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



 
   AVAILABILITY OF CAPITAL AND FEDERAL PROCUREMENT OPPORTUNITIES TO 
                       MINORITY-OWNED BUSINESSES

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

                             FIELD HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                   WASHINGTON, DC, FEBRUARY 17, 2004

                               __________

                           Serial No. 108-53

                               __________

         Printed for the use of the Committee on Small Business


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




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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina           ENI FALEOMAVAEGA, American Samoa
SAM GRAVES, Missouri                 DONNA CHRISTENSEN, Virgin Islands
EDWARD SCHROCK, Virginia             DANNY DAVIS, Illinois
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               BRAD MILLER, North Carolina
STEVE KING, Iowa                     [VACANCY]
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
Wordlaw, Mr. Obie, Chairman & CEO, JERO Medical Equipment & 
  Supplies.......................................................     3
Vazquez-Rowland, Ms. Neli, Greater Illinois 8(a) Procurement 
  Association....................................................     6
Harrison, Ms. Charlotte, President & CEO, Millennium Data 
  Services.......................................................     9
Redditt, Ms. Frankie J., President & CEO, Ashley's Quality Care, 
  Inc............................................................    12
Montgomery, Mr. Bruce, President, Montgomery & Company...........    13
Vaughn, Mr. Emmitt, National Diversity Sourcing Relations........    16
Roussel, Ms. Judith, District Director, Small Business 
  Administration (SBA)...........................................    23
Oliver, Ms. Linda, Deputy Director, Small and Disadvantaged 
  Business Utilization, Office of Secretary of Defense...........    25
Moss, Mr. Sean M., Director, Small and Disadvantaged Business 
  Utilization, Department of Transportation......................    26
Bamford, Ms. Patricia, Chief of the Acquisition and Assistance 
  Branch, Resource Management Division, Environmental Protection 
  Agency (EPA)...................................................    28
Denniston, Mr. Scott F., Director, Small and Disadvantaged 
  Business Utilization, Department of Veteran Affairs............    30
Smith, Mr. Tracye, Executive Director, Chicago Minority Business 
  Development Council............................................    31
Dobyne, Mr. Eric, Regional Director, Minority Business 
  Development Agency.............................................    34
Handley, Mr. James, Regional Administrator, Government Services 
  Administration (GSA)...........................................    35
Leggett, Mr. William H., President, Collectors Training 
  Institute, Inc.................................................    37

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    43
    Davis, Hon. Danny............................................    46
Prepared statements:
    Wordlaw, Mr. Obie, Chairman & CEO, JERO Medical Equipment & 
      Supplies...................................................    50
    Vaughn, Mr. Emmitt, National Diversity Sourcing Relations....    54
    Roussel, Ms. Judith, District Director, Small Business 
      Administration (SBA).......................................    57
    Oliver, Ms. Linda, Deputy Director, Small and Disadvantaged 
      Business Utilization, Office of Secretary of Defense.......    64
    Moss, Mr. Sean M., Director, Small and Disadvantaged Business 
      Utilization, Department of Transportation..................    69
    Bamford, Ms. Patricia, Chief of the Acquisition and 
      Assistance Branch, Resource Management Division, 
      Environmental Protection Agency (EPA)......................    72
    Denniston, Mr. Scott F., Director, Small and Disadvantaged 
      Business Utilization, Department of Veteran Affairs........    76
    Dobyne, Mr. Eric, Regional Director, Minority Business 
      Development Agency.........................................    80
    Handley, Mr. James, Regional Administrator, Government 
      Services Administration (GSA)..............................    88

                                 (iii)


      HEARING ON AVAILABILITY OF CAPITAL AND FEDERAL PROCUREMENT 
             OPPORTUNITIES TO MINORITY-OWNED SMALL BUSINESS

                              ----------                              


                       TUESDAY, FEBRUARY 17, 2004

                   House of Representatives
                                Committee on Small Business
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 9:40 a.m., at 3333 
West Arthington Street, Chicago, Illinois, Hon. Donald A. 
Manzullo [chairman of the Committee] presiding.
    Members present: Representative Manzullo and Representative 
Davis.
    Chairman Manzullo. Small businesses drive the economy. 
Small businesses have led the nation out of periods of 
recession, are far more innovative than large businesses 
producing more patents per employee than large businesses. 
Small businesses have generated 60 to 80 percent of the net new 
jobs annually and employ more than half of all private sector 
employees.
    I'm telling you, what you already know, small business is 
where the action is. However, no business, large or small, can 
exist or grow without ready access to capital. One of our daily 
cash flow needs are for capital improvements. The small 
business community has resorted to a number of funding methods, 
such as savings and loans, credit cards, and bank lendings.
    The private sector has been the primary source of capital 
for the small business community. Venture capital programs 
administered by the Small Business Administration, supplement 
private sector financing. The Committee is holding this hearing 
today in Chicago to hear from you as to the availability of 
capital to small businesses for sustaining day-to-day 
operations and for growth. We welcome your suggestions for 
improving the present system.
    There's also been concern in the past that the SBA and 
federal agencies have not provided enough assistance to small 
businesses that want to do business with the federal government 
for the first time or to increase their present sales. The 
hearing will provide overview as to the value of present 
programs to help small businesses successfully compete in the 
federal contract arena, taking advantage of domestic and export 
business opportunities.
    Your suggestions and ideas for improving contract 
opportunities for small businesses are most helpful to the 
Committee.
    We welcome your participation in the hearing. I'll turn it 
over to Danny Davis for opening remarks, and then I'll come 
back with a few of the rules on how we are going to run the 
hearing.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Chairman Manzullo. Oh, but before that, let me tell you why 
I'm here. We get invitations to have hearings all over the 
place. Now, we could have been in Las Vegas, or Florida, where 
it's warm, or New Mexico, but all kidding aside, we are here 
because of Danny Davis. Danny has been--has become a very dear 
friend of mine. I don't know of a person from this area that 
understands or works harder for small business people, and I 
talked to Danny a couple of months ago and said, ``Danny, it's 
time that we do a field hearing for the Full Committee out in 
your congressional district.''
    And, Danny said, ``Let's work on it.``
    And so, we are here today because we believe in what Danny 
is doing, and we believe in what you are doing. We are here to 
hear the pulse of the people you represent, Danny.
    [Chairman Manzullo's statement may be found in the 
appendix]
    Mr. Davis. Well, thank you very much, Mr. Chairman, and let 
me first of all thank you, not only for bringing this hearing 
to Chicago, but I really want to thank you for the tremendous 
advocacy and leadership that you provide for small businesses 
as Chairman of the House Small Business Committee. It is one of 
the committees that is a truly bipartisan committee, one that I 
have enjoyed serving on, and continue to look forward to 
working with it and with you, as we struggle with questions of 
how we really handle a global economy.
    And so again, I thank you for coming and for bringing this 
hearing to Chicago.
    I also want to thank all of you, because even though 
wherever you would have been in Chicago it would have been 
cold, but there are other things that you could have been 
doing.
    And, although we've heard rosy reports recently about our 
country's economic situation, local communities like this one, 
and others throughout the Nation, are still suffering.
    Right here in Illinois, there are over 400,000 individuals 
out of work, and we've lost more than 125,000 manufacturing 
jobs since the start of 2001.
    The one sector that can turn unemployment lines into job 
opportunities is small businesses. Small businesses, as you 
know, are the backbone of the American economy, and of the 
Illinois economy in particular. The more than 275,000 small 
businesses here employ almost 50 percent of our workforce. They 
provide the fuel and the jobs that drive our metropolitan area, 
our state, and yes, indeed, our country.
    The real trail blazers of small business growth are 
minority-owned firms. Across the country, minority-owned 
businesses are employing millions of people and contribute 
billions of dollars in revenue. In fact, Illinois is among the 
top five states that account for the majority of minority-owned 
businesses in the United States.
    Yet, given all their accomplishments and successes, 
minority-owned business firms in the Nation, and in Illinois, 
continue to face an array of barriers. These barriers impede 
their growth, preventing them from reaching their full 
potential and, ultimately, hinder the number of jobs they are 
able to create. That is where the Small Business Administration 
programs come in.
    The SBA's programs fill an important gap providing small 
firms with assistance in gaining access to capital of federal 
contracts when they have often times no place else to turn.
    Given all these good programs, and all the good that they 
do for businesses, I'm sorry to say that the SBA was one of the 
hardest hit agencies by budget cuts in the proposed 2005 
budget. The funding request for the agency declined by almost 
$120 million from last year's request, and is less than half of 
what was requested during President Clinton's last year in 
office.
    The SBA loan programs were among the most affected by the 
latest budget, but it is the SBA loan portfolio that provides 
small businesses in our area with the capital they need to 
start up and grow. These programs are especially important, 
since many traditional lending institutions are less likely to 
provide capital to minority-owned businesses.
    And so, Mr. Chairman, we thank you for bringing, again, 
this opportunity for those of us here in the metropolitan area 
of Chicago to analyze, discuss, and display what our 
experiences have been, with the idea that hopefully, even if 
it's only one idea, if it's only one approach, if it's only one 
technique, that provides another level of opportunity for small 
businesses, then, not only will this day have been important 
and worthwhile, but all of the continued advocacy that you 
provide would have made tremendous sense.
    And so, I thank you again, thank all of those who have come 
to participate, and look forward to a very worthwhile hearing. 
Thank you very much.
    [Representative Davis' statement may be found in the 
appendix]
    Chairman Manzullo. Thank you, Danny.
    The, I don't want to call it, ground rules, because that 
sounds like a football game, but what we are going to do is, we 
are going to have the hearing in two panels. We are going to 
combine the second and third panel so we have more time. Then 
I'm going to need somebody to help me keep time, but we are 
going to try to limit your testimony to five minutes.
    And now, when I sort of go like this, you know, that means 
you've got about 30 seconds left, or like this your time has 
expired. If I pick this up and get real excited, that means, 
you know, it's time to sum up.
    I think what we'll do is, I'm going to start with Obie. 
Obie Wordlaw, Chairman & CEO of the JERO Medical Equipment & 
Supplies, and, Mr. Wordlaw, we look forward to your testimony.

