[Senate Hearing 110-373]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 110-373
 
      ACCESS TO FEDERAL CONTRACTS: HOW TO LEVEL THE PLAYING FIELD 

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

                             FIELD HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP



                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            October 29, 2007

                               __________

      Printed for the use of the Committee on Small Business and 
                            Entrepreneurship


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                                 senate

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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                 JOHN F. KERRY, Massachusetts, Chairman
CARL LEVIN, Michigan                 OLYMPIA J. SNOWE, Maine
TOM HARKIN, Iowa                     CHRISTOPHER S. BOND, Missouri
JOSEPH I. LIEBERMAN, Connecticut     NORMAN COLEMAN, Minnesota
MARY LANDRIEU, Louisiana             DAVID VITTER, Louisiana
MARIA CANTWELL, Washington           ELIZABETH DOLE, North Carolina
EVAN BAYH, Indiana                   JOHN THUNE, South Dakota
MARK PRYOR, Arkansas                 BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland         MICHAEL B. ENZI, Wyoming
JON TESTER, Montana                  JOHNNY ISAKSON, Georgia

                 Naomi Baum, Democratic Staff Director
                Wallace Hsueh, Republican Staff Director





















                            C O N T E N T S

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                                                                   Page

                           Opening Statements

Cardin, The Honorable Benjamin L., a United States Senator from 
  Maryland.......................................................     1
Sarbanes, The Honorable John P., a United States Representative 
  from Maryland..................................................    53

                           Witness Testimony

Jenkins, Calvin, Deputy Associate Administrator, Office of 
  Government Contracting and Business Development, U.S. Small 
  Business Administration, Washington, DC........................     9
Martoccia, Anthony, Director of Small Business Programs, Office 
  of the Secretary of Defense, U.S. Department of Defense, 
  Arlington, VA..................................................    16
Rigas, Michael J., Deputy Associate Administrator, Office of 
  Small Business Utilization, General Services Administration, 
  Washington, DC.................................................    30
Frazier, Wayne R., Sr., President, Maryland-Washington Minority 
  Contractors Association, Baltimore, MD.........................    47
Green, Hubert ``Petey'', President, Prince George's County Black 
  Chamber of Commerce, Oxon Hill, MD.............................    54
Martinez, Ricardo, President, Maryland Hispanic Chamber of 
  Commerce, and CEO, Project Enhancement Corp., Germantown, MD...    61
Forbes, Melvin, President and CEO, Wilkerson Sports Enterprise, 
  Forbes Consulting and Associates, Largo, MD....................    73
Larsen, Carmen Ortiz, CEO, AQUAS, Inc., Bethesda, MD.............    77
Adams, Timothy, President and CEO, Systems Application and 
  Technologies, Inc., Largo, MD..................................    82

          Alphabetical Listing and Appendix Material Submitted

Adams, Timothy
    Testimony....................................................    82
    Prepared statement...........................................    85
Cardin, The Honorable Benjamin L.
    Opening statement............................................     1
    Prepared statement...........................................     4
    Post-hearing questions posed to:
        Calvin Jenkins...........................................    94
        Anthony Martoccia........................................    94
        Michael J. Rigas.........................................    95
Forbes, Melvin
    Testimony....................................................    73
    Prepared statement...........................................    75
Frazier, Wayne R., Sr.,
    Testimony....................................................    47
    Prepared statement...........................................    50
Green, Hubert ``Petey''
    Testimony....................................................    54
    Prepared statement...........................................    58
Jenkins, Calvin
    Testimony....................................................     9
    Prepared statement...........................................    12
    Responses to post-hearing questions from Senator Cardin......    94
Larsen, Carmen Ortiz
    Testimony....................................................    77
    Prepared statement...........................................    80
Martinez, Ricardo
    Testimony....................................................    61
    Prepared statement...........................................    64
Martoccia, Anthony
    Testimony....................................................    16
    Prepared statement...........................................    18
    Responses to post-hearing questions from Senator Cardin......    94
Rigas, Michael J.
    Testimony....................................................    30
    Prepared statement...........................................    32
    Responses to post-hearing questions from Senator Cardin......    95
Sarbanes, The Honorable John P.
    Opening statement............................................    53

                        Comments for the Record

Aguinaldo, Joe, Owner, J. Aguinaldo Group, Inc...................    98
Bowie, Terry, Managing Partner, Ingalls Lumber & Supply, LLC.....   100
Christiansen, Nicholas V., Sr., President and CEO, Eagle 
  Technologies, Inc..............................................   101
Cunningham, William Michael & Creative Investment Research, Inc..   108
Fay, Tim, Fay Communications, Inc................................   118
Genwright, Melvin, President, Power Cleaning Services, Inc.......   125
Jenkins, Luwanda W., Special Secretary, Maryland Governor's 
  Office of Minority Affairs.....................................   126
Lawson, Chris, President, Insuraty, Inc..........................   128
Lumpkins, Nancie, CEO/President, Imagine One Technology & 
  Management, Ltd................................................   129
McRae, Randy, Central Prince Georges, CDC........................   132
    Supporting documents.........................................   134
Pence, Robert, President, Lakota Technical Services, Inc., and 
  Shirley D. Collier, CEO, Optemax, LLC..........................   160
    Supporting document..........................................   162
Rekemeyer, Darryl D., Director, Fort Detrick Business Development 
  Office.........................................................   165
Thurman-Custis, Saundra, Principal, Crystal Enterprises, Inc.....   168
Women Impacting Public Policy....................................   169
Zhu, Jerry, Ph.D., President, UCSoft.............................   175


      ACCESS TO FEDERAL CONTRACTS: HOW TO LEVEL THE PLAYING FIELD

                              ----------                              


                        MONDAY, OCTOBER 29, 2007

                      United States Senate,
                    Committee on Small Business and
                                          Entrepreneurship,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 1:00 p.m., in 
Library Special Collections Room 2202, Thurgood Marshall 
Library, Bowie State University, 14000 Jericho Park Road, 
Bowie, Maryland, Hon. Benjamin L. Cardin, presiding.
    Senators present: Cardin.
    Representatives present: Sarbanes.

OPENING STATEMENT OF THE HONORABLE BENJAMIN L. CARDIN, A UNITED 
                  STATES SENATOR FROM MARYLAND

    Senator Cardin [presiding]. The Senate Committee on Small 
Business and Entrepreneurship will come to order, and I want to 
thank you all for being here at Bowie State University. I 
particularly want to thank our Chairman John Kerry for allowing 
me to bring a hearing to Prince George's County, Maryland, and 
Bowie State University on the issues of small business, 
minority, and women-owned businesses, to look at the efforts 
being made by Federal policies and agencies, because our 
Committee is looking at ways of strengthening the programs to 
achieve our goal of offering more opportunity for small 
businesses and for minority and women-owned businesses and this 
hearing will play a very important part of our committee 
record.
    I am going to put my opening statement into the record, 
without objection, and since there is no other member of the 
Committee here to object, I shouldn't have any trouble with my 
unanimous consent requests.
    [Laughter.]
    Senator Cardin. Without objection, we will be placing in 
the record all of the statements of the witnesses that are on 
both panels and the statements that have been submitted for the 
record and we would ask our witnesses to summarize their 
testimony or proceed as they see fit in order to make the 
points that they believe are important points to be made.
    Senator Cardin. I particularly want to thank all the 
witnesses on both panels for being here. I think that we have a 
well-balanced presentation from the government agencies that 
are responsible and have major roles to play in government 
procurement that affect minority and small businesses as well 
as from individuals who have real life experience here in 
Maryland with these programs.
    I want to again congratulate and thank Senator Kerry, our 
Chairman, for his commitment in this area. He has been very 
active in having hearings in Washington and encouraging us to 
have field hearings and in working in areas that will 
strengthen the programs and deal with these problems that we 
have.
    I don't think I need to talk too long to the audience that 
we have here today as the importance of small business to the 
economy of our country. It represents one-third of the new 
patents that are coming from small business. Sixty percent of 
our new job growth comes out of the small business community. 
It is a very important part of Federal contracting, and as a 
result, goals have been set as to the amount of procurement 
that we anticipate from small businesses. We will talk about 
those goals today, as to whether we are meeting those goals and 
whether these goals are the right goals for our country.
    In 2006, SBA went through the issues concerning contracting 
goals and looked at whether we have achieved those goals and 
there was a report that showed that we had not met those goals. 
I know there is some disagreement as to how it is calculated 
and I look forward to clarifying those points perhaps at this 
hearing.
    Let me go through very quickly some of the obstacles I 
think we face in achieving the goal of providing opportunities 
for small businesses and minority and women-owned businesses. 
One is the issue of bundling, and I hope that we will have a 
chance to talk about bundling, because in 2004, there was a GAO 
report that urged SBA to disseminate best practices to maximize 
small business contracting opportunities with Federal 
procurement. I am interested as to how much progress has been 
made since that 2004 GAO report. Bundling has clearly been an 
area that has presented challenges to whether we are achieving 
our objectives for small business.
    I also want to look at the issues concerning how prime 
contractors treat their subcontracts. I must tell you, I favor 
more prime contracts going to small businesses. I think that 
would solve a lot of the problems, so I hope that we can do 
that. But in the meantime, there have been many circumstances 
brought to my attention of where prime contractors have used 
small businesses for procuring contracts and then have been 
very suspect as to using those subcontractors or paying them on 
time. I want to talk a little bit about that today.
    I want to talk about the 8(a) program and its growth over 
the last several years and whether the Administration's budget 
is adequate to meet the challenges of Section 8(a) programs.
    We are meeting here in Prince George's County, which I 
think is noteworthy. Prince George's County has, I think, one 
of the most significant African-American populations in the 
country. It is a strong community. It is actively involved in 
business ownership, start-up companies, educational attainment, 
home ownership, capital formation. It is here. Plus, it is 
closely located in proximity to the Nation's capital. Now, that 
should be the formula for great opportunity for expansion, and 
yet I don't think that potential has been met. It also should 
be an area that is prime for Federal facilities and Federal 
leases. Its leasing cost is less than the other areas within 
the metropolitan area. And yet, I am not satisfied with the 
progress that has been made here.
    We have new opportunities. The BRAC process should be 
providing additional opportunities. How will the BRAC process, 
and I particularly appreciate that we have a representative 
from DOD that perhaps can talk a little bit about how BRAC will 
work into the opportunities for small businesses.
    So we have our work cut out for us and I very much look 
forward to hearing the testimony from our witnesses and I can 
assure you that it will be reviewed by the Committee and part 
of our record in trying to come up with the right type of 
policies to achieve our objectives will be based on testimony 
provided here.
    [The prepared statement of Senator Cardin follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Cardin. I do want to acknowledge some people who 
are in the audience that are here representing some of my 
colleagues. I saw Terrance Taylor, who is here representing 
Congressman Hoyer, and I appreciate Terrance being here. Trudy 
Perkins, who is representing Congressman Elijah Cummings. We 
have Julius West representing Congressman Chris Van Hollen, 
Nicole Schultz representing Senator Barbara Mikulski. Luwanda 
Jenkins is here in her capacity as the Special Secretary for 
Minority Affairs in the State of Maryland and we appreciate her 
being here, along with Assistant Secretary Herbert Jordan. So 
we welcome all of you that are here and we will now proceed 
with the first panel.
    The procedures that we use in our Committee allows the 
witnesses an opportunity to present their testimonies. We are 
using a 7-minute clock today. Then we will have time for 
questions that I will be presenting that some of you have asked 
for me to ask, and I will be using those questions.
    So if we might, we will start first with Calvin Jenkins, 
who is the Deputy Associate Administrator for Government 
Contracting and Business Development. Calvin Jenkins was 
appointed Deputy Associate Administrator for Government 
Contracting and Business Development of the U.S. Small Business 
Administration in October 2005. He is the Small Business 
Administrator's top career senior executive for government 
contracting and business development programs. Mr. Jenkins is 
responsible for overseeing the administration of the umbrella 
office with jurisdiction over the agency's Offices of 
Technology, Size Standards, Government Contracting, Business 
Development, 8(a), and Small Disadvantaged Business 
Certification.
    Mr. Jenkins, welcome. You may proceed.

 STATEMENT OF CALVIN JENKINS, DEPUTY ASSOCIATE ADMINISTRATOR, 
OFFICE OF GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. 
         SMALL BUSINESS ADMINISTRATION, WASHINGTON, DC

