    [Senate Hearing 111-1165]
    [From the U.S. Government Publishing Office]

                                                           S. Hrg. 111-1165

                      SMALL BUSINESS CONTRACTING: ENSURING
                  OPPORTUNITIES FOR AMERICA'S SMALL BUSINESSES

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

                                   ROUNDTABLE

                                   BEFORE THE

                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                              UNITED STATES SENATE

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 22, 2009

                                   __________

        Printed for the Committee on Small Business and Entrepreneurship

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                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                         ONE HUNDRED ELEVENTH CONGRESS

                                  ----------
                       MARY L. LANDRIEU, Louisiana, Chair
                    OLYMPIA J. SNOWE, Maine, Ranking Member
    JOHN F. KERRY, Massachusetts         CHRISTOPHER S. BOND, Missouri
    CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
    TOM HARKIN, Iowa                     JOHN THUNE, South Dakota
    JOSEPH I. LIEBERMAN, Connecticut     MICHAEL B. ENZI, Wyoming
    MARIA CANTWELL, Washington           JOHNNY ISAKSON, Georgia
    EVAN BAYH, Indiana                   ROGER WICKER, Mississippi
    MARK L. PRYOR, Arkansas              JAMES E. RISCH, Idaho
    BENJAMIN L. CARDIN, Maryland
    JEANNE SHAHEEN, New Hampshire
    KAY HAGAN, North Carolina
               Donald R. Cravins, Jr., Democratic Staff Director
                  Wallace K. Hsueh, Republican Staff Director

                                C O N T E N T S

                                  ----------

                               Opening Statements

                                                                       Page

    Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1

                                   Witnesses

    Drabkin, Dave, Senior Procurement Executive, Deputy Chief
      Acquisition Officer and Deputy Associate Administrator for
      Acquisition Policy, General Services Administration............     8
    Sullivan, Ann, Women Impacting Public Policy.....................     8
    Hesser, Bob, Vet Force representative............................     8
    Dorfman, Margot, Chief Financial Officer, U.S. Women's Chamber of
      Commerce.......................................................     8
    Chvotkin, Alan, Professional Services Council....................     8
    Brubeck, Ben, Director of Labor and State Affairs, Associated
      Builders and Contractors.......................................     8
    Fingarson, Ashley, Director of Legislative Affairs, Associated
      Builders and Contractors.......................................     8
    Willis, Greg, General Counsel (Majority Staff), Committee on
      Small Business and Entrepreneurship............................     8
    Hontz, Karen, Small Business Administration......................     8
    Walker, Matt, Deputy Staff Director and Counsel (Republican
      Staff), Committee on Small Business and Entrepreneurship.......     8
    Reece, Adam, Professional Staff Member (Republican Staff),
      Committee on Small Business and Entrepreneurship...............     8
    Newlan, Ron, HUBZone Council.....................................     8
    Oliver, Linda, Acting Director, Office of Small Business
      Programs, U.S. Department of Defense...........................     8
    Jordan, Joe, Associate Administrator, Government Contracting and
      Business Development, U.S. Small Business Administration.......     9
    Robinson-Berry, Joan, Co-Chair, TRIAD............................     9
    Ferrera, David, Vice President, Government Relations, U.S.
      Hispanic Chamber of Commerce...................................     9
    Zepeda, Sam, Vistas Construction.................................     9

                          Appendix Material Submitted

    Brubeck, Ben
        Testiminy....................................................     8
        Prepared statement...........................................    41
    Chvotkin, Alan
        Testiminy....................................................     8
    Dorfman, Margot
        Testiminy....................................................     8
    Drabkin, Dave
        Testiminy....................................................     8
    Ferrera, David
        Testimony....................................................     9
    Fingarson, Ashley
        Testimony....................................................     8
    Hesser, Bob
        Testiminy....................................................     8
        Prepared statement...........................................    90
    Hontz, Karen
        Testimony....................................................     8
    Jordan, Joe
        Testimony....................................................     9
    Landrieu, Hon. Mary L.
        Opening statement............................................     1
        Prepared statement...........................................     3
    Newlan, Ron
        Testimony....................................................     8
    Oliver, Linda
        Testimony....................................................     8
    Reece, Adam,
        Testimony....................................................     8
    Robinson-Berry, Joan
        Testimony....................................................     9
    Snowe, Hon. Olympia J.
        Prepared statement...........................................    38
    Sullivan, Ann
        Testiminy....................................................     8
    Walker, Matt
        Testimony....................................................     8
    Willis, Greg
        Testimony....................................................     8
    Zepeda, Sam
        Testimony....................................................     9

                      SMALL BUSINESS CONTRACTING: ENSURING
                  OPPORTUNITIES FOR AMERICA'S SMALL BUSINESSES

                                  ----------

                          TUESDAY, SEPTEMBER 22, 2009

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:12 a.m., in
    room SR-485, Russell Senate Office Building, Hon. Mary L.
    Landrieu (chair of the committee) presiding.
        Present: Senators Landrieu and Risch.
        Staff present: Greg Willis, Don Cravins, Karen Hontz, Adam
    Reece, and Matt Walker.

     OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S.
                         SENATOR FROM LOUISIANA

