[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
SEQUESTRATION: THE THREAT TO SMALL BUSINESSES, JOBS, AND THE INDUSTRIAL
BASE
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HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
HEARING HELD
SEPTEMBER 20, 2012
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 112-087
Available via the GPO Website: www.fdsys.gov
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C O N T E N T S
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OPENING STATEMENTS
Page
Hon. Sam Graves.................................................. 1
Hon. Nydia Velazquez............................................ 2
WITNESSES
Hon. Mike McCord, Principal Deputy Undersecretary of Defense
(Comptroller), Washington, DC.................................. 4
Stephen S. Fuller, Ph.D., Dwight Schar Faculty Chair and
University Professor Director, Center for Regional Analysis,
School of Public Policy, George Mason University, Arlington, VA 16
ML Mackey, Chief Executive Officer of Beacon Interactive Systems,
Cambridge, MA.................................................. 17
Laurie Moncrieff, President, Adaptive Manufacturing Solutions,
Burton, MI..................................................... 20
Mark Gross, Founder and CEO, Oak Grove Technologies, Raleigh, NC. 22
APPENDIX
Prepared Statements:
Hon. Mike McCord, Principal Deputy Undersecretary of Defense
(Comptroller), Washington, DC.............................. 31
Stephen S. Fuller, Ph.D., Dwight Schar Faculty Chair and
University Professor Director, Center for Regional Analysis
School of Public Policy, George Mason University,
Arlington, VA.............................................. 36
ML Mackey, Chief Executive Officer of Beacon Interactive
Systems, Cambridge, MA..................................... 46
Laurie Moncrieff, President, Adaptive Manufacturing
Solutions, Burton, MI...................................... 52
Mark Gross, Founder and CEO, Oak Grove Technologies, Raleigh,
NC......................................................... 58
Questions for the Record:
Committee on Small Business Questions for Mr. McCord and Mr.
Ginman..................................................... 60
Answers for the Record:
Answers from Mr. McCord and Mr. Ginman....................... 64
Additional Materials for the Record:
Small Environment Business Action Coalition Letter for the
Record..................................................... 73
Center for Security Policy Testimony for the Record.......... 76
HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
ROSCOE BARTLETT, Maryland
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
MIKE 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 T. SCHILLING, Illinois
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
MARK CRITZ, 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
SEQUESTRATION: THE THREAT TO SMALL BUSINESSES, JOBS, AND THE INDUSTRIAL
BASE
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THURSDAY, SEPTEMBER 20, 2012.
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 1 p.m., in room
2360, Rayburn House Office Building. Hon. Sam Graves (chairman
of the Committee) presiding.
Present: Representatives Graves, Mulvaney, Herrera Beutler,
West, Ellmers, Hanna, Velazquez, Schrader, Clarke, Chu, and
Hahn.
Chairman Graves. I will call the hearing to order. And I
want to say good afternoon to everybody, and thank you all for
being here today.
We are all acutely aware that the current level of federal
spending cannot be sustained. Our national debt already exceeds
$16 trillion and it is continuing to grow. Federal debt held by
the public will reach 73 percent of GDP by the end of the
fiscal year, which is the highest level since 1950 and about
twice the share that it measured at the end of 2007, before the
financial crisis and the recent recession.
This type of spending absolutely cannot continue. We all
hoped that the ``Super Committee'' would agree on a thoughtful
plan to curb government spending to ensure America's fiscal
security. Unfortunately, this did not occur and today we are
facing the possibility of an indiscriminate, across-the-board
cut on January 2, 2013, which is also known as sequestration.
I am committed to cutting spending and getting the nation
back on a fiscally sound course, and I am willing to make tough
decisions. But I question the wisdom of using sequestration's
crude cuts rather than deliberate, targeted cuts. I think we
all agree that the patient is sick, but I would rather prefer
that the surgeon use a scalpel rather than a meat cleaver. The
sweeping, unfocused cuts of sequestration are certain to have
unintended negative consequences, including for America's small
businesses.
Earlier this week, I heard from Perry Castro, the president
and CEO of Allied Associates International, Inc. This year, SBA
named Mr. Castro the Virginia Veteran Small Business Champion
of the Year. He told me that if sequestration becomes a
reality, it would, in one fell swoop, destroy his company. I
would like to enter his full statement for the record if that
is okay. And without objection, so ordered.
Unfortunately, Mr. Castro's story is not unusual. We are
here today, small firms that will be uniquely harmed by
sequestration. It is estimated that over half of the private
sector jobs lost to sequestration, which is about 960,000 jobs,
are going to be small business jobs. And surely, I do not think
that is what Congress intended.
To better understand the effects of sequestration, today we
are going to focus on government contracting and the Department
of Defense (DoD) for three reasons. First, DoD spends more on
government contracts than any other agency. Second, the Small
Business Act places special emphasis on the role of small
businesses and defense contracting since a strong small
business segment is vital to the health of our industrial base
and our national defense. And third, DoD has taken the greatest
cut of all the agencies, as an additional $55 billion will be
cut from DoD's budget in January, and that is on top of the
$487 billion previously cut this Congress.
Today's witnesses will discuss how sequestration may
irrevocably harm the industrial base, especially in areas such
as research and development, manufacturing, and aerospace. And
we will talk about the lack of certainty that small businesses
are already facing due to sequestration, at the prime and
subcontract levels. And they will also talk about the loss to
the government. Without strong small business participation in
procurement, we will have less competition and innovation in
contracting, which will result in higher prices to the
government.
However, while we are all talking about the DoD, all
agencies are facing very similar challenges--unfocused cuts
rather than smart cuts. For example, this Committee identified
about $100 million in potential savings to the SBA, and we
previously shared that with the Super Committee. However, the
$75 million SBA will lose due to sequestration lacks focus and
may put some very key lending programs at risk. The General
Services Administration, which is an agency not exactly known
as of late for its sound fiscal decisions, is only going to
lose $21 million, with a quarter of that coming from the very
inspector general who uncovered the GSA spending scandals.
As we seek to return our fiscal house to order, I believe
today's hearing is going to help form the debate. And again, I
want to thank all of our witnesses for being here. Today, we
are going to do this in two panels, and I very much look
forward to hearing your testimony. And with that I will turn to
Ranking Member Velazquez for her opening statement.
Ms. Velazquez. Thank you, Mr. Chairman.
When the Budget Control Act of 2011 was enacted last year,
sequestration was included as an incentive for action.
Unfortunately, the Super Committee was not so super and was
unable to agree on a deficit savings plan.
We are now facing the very sequestration that we had hoped
to avoid. Beginning in January, it will become all too real as
more than $100 billion in indiscriminate cuts take effect. This
outcome should not be a surprise to anyone as it is simply the
result of a process that has been held hostage by a few
unwilling to have an open mind on fiscal issues. By not
agreeing on a balanced deficit reduction approach, we have
chosen to limit our options.
The consequences of this path are seen in the businesses we
will hear from today. They are rightfully concerned about
losing defense contracts and the impact it will have on their
companies and employees. They have worked hard to build their
businesses, and the current situation is simply unfair to them.
Make no mistake, small firms will be among those hit hardest
when these cuts take effect. Indeed, it has been estimated that
for every dollar spent in the defense supply chain, 70 cents
flows to small companies. These firms developed their business
model around what they thought was a reliable customer, the
federal government. They now face the very real prospects of
revenue shortfalls and layoffs due to mistakes made in
Washington.
Of course, the impact is not just limited to businesses
that contract with the federal government. Small retailers,
like gas stations and grocers, will be hard hit by the ripple
effect as unemployed workers scale back on consumer
expenditures. Indeed, bipartisan estimates suggest that as many
as one million jobs could be lost and we could see gross
domestic product reduced by one-half percent. Beyond losing
customers, entrepreneurs will be deprived of tools and
resources they have relied on to grow, whether it is
manufacturing initiatives at the Department of Commerce, loan
programs at the Department of Agriculture, or counseling
services at the SBA.
So yes, it is clear that no one likes sequestration, but it
is the path we are on. And you cannot cut spending without
cutting the very benefits that many of our constituents enjoy
every day, whether they are defense contractors, franchise
owners, or the mom and pop restaurants on our street corners.
For these small businesses, this makes little sense, and I
do not blame them for their frustration. They would like a
government that is able to problem-solve without making matters
worse and doing so in a manner that is not so closed-minded. We
cannot help small businesses if we do not put all the options
on the table. And that means everything, even if you sign a
pledge to Grover Norquist. My first priority is to small
businesses, and that means being part of a give and take for
the better of this nation.
I yield back, Mr. Chairman. Thank you.
Chairman Graves. Thank you. All right. We will start with
our first witness, who I would like to welcome to the
Committee, the Honorable Mike McCord, who is the principal
deputy undersecretary of defense and has been in that role
since January 2009. In this capacity he provides advice and
assistance to the secretary, the deputy secretary, the
undersecretary on budgetary, fiscal, and financial management
matters. While Deputy Undersecretary McCord will be providing
the DoD's testimony, he is also joined by Mr. Richard T.
Ginman, who is the director for defense procurement and
acquisition policy, and he reports directly to the
undersecretary of defense for acquisition technology and
logistics. Mr. Ginman will be able to assist us on some of the
more contract-detailed type questions.
So with that, Undersecretary, I look forward to your
testimony.
