[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                    FULL COMMITTEE FIELD HEARING ON
                    PARTICIPATION OF SMALL BUSINESS
                IN HURRICANE KATRINA RECOVERY CONTRACTS

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 12, 2007

                               __________

                          Serial Number 110-14

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


JUANITA MILLENDER-McDONALD,          STEVE CHABOT, Ohio, Ranking Member
California                           ROSCOE BARTLETT, Maryland
WILLIAM JEFFERSON, Louisiana         SAM GRAVES, Missouri
HEATH SHULER, North Carolina         TODD AKIN, Missouri
CHARLIE GONZALEZ, Texas              BILL SHUSTER, Pennsylvania
RICK LARSEN, Washington              MARILYN MUSGRAVE, Colorado
RAUL GRIJALVA, Arizona               STEVE KING, Iowa
MICHAEL MICHAUD, Maine               JEFF FORTENBERRY, Nebraska
MELISSA BEAN, Illinois               LYNN WESTMORELAND, Georgia
HENRY CUELLAR, Texas                 LOUIE GOHMERT, Texas
DAN LIPINSKI, Illinois               DEAN HELLER, Nevada
GWEN MOORE, Wisconsin                DAVID DAVIS, Tennessee
JASON ALTMIRE, Pennsylvania          MARY FALLIN, Oklahoma
BRUCE BRALEY, Iowa                   VERN BUCHANAN, Florida
YVETTE CLARKE, New York              JIM JORDAN, Ohio
BRAD ELLSWORTH, Indiana
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


WILLIAM JEFFERSON, Louisiana         DAVID DAVIS, Tennessee, Ranking
HENRY CUELLAR, Texas                 ROSCOE BARTLETT, Maryland
GWEN MOORE, Wisconsin                SAM GRAVES, Missouri
YVETTE CLARKE, New York              TODD AKIN, Missouri
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  
?

           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


WILLIAM JEFFERSON, Louisiana         LYNN WESTMORELAND, Georgia, 
RICK LARSEN, Washington              Ranking
DAN LIPINSKI, Illinois               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               STEVE KING, Iowa
GWEN MOORE, Wisconsin                MARILYN MUSGRAVE, Colorado
JASON ALTMIRE, Pennsylvania          MARY FALLIN, Oklahoma
JOE SESTAK, Pennsylvania             VERN BUCHANAN, Florida
                                     JIM JORDAN, Ohio

                                 ______

            Subcommittee on Urban and Rural Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DEAN HELLER, Nevada
HANK JOHNSON, Georgia                DAVID DAVIS, Tennessee

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


JUANITA MILLENDER-McDONALD,          LOUIE GOHMERT, Texas, Ranking
California                           LYNN WESTMORELAND, Georgia
CHARLIE GONZALEZ, Texas
RAUL GRIJALVA, Arizona

                                 (iii)

  
?

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Westmoreland, Hon. Lynn..........................................     3
Jefferson, Hon. William..........................................     4
Melancon, Hon. Charlie...........................................     6

                               WITNESSES


PANEL I
Preston, Hon. Steven C., U.S. Small Business Administration......     8
Doan, Hon. Lurita, General Services Administration...............    10
Strock, Hon. Lt. Gen. Carl A., U.S. Army Corps of Engineers......    13
Schneider, Hon. Paul, U.S. Department of Homeland Security.......    15
Finley, Hon. Dr. James I., U.S. Department of Defense............    17
Dunne, Hon. Admiral Patrick, U.S. Department of Veterans Affairs.    19


PANEL II
Shear, William, Government Accountability Office.................    44
Dreyer, Ian Alexander, Perez APC.................................    46
Jones, Edwin, EJES, Inc..........................................    47
Pequeno, Ricardo, Mid-South Plumbing.............................    49
Priestley, Charles, Hummingbird Aviation, LLC....................    50

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    63
Westmoreland, Hon. Lynn..........................................    65
Melancon, Hon. Charlie...........................................    69
Preston, Hon. Steven C., U.S. Small Business Administration......    71
Doan, Hon. Lurita, General Services Administration...............    75
Strock, Hon. Lt. Gen. Carl A., U.S. Army Corps of Engineers......    85
Schneider, Hon. Paul, U.S. Department of Homeland Security.......    90
Finley, Hon. Dr. James I., U.S. Department of Defense............    98
Dunne, Hon. Admiral Patrick, U.S. Department of Veterans Affairs.   105
Shear, William, U.S. Government Accountability Office............   108
Dreyer, Ian Alexander, Perez APC.................................   124
Jones, Edwin, EJES, Inc..........................................   126
Pequeno, Ricardo, Mid-South Plumbing.............................   128
Edmonds, Kenneth, River Parish RVs...............................   130
Priestley, Charles, Hummingbird Aviation, LLC....................   132

                                  (v)

  


                    FULL COMMITTEE FIELD HEARING ON
                    PARTICIPATION OF SMALL BUSINESS
                IN HURRICANE KATRINA RECOVERY CONTRACTS

                              ----------                              


                        THURSDAY, APRIL 12, 2007

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    New Orleans, LA
    The Committee met, pursuant to call, at 2:00 p.m., at the 
Louisiana Supreme Court, 400 Royal Street, New Orleans, 
Louisiana, Hon. Nydia M. Velazquez [Chairwoman of the 
Committee] Presiding.
    Present: Representatives Velazquez, Jefferson, and 
Westmoreland.
    Also Present: Representative Melancon.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    ChairwomanVelazquez. The House Small Business Committee is 
called to order. First, let me thank everyone for being here 
today. It has been 18 months since this nation witnessed one of 
our country's largest natural disasters, Hurricane Katrina.
    We have never seen a more resilient community, people 
coming together to rebuild their neighborhoods on these vibrant 
streets. This is an important hearing to hold in a city whose 
very foundation is built on small business and the 
entrepreneurial spirit.
    There is no question that we still have a long way to go in 
repairing and rebuilding New Orleans. And the Federal 
Government must be a partner in this process. This path for 
many of these entrepreneurs has been delayed by massive 
backlogs, paperwork, and lengthy application processes.
    Last month, this committee passed the Recovery Act of 2007 
creating a grant program to help local businesses that were 
declined a disaster loan. It also addresses the Federal 
Government taking Road Home grants away from entrepreneurs 
ensuring entrepreneurs will finally have the assistance they 
need to get their businesses back on track.
    The focus of today's hearing is to make sure that as we 
move forward, small businesses are not left out of the 
rebuilding process. Early indications are that the Federal 
Government is not where it should be.
    Of the contracts that have been awarded, so far only 7 
percent, and I repeat, 7 percent have gone to local 
entrepreneurs. And for those small businesses fortunate enough 
to get work, over half of these contracts were less than 
$100,000.
    This is clearly unacceptable and undervalues the 
contributions and capabilities of these local firms. Sadly, the 
outlook has been even worse for minority entrepreneurs who have 
been more underrepresented in the rebuilding process receiving 
only 4 percent of the contracts.
    Given the significant role minority entrepreneurs play, 
particularly here in Louisiana, it only makes sense that 
minority businesses are at the center of rebuilding their own 
communities.
    To begin addressing this problem, the committee has passed 
H.R. 1468, the Disadvantage Business Disaster Eligibility Act 
introduced by representative William Jefferson, giving minority 
contractors more flexibility as they recover from Hurricane 
Katrina.
    This is a first step, but by no means an end to when it 
comes to this committee work to meet the needs of the minority 
business community.
    Shortly after Katrina hit, President Bush stood just a few 
blocks from here and said, and I quote, "As all of us saw on 
television, there is also some deep persistent poverty in this 
region as well. We have a duty to confront this poverty with 
bold action. When the streets are rebuilt, there should be many 
new businesses including minority-owned businesses along those 
streets," end of quote.
    If we fail to follow up on this commitment, it will be 
nothing more than empty rhetoric, which is why today we will 
hear from the heads of six agencies who represent over 95 
percent of the total spending as part of the Katrina relief 
effort. We will also hear from small businesses about their 
experiences in securing Federal contracts in the recovery 
process. It is the goal of the committee to examine the efforts 
of the agencies represented and to ensure that local 
entrepreneurs are given adequate opportunities for Federal 
work.
    More than 110,000 small businesses were destroyed or 
severely impacted by Hurricane Katrina. As we all know, the 
impact was enormous destroying houses, businesses, critical 
infrastructure adorning this historic city.
    Clearly it demands a response of the same proportion. That 
includes doing everything possible to ensure that local small 
businesses have the opportunity to rebuild their own 
communities and the Gulf Coast economy.
    Many small businesses are willing and able to perform these 
contracts. They are not asking for handouts here. The truth is 
that these local firms know this area and they know what it 
needs to get it back on track.
    It is important to acknowledge that we can stimulate the 
economy in small business growth by strategically using debt 
revitalization process of this city.
    For the past year and a half, we have seen a lack of action 
from our Federal Government. Today's hearing is not going to be 
a one-time event.
    The agencies that are present here today will be expected 
to live up to their commitments and responsibilities. This is 
not a matter of coming here and saying one thing and then 
leaving and doing another.
    We will continue to hold these agencies accountable for 
ensuring local small businesses are included in the rebuilding 
of this valuable community.
    I thank you, and I look forward to hearing the testimony of 
today's witnesses.
    And I now recognize Congress Member Westmoreland, ranking 
member of the subcommittee on regulations and health and also 
his feeling toward Ranking Member Steve Chabot.

             OPENING STATEMENT OF MR. WESTOMRELAND

    Mr.Westmoreland. Thank you, Madam Chairwoman, and thank you 
for holding this important hearing today to discuss the 
participation of small businesses in the Hurricane Katrina 
recovery effort.
    It's my honor to be here on behalf of Ranking Member 
Chabot. I sincerely appreciate the opportunity to come to this 
great City of New Orleans as I have many times before, but this 
time to examine the topic of a devastating effect that happened 
here in 2005.
    As we have all seen and heard, the Gulf Coast region was 
absolutely devastated by this unprecedented storm that hit here 
in 2005. These disasters will long be remembered for disrupting 
families, changing and ending lives, and enforcing Americans to 
rethink our vulnerability to Mother Nature's wrath.
    Over 1,800 lives lost and countless billions of property 
and infrastructure losses. Nobody can deny that this natural 
disaster will forever change our assumptions of what we should 
be ready for when disaster strikes.
    We will never forget these images, but today we want to 
focus on something bigger and decidedly better that has come 
from this tragedy. The inevitable American spirit to take the 
hand that it is given and make it into something greater.
    Immediately following the hurricanes, countless Americans 
offered charitable assistance to the Gulf Coast region sending 
funds, food, and necessities and in many cases themselves in 
order to help the survivors begin rebuilding their communities 
and their lives.
    American small businesses have played an integral part in 
these events. Small mom and pop shops ship their wares to the 
areas as part of the massive outpouring of charity.
    Small business owners gave their employees time off to 
travel to the area and assist in the clean up. And donated 
millions of dollars in relief to the aid and to the American 
Red Cross and numerous other charitable organizations.
    Small businesses can and will have a major impact in the 
rebuilding effort, as well through the Federal contracting 
system. The supreme goal of the infrastructure and 
reconstruction in this area is to rebuild this city and the 
entire Gulf Coast as quickly and efficiently as possible in 
order to provide these citizens with a safe and stable home to 
live in, to have places to go to work and to worship and to get 
their children back in local schools.
    Because of the size and scope of this reconstruction, there 
are many advantages for the Federal Government to seek out 
opportunities to work with the small businesses.
    For example, their ability to innovate and find new niches 
that their larger counterparts cannot allow the flexibility in 
addressing these problems.
    Additionally and perhaps more importantly, Madam 
Chairwoman, small businesses are job creators. Awarding 
contracts to exiting and new local small businesses invigorates 
the local economy providing jobs for displaced New Orleans, 
income and potentially health benefits for their families and a 
renewed sense of stability and community that has made this 
area such a strong contributor to our nation's prosperity in 
the past.
    Historically, small businesses in the U.S. has received a 
share of Federal procurement dollars, not quite in the size 
that is relatively important in the U.S. economy.
    While 99.7 percent of all employer firms are small, they 
receive about 23 percent of direct Federal procurements and 
close to 40 percent in subcontracting dollars. The Federal 
Government must do a better job to ensure that the Federal 
marketplace is open to any and all companies that can do the 
task at hand. Of course, that includes our nation's small 
business community.
    Madam Chairwoman, I want to thank you again for holding 
this hearing. I want to thank Congressman Jefferson and his 
efforts towards this relief and reconstruction, and I look 
forward to hearing from our distinguished panel today in 
working with you and others to address this important issue.
    And Madam Chairwoman, I yield back the balance of my time.
    ChairwomanVelazquez. Thank you. And now I recognize the 
member of the Small Business Committee Mr. William Jefferson 
and also - this is your district, right?
    Mr.Jefferson. Yes, ma'am.
    ChairwomanVelazquez. Mr. Jefferson has been very helpful in 
providing legislative alternatives and actions in Congress to 
help provide relief for small businesses in this area, 
particularly minority businesses.

               OPENING STATEMENT OF MR. JEFFERSON

    Mr. Jefferson, you are recognized.
    Mr.Jefferson. Thank you, Madam Chairlady. I want to welcome 
you to our city and to our region. And to thank you for 
bringing the Small Business Committee here. I want to thank Mr. 
Westmoreland. I understand it's not his first trip here. He's 
come before, just after the storm and he's been deeply 
interested in this area as well. So I thank him again for his 
return and the committee for its visit. I--we often say that 
the overarching question here with respect to our recovery is 
recovery by whom; that is to say--I'm sorry, recovery for whom; 
that is to say everyone who was here before the storm, is this 
recovery going to be for them, for all of them and not just for 
a few who were left here on high ground. And recovery by whom 
meaning, will our people have a chance to recover their city or 
will it be done by folks from the outside or folks who don't 
really bring a whole lot to restore our economy, but who take 
the money away and don't believe in lasting recovery for us.
    And my objective is to make sure the recovery is for the 
people who were here before the storm and by the folks who were 
here before the storm to the extent possible.
    And that's what I think all of this is about. I would like 
to also thank the witnesses who are here and welcome them to 
the region. Many have been here before, I know. And some have 
not. I understand that one actually lived in the Lower 9th 
Ward, and you will hear about that, I'm sure, in a little bit.
    But we've encountered many problems since the storm struck, 
and not the least of these have been our problems, small 
businesses have been overwhelmed, not only by the physical 
damage caused by the storm and by the levee breaches, but also 
by the inept policies, poor excuse strategies, and in many 
cases just being locked out of the Federal contracting 
processes after the storm.
    The storm left 80 percent of New Orleans under water for 
well over two months leaving 110,000 businesses--as our 
Chairlady has said, 80,000 of those in New Orleans--I'm sorry, 
in the State of Louisiana--businesses damaged and destroyed in 
the wake of the storms. 97 percent of which were small 
businesses that were left shut and unable to recover from their 
losses.
    We are relying on General Strock and the Corps to get it 
right this time. We have no choice. And I'm sure with all of 
the attention they are paying and others are paying to it, that 
it will get done.
    But for many of us, we know that the storm, itself, was not 
the immediate cause of the drowning of the city. The more 
immediate cause was the breach of the levees, and we take that 
as a Federal responsibility that didn't get done properly; and, 
then, therefore, we think there's more of an obligation on the 
part of the Federal Government to help restore us.
    And it ordinarily would be the case where we might just 
say, Well, we had bad luck here; and we just want to have the 
government help us out, in some humanitarian way reach out to 
us. But here we think it's more substantial than that because 
of what happened with the levees.
    The events that followed after the storm have made the road 
to recovery that much more difficult, especially for local 
contractors looking to have a hand in rebuilding their 
communities.
    In the time just following the storm, 90 percent of the 2 
billion dollars in initial contracts were awarded to companies 
based outside of the three primary affected states and to large 
concerns.
    Minority businesses took an even harder hit as they 
received just 1.5 percent of the first 1.6 billion dollars 
spent here. Women-owned businesses received even less. This was 
the outcome in spite of laws such as the Stafford Act, which 
required contracting officials to prioritize towards local 
businesses and to reach a goal of 5 percent of the contracts to 
minority-owned businesses.
    Davis Bacon was also temporarily suspended opening the door 
up for low-wage workers to take work away from our local firms. 
A prime example of the struggle that local contractors have 
faced is that of the Knight Enterprises, LLP, a New Orleans 
minority firm owned by Mr. Al Knight. Mr. Knight had a contract 
to wire Louisiana storm damaged Alvin Callender Naval Air 
Station. It was abruptly canceled, lost to a larger national 
firm putting his workers, primarily African American workers, 
out of work.
    The firm that ultimately received the contract to complete 
the work was BE&K out of Alabama and lower-wage workers without 
benefits. BE&K was working for Kellogg, Brown, and Root, a 
subsidiary of Halliburton Company.
    And I would ask unanimous consent, Madam Chair, for this, 
the record of The Wall Street--I'm sorry, Washington Post be 
inserted into the record, dated October 7, which chronicles 
this one horror story, which unfortunately is not--it's just 
one of the many.
    I want to mention something else that's been happening with 
our contractors here. I know my time has rapidly expired, but I 
just want to mention this if I might have another little time, 
Madam Chair.
    We've had--one of the major things, I hope you-all think 
through, is minority contractors and others and women, small 
women-owned businesses are winning contracts because--and they 
decide on how they want to bid--expenses for one aspect of the 
contract let's say for deactivation, they may bid it low; for 
maintenance, they bid high. Overall though, the thing wins 
because overall it's lower than the other bidders.
    And after that, there are reviews that take place. And the 
reviews say, goodness, in this one area where you have these 
high numbers, we can do better than this; let's redo this.
    And, in effect, they come back and take the contracts away 
from folks who won them in fair and square bids before. And 
they're just tearing them apart as they go along, and it's 
making it awfully hard to get this done.
    One of the biggest issues that I hope we will talk about 
also is this issue of bundling today. I don't know whether you 
call it bundling or something else. But they are making the 
contracts so large until small businesses can't reach them.
    And there are two problems with that. Number one, they 
don't have the capacity to reach them. And, Number two, when 
they get so large, they can't meet the bonding requirement. And 
they are being shut out in that way as well. And I hope we find 
some way to address these concerns.
    I want to say one last thing, Madam Chairwoman, if I might, 
on behalf of our local small business folks, they're doing an 
excellent job trying to do what they can, but they are sorely 
undermanned.
    In fact, four or five years ago, we had 30 people in our 
small business state office down here, and now we have nine. 
How in the world can we stage a recovery here with so much at 
stake, so much for the SBA to do without having the requisite 
number of folks.
    And nobody has asked me for an office to make this 
argument. I'm just saying, if we are going to be real about 
this, we really have to have this agency have what it needs to 
oversee this recovery, Mr. Preston. Somehow we've got to fix 
this problem for them.
    I'd just yield back--I don't have any time to yield back. 
But I thank the Chairlady for letting me go on past my time, 
and we'll have a lot to talk about here today, and I appreciate 
it.
    ChairwomanVelazquez. Thank you.
    And now I recognize Congress Member Charlie Melancon, whose 
district was devastated by Hurricane Katrina. And I just want 
to acknowledge the hard work and how instrumental Mr. Melancon 
has been in helping us draft legislation that has occurred in 
helping small businesses in this region.

