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



 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2010

                              ----------                              


                         TUESDAY, JUNE 16, 2009

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 3:30 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Richard J. Durbin (chairman) 
presiding.
    Present: Senators Durbin, Nelson, and Collins.
    Also present: Senator Bennett.

                     SMALL BUSINESS ADMINISTRATION

STATEMENT OF HON. KAREN G. MILLS, ADMINISTRATOR

             OPENING STATEMENT OF SENATOR RICHARD J. DURBIN

    Senator Durbin. Good afternoon. I am pleased to convene 
this hearing to consider the fiscal year 2010 funding request 
of two agencies within the jurisdiction of the Appropriations 
Subcommittee on Financial Services and General Government--the 
Small Business Administration (SBA) and the General Services 
Administration (GSA).
    My distinguished ranking member, Senator Collins, will be 
here shortly, along with others.
    SBA and GSA are both playing key roles in the Federal 
Government's efforts to stimulate the economy. The Recovery Act 
provided SBA with $730 million to expand access to capital for 
small business. As the lifeblood of the American economy, small 
businesses must be the main driver of our Nation's economic 
recovery. The Recovery Act also provided $5.5 billion for GSA 
to initiate new Federal building projects.
    These projects employ architects, engineers, electricians, 
plumbers, carpenters, and many others. They provide an indirect 
benefit to local economies by spurring increased economic 
opportunity. Capital construction projects led by GSA are 
important investments, not only for the Government, but also 
for the communities in which the projects take place, including 
many small businesses.
    Small businesses are at the heart of many sectors of the 
economy, including information technology, retail, and green 
jobs. In fact, in fiscal year 2008 alone, small businesses were 
awarded over $1 billion in GSA contracts. In addition to 
Recovery Act initiatives and implementation, we are also going 
to discuss the fiscal year 2010 funding requests for SBA and 
GSA.
    Joining us for our first panel is Karen Mills, the new 
Administrator of the Small Business Administration. I welcome 
you to the subcommittee.
    Ms. Mills. Thank you, Senator.
    Senator Durbin. The budget request for fiscal year 2010 for 
SBA is $779 million, which will provide funding for a wide 
array of programs supporting small business lending and 
entrepreneurial development. SBA has been on the front lines of 
the economic crisis, working to help small business owners as 
they face difficulty gaining access to capital. SBA oversees a 
loan portfolio of $85 billion and in a typical year makes or 
guarantees loans to $20 billion for small businesses.
    We will discuss the good news regarding the performance of 
new programs, as well as an array of entrepreneurial 
development programs that can help small businesses stay on 
their feet and even grow in this tough environment.
    Administrator Mills, I look forward to hearing your 
testimony on your fiscal year 2010 budget request and on SBA's 
progress on implementing new Recovery Act programs, and I give 
you the floor.

                SUMMARY STATEMENT OF HON. KAREN G. MILLS

    Ms. Mills. Well, thank you very much, Senator Durbin.
    Chairman Durbin and Ranking Member Collins, who I know is 
going to be here, and members of the subcommittee, it is an 
honor to testify here before you. And I am very pleased to be 
here to support the President's 2010 budget for the Small 
Business Administration.
    First, though, I would like to briefly update you on the 
progress that we have made with the Recovery Act.
    With the launch yesterday of the ARC loans, that is 
America's recovery capital, the SBA has implemented more than 
$645 million of the $730 million in our Recovery Act funding. 
So, on March 19, we announced that we were going to raise the 
guarantees--that we'd raise the guarantees on most of the 7(a) 
loans--and that we also would reduce or eliminate the fees on 
7(a) and 504 loans.
    The results actually are quite encouraging. The problem we 
are trying to address is that we had an environment of very, 
very tight credit for small business, and small businesses were 
suffering because they couldn't get any liquidity and any 
credit. And we were able to, with these two programs, increase 
our loan volume by more than 30 percent compared to the weeks 
before the Recovery Act.
    And just as importantly, we have been able to bring back 
over 500 banks who had not been lending, some of them since 
2007, and who are now lending through the SBA programs. So, at 
this pace, the funding for the 90 percent guarantee and the fee 
reductions will last through December 2009.
    As I said, on Monday, we began the ARC loans, and actually, 
30 were approved yesterday. We actually expect there to be 
10,000, but we are off to quite a lot of demand. These are 
loans that are going to provide relief for some viable small 
businesses that are struggling.
    They are 100 percent guaranteed by the SBA. They are 
$35,000, or up to $35,000. They have no interest for borrowers. 
And they have over 12 months before any repayment begins, and 
then the repayment is over 5 years.
    Overall, the SBA is here to ensure that small businesses 
will continue to drive the American recovery and also to be 
able to build a strong foundation for America's competitiveness 
and for the creation of what we call 21st century well-paying 
jobs.
    The 2010 SBA budget request is $779 million, and it is in 
support of these objectives. There are four basic functions of 
the SBA, and they are included, each one, in this budget.
    First is our disaster assistance programs, and they are to 
ensure that communities will recover from a disaster and begin 
to again contribute to the economy. We actually have more than 
1,200 trained standby employees, and they go from the ice 
storms in Maine to the wildfires in California, and then they 
go to the tornadoes in the Midwest and the floods. And now they 
are ready to go down to the gulf coast or the eastern seaboard 
for hurricane season.
    And they help communities. They are deployed to communities 
who are affected by disaster, and they process and give out 
both homeowner and business loans. And I am pleased to say that 
they are ready to go for this season and that our processing 
times in this disaster center, which we have worked very hard 
to bring quite lower, are on target, and that is 14 to 18 days.
    Our 2010 request in this area is $101 million for 
administration of the direct loan program.
    The second area is our Capital Access Division, and that 
oversees our business loans. And I heard Senator Durbin 
mention--I was going to say more than $80 billion--you actually 
said $85 billion. Thank you. That actually is right where we 
are.
    We are requesting the same authorization levels that were 
enacted in 2009 to support more than $28 billion in small 
business financing. This is through our 7(a), 504, our SBIC 
investments, and our microloan programs. The total subsidy 
request for this is $83 million in fiscal year 2010.
    Our third division is our Government Contracting Division, 
and that helps small businesses that have the opportunity--
helps them have the opportunity to participate in Government 
contracting and subcontracting. This budget requests an 
additional $2 million. We are going to revise the certification 
process for our HUBZone and 8(a) business development programs, 
and we are going to make sure that only eligible businesses 
participate, and we are going to be able to determine when our 
site visits and our oversight is necessary.
    Our fourth division is our Entrepreneurial Development 
Division, and that is really the backbone of the agency. We 
have over 900 small business development centers, SBDCs. We 
have more than 100 women-owned business centers. And we have 
more than 350 chapters of SCORE, which is our retired executive 
program.
    Overall, we have 14,000 affiliated counselors. And one of 
the partner organizations said to me the other day that he 
thinks that we are within 45 minutes to an hour of most small 
businesses with counseling assistance.
    The performance of these operations is quite strong. We 
have seen 34,000 clients since October, and that is a 5 percent 
increase, as you can imagine in these times, compared to last 
fiscal year.
    So, as you can see, we are a small agency with a big 
mission, especially in today's economic climate. Already, 
Federal agencies throughout the administration are turning to 
the SBA. They are looking for ways to tap into our network of 
staff and our partners who are already on the ground and 
working with small business owners.
    One recent visible example of our work has been with the 
auto task force and where we have helped devise dealer floor 
plans, the financing for dealer floor plans. This budget is 
going to allow us the flexibility to build more of these 
partnerships in response to these challenging times. 
Specifically, $20 million in the 2010 budget allows us to 
create three important collaborations.
    The first initiative is on veterans. We are going to 
provide an additional $5 million to focus throughout our agency 
on serving veterans. We have 12,000 troops returning this 
summer. We have tens of thousands over the next coming year, 
and we have to be ready to serve these veterans who are or who 
want to become small business owners.
    So already we have eight specialized veterans centers, but 
we actually need to be serving veterans in all of our other 
partners. There are 2 million women veterans. We need to be 
ready to serve them in our women-owned business centers. We are 
already in conversations with the Secretary at Veterans Affairs 
on how to coordinate our efforts, and this is part of an 
overall objective at the SBA and across the administration to 
collaborate, to break down sacred turf in order to make Federal 
dollars work more efficiently for those who need our help.
    The second initiative is $10 million, which is requested to 
form a ready reserve, or SWAT team. This is an interagency 
collaboration with SBA. At the request of a community, these 
teams will go into areas that have been disproportionately 
impacted by the economy and help them plan for jobs and growth. 
The focus is going to be on the manufacturing sector, on the 
automotive industry, on communities that are reinventing their 
economy from the ground up.
    I went to Kokomo, Indiana, which is one of the highest 
concentrations of Chrysler employment, 2 weeks ago, and the 
mayor, Greg Goodnight, asked me for just this kind of help. 
Could we send this kind of team in?
    The ready reserve teams are going to work closely with this 
network, this bone structure of SBA partners to help leverage 
the local assets, create jobs, grow small businesses.
    The third initiative in this budget is $5 million to 
support small businesses through regional economic clusters. An 
example that I like to talk about is the Maine boat builders, 
and the Maine boat builders have formed a cluster with the 
University of Maine, working on new composite technology. This 
is a 400-year-old industry now competing across the globe.
    Maine's small boat builders are one example, and I know 
that Senator Collins has actually been working with this group 
for a long time, even longer, much longer than I have.
    So clusters like this are forming in every State. They are 
going to be fueled by efforts in the Department of Commerce. 
The Department of Commerce has $50 million in their budget for 
these cluster activities. The SBA resources on the ground will 
coordinate with Commerce's manufacturing and export centers, 
with Labor's trade assistance programs, and a number of other 
programs to assist the clusters' needs.
    In the coming year, my personal commitment with all our 
efforts at the SBA is that we will measure our progress on an 
agency-wide basis and transparently report our activities to 
Congress and to taxpayers.

                           PREPARED STATEMENT

    Already, we are tracking our progress in a systematic and 
integrated way. We have a dashboard of data on a weekly basis 
and on a monthly basis. And we are going to continue to use 
these metrics in our objectives of implementing the Recovery 
Act, reinvigorating the agency, and serving as the strongest 
possible voice for small business.
    Thank you very much. I would be happy to----
    Senator Durbin. Thank you, Administrator Mills.
    [The statement follows:]

                   Prepared Statement of Karen Mills

    Chairman Durbin, Ranking Member Collins and Members of the 
Committee, it is an honor to testify before you. I am pleased to be 
here to support the President's 2010 Budget for the SBA, but first I 
would like to briefly update you on the SBA's progress with the 
Recovery Act.
    With the launch of the America's Recovery Capital (ARC) loan 
program yesterday, the SBA has implemented more than $645 million of 
the $730 million in total SBA Recovery Act funding. On March 19, we 
announced that we would raise guarantees on most 7(a) loans to 90 
percent and reduce or eliminate fees on both of our flagship loan 
programs. The results are encouraging. In this environment of tight 
credit, we were able to increase our loan volume by more than 30 
percent compared to the weeks before the Act was passed. Just as 
importantly, we have brought nearly 500 banks and credit unions back to 
the program who had not participated since 2007.
    By and large, the stimulus money is out in the marketplace--in the 
hands of entrepreneurs and small business owners--and it is working. At 
this pace, funding for the 90 percent guarantee and the fee reductions 
will last through December of this year.
    Yesterday, we opened up applications in our ARC loans program. 
These will provide the relief that many viable but struggling small 
businesses need. The ARC loans are up to $35,000 with no interest for 
borrowers and no repayments for 12 months. We expect these loans to be 
in high demand. We have taken steps to ensure that smaller lenders and 
community banks have access to these loans before the supply runs out. 
Specifically, we have limited the number of loans a lender can give to 
50 a week, with a total from any lending institution of no more than 
1,000. And if a bank doesn't use all of the loans one week, they can 
roll them over to the next week.
    The SBA is here to ensure that small business will continue to 
drive America's economic recovery and build a stronger foundation of 
American competitiveness while creating well-paying jobs in the 21st 
century.
    The 2010 SBA Budget request of $779 million is key to moving 
forward with that overarching goal in mind. There are four basic 
functions of the Agency that are supported by this budget.
    First, our disaster assistance programs ensure that businesses and 
communities can recover quickly from disaster and once again contribute 
to the local economy. We have a direct loan volume of more than $1 
billion for this area and the processing times for our disaster loans 
are on target. We also have more than 1,200 trained standby employees 
who can be deployed to communities affected by disaster, and we 
continue to find ways to improve operations and planning in this area.
    The total fiscal year 2010 request in this SBA function is $101 
million for administration of the direct disaster loan program. 
Disaster loan subsidy funding is available through unobligated 
balances.
    The budget request also includes $1.3 million in administration 
expenses for the disaster assistance programs and $1.7 million in 
credit subsidy funding to conduct two pilots of guaranteed disaster 
loan programs authorized in the 2008 Farm Bill.
    Second, our capital access division oversees our business loan 
programs which now support a portfolio of more than $80 billion in loan 
guarantees. We have requested the same authorization levels as enacted 
in fiscal year 2009 to support more than $28 billion in small business 
financing through our 7(a), 504, Small Business Investment Company and 
Microloan programs.\1\
---------------------------------------------------------------------------
    \1\ $17.5 billion, $7.5 billion, $3 billion and $25 million, 
respectively. In addition, $12 billion in authority is requested for 
the Secondary Market Guaranty program.
---------------------------------------------------------------------------
    The total subsidy request for this is $83 million for 2010, of 
which $80 million supports $17.5 billion in 7(a) volume and $3 million 
supports $25 million in Microloan volume.
    Also, we continue our multi-year investment in the SBA's Loan 
Management Accounting System, an effort to replace our outdated 
computer system. The budget requests $5 million in additional funds for 
this effort.
    Finally, $3 million is requested for Capital Access to conduct a 
study on the next generation of equity capital programs to help 
stimulate innovation and job creation.
    Third, the SBA's Government Contracting Division helps small 
businesses receive opportunities to participate in Government 
contracting and subcontracting, with a goal of delivering 23 percent of 
all Federal prime contracts to small firms. These contracts serve as 
stepping stones for small business growth while allowing Federal 
agencies access to quality products and services with high levels of 
innovation, service, and responsiveness.
    This budget requests an additional $2 million to revise the 
certification process for the HUBZone and 8(a) Business Development 
programs, so that only eligible businesses participate in these 
programs. The money will also improve training programs which target 
both small businesses and procuring agencies to ensure that small 
businesses have the opportunity to compete.
    Fourth, our entrepreneurial development division is the backbone of 
the agency, harnessing the entrepreneurial spirit of entrepreneurs and 
small business owners across the country. We manage this effort through 
nearly 900 Small Business Development Centers and more than 100 Women's 
Business Centers, 350 chapters of SCORE, our mentoring program that 
matches experienced executives with small businesses, and other 
programs which comprise about 14,000 affiliated counselors in total. 
Entrepreneurial Development also includes major initiatives to reach 
small business owned by veterans, Native Americans, minorities and 
other populations, such as those in rural areas. Our role is to be 
there for those who need help accessing capital and advice to pursue 
small business opportunities.
    I should note that the performance of our counseling operations is 
strong, with our Small Business Development Centers serving nearly 
34,000 clients since October, a 5 percent increase compared to last 
fiscal year.
    The major focus of this division in fiscal year 2010 will be not 
only to maximize the impact of the linkages the SBA has with our 
extensive network of partners, but also to improve the coordination 
between our partners. In addition, we will take advantage of the 
collaborative opportunities we are seeing with Federal agencies as well 
as state, local and private sector players who can help us serve 
entrepreneurs and small businesses.
    The SBA is also engaged in new collaborations with the Departments 
of Veterans Affairs, Commerce, and others that I will describe further 
shortly.
    As a foundation to support each of these four areas, the SBA is 
renewing its focus on investing in its people, technology, and other 
core agency investments that are critical to the agency's future.
    With technology, the Recovery Act provides $20 million to move 
forward with efforts such as automating old paper-based systems, 
boosting data transfer speeds and a new web portal and a customer 
relationship management system.
    The fiscal year 2010 budget request includes $3 million for 
additional IT improvements related to technical training, off-site data 
storage, a better SBA Internet presence, and more email storage 
capabilities for employees.
    Our people, of course, are our strongest asset.
    This budget request includes $13.6 million in additional funds for 
salaries and benefits, $10 million of which will go to hire about 80 
additional employees, bringing total salary expenditures to $268 
million with 2,203 employees. These new hires will be largely focused 
on loan purchases and processing.
    This budget also requests an additional $2 million to help the 
agency address much needed efforts in this training, mentoring and our 
succession planning efforts. Our hope is that these investments in SBA 
staff will allow us to build on our recent Most Improved Agency award 
related to job satisfaction in the Federal Government. We rose from 
30th to 26th, but there is still much room for improvement.
    As you can see, we are a small agency with a big mission, 
especially in today's economic climate.
    Already, Federal agencies throughout the Administration are turning 
to the SBA, looking for ways to tap into our vast network of staff and 
partners who are already ``on the ground'' interacting with small 
business owners across the country.
    The most visible recent example of this has been our work with the 
Auto Task Force. We are moving rapidly to implement a new program to 
finance dealer floor plans. We have also been engaged more recently in 
the health care discussion to ensure that the needs of small business 
employees will be met in the future.
    This budget allows us the flexibility to build more of these 
partnerships to adapt to the needs of these challenging times. 
Specifically, $20 million is allocated in the 2010 budget to allow the 
SBA to create truly powerful collaborations through three major 
initiatives.
    The first initiative provides an additional $5 million to focus on 
veterans business issues. We have 12,000 troops coming home from Iraq 
this summer and tens of thousands more in the coming year. We must be 
ready to serve these veterans who are, or who want to become, small 
business owners.
    Already, we have 8 specialized veterans resource centers, but we 
need to be serving veterans throughout our 900 Small Business 
Development Centers, our 350 SCORE chapters and our other partners. 
Also, there are nearly 2 million women veterans, and we need to ensure 
that our Women's Business Centers are well-equipped to serve all of 
them.
    The $5 million requested in the 2010 budget will leverage our 
existing networks to serve veterans. We are already in conversations 
with the Secretary at Veterans Affairs on how to coordinate our 
efforts. This is the part of an overall objective at the SBA and across 
the Administration to collaborate and break down ``sacred turf'' in 
order to make our dollars work more efficiently for those who need our 
help.
    Secondly, a $10 million initiative is requested to create a program 
of ready reserve teams or SWAT teams. This will be an interagency 
collaboration with SBA experts and experts at other Federal agencies. 
At the request of the community, this team will go into areas that have 
been disproportionately impacted by the economy and help them plan for 
growth.
    This will include regions that have been hit in the manufacturing 
sector, the automotive industry, and other communities that are 
reinventing their local economy from the ground up.
    I recently went to Kokomo, Indiana, a town with 25 percent 
unemployment. The mayor, Greg Goodnight, asked me for exactly this kind 
of help as they work to grow new companies in electronics and 
engineering.
    The ready reserve teams will work closely with our existing 
partners to leverage the local assets in communities like Kokomo and 
uncover possible new opportunities. They will find ways to grow a 
broader knowledge base, to learn new skill sets, and to create 21st 
century jobs.
    Third, the Budget contains a $5 million initiative is to support 
small businesses who participate in Regional Economic Clusters.
    An example is the Maine boatbuilders who are working with new 
composite technology to create lighter, faster boats that are 
competitive in global markets. Senator Collins has been working with 
this group for some time. Maine's small boatbuilders have clustered 
together to be a new driver of the State's economy.
    Clusters are forming in every State and will be fueled by efforts 
in the departments of Commerce and Energy. The SBA's resources on the 
ground will coordinate with Commerce's manufacturing and export 
centers, Labor's trade assistance programs, and others to serve each 
cluster's particular needs.
    This budget will allow us $5 million for this effort to identify, 
grow and expand the partnerships that will allow us to maximize the 
national economic impact of regional clusters.
    In sum, this $20 million budget request will allow the SBA to be a 
strong voice for small business across the Administration while 
reaching out to underserved populations such as veterans . . . 
emphasizing innovation in areas hard-hit by the recession . . . and 
building on the strengths that already exist in small business 
communities.
    As you can see, we are a small agency with a big mission, 
especially in today's economic climate.
    In the coming fiscal year, my personal commitment with all of our 
efforts--both new and existing--is that the SBA will measure our 
progress on an agency wide-basis and transparently report our 
activities to taxpayers. Already, we are tracking our overall progress 
in a systematic and integrated way, reviewing a dashboard of data on a 
weekly and monthly basis. We will use these metrics to continue 
implementing the Recovery Act, reinvigorating our agency and serving as 
the strongest possible voice for small business.
    Provided with the resources, the SBA can continue to be a true 
catalyst for the growth and innovation--helping entrepreneurs and small 
business owners lead us out of this recession, stimulate the economy, 
strengthen U.S. competitiveness, and create new, well-paying 21st 
century jobs.
    Thank you and now I'm pleased to take your questions.

                   SMALL BUSINESS DEVELOPMENT CENTERS

    Senator Durbin. I welcome my colleague Senator Collins.
    I would like to ask a question or two. First, you have 
requested some $20 million for new entrepreneurial development 
initiatives, and your testimony says this money will be used in 
part for increased focus on veterans, SBA SWAT teams, and small 
business clusters. I like the idea of innovative thought and 
new approaches. However, there is something that I find I can't 
resolve.
    Also in this budget is a proposed $13 million decrease in 
the small business development centers. They have an 
established network of connections across the country, and they 
are already on the street, ready to address the challenges that 
you have identified. I could give you the list of 
accomplishments of these SBDC associations, but I think you 
would know them.
    So here is what I am trying to struggle with. Why would you 
cut back on an established network that has proven that it can 
help businesses and then start a new function to go after three 
specific business needs? It would seem to me that we wouldn't 
want to sacrifice the SBDCs to create a new experimental 
program, and also will there be SWAT uniforms for the SBA 
employees?
    Ms. Mills. Well, yes, on the SWAT uniforms, of course.
    Well, you are absolutely right to point out this anomaly in 
the data. And let me be very clear, it is not our intention to 
cut the SBDC programs. So here is how the anomaly appeared.
    When we proposed our 2010 budget, proposed $97 million for 
SBDCs, that was level funding for this absolutely critical 
program. So 2009 was $97 million. We proposed in our 2010 
budget the same amount.
    This is a critical program, and it is what we call the bone 
structure, the foundation stone, as you have pointed out, of 
how we are executing, how we are on the ground. The numbers, 
the metrics on this are very, very good. Not only are they up 5 
percent, but we have--or we document how--when they serve 
clients on a long-term basis, the performance of these clients 
increases versus the control group who are not served. So these 
are really critical elements of our plan.
    The reason that you see $110 million in 2009 is that 
Congress passed the actual 2009 after we had submitted the 
2010, and there was an increase for the SBDCs, which we are 
very grateful for.
    Senator Durbin. So you are saying that the $97 million is 
flat funding from the previous fiscal year?
    Ms. Mills. Yes, and our intention was never to cut this 
program. We rely on this program. It is a backbone program. So 
there was no replacement contemplated.
    Senator Durbin. It would seem that flat funding would not 
anticipate just ordinary increase in cost of living and the 
like?
    Ms. Mills. Well, as I said, we are very, very happy to talk 
about supporting this program because this program is a 
foundation stone of everything that we want to do.

