[House Hearing, 110 Congress] [From the U.S. Government Publishing Office] FULL COMMITTEE HEARING ON DISASTER PLANNING AND RECOVERY: ARE WE READY FOR ANOTHER KATRINA? ======================================================================= COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS FIRST SESSION __________ AUGUST 2, 2007 __________ Serial Number 110-40 __________ Printed for the use of the Committee on Small Business Available via the World Wide Web: http://www.access.gpo.gov/congress/ house U.S. GOVERNMENT PRINTING OFFICE 36-115 PDF WASHINGTON DC: 2007 --------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800 DC area (202)512-1800 Fax: (202) 512-2250 Mail Stop SSOP, Washington, DC 20402-0001 HOUSE COMMITTEE ON SMALL BUSINESS NYDIA M. VELAZQUEZ, New York, Chairwoman HEATH SHULER, North Carolina STEVE CHABOT, Ohio, Ranking Member CHARLIE Gonzalez, Texas ROSCOE BARTLETT, Maryland RICK LARSEN, Washington SAM GRAVES, Missouri RAUL GRIJALVA, Arizona TODD AKIN, Missouri MICHAEL MICHAUD, Maine BILL SHUSTER, Pennsylvania MELISSA BEAN, Illinois MARILYN MUSGRAVE, Colorado HENRY CUELLAR, Texas STEVE KING, Iowa DAN LIPINSKI, Illinois JEFF FORTENBERRY, Nebraska GWEN MOORE, Wisconsin LYNN WESTMORELAND, Georgia JASON ALTMIRE, Pennsylvania LOUIE GOHMERT, Texas BRUCE BRALEY, Iowa DEAN HELLER, Nevada YVETTE CLARKE, New York DAVID DAVIS, Tennessee BRAD ELLSWORTH, Indiana MARY FALLIN, Oklahoma HANK JOHNSON, Georgia VERN BUCHANAN, Florida JOE SESTAK, Pennsylvania JIM JORDAN, Ohio 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 HENRY CUELLAR, Texas DAVID DAVIS, Tennessee, Ranking GWEN MOORE, Wisconsin ROSCOE BARTLETT, Maryland YVETTE CLARKE, New York SAM GRAVES, Missouri JOE SESTAK, Pennsylvania TODD AKIN, Missouri MARY FALLIN, Oklahoma (ii) ? Subcommittee on Regulations, Health Care and Trade CHARLES Gonzalez, Texas, Chairman RICK LARSEN, Washington LYNN WESTMORELAND, Georgia, DAN LIPINSKI, Illinois Ranking MELISSA BEAN, Illinois BILL SHUSTER, Pennsylvania GWEN MOORE, Wisconsin STEVE KING, Iowa JASON ALTMIRE, Pennsylvania MARILYN MUSGRAVE, Colorado JOE SESTAK, Pennsylvania MARY FALLIN, Oklahoma 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 CHARLIE Gonzalez, Texas LOUIE GOHMERT, Texas, Ranking RAUL GRIJALVA, Arizona LYNN WESTMORELAND, Georgia (iii) C O N T E N T S ---------- OPENING STATEMENTS Page Velazquez, Hon. Nydia M.......................................... 1 Chabot, Hon. Steve............................................... 2 WITNESSES The Honorable Paul Schneider, U.S. Department of Homeland Security....................................................... 3 The Honorable Lurita Doan, U.S. Government Services Administration................................................. 5 The Honorable Dr. James I. Finley, U.S. Department of Defense.... 7 The Honorable Lieutenant General Robert Van Antwerp, U.S. Army Corps of Engineers............................................. 9 The Honorable Steven C. Preston, U.S. Small Business Administration................................................. 11 The Honorable Robert Henke, U.S. Department of Veterans Affairs.. 13 APPENDIX Prepared Statements: Velazquez, Hon. Nydia M.......................................... 43 Chabot, Hon. Steve............................................... 45 Altmire, Hon. Jason.............................................. 46 The Honorable Paul Schneider, U.S. Department of Homeland Security....................................................... 47 The Honorable Lurita Doan, U.S. Government Services Administration................................................. 55 The Honorable Dr. James I. Finley, U.S. Department of Defense.... 62 The Honorable Lieutenant General Robert Van Antwerp, U.S. Army Corps of Engineers............................................. 68 The Honorable Steven C. Preston, U.S. Small Business Administration................................................. 71 The Honorable Robert Henke, U.S. Department of Veterans Affairs.. 75 (v) FULL COMMITTEE HEARING ON DISASTER PLANNING AND RECOVERY: ARE WE READY FOR ANOTHER KATRINA? ---------- Thursday, August 2, 2007 U.S. House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 10:05 a.m., inRoom 2360, Rayburn House Office Building, Hon. Nydia Velazquez [Chairwoman of the Committee] presiding. Present: Representatives Velazquez, Shuler, Gonzalez, Braley, Johnson, Chabot, Heller. Also Present: Representative Jefferson. OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ ChairwomanVelazquez. Good morning. I now call this hearing to order. This hearing continues the committee's examination of the government's response to Hurricane Katrina. With the hurricane season upon us, it is critical that we fully understand the ability of Federal agencies to serve those affected by large- scale disasters. This past April, the Committee held a field hearing in New Orleans to review the government's efforts to include local small businesses in Hurricane Katrina recovery contracting. What we found was disappointing. The Committee uncovered miscoded contracts and missed opportunities. Local small businesses testified at the hearing that they were unable to get prime contracts and that contracts were being awarded to large firms from out of State. The agencies' own data supported this testimony. At the end of that hearing, I told the agencies that the Committee will continue to monitor their contracting practices in New Orleans. So I have brought them back today to update the Committee on their progress. Today's hearing will explore what has been done since we met in New Orleans. We will also look at any institutional changes that may have been made, updated statistics and plans for future contract awards. I have to say that I am disappointed with the submitted testimony. Not one of the agencies testifying today has made local small businesses a priority. The testimony does not focus on specific and measurable ways to include these local small businesses in the rebuilding effort. At this point, I would expect less lip service and more action. The use of local small businesses is vital. It is vital to the recovery of the gulf coast. These agencies' witnesses acknowledged as much at our last meeting in front of local small business owners. Today, we are going to find out why more action has not been taken. When we talk about the Federal Government's response to disasters, we generally talk about the SBA Disaster Loan Program and with good reason. In the aftermath of the hurricane, thousands of small businesses turned to SBA for financial assistance but, instead, only found frustration and difficulty. Over 200,000 applications set mired in a long processing backlog that took well over a year to process. Those victims who were approved for loans often waited months to receive any funds. We are also beginning to learn that the agencies' efforts to improve the backlog employed some very aggressive tactics which left many disaster victims without the help they needed. A recent SBA Inspector General report confirmed this, and this committee continues to review these findings. In addition to these concerns, the SBA released a disaster recovery plan that falls short of making the necessary cultural and workforce changes to remedy these past problems. While we do want to spend time examining this plan, we also need to talk about government-wide plans to increase contracting opportunities for local small businesses. For the agencies here today, it must be a priority for them to ensure that small and local firms are part of any rebuilding process following a disaster. As Louisiana, Mississippi and Alabama begin the long process of reconstruction, we have already seen the important contributions that can only come from these businesses. Small firms are the largest job creators and the engines that power economic growth. Clearly, the Federal Government must focus on prioritizing these companies in its gulf coast recovery efforts. I look forward to the testimony today and I thank all of the witnesses for making every effort to be with us today. I now recognize Mr. Chabot for his opening statement. OPENING STATEMENT OF MR. CHABOT Mr.Chabot. Thank you, Madam Chair. No one disputes the fact that the Federal Government's response to the gulf coast hurricanes in 2005, particularly in Katrina, was not up to the standards it should have been. It was, in general, inadequate. Although, considerable effort was made by many individuals, and there were true heroes involved in the efforts, but there certainly were holes. The Committee held a field hearing in April to assess the state of small business involvement in the recovery. I commend the chairwoman for her diligence in the continued oversight to ensure that the recovery efforts utilize local small businesses to the extent possible. Local small business involvement after a disaster is crucial to economic recovery. Without economic recovery, an area will never return to its pre-disaster status. Businesses located in the area have a vested interest in ensuring the economic vitality of the region that they call home. Local businesses will hire members of the community to perform the work associated with the response in rebuilding. Funds disbursed will stay in the local area because the business and the employees are local. Participation by small businesses in disaster response and recovery certainly is valuable to the community. However, that must be tempered by the realities on the ground related to the disaster. Federal, State and local agencies certainly should have in place disaster response plans that call for the participation of small businesses but also recognize that the primary mission is health and safety, and that must take priority over small business participation. Although, small business participation, as I said before, is important. To make these types of decisions, it is necessary to have a comprehensive set of emergency response plans in place. I know that Administrator Preston has worked diligently in deriving an emergency response plan, one that provides the necessary response, but recognizes that Federal agencies operate under certain fiscal constraints. I am sure that the witnesses at the table will ensure that proper coordination takes place among the agencies in response to the next major disaster and that the mistakes associated with a response to Hurricane Katrina are not repeated. In closing, I would like to thank the distinguished members of the panel for coming here today to explain the actions they have taken to enhance the participation of small businesses in disaster relief and recovery. I yield back the balance of my time, Madam Chair. ChairwomanVelazquez. Thank you. Our first witness is the Honorable Paul Schneider. Mr. Schneider is the Under Secretary for Management at the Department of Homeland Security. He oversees the department's budget, appropriations, expenditure of funds, accounting and finance, procurement, human resources and personnel, information technology systems, facilities, property, equipment, and other material resources. Mr. Schneider previously served as a defense and aerospace consultant and was sworn in at DHS as Under Secretary for Management on January 3rd. Welcome, sir. I would just like to say that I want every witness to adhere to the 5-minute rule, and I am going to be watching the clock because we are going to be having a lot of votes today. So I want everyone to have the opportunity to make your presentation, but your testimony will be submitted into the record. So welcome, sir. STATEMENT OF HON. PAUL SCHNEIDER, UNDERSECRETARY FOR MANAGEMENT, UNITED STATES DEPARTMENT HOMELAND SECURITY Mr.Schneider. Thank you, Madam Chair, Congressman Chabot and members of the Committee. Thank you for the opportunity to review the actions of the Department of Homeland Security that we have taken to increase contracting opportunities for local small businesses affected by disasters. FEMA is the Department's lead agency, an operational component, and as such, is the focal point for preparing for and responding to disasters. On October 4th, 2006, section 307 of the Stafford Disaster Relief and Emergency Assistance Act was amended by section 694 of the Department's Appropriations Act of 2007, public law 109, 295. The amendment required that contracts for major disaster assistance activities be preferentially awarded to local businesses. FEMA responded to the change of legislation through the adoption of new procedures and strategies that facilitate the maximum level of engagement with local contracting communities. Prior to issuing the solicitation, FEMA conducts market research to determine whether or not the capabilities of small local businesses meet program requirements. The small local businesses are determined to possess the necessary qualifications. Then the solicitation is structured either as a local small business set-aside or as a price evaluation preference. If no such business is available, the scope of the set-aside is expanded to include all local businesses rather than only small local businesses. If no local businesses are available, then the geographic scope of the set-aside is expanded to the State level, then to the gulf coast region and, finally, open to a national pool of contractors. On June 22nd, 2007, the Small Business Administration provided the Committee with information of DHS contracting opportunities to small businesses, including small businesses affected by Hurricane Katrina and other disasters, utilizing the local set-aside discussed above. This list provided seven small business contracting opportunities, ranging from construction to professional, administrative and management support services to information technology services, including telecommunications and communications in detection equipment. Since its establishment in 2003, the Department has had a solid small business track record. In 2006, we achieved 31.62 percent in small business prime contracting and 10.75 percent for overall small disadvantaged business for a total small business obligated dollar amount of over $4.4 billion and a total overall small disadvantaged business obligated dollar amount of almost $1.5 billion. The government-wide small business goal is set at 23 percent for prime contracting. We have shown our strong commitment to small business by raising the bar from the 23 percent to a proactive and aggressive 30 percent small business goal for 2006-2007. The government-wide small disadvantaged business goal is set at 5 percent. We have set our goal at 8 percent for 2006-2007. The U.S. Small Business Administration has recognized the Department's effort to maximize opportunities for small business. During the last 4 years, SBA has twice elected DHS for its top award, the Gold Star Award, for overall sustained small business achievement and for the Francis Perkins award for women-owned small business achievement. I have seen our draft SBA scorecard results. They are outstanding, among the best in government, and we are very proud of these scores. Our small business office head, Mr. Kevin Boshears, who is with me today, was recently recognized by the small business community as one of the finest small business advocates in government. Despite these actions and our demonstrated track record, we are very disappointed that the House action on the DHS fiscal year budget zeroed out the accounts that fund our Small Business Office at DHS. In addition, the House Homeland Security appropriations bill, specifically section 537, has words in there that require full and open competition for all contracts. This will dramatically impact our ability to meet the small business goals and dramatically impact our ability to basically put more dollars in the small business community by requiring full and open competition for all our contracting efforts. We are very hopeful that these words and this action will be modified during conference. Small and local business partners in the Midwest have been integral in meeting FEMA mission requirements, resulting from the tornadoes which hit Kansas and the flooding which occurred in Missouri this past May. In both areas, FEMA utilized small local utility companies in order to restore basic needs back to the affected communities. In addition-- ChairwomanVelazquez. Mr. Schneider, your 5 minutes are up. You have 30 seconds, but you have an opportunity to make