    [Senate Hearing 112-722]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 112-722

     DISASTER RECOVERY: EVALUATING THE ROLE OF AMERICA'S SMALL BUSINESS IN
                          REBUILDING THEIR COMMUNITIES

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

                                    HEARING

                                   BEFORE THE

                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 15, 2011

                                   __________

        Printed for the Committee on Small Business and Entrepreneurship

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                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                          ONE HUNDRED TWELFTH CONGRESS

                                  ----------
                       MARY L. LANDRIEU, Louisiana, Chair
                    OLYMPIA J. SNOWE, Maine, Ranking Member
    CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
    TOM HARKIN, Iowa                     JAMES E. RISCH, Idaho
    JOHN F. KERRY, Massachusetts         MARCO RUBIO, Florida
    JOSEPH I. LIEBERMAN, Connecticut     RAND PAUL, Kentucky
    MARIA CANTWELL, Washington           KELLY AYOTTE, New Hampshire
    MARK L. PRYOR, Arkansas              MICHAEL B. ENZI, Wyoming
    BENJAMIN L. CARDIN, Maryland         SCOTT P. BROWN, Massachusetts
    JEANNE SHAHEEN, New Hampshire        JERRY MORAN, Kansas
    KAY R. HAGAN, North Carolina
      Donald R. Cravins, Jr., Democratic Staff Director and Chief Counsel
                  Wallace K. Hsueh, Republican Staff Director

                                C O N T E N T S

                                  ----------

                               Opening Statements

                                                                       Page

    Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
    Snowe, Hon. Olympia J., Ranking Member, and a U.S. Senator from
      Maine..........................................................     2
    Brown, Hon. Scott P., a U.S. Senator from Massachusetts..........     4

                                   Witnesses
                            A Panel, consisting of:

    Sligh, Jr., Albert B., Associate Administrator, Mission Support
      Bureau, Federal Emergency Management Agency, U.S. Department of
      Homeland Security..............................................     7
    Harrison, Brigadier General Theodore C., Director, National
      Contracting Organization, U.S. Army Corps of Engineers,
      Department of the Army.........................................    10
    Woods, William T., Director, Acquisition and Sourcing Management,
      U.S. Government Accountability Office..........................    18

                            A Panel, consisting of:

    Bennett, Terri, Program Manager, Heartland PTAC..................    48
    Davis, Sid, President, Big John's Heavy Equipment, Inc...........    55
    Rentrop, Jr. Dale, President, Tiger Tugz, LLC....................    59
    Nunez Airhart, Mindy, Marketing Director and Assistant to the
      President, Southern Services and Equipment, Inc................    66

              Alphabetical Listing and Appendix Material Submitted

    Bennett, Terri
        Testimony....................................................    48
        Prepared statement...........................................    51
        Response to post-hearing questions from Senator Landrieu.....   108
    Brown, Hon. Scott P.
        Testimony....................................................    60
        Prepared statement...........................................    30
    Davis, Sid
        Testimony....................................................    55
        Prepared statement...........................................    57
    Harrison, Brigadier General Theodore C.
        Testimony....................................................    10
        Prepared statement...........................................    12
        Response to post-hearing questions from Senator Landrieu.....    94
        Response to post-hearing questions from Members..............   117
    Landrieu, Hon. Mary L.
        Testimony....................................................     1
        Post-hearing questions posed to Albert B. Sligh, Jr., and
          subsequent responses.......................................    82
        Post-hearing questions posed to Brigadier General Theodore
          Harrison and subsequent responses..........................    94
        Post-hearing questions posed to Bill Woods and subsequent
          responses..................................................   103
        Post-hearing questions posed to Dale Rentrop, Jr., and
          subsequent responses.......................................   105
        Post-hearing questions posed to Terri Bennett and subsequent
          responses..................................................   108
        Post-hearing questions posed to Mindy Nunez Airhart and
          subsequent responses.......................................   113
    Nunez Airhart, Mindy
        Testimony....................................................    66
        Prepared statement...........................................    68
        Response to post-hearing questions from Senator Landrieu.....   113
    Orr, David W.
        Letter.......................................................   120
    Rentrop, Jr. Dale
        Testimony....................................................    59
        Prepared statement...........................................    62
        Response to post-hearing questions from Senator Landrieu.....   105
    Sligh, Jr., Albert B.
        Testimony....................................................     7
        Prepared statement...........................................     9
        Response to post-hearing questions from Senator Landrieu.....    82
    Snowe, Hon. Olympia J.
        Testimony....................................................     2
    Woods, William T.
        Testimony....................................................    18
        Prepared statement...........................................    21
        Response to post-hearing questions from Senator Landrieu.....   103

