[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                 SBA'S PROCUREMENT ASSISTANCE PROGRAMS
=======================================================================

                                HEARING

                               before the

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                     WASHINGTON, DC, MARCH 30, 2006

                               __________

                           Serial No. 109-45

                               __________

         Printed for the use of the Committee on Small Business


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



                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
28-555                      WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001


                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          RAUL GRIJALVA, Arizona
RIC KELLER, Florida                  MICHAEL MICHAUD, Maine
TED POE, Texas                       LINDA SANCHEZ, California
MICHAEL SODREL, Indiana              JOHN BARROW, Georgia
JEFF FORTENBERRY, Nebraska           MELISSA BEAN, Illinois
MICHAEL FITZPATRICK, Pennsylvania    GWEN MOORE, Wisconsin
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Deputy Chief of Staff/Policy Director

                  Michael Day, Minority Staff Director

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

W. TODD AKIN, Missouri Chairman      MADELEINE BORDALLO, Guam
MICHAEL SODREL, Indiana              ENI F. H. FALEOMAVAEGA, American 
LYNN WESTMORELAND, Georgia           Samoa
LOUIE GOHMERT, Texas                 DONNA CHRISTENSEN, Virgin Islands
SUE KELLY, New York                  ED CASE, Hawaii
STEVE KING, Iowa                     LINDA SANCHEZ, California
TED POE, Texas                       GWEN MOORE, Wisconsin

               Christopher Szymanski, Professional Staff

                                  (ii)


                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Martoccia, Mr. Anthony, Associate Deputy Administrator, Office of 
  Government Contracting and Business Development, U.S. Small 
  Business Administration........................................     5
Collado, Mr. Rafael, CEO & Chairman, Phacil, Inc.................     6
Heckman, Mr. Kurt, President, Sycamore US, Inc...................     9
Lopez, Mr. John, Chairman, Association for Service Disabled 
  Veterans.......................................................    11
Giordano, Ms. Catherine, President, Knowledge Information 
  Solutions, Inc.................................................    13
Schneider, Ms. Christina, Chief Financial Officer, Purcell 
  Contracting Corporation........................................    15

                                Appendix

Opening statements:
    Akin, Hon. W. Todd...........................................    24
    Velazquez, Hon. Nydia (Ex Officio)...........................    25
    Kelly, Hon. Sue..............................................    28
Prepared statements:
    Martoccia, Mr. Anthony, Associate Deputy Administrator, 
      Office of Government Contracting and Business Development, 
      U.S. Small Business Administration.........................    30
    Collado, Mr. Rafael, CEO & Chairman, Phacil, Inc.............    34
    Heckman, Mr. Kurt, President, Sycamore US, Inc...............    45
    Lopez, Mr. John, Chairman, Association for Service Disabled 
      Veterans...................................................    47
    Giordano, Ms. Catherine, President, Knowledge Information 
      Solutions, Inc.............................................    53
    Schneider, Ms. Christina, Chief Financial Officer, Purcell 
      Contracting Corporation....................................    62
Additional material:
    Espinosa, Mr. Raul, President & CEO, Fitnet Purchasing 
      Alliance...................................................    73

                                 (iii)
      



