[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
HEARING ON CHALLENGES THAT SMALL BUSINESSES FACE ACCESSING HOMELAND
SECURITY CONTRACTS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON RURAL ENTERPRISE, AGRICULTURE & TECHNOLOGY
of the
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC, OCTOBER 21, 2003
__________
Serial No. 108-43
__________
Printed for the use of the Committee on Small Business
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
_____
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2004
93-005 PDF
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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
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Witnesses
Page
Barrera, Michael, U.S. Small Business Administration............. 5
Boshears, Kevin, U.S. Department of Homeland Security............ 7
Brink, Benjamin M., Data Research Systems, Inc................... 15
May, Tim, Advanced Interactive Systems........................... 19
Driscoll, Patricia, Frontline Defense Systems, LLC............... 24
Sabety, Marian, National Small Business Association.............. 27
Appendix
Opening statements:
Graves, Hon. Sam............................................. 36
Shuster, Hon. Bill........................................... 38
Prepared statements:
Barrera, Michael............................................. 44
Boshears, Kevin.............................................. 54
Brink, Benjamin M............................................ 58
May, Tim..................................................... 74
Driscoll, Patricia........................................... 79
Sabety, Marian............................................... 82
(iii)
HEARING ON CHALLENGES THAT SMALL BUSINESSES FACE ACCESSING HOMELAND
SECURITY CONTRACTS
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TUESDAY, OCTOBER 21, 2003
House of Representatives
Subcommittee on Rural Enterprise, Agriculture and
Technology
Committee on Small Business
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:05 a.m. in
Room 2360, Rayburn House Office Building, Hon. Sam Graves
[chairman of the Subcommittee] presiding.
Chairman Graves. Good morning, everybody, and welcome to
the Small Business Subcommittee hearing, the Small Business
Subcommittee on Agriculture, Technology and Rural Enterprise.
Today we are going to be looking at the challenges that
small businesses face when it comes to accessing contracts with
the Department of Homeland Security. I will go ahead and give
my opening statement and then open it up to Mr. Ballance, and
then we will open it up to other Members.
The federal government is one of the largest markets for
U.S. business. Annually, the federal government spends
approximately $200 billion on goods and services purchased from
the private sector. The Department of Defense alone is the
largest federal marketplace for business, accounting for over
$120 billion in prime contract awards, more than 60 percent of
all federal procurement dollars.
Congress set statutory goals for all agencies that 23
percent of all prime contracts should be given to small
businesses. However, the benchmark is not always met. The
Department of Defense has not succeeded in meeting this goal
for the past two years, but it is not alone. Overall, the
federal government has not met its small business prime
contracting goal for several years.
On January 24, 2003, Congress created the Department of
Homeland Security and brought 22 separate agencies under one
roof to account for the safety and security of the United
States. It is certainly a daunting task in the wake of
September 11, and in order to ensure that the new department
could function Congress allowed the Department to bypass the
procurement regulations that other agencies have to adhere to.
Historically, small businesses have faced many barriers
accessing the federal procurement marketplace. Contract
bundling has been the most prevalent issue that small
businesses face, bundled contracts or combined contracts too
large or too complex for small businesses to handle.
Additionally, small businesses frequently face the difficulty
of traversing the maze of agencies or finding the procurement
officer that handles the applicable technology or specific
contract.
Also, small business has been more productive and
technologically innovative than their larger business
counterparts. Additionally, small business has frequently been
able to provide better goods and services at lower prices than
the larger competitors. We have to find a way to ensure that
small businesses receive its share of federal procurement
opportunities.
This is not intended, and I just want to point that out.
This is not intended to be a witch hunt or anything like that.
We are just simply trying to explore this issue, trying to
explore the problems and see what solutions we can find and
move forward in that direction.
[Mr. Graves' statement may be found in the appendix.]
Chairman Graves. Right now I would like to recognize Mr.
Ballance, the Ranking Member, for his opening statement.
Mr. Ballance. Thank you, Mr. Chairman. After listening to
your opening statement, I could almost waive mine, but I will
go ahead and give it.
The tragedy of 9-11 served as a wake up call for this
nation. With the reality of this attack on our soil, we
realized that reforms were needed. Last year, we responded by
creating the Department of Homeland Security, DHS, and this was
the largest reorganization of the federal government since
1947.
Congress understood that creating a new agency would not be
an easy process, but felt that it was a necessary one. This
process of creating this new department provided the
opportunity to correct inherent problems. While the primary
objective was to create a safer, more secure domestic front, it
also offered a chance to review federal contracting practices.
The procurement reforms of the 1990s have been a
disappointment as the government has not saved money, and small
businesses have seen their share of procurement dollars
decline. The federal government has increasingly failed to
provide our nation's small businesses with the opportunities to
succeed within the $235 billion federal procurement system. For
small businesses, accessing the federal marketplace can mean
increased productivity ensuring economic viability.
In an effort to ensure small businesses could fully
participate in this new agency, the House last year adopted and
passed certain changes. However, all of them did not make their
way into the final legislation and conference. Most
importantly, the legislation would have made this new
department subject to the Small Business Act, which means the
agency would be required to establish goals for doing business
with small firms. Unfortunately, the final legislation did not
include that and others.
The result leaves a great deal of uncertainty as to whether
small businesses will thrive or even have a chance to do
business with the Department. It is unfortunate that
legislation creating DHS did not provide for small businesses
to be fully integrated into the Department. I am hopeful that
Secretary Ridge shows a bold vision that fully incorporates
entrepreneurs into DHS contracting.
Sadly, what we have heard is the opposite. Secretary Ridge
said that the agencies contracting would not focus on small
businesses, but rather on economies of scale. This is somewhat
concerning to us because it, in my opinion, refers to contract
bundling. This practice robs small businesses of millions of
dollars in contracting opportunities.
Today we will look at what steps can be undertaken to
direct the Department to work with small businesses. While the
Department is telling small companies that they are important,
they are not rewarding their innovation with action. The mixed
message being sent is unfair to small businesses.
It is important to understand that creating a new
department will not happen overnight. It is going to take time
to effectively combine 22 separate entities with different
regulations, et cetera. As this agency evolves, an important
role for our Committee must be to ensure that in combining all
of these different entities into one unit, small businesses are
not squeezed out of the process.
I want to thank the witnesses for taking the time to attend
today and look forward to hearing your insight.
Chairman Graves. Mr. Shuster?
Mr. Shuster. Thank you. I first want to take this
opportunity to welcome our witnesses. I appreciate you being
here and look forward to your testimony.
I would like to begin by thanking Chairman Graves for
holding this important hearing. Having been a small business
owner myself, this is an issue that is very important to me. We
have all heard the statistics of the critical role small
business plays in our economy. Small businesses account for 99
percent of our nation's employers and are responsible for
creating thousands of new jobs across this country each year.
In my home state of Pennsylvania, more than 97 percent of the
state's employers are small business. These businesses are also
responsible for over half of the state's employment.
Despite the incredible success of small businesses and the
instrumental role they play in our economy, we find that too
often these same businesses face many hurdles while attempting
to do business with the federal government. Traveling
throughout my district, I routinely have heard from many small
business owners that say it is quite difficult to do business
with the federal government. The process is complex, and often
these firms do not have the start up resources or manpower to
bring their innovations to the government.
The federal government is the largest buyer of goods and
services, as we have heard here this morning, yet gaining
access to this market is very challenging for small businesses.
Contracting with the government is often thought to be an
insider's game that favors larger firms.
Two of the biggest complaints that I have heard from small
businesses in Pennsylvania are that it can be quite difficult
to gain access to the individuals who make the decisions on
awarding contracts and that paperwork can also be overwhelming.
It impedes businesses with minimum manpower.
Additionally, many constituents have told me that if they
were successful in winning a government contract, there can
often be a significant lag time between when the work is
completed and when they are paid. This can create a major drain
on a business with limited resources and funds.
This is not to say that there are not success stories when
it comes to small businesses winning government contracts. I
saw in Mr. Barrera's testimony that 2002 awards to small
businesses for federal government agencies increased by $3.6
billion to reach a level of $53.6 billion. This is good news
and a step in the right direction. We must now focus upon
building on that success and increasing opportunity for our
nation's small businesses.
With the creation of the Department of Homeland Security in
January, we are presented with a unique opportunity to once
again evaluate how successful the government is to reaching out
to our small businesses. It is often our nation's small
businesses that formulate new and innovative technologies, and
we must ensure that these businesses have the opportunity to
market these new technologies to the Department of Homeland
Security and that if awarded they are paid timely and in an
efficient manner. This will not only help small business
success, but additionally will create jobs at home and enhance
our national security.
Mr. Chairman, thank you again for holding this hearing, and
I look forward to the witnesses' testimony.
Chairman Graves. Thanks, Mr. Shuster.
[Mr. Shuster's statement may be found in the appendix.]
Chairman Graves. Dr. Christensen?
Ms. Christensen. Thank you. Thank you, Chairman Graves and
Ranking Member Ballance, also for holding this hearing to
discuss the Department of Homeland Security's federal
contracting opportunities for small business.
I want to take this opportunity to welcome Mr. Kevin
Boshears, the director of the OSDBU Office, on his first
appearance before this Subcommittee, and Mr. Michael Barrera
from SBA in his new capacity, as well as the small businesses
who are taking the time from their schedules to be here to
offer us their insight into this matter.
Both Homeland Security and small business are two issues
that are of particular importance to me. At the beginning of
this year, I was given the distinct honor and opportunity to be
named to the House Select Committee on Homeland Security, and I
sit on the Subcommittees on Emergency Preparedness and
Response, and Cyber Security Science, and Research and
Development.
Having made a special request to remain on this Committee
as well, the Small Business Committee, and I thank the chair
and Ranking Member of the Committee for allowing me to do so, I
have a unique opportunity I think to ensure that the needs of
both are addressed.
Along with my colleagues who also are on both Committees, I
want to assure you that we have made the small business
contracting goal of the overall agency and their several
sections a standard question when assistant secretaries and
directors appear before the Committee.
While I will soon leave here to go to a Homeland Security
hearing on first responder funding, I wanted to take this
opportunity to assure you that you also have voices there and
to let you know that along with Mr. Ballance and Mr. Graves you
can call on us to let us know of your concerns and provide us
with some guidance on how we can better accommodate the goals
that are the subject of today's hearing.
