[House Hearing, 109 Congress]
[From the U.S. Government Publishing 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
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
__________
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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
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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.
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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.]