and want to do something, the 
process speeds up, and more is accomplished, and a lot more 
gets done.
    So I just throw out this concept to look at it from a 
little different perspective, and one might say from more of a 
nurturing side, but I think that is a good thing about who we 
are as women, that we are able to look at something from a 
little different perspective sometimes.
    We know the bottom line, when it comes to contract bundling 
and the large businesses out there, is pricing and their 
ability to have a competitive edge, and as small businesses we 
all know that is what we are out there marketing for, 
competitive edge.
    If we could, perhaps somehow, when a large prime contractor 
meets their subcontracting plan and gets out there and let them 
demonstrate it, so we do not put that on the responsibility 
always of the Federal program person out there, a contract 
person there because we all know that part of the reason for 
the contract bundling is the lack of contracting staff. They 
are already overworked, and when you start asking them to do 
more paperwork and more requirements, sometimes that can slow 
the process down, rather than actually expedite it, which is 
what we are all trying to do, make it easier and faster to do 
things.
    So, if we are looking at that, and we are asking the prime 
contractor to take a responsibility that the Federal Government 
cannot do right now because of the lack of staff, which is to 
encourage small business, make sure that small business is 
there at the table to be able to play and be part of these 
large procurements, then perhaps incentives to the prime 
contractors can help facilitate that, and it is not necessarily 
more money.
    Maybe if they come in and meet their subcontracting goals, 
and they demonstrate to the contracting folks and to the 
Federal agency that they are meeting that, they get some kind 
of price evaluation to give them a competitive edge when they 
are out there also trying to compete for contracts. That brings 
everybody wanting to make this happen, rather than, in some 
cases, begrudgingly, if it is going to mean more paperwork or I 
am going to have to, as large primes will say, I have got a 
bottom line, I have got stakeholders, we have to go with the 
best price and the best quality.
    So maybe some incentives, from that standpoint, if we could 
look at that, might be able to help facilitate a faster 
progress than always just coming in and thumping people on the 
head if they do not do what they need to do. However, sometimes 
a thump on the head is necessary, and so I do not want to 
discount that.
    On Friday, I was very honored to be able to speak before 
OMB on the competition and contracting review, on behalf of 
Women Impacting Public Policy. We had made a suggestion that I 
thought was, as far as the enforcement--when you want to get 
somebody's attention, obviously, the pocketbook is always the 
way to get somebody's attention. So we recommended that 
perhaps, for every percentage that an agency fails to meet 
their goals, their budget be reduced by that amount. Perhaps 
that would give them incentive to go out there and make sure 
that those goals are met.
    Thank you very much.
    Mr. Smith. May I--I am sorry, please.
    Senator Carnahan. Go ahead, please.
    Mr. Smith. No, Senator, you get to--
    [Laughter.]
    Senator Carnahan. In that case, I will ask Cordell if he 
would like to ask a question.
    [Laughter.]
    Mr. Smith. Very well. Just to clarify. Your view is that 
the subcontracting plans are an appropriate approach, that if 
you did away with them and had it all direct Federal mandates, 
you would then have the problem of getting staff to police 
that; is that what you are saying? So your view is slightly 
different.
    Ms. Parker. It is slightly different, looking at it a 
different way. I mean, I am not saying that--subcontracting 
plans are what we have now. I guess I am looking at what have 
we got now, what have we got to work with? Yes, if we want to 
work with legislation to try to improve it, but that is a 
process that is going to take a while.
    Small businesses, we have got payrolls to meet next week.
    Mr. Smith. Right.
    Ms. Parker. We want to make sure that we try to get to the 
table and get some of that pie right now. While we are doing 
what we have to do to push legislation and make sure everybody 
can participate, that is great, but I also want to look at what 
we can do immediately. If the subcontracting plans are what we 
are having to live with right now, how can we encourage and 
facilitate primes to help us, not try to cause a little bit 
more of a tougher hand? I would like to want them to 
participate because, as I say, I find it's a little quicker, 
you get things done quicker that way.
    Mr. Smith. Thank you, Senator.
    Senator Carnahan. Thank you. Before I leave, I will take 
advantage of another senatorial prerogative and call on the 
gentleman from my State, a constituent, Morris Hudson, to speak 
next.
    Mr. Hudson. Thank you, Senator. I appreciate that very 
much.
    I know we are getting short on time, so I would like to 
make my comments concise and address each proposed bill.
    First of all, on Senate bill 1994, I think it is time that 
priorities are established. I think this is badly needed. I do 
have a question about whether the preferences would be optional 
or whether they would be mandated. So that is one issue I have 
with that bill.
    On Senate bill 2466, Small Business Federal Contractor 
Safeguard Act, on bundling: I think defining the problem better 
will help. I think bundling is a major problem, but there is no 
need to discuss that further. It has been discussed and seems 
to be unanimous.
    On the Ombudsman Act, I have concern with that. I am not 
opposed to it, but I do have concern about it, that it might 
just become another Federal bureaucratic activity. There does 
not seem to be any direct contact with the small business 
people, and that is one thing that concerns me with that act.
    In the Procurement Technical Assistance Centers, we work 
with businesses in the trenches on an hourly or minute basis, 
and there is a lot of frustration out there. I think this 
Committee may have, within their prerogative, to eliminate some 
of that duplication, and I will mention one example: If a 
company is going to do business with the Department of Defense, 
such as Fort Leonard Wood or Whiteman Air Force Base or the 
Army Corps of Engineers in Missouri, and of course this extends 
throughout the Nation, it is mandatory that they be registered 
in the Central Contractor Registry. We help companies with 
that.
    It is also recommended that they be registered in Pro-Net. 
Many of those data elements are the very same, but they have to 
enter this information into two different systems. We have 
heard rumors that the systems would be combined at some point 
in time, but right now it seems to be only rumors. We would 
certainly encourage the Committee to look at that and see if 
that could be done because that would help companies at the 
working level in eliminating this type of duplication.
    Also, and someone alluded to this earlier, we would like to 
see better publicizing of the requirements, and I am going to 
quantify this, from the $2,500 level, credit card level, up to 
$25,000. Now, agencies do maybe a good job of advertising this, 
publicizing this within their own agency or at a lower level, 
at the base or installation level. But when you are a small 
business person, you do not have time to go to all of the 
different websites where you have to track this down.
    I would like to see a system similar to FedBizOps that 
captures these type of requirements and makes them available 
for the small business community.
    Then, finally, I would like to add that a lot of companies 
have made a lot of progress with electronic commerce, moving 
into the computer age and so on, but there are still a number 
of companies out there that could use some assistance in this 
area. So I would like to see at least some of the funding and 
responsibilities restored that existed in the Electronic 
Commerce Resource Centers and see that made available for the 
small business community.
    Thank you.
    Mr. DaSilva [presiding]. Thank you, Senator. Thank you, 
Morris.
    I am going to be a little heavy-handed here. I am going to 
call on Michael Robinson in just a second, and then we are 
going to have to move on to the next topic because we are 
running very far behind on time--so I am going to ask everybody 
to put their cards down until I throw out the next topic for 
discussion after Michael is done, and I apologize to folks who 
did not get a chance to speak on this, but as it is 10:30, we 
are going to need to move on.
    Michael.
    Mr. Robinson. Thank you, John.
    Also, from a PTAC in Massachusetts, again, from the 
trenches, and I would just like to share one anecdote from the 
field that is a bundling-related anecdote, and it takes it out 
of the rather esoteric money and contracts and puts kind of a 
human face on the situation.
    We have an 8(a) company that is owned by a service-disabled 
veteran in a wheelchair. He had been performing on a contract 
for several years for the Veterans Administration's facilities 
in Rhode Island. The contract came up for renewal again, and 
the contract requirements were consolidated into a regional 
contract, which ultimately was awarded, after a lot of 
protests, and screaming, and gnashing of teeth, to a Fortune 
100 company.
    There have been several further protests by the service-
disabled vet. He is one of our clients. This service-disabled 
vet has since been forced to declare personal bankruptcy. This 
is the human face of a constituent contracting with the very 
agency who should be protecting his interests, and it is the 
effect of what we who are involved in Government might call 
operational streamlining and better stewardship of our dollars. 
It is kind of a tragic story.
    Thank you very much, John.
    Mr. DaSilva. Thank you.
    We are going to turn to the next topic on the agenda, 
``Improving the SBA's Small Business Contracting Programs.'' I 
would like to throw out two questions for the group: No. 1, 
Chairman Kerry touched on when he was here, wanted to put out 
why is the SDB set-aside program a thing of the past and does 
the Executive Branch have the authority to override the 
statute?
    I want to throw out a second question, as well, one that 
Senator Kerry has been working on, and I believe the SBA is 
addressing, is that: Why is certification so difficult for some 
SBA programs, and should all SBA programs have procedures and 
applications similar to the HUBZone program?
    So, at this time, if you wanted to address these topics, 
you can put up your cards.
    Hank, go ahead.
    Mr. Wilfong. SDB set-asides. Why would you figure I wanted 
to talk about that?
    [Laughter.]
    Mr. DaSilva. Just a hunch.
    Mr. Wilfong. Ironically, I see a lot of answers to a lot of 
the problems that has been raised. I see SDB set-asides as the 
answer. The General pointed out some things, and Ralph Thomas 
pointed out some things. I believe goals can be met if the 
agencies really want to do it and if they are caused to want to 
do it.
    SDB set-asides, we do not have to worry about 
subcontracting a whole lot if we have some pieces of action 
set-aside for competition between small and economically 
disadvantaged firms. That is one of the positives of SDB set-
asides.
    I have heard a complaint that, yeah, but, Hank, there is 
the Roth case and there are other cases about race-based 
methods. First, small and economically disadvantaged, I have 
