[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                                                   S. Hrg. 102-000 deg.

     National Small Business Week: Small Business Success Stories

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                   WASHINGTON, DC, SEPTEMBER 17, 2003

                               __________

                           Serial No. 108-37

                               __________

         Printed for the use of the Committee on Small Business


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


                                 ______

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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina           DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri                 DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia             CHARLES GONZALEZ, Texas
TODD AKIN, Missouri                  GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia  ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania           ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado           MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona                DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania            JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire           MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado               LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana               ENI FALEOMAVAEGA, American Samoa
STEVE KING, Iowa                     BRAD MILLER, North Carolina
THADDEUS McCOTTER, Michigan

         J. Matthew Szymanski, Chief of Staff and Chief Counsel

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Thompson, Maria, T/J Technologies, Inc...........................     3
Kalick, Erica, Erica's Rugelach and Baking Company...............     5
Doan, Lurita, New Technology Management, Inc.....................     8
Nenna, David, Tule River Tribe...................................    10
Evans, Randall D., AccounTeks Business Services..................    13
Glazier, Jordan, eBay, Inc.......................................    15
Collins, John, Fortel, Inc.......................................    16
Walsh, Brendan, FedBid.com.......................................    17

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    28
    Acevedo-Vila, Hon. Anibal....................................    32
Prepared statements:
    Thompson, Maria..............................................    34
    Kalick, Erica................................................    40
    Doan, Lurita.................................................    45
    Nenna, David.................................................    53
    Evans, Randall D.............................................    56
    Glazier, Jordan..............................................    62
    Collins, John................................................    66
    Walsh, Brendan...............................................    69

                                 (iii)

 
HEARING ON NATIONAL SMALL BUSINESS WEEK: SMALL BUSINESS SUCCESS STORIES

                              ----------                              


                     WEDNESDAY, SEPTEMBER 17, 2003

                          House of Representatives,
                               Committee on Small Business,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 1:05 p.m. in Room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
[Chairman of the Committee] presiding.
    Present: Representatives Velazquez, Schrock, Franks, King, 
McCotter, Ballance, Christensen, Majette
    Chairman Manzullo. Good afternoon. We gather today to 
celebrate National Small Business Week and the 50th anniversary 
of the SBA. We are also here to recognize several businesses 
that embody the spirit of entrepreneurship. Some are successful 
small businesses, and some are businesses that help create 
opportunities for other small businesses.
    Each year for the past 40 years, the president has issued a 
proclamation calling for the celebration of Small Business 
Week. This year, the National Small Business Week is being held 
from September 14 through the 20th, and in this year's 
proclamation the president said, ``The success of small 
business in America reflects the innovation, determination, and 
hard work of the American people. During Small Business Week, 
we celebrate the entrepreneurs and business people who create 
goods, services, and jobs that bring opportunity and economic 
prosperity to communities throughout our country.''
    Here on the House Committee on Small Business, we know that 
small businesses have been the catalyst for economic growth. 
From 1990 to 1995, one of our nation's most impressive economic 
growth cycles, small businesses created three-fourths of the 
new jobs. Unfortunately, burdensome regulations, complex tax 
code, and the high cost of health care are stifling small 
businesses. Small businesses face a compliance burden for 
regulations that is 60 percent per employee than large 
businesses.
    I look forward to listening to your testimony. In about 25 
minutes, Hector Barreto, the SBA administrator, will be joining 
us and sitting right here, which is very unusual, but I am 
chairman, and those are the rules we set down, because he loves 
to hear the small business success stories, and he will be part 
of this hearing shortly. And I look forward to the opening 
remarks of our distinguished Ranking Minority Member and 
herself involved in small business, Ms. Velazquez.
    [Mr. Manzullo's statement may be found in the appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman. Thank you.
    As we celebrate National Small Business Week, we are 
reminded how this nation's small firms and entrepreneurs are 
truly the drivers of the American economy. Today, our country's 
approximately 23 million small businesses create three out of 
every four new jobs, represent 99 percent of all employers, and 
provide almost 70 percent of workers with their first jobs and 
initial on-the-job training.
    There is no question of the important role small businesses 
play in keeping the U.S. economy strong. Owning a business is 
an integral part of the American Dream. This ideal brings 
hundreds of thousands of immigrants to our shores each year. 
Today, minorities, along with women, are opening small 
businesses in record numbers. In fact, Latinas are the new 
small business trailblazers. Between 1997 and 2002, the number 
of Latina-owned firms increased by almost 40 percent, and their 
sales grew by almost 10 percent.
    Our country was built on small businesses, and this legacy 
continues today. In order for small business owners to continue 
this legacy, they need to have the capability to expand and 
create new jobs, but it is important to understand the reality 
they currently face. We cannot dismiss the fact that it is 
difficult to be an entrepreneur with our nation in the midst of 
an economic slump. Today's environment does not make things 
easy for small businesses.
    This morning, the Small Business Committee Democrats 
released a first-ever, small business index. This report tracks 
the economic conditions facing small businesses. Unfortunately, 
after reaching a five-year high in 2000, the 2003 second 
quarter report represents a five-year low, meaning that 
conditions for small business creation and growth are more 
challenging than ever.
    Since small businesses have the power to turn our economy 
around, we need to start addressing their issues. It would be 
unfair to say that the White House has done nothing to help 
small business. They released a Small Business Agenda in March 
of 2002, but that is about the extent of it. There has been no 
progress to date on getting any of the agenda items 
accomplished.
    Small business owners need action, not empty promises. They 
need access to quality, affordable, health care, since they 
make up the majority of the uninsured. They need targeted, 
permanent tax relief and assistance in navigating the federal 
regulatory process. They need an easier way into the $235 
billion federal marketplace and avenues to access capital other 
than credit cards.
    But this administration has done nothing to help small 
businesses on these critical issues. It has failed to give them 
the tax relief they need. In the 2003 tax cut, just 3 percent 
of the $350 billion went to targeted, small business relief, 
and these provisions are set to expire in 2004 and 2005.
    On the health care regulatory and federal contracting 
fronts, small businesses have been pushed to the sidelines. 
After all they have done for this nation, don't we owe them 
some fairness and some action on their agenda?
    As we observe National Small Business Week and recognize 
some of our country's most successful entrepreneurs, we will be 
reminded of what they mean to the strength and vitality of the 
American economy. But the message this week should be if we are 
going to get this economy back on track, that small businesses 
should be the number-one priority. Without our small firms and 
entrepreneurs, the U.S. wouldn't be the superpower that it is 
today. Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you very much.
    The rules are we push the button, and when you see the 
green light you are fine; yellow light, you have got one 
minute; a red light. Okay? We anticipate a series of votes at 2 
o'clock, so I want to end this up by then.
    Our first witness will be Maria Thompson, who will be 
introduced by her member of Congress, Representative Thaddeus 
McCotter; and then the next witness will be Erica Kalick, who 
will be presented by her member of Congress, Ms. Velazquez. Mr. 
McCotter?
    Mr. McCotter. Thank you, Mr. Chairman. It is my honor to 
introduce Maria Thompson, president and CEO of T/J 
Technologies. We talked in my office prior to this. I won't 
bore you with the details, but I asked her to do two things for 
small business, survive and thrive, and she is doing both, and 
it will be a pleasure to hear her say it.
    Now, Maria's business is located in Ann Arbor, and she is a 
resident of the 11th Congressional District. So the way you can 
look at that is that her business is represented by the 
illustrious dean of the United States House of Representatives, 
John Dingell, and the other part is me.
    So, on my part, I would like to thank you for being here, 
and I look forward to your testimony.
    Chairman Manzullo. Okay.

