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





                        SUBCOMMITTEE HEARING ON
                       ENSURING SMALL BUSINESSES
                          HAVE FAIR ACCESS TO
                           FEDERAL CONTRACTS

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

               SUBCOMMITTEE ON CONTRACTING AND TECHNOLOGY
                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 16, 2008

                               __________

                          Serial Number 110-84

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

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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                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
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

                                 ______

               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)




                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Braley, Hon. Bruce...............................................     1
Davis, Hon. David................................................     2

                               WITNESSES

Ott, Mrs. Fay E., Associate Administrator, Office Of Government 
  Contracting & Business Development (ADA GCBD, U.S. Small 
  Business Administration........................................     4
Dorfman, Ms. Margot, CEO, U.S. Women's Chamber of Commerce.......     6
Bates, Mr. Chris, President, National Office Products Association     7
Day, Dr. Charles F., Senior Member, Charles F. Day & Associates 
  LLC, Davenport, IA.............................................     9
Wilcox, Ms. Aundrea, Executive Director, Kingsport Office of 
  Small Business Development & Entrepreneurship (KOSBE), 
  Kingsport, TN..................................................    11

                                APPENDIX


Prepared Statements:
Braley, Hon. Bruce...............................................    23
Davis, Hon. David................................................    25
Ott, Mrs. Fay E., Associate Administrator, Office Of Government 
  Contracting & Business Development (ADA GCBD, U.S. Small 
  Business Administration........................................    26
Dorfman, Ms. Margot, CEO, U.S. Women's Chamber of Commerce.......    30
Bates, Mr. Chris, President, National Office Products Association    36
Day, Dr. Charles F., Senior Member, Charles F. Day & Associates 
  LLC, Davenport, IA.............................................    47
Wilcox, Ms. Aundrea, Executive Director, Kingsport Office of 
  Small Business Development & Entrepreneurship (KOSBE), 
  Kingsport, TN..................................................    55

                                 (iii)



 
                    SUBCOMMITTEE HEARING ON ENSURING
                   SMALL BUSINESSES HAVE FAIR ACCESS
                          TO FEDERAL CONTRACTS

                              ----------                              


                       Wednesday, April 16, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:00 p.m., in Room 
1539, Longworth House Office Building, Hon. Bruce Braley 
[chairman of the Subcommittee] presiding.
    Present: Representatives Braley, Davis, and Akin.

              OPENING STATEMENT OF CHAIRMAN BRALEY

    Chairman Braley. I call this Subcommittee hearing on small 
business contracting to order.
    Today we will examine whether small businesses are given a 
real opportunity to access the Federal marketplace. The topic 
comes before us as a time when the U.S. economy is in a sharp 
downturn. The subprime mortgage crisis that began in 2006 was 
one of the worse we have seen since the 1930s, and the GDP data 
for the last quarter of 2007 shows less than 1 percent growth 
in our economy.
    Two weeks ago the U.S. Department of Labor reported that 
unemployment had risen from 4.8 to 5.1 percent, with an 80,000 
job loss shown during the month of March alone. Oil prices 
continue to climb, and the average price of a gallon of gas is 
now $3.33, a record. Meanwhile, credit is drying up, liquidity 
is limited, and businesses are finding it difficult to secure 
affordable capital.
    This picture may sound grim, but there is hope in small 
businesses. Entrepreneurs have always led the way to economic 
recovery and growth. However, the question of whether this 
administration is giving them a fair chance to do it again 
remains.
    While most sectors of our economy are struggling, the 
Federal marketplace, in contrast, continues to grow. Last year 
alone, Federal procurement spending rose by over 9 percent. In 
fact, the Federal Government now spends upwards of $400 billion 
in goods and services, which amounts to more than the GDP of 
many nations.
    Our Government buys everything from thumbtacks and staples 
to navigation components for satellites and turbines for 
submarines. The likelihood of a small business making one of 
these products or providing a needed service to the Federal 
agency that uses them is very high.
    Just as important, small businesses increase the diversity 
and quality of the supply base and stimulate the economy. 
Congress recognized this fact 55 years ago when it passed the 
Small Business Act. That law commit our Federal agencies to 
ensure a fair portion of Government contracts are awarded to 
entrepreneurs.
    But this administration has moved away from those goals. 
Over the past 7 years, it has not met the Government-wide 23 
percent targets for contracting with small businesses at a 
single time. Moreover, contract bundling, which robs small 
firms of the opportunity to compete for Federal projects, is on 
the rise. Within the agency, the situation is worse. 
Contracting systems are being mismanaged, and we are seeing 
many large businesses chosen to tackle projects that 
entrepreneurs could do far more efficiently.
    Last May, the Committee approved H.R. 1873, the Small 
Business Fairness and Contracting Act. I introduced this 
legislation to bring greater transparency to the contracting 
process, because it is obvious a high level of miscoding and 
contract bundling is shutting out small firms.
    In March of last year, the Subcommittee held a hearing on 
the delayed implementation of the Women's Procurement Program. 
At the time, I was less than 3 months into my tenure in my 
Congress, and I was shocked by the utter disregard of the 
administration for the important role women entrepreneurs play 
in our economy. Incredibly, the SBA continues to drag its feet 
on the implementation of this important initiative.
    In January the agency even issued a regulation that was 
completely unworkable. That was just the latest in a series of 
contracting decisions that run clearly counter to the intent of 
the current law.
    America's small businesses are the drivers of innovation 
and growth. That is a fact. They increase quality and help give 
us taxpayers the biggest bang for their buck. Offering these 
businesses a fair chance to compete for Federal contracts is 
the least we can do. I remain committed to ensuring the 
administration lives up to that commitment.
    I want to thank each of the witnesses for sharing their 
time with us today, and I look forward to their testimony.
    And I now yield to my colleague and friend from the State 
of Tennessee, Ranking Member Davis, for his opening statement.