                           EMPLOYEE TRAINING

    Senator Durbin. Let me ask you about one of the--since you 
are brand new to the agency, I will just ask you what your 
thought is about this particular issue.
    OPM did a survey in 2008 of the best places to work in the 
Federal Government. The Small Business Administration in 2008 
ranked 26th out of 30 agencies. That is low, but an improvement 
over the previous year, where it ranked 30th out of 30 
agencies, dead last.
    So when it comes to this issue of morale and the like, I 
would like to know what your thoughts are on how you are going 
to change that particular--or at least address that particular 
challenge. One of the things that has been suggested is more 
money into employee training so that there is a notion that if 
they do train and improve their skills, that there is a chance 
for advancement within the organization.
    However, the report states the agency has not yet 
documented a comprehensive plan for training that links core 
competency to your goals. So can you tell us if you are aware 
of this problem, what you are doing to address it, whether it 
involves any training component or things like student loan 
forgiveness?
    Ms. Mills. Senator, I am very happy to talk about this. 
When we talk about the priorities, when I talk about my 
priorities for the agency, one of the most important ones is 
reinvigorating the agency, and there are two components of 
this--investing in our people and investing in information 
technology. And what you have just described is at the core of 
our plan to invest in our people.
    It is unacceptable to be 30th out of 30. We won an award 
last month for most improved agency, and we are only at 26. 
This is not good enough.
    So we have embarked on a revision of our training program, 
and this is a priority for me as the Administrator and for our 
whole team because we have terrific people. And we ask them, as 
I said, to do a lot of jobs, to carry a big load. And we need 
to prepare them and invest in them in order for them to be 
great managers, in order for them to be great counselors. And 
we actually have some excellent programs in the planning 
process that we plan to begin to implement in the next month.
    So we are also looking at student loan forgiveness, and I 
am pleased to tell you that we are going to do that as well, 
and that is going to be implemented within the next 30 days.
    Senator Durbin. Do you have the legal authority to do that?
    Ms. Mills. Yes, I believe we do.
    Senator Durbin. Good.
    Senator Collins.
    Senator Collins. Thank you. Thank you, Mr. Chairman.
    I would ask unanimous consent that my opening statement be 
entered into the record.
    Senator Durbin. Without objection.
    [The statement follows:]

              Prepared Statement of Senator Susan Collins

    Thank you, Mr. Chairman.
    Administrator Mills, welcome and thank you for being here today. 
Before I discuss your new role as head of the Small Business 
Administration, I want to thank you for your service to our State of 
Maine. Your efforts to promote economic development and investment in 
small businesses in our State have helped retain and create jobs, and 
have helped small manufacturers increase efficiency and 
competitiveness.
    I am sure that you will bring the same leadership and vision to the 
SBA as you brought to our home State.
    As we all know, small businesses are the backbone of our economy. 
Our economic strength and future are tied to the strength of small 
businesses.
    During the last decade, America's small businesses have created 
about 70 percent of all new jobs. Small businesses employ about half of 
U.S. workers and create more than half of nonfarm private GDP.
    In Maine alone, we have 154,000 small businesses. About 112,000 are 
self-employed individuals, and another 42,000 of these small businesses 
have employees. These Maine entrepreneurs created nearly 5,000 new jobs 
in 2007 alone.
    Administrator Mills, I look forward to working with you to give 
small businesses the support and assistance they need to emerge from 
this recession strong and nimble. I am eager to hear about the progress 
you are making in implementing the SBA's portion of the Recovery Act, 
which contained many provisions aimed at helping small businesses 
recover, grow and expand. I also look forward to hearing your fiscal 
year 2010 proposals and how they will continue SBA's core services of 
entrepreneurial assistance and access to capital for small businesses.
    Mr. Prouty, the Recovery Act provided $5.5 billion to GSA for 
construction of new facilities, and for renovation and modernization of 
old ones to create more energy efficient Federal buildings. There are 
plans to spend these funds in all 50 States and 2 U.S. territories--
creating jobs, constructing buildings the Nation needs, and reducing 
the energy consumption of the Federal Government. The Recovery Act also 
included $300 million for the purchase of energy efficient motor 
vehicles for the Federal fleet. These funds were intended to help 
stimulate the economy and maximize economic benefit for the ailing auto 
industry. I look forward to hearing from you about the progress GSA is 
making in executing this enormous investment.
    The President's fiscal year 2010 budget provides funds for 
construction projects in many States, including my own. However, I am 
concerned that the President's request does not follow the Judicial 
Conference's Five-Year Courthouse Construction Plan. In fact, the 
fiscal year 2010 request does not fund a single courthouse on the 
Judicial Conference plan. Mr. Chairman, I am pleased that we have 
invited Judge Bataillon to testify about the selection process for 
courthouse construction. As Chair of the Space and Facilities Committee 
for the Judicial Conference, Judge Bataillon will be able to discuss 
how the fiscal year 2010 Budget request will affect the design, 
construction, and completion of our Nation's courthouses.
    Mr. Chairman, before I conclude, I would like to submit for the 
Record a letter that Mr. James Duff, Secretary of the Judicial 
Conference, sent to you and me on June 9, 2009. (Pause for Senator 
Durbin to accept the letter into the Record.)
    This letter expresses the Judicial Conference's concerns about the 
President's budget request. It states, in part, that ``if these 
projects are not funded in fiscal year 2010, we are concerned that all 
projects in 2010 and subsequent years will be delayed at least another 
year-seriously impacting the judicial process where courthouses are 
already out of space, and critical security deficiencies currently 
exist.''
    Mr. Chairman, thank you for calling this hearing. I look forward to 
working with you as we consider the fiscal year 2010 budget requests of 
SBA and GSA, as well as the other agencies within our subcommittee's 
jurisdiction.

    Senator Collins. Thank you.
    I want to apologize to you, Mr. Chairman, and to our 
witness for my late arrival. Since the witness is from the 
State of Maine, she can appreciate that I was at the Seapower 
Subcommittee of Armed Services, which is also a very high 
priority for our State.

                   SMALL BUSINESS DEVELOPMENT CENTERS

    Administrator Mills, let me first associate myself with the 
remarks made by the chairman about the small business 
development centers. As a former regional administrator of the 
SBA, I know personally how valuable those centers can be in 
providing advice and guidance, which can be at least as 
important--well, maybe not as important, but almost as 
important as money to a new business or a business that is 
thinking of expanding. So I, too, hope we are not seeing a 
cutback in those valuable centers.

                 AMERICAN REINVESTMENT AND RECOVERY ACT

    I would like to ask you for an update on the implementation 
of the Recovery Act. This subcommittee gave the SBA some $730 
million to help get small business lending going again through 
a variety of means, including increasing the amount of a loan 
that the SBA could guarantee, cutting fees, a variety of 
programs.
    What is the status of the SBA's efforts to implement the 
Recovery Act?
    Ms. Mills. Thank you, Senator Collins.
    The status of the Recovery Act is that as of yesterday, 
with the implementation of the ARC loans, we have implemented 
$345 million of the $730 million of Recovery Act money now 
available for funding. The first stage went out on March 19, 
which was the increase of guarantees to 90 percent and the 
reduction of fees. And the reaction--we really have to thank 
you for putting this money forward because the reaction was 
immediate.
    When small businesses had been having difficulty getting 
credit, we were able to see our loan volume go up by 30 
percent. And actually, I am told as of yesterday, it is now 35 
percent over the weeks before the Recovery Act.
    In addition, we were able to attract 500 new banks into the 
program who had not made a loan since--some of them since 2007. 
So the formula in that Recovery Act is exactly right, and we 
are seeing the loan volumes increase and increase. We are not 
back yet to pre-October, pre-2008 levels. But money is in the 
hands of small businesses, and the Recovery Act is working to 
keep those jobs.
    Senator Collins. That is great to hear.
    Ms. Mills. It is good.

                    SMALL BUSINESS ACCESS TO CREDIT

    Senator Collins. I will tell you, and I know you hear it 
back in Maine as well, that there is still a lot of small 
businesses that are having their lines of credit terminated, 
that are having loans called, and this infuriates me because a 
lot of times the financial institutions that are cutting off 
lending to small businesses are those that have received 
billions of dollars in TARP money.
    So it is just infuriating to me that they are cutting off 
credit to small businesses that, in many cases or in most 
cases, are paying on time. They have not violated the terms of 
their loan agreements, but it is just a matter of the bank 
trying to build up its capital or reduce its exposure.
    When I was the regional administrator in New England in 
1992 or 1993--I can't remember which year--banks were failing 
throughout New England, and we initiated a New England lending 
and recovery project, which I have discussed briefly with you. 
And what this project did is go into failed banks and take out 
the credit-worthy loans and place them with a new lender with 
an SBA guarantee. And the result was that we were able to 
intervene in cases where, through no fault of its own, a small 
business was losing its credit.
    Is SBA looking at some sort of proactive program like that, 
where you would go in and offer to put a guarantee on a loan in 
order to keep it from being called or the credit line 
terminated?
    Ms. Mills. Well, yes. We absolutely have, and in fact, you 
had mentioned this a while ago. There are two programs that are 
really going to be helpful to this quite distressful problem of 
credit lines being cut to small businesses.
    The first is actually the ARC loans. What is happening to 
many of these small businesses is that the credit lines that 
are being cut are actually credit card, business credit card 
lines. And the availability on those lines has been cut, and 
therefore, they have no liquidity to run their business.
    The ARC loans, which went out yesterday and became 
available, are $35,000 lines of loans to businesses to pay down 
any loan they want, including credit card loans. And that would 
give them an additional $35,000 line of credit.
    These are 100 percent guaranteed by the SBA. They have no 
interest to the borrower. The SBA pays the interest. And they 
have no repayment due for at least 18 months--6 months to give 
the loan, then 12 months after. So this will be very good for 
smaller borrowers who particularly have this issue of their 
lines of credit cut on credit card loans.
    The second--and it will give them a much cheaper option--
the second thing that we are implementing and have implemented 
is that you can refinance a bank loan into an SBA guaranteed 
7(a) loan today. And in the next couple of weeks, you are going 
to be able to implement, to refinance into a 504 loan.
    So if you meet the criteria for a 504 expansion loan, you, 
in the past, could not refinance existing debt into that 
guaranteed loan. But because of the provisions of the Recovery 
Act, we are going to be able to implement new rules. And so, 
those will be available for exactly the kind of great 
businesses that, for various reasons, the bank is not able to 
be the provider of enough liquidity and putting it with an SBA 
bank with a guarantee.
    Senator Collins. Thank you, Mr. Chairman.

                  DEALER FLOOR PLAN FINANCING PROGRAM

    Senator Durbin. I understand, Administrator Mills, that on 
July 1, SBA will begin guaranteeing loans to dealerships to 
finance inventories of cars, trucks, RVs, boats, and even 
manufactured homes, that this is because of recent changes to 
old regulations that used to prohibit this kind of lending.
    This is kind of a bold step for the SBA, and it clearly 
will be needed by some. But it is a stressed marketplace, and I 
am just wondering as the SBA considers these loans, what steps 
are you taking to mitigate the risks that are part of this new 
loan program?
    Ms. Mills. We worked very hard to do a number of things in 
response to the crisis in the automotive industry. The first 
was to provide some kinds of financing that the distressed 
dealers were looking for, and this goes to not just dealers at 
Chrysler and GM, but, of course, to all dealers, including used 
car dealers. And it goes to boat builders--boat dealers, RV 
dealers, as you said, and also motorcycle dealers, in fact.
    And the steps that we have taken, what we needed to do was 
make sure we were taking no more risk with these loans than 
with our normal 7(a) portfolio. So we actually constructed 
credit criteria, including our guarantee on this, for instance, 
is 75 percent, not 90 percent. And the advance rates are of a 
certain level.
    So we have been quite careful to balance the need to step 
up and provide liquidity to the sector and also to not take on 
additional--to manage our risk at the appropriate level.

                       SMALL BUSINESS CONTRACTING

    Senator Durbin. I would like to ask you about one issue 
that you are going to face and we have all faced in the Federal 
Government. Federal agencies reported a total of $78 billion in 
Federal prime contract dollars went to small businesses in 
2006. Many of these were obtained using contracting 
preferences, such as sole-source awards and set-asides for 
small businesses.
    The SBA's inspector general and others have reported flaws 
in this procurement system related to the contracts. There is 
evidence that large firms are awarded contracts reserved for 
small businesses. In addition, Federal agencies have 
inappropriately been counting contracts performed by large 
firms toward their small business procurement goals.
    SBA introduced a scorecard to rate small business 
procurement practices at Federal agencies, including the 
accuracy of reporting, and issued regulations to require small 
businesses to regularly recertify. How is the SBA working with 
Federal agencies to ensure contracting personnel are properly 
trained to understand what is a small business, what is a 
masquerading large business, and how we meet our goals to 
actually do business with smaller entities?
    Ms. Mills. Well, Senator, our Government contracting 
program is designed to have the SBA help ensure that 23 percent 
of all Federal contracts throughout all of the agencies go to 
small businesses. And the purpose of this is--it should be--we 
believe it should be a win-win situation. These are very good 
for small businesses, particularly some of the high-growth, 
innovative businesses because it allows them to get to the next 
level of volume, and then after that, they can export and they 
graduate and they become job creators and sort of the mainstays 
of the growth in our economy.
    From the Federal agency point of view, it is a win-win also 
because they get access to some of the most innovative 
companies and technologies. And when you contract with a small 
business, very often you get top management and you get the CEO 
at the table working on these issues.
    However, as you point out, it is difficult sometimes for 
Federal agencies to know how to access great small businesses, 
and they worry: Will the small business that I am contracting 
with be there? Is it financially stable?
    So one of the things that we are focusing on, in answer to 
your question, is increased training and activities that 
improve the reach and access and availability of small 
businesses to speak to these procurement agents and connect to 
these procurement agents.
    The second issue you raise, though, is that we have had a 
series of issues relating to whether this is really reserved 
for small business. This program is for small businesses. It is 
not for big businesses masquerading as small businesses. There 
have been a series of findings on this, and we are engaged in 
addressing every single one that has come out of the report.
    And in the budget you will find funding for our HUBZone 
program and our 8(a) certification programs so that we can re-
look at a number of ways we do business, certifying that 
sometimes it is good for big business to be affiliated and 
mentor a small business, but it is not good if the small 
business is not actually the one engaged in the contract and in 
fulfilling the contract.
    So we are working very hard on these issues that you have 
described and consider them one of our important priorities 
because we think, actually, this can be a win-win for small 
businesses and for the Federal Government.
    Senator Durbin. Thank you.
    Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.

                            LENDER OVERSIGHT

    I want to follow up on the questions that the chairman has 
just raised about the ability of your agency to guard against 
fraud. You have had an enormous budget increase as a result of 
the stimulus bill, and yet I am told that SBA's nondisaster 
staffing has decreased by about 28 percent since 2001. Your 
loan portfolio went up by 59 percent during that period. 
Information that you have given us today shows that it has gone 
up even further.
    How is the SBA going to ensure, when you have over 5,000 
lenders and 270 certified development companies that are making 
loans, how are you going to ensure the integrity of that 
process when your nondisaster staff is shrinking?
    Ms. Mills. Well, thank you, Senator Collins, for asking 
that.
    In fact, this agency went from 3,000 people 8 years ago to 
2,000 people now. The budget has gone down by 24 percent. But 
to answer your question, I said there are two areas that we 
were going to invest heavily in in reinvigorating the agency. 
And the first is our people. The second is information 
technology.
    A large part of the information technology investment that 
we are making, and we got some money in the stimulus act--in 
the Recovery Act to look at this--is for lender oversight and 
risk assessment. We have formed a new committee on risk 
assessment, and we are beginning the process of understanding 
how we can use technology as well as people to identify risk, 
to collect better data on risk, and to be more proactive about 
our understanding of how we go after risk-based solutions.
    And I think we do--at this moment, we have some very good 
components, but we are raising the level of this activity to 
really my level, to the administrator level. So I am getting 
very involved in this myself.
    Senator Collins. Speaking of human capital, I am told that 
the chief financial officer of the SBA as well as three senior 
staff who were involved in estimating credit subsidies all 
recently left the agency. That concerns me at a time when you 
are working so hard to expand your lending programs. What are 
you doing to fill that particular gap at a critical time?
    Ms. Mills. Well, thank you for that question because it 
gives me an opportunity to brag about our people a little bit.
    Our financial staff did at the period of January-February 
largely go over to the Troubled Asset Relief Program (TARP). 
But we have been able to actually build inside a first-rate, 
crackerjack chief financial officer's office and staff who are 
doing just a terrific job.
    So I am pleased to say that the staff has totally risen to 
the occasion, and we are very confident about our numbers. As 
you know, I am a metrics-oriented person. So that is a first 
priority for us.

                        SMALL BUSINESS CLUSTERS

    Senator Collins. Thank you.
    And finally, you and I share a common interest in helping 
to develop business clusters, particularly in rural areas of a 
State such as in our State of Maine. Does this budget have 
support for the development of small business clusters?
    Ms. Mills. Yes, Senator Collins.
    There is $5 million in this budget, and Senator Collins put 
forth a bill last year which designed a program for clusters. 
And much of that is now incorporated in the Commerce 
Department's $50 million cluster program. This $5 million is 
designed to have the SBA resources, the footprint that we have 
on the ground, which is so substantial, be linked and leveraged 
and aligned with those cluster programs.
    Senator Collins. Thank you.
    Senator Durbin. Thank you, Senator Collins.
    And Administrator Mills, thank you for your testimony 
today. We certainly appreciate it. We will be working with you 
and your staff on your budget for the next fiscal year.
    Ms. Mills. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Durbin. We will probably submit written questions, 
and if you can take a look at them and send us some replies on 
a timely basis, it would help us to do our work.
    Thank you for being here today.
    Ms. Mills. Yes, we will do that. Thank you very much.
    Senator Durbin. Appreciate it.
    [The following questions were not asked at the hearing, but 
were submitted to the Administration for response subsequent to 
the hearing:]

            Questions Submitted by Senator Richard J. Durbin

             RECOVERY ACT: IMPACT ON SMALL BUSINESS LENDING

    Question. The American Recovery and Reinvestment Act of 2009 
(Recovery Act) provided $375 million to stimulate lending in Small 
Business Administration (SBA) loan programs, supporting, on a temporary 
basis, reduced-fee loans for borrowers and a higher federal guarantee 
under the 7(a) program. SBA's loan data shows that since the Recovery 
Act, the volume of weekly lending under these new programs has 
increased by 32 percent. In addition, private lenders who had stopped 
partnering with SBA to make small business loans are returning to the 
7(a) program in large numbers.
    How long will SBA be able to continue making these reduced-fee 
loans?
    Answer. The $375 million in Recovery Act funds will support a 
program level of approximately $8.7 billion for the 7(a) program and 
approximately $3.6 billion for the 504 program with fee elimination and 
90 percent guarantees for 7(a) loans. Initially, SBA projected that 
these funds would last until the end of calendar year 2009. Given the 
higher-than-expected increase in lending volume, we now believe those 
funds might run out in early December 2009 for the 7(a) program, and 
will last through the middle of December for the 504 program.
    Question. To what extent does SBA estimate that lending volume will 
bounce back from the large drop-off that occurred early in fiscal year 
2009?
    Answer. Lending volumes are steadily increasing to more historic 
average levels. As the overall economy recovers, we believe the lending 
volume will recover as well. In July 2009, the combined 7(a) and 504 
volume rose to $1.4 billion, which is approaching the 2008 monthly 
average of approximately $1.5 billion.
    Question. What steps is SBA taking to ensure that lenders stay in 
the 7(a) program once the fees and guarantee level return to normal 
levels?
    Answer. We have heard from lenders that the higher guarantee has 
helped them extend credit to small businesses in the current economic 
environment. SBA continues to work with lending partners to identify 
areas of improvement in SBA programs. At the same time, the Agency is 
working to continue to revise and streamline operating procedures and 
to provide good customer service to lenders, making the agency a better 
long-term partner. This includes development of a much more robust and 
modern customer relationship management system, allowing SBA to 
systematically track its interactions with lenders.

             RECOVERY ACT: AMERICAN RECOVERY CAPITAL LOANS

    Question. The Recovery Act provided $255 million for a bridge loan 
program to help distressed small businesses make it through the 
economic downturn. These American Recovery Capital loans--or ``ARC'' 
loans--are risky because they are intended for small businesses that 
are already experiencing financial trouble. SBA estimates that the 
total volume of ARC loans will be around $350 million.
    In deciding which small businesses are eligible to borrow under the 
ARC loan program, how does SBA determine if a distressed small business 
is strong enough to weather the economy?
    Answer. SBA's ARC loan program is uniquely designed to meet the 
needs of viable businesses facing immediate financial hardship. SBA 
asks businesses to demonstrate their viability by showing evidence of 
profitability or positive cash flow in at least one of the past 2 
years. Future cash flow projections based on reasonable growth going 
out 2 years should show that the business will be able to meet current 
and future debt obligations, including future repayment of the ARC loan 
once the disbursement and deferred payment period end, and operating 
expenses. Also, the borrower must certify that they are currently no 
more than 60 days past due on any loan being paid with an ARC loan and 
they must have an acceptable business credit score as determined by 
SBA.
    Question. How does this compare to SBA's estimated demand for the 
program?
    Answer. Since it was launched last month, the ARC program has been 
steadily ramping up. Through August 4, SBA has approved over 1,000 
loans totaling over $34.5 million. SBA estimates that the funding 
provided will support approximately 10,000 loan approvals through 
fiscal year 2010, and the agency believes the program is on track to 
meeting that projection.
    Question. How is SBA ensuring that smaller lenders, like community 
banks, are able to participate in the program before funding is 
exhausted?
    Answer. SBA trained over 3,300 lending officers at over 1,300 banks 
on how to make these loans and how to use SBA's electronic lending 
systems. So far, smaller, community based lenders have made most of the 
loans in the ARC program. In addition, we have limited lenders to no 
more than 25 loans per week on a cumulative basis and no more than 
1,000 loans in total to help ensure access to the program.

                         LIQUIDITY OF SBA LOANS

    Question. The secondary market for SBA's loans is showing initial 
signs of improvement due to Recovery Act programs and other changes in 
capital markets. In May, sales into the secondary market reached the 
levels of months prior to the economic downturn. The Federal Reserve 
has, through May, made about $170 million in loans to investors to 
purchase pooled SBA loans, and Treasury expects to soon make $15 
billion in TARP funds available for the federal government to directly 
purchase SBA loans.
    How will the TARP purchases and the Federal Reserve's loan program 
complement or support the recent improvements in the marketplace?
    Answer. The programs from Treasury and the Federal Reserve have 
been important in the fragile recovery of SBA's 7(a) secondary market. 
Treasury's announcement that it would serve as a backstop for the 
market has provided lenders, brokers and investors with confidence 
around the market's overall liquidity. Over the past 3 months, the 
average monthly loan volume settled from lenders to broker-dealers has 
been $335 million, moving the market closer to pre-recession averages. 
In July, $324 million settled. At the same time, prices for these loans 
have begun to recover. In July, 67 percent of the loans settled (50 
percent of the dollar volume) were sold at or above premiums of 106.
    Similarly, the Federal Reserve's TALF program has now supported 
over $419 million in SBA-backed securities. SBA continues to work with 
Treasury and the Federal Reserve to ensure long term health of its 
secondary markets.

               SUBSIDIZING 7(A) LOANS IN FISCAL YEAR 2010

    Question. In a typical year, the fees SBA collects on 7(a) loans 
fully offset the cost of payments the agency makes on defaults. 
However, SBA's budget request states that in fiscal year 2010, those 
fees will not be sufficient to keep the 7(a) program operational. SBA 
is requesting an appropriation of $80 million to keep 7(a) loans 
flowing to small businesses throughout fiscal year 2010.
    What changes will occur between 2009 and 2010 that will cause the 
risk of 7(a) loans to increase?
    Answer. In the current economic environment, SBA has seen an 
increased number of defaults in its loan portfolio, and this historical 
performance is factored into the model that estimates the fiscal year 
2010 subsidy rate. This increasing default rate means that the risk of 
a subsequent SBA purchase of a 7(a) loan is more likely than it may 
have been in previous years. The risk of default in the 7(a) program is 
actually closely correlated to the unemployment rate in the macro 
economy. With unemployment on the rise, and projected to remain 
elevated for some time, we expect a higher default rate in fiscal year 
2010.
    Question. Does SBA expect that once the health of the economy 
improves, defaults in the program will return to a level fully 
supportable by fees?
    Answer. The econometric subsidy model that is used to determine the 
subsidy rates in SBA loan programs uses historical loss rates and 
defaults in SBA's portfolio as well as macro economic estimates related 
to unemployment rates and interest rates. Unemployment rates are the 
most significant indicator of loan default in the SBA 7(a) program 
credit subsidy model. Once the overall economy improves, and 
unemployment decreases, SBA may be able to run a zero subsidy 7(a) 
program. However, this could take several years and depends on many 
other broad market and economic factors.

                            LENDER OVERSIGHT

    Question. SBA's Inspector General has identified deficiencies in 
SBA's oversight of lenders. The President's request for SBA's lender 
oversight activities is $11.3 million, a 3.7 percent increase over the 
fiscal year 2009 enacted level of $10.9 million.
    How will the budget request enhance SBA's efforts to ensure lenders 
are properly overseen?
    Answer. The request will allow the SBA to continue expanding upon 
its goal of ensuring stewardship and accountability over taxpayer 
dollars through financial portfolio management and prudent oversight. 
The Agency will achieve this goal by: (1) continuing to perform on-site 
lender reviews with the objective of reviewing all large and mid-size 
lenders and community development companies generally on a bi-annual 
basis; (2) ensure that these lenders and CDCs whose portfolios comprise 
more than 80 percent of the Agency's guaranty dollars outstanding are 
accountable for managing their portfolios in a prudent manner, thus 
reducing the SBA's overall credit risk; and (3) continuing to monitor 
its smaller lenders and CDCs through its off-site monitoring process.
    The SBA will expand its oversight efforts to the Microloan program 
by applying its off-site monitoring approach to microloan 
intermediaries.
    The SBA also plans to issue guidance with regard to the use of loan 
agents by lenders to originate SBA guarantied loans. In addition, as 
the Loan and Lender Monitoring System (L/LMS) continues to be leveraged 
for oversight and portfolio management purposes, more involved data 
analysis of performance trends will be conducted. The results of these 
analyses will be used for more effective management of SBA loan 
portfolios, as well as to assist in identifying irregularities that may 
be an indication of inappropriate lending activities.
    Finally, the SBA will also apply its portfolio analysis 
capabilities, first developed through L/LMS, to the Agency's disaster 
loan portfolio. This portfolio analysis capability will be used to 
provide relevant information for senior management to use in decision 
making.
    The SBA plans to issue further guidance to lenders regarding 
grounds for enforcement actions and the types of enforcement actions 
that may be taken by the Agency against lenders. This guidance will 
increase Agency transparency with its lending partners.
    Question. What limitations does SBA face in following up on on-site 
and document reviews of lender activity?
    Answer. As the IG has pointed out, substantial strides have been 
made in lender oversight, and SBA continues to make improvements in its 
oversight processes. SBA utilizes a combination of an offsite portfolio 
monitoring tool as well as periodic onsite examinations of its largest 
lenders in its risk based approach to lender oversight. SBA published 
the Lender Oversight Interim Final Rule in December 2008, which 
provides SBA with increased enforcement capabilities. SBA has a robust 
system for portfolio management and lender performance evaluation. We 
are working to make the benefits of this tracking technology 
infrastructure more accessible and user friendly. Additionally, 
staffing has been increased by seven positions in the Office of Credit 
Risk Management over the last 2 years.
    Going forward, SBA recently re-procured its contract for off-site 
monitoring and is starting to make more information available to 
lenders and SBA staff for portfolio management, redeveloping risk 
rating metrics to enhance their predictiveness, integration of more 
dynamic, ongoing evaluation of lenders and loan portfolio--
identification and investigation of trends and developments--into 
oversight activities, and development of procedural guidance related to 
the lender oversight regulation.