    Mr. Jenkins. Thank you. Chairman Cardin, thank you for 
inviting me here today to Bowie State University to testify. 
Bowie State plays a key role in educating future business 
owners in this country, so I am particularly pleased to be here 
today to discuss the role the U.S. Small Business 
Administration plays in supporting the small business community 
within the Federal marketplace.
    As Maryland prepares for an influx of new jobs that will 
continue into the State as a result of the 2005 Base 
Realignment and Closure Commission recommendations, the SBA 
stands ready to provide small businesses with the tools that 
they need to succeed in the Federal contracting arena.
    The primary way by which SBA provides assistance to 
minority-owned businesses in the Federal marketplace is through 
the 8(a) Business Development Program. This program offers a 
broad range of assistance to firms deemed to be socially and 
economically disadvantaged. Today, there are about 8,867 firms 
participating in the 8(a) program, with Federal contract 
dollars of $12.5 billion in fiscal year 2006. In Maryland, 8(a) 
participants received over $1.5 billion in contracts in 2006. 
As SBA provides 8(a) participants with business development 
training through our 7(j) training program, this training 
consists of 80 workshops in 40 different cities and is being 
conducted by Unlimited Services Systems Management and 
Consulting, a small business located in Largo, Maryland.
    Through the various small business programs, the Federal 
Government has made significant progress towards achieving its 
small business goals. In fiscal year 2004, women-owned small 
businesses grew from $5.5 billion to $11.6 billion in fiscal 
year 2006. Service-disabled veteran small businesses grew from 
$554 million to $2.9 billion in fiscal year 2006. Firms located 
in the HUBZone increased from $1.6 billion to $7.2 billion in 
fiscal year 2006. And overall, small businesses grew from $50.1 
billion to $77.6 billion in fiscal year 2006.
    The SBA takes its responsibility for oversight of 
contracting activities very seriously and has taken a number of 
steps to remedy deficiencies found by the GAO. For instance, 
SBA has revised the partnership agreement to clarify Federal 
agencies' roles and responsibilities for monitoring contract 
compliance of and performance by 8(a) participants. SBA has 
also increased training to field staff responsible for working 
on contracting issues, including the 8(a) Business Development 
Program. In addition, the agency is exploring possible 
regulatory changes that will strengthen the program and 
increase SBA's overall capabilities.
    SBA recognized the need to improve management and 
efficiencies of its business development programs and has 
requested $500,000 in fiscal year 2008 budget to examine how 
best to serve the 8(a), HUBZone, Small Disadvantaged Business 
communities, and women-owned and service-disabled veteran-owned 
small businesses while not restricting the success of any one 
program.
    SBA is also working with the Office of Management and 
Budget's Office of Federal Procurement Policy to carry out a 
number of improvements to the Federal contracting programs. 
These initiatives include working with agencies to ensure that 
their small business contracting numbers reported to the 
Federal Procurement Data System Next Generation is accurate. 
The integrity of the data reported to Congress and the public 
is critical to instill confidence in the Federal contracting 
system.
    A great example of the progress being made in this area is 
SBA's recent publication of the first biannual Small Business 
Procurement Scorecard. The scorecard is a method of ensuring 
that Federal agencies provide maximum practical opportunity for 
small business in the Federal marketplace, especially those 
characterized as socially and economically disadvantaged. 
Consistent with contracting goals, it reflects current 
performance and, more importantly, progress Federal agencies 
are making in improving such performance. The new scorecard 
used the same approach as the President's Management Agenda 
scorecard to ensure that agencies have clear goals and action 
plans that the agencies are regularly assessed on their 
performance. Data integrity is a key element. Additionally, the 
scorecard is an important tool to both increase procurement 
opportunities for small businesses while more accurately 
measuring each individual agency's results. This scorecard, 
along with the advances made in the Federal Procurement Data 
System, are significant steps in adding transparency and 
greater accuracy to the Federal procurement process.
    As you know, the President issued an Executive Order to 
address the issue of contract bundling. SBA is committed to 
this policy and is working with all Federal agencies to ensure 
compliance with this policy and create opportunities for small 
business in the Federal procurement market.
    As part of this effort, SBA is redefining roles and 
responsibilities so that the Procurement Center 
Representatives, or PCRs, can devote more time to finding 
opportunities for small businesses with procurement agencies. 
SBA's district offices and its resource partners will focus on 
providing training and counseling to get small businesses 
positioned to compete for Federal contracts. Currently, there 
are 52 Procurement Center Representatives serving small 
businesses throughout the Federal marketplace. We have begun to 
implement a plan to increase the number of PCRs to 66 by the 
end of fiscal year 2008.
    SBA is also in the process of implementing a new size 
recertification rule. This new regulation requires small 
businesses to recertify their size standard on long-term 
contracts at the end of the first 5 years of a contract and 
thereafter whenever a contract option is exercised. 
Recertification is required for short-term contracts when a 
small business is purchased or merged with another business. 
When contractors can no longer certify their small business 
size standards, buying activities may no longer count them as 
part of their procuring agency's small business goals. 
Ultimately, the new size recertification rule will ensure that 
more accurate data and further support our efforts to receive 
more prime contracts throughout the Federal Government.
    This will conclude my testimony before the Committee. Thank 
you for the opportunity to come to Bowie State University to 
discuss these issues important to Maryland's small businesses, 
and I look forward to answering your questions.
    [The prepared statement of Mr. Jenkins follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Cardin. Thank you for your testimony.
    I do want to acknowledge that Dr. Burnim was here, the 
President of Bowie State University and--oh, he is still here. 
Dr. Burnim, thank you, again for your hospitality here. I know 
this is a busy weekend with homecoming----
    Mr. Burnim. Yes, indeed, but it is our pleasure to have you 
here.
    Senator Cardin. Well, thank you. We really appreciate the 
courtesies that have been shown here at Bowie. As I told you 
privately, you are doing great work here and we are very proud 
of the work being done here at Bowie State University.
    Mr. Burnim. Thank you.
    Senator Cardin. Our next witness will be Mr. Anthony 
Martoccia. Anthony Martoccia is the Director of the Department 
of Defense Office of Small Business Programs. Mr. Martoccia has 
served in a number of procurement management positions at the 
Department of Defense, NASA, and the Department of 
Transportation. Most recently, he was the Associate 
Administrator for Government Contracting and Business 
Development at the U.S. Small Business Administration. He 
served as the Chief Advisor to the Small Business 
Administration who is responsible for providing direction, 
oversight, and policy to all Federal small business contracting 
programs.
    It is a pleasure to have you here, Mr. Martoccia.

  STATEMENT OF ANTHONY MARTOCCIA, DIRECTOR OF SMALL BUSINESS 
 PROGRAMS, OFFICE OF THE SECRETARY OF DEFENSE, U.S. DEPARTMENT 
                   OF DEFENSE, ARLINGTON, VA

    Mr. Martoccia. Thank you, sir. Chairman Cardin, good 
afternoon. I am Tony Martoccia, the Department of Defense 
Director of the Office of Small Business Programs. Thank you 
for inviting me to discuss the Department's small business 
programs. I welcome the opportunity to participate in this 
hearing because this is a topic that is clearly important to 
me.
    My testimony will encompass challenges and ongoing 
initiatives within the DOD small business program. We have many 
challenges facing the small business program. One you 
mentioned, contract bundling. Contract bundling occurs when 
requirements that were previously or could have been performed 
by small businesses are consolidated into a single procurement, 
resulting in an acquisition that is unsuitable for award to a 
small business. Any Defense acquisition strategy that uses 
bundling or consolidation of requirements must undergo a 
rigorous and thorough review to get approved to consolidate or 
to bundle a particular requirement.
    Subcontracting--DOD contracting offices must ensure that 
prime contractors put forth their best efforts to achieve their 
small business subcontracting goals. Contracting officers must 
challenge any Small Disadvantaged Business subcontracting goal 
that is less than 5 percent. A Small Disadvantaged Business 
goal of less than 5 percent must be approved one level above 
the contracting officer.
    Competition--competition is the preferred method of 
acquiring goods and services. The Department's preference for 
competitions extends to the Small Disadvantaged Business and 
8(a) procurements involving 8(a), Alaska Native corporations, 
and others. Non-competitive acquisition strategies are the 
exception to the norm, and the rationale for not using 
competitive techniques must be justified.
    Alaska Native corporations--the Government Accountability 
Office noted that oversight was an area of vulnerability under 
8(a) ANC contracts. DOD discussed the GAO's findings during the 
2007 Small Business Training Conference. The military 
departments have also stepped up their training efforts with 
respect to this initiative.
    Now I would like to focus on some ongoing initiatives to 
increase opportunities for Small Disadvantaged Businesses in 
DOD procurement. Minority Contract Enhancement Program--my 
office has awarded a contract to a minority-owned 8(a) firm for 
the development and support of a DOD Minority Enhancement 
Program to assist small minority-owned businesses, including 
8(a) participants.
    Training the acquisition workforce--the Department has 
placed increased emphasis on educating the acquisition 
workforce in key areas of small business contracting.
    DOD's Small Business Community of Practice--my office, in 
collaboration with the Defense Acquisition University and the 
military departments, developed a Small Business Community of 
Practice to provide an easy to use online source of small 
business program information for the acquisition workforce.
    Small business size standards--the Defense Department is 
concerned that a number of size standards critical to defense 
industries have not kept pace with the U.S. economy. Early this 
year, DOD met with representatives from SBA and the Office of 
Federal Procurement Policy to discuss the issue at length. All 
parties agreed that a comprehensive review of size standards is 
needed.
    Procurement Technical Assistance Centers--we have many 
Technical Assistance Centers to help small businesses provide a 
road map to do business in the Federal marketplace. We have one 
such located at the University of Maryland in College Park.
    Base Closure and Realignment Act, BRAC--while the 
Department does not have a small business program that 
specifically addresses BRAC, DOD was actively involved in the 
passage of a law to designate all military installations 
affected by BRAC as HUBZones. Providing maximum opportunity for 
small business is always a primary consideration in any 
acquisition strategy, including procurements to fulfill BRAC 
requirements.
    I would also like to mention that the Deputy Under 
Secretary for Defense for Acquisition and Technology, the 
Honorable Dr. James Finley, is a strong proponent of the 
Department of Defense small business program. Working together, 
we obtained senior DOD leadership commitment to promote small 
business programs within the Department.
    Today, I have provided a brief overview of a number of DOD 
issues and initiatives that affect minority-owned small 
businesses. I appreciate the Committee's continued interest and 
oversight of DOD's small business program and look forward to 
your questions and any comments you may have that will guide us 
towards working more effectively with small businesses. This 
concludes my testimony. Thank you.
    [The prepared statement of Mr. Martoccia follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Cardin. Thank you very much, Mr. Martoccia.
    We will now hear from Michael Rigas, who is the Deputy 
Associate Administrator for Small Business Utilization at the 
General Services Administration. He is responsible for 
assisting the Associate Administrator in monitoring and 
implementing small business policies and managing small 
business programs. Prior to his appointment at GSA, Mr. Rigas 
was at Mellon Financial Corporation and Brown Brothers Harriman 
and Company, where he managed client relations, streamlined 
operations, and created efficiencies across global operations.

STATEMENT OF MICHAEL J. RIGAS, DEPUTY ASSOCIATE ADMINISTRATOR, 
    OFFICE OF SMALL BUSINESS UTILIZATION, GENERAL SERVICES 
                 ADMINISTRATION, WASHINGTON, DC