    STATEMENT OF OBIE WORDLAW, CHAIRMAN & CEO, JERO MEDICAL 
                      EQUIPMENT & SUPPLIES

    Mr. Wordlaw. Good morning, Mr. Chairman, and Members of the 
Small Business Committee. My name is Obie Wordlaw, CEO of JERO 
Medical Equipment & Supplies. Can everybody hear me? Okay.
    JERO is a manufacturer of disposable wearing apparel and a 
distributor of medical/surgical supplies and equipment. We were 
established in 1987, we're certified with the City of Chicago, 
Cook County, State of Illinois and SBA, and we are also an MBE 
enterprise. We are also a small disadvantaged business. We are 
also a veteran-owned business, which is located in the Illinois 
medical district, and we are also in a HUBZone, Enterprise 
Zone, and Labor Surplus area, as do 95 percent of our 
employees, and we hire from our community.
    Today, we'd like to discuss the failure of the private and 
public sectors to meet the capital needs of African-American 
small businesses and their contracting opportunities.
    SBA was established to protect the small businesses, their 
mission: Maintaining and strengthening the Nation's economy by 
aiding, counseling, assisting and protecting the interests of 
small businesses and by helping families and businesses recover 
from national disasters.
    SBA defines a small business as one that is independently 
owned and operated, and not dominant in its field, and meets 
the employment sales standard. I won't list all of those, but I 
have down here wholesale, retail, it tells you what the 
criteria is within those guidelines for a small business, 
manufacturing, construction, et cetera.
    According to SBA, over the past ten years it has helped 
435,000 small businesses to secure financing totaling over $94 
billion. That is very impressive, however, in the African-
American community we have not reaped any of those benefits. I 
think SBA's definition should include the social and economic 
disadvantaged small business in its loan eligibility.
    The 7[a] Loan Guaranty serves as SBA's primary business 
loan, their most flexible business loan program. The 7[a] Loan 
Guaranty Program is somewhat deceptive. It is called a Guaranty 
Loan Program, but if the lender is not willing to provide you 
the loan, even with SBA's guaranty, you are out of luck. Then 
you ask yourself why would we ask the same lending institution 
that has been redlining the African-American communities for 
decades to be a participant?
    Solution--SBA should be able to make direct loans, if you 
can guarantee a loan, you should be able to make a loan. Access 
to capital is a direct link to contracting opportunities and 
growth.
    Jero is a recent graduate of the 8[a] program, I support 
the 8[a] program, the HUBZone program, the veteran-owned, and 
women-owned programs 100 percent.
    During my nine years as an 8[a] firm, a veteran-owned, 
HUBZone, and a Small Disadvantaged Business and a minority-
owned business, Jero received excellent technical assistance, 
marketing plan, excellent technical assistance, which includes 
an array of things, from SBA. The contracting opportunities 
were not successful. Jero was awarded one 8[a] contract. Most 
recently awarded a HUBZsone contract. I would think that an 
8[a] HUBZone, veteran-owned small business contract, SBA should 
be trying to determine my eligibility as a small company 
because of all my contracts.
    Instead, one 8[a] contract in nine years, and the most 
disturbing is that SBA had to do a Notice of Appeal on that one 
contract, not because the contract exceeded its threshold in 
dollar amount, it was a very small contract. The Agencies/
contracting officers were not 8[a] friendly.
    When we were marketing the federal government prior to 
becoming an 8[a] company, we were told that from the government 
and agencies that we needed to be a 8[a] company. Then I was 
told that we needed to have a Federal Supply Schedule after we 
got the 8[a] designation. Then we were told we had to have a 
DAPA Agreement, so now we are told with the Federal Supply 
Schedule, the DAPA Agreement in hand, then we were told that if 
you had a standardized contract based on the products that you 
sell, that we would make sure that all the federal agencies 
would buy from the mandatory source, which would be us. Then 
once we got the standardized contract we were told that we 
needed to work closely with the prime vendors, which caused 
Jero an additional fee.
    I'm jumping around so I can stay within the five minutes.
    Chairman Manzullo. Tell us your story.
    Mr. Wordlaw. Okay.
    Jero was awarded the 8[a] standardized contract and the 
compliance of a federal agency. We were awarded an 8[a] 
standardized contract. The compliance on that contract was only 
utilized by 20 percent.
    After contracting with some of the VA mandatory contracts, 
and promised that we were told that we that they had to buy 
from us, we received several reasons why they could not buy 
from us. One being, and I'll just quote one, my team is 
involved with open market procurements. We require over 
$25,000--we were advised up to $25,000, we are establishing a 
BPA on our own. Now, this is after we were told all these 
different things that we needed to have, standardized BPA, 
Federal Supply Schedule and the works. It is not according to 
Mr. Wordlaw, this is one of the reports from one of the 
businesses, which was specifically VISN 21, which is in this 
area. Mr. Wordlaw, according to the National Accusation Center 
that the isolation gowns are standardized under the specified 
contract, but for now we are not currently using your product, 
and we must go through the prime vendor.
    Chairman Manzullo. Okay, now we are approaching the hand 
mark.
    Mr. Wordlaw. Okay.
    I got a call yesterday from Mr.--okay, let me jump over 
here then.
    In closing, SBA was very supportive of Jero during its nine 
years as an 8[a] and is still working with us as a HUBZone 
firm. Jero strongly supports SBA in its efforts to assist 
disadvantaged businesses with business development and 
contracting opportunities. I feel that they have no real 
authority in the lenders programs, or the contracting programs. 
I think the language is, ``We can't force the agencies [lending 
& contracting] to loan you money or give you a contract,'' even 
if you meet all the qualifications. Instead of cutting SBA's 
budget, it should be increased with some real authority.
    I shared the above stories to say that this isn't SBA's 
failure, but a failure of SBA's procurement partners, the 
federal buying agencies.
    Mr. Davis. Okay, Obie, I don't like to cut you off here, 
but Scott Denniston is here, and he's the Director of the 
Department of Veterans Affairs. Scott, where are you?
    Mr. Denniston. Right here.
    Mr. Wordlaw. Okay, and we talk to Mr. Denniston on a 
regular basis. In fact, I make regular trips to Washington to 
meet with Mr. Denniston and to meet with his office, and I 
think I know just about everybody in his office.
    And, thanks to Congressman Davis, he allows me to come and 
sit down and get my tools ready to go and fight the battle.
    Chairman Manzullo. All right.
    Mr. Wordlaw. So, I do know these people. But, what is 
happening, they don't seem to have enough piece in the process 
to make the contracting agencies do what they say they are 
going to do. So, all the socioeconomic programs we run into 
obstacles on a continual basis, in terms of being able to 
receive contracts, or being able to get the funds necessary to 
do the business.
    Chairman Manzullo. Okay, that's it, Obie. You've made your 
point here. Okay?
    Mr. Wordlaw. Thank you very much.
    Chairman Manzullo. You bet.
    [Mr. Wordlaw's statement may be found in the appendix.]
    Chairman Manzullo. Now, Neli, you are substituting for----
--.
    Ms. Vasquez-Rowland. Theresa Jamison.
    Chairman Manzullo. Let's see.
    Ms. Vasquez-Rowland. Theresa Jamison is from Smart 
Technology.
    Chairman Manzullo. All right, why don't you introduce 
yourself and your organization, and put forward your testimony.
    Ms. Vasquez-Rowland. Okay.
    Chairman Manzullo. Are you going to give your own testimony 
or are you going to be working from hers?
    Ms. Vasquez-Rowland. No, no, I had the pleasure of having 
Theresa Jamison on my Board.
    Chairman Manzullo. Okay.
    Ms. Vasquez-Rowland. Also Richard Jeffries.

   STATEMENT OF NELI VAZQUEZ-ROWLAND, GREATER ILLINOIS 8(a) 
                    PROCUREMENT ASSOCIATION

    Ms. Vasquez-Rowland. We are an association called the 
Greater Illinois 8[a] Procurement Association.
    My theme is, basically, federal contracting with small 
business means big business for Illinois, and I thank you for 
inviting the Greater Illinois 8[a] Association, known as GIPA, 
to speak on behalf of the issues that impact small business, 
particularly, those in the 8[a] program.
    Not only do we represent the 8[a] issues in Illinois, but 
we are also part of a council that represents 8[a]s from coast 
to coast, encompassing over 5,000 8[a] companies in the U.S. 
GIPA also serves on your Small Business Task Force on the Small 
Business Committee in Washington, D.C.
    Mainly, there are two issues that we're discussing today 
that affect 8[a], listed as access to capital and access to 
revenue. The obstacles that face small business today preclude 
small business from participating in the federal contracting 
arena.
    Not unlike Mr. Wordlaw's story, it's pretty common across 
8[a] companies to find it very difficult to do contracting with 
federal agencies. This has basically been the result of the 
changes over the years that have diluted the 8[a] program's 
effectiveness.
    Access to capital. The purpose of getting access to capital 
for small business is to provide a tool to finance small 
business and to increase capacity so that small business would 
qualify for contracting opportunities in both the private and 
public sectors. The SBA lending program allows companies who 
would otherwise not qualify for a typical loan to have access 
to capital.
    With the proposed budget cuts, and potential reduction in 
the SBA loan program, many small businesses will never get 
started.
    Already small businesses are reeling from years of a weak 
economy in the advent of 9/11, which has taken its toll on 
small business. Cutting funding programs will be a significant 
blow to the creative spirit of entrepreneurs in the U.S., who 
provide the majority, as you said, of job growth today.
    Historically, small business has led to growth in the 
economy whenever there's been recessions. Without SBA bank 
loans the banking industry would be subject to potentially 
redlining small minority-owned businesses.
    Small business also faces the same obstacles in the areas 
of finding insurance.
    A solution? Well, ideally small business is given access to 
revenue in federal contracting, and small business is given 
firm payments, provisions that would minimize the risk and need 
for significant amounts of capital. The life's blood of any 
business is cash flow. The cash flow created by prompt payment 
would provide the necessary requirement that allows small 
business to qualify for less costly conventional loans and will 
open up the arenas for insurance and bonding companies alike.
    Access to revenue. The SBA was created with a charge to 
develop small business in the U.S. Once successful, and 
credited with having originally funded many of our Fortune 500 
companies, unfortunately, the climate has changed significantly 
for small business. For example, today the SBA is operating 
under a series of memoranda of understanding, otherwise known 
as MOUs, with other federal agencies. In our view, the SBA has 
antiquated its role with respect to business development for 
the firms participating in the 8[a] program. Our understanding 
is the delegation of duty is in direct violation of the intent, 
as we understand the Small Business Act and as amended in 
Public Law 10656 that requires small business to enter into 
contracts on behalf of the subcontracts to 8[a] firms.
    Prior to the SBA entrance into these MOUs of the mid-1990s, 
SBA was involved in the 8[a] contracting process. The SBA 
accepted contracts under the program to be performed by 8[a] 
firms. The SBA assisted the firms with proposal preparation, 
contract negotiation, and contract administration.
    The SBA was even a party to the contract, as the SBA 
contracting officers were signatory to the contract. The SBA 
had the ability at the time to direct work to 8[a] programs 
that had not previously had contracts.
    The 8[a] firms knew then that the 8[a] program's focus was 
on business development. The SBA is painfully aware that goal 
of the agency is to meet the equitable distribution of 
contracts requirement. Due to this, the SBA has implemented 
business matchmaking programs to introduce local 8[a]s to the 
agencies. It's been stated by the SBA matchmaking programs that 
80 percent of all federal contracts are awarded to firms within 
50 miles of D.C. Their stated objective in this matchmaking 
program was to be able to distribute contracts throughout the 
states.
    The mission of the SBA is to develop small business, and 
these types of programs intend to meet their stated objectives. 
However, without the authority there's virtually no possibility 
of success. Furthermore, without the authority, funding, and 
staff required to execute the mission of the SBA under the 
current structure of the MOU programs, the SBA is set up to 
fail.
    Consequently, under the MOU structure, small business, 
specifically 8(a]s, will continue to go without 
representation----
    Chairman Manzullo. How are you doing on time, Neli?
    Ms. Vasquez-Rowland [continuing] Consequently, under MOU 
structure, small business, particularly 8[a]s, will continue to 
go without representation, contracting opportunities. The 
bottom line is that more business matchmaking programs will not 
work under the current MOU structure. There is an appeal 
process by the SBA that mainly questions contracting 
opportunities that could be directed to small business, yet 
there's no enforcement.
    Alternatively, for example, the Office of Advocacy could be 
appointed as intermediary on issues between agencies and 
independent agencies alike, like this to resolve areas of 
disagreement. As a result, the MOU's implementation and lack of 
SBA involvement in the contracting process, federal contracting 
is experiencing more instances of bundling of contracts, 
falling short of the small business utilization goals, 
bypassing local buys, a weak appeal process by the SBA, and 
lack of accountability on the part of agencies.
    The MOUs have been----
    Chairman Manzullo. We've got to be out of here by noon for 
a giant procurement conference, so I'm going to hold you to the 
clock.
    Ms. Vasquez-Rowland [continuing] Okay.
    Chairman Manzullo. All right, and the clock has ticked 
down.
    Ms. Vasquez-Rowland. Okay.
    Chairman Manzullo. So, we'll have time for some questions. 
Okay?
    Ms. Vasquez-Rowland. All right. Well, thank you, but in 
summary----
    Chairman Manzullo. What I would suggest, you guys have a 
story. You don't have to read the script.
    Ms. Vasquez-Rowland [continuing] Okay.
    Chairman Manzullo. All right? You know, get right to it. 
You've got a problem, let's get right to the problem. You got 
it?
    Ms. Vasquez-Rowland. Okay.
    Chairman Manzullo. All right. It took over five minutes to 
get there, but at least somebody's got to start. That's all 
right.
    Ms. Vasquez-Rowland. Let me----
    Chairman Manzullo. Your time is done. Give it to Charlotte. 
We'll get back to you.
    Ms. Vasquez-Rowland [continuing] Okay.
    [Ms. Vasquez-Rowland's statement may be found in the 
appendix.]