                 OPENING STATEMENT OF MR. DAVIS

    Mr. Davis. Good afternoon. Thank you, Mr. Chairman, for 
holding this hearing on ensuring that small businesses have a 
fair chance at Federal contracts.
    The House Small Businesses Committee, this Subcommittee, 
and our Nation recognize that small business is critical to the 
country's overall economic well-being. The drive, creativity 
and innovation of small businesses are the hallmarks of 
entrepreneurship and the keys to job creation and economic 
growth.
    I would like to extend a special thanks to each of our 
witnesses who have taken time to provide the Subcommittee with 
their testimony. I would especially like to welcome my fellow 
Tennesseean, Ms. Aundrea Wilcox, executive director of the 
Kingsport Office of Small Business Development and 
Entrepreneurship of the Kingsport Area Chamber of Commerce, 
also known as KOSBE. She is responsible for advising startups 
and existing small businesses.
    Welcome to the Small Business Subcommittee on 
Investigations and Oversight, Ms. Wilcox, and I am sure that we 
will find your testimony extremely helpful.
    The SBA Act was signed into law in 1953, creating the Small 
Business Administration. The Act recognizes that competition is 
the essence of the American economic system of private 
enterprise. The preservation and expansion of such competition 
is vital, not only to the economic well-being but the security 
of our Nation. Such security well-being cannot be realized 
unless the actual and potential capacity of small businesses is 
encouraged and developed.
    Congress has amended the Act or authorized a number of 
programs such to ensure small business concerns receive their 
fair proportion of contracts for property and services. These 
programs are controlled and managed by the Small Business 
Administration. As a result of these initiatives, small 
businesses produce 13 to 14 times more patents per year per 
employer than large firms. Small businesses participate in all 
major industries and represent 99.7 percent of all employers 
and 50 percent of all private-sector workers. In addition, 
small businesses employ 39 percent of high-tech workers such as 
scientists, engineers and computer workers.
    For President Bush and many Americans, small business 
embodies so much of what America is about: self-reliance, hard 
work, innovation, the courage to take risks for future growth. 
The President states that these values have served the Nation 
well since its very beginning. They are values that are passed 
on from generation to generation. We must ensure that all small 
businesses continue to thrive and prosper, not for their own 
sakes for but for all of our benefit as well.
    The SBA has overall done a good job implementing the 
congressional direction of the Small Business Act and 
specifically the contracting programs. The SBA, as this 
Committee does, should continue to assess the effectiveness of 
existing Federal contracting programs, recommending changes for 
improvement. They should also review the synergies that would 
benefit all small businesses. This course of action would 
reduce or eliminate infighting among the small businesses in 
the community involved by competing Federal contracting 
programs.
    We have excellent witnesses here today to provide us with 
the insight into how well the congressional directions to 
assist small businesses in the procurement process and 
increasing opportunities to do business with the Federal 
Government are working. I look forward to their testimony.
    Thank you again, Mr. Chairman. And I yield back the balance 
of my time.
    Chairman Braley. That obnoxious noise you heard is a call 
to the floor for votes. And, unfortunately, neither Mr. Davis 
nor I can control the floor schedule. So I have to apologize to 
the witnesses. We are going to ask to indulge your patience a 
little bit longer. And I will give you my commitment--I am sure 
Mr. Davis will as well--to get back here as soon as we can 
after the votes are concluded. It is a series of four votes. 
And then we will look forward to your testimony at that time. 
In the meantime, staff will be available to answer any 
questions you might have.
    And, with that, we stand in recess.
    [Recess.]

    Chairman Braley. The hearing is called back to order. I 
would like to welcome everyone back.
    The first witness is Ms. Fay E. Ott. She is the Associate 
Administrator of the Office of Government Contracting and 
Business Development at the Small Business Administration. And 
in that capacity, she is responsible for overseeing 
implementation of agency initiatives within the Office of GCBD, 
including the 8(a) Business Development Program, the Women's 
Procurement Program, and HUBZone Empowerment Contracting 
Program. She is also responsible for managing agency efforts to 
determine if small business contracts are awarded to businesses 
that meet the appropriate size standards. Prior to becoming the 
Associate Administrator, Mrs. Ott served as a senior manager at 
the SBA.
    Welcome. And we look forward to your testimony.



 STATEMENT OF MRS. FAY OTT, ASSOCIATE ADMINISTRATOR, OFFICE OF 
  GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL 
                    BUSINESS ADMINISTRATION

    Mrs. Ott. Chairman Braley, Ranking Member Davis and members 
of the Committee, I thank you for the chance to testify today. 
My name is Fay Ott, and I am the SBA Associate Administrator 
for Government Contracting and Business Development. On behalf 
of Administrator Preston, I welcome the chance to discuss 
increased access for small business.
    SBA has made strides to improve small business access to 
Federal contracts. From fiscal years 2000 to 2006, prime 
contracting dollars going to small business have grown 54 
percent, from $50 billion to $77 billion. During that time, 
subcontracting dollars increased 71 percent, from $35.5 billion 
to $60.7 billion.
    In terms of small business jobs, this increase in prime 
contracting translates into more than 571,000. Among some 
contractors, we estimate that more than 450,000 jobs were 
created or retained. This is real progress.
    Looking forward, SBA recognizes the need to improve small 
business contracting programs. We have worked to provide data 
that more accurately measures agency results, and we continue 
to improve SBA's scorecard measuring progress toward small 
business goals.
    We addressed the long-standing problem of the size standard 
recertification through regulations that will focus the efforts 
of agencies on providing contracts to small businesses. 
Finally, we are ensuring greater access to Federal contracting 
opportunities by adding to and providing better direction for 
the personnel who work directly with small businesses.
    Currently, there are 66 procurement center representatives. 
I know that the Committee realizes the important role that PCRs 
play, and SBA is committed to supporting this work. PCRs are an 
integral part of our plan to address access to contracting 
opportunities and issues such as contract bundling. SBA's 
fiscal year 2009 budget request is based on 66 PCRs, and this 
number includes the recent hires that Administrator Preston 
discussed during his testimony before this Committee.
    Along with more PCRs, SBA is implementing a plan to improve 
the services provided. One of Administrator Preston's 2008 
priorities is to review the duties of the PCRs. This review is 
ongoing, but, once fully implemented, it will allow PCRs to 
focus more intently on this vital work. It will allow SBA and 
our resource partners to focus on getting small businesses the 
training they need to compete for Federal contracts.
    In the 8(a) program, we are streamlining the process for 
annual reviews and certifications and focusing on the skills 
that businesses need to succeed. We have established new 
customer service training for district staff to improve the 
application review and contracting assistance stages.
    In the HUBZone program, eligible firms received $7.1 
billion in prime contracts and $2.6 billion in subcontracts in 
fiscal year 2006. In terms of jobs, the prime contracts 
supported nearly 53,000, while subcontracts provided more than 
19,000. The HUBZone program is directly benefiting historically 
underutilized areas and the small firms located there.
    Today, one of our major objectives for HUBZone is improved 
accountability. The May 2006 Inspector General's audit of the 
program identified needed improvements, and we have taken steps 
to address each of these issues. These plans and actions have 
satisfied the Inspector General in regards to its audit.
    Additionally, in regards to oversight and certification 
issues, we stepped up program examinations. So far in fiscal 
year 2008, we have completed 362 program examinations, 
resulting in 144 positive findings, 183 proposed 
decertifications and 35 decertifications. This process is 
continuing, and we are working for greater accountability in 
the HUBZone program.
    In August 2007, SBA released the Small Business Procurement 
Scorecard. The scorecard measures current performance and the 
progress plans of Federal agencies in providing more small 
business contracts. Based on performance, seven agencies were 
rated green, five yellow, and 12 were red. Since its release, 
the scorecard has provided a real incentive for agencies to 
increase access for small business. We work effectively with 
these agencies, and this new level of accountability is 
increasing access to Federal contracting.
    Chairman Braley and members of the Committee, thank you 
again for the opportunity to testify today. And I am happy to 
answer any questions you I may have.
    [The prepared statement of Mrs. Ott may be found in the 
Appendix on page 26.]

    Chairman Braley. Thank you.
    Our next witness is Margot Dorfman, who is the founder and 
CEO of the U.S. Women's Chamber of Commerce. She is dedicated 
to championing opportunities to increase women's business 
growth, career and leadership advancement. The U.S. Women's 
Chamber of Commerce is a leading national voice advancing 
economic opportunities for women in America. Ms. Dorfman has an 
extensive background in business, business ownership, 
publishing and nonprofit leadership. Her corporate experience 
includes 10 years in executive positions with General Mills and 
other Fortune 500 companies.
    Welcome.