     DISASTER RECOVERY: EVALUATING THE ROLE OF AMERICA'S SMALL BUSINESS IN
                          REBUILDING THEIR COMMUNITIES

                                  ----------

                          THURSDAY, SEPTEMBER 15, 2011

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:07 a.m., in
    Room 428-A, Russell Senate Office Building, Hon. Mary L.
    Landrieu, Chair of the Committee, presiding.
        Present: Senator Landrieu, Shaheen, Hagan, Snowe, and
    Brown.
        Also Present: Senator McCaskill.

     OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S.
                         SENATOR FROM LOUISIANA

        Chair Landrieu. Good morning, and welcome to the Small
    Business Committee room and welcome to our hearing this morning
    entitled, Disaster Recovery: Evaluating the Role of America's
    Small Business in Rebuilding Their Communities. Welcome to my
    Ranking Member, Senator Snowe.
        Good morning, and thank you for joining us for this timely
    and important hearing. Today's hearing focuses on the role that
    small businesses play in helping their communities following
    disasters, but it is also going to focus on the role of the
    Federal Government in making sure that small businesses are
    actually a part of that rebuilding, not only for the benefit of
    the communities they serve but for their own individual
    benefit, many of them ravaged by flood waters, high winds, and
    in some cases, the trembling earth.
        For example, right now small business in the states from
    North Carolina to Maine are trying to rebuild their communities
    impacted by Hurricane Irene. With that in mind, today we hope
    to hear about the federal disaster contracting process, more
    about the details, how is it working to direct this work that
    can be done so ably, so well, and with such appreciation, I
    might add, by the small businesses in these communities.
        We know there are two sides to this coin. Small businesses
    often get frustrated trying to navigate the federal procurement
    process while the Federal Government struggles sometimes to
    work with these small businesses unfamiliar with these system
    of procurement for goods and services.
        Today we are going to hear from some of our experts at the
    federal level, and then we are going to hear from some of our
    experts from the field, actual small business owners who have
    had in some cases good experiences, in some cases terrible
    experiences, in this sphere.
        We want to present to you today the good, the bad, and the
    ugly. Senator Snowe and I are committed to help make this
    process better, to improve upon it. I believe we have made some
    improvements since Katrina and Rita, but today we will hear
    more about exactly how significant, if at all, if there were
    any improvements in the system and what remains to be done.
        This year marks the sixth anniversary of Katrina, the
    costliest disaster in the State of Louisiana's history with
    over $81 billion in damage. We are now experiencing the impacts
    of disasters in all but two states in the United States,
    federally declared disasters, which is really unprecedented.
        This issue is relative not only to the work continuing
    along the Gulf Coast but most recently along the East Coast
    which Senator Snowe, I am sure, will share with us today.
        According to the GAO who will testify before this
    committee, Gulf Coast small businesses received almost $2.9
    billion in contracts, 14 percent of the total, $20.5 billion in
    total federal contracts. We are happy to see that, but we hoped
    the number might be a bit higher. We are going to delve into
    some of those numbers today.
        On May 22nd of this year, winds engulfed Joplin, Missouri
    leaving large-scale damage on stretches of Main Street. Many
    businesses were either heavily damaged or destroyed.
        In the wake of the disaster, we counted on our
    entrepreneurs to repair damage to St. John's Regional Medical
    Center, one of the largest hospitals in the area. The Federal
    Government reached out to construction companies in Joplin to
    help pick up debris and remove it so the community could get
    back to work. We are looking forward to hearing how many small
    businesses played a part in that effort.
        I am personally particularly interested in the U.S. Army
    Corps of Engineers. They do a tremendous amount of work in my
    state, important work around the country, and I want to hear
    from the Corps about the ways that you all are working with
    small businesses to supply the rock, the sand, the levee
    construction materials, and other supplies that the Corps needs
    as we try to improve our levee system nationally.
        On our second panel, we will hear from members and small
    businesses from the Gulf Coast to Missouri to other small
    business communities. I think we have particularly strong
    testimony from Mr. Dale Rentrop, the President of Tiger Tugz
    from Louisiana. I am looking forward to hearing his story. It
    is not a happy one, but I think it will be informative.
        Thank you for your time. I will turn it over to Ranking
    Member Snowe, and then we will go to opening statements.

    OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, RANKING MEMBER, AND
                       A U.S. SENATOR FROM MAINE

        Senator Snowe. Thank you, Chair Landrieu, for your
    continued and exceptional leadership of this Committee
    particularly on this timely issue of disaster recovery.
        I want to welcome our panelists who have taken valuable
    time out of your own schedules to be here today to testify.
        Our first panel of governmental witnesses will discuss what
    federal agencies are doing to aid disaster recovery, and our
    second panel of small businesses and local organizations with
    boots on the ground will tell us about their experiences
    working with federal, state, and local governments in ways to
    improve that process.
        Much of the Senate's work this week has been spent with
    policymakers debating FEMA's funding shortfall which has left
    the agency unable to support long-term rebuilding and
    mitigation projects because the depleted disaster relief fund
    can only cover damage costs immediately afterwards.
        As the Chair has pointed out, FEMA has had to stop disaster
    recovery projects such as rebuilding of roads, hospitals,
    schools, and public utilities because they have run out of
    money.
        Hurricane Irene has only compounded the problem because
    FEMA is quickly spending the remaining money in a disaster
    relief fund on immediate needs for those left without shelter
    and food in the aftermath of the storm.
        Let me be clear. There is simply no excuse for Washington
    continuing to fund disaster accounts on an emergency and ad hoc
    basis rather than preparing for them in advance. That is why
    today I am introducing the Safeguarding Disaster Funding Act
    with Senator Scott Brown.
        This bill would require that the President's annual budget
    request for disaster programs include funding levels equal to
    the average amount provided annually for the previous 10 years.
    Additionally, disaster funding that goes unspent in a given
    year will carry over to support years where additional funds
    are required.
        This common sense approach would alleviate the political
    haggling and brinksmanship that has become all too common place
    in Washington, while ensuring that taxpayer supported disaster
    funds are properly budgeted and offset moving forward.
        I hope my colleagues in this Committee will support this
    bill and help to secure its passage. Responsible budgeting for
    disasters is the right thing to do for the victims of
    devastation as the vivid images from the damage of Hurricane
    Irene has reminded us.
        As one of the Senate Committees responsible for overseeing
    federal disaster assistance, today we will examine the degree
    to which one tool, contracting opportunities for local
    businesses that want to participate in recovery and rebuilding
    efforts, is being utilized.
        Hurricane Irene caused more than 4.5 million homes and
    businesses along the East Coast to lose power, including
    185,000 in my home State of Maine which suffered flooding and
    washed out bridges in the western portion of the state.
        Now that the winds and rains have subsided, our cities and
    towns must rebuild from the devastation. Our local small
    businesses stand ready to aid in the rebuilding efforts, and
    the Federal Government should be partnering with these firms
    whenever possible in awarding recovery contracts.
        In response to the 2005 hurricanes, Gulf Coast small
    businesses received almost $2.9 billion in federal contracts or
    just over 13 percent of the $20.5 billion federal agencies
    directly awarded nationwide for recovery efforts related to
    Hurricanes Katrina and Rita.
        Key questions these statistics raise is, why are not more
    disaster recovery contracts going to local small businesses and
    is the Federal Government bundling many of the contracts out of
    convenience?
        This Committee has had a long history in trying to reduce
    unwarranted contract bundling to provide more opportunities for
    small businesses. In fact, the Small Business Jobs Act that was
    enacted last year contained a number of anti-bundling positions
    that had been passed unanimously out of this Committee.
        These provisions require bundled contracts to include small
    business teams or joint ventures. In certain cases, contracts
    are too large for many small businesses to compete and their
    only opportunity to participate in a project is to act as a
    subcontractor to a large business.
        In any construction contract over $1 million, a large
    business is required to submit a subcontracting plan to the
    agency before the contract is awarded. Unfortunately, in their
    report on Hurricanes Katrina and Rita, the GAO describes an
    alarming trend that federal agencies are not monitoring large
    business subcontracting plans which threaten small business
    participation in the rebuilding efforts.
        This morning that is one of the issues that I intend to
    explore in terms of what the federal agencies represented here
    today and others are doing to correct and to remedy these
    monitoring failures.
        So again, Madam Chair, thank you for your leadership and
    for this hearing here today.
        Chair Landrieu. Thank you so much, Senator, for being
    willing to help us try to solve this funding problem which is
    immediate. It is severe, and it is going to take our best
    efforts in the next few days to figure that out.
        So, thank you, and Senator Brown.
        Senator Brown.