STATEMENT OF CHARLOTTE HARRISON, PRESIDENT AND CEO, MILLENNIUM 
                          DATA SYSTEMS

    Ms. Harrison. I wanted to express my thanks to Congressman 
Davis for his engagement in, support of, and sincere concern 
for the small business community, and I want to thank his 
office for its tireless efforts in support of the small 
businesses.
    I'm going to get to the meat of it right now.
    Chairman Manzullo. Introduce yourself first, though.
    Ms. Harrison. My name is Charlotte Harrison-Smith. I'm the 
President and CEO of Millennium Data Systems.
    This is the second time that I've been given an opportunity 
to testify. The first time that I testified I was really full 
of fire, trying to find a fair playing field. Since then I've 
mellowed, but the fight has grown much more intensive, and it 
is difficult to choose a topic today.
    We have pending litigation that I'm not able to speak on, 
so we chose a matter that was dear to our hearts.
    Since 1999, we provided temporary clerical support to a 
naval command in the Great Lakes Region. In 2003, this command 
underwent an 876 study. The 876 study was designated as a small 
business set aside. We spent countless hours screening, hiring, 
and developing an employee base at this location over the 
years.
    This contract represented a significant portion of our 
organization's revenue. We thought that based upon our 
experience we would have an excellent opportunity to secure the 
business. We felt secure in our line of thought, because we had 
given our very best effort with this account. We worked 
tirelessly to raise the bar with regard to the skill level of 
our personnel, so much so that at each and every change of 
command the commanders received accolades for projects where 
our personnel had played a key role.
    So confident were we in our personnel's ability that as 
they rolled off assignments from time to time, we promoted 
personnel to positions without our corporate office location. 
We truly worked hard, we believe in an honest day's effort for 
an honest day's pay, and we had every right to be excited about 
our chances in the 876. We even took the extra step of taking 
specific training on how to respond to an 876 RFP. We had 38 
employees in every facet of the command performing clerical 
functions, and we were fully capable of running the entire 
command, and that's why we were so feared.
    But, we couldn't have been further from the reality on the 
ground. Certain individuals at the command, in very powerful 
positions, did everything in their control to prevent us from 
having a viable opportunity to bid and compete. They made every 
effort to intimidate us.
    One of the examples of this comes to mind, they refused to 
allow us to contact our employees, even after working hours, to 
update their resumes with the experience that they had earned 
over the past four years. We were threatened and told that if 
we did we would be changed immediately. We were told by the 
officer in charge that our Vice President could not visit the 
site without a military guard escorting him at all times, and 
his normal routine had been to visit the site twice a week for 
all the years that we managed those people without a military 
escort.
    At the same time, while we were under escort, the officer 
in charge granted full and unfettered access to the firm that 
eventually won the 876 competition. We felt overwhelmed by the 
very intense, concerted and obvious efforts to prevent us from 
competing fairly.
    More importantly, because this account represented a 
significant portion of our overall revenue, we needed to show 
caution with our most important customers. Without the ability 
to update our personnel's resumes we knew that we could not 
submit a viable bid. Other firms vigorously protested the award 
because it was a well-known fact that the company that 
apparently won the award had a parent relationship with a 
multi-billion dollar firm and did not qualify as a small 
business. In fact, the company that won has an estimated 3,000 
employees with revenue of $225 million. A true small business 
could not weather the economic consequences of the unreasonably 
low bid that they submitted. And franchising has become a dirty 
little loophole that large businesses are using to masquerade 
within the small business community and win contracts. This 
needs to stop.
    The sad irony of it is that this billion dollar firm will 
inherit the people that we cultivated over the last five years, 
and what about the civil servants that have served their 
government for many years, do you think that they even had a 
fair shot at winning the 876 study?
    Should base level commanders' unusual interest in seeing a 
private sector firm win a particular contract be the 
overwhelming factor in awarding a contract funded by taxpayers? 
And why doesn't the SBA have the authority to recommend cases 
to the GAO or the Inspector General of the command if it's 
brought to their attention? There should be a policy 
implemented to allow the SBA to investigate a company if it is 
brought to their attention by any other means than a protest.
    We submitted a Freedom of Information request to gain the 
names of the parties to the protest, but we were told that the 
information could not be released until after the award. The 
awards were made, and we still don't have the information. It's 
a mockery of the system that a company with the strength of a 
large business behind them is allowed to compete as a small 
business and be misrepresented as a small business.
    Congress must give the SBA enforcement authority regarding 
small business procurements. I believe that once these matters 
are thoroughly examined, the shameful outcome will compel 
Congress to grant more resources, authority, and tools to the 
SBA, so that they can work with other agencies like the GAO to 
enforce the laws of fairness.
    Most small businesses are in this to make a difference. 
Some are greedy and will give the whole barrel a bad taste, but 
some of us still believe that the best way to show our 
patriotism is to help create jobs for those who are not so well 
connected. We believe that when prosperity grows and flourishes 
the members of the community feel a sense of worth that the 
Nation as a whole improves. The expansion of the tax base and 
the positive effects on the economy are just wonderful 
byproducts of doing the right thing.
    The men and women who work in the SBA and the GSA also 
care. It's unfortunate that the SBA, as a whole, has received 
such a smear on their reputation over the years. I can tell you 
first hand that they are wonderful people who genuinely care 
about creating a fair playing field for small businesses, but 
like an electric lamp without a cord placed in a darkened room 
without a plug to provide light so, too, is the SBA in the 
procurement arena. They have no source from which to draw upon 
bringing in light.
    There are those of us who still believe that the system can 
work if we abide by the rule of law. We believe that if we 
strive to make a positive difference in the lives of others, 
our Nation and the world becomes a better place, but we are 
searching for the right word, the spark, the catalyst, that 
compels us to speak out and demand some change.
    I can only offer you this, when you look in the eyes of 
your loved ones, and your wives, and husbands, and daughters, 
and mothers, remember, they have to live here too, just like 
us, and this system needs to be fixed for the next generations.
    The abuse of the 8(a] businesses is in full bloom, from 
large businesses parading as small businesses, to the banks 
that refuse to lend even after receiving an SBA guarantee, only 
because they'd rather offer higher-priced terms to shamelessly 
enrich their bottom line. And, oh, yes, I was approved for a 
$250,000 loan by the SBA, but my bank preferred to keep me and 
my $3.6 million in a factoring arrangement so that they could 
make more than $100,000 in loan fees. Thank God for the SBA and 
my business opportunity specialist, she certainly did a 
thorough job of making sure that I explained why I had never 
accepted a $250,000 loan. If it hadn't been for her efforts I 
would have never even known that the bank had received the 
approval.
    To add injury to insult, they made up an ill-conceived 
story that I had asked for the funds for equipment financing, 
and they offered an alternative solution. The only problem with 
the explanation is that we had ceased equipment tax in 
September of 2002. Even now they continue with their bold 
behavior, miscalculating that we neither have the funds, nor 
the wherewithal, to fight them.
    And last, but not least, let me touch on MUCI. You'd think 
that since we were the incumbents of the command, with many 
detachments at Great Lakes Naval base, that EES would have 
responded to our efforts to become one of their subcontractors. 
Even they have a new winning strategy, promise the government 
they'll take all the small business incumbents and just sit 
back and wait for the government to downsize.
    When the command closes, the computers still need to run, 
but because the head agency has technically closed, and their 
detachments are streamlined to another activity, they are not 
obligated to extend the subcontract to the previous small 
business incumbent.
    Everyone has the system wired to work according to their 
will, everyone except the small disadvantaged business. Never 
before have we needed your intervention more than now.
    Chairman Manzullo. I've got to intervene on the time here.
    Ms. Harrison. I only have one thing left, we need you to 
strengthen the SBA and the 8[a] program with greater vigilance, 
compliance support from all sides of the aisle. We hope and 
pray that you'll heed the call.
    [Ms. Harrison's statement may be found in the appendix.]
    Chairman Manzullo. Thank you, Charlotte.
    Okay. Our next witness is Frankie, is it Redditt?
    Ms. Redditt. Redditt, yes.
    Chairman Manzullo. Redditt, President and CEO of Ashley's 
Quality Care, Incorporated, and we look forward to your 
testimony.

   STATEMENT OF FRANKIE REDDITT, PRESIDENT AND CEO, ASHLEY'S 
                       QUALITY CARE, INC.

    Ms. Redditt. Thank you.
    Chairman Manzullo. You'll have to pick up the mike there, 
speak from your heart.
    Ms. Redditt. Okay.
    Chairman Manzullo. Tell us about the nature of your 
business, and then speak from your heart.
    Ms. Redditt. Okay, thank you.
    Ashley's Quality Care provides in-home services to non-
elderly, handicapped persons throughout the city and suburbs of 
Chicago.
    However, well, also, we have over 400 workers, and our 
workers come throughout the city and the suburbs, we have 
experienced in the last two years slow payments because our 
contracts come from the Department of Rehab through the State 
of Illinois. We have not been getting paid on time, so, 
therefore, I've been losing quite a few clients, quite a few 
homemakers, because if you cannot make your payroll you cannot 
pay, and the homemakers will not stay there. They take our 
clients away from us and take them back to the state where they 
will get $7.00 an hour.
    We have been fighting this for the last two years. Ashley's 
was established in 1991, when we only had four workers, four 
homemakers, and two staff persons, now we have well over 400.
    We have experienced tremendous defeat from the banks. Banks 
would not give us a line of credit. I have to take my same 
contracts over to the banks in the minority communities, in 
order to get a line of credit, in order to pay. However, I 
still cannot get enough money to make payroll from month to 
month. Therefore, I'm going back and forth with the state, 
saying could you please release funds. I'm also asking them to-
we must submit a letter, I believe that's another grievance 
letter, we must submit a letter of where we actually need this 
money, and each month, each month we have to go through the 
same thing, sending out letters saying that we need money in 
order to make payroll, in order to pay our employees, and this 
has been going on since 9/11.
    We cannot grow, because there is no money to grow, there is 
no room to grow. We cannot accept other state contracts, 
because there is no money to pay the employees once we get a 
contract, so, therefore, we have to refuse contracts, and we 
cannot hire any more workers.
    Over the last ten years, we find that we are helping the 
state by keeping the clients in their homes and out of 
institutions, out of hospitals, and keeping them in a safe 
environment in their homes where they are familiar with. 
Therefore, the clients get better at a rapid rate, and they are 
able to function because they are familiar with their 
surroundings.
    We cannot pay our workers, we lose our clients, our clients 
are dissatisfied, and they are going without services, and this 
is due to the fact that the whole thing is not being paid in a 
timely manner.
    We have a lot of homemakers that have stuck with us down 
through the years, worked with us, continue to go to provide 
services for these clients. Some of our conditions, the 
conditions that the homemakers are actually going into are 
deplorable conditions. The clients cannot do for themselves, 
they cannot clean themselves, they cannot feed themselves, they 
cannot shop for themselves, they cannot cook, so our homemakers 
provide all of these services, and yet we cannot pay them in a 
timely manner.
    And, this is why we are coming--have gone to the Harris 
Bank, some of the large banks downtown, and they said we must 
have SBA backing. We get an SBA backing, and they still refuse 
to provide payments or provide us with a line of credit. We 
have to, therefore, take our business back into the community 
where they cannot afford to give us the line of credit that we 
need in order to grow, and, therefore, we are stuck with what 
we have.
    Our ambition is to grow. We want to grow. We want to 
provide services to more individuals who badly need the 
services, but we cannot do it because of lack of funds, and 
this is where we stand today.
    Thank you.
    [Ms. Redditt's statement may be found in the appendix.]
    Chairman Manzullo. Thank you, Frankie.
    Our next witness is Bruce Montgomery, President of 
Montgomery Company, and we look forward to your testimony.

 STATEMENT OF BRUCE MONTGOMERY, PRESIDENT, MONTGOMERY & COMPANY

    Mr. Montgomery. Thank you, Chairman, and again, I'd like to 
thank Congressman Davis and you for holding this forum in our 
community. It is one that's obviously necessary by the 
statements of the entrepreneurs that have spoken before me.
    My name is Bruce Montgomery, and I'm Founder and President 
of Montgomery & Company, which is an information technology and 
systems innovation company that I founded in 1989. My company 
was established to provide technology and information 
management services to business, education, government, and the 
non-profit sector. The company manages IT projects and computer 
hardware and software systems design and implementation, local 
and wide area networking, mobile computing, document imaging 
systems, desktop graphics, multimedia applications, and 
Internet and e-commerce.
    Chairman Manzullo. How many employees do you have, Bruce?
    Mr. Montgomery. I have five.
    Chairman Manzullo. Okay.
    Mr. Montgomery. I am not going to talk today about my own 
trials and tribulations as an entrepreneur, that's too much fun 
to talk about in five minutes, but what I will talk about, 
again, some ideas, and like you say, speak from the heart. 
Certainly it's been a pleasure to work with Congressman Davis, 
to talk about economic revitalization and job creation in this 
community, and I think a lot of hard work was done by the 
Congressman and others when they established the plans called 
``New Market Initiatives.'' They looked at the disparities of 
capital access and availability of capital markets.
    In the New Market plan some great ideas and concepts were 
raised. Unfortunately, they were not implemented to the full 
extent, because while the ideas and the plans were there, they 
weren't given the money and teeth, as we've heard before, to 
make a difference in effecting change to solve some of the 
problems that have been previously stated.
    So, my first statement would be to blow the dust off of the 
ideas that were raised and well documented in New Market 
Initiatives, and it's obvious that banks and the current 
institutions cannot be the only providers of capital that our 
businesses so sorely need.
    The Kaufman Foundation, the Ford Foundation, and so many 
others have well documented the need for equity capital, and 
the disparity, and the availability of equity capital to our 
businesses, and we've not even been allowed under the SBIC 
rules to be a part of that game.
    If you look at the SBA's own records in regards to what's 
going on in SBIC funding, small business investment 
corporations, there are some grave concerns about that program 
and the ability that minorities become certified as SBICs and 
do their job of providing equity capital to minority-owned 
businesses that will create jobs.
    Now, the truth is that once African Americans have been 
allowed to participate in the venture capital game, that 
they've been very successful. In fact, regardless of all the 
horror stories that we've heard, minorities, and women, and 
African Americans, have started businesses at a faster clip in 
the last ten years than ever before. They are creating jobs, 
despite all of the horror stories that we've previously heard. 
They are doing this with two arms tied behind their back 
because they haven't been able to get equity capital, and have 
equity events, and do IPOs, and access the capital markets.
    The problem is, the best and the brightest in our financial 
institutions have moved from the banking community into the 
realm of investment banks, and that's why a company like 
Comcast can make an untendered $50 billion offer to buy Disney.
    Chairman Manzullo. $56 billion.
    Mr. Montgomery. $56 billion, because all of the financial 
geniuses in America are more concerned about these mergers and 
acquisitions to provide capital, and schemes that allow them to 
have the capital to make these huge deals, but there's no 
opportunity for minority businesses to get access to equity 
capital. So, I say we need to look at the disparities in the 
availability of equity capital, and the SBA, again, needs to be 
empowered to move quickly to make sure that minorities get a 
chance to be certified SBICs, we need new vehicles in our 
community.
    We have this idea of community development financial 
institutions. We need new vehicles. Again, I would say that the 
Black Caucus has had tremendous success with their WOW 
initiative, recognizing that home ownership is a key to wealth. 
Well, the next initiative ought to be one for small businesses, 
and just like we would not have the tremendous movement in home 
ownership without creating vehicles like Fannie Mae, that are 
allowed to securitize the great mortgage pools and make money 
available for people to own homes which are the number one 
asset in America that makes a difference in people's wealth.
    We need to have that same type of availability that can 
securitize monies to really clean up this gobbledy-gook of weak 
programs that are under funding the opportunities for small 
businesses to grow and create jobs. So, we need to review how 
these securitization models can make a difference in capital 
available for minority businesses, and we need to do that right 
now.
    Your committee needs to hold their feet to the fire when 
somebody comes up with a scheme to create a new agency in the 
government, such as the Agency of Homeland Security, and say, 
hey, you know, we need to do this. We need to fund this. We 
need to move now, and we need to move quickly.
    Well, that agency, Tom Ridge needs to come before your 
department, and before he runs out and does whatever he feels 
he needs to tomorrow, he needs to show you how he's going to 
include small business in the process. They can find a way to 
do everything, bend the rules, do it tomorrow when they want to 
do it, but then there's no call to watch and monitor the 
contract, go think about what it needs to look like, they can 
give everybody else a contract to think about what needs to be 
done, there's no way all of the desperate IT systems are going 
to be galvanized in one new agency.
    I'll tell you this, though, they don't have an effective 
model of how to include small business in the process, and they 
need to have one.
    Chairman Manzullo. Bruce, it looks as though we are almost 
out of time here.
    Mr. Montgomery. Well, I've just got two more comments to 
make.
    One, certainly you've heard the problems with contract 
bundling. This is a terrible problem and speaks to the issue 
that I'm talking about.
    And again, I'd just like to say that there is well 
documentation, again, Kaufman, the Milliken Foundation, Ford 
and others, have done study, after study, after study, to show 
that venture capital, equity capital, access to capital 
markets, and new thinking, needs to be brought into models to 
create capital, make a difference, so that our businesses can 
be engaged.
    And, I would also say that technology adoption by small 
businesses can make a very big difference in their ability to 
be effective, and also, we've been locked out of the ability to 
provide our services into the very agency that we are here to 
talk about today, and that's the SBA. I would encourage the SBA 
to be very inclusive, to continue the SBIR program that allows 
small businesses to get innovation dollars to bring new ideas 
to the visibility of the United States, and again, I would 
encourage you to continue to hold these types of hearings all 
around Illinois, because Illinois is sending too many tax 
dollars to the federal government, we are not getting them 
back, and small businesses can make a big difference in our 
ability to employ and make a difference in our community.
    And again, I thank you.
    [Mr. Montgomery's statement may be found in the appendix.]
    Chairman Manzullo. Thank you, Bruce.
    Our next witness is Emmett Vaughn and--you're not Emmett?
    Mr. Vaughn. I am Emmett.
    Chairman Manzullo. That's right, you're on this panel, 
here.
    Mr. Vaughn. Change type------.
    Chairman Manzullo. President and CEO of Diversity Supply 
Company.
    Mr. Vaughn. No. I have no idea what that company is, but I 
am Emmett Vaughn.
    Chairman Manzullo. You are Emmett Vaughn. Was that a typo?
    Mr. Vaughn. It's a large typo.
    Chairman Manzullo. It's just a $100 million company we 
thought that you were the President of.
    Mr. Vaughn. What if that were true?
    Chairman Manzullo. Well, Emmett, why don't you tell us who 
you are and your company, if any, that you are representing.

