[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                            SUBCOMMITTEE ON 
                       CONTRACTING AND TECHNOLOGY 
                      HEARING ON ENSURING STIMULUS 
         CONTRACTS FOR SMALL AND VETERAN OWNED SMALL BUSINESSES 

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

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             MARCH 12, 2009

                               __________

                     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 111-010
Available via the GPO Website: http://www.access.gpo.gov/congress/house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman

                          DENNIS MOORE, Kansas

                      HEATH SHULER, North Carolina

                     KATHY DAHLKEMPER, Pennsylvania

                         KURT SCHRADER, Oregon

                        ANN KIRKPATRICK, Arizona

                          GLENN NYE, Virginia

                         MICHAEL MICHAUD, Maine

                         MELISSA BEAN, Illinois

                         DAN LIPINSKI, Illinois

                      JASON ALTMIRE, Pennsylvania

                        YVETTE CLARKE, New York

                        BRAD ELLSWORTH, Indiana

                        JOE SESTAK, Pennsylvania

                         BOBBY BRIGHT, Alabama

                        PARKER GRIFFITH, Alabama

                      DEBORAH HALVORSON, Illinois

                  SAM GRAVES, Missouri, Ranking Member

                      ROSCOE G. BARTLETT, Maryland

                         W. TODD AKIN, Missouri

                            STEVE KING, Iowa

                     LYNN A. WESTMORELAND, Georgia

                          LOUIE GOHMERT, Texas

                         MARY FALLIN, Oklahoma

                         VERN BUCHANAN, Florida

                      BLAINE LUETKEMEYER, Missouri

                         AARON SCHOCK, Illinois

                      GLENN THOMPSON, Pennsylvania

                         MIKE COFFMAN, Colorado

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

                  Karen Haas, Minority Staff Director

        .........................................................

                                  (ii)

  


               Subcommittee on Contracting and Technology

                     GLENN NYE, Virginia, Chairman


YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon                TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama

                                 ______


                                 (iii)

  






















                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Nye, Hon. Glenn..................................................     1
Schock, Hon. Aaron...............................................     2

                               WITNESSES

Jenkins, Mr. Calvin, Acting Associate Administrator, Government 
  Contracting and Business Development, Small Business 
  Administration.................................................     6
Szabat, Mr. Joel, Assistant Secretary for Transportation Policy, 
  Department of Transportation...................................     8
Wegner, Ms. Gail, Acting Director, Office of Small and 
  Disadvantaged Business Utilization, Department of Veterans 
  Affairs........................................................    10
DeGraffenreid, Ms. Brenda Office of Small and Disadvantaged 
  Business Utilization, Department of Energy.....................    11
Oliver, Ms. Linda, Acting Director, Office of Small Business 
  Programs, Department of Defense................................    13
Klett, Mr. Mark, Klett Consulting Group, Inc., Virginia Beach, VA    25
Hart, Mr. Jim, Arriba Corporation, Norfolk, VA...................    27
Schmidt, Mr. James, President, Hohulin Fence Company; Goodfield, 
  IL.............................................................    28
Cavolt, Ms. Janice, JBC Corporation; Virginia Beach, VA..........    30
Brown, Mr. Justin, Legislative Associate, Veterans of Foreign 
  Wars...........................................................    32
Sharpe, Mr. Joseph, Deputy Director, Economic Commission, The 
  American Legion................................................    34

                                APPENDIX


Prepared Statements:
Jenkins, Mr. Calvin, Acting Associate Administrator, Government 
  Contracting and Business Development, Small Business 
  Administration.................................................    45
Szabat, Mr. Joel, Assistant Secretary for Transportation Policy, 
  Department of Transportation...................................    49
Wegner, Ms. Gail, Acting Director, Office of Small and 
  Disadvantaged Business Utilization, Department of Veterans 
  Affairs........................................................    53
DeGraffenreid, Ms. Brenda Office of Small and Disadvantaged 
  Business Utilization, Department of Energy.....................    61
Oliver, Ms. Linda, Acting Director, Office of Small Business 
  Programs, Department of Defense................................    68
Klett, Mr. Mark, Klett Consulting Group, Inc., Virginia Beach, VA    76
Hart, Mr. Jim, Arriba Corporation, Norfolk, VA...................    86
Schmidt, Mr. James, President, Hohulin Fence Company; Goodfield, 
  IL.............................................................   104
Cavolt, Ms. Janice, JBC Corporation; Virginia Beach, VA..........   106
Brown, Mr. Justin, Legislative Associate, Veterans of Foreign 
  Wars...........................................................   110
Sharpe, Mr. Joseph, Deputy Director, Economic Commission, The 
  American Legion................................................   114

Statements for the Record:
The United States Association of Veterans in Business............   119

                                  (v)

  


                            SUBCOMMITTEE ON
                       CONTRACTING AND TECHNOLOGY
                      HEARING ON ENSURING STIMULUS
                          CONTRACTS FOR SMALL
                      AND VETERAN OWNED BUSINESSES

                              ----------                              


                        Thursday, March 12, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Glenn Nye 
[chairman of the Subcommittee] presiding.
    Present: Representatives Nye, Clarke, Halvorson, Schock and 
Thompson.
    Chairman Nye. Good morning. I would like to call the 
Subcommittee to order.
    I am going to make a brief opening statement. First o fall, 
thank you all for being here today, and it is a very important 
topic that we are going to discuss, and I appreciate you coming 
over.
    I also want to say I really appreciate our other panelists. 
The second panel are members of our small business community 
and our veteran-owned small business committee, for joining us 
today.
    I am going to make a brief opening statement, and then I am 
going to turn it over to our Ranking Member Mr. Schock to do 
the same, and we will proceed to hear your testimony.
    As our nation digs its way out of the current economic 
downturn, small businesses will be vital to our efforts. In 
every previous recession, small firms have acted as job 
creating catalysts, putting our nation back on the path to 
recovery and helping to revitalize our economy.
    Even today small businesses create 60 to 80 percent of new 
jobs. The recently passed Economic Recovery and Reinvestment 
Act will provide entrepreneurs with important tools to help 
them again lead the nation back to prosperity.
    During today's hearing, we will evaluate the plans of some 
of the key agencies charged with administering projects under 
the Recovery Act. In particular, we will look at how they 
intend to engage veteran-owned businesses and insure that this 
sector receives its fair share of opportunities.
    In recent years, veterans have played an increasingly 
prominent role in the small business community. After 
reentering civilian life, many former service members decided 
to go into business for themselves. Veteran entrepreneurs often 
have the skills that make them a natural fit for the federal 
marketplace, and given their knowledge of the federal 
government, they frequently have a unique understanding of what 
procurement offices are looking for and need.
    The Recovery Act is expected to create work in many sectors 
that are veteran dominated, like engineering, telecoms, project 
management, and construction. And given these realities, it 
would be logical to conclude that veteran-owned small 
businesses will see a significant growth as a result of the 
Economic Recovery Act.
    However, if history is any guide, there is reason to be 
concerned. The federal government has not once in the last 
eight years reached its small business contracting goals, and 
even more shameful, the government has not met its modest goal 
of providing three percent of contracts to service disabled 
members.
    Now, given this track record, it's easy to understand why 
veteran entrepreneurs fear they may be overlooked now, and that 
would be unacceptable. Those who have sacrificed for our nation 
deserve a fair chance to compete for this new business. I think 
everyone acknowledges the importance of paying tribute to 
veterans, especially at times like these. However, when it 
comes to honoring those who have served, I would suggest that 
veteran entrepreneurs are looking for and, indeed, deserve more 
than just lip service. They want the opportunity to work and 
contribute to our nation's economic recovery.
    If veteran entrepreneurs are going to get a fair shake, 
then the agencies before us need to be engaged. That means 
outreach to the veterans community, informing veterans of the 
available contracts and insuring that there are resources 
dedicated to helping veterans navigate the procurement process.
    There is no time to lose. The Recovery Act calls for 70 
percent of recovery funds to be obligated in the next 18 
months, and a substantial number of these contracts will be 
ready to go in 180 days. Agencies need to make preparations now 
if they are going to do right by small businesses and our 
veteran entrepreneurs.
    Today, this Committee is putting government agencies on 
notice. We will not accept the tired excuse that the need to 
move hastily and sheer volume of contracts resulted in an 
inadvertent oversight of veteran owned businesses. If that 
happens, veterans will not be the only ones losing. U.S. 
taxpayers will, too.
    In many cases veteran entrepreneurs provide the best value 
for the taxpayer dollar. When veterans perform federal 
contracting work, it is a win-win. We create opportunity for 
those who have served our nation and ultimately the government 
receives high quality products and services at more competitive 
prices.
    Now, before I yield to Mr. Schock, our Ranking Member, for 
an opening statement, I just want to again thank all of our 
witnesses for being here. In particular, I want to thank the 
veteran-owned businesses who traveled from far and wide, 
including a number from the Virginia Second Congressional 
District, who waited an extra three hours yesterday in traffic 
to get up here. So thank you for taking the time to make it to 
be here with us, to share with us your stories today.
    And with that I want to yield to Mr. Schock, our Ranking 
Member, for his opening statement.
    Thank you.
    Mr. Schock. Thank you, Chairman Nye.
    I want to thank the Chairman for calling this meeting 
today, which will increase the oversight of our efforts to 
insure our nation's small business are fairly represented in 
the recently enacted American Recovery and Reinvestment Act.
    I also want to thank our panel of witnesses here today who 
have taken the time to travel, as was mentioned, some from far 
distances to help address this issue.
    I am hopeful that they will speak on behalf of previous 
experiences and also future plans for the potential usage and 
protection of small businesses and the specific funds 
associated with this legislation.
    As we all know, small businesses represent the single most 
important sector of the American economy. They represent our 
nation's greatest ingenuity, economic drive, and are the direct 
result of the American entrepreneurial spirit. Small business 
provide a domestic resource for homemade goods and products, 
the craftsmanship which is rarely matched anywhere in the 
world.
    Of further significance are those small businesses run by 
our nation's veterans. This group of business men and women 
represent some of the most capable and qualified anywhere in 
our country. The dedication and honor that many of these 
individuals took day to day with them during their active 
service to this country is in very much the same manner in 
which they operate their small business.
    That said, our small businesses are suffering. they are 
being pinched from the credit markets, the labor markets, and 
overreaching regulations, all while they are trying to stay 
profitable during the worst economic downturn since the Great 
Depression.
    When I first heard the idea of some sort of stimulus aimed 
at small businesses to help bolster our economy, I was 
optimistic for the potential opportunity and growth for those 
who create the most jobs in our economy, our small businesses. 
As I have said many times, there is not a member of this House 
that does not want to vote for a stimulus package.
    However, as the details emerged of the legislation that was 
passed, my optimism changed to skepticism and then ultimately 
pessimism. The more I heard about the American Recovery and 
Reinvestment Act, the less that I liked: less than six percent 
for infrastructure and less than one percent for American small 
businesses. With such a low amount of this bill directed 
towards truly stimulus related projects, there are even fewer 
protections for American small businesses to convince myself, 
along with a number of my colleagues, that the job creating 
small business sector will receive the number of federal 
contracts that it truly deserves.
    It was this lack of guarantee for aid to small businesses 
or the potential for such which led to my opposition to the so-
called stimulus, something that could truly not be stimulative 
if it offers no real aid to the sector of our economy which can 
have the most direct impact on the American workforce, our 
small businesses.
    That said, today we are here to identify how we can insure 
that the funding in the American Recovery and Reinvestment Act 
specifically designated for our nation's small businesses will 
actually reach its intend recipients. During the debate of 
House Resolution 1, I offered a bipartisan amendment with my 
colleague Adam Smith of Washington, which would have insured 
the government's ability to trade stimulus dollars from the 
federal government to the state level, to specific towns and 
finally for what projects.
    The purpose for this amendment would have required the 
citation of the awarded contractor and in some instances the 
subcontractor in charge of carrying out each project. At the 
same time, this amendment would have required the full 
announcement and disclosure of all stimulus related bids be 
posted on the recovery.gov Website, fully visible to any and 
all small businesses within a given region.
    Unfortunately, such an amendment was not adopted. However, 
I urge this Committee to consider a similar approach. The 
burden of this type of disclosure in reporting should be on the 
federal government to clearly indicate the intended spending of 
taxpayer dollars, not on small businesses to comb classifieds 
to look for project announcements.
    My ultimate fear remains that because of the time sensitive 
nature of this stimulus funding, it will be distributed in 
large quantities rashly, without appropriate deliberation or 
traceability with the reporting on recovery.gov being a shadow 
of what was promised.
    I also worry that we will be revisiting this issue again in 
two years or four years or several months once we learn again 
that the proper portion of small business contracts was not 
reached and we hold hearings to try and find out what went 
wrong.
    As our nation has seen from previous experiences, the 
federal government is not always the best steward of taxpayer 
dollars. Each year federal agencies at all levels fall short of 
their promised contracting levels for small businesses. Today I 
ask all of you: how can we avoid these shortcomings of the 
past, and what assurances can the agencies before us here today 
provide that these mistakes won't happen again.
    I am hopeful here today we can find some answers to these 
questions and others as we consider how to effectively insure 
one of the largest distribution of taxpayer dollars is directed 
into those economic sectors which can do the most good, our 
nation's small businesses.
    Thank you for you being here, and I yield back to you, Mr. 
Chairman.
    Chairman Nye. Thank you, Mr. Schock.
    I now want to provide an opportunity to any other members 
present to make any opening statements or comments if they 
wish.
    I would yield to Ms. Clarke.
    Ms. Clarke. Thank you very much, Chairman Nye and Ranking 
Member Schock, for holding this very important hearing.
    I would like to start off by thanking our witnesses for 
attending today. I think this is a very important microcosm of 
our nation's small business sector. For me it is critical that 
we make sure that the veterans of our nation get their fair 
share of opportunity and of growth and development. Actually it 
speaks to who we are as a nation, and the best way for us to 
thank our service women and men is to create viable pathways to 
successful job creation.
    To encourage and support our veteran-owned businesses and 
entrepreneurs is an honor for us, something that we must do and 
are obliged to do. And so as I listen to my colleagues and put 
it in the context of the Recovery and Reinvestment Act, I know 
that provision has been made in the act for small business. It 
becomes our obligation to make sure that it gets to veteran-
owned businesses, to make sure that we monitor and make sure 
that your businesses grow, that your entrepreneurial spirit 
flourishes.
    And I am more optimistic that with our strident oversight 
and accountability that we can make it work. In the words of a 
very popular culture song, I say to you today don't worry; be 
happy.
    Thank you very much, Mr. Chairman.
    Chairman Nye. Thank you, Ms. Clarke.
    I would offer to yield to Mr. Thompson.
    Mr. Thompson. Thank you, Chairman.
    I just want to say I want to thank the Chairman and Ranking 
Member for this opportunity for this hearing. As a member of a 
military family, this is a topic that is near and dear to my 
heart.
    As our country looks at challenging economic times, you 
know, we have a lot of things to be concerned about, but 
certainly one of the things that gives me the greatest hope are 
our sons and daughters that have served and are serving right 
now and either are back or will be coming back to this country 
with that sense of service that they have exercised in doing 
their duty for the country, and the opportunities we are 
talking about today will be good for them, but frankly, they 
are good for our country as well in terms of the 
entrepreneurship.
    So I want to thank the panel for coming in. I am looking 
forward to spending most of my time in interchange with you 
folks after we hear your testimony.
    So thank you very much.
    Chairman Nye. Okay. Thank you, Mr. Thompson.
    I am proud to note that you are going to be giving your 
testimony today to a bipartisan group up here. We are really 
focused on practically how we are going to move forward and do 
better in the future, and I think that is what we want to focus 
on today. We want to recognize where we have had problems. We 
want to recognize where we have had successes, learn lessons 
and move forward.
    I have asked some of the panelists who are going to be on 
the second panel to listen to your testimony and then give us 
some commentary when they are invited to sit with us and let us 
know practically what are they seeing, and are we doing the 
best we can, and if not, and I think we are going to hear that 
we are not right now, how can we practically moving forward do 
better.
    There is money available under this stimulus package under 
the Recovery Act. We want to make sure that it is used 
efficiently and that it creates as many jobs as possible, 
obviously targeting small businesses and the veterans 
community.
    I am going to go ahead and invite our first panelists to 
give their testimony, noting that we may be called for votes, 
and if we are, I will warn you and let you know, and then we 
will adjourn and pick back up where we left off, and 
recognizing that members may need to come and go as they have 
other hearings that are going on. But thank you all for being 
here.
    I am going to start by introducing Mr. Jenkins. Mr. Cal 
Jenkins is the Acting Associate Administrator of the Government 
Contracting and Business Development Office of the Small 
Business Administration. This office works to develop policies 
and regulations to enhance the effectiveness of small business 
programs.
    So, Mr. Jenkins, thank you for being here, and we would 
like to hear your opening statement.

