[Senate Hearing 108-447]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-447

                SBA REAUTHORIZATION: NON-CREDIT PROGRAMS

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

                               ROUNDTABLE

                               before the

            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 9, 2003

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                      ONE HUNDRED EIGHTH CONGRESS

                              ----------                              
                     OLYMPIA J. SNOWE, Maine, Chair
CHRISTOPHER S. BOND, Missouri        JOHN F. KERRY, Massachusetts
CONRAD BURNS, Montana                CARL LEVIN, Michigan
ROBERT F. BENNETT, Utah              TOM HARKIN, Iowa
MICHAEL ENZI, Wyoming                JOSEPH I. LIEBERMAN, Connecticut
PETER G. FITZGERALD, Illinois        MARY LANDRIEU, Louisiana
MIKE CRAPO, Idaho                    JOHN EDWARDS, North Carolina
GEORGE ALLEN, Virginia               MARIA CANTWELL, Washington
JOHN ENSIGN, Nevada                  EVAN BAYH, Indiana
NORMAN COLEMAN, Minnesota            MARK PRYOR, Arkansas
           Mark E. Warren, Staff Director and Chief Counsel,
    Patricia R. Forbes, Democratic Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              

                           Opening Statements

Snowe, The Honorable Olympia J., Chair, Committee on Small 
  Business and Entrepreneurship and a United States Senator from 
  Maine..........................................................     1
Kerry, The Honorable John F., Ranking Member, Committee on Small 
  Business and Entrepreneurship and a United States Senator from 
  Massachusetts..................................................    40
Enzi, The Honorable Michael B., a United States Senator from 
  Wyoming........................................................    63

                            Committee Staff

Forbes, Patty, Staff Director and Chief Counsel, Minority Staff..     *
Warren, Mark, Staff Director and Chief Counsel, Majority Staff...     *

                              Participants

Alford, Harry President and CEO, National Black Chamber of 
  Commerce, Washington, D.C......................................     *
Armendariz, Fred C., Associate Deputy Administrator, Office of 
  Government Contracting and Business Development, U.S. Small. 
  Business Administration, Washington, D.C.......................     *
Au Allen, Susan, President and CEO, U.S. Pan Asian American 
  Chamber of Commerce, Washington, D.C...........................     *
Brogan, Molly, Manager of Government Affairs, National Small 
  Business United (NSBU), Washington, D.C........................     *
Coratolo, Giovanni, Director of Small Business Policy, U.S. 
  Chamber of Commerce, Washington, D.C...........................     *
Denlinger, Stephen, President, Latin American Management 
  Association, Washington, D.C...................................     *
Elmore, The Honorable William D., Associate Administrator, Office 
  of Veterans Business Development, U.S. Small Business 
  Administration, Washington, D.C................................     *
Gast, Zach, Policy Research Manager, Association for Enterprise 
  Opportunity, Arlington, VA.....................................     *
Glover, The Honorable Jere, Former Chief Counsel to the SBA 
  Office of Advocacy, Brand & Frulla, Washington, D.C............     *
Golden, Ellen, Senior Program Officer, Coastal Enterprises, Inc. 
  and President, The Association of Women's Business Centers, 
  Wiscasset, Maine...............................................     *
Henry, Major General Charles, U.S. Army (Retired), President and 
  CEO, The National Veterans Business Development Corporation, 
  Alexandria, Virginia...........................................     *
Homer, Pete, President and CEO, National Indian Business 
  Association, Washington, D.C...................................     *
Ibarra, Mickey, Government Relations, U.S. Hispanic Chamber of 
  Commerce, Washington, D.C......................................     *
Langer, Andrew, Manager of Regulatory Affairs, National 
  Federation of Independent Businesses, Washington, D.C..........     *
Massaua, John R., State Director, Maine Small Business 
  Development Centers, Portland, Maine...........................     *
Neece, Allen, Chairman, Small Business Legislative Council, 
  Washington, D.C................................................     *
Nelson, Marilyn Carlson, Chair, National Women's Business 
  Council, Washington, D.C.......................................     *
Newlan, Ronald, Chairman, HUBZone Contractors National Council, 
  Washington, D.C................................................     *
Street, Kaaren J., Associate Deputy Administrator, Office of 
  Entrepreneurial Development, U.S. Small Business 
  Administration, Washington, D.C................................     *
Sullivan, Ann, Federal Legislative Consultant, Women Impacting 
  Public Policy, Inc, Oklahoma City, Oklahoma....................     *
Sullivan, The Honorable Thomas, Chief Council for Advocacy, U.S. 
  Small Business Administration, Washington, D.C.................     *
Swain, The Honorable Frank, Former Chief Council to the SBA 
  Office of Advocacy, Baker & Daniels, Washington, D.C...........     *
Turpin, James, Director of Government Relations, American 
  Subcontractors Association, Alexandria, Virginia...............     *
Wilson, Donald, President, Association of Small Business 
  Development Centers, Burke, Virginia...........................     *
Yancey, Kenneth, CEO, Service Corps of Retired Executives 
  Association, Washington, D.C...................................     *

           Prepared Testimony and Appendix Material Submitted

Kerry, The Honorable John F.
    Prepared statement...........................................    43
Landrieu, The Honorable Mary
    Prepared statement...........................................    68
Alford, Harry
    Answers to Committee questions...............................   136
Armendariz, Fred C.
    Prepared statement...........................................    70
    Answers to Committee questions...............................   139
Brogan, Molly
    Prepared statement...........................................    77
Golden, Ellen
    Prepared statement...........................................    84
Ibarra, Mickey
    U.S. Hispanic Chamber of Commerce Legislative Priorities for 
      108th Congress.............................................    94
Massaua, John R.
    Prepared statement...........................................    99
Neece, Allen
    Answers to Committee questions...............................   154
Nelson, Marilyn Carlson
    Prepared statement...........................................   107
    Answers to Committee questions...............................   156
Newlan, Ronald
    Prepared statement...........................................   117
    Answers to Committee questions...............................   157
Street, Kaaren J.
    Prepared statement...........................................   120
Sullivan, Ann
    Prepared statement...........................................     5
    Answers to Committee questions...............................   168
Sullivan, The Honorable Thomas
    Prepared statement...........................................     5
    Answers to Committee questions...............................   174
Turpin, James
    Answers to Committee questions...............................   175
Wilson, Donald
    Prepared statement...........................................   128
    Answers to Committee questions...............................   178
  
  
* Comments, if any, are located between pages 3 and 63.

 
                    SBA REAUTHORIZATION ROUNDTABLE: 
                          NON-CREDIT PROGRAMS

                              ----------                              


                        WEDNESDAY, APRIL 9, 2003

                              United States Senate,
          Committee on Small Business and Entrepreneurship,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 9:08 a.m., in 
room 428-A, Russell Senate Office Building, the Honorable 
Olympia J. Snowe (Chair of the Committee) presiding.
    Present: Senators Snowe, Enzi, and Kerry.

OPENING STATEMENT OF THE HONORABLE OLYMPIA J. SNOWE, CHAIRMAN, 
SENATE COMMITTEE ON SMALL BUSINESS, AND A UNITED STATES SENATOR 
                           FROM MAINE

    Chair Snowe. Good morning. Thank you all for being here 
this morning half an hour earlier. There are so many hearings 
going on I may not be able to stay for the entire duration of 
this roundtable, but I wanted to have the opportunity to hear 
many of your comments before I have to depart. I have several 
other hearings this morning. But I really do appreciate you 
taking the time to be here to share your thoughts and 
perspectives as we begin the process of reauthorization of the 
SBA and the programs that come within its jurisdiction.
    I understand from the staff and my predecessor, Senator 
Bond, that these roundtables are invaluable in terms of shaping 
the direction of policy, so I really appreciate your input. It 
will help me to prepare for the reauthorization and to 
assemble, I think, the best approach in conjunction obviously 
with the Administration's proposal and the reauthorization, as 
well.
    Of course, this reauthorization coincides with the 50-year 
anniversary of the SBA. Of course, none of us can remember 50 
years ago, can we?
    [Laughter.]
    Chair Snowe. I think that really does underscore the value 
of these programs. The original goal and mission are no 
different than the goal and the mission today, and that is to 
level the playing field for small business and to make sure 
that they have opportunities, in the Federal marketplace.
    I certainly am going to consider how we can strengthen the 
resources within the SBA to help support small businesses 
throughout this country, and so your input is vital to this 
process.
    Today, we are going to be considering the reauthorization 
of the non-credit programs, such as, the SBA's Office of 
Advocacy, which has indicated that through their efforts, have 
been able to save more than $21 billion in regulatory costs for 
small businesses in fiscal year 2002, this is an astonishing 
number, but it also tells you about the role that the office 
plays in helping to represent small business and defending 
those interests within the agencies when it comes to a 
regulatory burden.
    I happen to believe, as well, that we ought to strengthen 
the independence of that office, and to that end, I have 
introduced legislation to support that effort, because I think 
it is critical that we do all that we can to ensure that the 
office remains free of any kind of political interference, 
because its role is critical to the vitality of SBA.
    As far as the SBA entrepreneurial development programs, I 
think, obviously, all of those programs are essential to 
delivering the resources to those who need them and want to 
start and operate small businesses in their communities, 
whether it is through the Small Business Development Centers or 
the Women's Business Centers or SCORE. Together, we can ensure 
that these investments and these programs, create a strong 
return to our economy through successful business ownership and 
job creation.
    On our agenda this morning as well will be SBA government 
contracting and business development programs. Since its 
creation, the SBA has been persuading Federal buyers and others 
of the value of contracting with small businesses. Not only is 
that good for small businesses, but it is also good for 
purchasing agents as well as for the taxpayers who foot the 
bills. When small businesses compete for contracts, we know it 
lowers the prices and also elevates the quality of these 
purchases, whether it is for goods or services.
    On March 18, as many of you know, I held a hearing on the 
issue of contract bundling and acquisition streamlining, both 
of which threaten, I think, the opportunities for small 
business to participate in the Federal contracting process. I 
plan to introduce legislation on that issue and I look forward 
to hearing your thoughts, because I do think that that is a 
critical issue and an important one to the small business 
community. Certainly, we need to do more to make sure that 
small business has the opportunities, and I am concerned when I 
see that small businesses are not being able to participate in 
the Federal contracting process and, in fact, we have seen a 
significant reduction in small business participation over the 
last few years and certainly over this last decade. That is not 
the trend we want, so we want to do everything we can to 
reverse that trend and move it in the right direction. So, 
again, it is removing those barriers and impediments, and so we 
are going to do all that we can on that issue.
    There are more than 25 million small businesses in America. 
Three-quarters of the new jobs created in this country are 
produced by small businesses and we also know, according to the 
Bureau of Labor Statistics, that small businesses provide a 
refuge for displaced workers. I have certainly heard that in my 
State. When people lose their jobs, and many have in my State 
over the last few years, they do decide to start their own 
business, their own small business over a job in another 
industry, so they have more personal job security.
    There are 3 to 4 million new business start-ups and 1 in 25 
adult Americans are taking steps to start a small business. 
One-quarter of existing small business owners are thinking of 
opening up another business. So small business is vital to the 
future of America and there is no question the future of 
America is tied to the future of small business, certainly when 
you consider that 32 percent of the wealth in America is 
produced and generated by small businesses.
    There is no doubt about the paramount role small business 
plays in America's economy. We understand that. We have to make 
sure that everybody else appreciates and acknowledges that 
fact, too.
    This gives us an opportunity to do all that we can to 
reinforce the programs that work well and to address those that 
don't. You know, if we have to transfer resources from 
ineffective programs to effective programs, we must do that. If 
we can improve programs, then we must do that, as well. I think 
it is important that we use this process as an opportunity to 
build upon those programs that work well and to make sure they 
work well for small businesses, because if they work well for 
small business, these programs are going to work well for 
America.
    So with that, I just appreciate the fact that you are here. 
We want you to take this opportunity to participate. I think 
obviously we want to make sure that everybody has a chance to 
give their perspectives, and so that when you want to speak, 
please put your nameplate up. I think that is a familiar 
process for all of you, but we will keep a list of speakers in 
the order that you put up your nameplate and we hope you will 
keep your comments brief so we can have a discussion. But I do 
want to make sure that you feel you have a chance to express 
yourselves on these issues because it is important that we hear 
your individual perspectives here today.
    We will move from one issue to another. We thought we would 
start with the SBA Office of Advocacy, move to the 
entrepreneurial programs and government contracting so we have 
some order. But in any event, please feel free to state your 
positions.
    I am going to begin by asking the Chief Counsel, Tom 
Sullivan, to describe the office's current staffing level and 
operations, so we will begin with that process. Then we will 
just participate and fill in, and please feel free to indicate 
your positions on these various issues as we proceed. Thank 
you.

              OFFICE OF ADVOCACY AND ITS PROGRAMS

    Mr. Sullivan. Thank you, Madam Chair. I have a formal 
statement that is lengthy and would prefer to summarize just 
what our staffing levels and operations are for the benefit of 
this roundtable and just submit the statement, if you would 
allow that.
    Chair Snowe. Absolutely. Without objection, it will be 
included in the record in its entirety, and the same would be 
true for all participants. If you have lengthier statements, we 
will include all of your comments in the record.
    Mr. Sullivan. Thanks, and Madam Chair, I would beg your 
forgiveness for being late. Although we are blessed with New 
England weather, we are not blessed with New England drivers, 
and so it took a little bit longer.
    Chair Snowe. I would agree with that.
    [Laughter.]
    Mr. Sullivan. Basically, the Office of Advocacy 
independently pursues a small business agenda, really, the 
agenda of all the participants here this morning, in three 
ways. First, through our regional advocates: we have regional 
advocates, 8 on board in 10 of the regions right now. Our New 
England advocate is Barbara Manning, and she is joined by seven 
other colleagues around the country, and they are our Main 
Street reality check. They basically tell us what is going on 
in small business around the country to help us prioritize.
    That same prioritization method is done by reaching out to 
the participants here that are gathered this morning and 
hearing from them what issues we should be working on in the 
Office of Advocacy. That is how we take our direction, Madam 
Chair.
    We also have a research team of economists and researchers 
who research vital small business issues and then get that 
information to the Committee and to small businesses so that 
more and more folks know the value of small business to the 
U.S. economy, and quite frankly, to the global economy.
    The third way we pursue a small business agenda is through 
our legal team. Our legal team is able to bring common sense 
solutions and perspectives from small business into the 
rulemaking process and it is working. Our regulatory 
intervention efforts under the authority of the Regulatory 
Flexibility Act and the Small Business Regulatory Enforcement 
Fairness Act resulted in a cost savings of $21 billion in 
fiscal year 2002 alone.
    My predecessor, Jere Glover, who joins us today, used to 
try to compare the Office of Advocacy's budget with the amount 
of money small businesses save, and we have done the same 
thing. Twenty-one billion dollars in foregone regulatory costs 
when compared to Advocacy's budget for last year means that for 
every dollar spent, we saw a return of over $2,700.
    Getting to one matter that is a legislative priority for 
our office, and I am very pleased to see the introduction of 
the Snowe-Kerry bill, S. 818, having to do with the 
independence and nonpartisan workings of our office, really 
does get at our budget process, and when you examine the 
statutory mandate of Advocacy and the authority that the office 
has to defend small entities, it becomes obvious why the Office 
of Advocacy is independent. The Office of Advocacy is supposed 
to be critical of government that treats small business 
unfairly.
    The current budget process is a dangerous one because the 
Office of Advocacy's budget is too easily pillaged when 
administration priorities change. A budget line item for 
Advocacy is the best and most efficient way to ensure that 
government continues to be accountable to small business 
through compliance with the Regulatory Flexibility Act and the 
Small Business Regulatory Enforcement Fairness Act.
    I am going to finish my statement there, Madam Chair, and 
really just listen. It is meetings like this and meetings like 
this all over the country where our office takes direction. 
Thank you.
    Chair Snowe. Thank you.
    [The prepared statement of Mr. Sullivan follows:]

