[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
PROMOTING ENTREPRENEURSHIP AND JOB
CREATION BY DECREASING DUPLICATION AT THE SBA
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MAY 25, 2011
__________
Small Business Committee Document Number 112-016
Available via the GPO Website: www.fdsys.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
ROSCOE BARTLETT, Maryland
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JEFF LANDRY, Louisiana
JAIME HERRERA BEUTLER, Washington
ALLEN WEST, Florida
RENEE ELLMERS, North Carolina
JOE WALSH, Illinois
LOU BARLETTA, Pennsylvania
RICHARD HANNA, New York
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
MARK CRITZ, Pennsylvania
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
JUDY CHU, California
DAVID CICILLINE, Rhode Island
CEDRIC RICHMOND, Louisiana
GARY PETERS, Michigan
BILL OWENS, New York
BILL KEATING, Massachusetts
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
----------
Page
Opening Statements:
Graves, Hon. Sam............................................. 1
Velazquez, Hon. Nydia M...................................... 2
WITNESSES
Mr. William B. Shear, Director, Financial Markets and Community
Investment, U.S. Government Accountability Office, Washington,
DC............................................................. 4
Mr. Arnold Baker, Founder/CEO, Baker Ready Mix & Building
Materials, New Orleans, LA..................................... 5
Ms. Jody Keenan, Director, Virginia SDBC Network Mason Enterprise
Center, Fairfax, VA............................................ 7
Ms. Denise Pickett, Executive Vice President, American Express
OPEN, New York, NY............................................. 9
APPENDIX
Prepared Statements:
Mr. William B. Shear, Director, Financial Markets and
Community Investment, U.S. Government Accountability
Office, Washington, DC..................................... 24
Mr. Arnold Baker, Founder/CEO, Baker Ready Mix & Building
Materials, New Orleans, LA................................. 37
Ms. Jody Keenan, Director, Virginia SDBC Network Mason
Enterprise Center, Fairfax, VA............................. 40
Ms. Denise Pickett, Executive Vice President, American
Express OPEN, New York, NY................................. 44
Questions for the Record:
Graves, Hon. Sam............................................. 55
Owens, Hon. Bill............................................. 56
Answers for the Record:
Mr. William B. Shear, Director, Financial Markets and
Community Investment, U.S. Government Accountability
Office, Washington, DC..................................... 59
Ms. Jody Keenan, Director, Virginia SDBC Network Mason
Enterprise Center, Fairfax, VA............................. 61
Ms. Denise Pickett, Executive Vice President, American
Express OPEN, New York, NY................................. 75
Additional Materials for the Record:
Association of Small Business Development Centers
Accreditation Standards 2010............................... 77
Association of Small Business Development Centers
Accreditation Standards Study Guide 2010................... 88
HEARING: PROMOTING ENTREPRENEURSHIP AND JOB CREATION BY DECREASING
DUPLICATION AT SBA
----------
WEDNESDAY, MAY 25, 2011
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 1:00 p.m., in room
2360, Rayburn House Office Building. Hon. Sam Graves (chairman
of the Committee) presiding.
Present: Representatives Graves, Bartlett, Hanna, Coffman,
Mulvaney, Fleischmann, Landry, West, Velazquez, Chu, Cicilline,
Richmond, Owens.
Chairman Graves. We call this hearing to order. I want to
say good afternoon and I appreciate all our witnesses being
here. We are going to have a vote called somewhere between 1:20
and 1:30 and it is going to be somewhat lengthy. It may be an
hour or an hour and a half, unfortunately, we do not get the
opportunity to schedule those. So it may mess up the hearing
for just a little bit. I hope you will bear with us and we will
try to get through as much of the opening statements as we can.
Our nation is at a critical point and our national debt and
annual deficits have reached historic proportions. It is
Congress's obligation to look for ways to reduce federal
spending to get our fiscal house in order. The first step is to
cut out waste and duplication in government programs. This
Committee is responsible for determining how the U.S. Small
Business Administration can operate more efficiently while
providing quality services to our nation's aspiring
entrepreneurs and business owners so that they can grow our
economy and create more jobs.
Turning an idea into a small business can be very
overwhelming. To aid small business owners, the SBA offers
online training and counseling, both through its district
offices and through its network of resource partners. However,
as government continues to grow, so have the number of
entrepreneurial development programs, not only at the SBA but
at a number of different federal agencies as well. It is our
job now to take a thorough look at what each of these programs
does and how best to serve the American people, both those who
use the programs and the taxpayers who obviously finance them.
Today we have a very distinguished group of panelists, who
will provide guidance to this Committee so we can look to
streamline the government to make delivery of services more
efficient and more effective. First, we are going to hear about
the scope of the problem. According to the Government
Accountability office, there are 80 programs in four different
federal agencies charged with helping entrepreneurs. And for
fiscal year 2010, these programs cost the government $6.2
billion.
Next, we want to look at the needs of entrepreneurs through
the eyes of the people on the ground providing the counseling.
We will hear from someone who is providing services through the
SBA Small Business Development Center Program. And then finally
we are going to hear about some of the programs available to
business owners that are not funded by the taxpayers but by
industry peers who want to help their communities prosper.
I am very much looking forward to the testimony today to
help guide our efforts to streamline the government and provide
more efficient delivery of services to entrepreneurs and the
taxpayers who are funding them. And again, I want to thank all
of our witnesses for their participation and for being here. We
appreciate it very much.
And now I will turn to Ranking Member Velazquez.
[The information follows:]
Ms. Velazquez. Thank you, Chairman Graves. And good
afternoon to all the witnesses.
The SBA is charged with a broad mandate and fulfils it
through various programs and initiatives. In doing so, it
undertakes a wide range of activities running the gamut from
providing seed capital for start-ups, to helping mature
companies gain access to foreign markets. This initiative has
become essential to our nation's small businesses, which are
responsible for creating two-thirds of all new jobs. In
administering these programs, it is critical that the SBA do so
in a manner that maximizes efficiency and minimizes waste. In
practice, this means ensuring that rules and regulations are
clearly articulated, that a framework for evaluation is in
place, and that the initiatives are not duplicative of other
agency efforts. It is imperative that programs are continually
evaluated and it should not take a fiscal crisis to do so.
Democrats on this Committee have repeatedly pinpointed
programs at SBA that are wasteful and duplicative, irrespective
of budgetary politics. We have annually identified tens of
millions of wasteful spending that could be reinvested in other
valuable programs, but as we do so we have to be mindful that
the Bush administration slashed the Agency's budget by nearly
50 percent, taking it from nearly a billion dollar agency under
President Bill Clinton and leaving it largely unable to meet
the needs of entrepreneurs.
The Committee has also done significant work with third
party evaluators such as GAO. As a result, fraud in the HUBZone
initiative has been exposed. There were 108,000 HUBZone
contract actions in 2010 and in 70 percent of these cases, the
small business actually qualified for another SBA contracting
program. We have also asked GAO to review the Agency's disaster
program, as well as how its loan program can be better
coordinated with the USDA. Eliminating waste and improving
efficiency could enhance services for entrepreneurs.