              MICROLOAN PROGRAM: FISCAL YEAR 2010 REQUEST

    Question. SBA's Microloan program was provided $22.5 million in 
fiscal year 2009 funding as well as an additional $30 million under the 
Recovery Act. Yet, the President requests only $13 million for fiscal 
year 2010. While the budget continues to support a robust level of 
lending--$25 million--it reduces funding for grants for borrower 
counseling.
    Has there been a measurable increase in demand for Microloans since 
the Recovery Act became law?
    Answer. The Recovery Act provided an additional $6 million in 
microloan loan subsidy, which supports approximately $50 million in 
additional microlending to intermediaries, and $24 million in microloan 
technical assistance grants. SBA was able to expedite expenditure of 
all 2009 non-Recovery Act microloan funds by mid-July, and now, 
Recovery Act funds are available for SBA microlending intermediaries to 
use through fiscal year 2010.
    Question. How will Microlenders provide adequate technical 
assistance to borrowers in fiscal year 2010 if the grant funding is 
reduced per the budget request?
    Answer. These funds, combined with the 2010 budget-requested funds 
will more than double the size of SBA's microloan program over 2009 and 
2010. The microloan grant fund request is adequate to support the needs 
of current and future intermediaries.

             MICROLOAN PROGRAM: EXPANDING MICROLOAN ACCESS

    Question. The Microloan program can accommodate up to 300 lenders. 
However, there are currently only 165 SBA-approved Microlenders. 
Additional partners would provide small businesses better access to the 
Microloan program.
    What steps is SBA taking to expand the number of Microlenders?
    Answer. Since the Recovery Act funding was provided, SBA has 
received 15 new applications from intermediaries, 9 of which have 
already been approved. The Agency has reached out to microlending 
institutions and made presentations at industry conferences and 
workshops to reach out to potential participant organizations.
    SBA is working to make improvements to its microlending program, 
including through a new electronic application. These program changes 
and new marketing efforts will help expand the number of intermediary 
partners that provide microloans to borrowers. SBA has done extensive 
work with intermediaries around best program practices and is reviewing 
applications for new intermediaries.
    Question. How can SBA connect other federal partners to the 
Microloan program--for example, Community Development Financial 
Institutions?
    Answer. SBA has reached out to Community Development Financial 
Institutions and continues to discuss this program opportunity with 
them.

         ENTREPRENEURIAL DEVELOPMENT INITIATIVE: ``SWAT'' TEAMS

    Question. The President's budget requests $20 million for a new 
entrepreneurial development initiative. Administrator Mills' testimony 
states that $10 million of this funding would be used to send SBA 
``SWAT'' teams into distressed communities, including regions that have 
been impacted by the economic crisis.
    What criteria is SBA contemplating to use in selecting communities 
for this assistance?
    Answer. To evaluate where SBA's pilot program would be most 
effective, SBA will consider target criteria that show economic 
distress such as the following: Unemployment; industries in distress 
(loss of tax revenue); natural disaster impact; involvement with other 
federal, state and local agencies; and other economic factors, 
including Employment and Training Administration or Economic 
Development Administration referrals.
    Individual businesses will be targeted to receive an in-depth 
assessment to identify steps for stabilization and growth.

      ENTREPRENEURIAL DEVELOPMENT INITIATIVE: VETERANS' BUSINESSES

    Question. SBA's proposed Entrepreneurial Development Initiative 
requests $5 million to increase SBA's focus on veterans' business 
issues.
    How would the requested funding help SBA help returning veterans 
start and grow their small businesses?
    Answer. Veterans constitute a special class of business owner. 
Currently SBA supports eight veterans' centers, but this outreach 
effort limits the number of veterans assisted to those located within 
one of these eight immediate geographic locations. To meet the unique 
needs of returning service men and women, SBA intends to leverage its 
Entrepreneurial Development networks to reach out to veterans who will 
need assistance to stabilize veteran-owned businesses and return them 
to prosperity. With this funding, SBA will: train all of SBA's current 
resource partners in the unique needs of veterans regarding business 
start-up or management; and will expand the outreach of existing 
services (business counseling, training and mentorship) to more 
veterans. SBA will leverage the knowledge and skills that reside in 
existing Veteran's Business Outreach Centers to more effectively target 
this training and outreach.
    Question. To what extent is SBA coordinating and collaborating with 
the Department of Veterans Affairs and other organizations to conduct 
outreach and implement other initiatives to best address the needs of 
veterans?
    Answer. SBA's Administrator Karen Mills will meet with the 
Secretary of Veterans Affairs to develop a strategy for greater 
collaboration, avoid duplication and fill gaps for services to veteran-
owned businesses and veterans wishing to explore business ownership.

       ENTREPRENEURIAL DEVELOPMENT INITIATIVE: BUSINESS CLUSTERS

    Question. Administrator Mills' testimony states that under SBA's 
proposed Entrepreneurial Development Initiative, $5 million of the 
requested $20 million will be used to support small businesses that are 
part of ``economic clusters''.
    How would this $5 million enhance the strength of regional cluster 
businesses?
    Answer. SBA's clustering program will facilitate networking among 
like-minded businesses that face similar economic problems. The network 
will promote the development of wide-scale discussions on industry 
solutions and best practices. SBA's district offices will promote 
clustering by leveraging existing programs and training opportunities 
to bring businesses together to focus on common economic challenges and 
potential linkages between businesses to foster growth. Examples of 
current or planned industry clusters include: The resurgence of the 
boat-building industry in Maine; and the robotics initiative in 
Michigan and southern Virginia.
    Question. How would SBA leverage these resources with the 
Department of Commerce's manufacturing and export programs, trade 
assistance programs at the Department of Labor, and state and local 
agencies?
    Answer. To expand the Clustering Program's impact, SBA will partner 
with numerous Federal departments and agencies (Commerce, Defense, 
Energy, Labor, Agriculture, Export Import Bank, etc.) to leverage 
extensive industrial knowledge and expertise.

                             DISASTER LOANS

    Question. As of June 2009, carryover balances in the disaster loan 
program were projected to support over $5.5 billion in new disaster 
lending. Due to these large balances, the budget does not request 
additional funds for new disaster loans.
    How does the level of balances compare to the needs of the disaster 
loan program in previous years?
    How does that compare to disaster lending after the largest recent 
disaster, Hurricane Katrina?
    Answer. The following chart shows original loan approvals for 
fiscal year 2005 through fiscal year 2009 to date:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Homes                       Business                      Total
                           Fiscal Year                            --------------------------------------------------------------------------------------
                                                                    Number         Amount        Number         Amount        Number         Amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004.............................................................    25,024       $627,425,200     3,486       $256,065,200    28,510       $883,490,400
2005.............................................................    52,677     $1,388,084,700     9,398       $890,604,800    62,075     $2,278,689,500
2006.............................................................   145,164     $8,399,440,708    24,819     $2,770,815,600   169,983    $11,170,256,308
2007.............................................................    11,760       $457,311,500     2,254       $362,358,400    14,014       $819,669,900
2008.............................................................    12,755       $536,303,400     2,373       $289,536,700    15,128       $825,840,100
June 2009........................................................    16,562       $698,964,200     3,020       $318,105,200    19,582     $1,057,334,500
--------------------------------------------------------------------------------------------------------------------------------------------------------

                          FEDERAL CONTRACTING

    Question. Federal agencies reported that a total of $78 billion in 
Federal prime contract dollars went to small businesses in 2006. SBA's 
Inspector General and media reports have highlighted flaws in the 
Federal procurement system related to these contracts. There is 
evidence that large firms are awarded contracts reserved for small 
businesses. Further, federal agencies have inappropriately been 
counting contracts performed by large firms towards their small 
business procurement goals. SBA introduced a ``scorecard'' to rate 
small business procurement practices at federal agencies, including the 
accuracy of reporting data, and issued regulations to require small 
businesses to regularly recertify that they meet certain standards to 
be considered a small business.
    How is SBA working with other federal agencies to ensure 
contracting personnel are properly trained to understand how small 
business contracting preferences should be implemented?
    Answer. The SBA employs professionals, known as Procurement Center 
Representatives or PCRs. PCRs are the SBA's ``eyes and ears'' at the 
buying offices they cover, ensuring that small businesses, including 
8(a), HUBZone, SDVOSB and Women-owned small firms, are afforded the 
maximum, practicable opportunity to receive Federal prime contract 
awards. In addition to the informal training, which often occurs during 
the pre-award consideration stage ``negotiations'' between the PCR and 
contracting officers, our PCRs provide and participate in formal 
training events for buying office staff, including training on how 
small business contracting preferences should be implemented. Thus far 
in fiscal year 2009 (October 1, 2008-June 30, 2009), SBA's PCRs have 
provided training to more than 1,100 staff at Federal buying offices. 
Additionally, PCRs handle many requests for guidance/training from 
contracting officers on how small business preferences should be 
handled on a daily basis.
    Also, SBA has worked with other agencies to develop a series of 
data checks to help ensure data quality. The checks have been used in 
to help improve the quality of the 2007 data and reduce instances of 
businesses being incorrectly coded.
    Question. What recourses or remedies does SBA use when identifying 
an award to an ineligible entity?
    Answer. SBA has a number of programs to identify potentially 
ineligible entities for its programs. SBA's primary program for 
identifying an award to an ineligible entity (i.e., a firm that may be 
other than small (a large business) is our size determination program. 
If a contracting officer, an other interested party, or the SBA itself 
believes that a bidder on a Federal contract may have misrepresented 
its size, the SBA (through our field network of Size Specialists) will 
investigate the allegations and make a formal determination as to the 
firm's size. Our determination is provided to the contracting officer, 
other interested party (i.e., the protestor) and the protested concern, 
which under certain circumstances can appeal the SBA's findings. First, 
size is determined at the time of offer, so firms that are large now 
may still be counted as small for the life of a contract if they were 
small at the time of offer. However, SBA's recertification rule 
requires procuring agencies to accurately reflect a firm's change in 
size status if there is an acquisition, or merger, or, for long-term 
contracts, after 5 years and each option thereafter. Second, SBA 
performs formal size determination in response to protests that may be 
filed by unsuccessful offerors, the contracting officer or SBA, and 
these determinations apply to the procurement in question and are 
binding on the procuring agency. Third, if we determine that a firm 
willfully or recklessly misrepresented its size status, we may refer 
the matter to the SBA's Office of Inspector General or propose the firm 
for suspension or debarment.
    The SBA also maintains a Service Disabled Veteran-Owned Small 
Business (SDVOSB) protest program (at its headquarters) that will 
investigate claims that an entity may have improperly self-certified 
its SDVOSB status. Our findings are set forth in a formal 
determination. If we determine that the firm is not entitled to SDVOSB 
status, we will issue a formal determination which sets forth the 
evidence we considered as well the basis for our findings which is 
provided to the cognizant contracting officer for the appropriate 
action.
    Question. What other steps is SBA taking to oversee the accuracy of 
reporting on small business contracting?
    Answer. SBA has increased its oversight of agency contracting 
officers who enter the award data into the Federal Procurement Data 
System, which is the official database for Federal procurement 
information. As briefly described before, we recently provided Federal 
agencies with ``anomaly reports'' identifying specific individual 
contract action reports which may be miscoded. SBA works closely with 
the headquarters of those agencies to investigate these apparent 
discrepancies and to correct the FPDS database, as necessary.
    Additionally, the SBA is conducting 30 Surveillance Reviews at 
major Federal buying offices across the country. Part of these reviews 
involve an examination of contracts reported to have been made to a 
small business to determine if the awardee is indeed small and the 
level of due-diligence performed by the contracting officer when 
verifying the firm's size.

                       WOMEN-OWNED BUSINESS RULE

    Question. Under the Bush Administration, SBA issued a proposed rule 
that would limit the use of sole-source contracts for women-owned small 
businesses to four industries. SBA is currently developing a revised 
rule related to sole-source contracts for women-owned small businesses.
    When will the revised proposed regulation become public?
    Answer. One of the Agency's highest priorities is implementation of 
the WOSB Program as quickly as possible and in a way that withstands 
legal scrutiny. In furtherance of this goal, the Agency has been 
working on a revised regulation and is preparing to submit a draft 
proposed rule for inter-agency clearance. Although I am unable to give 
you a precise timeline on the WOSB Program implementation because of 
the nature of the regulatory process, the proposed regulation will be 
published in the Federal Register for public notice and comment as soon 
as practical.
    Question. What resources is SBA consulting to develop the new rule? 
How is SBA involving women business owners and other stakeholders?
    Answer. SBA has already received approximately 1,700 comments on 
the previous proposed rule and SBA is considering these comments in 
drafting a proposed rule. Through the standard regulatory process, SBA 
will submit a draft proposed rule to OMB for approval and inter-agency 
clearance. Once cleared, SBA will then publish a proposed rule in the 
Federal Register which will provide the public notice of the proposed 
rule and give the public an opportunity to comment on any aspect of the 
proposed rule. Upon the close of the comment period, SBA will 
incorporate all of the comments into the rulemaking record and proceed 
with an evaluation of each comment. SBA will then draft a final rule 
for publication in the Federal Register which will provide an analysis 
of the comments received.
                                 ______
                                 
            Questions Submitted by Senator Mary L. Landrieu

                  FEDERAL AND STATE TECHNOLOGY PROGRAM

    Question. The Federal and State Technology Program--or FAST--and 
the Rural Outreach Program provide opportunities for businesses in 
underutilized areas to participate in the SBIR and STTR programs. By 
providing matching funds through competitive grants, the FAST program 
has been successful in increasing total SBIR dollars for small 
businesses in participating states. Through Louisiana's participation 
in the FAST program, the state jumped from 47th in the United States to 
33rd in total SBIR dollars.
    The program hasn't been funded since 2004. Given these programs' 
past successes, do you support funding this program again at the level 
of $5 million?
    Answer. This program has not had enacted funding since 2004 and the 
2010 President's budget does not request funding. However, SBA and the 
SBIR/STTR agencies work diligently to ensure that awards support high 
quality innovations through a competitive process. To ensure high-
quality innovations, the program elicits applicants from across the 
country and outreach efforts by participating agencies attempt to 
elicit the widest range of applications possible to enhance the SBIR 
and STTR competitive processes.

                        WOMEN'S BUSINESS CENTERS

    Question. For 20 years the Women's Business Center (WBC) program 
has successfully provided business counseling and assistance to women 
with an emphasis on those who are socially and economically 
disadvantaged. With the economic turmoil, this program, too, is seeing 
an increase in demand from entrepreneurs hoping to establish a small 
business, as well as requests from small business owners hoping for 
assistance as they attempt to survive through economic uncertainty. To 
demonstrate the negative impact on our local technical assistance 
providers, consider our Women's Business Center in New Orleans, which 
faced a $45,000 shortfall in funding in 2007--despite the increased 
demand for their services post-Katrina.
    Additionally, much of the country is still not served by this 
program; with Arkansas, Idaho, Kentucky, Montana, Wyoming, Washington, 
DC, Guam, Northern Marianas Islands and the U.S. Virgin Islands 
remaining without centers.
    Question. How much would it take to fund all of the present Women's 
Business Centers and fund a center for each of the states currently not 
served by one, at the full amount of $150,000?
    Answer. The President's budget would assist at least 150,000 
clients. Funding 9 additional WBCs within the program at $150,000 would 
cost $1,350,000.
    Question. Why would the President not request the $16.9 million 
that it takes to fund the present centers at the full amount?
    Answer. The current budget provides for a sustained level of 
performance for existing centers.
    In addition, the entrepreneurial development initiative will also 
serve similar economically or otherwise distressed populations.
    Question. Why not request at least what was enacted in 2009?
    Answer. The request provides an amount roughly equal to the 2009 
enacted amount.

                       7(A) LOAN GUARANTY PROGRAM

    Question. The President requested $80 million for the SBA's 7(a) 
loan guaranty program for fiscal year 2010. Taking this program to zero 
subsidy in 2005, as the last Administration did, and shifting the cost 
to borrowers and lenders by raising the fees has been very 
controversial. We want this important source of long-term capital to be 
affordable for borrowers and attractive for lenders, and we want to 
build on the investment we made in this program from the Recovery Act. 
Nevertheless, $80 million is a big share of SBA's budget.
    Please explain why this $80 million is necessary and what are the 
consequences if we don't provide the funding?
    Answer. The 7(a) upfront borrower and ongoing lender fees are 
capped by statute in the Small Business Act. In fiscal year 2010, even 
with the historical (i.e., maximum) fees in place, the 7(a) program 
cannot execute at a zero-subsidy rate, due to higher defaults and 
economic assumptions. The Subsidy rate for fiscal year 2010 is 0.46 
percent. Therefore, in order to maintain the fully authorized program 
level ($17.5 billion), the Administration requests $80 million in 
credit subsidy. If the full request is not provided, the SBA would need 
to reduce its anticipated program level that the lower appropriated 
amount would support.

                                DISASTER

    Question. As I have mentioned, last year I worked closely with 
Ranking Member Snowe and former Chairman Kerry to enact significant SBA 
Disaster reforms as part of the 2008 Farm Bill. In particular, these 
reforms increased SBA disaster loan limits, improved disaster planning 
capabilities, and provided the Agency with new tools for future 
disasters.
    It is my understanding that some of these provisions were 
immediately implemented, while others are still in the process of being 
tested. As we approach the 2009 Atlantic Hurricane season, I would like 
an update from the Agency on its implementation of these reforms.
    Please provide us with a status on what has already been 
implemented and what is in the process of being tested or implemented.
    Answer. SBA quickly began implementation of the 2008 Small Business 
Disaster Response and Loan Improvements Act of 2008 (a.k.a. the Farm 
Bill), immediately after enactment. Many of the provisions were in 
place for SBA Disaster Assistance operations during the very active 
2008 Hurricane season.
    As of June 2009 SBA has met 19 of the 26 requirements. SBA has 
existing authority to undertake four of the seven remaining 
requirements, and three are in development stages.
    A spreadsheet with status of each provision is attached. This 
spreadsheet shows which provisions have been implemented or completed 
and which are still in process.

------------------------------------------------------------------------
             Section                               Status
------------------------------------------------------------------------
12061--Economic Injury Disaster    Implemented/Regulations in Process
 Loans to Non-Profits.
12062--Coordination with FEMA....  Ongoing/Regulations in Process
12063--Public Awareness of         Completed
 Disaster Declaration and
 Application Periods.
12064--Consistency btwn. Admin.    Completed
 Regs & SOP's.
12065--Would allow up to $14,000   Implemented/Regulations in Process
 of a disaster loan to be
 disbursed without any collateral.
12066--Processing Disaster Loans.  Implemented
12067--Information tracking and    Implemented
 follow up system.
12068--Increased deferment period  Available if needed
12069--Disaster Processing         Completed
 Redundancy.
12070--Net Earnings Clause.......  Implemented/Regulations in Process
12071--EIDL loans in Ice Storms    Available w/Existing Authority
 and blizzards.
12072--Develop and implement a     Completed
 Major Disaster Response Plan.
12073--Disaster Planning--Full-    Completed
 time Disaster Planning Staff.
12074--Assignment of Employees to  Ongoing
 the Office of Disaster
 Assistance and Disaster Cadre.
12075--Comprehensive disaster      Completed
 response plan.
12076--Office Space..............  Completed
12077--Applicants that have        Implemented/Regulations in Process
 become an MSE.
12078--Disaster Loan Amounts/      Implemented/Regulations in Process
 Mitigation.
12079--Small Business Bonding      Ongoing
 Threshold.
12081--Eligibility for Additional  Available if needed
 Disaster Asst.
12082--Additional EIDL Asst......  Available if needed
12083--Private Disaster Loans....  In development
12084--Immediate disaster          Developing pilot for 2010
 assistance program.
12085--Business Expedited          Developing pilot for 2010
 Disaster Assistance Loan.
12086--Gulf Coast Disaster Loan    Available if needed
 Refinancing Program.
12091--Reports on Disaster         Monthly reports are being distributed/
 Assistance.                        Annual report pending
------------------------------------------------------------------------

    Question. The President's request for SBA calls for $1.7 million to 
fund the two Guaranteed Disaster Loan Program Pilot Programs that we 
enacted as part of disaster reform?
    Answer. The President's budget request for 2010 calls for $1.7 
million to fund two Guaranteed Disaster Loan Pilot Programs. SBA has 
developed an outline for these programs which will be vetted with 
banking industry representative in two planned focus groups. It is 
imperative that we develop a program that the industry accepts to 
ensure participation when disaster activity warrants.
    Question. Will it be available for the 2009 Hurricane season? (Yes/
No)
    Answer. The guaranteed commercial lending programs will not be 
available for the 2009 Hurricane season.

             PRESIDENT OBAMA'S SMALL BUSINESS RECOVERY PLAN

    Question. President Obama's plan to assist small businesses in 
gaining access to the credit markets contains elements of proposals 
that have been pushed by this Committee from the beginning of this 
economic downturn.
    Can you tell us how implementation of that plan is proceeding?
    Answer. Through the programs and funding provided in the Recovery 
Act, SBA has helped small businesses access the capital they need to 
survive the economic conditions. Recovery Act programs have helped 
through increasing lending through the 7(a) and 504 guaranteed loan 
programs, expanding the base of SBA lending partners, providing 
targeted assistance to struggling businesses through the ARC loan 
program, and allowing small businesses with higher dollar contracts to 
obtain SBA-backed surety bonds. All of the $675 million in SBA program 
funds are currently available to support small businesses.
    Question. Are there any lessons from your business background that 
can be applied towards improving SBA lending programs?
    Answer. Over the course of my career I've had the opportunity to 
gain valuable insight into the capital access challenges faced by 
entrepreneurs and small businesses. During the recession of the early 
1990s, I was operating small manufacturing companies that supplied the 
auto industry and that experience gave me a deep understanding of what 
our small businesses need today to survive this current downturn and to 
prosper in the years ahead. I've also had valuable experience with the 
funding needs of high-growth, high-potential companies that I've worked 
with over the years. That understanding of the capital needs small 
businesses have--whether you're a Main Street business or a high-growth 
potential business--is something I bring to this job and something that 
is guiding our current efforts at SBA to assess the efficiency and 
effectiveness of our programs and the systems through which we deliver 
them.

                          OFFICE OF TECHNOLOGY

    Question. The Office of Technology, which promotes and monitors the 
highly successful Small Business Innovation Research (SBIR) and Small 
Technology Transfer (STTR) programs, has seen its operating budget cut 
by more than half during the last 18 years. At the same time, the SBIR 
and STTR budgets have more than doubled, with participating SBIR and 
STTR Federal agencies allocating more than $2 billion to small high-
technology firms across the country each year.
    I find this trend very alarming, particularly when other agencies 
try to get out of complying with the SBIR and STTR laws, as happened 
with about $229 million in the Recovery Act, and I am interested in 
hearing your perspective on how the Office of Technology is handling 
its oversight responsibilities in light of its diminishing budget.
    In your opinion, does the Office of Technology have the staff and 
funding to meet the program's demands? (Yes/No)
    Answer. The budget provides $250,000 for the Office of Technology. 
Within this amount, the Office provides oversight of the SBIR and STTR 
programs. I also understand the value of rigorous oversight. That is 
why SBA has committed to developing comprehensive performance measures 
for the SBIR and STTR programs. Currently, no continuous or 
comprehensive measures exist for the programs. With performance 
measures in place, we can regularly evaluate the effectiveness of these 
programs. SBA is currently working to implement measures now.
    Question. As I just noted, without adequate funding, the Office of 
Technology cannot function as it was intended and cannot support the 
SBIR and STTR programs. The Committee believes that in order to provide 
the Office with the resources it requires, there should be at least 
$1.5 million allocated for the Office to go toward additional staff, 
oversight, outreach, travel, and maintenance of its databases.
    Would you disagree that at least $1.5 million would be an 
appropriate amount to meet with needs of the Office of Technology, as 
Senator Snowe and I have recommended?
    Answer. The budget provides $250,000 for the Office of Technology. 
Within this amount, the Office will provide oversight for the SBIR and 
STTR programs and will pursue high-priority activities, such as the 
development of comprehensive performance measures to regularly evaluate 
the programs' effectiveness.