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    Chair Snowe. Mr. Swain.
    Mr. Swain. Senator, it is a real pleasure to be here. Thank 
you for inviting me. I am sure with your robust record in 
Congress, you don't remember exactly, but in September of 1981, 
I was reflecting coming up here this morning, I appeared after 
being confirmed as the Chief Counsel for Advocacy for my very 
first congressional hearing. It was in front of the House Small 
Business Committee, of which you were a Member, and the subject 
was the authorization of the Small Business Innovation Research 
Program.
    At the time, that was quite a radical idea and the 
Administration, the Reagan administration, was not in favor of 
that idea. Our office was in favor of it, but I must say that 
you and Mr. LaFalce and several other Members of the Committee 
took that opportunity to remind me in no uncertain terms that 
my role was to be an independent advocate for small business--
--
    [Laughter.]
    Mr. Swain [continuing]. So I am pleased to say that you 
have been absolutely consistent on that over the past 20 years.
    Chair Snowe. Amazing how things come around.
    Mr. Swain. That is right. It got to the point in subsequent 
hearings with some Members of that Committee, I remember 
Congressman Bedell got on me at the time about whether I had 
cleared my statement with OMB. It is one of the little known 
facts from anyone that hasn't served in the Administration, the 
extraordinary power that OMB has over anybody that has got any 
job in the Administration at all.
    [Laughter.]
    Mr. Swain. So one of the first things that I discovered 
after I got into the job and thought that I would just willy-
nilly come up and testify about whatever I, my staff and the 
small business groups thought would be sensible, that that 
wasn't exactly the case. At least from Mr. Stockman's 
perspective, I had to take my statement and get it cleared with 
OMB to say what I wanted to say, and, of course, SBIR was a 
classic example, the first one out of the box. They weren't 
going to clear that.
    At that time, I said, ``Well, you have got my statement and 
this is what I am going to say, so I will simply be clear on 
the fact that you didn't clear it'', and so that happened more 
often than not. We always sent them the statement out of 
courtesy, and if they cleared it, it was wonderful because that 
meant that they had strong small business advocates at OMB. But 
in many cases, that wasn't the case.
    Some 20 years later, 25 years or so after the creation of 
the office, I think it has been a resounding success. I wasn't 
economically as sophisticated as Mr. Glover and Mr. Sullivan to 
actually figure out how much money we might have saved the 
small business community, but at any rate, I think it has been 
a good thing, The Congress is in an interesting position now 
because it is a largely successful office. But what can and 
should be done to make it even more so? Of course, there are a 
continuum of things.
    It has been suggested that the office be made entirely 
independent, and there are also other things, including a 
separate line item for the budget, and that is where I would 
certainly endorse a separate line item for the budget. I 
candidly do not endorse the absolute independence of the 
office. I think that the position within the Administration is 
a unique position. You sort of have one foot outside the 
Administration, one foot in the Administration, but it is a 
unique opportunity to try to make policy arguments to senior 
Administration and White House officials and absolute 
independence would probably negate that. But I do think that a 
separate budget item is a modest and not a dramatic step to 
improve the current situation.
    Chair Snowe. Thank you. Thank you for reminiscing about the 
old days.
    [Laughter.]
    Chair Snowe. The more things change, the more they stay the 
same.
    Mr. Turpin.
    Mr. Turpin. I am James Turpin, American Subcontractors 
Association. First of all, I knew I was getting old when I knew 
Tom Sullivan as a law student.
    [Laughter.]
    Mr. Turpin. But I just wanted to give our perspective. We 
are the trade association representing commercial 
subcontractors and our experience with the SBA Office of 
Advocacy has been extremely positive as a conduit of 
information and also as an arbiter between our organization and 
others to get the small business community on the same page 
when they need to be and the dollars that are spent, although 
they are relatively small, are leveraged more than just the 
savings. It is also a service to organizations like mine so we 
can then service our members.
    So there is a multiplier effect in the information going 
out there, and we would very much favor a line item for the 
office and commend the office for the work it does in making 
the most out of the resources it has available.
    Chair Snowe. Thank you. Others?
    Yes, Jere.
    Mr. Glover. Again, thank you for introducing your new 
Independent Office of Advocacy bill and your consistent support 
of the office over the years.
    We have been fortunate--the Congressional Committees and 
the small business community have been fortunate to have a 
number of Chief Counsel for Advocacies who have been very 
strong and done a wonderful job. There are a lot of advantages 
to that office. No. 1, it is the independence that we have 
received, the special hiring authority that the office has, 
tremendous support and cooperation from the Congressional 
Committees.
    But I have to be candid. Every year, the budget comes up 
and you do have to change roles from doing your job, which is 
what is best for small business and working for small business 
exclusively, to going to the Administrator and, in effect, 
begging for research money and other funds. Every time there is 
a freeze in SBA, the Office of Advocacy loses slots. We are 
down from 70, when Frank was Chief Counsel, to, what, low 50s, 
low 40s, high 40s? High 40s.
    It has dropped down over the years and it happens every 
time there is a freeze on personnel, because Advocacy has a 
turnover because we have to hire people in whatever area is 
hot, and we have that special authority to do that, but that 
means we have a turnover, and quite frankly, the office is 
unique and we have been able to hire the best and the brightest 
and they don't stay long. They move on to other jobs. So you 
continuously have this problem.
    My greatest fear is that the small business community and 
the Congressional Committees will get what they pay for in the 
Office of Advocacy. They have always gotten a lot more than 
they pay for.
    When we started quantifying the successes, and it was a 
real challenge--the first year, we didn't publish those--but on 
average, $3 billion of regulatory savings, that is not the data 
that you just quoted about how important small business is. 
That comes out of Advocacy's research budget. It is not all the 
other things that we do.
    So it is a wise expenditure of money and the need for a 
line item to focus on small business, the Office of Advocacy, 
is critical and I think that is important and I think some 
other things you can do to strengthen the Office of Advocacy, 
also, Office of Advocacy's independence makes a lot of sense. 
But I agree with Frank. It should not be totally independent of 
SBA. It should not be totally independent of the 
Administration. The idea that it is in both accounts is an 
important role.
    I think there are some things that might be needed to be 
put into that Office of Advocacy that are elsewhere within SBA, 
the Office of Technology, even the Ombudsman's Office. Clearly, 
these are more aligned with the advocacy function than other 
places. But I think the critical thing is to get a line item 
and make sure that the office gets the funding that it 
deserves.
    Chair Snowe. I gather from what Frank has said, and you 
feel that way, too, that the complete independence of the 
office might compromise its ability to be flexible in moving?
    Mr. Swain. I think the most effective place would be SBA. I 
think it would get lost out there by itself without some 
connection, at least administratively.
    Mr. Glover. When it works it works well, not having to 
worry about personnel, government contracting, a whole variety 
of things you would have to worry about if you were 
independent, totally independent. I think there is synergy at 
SBA. I think that SBA as a total does a lot for small business. 
A number of times, we actually did research and provided to 
SBA, for example, job creations through SBA lending programs. 
There were things we could do when SBA was challenged. 
Occasionally, SBA is challenged and I think we are able to 
provide the economic data and justification for some of SBA and 
its programs.
    You also have advocacy functions within SBA like the 
women's program, like the veterans' program, like the minority 
programs. All of those are also charged with advocacy and we do 
the research that supports and justifies those programs and 
some of their existence.
    So there is a synergy that does occur, and taking it 
completely out of SBA, and certainly taking it completely out 
of the Administration, I think creates an adversarial 
situation. I mean, I kept count of how many times I took 
independent positions from the Administration, and I think 
Frank did, as well, and I am sure Tom is keeping that list, as 
well. That is not the important issue. It is how many times do 
we get the Administration to later change its mind, and if you 
are part of the Administration, you have got more clout in 
getting them to change their mind.
    Let us face it. You can fight and lose, but if you can be 
as a partner and always working to improve the decision making 
process--what I view the Office of Advocacy, our success is 
when we change the decision making process. When we made 
whoever was the decisionmaker at the next level from whoever 
made the original decision aware of facts and information they 
didn't know, that changed the outcome and it changed the 
culture of that agency. The frustrating thing is there seems to 
be a never-ending source of problems popping up and you are 
continuously educating people. But once you do, it's easier the 
next time.
    Chair Snowe. I see. Yes, and your name is--I can't see.
    Mr. Coratolo. Giovanni Coratolo with the U.S. Chamber of 
Commerce.
    Chair Snowe. Thank you. I couldn't see your name tag.
    Mr. Coratolo. Senator, we really applaud you in introducing 
an Independent Office of Advocacy bill that establishes a line 
item, and certainly as well as my colleagues here, I agree with 
them. It is well needed. I can't add much to what they have 
said, but I wanted to point out one thing. Several years back, 
myself as well as a number of the organizations, small business 
organizations, NSBU, NFIB, SBLC, got together and recognized 
the value of advocacy and we set upon a quest to increase the 
funding. The only handle we had was a line item that exists now 
for economic research. This is just a subset of the whole 
budget for advocacy.
    When the story is told to Congress, it is a good story and 
they respond. We were able to increase that budget about 35 
percent based on the fact that we told the story and they 
recognized how good the story was. Without a line item, groups 
like myself cannot tell that story because the appropriators 
have no control over that budget. We are not afraid of 
different organizations incurring in that budget when we can 
have transparency with it.
    We feel very confident that when the story is told, people 
will respond. Members of Congress do respond. That is something 
that we would very much encourage, is the line item. Thank you.
    Chair Snowe. So you think it will make a difference?
    Mr. Coratolo. It will make a very big difference. It allows 
us as small business groups to defend that particular 
organization and encourage proper funding for that 
organization.
    Chair Snowe. Well, my bill isn't creating--we were just 
talking about it--my bill isn't creating a separate office.
    Mr. Coratolo. No.
    Chair Snowe. It is obviously strengthening internally the 
independence of that office. But Tom, can you explain and 
respond on some of the issues, and I know Allen wants to speak 
on this, as well. Maybe we will have your comments and then we 
will go to Tom.
    Mr. Neece. I represent the Small Business Legislative 
Council as its elected Chairman. I have known Jere Glover for, 
I guess back in the period way back into the 1970s. I actually 
worked for this Committee as a staff person at the time of the 
passage of the enabling legislation for advocacy and staffed 
the hearing for the first confirmation of Milt Stuart, or his 
only confirmation, but for the first advocate. So I have 
watched this program very carefully over the years.
    Chair Snowe. What year would that have been?
    Mr. Neece. Pardon?
    Chair Snowe. What year would that have been?
    [Laughter.]
    Chair Snowe. No, I am----
    Mr. Neece. We don't want to talk about the years, because--
--
    Chair Snowe. Seventy-eight?
    [Laughter.]
    Mr. Neece. I will be quick to----
    Chair Snowe. In the late 1970s, I came to Congress. So it 
was 1978?
    Mr. Neece. Actually, back in 1975.
    Chair Snowe. Nineteen-seventy-five. That was just before.
    Mr. Neece. I was going to say, I will be quick to add that 
I have known Frank almost as long, so that dates him, as well.
    [Laughter.]
    Mr. Neece. They were both terrific advocates----
    Chair Snowe. We weren't here when President Eisenhower 
signed into law----
    [Laughter.]
    Mr. Neece. No, but if you want to push the envelope, when I 
first went to work in this town, I worked for the first staff 
director of this Committee who staffed the passage of the 1953 
Act, so----
    Chair Snowe. Okay.
    Mr. Neece. We keep pushing back----
    Chair Snowe. We are getting closer. We are getting warmer.
    [Laughter.]
    Mr. Neece. I am a dinosaur, and the first advocate worked 
for Harry Truman down at--so we could really go back.
    Chair Snowe. Right.
    Mr. Neece. But to get to the point, first of all, we are 
very excited about the introduction of your bill and we would 
hope that you would act on that as quickly as possible. There 
was great debate in the last Congress about what to do with 
advocacy and it lingered and at the end of the day, nothing 
happened.
    No. 2, I would like to reinforce what Jere just said and 
maybe be more blunt about it. He is always very tactful. That 
is, we would not support complete independence of advocacy. We 
think it should have a line item.
    But at the end of the day, I have heard all of these 
advocates say over the years that some time during the course 
of an administration, and maybe more than once, you need to go 
to the well and you need to go to the White House and you need 
to go to the President when you have really got your back to 
the wall and you are trying to prevail on an issue. If you are 
an independent commission, you can never go to the White House. 
In fact, I think you would be shunned by lots of agencies. You 
are still technically part of that Administration, and you have 
got to be very careful about how often you go to the well and 
how often you take on OMB or they are still going to ask you to 
clean out your desk by the end of the day. But the advocates--
--
    Chair Snowe. Did that happen, Frank?
    [Laughter.]
    Mr. Swain. I got a few calls.
    Mr. Neece. He never returned the call.
    [Laughter.]
    Mr. Neece. So we think you have struck the right balance 
with your bill, and I don't mean to prolong this any longer, 
but just to commend you for your leadership on this.
    Chair Snowe. I appreciate that. I think your comments are 
very helpful.
    Yes, Tom.
    Mr. Sullivan. Madam Chair, I do want to point out one 
dynamic that is important for this roundtable to understand, 
and that is that I believe that the utility of a line item 
really is for the future successes of chief counsels. I have 
the luxury of having an Administrator who is tremendously 
supportive and obviously a President who is tremendously 
supportive and that is reflected in the budget. What I think we 
are doing and the emphasis that exists around the table really 
gets at preserving that through a budget method into the 
future.
    I do want to point out two examples, recent examples, of 
how it works with the Office of Advocacy being within the 
government, because it does work best this way and these recent 
examples, I think, point that out in real time.
    The first is our formal working relationship with John 
Graham, who is the President's regulatory advisor, the head of 
the Office of Information and Regulatory Affairs at OMB. Very 
early on in my tenure, we sat down and worked through how our 
offices are going to communicate and we formalized that in an 
MOU which really piggybacks on the successes of folks whose 
counsel I seek frequently, Frank and Jere.
    In March last year when we formalized this memorandum of 
understanding, basically what it said, Madam Chair, was that 
when there are issues of such critical importance to small 
business and we raise them with John Graham, then the small 
business component gets addressed first, and I say that because 
when a rule goes through John Graham's office, there is a 
checklist, I don't know if it is a formal checklist, but in all 
practical senses, it is a long checklist of things to look at--
cost-benefit analysis, duplicative nature of the rule on 
existing law, and so on and so forth.
    When we raise an issue to John Graham that has to do with 
small business, then his office literally drops everything and 
looks at the small business component of a rule package before 
it goes to the Federal Register, and we see results.
    Just last year when EPA was considering putting on a whole 
new Federal permit system for new home construction, we 
exercised our working relationship with John Graham, convinced 
OMB to take another look and work with EPA, and as a result, 
EPA is looking at how to protect new home construction and how 
it affects water runoff by existing permits that will produce 
real environmental protection instead of just throwing a whole 
new Federal permit system, and by trying to fill out new 
paperwork and costing, we estimated a cost of $3,500 for every 
new home. Because small business concerns were brought into the 
picture early, we were able to achieve real results, and that 
was very much at the center of our office being within the 
government.
    Lastly, Executive Order 13272. Last August, the President 
signed an Executive Order that calls on our office from within 
the government to train regulatory agencies in how to do a 
better job considering their impact on small business. So those 
two examples really do bring to light why our office should be 
within the government, but then its independence bolstered 
through a line item budget.
    Chair Snowe. What impact has that had on your staffing 
levels and workload requirements, that Executive Order?
    Mr. Sullivan. Well, the Executive Order really has 
recognized that it is not enough just to criticize government. 
The President wants us to do more, and that is to train 
government agencies on how to do a better job. So we have had 
to look at our staffing and shuffle them around so that we can 
go into a training mode, not necessarily a legal critique mode. 
We have promoted one of our top attorneys, Claudia Rayford 
Rogers, into the head coordinator of our agency training.
    We right now have a request for quotation out on the 
street, so if anyone knows contractors who would be able to put 
together a training module, please have them respond to this 
RFQ immediately because it is a quick one. That training module 
will be put in place so that our legal team and our economics 
team--Madam Chair, we actually are borrowing from Department of 
Transportation a regulatory economist who will be the economist 
role in training agencies on how to do a better job measuring 
their impact on small business.
    We expect to train over the following year and a half just 
over 33 Federal agencies on how to do a better job measuring 
their impact on small business. This is a huge load which will 
cause us to reprioritize where we are directing our resources, 
but we think that with the cooperation of the Federal agencies, 
because basically, it is their boss, the President, who is 
telling them to do this, that we will achieve success under 
current staffing levels.
    Chair Snowe. That is terrific. I am sure that is going to 
make a major difference for the small business community. Can 
you just tell me, if you are at high 40s in terms of staffing, 
I gather the high-water mark was 70-plus staffers, is that 
right?
    Mr. Sullivan. That is right.
    Chair Snowe. I mean, can you do the job effectively with 
all that you have to do with the current staffing?
    Mr. Sullivan. Right now, we have 47 slots. We could do with 
another attorney and another economist, and then we think that 
we can do the job.
    Chair Snowe. Okay. Andrew.
    Mr. Langer. Yes, Madam Chairwoman. I am Andrew Langer with 
the National Federation of Independent Business and I want to 
thank you for allowing us to participate in this roundtable 
today.
    I manage regulatory policy for NFIB's 600,000 members and I 
want to underscore something that Chief Counsel Sullivan has 
said, that this really isn't about his office, necessarily, his 
office today under his counselship. It really is about the 
future.
    I mean, for us, I am always talking about the fact that no 
matter who is in charge, either in the White House or up here 
on the Hill, new regulations are always being proposed and they 
are always having an impact on our members, and the fact is 
that there is but one office whose sole job is to stand inside 
government as a barrier between those regulations and their 
impact on our members and those small businesses who aren't our 
members, and that is the Office of Advocacy.
    The fact is, we support this line item because we believe 
that it will allow for a great deal of transparency in the 
future in terms of how budgets are created for the office, but 
also protect it from predation from other entities within the 
SBA itself, and that is a key issue. When times get tight, it 
is no surprise that they are going to be looked at as one of 
the ways for a great agency like the SBA to save money, and we 
believe that, frankly, with the dollar return that the Office 
of Advocacy provides, there is no reason for that to happen.
    So we support the budgetline item wholeheartedly. There are 
other issues we support, as well, but I will save those for a 
later time.
    Chair Snowe. Thank you.
    Ron Newlan.
    Mr. Newlan. Madam Chair, I am Ron Newlan with the HUB Zone 
Contractors National Council and I would like to go on the 
record as saying I don't know anybody that has testified today 
that remembers when these hearings were lit by candles.
    [Laughter.]
    Mr. Newlan. I am not part of that group. You and I don't 
remember those days, but I do know, as the only national trade 
association for an organization or program that has a line item 
in the SBA budget that continues to get zeroed out by the 
appropriators year in, year out, which we would think, and very 
few at the table, I hope, would disagree with me, that the HUB 
Zone program is as near to America as apple pie and motherhood. 
So is the Office of Advocacy, and the battle will still be 
ahead if they do get the line item, and we fully support that 
and we support your bill. But the battle will still be ahead to 
get the appropriators to put up the money. Thank you.
