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



 
  MINORITY CONTRACTING: OPPORTUNITIES AND CHALLENGES FOR CURRENT AND 
                    FUTURE MINORITY-OWNED BUSINESSES

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

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
                     ORGANIZATION, AND PROCUREMENT

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 22, 2010

                               __________

                           Serial No. 111-148

                               __________

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             JOHN J. DUNCAN, Jr., Tennessee
JOHN F. TIERNEY, Massachusetts       MICHAEL R. TURNER, Ohio
WM. LACY CLAY, Missouri              LYNN A. WESTMORELAND, Georgia
DIANE E. WATSON, California          PATRICK T. McHENRY, North Carolina
STEPHEN F. LYNCH, Massachusetts      BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                JIM JORDAN, Ohio
GERALD E. CONNOLLY, Virginia         JEFF FLAKE, Arizona
MIKE QUIGLEY, Illinois               JEFF FORTENBERRY, Nebraska
MARCY KAPTUR, Ohio                   JASON CHAFFETZ, Utah
ELEANOR HOLMES NORTON, District of   AARON SCHOCK, Illinois
    Columbia                         BLAINE LUETKEMEYER, Missouri
PATRICK J. KENNEDY, Rhode Island     ANH ``JOSEPH'' CAO, Louisiana
DANNY K. DAVIS, Illinois             BILL SHUSTER, Pennsylvania
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director

  Subcommittee on Government Management, Organization, and Procurement

                 DIANE E. WATSON, California, Chairman
PAUL E. KANJORSKI, Pennsylvania      BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                AARON SCHOCK, Illinois
GERALD E. CONNOLLY, Virginia         JOHN J. DUNCAN, Jr., Tennessee
HENRY CUELLAR, Texas                 JEFF FLAKE, Arizona
JACKIE SPEIER, California            BLAINE LUETKEMEYER, Missouri
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
MIKE QUIGLEY, Illinois
                      Bert Hammond, Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 22, 2010...............................     1
Statement of:
    Hinson, David, Director, Minority Business Development 
      Agency, U.S. Department of Commerce; Marie C. Johns, Deputy 
      Administrator, U.S. Small Business Administration; Jiyoung 
      Park, Associate Administrator for Small Business 
      Utilization, General Services Administration; Linda Oliver, 
      Acting Director, Office of Small Business Programs, U.S. 
      Department of Defense; and Brandon Neal, Director, Office 
      of Small and Disadvantaged Business Utilization, U.S. 
      Department of Transportation...............................    15
        Hinson, David............................................    15
        Johns, Marie C...........................................    27
        Neal, Brandon............................................    73
        Oliver, Linda............................................    62
        Park, Jiyoung............................................    56
    Robinson, Anthony W., president, Minority Business Enterprise 
      Legal Defense and Education Fund; Fernando V. Galaviz, 
      president, the Centech Group, on behalf of the Mid-Tier 
      Advocacy; Don O'Bannon, chairman, Airport Minority Advisory 
      Council; Joel Zingeser, FAIA, director of corporate 
      development, Grunley Construction Co., Inc.; and Michael 
      Sumner, Discrimination Research Center, Thelton E. 
      Henderson Center for Social Justice, UC Berkeley School of 
      Law........................................................    93
        Galaviz, Fernando V......................................   105
        O'Bannon, Don............................................   124
        Robinson, Anthony W......................................    93
        Sumner, Michael..........................................   148
        Zingeser, Joel...........................................   142
    Rush, Hon. Bobby L., a Representative in Congress from the 
      State of Illinois..........................................     5
Letters, statements, etc., submitted for the record by:
    Bilbray, Hon. Brian P., a Representative in Congress from the 
      State of California, prepared statement of.................     3
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............   166
    Galaviz, Fernando V., president, the Centech Group, on behalf 
      of the Mid-Tier Advocacy, prepared statement of............   107
    Hinson, David, Director, Minority Business Development 
      Agency, U.S. Department of Commerce, prepared statement of.    18
    Johns, Marie C., Deputy Administrator, U.S. Small Business 
      Administration, prepared statement of......................    29
    Neal, Brandon, Director, Office of Small and Disadvantaged 
      Business Utilization, U.S. Department of Transportation, 
      prepared statement of......................................    75
    O'Bannon, Don, chairman, Airport Minority Advisory Council, 
      prepared statement of......................................   126
    Oliver, Linda, Acting Director, Office of Small Business 
      Programs, U.S. Department of Defense, prepared statement of    64
    Park, Jiyoung, Associate Administrator for Small Business 
      Utilization, General Services Administration, prepared 
      statement of...............................................    58
    Robinson, Anthony W., president, Minority Business Enterprise 
      Legal Defense and Education Fund, prepared statement of....    96
    Rush, Hon. Bobby L., a Representative in Congress from the 
      State of Illinois, prepared statement of...................     8
    Sumner, Michael, Discrimination Research Center, Thelton E. 
      Henderson Center for Social Justice, UC Berkeley School of 
      Law, prepared statement of.................................   150
    Zingeser, Joel, FAIA, director of corporate development, 
      Grunley Construction Co., Inc., prepared statement of......   144


  MINORITY CONTRACTING: OPPORTUNITIES AND CHALLENGES FOR CURRENT AND 
                    FUTURE MINORITY-OWNED BUSINESSES

                              ----------                              


                     WEDNESDAY, SEPTEMBER 22, 2010

                  House of Representatives,
            Subcommittee on Government Management, 
                     Organization, and Procurement,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:07 a.m., in 
room 2203, Rayburn House Office Building, Hon. Diane E. Watson 
(chairwoman of the subcommittee) presiding.
    Present: Representatives Watson, Connolly, and Bilbray.
    Also present: Representative Chu.
    Staff present: Bert Hammond, staff director; Valerie Van 
Buren, clerk; and Adam Bordes and Deborah Mack, professional 
staff members.
    Ms. Watson. Good morning. The Subcommittee on Government 
Management, Organization, and Procurement of the Committee on 
Oversight and Government Reform will now come to order.
    Without objection, the Chair and ranking minority member 
will have 5 minutes to make opening statements, followed by 
opening statements not to exceed 3 minutes by any other Member 
who seeks recognition.
    Without objection, Members and witnesses may have 5 
legislative days to submit a written statement or extraneous 
materials for the record.
    Let me just read an opening statement, and then I will 
yield to you, Congressman Rush.
    I want to welcome all of you today to the hearing that 
examines the status of Government-wide minority contracting 
programs and the efforts made to date by Federal agencies to 
comply with requirements for minority-owned business programs. 
In addition, the subcommittee will hear testimony from 
Congressman Bobby Rush regarding his legislation, which is H.R. 
4343, the Minority Business Development Improvement Act of 
2009.
    Programs to assist minority-owned businesses represent one 
of the several types of programs in place to promote the growth 
of small business entrepreneurs. Such programs, administered 
under Section 8(a) of the Small Business Act, provide agencies 
the authority to set aside contracts for small disadvantaged 
business [SDBs], and to make sole source awards to such firms.
    The Federal Government offers assistance to small 
businesses to make sure they get a fair proportion of Federal 
contracts and subcontract dollars. In fiscal year 2009, $29.3 
billion, or 6.7 percent of all Federal contracts, were awarded 
to minority-owned businesses out of a total of $537 billion in 
goods and services purchased by Federal agencies. A portion of 
this funding was allocated as part of the American Recovery and 
Reinvestment Act [ARRA]. And as of July 16, 2010, the Federal 
Procurement Data System reported that about $3.6 billion, or 
12.6 percent of the ARRA funds, had been awarded to small 
disadvantaged businesses.
    While minority contracting programs have proven rewarding 
to both contractors and the U.S. Government, I am aware that 
significant obstacles and barriers still confront minority 
contracts in their attempt to bid for and obtain Government 
contracts. Evidence of ongoing and persistent discrimination 
against minority contractors has been documented over the 
years. Structural barriers, including access to financing, 
bonding, and trade union resistence, continue to impede the 
performance and successful participation in minority 
contractors. Moreover, recent court decisions, such as Rossi, 
have impacted the scope and the purpose of minority contracting 
programs on a going forward basis.
    I am very interested in hearing more specifics from our 
private sector panelists on how documented instances of 
discrimination have prevented minority firms from advancing in 
the marketplace, particularly because I do understand that it 
is often difficult for minority contractors to speak openly 
about these issues out of their fear that they will be 
ostracized. If Congress is to address the shortcomings in our 
minority contract program, it must have a comprehensive 
understanding of the problems at hand in order to develop 
appropriate legislative remedies.
    It is my hope that this hearing today will make a 
significant contribution to the development of a meaningful 
legislative record on this important issue, and I welcome all 
the witnesses that are here today and we all look forward to 
your testimony.
    OK, now I will turn the mic over to our ranking minority 
member, Congressman Bilbray.
    Mr. Bilbray. Madam Chair, you will be pleased to hear that 
I have a written statement for the record and ask for unanimous 
consent it be included in the record.
    Ms. Watson. Without objection.
    Mr. Bilbray. I yield back to the Chair.
    [The prepared statement of Hon. Brian P. Bilbray follows:]
    [GRAPHIC] [TIFF OMITTED] T5561.001
    
    [GRAPHIC] [TIFF OMITTED] T5561.002
    
    Ms. Watson. Thank you.
    Now we are honored to have our guest panelist and my good 
friend, Congressman Bobby L. Rush. Congressman Rush was first 
selected to the U.S. House of Representatives in 1992 and is 
presently in his ninth term serving the people of Illinois' 
First Congressional District, and he is a senior member of the 
Energy and Commerce Committee, where he chairs the Subcommittee 
on Commerce, Trade, and Consumer Protection.
    Congressman Rush is a sponsor of H.R. 4343, the Minority 
Business Development Improvement Act of 2009. The legislation 
would establish a program providing technical assistance, loan 
guarantees, and contract assistance to qualifying minority 
businesses. Also, the program would broadly resemble existing 
Small Business Administration [SBA], programs for small 
businesses owned and controlled by socially and economically 
disadvantaged individuals, among others.
    But it would differ in its eligibility criteria in the loan 
guarantees and contract assistance provided. Specific 
eligibility criteria differences include, first, the size of 
firms allowed to participate; inclusion of certain groups 
presumed to be disadvantaged; three, higher economic and 
network thresholds for individuals seeking to participate; and, 
four, limited eligibility for group owners to participate.
    Congressman Rush, you may proceed with your statement.

 STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF ILLINOIS

    Mr. Rush. I want to thank you, Madam Chairperson, Madam 
Chairwoman, for your leadership on this committee and, I also 
say, in 1992.
    Congressman Bilbray, it is so good to be with you and 
before you this morning. I would also extend my note of you 
being one of the most successful Members of the House of 
Representatives. But it is good to see you, my friend.
    To all the members of the subcommittee, I am so delighted 
to be here. I want to thank you for inviting me to testify 
before your subcommittee on this important hearing on Minority 
Contracting: Opportunities and Challenges for Current and 
Future Minority-Owned Businesses.
    During the first half of 2009, Congress took extraordinary 
steps to turn the Nation's economy around and create jobs that 
would fuel our economic recovery.
    Many States have already begun to distribute contracts. 
However, across the country, minority-owned firms are being 
shut out of the process because of what I call artificial 
barriers that I believe that this Congress must simply break 
down.
    Also, on the outside of the Federal marketplace, minority-
owned firms are struggling, literally, trying to stay afloat 
and finding the needed financial and technical assistance to 
continue their operations. In business, the metaphor of the 
level playing field comes to mind. But that metaphor doesn't 
quite describe the circumstances for minority-owned businesses.
    Far from being on the playing field, many minority 
businesses and business owners find themselves standing outside 
the stadium doors where the business games in America are being 
conducted, standing on the outside of the stadium, in a crowd, 
trying to raise their voices over the din and over the noise 
and over the clamber that is going on of business R&D inside 
the stadium and playing the American game of business. They are 
signaling with one voice as loud as they can, they are saying, 
we are here. Look at us. Recognize us. Acknowledge us. We are 
here and we want to participate in the American economy.
    Madam Chair, that is why I am here, because so many of 
these business persons in my community, in my district, in your 
district and districts like ours, they can't be here. Their 
voices won't be heard today, so I am here to speak for them in 
my own way. The question remains to be answered, and so many 
others that I represent here: Why are these companies 
continually shut out of a process that these men and women, who 
are also taxpayers, citizens of this Nation, veterans of wars 
of this Nation, why are they out of the process and how can we 
help fund and support them?
    Quite frankly, Madam Chair, I find that this situation is 
totally unacceptable, and I believe that all of you join me in 
this.
    Historically, minority-owned firms have long faced an 
uphill battle in gaining a foothold on the national economic 
scene. In 1997, a study by the Urban Institute identified 
several obstacles faced by minority-owned businesses. At the 
top of that list was the lack of access to financial capital, 
limited access to informal business networks, lesser skilled 
human capital, and limited access to non-minority markets.
    I am here today unequivocally saying that by building up 
minority firms we can begin to truly drive the economic 
recovery that Congress and the Obama administration has been so 
diligently working toward. I have spent some time looking for 
ways to assist minority-owned firms of all sizes, including all 
business sectors, in their efforts to succeed and prosper in 
their efforts to create jobs in our Nation. Minority businesses 
and business owners employ nearly 5 million Americans.
    I looked at the Minority Business Development Agency [MBDA] 
in my research. This agency is under the auspices of the 
Department of Commerce and it is the only Federal agency, the 
only one, the only Federal agency in the last 40 years that was 
created specifically to help minority-owned firms. This agency 
was created during the years of Richard Nixon and it has 
language in the Department of Commerce fighting to stay alive, 
really struggling against tremendous odds, trying to help 
minority businesses prosper, to gain a foothold in the American 
economy, with little to no help from the U.S. Congress; an 
ignored agency for the most part.
    Unfortunately, even today, it still currently lacks the 
resources it truly needs to bring about significant change, 
particularly in today's tough economic climate. If there ever 
was a time when this agency, given its mission of 40 years ago, 
needs to be strengthened, I say the time is now. There is no 
better time than now. Now is the time.
    To that end, I introduced my bill, H.R. 4343, the Minority 
Business Development Improvement Act of 2009. If adopted, this 
bill will establish a Minority Business Development Program to 
assist qualified minority businesses by providing technical 
assistance, loan guarantees, and contracting procurement 
assistance. The bill authorizes the director of the MBDA to 
certify any entity as a qualified minority business that 
satisfies each of the eight criteria outlined in the bill. The 
bill authorizes $200 million to the director to carry out the 
technical assistance program and $500 million for loan 
guarantees. The bill would also allow firms participating in 
the program to bid on select set-aside contracts for goods and 
services.
    Ladies and gentlemen, brothers and sisters of this 
committee, I believe that it is time to bring the Minority 
Business Development Agency to the forefront of our Nation's 
economic recovery, and I am sure that other witnesses at 
today's hearing will concur with me. I am also sure that each 
one of you have felt, in your own way, the desire to turn 
things around and to regain our economic footing for the people 
in our local communities and throughout the Nation.
    Madam Chair, I urge the members of this subcommittee to 
join me in an effort to create a viable platform for minority-
owned business development. Again, I thank you for giving me 
this opportunity to address this auspicious and this very 
important committee of the U.S. House of Representatives, and I 
thank you again. I am available for any questions that you may 
have.
    [The prepared statement of Hon. Bobby L. Rush follows:]
    [GRAPHIC] [TIFF OMITTED] T5561.003
    
