[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
______
HELPING SMALL BUSINESSES COMPETE:
CHALLENGES WITHIN PROGRAMS DESIGNED TO ASSIST SMALL CONTRACTORS
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HEARING
before the
SUBCOMMITTEE ON CONTRACTING AND WORKFORCE
of the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
HEARING HELD
SEPTEMBER 15, 2011
__________
GRAPHIC] [TIFF OMITTED] CONGRESS
U.S. GOVERNMENT PRINTING OFFICE
71-281 WASHINGTON : 2011
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Small Business Committee Document Number 112-034
Available via the GPO Website: www.fdsys.gov/house
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
ROBERT SCHILLING, Illinois
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
JANICE HAHN, California
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
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OPENING STATEMENTS
Page
Hon. Mick Mulvaney............................................... 1
Hon. Judy Chu.................................................... 3
WITNESSES
Mr. Joseph G. Jordan, Associate Administrator of Government
Contracting and Business Development, U.S. Small Business
Administration, Washington, DC................................. 8
Ms. Jiyoung Park, Associate Administrator, Office of Small
Business Utilization, U.S. General Services Administration,
Washington, DC................................................. 6
Mr. William B. Shear, Director, Financial Markets and Community
Investment, U.S. Government Accountability Office, Washington,
DC............................................................. 5
APPENDIX
Prepared Statements:
Mr. Joseph G. Jordan, Associate Administrator of Government
Contracting and Business Development, U.S. Small Business
Administration, Washington, DC............................. 25
Ms. Jiyoung Park, Associate Administrator, Office of Small
Business Utilization, U.S. General Services Administration,
Washington, DC............................................. 31
Mr. William B. Shear, Director, Financial Markets and
Community Investment, U.S. Government Accountability
Office, Washington, DC..................................... 36
Questions for the Record:
None
Answers for the Record:
None
Additional Materials for the Record:
Letter from Mr. Joseph G. Jordan............................. 57
HELPING SMALL BUSINESSES COMPETE: CHALLENGES WITHIN PROGRAMS DESIGNED
TO ASSIST SMALL CONTRACTORS
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THURSDAY, SEPTEMBER 15, 2011
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Workforce,
Washington, DC.
The Subcommittee met, pursuant to call, at 10 a.m., in room
2360, Rayburn House Office Building. Hon. Mick Mulvaney
(chairman of the subcommittee) presiding.
Present: Representatives Mulvaney, West, Chu, and Critz.
Chairman Mulvaney. We call this meeting of the Small
Business Committee to order. We are here today to talk about
three important programs that were created to help small
business compete for federal contracts. We will look at the
Offices of Small and Disadvantaged Business Utilization. There
is an acronym for that and I cannot pronounce it so I will be
calling it OSDBU. We will also look at the Procurement Center
and Commercial Market Center Representatives Programs and we
will look into the Mentor-Protege Program.
The primary focus of the OSDBU is advocating for small
business contracts and fighting unjustified bundling. To
underscore the importance of this effort, when Congress created
these provisions in 1978 they required that each OSDBU, with
the exception of the Department of Defense, would answer only
to and directly to the agency head or deputy agency head. So it
was answering very high up the chain.
The Procurement Center Representatives program and the
Commercial Market Representatives program are made up of Small
Business Administration employees and their focus is to ensure
that small businesses have the opportunity to compete for prime
contracts and that there are small business opportunities at
the subcontract level. In fact, PCR is one of the most
important defenses small businesses have against contract
bundling because they have the ability to protest procurements
up to the head of the contracting agency when a contract fails
to provide for small business participation.
The third program, which is really a conglomeration of 13
individual programs, is the Mentor-Protege Program. This could
also be an important tool to help small business become more
competitive. Generally speaking, the program allows small, less
experienced firms to be mentored by larger, more experienced
firms with a goal of increasing the participation of small
businesses in government contracting.
Small business contractors are good for the government and
good for the economy. They increase competition, innovation,
create jobs, and they save taxpayers money, which is why there
is a statutory goal of awarding 23 percent of prime
contractors--excuse me, prime contract dollars--to small
businesses. However, recent reports reveal that these programs
could and should do a little better. For example, last year
when the federal government spent over half a trillion dollars
through government contracts, the administration fell short of
that 23 percent goal and only about 20 percent of those prime
contract dollars actually made it to small businesses. Given
the achievement gap, we are going to continue to look at ways
to help small businesses compete.
But, we also must address the several agencies that are
refusing to comply with the Small Business Act, and thus making
the problem worse. For example, when we were looking at the
OSDBU practices, the GAO found seven agencies that were not
complying with the law regarding the reporting requirements. To
find out why, my office actually sent letters to the heads of
each of those agencies on August 5th. That was almost six weeks
ago. Thus far, only three agencies have bothered to respond.
Their responses range from the Social Security Administration
saying that it would change its practices to bring it into
compliance with the law, to the Treasury saying that it was
going to keep its policy even though it violated the law. I can
assure you that we will have future hearings on those agencies,
as well as the agencies that had decided not to respond to the
Congressional inquiry.
In addition to addressing those challenges on OSDBUs, we
are going to examine the PCR and CMR programs today. I hope our
witnesses will also be able to address ways in which we can
strengthen both of these programs, whether it is looking at
measures of effectiveness, addressing the challenges that the
programs have identified, prioritizing workloads, or looking at
ways in which technology can help us do the job.
Finally, and then I will close, within the 13 different
Mentor-Protege Programs, the eligibility requirements vary
widely as do the types of assistance provided to the proteges
and the incentives provided and encouraged to the mentors. Now,
GAO studied the controls for each of those programs and looked
at how each tracked success. I look forward to hearing more
about the GAO findings. Issues like affiliation play out in
these programs and whether having so many independent programs
puts an unnecessary burden on the participants. As the Small
Business Jobs Acts allows the SBA to create additional,
specialized mentor programs, I look forward to learning more
about their plans for the future.
As this Committee considers the PCRs, CMRs, OSDBUs, and
whatever other acronyms we can throw into that mix, we want to
learn how to help strengthen and improve all of these programs.
If we succeed, we will be able to help small business, which is
the goal of everybody who is on this Committee.
So with that I yield to Ms. Chu for opening comments and
then we will talk to the witnesses.
Ms. Chu. Thank you, Mr. Chair.
Since the financial crisis of 2008, small businesses have
faced a challenging economic environment, and for this reason
the federal marketplace has become an increasingly attractive
option. In fact, the reality is that doing business with
government is vital for many firms' success.
Historically, however, it has been difficult for small
businesses to gain a toehold in the federal procurement system.
The passage of procurement reforms in the 1990s has led to
bigger and more consolidated contracts. At the same time, the
federal acquisition workforce has declined, failing to keep up
with the explosive growth and procurement activity. When
combined with the sheer complexity of the system, this has left
many entrepreneurs on the outside looking in.
To help small businesses overcome these barriers, several
initiatives were established. While the most well-known
resources were set aside and restricted competition programs of
the SBA, there are several other tools that have great promise.
These include the Mentor-Protege Programs, the Office of Small
and Disadvantaged Business Utilization, which I shall call
OSDBU, and Procurement Center representatives, the PCRs.
Through different mechanisms these initiatives enable small
firms to gain great access to federal contracts that they would
not otherwise be able to serve.
This is accomplished in two ways. First, the OSDBUs and
PCRs provide oversight of contracts, looking for opportunities
in which small businesses can serve not only as a prime
contractor but also as a subcontractor on much broader
projects.
Second, through the Mentor-Protege Program, smaller firms
are given the opportunities to work directly with large
vendors. This can provide them with vital experience and lead
to future opportunities. Together these creative efforts are an
important means to getting more federal contracts in the hands
of small businesses.