    Chair Snowe. Thank you for those comforting thoughts.
    [Laughter.]
    Chair Snowe. Anybody else who cares to comment on the 
Office of Advocacy? The Ombudsman program, anything in that 
department?
    [No response.]
    Chair Snowe. Okay. Then I guess we will move on to the 
entrepreneurial development programs. Obviously, they had a 
range of issues there and obviously there are various methods 
of delivering. You folks deliver in the field all these 
important resources and assistance to the small business 
community. So I would hope that you can share with me some of 
the lessons that have been learned from your experiences and 
what we can do better as we approach this reauthorization.
    Who cares to begin, anybody? Small Business Development 
Centers, Women's Business Centers? Okay.
    Ms. Au Allen. Thank you very much. I did not get the 
message until this morning that the hearing had changed----
    Chair Snowe. Oh----
    Ms. Au Allen [continuing]. I have been on travel, so I am 
sorry I missed earlier, but I do want to add my 5 cents in.
    I think that the Office of Advocacy has done a terrific 
job. I enjoy reading the e-mail that you send to me as to what 
is going on and what other news comes out of your office.
    On the issue of entrepreneurship, one other thing that we 
have to pay attention to is how to bring the small businesses 
at a level where they could actually sustain. Oftentimes, 
corporations and government would say that, ``Well, we have X-
number of small and minority businesses in our fold and we are 
doing business with them''. When you really cut through the 
chase and will go in and see, well, how many are you actually 
doing business with, there are very few.
    I know that with government and corporations, one of the 
problems is if they were to be introduced to a new business, 
they say that, ``Well, I have to replace the incumbent. My 
buyer has been doing business with Mr. X for 5 years and we are 
quite happy with Mr. X. Now you bring Ms. Y in. Well, to give 
Ms. Y the business, Mr. X will have to be replaced. You have 
got to come up with some creative way to deal with the 
replacement of incumbency''.
    One way, and I was at the U.S. Postal Service 2 days ago 
and talked to the chief procurement officer and he was looking 
for ideas, and I said, ``You know what? What we would want to 
do is''--it is a difficult decision to ask a buyer or an agency 
to replace a competent incumbent, but at the same time, while 
you see others waiting in line outside of the door looking for 
the opportunity, it is to see that if there is an increase in 
expense in purchasing dollars, then it behooves the agency and 
the buyers to think, well, the increase in span should go to 
somebody else other than Mr. X. That is one.
    The other is, sometimes corporations especially, they throw 
the dollars at a small business and say, ``Well, I am giving 
you so much money, so much business. Now go.'' But they do not 
look at how they operate. They do not help mentor them about 
the management, about the financial processes, and also their 
strategic alliances with other companies, and as a result, they 
cannot sustain the operation. After a few years, they go out of 
business.
    In the telecommunications industry in the last 10 years, we 
had a study that out of the seven companies that were the 
largest company in the TI industry, three had gone bankrupt and 
they were touted, lauded, put on a pedestal as the most 
successful ones.
    So if there is something you can talk about in particular 
in these dialogues as to how do we, first, increase the number 
of small and minority-owned businesses who could benefit from 
the Small Business Administration program. Second, is to also 
continue to look at them and see whether the businesses can 
actually sustain the test of time.
    Chair Snowe. They are not getting the right guidance and 
assistance?
    Ms. Au Allen. Sometimes, businesses are given a big 
contract but they do not--management-wise, they do not have the 
skills. So they will go out and try to produce, but in the end, 
they are not operating in the company right and they go 
bankrupt. I will be happy to give you more information on this.
    Chair Snowe. Absolutely, yes. No, I would be interested in 
that because I think that would be useful.
    Ann Sullivan.
    Ms. Sullivan. I would like to start by just saying what we, 
as Women Impacting Public Policy, how we view the programs in 
SBA. In the Small Business Act, it says that with regard to 
women-owned businesses, the SBA programs should, (A) vigorously 
promote the legitimate interests of small business concerns 
owned and controlled by women; (B) remove insofar as possible 
the discriminatory barriers that are encountered by women in 
accessing capital; and (C) require that the government engage 
in a systematic and sustained effort to identify, define, and 
analyze those discriminatory barriers facing women and that 
such effort directly involve the participation of women 
business owners and the public-private sector partnership, and 
so that is how we evaluate the programs that you are talking 
about.
    Our members tell us that the SBA does a terrific job of 
working with people that want to just start their business. 
They have many resources for them. The centers provide that. 
What our members are telling us is that there is not much 
beyond that at the second stage of your business, when you are 
growing it from 10 to 50 or 50 to 100. At that point, the 
resources really drop off and our members would like to see a 
refocus or a larger emphasis on the SBA's, their resources to 
help businesses in those stages of development. Most women 
businesses are in first generation, so they don't have a lot of 
experience with that next level. That is where they could 
really use the help.
    Chair Snowe. What is the response, I mean, in terms of if 
somebody does, you know, a woman business owner wants to go to 
the next level? There isn't that kind of assistance?
    Ms. Sullivan. There just isn't much.
    Chair Snowe. They don't have enough staffing and funding to 
provide people----
    Ms. Sullivan. Right, and there is not a lot of expertise--
--
    Chair Snowe [continuing]. Guidance on expansion?
    Ms. Sullivan. Yes, and there is not a lot of expertise to 
help them beyond that level. There are--I see SCORE is here. 
Those are retired executives that can help. But the whole focus 
has really been toward----
    Chair Snowe. Start-ups.
    Ms. Sullivan. Right. So we would like to see that shift, if 
possible.
    Chair Snowe. Do you have much demand on the expansion 
level?
    Ms. Sullivan. Yes.
    Chair Snowe. You do?
    Ms. Sullivan. Yes.
    Chair Snowe. It would be interesting to know the difference 
for those who don't receive that type of assistance in terms of 
expanding but move ahead and do so, whether or not they are 
successful or do they fail.
    Ms. Sullivan. We would be happy to poll our members on 
that, because that is an interesting question that we would 
love to find the answer to.
    Chair Snowe. Yes.
    Ms. Sullivan. I would also like to, if it is appropriate, 
just talk a little bit about Women's Business Centers, another 
issue that is real important to us. As I understand it, Women's 
Business Centers, for the first couple of years, are funded 50 
cents to the dollar. They have to come up with in-kind and 
cash. The third year, it goes to dollar-for-dollar match. But 
after 5 years, you are on your own.
    We would like to see resources at the Women's Business 
Centers directed toward the people that they serve rather than 
chasing corporate money and we feel that the centers are 
providing services that help the economy because they are 
helping businesses grow. We think it is a good investment on 
the part of the government to do so.
    Chair Snowe. So you support extending it beyond the 5 
years?
    Ms. Sullivan. Yes. We think it is critical.
    Chair Snowe. Sustainability grants.
    Ms. Sullivan. Absolutely.
    Chair Snowe. That certainly will be under consideration, 
because I know a number of centers would be closing.
    Ms. Sullivan. Right. That is what we feel.
    Ms. Street. Good morning and thank you, Madam Chair, for 
providing this roundtable this morning and giving us an 
opportunity to discuss the entrepreneurial development 
programs. I am Kaaren Street and I head up the Office of 
Entrepreneurial Development for SBA.
    I would first like to talk about all of our programs. We 
believe that the entrepreneurial programs are the backbone for 
entrepreneurs to survive and grow in America. We also believe 
that we have made tremendous strides. I am proud to say that we 
served over 1.5 million clients in the year 2002. That is up by 
250,000 clients over the previous year, with basically a flat-
line budget. Our resource providers are some of the best in the 
country and we are really proud of them. We have SCORE, the 
SBDCs, the Women's Business Centers, our Business Information 
Centers, and our new program that is coming on board, our 
Native American Economic Impact program. So we are moving 
forward and progressing.
    Our Women's Business Centers are one of our prizes in terms 
of providing services to women-owned businesses. That program 
has been in existence for quite a while. It started out 
primarily serving, as Ann mentioned, entry-level, pre-start-up, 
and pre-business clients. We have been requiring new centers 
that come on board to provide a balance to that and provide 
services for first-stage and second-stage women-owned 
businesses, as well.
    Most of our programs, at first blush, appear as if there is 
some duplication, and we are accused of that quite a bit. But 
if you look closer at them, they all have their own particular 
niches. The Women's Business Centers, to a large extent, have 
been focusing a lot of their energy and resources on the start-
ups, which there are many of, and the fastest-growing segment 
is women-owned businesses in terms of start-ups. It is a huge 
number of women. They are growing at a faster rate than any 
other segment of the business. So there needs to be some 
mechanism in place, a process in place to provide that service 
and the Women's Business Centers clearly are doing a great job 
at that.
    The second is our Small Business Development Centers, which 
to a large extent deal with businesses who are already existing 
from the first year on into their fast-growth period, so that 
they tend to focus, to a large extent, on those existing owned 
businesses.
    SCORE, another one of our gems, to a large extent focuses 
on the counseling, and they do across-the-board counseling, but 
primarily on the pre-business or early-stage business 
development.
    So each one of them have their own particular area. All of 
our programs are serving women in large numbers. Our SCORE 
program serves--almost 41 percent of their client base are 
women, and our SBDCs, almost at the same rate. So we are 
serving women in all of our programs throughout. The Women's 
Business Centers are exclusively serving women, and to a large 
extent, the small start-up, self-employed women.
    So we are trying to address Ann's commentary about having 
more programs for women in the advanced stages, but there are 
other programs within SBA that these women can avail themselves 
to, and there clearly are the SBDCs, SCORE, and other parts of 
our system.
    Chair Snowe. Do you think there are sufficient resources to 
do that?
    Ms. Street. Yes, I do. I think so. I think that, more or 
less, we have a marketing program to let people know more about 
our programs and that is going to be extremely helpful to us, 
and in terms of letting people know that they don't have to be 
exclusively in the Women's Business Center to get technical 
assistance, business information, and entrepreneurial programs. 
They can get those services throughout a wide network. The 
SBDCs are there for them. They are on many college campuses in 
the United States. Also, SCORE is there for them, and it is 
proven that women are utilizing those programs.
    Chair Snowe. Can you just address or offer comments on the 
sustainability grants? I know that is something the 
Administration doesn't support, but if we want to have centers 
in every State and so many will close--I guess approximately 
26, is my understanding, will close in 2004 without any type of 
sustainability grants, and so I wonder what the objection is.
    I mean, doesn't it make sense to continue those that are 
already operating successfully as opposed to just continuing 
with the creation of new ones? Shouldn't there be sort of a mix 
here? These centers obviously serve a vital purpose, so doesn't 
it make sense to continue to fund with those that are working 
well and at the same time add into the mix the creation of new 
ones?
    Ms. Street. I would be happy to respond to that. First, I 
would like to talk about the intent of the legislation that 
created the Women's Business Centers. It was created with a 5-
year program and it was only in 1999 that the pilot, and it is 
clearly a pilot for a 4-year period, would add the 
sustainability component to the program. It was a pilot to see 
how it would work out and it would have to be reauthorized in 
order for that pilot to become part of a major program.
    Part of the application for Women's Business Centers 
requires the applicant to have a plan in place for graduation 
out of the program. It was not a program that was designed to 
be for perpetuity. In fact, the centers that came into being 
from the beginning did not have any sustainability. Only since 
1999 has the sustainability process been in place.
    We have no record or no evidence to say that, provided if 
those sustainability funds are not available, for those who 
will be graduating out of the program after their fifth year, 
they will not survive. Many of those programs do have other 
sources and have been encouraged along the way to begin to 
start looking at funding elsewhere other than SBA.
    Some of our Women's Business Centers have been receiving 
funds for 8 years, 7 years, 6 years, and well beyond--through 
the sustainability process. We are planning to look at the 
Women's Business Centers who may have difficulty in sustaining 
themselves beyond the 5 years and provide capacity building 
workshops, training, et cetera for them.
    Also, another thought that we were working with is that 
some of our Women's Business Centers who have graduated have 
moved on to become Women's Small Business Development Centers 
and we would like to see a lot more of that happen, because 
there, we can have the sharing of the funding, working with the 
SBDCs, and that is an important feature, as well.
    So really, our objective in not reauthorizing the 
sustainability is to try to get some diversity in geography, 
which we do not have, and that is a clearly important feature. 
Some of our centers are concentrated in certain parts of the 
country, and they are really an important feature with this.
    I brought a map along with this just to kind of give you a 
sense of where we stand in terms of our--these red stars, if 
you can see them from there, represent sustainability, those 
Women's Business Centers who are in sustainability. They are 
receiving sustainability funding beyond their 5 years.
    Chair Snowe. The ones that are lit up?
    Ms. Street. Yes, the ones that are lit up.
    Chair Snowe. How many are there of those?
    Ms. Street. Twenty--that are in sustainability now, there 
are approximately 29.
    Chair Snowe. Twenty-nine?
    Ms. Street. Twenty-nine that are in sustainability. But 
there are some pockets of the country where there are fast-
growing business areas for small businesses, especially women-
owned businesses, where we have very little, minimal 
penetration. We have no Women's Business Centers in southern 
California, none in Los Angeles, none in San Diego. We have 
also needs in Texas. We have--if you can see, most of them are 
concentrated in the Northeast and in New England and----
    Chair Snowe. Why is that, out of curiosity?
    [Laughter.]
    Chair Snowe. We are not complaining about that, but is it 
because the entrepreneurial spirit is thriving there or what?
    [Laughter.]
    Ms. Street. We have no centers in Las Vegas or Reno. We 
have no centers in Portland, Oregon. We would like another 
center--we would love to have another center in Minnesota. We 
have none in Portland, Maine, Bangor, Maine. We have none in 
Miami, none in Orlando, none in Tampa. The one center that we 
do have in Florida is located way on the border of Alabama 
here, which kind of serves the Alabama side of it.
    In an ideal world, we would love to have them all and we 
would love to have the sustainability and bring on new centers. 
But we are pretty much a victim of our funding. We have $12 
million. Thirty percent of that $12 million is dedicated to 
sustainability through the pilot program. Without the pilot 
program, or without the pilot program continuing, we would have 
that opportunity to reallocate to the geographical areas that 
are in desperate need for centers and want them.
    We haven't agreed that there should be a center in every 
State. There are some States that are large enough and have the 
fastest-growing businesses that should have two or three or 
maybe more Women's Business Centers. So we are not trying to 
make sure that every State has one. There has to be a 
demonstrated need for them there.
    Clearly, we go on. In New York, I mean, we could go on with 
more, Buffalo. In Syracuse, New York, I mean, those are fast-
growing areas. Cleveland, Ohio, has no centers. Pittsburgh has 
none. Richmond has none. Charleston, South Carolina, none of 
those--there are places that we really can use these centers 
and we just don't have the resources to do them.
    By continuing to fund these sustainabilities, it limits the 
growth of these centers. Now, I am not certain and we don't 
know the answer as to whether or not by not having 
sustainability, whether or not these centers are going to go 
out of business. I mean, that is what we have been hearing, but 
we have been working with them and we would like to continue 
that process so that that doesn't occur. A good number of them 
have already been receiving funding for 8 years, 7 years, and 6 
years into the program.
    So that is our position. We would like to try to see--to 
make sure that we have the geographical diversity. In some 
cases, some of the most very closely concentrated, they are in 
this particular area. We have some within a 30-mile, 40-mile 
area. So we are looking at the geographical dispersion of these 
centers. It is critically important, and we know OMB is going 
to look at that, as well, in terms of also the economic impact 
of these Women's Business Centers.
    Chair Snowe. So what do you think would happen to those 
Women's Business Centers if they don't have sustainability 
grants? I mean, do you think it would be appropriate to have 
them compete for SBDC grants?
    Ms. Street. We certainly would work with them to transition 
them to the SBDC program, to have Women's SBDC centers. We have 
five of those already in the system that are working very, very 
well.
    Chair Snowe. What is the longest time period that a Women's 
Business Center has been reseiving a sustainability grant?
    Ms. Street. Eight years.
    Chair Snowe. Eight years?
    Ms. Street. Yes.
    Chair Snowe. What do you expect to happen to those centers 
if they don't receive continuing funding?
    Ms. Street. I think the ones who are strong will continue 
on and they will get--they have had 8 years to grapple with 
this situation. Some of them--the ones who have been in the 
program 8 years didn't have sustainability even earlier. 
Sustainability came in 1999, so it has only been in existence 
for 4 years. So they were sustaining themselves even up to that 
point.
    Ms. Forbes. They were funded. The program started with a 3-
year grant and it was extended to a 5-year grant and then there 
was sustainability. So there is no period of time that they 
haven't received the Federal portion to attract the match. So, 
I mean, it is just not----
    Ms. Street. Yes, it is five plus the----
    Ms. Forbes. Right, but there is no--I mean, you were making 
it sound like----
    Ms. Street. I am not saying there was a gap there.
    Ms. Forbes. Okay.
    Ms. Street. I didn't mean to imply there was a gap.
    Chair Snowe. Okay.
    Ms. Street. I don't know of any evidence that a good number 
of these centers will close. Maybe some will. I am not certain 
of that. I can't say that that is not going to happen to some 
of them.
    Chair Snowe. They are working so well----
    Ms. Street. That is true.
    Chair Snowe [continuing]. It is unfortunate not to be able 
to find some way to continue their operations, but at the same 
time, addressing some of the other issues, and I realize it is 
all a question of funding. We will have to, obviously, look at 
that. How do you know what the demand is for creating Women's 
Business Centers?
    Ms. Street. Well, we have had quite a few applicants. Every 
time we have--we have not been able to open more than two to 
three a year.
    Chair Snowe. What is your demand?
    Ms. Street. Our demand, we have an application out now for 
three centers and with that we have over 100 applications in 
for that, for those three centers.
    Chair Snowe. In some of the areas that you say----
    Ms. Street. Yes. In fact, we are giving extra points to 
those areas that are underserved.
    Chair Snowe. That aren't represented?
    Ms. Street. Yes, that aren't represented.
    Chair Snowe. You don't have any, in Los Angeles----
    Ms. Street. None.
    Chair Snowe [continuing]. Or in southern California?
    Ms. Street. No.
    Chair Snowe. Do you have applications from that area?
    Ms. Street. Yes, we do, from San Diego, yes, and from 
Florida, both places.
    Chair Snowe. Mr. Homer.
    Mr. Homer. Thank you very much. Madam Chair, thank you for 
the opportunity for the National Indian Business Association to 
be here today to participate in this roundtable. I think that 
is very important, that we all share some of our issues.
    I want to get into and I want to report on the Native 
American entrepreneurial development, specifically a bill that 
is coming down the line, in fact, the House bill, 1166, passed 
the House and will be submitted and transferred to the Senate 
Committee on Small Business and Entrepreneurship.
    The House bill passed and is going to amend the Small 
Business Act to include specific funding for Native American 
businesses, and, of course, that is a legitimate one. This 
amendment has been a long time coming, and for the past 20 
years, there have been critical needs for SBA business 
development assistance in Indian country.
    NIBA has two amendment concerns that, if implemented, would 
hamper or may not expand or improve business assistance to 
Native American businesses. First would be the SBA delivery 
service provider, and the second is the SBA central 
administrative office for the program.
    H.R. 1166 recommends the funding of State non-Indian-funded 
business development center programs to deliver business 
development services to Indian reservations and communities. We 
have nothing against the Small Business Development Centers. 
They do great in Phoenix and Tucson and Albuquerque and Las 
Cruces. But on Indian reservations over the past years, they 
haven't done such a very good job.
    In the past 10 years of existence in NIBA, I have not seen 
an improvement, an expansion of services to Indian country by 
the Small Business Development Center program who have been 
receiving funding for many, many years for all minority 