    [GRAPHIC] [TIFF OMITTED] T5561.004
    
    Ms. Watson. We want to thank you too for bringing this 
issue, being persistent on this issue over a period of time, to 
our attention. It is right for us to have a hearing and bring 
all the facts as we know them to the table so that we can start 
discussing how we can do remedies, as I said before.
    Based on the information from your constituents, and I know 
that you have a history of always being tuned in to the people 
in your constituency, and even out of your constituency, or 
whatever sources you might have been talking with, how has the 
recent recession affected the minority-owned firms seeking to 
obtain Government financing or Federal contracts?
    Mr. Rush. Madam Chair, thank you for that great question. 
As I expressed before, there are still great disparities.
    Ms. Watson. Do you have kind of a percentage? Let's just 
stick within your district. What would you say the percentages 
would be in terms of those receiving contracts?
    Mr. Rush. Well, it is very paltry. I say that during this 
era, the Recovery Act, less than 3 percent of the minority-
owned businesses in my district have been affected, although we 
took initial steps. We had a number of seminars and forums; we 
brought Government officials out early on, when this was first 
proposed. We tried to get ahead of the tide, ahead of the 
program. We wanted to be associated with the mostest.
    However, as we see how these programs and these dollars are 
being spent, they have very little effect on my district. And 
one of the reasons why they have very little effect on my 
district is that there is not a singular entity that really can 
help address and deal with some of the difficulties that 
minority businesses have historically affected, and that is why 
I focus on, again, the President Nixon created program, 
Minority Business Development Agency.
    I looked at and said, well, this is what is sorely needed 
at this time. If we want to increase from 3 percent to 10 
percent to 25 percent to 30 percent, then we have to have an 
advocate, a well armed, well financed, well intentioned focused 
advocate that will help minority businesses in my district and 
provide assistance.
    Madam Chair, I am astounded and I am ashamed to say this, 
but MBDA right now is the smallest Federal agency within the 
Federal Government. It has been flatlined in terms of its 
budget for over 40 years. Flatlined. Everything else has taken 
off, has soared. But the one agency that can make a significant 
difference in my community, other minority communities, the one 
agency whose mission it is to help engage my constituents, your 
constituents, in a robust manner in this Congress, that agency 
is moribund almost because of the lack of funding and resources 
that it has.
    Ms. Watson. Let me just say this. We are all, in this 
Congress, focusing on jobs, jobs, jobs.
    Mr. Rush. Yes.
    Ms. Watson. And when we cannot focus or train our awards to 
these companies, there are a great number of people without 
jobs, laid off. That is correct. What is the jobless rate, 
percentage-wise, in your constituency?
    Mr. Rush. Madam Chair, I thank you for that question. Let 
me just say the published rate is about 16 percent. That is the 
published rate. Now, the real rates are more like about 30, 35 
percent. And that is just the ones who are considered 
unemployed and the ones who might be eligible for unemployment 
benefits. Those who have dropped out of the job market, I mean 
totally dropped out, then you would probably say it is 
somewhere around about 45 percent. If you want to include young 
people, then it is over 50 percent.
    So, I mean, if you are talking about a depression, I am not 
sure how the economists, how they identify employment of a 
depression, but I would just say that most of my district is 
beneath whatever the parameters in my district.
    Ms. Watson. These are depressed areas.
    Mr. Rush. Yes.
    Ms. Watson. In listening very closely to what you see as a 
remedy, I think it goes to the basis that the agency that was 
established to see that we had eligibility requirements that 
could be met by minority businesses is underfunded.
    Mr. Rush. Absolutely underfunded. And that is the 
foundation for the problem, that it is underfunded.
    Ms. Watson. So it really becomes a fiscal problem for us to 
see that we share with this agency a justifiable amount so that 
we can increase minority contract and put the people back to 
work. Is that a statement that would be verified by your bill?
    Mr. Rush. Madam Chairman, yes, it would be. It would be. 
And if we just want to look at, if we just extrapolate for one 
moment, if we invest in the beginning, at the outset, if we 
invest in minority businesses, invest in this agency, then the 
same--American taxpayer on the other end would mean 100 times 
greater, because if you invest in creating businesses, in 
creating jobs, and then your investment in the social program 
and the citizens.
    That investment on the back end would be less if we invest 
in a robust minority business program in order to help create 
jobs. By definition, jobs is still the standard for being 
productive in this society. Jobs are still the creator of the 
American dream and of the American economy. The real stimulus 
program that I think we need now is to disseminate minority 
businesses so that minority businesses can do its rightful and 
natural function of creating jobs for the American people.
    Ms. Watson. Thank you.
    I will now yield to Mr. Bilbray.
    Mr. Bilbray. Congressman, thank you for your kind words. 
Let me just say, as somebody who was born and raised in a 
working class neighborhood, one of the things that has 
frustrated me so often is, first of all, a lot of people come 
into our communities that are distressed and see the 
unemployment, see the redlining.
    I still remember this one company, this one bank that I 
caught when I was mayor of a small town and said that the 7-
Eleven being built in my community, built at half the revenue 
and be twice as expensive as the same 7-Eleven being built in 
another community. Now, I can understand half the revenue or 
reduced revenue because of our economic situation, but twice as 
expensive? So that tricky little game you get into.
    So I have seen that and I am concerned that we approach, 
many times, what we think is the problem is a symptom of deeper 
problems, and we see things in isolation; we go in and say this 
unemployment is the problem, but in reality there is a bigger 
problem.
    One thing that I really want us to concentrate on is that 
the minority community does not operate in the business 
community in isolation; it is part of a broader network. 
Wouldn't you agree that if you were breaking down the 
businesses into three categories, large, medium, and small, 
there are very few minority-owned businesses in the large 
category? Big business tends to be exclusive. Medium you have 
some, but not much.
    But the overwhelming majority of minority-owned and 
disadvantaged is in the small category. And I think we have to 
understand that a lot of these barriers appear to be just race-
based or social-economic, but, in reality, because of the way 
systems, especially in the Government, is operated, we favor 
the big guy so much that indirectly there is a discrimination 
that not only is based on the color of your skin but, more 
importantly, by the volume of your pocketbook And it happens 
that the minority and disadvantaged community tends to fall 
into that category, along with other groups.
    Have you looked at the fact that one of the biggest 
problems we have with this program is we tend to put the weight 
on that middle ground? That if you want to qualify, you must 
qualify to be one of those medium sized businesses, the initial 
hit. But if you are one of the smaller guys, you are not big 
enough to compete for those contracts; you are not able to 
fulfill those requirements; and the system tends to say, we 
don't care, medium guy, if all of your subcontractors are 
disadvantaged, we want you to be disadvantaged. So you don't 
have the incubator process.
    I mean, let's face it, the great majority of these non-
minority businesses were not born big, were not born even 
medium; they grew from the small. But the incubator concept 
tends to be stifled right now when I look at Federal 
contracting.
    In fact, one of the biggest problems we have, I think, with 
fraud in the system is that a lot of middle and big business 
are creating the fraud to get this advantage, where the true 
disadvantaged business people are not gaining access because 
they are too small to compete in the existing Federal program, 
they are not big enough to be able to play the game and, thus, 
they de facto are cut out not because of who they are, but 
because of the size they are. But the result is the same, 
exactly the same.
    Mr. Rush. Mr. Bilbray, let me just say this. It seems to me 
that the problem that you are addressing, first of all, small 
businesses employ the majority of the American people across 
the board. Firms that employ less than 500 people are the main 
employers of the American people; not major corporations, it is 
the small businesses. And what I think, I do think that there 
is a fallacy and there is a fault line with, Federal 
Government, because they do favor large corporations.
    And I think that addresses why there is such a need for the 
MBDA, because we have to change the thinking pattern, the mind-
set of the Federal procurement community so that they will go 
out of their way, rather than discriminating against small 
businesses, that they will switch the paradigm and--that small 
businesses should be a premium, should be the priority for 
Federal procurement.
    Now, it might be cumbersome in one extent, maybe in terms 
of the bureaucracy or paperwork, but in this age of 
computerization and technological innovation, I think that we 
are living in a new world, and I don't think the same 
competitiveness that existed 10, 20 years ago exists now in 
terms of how you manage having more contracts broken down, you 
know, smaller contracts, and thereby inviting more and more 
businesses.
    Mr. Bilbray. Let me kind of reinforce. One of the problems 
we have now is that if you have that middle business size, put 
a bid in, they do not get credit for the fact that all of their 
subcontractors, or a large percentage of the subcontractors, 
may be disadvantaged businesses.
    So what happens is there is not the incentive to help 
incubate and grow the small into the medium to where you have 
the ability to compete in there. It is like we look at whoever 
is the bidder and we don't look at where their supply chain is. 
And you and I know, from the employment point of view, just 
from the workers in your district, if they are hired by a 
subcontractor who is doing the Government project, that is just 
as good a job as if they are hired by the guy who got the 
contract originally.
    But we are not, right now, giving any credit to those 
middlemen, the guys who are getting the bid, of literally 
incorporating the small guy into it and making a special effort 
to go out and get those disadvantaged businesses into their 
proposal; and I really think that there is a real missing link 
to build this foundation.
    This kind of economic prosperity doesn't happen overnight. 
It is not just a political and a Government thing, it is a 
cultural thing of people getting in the habit of giving people 
a chance to bid and compete, and rewarding them for taking the 
effort to go do that. Right now I run into situations of 
frustration where a lot of guys are telling me I don't even get 
credit if I go out and recruit this on a lot of these 
contracts, and I think that is one of the things we have to be 
frank and open about.
    Just because it appears that we are playing a game by 
setting aside, the outcome doesn't reflect reality, and the 
outcome proves to us what we have been doing traditionally is 
not doing it right. And I think we should be willing to shake 
it up a little bit and try these new things of saying if you 
have a contractor who has done that outreach into the minority 
community and got subcontractors, he should get credit and be 
reflected in a benefit to him for going out and recruiting and 
incorporating and integrating those subcontractors into the 
process and empowering the disadvantaged businesses to start 
growing. And I think that is a critical component. I know it 
sounds like an abstract, but if we are going to create the 
jobs, you have to change the system.
    Mr. Rush. Mr. Bilbray, let's shake, rattle, and roll.
    Ms. Watson. I would like to introduce one of our 
colleagues, Judy Chu, of California, for sitting in with us 
this morning. You probably didn't hear the opening statement, 
but I know that you understand the subject matter. Would you 
like to make a comment?
    Ms. Chu. I am just happy to be here to pursue the issue of 
improving our minority contracting opportunities, and I am glad 
to hear the testimony, and I certainly support Congressmember 
Rush's efforts in doing so.
    Ms. Watson. Thank you so much for joining us this morning.
    And thank you, Bobby Rush, for being consistent and staying 
on us until we had this hearing. We appreciate it so much.
    Mr. Rush. Thank you very much.
    Ms. Watson. This will conclude the testimony for 
Congressman Rush. Thank you again.
    Mr. Rush. Thank you so much.
    Ms. Watson. I would like to invite our second panel. But 
before you come up will staff bring the chairs back? We will 
call up the second panel that is composed of David Hinson, the 
Honorable Marie C. Johns, Mr. Jiyoung Park, Linda Oliver, and 
Brandon Neal.
    [Pause.]
    Ms. Watson. It is the policy of the Committee on Oversight 
and Government Reform to swear in all witnesses before you 
testify, and I would like to ask you to please stand and raise 
your right hands.
    [Witnesses sworn.]
    Ms. Watson. With that, you may be seated, and let the 
record reflect that the witnesses answered in the affirmative.
    I will now introduce each one of you.
    Mr. David Hinson is the Director of the Minority Business 
Development Agency at the Department of Commerce. Mr. Hinson 
oversees five regional offices and a network of 48 minority 
business centers that provide services to promote the growth 
and competitiveness of minority businesses. Prior to this 
position, Mr. Hinson was president and CEO of the Wealth 
Management Network, Inc., a multimillion dollar independent 
financial advisory boutique. He also managed a 10-State sales 
region as director of advisory services for Investnet Asset 
Management, a $70 billion financial advisory firm.
    Ms. Marie Johns serves as the Deputy Administrator of the 
Small Business Administration. Prior to her appointment, Ms. 
Johns was the managing member of L&L Consulting, LLC, and she 
is also past president of Verizon in Washington, DC. At 
Verizon, Ms. Johns was responsible for 2,000 employees and over 
800 customers, including many of the small businesses.
    Ms. Jiyoung Park serves as the Associate Administrator for 
Small Business Utilization at the General Services 
Administration, where she oversees the agency's small business 
policies and programs. Previously, Ms. Park worked at 
Touchstone Consulting, where she managed communications 
strategy and program management efforts for the U.S. Agency for 
International Development and National Science Foundation and 
the Small Business Administration.
    Ms. Linda Oliver is the Acting Director of the Office of 
Small Business Programs at the Department of Defense, where she 
implements DOD policies that encourage the Department to 
provide opportunities for small businesses to successfully 
compete for small business contracts.
    And, finally, Mr. Brandon Neal is the Director of the 
Office of Small and Disadvantaged Business Utilization at the 
Department of Transportation, where he advises the Secretary of 
Transportation on opportunities for small and disadvantaged 
businesses to participate in the Department's contracting 
process. Prior to this position, Mr. Neal worked as a financial 
director for African-American affairs with Obama for America, 
and he also worked for the Democratic Governors Association as 
deputy political director and later as director of extended 
affairs.
    I ask that each one of the witnesses of the panel now give 
a brief summary of their testimony and keep their summary under 
5 minutes in duration, and I know you can do that, because your 
complete written statement will be included in the hearing 
record. So I would like to start with Mr. Hinson. Please 
proceed.