not mentioned race yet. But if we are talking about racial 
discrimination and remedying racial discrimination, how are you 
going to deal with racial discrimination if you do not deal 
with race? Now that may be a rhetorical question. I cannot 
figure the answer of how can we deal with race discrimination 
and cause efforts without some consideration of race.
    So I think, John, the SDB set-aside is the one thing that I 
would like to see this Administration address. We had it 
before. There was a moratorium, and as I recall, the moratorium 
was so that we could find--and I am generalizing--a better way 
of doing it. Hell, what we had was working well. Why do you 
have to find a better way than something that is working 
excellently?
    So I would like to have that moratorium, which was a 2-year 
moratorium established 7 years ago, removed.
    Mr. DaSilva. Fred, would you like to address any of those 
comments?
    Mr. Armendariz. Currently, the SDB numbers for fiscal year 
2001 were 7.12 percent, which is 140 percent of the goal, and 
is why at this time we believe that the program is working 
without the set-aside.
    Mr. DaSilva. Is that if you combine 8(a) and non-8(a) 
together for the SDB goal?
    Mr. Armendariz. All 8(a) firms are SDB firms.
    Mr. DaSilva. I understand. I know. But this is the first 
year--for 2001, it is the first year they are actually 
reporting the goal together instead of breaking it out 
separately----
    Mr. Armendariz. 8(a)s have always been SDBs.
    Mr. DaSilva. I understand, Fred. It is just the first year 
that it has been reported together, but it is true that all SBA 
firms are SDB firms, I understand.
    Mr. Armendariz. Correct.
    Mr. DaSilva. So that's the position at the time because of 
the percentage?
    Mr. Armendariz. Right.
    Mr. DaSilva. John.
    Mr. Turner. Thank you. The Minority Business Legal Defense 
Fund also takes a position as the Senator has and as Hank has, 
that SBA should seriously reconsider the set-aside program, and 
we believe that is the appropriate way to go.
    In the interest of time I will bullet to other comments 
that relate to that. You raised an issue relating to the SDB 
certification process, and in our view, to date the SDB 
certification process has been a disaster, and we stand 
prepared to work with, as we have in the past, to work with the 
Hill and the agency to make this process work better.
    There are many different suggestions which we will not go 
into today, but I think it is very important for us not to 
ignore the fact that work is required here. The last point is 
that of course our founder, Parren Mitchell, the author of 
Public Law 95-507 and the father of the 8(a) program, we have a 
overriding concern about the--that everything that we do, we 
must always keep in mind that the pie for 8(a) is getting 
smaller and smaller and smaller and smaller, much due to the 
Federal Acquisition and Streamlining Act, much due to other 
factors such as thresholds of purchasing. We have gone on 
record on our position concerning the parity or the HUBZone and 
8(a). HUBZone is a laudable program, but we must find a way to 
take the 8(a) program and to provide a greater pool, a greater 
reservoir for our 8(a) contractors.
    Mr. Armendariz. John, could I make a comment?
    Mr. DaSilva. Certainly.
    Mr. Armendariz. I wholeheartedly agree with you in regards 
to the application process. I think I am probably one of the 
few people here that has actually tried to go through that 
process. I drew on my own experience when I came to the agency. 
The first task force that I assembled, the very first one, was 
to address the application process. I put a very capable person 
in charge, Mike McHale, who put together our HUBZone 
application.
    Mr. Turner. Good man.
    Mr. Armendariz. He is a good man. He has been working 
diligently in putting together what we believe is a state-of-
the-art 
e-capable application that should be ready for launch in the 
next 12 months. So we are very excited about simplifying the 
process and getting more people involved in the program. We 
have been working furiously as well in regards to keeping the 
8(a) numbers up. Last year we increased the 8(a) program $500 
million over the previous year. There was a little bit of a 
setback in the year 2000, but we came back in 2001 and we want 
to make 2002 even a better year. So you have our commitment at 
the SBA that not only is the 8(a) program important, but it is 
extremely visible to us. We have a lot of new initiatives that 
are focused directly on that program, and we think are going to 
revamp the entire mission of the statute.
    Mr. DaSilva. I think Ron was next, and then Joann was up.
    Mr. Newlan. Thank you, John.
    A couple of thoughts. The topic we are on is improving the 
SBA's small business contracting programs. I think it starts 
with the funding of the SBA's contracting program within the 
Appropriations bill and the budget. I am not an expert in that 
area. We have got experts at the table. I do attend the 
hearings and I hear the SBA Administrator talking about, 
``Well, we got more money last year, and we got more money the 
year before that, and we got more money before that, but we are 
going to do the best we can with what we have.'' The world was 
more complex. The Small Business programs are more complex.
    The SBA Government contracting program, across the board 
needs more money. I led a fight for the HUBZone funding which 
got overlooked by the House, and was restored. But they need 
more money, and to the extent OFPP might be able to fit that 
into a recommendation if they happen to agree with me, the 
Administration and certainly the Senate represented here might 
be able to help out.
    One of the things, if I were there and got more money, I 
would buy some PCRs, Procurement Center Representatives, and I 
would go back to a system that worked well in the 1980s, where 
the PCRs really rode herd over the other agencies, and they did 
not do an unrestricted procurement without the PCR's personal 
involvement, the personal understanding and thorough 
examination. PCRs are spread so thin now, they cannot do that. 
There is perhaps one third the number of PCRs today to cover 
the Federal Government than there was 15 years ago.
    Mr. DaSilva. I am going to go to Joann, and then Barbara. I 
would also ask that if anybody else wanted to make comments on 
SBA programs, put your cards up so I can take note of you. 
After this we are going to move on to the next topic.
    Joann.
    Ms. Payne. Thank you so much. I just wanted to address 
something that the SBA advocate over there said. We have talked 
about the small disadvantaged business and the set-aside issue, 
and the program is working well at 7.12. The only comment I 
have is that it does include 8(a) so it means they were counted 
twice, sometimes three or four times. So my guess is, is that 
the counting figure is very high. I think that is simply the 
bottom line. If you are also certified as a HUBZone, counted 
you 4 or 5 times in that number. So just let me just stress to 
you it is so important that we reevaluate how SBA counts and 
tracks the goals because you do not know really what is going 
on unless you have that. In addition to that, as some of you 
know, SBA has a MOU with the Department of Transportation in 
the certification process, which means that women and 
minorities who are certified in the Disadvantaged Incentivized 
program should be able to get certified easier as a small 
disadvantaged or an 8(a). That is the point of it I think.
    The reality is that minorities can in fact get certified a 
lot easier. Women have got to jump an additional hurdle. On the 
one hand women are presumed to be socially and economically 
disadvantaged in a nontraditional area like transportation 
construction, but not so at SBA. So what happens is that women 
have to jump an additional hoop, and by doing so, there are not 
very many certified woman-owned businesses in the 8(a) program 
and on the Small Disadvantaged Business program.
    Mr. Armendariz. First of all, the 8(a) numbers are not 
counted double for the SDB number, and I will get some 
information to you immediately after the hearing that 
demonstrate that to you.\1\
---------------------------------------------------------------------------
    \1\ Information is located on page 98 in the appendix of this 
document.
---------------------------------------------------------------------------
    I do not know if Angela has any comment in regards to how 
the numbers are accumulated, but in that particular case that 
is not a correct statement.
    However, I cannot agree with you more in regards to needing 
to simplify the fact that companies, when they start working 
with our Federal Government, need to have a smooth transition 
into starting to participate in our programs. I do not believe 
it is in anyone's best interest that we ask small businesses to 
spend this disproportionate amount of time going through 
certification programs. One of the other task forces that I 
would like to launch in the near future is a reciprocity task 
force so that we can have small businesses apply once and be 
accepted not only within the Federal Government, but across 
state lines as well. We find that people have to go through and 
apply in Michigan and if they are doing business in Ohio, they 
have to reapply in Ohio, et cetera, et cetera, and I think that 
is just a complete waste of time. We think we can take the lead 
on that.
    Ms. Payne. What is interesting, if I may just follow up 
with that, is that women, with the certification process--and I 
will be interested to see how you count the 8(a), because I 
know they are counted as small business and they are counted as 
others as well, but we will get into that; I would love to talk 
to you about that. But with the certification--and with the 
Department of Transportation you have on-site reviews. You have 
DOT people who actually come on site of a business to make sure 
that you own 51 percent, you know, all of the requirements. It 
is an in-depth, thorough certification. My women get denied at 
SBA by paperwork. I just find it just absolutely appalling, 
absolutely appalling.
    Mr. Armendariz. I agree that we need to simplify the 
process. Joann, I would like to have a conversation with you 
again. I would like to talk about that a little bit further.
    Mr. DaSilva. I also remind everybody that the record is 
going to be open, that you can have 14 days to submit your 
comments at the end if you did not have a chance to speak to a 
particular topic.
    We are going to go Barbara, Susan, Pam, Steve, and then we 
are going to move on to the next topic.
    Go ahead, Barbara.
    Ms. Kasoff. Good morning. My name is Barbara Kasoff, and I 
represent Women Impacting Public Policy. We are well over 
250,000 women-owned businesses right now across the country. I 
can tell you that 80 percent of our constituency is not only 
just passionate and angry about this, but they are in a state 
of despair, and most of them do not even want to try to go 
through the process as it is right now. It is obvious that we 
have a very onerous and complex system that is riddled with 
barriers rather than with opportunities.
    I can tell you, I can bring it down even to a more basic 
level when I can say to you that almost half of our 
constituency is on dial-up rather than on high-speed access, 
and they cannot even download a procurement contract to bid on 
because high-speed access is not available to them.
    The President said real clearly that we need 
accountability. Everybody here in this room has said that we 
need accountability. I can tell you also that in the corporate 