               OPENING STATEMENT OF MR. MELANCON

    Mr.Melancon. Thank you, Madam Chairwoman, I appreciate it. 
First, I would like to thank Chairwoman Velazquez, and I'm 
sorry Mr. Chabot is not here, but, Mr. Westmoreland, thank you 
for taking the time to come to New Orleans and Louisiana, for 
their continuing commitment to helping us rebuild the Gulf 
Coast.
    Over a year and a half has passed since Hurricanes Katrina 
and Rita have devastated South Louisiana and the Gulf Coast 
area. I'm pleased my colleagues remain committed to seeing us 
fully recover and rebuild.
    I'd also like to join my colleagues in welcoming the local 
small business owners that have come here today to tell their 
stories. I know you are tired and you are frustrated, but I 
appreciate you taking the time to come here and testify about 
your experience since the storms.
    I also understand that you're tired of talk and that you 
want action and we do too.
    These hearings are our way of letting Congress know how to 
help remedy the current problems that still persist on the 
ground and also how to prevent the same problems from happening 
in the future to other homeowners, business owners, and non-
profit organizations and individuals.
    You survived two of the worst natural disasters in our 
nation's history. And then on the heels of those hurricanes you 
faced a manmade disaster, one of the most disorganized and 
chaotic Federal responses in the history of this country.
    Many of these Federal agencies that were created to help 
you recover wound up making matters worse. And this is 
inexcusable. Today we will put a spotlight on one of these 
instances in which the Federal Government's response was 
hurtful rather than helpful.
    After Katrina, there were millions if not billions of 
dollars worth of disaster work that needed to be done. 
Everything from debris removed to maintaining FEMA trailers to 
supplying and delivering emergency supplies across the Gulf 
Coast.
    Many of these contracts were awarded to out-of-state 
businesses rather than the local businesses who were victims of 
the storm, the people who needed to work the most.
    Small business owners that were struggling to survive after 
the storm had to watch on the sidelines as large contractors 
came from out of state and performed the recovery work that the 
locals could have also shared in.
    Many local business people and skilled workers who had 
already lost their homes, but were still hoping to find work 
were replaced by undocumented workers, by contractors looking 
to make more money.
    I have a situation in St. Bernard Parish, and I understand 
it also exists in several other parishes where parishes 
contracted their own debris removal. It is just abysmal that 
these people have not been paid. It is outrageous. And every 
time we do a meeting, we get promises; and that's all we've 
gotten. Our people that did get some work need to be paid just 
as other people from out of state got paid.
    I hope this hearing today will not only shed the light on 
what went wrong, but also ensure that this serious problem 
doesn't continue. Small businesses are the lifeblood of 
Southeast Louisiana's economy. And for that matter, it's the 
lifeblood of this country. To continue denying them the 
opportunity to get their businesses back up and running is 
hindering the Gulf Coast recovery. And this is totally 
unacceptable.
    Again, thank you to the Committee for holding this hearing 
today and continuing Congress's focus and attention on 
rebuilding the Gulf Coast. Thank you, Ma'am, I yield back my 
time.
    ChairwomanVelazquez. And now I welcome the first panel. And 
our first witness is the Honorable Steven Preston. He's the 
administrator of the U.S. Small Business Administration. This 
is his third appearance before the committee for Mr. Preston 
who was confirmed in July.
    Welcome. And normally we allow for a five-minute 
presentation. I'm going to be a little more flexible today. And 
I will use my gavel if you are taking too much time. But I just 
want for you not to rush.
    As you-all know, it is important for us to be able to allow 
for you to make a presentation as to all of the things that you 
are doing in making sure that we provide the assistance and 
recognize the role that local small businesses can do in the 
rebuilding of the Gulf Coast.
    Mr. Preston.

STATEMENT OF THE HONORABLE STEVEN PRESTON, ADMINISTRATOR, U.S. 
                 SMALL BUSINESS ADMINISTRATION

    Mr.Preston. All right. Thank you very much, Chairwoman 
Velazquez. Also Congressman Westmoreland, Congressman Jefferson 
and Melancon, thank you very much for having me here to testify 
before you.
    In the reconstruction of the Gulf today, small business 
participation has been about 29 percent of the more than $15 1/
2 billion that's been awarded.
    Of those amounts, about 7.9 percent has gone to small, 
disadvantaged businesses. I know the committee is also 
interested the performance of the Federal Government in 
contracting with local businesses as you've mentioned.
    According to our preliminary data, local businesses of all 
sizes in Alabama, Louisiana, and Mississippi have received 
approximately 22 percent or about 3.4 billion of that 15 1/2 
billion in contracts. And of that amount, the 3.4, about 57 
percent has gone to small, local businesses.
    Here in New Orleans, 58 percent of our district office 
portfolio of 8(a) firms has actually received government 
contracts. We at the SBA are committed to making sure that 
small businesses receive a fair opportunity in reconstruction 
efforts. After Katrina, SBA devoted five procurement center 
representatives specifically to work with Federal agencies 
contracting and subcontracting opportunities for firms in the 
Gulf region.
    All other PCRs nationwide were directed to search for small 
business contracting opportunities. We sent our district 
director from Chicago Judith Roussel with a long New Orleans 
history. She's a native down here. A former head of our 8(a) 
program of our government contracting programs. We brought her 
down here to support the effort because of the extent of it. We 
also partnered with the Department of Commerce and other 
agencies to establish the hurricane contracting information 
center, which is a portal for small businesses to access 
assistance and contract information from various contracting 
agencies.
    The HCIC contracting specialists took thousands of calls. 
The web site got nearly 57,000 hits. The operation of that has 
now been turned over to the SBA, and we will use that to 
support us in future disasters. We also adapted our business 
matchmaking initiative in conducting a six city mobile 
registration tour in the Gulf. That mobile tour provided help 
for small businesses with electronic registration in the 
central contractor registry and business counseling was also 
provided by the SBA resource partners through the SBDC and 
SCORE network.
    Following the registration events, our PCRs worked with 
over 700 small businesses to match capabilities of the firms 
with the needs of the procurement activities.
    Those registered small businesses have receive more than 
650 million in contracts and their profiles have been uploaded 
to the GSA's electronic notification system for procurement 
opportunities.
    We've held small business matchmaking sessions with many of 
the major agencies. We've held dozens of small business 
outreach events in coordination with state and local and 
Federal groups, which have been extremely well-attended.
    And as I've shared my written testimony, in the interest of 
time, I won't get into it. We have many success stories to 
highlight.
    In addition to prime contracts, obviously subcontracting 
puts much needed dollars in the hands of local small businesses 
in the Gulf. The SBA worked extensively with the minority 
business councils, New Orleans Youth for Prosperity, and other 
groups to locate other small businesses here in New Orleans and 
in Mississippi to support the subcontracting needs.
    I personally entered my ninth month in the job this week. I 
have personally made disaster recovery a top priority for me. 
Since I've come into the job, this is my ninth trip to the 
Gulf.
    Since my nomination, I've met with many leaders at the 
state, the local and congressional level. I've held homeowner 
and business outreach forums, participated in numerable 
outreach events and have taken much of that very, very valuable 
feedback I've gotten and implemented changes in the agency to 
address those concerns.
    At the height of our recovery effort we had approximately 
100 disaster centers operating down here to support disaster 
victims. And our overall staff in the Gulf last year exceeded 
1,600 people. That was mostly for our disaster loan program.
    But we've also trained and counseled over 20,000 people in 
Mississippi and Louisiana through our resource partners last 
year alone. We also guaranteed over 200 million in small 
business loans last year alone in addition to the disaster 
loans that we put out there.
    And we also think that because of the work we're doing that 
2007 could be a record year for the SBA in guaranteed business 
lending here in the New Orleans district.
    The agency is committed to utilizing all of our programs to 
help the Gulf Coast recover. We've disbursed approximately 1.2 
billion in physical and economic disaster loans to small 
businesses throughout the Gulf Coast in addition to more than 
4.3 billion to homeowners.
    We'll also build on these kinds of successes to expand 
small business Federal contracting opportunities.
    Going forward, assisting small businesses can be absolutely 
critical for us in this area. We'll work with small businesses 
to develop forward marketing strategies, for example, 
protecting financial information after a disaster and planning 
for possible future events not only in this region but other 
regions in the country. We will be working with our district 
offices and our resource partners to coordinate matchmaking and 
registration and training events to increase small business 
contracting opportunities; and we'll also continue to use, 
should anything in the future happen, the hurricane contracting 
information center as an important source of coordination.
    We continually work with GSA and a number of the other 
agencies to establish up-to-date sourcing list for small 
businesses and we're building upon all of this progress in 
small business contracting and subcontracting awards that we've 
seen here in the Gulf Coast.
    While small business goals do apply to government 
contracting as a whole, we and the other Federal agencies 
recognize their importance especially along with their other 
responsibilities under the Stafford Act as a guide for 
accomplishment in disaster recovery.
    So Chairwoman Velazquez, thank you very much for your time, 
and I look forward to your questions.
    [The statement of Mr. Preston may be found in the Appendix, 
on page 71.]
    ChairwomanVelazquez. Thank you, Mr. Preston. Now we have 
the Honorable Lurita Doan. Ms. Doan was sworn in as the 
Administrator of General services in May 2006.
    Welcome.

  STATEMENT OF THE HONORABLE LURITA DOAN, ADMINISTRATOR, U.S. 
                GENERAL SERVICES ADMINISTRATION

    Ms.Doan. Thank you, Chairwoman Velazquez, Congressman 
Jefferson, and Congressman Melancon, and Congressman 
Westmoreland. It's a pleasure to be back in my hometown of New 
Orleans and it's a privilege to testify before this committee 
on such an important topic.
    The house I grew up in is located just a few miles from 
here in the 9th Ward, and it's now a shell. It's smashed and 
it's been abandoned. And I have a personal interest in this 
hearing because one of the reasons I accepted this, President 
Bush's nomination to become the administrator, was because I 
wanted to retool GSA's abilities in national emergencies.
    In particular, as a black woman and a former small business 
owner, I'm on a crusade to remove bureaucratic barriers to 
small business women, service disabled veterans, and HUBZone 
minority businesses in dealing with the Federal Government 
because I know that the playing field is not always even.
    During the past ten months, GSA has had some good successes 
in opening doors to small minority businesses. We have a very 
extensive record, which has been submitted in my written 
testimony, so I'm just going to highlight a few things.
    Since coming on board, we directed that the restoration of 
GSAs most destroyed property and most valuable property in New 
Orleans, the U.S. Customs House had subcontracts performed by 
small, minority, and local-based companies.
    We awarded millions in contracts to a variety of small, 
local businesses that are performing on this contract now even 
as I speak. It used to be hard for small companies to get on 
the GSA schedule in order to successfully gain access to the 
Federal procurement system, but during the past 10 months, we 
have slashed the amount of time it takes for a small company to 
apply for and receive a GSA schedule from 157 days to 30 days, 
and I actually went over there and solicited a few more 
gentlemen to get a few more local businesses on the schedule 
before the hearing.
    Madam Chairwoman, I know first-hand experience that the 
Gulf South is a hot bed of entrepreneurship. My grandmother 
started a business just a couple of blocks away from here 99 
years ago.
    That same vitality is still very much alive in the Gulf 
region, and I'm going to keep cutting red tape and pushing to 
make sure that any small company with a great idea is going to 
have a much easier task getting on the schedule than ever 
before and to make sure that GSA does a much better job of 
tracking that participation.
    This is my fourth official trip back home in ten months, 
although actually since it's my home, I've been back a few more 
times. But GSA has already had four events here in the past few 
months. We are going to have more national and regional 
conferences in this region for I know that if we can push the 
Federal Government to come here, indirectly we are also helping 
small business owners around the region that would otherwise--
business that would otherwise go to different places.
    GSA employees have discovered their entrepreneurial 
energies and are finding better ways to save taxpayer money and 
drive business to the region.
    Our Region 7 Administrator Scott Army is here. And, Scott, 
could you just stand so they can see you? GSA put in place a 
new disaster response vendor database with 1,400 companies 
already listed. It will be a significant asset after future 
disasters.
    GSA has hosted or participated in more than 25 small 
business events in this region. And as I said, and as the GAO 
report indicates, this has resulted in the 71 percent of the 
Federal GSA spending going to small and minority businesses. 
Our new disaster recovery purchasing program for state and 
local governments allows state, local, and tribal agencies to 
access the GSA schedule to speed recoveries from a major 
disaster or an act of terrorism. So we are doing good things.
    But let me be the first to admit: It's not enough; we can 
do more. We need to do more. And as long as I am administrator, 
we will do more.
    Since I became administrator, GSA has completely retooled 
its emergency response capability and created a single office 
of emergency response and recovery that reports directly to me.
    In this way, all of GSA's abilities and resources have been 
more sharply focused and our ability to respond has been 
fundamentally improved. During Katrina, we had so many 
different folks trying to do so many different things, without 
the concerted push and support that was needed from the top, 
and we have fixed that problem.
    I want to compliment our GSA Federal contracting officers 
and support people that have been working hard on the recovery 
of New Orleans and the Gulf. Our employees belaboring as best 
they could in a broken system. Too often they were stymied by 
too much red tape, influx of old bureaucratic processes that 
inhibited their ability to do the right thing.
    Their needs to be better balance between contract 
compliance and accountability, and I think that our Federal 
contracting officers actually should have more leeway to take 
effective actions and make good decisions.
    And I will, depending on their initiative and 
professionalism to make decisions that the nation would be 
proud of. And our improved tracking processes will verify these 
results.
    Madam Chairwoman, one of the many things I've learned over 
the past few weeks is that I cannot do this alone. And I am 
going to need your and the committee's help and support in 
order to make this happen.
    When Federal contracting officers make difficult decisions 
under pressure, we need to support them in every way. I do not 
want our contracting officers to be so fearful of making a 
tough decision that they become paralyzed into inaction.
    We have terrific people who work in our contracting shop. 
And I think if we have the wisdom and courage to let them 
perform, we will see a fundamentally improved performance 
during our next national disaster.
    I want to change with your help the culture of Federal 
contracting to one based on accountability to the taxpayer, one 
that awards innovative Federal contracting officers who 
identify problems and solve them early when they can do the 
most good.
    And in 1965, my dad chopped a hole in our roof because we 
had to escape from Hurricane Betsy. He tied a rope around me 
and my brothers and my sisters. And we sat on the roof and 
watched our possessions and an occasional dead body float by as 
we waited for rescue. And while we were waiting, the one thing 
that I still remember from this is it is so important when you 
are in a crisis, when you have a national disaster to believe 
and trust that the government will not abandon you and that 
help will be on the way.
    So when the next hurricane hits or any disaster, I want all 
of my GSA employees to be focused more on the outcome than on 
the bureaucratic process, to be thinking about more what can be 
done to help those stranded on roofs than hiding behind excuses 
of compliance.
    GSA is justifiably proud as the GAO report indicates--page 
11, by the way, guys--that approximately 71 percent of all 
GSA--all Katrina procurement dollars in the Gulf region went to 
small and minority, service disabled veterans, and women-owned 
business. And even with a standard margin of error 5 to 7 
percent, 64 percent is still an extraordinary performance.
    We are even more proud of our recent efforts to champion 
and provide opportunities to local businesses. And I intend to 
continue this strong commitment.
    The Gulf region is home to our history, our heritage, and 
our hope for the future. You have my commitment that GSA, under 
my administration, will not, not ever, give up. And we will not 
abandon it. Thank you for giving me this opportunity, and I 
look forward to your questions.
    [The statement of Ms. Doan may be found in the Appendix, on 
page 75.]
    ChairwomanVelazquez. Thank you, Ms. Doan. Now I welcome the 
Honorable Lieutenant General Carl Strock. General Strock is 
Commander and Chief of Engineers for the U.S. Army Corps of 
Engineers.
    Welcome.

 STATEMENT OF THE HONORABLE LIEUTENANT GENERAL CARL A. STROCK, 
 COMMANDER AND CHIEF OF ENGINEERS, U.S. ARMY CORPS OF ENGINEERS

    GeneralStrock. Madam Chair, thank you very much and Members 
of the Committee. I am Lieutenant General Carl Strock. I am the 
Chief of Engineer and Commander of the U.S. Army Corps of 
Engineers.
    Thank you for the opportunity to testify before you today 
concerning small business participation in the rebuilding of 
the Gulf region in the aftermath of Hurricane Katrina.
    Following this disaster, our first priority was public 
safety and meeting the needs of the people impacted by this 
natural disaster. We then turn to setting the conditions for 
the recovery of the region, the recovery of the physical 
infrastructure and the environment, also the economics of the 
region.
    In the latter effort of economic recovery, I want to ensure 
you that I am personally committed and the U.S. Army Corps of 
Engineers is institutionally committed to using small 
businesses in the performance of our work, both in the normal 
course of business and in the times of natural disaster.
    As always, we've accomplished our mission through working 
with the private sector and as both the public interest in our 
own agencies to vocalize as much of that capacity as possible. 
And small businesses represent a tremendous amount of capacity 
necessary for us to accomplish our missions.
    Under the National Response Plan, the Corps is assigned as 
coordinator for emergency support function or ESF 3, public 
works and engineering and support other ESFs in addition to our 
own missions.
    During disasters, the Corps is the primary agency for 
response activities such as ice, water, debris removal, 
temporary power, and temporary roofs. And wherever possible, we 
use our program all of the advance contract initiative or ACI 
to competitively award contracts for future execution of these 
missions before the disaster strikes.
    Due to the unprecedented magnitude of Hurricane Katrina, 
the Corps needed to award debris contracts in excess of those 
that were pre-placed under the ACI program.
    Based on the large scale of the required works, we were 
awarded four more contracts following the emergency to remove 
debris in Mississippi and Louisiana. Each contract was valued 
at $500 million with an option to increase each contract by an 
additional $500 million. This requirement was open to any 
company under a shortened advertisement and proposal period.
    For these additional contracts, we realized that the 
accomplishment of this mission would require substantial 
subcontracting by the prime contractor. We included aggressive 
small business subcontracting goals in these contracts and 
negotiated a small business subcontracting goal of 73 percent 
for three of the contractors and 60 percent for the remaining 
one.
    Small businesses have played an important role in the Corps 
Gulf region recovery activities. As of March 2007, 88 percent 
of our subcontracting dollars went to small businesses for work 
in Louisiana. And 84 percent in Mississippi. As well as the 
Corps is doing, though, regarding disaster recovery 
subcontracting efforts, there is room for improvement.
    We have learned valuable lessens that will improve our 
practices and procedures in the future. I'm committed to 
ensuring that we maintain complete and accurate subcontracting 
information on all applicable contracts.
    We will continue to hold our large business partners 
accountable in fulfilling their small business obligations. We 
will ensure that proposed subcontracting goals are realistic 
and attainable, but challenging.
    Our large business partners who demonstrated their 
commitment to small businesses will be awarded higher ratings 
during proposal evaluations. When subcontracting plans are not 
required, we will ensure proper justifications are contained in 
the contracting file.
    And finally in our small business program, we are 
developing a formal subcontracting training module that will be 
delivered Corps-wide.
    I welcome independent reviews of our small business 
program. In addition to the GAO review in January of 2007, I 
directed the Corps' inspector general to conduct an evaluation 
of our small business program office. At the end of this 
inspection, the IG will provide a report to me containing 
findings, observations, and recommendations for any corrective 
actions.
    Our commitment to small business is not limited to 
subcontracting opportunities. I'm also committed to expanding 
our base to small business prime contract awards. 
Traditionally, the Corps of Engineers gives over 40 percent of 
its multi-billion dollar effort to small businesses as prime 
contractors. We are currently working on acquisition plans with 
the re-competition of several or our ACI contracts. These new 
plans work to include small disadvantaged businesses as prime 
contractors and are more friendly to small business firms.
    With this new business model after initial planning the 
Corps will consider the small disadvantaged business and HUBs--
will first consider the small disadvantaged business and 
HUBZone goals.
    Subcontracting goals will be higher in small business 
categories. The Louisiana recovery office has identified 
approximately 16 new small business prime contract 
opportunities worth over $150 million for this fiscal year 
alone.
    The Corps is in the process of repairing, restoring the 
hurricane protection system in New Orleans. And we have 
developed an acquisition plan as we move forward to execute 
this mission. Of the total of $5.8 billion appropriated for 
this work, the acquisition plan includes approximately 34 
percent of this work or 1.98 billion for small, disadvantaged, 
HUBZone, and service disabled veterans, and small businesses as 
prime contractors.
    The approximate number of planned contract awards is 150 
and 101 of those will be set aside for those small business 
categories as described above.
    Of the 43 contracts awarded to date, all but three have 
been awarded to small businesses. Of the $236 million obligated 
on this contract, 137 million has been obligated to small 
businesses on prime contracts.
    In addition to the prime contract plan discussed here, each 
unrestricted prime contract that is awarded to a large firm 
will require a subcontracting plan and goals that include small 
businesses.
    To close, thank you once again, Madam Chair, for allowing 
the Corps of Engineers the opportunity to be available before 
this committee to discuss the Corps subcontracting procedures 
during times of emergencies. Many Corps personnel have served 
our nation by helping in response to the natural disasters in 
Texas, Louisiana, Mississippi, Alabama, Florida and elsewhere 
in the nation and the world.
    We are proud to do so. I would be happy to answer any 
questions the committee members may have.
    [The statement of LtG. Strock may be found in the Appendix, 
on page 85.]
    ChairwomanVelazquez. Thank you. And now I welcome the 
Honorable Paul Schneider. Mr. Schneider is the Under Secretary 
for Management of the U.S. Department of Homeland Security.
    Welcome, sir.