STATEMENT OF MIKE McCORD, PRINCIPAL DEPUTY UNDERSECRETARY OF
DEFENSE
Mr. McCord. Chairman Graves, Ranking Member Velazquez,
members of the Committee. Thank you for this opportunity to
discuss the impact of sequestration on the DoD.
As you said, I am here today representing the Office of the
Comptroller, which has the overall lead in dealing with
sequester matters at the DoD, and joining me is Dick Ginman,
director of Defense Procurement and Acquisition Policy. His
organization is responsible for contracting and for
implementing our small business policy through our contracts.
Mr. Ginman and I have submitted a joint statement for the
record that in interest of time I will summarize briefly, and I
ask that our written statement be made part of the record.
As you know, Secretary Panetta has said for months that
sequestration would have devastating effects on the department
and on national security. He urged Congress to avoid
sequestration by approving a comprehensive and balanced deficit
reduction package that the president can sign.
As required by the Sequestration and Transparency Act of
2012, the Office of Management and Budget transmitted a report
to Congress last week showing the impact of sequester programs
across the department--across the federal government that is,
including defense. That report shows that national defense
programs will be reduced by almost 55 billion in FY 2013 by
sequester, which will translate to a 9.4 percent cut.
If allowed to go into effect, the lowering of discretionary
caps in the out years would result in reductions of a similar
amount each year from FY 2014 through FY 2021. These reductions
would force us to change the new defense strategy that the
administration introduced just a few months ago. The potential
sequester would apply to both the base defense budget and to
overseas contingency operations funding. The only exception is
military personnel, which the president has exempted from the
FY 2013 sequester. However, other DoD budget accounts will have
to make up the slack for that exemption. Moreover, the
department has little flexibility in determining where to take
these cuts, the remaining cuts, which leaves us with limited
ability to prioritize.
We are particularly concerned that funds to support our
troops in Afghanistan are subject to sequester under the law.
We would endeavor to protect these wartime operating budgets as
much as possible; however, protecting these wartime funds from
sequester would force us to make deeper reductions in other
areas, such as civilian personnel funding, possibly including a
partial hiring freeze or unpaid furloughs, which would reduce
our capability to perform other important missions. Military
families and retirees would also be affected through cuts to
base support services and to maintenance of our facilities.
Commissary hours could be reduced. Funds for the Defense Health
Program would be sequestered resulting in delays in payments to
service providers and potentially some denial of service to
retirees and dependents.
We are also concerned that cumulative impact to these cuts,
especially if continued beyond 2013 into the out years, would
contribute to the creation of an unready or hollow military
force. Sequestration would also lead to disruption of DoD's
investment programs. As outlined in OMB's report there would be
the 9.4 percent reduction in each of the accounts that fund our
investment in new technology and in facilities through
procurement, research and development, and military
construction.
We were asked today to address the consequences of
sequestration on the small business community specifically. In
response, we would say that DoD is committed to ensuring that
these essential business partners have their fair share of the
contracting dollars. When the pool of available resources is
diminished, as it would be under sequester, our ability to
partner with small business is going to be likewise diminished,
however.
This does not alter our commitment to small business or
change any of our small business contracting goals, but
sequestration would reduce our overall budget, forcing us to
reduce purchases from businesses both large and small. So 9.4
percent less money means we would in general buy 9.4 percent
less of everything. We cannot devise a plan that would
eliminate or even substantially mitigate these sequester
impacts. It was designed to be an inflexible policy that was
never intended to be implemented. It was a prod to Congress to
devise a balanced comprehensive package to reduce the deficit.
If implemented, sequester would be devastating to DoD and to
every other federal agency. The best outcome for the DoD and
for private companies large and small is for both houses of
Congress to enact fiscal changes the president will sign, which
will put a halt to the implementation of this inflexible law.
Mr. Chairman, this concludes our opening statement, and we
would welcome your questions.
Chairman Graves. Thank you, Undersecretary.
I am going to turn to Mr. West and let him open up for
questions.
Mr. West. Thank you, Mr. Chairman, and also Ranking Member.
And thanks to the panel for being here and this is an issue
that is very near and dear to my heart having spent 22 years in
the United States Military and also being on the HASC and also
being on this Small Business Committee.
First of all, let me say that I did vote for the Budget
Control Act of 2011. I did not believe that the Super Committee
nor this thing about sequester was a good idea, but you know,
people always talk about compromise and reaching across the
aisle. So that is what I did. And so now I am here to talk
about how do we resolve this?
You know, when I continue to hear about taxes increased, I
mean, we have to understand that if we increase taxes just on
those top two tax brackets, you are only talking about $85
billion of new revenue per year. And when you look at our net
interest on the debt that means that you will only fund that
for 10 days.
The federal government has a spending problem. We spend $4
billion a year--I mean, a day. Four billion dollars a day. So
when I look at this sequestration, while we are here talking
about it, I want to give you the numbers from the congressional
district that I represent in Florida's 22. Total small
businesses jobs lost due to sequestration. The estimation is
35,626. Total small business contract amount loss due to
sequestration, $60,983,639. Total contract amount loss,
somewhere about 80 million. This is a big deal for us. We have,
you know, places like Pratt Whitney.
The first question I would like to ask is when we look at
what is happening as far as the loss of these contractors? Are
we taking into account that there may be some type of legal
ramifications to these contracts being terminated that the DoD
will have to then pay for? I mean, you are going to have an
additional cost because of this. Correct?
Mr. McCord. We would, I think we would endeavor to minimize
that because it would not be our intention to, if it was
avoidable, to terminate contracts; rather, we would try and--if
we have within the scope of the contract the ability to buy say
10 percent less, we would probably do so. And we would have to
scrutinize new contracts. The contracts we are already in, if
the money is obligated and on the contract before January, it
would not be affected. So I cannot say it is not possible, and
I would ask Mr. Ginman to amplify it, but it would not be our
intent to go reopen contracts if it is avoidable.
Mr. Ginman. The vast majority of our contracts are fully
funded, fully obligated, dollars obligated on them at award.
There are a few, particularly in the R&D world, that are
incrementally funded but for product, fully funded. So this
sequesterization reduces our budget authority. And so from an
existing--and what that says is I have less money to spend
going forward. There is no need for me to terminate an existing
contract unless the product that was going to be delivered was
now not needed into the future. But if the product continues to
be needed, there is really no need for me to terminate it. What
I need to do is to adjust my spending on a go-forward basis.
Mr. West. So if on the 2nd of January this thing is not
staved off, anything that goes into calendar year next year, if
it is already, the contract has been awarded, there will be no
affects on that contract?
Mr. Ginman. If I may, I will do it in two parts.
For contracts that were awarded with FY 2012 current money
or prior, I really do not think there will be an impact. If I
have a contract that was awarded in FY 2013, since
sequesterization affects all of--what goes into the denominator
is all of the FY 2013 budget, if I put a service contract in
place with equal spend and I spend through the first three
months at that level, I would need to find a way through the
last nine months of the fiscal year to, in fact, spend less on
that contract.
Mr. West. Now, with that being the case then, you know, the
unpredictability for the workforce that is out there, you know,
one of the things that concerned me when you look at the Warren
Act, the Worker Adjustment and Retraining Notification Act, a
lot of these notifications will probably need to start going
out some time November, at the latest December, for a 2nd
January kick-in. Of course, the Department of Labor sent out a
recommendation that a lot of these businesses and the defense
industrial base do not have to adhere to the law. Do you think
that that will set them up for potential lawsuits down the road
if they did not adhere to the Warren Act?
Mr. McCord. The first thing I want to say is the
department, I think, has been--the secretary and the deputy
have met with industry leaders and I think they have been
clear. I am going to try and restate what they said, that we
cannot be in the position of providing legal device as the DoD
to corporations about their own relationships with their own
unions and workforce.
Mr. West. I understand, but the Department of Labor, which
I also, I mean, is there no coordination between the DoD and
the DoL for what they just sent out? I mean, I think that they
can be setting up, you know, a lot of people that service the
DoD for a really big pitfall if they are not careful.
Mr. McCord. Well, the Department of Labor does have the
responsibility and was speaking for the Executive Branch. And
so we are deferring to them on that guidance. And I understand
that not all corporations are satisfied with the Department of
Labor's position, but they are the person, they are the entity
in the lead for us on that.
Mr. West. If I could ask one more question, Mr. Chairman,
if I could.
Chairman Graves. Quick, yes.
Mr. West. Yes. The key thing that I want to ask, do you
think that if sequestration kicks in with our industrial base,
especially manufacturing, the aerospace, the shipbuilding, and
things of that nature, even weapons and permanent, will we be
able to restart these industries down the road or will we maybe
lose a technological and innovative advantage at some point?
Mr. Ginman. The manufacturing and industrial based policy
office within AT&L has been and continues to pay a great deal
of attention to the industrial base. They call it a sector-by-
sector and tier-by-tier analysis, looking expressly at very low
levels. What are the exact technologies and capabilities that
we need? When we find that one is threatened, then we take
action to attempt to protect it. We will continue, you know,
that office will continue to do the analysis to ensure from an
industrial-base perspective for the key technologies that we
need, that we are looking to find ways to, in fact, protect
them.
Mr. West. Thank you, Mr. Chairman. I yield back.