    STATEMENTS OF DAVID HINSON, DIRECTOR, MINORITY BUSINESS 
   DEVELOPMENT AGENCY, U.S. DEPARTMENT OF COMMERCE; MARIE C. 
       JOHNS, DEPUTY ADMINISTRATOR, U.S. SMALL BUSINESS 
ADMINISTRATION; JIYOUNG PARK, ASSOCIATE ADMINISTRATOR FOR SMALL 
 BUSINESS UTILIZATION, GENERAL SERVICES ADMINISTRATION; LINDA 
  OLIVER, ACTING DIRECTOR, OFFICE OF SMALL BUSINESS PROGRAMS, 
U.S. DEPARTMENT OF DEFENSE; AND BRANDON NEAL, DIRECTOR, OFFICE 
     OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION, U.S. 
                  DEPARTMENT OF TRANSPORTATION

                   STATEMENT OF DAVID HINSON

    Mr. Hinson. Chairwoman Watson, Member Bilbray, and members 
of the subcommittee, thank you for inviting the Minority 
Business Development Agency to appear before this subcommittee. 
I request that my entire written statement, including 
attachments, be entered into the official hearing record.
    For over 40 years, MBDA has been working aggressively to 
expand the economic footprint of minority business enterprises 
[MBEs]. At the time of the Agency's creation in 1969, there 
were approximately 322,000 MBEs that generated $10.6 billion in 
annual gross receipts. Today, according to the recently 
released numbers by the U.S. Census Bureau, the number of MBEs 
stands at 5.8 million, generating $1 trillion in gross 
receipts. However, while the recent numbers are encouraging, 
there is still work left to be done.
    Discriminatory barriers continue to persist which impede 
the ability of MBEs to access the Federal marketplace on an 
equal footing with non-minority-owned and operated businesses. 
I am submitting for the record as Attachment A to my testimony 
a document entitled The Compelling Interest for Race and Gender 
Conscious Federal Contracting Programs, which details these 
barriers, as well as a number of disparity studies. MBDA is 
working to eliminate these barriers, acting as both an advocate 
and facilitator for minority-owned firms seeking to gain 
greater access to the marketplace, including, but not limited 
to, procurement opportunities with the Federal Government.
    A great deal of work takes place in MBDA business centers 
located across the country and in Puerto Rico. The centers 
provide technical assistance to improve MBE competitiveness at 
securing both public and private contracts, in addition to 
promoting joint ventures and teaming arrangements as we 
recognize some contracts are too large for one firm to compete 
for alone. In fiscal year 2009, MBDA helped generate $2.2 
billion in contracts and helped create 3,858 new jobs. This 
exceeds the Agency's fiscal year 2009 goals of $900 million in 
contracts and 3,000 new jobs. We expect to surpass our 2009 
performance in fiscal year 2010.
    MBDA also works to match MBEs with contracting 
opportunities that fit each firm's profile and capabilities. 
Two of the more prominent methods are our business-to-business 
linkage form and the Phoenix-Opportunity Data base. MBDA hosts 
B2Bs throughout the year, matching MBEs with the public and 
private contracts ready to be let. During the B2B, MBEs have an 
opportunity to meet one-on-one with interested contract 
officers from all levels of the Government and the private 
sector to examine the possibility of doing business together. 
For example, at this year's National Minority Enterprise 
Development Week Conference, MBDA presented more than $30 
billion in public and private sector forecasted contract 
opportunities.
    The Phoenix-Opportunity Data base, which is linked to 
FedBizOpps, helps to connect MBEs with available contracting 
opportunities. Using this system, MBEs input their profiles 
into the system accessible on the MBDA Web site. Contracting 
officers throughout the Federal, State, and local government 
can use this system to upload notices of their Federal 
contracts into the MBDA Opportunity data base. The system then 
matches each opportunity with MBEs meeting the requirements of 
the solicitation.
    The lack of access to capital has often inhibited the 
ability of MBEs to compete for Federal contracts. In January 
2010, MBDA released a report titled Disparities in Capital 
Access Between Minority and Non-Minority-Owned Businesses: The 
Troubling Reality of Capital Limitations Faced by MBEs. This 
report, which examines the issue of capital access, accompanies 
my testimony as Attachment B.
    Capital, in the form of surety bonds, is required for 
Federal construction contracts. However, as credit markets 
tighten, obtaining bonding has become even more difficult. MBDA 
is working on a Surety Bonding Initiative to alleviate this 
problem and help MBEs secure the bonding needed to meet the 
requirements of Federal contracts.
    On April 26th of this year, President Obama established the 
Interagency Task Force on Federal Contracting Opportunities for 
Small Businesses, of which MBDA was a member. The Task Force 
was charged with providing recommendations to the President to 
help ensure that small businesses, including minority-owned 
businesses, have fair access to Federal contracting dollars. 
These recommendations include addressing the issue of contract 
bundling, subcontract planning, and identifying ways to 
increase small business utilization in prime contracting. MBDA 
was honored to serve on this Task Force and work with our 
colleagues to implement the recommendations put forth.
    So in conclusion, MBDA will continue to take an active role 
in eliminating barriers faced by MBEs in our Federal 
marketplace. MBDA is creating a Government Contracting Unit 
under our Office of Business Development. This Unit will be 
comprised of experts focusing on assisting minority-owned firms 
in accessing contracting opportunities. We anticipate having 
this Unit operational in the near future.
    Also, the Agency is working closely with Secretary Locke in 
establishing a National Advisory Council on Minority Business 
Enterprise to advise the administration on issues pertaining to 
the growth in minority-owned firms, including access to Federal 
contracts.
    MBEs are a critical part of this country's economic 
infrastructure, and it in Federal contracting that many will 
find avenues for growth. MBDA looks forward to working with 
Congress to help create more entry points into the Federal 
marketplace for MBEs. Thank you, and I look forward to your 
questions.
    [The prepared statement of Mr. Hinson follows:]
    [GRAPHICS TIFF OMITTED]     
    
    Ms. Watson. Thank you so much, Mr. Hinson.
    Ms. Johns, you may proceed.

                  STATEMENT OF MARIE C. JOHNS

    Ms. Johns. Thank you, Chairwoman Watson, Ranking Member 
Bilbray, members of the subcommittee. I am honored to testify 
on this very important topic and I am honored to be in my role 
for a little over 2\1/2\ months now as the Deputy Administrator 
at the Small Business Administration.
    Minority business is something that I care deeply about, 
and it goes back to my family roots. My grandfather was a 
pioneering small business person in my home State of Indiana, 
my father, uncles have been in small business ownership as 
well, so I have seen firsthand the hard work, the commitment 
that it takes to own a business, and how important business 
ownership is to minority communities. So I am eager to work 
with you all and this subcommittee to hear your questions and 
to discuss how we best support minority small businesses.
    In these tough economic times, minority-owned small 
businesses have been especially hard hit. According to a study 
by the SBA's Office of Advocacy, on average, minority-owned 
firms have lower receipts and fewer employees, and are less 
likely to have access to capital than non-minority-owned firms. 
Minorities are 32 percent of the population, but make up 18 
percent of business ownership.
    Meanwhile, for every dollar earned by a white-owned firm, 
Pacific Islander-owned firms made about 59 cents; Hispanic, 
Native American, and Asian firms made about 56 cents; and 
African-American-owned businesses made 43 cents. And, finally, 
survival rates of minority firms are significantly lower than 
those of white firms.
    Knowing this, it is clear that we must do all we can to 
support minority-owned businesses in a comprehensive way. 
Certainly, Federal procurement is a part of that, but also 
through increased access to capital and increased opportunities 
for technical assistance and counseling as well.
    As you know, Congress sets the goal of awarding 23 percent 
of all Federal contracting dollars to small businesses. 
Congress also created goals for women-owned business, service 
disabled veteran-owned small business, businesses in HUBZones, 
and socially and economically disadvantaged businesses [SDBs], 
which includes many of our minority firms. These goals, 
especially the SDB goal, reflect the capacity of minority-owned 
small businesses and help the Government to ensure that these 
companies have the opportunity to compete for and to win 
Federal contracts.
    We are proud that in fiscal year 2009, 7\1/2\ percent of 
contracts, or over $7 billion, went to SDBs. The 7\1/2\ percent 
exceeds the statutory goal of 5 percent. SDBs have also been 
successful in winning Recovery Act contracts. So far, nearly 12 
percent of Recovery Act contracts, or $3.7 billion, has gone to 
SDBs.
    Moreover, SBA has programs in place that expand businesses' 
capacity, including minority-owned businesses, so that they can 
compete for and win Government contracts, and chief among these 
are the 8(a) program. The 8(a) program is a 9-year business 
development program for socially and economically disadvantaged 
businesses, the majority of which are minority owned. 
Participants receive business development, technical 
assistance, and the chance to work alongside larger firms in a 
mentor-protege relationship.
    The 8(a) program has helped thousands of businesses across 
the country. I would like to cite a couple of examples. In 
Jacksonville, Florida, A. Harold and Associates provides 
training, tech support, and project management for clients 
across the country. Owner, Andy Harold, created 24 new jobs 
after enrolling in the 8(a) program.
    In Los Angeles, J&P Construction saw their sales increase 
tenfold since entering the 8(a) program. The company recently 
graduated from the program and has agreed to come back as a 
mentor for new 8(a) firms.
    But, of course, despite the success of the 8(a) program, we 
have more work to do. Recently, our agency undertook the first 
ever comprehensive review of the 8(a) program, strengthening 
the rules to ensure that the benefits of the program flow to 
the businesses that need them, and we are very close to 
implementing these recommendations.
    Furthermore, SBA has made strong, robust oversight a top 
priority. We are working to root out fraud, waste, and abuse in 
our certification program for the three-step process: improving 
certification, strengthening our monitoring and oversight, and 
increasing enforcement.
    In addition, the President's Task Force on Government 
Contracting came back with a number of concrete actionable 
recommendations to address the challenges and barriers to 
success for small businesses seeking Federal contracts, and 
many of my colleagues on this morning's panel lent their 
expertise to that very important effort. I want to thank my 
colleagues, Director Hinson, Associate Administrator Park, 
Acting Director Oliver, and Director Neal, all of whom were 
involved in that very important effort.
    It is clear that this commitment to small business 
contracting spans the entire Federal Government. The Task Force 
identified three main areas of focus: to develop clearer and 
more comprehensive policies, provide a better trained Federal 
contracting work force, and to improve and better leverage 
technology. And this fall the SBA will be announcing its 
Advisory Council on Underserved Communities. I am excited to be 
leading this effort and our purpose will be working to develop 
strategies to promote business growth and entrepreneurship in 
traditionally underserved areas.
    Finally, minority contractors will be helped by resolving 
the issue of parity. A current court decision would give 
HUBZone businesses preferences above other set-aside programs, 
potentially redirecting millions of dollars away from 8(a) 
businesses.
    In closing, let me assure you that everyone at SBA is aware 
of the need to support minority businesses. We are proud of the 
programs we have in place, but we must work diligently and 
continue to improve. And I am looking forward to working with 
this committee and with Congress as a whole in partnership to 
enhance the tools that we provide currently and to continue to 
develop new ones as we go forward. Thank you.
    [The prepared statement of Ms. Johns follows:]
    [GRAPHICS TIFF OMITTED] 
    
    
    Ms. Watson. Thank you, Ms. Johns.
    Ms. Park, you may proceed.

                   STATEMENT OF JIYOUNG PARK

    Ms. Park. Good morning and thank you for the opportunity to 
appear before you. I am Jiyoung Park, Associate Administrator 
of the Office of Small Business Utilization with the U.S. 
General Services Administration.
    Minority business ownership is something I feel strongly 
about. Several family members, including my father, have owned 
local small businesses. I have seen how business ownership and 
hard work can lead to economic independence and prosperity 
among minority communities and among their broader communities. 
I look forward to hearing your questions today and discussing 
how we all can better support minority business success in 
Federal contracting.
    As Director Hinson referenced with the statistics, minority 
firms, without question, will continue to play a pivotal role 
in our economy, and we at GSA continue to support this ever-
growing group of businesses, and we partner closely with the 
MBDA, SBA, and other agencies to do this.
    The Honorable Ms. Johns mentioned small business and small 
disadvantaged business goals Government-wide. GSA consistently 
exceeds these goals for our agency. To date, in 2010, we have 
awarded nearly $1.9 billion to small businesses, which is 28.7 
percent of the eligible contract spending. We have awarded $829 
million to small disadvantaged businesses, which represents 
12.7 percent of our contracting so far this year.
    This achievement illustrates GSA's dedication to creating 
opportunities for minority businesses. More importantly, these 
numbers are a testament to the great achievement of minority 
businesses themselves.
    In 2009, GSA received $5.85 billion through the American 
Recovery and Reinvestment Act to convert Federal buildings into 
high-performing green spaces and to green the Federal fleet. 
This portfolio includes many large capital construction 
projects that were not best suited for small businesses. 
Despite this challenge, we are committed to minority businesses 
at both the prime and subcontract level.
    To date, GSA has awarded $452 million directly to minority 
firms of Recovery Act funds. One such recipient is Rios 
Associates, a Los Angeles-based Hispanic-owned firm who won 
$300,000 to develop sustainable landscapes for GSA buildings. 
OKE Thomas and Associates, an African-American-owned Missouri-
based company, won $16 million for multiple GSA projects across 
the Midwest, ranging from carpet installation to roof upgrades 
using Energy Star materials. Finally, Epsalon System Solutions, 
an Asian-American firm in San Diego, won $350,000 to provide 
technical expertise for various GSA recovery projects. The list 
goes on.
    Awards like these across the country are helping minority 
firms make payroll, grow their business, contribute to the 
greening of our Federal buildings, and create green jobs for 
the future.
    The Recovery Act is only one part of GSA's overall 
portfolio. In a given year, nearly 17 percent of Federal 
contract dollars flow through GSA. We are fully committed to 
stewarding these funds to maximize small and minority business 
opportunities. One of the best ways we do this is through GSA's 
Multiple Award Schedules Program. Currently, 19,000 scheduled 
contracts are in place, of which nearly 15,000 are held by 
small businesses; 2,300 are held by small disadvantaged 
businesses. This fiscal year, as of the end of August, small 
disadvantaged businesses have received $2.8 billion through the 
Schedules Program, or 7.3 percent of program sales totaling $40 
billion.
    Another way we level the playing field is GSA's Government-
wide Acquisition Contracts that has been set aside exclusively 
for participants in SBA's 8(a) program. This contract is called 
8(a) STARS. Nearly 200 8(a) firms participate in GSA's STARS, 
and since 2004 these firms have received $2.7 billion in 
orders.
    In addition to our contract vehicles, GSA provides a wealth 
of outreach and education to minority businesses. Last October, 
GSA launched a Mentor-Protege Program to help small and 
minority firms team subcontracts to other firms and compete on 
their own. To date, our Mentor-Protege Program has established 
40 mentoring relationships, a third of which include small 
disadvantaged businesses. This program is just one of many 
resources that GSA has to help minority firms. We also host and 
participate in hundreds of outreach events across the country 
each year, including those listed by the SBA, MBDA and other 
Federal agencies. And we also work side-by-side with 
procurement teams to help create opportunities for minority 
businesses on from inside.
    In closing, we at GSA have a strong record with minority 
businesses. We are committed to increasing minority firms' 
access to contract opportunities and to building their capacity 
to succeed, while at the same time bringing the most innovative 
ideas and best industry expertise to the Government.
    I would be happy to answer any questions and provide any 
other information at the subcommittee's request. Thank you for 
your time.
    [The prepared statement of Ms. Park follows:]
    [GRAPHICS TIFF OMITTED] 
    
    
    Ms. Watson. Thank you, Ms. Park, for your testimony.
    Ms. Oliver, you may proceed.

                   STATEMENT OF LINDA OLIVER

    Ms. Oliver. Thank you, Chairwoman Watson, Ranking Member 
Bilbray, Mr. Connolly, Ms. Chu. It is nice to be here, but I 
have deadly boring testimony. It is all about numbers, so I 
will really summarize what the numbers tell us, and I will 
begin with a digression.
    Last night I had a telephone call from somebody who in 
theory was calling me because he wanted to know something about 
small businesses. This was a man in Los Angeles. I found out, 
as I talked to him, that the real reason he was calling me was 
because he thought I should take this chance to mention 
publicly, from many constituents, as I understand it, how much 
they have appreciated Ambassador, as he called her, Ambassador 
Watson's work. So I pass that along to you.
    Ms. Watson. It wasn't my brother, was it? [Laughter.]
    [Remarks made off mic.]
    Ms. Oliver. In developing testimony, we looked at the 
numbers in a general way and then in more specific ways, so it 
is a series of charts. The first chart tries to look at small 
disadvantaged businesses that do contracting with the 
Department of Defense. We looked at it over a 9-year period, 
and I am pleased to say that we have consistently, our 
contracting dollars that go to small disadvantaged businesses 
has consistently increased; and, in general, we have increased 
the percentages. In 2001 we were at 5.6 percent, which exceeds 
the goal, and in 2009 figures show that we are at 6.9 percent. 
So I am so happy to be talking about this area because this is 
an area where we are doing well.
    We also looked in more detail at the numbers for the last 3 
years, 2007, 2008, and 2009, and I am pleased to say again that 
whether we break it down by 8(a) companies or by the small 
disadvantaged businesses that are not 8(a) companies, in both 
cases the Department of Defense shows an upward trend in 
dollars contracted, in numbers of contracts with small 
disadvantaged businesses, both categories, and we are very 
pleased by that.
    We have also been happy with our Recovery Act numbers. The 
Department of Defense received $7.4 billion under the Recovery 
Act, which actually is not very much for the Department of 
Defense.
    Ms. Watson. Let me just interrupt you for a moment.
    Ms. Oliver. Sure.
    Ms. Watson. The charts that Ms. Oliver is referring to, I 
understand, are in your statement on the table.
    Ms. Oliver. Yes, ma'am.
    Ms. Watson. Great. So that you can pick them up on your way 
out.
    Ms. Oliver. Yes.
    Ms. Watson. Thank you.
    Ms. Oliver. You bet.
    Where Recovery Act is concerned, right now approximately 
half of all our Recovery Act dollars are going to small 
businesses and 34.9 percent of our ARRA dollars are going to 
small disadvantaged businesses.
    Now, I am realistic enough to know that there are going to 
be some big purchases down the road that are planned, and those 
numbers will go down, but we are very pleased with where our 
numbers are.
    Finally, we took a look at the source of things that the 
small businesses and small disadvantaged businesses with whom 
we contract, with what they purchase, because we think that 
might help us in our plans. But there are four main areas that 
small disadvantaged businesses contract with us: manufacturing; 
construction; professional, scientific, and technical services; 
and administration and support accounts for 89, almost 90 
percent of our small disadvantaged business contracts.
    Well, there is my quick summary. I have appreciated being 
able to come and tell you that Department of Defense is very 
happy with what we have done with small disadvantaged 
businesses, and through analysis we hope to continue on in this 
upward pattern.
    [The prepared statement of Ms. Oliver follows:]
    [GRAPHICS TIFF OMITTED] 
    
    
    Ms. Watson. Thank you so much. I am sure there will be 
questions.
    Mr. Connolly, I know that you are concerned about the DOD, 
so we will get to questions in just a few minutes.
    You may proceed, Mr. Neal.