Oversight is not only a responsibility on Congress,
however, but also for the SBA. Unfortunately, in this regard,
the Agency has not met expectations. According to GAO, it has
not yet developed outcome measures for the HUBZone program that
are linked to its mission. Without them the Agency is unable to
measure the program's effectiveness. In addition, the Agency
has established unauthorized pilot programs without any
performance measure that provide the basis for such oversight.
While these initiatives cost taxpayers millions of dollars,
the Agency has repeatedly failed to use objective metrics to
quantify their success or failure. It recently requested funds
to operate seven pilots, including the Small Loan Advantage and
Community Advantage programs, among others. The last three of
these programs alone cost $50 million. That is more than we
spend on the Women's Business Centers, an initiative that is
authorized and regularly overseen by Congress.
While the regional intent may be admirable, once launched,
these pilot programs often take on a life of their own, drawing
funds away from proven initiatives. Even among programs that we
know work, there is a need for better harmonization. In its
recent report, GAO found that SBA does not help its resource
partners coordinate their services. If it did, the SBA could
lower administrative costs and leverage each program's unique
strength. Such steps must also be taken between agencies that
operate similar programs so that taxpayers are getting the
biggest bang for their buck, and equally important, that small
businesses' needs are met.
Today, reducing the duplication and improving program
performance are not just nebulous bureaucratic catch phrases.
When applied, they mean better services for entrepreneurs and
greater job creation for the economy. Everyone here recognizes
the importance of entrepreneurship to our recovery. As we seek
ways to make economic development programs more efficient, we
cannot afford to shortchange small businesses. Instead, our
goal should be ensuring these programs work in concert together
delivering small businesses the help they need. And that is why
I look forward to today's testimony on this important topic.
And I thank the witnesses in advance for your presence here.
Thank you, Mr. Chairman. I yield back.
[The information follows:]
STATEMENTS OF WILLIAM B. SHEAR, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE; ARNOLD BAKER, CHAIRMAN, NATIONAL BLACK CHAMBER OF
COMMERCE; JODY KEENAN, STATE DIRECTOR, VIRGINIA SMALL BUSINESS
DEVELOPMENT CENTER NETWORK; DENISE PICKETT, EVP, AMERICAN
EXPRESS OPEN
Chairman Graves. Thank you very much.
Our first witness is going to be Bill Shear, who is the
director of Financial Markets and Community Investment Team at
the U.S. Government Accountability Office. The Financial
Markets Team works to improve the effectiveness of regulatory
oversight in financial and housing markets. It also oversees
the management of community development programs. Mr. Shear,
you are no stranger to this Committee and we appreciate you
being here today.
STATEMENT OF WILLIAM B. SHEAR
Mr. Shear. Thank you very much. It is really an honor to be
here.
Chairman Graves, Ranking Member Velazquez, and members of
the Committee, I am pleased to be here this afternoon to
discuss the potential for duplication and fragmentation in
economic development programs.
In March, and more recently last week, we reported on
potential duplication among federal economic development
programs. This statement is based on this work.
Absent a common definition for economic development, we had
previously developed a list of nine activities most often
associated with economic development. Our recent work includes
information on 80 economic development programs at four
agencies--SBA, Agriculture, Commerce, and HUD.
The SBA administers 19 of the 80 programs. According to the
agencies, funding provided for these 80 programs in fiscal year
2010 amounted to $6.2 billion of which about $2.9 billion was
for economic development efforts. Here I want to stress that
our focus to date has been on the design of these programs. In
other words, we have evaluated the permitted uses of funds and
have not as of yet drilled down to see how each program's funds
are actually distributed among various uses.
In summary, based on our work to date, we have found that
first, the design of each of these economic development
programs appears to overlap with that of at least one other
program in terms of the economic development activities that
they are authorized to fund. Second, Commerce, HUD, SBA, and
USDA appear to have taken actions to implement some
collaborative practices, but they have offered little evidence
so far that they have taken steps to develop compatible
policies or procedures with other federal agencies or to search
for opportunities to leverage physical and administrative
resources with their federal partners. And third, the agencies
appear to collect only limited information on program outcomes,
information that is necessary to determine whether this
potential for overlap and fragmentation is resulting in
ineffective or inefficient programs.
Building on our past work, we are in the planning phase of
a new, more in-depth review that will focus on a subset of
these 80 programs, including a number of SBA programs. In fact,
our current thinking is that we may focus on the 54 programs
that fund entrepreneurial efforts. And this would include all
19 SBA economic development programs. In this body of work we
will further differentiate the programs. In addition, we will
build upon previous work, such as those listed as related GAO
products in our written statement, including our work on
Women's Business Centers and programs to assist service-
disabled veteran-owned small businesses. We plan to evaluate
how funds are used, identify additional opportunities for
collaboration, determine and apply criteria for program
consolidation, and assess, how program performance is measured.
Chairman Graves and Ranking Member Velazquez, this
concludes my prepared statement. I would be happy to answer any
questions.
[The statement of Mr. Shear follows:]
Chairman Graves. Thank you, Mr. Shear. And I will now yield
to Mr. Richmond. I think you are going to introduce our next
witness.
Mr. Richmond. Thank you, Mr. Chairman and Ranking Member.
I have the great pleasure of introducing not only a
constituent and a business owner in my district but a true
friend. And that is Mr. Arnold Baker with Baker Ready Mix, who
is the chairman of the National Black Chamber of Commerce and
the CEO of Baker Ready Mix and Building Materials in New
Orleans, Louisiana. Mr. Baker's successful small business has
recently gone from only 10 employees to nearly 60. Mr. Baker is
testifying on behalf of the National Black Chamber of Commerce,
which has 140 affiliated chapters throughout the nation and
reaches over 100,000 black-owned businesses and also Mr. Baker,
on behalf of Congressman Landry and I--and I understand that
you have recently expanded to his district--so on behalf of
both of us, welcome. And we look forward to hearing your
testimony.
Chairman Graves. Mr. Baker.
STATEMENT OF ARNOLD BAKER
Mr. Baker. Thank you, Congressman Richmond.
Chairman Graves, Minority Leader Vasquez, and Congressman
Richmond, distinguished members of this Committee, thank you
for inviting the National Black Chamber of Commerce to
participate in this most important hearing.
The NBCC proudly represents the fastest growing segment of
the American economy, black-owned businesses. We were
incorporated in May 1993. When we were incorporated, the U.S.
Census Bureau stated that there were 300,000 black-owned
businesses doing 30 billion in sales annually. Today, the U.S.
Census Bureau states that there are over 1.9 million black-
owned businesses doing over $137 billion annually. This
fantastic growth has swelled our membership and made us the
largest black business organization in the world. We have over
160 chapters, with 70 percent located throughout the United
States. Our database of black-owned firms exceeds 60,000
businesses.
The NBCC Business Development Committee is rapidly making
new inroads and increasing the sales of our members. Several of
our chapters are working closely with the SBA and have members
benefitting from SBA-sponsored and/or supported programs.
Despite this fantastic growth, we found that the federal
government to be--I guess we found the actions of the federal
government seem to be counter to this activity. With the
exception of DOD contracts, of which we do not have the numbers
for, in fiscal year 2010, black firms were awarded 3,994
contracts, all federal agencies except for DOD as I shared
earlier, which was a 16 percent decrease from fiscal year 2009
and a paltry .3 percent of the total contract volume. We
suspect DOD numbers to be no better.