        Chair Landrieu. Good morning, everyone. Thank you so much
    for joining us for our Small Business Committee Roundtable, the
    focus of which is contracting with the Federal Government.
    Please forgive us for being a few minutes later and for the
    awkward set-up. This is not our normal room, but we are
    grateful for whoever allowed us to use it this morning. It is
    just a little different than what our staff is used to, but we
    are grateful for the space since ours is under renovation.
        I thank you for joining me for this roundtable, and we look
    forward to hearing from all of you today who are experts on
    this subject so that we can improve and expand small business
    opportunities for contracting with the Federal Government,
    which is the largest purchaser of services, products, and
    machinery in the world. We want small businesses represented
    here today to have an opportunity, a maximum opportunity, to
    participate in the purchasing power of the Federal Government
    for many reasons, but one of them is that the small businesses
    in America are often the drivers of innovation. They are an
    absolutely essential component of a vibrant economy, creating
    high-paying jobs, new prospects for women and minorities,
    innovation, technology, and cutting-edge products. These are,
    in fact, challenging times. We have all been struggling through
    them, and more than 80 percent of the jobs lost since November
    coming from small and medium-sized businesses.
        This Committee has been focused on many important issues
    the last couple of months since I have come into the
    chairmanship, working closely with my very able Ranking Member,
    Senator Snowe. We have focused on health care issues, we have
    focused on access to capital. Today we want to focus on
    contracting with the Federal Government.
        Let me just make a few brief opening remarks, and then I am
    going to ask everyone to introduce themselves and then turn
    some of the questions over to the staff, both Greg Willis and
    Don Cravins and the minority staff, for questioning.
        In these particular areas that I mentioned, Government can
    be very helpful. Today we want to explore how the Federal
    Government has or has not been hopeful. We want to explore
    increased contracting opportunities, and we want to review the
    goals that are set by the Federal Government. Generally, at 23
    percent of expenditures, those goals have not been met in the
    last year; however, the volume of contracting work has
    increased, which is good, but the percentages have slipped. We
    are going to review those in just a minute.
        President Obama has pledged to improve these numbers. It is
    a goal that his Administration supports, and one that we
    support as well.
        Let me go over just a few things that are probably obvious
    to those here, but small businesses have trouble gaining access
    to contracts because, unfortunately, there is a maze of
    complicated laws and regulations that make it difficult. Some
    of the barriers include contract bundling, standard sizes with
    loopholes for big businesses, lack of protection for
    subcontractors, difficult-to-navigate General Services
    Administration schedules at times.
        When Federal agencies bundle contracts, it limits a small
    business' ability to bid, reduces competition, and,
    unfortunately, leaves the taxpayer to pick up the tab for
    increased costs over time. We will review some of the other
    barriers as we move forward today.
        Let me also mention I have heard from a number of small
    businesses that they have waited months to get paid after
    completing their work. That can be very difficult for
    businesses that are on tight credit lines and budget
    restraints. So please be free to make some of those suggestions
    as well.
        And finally, as we prepare to reauthorize the contracting
    provisions of the Small Business Act and create legislation to
    strengthen contracting opportunities, I look forward to
    learning how to fix these problems and moving forward.
        I also would really prompt your feedback, ladies and
    gentlemen, on the stimulus package, the extra spending that has
    been given to almost every agency at the Federal level and to
    the states as well. Is your business or those that you
    represent experiencing an uptick in contracting because of
    that? Or is that money available or that expenditure available?
    I would like to learn more about that today.
        Basically that is our charge for this morning. I would like
    to ask each of you, starting with Ann, our representative from
    GSA, to start by introducing yourself. We will go around the
    room, and then we will start with some questions and comments
    to lead this discussion. So, please.
        [The prepared statement of Chair Landrieu follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Drabkin. Thank you, Senator. I am Dave Drabkin. I am
    the senior procurement executive, the Deputy Chief Acquisition
    Officer and the Deputy Associate Administrator for Acquisition
    Policy at the General Services Administration.
        Chair Landrieu. Thank you, Dave, and your nameplate is
    coming. I am sorry we did not have it ready for you.
        Mr. Drabkin. That is okay. I prefer to remain anonymous.
        [Laughter.]
        Chair Landrieu. That is okay. You can run, but you cannot
    hide. So we are going to get you a nameplate.
        Go ahead, Ann.
        Ms. Sullivan. I am Ann Sullivan. I represent Women
    Impacting Public Policy in Washington, as well as many other
    small businesses.
        Chair Landrieu. Thank you.
        Mr. Hesser.
        Mr. Hesser. Bob Hesser. I am a small business owner, but I
    am representing the vet force.
        Chair Landrieu. Wonderful. Push the button.
        Ms. Dorfman. Margot Dorfman, CEO with the U.S. Women's
    Chamber of Commerce.
        Chair Landrieu. Thank you, Margot.
        Mr. Chvotkin. Alan Chvotkin, Professional Services Council,
    a trade association representing firms that provide
    professional and technical services to the Federal Government.
        Mr. Brubeck. Ben Brubeck, Director of Labor and State
    Affairs with Associated Builders and Contractors. We are a
    construction trade association.
        Ms. Fingarson. Ashley Fingarson, Director of Legislative
    Affairs, Associated Builders and Contractors.
        Mr. Willis. Greg Willis, Procurement Counsel for the Senate
    Committee on Small Business and Entrepreneurship.
        Ms. Hontz. Karen Hontz. I do contracting for Senator Snowe
    on the Small Business Committee.
        Mr. Walker. I am Matt Walker. I am the Deputy Republican
    Staff Director for the Small Business Committee, and I just
    want to thank the Chair and also explain that Senator Snowe
    would have liked to have been here today. Unfortunately, this
    conflicts with the Finance Committee's markup of the health
    care bill, so, of course, she had to be there for that. She
    wanted to send her regrets for not being able to make it and
    thank everyone for participating today.
        Chair Landrieu. And considering there are over 500
    amendments pending, I think she would prefer to be there to
    wade through that challenge.
        [Laughter.]
        Mr. Reece. Adam Reece. I am contracting staff for Senator
    Snowe.
        Mr. Newlan. Ron Newlan, HUBZone Council, the only national
    trade association focused on the HUBZone program.
        Ms. Oliver. I am Linda Oliver. I am the Acting Director for
    the Office of Small Business Programs for the Department of
    Defense.
        Mr. Jordan. I am Joe Jordan. I am the Associate
    Administrator for Government Contracting and Business
    Development at the Small Business Administration.
        Ms. Robinson-Berry. I am Joan Robinson-Berry. I am the Co-
    Chair of TRIAD. That is an organization, a sponsoring
    organization of the aerospace industry that includes primes and
    small businesses.
        Mr. Ferrera. David Ferrera, Vice President for----
        Chair Landrieu. You need to turn your microphone on and
    speak into the microphone if you would.
        Mr. Ferrera. David Ferrera, Vice President for Government
    Relations at the U.S. Hispanic Chamber of Commerce.
        Mr. Zepeda. Good morning. I am Sam Zepeda, Owner of Vistas
    Construction, a small minority-owned business.
        Chair Landrieu. Thank you all so much, and let me also
    recognize back here against the wall Don Cravins, who is the
    staff Director of the Small Business Committee. We are happy to
    have Don's leadership. Thank you, Don, for helping us organize
    this.
        Let me open it up with some initial comments and questions.
    The way we have normally done this, Greg, is people put their
    cards up like this, if you want to answer a question or
    comment, and I will call on you.
        Let me just begin with the questions here. We want this to
    be very informal, and we have got some follow-up questions from
    the staff. In your opinions that any of you that would like to
    offer, are any of you experiencing in your realm of
    responsibility the stimulus funding or the impacts coming for
    stimulus funding, either from agencies that have more
    opportunities to contract with small businesses particularly,
    for companies that you all are representing that are attempting
    to bid on some of these contracts, whether it is being
    successful or not? Are you feeling any immediate impacts that
    you would like to share?
        Robert, we will start with you. And, please, you have got
    to turn your microphone on and speak closely into it. I know it
    is a little awkward, and I am sorry.
        Mr. Hesser. No problem.
        Chair Landrieu. Again, we are in a different room.
        Mr. Hesser. Senator, I sent you a letter about 2 weeks ago
    on this subject, maybe 3 weeks ago, and the ARRA--I guess the
    title is--it is the stimulus bill. Throughout the stimulus
    bill, 457 pages, you can find ``8(a)'' once and you can find
    ``small business'' once. They are both in the same sentence,
    and they are in one little sub-paragraph, and it is only under
    the broadband. So the only thing that the Secretary of Commerce
    is responsible for considering--they must only consider it;
    they do not have to do anything, just if they consider it.
    There is no small business in the stimulus program, no
    direction, nothing about anybody. Just one thing, and one thing
    on 8(a).
        We recently went through the broadband first part of
    grants, and one of the problems with a small business, if you
    have any kind of complaint or you think you were shortchanged
    or whatever it might be, there is no way you can do anything
    about it because the grants are not under the procurement, they
    are not under FAR.
        However, the 2300 bill and many other bills have always put
    in there grants, but the actual legislation is not there to
    require the Government to give an opportunity when there is a
    complaint or something might be going wrong. And we did have
    some problems with this one, the broadband. But the point is no
    small business in 457 pages for $29-some billion.
        Chair Landrieu. Okay. Mr. Brubeck.
        Mr. Brubeck. Yes, I work for ABC, Associated Builders and
    Contractors. We are a construction trade association. We have a
    variety of Federal contractors that received contracts from the
    stimulus bill.
        I will reiterate that they are large businesses. We have
    heard from many small businesses who have not had any
    opportunity to participate on the construction projects.
        We are finding that a lot of the projects under the
    stimulus bill are being bid very competitively. The private
    market right now for construction is very weak. There has been
    quite a bit of job loss. About a million jobs in the last 12
    months have been lost to the industry.
        The stimulus was a welcome investment of cash into public
    infrastructure, but it has been very competitive, and there is
    certainly not enough work to go around.
        Chair Landrieu. Your organization represents large and
    small businesses?
        Mr. Brubeck. Large and small, subcontractors, general
    contractors, materials suppliers, and the construction
    industry.
        Chair Landrieu. Okay. Ms. Dorfman.
        Ms. Dorfman. Thank you, and thank you very much for the
    invitation to be here today. We represent women-owned firms. We
    have over 500,000 members, but we represent all small
    businesses.
        We have heard from our constituents that they are not able
    to access the Recovery Act contracts, just as Mr. Brubeck
    mentioned. Additionally, we noted that there was a report that
    was floated out--a press release, actually--last month when
    Congress was out, from the SBA talking about isn't it wonderful
    $93 billion in contracting dollars went to small businesses for
    year ending 2008. When we took a deeper look, what we found was
    women-owned firms lost $12 billion of opportunities, and small
    businesses overall lost $30 billion.
        I suspect that what we will see with year ending 2009 is
    even higher because of the increase of dollar coming out from
    the Federal spending.
        Chair Landrieu. Margot, what you are saying--and I think
    this is very important, Ms. Dorfman--is that while the overall
    number went up from $83 billion, I think, to $93 billion, the
    percentages went down. So you are calculating that loss of
    opportunity between what would have been had we hit those
    higher percentages, the numbers that you just gave us?
        Ms. Dorfman. The Federal spending actually has increased
    overall, but they did not meet their goals. So that is part of
    it.
        Chair Landrieu. Correct, so it is a lost opportunity
    between----
        Ms. Dorfman. So there are lost opportunities----
        Chair Landrieu [continuing]. What the percentage would have
    been?
        Ms. Dorfman. Exactly. Additionally, some of the
