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



 
                  DHS'S PROCUREMENT PROCESS REGARDING
   ITS CONTRACTS WITH SHIRLINGTON LIMOUSINE AND TRANSPORTATION, INC.

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON MANAGEMENT
                       INTEGRATION, AND OVERSIGHT

                                 of the

                     COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 15, 2006

                               __________

                           Serial No. 109-84

                               __________

       Printed for the use of the Committee on Homeland Security
                                     


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  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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                     COMMITTEE ON HOMELAND SECURITY

                   Peter T. King, New York, Chairman

Don Young, Alaska                    Bennie G. Thompson, Mississippi
Lamar S. Smith, Texas                Loretta Sanchez, California
Curt Weldon, Pennsylvania            Edward J. Markey, Massachusetts
Christopher Shays, Connecticut       Norman D. Dicks, Washington
John Linder, Georgia                 Jane Harman, California
Mark E. Souder, Indiana              Peter A. DeFazio, Oregon
Tom Davis, Virginia                  Nita M. Lowey, New York
Daniel E. Lungren, California        Eleanor Holmes Norton, District of 
Jim Gibbons, Nevada                  Columbia
Rob Simmons, Connecticut             Zoe Lofgren, California
Mike Rogers, Alabama                 Sheila Jackson-Lee, Texas
Stevan Pearce, New Mexico            Bill Pascrell, Jr., New Jersey
Katherine Harris, Florida            Donna M. Christensen, U.S. Virgin 
Bobby Jindal, Louisiana              Islands
Dave G. Reichert, Washington         Bob Etheridge, North Carolina
Michael T. McCaul, Texas             James R. Langevin, Rhode Island
Charlie Dent, Pennsylvania           Kendrick B. Meek, Florida
Ginny Brown-Waite, Florida

                                 ______

         Subcommittee on Management, Integration, and Oversight

                     Mike Rogers, Alabama, Chairman

John Linder, Georgia                 Kendrick B. Meek, Florida
Tom Davis, Virginia                  Edward J. Markey, Massachusetts
Katherine Harris, Florida            Zoe Lofgren, California
Dave G. Reichert, Washington         Sheila Jackson-Lee, Texas
Michael McCaul, Texas                Bill Pascrell, Jr., New Jersey
Charlie Dent, Pennsylvania           Bennie G. Thompson, Mississippi 
Peter T. King, New York (Ex          (Ex Officio)
Officio)

                                  (II)


















                            C O N T E N T S

                              ----------                              
                                                                   Page

                               STATEMENTS

The Honorable Mike Rogers, a Representative in Congress For the 
  State of Alabama, and Chairman, Subcommittee on Management, 
  Integration, and Oversight.....................................     1
The Honorable Peter T. King, a Representative in Congress For the 
  State of New York, and Ranking Member, Subcommittee on 
  Management, Integration, and Oversight.........................     3
The Honorable Bennie G. Thompson, a Representative in Congress 
  for the State of Mississippi, and Ranking Member, Submittee on 
  Management, Integration, and Oversight.........................     5
The Honorable Sheila Jackson-Lee, a Representative in Congress 
  For the State of Texas.........................................     6
The Honorable Kendrick B. Meek, a Representative in Congress For 
  the State of Florida...........................................     2
The Honorable Bill Pascrell, Jr., a Representative in Congress 
  For the State of New Jersey....................................     9

                               Witnesses

Ms. Elaine C. Duke, Chief Procurement Officer, U.S. Department of 
  Homeland Security:
  Oral Statement.................................................     7
  Prepared Statement.............................................     8
Mr. Kevin Boshears, Director, Office of Small and Disadvantaged 
  Business Utilization, U. S. Department of Homeland Security:
  Oral Statement.................................................    12
Mr. Calvin Jenkins, Deputy to the Associate Deputy Administrator, 
  Small Business Administration:
  Oral Statement.................................................    13
  Prepared Statement.............................................    15

                             For the Record

The Honorable Sheila Jackson-Lee, a Representative in Congress 
  For the State of Texas:
  Prepared Statement.............................................     6


















                  HEARING ON DHS'S PROCUREMENT PROCESS
                      REGARDING ITS CONTRACTS WITH
             SHIRLINGTON LIMOUSINE AND TRANSPORTATION, INC.

                              ----------                              


                        Thursday, June 15, 2006

             U.S. House of Representatives,
                    Committee on Homeland Security,
                                Subcommittee on Management,
                                Integration, and Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 12:03 p.m., in 
Room 311, Cannon House Office Building, Hon. Mike Rogers 
[chairman of the subcommittee] presiding.
    Present: Representatives Rogers, King, Meek, Lofgren, 
Thompson, Jackson-Lee, and Pascrell.
    Mr. Rogers. [Presiding.] This hearing of the Committee on 
Homeland Security, Subcommittee on Management, Integration and 
Oversight will come to order.
    Today, we are holding a hearing on the Department of 
Homeland Security's contract with Shirlington Limousine 
Transportation, Incorporated. We are going to examine the DHS 
procurement process and how these two contracts, valued at $25 
million, came about. The goal of this hearing is to identify 
inadequacies and discuss concrete steps DHS can take to ensure 
that they are not repeated in the future.
    Let me first welcome our witnesses, all of whom are very 
busy, and I appreciate each of them taking the time to be with 
us today.
    Shirlington Limousine was established in Arlington, 
Virginia, as a limited liability company known as an LLC in 
1990. The SBA certified the company as a HUBZone business on 
April 8, 2004. Yet just 2 1/2 weeks later, DHS awarded 
Shirlington Limousine a $1.6 million transportation contract. 
This later grew to $4 million and was extended to an additional 
6 months on October 26, 2005.
    On October 27, 2005, Shirlington was awarded a second 
contract for $4 million in the first year, with three 1-year 
renewal options for a total of $21 million. We will hear more 
about this timeline and the circumstances surrounding both 
awards from the department's chief procurement officer.
    We will also hear from the director of DHS's Office of 
Small and Disadvantaged Business Utilization, and a senior 
official from the Small Business Administration.
    We also invited the president and vice president of 
Shirlington Limousine to appear today, but they declined 
because of a federal grand jury investigation. The company 
president, however, has responded in writing to questions that 
the ranking member and I have submitted. He has also responding 
to a second set of interrogatories that I sent yesterday. He 
has been completely cooperative.
    On May 18, we held a hearing on the DHS security clearance 
process. We heard testimony that the department does not 
regularly conduct background checks on small business owners 
that have DHS contracts such as Shirlington Limousine Company. 
We also discussed other security concerns, such as the 
possibility of eavesdropping on sensitive conversations and 
potential terrorists who could infiltrate DHS buses.
    In addition, our ongoing review of these contracts revealed 
that the department failed to learn critical information about 
Shirlington Limousine's past performance and its owner's 
background. The department's former inspector general called 
this process ``textbook poor'' because it ``failed to turn up 
readily available information about Shirlington Limousine's 
finances and performance.''
    He advised us that given the department's ultra-sensitive 
mission, DHS should have background investigations conducted on 
contractors, as well as security investigations. I agree.
    We also will examine why DHS has seven separate 
transportation contracts, which totaled almost $31 million and 
what steps are being taken to consolidate these transportation 
services and save taxpayer dollars. As I stated at the outset, 
we want to find concrete solutions to these deficiencies.
    Therefore, I am particularly interested in discussing 
questions such as: How Shirlington Limousine became a HUBZone 
company? Why DHS decided to compete this transportation service 
contract as a HUBZone set-aside? Given the department's 
sensitive mission, are there plans to better address security 
concerns in the procurement process? And finally, whether the 
department will institute financial and criminal background 
checks on small business owners in the future?
    We appreciate all of the hard work Ms. Duke has been doing 
to reform the process and improve the procurement process at 
DHS. I understand Ms. Duke is moving forward with a strategic 
source initiative which could result in more efficient and more 
effective department-wide transportation services. We look 
forward to working with you on this.
    With that, I will now yield to the ranking member for any 
statement that he may have.
    Mr. Meek. Thank you, Mr. Chairman.
    I want to thank our witnesses for coming before us today. I 
want to thank them for all of the meetings prior to this 
hearing today.
    One of the major challenges for the Department of Homeland 
Security from day one was hiring and retaining qualified 
procurement staff. The Shirlington Limo case is a timely 
example of what can go wrong when you don't have enough 
experienced staff to do the job.
    Whether there is any truth in the scandalous talk about 
Shirlington Limousine or not, we have a responsibility as a 
committee to be able to ask the tough questions. First, was the 
standard procurement process followed in the selection of 
Shirlington Limousine, or did some powerful friend, may they be 
a member of Congress or an official in the executive branch, 
pull some strings?
    The second question: How did department procurement staff 
investigate whether Shirlington Limousine was a responsible 
contractor? If so, why didn't the staff uncover the owner's 
bankruptcy and examples of Shirlington's past failures to 
perform, including the well-publicized incident in 2002 where a 
Shirlington Bus was repossessed in Atlanta, standing up the 
Bowie State football team, which was just a simple Yahoo 
search.
    Any procurement official that learned about the Bowie State 
incident would have had serious concerns of whether Shirlington 
was responsible enough as a contractor to support the top 
officials of the Department of Homeland Security.
    The third question: Why did the Department of Homeland 
Security award Shirlington Limousine a contract after all other 
bidders were deemed unqualified for consideration as a HUBZone? 
Why didn't the department re-compete the contract to assure 
that it had enough to be able to bring about the best value for 
the department?
    Finally, how did the contract start at just over $1 million 
and balloon to over $21 million in just 1 year?
    As you can see, I have a lot of serious questions about the 
procurement and I am pleased that Ms. Elaine Duke, DHS's chief 
procurement officer, has brought her staff who handled the 
procurement, here today, which I greatly appreciate. Hopefully, 
we can get some answers to these questions today.
    More broadly, I believe that anything to be gained from 
this attention paid to the Shirlington contract is that the 
Department of Homeland Security needs a larger and better-
trained procurement staff. If the Katrina contracting scandals 
were not enough to do it, I would hope that this one will show 
that those of us in Congress have to make sure that they have 
what they need to carry out their job.
    One more positive note: I want to thank Chief Duke on her 
efforts for understanding that she has taken to learn more 
about transportation services in the Washington metro area. My 
understanding is that she will be issuing a request for 
information in the next week to get more information and look 
more closely at local and private industry that can meet the 
department's needs as it relates to transportation.
    Once again, I would like to thank our witnesses for coming 
before the committee. I look forward to the fruitful testimony 
that hopefully we will be hearing. Thank you so very much.
    I yield back, Mr. Chairman.
    Mr. Rogers. I thank the gentleman.
    The chair now recognizes the chairman of the full 
committee, Mr. King, for any opening statement he may have.
    Mr. King. Thank you, Chairman Rogers. I want to thank you 
and Ranking Member Meek for the work you have done in bringing 
this matter this far and for having both the hearing we had 
last month and also the hearing today, and for the information 
you have managed to uncover.
    To me, this hearing today is important on many levels. It 
is important on the basic level of what procedures were 
followed, what procedures weren't followed, why they weren't 
followed. There just seem to be so many questions about the 
HUBZone, about why there weren't more bidders. Were other 
bidders discouraged from putting in applications? There is a 
question, as both Mr. Meek and Mr. Rogers have mentioned, about 
the prior record of Shirlington as far as its contracts with 
Bowie State, with Howard University.
    There are the personal problems which the president of 
Shirlington has had, all of which to me should have sent up red 
flags if there was a proper vetting process done. That, to me, 
would raise enough questions by themselves. When you add to the 
fact, when you put this against the backdrop of where we first 
heard of Shirlington Limousine; the fact that Shirlington 
Limousine currently was under contract to Brent Wilkes at his 
company, a defense contractor who we understand has been named 
as an uninvited co-conspirator in the Duke Cunningham case; 
when we find out from newspaper reports that Mr. Wilkes had 
arranged various parties at the Watergate Hotel and others 
where this limousine service was used in some way.
    I found out from seeing the affidavit of Mr. Baker that he 
says that Congressman Cunningham actually sent a letter of 
reference to the Department of Homeland Security recommending 
Shirlington Limousine for this contract. All of this could be a 
coincidence. It could be a coincidence having corruption, 
having the CIA, having defense contractors, having a 
congressman, a member of my own party who has pleaded guilty to 
doing worse possible offenses a member of Congress could 
commit, who sold his public office being the person who 
happened to recommend Shirlington Limousine to the Department 
of Homeland Security.
    I would ask why? Why of all 435 members of Congress did 
Duke Cunningham send in this letter of recommendation? And then 
my understanding is that the Department of Homeland Security 
says it does not have this letter on file and has not turned it 
over to us. This is a very serious question as to was that 
letter sent, as was sworn to under oath; is it missing; why is 
it missing; why again did Congressman Cunningham send in this 
letter of recommendation?
    I would also be interested, and I met with Ms. Duke last 
week and I know of her absolute dedication to do the right 
thing, so nothing that I am saying is in any way directed 
toward you, but it seems to me we are talking about a systemic 
problem. As a result of that systemic problem, when we have a 
scandal, which hopefully is just off to the side and not part 
of it, but it puts doubt over the entire department. It raises 
serious questions about whether all of this just happens to be 
a coincidence, or whether or not there was favored treatment 
here.
    That, to me, is the real reason why we have to have better 
processes in place, because any time the proper procedures are 
not followed or there are not proper procedures available to be 
followed, and something does go wrong, people assume the worst. 
And maybe we should assume the worst. I don't know yet whether 
or not we should.
    But I would be interested also as this hearing goes on to 
find out how seriously the people at the top of the department 
take this issue. I know there is a public information officer 
in the Department of Homeland Security who as far as I can see 
has never been right yet on any issue he has spoken on. But he 
was saying, whether it is the subway situation in New York last 
October or now, where he has basically said Congress has to 
understand what happened here; that really everything was done 
right, and we just don't appreciate that.
    Well, he is right. I don't appreciate that. From what I 
have seen here, almost everything that could have gone wrong, 
did go wrong, and it could be part of a much larger scandal. If 
it is not, it is only by luck. To me, the importance of this 
hearing, and I really commend Mr. Rogers and Mr. Meek for the 
work they have done, is to ensure that something like this does 
not happen again and the proper procedures are put in place, 
and the department takes it seriously.
    You are in the trenches. You have the day-to-day work to 
do. Really, my heart goes out to you. I know that you are 
understaffed and all that you have to do and everything is 
thrown at you, and you have to try to make sense out of it. I 
would hope that the secretary, for instance, realizes how 
important this is; that he realizes the cloud that has been put 
over his entire department because of what happened here.
    I really wonder: Has he contacted you? Has the under 
secretary contacted you? Have assistant secretaries contacted 
you to say this is a disgrace that should never be allowed to 
happen again? I really wonder, because I certainly have not 
seen anything coming from the department to indicate that they 
realize how serious this is. I am talking about the top levels.
    You, again Ms. Duke, I want to again thank you for the 
meeting we had with you and the cooperation you have given to 
this subcommittee and committee. So nothing I am saying here is 
in any way directed toward you. Quite frankly, when we were 
talking to Shirlington, when talking to the ranking member, 
they have also cooperated.
    So I think our problems may go higher than that, and I look 
forward to where this hearing is going to take us.
    I yield back.
    Mr. Rogers. Thank you, Mr. Chairman.
    The chair now recognizes the ranking member, Mr. Thompson 
from Mississippi.
    Mr. Thompson. Thank you very much, Mr. Chairman.
    Let me say from the outset that everything that has been 
said so far, I absolutely agree with. I want to talk about what 
Chairman King just recently talked about with respect to this 
letter from Congressman Cunningham. My staff asked for this 
same letter several weeks ago, and we were shocked to find out 
that the letter did not exist in the department's file, even 
though from my understanding Shirlington has admitted that they 
were aware of the letter and what have you.
    I agree. It puts a cloud on this entire process. I would 
hope that we have fixed the systems so we retain whatever 
documents that are there. I would hope that somebody didn't go 
in the file and remove that letter just because a cloud was 
around.
    But I also agree with Mr. King that Secretary Chertoff and 
Deputy Secretary Michael Jackson really need to come before 
this committee and at least give us their idea as to what they 
are doing to prevent situations like this from occurring. We 
were in a hearing yesterday, as most of you know, and we saw an 
example of FEMA gone wild. What we had was a good mid-level 
person taking the heat for the department. We should have had 
at a minimum the deputy and optimally the secretary.
    For that reason, just like Ms. Duke is here today, and Mr. 
Boshears and others, they do a good job, but the buck stops at 
the secretary. At some point, Mr. Chairman, I am absolutely 
convinced that we need to get the people who are responsible 
for the snafus and other things that have gone on before this 
committee, or else we will continue to hear about things in the 
press, and then get told by the public information officer that 
we don't know what we are talking about, which I take 
absolutely exception to.
    The only other thing I want to add is, we are still not up 
as an agency to be fully staffed. We heard testimony yesterday 
where people have been working 7 days a week. We have gone on 
and allocated money for the department to ramp up and hire 
people, and we are still too far away from capacity. So I can 
understand what happens to people when they are overworked. 
They tend to make mistakes. I am not certain that the 
Shirlington is a mistake, but when you work people 6 or 7 days 
a week for months on end, you potentially set yourself up for 
problems.
    So I am concerned about it. I would hope, Mr. Chairman, 
that somehow before we break for the July 4 recess that we can 
get the secretary in here. I think we have had him once this 
year, and that is not enough. Yes. So he needs to have a better 
relationship. There are too many questions out there, and for 
what we have to contend with in terms of the waste, fraud and 
abuse, he needs to be the person that we hold accountable, and 
then he can pass it on, but the buck stops with the secretary.
    I look forward to the testimony today, but I also look 
forward at some point to getting a commitment that we can bring 
the secretary in and ask some of these questions of the person 
who is in charge of the agency.
    I yield back.
    Mr. Rogers. I thank the gentleman.
    The chair would also remind other members that they can 
submit opening statements for the record.