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

    Ms. Dorfman. Thank you very much. Chairman Braley, Ranking 
Member Davis, and members of the Subcommittee on Contracting 
and Technology, I am here today on behalf of the millions of 
American women business owners to make you aware of serious 
issues in reporting of Federal contracting with women-owned 
small businesses.
    Today I will illuminate how the failures of the SBA cause 
false contracting data to be reported and fail to provide this 
Committee and the American people with the true picture of the 
Federal contracting with women-owned firms.
    I begin with a snapshot look at the tremendous growth in 
Federal contracting between 1999 and 2006 versus the incredibly 
small growth in contracting with women-owned firms during the 
same period. While total Federal spending grew by $200 billion 
in 1999 to over $340 billion in 2006, an increase of $140 
billion overall, spending with women-owned firms increased only 
by $5 billion.
    And if this were not bad enough, as we took a closer look, 
we find a very serious issue with the accuracy when reporting 
contract actions with women-owned firms. As contracts are 
awarded, contract actions are recorded in the Federal 
Procurement Data System. This data is used by the SBA to create 
annual goal reports, and that provides us with information on 
Federal purchasing such as total contract actions and total 
dollars spent.
    Using data from the FPDS, one can easily generate a report 
listing the largest contractors to which women-owned small 
business actions have been attributed. In 2006, the top 100 
contractors with actions flagged as women-owned represented 
over $5 billion of the total $11.6 billion that the SBA claims 
was spent with women-owned small businesses. By simply making a 
careful analysis of these top 100 contractors, the SBA could go 
a long way toward assuring the accuracy of their own reporting.
    With just a cursory look through this list of firms, it is 
clear that this list is shockingly full of businesses that are 
either not small or not appropriately designated as women-
owned.
    Suggestion number one: Require the SBA to provide an annual 
report on the top 100 firms with contract actions attributed as 
women-owned businesses.
    As we perused the CCR and Online Representations and 
Certifications Application system, we found that the ability to 
assert women-owned status is far too simple and lacks clarity 
with regard to how one determines women-owned status. ORCA 
simply reiterates the FAR definition of women-owned with no 
further assistance or differentiation that might prevent some 
of the overt misrepresentations that we found in the data.
    Suggestion two: Include more detail in the FAR, in CCR and 
in ORCA regarding the definition of a women-owned business 
concern. Include a simple checklist of attributes that force 
the corporation registering as women-owned to make sure it 
understands the elements of the women-owned definition and 
meets at least the most cursory of requirements.
    And be aware that even when we do finally have a women-
owned small business set-aside program, there may be a 
difference in how a business secures women-owned status for the 
purpose of the set-aside and for the purpose of registering in 
CCR. We must make sure that this loophole is closed in both 
places.
    The NRC recommended that the SBA should produce more useful 
reports on Federal contracting. And we would also like to see 
in our suggestion three that the SBA heed the advice of the NRC 
to provide more thorough analysis of small business 
contracting, to include such characteristics as type and size 
of business, thorough agency breakouts, and contracting and 
regional breakouts.
    Each year, the SBA publishes the total dollars spent and 
the total transactions completed with women-owned firms. 
However, no further analysis is presented. Never does this 
Committee or the American public have the opportunity to 
understand the total number of women-owned small businesses 
receiving contracts, the size of these contracts, the 
geographic disbursement, the number of new firms receiving 
contracts, the dollars flowing through joint ventures, the top 
100 women contractors, or similar data relative to each of the 
major agencies purchasing with women-owned firms.
    I strongly urge you to take action to require deeper 
accountability, transparency and useful reporting from the SBA. 
The information gleaned from these actions will most certainly 
assist in the efforts to assure small businesses have fair 
access to Federal contracts.
    Thank you.
    [The prepared statement of Ms. Dorfman may be found in the 
Appendix on page 30.]

    Chairman Braley. Thank you.
    Our next witness is Mr. Chris Bates, who is the president 
of National Office Products Alliance, known as NOPA. Prior to 
joining this organization, Mr. Bates served as president of the 
Motor and Equipment Manufacturers Association, and he has 
worked as an independent consultant, international economic 
policy advisor with the U.S. Government, and congressional 
legislative assistant, and, most importantly, apparently is a 
native of my district of Bettendorf, Iowa.
    In addition to that, NOPA, which is based in Alexandria, 
Virginia, is the U.S. industry association for office products 
dealers and their key industry partners who are focused on 
continuous improvement to increase profitable business growth.
    Welcome.

   STATEMENT OF MR. CHRIS BATES, PRESIDENT, NATIONAL OFFICE 
                      PRODUCTS ASSOCIATION

    Mr. Bates. Thank you very much, Chairman Braley, Ranking 
Member Davis, Congressman Akin. Thank you very much for the 
opportunity to be here with you today.
    NOPA represents and serves more than 700 independent office 
product dealers throughout the United States, undoubtedly in 
all of your districts. We appreciate the opportunity to talk 
with you today about the need to ensure that small businesses 
have fair and equal access to Federal contracting.
    This Subcommittee and the full Committee have worked very 
hard on this issue, with very significant results, the past 
couple of years. And we are very pleased with that and 
appreciate that support. We thank you all for that.
    And, in particular, we would like to highlight the passage 
of H.R. 1873 and other legislation that I know you have had an 
important role in crafting to try and help the small business 
community. We are working hard to encourage the Senate to pass 
a counterpart to H.R. 1873, if they can't adopt your measure as 
it stands. We are still hopeful that we can get some action 
this year, though, admittedly, it is an uphill battle in an 
election year. But we are trying very hard to get that done.
    In particular, H.R. 1873 establishes a strong foundation 
for needed reforms in the areas of contract bundling, data 
collection, reporting and oversight that we believe will help 
small businesses, and our industry among them. And it is 
particularly relevant that these kind of foundational changes 
be made, because it really does help the community overall.
    That bill also increases the target for Federal purchasing 
from small businesses from 23 to 30 percent and would improve 
Federal agency and congressional oversight to help achieve that 
goal. Having plans in place which are measurable we think will 
have a major bearing on the ability of all Federal agencies to 
make a major step forward.
    We do need additional help, however, to address a very 
serious growing problem that affects our industry, and that is 
the small business fronts or small business pass-through issue. 
This problem would not be resolved directly by H.R. 1873. It 
does have a widespread affect on our industry and perhaps 
others. Small business fronts harm legitimate independent small 
businesses across the country, as well as Government customers 
who are trying to boost their own purchases from them.
    Just what are these small business fronts? In the simplest 
terms, these are situations in which a large national company 
approaches a small business and proposes to create a quote, 
"partnership" relationship for the sole purpose of gaining 
improper access to contracts set aside for small business.
    Let me emphasize that these fronts are not the same thing 
as legitimate small business mentoring program relationships. 
In that case, the small firm plays a commercially useful 
subcontracting role which is definable and adds value.
    The abuses--and I would refer you to appendix 1 of our 
prepared testimony--are highlighted in appendix 1. These 
usually occur when, first, the small business has little or no 
prior experience as a reseller of office products; two, the 
large company performs most or all of the selling, order, 
management, customer service, delivery, invoicing and payments 
processing behind the scenes on behalf of the pass-through 
dealer partner; third, the small business performs few, if any, 
commercially useful functions; and then, finally, the small 
business typically receives a commission for its willingness to 
serve as a front for the larger business.
    The negative impact is fairly obvious. In the case of the 
office supply industry, independent dealers already are losing 
tens of millions of dollars annually as a result of this 
practice just at the Federal level. When you add in public 
institutions, State government contracting and some Fortune 
1000 contracting, we are talking about hundreds of millions of 
dollars as well.
    Government is also harmed as competition declines and 
independent dealers are excluded and the large national chains 
or their small business fronts get the lion's share of the 
awards under false pretenses.
    GSA and a number of Federal agencies are working to help 
legitimate small businesses expand business with them, but 
allowing small business fronts defeats this purpose. And we 
need to have the clear intent of Congress and bills like H.R. 
1873 restated loud and clear. And specific legislation to help 
us with this problem would be helpful.
    What can Congress specifically do to help us with this 
problem? Specifically, we ask that there be stricter bid 
evaluation review criteria; that, two, all bidders on small 
business set-aside contracts fully disclose and certify their 
functional roles that they will play in the contract's 
fulfillment; third, that each Federal agency should be 
reporting annually to Congress, to the relevant Committees, 
about the progress they are making in this area in preventing 
this kind of practice; and then there need to be some 
meaningful penalties to make sure this doesn't happen.
    Again, thank you for the opportunity to be here. This is a 
serious and expanding problem, and I hope you will give your 
full attention to it. Thank you.
    [The prepared statement of Mr. Bates may be found in the 
Appendix on page 36.]