    opportunities that the SBA has taken off the table for small
    businesses--for instance, contracting dollars overseas--that
    type of spending is not included in the dollars that should be
    included.
        Chair Landrieu. Okay. Does anyone--go ahead, yes.
        Mr. Drabkin. Senator, first of all, I would like to make
    sure that the Senator is aware that GSA is the only agency,
    according to the SBA, who met and exceeded all of its goals
    last year. We are also one of the agencies that has one of the
    larger construction programs under the stimulus package, and we
    are working very well so far at achieving our goals in fiscal
    year 2009 with the stimulus package.
        The only area that we experienced where small business was
    unable to play was in the $300-plus million for new cars,
    because new cars are purchased from large companies, and small
    businesses could not play there.
        I would like to observe also that some of the larger
    projects in the construction arena are difficult to reach small
    businesses through because of other issues associated with, for
    example, their ability to get a Miller Act bond at the dollar
    level required to do the work. But we are making up for those
    where those instances occur by increasing subcontracting goals
    for those prime contractors and ensuring that those prime
    contractors meet those subcontracting goals under their prime
    contracts.
        Chair Landrieu. Thank you very much for offering that. I
    would only suggest--and I do not have the numbers; maybe some
    of the staff do--that the stimulus funding that went for the
    Cash for Clunkers program, which is part of an extension of the
    stimulus, was very helpful to the dealers, and many of those
    dealers are small businesses. It did not just go to the large
    companies, but the dealers on the ground, and I think we could
    agree there are many small businesses that were dealers. I
    heard very positive feedback, at least from the dealers in
    Louisiana. I am not sure what other people have heard, but it
    was extremely popular in our state.
        Whether it was effective to meet environmental goals, I am
    not sure, but it was an effective stimulus.
        Mr. Drabkin. Yes, ma'am. I am talking about a different
    piece of money. GSA was given a little over $300 million
    specifically to purchase new cars for the Federal fleet.
        Chair Landrieu. Oh, I am sorry. Okay.
        Mr. Drabkin. Those cars have been purchased. They were
    obviously purchased from a large business. In fact, you will
    find on Federal recovery.gov our list of those cars. I believe
    there are 16,000 entries which track each individual car so
    that we can demonstrate that the car purchased was actually
    more efficient than the car it replaced.
        But my only purpose of reporting that to you is that the
    only area in GSA's funding where we could not reach directly to
    small businesses was for the cars, because there are no small
    businesses who manufacture cars, and we buy those cars directly
    from manufacturers.
        Chair Landrieu. Thank you very much for meeting your goals
    and for the efforts that GSA is making, and we will come back
    to that.
        Does anybody else want to comment about any stimulus issues
    before we move on to the next set of issues? Go ahead, Mr.
    Zepeda.
        Mr. Zepeda. Yes, well, we believe that the recovery money
    is very welcome into the industry, especially in today's
    economic environment.
        I do believe that there are a lot of hurdles through the
    contracting activity that they are having to overcome, such as
    the spending with small businesses. They are bundling more of
    the contracts. It kind of restricts the access to capital and
    bonding, restricts us rather than kind of helps us in many
    ways. But if they were to focus more with the SBA in
    conjunction of obtaining bonding capacity, I think it would
    kind of help be able to level out the playing field a little
    bit for us and kind of work hand in hand together to get access
    to those opportunities.
        Chair Landrieu. Thank you.
        Mr. Ferrera, and then I will call on you, Mr. Jordan.
        Mr. Ferrera. With the membership of the Hispanic business
    community representing both large and small, the feedback we
    have gotten from the ground is relatively positive, businesses
    saying they are engaging, that they are putting in requests for
    proposals and responding to them.
        At the same time, though, one of the primary needs of many
    of the chambers we represent is to try to track the data, how
    are the States actually contracting these dollars since a lot
    of the dollars are being handed out at the local level and the
    State level. How is the data being tracked? And a lot of the
    Recovery.gov data is very macro, a 30,000-foot view. And one of
    the items that we would love to see is for that taxpayer
    ability to review the small business components of these
    contracting activities.
        In some cases, like the Department of Transportation, they
    have actually threatened, for instance, the State of California
    to withhold portions of their transportation funds unless they
    revived some of their small business contracting 8(a) programs.
    But we do not know if that is the case for a lot of different
    States, and we do not know how consistent those efforts are
    being done throughout the Federal Government.
        Chair Landrieu. Okay. Mr. Jordan, and then Mr. Newlan.
        Mr. Jordan. Thank you. First, I just wanted to briefly
    touch upon some of the data that I do have, which is regarding
    the Federal contract dollars. There has been about $13 billion
    in Federal Recovery and Reinvestment Act dollars, contracts
    that have gone out thus far, and about $3 billion of that has
    gone to small businesses. So when you talk about the goals that
    several people have mentioned, that is running at 23.5 percent,
    so above the 23-percent goal.
        In terms of the subprograms or the socioeconomic groups,
    the HUBZone program, as Mr. Newlan knows, is currently running
    at 6.1 percent of stimulus contracts, so $811 million in
    HUBZone contracts have gone out through the Recovery Act; $1.3
    billion in contracts have gone to small disadvantaged
    businesses, so that is 10.6 percent, more than double their 5-
    percent statutory goal. Service-disabled veterans are at $490
    million, so 3.7 percent. And as Ms. Dorfman and I are aware,
    the women-owned small businesses, because there is not yet--and
    I believe we will touch on this later, not yet a set-aside
    program that contracting officers can utilize for women-owned
    small businesses, they are the one group that is currently
    below their statutory 5-percent goal, but they are at 3.6
    percent with $481 million of Recovery Act contracts.
        So as Mr. Ferrera pointed out, the State portion is still
    something that we are trying to get the numbers around, but at
    the Federal level I am cautiously optimistic that we are in the
    right place in terms of driving these contracts to small
    businesses. And I just want to briefly touch upon, well, what
    are we doing proactively to ensure that that continues
    throughout the duration of the Recovery Act, and that is where
    I point to the President and Vice President had talked about
    the Stakeholder Outreach Initiative. This is an effort to
    really drive contracts to small businesses and businesses owned
    by women, minorities, veterans, people living in impoverished
    rural or urban areas, to ensure that we both help agencies
    identify qualified small businesses quickly, given the rapid
    period over which these funds are being disbursed, and help
    build capacity and awareness in the small business community.
        Some of the examples of things incorporated into the
    Stakeholder Outreach Initiative are all Federal agencies are
    tasked with participating and hosting of outreach events. In
    aggregate, that will be over 200 in the 90 days since we began
    this at the beginning of August.
        The SBA has recently posted on sba.gov a ``How to win
    Recovery Act Federal contracts'' training. It is a 30-minute,
    self-directed, totally free training that we are now pushing
    out to small businesses to make sure that they are aware of
    this resource and can quickly get up to speed.
        As Mr. Brubeck said, with some challenges in the commercial
    buying base in many economic sectors, the Government can often
    step in, since it is the largest procurer of goods and services
    in the world, and we want to make sure that small businesses
    who may not have sold to the Government before are capable.
        So I just wanted to point out a few of those things and
    make sure that since we have this opportunity with all these
    representatives of great groups, so you can take some of this
    information back. And, conversely, I am always welcome to
    discuss more offline.
        Chair Landrieu. Thank you, Mr. Jordan, and thank you for
    your emphasis and your effort, and maybe some of the panelists
    will have questions directly to you, which would be appropriate
    as we move forward.
        Mr. Newlan, let me get you.
        Mr. Newlan. Thank you, Madam Chair.
        Joe just reported the quantifiable data, more than 6
    percent. I have inferential data. We ran our national
    conference a week and a half ago here in D.C. where we bring in
    HUBZone firms from all over the Nation, and we had a couple of
    dozen report to us: ``We would love to come, but we are too
    busy staying home writing orders, bidding jobs and writing
    orders,'' including some from Louisiana. And that is the good
    news.
        Chair Landrieu. Good. A little extra to Louisiana.
        [Laughter.]
        And Maine. That is the idea.
        Mr. Newlan. Sort of the bad news is about one-third of the
    land mass of Louisiana is today qualified a HUBZone. That has
    got good and bad aspects to it since any firm in those would
    probably qualify.
        But it looks like HUBZone first at least are out there
    getting more than their 3-percent share and doing well, writing
    orders, bidding jobs.
        Chair Landrieu. That is good to know.
        Go ahead, Ann. Ann Sullivan.
        Ms. Sullivan. WIPP launched a real effort to try to educate
    all of our members on how to avail themselves of stimulus
    money, and, it is a very detailed briefing. And what we have
    found is that mostly if you have not been a contractor, it is
    really hard to find money. But if you are a successful
    contractor already, a number of our members are having great
    success because they are already in the system. And since the
    Government is using existing contracts to put that stimulus
    money through, they are having a great deal of success.
        So it really varies, I think, by experience of the
    contractor and by how the money is flowing.
        Chair Landrieu. Let me ask this to press down a little bit.
    I was reviewing this with my staff in terms of the reporting
    mechanisms for the numbers and percentages of contracts that go
    to small businesses.
        I am hearing some feedback from small businesses in my
    state. At a reception for the Jefferson Parish Chamber
    recently, it came up with some of my small businesses that
    said, ``Senator, we are part of larger contracts. Our larger
    contractors contact us to include us as part of their bid. The
    problem is we never really see any of the funding through the
    contract, but we think that our participation in the bidding of
    that contract is getting counted towards goals achieved.''
        Is that your experience? If it is, could you comment about
    it? Could you give some feedback? Ms. Dorfman?
        Ms. Dorfman. That is a very common complaint with our
    members. They are asked to provide information like they are
    going to be included in the contract award. They spend a lot of
    money doing that, preparing for the bid, only to find
    afterwards they never hear from the contractor again. And I
    agree. I think the subcontracting plan should also include
    enforcement of using the small businesses, not just saying you
    have to get information included in the plan.
        Chair Landrieu. Mr. Ferrera.
        Mr. Ferrera. Our perspective is that a large number of
    Federal contractors do not generally comply with P.L. 95-507,
    which requires them to include small and minority businesses in
    their subcontracting programs. And, generally, when a large
    contractor puts together its bid, gets a lot of bids from small
    and minority-owned businesses, which they need in order to be
    able to compete it, but then generally there is no mechanism in
    place that requires them to use these SDBs once they actually
    receive the award, and they end up recompeting them afterwards.
    So it becomes almost a bit of a bait-and-switch sometimes, and
    there is nothing to stop them from then creating a subdivision
    within their own private contracting company to carry out what
    those SDBs or small or minority companies would have done.
        Chair Landrieu. Mr. Zepeda.
        Mr. Zepeda. Yes, from my own experiences, the process is a
    best-value process that requires a percentage of small and
    minority goals to be included in the proposal when it is
    submitted. And it looks good when the proposal is evaluated,
    but there is no mechanism in place, such as liquidated damages,
    that after award it could be followed or tracked that, in fact,
    they are using those goals that they submitted at the time of
    bid. And, unfortunately, you know, submitting a proposal does
    take resources from our company where we could be allocating
    them elsewhere, and it becomes a problem for us.
        Chair Landrieu. Thank you. I would like to hear from David
    at GSA about this, and then I am going to ask the SBA to
    comment about this particular complaint and what might we do
    about it.
