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


 
                    FULL COMMITTEE HEARING ON SBA'S 
                      PROGRESS IN IMPLEMENTING THE 
                      WOMEN'S PROCUREMENT PROGRAM 

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 16, 2008

                               __________

                          Serial Number 110-65

                               __________

         Printed for the use of the Committee on Small Business


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

                NYDIA M. VELAZQUEZ, New York, Chairwoman


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
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  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               , 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


PANEL I:
Preston, Honorable Steven C., U.S. Small Business Administration.     3
Papez, Elizabeth, U.S. Department of Justice.....................     6

PANEL II:
Dorfman, Margot, U.S. Women's Chamber of Commerce................    35
Farris, Denise, Farris Law Firm..................................    38
Gloss, Beth, United Materials, LLC...............................    39
Rubenstein, Pam, Allied Specialty Precision......................    41
Brown, Jennifer, Legal Momentum..................................    43

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    58
Chabot, Hon. Steve...............................................    60
Braley, Hon. Bruce...............................................    61
Altmire, Hon. Jason..............................................    64
Preston, Honorable Steven C., U.S. Small Business Administration.    65
Papez, Elizabeth, U.S. Department of Justice.....................    69
Dorfman, Margot, U.S. Women's Chamber of Commerce................    74
Farris, Denise, Farris Law Firm..................................    77
Gloss, Beth, United Materials, LLC...............................    92
Rubenstein, Pam, Allied Specialty Precision......................    95
Brown, Jennifer, Legal Momentum..................................   100

Statements for the Record:
National Association of Women Business Owners....................   111
National Women Business Owners Corporation.......................   114
CMW & Associates Incorporated....................................   115
Bailey Edward Architecture.......................................   117
Nash Resources Group.............................................   118
Miller's Office Products.........................................   119
Peak Electric, LLC...............................................   122
Pope Institute for Health and Education, LLC.....................   125
CertifytoSuccess.................................................   126

                                  (v)

  


                       FULL COMMITTEE HEARING ON
                     SBA'S PROGRESS IN IMPLEMENTING
                    THE WOMEN'S PROCUREMENT PROGRAM

                              ----------                              


                      Wednesday, January 16, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:07 a.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez 
[chair of the Committee] Presiding.
    Present: Representatives Velazquez, Gonzalez, Cuellar, 
Altmire, Braley, Clarke, Sestak, Hirono, Chabot, Graves, Akin, 
Gohmert, Davis, Fallin, and Jordan.
    Also Present: Moore of Kansas.


           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ


    Chairwoman Velazquez. I call this hearing to order. Today 
the Committee will continue its review of SBA programs in 
implementing the Women's Procurement Program. This initiative 
was created in part because of the government's inability to 
meet the five percent contracting goal for women-owned small 
businesses. Even though this goal was set in 1994, Federal 
agencies have yet to achieve it.
    Seven years - yes seven years - have passed since the 
Women's Procurement Program was enacted. And now, after all 
this time, the SBA publishes a rule that is so poorly 
constructed and so ill-conceived that it is insulting to the 
tens of thousands of women business owners that have been 
waiting for action. This makes it apparent that the 
administration is not serious about carrying out the law, and I 
don't believe it ever will be.
    In creating the program, Congress's objectives were clear: 
to increase participation by women-owned firms in the Federal 
market place. The very design of the legislation was meant to 
reverse at a systemic level the lack of women-owned businesses 
involved in Federal contracting. But the SBA's proposed rule is 
just too narrow and burdensome to achieve this intent.
    It is evident that few, if any, women-owned businesses will 
benefit from the new regulation. As a result, of the more than 
ten million women-owned businesses in this country, only 1,247 
businesses will qualify. Women entrepreneurs in industries like 
construction and manufacturing that are omitted are left 
scratching their heads. Can this be real?
    SBA has chosen one of the most restrictive methodologies to 
determine which industries will qualify for the program. Out of 
the 28 approaches identified by RAND, the agency chose a method 
that designates less than three percent of industries as 
underrepresented by women businesses. In doing so, it is using 
a "dollar amount of contracts" method for determining 
underrepresentation, which is inconsistent with the program's 
intent.
    The initiative was designed to be used as a contracting 
tool, to reverse the under usage of women firms in the Federal 
marketplace - not as a way to solely advance large dollar 
awards. A better measure would be the "number of contracts" 
method, which would find 77.1 percent of industries as 
underrepresented, or a mix of both the number and dollar 
approaches.
    The SBA is also requiring that Federal agencies make a 
determination of discrimination before any contract can be 
awarded under the program. This step creates another massive 
roadblock in the long series of obstructions to the program's 
implementation. The manner in which this finding is required is 
vague and could add layers of unnecessary bureaucracy to the 
program's administration.
    Perhaps most problematic, the proposed rule appears to 
exceed what is constitutionally required. As a gender-based 
program, "intermediate" scrutiny is called for. But, instead, 
it appears that the administration is stealthily applying a 
restrictive "strict" scrutiny standard. They can call it what 
they want, but the reality is that this is a standard that has 
no place in this rule.
    The truth is that the SBA's proposal does not embody the 
program that Congress envisioned. If this rule becomes final, 
the administration will be successful in blocking by regulation 
the program's implementation. As a result, women businesses 
will be one step further from gaining access to the Federal 
marketplace.
    Instead, the SBA should scrap this rule and go back to the 
drawing board to provide a wider path for the inclusion of 
women. Women-owned firms are one of the fastest growing 
segments of our economy. They employ nearly 13 million people, 
and their annual payroll is almost $175 billion. These firms 
are driving future growth and job creation in our communities. 
It is long past the time that they are given greater access to 
the Federal Government as a customer.
    And with that, I now recognize the ranking member, Mr. 
Chabot, for his opening statement.


                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you Madam Chairwoman. This morning the 
Committee is again examining the implementation of the Women's 
Procurement Program by the Small Business Administration. This 
hearing continues the efforts of this Committee to understand 
the issues and difficulties associated with the regulatory 
establishment of a program enacted by Congress back in 2000. 
Without prejudging the ultimate outcome of the SBA's effort, I 
remain concerned that the will of Congress remains unfulfilled 
after more than seven years and more than two years after a 
federal district court ordered the implementation of the 
program.
    Federal agencies are required to ensure that small 
businesses receive a fair proportion of contracts for goods and 
services purchased by the federal government. Recognizing the 
growing importance of women-owned small businesses to the 
growth of the economy and the longstanding perceptions that 
women-owned small businesses were at a disadvantage in 
obtaining federal government contracts, Congress enacted 
bipartisan legislation authorizing the SBA to create a Women's 
Procurement Program.
    Slightly more than seven years after enactment, the SBA 
finally issued a proposed rule to commence the process for 
implementation. I, like many members of this Committee and many 
Members of Congress, am somewhat dismayed at the length of time 
it took to begin the process of implementing the will of 
Congress.
    Administrator Preston's efforts to manage the 
implementation process should be commended, even if there is 
disagreement about the results. The notice of proposed rule-
making identifies certain industries in which women-owned small 
businesses are underrepresented in federal government 
contracting. However, I am troubled by the fact that the notice 
does not provide the public with sufficient information on the 
type of probative evidence that would convince the agency to 
expand the scope of the industry as initially covered by the 
rule.
    The crucial part of the program is the identification of 
industries in which women-owned businesses are underrepresented 
in federal procurement. In the notice, the SBA proposes to 
calculate underrepresentation every five years, but fails to 
specify how it will make that calculation. Without that 
information, the potentially-affected public has no way of 
accurately informing the SBA whether the proposal is adequate. 
In conclusion, the Administrator is taking an important first 
step to see that the program is implemented.
    On the other hand, the deficiencies in the notice raise 
real concerns about the adequacy of the notice and comment 
procedures mandated by the Administrative Procedure Act. I 
would urge the SBA to provide additional supplemental 
information to enable the public to respond to the notice in an 
intelligent manner, I yield back the balance of my time.
    Chairwoman Velazquez. Thank you, Mr. Chabot.
    So now I welcome our first panel.
    Chairwoman Velazquez. The Honorable Steven Preston, Mr. 
Preston is the administrator of the United States Small 
Business Administration. He has served in this capacity since 
July of 2006 and has testified several times before our 
Committee.
    Mr. Preston, you are most welcome.


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

    Mr. Preston. Thank you for inviting me to testify today. 
The proposed rule that will implement the women-owned small 
business Federal contracting procedures has been published in 
the Federal Register and is currently in the 60-day comment 
period. The SBA has been and remains committed to implementing 
the statutorily authorized set-aside for the program while at 
the same time meeting the specific directives provided in the 
legislation.
    Based on a nonpartisan guidance provided by the National 
Academy of Sciences or NAS, RAND conducted a statistical review 
to determine underrepresentation for women-owned small 
businesses in Federal contracting. The NAS recommended 
considering a variety of data sources and a variety of 
methodologies in order to gain a broad perspective.
    It did, however, emphasize that greater weight be given to 
results based on contracting dollars. In addition, NAS 
emphasized the importance of considering more detailed industry 
information represented by the four-digit North American 
Industry Classification System, which is called NAICS. And then 
they highlighted the need to demonstrate that businesses in the 
review were ready, willing, and able to perform in Federal 
contracting.
    To determine underrepresentation and substantial 
underrepresentation, RAND identified 28 possible approaches and 
considered data in the Central Contracting Registration; the 
Federal Procurement Data System; the Survey of Business Owners, 
which is a broad industry-wide survey. And relying on the 
guidance from NAS and the results of parsing the data, RAND 
then zeroed in on those methods that accurately measured 
underrepresentation and substantial underrepresentation.
    After careful analysis of the remaining approaches and in 
keeping with in the direction of the NAS and RAND, SBA adopted 
an approach that best captured the most appropriate measures. 
First, based on the NAS comments and the need to align with 
Federal policy, we used measures which considered contracting 
dollars going to businesses rather than the numbers of 
contracts. The very goal of the statute was intended to support 
five percent Federal contracting dollars going to women-owned 
small businesses. Getting revenue from contracts is what 
creates value for small businesses, not numbers of contracts. 
And the entire appropriations budgeting, contracting, and 
accounting process in the Federal Government is based on 
dollars.
    Second, based on NAS comments and the need to tailor the 
rule to address the need, we used the more detailed 
classifications in the four-digit NAICS codes. The proposed 
rule assists certain women owned small businesses in pursuing 
contracting opportunities with the Federal Government by 
providing procedures for certifying as an eligible women-owned 
small business; protesting eligibility determinations and 
awards; and providing a road map for agencies to make the 
determination that women-owned small business 
underrepresentation is related to gender discrimination.
    In addition, the rule sets forth when contract officers can 
restrict competition to women-owned small businesses. SBA's 
goal is not only to develop regulations implementing those 
procedures but to help women-owned businesses so they can 
compete both in the private marketplace and for Federal 
contracts.
    I and my team were surprised at the results of this study. 
We learned that those women-owned small businesses registered 
in the CCR generally received a higher percentage of their 
revenues from Federal contracting dollars than other businesses 
and that the data only showed underrepresentation in four 
categories.
    According to the study, once women-owned businesses 
register to do business with the Federal Government, they 
appear to be doing well as a percentage of their total revenues 
compared with other firms in their same industries. The study 
indicates the real issue is increasing the number of women-
owned small businesses who compete for Federal contracts.
    In fiscal year 2007, we, the SBA, began an initiative to 
more effectively assist small businesses interested in doing 
business with the Federal Government. We have aligned our field 
staff. We have provided additional training so they are better 
equipped to advise, train, counsel small businesses; so they 
are prepared to do marketing necessary to find procurement 
opportunities. As part of this initiative, PCRs will have a 
greater role in ensuring that Federal agencies reach the small 
business procurement goals which will increase procurement 
opportunities for small business.
    SBA has made great progress. In 2006, contracting dollars 
going to women-owned small businesses reached a record level, 
$11.6 billion. And in 2006, we experienced the largest growth 
in a single year since that goal was established in 1994, $1.5 
billion. The amount of contracting dollars going to women-owned 
small business is more than two and a half times the level it 
was in 2000, growing at almost 17 percent per annum. In 
addition, subcontracting dollars increased to over $10 billion, 
representing six percent.
    SBA is taking a forward-looking approach. First, our 
programs are tasked with growing the universe of women-owned 
businesses and encouraging businesses to register with the CCR, 
making those businesses eligible to contract with the Federal 
Government. Second, the role of SBA is to help those businesses 
become ready, willing, and able to undertake and build a 
successful track record working with the Federal Government.
    We provided our entire field organization with a full week 
of training to make them more effective in outreach and 
training. We have rolled out new technologies to help other 
agencies easily identify women-owned businesses that meet their 
specific contracting needs. We have established outreach goals 
for every single district office in the country within the SBA, 
and we are holding Federal agencies accountable for their 
performance to the score card process.
    We have a number of exciting initiatives planned for 2008. 
Some highlights: SBA intends to participate in almost 600 
procurement related events which have some component of women-
owned small businesses focused on. Additional training and 
match-making, we are rolling out online courses on procurement. 
We are realigning our field staff to focus on these 
opportunities. We think these initiatives will help women-owned 
small businesses to achieving the congressionally established 
goals.
    We must remember, I think, that there is no one single 
approach that will expand the participation of women-owned 
small businesses in Federal Government; rather, a combination 
of initiatives that take into account that the individual needs 
of businesses is the best approach to provide opportunities for 
women-owned small businesses to do business with the Federal 
Government.
    Thank you for the opportunity to testify today, and I look 
forward to any questions you might have.
    [The prepared statement of Mr. Preston may be found in the 
Appendix on page 65.]
    Chairwoman Velazquez. Thank you, Administrator Preston.
    And now I welcome Ms. Elizabeth Papez. Ms. Papez serves in 
the Department of Justice Office of Legal Counsel. She is the 
Deputy Assistant Attorney General and serves as counsel to the 
Assistant Attorney General.
    Welcome. You'll have five minutes to make your 
presentation.


    STATEMENT OF ELIZABETH PAPEZ, DEPUTY ASSISTANT ATTORNEY 
  GENERAL, OFFICE OF LEGAL COUNSEL, U.S. DEPARTMENT OF JUSTICE

    Ms. Papez. Thank you, Madam Chairwoman, Ranking Member 
Chabot and members of the Committee, for allowing me to appear 
here today to discuss the Justice Department's legal views on 
the Federal Government's efforts to improve contracting 
opportunities for women.
    The Justice Department's view of all gender-based programs 
rests on a simple premise: These programs, no matter how strong 
their policy justification, must comply with the Constitution. 
To do so, these programs must be able to withstand scrutiny 
under the equal protection component of the Due Process Clause 
of the Fifth Amendment. The type of programs addressed in the 
SBA's proposed rule clearly trigger equal protection scrutiny 
because the programs would require Federal agencies to grant 
contracts to some businesses and deny contracts to others on 
the basis of gender.
    The practical problem the government faces in administering 
these programs is determining what exactly this equal 
protection scrutiny means for the programs. The precise level 
of equal protection scrutiny that applies to a preference 
program depends on the type of preference at issue. 
Preferences, such as veterans preferences, that do not involve 
race or gender are subject to rational basis scrutiny, which 
means that courts will uphold them as constitutional as long as 
the government has a rational basis for adopting them.
    On the other hand, preference programs that do involve race 
or gender are subject to much higher equal protection scrutiny 
by the courts. Race-based programs are subject to "strict" 
scrutiny, which means the particular program must be narrowly 
tailored to serve a compelling government interest. In other 
words, they are highly disfavored. In contrast, gender-based 
programs are subject to "intermediate" scrutiny, which the 
Supreme Court has said is much more demanding than rational 
basis scrutiny but different than the "strict" scrutiny that 
applies to race-based programs.
    Justice Ginsburg's opinion for the U.S. Supreme Court in 
the VMI case elaborated on what "intermediate" scrutiny 
requires. It requires that the government be able to show, in 
the court's words, an "exceedingly persuasive" justification 
for awarding government benefits on the basis of gender. The 
reason is that these awards, no matter how well intentioned, 
grant or deny government benefits on the basis of gender rather 
than individual abilities or qualifications.
    Accordingly, the Supreme Court said that although 
"intermediate" scrutiny is different than "strict" scrutiny, 
"intermediate" scrutiny requires the government to show that a 
gender-based program furthers an important governmental 
interest and that the gender discrimination the program 
requires is substantially related to achieving those interests.
    The Justice Department in reviewing gender programs adheres 
to the "intermediate" scrutiny standard the Supreme Court set 
forth in VMI and looks to how courts have applied this standard 
to particular types of gender programs.
    For contracting programs, Federal courts have consistently 
held that to satisfy "intermediate" scrutiny the government 
must show genuine non-hypothetical evidence of discrimination 
in the particular field where the program will operate.
    I want to point out again that this standard of 
"intermediate" scrutiny and the court's focus in gender cases 
on the government's ability to prove discrimination does not 
erase the distinction between "strict" and "intermediate" 
scrutiny. The 11th Circuit explained the difference this way: 
While there is a difference in the evidence required to support 
a race- versus gender-based program, the difference is one of 
degree, not of kind. In both contexts, race and gender, the 
constitutionality of a government program turns on the adequacy 
of the government's evidence of discrimination. "Intermediate" 
scrutiny just means that, in gender cases, less evidence is 
required. Exactly how much less evidence is not clear from the 
cases. What is clear is that to survive "intermediate" 
scrutiny, a government's gender program must allow the 
government to show genuine, non-hypothetical evidence of 
discrimination in the particular field where the program will 
operate. And the cases make clear that mere findings of 
underrepresentation or disparity are generally not sufficient 
to satisfy the constitutional standard.
    The lesson these cases leave for Federal agencies 
implementing gender-based programs is clear: If the agencies 
want their programs to be upheld as constitutional, the 
programs must be based on government evidence of discrimination 
in the particular field where the program will operate. That is 
exactly what the proposed SBA rule requires. It requires that 
an agency intending to implement a gender-based set-aside 
program identify, as the government, evidence of discrimination 
in the field where the program will operate.
    It is for that reason that the Justice Department views the 
proposed rule as consistent with what the Constitution requires 
under "intermediate" scrutiny.
    The rule is also consistent with Federal agencies' 
obligation to implement statutes and programs in a 
constitutional manner. In order to discharge their obligations, 
Federal agencies can and should take steps to maximize the 
chances that courts will uphold their programs. Doing so not 
only helps the agencies comply with the Constitution, it also 
helps ensure that the programs will survive legal challenges 
that would otherwise prevent those programs from serving the 
very people they were intended to benefit.
    Thank you again for the opportunity to testify. I look 
forward to taking any questions.
    [The prepared statement of Ms. Papez may be found in the 
Appendix on page 69.]