whatever other statement you want. Mr.Schneider. Well, my testimony, Madam Chair, has some of the specific contracting actions that we have identified for small business in the gulf coast. I will not repeat them here. In conclusion, I would like to thank you for your continued support and for the Committee's continued support of our Department and of our small business program, and I would be happy to answer any questions that you may have. ChairwomanVelazquez. Thank you, sir. [The prepared statement of Mr. Schneider may be found in the Appendix on page 47.] ChairwomanVelazquez. Our next witness is Ms. Lurita Doan. She is the Administrator of the General Services Administration. Ms. Doan has served as the Administrator since May 2006. Prior to taking this position, Ms. Doan was the owner of a technology company. Welcome. Again, 5 minutes. STATEMENT OF HON. LURITA DOAN, ADMINISTRATOR, UNITED STATES GOVERNMENT SERVICES ADMINISTRATION Ms.Doan. Thank you. Thank you, Madam Chairwoman, Ranking Member Chabot and members of the Committee. Creating a more level playing field for all small businesses to participate in Federal contracting is one of my core priorities at GSA. I have had the unique perspective of founding and running a small minority business for 15 years, and for the past year, I have had the great privilege to lead GSA and manage the government's premiere procurement agency. Creating opportunities is a special passion for me that I work on every day. At GSA, there has been a revolution in our efforts to promote small businesses in Government contracting. During the past year, GSA has awarded 32 percent of all procurement dollars spent by GSA to small businesses. In the gulf region during my tenure, we have awarded 79 percent of all contracting actions, and 62 percent of all contracting dollars from GSA have gone to small business, and since this past April, understanding the concerns of the House Small Business Committee, we are increasing our efforts to ensure that the gulf coast contracting opportunities go to local small businesses. During the next 12 months, I fully expect these numbers to improve, and I will tell you why. First, I know from experience that the single most important element to ensure small business success is a favorable business environment that rewards and encourages entrepreneurs. The President deserves much credit for creating the economic environment that small companies need to grow, emerge and thrive. Second, this is a copy of the 1,800-page FAR that governs all Federal procurements. It is an amazing document, but it is a big beastie, and small companies need our help to navigate the process that is oftentimes expensive and time-consuming, and that is why, in my first week at GSA, I announced that GSA would commit to reducing the amount of time it takes companies, small companies, to get a schedule from 157 days to 30 days or less. Lots of folks were skeptical, but we did it. As a result, small companies can now sell their goods and services to government agencies far faster than ever before. I believe a GSA schedule is a small business's first and best chance to become a prime contractor. Third, we have a special obligation and an opportunity to help restore the economic vitality of the gulf that was devastated by Hurricane Katrina. I am from the Ninth Ward in New Orleans, and I have firsthand knowledge of the entrepreneurial talents of small business resources in the region. Over the past year, GSA has sponsored over 25 different small business events in the region, and GSA is delivering. During the past year, 62 percent of all contracting dollars spent by GSA in the gulf region were awarded to small business. Fourth, I am especially proud of GSA's new VETS GWAC directed at small businesses owned and operated by service- disabled veterans. GSA expects to award $5 billion over the next 5 years to some of the Nation's most deserving, dedicated and talented Americans. There can be no better way to honor our service members than to encourage their entrepreneurial energies. In addition, I am counting on these amazing men and women to provide a new source of pride and accountability as they help raise the standard of performance in Federal Government contracting. You have a determined colleague at GSA, anxious to remove roadblocks to small businesses. We are proud of our recent efforts. We are also eager to do more, and we need to do more, and I am especially eager to work with this Committee. I want to note that the helpful legislation introduced to reduce bundling is going to help create a more level playing field for small businesses, and I think that is terrific. I would also like to suggest that it is time to take an even bolder approach and to look at ways to advance the cause of small business. If you take the time to have a closer look at the Federal contracting process, you need to understand exactly why contracting officers try to bundle contracts that then become too large for small companies to compete on. What is the root cause? What structural problems exist? I think you are going to find two big problems. First, our Federal contracting officers are too risk- averse. Too often, it is easier and more bureaucratically acceptable to award a Federal contract to one of the big companies that have a longer history. The challenge is analogous to the situation every college graduate experiences when trying to get a job. They are often told they have the skills, but the position calls for someone with more experience. They do not have experience because companies are unwilling to give them their first break. Contracting officers are reluctant to give small companies with limited experience a chance because they know that even the smallest procedural error could ruin their careers. So they just do not do it. They are blamed, punished and vilified, and that has to change. We need to encourage them to take risks and to be willing to give these small and especially local small companies the opportunity to excel, but I cannot fix this without your help, and I would hope that, today, we can begin to work together to solve the problem. We must remove all barriers that prevent opportunities being offered to small, minority and women-owned businesses. I have no illusions about how difficult it will be, but to quote the late, great Alba Sungadore, "We will soon face the choice of doing what is easy or doing what is right." GSA is eager and ready to work with the Committee to do what is right. Thank you. ChairwomanVelazquez. Thank you, Ms. Doan. [The prepared statement of Ms. Doan may be found in the Appendix on page 55.] ChairwomanVelazquez. I understand that you have a family commitment and that you are going to stay here until 12:00 o'clock. Ms.Doan. I am going to try and stay as long as I can past that. ChairwomanVelazquez. Past 12:00? Ms.Doan. Past 12:00. ChairwomanVelazquez. Thank you very much. Our next witness is Dr. James Finley. Dr. Finley is the Deputy Under Secretary of Defense for Acquisition and Technology. He is responsible for policies and procedures governing the Department of Defense's procurement and acquisition process. Dr. Finley was confirmed to this position by the Senate in February 2006. STATEMENT OF HON. JAMES FINLEY, DEPUTY UNDERSECRETARY OF DEFENSE FOR ACQUISITION AND TECHNOLOGY, UNITED STATES DEPARTMENT OF DEFENSE Mr.Finley. Good morning. Chairwoman Velazquez, Ranking Member Chabot and members of the House Committee on Small Business, thank you for inviting me. Mr.Chabot. Would the gentleman yield for just a second. We pronounce it "sha-but," but you can pronounce it "shah-boe," which is the French pronunciation, which is fine, but we pronounce it "sha-but," just so it is cleared up. Mr.Finley. My apologies, sir. Mr.Chabot. Yes. No problem. It is all right, Mr. Finley. Okay. Mr.Finley. Thank you for inviting me here to appear before you today in a follow-up discussion to the meetings we had in New Orleans. Katrina was a catastrophe of unprecedented proportion. It is a matter of importance for all of us, and I welcome the opportunity to participate in this hearing. Today, I will focus on three areas--post Katrina local business/small business performance. I also plan to discuss the steps taken to improve the Department of Defense's emergency acquisition policy so we are ready for the next major event, also the improvements in DOD's overall small business policy in particular. Since our last meeting of post Katrina local small business performance, we have five contracts that we have identified, other than what was awarded by the Army Corps of Engineers, that we will share with you and that we have submitted in a letter to the chairwoman. They are summarized, you know, simply as about a $1 million contract to a small business company local in Louisiana called Fussell Company Contractors. They do runway repairs. A second company is called Cann Contracting, Incorporated, a civil engineering job of about $700,000 to construct a munitions' storage facility. There is a third company called Bechter Aviation, contracted for about $560,000 for liquid propellants for jet engines. There is a fourth contract for about $300,000, also with Cann Contracting, for construction repairs on runways. There is a fifth company, also with Cann Contracting, for sprinkler system failure at about $150,000. We have also worked significantly, from a local business point of view, with our PTAC organization on procurement and technical assistance centers, and we have a tremendous opportunity in New Orleans because our boots on the ground in New Orleans have been there for over 20 years. We have about nine PTAC people in the State of Louisiana, three or four of which are absolutely focused on New Orleans, itself. I have had the opportunity to meet them in our previous hearing, and I have also had the opportunity to directly talk with them again in preparation for this hearing, and I am very pleased to report that there is progress. I would say that the New Orleans area, in general, has a fairly significant way to go, you know, for restoration of where we used to be and where we want to be, but nonetheless, in our previous hearing, what we shared with you was that we had about 300 local New Orleans' companies in our database with PTAC pre Katrina. Post Katrina, we had 200. We lost about 100 companies we could not account for. After the 4/12 hearing, we took action on these areas. We also talked to the companies that you identified at the hearing. We followed up with about half of those companies that we thought we could deal with for DOD business. None of those companies, unfortunately, through PTAC could we arrange, you know, to find ways to put those into DOD contracts. Having said that, the mix today--and getting back to our 300 pre Katrina levels--is about 290 companies, small businesses, New Orleans-based, New Orleans doing business in New Orleans, if you will, and the mix has changed in what they do. They have changed their portfolios a bit, but nonetheless, they are, I would say, vibrant, and they are looking for more business in New Orleans. Based on what I have heard from the Army Corps of Engineers in preparation for this, I am very optimistic that we will continue to grow small business for DOD in that region. In addition to the small business focus, we are improving our DOD emergency acquisition policies. The last time we identified several initiatives. This time, we have about seven initiatives. My formal hearing testimony identifies each of those initiatives, and I will be pleased to talk and to address each of those during the hearing. In addition to that, improving the overall DOD small business policies, we have got about six practices that we are focused on improving. These include some of the things that the previous witnesses have testified about, including bundling and what we are doing with acquisition strategies to virtually eliminate bundling, if we can, as a practice in DOD. In summary, we at the Department of Defense are very committed to the health and welfare of our people and of our Nation. We have a strong small business program with strong performing organizations such as the United States Army Corps of Engineers as well as other support organizations like the PTACs, the Procurement Technical Assistance Centers. We are planning to continue to build on those strengths to provide more agility and flexibility for the acquisition of our products and services to protect our country and to provide emergency health in the time of need due to natural disasters here and on the home front and abroad. I thank the Committee for their time today and for their leadership in addressing the small business participation in the aftermath of Hurricane Katrina. Thank you. ChairwomanVelazquez. Thank you, sir. [The prepared statement of Mr. Finley may be found in the Appendix on page 62.] ChairwomanVelazquez. Our next witness is Lieutenant General Robert Van Antwerp. Lieutenant General Van Antwerp is the Chief of Engineers for the U.S. Army Corps of Engineers. His office is responsible for defining policy and guidance and setting the directions for the organizations within the Corps. Lieutenant General Van Antwerp succeeded Lieutenant General Carl Strock as Chief of Engineers in May of this year. Welcome, sir. STATEMENT OF HON. LIEUTENANT GENERAL ROBERT VAN ANTWERP, CHIEF OF ENGINEERS, UNITED STATES ARMY CORPS OF ENGINEERS GeneralVan Antwerp. Thank you, Madam Chair, Ranking Member Chabot. Is that close? Mr.Chabot. Chabot. It is "Chabot" like "rabbit." GeneralVan Antwerp. Chabot. We will get this right. Mr.Chabot. It is no big deal, really. GeneralVan Antwerp. I will just call you "sir." that is easier for me. Mr.Chabot. I will call you "sir," too. GeneralVan Antwerp. Okay. And members of the Committee, I thank you for this opportunity to appear before you today. The Army Corps of Engineers is committed to using local small businesses in both our normal course of duty and also in this case when we are reviewing times of disaster. In your June letter to us, you asked us to identify five small businesses that could be prime contractors. I am happy to report today that we have awarded five contracts and that we have seven more in procurement action for small businesses as the prime contractor in the area of local small businesses. I want to just talk for a second about our ongoing and future work and one initiative that is, I think, very important in this area. First of all, as to our repair and restoration, the appropriated funds for that right now are $5.8 billion. Our acquisition plan has 34 percent of that, almost $2 billion, going to prime small business contractors in both just small business, 8(a), HUBZone, and service-disabled, veteran-owned small business. We anticipate about 150 contracts all together. 101 of those are going to be set aside for small business. Just to report on where we are to date, 65 contracts have been awarded. 