As has been said, bringing this new Department on board
with its 22 other agencies or parts of agencies and 170,000
employees has not been an easy process. While it is a challenge
which I hope we on the Homeland Security Committee are meeting,
it is also an opportunity, as has been said, to show the older,
more entrenched agencies how to do certain things right and how
to do them better.
I think it is very clear that small business contracting
has to be one of those things that we can teach at Homeland
Security. We can teach the Department of Defense and some of
those other agencies that got Ds and Fs in our report how to do
this better.
I want to thank again the Chair and Ranking Member for the
opportunity to give this brief statement and for holding the
hearing this morning.
Chairman Graves. Thank you very much.
All statements by Members and witnesses will be placed in
the record in their entirety, and I would now like to welcome
our first panel, Kevin Boshears and Michael Barrera, for being
here today.
Mr. Barrera is the Acting Deputy Administrator for Small
Business Contracting with the Small Business Administration.
Mr. Barrera, I appreciate you for being here, and thank you for
coming to Kansas City to our Small Business Expo too. I
appreciate that very much. I turn the floor over to you.
STATEMENT OF MICHAEL BARRERA, ASSOCIATE DEPUTY ADMINISTRATOR,
GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL
BUSINESS ADMINISTRATION
Mr. Barrera. Thank you. Good morning, Chairman Graves,
Ranking Member Ballance, Congressman Shuster and Congresswoman
Christensen, and distinguished Members of the Subcommittee.
Consistent with President George W. Bush's commitment to
small business, the U.S. Small Business Administration is
committed to maximizing opportunities for all of the nation's
small businesses and the millions of people they employ. I am
pleased to submit my written testimony for the record.
Small businesses help drive this economy and are the
sources of innovative ideas and solutions in support of the
mission and needs of federal agencies and prime contractors.
The SBA programs and initiatives are designed to provide an
environment where small businesses can be competitive in
federal procurement.
When the President announced the establishment of the
Department of Homeland Security in early 2003, Administrator
Barreto sent a letter to Secretary Ridge congratulating him and
offering to work with him to ensure maximum small business
participation in procurements that support his mission.
We believe that leadership and accountability by the senior
management at the agencies make all the difference for our
nation's small businesses. Reinforcing these principles, SBA
has also met with the senior officials at Homeland Security to
obtain their commitment to the small business programs and to
achieve the government-wide small business procurement goals.
In June, we assigned a procurement center representative,
PCR, to work with Mr. Kevin Boshears, Director, Office of Small
and Disadvantaged Business Utilization, to review procurement
opportunities and establish traditional small business prime
and subcontracting goals for fiscal year 2004 and fiscal year
2005.
S.B.A. is pleased with the Department's commitment to
achieve the statutory goals. The Department proposed an
aggressive small business subcontracting goal of 40 percent,
which includes a five percent subcontracting goal for women and
SDBs and three percent for service disabled veterans and
HUBZone firms.
S.B.A. continues to use the best practices of the
marketplace to improve and modernize our programs so that an
environment can be created for small businesses to succeed,
create jobs and support economic growth. In fiscal year 2003,
we implemented the following key initiatives to increase prime
and subcontracting results:
The National Business Matchmaking Program. SBA held five
nationwide business matchmaking sessions to introduce small
business owners to potential buyers like federal agencies,
corporations and state and local agencies. Over 7,500 one-on-
one appointments were held between small businesses and these
potential customers.
A key objective was to increase women-owned business
participation at these sessions. At the Orlando and Chicago
sessions, we achieved 36 percent and 37 percent women-owned
business participation levels respectively.
These business matchmaking sessions facilitate small
business access to future procurement opportunities, and we are
also exploring ways to track and measure results. For
information on future matchmaking sessions, small businesses
can go to www.businessmatchmaking.com.
Contract Bundling. In October 2002, the President announced
a nine point strategy that agencies must follow to avoid
unnecessary contract bundling and mitigate the effects of
justified contract bundling on small businesses. When agencies
bundle contracts, small businesses often cannot compete, given
the size and multiple contract requirements.
In January 2003, proposed changes to SBA's regulations and
the Federal Acquisition Regulation were published to require,
among other things, that agencies conduct bundling reviews of
requirements for multiple award contracts and orders against
those contracts, strengthen their compliance with
subcontracting plans and improve oversight of their small
business programs.
Simplification of the 8(a) Program Processes. SBA is
committed to implementing an Internet based application for the
8(a) and small disadvantaged business certification. This
automation will reduce the paperwork burden consistent with the
Small Business Paperwork Relief Act and allow small
disadvantaged businesses to obtain their certification much
faster. This saves small businesses time and money.
Size Standard Simplification. We are developing a new
approach to simplify and reduce the number of size standards by
proposing employee based standards. This will streamline
existing processes and procedures and make them easier to use.
We are developing the proposed rule.
Procurement Training Academy. At the 50th Anniversary
National Conference and Exposition in September, SBA released a
new CD-ROM based Procurement Academy to provide distance
training to 7(j) eligible firms. This Training Academy can also
be accessed at www.sba.gov/gcbd and click on the Procurement
Academy.
When fully implemented, these initiatives will help to
create an environment where small businesses will have better
access to federal procurement opportunities.
This concludes my testimony, and I will be glad to respond
to any questions the Subcommittee may have.
Chairman Graves. Thank you, Mr. Barrera.
[Mr. Barrera's statement may be found in the appendix.]
Chairman Graves. Kevin Boshears is with the Department of
Homeland Security and Director of Small and Underutilized
Businesses.
Mr. Boshears. Disadvantaged Business Utilization.
Chairman Graves. I appreciate you being here very much and
look forward to your testimony.
STATEMENT OF KEVIN BOSHEARS, DIRECTOR, OFFICE OF SMALL AND
DISADVANTAGED BUSINESS UTILIZATION, U.S. DEPARTMENT OF HOMELAND
SECURITY
Mr. Boshears. Thank you. Good morning Chairman Graves,
Congressman Ballance and distinguished Members of the
Subcommittee. I am pleased to appear before you today to
discuss the Department of Homeland Security's, DHS', small
business procurement program.
I was designated the Director of the DHS Office of Small
and Disadvantaged Business Utilization, OSDBU Office, in May
2003 in accordance with the Small Business Act. I am a career
public servant, having previously served as the OSDBU Director
for the Treasury Department and as a contracting officer for
the Justice Department.
The role of the OSDBU is to assist, counsel and advise
small businesses of all types on procedures for contracting
with DHS. Additionally, the OSDBU works closely with each DHS
organizational element to implement the Department's small
business procurement assistance program.
I have had numerous discussions with Mr. Greg Rothwell, the
DHS Chief Procurement Officer, and I have been impressed by his
strong support for the DHS small business procurement program.
He considers a strong small business program to be a
significant part of building a world class acquisition program.
At DHS, our plan is to make the small business program part
of our budget and acquisition planning by using small business
considerations to further our mission and develop a climate of
small business opportunity.
Since my arrival at DHS, we have undertaken numerous
organizational projects to assist small businesses in
overcoming the challenges involved and accessing contracts in
the newly formed Department. Due to the reorganization of some
agencies that transferred into DHS, we first had to designate a
small business specialist in each DHS organizational element.
S.B.A. asked us to establish several non-traditional goals
for the remainder of fiscal year 2003. These goals, and our
results, are included in my written statement.
Since providing information and guidance is a cornerstone
of our work, we have also been actively participating in a wide
variety of educational events and seminars for small business
owners. In conjunction with the Department of the Treasury, we
conducted vendor outreach sessions to give small business
owners the opportunity to meet one-on-one with DHS small
business specialists and program managers.
One of our major accomplishments was publishing, in hard
copy and posting on the DHS Web site shortly after October 1, a
fiscal year 2004 forecast of contract opportunities to assist
Small Business's plan for upcoming contract opportunities.
For us to have a baseline since of how successful small
businesses are with obtaining DHS contracts, we started
compiling data last week for the March 1, 2003, through June
30, 2003, timeframe. This represents the starting date that the
22 agencies were transferred from their former organizations to
form DHS and the third quarter of fiscal year 2003.
While this four months' worth of data provides only a brief
snapshot and still requires final validation from the Federal
Procurement Data Center, the overall numbers appear to be
promising. Establishing this baseline set of statistics for the
fiscal year 2003 DHS transition period will help strengthen the
DHS small business program.
As we begin the first fiscal year as a department, we plan
to continue an aggressive outreach program. Local vendor
outreach sessions are already scheduled for the remainder of
the fiscal year, and we will be participating in the OSDBU
Interagency Directors Council Annual Procurement Fair in April.
We will also be teaming up with SBA for the National
Matchmaking Tour around the country.
We continue to receive numerous invitations to speak and
participate in small business development seminars. Just in the
next week, my staff will be speaking at two large scale
seminars in San Diego and Chicago and at a local town hall
meeting. We will continue to work with SBA to finalize our
small business prime and subcontracting goals for fiscal year
2004.
Our forecast of contract opportunities will be updated as
new information becomes available, and we plan to publish a
subcontracting opportunities directory, along with a working
tour establishment of a mentor protege program.
In conclusion, DHS will strive to meet or exceed our small
business goals by making small business participation part of
the DHS culture in support of our national mission. I would be
happy to respond to any questions you might have.
Chairman Graves. Thanks, Mr. Boshears.
[Mr. Boshears' statement may be found in the appendix.]
Chairman Graves. We will now open it up for questions for
our first panel.
I would just like to know, at least right now, as far as
the Department of Homeland Security goes, and I understand the
gravity of your mission and everything, but what do you see as
the most or the toughest thing or the biggest hurdle that small
business faces trying to get contracts with Homeland Security?
Mr. Boshears. In speaking with small businesses regarding
contracts with DHS and also in my previous work in this field,
the number one hurdle that most small businesses face is access
to the high quality information they need in order to
participate in the program.
For example, sometimes a small business has an interest in
the federal marketplace because they think they might have a
good or a service that might be of interest to the federal
government or DHS, but sometimes they do not quite know where
to start so what we have found is that if we provide high
quality, meaningful information, and what I mean by that is
personal points of contact for my office, small business points
of contact throughout the Department, a forecast of contract
opportunities which gives a listing of individual upcoming
projects with a point of contact for more information.