                  STATEMENT OF CALVIN JENKINS

    Mr. Jenkins. Mr. Chairman and other distinguished members 
of this Committee, I want to thank you for inviting the Small 
Business Administration to discuss its small business 
procurement programs, and to relate it to the American Recovery 
and Reinvestment Act.
    As mentioned, I am Calvin Jenkins, the Deputy Associate 
Administrator for SBA's Office of Government Contracting and 
Business Development, and we appreciate the opportunity to 
insure that small businesses receive a fair opportunity to 
participate in the federal procurement arena, especially in 
this time of historical economic challenge.
    The Small Business Administration provides policy direction 
and guidance to federal procuring agencies and works with them 
to develop acquisition strategies that will help to increase 
opportunities for small business in federal procurement. SBA 
facilitates this working relationship with these agencies by 
serving as an active member of the Chief Acquisition Officers 
Council and chair of the Small Business Working Group.
    The SBA also chairs the committee of the Directors of Small 
and Disadvantaged Business Programs.
    From Fiscal Year 2000 through Fiscal Year 2007, total 
federal procurement increased from approximately $200 billion 
to more than $378 billion. During this time, the small 
businesses share almost doubled, increasing from $44.7 billion 
to $83.3 billion. Subcontracting dollars going to small 
businesses in Fiscal Year 2007 totaled $64 billion. We estimate 
that for each $140,600 spent supports one small business job. 
Thus, for 2007, prime contract dollars supported 592,000 jobs 
within the small business community and subcontracting 
supported over 450,000 jobs.
    For the same period that I mentioned, awards to small, 
disadvantaged businesses increased from $7.3 billion to $24.9 
billion. Women-owned small businesses increased from $4.6 to 
$12.9 billion, and firms certified under our Historic 
Underutilized Business Zone Program went from $663 million to 
$8.5 billion. Contracts, awards to service disabled veteran-
owned small businesses increased from $554 million to $3.8 
billion.
    Although these are significant increases in contract awards 
for small businesses, federal procurement agencies have met 
only one of five goals consistently from the period of 2001 to 
2007. So clearly, more is needed in this particular area.
    Chairman Nye, you asked specifically that we discuss 
strategies that SBA is using to assist veteran and service 
disabled veteran-owned small businesses to obtain government 
contracts. The SBA through its government contracting function 
is responsible for assisting small businesses in attaining a 
fair share of government contracts through a variety of 
programs and services.
    A key tool in this effort is SBA's statutory mandate to 
establish small business procurement goals in each agency prior 
to the beginning of the fiscal year and insuring the agencies 
meet this government-wide goal. The government-wide goal for 
prime contracts includes 23 percent for small business, five 
percent for small disadvantaged businesses, five percent for 
women-owned small businesses, three percent for service 
disabled veteran-owned small businesses, and three percent for 
HUBZone certified businesses.
    SBA is also required to report on agencies' achievements in 
meeting their goals and plans to achieve goals not met. SBA has 
established a Small Business Procurement Scorecard to do this 
and it is publicly available on SBA's Website.
    Although there is no government-wide goal for veteran-owned 
small businesses, federal agencies in Fiscal Year 2007 awarded 
more than $10.8 billion in contracts, or 2.9 percent, to 
veteran- owned small businesses.
    As part of SBA's Small Business Procurement Scorecard 
initiative, SBA featured two agencies, the Department of 
Veterans Affairs and the Department of Homeland Security, as 
best practices for strategies to increase federal procurement 
opportunities for service disabled veteran-owned small 
businesses. SBA posted these best practices as a way to assist 
other agencies in meeting their service disabled veteran goals.
    As I mentioned, there is a three percent service disabled 
veteran-owned small business federal prime goal and 
subcontracting goal established, and in meeting these goals, 
federal agencies are given two primary tools. One of those 
tools is a competitive set-aside authority, as well as a sole 
source authority, where there is one firm that can provide the 
product, a service disabled veteran that can provide the 
product that the government is looking for.
    In response to your specific request for information about 
strategies the SBA will deploy to help small business obtain 
contracts resulting from the Recovery Act, I would like to 
report that the SBA has appointed a stimulus bill coordinator 
to insure that all of the agency's programs, lending, 
procurement, business development, are moving aggressively to 
assist small businesses.
    As it relates to contracting, we have begun a campaign to 
reach out to small businesses informing them of procurement 
opportunities available at the federal level and advising them 
how to get involved in state and local government 
infrastructure procurement actions that are likely to result 
from the Recovery Act.
    We are also posting and updating procurement information on 
our Website to make it easier for small businesses to locate 
these agencies and the products and services to support the 
stimulus effort.
    In addition, we are working to insure that small business 
procurement data in support of this effort is accurately 
reported through our field offices, which is another key tool 
in our delivery of small business--
    Chairman Nye. Mr. Jenkins, I am going to apologize because 
I did not warn you about the time limit today, and so I have 
let you go a little bit over, but just to let everybody know, 
what we are going to try to do because we want to keep this to 
two hours if we can is to ask everybody to try to keep their 
opening statement to five minutes.
    I did not give you the warning. So I will give you an 
opportunity go ahead and complete, but thank you.
    Mr. Jenkins. Okay, sure. Thank you, Mr. Chairman.
    I just want to point out that SBA primarily engaged federal 
agencies through our field activities, and that includes our 
procurement center representatives that monitor the federal 
agencies, their station at major buying activities, as well as 
our commercial marketing representatives that monitor the 
performance of large business prime contracts to insure that 
they provide opportunity for small business at the prime level.
    We also have industrial specialists, as well as natural 
resource and sales specialists that look at the natural 
resources and insure small businesses get a fair opportunity.
    That concludes my verbal testimony, and I will be happy to 
answer any questions that the Committee may have.
    Thank you.[The prepared statement of Mr. Jenkins is 
included in the appendix at page 45.]

    Chairman Nye. Thank you very much.
    I am going to introduce all of the panelists one by one, 
and then we will go to questions after that. Just FYI, you 
should be able to see lights in front of you, green, yellow, 
red. Yellow will indicate when you have one minute left. So I 
would appreciate it if we could try to keep the remarks within 
the five minutes. Then everybody has a chance to speak.
    I am now going to introduce Mr. Joel Szabat, the Deputy 
Assistant Secretary for Transportation Policy at the U.S. 
Department of Transportation. Mr. Szabat oversees the 
formulation of national transportation policy and promotes 
intermodal transportation.
    Mr. Szabat, I want to invite you to go ahead and give us 
some opening remarks. Thank you.

                    STATEMENT OF JOEL SZABAT

    Mr. Szabat. Thank you, Mr. Chairman, Ranking Member Schock, 
and members of the Committee.
    First, on behalf of the Department of Transportation, my 
apologies to those veterans from the Virginia Second 
Congressional District who were stuck in traffic on their up 
here. We will see what we can do to fix the ride back when they 
go home.
    [Laughter.]
    Mr. Szabat. I am Joel Szabat, Deputy Assistant Secretary 
for Policy in the Department of Transportation. Secretary 
LaHood has named me co-lead of our Tiger Team, which is in 
charge of overseeing the department's role in the Recovery Act, 
in implementing the Recovery Act.
    Overall, the Department of Transportation gives twice as 
much of its business to small businesses compared to a typical 
government agency. Over half of DOT's direct contracting work, 
nearly 800 million out of 1.5 billion, went to women-owned or 
to small businesses compared to a government-wide average of 22 
percent. Preliminary data for Fiscal Year 2008 indicate that we 
have maintained that level.
    The Federal Aviation Administration is exempt from Federal 
Acquisition Regulations and, therefore, not included in DOT's 
reports. However, FAA is an important part of our outreach to 
small businesses. FAA's direct contracting dollars are twice 
the size of the rest of DOT combined and 40 percent of FAA's 
contracts go to small or to women-owned businesses.
    In every small business category, DOT and FAA far exceed 
the government-wide averages. DOT contracted 2.3 percent of its 
work to service disabled veteran-owned small businesses, for 
example, more than double the government average. Service 
disabled veterans, the most recently established category, is 
the only category for which DOT has not yet exceeded its 
target.
    Of even more significance to the small business community 
are the formula funds, especially for highway and transit 
programs, that we distribute to state and local transportation 
authorities. Over $35 billion in funds are distributed this way 
each year, generating $30 billion in contracting opportunities.
    Under the law that DOT has to operate under which governs 
these programs, disadvantaged business enterprises are the only 
small businesses for which DOT can set goals. Veteran-owned 
businesses must separately qualify as DBEs in order to 
participate in this program.
    Through our work with our state and local partners, over 
$3.5 billion in contracts are steered annually to DBEs through 
our formula program.
    Now, in addition to our normal formulas, the Recovery Act 
will provide $48.1 billion, and as the Chairman indicated, with 
the bulk of this money to be obligated within the next 18 
months. I am sorry. For us the bulk to be obligated within the 
next 12 months, and all of it to be obligated within 12 months, 
the bulk to be spent within 18.
    Most of this money will be distributed through formulas and 
the existing laws that govern DOT programs apply. We can work 
to set targets for DBEs, but no other category of small 
businesses. We estimate that the formula fund programs in the 
Recovery Act will create at least another $3 billion in 
contracting opportunities for DBEs over the next 18 months.
    Bonding is an important challenge for DBEs in qualifying 
for government contracts. The Recovery Act establishes a small, 
$20 million bonding assistance program within DOT. DOT's Office 
of Small and Disadvantaged Business Utilization has been 
working with SBA to craft a program that will minimize the cost 
and administrative overhead for DBE participants and maximize 
the number of companies that can benefit from their support.
    There are also future year opportunities for service 
disabled veterans and other small businesses. The Recovery Act 
dedicates $8 billion for high speed and inner city passenger 
rail and a few other smaller discretionary programs where the 
department will have to craft business qualification criteria.
    President Obama has proposed an additional $1 billion a 
year annually for high speed rail and $5 billion for an 
infrastructure bank focused primarily, if not solely, on 
transportation.
    We look forward to working with Congress to shape the laws 
that will govern small business participation in these 
programs. Most importantly, both the surface transportation 
program and aviation programs were last reauthorized over five 
years ago, before federal standards for service disabled 
veterans were set. This year both of these programs are up for 
reauthorization with, again, the promise of more than $30 
billion a year in annual contracting opportunities.
    And, again, we look forward to working with Congress to 
shape the laws that will govern small business participation in 
these program.
    Thank you, Mr. Chairman, Ranking Member, and members of the 
Committee.[The prepared statement of Mr. Szabat is included in 
the appendix at page 49.]

    Chairman Nye. Okay. Thank you very much.
    I would now like to recognize Ms. Gail Wegner, Acting 
Director of the Office of Small and Disadvantaged Business 
Utilization in the Department of Veterans Affairs, which 
provides patient care and federal benefits to veterans and 
their dependents. The OSDBU identifies prime and subcontracting 
opportunities for small businesses and provides them with 
guidance on procurement matters.
    Ms. Wegner, I invite you to please make your opening 
statement.
    Thank you.