                   STATEMENT OF BRANDON NEAL

    Mr. Neal. Good morning, Chairwoman Watson and Ranking 
Member Bilbray, and members of the committee. Thank you for 
inviting the U.S. Department of Transportation to discuss our 
efforts to comply with Government-wide contracting requirements 
for minority-owned businesses. My name is Brandon Neal, and I 
am the Director of the Office of Small and Disadvantaged 
Business Utilization.
    Under the leadership of Secretary Ray LaHood, DOT has been 
a strong advocate for ensuring the participation of small 
businesses and ensuring that opportunities created by our 
Nation's investments are shared by all Americans. DOT small 
business contracting opportunities are available through our 
direct Federal contracting program and through recipients of 
DOT financial assistance via the Disadvantaged Business Program 
[DBE].
    In fiscal year 2009, DOT received an A scorecard rating 
from the U.S. Small Business Administration for meeting its 
direct contracting small business procurement goals. In fiscal 
year 2009, $752 million was awarded to small and disadvantaged 
businesses.
    The DBE Program is designed as a vehicle to increase the 
participation of DBEs in State and local procurements through 
our Federal Highway Administration, our Federal Transit 
Administration, and our Federal Aviation Administration. These 
are the three DOT operating administrations involved in the DOT 
program.
    The Department created a high level task force to take a 
look at the DBE program and develop a long- and short-term 
recommendation process to improve the administration of the DBE 
program. The task force is chaired by yours truly, and it is 
also comprised of the senior leadership of each operating 
administration. The Secretary and the Deputy Secretary have 
personally participated in many of the task force meetings.
    Secretary LaHood sent a letter to each Governor and State 
DOT administration indicating the Department's commitment to 
work together to provide small and disadvantaged businesses 
with an opportunity to participate in transportation projects. 
In a May 2010 Notice of Proposed Rulemaking, we proposed 
several important improvements to the DBE program: one, 
accountability for State DOT recipients; two, adjusting the 
personal net worth threshold; and, three, improvements with 
post-award oversight. We anticipate a final issuing within the 
next few months of the rulemaking.
    DOT quickly disbursed contracts funded through the Recovery 
Act and the projects are still continuing to provide 
contracting opportunities. Additionally, projects are now in 
the stage of providing subcontracting opportunities for small 
businesses. Our most recent data indicates we have awarded 
$24.9 billion in ARRA contracts, of which $2.08 billion have 
been awarded to DBEs.
    Additionally, we implemented a Bonding Education Program in 
collaboration with The Surety Fidelity Association of American 
to get small businesses bond ready. Becoming bondable is a 
major obstacle for many DBEs, and this pilot program aims to 
address the issue and help those businesses grow by becoming 
bond ready and to compete for larger contracts.
    Some examples of our outreach include over 180 outreach 
activities across this country this past year. The 
participation in the White House Interagency Task Force on 
Federal contracting opportunities for small businesses; in 
March 2010, DOT hosted the inaugural Small Business Summit 
entitled The Road to Recovery, attended by more than 700 small 
business leaders from across the country. Plans are currently 
underway for the second summit in 2011.
    Our short-term lending program continues to help small 
businesses gain access to financing. We have implemented a 
Pilot Entrepreneurial Training and Technical Assistance Women 
and Girls Program with Spelman College in Atlanta, Georgia. 
This program is a part of the broader effort led by the White 
House Council on Women and Girls. Last month, Secretary LaHood 
announced the award of $11.6 million in grants for minority- 
and women-owned businesses to provide Federal aid to State DOTs 
for DBE firms to improve their ability to compete for and 
fulfill Federal highway contracts.
    As demonstrated in the testimony of the Department and 
other witnesses on this subject before the House Transportation 
and Infrastructure Committee, the Department of Justice's 
compelling interracial narrative and the Department's own 
experience, race-conscious programs by the DBE program continue 
to be needed to address discrimination and its continuing 
efforts in transportation contracting. DOT is continuously 
looking for ways to increase small and minority business 
contracting.
    Thank you again for the opportunity to be here.
    [The prepared statement of Mr. Neal follows:]
    [GRAPHICS TIFF OMITTED] 
    