      STATEMENT OF MARIA THOMPSON, PRESIDENT AND CEO, T/J 
            TECHNOLOGIES, INC., ANN ARBOR, MICHIGAN

    Ms. Thompson. Mr. Chairman, members of the Committee, 
honored guests, ladies and gentlemen, I want to first thank you 
on behalf of my colleagues at T/J Technologies for this 
opportunity.
    When my husband, Professor Levi Thompson, Dr. Mike Wixom, 
and I started T/J Technologies 12 years ago, we never dreamed 
that our success would lead to speaking before such an esteemed 
audience.
    We have all heard that U.S. small businesses are the growth 
engine of the U.S. economy. Small technology businesses 
contribute to our economic security by ensuring that 
manufacturers have access to unique technologies that create 
new products and markets. The SBA reports that small firms 
produce two and a half times as many innovations per employee 
as large firms but at half the cost.
    Unfortunately, small companies have the greatest difficulty 
gaining access to capital to create these innovations. Contrary 
to popular belief, debt and venture capital do not fund 
research. Furthermore, in recent years, large firms have had 
difficulty funding their own R&D, let alone someone else's. We 
have witnessed these cuts firsthand, and some of the research 
groups with whom we used to interact no longer exist. Simply 
stated, without federal support, much of this research would 
move offshore where the investment climate is more patient, and 
technical labor is available at a fraction of the cost.
    Within this context, federal R&D programs offer a critical 
means for innovative small businesses to overcome the capital-
access barrier. We have benefited from the Advanced Technology 
Program, for example, which sponsors high-risk, high-payoff 
research with multimillion-dollar grants that cannot be 
obtained elsewhere. It is because we have effectively coupled 
our entrepreneurial spirit with third-party investment, funding 
from the SBIR, STTR, and ATP programs that we are here today.
    Since 1991, T/J has developed and demonstrated proprietary 
nanomaterials for lithium-ion battery, fuel cell, 
ultracapacitor, and environmental applications. To put it 
simply, we make the materials that make these devices better 
and less expensive.
    Some of our government customers include NIST, NSF, DOE, 
NASA, DoD, and EPA.
    Many of you regularly use portable electronics and may not 
be aware that the energy source is the bottleneck preventing 
the introduction of more features and applications. New 
materials are needed to keep pace with aggressive user demands 
and to make alternative technologies like fuel cells practical 
for commercialization.
    Let me share with you some specific examples of why I think 
T/J Technologies was chosen as a success story for the SBA. We 
are developing battery electrodes that will enable lithium-ion 
batteries to become more than 20 percent smaller or last 20 
percent longer for portable electronics. For high-rate 
applications, such as hybrid electric vehicles, we are 
developing a safe battery cathode with twice as much power at 
50 to 60 percent of the cost.
    The recent success of our SBIR from the Air Force and the 
Missile Defense Agency has generated interest in a development 
program with the Air Force to develop a lightweight, low-
temperature, affordable, lithium-ion battery for Global Hawk. 
Our materials could enable the switch to batteries that weigh 
50 percent less than currently used technology.
    The ATP is also funding our development of a direct-
methanol, micro-fuel cell combined with an ultracapacitor that 
are expected to achieve energy densities over five times that 
of batteries. To put this in perspective, future fuel cell-
powered laptop computers could run for more than 20 hours 
instead of the four to five hours provided by current battery 
technology.
    Other programs from NSF, DOE, and the Army have helped us 
to develop low-cost, fuel cell electrocatalysts and high-
temperature fuel cell membranes. This research is important 
because fuel cell costs must be reduced by more than an order 
of magnitude before they become commercially successful.
    We have leveraged our ATP and SBIR resources by 
subcontracting with other small companies from across the 
nation. SBA programs have also enabled us to partner with some 
of the country's finest universities, including the University 
of Michigan, to accelerate technology transfer.
    Our technical and management expertise has been locally, 
regionally, and nationally recognized, with over 10 major 
awards. We were recently declared the ``Future of Energy'' by 
the Great Lakes IT Report, and we are also proud to be 
designated a Green Gazelle by the Washington, D.C.-based Center 
for Small Business and the Environment. More importantly, large 
global companies have recognized our technical expertise, and 
we are negotiating joint development, materials testing, and 
other technology-transfer agreements.
    Before I close, I would like to invite you all to visit our 
facilities in Ann Arbor. First, I would like to take a moment 
to request your assistance. I request your continued strong 
support of the ATP program and the SBIR Policy Directive. 
Second, the Small Business Association of Michigan requested 
that the SBA host a national SBIR conference in Michigan in the 
near future. This would give SBIR program stakeholders an 
opportunity to see the great things that Michigan small 
companies and organizations, such as the Small Business 
Association of Michigan, the Michigan Economic Development 
Corporation, and Michigan's Next Energy, are doing to help our 
nation maintain technology leadership.
    [Ms. Thompson's statement may be found in the appendix.]
    Chairman Manzullo. I hate to tell you, but you are out of 
energy there.
    Ms. Thompson. Thank you.
    Chairman Manzullo. Thank you very much. How many employees 
do you have?
    Ms. Thompson. We have 22----
    Chairman Manzullo. Goodness.
    Ms. Thompson [continuing]. With Ph.D.s in material science 
and technical engineering.
    Chairman Manzullo. Wow. That is impressive.
    Ms. Velazquez, would you like to introduce your 
constituent?
    Ms. Velazquez. Thank you, Mr. Chairman. Today, I would like 
to introduce Erica Kalick, president of Erica's Rugelach and 
Baking Company. Erica's small bake shop is in my district in 
New York City. Her baking business has become an extraordinary 
success. She was just chosen as one of the small business award 
winners by Crain's New York Business. Erica's business has 
significantly grown since its humble beginnings in 1989.
    Today, her baked goods are sold through gourmet outlets, 
such as Zabar's, Dean & DeLuca's, and the Pepperidge Farm 
holiday catalog. Her firm now employs 10 bakers in a 2,500-
square-foot factory in Park Slope, Brooklyn, and its sales are 
nearing the $1 million mark. Erica has an amazing tale to tell 
and an extremely successful baking business to show for it.
    I would like to thank her for being here today to share her 
testimony. Thank you and welcome.

  STATEMENT OF ERICA KALICK, PRESIDENT, ERICA'S RUGELACH AND 
               BAKING COMPANY, BROOKLYN, NEW YORK

    Ms. Kalick. Thank you. I am honored to have this rare 
opportunity this afternoon to be heard by the House Small 
Business Committee. I would like to thank the chairman and 
members of the Committee and especially to extend my deepest 
gratitude to Congresswoman Nydia Velazquez for the unceasing 
care and integrity she has showered upon small businesses, 
regardless of size. She came to my wholesale bakery, met my 
workers, and really listened with undivided attention and 
compassion to the myriad of concerns that Erica's Rugelach is 
dealing with. Actually, my issues are every small business 
owner's issues.
    The approximately 23 million small businesses in the U.S. 
represent and estimated 99 percent of all employers, make up 
half of our GDP, and create three out of four new jobs. We are 
tenderly interconnected, interdependent, and have the untapped 
potential to reach out and help each other. Government must be 
a part of this partnership, yet, in March, the House Small 
Business Committee released a report that showed cuts to or the 
elimination of 25 small business programs in Bush's fiscal year 
2004 budget. We must work together, and federal government must 
walk their talk. At this late hour, with unemployment at new 
highs and a limping economy, we have no alternative but to 
listen to one another and then act with skill and wisdom. This 
is the spirit in which I would like to couch my testimony.
    As you are well aware, there are a daunting number of very 
complex, serious issues that small business owners are 
confronting and struggling with on a daily basis: difficult 
access to capital----.
    Chairman Manzullo. Erica, if I could interrupt you, could 
you tell us your story? I don't want time to run out.
    Ms. Kalick. Cut to the chase?
    Chairman Manzullo. Yes.
    Ms. Kalick. Okay.
    Chairman Manzullo. The other stuff is great stuff, but tell 
us----
    Ms. Kalick. Okay.
    Chairman Manzullo [continuing]. Who you are and how you got 
started. That is why we are here.
    Ms. Kalick. Erica's Rugelach and Baking Company----
    Chairman Manzullo. There you are.
    Ms. Kalick [continuing]. Is a small, Brooklyn-based, 
wholesale manufacturer of gourmet rugelach and specialty 
cookies. I began recipe testing in 1989, and today I employ 10 
people, mostly hard-working women from Puerto Rico, Central and 
South America who speak English as a second language, and we 
have received a business award.
    Obviously, I cannot produce my product without the loyalty 
and hard work of my staff. My product is of premium quality and 
can be found in the top specialty stores in New York City and 
around the country. I cannot cut corners with my product and 
still maintain my market niche. These cookies are expensive to 
produce, partly because of the nature of the complexity of this 
type of cookie, but also for the laundry list or reasons that I 
was just about to outline.
    I must be able to produce with the greatest profit margin 
so I can create better jobs and continue to do the community-
outreach work I have done since the inception of Erica's 
Rugelach. We support Safe Horizons' Brooklyn Child Advocacy 
Center, City Harvest, the Race for the Cure, literacy projects, 
the American Red Cross and have participated in fundraising 
events concerned with women's health issues.
    Again, along that list: difficult access to capital; 
untenable, seemingly unfixable, industrial real estate-rezoning 
problems; rental-versus-ownership problems; uncappable 
insurance and disability costs; unaffordable health care for 
workers; unjust and capricious fines and penalties levied by 
federal, state, and city regulatory agencies; sky-high energy 
costs with no end in sight--FERC is simply not doing its job; 
labor and immigration problems; unaffordable housing for 
workers in the inner cities; difficulties in producing products 
and services with a healthy profit margin.
    I built my business and pioneered in an area in Brooklyn 
that was once affordable. Today, this is not the case. I need 
to move to an industrial, food-manufacturing area that will 
support my enterprise over the long haul. The federal 
government must support organizations, such as NYIRN, ITAC, 
local business-development centers, the chamber of commerce, so 
that small business owners can make use of the programs and 
incentives they are plugged into.
    You know, the irony of these programs is that, in a New 
York Times article, most small manufacturers will not use these 
services. They are too busy running their businesses and may 
fear that if they contact the government, officials will 
interfere with their business or workers. The federal 
government must provide funding that would help small business 
owners to access and navigate these problems without the red 
tape. I urge you to read this editorial because, in many 
salient points, it sums up the conundrum that the small 
business owners are facing.
    There is a report from NYIRN and the Brooklyn Chamber of 
Commerce that I urge you to read, and I would just say that the 
Internal Revenue Code should be revised to permit IDBs to be 
used for the development of rental, industrial buildings, since 
most small business owners rent, and the program for that was 
cut.
    Just to sum up, we cannot become a virtual city where we 
eat holographic food, nor can America become a ghost town of 
tumbleweed, littered factories with armies of depressed but 
capable citizens with no jobs and nowhere to go each morning.
    Thank you for your careful consideration of these most 
serious issues. We, as business owners, rely and depend upon 
just and fair public policy that supports us all.
    [Ms. Kalick's statement may be found in the appendix.]
    Chairman Manzullo. You sound also like an author there. Did 
you happen to bring any cookies with you?
    Ms. Kalick. Well, virtual cookies.
    Chairman Manzullo. Virtual cookies. All right.
    Ms. Kalick. A picture is worth a thousand words.
    Chairman Manzullo. Okay, okay. Well, thank you for your 
testimony, and for the rest of the witnesses, tell us your 
story first, and then if you have any time left, then you can 
fill in the other things, but we really want to hear how you 
got started, your backgrounds. That is extremely important. 
Thank you, Erica, for switching gears so quickly and getting 
into your story. I appreciate that.
    The next witness is Lurita Doan, who is president and CEO 
of New Technology Management. She is the 2003 Office Depot 
Entrepreneurial Visionary Award winner from the SBA awards 
program, and we look forward to your testimony.
    Ms. Doan. Thank you.
    Chairman Manzullo. Remember, the complete written testimony 
will be made part of the record. Okay? So everything you gave 
us will be a permanent part of the record. Please.