    Chairwoman Velazquez. Thank you, Ms. Papez.
    I will address my first question to Mr. Preston.
    Mr. Preston, after seven years, a Federal lawsuit and 
multiple congressional hearings, the SBA puts out a rule that 
designates four industries as underrepresented. If this 
proposed rule is finalized, less than 1,300 out of ten million 
women-owned businesses will potentially benefit from the 
Women's Procurement Program. It also requires agencies to make 
a discriminatory finding regarding its past procurement 
practices, a heavy and unrealistic burden for any Cabinet 
Secretary. Once this is implemented, do you believe that it 
will increase contracts so dramatically that the five percent 
goal will be achieved?
    Mr. Preston. First of all, I want to highlight a couple of 
the numbers you just mentioned. Roughly 1,200 businesses versus 
many millions; the 1,200 is not all businesses in these 
categories. It is all businesses that are registered to do 
business with the Federal Government. So that 1,200 relates to 
about 55,000, granted still about two percent.
    We believe it will be an additional tool in their quiver, 
but we certainly don't think this is going to be the end all at 
helping agencies meet their Federal goals. And as I mentioned 
in my testimony, we think that Federal agencies are going to 
continue to have to focus on outreach efforts, recruiting more 
women into the CCR, and doing the job and finding the right 
business for those contracts.
    Chairwoman Velazquez. Do you believe that the five percent 
will be achieved?
    Mr. Preston. I believe that a five percent will be achieved 
some day. And I think if you look at the growth over the last 
several years, it has been very, very strong. So I think we are 
on the path.
    Chairwoman Velazquez. Okay. Do you believe it will be 
achieved this year?
    Mr. Preston. I don't believe it will be achieved this year.
    Chairwoman Velazquez. Mr. Preston, we have gone back and 
examined the numbers, and in order to achieve the five percent 
goal, each--and I know that you mentioned your numbers, but we 
went back, and based on the data, we found that 1,247 
businesses designated as underrepresented will have to receive 
a contract worth $4.4 million. This is ten times the average a 
small business contract gets.
    How likely, on a scale of one to 100, with one being 
absolutely no way, to 100 being absolutely guaranteed that each 
and every of these 1,247 women-owned businesses will receive a 
contract worth $4.4--
    Mr. Preston. Ma'am, you are presenting that Federal 
agencies are going to look at four out of 313 categories to 
increase their contracts with women. And you are presuming that 
the only way to do that is to go to those categories. It is a 
much, much broader opportunity, and I think for agencies to hit 
those goals they have to look well beyond those four categories 
to be effective.
    Chairwoman Velazquez. The number that I mentioned to you 
will have to correspond to the four categories, those four 
industries.
    Mr. Preston. Ma'am--
    Chairwoman Velazquez. I don't agree with you, and you know 
that.
    Mr. Preston. The $1.5 billion increase we saw in 2006 had 
nothing to do with set-aside programs. It had everything to do 
with agencies doing more business with women-owned businesses 
that were competing effectively. And these firms are competing 
effectively. And so I think this is an additional tool, but I 
don't think this is what we can look to--
    Chairwoman Velazquez. Well, Mr. Preston, the focus of 
today's hearing is the Women's Procurement Program.
    One of the four industries that SBA designated as 
underrepresented was national security and international 
affairs. Is that correct?
    Mr. Preston. That is correct.
    Chairwoman Velazquez. However, the size standards specify 
that such contracts cannot be performed by private businesses. 
Do you know that?
    Mr. Preston. My understanding is that there were private 
firms in that category, but most of the contracts were 
classified, so it was difficult for us to get that information.
    Chairwoman Velazquez. The size standards, Mr. Preston, 
specify that such contracts cannot be performed by private 
businesses. What this means is that it will prevent women-owned 
businesses, and any small business for that matter, from 
getting a national security contract, so I am appalled. And 
please explain to me then why the SBA included such an industry 
in its proposed rule?
    Mr. Preston. This was one of the four industries that was 
recommended by the RAND Corporation study, and that is why we 
included it.
    Chairwoman Velazquez. "Section 92, small business size 
standards are not established for this sector. Establishments 
in the Public Administration sector are Federal, State and 
local government agencies which administer and oversee 
government programs and activities that are not performed by 
private establishments." So what it means is that this industry 
is out. So we now have three industries where women will be 
able to participate. So the Small Business Administration had 
seven years to get this right. And you come back with this 
product. It just amazes me, Mr. Preston.
    Your regulation requires an agency to make a discriminatory 
finding in order to use the program. Has this ever been done 
before for a congressionally created affirmative action 
program?
    Mr. Preston. I don't have the history on that. My 
understanding is there is significant precedent in looking at 
contracting preference or contracting programs that require 
that.
    Chairwoman Velazquez. Ms. Papez, can you tell us if an 
agency finding of discrimination has ever been required before 
for a similarly situated program?
    Ms. Papez. Yes, absolutely.
    Chairwoman Velazquez.  And I need a yes or no answer.
    Ms. Papez. Yes, absolutely. Multiple Federal Courts of 
Appeals and multiple Federal District Courts applying 
"intermediate" scrutiny have required exactly that; they have 
required--
    Chairwoman Velazquez. Can you provide the Committee 
examples of such?
    Ms. Papez. Of course, absolutely. One of the examples I 
mentioned in my opening testimony was an 11th Circuit case--by 
the way, all the cases that I refer to--
    Chairwoman Velazquez. Ms. Papez, I am asking about 
programs, not court cases.
    Ms. Papez. Yes, yes, programs. The court cases address 
programs--programs to give women-owned businesses contracting 
preferences. Those were the court cases I was relying on. They 
all deal with the kind of programs that we are talking about 
here.
    Chairwoman Velazquez. For each agency, you will require.
    Ms. Papez. Well, for the government, yes--
    Chairwoman Velazquez. I want you to mention for each 
agency, programs such as the one that we are discussing today, 
is required for each agency?
    Ms. Papez. Well, if by each agency you mean, do courts 
require the government agency or entity doing the contract 
program to prove discrimination, yes, they do.
    Chairwoman Velazquez. So why then in a proposed rule don't 
you say the Federal Government instead of saying each agency 
has to prove past discrimination?
    Ms. Papez. Well, to be clear, I think what the courts 
require is that there has to be evidence of discrimination in 
the particular field where the program operates. So it makes 
sense to say that the agency who is administering the program, 
they are the agency in the field where the program operates, 
has to have the evidence of discrimination. That is what all of 
the cases hold.
    Chairwoman Velazquez. Do you think that what you are 
stating today is clear in the rule?
    Ms. Papez. I think it is clear in the rule that the agency 
doing the program has to identify evidence of discrimination in 
the field where the program is going to operate. I think that 
is clear, and it is absolutely consistent with the cases.
    Chairwoman Velazquez. But let me ask you, the test that you 
are putting out is not more consistent with "strict" scrutiny?
    Ms. Papez. No, it is not more consistent--it is the 
"intermediate" scrutiny test that the Supreme Court and Federal 
courts all over the country have applied to women-owned 
business contracting programs. It is not a "strict" scrutiny 
test that courts apply to--the tests that I am talking about 
and the test that is in the rule is what courts, not the 
Justice Department, courts have applied to women-owned business 
contracting programs across the country.
    Chairwoman Velazquez. It seems to us that there is a 
disagreement regarding the test that you are putting out, and 
you feel that corresponds to "intermediate" scrutiny. I would 
like for you to state for the record which member of your staff 
will remain in this Committee hearing so that you get the 
benefit of the second panel. We are going to have legal experts 
here which totally disagree with the interpretation that you 
are stating today. Would you please mention the name of your 
staff that will remain in the Committee hearing?
    Ms. Papez. Yes, of course. I will stay as long as I 
personally can. I have a staff member, Mr. Phillips, behind me 
who will stay. And the Justice Department will be happy to do 
whatever we can to help resolve this disagreement. We are 
committed to doing that.
    Chairwoman Velazquez. Thank you.
    Mr. Preston, in the preamble to the proposed regulation, 
the SBA states that RAND provided 28 different approaches to 
determining which industries are underrepresented by women. The 
SBA chose one of the narrowest methods to implement the 
program, even though the National Academy of Sciences 
recommended that two approaches be used. So I would like to 
know, why did the SBA ignore the National Academy of Sciences 
in this instance and just use one method?
    Mr. Preston. I would be happy to. Before I mention that, I 
think we need to reconcile some information, because my staff 
advises me that both small businesses and women-owned small 
businesses have contracts--
    Chairwoman Velazquez. I am sorry, Mr. Preston--
    Mr. Preston. I just want to state for the record here that 
we need to reconcile some information, because my staff has 
advised me that small businesses and women-owned small 
businesses have received contract awards under the category 
that you mentioned, so I would like to make sure that we offer 
something for the record subsequently.
    I think if you look at the guidance in the National Academy 
of Science, they recommend considering a broad number of 
approaches to get a broad understanding of the issue. However, 
when you look at the detailed guidance that the National 
Academy of Sciences provides, they provide very specifically a 
mention that monetary awards are critical to compute; that they 
are preferable because legislatively mandated goals are based 
on dollars. Dollar value is critical to business success--
    Chairwoman Velazquez. I understand that, Mr. Preston, but I 
am asking you about how the RAND Corporation, the company that 
you hired to do a study, recommended that out of 28 you could 
use more than one or multiple factors.
    Mr. Preston. Okay. The RAND study provided a multiplicity 
of methodologies, most of which are not defensible, we believe, 
in this case. There are two concepts I think that are clear to 
understand, the study looks at dollars of contracts because 
that is the goal we were trying to achieve, they look at 
underrepresentation based on dollars. The other piece of 
information they use is four-digit industry codes, which are 
much more detailed and which give us better information on 
underrepresentation. When you use those two concepts, it 
winnows it down to two methodologies. You know, I can get into 
a broader explanation, but it is as simple as that.
    Chairwoman Velazquez. Mr. Preston, it doesn't disturb you 
that by choosing the number of dollars amount, in terms of 
contracts given out will only, if you use that criteria, it 
will cover only three percent of women that are 
underrepresented, and if you use another method or a 
combination of more than one, it will show that other women are 
underrepresented, as high as 80 percent in some cases; it 
doesn't disturb you, that disparity between three percent and 
80 percent?
    Mr. Preston. Well, I think I can describe for you why that 
disparity occurs, but what I would tell you is, it would be a 
lot easier for me to stand here and provide you and the rest of 
the Federal agencies with a broad set of set-aside capabilities 
to meet this goal. But what we did is we determined what we 
thought was the most accurate depiction of what we needed to do 
to satisfy the statute, the Constitution, and align with the 
goals. I think there are some things--
    Chairwoman Velazquez. Let me ask you, of the 28 methods, do 
you agree with me that any of those will meet constitutional 
standards?
    Mr. Preston. I don't believe certain of them would meet 
constitutional standards, nor--
    Chairwoman Velazquez. At least maybe one, two, three, four 
out of 28?
    Mr. Preston. Ma'am, let me--if you'd like, I can talk about 
the numbers versus dollars issue because you brought it up in 
your testimony. When you look at numbers of contracts going to 
businesses, it doesn't look at a dollar value going to them. 
And let me just draw a comparison: If you have a $5 million 
business with five $1 million contracts from the Federal 
Government, so 100 percent is from the government. And you have 
GE with ten $1 million contracts from the Federal Government, 
so they have more contracts, but it is an irrelevant percentage 
of the revenues. That small business would be considered under-
representative, even though all of the revenue is coming from 
the Federal Government. Numbers you have got to adjust for the 
capacity to firm and their ability to perform. Numbers put sole 
proprietorships on the same basis as multinationals in terms of 
numbers of contracts they are able, capable of performing. That 
is why that is not a reasonable comparison.
    Chairwoman Velazquez. It is just frustrating, Mr. Preston, 
because what I am asking you is based on the National Academy 
of Sciences, which recommended to use more than one method, for 
you to explain why you choose to only use one when it is going 
to produce such a disparity in terms of the three percent that 
you are going to achieve by using one method or the 80 percent, 
in some cases, if you would have chosen to use multiple 
methods.
    Mr. Preston. The NAS said that all or most of the 
methodology should point to representation. They also mention 
very specifically that heavier weight should be given to 
dollars. And they also specifically said that two-digit NAICS 
codes were too broad to be used as the basis of disparity, 
which is what the preponderance of these methodologies used. 
They even said it is too broad.
    Chairwoman Velazquez. Okay.
    Mr. Preston. Let me make one more comment. A two-digit 
NAICS code, as retailers, when you get to the four-digit, you 
are looking at automobile dealerships, grocery stores, jewelry 
dealers, you know. And if you don't look at a more detailed 
category, you might say there is underrepresentation in jewelry 
dealers, and that would lead you to give a preference to auto 
dealerships.
    Chairwoman Velazquez. So the National Academy of Sciences 
is wrong.
    Mr. Preston, I have to leave with Mr. Chabot, we have a 
bill on the floor. And Ms. Clarke will be chairing this 
hearing, and I will be coming back as soon as I can.
    Ms. Clarke. [Presiding.] Ms. Fallin, I understand you have 
questions at this time, we yield to you.
    Ms. Fallin. Thank you, Mr. Chairman, we appreciate you 
coming today, and Ms. Papez, we appreciate your expertise, 
knowledge on constitutional issues and appreciate your 
explanation of court hearings and Supreme Court rulings. It is 
very complicated, so thank you for helping to give us a better 
understanding of what is going on.
    I think all of us are very concerned about how we can 
encourage more women to be able to participate in Federal 
Government contracting. I certainly know that I have heard from 
my district back over the many years that I have been in office 
that women would like to have more opportunities. But I had a 
couple of questions, and I had a wonderful briefing by your 
staff yesterday, so thank you for allowing them to come see me.
    I have a couple of questions. In looking through all the 
information, what can we do as a Nation to encourage under-
performing business categories to register to be on the list so 
that more women can take advantage of the Federal contracts? I 
know back in my district over the years I would hear women say, 
I don't know how to do this. I have heard you say that you are 
working closely with the contract procurement people at various 
agencies within the SBA to help them coordinate, but it seems 
like we are still not doing as good of a job as we can be. What 
can the Federal agencies do?
    Mr. Preston. Well, first of all, I think we can all 
continue to participate and expand our outreach efforts by 
holding forums; by doing match-making sessions where we bring 
businesses together with Federal agencies and procure; and by 
getting the word out there. We are working very hard do that, 
both by expanding our own physical outreach and making it 
simpler for people to understand how to do contracting with the 
Federal Government through various Web tools, through 
educational sessions that they can get through the SBA Web 
site. So it is outreach. It is education. We are also providing 
the Federal agencies with tools to simplify their ability to 
find the right business.
    A few months ago we rolled out a tool where if agencies put 
in what they are buying, where they need to buy it, they can 
basically get a list of all the women-owned businesses that 
perform that service. So we are helping them find the right 
small business, which is a brand new opportunity that we have 
given them. So it is on a number of fronts and increasing 
awareness as well.
    The last piece is holding people accountable. And we rolled 
out a score card last year to hold Federal agencies accountable 
for hitting not only their overall procurement numbers but for 
women in other target groups. And I can tell you that we have 
gotten more outreach in our direction since we started 
publishing that information than probably ever before, because 
the agencies do not want to appear like they are not doing the 
job to support these businesses. So we are trying to hit it on 
a number of fronts.
    Once again, I would remind the Committee, we had the 
largest increase in the government's history last year, women, 
on procurements. So we are on the right track. We just need to 
continue do more of it. Because we believe it is not only good 
for women-owned businesses; we think it is good for the Federal 
Government to have these qualified contractors competing.
    Ms. Fallin. And if I could clarify, what percentage of 
women-owned businesses receive, the ones that are registered, 
actually receive the Federal Government contracts?
    Mr. Preston. Last year it was 3.4 percent of contract 
revenues compared with a five percent goal in 2006, and I would 
highlight, in terms of our own commitment, that in 2007, SBA 
will hit almost 25 percent of our contracts. So we are trying 
to lead by example here, and we are leading the entire Federal 
Government.
    The other thing is, and I know the Chairwoman mentioned a 
lot of numbers, but when you look at the revenues of small 
business in the economy, the most recent census data shows that 
women-owned businesses get about 4.2 percent of the revenues of 
the economy, and women-owned small businesses get 3.4 percent 
of the revenues in the economy, compared with 3.4 percent from 
the Federal Government. So we are working within that body of 
businesses to get those revenues. I think it is important to 
make that distinction because we are comparing the numbers of 
firms with the dollars they get, and that is not the relevant 
comparison. We need to look at the capacity to perform versus 
the dollars we have to give out.
    Ms. Fallin. And the percentage of women-owned businesses in 
the United States, what percentage of those women actually 
registered to get the Federal contracts?
    Mr. Preston. Oh, it would be a very small percentage. It 
would be a fraction of one percent. Now, when you look at the 
18 million women-owned businesses in the United States, 
probably half of those are one-woman shops. They don't have 
employees. And then the preponderance of the rest of them are 
relatively small. So it is a very small number, but I think if 
you looked at all other businesses of comparable size, you 
would find a very small percentage. That having been said, it 
means that there is also a large group of businesses out there 
for us to go to as we look at recruiting them.
    Ms. Fallin. Madam Chairman, if I can ask one last question.
    Ms. Clarke. Yes.
    Ms. Fallin. Was the SBA removed from the process as far as 
being independent from the RAND study?
    Mr. Preston. Oh, yes. What we did with RAND is we conveyed 
to them the guidelines that were given to them by the National 
Academy of Sciences. And as many of you know, because it has 
been a long journey, the original study the SBA did was deemed 
to be not defensible. So we went to the National Academy of 
Sciences and said, how does a study have to look to be 
defensible here? They laid out a methodology. The SBA conveyed 
that methodology to RAND, and RAND followed the methodology. 
The agency pulled very much back from the analytical process 
and left it to the experts because we wanted to ensure that we 