world, when the sales department is having trouble getting 
sales because they are getting constant complaints, when a 
customer cannot fill out an order form so that they can get the 
product, and when a warehouse cannot ship a product and get the 
product out the door, two things better happen in that 
corporation. No. 1, they had better listen to their customer so 
they have a real clear understanding of what the problem is, 
and No. 2, they need to revamp their procedure. We are the 
customers here in this situation. We need to be part of the 
solution, not just experience the problem. If legislation was 
written two years ago and passes, and is not out the door, 
there has to be a real clear understanding of what is wrong 
with it so that we can fix it. The clock is ticking. We are not 
doing the business that we should be doing--we, the 
entrepreneurs--and if we are not doing the business that we 
need to be doing because of these barriers, then the economy is 
suffering.
    I want to state for the record that Women Impacting Public 
Policy is ready to have a seat at the table. We accept the 
challenge and we want to be part of the solution.
    Mr. DaSilva. Thank you.
    Susan.
    Ms. Allen. Susan Allen, U.S. Pan-Asian-American Chamber of 
Commerce.
    I just wanted to revisit the issue of certification. Fred, 
you talk about wanting to take the lead in getting reciprocity, 
which is a good thing, but right now there are more than scores 
of certification processes around the country, and we have got 
to live with that. That initiative that you are going to take 
the lead on is going to take some time. There will be turf 
battles to be fought all around.
    My question is that some years ago, during the last 
Administration, there was a process for self certification or 
privatized certification. I think the dialog is still there, 
and there are still some organizations doing private 
certification like WBNC, the Women's Business National Council, 
and NMSDC, but for the Asian-American community, we have 57 
ethnic groups within our community, spread across 1 million 
businesses. Many of them are new Americans. They are not very 
familiar with the Federal process, and as we know, the biggest 
procurer of products and services is the Federal Government and 
all the moneys and opportunities trickle down to the community.
    So what I would like to do is to make sure that the Asian-
Americans get into the certification program. What we want to 
do is to educate and tell them that we would help you out, 
because when we tell them to go to the SBA, they say, ``Oh, no, 
no, no. It takes too long.'' One told me, ``Moving the Federal 
Government, trying to get something done in the Government is 
trying to move a destroyer in the middle of an ocean. It takes 
what seems to be ages to turn a 10-degree corner.'' So we would 
like to be able to be considered, our organization, as a 
certifying agency accepted by the SBA, not that we will replace 
your program or any other program, but in so doing we can get 
these Asian-Americans into this process so that they say, ``All 
right, get one certification done, I can move on to the 
other.''
    We tried, during the last Administration, to get noticed. 
They never sent us the notice when the opportunities were sent 
out for this private process, and I would like to know whether 
it is still in place, and if so, can we get to the table?
    Mr. Armendariz. The Administrator constantly states that 
the focus of the SBA programs is to include more of the 25 
million small businesses of America. I think it would behoove 
the SBA to include all different parties at the table and start 
focusing and drilling down in the different program areas that 
we need to address, and this is one of them. We encourage your 
participation, so thank you.
    Mr. DaSilva. Pam.
    Ms. Mazza. Thanks.
    I thought that Senator Kerry's opening remarks were exactly 
on point. I mean these are very, very complicated issues that 
we are dealing with here. You know, fixing the SBA's 
procurement problems does not involve just SBA. It is a 
mentality with the agencies that relates to question No. 1: How 
do you increase commitment to meet goals? What do the 
procurement people think? What do the contracting officers 
think? Are they being evaluated on whether or not they have 
done the best that they can to meet their goals, or are they 
concerned because of the myth that we still live with, that 
bigger is better and smaller is more expensive? That is simply 
not true. So there is a lack of information still out there, or 
at least there is a myth that just keeps getting generated. I 
think that the more that we can do to continue to talk to 
eliminate those concerns, I think the better off we will be.
    Ron, your point that PCRs do not have any tools really to 
do their jobs, nor do they have the technical expertise to be 
able to--I do not think--to be able to say, ``Yes, there is an 
environmental firm out there that can do this as a small 
business set-aside or not''. So maybe we are limited with our 
resources, but can we be doing things to put task forces 
together to help the PCRs to do their jobs better and to make 
people more accountable for their decisions. I do not think 
there is any way they can be reviewing each procurement action 
to determine whether or not it is an appropriate set-aside or 
whether small businesses are capable.
    I have a couple of specific comments on the legislation, 
and I commend Senator Kerry and Senator Bond for trying to move 
these pieces forward. On contract bundling: as a lawyer I think 
that changing the definition is going to go a long way to the 
word-smithing that eliminated our ability to go in and say this 
is a bundled contract, because 3 or 4 years later we see that 
the definition just really had a lot of loopholes in it and I 
think that this legislation will certainly help with that.
    I have a thought that I throw out for you, and that is that 
if I read the contract bundling bill correctly, we are going to 
require agencies--if they procure a consolidated contract over 
$2 million and $5 million--to step through a lot of additional 
paperwork. I think that a $2 million contract and a $5 million 
contract is not a very large contract. In the IT field that is 
a few bodies if it is a 5-year contract. There is no reason why 
small businesses cannot perform those contracts even if they 
are consolidated. I mean I feel there are small businesses out 
there, certainly my clients, that could do that contract even 
if it were consolidated. So perhaps a consideration for the 
Committee would be to say, ``You do not have to step through 
those studies, over $2 million, over $5 million even though you 
consolidated it, if you are still restricting the competition 
to small businesses, whether it is through small business set-
aside, 8(a) set-aside, or whether you are going out on a GSA 
schedule but only to small business holders.'' So in other 
words, go ahead and consolidate if you want to consolidate, but 
if small businesses can still do it, then no need to step 
through your study as to why you consolidated. I am not sure of 
any of the down-sides to that, but I think it is something that 
maybe should be considered.
    On your Ombudsman bill, I think that is terrific that you 
are thinking of protecting the firms as they come in with their 
problems. I am on the SBA's Regulatory Fairness Committee and 
with the Ombudsman at SBA on reg. fairness issues. I was 
surprised, when I got appointed to that Committee, that 
procurements and contract bundling are not within the purview 
of the current Ombudsman or the current Regulatory Fairness 
Board. So there is a void right now, and as we go across the 
country and we listen to small businesses' concerns, a lot of 
them want to talk about bundling, and we have to say, ``No, we 
do not have jurisdiction over that.'' If this bill moves 
forward, I think it should be clear--I was happy to hear you 
say that the Ombudsman will be responsible to, it sounds like, 
all small businesses, including women-owned small businesses, 
because as I said right now, there is no Ombudsman for 
procurement, and I think that there is a void. On the other 
hand, I think that our board and the Ombudsman does not have 
the resources to do what we need to do, so creating another 
slot without resources may just be creating another slot that 
is not going to be effective, so I think that probably that 
needs to be reviewed too.
    Mr. DaSilva. Thank you.
    Steve.
    Mr. Denlinger. Thanks. Steve Denlinger, LAMA, Latin 
American Management Association.
    I am going to make a gentle remark about the difference 
between prime contracts and subcontracts, but let me assure 
you, I do not hear it gently from my members around the 
country. There is an enormous difference between prime 
contracts and subcontracts. It is not just a matter of dollars. 
Prime contracts give you extremely important experience with 
the Federal Government, direct experience with the Federal 
Government. Prime contracts are more profitable. They give you 
the opportunity to do the good quality work as opposed to the 
dregs, which prime contractors tend to give you when you are in 
the subcontract mode.
    Also importantly, it gives you the opportunity to get paid 
on time. I hear horror stories at every turn about members not 
getting paid by prime contractors, and they are afraid to do 
anything about it because they will be blackballed.
    I am delighted to hear, Fred, that you guys are taking on 
the issue of reciprocity with respect to certification. It is 
one of the most onerous things that small businesses have to 
deal with across the country. Would you please add to that the 
forms that prime contractors require MBEs and SDBs to fill out 
every year? Every prime contractor has a different form. Every 
prime contractor sends that out to our members each year to be 
done all over again. If you do not submit it, you do not have 
an opportunity to be considered for bids. If you do submit it, 
it is a mountain of paperwork. There ought to be one single 
form, one single intake form that is used by all prime 
contractors to get the basic data from SDBs, and then if that 
prime contractor is seriously interested in doing business with 
that company, then it is certainly appropriate to go ask for 
this new information.
    But that paperwork load is just onerous, and it comes from 
the very prime contractors, very companies that often complain 
about the load of paperwork that the Federal Government places 
upon them, but they have no problem placing that kind of 
onerous paperwork burden on our companies.
    The extreme case was Lockheed Martin Missiles and Space, 
which sent one of our companies a 23-page form to fill out to 
be considered for business there. The owner of the company 
looked at me and handed me this, and said, ``I am never going 
to do business there. This is ridiculous.''
    One item with respect to the Ombudsman's monitoring, about 
a year and a half ago I asked the SBA to what extent are the 
price adjustment credits being used by the civilian agencies? 
We know that they cannot be used by Defense right now. We were 
not able to get a handle on that. If you could make sure that 
the Ombudsman also monitors the extent to which price 
adjustment credits are actually used, I do not think anybody 
here knows the extent to which they are being used at any of 
the agencies in addition to the evaluation points that prime 
contractors get for the quality of their subcontracting 
programs and the incentives at the tail end.
    One final item, if at all possible, Ms. Styles, I am 
wondering if you could comment on the OMB's view of the SDB 