    Chairman Braley. Thank you.
    Our next witness, I am very proud, is also a constituent of 
mine and a founder of Charles F. Day & Associates in Davenport, 
Iowa.
    And it is great to have you here, Dr. Day.
    Mr. Day. Thank you.
    Chairman Braley. His firm is an established provider of 
program management, lifecycle management, logistics and 
business improvement services for the Department of Defense. 
Dr. Day is a Gulf War veteran who retired from active duty in 
1995 and started his firm. He has taught graduate classes in 
strategic management, management development, organizational 
development, and program and project management courses. 
Additionally, he has presented and published nationally and 
internationally on organizational development and 
entrepreneurship topics.
    And we welcome you here to the Committee.

STATEMENT OF MR. CHARLES F. DAY, SENIOR MEMBER, CHARLES F. DAY 
              & ASSOCIATIONS, LLC, DAVENPORT, IOWA

    Mr. Day. Thank you, Chairman Braley and Ranking Member 
Davis, members of the Subcommittee on Technology and 
Contracting. I am Charles Day, the senior member of Charles F. 
Day & Associates, a small HUBZone SDVOB business headquartered 
in Davenport, Iowa. We provide support service primarily to the 
United States Army and Marine Corps.
    I am happy to share my small business views of the 
technology challenges that may not be visible in the business 
environment but may impact entry opportunities. I would also 
like to discuss two core challenges I see in dealing with the 
Department of Defense, namely winning contracts and getting 
paid.
    The emerging technological requirements in the business 
environment are as important as the functions of human resource 
management, operations, finance and accounting, and marketing. 
Our business, like so many others now, is Net-centric, which 
means we are also Net-dependent. Increased Net dependency 
leaves us more vulnerable to threats of hackers, viruses, 
spoofing and similar activities.
    We all recognize that we have to continually update our 
intranet and Internet security measures. However, we are 
completely dependent on two or three security providers, and, 
personally, I am not confident that we are able to keep up with 
the threats. Where new and small businesses really need help is 
in defining the risks and the threats of information security 
and information assurance to the business environment.
    Another challenge is application of quality initiatives to 
the digital environment or how to take action to take action to 
continuously improve quality status in this environment. I 
personally don't know how to keep abreast of quality and 
innovation in this environment. We don't know what best 
practice is or where to find best practice. The cost of 
research is restrictive. I think small businesses need a 
helpful source, such as a small business technology community 
of practice and technology assistance centers.
    In the specifics of working with the Department of Defense, 
the two critical challenges are winning contracts and getting 
paid.
    Brand identity is a critical component to winning contracts 
with the Department of Defense. I think it consists of three 
elements: social capital and networks, status within the 
networks, and past performance. For new companies with no brand 
identity, there is minimal chance of entering the DOD market. 
In my experience, contracting officers generally do not allow 
personal experience to be submitted in lieu of corporate 
experience. Without an individual's past performance being 
permitted, a new company has limited chance of entering into 
the market.
    Now, the GSA schedule should be a good vehicle for 
contracting with the Federal Government. However, a GSA 
schedule award is based on past performance. Further, the GSA 
schedule is not necessarily good for growing small businesses 
because the prices negotiated for award are based on better 
than your current best prices. We are told there are no 
allowances for forward rates to support companies' growth. The 
GSA contracting office also tells us the initial negotiation 
locks you into a rate structure for 10 years. That is not good 
for a small business.
    The second issue is being paid and managing your cash 
flows. In my written testimony, I stated 90 percent of our 
payments were late. I would like to clarify that and say 90 
percent of our invoices, from the time that we created them to 
when they were paid, were late. We have data that shows that 29 
percent, based on DFAS measures, were late. When you look at 
the measure from when it was submitted to the Government and 
were accepted by the Contracting Officer's Representative (COR) 
to when it was paid, 42 percent were late. There is a gap of 
when you create an invoice and when there is action by the COR 
and put into the system that eats anywhere from 1 to 21 days, 
in our experience.
    The net result was that we were not able to execute our 
projected cash flow sources and uses because of the 
fluctuations in the DFAS payment schedule. When we went into 
the electronic system, we eliminated a lot of the variability, 
but most small businesses have not migrated.
    Thank you for your time, and I would be happy to answer any 
questions.
    [The prepared statement of Mr. Day may be found in the 
Appendix on page 47.]

    Chairman Braley. Thank you.
    Our next witness will be introduced by the ranking member, 
but I just want to personally welcome her to the Committee 
hearing, and we look forward to your testimony.
    Mr. Davis. Our next witness will be Ms. Aundrea Wilcox. Ms. 
Wilcox holds a master's degree from Brenau University, located 
in Gainesville, Georgia. Currently, she is executive director 
of the Kingsport Office for Small Businesses Development and 
Entrepreneurship at Kingsport Area Chamber of Commerce in 
Kingsport, Tennessee, also known as KOSBE.
    In her role as business advisor, she helps navigate 
startups and existing businesses through the maze of small 
business ownership and management. She helps small businesses 
with, one, providing technical guidance, finding sources of 
capital, identifying the available State resources, and 
outlining Small Business Administration programs.
    Before coming to her present position, she had more than 15 
years of corporate marketing and sales support experience in 
various industries. Ms. Wilcox is also actively involved in 
community service. At the present time, she is a board member 
of the Holston Business Development Center, a small-business 
incubator, and a board member of the Symphony of the Mountains 
Orchestra.
    Ms. Wilcox, welcome.