had a third party unbiased in any way performing that analysis.
    Ms. Fallin. Okay, thank you, Madam Chairman.
    Ms. Clarke. Thank you. I now yield to the gentleman from 
Pennsylvania, Mr. Sestak.
    Mr. Sestak. Thank you very much. The arguments which I 
understand for what your position is reminded me of some civil 
arguments I heard over the last 30 years, but there is an 
institution of the U.S. Government that understood that there 
was a national interest, an important interest which I think 
the Engineering v. Metropolitan Dade case established for 
gender discrimination. And that organization, the Federal 
Government said, We really do need women to be more 
represented. So the U.S. Military actually set goals for 
promotion boards, not the same as this legislation does, that 
needed to be achieved.
    The arguments I heard prior to this were not dissimilar. 
Everybody took every position they could of the old timers to 
prevent them from becoming or getting into combat roles. I can 
remember being off Afghanistan the first night, and this young, 
27-year-old woman pilot diving down as we went into the air and 
trying to salvage Special Forces that had died and got the 
other four out. But I never understood when I listened to you 
today, why was that unconstitutional? We do it today. We have 
goals that so many women should be promoted into these combat 
positions and all.
    Ms. Papez. I'm sorry, is the question addressed to me?
    Mr. Sestak. Yes, it is.
    And second is, when you set the standard that you have, it 
is a great block, frankly, yet military does it every day. And 
I have never heard the administration take a differing 
position.
    Ms. Papez. Well--
    Mr. Sestak. If I could, when you go down and look at the 
Metropolitan case, they actually say societal discrimination in 
the economic sector is sufficient for the government to prove 
discrimination. Why are you pushing a higher standard than that 
court said, the Third Court refers to the Ensley Branch case? 
Why are you now making a higher standard of having to prove 
direct discrimination than what the court already said, 
societal discrimination is sufficient?
    Ms. Papez. I guess there are a lot of parts to your 
question, so let me try to take them piece by piece. First, I 
just want to say, the Justice Department is not setting any 
standards here. We reviewed a rule consistent with case law so 
I want to say that at the outset.
    Secondly--
    Mr. Sestak. But shouldn't we as the Justice Department then 
say the military acted against the Constitution? Because one of 
your arguments was, we don't want the agencies to set off on a 
wrong course here and be pulled back. It appears to me you have 
got an agency, the Department of Defense, that is evidently on 
the wrong course. Why haven't you pulled them back? But we are 
preventing--
    Ms. Papez. If I could answer that, first, I want to say I 
don't recall saying or the Justice Department ever saying that 
anyone has acted unconstitutionally, so I am not really sure 
where that part of your question comes from. We are not saying 
that anybody is acting unconstitutionally here.
    Mr. Sestak. No, I guess what you are saying is, if you do 
not do this direct discrimination evidence, the intermediate 
level, that you won't be held constitutionally valid; it will 
be against the Constitution, because of court cases. My 
argument is, well, it seems to me we have got an agency over 
here that is doing exactly that.
    Ms. Papez. First of all, I don't know exactly the details 
of the program you are talking about. Secondly, I would say--
    Mr. Sestak. It is a goal that actually says--and we go to 
promotion boards there--5 percent that is our goal of how many 
women we want promoted.
    Ms. Papez. But it is a goal, not a requirement.
    Mr. Sestak. And that is what this is, five percent here for 
women-owned business is a goal, not a requirement.
    Ms. Papez. Right, I think.
    Mr. Sestak. What is the difference?
    Ms. Papez. Well, I think the same standard applies, and it 
is the standard I said.
    Mr. Sestak. So we should be over at DOD telling them that 
they are--that it is unconstitutional?
    Ms. Papez. Not at all, I don't think that is the case.
    Mr. Sestak. It is the same program that you are trying to 
defend here, ma'am.
    Ms. Papez. But I haven't said any program is 
unconstitutional. The point is a simple one; it is that if the 
government wants to do all it can to ensure that a court will 
uphold the program as constitutional and not strike it down, 
and I would point out--
    Mr. Sestak. Why hasn't the court struck this down as 
unconstitutional? We have been doing it for decades or so. Why 
all of a sudden are you holding at a higher stricture than the 
government already holds on a similar program?
    Ms. Papez. Again, I don't know exactly what DOD program you 
are talking about. One DOD program I do know about is the DOD 
program that has been at issue, tied up in litigation in the 
Rothe case for almost ten years. I guess if your question is, 
why hasn't a court struck down or upheld the particular program 
you are talking about, again, I don't know the details.
    Mr. Sestak. Can you go to the next question? It amuses me 
because I heard so many old timers over those decades say, We 
just don't need women in combat roles. It sort of like sounds 
to me, we don't need that many women to try to interpret this 
more easily for women to get a fair share. So my second 
question is, why are you setting what appears to me a higher 
standard of proving direct discrimination rather than evidence 
of societal discrimination in the economic sector?
    Ms. Papez. I really would like to address that. First I 
want to say, no one is disputing--I think we all share the goal 
that we want to encourage more women in contracting. No one is 
trying to block them.
    Mr. Sestak. Is the "we" the Justice Department, or that one 
should that have been addressed to Mr. Preston? I mean, it 
seems to me Chairwoman Velazquez's comments were spot on. I 
mean, you could have taken any of the measures, because the law 
did not specify the amount of money. And so it is unfair to 
you; that question was really to him of a combined. You went to 
the amount of money rather than the number of contracts. Anyway 
if you would go back to the societal issue.
    Ms. Papez. Let me talk about that. When you talk about the 
Justice Department advising on rules and these constitutional 
standards, we do that because we are trying really hard to help 
agencies make sure that these programs are upheld, that the 
programs that are helping these women are upheld and not struck 
down. So that is why we are doing it. We are doing it because 
we want the programs to be right and--
    Mr. Sestak. Why didn't you say the bar was societal 
discrimination? That is a lower standard than direct 
discrimination; correct?
    Ms. Papez. But I didn't say direct discrimination or 
societal, I said, like the cases say, that in order to sustain 
a program, the government must show evidence of discrimination 
in the relevant sector. That is what I said, and that is what 
the cases require.
    Now your point is some cases, like the ECA case, have said 
that evidence of societal discrimination may be enough to 
sustain a program. I would point out in the ECA case that the 
court actually struck down--
    Mr. Sestak. Actually, it said it can be satisfied by 
society, not may; there was no may in that hearing.
    Ms. Papez. Can be, can, may, it doesn't mean it must 
necessarily where it is. It can or may if the evidence is 
sufficient. What I would point out is, in that very case, the 
court struck down the program, the women's contracting program 
at issue, because the evidence was not sufficient. And where 
Justice comes from is we look at cases like that, and we advise 
agencies that if you don't want your program to be struck down 
like this one was, you need to have good robust evidence the 
courts will accept to uphold the program. It is not in the 
agency's interest or in women's interest to have courts strike 
these programs down, and that is what that ECA court did, it 
struck it down.
    Mr. Sestak. Yes, but it struck it down because they had not 
attempted to show societal discrimination, so if they would 
come back. Correct me if I am wrong, because--
    Ms. Papez. I hate to say that, but you are wrong in that 
case. They did try to show it, and the court held the evidence, 
which was a disparity study, was insufficient evidence. So they 
tried to show it through a disparity study, akin to RAND, and 
the court said that is not good enough.
    Mr. Sestak. But if I could, doesn't--I am not a lawyer, I 
am just a seaman, but if an intermediate--is that what it is 
called--discrimination, doesn't that require direct 
discrimination finding?
    Ms. Papez. No, the courts haven't said that, and the 
Justice Department hasn't said that. It doesn't require direct 
versus indirect. It requires evidence--
    Mr. Sestak. So societal is enough?
    Ms. Papez. It may be enough depending on the strength of 
the evidence. That is what courts have held. Courts have held 
that societal discrimination may be enough depending on the 
strength of the evidence. And in ECA, the court held that a 
disparity study was not good enough evidence of discrimination 
to qualify the program.
    Mr. Sestak. Can we then, either you or staff, I would like 
to know and then go through the military program which has 
similar goals as that does, why is that okay, and what is 
different about it that evidently what you speak about has not 
been a part of what the U.S. Government's agencies have tried 
to also lay down as requirements for the agency to be concerned 
or aware about?
    Ms. Papez. I actually think they have. Again, I don't know 
what specific Defense program you are talking about. The one I 
know a fair amount about, because it has been in litigation, is 
the 1207 DOD program, which has race and gender preferences and 
has been tied up in litigation for years on precisely the issue 
I was talking about, which is that people were coming in and 
saying, we don't think that these preferences DOD is giving to 
contracts are constitutional because--
    Mr. Sestak. No, it is promotion of women from lieutenant to 
lieutenant commander. That is a different--what I am talking 
about is a different program. It is just purely promotions.
    Ms. Papez. Okay, I am sorry.
    Mr. Sestak. I mean, same thing, trying to get more--I have 
gone over my limit--representation of women into the upper 
ranks, and so goals were set. Same thing, but same thing; it 
was gender-based and it was not--and we have been doing it for 
years. So I am curious why in this one we are so concerned to 
make sure the agencies don't get caught up, that they can work 
their way through constitutional issues, but over there in a 
very similar program, it seems as though they are going along 
for what is a national interest good. I have gone on too long I 
yield back.
    Ms. Papez. If I could say briefly for the record, I am not 
familiar with the military promotions program. I think that 
there are probably some real differences between that and the 
contracting program. And all of the evidence and testimony I 
have presented today is specific to contracting programs, 
although we would be happy to look at the military program and 
provide any answers that might help the Committee.
    Mr. Sestak. I would be interested, because there seems to 
be such commonality of more gender-based representation; the 
principle seems to be the same. And when I hear the other side 
of the argument here, I kind of look at the old Navy admirals 
that did not want them at the top and picked the right measure 
to make sure they didn't get in there. Thank you very much.
    Ms. Clarke. Ms. Hirono from Hawaii.
    Ms. Hirono. I have several questions for Mr. Preston. You 
note in your testimony that the proposed rule--about a proposed 
rule. And I take it that the proposed rule doesn't insulate the 
agencies from being challenged on constitutional grounds when 
they are awarding contracts to women-owned small businesses.
    Mr. Preston. I'm sorry, can you restate the question?
    Ms. Hirono. I'm saying the rule does not completely or even 
partially insulate the agencies from legal and constitutional 
challenge.
    Mr. Preston. No, the agency has to undertake its own 
review.
    Ms. Hirono. So have they been doing that? Have they set up, 
established, it says, a framework to make a determination as to 
justifiable discrimination so that they can award these 
contracts to women-owned businesses?
    Mr. Preston. The agency would need to look at the facts and 
circumstances within their agency, which vary dramatically from 
one agency to another and from one business category to 
another. And that is why, because of those uniquenesses, it 
doesn't set out a specific framework in sort of a one-size-
fits-all fashion.
    Ms. Hirono. I realize that, but all of the agencies have 
particular types of contracts that they are awarding, and so 
they need to justify, just in case someone decides to 
challenge, they need to lay out their rationale, so have they 
done that--
    Mr. Preston. Prospectively?
    Ms. Hirono. Yeah, in anticipation of legal challenges?
    Mr. Preston. I don't know what they have done. We haven't 
asked them for a description of how they would do it. Certainly 
in the process of the proposed rule, people bring forward ideas 
on that issue, and we will consider them in the rule-making 
process.
    Ms. Hirono. I think that that is an area that you probably 
should--if I can make a suggestion, you probably should proceed 
with, because it should be anticipated that these challenges 
will come forward, especially based on the Supreme Court 
decisions and the circuit court decisions. So you note two 
areas that you are moving toward. One is to increase a number 
of women-owned businesses that are registered, and I take it 
that the registration is a simple thing for women-owned 
businesses to do, that we don't have a lot of barriers for them 
to register themselves.
    Mr. Preston. No, there aren't a lot of barriers for them to 
register themselves. I would tell you that participating in the 
entire Federal contracting process has its own challenges just 
because of the Federal Regulations. And clearly they have to 
make sure they are aware of those and comply with those, which 
is somewhat of a higher hurdle.
    Ms. Hirono. I think registration is your easier challenge, 
I would think.
    Mr. Preston. I would agree with you, absolutely.
    Ms. Hirono. Because then you have all these thousands of 
businesses that are registered, and unless they know what to do 
once they have registered, it is just funds on seats. And so 
that is the second part of your task, the second part being the 
educating and helping them actually get these contracts.
    Mr. Preston. And I mentioned some new technology we have. 
Once they are registered, we have the ability to find them very 
simply based on the industries they compete in and their 
locations. So it is important for us to get them in there to 
help the other agencies find them.
    Ms. Hirono. That is right. But I see the larger problem as 
making sure that these agencies--you want to--you want to 
encourage them to give these contracts to women-owned small 
businesses, but they are not going to do that if they are going 
to have to face a legal challenge every time they do that. So I 
think the larger challenge is for you to really help them 
establish the--be able to sustain a legal challenge, and I 
don't see that as part of your push right now.
    Mr. Preston. I just want to emphasize one concept.
    Ms. Hirono. I am suggesting that it be.
    Mr. Preston. I want to make one comment. The only issue 
with respect to legality here has to do with an agency that 
chooses to do a set-aside for only women-owned small businesses 
in one of those four industry categories, which is--as we have 
all acknowledged, it is a relatively small percentage of the 
overall contracting pie, and only, once again, if it is set 
aside to the exclusion of other businesses.
    With respect to the overall contracting picture, where 99 
percent plus of the revenue base is, those types of 
justifications are irrelevant because women-owned businesses 
would be going to the table competing against other small 
businesses. The only thing I would mention is in our 8(a) 
program, about 30 percent of those companies are women-owned, 
and women represent a significant portion of the HUBZone 
program and overall small businesses. So there are set-aside 
possibilities in those categories, but they would be competing 
against non-women-owned small businesses in those categories.
    Ms. Hirono. And those would not be subjected to legal 
challenges, I take it. It is only the instance where it is just 
going to be women-owned small businesses that can qualify for 
the particular contract that raises a potential constitutional 
challenge.
    Mr. Preston. Yes. Specifically in those four categories for 
set-asides. I would tell you that there are ongoing cases that 
are challenging the constitutionality of our other programs, 
but I think that is a different issue.
    Ms. Hirono. That is probably a different constitutional 
standard.
    Now that you have explained that, then what percentage of 
all of your agencies' contracts are in the category where 
constitutional challenges could arise based on gender?
    Mr. Preston. It is less than one percent within these 
categories, and, once again, only if it is a set-aside, which I 
think is the concern that you raised is because of the small 
number of categories.
    Ms. Hirono. Is there a possibility of increasing this one 
percent to more than that to give--basically to really focus on 
women-owned small businesses?
    Mr. Preston. Yes, there is. One of the challenges in the 
RAND study is there are a number of codes where they found that 
there was not enough statistical evidence to really dig into 
it. For example, there might not have been any women signed up 
for those categories. There may have only been a few Federal 
contracts going to those categories. And I think it will be 
important for the SBA to continue to review those categories to 
see if they are significant enough to matter, and if there is 
additional activity coming into those categories that would 
enable us to do a review to determine underrepresentation.
    The other thing which we mention in this study is I think 
periodically it will be incumbent upon the SBA to update its 
findings to determine whether or not there is a change and 
whether or not the categories could be expanded. So that is, I 
believe, a task that we will have going into the future.
    Ms. Hirono. Thank you very much.
    Thank you, Madam Chair.
    Ms. Clarke. The gentleman from Texas Mr. Gonzalez.
    Mr. Gonzalez. Thank you very much, Madam Chair.
    My first question will go to the Administrator, and I am 
going to read from a story from the Post, January 7th, and see 
if you can respond to this concern expressed by a certain 
individual.
    The quote: The government's recent preference for hiring 
one large company to manage several smaller projects also makes 
the idea of capping individual projects at $3 million 
unfeasible, said Faye Coleman, president of Westover 
Consultants in Bethesda. And I am sure that you have addressed 
it, and I apologize for getting here late. We are starting the 
second session of the 110th, and we are spread out all over the 
place. But I am sure what Ms. Coleman is talking about is you 
already have a problem with bundling out there, and is this 
just basically an accommodation or an incentive for further 
practice in expanding what procurement officers are already 
doing, which will basically shut out women-owned businesses by 
capping it? Does it work that way, or am I just totally wrong?
    Mr. Preston. Well, the $3 million that is in the rule is 
based on the statute that was passed. So the $3 million in the 
rule, we have only implemented it to mirror the statute, and 
that is why it is in there.
    The other thing I would mention is on the $3 million, once 
again, that only relates--3 million for service, I think $5 
million for manufacturers, only relates to the ability to do 
set-asides, not for the ability for those people to compete for 
business. So it doesn't mean that these businesses can't 
compete for $5 million or $10 million contracts. It would only 
mean that those would not be available--
    Mr. Gonzalez. We are talking about set-asides, aren't we?
    Mr. Preston. Right.
    Mr. Gonzalez. We will leave it at set-asides then. That was 
her concern. And I understand you are pointing something out 
that is very important: That is part of a reg, it is part a 
rule, you are bound by the $3 million.
    Mr. Preston. It is part of the statute.
    Mr. Gonzalez. Exactly. I am just saying if that restricts 
you, you need to let us know so that we can understand how it 
may mitigate and actually work against the very thing that we 
are attempting to accomplish, because, believe me, we have 
serious problems with bundling already. Whether it is 8(a) or 
it is going to be 8(m), it doesn't matter. The whole problem is 
that they cannot compete because we have contracting and 
procurement officers out there that intentionally bundle these 
things because they really just want to deal with one big ball 
of wax rather than maybe ten moving parts, which we all 
understand is human nature. But it frustrates what we attempt 
to do, and that is why Chairwoman Velazquez's scorecard for 
governmental agencies and departments usually amounts to 
