[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
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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
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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
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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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