While they do show great promise, recent GAO reports
suggest there is a long way to go until their full potential is
realized. GAO found that while Mentor-Protege Programs have
policies in place to make sure that participants benefit,
agencies generally do not know what impacts such participation
has on a business' ability to win contracts without the mentor.
Similarly, the GAO reported that SBA's government contracting
area report data may not be accurate. In both cases, accurate
data is so critical because without it the agencies cannot
determine how well their staff has performed or if the
program's goals are being achieved.
Perhaps more troubling was GAO's finding with regard to the
OSDBUs. Although it is statutorily required that they have
direct access to the highest levels of the agency, that is far
from the case. Seven of the 16 federal agencies were not in
compliance with this requirement and this only shortchanges
small businesses that end up suffering the consequences of
OSDBU's diminished agency standing. Together, GAO's reports
paint a troubling picture of the agency's implementation and
oversight of these important small business assistance
initiatives.
With a sluggish economy, it is absolutely critical that
programs like these succeed and are successful in bringing more
entrepreneurs into the federal procurement marketplace with
small businesses making up more than 99 percent of all American
companies, but receiving fewer than one-quarter federal
contracts, these efforts could broaden the economic benefits of
federal contracts and create jobs in communities across the
nation. For each one percent increase in share of contracts
going to small businesses, 100,000 new jobs are created. And
with unemployment above nine percent, we should be finding ways
to make this happen and make sure that small businesses have
the tools they need to succeed.
Thank you and I yield back.
Chairman Mulvaney. Thank you, Ms. Chu. At this time I would
ask you, please, to begin the introduction of our witnesses.
Ms. Chu. Well, thank you. And I am so pleased to introduce
William Shear, who is the director of financial markets and
community investment at the U.S. Government Accountability
Office. Bill has directed substantial bodies of work addressing
the Small Business Administration, Housing Finance, including
the role of the housing GSEs, the Rural Housing Service, and
community and economic development programs. Mr. Shear will
also be directing a report that the Congressional Asian-Pacific
American Caucus requested last year on outreach development
programs and resources designed to connect minority-owned
businesses to contracting opportunities.
I look forward to that report and I look forward to hearing
your testimony today and working with you on future reports.
Chairman Mulvaney. Thank you. And welcome, Mr. Shear.
The next witness is Jiyoung Park, the associate
administrator of the U.S. General Services Administration's
Office of Small Business Utilization. Ms. Park manages and
oversees GSA's Small Business Policy and Programs, which
strives to expand opportunities in federal government
procurement for small, disadvantaged, woman-owned and
historically underutilized business zones, and service disabled
veteran-owned small businesses. During her tenure, Ms. Park
also started the GSA's Mentor-Protege Program, I believe. So
thank you and welcome.
Sitting next to her is Joseph Jordan. Mr. Jordan has served
as the associate administrator of Government Contracting and
Business Development at the U.S. SBA since March of 2009. The
Office of Government Contracting and Business Development works
to create an environment for maximum participation by small,
disadvantaged, and woman-owned businesses and federal
government contract awards and large prime subcontract awards.
It also plays a major role in the formulation of federal
procurement policies that affect small businesses. I just read
some of that yesterday. That was scintillating reading. There
is no question about it. So, about 24 pages single spaced.
So, anyway, Mr. Jordan, thank you. And thank you all.
STATEMENTS OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND
COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE;
JIYOUNG PARK, ASSOCIATE ADMINISTRATOR, OFFICE OF SMALL BUSINESS
UTILIZATION, U.S. GENERAL SERVICES ADMINISTRATION; JOSEPH G.
JORDAN, ASSOCIATE ADMINISTRATOR OF GOVERNMENT CONTRACTING AND
BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION
Chairman Mulvaney. We will begin, I believe, with Mr.
Shear.
STATEMENT OF WILLIAM B. SHEAR
Mr. Shear. Chairman Mulvaney, Ranking Member Chu, and
members of the Subcommittee. I am pleased to be here to discuss
our recent work on the federal government's efforts to increase
contracting opportunities for small businesses. My testimony
today discusses three reports we issued in June 2011.
Specifically, I will discuss our work on first, the reporting
structure at and the functions performed by Offices of Small
and Disadvantaged Business Utilization, often called OSDBUs, in
agencies with major contracting activity. Second, the Mentor-
Protege Programs at 13 federal agencies. And third, SBA's
Procurement Center representatives and commercial market
representatives.
In summary, we found the following and made recommendations
for improvements. First, we found that nine of the 16 agencies
we reviewed were in compliance with the Small Business Act's
requirements that OSDBU directors be responsible only to and
report directly to the agency or deputy agency head. However,
seven were not. We recommended that the seven agencies act to
comply with the requirement. The Social Security Administration
agreed with the recommendation and the Department of the
Interior agreed to reevaluate its reporting structure. The
Departments of Commerce, Justice, State, and the Treasury
disagreed, stating they were in compliance. We maintained our
position on these agencies' compliance status. Since issuance
of our report, Interior has indicated that it will work closely
with Congress in seeking a statutory exemption.
Second, while controls existed at all 13 federal agencies
with Mentor-Protege Programs to help ensure that participants
met eligibility criteria and benefitted from the program, the
agencies generally did not track protege achievements after
program completion. We recommended that 10 agencies consider
doing so. Six of the 10 agencies--Homeland Security, Energy,
GSA, HHS, Treasury, and VA--generally agreed with our
recommendation. State partially agreed with our recommendation
citing concerns about the impact that post-completion reporting
could have on the Department, mentor firms, and protege firms.
Since issuance of our report, VA indicated that it will collect
data from the protege for one year after enactment, and EPA
indicated it would evaluate whether its programs should
continue, and if so, what improvements should be made.
Third, although SBA had some measures to assess the
effectiveness of PCRs and CMRs, select data these staff
reported were not reliable and report controls and reviews had
weaknesses. We recommended that SBA take measures to improve
data reliability and internal controls. SBA agreed with our
recommendations and has been updating guidance for the PCR and
CMR programs to provide clear instructions for reporting. SBA
also said it would implement a method to verify and review PCR
and CMR documentation. For the purpose of this statement, I
will just state here that we do address resource challenges
with the PCR and CMR community. It is in my written statement.
Chairman Mulvaney, Ranking Member Chu, this concludes my
statement. I would be happy to answer any questions you or
other members of the Subcommittee may have.
[The statement of Mr. Shear follows on page 36.]
Chairman Mulvaney. Thank you, Mr. Shear.
And just a word to the witnesses. We are not under some of
the same time constraints that we have been in previous
meetings so you will see the lights go off in front of you.
Green means you are well within your five minutes, yellow means
you have moved within a minute, and red means you are over your
five minutes. But I will assure you that given the fact that we
are not under the gun here today, if you need to go a minute or
two over we would much rather get more information rather than
less. So do not feel constrained completely by the five
minutes.
And with that, Ms. Park.
STATEMENT OF JIYOUNG PARK
Ms. Park. Good morning, Chairman Mulvaney, Ranking Member
Chu, and members of the Subcommittee.
I appreciate being invited here this morning to discuss the
U.S. General Services Administration's Mentor-Protege Program.
And I would like to submit my written testimony for the record.
The purpose of GSA's Mentor-Protege Program is to leverage
private sector expertise to assist small businesses and enhance
their ability to compete for federal government contracts.
Navigating federal contracting can be complex and daunting, and
GSA's Mentor-Protege Program is an easy to navigate program
that helps reduce barriers to bringing small business private
sector partners to the government.