nothing more than maybe a lot of Ds, a lot of Fs, and maybe a C 
here and there.
    My next question would go to Ms.--is it Papez?
    Ms. Papez. Papez.
    Mr. Gonzalez. Papez. And let me--the good thing, and you 
are a lawyer, and the wonderful thing for members of the 
Committee is that we have staff that will prepare memos that 
really do explain where we are, at least with the situation, 
and give us some guidance. I am going read from the memo.
    The SBA has proposed that in order for an agency to set 
aside a new contract, the procuring agency would have to 
conduct an appropriate analysis of its own procurement history 
to show that there has been discrimination against women-owned 
small businesses in the past.
    Is that correct?
    Ms. Papez. I think the rule generally requires that the 
agency that would be administering a set-aside program has to 
find discrimination in the relevant field, which is the area 
where that agency is going to administer contracts.
    Mr. Gonzalez. So where does societal discrimination, as my 
colleague Mr. Sestak pointed out--where does that come into 
play? Because if we are really going to restrict it to what is 
going on in that particular arena, to that particular agency, 
to that particular product or service, then what happens with 
the bigger picture of what we are really trying to address as a 
societal issue, as a societal problem, reducing it to a 
specific instance here? Because that simply is not a 
consideration, it is really not a factor. I mean, they should 
just basically stay within their own purview, their own little 
universe and say, well, what our agency does and how we conduct 
our business is not discriminatory, one, within, again, another 
what I would say--I don't know if it is a subsection of a 
subsection of a subsection as far as the type of business 
product or service in which they are dealing. Is that where we 
find ourselves today?
    Ms. Papez. That is a very good question. I am glad you 
asked it because this goes to something that is a tough issue 
in these kind of programs, and it goes to the cases that your 
colleague mentioned also.
    I am not going to say that societal discrimination isn't a 
factor, because I don't think I need to say that or it is 
appropriate to say. I think what I would say is the rule talks 
about agency findings of discrimination in the area where they 
do government contracts, because that is what the cases are 
going to hold the agency to in order to get the program to pass 
muster. And specifically what these cases have said, including 
the Supreme Court, is the government, in this case the agency 
that is doing the contract program, has to show evidence of 
discrimination in--this is the Court's words--the particular 
field where the contract program is going to operate. And so 
the particular field is going to be the field where that agency 
is giving out government contracts.
    And the reason that the rule tells agencies line up your 
evidence of discrimination in your area where you do contract 
is because that is what courts are going to require. And I 
would point out in that ECA case that I was talking about a few 
minutes ago, it is an 11th circuit case in Florida, it involved 
a contracting program administered by the State to benefit 
women-owned businesses, and they contended that societal 
discrimination was indeed relevant, and they tried to sustain 
the program based on it. They had a disparity study and they 
were saying, look, women are underrepresented. The government, 
the State of Florida had, the county has an important interest 
in trying to help women out. They have been underrepresented, 
they have suffered societal discrimination, we want to help 
them, here is our program to do it. And they put forth that 
evidence, and the Court struck the program down. It said that 
is not good enough evidence under intermediate scrutiny.
    So what I am saying is we at Justice, we look at cases like 
that, and when we look at a rule, we say, okay, what should the 
rule say that agencies need to do in structuring these programs 
in a way that is going to get them upheld? Because that is what 
the real end game is here. I don't think it is in Congress' 
interest or the administration's interest to see these programs 
struck down.
    So a long story short, it is not that anyone is saying 
societal discrimination is irrelevant at all. The rule just 
simply reflects what the courts have been requiring the 
government and in these cases the agency that is doing the 
contracting program to show.
    Mr. Gonzalez. It seems to me then there is no application 
for a societal discrimination factor.
    Ms. Papez. I don't know that that is true.
    Mr. Gonzalez. Give me an example of where you might have an 
agency or department rely on societal discrimination as a 
factor to maybe carry the day before the Court. I am in a 
certain sector. I am an agency or department that deals in a 
certain product or service. Give me an instance where I might 
be able to bring into the legal argument societal 
discrimination.
    Ms. Papez. I think, I guess, the best and hardest, most 
concrete example I can give you is that ECA case where the 
government doing the contracting program relied on evidence of 
societal discrimination. The evidence they had was a disparity 
study. The Court said that wasn't enough because the disparity 
study didn't do regression analyses and other things that 
backed out the disparity and linked it up to discrimination. 
And the Court seemed to suggest that if the study had done 
that--in other words, instead of just saying there is disparity 
or underrepresentation, it can link it up to specific 
discrimination. And the Court, I guess, left open that 
discrimination could have been from society or the government 
if the study had gotten into that level of proof of 
discrimination. And again, the Court left it open; maybe it is 
societal, maybe it is government discrimination, but at the end 
of the day, you are linking up the disparity to discrimination. 
It might have upheld it.
    So that is, I guess, a court case and a fact pattern that 
says the government could convince a court that it has 
sufficient evidence of discrimination in the relevant sector by 
pointing to societal discrimination. They have got to show 
discrimination related to the disparity in the government 
contracting sector, and they have got to do that with 
statistics and hard evidence, not just with arguments or 
hypotheses.
    Mr. Gonzalez. Do you believe as a society there is still 
discrimination being practiced against women, again, gender 
bias and prejudice and discrimination in business enterprises, 
you as an individual?
    Ms. Papez. I think that is entirely possible.
    Mr. Gonzalez. It is way more than possible. You don't 
really--because I am going to get eventually to my last 
question. This is only my second question. Again, I am going to 
read from the memo.
    Furthermore, the Metropolitan Dade case cites the third 
circuit case for Ensley Branch, which states that the 
discrimination offered into evidence need not be governmental 
discrimination. In that case the Court found that, quote, one 
of the distinguishing features of intermediate scrutiny is that 
unlike strict scrutiny, the government interest prong of the 
inquiry can be satisfied by a showing of societal 
discrimination in the relevant economic sector. This suggests 
that the level of scrutiny required by the SBA in its proposed 
rule is beyond what is required under current case law.
    Is that an accurate statement by staff that prepared the 
memo?
    Ms. Papez. I do not think it is accurate to say that the 
SBA rule goes beyond what is required by intermediate scrutiny. 
I would say, and I think I just said it a couple minutes ago, 
including under that ECA case, that we are not saying that 
evidence of societal discrimination doesn't have a place here. 
That is not at all what we are saying.
    I explained in talking about the ECA case how a court might 
find evidence of societal discrimination to be good enough 
where the government can link up that kind of evidence of 
discrimination to the underrepresentation in the government 
contracting field, and I think that is clearly what the cases 
stand for.
    I think what your question goes to--and maybe the Committee 
generally looked at this rule and said, wait a second, isn't 
this rule making it harder than necessary? And if your question 
is are there cases out there that suggest that a program might 
be able to survive on something less than what the rule is 
requiring, I think there are some cases out there that may 
suggest that. But the body of the case law under intermediate 
scrutiny, and even those cases, are all clear about one thing: 
The government has to prove discrimination.
    So if the issue is is it okay to just go ahead with the 
set-aside program based on a disparity study that doesn't link 
up to evidence of discrimination, that is not going to pass 
muster. And I don't think it is advisable for an agency to 
proceed on that basis.
    Mr. Gonzalez. Have you ever advanced any argument relying 
on the societal discrimination factor, not alone, but in 
conjunction with specific practices within that agency or 
department's own practices when it comes to the specific 
service or product?
    Ms. Papez. Well, when you say "you," you mean the Justice 
Department?
    Mr. Gonzalez. I am just saying in your memorandums or 
brief, anything that you would even provide in the way of 
guidance to the Administration, to the Small Business 
Administration, as they attempt to promulgate certain rules 
governing this particular program. I mean, do you ever have a 
discussion about societal discriminatory practices that might 
come into play that would be relevant to substantiate and 
support whatever SBA would do in trying to meet their 
obligation under 8(m)?
    Ms. Papez. That is exactly what we do in discussing these 
cases when we look to the cases and try to explain what an 
agency would have to show to have their program upheld.
    Mr. Gonzalez. And so you do touch on the big picture. 
Societal discrimination is something that they would be able to 
try to show or establish to support whatever SBA efforts might 
be.
    Ms. Papez. Certainly we highlight that courts do look to, 
like the ECA case, societal discrimination as a relevant 
factor. The thing that we go on to point out, though, is that 
the ultimate test is whether your set-aside program is 
furthering a government interest, and do you have evidence of 
discrimination in the area where the program is going to 
operate?
    If the area where the program is going to operate is an 
area of government contracting where the government is the 
actor, we also caution, because courts have done it, that the 
government ultimately bears the burden of showing 
discrimination in that sphere. So if the government is going to 
rely on societal discrimination, they better be able to link 
that up to discrimination in the contracting sphere.
    Mr. Gonzalez. Do you know what, though? I think you have 
touched on it. There is no relevance when it comes to societal 
discriminatory practices unless you have a specific 
discriminatory practice occurring by that particular agency in 
whatever it is doing in its procurement practices on its 
products and services, which means--and as a lawyer you know 
this--you can throw out societal discrimination, it has no 
application.
    That is what I really want--I don't want to deal in 
fictions. I do not want to deal in fictions. I don't think the 
courts are dealing in fictions. What I think is the courts are 
sending out a message to all you lawyers out there saying, 
bring back these arguments, let us develop them.
    And I am going to leave you with one final thought. And I 
understand, look, you have a job to do, and as a lawyer you 
want to give advice to SBA that whatever they do will survive 
judicial scrutiny, because someone is going to contest it. 
Believe me, I know that is important. But you are still an 
advocate and a representative indirectly of women, of women in 
all the programs that we attempt to effectuate through 
legislation such as 8(m) or 8(a), whatever we may have.
    But I will never forget, there was a wonderful old lawyer 
named Judge Curry in San Antonio, and we would be up there 
arguing a case, and we would have the controlling case 
authority, and then he would rule against it. And we would say, 
but, Judge Curry, Smith v. Jones stands for the very opposite 
proposition. Do you know what Judge Curry would say? I am going 
to give the appellate courts another chance to get it right.
    And you really need--we used to think that was outrageous 
as lawyers. Do you know what? Judge Curry was right, because 
sooner or later they overturned old precedent because society 
moved on, and it was reflected more often than not by the 
judicial branch of our government. And that is the beauty of 
it. I think you represent actually both. But when it is all 
said and done, it will be some judge up there that will decide 
that we need to move forward as a society.
    So I am just going to say still look at the societal 
discriminatory practices as a relevant factor, and I hope that 
we are totally wrong that it really is not that relevant.
    And I yield back. And thank you for your indulgence, Madam 
Chair.
    Ms. Papez. If I may just respond very briefly to say that, 
again, we do not serve women or programs that benefit them by 
advising agencies to implement them in a way that courts are 
going to strike down.
    I would also say that I did not take the position, nor does 
the Justice Department, that in judicial challenges evidence of 
societal discrimination is irrelevant. That is not the position 
we have taken. What we have said is if agencies are going to 
rely on that, under the case law they have got to link it up to 
discrimination in their agency contracting field in order for 
the program to be upheld, which is really what everybody wants 
at the end of the day.
    And the final thing I would say is the U.S. Supreme Court 
very recently, it is not an old precedent, confirmed the 
intermediate scrutiny standards that I am talking about and 
that the rule reflects. I don't think the Supreme Court thinks, 
and I certainly hope they don't decide, that this country 
should move on from the equal protection standards that must be 
satisfied in these cases. These standards should be satisfied 
and should not, for policy preferences or even the most well-
intentioned policy reasons, depart from basic constitutional 
protections that have protected both sides of this question for 
a very long time in a way that has really benefited women.
    Mr. Gonzalez. The Constitution--I mean, we are going to go 
on and on on this thing, but the whole point is the way that 
the Constitution and its protections have been interpreted in 
the past have not been truly the most admirable way of doing 
it. Society has moved forward because brave lawyers and judges 
have been able to give true life to the words and spirit of the 
written word. That is what I am trying to discuss with you 
here.
    And I know that you keep telling me that societal 
discriminatory practices are relevant, but in your answers you 
are still telling me you are going to tell your client that 
that is lofty and wonderful, but if it doesn't have a specific 
application when it comes to your interpretation of 
intermediate scrutiny on what they are doing specifically 
within their own department, within their own product, with 
their own service, it doesn't matter. So if I am on the 
receiving end of that legal advice, where do you think I am 
going to go with this?
    Ms. Papez. Well, I didn't say it doesn't matter. I never 
said that. What I said--and it is not my standard or the 
Justice Department's standard. I said if an agency wants their 
program to be upheld by the courts, and that is what everyone 
should want, because it doesn't benefit women to have these 
things struck down, what I said was if you are going to rely on 
societal evidence of discrimination, and courts will look to it 
and they will let you rely on it, you have to link it up, 
because if you don't, your program is going to go the way of 
the 11th circuit case program, it is going to get struck, and 
that doesn't benefit anybody.
    Mr. Gonzalez. Thank you very much.
    Chairwoman Velazquez. Will the gentleman yield?
    Mr. Gonzalez. I yield back.
    Chairwoman Velazquez. Will you yield for me for one second?
    Mr. Gonzalez. Oh, absolutely.
    Chairwoman Velazquez. I want to ask a question of Mr. 
Preston.
    Mr. Preston, the 8(a) program is the most challenged 
program in the Federal Government. It has been challenged in 
court. It is the last affirmative action program that exists in 
the Federal Government. Are you required to admit past 
discrimination in order to award contracts under the 8(a) 
program, yes or no?
    Mr. Preston. I don't know, frankly, what the judicial 
history is for supporting discrimination.
    Chairwoman Velazquez. I am asking you today as the 
Administrator of SBA. This is a program that exists under SBA 
statute.
    Mr. Preston. Yes.
    Chairwoman Velazquez. Is it required to admit past 
discrimination in order to award grants, contracts?
    Mr. Preston. It is required for us to show social 
disadvantage and economic disadvantage. And social 
disadvantage, I think, is closely related.
    Chairwoman Velazquez. Ms. Papez, before I asked you to give 
me an example of programs in the Federal Government that will 
have to prove past discrimination.
    Ms. Papez. Yes.
    Chairwoman Velazquez. You didn't answer my question. I want 
to ask which programs and agencies.
    Ms. Papez. Well, 8(a) is certainly one.
    Chairwoman Velazquez. It is not.
    Ms. Papez. It is.
    Chairwoman Velazquez. It is not.
    Ms. Papez. Actually it is. In the Rothe case, the Texas 
case that just came down on Rothe said that, and the Supreme 
Court has said that, any program that awards benefits based on 
race or gender requires the government to show evidence of 
discrimination.
    Chairwoman Velazquez. Are you telling me each agency has to 
go through this in order to award 8(a) contracts in their 
agencies?
    Ms. Papez. I guess maybe I was confused on the question. 
You are saying, are there programs that have to show past 
discrimination? And I am saying, yes, all race and gender 
programs have to do that. If your question is agency-specific 
admissions of past discrimination, is that what you are asking 
about?
    Chairwoman Velazquez. Yes.
    Ms. Papez. If the question is do agencies have to admit 
past discrimination, I think if they do, they would certainly 
pass constitutional scrutiny. I don't know that they have to do 
that in order to pass constitutional scrutiny. But I would say 
also--
    Chairwoman Velazquez. It is a matter of semantics.
    Ms. Papez. No. If I may, though, I think this is partly--I 
get the sense that part of the frustration that the Committee 
is feeling, and I think what I understood you to be saying 
before, before you left for the break, was the Committee looked 
at this rule and said, wait a second, what is going on here? 
This rule is requiring individual agencies to find 
discrimination when we have already got a disparity study.
    Chairwoman Velazquez. What I am saying is that for gender-
based programs, it would be necessary to demonstrate that there 
is past discrimination when you do not require minority 
programs to do so. That is the whole issue here.
    And now I recognize Mr. Chabot.
    Mr. Chabot. Thank you, Madam Chairwoman.
    Mr. Preston, let me start with you if I can. I know there 
is considerable frustration in the seven years how long this 
has taken to implement, et cetera. How much, if any, of the 
delay in implementing the program is attributable to trying to 
make sure that it will ultimately withstand constitutional 
muster?
    Mr. Preston. I think the long and storied past of this rule 
is exactly based on that. The SBA, I think, after the 2000 
statute was passed, very quickly conducted a study of 
underrepresentation, and as part of the interagency review, it 
was determined that somebody on the outside basically needs to 
look at this to determine whether or not it was adequate. That 
is when it went over to the National Academy of Sciences, and 
the National Academy of Science basically said this will not 
for a number of reasons, which we can go into. The National 
Academy of Science then laid out a detailed methodology for 
what would be sufficient for a program of this nature, and then 
that methodology went over to RAND, and RAND took obviously a 
period of time to actually do the analytical work, to write it 
up and present it to us.
    So the entire pathway is one of trying to get this right. 
And as you have heard from Ms. Papez and other people, these 
are very complex issues and require a great deal of solid 
foundation to be able to ensure that this is sustained.
    Mr. Chabot. Thank you.
    Ms. Papez, I assume you agree with that, and is there 
anything that you would like to add to that?
    Ms. Papez. I would thank you. I very much appreciate the 
opportunity, and this partly goes back to the Chairwoman's 
question. I want to make a distinction here. The law and the 
Constitution require government proof of discrimination in both 
race and gender programs. So from the standpoint of the law and 
the Constitution, discrimination would have to be shown for 
8(a) programs and 8(m).
    I think what the Chairwoman may have been getting at is 
that the language of the Federal rules implementing these 