    STATEMENT OF EMMETT VAUGHN, NATIONAL DIVERSITY SOURCING 
                           RELATIONS

    Mr. Vaughn. Right. The other Congressman invited me as 
something of an independent subject matter expert. I am in 
charge of minority business development and ethnic marketing 
for Albertson's, which is----
    Chairman Manzullo. Oh, a grocery store chain.
    Mr. Vaughn [continuing] Right, the second largest grocery 
retailer in the United States.
    The other thing, just by way of background and resume, in 
the past five years, I want to say I have probably been 
involved in just under a half a billion dollars of transactions 
from the private sector through corporate supply and grocery 
programs. I've been very involved with Congressman's economic 
development initiatives.
    So, you know, the last guy on the panel is always the 
easiest guy to speak, because we can summarize all the fine 
commentary that's gone on before now.
    Statistical growth of small business in urban and rural 
areas speaks for itself. I think also the downsizing of 
companies has been clearly offset by a lot of what has been 
done by small business growth, and that's something that does 
not often get talked about, the relationship of small 
businesses to large businesses.
    The one thing that I'm clear on is that small businesses 
are among the best customers for large businesses. And, I think 
this Administration has clearly been very short sighted about 
what is going to happen to a minority customer base for some of 
its larger taxable agencies that are large corporations. Large 
corporations need to be further also incentivized to figure out 
ways to invest, and when we talk about access to capital, some 
of the largest holders of capital in the best pockets are 
clearly in the hands of Fortune 500s, and not nearly enough 
pressure has been put on Fortune 500s to get involved in the 
process, yet they are weakened----
    Chairman Manzullo. Emmett, would you tell us what your 
company is doing? Give us some life experiences as to what you 
are doing in these areas.
    Mr. Vaughn [continued] Well, we are simply, traditional 
supply diversity programs.
    Chairman Manzullo. Well, just explain. There are some folks 
who may be interested in working with Albertson's. Some people 
are shaking their heads back there. They are looking for 
contracts. Tell us what you are doing, or tell us what 
Albertson's is doing, obviously, a step ahead of other large 
corporations.
    Mr. Vaughn. I would actually say just the opposite, Mr. 
Chairman. Albertson's hired me a year ago to address this 
issue, so we are not a cutting-edge company. I think we've got 
a very forward thinking strategy, but candidly, I would say 
that if anything the company has taken a step to address its 
place in the economy, trying to create solutions. At this 
point, we are not the benchmark.
    Chairman Manzullo. Okay, go ahead.
    Mr. Vaughn. I think that a lot has been said about the 
banking environment, which is largely in favor of the small 
business. Private capital offerings are scarce for these 
enterprises, and I am so unclear, the one thing that I think as 
we talk about what banks have and have not done, I am not well 
versed on the Community Reinvestment Act, but the one thing 
that I do know is that the CRA is not--I think banks have 
mistaken supply diversity and diversity sourcing initiatives 
for fulfilling their commitments around community reinvestment. 
A lot of those things have been masked as being 
interchangeable, and they really are not.
    The SBA community is a significant contributor to the 
growth of small businesses has really just, in many ways, 
historically contributed to what little economic stability 
could really be claimed in urban areas, and I think that's 
something that, again, when you talk about the total face of 
the sub-economy that belongs to Brown America or Urban America 
the SBA has been the prime investor, has been a key investor. 
And so, any slowdown, and we talk about the big economy, can 
only be felt probably three or fourfold in the sub-economy that 
belongs in our cities.
    The SBA, really, I don't know, supply chains in corporate 
America, you want to talk about that or ask me about that. 
Supply chains in corporate America are being downsized even 
faster than corporate org charts. It is now a game of scale and 
now a game of big businesses trying to source to large 
companies, but small businesses are rapidly being cut out.
    In my mind, the SBA should not seek just to get back to a 
break even point, which would really only be still the tail 
sort of wagging the dog relative to what's going on in the 
economy. The SBA has really got to think beyond break even and 
find its way into developing new tools, new products, really 
revitalize models that matches itself with the needs of the 
struggling part of the sub-economy that's been affected by the 
SBA.
    I think that also given the fact that you've got more and 
more ethnic minorities that are finishing college education, 
pursuing corporate careers, getting downsized, and turning to 
entrepreneurship to maintain employment, there's not a lot of 
statistical data that supports that. But, what you are also 
talking about is some of the best and brightest minds that are 
available that have been causal to this growth in small 
business also being shut out, not only shut out of mainstream 
employment, but now having the channel of small business start-
up derail, and I just shudder to think, really, what type of 
potential economic ambience we are creating that have not been 
seen before by the short sightedness of how the SBA is being 
funded and also being strategized, not only around 
stabilization but towards growth.
    I would like the rest of the panels to encourage the body 
to explore rigorous exploration of how to accelerate this 
funding, encouraging more small business starts, encouraging 
overt inventions, for lack of a better term, to continue to 
develop brilliant ideas in inventions, and do anything that can 
help to sort of replenish and stabilize and grow communities 
that are struggling right now.
    Thank you.
    [Mr. Vaughn's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for that excellent testimony.
    I've just got a couple comments and then I want to ask a 
couple of questions.
    First of all, there is a big problem. We have a 
manufacturer in our district that was bumped on a very 
important defense contract, because originally they were told 
that they were a large business. I'm sorry, the company that 
got the contract was told it was a small business. It was an 
office front, huge, multi-national. I call it multi-national. 
It's the Alaskan Native Corporation, which carries out 
contracts in Guam, Florida, all over the country, and has been 
bumping small businesses. And the small business in our 
district appealed the size to the Native Alaskan Corporation. 
The appeal was carried out within the Small Business 
Administration, but there is no authority to impose that upon 
the Department of Defense. And really, that's where SBA is 
really frustrated.
    There's a bill, Congressman Velazquez and I are co-sponsors 
on it. In a situation like this, the Office of Management and 
Budget would be empowered to make a determination and take that 
contract out of the hands of somebody else if it's found out 
that the small business has, in fact, been discriminated 
against. This is not even disadvantaged or 8[a]s but just 
regular small businesses.
    A second thing is, Emmett, you talked about what some of 
the large businesses are doing. We've held three hearings on 
outsourcing, and one of our witnesses was Natasha Humphreys, 
remember that, Danny? Natasha is from the West Coast, African 
American, exemplifies the upward mobility that is absolutely 
necessary in order for the spirit of entrepreneurship to 
flourish in this country. She was forced to go to India by Palm 
Corporation, to train her successors, and she and 12 of her 
colleagues we thought were laid off from Palm. I'm mentioning 
Palm because you need accountability. One has found a job, and 
ironically one of those that lost her job was born and raised 
in India, came to the United States and was 7 months pregnant 
at the time that she was terminated, so they could outsource 
some of that type of software work to India.
    With respect to the supply chains, we've been working with 
several minority business people who do business with large 
companies. What the large companies are doing now is that they 
want to narrow down the number of what they call manageable 
sources, and I can understand where they are coming from. So, 
instead of ordering from six or seven, or eight different 
people, they'll order from one, and hire a new person to go 
ahead and make the component.
    What happens is, the little guy at the end of the line that 
ends up having a difficult time. We've asked for and got an 
investigation by the General Accounting Office of the Joint 
Strike Force fighter, to determine whether or not the small 
businesses were, in fact, being ordered to participate 
according to the projected goal of 29 percent. They came up 
with a software program, I don't know if you are aware of this, 
down to the third tier, for purposes of accountability.
    So, a lot has been going on. We've been working really 
hard. What you've been bringing to us is an example of the 
frustration that continues, but we've been working on this in 
cases--Bill, if you want to make a comment.
    Mr. Leggett. Well, the only comment that I'll make is that 
there seems to be an overwhelming direction in terms of 
suggesting that SBA, as an advocate entity, needs to have more 
power.
    Chairman Manzullo. Yes, it's true.
    Mr. Leggett. I mean, it's frustrating anyway for people to 
feel that they are going to get certain kinds of help, and they 
get the advocacy, but then those who can make the decisions 
often times discount or discard all of the work-up. And so, 
certainly there's going to be a great deal of resistance, but 
resistance does not necessarily mean that there will not be 
movement in that direction, and I would assure those of you who 
have expressed that position and that point of view that at 
least I, as one member of the Small Business Committee, and one 
member of the Congress, will advocate your position and your 
point of view relative to this matter.
    And so, thank you, Mr. Chairman.
    Chairman Manzullo. Yes, I've got a question, Emmett, to ask 
you.
    What does Albertson's, and I don't want you to get in 
trouble with your employer, because obviously there's a vision 
of where you want to take it.
    Mr. Vaughn. Thank you.
    Chairman Manzullo. No, no, you are here because you are 
concerned about it, and, obviously, Albertson's is concerned 
because they hired somebody of your competence, but what is it 
going to take for Albertson's to become a benchmark? Where do 
you want to see them go and what is your vision?
    Mr. Vaughn. Very good question. I think relative to what 
the body of the House of Representatives can do, I think 
there's got to be more and more incentives that protect large 
corporations or encourage them to take some risk with some of 
the available capital that are ours that can be put back into--
particularly, where companies have multiple markets where there 
is the need for economic catalysts to take place.
    Albertson's serves probably 11 of the top U.S. 25 
metropolitan markets, with Chicago being our--Chicago and Los 
Angeles being our two largest metropolitan markets. I mean, 
there is a tremendous amount of, perhaps, marketplace growth 
incentives for us to--for a company like ours to do things 
relative to gaining market share, however, I think in some 
cases we buy on both the sellable goods side and on the non-
sellable goods side, particularly, because I know there's 
companies that are represented here on the sellable goods side, 
there's a lot of capital needs because most of those companies 
are locked directly in with manufacturers. The relationships of 
some of our small vendors, relative to their manufacturers, is 
largely tainted because of the lack of capital that they have 
to create lines of credit and things with actual manufacturers 
of food services.
    So, there's no reason to answer that, Mr. Chairman, I 
appreciate you asked, it's just, I would say probably 
incentives for investment in a certain level of tier of our 
supply chain that's occupied by minorities and small 
businesses.
    Chairman Manzullo. Okay.
    Mr. Wordlaw. Mr. Chairman.
    Chairman Manzullo. Go ahead, do you want to give him the 
mike?
    Mr. Wordlaw. Thank you.
    We went to the Iraqi Conference in Washington here last 
month, and one of the criteria that in order for the companies 
to bid on Iraqi contracts was that they should have at least 23 
percent of all their purchases done through minority companies. 
That's the criteria that we think should be put in place to 
make sure that African Americans and minority companies do 
that.
    I'd like to think that we are, I mean, maybe not 
necessarily, but we are in competition with a $55 billion 
corporation that literally tells all of its--they are the prime 
vendor for all the VA hospitals. They tell them that they are 
buying our products, so there's no teeth in that process. So, 
we need you all to give a penalty or some kind of point system 
for the large corporations to suffer if they don't include us.
    Chairman Manzullo. Comment, Neli?
    Okay.
    Ms. Harrison. I did have one comment.
    Chairman Manzullo. Oh, I'm sorry, go ahead, Charlotte.
    Ms. Harrison. Yes. I had a comment, too, that, you know, 
we've had several legal actions where we've protested and gone, 
you know, both the SBA and GAO route.
    Nobody has the power, even if you win, and the agencies 
don't want to listen, you know, the SBA has no power. So, what 
good is it to fight? The SBA needs to have, they can, they 
fight with us side by side with all their heart, you know, and 
they are in it to win it, just like we are, but at the end of 
the day when they've done their duty, nobody has listened to 
them.
    Chairman Manzullo. Charlotte, the problem is the politics 
of it. The small business people have various organizations in 
Washington, but none of them have the lobbying power of the big 
guys. If you think for one second the big guys are going to put 
us small people in a position where we could knock out one of 
the contracts, because they haven't been following the rules on 
it, it's extremely difficult. And the big problem with the 
Alaska Native Corporation, the purpose of which was, you know, 
to employ Alaskan Natives, excuse me, in Guam, and Florida. 
But, on comes their senator, and they just put provisions in 
the laws, and we find out six months later that somebody has 
done that.
    So, we've got an ongoing controversy with that particular 
corporation, because it does damage to all small businesses.
    Ms. Harrison. Yes, and we have large businesses now, 
because of the economy, large businesses are coming down to the 
small business arena, taking work from small businesses, and 
parading as if they are a small business, knowing full well 
that they are not a small business, competing against us and 
winning, and being awarded, when the procurement is designated 
as a small business------.
    Chairman Manzullo. Neli, let's take your comment, we can 
finish the panel.
    Ms. Vasquez-Rowland. Well, I guess out of that comment that 
you said, the fact that we don't have the lobbying power, is 
what spurred on the founding of the Greater Illinois 
Procurement Association, that we're getting together with other 
associations around the country to represent 8[a] companies and 
support you and your efforts in trying to assist our businesses 
in participation with federal contracting. We truly appreciate 
that, and I just wanted to share a quick story.
    I attended one of your congressional meetings in Washington 
one day where a small group did organize, I believe it was an 
office products supply company.
    Chairman Manzullo. Yes.
    Ms. Vasquez-Rowland. Where the Department of the Army, I 
believe, the U.S. Army Corps of Engineers, had decided they 
wanted to consolidate the procurement to these and direct all 
of their purchases to Boise Cascade.
    I was there to witness Chairman Manzullo, pretty much 
hearing out the U.S. Army Corps of Engineers, in terms of what 
study did they have that showed that they were saving money in 
terms of directing all of their purchases to Boise Cascade, 
they had no background, no support, to, I guess, support that 
decision.
    There was lobbying, or the Association of Office Practices 
organization got together and did indicate that they have the 
buying power and, you know, cost savings for the government. At 
that point, Chairman Manzullo offered the U.S. Army Corps of 
Engineers to reconsider their decision and to once again refer 
back to small business in buying their office supply products.
    Mr. Davis. Mr. Chairman, let me just note the presence of 
Cook County Commissioner Bobby Steele, who has joined us. The 
lady in the back who is very interested in these matters
    And also, the one point, Charlotte and Obie both have 
indicated a serious willingness to fight, I mean, they've 
protested, protested. There are more small businesses, though, 
that are fearful. I mean, people come to us all the time, and 
often they will weigh whether or not there should be a 
complaint or whether or not we should try and intercede on 
their behalf, because they are afraid that the agency that they 
are dealing with will retrench, and that they will suffer 
punishment, I mean, as a result.
    But, somebody will say, you know, the Congressman called up 
here on your behalf, and we don't like that, or you can just 
about forget it.
    So, my question to both of them is, do you feel that you've 
had any backlash from agencies that you've attempted to do 
business with, as a result of your willingness to protest their 
inaction or inability to grant you business opportunity that 
you felt should rightfully have been yours?
    Ms. Harrison. They are not paying me anyway, what do I have 
to lose? I mean, no, as long as there's breath in my body, and 
I can feel, and think, and breathe, I'm going to go down 
fighting. I'm not going to--I'm not going out with a whimper. 
They are going to have to--you know, grind me into the ground, 
I'm fighting to the death, because this is our livelihood. This 
is what we do. I don't know how to do anything else, and I know 
that I'm right, I'm not wrong, I have rightness behind me. So, 
I'm fighting to the end.
    You know, they are not going to like it, I've had comments, 
and you know some of the comments that they've said, yeah, they 
don't like it.
    Unidentified. Speaker. She had the Congressman call, and 
they said that's why we couldn't do our work.
    Ms. Harrison. They weren't going to do their work anyway, 
you know, take them to the wall, that's what I say.
    Mr. Wordlaw. Just briefly, I'll say ditto, but in the 
meantime it feels good to battle. We are not getting anything 
anyway.
    Ms. Harrison. That's right.
    Mr. Wordlaw. So, let's see where it takes us.
    Ms. Harrison. I mean, and while we're battling, you know, 
we are not making that our only work, we are still getting 
other business and diversifying, because we've got to eat. We 
have to eat, and pay our bills, and keep our employees paid, 
and do those things, but the fight is part of the job.
    Chairman Manzullo. Okay. I want to get a second opinion
    Mr. Davis. I'm done, but since this is Black History Month, 
Frederick Douglass would be very proud of both of you, because 
one of his favorite comments was, ``He who is whipped the 
easiest is whipped the most often,`` and that if you find the 
level of oppression that a people or a person will accept, that 
is exactly what they will get. So, you are my Black History 
heroes.
    Chairman Manzullo. Bruce, thank you for being up here on 
the panel.
    Mr. Montgomery. And I would say that because it's so hard 
to change the inherent behavior of organizations that have 
operated a certain way for a long time, that when there are 
opportunities where new entities are created, such as creating 
a so-called new Department of Homeland Security, and there's an 
opportunity to include in these new processes new ways of doing 
business that are inclusive of minority business utilization, 
small business utilization, that you may ask some of these 
organizations at the outset of these things, when there's a lot 
of fanfare, to create some goals and objectives that pass the 
muster of your panel, and then come back a year later and ask 
them, as they move to rebuild Iraq, and as they move to do 
things in the United States, have they met the goals that they 
told you when they wanted your support to move these things 
through very quickly.
    Sometimes it's an opportunity, at the outset of 
establishing these new entities, that they can do business in a 
new way, and ultimately provide a benchmark that can show, as 
previous comments have been made, that there actually is some 
viability and cost savings in doing business with small 
businesses that really bring the ideas and bring the 
productivity to the federal government.
    Chairman Manzullo. Okay.
    Let's thank the first panel here.
    [Recess.]
    Chairman Manzullo. What I'd like you to do, since most of 
you are with government agencies, is in the course of your 
testimony to try to address, if you can, some of the questions 
and frustrations that were raised with regard to the first 
panel.
    Our first witness is Judy Roussel, District Director of the 
Small Business Administration, who had the pleasure of eating 
at our family restaurant in New Milford, Illinois, and, Judy, 
we had a great time there, didn't we?
    Ms. Roussel. We sure did.
    Chairman Manzullo. The SBA doesn't come anywhere near 
northern Illinois unless they build a family restaurant, so, 
Judy, we look forward to your testimony. I think your mike is 
live.