STATEMENT OF THE HONORABLE PAUL SCHNEIDER, UNDER SECRETARY FOR 
        MANAGEMENT, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr.Schneider. Thank you, Madam Chairwoman and Members of 
the Committee for the opportunity to discuss the Department of 
Homeland Security's small business participation in the 
rebuilding of the Gulf Coast in the aftermath of Hurricane 
Katrina.
    I have been the Under Secretary for about 100 days. For the 
previous 3 1/2 years, I was a defense and aerospace consultant. 
Prior to this, I was a career civil servant for about 38 years.
    My last three government positions were Senior Acquisition 
Executive at the National Security Agency; Principal Deputy 
Assistant Secretary of the Navy for Research, Development, and 
Acquisition; and Senior Civilian of the Naval Sea Systems 
Command of the Navy's largest shore command.
    The Small Business Act requires Federal agencies to 
establish an office of small and disadvantaged business 
utilization. The goal is to foster an environment where these 
highly-skilled businesses can on their own merits compete 
successfully for a fair share of DHS contracts.
    We have a solid track record of exceeding the small 
business, women-owned, and small and disadvantaged business, 
prime contracting goals every year.
    FY-O6 DHS achieved 32 percent in small business prime 
contracting, which is 9 percent greater than the Government-
wide goal. Government-wide small disadvantaged business goal is 
set at 5 percent yet we target small disadvantaged business for 
8 percent of our contracting this fiscal year.
    Following Hurricane Katrina, FEMA has played a key role in 
engaging the small business community and directing the maximum 
share of dollars back into local economies.
    FEMA has adopted new procedures and strategies that 
facilitate the maximum level of engagement with the local 
contracting communities. Prior to FEMA issuing any 
solicitation, FEMA field branches conduct market research to 
determine whether the local, small business can meet 
programming requirements. If so, then a solicitation is 
structured as either a set aside or local preference.
    If no such capability is available, then the scope of the 
solicitation is expanded to include larger local businesses. If 
still no capability exists, then the geographic scope of the 
solicitation is expanded to the state level, to the Gulf Coast 
region and finally to a national pool of contractors.
    Response to Hurricane Katrina and Rita, DHS issued 28 
percent of its contract dollars to small business and 8 percent 
to small, disadvantaged businesses. DHS has also exceeded the 
SBA's goal of 5 percent target for women-owned business and 3 
percent for HUBZone businesses.
    Additionally, FEMA has engaged the local business community 
by obligating 21 percent of all prime contract dollars to local 
businesses in the Gulf Coast region.
    In addition to the many contract awards issued to small and 
local businesses for requirements that would transition from 
the individual assistance, technical assistance contracts, FEMA 
has issued several other major procurements which support DHS's 
goals of maximizing contracting opportunities with the small 
and local businesses. One example of an upcoming solicitation 
targeted at small businesses is the Gulf Coast Site Restoration 
and Design Bill. This solicitation will support group site 
restoration needs and a development of future sites on an as-
needed basis and will be limited to small businesses in 
Louisiana and Mississippi.
    In order to facilitate further collaboration with the small 
business community, FEMA is taking the following steps: 
Outreach forums to the small business communities including 
vendors and subcontractors in the Gulf Coast, potential 
establishment of an office of small and disadvantaged 
utilization for the Gulf Coast region. Networking with 
representatives of U.S. Small Business Administration in 
Louisiana district office and local small business development 
centers and a creation of a database of contact information and 
portfolios for local, small, service disabled, veteran-owned, 
8(a), HUBZone, and women-owned businesses to be utilized by the 
contracting professionals.
    In summary, the Department of Homeland Security is firmly 
committed to a unified team approach to support the critical 
Homeland Security Commission and meet an important public 
policy objective of including small businesses in the Federal 
marketplace.
    I want to thank the members of this committee for your 
support of the Department of Homeland Security and its small 
business program. I will be happy to answer any questions that 
you may have.
    [The statement of Mr. Schneider may be found in the 
Appendix, on page 90.]
    ChairwomanVelazquez. Thank you, sir. Our next witness is 
the Honorable Dr. James Finley. Dr. Finley is a Deputy Under 
Secretary of Defense for Acquisition and Technology at the U.S. 
Department of Defense.
    Welcome, sir.

   STATEMENT OF THE HONORABLE JAMES I. FINLEY, DEPUTY UNDER 
   SECRETARY OF DEFENSE FOR ACQUISITION AND TECHNOLOGY, U.S. 
                     DEPARTMENT OF DEFENSE

    Mr.Finley. Thank you, Chairwoman Velazquez, and members of 
the House Committee on Small Business. Thank you for inviting 
me here today to appear before you and discuss small business 
participation in the aftermath of Hurricane Katrina.
    I come to you--I'm new to the Government. Like many of my 
colleagues here, I'm in my first year as a Federal Government 
employee. First time I've ever been in the Federal Government 
in any position. I have about 40 years of industry experience.
    My experience ranges from the Fortune 50 companies at the 
highest levels and corporate boards to small business as a 
small business owner. You will find me to be entrepreneurial 
and innovative and an extraordinary advocate of small business.
    As you know, several military installations have been 
impacted by Hurricane Katrina, including Keesler Air Force base 
in Biloxi, Mississippi; Maxwell Gunter Air Force base in 
Montgomery, Alabama; Naval Air Station, New Orleans, Louisiana; 
Naval Air Station in Pascagoula, Mississippi; and the Marines 
Corps Reserves headquartered here in New Orleans, Louisiana; as 
well as shipyards and production facilities.
    Tens of thousands of Department of Defense personnel 
including the military and civilian active workforce, the 
military and civilian retirees contractors, local businesses 
and families in support of the Department of Defense were 
directly affected.
    The Department of Defense completely agrees with the March 
2007, GAO report recommendations and has initiated actions in 
support of those recommendations to, one: Issue guidance 
reinforcing importance of the subcontracting plan requirements; 
and, No. 2, ask the Department of Defense inspector general to 
conduct a review of the appropriate future data to ensure the 
subcontract planned guidance is being followed.
    The GAO found at the time the report was issued that one 
contract action could not be explained with respect to the lack 
of a subcontracting plan. That one finding has since been 
addressed. It was attributable to a contract award by the 
Defense Logistics Agency with the Campbell Soup Company.
    The GAO has since been provided with that information, a 
full explanation provided and has concurred with the Department 
of Defense's explanation.
    The GAO report states that small business receives 28 
percent of the $11 billion in contracting dollars from DHS, 
GSA, and United States Army Corps of Engineers and the 
Department of Defense.
    Local business of all sizes in Alabama, Louisiana, 
Mississippi receive 18 percent or 1.9 billion of the 11 
billion. Of the 1.9 billion, small business receives 66 percent 
of the awards to provide trailers, administrative and service 
buildings, restoration activities, clean up activities, 
excavation, debris removal, and temporary ripping installation.
    The Department of Defense has issued an interim rule 
amending the Federal Acquisition Regulation Supplemental Part 
218 for emergency acquisitions. This rule enables flexible 
acquisition management and provides a single reference that may 
be used to facilitate and expedite acquisition supplies and 
services during emergency situations.
    In addition, the defense procurement and acquisition policy 
office has established an emergency procurement committee that 
meets weekly and includes membership of the Department of 
Defense Small Business Program Office.
    Outcomes from these meetings have resulted in a number of 
initiatives based on lessons learned. For example, a 
contingency contracting guide in the form of pocket-sized 
handbook is being developed for the Department of Defense and 
military and civilian acquisition workforce.
    Initiatives are being taken for improved processes to 
expeditiously procure goods and services in emergencies and 
contingency operations. Third web-based community of practice 
has been established on the Defense Acquisition University web 
site, www.dau.mil.
    Our capacity drives our nation's economy, provides for our 
national security, and enables our technological leadership 
role of the Department of Defense. The Office of Small Business 
Programs which oversees an annual budget of $1.3 billion to the 
Department of Defense small business innovative research 
program is a key compliment of that effort. Approximately, 
3,000 contracts were awarded annually to these research 
programs in small business. These innovative research awards 
enable our agility and flexibility to maintain our decisive 
advantage for existing and future challenges to protect our 
freedom and respond to national disasters.
    Small business prime and subcontract dollars have virtually 
doubled between 2000 and 2005. This mainstream of small 
business industrial base coupled with innovation provides 
additional momentum for our military and civilian workforce at 
the Department of Defense to protect our country.
    In addition to mainstream industry presence and the 
innovative research programs, the Department of Defense also 
utilizes comprehensive subcontracting programs and mentor/
protege programs incentivized small business to participate in 
opportunities at the Department of Defense.
    For example, today the Department of Defense has 152 
mentor/protege agreements with small business companies that 
encompass 40 states. Examples of these small business products 
and services include things from high accuracy global 
positioning equipment to thermo batteries for sonar and display 
systems to manufacturing and development methods of improvement 
for canvas, modeling and simulation capabilities, information 
security, advanced surface mount board manufacturing 
capabilities and sensor integration solutions.
    We took the opportunity while here to visit with our office 
of PTAC. PTAC is our Procurement Technology Assistance Center 
based here in New Orleans. There are three individuals that 
have been here with the Department of Defense for decades. We 
were here before Katrina, some prior to Katrina, and now we're 
in the aftermath of Katrina.
    Some of these individuals have lost everything. They have 
experienced first-hand to help and facilitate small business 
interests with the Department of Defense on the ground here in 
real time.
    We intend to use and keep a very close conduit with their 
activity here in New Orleans as to how we go forward in the 
future reconstruction of New Orleans.
    In summary, we at the Department of Defense are very 
committed to the health and welfare of our people in our 
nation. We have a strong small business program, and we are 
planning to build on that strength to provide more agility and 
flexibility for the acquisition of products and services to 
protect our country and provide emergency help in the time of 
need for natural disasters here on the home front or abroad.
    I thank the committee for their time today and their 
leadership in addressing small business participation in the 
aftermath of Hurricane Katrina. I will be happy to answer your 
questions. Thank you.
    [The statement of Mr. Finley may be found in the Appendix, 
on page 98.]
    ChairwomanVelazquez. Thank you. Our next witness is the 
Honorable Admiral Patrick Dunne, Admiral Dunne is the Assistant 
Secretary for Policy, Planning, and Preparedness at the U.S. 
Department of Veterans Affairs. Thank you.

  STATEMENT OF THE HONORABLE ADMIRAL PATRICK DUNNE, ASSISTANT 
    SECRETARY FOR POLICY, PLANNING, AND PREPAREDNESS, U.S. 
                 DEPARTMENT OF VETERANS AFFAIRS