programs may not say the same thing about exactly what an 
agency has to do. That may be. I don't have the rules on 8(a) 
in front of me. But just because an administration rule in an 
8(a) versus 8(m) program doesn't use the exact same language on 
agency findings doesn't mean there are different legal 
standards or that discrimination is not required in both.
    Mr. Chabot. Thank you.
    Mr. Preston, irrespective of the outcome of the rulemaking, 
what efforts is the SBA taking to get more women small business 
owners to register with the Central Contract Registry or 
otherwise get involved in the federal procurement process?
    Mr. Preston. Very significant outreach efforts through our 
network. We have about 100 locations throughout the country. We 
hold events to bring in people to teach them about Federal 
contracting, to introduce them to purchasers within the Federal 
contracting region so they can actually connect with contracts. 
We are providing educational tools on the Web site. We have 
retrained our entire field organization, over 1,000 people, to 
enable them to provide better training in support to small 
businesses when they come in. We have redirected the PCRs, 
which are procurement center representatives, that work for the 
SBA that actually sit at other agency procurement activities. 
They are focusing not only entirely now on those contracts, but 
we have also rolled out a new program where even when they look 
at small business set-asides, they will be working with the 
individual agencies to ensure that they are meeting their goals 
for preference groups within small business. And women-owned 
small businesses is one of the targeted categories for them to 
work with, and we continue to expand it.
    So these are very real, very tangible initiatives that we 
think will continue to drive that number forward.
    Mr. Chabot. Thank you.
    And also given the fact that the ultimate authority for 
utilizing the program rests with contracting officers, what 
actions will the SBA take to educate contracting officers about 
the program?
    Mr. Preston. We have a very consistent process of meeting 
with all the other Federal agencies on any new rules, any new 
processes. We get their input. We have dramatically expanded 
our coordination efforts with the other agencies in a number of 
ways. So I think--and they are very much apprised of the 
progress on this rule and what they are going to be required to 
do.
    Mr. Chabot. Thank you.
    Have you determined who in the SBA will be involved in 
interacting with other Federal agencies in the development of 
the final rule?
    Mr. Preston. There are a number of people. And frankly, 
this is an issue that my deputy is very engaged with directly 
and in chairing those meetings with the other agencies. So we 
have a very senior person at the agency focused on it all the 
way at the deputy level.
    Then we also have a new head associate administrator for 
government contracting business development named Fay Ott, who 
will be the primary contract person and primary driver of the 
implementation of the rule.
    Mr. Chabot. Thank you.
    And my final question with you is typically the SBA will 
only consider comments filed after the deadline if it is able 
to do so without delaying the rulemaking. Will the SBA consider 
late-filed comments in this proceeding given the potential 
controversy associated with the rulemaking?
    Mr. Preston. I think if we find that there is the 
possibility of a lot of additional comments coming in, what we 
would like to do is extend the comment period, and we have done 
this in a number of other situations. This is a rule that 
obviously has some very complex legal issues and analytical 
issues associated with it, so we would certainly be open to 
expanding that period if we believe it will be helpful in 
getting more comments in.
    Mr. Chabot. Thank you.
    And, Ms. Papez, finally, because of the Chairwoman and 
myself being called over to the floor and having to handle a 
different bill, we weren't here to hear all the questions that 
may have been asked. I know there has been a lot of 
controversy. Were there any of the questions asked of you that 
you think that you need to expound upon or to clarify that 
there still could be any confusion about?
    Ms. Papez. I think all I would say is, and this partly goes 
to one of the Chairwoman's questions, also something you 
touched upon, is does this rule--how can we say this rule is 
consistent with intermediate scrutiny in the Constitution? I 
think, again, all the cases applying that test, it is not the 
Justice Department, it is the courts, the government has to 
show discrimination in the relevant area, which would be the 
area where the agency administers its contracts, and what the 
rule represents is a prudent approach to that standard. 
Basically it is saying, agencies, get ready for the legal 
challenges, and if you want to do the best you can to make sure 
your programs are upheld, which is what everyone, I think, 
would want to see with these programs, you should have your 
evidence.
    I would point out, though, the rule doesn't say exactly how 
much evidence an agency has to have. I feel like some of the 
Committee may be frustrated with the rule - which is not a 
disagreement about the law, because the law is clear the 
government has to show discrimination - because the rule sort 
of looks like it makes it too hard on an agency. And I would 
just point out, the rule doesn't require an agency to have a 
specific level of discrimination. Again, this is a prudent 
approach to comply with the Constitution, but if people feel as 
a policy matter a riskier approach to the litigation challenges 
is appropriate, then that is certainly something that can come 
in through the notice and comment.
    Mr. Chabot. Thank you.
    Chairwoman Velazquez. Will the Gentleman yield?
    Mr. Chabot. I would be happy to yield to the Gentlelady.
    Chairwoman Velazquez. Ms. Papez, my frustration is that I 
asked you where does the Court rule, tell me where, that each 
agency has to show past discrimination; not the Federal 
Government, but each agency? I just want for you to tell me 
which case.
    Ms. Papez. Well, the cases say the government, not the 
Federal Government. And in the cases where it has been a 
county, for example, or a county board doing the contracts, 
they say that county board. So it is the issue of whatever 
government entity is administering the contract.
    Chairwoman Velazquez. That is not definitive. That is your 
interpretation.
    Ms. Papez. Well, no. What I am saying is the cases require 
that the government entity doing the program show 
discrimination. And all the rule is saying is the best way to 
be able to meet that standard is to have the showing. The rule 
doesn't say how much or exactly what--you know, it is 
consistent with the cases. There is not some hard, fast rule 
that says this has to be so.
    Chairwoman Velazquez. I yield back. Thank you.
    Mr. Chabot. I reclaim my time, and I yield back the balance 
of my time.
    Chairwoman Velazquez. Now I recognize Ms. Clarke.
    Ms. Clarke. Thank you. Thank you very much, Madam Chair.
    Last week I attended the Wall Street project hosted by the 
Rainbow/PUSH Coalition and Reverend Jesse Jackson. It was a 
women's luncheon that took place during our district work 
period. And I came away from that luncheon energized and 
knowing one thing: Women-owned businesses are the fastest-
growing sector of our small businesses.
    But I sit here today and I feel like I am in a time warp. 
Quite frankly, I just feel like I am in a time warp. And there 
is this huge disconnect between what is happening in the 21st 
century in communities across this Nation and what our 
government is really stuck on at this point. It pains me, it 
totally frustrates me to hear and read that despite this 
progress, it has been seven years since the Equity in 
Contracting for Women Act of 2000 was enacted. Women-owned 
businesses are still underrepresented in many industry and 
regions across this country. Almost 50 percent of all the 
women-owned businesses provide goods and services to the 
Federal Government, yet this administration has continually 
failed to increase procurement opportunities and provide a fair 
share to a sector that has made an invaluable contribution to 
the Federal marketplace.
    As you know, women-owned businesses recently received a 
meager 3.4 percent of small business contracting dollars from 
the Federal Government, which cost these businesses about $5 
billion a year. This is disturbing when the Federal Government, 
the largest purchasing organization of the world, has seemingly 
not been able to provide a fair share of about $410 billion 
annual procurement spending to women-owned businesses.
    As a member of this Committee and as a Member who just 
completed their first congressional session, I find it 
unacceptable that here we are yet again exploring and examining 
why the SBA has still not implemented the women's procurement 
program.
    Now, I understand all of the litigation and all of the 
challenges that we are facing in terms of interpretation of the 
law, but at what point is disparity morphed into discrimination 
is really what we are trying to deal with here. Can we agree 
that it will take a concerted effort within your agency to 
break through this wall that has been built up through 
litigation? On the one hand we have the acknowledgement that 
the participation of women-owned business is most desirable. On 
the other hand we have this paralyzing fear of the court 
challenge that keeps your agency operating under a philosophy 
of the lowest expectations of what could possibly happen.
    The one thing I know is that at the end of the 110th 
session, the end of your administration's tenure, we will all 
be able to say that through the procurement mechanism for 
women-owned business under the Presidency of this 
administration, there was no support, no assistance and 
virtually nothing was done. And I say, what a shame.
    Mr. Preston, in our last hearing I asked you whether you 
believed that the SBA, and by extension the Federal Government, 
discriminated against women. You stated, no, you did not 
believe it. Now, your agency recently proposed a rule that will 
require agencies to find evidence of direct discrimination 
against women-owned small business in order to qualify for 
protected status. Is there a change in position here, or do you 
believe that there may be discrimination?
    Mr. Preston. You have got a number of points in your 
speech. Let me make a couple of comments. First of all, I find 
it entirely unreasonable that you would say that about the 
administration. Contracts to women during the administration 
have gone up two and a half times where they were when the 
President came into office. It is a 17 percent growth rate, and 
it is significantly higher growth rate than occurred in the 
prior administration.
    Ms. Clarke. But five percent has not been achieved. I am 
sorry, in No Child Left Behind, if you don't meet the mark, you 
shut down the school.
    Mr. Preston. You also said it is a faster-growing sector. 
We agree. Last year the women-owned business sector in the 
Federal Government grew faster than any of the other set-aside 
programs. And so what I am unwilling to do is to let there be 
any implication that we aren't working hard, making progress, 
and that the President is for some reason not committed to 
this. The other thing is we rolled out a scorecard that one of 
the measures is the performance of women-owned business and 
expanded the transparency there.
    So I think this administration has done a lot here. We are 
presuming that a set-aside rule here is the only way through 
which we are going to expand contracting, and that is totally 
unrealistic, and it is not the right way to go, because I think 
that diminishes the strength of the businesses that are 
actually coming in here to do the contracting.
    So the other thing I would like to highlight is your 
comment to me in the last hearing addressed discrimination with 
me personally, and that is why we got a little fire in the last 
hearing. Your question did not have to do with discrimination 
more broadly. Thank you.
    Ms. Papez. If I may have a chance also.
    Ms. Clarke. But you didn't answer my question. My question 
is is there an acknowledgement now with the agency? And 
certainly as the head of the agency, you would be able to 
determine this. This is something that as the head of the 
agency you would be able to see. This is something that as the 
head of the agency you would set a tone for in terms of how all 
of your subordinates would focus on this project.
    It was not personal, and if you took it personally, I am 
sorry. It certainly was not personal. It is to the office that 
you hold.
    Mr. Preston. Well, what I would tell you, within the agency 
is 25 percent of our procurements this year went to women-owned 
small businesses. I think that shows a pretty big commitment 
within the agency. And I think if you look at the activities of 
people within the agency that have led to the expansion of this 
number dramatically over the past year, you will see commitment 
of people in the agency to expanding this goal.
    Ms. Clarke. My time is up. But we are to go about a very 
specific program here, and I think we need to focus on that 
because that is where the failure exists.
    And I yield back, Madam Chair.
    Chairwoman Velazquez. Mr. Gohmert.
    Mr. Gohmert. Thank you, Madam Chair.
    Since all of this is being recorded, taken down--and I 
appreciate my friend Representative Gonzalez's comment about 
Judge Curry, having been a judge--I just have to point out for 
posterity that any judge at the trial court level who says I am 
not going to follow the law, I am going to make new law is 
legislating from the bench and is violating his constitutional 
oath that he takes when he takes office. He is violating his 
oath, and I find that reprehensible.
    Mr. Gonzalez. Will the gentleman yield?
    Mr. Gohmert. Sure.
    Mr. Gonzalez. If Judge Curry heard you say that, and you 
are a Texan, you would probably be called out there, and you 
all would have your six guns, and you would have a shoot-out.
    He is a very honorable man. I think what Judge Curry was 
saying and, to be honest with you, was telling the lawyers to 
think beyond where we may be today and to continue to advocate 
and fight for a more just society. It was his way of telling 
us. Of course Judge Curry was going to follow his duties and 
his responsibilities. I only said that as an example.
    Mr. Gohmert. Let me reclaim my time here. He was not 
following his oath, he was not following the law, he was 
creating law. And as a judge, the way I would do that with 
lawyers was to say, I don't like this law, I think it is an 
unfair law, but I took an oath to follow the law, so I hope you 
will pursue this to the appellate court because I do not think 
it is fair and just, and that is where the change will be made. 
But my oath was to follow the law at this level, and that is 
what I will have to do. But I would encourage the lawyers to 
think outside the box, just as you. And that is why I think you 
were right when you felt like the judge was being unfair.
    Mr. Gonzalez. And you are speaking to the lawyer, as a 
matter of fact.
    Mr. Gohmert. I understand, I understand. And I will 
encourage that. But just so everybody understands, too, just 
basic constitutional law, when we have programs that say we 
want you to specifically consider gender in awarding contracts, 
that violates the Constitution, except that it is allowed to 
violate the Constitution if it is fixing past discrimination 
and past injustice. That is where we constitutionally allow 
discrimination based on race and gender is if there has been 
past discrimination. Otherwise, we can--and I hope and pray and 
look so forward to the day when we can achieve Martin Luther 
King, Jr.'s dream of people being judged by the content of 
their character, by their capability, and not by race, not by 
gender, but just by the content of what they can provide.
    But there are some--there have been some injustices in the 
past. And I think just Representative Clarke's comment, you 
know, just when disparity morphs into discrimination, that was 
a good characterization, that is the issue. But that still has 
to be addressed if it is going to pass constitutional muster.
    So I think the problem is you have obviously felt from this 
Committee is let us don't take too long finding those places 
where disparity has been discrimination. Let us fix those, let 
us address the discrimination so that we can move closer ever 
to that day when we can live out Martin Luther King's dream.
    And just a parenthetical, the No Child Left Behind probably 
isn't an adequate comparison because I think that is an area 
where this administration has stepped far beyond its powers and 
started having the Federal Government tell local governments 
what they can do.
    Ms. Clarke. Will the gentleman yield?
    I was saying that with regard to the No Child Left Behind 
Act, if school districts didn't meet the goals, they were seen 
as failures.
    Mr. Gohmert. Right.
    Ms. Clarke. I am not disparaging the program. I am saying 
now we have a situation, we have a group that is saying that 
they--we will talk about that in the Labor Committee. But what 
I am saying here is that now we are saying, well, we made 
minimal movement, and so that should be touted a success, when 
we actually had a goal set at five percent, which has never 
been met, and it has been seven years. The administration is 
almost over. So I think we need to acknowledge that and not 
brush that aside and pat ourselves on the back. I believe in 
movement, but then let us say that across the board, that 
everywhere we are in this administration, those standards are 
held.
    Thank you for yielding.
    Mr. Gohmert. And reclaim my time. Thank you.
    My point is there, that is a program where the 
administration has vastly exceeded, in my opinion, their 
constitutional authority because they haven't really understood 
the 10th amendment.
    But anyway, I appreciate your time and effort here, and we 
hope we will continue to see great progress in the future. 
Thank you.
    Chairwoman Velazquez. Mr. Preston, I would like to ask you 
my last question. We have votes on the House floor. Regulations 
specify four unique industries as being underrepresented. My 
question to you is do you find it arbitrary, for instance, that 
your agency specifies that women are underrepresented in the 
field of kitchen cabinet making but not in installing kitchen 
floors?
    Mr. Preston. No. I find that the information that came out 
of the RAND study was based on a methodology that was 
supportable. So I haven't looked at the specific kitchen floor 
category to determine whether that is or not.
    Chairwoman Velazquez. Well, I did. That is my function 
here; it should be your function, too, to look at the industry 
and the RAND study.
    Mr. Preston. I looked at every number in that study and wax 
eloquent on them if you would like.
    Chairwoman Velazquez. When I looked at it, and I saw yes 
for this one, kitchen cabinet making, but not in installing 
kitchen floors, you know, my first reaction, this is silly.
    Mr. Preston. Ma'am, the category isn't kitchen cabinet 
making, it is a much broader cabinetry category and gets to 
institutional furniture and all sorts of things. So I think it 
is important to look at the fullness of the category.
    Chairwoman Velazquez. Okay. My last question to you is 
would you at least agree with me that this program as currently 
crafted by SBA will do little, little to ensuring the 
government will come closer to achieving its five percent 
contracting goal for women-owned businesses?
    Mr. Preston. I think the government is going to have to 
focus on many different programs other than this program to 
reach those goals.
    Chairwoman Velazquez. Well, the focus of this hearing today 
is this program, the women's procurement program. And the fact 
is that after seven years, with all the things that you read in 
your testimony saying that we are training staff, that we are 
making these changes, that there is a scorecard, I am happy to 
know that after all the many scorecards report that we issue 
from this side, that you decided and opted to issue your own 
scorecard. That is great, but yet the five percent per women's 
procurement program has not been achieved. And with all these 
roadblocks under the proposed rule, I doubt that it will be 
achieved.
    Mr. Preston. I think it is important to note that there are 
no additional roadblocks being put in front of women through 
this rule. This specifically deals with an additional 
opportunity, not putting a roadblock in front of the 
opportunities that exist today.
    Chairwoman Velazquez. I think that all comes down to a 
philosophical disagreement with the program.
    With that, I excuse the first panel. And the Committee will 
be--will adjourn until we take the votes on the House floor. 
Basically we will be back in 20 minutes.
    [Recess.]
    Chairwoman Velazquez. This hearing is now called to order, 
and we are going to start with our second panel. And I want to, 
in advance, thank all the witnesses for being here this 
morning.
    Chairwoman Velazquez. Our first witness is Ms. Margot 
Dorfman, she is the CEO of the U.S. Women's Chamber of Commerce 
based in Washington, D.C.; the Chamber represents 500,000 women 
throughout the country.
    Ms. Dorfman, you will have five minutes to make your 
presentation.