  STATEMENT OF LURITA DOAN, PRESIDENT AND CEO, NEW TECHNOLOGY 
                  MANAGEMENT, RESTON, VIRGINIA

    Ms. Doan. NTMI provides turnkey solutions, including 
design, installation, and maintenance of all the secure 
surveillance technology that is currently being deployed at 
approximately 85 percent of all of the land border points of 
entry at the U.S.-Canadian and U.S.-Mexican borders, and we 
work for the Department of Homeland Security.
    I wasn't going to go into a lot of detail, but I think my 
story is the story of every person who has ever begun a 
business. I have had long hours, endless uncertainty, worry 
about budgeting and funding, inflexible banking arrangements, 
struggling to meet my payroll, fear of failure, and yet 
alongside of all of this is this knowledge, this thrill, of 
knowing I am my own boss, and I am in charge of my destiny, and 
I am able to change my life and life of all of my employees.
    We began work on border security about six years ago, well 
before 9/11 and well before the budgets on homeland security 
became the new gusher of government spending. Just before 9/11, 
there was a realization within Customs that the ``smart 
border'' which we had developed in Arizona should be deployed 
across the United States, and after the terrorists struck on 9/
11, NTMI began an accelerated deployment of the surveillance 
technology that we had prototyped on the northern and southern 
borders of the United States.
    Some of the projects that we have worked on over the past 
few years are secure wireless systems; enforcement operations; 
command and control systems, otherwise known as CAOS; video 
surveillance technologies; and the FIPS 140 encrypted wireless 
solutions. It was our technology that was used at a critical 
juncture last September 9, 2002, when President Bush met Prime 
Minister Chretien of Canada while he was in Detroit, and during 
the tour portion of his trip, the president saw the technology 
that we use and that we deploy at work on the Ambassador 
Bridge, and he praised the progress that had been made on the 
U.S.-Canada Smart Border Declaration and Action Plan. And I can 
tell you, there was no one prouder to be an American that day 
than those NTMI employees who had given up their Labor Day 
weekend to ensure that the technology functioned flawlessly.
    Ports of entry are located on the land borders with Mexico 
and Canada, and they require an automated operation system that 
maximizes security and reduces predictability, and our product, 
the Customs Automated Operating System, CAOS, was first tested 
in Arizona in 1999, and based on that success, CBP requested 
that NTMI deploy the systems to all of the land border ports in 
the U.S. We were a small, minority HUBZone business when I 
started. I started with $25 and a trip down to Kinko's, and we 
have become a leader in advanced border technology, and we have 
done this and achieved this position because we have had strong 
leadership, I like to think, within the company and with my 
managers but also with our government customers.
    I am mainly concerned because I see some dangerous ground 
ahead. Our contracts started very small, but as they grow 
larger through our innovation and our efforts, these contracts 
become very attractive to big businesses. And as our contracts 
grow bigger, the big businesses are willing to go to very 
unusual lengths to try to play the influence game, and a weak 
government customer who doesn't withstand this onslaught might 
begin to doubt the small businesses who have been working for 
him well and excellently over the past years. I am concerned 
that if the government starts playing favorites among the big 
business, and as they have all of these trends toward bundling 
and the omnibus contracts, that the pivotal role that small 
businesses play is going to be eroded.
    One thing that I see is that the president does have----.
    Chairman Manzullo. Excuse me a second. Hector, why don't 
you come on up here?
    We will give you more time. Don't worry about that.
    Ms. Doan. Thanks.
    Chairman Manzullo. Go ahead. This is where we merge two 
branches of government. You see it right here.
    Administrator Barreto, how are you?
    Mr. Barretto. Thank you, sir. Thank you very much.
    Chairman Manzullo. Good to see you. We are just thrilled 
that you are joining us today.
    Mr. Barretto. It is an honor to be here. Thank you very 
much for the invitation.
    Chairman Manzullo. Go ahead. We will tack more time onto 
your clock.
    Ms. Doan. You will? I will try to talk quicker, though.
    Chairman Manzullo. That is okay. Just ignore the red light, 
and I will tap when we get there. Okay?
    Ms. Doan. Okay. Thanks.
    So I was talking about these omnibus contracts, and I am 
concerned that with the large businesses that our country is 
going to run the risk that the solutions will then be dictated 
to the small businesses who are subcontractors by these less-
flexible, less-innovative, big businesses.
    I think that one of these bright spots is that the 
president has shown a commitment to small business, and, in 
fact, our main customer, the Department of Homeland Security, 
appreciates our flexibility and innovation, and they actually 
let us know as recently as last Wednesday, Don't worry. Keep on 
going. We intend to renew your contracts for this upcoming 
year. No problem.
    But what I look at as the key determinants in the success 
of small businesses is that leadership, governmental and within 
the business but mainly within the government, is a crucial 
ingredient. Although we are getting clear guidance from the 
government that they want small businesses to continue, and you 
can find very innovative niches within the government--for 
example, we have John O'Reilly out of DHS in Tucson; we have 
got Bill Holcombe at Fort Wachuga; Stacey Wright at TMAC. These 
are government persons willing to work with small businesses 
that build a better mousetrap. We need more government people 
like that.
    Speed is essential. Contracts are being bundled so quickly, 
the efforts are growing to put more and more contracts 
together, and I am concerned that at the same time that 
contracts are being bundled, we see the large contractors 
consolidating at this feverish pace, that what is going to 
happen is the small businesses are just going to get swallowed 
up and lost.
    I manage over 100 small business subcontractors in the work 
that I do, and I have picked them because they are more results 
driven, they are more innovative, and they are more focused 
than any of the large businesses that are currently out there, 
and they are more willing to respond to any kind of issue that 
I throw at them. And I think that is because, like my company, 
their companies are run the same way. Each of their employees 
can pick up the phone at any minute and call them with a 
critical issue, and I can tell you right now, I turned off my 
cell phone out of deference to you guys, but if it weren't off, 
it would be buzzing right now, saying, we need to do this or 
that, and I would be responding.
    We talk about breaking down the government stovepipes, and 
I know it is difficult, but it is not impossible because what 
it requires--we have had enormous success working with federal, 
state, and local agencies because we go directly to the source. 
This is where small businesses can really excel because there 
is no small town in the entire United States that doesn't have 
a small business, and they are best able to address reducing 
these stovepipes. And I think if we could get more of a focus 
placed on the sharing now of data within the national, state, 
and local governments, that would, you know, enhance everyone's 
well being.
    Chairman Manzullo. Thirty seconds.
    Ms. Doan. I just want to tell you, I have the privilege of 
living the American Dream every day. I work on the borders of 
our country, and I see the desperate attempts made by the 
citizens to get in here, and I have to tell you, we may be a 
country with problems, but we also have enormous privileges, 
and with those privileges come the responsibilities. I think 
that small businesses are the ones that most clearly address 
these responsibilities, and I want to thank you all for the tax 
cuts you have already started. I hope they continue because it 
ensures the likelihood that our businesses will survive.
    [Ms. Doan's statement may be found in the appendix.]
    Chairman Manzullo. Well, thank you very much for your 
testimony.
    Our next witness, I met several months ago. I had about 
five minutes on my calendar and sat down with David and the 
Tule Tribe until he mentioned something called a Cessna 
Skymaster, and that five minutes grew to an hour, didn't it, 
David?
    Mr. Nenna. Yes, sir, it did.
    Chairman Manzullo. You started talking about airplanes, and 
we started talking about all types of equipment and everything 
and the vision you have for your little tribe from California, 
and we invited you to come out here to testify as to what you 
are doing with that tribe, and we look forward to your 
testimony.
    Mr. Nenna. Thank you, sir.