    
    Ms. Watson. Thank you so much, Mr. Neal. I would like to 
start the questioning now, and I am going to go quickly so I 
can get to our ranking member, and then I will get to you, Mr. 
Connolly.
    Mr. Hinson, given that the Minority Business Development 
Agency now assists minority businesses of all sizes with their 
efforts to secure financing and other public and private sector 
contracts, what has your agency discovered regarding the issues 
confronting minority-owned businesses?
    Mr. Hinson. Thank you for that question. Certainly we have 
discovered, as was outlined in the testimony and in our 
reports, that minority firms suffer tremendously from a lack of 
access to capital. Our studies and our research has shown that 
they suffer from a lack of access to contracts and they suffer 
from access to new market opportunities. So those are the three 
areas where we found that minority-owned firms are, and 
continue to be, challenged.
    Ms. Watson. We are basing this hearing around H.R. 4343, 
and I think you heard the position. How would these programs 
that are proposed in that legislation affect the MBDA's current 
operations and what, if any, type of additional researches 
would the Agency require to implement these programs?
    Mr. Hinson. Thank you. To achieve our current mission right 
now, as it stands and as we are focused, we have adequate 
resources. These resources would expand our capabilities to go 
beyond where we are now. For example, we operate 46 business 
development centers around the country. These types of 
resources would quite naturally allow us to gain a broader 
footprint to help more firms grow to size and scale. But in 
terms of our current operation, our resources are sufficient to 
maintain the mission that we have now.
    Ms. Watson. If there is another area that seems to be 
uniquely depressed, how would they go about getting one of the 
centers?
    Mr. Hinson. Well, certainly it is in the purview of 
Congress to decide if they want to, a Congressperson or 
Congress in general to decide.
    Ms. Watson. Would we have to make that decision, or do you 
have the authority to make that decision?
    Mr. Hinson. We do not have the authority to make that 
decision beyond what is within the context of our budget.
    Ms. Watson. That is what I am really getting to. Can you 
open a new center if such an area exists and applies to you? Or 
do you have to come back to Congress?
    Mr. Hinson. We certainly have the ability, because the 
centers are public-private partnerships. So we go out and we 
actually bid these centers out. The centers we have are the 
number of cents that we can actually have in the marketplace 
given our resources. So, yes, it is within our power to expand 
that footprint, but, again, in that respect we are resource 
constrained.
    Ms. Watson. Let me give you a case in point. California 
could be three States. Central Valley is suffering, and these 
are the field workers and so on. Should they want to start a 
small business to enhance opportunities for jobs, other than 
picking our fruits and vegetables, would they come then to your 
center? And most of these are Hispanic workers and so on. Is 
your center authorized to start an opportunity there, in that 
area, if they applied?
    Mr. Hinson. Yes.
    Ms. Watson. Within your budget.
    Mr. Hinson. Well, again, we are within the context of our 
current resources. We have essentially maxed out on our 
capability to expand our center footprint.
    Ms. Watson. I see.
    Mr. Hinson. What we are doing is we are continuing to 
expand job growth by focusing on larger minority-owned and 
operated firms. Congressman Bilbray had an interesting point 
earlier, when he was speaking with Congressman Rush, about the 
power of size and scale. We partner and we work very closely 
with SBA.
    SBA has a tremendous number of programs that help firms 
start businesses of different sizes. Our target market is 
really geared toward, again, because of what we work with on 
the resource side, we are really geared toward providing 
services to those firms that $1 million or more in gross 
revenue. But at the same time we provide services to all 
minority firms of all sizes.
    Ms. Watson. Let me yield now to our ranking member.
    Mr. Bilbray. Thank you very much, Madam Chair.
    Let me just say I appreciate the comment.
    Ms. Oliver, I want to thank you for bringing up a 
comparison between the disadvantaged and the small. Some people 
may say, well, 50 percent may sound good, but when 60 percent 
of jobs are created by small, that looks 10 percent deficient. 
But in all fairness to you, I have to say I assume, though, 
that the 50 percent that go to the big guys, there are many 
subcontracts that are serving the small guys through the larger 
contracts, is that fair to say?
    Ms. Oliver. That is absolutely fair to say, and 
particularly with these funds, because many of them are 
construction, and construction is an area where there are 
virtually always lots of subcontracts. It is the way the 
industry operates.
    Mr. Bilbray. Right. I appreciate that.
    Ms. Johns, your reference and you made something that we do 
I think too often and, in all fairness to you, it just happens 
to be that we go down, we talk about the disadvantaged numbers. 
One thing I learned, I did a lot of work in environmental 
health, and that single component models are very, very 
deficient, if not delusionist. You have to have multi-faceted 
models to always make sure you cover the big ones. And I think 
you were pointing out there fairly on that about the return 
that businesses get based on the community or the ethnic 
background of the owner.
    Did you have with those data, too, the proportionality 
between the profit margin and the return that you get based on 
size and the inherent disadvantage of the little guy competing 
in the field?
    Ms. Johns. I don't have any specific data about that for 
this morning. Ranking Member Bilbray, I would be happy to come 
back or provide a specific response to any question you may 
have.
    What I would like to tell you, though, is that the SBA is 
undertaking a rigorous look at size standards. I have, even in 
my short time at the SBA, I have made it a strong priority to 
meet with minority business owners. In fact, I had roundtables 
with two sets of 8(a) business owners just last week, one with 
a national representation, the other was local; and the issue 
of size standards is something that comes up, and that is as 
companies grow to a certain size and their inability, once they 
size out of, so to speak, the small business category, but yet 
not sufficiently large to compete with really large companies, 
we know that is an issue that we have to pay close attention 
to. So that study is underway to do just that.
    Congressman Bilbray, if I may also just say a word about 
the notion of coverage and footprint and access to services to 
start small businesses. I appreciated Director Hinson's 
reference to the SBA because the agency does have a broad 
network throughout the country through our resource partners, 
the small business development centers, our affiliation with 
Score, our women business centers; that in a year's time we 
touched a little over 1 million individuals to provide 
counseling to them. So that is why partnership is so very 
important. MBDA has its area of expertise; the SBA is the place 
where a full complement of services particularly focus on small 
businesses that we strive to make available. And, again, we are 
looking at where we can improve our outreach and improve our--
--
    Mr. Bilbray. Ms. Johns, I appreciate that. I think one of 
the things we have to admit, in fact, I guess the example 
totally separate from this was the RTB back in the 1980's, 
where the big guys, everything was grouped together; 
contractors grew up so huge that there were only a few people 
that could put together capital to manage that. The American 
taxpayer was absolutely ripped off because you go out to bid 
where only two or three people could bid. But because it was 
easier for the bureaucracy to manage these huge packages, 
rather than breaking them up into competitive market-based 
structures, because just inherently it is easier to handle one 
contract rather than 10 or 100. But the taxpayer and the small 
guy got totally cut out of the system.
    I want to make sure that we keep that in mind, because you 
can't isolate the disadvantaged business people from the impact 
of our policies on small businesses. De facto, it is always 
going to be the minority community that gets hit harder when 
the little guy gets hit, regardless. And I think the one thing 
that isn't talked about enough in polite company is the fact 
that just because it is a disadvantaged minority-owned business 
doesn't mean that people that do not fall into that ethnic 
crowd is not benefiting, because the employees aren't 
necessarily in one little group; the employees are very broad. 
And I don't think we talk enough about that, that a job is a 
job is a job, and that just because the boss happens to fall 
into one category doesn't mean the general community is not 
benefiting with real viable jobs.
    My question, though, is when we get down to this issue of 
subcontractors, are we frank and open to the fact that, like 
you point out, they get credit for recruiting those 
subcontractors, but being much more aggressive on that? Is that 
fair to say?
    Ms. Johns. May I comment on that?
    Mr. Bilbray. Yes.
    Ms. Johns. What we have done at the SBA is, I believe it 
was referenced earlier, we have a scorecard that we utilize to 
track what Federal Government agencies are doing in the area of 
small business utilization, and just recently the whole area of 
subcontracting was strengthened and more focus is being put 
there because, as you cite, Congressman Bilbray, the notion of 
larger contracts for longer terms, as the Government is looking 
to operate more efficiently, we have to make sure that even in 
that situation that the focus on small business opportunity is 
not lost.
    Mr. Bilbray. And competition in the long run is going to 
save us. I know I have burned up time, but the 900K really 
sticks out to me. There is 900K being spent on these centers, 
and my question to you is, to give you a chance to defend it, 
wouldn't that be better used going directly out to your target 
rather than creating this structure and this overhead of 
getting this directly out into the market and stimulate the 
private sector, rather than building this public sector 
infrastructure that is costing 900K?
    Mr. Hinson. I am sorry, 900K, what are you referring to?
    Mr. Bilbray. I am talking about hiring the development of 
the business centers and hiring the experts, consultants.
    Mr. Hinson. Right. The answer to that question, I would 
respectfully say, is no. Those business development centers 
create the conditions for minority-owned and operated firms to 
gain access to capital and access to contracts, the two key 
inputs if you want to grow a company. When you look at our 
operation, our ROI is over 100 times.
    In other words, for every dollar of taxpayer money that 
flows into our agency, we create over $100 of economic output. 
I would argue, sir, that it is the exact reverse. You would 
want to expand the footprint so you can touch more firms, help 
these firms grow to size and scale. And I might add, 
anecdotally, that minority-owned firms are twice as likely to 
export as non-minority-owned firms. This sector screams for 
investment and for support. So I would argue to you that, from 
where we sit, the dollars that are committed to these centers 
are critical to providing the conditions under which these 
firms can grow.
    Mr. Bilbray. Madam Chair, just for the record, California 
does not constitute three States. My county of San Diego is 
larger than 20 States, and your county is larger than 40 
States.
    I yield back.
    Ms. Watson. Thank you for reminding us.
    I would like now to yield to Mr. Connolly.
    Mr. Connolly. I thank the Chair. And before my time starts 
counting, on a point of personal privilege, if I may just say, 
this may be one of your last hearings to chair, Congresswoman 
Watson, and I just want to say personally I have really 
appreciated your friendship and the civility and grace and 
thoughtfulness with which you comport yourself and bring to 
every debate and every issue. It is going to be something 
sorely missed.
    Ms. Watson. Thank you.
    Mr. Connolly. Thank you for your service.
    Let me start, if I may, as the Chair anticipated, Ms. 
Oliver, and, by the way, is there somebody from Pentagon 
Government Relations here with you?
    Ms. Oliver. I don't know.
    Mr. Connolly. OK, good. So I hope you take this back. You 
know I want to, first of all, thank you for your testimony and 
thanks for summarizing it and admitting a lot of it would have 
otherwise been boring. Thank you. [Laughter.]
    A refreshing change. And none of this is meant personally, 
but I want, since you are here and you are from the Pentagon, 
as you know, Secretary Gates announced a pullback of 10 percent 
of all outside Pentagon contracts for 3 years. Ten percent a 
year for 3 years.
    The Virginia delegation was recently briefed by Pentagon 
folks, and there was not a shred, not a scintilla of evidence 
to justify such an announcement. There was no analysis; there 
were no programs or priorities identified. It was just a number 
pulled out of a hat. And for this Member of Congress, and I 
think increasingly for colleagues on both sides of the aisle, 
that is unacceptable.
    And one of the concerns I got--by the way, this 
subcommittee has asked the Pentagon to testify on September 
29th. I hope Government Relations takes it back. If you want to 
duck it, some of us will call it out for precisely that. But 
the concern I got, Ms. Oliver, and I want you to have a chance 
to comment, when you set an arbitrary goal like that, and what 
that means is people in the bureaucracy have to scramble to 
meet it on a date certain. Ten percent, oh my God.
    So what happens? Well, you are going to take the low 
hanging fruit. What is the easiest to pull back from outside 
contracting to meet that goal? And it ain't the big guys. The 
have big law firms; they can litigate, they can appeal. They 
know how to work the system, and there are lots of other big 
contracts at stake even the Pentagon may not want to upset.
    I think the earliest victims of such an arbitrary 10 
percent pullback will be small and minority-owned businesses. 
It will be businesses owned by minorities, women, and disabled 
veterans, especially. And I wonder, No. 1, has your office at 
all been involved in any of the discussions about this 
incredible decision when we think about the money and the 
number of contracts potentially affected? And have you done any 
analysis of the potential impact and how to guard against that 
negative impact on all of the wonderful statistics you 
rightfully and pridefully shared with us this morning?
    Ms. Oliver. I would be so happy if you could tell me how to 
find those statistics. Yes, we have been. The Department of 
Defense has been asking itself internally how will we become 
more efficient particularly without harming small businesses. 
We are aware of the problem and I personally would so welcome 
any insight you might be able to give about how to quantify it.
    Mr. Connolly. I want to be real clear about your testimony. 
Are you testifying here that you were consulted before the 
announcement of a 10 percent pullback, 10 percent a year for 3 
years, and that the concern was expressed to you we want, of 
course, to make sure that we shield or protect or there is not 
some disproportionate negative impact on small and minority-
owned businesses?
    Ms. Oliver. No, I am not testifying to that.
    Mr. Connolly. That is what I thought. Have you been invited 
to any discussions, moving forward to the future, to talk about 
the implementation of such a sweeping goal?
    Ms. Oliver. Yes, I have been.
    Mr. Connolly. Are you aware of the fact that the Pentagon 
has been invited by this subcommittee to come and explain that 
goal and how it will be implemented? I understand you are not 
the spokesperson for the Pentagon but, unfortunately for you, 
you are here.
    Ms. Oliver. This happens all the time.
    Mr. Connolly. And even though we loved your testimony, we 
want to send you back with a message, because this is very 
serious business, and it doesn't just affect my district or my 
State; it is going to affect Mr. Bilbray's, it is going to 
affect Diane Watson's, it is going to affect Judy Chu's.
    There are contractors all over the country, especially for 
the Pentagon, and especially I worry that one of the unintended 
consequences, it certainly is not an intended consequence, is 
the very people you get paid to try to help, and the very firms 
you get paid to try to integrate into the opportunities of 
Federal contracting, will be hurt the first and the most; and 
that is the message I would like you to take back to the 
Pentagon.
    Thank you, Madam Chairman.
    Ms. Watson. Thank you so much for your concern, and we are 
planning to hold a private confidential hearing for you to 
raise those questions and get answers. We did not want to 
subpoena anyone from DOD at this hearing, but I think you can 
get the kind of information you need. We all represent 
constituencies that will be sorely affected, I mean, they are 
now.
    So that is one of the reasons why we are having this 
hearing. And in order to save the jobs, particularly those 
small firms and minority firms, that are really impacted 
greatly in this current economy, we would just like to know 
what the thinking that went in. So we are going to have a 
meeting. We hope to get some direct answers.
    With that, let me yield to Ms. Chu.
    Ms. Chu. Thank you so much, Madam Chair.
    I certainly embrace Congressmember Rush's bill, H.R. 4343, 
and certainly think that it is so important to improve the 
outreach to minority contractors for Federal contracts, and I 
am certainly alarmed that minority businesses make up 20 
percent of all businesses, yet are lagging with regard to 
Federal contracts.
    I would like to direct this question to Mr. Hinson. As the 
Chair of the Economic Development Task Force for the 
Congressional Asian Pacific Caucus, I have been contacted by 
several Asian Pacific Islander groups, the Asian Pacific 
Islander Small Business Program, the Pacific Asian Consortium 
and Employment, the Search to Involve Filipino-Americans in the 
Asian Business Association, as well as the Asian Pacific 
Revolving Loan Fund, and they are very, very anxious to 
participate in MBDA and to partake of the technical assistance 
that is inherent in it.
    I was wondering what kind of outreach you would be doing to 
the API community, other than attending conferences or 
participating at roundtables? What kind of technical assistance 
is there to make these businesses actually succeed?
    Mr. Hinson. Thank you for that question. The API community 
is a critical community in this country. In fact, the API 
community produces $500 billion of the $1 trillion in gross 
receipts that the entire minority business community generates. 
Certainly, this community is critical to MBDA, and we continue 
to provide outreach and support to this community.
    We have found that, from an overall business standpoint, 
around 20 percent of our business activity is within API 
companies. Those companies and those individuals who are 
interested in participating have access to our centers just 
like any other company does; we continue to provide outreach to 
the various members of the community.
    In fact, I would say that, at your prodding, which I very 
much appreciate, with our new Web site we actually have 
bilingual capability so that various members of the API 
community who don't have English as their first language have 
the ability to access the information that MBDA provides in the 
language of their choice. So we continue to outreach to this 
community; we are aggressive about it. It is important to the 
administration that this community continue to receive support 
and service, and we continue to outreach and support this 
community.
    Ms. Chu. Well, I appreciate your translation of services on 
the Web site. In fact, I wanted to follow that up with a 
question about linguistically appropriate outreach. And I am 
concerned for the Hispanic community, as well as for the API 
community, where you do indeed have many high-end businesses 
where people may be primarily proficient in another language. 
So I am wondering what kind of incorporation in the grant 
program is there about linguistically appropriate services? I 
just want to make sure that those centers do indeed have the 
capability to address the linguistic needs of our communities.
    Mr. Hinson. And again I thank you for that question. Some 
of our centers certainly do have people that work in those 
centers that speak multiple languages. Our centers are in high 
dense communities, where you have a lot of businesses, where 
you have a lot o f languages being spoken, and you know as well 
as anyone that there is no one language that represents the API 
community; there are quite a number of languages.
    I won't sit here and say that on the ground we have the 
ability, we have the people that can actually speak each one of 
the individual languages. I can say that our experience has 
been, for the businesses that we serve, that they are very 
comfortable speaking English in their business transactions. I 
would tell you that many of them participate in our B2Bs.
    In fact, we partnered with SBA and DOT, as I mentioned, for 
the B2B event at our MED Week Conference, and there were quite 
a number of API companies that took advantage of the access to 
the $300 billion of contract opportunities that we provided. So 
I understand your point and I appreciate that point, and we 
will continue to do as much as we can do to make sure we meet 
the language requirements of the community.
    Ms. Chu. In fact, I did write a letter asking for a legal 
opinion on a linguistic and culturally appropriate services in 
the new round of Federal funding opportunities to operate in 
MBDA centers. Can you tell me what the status is of this legal 
opinion?
    Mr. Hinson. I cannot tell you now. I will certainly get 
back to you with an answer to that question. I will tell you 
that, as I indicated earlier, that all the centers are public-
private partnerships. There is open bidding. We are in the 
process of going out with the new FFO to open up the bidding 
for these centers, and anybody who is interested in bidding, 
anybody from the API community who wants to bid, they have the 
right to bid, and they will be reviewed in competition with all 
the other bidders for those particular centers.
    Ms. Chu. That is great. I just would hope that there would 
be some encouragement for those bidders, especially those who 
might have linguistically appropriate capabilities.
    Mr. Hinson. Absolutely.
    Ms. Watson. Thank you so much.
    To conclude this panel, I would like to go to Mr. Neal, and 
if you can answer very quickly. I going to put two questions in 
one. DOT has received a considerable number of funds, stimulus 
funds. How much of these dollars have gone to DBE firms? And do 
you believe that discrimination continues to be a problem in 
the transportation industry?
    We are getting some feedback and there seems to be some 
contractors out there that are contacting us that they feel 
that they have been treated unfairly. So can you respond?
    Mr. Neal. Sure. Thank you, Madam Chairwoman. Under our 
Federal Highway Administration, $1.7 billion was committed to 
DBEs out of $24\1/2\ billion. Under our FTA, Federal Transit 
Administration, we had 13 percent go to DBEs and $2.3 billion 
funded, and $290 million was awarded to DBEs. And under our 
FAA, Federal Aviation Administration----
    Ms. Watson. Can I just stop you there?
    Mr. Neal. Sure.
    Ms. Watson. Would you give us those statistics in writing 
to our committee?
    Mr. Neal. Absolutely.
    Ms. Watson. I would like to circulate them so we can have 
proof that we are using these funds to serve the purpose.
    Mr. Neal. Absolutely. And under our Federal Aviation 
Administration, we had $1.1 billion in recovery money, and $92 
million went to DBEs and 8.4 percent were committed overall to 
DBEs.
    The Office of the Secretary, under the leadership of 
Secretary LaHood, has put together an Interagency Task Force 
solely focused on DBEs and accountability, and, of course, as I 
indicated in my remarks, that yours truly is the chair, and 
what we do is make sure that there is a lot of accountability 
and enforcement in making sure that the States who receive 
these moneys are now making sure that they are actually readily 
reaching out to DBEs and making sure that there is no form of 
discrimination. And through our Office of Civil Rights and 
through our Office of the General Counsel's Office, we have put 
together some extreme measures to make sure that there will be 
accountability for those contractors and for those companies 
who do not reach out to DBEs.
    Ms. Watson. If there are other questions that any Member 
might have, let's have them given to us, and we will submit 
them to you. We are really pushed for time now, so I want to 
thank this panel for your testimony. Everything you have 
presented to us has been recorded and your full statements are 
over there, and they will be part of the record.
    So any Members that want those charts that we referred to, 
please take the materials that are on the table.
    Thank you so much. We will adjourn this panel.
    The third panel will be composed of Mr. Anthony Robinson, 
Mr. Fernando V. Galaviz, Donald O'Bannon, Mr. Zingeser, Michael 
Sumner.
    [Pause.]
    Ms. Watson. I want to thank the panel for coming up 
quickly. Our time is growing short, so we are going to get 
started, and if the audience will quietly exit, those that are 
leaving, we can begin.
    As you know, it is the policy of the Committee on Oversight 
and Government Reform to swear in all witnesses before they 
testify, so I would like to ask you to stand and raise your 
right hands.
    [Witnesses sworn.]
    Ms. Watson. Let the record reflect that the witnesses 
answered in the affirmative.
    Now, I will take a moment to introduce each panelist. Mr. 
Anthony Robinson is the president of the Minority Business 
Enterprise Legal Defense and Education Fund, where he advocates 
on legislative and regulatory issues on behalf of the minority 
business community. Previously, Mr. Robinson, was a partner in 
the law firm of Singleton, Dashiell, and Robinson in Baltimore, 
and he also served as a commissioner with the Maryland Inmate 
Grievance Commission.
    Mr. Fernando V. Galaviz is the president and CEO of the 
CENTECH Group, Inc., and is here on behalf of the Mid-Tier 
Advocacy. The CENTECH Group, Inc., is a technology systems and 
solutions provider that has serviced Federal Government, 
civilians, and military agencies for more than 20 years. Mr. 
Galaviz also chairs the National Association of Small Business 
Federal Contractors, Inc., and previously he also worked as 
chief of industry trade and market development for the Minority 
Business Development Agency and as chief of the Contracting and 
Financial Systems Programs for the Office of the Secretary, 
U.S. Department of Transportation.
    Mr. Don O'Bannon is vice president of the Business 
Diversity and Development Department at the Dallas-Fort Worth 
International Airport. Mr. O'Bannon is currently serving his 
second term as chairman of the Board of Airport Minority 
Advisory Council [AMAC], and previously Mr. O'Bannon was a 
partner at the Dallas law firm of Vile & Hamilton, has also 
managed his own legal consulting firm, O'Bannon & Associates, 
P.C.
    Mr. Joel Zingeser is director of corporate development for 
Grunley Construction Co., Inc., and he leads the company's 
Strategic Planning, Business Development, and New Technology 
Programs, including sustainable design and construction. He has 
consulted with the World Bank and the U.S. Agency for 
International Development, and he is treasurer of the 
Washington Building Congress.
    And Mr. Michael Sumner, doctor, is research manager for the 
Henderson Center at UC Berkeley Law School, where he focuses on 
evaluating the effects of equal opportunity programs on both 
public contracting and public employment. Mr. Sumner has 
examined the impact of California's anti-affirmative action, 
Proposition 209, and has also led the Henderson Center's work 
on best practices in equal opportunity programs. Prior to his 
work with the Henderson Center, Mr. Sumner worked at the 
Discrimination Research Center, where he focused on language 
access rights to public institutions for speakers with limited 
English language skills.
    All right, I ask that each one of the witnesses now give a 
brief summary, a brief summary of your testimony, if you will, 
and keep this as much under 5 minutes, if you can. Your 
complete, as I said before, written statement will be included 
in the hearing record.
    Mr. Robinson, would you please proceed?