   STATEMENT OF MARGOT DORFMAN, CEO, U.S. WOMEN'S CHAMBER OF 
                            COMMERCE

    Ms. Dorfman. Thank you, Congresswoman Velazquez, Ranking 
Member Chabot and members of the House Small Business 
Committee; thank you again for addressing this very important 
issue.
    I am here again today on behalf of millions of women-owned 
firms all across America to tell you that the Small Business 
Administration has once again sabotaged the implementation of 
the Women's Federal Procurement Program, and to remind you why 
this program, as Congress originally intended it to be 
implemented, is so dearly needed.
    Recently, the SBA filed a new set of proposed rules for the 
implementation of the Women's Procurement Program. These new 
rules ignore the recommendation of the scientific and legal 
experts and render the program ineffective by limiting its use 
to a handful of industries and requiring each and every Federal 
agency to conduct an analysis of the agencies past procurement 
activities and make a finding of discrimination by that agency 
in that particular industry.
    For years and years, the SBA has hidden behind false pleas 
for time while women business owners have lost billions of 
dollars annually: time to hear from the experts, time to gather 
the data and time to understand how to determine women-owned 
status. But with this last action they can no longer hide their 
contemptuous position towards securing fair access to Federal 
contracts for women business owners.
    The arbitrary and unscientific method they have chosen to 
select the industries for the program looks more like something 
pulled out of a hat than the results of seven years of work and 
of this scientific disparity study. And the outrageous 
requirement that every agency that conducts the studies of 
discrimination in all industries only shows us how far this 
administration will go to prevent women from gaining fair 
access to Federal contracts.
    When Congress first passed the Equity in Contracting for 
Women Act of 2000, the SBA was to prepare a study to determine 
industries in which women business owners were underrepresented 
in Federal contracting and establish procedures to verify 
eligibility and participation in a competitive set-aside 
program. The SBA first undertook this study in house after 
completing their own study, the SBA leadership determined that 
they needed a study of the study and that they needed experts 
to tell them how to do their study correctly and how interpret 
the data.
    To this end, the SBA employed the National Research Council 
of the National Academy of Sciences. NRC is a prestigious and 
well-respected institution which regularly is employed to 
provide experts advice to the Federal Government.
    The NRC established a prestigious steering committee for 
the project including the Chair of the School of Public Policy 
in Social Research at the University of California, Los 
Angeles, and scholars from the Hass and Marshall Schools of 
Business, the Department of Sociology at Rutgers University and 
the School of Law at the University of Virginia.
    The scientific experts and legal experts carefully framed 
the requirements for the study through the lens of the legal 
framework of disparity studies and the legal standards of 
gender preferences. They made a very clear set of 
recommendations. They recommended using four variables in four 
tables to show industry groups using a wide view of "ready and 
able" and a narrow view, and measuring contract actions versus 
contract dollars.
    The NRC clearly stated how they recommend this data be 
interpreted. The agencies that appear in two or more of the 
four tables may be deemed unrepresented. Using the NRC 
recommendations and the RAND data that followed, 87 percent of 
all industries should be included as underrepresented in 
Federal contracting.
    But nothing is simple, direct or clear in the hands of the 
SBA. The SBA threw out the NRC scholarly recommendations and 
whittled away possible measurements until they found a narrow 
selection they liked. Then they tried to move the emphasis from 
underrepresentation to discrimination and tagged on the 
incredible requirement that every agency complete a 
discrimination study in every industry. Again, the SBA has 
turned years of time and money into a ridiculous circus 
treating the lives of thousands and thousands of American 
citizens as toys in some political game.
    Trust me, to women business owners, this is no game. Fair 
access to Federal contracts is serious business. The economic 
and political rise of women in America is truly something for 
the history books, but the economic realities for women 
business owners remains very troublesome.
    Since the paltry five percent goal for contracting with 
women-owned firms was set in 1994, the Federal Government has 
never hit the mark. Even today, as women own 30 percent of all 
firms in America, the Federal Government lags behind in doing 
business with women. Women lose between $5 and $6 billion every 
year as the Federal Government fails to meet the low five 
percent mark. And the openly unsupported attitude that is 
exhibited by the SBA only serves to continue a sad tradition of 
failure within the government contracting ranks.
    Once again I ask the House Committee on Small Business to 
compel the SBA to implement the Equity and Contracting for 
Women Act of 2000 as intended by Congress seven years ago. It 
is clear that without this law in place, women-owned firms are 
losing billions of dollars annually. Women business owners are 
ready and able to grow their businesses. We ask you to support 
their growth as they provide for their families and advance the 
economic growth for their communities.
    Thank you.
    Chairwoman Velazquez. Thank you, Ms. Dorfman.
    [The prepared statement of Ms. Dorfman may be found in the 
Appendix on page 74.]

    Chairman Velazquez. And now we would like to recognize Mr. 
Moore from Kansas for the purpose of introducing his 
constituent, Ms. Farris.

    STATEMENT OF THE HON. DENNIS MOORE, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF KANSAS

    Mr. Moore. Thank you, Madam Chair, for the invitation to be 
here today.
    I am Dennis Moore from the Third District of Kansas, and as 
the member of the Small Business Committee who has been on 
leave from the committee since the beginning of 2001, it is 
great to be back here in the hearing room.
    I am here today to introduce my constituent and your next 
panelist, Denise Farris. Denise is the founder and managing 
partner of the Farris Law Firm where she practices general 
business in commercial construction law. She was AV-rated by 
Martindale-Hubbell, representing the highest peer review 
ratings for expertise and ethics. Her firm provides legal 
services related to corporate consultation information with 
special emphasis on women and minority-owned small business, 
including Federal contracts and affirmative action, along with 
risk management and general contract litigation.
    Denise is a rising star in Kansas City and in surrounding 
areas with her law practice and experience as a small business 
owner. During 2007 alone, she was named Women Impacting Public 
Policy's Instant Impact Team Leader and awarded their 2007 
National Public Policy Award.
    Kansas City Business Magazine named her among the 50 most 
influential businesswomen and the Kansas City Chapter of the 
Nation Association of Women Business Owners named her Member of 
the Year. She is rated by the Missouri Bar top 25 presenters.
    Denise is a frequent speaker and author for various local, 
regional, and national trade organizations and magazines. She 
has authored chapters on affirmative action, and Denise has 
also been a featured presenter for the National Foremen in 
Construction Industry annual meeting, the Association of 
General Contractors, Builders Association of Kansas City and 
Springfield.
    My staff has another 14 pages of introduction, I will stop 
right there and welcome Denise Farris.
    Chairwoman Velazquez. Ms. Farris, you will be recognized 
for five minutes.


   STATEMENT OF DENISE FARRIS, FOUNDER AND MANAGING PARTNER, 
                        FARRIS LAW FIRM

    Ms. Farris. Thank you very much. Thank you, Chair 
Velazquez, Ranking Member Chabot, members of the committee. And 
Congressman Moore, thank you for coming by.
    My name is Denise Farris and I am appearing today on behalf 
of WIPP, Women Impacting Public Policy, and its general 
membership, which represent over a half million business owners 
nationwide. I own the Farris Law Firm in Stilwell, Kansas, 
which sits on the border of Kansas and Missouri. I am a 
certified WBE company, and I am apparently one of the 55,000 
women currently registered in the CCR.
    I am a commercial construction lawyer and for the past 17 
years I have focused on the constitutional parameters of 
affirmative action in government contracting. I know the 
committee appreciates how important this rule is to us and to 
me personally and professionally. I have focused my comments 
today on three aspects of rule: first, the RAND study, the 
legal standard applied and then the flow-down effect.
    The 2000 law gave the SBA the responsibility to determine 
in which industries women-owned businesses were 
underrepresented. The RAND Corporation released its study in 
2007 after seven long years of waiting.
    As discussed earlier in this hearing, the RAND Corporation, 
per SBA direction, computed disparity ratios for women-owned 
businesses in four different categories. The RAND study 
concluded that depending on how the SBA chose to interpret the 
data, either 87 percent on the one hand or zero percent on the 
other hand of industries shows a significant disparity for 
women-owned businesses.
    We believe this indicates some fundamental flaws in the 
data on which the proposed rule is based, and the RAND study 
actually admits the owned errors in the data. It identifies 
inaccurate NAICS codes, does not analyze the huge disparity 
variance in the methods, relies on outdated size standards. It 
omits important data such as the entire Department of Defense 
procurement stats, and it also ignores the effect of multiyear 
schedule contracts and classifications. In light of these 
deficiencies, the SBA nonetheless chose the method least 
supportive of the original legislative intent.
    Second, we believe the SBA proposed rule applies an 
incorrect standard of review. Although it says it is applying 
intermediate scrutiny, it clearly, in fact, has created a new 
level which goes beyond even strict scrutiny and created a 
level that doesn't currently exist for any other program. For 
example, under intermediate scrutiny, the government only has 
to show an important State interest or a government interest 
and a program substantially related to achievement of that 
interest. This standard has already been met. Specifically, as 
acknowledged in Public Law 106-554 and the RAND study and the 
preface to the current Federal Register Rule, the government 
has acknowledged, one, that women-owned businesses are the 
fastest growing segment of our economy; number two, that we are 
growing at twice the rate of the average business in the 
economy; and three, that despite this fact since 1994 we have 
not been able to hit a five percent target in Federal 
procurement.
    But here the SBA is actually saying we need a new strict 
scrutiny standard because we are saying, first, despite the 
law, the program can't be implemented until we have done this 
7-year study. And secondly, even after this study has found 
underrepresentation, we are now requiring a new level that 
requires each agency to do an additional study before the rule 
is implemented; and that is the key fact.
    For example, the 2007 study determines that if you are a 
women cabinetmaker you are substantially underrepresented, but 
before you can justify a set-aside, each agency then has to 
review its discriminatory cabinetmaking contracting practices 
before they can justify the set-aside. Now, we all know that 
government moves deliberately and slowly, but quite frankly 
under this standard any contracting opportunity will be gone 
once this study-after-study is done.
    Finally and importantly, this rule has a chilling effect on 
State and local programs because of this new standard, which 
effectively kills all gender-related programs.
    True availability cannot be measured until women business 
owners are encouraged to register their businesses and their 
capabilities. The message flows down to women-owned businesses 
that there is no reason to register because effectively no 
program will ever survive this standard. We urge the committee 
to send the SBA back to the drawing board and to investigate 
why only 55,000 women-owned businesses out of a pool of 10.4 
million are currently registered in the CCR.
    Since it has taken the SBA seven years to get this far, we 
believe the agency should thoughtfully consider the public 
comments it receives during the next 60 days. WIPP encourages 
Congress to require the SBA to implement a meaningful Women's 
Procurement Program which will actually have a positive effect 
on women-owned businesses in Federal procurement. Thank you.
    Chairwoman Velazquez. Thank you, Ms. Farris.
    [The prepared statement of Ms. Ferris may be found in the 
Appendix on page 77.]

    Chairwoman Velazquez. Our next witness is Ms. Beth Gloss. 
Ms. Gloss is the President of United Materials, a small 
business in the roofing industry located in Denver, Colorado. 
Ms. Gloss's company is one of the less than two percent of 
women-owned business firms in construction.
    Welcome.


STATEMENT OF BETH GLOSS, MANAGING MEMBER, UNITED MATERIALS, LLC

    Ms. Gloss. Thank you very much. I am Beth Gloss, the 
managing member of United Materials. We are a roofing 
contractor in Denver, and we specialize in commercial roofing, 
particularly re-roofing and roof repair.
    We are a successful company and handle Federal contracts as 
part of our normal business. We provide excellent value and 
customer service, but lose out on a great deal of business due 
to the lack of a clear, defined woman-owned business 
procurement program and an emphasis from Washington to fulfill 
the guidelines that are set.
    The SBA in my experience does nothing to encourage Federal 
buying from women-owned business, but only from existing, 
formal set-aside programs, and vehemently discourages 
contracting officers in a variety of agencies from attempting 
to purchase from women-owned small business. Conversely, the 
SBA, in its own words, has a program whose mission is to level 
the playing field for women entrepreneurs still facing unique 
obstacles in the business world.
    The ambivalence found inside this taxpayer-sponsored agency 
is frustrating and unconscionable, because there is no set-
aside program for women owners in business in place. Every 
pressure is continually applied in our construction field to 
purchase from contractors where a formal set-aside program is 
in place; this happens even when there are women-owned 
contractors available and eager to do the work.
    I have been floored in any and every attempt to encourage 
government buyers to do business with my company as a woman-
owned business. I have questioned the individual buyers and 
purchasers with whom I have been working, and they have 
directed me to one reason for not following through with a 
woman-owned bid opportunity. The one common answer is, the SBA 
is pressuring them to use one of the existing formal programs.
    Consequently, the lack of a women-owned set-aside program 
is a double-edged sword. There is no way for contracting 
officers to reach out and set aside competition between women-
owned businesses, and there is obviously not a serious push 
from Washington to reach women business owners.
    The attitude towards women's businesses is negative. There 
is no pressure coming down to the local level to outreach to 
women. The abundance of other set-asides without a specific 
program for women makes it difficult for women to get a fair 
opportunity to compete.
    Following a review of my negative experiences in dealing 
with the SBA and government purchasing, I have made three 
different trips to the local SBA office to search for 
information and help in obtaining Federal contracts. I was sent 
from person to person only to be repeatedly told, unless I was 
undercapitalized and could qualify for an 8(a) program, I was 
beating my head against a wall.
    We were the successful bidder on a contract for indefinite-
quantity roof repairs at the Denver military base. Without a 
women's program in place, the SBA pushed the buyer to cancel 
the bid and to do their purchasing within another formal 
program. This resulted in the purchasing being bundled in with 
other contracts to hide their steps.
    We have been told many times bundling is horrible approach 
in our field because the number of lawyers and people involved 
in communications essentially takes up the possibility of good 
emergency response to water leaks and infiltration. This is 
poor value for the government because a great deal of physical 
damage is done to valuable real estate and property while 
wading through procedures required in the bundled contract.
    I have had several meetings with the director of the Small 
Business Utilization Center at the Denver Federal Center. I 
wanted to encourage buying based on a woman-owned small 
business status. While I received courteous treatment, when I 
have gone back to the government buyers, they say that they 
were discouraged from pursuing woman-owned business purchases 
by the very office set in place to help us, because it doesn't 
help meet any formal percentages that are required.
    The new SBA proposal has unreasonable expectations and 
requirements, which are not included in other government set-
aside programs. It is unrealistic and unfair to ask contracting 
officers of Federal agencies to prove which industries have 
discriminated against women. That statistical analysis has 
already been developed by the SBA. Several separate government-
funded studies have been presented which identify over 2,300 
types of businesses that are underutilized when it comes to 
women, yet only four have been outlined.
    Small business employs approximately 50 percent of the 
private sector workforce. We account for 60 to 80 percent of 
new jobs. A great deal of new technology and innovation comes 
from the small business community. Even though over 30 percent 
of the small business in the United States today is owned by 
women, only 3.4 percent of contracting dollars go to these 
businesses.
    Providing a strong set-aside program for women-owned small 
businesses will increase the number of excellent competitive 
contractors from which purchasing agents have the right to 
procure goods and services quickly and efficiently. This 
increases opportunities for women business owners, helps them 
gain a stronger foothold into Federal contracting, makes sound 
economic sense, and provides far better value for the 
government as they continue to encourage small business to 
build and grow.
    Chairwoman Velazquez. Thank you, Ms. Gloss.
    [The prepared statement of Ms. Gloss may be found in the 
Appendix on page 92.]

    Chairwoman Velazquez. Our next witness is Ms. Pam 
Rubenstein, the President and CEO of Allied Specialty 
Precision, headquartered in Indiana, a aerospace manufacturing 
firm. Ms. Rubenstein's company is one of the 0.1 percent of 
women-owned businesses in the manufacturing industry.
    Welcome, and you have five minutes.


 STATEMENT OF PAM RUBENSTEIN, OWNER AND CEO, ALLIED SPECIALTY 
                        PRECISION, INC.

    Ms. Rubenstein. Thank you. Good afternoon.
    My name is Pam Rubenstein. I am the second-generation owner 
and CEO of Allied Specialty Precision, Inc., in Indiana. My 
company was founded in 1954, and today has grown to 85 
employees. We produce precision aerospace component parts 
serving the hydraulic fuel control and braking systems of every 
commercial and military aircraft that flies in the USA today.
    Since I bought my business in 2005, I am proud to say that 
we have added a major customer, doubled sales, increased 
employment and purchased five major machine tools. We have 
invested over $1.5 million in the last year alone in equipment 
and training.
    The advanced manufacturing business is expensive and 
competitive; and even with our strong effort, it is clear to me 
that implementing the Women's Federal Procurement Program would 
be a terrific boost to my company and employees. Direct Federal 
contracts are very important to our growth and movement into 
new industry sectors.
    The only industry we currently serve is aerospace. Right 
now, as you all know, aerospace is booming, and the outlook for 
the next ten years is excellent, but all business, even 
advanced manufacturing, is cyclical. I need to begin to prepare 
for that eventual downturn in aerospace manufacturing now, so 
that my employees and their families will be protected in the 
future. The Women's Federal Procurement Program would be an 
amazing asset in this endeavor. If the Federal Government is 
encouraged to seek out women-owned manufacturers, I would see 
more potential work, could quote more and find my way into 
other industries.
    Allied Specialty Precision, Inc., does not play on a level 
playing field. Unfortunately many daily challenges arise simply 
because I am a woman. Business people, whether bankers, 
insurance brokers, tool salespeople, machinery brokers, even 
some of our customers are shocked when they call or visit my 
shop. Many men are so taken aback at the fact that we are 
woman-owned that they can't look me in the eye during a 
conversation. We may be talking about my purchasing a half 
million dollar machine, but they just can't get past my being 
female.
    Two years ago I attended the international manufacturing 
technology show in Chicago; it is a huge venue dedicated to 
showcasing the latest in machine tools, technology, software, 
et cetera, for advanced manufacturing plants. I had been to the 
tool show many times during my years at Allied, but this was 
the first time that I was there as a business owner, and I had 
a mission at that show.
    I was shopping for a $500,000 five-axis simultaneous mill, 
a very high-tech, specialized piece of equipment that I needed 
to manufacture parts for hydraulic pumps in aircraft. As you 
might imagine, most booths at the show were staffed with men, 
giving out information, answering questions and writing quotes.
    As I entered the booths of manufacturers who offered such 
machines, most of the salesmen ignored me. One asked, what do 
YOU want? Another asked me whether my husband was out shopping 
since I was at the tool show. When I told them what I was 
looking for, their jaws dropped, but not one of those men 
apologized or offered me the information I was seeking. 
Obviously, they did not get my business or my money. Since that 
show, I have purchased two five-axis simultaneous mills from a 
company who took me seriously.
    Just yesterday I had a telephone call from a customer who 
wants to come visit our shop. He ended the conversation by 
asking me to make his plane reservations between New York and 
South Bend, find him a hotel and tell him how to get around 
town. He certainly would not have asked that of a male business 
owner. Needless to say, if he really comes to visit us, he will 
have made his own travel reservations.
    So why does the SBA feel that advanced manufacturing 
businesses owned by women should not be one of the industries 
selected for the Women's Procurement Program? Not a day goes by 
that we don't have some issue over my gender. Obviously, those 
issues haven't shut us down, but they certainly have slowed our 
growth.
    My employees and their families deserve the best that I can 
offer them, and I can offer them more if I can attract more 
work, especially from industries that are new to us.
    I ask the support of Congress to assure that the SBA amends 
the proposed rules for the implementation of the Women's 
Procurement Program to include manufacturing. We are ready to 
step up to new heights in business, and we hope Congress will 
act to support women business owners. Thank you.
    Chairwoman Velazquez. Thank you, Ms. Rubenstein.
    [The prepared statement of Ms. Rubenstein may be found in 
the Appendix on page 95.]