     OPENING STATEMENT OF HON. SCOTT P. BROWN, A U.S. SENATOR FROM
                             MASSACHUSETTS

        Senator Brown. Thank you, Madam Chair, and Ranking Member
    Snowe for scheduling this hearing.
        It, unfortunately, has grave importance not only to many
    parts of the country but, as you know, to my State of
    Massachusetts. We have had an unusual string of natural
    disasters, obviously the tornadoes that hit in May in the
    western part of the state. Then most recently Hurricane Irene.
        We have had to rely on SBA, FEMA, and the Army Corps to get
    back on our feet; and I want to thank you all for what you have
    done and continue to do. Obviously, we are here to try to learn
    how to do it even better because over the past several months
    since the May tornadoes, I have been urging my constituents
    through videos and newsletters and the like to utilize the
    resources provided by SBA, FEMA, and the Army Corps so that
    their homes and businesses can recover quicker.
        The issues the Committee is looking into today are not to
    attack the agency or the representatives but to make them
    better and more accessible to the citizens that need them most.
        I see two main areas of concern. First, the agencies need
    to do better at monitoring the contracts to ensure that the
    small businesses are truly getting our businesses to actually
    get out and do their jobs and have an opportunity to provide
    services and that the Federal Government is not being duped by
    the front facade contractors posing as small businesses.
        Most recently, speaking with many of the town
    administrators and mayors, when FEMA and other groups come into
    the area, they set up shop. They do their thing. They do it
    well. There is a lack of communication to the actual town
    administrators or mayors, and there is almost a duplicative
    chain like two trains going down parallel tracks and they are
    not really talking or communicating with each other. I think
    that is critically important. So, that is a suggestion I would
    certainly make.
        The second, in light of the discussions taking place where
    I know the chair has been very animated about a lot of the
    things that have been happening in the Senate, we need to take
    proper steps to budget better.
        It is common sense we do not properly budget for these
    types of disasters. When they happen and the money is gone, we
    are like, oh my gosh, where is the money? Well, we do not
    properly plan.
        Regarding the Senate's focus on this, I voted both times to
    move forward with the FEMA disaster relief bill as did other
    Republicans, because neighbors and constituents in
    Massachusetts have lost their homes and businesses, and quite
    frankly we need to do what we can to get them back on their
    feet so they can be contributing members of their towns and
    their communities and our state.
        Quite frankly, folks, you are Americans first and we need
    to start working together in these tough fiscal times as well
    as times when we deal with natural disasters. I, for one, will
    continue to work in a bipartisan, hopefully bicameral manner,
    to allow us to do it better.
        I am looking forward to cosponsoring a bill this week with
    Senator Snowe requiring the President's budget to include at a
    minimum a request for disaster funding based on the 10-year
    average on spending on disasters.
        We should not be getting insufficient budget requests for
    the disaster relief fund with agencies knowing full well that
    they can simply ask Congress for emergency supplemental funding
    or hope to count on a cushion from next year's surplus because
    we know disasters happen every year in your area especially and
    most recently in ours.
        Look what happened in Vermont, unheard of. Just speaking
    with our dear friends from Vermont, the senators from Vermont,
    they are just shocked.
        We need to plan. We need to do it better. I want to thank
    you for the hearing. Thanks for focusing on this issue, and
    let's get to work.