Combine that with information on how the federal
procurement system works, and this begins to open the doors to
access to the Department. We have found that once equipped with
the right information, small businesses at that point tend to
take over and lead the charge and pursue through a marketing
effort those opportunities in which they have an interest.
Chairman Graves. I know you have not been up and running
very long, but how close do you think you are getting right now
to meeting the 23 percent at least? Of course, you do not have
to adhere to that at this point, but as a benchmark if nothing
else. How close would you say you are getting?
Mr. Boshears. Well, we have collected some data
representing the month of March and the third quarter of fiscal
year 2003, which would be April, May and June, a four month
snapshot. As of today, we would be slightly exceeding the
overall small business goal of 23 percent.
Chairman Graves. Really? That is real good news.
Mr. Ballance?
Mr. Ballance. Thank you very much. Do you have, that is
DHS, goals, first of all, for prime contracting and then for
small disadvantaged businesses and then for the 8(a) program?
Do you have these goals? If so, what are they?
Mr. Boshears. When we first met with SBA in late May in
fiscal year 2003, we did not establish numerical goals for the
balance of 2003, but for fiscal years 2004 and 2005, in
compliance with SBA's instructions, we proposed our goals to
SBA.
Now, it is my understanding that they have not quite been
finalized by SBA for the entire federal government, but I would
be glad to share with you what we proposed to SBA.
Mr. Ballance. Yes. I would like to hear that.
Mr. Boshears. Yes, sir. There are----.
Mr. Ballance. If you would, when you say your proposal to
SBA, can you not establish your own goals?
Mr. Boshears. Well, yes, sir. The way that that process
works is that SBA, and I will defer to Mr. Barrera if we have
additional information needed, is that SBA is in charge of
establishing the goals for the entire federal government.
They start with a base of what statutory goals are, and
then they work with each agency individually, and in effect we
have a discussion to help establish goals for each department.
We do establish our goals, but we work in concert with SBA to
establish agreement on those goals.
Mr. Ballance. Let me just ask Mr. Barrera. What is your
position in terms of goals for DHS?
Mr. Barrera. I think the way we are going to work that,
first of all, I want to say that I have been with the
Department for two weeks, and I am learning about all the
goaling that is going on, but I think where we are working with
DHS is the federal goals are 23 percent, at least getting to
that.
We were very impressed with DHS and the way they are being
aggressive in their subcontracting goals, which is also very,
very important to small businesses. Forty percent for
subcontracting, and they are also committing to the five
percent for small disadvantaged business, which is part of
8(a), which 8(a) is part of the 3 percent for HUBZones, 5
percent for women and 3 percent for veterans also.
We are working with them. Our staff is working with them on
that. When he says that we are working with them on the goals,
you are right. They established their individual goals. I think
what we look at is to make sure that the individual goals at
least meet the government wide goals and what they have. From
what I understand, some agencies may want to have lower goals,
and we want to make sure that the agencies are meeting
aggressive goals for small businesses.
Mr. Ballance. I do not want to beat this horse too much,
Mr. Boshears, but it is interesting what is being said. What I
want to know is will there be a time when small businesses
around the country and those of us who are here can hear from
you definitively what these goals are?
Mr. Boshears. Yes, sir.
Mr. Ballance. And do you have any idea when that might be?
Mr. Boshears. Yes, sir. I understand late October.
Mr. Ballance. All right.
Mr. Boshears. Congressman Ballance, I can also share with
you, if you would like it in list form, what we proposed.
Mr. Ballance. Yes, I would like to have that.
Mr. Boshears. We established prime contracting goals and
subcontracting goals. Small business prime overall, 23 percent;
small disadvantaged business prime, including 8(a), five
percent; women-owned small business, five percent; HUBZone
small business, three percent; service disabled veteran owned
small business, three percent.
Changing gears to subcontracting, small business overall
subcontracting, 40 percent; small disadvantaged business, five
percent; women-owned small business, five percent; HUBZone
small business subcontracting, three percent; and service
disabled veteran owned, three percent.
Mr. Ballance. Thank you. Let me move to another area before
my time runs out.
What do you think the Secretary meant, and I know you
cannot read his mind, but by taking advantage of economies of
scale? What does this mean to you?
Mr. Boshears. When the Secretary addressed economies of
scale, I took it to mean that part of an effort to look at
strategic sourcing around the various parts of the Department.
For example, if you look across the board at all of the 22
agencies that came together with us, we might have contracts
previously done separately for a number of those agencies. One
idea on strategic sourcing is to see if there are any economies
of scale, particularly in the area of products.
Now, what is important about that effort is that as part of
our look at strategic sourcing to see if economies of scale can
be identified, I serve as a member of the strategic sourcing
group so that we can be on the lookout and have a discussion
about any proposed contract bundling. That is the area of
concern to small businesses.
Most small businesses that I have spoken to, and I have
spoken to many, many now over my years of service, seem to
understand the concept of strategic sourcing from the point of
view of a taxpayer, and that is the way they have explained it
to me, but in terms of our efforts where federal agencies can
bundle contracts, this is the area where we have to keep a
watchful eye on.
We believe, sir, that economies of scale do not necessarily
exclude small businesses, nor should we not include small
business participation as part of that in every decision.
Mr. Ballance. My time is up. Thank you very much.
Mr. Boshears. Sir.
Chairman Graves. Mr. Shuster?
Mr. Shuster. Thank you, Mr. Chairman.
As I mentioned in my opening statement, I have talked to a
number of small businesses that their concern and a big problem
for them is that the government is slow paying.
I wondered what steps you are taking not only at Homeland
Security, but maybe the other agencies across the government,
if you can speak to that, Mr. Barrera, where you are trying to
avoid or alleviate this problem.
As I said, a small business is working on a tight budget.
If they are not getting paid for 120 days, it really is a
tremendous strain on the business. Either one or both of you
can----.
Mr. Barrera. I will start. Actually, before coming over as
the head of the government contracting I was national
ombudsman. Many comments that we heard from small business was
the problem they had with getting paid on a timely basis from
the federal agencies.
What we have done is actually a lot of it is going to be
working with the actual agencies and finding the right contact
within the agencies that we can get to them and say this is not
getting paid. We have to work on this.
We had a great example with the Department of Homeland
Security. We had a business that when the agencies came
together and formed Homeland Security we had a business contact
us. They were a billing company. They were owed several hundred
thousand dollars, and it fell through the cracks when we came
over to Homeland Security. They contacted our agency. We got a
hold of Kevin's office very quickly, and this was resolved
within a couple of days.
A lot of it is that we need to find out here from the
companies when that is happening and then contact the SBA or
Homeland Security directly, and we will go directly to them to
let them know that this needs to be paid.
Mr. Shuster. Is there a standard policy on how many days?
When they bid the contract and are awarded it, in the contract,
in all contracts, is it stating you will be paid within 60 days
or 30 days upon completion of the service or the product
delivery?
Mr. Barrera. I cannot speak for every agency. I know every
agency probably has their own policy, and it probably depends
on the particular contract, so I would let Kevin answer that as
far as what Homeland Security's policy is on that.
Mr. Boshears. We have been using the standard Federal
Acquisition Regulation procedures for payment. The most common
clause they use is nicknamed----.
Mr. Shuster. What is that?
Mr. Boshears. It is nicknamed Net 30, the nickname of the
clause.
I might share one other thing about payment that is very
important to us as well as small business advocates. One
special thing that has happened in the government, and it is an
ongoing effort, but firms that do business with the federal
government now sign up electronically for payment.
It is called CCR, the central contract registration
database. It contains payment information, in addition to other
information, where firms can be paid electronically so that
their invoice payments are sent directly to their bank account.
That has helped small businesses a lot in terms of getting
paid.
Mr. Shuster. Are there any incentives in the contract for
the government to pay? I know in business many times if you do
business with somebody if you pay in 15 days they will give you
an extra two percent discount, 30 days you pay the bill, that
type of thing.
Mr. Boshears. Yes. That is available to the federal
government. Now, just from being an old contracting officer,
that is typically done when we procure supplies or products.
Mr. Shuster. The second question I have on timelines. We
had a business in my district that was dealing with DOD. Of
course, we started the war with Afghanistan. The war on
terrorism was going on, so I understand that some of those
contracts were pushed aside and pushed back, but in this
particular contract it was over a year before they awarded it,
and it was dealing with supplying the military with
sweatshirts. It was not a complicated piece of equipment.
It just seemed to me as I talked to the Department of
Defense a number of times they kept telling me next month, next
month. In the procurement process or when letting bids out
there, is there a timeline on that bid that says this is the
product we are looking for, this is the service, if you bid it
we are going to award it within six months, four months, three
months, anything like that so they can have some definite idea
of when something is going to be awarded? Anything like that in
those contracts?
Mr. Barrera. Without knowing more about that, I would have
to look into it.
Mr. Shuster. Right.
Mr. Barrera. If that person would like to contact us,
please have him do that. We will look into it for them.
Mr. Shuster. My concern when you are letting a bid,
companies in this case, and again there are other circumstances
here, but if a small business, for instance, is trying to get a
contract, is bidding on the contract, if they do not have some
kind of timeline a lot of times they are either going to lay
people off or keep people on, hoping that that contract gives
them some certainty.
In the private sector, with contracts for highways, for
instance, you pretty much know 30 days or 45 days after the
bids are submitted they are going to be awarded, and if
something happens they are going to let them know that we are
rebidding it. We are not just going to keep dragging it on.
That would be something I think that would be very useful
for small businesses when they are bidding a contract they know
that date certain this thing is going to be awarded unless some
circumstance comes up, some surprise circumstance that the
government cannot control.
I hope that is something you would look into because, as I
said, talking to a lot of small businesses they do not seem to
have a firm date in mind when the contract is going to be
awarded, and that hurts them on their planning and production
or manpower.
Mr. Barrera. I definitely agree.
Mr. Shuster. Thank you very much for being here today.
Chairman Graves. Mr. Boshears, I am curious how far up the
pecking order, I guess you might say, is your office? Is it
located close to the Director's office? Are you in the same
building? I know you guys are scattered out all over the place.
Mr. Boshears. We are scattered. I am physically located in
the GSA Regional Office Building in Southwest across from
L'Enfant Plaza.
Chairman Graves. Okay. I was curious about that.
I am also curious to know what action has been taken. Mr.