                             For the Record

       Prepared Statement of the Honorable Sheila Jackson-Lee, a 
           Representative of Congress From the State of Texas

    Mr. Chairman and members of the committee, we have many important 
questions to answer today, and I welcome the testimony that our 
witnesses are here to present. Thank you, Ms. Duke, Mr. Boshears, and 
Mr. Jenkins for appearing today.
    The purpose of this hearing is to determine the extent of 
Shirlington Limousine and Transportation, Inc's involvement in the 
corruption and on- going bribery scandal of former Representative Duke 
Cunningham. Shirlington is alleged to have been involved with 
transporting officials to and from hospitality suites where unseemly 
events occurred.
    Questions have been raised regarding the process of awarding this 
contract, the qualifications of Shirlington as a contractor, and 
whether or not any shortcuts led to a lapse in official duty. In 
particular, I am interested in discovering where the blame should lie, 
and laying blame where it is due, rather than throwing allegations 
around to make everyone look equally guilty. Those who committed crimes 
or unethical actions must be held responsible for their actions. It is 
unfortunate that media attention can swell the appearance of 
culpability. We are not interested in anything here but facts. Let us 
focus as much as we can today on how much responsibility lies with 
Shirlington, as opposed to the individuals and Departments that awarded 
and ran the procurement process and contract itself.
    Let me also say that, as we proceed with this hearing, I ask that 
we consider the testimony careklly. I want to make sure that we are 
focusing correctly on the corruption, and not simply the company. Many 
very poor decisions were made during this fiasco, and I want to make 
sure that Shirlington, as the contracted business, is held responsible 
only for those actions it made directly that were inappropriate. I do 
not want, for instance, the personal difficulties of an individual's 
past discussed as relevant if these circumstances had no direct bearing 
on the situation at hand. I would like to once again thank the 
witnesses for their testimony today, and I look forward to the 
discussion. Thank you Mr. Chairman, and I yield the balance of my time.

    We are pleased to have a distinguished panel with us today. 
I know this is going to be an enlightening set of opening 
statements. I would remind each of you that your full statement 
will be accepted for the record. If you would like to just 
summarize that statement within 5 minutes, that would leave 
more times for questions.
    The chair now recognizes the panel and calls Elaine Duke, 
chief procurement officer of the U.S. Department of Homeland 
Security, for her statement.
    Welcome, Ms. Duke.

                    STATEMENT OF ELAINE DUKE

    Ms. Duke. Thank you. Good morning.
    Chairman Rogers, Congressman Meek and members of the 
committee, thank you for the opportunity to discuss the 
Department of Homeland Security acquisition program and our 
contracting procedures. I am a public servant, a career 
executive and have spent most of my 23 years of public service 
as an acquisition professional.
    On January 31, 2006, I was selected as the department's 
chief procurement officer. Accompanying me today is Mr. Kevin 
Boshears, the director of the department's Office of Small and 
Disadvantaged Business Utilization. Mr. Boshears possesses a 
wealth of knowledge and experience with the small business 
program. He is also a career public servant and serves as the 
department's director, Office of Small and Disadvantaged 
Business Utilization.
    As chief procurement officer, my top four priorities for 
the department's acquisition program are to establish an 
acquisitions system whereby each requirement has a well-defined 
mission and a management team that includes professionals with 
the requisite skills to achieve mission results.
    Second is to build the DHS acquisition workforce. One 
initiative under this goal is improving and broadening the DHS 
fellows program. Under the fellows program, we recruit recent 
college graduates to ensure DHS has a qualified cadre of 
acquisition professionals to support its mission now and in the 
future.
    Third is to strengthen contract administration to ensure 
product and services purchased meet contract requirements and 
mission need.
    Fourth is to buy more effectively across the eight 
contracting officers within DHS through the use of strategic 
sourcing and supplier management.
    Since our establishment in 2003, the department has seen 
significant growth in its acquisition program. Due to its 
dynamic mission requirements, DHS continually assesses and 
updates its requirements and resulting contracts. In its first 
year, DHS obligated over $6.7 billion in contracts. Over the 
next 2 years, DHS grew and obligated over $17 billion, 
involving over 66,000 contract actions and 15,000 prime 
contractors.
    Last year, 75 percent of DHS contract awards were 
competitive. As part of the DHS CPO strategic sourcing program, 
we recognized the department-wide need for fleet transportation 
services and targeted this commodity as a strategic sourcing 
initiative. To ensure we obtain the best value source to meet 
our need for department-wide transportation services in the 
Washington metropolitan area, DHS will be issuing a request for 
information within the week to obtain information from our 
industry partners on how the private sector can meet our 
department-wide transportation requirements.
    The request for information will be posted on the federal 
government's public posting site, FedBizOpps. From that 
information, we will develop an acquisition strategy for the 
department's future transportation service requirements, 
including a potential 50,000 federal bus riders per month 
serving department components throughout the D.C. metro area.
    Over the next quarter, we will gather that information from 
industry, analyze it and plan our procurement approach. We plan 
to announce the procurement and request proposals for industry 
for a department-wide solution by the end of the calendar year.
    In closing, I would like to express my gratitude to Mr. 
Rogers, Mr. Meek, Mr. King and Mr. Thompson for working with 
me, Kevin and DHS to develop better business processes in the 
department. I look forward to continue working with the 
committee on developing solutions to current and future issues, 
including the one we are discussing today.
    I am happy to take any questions, and thank you.
    [The statement of Ms. Duke follows:]

                  Prepared Statement of Elaine C. Duke

    Chairman Rogers, Congressman Meek and Members of the Committee, 
thank you for the opportunity to discuss the Department of Homeland 
Security (DHS) acquisition program and our contracting procedures. 
Accompanying me today is Mr. Kevin Boshears, the Director of the 
Department's Office of Small and Disadvantaged Business Utilization 
(OSDBU). Mr. Boshears possesses a wealth of knowledge and experience 
with the small business program. He has served as a contracting 
officer, as the Department of Treasury's Director of OSDBU, and as Vice 
Chair of the Office of Small and Disadvantaged Business Utilization 
Directors' Interagency Council from FY 2001 through FY 2004. He joins 
me today to answer questions that this Committee may have concerning 
the Department's small business and socio-economic programs.
    I am the Chief Procurement Officer for the Department of Homeland 
Security (DHS). I am a public servant, as a career executive, and I 
have spent most of my 23 years of service in the procurement 
profession. On January 31, 2006, 1 was selected as the Department's 
Chief Procurement Officer.
    As the Chief Procurement Officer (CPO), I provide oversight and 
support to the following eight procurement offices within DHS: U.S. 
Customs and Border Protection (CBP), Transportation Security 
Administration (TSA); Immigration and Customs Enforcement (ICE); 
Federal Emergency Management Agency (FEMA); the Federal Law Enforcement 
Training Center (FLETC); United States Coast Guard (USCG); United 
States Secret Service (USSS), and the Office of Procurement Operations. 
In fiscal year 2005, these eight procurement offices obligated over $17 
billion for supplies and services in support of the DHS mission. Given 
the mission these contracting offices support, the supplies and 
services purchased by these offices are often sophisticated and 
complex. For example, to support its mission of air passenger security 
TSA has purchased increasingly sophisticated screening equipment for 
both personnel and carry-on and stowed baggage. We are also working 
with CBP, in support of DHS' mission to secure the nation's borders, to 
acquire the technologies to implement the Secure Border Initiative as 
well as Immigration and Customs Enforcement. The United States Coast 
Guard is in the midst of upgrading the entire offshore fleet of surface 
and air assets in the Deepwater program. This program is a critical 
multiyear, multibillion dollar program to integrate, modernize and 
replace the Coast Guard's aging ships and aircraft and improve systems 
for logistics and command and control. The Department is currently in 
the process of evaluating offers under our EAGLE and First Source 
programs which will become one of the Government's largest programs for 
Information Technology equipment and services. Efficiency and 
effectiveness of these mission critical procurements are facilitated 
through the use of performance based contracting principals and 
competitive contracting procedures.
    My top priorities for the DHS program are:
    First, to establish an acquisition system whereby each requirement 
has a well defined mission and a management team that includes 
professionals with the requisite skills to achieve mission results. The 
FY 2007 Budget request includes $7.8 million in improve acquisition 
operations.
    My second goal is to build the DHS acquisition workforce. In the FY 
2007 Budget, the Department requested $48.5 million to hire additional 
procurement personnel. In addition, we have created an initiative under 
this goal to improve and broaden the DHS Fellows Program. Under the 
fellows program, we recruit recent college graduates to ensure DHS has 
a qualified cadre of acquisition professionals to support its mission, 
now and in the future.
    My third goal is to ensure more effective buying across the eight 
contracting offices through the use of strategic sourcing and supplier 
management.
    My fourth goal is to strengthen contract administration to ensure 
products and services purchased meet contract requirements and mission 
need.
    The accomplishment of these key objectives requires collaboration 
and strong working relationships with all DHS stakeholders, to include 
private industry, other federal agencies, and members of Congress, to 
ensure DHS meets its mission as effectively as possible. I am committed 
to continuing with fostering those relationships.
    As the CPO, my primary responsibility is to manage and oversee the 
DHS acquisition program. I provide the acquisition infrastructure by 
instituting acquisition policies and procedures that allow DHS 
contracting offices to operate in a uniform and consistent manner. I 
ensure more effective buying across the eight contracting offices 
through the use of strategic sourcing commodity councils that allow DHS 
to secure volume discounts whenever possible. Commodity councils are 
cross departmental teams of subject matter experts that focus on 
developing the best strategy for acquiring groups of products and 
services. While I provide the infrastructure, the responsibility for 
properly planning and executing procurements rests with the components 
since, with the exception of the DHS's Office of Procurement 
Operations, each contracting office reports directly to the heads of 
the component it supports.
    Because seven of eight contracting offices report to the heads of 
their components, I strive to achieve functional excellence among the 
offices primarily through collaboration. I use the DHS Chief 
Acquisition Officers Council, comprised of the heads of each 
contracting office, to integrate the contracting function while 
maintaining the components' ability to meet their customers' unique 
needs.

DHS Contracting Procedures
    The contracting procedures DHS uses are those required by federal 
statute and by the Federal Acquisition Regulation. The federal 
procurement process is highly regulated and structured. Its purpose is 
to ensure that all federal government contracts are awarded fairly, 
vendors are treated equally in the selection process, and that the 
Government receives the best value for the American public. Although 
the FAR provides flexibility in how products and services are procured, 
the process is typically conducted in the following sequence:
    Step One: Need Identified. The procurement process is initiated 
when a program or requiring office independently identifies a need. The 
need is then communicated to the contracting office.
    Step Two: Market Capabilities Assessed. Upon identifying a need, 
the commercial market place is researched to identify products or 
services to meet the need as well as the availability of commercial 
sources (e.g., companies) to deliver.
    Step Three: Acquisition Strategy Developed. With an understanding 
of the need and the market place, an acquisition strategy is developed. 
It is generally during this step that it is determined that the 
procurement will be competitive, sole source, or set aside for small 
businesses, service disabled veteran owned small businesses, HUBZone 
small businesses, or for eligible 8(a) businesses under the Small 
Businesses 8(a) program. Other decisions are also made including the 
duration of a contract, type of contract, and security related issues 
which need to be addressed. It is our goal to ensure that a majority of 
our acquisitions are competitively awarded and use performance based 
acquisition vehicles.
    Step Four: Commercial Sources Solicited. At this step, the federal 
Government solicits offers (also referred to as quotes and bids 
depending upon the procurement method) from the commercial market. When 
required by the FAR, the Government announces its intention to solicit 
offers. This announcement is known as a synopsis and is issued before 
the release of the solicitation. The synopsis as well as the 
solicitation is posted publicly on FEDBIZOPPS, the Government's 
electronic bulletin board for announcing and posting solicitations. 
Step Five: Offers Received and Evaluated. Upon receipt of offers (also 
referred to as proposals, bids, or quotes depending upon the method of 
procurement), the Government begins the evaluation process. Offers are 
evaluated to ensure they meet the Government's requirements. Offers are 
evaluated according to the criteria stated in the solicitation. Offers 
failing to meet solicitation requirements maybe disqualified. Step Six: 
Source Selected. Upon concluding the evaluation of offers, the 
Government must then select the source for contract award. The basis 
upon which a selection is to be made is described in the solicitation. 
Often, the selection decision is based upon a best value analysis. This 
involves a trade off analysis between price and non-price factors such 
as performance or experience.
    Step Seven: Contract Award/Debriefs Conducted. Following the 
selection of a source, the Government awards a contract. Unsuccessful 
offers are provided an opportunity to learn why their offer was not 
selected for award (referred to as a debrief). If an unsuccessful offer 
believes they were treated unfairly in the evaluation process, the FAR 
permits them to protest the agency's decision regarding the award of a 
contract. The venues for protests include the agency awarding the 
contract, the Government Accountability Office, Court of Federal 
Claims, and, when the size status or eligibility of a business is 
questioned, the Small Business Administration. A protest allows for a 
second look at the source selection procedures employed and the award 
decision to ensure it was proper.
    Step Eight: Contract Administration. Upon award of a contract, the 
Government monitors contractor performance to ensure the product or 
service delivered meets contract requirements. We are currently 
implementing a policy that would require the use of Earned Value 
Management on all major development acquisitions. This would ensure we 
are consistent with federal requirements.
    Step Nine: Contract Close-Out. Upon the satisfactory delivery, 
acceptance and payment, the contract is closed out.