                    STATEMENT OF GAIL WEGNER

    Ms. Wegner. Mr. Chairman, members of the Committee, thank 
you for convening this hearing. I request that my written 
statement be submitted for the record.
    Veterans Affairs has a long tradition of outstanding 
support for small businesses, with special emphasis on veteran-
owned small businesses. The Recovery Act presents a valuable 
opportunity for us to maintain that tradition. I am honored to 
represent Secretary Shinseki, our employees, and the veterans 
who do business with VA here today.
    I am also delighted to inform you that VA received a Green 
Small Business Scorecard performance from the SBA in Fiscal 
Year 2007. Summary data is contained in my written statement, 
and it also appears on SBA's Website
    Of note, VA led the federal government in transactions with 
service disabled veteran-owned small businesses and with 
veteran-owned small businesses. Given this history, I believe 
that Recovery Act requirements will be carefully reviewed for 
participation by small businesses in VA.
    Our success is largely attributable to three principal 
factors. First, supporting veterans is our primary mission. 
This includes creating procurement opportunities for veterans.
    Second, our leadership is committed to small businesses. 
They meet monthly and review progress toward all small business 
goal achievements.
    Third, VA delivers services to veterans in the communities 
in which they live. We understand directly the impact that 
small businesses have on the local economy.
    VA has unique legislation which enables us to contract more 
easily with veteran-owned small businesses. We also award many 
smaller dollar value contracts. In challenging economic times, 
small purchases can make a big difference in the sustainability 
of a small business.
    Additionally, we formally review proposed acquisition 
strategies for buys over $500,000, and for purchases over five 
million, a small business analyst participates in acquisition 
planning meetings. As VA's Recovery Act requirements are more 
fully developed, they will be subject to these same proven 
strategies.
    Staff in VA's Office of Small Business Programs and in the 
Center for Veterans Enterprise provide quality, individualized 
attention to small business owners. We work closely with a 
number of partners. VA enjoys an especially strong 
collaboration with the Association of Procurement Technical 
Assistance Centers, who educate businesses new to the federal 
marketplace. We believe that PTAC support will be vitally 
important in Recovery Act contracts and the ability of small 
businesses to win them.
    Our achievements would not be possible without the 
fundamental work performed by SBA's professionals, their 
grantee organizations, and the support of Congress. These 
resources and processes apply when VA contracts under ordinary 
circumstances.
    The Recovery Act, however, represents an extraordinary 
response to extraordinary circumstances. VA is assessing 
whether the additional volume of contracting will require us to 
enter agreements with other federal agencies.
    And in closing, I hope that you will agree, given our past 
performance, that VA is committed to supporting small 
businesses and most especially veterans in business across our 
spectrum of procurement opportunities.
    Mr. Chairman, thank you again for convening today's 
hearing. I welcome your interest, and I am prepared to answer 
any questions that you or the members may have.[The prepared 
statement of Ms. Wegner is included in the appendix at page 
53.]

    Chairman Nye. Okay. Thank you very much.
    I would now like to introduce Ms. Brenda DeGraffenreid, 
procurement analyst for the Office of Small and Disadvantaged 
Business Utilization at the Department of Energy. Energy is the 
largest civilian buying agency in the federal government, 
procuring over $22 billion in goods and services annually, and 
Ms. DeGraffenreid, welcome and we would be happy to hear your 
opening statement.
    Thank you.

               STATEMENT OF BRENDA DeGRAFFENREID

    Ms. DeGraffenreid. Thank you, Mr. Chairman and members of 
the Subcommittee.
    I am the supervisory acquisition manager overseeing the 
Office of Small and Disadvantaged Business Utilization. I 
appreciate the opportunity to address the Subcommittee on the 
Department of Energy's plans and strategies that will insure 
that small businesses, including the veterans and service 
disabled veterans can participate in government contracting 
opportunities resulting from the Recovery Act to the maximum 
extent.
    Small businesses are critical to the health of the U.S., 
and according to the Small Business Administration, 99 percent 
of all employers in the U.S. employ approximately one-half of 
all private sector employees and have generated 60 to 80 
percent of all the net new jobs. So it is understandable that 
this Congress wants to insure that small businesses play a 
significant role in the recovery of the nation's economy.
    DOE has always been a strong advocate for the participation 
of small businesses, including small disadvantaged businesses, 
HUBZone, women- owned, veteran-owned and service disabled 
veterans, in its procurement process at both the prime and 
subcontracting levels, and we look to continue that trend in 
implementing the Recovery Act.
    At the prime contract level, DOE has increased its impact 
in the small business community over the past eight years by 
increasing prime awards to small businesses from $500.2 million 
in Fiscal Year 2000 to $1.4 billion in Fiscal Year 2008.
    Before discussing DOE's unique business and procurement 
model in order to place these achievements and recovery 
opportunities in context, DOE is different from many other 
agencies. We have two types of contracts: one, facilities 
management contracts, which we term FMCs, and non-FMCs. The 
FMCs represent the primary procurement model utilized at DOE 
for the operations of its network of government owned, 
contractor operated laboratories and other facilities.
    FMCs include management and operating, which are M&O 
contracts, management integration and environmental restoration 
contracts. These are generally awarded to large businesses, 
educational institutions, and nonprofit organizations. Through 
the FMC contracting model, DOE directs its mission related 
areas and the overall performance objectives that it wants to 
accomplish.
    FMCs range from the hundred millions to billions of 
dollars. They are complex and generally contain periods of 
performance of five years or more.
    Historically FMCs have represented from 85 to 90 percent of 
DOE's procurement dollars. So in FY 2008, for example, FMC 
contracts represented 84.3 percent of the department's 
procurement base. The remaining no-FMC dollars, or 15.7 percent 
of the procurement base, were used to fund a wide range of 
prime contracts of both small and large businesses.
    Now to the Recovery Act opportunities. As for the 
strategies that will insure that small businesses can 
participate in government contracting opportunities resulting 
from the Recovery Act, the department is in the process of 
developing guidance and an implementation plan to execute the 
requirements of the Recovery Act. Therefore, we cannot yet 
provide detailed acquisition methods that we will use to 
implement each program or sub-program designated in the act.
    However, we will attempt to provide the Subcommittee with a 
general overview of the types of acquisition methods we 
anticipate and a few examples of the specific work that we will 
be performing with recovery funds.
    As you stated in your letter, DOE will receive 
approximately 39 billion, 38.7 to be exact, in appropriated 
funds under the Recovery Act. These funds primarily have been 
directed to the following program offices: Office of 
Electricity Delivery and Energy Reliability, Office of Energy 
Efficiency and Renewable Energy, Office of Environmental 
Management, Office of Fossil Energy, Office of the Inspector 
General, and Office of Science.
    The funds appropriated in the Recovery Act will be awarded 
principally through several methods: financial assistance 
agreements, ongoing contract vehicles held by both small and 
large businesses, and through DOE's established network of FMCs 
which I mentioned earlier.
    The department has already provided information and tools 
to assist the acquisition work force in insuring that the 
requirements of the Recovery Act provide maximum opportunities 
for small businesses to participate in the recovery. A 
significant portion of the recovery funds will be obligated on 
financial assistance agreements and statutorily required that 
some of these monies be used for block grants.
    DOE's Small Business Innovation Research Program will 
receive funds under the Recovery Act. As you probably are 
aware, the SBIR program was established to provide funding to 
stimulate technological innovation.
    Small businesses will be able to compete for research and 
development funds within the Recovery Act as they always have 
within the small business investment research and small 
business technology transfer funding. A portion of the recovery 
funds will be obligated on current procurement awards, such as 
contracts with task orders pursuant to the federal regulations. 
These awards are held by both large and small companies.
    As I see that I have the yellow light and my time is almost 
up, I will conclude by saying that Department of Energy 
encourages small business, including service disabled veterans, 
to come to DOE not just for the Recovery Act, but for all of 
our projects because we all look for service disabled veterans 
to help us make our goals.
    So thank you for the opportunity to appear before this 
Subcommittee. That concludes my prepared remarks, and I will be 
pleased to answer any questions.[The prepared statement of Ms. 
DeGraffenreid is included in the appendix at page 61.]
    Chairman Nye. Okay. Thank you very much.
    I would now like to recognize our final panelist for this 
panel, Ms. Linda Oliver, the Acting Director of the Office of 
Small Business Programs for the Department of Defense. In this 
role Ms. Oliver is responsible for establishing Department of 
Defense policies that insure the inclusion of small firms in 
defense related procurement actions, an area of great interest 
to my district particularly, coming from southeast Virginia.
    Thank you for being with us, and Ms. Oliver, we would be 
happy to hear your opening remarks.

                   STATEMENT OF LINDA OLIVER

    Ms. Oliver. Thank you, Chairman Nye, Ranking Member Schock, 
distinguished members of the panel.
    I ask that my written remarks be included in the record, 
and I will summarize these remarks because five minutes is less 
than any of us ever realize it is going to be.
    The Department of Defense is poised, posed to help support 
small businesses in their participation in the American 
Recovery and Reinvestment Act. We look forward to this 
opportunity and appreciate the fact that the Committee is 
interested in what we are doing.
    I will summarize my written statement in three areas 
basically. I will talk a little bit about the Recovery Act at 
least from the Department of Defense perspective. I will touch 
on our record with service disabled veteran-owned small 
businesses particularly, and then I will talk quickly on a few 
of the things that we do to encourage small businesses and 
service disabled small businesses.
    The Department of Defense will receive approximately $7.4 
billion from the Recovery Act. That money will be distributed 
primarily through contracts. In order to manage all of the 
Recovery Act issues and money, there is a very senior committee 
formed which oversees the plans for money and oversees the 
writing of the required reports.
    We, my office, is involved with the committee. We will 
continue to stay involved with the committee. We are hoping 
that by staying involved in the committee we will do what we 
want to, which is make maximum practicable opportunities 
available for small businesses, including service disabled 
small businesses.
    Turning to our special relationship with service disabled 
veteran-owned small businesses, in my written remarks is a 
chart that shows a graph of our interaction with service 
disabled veteran-owned small businesses since the service 
disabled veteran-owned small businesses became a goal. Our 
progress was quite slow until 2003, which is exactly the time 
that the use of set-asides for service disabled veteran-owned 
small businesses became available to us.
    You will see that both in terms of dollars and in terms of 
percentages once we have the tool that you have given us and 
which we appreciate, we were able to move forward much more 
rapidly. Now, we have work to do, but we are hoping that we 
have found the key and will continue to move forward at the 
same rate.
    Some of the things that my office does in order to help us 
stay in touch and contract with all small businesses, including 
service disabled veteran small businesses, are that we do a lot 
of training. We are just in the process of completing revision 
of an electronic course available to everyone, but aimed at 
contracting officers about service disabled veteran-owned small 
business contracting.
    We have two other courses that we are in the process of 
putting together, all of this with Defense Acquisition 
University.
    We have done many Webcasts. We do annual awards for all 
sorts of small business activities, but particularly service 
disabled veteran-owned small businesses. We support a National 
Veterans Conference. We do training, a great deal of training 
of our small business specialists so that we stay on the 
cutting edge of procurement, and particularly as it relates to 
small business.
    In summary, we intend to and we expect to be involved in 
the plans for the Recovery Act funds. We have a track record 
which tells us if we try hard, we can maximize opportunities 
for small businesses, and therefore, I am happy to tell you 
that we think we can succeed in doing what you have asked us to 
do.
    Thanks.[The prepared statement of Ms. Oliver is included in 
the appendix at page 68.]