STATEMENTS OF ANTHONY W. ROBINSON, PRESIDENT, MINORITY BUSINESS 
   ENTERPRISE LEGAL DEFENSE AND EDUCATION FUND; FERNANDO V. 
  GALAVIZ, PRESIDENT, THE CENTECH GROUP, ON BEHALF OF THE MID-
    TIER ADVOCACY; DON O'BANNON, CHAIRMAN, AIRPORT MINORITY 
 ADVISORY COUNCIL; JOEL ZINGESER, FAIA, DIRECTOR OF CORPORATE 
   DEVELOPMENT, GRUNLEY CONSTRUCTION CO., INC.; AND MICHAEL 
 SUMNER, DISCRIMINATION RESEARCH CENTER, THELTON E. HENDERSON 
      CENTER FOR SOCIAL JUSTICE, UC BERKELEY SCHOOL OF LAW

                STATEMENT OF ANTHONY W. ROBINSON

    Mr. Robinson. Thank you very much, Madam Chairwoman. I am, 
as you have noted, Anthony Robinson, with the Minority Business 
Legal Defense Fund. We are affectionately referred to as 
MBELDEF, and act as a legal advocate, founded by former 
Congressman Parren J. Mitchell in 1980, on behalf of the 
minority business community. We appreciate very much you 
holding this hearing. We think it is quite significant and 
appreciate your time and attention as it relates to this 
matter.
    Madam Congressman, it has been noted by a number of 
previous witnesses that growth in minority enterprise in exact 
numbers, but what has also been acknowledged is the issue of 
capacity on behalf of these firms to operate at a level at 
which the new market has emerged in reference to that.
    Discrimination remains a stark reality for minority 
businesses. In a recent survey that was conducted by an 
economic research firm, where they surveyed some 350 of the 
fastest growing minority-owned firms as it relates to the 
significance of discrimination in their industry, brought about 
the following results: 80 percent of the firms in 
communications and utilities, 46 percent in transportation, 57 
percent in heavy construction, and 53 percent among general and 
specialty contractors considered discrimination a very 
significant, significant factor within their industry. And it 
impacts almost every aspect of their doing business, from 
business formation, access to contracts, access to credit and 
capital, to performance on the job.
    Recently, Madam Chairwoman, MBELDEF, along with the 
National Association of Minority Contractors Philadelphia 
Chapter, and the National Black Chamber of Commerce, conducted 
field hearings in some eight cities across the country, and we 
interviewed over 65 witnesses. I would ask that we be provided 
the opportunity to present the testimonies of these 65 
witnesses at some later point to supplement our testimony.
    The consistent theme----
    Ms. Watson. Let me just say you may give them to us and, 
without objection, we will accept them and put them into the 
record.
    Mr. Robinson. Thank you very much.
    As I said, minority business programs are important 
relative to speaking to the disparities that have been 
pervasive as a result of discrimination, and there has been an 
enormous amount of research that has been done, much of it 
noted. I would like to reference the fact that many of the 
disparity studies that my colleague on this panel, Mr. 
O'Bannon, will be putting in the record will speak to much of 
the private sector discrimination. As it relates to private 
sector discrimination, I would like to state that there is no 
affected policy to deal with private sector discrimination now 
in place, and we would ask this Congress to take a look at 
that.
    In addition, the disclusionary activities of the 
construction trade unions continue to have a pervasive impact 
on minority enterprise programs. And, of course, as you heard 
in reference to access to capital and access to bonding, there 
continues to be a persistent and pervasive problem.
    What I would like to do with the balance of my time before 
the committee is just to relate several of the individual 
experiences of minority businesses in the marketplace on the 
issue of discrimination, and among them would be a Louisiana 
concrete contractor. And we have deliberately maintained the 
anonymity of these contractors because of concerns about 
reprisal in the marketplace as it relates to this issue, and it 
is a very real issue, Madam Chairwoman.
    A Louisiana concrete contractor was rejected by six banks, 
despite the fact that he had worked for some of the largest 
real estate development firms in that region of the country on 
the issue of finance. He knew what banks were looking for and 
he knew many of the bankers personally. He had contract 
commitments from customers who were willing to go with him to 
the bank to verify their commitments.
    Nevertheless, he was forced to diversify his ownership to 
include a white minority partner before any bank would approve 
the loan. The only difference in his presentation to the banks 
before and after the loan approval was the presence of his 
white equity partner. The critical variable was not the 
financial strength of his presentation, because he has a 
wealthy Black football player that was willing to act as a 
credit backer, but still the bank rejected his loan 
application. Only when the white credit backer was presented 
did the banks approve, so the issue had to be the credit 
backer's race.
    His was an 8-year-old business with 45 employees, 
generating 25 percent annual growth during a recession, with 
$10 to $15 million in sales, and a $800 to $1 million in annual 
profits. He had three times the cash-flow needed to cover debt 
service on three new plants, but still he could not get a loan 
for a single new plant until he had the white equity backer. In 
spite of this creditworthiness, he faced the same challenges 
that a startup business would face. No matter how strong the 
business was, his secondary source for repayment, his loan 
application was disapproved by the banks.
    In another instance, an African-American contractor in 
Richmond, Virginia faced disparate treatment in his competition 
for construction, demolition, and disposal contracts. After his 
bid for a city demolition contract was determined to be the 
lowest, the contract was in fact split in half, resulting in a 
majority contractor receiving a portion of the contract as 
well. In other cases where he was the lowest bidder, the 
contract award was in fact split.
    I have many other anecdotes, Madam Chairwoman. I see my 
time has elapsed. Again, we would like to submit the balance of 
the 65 testimonies into the record.
    Thank you very much for this opportunity.
    [The prepared statement of Mr. Robinson follows:]
    [GRAPHICS TIFF OMITTED] 
    
                STATEMENT OF FERNANDO V. GALAVIZ

    Mr. Galaviz. Madam Chairwoman, members of the committee, we 
definitely appreciate the opportunity for us to share 
information and basically seek your support.
    From the previous distinguished panel, I think it would be 
helpful, because if you listened, as I listened, as a 
businessman and as an advocate for the community, that panel 
basically more or less gave me the impression that everything 
is just great and fine. However, there was no mention about the 
many, many small minority businesses and small businesses that 
disappear from the Federal sector over the last 20 years. There 
is no mention of how many of those businesses, the only way to 
get out is to be acquired.
    And in that process, for example, I would like for the 
panel to ask the previous members how many of the awards they 
claim has gone to small businesses. There has been a GAO study 
and an SBA study that shows that agencies are reporting awards 
that have gone to large companies as small business awards. 
Also, when small businesses get acquired, for example, the 
recent acquisition of a company that had almost $200 million 
worth of business that used to be a small business, a good 
portion of that portfolio was small business awards, and yet 
the big company now has the contracts but yet is being counted 
as small business.
    Also, as it relates to Department of Defense, it would be 
important to us why is it that, Air Force contract, where 
originally we had a small business set-aside program, the Air 
Force eliminated the small business set-aside program. And why 
is it that many DOD, particularly the Army, allows for direct 
competition, they call it small business set-asides, but yet 
the small business community and the minority business 
community has to compete against the large companies?
    Basically, also SBA representative talked about coming up 
with a new study on size standards. Madam Chairman, both 
Congress and the SBA have been studying size standards now for 
30 years, and still we are in the same place where we were 30 
years ago.
    My written testimony that has been submitted to the 
committee has been reviewed by the Minority Roundtable 
organization, by Tony's organization, by the LAMA organization, 
the Latin American Management Association, and also, of course, 
by the organization that we represent here today, MTA.
    The minority and small business community has made 
significant contributions to our Nation, both in the Federal 
agencies, through its employees, and to the community. However, 
I will focus my limited time to a specific issue that it is 
important that all of us focus on, and that is the inability 
for small business and minority businesses to really compete 
due to the faulty policy on size standards.
    Basically, Madam Chairman, it comes to a very simple 
question. If you take, for example, a training company, the 
size standards of a training company is $7 million. For a 
facility management company, it is $25 million. Now, when a 
training company graduates from the $7 million size standard, 
how can a $7 million company compete against a $29 billion 
company? Take the five top integrators. Their other sales are 
$29 billion. Now, even if you multiple the size standards that 
are now in the books by four times, you still have to ask how 
can a $28 million company, if you take the $7 million size 
standard on training and you multiple it by four, how can a $28 
million company compete against a $29 billion organization?
    The same thing on IT. The size standard for IT is $25 
million. Multiple that times four, be generous. How can a $100 
million company compete against a $29 billion firm?
    Now, basically, the large organizations, Northrop Grumman 
is $33 billion. Really, what it comes down to, Madam Chairman, 
over the years, mid-sized firms, and the reality is, Madam 
Chairman, is the mid-sized firms are really not the classical 
small businesses that have grown over the size standard; but it 
has been organizations like Booz Allen; CACI, $3.1 billion; 
Wiley, $1 billion; Unisys, $4 billion. Those firms themselves, 
if you look at their last 10 years records of growth, most of 
the growth has been through acquisition. So if those firms had 
difficulty in competing, how in the devil can we expect for the 
small business community that has grown out of the size 
standard to be able to survive? It is impossible.
    The one thing unfortunately, I must share with you, Madam 
Chairman, is that when I have had discussions with elected 
Members of the House and the Senate, and I ask them how does a 
small business, where do they pay for their business 
development and proposal development, quite frankly, it is sad 
for me over the years to find that those members do not know 
the answer.
    In order for a Government contract, there is a big 
difference between dealing with the private sector and the 
Federal Government. A big difference. And the way that a 
company can grow is how much can you build into your budget. 
And the only way you can have an increased budget in order to 
be able to afford to be competitive, you have to have a higher 
level of sales.
    But then if you become somewhat over the size standard, it 
really becomes impossible, and that is the reason you have so 
many casualties. So the basic solution--there is a solution, 
and that is to develop a tier effect of competition by the 
number of employees.
    We appreciate the opportunity, Madam Chairman, to provide 
our testimony.
    [The prepared statement of Mr. Galaviz follows:]
    [GRAPHICS TIFF OMITTED] 
    
    
                   STATEMENT OF DON O'BANNON

    Mr. O'Bannon. Madam Chairwoman, members of the 
subcommittee, thank you for inviting me here today. My name is 
Don O'Bannon, and I am Chair of the Airport Minority Advisory 
Counsel [AMAC]. AMAC is the only national nonprofit 
organization dedicated to creating success for minorities and 
women in the airport industry. While AMAC's primary focus is on 
airport-related business, AMAC members work on contracts funded 
by many different Federal agencies.
    AMAC is a strong advocate for Federal policies, like the 
DBE program, that address discrimination in Government 
contracting. As this subcommittee has heard and is well aware, 
racial and gender discrimination against minority and women 
business owners continues to be an ongoing problem.
    Minority women business owners experience discrimination in 
all aspects of public contracting, but DBE type programs do 
more than address discrimination. The DBE program is a 
significant source of the entrepreneurship, employment, and 
economic growth of the minority and women-owned business 
community.
    Minority and women-owned firms, when given a fair chance 
and a level playing field, are important engines of growth in 
our economy. Fortunately, various Federal, State, and local 
programs aimed at giving every entrepreneur a full and fair 
opportunity to succeed have begun to make some headway. 
Nevertheless, discrimination against minority and women-owned 
businesses continues to be persistent and pervasive.
    The evidence is compelling that the discrimination remains 
a problem and that programs like the DBE program are vital to 
address that discrimination. Testimonial from AMAC members 
detail the discrimination they have had to endure. These 
personal stories make it clear how difficult it is to run a 
business while enduring discrimination. To make matters worse, 
business owners are often fearful about reporting the 
discrimination. For this reason, we will report AMAC's members' 
experience without using their names.
    A female construction contractor reported aggressive sex 
discrimination. She has also repeatedly experienced harmful 
gender discrimination in supply pricing, bid shopping, and 
access to capital. One minority business expert has observed 
discrimination, including intimidation and retaliation against 
minority contractors; disproportionate punishment of minority 
contractors for minor infractions; and racially discriminatory 
remarks.
    A female Hispanic business owner developed a new airport 
concessions business. A majority-owned leasing company launched 
a whisper campaign intended to undermine her success and the 
retail lease by falsely claiming that she was not dedicated to 
her business and, instead, was focusing on being a mommy.
    An African-American business owner endured many instances 
of racial discrimination, including being charged 50 percent 
for certain supplies and being subject to racial slurs.
    The story of an African-American airport executive 
illustrates just how resistant majority primes can be to 
change. This executive was working to help identify business 
owners for concessions opportunities at Memphis Airport, but 
the prime was simple not committed to participation. The prime 
claimed that he could not find any qualified owners to open a 
barbecue restaurant at the airport in Memphis, TN. As our 
member said, I kid you not, this man looked at me in the face 
and told me he could not find a minority business that cooked 
barbecue in Memphis.
    With our testimony today, AMAC is submitting 24 disparity 
studies. We ask that these studies be included in the record.
    Madam Chair, may we offer these studies into the record?
    Ms. Watson. Yes. Without objection.
    Mr. O'Bannon. Through both quantitative and qualitative 
evidence, statistically they demonstrate the existence of 
serious discrimination against women and minorities in many 
different industries across the Nation. Each of the disparity 
studies provides significant quantitative evidence of 
discrimination against minority and women-owned businesses in 
both the public and private sector.
    In addition, the studies include numerous individual 
reports of discriminatory behavior similar to the examples I 
have given you from AMAC's membership. The accounts make it 
clear that minority and women entrepreneurs are subject to a 
broad range of discriminatory actions, including discrimination 
in lending and supply purchasing. They also reveal the use of 
racial slurs and other tactics aimed at intimidating minority 
and women-owned business owners.
    Overall, these studies provide strong evidence of serious 
discrimination against minorities and women. They also 
demonstrate that there is a compelling and continuing need for 
the DBE program and similar programs across the Federal 
contracting front dealing with public funds. For these same 
reasons, AMAC strongly supports final enactment of the FAA 
reauthorization bill and the improvements to the DBE program it 
contains. These changes are precisely the policy changes needed 
to ensure that the aviation system here in America remains the 
best in the world.
    Thank you.
    [The prepared statement of Mr. O'Bannon follows:]
    [GRAPHICS TIFF OMITTED] 
    
    
    Ms. Watson. Thank you.
    Mr. Zingeser.

                   STATEMENT OF JOEL ZINGESER

    Mr. Zingeser. Thank you, Madam Chairwoman and Ranking 
Member Bilbray. It is a pleasure to be here. My name is Joel 
Zingeser. I am with Grunley Construction of Rockville, 
Maryland. I come to you today on behalf of the Associated 
General Contractors of America.
    AGC strongly supports full and open competition for the 
many contracts necessary to construct improvements to real 
property. AGC supports procurement reform to improve delivery 
of Federal construction services. Reform of the Federal 
procurement process should recognize construction's unique 
melding of industry sectors, while ensuring the Government is 
using the most cost-effective method for procurement.
    AGC would like to discuss an issue of great concern to us 
that we believe, if addressed, would bring the greatest 
possible amount of transparency to Federal contracting, and 
specifically contracting with small and disadvantaged 
businesses nationwide.
    Current SBA rules require small business set-asides and 
establish small business goals be met by large businesses to 
assure that significant portions of Federal procurement dollars 
flow to small business firms. But the rules for keeping track 
and measuring the flow of dollars to small businesses do not 
take into account the actual amounts that flow down to small 
businesses below the first tier level of subcontracting. As you 
already heard today from others, the nature of the construction 
industry and how it operates is through subcontractors and 
second- and third-tier subcontractors.
    Within the construction industry, the bulk of the work is 
performed by subcontractors that specialize in specific 
expertise and, in turn, hire second- and third-tier firms to 
perform elements of the project. Under the current system, if 
an other than small business is included as a first-tier 
subcontractor, the prime contractor is not asked to report the 
flow of dollars that are going to small businesses hired below 
the first-tier subcontractor. This is because the contracting 
agency, those Federal agencies that are awarding the 
procurements, are not allowed to take credit for those dollars 
toward their goals.
    Allowing prime contractors to report small business 
subcontracting at all tiers would demonstrate true 
participation of small businesses on Federal contracts and 
would show more accurately how significantly the construction 
industry supports and is in fact dependent upon small 
businesses.
    In attempting to meet the various small business goals 
under the current system, prime contractors are often required 
to consider subcontractor choices for large projects that are 
beyond the capacity, especially bonding capacity, of small 
businesses. The present approach to keeping score puts pressure 
on small businesses to accept roles with larger firms operating 
under them in a way that is upside down, in an unnatural 
alignment.
    If credit for small business participation were allowed to 
be counted toward the goals when the small businesses are 
performing in their logical and most comfortable roles, the 
true benefits of small business to the construction industry 
will be measured, accounted for, and recognized for what they 
are, critical to the success of our industry. Moreover, such a 
system would allow small and emerging firms to grow in a 
natural manner that would force them not to become 
overextended, and ultimately this will make them more 
successful.
    Changing the scoring system will let prime contractors and 
small businesses determine together the best arrangement of 
large and small subcontractors according to capabilities, 
capacity, and availability. The ability to solve the reporting 
problem is available today. The shift to the Electronic 
Subcontractor Reporting System [eSRS], by the Federal 
Government provides the opportunity to simply and accurately 
gather the small business data at all tiers and thus correct 
the problem.
    The system has the capability to track and report small 
business subcontractors on multiple tiers, yet current rules do 
not encourage prime contractors and their subcontractors to 
account for total small business participation at all tiers. 
The Interagency Task Force on Federal Contracting Opportunities 
for Small Business recommends enhancing the Electronic 
Subcontractor Reporting System. Specifically, the Task Force 
recommends enhancing the eSRS to better capture subcontracting 
at all tiers.
    AGC recommends Congress direct a change to the system by 
amending the Federal Acquisition Regulations [FAR], through 
legislation to allow all parties to report and receive credit 
for the dollars flowing to all small businesses on Federal 
contracts. We have attached suggested language for the 
committee's consideration.
    I want to thank you for the opportunity to provide our 
views on working with the Federal market. We believe this 
market offers tremendous opportunities for both construction 
contractors and the Federal Government. AGC looks forward to 
continuing to work with the subcommittee on this critically 
important issue.
    [The prepared statement of Mr. Zingeser follows:]
    [GRAPHICS TIFF OMITTED] 
    
    Ms. Watson. Thank you so much.
    Mr. Sumner.