Shirlington Limousine and Transportation, Inc.
    Much has been written regarding the Department's decision to award 
contracts to Shirlington Limousine and Transportation, Inc., (SL&T) and 
the facts regarding the Department's decision to award contracts to 
Shirlington Limousine are as follows:
    DHS has awarded two contracts for shuttle bus and executive sedan 
service to Shirlington Limousine. One contract (HSSCHQ-04-C-00688) was 
awarded on April 27, 2004 and the second contract (HSHQDC-05-C090036) 
was awarded on October 27, 2005. Both contracts were set-aside for 
HUBZone small businesses based on the market research we conducted and 
an assessment that HUBZone small businesses could meet our 
requirements. We followed the procedures of the Federal Acquisition 
Regulation in reaching this decision.

Contract HSSCHQ-04-C-00688
    The first contract awarded to SL&T was contract HSSCHQ-04-C-00688. 
The Office of the Chief Administrative Officer identified a need for 
shuttle bus and sedan services. The DHS Fleet and Transportation 
Manager researched the market place. Based on the results of that 
research, it was determined that there was a reasonable expectation 
that two or more HUBZone firms would likely participate in the 
procurement. Therefore, as required by Federal Acquisition Regulation 
(FAR) Part 19.1305, the Contracting Officer set the procurement aside 
for only HUBZone firms. Further supporting the decision was the DHS 
Management Directive 0720.1, entitled, Small Business Acquisition 
Program, which established DHS policy for set-aside decisions. That 
Management Directive states in part, "Consistent with our mission, DHS 
will provide maximum practicable opportunities in our acquisitions to 
small business, veteran-owned small business, service disabled veteran-
owned small business, HUBZone small business, small disadvantaged 
business, and women owned small business concerns." On April 14, 2004, 
DHS publicly announced, through FEDBIZOPPS, its plan to compete the 
contract as a HUBZone set-aside and on April 15, 2004, posted the 
solicitation on FEDBIZOPPS. Four companies submitted proposals in 
response to the solicitation. Upon receipt of proposals, DHS verified 
the designation of each vendor as being a HUBZone vendor based upon 
certifications provided by the contractors and information obtained 
from the Central Contractor Registration database. Two companies were 
determined ineligible for a HUBZone set- aside based on their small 
business status. The two remaining proposals were then evaluated 
following the evaluation criteria in the solicitation. It was after the 
completion of the technical evaluation that the Contracting Officer 
questioned the classification of the third company as a small business 
HUBZone company. Upon receiving additional information from the 
company, it was determined that the third firm was ineligible for a 
HUBZone award. At this point, Shirlington Limousine was the only 
remaining company eligible for award. Consistent with the Federal 
Acquisition Regulation, the Contracting Officer completed the 
evaluation of the price proposal and in conjunction with the technical 
evaluation results determined that Shirlington Limousine's proposal 
offered the best value based on Technical Capability, Capability of 
Shuttle Bus and Sedan Drivers, Past Performance and Price. Per FAR 
19.1305(d) where "... the contracting officer receives only one 
acceptable offer from a qualified HUBZone small business concern in 
response to a set aside, the contracting officer should make an award 
to that concern." The Contracting Officer also determined the company 
responsible confirming that the company was not listed on the Excluded 
Parties List System (EPLS), a web based system operated by GSA, and 
checking past performance references provided in the proposal. None of 
these sources revealed any issues or concerns with the company's 
capability to meet its obligations under this contract. Hence given 
that the Shirlington Limousine was determined responsible, its proposal 
represented the best value and that FAR part 19.1305(d) allows for the 
award of a single acceptable offer, on April 27, 2004, the Contracting 
Officer awarded contract HSSCHQ-04-C- 00688 to Shirlington Limousine 
and Transportation, Inc, for a base period of one year plus one 
additional option year.
    I believe that the diligence with which the Contracting Officer 
awarded this contract is particularly noteworthy given that in April 
2004 OPO was in its infancy, having been established only eight months 
earlier (August 2003) and severely understaffed. Fewer than 10 
contracting professionals earnestly endeavored to meet the contracting 
needs of 35 new DHS program offices (such as Science and Technology and 
the US-VISIT program), which collectively spent about $2 billion 
annually. I commend the efforts of the OPO contracting staff given the 
very challenging environment in which they worked.

Contract HSHQDC-05-C-0036
    Although Contract HSSCHQ-04-C-00688 (the first contract awarded to 
Shirlington Limousine) was awarded for a potential performance period 
of two years, the Contracting Officer elected not to exercise the 
option for the second year due to changes in DHS' need for shuttle bus 
and executive transportation service. To ensure the Department would 
receive the best value for the required transportation services, while 
providing a fair opportunity for offerors to compete, the Contracting 
Officer decided to recompete the requirement. Market research concluded 
that there was a reasonable expectation that two or more HUBZone firm 
would likely participate. Therefore, as required by procurement 
regulation, the Contracting Officer set the procurement aside for only 
HUBZone firms. On June 30, 2005, DHS issued a synopsis on fedbizopps 
publicly announcing its plan to compete the requirement as a HUBZone 
set-aside and on July 29, 2005, DHS issued the solicitation, publicly 
posting the document on fedbizopps. Proposals were received from three 
offerors. Upon receipt, the HUBZone designation of each vendor was 
verified using each vendor's representations and certifications and 
information obtained from the Central Contractor Registration database. 
After conducting an evaluation, the Shirlington proposal was determined 
to be the best value proposal received. Prior to award and in 
accordance with FAR part 9.104-1, an affirmative responsibility 
determination for Shirlington was performed. This determination was 
based on confirmation that the company was not listed on the Excluded 
Parties List System and the contractor's qualifications and experience 
successfully performing similar work for DHS and other federal 
Government clients. On October 27, 2005, DHS awarded contract HSHQDC-
05-C-0036 for a base period and three option years. Subsequent to the 
award of the contract, DHS received two protests from one unsuccessful 
offeror regarding the award decision. One protest challenged the 
Department's selection decision and was subsequently withdrawn. The 
second protest challenged Shirlington Limousine's designation as a 
HUBZone small business. The SBA has jurisdiction over such matters and 
upheld that Shirlington Limousine met all of the requirements for a 
HUBZone small business.

Conclusion
    In closing, thank you for the opportunity to testify before the 
Committee about DHS contracting procedures and I am happy to answer any 
questions you or the Members of the Committee may have.

    Mr. Rogers. Thank you, Ms. Duke, for your statement.
    The chair now recognizes Mr. Kevin Boshears, director of 
the Office of Small and Disadvantaged Business Utilization of 
the U.S. Department of Homeland Security, for your statement. 
Welcome.

                  STATEMENT OF KEVIN BOSHEARS

    Mr. Boshears. Thank you, Mr. Chairman.
    Chairman Rogers, Ranking Member Meek, and members of the 
committee, thank you for the opportunity to discuss the 
Department of Homeland Security's small business contracting 
program. I am a career federal public servant with 16 years of 
public service. I joined the Department of Homeland Security as 
a volunteer from the Treasury Department in May of 2003, and 
was appointed as the director of the DHS Small and 
Disadvantaged Business Office.
    I previously served in the Treasury's small business office 
for 8 years, including the last 4 years as the director of that 
office. Prior to that, I was a contracting officer and small 
business specialist at the Justice Department's Federal Bureau 
of Prisons.
    As the director of the DHS Small and Disadvantaged Business 
Office, in accordance with the Small Business Act, my charge 
from Congress and the secretary was to implement the Federal 
Small Business Procurement Program at DHS and use the Treasury 
Department's program as a blueprint. I was the first member of 
the small business team to arrive at DHS. We now have eight 
full-time employees, one part-time intern, and one contract 
employee.
    Chairman Rogers, Ranking Member Meek and other members of 
the committee, Ms. Duke and I offered to conduct a DHS small 
business contracting event in your district. Our activities 
since inception included the following: in partnership with Ms. 
Duke's chief procurement office, creating the DHS Open For 
Business Web site at www.dhs.gov/openforbusiness; supporting 
all of the major small business program, including the 8(a) 
program, the HUBZone small business program, the service-
disabled veteran small business program, the traditional small 
business set-aside program, subcontracting and the DHS 
MentorProtege program.
    We have created an outreach program to meet personally with 
thousands of small business owners and representatives. This 
includes both DHS-hosted events and participation in a variety 
of events such as congressionally sponsored ones, trade 
association-sponsored events, and other federal agencies. In 
partnership with the DHS components, we identified operational 
small business specialists for each major DHS buying activity, 
created the DHS MentorProtege program, and each year we have 
prepared and published a forecast of contract opportunities to 
alert the small business community of upcoming opportunities.
    Working with the Small Business Administration, we have 
established small business goals with SBA on a fiscal year 
basis, and developed a close working relationship with the 
resident SBA procurement center representative assigned to DHS. 
This individual is physically located at DHS, where we identify 
small business opportunities on an ongoing basis.
    In closing, thank you for the opportunity to appear before 
the committee about the DHS small business contracting program. 
I look forward to working with the committee and I am happy to 
answer any questions you or the members of the committee may 
have.
    Thank you.
    Mr. Rogers. Thank you, sir.
    The chair now recognizes Mr. Calvin Jenkins, deputy to the 
associate deputy administrator of the Small Business 
Administration, for your statement. Welcome.

                  STATEMENT OF CALVIN JENKINS

    Mr. Jenkins. Thank you, Mr. Chairman.
    Chairman Rogers, Ranking Member Meek, Chairman King, 
Ranking Member Thompson and members of the committee, I am 
Calvin Jenkins, the associate deputy administrator for the 
Small Business Administration's Office of Government Contracts 
and Business Development.
    I thank you for extending to our agency the opportunity to 
discuss the matter now before you, the award of certain federal 
contracts to Shirlington Limousine Transportation, 
Incorporated. In addition to my testimony I am about to offer, 
I have supplied members of the committee with a hard copy 
timeline. This timeline would facilitate an understanding of 
the sequence of events with regard to Shirlington Limousine's 
participation in SBA's HUBZone program.
    First, let me establish a general understanding of the 
Historically Underutilized Business Zone Program. Following 
that, I will go into the particular set of circumstances 
relating to Shirlington Limousine. The objective of the HUBZone 
program is to create employment opportunity and stimulate 
capital investment in economically distressed neighborhoods, or 
HUBZones, through the award of federal contracts.
    Firms applying for the HUBZone certification must meet four 
basic eligibility criteria. To be eligible for the program, the 
concern must be a small business by SBA standards. It must be 
owned and controlled at least 51 percent by a U.S. citizen a 
community development corporation, an agriculture cooperative, 
an Indian tribe, or an Alaska Native corporation. Its principal 
office must be located within a historically underutilized 
business zone, which includes land considered Indian Country, 
military facilities closed by the Base Realignment and Closure 
Act, and at least 35 percent of its employees must reside in a 
HUBZone.
    Public Law 105-135, the HUBZone Act of 1997 does not 
require review related to the character of the principal or 
financial history of the applicant concern. Once the SBA 
certifies a firm as a qualified HUBZone, SBA adds that company 
to the list that appears on the HUBZone Web site, and within 
this same timeframe activates an indicator signifying HUBZone 
status in the firm's electronic profile appearing in the 
central contracting register system known as CCR, which is used 
by all federal agencies.
    This notice of certification is made available to all 
interested parties, including contracting officers via the 
Internet, using both our HUBZone Web site and CCR. A few brief 
strokes can ascertain within minutes whether a firm is indeed 
HUBZone-certified. Once this task of certifying the concern is 
achieved, the role of the SBA as it relates to the small 
business is largely reserved for three additional functions, 
which are resolving contract protests and appeals and showing 
continued eligibility through recertification, and conducting 
compliance reviews through program examinations.
    The SBA makes status determinations whenever a HUBZone-
certified concern is challenged in conjunction with a contract 
award. HUBZone-certified small business concerns are required 
to certify to the SBA their continued eligibility once every 3 
years in order to participate in the HUBZone program. An online 
form is provided that electronically compares the latest 
company data against any data previously supplied in connection 
with the program participation.
    The program exam is a full-scale compliance audit that 
requires a HUBZone-certified concern to verify to the SBA its 
continued eligibility through an online submission that is 
supplemented by collection of hard-copy documentation. A 
program exam can be purely random, or prompted as a result of a 
specific set of conditions that come to our attention. The SBA 
HUBZone program determines only whether an applicant concern 
meets the four HUBZone eligibility criteria, not whether a firm 
is capable of performing on a contract.
    With regards to Shirlington Limousine, the firm submitted 
an online application on HUBZone status on March 10, 2004. 
Consistent with the agency's standards, SBA determined, based 
on that application, that the firm did meet the four 
eligibility criteria. Part of this review included a site-visit 
by HUBZone staff to the firm's principal office at 425 8th 
Street N.W. in the District of Columbia, to ensure and confirm 
that it was a fully functional business. The firm received a 
certification on April 8, 2004.
    According to a recently updated record in the federal 
procurement data system, the U.S. Department of Homeland 
Security posted an announcement on April 14 in the online 
FedBizOpps alerting the contract community of the need for a 
HUBZone vendor to provide transportation services. The next 
day, April 15, 2004, the actual solicitation was posted as a 
HUBZone set-aside with a response date of April 19, 2004. The 
contract was signed on April 27, 2004, with the successful 
HUBZone offer identified as Shirlington Limousine.
    No one protested the HUBZone status of Shirlington 
Limousine for that contract. As such, there was no reason for 
the SBA to be involved. The SBA did become involved in a 
subsequent HUBZone status protest that involved a DHS contract 
signed on October 27, 2005, and identified in the federal 
procurement data system as a HUBZone set-aside. In this 
particular instance, there are two elements of Shirlington 
Limousine's HUBZone were questioned and reviewed: compliance 
with the principal office and 35 percent HUBZone residence 
requirement.
    On December 23, 2005, the SBA denied the protest, finding 
that the evidence supplied supported Shirlington's assertion 
that it did meet the HUBZone principal office and 35 percent 
residence requirement. The SBA decision was appealed. As acting 
deputy associate administrator for government contracts and 
business development, I denied the appeal on January 13, 2006, 
concluding that there was no error in processing the protest 
and that the SBA did not fail to consider any significant 
facts.
    The second and most recent action regarding Shirlington 
Limousine's HUBZone status is a HUBZone program examination. 
This was prompted by a change in Shirlington Limousine's CCR 
profile that indicated that they may have exceeded the size 
standard to be considered a small business concern. The profile 
reflected changes that were made on April 27, 2006, and which 
came to the attention of our agency on April 28, 2006. The 
program examination was assigned to our SBA Washington, D.C., 
district office on May 1, and Shirlington was notified of its 
need to respond to the audit on May 4, 2006. The firm completed 
its submission to the SBA on June 8, 2006, and the agency 
review of that response is ongoing.
    With regard to Shirlington Limousine and any other HUBZone 
contract, the SBA HUBZone office role is to verify that small 
businesses meet any and all of the four HUBZone eligibility 
criteria. With regard to DHS contracts signed on October 27, 
2005, the SBA fulfilled its obligation to act on a protest to 
review the eligibility of the HUBZone program participant.
    Thank you for this opportunity to testify. I would be happy 
to answer any questions you have.
    [The statement of Mr. Jenkins follows:]

                  Prepared Statement of Calvin Jenkins

    Good Morning Chairman Rogers, Ranking Member Thompson and members 
of theCommittee. I am Calvin Jenkins, the Deputy Associate Deputy 
Administrator for the SmallBusiness Administration's Office of 
Government Contracting and Business Development. Ithank you for 
extending to our Agency the opportunity to discuss the matter now 
before you,the award of certain Federal contracts to Shrlington 
Limousine and Transportation,Incorporated (Shirlington Limousine).
    In addition to the testimony I am about to offer, I have supplied 
members of the committeewith a hard-copy timeline. This timeline will 
facilitate an understanding of the sequence ofevents with regard to 
Shirlington Limousine's participation in the SBAYs HUBZone Program.