  STATEMENT OF DAVID NENNA, ADMINISTRATOR, TULE RIVER TRIBE, 
                    PORTERVILLE, CALIFORNIA

    Mr. Nenna. Mr. Chairman, Mr. Administrator, honorable 
members, it is a great honor to be here and to be able to offer 
my tribe's story on some of the successes that we have been 
able to achieve.
    I left the reservation at an early age in 1972 and joined 
the military, and one of the things that we didn't have on the 
reservation at the time was jobs. There was about an 80 percent 
unemployment rate. I spent a career in the military, retired in 
1993, and returned to the reservation. And once again, some of 
the same people that I left were doing the same thing they were 
doing when I had departed; they just had gotten older. And once 
again, there was no economic development.
    So my tribe hired me as the tribal administrator, and 
together with their leadership, we sat down and tried to be 
creative on what we needed to do to provide jobs to the 
community and get people employed. We knew there was a federal 
statute out there called the 1988 Indian Gaming Regulatory Act, 
so we looked into what the possibilities were on creating a 
casino. When we look at a casino, we don't think of it as this 
gambling institution. We look at what it takes to make the 
thing operate, and that is the jobs, the technology that goes 
into it. We need accountants. We need clerical skills. We need 
people that have computer backgrounds. All of the different 
things that are created to make this thing operate; that is 
what we see, the jobs and the opportunities for people. But 
along with that, we were able to realize some revenue.
    As it came over to the tribal side and to the tribal 
government, we knew one of the things that we had to do, and 
that was to diversify and diversify as quickly as possible 
because we saw this gaming thing as a window of opportunity. So 
what we did initially, we poured about 50 percent of the 
revenue into economic development, trying to create little 
businesses. We had some land in the City of Porterville, and we 
couldn't develop it because we didn't have the financial means 
to get there. Well, with the revenue that we realized from the 
gaming industry that we had created, which was a small way to 
employ some of our people, we put the money into the 
infrastructure, and, in rapid succession, we were able to put 
up our first buildings.
    The first building we put up housed our economic- 
development office, a water-testing laboratory, a food-
distribution center. We service 11 other reservations with food 
commodities. The next building houses a distribution center for 
office supplies, a small bakery. The third building we put up, 
we worked jointly with the U.S. Forest Service. We put up the 
central communication command center. They have the command and 
control for all of the initial air attack and bombers that 
fight fires from Tehachapi all the way to Folsom up by 
Sacramento, so it is a pretty broad area. We receive a lot of 
benefit from the Forest Service because we have free 
dispatching for our fire trucks.
    We have approximately 81 programs and subcomponents that we 
operate on the reservation, but one of the gems that I would 
like to talk about because we even diversified that within the 
company, and we started a little company called Tule River Aero 
Industries. What we do is remanufacture light aircraft. We have 
taken the 337 Skymaster, which is a very unique airplane in 
itself, an in-line, twin-engine airplane, and we were able to 
remanufacture it and essentially give the customer a brand-new 
airplane when we completed it, very state of the art, upgraded 
avionics, electronics, and essentially they get a brand-new 
airplane.
    Well, opportunities came in front of us, and we didn't turn 
anything away. We looked for the opportunity to joint venture 
with other companies and other people. We were approached by a 
foreign company that found out what we were doing and asked if 
we wanted to be the first North American engine retrofit 
facility to utilize diesel engine technology to put it into 
general aviation aircraft.
    So we jumped on the opportunity, and hopefully next month 
we will be able to roll our first aircraft out of the shop with 
a diesel engine in it. We are hoping to open up the aviation 
industry and aviation world to third-world countries where 
aviation fuel is too expensive, and hopefully we will move on 
from there and be able to create other things and also 
diversify that small company.
    Another thing that we have; we joined partners with a 
company out of Vero Beach, Florida, called Gyrocam. It is a 
multifunctional camera, and we really hope to participate in 
homeland defense because of the uses of the camera integrated 
with the airplanes that we manufacture.
    One of the things when I was talking with one of our state 
legislators in California, I asked him, how many people does it 
take when we go into a higher threat level to guard the Bay 
Bridge and the Golden Gate Bridge, some of our treasures? It is 
a pretty massive amount of people and a lot of money required 
for this protection. With that camera, we are able to do it 
with two people. We are able to see the entire expanse of the 
Bay Bridge and also look through the fog because of the ability 
that the camera has and the multifunctional uses.
    So we are very pleased, and, once again, I am very honored 
to give you some of our stories of success, and I wish there 
was much more time.
    [Mr. Nenna's statement may be found in the appendix.]
    Chairman Manzullo. We need that camera to look through the 
fog in Washington.
    [Laughter.]
    Chairman Manzullo. And all of that, and the total tribe 
numbers are what, 1,150?
    Mr. Nenna. There are 1,600 members, Chairman. I might say, 
there were only 35 people employed in 1993, and now we have 
951.
    Chairman Manzullo. Good for you. What a story.
    Did Mr. Evans come in late? Okay. Let us skip over to, 
then, Mr. Glazier. Oh, come on up. I feel like a game show 
here, come on down, you know.
    Our next witness--let me introduce you while you are 
sitting down--our next witness is Randall Evans, the small 
business owner from Silver Spring, Maryland. Mr. Evans is 
president of AccounTeks Business Services. When you see the 
yellow light, you have one minute. When you see the red light, 
it is time to stop. The total time is five minutes.
    Mr. Evans. Okay.
    Chairman Manzullo. We look forward to your testimony, and 
could you move that mike a little closer to you?
    Mr. Evans. Okay.
    Chairman Manzullo. Thank you. A little bit closer than 
that.
    Mr. Evans. How is that?
    Chairman Manzullo. That is fine. Thank you.
    Mr. Evans. Okay.