                        SBA CONTRACTING PROGRAMS

    Question. One of the principle functions of the SBA is to ensure 
that the Federal government meets its 23 percent small business 
contracting goal, specifically by reviewing more than $400 billion in 
federal contracts awarded each year. Several issues have been raised in 
the past with respect to the SBA not playing its proper oversight role 
with respect to contracting.
    First, do you intend to increase the contracting oversight staff at 
the SBA--Procurement Center Representatives (PCRs) and Commercial 
Marketing Representative (CMRs)? (Senator Snowe and I think we need 100 
more PCRs and 50 CRMS, which would require $15 million over time.)
    Answer. The SBA is in the process of reassessing our internal 
procedures regarding the criteria for placement of the PCRs and CMRs. 
As we add and/or replace PCRs and CMRs we want to ensure that they are 
placed in locations which can maximize their individual and group 
ability to assist the Government's small business contractor community. 
Specifically, we are working with the SBA's Office of the Chief 
Information Officer (OCIO) to move forward with the development and 
implementation of the electronic Procurement Center Representative 
(ePCR) program which will allow the Agency to further automate the PCR 
review process, making it possible for them to examine increased 
numbers of purchase requests while expanding the PCR's ability to cover 
Federal buying offices located outside their local commuting area. 
Implementation of the electronic Subcontracting Reporting System (eSRS) 
has enhanced the ability of our CMRs to more closely monitor the 
subcontracting programs in place at the large prime contractors within 
their portfolios by giving them access to ``real time'' data. 
Information entered into eSRS, available to the CMRs, provides for 
greater scrutiny of the prime's use of small businesses as 
subcontractors. As the CMRs have ready-access to the prime's reports 
they can respond more quickly to situations which require their 
attention. As information on Department of Defense large prime 
contractors is being entered into the eSRS, we believe that this 
additional availability of reporting data will only increase the 
effectiveness of the CMRs to effectively monitor the large primes.
    Question. Second, what plans do you have to ensure that minority 
small businesses--whether through the 8(a) program or as Small and 
Disadvantaged Businesses--have full access to the Federal marketplace?
    Answer. It is crucial that minority-owned small businesses are able 
to participate fully in the federal marketplace. One way to measure 
this participation is through the small disadvantaged business (SDB) 
procurement goal which has been established by statute at 5 percent. 
Over the past several years, the Federal government has consistently 
achieved and exceeded this goal.
    Our PCRs continue to work closely with the contracting officers at 
their assigned buying offices to ensure that all small businesses, 
including 8(a) program participants and SDBs have maximum practicable 
access to Federal procurement opportunities. Just recently, our PCRs 
undertook a major initiative with regard to the small business 
``parity'' issue in light of a recent GAO decision which seemed to give 
priority to HUBZone small business concerns over 8(a) firms in Federal 
contracting. The Office of Management and Budget released interim 
guidance that agencies should follow SBA's parity regulations, while 
the Executive branch undertakes a review of the GAO opinion. Our PCRs 
have undertaken substantial efforts to ensure that the parity rules are 
followed while the opinion is being reviewed. To this end, the PCRs 
have increased training for the contracting officers at the buying 
offices to ensure they understand the need to conduct adequate market 
research and have an awareness of their office's achievements relative 
to their goals when deciding which type of set-aside to use.
    Additionally, our PCRs are conducting 30 Surveillance Reviews at 
major Federal buying offices in fiscal year 2009. As part of these 
reviews, our PCRs are examining the individual buying office's 
compliance with the 8(a) Partnership Agreement, in place between the 
SBA and the higher Headquarters of the buying office reviewed.
    While access to federal contracts is one aspect of the business 
development offered through the 8(a) program, it is not the primary 
purpose of the program. Because the program is a business development 
initiative, the SBA is working diligently to better track assistance 
provided to 8(a) firms through the Business Development Management 
Information System (BDMIS) and the Business Development Assessment Tool 
(BDAT).
                                 ______
                                 
              Questions Submitted by Senator Susan Collins

    Question. What is the status of efforts to establish an economic 
stimulus lending program, a secondary market guarantee authority for 
pools of SBA 504 program first-lien mortgages, and SBA secondary market 
lending authority to make loans to important broker-dealers that 
operate in the SBA 7(a) secondary market?
    What are you seeing in terms lending to small businesses? Has the 
stimulus bill been effective in unfreezing the credit market for small 
businesses?
    Answer. To date, the Recovery Act efforts to eliminate fees and 
raise guarantees has helped restore access to capital for small 
businesses. Through reduced fee and higher guaranteed loans, the Agency 
has supported nearly $8 billion in lending to small businesses using 
$155 million in Recovery Act subsidy. Additionally, over 800 banks that 
had not made an SBA loan since October 2008 have made loans through the 
Recovery Act. At the same time, since March market activity and pricing 
in the 7(a) secondary market has rebounded from its severe contraction 
in 2008. Over the past 3 months, the average monthly loan volume 
settled from lenders to broker-dealers in the secondary market has 
risen to $335 million, moving closer to pre-recession averages.
    On June 15, SBA announced its ARC loan program, aimed at helping 
viable small businesses weather immediate financial hardship through 
interest free, deferred payment loans to help them make payments on 
existing, qualified debts. Since it was launched, the ARC program has 
been steadily ramping up. Through August 4, SBA has approved over 1,000 
loans totaling over $34.5 million.
    Two provisions in the Recovery Act were designed to address market 
disruptions in SBA's secondary markets for guaranteed loans. Both of 
these programs are entirely new and complex, requiring regulations, 
procedures, credit subsidy models and systems to implement. SBA is 
working diligently to develop and implement these programs.
    Section 503 established a new secondary market guarantee authority 
to provide SBA guarantees on pools of 504 first mortgage loans--which 
have not historically been guaranteed or securitized by SBA. The Agency 
has drafted regulations, credit subsidy models, procedural guidance and 
legal forms and agreements for this program. These documents are under 
review by OMB and through the inter-agency process. SBA has also 
started developing contracts and systems to implement this program.
    Section 509 established a new direct loan program to help broker 
dealers in the 7(a) secondary market finance their inventories of 
guaranteed loans. The Agency has drafted regulations, credit subsidy 
models, procedural guidance and legal forms and agreements for this 
program. These documents have been sent to OMB for inter-agency and 
Administrative review. SBA has also started developing contracts and 
systems to implement this program.
    Question. The Recovery Act directed SBA to initiate four new loan 
programs, and mandated revisions to other programs such as increasing 
SBA's guaranty on loans to 90 percent and increasing the size of surety 
bond guarantees. The SBA Office of Inspector General issued a Recovery 
Oversight Framework document identifying various risks to taxpayer 
dollars that could result from these new and revised programs. In 
addition, the OIG recently issued a report on unimplemented 
recommendations from prior audits that could affect the risks and 
performance of these programs. This included outstanding audit 
recommendations regarding the microloan program, which has now received 
additional funding under the Recovery Act.
    What resources is SBA planning to devote to other risk mitigation 
efforts to prevent or limit these risks?
    Answer. Lender oversight regulations were issued in the fall of 
2008 that established clear responsibilities and a supervisory and 
enforcement framework for lender oversight. Additionally, staffing has 
been increased by seven positions in the Office of Credit Risk 
Management over the past 2 years. Going forward, SBA recently re-
procured its contract for off-site monitoring and is: (1) making more 
information available to lenders and SBA staff for portfolio 
management; (2) redeveloping risk rating metrics to enhance their 
predictiveness; (3) integrating more dynamic, ongoing evaluation of 
lenders and loan portfolios; and (4) ensuring that trends or 
developments are identified and investigated when oversight activities 
surface them.
    In the case of the Recovery Act programs, SBA did a comprehensive 
risk assessment for each of the programs and developed a detailed risk 
mitigation plan for each program. Senior managers from Capital Access, 
Office of Credit Risk Management, Office of Chief Financial Officer, 
and the Office of General Counsel participated in the risk assessment 
and risk mitigation efforts. The Office of Inspector General reviewed 
the plans and provided detailed comments.
    What resources and efforts is SBA devoting to implementing the 
outstanding audit recommendations to improve efficiencies in these 
programs?
    Answer. The Agency has committed significant resources to improving 
lender oversight technology systems and has staffed up to meet the 
increased demands for new Recovery Act programs and for the processing, 
servicing and liquidation of Recovery loans.
    During fiscal year 2009, the Agency closed 66 OIG audit 
recommendations out of a total of approximately 200 at the start of the 
year and addressed in writing the majority of the 50 open GAO 
recommendations. Over the past 2 years, SBA reduced the average number 
of OIG audit findings from around 300 to approximately 150-170. In 
addition, per the 2002 Consolidated Reports Act, SBA's OIG publishes 
annually its Major Management Challenges (8 this year), with a 
scorecard rating system from red to orange to yellow to green. ``Reds'' 
have gone from 22 to 1 and the number of recommended actions from the 
high 80s to 26. We continue to work with OIG to incorporate lessons 
learned from previous audits and to develop corrective actions to 
minimize waste, fraud and abuse. Additionally, SBA has put in each 
senior executives job requirements a goal to address and resolve major 
audit findings in his/her respective program area.
    Question. Please describe the current Veterans' Assistance programs 
that SBA operates (1) by the SBA Vets Office, (2) by SBA Capital Access 
program, and (3) by SBA Entrepreneurial Development Office with a 
detailed description of loan programs (average dollar loans and average 
business size, geographic breakdown, total dollar volume) and grant 
programs (average dollar grants, average business size, total dollar 
volume).
    Also please describe SBA's staff efforts at outreach to other 
federal agencies (U.S. Department of Labor, especially its Veterans 
Employment and Training Services Office, and U.S. Veterans 
Administration, the U.S. Department of Defense), state and local 
governments, not-for-profit organizations and other stakeholders, and 
identify existing studies, programs, resources and all existing 
studies, programs, resources and all available federal funding to 
assist veterans in starting and/or growing a small business that 
conduct veterans' benefit programs.
    Answer. The SBA Office of Veterans Business Development (OVBD) is 
the lead SBA office for Veterans' Entrepreneurship. OVBD conducts 
comprehensive outreach to veterans including Reserve component members, 
for the formulation, execution, and promotion of policies and programs 
of the Administration that provide assistance to small business 
concerns owned and controlled by veterans, service-disabled veterans 
and reservists. The AA/VBD also acts as an ombudsman for full 
consideration of veterans in all Administration programs. OVBD, working 
with the Office of Capital Access, was responsible for the Agency 
establishing the Patriot Express Pilot loan program, which has approved 
3,828 loans for $324.2 million for an average loan amount of $84,702 in 
2 years, as of June 30, 2009; we enhanced the surety bond guarantee 
program for veterans, we established a special outreach and web based 
program for veterans and reservists in the SBDC program, we established 
a focused veterans and reservists on line program in SCORE, we market 
the Small Business Training Network to the veterans community, we 
established, and recently improved the Military Reservist Economic 
Injury Disaster Loan program, we provide funding to and manage the 
Veteran Business Outreach Center program, and we have expanded the 
District Office-Veterans Outreach Initiative. In addition, we oversee 
the government wide Service-Disabled Veteran Owned Small Business goal 
program, and OVBD provides training too and e-based ombudsman guidance 
to in excess of 10,000 veterans and reservists each year. OVBD works 
with the independent SBA Office of Advocacy in developing critical 
Advocacy research into veteran's entrepreneurship.
    To accomplish its primary responsibilities of outreach and to act 
as an ombudsman OVBD utilizes:
  --Veteran Business Outreach Centers (VBOC).--8 Veteran specific 
        business centers, which operate from a fiscal year 
        appropriation of $1.2 million or $150,000 each.
  --District Office-Veterans Outreach Initiatives (DO-VOI).--OVBD 
        Funding and support for district office Veteran Business 
        Development Officers.
  --E-Guidance and Ombudsman Assistance.--Program guidance provided to 
        agency customers via e-mail.
  --Service-Disabled Veteran Procurement.--Providing training SD 
        veterans and to contracting officials to improving SD Veteran 
        procurement opportunity.
  --Entrepreneurial Tools Development and Distribution.--Development 
        and distribution thousands of Veteran and Reservist specific 
        Program guides annually.
  --Policy and Program Development and Implementation.--Enhanced OVBD, 
        CA, ED, GCBD, ODA programs and policies for veterans and 
        reservists.
  --Inter and Intra Agency Coordination.--Coordination and cooperation 
        across SBA and representation, liaison and program and policy 
        development with DOD, DOL, DVA, State, local and private 
        Veteran Serving Organizations, numerous public presentations 
        each year, and representation of agency veteran program 
        resources with national media.
    Question. Though the Office of Government Contracting and Business 
Development, SBA's 7j program provides training to 8(a) firms (firms 
that are socially or economically disadvantaged). These firms are 
eligible for government contracts set-aside specifically for small 
businesses; however, because of a firm's status as a socially or 
economically disadvantaged firm, its employees need more than just 
financial opportunities to grow. These firms are also in need of 
technical assistance to help them meet the demands of these contracts. 
7j training is a significant part of the 8(a) program effort to promote 
small business opportunities and growth. Please give a status update 
report reviewing the last 5 years of the 7(j) program, including number 
of clients trained, length of training program, cost per client per 
training program, follow-up actions, description and examples of 
curricula provided, and all other relevant information that would 
provide the Committee with insight into the performance of the 7(j) 
program.
    Answer.

----------------------------------------------------------------------------------------------------------------
                                                                                    Fiscal year--
                                                                    --------------------------------------------
                                                                       2005     2006     2007     2008     2009
----------------------------------------------------------------------------------------------------------------
Number of 7(j) eligible firms assisted.............................    2,107    2,317    2,486    2,021    2,289
Per firm cost......................................................   $1,479     $988   $1,344   $2,356   $2,119
Duration of Training...............................................  ( \1\ )  ( \1\ )  ( \2\ )  ( \2\ )  ( \2\ )
----------------------------------------------------------------------------------------------------------------
\1\ 1 and 2 day workshops.
\2\ 1 day workshops.

    The U.S. Small Business Administration (SBA), Office of Government 
Contracting and Business Development, 8(a) Business Development Program 
(BD) is expanding its efforts to provide innovative training and 
business solutions to 8(a) Business Development Program Participants. 
Over the past 5 years SBA has funded projects to enhance the business 
savvy of 8(a) Participants by providing them with fundamental business 
development strategies as well as the tools to enhance their ability to 
successfully compete in federal markets.
    SBA monitors contractor/service provider performance and analyzes 
customer feedback from the 8(a) Participant and 8(a) Business 
Development Field Office personnel to assess the effectiveness of each 
7(j) funded project. In addition, periodic surveys of BDS staff in the 
field are conducted to fine tune and develop initiatives that will 
foster business growth and enhance performance and the long term 
viability of 8(a) firms in the federal and commercial sectors.
Fiscal Year 2009
    In fiscal year 2009, 7(j) funds have been used to support nine new 
initiatives. The first project involves the establishment of an 8(a) 
Association for the Washington Metropolitan Area that supports members 
throughout Washington, Virginia and Maryland. The 8(a) Association will 
be established to assist 8(a) certified businesses with valuable 
educational, promotional, and federal contracting information needed to 
further advance their level of experience and achieve a higher degree 
of success.
    Secondly, the SBA will continue Phase II of its initiative with the 
John H. Chafee Center for International Business at Bryant University 
to provide international business development to 8(a) Participant 
firms. Phase II of the SBA 8(a) 7 (j) Trade Data Matching Program will 
provide 7(j) eligible businesses with counseling and training in the 
areas of international business development that is designed to help 
small business start, grow and foster success in the international 
market place. The training will include one-on-one counseling, 
traditional and online training, feature business forums and 
traditional peer to peer networking opportunities, business modeling, 
conferences and access to a sophisticated trade data retrieval system.
    Additionally, three face-to-face projects utilizing traditional 
classroom as well as Webinars are being funded to provide critical 
business solutions to 8(a) Participants to bolster their ability to 
compete for and manage federal contracts, develop business strategies, 
maximize E-Commerce business opportunities, recruit, manage and retain 
talented staff, and access the capital necessary to grow and sustain 
business functions. Fifteen workshops are planned which include the 
following: Marketing to the Federal Government; How to Qualify for the 
GSA Schedule; Government Contract Negotiations; Proposal Preparation 
Training; Construction Contracting; Federal Contracting and Government 
Contract Management; Strategic Alliances; Leadership Skills; One-On-One 
Business Coaching; Small Business 8(a) Co-Ops; Regional Conferences and 
Seminars E-Commerce and Internet Business Strategies; Human Capital 
Management; Participating on Contracting Teams; Obtaining Debt, Equity 
and Contract Financing; and Planning for and Managing 8(a) Program 
Transition.
    The sixth initiative will permit SBA to develop a Webinars series 
that will provide an online resource to allow 8(a) and 7(j) eligible 
firms to obtain direct business development advice from key business 
development resources. The Technology to host the Webinars will also be 
provided.
    Project seven involves the award of a contract that will be awarded 
to a vendor to provide a publication that will be given to 
approximately 4,000 7(j) eligible and 8(a) firms. This publication will 
increase their knowledge of how to do business with the government to 
optimize their contracting opportunities.
    7(j) funding will also be used to provide enhancements to the 
Business Management Development Information System (BDMIS). The 8(a) 
Business Development Assessment Tool 8(a) BDAT) will provide a uniform 
mechanism to assess the individual management, technical, financial and 
procurement assistance needs of 8(a) participants. The 8(a) BDAT will 
also track individualized assistance provided to 8(a) program 
participants on an annual basis.
    Finally, the SBA serves as a co-host with the Department of 
Commerce Minority Business Development Agency for the 27th Annual 
Minority Enterprise Development Week Conference. The Office of 8(a) 
Business Development will provide networking, matchmaking and training 
opportunities to the 7(j) eligible participants during Minority 
Enterprise Development (MED) Week 2009.
Fiscal Year 2008
    SBA funded six projects using 7(j) Program funds. The first 
initiative funded Phase I of the international business model developed 
by the John H. Chafee Center for International Business at Bryant 
University to provide international business development assistance to 
100 8(a) firms. Projects two and three provided face-to-face training 
and included the following workshop titles, Business Development for 
Small Businesses Parts 1 and 2, Financial Management for Small 
Business, and Cost and Pricing Parts 1 and 2. These workshops were also 
delivered via the web.
    In addition, SBA awarded a contract to purchase a technical 
resource for 8(a) firms entitled ``Gems of Wisdom for Increasing 8(a) 
BD Competitiveness. This book was provided to increase the knowledge 
base and competitiveness of 8(a) BD firms through the vast network of 
shareholders such as Offices of Small and Disadvantaged Business 
Utilization, Procurement Center Representatives and Commercial Market 
Representatives, Acquisition Team Members including contract offices, 
program offices and mentors.
    The fifth project was awarded in support of the SBA's Emerging 200 
initiative. The purpose of this effort was to increase outreach to 
areas historically challenged by high levels of unemployment and 
poverty. The service provider was tasked with identifying 200-inner-
city businesses across the country that showed a high potential for 
growth--and to provide them the network, resources and motivation 
required to build a sustainable business of size and scale within a 
designated inner-city geographic location. The sixth and final project 
funded training activities for the fiscal year 2008 MED Week 
Conference.
Fiscal Year 2007
    During fiscal year 2007, the SBA supported two projects using 7(j) 
Program funds. The initial project financed face-to-face training 
provided management and technical assistance to 8(a) firms and other 
7(j) eligible businesses through one day face-to-face training for the 
following workshop titles, Business Development for Small Businesses 
Parts 1 and 2, Financial Management for Small Business, and Cost and 
Pricing Parts 1 and 2. This initiative also included individualized 
business counseling.
    The second project purchased a business development resource 
entitled ``Gems of Wisdom for Succeeding in the 8(a) BD Program and 
Beyond.'' The purpose of the publication is to share ``gems of wisdom'' 
of successful 8(a) BD graduates about their success in the Program. 
This book guided and encouraged others 8(a) firms, and it demonstrated 
that the ``hands on'' provided throughout the program really matters.
Fiscal Year 2006
    SBA funded a single award to provide workshops to 8(a) and other 
7(j) eligible firms. Workshops titles included Business Development for 
Small Businesses Parts 1 and 2, Financial Management for Small 
Business, and Cost and Pricing Parts 1 and 2. This initiative also 
included individualized business counseling.
Fiscal Year 2005
    SBA funded two awards to provide workshops to 8(a) and other 7(j) 
eligible firms. Workshop titles included Business Development for Small 
Businesses Parts 1 and 2, Financial Management for Small Business, and 
Cost and Pricing Parts 1 and 2. This initiative also included 
individualized business counseling.
    The second project was designed to maximize the return on time 
invested by each participant. Participants explored different areas of 
their business and discussed the common elements that lead to success 
and what decisions and practices might lead a business to fail. 
Identification of these elements and how they relate to individual 
business environments prepared participants how to analyze specific 
strengths, weaknesses, opportunities and threats so that achievable 
action plans could be developed and implemented. A companion workbook 
and DVD were produced which enabled SBA Field Offices to provide 
additional training to 8(a) Participants who were unable to attend 
previously scheduled workshops.

                    GENERAL SERVICES ADMINISTRATION

STATEMENT OF HON. PAUL F. PROUTY, ACTING ADMINISTRATOR
ACCOMPANIED BY THE HONORABLE JOSEPH F. BATAILLON, CHIEF JUDGE, U.S. 
            DISTRICT COURT FOR THE DISTRICT OF NEBRASKA; CHAIR, SPACE 
            AND FACILITIES COMMITTEE, JUDICIAL CONFERENCE OF THE UNITED 
            STATES

    Senator Durbin. Next panel is the General Services 
Administration, and I will give a little introduction here as 
the panelists are going to take the table.
    GSA employs more than 12,000 staff in 11 regions throughout 
our country; oversees a vast and diverse portfolio of Federal 
assets; manages more than 8,600 buildings with a total value of 
$74 billion, including 1,500 Government-owned buildings. This 
may be one of them.
    It is responsible for servicing the workspace requirements 
for 57 Federal agencies with approximately 354 million square 
feet of workspace for over 1 million Federal employees in 2,000 
American communities. It is a big job. They are big landlords.
    First, we will hear the testimony of Paul Prouty, Acting 
Administrator of the General Services Administration. We look 
forward to hearing about the GSA's plans to implement the 
Recovery Act by converting Federal buildings to high-
performance green buildings, as well as discussing the 2010 
budget.
    Also joining us to discuss the budget request for GSA is 
the Honorable Joseph Bataillon, Chief Judge of the U.S. 
District Court for the District of Nebraska. He is Chair of the 
Space and Facilities Committee of the Judicial Conference, 
which prepares an annual 5-year plan detailing the needs and 
priorities of the judiciary for courthouse space. GSA and the 
administration use this project plan in selecting projects each 
fiscal year and preparing the budget request.
    We thank you both for being here. Your statements will be 
made a part of the official record, and at this point, the 
floor will be available to each of you for 5 minutes.
    Mr. Prouty. Thank you very much.
    Chairman Durbin, Ranking Member Collins, Senator Bennett--
good to see you, sir--distinguished members of the 
subcommittee, I am honored to appear before you today in 
support of GSA's 2010 budget request. With your permission, I 
would also like to provide an update on our efforts to 
implement the American Recovery and Reinvestment Act of 2009.
    GSA's fiscal year 2010 budget request supports the 
administration's commitments to build a transparent, 
participatory, and collaborative Government through the use of 
new technologies, as well as address significant shortfalls in 
our national infrastructure.
    The fiscal year 2010 budget request, in conjunction with 
the Recovery Act, provides $6.4 billion for capital projects. 
These projects will create new jobs for thousands of Americans 
and will stimulate industries that have been battered by the 
economic downturn. In addition, these projects will deliver 
lasting progress toward modernizing our Nation's 
infrastructure, reducing the Federal Government's consumption 
of energy and water, and increasing our reliance on clean and 
renewable sources of energy.
    GSA's fiscal year 2010 budget requests $645 million in net 
budget authority. This amount is just 2.4 percent of our total 
planned obligations of $27 billion. The majority of our funds 
come in the form of customer reimbursements for goods purchased 
or rent paid for space under GSA's jurisdiction, custody, or 
control.
    For the Public Buildings Service, GSA requests $8.5 billion 
in new obligational authority. Of these funds, $658 million are 
requested for the construction and acquisition of critical 
facility projects for the Food and Drug Administration, the 
Federal Bureau of Investigation, U.S. Customs and Border 
Protection, and the judiciary.
    We also request new obligational authority of $496 million 
to address the backlog of repair and alteration projects. 
Although the Recovery Act funding provides GSA with some relief 
from our substantial backlog of repair and alteration needs, 
our inventory of aging Federal buildings requires continued 
reinvestment.
    We also request $40 million for our energy and water 
retrofit and conservation program and our Federal high-
performance green buildings program to help address Federal 
requirements for energy conservation and reduced energy 
consumption in Federal buildings.
    The GSA Federal Acquisition Service (FAS) is a leading 
acquisition organization for the Federal Government. Last year, 
revenues increased by 4.6 percent, making fiscal year 2008 the 
first year since fiscal year 2004 that GSA has seen revenue 
growth across the combined programs of FAS. FAS also realized a 
2 percent increase in cash collections from our multiple award 
schedules program. This business resurgence is the result of a 
concerted effort to reduce operating costs, standardize the 
fees we charge our customers, and restructure our service 
offerings.
    Today, GSA and FAS are delivering value to our customers by 
offering products and services that meet or exceed their 
expectations. As a leader in green Government, GSA continues to 
encourage Federal agency customers to consider the 
environmental impact of their acquisition decisions.
    The American Recovery and Reinvestment Act has provided GSA 
with an opportunity to contribute to our Nation's economic 
recovery by investing in green technologies and reinvesting in 
our public buildings. The Recovery Act provided GSA's Public 
Buildings Service with $5.55 billion, including $1.05 billion 
for Federal buildings, U.S. courthouses, and land ports of 
entry, and $4.5 billion to convert Federal buildings into high-
performance green buildings.
    We are moving forward with speed, tempered by careful 
consideration of our procurement responsibilities and our 
ultimate accountability to the taxpayer. On March 31, GSA 
delivered to Congress a list of 254 projects in all 50 States, 
the District of Columbia, and two U.S. territories to be 
completed with funds provided by the Recovery Act. GSA selected 
the best projects for accomplishing the goals of the Recovery 
Act based on a detailed analysis of a number of factors. Our 
goals in developing this list were to both put people back to 
work quickly and increase the sustainability of our buildings.
    As of June 5, PBS has awarded contracts totaling $244 
million to begin the construction, modernization, or repair of 
25 Federal buildings across the country. Of this, $213 million 
has been obligated to convert GSA facilities to high-
performance green buildings. We have also obligated $30 million 
for the construction of new energy-efficient land ports of 
entry at Calais, Maine and the Peace Arch at Blaine, 
Washington.
    The Recovery Act provided GSA's Federal Acquisition Service 
with $300 million to replace motor vehicles across the Federal 
fleet with those that are new and more efficient. GSA's 
strategy to improve the energy efficiency of the Federal fleet 
balances energy efficiency goals with the need to expedite 
procurement, in order to maximize economic benefit for the auto 
industry and the economy as a whole.
    To date, GSA has obligated $287 million to order over 
17,000 fuel-efficient vehicles, of which 3,100 are hybrids. In 
the final phase of this procurement, GSA will order $13 million 
of compressed natural gas and hybrid buses and electric 
vehicles by September 30, 2009.
    Today, I have discussed our fiscal year 2010 budget 
request, the Recovery Act, and GSA's eagerness to undertake the 
new challenges that lie ahead. Your approval of GSA's budget 
request is a vital step in helping us achieve our mutual goals 
of economic recovery, energy efficiency, and increased citizen 
engagement in Government.