HUBZone Program
    First, let me establish a general understanding of the Historically 
Underutilized Business Zone(HUBZone) Program. Following that, I will go 
into the particular set of circumstancesrelating to Shirlington 
Limousine.
    The objective of the HUBZone Program is to create employment 
opportunities and stimulatecapital investment in economically 
distressed neighborhoods, or HUBZones, through theaward of Federal 
contracts. Firms applying for HUBZone certification must meet four 
basiceligibility criteria.
    To be eligible for the program, a concern must meet the following 
criteria:
    It must be a small business by SBA standards;
    It must be owned and controlled (at least 51 percent) by U.S. 
citizens, or a CommunityDevelopment Corporation, or an agricultural 
cooperative or an Indian tribe; or an AlaskanNative Corporation.
    Its principal office must be located within a "Historically 
Underutilized Business Zone,"which includes lands considered 'Indian 
Country' and military facilities closed by theBase Realignment and 
Closure Act; and
    At least 35 percent of its employees must reside in a HUBZone.
    Public Law 105-135, the HUBZone Act of 1997, does not require 
review relating to thecharacter of the principals or financial history 
of the applicant concern.
    Once the SBA certifies a firm as a qualified HUBZone, SBA adds the 
company to the list thatappears on the HUBZone web site and, within 
this same timeframe, activates an indicatorsignifying HUBZone status in 
the firm's electronic profile appearing in the Central 
ContractorRegistration system, known as CCR, which is used by all 
Federal agencies.
    This notice of certification is made available to all interested 
parties, including contractingofficers, via the Internet using both our 
HUBZone web site and CCR. A few brief keystrokescan ascertain within a 
minute whether a firm is indeed HUBZone certified.
    Once this task of certifying the concern is acheved, the role of 
the SBA, as it relates to thesmall business, is largely reserved for 
three additional functions, which are: (1) resolvingcontract protests 
and appeals; (2) ensuring continuing eligibility through 
recertification; and(3) conducting compliance reviews through program 
examinations.1) HUBZone Status Protests and Appeals: The SBA makes 
status determinations whenevera HUBZone certified concern is challenged 
in conjunction with a contract award.2) Recertification: HUBZone 
certified small business concerns are required to recertify tothe SBA 
their continuing eligibility once every three years in order to 
participate in theHUBZone Program. An online form is provided that 
electronically compares the latestcompany data against any data 
previously supplied in connection with program participation.3) Program 
Examination: The program examination is a full-scale compliance audit 
thatrequires a HUBZone certified concern to verify to the SBA its 
continuing eligibility throughan online submission that is supplemented 
by the collection of hard-copy documentation. Aprogram examination can 
be purely random or prompted as a result of a specific set ofconditions 
that come to our attention.
    The SBAYs HUBZone Program determines only whether an applicant 
concern meets the fourHUBZone eligibility criteria, not whether a firm 
is capable to perform a contract.

Shirlington Limousine Contract
    With regard to Shrlington Limousine, the firm submitted an online 
application for HUBZonestatus on March 10, 2004. Consistent with Agency 
standards, SBA determined, based on thatapplication, that the firm did 
meet the four eligibility criteria. Part of ths review included asite 
visit by HUBZone staff to the firm's principal office at 425 8th 
Street, NW in the Districtof Columbia, to ensure and confirm that it 
was a fully functioning business location. The firmreceived its 
certification on April 8,2004.
    According to a recently updated record in the Federal Procurement 
Data System, the U.S.Department of Homeland Security (DHS) posted an 
announcement on April 14,2004, in theonline FEDBIZOPPS alerting the 
contract community to the need for a HUBZone vendor toprovide 
transportation services. The next day, April 15, 2004, the actual 
solicitation wasposted as a HUBZone set-aside with a response date of 
April 19, 2004. The contract wassigned on April 27, 2004, with the 
successfkl HUBZone offeror identified as ShirlingtonLimousine. .
    No one protested the HUBZone status of Shirlington Limousine for 
that contract. As such,there was no reason for the SBA to be involved.
    The SBA did become involved in a subsequent HUBZone status protest 
that involved a DHScontract signed on October 27, 2005, and identified 
in the Federal Procurement Data Systemas a HUBZone set-aside. In this 
particulas instance, two elements of Shirlington Limousine'sHUBZone 
status were questioned and reviewed - compliance with principal office 
and 35percent HUBZone residency requirements.
    On December 23, 2005, the SBA denied the protest, finding that the 
evidence supplied in thecase record supported Shirlington Limousine's 
assertion that it did meet the HUBZoneprincipal office and 35 percent 
residency requirements.Ths SBA decision was appealed. As Acting 
Associate Deputy Administrator forGovernment Contracting and Business 
Development, I denied the appeal on January 13,2006,concluding that 
there was no error in processing the protest and the SBA did not fail 
toconsider any significant facts.
    The second, and most recent, action regarding Shirlington 
Limousine's HUBZone status is aHUBZone program examination. This was 
prompted by a change in Shirlington Limousine'sCCR profile that 
indicated they may have exceeded the size standard to be considered a 
smallbusiness concern. The profile reflected changes that were made on 
April 27,2006, and whichcame to the attention of our Agency on April 
28, 2006. The program examination wasassigned to ow SBA Washington, DC 
district office on May 1, 2006, and ShirlingtonLimousine was notified 
of its need to respond to the audit on May 4, 2006. The firmcompleted 
its submission to the SBA on June 8,2006, and the Agency review of that 
responseis ongoing.

Summary
    With regard to the Shirlington Limousine and any other KUBZone 
contract, the SBA'sHUBZone office role is to verify that the small 
business meets any or all of the fourHUlBZone eligibility criteria 
protested. With regard to the DHS contract signed on October27, 2005, 
the SBA fulfilled its obligations to act on a protest to review the 
eligibility of aHUBZone program participant. Thank you for this 
opportunity to testify. I will be happy toanswer any questions you may 
have.