                 SBA'S PROCUREMENT ASSISTANCE PROGRAMS

                              ----------                              


                        THURSDAY, MARCH 30, 2006

                   House of Representatives
     Subcommittee on Regulatory Reformand Oversight
                                Committee on Small Business
                                                     Washington, DC
    The Subcommittee met, pursuant to call, at 2:00 p.m., in 
Room 2360 Rayburn House Office Building, Hon. W. Todd Akin 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Akin, Bartlett, Bordallo, Moore 
and Velazquez (Ex Officio).
    Chairman. Akin. The Committee will come to order. Good 
afternoon, everybody. I'm sorry that we had some votes and it 
has made us run a little bit late. We're going to try and 
redeem the time some here and so I'm going to proceed with an 
opening statement and then we'll take an opening statement by 
my counterpart here, the Ranking Member, and then if you'd like 
to make a statement you may.
    What we're going to do is run five minutes right across for 
everybody. I'm going to hold everybody pretty close on time. It 
is the equivalent of Friday afternoon in a school environment 
and so we're going to do five minutes for everybody and then 
have a time of questions. I would expect we'll be probably done 
pretty close to an hour or somewhere in that vicinity, okay?
    Good afternoon. Welcome to the hearing which will consider 
the Small Business Administration's procurement assistance 
programs. I want to especially thank those who have come some 
distance to participate in the hearing.
    Most of you know that small businesses are the backbone of 
our economy. Most, if not all, large businesses started as 
small businesses. Small businesses are often times the driver 
of innovation in both products and services. The Federal 
Government plays an enormous role in promoting the growth of 
this sector as the consumer of goods and services that small 
businesses provide.
    In fact, it is the stated policy of Congress that the 
Federal Government should purchase 23 percent of their goods 
and services from small businesses. Furthermore, the Small 
Business Administration oversees procurement assistance 
programs for small businesses that owned by the disadvantaged, 
women, veterans, or located in Historically Underutilized 
Business Zones.
    In the past, small businesses have expressed concern that 
SBA and other federal agencies were not providing sufficient or 
effective procurement assistance. In addition, there have been 
concerns that large businesses have received the benefit of 
small business contracting goals and policies. With a new 
associate deputy administrator for the Office of Government 
Contracting and Business Development at the SBA, this is the 
time for a new review of the Government's small business 
procurement policies.
    This hearing will examine whether or not federal 
procurement assistance programs are, in fact, helping small 
businesses compete in the fiercely competitive and complex 
contracting environment. Are the SBA's and other federal 
agencies' programs and efforts sufficient to assist small 
businesses in finding real procurement opportunities? Also, the 
Subcommittee will explore innovative ideas and recommendations 
to improve and enhance assistance to small firms that want to 
do business with the Federal Government.
    I now yield for an opening statement by my good friend and 
colleague, the Ranking Member of this Subcommittee, Ms. 
Bordallo of Guam.
    [Chairman Akin's opening statement may be found in the 
appendix.]
    Ms. Bordallo. Thank you very much, Mr. Chairman, and good 
afternoon, everyone.
    It has been some time since this Committee has been able to 
review the Small Business Administration's procurement 
assistance programs. These preferential contracting programs 
provide small businesses with some of the best avenues into the 
federal marketplace. And it is important that this Committee 
and Congress, as a whole, ensure that the SBA is administering 
these programs to their full potential.
    The Federal Government is the largest buyer of goods and 
services in the world. During Fiscal Year 2004, the Federal 
Government's purchases exceeded $330 billion. Amazingly, the 
value of the federal marketplace roes by more than $100 billion 
in the past five years.
    Small businesses, however, may not be benefitting from this 
growth in the federal marketplace to the extent that they 
should. And this of great concern to me. Small businesses are 
driving forces behind our economy. They are the largest creator 
of jobs. They are innovators that spur new technology and 
efficiencies in our economy. And they are also essential parts 
of the communities in which we live.
    I represent Guam. And small businesses constitute nearly 90 
percent of the businesses in my district. Supporting them is a 
top priority for me.
    The HUBZone program on Guam, in particular, is growing in 
importance to the island's small business community. Fifty-four 
Guam firms have been certified as HUBZone businesses, since 
August of 2005 when all of Guam was designated as a HUBZone. 
And I have the Small Business Committee to thank for that. That 
was a piece of legislation that we put through. This is 
encouraging considering that only six Guam firms were certified 
for the program prior to this legislation.
    Barriers to small businesses participating in the federal 
marketplace have traditionally been high. And this is one of 
the reasons why Congress authorized programs such as the 
Historically Underutilized Business Zone program, the 8(a) 
program; the Service-Disabled Veteran Business program, the 
Small Disadvantaged Business program; and, Women-Owned Business 
program. Congress has also set in place mandatory minimums for 
the percent of contracts that federal departments and agencies 
must award to small businesses each year.
    These preferential contracting programs and the mandatory 
minimum contracting percentages allow for a more level playing 
field for small businesses to be created in the federal 
marketplace. And it is because of these initiatives that our 
nation's small businesses can more successfully compete for and 
be awarded Federal Government contracts.
    Among other things, the SBA is responsible for ensuring 
that the playing field within the federal marketplace remains 
as advantageous as possible for small businesses. So it is the 
responsibility of this Committee today to review SBA's 
performance in achieving that goal, and to solicit ideas on how 
this Committee and Congress can enhance these initiatives to 
ensure that the barriers remaining between America's small 
businesses and the federal marketplace can be successfully 
overcome by our country's small entrepreneurs.
    I look forward to your testimonies today. Thank you, Mr. 
Chairman.
    Chairman. Akin. Thank you and a brief statement will be 
made by Ranking Member of the Full Committee, Ms. Velazquez, at 
this time.
    Ms. Velazquez. Thank you, Mr. Chairman, and I also to thank 
the Congresslady Bordallo for allowing me to sit in on this 
hearing and I want to express my appreciation for all the work, 
the hard work that you do on this issue.
    Over the last several years, the federal marketplace has 
continued to rapidly increase and is $100 billion more than it 
was at the beginning of the President's term. This growth is 
attributed to spending related to the war and our involvement 
in Iraq. The Department of Defense procurement volume in 2004 
was bigger than the entire federal marketplace in 1999.
    Based on this, you would think that small businesses are 
thriving, but let me tell you nothing could be further from the 
truth. From 2003 to 2005 alone, small companies lost nearly 
$1.7 billion on contracting opportunities and contract actions 
to small businesses' decline by 31 percent. While this 
Administration claims small businesses are important, they 
obviously don't think they are important enough to do business 
with.
    We constantly hear that SBA is doing more with less, but it 
is clear entrepreneurs are not benefitting. By 2007, the agency 
staff will be reduced by one third and their budget has already 
been cut in half. The lack of personnel and resources causes 
programs to be abused, fraud-ridden, and in some cases not 
executed at all.
    One of the most important roles SBA serves is to ensure 
agencies comply with current contracting laws. This job falls 
on the Procurement Center Representative, the front line 
defense against items such as contract bundling. There were 73 
PCRs when the federal marketplace was almost half of its 
current size and now there are only 58.
    This leaves small firms without an advocate and results in 
a drop in contracting opportunities. At a time when many small 
businesses are struggling to recover from Hurricane Katrina and 
Rita, local entrepreneurs are receiving less than 20 percent of 
FEMA's contracting dollars. To make matters worse, nothing has 
been done to expand business opportunity in the Gulf region for 
recovery work.
    While the SBA does not think this is alarming, our nation's 
small businesses are being neglected. These shortcomings are 
most glaring with respect to women and minorities. The 8(a) 
program, the primary program through which minority-owned 
businesses enter the federal marketplace has dropped by 20 
percent. What is most disappointing is that this program has 
not been updated in nearly 20 years and as a result has moved 
away from its core mission of minority business development.
    This Administration has also done nothing to implement the 
Women's Procurement Program that passed into law and signed by 
the President in 2000, an initiative that allows for women-
owned businesses to access the federal marketplace. By failing 
to execute this program, women business owners have lost out on 
$25 billion in contracting opportunity. Small business 
participation in the federal marketplace is important and 
should not be viewed as an undue burden.Entrepreneurs are the 
innovators, drivers of our economy. They make this economy 
tick. This is not just good for small businesses, but it 
creates competition in the federal marketplace, gives federal 
agencies quality products and most importantly, it provides the 
best value for taxpayers' dollars.
    If corporate America turns to small businesses and provides 
contracts for them, why can't the Federal Government do the 
same? Rather than recognizing this, the Administration's sole 
focus is providing big contracts to companies like Haliburton 
who then turn around and overcharge the Government millions of 
dollars. This is the wrong set of priorities for this nation 
and it needs to change.
    Thank you, Mr. Chairman.
    [Full Committee Ranking Member Velazquez's opening 
statement may be found in the appendix.]
    Chairman. Akin. Thank you, all of our speakers so far who 
have been able to stay within the five minutes here. So let's 
see if we can keep it within the five minutes and that will 
give us a little time for questioning as well.
    Our first witness is Anthony Martoccia. Anthony is the 
Associate Deputy Administrator in the Office of Government 
Contracting and Business Development, U.S. Small Business 
Administration, Washington, D.C., but Anthony, my understanding 
is that this is your second month in the job, is that correct?
    Mr. Martoccia. That's correct.
     Chairman. Akin. What we're going to do is allow Mr. 
Barlett, because he's on a tight time schedule, to introduce 
Mr. Heckman. But I'm still going to go ahead and go straight 
across to Mr. Heckman even though he isn't first. Mr. Barlett, 
if you would introduce your witness, Mr. Heckman, and then we 
will proceed.
    Mr. Bartlett. When you come to him in the line, I'll 
introduce him. Are you starting down the line? Go ahead.
    Chairman. Akin. I was going to go down the line, but--
    Mr. Bartlett. When you come to him, yield to me, and I'll 
introduce him.
    Chairman. Akin. Okay, that was what I was thinking about. 
Then I'm going to continue with the introduction then of 
Anthony, and your introduction is done, basically. Now your 
honeymoon is over, and you've been here a month, so we look 
forward to your testimony. Thank you.

     STATEMENT OF ANTHONY MARTOCCIA, OFFICE OF GOVERNMENT 
   CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS 
                         ADMINISTRATION

    Mr. Martoccia. Chairman Akin, Ranking Member Bordallo, 
Distinguish Members of the Subcommittee, I am here today to 
discuss the President's FY Budget request for the Small 
Business Administration and related legislative issues, 
specifically those related to government contracting and 
business development.
    I am Anthony Martoccia, Associate Deputy Administrator for 
Government Contracting and Business Development. Thank you for 
allowing me to represent the SBA on behalf of Administrator 
Barreto.
    Since 2001, the SBA has been on a mission to deliver more 
services to the nation's small businesses. We are proud of the 
SBA's success in that quest, and the FY 2007 budget reflects a 
continuation of this goal.
    Improved methods to assist small businesses gain access to 
government contracting opportunities have been implemented. By 
restructuring key agency operations and re-engineering the 
Agency's largest loan programs, the SBA has achieved record 
program growth while operating more efficiently and reducing 
its total budget by more than 37 percent since 2001. Government 
contracting dollars going to small businesses have grown 
significantly since Fiscal year 2000. There were $20 billion 
more in small purchases, prime contracts, small businesses in 
FY 2004 than in FY 2000, supporting an estimated 156,000 jobs.
    In addition, subcontracting to small business has grown by 
$10 billion. With improved efficiencies in Fiscal Year 2007, 
SBA will be able to serve record numbers of small businesses 
with a total budget request of $624 million of which $74 
million will be used for government contracting and business 
development.
    SBA has increased the number of Procurement Center 
Representatives to 58, assisting small businesses with federal 
procurement. In FY 2004, small businesses received contract 
awards a little over $69 billion of the approximate $300 
billion in total federal prime contract awards. Additionally, 
there were an estimated $45 billion in government-related 
subcontracts awarded to small businesses.
    SBA's Office of Government Contracting and Business 
Development also instituted enhanced practices and 
technological improvements. GCBD is working with agencies to 
help them meet their missions, as well as helping small 
businesses to identify contracting opportunities through these 
technological improvements. Technology, such as the electronic 
Procurement Center Representative system create increased 
efficiencies concerning governing contracting opportunities.
    Strides have been made to maximize staff resources and 
monitor contracting activities, as well as to improve 
communication and interaction with the small business community 
through the automation of many basic systems. These systems 
include the Electronic Subcontracting Reporting System, 8(a) 
application, HUBZone Procurement Query and Reporting System, 
Central Contractor Registration, Federal Procurement Data 
System Next Generation and Tech Net, among others. As 
technology is ever changing and improving, so are the 
efficiencies enhanced by using these E-gov systems.
    The added benefit of these technological advances is 
apparent in the business matchmaking efforts following the Gulf 
Coast hurricane disasters. More than 500 small businesses were 
registered and assisted by our Procurement Center 
Representatives across the country to get over $30 million in 
contract support. In other Katrina-related contracting, 
approximately $1.24 billion Katrina-related contracts listed in 
FPDS were awarded to small businesses. Also approximately $1.5 
billion in FEMA small business awards are pending.
    In addition to GCBD's traditional functions, the Office 
will leverage opportunities outside of our division. 
Opportunities provided by SBA's Office of Capital Access, 
Entrepreneurial Development and SBA district offices outreach 
to assist small businesses to be ready and able to do business 
with the Federal Government.
    The SBA operates like the businesses it helps to succeed by 
continually meeting challenges and evaluating cost 
effectiveness. The SBA has succeeded in achieving record growth 
in its programs while at the same time reducing the overall 
budget request through focused, practical implementation of the 
President's Management Agenda and related initiatives.
    Creating a better environment for small business to thrive 
and compete is a priority. It is well documented that when 
small businesses are thriving, the overall economy is thriving.
    Thank you. I will be happy to answer any questions you 
might have.
    [Mr. Martoccia's testimony may be found in the appendix.]
    Chairman. Akin. Thank you. I really appreciate your 
testimony, Deputy. And you brought it in 30 seconds under time. 
You're doing pretty good.
    Mr. Martoccia. Thank you.
    Chairman. Akin. Get a little extra star for that. Thank 
you.
    And Rafael--is that Collado?
    Mr. Collado. Yes sir.
    Chairman. Akin. And you're the CEO and Chairman of Phacil, 
Incorporated from Camden, New Jersey.
    Mr. Collado. Actually, it's Phacil, Incorporated in Camden, 
New Jersey.
    Chairman. Akin. Phacil?
    Mr. Collado. Yes sir.
    Chairman. Akin. I got half of it. Thank you, please 
proceed.