    Chairman Nye. Thank you very much.
    I want to go ahead and get into questions now, and I want 
to try to reserve some time for the other members to ask 
questions they would like to ask, and noting the time, of 
course, we want to have significant time for our second panel 
so that we can hear from the business owners about their 
experience.
    But I do have a couple of questions I would like to ask, 
and basically I think the bottom line that I want to get at 
here is we know that we can do better, that we need to do 
better. We know we have failed to meet our government set 
targets, and we are trying to focus on ways to get there. And I 
am going to start with a question for Mr. Jenkins.
    You represent the Small Business Administration and have a 
position that gives you the opportunity to see what the other 
agencies of the federal government are doing and to work with 
them on specifically establishing the benchmarks, but then they 
work to help us meet our overall target.
    Basically, can you just give us, you know, just candidly 
why are we not making the target and what do we need to do to 
fix that?
    And then can you talk about how the SBA will work to 
perhaps revise the target goals given the fact that we now know 
the dollars that we are going to get under the Recovery Act?
    Mr. Jenkins. Sure. One of the challenges that the agencies 
have is insuring that businesses are at a level that can 
support the contracting that they are doing both in terms of 
firms being in those specific industries that they are buying 
and selling. One of the things that the SBA is trying to do in 
terms of its outreach is to match agencies with businesses, 
including service disabled veteran-owned businesses. We are 
really pushing in terms of saying this is what this particular 
agency buys and, therefore, we are reaching out to those 
specific industries, those communities, and then making that 
information available. We are making sure that the small 
businesses understand how the agencies are buying, making sure 
they are registered in terms of the central contracting 
registrant, providing them with business development 
assistance, and certainly from an SBA standpoint, providing 
them with the financial support in terms of loans to assist 
them.
    We believe with the scorecard that we introduced about a 
year and a half ago that it heightened the visibility of all of 
these goals, including the goals for service disabled veterans, 
and working with the agencies to develop strategies and plans. 
We think that is critical that there is now an increased focus 
in this particular area.
    Chairman Nye. Thank you.
    I agree that it is critical with the increased focus.
    You mentioned that you have established a stimulus bill 
coordinator position, and I won't ask you to comment on that 
anymore at the moment, but I will be interested to follow up 
and hear about the plans that that coordinator has for 
increasing the share that particularly our veteran owned small 
business are getting in terms of that government contracting.
    I want to move on and ask a question of Mr. Szabat. Can you 
please comment from your perspective on how you are going to 
coordinate with the states to insure that the money that is 
coming from DOT through the states for transportation 
infrastructure then goes on and we insure that essentially our 
veteran owned and our small businesses have the best shot at 
getting access to that contracting?
    Mr. Szabat. Yes, sir, although if I may, first I will echo 
Cal's comments and reinforce his answer that I think absolutely 
one of the reasons that you have seen an uptick recently in 
government agency performance is the fact that more people are 
paying attention and there is more of a spotlight.
    I was the Chief of Staff at the Small Business 
Administration when the scorecard came out, and the Deputy 
Administrator at the time and myself split the duty of fielding 
the angry calls from our fellow government agencies of people 
who were ranked red in various categories. But one call, in 
particular, justified in my mind the reason we had the program 
where the Chief of Staff of another federal agency, which we 
may not name, called me to say, ``I have to confess that until 
you had the scorecard I did not know that our agency had a goal 
for service disabled veteran-owned small businesses, and now 
that we have that goal or now that we are aware of that, we can 
guarantee you that the front office of the agency will pay 
attention to that.''
    But to your question in particular, sir, as I mentioned in 
both our written prepared testimony and in my verbal testimony, 
the Department of Transportation is covered by a separate law, 
and that law restricts our ability to set targets to the states 
to only disadvantaged business enterprises, which also we do 
not have the latitude of how we can determine who was eligible. 
Those are presumptively women, Latino, African American, and 
Asian owned business owners with a net worth not to exceed 
$750,000 in contracts not to excess $21 million.
    Within those categories, veteran-owned and service disabled 
veteran-owned businesses may apply for qualification, but they 
will only qualify if they are identified as being both 
economically and socially disadvantaged, which we recognize can 
be high hurdles to accomplish.
    So we are letting, in the workshops and our outreach to the 
veteran-owned community, we are letting them know that these 
opportunities exist, but we are also aware that unfortunately, 
we do not have the ability to simply inform the states, tell 
the states that they must include veterans within these 
programs.
    So we are offering the veterans information and training 
opportunities. Most of the work that we have right now with 
service disabled veteran- owned small businesses is information 
technology related, not construction related. We want to get 
them more into the higher dollar value construction fields, but 
under current law we do not have the ability to actually 
require the states to fold them into the over a 30 to $35 
billion that we will be giving them through Recovery Act 
formula funds.
    Chairman Nye. Thank you.
    And I certainly do not mean to imply that you need to force 
some kind of goal on top of the states. However, there are 
still opportunities to be helpful with the states in working 
with them and insuring that our businesses get a fair crack at 
these opportunities, even absent a specific target sent to the 
states.
    But thank you for your comments, and this actually leads me 
into something I wanted to ask Ms. Wegner regarding the VA, and 
I wanted to ask you if you can comment, please, on your work 
with state VAs. Again, it's a similar question.
    We have federal level bureaucracy here in the state level. 
It would be a shame if we are not well coordinated. I know the 
VA has had some positive experience in this area, and I am 
wondering if you can just give us some comments on how you have 
worked together. You mentioned during your testimony working 
together with other federal agencies to help veterans get 
access to those contracts. You mentioned something about your 
work with the state offices and any plans that you have to ramp 
that up or take lessons learned specifically to help one way of 
targeting our Recovery Act funds.
    Ms. Wegner. Well, heck, I would rather talk about what we 
are doing with the other federal agencies because it is a 
better success story, but thank you very much for that hard 
question.
    In the Center for Veterans Enterprise, our outreach program 
manager has developed as part of our Web page a state programs 
site in which a veteran from any state in the nation can go and 
look at their particular state to see what legislation has been 
introduced in the past, if there is currently a program, what 
the status is, and anyone can review live programs from the 
other states.
    So when you look at the map of the nation, you can 
immediately see which states have veterans' supplier inclusion 
programs already in place and which have proposed them and 
sometimes which have voted them down.
    The purpose of that is to help advocates at the state level 
find legislation in other states that they can use to introduce 
comparable programs relatively easily within their state. The 
push from our perspective in the Department of Veterans Affairs 
is we have the federal model in place, and you have heard the 
people testify this morning that we are making good progress 
and that you have the attention of the agencies. Now in our 
opinion in VA, the next place to take this program is to the 
states so that we can insure that veterans and service-
connected veterans have opportunities at the state level.
    So we are trying to make it as easy as we can.
    Chairman Nye. Thank you also for mentioning how the 
spotlight that we put on the issue is apparently tremendously 
helpful in moving the ball forward in this area, and I think 
you can expect from us to continue to be in communication with 
you about how we are effectively moving forward here.
    Thank you for your comments.
    And I just had one more question for Ms. Oliver. You 
mentioned the success that Department of Defense has had over 
the past five, six years in dealing with service disabled 
veterans, and indeed, there has been a dramatic increase in the 
number of contracts and dollar amount awarded. Yet we are still 
only about halfway there.
    So can you tell us what do we really need to do to get to 
that target? What do we need to fix?
    Ms. Oliver. I do not think it is "fix"; I think it is just 
"keep it on". There is a pattern with all of these goals. The 
government and parts of the government do not begin by making 
the goals. If we can get the rate of increase, then it seems to 
continue on with that sort of increase. That is my hope with 
service disabled veteran- owned small businesses.
    I told you that the tool was really very helpful, and to be 
honest with you, in the same way that the committees have 
helped us focus, in the way Joel talked about, for example, the 
veterans themselves and the service disabled veterans and their 
organizations have been tremendously helpful to us. They have 
helped us understand why we are hard, the ways that we are hard 
to do business with, and why we cannot change some of those. 
Some of those are controlled by statute.
    We have, I think, had insights about how to some degree 
compensate for it. I think there are many more insights for us 
to find and inasmuch as we are not even half there toward our 
goal. I think the veterans and the service disabled veterans, 
individuals and their organizations will continue to help us.
    Chairman Nye. All right. Thank you.
    Again, I want to mention a number of you have mentioned 
today you have established oversight officers or committees to 
oversee how we are going to do better and do exactly what we 
are talking about today, and I am going to just put you on 
notice that we will be following up with you to hear about 
exactly how that work is progressing and how we are getting 
closer to that goal.
    Now, I want to reserve some time for other members. I just 
want to thank Ms. Halvorson for joining us and being here. 
Thank you.
    Now I am going to yield time to our Ranking Member, Mr. 
Schock.
    Mr. Schock. Thank you, Mr. Chairman. I think you did a nice 
job of asking each one of our excellent panel members a 
question.
    I am not going to do the same. We recognize there is a 
problem, and we all realize that we need to shine the spotlight 
as part one, and then obviously exerting effort and having a 
plan of action on how we are going to get there is job number 
two.
    I want to kind of ask Mr. Jenkins from SBA if you could 
explain to me your process within the agency to determine what 
is an appropriate percentage for each one of these departments 
to have for veterans, small business owners and small business 
owners' in general contracts. In other words, how do you 
determine, how do you negotiate with these agencies based on 
the agency, based on the type of work they do to come up with 
that percentage.
    Mr. Jenkins. It is actually a two-pronged strategy. We have 
the agencies participate on a particular subgroup, and goaling 
subgroup. We look at what they historically have done in the 
past in terms of their procurement numbers.
    We also look at the other part of the law which talks about 
the maximum practical opportunity; what can they do, what can 
be made available to small businesses, and then the individual 
categories.
    With that we also have to look at how we establish the 
nationwide goal. So, for example, the Department of Defense 
represents almost 70 percent of total federal procurement. If 
they do not make their goal, it is very difficult for the 
entire country to make the government- wide goal.
    So we kind of balance that out to get back there. So it is 
through a formula that we use and through this committee that 
we analyze the data and put it all together nationwide.
    Mr. Schock. How is it that the department allows, for 
example--and I am not going to pick on you personally; I know 
you are the messenger--but, for example, the Department of 
Energy, how is it that we allow the Department of Energy to 
have a negotiated rate or percentage lower than that as 
specified in the statute?
    Mr. Jenkins. Yes, once again, the statute applies to the 
government-wide and not the individual agencies. Where the 
individual agencies really play is at the maximum practical 
opportunity, but then we have to pull that to get up to the 
government- wide number.
    We recognize how the Department of Energy operates. They 
operate through the various facilities that were mentioned 
earlier. With that, we look at what is available after you pull 
those centers out or those facilities out, and they do 
everything from landscaping to high earning scientists and 
running national laboratories.
    Then we look at what is left. What is left that they 
themselves through their contracting activity can actually 
procure? And that is where we set the goals based on that 
maximum practical opportunity.
    They would be significantly lower, and we have to, for 
example, if we set a five percent small business goal, it is 
very difficult to set also a five percent women-owned goal 
because that would mean all of the small business dollars would 
have to go to women, and so we look at the actual percentage of 
performance over the last three years, and we certainly do not 
want them to slide backwards. So we set the goal at whatever is 
higher, either the average over the previous three years or 
what they received in the last year and pick whichever is the 
highest number.
    Mr. Schock. I was going to ask Mr. Szabat at the Department 
of Transportation. You know, you reported that you have 
exceeded your goal by 20 percent. I mean, what kind of 
practices have you put in place there at the department that 
you know of that have kind of helped you reach that goal?
    Mr. Szabat. Well, to clarify, we have doubled the 
government average. The government average is 22 percent. We 
are over 50 percent or just below 50 percent if you factor in 
FAA. But our goal is, for example, for one category of small 
businesses it would be 36 percent. We are at 38 percent. So we 
are exceeding our goal, but as Cal mentioned, they are 
calibrated for each of the different agencies because we have 
identified more opportunities that, for example, energy in the 
Department of Transportation where we can legitimately go out 
and seek the work of small businesses to do our work, we are 
able to set and achieve higher goals.
    And we are constantly looking for opportunities to raise 
those. I think, you know, I will echo Linda's comments. There 
is no magic to this or a particular formula. A lot of it is 
just elbow grease and hard work.
    We have been blessed with having a very, very competent 
OSDBU office, and again, the attention and support of senior 
management. The Transportation, as you are aware, has several 
different modes to distribute most of the money: federal 
highways, federal transit, Federal Aviation Administration, and 
they each have their own officials that are dedicated to 
working with communities to getting the word out.
    So it is not just Department of Transportation OSDBU having 
these meetings with, conferences with service disabled 
veterans, but each of the individual modes doing it and doing 
it in coordination, and you do this over enough time and you 
establish a culture within the agency that supports that, and 
Transportation has that culture so that when we are in a 
situation as we are now where out of, and I do not know the 
number, 25 to 30 presidential appointees would be our normal 
leadership contingent. We have one on board right now, in fact, 
the Ranking Member's predecessor, former Congressman LaHood, 
now our Secretary.
    So we do not have a leadership team to be driving this 
through the department to make sure that this happens, but we 
have a career team that is aware of these goals and has been 
working it for so long that this is second nature to us. So I 
think more so than any one thing I can talk about, it is the 
fact that we have just had people who had support for 
management in the past who are now able on auto pilot to 
continue to do this.
    Mr. Schock. Okay. Well, it is obvious to me at least by the 
panelists that are here that there is an interest on your parts 
to increase the percentage, and based on Mr. Jenkins' 
testimony, it is a matter of justifying how much of your work 
can actually be designated to a small business percentage or a 
veterans percentage or a women's percentage without 
jeopardizing what it is you are trying to do, your core 
business.
    What do you do at SBA or what should we be doing maybe that 
we are not then to help educate the small business owners? 
Obviously we are not here to talk about women business owners, 
veterans but all of these different subgroups that we go after, 
to help make them aware of the contracts that are out there so 
that they can benefit and also these agencies can then better 
meet their goals and we can raise those percentages years down 
the road.
    Mr. Jenkins. Oh, sure. A number of agencies have good 
strategies that they have put out. One of the things that is 
very important for agencies to put out is their procurement 
forecast so that they can let the public know what it is that 
they are intending to buy in the coming fiscal year.
    Mr. Schock. I do not mean to interrupt, but does SBA do 
anything collectively? I mean, obviously, I think it is more 
difficult for DOT, the DOE, Veterans, you know, all of these 
different agencies to do it independently as opposed to the SBA 
or one central warehouse for businesses to check as opposed to 
having it, you know.
    Mr. Jenkins. Well, the best place I would suspect would be 
the federal procurement data system. It is a place where anyone 
can go and look at some past history, and what the agencies 
actually have purchased in the previous year.
    The benefit that SBA can bring to the table is our 
procurement center representatives. We have individuals 
assigned to the various agencies, and we look at procurements 
that they do not want to put out for small business. We 
question those. We ask for market research to establish their 
reasoning behind not wanting to go small business, and we also 
question if they have met one particular goal, are they able to 
put some contracts in for service disabled veteran or are they 
just loading up in one particular area?
    A good example that would be the small disadvantaged 
business program. That area has exceeded the goal consistently 
over the period we talked about, but the others have not. So we 
would like the agencies to use the tools that they have, the 
set-asides, to put more contracts in the service disabled 
veteran area, and that is where our PCRs can really play a 
vital role by looking at what the agencies are doing, 
questioning them, and actually, in certain cases, appeal their 
decisions not to set aside in particular areas.
    Mr. Schock. Okay. Thank you.
    Chairman Nye. Okay. I am going to ask our other members to 
ask any questions they wish. I am going to suggest that we try 
to stick to five minutes if we can, just noting the time and we 
want to have sufficient time for the second panel. So I would 
like to recognize first Ms. Clarke.
    Ms. Clarke. Thank you very much, Mr. Chairman.
    Chairman Nye and Member Schock, I am kind of encouraged by 
this hearing, quite frankly. What I recognize is at the end of 
the day this is about leadership and accountability, and from 
what I have heard today, there is an indication that we have 
the tools in place and we are poised to maximize on 
inclusiveness and meeting our goal across contracting agencies. 
So I am really, really excited about that.
    My first question is for Ms. Wegner, and I want to commend 
your agency for initiating a partnership program with the 
HUBZone program to promote applications for veterans for 
certified HUBZone status. I have a particular interest in the 
well-being of women and minority-owned business within the body 
of veteran and service disabled veterans' businesses, and I 
understand that this is an effort that you plan to continue.
    However, the GAO found that in the past the program was 
continually subject to fraud and mismanagement, and though I'm 
an optimistic, the American public demands accountability and 
so does this Committee.
    I want to know two things. Do you have data that shows how 
many minority veterans have taken advantage of this partnership 
and a monitoring mechanism to do so?
    And two, what do you and the HUBZone program intend to do 
to mitigate any future fraud, waste or abuse?
    Ms. Wegner. Just as you have heard that when the SBA posts 
the procurement scorecards everybody pays attention, when the 
GAO issues a report identifying vulnerabilities, everybody pays 
attention. Those reports came out the middle of last summer. We 
began our partnership with the SBA's HUBZone office around 
August of last year after those reports came out. So we knew at 
that point in time that the Small Business Administration's 
leadership had already taken measures to bolster the program 
and to make sure that it had the resources it needed to put it 
back on the right track.
    Traditionally, the resources had been very minimal. So with 
SBA paying attention to the HUBZone program to make sure it is 
on track, the Department of Veterans Affairs said, ``We need to 
get veterans into the HUBZone program." Have we established 
measures yet?
    The only measures that we have established so far have been 
the number of veterans that we touched and informed about the 
HUBZone program and the contracting opportunities that arise 
from that and how you apply and the number who actually 
applied. So we are waiting to see how many of those received 
their certification.
    I will absolutely tell you that in the Department of 
Veterans Affairs we believe in the HUBZone program. We believe 
that veterans are the best set of owners to go into 
Historically Underutilized Business zone areas and to return 
those areas to prosperity and to lead the nation as role models 
for how we get this job done and how we return to economic 
stability.
    So I am happy that we are going to continue that and we 
will put effectiveness measures in place as soon as we get the 
first set of the applications certified.
    Ms. Clarke. Thank you very much, Ms. Wegner. I am 
encouraged by your response and look forward to seeing all of 
that come to fruition.
    My final question because my time is winding down is to 
both you, Ms. Wegner, and Ms. DeGraffenreid. The OSBDUs could 
have significant impact on small and disadvantaged businesses 
from the authorities given in P.L. 95-507 and the Office of 
Federal Procurement Policy, Letter No. 79-1, and the Clinton 
Executive Order of Number 129-28. However, I understand that 
not every SDBU office operates with the same level of 
authority. By law the SBDUs are expected to report directly to 
the head of the agency, but some do not and are far removed 
from the agency leadership.
    Also, the authority seems to lie at the discretion of the 
contracting officers rather than the SBDUs. Can you describe 
the impact of the SBDUs that report directly to the heads of 
agencies and those that do not?
    And what challenges do you face trying to promote the 
maximum practicable use of all designated categories within the 
federal acquisitions process?
    And what can be done to strengthen the effectiveness?
    Ms. DeGraffenreid. Yes. I cannot tell you the ones that do 
not, but I can tell you about the ones that do. At the 
Department of Energy, our Office of Small and Disadvantaged 
Business is headed by--right now the position is vacant. It is 
a political position, but it is headed by a Senate confirmed 
person who reports to the Secretary, and that is really 
important because you attend the Secretary's staff meetings, 
and you get support from the top. I think it is really 
important for all agencies to have their OSDBU operating at 
that level because you can put the importance of each program 
within your agency in setting aside for small business, and 
that is what we are doing in our agency.
    I can say that the OSDBU and our Office of Economic Impact 
and Diversity have already met with our Secretary Chu, who is 
extremely supportive of the small business program and has 
given us rein to do what we can to be sure that small 
businesses get a part of the Recovery Act, as well as other 
procurements in the department.
    So I think it is pretty important for each department to 
have an OSDBU. That is at that level, at that ranking level.
    Insofar as Department of Energy is concerned, I would like 
to add this. This is not part of your question, but I would 
like to say that insofar as the Recovery Act is concerned, we 
have spent much time with the committees and the persons who 
are working on the Recovery Act as to what portions are going 
to be given to small business, and in this agency in 
particular, the main portion that will be contracting has to do 
with environmental management, and we look forward to giving a 
significant portion of those awards to small businesses.
    In fact, environmental management has been one of our 
strongest programs, last year awarding 1.3 billion to small 
business alone. So we look forward to service disabled veterans 
becoming a part of that, and hopefully we have veterans who are 
in both the environmental remediation and the waste areas, and 
we look forward to them becoming some of Department of Energy's 
contractors both at the price and subprime contracting level 
because as I said earlier, we are unique and that most of our 
opportunities are at the subcontracting level.
    Ms. Clarke. Thank you very much, Mr. Chairman, and thank 
you to all the witnesses. This is a great hearing.
    Thank you.
    Chairman Nye. I would like to recognize Mr. Thompson.
    Mr. Thompson. Well, thank you.
    Actually my first question is for Ms. Oliver with DoD. 
Could you describe the practices in place through your office 
to insure prompt payment of services for contractors and 
subcontractors?
    Ms. Oliver. There used to be something called the paid cost 
roll, which required that--this concerns subcontractors--which 
required that prime contractors could not be paid, could not 
put it in the claim until they were paid. To get the money they 
had to pay out the money to the subcontractor before they could 
claim the money basically.
    That was a very helpful tool and that tool is gone. It does 
not exist anymore. The mechanism for making sure that small 
businesses are dealt with fairly, paid promptly by the prime 
contractors is mostly a matter of persuasion. There are not 
actually existing tools. Probably the most useful tool for 
prompt payment when it is the government, the Department of 
Defense, that's paying is the list that the payer's DFAS goes 
on if they do not pay promptly.
    I mean, some person gets dinged because their name is on a 
list for work that has not been processed. Finally it comes 
down to individual people even in organizations as big as the 
Department of Defense.
    There is the interest payment, but every small business 
will tell you they would rather have prompt payment than an 
interest payment because the interest payment usually does not 
cover the cost of their borrowing.
    Mr. Thompson. Does not cover the cash flow to keep the 
doors open as a small business.
    Ms. Oliver. Exactly, exactly.
    Mr. Thompson. Any idea of what the typical for the DoD to, 
say, the contractor, the amount of average time for payment?
    Ms. Oliver. I probably can find that out. I surely can find 
out more accurately than I could guess.
    Mr. Thompson. Okay. I would sooner have accuracy than 
guesses.
    Ms. Oliver. Okay.
    Mr. Thompson. That would be great.
    And just one more, and I guess I would open this up to the 
entire panel then. Any recommendations on just a better way to 
streamline that process in terms of prompt payment to 
contractors?
    Ms. Oliver. In fairness to my colleagues who do payment, it 
has gotten much, much better. I probably can find those figures 
for you, too. Computers have really helped.
    Some pressure, which is improved staffing, has really 
helped. That is for Department of Defense anyway.
    Mr. Szabat. Sir, for the Department of Transportation, you 
know, the vast bulk of our money, of course, does not go out 
directly to contractors, but goes out to states, transit 
agencies, and metropolitan plane organizations. The Federal 
Highway Administration has taken the lead for us among our 
surface transportation modes in automating that process where 
we're in the position now; they are in the position now that 
they can actually do overnight repayment.
    So a bill comes in from the state for a project that has 
been approved and the money has been obligated, and they can 
actually outlay that money overnight from the time that they 
get the bill, but we are a long way away from meeting a process 
like that that is automated to deal directly with all of our 
contractors, but I think that is the direction that in some 
cases quickly, in some cases slowly that all of us are moving 
toward.
    Mr. Thompson. Very good. Thank you, Mr. Chairman.
    Chairman Nye. Thank you. Thank you very much.
    And I want to go ahead and proceed on to the second panel 
so that we have got sufficient time.
    I want to thank again our witnesses on the first panel for 
testifying.
    I would like to actually suggest there would be some value 
here in having the members of the first panel remain if they 
wish to hear the ideas and testimony from those who are out in 
the field here, and I would like to ask if you would not mind, 
please, if the first panelists for the record could just let us 
know if you intend to stay or if you have someone else here you 
could identify who is a representative of your agency, if you 
would let us know who that is.
    Mr. Jenkins.
    Mr. Jenkins. Yes, we can stay for a while.
    Chairman Nye. Okay. Mr. Szabat.
    Mr. Szabat. I regret I have to go to a meeting at the White 
House with the Recovery Act czars from the states immediately 
following here, but Ferguise Mayronne from our OSDBU Office 
will be here to represent the department.
    Chairman Nye. Thank you.
    Ms. Wegner.
    Ms. Wegner. I am delighted to stay. Thank you.
    Chairman Nye. Okay. Ms. DeGraffenreid.
    Ms. DeGraffenreid. I can stay as well.
    Chairman Nye. Okay. Ms. Oliver?
    Ms. Oliver. And I will stay.
    Chairman Nye. Terrific. Thank you very much. the first 
panel is now excused.
    And I would like to invite the members of the second panel 
to take their seats.
    All right. I would like to go ahead and get started, moving 
on to the second panel now, and again, thank you all. I know 
some of you traveled significant distances to be here today, 
and I really appreciate you taking the time to join us.
    As we did for the first panel, I am going to introduce each 
panelist one by one and give you an opportunity to give opening 
remarks, and we are going to ask if you could please try to 
target five minutes or less for your opening statement, and 
then we will have some more time to converse during the Q&A.
    I am going to start with introducing Mr. Mark Klett, owner 
and CEO of Klett Consulting Group in Virginia Beach. 
Established in 2002 as a service disabled veteran-owned small 
business, Klett Consulting Group provides innovative 
operational systems engineering services and professional 
consulting.
    Thank you for joining us, Mr. Klett. I would like to invite 
you make any opening remarks.