                           PREPARED STATEMENT

    GSA is committed to delivering on these goals, contributing 
to the long-term objectives of the administration, and 
providing the best use of taxpayer funds. I look forward to 
continuing this discussion of our 2010 budget request with you 
and the members of the subcommittee.
    Thank you.
    Senator Durbin. Thank you.
    [The statement follows:]

                  Prepared Statement of Paul F. Prouty

    Chairman Durbin, Ranking Member Collins, and Distinguished Members 
of the Subcommittee: My name is Paul Prouty and I am the Acting 
Administrator of the General Services Administration (GSA). Thank you 
for inviting me to appear before you today to discuss GSA's fiscal year 
2010 budget request. With your permission, I would also like to provide 
you with an update on our efforts to implement the American Recovery 
and Reinvestment Act of 2009 (``Recovery Act'').
    GSA's fiscal year 2010 budget request supports the Administration's 
commitments to build a transparent, participatory, and collaborative 
government through the use of new technologies as well as address 
significant shortfalls in our national infrastructure. The fiscal year 
2010 budget request, in conjunction with the Recovery Act, provides 
$6.4 billion for capital projects involving the new construction, major 
modernization, and repair of Federal buildings. These projects will 
create new jobs for thousands of Americans and will stimulate 
industries that have been battered by the economic downturn. Our 
projects will provide jobs for constructions workers, carpenters, 
plumbers, electricians, architects, and engineers nationwide. Our 
demand for building materials will create or sustain jobs in those 
industries. And these projects will deliver lasting progress towards 
modernizing our Nation's infrastructure, reducing the Federal 
Government's consumption of energy and water, and increasing our 
reliance on clean and renewable sources of energy.
    The budget establishes an aggressive agenda for opening Government 
to the American people by rapidly expanding the use of technology 
across the Executive Branch. The President knows that new technology is 
crucial to delivering greater transparency, accountability, and public 
participation in government. The Recovery Act has been the staging 
ground for the Administration's new approach to open Government through 
the innovative use of new technology
    The fiscal year 2010 President's Budget creates a vision of Federal 
IT that goes beyond increasing the public availability of Government 
data. Data transparency is a key goal of this Administration, but we 
are limited in our ability to deliver the broader goal of participatory 
government without substantial changes in the Federal technology 
infrastructure. Sound and measured investments are needed to increase 
collaboration across Federal agencies, to open government processes and 
operations--not just data--to the public, and to consolidate, 
standardize, and reduce common Federal IT services, and solutions.
    Our fiscal year 2010 budget request is a foundational piece for 
moving forward with the President's vision of transforming Government 
by transforming Federal information technology. We have proposed nearly 
$40 million in technology investments, which will improve transparency, 
accountability, and public participation. The investments included in 
our request look to 21st Century technologies to accelerate rapidly 
efforts, which are often characterized as ``electronic government''.
    Our request seeks funding to begin building the capacity in the 
Federal Government for a culture of openness and transparency. That 
culture is based on innovative tools by developing new means of 
delivering Government data, citizen services, and Federal IT 
infrastructure. GSA's fiscal year 2010 budget requests the resources 
necessary for GSA to support the President's vision of ``leveraging the 
power of technology to transform the Federal Government''. The 
requested investments will allow GSA to take a dramatic step forward 
towards expanding public participation in and access to Government 
data, which will help to deliver greater transparency, accountability, 
and public participation in Government. Adopting new technologies and 
new ways to harness existing technology will make the Federal 
Government more efficient, more effective, and more responsive to its 
citizens.

                    FISCAL YEAR 2010 BUDGET REQUEST

    GSA's fiscal year 2010 budget requests $645 million in net budget 
authority for the Federal Buildings Fund and our operating 
appropriations. This amount is just 2.4 percent of our total planned 
obligations of $27 billion. The majority of our funding is provided 
through reimbursements from Federal customer agencies, for purchases of 
goods and services or as rent paid for space in Federally-owned and -
leased buildings under GSA jurisdiction, custody or control. GSA 
requests appropriations to support capital investments in the Federal 
Buildings Fund, to provide for our Government-wide responsibilities, 
and for other activities that are not feasible or appropriate for a 
user fee arrangement.

                        PUBLIC BUILDINGS SERVICE

    Our fiscal year 2010 budget requests $8.5 billion in New 
Obligational Authority (NOA) and an appropriation of $525 million for 
the Federal Buildings Fund. Our request proposes a capital investment 
program of $1.15 billion, for projects for the Food and Drug 
Administration (FDA), the Federal Bureau of Investigation (FBI), U.S. 
Customs and Border Protection (CBP), and the Judiciary.
    We have requested $658 million in NOA for New Construction and 
Acquisition, including $453.5 million for two Agency consolidations and 
three infrastructure and development projects, $151 million for three 
land port of entry facilities, and $53 million for two U.S. Courthouse 
projects. Our request includes the following projects:
  --FBI Field Office Consolidation in Miami, FL ($191 million);
  --FDA Consolidation in Montgomery County, MD ($138 million);
  --Acquisition of Columbia Plaza in Washington, DC ($100 million);
  --Southeast Federal Center Remediation in Washington, DC ($15 
        million);
  --Denver Federal Center Remediation in Lakewood, CO ($10 million);
  --Land ports of entry in El Paso, TX; Calexico, CA; and Madawaska, 
        ME; and
  --U.S. Courthouses in Lancaster, PA and Yuma, AZ.
    GSA also requests NOA of $496 million for Repairs and Alterations 
(R&A) to Federal buildings. Although the funding provided in the 
Recovery Act gives GSA some relief from our substantial backlog of R&A 
needs, our inventory of aging Federal buildings requires continued 
reinvestment. The R&A program will continue to be a strategic priority 
for GSA, and our fiscal year 2010 request focuses on the highest 
priority projects in our real property portfolio.
    The request includes $176 million in NOA for four major building 
modernizations, $260 million for non-prospectus level projects, and $60 
million for Special Emphasis programs. Our proposed major modernization 
projects are:
  --East Wing (White House) Infrastructure Systems Replacement in 
        Washington, DC ($121 million);
  --New Executive Office Building in Washington, DC ($30 million);
  --EEOB (Courtyard Replacement) in Washington, DC ($10 million); and
  --EEOB (Roof Replacement) in Washington, DC ($15 million).
    Our Special Emphasis programs would provide:
  --$20 million for Fire and Life Safety Program;
  --$20 million for Energy and Water Retrofit and Conservation 
        Measures; and
  --$20 million for improvements necessary to transform existing 
        Federal buildings into Federal High Performance Green 
        Buildings.
    GSA is dedicating $40 million to our Energy and Water Retrofit and 
Conservation program and our Federal High Performance Green Buildings 
program, to help address Federal requirements for energy conservation 
and reduced energy consumption in Federal buildings. These Special 
Emphasis programs will upgrade Heating, Ventilation and Air 
Conditioning (HVAC) and lighting systems, install advanced metering, 
increase water conservation, support new renewable energy projects, and 
many other items that will conserve energy in Federal buildings. These 
programs are in addition to the energy conservation measures that are 
already incorporated into our prospectus-level New Construction and 
Repairs and Alterations project requests.
    In fact, the Public Buildings Service (PBS) already incorporates 
sustainable design principles and conservation measures into the design 
and construction of, and repair and alteration to, many GSA Federal 
buildings. For example, 100 percent of the new construction projects 
initiated in fiscal year 2008 were registered for the U.S. Green 
Buildings Council's Leadership in Energy and Environmental Design 
(LEED). These projects will be measured against objective standards for 
sustainable design and construction and will receive LEED certification 
upon substantial completion. PBS has established a commissioning 
program, to ensure all building systems are working efficiently, and in 
a coordinated manner, upon completion of a construction project. PBS 
performs energy audits and environmental risk assessments on a regular 
basis to determine where resources should be focused.
    These initiatives are just a few of the environmental measures that 
GSA incorporates into New Construction and R&A projects, in addition to 
our Special Emphasis programs. Our many environmental initiatives 
compliment each other to build a comprehensive program to promote 
efficient use of energy and water, increased reliance on sustainable 
energy sources, and environmental stewardship in the Federal inventory. 
These programs not only benefit the environment but increase the value 
of our assets and reduce operating costs over the life of our 
buildings.
    In addition to our capital program, GSA requests New Obligational 
Authority for our operating program, in the amount of:
  --$4.9 billion for the Rental of Space program, which will provide 
        for 194 million rentable square feet of leased space;
  --$2.4 billion for the Building Operations program; and
  --$141 million for the Installment Acquisition Payments program.

                    OPERATING APPROPRIATION REQUEST

    While only $270 million of GSA's proposed budget is funded through 
GSA's operating appropriations, the activities they fund are critical. 
Our operating appropriations provide for GSA's Office of Governmentwide 
Policy and the Chief Acquisition Officer, the many Government-wide 
programs of the Operating Expenses account, the Electronic Government 
Fund, the pensions and office staffs of former Presidents, and the 
Federal Citizen Services Fund.
    The largest increase in our request is for major new Government-
wide E-Government initiatives, supported by the CIO Council and under 
the auspices of the new Federal CIO. The proposed increase of $33 
million in this account would be used to address initiatives in the 
area of Open Government and Transparency, to move agencies to realize 
large potential savings through alternative approaches to IT 
infrastructure, to increase agency use of collaborative technologies, 
and to advance the adoption of new tools to support innovations in how 
the Federal Government relates to citizens, the private sector, and 
State and local governments.
    Additional funds requested for GSA operating appropriations include 
increases for the Federal pay raise and inflation, along with proposed 
program increases to:
  --develop high performance green building standards for all types of 
        Federal facilities;
  --develop and enhance multiple Government-wide databases to improve 
        Federal reporting and transparency;
  --provide additional training support for the Federal Acquisition 
        Institute, supporting acquisition workforce of all civilian 
        Executive agencies; and
  --reflect the full-year cost of the pension and related benefits for 
        former President George W. Bush.

                      FEDERAL ACQUISITION SERVICE

    The Federal Acquisition Service (FAS) had a very successful year in 
fiscal year 2008. Revenues increased by 4.6 percent last year, making 
fiscal year 2008 the first year since fiscal year 2004 that GSA has 
seen revenue growth across the combined programs of FAS. FAS also 
realized a solid two percent increase in cash collections from our 
multiple award schedules program. Business with the Department of 
Defense, FAS' largest customer, increased by three percent in fiscal 
year 2008. This ``business resurgence'' is the result of a concerted 
effort to reduce operating costs, standardize the fees we charge our 
customers, and restructure our service offerings. Today, GSA and FAS 
are delivering value to our customers by offering products and services 
that meet or exceed their expectations.
    After 3 years of cost cutting, a protracted hiring freeze, and a 
major realignment of staff out of the Assisted Acquisition Services 
portfolio, to other parts of FAS and GSA, we are beginning to realize 
benefits. FAS now has a workforce that is better aligned with its 
workload, strong cash balances in the Acquisition Services Fund (ASF), 
and a stable organizational structure to support a strong mix of 
programs, which deliver value to customers. However, many years of cost 
cutting and reorganization have created new challenges for FAS, as 
major IT investments have been deferred, and staffing levels were 
reduced across all organizations. GSA must now begin to strategically 
invest in the FAS infrastructure and workforce to ensure a successful 
future.
    Our future depends on investments in technology and continued 
process improvements in FAS. Short term investments in information 
technology tools, such as business intelligence, will improve our 
ability to understand the buying patterns of FAS customers. Business 
intelligence will improve our ability to help customers make better 
procurement decisions, which will result in more efficient use of 
Federal funds and more effective Government. Additional technology 
investments must be made to FAS legacy systems, that are as much as 35 
years old. FAS has also implemented a Lean Six Sigma program. Lean Six 
Sigma is a process improvement methodology focused on improving 
efficiency and quality while reducing costs. Private sector experience 
suggests that Lean Six Sigma initiatives can produce significant 
improvements. FAS has already launched several Lean Six Sigma 
initiatives, which we expect to begin generating efficiency gains in 
fiscal year 2010 and beyond.
    FAS also supports the entire Federal community in promoting good-
for-Government initiatives, such as strategic sourcing. Strategic 
sourcing uses business intelligence to analyze customer spending data 
and makes recommendations to increase the efficiency and effectiveness 
of acquisitions. GSA participates in the Government-wide Federal 
Strategic Sourcing Initiative (FSSI), and has established an FSSI 
Program Management Office in FAS. FAS manages three major FSSI 
commodity categories: Domestic Delivery Services, Wireless 
Telecommunications Expense Management Services, and Office Supplies.
    In fiscal year 2008, the Domestic Delivery Services contract had 57 
participating agencies, boards, and commissions, with a total estimated 
spend of $94.7 million and $33.8 million in estimated savings. Wireless 
Telecommunications Expense Management Services expects to save agencies 
25 to 40 percent off their wireless cost of operations. And FSSI Office 
Supplies has grown to over 50 participating Federal agencies, boards, 
and commissions, with $10 million in spend. Eighty-nine percent of this 
work is conducted with small business.
    GSA and FAS also actively encourage our Federal agency customers to 
consider the environmental impact of their acquisition decisions. FAS 
offers a specially designed page, within GSA Advantage, which allows 
customers to shop by ``Environmental Specialty Category.'' This 
application enables customers to search for products and services that 
are environmentally friendly, contain recycled content, or are bio-
based. Customers are able to save time and make informed procurement 
decisions, as GSA has brought a wide range of products into a common 
procurement tool. In addition to offering environmentally friendly 
products, GSA has also a Multiple Award Schedule (Environmental 
Services, GSA Schedule 899) that is dedicated to environmental 
services. This schedule provides access to services from environmental 
clean up and remediation and waste management and recycling services, 
to consulting services.
    The GSA Vehicle Leasing program (GSA Fleet) is another example of 
our leadership in ``Green Government''. GSA Fleet enables agencies to 
fulfill their missions and meet their environmental responsibilities, 
offering over 80,000 alternative fuel vehicles (AFVs) that are leased 
to customers to meet their transportation needs. The use of AFVs across 
the Federal Government helps to reduce petroleum consumption, 
introduces more efficient vehicles into the Federal fleet and reduces 
greenhouse gas emissions. This GSA program also helps agencies better 
meet the requirements of multiple environmental statutes and 
regulations, including the Energy Policy Act and the Energy 
Independence and Security Act of 2007.
    FAS is well positioned to continue as a leading acquisition 
organization for the Federal Government and assist agencies in 
achieving their missions in support of the American taxpayer.

                 AMERICAN RECOVERY AND REINVESTMENT ACT

    The American Recovery and Reinvestment Act (``Recovery Act'') has 
provided GSA with an unprecedented and exciting opportunity to 
contribute to our Nation's economic recovery, by investing in green 
technologies and reinvesting in our public buildings.
    The Recovery Act provided GSA's Public Buildings Service with $5.55 
billion, including $1.05 billion for Federal buildings, U.S. 
courthouses, and land ports of entry, and $4.5 billion to convert 
Federal buildings into High Performance Green Buildings. In addition, 
the Recovery Act provided the GSA with $300 million to replace motor 
vehicles across the Federal fleet with those that are new and more 
efficient.
    Today, I would like to provide you with an update on GSA's efforts 
to implement the Recovery Act.

                  FEDERAL BUILDINGS FUND--RECOVERY ACT

    As of June 5, PBS had awarded contracts totaling $244 million, to 
begin the construction, modernization, or repair of 25 Federal 
buildings across the country. We have obligated $213 million towards 
measures to convert GSA facilities to High-Performance Green Buildings, 
including modernizations of the Thurgood Marshall U.S. Courthouse in 
New York, the Birch Bayh U.S. Courthouse and the Minton-Capehart 
Federal Building in Indianapolis, IN, and the Denver Federal Center in 
Lakewood, CO. We have also obligated $30 million for the construction 
of new, energy-efficient Land Ports of Entry at Calais, ME, and the 
Peace Arch at Blaine, WA.
    The Recovery Act funds that were provided for investments in 
Federal buildings will provide many direct and meaningful benefits. 
First, the money will help the Federal Government reduce energy and 
water consumption and improve the environmental performance of the 
Federal inventory of real property assets. Second, much of the funding 
provided will be invested in the existing infrastructure, which will 
help reduce our backlog of repair and alteration needs. This will 
increase the value of our assets and extend their useful life. Third, 
the funds provided for New Construction will reduce our reliance on 
costly operating leases, by providing more Government-owned solutions 
to meet the space requirements of our customers. Finally, we will 
stimulate job growth in the construction and real estate sectors and 
drive long-term improvements in energy efficient technologies, 
alternative energy solutions, and green building technologies.
    We know this is not business as usual and we are moving forward 
with speed, tempered by careful consideration of our procurement 
responsibilities and our ultimate accountability to the taxpayer. In 
order to streamline business processes and provide tools and resources 
to assist GSA's regional Recovery project delivery, the Public 
Buildings Service (PBS) has established a nationally managed, 
regionally executed Project Management Office (PMO). The PMO works 
closely with counterparts in the core PBS organization to leverage PBS 
resources and expertise. This national operation will be accountable 
for the following:
  --Develop and maintain consistent processes, policies and guidelines;
  --Manage customer requirements and expectations at the national 
        level;
  --Drive successful project oversight and management;
  --Ensure accurate tracking and reporting of Recovery Act funds;
  --Manage cross-agency resources; and
  --Enable PBS to adopt leading practices in the PBS organization 
        generally.
    PBS and the PMO have moved forward quickly. On March 31st, GSA 
delivered to Congress a list of 254 projects in all 50 States, the 
District of Columbia, and two U.S. territories to be completed with 
funds provided by the Recovery Act. These projects fall into the 
following categories: new Federal construction; full and partial 
building modernizations; and limited-scope, high-performance green 
building projects. In the new Federal construction category, we will 
invest $1 billion in 17 projects; in the building modernization 
category, we will invest $3.2 billion in 43 projects; and in the 
limited-scope green buildings category, we will invest $807 million in 
194 projects. This totals over $5 billion. GSA selected the best 
projects for accomplishing the goals of the Recovery Act based on a 
detailed analysis of a number of factors. Our goals in developing this 
list were to both put people back to work quickly and increase the 
sustainability of our buildings.
    Many of the projects in the new Federal construction and building 
modernization categories have previously received partial funding. We 
can start construction quickly on these projects, while also 
identifying ways that existing designs can be improved. These 
categories include projects such as the Bishop Henry Whipple Federal 
Building in Fort Snelling, Minnesota, a multi-tenant office building 
project where Heating, Ventilation and Air Conditioning (HVAC), 
plumbing, electrical and life safety improvements are expected to 
deliver 23.6 percent energy savings, once the project is completed. 
This is over and above the 20 percent in energy savings already 
achieved in this building in recent years.
    An example of the innovative improvements we will be making in some 
of the construction and modernization projects is the Edith Green-
Wendell Wyatt Federal Building in Portland, Oregon. As part of this 
project, GSA will install a new high-performance double glass enclosure 
over the entire building, which will dramatically enhance energy 
performance and blast resistance. On the west facade, vegetative 
``fins'' will provide shade, reducing the load on the new high-
efficiency HVAC system that will be installed. These are just some of 
the ``green'' improvements GSA will make as part of this project. We 
expect the building to attain a LEED Gold rating.
    By using well-established contracting techniques we can start work 
quickly, and make simultaneous improvements to the existing designs.
    In the limited scope category, we have identified a number of 
projects that can rapidly be deployed in many buildings at once--
buildings as varied as the Oklahoma City Federal Building, the 
Burlington Federal Building U.S. Post Office and Courthouse, and the J. 
Caleb Boggs Courthouse and Federal Building in Wilmington, Delaware. 
Through these projects, we can make significant improvement to the 
energy performance of a building and also improve the working 
conditions for the people in them.
    Greening our buildings will be an ongoing process. As the 
Subcommittee knows, the Energy Independence and Security Act of 2007 
(EISA) and other laws require GSA, among other things, to reduce its 
energy consumption by 30 percent by 2015; reduce fossil fuel-generated 
energy consumption in our new buildings by increasing amounts--from 55 
percent in 2010 to 100 percent in 2030; and ``green'' an even greater 
portion of our inventory. Although the Recovery Act will accelerate our 
progress in these areas, that alone will not enable us to meet these 
goals. Our fiscal year 2010 budget request provides the next steps in a 
long-term program to meet the aggressive goals of EISA and related 
legislation.

        ENERGY-EFFICIENT FEDERAL MOTOR VEHICLE FLEET PROCUREMENT

    GSA's strategy to improve the energy-efficiency of the Federal 
fleet balances energy-efficiency goals with the need to expedite 
procurement, in order to maximize economic benefit for the auto 
industry and the economy as a whole. GSA is focusing this procurement 
on vehicles that will provide long-term environmental benefits, and 
cost savings, by increasing the fuel efficiency of the Federal fleet. 
GSA will use newer and more fuel-efficient vehicles and advanced 
technologies, while at the same time spending funds quickly to provide 
immediate stimulus to the economy and the automotive industry.
    GSA is procuring new motor vehicles only to replace, on a one-for-
one basis, operational motor vehicles in the Federal inventory that 
currently meet replacement standards, so as to not increase the overall 
size of the Federal fleet. Each vehicle purchased will have a higher 
miles-per-gallon rating than the vehicle it replaces and the overall 
procurement will provide a minimum of a 10 percent increase in fuel 
efficiency over the replaced vehicles.
    GSA will only acquire motor vehicles that comply with all Federal 
environmental mandates. These vehicles will be included in the 
alternative fuel vehicle-acquisition compliance calculations of the 
Energy Policy Act of 2005, as well as the petroleum reduction and 
alternative fuel use increase requirements of Executive Order 13423, 
``Strengthening Federal Environmental, Energy, and Transportation 
Management''. Vehicles acquired under this procurement will meet, or 
exceed, standards for greenhouse gas emissions which were established 
in the Energy Independence and Security Act of 2007.
    On April 14, 2009, GSA obligated $77 million to order 3,100 hybrid 
vehicles for Federal agencies using Recovery Act funds. The vehicles in 
this initial order are a mix of Chevrolet Malibus, Saturn Vues, Ford 
Fusions and Ford Escapes. This purchase represents the largest one-time 
procurement of hybrid vehicles for the Federal fleet.
    On June 1, 2009, GSA obligated an additional $210 million. To date, 
we have obligated $287 million, and ordered 17,200 motor vehicles with 
funds provided by the Recovery Act.
    In the final phase of this procurement, GSA will order $13 million 
worth of Compressed Natural Gas (CNG) and hybrid buses and low-speed 
electric vehicles, by September 30, 2009. While this is the smallest 
segment of the plan, we are excited by the fact that the vehicles 
purchased will replace some of the highest-emission vehicles in the 
Federal fleet with much lower-emission vehicles, which will reduce fuel 
consumption and further the Federal Government's exploration of the use 
of alternative fuels.

                           SUMMARY STATEMENT

    Today, I have discussed our fiscal year 2010 budget request, the 
Recovery Act, and GSA's eagerness to undertake the new challenges that 
lie ahead. We at GSA are strongly committed to ensuring that the 
responsibilities entrusted to us are exercised in a manner that is 
effective, efficient, and transparent. My task, and the task of 
everyone at GSA, is to keep building on our recent successes and to 
fulfill GSA's mission to acquire the best value for taxpayers and our 
Federal customers, while exercising responsible asset management.
    We look forward to carrying out our role in the Recovery Act, to 
responsibly deliver modernized and energy-efficient Federal buildings 
and motor vehicles, and to stimulate the economy by creating jobs and 
outlaying Federal funds to industries in crisis. Your approval of GSA' 
budget request for fiscal year 2010 is a vital step in helping us 
achieve our mutual goals of economic recovery, energy efficiency, and 
increased citizen engagement in Government. GSA is committed to 
delivering on these goals, contributing to the long-term objectives of 
the Administration, and providing the best use of taxpayer funds.

                           CLOSING STATEMENT

    Mr. Chairman, this concludes my formal statement. I look forward to 
continuing this discussion of our fiscal year 2010 budget request with 
you and the Members of the Subcommittee.

    Senator Durbin. Judge Bataillon.