 STATEMENT OF RANDALL D. EVANS, PRESIDENT, ACCOUNTEKS BUSINESS 
               SERVICES, SILVER SPRING, MARYLAND

    Mr. Evans. Well, thank you for inviting me to provide 
testimony today.
    My name is Randall Evans, and I am the president and CEO of 
AyanAliyah Corporation. We do business as AccounTeks Business 
Services, and we provide managerial accounting and bookkeeping 
services to small businesses and nonprofit organizations. Our 
services include design, installation, setup, and maintenance 
of all facets of the accounting requirements for small 
organizations. We also provide training and software.
    We were incorporated in the State of Maryland on April 13, 
1998, and the name, AyanAliyah comes from a combination of both 
my daughters' names. At the time, I had two daughters, and now 
I have three, so that is going to create a little bit of a 
problem in the future, but I will deal with that when she gets 
of age.
    We emerged from a bookkeeping business that was started by 
a close friend of mine in my undergraduate career, and I grew 
discontented with the relationship with them and decided to 
break off on my own in '98 and formed AccounTeks. I wasn't 
quite sure what this testimony was all about, so I just kind of 
went through how I got involved with this.
    Chairman Manzullo. Tell us how you got started. Tell us 
your story.
    Mr. Evans. Okay. All right.
    Chairman Manzullo. It is testimony time.
    Mr. Evans. Okay. Well, my desire to become an entrepreneur 
began at the age of 12, when my parents started contemplating a 
career in entrepreneurship as a result of my father's 
retirement from the U.S. Army. He retired in '78, so in '76 
they purchased a franchise, a janitorial service, from 
Servicemaster, I am sure you are all familiar with, and as a 
result of that, like most business owners, when you get 
involved, there is a lot of enthusiasm about, hey, how do you 
succeed in business, and a lot of this wore off on me. So as a 
result, I was like, hey, how can I start my own business?
    So we were military brats, had access to a military 
commissary where prices are a little cheaper relative to the 
outside, and I would go out and purchase candy and gum and go 
to my junior high school and sell it, come home with 20 bucks, 
and say, hey, this is a lot of money. I had always been strong 
in math, so I was kind of compelled to say, well, I have got to 
keep an accounting of this. So my father gave me a ledger book. 
I started to keep track of all of the proceeds from my small 
business, and said, hey, this is kind of neat. So quickly I 
learned the concept of buying for a dollar and selling for two.
    There were a multitude of small business lessons in that 
experience, and, as I said, I was always strong in math and 
compelled to keep strict accounting and record all of my 
proceeds, but, in addition, the concept of inventory 
management--how much candy do I buy today?--market research--
what do the kids want to spend their parents' hard-earned money 
on? I also had my first experience with partnerships when my 
best friend wanted to go into business with me. I kind of 
recalled Rockefeller saying that the best partner is no partner 
and politely declined, but fortunately our friendship survived 
to today.
    After I earned enough money to buy a new stereo and set up 
a savings account and loan my parents about 700 bucks to pay 
their taxes, I closed the door on my hallway locker candy 
store.
    My next venture was an auto-detailing business, which I 
began at age 14, and the seeds for this venture came in 
response to my neighbor, Carl, who was a 19-year-old at the 
time. He had gone out drinking with his buddies, ended up with 
stained carpets as a result of his buddies spilling beer on 
them. He asked me to use my father's carpet-cleaning equipment 
to shampoo and clean his upholstery, and he paid me 12 bucks.
    About a week later, I was approached by another neighbor, 
who was a little older, in his forties, whom Carl had mentioned 
that I had done the work for, and he asked me about cleaning 
his car, and then he asked if I waxed cars as well. Now, this 
was a great question because, you know, I am listening to these 
motivational tapes and everything. I had never waxed a car in 
my life, but I told him. I said, Yeah, I know how to wax a car.
    So I got my father to drive me to the--I forgot the name--
Rally Auto Supply or something like that. I bought a can of 
wax, read the instructions about 20 times, and proceeded to 
completely clean my neighbor's car inside and out. Now, this 
was a valuable experience for me, as I developed a solutions-
oriented mindset, which has serviced me up until to day, even 
today, as the inevitable challenges of life, and particularly a 
small business ownership, persist.
    My focus is on what to do as a result of something 
occurring, adversity; not that the adversity occurred, but what 
do you do as a result of it, and how do you solve the problem? 
Being a bit of a car guy, I was extremely motivated to develop 
my knowledge, skills, and ability in this trade. I was 
fortunate to have a mother who adamantly discouraged her 
teenaged son from getting a job.
    Chairman Manzullo. Randy, we are out of time. I want to 
give you one more minute to tell us about your present 
business.
    Mr. Evans. I attended the University of Virginia and took a 
class called entrepreneurship, and I was compelled by my 
professor, who dared me to go out and start the business, so I 
floated a check, bought some supplies, cleaned the car real 
quick and covered the check, and ended up being in that 
business for eight years.
    As result of hurting my back, I segued into the business I 
am in now, which is managerial accounting, and we have been in 
business, like I said, all told, for almost 10 years, nine 
years, but formally under my own umbrella for the last five 
years. We have employed about 30 certified public accountants 
and 30 staff accountants and bookkeepers.
    [Mr. Evans' statement may be found in the appendix.]
    Chairman Manzullo. I need to cut you off there, and then on 
Q&A, we can come back and pick up some more on it.
    Mr. Evans. Okay. Great.
    Chairman Manzullo. Thank you so much.
    Our next witness is Jordan Glazier, general manager of eBay 
Business, not exactly a small company, but he has got a story 
to tell. We look forward to your testimony.
    Mr. Glazier. Thank you.

STATEMENT OF JORDAN GLAZIER, GENERAL MANAGER FOR eBAY BUSINESS, 
                eBAY, INC., SAN JOSE, CALIFORNIA

    Mr. Glazier. Good afternoon, ladies and gentlemen. My name 
is Jordan Glazier, and I am the general manager of eBay 
Business. I thank you for the chance to speak with you today 
about eBay and its community of small business users. It is an 
honor to be here.
    With more than 75 million users in over 200 countries, eBay 
is truly a global trading platform where practically anyone can 
trade practically anything. In essence, eBay is a large 
community of users on a local, national, and international 
scale. For example, within my home state of Illinois, we have 
more than 1.9 million users; in California, where eBay is 
headquartered, we have close to 6 million users; and in New 
York State, we have over 3.2 million users.
    People use eBay to buy and sell items across more than 
35,000 categories, from automobiles, clothing, and computers to 
antiques and industrial equipment. In short, eBay, which itself 
was a small business less than seven years ago, is now an 
incubator for other small businesses. We estimate that more 
than 150,000 small businesses and entrepreneurs make a living 
selling on eBay. Also, we estimate that over 20 million eBay 
users in the U.S. are employed by small businesses. That 
represents nearly one in three small business employees in the 
United States.
    Small businesses benefit from using eBay in three main 
ways. First, they use eBay as a sales channel; second, they 
equip themselves on eBay; and, third, they benefit from 
programs we have developed to support their success.
    I would like to share some small business success stories 
with you today. The first is the Reliable Tool Company, a 
dealer of metalworking machinery. Based in Pasadena, 
California, Reliable is owned by Mariano Ruiz, a first-
generation Mexican-American. Five years ago, they were 
struggling to survive. They turned to eBay to sell off some of 
their slow-moving inventory. The sales went so well that 
Mariano built a business selling on eBay. They went from having 
four employees to having 28 employees today.
    On the buying side, small businesses from saving money 
buying on eBay to equip their operations. Danny Rale owns DDTI, 
an engineering firm based in Gainesville, Georgia. When Danny 
wanted to expand his operation from engineering into 
manufacturing, he turned to eBay to buy the equipment he 
needed. With $100,000, he was able to equip his entire 
operation. Danny estimates that he saved more than $600,000 
using eBay. DDTI now employs five people.
    Randy Will is another example of a small business who 
equipped his business on eBay. For pennies on the dollar, Randy 
purchased the equipment he needed to start Novoli's Pizzeria in 
Salt Lake City, Utah. Novoli's opened its doors and hired five 
people. Randy told us, and I quote, ``Without eBay, I would 
still be dreaming about this place, and instead, I am running 
it.''
    There are thousands of additional stories just like these 
of hard-working small businesses who make up the eBay 
community. It is not easy running a small business, so eBay has 
developed a broad range of programs to support our community of 
entrepreneurs. Let me give you three examples.
    eBay University provides in-person training on how to be 
successful selling on eBay. This year, we will educate over 
20,000 people in 30 cities across the nation.
    We have also developed a program that allows our Power 
Seller community to have greater access to health insurance 
programs. Power Sellers are a group of over 74,000 users who 
number among our largest and most dedicated sellers.
    Also, we have recently formed an exciting relationship with 
the Small Business Administration. Together, we will provide 
eBay small business users more direct access to the SBA's 
educational, content, and financing programs while introducing 
the SBA's community of users to eBay as a tool for their 
business. Administrator Barreto and his team have been 
outstanding partners in this endeavor. We look forward to 
working with the SBA to meet our shared goal of empowering the 
small businesses of America.
    In summary, eBay enables small businesses to open their 
doors, to expand, to hire more people, to bring more home to 
their families, and to achieve their dreams as entrepreneurs.
    Thank you again for the chance to speak today, and I am 
happy to answer any questions.
    [Mr. Glazier's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your testimony.
    Our next witness is John Collins. John is the CEO of 
Fortel, Inc., and we look forward to your testimony.

 STATEMENT OF JOHN COLLINS, CEO, FORTEL, INC., WASHINGTON, D.C.

    Mr. Collins. Thank you, Mr. Chairman. I thank you and the 
members of the Committee for the opportunity to deliver this 
testimony.
    Fortel was set up in the year 2000 at Front Royal, and it 
was mainly set up for the telecom industry, and near the end of 
2000 and into 2001, there was an almighty crash in that 
industry. Since then, we have turned all of our forces onto the 
aerospace and defense industry, whereby our process and 
technology can develop and produce the aerospace and the 
defense antennas, such as this SATCOM antenna, at a greatly 
reduced price and a weight reduction of some 10-to-1.
    Over the last year, we have been looking also into the 
telecom industry, whereby there seems to be good opportunities 
in the in motion for the car, and we have developed processes 
whereby we can take the aerospace designs, if the volume is 
there correctly, and make them amenable to the in-car, either 
the entertainment or the cellular phone industry.
    The infrastructure is already available within the U.S. and 
around the world to deliver high-content broadband to moving 
vehicles, whether it is the defense or the consumer. For 
instance, a DBS satellite can send down a two-hour film in some 
80 seconds, while a higher frequency KA-band satellite can send 
the same content, whether it be data or film based, in some 40 
seconds. This requires for the consumer a low-cost antenna 
system which can track the satellite and fit flush with the 
family car.
    We have ongoing development whereby we have spray-on 
electronics which we can spray onto our lightweight antennas 
and, therefore, have the enabling technology not only for the 
consumer but for the military, for the homeland security, and 
there are ongoing additional technologies that can allow the 
high content that is stored in the vehicle to be delivered to 
the cellular phone. The technology exists, provided you have 
the air interface at a low cost to do amazing downloads and 
uplinks with broadband.
    What we have done is turned full circle now and are going 
back into the telecoms. We are meeting initially with some of 
the larger telecom groups, and we believe that we are opening 
business opportunities within the telecoms, the multimedia, the 
cellular phone, and all of the associated businesses, the 
spinoffs. For instance, the main problems we foresee in getting 
a two-hour film to the cellular phone isn't the cellular phone 
technology because the microdrives exist; it is the battery 
life, and somewhere along the table we heard about battery 
life.
    So things move around and go around, and our main problem 
at the moment is getting exposure to our technology within the 
consumer and telecoms business. We are well into the defense 
business, although mostly large defense contractors do not like 
spending their own money, so we are talking with government 
agencies to help spend the government's money with the defense.
    So basically, that is the end of our testimony. We need 
exposure in the telecoms and multimedia markets. Thank you, 
sir.
    [Mr. Collins' statement may be found in the appendix.]
    Chairman Manzullo. Thank you very much for that testimony.
    Our last witness is Brendan Walsh. Brendan is the co-
founder and vice president of FedBid.com. I look forward to 
your testimony.