           STATEMENT OF RAFAEL COLLADO, PHACIL, INC.

    Good Afternoon Chairman Akin, Congresswoman Bordallo, 
Members of this Subcommittee, fellow panelists and guests. My 
name is Rafael Collado and I am the Chairman of the Board and 
CEO of Phacil, Inc. Phacil, Inc. is certified by the Small 
Business Administration as a Small Disadvantaged, 8(a) and 
HUBZone Business. The company provides Information Assurance/
Security, Information Technology, Logistics Support and 
Engineering Services to the Federal Government and commercial 
customers. Phacil is unique among 8(a) companies in that it 
holds a Top Secret Facility clearance and is headquartered at 
the Applied Communication and Information Networking Center in 
Camden, New Jersey which is a HUBZone.
    I am pleased to join this panel of industry and government 
leaders to participate in a dialogue about contracting 
opportunities made available as a result of the Small Business 
Administration's HUBZone program. And more specifically, the 
legislation reauthorizing the SBA itself. For me and my Company 
Phacil, participating in procurement opportunities within the 
context of the SBA have been extremely disappointing. After 
four years of participating in SBA programs, Phacil's 
appropriate expectations have not been realized.
    Based on our experiences there is no doubt there is a bias 
against small business and that the SBA has done very little to 
mitigate it. I hope that forums such as this one will provide 
the guidance, and more importantly, sanctions that will 
transform the SBA from the bureaucratic speed bump for small 
disadvantaged companies into the facilitator of newly, 
reinvigorated, badly needed economic engines in urban 
communities.
    By way of personal background, I was born in the South 
Bronx. With the support of my parents working as an electrical 
engineer in the aerospace industry and my mother, a home-maker, 
I did well in school. I graduated high school as both a Regents 
and National Merit scholar attended Polytechnic Institute of 
Brooklyn where I majored in Electrical Engineering and after 
Polytech worked for several of the largest technology firms in 
the United States.
    Very early in my working career I knew that I wanted to 
start my own business. I did not want my life to potentially be 
in the hands of people who might not be fair to me. I decided 
that the only way I could help myself and my community was to 
build something which would directly contribute to the local 
economic infrastructure. In 1983 with the assistance of some 
friends I had grown up with, I founded Protocom Devices, Inc. 
and at its peak we employed over 200 people. The majority of 
these folks came from the local neighborhood and had been 
trained by the company to a high level of technological 
competence.
    I since went on to found several other companies, including 
Inabox Communications which was acquired by Register.com in 
2000. It was at Register.com that I met my current partner at 
Phacil, Sascha Mornell, who also shares the value of hard work, 
education, integrity, commitment and compassion for equality.
    Phacil was formed by Sascha and me, fulfilling a life long 
dream of creating, nurturing and running our own business. In 
2000, we formed Phacil and experienced all of the barriers that 
confront most Small Disadvantaged Businesses. Primarily, we 
experienced and continue to experience now what I call the 
institutional corruption of convenience, people not performing 
their congressionally-appointed duties because it requires them 
to work a little harder and they don't pay a price if they are 
not diligent.
    For the sake of brevity I will limit my comments today to 
the major obstacles the company historically faced so as to 
illustrate the SBA's failure to effectively implement the 
HUBZone program and the pervasiveness of its institutional 
apathy which is most corrosive to equal opportunity. Therefore, 
I begin as any small disadvantaged business wanting to develop 
in the Government contracting marketplace with the SBA.
    As I mentioned earlier, Phacil wanted to be a HUBZone 
company because Sascha and I wanted our Company to provide jobs 
to folks in economically disadvantaged neighborhoods. We had 
been successful previously; we wanted to continue and extend 
this success to folks in under utilized or under employed urban 
settings.
    The HUBZone Program was most co-incident to this purpose, 
or so we thought. The program was and is, first and foremost, a 
jobs-creation program. It was open to all businesses regardless 
of race, ethnicity or sex--not a quota system--which appealed 
to my particular idealism best expressed by Dr. Martin Luther 
King when he said that he hoped one day his children would live 
in a world where they were judged ``not by the color of their 
skin. but by the content of their character.''
    For me the decision to seek entry into the HUBZone program 
was a way of making part of that dream real. My first 
disappointment came, when after we had speedily filled out the 
forms, hired the requisite number of people from our limited 
capital resources and set up operations in Newark.the SBA said 
they were ``too busy'' to process our paperwork and worse yet 
had no idea as to when they could review it so that we could be 
certified. Despite numerous calls, emails and personal visits, 
we could not get any movement or support whatsoever from the 
SBA. Upset and frustrated, we decided to reach out to our local 
Congressman, the Honorable Donald M. Payne.
    Mr. Robert Cottingham from Congressman Payne's office came 
to visit us within a day of our call. He took the time to 
listen to us, asked a few questions and then very frankly told 
us that there might not be very much he could do. Thanks to the 
Congressman's assistance, within three days of that meeting, 
the SBA reviewed, asked a few questions and clarifications and 
certified us as a HUBZone company. That was the first time, but 
certainly not the last time, that aggressive and principled 
congressional involvement helped balance the scales of 
opportunity on our behalf and on that of the communities whose 
citizens we employ.
    Our experience with the HUBZone program caused us to become 
very concerned that other potential beneficiaries in Newark 
were being underserved by the SBA. Sascha and I, with 
assistance from--
    Chairman. Akin. Mr. Collado, we're already out of time. We 
have actually quite a lengthy record that is part of our record 
for the Committee that you've submitted. Do you want to just 
sort of summarize in one sentence?
    Mr. Collado. Surely. In closing, I would like to remind the 
Members of this Committee that Phacil has depended on the 
active, aggressive support of our elected representatives in 
leveling the playing field in dealing with Federal Government 
acquisition and contracting. Borrowing in a bipartisan manner 
from the words of two great American Presidents I say as 
President Kennedy did, ``always remember that sincerity is 
always subject to proof.'' In that same vein, another great 
American President, Ronald Reagan warned us ``to trust and 
verify.''
    I would again want to thank the Members of the Committee 
for this opportunity to share my perspective and I'd like my 
comments entered into the record. Thank you.
    [Mr. Collado's testimony may be found in the appendix.]
    Chairman. Akin. Without objection, and thank you for 
sharing and obviously an exciting personal journey and all. I 
think people have some questions for you.
    I would call on Mr. Bartlett to introduce our next witness. 
I'm sorry they didn't arrange the name tags on the table in the 
same order they did in our notes, so we're going to jump over 
to Mr. Heckman, but I'd like to recognize Roscoe Bartlett, my 
esteemed colleague.
    Mr. Bartlett. My honor. Kurt Heckman is a resident of 
Hagerstown, Maryland. He is the President of Sycamore US which 
is based in Frederick and McHenry, Maryland. He has a 
mathematics degree from Eastern Nazarene College and has 22 
years' experience in the U.S. intelligence community. He has 
primarily served as a systems engineer and has designed mission 
planning software for large, aerospace applications. However, 
he is most proud, as he well should be, of his beautiful wife 
of 23 years and his 5 children.
    In 1996, Mr. Heckman founded a small business to support 
the intelligence and aerospace communities with engineering 
services. Kurt and his business partner, Jim Lockwood, named 
the company and I really like this, named the company Sycamore 
Associates because Zaccheus, from the Bible, climbed up a 
Sycamore tree as a dishonest businessman and came down from the 
tree an honest businessman.
    Since 1996, Mr. Heckman and his team have led the company 
from a single contract with a few engineers, to numerous 
contracts with the US intelligence community, HUD, Fannie Mae, 
Freddie Mac, Ginnie Mae, Lockheed Martin and Orbital Systems 
employing a staff of over 100 people.
    I am honored to know him. He is both a friend and a 
constituent. He has brought really high-paying jobs to a 
HUBZone in a really depressed part of our district, a city 
that--a county that until a few years ago had 14 percent 
unemployment. And I think his employees there get what, four 
times the average income? HUBZones are really, really working 
in his district and thanks to Kurt Heckman, we had a lot of 
employees now in HUBZones.
    Thank you for coming as a witness, and I'm honored to be 
here.
    Chairman. Akin. Roscoe, thank you for that great 
introduction, and Kurt, you can proceed. Thank you.