set-aside with respect to the women's procurement preference 
legislation. I understand that there is a general sense that 
the President and the Administration does not support set-
asides. Then specifically with respect to the women's 
procurement preference, that there were issues related to how 
the study was conducted relating to which areas of Federal 
procurement women were under-represented in. Secondly, that 
SBA's approach did not meet the Adarand test. So could you 
possibly comment on that?
    Administrator Styles. Yes, I can briefly comment on it. It 
was actually withdrawn by the SBA Administrator, so Fred may be 
more appropriate to comment on some of the details. Certainly 
my understanding was that there were some legal concerns with 
the statistical data that were part of the study, and that we 
really wanted to, SBA really wanted to firm it up, make sure 
that it was done right and that it could be legally supported.
    As far as our policy: there is not an Administration policy 
against set-asides from a perspective certainly of my office. I 
am concerned about the broad procurement policies and the 
access of small businesses as a whole that we have created a 
situation in our procurement system that we cannot live with, 
and that in many respects I think is creating something of a 
stigma on businesses and small businesses themselves within the 
procurement community. I hear from a lot of contracting 
officers on a regular basis, and it concerns me that we have 
created a system of statutes and regulations that is very, very 
difficult to understand. Contracting officers do not know when 
it is appropriate to award to a HUBZone or SDB or an 8(a) or a 
women-owned small business, and they have to have a specialty 
in and of their own in order to understand it, and I certainly 
can sympathize. I did not come into this job as an expert in 
small business, and it has taken me a great deal of time to get 
up to speed on the different statutes and regulations and how 
they work. But I think the overriding concern in my mind is 
that it is almost as if the contracting officer wants to ignore 
them, or that it reflects poorly on small businesses, that 
there is something wrong, that this is a handout to them, that 
this is somehow something that they do not deserve.
    From my office I have got to help the procurement community 
get over those hurdles and ensure that we have a procurement 
system that is focusing on access for all of the small 
businesses, but that is not--I do not think that is to the 
detriment or to the exclusion of any particular group.
    Mr. DaSilva. I am going to let Steven App make some 
comments--he has been extraordinarily patient. He got bumped 
from the last go-round, but then we are going to move on to the 
next topic, and I apologize because we are running overtime 
slightly. Surprise, surprise, a Small Business Committee 
function running over time.
    Mr. App. Just very briefly, I think the legislation is 
important; we are supportive of it. I think the complexity is a 
real issue. But the key to it, and the key I think to 
Treasury's success has been that we had a very strong 
integrated acquisition planning process that permeates all 
levels of the Department. We consistently beat the 23 percent. 
We were over 30 percent last year for prime contracts. We set 
our goal higher at 28 percent this year. We are doing 26.
    The point is that we have instilled a culture in the 
acquisition planning process so that no procurement is really 
considered without looking at a small business aspect of it, 
and it is done through metrics. We can demonstrate metrics to 
everybody who is thinking about doing a contract, that the 
service quality and the cost advantage is very real, and that 
is how you do it. Legislation is important. Complexity you have 
to work through, but a strong, integrated planning process I 
think gets you over the hurdle of people trying to move through 
the cycle times quickly because they have not planned for it. 
Program people, procurement people, small business people, all 
together--integrated planning is how Treasury has been 
successful.
    Mr. DaSilva. Thanks, Steve.
    We are going to move over to the last part of the agenda, 
which is specifically on the legislation. We have heard a lot 
of comments on the proposals before the Committee, but I did 
notice that a lot of questions have been raised. Senator Bond 
raised some questions as well. So I wanted to throw out a 
couple of general things to start.
    No. 1, I hope to hear some more feedback on increasing the 
goal to 30 percent, whether that is achievable, whether we 
should take the idea of looking more at agencies that can do 
more on an individual basis. I want to talk about the 8(a) 
HUBZone Priority Preference bill and the 20-percent evaluation 
preference within the legislation, what people felt about that.
    Cordell, did you have any other specific issues?
    Mr. Smith. No, I think that covers it.
    I do think that I would be interested in knowing what is 
currently done in terms of efforts to try to help agencies that 
fall short of their goals, whether anyone currently does 
anything to negotiate goal attainment plans. I think that a 
real strength of the Ombudsman bill is requiring that, but I do 
not know what is being done. My sense is we hear about it by 
accident, when somebody decides to do that, but we do not know 
that there is anything done systematically now, and maybe that 
does point to a need for legislation.
    Mr. DaSilva. Hank, were you up first?
    Mr. Wilfong. Thank you. Thirty percent. You know, John, I 
think it ought to be 40 percent.
    [Laughter.]
    Mr. Wilfong. Thirty percent certainty. Forty percent it 
should be. Twenty-three percent they did not make. I think this 
is just an indictment against the fact that maximal practicable 
utilization. Senator Bond talked about maximal practicable 
utilization. I think that is excellent. So I think 23 percent 
is too low. Thirty percent is getting there. So I strongly 
endorse that.
    Part of it, John, too, to throw in my little bit, and this 
will be my final comment, I am totally disturbed by a number of 
things that are going on right now in the procurement area, and 
it gets back to this race-neutral versus race-based methods. No 
way to avoid it. Until and unless we address what was brought 
out in 95-507, the extensive findings of 95-507, that there was 
racial discrimination in this country, and that a certain part 
of the community was being denied equal access to the laws 
through the procurement system, we're not really getting to it. 
So my thing is that, as I sit here, some things are becoming 
very clear to me. Reluctantly, I am accepting the fact that 
these people tend to want litigation-proof kinds of things as 
relates to us. They are constantly bringing up the litigation 
that others are bringing. So I guess probably what I am 
reluctantly coming to, is that those of us like my association, 
and the women-owned business association, and maybe the 
HUBZone, we are going to have to start thinking about getting 
to our members to start to litigate, because they keep talking 
about the rights of others and afraid of the litigation of 
others. Nobody ever seems to bother about whether we are going 
to litigate or not.
    So that, John, if nothing else comes out of this--and 
reluctantly I sat here and my spirits got lower and lower, and 
it is because I do not like to sue, but I do not know what else 
to do if I am being denied.
    Mr. Turpin. James Turpin. I had one comment on the bundling 
bill. We talked about access and transparency in the 
procurement process. There is also an integrity issue, an issue 
we are concerned about is bid-shopping, where the prime 
contractor will win the bid and then shop it. Where you think 
you are going to get the subcontract, you are not going to get 
it. So there is an integrity issue here too because the same 
person that is bundled on Monday is going to be shopped on 
Tuesday, and the end result on Wednesday is that they have not 
gotten either job. So I think there is--if we are going to have 
a procurement process, it needs to have those elements if it is 
going to work for everybody.
    Mr. DaSilva. Thank you.
    Ron.
    Mr. Newlan. Ron Newlan.
    We will take advantage of the 14-day submission time and 
put our comments in writing with respect to S. 2466 and the 
Ombudsman bill, but just in summary say that we support both. 
We think they are very good bills. We think we could make a 
couple of small improvements, and we will document it to you. 
The 30 percent we believe is good and should remain.
    Senator Bond, I could not have asked for a better setup 
than he gave me as it relates to S. 1994. We are primarily 
concerned with the priority preference aspect, and that would 
be the aspect where a dual certified HUBZone and 8(a) firm gets 
a preference in a HUBZone competition or a 8(a) competition, 
and we are concerned that the tie breaker is if your bids are 
comparable. I have worked with both the Chairman's staff and 
the Ranking Member's staff, and we will submit in this same 
document our detailed thoughts on that. But I do not think, 
based on the conversations we have had, that we are far apart 
at all.
    Mr. DaSilva. Thank you.
    John.
    Mr. Turner. John Turner, Minority Business Legal Defense 
Fund.
    On the topic of attainability of the 30-percent goal, it is 
my experience and the fund's experience that if you have the 
commitment of the agency, if you have substantive enforcement 
powers, and above all, talented personnel, it can indeed be 
done. There is a good friend, colleague of mine in the city of 
Dallas that oversaw the building of the Dallas Area Mass 
Transit Subway, Barton Burrell, he succeeded in getting--and I 
think my numbers may be a little off--but last I checked, 
something like 29 point something percent, women minority SDB 
participation in that massive project. With the American 
Airlines Center--which he oversaw the building of--he met and 
exceeded the goals which were substantive. So you had a very 
talented man, you had the support of the employer, and he had 
some enforcement powers, it can be done.
    Mr. DaSilva. Thank you.
    Ralph.
    Mr. Thomas. Yes. I want to reassert the importance, and I 
wish--speaking for myself, I wish the bill could be amended to 
include some portion about subcontracting by just 30 percent--
with the Government, we are putting all of the responsibility 
on the Government and none on the prime contractors. The more 
we keep de-emphasizing subcontractors, we are de-emphasizing 
subcontracting, we are giving strength or energy to prime 
contractors not wanting to do anything. We are saying to the 
Federal Government that it is OK not to stress subcontracting, 
or not to follow up, or not to monitor, or not to make it 
important. It is a whole approach, it is not just the 
Government being responsible. Prime contractors have a 
responsibility as well. They are the ones getting the bulk of 
the money, and we cannot attack one without the other. We 
cannot measure one without the other.
    Thank you.
    Mr. DaSilva. Thank you. On that issue, first, I wanted to 
thank Steve for some comments that he had made before about the 
importance of prime contracting versus subcontracting. I think 
you are absolutely correct, subcontracting is important, but 
that relationship that a prime contractor builds with the 
Federal Government cannot be overemphasized. I think the 
Committee, throughout its history on procurement issues--and 
correct me if I am wrong, Cordell--has always stressed the 
relationship of prime contracting as being of paramount 
importance to the Committee and paramount importance to small 