SBA lending is somewhat better but that is a variable
decided upon by participating banks. For the past 20 years,
small business entrepreneurs of this great nation generate 70
percent of all new jobs in America. If you want more jobs, then
support the development and expansion of more small businesses.
We just met with two ambassadors from other countries who are
replicating the efforts that we are doing here to create small
businesses in their countries. The world is watching our small
business development support system. Watching it and
replicating it.
Cutting support for small businesses programming at this
time when the country needs jobs as the world is watching us to
replicate us seems counterintuitive. A better funded and better
staff-filled infrastructure for the SBA is critical to continue
improvement of this nation's economy. We see no indication that
cutting SBA funding is the right solution at this time as
outreach and inclusion to the business community is so
rudimentary and critical for our continued development.
If we just look to the black business community, the latest
census reports show that while the black business community was
fast-growing, the majority of black businesses around the
country employ one employee and generate less than $60,000 in
gross revenues. That is according to our census.
Other segments of the business community were not
significantly more stable. This nation's small business
community is still extremely fragile and they deserve a federal
government that assists in their development.
Since the 1990s, the manpower of the field offices for the
SBA has greatly declined. At one time the New Orleans District
Office had over 70 employees. When Katrina hit, there were
fewer than 20 and it could not possibly service the needs of
the local business population. The National Black Chamber of
Commerce stepped up its activity. We made over 75 visits within
the first three years and for the first three years also had
our annual conventions there to bring attention to the issues
and help bring resolutions to the table.
The SBA and Women's Business Development Centers that they
funded all collaborated and helped bring this to fruition
through a host of outreach activities, information sharing,
sharing of databases. I am proud to say that our newly opened
Gulf Coast chapters claim to have affected over $3 billion in
rebuilding contracts to the extent we are now opening a
regional office of the National Black Chamber in New Orleans to
help with further collaboration.
I feel the need to specifically address the potential of
private entrepreneurial development programs replacing current
services provided by the SBA. There is a fear spreading that
this may create a temporary duplication in some markets. We
must not forget that a private company can and only will
provide services that they can generate profits from. It is the
nature of business. As soon as that service or as soon as that
market or as soon as that target population becomes
unprofitable, they have a fiduciary responsibility to cease
those activities. It is the nature of business. In this case,
it would be to eliminate a segment of the population that needs
it the most.
It would be disingenuous of me to also not state that our
members have expressed great frustration with the SBA and some
of their programs. That happened. Even my wife has frustration
with me. I mean, she admits that. Our members, especially those
in the Gulf South, bore the greatest impact of their loan
program deficiencies and diminished inclusion efforts.
I personally--when Katrina hit, I had five employees. I had
one plant. I had five trucks. I produce concrete. And I had no
idea what a PTAC was. I had never had a federal contract
before. I had no clue. But it was through the assistance of--
fortunately, the Women's Business Development Center was one of
the first centers that opened and I was actually able to garner
information from there which led me to other pathways to where
today I have four plants. I have 43 trucks. I have 58 employees
and, you know, we are still growing. You know. I now have two
congressmen.
This Committee would do the country and the economy well by
fighting for increased funding and bringing manpower back to
the mid-1990s. So the subject of reducing duplication, it is a
tough question. I mean, it is tough. However, cutting support
at this time is simply not worth the risk to the small business
community.
I thank you for allowing us this time and I will be happy
to answer any questions.
[The statement of Mr. Baker follows:]
Chairman Graves. Thank you, Mr. Baker.
Next, I would like to introduce our witness, Jody Keenan.
Ms. Keenan is the state director of the Virginia Small Business
Development Center Network. Ms. Keenan is also a past chairman
of the board of the Association of Small Business Development
Centers, which is who she is representing today. Thank you for
being here. I appreciate it.
STATEMENT OF JODY KEENAN
Ms. Keenan. Chairman Graves, Ranking Member Velazquez,
members of the Committee, thank you for inviting me to testify.
Again, I am Jody Keenan and I am the director of the Virginia
SBDC Network and past chairman of the ASBDC.
For 30 years, SBDCs have been providing services to small
business owners while developing an infrastructure dedicated to
assist all small firms and providing them free consulting on
how to improve their businesses. The result is a national
network of over 900 locations with over 4,000 professional
advisors who advise hundreds of thousands of small businesses
in every state and territory.
Roughly, half of our clients are new businesses and half
are existing businesses. Last year, two percent of all new
business starts were SBDC clients. SBDCs work with women
entrepreneurs. More than 40 percent of our clients are women
and six of the state Small Business of the Year winners were
women-owned SBDC clients. SBDCs prioritize assistance to
veterans. Approximately 10 percent of our clients are veterans
and in Virginia we have a specialized program to assist them.
This year we are honoring Colonel Perry Casto, who founded his
firm a few years ago and now has 60 employees. Through our
program we aggressively market to the veterans' community and
guide them to our resources and services and other resources.
Many SBDCs have similar programs.
The SBDC outreach to minority and underserved communities
is also significant. Our minority clientele is over 33 percent
of our client base and our members support outreach programs
all across the country. In New York, the SBDC hosts the
organization for Latino entrepreneurs, and in Maryland, the
SBDC supports the Branch Avenue Project, an inner city business
restoration program.
Virginia's network is an example of the broad reach SBDCs
have. In addition to our veterans' outreach, we are co-located
with the Women's Business Center of Northern Virginia, and we
run the Small Town and Merchant Program in rural communities.
We also train small businesses in procurement, international
trade, and a host of other subjects.
We always try to expand our services to adapt to a changing
business environment. Through our association, SBDCs partner
with firms like Intuit, Google, and Boefly, to bring innovative
and efficient tools to small businesses for improving their
operations that lead to growth and job creation.
In order to give this Committee and Congress a better
picture of what we offer, ASBDC is compiling a catalogue of our
services. It is not complete yet, but as you can see, we are
much more than business planning. In many states, we are a key
provider of services, like in Missouri where the SBTDC is the
Delta Regional Authority's business development provider.
There are a few things that ASBDC believes need to be
developed. First, there need to be reasonable, uniform
standards for effectiveness of programs. Growth in sales,
investment, and hiring are key indicators. Obtaining capital is
usually the key measure. ASBDC believes that access to capital
is vital, but if that financing is not leading to an improved
bottom-line, it is just an output, not an outcome. We judge our
success by helping our clients increase their sales, their job
creation, and their financing. These metrics should be the
building blocks for assessing the effectiveness of any small
business assistance program. It is futile to compare programs
and yet hold them to different standards.
This goes with the need to share information. There is
nothing more unproductive than collecting different data for
different agencies in different formats. It does not matter who
the information is for. Incompatible databases and inconsistent
information are fundamentally inefficient. Federal agencies are
required to gauge their performance by using and tracking
outcome measures. If an agency operates entrepreneurial
development programs they must focus on small business success.
SBA does a good job of tracking SBDC performance. Every
SBDC is subject to a full SBA financial review every other year
on top of the audits from our hosts and the program offices.
SBA reviews our client impact in addition to our own client
impact surveys and our association's national impact survey.
And we believe the best way to gauge our effectiveness is to
ask our clients whether SBDC counseling is effective or not.