    Mr. Rigas. Thank you. Good afternoon, Chairman Cardin. 
Thank you for the opportunity to appear before you today to 
discuss access to Federal contracts for small businesses. I am 
pleased to be here this afternoon.
    I am also happy to be here today at Bowie State University 
because it is the home of the Procurement Acquisition Center of 
Excellence. As the premier acquisition agency of the Federal 
Government, GSA's mission is to help Federal agencies better 
serve the public by offering at best value superior workplaces, 
expert solutions, acquisition services, and management 
policies.
    Within GSA, the Office of Small Business Utilization works 
to ensure that small businesses, small disadvantaged 
businesses, women-owned, HUBZone, veteran-owned, and service-
disabled veteran-owned small businesses have ample 
opportunities to compete in GSA procurements. We know that 
small businesses are the engine of our national economy and 
that they bring to the market new and innovative solutions to 
government challenges, and a successful and strong small 
business community is integral to job creation, community 
empowerment, and economic revitalization.
    GSA works hard so that small businesses have every 
opportunity to participate in the Federal procurement process, 
and as an agency, we actually exceed the small business goals 
Congress has set. The Small Business Act established an annual 
goal of awarding 23 percent of prime contract dollars to small 
businesses. At GSA, over 32 percent of all prime contract 
procurement dollars go to small businesses. That impressive 
result is nearly 40 percent higher than the statutory goal of 
23 percent.
    But the story of GSA's support for small business doesn't 
end with our own direct GSA contracting. GSA has a strong 
record of supporting small business contracting throughout the 
Government through government-wide acquisition contracts and 
the GSA Schedules Program. The Schedules Program offers Federal 
agencies a broad range of products and services from private 
sector vendors and suppliers at prices that have been 
negotiated by GSA and meet accepted levels of expertise, 
performance, and best value. Its ordering process makes it 
easier for GSA and other agencies to reach small businesses. 
And I am happy to report that 80 percent of the companies which 
have been awarded GSA schedules contracts are small businesses. 
The Schedules, in short, offer small businesses an expansive 
avenue of potential work in the Federal Government.
    In fiscal year 2005, through GSA's Schedules Program, 
Federal agencies awarded over $12 billion in Schedule orders to 
small businesses. That amount increased to over $13 billion in 
fiscal year 2006, which is approximately 37 percent of all 
prime contracting Schedules spending government-wide going to 
small businesses.
    GSA's Small Business Government-Wide Acquisition Contracts, 
or GWACs, are another way GSA supports small business. It gives 
me great pleasure to tell you that this year, we awarded our 
GSA IT Infrastructure Technology Global Operations, or GITGO, 
contract to an 8(a) service-disabled veteran-owned small 
business headquartered right here in the State of Maryland. We 
determined that this opportunity, valued at over $200 million, 
could be competed among and awarded to small business if those 
businesses were given the chance.
    This success story for small business is a direct result of 
the commitment of our administrator, Lurita Doan, to expanding 
opportunities for small businesses. As one of the few 
government agency heads who was an entrepreneur, a former small 
and minority business owner, and a Federal Government 
contractor, Ms. Doan is our agency's biggest advocate for small 
business.
    One example of her leadership is the MAS (Multiple Award 
Schedule) Express Program. Historically, it has taken too long 
to review offers and reward contracts under GSA's Schedules 
Program. Under the leadership of Administrator Doan, GSA has 
reduced the amount of time it takes for an eligible small 
company to apply for and receive a GSA schedules contract from 
over 157 days to 30 days.
    We at GSA pledge to continue to improve and to keep 
fighting to make sure that any small company with a great idea 
will have a much easier path of obtaining a GSA schedule than 
ever before. Our Office of Small Business Utilization assists 
small businesses by answering the many questions that are 
submitted by phone, e-mail, letters, and in person. We also 
conduct hundreds of outreach events a year across the country 
for small businesses, including 57 events in the metropolitan 
DC area last year alone. These conferences open doors to 
Federal contracting opportunities to small businesses, and GSA 
conducts workshops that teach small business owners how to do 
business with GSA.
    We share the Administration's view, and I am sure this 
Committee's view, as well, that small businesses are the 
backbone of our economy and that a healthy small business 
community contributes greatly to the health of our national 
economy.
    Mr. Chairman, GSA has a strong record of supporting small 
business and small business contracting and we look forward to 
continuing our work to improve on our already impressive 
performance record with regards to small business contracting.
    I thank you for the opportunity to appear before you today 
and I will be happy to answer any questions you may have. Thank 
you.
    [The prepared statement of Mr. Rigas follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Cardin. Well, thank you for your testimony. I 
particularly appreciate your pointing out that the Procurement 
Acquisition Center of Excellence is here at Bowie State 
University.
    The three of you represent critical agencies and the 
opportunities for small businesses in our community. What is 
done at SBA, what is done at DOD, and what is done at GSA will 
literally affect the ability of companies to be able to grow 
and expand.
    We could argue the percentages. There was a study done in 
2006 by Eagle Eye, which you are probably familiar with that 
said that we missed our goal on small businesses by 3 
percentage points, which is equivalent to $12 billion, which is 
not inconsequential. It is a lot of money.
    And then we have the concerns as to whether minority and 
women-owned businesses are getting a fair share of the work of 
small businesses. In the testimonies that have been given 
before the Small Business Committee in the Senate, you look at 
the capital programs and you see the number of small business 
minority companies that are participating and they are not 
equivalent to what you would expect it to be. So we are finding 
problems in the development of opportunities for minority and 
women-owned businesses.
    I really do appreciate SBA developing a scoring system on 
their Web page, where it tries to bring more transparency as to 
the success and failures of each agency. It is interesting that 
the two agencies that are represented here, DOD and the General 
Services Administration, are unfortunately both in the ``red'' 
category here, which means that maybe your percentages are OK, 
but there is something that needs to be improved, as you 
indicated through your own testimony. By the way, ``red'' is 
not good.
    [Laughter.]
    Senator Cardin. ``Yellow'' is not that good. ``Green'' is 
what we should be striving for. I think it is helpful to have 
this scoring system. I thank SBA for starting it and for 
getting it going. But it does point out that we need to do 
better.
    So let me first just ask the question, I can tell you, from 
looking at the numbers, we need to do better, so why aren't we? 
What changes do we need to make in order to give greater 
opportunities to the economic engine of this Nation, small 
businesses, with particular emphasis on minority businesses? 
Who wants to take that on? What changes do we need to make? Mr. 
Jenkins, do you want to start?
    Mr. Jenkins. Sure, I will start. One of the things that we 
are looking at at the SBA, as I mentioned in my testimony, is 
to refocus our procurement center representatives. We believe 
that they play a very vital role in working with the Federal 
agencies and helping identify small business opportunities 
within their procurement process. We also, by refocusing the 
PCRs, we are shifting more responsibilities to our district 
offices and our resource partners to help us develop and create 
a pipeline of small businesses that can meet the needs of the 
individual agencies.
    Senator Cardin. As I understand, you are moving from 58 to 
66, is that the----
    Mr. Jenkins. Currently, we have 52 and we will be going to 
66.
    Senator Cardin. Is that enough?
    Mr. Jenkins. We believe it is enough. We are also looking 
at the use of technology. We have begun to look at something 
called EPCR, Electronic PCR. When you think of 3.5 million--
actually, 5.5 million procurement transactions that take place, 
both with small and other than small, our physical PCRs are 
only looking at a very small percentage of that. With the 
Electronic PCR, our hope is that we will look at every single 
procurement a contracting officer does not wish to set aside 
for small business and be able to challenge those.
    Senator Cardin. Well, I must tell you, I am concerned as to 
the Administration's budget requests as it relates to the SBA. 
You mention in your testimony the importance of the 8(a) 
program, and I think you also mentioned it in your oral 
presentation. We also know the 7(j) program, which you 
mentioned. The Administration's budgets for that were reduced 
substantially, and I guess my concern is I hear you with a 
commitment to try to improve the service level so that we can 
get to the goals that we know are right for our country, but 
then I take a look at the budgets that are being submitted and 
it doesn't seem to balance.
    Mr. Jenkins. Well, one of the challenges we have is that we 
are looking at a program that was created back in the 1960s. 
Over time, SBA has looked to improve the 8(a) program. We 
continue to look to improve the 8(a) program to make it a 
viable business development program.
    One of our biggest challenges is that the 8(a) program is 
not a contracting program. It is a business development 
program. Our primary responsibility is to help develop the 
firms. The use of contracts is just one of many tools. And so 
we believe we submitted an adequate budget to the Congress in 
which we will leverage technology and our resource partners. We 
will also do a better job in realigning our staff and we think 
that will get us to where we need to be.
    Senator Cardin. Well, that is not true, though, in 7(j), 
the budget that was submitted. That actually reduced it 
substantially.
    Mr. Jenkins. Well, it is approximately one-point--we are 
actually increasing the amount of work we are doing on the 
7(j). For example, last year, we did about 40 cities. Our plan 
this year is to make our 7(j) management and technical 
assistance available to all 68 SBA district offices.
    Senator Cardin. Well, I don't think it adds up. I hear what 
you are saying, and technology can certainly make every agency 
more efficient. But with the challenges we are facing, the 
increased volume alone has been dramatic over the last 5 years 
of applicants in these programs. So it seems to me it is 
difficult to see how that could be done.
    How many of these procurement center representatives 
``PCR'' are going to be in the State of Maryland?
    Mr. Jenkins. We currently have coverage for PCR--basically, 
our procurement center representatives cover multiple locations 
and some remote locations that are isolated pretty much at a 
particular base. We have recently reviewed all of the buying 
throughout the United States and we have assessed every 
location that we consider to be a major buying activity. Those 
major buying activities are the ones that are on the priority 
list for a PCR.
    Senator Cardin. So the answer to my question?
    [Laughter.]
    Senator Cardin. How many PCRs do we have--I will even 
broaden it. For the District and for Maryland, how many PCRs 
are we going to get?
    Mr. Jenkins. I believe we are looking at at least adding 
one. Our long-term is possibly going as high as three for this 
particular area--three additional PCRs. We have since moved our 
area office from Philadelphia to Washington, DC because of the 
amount of volume that goes on here.
    Senator Cardin. So DC will receive----
    Mr. Jenkins. At least one in this round and we will look to 
increase as we----
    Senator Cardin. And Maryland will receive----
    Mr. Jenkins. Well, when we say DC, we look at this area as 
one area, DC, Maryland, and Northern Virginia.
    [Laughter.]
    Senator Cardin. Well, that is ambitious. I mean, there is a 
lot of----
    Mr. Jenkins. Sure.
    Senator Cardin [continuing]. Of activity in that, what you 
just said, particularly adding Northern Virginia to the mix. 
And Maryland is a State that has--we are here in Prince 
George's County, which is one of the strongest growth areas in 
our State, but in the Baltimore region, we also have a need for 
these services. So it seems to me--I can tell you, we get 
numerous requests in our office of problems that are being 
confronted on qualifications and legitimacy of contracts and 
all these other problems and the concerns of bundling.
    I do think that the PCRs you are referring to are going to 
be very helpful. I question whether the number, 66 nationwide, 
will be adequate, considering the challenges we are facing 
today and sophistication of some of the operators within the 
procurement system to try to circumvent the intentions of our 
law.
    Mr. Jenkins. Sure.
    Senator Cardin. Let me move on, if I could, to give you a 
break for a second.
    [Laughter.]
    Senator Cardin. Let me go to DOD. You obviously can't be 
happy about being in the ``red'' category.
    Mr. Martoccia. No, we are not happy. The way the scorecard 
was structured, that if you didn't make your 23 percent, in our 
case, you didn't make your goal, whether it reads 22.9 or 1 
percent, you received a red. So we didn't reach the 2006 goal 
of 23 percent. Therefore, we were rated red. Now, we are 
working to improve the scorecard so that maybe it might have 
some ranges in there, so if we come close, we are not a red. 
But we do need to improve opportunities for small businesses 
within the Department.
    Senator Cardin. Well, let me mention a couple areas that 
have been mentioned to me over and over again as an impediment 
to small businesses being able to operate with DOD. One is the 
security clearance issues, which I hear of all the time, of 
concerns of moving that process in a way in which small 
companies can qualify for DOD contracts. The other is the 
surety bond issue, which is an area that has also been one that 
has caused difficulty for small minority businesses to qualify. 
Any comments as to how we can streamline that?
    Mr. Martoccia. With the BRAC coming up and the surety bond 
issues for especially construction contracting, we work with 
DOD and I think--correct me if I am wrong--we are raising the 
guaranteed limit up to $3 million per contract, so we are 
working on that. I know it is at a pretty low level. And there 
is also some private entrepreneurs and service organizations 
that are helping with the surety bond issue. I know there are 
some veterans' groups that are helping the disabled veterans 
and other veteran-owned companies to gain guarantee money when 
they perform under construction contracts.
    With regard to the security clearance, that obviously is an 
issue that takes time and I am really not well versed in that. 
I know it is difficult and time consuming for a company to get 
the security clearances needed, and that is out of my realm. I 
haven't heard too much complaints about the process, so I will 
have to defer on that issue.
    Senator Cardin. Well, I can tell you it is a huge problem. 
It is a huge problem and we need to figure out a way so that it 
doesn't become justification for inadequate progress being 
made.
    Mr. Martoccia. Are you talking about the time----
    Senator Cardin. Yes.
    Mr. Martoccia [continuing]. It takes?
    Senator Cardin. The whole process. We have had testimony 
before our Committee and we will have more today on the issue 
of security clearance issues, that it has prevented small 
companies from participating in contracts and bid making 
process. It has been a problem, getting the clearance issues 
for small companies to fully participate.
    Mr. Martoccia. Again, I know that it is time consuming and 
there are facilities clearance and individual clearances, but I 
will look into it when I get back.
    Senator Cardin. Well, it----
    Mr. Martoccia. I mean, I just----
    Senator Cardin. And that is all I can ask you today, I can 
say that NSA has developed a streamlined process to try to make 
it work, where we have had much more difficulty with DOD. So 
one of the things I would ask you to do is check what was done 
at NSA, because I think greater progress has been made there on 
the security clearance issues than within the Department of 
Defense.
    Mr. Martoccia. I will do that.
    Senator Cardin. Now, we have BRAC coming up. Maryland is 
one of those States that is very fortunate. We are going to see 
a lot more economic activity as a result of BRAC and it will 
provide many, many more opportunities for small businesses. I 
must tell you, there is nervousness among the business 
community as to how those contracts are going to be determined 
and whether there is sensitivity in the Department of Defense 
using its leverage to make sure that when you have an expanding 
pie, it gives you a greater opportunity to expand with small 
business and minority businesses because you are not taking 
work away from companies. There is a concern that we might miss 
this opportunity by just sitting back and letting the 
procurement process work its way without priority leadership.
    Mr. Martoccia. We work with the Small Business 
Administration's procurement center representatives you were 
just talking about, and DOD has, I think, a pretty effective 
team of small business people looking at requirements every day 
for opportunities for small businesses, along with the program 
managers. And BRAC obviously is an opportunity well suited for 
strong participation of small businesses. We had a meeting, an 
outreach meeting in my office--this happened to be a veterans' 
group asked for it and we put together a program and there are 
actions being taken to set aside many requirements for small 
businesses in the BRAC.
    So we are going to focus on it. My boss is extremely 
sensitive to small business and looking for participation of 
small businesses. So you can be assured through the services 
and the components that when they go out on their requirements, 
that they look to small businesses first.
    Senator Cardin. I appreciate that, and I will just 
underscore this point again. When you have an expanding pie, 
which is not normally the case today in government procurement 
because so many budgets have been cut and so many areas have 
been brought back that it is difficult to expand opportunity 
when companies are trying to preserve a workforce. Here, we are 
talking about expanding a workforce, expanding opportunity. It 
would be, I think, a real tragedy and loss of opportunity if we 
didn't use that to really reach out. To me, we should be going 
well beyond the percentages. This is a chance to really expand 
the base and opportunity and I just hope DOD has help, because 
again, you are the leadership agency on this, on BRAC, and we 
need your help. Otherwise, I don't think it is going to be done 
on base. I think it really requires----
    Mr. Martoccia. Sir, we will be focused on the requirements 
that come out of BRAC for small businesses. I can assure you of 
that.
    Senator Cardin. Well, I want to go beyond requirements. I 
want a sense that this is an opportunity that we can really 
make some progress that otherwise would not be available to a 
community, so I just urge you to--we will be watching on that. 
I will be very happy to work with you in trying to figure out 
the ways in which we can work together.
    Mr. Rigas, I want to talk about the GSA Schedule Program. I 
was pleased to hear that 80 percent of small business is in 
that number. I know you are not going to be surprised to learn 
that there are more concerns that are expressed to us with 
companies trying to get on that Schedule than probably any 
other single issue that we get relating to your agency. I know 
it is a ticket to business and economic success----
    Mr. Rigas. Right.
    Senator Cardin [continuing]. And you mentioned 80 percent. 
Do you know how minority businesses are represented in that 80 
percent, women-owned businesses? Do you have numbers that break 
it down a little bit more than just small businesses?
    Mr. Rigas. Right. I don't have those with me, but I would 
be happy to get back to you for the record----
    Senator Cardin. If you could, I would appreciate knowing 
that----
    Mr. Rigas. OK.
    Senator Cardin [continuing]. Because I must tell you, just 
my own observation is that there is still room for significant 
improvement on how a company gets scheduled. And again, GSA is 
marked ``red'' on this report, which is again something you 
don't want to see.
    Mr. Rigas. Right.
    Senator Cardin. I would urge you to look for creative ways 
to try to improve that rating. I think the schedule program is 
one that could really be a benefit to minority businesses and I 
urge you to----
    Mr. Rigas. Yes, and that is actually one of the areas that 
we are talking to SBA about right now in terms of they formed a 
committee with regards to the scorecard, because this, as you 
know, was the first year that they have come out with a 
scorecard, and as with anything, the first time you do it, it 
is a learning process. One of the things we are talking to SBA 
about is GSA's unique role in the procurement process in the 
Federal Government in terms of being a catalyst for other 
agencies to buy from small businesses, which those dollars 
rightfully go to the procuring agency. So even though we make 
all this effort to award 80 percent of those schedule contracts 
to small businesses, that effort and those contract dollars are 
not--there is no recognition of that in the scorecard in terms 
of the efforts we make with regards to small business.
    And the other point that we are in the process of 
discussing is the fact that GSA is presently tasked with 
building all Federal buildings for the executive branch and the 
judiciary and those, while typically procurement dollars are 
credited back to the agency in terms of how they are measured 
for your small business goals, GSA is--we are required to count 
those dollars as GSA procurement dollars, even though we are 
building a $200 million courthouse for the judiciary or a 
Federal building somewhere. Those are all counted as GSA 
procurements, which--and as you know, the limit on bonding 
capability that SBA has right now is $2 million. It is moving 
up to three, but it still makes it very difficult for a small 
business to be able to win a contract to build a $200 million 
courthouse, or even a $50 million courthouse.
    But we are definitely making strides. Our preliminary 
numbers show that we have increased our small business 
procurement within GSA from 32 to 35 percent this past year and 
our administrator is--she is the biggest advocate, I can assure 
you, of small business that we have because she used to be a 
schedules contract holder and has been there on the ground and 
understands what it means to be a small business trying to do 
procurement and reminds us of that on a regular basis.
    But I would be happy to consider and hear any suggestions 
that you guys might have in terms of what we can do to improve, 
as well.
    Senator Cardin. Well, I thank you for that. We will have 
suggestions because I think it is a very important program.
    When you get back to us on the numbers within the schedule 
contractors on minority and women, it would be useful also if 
we had an idea about what percentage of procurement goes 
through schedule contractors and also the dollar volumes. I 
understand you said 80 percent are small business, but how much 
does that represent in the dollar volume of the procurement 
under schedule contractors? I think those numbers would be 
helpful for our Committee to try to evaluate the importance of 
the Schedule Contract Program, because I can tell you, again, 
we get a lot of concerns from minority businesses particularly 
about getting on the schedule.
    Mr. Rigas. Right. Yes, the overall number for schedule 
dollars going to small businesses is 37 percent.
    Senator Cardin. On schedule, or----
    Mr. Rigas. Yes. In terms of procurement dollars across the 
Federal Government that go to small businesses via the GSA 
schedules, 37 percent of all of those dollars----
    Senator Cardin. Go to----
    Mr. Rigas [continuing]. Go to small businesses.
    Senator Cardin. And I am not questioning that number, 
compare it to the numbers. That is 80 percent that are on 
there, and they get 37 percent of the----
    Mr. Rigas. Right.
    Senator Cardin. So we are talking about the same--OK. We 
will be coming to you with suggestions.
    Mr. Rigas. OK, great. I welcome them.
    Senator Cardin. Mr. Jenkins, I want to go back to the 
arithmetic here again.
    Mr. Jenkins. OK.
    [Laughter.]
    Senator Cardin. I am a little concerned about your budget 
and the support that you have and I want to go back to these 
PCRs and have a better understanding of the procedures you are 
using for allocating these new services. My staff tells me that 
there are currently over a million contracts nationwide, and I 
guess my question is how many Federal contracts will be 
supervised or under the responsibility of a PCR? Is there a 
guideline here that you are looking for? You mentioned remote 
areas. What are the standards being used to make sure that our 
community has the appropriate service level?
    Mr. Jenkins. Sure. Well, first of all, the PCRs are 
assigned to buying activities. Some are assigned as a primary 
location. Others have multiple locations. Our standards for 
establishing where a new PCR would come in would be looking at 
whether or not it is what we call a major buying activity, an 
activity to purchase roughly $100 million or more in contracts. 
Those become our primary sites or priority sites to place a 
PCR.
    Senator Cardin. And we will have those numbers for us to be 
able to review as to where they are being located?
    Mr. Jenkins. Oh, sure. Yes.
    Senator Cardin. Obviously, I want to make sure that all the 
areas of the country are fairly treated. I can tell you that we 
need the services here, and I am sure my colleagues from around 
the country feel equally strong for their particular region.
    Let me just conclude by asking you about unbundling. This 
has been identified as a problem. We have had reports 
demonstrating we have to do a better job, that it has been used 
and abused. Can you just give us an update of where we are in 
monitoring bundling activities?
    Mr. Jenkins. OK. Well, reviewing the bundled contracts is 
part of the day-to-day activity of a PCR and we work very 
closely with the agencies. There are set criteria on which a 
contract can be classified as a bundle. All of the Federal 
agencies have those and we are working with the agencies to 
make sure that they understand what constitute a bundle and 
that they are, in fact, reporting those to the SBA.
    One of our key ways of looking at these activities and 
these agencies is to look at whether or not they are achieving 
their goals. As we talked about placement of the PCRs, we may 
have a major activity where a PCR is not located, but that 
agency may be meeting their goals, and therefore we think it is 
important to put the PCR in another location where they may not 
so that we can look at things such as contract bundling, we can 
look at whether or not they are setting these contracts aside.
    We believe the scorecard is going to be the whole catalyst 
behind it. It gives everyone the clear tool. It gives our staff 
the tool of who is and who is not meeting their goals. It gives 
the agencies a clear indication of whether or not they are 
meeting the goals.
    As Mr. Rigas said, we have established a committee to look 
at not only the scorecard and the criteria that we use in the 
scorecard going forward, but we are also looking at the goals. 
Agencies are not scored on the government-wide 23 percent small 
business goal. Each year SBA negotiates goals with all of the 
Federal agencies. Some agencies, such as GSA, may have a very 
high goal compared to the 23 percent, and we are looking at 
those criteria, as well, in terms of how we set the goals for 
each agency with the intent that we will get to the overall 
Federal Government numbers of 23 percent.
    Senator Cardin. I mentioned in my opening comments 
subcontractor issue, prime contractors, and potential concerns 
about payments by primes to their subs, the abuse where primes 
getting contracts do not give the amount of work that was 
initially committed to subcontractors. Can you tell us the 
status of those types of concerns, how they are being handled 
by the SBA?
    Mr. Jenkins. Sure. Well, let me first say that, this was 
our first full year of having a system called ESRS, which is 
the Electronic Subcontracting Reporting System. DOD was able to 
get their subcontracting data in, so we have a full year of 
electronic data. We now can look at each of the large business 
primes and determining whether or not they are meeting their 
subcontracting goals. We coordinate with the Federal agencies.
    Part of what the PCR does, as well, is not just the prime 
side. When a PCR goes into an agency and they look at a 
procurement, they also look at the subcontracting goals that 
were established in the contract or the potential contract bid 
by a large business and we question those and we can protest 
those in terms of we believe they are too low. We are looking 
at those, as I mentioned.
    Our plan is to continue to work with the agencies to do 
more training, to make sure that they understand the 
requirements. There have been some new folks that have come 
into the contracting procurement arena and we are doing more 
training of all of the small business programs, but 
specifically the subcontracts.
    In terms of actually resolving a dispute between the prime 
and the subcontractor, SBA does not have what we call privity 
of contract, meaning we can't necessarily engage in that 
dispute because we don't have a relationship with the 
subcontractor themselves. We talk to the agencies when we are 
approached on those problems and we ask the agencies if they 
can get involved or if they can put some procedures in future 
contracts that deal with those kinds of problems and 
relationships.
    Senator Cardin. So by the end of fiscal year 2008, you will 
have 66 PCRs?
    Mr. Jenkins. That is our plan, yes, sir.
    Senator Cardin. And you will share with this Committee the 
standards being used for the allocation of those?
    Mr. Jenkins. Yes.
    Senator Cardin. I appreciate that. Is there an objective as 
to a maximum workload for any PCR?
    Mr. Jenkins. No, because the key is we try to look at as 
many procurements as possible in terms of the PCR. As I 
mentioned, if it is a large buying activity in a remote 
location, more than likely, that is going to be the primary 
site. But if there are multiple activities that are very close 
together, for example, the Washington, DC area, we may have one 
PCR assigned to five, six locations and they still may be 
considered major activities and they do some for----
    Senator Cardin. The reason I ask that question is that I am 
not convinced 66 is the right number. I don't know. But it 
seems to me with the increase in volume that you have been 
talking about and the increase in responsibility that the work 
is critically important to achieving our objectives. I would 
like to know that we have some process to evaluate those 
numbers and are prepared to recommend larger numbers if they 
are needed.
    Mr. Jenkins. Yes. Well, as I mentioned, one of the critical 
pieces is we are shifting some work that the PCRs had done in 
the past. For example, our PCRs, the 52 that we had on board in 
fiscal year 2007, counseled and trained probably 20,000 to 
25,000 small businesses. That workload is being shifted to our 
district offices and our resource partners. Just this past 
year, we have literally pulled every single SBA employee in the 
field into a training activity called SBA University in which 
we train them on the basic procurement information so that they 
can pass that kind of information on to the small businesses to 
free up the PCRs.
    Senator Cardin. Once again, let me thank our three 
witnesses from our governmental agencies for being here. I 
found this very helpful to understand the scope of our problem. 
I would just comment in conclusion that I think it is difficult 
to achieving the objectives, Mr. Jenkins, you have mentioned, 
with the budget that had been submitted.
    I am hopeful that the budget that you are going to receive 
will allow you to achieve a more ambitious program. I am 
pleased to hear the commitments made by all three agencies to 
not only achieve the number of the goals that are set out 
there, but to achieve what is clearly the intent of Congress, 
and that is to provide opportunities for small businesses not 
only to grow and flourish, but to continue to be a dominant 
part of our economy with particular emphasis on minority and 
women-owned businesses.
    Thank you all very much for your testimony.
    [Applause.]
    Senator Cardin. We are going to take a brief break while we 
reconfigure for the next panel.
    [Recess.]
    Senator Cardin. We are going to get started. I must tell 
you, I very much appreciate the incredible attendance we have 
here. It is really----
    [Applause.]
    Senator Cardin. And I am glad that some networking is being 
done here, too. That is also good.
    [Laughter.]
    Senator Cardin. So I hope as a result of today's hearing, 
there will be some business connections that are made. That is 
one of the side advantages. I was saying, we are very pleased 
that we have such a large attendance and we thank you all for 
your interest in this subject.
    During the short recess, I had a chance to talk to some of 
you. I want to assure you that under our committee procedures, 
the record will be left open for 2 weeks, so this is not the 
end of this hearing. There are additional questions that can be 
asked and we will follow up on some. Obviously, there is a 
limit to the amount of time that we have with the witnesses 
being personally present.
    I do want to acknowledge the presence of those representing 
our veterans and the veterans' community, the disability 
community. These are all important goals that we have to 
increase activities, economic activities for our veterans and 
our disability community and those issues will be taken up by 
our Committee and our records will be clearly supplemented in 
those areas.
    In regards to the women's programs, during the break, some 
additional questions were brought to our attention and we will 
make sure that they are also--my staff informs me that we have 
taken up some of these issues, but we will make sure that those 
questions are asked of our administration officials and that 
our Committee has ample information in order to move forward in 
all those areas.
    So we always appreciate the input that we are receiving. 
Our objective is to increase economic activities in those areas 
that historically have not had the type of attention from our 
Nation as it should, which affects not only those communities 
that have not had the opportunity, but affects our entire 
country. And that is our objective, to expand economic 
opportunities for all of the vulnerable groups in America that 
have been historically denied the full economic participation 
in our country.
    So with that, we will start the second panel. I am very 
excited about the witnesses that are here. I know them all and 
they have been extremely helpful in our community here in 
Maryland.
    We will start with Wayne Frazier, who has close to 30 years 
of experience in development, finance, banking, and investment 
fields. His strong leadership in project financing and public-
private development contracts have been instrumental in 
garnering new business and growth for numerous small and 
minority business contractors in the State of Maryland as well 
as the Mid-Atlantic region.
    Currently, he is the president of the Charlotte Development 
Company, a real estate development firm, WRF Financial Services 
Company, and the Maryland-Washington Minority Contractors 
Association. Then-Governor-elect Martin O'Malley asked him to 
serve as chairman of the Governor's Minority Business 
Enterprise Transition Team.
    Mr. Frazier, it is a pleasure to have you with us.