Barrera, I know you mentioned the President's agenda when it
came to contract bundling, but has any specific action been
taken at this point or things moving in that direction?
Mr. Barrera. Thank you, Mr. Chairman. We actually are very
excited to announce that as of yesterday we have now published
rules on contract bundling in the Federal Register, and what
the rules are basically going to set out is part of the
President's nine point strategy to absolve and really get rid
of the contract bundling that is hurting small businesses.
One of the things that the proposed regulation will require
now is that the agencies will now have to conduct bundling
reviews of the requirements of multiple award contracts and
orders against those contracts. They also need to strengthen
their compliance with subcontracting plans, and the rule will
also involve improving oversight of the small business
programs. Again, this was published yesterday in the Federal
Register.
Additionally, as a result of the new rule and the attention
brought to these, we also submitted another rule, a companion
proposed subcontracting rule, to provide guidance for agencies
to use when determining whether or not a large business and
prime contractor makes a good faith effort to comply with their
subcontracting plans.
That is part of what the President has done, and we are
going to be working with agencies a lot more on the oversight
when they look at contract bundling. The multiple awards
contract is a very big one for small businesses.
Chairman Graves. Any other questions?
Mr. Ballance. Yes, just a follow-up. Is that binding on
Homeland Security?
Mr. Barrera. It is on all of the agencies.
Mr. Ballance. You will agree with that?
Mr. Boshears. Yes, sir.
Mr. Ballance. I read somewhere that maybe some of these
regulations you were exempt from.
Mr. Boshears. No, sir. Most of the Department of Homeland
Security follows the FAR.
Mr. Ballance. All right. Now, I am being told that those
regs do not apply, and I want to see how specific we can be
here.
First for Michael. Is it your opinion that those will apply
to the Homeland Security Department, the ones that you just
published?
Mr. Barrera. It is my understanding that they will.
Mr. Ballance. Mr. Boshears, it is your understanding they
will also?
Mr. Boshears. Yes, sir.
Mr. Ballance. The Transportation Security Department within
your agency, will that be covered?
Mr. Boshears. Now, that I think we will have to open for
discussion. I would say likely no. It is my understanding that
when the Transportation Security Administration, TSA, was first
created about 18 months ago prior to the Department of Homeland
Security, TSA was exempted from the FAR. Therefore, under the
current guidelines they do not follow the FAR. However, the
remainder of the Department does.
Mr. Ballance. I do not want to take too much time, but
there are quite a bit of contracts, would you both agree, in
TSA?
Mr. Barrera. Sure.
Mr. Ballance. The bulk of the contracts, and that agency is
not covered by this?
Mr. Barrera. I was just informed the TSA is exempt.
Mr. Ballance. It is exempt. Maybe we can work on that.
Chairman Graves. Another other questions?
[No response.]
Chairman Graves. I thank both of you for being here. Mr.
Boshears, if you have somebody that might want to stick around
and listen to some of the testimony from some of the other
witnesses too, I think it would be beneficial.
Mr. Boshears. Yes, sir, I do. My colleague is in the back.
Chairman Graves. We will go ahead and seat the second panel
real quick.
Mr. Boshears. Thank you.
Chairman Graves. Thank you both.
[Recess.]
Chairman Graves. I want to thank all of you for being here
today. We just got informed that we are going to have a series
of votes anywhere between 11:15 and 11:30, somewhere in there.
I would say it would probably be closer to 11:30, so we do not
want to run over too much time on testimony.
If we do happen to have to break in there sometime, it will
not take us terribly long to go over and vote and come back. We
will just recess for a short time, but that happens once in a
while. I apologize if that does. We might be able to get
through everything.
We will start out with Daniel Lane, who is the CEO of the
EMCOM Project from Independence, Missouri. Mr. Lane, I
appreciate you being here today, and I will turn the mike over
to you.
STATEMENT OF DANIEL LANE, CHIEF EXECUTIVE OFFICER, EMCOM
PROJECT
Mr. Lane. Thank you. Mr. Chairman, Ranking Member Ballance,
Members of Congress, staff, ladies and gentlemen----.
Chairman Graves. You might pull the mic right over there
and turn it on.
Mr. Lane. Okay. Is that better? Is it on? It is on. Okay.
My name is Dan Lane, and with me today is Dr. Chris Powell,
who will be issuing some alerts demonstrating EMCOM while I am
telling you a little bit about EMCOM and our struggle to get
recognition.
EMCOM is a product of Technical Legal Consulting. We are a
forensic computer engineering company who develops and deploys
software designed for legal, government and financial
applications. EMCOM is the only existing fully integrated and
immediately deployable, fully redundant all hazard emergency
alert notification and integrated communication system in the
world.
EMCOM is completely device and network independent. EMCOM
uses whatever device or network is in the hands of the public
and allows the public to pick and choose how they are notified.
EMCOM is simple to use from a single point of interface, and
any message can be targeted by any combination of groups or
geographic areas. EMCOM also provides multiple layers of
encryption for message and system security.
Chris has now keyed in one of the alerts on one of the
devices and networks which will issue an alert received on cell
phones, which we have asked the staff to keep on in the hearing
room today, and on a nationwide satellite network device which
we brought with us today, so things may start buzzing here in a
minute.
EMCOM interfaces with just about every electronic device
known. It is the most pervasive and useful emergency management
system in the world. EMCOM gives the public multiple ways to
receive a message, and it gives emergency management directors,
EM directors, multiple ways to issue alerts or coordinate
relief efforts, even if their command center is destroyed. This
type of redundancy allows EMCOM to send messages from its
single point of interface throughout all communication channels
at once, achieving immediate notification.
One of the primary lessons we learned from 9-11 is not all
communication methods will be operational after a disaster, and
those that are operational may be overloaded. Therefore, even
if a command center is destroyed an EM director can still issue
an alert or direct relief efforts.
Chris is going to be issuing a second alert at this point
in time using a second network and a second device, so we are
going to see things start going off again certainly after this.
Alerts are received through our system within 30 to 45
seconds from issuance, assuming that we have--Chris is just
getting the second alert now, which is anywhere from 500 to 800
times faster than the EAS. The public can receive alerts, and
first responders can still be directed as long as they have any
one of the communication means available, any communication
means available to them.
EMCOM also provides for bidirectional interactive
communication from the field by text, video or audio, allowing
EM directors to issue and apply limited--there is the first
alert. That is the satellite device. Allowing EM directors to
issue and apply limited resources effectively.
Feedback loops and situation reporting are built in to
allow quicker assessment in the field and for training
purposes. First responders can be guided to the places they are
needed most; in other words, better triage because, as we all
know, where main communications are out those are the last
places to get help.
EMCOM is the only network with a built in volunteer
organization of community coordinators who are the last mile
notification network and the first on the scene to report back
in a disaster. The coordinators are able through EMCOM to work
with first responders. Nothing like EMCOM exists, and it would
take years to develop a similar system.
EMCOM began in 1997, starting with an extensive needs
analysis and working with EM managers all over the U.S. In
1998, we had the first test of EMCOM with over 800 EM directors
on line. Since then, extensive improvements in the system have
been made, with 9/11 giving us new focus. By October 2001, the
system was completed in a final deployable form.
In October 2002, we were invited to present the system to
the Partnership for Public Warning, an organization to which
Congress has contributed $10 million to define a system. PPW
issued reports, portions of which we have included, showing the
need for EMCOM. We have also included several articles from
media urging adoption of such a system and reporting on the
policy of Homeland Security to deploy such a system. These
exhibits specifically describe EMCOM.
Initial attempts by EMCOM were made to contact the then
Homeland Security Agency before it became a Cabinet position,
particularly its Chief Technology Officer, Steve Cooper, by
phone at his White House office.
Ike Skelton's office hosted some governmental contracting
expos, which we have attended, at which NavAir, through Admiral
Crowley, became interested in the project. There has never been
a presence by Homeland Security at those conferences.
There is the second alert, so we all know the system works.
Because of the nature and importance of the product to the
nation, we continued to pursue contacts with Congress and our
technology contact with Homeland Security attempting to find
some inroad as a sole source provider of new technology to
either a contracting route--that is the cell phone alert that
goes along with everything else we have.
We are attempting to find some inroad as a sole source
provider of a new technology to either a contracting route or
simply to make Homeland Security aware our product existed and
filled an immediately articulated need by Homeland Security.
Initially in 2002, we were told no money existed in any
Homeland Security budget, and they had no idea when and for
what money would be forthcoming. Even though we had made
contact with the office, no duty assignments had been made. No
one claimed responsibility for finding or deploying an alert
system. Even though it was a policy objective, no one could
direct us to how or where to contact the appropriate person to
talk contract.
We continued attempts to expand our contacts with Homeland
Security by asking our congressional representatives to
intervene. We continued to keep track of government contracting
sites, but nowhere was there anything which could point either
the legislative assistants or our staff to any policy or
procedure that would allow EMCOM to be reviewed by Homeland
Security or to allow EMCOM to be presented to Homeland Security
for consideration. No one knew what the command structure would
be and where the offices would be located. In essence, there
was a face with no body or functionality.
To the credit of Congressman Graves and Senator Talent,
their staffs continued to call people like Mike Brown, who by
sheer accident we met in Tennessee and who provided us with
contact information. This was passed along to the LAs, and
finally we were able to get 30 minutes with Rose Parks, the CIO
of FEMA, on May 14, 2003. In that meeting she had Gordon
Fullerton and Tim Putprush.
By May, the organization of Homeland Security was still in
progress. No one seemed to know what the responsibilities would
be and where people would be physically located and what their
phone numbers were. Mike Brown had just got his first
administrative assistant.
FEMA indicated in those meetings that we were the most
advanced and comprehensive system in existence, but, very
simply put, we were not a big company, were not tested over a
large network and, therefore, could not be immediately
considered, even though there was nothing like it in the world.
Ms. Parks instructed her staff to follow up with
appointments for EMCOM with NOA and the National Weather
Service by the end of the summer and report back on the next
steps to move forward with EMCOM. Even though we continued to
call and make contact with FEMA, those appointments have never
occurred.
We have not been contacted by either FEMA or Homeland
Security since then. We have continued to make trips to D.C.,
call FEMA, monitor the contracting policies and procedures of
Homeland Security, but nothing has happened.