programs. Statistical reports of the 13 Western States with 
substantial Native American populations have not received 
substantial SBA training and 8(a) certification, HUB Zone 
certification, 7(j) assistance, veterans', women's assistance, 
loan programs. Bonding is nonexistent.
    If Congress wants to expand and improve business assistance 
to Indian country, NIBA recommends the following changes in the 
bill that the Senate will get. Instead of funding State non-
Indian small business development programs, legitimately, 
funding should be established for the SBA Tribal Business 
Programs who have been established for the SBA programs, who 
have been providing services to Native Americans in the 13 
Western States for the past 6 years.
    Tribal colleges, 31 total exist out there to receive 
training and technical assistance money. Intertribal 
organizations and organizations such as the National Indian 
Business Association and some of the National Indian Chambers 
could receive and be training providers. NIBA recommends that 
the SBA's office in Washington, D.C., the Office of Native 
American Affairs, which was implemented in 1992, be the 
administrator of the program instead of the Small Business 
Development Center Program.
    We feel very strongly that these changes are important for 
expanded and improved programs. So I am looking at that as one 
of the really enhanced recommendations from Indian country, to 
go ahead and provide the funding to those Indian colleges, 
Indian universities, 31 Indian colleges, 33 universities, 
instead of some of the other colleges in Phoenix or Las Cruces, 
Albuquerque, New Mexico.
    Chair Snowe. Ms. Street, can you respond to some of the 
issues that Mr. Homer raised? I would be interested in getting 
your perspective on this, and also about the Tribal Business 
Information Centers. Does that provide any support for what Mr. 
Homer is referring to?
    Ms. Street. Yes, it does----
    Chair Snowe. But obviously deficient in terms of the issues 
that he is raising.
    Ms. Street. The Tribal Business Information Centers were 
discontinued in the last fiscal year. We are replacing that 
with a new program. It is a Native American economic 
development program that has just been funded for this year to 
provide economic development services through tribal 
organizations as working closely with the tribal colleges as 
well as the tribal universities.
    I agree with my colleague in terms of the SBDCs having the 
role already established in their charter to provide services 
to the Native American community. We have been working very 
closely with them to expand that proposition. At the same time, 
we are very pleased to say that we are implementing a very 
comprehensive Native American program that is in--we just hired 
a Director of our Office of Native American Affairs who is 
going to begin work next week, who is going to lead this 
effort, and we certainly have been working on it up to this 
point in time.
    That kind of leads into my response that our response that 
we had in terms of the SBDC, opening it up for competition, 
because we don't believe that the SBDCs, as good as it is, can 
be all things for every business, and in this particular case, 
I think the services for Native Americans are better served 
with Native Americans provided that service at the tribal 
college and tribal university level as my colleague stated.
    Chair Snowe. Mr. Homer, do you----
    Mr. Homer. That is very good. Thank you. That is a very 
good response. We will work with you on that. Thank you, 
Kaaren.
    Chair Snowe. First, Ellen Golden, and then Marilyn.
    Ms. Golden. Thank you. Thank you, Senator Snowe, for 
inviting me here today for this roundtable. I am Ellen Golden 
and I am here wearing two hats. I am the President of the 
Association of Women's Business Centers and I am also Senior 
Program Officer for Coastal Enterprise and manage a Women's 
Business Center in Maine.
    I would like to set the record straight. Ms. Street said 
that there is no Women's Business Center in Portland. In 
reality, Coastal Enterprises provides extensive services to 
women business owners across the State, and certainly 
Cumberland County, which is one of our most densely populated 
counties, gets their fair share of services. So we needn't 
worry about that.
    I want to make a number of points here, and I will be 
submitting more extensive written testimony for the record.
    First of all, going back to the history of the program, I 
appreciate Patty Forbes making clear that there has been an 
evolution over time, and that is, of course, the evolution in 
the Women's Business Centers program has been accomplished 
through extensive and remarkable bipartisan support of 
Congress, and we really appreciate your help in terms of 
growing and strengthening the program.
    In response to the comment that there is no evidence that 
the programs will survive, I think that that is true. On the 
other hand, we have some extensive experience in terms of what 
goes on currently within the program and I can say that there 
is evidence that certainly some programs will not survive. Just 
this past year, we were saddened to lose a very old and well-
established program in Long Beach, California. They were unable 
to come up with their match, so they decided to close their 
doors.
    So even with sustainability, there are certainly challenges 
for the Women's Business Centers program, particularly in this 
funding environment. I am sure you are all aware of the fact 
that it is extremely difficult. Foundations don't necessarily 
have the capacity to fund what they did. Even banks are no 
longer providing the kinds of dollars that they did a few years 
ago, and I know in a rural State like Maine, where there has 
been a restructuring of the banking industry. In many cases, 
the larger banks are now owned by out-of-State corporations and 
we are no longer competing on a local basis but we are 
competing nationally for shrinking funds.
    I would say that the importance of the availability of the 
SBA grant cannot be underestimated. I think it is so much 
easier to have that as a foundation and use that as a catalyst 
for leveraging the non-Federal match. I think without that, I 
think a lot of the centers would, in fact, disappear or really 
be compelled to significantly reduce their capacity at a time 
when we know that this is a growing and increasingly vital 
sector of the economy.
    I think the other piece that can't be underestimated is the 
existence of the SBA funding that serves to give programs 
significant credibility. It helps the centers position 
themselves so that they are, in fact, better able to secure 
additional funds. I know it has been a huge factor for us and I 
know that is true for other organizations across the country.
    In terms of the sustainability program, clearly, the 
association would strongly recommend that we make the 
sustainability pilot a permanent part of the Women's Business 
Centers program. We think it is incredibly important to invest 
in those organizations that have demonstrated that they have 
the capacity to successfully meet the program goals of the 
Women's Business Center program.
    I am sure that everybody here knows that it was a 
competitive process and that each Women's Business Center goes 
through an annual programmatic and financial review. So we are 
certified as being able to deliver the program effectively.
    I think it is also important to understand that it takes 
time to build a successful program. It takes time to attract 
and build staff capacity. It takes time to really understand 
the market, to understand what services need to be delivered, 
to build that kind of trust, visibility, and credibility in a 
marketplace. It takes time to build successful partnerships 
that increase the efficiency and effectiveness of program 
delivery. It takes time, again, to establish the funding 
relationships that allow us to generate the non-Federal match.
    According to my calculations, if we eliminate the 
sustainability program, we not only eliminate the 26 centers 
that would be eligible to apply next year for sustainability, 
but we eliminate those that are currently benefitting from the 
sustainability pilot. In effect, we end up eliminating two-
thirds of the current centers. In other words, we eviscerate 
the current infrastructure that is providing services.
    I think it is just unconscionable to do that. I think that 
is an incredible waste of Federal dollars, when we have been 
investing in carefully building an infrastructure over the past 
X-number of years.
    The other thing I think is important to understand is not 
only do we lose that existing capacity, but the existing 
centers, particularly through the Association of Women Business 
Centers, serve as mentors for those new centers that are coming 
on board. I know that I have personally, and I can think of 
many other existing centers who have nurtured centers right 
from the ``thinking about applying'' stage, through the 
earliest stages of starting up their center, to trying to 
understand what the best practices in the field are.
    If you get rid of the sustainability centers and those who 
become eligible next year, you also lose that capacity to 
provide mentoring and ongoing support to new centers.
    So what we would like to see, and I hope that we will have 
your support in this, we would like all the Women's Business 
Centers who have demonstrated their capacity to deliver the 
program effectively to be eligible for 5-year funding on an 
ongoing basis, obviously subject to the annual programmatic and 
financial review.
    We would like to see that the sustainability and existing 
centers have priority over new centers, although we would 
certainly like to see adequate funding to have new centers in 
those areas that are currently underserved.
    We would request that Congress would authorize funding 
levels for the next 3 years at $14.5 million, $16 million, and 
$17.5 million, which we think will be adequate to support the 
current infrastructure and still allow for new centers to come 
into existence.
    One or two other points. I can appreciate what my colleague 
said earlier about services for existing businesses. I do think 
that that is something that is variable, depending on the 
specific market that Women's Business Centers serve. There are 
a number of centers that are providing services for existing 
businesses. I think each center tries to develop services that 
fit into the context of their market area.
    Lastly, in response to what Ms. Street said about 
transitioning the Women's Business Centers to the SBDC funding, 
quite honestly, I just don't think that that is realistic. I 
know that my colleague from Maine, the Director of the SBDC in 
Maine, who is here with me, is happy to work with me. I am not 
sure that he is happy to share his funding with me.
    [Laughter.]
    Ms. Golden. Thank you.
    Chair Snowe. Thank you, Ellen.
    Okay, and then we will go back to some of the issues.
    Marilyn Carlson.
    Ms. Nelson. Thank you, Madam Chair. Thank you for inviting 
the National Women's Business Council to be a part of this 
roundtable discussion. We welcome this opportunity to share our 
views of our mission, of our current activities and future 
plans very briefly and we will submit our written testimony, as 
well.
    Since my appointment in May of last year, we have been 
moving ahead on a number of fronts. The council is now fully 
staffed. Joining me here today is our Executive Director, Julie 
Weeks, who was formerly of the Center for Women's Business 
Research and the SBA's Office of Advocacy. So she comes, I 
think, with a great deal of skill to help us accomplish our 
mission.
    My vision for the council is to be regarded as a trusted 
source of fact-based information for public policy change, to 
be a connective force for the women's business community with 
one another and with the public policymakers, and to be a 
leading and respected advocate for women's business community.
    The National Women's Business Council is the government's, 
at this time, the government's only independent voice for women 
business owners. This responsibility is critically important to 
policymakers in both parties who are committed to understanding 
and supporting women business owners.
    The only entity in the Federal Government which can be 
counted on to represent the most informed, diverse, and 
bipartisan views of women business owners and what we need to 
succeed is the National Women's Business Council. If I may 
borrow some wise words I read this morning in the Washington 
Post, it is possible that we could say that the council tries 
to bridge the differences on issues that are important to women 
business owners.
    To that end, the council is committed to supporting women 
business owners at all stages of their growth, from start-up to 
success, and certainly with an eye to what Ann Sullivan has 
mentioned, to significance.
    In our 2002 annual report, you are going to find greater 
detail about our activities, but let me briefly share one 
project to illustrate how we are encouraging more and more 
women business owners to participate in the public policy 
arena. We have just launched a monthly conference call that we 
are calling the ``Women's Business Connection.'' These toll-
free calls feature speakers discussing important business 
issues. They offer an opportunity for people to ask questions, 
to learn from each other, and to get more involved in public 
policy.
    Joining us last month, as an example, was Administrator of 
the Office of Federal Procurement Policy Angela Stiles. She 
spoke about the new contract bundling regulations that were out 
for public comment and urged those on the call to be informed 
and to express an opinion.
    This month, we will discuss the issue of military 
reservists who are being called to active duty and what 
assistance is available to small business owners who are 
temporarily without very valuable employees.
    We would be delighted to invite any of the Committee 
Members to be a guest speaker on an upcoming call, or indeed if 
you have topics, and I imagine that you do, to suggest topics 
to us that we might discuss on those calls.
    Now on the matter of the council's reauthorization. Let me 
first say that, in general, the NWBC statutory authority is 
sufficiently broad and addresses the key issues facing women 
business owners. So we don't have a need for a major change in 
the language. There are some minor changes that we have 
submitted in our written testimony.
    But there is a point of confusion as to how the council's 
organizational members are to be treated. Women Impacting 
Public Policy, right away, is a member of our council. Six of 
the fifteen council members are to represent women's business 
organizations. We believe that the intent of the structure is 
to have organizations, as well as women business owners, 
comprise the council. However, in the past, when an 
organizational member has left their position in the 
organization, the SBA has interpreted our organizational 
membership in such a way that it has been difficult to replace 
the individual in that seat with another member of that 
organization to serve out the term and we would be very 
appreciative of some clarification on this issue.
    Then there is also reference in our statutory authority to 
the Interagency Committee on Women's Enterprise. As written, we 
are charged with advising, consulting, and meeting with this 
Committee on an ongoing basis. This Committee is currently not 
active. I don't know if it is not active or nonexistent, but in 
any case, we haven't been able to fulfill that piece of our 
responsibility.
    [Laughter.]
    Ms. Nelson. Our suggestion would be that rather than 
waiting for an interagency committee to be reconstituted, we 
might offer that the council could, on an annual basis, conduct 
a meeting with the relevant Federal agency representatives to 
inform them on the activities and to solicit views on issues 
related to women enterprise development.
    Finally, I would like to address the issue of support for 
women business owner-focused programs. I don't believe I need 
to tell most of you here of the economic importance of women-
owned businesses in this country, certainly at a time that we 
are all looking to reignite this economy. For the record, we 
represent over nine million businesses and growing. We need one 
of those, like McDonald's, one of those signs that keeps 
telling you how many we have at the moment----
    [Laughter.]
    Ms. Nelson [continuing]. Because we are growing so fast. We 
employ 27.5 million workers and contribute over $3.6 trillion 
in annual revenue, and we are growing at a number twice the 
rate of all firms.
    Sustainability becomes an important issue for these start-
up firms, and sustainability beyond the very nascent period. I 
think of it as seedlings and saplings and then the large mature 
trees.
    Despite the growth, there are still inequities, such as the 
fact that we receive slightly more than two percent of Federal 
procurement dollars and a similarly low share of venture 
capital investment. The playing field is not yet level. Women 
need environments which acknowledge their unique style of 
learning and address specific circumstances.
    One example of a program that addresses these needs is the 
Women's Business Centers program, and certainly over the last 5 
years alone, the budget for these programs has increased from 
$4 million to $12.5 million. The number of supported centers 
has grown actually from 27 to 81, and the number of clients has 
increased from 8,000 to 86,000. In my business, that would 
demonstrate a need and the ability to fulfill a need. Thus, we 
can notice that the budget has actually tripled in the past 5 
years, but the number of clients has increased more than ten-
fold.
    We are also keenly aware of the debate on sustainability 
and we think that the debate is probably justified. Evidently, 
the performance and the effectiveness of these centers is 
uneven. Many of us who have businesses with operations across 
the country or across the world recognize that, inevitably, 
there is unevenness. There is no question about that.
    The Women's Business Council needs some time to understand 
the real issues surrounding this, to look more closely at the 
research, to really understand best practices. We appreciate 
the value of the centers. We appreciate the importance of 
making sure that we are leveraging every Federal dollar, and we 
are going to definitely monitor this extremely important issue 
and work with our friends, both in the women's business 
community and at SBA, to try to come up subsequent to these 
deliberations with a better understanding and to actually weigh 
in on the issue after we understand better what the research is 
available and perhaps even what research needs to be done.
    Finally, there is a growing body of knowledge about women's 
business ownership, but that knowledge is truly scattered. I 
think the lack of real clarity on the Women's Business Centers 
is an example, and it is not presented in a usable form for 
public policy arena.
    The National Women's Business Council, I believe, could 
actually serve a role in gathering and synthesizing on an 
annual basis the best and most relevant research on women's 
entrepreneurship. This ``state of women's entrepreneurship 
compendium,'' if you will, could actually, I think, make an 
important contribution to women's business and policy 
communities and it would be highly anticipated. Congress might 
wish to actually formalize this kind of added responsibility to 
our statutory authority to preserve it beyond my tenure.
    The council is also uniquely positioned to serve as a 
central clearinghouse for all major research on women's 
business issues. However, this possibly could require maybe 
modest additional funding. We believe it could require one more 
staff to do the job appropriately. This has not been in what we 
have applied in our application, but it is really a 
consideration, because once again, we have--we are deeply 
committed to the kind of research that informs these decisions 
for all of us involved because we all, I believe, are looking 
towards the same ends.
    In closing, I just want to say how delighted I have been to 
have been appointed the chair of the National Women's Business 
Council. There are extraordinary women in this country who are 
building businesses, who are looking to participate in the 
American economy and contribute to the vitality over time, and 
I say thank you to all those who have gone before and made this 
possible and to look forward to collaborating with those of you 
at this table to make an even more important difference.
    Chair Snowe. Thank you very much, Marilyn, and I think you 
made an excellent suggestion about a compendium to determine 
the successes. I think that would be very helpful in shaping 
public policy. I think that is an excellent idea.
    Ms. Street, I would also ask that in response to the issue 
Marilyn raised about the interagency committee, whether or not 
it will be active again, can you report back to the Committee 
on its status----
    Ms. Street. I sure will.
    Chair Snowe. and what are the future intentions with 
respect to that Committee?
    Ms. Street. I will, yes.
    Chair Snowe. Thank you.
    Mr. Yancey.
    Mr. Yancey. Thank you, Madam Chairwoman. Thank you for 
allowing me to participate in this roundtable discussion of the 
Small Business Administration's entrepreneurial development 
programs. I am Ken Yancey and I am CEO of SCORE and I am 
representing SCORE's 10,500 volunteers, men and women who 
provide their time and talent in support of America's 
entrepreneurs. The 10,500 volunteers we have represent over 
300,000 years of business experience and know-how. They 
volunteered 1.3 million hours of service last year.
    [Laughter.]
    Mr. Yancey. It is an impressive number, is it not, and 
certainly sufficient to work with existing businesses. They 
volunteered over 1.3 million hours of service to America's 
entrepreneurs last year at a cost to the taxpayer of just over 
$5 million, on an hourly basis, less than the Federal minimum 
wage for very high-quality service.
    Over the last 2 years, SCORE has been working diligently to 
do business more on the client's terms, and to do that, what we 
have been trying to do is improve the quality of our 
organization as well as expand our reach. Since October 1, 
2001, we have opened 96 new branches across the country and 15 
new chapters in an effort to be more accessible to America's 
entrepreneurs in the markets that we now serve.
    We are also working diligently to become more diverse, not 
only as an organization of volunteers, but also from a client-
based standpoint. We have new and emerging relationships with 
organizations that represent the minority community and 
underserved communities, including the NAACP, the U.S. Hispanic 
Chamber of Commerce. Mr. George Herrera has recently joined our 
organization on the Board of Directors to help us do a better 
job in that market, and we have targets with other 
organizations that we will be working with in the future.
    In terms of our outreach, we have also been very successful 
with our e-mail counseling service. Most of you know that we do 
counsel online. We were one of the very early offerers of 
advice online, starting in 1997. Today, we have over 1,100 
volunteers that are available to answer questions online 24 
hours a day, 7 days a week. Our online services grew by 51 
percent last year. We are in the process of actually, for lack 
of a better term, franchising that opportunity to other sites 