        Mr. Drabkin. Senator, you may be aware that I guess now a
    little over 2 years ago, we put online a new database called
    ``ESRS.'' ESRS is a database which requires prime contractors
    to report their actual subcontracting performance.
        In the past, the subcontracting performance was reported in
    paper to the various contracting officers. You probably know we
    have about 2,600, give or take 20 or 30, contracting offices
    spread around the world. We do about 11 million contracts each
    year, which means that is 11 million separate contract files
    into which these reports were being put. And by now, going
    online and having prime contractors report their actual
    performance under their subcontracting plans, we are beginning
    to gather data that we can use to determine whether or not
    prime contractors are living up to their commitments in the
    contract to achieve a certain level of subcontracting with
    small businesses.
        I would observe that the Federal Government avoids--we have
    historically avoided--since before the passage of the Armed
    Services Procurement Act of 1947, we have avoided becoming
    involved in the relationship between prime contractors and
    subcontracts. That is referred to as ``privity.'' The
    Government does not want to be in a direct relationship with a
    subcontractor. So who a prime contractor negotiates with up
    front to submit their bid to the Government is less important
    to us as the purchaser of goods or services than their actual
    performance after they have received subcontracting--after they
    have received their prime contract award.
        In fact, one might argue that the whole process of having
    prime contractors what we call ``sub up'' before they submit a
    proposal actually gives the Government a sub-optimal proposal,
    and that it might be better if we did not allow them to sub up
    before they submit a proposal so that after they have won the
    contract, they can go out and put together the best
    subcontracting team instead of a subcontracting team that might
    have the best in one category, but not the best in another. It
    would serve both the taxpayer and the small businesses better.
        But having said all of those things, I believe you will
    find that as ESRS matures--and we are working on its maturation
    right now; you will hear from Mr. Jordan on what they are doing
    at SBA--we should have better and better, more discrete data on
    what is actually being done under prime contracts, and we will
    be able to better and better enforce prime contractors'
    responsibilities to meet their subcontracting goals because
    that data will be transparent and readily available not only to
    the agency's senior procurement executives responsible for
    managing that, but also to your staff and other people in the
    oversight community.
        Chair Landrieu. Thank you for those comments, and I can
    appreciate it. I might want to just respectfully argue that it
    might be in the Federal Government's interest not to get
    between contractors, large and small; but most certainly, if
    the Federal Government is going to require, if we are going to
    require, that a certain amount of our goods and services go to
    small business, then we have a vested interest in finding out
    if that requirement is being met.
        So how we do that, whether you say we are getting between
    contractors or not, or some sort of reporting mechanism,
    because otherwise it becomes--I do not know--work with no
    meaning. If you are requiring a certain amount of money that we
    are spending to go out to small businesses, but then you accept
    on face value the contracts from larger contractors saying, oh,
    yes, 20 percent of our work is going to small businesses, but
    then you never check.
        I think that is what we are trying to get to, but I
    appreciate your comments there.
        Mr. Drabkin. Yes, ma'am. If you do not mind, just to make
    sure we are clear, ESRS allows us to check. When I said we do
    not get between the prime contractors and their subcontractors,
    that is to say, whatever relationships they have and how they
    establish those relationships are between those two
    individuals. But the prime owes us a duty of meeting those
    subcontracting goals. ESRS is designed to help us make sure
    that they do what they promised to do, which is clearly our
    responsibility to execute.
        Chair Landrieu. Thank you for clarifying that.
        Mr. Chvotkin.
        Mr. Chvotkin. Thank you, Senator. Mr. Drabkin is a good
    friend, and he is right on the philosophy, but the fact is that
    the Government is heavily involved in the relationship. There
    are many of the rules you talked about earlier, but the rules
    that apply--and the Government evaluates contractors'
    purchasing system methodologies, they question some of the
    make-buy decisions that companies make. They look for the
    extent of competition in the subcontractor arena, and so there
    is a lot of activities.
        The reporting, as you said, contractors have been reporting
    on performance, and those are monitored by both the small
    business offices as well as contracting officers. More can be
    done. ESRS is one way because it provides an electronic method
    for matching up prime contracts and subcontract awards, and
    more can be done in the enforcement side. We agree with that.
        Your first question was: Is the Government reporting on
    taking credit for work that is not being done? And I do not
    think that is the case because they should be reporting on
    awards made and not simply that a company has proposed a set of
    small businesses. So if they are reporting simply on proposals,
    you ought to double-check with the agencies, but I think they
    are only reporting on actual awards made.
        Chair Landrieu. Let us hear from DOD on that and also from
    Small Business, and then we will get back to others. Ms.
    Oliver.
        Ms. Oliver. I am not sure which way to scoot.
        [Laughter.]
        Mr. Newlan. Come towards HUBZone.
        Ms. Oliver. At risk of getting too technical about all
    this, I am afraid we are having some talking past each other,
    and I do not want that to happen, especially with this group,
    most of whom I know, who have such great influence over so many
    different small businesses.
        There is a great deal of confusion about what is in a small
    business plan and what is in a contract. If it is in a
    contract, it is probably going to get enforced. If it is not in
    the contract but, rather, in the small business plan--this has
    been my experience--the chances of enforcement seriously
    diminish, and part of the reason is small business
    performance--it did actually from my standpoint--whatever the
    small business requirements are in the contract, that is the
    best place for them to be. And that is in part because when the
    contracting--whoever the contracting officer is that receives--
    rather, it is the procuring contracting officer or the
    administrating contracting officer. Small business should not
    be off to the side. It should be just part of the regular
    review and enforcement. And if it is in the contract, that is
    the natural way for it to go.
        There was a mention earlier about enforcement, liquidated
    damages. We might as well just be realistic about this. In
    order to get liquidated damages, which I do not know if it has
    ever happened. David, has anybody ever gotten liquidated
    damages?
        Mr. Drabkin. Linda, actually there are quite a few
    contracts--not a majority, but particularly large contracts--
    where failure to meet the subcontracting goals has resulted in
    liquidated damages. And, in fact, when I was in the Department
    of Defense, we had a number of those types of contracts. It is
    not a preferred method because once you get into liquidated
    damages, your ability to work with a prime contractor becomes
    adversarial, and they begin building their claims files, which
    is normal in any kind of relationship.
        What we prefer is incentives that are managed well, and,
    unfortunately, Senator, as you know, you have heard about how
    incentives have not been managed well. But when I was on the
    Pentagon renovation, we managed our incentives on small
    business participation every month, and they either performed
    and they got an incentive, or they did not perform and we took
    that incentive away.
        When managed well, it works great, but when you manage 11
    million contracts across the Government, with only 27,000,
    28,000 people to manage those contracts, your ability to manage
    incentives on each and every contract on a quarterly or even
    semi-annual basis, it is very difficult
        Ms. Oliver. I agree with everything----
        Chair Landrieu. Go ahead and finish, and then I am going to
    get to Ms. Berry. Go ahead.
        Ms. Oliver. I agree with everything that you have said,
    David, except the difficulty of proving liquidated damages.
    You----
        Chair Landrieu. Can you all hear in the back? Okay. Could
    you speak--I am sorry. You just have to lean up to the
    microphone.
        Ms. Oliver. I will try to yell.
        What I want us to stay focused on is what works the best,
    just as a practical matter, and that is having the part of the
    contract--David is very knowledgeable. I just never--although I
    spent most of my life worrying about Government contracts, I
    have never seen liquidated damages work. It is too hard to
    prove, and it becomes--there are a lot of reasons. But
    liquidated damages are a product of having something be in the
    subcontracting plan, not in the contract. If you do not
    perform--if it is in the contract and you do not perform----
        Chair Landrieu. Correct. Being in the contract, there is an
    enforcement mechanism that is easily understood.
        Ms. Oliver. Exactly.
        Chair Landrieu. So that is very good, and thank you for
    clarifying that.
        Ms. Robinson-Berry.
        Ms. Robinson-Berry. Yes, I represent a lot of--can you
    hear?
        Chair Landrieu. Yours is not--okay, try it now.
        Ms. Robinson-Berry. I am representing a lot of the primes,
    and I think there is a lack of communication. Folks assume that
    after you win a contract the construct of that contract is the
    same. You come in with a great RFP and you win that contract,
    and by the time it is awarded, it is a totally different plan.
    And we do not always effectively communicate that change in
    that contracting scope. And so some small businesses believe
    that they were bamboozled. But, again, it is phased over a
    longer period or they slow it down or they change the content.
    So I think that that is what we can work on to make sure that
    we communicate effectively to all the small businesses of the
    actual award.
        The second point is that we also--our members do get
    evaluated every year. There is very, very rigorous audits--we
    call them 640 audits--every year on our performance, and we get
    a report card. And if that report card is not good, it affects
    our performance. And when you are going after new activities,
    they ask for your past performance. And when you are competing,
    when you look at the past performance and all of the technical
    requirements are there, I know that a lot of our contracting
    officers look at that past performance and then we are
    impacted.
        And, again, many of our contracts, also our small business
    goals are tied to the contract, and if we do not perform in all
    areas, it affects our award fee. So I think that a lot of that
    information on our report card and the actual winner of the
    contracts is not always communicated clearly. So I just wanted
    to go on record that that does, in fact, happen.
        Chair Landrieu. Mr. Hesser has had his banner up for a
    while, and then Mr. Newlan, and then we are going to move on to
    another issue or two.
        Mr. Hesser. I want to make two comments. My first one was
    with Mr. Jordan. The vet forces found many--questioned several
    of the statistics that come out, and we seem to be right most
    of the time, because how was all these funds that you said for
    8(a)s, for SDBs, for women-owned, how was each one of those
    awarded? And that is a big question, because when--the very
    first time in 1998 or 1999 through 2001 to 2002, service-
    disabled veterans--what was being counted was they were finding
    an 8(a) who was also a service-disabled veteran. They were
    awarding it as an 8(a) contract. But then they would count
    service-disabled veterans and 8(a)s. A fact. We have testified
    about four or five times in front of the House or Senate about
    this subject.
        Now what they do is they have the same ability, but if it
    is easier to give an 8(a) contract, which it always is, they
    will give an 8(a) contract, and if you are also a service-
    disabled veteran, you have got it made because they really want
    you. And they will give you two counts.
        Some people say, well, they do not count it twice. Well,
    they do, in fact, count it twice in a roundabout way. Sometimes
    they do only report it once. For instance, if the service-
    disabled veteran goal is not doing very well, they will count
    it over on this side. But what is important that the vet force
    is very, very serious about, we do not want a contract awarded
    as a service-disabled veteran--I am sorry, as an 8(a). We want
    it as a service-disabled veteran because the law protects the
    8(a), the law protects service-disabled vet, the law protects
    HUBZone, et cetera. That is what it should be and only be that.
    That is number one.
        Number two, accounts have not been brought up here about
    the subcontracting contracting is--frequently, an 8(a) will get
    a contract, and they will share that with a large business. Or
    they will do it all by themselves. But as time goes by, the