60 of them have gone to small businesses. Just as a sideline, we have two flood fights in the recent past. One is in Oklahoma. The other is in Texas. We awarded three contracts in Oklahoma, all three of those to local small businesses and, in Texas, two contracts both to local small businesses. The initiative I would like to talk about is the Advance Contracting Initiative, and this, of course, is the vehicle the Corps of Engineers used to be ready for a disaster so that our response can be immediate. We have proposals out there, and we received them on June 23rd because we are recompeting or Advance Contracting Initiative. Before, all of our contractors were large businesses, 100 percent, so we are recompeting that, and the proposals have been received, and what we are doing is establishing three multiple award, task-ordered contracts, and two of those will be for HUBZone and 8(a). So, of those three, two-thirds of those, and what we will do is we have a local office that is set up, and when we have a disaster, they will determine on capacity where that award goes, but we think this will greatly facilitate the use of local small business. Also, we have increased our subcontracting goals for our large businesses. They will be hiring in all small business categories, 75 percent to small business. Finally, I would like to say that we have done a lot of engagement down in the Katrina area and in other areas where we have had disasters in the past--industry forums, market surveys and all kinds of conferences where small business interests are represented of which, as to many of them, either General Strock or myself in the future will be speaking. Again, I thank you for this opportunity to appear before the Committee, and I welcome your questions at the right time. ChairwomanVelazquez. Thank you. [The prepared statement of Lieutenant General Van Antwerp may be found in the Appendix on page 68.] ChairwomanVelazquez. Our next witness is the Honorable Steven Preston. Mr. Preston is the Administrator of the Small Business Administration and has testified before this Committee several times this year. Mr. Preston was sworn in as Administrator on July 11, 2006 after serving as Executive Vice President of the Service Masters Company. Welcome, sir. STATEMENT OF HON. STEVEN PRESTON, ADMINISTRATOR, UNITED STATES SMALL BUSINESS ADMINISTRATION Mr.Preston. Thank you. Good morning, Chairwoman Velazquez. Mr. Chabot, I am trying to find a new pronunciation, but you know, I have talked to you too many times, so I will stick with "Chabot." Members of the Committee, thank you very much for having me here to testify with my colleagues. When I came to the Agency just over a year ago, the SBA's response to the gulf coast hurricanes had many backlogs in it and a number of critical areas as you all know. Prior to coming into the position, I visited New Orleans to get a firsthand account of the pulse on the ground. Obviously, like many of you who have been done down there, I was overwhelmed by what I saw, and after visiting both our New Orleans district office and our processing center that handles those loans, it became very clear to me that there were serious issues we needed to address very quickly. We quickly dug into those issues to address them, and we spent months listening to and working with our customers, our employees, as well as doing an intensive examination of our operational processes. We discovered a number of issues that have led to high error rates, backlogs in critical processes and decision-making bottlenecks. Today, we have not only redesigned the closing and disbursement processes needed to complete our work in the gulf, but we have fully reengineered the way that the SBA responds to future disasters to provide dramatically faster and more responsive service to disaster victims. On June 1st of this year, we presented to the Committee the agency's disaster recovery plan. After months of deliberation and countless hours of work, the plan has documented the critical steps to be taken by the SBA to prepare for, to respond to and to recover from natural disasters. Just as we have learned many lessons and made significant contributions on the disaster lending side of our response to the 2005 gulf coast hurricanes, we have also done a lot of work in assessing our role in the contracting process during the rescue relief and reconstruction of the region, and we have made important progress on that front as well. The SBA was and continues to be committed to making sure that our small business customers receive fair opportunities following natural disasters. In the interest of time, I will dispense with a lot of the statistics. I think they are in my testimony, my written testimony that has been submitted. As we have done on the lending side in our disaster response, we are also looking at our role in the post-disaster procurement process. Rebuilding communities after a disaster requires tremendous strength and dedication from the individuals who live there as well as from the small businesses that provide jobs and long-term economic stability. The SBA has acquired the responsibility for the Hurricane Contracting Information Center from the Department of Commerce. We have identified an intake point for the information on disaster contracts for coordinating staff communication between government contracting and our disaster call center and our renaming of the Disaster Contracting Assistance Center. Additionally, the SBA has begun an initiative to refocus the workload of our PCRs throughout our field network to work more intensively and specifically with contracting officers and specialists at the purchasing agencies to identify opportunities for small businesses. Our district office will be working more intensively with the small businesses themselves to identify the contracts for which they may be eligible to apply as well as finding more small businesses interested in pursuing new contracting opportunities as they arise. I am accelerating the 2008 hiring decisions for PCRs as well, and this month, we will actually have 1,200 people from the SBA across the country coming in to train them on many of the new practices I am talking about, many of which specifically are business development people. Even since our hearing in April, the SBA has participated in and has helped lead multiple events designed to expand small business opportunities in the gulf, each touching hundreds of small businesses. I personally keynoted the Post Katrina Development Summit, which included 268 small businesses and many Federal as well as State level purchasing agencies. I also want to point out that, just last week, we announced changes to the Surety Bond Program that will help enable small businesses to bid on public construction projects. The pricing structure for the surety bond guaranty is now more flexible, which we expect will make the product more affordable for small business. We are also working with other agencies, including my colleagues here at this table, to assist with and to complement their efforts. In the coming months, we will be focusing on identifying more small businesses that can fulfill their contracting needs. In addition, we plan to work with the Army Corps of Engineers and with the GSA as they work to make advance contracting arrangements for disaster needs of small business vendors and service providers. So thank you for allowing me to testify here today. I also want to thank my colleagues here at the table for the work they are doing with each one of them. I know they have done a good job of elaborating on that, but I want to thank them specifically, and I look forward to working with this committee and with my counterparts in the other Federal agencies to continue this important work of improving the Federal Government's disaster response and enabling small businesses to participate more fully in disaster recovery and rebuilding efforts. Thank you. ChairwomanVelazquez. Thank you, sir. [The prepared statement of Mr. Preston may be found in the Appendix on page 71.] ChairwomanVelazquez. Our next witness is the Honorable Robert Henke. Mr. Henke is the Assistant Secretary for Management of the Department of Veterans Affairs. He is responsible for the Department's budget, financial policy and operations, a position of material management, real property, asset management, and business oversight. Mr. Henke was sworn into office in November 2005. Thank you, sir. STATEMENT OF HON. ROBERT HENKE, ASSISTANT SECRETARY FOR MANAGEMENT, UNITED STATES DEPARTMENT OF VETERANS AFFAIRS Mr.Henke. Yes, ma'am. Thank you, Madam Chair, Ranking Member Chabot. I did live in Cincinnati from 1993 to 1997, so I am not going to get that name wrong. I appreciate the opportunity to discuss the VA's commitment to increasing contracting opportunities for local small businesses participating in rebuilding New Orleans and the greater gulf coast region. In the aftermath of Hurricane Katrina, the VA very much wants to see a sustainable, vibrant, economic recovery in New Orleans and in the rest of the gulf coast region. I am honored to represent the totally dedicated VA employees throughout the country who serve our veterans and our Nation's heroes on a daily basis. Last April, the VA testified before this committee regarding our complete commitment to small business in New Orleans and the greater gulf coast, and I will use my time this morning to briefly give you an update on where we are at. We have been an active participant in our outreach efforts to small businesses in the southeast region. On May 8th, the VA attended the Vicksburg, Mississippi Business Procurement Opportunities Conference and Trade Fair, sponsored by the Mississippi Development Authority and Mississippi PTAC. The VA representatives spoke with over 200 small businesses regarding opportunities for VA hurricane cleanup as well as ongoing operational opportunities. We also participated in the Post Katrina Economic Development Summit in June in New Orleans. VA's Office of Small Disadvantaged Business Utilization and our gulf coast veterans' health care network discussed VA's contracting opportunities with over 300 small businesses. Firms were provided information, process guidance and networking opportunities for VA post Katrina recovery. Since this committee's hearing on April 12th, we have been in nine outreach efforts in the gulf coast region, and we have three more planned for before the end of this year. Also, the VA will participate in GSA's small business conference in New Orleans next week on August 9th. During the hearing on April 12th, the Committee asked each agency to commit to working with the SBA to identify five prime contracting opportunities that target the local small businesses. We have kept that commitment to you, and I will just review the results briefly. At a medical center in Biloxi, a parking lot design-build contract solicitation has been released that we project to award this month. At a medical center in New Orleans, there are three different projects, one to rebuild a pharmacy. We have completed negotiations with an 8(a) firm. We project to award it this month. Also in New Orleans, a roof repair. We project to award that to a local small business in September. In New Orleans, as to the demolition of a damaged building, a local small business has been identified, and we project to award that contract in September. At the VA medical center of gulf port, there is the environmental remediation of the property, tank removal. A small business set-aside is planned, and we project to award that in September as well. At April's hearing, the VA shared with the Committee the fiscal year 2006 small business accomplishment of the South Central VA Health Care Network. Through June of this year, the network had spent approximately $270 million, fully one-third or 33 percent of that with small businesses, to include 12 percent with small disadvantaged and 8(a) firms. In closing, I want to reassure you, Madam Chair, that the VA is committed to small business in general and specifically to those in the gulf coast region. Thank you for this hearing, and I look forward to your questions. ChairwomanVelazquez. Thank you. [The prepared statement of Mr. Henke may be found in the Appendix on page 75.] ChairwomanVelazquez. Almost 4 months ago, we met in New Orleans, and at that hearing, you clearly saw firsthand the agony and the frustration of local small businesses. I hope that, today, you come out of this hearing understanding that this is more than just local small business participation. What this is about are people's lives in the gulf coast, and of those who have been suffering so much, they have a lot to offer in the recovery and reconstruction of the gulf coast. So, as to my question to each of the witnesses, since I was not able to gather this out of your testimony, I would like to start by asking each one of you to share their local small business percentages since we met in New Orleans. Mr. Schneider. Mr.Schneider. Madam Chair, we wanted to wait until July 31st so we could get the most accurate, up-to-date numbers, which is why it was not in my submitted testimony, and we will provide the tables, but I will give you the rough numbers. From April 13th to July 31st, 69 percent of the DHS dollars obligated in the gulf coast were awarded to small businesses. ChairwomanVelazquez. Sir, I am asking about local small businesses. Mr.Schneider. As to local small businesses, 49 percent of the net dollars obligated in the gulf coast region were awarded to local businesses, small and large. ChairwomanVelazquez. No. We need to make a distinction here. It is not local businesses. It is local small businesses. Mr.Schneider. I have got that number. It is 33 percent of the total dollars obligated that were awarded to local small businesses. ChairwomanVelazquez. Why is it that you did not include that in your testimony? Mr.Schneider. We wanted to wait until the closeout of the books on July 31st. There was no way I could get those numbers, get it into my testimony clearing process and get it to you to meet the date or the time that you required. ChairwomanVelazquez. Let me ask my staff to put up the chart. Oh, I am sorry. No. No. I do not want to go there. Yes, I will come back to you, sir. Ms. Doan, what percentage? Ms.Doan. Thank you. 22.8 percent of all of the small local business contracts to Louisiana vendors were awarded since April 12th, and our time frame only goes through June 30th because that is when our books cut off. ChairwomanVelazquez. Local small businesses. Ms.Doan. Local small businesses, 22.8 percent. ChairwomanVelazquez. General. GeneralVan Antwerp. Ma'am, we have awarded 60 of 65 contracts to small businesses. The local small businesses is in the neighborhood of 35 percent. ChairwomanVelazquez. Dr. Finley. Mr.Finley. Madam Chair, as to the numbers we have, all contractors in the area post 4/12 from our FPDS system are $670 million for all contractors. Instate local contractors amount to $560 million of that. So it is well over 50 percent. ChairwomanVelazquez. I am sorry. Mr.Finley. It is well over 50 percent. ChairwomanVelazquez. I am asking if this is contracts or money, dollars. Mr.Finley. Dollars. ChairwomanVelazquez. Dollars. They are not contracts? Mr.Finley. Dollars. ChairwomanVelazquez. I will go back to the general. Dollars or contracts? GeneralVan Antwerp. Contracts, ma'am. ChairwomanVelazquez. Yes. Ms.Doan. We are dollars. ChairwomanVelazquez. Sir. Mr.Schneider. Dollars. ChairwomanVelazquez. Mr. Preston. Mr.Preston. We are really not procuring down there. I think, though, you appropriately pointed out in the last hearing that we did have some issues with small businesses down there. Our overall percentages for small business were very good, and prior to April, they were not good for local small business, and we would be happy to work with your committee to help understand why we were not doing the job on that. ChairwomanVelazquez. Mr. Henke. Mr.Finley. Excuse me, Madam Chair. If I may, I read the number wrong. About 25 percent. All dollars. Local. Mr.Henke. Yes, ma'am. As to the network, 16 South Central Health Care Network, the data I have says that they have procured about $88 million to date. 33 percent of that--excuse me. That is 33 percent to small businesses, and I also have data that indicates-- ChairwomanVelazquez. Local businesses? Mr.Henke. Ma'am, I do not have that by local. I have it by small businesses. ChairwomanVelazquez. So I will ask you to please provide that information to the Committee-- Mr.Henke. Yes, ma'am. ChairwomanVelazquez. --in the next 2 weeks. The staff, please. I need for Mr. Schneider to look at that. Would you turn that, please. Mr. Schneider, you awarded close to $12 million to larger businesses since April, and this is in contrast to a net loss of $82 million in small business contracts due to modifications that removed work. I just would like to ask you why is it that large firms seem to be able to secure contracts when small businesses are losing ground. Mr.Schneider. I cannot relate directly to those numbers because they do not match with, frankly, the numbers that I work with. I think I need to take a couple of minutes to talk about why we de-obligate money from contracts, which seems to be what the issue is here. Most of the contracts that we obligated in the gulf coast are on what we call ID/IQ, indefinite delivery/indefinite quantity-type contracts. We have two choices. Our contracting offices have two choices. They could either negotiate a specific price for each order or they can put out a max price not to exceed, and the reason we encourage them to put out the max price not to exceed is to get an agreement, to make sure that we have enough ceiling coverage so that the work can be done within that, and to