Chairman Graves. Ranking Member Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. McCord, as of September 6, Undersecretary Kendall was
stating that he expects the DoD accounts to take an 11 percent
cut. However, the report released by OMB last week projected at
most 10 percent decrease in funding. To what do you attribute
the difference in the projected cut?
Mr. McCord. Well, I guess I cannot be sure where Mr.
Kendall got his, you know, all of us prior to the report coming
out were using approximate numbers. It was common to say 10
percent, 11 percent. Two things. First of all, we in the
department tend to think almost exclusive in terms of
relationship to the budget that we submitted and calculate
differences from what our plan to do was in 2013 and the
sequester report that OMB did was not done that way. It was
compared to the CR.
Second, as Mr. Ginman was describing, with respect to 2013,
the amount of reduction across the entire 12 months is 9.4
percent, but if you kind of look at the last nine months you
would come with a figure close to what Mr. Kendall was using if
you look at how you have to get that money out of less than a
full year.
Ms. Velazquez. Thank you. Small businesses do not have the
resources that larger companies do, such as Lockheed Martin or
Boeing. And they will not have the money to have the lobbyists
to fight to keep their contracts. Given this inequality, how
can you assure us and small businesses that their contracts
will not be the first one on the chopping block?
Mr. Ginman. So I think the best answer I can give, what we
buy is what we need for our war fighters. If there is something
that we do not need, that will be what we stop spending on
first. It is not going to be I need to protect large business
or I need to protect small business. It will be I need to meet
the requirements of the war fighter.
So we will make our prioritization decisions based on what
war fighters need.
Ms. Velazquez. Well, one of the requirements are for DoD to
comply with the 23 percent contracting goal for small
businesses. And, you know, traditionally you have had issues
and problems not achieving those goals. I just want to make
sure that if sequestration takes place that there is a level
playing field that would allow for small businesses to have a
shot at the door.
Mr. McCord. If I could just comment, amplify one point
though. There is, if anything, perhaps too much of a level
playing field because we are not going to have a great deal of
discretion. We are going to endeavor to do exactly what Mr.
Ginman said, to do the things that our war fighters need the
most. And that was in my opening statement I referred to
protecting the funding for the troops in Afghanistan as a top
priority. But the law is going to limit our flexibility,
especially in the procurement account, so we may not be able to
go even as far as we want to to buy what we need. And so some
levelness of playing field is enforced upon us by the rigidity
of sequester, for good or for ill.
Ms. Velazquez. What will it mean in terms of readiness and
readiness if small businesses are no longer there to provide
the products and services that are necessary for our military
Because sequestration could very well threaten some of these
small businesses?
Mr. McCord. From a sequesterization perspective and our
policies with small business, virtually no policy in the
department that we have with the requirements to award to small
business will change. There is nothing in the sequesterization
law that would cause us to do that. We will continue to have
the same emphasis to award to small business. We will continue
to have the requirement to do the market research. If there are
two small businesses capable of doing the work, we will
continue to set aside the work for small business.
Ms. Velazquez. Okay. As you know, on this Committee we have
discussed so much throughout so many hearings. The impact of
contract bundling. And it continues to be a prevalent program
government-wise, preventing many small businesses from
competing in the federal marketplace. With a position workforce
likely impacted by discards, what measures will DoD take to
ensure that this impediment to small business participation
does not grow?
Mr. McCord. The first thing I would say is that the
acquisition workforce, again, kind of getting back to the
rigidity of sequester, we recognize the importance of it and we
would not want it to have it take a disproportionate hit but
there is probably no part of the workforce that can be totally
exempt, so it is going to have to be part of the balancing that
everyone participates in if sequester happens.
That said think it was respect to our workforce and our
civilian workforce in particular that we would probably be
strongly inclined toward looking at furloughs as opposed to
RIFs. So the people were not going to try. If it is possible, I
think it is not in our interest. It is not helpful to us to
divest workers, but we may need to go with furloughs. So I
think that we are not going to lose the expertise, although we
are probably going to lose some work gears out of this.
Ms. Velazquez. Let me just ask you, as we continue to work
towards a solution, there are a lot of people that say that
there should not be any cuts to defense spending. With our
country facing historic deficits, should not all agencies,
including DoD, makes sacrifices and not let all the cuts, the
burden, fall on social programming?
Mr. McCord. I think that is the principle embodied both in
the Budget Control Act and really, the backup sequestration,
you know, took that approach.
Ms. Velazquez. Thank you.
Chairman Graves. Ms. Ellmers.
Ms. Ellmers. Thank you, Mr. Chairman. And thank you to our
panel, Undersecretary McCord and Director Ginman.
I represent the 2nd District of North Carolina. In North
Carolina, 30,000 jobs are at risk through sequestration. In
Fayetteville, I represent Fayetteville and the Fort Bragg area,
which accounts for 50 percent of the local economy there.
Sequestration may cause the government to make unilateral
changes to tens of thousands, if not hundreds of thousands of
government contracts and task orders. And I know you are aware
of this.
I do want to share a personal business situation in Cary,
North Carolina. I recently spoke to Doug Bennett, president of
Bennett Aerospace located in Cary, North Carolina. Bennett
Aerospace, as mall defense contractor, said their business
would come to a grinding halt should sequestration go into
effect. And obviously, as you have pointed out, research and
development will greatly be affected. Mr. Bennett has already
lost three major projects as a result of what he is facing.
Now, I have a couple questions. One, are you aware that in
the House of Representatives, we have passed a couple of cases
of legislation that will avoid the devastating military cuts by
making other budget cuts to keep to the number. Are either one
of you aware of that?
Mr. McCord. Yes, we are.
Ms. Ellmers. Okay. Because I know you had mentioned in your
opening statement that, you know, certainly we can all work
together, with the president as well, in order to avoid this.
And I would say that on behalf of the House of Representatives,
I think we have definitely. I think we have definitely made an
effort at that.
My other question to you is, and again, I am going back to,
I believe it was when you were answering Mr. West's questions.
The FY 2012, that any contracts that are FY 2012 that are not
FY 2012 would have no impact. Is that correct? Did I understand
correctly?
Mr. Ginman. For existing contracts.
Mr. McCord. And prior.
Mr. Ginman. It is FY 2012 and prior. But if the existing
contract was funded with FY 2012 and prior funds, it is fully
obligated. There really should be no reasons, sequesterization
does not go after funds that were already obligated; it goes
after unobligated funds.
Ms. Ellmers. Okay. So for Mr.----
Mr. Ginman. It will reduce budget authority in 2012 and
prior to the extent that they are unobligated dollars. But it
will not cause us to go back to an existing contract already
placed, already with funds obligated on it and make a change to
that contract.
Ms. Ellmers. So how would we explain to Mr. Bennett then
that he has had three major contracts canceled?
Mr. Ginman. I do not know the reason why the contracts were
canceled. I am comfortable that it was not because of
sequestration.
Ms. Ellmers. Okay.
Mr. Ginman. But I would be happy to either meet with Mr.
Bennett or to entertain a question from him, you know, to help
him understand where that is, but it sounds like it was in a
competition that he did not win.
Ms. Ellmers. Okay. I think he would be most appreciative of
that.
And I guess from that perspective with the time remaining,
what is the advice you are giving to these businesses? What
guidance are you giving. I know I heard you mention adjusting
spending as a possibility. What other suggestions would you
have for any businesses that are faced with this?
Mr. McCord. I think one of the things that Mr. Ginman and I
have discussed is that probably the more unique a skill that a
company has as a subcontractor or a supplier, probably the
better shape they are going to be in. Of course, if they have
or can diversify a little bit away from federal business,
obviously that would probably help them in the coming months as
well.
I do not know if, Dick, if you want to talk about what we
have seen historically.
Mr. Ginman. You know, as we spend less, there are going to
be less opportunities. I mean, we have put the budget out for
2013 and we have allocated where our priorities are and what
they are and that is what companies use to plan and look. If
sequestration hits, it is a 9.4 percent hit at every line item
level we have that is visible and capable of being seen.
Ms. Ellmers. Okay. All right. Well, thank you, gentlemen. I
appreciate your input. Thank you very much. And I yield back
the remainder of my time.
Chairman Graves. Ms. Hahn.
Ms. Hahn. Thank you, Chairman Graves, Ranking Member
Velazquez. Thank you, Mr. Undersecretary McCord and Mr. Ginman
for taking the time today.
I am really glad we are holding this hearing on this
specific issue because I know that we, specifically on this
Committee and I am sure the rest of our colleagues in Congress,
understand the importance of small businesses as it relates to
the recovery of this economy and the job creation that we know
comes directly from our small businesses. So the threat of
sequestration at this time, when they are beginning to recover,
it could be devastating.
I have only been here in Congress a little over a year, and
I came to Congress last July just to see one of the most bitter
partisan fights I think this country has ever seen. I voted
against the Budget Control Act because I thought it was a bad
idea then and it has proven to be a very bad idea. I did not
think it was my job or any of us who came to Congress to set
automatic across-the-board budget cuts. And I voted against it
because I did not think it was also my job to turn over my
authority to a Super Committee to make the decisions for this
country. And I think it is bearing out today that these
automatic cuts will damage our economy, specifically to our
small businesses.
One of the things I think we stand to lose because of
sequestration is the innovation, specifically by our small
businesses, who stand to suffer the most damage from the loss
of federal governments. Can either one of you maybe give the
Committee a specific example of the type of technology or
innovation you fear that we could lose if sequestration goes
through?