STATEMENT OF MS. AUNDREA WILCOX, EXECUTIVE DIRECTOR, KINGSPORT 
   OFFICE OF SMALL BUSINESS DEVELOPMENT AND ENTREPRENEURSHIP 
                 (KOSBE), KINGSPORT, TENNESSEE

    Ms. Wilcox. Thank you. Pleasure to be here. Thanks for 
having me. My name, again, is Aundrea Wilcox. I am the 
executive director at KOSBE in Kingsport. And, as you know, 
Congressman, Kingsport is a different place. And so, what I 
would like to do today is talk about my experience in 
Kingsport, and it may be certainly a different experience for 
others in the same position.
    As was mentioned earlier, we are engaged in helping our 
clients write their business plans, find capital for their 
business, find a location for their business. So the mission of 
KOSBE is to not only help them start up, so it is not just for 
startups, but for also for existing businesses, seasoned 
businesses as well. KOSBE is a partnership between the city of 
Kingsport and the Kingsport Area Chamber of Commerce. And KOSBE 
has actually been around, out there, since 2004. I joined KOSBE 
in 2006, and been having a good time. There is a lot to do.
    So we already know what the statistics are for the 
contracting and small business. So, again, I just want to share 
with you my experience with SBA and also some of the service 
providers that have helped me help my clients with the 
Government contracting.
    In preparation for this visit, I did look at the CCR 
database and found, actually, that there are 95 companies in 
Kingsport, Tennessee, that are registered in the CCR that are 
active. And of those active registrants, 14 of them were 
clients that I have actually dealt with.
    I felt that it was important to look at the different 
certification programs that SBA has in place and just do a 
quick analysis to see what had been done.
    And as far as SBA small disadvantaged business being 
certified, there were none of the 95 that were actually 
certified SBA businesses. Twelve of those were veteran-owned 
businesses in the system. And of those 12, three of them were 
KOSBE clients.
    Many of the clients that had registered in the CCR went a 
bit further than just the step one in the CCR; they had to have 
additional help. And so what I am trying to say here is that 
most small businesses, in my experience, most of the clients 
that I have dealt with find the system a little complicated for 
them, a little complex, and they are easily overwhelmed. But it 
is not a difficult process. I think that the steps are there. 
There is a system in place, and we just need to follow through 
with our clients and get them through the process, because the 
process--there is a system in place.
    Ms. Wilcox. The relationship with SBA is a new 
relationship. We recently, on March 28th, signed a strategic 
alliance with SBA. Our Mayor, Dennis Phillips, Miles Burdine, 
the President and CEO of the Kingsport Chamber of Commerce, 
myself and Clint Smith, who is the district director at SBA, 
did sign a SAM agreement, a strategic alliance, so that we 
could look at ways to collaborate, share information and help 
our clients in a greater way by having the partnership.
    Now the partnership would not have been possible so soon 
without the help from BERO, the State of Tennessee. Ronald Wade 
is the East Tennessee BERO specialist, and he has introduced me 
to a number of folks and made KOSBE's success possible, made it 
possible for us to forge the relationship with SBA and get the 
additional help and resources for our clients.
    He has also introduced me to the lending specialist, Maria 
Lloyd at SBA, TDOT contract administrator, Carol Crawley at 
SBA. They came to Kingsport in 2007 and put on an SBA 
certification workshop, which was very well attended; and we 
did have a lot of participation from the region.
    So it was not just the Kingsport area. This type of 
workshop and this type of help coming to Kingsport was a draw 
for KOSBE. And whenever we do an event with SBA we get that 
type of draw, because there is a need for education on the part 
of the small business and also on my part, on the part of the 
technical service provider. I feel like the more information 
that is made available to us, of course, the better we are able 
to help our clients this is number one.
    Mr. Wade also introduced me to Mr. Paul Middlebrooks, who 
is with the Procurement Technical Assistance Center, and they 
are actually in Chattanooga, and that is a bit far. The Women's 
Business Center is also in Chattanooga, and that's a bit far. 
And, unfortunately, we do not have a SCORE chapter that is 
existing in Kingsport. But, despite all of that, Mr. Wade, 
through introducing me to the various persons that I mentioned 
earlier, made it possible for us to make it happen in Kingsport 
and get our clients the help that they are needing in the 
contracting.
    The biggest area that I feel that SBA could help us and 
continue to concentrate and must work on is just the face to 
face, you know, getting out there, coming out to Kingsport and 
training the customer or the client and also training the 
technical service provider. That has been happening in 
Kingsport.
    As I said earlier, Kingsport is a different place. We have 
had a lot of contact with SBA, and we have been able to work 
with them and help our clients get a step further ahead. What I 
find again in the certification process I think, it is 
overwhelming, although it is on line and it is streamlined and 
supposed to be a little bit easier for them to work with. But 
if they are not aware of the resources that are out there, if I 
am not aware of the resources that are out there, it is going 
to be underutilized. So mainly from SBA, we are just looking at 
some additional training, getting out there, getting face to 
face and just a regular communication, letting us know what 
services and resources are available.
    In Tennessee, again, in Kingsport, I feel the relationship 
with SBA has been positive. There is a lot of information, a 
lot of people still to meet; and, again, I think those things 
are there. We need the help to discover them.
    So I am just asking the Committee to please assure that the 
small businesses will have an equal chance for these contracts, 
and the way to do that is through training and communication 
with the client, as well as the technical service provider such 
as KOSBE, and I hope they keep it up. I am very pleased with 
the relationship, and it is a pleasure to be here today.
    If there are any questions, I will be happy to have them. 
Thank you.
    Chairman Braley. Thank you.
    [The prepared statement of Ms. Wilcox may be found in the 
Appendix on page 55.]