                 STATEMENT OF HON. JOSEPH F. BATAILLON

    Judge Bataillon. Good afternoon, Mr. Chairman, Senator 
Collins, Senator Bennett, members----
    Senator Durbin. Would you check and make sure that your 
microphone switch is on?
    Judge Bataillon. Now it is on. Thank you very much.
    That is what I say to the lawyers all the time. You have to 
speak into the microphone, gentlemen.
    But at any rate, thank you for inviting us here today. I 
appreciate the opportunity to appear before the subcommittee 
today to discuss the judiciary's courthouse construction needs, 
the process for identifying and prioritizing these needs for 
Federal construction projects, as well as lease construct 
projects, which are an alternate approach for acquiring smaller 
courthouse facilities.
    Before addressing those issues, however, I want to convey 
the judiciary's gratitude to this subcommittee for supporting 
and furthering the administration of justice through 
appropriating monies from GSA Federal Buildings Fund for the 
construction of new courthouses and for the renovation of 
existing courthouses.
    We understand that there are many Federal needs competing 
for scarce capital resources in Government, and we deeply 
appreciate the subcommittee's willingness to champion the needs 
of the judiciary in terms of the real estate infrastructure 
necessary to conduct the work of the courts and administer 
justice. We are particularly grateful for the subcommittee's 
appropriation of additional funds for the San Diego courthouse 
in 2009 and for its support of courthouse construction with the 
American Recovery and Reinvestment Act funds.
    On April 1 of this year, James Duff, Director of the 
Administrative Office of the United States Courts, on behalf of 
the Judicial Conference, transmitted to this subcommittee, 
other cognizant congressional committees, the White House, the 
Office of Management and Budget, and the General Services 
Administration, the 5-year plan for courthouse construction 
projects as approved by the Judicial Conference of the United 
States in March 2009.
    An advance copy of the plan was provided to GSA earlier 
this year for use in developing the 2010 Federal Buildings Fund 
budget request. We are disappointed that none of these projects 
listed on the 2000 plan--on the 2010 plan appear on the 
President's 2010 budget.
    The projects that were included, however, were Yuma, 
Arizona, and Lancaster, Pennsylvania, which were initially 
determined by GSA and by the courts as lease construction 
projects as opposed to Federal building projects. They now 
appear on the budget as Federal building projects.
    The distinction between these two execution strategies for 
acquisition of new construction has never been in place before, 
and it has never been part of the 5-year plan for the courts. 
Federally constructed projects have to be ranked and 
prioritized because Federal construction dollars are scarce, 
and at any given year, only so much money is available to be 
appropriated for these projects.
    Lease construct projects, on the other hand, do not compete 
with each other for funding from a limited pool of Government 
construction capital but are privately financed. Consequently, 
there has been no need for the judiciary to rank or prioritize 
lease construction projects as long as they fit within our 
budget requirements.
    Moreover, Federal construction has been and remains the 
primary means by which GSA provides new space for the courts. 
Lease construction has only played a small role in one or two 
courthouse construction projects in low-density population 
areas where a large court presence is not necessarily needed.
    In addition, lease construction courthouse projects are 
delivered in a fraction of the time that it takes the 
Government to construct a Federal courthouse. This expedited 
delivery feature is a key benefit to the lease construction 
alternative.
    While the use of the lease construction method has been 
very modest with the judiciary, it has been critical to the 
judiciary and GSA to deliver small projects on an expedited 
basis. We now understand that the Office of Management and 
Budget (OMB) has raised objections to the lease construction 
courthouse process, even for modest projects like the ones in 
Yuma and Lancaster.
    If the lease construct execution strategy will no longer be 
accorded to GSA as an alternative to Federal construction 
methods for delivery of new courthouses, and the administration 
seeks funding for these projects from the Federal Buildings 
Fund, the projects on the judiciary's 5-year plan will suffer, 
and the President's budget this year is an example of that. 
None of the 5-year construction projects are included in the 
President's budget request, only what would otherwise be 
considered as lease constructions.
    If that continues to be the case, lease construction 
projects would have to compete for scarce Federal building 
dollars, along with long-term judicial space requirements, and 
Yuma is a prime example. Yuma was on the verge of a lease 
construct contract award and scheduled for completion in June 
2011. A Federal construction execution will likely delay the 
project by at least another year or 2 years.
    Yuma, to date, has handled over 2,000 defendants, and it is 
anticipated that they will handle at least 5,000 defendants 
this calendar year. The security requirements are so limited in 
this leased facility that ICE has required the court only to 
process 40 defendants a day because we don't have the capacity 
to do any more than that, and it becomes a bottleneck for the 
prosecution of these individuals.
    The judiciary was not consulted prior to this change in 
execution strategy. We are disappointed that the Yuma and 
Lancaster projects, which we believe are appropriate for the 
lease construct path, have now been redirected to the Federal 
construction path, apparently at the expense of the 5-year 
plan.
    With regard to the fiscal year 2010 projects, if they are 
not funded in this budget year, then they will be pushed back 
yet again another year, and it has been our experience that 
every time we push back a project, the costs for the project 
increase substantially. The judiciary urges the subcommittee to 
support remaining lease construction as necessary and 
appropriate and as an alternative to Federal construction, 
especially in locales where the court space is modest, acute, 
and of possible intermediate duration.

                           PREPARED STATEMENT

    The judiciary believes that GSA has the authority to use 
this procurement method, which is a widely accepted method of 
delivering buildings in the private sector. Again, the 
judiciary is grateful for the past and continuing support shown 
by this subcommittee for its facilities and space needs.
    Thank you very much.
    [The statement follows:]

               Prepared Statement of Joseph F. Bataillon

                              INTRODUCTION

    Good afternoon, Mr. Chairman, Senator Collins, and members of the 
Subcommittee. I am Joseph F. Bataillon, Chief Judge of the United 
States District Court in Nebraska and Chair of the Judicial Conference 
Committee on Space and Facilities. I appreciate the opportunity to 
appear before this subcommittee today to discuss the Judiciary's 
courthouse construction needs, the process for identifying and 
prioritizing these needs for Federal construction projects, as well as 
lease-construction projects which are an alternative approach for 
acquiring smaller courthouse facilities.
    Before addressing those issues, however, I want to convey the 
judiciary's gratitude to this subcommittee for supporting and 
furthering the administration of justice through appropriating monies 
from GSA's Federal Buildings Fund for the construction of new 
courthouses and for the renovation of existing courthouses. We 
understand that there are many Federal needs competing for scarce 
capital resources in Government, and we deeply appreciate the 
subcommittee's willingness to champion the needs of the judiciary in 
terms of the real estate infrastructure necessary to conduct the work 
of the courts and administer justice. We are particularly grateful for 
the subcommittee's appropriation of additional funds for the San Diego 
Courthouse in the 2009 appropriations bill, and for its support of 
courthouse construction with American Recovery and Reinvestment Act 
(ARRA) funds.

               FIVE-YEAR COURTHOUSE PROJECT PLAN PROCESS

    I would like to begin by describing the process and criteria used 
to develop the Judiciary's Five-Year Courthouse Project Plan. On April 
1, 2009, James Duff, Director of the Administrative Office of the U.S. 
Courts, on behalf of the Judicial Conference, transmitted to this 
subcommittee, other cognizant congressional committees, the White 
House, the Office of Management and Budget, and the General Services 
Administration, the Five-Year Plan for Courthouse Projects as approved 
by the Judicial Conference of the United States on March 17, 2009. An 
advance copy of the Plan was provided to GSA earlier in the year for 
its use in developing the 2010 Federal Buildings Fund Budget request. 
The Five-Year Plan is a key output of the Judiciary's Long-Range 
Facilities Planning process. The Plan consists of an ordinally-ranked 
list of new courthouse construction projects for which the Judiciary is 
requesting authorization, funding and execution from the Executive and 
Legislative Branches. With one minor exception, all of the Federal-
construct courthouse projects on the Judiciary's current Five-Year 
Courthouse Project Plan are projects that were not affected by the 
moratorium on new construction described below, because they all had 
received either authorization or funding from the Congress. These 
projects were evaluated by the Judicial Conference and its Space and 
Facilities Committee, and placed on the Plan on the basis of the 
following four weighted criteria: (1) year out of space (weighted 30 
percent); (2) security concerns (30 percent); (3) operational concerns 
(25 percent); and (4) judges without courtrooms (15 percent).
    In terms of the courthouse projects that populate the Five-Year 
Plan, it is important to note that a project is removed from the Plan 
once it receives the requested construction funding. Should a 
previously funded construction project require additional funds due to 
a budget shortfall (e.g., cost overrun), it is not placed back on the 
list. Thus, the Plan no longer lists the Los Angeles courthouse 
project, even though this remains the Judiciary's top priority among 
new courthouse projects. In 2005, Congress appropriated the full 
construction amount requested by GSA for the Los Angeles courthouse; 
but when the time came to put the project out for bid, GSA determined 
that it could not be delivered for the appropriated amount. Several 
years later, even with a substantial reduction in scope, GSA awaits 
sufficient funding for this much needed court project.
    As part of its cost-containment effort which I will discuss later 
in my statement, the Judicial Conference has recently adopted changes 
to its long-range facilities planning process. I will briefly describe 
these changes, because they include revisions to the way new projects 
not previously authorized or funded will be scored for placement on 
future Five-Year Plans. Again, none of the projects on the current Plan 
were placed there under the new, revised scoring methodology. Under the 
new methodology, however, courthouse locations will be ranked in order 
of urgency of need, based on four criteria: (1) judges without chambers 
(30 percent); (2) judges without courtrooms (20 percent); (3) facility 
assessment (40 percent); and (4) caseload growth (10 percent). Building 
security issues are included in the facility assessment criteria. We 
are in the process of completing plans for approximately 30 districts, 
representing nearly a third of our courthouse inventory. The Long-Range 
Facilities Plan includes short- and long-term statistical projections 
of caseload and personnel in order to estimate future facilities needs, 
a comprehensive assessment of each courthouse building to see how it 
meets the needs of the court, and a set of strategies, some involving 
real estate and some operational solutions, to address current and 
projected space deficiencies. Security remains an important factor in 
the determination of urgency of need, but it is now part of the 
facility assessment criterion, rather than a stand-alone criterion.

                            COST CONTAINMENT

    In 2004, the Federal Judiciary looked into the future and saw that 
its ``must pay'' requirements, such as GSA rent, would increase at a 
pace that would exceed projected appropriations within a few years. 
Budget projections indicated that rental costs for existing and new 
facilities would increase 6 to 8 percent annually, outpacing budget 
growth. The Judicial Conference recognized that controlling rent costs 
was absolutely critical to avoiding personnel reductions. As part of 
that effort, a national moratorium on courthouse construction was 
imposed from 2004 to 2006. The moratorium lasted 24 months and gave the 
Judiciary time to re-evaluate its space planning policies and practices 
and to enhance budgetary controls.
    The long-range facilities planning methodology for the Judiciary 
was re-evaluated resulting in a greater emphasis on the ability of a 
facility to accommodate additional space requirements rather than the 
physical attributes of a facility in determining whether or not to 
recommend a new courthouse construction project. If a building has 
sufficient space, functional issues such as security concerns would 
then be addressed through repair and alterations and technology 
strategies. An emphasis on cost, which was the key driver in the 
development of the new rating methodology, has resulted in a 
realignment of the criteria for ranking projects, giving greater weight 
to when a building is out of space and less weight to security and 
operational concerns.
    While the Judicial Conference undertook many other initiatives to 
reduce rent costs, which I will not enumerate at this time, the 
moratorium and changes to space planning policies and practices affect 
the Five-Year Plan process most directly.

                      LEASE-CONSTRUCTION PROJECTS

    While GSA has utilized two execution strategies for the acquisition 
of new courthouses--Federal construction and lease-construction--the 
Judiciary has never placed lease-construct projects on the Five-Year 
Plan. Federally constructed courthouse projects have to be ranked and 
prioritized because Federal construction dollars are scarce, and in any 
given year, only so much money is available to be appropriated for 
these projects. Lease-construct projects, on the other hand, do not 
compete with each other for funding from a limited pool of Government 
construction capital, because they are privately financed. Hence, there 
has been no need for the Judiciary to rank or prioritize lease-
construct projects. Moreover, Federal construction has been and 
remains, the principal means by which the GSA provides new space for 
the courts; lease-construction has only ever played a minor role, for 
small (one or two courtroom) courthouse projects in low population 
density areas where a large court presence is not needed. Use of the 
lease-construct method has been very modest.
    I do want to note, however, that lease-construction is clearly a 
secondary means of new courthouse execution, running far behind Federal 
construction in terms of overall capital value. Nonetheless, the 
Judiciary is mindful that these projects add to the overall rent burden 
of the courts. Accordingly, it is Judicial Conference policy that each 
lease-construct project be subject to approval by both the Space and 
Facilities Committee and the Judicial Conference, and if the project is 
approved, it is with a specific dollar rent cap.
    We now understand that the Office of Management and Budget has 
raised objections to lease-construct courthouses, even for modest 
project scopes. If the lease-construct execution strategy will no 
longer be accorded to GSA as an alternative to the Federal construct 
method for the delivery of new courthouses, then the Judiciary will 
need to revisit its courthouse prioritization method. However, the 
Judiciary urges the subcommittee to support retaining lease-
construction as a legitimate, valuable and appropriate alternative 
strategy to Federal construction, especially in locales where the court 
space need is modest, acute and of possible indeterminate duration. GSA 
has the authority to use this procurement method, which is a widely 
accepted practice in the private sector. Furthermore, lease construct 
courthouse projects are delivered in a fraction of the time that it 
takes the Government to construct a Federal courthouse. This expedited 
delivery feature is a key benefit of the lease-construct alternative. 
From Judiciary project approval to completed construction, the lease-
construct alternative takes approximately 3 years; the Federal 
construction alternative takes over 10 years, which includes time 
waiting to place the project on the Plan, and then time expended 
waiting for funding once it is on the Plan.

             GSA FEDERAL BUILDINGS FUND 2010 BUDGET REQUEST

    The President's fiscal year 2010 Budget Request for the Federal 
Buildings Fund does not include any projects from the Judicial 
Conference-approved Five-Year Courthouse Project Plan. Instead, funding 
is included for Federal construction of projects in Yuma, AZ, and 
Lancaster, PA, which GSA and the Judiciary had previously determined 
should proceed as lease-construction projects. In the case of Yuma, AZ, 
a critically needed facility in a very busy southwest border location, 
GSA had already begun the procurement process of preparing 
solicitations for offers.
    The Judiciary was not consulted prior to this change in execution 
strategy. We are disappointed that these projects, which we believe 
were appropriate for the lease-construct path, have now been re-
directed to the Federal construct path, apparently at the expense of 
projects on our Five-Year Plan, since no Plan projects were included in 
the President's fiscal year 2010 budget request. With regard to the 
projects on the Five-Year Plan for 2010, if they are not funded in 
2010, these projects and all projects in subsequent years would be 
delayed at least a year.

                               CONCLUSION

    Again, the Judiciary is grateful for the past and continuing 
support shown by this Committee for the facilities needs of the Federal 
courts. It is clear that while many projects have been successfully 
executed, much additional work remains to be done. I will be glad to 
take any questions you have at this time.

    Senator Durbin. Well, thank you both very much.
    And first, let me get it straight ``Prow-ty'' or ``Pru-
ty''?
    Mr. Prouty. ``Prow-ty.''
    Senator Durbin. Prouty. Thank you. I'm sorry I 
mispronounced your name to start with.

                   DIFFERING CONSTRUCTION PRIORITIES

    This really is a classic constitutional confrontation here, 
the building of courthouses, where we literally have three 
branches of Government involved in it and obviously going in 
different directions.
    It reminds me when I was in the House, and then 
Appropriations chairman Jamie Whitten allowed me to come in as 
a new member, and I said I would like to also serve on the 
Budget Committee, which was permissible. You could be on 
Appropriations and Budget. And he said, ``You can do it if you 
want to do it. But just remember, the Budget Committee deals in 
hallucinations, and the Appropriations Committee deals in 
facts.''
    So I went on and took on the Budget assignment. Turned out 
he was right.
    So here, let me show you some charts here just to give you 
an idea of some things that we have noticed about construction.
    This one is interesting, and I think that Senator Bennett 
will like it a lot. And it shows on the left-hand side what the 
judiciary lists as priorities in fiscal year 2010, and Salt 
Lake City is on there.
    Senator Bennett. Why do you think I am here?
    Senator Durbin. I know.
    Your timely arrival. And you will notice the President's 
budget zeroed it out, and then you will notice what the history 
has been in the past. We have, I guess, appropriated some $40 
million for a $211 million project.
    I won't go into detail here other than just to show you 
that the three branches of Government all have different 
priorities when it comes to this construction. I am going to 
mention in a moment much of the last chart, the bar chart 
there, that shows the increased cost, which was a point that 
was made by Judge Bataillon.
    Salt Lake City, off on the right, has been delayed for 9 
years, and the estimated cost of construction has gone up from 
somewhere in the range of $50 million to over $200 million. And 
we have all been very cognizant of that.
    So it appears that the judicial branch picks its 
priorities. The President then picks his priorities, and then 
Congress decides what to fund, which may be a different 
priority. And that has been the way this has worked back and 
forth or has failed to work back and forth. And I don't know if 
we will be able to resolve that at this moment, Judge. But we 
will try to at least discuss it here.

                          SAN DIEGO COURTHOUSE

    If I can ask about two specific courthouses, and I believe 
one or both have been mentioned. The San Diego courthouse, in 
the fiscal year 2009 appropriation, we provided an additional 
$100 million to cover cost overruns necessary to complete the 
project. The law was enacted in March, but a contract has yet 
to be awarded. It appears it is stalled once again.
    The GSA didn't inform us of a delay. Would you like to tell 
us, Mr. Prouty, what is going on in San Diego?
    Mr. Prouty. We are currently, at the request of the House 
staff, reviewing the San Diego housing plan. It appears that 
there may be some space that is in the building which we, like 
you, would like to award that is not currently designated for 
the courts.
    So we are putting a plan together. We think that there is 
some space that we can give to another Federal agency until 
such time as the courts need that space. So it is just a space 
requirements issue.
    Senator Durbin. So what is going to happen to the $110 
million?
    Mr. Prouty. It is going to be spent and, hopefully, soon.
    Senator Durbin. Okay, and the contracts will be awarded 
soon?
    Mr. Prouty. I certainly believe that to be true.

                         LOS ANGELES COURTHOUSE

    Senator Durbin. Let us take a look at a downtown photograph 
of the home of the National Basketball Association (NBA) 
champion Los Angeles Lakers.
    We appropriated $300 million for the construction of a 
Federal courthouse in fiscal year 2005, and you will notice 
that empty lot in the corner there. There is no indication that 
construction will begin anytime in the foreseeable future. 
Costs have obviously escalated dramatically in 4 or 5 years, 
making the initial project prohibitively expensive. As a 
result, GSA and judiciary have been exploring less costly 
alternatives.
    Can you tell us, when we are so short on money and we do 
appropriate the money and nothing happens for 4 or 5 years, you 
can understand why that gives us a fair degree of angst. Would 
you like to comment on that?
    Mr. Prouty. I think it is safe to say that we are at a 
total impasse. For the amount of money that we have, we can't 
build what the courts want. So we currently have a project 
that--the original project, as you indicated, is with the 
scope, even the reduced scope, is beyond the money that we have 
got. We proposed a project, which included a smaller building 
and a renovation of an existing Federal building, and the 
discussions continue.
    Judge Bataillon. It has been very problematic for us, and 
that is a tremendous understatement. I have been on the Space 
and Facilities Committee for 9 years. The Los Angeles 
courthouse showed up on the 5-year plan in 1999, and it was 
scheduled for site and design, number one on our list in 1999 
and number one on our list for construction in 2000.
    And frankly, the extraordinary increases in construction 
costs in the Los Angeles area have presented tremendous 
problems for both the courts and GSA. And we have tried to work 
together to solve these problems.
    The latest scenario would be to split the courts even more 
than they are already, and Los Angeles is one of the largest 
courts, if not the largest court in the country that has not 
had a comprehensive housing plan. And it is important for the 
courts in order to maintain the way we operate to get this 
problem solved. And unfortunately, we haven't been able to 
overcome that.
    And part of the problem, I believe, is that any further 
authorization from the House side for this project has pretty 
much been blocked.
    Senator Durbin. One last quick question, Mr. Prouty. This 
morning on National Public Radio (NPR) local broadcast, there 
was an indication that D.C. charter schools are having a tough 
time finding space to open new schools. I assume there is some 
excess GSA property in the District of Columbia. Is it possible 
that we could open up a dialogue between you and the District 
of Columbia government and see if there are any opportunities 
there that could be utilized?
    Mr. Prouty. The answer is absolutely yes, although I don't 
know the authorities and I don't know the vacant inventory.
    Senator Durbin. Okay. Well, let me try to work with you on 
that.
    Mr. Prouty. Great. Thank you.
    Senator Durbin. Senator Collins.
    Senator Collins. Thank you. Thank you, Mr. Chairman.

                   JUDICIARY'S 5-YEAR COURTHOUSE PLAN

    Judge, as Senator Durbin has pointed out, the 
administration did not follow the priorities set forth in the 
judiciary's 5-year courthouse project plan. Had the budget 
reflected your plan, Salt Lake City would have been first on 
the list. Could you give us more insight into the process? Is 
there a back-and-forth discussion of the priorities with GSA, 
with OMB, or did the budget proposal come as a surprise to you?
    Judge Bataillon. Well, the budget proposal came as a 
surprise to us. We submit the 5-year plan every year to GSA, 
and then it is up to the President to decide how the President 
wants to fund our building requirements. The stimulus bill 
included two courthouses, one in Bakersfield and one in 
Billings, Montana. And those were both originally slated as 
lease construct buildings.
    When that occurred last year, we received some signals that 
OMB was changing the way it was interpreting the A-11 circular. 
And when that happened, then when the President's budget came 
out this year, I suppose it was somewhat of a surprise, but not 
too much of a surprise. Because apparently, we have changed the 
way we have decided to score these courthouses, and it does 
create problems as far as the 5-year construction plan is 
concerned.
    We have always done a 5-year construction plan. That plan 
is based on the priorities set by the judiciary. We score these 
courthouses, and we have rescored these courthouses, and now we 
even have a new method of scoring courthouses to make sure that 
the needs of the judiciary, in order to administer justice 
appropriately, are met. And that is why they give the 5-year 
plan.
    By taking these two projects off of the lease construction 
line, if you will, or execution plan, it creates a problem 
about how we prioritize our courthouses. And it really puts 
these two projects in jeopardy because we have already set the 
5-year plan, and the conference won't meet again until 
September to determine whether we can incorporate these. So it 
is very problematic for us.
    Senator Collins. Mr. Prouty, this doesn't make much sense 
to me. I would understand if the GSA or OMB said we have x 
amount to spend, and we are going to go down the list until 
that is spent. But it doesn't make sense to me that the 
priorities are different than those established by the Judicial 
Conference.

                            MIAMI FBI OFFICE

    Let me ask you about another line item in the construction 
budget, which is almost as much as it would cost to build the 
courthouse that is so high on the Judicial Conference list. The 
budget request includes almost $191 million for Federal 
construction of a new Federal Bureau of Investigation (FBI) 
field office in Miami. Prior to this request, the project was 
originally planned as a lease construct project, which is 
obviously far lower cost.
    What criteria, what objective criteria led GSA to decide to 
request this funding for the Miami FBI field office at a time--
at this time as opposed to other projects that are urgently 
needed?
    Mr. Prouty. The only--first of all, I want to mention that 
in the recovery funding, we did fund the top priority, which 
was Austin. But there are competing challenges here. Both OMB 
and the Government Accountability Office (GAO) are concerned 
about the lease construction program. It has been our goal for 
a very long time to have few, if any, courts in leased 
properties because it is problematic.
    So the challenges have been to find a way to deal with 
those issues. If you look at the payback on the FBI project in 
Miami, over the 15 years of that initial lease period that it 
is beneficial to do a Government construction to the tune of 
$130 million.
    Senator Collins. But initially, the upfront cost is more to 
do construction. Correct?
    Mr. Prouty. The payback, it is $190 million up front. You 
are right.
    Senator Collins. And could the FBI's needs be met, should 
the building proceed as was originally planned as a lease 
construct project?
    Mr. Prouty. It certainly could have been.
    Senator Collins. Thank you, Mr. Chairman.
    Senator Durbin. Senator Nelson.
    Senator Nelson. Thank you, Mr. Chairman.
    Welcome, Judge Bataillon. Mr. Prouty.
    Judge Bataillon. Senator, it is always good to see you.
    Senator Nelson. Good to see you.
    My colleagues may not know that when I was Governor, I was 
pleased and proud to recommend you for the judgeship, and I 
have been proud ever since.
    Judge Bataillon. Thank you very much, Senator.