Mr. Ginman. I do not have one off the top of my head.
Mr. McCord. Yeah, I guess we do not have a good example in
that the cuts going forward are kind of going to be spread
everywhere. And our SNT area is not going to be exempt, so
there will be impacts there, but I guess I am not familiar
enough to know what specific projects might be the ones that
fall by the wayside as we deal with 9 percent less, the thing
that we would have done with our 13th SNT funding that will now
have 91 percent. I agree with your premise; there will be an
impact down the road. It is hard for me to assess in advance
what projects will not be selected perhaps because we cannot
afford to fund them all.
Ms. Hahn. Let me get a little more specific. I know in my
district in California, we have benefitted from new, innovative
technology that has saved government agencies time and money
and even saved lives. And some of these businesses were able to
do this through the SBIR grant program. And we know that
seemingly unrelated research can often lead to inventions that
prove useful for defense and other purposes. And given that
nondefense, discretionary spending includes virtually all
research and development at agencies like the National Science
Foundation, the National Institutes of Health, and NASA. Are
you worried that sequestration to these non-defense programs
could negatively impact our national security and
competitiveness. Is it probable that research for NASA or NIH
could benefit our national defense. And maybe you could give us
a sense, this Committee, on the role that non-defense research
plays in our national defense.
Mr. McCord. Well, we certainly understand and I think the
administration touched on this, that the effects are bad on our
agency as well as other agencies. Secretary Panetta, as the
former Budget Committee chairman, used to looking across, you
know, the spectrum when he was here as a member, certainly
understands that as much as we talk about and think about the
impact on ourselves, of course, primarily as a DoD, that is
what we are doing and what we are talking about. He does
recognize the impacts are damaging and that across-the-board
cuts do not make any more sense for domestic agencies like NIH,
than they do for us. So yes, we certainly understand that
concern and share it.
Ms. Hahn. Thanks. Because I did not want us to get in a
thought process in Congress that it is defense and then it is
nondefense cuts because I think there is a huge relationship
between some of our traditional nondefense research that
actually has played into technology and innovation that has
clearly benefitted our national security.
Thank you. I yield back my time.
Chairman Graves. Ms. Clarke.
Ms. Clarke. Thank you very much, Mr. Chairman. And I thank
the ranking member. I thank Undersecretary McCord and Mr.
Ginman, Director Ginman, for this very sobering conversation. I
just sit here and I remember the debate distinctly about
sequestration. And I just wonder why we are so surprised. Or
you know, there is this major concern. The concern would have
been we could have compromised with one another. We could have
worked with anybody to make sure that we would be sitting here
during a hearing trying to avert what can be catastrophic. But
we are here nonetheless and so I have a few questions to ask.
Mr. McCord, you indicated that you foresee a possibility
where the sequestration could be averted at a late point, yet
you will have triggered some of its effects. Understanding that
would cause a disruption across the board, can you extrapolate
at this point or quantify the level of disruption that would be
caused and how long it might take to rectify?
Mr. McCord. Well, the type of disruption we are talking
about are both things that can be quantified, and I think
things that cannot be easily quantified, such as moral impact.
If you start telling people we are about to furlough you or we
are about to lay you off, and one of the things I know the
deputy secretary feels strongly about is that we not do that
until we are absolutely certain it is necessary because it
conveys a message to your workforce and to the contracting
workforce, as well, that you do not want to send unless it
becomes you are kind of at that irrevocable point.
In terms of other impacts, again, that we do not want to
trigger, certainly as Mr. Ginman said, we do not want to go
into contracts. There is no reason for us to go into existing
contracts. That is not going to be productive.
I think the other thing that we recognize that we cannot
really fix is that uncertainty creates its own bad dynamic. I
think Chairman Bernanke talked about that recently in front of
one of the other committees, and that we understand that that
is out there today and there is not a great deal we can do. So
what we are trying to do, and I think what the administration,
the OMB director's memo at the end of July, told people to keep
continuing normal operations while we see if there is a way
out. And so that is what we are still doing but the uncertainty
still remains in people's minds, understandably.
Ms. Clarke. Yes. It has a very dampening effect.
I would like to get a better idea of the baseline we are
using there. As it stands, the surge is ending in Afghanistan
and the troops will be coming home soon. And I understand the
concept of readiness means the ability to respond to any
threat, anywhere across the globe. However, with the evolving
nature of warfare moving toward reliance to a certain degree on
drones and other military technologies, are we making
projections at the same or similar cost of readiness that has,
I guess, been the contemporary meaning of readiness? And in the
future, as it stands right now with the troops in the field or
is there something that you are adding to this equation now
going forward that you may put into your thinking should
sequestration be a part of that equation?
Mr. McCord. I hope I am going to be able to answer the
question. I think there were sort of two parts of it.
Sequestration, the readiness impact of either the drawdown
or of changing the technology is probably not going to help us
in any way that is material, especially as we look at, say,
comparing 2012 to 2013. The situation is just not changing
enough in a way that would produce any dramatic savings. The
reduction in wartime spending that comes with the drawdown was
already planned and is not really going to help us. Wartime
spending is subject to sequester but having less of it does not
lessen the impact. It is kind of an unusual player in the
sequester equation. So I do not really see any windfall from
that respect or any major changes in operational concepts or
readiness concepts that is going to materially affect the
discussion that we have been having or that you probably have
had with your constituents.
With respect to going forward, I think Mr. Hale, my boss,
and the vice chiefs of the services testified this morning, and
I know Mr. West was there, that there are going to be readiness
impacts of reducing funding for training, things like that. So
that, if sequester happens, is going to be a readiness impact
of sequester impacting readiness, but the vector going the
other way of readiness changes affecting sequester I do not
think is really going to be much of a factor. I hope that is
responsive to your question.
Ms. Clarke. That is helpful, sir. And I thank you for your
testimony here today. Mr. Chairman, I yield back.
Chairman Graves. Ms. Chu.
Ms. Chu. Mr. McCord, thank you for being here today to
testify about this important matter.
As you know, the defense budget for FY 2011 was 700
billion, which is over half of discretionary spending in the
federal budget. With defense spending making up such a
significant portion of our budget as we work together to
implement a balanced deficit reduction plan, we will inevitably
have to make some cuts to defense spending.
I agree with you that sequestration is not a good policy,
and in fact, I voted against the Budget Control Act, which
engineered it. Sequestration would have such a devastating
effect on every federal agency and thousands of small
businesses who would be directly affected by the reduced number
of federal contracts and subcontracts and indirectly affected
by the decrease in economic activity.
But my question to you is as we negotiate a better deficit
reduction plan, how do we make strategic cuts to the Defense
Department that will not threaten our national security while
helping us to bring down the mounting deficit?
Mr. McCord. Well, we feel, the secretary feels strongly,
that we did that in presenting the budget that is before the
Congress now that I guess will not be probably dealt with fully
until at least after the election.
If we were to do another round as a way to, say, deal with
sequester, we understand that defense would be on the table. It
is hard for us to assess at this point exactly--to say give a
number of what we could live with as a change, if any, but we
would want to be part of the conversation if there was another
look at a new budget deal. But we feel that what we have done
so far was strategically based and although people have
disagreed with particular aspects of it, such as the air guard,
that the broad outlines we think have been pretty compelling to
people, and the secretary is concerned that we will have to
walk away from that in some material way if the sequestration
happens with no further adjustment.
Ms. Chu. Okay. I want to also talk about the contracts that
are given to small businesses. You said that the DoD would
still fund contracts from the prior year and these would not be
subject to cuts. How would the DoD handle the contracts that
small businesses won but those contracts that have not yet been
funded? And what if the contracts that were given last year
were multi-year contracts that extended beyond 2013? Would they
also be subject to sequestration? And also, under
sequestration, would small businesses lose the number of
contracts or just get a smaller dollar amount per contract? And
how would you ensure that the Defense Department's goal to give
small businesses 22 percent of contracts and 32 percent of
subcontracts, how would you ensure that that goal is met?
Mr. Ginman. The existing contracts that are there, there is
no need to do that. Multi-year contract and the careful
definition of a multi-year, the department only has eight of
those. All of them are large businesses. Multi-year--if what
you meant by multi-year was a contract that had options in it
that I would exercise into the future, while the effect of
sequestration within whatever budget line item I am in, if in
fact I need the requirement and I do not have enough money to
spend it, I would have to renegotiate the option to bring it
down to the dollar level I could afford.
Many of the contracts that we write, understanding that the
money that we ask for is not always necessarily what we get, we
tend to write options--contracts with options in them with the
flexibility to order varying levels. So my hope would be in
most of those levels of those types of contracts, we would,
without having to renegotiate, simply be able to exercise the
option at a lower dollar value.
Ms. Chu. What about this 22 percent of contracts?
Mr. Ginman. So as I said earlier, no direction with regard
to awarding business to small business will change as an effect
of sequestration. We simply wind up with 9.4 percent less
money. We will continue to work to do that. Undersecretary
Kendall, the deputy secretary, and the secretary have all
issued letters recently looking to improve. The deputy
secretary has made it mandatory that for all senior executives
within the department that have any responsibility for spending
money have as an element in their personnel evaluations how did
they do in getting work to small business. Secretary Kendall
recently issued one in three very specific areas saying we know
small business can operate in these areas. We want you to
increase the percentage by 10 percentage points. I have
recently issued one looking at those orders that are small
dollar values, the below $150,000, remind people that it is our
policy to set those aside and ask him to do that.