  STATEMENT OF BRENDAN WALSH, CO-FOUNDER AND VICE-PRESIDENT, 
                 FEDBID.COM, FAIRFAX, VIRGINIA

    Mr. Walsh. Thank you, Mr. Chairman, and our Ranking Member 
Velazquez, Administrator Barreto, and the other members of the 
Committee. It is an honor today to testify on behalf of the 
contribution that the Small Business Administration and their 
programs have made to our success, the success of Daston 
Corporation's FedBid.com business unit. Today I hope to share 
some of the successes and how the federal agencies that are 
using FedBid today and the small business community are 
benefitting from the efforts that we have undertaken.
    I would also like to express our gratitude to the Committee 
and its members for their efforts in ensuring that the nation's 
small business community has a resource like the Small Business 
Administration to rely on for guidance, financing, and 
inspiration.
    Each year, the federal government awards over $200 billion 
in contracts. That $200 billion includes over $50 billion in 
commercial item buys or simplified acquisitions. This 
combination of high volume, attrition in the federal 
acquisition workforce and often conflicting procurement 
directives has created a very unique situation for the federal 
procurement buyer. This situation requires the buyer to 
simultaneously increase the awareness of procurement 
opportunities among the nation's vendor and supplier 
communities; increase the levels of competition among the 
qualified vendors; ensure a fair, competitive landscape for all 
interested bidders; and guarantee there is price reasonableness 
without sacrificing quality of service or product.
    This dynamic, this situation or challenge, we saw in 2001 
as an opportunity to bring to market a service that would help 
both the buyer and supplier communities, especially the small 
business communities, and that is what I will speak to as we 
get further into it.
    As a privately held, woman-owned, minority-owned small 
business, a Section 8(a)-certified company that was already 
offering IT services to the federal government and some 
industry customers, we knew the true nature of competing in the 
federal market, what it really meant, how the system worked, 
and how you win contracts. Using this knowledge, combined with 
our understanding of the situation the two buyer and seller 
communities are faced with, is why we created this Web service 
called FedBid.com.
    FedBid.com is a communication and competition tool. Since 
Mr. Glazier is sitting next to me, I want to make sure that the 
attorneys understand my next comment. Federal buyers often say 
when they use FedBid that, ``Oh, this is eBay for the 
government; it is reverse eBay for us.'' The dynamic, the 
nature, is very similar, but there are some differences.
    Anyone in the world can have access to FedBid if they have 
access to the Internet--very important for both the buyer and 
supplier community. We have over 60 U.S. embassies around the 
world using FedBid today. We have naval air stations and naval 
bases--one in Otsugi, Japan--using FedBid today. One of the 
embassy staffers even said, ``FedBid.com is our lifeline to 
capitalism.'' When you are sitting overseas, and you are 
directed to buy from U.S. suppliers, how do you do it? And that 
is one of the niches we fill.
    But that is now. That is not how it always has been at 
FedBid. When we started FedBid, the biggest challenge was 
getting agencies to give us a chance. A common comment was, 
``How do we contract your service--where is the vehicle?'' And 
our answer, thanks to the SBA, was, our 8(a) status issued by 
the Small Business Administration in 1995. The SBA's Section 
8(a) program gave us the opportunity and the contractual 
mechanism to initiate a pilot with the Department of State. The 
Department of State was our first large customer.
    During the pilot, the case studies, the business logic was 
there to develop and to adopt online procurement tools and 
techniques across both the State Department's domestic and 
international buying community. I believe that the State 
Department is a model for procurement innovation within the 
federal market, and they have, in the last year and a half to 
two years, completed over 1,300 reverse auctions through 
FedBid.com. But the important part about that statistic is not 
the 1,300 reverse auctions; it is that over 90 percent of the 
dollars that they competed through FedBid went to small 
businesses.
    So I think I can say, without the Small Business 
Administration and the 8(a) program, we would not be able to 
share statistics such as: In 2002, over 80 percent of the 
dollars competed on FedBid went to small businesses. The 
government agencies are tracking today to purchase over $100 
million through the site, with over 75 percent to small 
businesses. And in 2004, with, hopefully, the help and 
continued support of the Small Business Administration, we 
anticipate government agencies to purchase over $200 million 
through FedBid.com. Balancing the benefits to the buyer and 
supplier community are very, very important----.
    Chairman Manzullo. And I have got to balance the clock.
    Mr. Walsh. Well, I want to say thank you very much.
    Chairman Manzullo. You are welcome.
    Mr. Walsh. I appreciate the time.
    [Mr. Walsh's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your testimony. Thank you 
for the testimony of all of you.
    Administrator Barreto, do you have a few words of greetings 
for us as we merge to the administrative and the legislative 
branch at this hearing?
    Mr. Barretto. Thank you very much, Mr. Chairman. I am not 
used to sitting up here, so I don't even know how to work the 
microphone. I want to thank the chairman and the ranking member 
and all of the members on the Committee: Congressmen McCotter, 
King, and Franks; Congresswoman Christensen and Congressman 
Ballance. Thank you for allowing me to be here, and I want to 
thank each and every one of you for that very enlightening 
testimony.
    I think it is very appropriate that you are here during 
Small Business Week, and it definitely reminds me about the 
mission of the SBA. You know, we are 50 years' old this year, 
and I was looking at that Small Business Act, and, you know, 
the mission really hasn't changed. We are supposed to be aiding 
and counseling and assisting and protecting small businesses, 
and this Committee does a wonderful job of doing that. We do 
our part at the SBA and take your lead because you are the ones 
that are really getting it done every single day in this 
country.
    One of the things that I was so amazed when I was hearing 
the testimony was the diversity of the businesses, the 
diversity of the people, the regions of the country that are 
represented. When I travel around the country, people always 
ask me, What are the businesses that are successful? Who are 
the people that are getting ahead? Where are the opportunities, 
and what kind of businesses can I get started in? And as I look 
at all of you, I am reminded that it is all across the board, 
in manufacturing, in technology, in consulting, in services, in 
e-commerce. It is very, very exciting.
    So I want to thank the chairman for allowing me to be here. 
I want to thank this Committee for their leadership, and we 
look forward, not only in acknowledging the 50th anniversary, 
but truly positioning the SBA for at least another 50 years of 
service to the small business community. Thank you very much, 
Mr. Chairman.
    Chairman Manzullo. Thank you. I am going to keep all of the 
members to five minutes, including myself, because of the 
imminent votes coming up.
    Mr. Walsh, you mentioned that you have the contract with 
the State Department----
    Mr. Walsh. Yes, sir.
    Chairman Manzullo [continuing]. So that in their overseas 
offices, they will use your----.
    Mr. Walsh. Web service.
    Chairman Manzullo. [continuing]. Web service to buy 
products made in America. Is that correct?
    Mr. Walsh. Primarily. The different countries have 
different rules, depending on the relationship of the 
governments, but primarily they are directed, when they can, to 
buy from U.S. suppliers. And what they have lacked in the past 
is a tool that is there, readily available, depending on their 
country infrastructure, that will reach out and work with the 
U.S. supplier community.
    Chairman Manzullo. And then, with the Department of State, 
is there a dollar amount that they buy each year through your 
facilities? Do you have any idea?
    Mr. Walsh. Sure. This year, they are going to probably 
track to 45 to 50 million dollars through FedBid, primarily in 
commodity commercial items.
    Chairman Manzullo. What percentage of that would be items 
from America? Do you have any idea?
    Mr. Walsh. Almost 100 percent from U.S. suppliers.
    Chairman Manzullo. From U.S. suppliers?
    Mr. Walsh. Yes, sir.
    Chairman Manzullo. Give me an example, can you?
    Mr. Walsh. Everything from bullet-proof vests, tactical 
body gear, generators, computer parts, supplies, MREs. 
Remember, they are staffing facilities abroad, but also they 
are domestic buyers--a lot of IT products. We have done 
automobiles, boats, motorcycles, snowmobiles for other agencies 
besides, obviously, just State Department: the Navy; IRS; 
Transportation headquarters; EPA; we have got contracts with 
prisons; the Department of Justice; DOE. So we have over 30 
agencies already using FedBid today.
    The challenge is working within the 1102 community, or the 
contracting officer community, giving them the umbrella to try 
new things, and the 8[a] program gave us our chance, and now we 
are expanding upon that every day.
    Chairman Manzullo. If somebody wants to list a product--
there are not too many chairman out there, fortunately, but say 
I manufacture this hammer, and I want to sell it to a 
government agency. Would I contact you?
    Mr. Walsh. Not at all. That is why we are ``reverse eBay.''
    Chairman Manzullo. Tell us how it works.