    Mr. Rogers. I thank you. I would like to start off with 
some questions.
    The first question would be, particularly for Ms. Duke, but 
any of you could join in. Why did DHS designate this contract 
as a HUBZone contract set-aside as opposed to some other sort 
of set-aside, particularly given that the incumbent company was 
a woman-owned company that did not have the designation of 
HUBZone provider?
    Ms. Duke. We have talked with the persons involved in 
making the decision of deciding this was a HUBZone contract. 
Let me address the incumbent first. The incumbent was not 
considered as a potential offer on a follow-on contract 
principally because after the award of a contract and during 
its administration, we learned that the first incumbent was not 
certified by WMATA, the Washington Metropolitan Transit 
Authority, which is a requirement to run a shuttle bus service 
in the Washington, D.C. area, and they did not have the 
appropriate license. That was one of the decisions, one of the 
factors in deciding that we were going to do a re-competition.
    So really in making this decision, we had a clean slate. 
The small business office at DHS consulted with the program 
office and the contracting officer and knew of the HUBZone 
company, at least one HUBZone company. Our oral records 
indicate that there were several known HUBZone companies. The 
regulations allow the contracting officer discretion in picking 
one socioeconomic program over another.
    In the case of HUBZone for the Department of Homeland 
Security, that has been a goal that has been more difficult for 
us to meet. So we look for opportunities to set procurements 
aside for HUBZone. So the decision was made based on the 
likelihood that we would have two or more HUBZone contractors 
to offer.
    Mr. Rogers. Who makes that decision?
    Ms. Duke. The final decision is made by the contracting 
officer, in consultation with the small business 
representative.
    Mr. Rogers. Okay. I would like to talk with you for a 
minute about a timeline. We have, in Mr. Baker's affidavit, he 
sets out that on January 12, 2004, he submitted a written 
proposal for shuttle bus service that stated he was a qualified 
HUBZone provider. That was on January 12, at a time when DHS 
didn't have a request for proposals, and weren't looking for a 
contract. But he sends his in, and says he is a HUBZone-
qualified provider.
    You just heard Mr. Jenkins offer his timeline that points 
out Mr. Baker didn't even qualify as a HUBZone, didn't even 
submit his request until 2 months later to be designated as a 
HUBZone provider, and it wasn't until April 8, 3 months later, 
that he was designated as a HUBZone provider. And then 4 days 
after he is qualified as a HUBZone provider or designated, an 
RFP goes out by DHS for a contract, a bus and motor pool 
contract, and 2 weeks later he gets it, and he is the only 
bidder.
    Tell me if that timeline bothers you?
    Ms. Duke. We do not believe the January proposal that you 
are referencing was submitted to DHS. I have talked with all 
the persons involved in the process. The recommendation came 
from Kevin's small business office because the Office of 
Procurement Operations did not have a small business 
representative at that time.
    The gentleman does know that we had conversations with 
Shirlington Limo, as well as they believe a couple of other 
contractors. We were under the belief that Shirlington Limo was 
a HUBZone-certified contractor, but we did not receive, 
according to all our records and memories, the January 
proposal. The department did talk with Shirlington Limo in 
January as part of market research, and that Shirlington Limo 
in preparation, hoping there would be a requirement that came 
out, did do some work on preparing a proposal, but that was not 
submitted.
    Mr. Rogers. This is a proposal that, again, Mr. Baker under 
sworn affidavit says that he gave your office. It went to the 
attention of a Mr. Steven Saucen. Are you familiar with him?
    Ms. Duke. Yes, I am.
    Mr. Rogers. Have you talked with him about whether he 
received this proposal?
    Ms. Duke. Yes, I have. He does not recall having that.
    Mr. Rogers. Okay. None of his records are available?
    Ms. Duke. He does have records. Yes.
    Mr. Rogers. But they don't include this request?
    Ms. Duke. That is what he has told me. I have not 
personally reviewed his records.
    Mr. Rogers. Okay. Can you think of any reason why Mr. Baker 
would lie under a sworn affidavit about sending that in in 
January?
    Ms. Duke. No, I can't.
    Mr. Rogers. Okay. My time is up. I will yield to the 
ranking member, Mr. Meek, for any questions he may have, and I 
look forward to my next round.
    Mr. Meek. Thank you, Mr. Chairman.
    I must say that this must be a very painful hearing for 
many small and disadvantaged businesses because, Mr. Boshears, 
I am pretty sure that you can testify to the point that it is 
hard to have opportunities for small and disadvantaged 
businesses.
    I must say for the record that there are some large 
businesses that are doing business with the Department of 
Homeland Security, DOD, that are not carrying out their 
actions, and they may have questionable information from people 
that are on their boards or at the head of their companies 
also.
    I am making a statement. I don't want you to respond to it. 
But I just want to say that I don't think that this is the 
committee's attempt to shed a bad light on small and 
disadvantaged businesses at all. I think that we have some 
questions here that we have to ask, and we need answers to.
    So I wanted to alleviate any worries that small businesses 
may have that there will be a lack of contracts designated for 
procurement opportunities.
    With that, Mr. Chairman, I would like to yield the rest of 
my time to Mr. Pascrell from New Jersey.
    Mr. Rogers. The gentleman from New Jersey is recognized.
    Mr. Pascrell. Thank you, Mr. Chairman.
    Mr. Jenkins, you say in your testimony that you identified 
the federal procurement data system, that this was a HUBZone 
set-aside. In this particular instance, two elements of 
Shirlington Limousine's HUBZone status were questioned and 
reviewed: compliance with principal office. Where is their 
principal office?
    Mr. Jenkins. Yes, their principal office is within the 
District of Columbia, I believe 425 8th Street, N.W., District 
of Columbia.
    Mr. Pascrell. That was checked out to make sure that they 
do have an office there?
    Mr. Jenkins. Yes.
    Mr. Pascrell. What kind of office do they have there?
    Mr. Jenkins. It is a residential building.
    Mr. Pascrell. My second question is this, you say that in 
order to be HUBZone-qualified, eligible, you must have 35 
percent of those folks working with you have residency within 
that area. Is that correct?
    Mr. Jenkins. Well, within a HUBZone. It doesn't have to be 
the same.
    Mr. Pascrell. So that could come from another area into the 
area where the residency, the establishment is. Let me ask you 
this question, do you continue to monitor this to make sure 
that their principal office is there? And number two, they 
continue to have 35 percent of folks that work for them living 
in a HUBZone?
    Mr. Jenkins. Yes. We have about four points that we check 
in terms of meeting the compliance, one at the initial 
eligibility review. Secondly, we do a program examination, 
which could get triggered for a number of reasons; or do part 
of our random check. Then we also have the recertification 
process in which we recertify all of the firms that are in the 
program.
    Mr. Pascrell. When were they recertified?
    Mr. Jenkins. At this point, they have not been.
    Mr. Pascrell. I would like to know when they were 
recertified, and when was the last time you checked on the 
residency.
    Mr. Jenkins, are you aware of the record of Mr. Baker?
    Mr. Jenkins. No, I am not.
    Mr. Pascrell. Between 1979 and 1989, he was convicted of 
several misdemeanor charges including drug possession, 
attempted petty larceny, as well as two felony charges for 
attempted robbery and car theft, according to the D.C. Superior 
Court records. Are you aware of that?
    Mr. Jenkins. No, I am not.
    Mr. Pascrell. You are not aware of that, but you examined 
the efficacy of whether this company is eligible for a 
government contract and you do not know what the owner of the 
company, what his past record or character is.
    Mr. Jenkins. No, the SBA does not examine the company's 
ability to perform on the contract. We review the firm and 
determine whether or not the firm meets the four statutory 
requirements for entry into the HUBZone program.
    Mr. Pascrell. And you do examine what the record is of each 
of the drivers that works for that company, correct?
    Mr. Jenkins. We only examine whether or not they reside in 
a HUBZone, but not their records.
    Mr. Pascrell. So anybody that drives for Shirlington could 
have a police record, that is driving around public officials 
from the DHS?
    Mr. Jenkins. The Small Business Administration does not 
review the records of the individual drivers.
    Mr. Pascrell. You don't do that?
    Mr. Jenkins. No, we don't.
    Mr. Pascrell. Okay. Ms. Duke, the contracting officer, you 
presented, determined the company is responsible, confirming 
that the company was not listed on the excluded parties list 
system. How robust is the excluded parties list?
    Ms. Duke. The excluded parties list is one element of 
determining responsibility. It only includes contractors or 
individuals that have gone through a formal process and then 
suspended or debarred.
    Mr. Pascrell. Ms. Duke, you do know the record of the Baker 
Company. They received small federal contracts in 1998, and 
fell into debt. In early 2002, Arlington Country Circuit Court 
ordered Shirlington's limousines to pay American Express 
travel-related services over $55,000. That summer, Howard 
University terminated a contract with Shirlington Limousine to 
supply shuttle bus service, citing poor service and their 
problems. In 2003 and 2004, the company received eviction 
notices for an office it maintained in a luxury D.C. apartment 
building.
    My question to you is this: Do you know Brent Wilkes?
    Ms. Duke. No, I do not.
    Mr. Pascrell. Do you know Mitchell Wade?
    Ms. Duke. No, I do not.
    Mr. Pascrell. Mr. Jenkins, have you ever heard of those two 
people?
    Mr. Jenkins. No, I have not.
    Mr. Pascrell. Never heard.
    How about Mr. Boshears?
    Mr. Boshears. No, sir.
    Mr. Pascrell. You haven't heard of them. I will come back 
to my questions.
    Mr. Rogers. The gentleman's time has expired.
    The chair now recognizes the chairman of the full 
committee, Mr. King, for any questions he may have.
    Mr. King. Thank you, Mr. Chairman.
    Ms. Duke, I would like to ask you a line of questioning, 
beginning with the affidavit, which Mr. Baker has submitted. On 
page two of his affidavit, he specifically states that 
Congressman Cunningham sent a letter of reference to the 
Department of Homeland Security recommending him for this 
contract. Do you have any record of that in the documents?
    Ms. Duke. We have an e-mail sent by Shirlington Limo's 
chief operating officer, Lucretia Pearce, I believe is her 
name. It was sent from an AOL account, and it references 
sending the proposal forward, and it also says that Shirlington 
Limo is going to fax I believe it was four documents. And one 
of the documents listed in this e-mail?and I only have a hard 
copy of it, I don't have it electronically?says a letter of 
reference from Congressman Cunningham. However, we have looked 
through the entire contract file and all our record and do not 
have a copy of that letter, only the e-mail referencing the 
letter.
    Mr. King. Has the department acknowledged before this e-
mail reference to the letter from Congressman Cunningham?
    Ms. Duke. Not to my knowledge.
    Mr. King. My understanding is that the Department of 
Homeland Security is saying that Congressman Cunningham was in 
no way involved. To me, if there is an e-mail making a 
reference to a letter from Congressman Cunningham, that shows 
he is involved, and if that is the case, I don't think the 
department has been truthful with us. They may be being cute 
saying they don't have the letter on file, but if there is a 
reference to a letter, I think in the interest of basic 
governmental integrity that should have been made known to this 
committee.
    Ms. Duke. Yes, I agree.
    Mr. King. Who would be the custodian of the records?
    Ms. Duke. The contract file is within the Office of 
Procurement Operations, in the contracting office is the 
official contract file.
    Mr. King. Now, have you spoken to anyone in that office as 
to who has made a thorough search for this letter from 
Congressman Cunningham?
    Ms. Duke. Yes. Both the contracting officer looked through 
the file and then I had someone on my staff, a procurement 
analyst, look through the file to try to locate the record. We 
also actually did speak with Shirlington Limo, Mr. Baker, and 
asked him for the letter. He initially said he was going to 
provide it to us, and then after meeting with the committee he 
declined to provide it to us.
    Mr. King. Has anyone from Secretary Chertoff's office asked 
you about Congressman Cunningham or whether or not there was 
any involvement by him?
    Ms. Duke. I have not been asked, but we did have a brief 
discussion about it. I told them.
    Mr. King. With whom? Between you and who else?
    Ms. Duke. I believe it was Secretary Chertoff. I mentioned 
it at the end of a staff meeting, or one of his staff.
    Mr. King. When would that have been?
    Ms. Duke. It was at a senior staff meeting. I can get you 
the date. There is a daily staff meeting.
    Mr. King. Was this yesterday or last week or 2 weeks ago?
    Ms. Duke. It was probably within the last 2 weeks, but not 
this week.
    Mr. King. So at least a week ago, Secretary Chertoff knew 
there was a reference to Congressman Cunningham in the records. 
Mr. Chairman, if I may ask, have you been called at all by the 
secretary? Has anyone in this?
    Again, you are the one who is sitting there, so let this go 
right by you. This is not you. I find it disgraceful that the 
secretary of homeland security knew that a convicted felon who 
was at the center of one of the worst scandals ever, with 
ramifications all over the city, has not said a word to us 
about the fact that there is a reference to him as far as this 
contract is concerned. And that to me is a gross dereliction of 
duty by Secretary Chertoff. I am saying that on the record and 
I appreciate your honesty in coming forward and telling us 
that.
    I would just ask the subcommittee staff through the 
chairman if they would contact the department immediately and 
find out if there are any other references that Secretary 
Chertoff is aware of. I agreed with Ranking Member Thompson 
before that I think only Secretary Chertoff himself can explain 
to us why he didn't come forward.
    This isn't just a person who happens to be a congressman. 
We are talking about a congressman who was involved in a major 
scandal, a congressman who was named and indicted and convicted 
and an unindicted coconspirator was Mr. Wilkes. Mr. Wilkes is 
the one who used this limousine company. Mr. Cunningham then 
recommends, according to the documents, this limousine company. 
And if Secretary Chertoff is wondering why there is a lack of 
confidence in the department, this is one of them.
    Let me ask you one other question. Has the public 
information officer, Mr. Kinnock, has he discussed this with 
you at all?
    Ms. Duke. No, he has not.
    Mr. King. Has he discussed with you any of the procedures 
involving Shirlington Limousine Company?
    Ms. Duke. No, he has not.
    Mr. King. You are aware that he has gone public, though, in 
saying that everything was done properly and the Congress 
doesn't understand how well it was done. But as far as you 
know, he never spoke to you or anyone in your department before 
he went public defending the entire procedure here.
    Ms. Duke. We submitted sample Q&As to the public affairs 
office with the background of what went on in the contract. We 
submitted those to the public affairs office.
    Mr. King. Mr. Chairman, could they be made available to the 
committee?
    Mr. Rogers. Yes.
    Mr. King. I would ask, then, Mr. Chairman, that we call the 
Department of Homeland Security to make all those documents 
available as far as Q&A, as to what Mr. Kinnock knew and when 
he knew it before he went public and said everything has been 
done properly, and also did or did he not have the obligation 
to come forward and clarify the record once the secretary found 
out that Congressman Cunningham is mentioned in the records of 
the Department of Homeland Security, as far as this specific 
contract.
    With that, I yield back.
    Mr. Rogers. The gentleman yields back.
    I would like to go back just for a minute to the timeline 
referenced in our previous series of questions.
    I am sorry. I notice Ms. Jackson-Lee has come in.
    Are you ready to be recognized? I am sorry. The chair 
yields to the gentlelady from Texas for her questions.
    Ms. Jackson-Lee. I thought you were taking another round, 
Mr. Chairman.
    Let me thank the witnesses for their presence here today. 
And let me just thank the chairman and the ranking member, and 
chairman and ranking member of the full committee, my 
colleagues.
    I think we have some very difficult questions to answer. I 
would like to put on the record that whether or not we ask for 
the presence of the secretary or whether there is a necessity 
of a subpoena, which we have had a very congenial relationship 
with DHS, I do think it is crucial that we have the opportunity 
for Secretary Chertoff to be here, which emphasizes that this 
committee and this subcommittee means business.
    But we also have a sense of understanding the facts. Ms. 
Duke, let me thank you for your service, and likewise let me 
thank Mr. Apse, if I have that correct. I am looking at it from 
a distance, and not looking at my sheet. We had an opportunity 
to review the facts, and I appreciate that.
    Let me also thank you, Mr. Jenkins. You are with the SBA?
    Mr. Jenkins. Yes.
    Ms. Jackson-Lee. Now, there is a lot that is fueling the 
fires, but I want to get to the facts. My understanding is that 
the present small contract on its performance, Ms. Duke, has 
been performing, this particular limousine service.
    Ms. Duke. That is correct.
    Ms. Jackson-Lee. Evidence of untoward activity has occurred 
basically in the press. Is there some other evidence that has 
come to your attention outside the press?
    Ms. Duke. No, just from the press and members of the 
committee.
    Ms. Jackson-Lee. Do you have any internal documents that 
may have been placed in your jurisdiction or the jurisdiction 
of the secretary that would speculate about any activities of 
this company?
    Ms. Duke. Since we have been learning the new events, we 
have been following up on them, and I have some new records of 
the results of following up on some of the news articles and 
recent allegations.
    Ms. Jackson-Lee. Would that include documentation that 
evidences names or members of Congress or otherwise?
    Ms. Duke. No, it does not.
    Ms. Jackson-Lee. Okay. My understanding, then, on this 
particular company, the choice against the then-incumbent was 
that the incumbent had not been certified. For most of us who 
have dealt with small and minority disadvantaged businesses, we 
realize, and I was a member of the Houston City Council and we 
did not have a city manager, so we ran the city, that there is 
that level of certification many times of a federal government 
or a state government that will look to that. Is that my 
understanding?
    Ms. Duke. Yes, it is.
    Ms. Jackson-Lee. So do you feel you were biased in not 
going to the then-existing incumbent?
    Ms. Duke. No. We did not go to them because they weren't 
properly licensed to do the work we needed.
    Ms. Jackson-Lee. Okay. You understand the outrage when you 
hear that there was a free-for-all, seemingly, with cars going 