get on with the business, okay? So what happens is, when we settle up and the work actually comes in less, we deobligate money from the contract. The work is done. Small business does not lose out. Industry does not lose out. The fact of the matter is it is a way of expediting the awarding of the contract. We have specific numbers that, in fact, by State show the deobligations, but that is the reason for the deobligations. ChairwomanVelazquez. Sir, first, those numbers are accurate numbers, and they are taken from the Federal procurement data system that each of you have to submit. Two, what it shows and what that chart shows is the fact that, indeed, you are taking money away from contracts that were given or awarded to small businesses. You came back. You modified those contracts, and you took that money away. Small businesses--local small businesses in the region--are losing money, but we do not see the same pattern with large firms. My question to you is why. Mr.Schneider. Most of the work at large firms is negotiated at the actual price of the work. Again, to get on with the work, it is contractually expedient that we put out a not-to- exceed ceiling price, and the fact is we have two choices. We could either negotiate down to the decibel point the cost of work, in which case that would actually delay the execution of the work, or we can agree that it will not exceed, get on with the work and settle up with the bills. We always make sure that the not-to-exceed is high enough to truly cover the cost of the work. So, when we deobligate the money from the contract, and this is done after the work is done, we are basically settling up. The work has been done. It is not a question of taking money from the small business. It is a question of basically removing the excess dollars that were obligated as part of the financial responsibility that we have. ChairwomanVelazquez. Why is it that it always happens with small businesses? You are not seeing that. We are not seeing that based on the data that we have analyzed. Mr.Schneider. With most of our large businesses, we negotiate the specific price. When we are talking about just in the past--since post April--that 69 percent of the dollars are being obligated to small business, the majority of those dollars are, in fact, due to these emerging types of work where we issue the not-to-exceed, and where the large businesses are we basically negotiate the specific price as opposed to a not- to-exceed. ChairwomanVelazquez. Look at that chart. Those are the contract losses since April. Mr.Schneider. With all due respect, Madam Chair, they are not losses. They are deobligations. There is a significant difference. ChairwomanVelazquez. Call it the way you want it. Mr.Schneider. That is what the financial people call it. ChairwomanVelazquez. The fact, sir, is that it is happening with small businesses. It is not happening with big firms. Yet, we have not gotten to the fact that you are miscoding large firms as small businesses. Ms. Doan, during the last hearing, you stated that GSA awarded more than 70 percent of its contracts to small businesses. In fact, since April, when we met in New Orleans, GSA has awarded only 6.3 percent of its contract dollars to local small businesses. Only $62,000 has been awarded to these businesses. When we asked you to identify five prime contract opportunities for local small businesses, the GSA provided five contracts but did not address local small businesses at all. So I ask you: What is it that the GSA is doing to increase the participation of local businesses in contracting opportunities? Ms.Doan. First, Madam Chairwoman, out of the contracting dollars, I would like to say that what we reported are Katrina- related contracts. We also have contracts which are just for general procurement work, and none of these, of course, show within the construction field contracts that are actually subcontract dollars, which would actually also be local small businesses. Unfortunately, the way the system is set up for metrics it does not allow you to count all of that. As for the things that we are doing for small businesses, for local small business, first of all, we have issued guidance on the Stafford Act, which allows them to have the opportunity to have a local preference. I think this is one of the, probably, most important things that we are going to be able to do because it became clear that a lot of our contracting officers, while they understood that was a requirement there, did not necessarily feel as empowered to do that, and that is something that I can change. We have our Chief Acquisition Officer, who is getting procurement folks who are trained only in disaster recovery. There will be training sessions to make them aware of how to utilize and write the justifications for local small businesses. We have an invoice modification process which requires our prime contractors to account on the front of the invoice for all dollars awarded to local small businesses. We have put in place something called "workplace solutions," which allows us to combine our public building service, which has the large contracts for construction, and our Federal acquisition service, and those-- ChairwomanVelazquez. Are you talking about the gulf region? Ms.Doan. Yeah. I am sorry. Yes. Yes, Madam Chairwoman. Yes, we are talking about within the gulf region. ChairwomanVelazquez. But we met in April. Ms.Doan. Yes, I know, ma'am. ChairwomanVelazquez. From April to this day, you come here, and we can point to just only 6.3 percent. You did the same at that hearing. Ms.Doan. With all due respect, Madam Chairwoman, I would appreciate the opportunity to come to you at the end of our fiscal year. Much of our procurement at GSA happens in the August to September time frame when the end of your spending occurs and we have put and positioned our contracting folks in place within Louisiana, Mississippi, Texas, and Alabama to handle these procurements, and we are set up to handle, and we expect quite a bit of procurement in that time frame. ChairwomanVelazquez. You will come back at the end of fiscal year. I promise you that. Ms.Doan. Thank you very much. I appreciate that. ChairwomanVelazquez. My next question is: Since you spent so much time in your testimony talking about VETS GWAC, how many local small businesses got awarded any portion of VETS GWAC-- Ms.Doan. I do not have that. ChairwomanVelazquez. --for the gulf region? Ms.Doan. I do not have that information at this point, but I will be happy to follow up with the Committee on that. ChairwomanVelazquez. Well, your answer is totally irrelevant because it did not pertain to the gulf region at all. So that is why we cannot have any information as to any of the contracts going to local small businesses. It was nationwide. It did not have anything to do--but you spent all of your time talking about this. I asked in the letter that I sent to you specifically for you to address local small business participation in the region. With that, I recognize Mr. Chabot. Mr.Chabot. Thank you, Madam Chair. Mr. Schneider, let me begin with you if I can. After the gulf coast hurricanes, did FEMA undertake a critical review of its coordination with the SBA in responding to natural disasters, and if so, what lessons did it learn, and have those been implemented? Mr.Schneider. I am not familiar in detail with how they coordinated. I do know, because I researched it in preparation from the previous hearing in April, that we were not prepared post Katrina for what happened. So I can tell you that we had no people on the ground. We had no awareness of small local business. We had no contracts people. We had no market analysis of what the industry could do locally, and so those are the major lessons learned across the board. Though, there really was, from what I understand, very little interfacing down in that area with the Small Business Administration. So what we have done since then is, you know, beef up. We have about 60 people. We have contracting officers on site. We work very closely with the SBA. We do a tremendous amount of outreach. While in the immediate response to Katrina, we awarded major contracts to big business, close to 70-some-odd percent of the work was actually done by small businesses. So, in the course of doing that, we built up a pretty good knowledge on the ground of what the capabilities were of small and local business, and we have used that. We keep databases. We have outreach. We do forums jointly with SBA. We have what I consider to be--I have actually met with the people who are working it on the ground, and I think we have done a pretty good job to make sure we are much better positioned to handle that type of problem today. Mr.Chabot. If such a review were performed and is in writing somewhere, could you make sure that the Committee acquires a copy of it, assuming that it is within security requirements and thing of that nature? Mr.Schneider. Yes, sir. I will go back and look at that. Mr.Chabot. Thank you very much. Ms. Doan, let me turn to you if I can now. Is one of the issues associated with contracting with small businesses in these areas such as we are discussing here, in areas where there was a disaster, the fact that the area is still recovering and that the number of small businesses operating in the area remains well below the prehurricane totals? Ms.Doan. Yes, this is very much a problem. And on Friday, when I was actually in New Orleans talking with our contracting officers, one of the commitments that we made together is that every month we will be hosting from now on training sessions in New Orleans that we are going to work around the small business person's schedule because a lot of them, they are the owner of the business, and they are working in the business. So they will be very early in the morning, during lunch or in the evening, and we will try to get them on the GSA schedule, making them aware of procurements. What we have found every month, more businesses are returning to the region, and therefore, it is important for us to be constantly refreshing that information. What we have been doing in the past--we need to have a regularly scheduled meeting where new businesses, when they return to the region, can come to us and know that they can get that help and guidance to get those Federal contracts. Mr.Chabot. Okay. Thank you. General, are there some functions performed by the Corps of Engineers that small businesses, for one reason or another, are unable to perform or incapable of performing? And do any of those functions relate to disaster response? GeneralVan Antwerp. Generally there are always contracts that some small businesses can do. But in a disaster, we are finding most of those contracts are in the area of water, ice, debris removal, temporary roofing and those things, that they are capable. Now, we have found that in some instances, the affected area, the contractors and some of their workforces are affected initially. So one of the things we are looking at is, how do you get them under these long-term contracts that are standing so they are geared up for it, and they are ready to respond. And then, secondly, can we get them re-engaged for those--because we will go to them and say, you know, a temporary roof contract, can you do this and do you have the capacity. And during the disaster or right after the disaster, we are going to have to contact each one of those firms. But we do know who they are, and we have them under a standing contract. So that is our commitment to use them and then we'll work with each one. Mr.Chabot. Let me follow up on that if I can. From your written testimony, it appeared that small businesses were to a considerable degree limited to debris removal. And are small businesses capable of providing other services to the corps in response to the aftermath of the gulf coast hurricanes? And if so, are you going to pursue that area and try to do a better job in the future. GeneralVan Antwerp. Yes, sir. I think there are two areas. We separate this. One is the response to the disaster immediately, and then there is the rebuild and restoration. Right now, most of that $5.8 billion that I spoke of--and it is in my testimony--is first rehabilitation and restoration of the hurricane protection system. And we are using to the maximum extent small businesses in those local areas. I would report on one area. Most of our response efforts are under FEMA. And there was one area--and this is in the area of demolition--that we had a number of contracts prepared for demolition, but it has been slow in identifying those areas in the parishes for demolition. So FEMA has gone back and taken those dollars back. And they will go to individual parishes to do that demolition with the idea that the small businesses from those parishes would help with that response. So that is one area we have decreased a little bit because the work wasn't there yet. Mr.Chabot. Thank you. Secretary Finley, in your written testimony, you were--you may have done this in your oral as well--refer to the reference guide. Does the DOD plan to make the reference guide available on the Web so that small business owners know exactly what contracting officers in the field are utilizing when they are determining emergency contracts? Mr.Finley. Yes, sir. The guide has been going through numerous--I have a copy of the latest updates here. It has been going through what we call red team review. It will be on the web. It has gotten inputs back from the air force, the Navy, Marine Corps and the Army. We plan to post this, you know, on the Web site this week and start to get feedback. And the first addition of this is planned to be issued on or around 1 September this year. Mr.Chabot. Good. I think it is important to let the small business community know exactly as much as possible so they are able to bid and that sort of thing. Secretary Preston, last year, storm forecasters predicted a more active than normal hurricane season and, of course, as we know, no major storm made landfall in the U.S. How difficult is it to be fiscally responsible with an employee budget yet maintain appropriate readiness for a major disaster on the level of Hurricane Katrina or Rita or other major disasters that we have had or a major earthquake, for example, in California? Mr.Preston. Sir, it is a balancing act. I do think it takes money to be prepared, but I think there are ways that we have looked at preparedness that we think are fiscally responsible but also, and most importantly, ultimately will be sensitive to the people that we are here to serve. I think it hits in two areas. Primarily it hits in--probably three. It hits in having a system's capacity to handle the volume with your computers. It hits with facilities, having backup facilities to help people because we ramp very quickly. And most important and most challengingly, it deals with people. And what we have done in those areas is we have already expanded our system's capacity fourfold. So it has been dramatically expanded. We have a very specific facility expansion plan with currently active backup facility. And then we also work with people at the GSA every month to understand what is available in the Federal network should we blow through that which would only anticipate an event much bigger than Katrina. And what we have never done before is dramatically expanded our reserve corps. That does cost money. It costs money to bring people in every year for a week so we can train them. But they stand ready to come and serve. We have significantly expanded our lending train for people who are not in our disaster business in the SBA. That costs money, but we think it is a very frugal way because we are identifying people, training them but not fully employing them at this time. And you really have to kind of understand how that ramps with the needs. But I think we have done a good job of balancing that. Mr.Chabot. Finally, Mr. Henke, since you lived in Cincinnati, what I should ask is more, do you miss Skyline Chili, Graeter's ice cream or La Rosa's Pizza. But I won't put you on the spot for that. Although I will ask-- Mr.Henke. All of the above, sir. Mr.Chabot. If a similar event like Katrina occurred in the gulf coast region or elsewhere, how would the VA's response differ from the response in Katrina? Mr.Henke. We have taken a look at our