                    STATEMENT OF MARK KLETT

    Mr. Klett. Thank you, Congressman Nye, Congressman Schock, 
distinguished members of the Committee. It is an honor for me 
to speak here on behalf of veteran business owners about doing 
business with the federal government to insure small and 
veteran owned businesses secure contracts awarded under the 
American Recovery Act.
    I have been in business as a business owner for over six 
and a half years. We have been fortunate to be able to grow at 
a rate of almost 80 percent a year; have 35 employees 
currently, and we continue to grow in this tough economic 
environment.
    I served my country for over 20 years, and I am currently a 
disabled veteran as well. But I am not an anomaly. There are 
over 10,000 companies like mine registered in the central 
contracting registration. We are out there. We are able to do 
the work, and we look forward to helping this country move 
forward in this economic situation.
    If you get contracts to us in this stimulus package, 
companies like us, we will hire people today or tomorrow. We 
typically when we get a contract awarded to us, we are hiring 
people that day.
    I have had situations where we have won a contract. From 
awareness to win was three days, and when money was assigned to 
us we hired 15 people within a week and had them on the ground 
working.
    Recently we had a situation where there was training that 
was required for the Marine Corps out in Hawaii. A contract was 
established within 48 hours, and we had boots on the ground in 
Hawaii training on a Sunday four days after the contract was 
awarded.
    The procurement system and the way it is set up right now 
can support these types of things and these requirements, and 
we can do it. I am just showing you the agility that small 
companies have. You give dollars to a small company; our 
overhead is really small. I currently have about eight 
different jobs which includes cleaning bathrooms in our 
corporate office. Okay? So we do a lot of different things.
    If you get money to us through a large company, which I am 
on 11 different contracts through large companies, the trickle 
down effect as you go through the government pass-throughs, the 
large company's pass-throughs, which are all ethical and legal, 
you do not get that big of a return on the dollar.
    With us you get 100 percent return on the dollar, and you 
get people working, moving right away. So what can you do right 
now? What are some of the solutions, as I heard all of the 
people out there who talked earlier in this hearing? How can 
Congress help the country right now to get things going?
    For proven and performing small and veteran businesses, 
leverage existing contracts that are in place right now. Allow 
the ceiling and the dollar amount to be raised on existing 
contracts, and permit the adjustment of the contract periods of 
performance. Just extend those periods of performance and the 
scope of work, just those existing contracts and the existing 
scope of work.
    Those things can be done in a matter of weeks, and people 
can be hired, dollars can be put on those contract. These 
changes are the fastest means to deliver funds to small 
business. This is the small business job creation engines, 
creating new procurement vehicles while a longer term solution 
will not result in economic stimulus needed today.
    Typically an RFP, request for proposal, can take 18 months 
to allocate 25 million to $50 million or larger, but to get to 
those small businesses it's going to take a while.
    Here is your other problem. The federal procurement process 
will not be able to execute the volume of the stimulus funding 
without assistance. The government acquisition process needs to 
be streamlined to insure that stimulus funding delivers 
positive economic impact.
    The federal acquisition work force must be expanded 
immediately with experienced procurement contracting officers 
to implement the small business objectives and procurement 
demands of this 18-month stimulus package. You have got to get 
a bigger acquisition workforce. Again, there is an opportunity 
to contract some of that out.
    So in conclusion here, I greatly appreciate the opportunity 
to speak to this Subcommittee. There are a lot of us out there, 
small businesses, service disabled veteran-owned small 
businesses. We can do the job. We can hire. We can get people 
out there working within the next 30 to 60 days easily. Just 
get the funding to us.
    Thank you.[The prepared statement of Mr. Klett is included 
in the appendix at page 76.]

    Chairman Nye. Thank you very much, Mr. Klett, for being 
here.
    I would like to introduce now Mr. Jim Hart, President and 
CEO of ARRIBA Corporation. Mr. Hart was a Navy shipbuilder for 
22 years when he retired and began to explore the field of 
construction and security installations. ARRIBA was established 
in 1998 in Norfolk, Virginia, certified as an 8(a) and a 
service disabled veteran-owned business.
    Thank you for being with us, Mr. Hart, and I would like to 
invite you to make any opening comments.