back and forth to again what seems to be inappropriate places, 
and the overlying theory that being at DHS you have the 
unfortunate capacity to be, if you will, compromised. You 
understand that concern?
    Ms. Duke. Yes.
    Ms. Jackson-Lee. But tell me, do you have evidence of the 
drivers, both of the shuttle and the individual cars, of being 
engaged in these activities, inappropriate activities, 
pornographic visits, whatever we are talking about at this 
point?
    Ms. Duke. No, we have no evidence, and we also have done 
background investigations on everyone involved in performing 
the contract, including the drivers.
    Ms. Jackson-Lee. You can find no iota of evidence that they 
were parked outside of the latest brothel that might be located 
in the surrounding area?
    Ms. Duke. No, I do not have that.
    Ms. Jackson-Lee. And do you distinguish between the drivers 
and the owner?
    Ms. Duke. In terms of background investigations, yes.
    Ms. Jackson-Lee. Okay. And so you have a clean slate of the 
drivers?
    Ms. Duke. Yes.
    Ms. Jackson-Lee. We are not under oath here, but you 
understand how serious this is? So you have a clean slate of 
the drivers?
    Mr. Rogers. Excuse me. Everybody is under oath. They signed 
an oath when they sign in. We just don't make them go through 
the swearing in.
    Ms. Jackson-Lee. Thank you for making that clear, Mr. 
Chairman. I think that is very important because Mr. King 
raised some very important issues here.
    So therefore what you are saying to me, it has to beyond a 
reasonable doubt. The truth is that you have no, not in this 
new filings or paperwork that you have in your presence, 
because we are probably going to want to see that.
    Ms. Duke. Yes.
    Ms. Jackson-Lee. What I would simply say to the committee, 
I hope that we have the opportunity. This bears consideration, 
but my understanding is that a lot of what we have been talking 
about is an individual who is an owner, who has had some 
infractions. I use that term, and some people would want to 
expand it, violate the law or however they want to dictate. I 
don't have any problems with that.
    But the fact is that that person was vetted for the 
timeframe of what you are dealing with, and that person is not 
in the driver's seat. They are not driving the car.
    Ms. Duke. Correct.
    Ms. Jackson-Lee. Okay. I would lay out on the record, and I 
assume we are going to have a second round, because I do have 
some more pointed questions, but let me just finish this 
thought. I hope as I look at Mr. Jenkins, and I hope people in 
the audience understand what HUB is all about, because I am 
here to embrace the Historically Underutilized Business. I am 
here to be the shield for any spears trying to get rid of that.
    We do want in this country for people to pull themselves up 
by their bootstraps. We do want the opportunity for people to 
be able to get work, barring the direct violations of the law 
pursuant to the business at hand that the government wants them 
to do. So I just want to make it clear that I am not here to 
destroy HUB, to destroy the process, or to undermine an owner 
who unfortunately went the wrong direction, but I believe has 
come back to the right direction. But I am here to take an 
attack or to take a look very keenly and closely at a 
procurement system that many do believe is broken.
    So as you think in the second round, please be keenly 
thinking of the answers you gave me so that if there is any 
documentation that speaks to laws being violated by this 
limousine service, we need to put it on the record. But 
otherwise, let my colleagues be aware that pulling yourself up 
by the bootstraps is no crime as far as I know in the American 
criminal justice system.
    I yield back.
    Mr. Pascrell. Mr. Chairman, I must speak after that, if I 
may, in response to the statement that was just made.
    Mr. Rogers. The gentleman is recognized.
    Mr. Pascrell. No one is questioning the significant of a 
HUBZone. I was on that committee. No one is questioning it. And 
for anyone to say that this company has had appropriate records 
since this guy stopped having a rap sheet, which is 62 pages 
long, has not read the record on bankruptcies, on what Howard 
University had to say about this company. This did not just end 
in 1998. This company has a horrible record.
    A felon at the head of the company means something to me. 
If we are going to have oversight, let's have oversight, and we 
should be able to answer anything we wish. In fact, if we don't 
get the answers, we ought to put people under oath.
    Ms. Jackson-Lee. Would the gentleman yield just for a 
moment?
    Mr. Rogers. Again, I want to re-state?
    Ms. Jackson-Lee. Let me get one sentence, Mr. Chairman. I 
appreciate your indulgence.
    Mr. Rogers. Every witness that comes down before this panel 
we have them sign an oath. They are under oath. I just don't go 
through the audible exercise, but do know, and that has been my 
practice since I took the chair of this subcommittee.
    The gentlelady from Texas is recognized.
    Ms. Jackson-Lee. I appreciate the great respect for the 
distinguished gentleman from New Jersey, but let me be very 
clear. Nothing in my comments suggests that I don't want to get 
to the bottom of the crisis. What I want is that the facts are 
fair and that we talk about the performance of this contractor 
with DHS, which is who is under scrutiny. I have a list of 
failed contracts for DHS.
    My last point is, an ex-felon.
    I yield back.
    Mr. Rogers. I thank the gentlelady.
    I would like to take a round of questions and visit briefly 
this timeline again. Then I want to talk more about some 
practices that maybe we can endeavor to pursue in the future 
that would prevent this. I am still puzzled by this written 
proposal that Shirlington sent in when you all weren't looking 
for a contractor. Is that common for you all to receive 
proposals for work that you are not inviting?
    Ms. Duke. We do get a lot of unsolicited proposals, people 
having ideas and they come to the department. So it is not 
totally unusual, but we do have a record of having discussions 
with Shirlington Limousines specifically about the upcoming 
need.
    Mr. Rogers. Before the RFP was sent out in April?
    Ms. Duke. Yes.
    Mr. Rogers. Okay. And although you don't show a record of 
this written proposal, your records do show there were some 
discussions with him?
    Ms. Duke. I didn't find a written record, but I did talk to 
the individuals involved and they remembered that.
    Mr. Rogers. Okay. Now, again this came in on January 12, 
saying he was a HUB, offering, volunteering he was a HUBZone-
qualified. And it was 3 months later before he was actually 
HUBZone-qualified and within 4 days the RFP goes out and he is 
the only guy that bids and gets it, 2 weeks after that.
    That strikes me as a very odd sequencing. Given that he, 
according to his affidavit submitted a letter of recommendation 
from Mr. Cunningham, who is not his congressman, not even in 
the same part of the country as him. It really raises concerns 
that maybe there was some manipulation of the process, 
particularly of whether or not this was going to be segregated 
as a HUBZone contract.
    So my question would be, do you believe that the process is 
open to any kind of political manipulation that would set up a 
HUBZone designation to facilitate a particular company having 
an advantage in the bid process?
    Ms. Duke. I believe that the persons involved in making the 
decision thought that Shirlington Limo was a HUBZone-certified 
company from the initial discussion. I have no evidence that 
there was any type of outside influence on the decision to set 
aside the contract for a HUBZone. There is no record of senior 
persons even from within the department being involved. It 
appears from the record to be handled really at the working 
level, the decision.
    Mr. Rogers. Again, my question is, do you think the process 
could be politically manipulated?
    Ms. Duke. It could be, yes.
    Mr. Rogers. Okay. What I want to do is visit briefly this 
background check information that Mr. Pascrell visited. Is it 
your practice to ever do background investigations on the 
owners or officers and directors of small companies, or what 
would be designated small businesses when they make 
applications in response to your RFPs?
    Ms. Duke. Only if they were going to actually be performing 
work on the contract. It would need a DHS badge. Then we would 
do the background investigation on the owner.
    Mr. Rogers. So you just do the investigation on the company 
itself. The owner could be an Al Qaida individual, not even a 
U.S. citizen, who sets up an LLC or company, and then makes a 
request for proposal. As long as his business has not been in 
any trouble financially or criminally, you would have no way of 
knowing that the company was actually owned by a member of Al 
Qaida.
    Ms. Duke. There is no specific check. We have one 
certification requirement where the companies must certify 
about criminal records over the last 3 years.
    Mr. Rogers. For the company.
    Ms. Duke. For the company, yes.
    Mr. Rogers. But not for the owners or officers and 
directors. Which in my experience, and I practiced law before I 
came here, I set up many LLCs and many corporations, and most 
of them have just one individual that actually is the sole 
stockholder or the sole member. If you don't look to that 
person's criminal or financial background, you really are not 
doing due diligence.
    It seems to me that that is something that ought to look to 
as a change in policy with the department is to make it a 
practice, particularly on smaller companies, to look to those 
individuals and search their backgrounds both criminal and 
financial to ensure that they are of the character and quality 
that we want involved in these very important DHS issues.
    I am going to pause right there, because I inadvertently 
jumped Mr. Pascrell on his 5 minutes of questions. He was just 
using the last 3 minutes of Mr. Meek's questions, and I 
apologize and yield to the gentleman from New Jersey for his 5 
minutes.
    Mr. Meek. I think what we have, Mr. Chairman, if we can, 
just follow the normal process. When it comes around to Mr. 
Pascrell, he will get 10 minutes and he will probably take 12.
    [Laughter.]
    Mr. Rogers. Good solution. Thank you, Mr. Meek.
    The gentleman is recognized.
    Mr. Meek. I am just a chairman-in-waiting.
    [Laughter.]
    Mr. Rogers. I hope he is waiting a long time.
    [Laughter.]
    Mr. Meek. I just want to, Chief Duke, I want to ask you a 
question. How much money or procurement does your office 
handle? What is the ratio, when you break it down per a 
procurement officer, that they are handling and the ratio it 
should be at as it relates to the dollars that they are 
actually working on day in and day out of transactions by the 
department?
    Ms. Duke. In our last fiscal year, we handled about $17.5 
billion in contracts. I don't have the exact ratios with me, 
but the ratio we think we should be operating is, it is called 
a cost-to-spend ratio, of 1.2 cents to spend a dollar, up to 
1.9 cents. That is based on research we have done with industry 
and best practices. We are well below that right now, and I can 
get you the exact number, but well below the 1.2 percent, the 
lower threshold.
    Mr. Meek. When you say ``well below,'' you mean well below 
as it relates to FTEs, individuals that should be handling a 
smaller amount of money?
    Ms. Duke. Yes.
    Mr. Meek. Can you just for the committee purposes, could 
you for the record purposes, can you describe the kind of 
insight that a procurement officer must have to make sure that 
they can evaluate a given contract appropriately? How much 
time, like for instance the Shirlington Limo contract, how much 
time would that usually take?
    Ms. Duke. I would think something of that size, Shirlington 
was large dollar-value, but not very complex. So I would say 
coming from the Department of Defense, that would have probably 
taken I would say 4 to 6 months on average.
    Mr. Meek. Okay. So I am pretty sure that when the 
department makes a decision that it wants to let a contract, or 
what have you, that pressure on procurement officer to move 
quickly is a great deal of pressure, a fair amount of pressure, 
or no pressure at all?
    Ms. Duke. Our contracting officers are under a great deal 
of pressure to meet the mission requirements.
    Mr. Meek. Okay. Has there been any requests, either the 
secretary's department or has anyone come down from the 
secretary's department and said, hey, you know, we have some 
problems here at the Department of Homeland Security as it 
relates to carry on our procurement function; do you need or 
have you sent any, when it comes down to budget time, have you 
sent any recommendations with what one may call upstairs on 
Nebraska Street? Are you located on Nebraska?
    Ms. Duke. No, I am at L'Enfant Plaza.
    Mr. Meek. I didn't think so. So have you sent it over to 
Nebraska Street, the headquarters, that you need more 
procurement officers to carry out the duty in a way that it 
should be carried out?
    Ms. Duke. We have. And we have several increases in the 
budget, the upcoming budget year for more contracting staff in 
many of our contracting offices, and in my own personal office.
    Mr. Meek. Okay. So you feel confident that that is going to 
happen and that life will get better as it relates to oversight 
and making sure that we carry out every function that we need 
to carry out?
    Ms. Duke. I think it is a first step. I think once we fill 
those vacancies, if we get the final budget for it, that we 
will be looking for more positions. It does not bring us to the 
level we should be at, but it is a step in the right direction?
    Mr. Meek. The average time for your procurement officers, 
how long do they stay, on average, by average?
    Ms. Duke. I do not have that information. I do know that we 
have a fairly, in the Office of Procurement Operations, we do 
have a fairly significant turnover rate in like the 20 percent 
range, between 20 percent and 30 percent of turnover of 
contracting officers.
    Mr. Meek. I want to personally commend you for the steps 
that you all have taken since we started this process of 
looking at the Shirlington Limo contract. I just would, 
definitely for Mr. Jenkins, I know that you are doing what this 
Congress has asked for you to do, look at those four statutory 
requirements.
    But this committee's review may very well come about, may 
very well bring in the question or require the issue of 
character. The Department of Homeland Security, with you being 
a national security agency protecting the homeland, may have to 
go to the next level as it relates to looking at individuals 
that serve in a leadership capacity that may have influence 
over the employees of said contractor, or what have you.
    I believe that this is a road that I think many individuals 
that have made youthful indiscretions in the past may push back 
against, because I am pretty sure that there are border 
directors that may make the person in question look like a boy 
scout in other companies, and there may be CEOs that may very 
well be scrambling around making sure that that is not 
enforced.
    So I know that people make youthful indiscretions. I know 
that people do things they should not do, but I want to say 
that the CEO of this company, I personally feel that there are 
some questionable issues there around the issue of crime that 
may very well have the American people looking at this whole 
contract, since we have individuals that are driving, people 
that are making national security decisions, that are making 
phone calls, that are having car meetings, that is sensitive 
information.
    I do know from past meetings that you said these 
individuals do receive a background check who are driving. All 
these individuals have been cleared by the Department of 
Homeland Security, but this is something to consider in the 
future.
    I don't know if I will have an opportunity to have another 
round, but I want to thank the witnesses for coming before the 
committee today.
    With that, Mr. Chairman, I yield back.
    Mr. Rogers. I thank the gentleman.
    The chair now recognizes the chairman of the full 
committee, Mr. King, for any questions he may have.
    Mr. King. Thank you, Mr. Chairman.
    I would just like to follow up on what Mr. Pascrell said. 
In fact, I know that every member of this committee, if anyone, 
wants to strengthen the whole HUBZone process. We want to make 
sure it is done right, but this goes I think far beyond that, 
because again, to put this in some kind of perspective, so we 
don't get lost in the weeds here. We are talking about a losing 
company, owned by an individual with a criminal record, who 
also had a business relationship with a defense contractor who 
is named as an unindicted co-conspirator in one of the worse 
scandals to hit Washington in years.
    That unindicted co-conspirator, a defense contractor, is a 
personal friend of the former number three man in the CIA. They 
were involved, and I am talking about the defense contractor, 
and also to some extent the number three person in the CIA, 
involved in, besides the corruption of the defense contractor 
as an unindicted co-conspirator, they were also involved in 
what appear to be sex parties, card parties at which the 
limousine service in whatever legal or lawful manner they may 
have been conducting themselves, were involved.
    And then we find out that the congressman who was at the 
center of all this, who also was a member of the Intelligence 
Committee and received almost $2.4 million in bribes, sends a 
letter on behalf of this limousine company. Now, if that 
doesn't raise issues; if that doesn't look as more than just a 
series of coincidences, I don't know what does, especially 
against the background of what I think is a very questionable 
work record by this limousine company.
    But Ms. Duke, let me ask you as a follow up to what 
Chairman Rogers was saying, Chairman Rogers brought out you 
can't inquire as to whether or not the owner is a U.S. citizen. 
You can't check whether the owner himself or herself has a 
criminal record. Do you know what the procedures are for the 
FBI and the CIA in similar contracts like this?
    Ms. Duke. We do have, for U.S. citizen we do have some 
requirements on that in the DHS, Homeland Security Act. But in 
terms of the CIA and the FBI, they do do some checks. They also 
on some of their contracts require what we call facility 
clearances, which require the whole company to be cleared. So 
it would depend on the severity of the contract.
    Also, they may, for instance even within DHS, Immigrations 
and Customs Enforcement requires their drivers to be cleared, 
not just a background investigation, because they carry 
classified documents in the vehicles they use. So there are 
differing levels.
    Mr. King. In the Department of Homeland Security, as I 
understand it, this company would drive top executives. Other 
than the secretary and the under secretary, are they the only 
two that are not driven?
    Ms. Duke. The secretary and the deputy secretary are the 
only two.
    Mr. King. Deputy secretary, are the only two who are not 
driven.
    Now, so we have a situation where you could have a company 
owned by an individual who could be in organized crime. He 
could be an Al Qaida operative. He could be any type of 
nefarious individual. We would have no idea, and yet his 
company, and even though he could have drivers who don't have 
criminal records, he could still pick people who may not have a 
rap sheet, but are loyal to him, driving around the very top 
executives in the department, being able to overhear whatever 
conversations might be going on. I know that top executives are 
told not to say things, but if you just read any of the 
criminal cases, you see that people talk, whether they should 
or shouldn't, human nature being what it is.
    So you would be able to overhear conversations. You could 
very well know whom they are meeting with, where they are 
going, what they are doing. To me, this is a real serious 