On top of that we have our accreditation process that
monitors the skills of our counselors and the strength of our
management. The SBDC program was recognized in 2008 by OMB for
its accountability and the quality of its performance data.
Our final theme is cooperation. My network incorporates the
Women's Business Center. Many SBDCs host SCORE, PTACs or VBOCs,
yet programs arise that seem to duplicate the efforts of
existing programs and ignore capabilities that are already in
place. This is because people do not realize what is out there.
We need to know the resources we have and how to leverage them
to the best effect.
In closing, thank you for letting me share our thoughts,
and I look forward to your questions.
[The statement of Ms. Keenan follows:]
Chairman Graves. Thank you, Ms. Keenan.
Our final witness is Denise Pickett. Ms. Pickett is the
Executive Vice President at American Express OPEN. OPEN is
American Express's business unit dedicated exclusively to
supporting small business owners and is the leading card issuer
in this segment. We appreciate you being here. We did get a
vote called but I think we can hear your testimony.
STATEMENT OF DENISE PICKETT
Ms. Pickett. Okay. Chairman Graves, Ranking Member
Velazquez, and members of the Committee, thank you for allowing
me to share a few thoughts with you today.
Despite the enormous pressure the economy has put on small
business, our research shows that small business owners are
beginning to show optimism for the future. Nonetheless, they
still face great challenges. I would like to discuss three of
those--gaining and maintaining customers, acquiring knowledge
and ideas to improve their business, and meeting financial
needs. American Express has responded to each of these through
programs, partnerships, and resources.
To help address the first challenge, the need for more
customers, OPEN has created several programs, two of which I
would like to discuss today.
First, we launched the Victory in Procurement program, or
VIP in 2008, which was designed to help small businesses
capitalize on the enormous opportunities in government
contracting. VIP live events and websites give small businesses
access to training and educational resources to assist
throughout the contracting process. This includes providing
access to coaching and mentoring and critical information about
working with procurement officials and forming teaming
relationships.
Last year, OPEN engaged more than 150,000 small businesses
through our VIP events and our VIP site. And in partnership
with SCORE and other organizations, VIP gave these businesses
tools to grow. Our Give Me Five program has focused on
contracting for women. We provided a Train the Trainer session
for over 100 representatives of the Women's Business Centers.
The second program we created to generate more customers is
Small Business Saturday. This national grassroots movement
encourages consumers to shop at small businesses on the
Saturday after Thanksgiving, which falls between Black Friday
and Cyber Monday, two of the country's biggest annual shopping
days. We relied heavily on Facebook to promote Small Business
Saturday, since small businesses are increasingly turning to
social media for business promotion.
One point two million people joined the movement by liking
Small Business Saturday, and small retailers experienced a 28
percent increase in sales on American Express cards that
Saturday, compared to the same day in 2009. This year we will
be growing that movement further and we look forward to the
continued support of this Committee as we build what we believe
will become a holiday shopping institution to benefit small
businesses in America.
To address the second major challenge, which is the need
for knowledge and information to grow, we created OPEN Forum, a
website designed to empower all small businesses, not just our
customers. It has become the number one online destination site
for small businesses. OPEN Forum's mission is to provide three
resources--information from experts and peers, education, and a
true community of small business owners. While OPEN Forum
delivers the most current and relevant information through
articles and interviews, we are most proud of the community we
have helped create. OPEN Forum's interactive nature has allowed
us--has allowed small businesses to draw on the power of
collective knowledge. It has even provided a platform through
which government can interact with them, including an online
event that allowed hundreds of thousands of small business
owners to submit questions and interact directly with SBA
Deputy Commissioner Marie Johns.
Our core business addresses the third challenge, meeting
financial needs. We give small businesses access to working
capital, primarily through our small business pay-in-full
charge cards and our credit cards. They provide purchasing
power, flexibility, rewards, and savings on business services.
In the first quarter of this year alone, small businesses spent
almost $2 billion every week on their cards to buy goods and
services they need to operate their businesses.
We also made nearly $27 billion in credit available to our
business customers through our lending products.
In closing, we believe if the economy is to prosper, there
is a great need to cultivate thriving small businesses and
support their growth. And while we strongly believe in the
results we have achieved, we feel when the public and private
sector work together, small businesses of all sizes are going
to benefit.
We look forward to working with members of this committee
and others in Congress to continue to help small business and
the economy grow. I appreciate the opportunity to speak with
you today. And I look forward to taking questions.
[The statement of Ms. Pickett follows:]
Chairman Graves. Thank you, Ms. Pickett.
We are going to adjourn until his series of votes is over,
which is approximately--I think there are five votes with a
Motion to Recommit in there. So we will adjourn and be back
just as soon as we can. Thank you.
[Recess]
Chairman Bartlett. Thank you very much for your patience.
Our Subcommittee will reconvene.
As is my practice, I will ask my questions last, hoping
that someone else will have asked them so I do not have to ask
them. I will now recognize Mrs. Velazquez for her questions.
Ms. Velazquez. Thank you, Mr. Bartlett.
Mr. Shear, the GAO recommended to the SBA to increase
collaborative practices to develop compatible policies with
other federal agencies. And this was recommended in 2007, again
2008, and yet there is little evidence that this recommendation
has been taken anywhere by SBA. Why is this not occurring in
your judgment based on----
Mr. Shear. There does not seem to be----
Ms. Velazquez [continuing]. Is it on?
Mr. Shear [continuing]. It is on. Yeah. Okay, sorry. Now
can you hear me?
Ms. Velazquez. Yes.
Mr. Shear. Okay, I am sorry.
With respect to SBA and USDA, every once in a while when we
follow up with them they say they did develop an MOU so they
have something in place, but then when we follow up further and
ask are you taking that step further and actually developing
compatible policies or ways to share responsibilities----
Ms. Velazquez. Or to leverage resources.
Mr. Shear. Leverage resources. We do not see evidence of
that occurring. In this most recent work, and again we just
took a little bit of time to touch on some economic development
programs. We asked more broadly about collaborative practices
and it seemed like there were some initiatives put on the table
but there just does not seem to be the leadership to really
take it further. So we see that in the veterans' area. We see
it with USDA. We see it in a number of areas. So we do not
really get a good explanation except to say we are working on
it.
Ms. Velazquez. There were 108,000 HUBZone contract actions
in 2010, and in 70 percent of these cases the small business
qualified for another SBA contracting program. With all the
problems GAO has identified with the HUBZone program and that
the majority of its participants qualify for another program, I
would like to ask you what will happen. What will be the impact
on contracting opportunities for small businesses if Congress
eliminated the HUBZone program?
Mr. Shear. I think you make a very important point here and
one of the reasons--over the years when we have written about
the various contracting programs and business development
programs we always include a pie chart just to show that type
of illustration--how much overlap there is in terms of those
who qualify for one or more of the preferences. And if it was
eliminated, it is hard to say because it has never really been
an evaluation of what the HUBZone program provides, either in
terms of a one-time study except for one study by the Office of
Advocacy. There is some anecdotal evidence but it is hard to
say what you would give up.
The HUBZone program is more--it is based on location rather
than the characteristics of the business. And in that sense, in
that there is overlap among businesses, you know, businesses
that qualify for more, it becomes more problematic in that
there are not good performance measures out there. It is hard
for this Committee and it is hard from a management standpoint
for SBA to say where they should be using their resources. So
if you eliminated the program, there would be some businesses
that would no longer participate in Federal contracting.