GSA established its Mentor-Protege Program in September
2009, and over the past two years we have developed a robust
program that is already yielding tangible results in the form
of contracts awarded and jobs created.
Now, our program's success is a testament to the commitment
and hard work of the GSA team, and in particular, of our
program manager, Tony Eiland, who is also here today. And I
should point out and clarify that I unfortunately cannot accept
credit for standing up the program as it was in motion before I
arrived at GSA, so I just wanted to make that clear. But we
have been working on it together as a team and very proud of
the accomplishments.
And more importantly, our success is due to the program
participants themselves. Proteges have reported 41 new
contracts, one as a result of assistance received from their
mentors, with a total value at up to $260 million, including in
some cases indefinite delivery, indefinite quantity contracts
with high dollar ceilings spanning multiple years. We have also
seen significant subcontract awards from mentors to their
proteges. The proteges have reported 54 new subcontracts from
their mentors. Last, but not least, participants have reported
creating 132 new jobs as a result of participating in the
program. Some jobs were the result of new contract awards and
others were the result of mentors' assistance to expand
existing contracts. Given today's economic climate, these new
jobs certainly are a particularly important statistic.
There are many specific examples of success I could share
but I will share just two examples we have seen. One service-
disabled veteran mentor helped its protege, another service-
disabled veteran-owned small business, to bid on an opportunity
by sharing tips on how to form a winning proposal team and by
providing technical writing assistance on the proposal. As a
result, the protege won an IDIQ valued at $50 million over the
life of the contract. The mentor was not part of the contract
team, which demonstrates the mentor's investment in the
protege's business growth as a long-term strategic partner.
Another protege firm struggled with proposal and bid
decisions. The company was bidding on many opportunities
without a clear focus. The mentor taught that the protege had
to develop a clear bid-no bid review process and a targeted
bidding strategy. After implementing this new process, the
protege bid on 44 opportunities in a six-month period, winning
11. The mentor's help made all the difference between the
protege wasting valuable bid and proposal dollars and growing
their bottom-line.
In total we have 81 proteges directly benefitting from
guidance and assistance from their mentors. Our proteges are
all small businesses representing all socioeconomic categories,
including 8(a) or small disadvantaged business, woman-owned
small business, veteran and service-disabled, veteran-owned
small business, and those businesses located in historically
underutilized business or HUBZones. Forty-five, or more than
half of the proteges, are small businesses owned by veterans.
In closing, GSA has high expectations for the continued
success of our Mentor-Protege Program. In this tightened fiscal
climate, our goal is for GSA's mentor-protege relationships to
spur innovation in areas of information technology, open
government, and high-performing and efficient green buildings
consistent with GSA's mission. The program can help drive
government transformation, reduce government waste, and create
high-paying American jobs.
The 41 new contracts, 54 new subcontracts, and 132 new jobs
the program has created are just the beginning.
We look forward to continuing to improve GSA's Mentor-
Protege Program through collaboration with the program
participants, SBA, other agencies, and following GAO's
recommendations as well. For example, pursuant to GAO's
recommendation, we have made steps to implement a post-
completion assessment that will allow us to track protege
firms' success after they exit the program. Now, our first
graduation is anticipated to happen early 2012.
I welcome the Subcommittee's questions. Thank you.
[The statement of Ms. Park follows on page 31.]
Chairman Mulvaney. Thank you, Ms. Park. And again, we are
going to save our questions till the end. So we will move down
to Mr. Jordan.
STATEMENT OF JOSEPH G. JORDAN
Mr. Jordan. Thank you. Chairman Mulvaney, Ranking Member
Chu, and members of the Subcommittee, thank you for inviting
the U.S. Small Business Administration to testify today.
Our top priority at SBA is to maximize opportunities for
small businesses and ensure that the benefits of our programs
flow to the intended recipients. My office works each day to
provide increased opportunities for eligible small businesses
to compete for and win federal contracts. We are always looking
for ways to increase small business contracting opportunities,
and I am proud to say that in the two and a half years I have
been in my position, we have made significant and quantifiable
improvements.
The federal government spends about $500 billion every year
through federal contracts, and it is with SBA's support and
assistance small businesses receive nearly $100 billion of that
spend. In fiscal year 2010, small businesses won 22.7 percent
of federal contracting dollars. This marks the second
consecutive year of increase and the largest two-year increase
in over a decade. SBA is committed to meeting and exceeding the
23 percent statutory goal and getting more contracts into the
hands of small businesses. At the same time, we are working to
implement the provisions of the Small Business Jobs Act and
eliminating fraud, waste, and abuse from all of our programs.
With these priorities in mind, please allow me to discuss
the three Government Accountability Office reports that are the
subject of today's hearing. The first report concerned SBA's
Procurement Center Representatives (PCRs) and Commercial
Marketing Representatives (CMRs). These members of my team play
a critical role in ensuring small businesses receive their fair
share of government contracts. They are located at the largest
federal agency buying activities across the country and work
closely with acquisition teams at these agencies to ensure
small business utilization is maximized.
We recently conducted an analysis of our PCR and CMR
functions and their role and responsibilities. This analysis
helped us determine how we can more effectively utilize these
resources to increase opportunities for small business
contracting. Our analysis also looked into whether we have
appropriately allocated our PCRs and CMRs in the most effective
and efficient way. Furthermore, in the fiscal year 2012 budget
request, the president asked for additional full-time
employees, including PCRs, to provide oversight for small
business contracting programs and work towards eliminating
fraud, waste and abuse.
The second GAO report is in regards to the Offices of Small
and Disadvantaged Business Utilization that work in each
federal agency. SBA works very closely with the directors and
staff of these offices. We chair monthly meetings with the
OSDBU directors to share program updates, discuss policy and
regulatory changes, and discuss best practices. We also work
with the OSDBU directors to set small business goals for their
agency and help them develop plans to meet those goals.
The report discusses Section 15(k)3 of the Small Business
Act, which says the OSDBU directors should report to agency
heads or deputy agency heads. SBA strongly supports the
underlying policy set forth in this statute and is asking all
agencies to ensure they are in compliance with the
requirements. In fact, SBA administrator Karen Mills recently
sent a memorandum to all agency heads and deputy heads
reinforcing the importance of this requirement and asking each
agency to ensure they are in compliance. SBA strongly believes
in the importance of the OSDBU role and works closely with the
White House and Office of Federal Procurement Policy to engage
senior officials at each agency on the importance of small
business contracting and also keep those agencies accountable
to their goals.
The third and final report concerned Mentor-Protege
Programs. Mentor-Protege Programs are arrangements in which
mentors, typically experienced prime contractors, provide
business development assistance to small business proteges. In
return, the program provides incentives for mentor
participation, such as credit towards subcontracting goals and
additional evaluation points towards the awarding of contracts.
Mentors may also enter into joint venture agreements with
proteges to compete for government contracts.
SBA currently runs an Overseas One Mentor-Protege Program,
which is for participants in the 8(a) Business Development
Program. However, the Small Business Jobs Act gave the agency
authority to implement additional programs for HUBZone, woman-
owned, and service-disabled veteran-owned small businesses. We
are in the process of implementing these new programs. Other
federal agencies also have their own Mentor-Protege Programs.
SBA does not oversee the other agencies' Mentor-Protege
Programs but we are supportive of efforts made to increase
opportunities for small businesses to compete for and win
federal contracts.