    Chairwoman Velazquez. Our next witness is Ms. Jennifer 
Brown. She is the Vice President and Legal Director of Legal 
Momentum, founded in 1970. Legal Momentum is the oldest legal 
advocacy organization dedicated to advancing the rights of 
women and girls. Legal Momentum is a leader in establishing 
litigation and public policy strategies to secure equality and 
justice for women.
    Ms. Brown, you are welcome and have five minutes.


   STATEMENT OF JENNIFER K. BROWN, VICE PRESIDENT AND LEGAL 
                    DIRECTOR, LEGAL MOMENTUM

    Ms. Brown. Good morning, distinguished members of the House 
Committee on Small Business. Thank you so much, Chairwoman 
Velazquez, for inviting me to speak here today. And thank you, 
as well, Ranking Member Chabot.
    I have been the Legal Director at Legal Momentum for five 
years, and I am very happy to have the opportunity to 
contribute today to your consideration of the Small Business 
Administration's proposed rule for implementing the Women's 
Procurement Program. I can summarize my testimony very briefly, 
but of course I will go on for five minutes.
    The SBA has correctly named "intermediate scrutiny" or 
"heightened scrutiny" as the constitutional standard that the 
Women's Procurement Program must meet; and the program, as 
Congress created it, meets that standard. It is substantially 
related to the important governmental objective of redressing 
and ending discrimination against women-owned businesses. The 
SBA's proposed rule, however, would require Federal agencies to 
make a public finding that the particular agency had 
discriminated against small women-owned businesses in 
particular industries in their own procurement practices before 
they could let a single contract under this program.
    This is an emperor-has-no-clothes moment. The SBA's 
requirement is frankly preposterous. It has no basis in law and 
would doom this program.
    I used to represent the Federal Government against 
discrimination claims as an Assistant U.S. Attorney in the 
Southern District of New York. I can assure you no Federal 
agency will ever voluntarily make a finding that it has 
discriminated in its contracting practices. It is absurd.
    The proposed rule would guarantee that no woman-owned 
business would ever benefit from this program. It is an insult 
to the Congress that created the program, and it is an insult 
to the women like those on the panel today who own small 
businesses and are the driving force behind economic growth 
that this country needs.
    Congress created the Women's Procurement Program against a 
background of persistent discriminatory barriers faced by 
women-owned small businesses in government contracting, and 
amid evidence of the Federal government's continuing failure to 
award even a mere five percent of its contracting procurement 
dollars to these businesses despite the goal that was set to do 
so in 1994.
    My written testimony details some of the evidence that 
Congress has had available to it over the years of 
discrimination against women business owners. There can be no 
doubt that the program meets the Constitution's requirement 
that it serve a substantial government objective.
    The Constitution also requires that gender-conscious means, 
like the Women's Procurement Program, be substantially related 
to the achievement of their objectives. Congress met this 
requirement by limiting the availability of the program to 
small, women-owned businesses in exactly those industries where 
they are underrepresented in Federal procurement contracting. 
This type of limitation is exactly what courts look for when 
they assess the scope of affirmative action programs.
    The SBA's proposed rule would go far beyond constitutional 
requirements into unrecognizable territory. It would impose an 
unprecedented and entirely unwarranted condition on a well-
crafted program by actually barring any Federal agency from 
letting a single contract under it without first making--and I 
quote this from the introduction to the Federal rule as 
submitted by the SBA--"a finding of discrimination by that 
agency in that particular industry."
    As I said, this is truly remarkable. What agency would ever 
announce to the world that it had documented its own history of 
sex discrimination in awarding contracts? I can only imagine 
the rush to the courthouse the next day by disappointed 
contract bidders, a rush that would be fully justified. Of 
course, there is no precedent for such an absurd requirement 
nor any constitutional justification.
    To the contrary, the Supreme Court flatly rejected the 
position that the SBA is taking here, that the government may 
take affirmative measures only to address its own 
discrimination. The Court dealt with that forthrightly in the 
landmark Croson decision.
    Now, the Croson decision for the first time required strict 
scrutiny of a race-based State affirmative action program. It 
was a ruling that drastically reduced the scope of affirmative 
action programs, and yet in that ruling, the Supreme Court said 
the government has, "a compelling interest in assuring that 
public dollars drawn from the tax contributions of all citizens 
do not serve to finance the evil of private prejudice," and 
that was nearly 20 years ago.
    Courts evaluating sex-conscious measures to enlarge 
opportunity have held explicitly--and over and over again as 
was noted this morning--that it is perfectly acceptable for 
such remedies to address societal rather than governmental 
discrimination against women.
    As lawyers who work to advance the rights of women and 
girls, we at Legal Momentum are frankly astonished by the SBA's 
action here. After so many years of stalling, the agency has 
finally promulgated a rule to implement the Women's Procurement 
Program only to include what can only be called a "poison 
pill." Far from finally fulfilling its duty to implement this 
congressionally authorized program, the SBA's proposed rule 
would render it a nullity.
    And if I could just very briefly, I do want to flag for the 
committee an issue which is not addressed in my written 
testimony, but I would urge you to get further expert advice on 
the methodology of the RAND study, in particular the way that 
the dollar value disparity measure is calculated. It says that 
if government spending for women-owned businesses, small women-
owned businesses, in proportion to all spending in the industry 
is proportionate to not the number of women-owned businesses in 
that area, but the dollar value of those businesses in 
comparison to the dollar value of all businesses in the 
industry, then you have parity.
    That means that - small businesses are always going to be a 
very small fragment of the total dollar value of businesses in 
their fields, or most often they will be. So very small amounts 
of government spending will always produce parity when you are 
using that kind of measure. It is not how many dollars did we 
spend on women-owned businesses compared to what percentage of 
the companies in the field are women-owned businesses.
    So I would--as I said, I am not an expert in the area, but 
I would really urge you to get another look at that. It is not 
the way that most disparity studies are done, and it definitely 
bears further scrutiny from you. Thank you very much.
    Chairwoman Velazquez. Thank you, Ms. Brown.
    [The prepared statement of Ms. Brown may be found in the 
Appendix on page 100.]