emergency contracting procedures and are trying to establish a core competency in the acquisition workforce to handle that. If you look at VA's response to Katrina, we had frankly a remarkable achievement. Our gulf port facility was completely destroyed. It was planned to be consolidated with the facility at Biloxi anyway, and we moved ahead and are now rebuilding--or expanding our campus in Biloxi, Mississippi. The VA care providers in the hospital in New Orleans, there are many of them who stayed in the bed tower, in the hospital in New Orleans tending to their patients and evacuating their patients as they could. And they could see from the hospital tower where their own homes had been flooded, had been destroyed. So we are actually quite proud of our performance and our response. We didn't lose a single patient and many of them were in critical care. But we did extraordinary things to evacuate them to safety. We quickly established three new community clinics in Hammond, Slidell and LaPlace, Louisiana, to re-establish the VA presence in the area and start to provide that care. And the workload for veteran patients is showing up and is reappearing in the New Orleans area. So we are very proud of what the VA employees did in that region. Mr.Chabot. Thank you very much. Yield back, Madame Chair. ChairwomanVelazquez. Thank you. Mr. Gonzalez.Mr.Gonzalez. Thank you very much, Madame Chairwoman. First, it is going to be an observation. Assistant Deputy Schneider, you made a comment about legislative language out there, about having full and open contracts that you think may impede. But let me explain, I guess, from the perspective of Congress. The purpose of that language that we are attempting to put in legislation is to address some problems. And one of those, of course, is to assure that we don't have a proliferation of no-bid contracts, for instance, or to make sure that we don't have favoritism based on political party affiliation demonstrated in the awarding of contracts. I will agree with you that we have to be very careful that there may be some unintended consequences which I think we can address. So I do appreciate the import of your observation, but I want everyone to be abundantly clear of why we would have such language. My question to you would be the following, and it was somewhat addressed with the graphs and stuff. But I am still somewhat confused. In our memo, it says, although the Department of Homeland Security awarded 297 of its 340 contracts to small businesses, the total dollar value of these awards was negative in your responses to the chairwoman's questions. Let me see if I sort of understand this. Let us say you have 100 small business contracts each at a dollar, and that is the upper limit--because you are not real sure what it will cost at the end of the process. But at the end of this, you still have 100 contracts fully completed but you have de- obligated and you are down to $30 for those 100 small businesses. Now, you would still take credit for contracting with a hundred small businesses, would you not? Mr.Schneider. The number of the small businesses that we contract with doesn't change. Mr.Gonzalez. Let me stop you there. Now, in reporting to us, would you reflect that you have contracted with the small businesses to the tune of $100 or $30? Mr.Schneider. It would originally be-- Mr.Gonzalez. No, no, no. I want to know, when we look at your figures, are you going to report to us that you invested $100 in small businesses or $30? Mr.Schneider. The net ultimately would be reported as 30. The process would show a de-obligation in the system of what the excess money was. So initially but not to exceed would be recorded. Then when the work was done and the work actually came in at less money, what was not spent--because it didn't need to be spent--would then be de-obligated. And that de- obligation would show as a negative in the system. So you ultimately see the net. Mr.Gonzalez. I will tell you something. I don't know. Maybe my fellow members are in disagreement with me. We are really interested in the net. We understand how you have to do business, and I think it is good common sense to say, this is the ceiling, and you are not going to exceed it. I understand that. But I think for our purposes to see what small businesses are really receiving in this country, we need to figure out what is the bottom dollar that any department or agency is actually paying to that small business. That is the reality. Let me move on to something else because I believe our time is going to be up. Mr.Schneider. In response, I will submit these detailed charts so you will be able to actually track the flow by State, put in not to exceed, de-obligated and net. Mr.Gonzalez. I understand. But we have individuals out there that will be using the not-to-exceed numbers as representing the effort out there by a department or agency. I am just placing people on notice that, to us, that is irrelevant. It is totally irrelevant. If you are the business person on the end of this transaction, I guarantee you it is totally irrelevant. The next thing is about miscoding. And I am going to quote from the memorandum. In looking at the data, the Committee found that hundreds of these contracts had been miscoded. Contracts with fire departments and cities have been listed as small business awards and then also subsidiaries of bigger companies. Now, you would think some of these subsidiaries may have misled you. But this is the comment that we have in the memo. More often, the companies made no effort to self-identify a small business. The miscoding then largely occurred at the agency level. Now, as it applies to FEMA and to the Department of Homeland Security, how do you respond to that particular assertion in our memorandum? Mr.Schneider. I am not sure that the memorandum that you are reading from--yeah, I am not sure specifically how that is worded. But let me tell you a little bit about the coding. I went through after the last hearing with the contracts expert to actually understand how something gets coded in the system. And I asked the question, like, how many contract actions we have. We have 66,000 a year. So with an experienced contract expert, I went through them and I said, show me why it is so hard to enter this data. What they did was actually walk me through each of the lines and show how an experienced contracting officer, sometimes based on the choices you have, can make a mistake. Okay? And that is why what we do is the following. We have been working closely with the GSA folks. We have identified approximately 20 different changes that could be made to facilitate the entry. We have an outreach program with all of our contracting people in terms of how we can do a better job of coding. In November 2006 and May of 2007, we reviewed 4,000 entries to see how many errors there were. We found errors, and we fixed them. What we try to do is figure out where in these lines are the errors being made and then let us focus on the attention to fix them. The other thing I might point out is this. This is the very last thing a contracting officer does after they basically sign off on a contract. What we have found is that some of the practices vary. Sometimes they actually enter right after they sign off on the contract. Sometimes they wait until the end of the week. Sometimes they wait longer. And the longer they wait, the less fresh it is in their memory, and there is an opportunity actually for more errors. So I think we were aggressively looking at the errors, what causes the errors-- Mr.Gonzalez. Secretary Schneider, because my time is going to be up. Look, I am not questioning your sincerity and everything. I think you were finding some of the problems. We just want you to hurry up and fix them. And let me explain why I am saying that. I have been handed some information that, in the spring, 106 miscoded contracts were identified. You still have them on the books as constituting small businesses when they are not. One of those is the water board of New Orleans. And I can name Oakley, Avery Dennison and Global Charter Services and such. So much of what you said right now, I don't think you have even instituted. We just want to see something that is a lot more aggressive, much more thorough in addressing these problems. When you give us these numbers about how you are engaged with small businesses, they are not representative. And we are starting off with some base information which is incorrect and inaccurate. So we are starting with a foundation that is faulty and trying to build on faulty foundations. That won't do anybody any good, whether it is Congress or the department or the agencies. With that, I yield back. Thank you, Madame Chair. ChairwomanVelazquez. The Committee stands in recess subject to the call of the chair. [Recess.] ChairwomanVelazquez. The Committee is called to order. Mr. Preston, I want to follow up on the miscoding issue that was raised by Mr. Gonzalez. As we all know, your agency is responsible for submitting an accurate report to Congress of small business goals. Yet the Committee found approximately 250 miscoded contracts in FPDS, the Federal Procurement Data System, for Katrina-related actions and most are still in the data. Since you have stated that cleaning up this problem is a priority, can you provide the committee with a timeline for when these errors will be corrected? Mr.Preston. Yes. As you know, this has been a big issue for you, this has been something we publicly talked about a lot. Last year, I sent a letter to all the agency heads, along with people in the White House asking for clean data not only going forward but to restate 2005 and make sure 2006 was correct. We have worked with the agencies very extensively to get to a much cleaner output when we look at that data. Paul Bennett from OFPP has also asked all the Federal agencies to represent to the White House the validation and verification procedures they will have, having third parties do that. People are responsible back to him for that. We will be making a resubmission of the 2005 data available within the next few weeks. That is the result of many months of work with the Federal agencies. We think it is a much higher quality product. I will tell you, 3 and 1/2 million small business actions a year, it won't be perfect. The other thing we are doing is we are working with the people at the GSA to make that data--every one of those lines of data publicly available and easier and in a more user-friendly format. We are working with people a lot in the process. We have a lot of support broadly in the administration. I think the agencies have worked very hard on this, but it is a very extensive project I think that will continue forward for a while before I think we really get it right. ChairwomanVelazquez. When do you think this will be ready? Mr.Preston. We will have 2005 and--cleaned up 2005 and 2006 data available this month. ChairwomanVelazquez. Mr. Schneider, I asked the Department of Homeland Security to identify five new prime contracts after our April hearing in New Orleans. And in your response, you included one that was posted prior to the hearing in April. So since I requested for each one of the agencies to identify five new contracts, I will ask you that you identify one new contract, one new prime contracts and explain to me first why, when I asked for five prime new contracting opportunities, you included one that was old. Mr.Schneider. I wasn't aware at the time that one contract was old. I think it was the seven total, which were, I think, two over and above the five you asked for-- ChairwomanVelazquez. Well, I want to-- Mr.Schneider. I will go back and find out why and we will take a look to see if there is any other additional contracts. But, you know, I don't know why the one. But we did provide five. ChairwomanVelazquez. Well, I will ask that, in the next 2 weeks, you provide information with the five new contracts going forward after the April hearing. My understanding is that two of the contracts were listed twice, so that is why you come up with the seven contracts. So we need accurate information. And I please ask you that you submit it to the Committee in the next 2 weeks. Mr.Schneider. Sure. ChairwomanVelazquez. Mr. Van Antwerp, In your testimony, you mentioned that your debris removal contracts will be more small-business friendly. You mentioned 8(a) and HUBZone set asides. But now only one mechanism to ensure local firms are included. So my question is, why is it that you are not using set asides for local small business participation. GeneralVan Antwerp. Ma'am, I am not sure exactly how we can code local small business. And we are trying to come to grips with this as we look at how we code them. But we have small business. But we will go after that local small business set aside. ChairwomanVelazquez. If your staff has problems in identifying or the definition, I would suggest that you get the assistance of the Small Business Administration. GeneralVan Antwerp. Thank you, ma'am. ChairwomanVelazquez. Mr. Henke, at the hearing in April, Admiral Dunn, who represented your agency at the time, testified that the agency's policy for the veterans' medical center was to have large prime contractors and involve small businesses only at the subcontractor level. And he, in our exchange, basically made the statement that he thought, based on experience but not on data, that there will be no local small businesses that could do the job that was required. So in the contracts that you are submitting to the Committee, there were prime small business contracts for the VA medical center; right? Mr.Henke. Yes, ma'am. ChairwomanVelazquez. So, I guess that Mr. Dunn was wrong in his statement because when he came in April, he said there is no way that we could identify or set aside five prime contracts for small business, yet you are submitting prime contracts for small businesses to our Committee. So what happened between then and now? Mr.Preston. Ma'am, I am not exactly sure what Admiral Dunn said before the Committee. Perhaps the discussion was about the construction effort that the VA must undertake in New Orleans. But I know that when the admiral responded, when the VA responded in the letter, we did provide the five, and we are executing two of them this month and three of them next month. We expect to award all five here in the next month or two. ChairwomanVelazquez. You are expecting to? Mr.Henke. Yes. ChairwomanVelazquez. When. Mr.Henke. Two in August and three in September is the expected award date for these five efforts. ChairwomanVelazquez. Mr. Finley, at 4:30 p.m. Yesterday, DOD finally provided contracts in response to the Committee's request. These were all contracts that had already been awarded. The purpose of my request after the April hearing was for the agency to show what they planned to do going forward. What DOD did instead was wait until the last minute and then simply go back and pull from the contracts that they have already let. And I have to tell you that this demonstrates a lack of goodwill on the part of the department. And then to wait 4 months for you to comply with the Committee's request and not providing any new prime contracts, that is unbelievable. Four months. Sir, I thought that military time was more prompt than 4 months. Do you have anything to say? Mr.Finley. Yes, Madame Chair. First of all, I apologize for the very late response. The letter that you sent to us unfortunately did not reach our office in what you might consider a normal fashion. Everything gets checked for chemical, biological things. It came in through our normal mail and it-- ChairwomanVelazquez. Two months--excuse me. What do you mean by, "it didn't reach your office in a timely manner"? Mr.Finley. It didn't reach our office in more of what I consider a timely fashion. I am not using it as an excuse. I am using it as an example of what slowed our system down. ChairwomanVelazquez. Sir, you have to check your system. This is the military. Huh? We send it electronically, too. Mr.Finley. I will double check on that as well, ma'am. As a point of the contracts themselves, Madame Chair, I am not aware that these were already awarded prior to 4/12. My information was that these were awarded post-4/12. And I will take that question for the record, and we will get back to you on the