                        CONSTRUCTION PRIORITIES

    Senator Nelson. One of the challenges that is obvious 
before us is that the three branches of Government have not 
come together with any common understanding or common agreement 
as to where to proceed or how to proceed. Is it possible or is 
it naive to assume that it is even possible to work with OMB to 
sit down and go through the priorities? Do we know what their 
priority list, what criteria they use to establish their 
priority list that is different than what you do?
    I guess first, Judge, I will ask you and then Mr. Prouty.
    Judge Bataillon. Well, OMB communicates directly with GSA 
on these issues, and GSA, of course, has to, I assume, follow 
what OMB tells them to do as far as their scoring method under 
the A-11 circular.
    Previously, they have on small projects that the courts 
have been presenting, that scoring criteria was such that they 
believed that courthouse buildings were not special use. In 
other words, that there was no other private market for it. It 
wasn't uniquely governmental.
    A courthouse has courtrooms. You could use that for a 
banquet hall. You could use that for a gathering hall. And it 
has office space, just like any other office might have, a bank 
or any kind of business.
    And so, these smaller projects generally were scored so 
that they could be a lease construct. The part that was scored 
as uniquely governmental was the marshals' money for the 
holding cells. And so, we would always bring the money--or the 
marshals would bring the money up front for the holding cells.
    Now OMB, as we understand it, has changed their 
interpretation of the scoring and has decided that this is a 
special purpose building, and it ought not to be built as a 
lease construct. So I am sure the administrator can elaborate 
on that.
    Mr. Prouty. There certainly is a discussion about the 
benefit to the Government and about the nature of these 
properties, and I am certainly not in the position to speak on 
behalf of OMB. But we, at GSA, would very much like to have a 
discussion which would preclude these types of discussions in 
the future.
    Judge Bataillon. So would we.
    Senator Nelson. Well, it does seem that that would be part 
of the answer, to come to some sort of an agreement on whether 
it is a special use or not a special use to resolve the 
question about lease construct. And just because they have 
taken that position that it is special use doesn't make it so.
    And hopefully--I don't know how to facilitate that, but I 
wish you would think about what we could do to help facilitate 
that because I think we are as frustrated as you are when you 
see the lack of construction on a project that has been 
appropriated, and then you see the cost of construction go up. 
It is as frustrating in some ways as seeing cost overruns. It 
just takes more Treasury dollars to be able to complete at some 
point.
    If you are putting together another 5-year courthouse 
project plan, do you have any idea how long it might take for 
the Judicial Conference to come up with another 5-year plan? 
And if you do come up with it, can you come up with it assuming 
the lease construct under one assumption and then no lease 
construct under another assumption?
    Judge Bataillon. We can come up with another 5-year 
construction plan, and the 5-year plan is a priority on how to 
spend the Federal Buildings Fund money. If it is a lease 
construct, then it doesn't come out of that pot of money and is 
just like leasing any other office space, except that GSA makes 
a contract with a developer. And so, we haven't put those 
buildings on the 5-year plan for a number of reasons.
    One is because we have acute court needs, administration 
needs like in Yuma, and we want to get the building built as 
quickly as we can, and it is a small project and so we can 
deliver it.
    But as far as the 5-year plan, we have a particularly 
difficult problem. In 2004, through 2004 and 2006, we had a 
moratorium on any construction because of the budget problems 
that we encountered in 2004 and had to lay off people, as a 
matter of fact, in order to meet our budget constraints. So we 
did a moratorium.
    And when we did the moratorium, there were 15 courts that 
had some appropriation from Congress, and so we left those on 
the 5-year plan. And the 35 that didn't have some appropriation 
we pushed off of the 5-year plan, and now we are reevaluating 
all of those courts in what we call an asset management 
process.
    So we have frozen the 13 to 15 courts that were on the 
original 5-year plan, and now we are trying to bring on other 
courts on the 5-year plan, and meshing those two groups of 
folks is getting to be very problematic.
    And then if we throw Yuma into the mix or Lancaster into 
the mix or some other lease construct projects that we are 
talking into the mix, we have just created a quagmire for the 
judiciary. But to answer your question, we are smart folks, and 
if you tell us that we have to do 5-year--put these programs on 
the 5-year plan, we will do the best we can to do it.
    Senator Nelson. Well, I am not telling to you to. I am just 
asking if you can. It is perhaps over my head to try to require 
that. But it seemed to me that it might be one of the ways to 
proceed.
    Judge Bataillon. Well, it is not that you would require it. 
I think it is basically OMB saying that they won't accept the 
lease construct process, and GSA communicating that to us, and 
so then we will have to take a different approach.
    But it is a Gordian knot. And I go off the committee in 
October, and I will be happy to do it then.
    Senator Nelson. Well, on the way out, will you rule them in 
contempt?
    Judge Bataillon. I will try.
    Senator Nelson. Thank you. Thanks to both of you.
    Senator Durbin. Senator Bennett.
    Senator Bennett. Thank you very much, Mr. Chairman. I 
appreciate the opportunity to be here with the subcommittee.
    Judge Bataillon, I couldn't have written your testimony 
better than you wrote it.
    Judge Bataillon. Thank you very much.

                       SALT LAKE CITY COURTHOUSE

    Senator Bennett. And the chairman, of course, has 
highlighted the fact Salt Lake City first went on the list in 
1998. Is that correct?
    Judge Bataillon. Right.
    Senator Bennett. So it is even older than----
    Judge Bataillon. It has been on the list for 9 years.
    Senator Bennett. Yes. And I would like to--I can't 
appropriately give you the full letter because the last 
paragraph of the letter says, ``The specific weaknesses in 
building security highlighted by this inspection should be 
treated as sensitive information and should not be released to 
the public.''
    But this is a letter from the senior inspector of the U.S. 
Marshals Service just this month, having gone through the Salt 
Lake City courthouse and looked at the various security 
problems that are there.
    Judge Bataillon. Right.
    Senator Bennett. Is it your understanding that this project 
is, to take a term that has been vastly overused here in the 
Congress in the last 6 months, shovel ready?
    Judge Bataillon. It is absolutely shovel ready. We have a 
site, and I am sure you have been to the site and seen the 
chain-link fence that is around it. We moved the Masonic Temple 
and a local pub in order to get this place, and now we have 
vacant property in Salt Lake, and it is ready to go.
    We have designs. In fact, I have talked to Members of the 
House and the Senate, and it is a model of appropriateness and 
efficiency for the judiciary, and it needs to be built.
    Senator Bennett. As I say, I couldn't do this any better 
than you have done for me.
    Judge Bataillon. Thank you very much.
    Senator Bennett. Mr. Prouty, I would be ungrateful if I 
didn't acknowledge how helpful you have been over the years, as 
we have wrestled with this problem. And your office has always 
been available to mine, and you have always been very helpful.
    Now we have been in touch with Alan Camp, who is the 
project manager in your Denver office, and he has informed my 
staff that the building prices are at their lowest point in 3 
years. And if funding is not received in the 2010 budget, there 
is the possibility that costs will escalate, and the Salt Lake 
courthouse currently is projected to come in right under 
budget. Is that your understanding as well?
    Mr. Prouty. We are seeing--we are testing the market. We 
are obviously--we do a lot of research in the market. And now 
with all of the recovery funds, we think we are seeing and we 
anticipate the projects will come in less than they were. So I 
think the markets are decreasing. The extent of that we are not 
sure.
    But you are right. The Salt Lake City project, if it were 
bid today, would certainly come in within budget.
    Senator Bennett. Thank you very much.
    Mr. Chairman, I have laid out my case, and I have had a lot 
of help from your two witnesses, and I am now completely at 
your mercy.
    Senator Durbin. I have been waiting for this for so long.
    Senator Bennett. Thank you very much for allowing me to 
participate.
    Senator Durbin. Well, I am glad that you came by, Senator 
Bennett. You are always welcome here.
    Senator Collins, do you have any additional questions?
    Senator Collins. Mr. Chairman, I would just like to submit 
for the record, with your consent, a follow-up letter from the 
chief judge.
    Actually, I take it back. It is from the Judicial 
Conference of the United States. It is a letter from James Duff 
that expresses disappointment that the budget does not fund any 
of the projects on the 5-year plan and talks about the impact 
on the judicial process where courthouses are out of space, as 
well as the critical security deficiencies.
    I think it strengthens the case that our witness has made 
today on behalf of the judiciary and strengthens the case that 
Senator Bennett has made as well.
    Thank you, Mr. Chairman.
    Senator Durbin. Without objection, it will be made part of 
the record if you would like it to be. Would you?
    Senator Collins. Yes, please.
    Senator Durbin. Okay.
    [The information follows:]

                  Judicial Conference of the United States,
                                      Washington, DC, June 9, 2009.
Honorable Richard J. Durbin,
Chairman, Subcommittee on Financial Services and General Government, 
        Committee on Appropriations, United States Senate, Washington, 
        DC 20510.
Honorable Susan Collins,
Ranking Member, Subcommittee on Financial Services and General 
        Government, Committee on Appropriations, United States Senate, 
        Washington, DC 20510.
    Dear Chairman Durbin and Senator Collins: On April 1, 2009, I sent 
a letter on behalf of the Judicial Conference of the United States, 
transmitting the Judicial Conference-approved Five-Year Courthouse 
Construction Plan for Fiscal Years 2010-2014 to this Subcommittee, the 
Office of Management and Budget, and the General Services 
Administration (GSA). An advance copy of the Plan was also provided to 
GSA earlier in the year for its use in developing the fiscal year 2010 
Federal Buildings Fund budget request.
    At the time of my letter, we did not know which, if any, projects 
would be included in the President's 2010 Budget Request. We were 
disappointed to learn that funding was not requested for any of the 
projects on the Five-Year Plan. If these projects are not funded in 
fiscal year 2010, we are concerned that all projects in 2010 and 
subsequent years will be delayed at least another year--seriously 
impacting the judicial process where courthouses are already out of 
space, and critical security deficiencies currently exist. These 
projects are ranked in priority order, and several are ``shovel-ready'' 
with contractors in place and construction ready to begin.
    I have enclosed another copy of our Five-Year Courthouse 
Construction Plan for Fiscal Year 2010-2014 and appreciate any 
consideration you can give to our courthouse construction needs. If you 
have any questions, please do not hesitate to contact me.
            Sincerely,
                                             James C. Duff,
                                                         Secretary.
Enclosure

 FIVE-YEAR COURTHOUSE PROJECT PLAN FOR FISCAL YEARS 2010-2014 APPROVED BY THE JUDICIAL CONFERENCE OF THE UNITED
                                             STATES--MARCH 17, 2009
                                         [Estimated dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                        Est. Net
                                                                                      Cost      Score    Annual
                                                                                                          Rent
----------------------------------------------------------------------------------------------------------------
               FISCAL YEAR 2010

Austin, TX....................................  Add'l. S&D/C......................    $116.1      82.0      $6.5
Salt Lake City, UT............................  Add'l D/C.........................    $211.0      67.9     $11.4
Savannah, GA..................................  Add'l. D..........................      $7.9      61.3      $3.5
San Antonio, TX...............................  Add'l. D..........................      $4.0      61.3      $9.2
Mobile, AL....................................  Add'l. S&D/C......................    $190.3      59.8      $4.7
                                                                                   -----------------------------
      Total...................................  ..................................    $529.3  ........     $35.4
                                                                                   =============================
               FISCAL YEAR 2011

Nashville, TN.................................  Add'l. S&D/C......................    $183.9      67.3      $7.0
Savannah, GA..................................  C.................................     $95.5      61.3      $3.5
San Jose, CA..................................  Add'l. S..........................     $38.6      54.5      $9.4
Greenbelt, MD.................................  S&D...............................     $14.0      53.8      $1.6
                                                                                   -----------------------------
      Total...................................  ..................................    $332.0  ........     $21.5
                                                                                   =============================
               FISCAL YEAR 2012

San Antonio, TX...............................  C.................................    $142.2      61.3      $9.2
Charlotte, NC.................................  C.................................    $126.4      58.5      $7.1
Greenville, SC................................  C.................................     $79.1      58.1      $4.1
Harrisburg, PA................................  C.................................     $57.3      56.8      $5.4
San Jose, CA..................................  D.................................     $17.2      54.5      $9.4
                                                                                   -----------------------------
      Total...................................  ..................................    $422.2  ........     $35.2
                                                                                   =============================
               FISCAL YEAR 2013

Norfolk, VA...................................  C.................................    $104.7      57.4      $5.1
Anniston, AL..................................  C.................................     $20.4      57.1      $1.1
Toledo, OH....................................  C.................................    $109.3      54.4      $5.9
Greenbelt, MD.................................  C.................................    $170.0      53.8      $1.6
                                                                                   -----------------------------
      Total...................................  ..................................    $404.4  ........     $13.8
                                                                                   =============================
               FISCAL YEAR 2014

San Jose, CA..................................  C.................................    $223.9      54.5      $9.4
----------------------------------------------------------------------------------------------------------------
S=Site; D=Design; C=Construction; Addl.=Additional.

All cost estimates subject to final verification with GSA.

                     ENERGY EFFICIENCY IN BUILDINGS

    Senator Durbin. Can I switch off courthouses for a very 
quick observation and question, Administrator Prouty?
    I recently was invited to tour what was formerly known as 
Sears Tower in Chicago. It is now known as Willis Tower. And it 
was built 35 years ago and I think still is the tallest 
building in the United States. And maybe it has been eclipsed 
overseas by some other building, but it is certainly a dominant 
feature on the Chicago skyline.
    And the management company brought me in to show me what 
their plans were. And their plans involve about a $300 million 
investment in making this 35-year-old building energy 
efficient. It turns out when it was built 35 years ago, no one 
paid any attention to the basics. They have 16,000 single-pane 
windows in the Sears Tower, for example.
    And if you can imagine a heating and air-conditioning 
system that is ancient by today's modern standards, and it 
costs a fortune, 125 elevators and all of these things. They 
have decided that it is economical for them to invest $300 
million in energy savings and that it will be paid back rather 
promptly.
    And that, of course, means replacing the windows, maybe 
even repainting the building, putting wind turbines on every 
roof, adding solar panels, creating new heating and air-
conditioning unit, actually creating a co-generation 
opportunity with 125 elevators, which with the friction they 
create can be generating electricity.
    They think that this building can become an energy producer 
to the point where they can build a hotel next door and use the 
energy off the old Sears Tower to sustain a building next to 
it.
    I think of that in terms of your responsibility with a lot 
of buildings even older, and pollution coming off of them every 
day. Someone estimates 60 percent of our pollution comes off of 
our structures as opposed to what we drive. And I am wondering, 
as you get into this decisionmaking about the future of GSA 
buildings, what calculations are you making that may parallel 
what I found at the Sears Tower?
    Mr. Prouty. I think we are in the same category. I was just 
going to say that we wished we had buildings so young as 35 
years old. Our buildings are a lot older, a lot more 
inefficient.
    There are a lot of really good things that are happening 
right now. The technology is improving to the point that you 
are getting a payback that causes these all to pay out in 
reasonable amounts of time.
    Also what we are seeing is green buildings in the market 
perform better. We also know with the $4.5 billion that we have 
been given, that we are going to drive that industry. So we 
absolutely agree. We are looking for every innovative approach 
we possibly can. We are using solar. We are using wind. We are 
doing windows. We are doing insulation. We are doing improved 
technology in all the systems. So we agree we are learning more 
every day.
    I am not an expert. We happen to have an expert with us.
    Senator Durbin. How do you stay in front of it on the 
technology? For example, it appeared at first blush the window 
replacement would be some at least double-paned insulated 
windows, and then it turns out there are other windows coming 
on the scene with film that allows in the sunlight at certain 
times of the year--the winter, when you want it--and shields 
the building, inside the building parts of the year when you 
don't want it.
    And this really just seems to be coming so quickly. How do 
you evaluate these technologies when you are about to make 
massive investments?
    Mr. Prouty. Yes, we are tied to the industry. We have a 
green building program. Kevin Kampschroer leads that program. 
He is--he meets with them all the time. In many cases, we are 
leading that industry. So, as you say, it is a very dynamic 
world. It is changing every day. But the good news is we have 
$4.5 billion, which causes us to be able to test out some of 
these new technologies.
    Senator Durbin. At the risk of a commercial announcement, I 
have discovered a company that just bought a facility in 
Chicago called Serious Materials. It is out of California. And 
they have production facilities in several different places, 
and they are doing the window replacement on the Empire State 
Building with these new filmed windows. And so, I am going to 
promote them in the hopes it means more jobs in Chicago, a 
place that I am proud to represent.
    Thank you very much.
    Do you have anything further?
    Well, thanks a lot for your testimony, Mr. Prouty.
    Mr. Prouty. Thank you very much.
    Senator Durbin. And Judge Bataillon, thank you for coming 
and giving us an insight into this constitutional clash that we 
have over the construction of courthouses. Thanks a lot.
    Judge Bataillon. Thank you very much. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Durbin. At this point, we are going to recess the 
subcommittee and tell you that there will be some written 
questions coming your way. Hope that you can respond to them on 
a timely basis and maybe by--we will leave the record open 
until Wednesday, June 24 at noon.
    [The following questions were not asked at the hearing, but 
were submitted to the Administration for response subsequent to 
the hearing:]

                 Questions Submitted to Paul F. Prouty
            Questions Submitted by Senator Richard J. Durbin

                      RECOVERY ACT IMPLEMENTATION

    Question. As part of the Recovery Act, GSA received $5.5 billion, 
of which $4.5 billion was designated for converting GSA facilities to 
High-Performance Green Buildings. The Act states that not less than $5 
billion of Recovery Act funds must be obligated by the end of fiscal 
year 2010. GSA has identified 43 buildings for ``full and partial 
building modernizations'' at an estimated total cost of approximately 
$3.1 billion. GSA has also identified 194 buildings for ``Limited Scope 
projects'' at a cost of approximately $800,000,000. In addition, the 
Recovery Act funds an additional $1 billion in construction projects. 
This is a significant increase in workload as compared with previous 
years, and recent press reports suggest that there may be as many as 
150 vacancies for contracting officers at GSA and shortages in other 
critical personnel areas.
    Given the volume of projects to be undertaken by GSA and the amount 
of funds to be obligated in fiscal year 2010, how can you assure the 
subcommittee that GSA will be able to responsibly obligate $5 billion 
or more by the end of fiscal year 2010?
    Answer. To ensure that we responsibly obligate $5 billion or more 
by fiscal year 2010, GSA has established a centralized program 
management office (PMO) within the Public Buildings Service (PBS) to 
oversee and manage recovery activities. The PMO is a small, cohesive, 
National Office staffed with high performing project managers and 
subject matter experts who are supported by contract/consultant 
resources.
    The PMO will: manage Recovery Act tracking and reporting efforts; 
support regional offices by providing contracts, subject matter 
experts, legal expertise, audit functions, workload/staff modeling, 
tools, and troubleshooting of program and project challenges; interface 
with stakeholders, including Congress and tenant Federal agencies; 
ensure that cost, schedule, and scope are completed as promised; 
identify resource needs and shift resources to accommodate changing 
program requirements; and establish a quality review plan to define and 
assess the key GSA information systems that may contain information 
required for full Recovery reporting and continually monitor and review 
the information required for compliance with Recovery Act reporting 
requirements.
    GSA's PBS has enhanced the reporting capabilities of its project 
tracking database to incorporate additional project milestones into the 
Variance Tracking Report, a management tool for monitoring and tracking 
project progress. This report also serves as an early warning tool so 
management can identify projects that are starting to deviate from the 
plan and promptly implement corrective activities.
    The PMO is undertaking regular and ongoing activities with the 
Office of Inspector General to ensure effective and efficient program 
execution, including pre-award audits and ongoing dialogue.
    GSA has implemented additional management controls and oversight 
mechanisms to ensure effective and efficient execution of recovery 
activities. For guidance, we are drawing on Agency-wide existing 
management controls, which are based on OMB Circular A-123, 
Management's Responsibility for Internal Control; the Federal Managers' 
Financial Integrity Act (FMFIA); OMB Circular A-127 Financial 
Management Systems; and the Federal Financial Management Improvement 
Act (FFMIA). GSA's internal control reviews are conducted for Agency 
program components to ensure that all significant risks are identified, 
tested, evaluated, and mitigated in a timely and effective manner.
    Question. Does GSA currently have sufficient staff to handle these 
projects?
    Answer. GSA is currently using several approaches to ensure there 
are sufficient resources to manage Recovery Act projects. Our 
approaches include deploying our experienced personnel to Recovery Act 
projects and backfilling with temporary hires as well as ``industry 
hires'' whose limited terms sunset with the expiration of the Recovery 
initiative. This solution fulfills our short-term need for a larger 
workforce without encumbering our long-term personnel goals. These 
industry hires are recruited from the ailing design, construction, and 
construction management industries.
    GSA is also hiring contractors to support GSA in such areas as data 
tracking and reporting, reviews of scopes, schedules and budgets, 
energy performance reviews, design services, construction contracting, 
technical expertise, and project management.
    GSA will continue to evaluate our resource needs on an ongoing 
basis, to determine where we have gaps and the best means to fill those 
gaps, including recruitment, contract staff, and redeployment of 
current staff. We are addressing resource requirements for 
accomplishing Recovery Act projects as well as our existing workload. 
We have sought approval from OPM to utilize various hiring authorities 
and are establishing national contract vehicles to supplement the 
workforce.
    Question. What is the optimal number of FTEs (GSA contracting 
officers, project managers, and support staff) needed to ensure that 
GSA will be able to award contracts for the 237 green building 
``modernization or limited scope'' projects and the $1 billion worth of 
new Recovery Act construction projects in a timely manner?
    Answer. GSA has conducted a series of workforce analyses to 
determine the resources needed to deliver Recovery projects. It was 
estimated that approximately 232 Government FTE and contractor 
positions are required in procurement, realty, architecture, 
engineering, project management, and program analysis to expeditiously 
and fully support the projects and programs tied to the Recovery Act. 
GSA will be re-directing existing resources, as well as hiring 
temporary resources, to meet this workload demand.
    Question. How does the optimal number compare to the actual 
staffing level?
    Answer. The optimal number of combined Government FTE and 
contractor positions is approximately 232 positions. To achieve this 
staffing level, PBS has redeployed current staff, recruited new hires, 
and procured contractor support to address resource requirements for 
accomplishing Recovery Act projects as well as our existing ongoing 
workload. We are on track to achieve this goal.
    Question. With respect to contract oversight, what is the optimal 
number of FTEs needed to ensure that these projects are appropriately 
monitored and contractors are delivering the products and services on 
time and at the proper cost?
    Answer. The optimal number of positions estimated above includes 
contract oversight resource needs. The 232 positions include managers 
and analysts who are dedicated to monitoring contractor performance and 
ensuring that projects are delivered in compliance with Recovery Act 
funding and GSA requirements, on-time and at the proper cost.
    Question. How does GSA plan to measure the environmental benefits 
of the Green Building projects in a quantifiable way?
    Answer. We are improving energy performance on a large scale with 
our full and partial building modernization projects and in specific 
ways with our limited scope projects. In both types of projects, we 
expect energy savings from new building controls and adjustments; 
lighting replacements; new roofs and windows: and building mechanical 
system upgrades. We are performing detailed surveys of each building to 
quantify the potential for energy savings. Once the surveys have been 
completed and the baselines identified, we will be able to estimate the 
energy consumption reductions for the building specific projects.
    Question. How does GSA plan to measure the number of jobs created 
by the projects?
    Answer. GSA will not prepare independent estimates of jobs created 
by our Recovery Act projects. Instead, we will support the 
Administration's efforts to collect job data directly from recipients 
of Federal contract awards and their sub-recipients.
    GSA has included provisions in our Recovery Act contracts 
consistent with interim Federal Acquisition Regulation (FAR) clause 
52.204-11. This FAR clause requires recipients of Federal contract 
awards to submit information required by Section 1512 of the Recovery 
Act through the www.FederalReporting.gov website.
    Question. What the basic distinction between a ``partial building 
modernization'' and a ``limited scope project?
    Answer. Generally, full and partial building modernizations adopt a 
``whole building approach'' and include repairs and renovations to 
multiple building systems in order to improve energy- and water-
efficiency of the entire facility. Building systems, in this case, 
include Heating, Ventilation, and Air Conditioning (HVAC), building 
envelope, or lighting. Limited scope projects focus on installing a 
specific green technology (such as intelligent lighting, or ENERGY STAR 
roofs) or addressing a single building system.
    Examples of repairs and renovations included in full and partial 
modernization projects include:
  --Adding thicker insulation than required by the newest energy codes 
        in climates where it makes sense;
  --Installing variable frequency drives to reduce energy and extend 
        the life of mechanical equipment;
  --Converting parking structure lighting to LED (light-emitting 
        diode), which dramatically lowers energy consumption, improves 
        safety and visibility and reduces maintenance as LEDs can last 
        two to three times as long as typical parking lot lights;
  --Retrofitting or replacing less efficient windows; and
  --Specifying dual flush toilets and waterless or low water urinals to 
        save water and reduce demand on aging city sewer systems.
    Examples of limited scope improvements include:
  --Installing intelligent lighting systems that provide daylight and 
        provide controls for occupants to adjust for ambient light 
        versus task light;
  --Replacing flat roofs with ENERGY STAR membranes; integrated 
        photovoltaic panels bonded to the membrane; or planted roofs. 
        These options offer benefits ranging from increasing the life 
        of the roof, to producing energy and to reducing the ``heat 
        island'' effect of a black roof; and
  --Accelerating the installation of advanced meters--required under 
        the Energy Policy Act to be completed by 2012. Advanced meters 
        enable us to better manage buildings by instantaneously 
        providing information on a building's energy use and 
        encouraging immediate operational changes.
    Question. What will be GSA's approach to prioritizing among the 43 
``full and Partial Modernization Projects'' for implementation? Among 
the 194 ``limited scope'' projects?
    Answer. GSA's priorities for ``Full and Partial Modernization'' and 
green ``limited scope'' projects are based on the purpose of the 
Recovery Act: (1) Stimulate the American economy by spending money 
quickly; and (2) Improve the environmental performance of Federal 
assets, particularly reducing our dependence on carbon-based fuels.
    Within these broad objectives, each class of project is prioritized 
based on the following criteria:
    Full and Partial Building Modernization projects:
  --High-performance features concentrating on energy conservation and 
        renewable energy generation.
  --Speed of construction start (job creation).
  --Execution Risk (ensuring that the projects will not fail due to 
        unforeseen conditions).
  --Facility Condition. The Facility Condition Index is a standard real 
        estate industry index that reflects the cost of the repair and 
        alteration backlog of a particular building relative to the 
        building's replacement value.
  --Improving Asset Utilization.
  --Return on Investment.
  --Avoiding Lease Costs.
  --Historic Significance.
    Limited Scope projects are prioritized based on energy performance 
(beginning with the worst performing buildings) and informed by 
existing physical condition surveys:
  --Projects are initially prioritized based on Energy Use Intensity: 
        Btus/Gross Square Foot.
  --This list is refined, based on input from Regions on specific 
        building conditions and operations.
  --Preference is given to projects in descending order of: energy 
        conservation, return, or high-performance improvement.
    No project is on our list if it does not deliver a positive return 
on investment.