                  STATEMENT OF MICHAEL SUMNER

    Mr. Sumner. Chairwoman Watson, Ranking Member Bilbray, 
thank you for the opportunity to speak with you today regarding 
the challenges and opportunities for minority-owned businesses 
in contracting. My name is Michael Sumner, and I am the 
Research Manager at the Thelton E. Henderson Center for Social 
Justice at the University of California Berkeley School of Law.    The Henderson Center is a training and research center that 
produces scholarship on issues of race, sex, and poverty. My 
colleagues and I research equal opportunity programs in public 
contracting. In a series of reports, we looked at the 
California Department of Transportation [Caltrans], which 
operates a program for disadvantaged business enterprises 
[DBEs]. DBEs are small businesses that are majority owned and 
operated by people of color and women of any race or ethnicity.
    In the mid-1990's, there was a successful effort to curtail 
equal opportunity programs in California, culminating in the 
passage of Proposition 209 in 1996. The DBE program was 
dismantled entirely for projects with only State funding, but 
continued for projects with Federal funding, as required by 
Federal law.
    We examined over 20 years of Federal awards and found that 
awards to DBEs doubled between the mid-1980's and the mid-
1990's, providing evidence for the success of the equal 
opportunity program. However, when equal opportunity programs 
were removed and scaled back, the percentage of awards to DBEs 
dropped by nearly 50 percent and continued to decline. In fact, 
rates have fallen from a high of 28 percent of awards going to 
DBEs in 1994 to only 2 percent of awards going to DBEs in 2008.
    It is important to note that we were unable to analyze 
awards for projects that only receive State funding, as 
CalTrans ceased collecting data for State awards. However, in a 
report commissioned by CalTrans, it was found that disparity 
for State awards was two to three times higher than for Federal 
awards. Therefore, the federally required DBE program might 
have been instrumental in reducing the level of disparity by at 
least half.
    We also collected anecdotal evidence via focus groups and 
interviews with DBE owners. Contractors said the DBE program 
helped them build relationships and encourage prime contractors 
to pick up the phone. However, after the DBE program ended, the 
phone stopped ringing. Contractors perceived being 
systematically excluded in part from the existence of an old 
boys network. When the anti-affirmative action, Proposition 
209, was passed, it was perceived by DBE contractors as 
reinforcing a system of exclusion.
    For example, one female contractor that participated in our 
study reported that the day after Proposition 209 passed, the 
senior project manager walked up to me and said, hey, Prop. 209 
passed and we don't have to use you anymore. I didn't say 
anything to him at first, but the next day I told him that I 
wanted to talk to him about what he had said to me. I said, did 
it occur to you that I have been working here for a number of 
years and that I have always finished on time or early? And how 
many letters do you have from my clients praising my 
cleanliness and professionalism? Well, he didn't care; he just 
looked at me and said, well, it's true, Prop. 209 passed and we 
don't have to use you anymore.
    Additionally, contractors discussed the challenges in 
securing loans, bonding, and insurance. One contractor shared a 
story of being asked to provide collateral for a $200,000 loan. 
His attorney said that similarly situated white male clients 
were able to secure loans of that size without being asked for 
collateral.
    In summary, our research found evidence that discrimination 
and disparity are still prevalent for minority and women-owned 
businesses; that equal opportunity programs can aid in leveling 
the playing field; removing or weakening equal opportunity 
programs can lead to dramatic reductions in the opportunity for 
minority and women-owned businesses to succeed; and the removal 
of equal opportunity programs can create a climate in which 
discrimination and disparity become more widespread.
    In order to promote equal opportunity in contracting, we 
recommend that programs should be championed by key leaders and 
organizations to counter discriminatory and isolated social 
networks. The programs should include help with securing 
bonding, financing, and insurance. The programs should minimize 
the burdens on entrepreneurs applying for certification, while 
being stringent enough to weed out false fronts. The programs 
should promote prompt payment, unbundled contracts, and 
increased lead times, elements that are race and gender 
neutral. The programs should include a data collection and 
analysis mandate to ensure the utilization of best practices.
    The research I mentioned today is available in more detail 
in our reports, which are freely available on our Web site and 
I have asked to be included in the record.
    Thank you very much for the opportunity to be here today. I 
would be happy to answer any questions you may have.
    [The prepared statement of Mr. Sumner follows:]
    [GRAPHICS TIFF OMITTED] 
    
