[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

                                 _____

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                          WASHINGTON : 2004

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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

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

         J. Matthew Szymanski, Chief of Staff and Chief Counsel

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)




                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
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

                              ----------                              


                       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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