And we have reinforced the Office of Small Business Policy
within the department. Created a very sophisticated tool to be
able to facilitate market research to help contracting officers
find better opportunities for small business so that we can
meet the goal.
Ms. Chu. Thank you. I yield back.
Chairman Graves. I do want to echo the words of the
undersecretary in that and you pointed out that the goal for
the Super Committee was not sequestration; it was a prod. The
goal of the Budget Control Act was for the Super Committee to
find savings to help pay down the debt. Unfortunately, they
failed and now we have to deal with this.
But with that, what we are going to do is we have two votes
and we are going to recess for approximately 30 minutes. When
we come back we will set the second panel out there. And I want
to thank the Undersecretary, Mr. Ginman, both of you for being
here today. We appreciate it very much. And with that we will
recess again for approximately 30 minutes and then we will be
back.
[Recess.]
Mr. West. We will continue on with the hearing for today
and now we will have our introductions for panel number two.
I would like to introduce Stephen Fuller. Our next witness
is Professor Stephen Fuller, the Dwight Schar faculty chair and
university professor, as well as director at the Center for
Regional Analysis, School of Public Policy at George Mason
University in Arlington, Virginia. Professor Fuller is an
expert in the field of urban and regional economic development.
He has authored over 500 articles, papers, and reports in this
field, including his newest report released this morning, which
looks at the economic impact of the Budget Control Act of 2011
on small business. Thank you for testifying today, Mr. Fuller.
You may begin.
STATEMENTS OF STEPHEN S. FULLER, PH.D., DWIGHT SCHAR FACULTY
CHAIR AND UNIVERSITY PROFESSOR, DIRECTOR, CENTER FOR REGIONAL
ANALYSIS, SCHOOL OF PUBLIC POLICY, GEORGE MASON UNIVERSITY; M.
L. MACKEY, CEO, BEACON INTERACTIVE SYSTEMS, ON BEHALF OF THE
NATIONAL SMALL BUSINESS ASSOCIATION; LAURIE MONCRIEFF,
PRESIDENT, ADAPTIVE MANUFACTURING SOLUTIONS; MARK GROSS,
FOUNDER AND CEO, OAK GROVE TECHNOLOGIES.
STATEMENT OF STEPHEN S. FULLER
Mr. Fuller. Thank you, Mr. West and Committee Members. I
want to go back to July of this year when I released another
report called ``The Economic Impact of the Budget Control Act
of 2011.'' The analyses in that report set the stage for my
comments today and it identified the loss of 2.1 million jobs
nationwide by the year 2013 or during 2013 from the Budget
Control Act or if sequestration is implemented. My subsequent
analyses have established the fact that these impacts will
disproportionately affect small businesses and their workers,
workers in small businesses which suffer more than 50 percent
of the projected job losses due to spending reductions mandated
under the Budget Control Act. These job losses would show up in
small businesses that are prime contractors. Also,
subcontractors, suppliers, and vendors, and also thirdly, the
businesses that support the retail and consumer service needs
of laid-off workers and the loss of their labor income. This
latter class of small businesses span the economy, although we
find it more concentrated in retail and consumer service
sectors. The direct impacts, the federal contractors who are
small businesses that would be impacted by sequestration, would
involve the loss of about 158,000 jobs. It just represents
about 34 percent of the prime contractors. Overall, the loss of
jobs that is attributable to small businesses is about 51
percent.
The difference is important. What it says is that the
concentration of small business impacts are among
subcontractors, and suppliers, and vendors, and those
businesses that provide services supported by the payroll
spending of laid-off workers. In fact, they represent 58
percent. Small businesses in these other categories represent
58 percent of the job losses that would result from
sequestration. It is 58 percent of 1.4 million jobs. It is a
very significant impact.
And what is more important about this, these companies have
less control over their destiny. They are the subs. They are
the suppliers. They are the vendors. And in many cases, they do
not even know that they are working on a federal contract. And
so as large companies adjust to changes in federal spending,
clearly they are going to be impacted, too, as they adjust. One
of the typical adjustments is they bring work back from the
small--their subcontractors into the main company. They have
much deeper pockets and can adjust financially and take time to
restructure and reposition their businesses. Small businesses
do not have that capability.
I am going to skip forward because time is short.
The small businesses are less able to sustain themselves
when they experience a contract loss, whether they be a prime
or a sub. Due to the more limited economies of scale that
characterize the operations of most small businesses, the loss
of even a small portion of their projected backlog or a
cancellation of a contract could result in these firms becoming
unsustainable. Small businesses typically do not have the
financial resources to sustain unprofitable operations for a
sufficiently long term to permit restructuring alternative
market or product development.
It should be noted that all of these calculations of job
impacts associated with sequestration only measure the job
equivalent of the direct spending reductions and their
subsequent impacts. What they do not include are any
consideration of induced failures of small businesses from
partial losses of federal contracts or subcontracts. The
literature shows that small businesses are much more vulnerable
than big businesses to changes in the business climate. And one
of the principal reasons for this is that they have a much
smaller margin of operation. Their profit margins are smaller.
They cannot adjust as quickly to changes in the business
environment, and so with a small reduction in spending, may
actually force them out of business. So these of the collateral
effects have not really been considered.
The workers for small businesses face some of these same
problems. Employees in small businesses may be more specialized
or less networked than employees in larger businesses, making
their reemployment more challenging than for employees working
in large businesses that may be experiencing cutbacks or
cancellations in federal contracts. Workers in larger
businesses have the opportunity to reassignment to another
division. You do not find that in small businesses. Or perhaps
a transfer to another location. Small businesses have very
little options.
To me the key takeaway from all of this analysis is that
besides bearing a disproportionate impact or potential impact
of federal spending reductions, small businesses are more
vulnerable to actions they cannot control. The larger
businesses can move the contracts around and the small
businesses are sitting there waiting for something to happen.
The fact that 58 percent of all of the job losses are in the
secondary kinds of functions I think highlights the
vulnerability of small businesses. Most importantly, beyond the
loss of jobs it is the survivability of these small companies
from partial reductions in federal spending or federal
contracting that they might be doing. Thank you very much.
Mr. West. Thank you.
Our next witness is Ms. M. L. Mackey, CEO of Beacon
Interactive Systems in Cambridge, Massachusetts. Her company
was started 18 years ago, and for the last decade has been
active as a federal small business contractor. Through
government contracts, her innovative firm has developed
effective and cost-saving software products used within the
DoD. Ms. Mackey is testifying today on behalf of the National
Small Business Association. Thank you for being with us, Ms.
Mackey, and you may begin.
STATEMENT OF M. L. MACKEY
Ms. Mackey. Good afternoon, Congressman West and Ranking
Member Velazquez, and the members of the Committee. Thank you
for the opportunity to testify here today and for your tireless
efforts to promote economic development and job creation in
America's small business community. Your continued leadership
on critical issues, such as the one before us today and your
collective ability to understand and shed light on the
challenges facing small business in the federal marketplace is
invaluable and greatly appreciated.
My name is M.L. Mackey, and I am the CEO of Beacon
Interactive Systems, a small business located in Cambridge,
Massachusetts. I am also on the board of trustees of the
National Small Business Association.
Eighteen years ago, my husband and I co-founded our company
out of our rent controlled apartment on Beacon Street. We built
the company as a provider of commercial systems, initially
providing software products to companies like Olympus, MetLife,
and IBM. For the past nine years, we have worked as a federal
contractor delivering efficiency, improving, and cost-savings
applications to the DoD. The Navy is currently using products
we developed through the highly successful Small Business
Innovation Research (SBIR) program to improve performance of
the equipment maintainers deployed across U.S. Fleet Forces
Command, the sailors who keep our ships mission-ready. At full
deployment of our software, initial estimates on cost savings
and cost avoidance are in excess of $40 million; all on an
initial SBIR investment of $5.5 million. This is the kind of
cost savings and efficiency improvements that small business
provide for the DoD, exactly the approach needed in these
austere times.
I, along with many of my counterparts across the country,
am very concerned with the proposed arbitrary approach to
sequestration. Simply cutting the top-line of nonexempt agency
budgets is not based on a rational assessment of the relatively
effectiveness or usefulness of various programs. It has the
potential to devastate key programs and specifically to have a
disproportionate impact on small business. While major program
cuts will be necessary inside federal agencies, these cuts
should be made with a purposeful and thoughtful approach. In
order to not only insure an equal impact across the defense
industrial base, but also to ensure a rational approach that
does not gut the advances made in government procurement to
this point.
Today, I am speaking to you as someone who has already felt
the effects of this uncertainty. We, like many other businesses
in this sector, have had to tighten our belts in anticipation
of the rough times ahead. In spite of successful pursuit of new
opportunities, we have purposefully trimmed our workforce. This
is counter to how we have strategically built our business over
the last 18 years. Previously, once we closed a big
opportunity, the first thing we did was evaluate our team and
act on ways to improve our capabilities, like defining new
roles and hiring new employees. This approach has not only kept
us viable, but has helped us expand our business and create
jobs. Unfortunately, give the uncertainty surrounding
sequestration, this is not the approach we are taking now.