In addition to sharing our views on the three GAO reports,
I would also like to take this opportunity to share with you
two important initiatives our Office of Government Contracting
and Business Development is currently focused on. The first is
our effort to combat fraud, waste, and abuse in all small
business contracting programs. We have no tolerance for fraud,
waste, or abuse, and have implemented a comprehensive three-
prong strategy to identify, prevent, and pursue non-compliance
or fraud across all of our government contracting programs. The
three prongs of our fraud, waste, and abuse strategy are as
follows: (1) effective certification processes; (2) continued
surveillance and monitoring; and (3) robust and timely
enforcement.
The other issue I would like to discuss is in regards to
our HUBZone or historically underutilized business zone
program. With the public release of the 2010 census data, a
number of existing areas will no longer be designated HUBZones
due to the statutory mandate to remove these past redesignated
areas. This mandate will have an impact on thousands of
existing HUBZone firms who will no longer qualify for the
program. Extending these firms eligibility can only be done by
Congress. SBA is happy and willing to work with Congress on any
proposals related to this issue to promote economic development
and employment growth in distressed areas.
As demonstrated by the initiatives and efforts described in
this testimony, SBA has taken great strides to strengthen our
Small Business Contracting Programs and strategies for
combating fraud, waste, and abuse. These efforts are critical
in ensuring small businesses gain access to federal contracting
opportunities so that they can grow their businesses and create
jobs.
Thank you for allowing me to share SBA's views and
initiatives with you today, and I will be happy to answer any
questions.
[The statement of Mr. Jordan follows on page 25.]
Chairman Mulvaney. Thank you, Mr. Jordan. And here is what
has happened in the meantime. We have an unexpected vote as you
can see up on the board, so what we are going to try and do is,
I think Mr. Critz has just a few minutes of questions. I am
going to let him ask his questions and then welcome you back if
you want to come back. But Ms. Chu and I will be back at
probably a quarter to 11. So what we will do is go to your
questions now, Mr. Critz, and then Ms. Chu and I will come back
after we adjourn for a few minutes.
Mr. Critz. Thank you, Mr. Chairman. And I just have
actually two or three quick questions.
Mr. Shear, you had mentioned at one point that Commerce,
Justice, Treasury, and there was a fourth that were not
complaint. And I think Interior and someone else----
Mr. Shear. It was State.
Mr. Critz. And State were not compliant. So you say they
are not complaint; they disagree. Is the final outcome that you
just agree to disagree or what comes next?
Mr. Shear. It is a complex question even though it started
out as a simple question.
With Justice and State, we just looked at the reality of
what the interaction is between the OSDBU directors and senior
officials--or the interaction with the heads of the agency or
the absence thereof. It was strictly based on the facts that we
collected from our audit. And we think the facts on that are
quite clear. So we are at a disagreement there and we state it,
and continue to maintain what we found.
With Treasury and State, the disagreement is over--what
they have done is that they named somebody an OSDBU director
who reports to the head or deputy head of the agency but then
they delegate the authority. And then they cite a legal
argument dealing with delegated authority and whether it can be
withheld or not. We think the delegated authority is withheld
by implication in the Small Business Act in the relevant
section. So with Treasury and State it is a legal disagreement.
What we do about all of this, the chairman raised a very
good point. He has sent letters to these agencies. There is
going to be oversight of these agencies. When we were writing
our report, our report reviewer said--what happens to an agency
that is not in compliance? We said there really are not any
sanctions so maybe there will be congressional oversight. That
is one reason we put in our recommendation that if they are not
going to comply they should state in reporting to Congress why
they do not comply to create some burden of proof on these
agencies. So we are trying to move the ball forward but there
is a disagreement here.
Mr. Critz. You also mentioned that at some point that you
mentioned resource challenges that I guess some offices are--
and I am assuming what you are saying is that they do not have
the funding to put in place some of the things that they need
to do. This is not the same issue though.
Mr. Shear. No. It is a different issue. And it is an
important one. So I thank you for asking that.
With the PCRs and CMRs, starting a few years ago we
recommended to SBA that they do a resource assessment of the
adequacy of the PCRs to basically fulfill their
responsibilities. In response to that they have had an
evaluation done and Mr. Jordan referred to that evaluation.
That evaluation was not completed so therefore, it was not
shared with us during our work that I am testifying on today.
But we think there are some real resource issues here in terms
of the ability of PCRs and CMRs to carry out their functions.
And we think SBA should be close enough to the situation and be
able to do an evaluation of its own needs and share with the
Congress and with us and other parties how they plan to address
what seem to be shortcomings in the ability of PCRs to carry
out their functions.
Mr. Critz. Good. Good. Thank you.
Ms. Park, the Mentor-Protege Program from the reading that
I had, the reporting that comes post, is it not dictated that
the reporting is from the mentor and the protege? I guess
sometimes it is just the mentor that people go to and sometimes
it is just--it is a joint. And I am curious. This is not
clearly defined?
Ms. Park. So in GSA's Mentor-Protege Program we currently
conduct an assessment on a semi-annual basis of the proteges
and the mentors jointly. They submit from both perspectives how
the agreement is progressing while the expectations set forth
are being met, what contracts have been won by the protege,
what jobs have been created by the protege, and you know, to
what extent the mentors have fulfilled their commitment and
vice versa in terms of commitments and expectations being met.
Now, what the GAO report guides GSA to do is to implement a
post-completion evaluation so that if a mentor and protege have
set up a one-year agreement, after that one year has been
completed, to then continue to track the progress to see to
what extent proteges can compete successfully for contracts
without the assistance of their mentor. So that is something we
have already taken steps to implement.
Mr. Critz. Thank you. Thank you, Mr. Chairman.
Chairman Mulvaney. Thank you. And I would hope to have Mr.
West get some time. Mr. West, do you want to try and proceed or
do you want to come back?
Mr. West. Thank you, Mr. Chairman and ranking member.
First question, the PCRs and CMRs, full-time or part-time
positions?
Mr. Jordan. These are full-time positions.
Mr. West. Okay. Very well.
We talked about meeting the 23 percent contracting
stipulation and we are at 22.7. What are we as far as vet-
owned, woman-owned, minority-owned right now?
Mr. Jordan. I can get you that. In 2010, so the small
businesses overall were 22.7 percent as you said. Woman-owned
small businesses were just over four percent. Small
disadvantaged businesses were just under eight percent.
Service-disabled veteran-owned small businesses were two and a
half percent. And HUBZone businesses were 2.8 percent.
Mr. West. Now, how does that relate to the statutory
requirements?
Mr. Jordan. To the goals? I'm sorry. So the woman-owned
businesses are four percent towards a five percent. So about a
little less than a percent short. SBDs were at eight percent
towards a five percent goal, so significantly exceeding.
Service-disabled vets, two and a half percent of a three
percent goal, so half a percent short. And HUBZones, 2.8
percent of a three percent.
Mr. West. Very well.
Last question. What do we see as the average amount of time
that we have this mentor-protege relationship going on? Is it a
long umbilical cord? Short umbilical cord?
Ms. Park. I would be happy to answer that about GSA's
program. We ask of the mentors at least a one-year commitment
as a requirement and up to three years.
Mr. West. Do we see any instances of, you know, some
bundling from the mentors to the proteges as far as, you know,
getting them to come on as subcontractors or are they truly
operating independently to help people on contracts that are, I
guess, separate from what their field of expertise is?
Ms. Park. We have seen good contracts awarded both on the
prime and the subcontract level to protege firms. Certainly,
subcontracts are a great way for small businesses to enter the
federal marketplace either as a starting point or as continued
ways to win federal contract work.
Mr. West. Okay.
Mr. Jordan. And Congressman, I will just expand. For the
8(a) Business Development's Mentor-Protege Program we did see
some issues with the way that the joint ventures between those
mentors and proteges were happening. And in March we released
the first comprehensive revision of the 8(a) regulations in
more than a decade which addressed a lot of the issues around
that.