    STATEMENT OF WAYNE R. FRAZIER, SR., PRESIDENT, MARYLAND-
   WASHINGTON MINORITY CONTRACTORS ASSOCIATION, BALTIMORE, MD

    Mr. Frazier. Yes. Good afternoon. Good afternoon, Senator 
Cardin, our Senator from Baltimore. Now we're honored that he 
is everybody's Senator. But Senator Cardin, I am so glad that 
you have called for this hearing because America's minority 
business is in trouble. Why? Because discrimination is running 
rampant throughout Federal Government procurement agencies.
    I think that I am qualified to sit here and discuss this 
issue this morning simply because back in Baltimore, they call 
me the sheriff, the police of MBE, because I fight for 
inclusion for minority businesses. My testimony shall comprise 
of three prominent issues that surfaced during interviews that 
I have had with about 12 minority businesses hailing from 
Montgomery County, Prince George's County, Baltimore City, 
Baltimore County, Anne Arundel County, and Queen Anne's County. 
All of those businesses are attempting to do business with the 
Federal Government or doing business.
    It came to my surprise that the No. 1 issue dealing with 
minority businesses attempting to do business with the Federal 
Government is bundled contract procurement. The No. 2 issue is 
financing. And the No. 3 is surety.
    The issue centering around with bundled contracting with so 
many governmental agencies are procuring business. The General 
Services Administration, the GSA Schedule, the Multiple Task 
Award Contract, the MTAOC, the Indefinite Delivery Indefinite 
Quantity Contracting, IDIQ, Task Order Contracting, TOC, Job 
Order Contracting, JOC, SBA Small Disadvantaged Business, 
Disabled Service Veterans, Historically Under-Utilized 
Businesses, HUBZones, all in some shape, form, or way compete 
against one another and promote alternately discrimination.
    The term constantly used around government procurement 
offices is, ``What is the flavor of the day?'' ``What is the 
flavor of the day'' can be heard from procurement offices at 
various agencies when selecting how to procure work.
    Bundling contracts, according to the interviews, no matter 
what method selected by the procurement office, was the 
preferred scope of work. Now, we know that bundling has been 
outlawed. We know that. But it exists. Bundling appears to be 
easier for procurement officers to issue work, but is 
detrimental to small and minority businesses to compete against 
established, financially stronger firms. The general rule is 
that the stronger financially one's firm is, the more 
sophisticated and experienced the business has become. How can 
larger small businesses compete fairly against smaller or real 
small businesses? There is no way that the two can compete. 
That has to change. These so-called strong small businesses 
compete equally with struggling small businesses. By adding 
minority business to the equation, the exclusion gets worse. 
Unbundling of procurements should commence to open up 
competition with more work put out to bid as opposed to adding 
task orders after task order after task order to a contract.
    Other complaints surface during the interview process that 
the wonderful Native Alaskan firms can come to the lower 48 
States plus Hawaii and compete the same as those firms 
domiciled in their States. That is wrong. We shouldn't allow 
that type of competition to come to Maryland, for example. And 
guess what? The task orders sometimes continue to get added for 
work that wasn't even part of the original scope, wasn't even 
part of the original scope, but yet it gets added. I am not 
beating on the Native Alaskan firms, but that is just an 
example.
    GSA Scheduling is worse, and the flavor of the day is 
service-disabled veterans. Why? Because of the war and GSA 
Scheduling.
    Now, financing was No. 2. The folks I interviewed had no 
problem with the long-term SBA financing that is offered. It 
works well. The concern is the short-term, less than 1 year, 
financing, Capline. That is the name of the product that the 
SBA is marketing. That is a product that will only guarantee if 
you win a contract and then they will take your receivables as 
collateral. But the bankers and the borrowers complain. The 
bankers say it is too expensive. They can't make a profit off 
of the fees as well as the rate because there is so much 
paperwork, so much due diligence involved. And the small 
business person says, hey, I can't run my business with pile-on 
after pile-on of paperwork. We need to address that. Remember, 
once you win a contract, the trials and tribulations just 
begin. If you can't get financing, forget it.
    The third thing that was brought to my attention was the 
most startling, and that is the surety bond. I heard you 
mention that earlier, Senator. Right now, corporate sureties, 
the Travelers, the Mountbattans, the USA Surety, they have a 
monopoly, with Travelers the biggest monopoly. Small businesses 
dealing with the Federal Government cannot get surety bonding. 
Again, no financing, no bonding, no contract, no award, no way 
to compete.
    There is an option. The option is a new product that was 
approved--excuse me, it is not new. It has been around just as 
long as corporate sureties have been around. It is called the 
individual surety. But the problem that we have with the 
individual surety is that it was approved last year in the 
State of Maryland unanimously in the General Assembly. Both the 
House and the Senate approved it with no dissenting votes. The 
problem is that, the Federal Government, on the other hand, 
won't accept it. The individual surety is a group of rich, I 
mean rich, individuals. Criteria, $2 billion or more in assets, 
not net worth, assets that you can pledge in order to back the 
bonds. The problem is, the Federal Government won't accept it 
because our belief is that the procurement officers are in line 
with the corporate surety brokers and dealers and they will not 
accept because of competition. And we also feel that that is 
discriminatory, as well. There are solutions, but the Federal 
Government won't consider them.
    I appreciate you listening to me this afternoon and I hope 
that some of these suggestions will go a long way. Thank you.
    [The prepared statement of Mr. Frazier follows:]

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    Senator Cardin. Mr. Frazier, thank you very much for your 
testimony.
    We have been joined by my colleague from the Third 
Congressional District of Maryland, Congressman John Sarbanes. 
Congressman Sarbanes has been one of the leaders in the House 
of Representatives on the issues of fairness in government 
procurement and the issues of small and minority businesses and 
I am very pleased that he could find time to join us at this 
hearing and I would recognize Congressman Sarbanes for the 
comments that he might want to make.