business. But on the subcontracting issue, I would like to 
point out that the Ombudsman legislation, in response to small 
businesses that have come to the Committee on subcontracting 
issues, saying that their prime contractor is not meeting their 
subcontracting plans and that the oversight of them is very 
very limited, specifically because the CMRs at SBA are 
essentially disappearing or being merged with the PCRs. it does 
call on the Ombudsman to monitor those subcontracting 
agreements, to take reports back when small businesses are not 
receiving their share of prime contracts when they were told 
that they would be getting those prime contracts, and the prime 
never contacts them again after they win.
    But if anybody would like to add anything on the 
subcontracting and subcontracting agreements and oversight of 
that, I would be more than happy.
    Mr. Thomas. I just want to say that it is not just the 
responsibility of the SBA or any Ombudsman. It is the 
responsibility of the Federal agencies as well. A lot of prime 
contractors today, small businesses start off as 
subcontractors. I mean subcontracts can lead to prime 
contracts. As Joann said, they inter-relate a lot. Primes can 
be subs. It depends on the situation if a prime contract is 
better than a subcontract. But my point is, regardless of how 
we feel about that, to consistently de-emphasize subcontracting 
and say it is not important, we are falling--we cannot not talk 
about it on the one hand and then expect somebody to monitor it 
on the other. I know that we give a lot of attention to team 
agreements. We have a lot of classes on understanding team 
agreements and we teach them all over the country, and we are 
working with the aerospace industry's association to have 
general rules of fairness and principles of fair dealing, but 
it has to come from all ends. It is not a one-hand approach. 
It's like--just stressing prime contracts is just like having 
one arm with the other arm. They both inter-relate and one 
leads to the other, so I would hope that we would pay more 
attention to that in the future.
    Mr. DaSilva. Thank you.
    We are going to go to Joann, and then Hank, General Henry, 
and then Ron, and I am going to ask that by the time we have 
gone on to Hank, if you want to address any topic, to have your 
card up by then, because I am going to close it out after that.
    So, Joann.
    Ms. Payne. Just very quickly, I agree with Steve and of 
course with Ralph with the prime and the subcontracting, so do 
not get me wrong. But the reality is, the majority of women- 
and minority-owned businesses are in fact subcontractors, and 
that is why the subcontracting piece is so important to have 
money flow to woman and minority contractors.
    Mr. DaSilva. Hank.
    Mr. Wilfong. Hank Wilfong, NASDB. Jumping in on the 
subcontracting part, the reality of the way we are now is that 
the majority of the work from our association, the overwhelming 
majority of quality work is coming through subcontracting. Now, 
we can wish that we had the heyday in the 1970s and 1980s where 
small and disadvantaged businesses were getting a significant 
amount of contracts from the Federal Government or we had PCRs, 
Ron, who would go out and help break out requirements that we 
could prime contract with. But the reality is that we have 
things like space stations, consolidated space operation 
contracts, Odin, et cetera, et cetera, joint strike fighter, 
that these are major kinds of already bundled, already 
consolidated contracts, and there will be more like them no 
matter what kind of language you put into law because 
economically it makes good sense. Falling back again to where I 
started off, part of the reason I wear my NASA pin so proudly 
and proud of my participation in the program over there, is 
because of the subcontracting part. Of course we have got good 
prime contracts, but overwhelmingly, our members have made a 
good substantial profit and firm development through 
subcontracting. So I join my friend Ralph by saying, why do we 
so de-emphasize subcontracting? Subcontracting is extremely 
important, and that is the point I think, Ralph, I am glad that 
you made, that the subcontracting part--and I did not realize, 
John, this law did not include subcontracts?
    Mr. DaSilva. It does.
    Mr. Wilfong. Oh, it does?
    Mr. DaSilva. It does.
    Mr. Wilfong. OK, thank you.
    Mr. DaSilva. General Henry.
    General Henry. Thank you.
    First, let me say how pleased I am to be here with you and 
thank you very much, you and the Senator, for asking.
    Just a couple of comments around. I certainly agree with 
the comments of Mr. Thomas of NASA. I agree with him on the 
point of the subcontracting. As you may know, I spent many 
years in contract management. We had $780 billion at one point, 
so I spent a lot of time studying the issue.
    The first thing that I think that you should recognize is 
contracting officers really do not like mandatories. Any time 
that you get into it, there is a rebellion that exists for 
that. Contracting officers like to preserve the contracting 
officer's discretion. So when you impose either the social or 
economic provisions on a contracting officer, there is a 
natural tendency for him not to like it, so they are never 
going to like it.
    That brings me to the point of the goal. I certainly 
support, as my friend here, I would like to see 40 percent for 
it, but I do not think that adding legislation a ratchet up on 
the goal is going to get you where you want to. I think that 
you have got to focus on the accountability. The issue to the 
prime contractors. Prime contractors are looking for the next 
job. If you embody into their present contract a responsibility 
to act a certain way and to give a certain performance, and 
failure to do that is a condition precedent on the next award, 
you have got the CEO's attention. If you embody it into that, 
you will have the contracting community.
    I certainly agree with what I heard over here, debundle and 
deconnect the fact of the small business plans. That is kind of 
a feel-good approach that everybody does it, it goes on the 
shelf and nobody ever looks at it. The comment that the lady 
said was that let us take and find out what did you do. If you 
are a prime contractor and you are on the next major supersonic 
whatever it is, what was your performance on this contract at 
the end of the day? Did you or did you not make it? For the 
next award or the following award it is going to be a critical, 
essential element for the award of that contract. You will get 
their attention.
    Same thing holds true for the agency. When I was a senior 
acquisition executive I made a comment one time, what happens 
to me if I do not meet this award? The answer was, nothing. If 
you can turn that, to say to the guy that is in my position, 
that bad things are going to happen to you, you will get their 
attention. The agency has got to lead this issue because all 
those contracting officers are stretched thin. They have a 
position where they need to have some guidance. If the agency 
comes out and says that by September 30, regardless of what 
happens, you will meet this goal and you will produce that, 
then I think that you have a chance of being successful, and 
all that we have spoken to will come to pass. Thank you.
    Mr. DaSilva. Ron.
    Mr. Newlan. Ron Newlan.
    There is an expression in sports, a tie is like kissing 
your sister. Well, a subcontract, in my opinion, is even less 
exciting than that. Many of you know that in the late 1970s I 
founded a small business and ran it for 20 years, and when I 
left that firm 4 years ago, it was the 54th largest Federal 
Government contractor. At that business, we spent 92 percent of 
our marketing dollars focused on being a prime. Eight percent 
of our marketing dollars, in any one year, we would chase 
subcontract opportunities. That is just one business's 
marketing strategy.
    Administrator Styles, who represents what the President 
said, has said many times that the President wants to create an 
environment in which small businesses can flourish. If our role 
is to help small businesses flourish, it is to get them prime 
contract opportunities. If it is to keep them a small business 
and to put bread on their table and feed their family, then 
perhaps subcontracting business is good enough and appropriate, 
but if we want to flourish as a small business and ultimately 
become a big business, there is no substitute for being the 
prime. Thank you.
    Mr. DaSilva. Thanks, Ron.
    Pat.
    Ms. Parker. Patricia Parker.
    You know, we talk about accountability and holding--and 
reports, and even the certification process. Well, what we are 
talking about is data, the ability to collect data, the ability 
to identify data, process it, get it back, make decisions 
quickly so this can go through. As we know with any good 
legislation, any good programs that come of that, resources, 
financial resources are needed to make that happen, and as we 
know, this is in scarce resources, we need to focus those 
resources. I think a lot of attention needs to be paid to 
putting resources towards technology to help us all work better 
and smarter. Thank you.
    Mr. DaSilva. That is quite ominous.
    [Laughter.]
    Ms. Parker. I am glad somebody agrees.
    [Laughter.]
    Ms. Parker. But I mean because it is. If we want to hold 
primes accountable, we want to hold agencies accountable, then 
we do need to report. They need to be able to have the data. 
There needs to be software programs that are out there. Small 
businesses go get a Small Business Innovative Research grant so 
that they can develop a technology that can help process all of 
this quickly so agencies can see those numbers and they can 
hold people accountable. Without that it is just pointing 
fingers and saying you did not do it, and coming up with 
numbers. So I think that using technology to help this process 
is going to be a big push in making all of this happen.
    Mr. DaSilva. Thank you.
    Michael.
    Mr. Robinson. Michael Robinson.
    Building on what General Henry said, I think that the way 
to incentive primes and agencies is to get this buy-in at the 
top. Without that buy-in this is not going to work. We have 
programs right now that are languishing, where we offer an 
awardee in the amount of 5 percent if companies will use Native 
American-owned firms in the Indian Incentive Act, and this 
program is not working. So financial incentives do not work. 
Report-onlys, which is what we have in DoD, is not working. We 
have an agency charged to find and report on the progress of 
the primes. DCMA, they do a wonderful job, but DoD is not 
making its goals.
    So I think that buy-in at the top and holding primes 
accountable in past performance, and making those conditions 
for further awards, is a good incentive to move these programs 
forward.
    Mr. DaSilva. Thank you.
    With that, I am going to be closing out the Roundtable. 
Before I do, I would just like to again thank Senator Kerry's 
constituent, Michael Robinson from our PTAC, Morris Hudson, 
Senator Bond's constituent from their PTAC, Angela Styles, who 
just left a few minutes ago, but gave a tremendous amount of 
her time, as did Fred Armendariz.
    With that I would like to thank all the participants for 
participating in this Roundtable discussion today. I remind you 
that the record will be open for 14 days. Please feel free to 
submit any comments on anything anybody said, any of the agenda 
items, and particularly the legislation.
    And with that, thank you very much for coming. We are 
adjourned.
    [Whereupon, at 11:27 a.m., the Roundtable was adjourned.]
      