    AdmiralDunne. Thank you, Madam Chair, Members of the 
Committee. I greatly appreciate the opportunity to testify at 
this hearing about VA's ongoing commitment to small businesses 
in New Orleans and the greater Gulf Coast region.
    VA is a proud and longtime neighbor in each of these 
communities. Veterans in these areas count on us for healthcare 
and benefits delivery. We recognize the importance of small 
business to VA operations. By partnering with VA, they help 
underwrite the quality care we provide to veterans.
    Our mutual success is tied to one another in so many ways. 
We too want to see a vibrant economic recovery take root and 
reinvigorate small businesses in this region.
    In early 2006, VA took positive steps in this regard. On 
March 7th, VA's Office of Small and Disadvantaged Business 
Utilization in concert with the Veterans Health Administration, 
veterans service organizations and representatives from 
National Task Force on Veterans Entrepreneurship hosted an 
event in Biloxi, Mississippi, attended by approximately 100 
veteran-owned small businesses.
    These firms were provided information, process guidance and 
networking opportunities for VA's post Katrina recovery 
acquisition opportunities. A similar event was held the next 
day, March 8, at the Veterans of Foreign Wars hall in Metairie, 
Louisiana, and attended by 85 veteran-owned small businesses 
from Louisiana.
    These programs discussed requirements for bonding, teaming 
and joint ventures to help veteran entrepreneurs prepare their 
firms to be responsive to upcoming contracting opportunities.
    To gauge the effectiveness of our efforts, we have to look 
at the Federal contracting record of the firms that received 
advice during these two events. Of the 185 firms that signed in 
at the March events, we found that during the following year, 
24 of those firms were awarded multiple contracts totaling over 
$43.4 million.
    We would like to think that the efforts of VA and our 
partners were instrumental in the success of those contractors.
    In June of 2006, VA participated in the Minority Business 
Development Agency's Business-to-Business Linkage Forum in New 
Orleans. This forum brought together 8(a) firms from Louisiana 
and Mississippi, with out-of-state minority businesses to 
explore partnering opportunities on upcoming Federal and State 
contracts.
    In December of 2006, VA participated in the U.S. Army-
sponsored National HUBZone conference held in New Orleans. In 
addition to providing presentations on VA's acquisition 
operations and opportunities, representatives from VA's Office 
of Small and Disadvantaged Business Utilization along with an 
accusation professional of the New Orleans VA Medical Center, 
conducted one-on-one counseling sessions with small businesses 
in attendance. Many of these firms were from areas affected by 
Hurricane Katrina.
    Our outreach efforts continue in this region. Personnel 
from VA's Office of Small and Disadvantaged Business 
Utilization will soon attend small business events in 
Vicksburg, Mississippi, and Birmingham, Alabama.
    VA plans to participate in the PostKatrina Economic 
Development Summit in New Orleans, June 5-7th of this year, 
hosted by the National Community Development Organization, 
Incorporated. The summit is billed as bringing America's top 
corporations, Government agencies and small businesses together 
to discuss acquisition opportunities to rebuild an economically 
strong Gulf Coast.
    VA is using small businesses in its recovery efforts in the 
affected areas. VA's Office of Construction and Facilities 
Management has three 8(a) contracts in place worth 
approximately $1.6 million. By June of 2007, award of several 
additional contracts for recovery work in New Orleans under 
Section 8(a) are contemplated. The values of these contracts 
are estimated at slightly over $4 million.
    An additional three to four 8(a) contracts with values of 
up to $12 million total are contemplated for Gulfport, 
Mississippi, along with additional awards to service-disabled, 
veteran-owned small businesses. VA intends to award another 
$600,000 in contracts with a service-disabled, veteran-owned 
small business and Section 8(a) contractor in Biloxi, 
Mississippi.
    VA's National Cemetery Administration is spending over $1.6 
million with small businesses, small disadvantaged businesses, 
veteran-owned and HUBZone small businesses in postKatrina 
recovery work at their facilities throughout the Gulf Coast 
region. These contracts were set aside for small businesses. A 
project to construct the replacement VA Medical Center in New 
Orleans alongside a new Louisiana State University healthcare 
facility will create additional opportunities for local small 
businesses. Construction of this approximately $625 million 
project is due to begin in 2008, once the State of Louisiana 
has committed funds and acquired the land. Although projects of 
this magnitude provide very limited opportunities at the prime 
contracting level, VA is committed to promoting maximum 
practicable opportunities for small businesses at the 
subcontracting level.
    VA's healthcare facilities in New Orleans, Gulfport and 
Biloxi are operated by the South Central VA Healthcare Network. 
As with VA's senior leadership, the South Central VA Healthcare 
Network is committed to ensuring business opportunities for 
small businesses in the areas affected by Hurricane Katrina. 
This commitment is evidenced in the socioeconomic 
accomplishments for the entire network in this region.
    In Fiscal 2006, the South Central VA Healthcare Network 
reported expenditures for supplies and services in excess of 
$574 million. Over 37 percent of these dollars were spent with 
small business. Broken down by socioeconomic category, over 3.6 
percent were spent with service-disabled, veteran-owned small 
businesses. Over 9 percent with veteran-owned small businesses, 
almost 9 percent with small disadvantaged businesses, over 6 
percent with women-owned small businesses, and 4.35 percent 
HUBZone small businesses, each of these exceeding the 
congressionally mandated goals.
    Despite the incredible damage sustained by our facilities 
in the surrounding area, the VA Medical Center in New Orleans 
and the VA Gulf Coast hospital care system located in Biloxi 
continue to support small businesses. The VA Medical Center in 
New Orleans spent nearly 44 cents of every acquisition dollar 
with small business. And the VA Gulf Coast Veterans Healthcare 
System spent almost 50 cents of every dollar with small 
businesses.
    Their accomplishments in each of the small business 
socioeconomic categories are equally impressive. The 
socioeconomic accomplishments for the South Central VA 
Healthcare Network will be submitted for the written record.
    In closing, I want to reassure you VA is committed to small 
businesses in general, and to those in the Gulf Coast region in 
particular.
    Thank you for convening today's hearing. I welcome your 
interest and any questions you may have.
    [The statement of Mr. Dunne may be found in the Appendix, 
on page 105.]
    ChairwomanVelazquez. Thank you, sir. And I thank all of you 
for your testimony. Let me just say that we hear a lot of talk 
about small business and local businesses, but we don't hear 
anything about local small businesses.
    And here we are and with your own numbers and the data from 
this Federal Government, the Federal Procurement Data System 
that tells us only half percent of contracting opportunities 
has been provided to small businesses right after Congress 
strengthened the requirements for the use of local business.
    Numbers don't lie. What we have seen here is a mere 7 
percent of contracting opportunities with local businesses, 
local small businesses. So I would like to ask each one of you, 
starting with Mr. Finley, Ms. Doan and Mr. Dunne: What are you 
going to do to change this in this area?
    Mr.Finley. Thank you, Madam Chairwoman. What we are going 
to do is we are working to expedite the law that has been 
passed in Congress to make it into the FAR. Right now that is 
not into the farmers as an official Federal acquisition 
regulation. It requires to be processed. We are going to 
accelerate that processing and expedite that processing such 
that we can have that truly in law in accordance with the 
paperwork that's been passed by the Congress, you know, this 
year. We are committed to make--
    ChairwomanVelazquez. All I want to know is: How this is 
going to get those numbers up? We carry local, small businesses 
here in the region.
    Mr.Finley. I believe we will take that act, Madam 
Chairwoman, and we will implement that into actionable efforts 
that will be focused on our local businesses here in New 
Orleans. We will implement that through our PTAC organization 
that's based here in New Orleans to help facilitate that 
network of small businesses already established here in New 
Orleans.
    ChairwomanVelazquez. I will be coming back to you, sir. Ms. 
Doan?
    Ms.Doan. Madam Chairwoman, I believe that leadership 
matters. And the way that I intend to make this happen is 
because it's something that's really important to me. So I look 
at this on a regular basis. However, the changes have already 
begun to happen. In the ten months since becoming 
administrator, our numbers are really nothing short of 
extraordinary.
    We have in this region, Gulf region, 55.8 percent of our 
procurements going to local, small businesses. In addition to 
that, we have a disaster and emergency operations vendor 
profile which we have now begun. I mentioned it in my speech. 
But we have already registered 1,400 businesses. We will be 
utilizing this on a regular basis.
    But I believe that the only way, Committee and Madam 
Chairwoman, that we can really make this happen is the heads of 
the agencies have got to say that this is a priority.
    Now, for me, I will tell you--maybe it's because I'm from 
this area, but this is a priority. And one of the things you 
have to do, for example, right here, these are our guys. You 
look at them. You look at the list of who these businesses are, 
and you can say--you can eyeball them and say, Is that really a 
small business? Isn't it? You have to do that. And if the heads 
of the agencies are going to be committed, that will make the 
difference.
    ChairwomanVelazquez. Would you say that 7 percent of 
contracting opportunities awarded to local businesses is 
enough?
    Ms.Doan. Madam Chairwoman, I am the leader of GSA. GSA has 
a stellar performance. I cannot account for my other fellow 
agencies. I would like to see them do more. Believe me as a 
small, black, former woman-owned business, there is not enough 
that can be done. This is something that--we have to do a great 
thing. What I can do is focus on my agencies. What I'm asking 
is that every other agency head do the same.
    ChairwomanVelazquez. I hear you. Yes?
    GeneralStrock. Yes, ma'am. We too are--
    ChairwomanVelazquez. Mr. Dunne?
    I will ask you a specific question later. Mr. Dunne?
    AdmiralDunne. Thank you. The VA will continue to conduct 
our outreach as I mentioned in my statement, we have plans to 
continue that this year. We also have plans to provide guidance 
to our contracting personnel about the details of the Stafford 
Act. And we have personnel right here in the area who are aware 
of the business opportunities here and will continue to pursue 
those throughout our outreach.
    ChairwomanVelazquez. Well, we have a real problem here. I 
mentioned to you that only 7 percent have been provided to 
local businesses. And the problem is that this number is not 
only a disaster by itself and shows a lack of commitment of our 
Federal Government in helping the recovery process here, but 
the true number is most likely to even go lower than the 7 
percent.
    This Committee has examined who agencies claim are the 
local, small businesses. And the truth is that many of them are 
neither local nor small.
    Let's take for example Homeland Security. Listed contract 
with the United States Services of Maryland and Fastenal 
Company of Minnesota a small business award. Neither of these 
companies identifies themselves as small. Fastenal actually 
owns and operates over 2,000 stores with locations in all 50 
states as well as Canada, Mexico, Puerto Rico, Singapore, 
Europe, and China.
    And you are going to come here today and say that it is a 
small business? GSA counted contracts with Oshkosh Truck 
Corporation of Wisconsin; Coleman Company of Wichita, Kansas; 
Analytic Systems Ware, a Canadian Company; Americold Logistics 
of Georgia towards small business achievement.
    None of these companies themselves are small. Americold has 
6,100 employees and handles over 60 billion pounds of freight. 
DOD has taken credit for URS Group as a small business 
contract, a company that is not identified as small.
    Additionally, the agency included contracts with Americold 
Group of Indiana. And another company in Ohio despite the fact 
that these businesses are subsidiaries of large companies and 
cannot be considered small. URS has over 25,000 employees in 
over 300 offices. It's stocks traded on the New York Stock 
Exchange. And achieved a $3.292 billion in revenue for fiscal 
year 2005, and you are going to come here and paint a rosy 
picture as to how much your agencies are doing in providing 
contracting opportunities to local, small businesses in this 
region?
    Army contracts were awarded to August, Inc. (Phonetically 
spelled), a Canadian company. And the list goes on and on and 
on.
    Mr. Schneider, I will start with you. Since you paint such 
a rosy picture in your testimony in reference to the number of 
contracts going to small businesses, let me say that it's easy 
to get those numbers when the businesses that you are counting 
are not small businesses, but large and out of state.
    Here, I have a list of 150 companies that we examined. And 
this is your own data system, 150 companies valued at nearly 
$70 million. And you took credit as local businesses that are 
neither local, small businesses nor small, 150. Mr. Schneider, 
61 of them are from your agency. So I want to ask you what is 
your priority here; making sure local, small businesses get 
contracts or making your numbers look good?
    Mr.Schneider. As I indicated, Madam Chair, in my testimony, 
the procedures that we've instituted with FEMA once the--with 
the amended Stafford Act in terms of priority that should be 
given to local, small business, in fact, that they are--once we 
go out with surveys, we determine the fact if we have at least 
two companies that are capable of doing that particular work.
    ChairwomanVelazquez. Sir, sir--
    Mr.Schneider. That is our policy.
    ChairwomanVelazquez. Sir, how could you explain 61 
companies, large companies, being miscoded and claiming credit 
as small companies? What kind of system do you have in place? 
This is the law. The law requires contracting with small 
businesses. And you should not be coming here and saying that 
you not only achieve but you went beyond.
    Mr.Schneider. Well, two points: First, there clearly has 
been errors in coding in the data. That's been pointed out, I 
believe, in the GAO report, and we are taking action to fix the 
coding.
    The other thing we are doing is we're working closely with 
GSA and a total government team to fix the system by which you 
enter the coding. I have personally looked at the details of 
how you enter coding in the system and what happens is you find 
that it forces people that enter the coding to fundamentally 
make a choice.
    ChairwomanVelazquez. I hear you.
    Mr.Schneider. And so what happens is, the logic flow of the 
system is flawed and needs to be fixed. We believe--
    ChairwomanVelazquez. And that is why I ask you now: Are you 
going to follow the recommendation made to you by the General 
Accounting Office regarding having the inspector general or why 
is it that you decided not to go with a General Accounting 
Office recommendation, but to have your own team to review 
contracting practices by the Acquisition Oversight Team and the 
Defense Contract Management Agency?
    Mr.Schneider. The Defense Contracting--
    ChairwomanVelazquez. Doesn't this look like a conflict of 
interest to you?
    Mr.Schneider. The Defense Contracting Management Agency is 
independent from the Department of Homeland Security. It's a 
separate organization. They do not report to the Department. We 
use them as an independent auditing agency.
    ChairwomanVelazquez. Let me ask you: Why is it that the 
Army Corps is going to have the IG and you cannot have the IG? 
So you are going to come here and say to me that it is okay for 
your people to police themselves instead of having an 
independent like the IG?
    Mr.Schneider. I respectfully submit that the Defense 
Contract Administration Agency is, in fact, independent from 
the Department of Homeland Security. It is not a Homeland 
Security organization.
    ChairwomanVelazquez. Same with the IG, sir.
    Mr.Schneider. We elected to use the CAA.
    ChairwomanVelazquez. Well, it shows the real commitment 
that you have in order to correct the errors that you are 
making and the miscoding that you are making.
    Now I recognize Mr. Westmoreland.
    Mr.Westmoreland. Thank you, Madam Chairwoman. You know, we 
have to understand that these two storms, natural disasters 
hitting as quick as they did, I don't know that any of the 
agencies--I know that several of you have mentioned that you 
came on board after this mother nature's wrath hit this Gulf 
Coast region.
    And I'm sure that each one of your agencies felt the urge 
to get these jobs done as soon as possible. And I'm sure that 
each one of you in your agencies have certain criteria that a 
contractor must meet or certain qualifications that they may 
have.
    I know that I'm a small businessman, at least I was a small 
businessman, and I would like to think of myself as one. Mom 
and pop contracting, we did restorations. We did new 
construction, remodeling other parts. And I don't know that 
what--although, I would have loved to have come down and gotten 
some contracts and some capabilities, I don't know to what 
extent I would have been capable of doing some of the major 
jobs that were required here. And I think Congressman Jefferson 
mentioned the bundling process. And I'm sure in trying to get 
some of these things done as soon as possible, you probably did 
bundle a lot of these things to some larger companies. And then 
they may have, in fact, turned around and subcontracted out to 
smaller companies.
    I know we had a tree cutting company from Georgia that was 
actually the sub of a sub of a sub. Now, I'm not saying those 
are good things because I think they can really be bad things 
because sometimes that sub of the sub of the sub doesn't make 
any of the money and the subcontractor or the original 
contractor is kind of the fat cat in this whole thing, and 
makes all of dough; and the subcontractor doesn't.
    So I'm not making any excuses for that. But I think that a 
lot of these contracts that you made were good intentions of 
trying to get the work done to make sure that the people of the 
Gulf Coast could get back to a normal way of life as soon as 
possible.
    Now, Mr. Preston, I have a specific question to you and it 
comes too from Congressman Jefferson's question about the 
number of PCRs that are stationed in the New Orleans Gulf Coast 
area, the Procurement Center Representatives.
    How many are actually down here and how many have been 
added since Katrina and Rita?
    Mr.Preston. Right now physically down here there's one PCR. 
He's at the Army Corps of Engineers right now working 
specifically with them on their contracting activities.
    At one point, we had five people down here right after the 
storm working on a number of things. But I think the important 
thing to recognize with that is it's not just PCRs that are 
physically present down here because all of the purchasing 
doesn't take place down here. PCRs across the country were 
directed to focus on supporting small businesses in their 
efforts to get contracts down here as well.
    I think that the other thing to say is in addition to the 
PCR, our district office is also very active both in working 
with contracting activities down here and with local business 
to make sure there is conic activity between those 
opportunities.
    Mr.Westmoreland. I think it's important that you may have 
more than five people down here with this magnitude and the 
devastation that was down here. And I'm sure Mr. Melancon or 
Mr. Jefferson would agree that the people down here who were so 
devastated by this storm that changed their lives forever 
didn't really care who was doing the work as long as the work 
was getting done. And getting done in a satisfactory manner. 
And that's the thing that has really bothered me about the 
administration's position and really Congress' position in the 
fact that they felt like if they threw money at the situation, 
that it would just fix itself.
    I think if you ride around even today, almost two years 
after, you would see that money is not necessarily the answer 
to all of these problems down here. And your agencies are 
really kind of what we're depending on to bring this area back 
to where it was.
    So I want to ask the entire panel a question, and as I 
stated before, I know some of you have not been on board but a 
short period of time. In the short period of time that you have 
been on board and listening to the other people in your 
agencies, what would you say was different today, if anything, 
as your approach to small business and bundling of contracts 
and really being prepared to handle a crisis such as this? 
What's different today than when these two storms hit? And any 
of you, I will be glad to hear from.
    Mr.Schneider. I'll start. Thank you for the question. 
You're absolutely right. We had in the initial aftermath of 
Katrina those bundling contracts. In the case of DHS, we had 
four big ones. And the reason for that was we frankly had no 
people on the ground. We had very few people on the ground in 
the area. We had no contracting officers. We didn't have people 
that could integrate a large amount of effort. We really didn't 
have my term, military term, situational awareness relative to 
the capabilities of the businesses in the Gulf Coast. Quite 
frankly, we did not have good command and control in terms of 
how things got executed.
    It was so bad we had to use a corps of contracting officers 
at headquarters to contract for local efforts down here. So 
what happened was some of these major contractors--these 
efforts were bundled frankly because we did not have the 
resources on the ground to do the proper integration and 
oversight of the individual effort.
    As it turns out, my understanding is that a large 
percentage of those efforts did, in fact, go to small 
businesses, local businesses, etcetera. But the thing that's 
different today is that gave--well, we put a lot of people on 
the ground. We have lots of contracting offices throughout the 
Gulf Coast. We think we have a pretty good organizational 
structure. We have Deputy Director of FEMA that's down here for 
the Gulf Coast rebuilding effort. We think we have pretty good 
situational awareness. And that brought us a lot closer to 
understanding the individual capabilities of the small 
businesses in the area, which is why we don't have these large 
contractors, contracts anymore. We have individual contracts 
that have been awarded, basic wording agreements. And frankly, 
the opportunity that was given to the small businesses under 
these bundling contracts has enabled them now to compete and be 
prime contractors themselves.
    So I think it's a matter of people, situational awareness 
on the ground, contracting officers who could execute. And just 
better organization is what I would consider to be a 
significant change from what I understand the situation was in 
the initial aftermath of Katrina.
    Mr.Westmoreland. So, Mr. Schneider, if I understand it 
correctly, what you're saying is when this first hit, because 
of your inadequate number of people that you had on the ground, 
these contracts were bundled. But I hope what you are saying 
is, now, almost two years afterwards, that you have more people 
on the ground and that you will be able to give some of these 
contracts to some small business people.
    And as you have said, some of these small business people 
have now earned their way into probably doing some of the 
bigger contracts.
    Mr.Schneider. They have. In fact, we don't have these big 
bundled contracts. We have individual contracts because we have 
people on the ground that are capable of managing them. So we 
don't need to pay a prime contractor or a large contractor to 
manage the integration effort.
    Another thing is we go out actively with outreach within 
the community. There's a lot of mentor/protege work going on 
down here on the Gulf Coast. We encourage all businesses to 
register. We keep a web-based type of analysis pool so that all 
of our contracting officers in the Gulf Coast know of the 
capabilities of all of the businesses in the Gulf Coast. So 
just the sheer numbers of resources has dramatically changed. 
We have what I consider to be a very robust contracting 
organization down here on the Gulf Coast. What we did actually 
was take somebody from headquarters and FEMA, move her down 
here to the Gulf Coast. She supervised the initial aftermath 
and the building up of the contracting infrastructure down 
here. And then we moved her back to Washington as the head of 
the contracting organization in FEMA.
    So we have somebody at headquarters that personally 
understands, has spent a year down here on the Gulf Coast, 
understands the situational awareness. So you have a very, what 
I would consider, unique relationship between contracting 
organizations down here on the deck plate, so to speak, and the 
head of contracts up in Washington. That is totally different.
    ChairwomanVelazquez. Time expired. Now I recognize Mr. 
Jefferson.
    Mr.Jefferson. Thank you, Madam Chair. We are very familiar 
with the history that you are referring to, Mr. Schneider. 
These big companies are still around, still doing the work from 
the initial, big contracts they got, for the most part.
    There have been, of course, other opportunities. We are 
talking about the early stages here. I wanted to ask you 
something, and then I want to ask Mr. Preston a question. There 
is a group called "CorpWatch," a report done by Dr. Rita King, 
which talks about "Big Easy" money. The report was released 
sometime ago.
    But it talks about FEMA contracting down here and how the 
small companies missed out on the money and the local companies 
did. And basically what it said is that of the $6 billion of 
hurricane-related contracts granted by FEMA, only 13 percent or 
780 million were awarded to local firms, she said.
    Are you familiar with that report and do you agree with 
that or have you found it incorrect?
    Mr.Schneider. Congressman, I am not personally familiar 
with that report.
    Mr.Jefferson. The report cites incident after incident as 
the Chairlady has of big companies that have come and done 
extraordinarily well, and they have not been local firms. They 
have not been small firms. But I would like to ask you to turn 
your attention to that because it does reveal some interesting 
information.
    We are talking about the small part of this thing whole 
thing, though. Down the road, the big issue is going to be 
recovery--I mean, rebuild. And that's going to be a lot more 
money and a lot more things are going to come through the whole 
FEMA structure. And we have time now to handle that correctly.
    I want you to know that we've been having a lot of local 
firms that have been subbing and have been happy to have some 
work, but very unhappy that they didn't have any margin of a 
profit. And the profit was made by the guy on the top. And 
sometimes--Charlie and I were talking about it a minute ago, 
you have four or five different tiers here, maybe more, and 
every one of them, the money they made was--all of the work was 
done by the guy on the lower end and then the money made by the 
guys on the topside of it. And that's, of course, not fair in 
all of this process.
    But since you don't know about the CorpWatch, I can't ask 
you anything about it. I will let that slide for a minute and 
ask you to please take a look and see if you agree with that. 
I'd like to know how you feel about it.
    Mr. Preston, you have a responsibility--or your agency does 
anyhow, to I guess be in contact with the rest of these other 
24 agencies out there. If you need to, beat up on these guys to 
make sure they are providing small business opportunities. And 
under the aegis of which we are working, small and local 
business opportunities. This Stafford Act requires that we get 
small business folks to do local work.
    You have had a vacancy in this job called the Associate 
Administrator for Government Contract for a good long time. But 
I understand somewhat recently filled that job. I want to know 
what your agency is doing to--first off, before you even get to 
the local question, to make sure they are setting aside small 
business opportunities down here in our region, and tell me 
exactly what you are doing to make sure this agency is working 
properly; and that we are getting accurate results out of it.
    Mr.Preston. Well, we have very extensive interaction with 
all of the agencies at the table, both in the individual 
contracts and under plans. We held outreach events with all of 
them. We've held matchmaking sessions to make sure that we get 
the right business to the right place.
    Mr.Jefferson. Let me ask it differently: What is the new 
emphasis you place on it now since you have someone who's 
filled that job? I mean, you've been doing something with it, 
perhaps a lot with it as you say. What is he going to do more 
than you have done so far? And what more could be done or what 
should be done?
    Mr.Preston. He's and our entire contracting staff down here 
will do two things--three things, really. Continue with 
aggressive outreach, continue with coordination with these 
agencies, but also continue specifically to look at the 
contracting actions that are taking place to determine whether 
or not they should be going to small business or not.
    Although, I would commend the agencies at the table for a 
lot of the great work they've done, I think we've made some 
terrific progress down here. I will say this office down here 
has issued 27 Form 70 actions on contracts.
    So in addition to a coordinating and cooperation role, we 
are also playing a role where we getting in front of these 
contracts that are not going to small business and asking that 
they be redirected to small business.
    Mr.Jefferson. That's a critical part of your role to 
advocate for small businesses. These contracts are coming out 
of the Corps. The Corps not too long ago was putting out a 
contract for $90 million. I think it was for some--it might 
have been for debris, at this late date, I think it might have 
been. And we had a big fight trying to get this thing into 
pieces where local, small business folks would have a chance at 
it. What's happening with that?
    GeneralStrock. Sir, I'm not sure what specific contract you 
are talking about. It could well be at this late date we're 
talking about demolition requirements of these structures 
damaged beyond repair in the city. Today our policy is that all 
demolitions will go to local, small businesses. If that's what 
you are talking about, then I think that's been solved in that 
way.
    Mr.Jefferson. Let me ask a question because I want to see 
how this is interpreted. There may be a couple of ways to think 
about this local preference in the Stafford Act. You could say 
all things being equal, we'll prefer a local company. Or you 
can say if a local company has capacity, we prefer a local 
company without worrying about all of the things out there 
being equal, everybody else and the whole wide world.
    Which way do you look at this as you go about deciding on 
who ought to have the procurement opportunity here? Which way 
do you look at this local preference?
    GeneralStrock. Sir, I think it's really in Dr. Finley's 
lane to talk about the policy and then we will follow whatever 
policy emanates from DOD on how we implement the Stafford Act. 
So we are prepared to do whatever.
    I absolutely concur with the idea that local firms--and by 
the way, Stafford Act, as you know, only says local. It does 
not refer to small business. I certainly agree with that 
philosophy that local firms must participate in the recovery. 
Because that very participation is part of the recovery. So 
there is only goodness there to rely as heavily as we can on 
local, small business firms.
    Mr.Jefferson. When you're in a state like ours, almost 
every firm is small. Local kind of turns out to mean local 
small, for the most part.
    GeneralStrock. Yes, sir.
    Mr.Jefferson. The big issue for us is how this thing gets 
looked at. Your agency did something that FEMA didn't do some 
time ago. It did test out this issue by issuing Louisiana only 
procurement opportunities. And you've got a suit about it, and 
you ended up winning it, which means that it can be a Louisiana 
only procurement as we understand it now.
    GeneralStrock. Sir, I think that was actually in 
Mississippi. And we attempted to do a geographic set aside in 
the State of Mississippi. It was protested by the contract, the 
current contract. By the time we got through all of the 
protests, much of the work had been done, and we did not award 
the contract.
    So that particular action did not rise to precedent 
setting. So I'm not sure we really validated the fact that we 
have the authority to do that. But we believe we do or we 
wouldn't have done that.
    I think the language contained in the modification of the 
Stafford Act is more prescriptive and more clear. It says that 
if you have contracts in place after the declaration of 
disaster, the agency shall transition to local firms.
    So it's much more clear for us. And I think for the 
industry as we move ahead. I think that language helps clarify. 
Of course, again, there's a process to convert that language 
into policy and application. And that's what we are waiting 
for, for that process to be identified.
    Mr.Jefferson. Let me ask one thing here that is tearing up 
the local contractors. I mentioned in my opening statement, and 
anyone can react to it, and tell me how we fix this.
    If I'm Company X, and I just want to be a Y. And I decided 
how I was going to present my bid to win. I was going to say 
that for maintenance I would bid low and lose money. On the 
deactivation, I would bid a little higher and make money, and 
all together when you count it all, deactivation and 
maintenance, my bid was lower than somebody else's bid; and, 
therefore, I won.
    Then you come back and have some folks reviewing the 
contract. You say, My goodness, now it's a new person, maybe 
somebody who just came on. And they say, My goodness, on the 
deactivation side, this is way too high. This guy is getting 
too much money over here. We ought to undo this thing. That is 
happening over and over with our local people. How do we fix 
that? I mean, why do we go back and review and undo these 
contracts? Folks have won in a fair bid. Because we wanted to 
examine parts of the contract and say we can do better. And 
it's really ruining them.
    GeneralStrock. Sir, I'm not aware of any specific instances 
of that. That's something I'll take aboard and go work with our 
contracting people and see if that sort of thing happens, if we 
do a post-award revocation based on review after the fact.
    Again, I'm not sure that we have done that.
    Mr.Jefferson. Has anyone at the table heard about this 
problem?
    [No response from the panel is given.]
    Mr.Jefferson. I hear about it all of the time. It's quite 
odd.
    Mr.Melancon. It's happening in St. Bernard.
    Mr.Jefferson. Maybe it's not getting to your level, but I 
wanted to bring it to your attention. It's happening. And it's 
a big problem for our local contractors.
    GeneralStrock. Sir, we would be happy to talk to the 
specific contractors involved that that's occurred. I'm 
informed by the New Orleans district that we do not revoke a 
contract if we review something and say, Gosh, we should not 
have done it different. Our policy is not to revoke contracts 
after we award them.
    Mr.Jefferson. Is that FEMA's policy too, Homeland 
Security's policy?
    Mr.Schneider. No.
    Mr.Jefferson. It's happening. I don't know where it's 
happening at.
    Mr.Schneider. As far as I know, we don't revoke contracts. 
What happens is, there needs to be a cost realism determination 
made as part of the source selection. And so it depends on what 
the criteria for--
    Mr.Jefferson. I'm told that it isn't--it doesn't amount to 
a revocation. It simply says we just stop them from doing the 
work, which amounts to the same thing. It's not an actual 
revocation, but they say you can't do anymore work in this area 
and end up giving it to somebody else. So it works for them 
like a revocation.
    Mr.Schneider. My guess is it depends on how the contract is 
structured, what's the nature of the individual work items, and 
whether or not the Government elects to continue based on how 
those things are specified in the contract and individually 
priced.
    And there's also in some circumstances a contracting 
officer that has the responsibility to make responsibility 
determination as to whether or not the contractor can 
successfully execute the contract at certain points in time, 
whether mods are made or whether options are exercised.
    GeneralStrock. Sir, on reflection, I think that a potential 
scenario there would be a multiple award task on a contract 
where we have a contractor that actually wins a contract. But 
as we complete task orders--as we look at that contractor's 
bid, we may elect not to go with that contractor based on how 
his bid is structured and go with another, based on what their 
proposal for that task was.
    So it's possible to win a contract for us for task orders 
for a blank purchase agreement where we evaluate task orders 
independently. And that could well be what's happening.
    Mr.Jefferson. Madam Chairlady, you have been very liberal 
with me, just last thing, if I might ask.
    ChairwomanVelazquez. Sure.
    Mr.Jefferson. Mr. Preston, I made the remark about our 
local office. They have a big responsibility here, and not just 
to carry out the day-to-day responsibilities, like one might 
have in Minnesota or someplace. But also to oversee this 
disaster and try to make some sense of it, and also train 
workers coming in from out of state who might serve as folks 
who are just working on the disaster, itself.
    You have the officer working pretty much bare-bones. Have 
you looked into this and what we can do about getting this 
office staffed up again? From 39 in the midst of all of this 
disaster--we need to do better than that.
    Mr.Preston. Sir, I would like to talk to you about the 
historical staffing numbers. I'm not sure if they sync with the 
ones that I have, but what I can tell you is--
    Mr.Jefferson. What do you have? What are your numbers?
    Mr.Preston. Most recently, right now, we are at a staffing 
level of nine. Several years ago--my understanding was--it was 
the low to mid teens. And a lot of that was due to the 
restructuring of how we do that operation.
    I mean, the field in SBA used to do a lot of things that 
they don't do anymore, like processing loans, which are 
processed centrally and those types of things.
    What I would like to do is sit down with your staff to 
understand where you think we're missing the grade locally; 
where you think we are not performing effectively and by virtue 
of having a deeper staff, we would be able to do a better job. 
Because I would like to--considering staffing issues, match the 
problem with the solution.
    Mr.Jefferson. Yeah. There are certain positions that aren't 
in the field like the loan directors in the field. That's 
pretty basic. There's nobody there. The administrator does it 
all, but there is no one there who is a loan director. There is 
no one there who does the education part of it. There's no one 
there that does the technology. There's four or five positions 
that used to be filled that aren't filled now that are really 
critical, we think.
    But anyway, I just think it's very important that we have 
this office up and going. I don't think I can sit with you and 
evaluate because I don't think the performance of the office is 
really a big question. They are working hard. They just can't 
do everything. And they can't do enough, although, I think they 
are working very hard.
    ChairwomanVelazquez. Mr. Melancon.
    Mr.Melancon. Thank you, Madam Chair. Ms. Doan, first let me 
say I hear the passion in your voice, and I appreciate that. 
There are several of you that are new at the agencies, I hope 
that you would take the passion that she has for this area and 
apply it to your agencies to respond if, in fact, she's doing 
the things, and I believe she is, to try and get this region of 
the country back up. It's a model that I think every agency 
needs to start following.
    We are sitting here talking about contracts and bids and 
such as that. And right after the storm in the immediate 
aftermath, Mr. Jefferson referred to Knight Contractors, and 
they got a bid to go out and do I think it was electrical work 
based down in Belle Chasse.
    Now, here we are 19 months later and we're talking about 
letting bids and because they expire, then we changed the price 
and, et cetera, et cetera. In the midst of everything that was 
going on, somebody found the time to go bust those guys out of 
there and replace them with somebody else that was doing 
cheaper labor.
    Now, maybe there wasn't a contract with these people. Maybe 
it wasn't a bid, but that's the kind of things that I have been 
getting since day one that bother me. You know, we talked about 
the public bids. We've talked about coming back in, General 
Strock, coming back in and saying, Oh, their price is too high 
now. When you find that price too high is that because some 
contractors come in and said, I will do it cheaper than now or 
is there a public bid that's actually put out. Because what I'm 
appearing to see is that somebody comes in and summarily--
whether it's from the Corps or from FEMA or DHS or whoever, 
somebody is summarily coming in and saying we've got to 
renegotiate. And renegotiate back to day one. And that concerns 
me. How do we do that to these people?
    GeneralStrock. Sir, it's conjecture that that's what we're 
talking about here. Let's take, for example, the blanket 
purchase agreements that we have to provide helicopter 
services. We have three companies that do that. Each one of 
those competed for that. We looked at their proposals. We said, 
yes, we think you have the capacity and the price looks okay.
    Each time we need a helicopter, though, we compete that 
need among those three vendors. And at that time, they can 
change it based upon the nature of the mission and their 
availability of the aircraft so forth.
    And if they come in with a bid that's better than the other 
two, we give it to that contractor. So it may appear to the 
others that I bid and I got accepted on the team, and now you 
are changing the rules. That's how these things work.
    Mr.Melancon. I can understand a task for helicopters.
    GeneralStrock. Yes, sir.
    Mr.Melancon. I'm talking about on the ground. The equipment 
is there. The manpower is there. The people aren't getting 
paid. They are all of a sudden being told that they are not 
going to get paid retroactivity for work that has been done and 
completed because now somebody says they will do it at a lower 
price and come in after all of the big work has been done, 
after hard work has been done and all of the equipment has been 
ripped apart; and then they haven't got paid.
    And then what happens is there's a bid that's being let on 
another job in the same parish I'm talking about--I think we 
know which one that is; I don't think it's complicated--to pump 
out this sewage pump station, and nobody wants to bid on it 
because they are not getting paid right now so what the hell 
are they going to do, go bid for a contract they are not going 
to get paid on? And why do we relet it? I mean, do you stop the 
work? And that seems to be what goes on in these agencies. It's 
like go forward for a foot and then stop; we need to back up 
two feet.
    So, you know, if you could, explain that to me. If you 
can't do it here today, I need to get an explanation or at 
least sit down with the people I can get--I get sessions. When 
I get a session, I get good feeling conversations when I 
intervene. Then as soon as I step away again, it goes to hell 
in a handbasket. I need to know, General, are these--are you 
aware of these things? Or is this something that's happening on 
the ground with your subordinates who are here running the task 
and operations?
    GeneralStrock. Sir, again, I think we need to look at the 
specifics of each situation to truly understand what's going 
on. I can say it's our policy once we issue a task order for a 
contract, we do not go back and say, Well, we've changed our 
mind; we found somebody who could do it; stop work. We don't do 
that routinely. Our policy is to stay with that contractual 
obligation we have because those obligations work both ways.
    We do however--I understand anecdotally we're hearing that 
some subcontractors are not getting paid. We have a prompt 
payment requirement to primes. And it's up to the prime to pay 
subs. And it could be that some of these that are not being 
paid are subcontractors.
    And we don't have the ability to reach down and force the 
payment of subcontractors.
    Mr.Melancon. I understand that. This wasn't in that 
situation. What I would like to ask you to do because what I 
happen to have is a situation this week where I've pushed them 
to get together. They've gotten together and they were supposed 
to report back that night, never reported back. And that was 
about four days ago.
    I think it's just they came in just to let them go a little 
bit longer.
    I would like to ask you: When I can get them all back 
together in a room, I want you to come listen to these 
meetings; and I want you to listen to what's going on. Because 
it's all this (gestures). Everybody is blaming everybody else 
and we're getting nowhere. And that's the frustration.
    GeneralStrock. Sir, I will attempt to do that. My 
experience is it's best to solve problems at the lowest level 
possible where people really understand what they are talking 
about. And we would prefer to solve those here with the New 
Orleans district or Mississippi Valley. But if it requires my 
presence, then I can make every effort to be there for that.
    Mr.Melancon. Well, if it gets to the attention of the 
people that you command, and if I've got to get the generals 
and the National Guard that are involved in GOSEP, that's what 
I'm going to do. And the next step is going to be going to 
Congress and ask for subpoenas and whistleblower status and 
whatever because it's gone on too long.
    GeneralStrock. Yes, sir.
    Mr.Melancon. Mr. Preston, when we talk about the number of 
people that are here in the New Orleans area, was there an 
office here before the storm?
    Mr.Preston. Yes, there was an office.
    Mr.Melancon. How many people did we have in the office?
    Mr.Preston. I don't have the number right before the storm, 
but I can get that to you.
    Mr.Melancon. And we brought some people in. What, nine 
people, I think I heard?
    Mr.Preston. Yeah. I think what's important to understand is 
we do a lot of different things. What the Congressman has been 
talking about is our district office.
    We also have disaster loan people down here. I mean, that 
number was--a little over a year ago, 1,600 people down here 
throughout the Gulf. We had about 100 locations. So this is 
really the office that is in place for a longer period of time.
    Mr.Melancon. Well, the district office that was here 
before, how many people do we have in there now?
    Mr.Preston. That's nine people.
    Mr.Melancon. That's nine people. But was it bigger before?
    Mr.Preston. It was somewhat larger a few years ago, but I 
don't have that number for you.
    Mr.Melancon. One of the comments that I heard--not just 
one, I've had several people call me--that after the storm, 
offices were set up and then in recent times they will call and 
the numbers have been disconnected; they've moved to a new 
location; the numbers of people that were handling the claim 
are gone because SBA just said, We don't need you anymore, even 
though they've got a stack on their desk. Is that, in fact, 
going on?
    Mr.Preston. What you are probably referring to is the 
disaster loan site.
    Mr.Melancon. Yeah.
    Mr.Preston. And I will tell you even into last summer and 
into last fall, we had tremendous backlogs. People had been 
waiting months for any number of reasons, which we can get into 
detail at some point if you would like to. We have very 
significantly reformed that operation. And I think we are 
down--you know, when we came in last summer, we had about 
120,000 people backlogged. And a relatively low level of 
disbursements. We've now disbursed $5.4 million dollars. We are 
down to the last 18 thousand people. 16 of those 18,000 have 
already gotten some of their money. It's mostly people who are 
having challenges like, Can I get contractors; can I get 
insurance? Trying to--you understand. Right now we're down to 
the toughest areas where people don't know whether they are 
going to move forward or not.
    Mr.Melancon. And I understand that because it's a real bad 
problem.
    Mr.Preston. If you continue to hear issues with that, 
please call my staff directly. The feedback we've gotten is 
that we've made a lot of progress there. And we're really proud 
of the reforms. But any issue with people getting disaster 
loans or paperwork getting lost, I would ask you to call my 
staff directly in Washington because we're trying--you know, I 
think we've made a tremendous effort. And hopefully that's 
largely cleaned up.
    Mr.Melancon. One of the things that concerns me when you're 
telling me the dollar amounts of loans that have been approved 
as compared to how much money is supposed to be put into the 
pot. It's starting to sound to me that we had more people on 
the ground than we had payouts to small businesses. And I would 
like to see what those numbers compare. I mean, 1,800 people, I 
know they didn't come cheap, and they were putting them up in 
hotel rooms and every available place in town. And that's a 
whole other issue about FEMA trailers. Keeping people from 
coming in because the contractors were in all of the available 
housing in the city. And people wanting to come back, but there 
was no place to come. And that's not your--I'm not going to hit 
you with that one. But I think I've run over my time. And I 
thank the Chairwoman for her patience.
    ChairwomanVelazquez. Thank you. Mr. Preston, it seems in my 
first round, I wasn't able to make it to you and I didn't want 
to leave you out.
    Mr.Preston. Thank you.
    ChairwomanVelazquez. So in discussing the level of agency 
views of local small businesses, I understand that this issue 
may not be first and foremost with some of your colleagues here 
sitting at the table. But clearly at the SBA, that is not the 
case. And due to the nature of your agency, it has not had a 
substantial direct role in letting prime contracts.
    But in taking a look at the SBA Katrina-related contracts, 
I was surprised to find 32 valued at almost $32 million. Of 
this, only one was awarded to a local small business. None was 
awarded to minority-owned companies. So, Mr. Preston, my 
question to you is: How is it that the agency which is supposed 
to be the one advocating for small businesses in the Federal 
Government do almost no work with these companies?
    Mr.Preston. I know that our small business record here in 
the Gulf on the businesses related to these efforts was over 
half. So about over half went to small business. I don't have 
the specific numbers for those contracts, but I will absolutely 
follow up on that and get back to you.
    ChairwomanVelazquez. I know that most of these contracts 
were awarded by the previous administrator. What I want to hear 
is: What are you going to do to make sure that this pattern 
will be changed by the agency whose mission is--
    Mr.Preston. Yeah.
    ChairwomanVelazquez. What are you going to do?
    Mr.Preston. Absolutely. If we are in a role where we're 
charged with bringing these businesses to the table and helping 
to get contracts more broadly, we have to set the stage. So I 
will leave here and work with your staff specifically to get 
you back the information and look into it. So thank you.
    ChairwomanVelazquez. Thank you. Ms. Doan, we all know and 
you know because you are from here that New Orleans has a 
significant minority population. And I just want for you to 
explain to the Committee how is it that your agency ranked next 
to last of the agencies represented here today in terms of 
contracting with local minority businesses? What could possibly 
explain this?
    Ms.Doan. I actually would like to see that statistic. 
That's not the statistic that I believe that we have.
    ChairwomanVelazquez. This is based on the data from your 
agency and the data provided by--
    Ms.Doan. Our data is that in disadvantaged businesses, we 
have 6.9 percent went to disadvantaged businesses, 9 percent to 
women-owned, 2.4 to HUBZone, and 71 percent--
    ChairwomanVelazquez. Ms. Doan, I would strongly suggest 
that you go back and check your numbers.
    Ms.Doan. I'm happy to do it.
    ChairwomanVelazquez. Those are not local minority 
businesses. Those are nationally. The scope of this hearing is 
not about small businesses nationwide. It's about small 
businesses, local small businesses, minority businesses here 
from the Gulf region.
    When you use that data, then we are going to have very good 
numbers to report. But those are not the numbers that were 
requested.
    Ms.Doan. I will look into this. If it's something 
happening, I will fix it. I would like to also point out that 
one of the programs which I mentioned which is U.S. Customs 
House has been a local, small business that we have worked with 
and it also is a HUBZone business that's subcontracting. We 
have--
    ChairwomanVelazquez. HUBZone--the businesses that goes into 
HUBZone are not necessarily minority businesses.
    Ms.Doan. Yes, I know. But under that one alone, we had 6.3 
percent for small disadvantaged. What I would like to do, 
though, is follow up with you on this because it's so important 
to me, we will work on it.
    ChairwomanVelazquez. Okay.
    Ms.Doan. Could I ask to just plug real quickly--
    ChairwomanVelazquez. No. No. Because I have a question--
    Ms.Doan. --gsa.gov, if we could just get people to go--
honestly, every time you guys get someone local, tell them to 
go to gsa.gov, please, gsa.gov, please, have them register for 
us. This is our best way to make this happen. Oh, by the way, 
if they are having problems, have them e-mail me directly. I 
respond to all of my e-mails. I will move this along. This is 
important to me.
    ChairwomanVelazquez. Well, let's talk about the fact that 
GSA earlier this year requested bids on ADA contract for 
architectural and engineering services for Katrina-related 
repairs to a GSA building in the region. Prior to that 
solicitation, GSA would have had to first make that 
determination that two or more qualified 8(a) firms existed 
that could do the work. Given the significance, and we just 
mentioned it, local minority population, my guess is that it 
shouldn't be difficult to find two 8(a) contractors here.
    Yet after offering that contract on their 8(a), it was 
never let. Recently GSA has come out with a new proposal that 
does not use the 8(a) program. So small businesses, as you 
know, have to be strategic in what business opportunities they 
pursue because this is going to cost them.
    So when I see this type of poor planning on an agency's 
part and given the poor track record that your agency has when 
it comes to minority contracting opportunities, I want to know 
why this is happening. And if you will commit yourself today to 
replacing this contract with similar work for this industry.
    Ms.Doan. Congresswoman, I don't know why this is happening. 
But it is important to me. What I also don't know why is 
honestly, guys, [email protected], pick up the phone, e-mail 
me, call me. You don't even have to get me to come here to this 
hearing. I would have looked into this immediately. I will look 
into it as soon as I get out of this hearing.
    I will commit to you to doing whatever is legally possible 
to circumvent this. I think if you guys look at my track record 
in the last ten months since I came on board, I have grabbed so 
many bundled opportunities. I have made them available to the 
8(a) and minority community.
    This is something that's important to me. I have a great 
track record for ten months on this and I will continue that. 
Let me work with you.
    ChairwomanVelazquez. Your words sound good, but measurement 
is done through numbers here.
    Ms.Doan. I absolutely agree and let me make those numbers 
count. Please, work with me on this. If you know of something, 
call me.
    ChairwomanVelazquez. The first thing I would suggest that 
you do is go back and sit down with your staff and look at this 
contract, the architectural contract.
    Ms.Doan. I intend to as soon as we--as soon as I get back 
to D.C. I appreciate this opportunity. If I could just say once 
more, please, please, please, give me a chance to make it 
right. Alert me as soon as you're made aware by either your 
constituents or any small business, please, let me know.
    ChairwomanVelazquez. Ma'am, I'm telling you--
    Ms.Doan. We're together. Believe me, we are aligned. We are 
kindred spirits on this.
    ChairwomanVelazquez. Look, if you read the papers and you 
watch TV news, you know what is happening in this region. You 
don't need for me to come and tell you.
    Ms.Doan. I live--I am living this nightmare every day.
    ChairwomanVelazquez. You don't need me to come and tell you 
that your agency ran next to last when it comes to minority 
contracting opportunities. So I will suggest to you, go back 
and make sure that you implement a plan.
    Ms.Doan. I'm happy to do that. What was past is prologue. 
From ten months onward since I have been in this, I am 
committed to this and I will continue to do that as long as I 
am the Administrator.
    ChairwomanVelazquez. Thank you.
    Ms.Doan. You have my promise.
    ChairwomanVelazquez. Thank you.
    Mr. Dunne, the VA has more than 36 million in Katrina-
related contracts, but have awarded less than 245,000 to local 
minority businesses. What is the Veterans Department doing to 
target and ensure that minority business that can do this 
work--we're not talking about handouts--are getting their fair 
opportunity?
    AdmiralDunne. The VA is reaching out to small businesses, 
local businesses in the area to ensure that they are aware of 
the opportunities. And I would offer up as an example that 
since the Stafford Act was passed, 14 of 16 contracts that have 
been let were for local contracts representing $240 million out 
of a total of $257 million contracting. We need to keep this 
emphasis on, and we will continue to do that and continue to 
use the Stafford Act and the other legal guidelines in order to 
make sure that we fulfill our responsibility.
    ChairwomanVelazquez. Mr. Dunne, do you know what really 
troubles me or concerns me when I read your testimony, that you 
are so quick to dismiss small business ability to serve as a 
prime contractor for the VA hospital. Why is that?
    Mr.Dunne. The reason for that is our historical experience. 
We are more than happy to learn that there is an ability to do 
that--
    ChairwomanVelazquez. What kind of experience?
    AdmiralDunne. An experience that we have had in other 
contracting environments. We work with the prime contractor 
when we have the ability to set guidelines within the 
contracting, and then get the prime contractor to work with 
subcontractors on a local basis, on a minority basis, on a 
veterans basis and incorporate them into the overall contract.
    ChairwomanVelazquez. So are you telling me that small 
businesses are not able to be a prime contractor to build the 
VA hospital here?
    AdmiralDunne. I'm saying that--
    ChairwomanVelazquez. I would like you to base that in some 
type of analytical analysis, not experience--traditional 
experience, historical experience.
    AdmiralDunne. I think oftentimes it becomes an issue of 
bonding. We are in the process of talking with the Small 
Business Administration about that specific issue. If it is 
possible to get a local, small business, any small business 
could be involved in our contracting, we welcome that 
opportunity.
    ChairwomanVelazquez. Mr. Dunne, in developing the 
purchasing strategy for this program, did the SBA engage your 
agency to make recommendations as to how local, small 
businesses would be used?
    AdmiralDunne. I would have to get back to you on the answer 
to that.
    ChairwomanVelazquez. Mr. Preston, who is the PCR assigned 
to VA?
    Mr.Preston. I don't have the name of that person.
    ChairwomanVelazquez. Are you going to work with the VA to 
make sure that the PCR will work with VA to make sure that 
there is going to be small business participation in this 
project?
    Mr.Preston. Yeah. That's the PCRs job, and it's also the 
local office--
    ChairwomanVelazquez. But this is--you know, we all know for 
months now that this project is coming here, $300 million. We 
have witnesses that will be testifying here later today in the 
second panel that have been prime contractors. One of them 
built a Harrah's hotel for half billion dollars. So if it's 
good for the private sector to turn and hire a small business 
as a prime contractor, why is it that it's not good for you?
    So, Mr. Preston, are you going to direct a PCR to look into 
this?
    Mr.Preston. Yes. We will look into it.
    ChairwomanVelazquez. Mr. Dunne, since the work of the VA 
hospital has been divided into five phases--general design, SAL 
utility phase, energy planned phase, foundation phase, and a 
build-out phase--will your agency commit to at least one of 
those phases being awarded for a local, small business?
    AdmiralDunne. The agency will commit to following the 
contracting process in giving of all able contractors an 
opportunity to bid on any element of our contract.
    ChairwomanVelazquez. Let me ask you: Portions of these 
phases could easily be done through the 8(a) program either as 
a set side or for those contract portions over 3.5 million 
competitive among just 8(a); will the VA commit to this?
    AdmiralDunne. The VA will commit to continuing the 
contracting in accordance with all of the legal capabilities 
that we have in making opportunities available to every 
qualified contractor.
    ChairwomanVelazquez. Let me say this to you, sir, and to 
the SBA, Mr. Preston, we are going to be watching what your 
agency is going to do. We are not asking you to give a handout 
to small businesses. We are asking you to follow the law. And 
we are going to look and see what contracting goals you have 
established for small businesses and minority and women-owned 
businesses.
    Mr.Preston. Chairwoman, my district rep just informed me 
that we are working through the district office to provide a 
recommendation for local businesses to the VA and to see what 
we could do to help with that particular contract.
    ChairwomanVelazquez. Thank you. I know that Mr. 
Westmoreland has to leave, and he would like to make a 
statement.
    Mr.Westmoreland. Thank you, Madam Chairlady. My grand mamma 
used to say sometimes you get between a rock and a hard place. 
And I see six people between a rock and a hard place down there 
because I know that your agencies are probably doing everything 
they can to work at the fastest pace possible to bring this 
region back to--if it ever could be brought back to a normal 
condition that it was prior to these two natural disasters.
    And while right now you are maybe getting talked to about 
not using the right percentages of minority contractors or 
small businesses, at the same time, if you weren't as far along 
down the road as you are today with what you have completed, 
you would be getting hollered at about not getting this work 
done. And sometimes those things just don't mix and match as 
quick as you would hope they would. So my hat's off to you for 
the job that you-all have done so far.
    And I will just leave with this little bit of advice 
about--and I hate to leave you-all. We're having such a good 
time, but I have got to go back to Atlanta--let me just say 
this to you, you can't imagine what it's like to sit on this 
end that we sit on. And Mr. Melancon, and Mr. Jefferson, and 
Mr. Pickering, and Mr. Wicker, Mr. Jo Bonner, the boys along 
the Gulf Coast that have suffered this kind of damage. And I'm 
sure they hear constantly from their constituents about these 
things that we don't understand about how Government operates. 
And my suggestion would be simple to you. And I can't believe 
that you-all haven't done this or maybe you-all have done this, 
I don't know. I would have somebody from my office assigned to 
each one of those congressional offices and I would go by once 
a week and I'd find out what was going on in their district. 
Because I promise you, if you go to the grocery store or if you 
go to the Rotary Club or Kiwanis Club or wherever you go, you 
are going to hear from your constituent about some thing that 
the Government didn't do for them or that the Government did to 
them.
    So I suggest that you-all stay in constant communication. 
That you are able to discuss these issues. And for the 
Chairlady, I have sat on this committee for three years with 
her. I can promise you that she is not going to be satisfied 
until she sees an increase in the minority businesses, in small 
businesses, especially those minority small businesses get a 
fair crack at government contracts, which we all believe that 
they should.
    So my suggestion to you on that is I would give her a 
report once a month as to how you're coming and especially in 
these projects along this Gulf Coast region.
    Madam Chairwoman, I want to thank you for having me down 
and letting me participate in this. And if it's okay with you, 
I'm going to leave and go catch a flight. Thank you.
    ChairwomanVelazquez. Mr. Jefferson?
    Mr.Jefferson. Thank you, Madam Chair, I want to ask about 
the bonding program because it's come up with the VA and a few 
other places. I'll go back to Mr. Preston and ask him about 
this.
    Just after Hurricane Katrina, the SBA delayed the schedule 
fee increase and the surety bond guarantee program for six 
months from October 1st, 2005 to April 3rd, 2006, to assist 
small contractors needing bonds to participate in the 
rebuilding of the Gulf Coast area.
    However, that period, of course, has long since passed. One 
idea that's been proposed in the previous Congress would allow 
the SBA administrator to use rates approved by the local 
insurance commissioner in the state in which the contract is 
let or is to be performed.
    Removing these bonding barriers, whatever they are, to 
small businesses is really the key to making these available. 
If they set aside contracts to whatever they do, and then the 
small business folks can't meet the bonding requirement, it's 
really all for naught.
    Do you have any ideas as to how we can assist in this area 
more than you are already doing to make sure that when these 
contracts are broken down and they are reachable by small 
business folks, that they'll be bonding capacity in place for 
them to help them to meet the requirements to do these jobs?
    Mr.Preston. Yeah. I think part of the challenge is the 
bonding limit. And part of the challenge is the size of the 
bonding program. And we would be open to talk about working 
with you-all to expand that limit.
    Mr.Jefferson. What should we do to do that, though? 
Whatever we need to do, we need to know it because we want to 
do it to make sure it's available here.
    Mr.Preston. Right. I think we would be happy to work with 
you on that. The other thing that we can do pretty actively is 
work to joint venture numerous small businesses together to 
expand their capacity as well, which can partially address that 
issue.
    Mr.Jefferson. What's the bond limit now that you are 
working with?
    Mr.Preston. It's $2 million.
    Mr.Jefferson. Now, explain that to me.
    Mr.Preston. It's the amount that we would guarantee. It's 
the amount that we would back the insurance company for behind 
that.
    Mr.Jefferson. Madam Chairlady, with the bill that you have 
pending in Congress to be passed, we haven't yet gotten out 
from the floor yet, huh?
    ChairwomanVelazquez. Next week.
    Mr.Jefferson. All next week. This bonding issue is a real 
key part. But I don't know to the extent we addressed it, but 
it is still addressable, I'm sure next week, if we wanted to. 
And I would just like to know if the Administrator would back 
the notion that we raise the bonding guarantee limit from $2 
million to some other figure that would permit more opportunity 
down here in the Gulf region especially.
    Mr.Preston. Yeah, we'll work with your staff on it. We'll 
actually call the Chairwoman's staff to work on it.
    Mr.Jefferson. Because this could be included as early as 
next week in legislation that's on the floor which I'm sure we 
could pass out of there without any problem with the 
Chairlady's leadership on that.
    ChairwomanVelazquez. Mr. Melancon?
    Mr.Melancon. Thank you, Ma'am. General Strock, I have got a 
question that I asked in the Katrina Committee of the Corps, 
and they told me they were going to get me that information. 
The Katrina Committee ended and I still have yet to see that, 
the cost paid or the price paid by the Corps per cubic yard of 
material collected and disposed of at the top, first primary 
contractor.
    If you could do that for me, I would appreciate it.
    GeneralStrock. Is that just in general, sir, on this 
specific parish?
    Mr.Melancon. Yeah. We went to Federal Court trying to get 
this number and they say it's not public information. I beg to 
differ, and I hope I don't have to speak for it; but somebody 
ought to be able to give us that number. And, you know, 
everybody said, Well, I don't know. And we're 19 months, and 
we've picked up how many million cubic yards? Several hundred 
million cubic yards?
    GeneralStrock. About 100 million, yes, sir.
    Mr.Melancon. And so somebody has got to know that number. 
If you could, get that for me. And I would like it pretty quick 
because I know somebody has got to have it over there.
    GeneralStrock. Sir, I will give you that number, and I'll 
tell you why we cannot do that, but I guarantee I'll get an 
answer to you.
    Mr.Melancon. Okay.
    GeneralStrock. You're looking for the tiering--
    Mr.Melancon. That number may settle a whole lot of problems 
we've had in this area.
    GeneralStrock. You're looking for the tiering; what the 
prime got versus the second sub, third sub and so on.
    Mr.Melancon. Yeah. One of the things that I have been told 
and told this by a contractor, or a representative, I should 
say, of a contractor, that Mississippi has less tiers than 
Louisiana. Is that so? Do you know that? Is that a frequent 
event? Or is that just maybe one contractor?
    GeneralStrock. Sir, I don't know that, but one thing I can 
tell you that we learned in this event is that in future 
contracts, we will specify as part of the proposal how they 
plan on subcontracting, how many tiers and so forth. We will 
require them to tell us in advance.
    Mr.Melancon. Why can't we make that change since we have 
been making changes with the price on the jobs that they are 
doing, why can't we make that change now?
    GeneralStrock. I don't know the answer if we can do it or 
not.
    Mr.Melancon. We ought to be able to at least find out 
exactly what every contractor that's the prime, whether it's 
the low bidder or whoever, what they are collecting, how many 
tiers they have going down. I'm told in Mississippi it's three 
tiers. In Louisiana, I'm told it's five to seven depending on 
who you are talking to. And I'm also told that the price per 
cubic yard that's being paid over here might be as much as 
three times more than what is being paid in Mississippi.
    I don't know that. I can't get the numbers.
    GeneralStrock. Sir, I will get that to you if I can. Each 
contract, though, is a little different. Debris here in an 
urban environment in New Orleans is significantly different 
than the debris you will find in a rural environment in 
Louisiana and Mississippi. So it's very difficult to compare 
one contract and one situation to another. We'll do what we 
can.
    Mr.Melancon. And I agree with that. I don't think St. 
Bernard and Lower 9th Ward are going to have a whole lot of 
difference depending on the contract work.
    Mr. Preston, we talked a while ago--I think you said 22 
percent of the contract--and maybe the Chairlady got it, and I 
didn't pick it up--22 percent of the contracts are small 
businesses. And with her asking about the different 
corporations or businesses that are doing it, does that 
squirrel your number?
    Mr.Preston. I guess 22 percent of the contracts were local 
businesses. Actually, 29 percent, I believe, overall were 
small. But the Chairwoman's comment is that they are not small, 
local businesses. My number is somewhat higher than hers. I 
think my number is 12 but we'll work with you-all to reconcile 
the number. But it's still--it's a solid number, but it's not 
enormous.
    Mr.Melancon. I think what I would like to try to do, Madam 
Chairwoman, is if we could try and get--because, as you know, 
we can make numbers do whatever we want them to do. And what I 
think we need to get is for all agencies numbers with regard to 
small business contracting, with regard to 8(a) contracting, we 
need to get everybody on the same formula, the same basis. And 
if we could, maybe we could get staff to work with an agency, 
get one and then let's go back and look and see what those 
numbers really are a comparative basis. If that's possible.
    I don't know if I've got any time left. I have very little. 
I give it back to you.
    ChairwomanVelazquez. Okay. Mr. Preston, earlier this year 
at the Committee's budget hearing, we asked as a part of the 
record that the agency provide information on all of the local, 
small business contracts that SBA had worked with the other 
agencies to secure it.
    SBA wasn't able to identify seven. So given that, Mr. 
Preston, Administrator Preston, would you commit to meeting 
with each of the agencies that are at this table to identify 
five prime contracting opportunities for small and minority 
businesses including a process to ensure that local companies 
are included? And I am going to ask you to do that and report 
back to this committee in 30 days.
    Mr.Preston. Great. I'm surprised we were only able to 
provide seven.
    ChairwomanVelazquez. I have your answer right here.
    Mr.Preston. Okay. We've worked with just numerous 
businesses.
    ChairwomanVelazquez. We just received a letter from your 
office two weeks ago.
    Mr.Preston. Okay. My understanding of--in fact, we talked 
about it earlier today--my understanding is the request was for 
the number of Form 70s that we issued on HUBZone companies. So 
there may have been some confusion on the request because we've 
actually issued 27 Form 70s and worked with hundreds of small 
businesses.
    ChairwomanVelazquez. Sir--
    Mr.Preston. So I apologize if we misunderstood the request.
    ChairwomanVelazquez. We will work with your staff, but 
that's not correct.
    Mr.Preston. Great. Thank you.
    ChairwomanVelazquez. I'm going to excuse the panel now. I 
want to thank all of you for coming here today. As I mentioned 
to you, we will continue to monitor the situation about 
procurement practices with local and small businesses. And I 
will excuse you with one caveat. On the second panel, we are 
going to have local, small businesses participating. I will ask 
for each one of you to identify the staff person for the record 
that will remain in this hearing.
    Mr. Preston?
    Mr.Preston. Tee Roe.
    ChairwomanVelazquez. Ms. Doan?
    Ms.Doan. Karen Kurksy.
    GeneralStrock. I'll stay myself.
    Mr.Schneider. I'm going to stay.
    Mr.Finley. I will stay.
    ChairwomanVelazquez. Mr. Dunne?
    AdmiralDunne. I will be here also.
    ChairwomanVelazquez. Thank you very much. The panel is 
excused.
    ChairwomanVelazquez. On this second panel, our first 
witness is Mr. William Shear. Mr. Shear is the Director of 
Financial Markets and Community Investment at the U.S. 
Government Accountability Office. Thank you, Mr. Shear, and 
welcome to the Committee for the second time recently.