    Chairwoman Velazquez. I would like to address my first 
questions to you.
    Would you say, Ms. Brown, that this regulation is more in 
accordance with strict scrutiny or intermediate scrutiny?
    Ms. Brown. I would say it is an unrecognizable standard. 
Contrary to Ms. Papez's testimony this morning, there is no 
case in the country that has held that an individual Federal 
agency administering a government-wide program has to make 
findings of its own to begin with, much less an admission that 
it has discriminated in the past. So whether you are talking 
about a race-based affirmative action program or a gender-based 
affirmative action program, that just comes out of nowhere.
    Chairwoman Velazquez. Basically, you are stating that the 
representation made by DOJ this morning is incorrect?
    Ms. Brown. Absolutely. It is not recognizable as 
intermediate scrutiny; it is not even recognizable as strict 
scrutiny.
    Chairwoman Velazquez. Had the Supreme Court ruled that 
strict scrutiny should be applied in a situation compatible to 
this?
    Ms. Brown. No. The Supreme Court is very clear that 
heightened scrutiny is the standard for gender-based scrutiny. 
We are a women's rights organization; we like to see government 
measures that differentiate on the basis of gender scrutinized 
very carefully. The Supreme Court has adopted the heightened 
scrutiny standard for that; it has spelled it out in different 
ways, but substantial relation to an important governmental 
objective is the standard, and this program clearly meets that.
    Chairwoman Velazquez. How would you respond to Ms. Papez's 
testimony that the agencies must show past discrimination to 
meet the intermediate standard?
    Ms. Brown. I think Ms. Papez was skating on two lines, with 
all due respect. First of all, when she said that Court 
decisions require the government--and she inserted here the 
agency--to show past discrimination, what she is ignoring and 
what that analysis ignores, not to personalize it, is that 
Congress speaks for the government here.
    Congress has had testimony before it for years about 
discrimination against women-owned businesses, and as I 
mentioned, some of that is detailed in my written testimony. 
Congress made the decision that there is a governmental 
objective here, and that is what would be tested, not an 
individual agency's finding.
    And then she goes beyond that, most of her remarks focused 
on agencies having to show there is discrimination--
discrimination in the industry. Well, that is exactly what the 
disparity study did. That was an important part of--that was an 
important, very useful thing that was built into this statute 
to require a disparity study, so you know that your remedies 
are focused on the industries where you have a proven 
disparity. But she goes even beyond that to say you also need 
an admission of discrimination by the agency. And the Supreme 
Court in the Croson decision itself said, no, you don't.
    Chairwoman Velazquez. Are you familiar with the case cited 
in the regulation, Engineering Contractors Association of South 
Florida v. Metropolitan Dade County?
    Ms. Brown. Yes, I am.
    Chairwoman Velazquez. Do you think that this case justifies 
the SBA's requirement of individual agency determinations of 
discrimination?
    Ms. Brown. Absolutely not. Again, I would say on two 
levels.
    First, let's note that that is a case where a county has an 
affirmative action program for women-owned business 
enterprises. Nothing is the equivalent to the Federal 
Government on the county level--excuse me, the equivalent to 
requiring an agency-by-agency finding would be if the Court had 
said, where is the department of buildings, where is the school 
construction authority, where is the hospital, the health 
department that lets construction dollars?
    The Court never suggested for a moment that each agency of 
that county would have to show discrimination, never for a 
moment. And that is where the Department of Justice analysis 
would lead us. But besides that, the reason that the women-
owned business provision was struck down in that case was that 
the disparity studies didn't show sufficient disparity.
    Well, that is no problem. We are talking about a program 
here that is targeted, that can only be used if you already 
have a disparity finding for the industry. So it wasn't that 
disparity findings were not enough.
    My testimony mentions multiple cases where courts, 
including the Supreme Court, have said disparity is prima facie 
evidence of discrimination. In that case, the disparity study 
showed results all over the place--up, down, all around--and 
the district court said, that doesn't convince me, and the 
court of appeals said, I can't see you are clearly wrong.
    Chairwoman Velazquez. Thank you, Ms. Brown.
    Ms. Rubenstein and Gloss, a lot of testimony and questions 
today have been regarding our concerns with the SBA's approach 
to its proposed rule. The bottom line is, without this program, 
the Women's Procurement Program, women business owners will 
continue to be shut out of government contracts. Less than two 
percent of women entrepreneurs are in construction and only 0.1 
percent are in manufacturing, both of which are represented 
today.
    Aside from implementing this program, how can we increase 
the representation of women in your industry, if you can offer 
any guidance?
    Ms. Gloss. I would say an active role needs to be taken by 
the Small Business Administration to genuinely educate and 
encourage women business owners.
    I have been in the roofing industry myself for 32 years and 
have experienced nothing but a negative approach or 
discouragement. Unless I was undercapitalized and couldn't 
essentially afford to run my business--high litigation business 
takes a large dollar amount to be able to cure a problem, and 
they were not willing to help in any instance in any way unless 
I was an 8(a) contractor. Women-owned business, they said, 
means nothing to them because it doesn't provide statistics, 
and without statistics they aren't willing to put dollars 
behind it. That was all strictly at the local level.
    Chairwoman Velazquez. Ms. Rubenstein.
    Ms. Rubenstein. From manufacturing there are very few of 
us, and in aerospace probably a lot fewer. It might be good to 
reach out to the trade associations, though. There are so many 
associations for manufacturing.
    I am very active in the National Tooling and Machining 
Association; there are some women-owned businesses there. So 
going that way may help you identify those of us that are 
there.
    That is the best I can say.
    Chairwoman Velazquez. Ms. Farris, the SBA regulation lists 
only four industries where women are considered sufficiently 
underrepresented. Do you think that adding more industries to 
that list, consistent with the RAND study's finding, would make 
the program constitutionally questionable?
    Ms. Farris. Let me be sure I understand that question. In 
other words, if the SBA enlarges the four groups, including the 
women cabinetmakers--
    Chairwoman Velazquez. Correct.
    Ms. Farris. Would the program be vulnerable to a legal 
challenge?
    Chairwoman Velazquez. Uh-huh.
    Ms. Farris. No. As a matter of fact, my concern is that if 
the rule is implemented as currently written, the program will 
be subject to a legal challenge on several bases. Number one, 
when I say it creates a new standard, I am very serious about 
this, there are currently three constitutional standards--
rationale basis, intermediate scrutiny and strict scrutiny.
    There was a very good 1995 internal memorandum from the 
Department of Justice right after the Adarand decision came out 
that identified exactly what level of evidence is required 
before you implement these types of programs under a strict 
scrutiny standard.
    I want to point out to the committee there was some very 
good language in that internal memorandum. Under a strict 
scrutiny standard of review, it says, number one, you don't 
delay the program until you do all these disparity studies, you 
only show that there is substantial evidence to make a prima 
facie case of the need of the program.
    Number two, it says, what level of evidence is required; 
and it uses the language, Not that level of evidence that rises 
to paradise; the SBA had basically suggested a rule that goes 
beyond paradise and lands at the foot of God.
    The third point in that internal memorandum, which I think 
is very, very good, is that it indicates that; and I think I 
know where Ms. Papez was coming from when she saying you have 
to do an agency-by-agency study. Croson was passed in 1989 and 
dealt with local remedial programs under strict scrutiny.
    Adarand was passed in 1995 in a series of cases that took 
that standard and applied it to the Federal Government. After 
Adarand came out in 1995, there was a flurry of internal 
governmental memorandums to the agency saying, What do we do 
now; how does this impact our program. The memorandum was 
saying, Let's buttress our facts by taking a look at our 
internal practices.
    The big distinction is that all those remedial programs 
were already in place. You already had a WBE program basically 
working; you had an 8(a) program working.
    In this instance, the women-owned set-aside is not in place 
yet; and so applying this strict scrutiny-plus standard which 
states you have got to have a disparity study, you have to have 
a study of the disparity study and then you have to have an 
agency study of the disparity study that studied the disparity 
study. That is where it goes into this new strict, strict 
scrutiny standard.
    I think it is a slippery slope for the SBA and also a 
concern to all of the minority programs that are in existence, 
because it is suggesting a new standard that essentially means 
no program will ever by implemented because the studies will 
never be completed.
    Chairwoman Velazquez. Ms. Brown, do you believe that the 
program will be constitutional even if additional industries 
were added?
    Ms. Brown. Well, you do need evidence that the--not need, 
but I think it is useful to have evidence that the particular 
industries are underrepresented in Federal contracting. But the 
RAND study produces, as you have discussed, four different ways 
to look at that question, and some of them have as many as 87 
percent of industries underrepresented.
    So, no, I don't think it would be subject to constitutional 
scrutiny--or overturned, rather--simply because there were 
additional industries identified through a different 
methodology.
    Chairwoman Velazquez. Thank you, Ms. Brown.
    I now recognize the ranking member, Mr. Chabot.
    Mr. Chabot. Thank you, Madam Chair.
    Ms. Dorfman, I will begin with you, if I can.
    Without revealing any potential attorney/client 
communications, is the U.S. Women's Chamber of Commerce 
planning on taking any further action in the federal court 
case?
    Ms. Dorfman. We do have a status hearing coming up on 
January 28th. It is my hope here today to once again ask you 
all to take a look at what you can do to compel the SBA to do 
its job to implement the program. Certainly, passing H.R. 1873, 
which has the language that is needed to get a program in place 
for women-owned firms is a great start, and we are working with 
the Senate side to try and help them to make sure to get that 
through. But that may take some time, and I am curious if there 
is not something that Congress can do that deals with agencies 
that are, in fact, breaking the laws that they had passed and 
intended for implementation.
    So I am passing it back to you to see if there is something 
here that we can take further to compel the SBA to implement 
this program as intended by Congress when it was originally 
passed.
    Mr. Chabot. Thank you.
    Ms. Gloss, I will move to you next, if I can.
    Do you know approximately how many women-owned roofing 
firms there are in the Denver area, and how does the SBA 
discourage contracting officers from buying from women-owned 
small businesses--if you know, if you have heard?
    Ms. Gloss. I am aware of five women roofing contractors, 
and they are all members of the National Roofing Contractor 
Association, so I am familiar with them.
    In cases where I have been working with, since I have been 
in the industry for 30-plus years, I have gotten to know 
contracting officers throughout the Federal Government before 
many of the set-aside programs were even in place. We have done 
business successfully with them. They solicited bids from us 
actively. We have actively solicited work with the Federal 
Government; we enjoy them as a good buyer of ours.
    Over the past five to six years, contracting officers have 
come to me and talked to me about, How can we better buy from 
you, how are they going to be able to continue to do business 
with us when the SBA pressure is so high to go to one of the 
other government set-aside programs.
    They say there is active discouragement from doing business 
with a women-owned firm versus doing business with an already 
set aside formal program; and I have lost, I would say, about 
$2 million a year in bids set aside to just one of those 
programs.
    Roofing is an easy thing for people to feel it doesn't take 
much talent to do. It is easy to shove it off onto someone who 
doesn't have much experience, and that is exactly what the 
contracting officers that I have dealt with in the past have 
said. The pressure is so high from SBA to go with one of the 
other set-aside programs that they have no dollars left to come 
and purchase.
    Mr. Chabot. Thank you.
    Ms. Rubenstein, what other steps, other than the 
implementation of the Women's Procurement Program, could the 
SBA, in your opinion, or other Federal agencies take to 
increase participation by women in Federal Government 
procurement programs?
    Ms. Rubenstein. I am really only familiar with my industry, 
and as I said, there are very few women in the industry. I 
think, for me, the best thing that Congress can do is implement 
the law as you originally intended it and that would help me 
and my employees tremendously.
    Mr. Chabot. Thank you.
    Any of the others who would like to take--
    Ms. Farris. Yes. Thank you. I do a lot of work with 
minority and women-owned businesses, and I have a couple of 
thoughts on that.
    First of all, I think it is critically important that this 
committee acknowledge that Federal contracts use a unique type 
of delivery system called "indefinite delivery, indefinite 
quantity" contracts; these are large, long-term contracts that 
typically have thousands of line items within them that might 
include parts, might include roofing, might include labor 
services, et cetera. You bid it on a fair market value times a 
markup or a discount. And so there are many, many small 
businesses out there that don't understand these IDIQ contracts 
or even how to bid them.
    My experience with the SBA has been that it is more of a 
"come to us," instead of "let us come to you and actively 
recruit." There should be active regional and local programs 
that are designed specifically to look at the local 
availability.
    Every major city in the United States has done its own 
internal disparity study that identifies minority and women-
owned businesses within that city. There should be detailed 
training of the difference between a standard contract and an 
IDIQ contract. And I hate to admit my own stupidity, but I am a 
lawyer that specializes in this area; when I went through the 
CCR registration process, I had to stop and start over three or 
four different times because I wasn't quite understanding what 
they were looking for.
    The NAICS classifications are extremely difficult to be 
able to take your company and get it to fit in this little 
hole. For instance, I am a law firm, but I also do education, I 
also do training. There are three or four different NAICS codes 
that I can register under.
    So all of these things are things that potentially are 
barriers to women within Federal contracting, and I think the 
fact that there are only 55,000 women currently registered in 
the CCR should be of significant concern to the SBA and should 
be addressed immediately.
    Mr. Chabot. Thank you very much.
    Ms. Dorfman. May I answer as well?
    Mr. Chabot. Sure.
    Ms. Dorfman. Thank you.
    First of all, when we met with the U.S. Women's Chamber of 
Commerce we met with all the agency heads, and we said, How can 
we help you improve your goals for women-owned firms; you are 
not meeting them. They said, You have to get this law 
implemented. There is--the other set-aside programs that--there 
is an order they have to go through when we are at the very 
end, but they usually have to fulfill that. That means that 
women-owned firms are left to have to compete in full and open 
with the larger corporations. So we don't have that access.
    When you get into the different programs that you were 
talking about, there are the procurement technical assistance 
centers out there to assist small businesses in contract 
accessing, that kind of information. But what we see the SBA's 
whole focus should be on is implementing this program, not 
worrying about whether it will pass the court's scrutiny, 
because that is not their role. Their role is to get this 
implemented, let the court do their job and help women to 
access these contracts.
    We have hundreds, if not thousands, of women-owned firms 
who are not registered in CCR right now. Why not? Because this 
program has not been implemented; it has been a waste of time 
for them to do so. So you will not see more registrants in CCR 
until we get this program moving forward.
    Mr. Chabot. Thank you.
    Ms. Brown, I only have time for one more question. Do you 
want to take your shot at that one or do you want me to ask you 
an entirely different question?
    Ms. Brown. Ask me what you would like.
    Mr. Chabot. We will give you a different question. What 
data would you suggest that the SBA needs to examine to 
determine underrepresentation of women-owned small bushiness in 
the Federal contracting arena?
    Ms. Brown. The data of an underutilization study--
    Chairwoman Velazquez. Would you please get the mike?
    Ms. Brown. Sure. I am neither an economist nor a 
statistician. As a lawyer, I can tell you that with 
underutilization studies, one court after the next has said 
this is excellent evidence of discrimination. So the repeated 
refrain earlier today from Ms. Papez, that you need that plus 
something else, is just not supported in the cases no matter 
how many times she asserted that it was.
    The thing about the underutilization analysis - the point I 
was making earlier about the dollar value measures as done by 
RAND, they basically accept that small businesses are going to 
get very, very small portions of Federal contract dollars. And 
as long as--and since the whole--the problem with relying on 
that, it is a measure of underutilization, but the problem with 
relying on that is, it kind of freezes the status quo in place.
    Much of the impetus for having special efforts made to 
invite small businesses, minority-owned, women-owned or just 
small businesses period into the contracting realm is based on 
the idea that that will help them grow, that they remain small 
because they have been shut out; and by coming in, they will be 
able to realize their economic potential. So a measure that 
kind of captures and reinforces the status quo, as far as their 
size in relation to their industry as a whole, is not going to 
help you make any progress on getting them to grow, which I 
think is the whole idea of these programs in the first place. 
And that is why I hope the committee can get some additional 
expertise on that point.
    I looked at--I think it is mentioned in my written 
testimony--there was a meta-analysis of maybe 60 disparity 
studies, it was undertaken by the Urban Institute under a 
contract with the Department of Justice, that is referenced in 
my testimony. And the normal disparity study as it was 
described there--they were looking at ones with different 
methods, too, but it was taking, not the number of contracts 
and the number of firms--I can see why that is no good; you can 
have a million tiny contracts that would look like disparity, 
but mean nothing economically for the businesses. But it was 
the percent of spending on that category of business compared 
to the number of those businesses in their industry. And I 
think that is a measure that many courts and statisticians and 
economists have been satisfied with for years. It would look to 
me like RAND could rerun the numbers it has already collected 
under that analysis and see what the result was.
    Mr. Chabot. Thank you very much. I yield back my time.
    Chairwoman Velazquez. Ms. Clarke.
    Ms. Clarke. This question is for Ms. Dorfman. It sort of is 
a follow-up to the question that our ranking member raised. I 
want to say that after being in Congress for one year, I too an 
outraged and frustrated by the blatant disregard of the SBA for 
the law mandated by our colleagues in 2000.
    Can you provide this committee today with any recent 
factual or legal background as to your association's next 
steps? And are you planning another lawsuit against the SBA? 
And if so, what would be the nature of your action?
    Ms. Dorfman. This, as you know, is the number one issue 
that we are working on and we will do whatever it takes to get 
this law implemented as originally intended by Congress.
    At this point, we do have the status hearing set for 
January 28th. We are here today again to ask, Please help us to 
compel the SBA to implement the program, as it was originally 
intended. The fact that we have got the law that was put in a 
very narrow scope, which is in total disregard of the NAS 
study, it just shows that the SBA is again dragging its feet; 
and it is time to hold them accountable. And there certainly 
should be some remedy for Congress to be able to address an 
agency that is clearly breaking the law.
    We need to move forward to the next step, whatever it 
takes.
    Ms. Clarke. Let me just say to all of you, thank you so 
much for coming and for testifying and for making it real, 
particularly from a legal perspective, from a practical 
application. I am just astounded, as our chairwoman has been, 
that again it has been seven years. And I raise that--I keep 
saying seven years, and I think we all do; but for me, being a 
freshman, who realizes that at the end of this year, we are 
entering into a whole new administration, it just indicates to 
us that this administration has done nothing, nothing, to 
advance, you know, the ability for women-owned businesses to 
participate in billions of dollars that are being spent 
annually by our Nation, dollars that, quite frankly, you all 
contribute to, right, as women in our economy.
    And so I am standing very close to our chairwoman, who I 
know is going to pursue this, but quite frankly, I just don't 
see it happening under this administration. If they have done 
this for seven years and they have not been able to close the 
deal with the American people, and women in particular, to make 
sure that they are equal participants in our economy and the 
things that we do, I don't hold out a whole lot of hope that it 
is going to happen before this administration leaves.
    Having said that, I yield back the rest of my time, Madam 
Chair.
    Chairwoman Velazquez. Thank you, Ms. Clarke.
    Mr. Gonzalez.
    Mr. Gonzalez. Thank you very much, Madam Chairwoman. I 
think my colleague, Congressman Gohmert, indicated he had been 
a judge; and I also had the great privilege of being a judge. 
After listening to the testimony by Ms. Elizabeth Papez and 
listening to the testimony of Ms. Brown and Ms. Farris, then I 
understand the need for judges.
    But it really is interesting, because the basic 
proposition, the different hurdles that have to be overcome 
just to give this particular program, which has been legislated 
by Congress, and I think Ms. Brown points out--we see that 
there is a problem, we would like to see it addressed; we pass 
the ball off to the appropriate agency in our department, and 
then hopefully they will follow through. I do not think that 
has been the case.
    But I do not believe that Ms. Papez came here today to 
misrepresent anything to this committee in bad faith. She could 
be wrong. In her opinion, it is not an open, legal question, 
yet her interpretation of the same cases is 180 degrees from 
that which we have heard from this particular panel of the two 
attorneys Ms. Brown and Ms. Farris.
    In her written testimony, Ms. Papez states the Justice 
Department's position on gender-based set-aside programs 
reflects these cases, and the simple lesson they offer Federal 
entities considering such programs, if those entities which 
must establish and administer gender-based set-asides in a 
constitutional manner wish to maximize the chances that a 
particular program will survive constitutional scrutiny, it is 
both legally appropriate and legally prudent to require 
evidence of discrimination before implementing the program.
    Now, I think the chairwoman specifically asked that 
question. I am not sure that Ms. Papez really looked at her own 
written testimony, because she didn't basically just stand by 
those couple of sentences. But let's just say it is an open, 
legal question, let's just say it is out there and there is a 
prudent judge somewhere out there who is going to rule on this 
and try to give meaning to the legislative intent of Congress 
which--if you recall, that is one of those guiding principles 
in separation of the three branches of government and the 
duties of each and every one of them.
    The problem that I see, to be real honest with you--and 
those that are here from SBA and from DOJ, I don't mind you 
going back and telling people. My problem is, the argument 
advanced by Ms. Brown and Ms. Farris, to the objective 
observer, would be the argument that would support and promote 
the program.
    The argument advanced today by DOJ and the representative, 
Elizabeth Papez, you would expect to hear from the opponent. No 
one has to do work for the government on this one, it is over, 
its over, because the position they have taken defeats it, that 
is my problem. That has been my problem with many 
representatives from different departments and agencies. I 
mean, from the get-go, we are not going anywhere.
    All I am saying to the agencies, to the Department, to DOJ, 
we are not asking you to misconstrue or lie to a court, but if 
I had Ms. Brown and Ms. Farris that can knowledgeably look at 
the same cases and come to this other conclusion, why can't you 
advance the same legal argument to promote that which we are 
trying to accomplish as Members of Congress. That is the real 
question after all this is said and done today, but it doesn't 
look like we are going to get anywhere.
    I am not sure what we do. We have a new Attorney General 
who knows, all sorts of things could happen in the coming 
months. It really is frustrating. That is a speech and that is 
a statement, but when it is all said and done, it really is, 
who is your advocate? This is the government attorney, this is 
the government attorney that is giving advice and guidance to 
agencies.
    Now, let's just say you start off with the RAND information 
and all of us up here know all about statistics and studies and 
such and we can do all sorts of things with them. They have 
already placed a huge hurdle. I am not sure if Ms. Gloss's 
enterprise is going to come under those enterprises' product 
services where there is an easily identified disparity. I think 
Ms. Rubenstein might, maybe not, we don't know.
    But a lot of people, the majority, the huge majority of 
women-owned businesses are not going to fall under certain 
categories. That is number one. We are going to have to deal 
with that; I don't know what we do about it. Let's see if the 
comment period is extended; let's see if we get some good 
information out there, and people will listen.
    When we get into the legal framework, I don't see that 
there is one change in giving direction on how they are going 
to meet what DOJ believes are the legal standards, and that is 
going to be past discrimination.
    My question goes back to what Ms. Brown says. I have never 
see a government official, civil servant--actually, I have 
never seen it in the civilian society either--someone come up 
and say, Oh, yeah, our practices are discriminatory, oh, yeah. 
Because you know why? There are consequences to that. Why would 
you expose yourself to that? Confession is fine in a 
confessional.
    This is just beyond belief.
    What I want to know, let's just say we do have good-faith 
introspection by agencies and departments, and someone says, 
you know what, that appears to be discriminatory, it might be 
found to be discriminatory so we are changing it; as of right 
now, right now, we are not going to do that anymore.
    Would that cure it? Because it is past discrimination, are 
we talking about ongoing discrimination? I am just trying to 
figure out all sorts of ways to frustrate this whole program. 
We are going to come against--I am just saying, What are we 
talking about--past discrimination, present discrimination, 
ongoing discrimination? What is it that we are talking about?
    Either Ms. Brown or Ms. Farris or both.
    Ms. Brown. Should I start?
    Ms. Farris. Go ahead.
    Ms. Brown. Well, we could look at what DOJ or SBA in 
response to DOJ has said, and I think it would be saying that 
the agency has to find that it has a history of discrimination.
    But I want to address this one point. The Adarand decision 
was the Supreme Court decision that, for the first time, said 
Federal affirmative action programs also must meet the strict 
scrutiny standard if they are using race-conscious measures, by 
implication intermediate scrutiny if they are using gender-
conscious measures.
    Now, the Adarand decision--Adarand went back on remand to 
the 10th Circuit Court of Appeals, and the 10th Circuit Court 
of Appeals examined the record of discrimination. They didn't 
examine the Department of Transportation's record of 
discrimination and that is the department of the Federal 
Government that was carrying out the program.
    They examined what Congress had before it, how did Congress 
come to the conclusion that this race-conscious program was 
necessary to redress discrimination. And again, I just have to 
emphasize, there is no court that has said that the government 
can act only to redress its own discriminatory actions. It has 
said time and again that participating in existing 
discriminatory practices is enough, and in the gender context 
it has said over and over again that societal discrimination is 
enough.
    So both--I do not believe, with all due respect, that there 
is a good-faith basis in the cases for requiring an agency-by-
agency examination of discrimination, nor do I think there is a 
good-faith basis for requiring an agency determination that it 
itself has discriminated in order to implement a 
congressionally enacted program.
    Mr. Gonzalez. Thank you, Ms. Farris.
    Ms. Brown. One other note. If you examine, as I did, the 
testimony submitted for the Department of Justice by Ms. Papez, 
you will not find cases cited to support those propositions; 
and that is a very glaring omission when you are talking about 
a lawyer's testimony.
    Mr. Gonzalez. Ms. Farris.
    Ms. Farris. Thank you, I want to be sure your question 
again is, do the programs require remediation of past 
discrimination or are they more forward looking. And the case 
law again--I want to clarify. When I refer to "case law," I am 
referring to the top law of the law of the land, U.S. Supreme 
Court decisions.
    The case law indicates that the programs are remedial in 
nature; they are designed to remedy past discrimination, but 
they are also forward looking because it defines discrimination 
as those patterns and practices which have created barriers to 
a certain class of people that don't exist for other classes of 
people.
    So, in answer to your question, the programs are both 
backward and forward looking.
    I also wanted to pick up on a point that you made that I 
think is very important, and that is that there is a 
fundamental lack of logic to the SBA's entire argument. That 
argument is that they have to do all of these studies to be 
sure that they have enough justification to withstand a legal 
challenge.
    Well, we are missing the fact that there will never be a 
legal challenge because there is no darn program in place to 
challenge and never will be.
    So, you know, I feel like sometimes we are out there doing 
battle with smoke and mirrors, when it is not complicated.
    Member Gonzalez, you correctly pointed out there is not a 
single Supreme Court decision identifying intermediate scrutiny 
that has the words "disparity study" and "narrowly tailored" in 
it; it is a different standard. The only case law, the only 
case in the entire universe of case law out there that the DOJ 
is building their argument on is one decision that even within 
the decision talks about you being able to use societal 
discrimination as proof.
    In my mind, there is no reason that the SBA cannot 
immediately implement this program.
    I want to address one other question and that was, do we 
have to do another disparity study? No. The proof has already 
been made through the disparity between the number of women-
owned businesses and the ones that are currently competing in 
the CCR.
    But even taking it a step farther, if you want a disparity 
study, you have one with the RAND Corporation. Now, is it 
perfect? No. But you all look at statistics all the time and 
have you ever seen a perfect statistical study?
    What the study did was, it identified in a very forthcoming 
manner the flaws within its own study. It said, here are the 
four methodologies we were given; you have one that is way out 
there, and you have one that is way out here and you have two 
that are in the middle.
    I am not a statistician either, but I do remember a course 
that I took, and isn't there a concept that you throw out the 
top and you throw out the bottom and you look at what is left 
to be somewhat average or representative?
    There really--again going to what Ms. Dorfman said, there 
is no administrative or legal justification for failure to 
immediately implement this program at a five percent level.
    Mr. Gonzalez. Thank you very much. I yield back. Thank you 
for your patience.
    Chairwoman Velazquez. Ms. Brown, if strict scrutiny is 
applied to gender-based programs like this one, what will that 
mean for the 8(a) and other SBA business development programs?
    Ms. Brown. I would have to say I don't know the 8(a) 
programs, so I can't answer that question.
    Ms. Farris. I would like to answer that.
    It should be a matter of extreme concern to any members of 
a minority or ethnic-based group, because what it is basically 
doing again is, it is creating a strict scrutiny-plus standard 
that, if it is applying to gender-based programs, its only a 
matter of time. The writing is on the wall that it will trickle 
down not only to every program within the Federal, but also to 
every program at the State, county and local level. Extremely 
concerning.
    Chairwoman Velazquez. Thank you. And as you can see, there 
is so much concern about the proposed rule. Based on the 
testimony provided here by all the witnesses, I just can't help 
myself but to conclude that the proposed rule goes far beyond 
congressional intent. And it is my intent to submit comments on 
the proposed rule to the SBA, and basically stating the fact 
that what I feel they are doing, the bottom line regarding the 
proposed rule, is to destroy the program, just to make it so 
difficult that it will never be implemented.
    And if we are going to apply past discrimination, I just 
would like to find the one agency, including SBA, that will 
come out and say, yes, in the past we have committed 
discrimination against women business owners.
    Given all these facts and the testimony presented today by 
both SBA and the Department of Justice and the fine second 
panel of witnesses that we have with us this afternoon, I would 
strongly suggest to the Small Business Administration that they 
must scrap the proposed rule and go back to the drawing board.
    With that, I ask unanimous consent that members will have 
five days to submit a statement and supporting materials for 
the record. Without objection, so ordered.
    Chairwoman Velazquez. This hearing is now adjourned.
    [Whereupon, at 1:51 p.m., the committee was adjourned.]

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