Ms. Velazquez. So what impact does the lack of this measure
have on the HUBZone and other contracting programs? The lack of
those measures implemented by the SBA.
Mr. Shear. At some point I cannot answer the question as
far as picking winners and losers among various programs. But
in looking at our body of work on economic development
programs, and in those that are confined to SBA, at some point
I would think it would be a question that this Committee should
be asking and that SBA would address as a management practice.
It costs money and resources to run various programs. And
so if you required resources to run programs and you are
strained for resources, at some point you at least have to ask
the question, do we want to keep all these separate programs
operating? So that is a more general observation.
Ms. Velazquez. I guess that you have been able to detect my
frustration in previous hearings with SBA. And GAO's
investigation showed fraud and abuse and waste on the HUBZone
program.
So for the Agency not to have any outcome measures in
place, any metrics, it is just unbelievable. So my question to
you is do you believe that the SBA is not implementing these
measures because they are afraid that it will show that the
program is not achieving its goal?
Mr. Shear. You raise a very good observation and I cannot
read into the minds of people at SBA. But at some point after
being repeatedly told, and when we reached out in terms of what
we call constructive engagement, we would actually help SBA
develop performance measures. And after having interactions and
having all these what I will call false starts, the question
becomes what is the motivation to do this? The one observation
I will make is one evaluation that was completed around the
time that we--just after we completed our first audit at your
request was by SBA's Office of Advocacy. It did not demonstrate
that the program was really serving its purpose well. So there
was one report since the time we finished our audit work that
would suggest that the benefits from the program seem to be
small but yet I cannot read the minds of people at SBA.
Ms. Velazquez. Thank you.
Ms. Pickett, there are many private entities that provide
small business services which supplement federal and state
efforts. Some believe that government funding is unnecessary
and the market will create assistance if there is demand. My
question is do you believe that private efforts alone can meet
the need for entrepreneurial assistance?
Ms. Pickett. So thank you, Congresswoman Velazquez.
I would say that in our case we have many small business
owners who have very different needs. They come in different
industries, they come in different sizes, and they are at
different stages. And those different needs suggest that both
private and public programs need to work together and they
cannot work alone to meet all of those needs. So in our
experience I would say no, you need both programs working
together, and the best hope we have for small businesses is if
private, public and not-for-profit institutions work together
to help meet the needs of small businesses.
Ms. Velazquez. Okay. I have more questions but I will do it
in the second round.
Chairman Bartlett. Thank you. Before recognizing Mr.
Richmond I would like to make a comment about HUBZones. It is
not surprising that most of the HUBZone contractors would have
qualified for a contract in some other category because the
HUBZone contracts are open to any small business. The unique
thing about HUBZone contracts is not who they are but where
they are because the HUBZone contracts have to be in an area--I
have a whole county that qualifies--that has high unemployment
or low income levels. I have personally seen the benefits of
moving a HUBZone contract to one of these areas. I have in my
western-most county in Appalachia--a HUBZone company that moved
there and they pay their people three times the average salary
in that county. This clearly creates other jobs and lifts the
whole county. So it is not surprising that HUBZone contractors
would qualify to get the contract under some other category
because it is open to anybody and everybody. It is not who they
are; it is where they are that is important about the HUBZone
contract. I think it is probably unique in that category. It is
the only contracting we do with small business that is
determined by where they contract rather than who they are.
Let me now recognize Mr. Richmond.
Mr. Richmond. Thank you, Mr. Bartlett.
My first question will go to you, Mr. Baker. Part of what I
am trying to assess is just the common sense and the day-to-day
struggles of small businesses when dealing with the SBA. For
example, I had someone in my office yesterday who, while trying
to navigate the 8A application process, asked why will they not
just put the status online where they can go into your pass
code and find the update as opposed to staying online all day?
So in your experience, especially after Katrina as businesses
try to stand back up, how was your interaction with the SBA and
how do you find the programs as you try to grow and hire more
people?
Mr. Baker. Thank you. In the immediate aftermath of
Katrina, we found interaction to be, at best, difficult. You
know, their resources were stretched. They were underfunded.
They had an enormous task with new contracts being led and also
administering various loan programs. And so it created a
potentially detrimental situation for access for small
businesses in the region. It was actually through--and that is
why the Black Chamber stepped up and actually created
throughout the Gulf South to help coordinate and work with not
just the SBA but their business development centers, partnering
with Southern University and the University of New Orleans
Business Development Centers, we actually hosted events
together.
But it short of that, you know, I think we were able to as
a region be able to do something that was a unique and
generational opportunity to actually come together in a
collaborative fashion to use a grassroots--truly grassroots
communication and inclusionary effort to bring more people to
the table of information. This included setting up computers in
our offices so that businesses that did not even have homes,
much less computers, had access to web information.
But there are certainly many shortcomings in the delivery
mechanisms but, you know, they are improving and I think as Ms.
Pickett shared earlier, it is going to take a complete
collaborative effort of the private sector and public sector to
actually make a dent in this. I mean, the challenge is that
large, that tremendous, and we are still trying to play catch-
up as a nation.
Mr. Richmond. Next, for Ms. Pickett. Ms. Pickett, I know
that you and American Express, that you both work with SCORE
chapters and WBCs. If the SBA's Business Assistance Center
budgets were to be cut at the federal level, do you think it
would make it more difficult for SCORE and WBCs to attract the
private sector or such private sector funding?
Ms. Pickett. So I am certainly not an expert on the role
that private sector funding plays in those organizations, but
what I can tell you is that those organizations are very
important to the programs that I described earlier and our
ability to put them on. And they bring content to those
programs and they bring one-on-one technical mentoring and
coaching that we simply could not deliver without that
partnership.
Mr. Richmond. So it would hamper at least that
collaborative and the deliverables?
Ms. Pickett. It would certainly put our ability to partner
in question if they did not have the funding they needed from
their perspective.
Mr. Richmond. And I guess my next question, and I have, I
guess, a minute left, is for Ms. Keenan. Collaboration among
the SBA's Business Assistance Centers has been sporadic. What
efforts has your center made to improve such collaboration and
what barriers still exist to further cooperation and
collaboration?
Ms. Keenan. Well, I can speak for Virginia. We, as I
mentioned earlier, we have a Women's Business Center that is
co-located with one of our SBDC offices in Northern Virginia
and we do quite a lot of work referring clients and companies
back and forth to their program as they refer programs back to
ours. We also on some occasions have had SCORE counselors who
have come out into the Northern Virginia area and set up office
areas in our SBDCs as a way to help them reach into the
suburban communities. And we have done this throughout Virginia
as well, and in many other states the same partnerships happen.
Some of the obstacles--was that your question then? What
some of the obstacles are? Candidly, I think we have made an
effort to overcome the obstacles but sometimes the obstacles
are data tracking and just accountability. You know, SCORE, for
instance, they have their metrics and goals to meet with a
certain number of clients. We have our goals and metrics to
meet with a certain number of clients. Our philosophy--my
philosophy in Virginia has been there are more than enough
businesses for all of us to serve. We are not serving 100
percent of the businesses. So we do our best to make sure that
when we start these engagements that everyone understands what
type of business we are going to work with, what kinds of
services each of us is going to provide so we are not tripping
over one another, so we are not confusing the client. So I can
speak to that in Virginia. That has happened and that has been
our mantra.