    original seven people that they had in 3 years is about 21
    people. So the contracting officer follows the ``once an 8(a),
    always an 8(a)'' rule. But the point in the law, as I
    understand it--and we have had this kind of researched out. The
    point in time when the award was made, that is what the SBA
    Small Business Act protected. They protected the competition
    for them to win seven, only seven. Now, in 3 years, when it
    grows up to 21, they should only award the seven as an 8(a) and
    break the other one, the other 14 back out. Or take the whole
    contract and put it out either women-owned, but somebody
    different other than 8(a), because it keeps hanging in there
    all the time. I do not know if the HUBZone runs into that. I
    know I do. It is 8(a), 8(a), 8(a). I am not against the
    program. I love it. I have run four 8(a) companies. So I am not
    against it. I am only saying the way it is being done.
        Chair Landrieu. Okay. Thank you.
        Mr. Newlan. And then, Mr. Jordan, you may want to comment.
        Mr. Newlan. Madam Chair, as the Nation prepares to attempt
    to prevent the H1N1 flu epidemic this fall, we have an epidemic
    right now in the topic you asked the question about. Small
    businesses are getting the raw end of the deal by large
    businesses every day nationwide, and have for 30 years, and I
    speak with firsthand experience running small businesses and
    large businesses.
        If this Committee wanted to step in, this Committee would
    be recognized for the work that it did in that area. It is a
    tremendously important area to improving small business
    contracting.
        One quick example. As I understand it, the Federal
    Government contracting officer cannot make an award to a prime
    without putting some money in the contract. You cannot make an
    empty, hollow award. There is usually at least $5,000 or
    $50,000 put on this billion-dollar contract because it
    consummates the contract. There is a transference of cash. But
    the small businesses help the big business win. We do a lot of
    work, we do a lot of writing, and all we get is a promise that
    downstream maybe.
        Perhaps the same concept could be applied where the prime
    contract cannot mention in their proposal anything that they
    are not prepared to pay for and put up real money to a small
    business to help write the winning proposal.
        That is what hurts the most. These small businesses spend
    $10,000, $20,000, $50,000 of their own time and energy to help
    a big business win. Big business wins, then they never talk.
    But if we got paid that $50,000, it would not be quite as big a
    complaint because we got paid for at least the work we did.
        Chair Landrieu. Thank you, Mr. Newlan. I am glad someone on
    this panel is more articulate than I have managed to be. That
    was very good. Thank you very much.
        Mr. Newlan. I have got 30 years' experience.
        Chair Landrieu. Thank you, Mr. Newlan.
        Mr. Jordan.
        Mr. Jordan. I cannot promise to be articulate, but I will
    address the issue.
        [Laughter.]
        Bait and switch, especially when it comes to subcontracting
    plans, is certainly something that we are concerned about that
    is frequently raised to us typically through our procurement
    center representatives or in our district offices, and it is
    something that we work very hard to help address. So what are
    the actions that back up those words?
        I think, you know, from our standpoint there are two main
    arenas in which we can effect some change here, and one is
    working collaboratively with the agencies, so this is both
    through our effort with the various OSDBUs and other small
    business people within the agencies, as well as the contracting
    officers and our procurement center representatives who work
    with those contracting officers and sit at those buying
    activities and look over many of these contracts. And with the
    larger primes, it is making sure that you have a dialogue with
    groups such as TRIAD. Ms. Oliver and I just recently went down
    to Fort Worth, Texas, and met with the Lockheed Martin team
    working on the F-35 to talk about: Okay, as this ramps up, what
    are your small business contract plans? We are going to hold
    you to what you say, so do not make these empty promises, as
    you put it.
        That is where the second level is, almost a trust but
    verify sense, using the electronic subcontract reporting system
    to ensure that primes are following through on the allocations
    that they have signed up to do, and with the agencies
    conducting things like surveillance reviews where we can
    evaluate the performance around that.
        So we certainly hear it anecdotally as well, but we are
    also trying to put the data against it and marshal our
    resources to ensure that in a collaborative but enforceable way
    we can address this issue.
        Chair Landrieu. Thank you for taking those extra steps. I
    am going to have to step out and turn the microphone over to
    Don Cravins, the Staff Director of our Committee, and he is
    going to be joined by able assistants on both the Republican
    and Democratic side to continue the questions.
        This record will stay open for 2 weeks after today. This
    meeting will go on probably until 11:30, quarter to 12:00. So
    thank you all. It has been very informative, and I am just
    going to have to slip out for another engagement but the
    roundtable will continue. Thank you all very, very much for
    participating, and I am going to turn the questions over to Don
    now. Thank you.
        Mr. Cravins. All right. Thank you, Senator Landrieu.
        At this time I am going to ask my colleagues, my able
    colleagues from Senator Snowe's staff, to ask the next
    question.
        Ms. Hontz. Thank you, Don.
        Well, you see we have sort of skipped around. We had an
    agenda, but it is hard to stay on the agenda because all these
    issues somewhat intertwine. Before I begin the questioning, I
    want to thank all of the panelists for showing up. I think in
    the discussion already we have learned a lot, and it will be
    helpful as we progress in trying to improve small business
    contracting.
        I want to go back to the goaling for a minute. I know there
    are other things that we need to cover, such as size standards
    and some of the individual programs. But I think it is
    important because obviously Senator Snowe is very upset every
    time she sees a report coming out that says the governmentwide
    goals were not met.
        The question is--well, there are lots of questions, but the
    law states that it is maximum practical extent--practicable, I
    guess, which is a very hard word to say, but I want to discuss
    that a little bit.
        For example, congratulations, GSA, on meeting all your
    goals. Unfortunately, DOD, which is 75 percent of the buy, is
    not quite in that situation--not that they have not tried. I
    have been working with Linda for a long time on this issue, and
    I know she is passionate about it, as are her staff across the
    world, really.
        But, for example, now in the Recovery Act, if you look at
    the statistics, I believe DOD is 56 percent and GSA is 8
    percent. And, Mr. Drabkin, you said you were buying a lot of
    cars, and you buy them from large manufacturers, and that was
    what some of your money in the stimulus bill was. I think for
    DOD it was construction, and, of course, small businesses do
    well in construction.
        So I am going to throw out a couple of things here: one,
    the maximum practicable extent and some discussion on that; and
    then related to that is this Small Business Demonstration Act,
    Comp. Demonstration Act, which limits in certain fields that
    small businesses seem to exceed in that they cannot have set-
    asides. This has been on the books since 1988, and I am
    wondering if maybe it is time to look at it and see if this is
    prohibiting small businesses from getting contracts through
    set-asides.
        Anyone care to comment?
        Mr. Drabkin. Well, a couple of points. When you look at the
    stimulus money alone and you look at what GSA is required to do
    with that money, there are a couple of points that become
    obvious. And this is a difficulty, by the way, with small
    business goaling generally. You have to look to the marketplace
    to who is capable of performing the particular work that needs
    to be done.
        So, for example, if we are building a several-hundred-
    million-dollar courthouse--we build those--finding a small
    business that can get a Miller Act bond for--well, first of
    all, there are not several-hundred-million-dollar Miller Act
    bonds available. You cannot get them. And they have to be
    bonded to do the work, and so small businesses in those
    circumstances are excluded from the market that we can go to to
    purchase that service. So we have to redouble our efforts in
    other areas to try to make up for those goals.
        This is just like when I was in DOD. There is no small
    business that builds a fighter aircraft or an aircraft carrier
    or, for that matter, a tank. And so when you get to large
    construction projects--and GSA's dollars were almost $6 billion
    total--5.8, I think--5.5 for building and construction, $300
    million or so for cars. Cars cannot be bought from small
    businesses for that entire $300 million--there was nothing we
    could do to reach out to small business as part of that $300
    million.
        Of the 5.8, you are correct that our recent report shows
    that overall of the 1.3 that we have obligated in accordance
    with our goals for obligating ARRA money, only 8 percent so far
    has gone to small businesses. When you look at the projects
    that were awarded, you will observe that where they could go to
    small businesses, they did. Where they could not because of the
    size of the project or inability for the people to compete, in
    accordance with the rules that Congress has set up, they did
    not go to small businesses.
        If you look at our subcontracting goals in those projects,
    you will notice that they are very aggressive; in many cases 50
    percent of the project is laid out. And unlike other agencies,
    we in GSA--and this is not to make negative remarks about other
    agencies, but we manage aggressively the performance of the
    subcontracting goals by our prime contractors to make sure that
    they meet them.
        But this is a general observation about small business
    goaling altogether, and it is one which you did not ask, but
    you opened the door. As you look at the marketplace today, what
    you have to evaluate is where are small businesses that can
    perform in accordance with the rules that we have set for small
    business performance. And I think you will find that the market
    has changed dramatically, and so finding a small business that
    can deliver a small business-manufactured IT product is awfully
    hard to do because nobody manufactures IT products in the
    United States at all. And we buy a lot of IT.
        And you have a rule--remember, we have a rule--that says
    that small business, to be a small business for goaling
    purposes, has to either manufacture the product itself or sell
    the product of another small business. Now, I know SBA was
    considering changing that rule, but that is still the rule.
        In the services world, you have the same rule. A small
    business to be counted for goaling purposes as a small business
    has to offer the services, at least 50 percent of the services
    as a small business. And so I guess my point is what we have
    never done, as far as I know, is do a complete market analysis
    of where it is appropriate--where there are small businesses
    available to do the work, who can follow the rules that have
    been set by Congress in the statute, and then set our goals
    based upon those numbers, as opposed to trying to take a
    salami-cut approach to the total number of dollars we spent.
        And, believe me, I am committed and everybody in GSA is
    committed to small businesses. We want to do business with
    small businesses. As you know, we are the only ones, the only
    agency with a small business GWAC for 8(a)s, which we are
    recompeting. We are the only one with a service-disabled-
    veteran-owned small business GWAC. We are the only ones with a
    HUBZone small business GWAC. We are the only who created a GWAC
    just for small businesses in Alliant. We are committed to small
    businesses. But we have a difficulty achieving those goals when
    they are spread across an entire marketplace where small
    businesses cannot compete.
        Ms. Hontz. Okay. Thank you very much for those comments.
        Mr. Willis. Can I follow up really briefly?
        Ms. Hontz. Yes.
        Mr. Willis. What I am hearing is because it is difficult we
    should abrogate our responsibility to do it.
        Mr. Drabkin. That is not what you are hearing. What I am
    talking about----
        Mr. Willis. That was the long answer.
        Mr. Drabkin [continuing]. Is impossibility. That is not the
    answer I gave you, sir. The answer I gave you was----
        Mr. Willis. You are saying it is impossible for small
    business----
        Mr. Drabkin [continuing]. If there is no small business
    capable of doing the work, then having a goal in that
    particular part of the market makes no sense.
        Mr. Willis [continuing]. Abrogate the agency's goal to meet
    small business goals generally. You might have to work harder
    in another area.
        Mr. Drabkin. That is true.
        Mr. Willis. But it does not relieve you of the
    responsibility----
        Mr. Drabkin. And I did not say it did.
        Mr. Willis [continuing]. To meet the goal. I am not saying
    you did.
        Mr. Drabkin. Actually, you did say----
        Mr. Willis. But what I am saying is if you are saying that,
    that is a wrong assertion. That is exactly what I heard. But if