Since then, there have been tornadoes all over the Midwest,
flooding in the east, hurricanes, wars in Iraq causing
substantial changes in the Homeland Security levels, untold
lost children, chemical spills, escaped prisoners, boil orders,
weather warnings and countless other emergency situations for
which EMCOM would have been essential not only for warnings,
but also for disaster relief and coordination.
TLC is a small business with great expertise. Our main
programmer developed missile systems for the U.S. His expertise
is recognized worldwide. TLC cannot afford a staff just to
coordinate government contracting. It cannot afford to
implement large test areas, but the system has been running for
over two years and issuing alerts and being accessed without
failure. EMCOM is reliable.
We cannot pledge the assets of a Fortune 500 company.
However, neither could a Fortune 500 company have the foresight
to develop and deploy EMCOM. It took the vision of a group of
software designers in the Midwest who listened to what EM
directors were telling them to make EMCOM a reality.
Since our journey began, we have enlisted the help of state
and local governments to deploy EMCOM. Some of those are
Gloucester, New Jersey, Rhode Island, Mississippi, Tennessee,
Juneau, Alaska, Monroe, Washington, Nevada, Texas, and just
recently Summit County, Ohio, has asked for a deployment of
EMCOM. They have also supported and requested deployment
available for immediate test areas.
We have had inquiries from companies who have not only seen
the governmental, but the private utility of EMCOM. EMCOM could
be privately funded, but all that does is drive up the cost of
the system to the American people. EMCOM is a cost effective
solution, its implementation estimated to be substantially less
than anything else proposed to date.
On behalf of EMCOM, I would continue to knock on the door
of Homeland Security and this Congress. Congress has opened the
door and is listening. Based on what I have seen of this
Congress, you do not believe the American people are expendable
to either natural disaster or manmade disaster.
However, I have not seen a similar response from Homeland
Security, either as a lack of organization or a lack of
interest in its primary responsibility, which is the safety of
the American people.
EMCOM is a sole source contractor with new technology, and
has not been able either through your efforts or the efforts of
state and local government to gain the attention of Homeland
Security. Our sincere desire continues to be to work with
Homeland Security and bring a comprehensive and affordable
alert notification system to the people.
Thank you.
Chairman Graves. Thank you, Mr. Lane.
[Mr. Lane's statement may be found in the appendix.]
Chairman Graves. That is our vote, so we are actually a
little early on votes. It will take us about 20 minutes to get
over and go through two votes, a previous question and a rule
vote, so it should not be very long.
We will recess for approximately that time until Mr.
Ballance and I get back, but it should not take too terribly
long so just sit tight for just a little bit. We will be right
back.
[Recess.]
Chairman Graves. I apologize for the delay, and I thank
everyone for their patience.
We will now move on to Benjamin Brink. He is the CEO of
Data Search Systems, Inc., out of St. Louis, Missouri. Mr.
Brink, I appreciate you coming all the way out, and I look
forward to your testimony.
STATEMENT OF BENJAMIN M. BRINK, CHIEF EXECUTIVE OFFICER, DATA
SEARCH SYSTEMS, INC., ST. LOUIS, MO
Mr. Brink. Mr. Chairman, Ranking Member, distinguished
Members of the Committee, thank you for inviting me to testify
today.
My name is Ben Brink. I am the president and chief
executive officer of Data Search Systems in St. Louis. I am
also a Captain in the Naval Reserve and Commanding Officer of a
Naval Intelligence Unit in Memphis, Tennessee.
My background includes approximately 25 years of technology
company management, primarily in Silicon Valley and southern
California. I began my career after my active duty Naval
service and completion of a B.S. and M.S. at Stanford and an
MBA at Harvard.
During my career, I have had the opportunity to lead a
number of technology companies from start up to $35 million in
revenues during stages of turnaround, transition and growth.
Several of these companies have provided products and services
to the federal government, primarily to DOD, either as a
contractor or subcontractor.
DSSI is an early stage company commercializing technology
developed by a team of four professors at Washington University
in St. Louis. This technology enables very rapid searches of
large, unstructured databases. We expect early applications of
our technology will be relevant to intelligence, defense,
homeland security and law enforcement. Later applications will
address the needs of defense imagery, genomics research,
medical, financial and other commercial databases.
DSSI and I have not to date had specific experience
attempting to gain contracts with Homeland Security. In fact,
our venture funding closed about three and a half months ago,
and we are just ramping up operations. We have made the
strategic decision in fact not to address Homeland Security
first because of some of the problems discussed here today and
the fact that we have limited band width as an organization to
search through an organization, a Department still in
formation. We are addressing primarily the established
intelligence agencies in the U.S. Government.
This testimony is, therefore, more of a discussion based on
my previous experience with small technology growth companies
and the challenges that they have faced to do business with the
federal government. Based on that experience, I will make
several recommendations on how it may be done better,
specifically with application to DHS.
This is a key time for such a hearing, and I commend the
Committee for doing this now. The President's goal to make
federal contracting accessible to small business is good not
only for small business, but also for our nation's security.
New, innovative companies develop new, innovative technology.
We are in a new security environment. We face a new threat. The
DHS is a new agency with new needs.
This embryonic Department's structure is still being formed
and not set in stone. Now is the chance to review how the
Department has done so far and in fact how other federal
agencies have done and to get it right. In particular, it is
important to support small, innovative businesses that can
provide new, out-of-the-box solutions for our nation's
security.
It has always been difficult for small and growth stage
businesses to contract with any very large bureaucratic
organization, especially the federal government. It is a little
bit like a pond trying to do business with the ocean. The pond
will become salty.
The mismatch in size between a large organization and a
small one often causes two major problems. The large
organization can swamp the small one with its demands for
information, accounting, services, et cetera, at a level much
greater than the small organization can handle.
Going the other way, the small organization can get lost
dealing with the large organization. Where is the decision
maker? Where is the information provider? Again, the small
organization burns its very limited band width, its very
limited personnel resources, just trying to get to the right
person.
In the interest of time, I will just make comments on the
eight recommendations I have. The full recommendations are in
my written testimony.
Some of the best business practices which make sense is one
stop shopping. The DHS testimony says they are working on that,
but, like any small entrepreneur, I decided to do a web search
to prepare for this testimony to find out where I might do
business with DHS if I wanted to.
The page DHS took me to mentioned eight or nine agencies,
gave a few links to regulations. I could not find anything
about HSARPA on it, and in fact I found something about HSARPA
by going to the Web site of one of your colleagues,
Representative Steve Buyer, who had far better information on
small businesses doing business with DHS than DHS did, and he
had about 40 or 50 links.
Clearly, DHS needs to do a good job, take lessons from
people like fellow Members of Congress who are doing a good job
to help people find how to do business with them.
The second, which is a long-term complaint, and a couple
Members of the Committee mentioned this, is on time payment by
the federal government. Small companies do not have the cash
resources, do not have the debt capacity to support 60 to 90 to
120 day payables.
Clearly, there are people of good conscience in the
government trying to pay sooner, but it is very hard to get
early payments from the federal government. Some sort of either
ombudsman arrangement or, much better, just standard procedure
to pay small companies on time would make DHS much more small
company friendly.
Third is the federal government needs to use best business
practices to be a reliable business partner and to be
consistent. As an example, when I first moved back to St. Louis
from California I was asked to run a small technology company,
a development stage company also spun out of Washington
University to see if I could save it.
The company had run out of money in the post dot-com era,
had done very well, however, on about $2 million worth of SBIRs
and had the expectations of a couple more million dollar
revenues coming in over the next few years. About four weeks
before the company was pretty seriously out of money, they were
asked to bid on several SBIRs.
In the changeover between Administrations, there was a
funding hold with the particular agencies that ran these SBIRs,
and the company found itself absolutely out of revenues for
eight months. We shut the company down, laid off 14 people, and
I am now licensing the technology else. The government needs to
be more consistent with small companies because they cannot
survive those sort of revenue gaps that a larger company could.
Another area is DHS should develop, if it already has not
done so, and I do not know about it, a separate semi-
independent funding agency as the CIA has done with In-Q-Tel.
In-Q-Tel is a federally funded venture capital firm which can
invest in promising technology companies as a venture capital
fund and is a strategic fund which seeks out and invests in
technologies that are useful to the CIA. It also provides a
link between those companies and the often hard to navigate
paths of the intelligence community.
Very good concept, and it should be adopted elsewhere in
DHS, especially with its current confusion of going from 22
agencies to one Department. This would be a real beacon of hope
for small companies.
The next area is the first time that corporations try to
get on the GSA list it is very hard, and it is very hard for
companies to sell standard, commercial, off-the-shelf products
without being on that list.
It would be interesting to discuss the possibility of
creating not just for DHS, but perhaps for the whole government
for technology products sort of a baby COTS list, a baby GSA
list that could be opened with small companies which would have
a lesser set of requirements or a set of requirements tailored
for small business, as opposed to large business.
You talked a bit about contract bundling. Efforts should be
looked at for perhaps separate bidding for subs along with the
prime that may manage that so that small companies tend not to
be quite so squeezed as often happens by their primes.
There is probably a lot of work to do there because clearly
the government wants to get value for its money, but if more
than just a set aside for small business you enable them to bid
separately, that could protect their profitability, which they
need to survive.
The SBIR policy for DHS needs to be clear. It needs to be
clear for other agencies as well. I have an example in my
written testimony of where a decision was made that venture
funded companies that were owned more than 51 percent by
venture firms were no longer considered small business.
What that did essentially with that SBIR money pot is it
said if you are good enough to be invested in, the government
does not want to support you, and so it tends to force that
kind of money to the losers instead of the winners. It is not
good for the companies. It is not good for the government.
Finally, since small businesses find it easier to work with
small organizations, decomposing the DHS organization into
smaller pilots makes sense to introduce small companies to
doing business with the government, and also local pilots give
companies like my colleagues to the right here a chance to
prove himself in a smaller scale and not have to get over that
hurdle that the acquisition officer might have to have him be
acceptable to applying his technology to the whole country.
There is a pilot in St. Louis to do joint intelligence
fusion centers. There is a small St. Louis company called
Talisen Technologies, about a $20 million company in St. Louis,
which is partnered with Boeing to address that. It is a good
model, and that should be looked to being used elsewhere.
Thank you.
Chairman Graves. Thank you.