Mr. West. Very well. That was a concern that I had.
Mr. Jordan. Absolutely.
Mr. West. Thank you very much. Mr. Chairman, I yield back.
Let's go vote.
Chairman Mulvaney. Exactly. So we will adjourn. We will
adjourn now until 11 o'clock, although I will tell you Ms. Chu
and I will come back as quickly as we can to try and move
through. So if you can stay in the area that will be great. We
will adjourn until 11 o'clock.
[Recess.]
Chairman Mulvaney. Thanks again to everybody for sticking
around. I apologize for the inconvenience. Unfortunately, it is
something that neither Ms. Chu nor I have any control over. But
it was nice to welcome the two new members of Congress.
We will pick up on questions. And as is my practice I will
defer to my ranking member and let her ask to her heart's
delight and then I will go last. So, Ms. Chu.
Ms. Chu. Okay, thank you. Thank you, Mr. Chair.
Ms. Park, you described some great progress that was made
with the Protege-Mentor Program and these 41 new contracts,
$260 million worth of contracts. What I was wondering was are
there certain departments where this relationship works well
more so than others? And the reason I ask is because we see
with the OSDBU compliance that there is variation, a great deal
of variation with the departments. And I am wondering if there
are certain departments, like say for instance with the
Department of Defense where there is more compliance than with
others because it lends itself more to that because there is a
lot of subcontracting that goes on there? And if there is
variation, how do we better enhance the other departments in
this area?
Ms. Park. Well, GSA's Mentor-Protege Program focuses on,
you know, developing suppliers, subcontractors, and primes in
industries where we do business. That is really in support of
our mission. So right now we have, you know, primarily in
professional services, construction services-related
participants in the program. Facilities maintenance as well. I
do not know if there are, you know, particular compliance
hurdles that may be, you know limiting in other agencies'
programs. I can speak about GSA's program. It is really open to
any and all industries that GSA does business with. We have,
you know, seen interest primarily from those industries I
mentioned that we do, you know, a preponderance of our business
with, but certainly it is open to any and all businesses,
including those on the schedules in the schedules program.
Ms. Chu. So do you see certain industries where it is
easier to set up that kind of Mentor-Protege Program?
Ms. Park. Well, for, you know, for us I do not think it is
really industry specific. Certainly, with our Public Building
Service we, you know, primarily that is construction-related
services, facilities maintenance. So we do have a good number
of participants from those industries. We also have
participants from professional services, IT, you know,
management consulting and strategy services that are in the
Schedules Program for GSA. So, you know, I really do not know
that there are specific industry or industry-specific
challenges to participating but certainly we see interest from
particular firms in certain industries in support of where, you
know, GSA spends money and where our contract dollars are.
Ms. Chu. Mr. Shear, did you find any differences there?
Mr. Shear. I am going to make a general statement about
what we were mandated to do to set up the answer if I could. We
thought it was great to receive a mandate from Congress to look
at Mentor-Protege Programs, partly that it seems like there has
been very little evaluation of these programs even though the
number has grown to 13. And even when we started it seemed like
everybody was shocked to hear that there were 13 programs. And
it was in a way very good that we had a short time fuse. You
know, it was a mandate with a specific date. So it was good
because we scoured the universe and we were able to describe
the programs, at least the controls that are on paper, to
operate these programs. And we could at least describe in our
report how they vary.
But the question you raise is an extremely important one.
And as auditors, here we looked at controls on paper but we
said we did not test the controls of these various programs.
And one of the first things that would go off in my mind if we
did have the time or in the future did look at the controls
around these programs is how about the agencies where it seems
the OSDBUs do not play as prominent a role, do not have the
right reporting structure, might have budget problems. We see
it on the surface from just going into each agency. But you
raise a great question that we hope that sometime in the future
we will be able to go in and get a better handle on
particularly on the agencies that seem to have OSDBUs that have
limited staff resources and those that are not reporting to the
senior-most levels to see how well those programs are being
carried out.
Ms. Chu. Thank you for that.
Mr. Shear, I also wanted to ask about the Procurement
Center Representatives, the PCRs, and your report recommends
several options for increasing PCR effectiveness. Certain ones
seem to be ones that could be implemented by the administration
without any legislative action. For instance, increasing the
face-to-face interactions, increasing service capacity, and
improving the training. And has SBR responded to or implemented
any of these actions?
Mr. Shear. In our report we discuss these various options
and we discuss them with the PCR community. So we explored
these options. It is in the context that in the past we have
recommended that SBA has to assess its PCR workload and its
resources for this activity. So what we found from that was
consistent with the idea that most of these options do involve
greater use of resources so it is one of the reasons we have
always been very anxious to hear about the evaluation that SBA
had of their PCR resources and what results from that. And Mr.
Jordan, you know, alluded to that in terms of the president's
2012 budget request. So a lot of these have to do with greater
resource availability, whether it is through IT or just
basically having more people or increasing interaction by
increasing the travel budget. All these are options that could
improve PCR effectiveness.
Ms. Chu. And, of course, I must ask Mr. Jordan.
Mr. Jordan. Sure. Yes, as Mr. Shear says, we agreed with
most, if not all of the recommendations in the GAO report. We
had already begun a proactive analysis of our Procurement
Center Representative and Commercial Marketing Representative
workload with an eye towards maximizing both the effectiveness
of these folks in getting contracts awarded, both the prime and
sublevel to small businesses, but also the efficiency. And that
is where, you know, we have got to figure out what which level
is cross functional performance important. So these folks also
handle size protests, service-disabled veteran-owned small
business status protests. They do surveillance reviews and some
of these other functions that the GAO commented on, at which
point is it very helpful to have them cross-train and cross-
functional versus that become a workload balancing challenge
and you really want specialization.
And we did conduct this robust analysis both where they are
located and what they are doing and have started implementing
some of those changes already and have implemented some of
those changes already. But in addition, as the GAO noted, some
of those workload and resource challenges really need to be
addressed by increasing the workforce of the PCRs and to keep
from robbing Peter to Paul and taking them from somewhere else
and then causing another problem, the president did ask for an
increase in this workforce.
Ms. Chu. One of your recommendations, Mr. Shear, was to
allow PCRs to dispute procurement if their recommendations were
not implemented. And I was not sure whether that one required
legislation. Does it?
Mr. Shear. I would have to defer to Mr. Jordan. I think it
might require legislation to provide that but I am really not
sure on that particular option. And I don't know, Joe, if you--
--
Mr. Jordan. Which one is it again?
Ms. Chu. That is the one allowing the PCRs to dispute the
procurement if their recommendation is not implemented. And
also I would like to know why would their recommendations not
be taken if they have gone to all this trouble to put such one
together.
Mr. Jordan. Sure. So we have an important tool right now in
the PCR toolkit to address that issue, which is called the Form
70. And this is one of the things that make PCRs as a cadre so
effective and important is that if they file a Form 70, that
procurement that they are in disagreement with has to stop
until there is a resolution. And as we all know, we have an
overall contracting officer workload. They want to get things
through quickly and done well. And so they do not want the
procurement to stop. And it can be very helpful as a specter,
you know, not having to use it but knowing that you could. And
then we do use it sometimes and there is a series of
escalations if we continue to disagree between the buying
activity that is issuing the contract and the PCR. So that
actually is something that we do do quite a bit.
Now, the best situations are where Procurement Center
Representatives and the contracting officer workforce and the
buying activities they cover are working together at the
acquisition planning stage, at the program level, etcetera, so
that you do not get to the end. But if a PCR disagrees that,
you know, a contracting officer is trying to issue a contract
to full and open competition and the PCR believes, no, there
are two more small businesses that could do this, you must set
it aside, the PCR can stop that procurement until that is
resolved. And there is a series of protests that rise up all
the way to the secretary level.