                     STATEMENT OF JIM HART

    Mr. Hart. Thank you, Mr. Chairman and members of Congress.
    It is really a pleasure and a privilege to be here with you 
today. As the Chairman said, we do construction, and we do 
heavy construction and we do renovation. Right now we are 
working on the Pentagon, for example, because there is no work 
down in the Tidewater area, and I will get into that in a 
second.
    This company of mine works primarily for the federal 
government. We do not really work for anybody else. We work on 
bases. We work for FEMA. We work for the Coast Guard, the Army 
Corps of Engineers, NAVFAC, Veterans Affairs. You name it, but 
it is primarily for the federal government.
    We understand how to do business with the federal 
government. We like the structure, and we stay there.
    Service disabled veteran businesses in my belief can 
actually implement the President's stimulus package and 
actually get work into the field, get paychecks to the 
unskilled, semi-skilled people quicker than anything else. What 
I want to speak to today, well, I have two points. How did the 
marketplace for construction for the service disabled vet get 
where it is today, the history of it?
    And number two, what actions can be taken to take advantage 
of the service disabled vets?
    How did we get there today in construction? BRAC is the 
problem. What happened was the edict was given on October 1st, 
2011. Unfortunately the program was not funded, but the end 
dates stayed. Up front planning and funding came out of hide 
for NAVFAC and the Army Corps. This was done using regular 
appropriated funds from the operating budgets and, therefore, 
maintenance and renovations were deferred. This includes 
building renovations, HVAC upgrades, road maintenance, roof 
repairs, et cetera.
    In addition, in order to accomplish the monumental task 
dictated the services bundled large projects together so they 
could manage them without adding personnel resources and 
contracting inspections. Without the funds for either advanced 
planning or the added manpower, the services had no choice but 
to bundle these contracts to mega projects which cut out the 
small business.
    In 2006, seven and eight, the maintenance budgets for most, 
if not all, of the bases in Tidewater were zeroed out, and the 
result is we are completely dried up. Only the most critical 
work is being done. In 2008, the contracting officer who has 
just recently retired told me that in NAS Oceana, Fighter Town 
USA, he could spend five to $10 million just on the roads, not 
to include any of the hundred-plus packages that were already 
designed and budgets developed for, but due to lack of funding 
were not done.
    Other bases like Dam Neck, Little Creek, Fort Story, Fort 
Eustis are in the same situation. All types of work are 
required, but no funds are available to do the projects, and 
these are bases only in Tidewater.
    Now, we do have the largest number of bases around in the 
country. So you are talking about a large concentration, but it 
is the same all over Tidewater.
    Here is where the service disabled veteran companies depend 
on work for growth. Projects of the $250,000 variety to the $3 
million size is what will grow service disabled veteran 
companies.
    To sum up where the problem is, BRAC bundled the projects 
to the size that the service disabled contractors could not 
compete. A service disabled veteran contractor, in general, is 
not going to go after a ten million to $25 million contract, 
and many of them, for example, are 40 or 50 and $100 million.
    Right now, today, there are over 200 job openings for 
qualifies inspectors and contract specialists in NAVFAC MIDLANT 
alone. These people need help. What I am telling you is the 
system is stretched too tight. You put money in there, and it 
is not going to do you any good.
    What can be done? Provide funding to the services and the 
VA and other federal agencies to get their maintenance backlog 
done. You don't have to do any engineering. Your engineering is 
finished. So your up front time is already expended.
    The VA has language and they did not really go into it very 
deeply, but the VA has language in their procurement authority 
that says they can go sole source to a service disabled veteran 
company to get work done. I would recommend that the President 
sign an executive order authorizing all federal agencies to 
have that tool.
    As part of the funding, include additional funds to 
outsource the inspections and the contract specialists. By 
using these work packages that are already there, the sole 
source tool, you are going to be able to put funds in the hands 
of unskilled, semi-skilled, and tradesmen all over the country 
working all of the federal agencies that have a backlog.
    Thank you, sir.[The prepared statement of Mr. Hart is 
included in the appendix at page 86.]

    Chairman Nye. Thank you very much, Mr. Hart.
    I am going to yield to Mr. Schock now.
    Mr. Schock. Thank you, Mr. Chairman. I wish to introduce 
Mr. Jim Schmidt from my district in Illinois. Mr. Schmidt is a 
Vietnam veteran and currently President of Hohulin Fence 
Company located in Goodfield, Illinois.
    Hohulin Fence was founded over 100 years ago and is 
credited as being the first to commercially manufacture chain 
link fence fabric here in the United States.
    Mr. Schmidt, thanks for traveling all the way here, and you 
are welcome to make some statements.

                   STATEMENT OF JAMES SCHMIDT

    Mr. Schmidt. Good morning, Mr. Chairman and distinguished 
members of the Committee.
    I am James Schmidt, President of Hohulin Fence Company. 
Thank you for the opportunity to present the views of Hohulin 
Fence and our experience as a small, veteran owned business 
trying to survive in a down economy with limited funding.
    Hohulin Fence Company was established in 1897, some 112 
years ago, as a family owned company in Goodfield, Illinois, a 
small farming community in central Illinois. Hohulin Fence was 
the first company in the United States to weave chain link 
fence commercial. That first contract was for 396 feet of 48 
inch high chain link fence with one gate for the grand sum of 
$26.90 installed. Today that would not pay for the gate 
hardware.
    The Hohulin brothers were an inventive group who took the 
first hand operated machine and engineered and designed an 
automatic weave machine which increased production immensely. 
The Hohulins went on to increase their business, including 
selling weaving machines to Cyclone Fence Company of Waukegan, 
Illinois, for a World War I base security. Through the years 
the company survived both World Wars and the Great Depression.
    Although a conservative family, the Hohulins were always 
able to provide for the family and those of their employees. 
Today Hohulin Fence is still family owned. In fact, I married 
the youngest daughter of one of the third generation brothers. 
I have two Hohulin fifth generation employees. We are a union 
company which services approximately a 100 mile radius selling 
and installing commercial industrial fences to universities, 
schools, sports facilities, government facilities, private 
companies, parks, utilities and pipeline companies.
    As everyone in this room knows, the current economic 
climate has been extremely difficult for small contractors and 
the customers we serve. Our larger manufacturing customers 
continue to reduce staffing and cut back production. All 
municipalities are struggling with declining sales tax 
revenues, and at the same time residents have reduced their 
discretionary spending.
    Every market we serve has been impacted. This has had a 
direct impact on our business. In 2007 we posted revenues of 
approximately $4 million. In 2008 our revenues were reduced by 
15 percent, and would have been off by 33 percent had steel 
pricing not increased so dramatically. Steel is another topic 
for another day.
    We reduced staffing by 20 percent to adjust for the 
reduction in sales. We have watched smaller competitors close 
their doors because they could no longer get financing to 
operate their businesses. As a veteran owned small business I 
see no advantage for us. If I were a disabled veteran, there 
may be a few more opportunities, but not many.
    I believe if a veteran owned business would receive the 
same benefits as a WBE or DBE, we would have more work 
available for us to bid. Typically, most federally funded 
projects require a certain percentage of minority 
participation. We are not able to bid many of these projects 
because we are not considered a minority enterprise.
    I know that many of our larger construction contractors 
struggle to fulfill the minority participation on large 
projects because there just are not many WBE and DBE firms in 
the area.
    Many times companies are brought in from outside the state 
to fill this requirement. I do not think it is fair to a local 
contractor not to be able to bid projects in their own 
backyard. Also, the WBE and DBE are able to place a higher bid 
and receive the contract. With a level playing field, I am 
confident Hohulin Fence can compete in the marketplace, and as 
a commercial business remaining competitive is our 
responsibility.
    What we need from Congress are the right policy actions to 
insure the playing field remains level. Congress and the 
administration must insure that the funds available through the 
American Recovery and Reinvestment Act are made accessible by 
small business through equitable contract administration.
    Currently our country seems to be paralyzed by the fear of 
the unknown, whether they will have a job or not tomorrow, 
whether they will lose their home or not, whether they can 
provide for their families or not. We are all looking to 
Washington for an answer.
    Mr. Chairman, I applaud the efforts of you and your 
colleagues on the Committee to bring the voice of small 
business into this important debate. I look forward to working 
with you and your colleagues in support of small business in 
the current economic climate.
    Thank you.[The prepared statement of Mr. Schmidt is 
included in the appendix at page 104.]

    Chairman Nye. Thank you very much, Mr. Schmidt.
    I would like to now introduce Ms. Janice Cavolt, a minority 
owner of JBC Corp. in Virginia Beach, Virginia. She established 
the firm together with her husband, Mr. Brian Cavolt, who is 
though unable to attend today a service disabled veteran. She 
established the company in 2006.
    Thank you very much for being with us today, and I would 
like to invite you to make any opening remarks you would like 
to do.

                   STATEMENT OF JANICE CAVOLT

    Ms. Cavolt. Good morning, Mr. Chairman, Ranking Member 
Schock, and members of this Subcommittee. Thank you for 
inviting our company to testify before your Subcommittee and 
discuss insuring stimulus contracts for small and veteran owned 
businesses.
    My name is Janice Cavolt, and I am representing JBC Corp. 
and presenting testimony for Brian Cavolt, my husband and 
business partner.
    My husband is Brian Cavolt and is a 100 percent rated 
service disabled veteran. He retired as a master chief after 29 
years of active duty in the U.S. Navy. Since 2006, he has owned 
and operated JBC Corp., a service disabled veteran-owned small 
business.
    JBC Corp. is a provider of medical trauma kits for the 
military. Our kits are custom designed and packed to order as 
specified by the government. Our company is located and we 
reside in the city of Virginia Beach, Virginia.
    My military service and experience as an operator and 
hospital corpsman with Special Forces inspired and enabled me 
to continue to serve the active duty war fighter by providing 
medical kits designed specifically for administering trauma 
combat casualty care under fire.
    As a business owner and veteran, I have regular and 
continuing contact with other veteran owned small businesses. 
As small business owners, we face many of the same challenges 
and share the same concerns. Currently the economy is our 
greatest concern. We are aware that the economic climate could 
have a tremendous effect on our businesses. We recognize that 
it is important that we position ourselves and not be 
vulnerable to the unfair practice of not being able to bid on 
contracts that are automatically assigned to prime vendors.
    The government has a variety of ways to purchase the items 
required for its many agencies and departments to conduct 
business. Although the requirements and methods vary, it seems 
the common objective for the government is to obtain quality 
products at reasonable prices with reliable availability while 
providing an opportunity for U.S. businesses to progress and 
become an integral component in the economy.
    One method of procurement the government employs is the 
prime vendor contractor. The prime vendor was created to enable 
the government to purchase products for manufacturers who do 
not have contracts of their own with the government. Prime 
vendors are frequently used to obtain and deliver the best 
equipment to our troops at war in an expeditious manner. Prime 
vendors can be used to bypass contracting personnel to expedite 
orders and eliminate the requirement of justification for 
purchasing a superior, reliable product over a less expensive, 
inferior model with unknown reliability.
    While the reasons stated here seemingly justify the use of 
prime vendors, it is my belief that the very system created to 
improve the procurement of products for our military does not 
work in a way that promotes or insures economic growth and 
stability for small businesses.
    Further, the system does not protect the government from 
excess wasteful spending and in many cases does not adequately 
serve the end users of those purchased products. the prime 
vendor is a giant in the government procurement system. As 
such, they exercise great power over the small business who is 
trying for the opportunity to get their product to market. 
Sometimes that power becomes abusive. A small business may take 
years to develop a product, show it to an interested party, and 
then find that their only recourse to sell in any large volume 
requires a prime vendor be involved.
    Refusal to accept the terms of business from a prime vendor 
is a no win option as to do so puts your product at risk as it 
is not uncommon for the prime vendor to take your product and 
actively pursue manufacturers that will produce it for them. 
The tactics used by many prime vendors to take advantage of the 
small business are coercive and frequently test the ethical 
standards of business.
    We were invited to do business with different prime vendors 
on two separate occasions when our product was being sought for 
purchase. In both instances we were pressured to get an 
agreement in place quickly so that orders could be received. 
The main issues addressed in both agreements were the price, 
payment terms, and consequences for default. Both PVs wanted a 
preferred price going so far as to say they needed room to get 
additional points in their markup.
    As manufacturers, we calculate our sell price by taking the 
actual cost of the item, adding our labor, other overhead 
costs, and factoring a conservative markup. We have found that 
in most cases the prime vendor's markup often matches our 
profit. The idea that both entities make the same profit when 
the work for each is considerably different does not seem fair 
or equitable.
    It is the attitude of the prime vendors we have done 
business with that makes us reluctant to keep doing business 
through such a vehicle.
    And in the interest of time I am going to jump ahead here 
just to what our suggestions are or what we have observed.
    It is suggested that government procurement regulations be 
reviewed, modernized, and streamlined to give equal opportunity 
to multiple American businesses.
    In addition, it is an opportunity to renovate a system that 
has become inefficient and that places cost containment and the 
ability to provide items in a timely manner secondary to 
finding the easiest way to push an order through.
    There are procurement methods in place and available that 
with modification could significantly elevate the opportunity 
for small businesses to compete. Those would include being able 
to raise the limits that credit cards can be used. Sole source 
contracts should go directly to the manufacturer of the 
product.
    And I am out of time, but I thank you for the time to be 
able to present. This is my oral testimony, but my statement is 
in its full edition, and I would appreciate if you would take 
the time to read it.
    Thank you.[The prepared statement of Ms. Cavolt is included 
in the appendix at page 106.]

    Chairman Nye. Thank you very much, and yes, we did get a 
written statement from you which we will submit as part of the 
official record. So thank you very much.
    I would like to recognize now Mr. Justin Brown, a 
Legislative Associate for the Veterans of Foreign Wars. Mr. 
Brown himself is a veteran of the U.S. Navy, having 
participated in Operation Southern Watch and Operation Iraqi 
Freedom.
    The VFW is the nation's oldest major veteran group with 
more than 1.7 million veterans who have served our nation 
overseas.
    And thank you, Mr. Brown. I appreciate you being here with 
us, and we would be happy to hear your opening remarks.