[Mr. Brink's statement may be found in the appendix.]
Chairman Graves. We will now move on to Tim May, who is the
CEO of Advanced Interactive Systems in Seattle, Washington. I
appreciate you coming all the way out, Mr. May. Thank you.
STATEMENT OF TIM MAY, CHIEF EXECUTIVE OFFICER, ADVANCED
INTERACTIVE SYSTEMS, SEATTLE, WA
Mr. May. Mr. Chairman, Members of the Committee, I wish to
thank you for the privilege and opportunity to appear before
you, the Subcommittee, today. I want to address the challenges
facing small companies such as ours when attempting to secure
or do business with the Department of Homeland Security.
Let me begin by introducing you to our company. My name is
Tim May, and I am president and CEO of Advanced Interactive
Systems. AIS is a privately held company headquartered in
Seattle, Washington. We employ more than 125 people in seven
facilities in the U.S. and abroad.
Our company designs and manufactures high tech simulation
systems, virtual reality systems and training facilities
worldwide. It provides anti-terrorism training, including
behavior pattern recognition. Using technology, we provide
comprehensive training solutions when lives are on the line.
When the Office of Homeland Security was created, we were
eager to bring these comprehensive solutions for training to
this new branch of the federal government. The question was
how. How do we get technology in front of the right people? Who
are the right people? If we were fortunate enough to land a
large contract, what was the best approach to managing it?
An analysis of the market led us to conclude that all roads
led to teaming with large contractors if we were to have any
real chance at securing business in this new arena, so we did
just that.
In June of 2002, AIS was selected by Boeing to conduct the
operator training for up to 30,000 baggage screeners at
airports throughout the United States in connection with a
contract installing explosive detection devices and explosive
trace detection equipment for the Transportation Security
Administration.
The project required us to train more than 1,700
instructors and enabled them to deliver the curriculum provided
by the government at more than 160 locations, all in less than
six months. While this was a tremendous opportunity for AIS, it
was fraught with challenges, many of which were unrelated to
the basic task.
The difficulties AIS faced in this contract were typical of
those that any subcontractor faces when it is teamed with a
large contractor. We did not have direct access or contact with
the ultimate customer, and there was too much time spent in
managing the relationship with the prime contractor, as I think
has been mentioned earlier, trying to determine particularly
with the Transportation Security Administration which FARs were
applicable and which were not.
We were keenly aware that this contract was AIS' chance for
entry into a new market and the opportunities it could afford.
However, since we were a subcontractor, success in this
particular contract did not ensure us future success with the
Department of Homeland Security.
As a result, when the contract ended we found ourselves
back marketing to DHS as if we were the new kid on the block.
That task is further complicated with the difficulties
presented by ever changing personnel at the Department of
Homeland Security.
With the experience of having successfully completed this
contract, our business approach now has a dual focus--securing
further business directly from the federal government and
marketing directly to emergency responders. While we are making
process, we are confronting some difficulties that were not
faced in our other business sectors.
In the emergency responder community, we face the normal
challenges one expects when marketing to state and local
agencies. They are fragmented and require us to prioritize. AIS
cannot easily and economically reach all potential customers,
so we have opted to concentrate our marketing efforts on states
and larger cities.
Virtually every law enforcement agency or firefighter
agency we have demonstrated our technology and services to have
been excited about our solution and are willing to contract
with us, but they have a surprising dilemma. Despite all the
media reports of the new and expanded federal funding being
made available to first responders, we have found that even in
major cities front line agencies do not know how to access
those funds within their own states.
As a result, we have necessarily become a resource for them
on how they can locate those funds. This is a difficult burden
for a small business' shoulder inasmuch as it stretches our
marketing and manpower budget and increases the sales cycle of
our customer purchase.
Additionally, we have found that many in the first
responder community are unsure of the procedures involved in
contracting, so we are faced with having to learn the rules and
procedures and even the identity of a myriad of state and
federal contracting agencies. As you can well imagine, it is
time consuming and places a costly burden on AIS and others in
our position.
We have been in numerous meetings and discussions with the
Department of Homeland Security about these issues and others
related to doing business with DHS, and we sincerely appreciate
the support and assistance they have given us. We are very
aware, for example, that the DHS and other government agencies
face a difficult task in taking a chance on awarding contracts,
especially of a critical nature to small business. However,
ignoring the benefits these smaller firms might bring simply
because of perceived risks is an unfair and indeed an unwise
policy.
I would like to offer some suggestions and solutions to
assist small business. AIS would propose creation of a small
business advisory board as part of the Department of Homeland
Security with the intent being that this board will mirror, but
not duplicate, what the Department of Defense does with small
business; for instance, creation of a mentoring program, small
business advocates and incentives for larger companies to work
with small businesses and a program such as the DOD SBIR
program.
My company and I are willing to assist in any way possible
to make such programs a reality, and once again I thank you for
your time and the privilege of addressing you.
Chairman Graves. Thank you, Mr. May.
[Mr. May's statement may be found in the appendix.]
Chairman Graves. We will now hear from Patricia Driscoll
with Frontline Defense Systems here in Washington, D.C. Is that
right?
Ms. Driscoll. Correct.
STATEMENT OF PATRICIA DRISCOLL, FRONTLINE DEFENSE SYSTEMS, LLC,
WASHINGTON, DC
Ms. Driscoll. Thank you very much. I would like to first
say I am extremely disappointed in the Administration by
disappearing when all of us came here and took time off of our
busy schedules, and you guys are still sitting here to listen
to what we have to say and what suggestions we really think the
Department can use to make things better for us, but I would
like to say thank you to the Department of Energy for showing
up here today.
Mr. Chairman, Members of the Committee, I appreciate this
opportunity to come before you and tell you about my
experiences as a small business. My name is Patricia Driscoll,
and I am the CEO of Frontline Defense Systems. Frontline
Defense Systems, a Nevada based corporation, is a certified
woman-owned small business.
The company works with government agencies to develop and
implement security programs and solutions for the borders,
ports and federal facilities. FDS provides a complete package
of unique security solutions and services. We do threat
assessment and penetration of armed facilities, policy,
planning and procedures, security development planning, hard
and software.
We are some of the best in sensors, biometric solutions,
infrared cameras, multi-spectral thermal imagers, wireless
devices, network security solutions, X-ray and gamma ray high
density cargo inspection, chemical and biological sniffing
devices, license plate recognition systems, facility access
control, signals, intelligence and temporary facilities. We
also deal in integration, management training, systems support
and operational and maintenance support of our equipment.
Frontline Defense Systems' companies have locations
nationally and worldwide. FDS either owns or has an interest in
over 25 small businesses that are the best in their field to
provide services and products to the customer. Most of these
companies have been in business for over 20 years. Our team is
made up of technologies with a proven past performance history
with the government.
Our customers include the White House Military Office of
this current Administration, U.S. State Department, Department
of Defense, classified sites of U.S. intelligence community,
TSA, SOCOM, NRO, DTRA, Department of Energy, DIA, U.S. Army
ECBC, DPG Life Sciences, DARPA, U.S. Customs, FAA, Department
of the Interior, U.S. Coast Guard, Salt Lake City Olympics
Operations Center, Centers for Disease Control, Ports of
Baltimore, Charleston, Savannah, Honolulu and Guam, Johns
Hopkins University, Los Alamos National Labs and Governments of
Canada, Spain, Germany, the U.K., New Zealand, France, Taiwan
and South Korea.
After seeing a list of customers like that, one might ask
what do you have to complain about? Well, I am really not here
to complain, but I am here to educate. If you notice, we do not
do a whole lot of work with the Department of Homeland
Security, but after looking at our qualifications you see that
we should.
When it comes to chem/bio, we are the best, and we secure
and are the referee system for the National Chemical Warfare
Center. When it comes time to do covert operations or to go to
war, who does the Special Forces community get their equipment
from? Us. When Customs wants to inspect densely packed cargo or
is looking for people in the back of a truck, instead of
sending the truck trough a deadly radiation blasting device,
who do they trust? Our system.
When the White House believed that it was very important to
have a second set of eyes look at their security, who did they
ask? They asked our team to come in. When people's lives are at
stake or when the situation is critical, the government has
called on us. Do our ports, borders and airports not deserve
the same level of protection?
Let us get down to the problem as we see it. When the
Transportation Security Administration was stood up, UNYSIS was
brought in to handle the majority of the procurement. Instead
of dealing with government officials, we had to pitch to a very
large corporation who wanted to see all of our proprietary
material. This is death to a small, innovative company.
In the past, we have been burned by the large integrators
because they have used us to get qualified on a contract,
abused us when they won by telling us that they wanted us to
work for a price that we could not afford and then created a
half-baked version of our solution for the customer. For this
reason, we need the ability to procure on our own and not leave
our livelihood in the hands of the big boys.
We also need a better standard for measuring the size of a
business, the ability to update the changes and better
oversight on contracting. The GAO report of March 18, 2003,
stated that there is very little oversight in large contracts
on true small business activity. The oversight is generally
left to the integrator to tell the SBA their version of the
truth.
I agree with the GAO that we should stop overwhelming our
SBA people with tasks that have nothing to do with their job
and allow them to go back to fighting for small businesses and
have on-site reviews of these contracts.
The GAO also reported in May of 2003 that over $460 million
in contracts were awarded to five large corporations posing as
small businesses due to the lack of records on current business
status and oversight by the government. How can I compete
against big integrators when they are still posing as small
businesses that they acquired 10 years ago?
Recently, the Bureau of Citizenship and Immigration
Services let out a BPA, blank purchase agreement, worth $500
million citing the Paperwork Reduction Act. This statement of
work was only one and a half pages long and included anything
IT that BCIS intends to buy over the next few years. The way
the BPA is currently written up, it will exclude any small
business from getting a part, which is a great acquisition
vehicle for small businesses to do business with the government
easily.
This BPA was put on the street after the CIO of Homeland
Security, Steve Cooper, said that he did not want the BPA to go
out. Mr. Cooper and Undersecretary for Management, Janet Hale,
said this BPA did not fit the new departmental guidelines'
investment plan for IT or strategy for acquisitions that the
Department has set up and would severely hurt the small
business initiative put forward by the White House.
What is the point of having a CIO if he is not given budget
control over the Department's IT? Giving him control of the IT
money is the only way that we are going to see the Department
start behaving differently and the only way we are going to see
some real initiatives on sharing of resources.