           OPENING STATEMENT OF THE HONORABLE JOHN P.
     SARBANES, A UNITED STATES REPRESENTATIVE FROM MARYLAND

    Representative Sarbanes. Thank you very much. I appreciate 
the opportunity and I want to thank Senator Cardin for holding 
this hearing on a critical issue, which is what is happening in 
terms of procurement with respect to minority and women-owned 
businesses.
    Your testimony, for starters, points out a lot of the 
issues that are faced, particularly now with BRAC coming and 
the other opportunities that are presenting themselves. If we 
are not ready to take advantage of that on behalf of small 
business and minority-owned and women-owned businesses, we are 
going to look back 10 years from now, 15 years from now, or 
even 6 months from now and wish that we had been better 
prepared to make sure that these opportunities are available so 
that they are opportunities and they are not missed 
opportunities.
    I don't think there is anybody better situated than Senator 
Cardin to lead an inquiry into this, given his experience, and 
also given his attitude of optimism. I don't know if anyone saw 
the paper today, the Washington Post article, but in terms of 
being able to get things done, and you can get things done even 
in a body as difficult as the U.S. Senate, you can get things 
done if you bring a can-do attitude, which is clearly the 
attitude that Senator Cardin has brought to the job even in the 
first few months. I am happy to participate in this hearing and 
to learn as much as I can about the issue so that I can work as 
hard as I can to make sure we move forward.
    So thank you again for the opportunity to be with you 
today, Senator.
    Senator Cardin. Congressman, I really do appreciate you 
coming by. As I said, most people know Congressman Sarbanes' 
district includes Baltimore City and Baltimore County, Howard 
County, and Anne Arundel County. It comes right up the border 
here on Prince George's County. Obviously, the small business 
issues are critically important to all areas of Maryland and we 
thank the Congressman for joining us today for as long as you 
can. We understand your schedule may very well require you to 
leave and I thank you for coming by.
    I also want to acknowledge that Steve Umberger was here, 
who is the District Director of the Small Business 
Administration. He is still here. Thank you. Thank you very 
much. We have had a wonderful working relationship with our 
office and we thank you very much for the assistance that you 
have been able to give all of us in trying to do what is right 
for small business here in Maryland. Thanks for being here. I 
appreciate it.
    We will now hear from Petey Green. Petey is the co-founder 
and president of the Prince George's Black Chamber of Commerce. 
The Prince George's Black Chamber was founded in February 2004 
as an advocacy and educational organization representing small 
local and minority-owned businesses. Petey is also co-founder 
of the Prince George's Classic, a 3-day cultural celebration of 
community and education culminating with a football game at 
FedEx Field in Landover between two historically Black 
colleges.
    Petey Green is involved in many charitable activities, 
including the Haines Frederick Scholarship Fund, the Coalition 
of Concerned Black Christian Men, Prince George's Financial 
Services Corporation, past president of Prince George's County 
Board of Trade, Prince George's Business Alliance for 
Education, the Business Roundtable for Education Achievement, 
Counts Program, and the list goes on and on and on.
    It is a pleasure to have you with us today, Mr. Green.

STATEMENT OF HUBERT ``PETEY'' GREEN, PRESIDENT, PRINCE GEORGE'S 
        COUNTY BLACK CHAMBER OF COMMERCE, OXON HILL, MD

    Mr. Green. Thank you. Good afternoon, Senator Cardin and 
Congressman Sarbanes and Committee members. My name again is 
Petey Green. I am the president of the Prince George's Black 
Chamber of Commerce. It is truly an honor and a privilege to 
appear before you today and share my views and those of the 
Prince George's Black Chamber of Commerce in the area of 
Federal contracting.
    I would first like to thank you for bringing government to 
the people of Prince George's County, especially to our 
institution here of higher learning, Bowie State University.
    Incorporated in February 2001, the Prince George's Black 
Chamber of Commerce is a Maryland-based business association 
representing small, local, and minority-owned businesses as an 
advocate and educator. We are an affiliate of the National 
Black Chamber of Commerce. We are a 501(c)(3) non-profit, non-
partisan, non-sectarian organization dedicated to the 
empowerment of minority communities. We promote and enhance the 
visibility of our business community, address institutional 
barriers that impede business progress, and provide support and 
resources that empower our members to grow their businesses and 
enrich their lives.
    We are grateful for the daily sacrifices that small and 
minority-owned businesses and their families make in their 
efforts to achieve the American dream of entrepreneurship. 
Small businesses are essential to America's prosperity. Their 
drive, creativity, and innovation are the hallmarks of 
entrepreneurship and the key for job creation and economic 
growth.
    Small and minority-owned businesses represent more than 90 
percent of all America's employers. Small business owners are 
often found in unusual places. They frequently react to 
negative conditions by tightening their belt, hoping to ride 
out their storm. Even when it is raining gloom, they fold up 
their umbrellas and see some sunshine.
    But the business world in which they are operating has 
changed dramatically and the pace of change has accelerated at 
an alarming rate during the past few years. Today, these 
entrepreneurial businesses face major challenges. The most 
significant challenge has been the globalization of business, 
which has intensified the competitive pressures.
    We recognize that it is not the role of government to 
create wealth, but to create an environment in which people are 
willing to take risk, to risk capital and personal property to 
achieve the American dream of success and prosperity. You 
accomplish this through a variety of financial, technical, and 
procurement assistance programs as well as counseling and 
training partnerships. You focus on customer satisfaction by 
streamlining services to small businesses. The Government needs 
to increase the number of small businesses owned by minorities, 
women, low- and moderate-income people. You must find a way to 
help these entrepreneurs overcome the challenges and reap the 
rewards of successful small business ownership.
    There are a number of steps to take to remedy the 
situation. In order to achieve the mission, we must first level 
the playing field. Where disparities exist, we must remove the 
barriers. While financial barriers often impede the progress of 
small and minority-owned businesses, access to market is as 
important as access to capital.
    The second and most important remedy is to create a single 
source certification that would open more doors and 
opportunities for the entrepreneur. As it stands today, Federal 
and State agencies have their own certification requirements 
with little or no reciprocity between them. This practice 
limits the opportunity to those minority and women business 
enterprises who possess the particular agency certification. A 
single source certification would open the doors of 
opportunities to all. Multiple certifications can be extremely 
costly to small and minority business owners and they are often 
too pricey to obtain. Minority-owned enterprises have been 
around for many years, yet many still struggle because of lack 
of capital and access to markets.
    Just as access to capital and markets are important, it is 
also important that regulatory barriers be addressed. Small and 
minority-owned businesses need to be protected against the 
negative effects of burdensome Federal agency regulations. 
Tearing down regulatory barriers to job creation and giving 
small and minority-owned business owners a voice in the complex 
and confusing Federal regulatory process is key and essential 
to the overall success of the small and minority-owned business 
community.
    Often hard to prove but seems to be running rampant 
throughout the small business community is the ugly head of 
discrimination. In order to level the playing field, there must 
be a wholesale reform of minority business programs at the 
State and Federal level. The State of Maryland recognized the 
fact that discriminatory practices existed throughout its 
agencies and took steps during the Minority Business Reform to 
remove them by passing cutting-edge legislation that could 
serve as a model for Federal and State agencies throughout 
America.
    Key components of the legislation dealt with the 
relationship of prime contractors and subcontractors as they 
related to minority participation goals. A number of prime 
contractors with minority subcontracting goals didn't even 
bother to look for qualified MBEs to do the work. Instead, they 
automatically sought and received waivers that freed them from 
meeting their subcontracting goals. After a commission study 
was released, legislation requiring prime contractors to name 
their MBE subcontractors at a time of bid and use them if 
awarded the contract. It also created a Small Business Reserve 
Program which reserves 10 percent of contracting dollars in 22 
State agencies exclusively for small businesses, which created 
a pool of new prime contractors. It doubled the MBE personal 
net worth cap to $1.5 million for State contracts and 
established a commercial non-discrimination policy.
    This kind of sweeping reform at the Federal level would 
also aid immeasurably in leveling the playing field and 
creating access to Federal contracts for small and minority-
owned businesses.
    On September 27, 2007, Anthony Robinson, President, 
Minority Business Enterprise Legal Defense and Educational 
Fund, and someone I have a great deal of respect for his 
commitment to ensuring a level playing field for minority 
businesses, stated in his testimony before the U.S. House of 
Representatives Subcommittee on Government Management, 
Organization, and Procurement of the Committee on Oversight and 
Government Reform, and I quote, ``The reasons minority-owned 
firms are not fully participating in the market are many, not 
least of which is discrimination.''
    The Kaufman study cited several reasons after concluding 
the gap that exists has not in any way been caused by a lack of 
effort on the part of minority entrepreneurs. The first reason 
cited by the foundation was that ``discriminatory conditions 
that previously existed were deep and pervasive and have not 
been fully reversed,'' unquote. That is a tragedy, Senator. 
Government must prove its commitment to minority businesses by 
ensuring agencies such as the Small Business Administration are 
working to remove the disadvantages and increase the 
opportunity to access the marketplace as well as empower the 
small business community through education and training.
    I would like to leave here today confident that the Small 
Business Administration will enforce Federal regulations that 
guarantee a good faith effort is put forth by governmental 
agencies to ensure minority-owned businesses have a fair and 
equitable chance at contracts and subcontracts on government 
projects. Congresswoman Gwen Moore of Wisconsin said, and I 
quote, ``that it was clear to her that one of the next 
frontiers in the fight for civil rights is economics, that 
America is a capitalist society and until minority businesses 
have the same access to Federal contracts and subcontracts as 
other businesses, there is little hope for economic equality,'' 
unquote.
    Mr. Chairman, I thank you for the opportunity to present my 
views. We stand ready at the Prince George's Black Chamber of 
Commerce to assist in the effort to achieve parity and to serve 
in any way that we can to make a difference in the lives of 
small local and minority-owned businesses. Thank you.
    [The prepared statement of Mr. Green follows:]

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    Senator Cardin. I thank you very much for your testimony.
    Ricardo Martinez is the president of Project Enhancement 
Corporation, which he founded in 1998 to provide solutions for 
projects in engineering managers. It is one of the fastest-
growing businesses in the United States. It provides services 
to the U.S. Department of Energy, Offices of Environmental 
Management and Environment Safety and Health, as well as to 
prime contractors. He chairs the board of directors of the 
Western Maryland Hispanic Chamber of Commerce and is chairman 
of the board of directors of the Maryland Hispanic Chamber of 
Commerce. It is a pleasure to have you here.

  STATEMENT OF RICARDO MARTINEZ, PRESIDENT, MARYLAND HISPANIC 
   CHAMBER OF COMMERCE, AND CEO, PROJECT ENHANCEMENT CORP., 
                         GERMANTOWN, MD

    Mr. Martinez. Thank you, Senator, Congressman Sarbanes. 
Thank you. My name is Ricardo Martinez. I am the chairman of 
the Maryland Hispanic Chamber of Commerce.
    The Maryland Hispanic Chamber of Commerce has been in 
existence for over 20 years and has and continues to be a 
recognized voice of the Maryland Hispanic business community. I 
am also the owner of a 10-year-old, $14 million-a-year company 
doing business with the Federal Government.
    A particular focus of our chamber is Federal contracting. 
The Federal Government is the largest employer in our State. As 
such, we believe that Maryland Hispanics need to clearly 
understand the requirements and be equipped with the physical 
and intellectual tools to successfully compete in the Federal 
marketplace.
    I would like to bring attention to a number of issues 
impacting the Maryland Hispanic business community, which is, 
for the most part, a subset of the Maryland small business 
community.
    The Federal Government is just recently paying serious 
attention to the practice of lumping together, i.e. bundling, 
what could be several or perhaps many small and discrete scopes 
of both technical and administrative work. Requests for 
interests or information sometimes precede such requests for 
proposals in order to prove that there are no qualified small 
businesses that can do full scope. Sometimes bundled 
opportunities are indeed set aside for small businesses only to 
be canceled after the agency determines the work to indeed be 
too large for small businesses.
    At times, the decision to finally award or cancel 
procurement comes after many months of torturous bid and 
proposal processes that can cost millions of dollars to the 
bidding small businesses. The impact on a given sector of small 
business due to a protracted or canceled procurement can be 
financially and morally devastating to many small businesses.
    There is also bundling of requirements. Bundling of 
requirements, such as unreasonable expectations for security 
clearances, specialized technical expertise, incumbent 
knowledge, internal knowledge of agency operations, among 
others, is a way of discouraging or disqualifying small 
businesses. Security clearances, particularly after 9/11 are 
understandably harder to obtain and retain. Many clearances 
take over a year to issue from the time of submittal to the 
agency. This is a great disadvantage to small businesses 
designed to work with a number of Federal organizations that 
deal in high-tech, defense, and national security fields. Many 
small businesses are not able to hold on to valuable clearances 
and as such find obtaining similar work in the future more 
difficult to get.
    The desire to deal with only one prime contractor forces 
either a clear advantage to the incumbent large company that is 
teamed up with a favored small business or the creation of 
elaborate and at times inefficient small business teaming 
arrangements. Either way, the Government loses out on bringing 
in a broader talent pool for multiple contracts to small 
business.
    Most, if not all, if not close to all, small businesses 
start out as micro-businesses, that is, businesses averaging 
over a 3-year period less than $2.7 million a year. However, to 
get to do even this much business requires contract 
opportunities that allow a start-up small business owner to 
prove his or her capabilities to a Federal manager willing to 
provide an opportunity. Many of our members have stories of 
how, was it not for the wisdom and foresight of a particular 
manager, they might not have had the opportunities needed to 
succeed later on.
    It is important to understand that the real decisionmakers 
for these types of opportunities are not high-level managers, 
SADBUs, or even procurement officials. They are the technical 
managers. So access to these individuals can be obstructed by a 
labyrinth of offices who are either not knowledgeable enough of 
the programs or focused on much larger procurements. Once 
accessed, those managers need to be sufficiently trained to 
understand the best mechanisms for procuring the services of a 
small company.
    Agencies have relied on the subcontracting to small 
businesses through large prime contractors. These large 
contractors, sometimes called management and operating, or 
M&Os, are being relied on to fairly and ethically carry out the 
small business contracting objectives of the Federal 
Government. However, the performance metrics used by the 
Federal Government don't evaluate or hold to account the 
sometimes questionable behavior of some M&Os.
    In one instance, an 8(a) SDB had been awarded a competitive 
contract to provide cost estimating and project controls, only 
to learn after several months of frustration that sole source 
contracts for the same scope were being awarded to non-8(a) 
businesses with close ties to procurement and technical 
managers. After several attempts to work with the prime to 
correct the matter, the small 8(a) decided to focus business 
development elsewhere rather than be blackballed by a large 
company.
    Another example is the practice of large prime contractors 
prostletizing the employees and ideas of small subcontractors. 
This practice appears to be rampant in the high-tech 
industries. There are exceptions, but this is a common 
complaint among small businesses. Why do some large businesses 
do this? Well, in areas where large businesses enjoy virtual 
monopolies over the work, the answer is because they can.
    The examples given are from real life experiences of small 
businesses. There are other issues, such as access to 
affordable capital, rising health care costs, and cuts to the 
resources within the Small Business Administration and 
procurement personnel that weigh heavily on the prospects for 
small business contracting in the Federal Government.
    We are seeing a transformation of the small business 
community to include a larger variety of products and services 
than ever before. With this change is an obligation to 
understand the old and emerging challenges facing small 
business. We in the various chambers and other business 
organizations stand ready to partner with our Government to 
lead the way to reform Federal procurement and business 
practices in harnessing the power of small business.
    Thank you very much.
    [The prepared statement of Mr. Martinez follows:]