                   STATEMENT OF JUSTIN BROWN

    Mr. Brown. Thank you, Chairman Nye and Ranking Member 
Schock, counsel.
    On behalf of the 2.2 million member of the Veterans of 
Foreign Wars of the United States and our auxiliaries, I would 
like to thank this Committee for the opportunity to testify and 
for its rigor in pursuing contracting issues on behalf of 
veterans. The issues under consideration today are timely and 
of great importance to our members and the entire veteran 
population.
    During this economic recession, the number of unemployed 
veterans has increased to nearly one million as of February. 
That is an increase of more than 400,000 since last November 
and an increase of more than half of one million since last 
April. There are twice as many unemployed veterans as there 
were one year ago, and there are as many unemployed Iraq and 
Afghanistan veterans as there are men and women currently 
serving in Iraq.
    Make no mistake. Our service members are leaving Iraq, 
coming home, and fighting another war against unemployment, 
homelessness, bankruptcy, and a host of medical conditions. 
With a lack of opportunity, many service members are likely 
considering self-employment. Unfortunately, the economic 
stimulus was stripped of the language that would facilitate a 
stimulus for veterans in both business and employment.
    Furthermore, a large amount of the stimulus will be spent 
in the form of state grants bypassing federal laws in regards 
to contracting. In order for veterans to succeed in small 
business we need training; we need capital; we need parity; and 
we need compliance.
    Veterans' access to capital needs to be increased and 
diversified. For many veterans, the Patriot Loan Program is not 
an option because their loans are being denied by lenders even 
with the guarantee. The VFW suggests creating a direct loan 
program via the SBA. This would allow SBA to have an array of 
financial tools available to veteran start-ups and veterans in 
business.
    Also, there is an extraordinarily small amount of resources 
being diverted towards educational programs for veterans' 
entrepreneurship. In Fiscal Year 2008, SBA's operational budget 
was $888,000. This funded SBA's five business centers and 
various forms of outreach. The VFW would like to see these 
programs greatly expanded to include various locations 
throughout the country.
    In fact, not one member of this entire Committee has a 
veterans small business center located in their congressional 
district.
    Furthermore, veterans should not be taking the back seat to 
any other government contracting program, including HUBZone. 
Because HUBZone's language in the Federal Acquisition 
Regulation includes ``shall`` instead of ``may,`` GAO ruled 
that HUBZone has priority over veterans' contracting. The 
Veterans of Foreign Wars objects to this determination and 
urges Congress to return parity to the aforementioned programs.
    If the VFW were to sum up the current state of veterans' 
business and procurement in one word, it would be complacency. 
There are extremely limited options in regards to veterans' 
access to capital, few options for education, and a host of 
federal agencies that after nearly a decade continually and 
willfully fail to abide by their public mandates.
    Their failure to abide by these mandates for such an 
extended period of time challenges the very authority of this 
body by woefully ignoring the laws that it passes. If the past 
is any indicator, we will be back next year looking at slightly 
better numbers, but hearing the same old song from the agencies 
in question.
    The VFW demands, in compliance with the laws our veterans 
so proudly defended, that three percent of the economic 
stimulus contracts go to small disabled veteran-owned 
businesses.
    To help alleviate our one million unemployed veterans, the 
VFW also calls on the veteran businesses that receive these 
contracts to publicly establish a veteran employment 
preference.
    As America's largest group representing combat veterans, we 
thank you for allowing the Veterans of Foreign Wars to present 
its opinion on federal contracting in regards to the economic 
stimulus. Veteran entrepreneurship, if expanded, is a win-win 
for everyone, including the government and America's taxpayers.
    Mr. Chairman, this concludes my testimony, and I will be 
pleased to respond to any questions you or the members of this 
Subcommittee may have.
    Thank you.[The prepared statement of Mr. Brown is included 
in the appendix at page 110.]

    Chairman Nye. Okay. Thank you, again, for being with us.
    And I would finally like to recognize Mr. Joseph Sharpe 
from the American Legion. Mr. Sharpe is the Deputy Director for 
Economics for the American Legion. He entered the U.S. military 
and was deployed twice overseas in Operation Joint Force in 
Bosnia- Herzegovina, and recently for the Global War on 
Terrorism in Iraq for which he received the Bronze Star.
    The American Legion was chartered by Congress in 1919 as a 
veterans organization which now numbers nearly three million 
members.
    Thank you, Mr. Sharpe for being with us, and we would be 
happy to hear your opening comments.

                   STATEMENT OF JOSEPH SHARPE

    Mr. Sharpe. Chairman Nye, Ranking Member Schock, thank you 
for the opportunity to present the American Legion's view on 
federal contracting opportunities for small business in 
relation to veterans.
    The American Legion views small business as the backbone of 
the American economy. It is the mobilizing force behind 
America's past economic growth and will continue to be a major 
factor as we move well into he 21st Century. Reports show that 
businesses with fewer than 20 employees account for 90 percent 
of all U.S. firms and are responsible for more than 97 percent 
of all new jobs, generating $993 billion in income in 2006 and 
employs 58.6 million people. There are 27 million small 
businesses in the United States and 89.7 percent of all firms 
are small businesses.
    In Fiscal Year 2007, the Small Business Administration's 
Office of Government Contracting reported that more than 378.5 
billion in federal contracts identified as small business 
eligible. Small businesses only received a total of 83 billion 
in prime contract awards and about 64 billion in subcontracts.
    Service disabled veteran-owned businesses were recipients 
of 3.81 billion, or about 1.01 percent, of all those available 
contract dollars. America has benefited immeasurably from the 
service of its 26 million living veterans who have made great 
sacrifices in the defense of freedom, preservation of the 
democracy, and protection of the free enterprise system. Due to 
the experience veterans gain in the military, the success rate 
of veteran owned businesses is higher than other non-veteran 
owned businesses.
    The current War on Terror has had a devastating impact on 
our Armed Forces and has contributed to exaggerating the 
country's veteran unemployment problem, especially within the 
guard and reserve components of our military. According to the 
Department of Labor, the present unemployment rate for recently 
discharged veterans is an alarming 20 percent, and one out of 
every four veterans who do find employment earn less than 
25,000 per year.
    Unfortunately, many of the thousands of service members who 
are currently leaving the service are from combat arms and non-
skilled professions that are not readily transferable to the 
civilian labor market.
    One way of combating unemployment is through the creation 
of new jobs. Small business creates an estimated 60 percent to 
80 percent of all net new jobs, therefore providing an 
essential element for a strong economic growth. Government 
should insist in the creation of new jobs by encouraging 
qualified entrepreneurs to start expanding their small 
businesses, and no group is better qualified or deserving of 
this type of assistance than our veterans.
    The American Legion believes that the majority of funding 
allocated veteran military projects through this as well as 
future spending bills should be spent exclusively with veteran 
owned firms. It was the veteran who volunteered to defend this 
nation, the veteran who continues to keep our democracy intact, 
and the veteran who deserves the right to participate in 
rebuilding America's infrastructure and other necessary 
projects.
    In this capacity, the veteran will continue to serve the 
people of the United States by building and growing strong, 
reliable, dependable businesses.
    The mission of the American Legion's national economic 
mission is to take action that affects the economic well-being 
of veterans, including issues relating to veterans' employment, 
home loans, vocational rehabilitation, homelessness and small 
business.
    Small business continues to be a primary job generator and 
a major trainer for American employees. The small business firm 
work force includes more young and entry level workers than 
colleges and large businesses combined. It is vital that 
veteran-owned and service disabled veteran-owned businesses 
receive a fair proportion of the amount of federal contracts, 
are paid promptly for services rendered so these veterans can 
build and maintain successful businesses while they contribute 
to this down economy.
    The American Legion reiterates the Small Business 
Administration Office of the Veterans Business Development 
should be the lead agency to insure that veterans returning 
from Iraq and Afghanistan are provided with entrepreneur 
development assistance.
    We look forward to continuing work with this Committee to 
enhance entrepreneurship among American veterans. Thank you, 
Chairman Nye and Ranking Member Schock, for allowing the 
American Legion to present our views on this very important 
issue.[The prepared statement of Mr. Sharpe is included in the 
appendix at page 114.]