    you are telling me that that is not what you are saying, then I
    will accept----
        Mr. Drabkin. Not what I am saying at all.
        Mr. Willis. But----
        Mr. Drabkin. What I am saying is we need to do an
    analysis----
        Mr. Willis. Excuse me----
        Mr. Drabkin [continuing]. Of the marketplace----
        Mr. Willis. Excuse me. What I am telling you is the fact
    that it is hard does not relieve you of the responsibility to
    meet the goal.
        Mr. Drabkin. And we did. And what I am telling you, sir, is
    that----
        Mr. Willis. Let us move on.
        Mr. Drabkin [continuing]. Our obligation is----
        Mr. Willis. Let us move on from there. Karen.
        Ms. Hontz. Okay. Can I have DOD--and, you know, this
    discussion could go on forever, but we have a lot to talk
    about, so if you could keep your remarks somewhat short. Linda.
        Ms. Oliver. Well, I just almost do not know where to go
    there. There is so much material here.
        The Senator mentioned very early on and Karen just re-
    mentioned that what the law requires is maximum practicable
    opportunity. And that is what is reflected in the Federal
    Acquisition Regulation. And that is what we need to keep our
    eye on, and one way we have tried to keep our eye on that is to
    begin to do exactly what David Drabkin just said we should be
    doing, which is to do more and more analysis.
        Now, we are nowhere near the stage that you are speaking
    of, David. We are working on it all the time, and we are
    getting better. If we understand our data well enough, it seems
    to me like we should be able to--I am sure you do not want a
    big technical explanation of why I think this, but we should be
    able to say--in my office, for example, we should be able to
    say, Department of the Navy, you are buying this, there are
    other parts--and you are not buying much of it from small
    businesses. We can look at the data and see that there are--I
    do not know, Justice Department is buying from small
    businesses. You need to focus.
        That is where we need to go with the data. But it is always
    maximum practicable opportunity. I am here to tell you, the
    Army does not get by with 23 percent because of what they buy.
    And David is correct. You know, no small businesses make
    fighter planes or combat ships or all sorts of systems, and
    Greg is right, that is what David did say. That means we have
    to focus on the other thing. But David has the key, and it is
    really where we are trying to go, is to keep on the maximum
    practicable opportunity so that we find what is possible,
    because it does not help any for me to say, NAVAIR, why aren't
    you buying more jets from small business? They cannot get
    there.
        Ms. Hontz. Do you want to comment?
        Mr. Willis. I think what we are saying is do whatever you
    need to do internally to meet your goals. We are not going to
    micromanage how you manage your work flow. But the goal is what
    it is. And I think it sounds like you are stepping back from
    wanting to meet that goal because it is difficult. The goal----
        Ms. Oliver. I am sorry. It comes across that way. And,
    actually, this is not--I think you are probably right that I
    sound--because I am somebody who tends to see problems. I agree
    that it probably sounds like I am stepping back. I am not, not
    intending to. I think Margot and Bob and I have all had this
    discussion at one time or another. We are not stepping back.
        But if we do not look at the problem, if we do not try to
    analyze where the possibilities are, if we use our limited
    resources to beat up parts of the Department of Defense who
    cannot do otherwise, it is just--it does not help anything.
        Mr. Willis. I do not want to step on Karen's----
        [Laughter.]
        Ms. Hontz. That is all right. Joan.
        Ms. Robinson-Berry. Yes, I agree with both Linda and David
    that it is a real challenge from our industry--this one does
    not work. Sorry. We are all sharing one.
        Mr. Jordan. That is all right. I am good at sharing.
        Ms. Robinson-Berry. I agree with both Linda Oliver and
    David. It is a challenge, especially in a high-tech arena. But
    I agree with you. We cannot stop. We have got to find creative
    ways to expand the pool of qualified technical small
    businesses, and we really, really embrace the SBIR program that
    is designed to help small business go after high-technology
    fields. But we do not have the--the pool is not there. We have
    done the analysis, and industry and a lot of our partners have.
    But it goes to your point. We have got to find a way.
        And I believe if we try to integrate some of the very
    successful SBA and other programs like SBIR--that is, small
    innovative research projects--as well as mentor-protege, and
    align them with universities, maybe one day we can have a car
    manufacturer or have more of our small businesses in technology
    so that we can take advantage of that. But it takes a more
    integrated effort where small businesses have to understand the
    technology road map for DOD and be willing to make the
    investment in those areas. In that comes the challenge. When
    you have a personal net worth of $750,000 for small
    disadvantaged businesses, how practical is it going to be for
    them to be able to compete in the high-tech arena?
        But both sides are right. We need to do more. We never
    need--we cannot give up. But we have to be realistic about the
    real art of the possible.
        Ms. Hontz. I know others have had their signs up, but in
    the interest--and I remind you that you can always submit for
    the record up to 2 weeks. If you do not mind, I will turn it
    back over to Greg, and maybe in the course of the next
    questioning, you can get in what you wanted to say.
        Greg.
        Mr. Willis. Thanks, Karen.
        I am going to try to move a little quickly now. We are kind
    of running out of time, and we have a number of topics that we
    need to cover quickly.
        The first thing I wanted to kind of ask the participants
    here--and I especially want to hear from the small businesses
    and those who represent small businesses. There is this
    challenge with bundling, and we have spoken a little bit about
    that, but I want to talk a little bit about what we can do in
    terms of policy to make it easier for small businesses to get
    at larger procurements, i.e., teaming, joint ventures. What
    structurally prohibits small businesses from doing joint
    ventures, from teaming? And what can we do to kind of change
    that environment?
        Mr. Hesser. I can comment on the joint ventures. That
    happened a lot during the vets' GWAC and veterans trying to get
    joint ventures. 8(a)s and HUBZones--I know 8(a)s--you may
    correct me. I think HUBZone also has to have SBA's approval for
    a joint venture. I know that 8(a)s do. On service-disabled
    veterans, we do not have to have that, and that is a very good
    thing. And I was part of the discussions of getting the law
    together to do that. So that is one thing. Joint ventures
    should be between two companies. They have a responsibility.
    They report to the Government. They say, ``We can do this. Here
    is our joint venture.'' They can do it. If it is a HUBZone, it
    is 51 percent or whoever--whatever it has to be, they are the
    ones responsible for making that response to the government,
    say, ``We did that.'' They raise their hand--or whatever they
    do, they sign it and say that is it. It used to be that way
    years ago. You do not put so much requirements on that small
    business just to win the award. That is one thing I know I have
    run into. That was just joint venture.
        Mr. Willis. David.
        Mr. Ferrera. It is funny you should bring up the question
    of joint ventures since we have been approached by--many of our
    companies that we represent have been approached by folks from
    a particular State trying to get into joint ventures, but never
    mind that gets us into an entirely different issue.
        Now, one of the things that we would propose, actually,
    outside of the joint venture issue, is the expanded use of two
    plus two could be very useful towards--getting towards the
    issue of breaking--forcing procurement officers to start
    redirecting a lot of contracts that could be used by--that
    could be awarded. It is already in the law. And if there is any
    way that we can find ways to expand the enforcement and the use
    of two plus two, that would be very useful. That is about the
    one comment there.
        Also, to say that Chairwoman Velasquez and several folks in
    the other chamber, of course, you know, not to say that they
    would ever draft anything a little better, but I think a lot of
    inspiration can be taken from the contracting reform bill and
    the contract debundling provisions that they wrote into the
    bill that they passed.
        Mr. Willis. Mr. Zepeda.
        Mr. Zepeda. Yes, first of all, I think that as I climb the
    ladder from getting from one year's revenue to the next year's
    revenue, I think we always run into the challenge of the
    capacity both with bonding and capital, and they are always
    very restrictive of what we can and cannot do. We have options
    such as partnerships, mentor-proteges and others that we
    mentioned here.
        I think that probably the one solution that we could think
    of would be a partnership maybe with the SBA as well as a large
    company that kind of becomes the mentor in between and the
    large company that would facilitate or alleviate the bonding
    headache on the overall project requirement or a portion of the
    requirement. I think that in itself would be a big restriction
    that you would overcome.
        I think others that we probably would be dealing with is
    the past performance. Every contracting officer has at his
    disposal discretionary issues of past performance. If you have
    not done it before, there is no past performance that you could
    offer to an agency. So it is climbing the ladder type attitude
    that how do we get to the next level if you have--or go to
    Lockheed or go to one of the larger companies, more than likely
    they are not going to want to allocate resources for a smaller
    project. The mentor-protege gives you that or affords you that
    opportunity. But if we look at the historical statistics of the
    mentor-protege, it has not been very successful, and it does
    continue to be a hassle for all of us in trying to go to the
    next project.
        Thank you.
        Mr. Willis. Ms. Dorfman.
        Ms. Dorfman. I have a statistic here. The top 100
    contractors were awarded about 60 percent of all Federal
    spending in 2008; 200,000 contractors were remaining in the
    rest of that portion. I think bundling is a big issue. I am not
    sure that just having teaming will work. I know that in some
    instances it is a very good tool. We encourage, especially with
    the women's program not there, we encourage our members to try
    and team to access these contracts. But I think that we have a
    much bigger issue on hand.
        One of the thoughts I had was if you take a look at the
    Department of Defense, with the large contracts, the other
    thing that we are seeing is the majority of contracts are
    centered in four States--Virginia, Texas, California, and
    Maryland--which says to me that these contracts, while there
    are bases all over the place, there are less and less contracts
    going to the local community because they are getting bundled
    in.
        So I think there are some areas where we can take a look
    and identify where we can pull some of the contracts apart, and
    with that I say we need to put more money into the SBA and get
    the PCRs in place to handle the situation.
        Mr. Willis. I think we need to move briefly on because we
    need to----
        Ms. Hontz. Okay.
        Mr. Willis. It is a similar topic, but we have heard a
    number of different opinions about the relative size standards
    that are currently in place. We have over the last two
    Congresses heard SBA comment about how they are going to update
    those size standards at some point. And so, first of all, I
    want to hear whether or not size standards need to be
    increased, decreased, what the opinion is, and also whether or
    not SBA intends to update those size standards in my lifetime.
        [Laughter.]
        Mr. Jordan. How long are you going to live, Greg?
        Mr. Willis. Beyond tomorrow, with the Lord's help.
        [Laughter.]
        Ann.
        Ms. Sullivan. I would just like to point out that while I
    think everybody kind of thinks that the size standards need to
    be updated, the consequences to small business are just
    enormous, because small businesses are basing their next 5
    years on the current size standards. So every time this issue
    comes up before WIPP members, it is with great trepidation that
    they think about an update in the standards just simply because
    it could completely change their business plan. So I would just
    say that if you are going to do that, you need some kind of
    phase-in. You would need some kind of way to accommodate the
    change. That is what they struggle with.
        Mr. Willis. Alan.
        Mr. Chvotkin. The current size standards are out of date.
    They need to be updated. They are woefully undersized--pardon
    that expression--for the Federal procurement marketplace. So
    there are actually two other things that need to be done. My
    own view and the Professional Services Council, the
    recommendation is that we go back to a separate size standard
    for Federal procurement. The size standards are actually
    suppressed when you look at--because of the standard used to
    establish them, which is where 95 percent of the businesses are
    in the economy as a whole, that the requirements that the
    Senator talked about, some of the statutory requirements, the