deficiency if we are going to treat the Department of Homeland 
Security as our main bulwark in the fight against international 
terrorism.
    So do you think that you need legislation? Do you want this 
committee to initiate legislation which would give you the 
opportunity to check into the backgrounds of owners of 
companies such as this? And to give you more leeway to decide 
who is going to get contracts and who is not?
    Ms. Duke. I look forward to working with the committee on 
that. I do believe that given the current case law that if we 
do have a new standard now that legislation would help move 
enacting that more quickly than going to strictly a regulatory 
process, yes.
    Mr. King. So you do believe that legislation could be both 
necessary and helpful?
    Ms. Duke. Yes.
    Mr. King. Okay. I would appreciate if you would pass that 
on to the secretary, and have him communicate us, too, how he 
believes this should be done. If any good can come out of this, 
it could be a wake-up call as to what I think could be a 
serious gap in our security procedures.
    With that, I yield back and I thank you.
    Mr. Rogers. I thank the gentleman.
    I would also remind everybody present that if you have a 
cell phone, please turn it to the off position or to vibrate. 
It is kind of disturbing the equipment up here when it goes 
off.
    The chair now recognizes for 10 minutes my colleague from 
New Jersey, Mr. Pascrell.
    Mr. Pascrell. Thank you, Mr. Chairman.
    Mr. Chairman, we are not developing material for a B movie 
here. We are talking about some serious stuff that provides 
substance for or responsibilities to have oversight, as I 
understand this. And that is why we ask the questions that we 
do.
    I would like to ask Ms. Duke some further questions about 
that. If what the chairman was talking about is true, all of it 
true, not just speculation, if there was an arrangement between 
a defense contractor or contractors, with the owners of this 
company, with those defense contractors involved in bribery, 
admitted bribery, and an arrangement with some other service, 
and I don't want to even get into that because that is not 
really significant here. It is important, but not significant 
here.
    Would that, Ms. Duke, be in your judgment bring about some 
questions about whether this person was a responsible bidder?
    Ms. Duke. Yes, it would.
    Mr. Pascrell. It would. Okay. So the public records 
indicate, Ms. Duke, that between 2002 and 2005, I just want to 
get some things clear here, that Shirlington had many financial 
difficulties and performance problems. They were in court on 
bankruptcy and a lot of other things. There were court actions 
for unpaid debts. Under federal procurement regulations, a 
vendor must be deemed a responsible bidder by the contracting 
authority.
    Given its history of financial and performance problems, 
not to mention the criminal history of its owner, I think the 
fact that this contract was awarded shows absolute negligence 
on the part of DHS, not you. This happened really before you. 
Can you explain to us in simple language the past performance 
problems of Shirlington Limo, why that didn't prevent it from 
being deemed a responsible bidder, in your estimation?
    Ms. Duke. In my estimation, the contracting officer and the 
staff that awarded the contracts looked at the references that 
Shirlington Limo submitted with its proposal, and did not look 
to the other sources that have come to light recently. So based 
on the information provided within the proposal, it appeared 
that there was a satisfactory record of performance.
    Indeed, we continue to look at the record of performance, 
and on other federal contracts, others are experiencing 
satisfactory performance also.
    Mr. Pascrell. Mr. Jenkins, thank you. I want you to explain 
to us what kind of internal oversight you do in the HUBZone 
program. For instance, in the last fiscal year, how many 
companies have been disqualified upon your examination?
    Mr. Jenkins. I would have to get that number back to you in 
terms of how many that have been removed because of not meeting 
the qualifications.
    Mr. Pascrell. Well, let's go to the previous question, 
then. Could you explain what the internal oversight, what do 
you do?
    Mr. Jenkins. Okay. As I mentioned earlier, there are, once 
a term has been certified into the program, 3 years outside of 
that certification they go through a re-certification process. 
There is also a random process that we have in our system which 
will randomly identify firms each year that we would do a 
program examination. In addition, we will also do program 
examinations where information has come to light.
    We also review protests, when another interested party 
questions the HUBZone eligibility of a firm, the SBA will 
review that protest to see if the firm is actually still 
eligible.
    Mr. Pascrell. In January 2003, the SBA inspector general 
found that there are inadequate mechanisms to move disqualified 
firms from the HUBZone list. Can you explain the removal 
process to us? Give us an idea of how long it takes? And what 
have you done to improve the situation that was brought to 
light by the SBA inspector general?
    Mr. Jenkins. Okay. We are currently in the process of 
reviewing the inspector general's findings.
    Mr. Pascrell. That was 3 years ago.
    Mr. Jenkins. Right, and looking at how we implement the 
requirements. The inspector general has recently issued a 
report to us as well. They have done a subsequent review of the 
program.
    Mr. Pascrell. So has GAO.
    Mr. Jenkins. Right. And there have been a number of 
improvements in the program in the sense of these kinds of 
processes that we go through now in terms of looking at the 
eligibility of these firms.
    Mr. Pascrell. Do you conduct site visits prior to any 
certification or re-certification?
    Mr. Jenkins. In normal cases, we do not.
    Mr. Pascrell. You do not?
    Mr. Jenkins. In this particular case, we did.
    Mr. Pascrell. What do you depend upon if you don't go to 
the site?
    Mr. Jenkins. We base it on the application, the information 
submitted by the applicant in terms of the residency of the 35 
percent of the employees, the actual location of the business.
    Mr. Pascrell. So basically you paper check?
    Mr. Jenkins. Paper check, with supporting documentation.
    Mr. Pascrell. So in other words, those folks have to prove 
and provide you the addresses of the people that are working 
for them to prove that the individuals live in that HUBZone or 
live in another HUBZone designated by the Small Business 
Bureau?
    Mr. Jenkins. That is correct.
    Mr. Pascrell. Is that correct?
    Mr. Jenkins. That is correct.
    Mr. Pascrell. And you did have an on-site inspection of 
Shirlington?
    Mr. Jenkins. Yes.
    Mr. Pascrell. When did that take place?
    Mr. Jenkins. This took place on April 7, the day before 
they were found to be eligible.
    Mr. Pascrell. Of this year?
    Mr. Jenkins. No, 2004.
    Mr. Pascrell. Have there been any other inspections, since 
this was the largest part of the contract of contracts that 
they have had in the past. Did you have anything since April of 
2004 up until now? Since the stories broke long before we had 
these hearings, what did you do after the stories broke, 
because you knew questions were going to come as to how these 
folks even got here, and then what they did since they got 
here. What did you do?
    Mr. Jenkins. Well, after we were given information that 
there were some concerns, of the information that the firm 
placed into the CCR system, whether or not they were actually a 
small business, we initiated a program examination. That is 
ongoing as we speak.
    Mr. Pascrell. The last time you had an on-site inspection 
was April of 2004.
    Mr. Jenkins. That is correct.
    Mr. Pascrell. Is that correct?
    Mr. Jenkins. That is correct.
    Mr. Pascrell. Thank you.
    Mr. Boshears, let me ask you this question first. Can you 
tell us why Shirlington received a Department of Homeland 
Security small business achievement award for meritorious 
service in 2005? You are aware of that, aren't you?
    Mr. Boshears. Yes, sir.
    Mr. Pascrell. Can you explain to the committee what 
happened and why they got that award?
    Mr. Boshears. We met with our entire small business team 
prior to the event and decided that we would have an event and 
how it would be structured.
    Mr. Pascrell. Before what event?
    Mr. Boshears. Before the small business awards ceremony 
event that you described.
    Mr. Pascrell. That is a yearly event?
    Mr. Boshears. Yes, sir. Well, we would like to make it a 
yearly event. Our first one was in April of 2005.
    Mr. Pascrell. So your first event in 2005, one of the 
honorees is Shirlington.
    Mr. Boshears. Yes, sir. That is correct.
    Mr. Pascrell. Would you explain to us the things that they 
did to get to that event, and then you gave them an award?
    Mr. Boshears. Yes, sir. We have eight major buying 
activities at the Department of Homeland Security, and we asked 
each of our buying activities to submit the names of two small 
businesses that have done a good job in their respective 
contracts.
    Mr. Pascrell. Would you explain that to me, what you are 
talking about, buying activities?
    Mr. Boshears. Oh, yes, sir. At the Department of Homeland 
Security, we are divided into eight major procurement shops. 
For example, the Coast Guard, the TSA, Transportation Security 
Administration, the Federal Law Enforcement Training Center, 
the U.S. Secret Service, Customs and Border Protection, 
Immigration Customs and Enforcement, ICE, FEMA, and the 
Department of Homeland Security headquarters procurement shop.
    So when say ``major buying activities,'' we mean those 
eight.
    Mr. Pascrell. Okay.
    Mr. Boshears. Then working with our network of small 
business specialists, we asked each of our buying activities to 
nominate two small businesses that had done a good job.
    Mr. Pascrell. So in other words, those recommendations came 
out of those divisions that you just mentioned?
    Mr. Boshears. Yes, sir. That is correct.
    Mr. Pascrell. Where did this recommendation come from?
    Mr. Boshears. This recommendation came from the 
headquarters procurement operations shop.
    Mr. Pascrell. Who is that?
    Mr. Boshears. Who is that?
    Mr. Pascrell. Yes, who is that? Who is the chief? Who is 
the administrator? Who is the director? Who is in charge?
    Mr. Boshears. At the time?
    Mr. Pascrell. Is that clear?
    Mr. Boshears. Yes, sir. At the time, it was headed by Mr. 
Mickey Jones.
    Mr. Pascrell. Who is he?
    Mr. Boshears. He was the director of that office.
    Mr. Pascrell. Is he a political appointment?
    Mr. Boshears. No, sir. He was a careerist, now retired.
    Mr. Pascrell. He recommended Shirlington for this award?
    Mr. Boshears. His subordinate, Ms. Carolyn Smith, made the 
recommendation.
    Mr. Pascrell. On what basis?
    Mr. Boshears. On the basis of the company's performance.
    Mr. Pascrell. Performance with regard to?
    Mr. Boshears. With regard to their work.
    Mr. Pascrell. Traveling throughout the Washington, D.C., 
area, bringing DHS people wherever they wanted to go.
    Mr. Boshears. Yes, sir.
    Mr. Pascrell. What did they do that merited them an award?
    Mr. Boshears. According to the nomination form, they 
provided outstanding customer service?
    Mr. Pascrell. You know what I am thinking, but go ahead.
    [Laughter.]
    Go ahead.
    Mr. Boshears. --on their contract with us, and then 
subsequently, we received two small business recommendations 
from each of these buying activities, for a total of 16 
companies, and Shirlington was one of the 16, and we hosted an 
awards ceremony in April of 2005 and that was how that came 
about.
    Mr. Pascrell. And they were presented the award. They 
showed up?
    Mr. Boshears. Yes, sir.
    Mr. Pascrell. They were there. They got the award, and now 
they are on even better terms.
    Mr. Boshears. Well, in terms of their contract performance, 
the recognition was that they had done a good job. Yes, sir.
    Mr. Pascrell. Okay.
    So I think, Mr. Chairman, I am sorry I went over my time, I 
think what we take a look at, I think we should take a look at 
the performance, since there is question. Maybe we are wrong. 
Maybe this was the right company. Maybe they have an 
outstanding performance record, and can take a look at outside 
reviews of this company and how they performed. And maybe all 
the other things we know about the company are fallacious. 
Maybe.
    And then I want to know, those people who made those 
decisions, whether they know any of these people, Mr. Wilkes or 
Mr. Wade, who are right in the center of the very scandal that 
the chairman talked about earlier. I think we need to bring 
this to the committee and I think, and I trust you that you 
will do that.
    Mr. Rogers. I thank the gentleman. In fact, a set of 
interrogatories went out yesterday asking about all those 
individuals and any connections. So when we receive our second 
set of responses to interrogatories, we will then look to see 
if we need to do a third round, and whether or not we need to 
bring Mr. Baker in. But I will say again, he has been very 
cooperative in answering all the questions we submitted.
    Now, I would go to the gentlelady from Texas, Ms. Jackson-
Lee, for any additional questions she may have.
    Ms. Jackson-Lee. Did you say I had 12 minutes or 15 
minutes?
    [Laughter.]
    Mr. Rogers. Five minutes.
    Ms. Jackson-Lee. The distinguished gentleman from New 
Jersey has asked a series of deliberate questioning that I 
think tracks the questioning of the full committee chair, and 
of course the ranking member of this subcommittee and the 
chairman.
    So let me say for the record that if there is a terrorist 
threat in this room, with the oversight responsibility that we 
have, Mr. Chairman and in the absence of the chairman of the 
full committee, I am requesting a closed classified session to 
discuss some of the issues raised by Chairman King.
    I agree with him that maybe legislative action needs to 
occur. But on the basis of an open session, we can't probe some 
of the not only murkiness, but the sheer ugliness of what may 
be in fact a terrorist, if you will, threat and/or, when I say 
``threat,'' undermining of important leadership.
    So I don't argue or quarrel with that. I think in this open 
oversight hearing, however, we have to distinctively cut the 
line on information that has, as I understand it, these 
individuals are under oath, come subsequently to the following 
of the rules. So I am going to pointedly ask, I have to move 
quickly, so I need quick answers.
    Mr. Jenkins, I have looked at your testimony each step of 
the way. You didn't interfere initially because there was no 
protest on their original filing. When there were protests, you 
looked at it. SBA followed their rules and subsequently 
determined there was no merit in the protest and proceeded on.
    Now, you are in a review and an audit and you are waiting 
on their response or they are waiting on your response. I think 
the materials are in. Is that correct?
    Mr. Jenkins. That is correct.
    Ms. Jackson-Lee. That is all I need. And you followed your 
basic regulations that you are governed in this current 
lifetime? Laws that the Congress gave you, and subsequent 
regulations that you abide by. Is that correct?
    Mr. Jenkins. Yes.
    Ms. Jackson-Lee. Okay.
    Ms. Duke, with respect to a lot of what the chairman has 
recounted about the CIA offices, et cetera, do you have any 
documentation to your knowledge, present in your possession, 
that speaks to these issues?
    Ms. Duke. No, I do not.
    Ms. Jackson-Lee. Okay. At the course of the selection of 
this individual, you believe you followed the rules?
    Ms. Duke. Yes, I do.
    Ms. Jackson-Lee. Okay. You understand our concern, however.
    Ms. Duke. Yes.
    Ms. Jackson-Lee. I will again put on the record that we rap 
sheets can tell a story, and I may yield to the idea that new 
criteria should go in for the ownership. What I would also 
argue is that there should be discretion when we talk about 
opportunities for small, disadvantaged and women-owned 
businesses, as we do for others, if that is the case.
    That these are factors and elements that you take into 
consideration, but there is at least some discretion if some 
hard-working person has overcome their early failings in life 
and they have made good, we certainly should, outside of 
fighting the Al Qaida and others, have that as an element if we 
write legislation, because right now what you are suggesting is 
you had no facts to argue differently, except a glaring rap 
sheet raises a question that then translates into action.
    Do you understand where we are going?
    Ms. Duke. Yes.
    Ms. Jackson-Lee. Okay. I just want to acknowledge that I 
understand that there was some comment about Howard University. 
I don't know their present status, but I understand that they 
had some complimentary things to say earlier about this owner. 
Is that not correct?
    Ms. Duke. Yes, that is correct. We called the contracting 
officer that had the contract for the first 3 years. She said 
that their performance was satisfactory and that the contract 
was taken away from her after 3 years, and things went down 
hill from there.
    Ms. Jackson-Lee. Let me throw these questions out so as the 
light turns red, I am okay.
    Mr. Boshears, you have just thrown some people into what we 
say in the neighborhood, ``in the grease'' by suggesting that 
this person helped them get an outstanding award. Do you have 
any materials in your possession that would speak to CIA agents 
undermining of security, et cetera, that that person who gave 
some credence to the performance of this subcontractor would 
cause them to have not given them a performance award?
    Hold your answer. Let me just say, Ms. Duke, you need to 
answer that. You had nine employees, I understand, when the 
decision was made in Shirlington, nine employees. You today 
have 92 in the procurement office. We need 127. It suggests to 
me that it is hard for you to do your job because you don't 
have the staff. Tie that to this final answer or question, and 
I am going to say on the record that we should be having 
hearings on the trailers that are still sitting in Arkansas and 
wondering why you gave that contract.
    We should be having hearings on why you have given very few 
contracts to New Orleans, Louisiana residents, and Texas 
residents. With a first-hand view that I had of a bid 
conference where people were very disappointed, 400 people 
there and you did nothing for them. And then you pushing off 
blame on the Army Corps of Engineers with failed contracts in 
Louisiana dealing with blue roofs, dealing with picking up 
trash, contracts that never got down to the local citizens. 
That is the procurement hearing that I hope that we will have 
that talks about a failed procurement system for small and 
medium, women-and minority-owned businesses.
    I yield to Mr. Boshears.
    Mr. Boshears. Yes, ma'am. In answer to your question about 
having any of that type of information, I do not.
    Ms. Jackson-Lee. And did not?
    Mr. Boshears. And did not.
    Ms. Jackson-Lee. All right. And so nothing you think is in 
your documentation on this situation that we should go into 
closed session on?
    Mr. Boshears. No, ma'am, I don't have any information that 
would indicate that.
    Ms. Jackson-Lee. You would present anything if you had it?
    Mr. Boshears. Oh, yes, ma'am. Certainly.
    Ms. Jackson-Lee. I suspect that you are under oath and you 
know that.
    Mr. Boshears. Yes, ma'am. Certainly.
    Ms. Jackson-Lee. Ms. Duke?
    Ms. Duke. Your numbers are correct on the Office of 
Procurement Operations. We have a vacancy, but we want to go to 
127. We have actually asked to go in fiscal year 2007 to 220 
people because of the very increasing workload in that office.
    Ms. Jackson-Lee. But underfundedness impacts on work 
product, does it not?
    Ms. Duke. It does.
    Ms. Jackson-Lee. All right. Do you want to talk about those 
last two points, the failed FEMA contracting down in the Gulf 