    Chairman Braley. Mrs. Ott, let me begin with you. One of 
the focal points of not just this Subcommittee but also the 
Committee as a whole has been on the implementation of the 
Women's Procurement Program, and I am not going to go back over 
all of the ground we have covered this year on that. But the 
SBA's proposed rule for implementing the Women's Procurement 
Program was issued in December of last year, 7 years after the 
program passed Congress; and the comment period, after being 
extended, was closed on March 31st. Can you tell us when we can 
expect to see the program up and running by the administration?
    Mrs. Ott. Well, we did extend the comment period, and we 
received over 1,600 comments that we are currently going 
through and we are cataloging and analyzing at this point. We 
are happy that we received so many. We extended the deadline so 
that we could get more comments in, and we are going to take 
the time and go through and do that analysis. Once we have 
completed that analysis, we will move forward.
    Chairman Braley. And given the volume of comments that the 
agency received, you consider that to be a reflection of the 
interest in this particular rule? Is it an abnormal amount of 
comments? A typical amount of comments? How would you 
characterize that?
    Mrs. Ott. I think this rule has generated a tremendous 
amount of interest, and we welcome the public's comments, and 
we are looking forward to going through and analyzing the 
comments and moving forward.
    Chairman Braley. Now one of the goals that I have as Chair 
of this contracting Subcommittee is to try to encourage a more 
equitable distribution of contract opportunities outside the 
Beltway, and we have heard a little bit from some of the other 
witnesses about that concern. I know in June the SBA will be 
working with me on a contracting forum in Waterloo--or back in 
my district in Iowa.
    But my question for you is, does the agency have a specific 
program or programs in place to help businesses in those areas 
that normally are not as familiar with contracting 
opportunities in the Federal marketplace as those located in 
and around the metro D.C. area?
    Mrs. Ott. We have a number of initiatives. As I mentioned 
the PCRs in my opening statement, we found that our PCRs were 
spending a lot of time training and counseling small 
businesses. What we tried to do was get the PCRs to focus more 
on the buying activities and to push training and counseling 
out to our district offices as well as our resource partners. 
So we have really broadened the scope of resources available to 
small businesses, and we have given our district offices and 
our resource partners the tools that they need to educate and 
train small businesses.
    We have developed an on-line course. We have developed a 
brochure on how to contract with the Federal Government. As a 
matter of fact, the on-line course, we just went live with it 
in February. Already 5,000 people have taken the on-line course 
on how to contract with the Federal Government. Over 40 percent 
of those that have taken the course--or 45 percent, I believe--
are women that have taken the on-line course; and we have a 
number of initiatives in place to reach out to more small 
businesses and provide them with the opportunity to register in 
CCR and learn about contracting with the Federal Government.
    Chairman Braley. One of my passions is pushing Federal 
agencies to use plain language in communicating with their 
intended audience; and on Monday we passed with an overwhelming 
bipartisan vote, 376 to 1, my Plain Language in Government 
Communications Act that is going to require Federal agencies, 
if passed into law, to use plain language in communicating in 
Federal brochures, documents and other communications.
    Has the SBA done anything to implement plain language 
guidelines as part of its outreach effort? And I ask this 
question because of Ms. Wilcox's comment earlier, which is 
consistent with my perception, is that many small business 
owners are struggling to incorporate a lot of new information 
and sometimes new technologies; and I am interested in what the 
SBA is doing to try to communicate with that intended audience 
in a manner that they can clearly understand and respond to.
    Mrs. Ott. Absolutely. One of the big concerns that we had 
was everybody kept saying that it was so difficult to contract 
with the Federal Government, which is why we came up with the 
on-line course. The on-line course is a step-by-step guide in 
plain language; and a brochure that goes along with it is very 
comprehensive, and it is plain language. We also have workshops 
that we are putting together with plain language that go 
through the steps that are necessary for small businesses to 
participate.
    So we have really focused on that, and we have looked at 
all our small business programs. The administrator has been 
very focused on making our programs more accessible to small 
businesses and asked us to consult with small businesses as we 
look at business process reengineering. So we take that very 
seriously, and we are constantly looking at ways to improve.
    Chairman Braley. So if this bill becomes law, the President 
signs it, it is passed in the Senate, your belief is that the 
SBA would be well-prepared to implement those practices as part 
of its overall day-to-day operations?
    Mrs. Ott. Yes, I believe we would.
    Chairman Braley. Dr. Day, the GSA schedule offers many 
opportunities for small businesses, but it also creates some 
long-term challenges. In your testimony, you touched upon how 
the 10-year pricing mechanisms can limit small business' 
ability to grow. Could you elaborate for us on those concerns 
and these GSA contracts and how they present smaller entities 
challenges; and, as part of that, how do the rising costs of 
energy and other inputs exacerbate that problem?
    Mr. Day. First of all, I have to tell you that being told 
something by GSA doesn't mean that it is correct. So the 
function of overhead as a business grows is actually a step 
function. You can establish the overhead that will sustain you 
through a certain percent growth. At that point, you take a new 
step up in your cost structure and in your overhead to be able 
to continue fueling the growth and maintaining the growth.
    If you go into a GSA schedule and they require that you 
provide them a better than your best cost and it is a 10-year 
instrument where they tell you you can't use forward rate, what 
you are doing is you are being pinned to where you are in your 
current cost structure as a function of your growth status. You 
are getting pinned to that; and, in fact, if you are getting 
ready to take the next step up in growth, that cost structure 
will not be supported by GSA schedule.
    So when you talk about the increasing cost of energy and so 
on, that is a variable that has significant impact on an 
overhead expense; and depending on what industry you are 
operating in, that may be a key driver on your success or 
failure within that industry.
    There is a serious risk to the small business in getting 
into the GSA schedule if they don't have a very firm 
understanding of how that cost structure will affect their 
future growth and what variables, what risks they are carrying 
along with getting into that schedule, with that kind of 
duration.
    Chairman Braley. It has been my experience that one of the 
challenges facing many small business owners is that 
frequently, especially if they are in their start-up phase, 
they are operating under smaller margins to begin with. When 
you add these long-term variable costs, it really can be a 
detriment to their success as they move forward. Is that a fair 
characterization?
    Mr. Day. That is absolutely correct. When you are young and 
small and you have tightened your belt and you are getting by 
and everybody is wearing multiple hats, at that point your rate 
structure will not support you through 10 years of growth; and 
that is a real challenge.
    Chairman Braley. One of the obstacles small businesses face 
in breaking into the Federal marketplace is quantifying their 
private business experience as it competes against larger 
competitors that have performed government contracts, and I 
think you touched on this in your opening statement and you 
noted that contracting officers tend to favor those companies 
with prior experience. What ways do you think procurement 
methods could be changed to account for private business 
experience and success?
    Mr. Day. Well, the issue isn't actually private business 
experiences. It is personal experience that I am referring to. 
Obviously, a lot of the folks who are doing work in the 
Department of Defense have had defense experience; and they 
understand the lay of the land. If someone wants to start a 
small business and contract for the Department of Defense, when 
they initially try to gain contracts, whatever they have 
personally done--let's say they established a sole 
proprietorship. Their personal experience prior to establishing 
that sole proprietorship has no bearing on past performance 
when they are competing. Only past performance on government 
contracts or commercial contracts do that.
    If you have someone who is highly qualified and has done 
something in the military that they now want to do as a 
contractor because they have retired, in most cases they don't 
have the past performance to be able to compete for the 
contract. They are driven to belong to someone else.
    Chairman Braley. Thank you.
    At this time, I would yield to the ranking member for 
questions that he might have.
    Mr. Davis. Thank you, Mr. Chairman.