    unique burdens, says that the SBA ought to take a look at what
    it takes to do business in the Federal procurement marketplace,
    which is different than what it takes to be a small business in
    the regular marketplace.
        Secondly, the size standards are based on the NAICS codes,
    which are really a manufacturing base. The preponderance of
    Federal spending over time is on services, and while we cannot
    change the NAICS codes--it would take a papal dispensation to
    do that--we ought to take a look at whether there are other
    measures that can be used to help the Federal procurement
    agencies particularly when they are trying to acquire services.
    That is where the marketplace has been in the last 5 or 6
    years. It is clearly where the marketplace is going in the next
    5 to 6 years. And we see a lot of effort at trying to squeeze
    procurement opportunities into the existing NAICS code
    standards, which really are manufacturing--in many cases are
    manufacturing or an antiquated basis for describing the work
    that is actually being done today.
        Mr. Willis. Mr. Jordan.
        Mr. Jordan. Sure. You know, one of the biggest challenges I
    face is that when people ask me, okay, so what is a small
    business, the answer takes about 10 minutes.
        The confusion around size standards is something that we
    certainly feel, and there is also--it is not as cut and dried,
    as Ann said. Even increasing a size standard can have a
    negative impact on a certain sector of small businesses, so as
    often as I hear the size standards need to be raised so that we
    can effectively grow and hire and create jobs, I frequently
    hear from businesses just starting, if you raise them, you are
    creating even within this protected environment an unfair
    competitive situation where we cannot possibly ever grow, and
    all you are doing is perpetuating the exact same set of ``small
    businesses,'' without really letting them graduate and then
    letting us climb the ladder as well. So there are certainly
    many sides to this issue, and I hear them all quite frequently.
        But to your point about what are we doing about it, we are
    conducting a comprehensive size review, so looking at all the
    different standards. We have recently gotten, with the
    Department of Defense's help, a whole bunch of data from GSA
    that we can use to analyze historical trends, which industries
    are growing, as was mentioned, utilizing the North American
    Industry Classification System, for both manufactured goods and
    services, to look at where those standards should be, and we
    have a methodology that we have been using--that we have been
    applying to this review, and w hope to have both that
    methodology and the first few industries to which that
    methodology was applied in a size standard review out for
    public comment in the near future, sometime between tomorrow
    and the end of Greg's long life.
        [Laughter.]
        Mr. Cravins. Seriously, Joe, when? I mean----
        Mr. Jordan. I cannot promise a time, but they are in an
    internal review right now, and we really do hope to have them
    out in the near future, both the methodology and then the first
    few size standards, so that we can receive the many public
    comments that we would anticipate, incorporate--or make any
    changes based on those comments that, you know, are deemed
    appropriate, and then resubmit them for final clearance and
    publish them. Then that will set the tone for the process that
    we will undergo as we review all of the various industries for
    both manufactured products and services, not just manufactured
    goods.
        Mr. Willis. This is the challenge that we have, and Don
    brought it home with what he asked. We have been promised these
    updates for--I have been on the Committee 3 years. We have been
    promised them for the 3 years, and I have been told that we
    have been promised them since before then. And people are
    anxious because they are managing up or down their work flow.
    That is probably the last thing we need right now in this
    economy, is people managing down their opportunities.
        Mr. Jordan. Sure. And I would just say that since this
    administration has been in, it has only been a short period of
    time, and while, you know, you have had to deal with many
    frustrations on many issues for quite some time, several of
    these issues did not crop up overnight. Some of the problems
    and concerns are not brand-new.
        However, in a short period of time, I am proud of the
    progress that we have made against things like conducting the
    size standards review. We are working on--I know it is an
    agenda item for later, but working on the women's procurement
    rule that I know is a concern of this Committee and has been
    for some time. Mr. Newlan and the HUBZone folks are well aware
    of the progress we have tried to make in addressing that
    program.
        And so I do fully anticipate being held accountable for
    delivering the actual results, not just the promises, but I
    would encourage you to look at what we have done thus far.
        Mr. Willis. Well, that is a good segue to the women's
    procurement rule. Obviously--what are we on? Year 9, give or
    take, of waiting for implementation of the women's procurement
    program. And we had some challenges last Congress that we
    hopefully worked through to get to this point. So I want to
    hear from those who represent women-owned businesses, owners,
    about where we are, where we should be going forward. So we
    will start with Margot and then Ann.
        Ms. Dorfman. Thank you. Again, obviously it is needed. A
    statistic: a $300 billion increase in Federal spending since
    2001, but the increase for women-owned firms was only $6.5
    billion. We have been consistently losing about $6 billion
    annually until 2008 where it jumped up to $12 billion. I
    suspect that in 2009, which is coming up in a few days, we will
    see that increase even further because of the recovery money
    that has been put into the economy.
        I have heard a lot of folks say, well, an answer would be
    to get more women-owned firms registered in CCR. There are
    currently 75,000 registered in CCR. Only 26,000 of them have
    contracts. I have heard from numerous women-owned firms that
    there is no point for them to register because they do not have
    access to these contracts until the women's program has been
    implemented. We are seeing that that--this is like the number
    one thing that needs to be done. July 24th was our last status
    hearing with the court, and the SBA and the U.S. Women's
    Chamber filed a motion to stay so that we could hopefully work
    through this process. And there is work in the background and I
    keep--I am anxious, too. When will it happen?
        Thank you.
        Mr. Willis. Ann.
        Ms. Sullivan. We believe that it is absolutely critical
    that this is put in place by the end of the year. And I know
    that is ambitious, but I know that your General Counsel is very
    ambitious, so--because of the stimulus dollars. Without that
    program, you know, we are just going to keep on losing many
    more opportunities than otherwise we would.
        We need the program in place. We know that is ambitious. We
    will help you in any way when it comes to maybe shortening the
    review periods to get it into place. I think we have waited
    long enough, so, you know, I do not think there is a lot more
    that people have to add to your bank of knowledge to be able to
    put it in place.
        One of the things that WIPP did was, when we saw that there
    were only 55,000 women registered in the CCR, when the RAND
    study came out, I mean, the first no-brainer was, well, you
    better increase people registering on CCR. And as Margot said,
    there are now 75,000.
        We did a major push with American Express--it is called
    ``Give Me Five''--where we have a very ambitious program to get
    every woman we basically meet registered on the CCR so that
    they will be counted in your statistics.
        We urge the SBA to take the interpretation from the RAND
    study, since that is the study that you have right now, to
    include industries up to 87 percent rather than the four little
    industries that the last administration put in place.
        And we appreciate the support of this administration to put
    this program into place. The President is on record as saying
    that. So we look forward to an expeditious program.
        Mr. Willis. Joe.
        Mr. Jordan. Yes, absolutely. As Margot and Ann know, we are
    working quite hard on this. There were some challenges
    presented by the fact that the RAND study was conducted in the
    past, and we are working through a number of those, and the
    various legal challenges, as Ms. Sullivan alluded to, our
    General Counsel has been leading this effort because this is
    absolutely a top priority to the Administrator to get a rule
    out there quickly.
        You know, I hear all the time--I am a metrics person, and
    as I am quoting various statistics, I always have to put the
    little asterisk in there, well, but the women-owned small
    business number, you know, there is not a lot that contracting
    officers can do about it because there is no tool in place. And
    they say, Oh, well, what are you doing about that?
        So we hope to have--we have made a lot of progress in the
    last few months, and we hope to have, again, something out
    there, you know, quite quickly.
        Mr. Willis. With that, Karen.
        Ms. Hontz. I am going to turn it over to Matt.
        Mr. Walker. Let me just add to that that Senator Snowe as
    well is very interested and concerned with having the women's
    contracting program up and in place, and it is a high priority
    for her.
        I would like to shift briefly to the HUBZone program. The
    HUBZone program, of course, is a critical program. It helps
    individuals in economically distressed communities. There were
    some GAO reports--in fact, there were three of them of late
    that were critical of the program, found problems with fraud,
    the monitoring system that was in place at the SBA and others.
    And, unfortunately, there are those who would try to destroy
    the program or use that against the program to try to do
    something detrimental to it. And we are strong proponents--by
    ``we,'' I mean Senator Snowe as well as other Republicans on
    the Committee--of trying to support this program. She thinks
    that it is a critical program that does a lot of great work,
    and that none of the programs are immune to problems. There
    have certainly been problems with each individual program, and
    that the proper measure to take place is to try to fix the
    programs that continue to do great things.
        We were fortunate enough to recently speak with Mr. Jordan
    about some of the efforts that the SBA has been taking to
    address those issues. To the credit of both Administrator Mills
    and to him, they have taken great, incredible steps to try to
    address those problems. But I think that it is important that
    others hear this as well so that they can be aware that there
    are a lot of things that are being done to try to address those
    issues, particularly his reference to a 100-fold increase in
    the monitoring that has been done. But I will let you just
    briefly speak about that, if you can, just so that others in
    this room can hear about the benefits of everything you guys
    have been doing.
        Mr. Jordan. Absolutely. Thank you.
        The Administrator, the agency, and myself, we take our need
    to execute and oversee the HUBZone program effectively and
    efficiently incredibly seriously. We are well aware of the GAO
    and some of the IG reports around the difficulties that have
    been found in the program, and so we have taken some quick
    action to both improve the sort of up-front certification
    processes and also assess and clean the current pool of
    certified firms to ensure that we eliminate all small business
    contracting programs of fraud, waste, abuse, or mismanagement.
        Now, the problems did not crop up overnight, and they will
    not be fixed overnight, but I feel we have made a lot of
    progress, and there are a few tangible things that I would just
    briefly highlight.
        On the certification front, we have engaged some external
    experts to help us with the business process reengineering, so
    we are currently operating a very strict level of certification
    review, and we want to figure out what is the best level that
    we can effectively and efficiently certify firms, so ensure
    that no fraudulent firms get in but also do so in a timely
    manner so that firms that want to pursue the certification and
    avail themselves of some great HUBZone set-aside opportunities
    are able to do so.
        Then in terms of evaluating the firms who are currently in
    the program, while we are doing a number of things, leveraging
    technology in our databases, we did understand the GAO's point
    about conducting actual site visits. And when Acting
    Administrator Hairston had testified in March in front of the
    House Small Business Committee, he was asked, ``How many sites
    visits have you conducted in the first 6 months of the fiscal
    year?'' And his answer, unfortunately, was seven. And so
    Administrator Mills has built on what Acting Administrator
    Hairston set up to conduct quite a few site visits to verify
    eligibility of HUBZone firms, and so in the less than 6 months
    since that testimony, we have conducted over 800 site visits,
    and these are comprised of typically verifying the principal
    office location and the fact that 35 percent of the employees
    reside in the HUBZone.
        And so we are very proud of--as you said, it is over a 100-
    fold increase in the number of sites visits that we have
    conducted; also in the fact that we are still not taking our