Steve Cooper came in with the solid plan on doing business
with small businesses. Mr. Cooper and Ms. Hale understand that
small businesses are innovative, reasonable and get the job
done quickly. I am asking you today what are you going to do to
give people like this a really big stick to make a change in
the Department of Homeland Security?
I can tell you from personal experience I have not seen
anything change within these agencies over the last two years
except for their name. Since there has been so much chaos in
the last two years bringing these 22 groups together, you have
not seen the amount of money that has been wasted or procured
improperly. Today, our ports and borders are no safer than they
were two years ago.
By having this hearing today, I feel that you have an
understanding that things need to change, and I am encouraged
that this Committee is taking the initiative to make a
difference. I hope that you will strongly encourage the
Department of Homeland Security to follow in the footsteps of
the Diversity and Small Business Offices of Department of
Energy, HUD, who is procuring 51 percent of all their contracts
to small business, and the Department of Transportation, who is
doing 42 percent. They have shown true progress in helping
small businesses obtain contracts and keeping an eye on
contract bundling.
I hope that you will work to give the control of the money
to agencies that follow good business practices and take it
away from those who have repeatedly shown they have no interest
in small business.
Thank you.
Chairman Graves. Thank you, Ms. Driscoll.
[Ms. Driscoll's statement may be found in the appendix.]
Chairman Graves. Marian Sabety with the Flywheel Group here
in Washington. We look forward to your testimony.
STATEMENT OF MARIAN SABETY, PRESIDENT, FLYWHEEL GROUP,
WASHINGTON, DC, REPRESENTING THE NATIONAL SMALL BUSINESS
ASSOCIATION
Ms. Sabety. Thank you, Chairman Graves and Ranking Member
Ballance and Representative Shuster. I appreciate the
opportunity to be here.
My name is Marian Sabety, and I am here on behalf of the
National Small Business Association, the nation's oldest
nonpartisan small business advocacy group representing more
than 150,000 small businesses across the country.
I am the president and CEO of the Flywheel Group, a small,
woman-owned firm engaged in homeland security consulting. We
conduct vulnerability assessments, threat scenario planning,
risk quantification and technology evaluation. We work with
organizations in both the private and public sector to plan
programs and implement technologies that protect people,
operations and assets in the event of a catastrophic event. Our
particular area of technical expertise is document security and
wireless technology.
I have been in the telecommunications and high tech sectors
for over 20 years and made the leap to business owner with
Flywheel Group in 2000, after working for such firms as AT&T,
Sprint, AMS, American Management Systems, SAIC and Stanford
Research Institute.
Though I am proud to report that my company has been
profitable each year of operation, I know our growth rate could
be much higher. Last year I successfully negotiated our IT
schedule status, which took us I think 18 months of negotiating
to meet those hurdles.
Several months ago, we responded to the call for
technologies by the TSA for a solution that will compile actual
event data from around the country and model the data against
predictive indicators in order to track, preview, defend and
plan response to potential disasters. We submitted a
combination of proven patented technologies, one of which was
already funded through several Department of Homeland Security
and Department of Defense contracts.
Our solution included proven software that automates
inventorying of assets through a simulated 3-D program for any
type of threat so that prevention, protection and evacuation
planning can be optimized with an integrated 911 computer
dispatch system.
What I mean by this is by simulating scenarios using 3-D
modeling, you can actually help to evaluate how you might
respond if the actual event occurred so that when the 911 call
center gets a set of indicators based on calls that occur, they
can go back to that scenario and make sure to pull together the
right resources, and that is actually the value of this kind of
modeling.
Not only would this solution provide more accurate planning
and training, but it would enable municipalities to manage risk
responsibly and coordinate with DHS, but not necessarily at the
same threat levels commanded by DHS. We all know that this is a
key factor today in the municipalities relative to budget
control.
We proposed this program because portions of the solution
were already in operation in the New York-New Jersey Port
Authority and in the City of Tampa in Florida. It has been
several months since we submitted this proposal. We have heard
nothing. I can assure you, we have had the same intense follow-
up on business development you have already heard in testimony
this morning.
While I recognize that other firms may have submitted
similar solutions, it is disappointing that our submission has
not gotten any airtime at all. It meets the requirements head
on and at a competitively lower price.
We have now turned our energies to organizations that are
on the first responder front line to try to get a pilot for
this proposed solution underway. For a $300,000 pilot, we are
hoping to coalesce resources and partners to bring up the
system by the end of the year. This pilot alone would guarantee
creation of 25 permanent jobs.
As an expert in the field of risk management and security,
I can tell you that the security of our nation is paramount,
but it must be done with small businesses to ensure that
economic growth that we so badly need. Small businesses do well
by the government. Our margins are lower. We are creative. We
deliver.
Yet, not all federal agencies are held to the same
standards for meeting small business goals as established and
promulgated by this very Committee. The TSA, as we all know, is
an integral part of the newly organized Department of Homeland
Security.
In preparing for my testimony, I did some on-line research
into TSA. According to their Web site, TSA is non-regulatory in
nature, meaning that they are exempted from the FAR, the
Federal Acquisition Regulations, regulations that nearly every
other government agency is expected to abide by. The head of
acquisition for TSA has stated that while TSA uses FAR and FAA
procurement guidelines, they are only used as benchmarks.
For small business owners like me, benchmarks and
guidelines do not translate to real business. It is important
that DHS and TSA live up to the government-wide accepted rules
for small entity procurement. First of all, it is the right
thing to do.
The people in this room are here because we are either
small business owners or we care about small business. It is
only fair that small businesses have equal access to
opportunity for lucrative contracts within the federal
government. You cannot say on one hand that a small business is
a pathway to economic recovery and on the other hand allow TSA
to operate outside that purview.
Secondly, small business procurement is important in
creating jobs, and in the case of this one pilot alone I just
described 25 jobs, permanent jobs. DHS was just approved for
fiscal year 2004 a $29.4 billion budget. Certainly small
businesses should be a part of those contracts, yet with no
compete bids and huge corporations taking on massive
responsibilities, small business is being forgotten. You have
heard testimony this morning that I can attest to as well, but
will not take the time.
Early in the year, Ranking Member Velazquez unveiled her
Scorecard IV to evaluate federal agencies on small business
procurement. Though DHS could not be included on that report,
it is worth noting that more than half of those evaluated got a
D or an F. Keep in mind, these are agencies that must abide by
FAR. I suspect that those outside the legal realm of FAR would
leave much to be desired.
Successful contracting with the government is difficult. It
takes inordinate energy and overhead, and you have heard some
of that this morning, to successfully clear all of the hurdles
that come with pursuing and winning government opportunities.
Quality performance of government contracts is also
challenging, but something I used to do for large corporations
in my previous life.
I assure you, it is an entirely different ball game,
though, for a small business. Getting your foot in the door is
a challenge, and, frankly, even getting a call back is a
challenge. There are government rules and regulations in place
to help small businesses. When agencies are exempted from
following those rules, it not only stunts the growth of small
business, but it sets a dangerous precedent.
I thank you, Mr. Chairman and Ranking Member and the
Committee, for your time, and I welcome any questions you have.
[Ms. Sabety's statement may be found in the appendix.]
Chairman Graves. Thank you, Ms. Sabety. You have not heard
a thing? Yes? No?
Ms. Sabety. No.
Chairman Graves. Looking? Nothing like that?
Ms. Sabety. No.
Chairman Graves. Also, I am curious too with each one of
you. How many employees? I will start with you, Ms. Sabety. How
many employees approximately?
Ms. Sabety. I have nine employees.
Chairman Graves. Nine.
Ms. Driscoll. Our information is classified. We are still
small.
Mr. May. We have 125 employees.
Mr. Brink. We are a start-up with 12.
Mr. Lane. We are under 10.
Chairman Graves. I am curious too, Mr. May, and we will
start out with you. You got a contract to train baggage
screeners with TSA, which obviously you have to be one of the
very first businesses to get any sort of a contract.
I was curious how that has worked out, what they were like
to work with, the problems you faced. Was it different than
other contracts you have had with the government? I would be
very curious to know how that all worked out.
Mr. May. Well, yes. It has been extremely challenging.
Obviously you have two issues, one in dealing with the TSA, who
you mentioned earlier is not required to follow the FARs, and
then from a small business in learning the nuances in dealing
with all of the requirements of a large company like Boeing.
We have spent an extraordinary amount of time managing the
relationship and managing how we do business with our prime
contractor, in some cases more time than we spent delivering
the products and services to the customer. I think that is a
learning process that small businesses need to go through, but
I think it is a sensitivity issue that needs to be addressed
with the prime contractors.
If the Department of TSA and DHS is going to bundle
contracts and give all of the major work, if you will, to the
large integrators, I think there needs to be a lot more time
emphasizing with those integrators that they need to spend time
and effort on how to deal with small contractors and bring them
into the process.
It was a very interesting experience, and in fact even
though that work was completed on December 31 of this past
year, we are still in the process of trying to collect our
final payments on that contract in excess of $5 million----.
Chairman Graves. How long ago?
Mr. May.--which is an extensive amount of money for a small
business like hours.
Chairman Graves. How long have you been waiting?
Mr. May. We have been waiting since March.
Ms. Sabety. That is criminal.
Chairman Graves. Mr. Lane, when you have new technology,
and in fact anybody can answer this because you all have new
technologies you are developing, but are you having just a
tremendous amount of trouble getting an audience to demonstrate
your technology?
Mr. Lane. Absolutely. I have had----.
Chairman Graves. Go ahead.
Mr. Lane. I have had lots of success with Members of
Congress and Members of the Senate demonstrating the
technology.
We have had no success at all other than the one 30-minute
meeting with FEMA, which they have not followed up on. They
just do not seem interested in the technology because we are
not big enough for them to take a chance on. That is basically
the problem we are having.
Chairman Graves. Anybody else?
Mr. Brink. We have not had particular difficulties in
getting an audience. Since our technology has been developed by
four professors at a major university that have long-term
relationships with these research agencies, that is fine.
Where I expect we will have the difficulty is when we want
to cross that hurdle from research contracts to develop to
actual contracts to supply, and I am prepared to partner with a
prime to do that, but clearly the difficulty that small
companies have when they actually want to sell product rather
than do research is do we have the credibility and the size to
be viewed as a supplier of a large agency.