I am by no means the first business owner, nor will I be
the last, to tell a congressional panel that sequestration will
have major, negative impacts in areas ranging from business
survival to national security. Nor will I be the last to argue
that something must be done to stabilize our economy. Surely
Congress can craft a more deliberate and careful approach than
the current strategy, which will lead to considerable job loss
and greater economic uncertainty at a time when job creation
and economic growth remain a top priority for our country.
The federal contracting and acquisition systems are
overtaxed and have struggled with efficiency and transparency
issues for years. This problem will only get worse with
sequestration in place. The contracting staff of Federal
agencies will likely face major personnel reductions under
sequestration. As a result, we are likely to see an increase in
contract bundling and less efficient, less predictable
contracting system. This will have a major impact on small
business contractors who are likely to be the first to go on
many projects. According to NSBA's most recent Politics of
Small Business Survey, 99 percent of small business owners are
registered to vote, 97 percent said that they regularly vote in
national elections, and the 25 percent of small business owners
who have contacted their elected officials on a small business
issue have done so on the matter of contracting.
Small businesses create efficiencies. We are agile and
flexible, which saves the government money. We believe that
program managers and contracting officers should be
incentivized to create efficiencies and cost savings through
increased work with small business, not the other way around.
Small businesses around the country are waiting on funds from
previously awarded contracts, large businesses are
contemplating mass layoffs, and the end users, our men and
women in uniform and the people who are served by our Federal
Government, are waiting for products and services they expected
months ago.
Washington needs to set their differences aside and not use
the excuse of an election year or partisan gridlock to
shortchange America's small businesses and the broader public.
We cannot afford to wait and fix our economy or shore up our
industrial base after it has been decimated. If sequestration
happens, DoD contracts being competed now or in the near term
may be canceled with little recourse for contractors. Business
owners do not know which opportunities are real and which are
illusory, causing a massive waste of our limited resources.
Businesses are frozen, in need of personnel, but unable or
willing to hire because of this uncertainty.
Congress, to its credit, has increasingly recognized the
benefits of small business engagement. The small business
contracting reforms incorporated into Title XVI of the 2013
National Defense Authorization Act (NDAA) are a positive step
forward and incent behavior that incorporates the efficiency
and cost-savings approach that our small business are known to
provide. These are the kind of proposals that will push the
federal government toward greater efficiency.
I know that pointing out problems is far easier than
finding solutions. The path ahead will definitely be
challenging. Having said that, as a small business owner, I can
state unequivocally that we are a critical component of the
solution to our government's fiscal concerns.
I applaud this Committee for your vigilance in promoting
small business-friendly policies and your work to reinforce the
idea in your colleagues that small business is a value-added
proposition for the government and an enabler of innovation and
growth.
I appreciate the opportunity to be here today. It is an
honor and a privilege, and I welcome your questions.
Mr. West. Thank you, Ms. Mackey.
Our next witness is Laurie Moncrieff, president of Adaptive
Manufacturing Solutions in Burton, Michigan. Adaptive
Manufacturing Solutions formed by Ms. Moncrieff in 2007, is a
group of small tooling and manufacturing companies that work
together to bid on contracts. She is also president of Schmald
Tool and Die, one of the companies within Adaptive
Manufacturing Solutions, a small tooling and die company which
has been in her family for over 60 years. She is testifying
today on behalf of the National Defense Industrial Association.
Thank you for testifying today, Ms. Moncrieff, and you may
begin.
STATEMENT OF LAURIE MONCRIEFF
Ms. Moncrieff. On behalf of the 1,756 corporate and over
96,000 individual members of the National Defense Industrial
Association (NDIA), I would like to thank Chairman Sam Graves,
Ranking Member Nydia Velazquez, and all the members of the
Committee for holding this important hearing.
We are all painfully aware that in the past 10 years the
U.S. has experienced an economic downturn second only to the
Great Depression. The most severe impact has been experienced
by small businesses.
Even in a good economy, small businesses have to navigate
barriers and challenges. But through this downturn, we have
seen it at an unprecedented magnitude. The resulting erosion
has decimated many critical sectors that are still widely
needed and in demand to produce product worldwide and also
recognized as integral to part of our national innovation
system. The vast majority of the companies classified in these
critical industries are small businesses with less than 50
employees.
As a representative of small business and manufacturing, I
ask each of you to consider how can we ever revitalize these
industries that have sustained considerable economic injury,
encourage innovation and invention, increase production and
demand, and support and approve national security if small
businesses are hit with yet another blow from astounding budget
cuts the DoD faces with sequestration?
The challenges of the last 10 years have made it difficult
to find and identify individual businesses in these segments.
It can be easily demonstrated that these companies hold
irreplaceable intellectual knowledge, which may not reside in
the prime contractor community. Yet with the structure of the
supply chain today, small business innovation and value-added
work is often unrecognized, unrewarded, and under-represented
in government contracting.
Some examples of companies and communities that could in
the future or have already been impacted include TACOM LCMC
awards of the FHTV, M-ATV, FMTV, Stryker, and HMMWV include
$539.6 million directly to small businesses and an additional
$563.5 million in subcontract awards through March in FY 2012.
The totals of over $1.1 billion in the first half of the year,
demonstrating the importance of small business in this supply
chain.
A manufacturer of High Tech ``Hot Press'' furnaces used in
the manufacture of ceramic body armor plates will simply shut
their doors if this demand for sustainment of furnaces is
decreased or eliminated. There is no other application for
these furnaces outside of the military. It would take us
between 18 and 24 months to get this business operational yet
again.
A small manufacturer who makes ``high strength'' carbon
used to produce armor felt the impact of demand decrease back
in 2010 when the DoD allowed this key component to be diverted
to support other worldwide demand. When DoD later wanted to
reinstitute the manufacture of body armor, it suffered a 12-
month lag in delivery times for body armor in theater. We
cannot afford to repeat this scenario.
The manufacturer of carbon tooling, special foils, and
other unique production products are all supported and
maintained by small businesses, many of whom only have two to
three people per company in their operations. If lost, it could
take up to 24 months to replace such lost capabilities.
Miller-Holzwarth, a 2007 recipient of the SBA Subcontractor
of the Year recently announced the closing of their doors. The
business located in Ohio manufactured periscopes, vision
blocks, ballistic window armor, and had been in the defense
industry for over 35 years. Among the issues that impacted
their decision to close was the potential of budget cuts with
sequestration. There are many other businesses like that that
we could see similar instances arising.
It is documented that small businesses are critical to the
economy. Thirteen times more patents per employee, 99.7 percent
of all employer firms are small businesses.
There are several ways we could strengthen small business
and increase the value to the government, presenting a win-win
situation.
We can encourage more sourcing to small business. The
executive office of the president in management and budget
published a memorandum dated February 11, provided examples of
savings in excess of $383 million due to targeted set-asides to
small business.
Develop a program to reverse engineer ``low hanging fruit''
already in the DoD inventory.
Review processes of DCMA, as many have minimal value and
are costly to small business as well as government.
Many great products and processes originate in small
businesses. However, they struggle to connect and bring their
product to market. We must work towards the support of more
robust avenues for these products to reach the federal and
commercial market.
Streamline and reduce the amount of paperwork and effort
required to find and bid on contracts.
We need to celebrate and support the strength that small
businesses bring to the market and better leverage these
valuable resources. There are many ideas of how to reduce cost,
but with every decision there are many unintended consequences.
We must consider how decisions could support, uphold, and
encourage small business, innovation, and growth, and
revitalize critical industrial sectors. These actions will move
us forward to create jobs, improve the economy, and our
national security. It is time to step up and support the
industrial sector and the small businesses which are the
backbone of our country. Thank you.
Mr. West. Thank you, Ms. Moncrieff.
I now yield to Ranking Member Velazquez to introduce our
final witness.
Ms. Velazquez. Thank you, Mr. Chairman.
It is my pleasure to introduce Mr. Mark Gross. Mr. Gross is
the founder and CEO of the Oak Grove Technologies, a service-
disabled, veteran-owned small business located in North
Carolina. Prior to starting his business, he worked for DoJ's
antitrust division and in management-level positions of several
Fortune 500 companies. Additionally, Mr. Gross served on the
SBA Veterans Advisory Committee and was a founding member of
the American Legion's Small Business Task Force. Welcome to the
Committee.
STATEMENT OF MARK GROSS
Mr. Gross. Good afternoon, Ranking Member Velazquez,
Congressman West, and members of this Committee. Thank you for
the invitation to come before you and share my concerns
relating to the topic of sequestration and the impact it is
having on small businesses today and the potential impact it
will have on small businesses in early 2013.
I am a veteran of the United States Army, founder of Oak
Grove Technologies, a service-disabled veteran-owned small
business focused on training, strategic communications
information technologies, and intelligence and analytical
services. We employ over 390 employees, over 70 percent of
those are veterans, and over 20 percent of those are service-
disabled veterans. Geographically, we are dispersed in 21
states, Africa, Afghanistan, and Iraq.
The threat of sequestration creates uncertainty, which
paralyzes small businesses. Most small businesses do not have
the robust or diversified contract portfolio supporting their
operations. Small businesses often wait until they have a
contract before they acquire the resources necessary to perform
the contract. Without reasonable assurances of future business,
small businesses cannot plan for the future and are not likely
to invest in the company's growth by acquiring additional
equipment, facilities, or personnel. However, small businesses
that fail to invest or grow will find themselves less
competitive for the opportunities that do remain.