    Chairman Nye. Thank you very much, Mr. Sharpe. You and the 
other members of the panel have quite rightly recognized today 
the important role of veterans in our society and recognizing 
their service to our country, and I appreciate you helping us 
echo that sentiment.
    I want to say, first and foremost, thank you to all of you 
who have served and are veterans yourselves, and please extend 
our thanks to those members of your organizations and your 
companies that have served our country. We appreciate their 
service. That's why we wanted to hold this hearing, to make 
sure that we recognize the role of veterans in our community 
and in our economy, and in trying to do everything we can to 
help them get access to contracts and jobs.
    I also would like to expand that comment a little bit to 
thank members of our military families, and I want to note that 
we have voted in the last few days actually here in the House 
to designate this year as the Year of the Military Family. We 
very much recognize that military families work just as hard 
and serve and struggle as much as our veterans do, and we 
appreciate your role there.
    So thank you very much for that.
    I think this has been a very productive hearing in the 
sense that we have gotten to hear from you who represent 
businesses and veterans organizations, and I want to thank you 
all for being very frank and very forthcoming with specific 
ideas of things that we can change to hopefully move things 
forward. We recognize the great challenge here being that we 
have got funds coming for recovery. We would like those funds 
to create jobs. That is what they are designed to do.
    We obviously need to have a system in place that works. We 
have problems with the system as it is now. We want to fix 
those so that going forward we don't look back in a year or two 
and say, well, we wish we had thought ahead a little bit and 
planned a little bit better. We want o look back and say we are 
really glad that we took the time to think ahead to how to 
tackle these challenges and make this work better.
    I want to start by asking our business owners here if you 
could just comment about Veterans Affairs has a list of veteran 
owned and service disabled businesses, and I wanted to ask you 
are you on that list and can you give us any comments on your 
interaction with the VA in terms of that list? Is it helpful? 
You know, what can we do to make it better?
    And then I'm going to ask you to just comment please on 
training opportunities that VA programs offer for veterans in 
terms of approaching the procurement process.
    But let's start just by asking you if you wouldn't mind 
commenting on the list that the Veterans Affairs keeps of 
veterans and whether or not you are on there and if you think 
that works.
    Mr. Klett. I am Mark Klett. I am personally on the list 
with the Veterans Affairs and also a number of other lists 
within the government, and we do get a lot of spam of wonderful 
opportunities within the government. You have to be able to 
filter through all of that.
    As small businesses, it is very difficult to try to focus 
in on just the right opportunity to stay within your 
capabilities and what you're really good at. So you have to 
filter through all of those things.
    To make one other comment about the great training 
programs, as you're a new and an entrepreneur starting out, 
those are very good. In my particular case, 20 years of 
service, six years doing procurement with the military, six 
years of working with the large defense companies as a program 
manager before I started my business, I was pretty well trained 
and a ready up round, but starting the business, it was pretty 
good to go through some of these training programs, and I do 
refreshers and send some of our people to some of those 
programs.
    So it is good. It is helpful. It is needed, and that is 
what you need to have to go to that baseline.
    Mr. Hart. ARRIBA is also on the list, and in order to be 
certified as a service disabled veteran, you really ought to be 
in that list for the VA and the rest of the organizations, it 
is my belief.
    After doing 22 years in the Navy, I went into ship repair 
for 18, and then I became an entrepreneur, if you will, and 
started my own business in construction. That shows I am not 
really that smart, but what happened was I as well came with a 
background of working with the federal government with 
contracting. I did not really understand how to market.
    And the statement about PTACs, they are absolutely 
wonderful. The actual training that the SBA provides, the free 
training they provide, I go to it all the time. I always pick 
up a little something or I will meet somebody, and so that is 
something that needs to be expanded, in my belief.
    Mr. Schmidt. I really have not had any experience with the 
veterans. Obviously I am listed because Bradley University in 
Peoria administers the economic development, and I was 
receiving bid opportunities from them prior to the FedBidOpps. 
There was Commerce Business Daily, which was very, very 
difficult to use.
    Unfortunately, the classifications that I fit into are so 
limited, but the classifications are so broad that I was 
receiving numerous opportunities for things like helicopter 
parts and stuff that did not even apply to me.
    The other problem was that, again, the classification of a 
small business included, you know, such a range that if it was 
a bid for chain link fence, let's say, or for a razor ribbon, 
which I do not manufacture, I would have to purchase and resell 
it. I was actually bidding against my manufacture. So there was 
really no opportunity there for us at all, and actually I was 
getting so much that did not apply that I asked them to quit 
sending them. It just didn't apply.
    Ms. Cavolt. Hi. We are on the VA list. Generally we receive 
notices from FedBizOpps, and also being in one of the largest 
military communities and our product serves the military 
specifically, we frequently have the different commands coming 
to us asking us for our product because we do work with them to 
basically custom and specialize it for what their needs are.
    As far as the training we have received, Small Business has 
really helped us with the programs that they have. The American 
Legion in conjunction with Small Business has really been very 
helpful, and I look forward to seeing what I can find out from 
the VFW as well. But that would be it.
    Thank you.
    Chairman Nye. Thanks.
    Well, we do not want to put you on the spot, Mr. Brown, but 
I do want to give you and Mr. Sharpe a chance to comment on 
this question about the training programs if you have anything 
you would like to add about your experience from your 
membership.
    Mr. Brown. Sure. My experience with the training programs, 
and thank you for the question, Mr. Chairman, is that they are 
very good. The problem is there is not enough of them, and they 
are located in very limited geographic regions. There is only 
eight across the country. I think there is only one on the West 
Coast, which is California.
    So our experience at the VFW is just plain out there there 
is not enough of the centers, and there is not enough funding 
for SBA to expand the centers.
    Also TVC was running three of the centers, and now that 
they are no longer receiving funding, those three centers are 
also in danger of going under, if you will. So we are hoping to 
see their funding rediverted under SBA, and we would like to 
see the whole program be expanded.
    Thank you.
    Mr. Sharpe. Because there is a real lack of training, that 
is one reason why the American Legion formed its own business 
task force, and with those task force members we have started 
conducting our own training for veterans. Currently the SBA has 
five centers. They are under funded. TVC had three centers. 
They are also under funded, and it looks like they may possibly 
close if we do not get funding to them right away.
    I understand there is over 100 women's business centers, 
but with only eight centers that are all under funded, we do 
not consider there being much of a training program.
    We just had our Washington conference last year. We did a 
one day training class. It was standing room only, and it 
appears that seems to be the situation across the country. 
There is a dire need for training, and it is not there.
    Chairman Nye. Thanks.
    You know, that is something I hear actually from a large 
number of veterans constantly, is that they would take 
advantage of programs more often if they actually were informed 
better about what is out there already. So we need to take a 
look at that as well.
    Let me just ask, and just in the interest of time I do want 
to give Mr. Schock an opportunity to ask whatever questions he 
has, too. I want to just ask the business owners if you could 
tell me just very briefly how do you find out about your 
contracts. I mean, where do you get the information for the 
contracts that you get?
    And if there is one, the principal thing that you could 
change about the federal procurement system, what would be on 
the top of your list?
    Mr. Klett. Most of the contracts that we win, and we have a 
very high win percentage, I find out directly from my 
customers. If you see it on a public announcement, it is too 
late. So it is direct marketing, directly to your end 
customers, and that is basically how you do it or we get 
references or people that call us. I mean that's how it is 
because we have been in the business quite a while. That is how 
it is.
    Mr. Hart. Congressman, we do it two ways. Direct marketing 
is one, and of course, we are an 8(a) company. We do have the 
ability to get sole source contracts, and that is the way you 
have to do the individual marketing to get that.
    But in our general contracting, we will do a couple of 
things. One, FedBizOpps is a good tool, but we will go to the 
various agencies and look at what their forecasts are, and many 
times you can find out who the project manager is in that 
agency for that forecasted project that you find interesting, 
and then you go talk to that individual so that they will know 
who you are when you submit your proposal.
    Now, your proposals are going to cost you anywhere from 
60,000 to $125,000 in construction. So you don't do too many of 
those and lose.
    Mr. Schmidt. Since we do not deal directly with the federal 
government, our projects are basically federally funded, being 
an airport, and I subscribe to a private information service 
that I get notifications of bids coming up in our area, and 
also through our general contractors mainly.
    Unfortunately even on an airport job where there may be a 
lot of fence, it does not go to the fence contractor. It goes 
to a general contractor, and therein is a problem because if it 
was separated out, you know, I think we are capable of handling 
that project on our own, but we do not get that opportunity.
    Then, again, if there is a minority participation involved, 
I mean, there was one recently that we could not even bid it 
because, you know, we were not minority at all. So it is 
unfortunate, but we take what we can get.
    Ms. Cavolt. I think I actually mentioned before that we use 
FedBizOpps quite a bit, and also looking up our codes on DLA 
because any contracting we do basically comes through DSCP.
    I think that the greatest thing that the government could 
do to help stimulus is, well, I am going to say two things. One 
is accountability. Make sure that what we have in place is 
working, that the quotas are being met for what should be set-
asides, and also empowering those people who actually have 
training within the government to buy. Currently buyers are 
limited to a $3,000 purchase on a credit card, when, you know, 
we are in a product business. Three thousand dollars does not 
buy a whole lot, and those limits could be raised, again, with 
accountability.
    There is always the concern for fraud, I think, in any 
business or any arm of the government, but accountability and 
empowering the people who are already there.
    Thank you.
    Chairman Nye. I want to make sure I reserve as much time as 
Mr. Schock would like. So I am going to recognize him for as 
much time as he would like to use.
    Mr. Schock. Well, I think we have until what, three 
o'clock? Is that when votes start?
    [Laughter.]
    Mr. Schock. You know, I would like to take a different 
approach. You know, you all were in the audience when the 
government agencies presented their testimony. You all 
submitted the testimony you just gave days in advance of 
hearing that testimony. So I want to give each one of you the 
opportunity to kind of respond to those agencies who were here 
today, their testimony, and I want to hear your reaction to it 
and any comments you would like to have us, as your members of 
Congress and your representatives here to know.
    So let's just go down the line here, and I want to give you 
the opportunity to take a couple of minutes to respond. Mr. 
Klett.
    Mr. Klett. Yes, sir. And I know for the Department of 
Defense I do all of my contracting with the Department of 
Defense. I will make a few comments on that.
    Their current strategic plan for 2009 is to continue on 
that slope at the same rate, to hit a goal. It is Public Law 
106-50, which says three percent of all federal contracts will 
be for service disabled veterans, a minimum of three percent, 
and that is law.
    And they should be going for that goal, and there are ways 
of doing it for both subcontractors and prime contracts. I 
personally am on 11 different contracts for large companies 
doing defense work, and I typically am getting about one 
percent of that contract each year, exactly the goal, and we do 
really neat, big stuff on aircraft carrier architecture design 
and integrating systems, strategic support for the Pacific 
missile range, a lot of big programs that have people with 22 
inch foreheads are working on. Okay?
    But we are only getting that piece that is being in the 
strategic plan. We can do a lot more than that, and it is 
unfortunate that the goal is there.
    In the VA they have set a seven percent goal, and guess 
what they are hitting: eight percent. So if the leadership sets 
it and attacks it and goes for it aggressively, it will be 
done. I guarantee it. There is no hammer within the Department 
of Defense to really try to attain some of those goals 
unfortunately, and I would like them to try to hit a three 
percent goal. It can be done, and qualified, good people are 
out there to really do it.
    We have a $30 million prime contract that we were awarded 
six months ago, the second largest one in the Navy seaport, 
contract for over five years, and we have only been funded at 
about $100,000 so far, doing things to get critical equipment 
and critical capabilities to the forward war fighters in the 
Global War on Terrorism.
    So the vehicles are there. There is funding out there to do 
these things. It is just not getting to the service disabled 
veterans because the leadership within the Department of 
Defense does not have its arms around it. And I hope we get 
more work now.
    Chairman Nye. Thank you.
    Mr. Klett. Thank you very much for that question.
    Mr. Hart. To go down the table, the SBA is doing a great 
job. They are woefully under funded. They need help.
    The Department of Transportation, they do things that I do 
not do. We do security systems, but they do not want to do a 
security system for a small region. They want to do the State 
of Virginia. Well, unfortunately we do large security systems, 
several million dollar security systems, but I could not do the 
surveillance system for all of the roads in the State of 
Virginia. You know, they are not interested in breaking things 
up, which is fine with me. That is not a problem.
    The VA has got the teeth that everybody needs, and they 
have the authority to do sole source contracting. A case in 
point. they needed security upgrades to their VA medical 
centers in VISN 6, which is out of Hampton. We received a sole 
source contract for right at $2 million to go do that, and we 
are in the process of doing that for them, and we are doing the 
design and installation all at the same time. So you get two 
things. You save time and you save a lot of money.
    To follow on with that, their competitive procurements are 
service disabled. That is their prime focus, and that is not an 
after the fact with them. That is up front with them. We have 
won competitively a $1.3 million mass announcing system. It is 
part of your anti- terrorism package for a large hospital. That 
is what the VA is doing. The VA is out front. This is what the 
rest of the federal agencies need. they need the same language 
that the VA has.
    As far as DoD, as far as constructions are concerned, they 
are not even setting aside one-half of one percent. They are 
bundling contracts. They are using mass contracts for the large 
players, and the latest wrinkle is for the large contractor to 
go out and find another large contractor to subcontract to and 
then say, well, now, look. You go find a service disabled 
veteran contractor, and we are going to sign two combined 
contracts, and what is going to happen is we will just work 
with you in the service disabled veteran contract and we will 
not even have to bond it, and we will just do a pass-through 
and just add another $100,000 onto your bid and bring them in 
as a shell game.
    And I have one of those contracts for you if you would like 
to have it, and, Congressman, I have provided it to your 
office. This is the latest wrinkle, and this thing actually is 
a two-part contract which allows the prime to cancel the 
contract with VA service disabled member, keep the contract 
with the second tier sub, and pocket the difference's profit.
    That is pretty good. Now, that is your trickle down using 
big businesses to work the service disabled veterans. That is 
the biggest hooey I have ever heard in my life, and I refuse to 
do it.
    Mr. Schmidt. I had minority ownership in Hohulin since 
1994. In 2007, I had an opportunity to buy out some non-active, 
non-participating partners that held the majority of the stock. 
Our local bank, it is a very small, private owned bank. I had 
approached them obviously because we had been doing all of our 
business with them. All of our lending, all of our everything 
had been with the local bank. Because of a weak balance sheet, 
they preferred to run a loan basically, what I needed to borrow 
to buy the rest of the company through the SBA.
    That started in March of 2007, and it took approximately 
almost four months to get to the point where I received some 
sort of approval, and the problem was that literally every two 
to three weeks I would get another road block, a request for 
more paper work, more paper work, more documentation, and it 
was really getting ridiculous.
    I would have to call and say, ``Where are we at with 
this?'' and the bank would go, ``I do not know. Let me call and 
find out.''
    It just dragged on and on, and interesting enough, I 
approached another bank. I was wanting to stay the course. I 
was wanting to get this finished so that we could complete the 
purchase, and I went to another local bank, another private 
owned but larger bank, and the owner came out literally the 
next day, and within an hour and a half we had a verbal 
approval. Within two weeks it was done, and we did not have to 
put up the collateral that was required for the SBA.
    So, again, you know, if there was that risk, the other bank 
did not see that and went on what we showed them, which was the 
same documentation we showed the SBA.
    Again, I do not deal with the DoD. I do not deal directly 
with the large government agencies directly because we are in a 
very small area, but as far as the Department of 
Transportation, our state really does not have much funding at 
all. I mean, coming into our area is very little money.
    So you know, business opportunities really are not there at 
this time. One thing, I was encouraged when the Recovery Act 
was proposed was there was going to be a Buy American clause in 
there. You know, we are an American company. I am an American 
and proudly an American. You know, America is the strongest 
country in the world, and our company is proud to sell American 
made products.
    But I see the proliferation of foreign products in our 
industry specifically, and that is disheartening because it 
does not give me any advantage at all because if I am trying to 
compete with a foreign made product with an American made 
product, it is not level at all. It is not fair. You know, 
there may be a specification come out; in fact, it just 
happened recently for, you know, a six foot tall fence with 
barbed wire and certain sized posts and that, but that was the 
end of it. It did not say, you know, to be American made 
products.
    I know that the school system is saying that now. I am glad 
to see that, use American made products, but it is just not 
fair to let foreign made products come into the marketplace. It 
puts us at another disadvantage.
    Ms. Cavolt. First I would like to say that I did appreciate 
everything the first panel had to say in response to your 
question. I think it is probably the largest gathering of 
government officials that I have heard acknowledge that there 
are goals that are not being reached, and it was very nice to 
hear that they realize we have a ways to go, and I sincerely 
hope that having heard what we are saying that they can 
understand and recognize what our problems are and go forward 
and take care of some of those with the assistance, of course, 
of Congress.
    I think, you know, Ms. Oliver addressed the issue of 
payment, of prompt payment, and it is a problem particularly 
with the small business. Sometimes, as Mr. Schmidt will say, 
taking time to get bank loans can be extremely--first of all, 
it is very time consuming and you do not always know what you 
are going to get in the end.
    I find for ourselves as a small, emerging business, that 
because of the size of the contracts that we do manage, and we 
are going through the prime vendor, one of the greatest 
problems we are having is there is no way that we can put 
grievance if we are not being treated fairly.
    Right now I am having payment withheld by a subcontractor, 
and I have nobody to talk to to help me with it, and if I do 
not rectify it, there is a good chance that my business could 
go under just because of the amount of money.
    But, again, my comment about accountability, that is why it 
becomes so important, and just one other comment I would like 
to make about that is when prime vendors are renewed, they go 
to the customer and say, ``Well, how was it? Did it work for 
you?'' And yet the subcontractor is never asked did it work for 
you. Were you able to work with this company? Because you do 
not know. A prime vendor may be showing great success, but they 
are jumping from business to business, and there are some very 
good prime vendors. So please understand I am not on a mission 
to try to get rid of that system because it is a very valuable 
system and it works, but it just needs oversight and 
accountability so that smaller businesses that are using prime 
vendors can be assured that they will get paid and that they 
have the opportunity to grow.
    Thank you.
    Mr. Brown. Congressman Schock, thank you for the question.
    In regards to the agencies' testimony before this, I mean, 
it has been ten years since we passed this law. We cannot even 
say we are halfway there. The preliminary numbers are showing 
1.4 percent of these contracts are going to small, disabled 
veteran-owned businesses. I would not be half shocked if I 
started raffling through the old testimony and it did not look 
nearly similar to what was submitted today. So that is kind of 
where we are at.
    We are ready to see some action and tired to talk.
    Thank you.
    Mr. Schock. thank you.
    Mr. Sharpe. The American Legion perspective on this is that 
there is just not enough buy-in from the various federal 
agencies from the top. You know, the individuals who spoke 
today are not those who make the decisions on whether or not to 
help the veterans or not. For the last few years we have worked 
pretty closely with both House committees, small business House 
committees, and I mean the Senate and the House, and I have to 
say both committees were very active as far as especially 
working with SBA and really pushing the federal agencies to do 
what should be done.
    And, frankly, many of them just refuse to do it. It takes a 
lot of work to get a bill passed and then get it implemented 
and then get it funded. But if the head of the SBA or DoD just 
refused to implement what has already been passed, it tells the 
veteran that we really do not see you as a viable partner, and 
it is really a missed opportunity.
    Those of us who have been overseas, we come back with a lot 
of expertise and we still have that same belief in completing 
the mission, and we probably are the best partners to try and 
get anything done that the country needs completed. And when 
these agencies do not recognize that, they would rather do 
business as usual with the large contractors, not really paying 
attention to where the money is going and how it is used or how 
effective it is, that is disheartening for a lot of these 
business owners who are veterans, and that is the problem.
    If you pass the bill and the Administrator of SBA refused 
to implement it, you can see there would be a lot more shock. 
He has had a budget of $750,000 for the last three or four 
years. What can he do with that? He has to run five business 
centers. They have to try and monitor all compliance from the 
various federal agencies with a staff of next to nothing, and 
then you have DoD who has one of the largest budgets and they 
still have not been able to make a three percent goal.
    That tells people that we really do not want to do business 
with you, and it comes from the top.
    Mr. Schock. Thank you for your candid responses, and I 
sincerely appreciate it. It has been very helpful to me.
    So thank you, Mr. Chairman. I hand it back to you.
    Chairman Nye. I just want to thank members of both of our 
panels again for being here today, and again, I think the theme 
here is that we have got some work to do. I was surprised to 
hear, but actually I want to give some credit to the agency 
representatives here for being frank about the fact that they 
have not done what they need to do. In some areas we are making 
some progress, but what we want to avoid here is exactly what 
Mr. Brown described. We do not want to look back again in the 
future and say after the testimony we heard today and find that 
it is very similar to testimony given many years ago and have 
the same testimony given two years from now.
    We would like to see progress made in this area that we can 
measure, and again, I want to thank all of those who traveled 
from quite some distance to be with us, to share with us your 
stories. I am a firm believer in the notion that in order for 
us to improve, we have got to hear ideas coming from outside 
Washington. So we really appreciate you taking the time to be 
with us here today and share your anecdotes with us.
    And as I mentioned before, we will be continuing to keep up 
with our agencies and very interested to see and track the 
progress, particularly with those who have established special 
agencies or special committees or a special oversight body to 
track this, and we will be keeping up with the progress we are 
making on that.
    Again, thank you all very much for being here today. I want 
to ask unanimous consent that members have five days to submit 
statements and supporting materials for the record, and without 
objection, so ordered.
    Thank you very much, again, all for being here. This 
hearing is now adjourned.
    [Whereupon, at 12:37 p.m., the Subcommittee meeting was 
adjourned.]

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