  STATEMENT OF WILLIAM SHEAR, DIRECTOR, FINANCIAL MARKETS AND 
  COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr.Shear. And I'll thank you again. It's a pleasure to be 
here, Madam Chairwoman, and Members of the Committee. I am 
pleased to be here in New Orleans to discuss small business 
participation in the rebuilding of the Gulf Coast in the 
aftermath of Hurricane Katrina.
    My statement today is based on a report we issued last 
month under the Controller General's authority describing the 
extent to which small businesses participated in these Federal 
contracting opportunities.
    Our report addressed contracts awarded by the Department of 
Homeland Security and Defense, U.S. Army Corps of Engineers, 
and the General Services Administration.
    Here, I will discuss first the amounts that small and local 
businesses receive directly from these contracts with these 
agencies for relief and recovery efforts related to Hurricane 
Katrina. And second, the extent to which small businesses 
receive subcontracts for relief and recovery efforts.
    In summary, small businesses receive a total of 28 percent 
for relief and recovery efforts. In summary, small businesses 
received a total of 28 percent of the $11 billion in 
contracting dollars that these agencies directly awarded in 
response to Hurricane Katrina, between August of 2005 and June 
of 2006.
    DHS awarded the highest dollar amounts to small business 
and GSA awarded the highest percentage of its Katrina-related 
contracting dollars directly to small businesses. Small 
businesses in Alabama, Mississippi, and Louisiana, received 66 
percent of the $1.9 billion awarded to business in these 
states. With respect to small business subcontracting 
opportunities, required information was not consistently 
available in official procurement data systems for these 
agencies.
    For example, the systems had no information on whether DHS 
or GSA required small business subcontracting plans for 70 
percent or more of the contracting funds.
    In addition, the agencies often did not provide reasons for 
their determinations that plans were not required, even though 
Federal rules require such documentation. And such information 
should have been readily available.
    Because of the incomplete information about subcontracting, 
we were not able to determine the extent to which agencies 
complied with contracting rules and gave small businesses 
maximum opportunities to win subcontracts.
    We concluded that demonstrating compliance with the rules 
about subcontracting compliance is important for reasons beyond 
just documentation.
    By requiring these plans, agencies commit prime contractors 
to specific goals providing opportunities to small businesses 
and give themselves tools, incentives as well as sanctions that 
they can use to ensure that contractors engage in good faith 
efforts to meet their small business subcontracting goals.
    In doing so, the agencies ensure compliance with Federal 
procurement regulations, and that small businesses have all of 
the practical opportunities to participate in Federal contracts 
that they are supposed to have.
    Therefore, we made recommendations to the agencies to more 
transparently disclose the extent to which subcontracting 
opportunities are available to small businesses. We 
recommended, first, that the agencies issue guidance 
reinforcing the need to document in publicly available sources 
their decisions regarding subcontracting plan requirements; 
and, second, consider asking the Inspector's General to conduct 
reviews to ensure that this guidance and requirements are being 
followed.
    The agencies generally agreed with our recommendations and 
describe various steps that they are taking to implement them. 
We plan to follow up with the agencies on their efforts to 
implement these recommendations.
    Madam Chairwoman, this concludes my prepared statement. I 
would be happy to answer any questions.
    [The statement of Mr. Shear may be found in the Appendix, 
on page 108.]
    ChairwomanVelazquez. Thank you, Mr. Shear. Our next witness 
is Mr. Ian Alexander Dreyer. Mr. Dreyer is Vice President of 
Perez, APC, a 60-year-old architectural and engineering design 
firm based in New Orleans.
    Welcome.
    And I would recommend to make a presentation for about five 
to seven minutes, but close to five minutes, please.