                            A P P E N D I X

      
    [GRAPHIC] [TIFF OMITTED] T1834.028
    
    [GRAPHIC] [TIFF OMITTED] T1834.029
    
    [GRAPHIC] [TIFF OMITTED] T1834.030
    
    [GRAPHIC] [TIFF OMITTED] T1834.031
    
    [GRAPHIC] [TIFF OMITTED] T1834.032
    
    [GRAPHIC] [TIFF OMITTED] T1834.033
    
    [GRAPHIC] [TIFF OMITTED] T1834.034
    
    [GRAPHIC] [TIFF OMITTED] T1834.035
    
    [GRAPHIC] [TIFF OMITTED] T1834.036
    
    [GRAPHIC] [TIFF OMITTED] T1834.037
    
    [GRAPHIC] [TIFF OMITTED] T1834.038
    
    [GRAPHIC] [TIFF OMITTED] T1834.039
    
    [GRAPHIC] [TIFF OMITTED] T1834.040
    
    [GRAPHIC] [TIFF OMITTED] T1834.041
    
    [GRAPHIC] [TIFF OMITTED] T1834.042
    
    [GRAPHIC] [TIFF OMITTED] T1834.043
    
    [GRAPHIC] [TIFF OMITTED] T1834.044
    
    [GRAPHIC] [TIFF OMITTED] T1834.045
    
    [GRAPHIC] [TIFF OMITTED] T1834.046
    
    [GRAPHIC] [TIFF OMITTED] T1834.047
    
    [GRAPHIC] [TIFF OMITTED] T1834.048
    
    [GRAPHIC] [TIFF OMITTED] T1834.049
    
    [GRAPHIC] [TIFF OMITTED] T1834.050
    
    [GRAPHIC] [TIFF OMITTED] T1834.051
    
    [GRAPHIC] [TIFF OMITTED] T1834.052
    
    [GRAPHIC] [TIFF OMITTED] T1834.053
    
    [GRAPHIC] [TIFF OMITTED] T1834.054
    
    [GRAPHIC] [TIFF OMITTED] T1834.055
    
    [GRAPHIC] [TIFF OMITTED] T1834.056
    
    [GRAPHIC] [TIFF OMITTED] T1834.057
    
    [GRAPHIC] [TIFF OMITTED] T1834.058
    
    [GRAPHIC] [TIFF OMITTED] T1834.059
    
    [GRAPHIC] [TIFF OMITTED] T1834.060
    
    [GRAPHIC] [TIFF OMITTED] T1834.061
    
    [GRAPHIC] [TIFF OMITTED] T1834.062
    
    [GRAPHIC] [TIFF OMITTED] T1834.063
    
    [GRAPHIC] [TIFF OMITTED] T1834.064
    
    [GRAPHIC] [TIFF OMITTED] T1834.065
    
    [GRAPHIC] [TIFF OMITTED] T1834.066
    
    [GRAPHIC] [TIFF OMITTED] T1834.067
    
    [GRAPHIC] [TIFF OMITTED] T1834.068
    
    [GRAPHIC] [TIFF OMITTED] T1834.069
    
    [GRAPHIC] [TIFF OMITTED] T1834.070
    
    [GRAPHIC] [TIFF OMITTED] T1834.137
    
    [GRAPHIC] [TIFF OMITTED] T1834.071
    
    [GRAPHIC] [TIFF OMITTED] T1834.072
    
    [GRAPHIC] [TIFF OMITTED] T1834.073
    
    [GRAPHIC] [TIFF OMITTED] T1834.074
    
    [GRAPHIC] [TIFF OMITTED] T1834.075
    
    [GRAPHIC] [TIFF OMITTED] T1834.140
    
    [GRAPHIC] [TIFF OMITTED] T1834.141
    
    [GRAPHIC] [TIFF OMITTED] T1834.142
    
    [GRAPHIC] [TIFF OMITTED] T1834.079
    
    [GRAPHIC] [TIFF OMITTED] T1834.080
    
    [GRAPHIC] [TIFF OMITTED] T1834.081
    
            Computer & Communications Industry Association,
                                     Washington, D.C., July 2, 2002
Senator John F. Kerry, Chairman,
Senate Committee on Small Business,
428A Russell Senate Office Building,
Washington, D.C.

    Dear Senator Kerry: I am writing to express the Computer & 
Communications Industry Association's (CCIA) support for S. 2466, the 
``Small Business Federal Contractor Safeguard Act.''
    CCIA was founded on the belief that competition and vibrant markets 
are critical factors in the success of our economy and in our ability 
to lead the world in innovation and technology. We are the leading 
industry advocate in promoting open, barrier-free competition in the 
offering of computer and communications products and services 
worldwide, and our motto is ``open markets, open systems, open 
networks, and full, fair and open competition.''
    CCIA is an association of computer, communications, Internet and 
technology companies that range from small entrepreneurial firms to 
some of the largest members of the industry. CCIA's members include 
equipment manufacturers, software developers, providers of electronic 
commerce, networking, telecommunicatioas and online services, 
resellers, systems integrators, and third-party vendors. Our member 
companies employ nearly one million people and generate annual revenues 
exceeding $300 billion.
    We have found that, in general, contract bundling can harm many 
small businesses by locking them out of ``mega contracts;'' can harm 
taxpayers by promoting procurement of goods and services that may not 
be cost-efficient; and can hurt vendors of all sizes who do not have 
the resources to fulfill bundled contracts. We believe that the 
requirements of S. 2466 in regards to bundled contracts of over $2 
million and $5 million will go far in ensuring that bundling is used 
only in the rare case and as the norm.
    We appreciate your efforts to promote effective and fair 
procurement policies, and congratulate you on this excellent proposal. 
Please let me know if there is anything I can do to assist in passage 
of S. 2466. You can contact me at (202) 783-0070 ext. 110, or Gabe 
Rubin of my staff at (202) 783-4070 ext. 107.
            Sincerely,
                                          Ed Black,
                                           President & CEO.
                                 ______
                                 
News Release of the Computer & Communications Industry Association\1\, 
                              July 1, 2002
---------------------------------------------------------------------------
    \1\ CCIA is an international, nonprofit association of computer and 
communications industry firms, representing a broad cross-section of 
the industry. CCIA is dedicated to preserving full, free and open 
competition throughout its industry. Our members employ over a half-
million workers and generate annual revenues in excess of $300 billion.
---------------------------------------------------------------------------
    ccia: contract bundling impediment to full and open competition
    Washington, D.C.--The Computer & Communications Industry 
Association (CCIA) today submitted comments to the Office of Management 
and Budget (OMB) describing the potential competitive barriers created 
by contract bundling when used for Federal procurement. CCIA submitted 
its views in response to President Bush's call for comments from 
affected industries and individuals describing how contract bundling 
limits ``fair and open'' competition.
    In the comments, CCIA makes several recommendations including: 
making bundled contracts easier to protest; providing longer times to 
respond to requests for bundled contracts; giving OMB the authority to 
resolve disagreements on bundled contracts; and requiring more 
stringent standards for an agency to request the use of bundling. 
Additionally, CCIA recommends that the presumption of validity for the 
use of bundling move away from the affected agency and to those 
challenging its use.
    CCIA recognizes the hard work of several Senators and Members of 
Congress, and heartily endorses Senator John Kerry's bipartisan ``Small 
Business Federal Contractor Safeguard Act'' and Representative Nydia 
Velazquez' bipartisan ``Small Business Opportunity Act.'' Both pieces 
of legislation will go far in ensuring greater access to the government 
procurement system, and better, more cost-effective solutions to 
acquiring goods and services for the Federal Government. While not just 
a small business issue, CCIA recognizes that small businesses are 
disproportionately affected by bundling, and locked out of contracts 
where they could otherwise provide cost-effective solutions.
    ``Too many times the Federal Government will decide that it wants 
to procure from a particular vendor and create a bid process that is 
tilted against anyone but the one vendor who can provide the `mega-
contract,' '' said Ed Black, President and CEO of CCIA. ``This does not 
achieve the goals of full, fair and open competition that is required 
from our laws. Moreover, this causes the taxpayers to pay more for what 
the government wants to do. This is not the way our resources should be 
used.''
    The comments can be found at http://www.ccianet.org/papers/
contract--bundling.pdf.
                                 ______
                                 
Comments on Competition in Contractng Review: Contract Bundling, Office 
      of Management and Budget, Executive Office of the President
    The Computer & Communications Industry Association (CCIA) was 
founded on the belief that competition and vibrant markets are critical 
factors in the success of our economy and in our ability to lead the 
world in innovation and technology. We are the leading industry 
advocate in promoting open, barrier-free competition in the offering of 
computer and communications products and services worldwide, and our 
motto is ``open markets, open systems, open networks, and full, fair 
and open competition.''
    CCIA is an association of computer, communications, Internet and 
technology companies that range from small entrepreneurial firms to 
some of the largest members of the industry. CCIA's members include 
equipment manufacturers, software developers, providers of electronic 
commerce, networking, telecommunications and online services, 
resellers, systems integrators, and third-party vendors. Our member 
companies employ nearly one million people and generate annual revenues 
exceeding $300 billion.
    For nearly 30 years, CCIA has supported policies that ensure 
competition and a level playing field in the computer and 
communications industries. CCIA has been effective in advocating our 
mission in Congress, in the Executive Branch, and in the courts. 
Notably, we have taken a keen interest in antitrust enforcement, 
participating in the cases against IBM, AT&T, and most recently 
Microsoft. Additionally, CCIA has taken a lead role in advocating that 
the government should not compete against private sector enterprises, 
such as current competitive activities undertaken by the United States 
Postal Service, the Office of Personnel Management, and plans by the 
Internal Revenue Service.
    It is with this strong belief in full, fair and open competition 
that CCIA was extremely pleased by President Bush's recent 
announcement:

        government contracting must be more open and more fair to small 
        businesses . . . I know government contracting, if wisely done, 
        can help us achieve a grand national goal . . . But you know as 
        well as I do that there are some large hurdles for small 
        businesses . . . and the main one is . . . that agencies 
        sometime, many times, only let huge contracts with massive 
        requirements . . . called bundling. It effectively excludes 
        small businesses. And we need to do something about that.\1\
---------------------------------------------------------------------------
    \1\ President George W. Bush, Address at the Women's 
Entrepreneurship Summit (March 19, 2002) (transcript available at 
http://www.whitehouse.gov/news/releases/2002/03/20020319-2.html).

