[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



                                 ______
 
                   HELPING SMALL BUSINESSES COMPETE:

    CHALLENGES WITHIN PROGRAMS DESIGNED TO ASSIST SMALL CONTRACTORS

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



                                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





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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

                              ----------                              

                           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

                             ------------ 


                      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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