facts of those programs. And if we cannot find that those are the proper timed programs, we will certainly work to identifying in the next 2 weeks five contracts that do fit post-4/12 awards. ChairwomanVelazquez. Those contracts were awarded prior to the April field hearing. I am asking you that you go back and identify five new prime contracts that will be posted after this hearing for local small businesses. Mr.Finley. Okay. Ma'am. ChairwomanVelazquez. I ask that you comply in 30 days. Mr.Finley. I will. ChairwomanVelazquez. Now I recognize Mr. Chabot. Mr.Chabot. Thank you, Madame Chair. Mr. Preston, let me begin with you if I can. I just have a few questions. Not terribly in depth with anybody at this point. But did the SBA use the disaster response plan in response to the tornados that occurred a few months back that devastated Greensburg, Kansas? Because, obviously, Katrina was, you know, a number of years ago and you all came up with a different disaster plan, I think, which was supposed to be more efficient. And how did it work in the Kansas situation? What kind of differences-- Mr.Preston. In Kansas, also with the tornados in Florida and in many other cases, a lot of the changes that have occurred over the last year and many which are described in the disaster recovery plan were in place for those disasters. We saw a very responsive turnaround time both for people getting approved for their applications and actually getting disbursements. In fact, in Florida, the local newspaper highlighted the reforms of the agency and how responsive we had been down there. Mr.Chabot. Thank you. And finally, for any of the panel members that might like to respond, I would be happy to give each of you, you know, a minute or so if you would like to just to maybe clarify anything that you think you would like to bring out in response to any of the questions that might have been asked or any points that you think that you didn't have adequate time to explain your answers. I would be happy to give you that time now, approximately a minute each. You don't have to take it. But if there is something you would like to clarify, I would be happy to hear it. I begin with you, Mr. Schneider. Mr.Schneider. Yes, sir. I appreciate the opportunity. I would like to follow up on the discussion with Congressman Gonzalez. His discussion of our concern about the appropriations bill where specifically that Section 537 where he, I think, used the term there may be some unintended consequences. We are very much worried about this. While our department clearly supports the tenets of competition and the benefits of it, basically the restrictions, the way we see this would be absolutely detrimental to all of our efforts in small business HUBZones, small disadvantaged businesses, woman-owned businesses, et cetera. So the Secretary is given by the statute very limited authority only in terms of national emergency. So anything that you can do, we would really ask for your support basically in conference in getting this turned around. This is a big deal for us, so we would appreciate your help in that regard, as well as frankly the salary lines for the account that basically funds the small business office. Mr.Chabot. Thank you. And we can just go down the line. ChairwomanVelazquez. Yield? Mr.Chabot. I would be happy to yield. ChairwomanVelazquez. Sir, can you explain to me more specifically how to have these full and open is bad? Mr.Schneider. Yes, Madame Chair. Section 537 states none of the funds appropriated in this act may be obligated for a grant or a contract awarded by a means other than full and open competition other than a grant distributed by a formula or other mechanism that is required by statute. The Secretary of Homeland Security may waive the application of this subsection during a national emergency. So full and open competition is full and open competition for all businesses. That means we would, except in the case of a national emergency, not be able to set aside a procurement for small business. We are all for competition. We want the benefits to be able to execute the small business programs that we have been executing because we think they are absolutely essential to stimulate growth in that particular area of the economy. ChairwomanVelazquez. That is a matter for interpretation. Mr.Schneider. This is one of the reasons why we have taken, our department, very strong exception to this because we believe we are significantly disadvantaged by that statute as currently written. Mr.Chabot. I reclaim my time, unless you need to continue, Madame Chair. ChairwomanVelazquez. Yeah. The issue at hand today is local small business participation. This is going forward. The fact of the matter is small business participation by each and every one of the agencies represented here in the gulf coast. And there is no way that we can rebuild the gulf coast region if we do not address the issue of fair participation by the same businesses, local small businesses that will be the ones creating the jobs, to help the region recover. This segment called for transparency, and that is good for big business and small business. Mr.Chabot. Reclaiming my time. Ms. Doan, did you-- Ms.Doan. I would also like to add that GSA believes the other way to revitalize the gulf coast region is by ensuring that local small businesses actually participate in the National Federal contracting arena. And that is one of the reasons why our GWACs are so important. If we can get them on the schedule, our GSA schedules, if we can get them on our other government wide acquisition contracts, it gives them a chance to participate in all of the Federal contracting dollars that are available. And I appreciate, Madame Chairwoman, that you mentioned that the gulf coast region is more than just Louisiana. Because, for example, you know, Alabama was also affected, and we have 8(a) stars which are the 8(a) set-aside contracts awarded to gulf coast companies there. Each of these are ways, even though they are participating on a nationwide arena, to help revitalize that region. And GSA is small-business friendly. We are local-small-business friendly. And we will continue to work with this Committee to be aggressive in pursuing these opportunities. Thank you. Mr.Chabot. Thank you. And we can go down the line. If you don't need to take time, that is fine. GeneralVan Antwerp. I might just very quickly say--give a status report. We are at about the pre-Katrina authorized level as we do the recovery, but that means we have got a very large effort to get to the 100-year storm protection. So there will be more opportunity here from the Corps of Engineers where we have a good acquisition plan to involve local small businesses in that next piece to go to the 100-year storm protection. And then, as I said earlier, for the advanced contracts to be ready for the next hurricane, we have the RFPN, and we have got a situation in place where we will use as much small business effort as they can provide. Mr.Chabot. Secretary Finley? Mr.Finley. I will simply reinforce and endorse that local small business is the key, is the focus. We have boots on the ground through our PTACs in New Orleans, and we are absolutely using them as a focus and barometer of our success in making results happen in New Orleans in particular. ChairwomanVelazquez. Director Preston. Mr.Preston. I want to say, in the last year, certainly some of the successes we have had down there as well as the lack of successes has taught us a lot this year. And it has allowed us to refocused our PCRs. We are in the process right now--in fact, I think we rolled it out last week, a tool to help Federal contracting officers electronically identify small businesses specifically in the preference areas to support their work. I think it has helped us get a much better degree of coordination across the agencies going forward. That is going to be a critical element. And certainly, just as the leader of the agency, it is put on my radar screen much more clearly in the realization that the leadership for this type of thing does need to be at the top. I think we are in a better position than we have been before, and we will continue to make good progress. Mr.Chabot. Secretary Henke. Mr.Henke. Yes, sir. I'd just make two quick points. The VA is very committed to ensuring that we meet our small business goals. We met them last year. Our goal is 23 percent. We made 28 percent. End of note, VA--as VA should be--we made the goal for service-disabled veteran-owned small businesses, one of two agencies to do that. We are proud of that accomplishment, and we are moving forward to implement new legislation that the Congress gave us last year, to put service-disabled veteran- owned and veteran-owned businesses at the head of the line. Second point, sir, on the VA medical center in New Orleans, we are very committed--the VA is very committed to re- establishing a presence, a commanding presence in New Orleans. We want to put our medical center back down there. We do need Congress's help in one way. We have the $625 million appropriated for construction to build a facility. We have only $300 million authorized to do that. So we need congressional authorization to move ahead on that project when the time comes. We are very committed to a partnership with LSU in the area. And we are very close to a site selection. But this hospital in New Orleans, the VA facility will be a million-- more than a million gross square feet. We hope it will include more than 140 hospital beds. The outpatient clinic has the capacity to receive 410,000 visits per year and a 60-bed nursing home. So we intend for this to be a state-of-the-art facility. We are pursuing collaboration vigorously with LSU and want to find ways we can collaborate and work together. We need congressional help to get the project fully authorized so that, when we come to the construction point, we can do that. Thank you. Mr.Chabot. Madame Chair, I yield back the balance of my time. ChairwomanVelazquez. Mr. Braley. Mr.Braley. Thank you, Madame Chairwoman and Ranking Member Chabot for holding this important hearing. One of the important pieces of legislation to come out of this Committee this year was a Small Business Fairness in Contracting Act which I was very proud to sponsor and which had overwhelming bipartisan support from the Committee as a whole and on the House floor where it passed with 409 votes. And the chairwoman and Ranking Member Chabot were both cosponsors of that legislation. So my question for the entire panel is, are you aware of the requirements of the act? And what, if anything, are your agencies doing to prepare for it in the event that the President signs it into law? Mr.Schneider. I am not. Ms.Doan. I know there were several portions--and, yes, we are aware of the act, and our chief acquisition officer is working on a plan. One of the clauses, or whatever you want to call it, in the plan is, of course, the anti-bundling, and we at GSA, and I in particular, are very proactive in trying to prevent anti-bundling because it is probably one of the hardest things as a small business to try to perform on these really huge contracts. And I might add that is one of the initiatives that we are working on because one of the ways that we can prevent the tendency to bundle is to make our contracting officers comfortable with taking the risk and making those awards to small businesses and knowing that they can provide those goods and services, that they have that ability to excel. And that is one of the things we are working on, is to provide that guidance to our contracting officers so that they will give those small businesses a chance. And you missed my earlier statement, but I said I actually think that it is terrific. The small women-owned business clause is in it. We also have a group that is working on trying to make opportunities available to women-owned businesses. We are working on, how do we handle mid-size business opportunities? So, yes, we are aware of it. We look forward to working with the Committee on all the many aspects of this legislation. Mr.Braley. Ms. Doan, can we take it from that testimony, then, you would be on record as supporting the anti-bundling provisions of the Small Business Fairness in Contracting Act. Ms.Doan. Actually when I was looking at it the other evening, there are four or five different clauses or phrases or caveats in it. And what we are doing at GSA is trying as hard as possible to develop our approach to each one of these. The ones that we can support, we obviously will. I will tell you that there are some challenges with it in that we have to balance this with the need to respond to other congressional requirements and other statutes. For example, enterprises architecture. Enterprise architecture in and of itself is in a way a sort of bundling because they are saying that you have to have one platform, one performing in a particular area. But those are things we will look forward to working with the Committee on trying to redefine and find ways to make these opportunities available to small business. Mr.Braley. But can we take it from your testimony that you at least in concept support the idea of eliminating bundling obstacles that prevent small businesses from getting their fair share of the Federal pie? Ms.Doan. As much as possible whenever something comes over my desk that I have actually seen that implies there is bundling involved, I usually say no. GeneralVan Antwerp. Sir, I am aware of the Fairness in Contracting Act, and I would agree with your statement that we want to make sure that we have removed the obstacles and so, in your words, eliminating the bundling obstacles. We are in agreement with that. Mr.Finley. Sir, I would reiterate that we would very much like to work with the Committee on this. I personally have not reviewed the language. Bundling is something that we are opposed to. And from an acquisition strategy, we do everything we can to avoid it. But we very much would like to work closely with the Committee and perhaps yourself to better define what the concerns would be, if any, and work together to find a way out so that when it became law, we could implement it right away. Mr.Braley. Mr. Preston? Mr.Preston. I think the big issue for us is how to support the people at the table as effectively as possible. It will require us to really redouble our focus in ensuring that they see the right small businesses, that we see all the contracts that are available for small business to work our network. So, in some ways, I think it will up our workload, but that is a good thing because I think it will intensify people's focus on the small business needs and give us an opportunity to be in the middle of that process. Mr.Braley. Administrator Henke. Mr.Henke. Sir, I am not familiar with the details of the legislation you cited. But the VA has a proactive effort to reduce contract bundling. It is required that we review every action that is $2 million or above. At the VA, we cut that threshold in half. We review every action over a million dollars. We have reviewed over a thousand contract actions and returned about 20 percent of those back to the acquisition professionals to say that this needs to be unbundled. So we take that effort very seriously. Mr.Braley. Thank you, Madame Chairwoman. ChairwomanVelazquez. Mr. Jefferson. Mr.Jefferson. I am going to commend you and the ranking member for the work that you have done in New Orleans and the field hearings, all the special attention you've paid is extraordinary. And on the awards received this past weekend from the Black Chamber of Commerce, the Mitchell award, the highest award they can give, I think you deserve it. And I appreciate the work you have done to continue the focus on the recovery of the gulf. Mr. Braley asked the question whether you supported his act. This bundling issue is one of the largest ones that we are dealing with down home. The question that I would like to ask is--because the chair lady is concerned, and we all are, about going forward. We know that it hasn't worked so far. Whatever you have done to deal with the anti-bundling issue hasn't really worked now. My question is, if you support this legislation, in what particular ways do you envision undoing this issue of bundling? What specific steps are you going to take to make sure this doesn't