          STATEMENT OF KURT HECKMAN, SYCAMORE US, INC.

    Mr. Heckman. Congressman, thank you for your kind 
introduction. It's an honor to be here in front of this 
subcommittee today. On behalf of the 100 employees at Sycamore, 
please accept my thanks for creating the HUBZone program and 
maintaining it through these years.
    In my ten years at Sycamore, I've discovered that there is 
really only one inherent virtue to being a small business, and 
that virtue is that the stockholders know the employees on a 
first name basis. It's impossible to work side by side with 
your employees for any length of time and coldly refer to them 
as ``labor.'' In a small business, employees are your partners. 
In a small business like Sycamore, they become owners where 20 
of my 100 employees own part of my company. Small business is 
where humanity truly intersects with economics and frankly, a 
lot of America's business problems today can be traced to 
dehumanization of our workers.
    Sycamore has been a delight to me for the last 10 years, 
but with the delight comes a burden regarding the care of a 
growing number of individuals and families. We've worked to 
create the employee-centric company that I always wanted to 
work for, and the net result is that we have top-performing men 
and women and virtually no attrition. People come to Sycamore 
and stay, and in the Intelligence Community, that is virtually 
almost unheard of. For moral and ethical reasons, we keep the 
respect for our employees at the top of our priorities, but it 
is also good business. A stable and motivated workforce is a 
powerful thing. If your employees know that you will do 
everything in your power to take care of them, they won't bolt 
at the first sign of bad news; couple that with honesty and 
transparency, and you will overcome great hurdles.
    You should know that Sycamore was a successful business 
prior to the HUBZone program. We were five years old, had 30 
people, were doing about $3 million in annual revenue, but with 
the exception of some small contracts with Fannie Mae, Freddie 
Mac and Ginnie Mae, the vast majority of our business was as a 
subcontractor. That was fine, but as a sub you typically don't 
get credit for your success, you rarely get project management 
experience and in general, leadership opportunities are scarce. 
Often you can't even cite the good work you've done as a sub on 
proposals. Furthermore, as a sub, the prime's add-on cost 
creates a lower ceiling for what you can pay your employees and 
what benefits you can provide. The funny part is that even 
though the primes skim their G&A and profit off of the top of 
our bill rates, my employees are typically higher paid than 
their prime contractor peers, and certainly have better 
benefits, and that's because as a small business we've had to 
be efficient.
    In our five years as a HUBZone certified company, we've 
gone from a good little company, to a leader in the small 
business arena. We've more than tripled in size, and have five 
significant prime contracts because of the HUBZone program. The 
HUBZone requirements on the agencies have given us a chance to 
perform and I am happy to say that we have executed. Our 
performance grades are excellent across the board, and on our 
largest prime contract, which is a multimillion dollar HUBZone 
IT contract in the Intelligence Community, we have received our 
fourth straight 100 percent award fee for outstanding 
performance. Instead of viewing HUBZone regulations as a burden 
and a mandate to do work with inferior businesses, our 
customers see it as an efficient and simplified way to do 
business with an excellent company.
    I must confess that I love how the HUBZone program isn't 
geared to make rich men and women richer, but sends dollars to 
communities with statistically proven needs. It was very easy 
for Sycamore to extend its practices of excellence to our 
customers and employees to include our community. All three of 
our offices are in HUBZones. Sycamore is required to have 35 
percent of our staff be residents of a HUBZone. We have over 50 
percent. Our investment in the HUBZone community in 2005 was 
over $2.5 million.
    In closing, one our first HUBZone employees is a smart 
young man that was literally working in a coal mine in the 
Appalachian region of Western Maryland. Today, through his own 
efforts and with the help of tuition assistance, part-time 
work, benefits and technical training from Sycamore, that young 
man has a bachelor's degree in mathematics, has some of the 
highest security clearances in the land, and has a full-time 
job making over $45K straight out of college and is on his way 
to a terrific career and a bright future, all because of the 
HUBZone program. On his behalf and the others in Sycamore, 
thank you for creating the HUBZone program.
    [Mr. Heckman's testimony may be found in the appendix.]
    Chairman. Akin. Thank you so much for your testimony and 
the story as well.
    Our next witness is John Lopez. He's Chairman of the 
Association for Service Disabled Veterans from Washington, D.C.
    John?