Mr. Richmond. Thank you. I yield back.
Chairman Bartlett. Ms. Chu.
Ms. Chu. Thank you.
Well, I would like to ask Ms. Pickett from American
Express, you have a program called Victory in Procurement for
Small Business and that is for the general small businesses,
but then you decided to do something above that for women
entrepreneurs called Give Me Five. Now, there are some here who
are saying SBDC and WBC would be duplicative but you apparently
have not found your women's program to be duplicative. Why did
you have a women's program above your regular small business
procurement program?
Ms. Pickett. So despite the fact that women-owned
businesses are actually growing at a faster rate, they are
actually not getting to the same size as male-owned businesses.
And so we decided to have a program specifically designed. They
have very unique needs, women-owned businesses. They generally
have needs for negotiating skills. They have different needs as
it pertains to financing. And I think that they also have
different work-life balance needs in terms of running their own
businesses. So we know that women-owned businesses have unique
needs and we designed a program for them called Give Me Five.
Give Me Five is not a substitute for the programs that are
offered by some of these agencies. In fact, it provides an
introductory level of how to get into federal government
contracting, but I think for them to be really successful they
need the ongoing support that are provided by the agencies that
we have discussed here today.
Ms. Chu. And then, Ms. Keenan, let me ask the SBDCs, of
course, and the WBCs both coexist and some are saying that it
is duplicative. However, it seems that WBCs focus on poorer
clients with less education than SBDCs and that the Center for
Women's Leadership found that 67 percent of the Women's
Business Center clients came from households with income less
than $50,000 and that 55 percent of the WBC clients had only a
high school education or less. So if the WBC is removed and
incorporated into SBDC, what would happen with this
demographic? What would happen with minority entrepreneurs such
as this?
Ms. Keenan. Forty percent of our client base are women
entrepreneurs. Thirty-three percent of our client base are
minority entrepreneurs. So we would continue to serve that
growing population within the SBDC program. In Northern
Virginia, where our SBDC is co-located with the Women's
Business Center, I think they would very easily be able to
continue to deliver the audience that the Women's Business
Center has been targeting.
Ms. Chu. But how can you explain the difference in the
demographics between the two populations?
Ms. Keenan. I agree. I think that the Women's Business
Centers do tend to focus--particularly in our Northern Virginia
office, that is the one I am most intimately familiar with--
they do have some specialized services for new Americans who
are women entrepreneurs. They also work with male entrepreneurs
as well. And that partnership in Northern Virginia is the
result of a collaboration with the Fairfax County Office of
Economic Development and the Fairfax County Family Services, I
think is the program. So in Northern Virginia, we would
continue those relationships and work with that population
without much of a hiccup in all honesty.
Ms. Chu. Let me ask another question in another arena where
duplication has been raised as an issue and that has to do with
exporting assistance. In your testimony you mentioned that
Small Business Development Centers are a key in the state's
export assistance program. Now, in my opinion there is a lot of
help that is needed in exporting. In California, the exports
have risen 19.3 percent in 2010 to 143 billion, but
California's exporters are small and do not venture far. Mexico
and Canada are the top two countries where the state exports
and yet there is so much potential.
Now, the Committee has recommended rescinding $30 million
in grant programs to states to help trade and export promotion.
Is such funding duplicative of the work that you are already
doing at SBDC?
Ms. Keenan. In a couple of states, for example,
Massachusetts and Illinois, the SBDC programs in those states
are the premier export assistance provider on behalf of the
states. So there is a lot of collaboration there. In Virginia,
how we are working with the state in their response to the STEP
funding is the state is really working with new-to-market
companies, so firms that are already exporting to Mexico and
Canada and helping them expand into their second or third
country, and the SBDCs are working with--and we are developing
a new initiative this summer--to work with new-to-export
companies to identify and prepare firms who are not currently
exporting to get into that pipeline to take advantage of the
state services. So we are being very careful not to step on the
products that are already out there in Virginia and helping
kind of feed that pipeline which the state program just is not
funded or resourced to do right now. So that is how we are
really trying to make sure that the services are complimentary
and expansive and not redoing what is already out there.
Ms. Chu. So you are saying that they are actually not
duplicative?
Ms. Keenan. In Virginia they will not be duplicative. In
Massachusetts and Illinois as two examples, the SBDC is the
program that the state turns to to prepare companies for
exporting, as well as to take them on exporting initiatives.
Ms. Chu. Thank you.
Chairman Bartlett. Ms. Velazquez, you had additional
questions?
Ms. Velazquez. Yes, I do.
Ms. Keenan, in your testimony you indicated that there are
programs and initiatives that seem to be--to duplicate the
efforts of existing programs and basically some of those
questions were asked by Ms. Chu. In recent years SBA has
created two new programs, Emerging Leaders and Regional
Innovative Clusters. Is this a good example of expenditure of
tax funds or do SBDCs already provide these services?
Ms. Keenan. I think some of the confusion in those new
programs was what were they intending to achieve. So I think
that the SBDCs are engaged in activities that support those
initiatives, but it was very difficult for us to identify
exactly what the goal was for those programs.
Ms. Velazquez. Well, Emerging Leaders, for example, they
select entrepreneurs for training. Do you do that?
Ms. Keenan. Yes. Yes, ma'am.
Ms. Velazquez. Mr. Baker, after Hurricane Katrina, you went
to a local Women's Business Development Center to seek help.
Right? Why did you choose that center and not an SBDC?
Mr. Baker. In the immediate aftermath of Katrina there were
only a few resources available. Fortunately, the Women's
Business Center and the SBA office were located in areas that
were not impacted by water and so they were functional early
on, just as the Black Chamber was.
Ms. Velazquez. Okay. Thank you.
Ms. Keenan, according to SBA's data, the Women's Business
Development Center assists over 160,000 small businesses at a
cost of only 139 per business. Also, SBDCs help create over
14,000 small businesses at a cost of over $9,000 per business.
In your testimony you state that the foundation of the SBDC
network is designed for and can accommodate expanded services.
I understand that SBDCs have a broader scope for services for a
variety of clientele, but why should we expand SBDCs' services
when the cost for business is already much higher than other
programs like WBDCs? Would it not make sense to encourage the
expansion of WBDCs since they assist more businesses at a lower
cost?
Ms. Keenan. We have a larger footprint, so we have 900
offices around the country that have been--those are invested
costs already. That infrastructure is in place. We see a number
of existing businesses as well. I do not know what the
breakdown is for Women's Business Centers with existing versus
start-up.
Ms. Velazquez. This is data provided by SBA.
Ms. Keenan. By SBA, right. Right. Okay. But I do not know
the breakdown. I do know that our base of existing businesses
that we have been serving, particularly in the past three or
four years has really expanded. So I think that although we are
working with start-up companies and helping businesses get
started, we are spending a lot more time as well attending to
existing companies and so that could have an impact on why
those numbers look the way they do.
Ms. Velazquez. My question is because some members would
like to take the Women's Business Development Centers
allocation and give it to SBDCs so that you have the
infrastructure to provide the services and the clientele that
is being served, as Ms. Chu pointed out, is more low income
women and low income communities. But when we are considering
programs in a cost efficient manner, we need to look at costs.