STATEMENT OF JUDITH ROUSSEL, DISTRICT DIRECTOR, SMALL BUSINESS 
                         ADMINISTRATION

    Ms. Roussel. Good morning, Mr. Chairman, Congressman Davis, 
thank you for inviting me today to discuss the U.S. Small 
Business Administration's SBA programs to assist America's 
small business communities with access to capital and finding 
federal procurement opportunities.
    The President's Fiscal Year 2005 budget request for SBA 
reflects his commitment to maximizing opportunities for small 
businesses and the millions of people they employ.
    Last March, the President announced his Small Business 
Agenda to reduce regulations and taxes, and to expand 
opportunities for small business. A prominent feature of the 
President's agenda is ensuring full and open competition in 
government contracts and avoiding unnecessary contract 
bundling. This measure will create opportunities for small 
businesses and save taxpayer dollars.
    As you know, SBA is submitting legislation that is a long-
term solution for the 7[a] program and will have immediate 
benefits. Our proposal will put approximately $3 billion in 
additional loans into the economy and help more small 
businesses and create more jobs. We urge your support for this 
proposal.
    As announced by SBA Administrator, Hector Barreto recently, 
``The SBA guaranteed a record number of loans last year, with 
double digit increases in the percentage of loans to women, 
Hispanics, African Americans and Asian Americans.'' The Fiscal 
Year 2005 budget request of $12.5 billion in loan guarantee 
authority for the 7[a] program will allow the SBA to provide 
more businesses with the capital needed to start-up and to 
expand. With our proposal we intend to have another record-
breaking year.
    The Agency's main objectives related to Government 
Contracting are first to increase prime and subcontracting 
awards by securing top level commitment from the agencies to 
achieve their goals, to promote procurement opportunities 
through a Nationwide Matchmaking Event, and to improve customer 
service. Secondly, to modernize the 8[a] Business Development 
Program through restructuring, through the development of an 
automated on-line 8[a] application, and through implementation 
of a Procurement Academy, and thirdly, to facilitate community 
economic development and job creation through the HUBZone 
Program.
    I'll talk a bit about access to capital. As you are aware, 
SBA submitted its 2005 budget request on February 2nd of this 
year. This budget will ensure continuity in SBA's programs, 
while reducing SBA cost to the taxpayer by approximately $120 
million. Through improved management and program reforms, SBA 
will better serve America's small businesses by reaching the 
communities where our programs have had little market 
penetration.
    One of the most recognizable services SBA provides is 
financial assistance. Last year, a record number of small 
businesses turned for credit assistance to SBA, producing a 29 
percent increase in the total number of loans backed by the 
Agency. Nationally, the increase in loan approvals under SBA's 
three major loan programs came to 29.8 percent. This reflected 
a rise from 59,500 loans in 2002 to 76,465 loans in Fiscal Year 
2003.
    The loans demonstrate our commitment to meeting the unique 
financing needs of small businesses, and the impressive 
increase posted for the year validates our approach to making 
smaller loans more readily available to the real job creation 
engine of our economy. By focusing on a smaller average loan 
size, we are leveraging our resources to assist more small 
businesses and create more jobs. Based on statements from 
borrowers, our financial backing helped small businesses create 
or retain more than 526,000 jobs.
    Ironically, our success in promoting these programs hurt us 
earlier this year, as SBA was forced to suspend its operations 
of the 7[a] program. Now, unprecedented demand and a series of 
short-term continuing resolutions caused the program to run out 
of budget authority under the last Continuing Resolution. SBA 
reopened the program as quickly as possible, but we did place 
some restrictions on the program to keep it running until a 
more permanent solution can be reached.
    Chairman Manzullo. You have one minute, Judy.
    Ms. Roussel. In our 2005 budget, SBA requested a 30 percent 
increase for the program to $12.5 billion, and has proposed 
legislation to adopt a permanent zero subsidy rate for the 
program that will allow SBA to ensure that funds remain 
available for small businesses seeking financial backing.
    SBA has requested $4.5 billion in lending authorities for 
the 504 loan program, which has no cost to the taxpayers. This 
program, of course, was established to increase small 
businesses' access to real estate and other long-term fixed 
financing.
    [Ms. Judith Roussel's statement may be found in the 
appendix.]
    Chairman Manzullo. Now I've got a fixed clock here, so I've 
got to cut you off at that point. Thank you.
    Our next witness is Linda Oliver, Deputy Director, Small & 
Disadvantaged Business Utilization, of the Office of the 
Secretary of Defense, and, Linda, we look forward to your 
testimony.

     STATEMENT OF LINDA OLIVER, DEPUTY DIRECTOR, SMALL AND 
    DISADVANTAGED BUSINESS UTILIZATION, SECRETARY OF DEFENSE

    Ms. Oliver. Thank you. Thank you, Chairman Manzullo and Mr. 
Davis. It's a pleasure to be here.
    I've heard what you have been saying, which is abbreviate, 
abbreviate, so I will do that. There are two things that I 
definitely want to say, more to the people who are here at the 
hearing than to you two, which is, to commend your good 
judgment for having two, from the same state, two such capable 
people so truly interested in small business. They are, both of 
them, so good, and they work so well together, that it's been a 
pleasure for me to listen to them, to take their lessons.
    And, to my second point that I do insist on making is, how 
fortunate I feel to be coming to a hearing in Chicago. Chicago 
was the first big city I ever learned to love. I came here as 
a--I think I'm gone.
    Chairman Manzullo. Hold on a second.
    For somebody who doesn't like Chicago--hold on one second.
    Ms. Oliver. Okay.
    Chairman Manzullo. Well, Linda, just belt it out.
    Ms. Oliver. Okay. I will just speak loudly.
    This is a wonderful city. I first came here when I was 16, 
to a big meeting which I had wanted to come to forever, and 
Chicago over the years has simply made me delight in this city 
more rather than less. There are so many wonderful things about 
Chicago, so it's great to be here, even if it's a cold day, and 
even if it's for a brief amount of time.
    In my written testimony, which you can pick up and read so 
I will not go over it in any sort of detail, is a little 
discussion on what the Department of Defense is trying to do to 
better understand what we can do better for small business. 
This really has amounted to our trying to do analysis of what 
works and what doesn't work.
    The first thing that's worked is, we are surely 
understanding better what it is we are doing which we think is 
leading, hope is leading, to better decisions.
    The second thing I touch on in my testimony is, my written 
testimony, the service disabled veteran-owned small business 
goals. We have not done nearly as well as we had wanted, and we 
are very pleased that Congress has given us a tool, because it 
was clear to us that where we were heading was not working. We 
think--we appreciate Congress' sensitivity, and we think that 
we will start to turn these numbers around.
    The next thing I touch on in my testimony is improved 
processing of small disadvantaged business certification. This 
has been a tremendous problem for small disadvantaged 
businesses, a requirement for certification came in after the 
Ataran decision, and it has caused small businesses, small 
disadvantaged businesses enormous problems for two reasons. One 
is because it's a painful process to go through with, 
apparently, very little reward, while trying to solve this 
problem. And, I think that is particularly in keeping with both 
Congressman Davis and Congressman Manzullo's direction to us, 
to make things easier, not harder, for small businesses.
    The next area that my testimony touches on is improved 
small business training, and that happens to fit with much of 
the testimony that we have heard this morning.
    We heard Mr. Wordlaw testify about contracting officers not 
being 8[a] friendly, and that we don't seem to be able to make 
the contracting officers do what he believes, and I do too, 
needs to be done.
    Well, it's really hard to push a noodle, but it isn't so 
hard to pull a noodle, and we truly believe that more and 
better training will make a very big difference. We are 
excited----
    Chairman Manzullo. You have about 30 seconds.
    Ms. Oliver[continuing] Okay, thank you, I appreciate that.
    You can read the other things I have to say in my 
testimony. I appreciate being able to be here, and I wish I'd 
done it even more quickly, because what you say is more 
valuable than what I say.
    [Ms. Oliver's statement may be found in the appendix.]
    Chairman Manzullo. We appreciate it. The complete 
statements of all the witnesses will become part of the 
permanent record.
    Our next witness is Sean Moss, with the Department of 
Transportation, Director of Small and Disadvantaged Business 
Utilization. Sean, I look forward to your testimony.