    Mr. Walsh. A federal buyer will come onto our Web site, and 
they will post a specification saying, ``I need 20 mallets or 
gavels. They have to be wood, they have to be under two pounds, 
and they have to have a lacquer finish.'' Vendors are notified 
of the opportunity, and they can then bid, with the price going 
down, on what they want to deliver the price for.
    Chairman Manzullo. Do those vendors sign up with you in 
advance?
    Mr. Walsh. Yes, sir.
    Chairman Manzullo. Okay.
    Mr. Walsh. We have thousands of vendors today registered.
    Chairman Manzullo. If I made these, I would just call you, 
and then you would list me on your----.
    Mr. Walsh. We haven't done too many gavels.
    Chairman Manzullo. That is because, fortunately, there 
aren't too many chairmen.
    [Laughter.]
    Chairman Manzullo. I guess there are too many, huh, 
Congressman Schrock?
    You know, there are four major hammer manufacturers in the 
country. Two are in the district that I represent. But, say, if 
one of those wanted to----.
    Mr. Walsh. At no charge, they could register in 10 minutes. 
We would check their qualifications and statuses against SBA's 
PRO-Net, which has been a wonderful data resource, and also the 
Central Contractors Registry. So if they claim to be a small 
business, we are going to double-check and make sure they are.
    Chairman Manzullo. Okay. I appreciate that very much.
    Mr. Evans, the Mr. Entrepreneur there that waxes the cars 
and everything, your business now, you said you have how many 
CPAs working for you?
    Mr. Evans. During the course of time that we have been in 
business. Right now, we have five active CPAs and two active 
staff accountants/bookkeepers.
    Chairman Manzullo. You do the financial work for small 
businesses.
    Mr. Evans. That is correct. We go in and set up the 
accounting systems. Actually, in effect,----.
    Chairman Manzullo. Right from the beginning.
    Mr. Evans. Right. Oftentimes, we work with startups. A lot 
of times, we come in and clean up messes that were created 
because people were undercapitalized and couldn't afford to--
--.
    Chairman Manzullo. Used the wrong wax.
    Mr. Evans. But people were undercapitalized and couldn't 
afford to get the appropriate staff in place from the onset, so 
we come in and clean up the books, get them audit ready, if you 
will, and also position them to attain financing. So we work 
with capital-formation people, and they get involved with SBA 
loans, so we do a lot of that.
    One of the particular challenges that we have faced 
recently is trying to get a very fast-growing small business 
bonding. He has got a very good opportunity to provide 
surveillance and security equipment for a housing authority, 
and he needs a bid bond and a performance bond. We did a 
compilation, got a CPA to come in and do a formal review, and 
put together a very thorough package, and he has not been able 
to secure the bond.
    Chairman Manzullo. The boss is here, so maybe there is 
something that he can think of before you leave.
    Mr. Barretto. I would love to follow up on that. You know, 
we have an Office of Surety Bonds in the SBA, and if there is 
anything that we can do in our area, we would love to talk to 
you, and if not, we would like to help you find somebody that 
would be able to.
    That is a big area for a lot of small businesses. They have 
business, but they can't get the business done because they 
don't have enough bonding capability or some other kind of 
guarantee or insurance that they need to be able to perform the 
business, so definitely I would like to follow up with you on 
that.
    Chairman Manzullo. And the reauthorization of the SBA 
increases the amount of that bonding limit. Well, maybe we will 
get your problem solved. Ms. Velazquez?
    Ms. Velazquez. That is why we need to bring that 
reauthorization bill to the floor.
    Yes, Lurita Doan.
    Ms. Doan. Yes.
    Ms. Velazquez. You talked about contract bundling, and that 
is an issue--the federal contracting practices of our federal 
government has been an issue that I have been working on for so 
long----
    Ms. Doan. Yes, I know.
    Ms. Velazquez [continuing]. And I have issued four 
scorecards on which we showed how the federal government is 
closing the door on small businesses. And you mentioned the 
fact in your statement, as NTMI's contracts grow larger through 
innovation and effort, these contracts become attractive to big 
business. Do you have a plan in place as to what you are going 
to do if that happens?
    Ms. Doan. If the contract bundling happens? We have two 
different ways that we are approaching it--well, three. One of 
them is to just scream as loud as we can and pick up the phone 
and call you, the first one.[Laughter.]
    Ms. Doan. The second one that we are trying to do is, of 
course, we are trying to negotiate very strong legal agreements 
with the larger companies that have most of the bundled 
contracts. This is a very dicey area and actually another area 
where the SBA can help. I am fortunate that although I started 
my business with 25 bucks, we are now quite large, and I can 
afford excellent legal advice to put in place very stringent 
and rigorous legal contracts. Very small businesses can't 
afford to do that, and what I have found is that while the 
government does say that the large businesses have to adhere to 
certain percentage set-asides in obtaining those large omnibus 
contracts, actually the legislation is already in place, but it 
is never enforced.
    Ms. Velazquez. Tell me.
    Ms. Doan. And so what I find is that good legal agreements 
are very important, and if you don't have access to that, you 
are in big trouble.
    The third thing that we try to do is actually get a little 
bit out in front. We have always survived by word of mouth. We 
do great work. We do very innovative and niche work that no one 
else--very high-risk, high-visibility work, and all of our 
business for the last 13 years has been by word of mouth with 
our government customer. Now, for the very first time, we are 
having to step out and try to get a little bit more visibility 
in the public through participating, sponsoring, advertising, 
things of that nature.
    In addition, if I could just say, what we do is we believe 
that our subcontractors, all of whom are small, minority- or 
woman-owned businesses, are also our biggest bet because--I 
call it my ``dream team''--because I get the best people and 
the best businesses in each of these niche areas. We are 
bundling ourselves together so that we can go and compete 
against the larger contracts like Spirit and things of that 
nature.
    Ms. Velazquez. The reality is that the trend has been that 
while the federal government is spending more, and it is $235 
billion in contracting money, the number of contracts going to 
small businesses is going down.
    Ms. Doan. Exactly.
    Ms. Velazquez. Mr. Glazier, during the tech boom of the 
late-1990's, venture capital played an important role in the 
creation and growth of small businesses. How has the 
substantial decline in venture capital affected the current 
environment facing tech entrepreneurs?
    Mr. Glazier. It is not my area of expertise, but, in 
general, we see less venture capital flowing in the Silicon 
Valley these days. I know several entrepreneurs personally who 
have great ideas who are not able to find funding. It still 
exists for some, but, in general, I think it is less available 
now than before.
    Ms. Velazquez. I guess that that is an area where the 
federal government can play a role.
    Ms. Erica Kalick, if I asked you what is one issue, from 
the access to capital to health care, that would mean to your 
business, if you have access, for example, to affordable health 
care, what it will do for your business?
    Ms. Kalick. Well, primarily, it will create more confidence 
and loyalty among workers. Workers are frightened, terribly 
frightened. I didn't get to read this in my testimony, but, you 
know, in a New York Times article there was a very poignant 
quote, if I can read it?
    Ms. Velazquez. Sure. It is on my time.
    Ms. Kalick. What?
    Ms. Velazquez. This is my time.
    Ms. Kalick. Mr. Greathouse; he was an unemployed, 55-year-
old, tool-and-die man laid off from the Hoover Vacuum Cleaner 
Factory in Canton, Ohio, and he says, ``Manufacturing has been 
the strength of this country. If we can't make anything here 
anymore, what does that do? The fabric of this society is 
falling apart. When you have CEOs who think of moving jobs 
offshore, what are you doing but terrorizing the people who 
lose their jobs?'' And this is from a New York Times article, 
``As Factory Jobs Disappear, Workers Have Few Options, and as 
Jobs Disappear, Health Care Disappears.''
    Workers are frightened. It makes it harder for us to be 
productive. I had that laundry list of all of the sky-high 
costs that just seem to be uncappable.
    Ms. Velazquez. Thank you. Thank you, Mr. Chairman.
    Chairman Manzullo. Is that editorial attached to your 
testimony?
    Ms. Kalick. Yes.
    Chairman Manzullo. Okay. Mr. McCotter.
    Mr. McCotter. I am sorry, Mr. Chairman, no questions.
    Chairman Manzullo. No questions? Congresswoman Majette? Oh, 
she has gone. Okay. Frank. Congressman Ballance?
    Mr. Ballance. Mr. Chairman, what I am going to do is just 
congratulate. I apologize for coming in late. I would like to 
know, and maybe I will just start with Maria, the issue of 
financing your business. I don't know if you want to talk about 
your own situation or someone you know of. How difficult is 
financing and continued financing for a small business?
    Ms. Thompson. For a small business such as ours, it can be 
difficult because, as I mentioned in my testimony, venture 
capitalists do not fund research. We have gone to venture 
capitalists before. They don't want to fund research. They 
don't want to make anything. We have gone through things where 
they say, Great idea. I would love to have my cell phone or 