around the Internet so that, like we have done in our face-to-
face business, we can expand that reach from an electronic 
standpoint.
    In addition to these things, we have been working 
diligently to improve our quality, and that work has included 
recruiting more people with more current skills. Our turnover 
is roughly 20 percent per year. Mother Nature certainly takes 
its toll on our organization, as you can imagine, and so 
recruiting is clearly our life's blood.
    We find that in our recruiting, we are attracting younger 
individuals. We are also attracting individuals much sooner 
after retirement than we have in the past. The good news is 
that we are not only an organization of retired men and women. 
Ten percent of our organization today is still employed, and of 
our new volunteers, over 25 percent remain active in the 
workforce. So we are getting a current cadre of individuals 
that are willing to volunteer their time on behalf of America's 
volunteers.
    We are working diligently with our chapters to develop new 
core competencies against which we can measure performance and 
continue to improve our quality.
    Our organization has been funded for the last 2 years at 
the $5 million level. That is level funded. We were increased 
roughly 35 percent a little more than 2 years ago. We have put 
that money to very good use in terms of our expansion both 
geographically, demographically, and online. Our request for 
2004 was $7 million and we are in the Administration's budget 
at $5 million. We are hopeful that that will be supported and 
that we would be funded at that $5 million level.
    In the wonderful event that this Committee and the 
appropriators would consider additional funding for SCORE, we 
would use that money for additional outreach. We have a great 
infrastructure of volunteers and skills. What we need to do is 
create broader awareness and drive more traffic to those 
volunteers in an effort to serve. So it is not necessarily 
about building more infrastructure. It is about creating 
broader awareness, and we are attempting to do that both online 
as well as face-to-face and through the types of relationships 
and partnerships that I just mentioned.
    Again, thank you very much for your support, the support of 
the Committee. We will be 40 years old in 2004 and we 
appreciate all that you have done as well as our partner, the 
Small Business Administration. Thank you.
    Chair Snowe. I wish I could say the same.
    [Laughter.]
    Mr. Yancey. Me, as well.
    Chair Snowe. Just one other comment on serving. You have 
more than 10,000 volunteers?
    Mr. Yancey. That is correct.
    Chair Snowe. That is obviously insufficient for the demand 
for the services that your volunteers provide?
    Mr. Yancey. I think today, Madam Chair, we have capacity. 
We recruit today to maintain a corps at this level. I don't 
anticipate significant growth in our volunteer corps. Again, 
the resources that we have, we are going to focus more on 
creating new resources and expanding our reach. We often find 
that we are cooped up in a downtown office building on the 15th 
floor and you have to go through security to access our 
services.
    We don't necessarily, or haven't been in the past located 
where growth is really occurring in the communities where we 
operate. A perfect example, here, with not sufficient resources 
in Loudoun County, the fastest growing county east of the 
Mississippi. The downtown location is wonderful, but those that 
live there are unlikely to travel into downtown for the 
service. So that would be an example of how we are trying to 
reach out into markets that we don't presently serve and make 
ourselves more available within the communities where we 
operate. That, I think, is more important than adding--becoming 
13,000 volunteers as opposed to 10,000.
    Chair Snowe. Thank you. John, welcome to the meeting.
    Mr. Massaua. Madam Chair, thank you for inviting me to 
participate today. I would like to report that the weather in 
Maine is a lot nicer than it is in Washington, D.C.
    [Laughter.]
    Chair Snowe. See.
    Mr. Massaua. Senator, I would like to address some of the 
issues that have been discussed this morning, especially the 
area of duplication, and I think we would all be foolish to 
think that there isn't some sense of duplication between the 
Women's Business Centers and SCORE and the SBDCs. But the 
reality of it is that there is plenty of work for all of us to 
do, whether it be at existing businesses or it be start-up 
businesses.
    I think we would be well-served if we worked together on, 
as we have been doing very much in Maine, on collaborative 
models to focus the various programs, whether it be SCORE, 
Women's Business Centers, or the SBDC, in a collaborative 
model, and I know that we are trying to do that nationally, as 
well. Therefore, we could focus the right resources to the 
existing businesses, as you started the conversation on 
entrepreneurship this morning.
    In terms of the Women's Business Centers becoming part of 
the SBDC program, whereas that could be a reality, what would 
essentially happen, since there aren't any increasing 
resources, we would shrink the SBDC and increase the Women's 
Business Centers. It would be a net decrease in resources that 
we so vitally need across the nation.
    Some of the other issues I would like to address that I 
understand are in some of the proposals from the SBA, and that 
has to do with the issue of sustainability and whether or not 
we should be rebid every 5 years, whether or not the other 
organizations other than universities should be able to 
participate in the program.
    On the position of the universities, there is a tradition 
of 25 years. Maine was one of them. The University of southern 
Maine has been a participant in the program. We have built the 
program over the years to include not only the money that is 
received from the Federal Government, to a significant State 
match, to being able to leverage other resources around the 
State, so that the $500,000 that is given to us nearly gets to 
be almost $2 million that we are able to bring to bear on 
helping small businesses.
    My suspicion would be that once you put that in place, that 
if you out rebid it or for some reason, whatever the motivation 
might be, those resources would have to all of a sudden be 
rebuilt again.
    Ellen spoke nicely about the fact that programs need to get 
up and running, and we have a tradition of people who work in 
our SBDC, some of which have been with us for 10, 12, 13, 15 
years, and to jeopardize that every 5 years would probably 
detract from the ability to keep good people, which is very 
important in what we do.
    We do certify all of our counselors. It takes--to get to a 
master certified counselor--it takes 6 years to get there if 
you are really good at it. So I would be remiss--I think we 
would be remiss if we were able to allow that to happen.
    One of the issues about start-ups versus existing 
businesses, we believe, certainly in Maine and have worked very 
closely with our District Director there, is the quality versus 
quantity. Unfortunately, in the funding that we continue to 
receive through the SBA, the numbers just go up every year and 
the dollars don't, and that, therefore, forces you to go out 
and maybe not spend as much quality time with an existing 
business that you would want because you are trying to serve 
two masters, the client and the SBA accounting.
    We, of course, in Maine and most of my partner States, look 
at the impact in terms of loans that we are able to provide, 
the jobs that we are able to create, and the return on 
investment that is made through the efforts that we have. That 
is more important than necessarily the number of clients we 
see. You know, how many clients do we really have success with? 
That is indicative of our program and that is the measurements 
that we hope to be put in place in the future.
    The final one is on match dollars. I think there is some 
discussion about whether the States should be--what requirement 
the State might have on match dollars. Having just come through 
our own budget battle in the State, I think match dollars are 
very important. I think that we need to encourage that, but 
perhaps encourage those States to actually overmatch in some 
shape or form to allow for rewarding those States that actually 
put more dollars in.
    Chair Snowe. Did you face a reduction, John?
    Mr. Massaua. We faced it, but fortunately, with a lot of 
help, we were able to reverse it and we stayed the same.
    Chair Snowe. You maintained the status quo.
    Mr. Massaua. We are status quo. Thank you, Senator.
    Chair Snowe. Because some of these States have reduced or 
eliminated their support, loss of matching funds has certainly 
hurt a lot of the centers.
    Mr. Massaua. Fortunately, I think most of the States are 
battling back, and I think perhaps when Don Wilson talks, he 
can address specifically what is happening there. Thank you.
    Chair Snowe. Thank you.
    Mr. Gast. Thank you, Madam Chair. I appreciate the 
opportunity to come here and participate in this discussion 
today. I represent the Association for Enterprise Opportunity. 
We have over 450 micro-enterprise development programs across 
the country that are working with the smallest businesses, four 
employees or less, and initial capital needs of $35,000 or 
less.
    We are actually speaking up in support of two programs here 
today that are top priorities for our members. First is the 
Women's Business Centers. Fortunately, the women who have 
preceded me have certainly made the case far more eloquently 
than I could, so I will just let it go that AEO strongly 
supports Women's Business Centers and all the recommendations 
that have been made here today.
    Then I would like to say a few words about the Program for 
Investment in Micro-Entrepreneurs. This is an entrepreneurial 
development program that hasn't been discussed yet. This is a 
program that was passed 4 years ago, in 1999, and it has been 
operational now for about 18 months. We are eagerly awaiting 
statistics on the first year of performance in the program, but 
anecdotally, we know that it has been incredibly strong. The 
demand is tremendous, particularly in these economic times, for 
low-income entrepreneurs who are seeking to create their own 
employment through self-employment.
    PRIME was created 4 years ago to reach a target market that 
wasn't being met. Two major focuses. One is very low-income 
clients. The legislation stipulates that more than 50 percent 
of the entrepreneurs served have to be below 150 percent of the 
Federal poverty line. So we are reaching a market that wasn't 
being met.
    The second is an investment focus. We heard a little bit 
from
the Small Business Development Centers. These programs, micro-
enterprise, define a client as someone they spend 10 or more 
hours with. So we really are making a human capital investment 
in these entrepreneurs to build businesses, and research, 
longitudinal research that we have seen has shown that it 
works. It is effective.
    Our request today is that PRIME be included in 
reauthorization, preferably with increasing funding levels. 
Currently, PRIME was not passed as part of the Small Business 
Act, so it required being folded into that. It was originally 
stand-alone legislation. I guess I will stop there.
    Chair Snowe. Thank you, Zach. We will look at that in the 
reauthorization.
    Ms. Brogan.
    Ms. Brogan. Thank you, Madam Chair. We appreciate you 
holding this roundtable. I am Molly Brogan. I represent 
National Small Business United and we represent 65,000 small 
businesses across the country.
    First of all, I would like to reiterate what my colleagues 
here have said in support of the Small Business Office of 
Advocacy. We have been a longtime supporter and we appreciate 
you introducing legislation and look forward to working with 
you and your Committee in that capacity.
    Secondly, I would like to do a little cheerleading. As a 
former SBDC employee, I would like to tell you some of the 
great things that they are doing. The Denver Small Business 
Development Center in 2002 alone helped small businesses secure 
over $3 million in loans. They counseled over 600 small 
businesses. They helped 132 small businesses gain government 
contracts, something we will be talking about later, which is a 
very significant number. We held--we, I don't work there 
anymore--they offered training programs for 1,200 people.
    I think those are significant numbers and I think, like the 
Office of Advocacy, the SBDCs have a broad client base. They 
help bridge the gap, as Mr. Swain said the Office of Advocacy 
does. They work with the Women's Business Centers. They work 
Chambers. They work with small businesses, and I think it is a 
really important office and our members support SBDCs as well 
as the Office of Advocacy. Thank you.
    Chair Snowe. Charles Henry.
    General Henry. Thank you, Madam Chair. I am Major General 
Chuck Henry and I have the honor to be the President and CEO of 
the Veterans Corporation. I come in support of the SBA's 
reauthorization and your efforts on this behalf.
    I have had the opportunity to meet with the Administrator. 
We have agreed to meet every 60 days to promote the veteran 
entrepreneurial issues. We feel that that is a major advantage 
going forward, and the Administrator and I have agreed in 
principle on a memorandum of agreement, in effect, to promote 
the entrepreneurship of veterans and what you and Senator Kerry 
have been putting forth in Public Law 106-50.
    We have been working very closely with Bill Elmore in his 
efforts to assist in the definition of the Guard, in the 
Reserves, in the service members, and we certainly support 
that. As an old Army guy, I can tell you that 60 percent of 
America's citizen soldiers go to war in the very beginning and 
a lot of these people have businesses and these businesses are 
being impacted. They call it op-tempo in our line of work, but 
it is being impacted on a 120-day basis.
    We tried to help with that by establishing America's 
Veterans Network. It is a listing of those individuals who have 
businesses in the veterans' business so that people--it is 
Internet-driven--will know those individuals who are serving 
our country right now and they can buy from those and that is 
the concept. It is totally a grassroots effort. It has started, 
but it is underway and we are very proud of that.
    I also support the amendment to extend the advisory 
committee to October 1, 2009. There was a late start, as you 
well know, Madam Chair, on that committee and we feel that 
keeping it until 2009 and then transferring it to the Veterans 
Corporation, as the law prescribes, would be the thing to do.
    In the next few moments, if I may, I would like to just 
brief a couple of the advantages and some of the 
accomplishments of the Veterans Corporation. The Kauffman 
Foundation was able to help us meet our matching grant with $2 
million, and that was with a program called Fast Track. We have 
taken that Fast Track and we are working very closely with 
SCORE and SBDCs. They have the counselors. We have built a 
business plan around that and we will graduate 617 veterans 
throughout the country between now and 30 September of this 
year. Our program shows that we will graduate 1,500 next year 
and 3,000 the year following. This is a very robust program.
    We pioneered a Fast Track program in Maine with the help of 
John Massaua. I was glad to be up there at the graduation and 
the reports on this is dynamite from the graduates coming out 
of this very, very sophisticated Kauffman-driven program. We 
declared victory on that. It looks good.
    Additionally, this week, I will sign a contract with a 
nationwide company that will create on the private sector a 
$100 million line of credit for the use of veterans in veteran 
entrepreneurship. This is a major, major victory for us because 
we are in 50-State coverage with this $100 million line of 
credit and we are just very happy to declare victory there.
    I mentioned the American Business Network, thoroughly 
supportive of the Guard and Reserve, but all veteran 
businesses.
    The other two points that I would make is the veteran 
marketplace. It is Internet-driven. We are in a partnership 
with a very large company that provides veterans the 
opportunity to buy and sell across the marketplace. It takes 
them from where they are today, it makes them global. If you 
can provide a quality product at a competitive price, we have 
an opportunity to give you the tools to be able to market their 
commodities wherever it may be, globally, if you will.
    The last point is that working with Bill Elmore again on 
the community-based organizations, we have now established 
three community-based organizations that would drive bringing 
in the private sector, the San Francisco Giants, the Sword and 
Ploughshares out of San Francisco, large law firms there, along 
with Lenore Corporation, coming together and building an 
opportunity that would teach veterans the trades, 
carpentership, things of that nature, so that they could then 
go and expand those. That is in its very infant stage, but we 
have agreements and principles with all of the partners on 
that. We are using that on a test basis. I will go back to Mr. 
Elmore and ask him to start finding us some money to explore 
the concept of this.
    These are not infrastructure points that I am asking the 
money for in the future, but it is that, for example, for every 
$2,100 we get, we can graduate a veteran that has got a 77 
percent better chance of being in business 5 years later.
    Madam Chair, you have been very kind with your time.
    Chair Snowe. No, thank you. It sounds like you have gotten 
off to a great start. Those are outstanding results.
    Donald Wilson.
    Mr. Wilson. Chair Snowe, Senator Kerry, we thank you very 
much for having the ASBDC to the roundtable and for holding the 
roundtable and inviting all points of view with regard to the 
agency's non-credit programs.
    ASBDC, as you know, represents all of the 58 grantees of 
the SBDC program. The SBDC program is in every State, the 
District of Columbia, Virgin Islands, American Samoa, Guam, 
Puerto Rico. In 2002, we served probably 1.5 small business 
clients, 650,000 of those with face-to-face, one-hour training 
or 1-hour counseling or 2-hour training.
    The latest data we have indicates that simply our long-term 
clients, those that received 5 hours or more of counseling in 
the year 2000, produced 66,000 new jobs as a result of their 
counseling by their own estimates, saved 34,000 new jobs, 
experienced sales increases at four times the rate of the 
average business and job creation at 10 times the rate of the 
average business.
    That is why, Madam Chair, we somewhat were taken aback when 
we saw the proposals of the agency to radically restructure a 
program that has indeed been the most successful management and 
training program in the history of this country. We are 
concerned that the people who crafted those proposals had very 
little experience on the ground with SBDCs out beyond the 
beltway and how they interact with their partners and their 
host.
    SBA and the SBDC program are closely linked in a 
partnership, but there are other partners--State governments, 
educational institutions, Chambers of Commerce, foundations, et 
cetera. The fact of the matter is that under the matching 
requirements--as you know, it is a one-to-one match--the SBA, 
the Federal Government, puts in less than the other partners. 
There is probably only 5 to 10 percent of our programs in which 
the SBA is at least a 50-50 partner. They are a minority 
partner in all other instances.
    So that is why we are concerned that they would take these 
hosts who for 20 years--25 years, like the University of 
Southern Maine--who have invested millions in this 
infrastructure under that partnership arrangement, and that 
partnership arrangement was you will retain this grant as long 
as you perform adequately, and they have performed admirably, 
as the data I just told you. Now the Federal Government under 
this proposal would come back and say, ``Thank you for all your 
investment. Thank you for your partnership. We will take our 
models and go elsewhere.''
    Now, where else are they going to go? Who are they leaving? 
They are leaving the great educational institutions of this 
country, the University of Wisconsin, the University of 
Pennsylvania, the University of Missouri, the University of 
Massachusetts, the list goes on and on, and in some instances, 
the key economic development agencies in the States. These 
people have come to the table in good faith, made these 
investments, and now the rug will be pulled out from under 
them.
    But what will we have in return? Let us assume that it goes 
through. In the last year before they start recompeting, the 
host will realize they will no longer be the host. They will 
begin to drastically cut back their money. SBDC counselors will 
leave the program, realizing that their jobs will be up in a 
matter of months. So then you grant the dollars to a new host.
    At a minimum, it will take a host 2 years to create even 
the most minimal productivity in a Statewide network. So now 
you have lost 3 years of productivity. So then you probably 
have 2 years of okay productivity. Then you are recompeting 
again. So out of a 6-year cycle, you have kissed off 4 years. 
That, to us, makes no sense, none whatsoever.
    The other thing, we absolutely depend on the States and 
other partners like the universities to provide the match. As 
the Federal Government pulls the rug out from under them, 
breaks the partnership arrangement of 25 years standing, nobody 
will come and deal with the Federal Government in good faith 
because they won't feel that you have dealt in good faith. The 
match will not be there. Right now, we are overmatched, but who 
is going to invest in a program that is going to be taken away 
from them in just a matter of years?
    The third thing is that they have proposed that State plans 
proposed by State governments, under the current law, no grants 
should be made unless they complied with the State plan. Those 
plans are generally written by the government, the State 
government. What they are saying in their third proposal is, we 
would like for you to be a partner, but a very silent partner. 
You really just give us the money, but don't have any role. 
Now, that would be rather insulting, I think, to most 
governments and most State legislatures who are putting in 
oftentimes a 2 to 1 match.
    So we are extremely disturbed that, basically, what they 
have proposed is a radical restructuring of a program that has 
proven itself over and over and over again for a quarter of a 
century, modeled after the Agriculture Extension program that 
harnessed the knowledge, the resources of our land grant 
colleges, and we have done the same with our great 
universities, their great business schools, their great 
business faculty, their entrepreneurial faculty. Once it is 
taken away from those hosts, those resources will no longer be 
available to us. Thank you very much.
    Chair Snowe. I appreciate your thoughts, and I am sure we 
will get a response from Ms. Street.
    I would like to welcome the Ranking Member who you all 
know, Senator Kerry, who has been a great champion and advocate 
for small business in his own leadership of this Committee, so 
I welcome you, Senator Kerry. Thank you, as well, for 
introducing the Independent Office of Advocacy and all the 
other efforts that you have made on behalf of the small 
business community in America.