   STATEMENT OF SEAN MOSS, DIRECTOR, SMALL AND DISADVANTAGED 
       BUSINESS UTILIZATION, DEPARTMENT OF TRANSPORTATION

    Mr. Moss. Thank you, Mr. Chairman, I might as well say 
thank you on behalf of Secretary Mineta that we can be here 
this morning to testify, and also, Mr. Davis, thank you so 
much.
    DOT is a lead in government procurement. It's developed a 
culture, has demonstrated its commitment to small disadvantaged 
businesses.
    To give you an idea, over the last three years DOT has 
awarded $3.476 billion to small women and disadvantaged 
businesses, and represents about 42 percent of DOT's total 
direct contracting dollars.
    Now, last year, nearly 20 percent of that went to women and 
disadvantaged businesses, that's both SDB and 8[a].
    Now, although we made some progress and advances in small 
business interests in the Department, there are a lot of 
obstacles we realize that still exist. So, we've defined those 
challenges as access to information, access to capital, and 
also access to advocacy. So, to better address those concerns, 
our office has been aligned to address those challenges.
    I'm just going to talk very quickly on these three issues. 
One is outreach. Now, obtaining information about how to be 
visible to government is very overwhelming, especially for a 
small business. So, we have three solutions in place. Firstly, 
we have what we call a National Information Clearinghouse, 
which really provides a single point of contact for all small 
businesses to reach us.
    Chairman Manzullo. That's the entire government, isn't it, 
or just DOT?
    Mr. Moss. This is DOT, sir.
    Chairman Manzullo. Okay, go ahead.
    Mr. Moss. We have customer service reps that respond to 
inquiries, and questions, through a dedicated toll free line, 
e-mail and written correspondence. Also, our NIC, as we call 
it, is equipped with a state-of-the-art web site that provides 
small businesses about information about how to do business 
with us. Just to give you an idea, we have about 750,000 hits 
per month.
    Secondly, we've established 13 cooperative agreements with 
business organizations and minority-serving institutions across 
the country to assist small business. Now, these partners are 
responsible for increasing the number of small disadvantaged 
businesses that enter into both direct and federally-assisted 
transportation-related contracts.
    Now, right here in Chicago, we have one of our partners, 
it's the Business Resource Group, and what they are doing 
currently is helping small disadvantaged firms on projects like 
the Dan Ryan Expressway rehab, and also the CTA Greenline 
Project. So, without their involvement, many of these firms 
would not have the opportunity to compete.
    And, the third area that we outreach is that we sponsor and 
attend a variety of conferences that teach how to do business 
with DOT. Last year, we attended 46 of these conferences. Last 
month, we held a conference in D.C., that targeted HUBZone 
companies, and next month we will go to Oakland, California, 
and focus on federal highway contracting opportunities in that 
area. And also, our procurement office is very involved, too, 
and they work with organizations like AEA, that train our 
memberships, including small businesses, on how to gain access 
to federal procurement.
    The second area I want to talk about is financial services. 
You've heard a lot about that this morning. We at DOT are very 
sensitive to the challenges that exist within the credit and 
capital markets for small businesses. It's even more acute for 
minority firms. So, we support and applaud the efforts of the 
U.S. Department of Commerce and other organizations that, the 
research that shows that it's not fair out here.
    So, in order to increase participation for all firms, the 
Department provides two credit programs to address the capital 
issues. The first one is called the Short-term Loan Program, 
and basically what it is, it's an accounts receivable finance 
program where credit lines are provided by banks that we select 
to assist these companies to finance these contracts. And, 
we've partly had success with providing working capital 
financing for firms that otherwise would not receive it from a 
bank. Approximately 35 percent of our loans have been made to 
African American firms over the last two years.
    The second program is called our Bonding Assistance 
Program. Again, it's for certified minority disadvantaged firms 
that participate on our transportation projects. This is a real 
issue in the bonding community, the inability to access surety 
bonding is often a primary factor that keeps these small and 
minority firms from our public projects. So, even as 
subcontractors, minority firms need bonding.
    The last area is the area of advocacy, and our office is 
dedicated to supporting legislation that reflects the interests 
of small minority firms. Now, our efforts range from supporting 
a government-wide initiative to unbundle contracts, that was 
talked about earlier today, and also subcontracting.
    And also, our Department supports our own disadvantaged 
business enterprise program, which was first enacted in 1983 as 
part of the Highway Bill, and what it does, it encourages the 
participation of disadvantaged businesses in highway and 
federal transit projects.
    Just to give you an idea, in Fiscal Year 2003 we awarded 
$3.16 billion to DBE firms, which represent about 10 percent of 
our total federal dollars.
    So, I'd like to conclude my remarks and I'll be happy to 
answer any questions later on.
    [Mr. Moss' statement may be found in the appendix.]
    Chairman Manzullo. Thank you very much.
    The next witness is Patricia Bamford, Chief of Acquisition 
and Assistance Branch, Resources Management Division, with the 
Environmental Protection Agency, and, Patricia, we look forward 
to your testimony.

  STATEMENT OF PATRICIA BAMFORD, CHIEF OF THE ACQUISITION AND 
ASSISTANCE BRANCH, RESOURCE MANAGEMENT DIVISION, ENVIRONMENTAL 
                       PROTECTION AGENCY

    Ms. Bamford. Good morning, Chairman Manzullo and 
Congressman Davis. I want to thank you for the opportunity to 
appear today to discuss the work of the Agency in assisting 
small business enterprises in our region.
    I want to take this opportunity to highlight EPA's efforts 
to include small businesses in the procurement process.
    The Office of Small and Disadvantaged Business Utilization 
partners with the Agency's contracting activities to support 
the protection of the environment and human health by fostering 
opportunities for small and economically-disadvantaged 
concerns.
    Small businesses play an important role in helping the 
Agency to protect human health and the environment.
    In Region 5, we have awarded three major emergency and 
rapid response services contracts, also known as ERRS 
contracts. Two of these contracts have been awarded to small 
business concerns. In Fiscal Year 2003, small businesses 
received 71 percent of the total dollars obligated for ERRS 
contracts. If we include the subcontracts awarded by the large 
business contractor, small businesses received 83 percent of 
the total dollars obligated under the ERRS contracts. Small 
businesses supply us with many of the items needed to carry out 
our environmental and counter-terrorism missions on a daily 
basis.
    Over the last few years, we have tried to develop a good 
understanding of the major problems facing small businesses in 
their efforts to obtain contracts with the Agency. We have 
worked hard to increase the number of procurement opportunities 
available to small businesses. In Fiscal Year 2003, the 
Agency's small business goal was 23.5 percent. The Agency 
awarded over 31 percent of our net obligations to small 
business concerns. In the same year, Region 5 awarded over 34 
percent of our net obligations to small businesses. EPA's goal 
for Fiscal Year 2004 is to award 27 percent of the available 
procurement dollars to small businesses. We are confident we 
will continue to surpass that goal.
    The President's Small Business Initiative calls for the 
Agency to improve small business access to government 
contracts. The Agency is taking several steps to address this 
initiative. We are reviewing acquisitions in excess of $2 
million to determine if our needs are being bundled. This also 
includes reviewing proposed orders to be placed against other 
Agency contracts, including multiple award schedules. These 
reviews will enable our small and disadvantaged business 
utilization specialists to propose alternative contract 
strategies to ensure that small businesses are considered. We 
are also working with our program offices to break out work 
that is suitable for small businesses. For example, in Region 5 
we have broken out Superfund sampling work from our Remedial 
Action Contracts.
    Weston Solutions, one of our prime Remedial Action 
Contractors, has a Mentor-Protege agreement with Environmental 
Design International, EDI, a Chicago firm. EDI is participating 
in the SBA's 8[a] program and has been certified as a small, 
disadvantaged, woman-owned business that is located in a 
HUBZone. When Region 5 was reviewing environmental work that 
would be suitable for small business participation, 
environmental sampling was chosen as a candidate. We developed 
a requirement and were able to negotiate and award a new 
contract to EDI because of the experience and knowledge they 
had gained under their Mentor-Protege relationship with Weston. 
This contract is currently being utilized by our Superfund 
program personnel and is a great success.
    Headquarters, along with our regional offices, have Small 
and Disadvantaged Business Utilization Representatives assigned 
to assist small businesses in their pursuit of Agency 
contracts. These specialists coordinate business presentations 
with our procurement and program personnel. They conduct on-
site business fairs and are the advocates for small businesses 
in the Agency. We have worked hard to ensure that small 
businesses have the opportunity to contribute their skills, 
talents, and expertise to furthering our mission to protect 
human health and the environment, and we are pleased to report 
that we have exceeded our small business goals in recent years. 
Moreover, we expect our recently implemented programs to help 
us achieve even greater participation by small businesses in 
EPA's procurement process in the years to come.
    I want to reiterate EPA's commitment to ensuring that small 
businesses have equal opportunities to participate in the 
Agency's procurement process. I look forward to playing a key 
role in working with the small business community in Region 5, 
to ensure that they become active participants in assisting us 
to fulfill our environmental mission.
    Thank you for the opportunity to speak today. I will be 
pleased to answer any questions you may have.
    [Ms. Bamford's statement may be found in the appendix.]
    Chairman Manzullo. Thank you very much.
    Our next witness is Scott Denniston, Director of Small and 
Disadvantaged Business Utilization, Department of Veterans 
Affairs, look forward to your testimony, Scott.

STATEMENT OF SCOTT DENNISTON, DIRECTOR, SMALL AND DISADVANTAGED 
      BUSINESS UTILIZATION, DEPARTMENT OF VETERANS AFFAIRS

    Mr. Denniston. Mr. Chairman, thank you, and, Congressman 
Davis, thank you for the opportunity to be here today.
    On behalf of Secretary Principi I bring you greetings from 
the Department of Veterans Affairs. VA has a long history of 
supporting small business programs. We consistently meet our 
goals for awards to small business, to small disadvantaged 
business, and we're one of the few agencies that meets the 
HUBZone 3 percent goal. Last year, over $2.6 billion, a little 
over 30 percent, went to small business.
    You asked that we address two issues today, one being 
access to capital. That is not our field of expertise. VA does 
not do small business loans. Anecdotally we hear from veteran 
small businesses all the time the difficulty of obtaining 
capital and equity financing to grow businesses.
    The other area that I'd like to address is the area of 
contracting, federal procurement opportunities, and I'd like to 
digress, if I can, from my testimony, as you suggested.
    We, as a number of agencies, are in the process of changing 
the way that we do business. As an example, when Secretary 
Principi came on board, realizing that we were having an 
exponential growth in our veteran populations coming to the VA 
for healthcare services, but yet we were doing it at the same 
budget, there was a realization that we had to improve our 
processes.
    One of the things that we did as a way of improving was we 
said that we need to standardize, and we need to be more 
efficient and effective in the way that we buy the products and 
services that we need to treat veterans. And, to some extent 
we've been successful in doing that. You heard testimony this 
morning from Obie Wordlaw of JERO Medical, and Obie is 
absolutely correct, he did all of the steps that we asked him 
to do, to do business with the Department of Veterans Affairs. 
He got his 8[a] certification, he got his Federal Supply 
Schedule contract, and then he became one of our standardized 
vendors.
    One of the dilemmas that we have faced in this 
transformation of the way that we do business is that we were 
very good at putting out front the tools necessary, but what we 
lacked was the back end compliance and review, how we make sure 
that all the 5,000 contracting officers that we have in VA at 
the 200 facilities actually do what we wanted them to do.
    And, we are getting better at that. Congressman Davis, you 
asked Obie about being a fighter. Obie is a fighter, but 
compared to some of the businesses that we do business with 
he's a wimp.
    And, we are having some successes. As an example, as you 
know, the Federal Supply Schedules are a preferred way of doing 
business right now with the federal government. We, at the VA, 
run the Federal Supply Schedules for healthcare government-
wide, and, currently, 72 percent of all of the businesses that 
are on Federal Supply Schedule are small businesses.
    Now, the dollars that they get don't equate to those 
numbers, but we've got to get the companies on the Federal 
Supply Schedule in order to do business with them first.
    We are in the process now of establishing a new Federal 
Supply Schedule for healthcare and allied services. As you 
know, small businesses are very much engaged in the industry of 
services, and we have great hopes that we are going to be in a 
position to even improve our small business numbers even 
greater.
    The next thing that we've done, our folks here in Chicago 
at the National Acquisition Center, have established an online 
computerized database, so that contracting officers throughout 
the government can go on to this database, identify all Federal 
Supply Schedule holders for different products and services, 
and identify those by small and socioeconomic disadvantaged 
category. So now, we've given contracting officers around the 
country a tool.
    Linda Oliver mentioned it's a lot easier to pull a noodle 
than push it, this is one of the ways that we think that we can 
help pull those noodles, by giving them the tools necessary to 
identify the small businesses and the minority-owned small 
businesses that we're all trying to help.
    And, it's having some effect. If we look at the total sales 
under the Federal Supply Schedule to small businesses, they've 
more than doubled in the last two years. We think that process 
will continue. Now what we have to do is, we have to continue 
to bring more discipline to the system, so that when companies 
like JERO Medical do what we ask them to do, get the 
certifications, get the tools that we ask them to get. Now, we 
can have an opportunity to make sure that the sales that they 
get are commiserate with the effort that they put forth.
    We have realized that that's an issue within the VA. We now 
have a management team that's addressing that issue. I meet 
with them on a monthly basis to review the accomplishments, and 
I work with a lot of small businesses, like JERO, through their 
sales reports to actually identify what the sales are that they 
are getting, and who are the facilities that are buying and 
consequently who are those that aren't, and then go and try to 
identify those that aren't, why not, what are the impediments 
that are still there in the process that we need to break down 
in order to make them more successful.
    [Mr. Denniston's statement may be found in the appendix.]
    Chairman Manzullo. Okay, thank you.
    The next witness is Tracye Smith. Tracye Smith is the 
Executive Director of the Chicago Minority Business Development 
Council, we look forward to your testimony, Tracye.