    I know time is short. Again, they have called votes, so I 
will be very brief.
    Ms. Wilcox, could you tell me how the SBA could enhance 
their outreach efforts to make it easier for small businesses 
to do business with the government?
    Ms. Wilcox. Yes. I think, again going back to my testimony, 
it is about visibility, actually getting out there and meeting 
with operations such as KOSBE, the other technical assistance 
providers.
    For example, my relationship, as I mentioned, with SBA is a 
new relationship; and I have been with KOSBE since 2006. But 
really it was not until last year actually that I started to 
have contact with SBA. And, as I mentioned, that contact was 
brought about through Ronald Wade with the State of Tennessee 
economic development, BERO, Business Enterprise Resource 
Office, who introduced me to SBA representatives. So it wasn't 
the SBA coming out on their own to make the introduction. So 
thank goodness for the State of Tennessee and BERO for making 
that introduction.
    But since we have met, it has been a wonderful 
relationship. We do see representative from SBA frequently.
    And again, as I mentioned, to just answer that question, it 
is just getting out there, being visible, making the personal 
contact. Regularly.
    Mr. Davis. Could you tell me if the Web site is working?
    Ms. Wilcox. Yes, it is.
    Mr. Davis. Is that a good outreach program?
    Ms. Wilcox. It is if the recipient of the education is open 
to that. Everybody is not a distance learning subject. 
Everybody doesn't learn the same way, as we know, especially 
when we deal with our clients. Every client is different, and 
so the way they learn is going to be different. So that is 
effective up to a point, but, of course, it is not going to 
satisfy everyone.
    I think it is a good product, especially the contracting 
piece. I went through that one myself. It is very simple, and 
it is easily understood, and I think that the matter there is 
just letting people know that that is out there, letting me 
know that that is out there so that I can tell my clients that 
is there. But it is a good product. I think it is effective.
    Mr. Davis. Thank you.
    I yield back.
    Chairman Braley. Well, I want to just apologize to our 
panel. I know that Dr. Day has a plane to catch; and these 
votes are very challenging, require us to do a lot of 
multitasking. I am committed to making sure that our other 
witnesses get an opportunity answer some questions. So I am 
going to run over and vote and then come back.
    Mr. Davis, if you are willing and able to, that would be 
fine. But I just want to make sure that the witnesses who have 
made the effort to come here get an opportunity to talk a 
little bit more about the issues that brought them here. And 
then we are probably going to adjourn after this first vote, 
because it looks like it is going to be about an hour of votes. 
So I really appreciate your indulgence, and the hearing is 
adjourned until we return.
    [Recess.]
    Chairman Braley. I call the Committee back to order.
    And, Mr. Bates, let me ask you some questions. One of my 
favorite TV shows is The Office, which admittedly is a comedy 
about the business that you represent. But there is also some 
important lessons about what is going on in the office product 
industry in that show, and one of the things that I think is 
significant is how the industry has changed in the last 10 or 
15 years. One of the things that we know is it has faced many 
issues recently, some of which relate to the administration 
policies, rather than to SBA programs. In your opinion, what 
can Congress and the SBA do, without micromanaging, to help 
small businesses that suffer when the government changes its 
buying procedures?
    Mr. Bates. Well, I think education is a critical component. 
I mean, we heard a story here earlier where getting the word 
out in a quick, easy-to-understand way is important. But I do 
think that the choice of purchasing vehicle has a big impact on 
the act of any small business to participate; and our general 
approach is there ought to be more competition, not less. So 
excessive contract bundling, things that limit the number of 
competitors on any given contract really in the long run 
doesn't help the government. You get higher prices, less 
choice, less effective service to the end customer. And there 
is always a big disconnect if you talk to any of our members 
between what the people in the field say and what the people 
who let the contract say at headquarters. So there is a lot of 
goodwill here, but getting it connected through more 
competition is really the solution at the end of the day.
    Chairman Braley. And I know I am going to lose people who 
aren't fans of the show, but my kids and I, this is one of my 
favorite things that we do together. There is a great episode 
where Dwight and Jim go out on a call to a customer who has 
placed most of their business with somebody where price is the 
primary objective, and they make a call to that competitor and 
leave the phone on the desk while they are having the 
conversation with the potential customer just to demonstrate 
the point that sometimes customer service is an important 
component in addition to pricing.
    For your members, you know, what types of challenges do you 
face in a government procurement system where price is such a 
high priority in breaking through and talking about the total 
contract performance and what your members can provide to be 
competitive in that type of an environment?
    Mr. Bates. Well, I think one of the disturbing things is 
past performance has not been really adequately factored into 
the equation. A large number of our members at one point in 
time over the last 2, 3, 4, 5 years have had more significant 
government businesses in many cases than they have today. And 
that whole positive history has been, I think, left by the 
wayside in a lot of cases.
    Also, again, I will come back to the end user. There is a 
disconnect between the value that is actually provided when the 
product is ordered and delivered versus the people who are just 
responsible for making the purchase order, so to speak. There 
are also a lot of the shenanigans, frankly, about pricing. In 
our industry, a large number of products, difficult to audit 
and track. You have a lot of product substitutions. You know, 
private label for branded product, different units of measure. 
All sorts of things that can go wrong to really change from 
what was actually bid to what is actually priced when it is 
delivered.
    Chairman Braley. So what are some of the solutions to 
address those problems?
    Mr. Bates. I think the solutions are, one, that we do need 
to have legislation that focuses in on this and makes it clear 
that past performance is something that ought to be taken into 
effect. We obviously have to do a better job of getting the 
message out to the people who are involved in the procurement 
as well about what that value is. But they have to be empowered 
to recognize and take that into account.
    I think the other key issue here is that the whole shift 
toward sole sourcing contract, bundling, and even--forgive me, 
the Small Business Administration is not at the top of the list 
in terms of their purchasing from small business, and there 
needs to be more of walk the talk. If there is a goal, let's 
get good data in place which your bill and other bills have 
started to do. Let's measure that information, let's get it out 
where it is visible, and then I think people will perform.
    The other thing that hasn't come up today is there are 
fewer and fewer contracting officers government-wide who are 
out there. So part of the lack of oversight or insufficient 
oversight is really related to the problem that there just 
aren't enough qualified people who are able to look into the 
details of a contract as they are reviewing bids before them.
    Chairman Braley. Thank you.
    Ms. Dorfman, it is great to have you back, and we have had 
an opportunity to talk a little bit today about some of the 
issues and concerns historically with the Women's Procurement 
Program. We do know the government is falling short of its goal 
for contracting with women-owned businesses, and the SBA 
recently released the proposed rule I mentioned earlier for 
implementing the Women's Procurement Program which will allow 
for set-asides. Allowing set-asides for small businesses as a 
whole has nearly doubled agency achievements. However, the rule 
will only allow for women-owned set-asides effectively in three 
very narrow industries, for example, kitchen cabinet 
manufacturing.
    Apart from set-asides, what can the SBA do to help women-
owned businesses that are small businesses enter and compete in 
the Federal marketplace?
    Ms. Dorfman. Well, thank you.
    First of all, I would say that the SBA needs an attitude 
adjustment. I really would hope that the SBA would start to go 
back to its core mission and assist small businesses, whether 
it is implementing a program that was passed by Congress as 
Congress had intended or providing the funding needed to the 
regional offices which are struggling to provide the real 
resources that are needed.
    We do need to also see them working hand in hand with the 
small business committees so that we can work together as a 
team. I should include it to include small businesses to get to 
the next level.
    I spoke a lot about transparency and the numbers, which 
also would be part of the accountability process. I believe 
that very strongly. Also, the number of PCRs, 66. Well, back 
when the spending wasn't so great, it was about 125 PCRs; and, 
obviously, we need to increase the PCRs.