        OPENING STATEMENT OF THE HONORABLE JOHN KERRY, 
           A UNITED STATES SENATOR FROM MASSACHUSETTS

    Senator Kerry. Thank you, Madam Chairwoman. Thank you very 
much. Thank you for your bipartisan efforts over the last weeks 
which have helped us do a number of good things for small 
business, from confirming Harold Damelin to passing the drought 
assistance and the supplemental appropriations bill and so 
forth. I appreciate the opportunity to share a few comments. I 
apologize for coming in late, and I have an 11 o'clock meeting 
which I am now late for and have to go to in a minute.
    But let me begin, if I can. I want to make a few comments, 
if I can, Madam Chairwoman, and so the record contains them, 
since we are building a record here and it is important. Also, 
thank you yesterday for introducing with us a bill on the 
independence of the Office of Advocacy.
    This is an important component of the business of the 
Committee, and I am grateful to you for having this roundtable 
on the non-credit component of the reauthorization. I do want 
to associate myself--I listened with interest to Mr. Wilson's 
comments. I think he has made very, very important points, and 
I, in fact, had some questions I wanted to ask Ms. Street with 
respect to the rationale, and we might come back to that in a 
moment.
    But let me just begin at the beginning, if I can. We have 
had a 3-year reauthorization process here, and we and our House 
counterparts regularly ensure that programs are properly 
structured and appropriately authorized. I think it has been a 
really healthy process, frankly. This Committee has an 
incredibly good record of bipartisan effort. Almost nothing 
happens without a bipartisan effort because of the time on the 
floor and the scheduling issues, and just because of the nature 
of the beast, we tend to need to have that consensus when we do 
something. So I am really disturbed by the notion that we are 
going to consider moving to a 6-year period, and I will say a 
few more words about that.
    Everybody understands the economy is deeply troubled. There 
is nobody who has any difficulty figuring that out. Anybody who 
analyzes the economy also knows there is an absence of 
confidence, that increasingly capital requirements for people 
are very dicey in this atmosphere. You can't call small 
business the engine of the economy and then, I think, 
disrespect it to a certain degree when you don't empower it to 
be able to create the jobs that we want and weather this 
downturn, to weather the storm.
    I really regret, and I don't come here for the purpose of 
being critical except to the degree that I feel forced to say 
that some of what is being offered here in this legislative 
proposal just falls short of the needs of small business in the 
country, and I think it is problematic on a number of different 
levels, including the recommendation to reauthorize for 6 years 
at level funding. I mean, 6 years at level funding, folks. Are 
we nuts? You have got to be--I mean, that is a fundamental cut 
on an annual basis for the next 6 years in the volatility of an 
economy that we are sitting around saying, how can we help 
small business?
    Now, capping funding with no adjustment for inflation would 
be a cut in virtually every one of SBA's programs and that will 
place the effectiveness of some programs and possibly the 
viability of others in complete jeopardy, and businesses and 
citizens are going to be the ones that lose.
    I think a 6-year reauthorization compromises the oversight 
authority of the U.S. Congress, of our Committee, of our 
counterparts in the House, and I think it is irresponsible 
given the way in which we have very effectively, in a 
bipartisan way, tinkered, tuned, fine-tuned, sometimes changed, 
often revitalized various programs in the course of a 3-year 
period. I don't think this Committee should be denied the 
opportunity to do that. There is just no showing whatsoever 
that there has been any irresponsibility in our approach to 
these kinds of issues.
    In the entrepreneurial development arena, I am really 
concerned about several proposals that will hamstring two very 
popular and extremely successful SBA programs, and they are the 
Small Business Development Center program and the Women's 
Business Center program. Now, I gather that the potential 
effects of that are already being discussed this morning, and I 
am glad and I hope we build a strong record in response to 
that.
    But I hope this Committee will proceed very, very carefully 
with respect to mandating changes to these programs. You know, 
the old saying, ``If it ain't broke, don't fix it,'' really 
ought to be taken to heart with respect to these.
    I also, Madam Chair, have the additional concerns regarding 
the SBA's ability to effectively advocate on behalf of small 
businesses without all the tools necessary to do so. There are 
shortages in the staff of the Office of Advocacy and a shortage 
in the number of procurement center representatives compared 
with the growing demand that is being placed on both offices. I 
regret to say that the Administration has failed to meet its 
statutory goal for Federal contracting to veterans, to women-
owned businesses, and HUB Zone firms for fiscal year 2000, 
fiscal year 2001, and it is doubtful that they are going to 
reach the goal for 2002.
    That means literally, in real terms, that $14.3 billion is 
being denied to small businesses--$14.3 billion denied because 
we don't work to meet those goals, and with Federal contracting 
growing but the portion going to small business firms 
continuing to shrink, it is evident that the SBA ought to have 
that additional staff or it ought to better use the staff it 
has got to make sure we are meeting those goals.
    So I am very grateful to all of you for taking part in this 
effort today and I thank you, Madam Chairwoman, for holding 
this roundtable which allows this sort of input to take place 
from all sides.
    But it just doesn't make sense to me. I mean, we have 
struggled here for years. I have been here 18 years now, most 
of them on this Committee. I have watched while we have gone 
through ups and downs. We all remember the cycles of 1985, the 
cycle of 1989-1990, 1992, and we know through the 1990s what we 
were able to do in terms of small business growth. It just 
doesn't make sense to cut these programs. It is sort of robbing 
Peter to pay Paul, and I am not sure what Paul is going to 
accomplish for us in the process.
    So I really hope that we are going to keep our eye on the 
prize here, and that is how we enhance small business, and I 
just don't see a strong enough rationale for this shift in the 
SBDC program. I mean, how we are going to have funding--why we 
are going to ask people to recompete every 5 years when SBA 
already has the authority to revoke any non-performer today? 
You are going to make everybody recompete even though you could 
revoke a non-performer now? It seems to me SBA has all the 
tools it needs to guide this.
    So again, I worry about the rationale for that. I can find 
several rationales and I don't like them. It just doesn't make 
sense.
    The other thing is, I don't understand why a State 
government would want to provide matching funds to an SBDC when 
the governor is opposed. I mean, how that is going to happen is 
beyond me, particularly at a time when every State budget in 
the country is under fire for cutting, and any excuse in the 
world not to perform is going to be seized on.
    So I hope we are going to be smart here and not undo things 
that we have worked very hard as a Committee to try to create. 
Madam Chair, I really appreciate your indulgence and thank you 
for letting me intervene, and I thank all of you for allowing 
me to do that. I would ask if staff can, in my absence, take 
part.
    Chair Snowe. Without question.
    Senator Kerry. I thank you very much.
    Chair Snowe. I appreciate your comments and look forward to 
working with you, and you have offered some very thoughtful, 
provocative comments and those are some of the issues that we 
will be exploring in the months ahead. Thank you.
    Senator Kerry. I appreciate it. Thank you, Madam Chair.
    Chair Snowe. Thank you. Thank you, Senator Kerry.
    [The prepared statement of Senator Kerry follows:]
    
      
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    Chair Snowe. Ms. Street.
    Ms. Street. Yes. There is no question that the Small 
Business Development Centers are a key component of our 
entrepreneurial development programs and that they are 
performing. That is not a question that we will debate at all.
    However, for the past--for 10 years, the SBDCs have 
operated somewhat as a quasi-monopoly that has prohibited new 
centers and new ideas from coming forward. We need an 
environment that is going to reward innovation and encourage 
competition and performance. Only three lead centers have 
changed over the past 10 years. This program has grown from 
$300,000 in 1980 to almost near $90 million in this current 
fiscal year.
    As good as the SBDCs are, they are not everything to every 
small business out there, and each particular need that a 
business comes up in terms of the business marketplace requires 
doesn't necessarily mean that we throw more funding in there 
without competition and allowing other organizations to at 
least compete and also the SBDCs to recompete, and I don't 
think that is a bad idea or an upsetting of the apple cart in 
any form or fashion. It is American tradition to have 
competition to avoid monopolies.
    I think that this is--if the SBDCs, and we know they are 
good, if they are good as they are, competition should not be 
anything that they fear. They should be able to compete with 
anyone and win. They have the leading edge on it. But to open 
it up--to keep it closed as it is, is not doing good for our 
innovation and our competitive way. I think competition adds to 
increasing and producing results.
    So I think that that is our key and main rationale for 
this. There has been no change in lead centers. As Don 
mentions, 20 years, 25 years, I mean, these people have been 
entrenched and in place, and that could be a good thing. I am 
not saying that is a bad thing at all. All I am saying is that 
we at SBA feel that competition will lead to greater 
productivity and that is what we are trying to get at.
    Chair Snowe. Well, obviously, this is a dramatic 
departure--
    Ms. Street. Sure.
    Chair Snowe [continuing]. It is something we are going to 
have to look at very carefully----
    Ms. Street. Right.
    Chair Snowe [continuing]. Because we don't really want to 
undermine something that is working very well, if, in fact----
    Ms. Street. Exactly.
    Chair Snowe. I understand the thought behind it. I just 
wonder if it doesn't leave a lot of anxiety and uncertainty and 
produces unintended consequences as a result. So I think we 
will have to look at it very carefully----
    Ms. Street. Right.
    Chair Snowe [continuing]. Since it is a major departure 
from the traditional approach.
    Ms. Street. Sure. This is a dialogue, and I think that we 
don't want in any way, form, or fashion the process or the 
programs to be harmed in any form or fashion, and if we thought 
this was going to be the case, we probably would not have put 
forth this proposal. But I agree with you that we could have 
more dialogue on the process.
    Chair Snowe. I appreciate it.
    I regret to say that I have to depart. I have to meet with 
several of my colleagues right now on something that is coming 
up today. I just got a message. So I am sorry that I can't 
complete the last round on government contracting, but I really 
do welcome all of the thoughtful comments here today and 
presentations. This is just the beginning of this dialogue for 
the reauthorization process. But it certainly helps me. As the 
new Chair of this Committee, I want to have a full breadth of 
understanding of the issues and dimensions of these programs as 
well as your perspectives. You represent, obviously, a broad 
constituency across this country, and obviously represent the 
Administration and SBA. We certainly appreciate your input.
    Mark Warren, who is my Staff Director, and Patty Forbes who 
is here on behalf of Senator Kerry, will continue with this 
discussion. I thank you very much for your participation here 
today and I am sorry that I have to leave.