computer last longer, but you have to make something. We don't 
want to fund anything you have to make; we would rather fund 
software. And I said, Sorry, guys. I think that party is over 
with. We need to start making things and producing real things 
that you can touch and feel in this country. We have gotten 
more interest from overseas than we have from this country.
    But there is a new danger that we have started to see on 
the horizon, and it is the fact that the intellectual property 
that is being developed in this country by scientists and 
engineers is quickly being replaced in places like China where 
they can hire 20 Ph.D.s for what I have to pay one. That is 
very scary. I have heard inklings of it. I am starting to see 
it. I was talking to another high-tech entrepreneur, and he 
said his lab is empty because his company that had originally 
hired him to fund his lab is now doing everything in China just 
because the cost of labor is so much less expensive. So I have 
to compete against that.
    What has been the saving grace for our company has been the 
SBIR program and the ATP program that has provided us capital 
that we can leverage to then go to some of these big companies 
who have cut their research budgets to almost zero and say, You 
have research that needs to be done. ``You need your batteries 
and your fuel cells to be cheaper and last longer. Let us 
leverage the money that we are able to bring in with what you 
want to do and see if we can come up with a new product and new 
technology.''
    Mr. Ballance. All right. One more short question. Is there 
one barrier in our SBA programs that you would like to see us 
change?
    Ms. Thompson. Well, I know for companies when we first 
start out--I understand you have FARs, and I am not trying to 
complain, because if you get free money, it is very nice; you 
fill out your timecards and stuff. But I have an MBA. I don't 
consider myself a dumb person, and I have a lawyer who is a 
friend. When you are starting out, you don't have the energy or 
the resources to hire a $350-an-hour lawyer. Luckily, I had 
some friends who had been to law school and were able to help 
me.
    We went through our first contract, and I read every FAR. 
They have the FAR, and then they have a sub-FAR, and then they 
have a sub-FAR, so it is like opening those boxes that you keep 
opening smaller and smaller boxes to get to the meat of it. So 
I spent about three days going through that, and I said, Oh, my 
goodness. If there is some way that we could have ``The FAR For 
Dummmies'' or something that would make it easier to 
understand, or some crib notes, it would make things a lot 
easier for small companies. I had a company that helped me 
understand some of the issues in the FARs and DFARs, and I have 
actually hired some consultants to help us with that. We 
counsel each other back and forth. But that sure is a tough way 
for a lot of these companies to try to figure it out and get 
involved in taking advantage of these contracts.
    Mr. Ballance. Thank you.
    Chairman Manzullo. Thank you. Mr. Franks, do you have a 
question? We are going to have votes in about five minutes.
    However you want to do it among the three of you.
    Mr. Franks. Well, I guess I just want to add my 
appreciation to all of you. You know, I ran a small agency in 
Arizona, the Department for Children, and one of the things 
that we found is that when government funded something, if they 
also did the work themselves, it didn't work out very well; but 
if they, in turn, allowed the money to follow the recipient or 
they jobbed it out to someone in the private sector, it always 
worked better.
    And I look forward to a day when nearly all of our 
government contracts will go out to bid, FedBid or these kind 
of efforts, and take advantage of the genius that all of you 
offer here because I believe, whether it is Medicare or 
whatever issue we are facing, that you have the answers. And 
unless the kinds of innovations that I have seen here today are 
applied to certain things that we face in the future, we have 
got some financial impossible challenges to overcome, apart 
from what you do, and I just hope you stay with it. You are on 
the front line of America, and we are proud of you.
    Chairman Manzullo. Mr. King?
    Mr. King. Thank you, Mr. Chairman. I want to thank you all 
for your testimony. Before I ask my questions, I want to tell 
you, first off, that I have been in small business for about 28 
years and met payroll about 1,480 consecutive weeks, so I am on 
your side.
    The questions I would pose, then, are maybe a little bit 
devil's advocacy questions, and the first one would be to Ms. 
Doan. You remarked that all of your subcontractors are small, 
minority-, or women-owned businesses. Why is that?
    Ms. Doan. Well, first, I truly believe you need to keep the 
money in the family, so if I am a small business, and I am 
receiving money because I am a small business, I think I almost 
have an obligation to try to help the other small businesses 
get their foot up. The hardest thing in the government now is 
that past performance judges everything, and if you don't have 
a past performance, you don't have much of a chance of getting 
another contract. So if you see an innovative technology, and I 
am on the leading edge of it, if you see that perfect product, 
just because it is a small company, you don't give up on them.
    Mr. King. So I would add to that that I have found over the 
years that it is not really possible, or it is very difficult--
I should put it that way--very difficult to hire the loyalty 
that you can raise. That is why we have so many successful 
family businesses. We have had difficulty hiring minority 
people to work for us. That is the other side of that equation. 
So I would assume, then, if my son met your daughter, they 
could bid in some work together with you. I hope that we could 
do that, and I trust we could. I am looking for a bride for my 
son, and that is in the record. Now I understand.
    Ms. Doan. I am probably a little young at 14.
    Mr. King. I am not a patient man, I guess. I do admire 
everybody's spirit here, too, by the way, and I appreciate 
this. Ms. Kalick, Adam Smith wrote in 1776----.
    Chairman Manzullo. Let me do this. Adam Smith is a nice 
guy, but I want to let Ed Schrock ask a question. Did you have 
a quick question?
    Mr. Schrock. All I wanted to say, Mr. Chairman, I am sorry, 
very sorry I was late. I represent Virginia Beach, Virginia, so 
you can imagine some of the issues we are dealing with today.
    Chairman Manzullo. You should get out of here.
    Mr. Schrock. Well, my state police have told me already I 
can't get in. They have closed the road.
    I wanted to come here to hear success stories because we 
don't usually hear that sort of thing. Ms. Kalick, the bundling 
thing; I think Ms. Velazquez and the chairman and I agree with 
that, that there has just got to be a stop to some of this 
stuff because it is going to kill part of you guys.
    My last comment is, Mr. Collins, are those little things 
you have on there miniature gold ingots, and if they are, are 
you giving away samples?
    [Laughter.]
    Mr. Schrock. What are those?
    Mr. Collins. They are gold, and we are keeping them for 
ourselves, sir.
    Mr. Schrock. They really are, then.
    Chairman Manzullo. We would settle for some cookies.
    Mr. Schrock. Oh, they are empty. Oh, okay. Thank you.
    Chairman Manzullo. Back to Adam Smith.
    Mr. King. Okay. My train of thought was this. With your 
remarks with regard to competition going overseas, Smith wrote 
that if we can buy it cheaper than we could make it, we ought 
to buy it. The cost of all goods are the sum total of the cost 
of the labor it takes to produce it and the cost of the 
capital. So if we can buy it cheaper overseas, outside of 
national security, why should we do that?
    Ms. Kalick. Well, in relation to the quote that I just 
read, as Mr. Greathouse said, manufacturing really is the 
backbone of this country, and as I summed it up, you can't eat 
virtual cookies. You just can't. I think it erodes the 
confidence of all Americans when they can't get up in the 
morning and be connected to their community, feel a loyalty to 
company. We have all seen Roger [sic] Moore's films, you know, 
the devastation in Michigan in Flint, factories closing, and 
the incredible ripple effect this has: serious despair and 
depression. How can this nation thrive if everything is 
exiting?
    Mr. King. I see Maria has an answer. It is in her eyes.
    Ms. Thompson. We would hate to mortgage the future of our 
country. The nineties were powered by a lot of technological 
innovations that were created in this country, and if the 
innovation moves overseas, I think we will be mortgaging our 
future.
    Mr. King. My very quick comment is if we can reduce taxes 
and regulation, we can compete more effectively, and that will 
protect us better than protectionism. Thank you very much. 
Thank you, Mr. Chair.
    Chairman Manzullo. You know, this is America at its best, 
great stories. Randy, my dad had a grocery store, and when I 
was five years' old, my brother and I took the fruit that he 
had put out back because it was overripe or spoiled and put 
them in our wagon. We were selling fruit in the neighborhood. 
And then some of the people called and said, Frank, your sons 
are selling rotten fruit. We thought it was mature fruit.
    [Laughter.]
    Chairman Manzullo. So that was our introduction to 
entrepreneurship.
    Thank you for your testimony. Thank you for your tremendous 
witness to what makes America great.
    Administrator Barreto, thank you so much for sharing your 
valuable time with us. What a joy it is. This is the best 
hearing that we have once a year when guys come in and talk 
about what they did to become part of the American spirit. 
Thank you again.
    [Whereupon, at 2:25 p.m., the Committee was adjourned.]

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