                UNDERUTILIZED OR EXCESS FEDERAL PROPERTY

    Question. Underutilized or excess federal property is a significant 
problem that puts the government at significant risk for lost dollars 
and missed opportunities. GAO reported in May 2007 that GSA reported 
258 buildings, with 13.8 million rentable square feet, as excess 
property. In order to help other agencies better serve the public by 
meeting--at best value--their needs for real property such as federal 
buildings and to meet its goal of exemplary management of buildings, 
GSA should reduce its excess and underutilized property.
    What strategy will GSA employ to help the federal government reduce 
its excess and underutilized property?
    Answer. GSA is responsible for managing the utilization and 
disposal of Federal excess and surplus real property government-wide, 
and we have a comprehensive strategy for promoting the effective use of 
Federal real property assets.
    GSA Properties.--GSA has over 1,000 properties in our portfolio, 
making the disposal of underutilized real property a considerable task. 
GSA works together with partner Federal agencies, State and local 
governments, nonprofit organizations, business groups, and citizens, to 
ensure that we create a lasting, positive impact on communities by 
making valuable government real estate available for numerous public 
purposes. Properties that are not conveyed to eligible recipients for a 
public purpose are sold by competitive bid to private individuals.
    In fiscal year 2008, GSA disposed of 13 of our own properties, 
valued at approximately $58.5 million. These disposals provided 
revenues of $56 million for the Federal Buildings Fund (FBF).
    Other Federal Agencies.--GSA supports the Administration's goals of 
disposing of unneeded real property and reducing Federal spending by 
providing a variety of asset management and disposal services to other 
landholding Federal agencies. GSA assists those agencies in developing 
asset management plans and strategies, in accordance with Executive 
Order 13327, ``Federal Real Property Asset Management'', and provides a 
variety of asset utilization and disposal services, including: 
Understanding the role of each asset in supporting agency mission 
objectives; examining current and future utilization alternatives; 
collecting and organizing title, environmental, historical and cultural 
information; and identifying real estate and community issues affecting 
the property.
    In fiscal year 2008, GSA disposed of 235 properties valued at 
approximately $192.2 million for other Federal agencies. GSA also 
conducted 26 targeted asset reviews to help agencies identify 
underutilized real property assets and improve their compliance with 
E.O. 13327.

                PROJECTS REQUESTED FOR FISCAL YEAR 2010

    Question. The 2009 Omnibus Appropriations Act required the fiscal 
year 2010 budget submission to include 5-year plans for Federal 
Building and Land port-of-entry projects. However, these plans have not 
been furnished to the Subcommittee.
    Why were these plans not included in the Budget submission? When 
will they be provided?
    Answer The 5-year capital plans required by the fiscal year 2009 
Omnibus cannot be completed without input from many different customer 
Federal agencies. Our customers' long-term requirements and GSA's needs 
have changed as a result of the substantial new funds provided in the 
Recovery Act. The complexities created by the Recovery funding--as well 
as the increased workload that it placed on Federal capital planning 
staff--made it difficult to prepare a 5-year forecast of capital 
investment needs in time to include it in the fiscal year 2010 budget 
submission.
    The required plans will be submitted as soon as they are 
coordinated. GSA will include the plans in future budget requests.

                            REPAIR BACKLOGS

    Question. Restoration, repair, and maintenance backlogs in federal 
facilities are significant and reflect the federal government's 
ineffective stewardship over its valuable and historic portfolio of 
real property assets. As part of its 2008 financial statement, GSA 
reported about $7.3 billion in capital repair and alteration work items 
that had not been addressed by ongoing projects.
    To what extent, if any, will the funding provided by the American 
Recovery and Reinvestment Act address these needs?
    Answer. GSA expects Recovery Act funds to reduce the backlog of 
traditional Repairs and Alterations (R&A) needs by $1 to $1.5 billion. 
Of the $4.5 billion of ARRA funds directed towards High-Performance 
Green Buildings, almost two-thirds has been dedicated to energy 
improvements and greening initiatives, and the remainder will directly 
address the R&A backlog. The $1.05 billion provided for Federal 
buildings and LPOE projects will be used for New Construction, and will 
not have a direct impact on our repair and alterations liabilities.
    Question. What action is GSA taking to ensure that recently 
constructed and recently renovated properties are maintained so the 
situation of allowing facilities to deteriorate does not continue?
    Answer. GSA strives to maintain a portfolio of assets that are in 
``Good'' condition, meaning needed repairs are less than 10 percent of 
the asset's functional replacement cost. GSA maintains the condition of 
these core assets through strategic reinvestment throughout the life of 
the asset. Asset condition is evaluated and monitored annually, through 
a series of asset management diagnostic tests. When repair and 
alteration needs are identified, such repairs are addressed through the 
minor repairs and alterations program. Recently constructed and 
recently renovated properties have few, if any, repair and alteration 
needs.
    GSA has made progress in improving the condition of its portfolio 
of assets through strategic management of existing assets, and Recovery 
Act funding provided for repair, modernization, and green initiatives. 
For example, 50 U.N. Plaza in San Francisco, CA, had been mostly 
vacant, and Recovery Act funding will allow this historic asset to be 
fully utilized again. However, despite the investments of the Recovery 
Act, GSA continues to face challenges from maintaining an aging 
building portfolio. The Recovery Act is expected to reduce GSA's R&A 
backlog by approximately $1 to $1.5 billion.
                                 ______
                                 
             Question Submitted by Senator Mary L. Landrieu

                             CUSTOMS HOUSE

    Question. The New Orleans Customs House is a magnificent historic 
structure located on the edge of the French Quarter that dates back to 
1848. During Katrina, its roof failed, and the building suffered 
significant water damage. Since that time, GSA and Customs have 
dedicated funding to repair the building, and it is scheduled for re-
occupancy in the spring of 2010. The Customs House is the only National 
Historic Landmark building in GSA's Southwest Region, which is based in 
Fort Worth, Texas. This subcommittee included language in the previous 
year's appropriations report that mentioned the building by name and 
underscored its significance to the local community. Section 307 of the 
Stafford Act and GSA Policy Number 2851.5 both require that preference 
for reconstruction work following a major disaster be given to locally-
based firms. However, there are no Louisiana firms under contract to 
perform work on the Customs House.
    Will you and the Chief Architect of GSA work with my office to 
ensure that the agency complies with the Stafford Act and follows its 
own policy on Gulf Coast reconstruction projects, by allowing locally-
based Louisiana firms to participate in the restoration of the Customs 
House?
    Answer. Yes, GSA will work with Senator Landrieu's office to 
address any questions on the restoration of the New Orleans Customs 
House.
    Phase I of the New Orleans Customs House repair and alteration is 
for Hurricane Katrina reconstruction, and as such is governed by the 
Stafford Act. The design-build contract has been awarded to a local 
business: Carl E. Woodward, LLC, a New Orleans-based firm. The Phase I 
design firm is Waggonner & Ball Architects, also of New Orleans. As of 
July 2009, $36 million has been awarded. 95 percent of that amount, or 
approximately $34 million, has been awarded to Louisiana-based 
subcontractors.
    Phase II of the Customs House restoration does not involve any work 
covered by the Stafford Act, such as debris clearance, supply 
distribution, or reconstruction work. Nevertheless, GSA has awarded 35 
percent of the design contract to Waggonner & Ball Architects of New 
Orleans. The remainder of the Phase II design contract was awarded to a 
design firm that, while not locally-based, had extensive prior 
experience working on the Customs House, and was able to present a fair 
and reasonable price for the remaining design work. The construction 
contract for Phase II repair and alteration is anticipated to be 
awarded during or near January 2010. GSA is encouraging organizations, 
firms, and individuals residing or doing business primarily in New 
Orleans to submit proposals for the final portion of the Customs House 
restoration work, and is considering holding a local business workshop 
on the subject during autumn 2009.
    Re-occupancy of the Customs House is scheduled for Summer 2011.
                                 ______
                                 
              Questions Submitted by Senator Susan Collins

    Question. It seems like the $4.5 billion provided for converting 
GSA facilities to High-Performance Green Buildings will create a great 
deal of demand for ``green'' building products and technologies, such 
as LED lighting and solar roofing materials.
    Is the domestic market for these materials strong enough to meet 
these needs?
    Answer. GSA is investigating the capacity of American manufactures 
to provide products, particularly in the energy efficiency sector, to 
be installed and used in GSA's Recovery projects. GSA is using the 
services of a major construction management firm with close ties to the 
construction industry to analyze product requirements and project 
schedules. We are also using information already collected by the 
Department of Energy in this analysis. As part of this effort, GSA 
plans to manage project schedules and by extension, product orders, to 
level demand for specific manufactured products and materials.
    Question. Will all of these materials come from American 
manufacturers?
    Answer. The Recovery Act generally requires Federal agencies to 
utilize iron, steel, and manufactured goods produced in the United 
States for Recovery projects. GSA is asking the American manufacturing 
community to help meet its goal of ``on time, on budget, on green.'' 
Although specific requirements vary by product type and project, GSA 
strives to use American-made goods to the greatest extent possible on 
all Recovery Act projects.
    Question. Will GSA take any additional or extra steps to ensure 
that local, small businesses can compete to provide ``green'' products 
or services?
    Answer. GSA's Recovery Act projects provide many opportunities for 
small businesses:
  --GSA has planned over 200 high-performance green building limited 
        scope projects, which range in size from $114,000 to 
        $107,000,000, and together total just over $800 million.
  --Other opportunities include an additional $296 million for small 
        projects across the country.
  --Opportunities also exist in support service contracts, such as 
        acquisition and project management support.
    GSA will support small businesses through the use of new small 
business set-asides where adequate competition and competitive pricing 
can be achieved.
    GSA is also preparing a list of Indefinite Delivery, Indefinite 
Quantity (IDIQ) contract holders: This list will be made publicly 
available to assist small businesses in obtaining sub-contracts with 
existing GSA contractors. All bid opportunities will be advertising on 
www.FedBizOpps.gov.
    GSA is hosting partnering events that provide opportunities for 
small vendors to present qualifications and form relationships with 
prime contractors. We have also developed a communication network 
through small business associations, to provide information to vendors 
across the nation.
    GSA remains committed to negotiating aggressive small business 
subcontracting plans with our prime contractors for large design and 
construction contracts. As appropriate, GSA will publish prime 
contractor contact information online
    Question. GSA's lack of responsiveness to this Committee and to the 
Committee on Homeland Security and Governmental Affairs is very 
problematic. As you know, both Committees have oversight over GSA's 
policies and activities, and are responsible for ensuring that GSA is 
using Federal funds effectively. Inquiries to GSA--particularly 
questions relating to the Public Buildings Service and construction 
projects--take a very long time to generate responses, and sometimes 
are never answered.
    GSA frequently takes months to prepare responses to formal letters. 
Are you aware that this is a problem for GSA? Can you identify steps 
that you will take to improve this situation and ensure that GSA 
responds to Congressional inquiries--formal and informal--in a timely 
manner? If not, will you agree that this is a problem and will you 
commit to taking immediate steps to improve this situation?
    Answer. GSA is aware of the problem and we are currently analyzing 
our organizational structure and internal processes to correct this 
issue. The Public Buildings Service (PBS) has merged its legislative 
and correspondence offices into one office that reports directly to the 
PBS Chief of Staff. We have analyzed the correspondence process within 
PBS and are testing a new process starting July 30, 2009. We believe 
the new procedures will streamline the correspondence process within 
PBS and reduce the overall time it takes to return letters. In fact, 
PBS is aiming to reduce response time within PBS from months to 7 
business days. This would include receiving the letter, vetting the 
request, researching the answer, drafting a response, and obtaining 
proper internal clearance for the draft response, to ensure we have 
properly answered the letter.
    Question. The Fiscal Year 2009 Omnibus Appropriations Act includes 
separate provisions directing GSA to provide both a 5-year plan for 
Federal buildings and a 5-year plan for land ports of entry in fiscal 
year 2010 Congressional Budget Justification materials. GSA did not 
provide these plans in their budget justification materials and has yet 
to provide them to the Committee.
    If these plans are not available, what is the basis for GSA's 
fiscal year 2010 request for Federal building construction and land 
ports of entry? How can this Committee be certain that the projects 
included in your request are the best or most pressing needs for 
Federal construction?
    Answer. GSA's fiscal year 2010 request for New Construction 
projects concentrates on space consolidation efforts, for the Food and 
Drug Administration and the Federal Bureau of Investigation, and for 
mission-critical requirements that cannot be easily met in leased 
space.
    Our customers' long-term requirements and GSA's needs have changed 
as a result of the substantial new funds provided in the Recovery Act. 
However, the Recovery Act plan was based on shovel-ready projects, and 
a large number of high-priority needs remain that were not ``shovel-
ready'' at the time the Recovery Act plan was prepared.
    The required plans will be submitted as soon as they are 
coordinated. GSA will include the plans, as required, in future budget 
submissions.
    Question. Although GSA has not provided 5-year plans for Federal 
buildings or Land Ports of Entry, this Committee does have the 5-year 
courthouse plan of the Judiciary. But neither of the courthouses in 
GSA's request are on that list. The projects on the Judiciary's list 
are scored and ranked by fiscal year.
    In developing the fiscal year 2010 budget request, why did GSA not 
follow the priorities set out in the Judiciary's Five-Year Courthouse 
Plan?
    Answer. The funding provided by the Recovery Act allowed GSA to 
fund a large program of Courthouse requirements in fiscal year 2009 and 
fiscal year 2010; this freed up funds to meet the needs in Lancaster 
and Yuma with Federal construction.
    Our Recovery Act project plan includes 6 Courthouse New 
Construction projects, including the Austin Courthouse ($116 million), 
which is the highest priority Courthouse to be identified by Judiciary 
in their Five-Year Plan. The Recovery Act project plan also includes 
funds for repair and alteration work on more than 110 Courthouses.
    Question. What objective criteria led GSA to select Lancaster, 
Pennsylvania, and Yuma, Arizona, over the projects on the Judiciary's 
list?
    Answer. These projects were originally identified as potential 
lease construction projects. Both OMB and GAO have been closely 
reviewing lease construction scenarios and have determined that it is 
often not in the best interest of the Federal Government and the 
taxpayer. In this case, GSA performed a 30-year present value life 
cycle cost comparison between Federal construction and leasing. The 
analysis considered both the government's equity and its capital and 
operating costs in each alternative to determine the lowest net costs 
expressed in present value terms for a given amount of space. The 
inherently governmental nature and long term requirement of these 
courthouses make Federal construction a financially responsible 
solution. A lease construction project would involve annual above-
market rent outlays from the government over the life of the lease 
without any benefit of residual value at the end of the lease. The 
life-cycle cost analysis supports Federal construction as the best 
value to the taxpayer.
    The Courthouse project in Yuma, AZ was originally proposed as a 
lease construction project because funding was not expected to be 
available to meet the Judiciary's requirements with Federal 
construction. GSA was also working with the Courts to develop a 
potential lease construction project in Lancaster, Pennsylvania. If 
funding were provided through the 2010 Appropriations, both projects 
would be converted to Federal construction, which would allow for a 
government-owned solution and save taxpayer money.
    Question. GSA seems to have an inability or unwillingness to 
appropriately address the needs of local communities when planning and 
executing Federal construction projects. For example, this is apparent 
in GSA's dealings with the Madawaska, Maine community.
    Does GSA have a formal process for collecting public input on 
construction projects?
    Answer. At GSA, we take pride in our work with communities when 
planning and executing Federal construction projects. Large or complex 
development projects often engender competing views on community 
impacts. GSA conducts formal and informal communications with local 
communities throughout all stages of the design and construction 
process for new construction projects.
    During the planning stage of a project, GSA utilizes the process 
set forth by the National Environmental Policy Act (NEPA) to solicit 
public involvement and input from residents, business owners, local and 
state officials, and affected agencies. GSA typically hosts a public 
meeting to hear local concerns and provide contact information for 
those who want to comment directly to the agency. GSA takes into 
consideration issues raised by the public at these meetings or in 
writing to determine and update the scope of the prospectus development 
study. NEPA documentation is made available to local communities as it 
is developed. GSA then evaluates and responds to those comments as a 
part of our NEPA process.
    Additionally, GSA holds community open house meetings and hosts 
stakeholder meetings at key stages during project design. For example, 
GSA held a stakeholders' meeting for the Madawaska Land Port of Entry 
on March 31 of this year. Nearby businesses (Fraser Paper and Montreal, 
Maine, and Atlantic Railway, Inc.), Town of Madawaska officials, 
Congressional delegation representatives, and the facility's future 
tenant, the Department of Homeland Security's U.S. Customs and Border 
Protection, were invited to attend. The GSA design team presented an 
electronic building information model (BIM) showing the new port and 
incorporating a 4 dimensional (time visualization) demonstration of how 
traffic will flow through the new port.
    Question. Does GSA perform an objective review of citizen concerns, 
and notify the community of GSA's decision in a timely manner?
    Answer. GSA performs an objective review of citizen concerns for 
Federal construction projects. GSA immediately responds to oral 
questions received during open houses and stakeholder meetings, and 
addresses written comments submitted through the Agency's NEPA review. 
In the case of Madewaska, GSA thoroughly reviewed and responded to 
community concerns, questions and comments. Once substantive comments 
were addressed, GSA notified the community of how it evaluated and 
responded to comments in its final EIS.
    The timeliness of the GSA's responses can be best demonstrated by 
example. For the Madawaska Land Port of Entry, the Draft EIS was made 
available to the public on August 8, 2006. The public comment period 
started on August 3, 2006 and ended on September 22, 2006. GSA also 
hosted an open house on August 17, 2006, where 14 attendees offered 
oral comments and GSA received ten written comments. GSA received a 
total of 75 pages of public concerns and comments regarding its Draft 
EIS, including verbal and written comments. GSA objectively reviewed 
these comments and then responded accordingly in the final EIS, which 
was published in December 2006.
    Question. Approximately how many data centers does the Federal 
Government own? Approximately how many square feet of data center space 
does the federal government occupy in government owned facilities and 
contractor owned facilities?
    Answer. The Office of Management and Budget is currently gathering 
Government-wide information on data centers. Once we receive the 
updated information, we will be in a better position to answer these 
questions. We expect to provide the Committee with the answers by 
October 15, 2009.
    Question. What risk does the continued proliferation of federal 
data centers present to the federal budget and our nation's energy 
consumption?
    Answer. The proliferation of Federal data centers will increase 
energy consumption in order to support the facilities' environment 
control systems and information technology systems. Additional data 
centers, as historically constructed, would increase overall costs to 
the Federal government for construction and operation and maintenance, 
and not take advantage of modern concepts such as cloud computing and 
virtualization that can reduce IT cost, energy consumption and lower 
the cost of government operations. Future data centers should be built 
with a well-coordinated strategy that increases capacity and utilizes 
modern concepts such as green building, and other efficiencies that 
would otherwise not be realized.
    Question. Is GSA actively exploring how it can be a singular 
provider of data processing and storage capability to a large portion 
of the rest of the Federal Government?
    Answer. Yes, GSA is currently preparing a business case analysis to 
determine the viability of providing multi-tenant government-owned data 
centers that offer a fully acceptable risk mitigated data survivability 
solution to all Federal entities.
    To date, this analysis has focused on ensuring that Federal data 
centers provide adequate protection for our nation's most critical 
information and network infrastructures.
    Question. What role can intra-data center and inter-data center 
virtualization play in facilitating federal data center consolidation?
    Answer. These activities will reduce the footprint of information 
technology tremendously, through the provisioning of technology 
resources, and will assist in the reduction of Federal energy 
consumption. Data center virtualization will be one vehicle to 
realizing the cost savings and efficiencies proposed in this area by 
this Administration.
    Question. What challenges exist to GSA and other agencies on the 
statutory and regulatory levels to achieving a more consolidated 
federal IT infrastructure?
    Answer. We are currently gathering Government-wide information on 
data centers. Once we receive the updated information, we will be in a 
better position to answer these questions. We expect to provide the 
Committee with the answers by October 15, 2009.
    Question. What are some examples of excellence within the federal 
government with regard to pushing the consolidation agenda forward?
    Answer. We are currently gathering Government-wide information on 
data centers. Once we receive the updated information, we will be in a 
better position to answer these questions. We expect to provide the 
Committee with the answers by October 15, 2009.
                                 ______
                                 
               Question Submitted to Joseph F. Bataillon
              Question Submitted by Senator Susan Collins

    Question. GSA will be spending $1.5 billion of American Recovery 
and Reinvestment Act (Stimulus) funds on facilities in which the 
Judiciary is a tenant. Do you believe the projects that have been 
identified reflect the Judiciary's highest priority needs?
    Answer. The Judiciary's top space priority is the additional money 
needed to build the Los Angeles project. We were hopeful that stimulus 
funding was going to be provided to fund the estimated shortfall for 
the Los Angeles project that was authorized by the House and Senate. 
Thereafter, the Judiciary's space priorities are set forth in the 
attached Five-Year Courthouse Project Plan for Fiscal Years 2010-2014 
(Five-Year Plan). Only one courthouse that was on the Five-Year Plan, 
Austin, Texas, was included in the stimulus legislation ($116 million). 
The Judiciary recognizes and is appreciative of the fact that of the 
$4.5 billion appropriated for green buildings, we will receive almost 
$1.3 billion of that money for repair and alteration projects in 132 
buildings where the Judiciary is a tenant. In addition, two projects 
(Billings, Montana and Bakersfield, California) which the Judiciary and 
GSA had initially determined could best be provided through lease-
construct are now funded as federal construction projects through the 
stimulus legislation. The Judiciary's highest priority space needs, 
however, are reflected in the Five-Year Plan.

 FIVE-YEAR COURTHOUSE PROJECT PLAN FOR FISCAL YEARS 2010-2014 APPROVED BY THE JUDICIAL CONFERENCE OF THE UNITED
                                             STATES--MARCH 17, 2009
                                         [Estimated dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                        Est. Net
                                                                                      Cost      Score    Annual
                                                                                                          Rent
----------------------------------------------------------------------------------------------------------------
               FISCAL YEAR 2010

Austin, TX....................................  Add'l. S&D/C......................    $116.1      82.0      $6.5
Salt Lake City, UT............................  Add'l D/C.........................    $211.0      67.9     $11.4
Savannah, GA..................................  Add'l. D..........................      $7.9      61.3      $3.5
San Antonio, TX...............................  Add'l. D..........................      $4.0      61.3      $9.2
Mobile, AL....................................  Add'l. S&D/C......................    $190.3      59.8      $4.7
                                                                                   -----------------------------
      Total...................................  ..................................    $529.3  ........     $35.4
                                                                                   =============================
               FISCAL YEAR 2011

Nashville, TN.................................  Add'l. S&D/C......................    $183.9      67.3      $7.0
Savannah, GA..................................  C.................................     $95.5      61.3      $3.5
San Jose, CA..................................  Add'l. S..........................     $38.6      54.5      $9.4
Greenbelt, MD.................................  S&D...............................     $14.0      53.8      $1.6
                                                                                   -----------------------------
      Total...................................  ..................................    $332.0  ........     $21.5
                                                                                   =============================
               FISCAL YEAR 2012

San Antonio, TX...............................  C.................................    $142.2      61.3      $9.2
Charlotte, NC.................................  C.................................    $126.4      58.5      $7.1
Greenville, SC................................  C.................................     $79.1      58.1      $4.1
Harrisburg, PA................................  C.................................     $57.3      56.8      $5.4
San Jose, CA..................................  D.................................     $17.2      54.5      $9.4
                                                                                   -----------------------------
      Total...................................  ..................................    $422.2  ........     $35.2
                                                                                   =============================
               FISCAL YEAR 2013

Norfolk, VA...................................  C.................................    $104.7      57.4      $5.1
Anniston, AL..................................  C.................................     $20.4      57.1      $1.1
Toledo, OH....................................  C.................................    $109.3      54.4      $5.9
Greenbelt, MD.................................  C.................................    $170.0      53.8      $1.6
                                                                                   -----------------------------
      Total...................................  ..................................    $404.4  ........     $13.8
                                                                                   =============================
               FISCAL YEAR 2014

San Jose, CA..................................  C.................................    $223.9      54.5      $9.4
----------------------------------------------------------------------------------------------------------------
S=Site; D=Design; C=Construction; Addl.=Additional.

All cost estimates subject to final verification with GSA.

                         CONCLUSION OF HEARINGS

    Senator Durbin. So that is about it for today, and the 
subcommittee is going to stand recessed.
    Thank you very much.
    [Whereupon, at 4:53 p.m., Tuesday, June 16, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