STATEMENT OF TRACYE SMITH, EXECUTIVE DIRECTOR, CHICAGO MINORITY 
                  BUSINESS DEVELOPMENT COUNCIL

    Ms. Smith. Thank you, Chairman, and thank you, Congressman 
Davis, for inviting me to speak today.
    The Chicago Minority Business Development Council is part 
of 39 councils nationally dedicated to creating buying 
opportunities for minority-owned businesses and major buyers in 
corporate America and in government, and we do that, primarily, 
through supply diversity programs. In Chicago, we have over 100 
corporate members and over 1,000 minority business affiliates.
    I'd like to get right into the commentary of both capital 
assets to minorities, as well as access to government 
contracting, and this is a particular critical issue as 
minorities continue to become a greater percentage of the 
American population. It's projected to be over 50 percent by 
2050, so I believe it's critical to our Country's economic 
stability, job creation and global competitiveness that we 
really address these issues effectively.
    The SBA 7[a] and 504 loan programs are working fine. I 
think the government should stop trying to change them and 
reduce the funds available under them. However, what is needed 
and is not currently being provided is working capital for 
ongoing operations.
    Businesses need cash to grow their businesses. Private 
banking is not actually filling that need either. And, what's 
happening is, minority-owned firms are turning to factoring and 
other high-cost methods of financing just to grow their 
businesses and finance their receivables. And, a lot of 
businesses go out of business because of the lack of cash, and 
otherwise that business would have been successful.
    We also need more structured professional technical 
assistance offered by the SBA. The Small Business Development 
Centers are, while helpful, the technical assistance provided 
on a volunteer basis really does not get at the critical needs 
of cash management advice and other strategic management 
consultants that businesses need, particularly, in the first 
one to five years of operation.
    Chicago Community Ventures, this is a non-profit operating 
in Chicago, has a $2 million loan fund with an average loan 
size of $250,000. They have a zero percent default rate, which 
is unheard of. I'm a former banker, too. And, that's because 
they provide management consulting to all of their borrowers.
    Chairman Manzullo. Tracye, could you go into that?
    Ms. Smith. The loan fund?
    Chairman Manzullo. Yes, with the zero default rate.
    Ms. Smith. Yes. Basically, they have former bankers and 
very qualified technical assistants on their staff, that 
provide strategic management consulting to growth-oriented 
companies. Their services are targeted towards companies in the 
Empowerment Zone, as well as minority-owned businesses.
    Chairman Manzullo. And, how many loans are out there?
    Ms. Smith. The loan fund is fully depleted, all $2 million 
are out, although one loan has been repaid already.
    Chairman Manzullo. Okay.
    Ms. Smith. And, they have been--they restructured from the 
one stop just capital shots, they were one of the ones that 
survived. And, in the past, the loan fund has been operating 
for about two years, and it's been very successful.
    Chairman Manzullo. Let me interrupt you here and I'll give 
you more time on it.
    Ms. Smith. Okay.
    Chairman Manzullo. We've got a group of business people 
back in Rockford, thank you, that are interested in putting 
together--thank you--a company to make PA systems, that's 
right, that want to do it on an informal basis, and where is 
Brian. Brian, would you stand up, Brian Davis. Tracye, if you 
could work with Brian to get that information to him, to help 
serve as a model.
    Ms. Smith. Sure.
    Chairman Manzullo. Thank you, go ahead.
    Ms. Smith. Our solution, one proposed solution is that a 
new form of financing should be offered by the SBA, in addition 
to the 7[a] and the 504 term loans, there should be a revolving 
line of credit instrument offered by the SBA, financing between 
$100,000 and $500,000.
    And, to help fund this loan, it should be offered to 
community banks or organizations like Chicago Community 
Ventures, that have more expertise and success in lending to 
entrepreneurs.
    Also, in the private venue streams, we've heard that is not 
being made available, lines of credit like that, revolving 
lines of credit, but I think those banks should contribute to a 
loan fund that makes these kinds of loans to non-profit 
organizations or community banks that have a proven track 
record of lending successfully to entrepreneurs, and they can 
get CRA credit for that. And, they talk about they confuse CRA 
with the supplier diversity programs, they are totally 
different. So, they should be required to do that.
    And, the banks that receive funds to lend in this manner 
should be held accountable also for fair lending practices, 
which is still a problem for minority-owned businesses. And 
particularly those banks that have branches in minority 
communities and take their deposits.
    Now, let's move into government contracting. There are four 
critical areas that have adversely impacted access to 
government contracting by African American and other minority-
owned businesses. One would be the size standard contract 
bundling, flow down or second tier programs, and the dilution 
or elimination of NBE as the Federal stand alone 
classification.
    The minority firms are required to remain small in order to 
be certified as a small, disadvantaged business. This practice 
completely eliminates their ability to compete for contracts 
that have been bundled. They are competing against multi-
million dollar companies and multi-billion dollar firms for the 
same contracts. They don't have the size or the scope to be 
able to compete on a national basis, and they certainly don't 
have the economies of scale to price their contracts 
competitively in that environment.
    Also, the size limitation in no way allows them to grow. 
Corporate America has a very effective contract bundling or 
national account strategy that includes and, in fact, requires 
diverse suppliers, because they don't have a size standard. 
NBEs are able to grow, and, in fact, if they had that size 
standard they would not be able to integrate them into their 
supply chain. They have a problem as a prior contract in doing 
that.
    Chairman Manzullo. I took some of your time, but how are 
you?
    Ms. Smith. Okay, I can just skip, we know the problem of 
contract bundling.
    Chairman Manzullo. All right.
    Ms. Smith. Flow down has the same problem.
    Chairman Manzullo. Money, it's about money.
    Ms. Smith. It's about money, but then you have to decide, 
limitation limits companies from being able to grow, so the 
very--they still have the same problem with discrimination, but 
they can't grow enough to be able to service the contracts. So, 
the solution is, break some of those contracts down, you know, 
don't bundle them all.
    And the other issue, even the $2 million low bid contracts, 
just because they are on the Federal Registry doesn't mean 
they'll be invited to bid. So, you still have that relationship 
ongoing.
    Chairman Manzullo. Let's go on to Eric.
    Ms. Smith. Okay.
    [Ms. Smith's statement may be found in the appendix.]
    Chairman Manzullo. Eric, how do you pronounce the last 
name?
    Mr. Dobyne. Dobyne.
    Chairman Manzullo. Dobyne?
    Mr. Dobyne. Yes.
    Chairman Manzullo. Eric Dobyne is the Regional Director of 
Minority Business Development Agency, Eric, we look forward to 
your testimony. You know you can take your coats off if you 
want, I mean, that's fine.

STATEMENT OF ERIC DOBYNE, REGIONAL DIRECTOR, MINORITY BUSINESS 
                       DEVELOPMENT AGENCY

    Mr. Dobyne. Thank you, Chairman. Thank you, Congressman 
Davis, for the opportunity to speak here.
    The Minority Business Development Agency was established in 
1969. We are part of the U.S. Department of Commerce. We are 
actually the only Federal agency that was created specifically 
to foster the establishment and growth of minority-owned 
businesses in America.
    The Agency's mission is to actively promote the growth and 
competitiveness of large, medium, and small minority 
businesses. Our target minority groups include American Indian, 
Asian, African American, Hispanic, Pacific Islander, and 
Hasidic Jew.
    MBDA actively coordinates and leverages public and private 
sector resources that facilitate strategic alliances in support 
of this mission. We are set up such that we are headquartered 
in Washington, D.C. We have five national enterprise centers, 
those are in Atlanta, Chicago, Dallas, New York, and San 
Francisco.
    One of the big pushes for our Agency now is to move from an 
administrative agency to more of an entrepreneurial focused and 
innovative organization, so we've developed programs around 
just that aspect of our organization.
    We provide funding for a network of minority business 
development centers, Native American business development 
centers, and minority business opportunity committees.
    The business development centers offer a wide range of 
business services to minority entrepreneurs. The centers are 
staffed by business specialists, who have the knowledge and 
practical experience needed to run successful and profitable 
businesses. Their main focus as the business development 
centers is helping minority businesses secure contracts and/or 
financing.
    The MBOCs are designed to coordinate Federal, state, and 
local business resources to benefit minority business 
development. They identify business and economic opportunities 
in the community, and leverage those opportunities to meet the 
needs of the minority business enterprises.
    These are the two main programs that we utilize, and both 
of them are measured by amount of financial
    transactions, as well as contracts that are verified that 
they created for minority businesses.
    Another tool that we use that's critical in support of 
minority businesses is our internet portal. The portal has 
several tools that are very useful for MBEs in helping them 
secure contracts, as well as financial assistance. There is a 
Phoenix Database of minority-owned businesses, which allows 
large contractors to come onto our portal and identify minority 
businesses in the areas where they are looking to contract.
    We also have an opportunity contract matching system, which 
matches MBEs to contract opportunities, and actually forwards 
those opportunities to them on a regular basis.
    We have a resource locator, which allows MBEs to locate 
financial and contract resources in their general area of 
expertise.
    There's a business plan ladder that helps small or minority 
businesses to construct business plans, so that they can 
efficiently locate contract opportunities, as well as financing 
opportunities.
    We provide a GIAS software as well for a system of funded 
projects, which actually provides valuable marketing 
information for MBEs that are going to banks for financing or 
putting together business plans.
    As part of MBDA's strategic growth initiative, we shifted 
the focus of our organization. We are now focused more on high 
growth MBEs, or MBEs that are in high growth industries, 
generally MBEs with $500,000 in revenue and above. They are not 
necessarily $500,00 and above, but more of the focus is on, if 
it's startup, just high growth companies. We are looking for an 
opportunity to make the biggest impact, and we felt like 
traditionally we've had some of our focus on large-style 
businesses, and we felt that moving to high-growth industries 
and companies in high-growth industries could generate more of 
an impact.
    The Chicago center is responsible for a ten-state region, 
which includes the entire Midwest. There are four business 
development centers and three MBOCs located in this area. 
Currently, we fund both MBDC and MBOC in the Chicago area. Over 
the past three years, they've generated over $148 million in 
verified contracts and financial transactions for minority 
businesses, and over $17 million of this has come in financial 
assistance packages.
    And, as part of our move to become more of an 
entrepreneurial type organization, we've also now assigned a 
regional goal to our regional staff to create $36 million 
transactions in financial.
    [Mr. Dobyne's statement may be found in the appendix.]
    Chairman Manzullo. Very good, great timing.
    Our next and last witness, James has been very patient down 
there, is Jim Handley. Jim is the Regional Administrator for 
the General Services Administration, which is one of the 
largest utilizers of small business procurement. Jim, look 
forward to your testimony.

  STATEMENT OF JAMES HANDLEY, REGIONAL ADMINISTRATOR, GENERAL 
                    SERVICES ADMINISTRATION

    Mr. Handley. Thank you, Mr. Chairman, Congressman Davis. We 
appreciate the opportunity to speak to you today.
    As you mentioned, I am Jim Handley, the Regional 
Administrator for the General Services Great Lakes Region. With 
me today is Mary Kennedy. Mary is a Procurement Manager of our 
Public Building Service.
    Let me begin by saying that this Administration remains 
committed to the health of our Nation's small businesses. The 
prosperity of the Nation's 25 million small businesses, 
including nearly 700,000 in this region, is a top priority of 
the Bush Administration.
    As mandated by Federal law, GSA ensures that Federal 
procurement opportunities are available to small businesses. 
According to preliminary figures for Fiscal Year 2003, $6 
billion of the $15 billion GSA spent in procuring goods and 
services went to small businesses. This meets our internal 
Agency goal of 40 percent, and nearly doubles the government-
wide goal of 23 percent.
    As part of this effort, the Great Lakes Region awarded 
small business contracts representing more than $271 million 
worth of goods and services.
    In addition to our own procurement opportunities, GSA 
establishes contracts with suppliers of commonly used goods and 
services through the Multiple Award Schedules Program. This 
program offers small businesses another avenue of potential 
work with the Federal Government. Of the 14,700 contracts 
currently on the GSA schedules, nearly 12,000, or 80 percent, 
have been awarded to small businesses.
    Outreach programs established by GSA, SBA and other 
agencies, enable the small business community to meet key 
contracting officials, and receive one-on-one counseling from a 
team of business specialists.
    In Fiscal Year 2003 alone, the Great Lakes Region conducted 
21 such outreach events, including two here in the 7th 
District, the 2003 Business Procurement Expo, and the 7th 
District Town Hall meeting, and one in the 16th District for 
the new Rockford Courthouse. These 21 events drew over 8,500 
participants.
    A special note, the Chicago Business Matchmaking Event, 
jointly sponsored by the U.S. Chamber of Commerce in June of 
2003, attempted to match up 1,300 small businesses with 
counselors and potential customers.
    We also conduct workshops at conferences to teach small 
business owners how to do business with GSA, and we encourage 
these businesses to come to talk with our contracting officers, 
allowing them to learn more about possible opportunities with 
our Agency, and allowing us to learn more about those 
companies.
    GSA offers many resources to provide small businesses with 
useful information. One such resource, a booklet entitled, 
``Doing Business With GSA,`` gives practical advice and helpful 
websites, including the redesigned gsa.gov site. The GSA 
website provides points of contact, information on upcoming 
conferences, and links that help small businesses get started 
on government contracts.
    One such link, fedbizopps, lists federal and military 
procurement opportunities larger than $25,000.
    Finally, we distribute a local procurement directory and a 
list of toll free telephone numbers so small businesses can 
contact us with questions. These efforts have led to many small 
business success stories, including our efforts on five recent 
construction projects in the Great Lakes Region. Of nearly $260 
million in contracts for these projects since 1998, we have 
awarded or targeted nearly $70 million to small businesses.
    Current renovation work at 536 South Clark here in Chicago, 
for example, has targeted nearly $11 million of the $54 million 
in projected contracts.
    In our experiences with small business procurements, we 
have designed several programs that we believe can improve the 
procurement process. One initiative involves changing the 
turnaround time for paying small contractors from 23 days to 
within 14 days of completion. Potentially, this can provide 
contractors with more on-hand capital.
    Other ideas that help small businesses include encouraging 
small contractors to join a mentoring program and dissecting 
large projects to see what smaller portions of the work can be 
contracted out to small businesses.
    Mr. Chairman, the General Services Administration, and 
specifically, the Great Lakes Region that I oversee, are proud 
of our relationship with small businesses. We share President 
Bush's view that a healthy small business community contributes 
mightily to the Nation's economy.
    We thank you for this opportunity and would be happy to 
answer any questions you might have.
    [Mr. Handley's may be found in the appendix.]
    Chairman Manzullo. Who is Bill Leggett? You came in late? 
Bill, come on up here, I'm going to give you two minutes.
    Mr. Leggett. Two minutes?
    Chairman Manzullo. Yes, we are running late.
    Just come up here. Bill, start talking, you've got two 
minutes, because we are running out of time.
    Go ahead.
    Mr. Leggett. Okay.