Ms. Keenan. Right.
Ms. Velazquez. And it seems to me that the Women's Business
Development Centers are providing the services that you are
providing. And this is not--I am not criticizing the Small
Business Development Centers. What I am saying is that we just
cannot pick winners and losers here when we know that you have
a target clientele and the Women's Business Development Centers
have another target clientele. And it is being served in quite
a costly-efficient manner.
Mr. Baker, do you believe that socially and economically
disadvantaged business owners currently have adequate access to
federal contracting opportunities? If not, what can be done to
improve the situation?
Mr. Baker. No, I do not believe that socially and
economically disadvantaged businesses have adequate access to
federal procurement opportunities. There are some--while it has
certainly improved over the past few years, there is certainly
a tremendous amount of work to be done in that arena. One
shining example of where there has been a focused effort and
federal procurement inclusion is in Mississippi where
Congressman Thompson and the governor's office there--they
actually made a commitment to formal inclusion that, just as an
example, Mississippi has six PTAC offices whereas Louisiana has
two. And just the results of that combined with bonding
assistance programs and local collaboration with various
chambers has actually increased the amount of black business
contracting in the state by 40 percent. I mean, that is a
tremendous impact but it shows that, you know, there is still a
lot of work to be done but yet if there is a focused, funded,
concentrated effort, you know, the results will definitely come
to fruition.
Ms. Velazquez. Okay. Thank you. Mr. Shear, I have my last
question to you. And given the most recent natural disasters
that we have been witness on television, I am concerned about
the fact that in 2009, in the GAO report you found that the SBA
had only met 13 of 26 requirements of the Small Business
Disaster Response and Loan Improvements Act which was passed to
make improvements in the aftermath of Katrina. Where does the
agency stand on implementing these requirements? Do you know?
Mr. Shear. At the time it was reported to you two years ago
it was 13 out of 26. We are not as diligent at looking at
legislative provisions as we are our own recommendations, but
the last time we really got an assessment was one year ago. So
this would have been one year after we reported to you, and at
that time it had increased to 15 out of 26. Five of the
provisions we did not think were relevant at the time because
there has to be a triggering event for those five provisions to
become effective. So the remaining six provisions we saw some
movement by SBA but they were not implemented yet. And the ones
that they seem to be most challenged with were the ones that
involved using private sector lenders and private sector
entities in reaching out when disasters strike.
Ms. Velazquez. Thank you.
Chairman Bartlett. Thank you very much. Let me recognize
Mr. Hanna.
Mr. Hanna. Thank you very much.
Ms. Keenan, thank you for being here. Do you believe that
business owners in general around, well, your area in
particular, are overwhelmed by the number of programs that we
have?
Ms. Keenan. Yes.
Mr. Hanna. What would you do about it?
Ms. Keenan. Well, certainly not create any new ones. I
mean, we spend a lot of time in our centers just educating our
clients about who does what and why to come here instead of
going there. And we also work on the other side to make sure we
understand who the other programs are and collaborating and
trying to define the piece of the spectrum that everyone is
trying to serve. So, you know, short of not creating new ones
and if possible encouraging better collaboration and
coordination, that is the approach.
Mr. Hanna. Do you find that people are leaving the building
simply because they cannot cope with the complexity of it all?
I mean, basically----
Ms. Keenan. We hope that we do not send them out of the
building----
Mr. Hanna [continuing]. Right.
Ms. Keenan [continuing]. More confused than when they came
in. That is for sure. But, you know, certainly, if they come to
us it is very often after they have been to a number of other
places, whether--and I do not know if it is individuals or
organizations or entities--and they are hearing a lot of you
need to talk to Jody. You need to talk to Barbara. You need to
talk to John. You need--so when they come in we try not to just
shoot them down the pike somewhere else but really work to help
them understand who does what and why they need to be with us
or why they need to be at the Women's Business Center or why
they need to be at PTAC. And we tend to pride ourselves on not
just pushing someone on down the pike.
Mr. Hanna. Thank you very much.
Ms. Pickett, I had a couple of corporations and for many,
many years and duplication was something, you would not even
begin to tolerate. It becomes clear and obvious waste and the
first target. Do you think there is a lot of that in your
organization?
Ms. Pickett. So in our organization we obviously spend a
great deal of time making sure that we are efficient and
effective in what we do and that is our obligation to do it and
that is what we do in our organization.
Mr. Hanna. So you are pretty well clean of that in your
opinion?
Ms. Pickett. We are as efficient and effective as we can
be.
Mr. Hanna. Thank you.
Chairman Bartlett. Thank you.
My understanding is that a major reason we have a number of
programs is because we have identified a number of groups that
we would like to help. It is not quite clear to me what we mean
by duplication. Obviously, a wounded veteran comes in and they
are a small business person, and they are a male, they could
qualify under several different programs. But it is my
understanding in watching this development now for nearly 20
years, that every time we find a new group that is not being
adequately served we create another program for that group.
What do we mean by duplication? Do you have duplicative
programs that serve wounded warriors or is your duplication the
fact that you are serving both a black person, a small business
person, and a wounded veteran.--It can be all three at one
time, can they not? What kind of duplication are we talking
about? And, if our goal is to service more small businesses and
if we are not confusing them and piling on with this
duplication, why is duplication a problem? If we want to cut
our costs but then they also cut what we get done, why is
duplication a problem for simply looking out to contact and
serve more small business people?
Mr. Shear. You have asked some very good questions and that
is part of our challenge as an agency in looking at these
issues generally and also with respect to what I am speaking
about today as far as economic development programs. We see
that there is overlap which could lead to potential duplication
of services.
Chairman Bartlett. But sir, if the duplication simply
serves another small business, is not that what we want to do?
Mr. Shear. If we have a situation where separate
infrastructures are being created, and this is part of when we
look forward when we try to determine principles that we could
apply for when consolidation might be appropriate. We are
looking at questions such as, are there separate
infrastructures in place and are there so many different
programs that are not harmonized? To bring up what
Representative Hanna just brought up, the idea is how do you
figure out all these different programs? And if it leads to
confusion or if it leads to difficulty in rural areas of
figuring out what do we turn to USDA for and what do we turn to
SBA for, all those things we are looking for areas where there
could be inefficiencies associated with multiple programs at
multiple agencies serving similar interests.
But let me make something really clear. When we look at
questions such as--let us just take the three counseling and
training programs at SBA. We do not view it that somehow there
is an efficiency created ifi youi eliminate a program and stop
serving there recipient. If you eliminate one program and just
say, well, this is how much was appropriated for that program
this year, efficiency is not evaluated. The types of things we
will look into is that is there something about delivering the
services that can be done more effectively either through
increased collaboration among the three programs and the
resource partners or possibly through certain reductions in the
number of programs. We are looking for efficiencies in
government and how services are being delivered. So we are
looking at those types of questions.
And so you are very right. We are reaching out. We are not
passing judgment as far as how many resources are allocated
toward reaching out to small businesses and different
components of small businesses, but the question is the
efficiency of that service delivery. That is what we are
focusing on.
Chairman Bartlett. So you are really focusing on efficiency
rather than duplication. If you have duplicative programs, they
are simply serving more small businesses, and if both of those
programs are efficient, who should care?