CCIA wholeheartedly endorses President Bush's vision, and is pleased to 
provide our comments on how contract bundling often fails to achieve 
the rule of ``full and open'' competition that ``remains the general 
rule when agencies acquire goods and services.''\2\
---------------------------------------------------------------------------
    \2\ Competition in Contracting; Contract Bundling; Notice of Public 
Meeting and Request for Comments, 67 Fed. Reg. 87, 30403 (May 6, 2002).
---------------------------------------------------------------------------
    In short, most contract bundling is a huge impediment to full and 
open competition in Federal procurement. Bundling is defined as ``the 
consolidation of two or more smaller contracts into one very large 
contract.''\3\ Invariably, these are contracts that could have been 
separately bid on by a variety of vendors, achieving the same outcome 
but with a more cost-effective solution for the government and U.S. 
taxpayer. The practice of contact bundling deprives small vendors of 
the ability to compete for many Federal sales, as many compete in niche 
areas and are not able to fulfill contracts that reach beyond their 
business specialty. The numbers make this fact clear: for every 
additional 100 bundled contracts, there is a corresponding decrease of 
106 contracts awarded to small firms.\4\
---------------------------------------------------------------------------
    \3\ Procurement Policies of the Pentagon with Respect to Small 
Businesses and the New Administration: Hearing Before the House Comm. 
on Small Bus., 107th Cong. 51 (2001) (Statement of Susan M. Walthall, 
Acting Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Bus. 
Admin.).
    \4\ The Impact of Contract Bundling on Small Business: FY 1992-FY 
1999, Report by Eagle Eye Publishers, Inc. to the U.S. Small Bus. 
Admin. Office of Advocacy, (September 2000).
---------------------------------------------------------------------------
    Contract bundling was also cited by the House Small Business 
Committee Democrats as a major impediment for Federal agency 
contracting with small businesses. In a recently released report, 
Ranking Democrat Nydia Velazquez (D-New York) emphasized the woeful 
performance of the Federal Government's track record in accomplishing 
its statutorily defined small business goals.\5\ In grading 21 
agencies, only one received a grade of A; one received a grade of B; 
seven received a grade of C; 10 received a grade of D; and two received 
failing grades.\6\ Senator Christopher ``Kit'' Bond (R-Missouri) has 
also faulted contract bundling as anticompetitive, resulting in 
contracts that small businesses are unable to perform ``due to its 
complexity or its obligation to do work in widely disparate geographic 
location[s].''\7\ Senator Bond further stated that contract bundling 
``eliminates small businesses from competing for contracts to sell the 
government some of the $200 billion in goods and services it buys every 
year.''\8\
---------------------------------------------------------------------------
    \5\ See generally 2002 Scorecard III: Small Bus.: Opportunity 
Denied, Report by the House Small Bus. Comm. Democrats, (May 15, 2002).
    \6\ Id. at 8.
    \7\ Senator Kerry Introduces Legislation to Limit ``Contract 
Bundling,'' 44 No. 19 Gov't Contractor 189 (May 15, 2002).
    \8\ Id.
---------------------------------------------------------------------------
    Clearly, contract bundling is a device that locks out many 
qualified venders and strikes at the heart of fair and open 
competition. In addition to costing taxpayers valuable resources, the 
restrictions in availability of these contracts will hurt these 
vendors' ability to survive, thus reducing future competition.\9\ CCIA 
certainly does not believe that it is the Federal Government's 
responsibility to subsidize small business, or specifically use its 
purchasing power to buttress venders who otherwise would not be in a 
position to provide goods or services on competitive terms. This also 
parallels President Bush's comments: ``I do not believe the role of 
government is to create wealth. . . . The role of government is to 
create an environment that facilitates the flow of capital, and an 
environment in which people can realize their dreams.''\10\ However, 
there is a great difference between subsidizing small businesses that 
aren't competitive and placing onerous restrictions that unnecessarily 
foreclose viable businesses from bidding for Federal contracts. In 
CCIA's view, contract bundling, in its current excessive use, has 
operated to do the latter.
---------------------------------------------------------------------------
    \9\ See Ishak Akyuz, Bundling into the New Millenium: Analyzing the 
Current State of Contract Bundling, 30 Pub. Cont. L.J. 123, 124 (2000).
    \10\ President George W. Bush, Address at the Women's 
Entrepreneurship Summit (March 19, 2002).
---------------------------------------------------------------------------
    CCIA recognizes that there may be circumstances that warrant the 
use of bundled contracts but cautions that they should be used in only 
the most sparing cases. In general, Federal law appears to discourage 
bundling but allows it when there would be ``measurably substantial 
benefits'' including: cost savings; quality improvements; reduction in 
acquisition cycle times; better terms and condition; or any other 
benefts.\11\ While the agency is required to conduct market analsysis 
to determine if bundling is ``necessary and justified,''\12\ the 
language of ``any other benefit'' is troubling due to its vagueness. 
Further, it should be noted that there is no guarantee ensuring the 
independent quality of market research, and such research has recently 
come under attack for its less than objective reporting.\13\ Given the 
limitations of relying on questionable market research, CCIA believes 
that this data, used to justify any other benefit, creates too much 
leeway for vendors and agencies to game the system.
---------------------------------------------------------------------------
    \11\ See 15 U.S.C. Sec. 644(e)(2)(B) (2000).
    \12\ See 15 U.S.C. Sec. 644(e)(2)(A) (2000).
    \13\ See e.g. Analyzing the Analysts: Hearing Before the House 
Subcomm. on Capital Mrkts., Ins. and Gov't Sponsored Enterprises, 107th 
Cong. (2001).
---------------------------------------------------------------------------
    There are other particular circumstances when bundling is allowed, 
such as when the agency reasonably believes that de-aggregating tasks 
to separate contracts would be impracticable;\14\ when effective 
coordination of the tasks involved require a single contractor;\15\ 
when unbundling would create undue technical risks;\16\ when 
interoperability and compatibility would be hampered;\17\ when the 
agency has integrated the purchasing and installation on systems;\18\ 
and when the procurement results in a novel approach that will provide 
substantial benefits to the agency.\19\ While protests have 
demonstrated that contract bundling will be rejected when the agency's 
rationale for doing so is insufficient or unreasonable,\20\ considering 
all the circumstances in which bundling is allowed, as described above, 
it appears that agencies have wide latitude and discretion in bundling 
contracts. In CCIA's view, this discretion often leads to unwise 
bundling, and as a result, the current structure is an ineffective one 
for ensuring fair and open competition.
---------------------------------------------------------------------------
    \14\ Ishak Akyuz, Bundling into the New Millenium: Analyzing the 
Current State of Contract Bundling, 30 Pub. Cont. L.J. 123, 125-6 
(2000) (citing EAI Corp., Comp. Gen. B-283129, Oct. 7, 1999, 99-2 CPD 
para.69).
    \15\ Id. (citing Electro-Methods, Inc., 70 Comp. Gen. 53, 90-2 CPD 
para.363, at 5; LeBarge Prods., Inc., Comp Gen. B-232201, Nov. 23, 
1998, 98-2 CPD para.510, at 3-4).
    \16\ Id.
    \17\ Id.
    \18\ Id. (citing Tucson Mobile Phone, Inc., Comp. Gen. B-274684.2, 
Feb 1, 1994, 94-2 CPD para.45)
    \19\ Id. (citing S&K Elecs., Comp. Gen B-282167, June 10, 1999, 99-
1 CPD para.111, at 4).
    \20\ Ishak Akyuz, Bundling into the New Millenium: Analyzing the 
Current State of Contract Bundling, 30 Pub. Cont. L.J. 123, 125-6 
(2000) (citing Better Serv., Comp. Gen B-265751.2, Jan 18, 1996, 96-1 
CPD para.90, at 3; Ralph C. Nash, Contract Bundling: An Update, 12 Nash 
& Cibinic Rep. para.9 at 24-5 (1998)).
---------------------------------------------------------------------------
    There are two notable legislative efforts to reform contract 
bundling and CCIA wholeheartedly endorses both. In the House, the 
bipartisan Small Business Opportunity Enhancement Act (H.R. 2867) has 
passed the Small Business Committee and is awaiting floor action. This 
bill would amend the Small Business Act to give the Director of the 
Office of Management and Budget (OMB), or a subordinate who is 
appointed by the President and approved by the Senate, the authority to 
resolve disagreements on bundled or ``mega'' contracts in addition to 
extending the time period from 30 to 60 days for a small business to 
respond to a solicitation for a bundled contract. By moving the appeal 
process from the affected agency to OMB, bundled contracts will likely 
face more rigorous scrutiny and not be rubber-stamped, an issue that 
the Small Business Committee identified as a major problem in bundled 
contract appeals.\21\
---------------------------------------------------------------------------
    \21\ H.R. REP. NO. 107-432, at 3 (2002).
---------------------------------------------------------------------------
    Senator John Kerry (D-Massachusetts) has introduced the bipartisan 
Small Business Federal Contractor Safeguard Act (S. 2466). This bill 
provides more stringent guidelines for allowing a bundled contract. It 
would require, for bundled contracts over $2 million, a statement of 
benefits, a statement of alternative approaches, and a specific 
determination that the bundling is necessary and the anticipated 
benefits justifies bundling. The bill adds further requirements for 
contracts over $5 million, including conducting market research, an 
assessment of impediments to small business participation, and 
specified actions to maximize small business participation. 
Additionally, these contracts will not be accepted if the ``necessary 
and justified'' determination is based solely on administrative and 
personnel savings unless those savings will be substantial.
    Taken in tandem, these two approaches would go far in ensuring more 
access by a wider array of vendors into the government procurement 
process. CCIA also recommends that protests be automatically available 
in the case of bundled contracts and that Congress should direct the 
Government Accounting Office (GAO) to shift the presumption away from 
the affected agency when determining if a bundled contract is necessary 
and justified. Anecdotally, CCIA has determined that in too many 
instances, Federal agencies give far too much deference to their 
procurement offices in determining the appropriate scope of bundling of 
contracts, and in turn GAO gives these agencies overly broad latitude. 
This trend needs to be reversed. CCIA believes that the aims of H.R. 
2867, moving dispute resolution to OMB, would be an effective way to 
begin to overcome this hurdle.
    CCIA believes contract bundling serves as a significant impediment 
to not only fair and open competition, but more importantly, fosters 
shortsighted decisionmaking resulting in limiting the value the 
government ultimately receives for their investments in technology.
    A recent example can be found with the implementation of agency 
Financial Management Systems required under GAO's Joint Financial 
Management Information Program (JFMIP) where contract bundling is 
prevalent, resulting in unfair (or lack of) competition and the 
elimination of both ``best of breed'' and Small Business as solution 
providers. Under the direction of the GAO, JFMIP documentation calls 
out for a ``single integrated system''. The document further explains 
that this does NOT mean one software solution yet this is exactly the 
path recently taken by such agencies as NASA, the Navy and programs 
such as the Army's Wholesale Logistic Modernization Program (LOGMOD). 
In each case, a foreign-based provider was selected to support the 
modernization of the agency financial system. Agencies have gone on to 
further justify the use of this solution for all encompassing agency 
requirements at what appears to be significant and elevated costs 
resulting in reduced value to the government.
    Further contract bundling is frequently the precise hidden 
objective of the ``so-called independent'' analysis from consultant 
firms who strive to benefit from their very same decisions. In our 
opinion, the government needs to have a far more critical review of 
``independent'' analysis perfonmed by consultants and organizations. 
Certainly, the top Fortune 100 companies are NOT moving toward a single 
or one software solution relying on an individual organization. They 
realize the risk is just too high to depend on ``one'' software 
provider, but instead move toward a strategic alliance with several 
software companies that meet a high degree of their critical needs 
(i.e. financial, HR-Human Resources, physical assets, IT assets). 
Consultant organizations will provide integration but allow the client 
company or agency to have the benefit of superior products which fit 
the specific needs of their organization.
    In summary, bundled contracts greatly harm the competitive process. 
As the Federal Government spends over $219 billion annually, making it 
the largest purchaser in the world,\22\ procuring the best solutions 
for government agencies in a fair, competitive and thus cost-effective 
way should be of paramount importance. The Federal Government has the 
ability to make winners and losers in the marketplace. As previously 
stated, CCIA does not advocate using this power to unduly help 
businesses that can't compete effectively in the marketplace; however, 
it should not use this system to lock out venders who can compete, but 
for unnecessary, burdensome contracting requirements. While much 
discussion of bundling revolves around small businesses, CCIA's 
position is not that this is solely a small business issue. Rather this 
is one that affects vendors of all sizes, and more importantly, it 
affects all citizens in how much they pay for goods and services 
through their taxes, and what they will receive. CCIA appreciates the 
President's dedication to this issue, and welcomes the quick action on 
the part of OMB in assembling these written comments, and oral comments 
at the open meeting recently held. If you have any further questions, 
or if CCIA can be of more assistance, please do not hesitate to contact 
CCIA President & CEO, Ed Black.
---------------------------------------------------------------------------
    \22\ Federal Agencies Receive Poor Grades for Small Business 
Contracting, 44 No. 20 Gov't Contractor 195 (May 22, 2002).
[GRAPHIC] [TIFF OMITTED] T1834.082