Ms. Chu. And do you know whether they are successful or
not?
Mr. Jordan. We find, one, again, the overwhelming majority
of the time it does not need to get to the actual issuance of a
Form 70, just saying we disagree to this level we are going to
precipitates a conversation in which the disputes are resolved.
And I do not know of really any cases in my two and a half
years here whereas it has gone up a chain of protests. We have
not agreed by the end.
Mr. Shear. And I will apologize for bouncing back but one
of the options we looked at had to do with the role of PCRs if
they disagree with the subcontracting plan. And that for them
to take an action specific to a subcontracting plan would
require statutory change for them to do that. So the Form 70
process I really thank Joe Jordan for pointing out how the Form
70 process works but there is not the authority--the PCR does
not have the authority to go through that type of Form 70
action when the objection is to the subcontracting plan.
Ms. Chu. Okay. Mr. Shear, your report mentions that many of
the OSDBU directors felt they had a lack of influence on the
procurement process and that hinders their responsibility,
their ability to carry out the responsibility. And that the
OSDBU directors seemed to have a conflict with the authority of
the contracting officers in the process. So is the tension
between these offices intended or does this need to be
corrected?
Mr. Shear. There are two types of tensions here and it is a
great question. So first I will start with the tension that I
think is intended to be there and that is OSDBU directors are
in a position to be advocates for small businesses. And so they
are there to create some tension so that when contracting
officials are making awards, they are doing the right market
analysis, and they are taking the appropriate actions for set
asides. So it is to create a tension for--to carry out the
Small Business Act provisions. So that we would refer to as a
pretty healthy tension.
There is some tension, and this especially seems to be
present in those agencies that do not comply with the reporting
structure. And those tend to be those where we hear from OSDBU
directors that while that function is taken care of by the
contracting officials, well, in a sense that there can be in a
reporting relationship, if it does create a situation where a
healthy conflict is not there, if there is a different conflict
which plays out where the OSDBU does not have enough influence,
then it can lead to a result where they are not able to really
fulfill their purpose.
Ms. Chu. And do you think there should be an increase in
the authority of the OSDBU? And is there a way to do that
without adding to the complexity or length of the contracting
process?
Mr. Shear. There seems to be two issues that are most
associated with what I will call the prominence of the OSDBU in
carrying out their mission. One tends to be reporting structure
and the other one tends to be budget and resources. And those
are the two that stand out to us. It is very hard for us to
evaluate certain cases where the OSDBU might say the
contracting officials take care of that function because in
some agencies it might be that the OSDBU has created a sense of
culture where the contracting officials are very close to
serving the needs of small businesses, that is including small
businesses. So it is hard for us to make that distinction. So
we find ourselves coming back to why did Congress set things up
in this way? And it makes sense to us.
Ms. Chu. Okay. And finally let me ask this. I know that
SBA, Mr. Jordan, asked for 24 full-time employees. Are you
devoting these--any of these employees to the PCRs and the
CMRs?
Mr. Jordan. Yes, absolutely. So the exact split is
something that we would be working through based on the
implementation of the analysis we discussed but it would be to
handle those oversight and fraud, waste, and abuse prevention
functions. So yes, you would have more PCRs. Yes, you would
have more CMRs out of that, in addition to looking at how can
we best handle the size protests, status protests, and
surveillance reviews which are also ongoing continuous
improvement projects that we do in discussion with the OSDBU
community, GAO, and Congress.
Ms. Chu. Okay, thank you. I yield back.
Chairman Mulvaney. Thank you, Ms. Chu.
My questions are going to be all over the board. And while
I think I have a feel for who they should be directed to,
please, I encourage you, if you feel like you can contribute
something, please feel free to chime in.
In no particular order, I think my first question is to Mr.
Shear and Ms. Park regarding the mentor programs. In fact, I
think maybe it is to everybody. How much uniformity is there
across the differing mentor programs of the different agencies?
And is there any system that is set up to help deal with
somebody who might want to participate in the program at the
DoD and then go over and participate in the GSA? And if so, is
that system working?
Mr. Shear, we will begin with you and then Ms. Park.
Mr. Shear. Your direct question we did not address--the
ability of small businesses to participate as proteges, let's
say in multiple programs. We did not look at that. We know that
when you have 13 programs and there has not been a lot of
evaluation looking across the programs, and I would say ours is
again kind of like a first effort of just trying to describe
them----
Chairman Mulvaney. Can you cross--is there any value to
crossing? If I run a small business that does three or four
different things and I want to do a job for the DoD and I want
to participate in that mentor program, is there any demand
for--do I learn what I need to learn about all government
contracting if I am a protege in the DoD program? Does it
carryover to GSA or do I have to--is there a benefit then for
me to go to GSA separately?
Mr. Shear. I will answer that by saying that there is a
benefit of going to each agency separately and where that--so
it is not strictly a one-sided answer but the issue becomes
what is the small business that I am providing and what
agencies have supply chains that I could fit into best? So I
won't say that there should not be just one Mentor-Protege
Program across the government. I know there is some interest in
that. So I cannot opine on that one way or the other. But the
challenge with that would be to ensure that businesses that can
be successfully applied to one supply chain but not others are
really incorporated by the Mentor-Protege Program. So the role
of the individual OSDBU in running the Mentor-Protege Program
becomes important.
At the same token, one of the things that we certainly
discussed a lot looking at our three reports together and it
kind of points to the Interagency Taskforce that the president
created and the role of SBA with the various OSDBUs--is that is
there a way to identify best practices or a certain structure
where you can figure out what is the appropriate role for the
OSDBU and what is the appropriate role for PCRs and the various
entities because they bring a different tool mix to the table.
How do you reconcile all of these? And these really come to a
head when you start talking about the roles of these various
entities in running Mentor-Protege Programs. So it is a two-
sided answer but it is one that there are benefits to some
businesses. If you have a business that can be part of the
supply chain of multiple agencies, there could be a benefit of
having one program. There certainly would be a benefit if the
programs were a little more transparent and there was some
standardization to those programs. But having one program could
leave out certain proteges that might fit in best with
basically the supply chain and one agency.
Chairman Mulvaney. Ms. Park, go ahead with that.
Ms. Park. We do collaborate with other federal agency
program managers of the other Mentor-Protege Programs. You
know, our program manager, Tony Eiland, does meet and talk with
the other agencies' programs. To what extent there is
uniformity across programs, you know, I do not believe there is
100 percent uniformity either in the application process or who
can participate depending on what kind of small business
category you are in. So, you know, there is probably
opportunity for that to be streamlined. I can imagine that, you
know, the business community, you know, fewer forms or fewer
applications, fewer agreements would, you know, would be a good
thing.
But we do see that there are participants in our program
that are also participants in other agencies' programs. You
know, each agency has our specific mission and, you know, our
specific supply chains and looking to develop a supplier base
that supports our mission. So there surely is a specific
mission that each Mentor-Protege Program is supporting.
Certainly with GSA's wide contracting vehicles, you know, we do
serve a broad range of industries that also support other
agencies' missions.
Chairman Mulvaney. If we were to--and I recognize the fact
that one of the complaints--complaint is too strong a word, but
one of the concerns that you raised, Mr. Shear, is the sort of
lack of evaluation, the lack of input, the lack of
transparency. But if we had a chance to talk to the firms who
had been proteges, what would they say is the best part about
the program? What does the Mentor-Protege Program help them
with the most? What is the hardest part about being a
government contractor and how does that problem get solved
through the Mentor-Protege Program? Start with you, Mr. Jordan.