Ms. Driscoll. I have had a very difficult time, especially
with our border inspection units, our cargo inspection units.
Customs has rated us as the highest and best performing
machine, and I am competing against SAIC.
Every time I get a contract, SAIC takes it personally and
thinks that it is one more that they are not getting, so I have
had an incredibly hard time getting anybody to pay attention to
Customs' own reports about how good our stuff is.
Chairman Graves. Mr. Ballance?
Mr. Ballance. Thank you, Mr. Chairman.
Let me first say I find it a little bit amazing. From your
testimonies you seem to be strong businesses, and you have so
much difficulty getting an audience. I do agree that I wish the
other witnesses could have stayed around a bit to hear your
testimony. Maybe they will get it in writing or something.
Ms. Sabety, since TSA is exempt from most of these
requirements--I believe we finally got that concession--do you
think that that is an issue? Will they do business because they
want to or because they have to?
Ms. Sabety. I have two comments. One is that I think it is
a bad precedent that they are exempted because within the
Department of Homeland Security for those who are defining the
contract requirements and the potential bidders that the
contract might be opened up to, you can make an argument that
says it invites the ability for some contracts to naturally be
put underneath the aegis of TSA so that in fact they can
control how the bidding proceeds. I think that is a bad
precedent.
The second I would say is that I think that unfortunately
unless the law applies to force equality across the board, it
is unfortunate when you ask for guidelines and benchmarks it is
not strong enough to establish policy.
You really do have to establish from a strict budgeting and
procedural point of view. You have to establish the rules and
regulations by which everyone has to govern the way procurement
proceeds. It is the only way to create equality, and we all
know this from history.
Mr. Ballance. I am not a businessperson, but I guess I am
an attorney. How do you find out about these contracts, Ms.
Driscoll, and then what is your normal process?
Ms. Driscoll. Well, how we normally find out about the
contracts is I hang out at the Capitol Hill Club sometimes, and
there are some people hanging out down there talking about what
is going on. I find out more stuff down there than I do ever
attending any meeting, in any department anywhere else, or
hanging out at the Capitol Grill. Unfortunately, I find out
about them in a bar.
We do go after like for the border port security. We push
and say look, this is really what we need to do. We have an
initiative out there that Congress has said we are going to
inspect our ports, and we are only doing two percent inspection
across the board and so we go and push our equipment.
We have had it tested and evaluated over the last five
years, and Customs says it is great. Then we hear this
initiative is coming out, and it is coming out, and it is
coming out, and it is coming out. It never does.
Actually, Customs offered us a contract to purchase an
unlimited quantity of our equipment, and they have yet to fill
any of those orders, even though they are taking down one of
our machines in Miami to go use it in El Paso, Texas, for a
test that is going on out there, but they are not putting
anything back in the Port of Miami.
The cargo that comes in, we can see through about 95
percent of most of the container ships that come through.
BACKIS, which is the SAIC equipment, can only inspect about 40
percent of all the cargo, so I am asking you. You know, what
are we supposed to do? When we are at the finish line, how do
we cross? We have done everything we think we can possibly do.
Mr. Ballance. I think you all heard the testimony of the
earlier panel, and it is seemingly the President wants this to
happen. They say they want it to happen, but, listening to the
panel here, it is not happening.
Mr. Lane, I was particularly interested in your testimony
that you seem to have done everything you could do. What are
you doing now? Is anything else left?
Mr. Lane. We are continuing to make our phone calls. We are
continuing to check the contracting Web sites on a day-to-day
basis. The problem is there is no RFP out there. There is
nothing out there that specifically indicates that they want an
alert notification system.
We are essentially a sole source contractor. We cannot even
get an evaluation of the technology done by FEMA and by the
people assigned to evaluate the technology, so we are kind of
at a black hole. All we can do is continue to ask for your
help, ask for the help of the people in FEMA, continue to make
the phone calls, continue to write letters. Again, we are right
at the finish line with no way to cross.
Mr. Ballance. Yes, sir?
Mr. Brink. This is a fundamental problem that companies
developing new technologies have is they are essentially
developing new technologies for applications which have not
been conceived yet and so they are not going to be in RFQs, and
they are probably not going to be developed in large
organizations that just naturally have the access into the
contracting offices, the development offices.
The key is obviously to get in early. The problem with an
organization like DHS is it is so disorganized. You do not know
where to get in early. There is no mechanism to get in early to
influence the RFQ, which is the way you win them.
Ms. Driscoll. One of the things I also wanted to mention is
that the majority of our business is done by me pushing our
technologies on people. I have yet to win many contracts
responding to an RFP.
We give them a good idea and say we really think this is
going to work, and we really think you have a need for it. I
convince them until they believe they have a need for it to get
most of my business.
Mr. Ballance. What about this economies of scale issue?
Does anybody have any comments on what that means? Yes, sir,
Mr. May?
Mr. May. Well, I think what that means is that particularly
the Department of Homeland Security and TSA has been relying a
tremendous amount on the large scale systems integrators, and I
guess they are the economies of scale.
If you are going to have an opportunity to do business
there, you have to deal with those folks rather than directly
with the federal government in order to get business.
Ms. Sabety. But regarding the economies of scale, I tried
desperately--I am in the same boat here as all of us on the
panel--doing everything we can to kind of push the capability
that we know is needed and has already been defined notionally
out there.
I have actually approached the large integrators, these
economies of scale, and their comment back to me is we have so
many small businesses on our list. We do not have enough
business for them, so you will have to get to the back of the
line.
That is one comment. The second is that we find that these
shall we call them the large economies of scale are already
contracted in TSA and in DHS, and they are giving advice and
counsel on how contracts should be defined, how requirements
should be defined, who are the likely types of technologies
that should be short listed.
We all understand how that system works because if they are
the ones who are whispering in the ears it makes it a lot
harder for folks like us to be able to come in with either a
fresh idea or a new technology that they may not have thought
of, so there are really two aspects of this large economy of
scale that is running against the opportunities for small
business.
Mr. Brink. Also, I think clearly that is what is going on,
but looking at it from the other point of view the problem with
the traditional suppliers supplying technology to DHS is that
we are dealing with a new and different kind of threat, and if
those people who have been thinking about how to deal with the
old threat are the suppliers and the only ones thinking the
problem, new and innovative solutions dealing with terrorism
and these new threats are not going to be brought to bear, and
it will affect the security of the nation.
Mr. Ballance. Well, I think someone said, and I can tell
you, that you will find this Committee and our Subcommittee
chairman here and our full Committee chairman and all of us
very concerned about this issue.
I will give up here and quit, but if there is any one
suggestion that anyone has left, I would be glad to hear that.
Chairman Graves. Do we have anybody here from Mr. Boshears'
office representing Mr. Boshears' office or Mr. Barrera?
[Responds Yes.]
Chairman Graves. Thank you. I do have one final question
out of curiosity. Many of us as Members of Congress conduct
procurement conferences. Have any of you ever participated in
any of those? I would be curious as to how effective they are.
I would love to hear from each of you on that too because
we are always trying to make ours better, make it work in
trying to bring people or businesses in contact with those who
are hopefully looking for technology or making those decisions,
but in many cases we do not know if it is effective.
We need guidance and suggestions on how far we need to go
too, so all of you who have participated, and, Ms. Driscoll, we
will go ahead and start with you.
Ms. Driscoll. I really hate to tell you this, but they are
not effective. We are tired to going to a lot of these
conferences, and we are tired of going and showing our goods
because I think the integrators come into appease you. They
smile and they politely nod, and then that is the last we ever
hear of them ever again.
We do not need any more conferences. What we need really is
we need what is going on at the Department of Energy where the
Small Business Office is actually looking at the big bundled
contracts, and they identify the small businesses here that are
capable to do part of that contract. They go and fight to break
it out.
That has been how we have been best helped, and I really
think that you should push the Departments to start doing that
and start having conferences of your own where you invite the
offices, and you get them to start fighting for us at the
Department level. That is what would be most effective for me.
Mr. Lane. Unfortunately, I would agree.
Mr. Brink. I would agree.
Mr. Lane. They simply pat you on the head and say this is
nice. How do you do it so we can steal it.
Ms. Driscoll. Yes.
Mr. Brink. Although congressional intervention has clearly
caused things to happen.
Ms. Driscoll. Yes.
Mr. Brink. The pilot program that I mentioned in St. Louis
was caused by our two Missouri Senators and by Representative
Akin, and that is what made it get started.
Clearly, your intervention makes a difference. Now, it
should not have to be that way, but it does make a big
difference.
Ms. Sabety. I was only going to add one other point, which
is that I am used to a businesslike way of doing business. I am
not used to having to go through all of these hurdles to try
and get an audience before a good idea is given any airtime,
and then by the time it is given airtime it is either taken by
a large company or it is too late.
I am used to businesslike ways and business processes, so
to Patricia's point if the IT organization recognizes that
there is a need then the IT organization ought to be given the
opportunity to look at any new technologies that come their way
and be able to set up pilots so that if the only hurdle is that
you are a small company and you are unproven then they ought to
be given the opportunity to set up pilots so that the
technology or the company can be proven. That is how
corporations work.
Mr. Lane. I would agree. I have a list of at least 10
different local governments who are dying to have this
technology implemented immediately. They want the technology.
They have looked at the technology. They are willing to take
the chance.
They do not have the funds, and the block grants that are
coming down there nobody knows how to access, and they are not
necessarily designed for new technology. They are designed for
things, for products. They do not know how to access them with
the block grants, and they do not know how to implement this
technology using their contacts.
I think we could have several pilot programs up and running
immediately if we they were given some sort of funding to do
it.
Chairman Graves. Thank you all. I appreciate you being
here.
I want to encourage you to add in your book of resources
the Small Business Committee because I know Ranking Member
Velazquez and Chairman Manzullo, as well as the Subcommittees,
Ranking Member Ballance and myself, are very committed to
making sure that small businesses can compete and trying to
level this playing field.
Please use the Small Business Committee whenever you can
and use it as a resource because this is an important issue to
all of us or we would not be on this Committee.
I thank you all for coming in and your testimony. It was
very, very enlightening. We obviously have a lot of work to do.
Thank you.
[Whereupon, at 12:12 p.m., the Subcommittee was adjourned.]
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