 STATEMENT OF IAN ALEXANDER DREYER, VICE PRESIDENT, PEREZ, APC

    Mr.Dreyer. Thank you, and good afternoon. Chairwoman 
Velazquez and members of the Committee, thank you for giving me 
the opportunity today to discuss the role small businesses are 
playing in rebuilding the Gulf Coast.
    My name is Ian Alexander Dreyer, as previously stated. I am 
Vice President of Perez, APC. We are a 67-year-old company 
based here in New Orleans that provides architectural and 
engineering design services.
    Our recent projects included: Ascension Parish Courthouse 
in Gonzales, Louisiana; Pearl River Junior High School; and the 
Natchitoches Events Center.
    Owned by a Hispanic female, Perez, APC has qualified as an 
8(a) firm. Even before joining the 8(a) program, we had done 
work as a subcontractor for the Air Force and as a prime 
contractor for the Louisiana Air National Guard and Army Corps 
of Engineers. We are currently working on three subcontracts 
for the Army Corps of Engineers.
    In October, we bid on a GSA contract for architectural and 
engineering services in Louisiana. The solicitation was for 
Katrina-related repairs to GSA buildings throughout Louisiana. 
There was an 8(a) set aside. We were perfect for the contract 
as initially solicited, but it was later canceled.
    During our telephone debriefing, I was told that we 
fulfilled all of the requirements, but they feared our firm was 
too small to handle the number of task orders and that we would 
be overwhelmed.
    The contract has been offered a second time, but with no 
set asides. The solicitation is due later this month.
    We have demonstrated over the years that we are able to 
expand based on the size of the contract. We were recently the 
prime architecture and engineering firm on the construction of 
Harrah's Casino, a project worth $400 million. For that 
contract and similar projects, we grew to meet the demands of 
the workload. In the last 10 years, our staff has been as small 
as five people and as large as 50, all employees, not including 
contract labor and sub-consultants.
    In fact, all businesses manage their labor force in this 
way. It is extremely rare for the timing of contracts to be so 
perfect that a new one starts exactly as the last one ends. 
Businesses do not need to have idle employees sitting around 
waiting for contracts. Both large and small companies deal with 
the same staffing issues.
    If anything, small businesses handle these fluctuations 
better and with lower overhead. They can hire people much 
faster when heavy project loads require it. Many of us at the 
company have worked for huge, multi-national architecture and 
engineering firms and have found that our small firms compete 
with them very well, for the same work, and produce as well or 
better than they do in part because of our inherent 
flexibility.
    I believe that GSA and all of the Federal agencies 
participating in the rebuilding effort should be selecting 
local small businesses to participate in rebuilding contracts 
based on their track records and experience.
    Through our past service to Federal agencies and successful 
management of simultaneous IDIQs and large-scale projects, we 
have demonstrated that, though we are a small firm, we are 
well-equipped to do the work.
    There are many small businesses in our area that, like us, 
stand ready and willing to help rebuild Louisiana.
    Thank you again for this opportunity to present our 
experiences. I look forward to answering your questions about 
how local small businesses can help rebuild the area.
    [The statement of Mr. Dreyer may be found in the Appendix, 
on page 124.]
    ChairwomanVelazquez. Thank you, sir. Our next witness is 
Mr. Edwin Jones. Mr. Jones is the President of EJES, Inc., a 
multi-discipline engineering services firm. EJES has three 
offices around Louisiana.
    Welcome, sir.