   STATEMENT OF JOHN LOPEZ, ASSOCIATION FOR SERVICE DISABLED 
                            VETERANS

    Mr. Lopez. Good morning Mr. Chairman, Ranking Member and 
Members of the Committee.
    Thank you for your attention and without objection, I shall 
submit a written statement for the record and summarize my 
testimony for the Committee.
    Since the beginnings of our nation, the people of the 
United States of America have placed great confidence in that 
interpretation of the United States Constitution that permits 
our Government to conscript or seduce our citizens to be 
killed, disabled and tortured in military service, for the 
security and prosperity of the total population.
    Complicit in that application, has been presumption that 
our nation, through its Government, would provide 
rehabilitation for our service disabled veteran survivors of 
the resulting horror.
    This has not been the case when service disabled veterans 
have attempted to maintain their rehabilitation as owners and 
operators of smaller businesses.
    It has been nearly six years since the U.S. Congress first 
provided support for the service disabled and prisoner of war 
veteran enterprise initiative, by enacting Public Law 106-50 
and Public Law 108-183.
    The Administration followed that direction by invoking 
Presidential Executive Order 13360, directing aggressive and 
immediate implementation of those laws and specifying actions 
to be taken.
    Those activities took place in October 2004 and since that 
time frustration has continued and subsequently the legislated 
intent of the United States Congress has been variously 
interpreted by regulators, due to the necessity for inserting 
and parsing of the required language, statements and references 
to existing regulations and laws.
    This bureaucratic abuse has had the effect of confusing and 
impeding the effort to increase the participation of the 
service disabled veteran in government procurement and 
contracting opportunities.
    The policy of the nation and the intent of the Government 
has been ignored and the congressional compact for our nation's 
security has been violated.
    Consequently, it is imperative that the Congress enact H.R. 
3082 ``The Veterans Owned Small Business Promotion Act'' which 
clarifies and reemphasizes the intent of the U.S. Congress. The 
intent is a splendid example of the concern and focus of the 
congressional response to the veteran's need for rehabilitation 
and transition assistance.
    H.R. 3082 gives specific authority to the Department of 
Veterans Affairs to confirm the eligibility of service disabled 
veteran businesses and to accept direct responsibility for the 
provision of benefit to the veteran, especially, the service 
disabled veteran. It puts the task to that agency specifically 
established for the purpose of serving ``those who have borne 
the battle.''
    H.R. 3082 also clarifies the misconception that Veterans 
Entrepreneurship, and the proposed act, are a socioeconomic 
development initiative or a cultural inequity panacea.
    H.R. 3082 is a specified contribution to that continuing 
obligation of our nation to rehabilitate those veterans that 
sacrifice for our nation's security and prosperity.
    The service disabled veterans government service incurred 
misery, is unique. There is no justification for requiring that 
service disabled veteran indemnification and rehabilitation be 
adjusted to the conduct of any other socio-economic program. 
H.R. 3082 only addresses the symptoms of the Government's 
neglect of responsibility for our nation's disabled veteran.
    To finally and accurately respond to that responsibility, 
the U.S. Congress is urged to amend the Small Business Act by 
adding a new section, the service disabled veteran 
comprehensive eligibility amendment as follows:``The U.S. 
Congress hereby authorizes businesses owned and operated by 
veterans with service connected disabilities, adjudicated by 
the United States Department of Veterans Affairs, to enter into 
contracts with the United States Government and any department, 
agency, officer or government contractor, thereof having 
procurement powers obligating the entity to furnish articles, 
equipment, supplies, services, or materials to the Government 
or to perform construction work for the Government. In any case 
in which the procurement officers certify to any officer of the 
Government having procurement powers, that the service disabled 
veteran business is competent and responsible to perform any 
specific government procurement contract to be let by any such 
officer, such officer shall be authorized and directed to let 
such procurement contract to the service disabled veteran owned 
business upon such terms and conditions as may be agreed upon 
between the service disabled veteran owned business and the 
procurement officer. Whenever the procurement officers and 
service disabled veteran owned business fail to agree, the 
matter shall be submitted for determination to the Secretary or 
the head of the appropriate department or agency by the 
procurement officers.''
    Chairman. Akin. Mr. Lopez, your out of time here. Did you 
want to have one concluding sentence?
    Mr. Lopez. I have one concluding sentence already. It would 
be appropriate to recall the words of the first President of 
the United States of America, George Washington, who stated 
that ``the willingness with which our young people are likely 
to serve in any war, no matter how justified, is directly 
proportional to how they perceive the veterans of early warn, 
were treated and appreciated.''
    I would be pleased to answer any questions of the 
Committee.
    [Mr. Lopez's testimony may be found in the appendix.]
    Chairman. Akin. Thank you very much for your statement and 
for your concern about the service people that are overseas, 
particularly, and who have served our country.
    Our next witness is Catherine Giordano. And you're the 
President of Knowledge Information Solutions from Virginia 
Beach.
    Thank you. Please, and Ms. Giordano, please proceed.

    STATEMENT OF CATHERINE GIORDANO, KNOWLEDGE INFORMATION 
                        SOLUTIONS, INC.

    Ms. Giordano.
    Mr. Chairman and Members of the Subcommittee, my name is 
Catherine Giordano. I am CEO of Knowledge Information 
Solutions, located in Virginia Beach, an 8(a) certified firm. I 
am testifying today on behalf of Women Impacting Public Policy, 
a bipartisan organization representing 39 small business groups 
with a combined membership of over 535,000 women in business 
nationwide.
    Procurement programs are near and dear to my heart. Our 
company has several contracts with Department of Defense and a 
number of other government agencies and holds six Government 
Wide Acquisitions Contracts. Due to our success in the federal 
marketplace, our company has grown from $9 million in annual 
revenues to $27.5 million in the last five years. So, it is 
possible for a small company to penetrate the federal 
marketplace.
    I ask that the written testimony be made part of the 
record.
    Chairman. Akin. Without objection.
    Ms. Giordano. Rather than read the testimony, I will try to 
come to seven points of interest to the Subcommittee.
    Number one, adequate funding for SBA staff that can provide 
procurement assistance. The number one issue for small 
businesses who want to enter the federal market is an 
understanding of how the federal buying system works and the 
ability to respond to a federal sales opportunity. The SBA 
regional offices should be prepared to provide this assistance, 
but the reality is that there is inadequate staff to provide 
procurement expertise to small businesses. Members report that 
the assistance from SBA regions is inconsistent. We believe 
this to be largely due to whether or not the Procurement Center 
Representatives are located at that facility and whether or not 
the SBA staffer is properly trained to under the government 
procurement.
    WIPP urges the Committee to work with the Appropriations 
Committee to ensure adequate funding for additional PCRs beyond 
the six requested in the FY07 President's Budget.
    Number two, implement the law. Restricted competition for 
women-owned businesses is key to meeting the congressional goal 
of five percent. Putting aside any philosophical discussion on 
whether competition should be restricted to minority, women-
owned, HUBZone certified or veteran, the practical reality is 
that unless federal agencies are required to do so, it will not 
happen. The most recent statistics show that only 3 percent of 
all federal business is awarded to women-owned businesses. As 
long as there is no penalty to the agencies, nor the federal 
employees, that the agency fails to meet the women-owned goal, 
it's just nice to have.
    Number three, why is the 8(a) certification so difficult to 
obtain? In the absence of restricted competition for women-
owned businesses, the tool most often cited by the federal 
agencies is go get your certification for 8(a). And yet, it is 
abundantly clear to WIPP that SBA presumes that women business 
owners are not really socially and economically disadvantaged. 
One only needs to go through the tedious process of assembling 
reams of financial documents, personal stories dating back 
decades to be awarded an 8(a). In the past, clear and 
convincing evidence was the standard which made it almost 
impossible for women-owned businesses to get into the 8(a) 
program. In the late 90s, that standard changed to the 
preponderance of evidence in order to facilitate the entrance 
of women-owned businesses into the program.
    It seems to our members that SBA has reverted back to the 
old standard for women-owned businesses. If the SBA believes 
that women who are not minorities should not qualify, then they 
should just say so. It would save our members hundreds of hours 
of paperwork and valuable dollars.
    Number three, increase in income thresholds for 8(a) 
certification. Income thresholds have not been updated since 
1998. The present and real problem for the program thresholds 
are so low in 2006 dollars that the program is really set up to 
fail. If the business owner does not have assets on which to 
draw the business is likely not to succeed.
    Four, reverse the trend toward contract bundling. Despite 
the President's initiative in 2002 which clearly stated that 
unbundling of contracts was a priority of the Administration.
    I will try to come to the others quickly.
    OMB reported for every $100 awarded, only $33 go to small 
business.
    Number five, Congress should closely monitor strategic 
sourcing which in most cases means bundling. Strategic sourcing 
basically means that a very large contract will have only one 
source and that company can sell to the Government as opposed 
to any award or multiple vendors. Small businesses can be 
harmed in two ways: one, by structuring a procurement so that 
even a large team of small businesses can never win a contract. 
Basically, if the small business does not align itself with the 
winner, they are out of luck.
    Chairman. Akin. Your time is expired. We may be able to get 
to some of your points with the questioning later on.
    Ms. Giordano. Thank you.
    Chairman. Akin. We have taken your statement for the 
record, I believe.
    Ms. Giordano. Thank you.
    [Ms. Giordano's testimony may be found in the appendix.]
    Chairman. Akin. Our next witness is going to be Christina 
Schneider, Chief Financial Officer of Purcell Contracting 
Corporation from Watertown, New York. Is that right, Ms. 
Schneider?
    Ms. Schneider. Yes.
    Chairman. Akin. Proceed, please. Thank you.