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    Senator Cardin. Thank you very much.
    Let me start by talking about BRAC for one moment. As I 
said earlier to the previous panel, this is an opportunity to 
expand the pie so it gives you certain opportunities that would 
otherwise not be available because it is new contract work. I 
am interested in knowing as to whether responsible parties in 
procurement related to BRAC have been in touch with you in 
order to try to figure out strategies to get more participation 
from small business and minority businesses. I will start with 
Mr. Frazier.
    Mr. Frazier. BRAC? I read about it every day, but there has 
never been--I have not received one call from any government 
procurement, not one. Not one.
    Senator Cardin. Mr. Green?
    Mr. Green. Neither have I, Senator. What we are relegated 
to is an informational pipeline organization within the county 
that keeps us informed of posting on upcoming things involving 
BRAC. But we haven't had any contact with any official from the 
Government.
    Senator Cardin. Mr. Martinez?
    Mr. Martinez. Neither have we.
    [Laughter.]
    Mr. Martinez. We do have an e-mail----
    [Laughter.]
    Mr. Martinez [continuing]. For a meeting in January.
    Senator Cardin. And I know that there is a lot of outreach 
being done by our counties and by different entities, but it 
seems to me that the Federal Government has a responsibility 
here and should have been planning some strategies, not 
necessarily individual contracts, but strategies so the pool 
would be as large as possible to expand opportunity in the 
areas that we have talked about. So it is somewhat 
disappointing that there has been no outreach to the leaders of 
the different organizations that encourage minority 
participation.
    Let me go to this bundling problem, because I have heard 
about this. We have had other hearings in our Committee on 
bundling, and you are correct, we are supposedly doing things 
to bring an end to these practices of abuse. On the ground, it 
is still happening? You are still finding it a major issue from 
your testimonies?
    Mr. Frazier. Yes, but it is sort of disguised now, and that 
is why in my testimony I placed emphasis on increasing the task 
orders, because it has become easier for the procurement 
officers if they have a certain comfort level in dealing with a 
particular contractor to, oh, you have done a good job. I am 
going to reward you with additional work. Well, one may not 
look at that as bundling, but in effect, it is because that 
opportunity was not put out to bid. So it was a lost 
opportunity perhaps for the Government, because that same 
procurement could come at perhaps a lower cost, or best, a new 
innovative way of achieving that. And so you are losing that 
potential intellectual capital for someone coming up perhaps 
with a better idea, plus you are losing that opportunity for a 
lower price. You never know unless you get a bid.
    Senator Cardin. Mr. Green, I think it was in your testimony 
you said that small companies or minority companies are 
concerned about challenging too much because they could be 
prevented from getting work, that it actually could be used in 
a punitive way if they tried to be aggressive in saying, this 
company is not a small business and yet they are getting some 
of the percentages, or the bundling is being used to prevent 
the work from really going to the companies it should, or the 
prime contractor is abusing the relationship with a 
subcontractor in order to appear to be getting the job done for 
minority set-asides, but it is not real. It is having a 
chilling effect on companies that want to challenge this but 
are afraid to lose work if they do.
    Mr. Green. Well, I can tell you that we are very thankful 
for the State of Maryland and its efforts to clean it up. But 
for sure, the practice was running rampant long before Maryland 
did its reform. There was no vehicle in places for small 
businesses really to take their message that were concerned 
about it. Oftentimes, they just gave up and then it became a 
situation where the ability to stay in business was preeminent, 
so we had to step forward to make it right.
    When the Governor convened the commission to study it, that 
was the best thing that could have happened to the State of 
Maryland. They took the commission study and they corrected the 
problem and now the Government monitors the bid. So if there is 
a small business subcontractor who is listed in the bid and he 
is not a minority certified by the State of Maryland, the bid 
is kicked out. So that problem has literally been solved in the 
State of Maryland, but we believe that is something that an 
overhaul of the system in the Federal Government could 
undertake.
    Senator Cardin. Mr. Martinez, do you want to add anything 
on the bundling issue or the problems there?
    Mr. Martinez. Yes, sir. Basically for me, it is, as Mr. 
Frazier has mentioned, sometimes it is not very evident. It can 
be pretty sneaky in the way that happens, and that is why I 
broke mine out into terms of scope and requirements. I had a 
member that basically said that he was trying to go after a 
procurement and it was a $6 million-a-year set-aside, and the 
requirement was for 40 Q-cleared, that is top secret 
clearances, to be made available on day one. Do the math. That 
doesn't add up. So it was just an obvious attempt at basically 
eliminating any small business that might have an interest in 
doing that.
    Senator Cardin. Mr. Green, you seem to have a pretty 
sensible suggestion of some form of unified certification 
process. It seems like that would save a lot of money. I can 
understand there may be some variances that have to be dealt 
with, but a lot of the information is similar. What is stopping 
that? That seems so common sense.
    Mr. Green. It is a combination of things. First of all, you 
have to have the buy-in from those that are not seeking SBA 
certification. See, primarily, we believe that within the 
framework is that if you have SBA certification, which is the 
hardest certification to get, then you should be exempt from 
requiring anybody else's certification as long as there are 
Federal dollars in the project, and for the most part, 99.9 
percent of those projects are going to have some form of 
Federal dollars in it.
    But there is a segment of the small business community that 
is not seeking SBA certification at all. They are doing what 
they can do to make a living through a different route. So if 
you take and create a single source certification that would 
make it easier--nothing is easy, but make it easier to 
participate, then we believe that they would come and step 
forward.
    Our problem is that we haven't had an opportunity to sit 
with anybody from the Federal Government and talk about the 
possibility of a single source certification. We hear others, 
but nobody has invited us to the table and it is a message that 
we are trying to carry every time we get a chance because we 
want to see opportunities increase for all the small local 
minority-owned entrepreneurs.
    Senator Cardin. Let me ask one additional question, and 
that deals with the PCRs and the numbers of the PCRs and how 
helpful they are to dealing with the abuses in bundling or 
subcontract-prime contract issues. I have my doubts whether 66 
will be enough, knowing the workload, knowing the problems that 
are out there. My staff tells me that the number that is needed 
is substantially higher than that number.
    But having said that, I would like to get your assessment 
as to how important it is to have an adequately funded resource 
available to deal with these abuses that occur in minority 
contracting and procurement issues. Any thoughts on that?
    Mr. Green. I think we need to have one in Prince George's 
County.
    [Laughter.]
    Mr. Green. I don't like that----
    Senator Cardin. And Congressman Sarbanes wants to make sure 
there is one in Baltimore.
    Mr. Green. There is a need to increase the number. But I 
don't think that we can take a regional approach to this. 
Maryland is growing in its small business capacity, probably 
outpacing any other area in the country. So when you group us 
into Maryland, Virginia, and Washington, DC, it always seems to 
go to the Federal center and not out to the suburban community. 
I know it doesn't come to Prince George's County but it goes to 
Northern Virginia. So I would like to see that number increase 
and Prince George's County become a beneficiary of that.
    Mr. Martinez. I would agree with that. I think that 
Maryland needs a larger share of resources from the Small 
Business Administration, and we have more Hispanic-owned, 
minority-owned, women-owned businesses probably per capita than 
just about any State in the Nation. And so there is a real need 
here.
    Without the SBA, I have to say, without the SBA, and as a 
small business I can say this, a lot of that segment of 
business is going to be lost. You have to have answers, and you 
have got to have the right answers, and you have got to have a 
government agency that is willing to step in and work with the 
people who are providing the business opportunities.
    Senator Cardin. Congressman Sarbanes?
    Representative Sarbanes. Just a couple of questions 
quickly. I am curious as to the extra kinds of barriers and 
obstacles that exist for minority-owned businesses over top of 
the issues you have discussed for small businesses generally, 
because small businesses are affected by the bureaucratic 
nature of things, they can be affected by bundling, they are 
going to be affected by lack of education opportunities in 
terms of what is available, the information that is available 
on what is out there, et cetera. But you alluded to continuing, 
I think all of you did, continuing discriminatory practices 
that exist above and beyond the difficulties that any small 
business would encounter, and I wondered if you could just be a 
little more specific about the kinds of practices or issues you 
see in that respect.
    Mr. Frazier. Well, one hates to use this highly-charged 
word in America, but it is racism. As an example, if you took a 
survey in this room of minority business owners, I would 
venture to say 95 percent or more are first-time business 
owners, first-time entrepreneurs. And if you dug even deeper, 
you would find that no one in their family had ever owned a 
business before. So when you talk about the initial barriers, 
it is, one, comprehension, understanding. We want to do a good 
job. We believe we can. We have worked for someone else and 
made them millions of dollars. Now let us do it on our own. But 
then when you step out, you have no money. All you have got is 
your house and your wife says, ``Nope, you ain't putting that 
up.''
    [Laughter and applause.]
    Mr. Frazier. And then when you attempt to win business, you 
are approaching someone in a government--an employee of the 
Government, a procurement officer who, for the most part, 
doesn't look like you, doesn't attend the same club, church, 
whatever, and no one wants to beg, but you find yourself in a 
begging position. Again, those relationships that those 
procurement officers have with those primes that have won, won, 
won, I mean, I don't want to say that things are going on 
shady, but----
    [Laughter.]
    Mr. Frazier. Those are the barriers.
    Mr. Green. One of the additional barriers is the fact that 
we have a lot of people in government who are making decisions 
for business owners who have never been in business before.
    [Applause.]
    Mr. Green. So that in itself is creating a serious problem 
and that is part of the streamlining process that I am for. 
Most of the small businesses--I am a Prince Georgian, so I 
really want to stand up for my hometown. Most of the businesses 
in Prince George's County seek county and State contracts.
    Now we have this new thing that is floating around in our 
State and counties is a living wage bill. It is a social bill 
that has become a business killer, all right, because what they 
have done, government is setting wages for private businesses 
and that is one of the worst things that could have happened to 
us. If you are going to hire this person for this contract, he 
or she must be paid a certain amount of money. Big businesses 
tend to be able to spread their costs over a number of people. 
They can handle it a little bit better than the smaller guy.
    So those are, to me, they are institution, I will call them 
institutional barriers. I won't call them discriminatory 
barriers, but institutional barriers, but they were social 
issues brought to the table on the backs of unions. They could 
have looked at other alternatives like tax breaks for people 
who were in an income level that needed a little bit more to 
work with, but they didn't do that. Counties and States bought 
into this living wage as, well, this is something that has got 
to happen.
    I believe that everyone should make a decent living, but I 
don't think that the Government should be in the business of 
setting wage requirements for us. We hire people based on their 
ability to do the job and their qualifications for the job. So 
for me to hire an $11.50 person that I would normally pay $8.50 
for, that is not a good thing and that is part of the problem.
    So what happens is small businesses don't go after these 
contracts anymore. They just can't afford to, so they stay away 
from them. So that is another form of discrimination, I 
believe, Senator, or Congressman.
    Representative Sarbanes. Thank you. I do not have any more 
questions.
    Senator Cardin. Congressman Sarbanes, thank you very much 
for that question. I think it is a very critical question, 
because we are here to help small businesses and minority 
businesses, women-owned businesses, and Senator Kerry has 
really been the leader on our Committee on the special burdens 
and problems that minority businesses face and I have joined 
him in that effort because we are looking to address the 
shortcomings in our system for minority businesses, the 
problems that they confront that are different, and I think Mr. 
Frazier did a good job in outlining some of those problems.
    But we are very mindful of the need for capital and the 
difficulty that minority businesses have had in raising 
capital, and the SBA programs that are aimed in this direction, 
the numbers do not reflect what we think are the needs of the 
country in that regard. So we are trying to figure out ways in 
which we can target these programs to where they are really 
needed to show better opportunities, particularly in the 
minority community.
    But I think the question that Congressman Sarbanes asked is 
a critical question, because we are here to help small 
businesses and minority businesses and women-owned businesses 
and our veterans and our disabled population and those who we 
have targeted for help, but the answer is not always the same 
for each group and we should be mindful of that because we need 
to tailor the programs to meet those needs.
    I want to thank Mr. Martoccia for remaining here to listen 
to these concerns because I think we all need to work together 
in order to try to figure out the solutions to these problems, 
so I thank you for staying during the panel.
    We are now going to move to our third panel, starting with 
Mel Forbes. As our group comes up, I will save a little bit of 
time by starting with the introduction of Mel Forbes, who has 
spent more than 30 years in key management executive positions 
in corporate America with such companies as MCI 
Telecommunications, Amtrak, Geico Insurance Company, NASA Space 
Center. Mr. Forbes currently serves as CEO of Wilkerson Sports 
Enterprise and founder and CEO of Forbes Consulting and 
Associates. Mr. Forbes' services include business development, 
political strategies, government relations, and 
telecommunications technology services.
    Mr. Forbes, it is a real pleasure to have you before the 
Committee and we welcome your testimony.