Coast Region.
    Ms. Duke. FEMA was in a similar situation staffing-wise. 
They had less than 40 people in FEMA contracts when Hurricane 
Katrina hit. And we are working towards that. We do have the 
new legislation on the local preference under the Stafford Act. 
It allows us to set aside business for local companies in 
disaster areas, rather than just have a preference. We really 
think that that, in addition to better planning, is going to 
allow us to respond better both quality-wise and getting 
business to the local companies quickly.
    Mr. Rogers. The gentlelady's time has expired.
    Ms. Jackson-Lee. I thank the chairman very much.
    Mr. Rogers. You are welcome.
    I want to pick back up where I was with you before our last 
series ended.
    The background checks, you don't do those on these officers 
and directors and owners. Would that be a desirable piece of 
information for you as a procurement officer to have available?
    Ms. Duke. I believe that knowing more is good. Right now, 
the regulations say that we are supposed to determine if there 
is a satisfactory record of integrity and business ethics. It 
defines it no further.
    When this regulation was put in place at the federal level, 
there was an attempt to define what ``integrity'' meant. It 
went out for public comment that way. It actually got involved 
in a court case and there was so much public comment that they 
struck it from the record. So it really puts a lot of undefined 
burden right now on the contracting officer to define 
``integrity.''
    Mr. Rogers. So you may need some policy changes from us to 
clear the way for that kind of search to be done and maybe 
delegated to a third party?
    Ms. Duke. I think that would be helpful if the public 
policy decision is that we should be more thorough now because 
of our current world situation.
    Mr. Rogers. I think the sentiments exhibited from this 
committee today is we should be more thorough in our due 
diligence, particularly in an important area like this.
    I would like to, the last question I will ask of you, and I 
know it is one you have been waiting for from me, is would it 
be more help to you if you had direct line authority over other 
procurement officers throughout DHS? Before that, do you 
currently have direct line authority over them?
    Ms. Duke. In one of the procurement shops, the headquarters 
one. The other seven I do not.
    Mr. Rogers. Would it be a help to eliminate these kind of 
problems if you could establish practices and procedures that 
you then had direct line authority to implement throughout the 
system?
    Ms. Duke. I do have the cooperation of the contracting 
shops, but it is more efficient, I believe, if I had direct 
line authority.
    Mr. Rogers. I thank you.
    Mr. Jenkins, I wanted to ask you about Shirlington's 
principal office. I understand it is located in the Lansburgh, 
in a luxury apartment building in northern D.C.'s Penn Quarter 
neighborhood. The first impression is that that doesn't seem to 
fit what we are trying to accomplish with HUBZone status. Am I 
accurate in that impression?
    Mr. Jenkins. Well, the HUBZones are defined by either the 
HUD Department or the Census Department or the Department of 
Labor. SBA basically takes those definitions and applies it to 
the HUBZone program. So we don't actually physically define it. 
Those locations are already defined.
    Mr. Rogers. But HUBZones generally are established to help 
under-economically developed areas grow with the help of 
government contracts.
    Mr. Jenkins. Yes.
    Mr. Rogers. So the fact that this company is in a luxury 
apartment building does strike me as odd. Apparently, you are 
saying that is not inconsistent with what your criteria area.
    Mr. Jenkins. Right. The criteria is a statutory criteria.
    Mr. Rogers. Okay. It is my understanding that SBA is 
currently conducting a program of review of Shirlington 
Limousine HUBZone status. What is the timeframe of the 
completion of that review?
    Mr. Jenkins. We hope shortly, hopefully within a week or 
so. We have all the information in now from Shirlington 
Limousine and we are actually processing that information.
    Mr. Rogers. You have heard me talk with Ms. Duke about the 
need for, in my view, to complete due diligence, to have these 
background checks on individual owners and/or officers and 
directors of companies before these designations are assigned. 
Do you believe that would be a benefit in your organization to 
have that information available?
    Mr. Jenkins. Yes, it could be helpful. Yes.
    Mr. Rogers. Okay. And do you do any of those things now? 
Any due diligence background checks on criminal or financial 
background of individuals other than just the corporate entity 
or the company entity?
    Mr. Jenkins. No, we do not do any background in terms of 
integrity of the owner of the business. We are limited to just 
those four eligibility criteria in statute.
    Mr. Rogers. Okay. Let me just throw this out to any one of 
you. What would be the overriding thing that you would like to 
see us change or see changed in the system that would prevent 
us having a problem like this one arise in the future?
    Not all at once.
    Ms. Duke. I do believe that recognizing the changing in our 
world environment. It is one thing following the regulations, 
which in great part we did on these procurements, but then 
recognizing that with world changes, terrorism, those type of 
things, that there might be a need to change or to alter our 
processes to match our dynamic environment.
    So I think that in the areas of security, rather than 
really the criminal piece, the security, the terrorism is of 
utmost concern to me.
    Mr. Rogers. Okay. Before I go to my other members for their 
final sets of questions, I do want to emphasize how much I 
appreciate how cooperative all of you have been. We are not 
meaning to beat up on you all. We are trying to beat up on the 
process that apparently allowed this contract to come into 
existence.
    More importantly, to determine what we can do to make sure 
it doesn't happen in the future. We can do better not only in 
this area, but in a lot of areas of DHS, and that is what we 
are striving for, and that is the whole purpose of this 
vigorous oversight. I do want you to know you all have been 
very cooperative. We have had several meetings. We intend to 
continue to meet on a staff level to do what we can do to help 
you do your job better.
    With that, I think I am being signaled. The gentleman from 
New Jersey?
    Mr. Pascrell. I was going to ask a question.
    Mr. Rogers. The ranking member is up for questions next.
    Mr. Pascrell. Can I clarify the record?
    Mr. Rogers. Yes, sir, you can.
    Mr. Pascrell. Thank you.
    [Laughter.]
    Mr. Chairman, you asked I think some very important 
questions. I just wanted to look back at the record. I want for 
my own clarification, and for all of our clarification. April 
7, 2004, the HUBZone staff performed a site visit at the 
principal office. Going to visit, staff met with senior 
principals of the firm; April 8, approved participation in the 
HUBZone program; April 27, they were awarded the HUBZone set-
aside.
    If that isn't peculiar, I don't know what is. And by the 
way, when you talk about a review of these companies, you know 
what the review consists of? The company does not have to 
disclose. They can show you whatever they want to show you in 
terms of the contracts that they want to show you, and they 
don't have to show you, they are under no obligation, Mr. 
Chairman, to show you all of their contracts. Am I not correct?
    Mr. Jenkins. We do not review contracts at all.
    Mr. Pascrell. This is a charade, regardless of how you 
spell it; regardless. You can't even make it look good. You 
can't even make it look good. And we are talking about 
Shirlington. We could be talking about 50 other companies, I am 
sure. That is the point I want to make today.
    Mr. Rogers. And it is a very valid point.
    The chair now recognizes the ranking member, Mr. Meek of 
Florida, for any additional questions he may have.
    Mr. Meek. Thank you, Mr. Chairman.
    Ms. Duke, I wanted to ask you, how many of those 
procurement officers that you have now are contract officers 
versus employees of DHS?
    Ms. Duke. In the contracting shop, the far majority are 
federal employees. We do have some contract support and I can 
get you those numbers. Those numbers do not include the 
contractor support, though, so the number we gave you was 
federal employees. Of those, not all are contracting officers, 
but I can get you the specific numbers and the number that are 
contracting officers.
    Mr. Meek. So the individuals that are letting DHS contract 
or working on the procurement or the evaluation of DHS 
contracts, would it be fair to say 30 of them are procurement 
officers or contract officers? Maybe 20?
    Ms. Duke. The one that ultimately signs the contract is 
always a contracting officer. Anyone that makes a decision is a 
federal employee. Our contract support does not make decisions 
in terms of selecting contractors or any other decision.
    Mr. Meek. Okay. When you say ``make a decision,'' let's say 
for instance contract support, which you are calling them, they 
go out and they do this ``4-month'' investigation, or what 
should happen, 4-month. And then they come to a DHS employee 
and the procurement officer works in your shop. And they look 
over that work and make a decision or what happens?
    Ms. Duke. That can happen. The far majority of the work is 
done by federal employees, though, and I can get you a ratio of 
the number of federal employees to the number of contractors. 
But contractors provide some support, but more administrative, 
more like you said, doing some of the legwork, but the majority 
of work is done by federal employees.
    Mr. Meek. I think, Mr. Chairman, what I may have to do, 
that I have done in the past, I have been out to the Nebraska 
office of the Department of Homeland Security, and I have said 
this before, Ms. Duke, I may need to go on a walkabout there in 
your office to kind of hear what people have to say, to see 
what they do. Because it is one thing for us to say: What are 
you all doing? Why aren't you doing this? Why aren't you doing 
that? And we have the power to do exactly. We don't have to ask 
you to do anything. We can pass it.
    Mr. Chairman, I believe without even calling the secretary 
of homeland security and asking him should we do what you call 
a ``full case'' investigation or full site investigation, that 
I believe you said the CIA does with their contracting, looking 
at everyone involved, everyone that has a business card in that 
company. That is not something that we must legislate on. The 
secretary can just say, hey, that is going to happen. And it 
will happen.
    Or we can file a piece of legislation, Article I, Section 1 
of the U.S. Constitution, pass it and say it should be done, 
with hopefully the help of the Senate and the president of the 
United States. I think what the American people are most 
frustrated with is the fact that this could happen, under all 
of this oversight, under all of this technology, for all the 
things that we talk about day in and day out about integrity 
and transparency. And there is not a secret, maybe I am by 
myself, that members of Congress don't write letters in 
support. And you have got them before, am I correct?
    Ms. Duke. Yes.
    Mr. Meek. And you probably have them sitting on your desk 
right now. If there is a hometown company that wants to do 
business with the Department of Homeland Security, with the 
Department of Defense, you name it, with the Department of 
Health and Human Services, they are going to get a letter from 
their local elected officials saying, from the mayor probably, 
that this is a good company and this is what they do.
    What I was hoping at this hearing, and some information I 
did pick up, and established a record with some of the 
questions that needed to be asked, for us to legislative to 
bring about change, change in the right direction. 
Comprehensive change as it relates to procurement is just 
something that is well overdue at the Department of Homeland 
Security. I am of the opinion that we shouldn't have to ask 
permission to put forth good legislation that will be able to 
help all of you as it relates to your jobs being carried out.
    So we are going to continue. In the record, I know the 
chairman is going to leave the record open for several days. 
Anything that any of you may have in support, because the 
chairman asked a burning question that I wanted to ask if you 
had any recommendations that we should follow up on. Sometimes 
it may be better outside of the committee room when you think 
about it, go back to the office and maybe talk with your 
colleagues about today's hearing, of some of those 
recommendations being forwarded to this committee because we 
will look at the procurement issue at the Department of 
Homeland Security and the input will be very, very helpful.
    I would, Ms. Duke, hope that we could work out with my 
staff and your staff a time that I can come out and possibly, 
you know, if the other members of the committee have time to 
come out to ask the questions, talk to the individuals that 
deal with this every day around the water keg, what would be 
best practices to help us.
    Like I said in the opening, it hurts me to be a part of 
this committee questioning a small disadvantaged business' 
integrity and performance when there are Fortune 100, Fortune 
50 companies that are involved in the federal dollar, that have 
wasted and stolen money from the taxpayers of the United States 
of America, and there is no question about it. There is no 
oversight and no one calls anyone. No one subpoenas anyone in 
Washington.
    So I am saying that by saying we want to make sure that we 
deal with this, but we hope through this process that we don't 
hurt small and disadvantaged businesses, veterans that come 
back from the war and open businesses, that they have the 
additional tier of scrutiny than the individuals that are being 
driven somewhere in New York City, no pun intended, and New 
York says, well, you are from Alabama. The chairman is gone. 
But being driven and looking at the stock reports as they move 
along.
    So I want to thank you for coming before the committee once 
again, Mr. Chairman, and I thank members of the panel.
    I yield back.
    Mr. Rogers. The gentleman yields back.
    The gentlelady from Texas is recognized.
    Ms. Jackson-Lee. I thank you very much.
    I wanted to, in light of where we are, simply echo what I 
heard from both the ranking member and the chairman of the 
subcommittee. As I indicated to the distinguished gentleman 
from New Jersey and the distinguished gentleman from New York, 
I want to make an official request to bring the secretary of 
homeland security, who has as you have noted as willingly 
appeared before this committee.
    I would make a secondary request that if necessary, because 
of some of the intelligence that has been garnered in whatever 
manner it has, that it be a classified meeting, closed meeting. 
I say that because I agree with Mr. Meek that we need to 
distinguish the value of historically utilized business, small 
and disadvantaged businesses, and veterans and others where we 
have tried to spread the American dream from our fiduciary 
responsibility of getting at the truth.
    That was my point that I was making. So I think it is 
important that we hear about the CIA and untoward activity and 
any compromising of our staff, making very particular 
decisions. At the same time, I am going to raise this question. 
Mr. Chairman, let me just put these in the record for these 
individuals to provide answers back.
    Mr. Boshears, you need to be, if you might, a little more 
pointed and direct on the role of your office. Maybe people 
don't understand it, and what you have been doing to outreach 
to small and disadvantaged businesses, because I can assure 
you, as we travel across America, people are, Alabama, Florida, 
Texas, are outraged because they don't think they are getting a 
fair hearing.
    I will say this on the record because maybe this will help 
me. It might hurt me. As a member of Congress, I seek no 
influence, but I am going to encourage my small and medium-size 
and other businesses, women-owned businesses, disadvantaged, to 
go forth. I am going to say to X, Y and Z, this is a good 
person. You will then have to perceive whether I have any stake 
or anything. I would hope that at all times you will find that 
there is no pecuniary interest whatsoever. But I am going to 
represent my constituents.
    So you need to give that answer. Ms. Duke, you need to tell 
us whether, as you have acknowledged, the underfunding and the 
understaffing and maybe trying to do it, whether these 
deficiencies or what deficiencies do you believe exist in the 
procurement system. Because if we are going to be good, if you 
will, custodians of this agency, then you need to give us a 
sense of what are your deficiencies.
    It seems like you have it, because you operate in the 
rules, and we are here expressing outrage. And specifically, 
what deficiencies exist that can be fixed with the appropriate 
level of funding.
    My last submission to the record is to say that I am going 
to particularly ask for answers. It may be a little expanded, 
but particularly ask for answers on your relationship, and you 
are on DHS, but your relationship between FEMA and the Army 
Corps. You have new change rules now. You are talking about 
contracting with local and state governments, as opposed to 
individual contractors. That is probably going to hurt a lot of 
small folk as well.
    But just get a report back through FEMA, through you, on 
this existing field of trailers and the relationship between 
the Army Corps and FEMA and your DHS. So I just, as it relates 
to those sore points in New Orleans, big contracts to big guys, 
layering contracts where the big guys are getting primetime, 
the $28 to $30 per cubic yard for debris removal, which is what 
these little cities and parishes were complaining about. And 
then you layer it down to the small guys getting $6 to $10 per 
cubic yard.
    It just looks like a big scandal to us, and the small guys 
are barely surviving; spending $3 million for 4,000 base camp 
beds that were never used; $33.3 million for security services 
at a rate of $950 per staff day; $10 million to renovate rooms 
in a military barracks that are only used to house six people; 
entering into a $236 million lease for cruise ships that were 
never fully occupied by evacuees; and failing to properly 
invest $66 million that was donated by foreign governments, 
thus losing $2.5 million in interest.
    These are procurement or investment or contracting issues 
that may be long down the road, but I am going to ask for, if 
you will, answers on this. I simply conclude to say to you, I, 
too, thank you for your service. I thank you for a small 
business program because there are countless Americans, 
millions, who are experiencing the American dream because of 
it. We will give you the tools. You give us the truth. If we 
can't get the truth in an open public hearing, then we need to 
get the truth in a closed classified hearing so that any 
terrorist that thinks they can undermine us through a small 
business program will have something coming to them.
    But right now, I am not going to malign the program based 
upon inadequate procedures. I thank my good friends and hope 
that we will continue the great work of this committee, two 
great leaders, and the chairman and the ranking member of the 
subcommittee.
    I yield back.
    Mr. Rogers. I thank the gentlelady.
    Again, I want to remind the panelists that the record will 
be left open for 10 days. I know that I have some additional 
questions that we will be submitting to you. I would ask that 
you respond to those in writing. I am sure some of the other 
members will probably have some additional questions as well.
    Thank you again for your participation.
    And, with that, we are in adjournment.
    [Whereupon, at 2:03 p.m., the subcommittee was adjourned.]