[GRAPHIC] [TIFF OMITTED] T1834.083

[GRAPHIC] [TIFF OMITTED] T1834.084

[GRAPHIC] [TIFF OMITTED] T1834.085

[GRAPHIC] [TIFF OMITTED] T1834.086

[GRAPHIC] [TIFF OMITTED] T1834.087

[GRAPHIC] [TIFF OMITTED] T1834.088

[GRAPHIC] [TIFF OMITTED] T1834.089

[GRAPHIC] [TIFF OMITTED] T1834.090

[GRAPHIC] [TIFF OMITTED] T1834.091

[GRAPHIC] [TIFF OMITTED] T1834.092

[GRAPHIC] [TIFF OMITTED] T1834.093

[GRAPHIC] [TIFF OMITTED] T1834.094

[GRAPHIC] [TIFF OMITTED] T1834.095

[GRAPHIC] [TIFF OMITTED] T1834.096

[GRAPHIC] [TIFF OMITTED] T1834.097

[GRAPHIC] [TIFF OMITTED] T1834.098

[GRAPHIC] [TIFF OMITTED] T1834.099

[GRAPHIC] [TIFF OMITTED] T1834.100

[GRAPHIC] [TIFF OMITTED] T1834.101

[GRAPHIC] [TIFF OMITTED] T1834.102

[GRAPHIC] [TIFF OMITTED] T1834.103

[GRAPHIC] [TIFF OMITTED] T1834.104

 Additional Written Comments by Women Impacting Public Policy for the 
                          Committee Roundtable
       are government purchasing policies failing small business?
    Mr. Chairman: On behalf of Women Impacting Public Policy, (WIPP), 
we are responding to questions raised at the June 19 Roundtable 
Discussion, ``Are Government Purchasing Policies Failing Small 
Business?'' Specifically, Women Impacting Public Policy (WIPP) wants to 
go on record as supporting the draft language submitted by Chairman 
Kerry at the hearing regarding the creation of a Small and 
Disadvantaged Business Ombudsman for Procurement in the Small Business 
Administration (SBA).
    Women own more than 9 million businesses in this country, employ 
more than 27.5 million and contribute more than $3.6 trillion to the 
nation's economy. Yet, since the Federal Acquisition Streamlining Act, 
enacted 7 years ago, women-owned firms have received, at most, 2.2 
percent of all contracting dollars.
    Given those statistics, our support for the creation of an 
Ombudsman for procurement at the SBA should come as no surprise. There 
is no question in our members' minds that the SDB Ombudsman should 
serve as a facilitator between Federal agency procurement officers, 
small businesses (especially women-owned firms) and prime contractors.
    The interagency coordination required through each Federal agency's 
Office of Small and Disadvantaged Business Utilization (OSDBUs) in the 
proposed language, should go a long way toward ensuring procurement 
goals for women-owned and minority-owned businesses are met. Toward 
that end, the confidentiality provision of the proposed legislation is 
absolutely essential to making that happen.
    WIPP understands that Committee members may differ on where to 
place the Ombudsman within the SBA. We believe the Committee must make 
a judgment as to where the Ombudsman can be the most effective 
independent voice for small and disadvantaged business. Certainly, no 
Ombudsman can be effective unless he/she is perceived to have enough 
authority and access to compel compliance among Federal agencies and 
prime contractors. We feel certain the Ombudsman cannot be an effective 
voice for our members if he/she is hampered by the perception of being 
subject to political pressures rather than being a true advocate for 
small and disadvantaged businesses.
    Finally, we support increasing the governmentwide small business 
goal from 23 percent to 30 percent. As Senator Bond indicated in his 
opening remarks at the Roundtable, the government is not currently 
meeting the 23 percent goal. WIPP believes, however, raising the goal 
to 30 percent provides leadership from the Congress that Federal 
agencies must continue to strive to work with small businesses. At the 
same time, setting higher goals must be accompanied with a strong goal 
attainment plan. The proposed legislation requires a plan from each 
agency on how to meet the targets if they fail to do so. WIPP believes 
that consequences for failing to meet the goals should be stronger than 
requiring a plan. Our small business owners face much greater 
consequences when they fail to meet their business targets. Failure to 
meet business goals results in lost revenue for small businesses. In 
the private sector, failure of employees to meet company goals and 
objects results in lost jobs. We suggest that Congress consider a 
similar model for the agencies. Those agencies failing to meet their 
goals, should face a decrease in their budget by a corresponding 
amount. We urge the Committee to explore stronger enforcement measures 
for agencies failing to meet their small business goals.
[GRAPHIC] [TIFF OMITTED] T1834.105

[GRAPHIC] [TIFF OMITTED] T1834.106

[GRAPHIC] [TIFF OMITTED] T1834.107

[GRAPHIC] [TIFF OMITTED] T1834.108

[GRAPHIC] [TIFF OMITTED] T1834.109

[GRAPHIC] [TIFF OMITTED] T1834.110

[GRAPHIC] [TIFF OMITTED] T1834.111

[GRAPHIC] [TIFF OMITTED] T1834.112

[GRAPHIC] [TIFF OMITTED] T1834.113

[GRAPHIC] [TIFF OMITTED] T1834.114

[GRAPHIC] [TIFF OMITTED] T1834.115

[GRAPHIC] [TIFF OMITTED] T1834.116

[GRAPHIC] [TIFF OMITTED] T1834.117

[GRAPHIC] [TIFF OMITTED] T1834.118

[GRAPHIC] [TIFF OMITTED] T1834.119

[GRAPHIC] [TIFF OMITTED] T1834.120

[GRAPHIC] [TIFF OMITTED] T1834.121

[GRAPHIC] [TIFF OMITTED] T1834.122

[GRAPHIC] [TIFF OMITTED] T1834.124

[GRAPHIC] [TIFF OMITTED] T1834.125

[GRAPHIC] [TIFF OMITTED] T1834.126

[GRAPHIC] [TIFF OMITTED] T1834.127

[GRAPHIC] [TIFF OMITTED] T1834.128

[GRAPHIC] [TIFF OMITTED] T1834.129

[GRAPHIC] [TIFF OMITTED] T1834.130

[GRAPHIC] [TIFF OMITTED] T1834.131

[GRAPHIC] [TIFF OMITTED] T1834.132

[GRAPHIC] [TIFF OMITTED] T1834.133

[GRAPHIC] [TIFF OMITTED] T1834.134

[GRAPHIC] [TIFF OMITTED] T1834.135

[GRAPHIC] [TIFF OMITTED] T1834.136

         Association of Small Business Development Centers,
                                                     July 16, 2002.

Hon. John F. Kerry, Chairman,
Committee on Small Business and Entrepreneurship,
U.S. Senate
    Dear Mr. Chairman: I am writing in strong support of the National 
Small Business Regulatory Assistance Act, S. 2483. As you know, this 
legislation establishes a pilot program to award competitive grants to 
20 selected Small Business Development Centers (SBDCs) to provide 
regulatory compliance assistance to small businesses. With these 
grants, the SBDCs would form partnerships with Federal compliance 
programs, provide education and training, and offer free compliance 
counseling to small businesses. The legislation also provides privacy 
protections to small business owners who seek assistance under the 
pilot program, and also extends privacy guarantees to all small 
businesses that seek assistance from their local SBDCs.
    SBDCs are in a unique position to provide regulatory assistance to 
small businesses. With more than 1,000 centers across the nation, the 
SBDC network assists about 600,000 small business owners each year in 
face-to-face counseling and training, in addition to hundreds of 
thousands more small businesses that SBDCs assist through the mail, 
telephone, fax-on-demand and e-mail.
    Small business owners try to comply with government regulations. 
Many small businesses are family-owned and operated. Small business 
employees are frequently family or friends of the same employer. Small 
business owners do not want their employees working in unsafe 
workplaces, and they want their children to grow up in a clean and 
healthy environment. However, small business owners may not know what 
is expected of them and how they can comply with regulations in a cost-
effective manner.
    Legislation similar to S. 2483 was passed by the House of 
Representatives by voice vote on October 2 of last year, with strong, 
bi-partisan support from the House Committee on Small Business. S. 
2483, which you are cosponsoring, includes changes to the House-passed 
bill that are supported by the ASBDC. These changes include technical 
corrections, an improved funding formula to distribute grants more 
evenly among grant recipients, improved study provisions, and 
clarification of privacy protections. I sincerely appreciate your 
openess in working with the ASBDC on these changes, and I want to 
commend John DaSilva of your staff for his work on this bill.
    S. 2483 recognizes the very real need of small- and medium-size 
employers for regulatory compliance assistance. Thank you for your 
leadership on this important small business development legislation.
            Sincerely,
                                        Don Wilson,
                                                 President.
  

                                