    Ms. Watson. Thank you so much. I was there on the fateful 
day that affirmative action was eliminated in front of the 
Board of Regents. Seated next to me was the president of UCLA; 
on the other side Jessie Jackson and another Member of the 
Senate. Tears came down the face of the president and he left 
the university at that time.
    The results of the passage of the bill to eliminate 
affirmative action resulted in not one Hispanic being admitted 
to the law school at UCLA, and only one African-American being 
admitted to Boalt Hall, and he chose not to go. So it has had a 
dire effect. Potentially very bright students who would have 
been able to come out and practice, started their own firms 
were just blackened with that one vote.
    And I have other things I want to say, but I am going to 
yield now to Mr. Bilbray.
    Mr. Bilbray. Thank you. First, may I advise maybe you two 
want to get together and work this thing out. I think that the 
goals of the program and the results, we get frustrated with a 
lack of results, but I think that the Association of General 
Contractors were pointing out the issue that I have run into, 
and it is not just in the construction trades. The fact is it 
is across the board and is something we need to talk about and 
make sure that we should follow the money, as we say. That is 
what really counts.
    I know it is tougher on the bureaucracy to do multi-tier 
evaluation assessment, but this is important enough. If it is 
really enough to have the program, then it is important enough 
to have the program operate appropriately and function the way 
its goals are, rather than just basically saying, look, we have 
done this, we have spent this money, and obviously we should 
pat ourselves on the back.
    Let me just say one thing, and I want to say it again and 
again. The biggest problem with Washington is not that we try 
new things. The biggest problem with Washington is not that we 
try new things and make mistakes. But when we make mistakes, we 
are not willing to go back and take care of it. And we love to 
take the credit when we sign a bill, but we have an obligation, 
and it is one of the things I enjoy being in Oversight about, 
is go back and fine-tune it. Any businessman knows that, 
because there is a real incentive to do that.
    Sadly, that incentive doesn't occur in Government, because 
if we go back and find problems, then we have to admit that our 
package wasn't perfect. But we should be proud to say, you are 
right, it wasn't perfect, but we care enough about it, this is 
our baby, and we ought to go back and, yeah, every once in a 
while we have to change the diapers for the bureaucracy and get 
this thing straightened, even if it is a messy process. But I 
think that we need to talk specifically about making sure that 
system of following the money reflects reality, not just some 
kind of easy accounting process.
    Look, there were some discussions here. There are certain 
characteristics that each one of your industries have on this 
issue. Would you point out in your industry what makes it more 
or less difficult for small disadvantaged businesses to enter 
the contracting process specifically to your industries?
    Mr. Robinson. I'm sorry, I didn't hear the question.
    Mr. Bilbray. The question is, every business has its pros 
and cons and whatever when it gets into it, but specifically 
from your industry's point of view, do you see the advantages 
or can you point out the advantages and disadvantages from your 
perception of your industry either gaining access or not being 
able to gain access into the Federal process?
    Mr. Robinson. First of all, Mr. Bilbray, I don't represent 
any particular industry. The nature of my organization is to be 
an advocate on behalf of minority businesses in the courts and 
in the legislative bodies.
    Mr. Bilbray. And I appreciate that and I apologize. I was 
trying to get down to those specific industries and, Mr. 
Robinson, it obviously wouldn't be a question to you, but it 
would be to some of the other members.
    Mr. Galaviz. If we take the information technology and 
engineering logistics and support contracting efforts in the 
Federal Government, we basically most contributed to minority 
business to enter into the Federal space has been over the last 
30 years the 8(a) program. The 8(a) program has made a lot of 
significant contributions to startup the funds. The other is 
the small business set-aside program. And particularly during 
the Clinton administration, with the reform of the GWAC 
concepts, that also provided some added opportunities.
    However, the downside is that when those firms finally 
start developing some modest capability, then they are cut down 
at the knees, because I said earlier in the testimony the one 
question that all of you----
    Mr. Bilbray. Success goes punished, basically, once you----
    Mr. Galaviz. No, no.
    Mr. Bilbray [continuing]. You reach a certain level, a 
tier, and you start getting cutoff?
    Mr. Galaviz. Well, that is one interpretation, but the 
other is, to ask a simple question, how can a $7 million firm 
compete against a $29 billion firm? Or how can a $100 million 
firm compete against a $29 billion firm, or even a $300 million 
firm? And that is one thing, in the community, where we are 
working with antiquated policies that basically put us in the 
economic ghetto, because the one thing that every time you look 
in the paper about XYZ Co. being acquired by a large 
corporation, and look at the history of what has happened to 
those companies, a lot of them finally give up because their 
balance sheet has become so deteriorated because they keep 
losing competition.
    My firm alone, I have had years worth of successes. Now 
that I am in the so-called twilight zone market, first of all, 
I am not a mid-tier firm because I am not Booz Allen or I am 
not UniSys. Those are the guys are the mid-tier firm. I'm the 
small guy. Even though I outgrew the size standards, I am still 
a small guy. So what is going to happen, let's say, to most of 
us? Give us an accountability of what has happened, the 
Government has made an investment in developing these firms, 
particularly in operation support contracts.
    Let's be honest. The private sector hasn't made an 
investment on developing the staff of those contracts, because 
you have the concept in the Federal Government that operation 
support contract that when the new company picks up the same 
cases from the previous company, and the new company, 
regardless what was said in their proposal, because that is 
another thing the Congress has never looked at, and that is 
these companies get selected because of a competitive process, 
Lockheed Martin, IBM, anybody. And they say, well, the reason 
you won is because you had these strengths, because you are 
going to bring this added value.
    But yet, Madam Chairman, the Government never puts that in 
the contract. They do not put that in the contract. So then 
what does the new site management for that company do? He is 
hired to manage the contract according to what the Government 
signed on to, and the Government neglects to put down all the 
goodies that were in the proposal.
    Mr. Bilbray. That is absolutely fabulous testimony on that. 
It really is a good point. The fact is it is a proposal. If 
this is what the decision was made on this standard, on these 
proposals, then it should be almost automatic to transfer that 
in.
    And I know my time has expired, but from the AGC's point of 
view, let me kind of hit you with a counter on that. Do you 
have any reason why we would not take that proposal and 
basically say, here is your proposal, this is what you propose, 
this is what the bid was on; we are now going to include that 
in the contract that you sign? From the AGC's point of view, do 
you see a major problem with that?
    Mr. Zingeser. Generally speaking, I think any general 
contractor working with subcontractors is always looking at 
their proposal. In other words, we might write a scope of work 
of some sort, which is saying how we see the work that needs to 
be done. They come back in turn and either agree that is what 
they can and will do or come back with their scope and saying 
that they ``got it all.''
    Mr. Bilbray. What if, right off the top, the proposal is 
put out there, and this is one of those things, don't offer if 
you are not willing to deliver, and this is a very good point 
that we may want to be talking about, and that is the fact is 
when a proposal uses certain terminologies used in certain 
proposals, that terminology from the proposal is incorporated, 
at least referred to in reference right in the contract.
    Mr. Zingeser. Yes. That is an automatic.
    Mr. Galaviz. Well, that is not quite so in the Federal 
sector.
    Mr. Bilbray. But that is what you are saying and I am 
saying, is if that was a goal that we were shooting for, you 
think that should be included in, sir. That is what I am 
talking about.
    Mr. Galaviz. Well, yes. In other words, if you are going to 
say, the evaluation committees, if they are being ethical and 
morally correct, they made a decision to hire this other 
company because they can do a better job, then those things, 
and probably I can give you some very interesting examples, and 
have those submitted to the committee.
    But the fact is that right now, we are going through a very 
dynamic, kind of stupid experience right now. Right now, 
because of the budget pressures, right now companies or 
agencies are just doing the following: as long as you pass the 
technical cut, then lowest price will prevail. So what really 
the Government now is doing is saying we really don't care 
about added value, we really don't care about innovation, OK? 
Right now we just care for you to show that you are a 
reasonably good contractor, that you have not been arrested 
over the last month, and, therefore, as long as you have the 
lowest cost.
    Now, what is happening? Now, how do these large companies 
get the lower cost? And what is happening today in the 
marketplace is what they are doing is they are using different 
call centers with different benefits package. So now the new 
employees are now basically having less benefits, less holiday. 
So guess what happens? Those folks are going to stay there as 
long as they can find another job.
    We have gone through this cycle before in Government over 
the last 40 years, OK, and then find that people get wise. 
Right now we know of three contracts that have been awarded 
just in the last 90 days in which a third of the incumbent 
employees either have left or are looking for a job because the 
new bidder won the contract in a totally different environment. 
So what is the Government really doing? You are creating 
sophisticated body shops.
    Mr. Bilbray. Thank you very much.
    And I appreciate the extended time. I think we have some 
opportunities here. I am sad to say that I don't have the 
opportunity to look forward to working with the Chairwoman. 
Hopefully, with the blessing of the voters, I will be around to 
work with whoever the democratic leadership chooses to work 
with me on this committee. But I think that there are some 
great opportunities here.
    I just have to say one thing about the budget process. You 
think it is tough now? Believe me, it is going to get very, 
very ugly. I mean, the Congressman from Virginia talked about a 
10 percent cut across for the Department of Defense for 
contracts. I think we are going to see some real tough times 
coming down the pike and, believe me, when all of us go back to 
the district they are really looking at us; and coming from 
this committee, we get a lot of scrutiny.
    So I appreciate your testimony and, Madam Chair, I really 
appreciate the fact that you have jumped into this, and I know 
you have some questions.
    Ms. Watson. Thank you so much.
    Let me quickly just go down the line of panelists. I would 
like to start with you, Mr. Robinson. You are in the business 
of providing the legal defense and so on. In your opinion, how 
do minority-owned firms tend to view the various types of 
Federal assistance provided to them? And are some programs 
perceived as being more or less effective in offering 
assistance?
    Mr. Robinson. Madam Chairwoman, that is a very mixed bag. 
There are programs where the policies that are in place that 
Congress designed to develop companies, we have been talking a 
lot about capacity, and if you look at the statutes that 
Congress has passed as the goal of these programs to build 
competitively viable companies, and yet you look at how that 
policy is executed on the ground, it leaves a great deal to be 
desired.
    And I am specifically talking about, for example, the 
Department of Transportation. I think one of the things that 
they have instituted relative to accountability between State 
recipients and the Federal Government, and how they are 
accountable for the implementation of the program, begins to 
move us in the right direction, but there is a huge distance 
between what Congress has intended, or the Federal Government 
has intended, and how that is actually executed on the ground. 
And I think that, if you would poll many companies, they would 
indicate that those services designed to develop them are 
wholly inadequate.
    Ms. Watson. Assuming that the Federal courts will continue 
to eliminate these exclusive programs, including price 
evaluation adjustments and quotas, such as inclusive programs 
like technical assistance and outreach, how could the inclusive 
programs be made more effective? You know, we recognize there 
are some problems with the execution of these provisions. How 
can we make them more effective?
    Mr. Robinson. I would like to correct one observation, one 
point that you just made. There is no program that you can 
consider a quota. All of these programs are inclusive. The SDB 
program, which is questionable as to whether it is in fact 
operating right now, but all of the other programs eligibility 
is determined by socioeconomic criteria.
    And if you read that socioeconomic criteria, in most of 
these programs you can participate. So there are no what I 
would call exclusive programs in the Federal sector; most of 
these programs have general socioeconomic criteria by which you 
can in fact engage.
    The second part of your question as it relates, again, to 
the effectiveness of the program.
    Ms. Watson. Right.
    Mr. Robinson. I think the importance there is 
accountability, because most of this money flows through State 
and local actors, and to the degree that the Federal Government 
provides accountability, and for those who do not provide that 
accountability and do not implement these programs according to 
Federal law, the Federal Government has an obligation to cut 
out those funds to those agencies.
    Ms. Watson. That is why we are the Oversight Committee, and 
we are looking at how we hold the entities out there 
accountable. That is an excellent point, and I am so pleased 
that Mr. Bilbray is our ranking member, because you heard him 
commit to helping to work through some of these issues that you 
are raising today. Thank you so very much.
    Mr. Galaviz, what types of Government programs would help 
the mid-tier companies in obtaining financial or Government 
contracts, and what could be the downside of such assistance?
    Mr. Galaviz. Madam Chairman, thank you for that question. 
First, the reality of the environment of size standards is 
really a major, major hurdle, because it just practically, 
practically, it is difficult to answer that question, how can a 
$7 or $25 million company compete with a $29 billion company. 
So what we basically are proposing, to design a pilot program 
that would provide a tier type of competition, which, by the 
way, we implemented this and I helped part of design 20, 25 
years ago, when the Department of Commerce introduced the 
comments program.
    And there have been several agencies that have used that 
tier effect, and right now we do have a couple of agencies 
looking at that, and the reason why they are looking at that, 
because there has been a significant number of investments made 
by the Federal Government in the development of some of these 
firms, and some of these firms have performed very, very well 
particularly because they know that on these mission-critical 
programs that are quite sophisticated and accomplished in 
technology, they know that when something goes haywire they can 
get the CEO of that company, of that small business, to come 
down and take care of it right away. They know they are not 
going to get the chairman or the CEO of Northrop Grumman to 
even say hello.
    But also, for example, another thing that has been 
important to us in support of this pilot program is the fact 
that the small business community, the one thing that has been 
very positive on the Federal level is that over the last 35 
years the small business community and the minority business 
community have gained significant amounts of capability to give 
confidence, for example, to the Air Force, which is the most 
sophisticated range you find in the world, and, 5, 7 years ago, 
they decided to make that a small business set-aside, and they 
had a significant number of competition. A small business won 
the contract 5 years ago; they performed very well. And the 
other examples we can provide to the committee were the small 
business community has really demonstrated to be able to 
provide the services that are needed in complex, critical 
projects.
    So what we propose is basically to have the ability of 
collaboration to stop the bleeding that is happening in the 
marketplace by having a program that either SBA gets their act 
together and the Department of Commerce gets their act together 
of coming up with a realistic size standard program or develop 
a pilot program to show that indeed it can be a win-win 
situation, because in the proposal that we have, it would 
protect small emerging businesses.
    Now, one thing that we have to give credit to MBDA is that 
since President Nixon established the minorities agency, they 
have done tremendous excellent work throughout the country in 
small businesses; the small manufacturer, the barber shop, the 
little market. All that has created a lot of vitality of 
economic development.
    However, it is important to say that in the history of 
MBDA, as far as working with Federal contractors and really 
supporting Federal contractors, that has not been their 
strength. And SBA still has what we call the ghetto economic 
mentality. We hope that the proposal that we are saying on this 
pilot program, that should be considered, Madam Chairman.
    Ms. Watson. Thank you so much. We have other questions we 
would like to ask, but, for the sake of time, we are going to 
send you a letter with these questions, and you can respond in 
writing to us.
    Mr. Galaviz. Yes, ma'am.
    Ms. Watson. Mr. O'Bannon, you described a situation that we 
know all too well. Are you aware of any ongoing efforts by the 
Department of Transportation to ensure that airports are 
actively working to increase the contracting opportunities for 
minorities and women-owned businesses? What are they doing that 
you are aware of?
    Mr. O'Bannon. AMAC has worked extensively with some of our 
sister organizations, COMTO, with Tony's group and other 
organizations, to work directly with the Federal Aviation 
Administration and DOT on rulemaking, and some of the rules 
that have been proposed, such as the increase in personal net 
work for an adjustment for inflation are those types of efforts 
that will hopefully have a positive impact. In addition, there 
has been more of an emphasis on accountability, and there are 
some efforts being taken by the agencies in that regard in 
terms of increasing accountability.
    It just seems to me that, fundamentally, the issue has to 
be a recognition that there is a problem by these agencies, and 
it just seems to me, and, again, I am not a statistician, so 
when I go down this road, please don't ask me about the 
statistics of all of this, but many of these A&D studies look 
at a lot of factors, and at the end of the day, when they 
control for size, when they control for education, when they 
control for experience in the given industry, at the end of the 
day, a lot of these studies, when they find discrimination, it 
is race or gender, which is the motivating force that 
establishes that discrimination still exists, despite size, 
despite income.
    I hate to use an example, but when I was younger and I was 
driving through certain neighborhoods in North Texas, they 
didn't stop and ask me if I was in college, and they sure as 
heck, when I stop now, don't ask me if I am a lawyer or what 
the balance in my checkbook is. They stop me because I am 
African-American driving through a certain neighborhood after 
hours. And that is the reality that we have to keep in mind and 
continue to address. And I think fundamentally, as long as the 
agencies focus on that and then come up with specific policies 
to address that, then we can move forward. But until that 
happens we are not going to move forward.
    Ms. Watson. You used an example of asking about, is there 
anyone available who can set up a barbecue stand in the 
airport. That is just like saying there is no available sand on 
the Hawaii beaches, you know. Maybe we ought to establish this, 
this is what I did at the University of California when I went 
in to talk to the current president at that time, and there 
were several minorities, five of them, trying to get tenure, 
and he said they didn't do the kind of academic research; and I 
set up an example for him and he couldn't respond.
    But where I went with it, I said, well, why don't I supply 
you with a list of credible academicians in this country that 
will meet the standard that you set, because I know, right off 
hand, 10 of them? I would not let that excuse rise. So maybe we 
ought to be developing lists of people who meet those 
standards. Think about it. You don't need to respond. But I 
think if they can't find qualified contractors to fill this 
requirement or this need, we ought to some available.
    Mr. O'Bannon. Ms. Watson, I know we are in need of time, 
and I will be brief, but I just want to point out, again, I 
think the committee should keep in mind that if you analyze in 
sheer number, not size of contract, but sheer number of 
contracts, that a significant portion of those contracts are 
well within the capability of the majority of our minority and 
women-owned business community.
    Ms. Watson. Of course. And that is what I am saying. Maybe 
we better have, when we go in and raise these issues, a list of 
those that are qualified. Then they would have to tell us why 
they don't meet the standards. And I think they are illusional, 
as you have referred.
    Mr. Zingeser, how are other firms in the industry affected 
when minority-owned firms are unable to meet the bonding 
requirements for prime contractors and, instead, become 
subcontractors? You know, I have gone through this for decades, 
and I remember sitting on the school board in Los Angeles, the 
largest one in the State, really, the largest one in the 
country under one board, seven members, and there would be 
contracts, and minority contractors, of course, would come to 
me because I am the only one of color sitting there, and they 
would say they can't compete because the bonding was too high 
and they couldn't get bonded. And I said we are still in 2010, 
pointing up the same problem. Would you respond?
    Mr. Zingeser. Yes. It is a complex issue, but I will try 
and break it down into a couple of pieces.
    Ms. Watson. Please.
    Mr. Zingeser. First of all, in our industry, we have 
general contractors who are like systems integrators and 
putting all the pieces together, and then there are 
subcontractors, and those subcontractors on a large project, 
and by large I am talking about $100 million renovation of this 
building, they may, in turn, have large subcontracts, like the 
mechanical work might be $30 million. And then, in turn, their 
subcontractors look down at other smaller firms to do work that 
break down into the duct work or other parts of that trade.
    So there is general contracting and then trade work. 
General contracting does require, generally, a higher bonding 
capacity than work at a lower tier. The issues related to 
subcontracting for any general contractor, and I am not 
speaking necessarily for AGC, but I will speak for myself and 
our company, and I think it is similar. We are looking at two 
things, capability and capacity. Capability is to do the job. 
If it is painting, if it is installation of some specific 
system. And then capacity is ability to know that they are 
going to show up, they have the workers and they have the 
financial capacity to be there.
    There are programs for small businesses, whether they be 
minority businesses or not, such as the SBA 8(a) Mentor-Protege 
Program, which is an excellent program. We participate. We have 
a couple of proteges that we work with. It has been very 
successful from the mentor's point of view and I think from the 
protege's point of view. That process officially allows us to 
bond the work. We have the bonding capacity, where they may 
not. Their bonding capacity has grown because they have been 
more successful. We have been in this relationship for a few 
years now, so they are developing their bonding capacity. But 
because there is an entity that is blessed, we can bond that 
and we can help. We can help in that way.
    The issue that I pointed to in my testimony is really two 
points. One is very, very, very simple; it is that we can get 
the right data. We have the ability to know where the dollars 
go, as Mr. Bilbray said. We can do that easily. And we, the 
contractors, will give you that information; all you need to do 
is ask us for it. The Electronic Reporting System enables us to 
ask our subs, and they their subs, for this data. We can tell 
you how many dollars go to what types of entities.
    Now, the second part of the problem, though, is by not 
scoring that information or allowing it to be accounted for, we 
are forcing the subcontractors, who both logically and from a 
business model point of view don't necessarily want to be 
general contractors or don't want to work at a higher level, 
they do what they do; we are forcing them into situations where 
they are taking risks that they may not be comfortable with or 
creating some situations that I think are now being looked at, 
which I referred to as being upside down. That is where a small 
business gets in bed with a large business because the large 
business can provide the bonding. Well, the surety companies 
are not looking favorably on that and I don't think the 
Government is looking favorably on that.
    That is a business model that I suggest is not meeting the 
social economic goals of the program. I think it creates some 
businesses whose model is to operate in the scoring system, but 
not to hire employees to do work, to get out there, to increase 
productivity and contribute to the Nation as a whole. So if we 
simply do the right thing, which Mr. Bilbray, I think, 
suggested when we make a mistake perhaps we can correct it, if 
we properly account and let these businesses, whether they be 
minority or other specially characterized businesses, if we 
allow the businesses to operate at the level they want to 
operate at, the trade they provide, the service they provide, 
and we get the credit, everybody gets the credit, we will see 
what we are doing; they will grow, they will be more 
comfortable, they will do the things that the program is 
intended to do, not create some opportunity for other business 
models.
    So I am, as you can tell, pretty passionate about this. I 
think we have the answers to some part of it. It is an 
incremental problem. We can't solve all of the history of our 
country through some of these things, but we can do some things 
that will make a better environment for these programs to 
succeed. That is what we are trying to suggest.
    Ms. Watson. I appreciate your testimony.
    Finally, Mr. Sumner, in your testimony you cite the 
decrease in Federal contract awards given through CalTrans to 
disadvantaged business enterprises from 28 percent, that was 
1994, to just 2 percent in 2008. How much of an impact has the 
Federal Government had in increasing contracting opportunities 
for minority-owned businesses?
    Mr. Sumner. Specifically from the Federal Government, the 
DBE program that was required, because it is a USDOT 
requirement if you receive Federal awards, I think was 
beneficial in the State of California because it continued some 
form of the DBE program. Although we weren't able to collect 
evidence on that ourselves, the CalTrans Availability and 
Disparity Study showed the level of disparity to be two to 
three times higher for State awards, which is where the program 
wasn't operating.
    And, on top of that, some of the things that were part of 
the Federal program would be things like mentorship 
opportunities, technical assistance opportunities. That would 
have a spillover effect on State awards. So it is possible that 
without the Federal program the State program might have shown 
even more disparity. So the Federal Government's DBE program 
has been a benefit, I think, in California.
    Ms. Watson. And given the influx of the American Recovery 
and Reinvestment Act funds to California, are you aware of an 
increase in opportunities for minority-owned businesses?
    Mr. Sumner. Obviously, there the potential of opportunity 
is there, since it was a large increase in construction dollars 
that were available. We haven't done any research on that 
nationally or in California. I know, anecdotally, that others 
have done research. I know that the Kirwan Institute has been 
tracking stimulus money by race and I believe by gender, but I 
would have to review what their findings were, and I could get 
back to you on that.
    Ms. Watson. I want to say to this panel we really 
appreciate your input. We are going to be back in touch with 
you to give us concrete suggestions as to how we can fix the 
programs that we put into place through legislation. Working 
with our ranking member, I think that we can take the bill that 
we have and add provisions to it that would have the outcomes 
that we intend for Federal funds to have.
    When we put them into a program, there is an outcome that 
we expect, and this hearing this morning and now into the 
afternoon has been about how do we cover minority- and women-
owned businesses, and I think that all of you are on the track 
to helping us design the kind of policies that will reach our 
goal and have the outcomes.
    We are about fairness and justice. As you know, we are in 
an economic time that is very troublesome for most families, 
and certainly for those at the lower end of the socioeconomic 
scale. People of color, women, feel the brunt of it greater 
than other segments of our population. We need to address it. 
We can't create miracles, but we can identify the provisions 
that need to be applied and the oversight that we need to do to 
be sure we get the results we intend.
    So thank you so much, panel members there, and we will be 
extending to you more questions that we would like to have 
answered. We would appreciate your getting right back to us 
within 10 days, if you can.
    Thank you very much, and we will adjourn this panel.
    [Whereupon, at 1 p.m., the subcommittee was adjourned.]
    [The prepared statement of Hon. Gerald E. Connolly 
follows:]
[GRAPHICS TIFF OMITTED] 

                                 
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