 STATEMENT OF WILLIAM LEGGETT, PRESIDENT, COLLECTORS TRAINING 
                           INSTITUTE

    Mr. Leggett. I'd like to thank you, Mr. Chairman
    I'd like to thank you, Mr. Chairman, and Danny Davis, and 
this fine panel. My name again is Bill Leggett, and I know I'm 
tardy, and I'm a small business owner. I started out, my 
partner and I started out, in his living room. We started out 
with two people, we had just a table in the middle of his 
living room floor, and we started collecting money, because 
that's what we do, we started a collection agency.
    The reason we started a collection agency was to give 
people the opportunity that were unemployed, under-employed, 
people who were displaced, an opportunity to make some money. 
People laugh at collection agencies, but one thing about it, 
they are making money. They are hiring people right now today, 
and we knew that we could employ people that make an average of 
$28,000. You won't be rich. However, you can make a decent 
living.
    Chairman Manzullo. How many employees do you have, Bill?
    Mr. Leggett. Right now we have 60, and that's in this 
building.
    Chairman Manzullo. Oh, this building?
    Mr. Leggett. Yes.
    Chairman Manzullo. And, you were late.
    Mr. Leggett. Yes, that's the truth.
    One of the problems we have, and this is--now, we both live 
in the suburbs, he lived in Oak Park, I lived in Downing Road, 
we applied for an SBA loan, $50,000. He had excellent credit, I 
had excellent credit. We both were making above $56,000. We 
were rejected. We were rejected.
    They told us to go to South Shore Bank, and it just so 
happened we were living in the far-western suburbs, why would 
we go to South Shore Bank? Unfortunately, they didn't know that 
my partner was an ex-banker, so we realized that that was 
redlining. So, what we did, we approached--the next day we 
approached, contacted the company, wrote a letter. The next 
thing we know we got the loan, and we got another loan. Okay?
    But, what has happened is, since that time we're in the 
midst of growing. We've obtained probably about three Fortune 
500 companies. We can grow. The current clients have access to 
expand our business double, and we can do it, but we don't have 
the capital, we can't get the capital. It's not reality that we 
can possibly get the capital, because the industry itself says 
that you don't have a lot of assets. We have a computer, okay. 
And, you don't have----
    Chairman Manzullo. Human assets.
    Mr. Leggett[continuing] Yes, human assets. I mean, most of 
our employees are local employees from the community, and we 
just don't have those assets. Accounts receivable, delinquent 
debts, we tried that. The bankers laughed us out the door. 
Would you finance these delinquent debts, no. Would you loan 
anything on a delinquent debt?
    Chairman Manzullo. You are probably collecting on their 
debts.
    Mr. Leggett. Right, but it doesn't work, I mean, you know, 
and it's unfortunate because like, you know, the spirit was 
right to employ people--we moved along there because of the 
mere fact that, number one, we wanted to give people in Londale 
an opportunity to gain some type of employment, and we have 
done that, and we are going to continue to do that, but we have 
to be very, very creative, and, you know, as far as 
privatizing, the government possibility, they are going to 
privatize the IRS, they are still privatizing the Department of 
Education, but the possibility of me getting one of those 
contracts is one in 10 million, it won't happen, because, 
number one, if I'm in business and I grow, I still don't have 
the assets and the capital that I would need in order to be 
considered for that type of loan.
    [Mr. Leggett's statement may be found in the appendix.]
    Chairman Manzullo. Okay, thank you.
    One question, and this is--Judy, if a small business person 
wants to do business with Defense, EPA, Transportation, GSA, 
Veterans, i.e., small businesses want to do business with the 
government, what do you tell them, the Small Business 
Development Center, what's available?
    Ms. Roussel. Well, if they go to a PTAC, which, you know, 
are part of the Small Business Development Center----
    Chairman Manzullo. Procurement Technical Assistance Center.
    Ms. Roussel[continuing] Absolutely.
    Chairman Manzullo. All right.
    Ms. Roussel. And, they can provide assistance in terms of 
taking them through the process.
    Chairman Manzullo. For all the agencies?
    Ms. Roussel. That is correct.
    Also, I might mention to you sitting behind me, this 
gentleman, Bob Murphy, runs our Government Contracting Office 
in SBA, and we also have people who will work with the small 
business to help them get a foot in the door, figure out who 
buys what they are trying to sell, and assists them in 
approaching Federal agencies for Federal procurement.
    Chairman Manzullo. First level, would that be the SBDC, or 
would it be the SBIC?
    Ms. Roussel. I would say that is a viable approach.
    Chairman Manzullo. All right.
    Ms. Roussel. Because there are various----
    Chairman Manzullo. I want to do business, I want to go to 
one live body, and say, help us to access all the different 
portals.
    Ms. Roussel[continuing] Sure, and they want to go to where 
that's convenient to them.
    Chairman Manzullo. Well, Mark, where is the nearest SBDC in 
this area, do you know?
    Mark. [Off mike.] We have an SBDC up at the Latin American 
Chamber of Commerce. We also have one at the Greater Northern 
Pulaski Development Council. We also have one at the Hispanic 
Chamber of Commerce on Western, and we have several, you know, 
in the surrounding area. There's one a little bit to the west 
at Titan College, and we also have them up on the north side. 
We have a couple as well down----
    Chairman Manzullo. So, we just go to small business 
development centers, SBDCs?
    Mark[continuing] [Off mike.] They could go either to the 
sba.gov site, or to our Agency's site, illinoisbiz.biz. (Ph.). 
I mean, you can go to just about any of those sites and you can 
get linked up to the nearest----
    Chairman Manzullo. Sba.gov will tie people into getting the 
resources.
    Mark[continuing] [Off mike.] Right, right. There's an 800 
number they can also call and get information on all the 
resources.
    Chairman Manzullo. All right.
    Ms. Roussel. And, if they contact us directly we'll get 
them to the assistance that they need.
    Mr. Davis. Eric, you mentioned your Agency's coordinated 
efforts. If I was a small business person and came to you, what 
could you do for me?
    Mr. Dobyne. Well, we service small businesses, typically, 
through our minority business development centers. I think we 
provide a couple things. We can provide you with technical 
assistance, so that you are prepared to enter into the Federal 
contracting arena, as well as we have minority business 
opportunity committees that will provide you with the contacts 
and the resources that you need in order to be successful.
    We find that with our focus on MBEs and high growth 
industries, that we find that the contacts and the brokering 
services that we provide are more valuable than even the 
technical assistance.
    Mr. Davis. Pam, as I listened to your testimony, I was 
reminded of Abraham Lincoln and Ulysses Grant, that when Grant 
was in charge of the Army he got a lot of criticism, and people 
would come to Lincoln and would tell him all kinds of things. 
And finally, you know, he drinks a lot of whiskey, he's an 
alcoholic, but he kept winning wars, I mean battles.
    Chairman Manzullo. I think he was from my District.
    Mr. Davis. Yes, well, they are both, so he says--finally, 
Lincoln says, ``Well, tell me what brand of liquor does he 
drink?``
    And, I wanted to know, what makes the Environmental 
Protection Agency seemingly so good, in terms of what you are 
doing that others can easily. I mean, it seems like EPA has a 
great record.
    Ms. Bamford. Well, we have a lot of people that are 
dedicated to this mission, but there's always further to go. 
And, you know, thinking about the testimony here today, and 
some of the impediments that I heard something just occurred to 
me as we were talking about getting contracting officers to buy 
into this and support the program. I actually come from a 
contracting background, I've done Federal procurement for more 
than a quarter of a century, believe it or not, and I started 
thinking about a situation that rose to my level earlier in the 
summer. There are sometimes conflicts in the Federal 
Acquisition Regulation. For instance, we read Part 19 with the 
Small Business Programs, and they say these program don't apply 
to Part 8, which is the General Services Administration 
guidance on how to use multiple award schedules. You know, I 
was amazed to find out that I couldn't have a contracting 
officer set aside a procurement under multiple award schedules.
    Somebody needs to take a look at that and make those parts 
of the FAR coincide so that contracting officers have good 
tools to support this program better.
    I know I've deviated from your question here, but I think 
one of the things we need to do is give our contracting 
officers tools.
    Mr. Davis. Well, she didn't have to drink as long as she--
Thank you very much.
    One other question. Tracye, the Federal government, 
obviously, guarantees to lenders that they are going to recoup 
their resources, and it would seem as though that would be 
stimulation, you know, in a sense, to them. Is there something 
else that we need to do to try and make resources available to 
small businesses?
    Ms. Smith. Yes, two things. I think all banks are not 
created equal. I don't think SBA loans should not go to all 
banks, because all banks are not interested in lending to 
entrepreneurs of small businesses. You find the most effective 
lenders, he mentioned Shore Bank, I used to actually work for 
Shore Bank, but they do--they focus on entrepreneurs, Cole 
Taylor, you know, the smaller banks, and their loan appetites 
are smaller, so they may have more experience lending to 
entrepreneurs different than lending to a major corporation or 
middle market company.
    I think, though, that large banks should contribute money, 
because, apparently, I know that SBA, in general, does a grand 
job when you talk about the funding issue. They should 
contribute money to loan funds to make available to lend to 
entrepreneurs in many minority-owned businesses and small 
businesses.
    Chairman Manzullo. As part of the CRA?
    Ms. Smith. Yes, yes, and hold them accountable, because we 
talked about the issue being money, the money should come from 
them. They take deposits from everybody, you know, so I think 
the CRA, that would be one way to utilize it, and then I think 
one thing that's critical, as the gentleman talked about his 
collection company, is cash, but cash for ongoing operations in 
a firm with a revolving line of credit, as you grow you are 
going to continue to need more cash, and that's not currently 
available.
    Chairman Manzullo. Thank you.
    Sean, can we go to you? Your organization has a revolving 
line of credit.
    Mr. Moss. Yes, that's true, Chairman.
    Chairman Manzullo. Can you explain that, how that works?
    Mr. Moss. Absolutely.
    We have six banks across the country. Hopefully, by the end 
of the year we'll have 12. Basically, the bank does the 
analysis, they do the underwriting, and what they do is, the 
government will come in and provide the guarantee. DOT will 
guarantee to 75 percent of the value of the contract. And 
again, it's accounts receivable financing.
    You know, a lot of the small banks just don't have the 
labor and the wherewithal to really do that, so it's been a 
challenge for us to find the right banks. But it works 
perfectly well for us. But for this kind of program a lot of 
these small minority contractors, you know, that work on large 
public works projects, would not be able to pay the payroll.
    I heard that, that was the issue earlier, you've got to 
meet payroll. Every thirty days these contractors have to lay 
out the cash, so, but for our program, the contractors are able 
to do that.
    Just to give you an idea. You know, we guaranteed about $9 
million last year, and the average size of our transactions is 
about $300,000, and we'll support up to three quarters of a 
million. So, it works.
    Chairman Manzullo. Sean, could you see Nelson when we, 
before we leave here?
    Mr. Moss. Sure.
    Chairman Manzullo. And then you're the Washington office, 
aren't you?
    Mr. Moss. Yes, sir.
    Chairman Manzullo. Well, listen, thank you for the 
invitation to come up to Chicago. I don't know who thought it 
was cold here now. Oh, my gosh, what was it, close to thirty 
degrees? There's a heat wave going on here.
    But, the testimony has just been stunning, both from the 
folks that are out there fighting for whatever dollars are 
possible, and then the second panel here, with the folks from 
the government agencies that are working very, very hard on it. 
This is my 11th year in Congress, and I can tell you, even in 
the past three years since I've been Chairman, there's been a 
tremendous improvement in terms of the tremendous outreach to 
the community, trying to coordinate people doing business with 
the Federal Government. It's not where we want it to be yet, 
but you folks agree also. I mean, obviously, it's not by way of 
criticism, but simply by way of getting everybody involved in 
the process.
    So, again, I want to thank you all for coming, and, Danny, 
if you have any concluding remarks, and then we can go ahead 
and adjourn the hearing.
    Mr. Davis. The only thing, Mr. Chairman, and I agree with 
you that there has been tremendous progress. One of the reasons 
has been because of your stewardship, and I make no bones in 
saying that, because of your willingness to take positions that 
are sometimes contrary.
    Chairman Manzullo. I used a subpoena a couple times.
    Mr. Davis. Yes, many of your colleagues in your party on 
your side of the aisle. As a matter of fact, you will even 
disagree with the President.
    And, I think that's the true mark of a public servant, that 
is, one who advocates a cause based upon what they have taken 
as their responsibility. And, one of the responsibilities of 
the Small Business Committee, no matter who sits in the White 
House, no matter who sits in the Senate, no matter who sits 
wherever, is to advocate on behalf of small businesses, and you 
have done that.
    And so, I thank you very much, and I thank you for bringing 
this hearing to Chicago, and thank all of the witnesses who 
have come to testify, and those who have come to participate.
    Chairman Manzullo. Thank you, Danny.
    The hearing is adjourned.
    [Whereupon, at 12:03 p.m., the committee was adjourned.]
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