STATEMENT OF MELVIN FORBES, PRESIDENT AND CEO, WILKERSON SPORTS 
    ENTERPRISE, FORBES CONSULTING AND ASSOCIATES, LARGO, MD

    Mr. Forbes. Thank you, sir. Good afternoon to everyone and 
let me just say that it is a privilege to be here. I have a 
vested interest being here for several reasons. One is because 
my son attends this great university, and God willing, I hope 
that it will be his last year.
    [Laughter.]
    Mr. Forbes. I also want to thank Senator Cardin, Senator 
Kerry and Mr. Sarbanes for having the sagacity and perspicacity 
to have this type of hearing. I already have provided written 
testimony, so to save time, can I just cut to the chase? Let me 
just talk about three things very quickly because I don't want 
to be redundant. I want to talk about policies, procedures, and 
people.
    First, policies are very important. When we take a look at 
the elements that are in the current legislative policies for 
procurement regarding small businesses, it is clear some of the 
language is outdated, out of touch, and almost difficult 
sometimes for minority businesses to participate. Some of the 
language in the policy makes it very difficult for small 
businesses to sometimes attain the level of Federal procurement 
awards.
    When I look at the process, we are in the 21st century and 
it is amazing to me that we can send people to the moon, we can 
do heart transplants, we can do all kinds of creative things, 
but when it comes to minority businesses, it always seems that 
we are never moving forward but moving backwards.
    I would suggest to you that maybe it has to do with the 
timing of our current political administration, that's 
determining whether or not we are progressing. I have always 
believed that progress is upward movement and not just moving 
in place or moving backwards. In the last 8 years, I have seen 
a dramatic move backwards, when it comes to dealing with 
minority businesses by the current administrations to the point 
it just was mean-spirited.
    Now let's discuss the third and final element: people. In 
some cases there are people doing a job without knowing the 
job. Dr. Green spoke very eloquently about it when he said that 
you have got people making decisions that don't even understand 
how businesses work. And then you have these specialists who 
are the same people that are supposed to help you that are 
often the biggest barriers. If they like you, they will help 
you. If you are on the right side of their ledger, they will 
help you. If not, you're in trouble.
    In order to secure and ensure there is fairness, we must 
bring people to a plateau of understanding. A lot of our 
minority businesses don't even understand the process of how to 
really get involved and these people, these specialists are 
there to help them. But unfortunately, a lot of them are 
inadequate in their training. They get information that is 
delayed and sometimes outdated, and I am speaking from 
experience now.
    So I think that the largest room in the world is the room 
for improvement, and God knows this one has a lot of room to be 
improved upon.
    I want to thank you for the opportunity and I would wait 
for any questions that you would have. Thank you.
    [The prepared statement of Mr. Forbes follows:]

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    Senator Cardin. Thank you very much, Mr. Forbes, for your 
testimony.
    Carmen Ortiz Larsen is the president and CEO of AQUAS, 
which was founded in 1990. Ms. Larsen has served as the 
president of the Hispanic Chamber of Commerce of Montgomery 
County, worked with the U.S. Small Business Committee in 
support of legislation impacting small business, served as vice 
chair of the Latin American Management Association. Ms. Larsen 
also serves at the Montgomery County Workforce Investment 
Board, the Board of Montgomery Alliance, a charitable 
foundation, and has served on the Montgomery County Gang 
Violence Prevention Task Force, just to mention a few of her 
attributes.
    It is a pleasure to have you here.

 STATEMENT OF CARMEN ORTIZ LARSEN, CEO, AQUAS, INC., BETHESDA, 
                               MD

    Ms. Larsen. Thank you. I want to thank you for calling this 
small business meeting and allowing us to provide testimony 
regarding small business and particularly minority small 
business. I am very proud to be part of these panels because I 
have heard so much about real issues that we deal with every 
day.
    I just want to let you know, I have been running a small 
business for 25 years. AQUAS started in 1990, but I have been a 
small business owner for over 25 years in Maryland. My company 
has successfully been a contractor to the Federal Government 
for many years, so I have been a prime contractor to the 
Federal Government for many years after I set my mind to do 
that. I was a subcontractor prior to that. We are a graduate of 
the SBA 8(a) program and I am an American Hispanic and I have a 
company of expert business process analysts and information 
technology folks.
    I have the qualifications and education to be in corporate 
America, but I chose to be a small business owner because I 
believe that small business is where you can get to create 
valuable solutions for the public sector and bring in the 
talent and the technical know-how to have innovative solutions 
and I really like that. I think it is part of the American 
dream that I believe in, which is waning a little bit, but I 
still believe very strongly that that is very important.
    I want to particularly emphasize that I believe that 
minority small businesses and the ability to make them 
sustainable is critical for developing healthy communities. We 
have a lot of minority communities that are economically 
disadvantaged. I think the fact that they can see that there 
are success stories in minority businesses is a way to get the 
community to be inspired and move forward. I think that this is 
really critical and that is why minority small business is 
very, very important. I think we lose sight of that a lot, and 
we say, well, what about these social issues in minority 
communities, and yes, they are important and we have businesses 
that partner or provide services to address these issues. But I 
just want to emphasize minority small business is important.
    The public sector has the power to make or break our 
tomorrows. Federal Government's contract awards still heavily 
favor large businesses, large companies with well-known names. 
These are companies that can afford a greater lobbying power 
and exercise influence on decisionmakers, and I think that is 
part of what is going on where we get into a disadvantaged 
situation.
    A lot of times, Federal legislation is put in place because 
there are some national priorities where it seems an 
opportunity to justify expediting procurements to well-known, 
well-established corporations that are a known entity. I think 
legislation proposed under the umbrella of expediting 
procurements for critical missions are detrimental to small 
businesses. There are a lot of vehicles that facilitate 
awarding contracts to small businesses. Why not use those in 
certain situations that require expediting? Why not afford 
those small businesses those opportunities?
    We need a broader range of procurement options. Government 
small business programs also are first in line for budget 
cutbacks. I mean, you mentioned this with regard to PCRs. We 
talked to SBA in terms of why they were cutting back on their 
budgets for PCRs. SBA has a shortage of business opportunity 
specialists.
    Mr. Forbes mentioned the specialists. I want to clarify, I 
believe he is talking about business opportunity specialists. A 
lot of times, the small business procurement world has 
terminology and words that obfuscate and confuse people and you 
get into traps where you agree on legislation that really is 
detrimental to small business.
    I want to say, when you go into an 8(a) program, you are 
appointed a business opportunity specialist that is supposed to 
work with you so that if you do see an opportunity and you want 
an advocate to go and speak on your behalf or give you a letter 
saying, yes, this small business is qualified, you go to your 
business opportunity specialist. I am going to wager that a 
greater proportion of the 8(a) firms don't even know that they 
have a business opportunity specialist. A lot of them don't 
even know what they look like, OK? I just want to point this 
out.
    And the SBA is cutting back on business opportunity 
specialists. I was sitting there when you were asking the 
gentlemen about the PCRs. I want to also ask the question with 
regard to the business opportunity specialists, providing 
enough people to support the growing small business community. 
When I ask the SBA folks who are on the ground why they don't 
do more, they say, ``because we have too many companies 
assigned to us and we don't really have the time.'' So I just 
wanted to bring that up.
    Our Government increasingly relies on the perceived wisdom 
of representatives from large corporations to provide policy 
guidance and recommendations for the acquisition of products 
and services. I want to point this out because I have gone to 
Departments where I have spoken to the E-Gov person or the 
person in charge of the technology and they say, you know, ``I 
would love to sit here and talk to you about what you have 
available, but I am relying on company fill-in-the-blanks who 
has always been my advisor for those,'' and generally it is 
some large corporation that has their own connections and their 
own preferences.
    So I would like to point out that this is not going to 
result in a better America. This is just taking the comfortable 
way out. Those are people who don't want to take the time to 
find out for themselves what is available out there that can 
give us better solutions in the public sector.
    Negotiations and paperwork, I don't need to tell you that 
these burdens are very big on small business. Small businesses 
are forced to accept lower prices to compete in the 
marketplace, whether because they are subcontractors and the 
prime contractor is giving them really what comes across as a 
favor, a handout, so they drive the prices down. So even though 
something may be worth a certain amount of money, you are 
forced to take a lot less just to have the opportunity, but 
also from the Federal Government.
    We have been in situations where we have been asked to come 
in as an 8(a) to take on a job that a large corporation of 
well-known established name used to staff and we are told, 
``please hire this person.'' OK, that person comes with a 
pretty high salary, or actually for them to come and work for 
you, they want an even higher salary, so you put the 
appropriate price on and they say, well, no, you are a small 
business. You ought to be able to take less. So we have been in 
situations where our margins are so small that we are making 2 
or 3 percent margins, and to borrow the money, we are paying 
out at least that, OK.
    And so it is really very difficult, especially if you are 
on a cost-plus-fixed-fee contract, and again, here is 
terminology that sometimes is difficult in a sound bite to get, 
but cost-plus-fixed-fee contract, sometimes some Federal 
agencies go that way. Well, they are really meant for 
corporations that are providing 20, 30 people. Well, when you 
are providing one or two people and they say, ``it is a cost-
plus-fixed-fee contract, by the way, and it is on site so your 
risk is low so you have to accept 3 percent profit margin''. 
Then you have a hard time because you can't spread the cost 
around, and plus then they always come to you to ask you for 
more than what is covered.
    All right. So I want to just say three points. There is no 
direct path to obtain facility clearance. I know I mentioned 
the PISA program at NSA. They have a model. Why doesn't DOD use 
this?
    I want to clarify that it is not just the length of time 
that it takes to get a security clearance but it is the fact 
that you can't get an award unless you have a facility 
clearance. And I want to say that having a facility clearance 
means that you have clearances for your key management people. 
It is not some voodoo thing, guys. It really isn't a voodoo 
thing. It is just that we have to have the opportunity to have 
a contract vehicle or some kind of legislation in place that 
allows us to apply for our own facility clearance if the 
Government won't let us do it any other way. It is not just the 
time, it is the access. That is what the NSA model is. It is 
actually the access to that.
    We need contracting officers and program managers to have 
better training about how to deal with small business and being 
sensitive to that so that we don't get talked down to by these 
folks. Sometimes we know more than that.
    And also, procurement evaluations should offer a 
``handicap'' score for small businesses. There is a best value 
award method and I think that there should still be a 10 
percent price preference.
    Thank you very much for your time.
    [The prepared statement of Ms. Larsen follows:]

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    Senator Cardin. Thank you very much for your testimony.
    Our final witness is Tim Adams, who is president and CEO of 
Systems Application and Technologies. He serves on numerous 
committees and foundations, among those Bowie State University 
Foundation, Greater Prince George's Business Roundtable, 
Doctor's Community Hospital Foundation, U.S. Chamber of 
Commerce, the National Black Chamber of Commerce, the 
University System of Maryland Foundation Board of Directors. 
Tim is one of the most active individuals we have in our 
community.
    It is a pleasure to have you with us.

    STATEMENT OF TIMOTHY ADAMS, PRESIDENT AND CEO, SYSTEMS 
         APPLICATION AND TECHNOLOGIES, INC., LARGO, MD

    Mr. Adams. Thank you. Senator Cardin, Congressman Sarbanes, 
thank you for being here today. I applaud the choice of holding 
this hearing at Bowie State University, an institution that has 
a proud history of producing small business leaders and 
entrepreneurs, and the symbolism of our meeting in the Thurgood 
Marshall Library, named for the American hero who did so much 
to provide opportunity and justice to millions.
    I also would like to praise you, Senator Cardin, for your 
strong record on small business issues, which was underscored 
by your meeting earlier this year with Prince George's County 
small and minority business owners at which you repeated your 
promise to continue to find ways to improve opportunities for 
all small business owners. That commitment was recognized 
throughout the State.
    The title of today's hearing is very pertinent to our 
collective efforts to use the engine of small business to add 
to economic growth and job creation in society. And as much 
progress as we have made in our society towards enabling 
minority small businesses to make productive contributions to 
this process since Justice Marshall was first appointed to the 
High Court over 40 years ago, the issue of leveling the playing 
field is still a matter of critical importance.
    This subject came up when the man who appointed Justice 
Marshall, President Lyndon Johnson, was asked why he aimed 
policies aimed at leveling the field for minorities. Johnson, 
whose life experience taught him about the barriers that 
minorities and the poor of all colors have faced in our 
country, said the following wise words in response, quote, 
``You do not take a person who, for years, has been hobbled by 
chains and liberate him, bring him up to the starting line of a 
race, and then say, `You are free to compete with all the 
others,' and still justly believe that you have been completely 
fair,'' end quote.
    Please allow me to clearly state my position about a 
critical point relating to the issue of leveling the playing 
field. I do not assert that the only means by which the Federal 
Government can take positive steps to help minority enterprises 
contribute to society's vital work is to create contract 
bidding systems that benefits one particular group or another. 
I do recommend that the Committee use its influence over 
Federal contracting and programs run by the Small Business 
Administration and the Department of Commerce's Minority 
Business Development Agency to implement positive policies that 
encourage small and minority-owned business growth.
    The Federal Government can positively work to level the 
playing field through policies that help make capital more 
accessible, expand business education, promote a culture of 
entrepreneurship, reduce unnecessary regulatory burdens, and 
protect intellectual property.
    First, to help minority and other small business 
entrepreneurs get started, the Federal Government should 
encourage banks to provide more seed money to these risk takers 
by establishing a larger pool of federally guaranteed small 
business loans.
    Second, to help give new business the knowledge and know-
how to succeed, the Federal Government plays a small but vital 
role by providing institutions such as Bowie State University 
financial incentives and tools to create and enhance business 
incubators. These are facilities where faculty business experts 
can teach and provide support to budding entrepreneurs in all 
areas, from sales and marketing to law and taxes. Similarly, 
expand the amount of information they offer to potential small 
business contractors on their Web sites. Implementation of best 
practices in a timely manner is key to success.
    Third, the Federal Government can do more to recognize and 
tap the skills and wisdom of distinguished minority business 
owners on commissions dealing with important societal issues.
    Fourth, the Federal Government can creatively use the tax 
code with an eye towards encouraging small business growth by 
offering credits for investment and training and education and 
increasing the deductions for investments. With respect to 
small business regulation, we must guard against stymieing 
small business expansion through unnecessary and burdensome 
rules and reporting requirements.
    Fifth, to encourage small business entrepreneurs to be risk 
takers, the Federal Government must continue to zealously 
ensure that the Government is enforcing policies that protect 
firms' patent, copyright, trademark, and other vital 
intellectual property rights.
    Finally and most importantly, the old adage, people often 
don't do what you expect but what you inspect, is truly still 
around in Federal contracting. Therefore, the Federal 
Government must implement a 21st century technology with the 
capability of real time minority business tracking analysis and 
strategic planning. This system should have the ability to 
identify disparities in the marketplace and to help determine 
if those disparities are the result of discrimination, benign 
or otherwise. The system should assist in determining if race-
conscious or race-neutral programs should be implemented to 
address any identified disparities throughout the Federal 
marketplace. The technology should be implemented throughout 
the Federal Government. It should also provide an overall 
Federal report card on minority business participation as 
required by oversight entities. This type of technology, which 
is Croson, Adarand, and now Western States Paving compliant, is 
available today in the marketplace and could provide the 
backdrop for a serious minority business develop initiative.
    To sum up, all of these proposed policies will help create 
win-win situations and provide a useful framework for 
Congressional action to level the playing field.
    I thank the Committee for the honor of speaking to you 
today.
    [Applause.]
    [The prepared statement of Mr. Adams follows:]