happen in the future? Each of you, if you want to answer that. And the other question I want to ask--because Mr. Hsu came before us sometime ago to say that--he was the associate administrator for government contracting--who said that his job is to contact each agency under the leadership of Mr. Preston and to engage each agency in finding new opportunities for small business. I wonder, have you been contacted, any of your agencies, by Mr. Hsu? Has he gotten his program underway to help you identify--work with you to identify small business procurement opportunities? And has he emphasized the issue of local small business opportunities that we are emphasizing at this hearing? Mr.Schneider. Well, Congressman, I will answer that last part first. The talking to Mr. Boshears, who is the head of our small business, yes, his staff has worked with our staffs looking at potential opportunities. So it sounds like that is working, at least from what Mr. Boshears tells me. I can tell you just-- Mr.Jefferson. What kind of schedule are you on with him to get back to him with some answers? Mr.Schneider. It is an ongoing dialogue. And I would expect frankly that it would be because what we would be interested in is a continuing evolution to continuously identify those capabilities. I think as I indicated in response to your earlier question, I have not read that legislation. Just picking up from the discussion, clearly it addresses bundling. I can tell you that what we do in terms of our--from our contracting--from our chief procurement officer perspective and in her dealings with all the chief procurement offices in the department, what we do is encourage and we highlight the need to basically eliminate the bundling of contracts where it doesn't make any sense. Mr.Jefferson. I'd encourage you to think hard about that, think about some new ways to get after this issue. Have you given this any thought, Madame Secretary. Ms.Doan. I have given it enormous thought. And the first thing I have done is, every time an opportunity has come across my desk that appears to be bundling, I say no to it. I did that my second week on the job with a $200 million award that was going to go to a large business. And I said this has to be offered to our small and minority business community before-- Mr.Jefferson. Have you given particular emphasis of this and what is going on-- Ms.Doan. Yes. As a matter of fact, I did. And one of the things I realized is required is our contracting officers get a little risk averse because they have to write justifications or validations because of the nuances. Is it debris removal? Is it collections? So it occurred to me that I as administrator have the ability to issue a GSA order that gives them the cover, that basically says all contracts that are performed in the region-- Mr.Jefferson. This is something new you have come up with. Ms.Doan. Yes, it is, because I realize more has to be done in order to empower our contracting officers to-- Mr.Jefferson. This is a very recent action you are taking. Ms.Doan. Yes. Mr.Jefferson. So you think this will cure some of the issues we are talking about here with respect to this fuzziness that may exist as to what agencies can and cannot do. Ms.Doan. I believe it will help. I intend to monitor it very, very closely. And since we will meet sometime after September 30th, I imagine I will be happy to present you with any results that we have had as a result of that. But I also believe that it is really important for us to work with our contracting officers. And our chief acquisition officer is providing training for them to make sure that they feel empowered to go to the local small businesses. Mr.Jefferson. General? GeneralVan Antwerp. First of all, I don't believe that we have been contacted from my small business people, so we need to make contact on that. Of your question with Mr. Hsu-- Mr.Jefferson. Mr. Hsu's job is to contact you and to try to advocate for small business, to find opportunities within your agency. GeneralVan Antwerp. To my knowledge, we haven't been contacted yet. Mr.Jefferson. What specific steps are you taking different from what you have taken in the past to deal with the bundling issue? GeneralVan Antwerp. It is a great question. The best indicator is in our advance contract initiative. We have three task force orders that we have out there, and we have set two of those aside for small businesses. And that is because the theory before was, get someone that has the total capacity to do it in all different phases of it. But now we are breaking it up so it may be on a parish-by-parish level. So we are carving that out and taking those things apart, and we will apply them as the small businesses have capacity. Mr.Finley. Congressman Jefferson, we have a regular discussion ongoing that the small business--Mr. Preston and myself stay in touch a couple of times every couple of weeks. Mr. Hsu has clearly been in touch with myself. He has been in touch with Anthony Martocchia, our new director of small business programs. This particular subject matter has come up. We in the DOD have been streamlining and simplifying our acquisition processes on a grander scale. And as it comes into small business programs, we are putting in metrics and our acquisition strategies have checks and balances to eliminate bundling. We are fundamentally opposed to this. We want more-- Mr.Jefferson. Is this a new procedure you are talking about? GeneralVan Antwerp. These metrics are new, yes, sir. Mr.Preston. I just want to say thank you for acknowledging Dr. Hsu. He is a true American success story. He was an 8(a) firm owner. And it is sort of a rags to riches story. We hired him because of his tremendous passion not only for small business. And he is very actively getting out there, meeting with the agencies as is his staff. So I appreciate your acknowledging that. Mr.Jefferson. Is he getting results out of his work? Mr.Preston. I think he is. The other thing he does is he chairs the Procurement Advisory Committee which has small business representatives from all the major agencies. And I can tell you the deputy or I are at all of the those meetings or at least a portion of them. Paul or Dr. Hsu chairs them. And I feel like there is--even the dialogue among the agencies on these issues has expanded dramatically. Mr.Jefferson. Anything with specific recommendations on the anti-bundling that you might pass on to the other agencies? Mr.Preston. I think we are working with them on a number of those issues. I don't have anything specific here today. But what I would tell you is, we work very hard to see bundled contracts in the field. Our procurement center representatives look at those. A very significant percentage of the small business contracts that go out are awarded after we file actions to have agencies relook at those procurements and redesignate them for small business. And I don't have that data here today, but I would be happy to share it with the committee. So I believe that our interaction with the committees, with the other agencies is a very important part of getting those contracts to small business. And much of it is in looking at potential bundling situations. Mr.Henke. Sir, I do know that Mr. Hsu has been in contact with our small business office on a regular basis. I am not sure of the exact status of those discussions, but I do also know that Administrator Preston had a visit with our deputy secretary about 2 and 1/2 to 3 weeks ago. So that just reflects the level of dialogue we have with the VA, with SBA. ChairwomanVelazquez. Time has expired. Mr.Jefferson. Can I ask one last--this is about the--there was a commitment on the part of the Homeland Security to go back and undue those things and let them be rebid. But most of us think that never really happened, that the old contracts were added to and people kept on. Am I right on that or have you unbundled those things and gotten them out for local folks to have a chance at them? Mr.Schneider. Congressman, I don't know the details of that. Mr.Jefferson. The no-bid contracts, the early ones that were put out, $500 million a piece-- Mr.Schneider. The large contracts I think are the ones you are talking about? What they did was--if it is the four big ones that were awarded immediately after Katrina where they were awarded to large businesses, we are in the final--I believe in the final closeout phase of most of those contracts. I might point out that roughly 70 percent of all the work under those four big contracts was done by small business, and so I think we are still in the closeout phase. Mr.Jefferson. It is way down the-- ChairwomanVelazquez. Would the gentleman yield? You said 70 percent of those four large contracts were performed by small businesses. What percentage was performed by local small businesses? Mr.Schneider. I do not have those numbers. ChairwomanVelazquez. Interesting that you remember the 70 percent but not the other one. Now I recognize Mr. Braley. Mr.Braley. Thank you, Madame Chairwoman. Certainly contract bundling was one of the principle focuses of the Small Business Fairness in Contracting Act, but another major component had to do with miscoding of contracts. And we discussed this at our earlier hearing on this issue and also during the field hearing. And one of the problems that was identified during the field hearing was that, during an analysis of a list of over 15,000 Katrina-related contracts, hundreds of contracts had been identified as miscoded; 106 in the Department of Homeland Security; 79 at GSA; 71 at DOD; and totaling 259 at the relevant agencies. And, Ms. Doan, let me start with you. Given the fact that the Committee has identified $4.6 million in miscoded contracts, including 79 that were counted as small business contracts that were not in fact awarded to small businesses, can you explain for us how it is possible to express satisfaction with your agency's small business achievements when they include so many awards to large businesses and nonprofits? Ms.Doan. GSA scrubbed its numbers, and we are standing by them. We can't actually certify the validity of the other agencies' data at this point. But when we were alerted by the SBA that there were some significant miscoding, we identified those, and we corrected them in May of 2007. So that is a very recent correction that we did. The contracting officers who are responsible for the procurements were not always the same people who were entering the data in the database. We have corrected that. And it is possible that the folks who had been entering them in were not sufficiently knowledgeable to complete the information. The contracting officers themselves from now on will be entering the coding and that can assure a level of validity that we didn't have previously to that. In addition to that, our chief acquisition officer is going to stress the importance in our current emergency response training program that we are hosting, and they are going to stress the importance of coding at the time of the award of the contract to ensure that the data is going to be accurate. Mr.Braley. I wasn't able to tell from your testimony whether there have been any specific changes in interagency operations and procedures in direct response to miscoding problems. Has that been implemented in any formal way other than just a directive to do a scrubbing of the numbers. Ms.Doan. I believe that actually came from the SBA, and I think they sent letters to every government agency asking them to go in and scrub their numbers because each agency is responsible for its own numbers within the database. GSA has already done the scrub of its numbers as of May 2007. I think you will also find now that we have cleaned up the numbers--I think government wide, at least within GSA for 2005 and 2006. That allows the data that is now going to be certified for 2007 to be a lot more accurate. Mr.Braley. Getting back to my question. Were there formal changes in policies and procedures within the agency to deal with the problem of miscoding other than in response to a directive from SBA? Ms.Doan. Yes. Our chief acquisition officer issued a letter to all of our regional contracting officers who are responsible for performing the contract work within GSA. And I will be happy to follow up with you and the Committee with the various letters and guidances that our chief acquisition officer has put out to correct these issues. Mr.Braley. We would appreciate that. And also if there is any intended or anticipated training for these contract officers on the coding problem that has been identified and to make sure that the numbers being reported going forward are accurate. Ms.Doan. There is training that is planned, and I will have the chief acquisition officer follow up with that information. I will take responsibility for sending that over to you and the committee. Mr.Braley. And just for the benefit of my information, who is that? Ms.Doan. Molly Wilkinson. And she is our chief acquisition officer for the General Services Administration. Mr.Braley. And does she report directly to you. Ms.Doan. She reports directly to me. Mr.Braley. Thank you. Administrator Preston, one of the things you talked about was the need for better cooperation among the agencies. Do you remember that in your earlier testimony. Mr.Preston. Yeah. Mr.Braley. One of the things we have been dealing with a lot, in terms of implementing the recommendations of the 9/11 Commission, which we just voted on yesterday, is this whole concept of interagency interoperability, and that is breakdowns in communication system that prevent governmental agencies from communicating effectively among each other. Based upon your unique role in dealing with a host of Federal agencies in trying to reach the small business target goals pursuant to the directives from this Committee and Congress, have you identified specific factors that are preventing the type of interagency communications that can lead to better outcomes for small businesses in this country? Mr.Preston. Yes. I think there are some, a number to point to. Some of it is interagency communications. Some it of it I think is enabling the agencies to do their job better and having us give them better support as well. I think there needs to be formalized bodies that interact on these issues consistently. And we do have a consistently standing meeting with all of the small business representatives at all of the agencies. As I mentioned before--and I am not sure if you were in the room yet--either I or the deputy participate in every one of those meetings now. We get readouts. It is a terrific forum for us to raise issues. We learn a lot of things we are not doing right, and it allows us to communicate out as well. It also gives me the ability to call people at this table if issues arise. So that is on the block in the tackling site. And I don't know that it can happen any other way than actually having that kind of communication and that accountability with individuals. On the systemic side, I think what we are seeing is there is a much better opportunity for us, especially with some of the improvements that GSA continues to make in the Federal procurement contracting system, for us to support people by getting them access to better data on who is out there, who is available to do contracting. And then putting our people in the mix to make sure we help the agencies connect the dots. We are also looking very specifically once again within our agency and the productivity of our people in the field in getting in front of contracting actions and ensuring that those get to small businesses where they should. Mr.Braley. Thank you. ChairwomanVelazquez. Mr. Preston, I would like to address some questions to you regarding the improper loan cancelations that was reported by the general inspector. And, of course, they are all related to victims from the gulf coast region. Did loan processing employees have any incentive to cancel or withdraw disaster loans in order to appear more efficient, yes or no? Mr.Preston. The only incentive programs we had in place were to increase disbursements. It was clear based on what we were trying to achieve that the real issue was getting money into people's hands. ChairwomanVelazquez. Okay. Isn't it true that your agency gave bonuses to employees who resolve the most loans irrespective of whether that was by cancellation