              GOVERNMENT CONTRACTING AND BUSINESS 
                      DEVELOPMENT PROGRAMS

    Mr. Warren. I know there were a number of people who still 
wanted to speak on this area, but we need to move on, if we 
can, to our third segment on government contracting and 
business development. If we have more time left over, 
obviously, we will come back. As Senator Snowe mentioned at the 
beginning, we will leave the record open for formal written 
statements for 2 weeks and we expect that there will be 
questions from Members, and the Chair and Ranking Member.
    So let us turn to the government contracting and business 
development programs. Certainly, the Committee has heard over 
the last month, including at the hearing we had on contracting 
bundling, how critically important it is for small businesses 
to have an opportunity to compete for Federal contracts. The 
Committee has also heard how the government is not living up to 
its obligations and falling short on that task.
    So this is one of the things that we would like to hear 
about from you all this morning, and in particular, because we 
have a number of participants with very strong views and good 
strong backgrounds in this area. We would like to get ideas 
from you on the various programs that SBA currently has, the 
lessons that we can learn from the past, and the improvements 
that can be made. Any comments that you have on the fiscal year 
2004 budget submission would also be most welcome.
    So who would like to open?
    Steven.
    Mr. Denlinger. Thank you very much. I certainly appreciate 
the opportunity to be here today. For those of you who are not 
familiar with LAMA, LAMA is the oldest national Hispanic 
business organization. We are a strategic partner of the U.S. 
Hispanic Chamber of Commerce and my colleague, Mickey Ibarra, 
sits across the way.
    You could think of us as a national association of Hispanic 
Federal contractors. That is probably the simplest way to think 
about it. Needless to say, we focus on programs like the 8(a) 
program and so forth and I would like to make a couple of 
comments in relation to that very important program.
    The 8(a) program is the single most important instrument in 
the Federal procurement arena for minority businesses to 
participate in the Federal marketplace. That is a program that 
we have monitored and supported and nursed for the past 30 
years.
    I would like to focus on the issue of the 8(a) net worth. 
The entry criteria for the 8(a) program is $250,000 net worth, 
and that is designed to be responsive to the need for showing 
of economic disadvantage. Our sense is not only has that net 
worth issue or criteria or floor not changed in the past 10 or 
15 years, but it is artificially low to begin with in a number 
of respects. It does not take into consideration the differing 
capital needs in all of the different markets or industries 
that are represented across the spectrum of the 8(a) program, 
and I will come back to that in a second.
    But what it is doing is unwittingly admitting the companies 
that are the weakest financially, and then we wonder why they 
are not bankable and why there are failures down the road. If 
the entry criteria is so unforgiving that we hamstring our 
companies coming into the program from a good capital base to 
begin with, then we are certainly going to pay the price later 
on through failures and lack of bankability and lack of access 
to capital for growth.
    What we would like to suggest would be a system whereby for 
major industry sectors, the SBA or some appropriate entity do a 
study as to what the average net worth is in given industries 
and then through some formula peg what a logical and reasonable 
net worth criteria ought to be for each of those industries 
instead of having a flat $250,000 entry criteria for each and 
every and all folks participating in any program.
    I would like to talk briefly about the 7(j) program. 
Basically, we see the program in support of minority 
enterprises, providing access to contract opportunities, 
providing access to capital, and providing access to technical 
assistance. The most troubled element with respect to that 
troika of support is the technical assistance. The 7(j) program 
is, oh boy, just lacking in definition, lacking in clear 
funding support historically, and it is--there are many special 
programs that are kind of reaching into that very limited till.
    I remember a couple of years ago there were 15 or 20 
different special programs that were authorized for particular 
institutions in particular congressional districts, for 
particular institutions, many of them institutions of higher 
learning, that basically glommed onto a very significant 
portion of the 7(j) funding, 7(j) funding that was designed for 
the SBA folks to be able to provide technical assistance across 
the board. So that third pillar of the support structure for 
minority business is really weak, needs clarity, needs 
definition, and needs funding.
    I will weigh in on the SBDC issue very lightly in the 
following respect. Historically, the SBDC system was structured 
in a manner that wound up excluding minority and particularly 
Hispanic business organizations from providing services as far 
as that national network is concerned. That has been an ongoing 
concern for many years. We have had discussions on this issue. 
Hopefully, out of this debate can come a mechanism to ensure 
that Hispanic organizations that can provide services out 
across the country are eligible to participate in this 
important program, as well.
    I would like to talk about advance payments. I would like 
to suggest that the advance payment program be resurrected. It 
was one of the most effective funding vehicles to support the 
growth and nourishment of minority enterprises just getting 
into the Federal contracting arena.
    Basically, what it did was provided advance payments to 
minority businesses that had Federal contracts in the 8(a) 
program and they were self-liquidating in the sense that when 
the contractor performed under the contract, the 8(a) company 
submitted the bill, the Federal Government agency paid the SBA. 
The SBA took out a prorated portion of the advance payment and 
then the rest went into the minority company's bank account. So 
it was self-liquidating and it was managed by the SBA directly 
and so the potential for abuse on the part of the participating 
companies is absolutely minimum. That was a very, very 
effective vehicle and some years ago it simply went away and we 
would like to recommend that that be resurrected.
    PCRs, let us get serious about the PCRs. We need more PCRs. 
They are the first line of defense with respect to combatting 
the issue of bundling and we just need more PCRs.
    Size standards, I would like to focus a moment or two on an 
issue that I think is really long overdue and needs to be 
addressed. The size standards, particularly in certain 
industries, such as information technology, are totally 
inadequate with respect to the current marketplace. What do I 
mean by that?
    In the information technology arena, you have large 
businesses that have annual sales in the area of multi-billions 
of dollars a year. You have middle-size businesses that have 
sales in the hundreds of millions of dollars a year. Yet you 
have an SBA criteria that says once you have achieved $23 
million a year in sales over a 3-year average, you are now 
considered a large business. So these very, very tiny minuscule 
companies in the IT arena that have achieved $23 million in 
sales are now cast out into the open marketplace and it is just 
not even remotely close to a level playing field. That really 
needs to be addressed.
    We think that there perhaps ought to be a tiered approach 
where companies of similar size are competing against one 
another in the small business arena, maybe $1 to $10 million, 
$10 to $25 million, $25 to $100 million. But the size standard 
is artificially low and is really impacting a growing cross-
section of our companies, particularly in the fast-growing IT 
arena, and we really respectfully request that that be looked 
into and some adjustments be made.
    Thank you very much. I appreciate the opportunity to be 
with you.
    Mr. Warren. Thank you. Mr. Denlinger has made a number of 
points, and I wanted to ask, Fred, if you want to take just a 
minute and respond to some of those points.
    Mr. Armendariz. Absolutely. Thank you for allowing me to 
make mention of some of the points that Mr. Denlinger brought 
up today, and thank you all for being here. I see a lot of 
friends around this table, a lot of people I have worked with 
over the last almost 2 years now at SBA, and as a result of a 
lot of your counsel and meetings with each and every one of 
you, we are moving on a lot of targets that I think are 
important to you.
    I would like to talk about the net worth issue, and I agree 
with Mr. Denlinger over at LAMA that there are some issues 
related to the net worth. One of the problems that we face is 
not only the entry point, $250,000, but the fact that we don't 
include the value of your home and the value of your business 
as part of the equation, and being a former entrepreneur and a 
small business person for almost 20 years, I know where my net 
worth is. It is in those two areas. It is not in my cash 
reserve sitting in my personal bank account. It is in the value 
of my home and the value of my business.
    So I think we could make some type of adjustment to this 
and we are studying this issue day in, day out, to find the 
proper balance to properly identify which companies are 
socially and economically disadvantaged. So I think there is 
definitely some work to be done there.
    In regards to 7(j), I agree that for far too long, the 7(j) 
program has focused its revenue sources on very few 
organizations, and I look around this room and I know four in 
this room, maybe five, that received 7(j) grants this past 
year, and the reason that they did is because we tripled the 
amount of awards this past year over the previous year with the 
same amount of funding. The way we did that was we looked at 
who was going to deliver the most value and product, if you 
will, to the most small businesses dollar for dollar. So we are 
very excited and proud of the progress we have made in regards 
to addressing the 7(j) issue.
    In regards to technical assistance, one of the things that 
we have done is we have looked for proposals that give guidance 
or assistance to the most small businesses per dollar, if you 
will. One of the programs we are about to launch was a result 
of a 7(j) grant and that is our procurement academy. This is 
going to be a virtual program, a multi-media program that 
people will be able to log onto nationwide for pennies on the 
dollar of what that program would cost if we were to do it 
face-to-face or in traditional educational forums.
    PCRs, I agree. We have a need to address the PCR issue on a 
whole host of fronts. One of the things that I think is the 
most important issue regarding PCRs is that we can't do 
business the way we have in the past. In the Integrated 
Acquisition Environment Task Force, which is an 
intergovernmental, interagency working group, they are 
addressing that issue, how to utilize technology in order for 
the PCR to do the proper surveillance on the agencies to ensure 
that small business is getting their fair share.
    Last but not least, size standards. I am very happy to say, 
and Steve probably doesn't know this, but last week, we 
assembled an interagency task force to work on size standards, 
and the reason that we are working on size standards is it is 
just too cumbersome for small business. It is too confusing for 
the procurement community. We have over 32 different size 
standards and we think we can whittle that down dramatically 
over the next couple of months once we start reviewing this 
process in depth.
    I think I addressed most of your issues. Thank you.
    Mr. Warren. Thank you.
    Mr. Turpin.
    Mr. Turpin. Thank you very much. I just wanted to bring up 
a number of procurement-related issues. Some come under SBA, 
some don't. Some are Office of Advocacy issues. But it is this 
common overview of the landscape of why an important part of 
the procurement system isn't necessarily working that well.
    The government is the largest procurer of construction 
services in the country, and as a result, it sets the tone for 
the whole construction marketplace. We face an ongoing issue 
where if you are a part of the team that bids a project and you 
think you have won that project, that does not necessarily mean 
you get the work, because with a process called bid shopping, 
where the actual award of the contract is simply another step 
in the process of negotiating what you are actually going to do 
the work for, it means the cost is actually--what the 
contractor is actually paid is whittled down and the government 
does not benefit from that lower cost.
    This has expanded to where the government is now looking at 
doing reverse auctions, and the country's infrastructure and 
its buildings should not be run the same way e-Bay is. We 
should not bid down to the lowest level on the Internet to 
determine how we are going to build something like a Federal 
courthouse.
    Our second issue has to do with payment protection. If you 
don't get paid, the next job isn't going to mean anything 
because you are not going to be there. Going back to 1983 and 
1988, the Congress passed the Prompt Payment Act and the 
amendments to that, which has functioned very well. But that 
does not help you if you are working on a Federal grant that 
you think is a Federal project because the big sign out front 
says, ``Paid for by Federal dollars,'' but it is actually a 
Federal grant, and we would hope that the Federal payment 
protections would be expanded to work done under Federal 
grants, because what has happened is as the States' financial 
situations have deteriorated, how fast they pay has slowed 
noticeably and people think they have payment protections that 
they don't have.
    I would like to commend the Committee for their work and 
the hearing they had on bundling, but just point out a couple 
of things. Bundling of construction alone has increased 150 
percent in the last decade, and the dollar thresholds that are 
in the regulation, the proposed regulation that is out now, are 
troublesome because they are anywhere from $2 million to $7 
million, depending on the agency. Well, our average member 
has--their revenue is $6 million. So it is not going to help 
them much if the contracts that are being unbundled are larger 
than their whole net revenue. So the bundling is becoming more 
of an issue in construction, and if you are unbundling such a 
large number that it never gets down to the people that can 
actually use it, it is not really helping the situation.
    Then it is really unclear who enforces what is bundled and 
what is unbundled. That is a real problem for us. If you have 
got somebody who is not necessarily that involved in the 
Federal procurement process, they would like to get a piece of 
something but they can't find out how to get it unbundled so 
they can get part of that, who enforces the bundling and 
unbundling?
    Related to the bid shopping, the GSA is working on placing 
construction on the schedule so you can buy construction 
services off of the schedule like you were buying office 
supplies. Our contention is that construction has its own part 
of the Federal Acquisition Regulation for a reason and that 
this is a solution in search of a problem. There is not this 
great hue and cry by contracting officers that they want to buy 
construction services off the schedule. It is a system that is 
working and doesn't really need to be modified.
    Then lastly, also a payment issue, we are at a time now 
that the government should be paying contractors and 
subcontractors directly rather than this delayed process of the 
government paying the contractor who then pays the 
subcontractor. The technology is there that the government 
could pay both the contractor and the subcontractor directly on 
the date it was due rather than delaying the process by passing 
paper checks along. We are beyond that, and it could expedite 
everybody's cash flow. Thank you.
    Mr. Warren. Just a procedural note. We are running close on 
time. We have been using the lights at about 3 minutes, so if 
everybody can try to keep your comments moving so we can get as 
many people out there as possible.
    General Henry.
    General Henry. I come back to you from my old procurement 
position, and I noticed Senator Kerry's comments about 
competition. Let me, if I may, just put my oar in the water as 
the Army's Competition Advocate General a few years ago.
    The one thing that I found about, competition for 
competition's sake doesn't do anything. My experience is on 
major weapons systems, and the issue is always how do we give 
everybody a fair chance to compete for something, what I came 
to find out is that if you started out with the competition in 
the beginning and you had clear metrics, call it a learning 
curve of where you want to be at a point down, it could be 10, 
5, 15 years into the future, and as long as the contractor, 
once you initiated the contact, stayed on your learning curve, 
then there was no reason and there was no economies of scale to 
recompete. It was only when you failed to manage the process 
through that that you felt that you could get this perturbation 
into the point, whatever that may be to you.
    My other point is on the 3-percent goals, the socio-
economic goals that we have today, I think that it presumes 
that contacting officers have discretionary authority, and if 
you look at the Federal Acquisition Regulation, you realize 
that they don't have that discretionary authority. So a goal 
without some teeth into it, like a set-aside that would require 
something on the part of the contracting officer, is going to 
end up meaningless, and I think that is why we come around the 
table saying we have got the goal, but the Federal Government 
is not meeting it.
    So if we are really serious about wanting to mandate, 
whatever it be, whether it is veterans' preference, whether it 
be the 8(a) program, whether it be small business, women 
business owned, whatever it is, I think we need to sort of 
optimize that, determine what progress that we want this 
Congress to mandate that into legislation, and that puts the 
Administration on the point to meet that goal.
    Mr. Warren. Thank you. Do you have any suggestions as to 
``teeth'' that can be added to the law?
    General Henry. Well, if you don't meet your budget, you 
don't get money. That always works.
    Ms. Forbes. Can I just ask a follow-on question of you and 
Mr. Elmore? We are interested in looking at these goals because 
it is a reauthorization process, and right now, there is a goal 
for service disabled veterans but there is nothing for regular 
veterans. We wondered if you could comment on that and if you 
have any recommendations.
    General Henry. Obviously, yes, Patty, thank you, and 
obviously, the legislation of Public Law 106-50 favored the 
service disabled veteran in the beginning, and within the 
veteran community, you will find that there are two areas on 
it. There is a feeling that those service disabled veterans 
have given more to this country and, therefore, they should be 
at the very beginning in order to receive something. I support 
that concept. I think that if you look at it as a bifurcated 
type of process, if you want to go 5 percent for service 
disabled veterans and 3 percent for other veterans, I think 
somewhere along those lines would be my thinking about how you 
should approach that.
    Mr. Elmore. From my perspective, I look at the entire 
veterans' community as a market, and I agree with General 
Henry, that service disabled veterans are at the forefront of 
that market. They are at the very point.
    But I also think that if we don't engage the entirety of 
that veterans' small business community, it has ultimately a 
negative effect on our ability to help all veterans in the 
small business community, including service disabled veterans. 
So as we talk about goals and procurement, if we don't engage 
the other 90 percent of the veterans' business community into 
this arena in significant ways, we can't mobilize them to 
assist service disabled veterans to better success.
    Ms. Forbes. Thank you very much.
    Mr. Warren. Mr. Newlan.
    Mr. Newlan. Thank you. As the chair of the Hub Zone 
Contractors National Council, I will focus my comments today 
just on the reauthorization of the HUB Zone program and my 
written comments will include all other government contract 
programs.
    The program was enacted to bring good employment 
opportunities and economic development to the 8,000 
geographical areas of our nation designated as HUB Zones due to 
their high rates of unemployment or the low wages paid in these 
areas. As designed, the program is very sound and, at best, 
only requires some very, very fine tuning during 
reauthorization.
    Just as the design of the program was and remains quite 
solid, the implementation of the program has been quite flawed. 
The program is authorized $10 million annually. During its 
highest year of funding, only $2 million was appropriated in 
the SBA budget for the HUB Zone program management and 
oversight. In fiscal year 2002 and fiscal year 2003, during 
conference, the two congressional appropriations subcommittees 
eliminated the program's $2 million line item. Only through the 
extraordinary efforts of Senator Bond was the funding for 
fiscal year 2002 restored.
    As of today, there has been no funding restored for 2003. 
This eliminated funding would have paid for community outreach 
and new firm certification, program management, including 
keeping the award-winning website current and functional, 
program examination audits of currently certified firms, and 
the adjudication of HUB Zone award protests.
    Recently, the program has come under some fire for not 
performing an adequate number of oversight reviews to ensure 
the eligibility of all HUB Zone certified firms. With no 
appropriations to fund the program, it is impossible for the 
SBA to perform the necessary oversight and to protect the 
taxpayers from those willing to commit fraud.
    With this being the case, I must urge this Committee to 
closely and aggressively work with the congressional 
appropriators and ensure that they do not eliminate our funding 
again for fiscal year 2004. The SBA cannot perform the task 
required by the statute with the resources they have.
    The second area of the program's implementation that needs 
to improve is at the agency department level. The statute is 
clear. The regulations have been clear for some time. However, 
the executive agencies fail to follow them. The annual 
contracting goal started at 1 percent and has increased by .5 
percent each year and is now at 3 percent. The executive 
agencies have failed to even come close to these statutory HUB 
Zone goals.
    For fiscal year 2001, the government achieved 0.72 percent 
level of actual HUB Zone awards with a 2 percent goal. In 
fiscal year 2002, the goal was 2.5 percent, but the fiscal year 
2002 data has not yet been released to the public, but I have 
no reason to believe that any actual contract award progress 
was made in 2002 over 2001.
    We, in the HUB Zone community, are frustrated. We have a 
well-designed program, designed to reduce or eliminate poverty 
in the United States. We have a program that focuses on 
economically developing communities and their infrastructure by 
offering good jobs where they are needed most. This is no 
handout program. Virtually all contracts are awarded 
competitively.
    The biggest problem facing the program today is the 
government's failure to overcome the inertia in implementing 
it. This inertia can and will be overcome when the program is 
adequately resourced and each agency focus on statute 
compliance.
    Meanwhile, the HUB Zone business community is frustrated. 
Today, there are 7,800 HUB Zone certified firms. They range 
from a small helicopter transportation firm in Hawaii, to a 
bulletproof shelter manufacturer in Missouri, to a 150-person 
precision machine shop in Maine. Collectively, HUB Zone firms 
have annual revenues approaching $14 billion. With this size, 
if ranked on the Fortune 500 list, collectively, we are larger 
than Kodak or General Dynamics and we would be ranked 135th.
    Unfortunately, only a very small percentage of our business 
today comes from HUB Zone contracts. We as a group are ready to 
begin to fulfill the promise of the American dream to 32 
million Americans who today live in poverty. When the Federal 
agencies begin to award HUB Zone contracts per the statute, we 
will be able to deliver good jobs at fair wages with medical 
insurance and benefits. We will continue to move people off the 
welfare roles and give them a chance they have never had 
before.
    To accomplish this, we simply need the current program 
reauthorized at $10 million. We need a like amount of 
appropriations. We need each agency to follow the law. It is 
within our grasp, and with the continued strong focus, 
interest, and oversight of this Committee, we know it will 
happen. Thank you very much.
    Mr. Warren. Thank you. You raise a good point in terms of 
the availability of data. Fred, I wonder if you could report 
back to the Committee on what steps are being taken and when we 
might be able to see that fiscal year 2002 procurement data.
    Mr. Armendariz. Yes. The SBA gets our data from the FPDS 
system, Federal Procurement Data System, that generates a 
report over at GSA through the Office of Federal Procurement 
Policy, and we should probably be getting that information in 
the next 90 days, I would suspect, for fiscal year 2002. That 
system obviously has been something that is a little bit to be 
desired and the Integrated Acquisition Environment Task Force 
is addressing that issue as we speak.
    Mr. Warren. Harry.
    Mr. Alford. Thank you. Last night, former Secretary of the 
Treasury Donald Regan and myself participated in a debate in 
Detroit. Benedictine High, which is an all-black school in 
inner-city Detroit represented corporate America, specifically 
the auto industry, and Brother Rice High, a suburban school 
that is virtually all white, represented minority business, and 
the debate was holding prime contractors, major firms who get 
contracts with the Federal Government, accountable for their 
subcontracting and their diversity. From this exercise last 
night, the two high schools are going to have a joint project 
in tracking the auto industry in Michigan and what they do with 
minority business. I think this is beautiful.
    Another point I want to make--I am getting to something 
here--our Peoria chapter gets technical assistance funding from 
the State of Illinois for highway construction work, technical 
assistance. There is a minority contractor in central Illinois 
who is not at 100 percent capacity working on the freeways of 
Illinois. The project is so good that our East St. Louis 
chapter is going to get a similar contract from the State of 
Illinois for southern Illinois.
    Our chapter in Wisconsin gets $500,000 a year from the 
State of Wisconsin to perform capacity building for small 
business in the State of Wisconsin.
    Our Harrisburg, Pennsylvania, chapter gets $650,000 every 3 
years from the Harrisburg Airport Authority to provide 
technical assistance and subcontracting competition for the 
contractors there at the airport.
    The Chattanooga, Tennessee, chapter, Shari Gilchrest, 
Executive Director, gets $200,000 a year from the city council 
of Chattanooga, and she can document $90 million a year in new 
contracts based on their efforts. She has never, never met the 
District Director of the SBA in Nashville.
    What I am saying is that too many of us, I think--woe to us 
who put all the marbles in the Federal pie. There are other 
ways of going about getting funding and improving the lot. The 
government is not going to grow. Hopefully, it is going to 
shrink, and I think the SBA is going about this right in trying 
to find the best bang for the buck.
    We must have competition to improve products and service. 
You can't get a contract for life. You must have competition 
there. I think all of these things go together and I support 
whatever the SBA, whatever resources they have. We want to work 
with them and include them in the mix.
    Other associations, like the National Black MBA 
Association, they are starting to get into technical assistance 
for small businesses and providing some good professional 
support that would rival SCORE. So I think the whole point is, 
there are other ways of going about doing this.
    Finally, my biggest complaint that I get from our members 
is the size standards and net worth. It is ridiculous. It is 
unrealistic.
    Mr. Warren. Thank you. Where we are right now is pretty 
close to wrapping up our time, so what I would like to do is 
say who we have on the list and we will close it off with that. 
If everybody could help me work with the lights, we can wrap up 
pretty close to on time.
    I have Ann Sullivan, Jere Glover, Allen Neece, Susan Au 
Allen, Giovanni Coratolo, Mickey Ibarra, and Ellen Golden--but 
I can't tell if you still want to speak?
    Ms. Golden. Yes.
    Mr. Warren. Okay. So if anyone else has comments beyond 
that, if we could work through the record and submit them in 
writing, that would be great.
    Ann.
    Ms. Sullivan. Well, as we have told the Committee, 
contracting with the Federal Government and the government 
contracting business is one of our members' hot buttons, and 
the hottest button of all is implementation of Public Law 106-
554. We understand the SBA is going to devote $150,000 to study 
the study, 7 months. We would like to see a much shorter time 
table. We think it can be done much more expeditiously.
    The other thing we would say to Mr. Armendariz is, thank 
you for what you do. Thank you for your help. We think you 
could use more and we would love for you to take on unbundling 
the paperwork. So we would love to see the 8(a) process 
streamlined. We would love to see your help with spearheading 
and trying to get the GSA scheduled paperwork under control. 
There is just a lot of--that is a huge barrier for our women-
owned businesses.
    Mr. Warren. Thank you, Ann.
    Jere.
    Mr. Glover. Yes. As Director of the Small Business 
Technology Coalition, I wanted to point out a couple of areas 
of interest and concern, one of which is the Office of 
Technology staffing. That program has more than doubled to $1.4 
billion. The staffing and resources in that program have been 
cut by well over 50 percent. That issue was raised with the 
Administrator during his confirmation hearing. It is not a new 
issue, but it hasn't gotten any better. In fact, it is getting 
worse.
    The other issue is when we talk about bundling, there is 
one specific area, and I will talk with the staff more about it 
later, and that is the Army's new future combat systems, which 
is a huge program that is going to take care of the next 
generation of the soldier in the field, and all of that R&D has 
been directed to one company, Boeing, who is making 30 awards. 
There is no small business subcontracting plan. There is no 
guarantee that small business will participate in any of these 
plans. We are told that once these awards are made, they will 
think about putting together a small business plan. But those 
solicitations have already closed and they are now being 
awarded and small business is going to be squeezed out of 
those. It is the next 10 years of R&D being crammed into a 
program that is not under the Federal Acquisition Regulations 
or the statute.
    When we talk about bundling, it is a horrific problem and 
this is one of the worst examples, exactly opposite of what the 
President said he wanted in the way of bundling.
    Mr. Warren. Allen.
    Mr. Neece. Three things on procurement We concur. SBA has 
been underfunded in its PCR program and in its procurement 
office, we believe, for a number of years, so we would urge 
increased funding for the procurement office. It continues to 
be underfunded and graduated down over a period of time and we 
think that ought to be reversed.
    Secondly, many of Jim Turpin's comments, they are one of 
SBLC's members.
    Lastly, we also feel very strongly about SBA's 
recommendations addressing the SBDC program. I know you 
addressed that earlier. We just want to be on record that we 
strongly oppose those recommendations from the Administration. 
This Committee and the Congress has been a great champion of 
the SBDC program over the years and protected that program. We 
think those recommendations are unwise and could have 
catastrophic consequences if they are enacted and we presume 
that, based on what Senator Kerry said, and I understand the 
Chairwoman has also been a longtime champion in this program, 
that hopefully, this Committee will not accept any of those 
recommendations. Thank you.
    Mr. Warren. Thank you.
    Susan.
    Ms. Au Allen. Susan Au Allen, U.S. Pan Asian American 
Chamber of Commerce. I am going to say that this is just some 
music to my ears to hear the issue of bundling being talked 
about, debated so vigorously.
    What I suggested 2 years ago at the Missouri Women's 
Business Summit, that in order to make sure that there are 
contracts left over for the small business community, that 
there should be a policy that the agencies set aside a 
particular portion in dollar terms of contracts that will be 
free of bundling, first.
    Secondly, we need to direct the Office of Procurement to 
make sure that these unbundled opportunities are in areas where 
small business could perform. There is no point in unbundling 
contracts in areas they could not perform, and I would give you 
more details, but in the interest of time, I will move forward.
    Thirdly, in order to enforce unbundling, there has got to 
be a penalty clause. Fine. But you have got to put into the 
penalty clause there is no transfer of the penalty from the 
prime contractor all the way down. Otherwise, that cost is 
going to share by the subcontractors who had nothing to do with 
the failure to unbundle. Three points. Thank you.
    Mr. Warren. Good points.
    Giovanni.
    Mr. Coratolo. Three quick points. No. 1, we certainly fully 
support SBIR and we hope the Committee will exercise oversight 
to make sure that homeland security gets a viable SBIR program 
as quick as possible.
    The U.S. Chamber of Commerce has as its member base 3,000 
State and local Chambers who utilize a lot of programs 
throughout the United States that are offered by all the SBA. 
As the Ranking Member had pointed out, the State resources are 
shrinking. State budgets are pressed. We hear from a lot of our 
members that State resources for small business are also taking 
an unproportional hit.
    As you go through the reauthorization process and the 
funding process for SBA programs, please recognize it is not a 
level playing field. A lot of people are really depending on 
these services out in the State and local governments because 
the State budgets are really incurring very much so into 
resources they offer for small business.
    This gets me to a final point. SBDCs are used by our State 
and local Chambers and a lot of our memberships and a lot of 
our underlying members and we certainly support the current 
system of SBDCs and certainly the funding there. We would 
certainly like to see at least level funding, if not more 
funding, because they are truly underfunded. Thank you.
    Mr. Warren. Mickey.
    Mr. Ibarra. Thank you, Mr. Warren, and also to Ms. Forbes. 
The U.S. Hispanic Chamber of Commerce, I am proud to say, 
represents over 1.2 million Hispanic-owned businesses that earn 
nearly $200 billion annually. It is comprised of 130 local 
Chambers from across the country. We are just here in 
Washington, D.C., to conduct the 13th Annual Legislative 
Conference, where our Hispanic-owned businesses really 
attempted to make four major points. Two of them, I would like 
to share with you today.
    Before doing so, though, I would like to also mention and 
compliment the Small Business Administration. I think today, 
more than ever before, the SBA is viewed by the U.S. Hispanic 
Chamber of Commerce, as vital to the success of small business. 
We will work very hard, very hard, hopefully most of the time 
with the SBA's support, for additional resources for the 
important programs that they are responsible for delivering to 
Hispanic small business and all small business throughout the 
country.
    Two points I would like to make. First, access to capital. 
The U.S. Hispanic Chamber of Commerce continues to support 
Federal programs that provide access to credit and venture 
capital. We believe, again, this is vital sustenance in order 
to ensure the success of small business. Also, we would ask 
that the 108th Congress, and we will continue to work hard to 
ensure that the 108th Congress meets the needs of small 
business, that, in fact, we provide the adequate resources 
through the funding process, appropriations process, to reverse 
what we believe are threats to the flagship programs of SBA, to 
include the 7(a), 504, the SBIC, as well as the micro-loan 
programs.
    Second point, procurement. The U.S. Hispanic Chamber of 
Commerce certainly supports the preservation and expansion of 
existing minority programs within SBA, as well as the 
enforcement of legislative mandates to ensure Federal 
departments meet their goals in awarding contracts to minority 
and women-owned firms. Moreover, the USHCC believes it is 
critical to support the elimination of contract bundling within 
the Federal Government.
    I will just close. I mentioned our legislative conference. 
Clearly, the issue that is of most concern currently is the 
issue of contract bundling and we urge the Small Business 
Committee, the SBA to vigorously address this issue which is of 
grave concern, I think, to many small business owners around 
the country. Thank you.
    Mr. Warren. Absolutely. Thank you.
    Ellen.
    Ms. Golden. Thank you. I will keep it very, very brief. I 
want to go back just for a second to two issues around 
technical assistance. One is the issue of the competition for 
the SBDC, and I want to say that while I can understand the 
desire for innovation and increased performance, like others 
have said, I think that there are more cost-effective and 
efficient ways to achieve that.
    Similarly, in terms of the concerns expressed about the 
gaps in services in the Women's Business Center program, I 
think that there are other ways to achieve those ends without 
taking funding away from current centers. On behalf of the 
association, I would like to extend an offer to work with the 
Small Business Administration so that we can look more closely 
at their concerns and see if we can't find alternative 
solutions. While I can't really speak on behalf of my colleague 
from the Association of SBDCs, I assume that he, too, would 
extend a similar offer to the Administration.
    Mr. Wilson. Absolutely.
    Mr. Warren. Thank you.
    Fred.
    Mr. Armendariz. Yes. I would just like to make one comment 
in closing today. We can use all of your help in regards to 
getting these small business goals accomplished. One of the 
things that we have embarked on at the SBA is we have been 
going out agency to agency, the Deputy Administrator and the 
Administrator and I, and working with senior-level officials at 
each agency, educating them as to the importance of small 
business.
    When I was a young businessman, my dad gave me a little bit 
of advice and he said, ``You know, if you can get two of three 
things in any business transaction, you have a solid deal, 
something that is in your favor,'' and that was price, quality, 
and speed. If you can get two of those three, you have got a 
fair deal.
    Well, I venture to say that small business offers all three 
to the Federal Government. They offer the highest quality, the 
best prices and we can deliver overnight. When we go out and 
educate the secretaries and deputy secretaries of each one of 
these agencies, they understand, they listen, they see the 
leadership of the President, and when they look at their bottom 
line, they are trying to leverage every day to get the most out 
of every dollar. They seem to act. We have gone to three 
agencies this year, and I can tell you that all three agencies 
have made huge moves in regards to getting their culture, if 
you will, within their agency to understand the value of small 
business.
    We started out at HUD and they self-imposed a 50 percent 
goal on small business. In other words, 50 cents out of every 
procurement dollar is earmarked for small business, and that is 
self-imposed, once again, because of the leadership of Deputy 
Secretary Alphonso Jackson.
    We then went to Labor and talked to Labor, and Ken Finley 
put in place an MOU with the SBA that puts us at the front end 
of the design of procurement opportunities so we can make sure 
that small business is within the design of the procurement, 
not on the back end as an afterthought.
    Most recently, we went to Energy, which, as we all know, 
has been a struggle for all of us, and Energy's deputy 
secretary put into their performance measurement plan a small 
business provision.
    Now, all of these three landmark moves came as a result of 
the education of the senior-level management at each one of 
these agencies, and I want to enroll each and every one of you 
to help us with this cause because I do believe that leadership 
is the silver bullet, if you will, for all of us to achieve the 
goals that we have in mind for our constituents. Thank you.
    Mr. Warren. Thank you, Fred. We are pleased to be joined by 
Senator Enzi.