     STATEMENT OF CHRISTINA SCHNEIDER, PURCELL CONTRACTING 
                          CORPORATION

    Ms. Schneider. My name is Christina Schneider and I am 
testifying on behalf of the Associated General Contractors, the 
nation's largest and oldest construction trade association. We 
represent more than 32,000 construction firms nationwide. Our 
firm derives much of its work from Department of Defense 
construction contracts. Our main office is in upstate New York 
near Fort Drum, the home of the 10th Mountain Division. We were 
a HUBZone contractor. We've since grown out of the program. We 
have graduated the HUBZone program. We have now sales slightly 
more than $31 million average. We wouldn't describe ourselves 
as large business. We're more medium size, but we're considered 
large business according to the SBA standards.
    AGC is pleased to share our thoughts for this year's 
upcoming reauthorization of the Small Business Act. I am going 
to focus on the changes that we recommend for the HUBZone 
program, the impact of contract bundling and the growing 
concern over large construction contract awards to Alaska 
Native Corporations.
    Regarding the HUBZone program, we suggest that you limit 
the program to construction projects in or near HUBZones within 
150-mile radius of the HUBZone contractor's principal place of 
business. Only those projects can offer employment to a 
significant number of HUBZone residents and only those projects 
can promise to make a lasting change on their economic 
circumstance. Extending the HUBZone program to distant projects 
only encourages brokering, merely acting as an agent to get 
someone else to perform the work. While the HUBZone concept may 
have merit encouraging economic development within HUBZones, 
the concept does not transfer appropriately to the construction 
industry. Since a HUBZone contractor can perform work outside 
the zone, this does not economically benefit the zone.
    The HUBZone concept is designed to encourage employment in 
the HUBZone and is suited for manufacturing and other 
industries where the majority of employees are working in the 
HUBZone.
    Our second point is that Congress should authorize and 
require a smaller price preference applied to the construction 
industry. While Congress may want to give HUBZone contractor's 
an advantage, it should be an advantage that reflects the 
realities of the market. At most, Congress should give the 
construction contractors in the HUBZone a 5 percent bid 
preference. Such a bid preference would still exceed the profit 
margin in the vast majority of federal construction contracts.
    As a HUBZone contractor, our firm was once awarded a 
construction contract that was nearly $1 million over the 
lowest bidder when the 10 percent preference was applied. As a 
small business we were thrilled. As a taxpayer, we were 
embarrassed.
    While Congress may want to give HUBZone contractors an 
advantage, a 10 percent preference for the construction 
industry is a windfall, not an advantage.
    Regarding contract bundling, it's been a concern in the 
construction industry for several years. It's still going on. 
Small contracts are being bundled to result in large dollar 
volume solicitations and HUBZone preferences are being applied 
to large dollar volume solicitations.
    I'm going to skip through this. I'm running out of time.
    Regarding the Alaskan Native contracting issue. AGC has 
continued to hear complaints about the ANC. Speaking on behalf 
of my firm, we have been directly impacted by a $400 million 
sole source award to Alaskan Native corporations at Fort Drum, 
New York. We've met with SBA Headquarters and we determined 
that SBA believes in their statistics to you that ANCs are 
small businesses. And we don't believe that.
    In other words, awarding large dollar volume contracts to 
ANCs, large and small, helps the SBA and contracting agencies 
meet their utilization goals.
    We understand the ANC matter is currently under 
investigation by the GAO. And we look forward to their 
findings. We hope we'll be resource for information for the 
Committee as it reviews the findings of this report.
    Thank you for the opportunity to testify.
    [Ms. Schneider's testimony may be found in the appendix.]
    Chairman. Akin. Thank you very much, Ms. Schneider. You 
came in 30 seconds under, pretty good there. You get your star 
here too.
    What I'm going to do is I'm going to allow the Ranking 
Member, Ms. Bordallo, she has five minutes to ask questions. 
And I'll let her proceed first.
    Ms. Bordallo. Thank you very much, Mr. Chairman. I have 
three quick questions for Mr. Martoccia.
    First of all, I know you're very new in your position, but 
what are your initial impressions about SBA's procurement 
assistance programs and what new thinking do you feel you bring 
to the table?
    Mr. Martoccia. I bring a perspective--I've been a 
contracting officer all my life in the Federal Government. So I 
bring that perspective. I know we need to communicate, train 
and provide outreach to the procuring community. And we have to 
use the resources that the procuring activities have. They have 
small business specialists. Each procuring activity typically 
has a small business specialist and I think with our PCRs and 
our new electronic system that we should be able to get 
involved in the procurement strategy before decisions are being 
made to give those small companies a fair opportunity.
    Ms. Bordallo. So you do see inadequacies in things that you 
will be changing?
    Mr. Martoccia. I see improvements that can be made. I don't 
see any inadequacies.
    Ms. Bordallo. Do you believe that the SBA has all the 
authority necessary to promote the development of small 
business and improve their access to the federal marketplace?Or 
should Congress be providing more, in your opinion?
    Mr. Martoccia. I believe that we're providing the 
opportunities needed. You know, as far as the dollars, our 
dollars have improved every year since President Bush took 
office and they're going up. I know the total dollars have gone 
up, but the percentages, especially in the women-owned 
businesses and other areas have been moving up significantly in 
the last few years.
    Ms. Bordallo. Weren't there cuts made at SBA?
    Mr. Martoccia. There have been cuts, but I think, you know, 
they're operating smarter with better technology and I think we 
have the adequate resources necessary to perform our job.
    Ms. Bordallo. But really then you can't say funds have 
been, you know--
    Mr. Martoccia. I know funds have been cut 37 percent over 
the last five years.
    Ms. Bordallo. That's correct, yes. By your comments, I 
understood that things were--funds were becoming larger and 
larger as each year goes by?
    Mr. Martoccia. No, I say the results of the small business 
program have been pretty successful since President Bush took 
office. The dollars go into small businesses in prime as well 
as subcontracts. It's gone up significantly since the Year 
2000.
    Ms. Bordallo. Now one last question I have for you. Can you 
describe the SBA's efforts to combat contract bundling?
    How can SBA's record on this be improved?
    Mr. Martoccia. Well, we're working with the agencies to 
make it a priority. We share your concern that bundling in 
large contracts do provide less opportunities for small 
business. So we're working with the agencies to communicate, to 
train, to talk to the program managers and the contracting 
officers and the senior level officials to find best practices 
to improve opportunities for small businesses.
    Ms. Bordallo. So you do consider this a priority?
    Mr. Martoccia. Yes, I do.
    Ms. Bordallo. Thank you. Thank you. Thank you, Mr. 
Chairman.
    Chairman. Akin. Thank you for your questions and being 
right on point with some very good questions.
    I'm next going to recognize Ms. Velazquez who is not just a 
Member of the Committee, but also is the Ranking Member of the 
Full Committee. So if you would please proceed.
    Ms. Velazquez. Thank you, Mr. Chairman. Mr. Martoccia, 
look, I know you have been there, what, a month now, two 
months?
    Mr. Martoccia. Five weeks.
    Ms. Velazquez. Well, welcome and I'm sorry.
    Mr. Martoccia. I'm enjoying the job.
    Ms. Velazquez. I'm sorry. Sir, I know that you read the 
papers, don't you?
    Mr. Martoccia. Yes, I do.
    Ms. Velazquez. USA Today, Washington Post, New York Times. 
If you look at the SBA disaster loan response to Katrina, I 
don't think that it has been good. And you know why? Eighty 
percent decline rate on disaster loan for Katrina victims 
because you don't have the resources. In five years, the budget 
has been cut by 50 percent, so and then later on we are going 
to discuss PCR.
    But let's go to the question. In 2003, the SBA's Inspector 
General conducted an audit of the HUBZone program. The result 
was that the program was vulnerable to contracting fraud. Then 
there were almost 7,500 companies in the program and SBA did 
nothing. Now there are nearly 13,700 companies and SBA has 
still done nothing.
    Why have you allowed this time bomb to continue ticking?
    Mr. Martoccia. I'm not aware of any fraud involved in the 
program. I know that the marketplace polices itself pretty well 
and if a procurement is set aside for HUBZone companies, that 
any interested party can protest that to the contracting 
officer who would fully investigate with SBA whether a company 
falsified their status.
    Ms. Velazquez. Well, the thing is that you have 13,700 and 
you have not conducted the audits and even if SBA reviewed 500 
companies per year, you will never keep up with the incoming 
businesses.
    My second question, the number one problem facing small 
businesses in their attempt to get Government contracts is 
contract bundling. A report for SBA's Office of Advocacy has 
estimated that bundles represent nearly 10 percent of all 
government contracting dollars and have reduced small business 
contract opportunities by more than half, yet for the past two 
and a half years, SBA has filed four appears on bundled 
contracts. Why isn't the SBA challenging agencies when they are 
taking opportunities away from small businesses?
    Mr. Martoccia. We do challenge agencies when they're taking 
business away from small businesses and we have PCRs in the 
field who are working with the agencies to assure that these 
contracts are not restricting small business participation. We 
are communicating to the senior levels of the agency. We're 
talking to the small business specialists. We're talking to the 
contracting officers. We're trying to train contracting 
officers. We want them to justify when they have to have a 
large contractor or a bundled contractor, what the benefits 
are, what the efficiencies are. So we are proactive in trying 
to assure the contracts are not being bundled.
    Ms. Velazquez. I can see that proactive when you challenge 
on four contracts. Four appeals.
    Mr. Martoccia. Well--
    Ms. Velazquez. The witnesses here are telling us that is a 
big issue for them. The President, in 2002, issued his small 
business agenda. And in that agenda he said my number one 
priority is going to be contract bundling. We need to tackle 
it. And in two and a half years, you're going to tell me that 
only four appeals?
    Mr. Martoccia. Those are four formal appeals.
    Ms. Velazquez. Let's go to the next question.
    Mr. Martoccia. But we have discussed and made many changes 
to the contracts that are to be bundled and made many changes 
to the procuring activities to break up these contracts into 
smaller parts that small business can participate in.
    Ms. Velazquez. Thank you. In your testimony, you spent a 
lot of time talking about the small business goal being 
achieved. In reality, the goal has been achieved because SBA 
counts large businesses' awards as going to small companies. 
The Office of Advocacy has said that SBA is counting $2 billion 
in award to large businesses. This is the number one management 
challenge to the office, according to the Inspector General. 
The General Accounting Office has also confirmed this problem.
    So can you please explain to us why it is appropriate for 
the SBA to claim that the government-wide small business goal 
has been met, when you are counting large businesses to do 