or approval? Mr.Preston. I don't believe so. I believe that the only incentive plan in place had to do with disbursements. ChairwomanVelazquez. Mr. Preston, clearly the inspector general believes there was a deliberate effort by your agency to cancel outstanding loans. Was it? Mr.Preston. No. ChairwomanVelazquez. If there was not a deliberate effort from your agency, then why were these loans cancelled? Mr.Preston. Well, the inspector general report deals with a very specific campaign we had. One of the issues we had at the agency is that our interactions with people are primarily through the mail. People who needed help in New Orleans didn't have somebody to call. So we either took--we fully reengineered our process as you know and one of the things we did is we gave every individual a human being to talk to, to manage their cases. There were about 30,000 people that we--whose loans had expired. ChairwomanVelazquez. And that didn't work. Mr.Preston. It did work. ChairwomanVelazquez. Were you able to have physical contact with those that applied for those loans? Mr.Preston. Yeah. Out of the people that we did not get to, that the IG is focussing on, is about 3,000 people. These are people whose loans had expired. Historically they would have simply gotten a letter that said your loan expired. Instead we attempted to call every one of them. There were about 7,700 people that we could not contact. We left messages for them. Their loans had expired. We sent them a letter that said, your loan has expired. If you want to contact us in 6 months to get reinstated, please contact us. A week later we attempted to recontact everyone by phone; 1200 people said, actually, we don't want our loan reinstated--we don't want our loan cancelled, please reinstate us. About 3,000 we couldn't contact. ChairwomanVelazquez. Let me ask you. What harm could possibly have come from leaving these loans open for borrowers to use when circumstances permitted? We knew that some of these victims were no longer there, that they moved and they were living either in New York or with some relatives. Mr.Preston. They have the ability even today, ma'am, to come back and reinstate those loans. We gave them a 6-month timeline. Our policy at the end of those 6 months is we extend it another 6 months. Today when borrowers come back and say, you know, I am sorry, my loan is expired, you haven't heard from me, we would still reinstate them today. ChairwomanVelazquez. Isn't it true that cancellations--that people that apply got a letter stating that their loans were cancelled even though they had not been contacted? Mr.Preston. Their loans had expired. So they were given a timeline and that timeline was extended once to get back in contact with us and provide us closing documents. That had expired. So what we did was called out to say, do you really want this to expire or do you want us to extend it? Those people we couldn't contact after two call campaigns--there are about 3,000 of them--had their loans cancelled.RPTS SCOTTDCMN BURRELL[12:45 p.m.] ChairwomanVelazquez. We know that your agency--explain it to me. Maybe it is not so--has policies in place whereby a disaster victim's application may be withdrawn from consideration unilaterally. This is without express consent from the person who is applying for that loan. So what proportion of loan applications from the 2005 hurricanes were withdrawn without the express consent of the applicant? Mr.Preston. Well, I do not know. From that particular campaign, there were somewhat over 3,000 people, but once again, these are people we reached out to more than once, sent them a letter, and they said, "Call us back if you want, and we will reinstate the loan." So, you know, let me just also mention, Madam Chairwoman, that I have looked at the e-mail traffic that went between the leaders and the call campaign people. I have looked at the call scripts. I have looked personally at all of the files the IG pulled, and these people in Buffalo who undertook this project are devastated by the implication that they were doing something inappropriate. They worked long hours, 7 days a week, with a tremendous heart of service here, and so I think, you know, we really need to look at the whole picture on this one. ChairwomanVelazquez. Of the 3,000 loans that have been canceled, how many of them did you contact? Mr.Preston. Well, the 3,000 were the ones we did not, who we were not able to contact. So out of the 94,000--and what I cannot tell you is that I do not know how many of those people got back to us to reinstate, but if they called today, even today, they will still get reinstated. ChairwomanVelazquez. Yes. I understand that 1,200 borrowers requested to be reinstated. Mr.Preston. That is right. That is correct. ChairwomanVelazquez. So it tells us that, if there is a contact between the agency and the borrowers, most probably they will ask for their loans to be reinstated. Mr.Preston. No, I do not think that is the case. The vast majority of the people we contacted from that group either went to someplace or--of the 7,700 that we recontacted, that we tried to contact again--most of the people who we contacted did not want the loan, but they had gotten multiple written communications from us, and we have attempted to reach them at least twice telephonically. ChairwomanVelazquez. So you are telling me there was not a deliberate effort from your office to respond or to react to criticism about the backlog on these loans? Mr.Preston. The criticism--and you know, I read this very carefully coming into the job. The criticism was that we were not getting money in people's hands. I did not see any criticisms that we had loans that we were--there was criticism that we were taking too long. When you look at the information we track, it is customer response times backlog, that kind of thing. So my view is I do not see any incentive for us to cancel loans. In fact, the only incentive people had was to disburse, and like I said once again, I have reviewed this pretty deeply. Now, I will tell you there are thousands of people working these processes. I cannot tell you that every person on these phone calls, you know, conducts business the way we would like them to. You know, I get concerned that, you know, in some circumstances, people might--you know, nerves fray, whatever, but I believe, by and large, these are good people who cared about what they were doing. ChairwomanVelazquez. Mr. Johnson. Mr.Johnson. Thank you, and I must apologize for being absent. I had a markup on the Judiciary Committee. I wonder if each of you could take about 15 seconds to--do each of you have a spare sheet of paper, a blank sheet of paper, and something to write with? If you would, take about 15 seconds to just write down your definition of a "small business," and if someone would be prepared--Scott, if you could, go down and collect those. It may sound crazy, but I think it is important. It does not have to be too verbose either. It can be pretty simple maybe with some dollar amounts down there also. Do you have dollar amounts? Do each of you? Okay. While we are collecting those, I might ask Mr. Preston a question. There is a memo dated May 10th of 2007 from the SBA Inspector General, which addressed an audit of the section 8(a) contracts related to gulf coast construction. The memo concluded that the handling of data collection was inadequate and that there was not one central collection point existing to compile data on the awarding of these loans or on how the loans were being spent. Specifically, the Inspector General noted that the database tracking these loans was missing data because, according to the district office, that office was short-staffed, and the data was not being entered. In addition, the memo notes with concern that the database SACS/MEDCOR ceased to exist on April 30th of 2007 and that the interim database was not known. My question to you is this: Is the situation with the 8(a) database--well, how does that situation affect the tracking of the 8(a) loans? Mr.Preston. Okay. Are you referring to 8(a) contracts? Mr.Johnson. 8(a) contracts. I am sorry. Mr.Preston. Yes. The SACS/MEDCOR is an internal system, so what that does is it helps us follow how--it helps us work with information on the 8(a) firms. What I would tell you is right now a lot of our systems, in my view, are deficient. Our systems that we use to work with 8(a) firms to track them, to work on their annual certifications and to work on their initial applications when they come in to us all need significant work. In fact, I just spent 2 hours with my team earlier this week to work out a pathway on how best to upgrade those systems because I think what it does--and correct me if I am wrong. Maybe Lurita understands this better than I do, but I do not think that affects how these people gather data on 8(a). It affects how we manage those firms and how we get data on how they are doing. So it is very important for us to improve that system as well as the other systems that relate to 8(a). Mr.Johnson. I have noticed that neither the 8(a) nor the SACS/MEDCOR is addressed in the newly released disaster plan. Mr.Preston. The newly released disaster plan deals with disaster lending and all of the issues around disaster lending. It does not address specifically the contracting side. Mr.Johnson. So exactly what will be your plan? Do you have a plan for addressing those deficiencies? Mr.Preston. Yes. We have a number of major projects in place right now that deal with two things--number one, improving our processes around helping 8(a) firms, making sure that we are compliant in what we do and also in making sure that we have the capacity to provide them business development and then, thirdly, in making sure that we can identify the right firms for the right contracts as they come up. A lot of this deals with, you know, as you rightly noted, IT systems. Mr.Johnson. Okay. All right. Well, let me look at these definitions here. Mr. Schneider, I think your answer was "small business has a revenue of less than--" and then it is blank. Mr.Schneider. I left it blank because it depends on what the field, if you will, is that--and I forget what the code is an NC or NAC, depending on what your field is. It is graded by field, and it is graded by the number of employees, and I just do not remember what the field designation is. Prior to this, for 3-1/2 years, I was a defense consultant prior to taking this job 7 months ago. I was a small business. I just do not remember what the coding was because I know the criteria is different. Mr.Johnson. What were your gross revenues? Mr.Schneider. Very low. Mr.Johnson. Okay. A private firm? Mr.Schneider. Well, me. Plus, what I would do is contract out for temporary work depending upon the nature of the jobs. I also was an employee for a better part of that 3-1/2 years for one of the most successful women-owned small businesses in the State of California. Mr.Johnson. How many employees-- Mr.Chabot. Madam Chair, I would just note that the gentleman's time has expired and that, if he wants an additional minute or two I would be pleased to go with that. Mr.Johnson. I would love to have an additional minute or so, but will we have a second round? ChairwomanVelazquez. This is the third round, basically. You may have an additional minute. Mr.Johnson. Well, all right. I will note for the record that you have no idea what a "small business" is, Mr. Schneider, according to your definition. Then from Ms. Doan, the definition of a "small business" is "as per the NAICS and the SBA guidelines," but there is no definition. Ms.Doan. Sir, the NAICS code specifies certain categories, if you are in manufacturing with a size standard of 500 employees or more. If you are in technology, for example, it might be 2,500 or more employees. It might be that technology is like $23 million as your upward ceiling. Depending on what your line of business is, there is a NAICS code that corresponds with that particular discipline, and it gives you a size standard, and that is the definition of "small business." Mr.Johnson. Okay. Then General Van Antwerp, "a business that has certain limitations of size and capacity that distinguishes it from large business. A categorization is based largely on past contracts." ChairwomanVelazquez. Mr. Johnson, your time has expired. Mr.Johnson. All right. ChairwomanVelazquez. Okay. Mr. Chabot. Mr.Chabot. Yes. I do not have any more questions. I just want to make the point that, to be fair to the panel, I think that there are a number of definitions depending on whether you are in the construction industry or in steel producing or services. There is a whole range of definitions. So I think, if we got an exact answer from every one of the panel members, I would be very surprised, and my crack staff has advised me that the definition is "a small business is one that is independently owned and operated and not dominant in its field," section 3(a) of the Small Business Act, 15 USC, section 632(a), which is what I would have said off the top of my head, of course. ChairwomanVelazquez. I guess the point that the gentleman is trying to make is, you know, how can we make sure that-- look, the President in 2002, during the Small Business Week, made a great speech. He said, "This is my small business agenda." the number one priority on top of that agenda was to unbundle contracts, and so the direction has to come from the head, from the chief secretary, from the secretaries of the different departments, to instruct and to make sure that the contracting officers comply with the contracting goals for small businesses. I guess that he is trying to make-- Mr.Johnson. Would the gentlewoman yield? ChairwomanVelazquez. Yes, sir. Mr.Chabot. It is my time, but I will yield. Mr.Johnson. All right. Thank you. Thank you. I was leading up to the fact that ITS, which has $69 million in contracts with Homeland Security, is a company that in 2004 reported revenues of $108 million with 950 employees. Yet, they are qualified as a "small business." SRS is a company that just was purchased for $195 million, a company with $294.3 million in revenue in the first quarter of 2007, but it has got $32 million worth of contracts. Also, last but not least, Clear Brook, has multiple contracts, one that is more than $16 million, but you know, it is another company whose Federal paychecks were suspended in 2005 when the DHS Inspector General found that they had overcharged the Government by millions of dollars. Yet, they are receiving small business contracts as well. Thank you. Mr.Chabot. Reclaiming my time, I think this hearing has been helpful to the extent that it continues to focus attention on the need to make sure, to the extent that we are able to, that small businesses do get their fair share of contracts whether it is Katrina or anything else. I also want to thank the panel for their testimony, each and every one. This can be a very challenging Committee to testify before, maybe not to the degree it is if you are on patrol in Baghdad or something, but as things go it is pretty challenging, and I think the members have done very well, but I am sure the Chair and this Committee will continue to keep an eye on it to make sure that the small business community in this country is being served well. I yield back my time. ChairwomanVelazquez. Thank you, Mr. Chabot. One thing is clear. We have a lot of work to do, and we will be exercising our responsibility of this Committee in terms of oversight. People love to talk to us and preach in this country about accountability. So we are going to hold the agencies accountable, and this is the responsibility that we have as good Americans in terms of helping in the reconstruction and in the rebuilding of the gulf coast. We cannot accomplish that without an important element. Do not come here and talk to me about small businesses in general. We are asking about local small business participation from the gulf coast. We will be coming back, and you will be asked to report on the progress. With that, I want to thank all of the witnesses for your cooperation and for your testimony here today. The Chair will ask unanimous consent that any statements admitted for the record be accepted. Hearing adjourned. [Whereupon, at 1:05 p.m., the Committee was adjourned.] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]