        STATEMENT OF EDWIN JONES, PRESIDENT, EJES, INC.

    Mr.Jones. Madam Chairwoman, I want to thank you and the 
Committee for giving me the opportunity to speak on 
participation in this Gulf Coast region. I want to start by 
giving a background of myself. I'm born and raised here in the 
State of Louisiana, a Southern University graduate from the 
College of Civil Engineering in Baton Rouge.
    To give a quick history on EJES, we have completed over 75 
different civil engineering infrastructure-type projects 
throughout the State of Louisiana. At the present time, we have 
prime consulting work with the City of Baton Rouge, with the 
City of Alexandria, the City of Shreveport, and also a 
subconsulting project with the New Orleans airport.
    The one thing I want to emphasize is that I've been doing 
work here with my company since 1998. So even before the 
hurricane came and devastated New Orleans, we were already 
existing and doing work and participating in Louisiana.
    One thing I want to key in on is: We have an existing IDIQ 
contract with the Tulsa District already. And at the present 
time, we got the contract signed about February of '06. Still 
today, we have not done any meaningful work with the Tulsa 
District.
    So we went to the chief contracting officer. Rick Hendrick 
agreed to call the New Orleans District and say, We've got an 
8(a) firm; they do good work.
    You know, we could do work here in New Orleans. The New 
Orleans District said, No, we know you guys have the 
qualifications, but we want you to have a New Orleans contract.
    I want to highlight something that I just got from the 
Corps on February the 6th. It says, "Your firm was among the 
most highly-qualified firms, but was not among the selected 
firms." This is what the New Orleans District just wrote me on 
February 6th. It says, "Even though your firm was not among the 
selected firms, you are among the most highly-qualified, and 
will be notified if the workload requires additional contract 
award."
    So we put together a complete team of minority companies 
and submitted it for a contract with the New Orleans District. 
We had four outstanding local firms on our team from BFM, 
Eustis Engineering, Parsons Brickenhouse (phonetically spelled) 
for this contract. And still, again, we get disappointing news 
on that contract.
    About three years ago we went up to Washington D.C.--maybe 
two years ago, we went up to Washington D.C. And Ms. Bernadene 
Greenhouse was in office then. And she talked to us about 
contract bundling and about being able to have strategic 
alliance team members in order to compete for the large-sized 
contracts. Because one of the excuses is: You don't have the 
capacity in order to do a major Corps contract.
    So we assimilated a whole strategic alliance of small 
businesses. When we did that, we were successful to win the 
Corps contract. Also, immediately after the hurricane, Mrs. Kim 
Carter, which was representing the Department of Commerce, 
contacted me. I gave her all my financial information, all of 
my certifications to show that we were a vibrant business in 
Louisiana. And she responded back to us that we were one of the 
number one ranking firms to do business with the recovery work. 
Still again, from her conversation, she got frustrated because 
they were not serious about giving minority business contracts. 
So she said she went to another job.
    Also we have met with the New Orleans District on over ten 
occasions giving our work experience and giving them everything 
that we have to show that we can do this type of work. On every 
occasion, they looked at our experience and they said, You've 
got all of the experience; you've got all of the capabilities; 
you should win a contract. Still, again, nothing.
    I want to submit this for the record because this is from 
the Corps when they said that we are highly qualified.
    ChairwomanVelazquez. Without objection. It will be 
submitted.
    Mr.Jones. Thank you. And really quick to wrap it up, I want 
to submit this IDIQ that I have in place. I will give you a 
example. We have a Tulsa contract. About two weeks ago, another 
company, a major company called out of the Louisville District 
and said, We got work going on in the Tulsa District. But still 
yet we as an 8(a) firm, with a five year, $1 million a year 
capacity to $25 million, they still have not given us a 
meaningful contract. The only contract we have is a contract 
that a majority firm is doing $130,000 of work. And as a team 
we're getting 9,000.
    So something is wrong. I want to end with this: When the 
hurricane hit, it was very close to me, so close to me as an 
owner that I had families coming from New Orleans to stay with 
me during this period. So for me as an owner and native 
Louisianan and as a person that loves this State, I feel that 
it is a crime; and it's a shame that putting all of our time 
and effort into Louisiana to build a business as a black owner 
with the 9th Ward being a majority black area, that we as 
black, African Americans are not getting our fair opportunity 
to do work under this recovery work.
    Thank you.
    [The statement of Mr. Jones may be found in the Appendix, 
on page 126.]
    ChairwomanVelazquez. Thank you, Mr. Jones. Our next witness 
is Mr. Ricardo Pequeno. Mr. Pequeno is the owner of Mid-South 
Plumbing, a 10-year-old company located in Louisiana.
    Welcome, sir.

    STATEMENT OF RICARDO PEQUENO, OWNER, MID-SOUTH PLUMBING

    Mr.Pequeno. Thank you, everyone. Members of the Committee, 
thank you for the opportunity to be here today. My name is Rick 
Pequeno. I am owner of Mid-South Plumbing, LLC, in Slidell, 
Louisiana.
    Prior to the storm, my 10-year-old company was doing very 
well. We were growing thanks to the work on many commercial 
projects. We were involved in doing hotels, shutdowns, repairs, 
banks, you know, high-end houses; and I've even done hospitals 
in my apprenticeship program.
    But since the storm, the amount of work available to a 
businesses like mine has changed. It's declined. There is 
virtually no commercial construction going on. Even though 
numerous office buildings were damaged by the hurricane, they 
are not being rebuilt at this time. My business has suffered as 
a result and is in danger of failing after 10 years.
    After the storm, at my accountant's suggestion, I 
registered with the Central Contractor Registry, CCR. And to 
date, I've received no Federal contract work even with this 
registration.
    Because of the decline in our commercial work, which was 
the cornerstone of my business, I decided to apply for the SBA 
8(a) program. I am already certified by the Louisiana Minority 
Business Council. I applied for 8(a) both electronically and 
with a hard copy application and mailed it in.
    My business was coded as 8(a) in the Central Contractor 
Registry, even though we had not been approved yet. The phone 
calls then flooded in. We received calls from military 
personnel who were suddenly very interested in our business.
    Later, I found out that my 8(a) application had been 
declined. The CCR, Central Contractor Registry, removed our 
8(a) designation in the database and the phone calls stopped.
    I eventually learned that the SBA declined the 8(a) 
application because my brother, who lives 50 miles away, owns a 
company that is in the 8(a) program. On the application, one of 
the questions asked was whether or not I, as the applicant, 
have a family member in the program. I answered the question 
truthfully, that I do; but that I do not own any of his 
company, and he does not own any of my company.
    I was declined because the SBA decided--there is a quote in 
there. And this is a quote from their decline letter to me 
"Current 8(a) program eligibility criteria, CFR 124.105(g), 
require that an applicant concern be declined if individuals 
determined to be disadvantaged for the purposes of one 
participant, their immediate family members, and the 
participant itself, may not hold an aggregate, more than 20 
percent equity ownership interest in any other single 
participant.
    "The fact that your brother owns a current 8(a) 
participant, and you own more than 20 percent interest in the 
applicant firm"--which I don't--"prevents you meeting 8(a) 
eligibility criteria."
    This makes no sense to me. I am particularly frustrated 
because I'm not getting into the 8(a) program. And that has 
reduced my opportunity to get Federal work, which is the only 
work in town.
    Many additional barriers do remain. Federal work also 
requires bonding. Commercial work does not. I am working 
closely with my banker, Ann Watsky, First Bank, who has 
provided me with an increased line of credit, and will finance 
my company for larger projects. My banker and my suppliers 
recognize the important role that small businesses like mine 
have on this economy, both as employers and as the main source 
of community investment.
    I wish that the Federal Government would also recognize the 
importance of Louisiana small businesses and be as responsive 
as some local partners have been. My employees and I are ready 
to begin work and help rebuild our community.
    Thank you for your concern about Louisiana Businesses. I 
welcome any questions.
    [The statement of Mr. Pequeno may be found in the Appendix, 
on page 128.]
    ChairwomanVelazquez. Thank you, Mr. Pequeno. Our next 
witness is Mr. Charles Priestly. Mr. Priestley is the Managing 
Member and Director of Operations at Hummingbird Aviation, LLC.
    For the last seven years, Hummingbird has owned and 
operated helicopters and fixed-wing airplanes for 
transportation and cargo handling.
    Welcome, sir.