that?
    Mr. Martoccia. I don't think--
    Chairman. Akin. Time has expired. You can go ahead and 
answer her question.
    Mr. Martoccia. I don't think the problem is as widespread 
as some people think. I think what happens is that small 
companies, successful small companies are being purchased by 
large companies. If they have a five-year contract, the company 
is being purchased and we do have--we just instituted a rule on 
novations. And in addition to that we have rulemaking which 
will require small businesses to recertify if they're being 
bought off.
    Ms. Velazquez. I'm sorry. You just can't come here and 
inform to the small business people that are here to say to 
them that $2 billion is nothing. $2 billion. You can do better 
than that.
    Chairman. Akin. Thank you. The next questioner would be 
Congresswoman Moore. We're trying to stick to five minutes.
    Ms. Moore. Thank you, Mr. Chair. I would be offended, Mr. 
Martoccia, that you were new, except that I'm new too.
    But I am concerned about whether or not you've realized 
that we have an 8(a) program, an 8(a) procurement program which 
has not been redesigned since it was started. And it has really 
cost billions of dollars in contracting opportunities to those 
small and disadvantaged businesses.
    The Federal Government purchases--is the largest buyer of 
goods and services in the entire world. And during the '90s, 
there were so-called reforms that allowed Government buyers to 
use a number of expedited contracting options with the 
exception of the 8(a) program which meant that 8(a) programs 
and minority businesses have been left behind.
    And you know, one of the things, one of the SBA programs is 
the HUBZone program which operates in distressed areas, but you 
don't have to be a minority business or a disadvantaged 
business to take advantage of that. Again, women-owned 
businesses, the Women's Procurement Program never implemented. 
There is a bill that I am co-sponsoring, along with our Ranking 
Member, Representative Barrow, called the MOVE Act, which would 
really modernize the 8(a) program so that minority businesses 
won't lose billions of dollars by what Congressman Barrow calls 
a repeal by neglect in terms of how this program operates.
    And I'm wondering if we could depend on your stewardship to 
move this initiative forward and bring it before the 
Administration's attention?
    Mr. Martoccia. Are you speaking of the women-owned program?
    Ms. Moore. The 8(a) program modernization, the women's 
initiative, yes.
    Mr. Martoccia. We'll be working on all the programs to--
    Ms. Moore. To modernize them so that minority businesses 
can, in fact, take advantage of some of the contracting 
opportunities. We can't, because these programs are stagnant. 
Would you stipulate to that being true?
    Mr. Martoccia. No. What I would I would say is we're 
complying with the law and I think the laws are flexible enough 
for us to deal with the agencies to improve the opportunities--
    Ms. Moore. In 1990, the Government buyers used an expedited 
means to get contracts. The exception was that 8(a) programs 
couldn't do it.
    Mr. Martoccia. Well--
    Ms. Moore. Would you stipulate--you said you're following 
the law.
    Mr. Martoccia. Right.
    Ms. Moore. But the law is stagnant is what we're saying.
    So we're asking for a commitment from you that you will 
look at the need to initiate reforms of the 8(a) program.
    Mr. Martoccia. We'll try to reform the 8(a) program when 
it's necessary.
    Ms. Moore. It's necessary now. We've lost tens of billions 
of dollars in contracting opportunities.
    Mr. Martoccia. The 8(a) program provides the most expedited 
method of contracting of all the set aside programs.
    Ms. Moore. Okay, Mr. Chair, I'd like to yield the balance 
of my time to the Ranking Member.
    Chairman. Akin. Yes, you can do that and I believe Ms. 
Velazquez said she had a question also, so why don't you 
proceed.
    Ms. Bordallo. Go right ahead.
    Ms. Velazquez. Mr. Martoccia, since Mr. Giordano raised the 
issue of the women's procurement program, it is appropriate for 
me to ask this final question. I understand that the Rand 
Corporation is conducting the study for the SBA to identify 
industries that are under represented by women and 
entrepreneurs in order to get this program up and running. Rand 
was subject to a class action lawsuit by several of its own 
female employees on a pay disparity issue.
    Can you explain to this Committee how SBA could contract 
with a company that was sued by its own female employees on a 
study designed to implement a program to halt women business 
owners?
    Mr. Martoccia. I'm not familiar with that lawsuit. The way 
the Government works is that if a company--
    Ms. Velazquez. No, no, no. I'm not asking you--
    Mr. Martoccia. I have to answer the question.
    Ms. Velazquez. Look, how could the Federal Government give 
out a contract, we love to lecture people here about you know, 
playing by the rules, and you have a company that has been sued 
by their female employees and they are the company that is 
going to do a study about women being under represented? That's 
bizarre.
    Mr. Martoccia. Well, the Government has a process called 
the debarred list and when a company is not responsible to 
perform Government contracting work, they're not allowed to 
receive contracts. To that extent, if they're not on the 
debarred list--
    Ms. Velazquez. My last question. In your testimony you 
state that the current number of SBA Procurement Center 
Representatives is 58.
    Mr. Martoccia. Correct.
    Ms. Velazquez. When the federal marketplace was half this 
size that it is now--
    Chairman. Akin. Congresswoman, this is your last question, 
right?
    Ms. Velazquez. Okay. My last. How do you expect 58 people 
to do twice the work that 73 did?
    Mr. Martoccia. Since President Bush took office, he moved--
we moved the number of PCRs from 35 to 58 and they cover 
approximately three quarters of the buying activities in the 
Federal Government.
    In addition to that, we're instituting an electronic 
Procurement Center Representative system which will be very 
effective and efficient and productive in providing those 
requirements at a sooner date so the PCRs can get involved from 
their desk, on their computer to talk to the procuring agencies 
and officers about their procurement strategies with regard to 
small business participation.
    Chairman. Akin. Thank you for responding. Now it is my 
turn. I only have five minutes as well.
    I'm going to ask you for short answers. I'm trying to give 
you a few short-answer questions.
    The first one is, because the only person who got into play 
here was Anthony and I want everybody else to have a chance 
too.
    And so what I'd like you to do first of all would be to 
state how would you rate the SBA's performance on procurement 
assistance contracting? You've got a choice of good or medium 
or bad and I want to go straight across. Good, medium or bad. 
This is report card. Some of you are technical people and I'm 
one of the very few engineers that they allowed to get into 
politics which tells you I wasn't much of an engineer.
    Rafael, I'm going to let you go first.
    Mr. Collado. Bad.
    Chairman. Akin. Bad, okay.
    Mr. Lopez. Worse than bad.
    Chairman. Akin. Worse than bad. That wasn't an alternative, 
but I know what it means.
    Mr. Lopez. Bad.
    Chairman. Akin. Kurt?
    Mr. Heckman. They've had some successes. I would say 
medium.
    Chairman. Akin. Medium, okay. Catherine?
    Ms. Giordano. Other.
    Chairman. Akin. Other. Do you have a little short other?
    Ms. Giordano. It would be below medium and just above bad.
    Chairman. Akin. Okay. Christina.
    Ms. Schneider. Bad.
    Chairman. Akin. Okay. That being the case, now I'm going to 
give you a chance for a little bit longer answer, okay?
    We've got a guy in here, Anthony, who is a brand new guy on 
the block. Now it used to be when Harvard Business School would 
do cases, they wouldn't want to know your second or your third 
piece of advice. They want to know your very best shot.
    So what I'm going to ask for those of you who, if you have 
one piece of advice--let me ask one other question--well, I 
don't have time for that.
    Here's just one shot. You have a piece of advice to give to 
the SBA, you've got a brand new guy. He's got an open mind for 
the moment anyway. What's your best piece of advice to him on 
how we try to do a better job here, because we're all on the 
same team. We really want to make this work.
    Rafael, you're an innovative guy. What's your best shot?
    Mr. Collado. Best piece of advice is force the unbundling 
of contracts and audit, audit, audit prime contractors at their 
meeting--and agencies--at their meeting their goals. Make sure 
they're not lying about their numbers.
    Chairman. Akin. That was short and very much to the point. 
Thank you.
    John?
    Mr. Lopez. I'm Stanford Business School and we don't do 
that.
    Chairman. Akin. I already got in trouble politically, 
didn't I? I applied there too, but they didn't take me.
    Mr. Lopez. I would suggest to Mr. Martoccia that he demand 
accountability from his workforce and demand reports. 
Documentation. Documentation goes a long way to steering 
decisions and making certain those decisions are the correct 
ones.
    Chairman. Akin. Thank you.
    Mr. Heckman. I would say in speaking from the HUBZone 
program side where I am, I would recommend that they would do 
an automatic audit of the HUBZone requirements and they can't 
do them for all the HUBZone allocations, there's just too many. 
But I would recommend they automatically do it for any HUBZone 
contract that is awarded above some reasonable threshold, $10, 
$12, $15 million something like that, so that at least the big 
ticket items that go out there, it's just carte blanche. If you 
win a HUBZone contract above that threshold, you're going to be 
audited.
    Chairman. Akin. Okay, good. Thank you.
    Catherine?
    Ms. Giordano. I think first and foremost is implement the 
women-owned rule. I think if we were having children based on 
how long it takes to gestate, this would be a twin, quadruple--
elephants, because it takes you that long to have elephants.
    I think it's an over-abused process on our part to be last 
in line, waiting for something that was passed in 2000.
    Chairman. Akin. Thank you.
     Ms. Schneider. My advice isn't necessary to the SBA, it's 
to Congress and my advice is to look hard at the utilization 
reports that you're getting because I don't believe they're 
accurate. I believe they're flawed. I believe the statistics we 
heard today are fraught with large dollar volume contracts 
awarded to Alaskan Native Corporations under the guise of small 
business. I believe that large volume HUBZone contract awards 
are being--HUBZones are fronting for large businesses in those 
large dollar volume awards. There's no way a small business can 
bid $100 million HUBZone contract in the construction business.
    There's really nasty stuff going on out there and when the 
SBA sits at this table and tells you that they've doubled their 
utilization volume, I'm sitting here and--
    Chairman. Akin. Christine, I'm down to 10 seconds. What I'd 
like to ask you to do, all of you that had recommendations, if 
you don't mind writing them up and shooting them over to the 
SBA to Mr. Martoccia so that he can hear what you have to say. 
I think that would be helpful just for starting places.
    I will take, Christina, what you were saying, and see if we 
can factor that into what we're doing. I was going to ask 
another question which I don't have time to do.
    Ms. Velazquez. Mr. Chairman, we would like to receive a 
copy of those recommendations.
    Chairman. Akin. If you could send those to the Committee, 
that would be good, too.
    I was going to also ask you, being a conservative 
Republican, my question would be can the Government really do 
this or not? I mean I have some skepticism about that, but I'm 
not going to ask that question. And with that, I'll make this 
informal, let people chat as they have time to this afternoon.
    The hearing is adjourned.
    (Whereupon, at 3:54 p.m., the hearing was adjourned.)