Many of the business owners that I speak with in North
Carolina, excuse me, are taking a similar approach as we are
considering the uncertainty of sequestration. We are putting
expansion, infrastructure, expenditures, and indirect hiring on
hold. We are forced to prepare for the worse case in order to
regroup and/or recover. Oak Grove Technologies has in the past
year purchased over 200 acres of land in Richmond County,
Hoffman, North Carolina, which is the most economically
disadvantaged company [sic] in the state. It is adjacent to
Camp Mackall Army Air Field, where we support training for
special forces, military information support operations, and
civil affairs soldiers. We are putting much of our planned
construction on hold, minimizing our marketing campaigns and
trade show participation, and in general, tightening our belts
because of the uncertainty surrounding sequestration.
Sequestration in the short term will have the most impact
on the agency's budget for operations and service contracts
that are a large part of that budget. Most small business
federal contractors provide the government with services rather
than products because there are fewer barriers to entry in the
service market than the market for manufactured items and
supplies. For supplies, companies need personnel, equipment,
facilities, distribution channels, et cetera. For services,
companies just need people. It is easier for an agency to
eliminate two data processors from a contract than to eliminate
a section of a fighter jet. By cutting services in a greater
proportion than products, sequestration will affect many more
small business contractors than large contractors.
A small business with 10 federal contracts will feel the
effects of a loss of one of those 10 contracts more than a
company with 100 contracts that loses 10 of those contracts.
Although both scenarios reflect a 10 percent cut in each
company's contracts, larger companies have a greater ability to
reallocate personnel and idle resources to other contracts
because of the large number of contracts remaining. Large
contractors, moreover, are more likely to have commercial and/
or international contracts that can offset the effects of the
stymied federal market. Small businesses rarely have the
ability to diversify in this manner.
We completely understand the necessity of budget cuts,
especially while we have two military conflicts ending.
However, an across-the-board cut will hurt everyone. Although
the same economic engine that powers America, small business
will be the one that suffers most.
I appreciate the opportunity to address this Committee
today. Thank you for all you do for us, and I welcome any
questions.
Mr. West. Thank you. And thank you for your service in the
Army. Army Strong.
I would like to start with a simple question. DoD just told
us earlier, and if you were here you saw the first panel, that
they would not be terminating contracts but yet we just found
out that the Air Force has reported it may cancel the tanker
contract with Boeing and Northrop is laying off about 600. One
of my big concerns, of course, is the trickle-down effect, not
just to the small business but also to the suppliers and the
subcontractors that you all use. What do you see as being those
effects in your line as far as to those suppliers and the
subcontractors that some of you alluded to earlier from the
effects of sequestration?
Mr. Gross. Congressman, I think many of us small
businesses, the predominance of our contracts are subcontracts
from larger contractors, Oak Grove included. When the large
contractors feel the squeeze, there is a trickle-down effect to
the subcontractors, whether it is in rates, whether it is in
reduction in your staff, or they will take some of the
positions in-house. It is certainly something we are concerned
with currently on a number of the operations that we are
involved in in contracts, so I definitely think it is going to
happen for certain and it is definitely a concern.
Ms. Mackey. So I would answer that question in terms of how
it specifically affects small business. So when you ask about
sort of the down-line of your supply chain, I would also
perhaps, if I could expand that question to your up-line, who
you have relationships to that you are the subcontract to? Who
do you team with as other small businesses? So as small
business, sometimes people say to me, oh, you are the CEO of a
business. I go, you know, it is a small business. Maybe it is
not quite as glamorous as you think. I spend a lot of time
doing a lot of things. I do not have a lot of time to build
relationships. So the relationships, the extended team that I
have, took a long time to get in place. And I think some of the
trickle-down that Dr. Fuller was talking about is that it will
be very difficult for me to recoup all that time and investment
in relationships. I hope that is helpful.
Mr. West. Dr. Fuller, is there a concern in your analysis
that you see as we start to push out and decimate the small
business contributions to the defense industrial base that
maybe there will be more of a monopoly by some of the larger
businesses and companies and therefore you could end up seeing
higher costs because you reduced the amount of competition?
Mr. Fuller. That is certainly one of those collateral
impacts that need some attention. I think we have seen this in
very recent days where some of the very large defense
contractors are talking about mergers and we have seen
increasing acquisitions. I guess my biggest concern is that
first, the numbers are really big. We are talking about a
million jobs among small businesses and two million overall. So
the small businesses just are extremely exposed, and they are
exposed in a way that I think the other witnesses have
illustrated so well, is that they in effect are sitting ducks.
They are at the mercy of the primes in so many cases. And I
have seen as we have analyzed these data that approaching 60
percent of the potential job losses coming out of companies
that are not primes and who are small businesses, that they
have very little recourse. And adjusting is not an option to
them. They go out of business increasingly and I think we--I am
more concerned that we are losing the innovative talents of
small businesses either because they are threatened at this
point or they actually go out of business later on as times get
tougher.
Mr. West. Last question. Ms. Moncrieff, you kind of alluded
to it. The start-up time. If you go to zero, I mean, how long
does it take to kick this back in? You know, because the
question I asked to the first panel, are we looking at an
industrial base at capacity and capability and therefore, our
technological advantage and innovations may be lost? So I would
like to get your input as far as what would it take, what type
of timeline you would look at to try to recover yourself to get
back to a full operating capacity or capability?
Ms. Moncrieff. I, myself, am not going to be impacted, and
I think, I guess I cannot say it like that. I am not as
concerned about my impact as some of the other companies that I
work with because I went through an economic time five years
ago where I lost 75 percent of my business overnight. So when I
got into government contracting, what I did is I purposefully
contracted first direct with the military knowing that should
there be a downturn, you are in a worse position if you are in
a subcontract mode.
Now, on the innovation piece, there are 16 industries that
are key to innovation, 13 times more patents per employee, and
a lot of these folk are behind the scenes. Without them in
business, you cannot make anything anymore. So there are
businesses that are upstream from them that will lose the
ability to make product. And we have got a lot of product in
the military that we have one supplier left in the country. We
have one manufacturer for chaff for our jets. No other
manufacturer in the United States. They are already struggling.
To rebuild them, it is not just time; it is an incredible
amount of money. I do not know that we would have the ability
to bring that back. So there are a lot of industries that I
think it is not just a matter of time but it is the amount of
money to rebuild those industries down the road.
Mr. West. Thank you. And I yield to Ranking Member
Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. Gross, with the wars in Iraq and Afghanistan coming to
a close, there has been a concerted effort among federal
agencies to promote entrepreneurship among veterans coming
home, and one of the issues is high unemployment among veterans
that are coming back. It seems DoD is the largest provider of
contracts to all veterans. How do you think sequestration will
impact the decision of these veterans to enter the federal
marketplace?
Mr. Gross. That is a great question. I think if you look at
across-the-board cuts, especially in DoD, most of the veterans
coming out are more than likely looking at opportunities within
DoD based on their background, their skills, their training.
With less opportunity within DoD, obviously it creates far more
competition and it makes the barrier to entry far greater. I
think for companies like myself, you know, veterans hire
veterans. It is what we do. And so for us, you know, a down, a
decrease in DoD dollars, unfortunately, that is generally who
gets impacted.
Ms. Velazquez. Mr. Fuller, in your study you estimate that
45 percent of job losses will come from small businesses, and
you also discussed the fact these losses will have on other mom
and pop shops that are patronized by employees of defense
contractors. Does your estimation of job losses also include
this multiplier effect or do you expect the impact to be even
greater?
Mr. Fuller. The numbers that have been cited include the
indirect effects as well. And also, the scope of our work, even
though we are focused on DoD because it is the single largest
source of federal contracting, includes all the non-DoD
agencies. So this is even a bigger problem than we are talking
about. And we are at 51.6 percent of all of the potential job
losses coming from small businesses, and that would include
those subcontractor suppliers and vendors as well as those
companies across--you find them in every single county in the
country that are supported by the spending of those jobs that
might be terminated.
Ms. Velazquez. Thank you. Ms. Mackey, while the cuts to
DoD's discretionary spending will be significant, there will
also be 75 million dollars in cuts to SBA. And SBA is the
agency in charge of making sure that small businesses get their
fair share of federal contract dollars. So what will the cuts
to these agencies mean for small businesses and their ability
in the federal marketplace to enter the federal marketplace?
Ms. Mackey. The SBA is the agency that watches all our
small businesses' backs. We need to make sure that they stay in
the game and funded in a way that they can perform effectively.
The challenges that are going to come up around contracting and
deciding with limited resources who to contract and when, we
need to make sure that that level playing field you were
talking about stays level by having an ombudsman, by having
people that watch and make sure that we are not doing the
bigger contracts because then we can get more of the money
committed, but just leaving the small business contracts
because we have to cut some out; we might as well cut the
smaller ones. We need to keep the whole industrial base
performing and engaged through the difficult times ahead.
Ms. Velazquez. Thank you. Thank you.
Mr. West. Mr. Mulvaney.
Mr. Mulvaney. Thank you, Mr. Chairman.
Dr. Fuller, does government spending create jobs?
Mr. Fuller. Yes.
Mr. Mulvaney. And the lack of government spending causes us
to lose jobs?
Mr. Fuller. Yes.