Mr. Jordan. So when Congress passed the Small Business Jobs
Act, which asked SBA to expand our 8(a) Mentor-Protege Program
to include HUBZone-eligible firms, women-owned small businesses
and service-disabled vets, we wanted to figure out that very
question, how best to do that. And so as part of a 13 city
listening tour we asked small businesses, both who had
participated in our program or perhaps had participated in
another Mentor-Protege Program or had not yet participated,
what was the benefit they were looking for or had experienced.
What we overwhelmingly heard is that it is a great opportunity
to learn from somebody who has done this how to do it. You
know, there are various kind of shades of that answer but it
was essentially we do not yet have the capability or capacity
to do this. It is really hard to just learn by reading the FAR.
Chairman Mulvaney. So is that paperwork? Is that
development technology standards? What is it?
Mr. Jordan. So that, with our 8(a) Program, we specifically
say that that mentor and protege who want to come together, the
mentor needs to prove it has a defined skill that meets the
protege's defined need. So sometimes that is marketing. How do
you get in front of federal agencies? How do I sell the
government? For other people it is the back office systems. I
do not know how to set up, you know, defense or, you know,
DSEC-compliant system accounting systems and all these types of
things. It depends on what that protege needs but it works best
when it is not just a mentor and a protege saying, hey, we both
are in a similar industry; let's figure out how we can best go
get contracts. But rather, the protege has a defined need. The
mentor has a skill there that they can help build the
capability and capacity of the protege. They come together and
then the key question is how do you provide a mentor-true
incentive to want to do that? You know, they are businesses. It
is not always altruistic. So there has got to be some
incentive, either DoD funds theirs, we waive affiliations so
they can form joint ventures. There is a series of those, but
make it a good enough incentive that they do come in but good
enough controls that there is not the fraud, waste, and abuse
that you could see.
Chairman Mulvaney. Gotcha. I guess we will leave for
another day the problem of how it got so complicated in the
first place that we have to have this program.
Let us talk about goals and accomplishments. Ms. Park, you
had mentioned some numbers and in all candor I probably lost my
notes on them. But regarding the number of jobs that you folks
have helped create and the success of the program, could you
give me those again? Do you have those readily?
Ms. Park. Sure. We have 123 new jobs, 54 new subcontracts.
And then on prime contracts, let me flip to that page as well.
Chairman Mulvaney. And there was a huge amount of money,
several hundred million dollars.
Ms. Park. Two hundred sixty million dollars.
Chairman Mulvaney. That is what it was. So here is my
question because it sounds great and I congratulate you. This
is not a small on the program at all but I guess my question is
what did it cost us to get that?
Ms. Park. We have one program manager, full-time employee,
who actually splits his time between this program as well as
really being our service-disabled veteran-owned small business
champion in the agency. And they really are overlapping and,
you know, very complementary duties if you think about it. We
have, you know, certainly a commitment to increase
opportunities for veteran-owned businesses in federal
contracting and more than half of the proteges that are in the
firm are veteran-owned companies. And so it really is a
streamlined and efficient program. I think we have our program
manager, Tony Eiland, who is really committed to meeting face-
to-face with the businesses to help walk them through the
process. I think the paperwork we have in place is streamlined.
It is just a couple pages. We assume that folks coming to the
table can, you know, have their business plan in place and
their financials are in place.
Chairman Mulvaney. Is it generally less than one full-time
employee? Is that what you are telling me?
Ms. Park. Yes. Yes, sir.
Chairman Mulvaney. Okay. That is helpful.
By the way, Mr. Jordan, to the extent we were to put
something on our websites for our constituents who want to do
this, is there an overall website on how to do this? Is it part
of the SBA? Or, if I wanted to get in the Mentor-Protege
Program, where would be the one best place to go?
Mr. Jordan. SBA.gov, for sure. And we will get everybody
exactly where they need to go.
Chairman Mulvaney. Mr. Shear, let us talk a little bit
about accountability. It sounds like you are getting a lot of
the same treatment that the Committee got in terms of folks who
are not responding or responding essentially saying that we do
not think we are breaking the law. Is that a common occurrence
when you try and look into these programs? Or is it a new
development? What do you think is causing it? Is it just
bureaucratic red tape?
Mr. Shear. Well, I will just give a broad reaction because
you are saying compared with other experience. Most of the time
when, whether it is agencies or individuals who have a
statutory responsibility to do something, there is normally
some type of implications of not complying--there is some sense
of punishment involved. And you are just seeing--it seems here
that, we did this evaluation almost a decade ago. It is getting
pretty close. And you had agencies not in compliance and you
still have those agencies not in compliance today that were not
complying at that time. And it does not seem like there has
been any harm from that. So----
Chairman Mulvaney. What would be an appropriate sanction
for that, seriously?
Mr. Shear. All I can say is that you would think, at some
point--we can point out but there are certain value judgments
on what the severity of what you could say the deficiency is
and what the reaction is. What we took the prerogative of
doing, which in a way was creating work for you, was saying
these agencies that are not in compliance, maybe we can push
them a little bit if we say at least you have to come up with
a, in that our recommendations do not carry legal sanctions
either but the idea is if you have a reporting responsibility
to Congress where you have to justify this it creates some
burden of proof. From your standpoint you send letters. That is
a great--that is more than I think what has happened in the
past. If you have oversight hearings I think that can help.
There are a lot of things that can help but as far as what is
an appropriate legal sanction, that is where I just say that I
do not have a basis to say what the right legal sanction should
be. But it is quite clear there are a number of agencies that
have not taken these requirements seriously.
Chairman Mulvaney. Well, and we will be--we will be asking
those folks to come in. To the extent sitting here is a
sanction, I guess we will get them to do that.
Jumping around a little bit to close up, Mr. Jordan, you
mentioned Form 70. Did one of your PCRs issue that to the Coast
Guard this year on insourcing?
Mr. Jordan. Yes, sir.
Chairman Mulvaney. What was the outcome of that? And the
only reason I ask is we have had separate hearings on
insourcing. I just read your rules yesterday that you
promulgated I guess on Monday--I assume that was you folks--on
insourcing. So what was the outcome of that one?
Mr. Jordan. So it is not yet resolved. And I am happy to
follow up as that progresses. There is still a lack of clarity
as to whether or not the Form 70 authority applies to
insourcing since it is not--it is almost the reverse of a
contract. We are not stopping a contract from going out; there
is no contract anymore. So that is what we are trying to work
out. Again, if there is one thing I have learned over the last
couple years is that when we always rely on adversarial-type
tools, we do not get the same progress as if we work
collaboratively. So we are working closely with our
counterparts at Homeland Security and at Coast Guard to try to
figure out what is going on with that situation. Is there
something thematic that we can do more? And like you said, Dan
Gordon, the Office of Federal Procurement Policy, just re-
released very clear guidelines on what is inherently
governmental and closely associated, and we are working with
him.
Chairman Mulvaney. And again, I do not want to get off
topic too much but since it is something we spent some time on,
do you think that the rules that were issued on Monday will
help bring some clarity to that specific situation?
Mr. Jordan. We have not gotten yet the information as to
their precise rationale and impetus for insourcing the
particular contract or function that you are talking about. So
I am not sure if it was due to a cost savings which is one of
the previous issues that drove insourcing, or whether it was
because there was inherently governmental or closely associated
function being insourced. So I do not yet know.
Chairman Mulvaney. And staff tells me they have some
information that they might be able to share with you, so thank
you. We will continue to follow insourcing, by the way,
throughout the course of this year.