    eye off the ball and encouraging contracting officers to
    utilize this program to drive contracts to small business
    owners in historically underutilized business zones. I would
    point again to the Recovery Act statistics where while the
    HUBZone program has a 3-percent statutory goal, it is currently
    at 6.1 percent, so it is certainly a focus to make sure that
    the program is run effectively from a certification and
    eligibility standpoint, but also effectively from a serving the
    people for which it was set up standpoint.
        Mr. Walker. Okay. Thank you very much for that.
        The other question I wanted to shift over to the service-
    disabled-veteran realm as well. Maybe first, did you want to
    say anything in addition to that about the HUBZone program, Mr.
    Newlan?
        Mr. Newlan. I never want to pass up the opportunity.
        [Laughter.]
        We fully support everything that the SBA is doing. We
    clearly do not want any other HUBZone firms headquartered in a
    Starbucks. We have got to stop that. You know, we are reporting
    to the SBA any incidences that we know about.
        But consider, as the House is, throwing the program out, it
    is like throwing the baby out with the bath water. It is the
    only program designed to bring jobs where America needs them
    the most. The most recent census report shows more Americans
    living in poverty this year than last, and it is one in eight.
    One in eight Americans right now live below the poverty level.
    And the HUBZone program is the only program we are going to
    talk about today in this forum that is designed to help that
    situation.
        So we appreciate Senator Snowe's strong support for the
    program. We hope we have Senator Landrieu's strong support for
    the program. And I know we have strong support from other
    members of this Committee.
        Thank you.
        Mr. Walker. Great, thank you.
        Like I said, I would like to briefly, in the interest of
    time, quickly shift over to the service-disabled-veteran
    program, the women's program, and the HUBZone program, too, in
    other aspect, and that is in terms of parity for the programs.
        As we know, there was an issue--most people are familiar
    with it--where there was a question as to whether or not each
    program should be put on equal footing when awarding contracts
    or whether one contracting program had a preference over
    others. That is something that Senator Snowe strongly cared
    about making sure that there was true parity, and that in her
    definition, true parity is giving every program equal
    opportunity to compete. Chair Landrieu as well cared very
    deeply about this, and they worked together to ensure that the
    DOD authorization bill included a provision to make that very
    clear. So we appreciate Chair Landrieu and her staff's work on
    that as well to make sure that happens, and we are hoping that
    that gets retained in conference.
        But as another side of that, another aspect of it, as I
    said, Senator Snowe believes that true parity requires an equal
    opportunity for all the programs to compete, and as part of
    that provision that she included in an amendment would called
    for the creation of a mentor-protege program modeled after the
    8(a) program for service-disabled veterans, HUBZones, women-
    owned firms. And I just wanted to get some feedback from those
    on why that would be beneficial and what the benefits are to
    making sure that true parity should include mentor-protege,
    because if the programs are going to be on an equal footing,
    they should truly be on an equal footing, in our opinion.
        Anyone who would like to response?
        Ms. Sullivan. Well, I would like to say that, absolutely,
    please do. It is so much common sense, it is almost
    embarrassing to have to say that you have to do it.
        Why would you have different mechanisms in different
    programs that are all designed to help the small, disadvantaged
    business community? To not give it parity and not give the same
    mechanisms for every program seems to me to defy logic.
        Mr. Walker. Mr. Newlan.
        Mr. Newlan. We certainly support mentor-protege, and thank
    you for sponsoring that amendment. We do hope it gets passed.
    Anything we can do to encourage. We support parity, even though
    we happen to find ourselves right now today probably at the top
    of the heap. That is not a position we have worked for or asked
    for, but it is certainly one GAO protest decisions have thrust
    upon us. But we support parity.
        We ask you to keep in mind that even after that bill, if it
    does become law, we will not be in parity with the 8(a) and
    certainly with the ANC sole-source rules and the 8(a) sole-
    source rules dramatically different than what the service-
    disabled vets have, what we have, and probably what the women
    will have, I think the next thing we will have to look at is
    should there be a change in the sole-source rules for the up-
    and-coming women's program, the service-disabled vet, and the
    HUBZone program.
        Thank you.
        Mr. Walker. Would you like to comment, Ms. Robinson-Berry.
        Ms. Robinson-Berry. Yes. I think that it is very important
    that we do have parity, because right now a lot of the programs
    and the socioeconomic categories are in competition. We have
    some--especially in the small disadvantaged businesses, some
    are grandfathered for life, like the Native American and the
    ANCs, where others are not. And then we have emerging new
    socioeconomic categories that come up and some that people just
    make up on certain RFPs. And so I think it is really important
    that we have standards in that area.
        To address the mentor-protege issue, I think mentor-protege
    is a good program. As a matter of fact, many of our industry
    partners have graduated, and more small disadvantaged
    businesses, into large business because of the successful
    mentor-protege. But there are funding limitations and so forth.
    But having a mentor-protege program aligned by itself I do not
    think works. You need to align it with the other initiatives.
    You have the historical black college and minority institute
    initiative. You have the SBIR program. You have the mentor-
    protege program and others that are all separate. And I think
    the best model would be to look at how we can integrate those
    various programs together so we can benefit and grow our small
    businesses more rapidly.
        If we are going after high-tech companies, we align the
    innovative research projects with a mentor-protege opportunity,
    align it with a university so we are fixing the pipeline for
    the future, but we are also pushing our small business
    community in the same alignment with our technology road map.
        Mr. Walker. Certainly, it is important to have synergy and
    to foster coordination and leverage, and I think that is
    something that we should do as well.
        Mr. Hesser.
        Mr. Hesser. I agree.
        [Laughter.]
        Mr. Walker. Well put.
        Mr. Hesser. The vet force does, in fact, agree. Recently,
    last month, we presented to the congressional roundtable at the
    House, and we had a report to the Nation entitled ``Breakdown:
    National Security Crisis in a Small Business World.'' What we
    were first doing was writing a paper on veterans back from the
    beginning of the country as to how it has gone, and then we got
    involved with small business, and all of a sudden, we found
    that we wanted our report to be only on small business. And I
    hope you get an opportunity to see it. There are some out on
    the table. But it is also on vet-force.org. That paper is on
    there, and any small business, I think, should read it because
    it has been presented everywhere around the House, the Senate,
    and the executive branch, and wherever we could get it.
        It basically says we are in trouble because--Ron Newlan
    said it. We are in crisis right now, true crisis of small
    business. That was our concern about the ARRA brought up, no
    small business in there. And I do not care what your figures
    say, I would like to have a separate meeting about what money
    is really going where. And I know $4.2 billion that just went
    right out the window, no small business.
        We are very concerned from the service-disabled-veteran
    side about the slowness for the veteran resource centers. We
    are talking about the women-owned program. They have got
    centers all over the place. We have none--well, we have three.
    I am sorry. I think we may have gone up to four now. We are up
    to four now. Wow. I mean, why are the veterans not getting
    veteran resource centers? That is something that does not make
    sense to me.
        The other thing is I will refer to S. 2300, but it has been
    put in other bills about verification, certification of all the
    things, 8(a), women-owned, everybody, about how they have to be
    verified and everything else.
        I think there has to be a separate powwow between several
    agencies and organizations looking at what has happened to the
    Center for Veteran Enterprise. The Center for Veteran
    Enterprise picked up this thing of verifying service-disabled
    veterans. They now have 2,000 who have been verified, and there
    are 13,000 total. So they have another 11,000 to go. In about 5
    years they will make it, because they have the staff that they
    have. All the contracting, they are working hard to do this.
    This is not a slight against CVE. They are working, but it is
    an example that if you put that same thing in there for 8(a)s,
    the same thing for all the others, women-owned, everything, it
    is just going to tie things up again, because someone had a
    brilliant idea at CVE of giving a logo and letting people use
    this logo and having a pin. You go to a show now, and you go
    along the booths, and you will see this one has a logo, this
    one doesn't, oh, the other two do not--it automatically put a
    fence around all the service-disabled veterans who have not had
    their turn yet to be verified. This is a very serious problem.
    We brought this up over and over and over at CVE.
        They are working on it now, trying to figure out what they
    are going to do. We now have 2,000 companies out there with a
    logo saying they are verified, a real pretty logo, and they put
    it everywhere, on their letterhead and everything. There are
    people who did not have the verification. It looks like they
    are less than they are. In fact, they have changed the wording
    on what they are.
        So the veteran enterprise resource centers we have talked
    about, the certification, of course, there are all the other
    ones, but I guess the last thing I would like to say about
    veterans, I have heard the figure from 94 percent to 98
    percent, saying that 98 percent of those employed Americans are
    employed by small businesses. I want to emphasize over and
    over. How can you increase employment, which the stimulus bill
    is supposed to be doing, when you keep giving all the money to
    big business? They do not hire anybody. They usually fire them.
    Or they work with a small business and get them up there where
    they have got to maintain $2 million, $3 million support, and
    then they let go of them, and they are out there by themselves.
    What are they going to do now?
        This is happening all over the place. I do not know all the
    answers. I do not think any of us have all the answers. But I
    do think we need to look real close at those other points.
        Mr. Walker. Yes, I just want to quickly, before turning it
    over to Don, thank you for that as well as just give notice to
    Jim Wilfong. Jim Wilfong is from Maine, a veteran, who
    contributed to that report and did a phenomenal job, and he is
    a close friend to the Senator as well as the Committee.
        I also just want to mention that this Committee could not
    agree with you more about the veteran centers. We worked
    together on a bipartisan basis to pass a bill that would take
    the funding for the Office of Veterans Business Development for
    a traditional level of $750,000 up to multiple million dollars.
    We worked together and passed that bill out of Committee
    unanimously.
        So we agree completely. We are on your side. We agree with
    it, and thank you for your time.
        Mr. Hesser. We know that. Thank you.
        Mr. Walker. Thank you. That is all.
        Mr. Cravins. All right. First of all, let me just on behalf
    of the Chair and on behalf of the Ranking Member and our staffs
    thank all of you for participating in the roundtable today.
    Again, we hope this is just the beginning. We have had a
    relationship with many of you for many, many years, and we hope
    that we can continue that.
        Just to give you a heads up of what we are going to be
    doing in the future, we are going to have a hearing on October
    1st where we will look into the Recovery Act and look at the
    provisions of the Recovery Act as they relate to small
    businesses to make sure that our small businesses do have
    access to capital and that they are participating in the
    procurement opportunities in the Recovery Act. Senator Landrieu
    and Senator Snowe will have a full Committee hearing on October
    1st.
        Also, both of our staffs are working very hard to craft
    legislation that will hopefully fix some of the issues that we
    talked about here today, so we would love to continue having
    input from your respective agencies and organizations.
        And as Senator Landrieu said, the record will be open for 2
    weeks, so if you have more information that you would like to
    submit for the record, we would appreciate it.
        Thank you all very much, and thank you to those of you in
    the audience for participating.
        [Whereupon, at 11:56 a.m., the Committee was adjourned.]

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