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    Senator Cardin. We thank all the witnesses. It has been 
extremely helpful, I think, to the Committee to hear those of 
you who are in the field and have to deal with the challenges 
that are out there.
    There are several things I believe Congress can do to help 
in our role, and one is to look at strengthening of the 
underlying statutes and programs, and as I mentioned from the 
beginning, Senator Kerry is committed to doing that. There has 
been legislation already moved through our Committee and I 
expect there will be some additional bills that are going to be 
considered.
    Of course, the second role we have is oversight, and one of 
the reasons we are having this hearing is to hear firsthand and 
to try to get our agencies working more effectively in 
administering the programs and doing that oversight as 
aggressively as we can.
    The third way is the budget support, and I keep coming back 
to the budget support. Ms. Larsen, you mentioned the services 
that are provided under 8(a) and the numbers have gone up 
dramatically of those participating in the 8(a), yet the budget 
support by this administration has been to reduce funding in 
these levels. The PCRs that we have been talking so much about, 
it seems to me that if you had adequate services provided here, 
concerns of bundling will be much less. Bundling goes forward 
because there is no one there to stop it. So you need to have 
people there, which is what Mr. Adams was referring to as far 
as having the people who can really implement the program of 
enforcement.
    We really do appreciate SBA having this report card, but 
now you have got to follow up on it and they have to do that. 
So I really do challenge this administration's commitment on 
budget support for this agency because I think they need a 
stronger budget and we are going to be working for that as we 
go forward.
    Ms. Larsen, I want to ask you one specific question because 
you and I have had many conversations about security clearance 
issues. I was surprised by the brevity of your statement in 
that regard. Normally, you are----
    Ms. Larsen. Well, you had the hammer ready.
    [Laughter.]
    Senator Cardin. But you mentioned and I am interested in 
the approach that NSA takes versus DOD. Perhaps you could 
elaborate. It seems to me that we have had progress made in 
NSA. Perhaps you could talk a little bit more about that, 
whether this is a much better model that we should be looking 
at to deal with the clearance issues which become a major issue 
for opportunity.
    Ms. Larsen. All right. The NSA model just happens to be the 
only model I know of, and so I talk about that--and I have 
sought other avenues, but I haven't seen any. So just to 
explain that a little bit better, when you bid on a government 
contract, increasingly, you are going to be required to have 
facility clearance. In order to have facility clearance, you 
have to already have a contract that requires security 
clearance. So if you are not already, well, you are not going 
to get that award.
    If you do have facility clearance and your contract ends 
and you don't have another contract in line that requires you 
to have facility clearance, you then lose that clearance, OK. 
If you have facility clearance, you can then clear your own 
people, you can bring in and hire people that are already 
cleared and what is called ``hold their clearances'' and so 
forth. So there are a lot of benefits to that. I can't, if I 
don't have facility clearance, I can't hire somebody who has a 
security clearance to go and work on a government contract 
because I can't hold their clearance.
    So what NSA has done, they have something called the PISA 
program, and I don't have all the details in front of me on 
that, but I did forward them to your office.
    Under the PISA program, and it was the Small Business 
Office at NSA that drove this forward, they will accept an 
application from a small business who wants to enter into the 
program and award them--and there are certain criteria you have 
to follow--but they will award them a contract, which is called 
a no work order contract--there is no value to that contract. 
This is where you get a contract under which you will have five 
positions that you can fill of people who have security 
clearance. Now, I think two or three of those positions are 
principals of the company or have to be fixed positions, what 
they call fixed positions--I think it is two of them are fixed 
positions and three are rotating, or vice-versa.
    But what it allows you to do is to bring in people who are 
cleared and to work for you for a while, and during that time 
period what you can use it for is to go and talk to people at 
NSA and do presentations and sell them on your product. So that 
is what the model is about. So you have a 5-year contract, or a 
3-year contract--I think it is just a 3-year contract where you 
can have this.
    If DOD had something similar, people could then apply to be 
under this contract, which would then allow them to bid on DOD 
contracts that require clearances.
    Senator Cardin. Thank you for that.
    To Mr. Forbes and Mr. Adams, I want to explore a little bit 
the concerns about small businesses being intimidated not to 
raise too many issues. My staff prepared for me a list of 
Fortune 500 companies that have qualified for small business 
contracts, and that happens----
    [Laughter.]
    Senator Cardin. It does sound like a--but it happens 
because they acquire small businesses and it can count towards 
the set-asides, and whether that is abused or not is another 
issue. We also know that the Fortune 500 companies are the 
prime contracts and are used to allocate the subcontract work.
    We have heard, and we have some very creative small 
businesses, minority businesses that are out there that really 
would like to be prime contractors. They think they are 
qualified to do that, but they are afraid to go in that 
direction, at least I have been told, because they are worried 
about losing their existing work. I don't know whether you have 
run into these types of circumstances or not, but it seems like 
it is holding down the potential growth in this country in the 
areas that we would like.
    Mr. Forbes. Senator, let me just say that I think it is not 
just a myth, it is a fact that companies, especially small 
minority companies who understand they already have so many 
challenges to deal with just trying to get a contract, have 
sometimes been told by certain people, that if you don't make 
waves, you probably can wind up getting an opportunity. So it 
is not a myth. I was hoping to see in the room a couple of my 
clients who had firsthand experience in that, and maybe at a 
later date I will have them come talk to you directly.
    I represent a security company who has over 300 employees 
right here in Prince George's County and he was trying his best 
to get an opportunity and ran into that exact situation, where 
he was told, just don't make waves, you know. Your turn will 
come. Your time will come. It is just not your time. Now here 
is a man that is feeding 300 families times four. Small 
businesses are the life blood of a community, and he has 300 
employees and yet doesn't have an opportunity to participate 
further? I think there is something that needs to be looked at 
very closely and I would love to have an opportunity to bring 
him to meet you.
    Senator Cardin. I have also heard of cases where a small 
company who owned a patent was pretty much required to sign 
that patent to the larger company in order to be able to get 
the type of opportunities through Federal procurement. It seems 
to me that we have got to be able to address those problems.
    Mr. Forbes. Well, very often, small businesses are used to 
get contracts by majority companies. Once they get them, very 
little monitoring, if any, is done to find out how they are 
faring. So the minority company takes the majority company to 
the prom, but they take someone else home with them.
    [Laughter.]
    Mr. Forbes. And I think that is something that needs to be 
looked at.
    Senator Cardin. Mr. Adams?
    Mr. Adams. Along those lines, I think it is important to 
understand that fear is pervasive not just on very small 
businesses, but also larger minority businesses. As I sit here 
today, I, too, have concerns, even to the extent of what I may 
say here regarding repercussions to my organization. I have 
been doing government contracting almost 20 years now. We have 
people all across the globe. But there is still that concern 
about addressing critical issues in an open forum and the 
repercussions of that, and they are real. They are not 
perceived. I sit here as testament to that. We have sat here 
and we talked a great deal about security clearances. My 
organization did security clearances. We are now no longer 
continuing in that process.
    There are a lot of challenges that go along with being a 
business owner. There are a lot of challenges that go in the 
current marketplace. There are also a lot of concerns. When you 
have 500 people that you are responsible for feeding and 
families, one has to be very cautious in just how aggressive 
they can be.
    Having said that, I probably said too much already today.
    [Laughter.]
    Representative Sarbanes. Senator, I am going to have to 
leave----
    Senator Cardin. Let me recognize Congressman Sarbanes.
    Representative Sarbanes. I am going to have to leave, but I 
wanted to thank the witnesses and again thank Senator Cardin. I 
was actually going to ask a question about whether there are 10 
specific things you would recommend, and I think you got to 8, 
Mr. Adams, so there is clearly no shortage of good 
recommendations out there based on the knowledge and experience 
that you have accumulated and it is incumbent on us and others 
to make sure that we take that and try to move in the right 
direction with it.
    So thank you very much for your testimony. Thank you for 
letting me participate.
    Senator Cardin. And I would welcome, and it doesn't have to 
be at this moment, but if you have specific recommendations, 
please let us know. We are very much interested in protecting 
businesses from that sort of intimidation, so please feel 
comfortable to let us know what is happening and offering 
suggestions as to how we can be helpful in providing the type 
of protection to small businesses so that they can voice their 
concerns and be prepared to enter into direct business 
relations with government agencies, which I think they need to 
be able to do. So we would welcome that type of thought.
    Let me just thank all of our witnesses. As I said at the 
beginning of the hearing, this record will be made part of our 
committee record and part of the record we are using in order 
to carry out our responsibilities that I have already said a 
couple times.
    I want to, if you would just indulge me, to thank the staff 
from the Small Business Committee for allowing us to have this 
hearing.
    [Applause.]
    Senator Cardin. It takes a lot of work to put on these 
hearings, a lot of work, particularly when they are not in the 
Capitol itself. I sort of just show up and can ask the 
questions and preside over it, but it is the staff that really 
puts together all the work to make sure this happens, so from 
the hearing clerk to our staff on Committee to my personal 
staff, I want to thank them.
    This has been an incredible set of witnesses, but also the 
people that have been here participating in attendance. We 
thank you for making this an important moment, I hope, in 
trying to move forward with our commitment to help the small 
businesses and minority businesses, women-owned businesses in 
our community to carry out the mission of our country and the 
economic equality which has been for too long not met by 
policies in America.
    Thank you all very much. Our hearing will be adjourned.
    [Whereupon, at 3:34 p.m., the Committee was adjourned.]
      

                     APPENDIX  MATERIAL  SUBMITTED

      Responses by Calvin Jenkins to Questions from Senator Cardin
    Question 1. The following is a question you were unable to answer 
during the field hearing of October 29. I would appreciate a response 
from you or an appropriate individual with knowledge in this area.
    You were asked to provide the rationale and procedures involved in 
allocating Procurement Center Representatives (PCR) by locality as well 
as the dollar amounts in allocating such PCR. At the time of your 
response, you could not provide a complete answer as to how such 
distributions were determined. Please provide that information.
    Response. While SBA tries to place its PCRs in buying activities 
with the greatest dollar volume (at least $1 billion in federal 
contracting dollars), there are other considerations that come into 
play, such as the need to have at least one employee with expertise in 
Government contracting in as many states and regions of the country as 
possible. For example, we recently hired a PCR for Hawaii, and we are 
currently recruiting a PCR for Alaska. The buying activities in those 
states do not have as large a dollar volume as many of the buying 
activities in the Washington Metropolitan Area, but this approach 
ensures that we have an employee in each of those states who can handle 
Government contracting matters that may require SBA's involvement--not 
only those matters related to a PCR's duties but also those related to 
Certificates of Competency, Size Determinations, and subcontracting 
assistance.
    SBA currently has three (3) PCRs stationed in Maryland. They are 
located at Goddard Space Flight Center, National Institutes of Health, 
and the Naval Air Command in Patuxent River.
                                 ______
                                 
    Responses by Anthony Martoccia to Questions from Senator Cardin
    Question 1. I have been informed that DOD's security clearance 
process is too cumbersome and drawn-out and that contracts are 
generally awarded before a small business can even begin to obtain its 
clearance. NSA, on the other hand, has developed a fast-track system, 
to obtain security clearance for small contractors. Under ``fast-
track,'' the contractor comes in without a contract, obtains clearance 
and can then bid on subsequent contracts. Has DOD given any thought to 
developing a similar certification process based on the NSA ``fast-
track'' model? If so, please elaborate. If no, please explain why DOD 
would not create such a system given the problems it has had in meeting 
its small business goals?
    Response. Based on your description, it appears that you are 
referring to NSA's Provisional Industrial Security Approval (PISA) 
Sponsorship Program. The PISA Program is designed to assist small 
businesses in gaining personnel clearances for the express purpose of 
conducting classified discussions with NSA personnel. As the Defense 
Security Service (DSS) understands the PISA Program, NSA arranges for 
the underlying investigations, determines eligibility and holds the 
personnel clearances for those individuals cleared under the PISA 
Program. If NSA decides to issue a contract requiring access to 
classified information, the steps described above allow DSS to 
expeditiously issue a facility clearance.
    DSS has not recommended implementing the NSA Provisional Industrial 
Security Approval (PISA) Sponsorship Program across the Department for 
the following reasons:

     Prohibition Against Granting Personnel Clearances in the Absence 
of a Requirement: As stated in Executive Order 12968, Access to 
Classified Information, ``. . . eligibility for access to classified 
information shall only be requested or granted based on a demonstrated, 
foreseeable need for access. Requesting or approving eligibility in 
excess of actual requirements is prohibited.''
     Scalability of NSA Program: The NSA Program is founded on the 
unique needs of NSA. A ``fast track'' system to issue security 
clearances for contractors with no existing requirement for access to 
classified information across the Department would appear to provide an 
unfair advantage to certain contractors. It would also exacerbate cost 
considerations for personnel security investigations and adjudications 
without the concomitant need for access.
     Availability of Alternatives: In the event a DoD contracting 
activity wishes to issue a contract requiring access to classified 
information to an uncleared company, DSS is able to issue an interim 
facility clearance and associated interim personnel clearances to 
eligible U.S. owned companies and their employees within days of 
receiving required forms (e.g. Electronic Questionnaire for 
Investigations Processing).

    Question 2. Currently many small businesses are unable to bid on 
DOD construction contracts because they cannot obtain conventional 
surety bonds. However, these same contractors can and do utilize 
``individual surety bonds'' in state and local contract bids--Maryland 
is such an example. Why has DOD not adopted a similar surety vehicle to 
increase the number of businesses owned by minorities, women and 
disabled veterans?
    Response. The Department of Defense does accept individual sureties 
for all types of bonds, with the exception of position schedule bonds. 
The use of individual surety bonds is prescribed at section 28.203 of 
the Federal Acquisition Regulation.
                                 ______
                                 
     Responses by Michael J. Rigas to Questions from Senator Cardin
    Question 1. Currently, many small businesses are unable to bid on 
GSA construction contracts because they cannot obtain conventional 
surety bonds. However, these same contractors can and do utilize 
``independent surety bonds'' in state and local contract bids--Maryland 
is such an example. Why has GSA not adopted a similar surety vehicle to 
increase the numbers of businesses owned by minorities, women and 
disabled veterans?''
    Response. The use of bonds and surety vehicles for General Services 
Administration (GSA) construction contracts is governed by the Miller 
Act, 40 U.S.C.  3131, et seq. The Miller Act and its underlying 
regulations do not provide for the use ``independent surety bonds''. 
The Miller Act does, however, permit the use of bonds provided by both 
corporate and individual sureties, as well as bonds supported by a wide 
variety of other forms of security.
    Small Contractors that seek public or private contracts for which 
bonding is required may benefit from the Small Business 
Administration's Surety Bond Guarantee Program, which makes available 
SBA guarantees for bid, performance, payment, and ancillary bonds that 
may be issued on their behalf by participating corporate sureties.
    The mission of the SBA's Office of Surety Guarantees is to provide 
and manage surety bond guarantees for qualified small and emerging 
businesses, in direct partnership with surety companies and their 
agents, utilizing the most efficient and effective operational policies 
and procedures. Further information about the program is found at: 
http://www.sba.gov/aboutsba/sbaprograms/osg/index.html
    Where the size of GSA construction contracts make it difficult for 
small businesses to obtain either corporate or individual surety bonds 
in the amounts required under the Miller Act, GSA has an aggressive 
small business subcontracting program to help further the contracting 
opportunities available to small businesses.
    GSA is committed to supporting small businesses by maximizing the 
flexibility afforded to us under the law provided that the financial 
interest of the U.S. Government is adequately protected.

    Question 2. You were asked during the field hearing to review your 
records and provide information on the numbers and percentages of 
women, minorities, and disabled veterans small businesses participating 
in the GSA Schedule as well as dollar amounts associated with each of 
the categories cited above. Please provide that information.
    Response. Please see below a breakdown of the total number of GSA 
Schedules contract holders. This breakdown shows the number of small 
business contract holders and further breaks down the small business 
categories to show the various socio-economic groups you requested and 
the dollars spent via GSA Schedules related to each category.

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