    I am very glad to hear today that now we are not having 
them train small businesses, but they are actually going back 
to do the job they should be doing, which is making sure that 
contracts, as they come forward, do provide for small 
businesses to be able to access part of those contracts, and I 
would like to see more and more of that.
    And then, also, access to capital is huge for women. We 
still are finding it challenging to get the amount of funding 
we need to grow our businesses. And even with the SBA, if we 
get a loan, it is generally not to the amount of money that we 
need for the small business owner to grow at the rate that she 
needs to grow.
    Chairman Braley. Two of the concerns you mentioned in your 
opening statement, I wanted you to follow up on and amplify if 
you would. One has to do with the problem we talked about 
frequently, and that is false contracting data and how that 
impacts small women-owned businesses who are trying to get 
their foot in the door of the Federal procurement 
opportunities.
    And the other thing you mentioned was the need for regional 
breakouts of data showing what successes are being achieved. 
And this is similar to the concern I raised earlier about this 
circle that has been drawn around the District of Columbia and 
where the concentration of Federal contracting dollars goes and 
then the other circle that goes around the large corporations 
that have the lion's share of these Federal procurement 
dollars. If you would, if you could just elaborate a little bit 
on those two concerns, false contracting data and the need for 
requested regional breakouts.
    Ms. Dorfman. Sure. When we take a look at the measurements 
and the top 50 firms, for instance, that I mentioned, what we 
see is there is over--there is about a third of the contracts 
with the top 50 firms that are claiming to be women owned, but 
they are not. And there is about $5 billion is what we are 
looking at when you look at the 100 firms that is in question 
of the dollars.
    So giving some examples of some of the issues, 
approximately half of the 50 firms listed in the top 50 have 
male CEOs, approximately 21 of the 50 firms listed at the top 
50 are not designated as women-owned and CCR, and then 17 of 
the firms that we found in the top 50 are not shown as small in 
the codes in CCR that they have the contracts in. And so there 
are a number of those issues.
    And what happens, especially when we get the women's 
contracting program up and running--there are two portions of 
that. One is how this will impact that, making sure that women-
owned firms are really accessing it. But then also from this 
side of it, where we don't have that program yet, we are 
reflecting data that is out there and the agencies are claiming 
to make their numbers and yet they are not. So women, I 
believe, are being locked out of more contracts than what the 
SBA is showing right now.
    So that is the first part. And I forget the second part. I 
apologize.
    Chairman Braley. The second part had to do with the 
regional breakouts and why that is important.
    Ms. Dorfman. Right. I think it is important to show where 
the contracts are going so that you can see the impact in the 
communities. When you take a look at right now the companies 
that are in D.C. and are able to get to D.C. that are servicing 
most of the contracts and when you get--well, there might be 
agencies that have buying capabilities in the various regions. 
We need to make sure that those businesses in their regions 
have access to those dollars.
    Chairman Braley. I spent part of Friday afternoon in the 
small community of Oelwein, Iowa, in my district with five 
women who own their own businesses and are really having an 
enormous impact on revitalizing a downtown area. My sense is 
that a lot of your members really feed on this synergy that 
develops when one successful women-owned business is providing 
opportunities for networking and connection with other women. 
Is that why expanding regional access to procurement 
opportunities is so critical to the people in your membership?
    Ms. Dorfman. I think that is a part of it and certainly 
what we see in general for small business, whether it be woman 
or not, that when you bring the buying back into the 
community--and I think Hurricane Katrina speaks very closely to 
this, where the contracts were actually awarded to corporations 
that were not based in the region and the region is still 
suffering how many years later, going on 3. Whereas if we could 
make sure that in the communities that there are--whether it be 
this disaster and helping to rebuild or there is other economic 
impact within the community, that is how we are going to make 
sure that the community itself will be growing. If we can 
provide access to contracts into the community, then the money 
will come in. We can further businesses, hire more employees in 
the community. The money goes back into the community, and that 
is very good for the economy.
    Chairman Braley. Thank you.
    Ms. Wilcox, the SBA Certification Workshop you described in 
Kingsport sounded like a great opportunity to help bridge some 
of this knowledge gap that many small business owners 
experience. Can you just share with us some of the observations 
or lessons you learned from being part of that and what things 
you think the Committee could benefit from knowing about that 
particular workshop?
    Ms. Wilcox. The workshop that I mentioned earlier was the 
SBA Certification Workshop, and also Carol Crawley came out and 
did the certification for TDOT. And whenever we do an event 
like that on certification or anything money related, capital 
related, we do tend to draw a larger participation. And it is 
not just Kingsport participation, but it is a regional draw. So 
the need for that--it just demonstrates to me that there is a 
tremendous need for that type of workshop to go on.
    In 2007, we did about five SBA events in Kingsport; and I 
think that, of course, put us in the position that we are in 
today having that strategic partnership. But there is 
definitely a need for it. There is a draw. People come out for 
it, and people actually register in the CCR after doing that.
    And I was talking to a panelist during one of our breaks, 
but I found that, after a workshop like that, the client will 
go in, they will register themselves in the CCR, but then I 
think it stops at that point because it can be a little bit 
overwhelming for them. They don't know where to go next. So it 
is a good start, but I think we need to help them get further 
with it.
    The 95 clients that I mentioned or businesses in Kingsport 
that are there, how many are really still interested in doing 
Federal Government work? How many have been awarded a contract? 
And how many are just going to stay right there on that step 
one? I am in the CCR system. But they haven't gone that step 
further to say, I am a small disadvantaged business. I am a 
HUBZone business. They don't go the extra steps. They seem to 
stop.
    Chairman Braley. My perception is it is a lot like fishing. 
If you haul out a trophy fish and take it around and show it to 
your friends and family, they are more likely to go fish in 
that lake or pond.
    I think with SBA programs, if you can document some of the 
successes that businesses in your region are having in 
participating in these procurement opportunities, it creates 
more enthusiasm for further participation. But if people don't 
see result, they don't have the incentive to continue to 
explore the opportunities. Is that what you are seeing?
    Ms. Wilcox. That is exactly what I am seeing, and I can 
give you a great example, great example.
    Keith Joy with Oak Ridge National Laboratories has been to 
Kingsport a number of times last year to support KOSBE. And he 
came out one time, he did a breakfast meeting for us and spoke 
to about 50 small businesses at that breakfast meeting. On 
another occasion, he came out and we set him up with individual 
appointments with clients that we had prescreened and 
prequalified.
    So that means they were already in the CCR. They were 
already in the Oak Ridge database; and Keith sat down with them 
and talked about marketing strategies, et cetera. That client, 
that KOSBE client, has actually been contacted. At least he is 
getting a little bit further. He is the one that was HUBZone 
certified. He is a veteran. So there is a good story there.
    Now he has an opportunity to bid on something. Now did he 
respond to it? I don't know. I will have to verify that. But 
there is a good story, and it is contagious.
    Chairman Braley. Great. Thank you.
    I want to thank all of our witnesses for coming here today.
    Mrs. Ott, it is not always fun to be the SBA representative 
at these hearing, but it is a very important function for the 
work of the Subcommittee. We appreciate your willingness to 
come and share your candid assessment of some of these issues. 
It is very important to the small business owners of this 
country. So thank you for joining us today.
    To all the other witnesses, I know this is an imposition on 
your time; and we really do appreciate the stories you have 
shared, the experiences that you have learned. It makes the 
work of this Committee more vital and gives us a human face 
that we can apply to these important decisions we are making 
here. So thank you all.
    I ask unanimous consent that members have 5 legislative 
days to enter statements into the record. Without objection, so 
ordered.
    This hearing is now adjourned.
    [Whereupon, at 4:45 p.m., the Subcommittee was adjourned.]
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