    [GRAPHIC] [TIFF OMITTED] T8555.001
    
    [GRAPHIC] [TIFF OMITTED] T8555.004
    
    [GRAPHIC] [TIFF OMITTED] T8555.005
    
    [GRAPHIC] [TIFF OMITTED] T8555.006
    
    [GRAPHIC] [TIFF OMITTED] T8555.002
    
    [GRAPHIC] [TIFF OMITTED] T8555.003
    
    [GRAPHIC] [TIFF OMITTED] T8555.007
    
    [GRAPHIC] [TIFF OMITTED] T8555.008
    
    [GRAPHIC] [TIFF OMITTED] T8555.009
    
    [GRAPHIC] [TIFF OMITTED] T8555.010
    
    [GRAPHIC] [TIFF OMITTED] T8555.011
    
    [GRAPHIC] [TIFF OMITTED] T8555.012
    
    [GRAPHIC] [TIFF OMITTED] T8555.013
    
    [GRAPHIC] [TIFF OMITTED] T8555.014
    
    [GRAPHIC] [TIFF OMITTED] T8555.015
    
    [GRAPHIC] [TIFF OMITTED] T8555.016
    
    [GRAPHIC] [TIFF OMITTED] T8555.017
    
    [GRAPHIC] [TIFF OMITTED] T8555.018
    
    [GRAPHIC] [TIFF OMITTED] T8555.019
    
    [GRAPHIC] [TIFF OMITTED] T8555.020
    
    [GRAPHIC] [TIFF OMITTED] T8555.021
    
    [GRAPHIC] [TIFF OMITTED] T8555.022
    
    [GRAPHIC] [TIFF OMITTED] T8555.023
    
    [GRAPHIC] [TIFF OMITTED] T8555.024
    
    [GRAPHIC] [TIFF OMITTED] T8555.025
    
    [GRAPHIC] [TIFF OMITTED] T8555.026
    
    [GRAPHIC] [TIFF OMITTED] T8555.027
    
    [GRAPHIC] [TIFF OMITTED] T8555.028
    
    [GRAPHIC] [TIFF OMITTED] T8555.029
    
    [GRAPHIC] [TIFF OMITTED] T8555.030
    
    [GRAPHIC] [TIFF OMITTED] T8555.031
    
    [GRAPHIC] [TIFF OMITTED] T8555.032
    
    [GRAPHIC] [TIFF OMITTED] T8555.033
    
    [GRAPHIC] [TIFF OMITTED] T8555.034
    
    [GRAPHIC] [TIFF OMITTED] T8555.035
    
    [GRAPHIC] [TIFF OMITTED] T8555.036
    
    [GRAPHIC] [TIFF OMITTED] T8555.037
    
    [GRAPHIC] [TIFF OMITTED] T8555.038
    
    [GRAPHIC] [TIFF OMITTED] T8555.039
    
    [GRAPHIC] [TIFF OMITTED] T8555.040
    
    [GRAPHIC] [TIFF OMITTED] T8555.041
    
    [GRAPHIC] [TIFF OMITTED] T8555.042
    
    [GRAPHIC] [TIFF OMITTED] T8555.043
    
    [GRAPHIC] [TIFF OMITTED] T8555.044
    
    [GRAPHIC] [TIFF OMITTED] T8555.045
    
    [GRAPHIC] [TIFF OMITTED] T8555.046
    
    [GRAPHIC] [TIFF OMITTED] T8555.047
    
    [GRAPHIC] [TIFF OMITTED] T8555.048
    
    [GRAPHIC] [TIFF OMITTED] T8555.049
    
    [GRAPHIC] [TIFF OMITTED] T8555.050
    
    [GRAPHIC] [TIFF OMITTED] T8555.051
    
    [GRAPHIC] [TIFF OMITTED] T8555.052
    
      

                                 