 STATEMENT OF CHARLES PRIESTLEY, MANAGING MEMBER, DIRECTOR OF 
             OPERATIONS, HUMMINGBIRD AVIATION, LLC

    Mr.Priestley. Chairwoman Velazquez and Members of the 
Committee, thank you gentlemen for the opportunity to talk to 
you today about the challenges my company has faced while 
trying to participate in the rebuilding efforts after Katrina.
    My name is Charles Priestley and I'm the Managing Member 
and Director of Operations at Hummingbird Aviation. For the 
last seven years, we have owned and operated helicopters and 
fixed-wing airplanes for transportation and cargo handling. Our 
employees are based and supported out of Hammond, Louisiana.
    In our previous work on Federal contracts, including the 
Department of Defense, we have successfully navigated the 
agency processes, which can be very different from how we seek 
out work in the private sector. But since Katrina, we have 
found the difficulties associated in dealing with Federal 
agencies to be a real barrier to rebuilding our business, and 
our economy.
    We have a large variety of services that we could be 
providing to assist in cleanup and reconstruction projects.
    Unfortunately, many agencies do not realize how the work we 
do fits into what they need done. For example, when procurement 
officials see the name "Hummingbird Aviation," they don't know 
we work in debris removal, or picking up logs and other loads. 
We basically just kind of get a blank stare or a look of 
confusion.
    For this reason, I have invested time and money in both 
outreach and advertising. Vendor registries that are being 
utilized by the Federal agencies have proven unsuccessful for 
our line of business.
    Still, we found that there are very few ways to reach a 
decision maker at agencies and let people know what we have to 
offer. As a Louisiana resident, it's especially important to me 
to reach out in the parishes and let people know we are 
available. Finding out where the right people are seems to be 
impossible. When I do make contact with someone, they always 
seem to be low-level staff members who simply cannot or will 
not run a small business up the chain when they admittedly do 
not understand how our business can provide solutions.
    Despite these road blocks, we have made numerous inquires 
and applications over the last 20 months. Each of these costs 
time and money to prepare. Although we are essentially 
presenting our company with our years of experience and 
previous work for the Federal Government, the process is 
different every time, meaning a new application procedure, new 
certification rules, more time and more money.
    We are the exclusive facility that conducts training for 
every helicopter inspector in the Federal Aviation 
Administration. We are an approved DOD air carrier by the Air 
Mobility Command and we operate under four different FAA 
certifications.
    The amount of redundancy in the process has prevented us 
from filling applications that just don't seem worth the up-
front expense.
    Ultimately, we want our qualification to be fairly 
considered. I'm tired of hearing from agencies that we do not 
have the necessary experience or are not viable. We were 
performing similar services before Katrina and have 
demonstrated our ability to do so now.
    I want future contracting with the Department of Defense 
and the Department of Homeland Security because I believe our 
company has an important service to offer, and we can do it 
competitively.
    Thank you, Ma'am. And I'll be available for any questions.
    [The statement of Mr. Priestley may be found in the 
Appendix, on page 132.]
    ChairwomanVelazquez. Thank you for your testimony. And 
taking time out of your businesses to be here today.
    Mr. Shear, the General Accounting Office issued a report on 
small businesses and Hurricane Katrina on March 1st, 2007. What 
do you set out to find in your story?
    Mr.Shear. When we first started talking with House Small 
Business and Senate Small Business and looking at the issue, 
what was emphasized to us was that the Congress and the small 
business communities, in particular, in plain leadership in 
this area, had to know what the facts were. And the committees 
were very mindful of how the Federal procurement systems have 
shortcomings. But they said try to get behind it, try to dig 
for the numbers, try to give us the best picture possible of 
what opportunities small businesses have had with these 
contracts, both with respect to prime contacts and 
subcontracting.
    That's what we set out to do.
    ChairwomanVelazquez. Mr. Shear, I gather from your 
testimony that you had difficulties finding subcontracting 
data. What specifically was the problem?
    Mr.Shear. The problem was that there were requirements as 
part of the Small Business Act, the Federal Acquisition 
Regulation, for contracts for large businesses over certain 
thresholds, where there are subcontracting opportunities, to 
provide information into the Federal procurement system on 
subcontracting plans. And when there aren't subcontracting 
plans, the reasons why there weren't subcontracting plans.
    So we found this terrible deficiency. So, again, in this 
context of trying to collect the most information to address 
this issue, this deficiency, in terms of the agencies reporting 
on subcontracting opportunities.
    ChairwomanVelazquez. Although the General Accounting Office 
didn't address waivers in its report. GSA raised the issue in 
its comments. Have you given any thought to the waiver issue?
    Mr.Shear. Yes. And it's true we didn't address that during 
the course of our work, but in that comment letter and since, 
we have certainly thought about it among ourselves. We have 
talked about it, and we have discussed it with the agencies. 
And I think what is really important--and our thinking at this 
stage--and what it is, they're thoughts, is that what 
alternatives are there to having waivers for Small Business Act 
provisions that really get to the heart of trying to include 
small business. And Stafford Act provisions of trying to 
involve local businesses.
    So what we have really focused on alternatives to waiver 
issues. So let me just kind of give an example of some of the 
thinking along here.
    Even though you could say that, This was an emergency, a 
disaster of major proportions, many of the contracts are of a 
long-term nature for response and recovery. By their very 
nature--a plan is important for any type of contracting 
measure. So I'd say contracting in kind of like our initial 
view is--contracting requires a plan. And part of that is a 
subcontracting plan and part of that is involvement of small 
businesses including small disadvantaged businesses and the 
other.
    So in most situations, I think that the provisions of the 
Small Business Act and what the Stafford Act is trying to 
achieve can work consistently with one another.
    There could be certain facts and circumstances where there 
could be some conflict. So let me just identify two of those 
areas. And, again, we're thinking what are the alternatives--
our major things, what are the alternatives to waivers?
    The first one would be it's an emergency situation, you 
have to deliver ice. You have to deliver provisions over a 
short period of time. Well, with respect to that, one of the 
things that we have identified in this work and even in 
previous work and in previous testimonies, is the importance of 
planning.
    I know in front of this Committee I talked about the 
importance of planing in the SBA's Disaster Loan Program. As an 
agency, we've talked about failures in planning for disasters 
of this magnitude. But one of the things that we've identified 
in contracting--as far as planning, it can ease any tension 
when it does exist, between responding to an emergency and 
including small business.
    The role of prenegotiated contracts becomes very important 
to that. And part of prenegotiated contracts does and would 
include plans for small business involvement when those 
contracts actually do go to large businesses.
    The second area that I want to point out, in our initial 
thinking, we don't really know whether waivers should even be 
the issue that's discussed. Maybe it's deferral. And that again 
might be very much under very specific, you know, facts and 
circumstances where you might require either a subcontracting 
plan, you know, at some later date. It could be days later 
after a contract. It could be weeks later. Maybe it could be 
more than that. But the idea is that maybe it would be 
deferral. That would probably require a statutory change. But a 
deferral could be an alternative where especially if the 
original contract stated you had to make good faith efforts to 
develop a plan and include small business, maybe there's some 
avenue there.
    But, again, our focus on that as we've thought about it, 
isn't to go out and change the Small Business Act, but the idea 
is what alternatives are there to try to address these 
emergency situations?
    ChairwomanVelazquez. Thank you, Mr. Shear.
    Mr. Dreyer, I guess you were here when I was asking the 
questions to the VA?
    Mr.Dreyer. Yes.
    ChairwomanVelazquez. So you heard that he testified that 
there was no plan to use local small business prime contractors 
for the new VA Medical Center. Does the design work sound like 
something that your firm can do?
    Mr.Dreyer. Absolutely. If not mine, I can easily refer them 
to many other small firms here in the New Orleans area and 
probably the larger Louisiana area that could easily handle 
that sort of work.
    ChairwomanVelazquez. Mr. Priestley, you mentioned in your 
testimony regulatory burdens associated with contracting. Could 
you expand on how that has limited your ability to secure 
Federal work?
    Mr.Priestley. Yes, Madam Chair. First off, I have to 
express a little level embarrassment here. We're kind of an 
oddball company in that up until the past two weeks we had two 
business locations. One in Connecticut and one in Hammond, 
Louisiana.
    We got down here just as Katrina hit. So unfortunately, we 
are not a business that existed before Katrina in Louisiana. 
But in the process of responding, we were probably one of the 
heaviest used helicopter companies by FEMA during the response. 
And we kind of fell in love with the place and made a business 
decision to move here.
    We have since closed Connecticut and moved the entire 
operation into Hammond, Louisiana. So I just wanted to make 
that clear. On the regulatory burdens, I discussed--an example 
would be for contracting with the Department of Defense, which 
also includes the U.S. Army Corps of Engineers, there is a 
requirement and a just requirement that any commercial vendor 
be approved through this air mobility command. And that's a 
Federal requirement under 32CFR part 861.
    What we have found in trying to contract with other 
Department of Defense agencies is that the Navy, the Marines 
and even some tenants of the Air Force, they all have their 
separate, private certifications. And they don't recognize the 
dedication and the expense that an operator takes in becoming 
AMC approved.
    To the Corps' credit, I would say throughout the entire 
United States, they are pretty diligent in adhering to that.
    So what happens is for us to get an AMC certification it 
takes about four months and probably 20 to $30,000 in cash out 
of pocket.
    Now we go to contract with the Navy and they want another 
certification, another chunk of change. It just seems that 
there should be--there is a requirement and standardization by 
Federal law. I don't know why they can't follow it.
    ChairwomanVelazquez. You have had success in securing 
Federal contracts in the past. So in your observation, why has 
the work associated with Katrina recovery been so difficult to 
secure?
    Mr.Priestley. I have a couple of observations on that. I 
think one thing is, in general, as a small business interest, 
we're limited in staff personnel. And several years ago as an 
example--the Central Contractor Registry, that popped up. And 
my understanding--I'm not saying this is their true case--but 
in my understanding as an individual, the purpose of the 
Central Contractor Registry was to simplify the contracting 
mechanism and channel and make it a conduit to all of the 
Federal agencies. So that as a small business, I don't have to 
almost have a full-time employee that can navigate all of the 
various Federal agencies and get on all of their individual 
registries and market to all of their individual solicitations. 
CCR was supposed to take care of that.
    Well, what I find is, whether it be DOD or other Federal 
agencies, sometimes it's on Central Contractor Registry; 
sometimes it's on a private, hidden registry associated with a 
specific military installation or Federal agency.
    So that's a real problem. And the final part is, I don't 
believe the registries work. And I'm in an oddball industry. We 
provide custom, on-demand services and tailor what we do to the 
customer's need.
    If I made widgets or had a civil engineering practice or a 
law firm, maybe it would be easier. I don't know that. So what 
I find is--if you-all remember, back when Katrina--when the 
initial response was going on just down the road here at Tulane 
Medical Center, all of that stuff was going on, you couldn't 
get enough helicopters down here.
    Prior to Katrina, we were on the CCR registry, GCA, DHS, 
all of these registries listed as "helicopter" and having eight 
or nine NAICS codes listed, which clearly showed what we could 
do. We never got one call or e-mail from the Federal Government 
requesting our services as a helicopter operator.
    It just proves to me that they don't work.
    ChairwomanVelazquez. Before I recognize Mr. Jefferson, I 
would like to ask a question to Mr. Jones. I understand that 
your company was told by GSA on competitive IDIQ 8(a) contract, 
that your business will be overwhelmed by the work. What was 
your reaction to that?
    Mr.Jones. Okay, thank you. Well, one of--most all of the 
time in 8(a) industry when you go in to pursue a Federal 
contract, they tie it specifically to capacity. And they said 
that we would be overwhelmed. But what they did not--they 
didn't look at the total package of what I was bringing. I told 
you I had created a strategic alliance, members of small 
disadvantaged businesses.
    All of these businesses were proven and had excellent track 
records. And combined with all of the team members, we had an 
awesome team. But they looked strictly at EJES. Even EJES as a 
small business, we still, combined had about 23 full time and 
about seven part time on staff. So we did have the capacity.
    One of the things that I think that's really biased in the 
government--and the reason I can say this is because before I 
started my company, I worked for the Federal Government. I 
worked for the Federal Aviation Administration. I know how they 
give out contracts. And I'm going to use this word so don't 
anyone cringe when I use these words, but it's a-good-old-boy 
system.
    The number one thing I want to say is that this it how it 
works--if it's basketball, if it's dancing, and football, they 
automatically think African Americans do it well. But in this 
industry of engineering, in this industry where it's technical 
design and computation of different technical abilities, then 
they tend to cringe on our ability to perform this work. It 
doesn't matter whether we worked for Bechtel. It doesn't matter 
if you did major engineering projects.
    Before I came to own this company, I did $300, $400 million 
design projects as the engineer of record. That was fine 
through the agencies. But when we come as a company, they start 
talking about capacity, and then they question whether we 
really have the capability, even though we have tons of 
references, even though they can come and tell us that we are 
amongst the most highly qualified company. At the end, we don't 
get selected.
    ChairwomanVelazquez. Well, would it be surprising to you no 
know that two-thirds of the contracts that were being awarded 
here, has gone to only ten companies?
    Mr. Jefferson.
    Mr.Jefferson. Thank you, Madam Chair. Your last comment was 
leading me to a question, but I'll ask something a little 
different: Are you aware of other minority engineering 
companies in the area? I guess you would know who they all are?
    Mr.Jones. Yes.
    Mr.Jefferson. Do you know whether they have had the same or 
similar experience that you've had in trying to get the work 
through the various agencies?
    Mr.Jones. Yes. I talked to the owner of Julian Engineering. 
It's a very popular African American company here. It's the 
same story. They challenge us on capacity. They really just 
don't want to believe that we can do this work. Even though--as 
far as myself--I'm a licensed civil engineer in six states by 
exam, no grandfather, by exam, by a test from the national 
board.
    Mr.Jefferson. So no grandfather. Your grandfather was an 
engineer in other words.
    Mr.Jones. Yes, I hear that from a lot of the other A&Es, 
small businesses. And one thing I want to highlight. It's 
different than small businesses. We have small businesses in 
this country with 2000 people. But we are talking about small 
disadvantaged businesses. We are talking about the people that 
were totally affected here from this disaster. What about the 
small disadvantaged businesses that are out here? And that's 
where I think they are missing the boat with these contracts.
    Mr.Jefferson. What do you think a firm like yours could 
bring to these projects that the other firms that aren't from 
here might not be able to bring, that add value to the whole 
effort of recovery?
    Mr.Jones. I'll tell you one thing that I know for sure that 
we bring, we bring--I bring along with EJES, itself, a 
tremendous amount of drainage, box cover, and infrastructure 
improving. But what I really bring is a strategic alliance of 
small businesses. And an example of what people really think 
about us is we have an opportunity right now in South Africa, 
I'm talking about out of the country, that we have been ranked 
No. 1 to do power generation and nuclear-type power plants.
    Now I think that says a lot about our strategic alliance. 
But still here in this city, in this state, in my home state, 
we can't get a conversation when it comes to providing a 
service right here. And we do tons of infrastructure designs 
for major cities all over the U.S.
    Mr.Jefferson. I don't want to put the burden on you, but I 
want to ask you this, and anyone else who wants to answer can: 
What steps do you think this Committee or the Federal 
Government, in general, ought to take to enhance your ability 
to secure contracts? What can be done to make this better, if 
you have any idea?
    Mr.Jones. I think it will come down to accountability from 
our earlier panel. Being held accountable to really, truly give 
firms like myself and the other gentlemen at the table--they 
have to give us an opportunity to do the work.
    I go back to this, they say I'm the one of most highly-
qualified firms that they can get. They gave out four 
contracts. This is not an opportunity where one contract was 
given. This was four contracts. When they sent me this letter 
and told me that I did not qualify to be selected, I really had 
a problem with that.
    Mr.Jefferson. Let me ask you: What was the size of the 
contract that you were seeking in this instance?
    Mr.Jones. It was a $50 million contract, $10 million a year 
for five years in a row, a $50 million contract. And I want to 
echo this, because this is important. They called me for an 
interview. They called me one evening and said, You've got an 
interview tomorrow morning at 10:00. I said, Well, I'm at the 
Army Corps of Engineers Small Business conference in St. Louis. 
They said, It doesn't matter. You get ready for that interview 
at 10:00. This is what I was told. I was at one of their 
conference in St. Louis, Missouri at the Army Corps of 
Engineers Small Business Conference. They called me--I got a 
call from my office saying, You've got the interview in the 
morning at 10:00. It was a phone interview. But still. I still 
was able to pull together all of my team members and go in and 
get that interview completed. And this is the result. It's very 
frustrating.
    Mr.Priestley. Mr. Jefferson?
    Mr.Jefferson. Yes.
    Mr.Priestley. Mr. Jones brings up a couple of really good 
points. And to answer your question, two things: One is that I 
don't think the Government agencies understand what small 
businesses do best; and that is expand and contract. I can 
understand the convenience to a contracting officer to go with 
a large--I'll cut to the chase--bureaucratic company that has 
indefinite resources. But what they don't understand is that 
small business is in a lot of cases a very good economical 
choice because we can't can survive if we can't contract and 
expand as contracts and opportunities come. We do it very well.
    Secondly, I don't know if it's intentional or it's just a 
misunderstanding, but I don't think the government contracting 
agencies fully understand how much of a penalty it is to us to 
issue us an IDIQ or a blanket purchase agreement without a 
schedule of services or some scope of money.
    Now, you can put me on an IDIQ and say, Well, we've got you 
on for three years, and you have given us a list of your 
prices, and we'll call you when we need you. Now, how do I go 
to the bank and say, I've got this opportunity here, and I need 
to invest and go get another aircraft; or I need to hire a few 
more people or something?
    It doesn't mean anything. And then you may never get the 
call. You are under contract for three years and you can 
advertise you are with Corps or DOD, but there's no work.
    Mr.Jefferson. Let me ask this, Chairlady, it's the last 
comment. Those of you who are missing these contracts, have you 
been watching who is getting them? She made a remark that some 
ten or so companies are getting the contracts over and over 
again. Is that your experience and what you are finding out 
there? Maybe the gentleman sitting between you can join in.
    Mr.Pequeno. I'm in the plumbing industry. For instance, 
earlier they were talking about the U.S. Customs Building. I 
went to--my wife and I went to the meeting to see about getting 
the procurement through that. That didn't develop.
    Keep in mind, I'm not registered 8(a) through the 
government. Now, in the state, I am. But not at the Federal 
Government level. And that's one place there--plumbing, I'm a 
plumber. A 30-year career at it. So these trailers that were 
being installed--as I chased these contractors around, they 
were chasing me down because of my license, my qualifications, 
and everything that goes along with it, because we have a 
governing board in the plumbing department that governs the way 
we do things in the plumbing area.
    But, yeah, there were a lot of things myself that I've gone 
through, and it's frustrating, it is really is. As a minority, 
myself--I never considered myself one, I never looked at myself 
like one, still I am. And I probably wished I would have 
addressed this sooner in my career, but I didn't.
    Either way, yeah, it's happened to me too. The same way 
with other companies out there also. It's unfortunate.
    Mr.Jefferson. Mr. Dreyer?
    Mr.Dreyer. Yeah. We have noticed that certain, select 
firms--I can't guarantee that this is Federal work, but 
specific to Louisiana work, that there are several local firms, 
though, on the larger side, who are repetitively chosen over 
and over again.
    And what's curious about that is the variety of sizes. I 
don't know if this is because they are politically connected, 
but competitive firms that aren't any larger than Perez have 
been repeatedly chosen without offering any substantive 
difference, I would say, beyond sort of ownership being 
detected. Now, whether that relates to the Federal level, I 
can't say for sure.
    Mr.Jefferson. Mr. Jones, you mentioned that some individual 
left an agency in frustration, did you say?
    Mr.Jones. Yes. We had a young lady by name of Kim Carter 
that represented the Department of Commerce. And she contacted 
us about four months after the disaster, and she started to get 
us to give her all of our financials. We sent in our tax 
financials for three years. We sent in our 8(a) certification. 
We sent in all of this information. And she basically told me 
after we--you know, over months and months of time we continued 
to call her. She said, Look, I'm frustrated with this issue. 
They are really not serious about giving minorities contracts. 
She stated to me that she was going to go and work for, I 
think, one of the majority firms. I don't know what firm it 
was. But I have not heard from her since, so I'm assuming that.
    We lost all contact. But she was representing the 
Department of Commerce.
    Mr.Jefferson. Mr. Jones, your work, your effort has been 
with the Corps of Engineers for the most part or with FEMA?
    Mr.Jones. We have solicited the Veterans--
    Mr.Jefferson. The VA?
    Mr.Jones. The VA. We solicited the VA out in Oklahoma. We 
solicited to pursue work there, but mostly we have--
    Mr.Jefferson. Is this the VA here?
    Mr.Jones. No, not the VA here. We really targeted the Corps 
here. I mean, we were meeting with Mr. Falcon Hall 
(phonetically spelled) out at the Corps. And we met with them, 
that group over there on at least ten occasions.
    Mr.Jefferson. No other questions.
    ChairwomanVelazquez. Mr. Melancon.
    Mr.Melancon. Mr. Shear, one of the frustrations that I 
experience is, you know, we pass laws, and we don't break laws. 
And I don't expect agencies to break laws. But we have rules 
and regulations that were drafted as guidelines to administer 
the laws or the programs that were passed by the Congress.
    My experience is that no Federal agency seems willing to 
ever waive a rule, even if it's commonsensical, even if it's 
practical; and, particularly, if it seems like it moves things 
forward, particularly in this disaster.
    I guess my question is: Have you ever waived rules in your 
agency?
    Mr.Shear. Have we waived rules that we are subject to? As 
far as subject to congressional oversight, for example?
    Mr.Melancon. Rules that your bureaucrat--that when they got 
the law said, Okay, we are going to do this, and put it out for 
public notice; these are the rules that we abide by? You get a 
special interest. Has there ever been an instance that you 
have, from your knowledge in your agency, where they said, 
Well, maybe we can waive this one, so that we can work this 
better or get something moving or whatever, whether it's an 
emergency or regular program?
    Mr.Shear. Well, I say that we're a Congressional agency. 
The work we do is for the Congress. If we waive rules--my 
answer to that is no, certainly not, not that I'm aware.
    I think there are certain times, in terms of when we put 
out information to Congress and the public, when we do our 
strategic planning, we work within some flexibility that we 
have. And we are very transparent about how we use that 
flexibility to operate.
    But I don't think we unilaterally say, Well, we don't like 
that rule under this circumstance; we're going to waive it.
    Mr.Melancon. Have you every seen any other departments of 
the Federal Government as the accountability officer that has 
waived any rules or regulations to accomplish a task? And we're 
talking about changing bid things in the middle.
    I'm not quite sure I understand some of these things--that 
phrase. So it sounds like, we can do it; but we can't do it. So 
I don't know how specific or detailed your agency gets; but is 
there some way to measure from the accountability standpoint 
when an agency has made an exception to a rule?
    Mr.Shear. There are certainly times where as an 
accountability agency--we find times where agencies may not 
follow the rules. And certainly, we find times when there's 
regulatory--when there are certain regulations in place where 
there might be different interpretations of the rules, where we 
might take issue with an interpretation an agency has of the 
rules.
    So the answer to that is, have we observed times as an 
accountability agency? You know, at a minimum in our work we 
have investigators that look at fraud and issues of fraud. We 
certainly have issues where there might be regulations or rules 
that an agency didn't follow.
    Mr.Melancon. Is it common for attorneys or counsel in 
departments, for them to sit down with the leadership of the 
agency to advise, You shouldn't set a precedent; you can't 
waive that rule. I mean, is that, maybe, a normal occurrence in 
an agency where counsel says, Don't do it?
    Mr.Shear. I don't have the breadth of experience with the 
hypothetical you're talking about.
    Mr.Melancon. I guess, do any of the agencies call you 
before any action and say, Well, we would like to make some 
waivers? Or has your experience only been going in after the 
fact and found that maybe there were some exceptions to the 
rules or waivers?
    What I'm trying to get to is that, you know, we've had a 
precedent-setting event or events in the Gulf Coast. And all I 
keep getting is, Well, we can't suspend the rule; we can't 
waiver; we can't do anything. But, yet, I see things going on 
day-to-day that in some instances looks like they can when they 
want to.
    And I don't know how you audit that or is it possible to 
audit that?
    Mr.Shear. It's possible to audit that. And I think that 
when you start talking about what we observed in this work 
looking at Katrina contracting, it was certain things that I 
haven't observed. I don't take the lead on many acquisition 
issues. We have an acquisition management team.
    I took the lead on this. And we took the lead on this 
within the agency working with our acquisition people because 
of the small business concerns.
    So I don't have the breadth of experience here. For me, if 
you are asking for a personal reaction based on the work that 
I've seen at the GAO and work I've directed at the GAO, I was 
actually glad when GSA said, We know we don't have the legal 
authority to waive a rule, but we had an emergency; and that's 
how they accounted for it after the fact. So I was glad that 
they were forthcoming with us. But at the same token, I can't 
relate it to any other experiences that I'm aware of.
    Mr.Melancon. I'm glad in an emergency there's somebody that 
will take the initiative. Last question, from the standpoint of 
auditing, per se, agencies, do you audit specifically for 8(a) 
contracting or small business contracting and things that are 
provided in the law? Because if they've got some requirements 
in the law, and they are not getting any contracts, it sounds 
like somebody is getting waivers or suspending the rule or just 
ignoring it.
    Mr.Shear. What we'll do in many cases is we audit executive 
agencies and how they carry out the statutory responsibilities 
and their regulatory responsibilities. You know, their 
oversight responsibilities. So the focus is always on the 
agency. In our work for the report we issued on March 1st, our 
focus was on an even higher level than that. But not getting 
down to the individual contract level. To go to a phrase that I 
think you said as far as--you know, you said something to the 
effect of how people like to play with data. That is a real 
concern raised to us. And we think it's an important concern. 
You know, even times we audit to see our agencies following the 
rules; are there ways the agencies can operate more 
efficiently, more effectively?
    The idea of bringing information--this audit in particular 
was kind of higher level in terms of can you account for us for 
what's going on here, and even at a more macro level.
    But we aren't in the business of auditing individual 
contracts, if that's what at you are asking. But we certainly 
audit the programs of agencies and how they carry out their 
responsibilities.
    Mr.Melancon. I don't have any time, and I thank the 
Chairwoman for allowing me to go over.
    ChairwomanVelazquez. Mr. Jefferson. Do you have any 
questions?
    Mr.Jefferson. I want to thank the folks that are here 
because we tried to get a lot of folks here we know have 
problems. And they were really worried about testifying in the 
public about these issues, worried about not ever getting a 
contract. You don't have one now, you'll never get one.
    It shows a lot of courage and a lot of moxie to come here. 
Really, we couldn't do the work without you having shown up. 
And I hope it doesn't penalize you in any way whatsoever. I 
hope it just enlightens the agencies as to what your 
qualifications are and helps you get the next job.
    I want to ask Mr. Shear, if I can, just one question: Have 
you found that the agencies that follow the rules with respect 
to 8(a) contracting and minority contracting and local 
contracting waste the Government's money? Do you find that 
these things cost the Government money? Or do you think they 
add to the riches of the outcomes of the Government.
    Mr.Shear. I haven't directed any work that has addressed 
whether there's any potential deficiencies there. But what I 
would recognize in carrying out this work, the Congress has 
played a leadership role. And I think that--let's say the 
information that I report, and this testimony, it's to try to 
inform those decisions.
    So there certainly isn't anything that we've seen in the 
record when we go out and do our audit work that would suggest 
that somehow the Congressional leadership or the statutory 
leadership or how the Federal Acquisition Regulation has been 
implemented. We don't see any evidence to that.
    Mr.Jefferson. Let's just talk about the small business. 
Obviously, larger companies have what we might call larger 
capacities than smaller companies have. So have you seen in 
your work just the idea of assisting small business ends up 
with the Government agency getting less in the ultimate product 
from the company?
    Mr.Shear. I think what I would like to do with that--if 
you'd entertain me on this--if that question is provided by the 
Committee to us, I will put together--we will put together 
information, reports, that we have done in the past that would 
specifically give you a specific answer.
    Mr.Jefferson. All of this business about capacity is 
worrying me here because they keep getting turned down saying 
they are not big enough. Well, the idea is if they have small 
concerns, they'll never be as big as the big ones. And there's 
a bit of assumption made in the law that that's not necessary 
to do the job. And as they have said, the issue of how big a 
firm is depends on what they are required to do. Engineering 
and architectural firms expand and contract, other ones do, 
depending on if they have work or not.
    If they had steady work and one contract ended and another 
began, of course, they would never lay anybody off they would 
keep working them. But that's not how it is in the world of 
small business.
    So we need to get past this whole issue and get some notice 
to the agencies out there to get away from this whole business 
about capacity. Get a real life view of this. And it may be 
helpful for you to help us get a full understanding of the 
question.
    Mr.Shear. Okay. I think that you are raising a very 
important issue. And if you would like us to follow up either 
with the Committee or with your staff to talk about, perhaps, 
what those have been, a variety of work in the acquisition area 
and contracting area, we'd be glad to entertain it with you.
    Mr. Jefferson, I want to address one statement in terms of 
what you said. I really want to say something on a very 
personal level to those who are on this Committee; and I'll 
just say especially Representative Jefferson and Melancon as 
being representatives from here.
    I've been one of many directors who have directed GAO work 
looking at the Federal response to this absolutely awful 
natural catastrophe. And I'll just say on a personal level that 
not only the greeting here and the pleasure of being here in 
New Orleans, but I'll just say going back to December 2005, 
when I first lead our first team that was looking into the 
SBA's disaster loan program, how generous many of your 
constituents, small business owners, and local officials have 
been in helping us do our work.
    And I just wanted--since you had just made that comment and 
have the pleasure of being here in New Orleans, I want to on a 
personal level say thanks to both of you and to many of your 
continuants for helping us do our work.
    Mr.Jefferson. I appreciate that.
    ChairwomanVelazquez. Before I ask my last question, to Mr. 
Pequeno, I would like to make a comment on the comment made by 
Mr. Jefferson. And that is that I want to thank you because you 
are being courageous in coming before our Committee to share 
with us your experience regarding contracting opportunities, 
Federal contracting opportunities.
    And Mr. Jefferson alluded to the fact that some small 
businesses were afraid. And, in fact, they were because we 
reach out to many of them. And I want for you to know that I 
personally will be watching over every Federal agency. And if 
you hear or if you know of any action or behavior that is 
punitive in nature regarding your participation here, those 
agencies will be coming before this Committee faster than they 
know it.
    So with that, Mr. Pequeno, you said in your testimony that 
your 8(a) application was declined because, apparently, your 
brother owns an 8(a) company.
    Mr.Pequeno. Yes, ma'am.
    ChairwomanVelazquez. But you also stated that you have no 
interest in this company.
    Mr.Pequeno. Correct.
    ChairwomanVelazquez. So I am going to pursue this issue 
with my staff and the staff of the Small Business 
Administration, okay?
    Mr.Pequeno. Thank you.
    ChairwomanVelazquez. With that, I conclude. I thank all of 
you. As I mentioned before, this is not going to be just one 
hearing. We will continue to monitor the Federal Government's 
commitment and the responsibility in the Gulf region, the Gulf 
Coast region.
    And we are going to continue to reach out and to have a 
working relationship with all of the Federal agencies because 
not only are they eager to make sure that those numbers are 
improved, but the name of the game from this Committee is going 
to be oversight and accountability. With that, I thank you.
    This Committee concludes its work.
    [Whereupon, the committee was adjourned.]

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