Let me see. Ms. Park, staff has a couple of questions and
this is a good one. Under the Act, the SBA, you are supposed to
have supervisory authority over personnel carrying out the
functions of the SBA of the Act itself. Are you able to do
that? Is that the case? Is that working well?
Ms. Park. I do have supervisory authority over the staff
that I have in Central Office that do report directly to me.
There are about 11 staff members. And we have a network of
regional representatives across the country, another two dozen,
and so together we carry out the functions of the Small
Business Act. And in the different regions they report to the
head of Contracting Activity for the Federal Acquisition
Service currently with a dotted line reporting in to Central
Office. And so we do work closely together to carry out the
responsibilities of the Small Business Act.
I would mention going back to your previous question about
the half full-time employee that manages the Mentor-Protege
Program, the whole network of employees on the OSDBU staff do
support the program as well as part of overall duties, so I
would be a little bit misleading in saying just one full-time--
half a full-time employee to clarify that.
Chairman Mulvaney. Just a second. Clearly, we would
consider that a success. Are there goals for your Mentor-
Protege Program? Are there specific goals in terms of the
number of jobs, the number of contracts awarded? Are there any
specific goals? We start the new year, I guess, next week or
two weeks from now. October 1st will be the beginning of our
fiscal year. Do each of these programs have specific goals they
are setting out to accomplish for FY2012?
Mr. Jordan. For SBA's Mentor-Protege Program, which is part
of the 8(a), it does not have a programmatic specific goal,
i.e., contracts awarded, dollars, those types of things. What
it has is for each individual Mentor-Protege agreement, those
are good for a year and each year there is an annual review
where SBA business development specialists talks with the
protege and the small business in our program and says you laid
out a plan for what your specific needs were, how this mentor
was going to help you. Did that happen? Can you show it to us?
Because each one, like I said, has a slightly different metric
for success but we want to make sure we are looking at that
every year.
Chairman Mulvaney. But at the--you are GAO, you are GSA, I
lose track of all the letters. At the GSA, do you all have a
goal for next year?
Ms. Park. Well, similar to SBA's approach, we do not
necessarily have specific targets for contracts awarded or
dollars won. We do have, you know, an internal goal to have 100
agreements in place by I think the end of the calendar year is
what we are looking at. But we really are taking the data and
what we have seen the past two years to see if they make sense
given kind of that baseline to see if it makes sense to
establish specific goals. What we do not want to do is box in
the program to be just about the contract dollars and the jobs
won. We want to make sure that there is room to define success
by the different business capabilities that are developed.
Certainly, what are the specific needs of each business coming
to the table?
I will give you one example that is not necessarily about
contract dollars or new jobs. Where the large business scale
and training resources can be helpful if there is an ISO or
CMMI IT-related certification that is fairly expensive that
costs thousands of dollars to obtain, the smaller business
could and has been in a couple of examples, been invited to
participate in the training that the large business is already
paying for their own employees. And so that is a clear benefit
that is not necessarily defined in terms of contract dollars
and jobs.
Chairman Mulvaney. It is. But going back to Mr. Shear's
original point when he started and what you have just mentioned
are very admirable qualitative goals. That makes it very hard
to measure though, does it not, Mr. Shear, if that is what we
are chasing if we have to look at everyone on a case-by-case
basis, every single Mentor-Protege Program to say was that
individual program a success? Or should we have quantitative
goals of some fashion to make your job a little bit easier? And
they will still be friends either way.
Mr. Shear. Both. Because when we look across the programs
there is a lot of attention paid to the actual agreement and
the needs of the protege. And I think both witnesses
characterize that well. But there are certain things that are
looked at, such as how well the proteges are doing while they
are in the program. And we at least wanted the agencies to
consider to look at how well they have done, even after they
leave the program a year or two, such as the way DoD does. So
there are advantages of trying to create both. The concern
sometimes if you try to create too many quantitative metrics is
what becomes your baseline. And we recognize that many times
you say, well, there has been job growth among the proteges
this year, how about if we saw a decline, which at DoD you did
see, when the recession hit. Well, you have to put it into a
context and you have to have some sense of putting it into
perspective. But quantitative goals, in looking at how well
proteges do, can be very useful.
Mr. Jordan. And if I can just add, Mr. Chairman, the
difference between quantifiably tracking these things which we
are really trying to push on and setting goals in advance as
Mr. Shear said is where some of the challenges--so we have
7,000 8(a) firms, approximately 500 mentor-protege agreements.
That is more of a process programmatic data point. Then you
look at output. So how many contracts do they get? How many
contract dollars? And we do track those metrics. But really
what we are driving towards are outcomes in quantifying what
those desired--or defining what those desired outcomes are and
then quantifying them is where we are really spending a lot of
time trying to push our thinking so that we can track whether
these programs are actually successful in the goal of the
program, which is to develop these businesses for long-term
growth and sustainability.
Chairman Mulvaney. Last question, I promise. You have
mentioned a number, one of the quantifiable goals here is the
overall SBA goal of the 23 percent participation. I mentioned
in my opening statement 20 percent from last year. You
mentioned 22.7 percent, which it does not sound like a lot, but
when you are talking about half a trillion dollars worth of
contracts it actually is a lot. What is the difference between
those two numbers, Mr. Jordan?
Mr. Jordan. Without seeing the exact quantitative inputs
you are using, what I would surmise is that we are using the
same numerator of $98 billion in prime contracts to small
businesses.
Chairman Mulvaney. I have got 109,171.
Mr. Jordan. Let us use your number. I like that better.
So we are pretty close in that the question is what
constitutes the denominator, which for purposes of goaling we
use small business-eligible dollars, which is a subset of all
federal procurement dollars. So in 2010, the all federal
procurement dollars spent was roughly $530 billion. The small
business-eligible dollars that we use as the denominator was
$435 billion. And so that is how we get to the 22.7. What
drives that delta is a set of spend categories that have long
been excluded, things that do not have to play by the rules of
the Federal Acquisition Regulation. So either specific
agencies, like FAA, or specific types of work, work done OCONUS
(outside the continental United States), foreign military
sales, those types of things are removed from the base.
Now, I know it is a constant source of discussion and one
that we have had and will continue to have with your staff, but
the important thing from my perspective is when I joined we had
just had three successive years of declining performance year
after year. So instead of worrying about adding to or moving
from that list of exclusions we said we want an apples to
apples comparison as we fix this process and these programs to
see if we can move performance in the right direction. And as I
said, we, over the last two years, have had the largest
increase in over a decade having not added anything to nor
removed anything from that list. So that is where we were and
now, you know, we are happy to continue the dialogue of what
comprised the delta.
Chairman Mulvaney. We may do that. We may follow up with
you in writing because that is one of the things that I know
everybody on this Committee tracks, because that 23 percent
number is burnt into our brain from the very first day that we
are here that that is the goal. And you know where I am coming
from which is that we just do not want you folks to say, well,
22.7 percent, that is close enough. We want to continue to have
folks push and I know that you are doing that.
Listen, thanks to everybody who stuck around. Thank you for
waiting during the break. As always, it is an honor to see
someone sworn in on the floor of the House. So thank you for
accommodating us in that. We look forward to having you back
sometime soon. Please do send to the extent you have friends at
the Interior or at the Treasury or any of the other folks who
have not responded to us, that this was a really good
experience I hope today, notwithstanding the fact it took two
hours. It is not going to be as much fun for them. So if you
could let them know that we are serious about getting the
information that we have requested.
So thanks very much. With that we are adjourned.
[Whereupon, at 11:58 a.m., the Subcommittee hearing was
adjourned.]
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