Mr. Mulvaney. And using your numbers, I think you said that
this sequester, you have got it at $115 billion in FY 2013. I
think the number we use around here is $110 billion. It leads
to roughly $215 billion in loss of GDP and 2.1 million jobs
lost. Am I reading this correctly?
Mr. Fuller. That's correct.
Mr. Mulvaney. Okay. I recognize the fact that there is not
a perfectly inverse relationship between spending cuts and jobs
lost and spending increases and job loss, but just running the
basic back-of-the-envelope numbers, Dr. Fuller, using your
numbers, the $800 billion stimulus that we had here several
years ago should have created 15 million jobs and at the two
times multiplier that you have, should have added $1.6 trillion
or 10 percent to our GDP. And I just have not seen it yet. And
I am sympathetic to folks who come in here and say that
government spending will cost us jobs, but I am very much
concerned about making the same argument the other way in light
of the fact we have just been through that economics experiment
where we spent $800 billion and did not get anywhere near 18--
excuse me, 15 million jobs. In fact, there is another report
that you wrote that said that $1 billion in investment--excuse
me $1 billion--in government savings would lead to 28,500 jobs,
which means that the $110 billion represented by this cut would
be 3.1 million jobs but conversely, the stimulus should have
created 21 million jobs.
And I guess my question, Mr. Fuller, it is not as much a
question as much as it is a comment to anybody who is willing
to listen. I believe, Mr. Chairman, that these cuts will hollow
out the military. I do believe that. And I believe that is
where we should be focusing our attention. I think it is
disingenuous of us as a party to have railed against government
spending for the last two years as not creating government jobs
and then running to that argument the very first time we
actually have job cuts.
Let me ask you this, Dr. Fuller, have you done an economic
analysis of the impact of jobs in this country of adding $110
billion of additional debt when 77 cents of every dollar
borrowed is printed by the Federal Reserve?
Mr. Fuller. I have not done that analysis. No.
Mr. Mulvaney. Is it fair to say that adding to our debt
burden, especially in light of the fact that we are printing
effectively 77 cents out of every dollar that we borrow, would
have a negative impact on GDP and on job growth in this nation?
Mr. Fuller. I think we could manage this process much more
effectively than we have done, and the stimulus, while I
believe that the idea of a stimulus could have been more
productive than it was, I do not think it was executed very
well. It is quite easy to--it is how you spend the money that
is important, and we can run--we know what we are going to cut
back when we begin to cut back DoD spending, and we know that
it has a job impact. And so it is important to know that there
are costs associated with these decisions. It does not mean
there are not benefits. And you might be able to cite some of
the benefits. If these monies were spent in another way, they
might have a different kind of impact. The point is that this
economy cannot accommodate this kind of loss this quickly. It
would throw the economy into another recession. It would add a
point and a half, maybe two points to unemployment. And so we
need to know what the consequences are.
Mr. Mulvaney. Have you seen the studies, Dr. Fuller, that
indicate that traditionally when countries have debt that
exceeds 90 to 100 percent of their GDP that it annually takes
one percent off of their GDP growth?
Mr. Fuller. I would agree that having more debt--having the
debt levels we have is not good for our economy either. That is
a different question than do we take it out of the backs of
small businesses. It is how we do this that ought to be
discussed and not whether it is done.
Mr. Mulvaney. And Dr. Fuller, just so I understand, the
numbers that you used, were they just the defense cuts or were
they the entire sequester?
Mr. Fuller. The 2.1 million job losses is the entire
sequester as spread across the nondefense agencies as well.
Mr. Mulvaney. Thank you, Dr. Fuller.
Mr. Chairman, I will say again, you and I have worked
tirelessly over the last two years trying to make the argument
that government spending does not create jobs, and yet now I
see us relying almost exclusively on the argument that reducing
this spending will cost us jobs. We cannot have it both ways,
and in fact, by doing this I feel we open ourselves up to
claims of hypocrisy. The sequester cuts will harm the military.
There is no question about it. It will harm our ability to
defend our nation. And I continue to think that that is the
focus that we should be taking and we should focus instead not
on the job losses that come from the sequester. I think it is
easy to make the argument; hard to prove the argument. I think
instead it should be focusing on where else we could save the
money instead so that we can move the money from wasteful
programs into actually defending the nation.
With that I thank you and I yield back the balance of my
time.
Mr. West. The chairman yields back. And I would like to
dovetail off what my good colleague said because I do not
support, you know, looking at the DoD as a job creation
program. But when I go to the Constitution and I look at
Article 1, Section 8, and a lot of the tasks that are listed
for us as members of Congress, to define and punish piracies
and felonies committed on the high seas and offenses against
the law of nations; to declare war, grant letters of Marque,
rules concerning captures on land and water; to raise and
support armies but no appropriation of money, to that use shall
be for a longer term than two years; to provide and maintain a
Navy; to make rules for the government and regulation of the
land and naval forces; to provide for the calling forth of the
militia; to execute the laws of the Union, suppress
insurrections, and repel invasions; to provide for organizing,
arming, and disciplining the militia.
So I think that the thing that we have to understand is
that the men and women in uniform are not the ones out there
building the ships. They are not the ones out there building
the planes. I often tell people the great story of the USS
Yorktown during World War II and how it was severely damaged
during the Battle of the Coral Sea, to the point where the
battle damage assessment was six months. When it got back into
port at Pearl Harbor, Admiral Nimitz said we do not have six
months. The USS Yorktown steamed out of Pearl Harbor in less
than two weeks. Those were not sailors that did the repairs on
the USS Yorktown. That was a defense industrial base that made
that happen.
Now, what is the point of the story? The USS Yorktown
joined up with the rest of the Pacific Fleet at a place called
Midway. And if you understand your history, you understand
exactly what happened in turning the tide in the Pacific at
Midway. So I am not an advocate for looking at defense as a job
creation program but I know this. Having spent 22 years in the
military, all of a sudden we are about to tell our men and
women out there that they may not get the support that they
need because we are about to gut out an industrial base that
supports them and I think that is the stance that we should
take and I think that is the stance that everyone can agree
upon.
My last question. In DoD's written testimony they said that
when the pool of available contracting dollars is diminished as
it would be under sequestration, their ability to partner with
small businesses is likewise diminished. I know that NDIA and
NSBA both sent the Committee letters of support for our
contracting reforms earlier this year, but I think this
statement makes the need to raise the small business goal more
important than ever. As we talk about sequestration for the
panel, do you think we should still be focused on these
contracting reforms?
Ms. Mackey. I think it is really important that we enable
the DoD to behave in a way that maintains our small business
base. So I would say those contracting reforms are important
well beyond the goal setting, but the very practical approach
to how to manage contracting and how to make sure there is more
transparency to keep the playing field level.
Ms. Moncrieff. I also agree that we need to uphold the
contracting goals and hold the DoD to the same federal
contracting goals of other agencies. And just as an example, I
had a recent discussion with a very large multinational global
that went through--an industrial base that went through an
incredibly bad time five years ago. And their kneejerk reaction
was to cut out a lot of small business and depend on larger
companies. They have now gone back and analyzed the impact of
that and they are now wanting to reverse that trend and reach
back now five years later to do more contracting with small
business because what they figured out in doing less small
business contracting is that in the end it is costing them
much, much more money. So, yes, I think it is very important.
Mr. Gross. I further that sentiment. I believe that DoD
should be held to the same standard everybody else is as far as
the subcontracting goals for small business or contracting
goals for small business. I think that we are all prepared for
budget cuts, all of us. It has to happen. We understand that. I
do believe taking a more surgical look at redundancies, non-
mission critical agency, non-mission critical programs, that
sort of thing is the way to do that. I am not a big proponent
of cutting SBA. It is the only advocacy agency we have out
there and so I would think that any cuts at SBA are really
going to hurt small business.
Mr. West. Thank you, and I yield to Ranking Member
Velazquez.
Ms. Velazquez. Thank you. And following what you just said,
that you believe that cuts, $75 million to an agency that has
suffered so much in the past in terms of budget cuts will be
detrimental to the same small business contractors that are
sitting here. So if we do not want for DoD--if we do not
support DoD's defense cuts because of sequestration, and we do
not want to cut SBA because it is the watchdog that will make
sure that DoD will achieve those contracting goals, it means
that we cannot have it both ways. So there are some of us who
are proposing a balanced approach and that will call for
domestic spending cuts but also the revenue side. Otherwise, we
are going to defeat the purpose. We will not touch DoD. But on
the other hand we are going to impact, negatively impact the
very same small business contractors that we are trying to
protect.
Thank you, Mr. Chairman. I yield back.
Mr. West. Thank you, Ranking Member. I think we also need
to realize that we already put $487 billion of cuts on the DoD
over the next 10 years, and this $500 billion is in addition to
that. So you are looking at 19.6 percept of our budget getting
about 55 percent of budget cuts.
Thank you all for participating today. While I support
strong cuts to curb America's severe spending habit,
sequestration is not the proper remedy. Today's testimony
highlighting the need for the administration to work with
Congress to ensure that small businesses, our nation's
innovators and job creators, are not unduly burdened under
sequestration.
I ask unanimous consent that members have 10 business days
to submit statements and supporting materials for the record.
Without objection, so ordered. This hearing is now adjourned.
[Whereupon, at 3:10 p.m., the Committee was adjourned.]
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