 OPENING STATEMENT OF THE HONORABLE MICHAEL B. ENZI, A UNITED 
                  STATES SENATOR FROM WYOMING

    Senator Enzi. Thank you. It is good to be here today and I 
appreciate all the efforts and comments of everybody that has 
contributed today. I have had a staff person here recording 
those things so that I can get a briefing later this afternoon. 
I have been in Foreign Relations, where we are doing the 
reauthorization that involves some of the things dealing with 
the war right now, so I apologize for not having been here.
    The Small Business Committee is my favorite Committee. It 
has a bigger effect on Wyoming than any other Committee that I 
serve on, and I suspect that it has that kind of an effect in 
almost every State. Small business is the backbone of this 
country. We have had the mega-mergers where the big 
corporations have come together, and shortly after they do, 
then they have what they call a right-sizing or a down-sizing. 
I call it laying off people.
    [Laughter.]
    Senator Enzi. But following that, until we had the 
downturn, all of those people were being absorbed and they were 
being absorbed by small business. Thank goodness small business 
has continued to grow and improve throughout all the times of 
this country. That is where the real innovation comes from, 
and, of course, the reason we had big business is because some 
of those little businesses grew up, and that is what we want to 
have with all of the businesses in the United States.
    My office has been in the process of moving this week and 
it gives us a chance to clean out some of the nooks and 
crannies and that is what this reauthorization of small 
business does. It gives us a chance to clean out some of the 
nooks and crannies and places that are less used and refocus 
those resources into areas that are more used and to streamline 
some of the ones that are used on a daily basis. So I do 
appreciate your efforts on that.
    I am pleased that the reauthorization includes an extension 
of the Technical Rural Outreach Program. I helped get that 
program rolling in 1997 and it has provided valuable technical 
assistance to Wyoming's small businesses. Unfortunately, we 
have had some difficulty getting appropriators to fund the 
program at the level that we authorized, but that is a topic 
for another day.
    I am interested in the comments that you have made on 
suggested amendments to the Small Business Development Centers. 
They have the potential to alter how SBDCs function. I want to 
assure that any alteration that we make is a good one. We do 
have the University of Wyoming, it is our only 4-year 
institution, public or private in Wyoming, and they had taken 
the lead on SBDCs. They developed strong working ties with the 
local communities, and so any changes that the Committee 
considers, I hope will strengthen rather than weaken those 
ties.
    The Small Business Development Centers and several other 
organizations, both with the Federal Government and in Wyoming, 
have worked with me for each of the last 2 years to hold a 
procurement conference in Wyoming. It has been an opportunity 
for the small businesses in our State to get together with 
representatives from Federal agencies, particularly the SBA 
liaison with the agencies, to help come up with ways that they 
can get contracts with the Federal Government. It has been an 
extremely valuable conference. We have had actual contracts 
come out of it. Each year, we have always had at least twice as 
many people as we expected show up for it, so it is something 
that is needed and something that I hope will expand into other 
States.
    Of course, we are interested in government contracting. We 
are interested in business development. I want to place some 
special emphasis on the Small Business Innovation Research and, 
again, with the hope that that will be funded more fully. We 
have some great success stories that have come out of Wyoming, 
of inventions that have worked their way through that process 
and are now being marketed independently worldwide. Small 
businesses give people a lot more flexibility in where they can 
live and in what they can earn. I think that is the future for 
our young people in this country, to be able to start a small 
business and grow it into one of the mega-businesses that I 
complained about earlier.
    So I thank you for all of your efforts and look forward to 
working on the reauthorization, and I thank you all.
    Mr. Warren. Thank you, Senator Enzi.
    [Laughter.]
    Mr. Warren. On behalf of Senator Snowe, let me thank you 
all for coming today. Your input has been absolutely 
invaluable. We look forward, and she asked me to tell you how 
much she looks forward to working with you, with the SBA, with 
the Members of this Committee, including Senator Kerry and the 
other side of the aisle, in order to craft a good, balanced, 3-
year reauthorization as we move forward into the next cycle for 
SBA.
    As Senator Snowe said at the beginning, the record will be 
open for the next 2 weeks, so if you have additional comments 
or written statements, if you have brought them and would give 
them to our hearings clerk, Lindsey, we will insert them into 
the record.
    The Senators may also have additional questions, which we 
will send out, and we would ask you to try to have responses 
back as quickly as you can. Given the mail around here, if you 
can e-mail them in, we might actually get them faster and they 
won't be crispy.
    [Laughter.]
    Mr. Warren. So with that, thank you, and we are adjourned.
    [Whereupon, at 12:12 p.m., the Committee was adjourned.]
      

                          PREPARED  TESTIMONY


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                      APPENDIX MATERIAL SUBMITTED


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