Mr. Shear. And the question becomes, for this Committee and
for the Congress and for all of us, is to try to look at what
demonstration is there that these programs are all efficiently
providing services. And to do some comparison what, if
anything, could be gained by combining programs or by expanding
collaborative practices in how these programs are carried out
in states and localities and in urban and rural areas. So that
is really a major part of our focus. But ultimately it is a
question of efficiency of service delivery and reaching out and
serving the needs of small businesses and the needs of what
Congress assesses as the priorities in reaching out to serve
economic development activity.
Chairman Bartlett. One of the other elements of our charter
for this hearing was how private efforts can help meet the
needs of businesses. As an example of this kind of question,
our kids go out at Halloween and they do not Trick or Treat,
they leave a basket, a bag in the home and they say if you will
please put some nonperishable food in this we will come back
and collect it and then we are going to make up food baskets
for poor people. So we did that. And then the women who were
involved in organizing this program called up the Welfare
Society and they said we would like to know of some poor
families because we have these food baskets. The welfare people
were indignant. What do you mean poor families, needy families?
What do you think we are here for? How private efforts can
help? Are we crowding out private efforts by our multiple
programs?
Mr. Shear. I do not have an answer to that question but
when we look at these various programs we do look for what
resources are available. So I will just take this one example.
The work that we have done in the past, looking at programs to
help service disabled veterans start their own businesses. We
know that there are state programs. We know there are local
programs. We know that there are nonprofits all involved in
that activity. And what we are looking for and what I think the
Congress has been looking for, and it has been expressed in
legislation, is the idea of how can we allow all those
activities to really provide services where veterans know what
is available to them to help to start or to grow their small
businesses. So what information is out there? How are things
being coordinated among various nonprofits, private entities,
and government entities? And that is what I think that many of
us are looking for.
Chairman Bartlett. Yeah. In our desire to be helpful we may
have limited the helpfulness of others, have we not?
Ms. Velazquez, do you have other questions or comments
before we close?
Ms. Velazquez. No.
Chairman Bartlett. Mr. Hanna, other questions or comments?
Mr. Hanna. You do run a remarkable company.
Ms. Pickett. Thank you.
Mr. Hanna. I only know that because it was the first credit
card I ever had in the '70s. So thank you for that. And I do
not owe you anything, incidentally. My wife might.
There is this kind of implicit assumption about government
that it does everything more or less badly. And I wonder if
sometimes we ask the wrong question, we assume that because we
are the government and there are layers within that, and
bureaucracy being what it is, that we could always do better.
And that is probably true. But it does seem as though the
opportunities on the street away from government are great but
people--you said people come to you last--come to small
business, Ms. Keenan, last.
Ms. Keenan. Not always last but they do come to us.
Mr. Hanna. What drives--I am curious--what drives them to
your door that they cannot find someplace else?
Ms. Keenan. Well, we get a lot of referrals from lending
institutions and accounting professionals, for example. So a
business will go into a lending institution looking for
financing and they have not fully prepared their business plan
or their financial projections. Or maybe they are just not
really fundable at this point. So the lender will refer them to
the SBDC because the lender himself or herself is not tasked or
missioned or incentivized to help that business figure itself
out. But the Small Business Development Center can help them do
that.
Mr. Hanna. So there is a big difference between being loan
worthy and being potentially successful? I mean, there are a
lot of people with good ideas that simply cannot get off the
ground.
Ms. Keenan. Right. Absolutely. Or good ideas and they are
not quite sure how to get it off the ground. I mean,
particularly in financing we are all familiar with getting a
credit card or a car loan or a mortgage, but getting a
commercial loan is a different animal. And if you have not done
that before and are not sure how to go about it and you go into
the lender, much like you would go into a mortgage broker or a
banker looking for a mortgage, you are just not--you just do
not have it all together right then. So that is where the SBDC
in that case would help put everything together.
Mr. Hanna. Indulge me for one moment if you would. What is
your best success story?
Ms. Keenan. Oh, we had a company that was a software
developer that was acquired by Microsoft four years ago.
Mr. Hanna. Good. Second best.
Ms. Keenan. We have been working seriously with some
spinoff companies out of the George Mason University Computer
and Technology--Information Technology and Engineering. So a
number of those companies have spun off out of the university
and created 40 and 50 jobs in Northern Virginia and they are
also positioned for acquisition. So those are some of our top
success stories.
Mr. Hanna. Thank you very much. I am good, sir.
Ms. Velazquez. I just would like to ask a question to Ms.
Keenan.
Ms. Keenan. Yes, ma'am.
Ms. Velazquez. You do workshops, right?
Ms. Keenan. Yes, ma'am.
Ms. Velazquez. I do workshops in my district and I work
with the Women's Business Development Center, the Small
Business Development Centers. Is it not true that because you
work with the lending community, the financial institutions in
a cluster and geographic area, you come to know which of those
financial institutions serve best the needs of a potential
business person, right, who comes to you? And then based on
their business plan, based on their idea, if they want to start
up a business you are better equipped to maybe match that
borrower with a lender.
Ms. Keenan. Absolutely. I mean, just like we work with the
other organizations to know what they are doing, we certainly
do that in the lending community as well.
Ms. Velazquez. And because you are better equipped in that
sense, capacity building and technical assistance is so key in
the success of these potential businesses.
Ms. Keenan. Absolutely. And that is what we hang our hat
on.
Ms. Velazquez. Mr. Shear, I think that one of the
frustrations that we have when we talk about duplicative
programs is the fact that there is this attitude of agencies
not to establish clear measurements, right, and metrics, so
that it will enable them to measure outcomes and decide which
of the programs is better and some of the metrics that they
have in place to determine what is working and what is not and
what type of program we should get rid of, which one of those
programs we should eliminate. Do you see that--lack of will
from agencies to clearly establish those clear measurements and
clear metrics that will enable them to decide which programs
are delivering the service that they were supposed to deliver
in a more cost efficient way?
Mr. Shear. You have raised a tremendous question. There
have certainly been attempts over the years, whether it is
through Results Act or through different actions of Congress.
Certainly through our audits we are trying to address that
issue. Evaluation of how programs are working should be
integral to the management of those programs. There has been
progress in some places and not in others. And this stands out
as being a major area. And a lot of times the reaction is the
cost to make evaluations. But the response should not be to not
do any evaluation at all. It might be hard to measure certain
statistics on an annual basis but it might be important to do,
such as coming out of the part reviews from a number of years
ago where SBA actually did have some evaluation of SCORE, SBDC,
and Women's Business Centers. So we are looking for that more
evaluative framework to try to inform those decisions and we
see that in this area.
Ms. Velazquez. Thank you, Mr. Chair.
Chairman Bartlett. Thank you all very much for your
testimony. Thank you for your patience during a long series of
votes.
When the Committee has had a chance to review the hearing
and the question and answer period, there may indeed be
additional questions that we will need to ask for the record.
We would appreciate it if you could be available to answer
those questions.
I ask unanimous consent that members have five legislative
days to submit statements and supporting materials for the
record. Without objection, so ordered.
Thank you all again very much. And the hearing is now
adjourned.
[Whereupon, at 3:55 p.m., the Committee was adjourned.]