        Chair Landrieu. Thank you. I will introduce the panel in
    just a moment but I would like to respond just a second. I
    thank you, Senator, for those comments, and animated is a very
    kind word for these speeches I have been giving on the floor.
    So, I thank you. You were very careful in your selection of
    words.
        Senator Brown. That is how I am.
        Chair Landrieu. Let me say this. We have budgeted for
    disasters. The average that we budgeted in Homeland Security,
    and I just became the Chair two years ago, so prior to my
    becoming the Chair, was about $800 million a year. I can give
    you the charts to show this, but I do not have them with me.
        When I became Chair, I knew that was not sufficient, so I
    doubled the amount of money up to $1.8 billion out of the
    Homeland Security budget which is a total budget of $42
    billion.
        I have been resistant to budget any more out of Homeland
    Security because if I do that, it takes away grants from your
    states that help you to protect yourself against future
    disasters. I have said it is not right for the country to fully
    fund disasters out of the Homeland Security budget which is
    only $42 billion.
        So, I am looking for a solution. I think the solution that
    you and Senator Snowe have at least described to me just now in
    your bill that you intend to introduce might be one requiring
    the President to do a 10-year average. You take out the high
    and the low.
        The other problem with budgeting, Senator Brown, if I might
    say, in advance is sometimes events happen that no matter how
    well you planned just absolutely blow the roof off of any
    estimates and that is what happened in Katrina.
        Even if we had budgeted $10 billion which is going to be
    about what the average is, it was $43 billion. So, if one side
    continues to require offsets even when that happens, we are
    back in the same place we are now.
        I am willing to be open but we have got to find a way
    forward that allows in really extraordinary circumstances for
    there to be emergency funding because you will never, in my
    opinion, be as accurate as we need to be about it.
        We can prepare better. Absolutely. I think that might be a
    good approach, but we will see as we go on.
        Let's get our panel started.
        Mr. Sligh is the Associate Administrator for FEMA. I am
    looking forward to his comments today. He has more than 28
    years of experience in leading acquisition contracting and
    program management initiatives with the Federal Government.
        Next we will hear from Brigadier General Ted Harrison,
    Director of the Army Corps of Engineers. Previously, he was
    Deputy Director and also Chief of Staff for the Joint
    Contracting Command in Afghanistan and Iraq.
        And lastly but equally importantly, we have Bill Woods,
    Director of the Acquisition and Sourcing Management Team for
    the GAO.
        So, why don't we start, I guess, Mr. Sligh, with you? Go
    right ahead and I think you have five minutes each for opening
    statements.

      STATEMENT OF ALBERT B. SLIGH, JR., ASSOCIATE ADMINISTRATOR,
     MISSION SUPPORT BUREAU, FEDERAL EMERGENCY MANAGEMENT AGENCY,
                  U.S. DEPARTMENT OF HOMELAND SECURITY

        Mr. Sligh. Yes, ma'am. Good morning, Chairwoman Landrieu,
    Ranking Member Snowe, and Senator Brown.
        My name is Al Sligh, and I am the Associate Administrator
    for Mission Support Bureau at FEMA. I appreciate the
    opportunity to appear before this Committee today to discuss
    FEMA's efforts to increase contracting opportunities for local
    small businesses, especially in the wake of disasters.
        FEMA uses a variety of tactics to increase opportunities
    for small businesses. For example, we have a full-time small
    business specialist whose primary responsibility is to increase
    opportunities for small, minority, and the disadvantaged
    businesses.
        Using lessons learned from Hurricane Katrina, FEMA has
    implemented a local contracting strategy. With this strategy,
    prior to issuing a solicitation, FEMA does research to
    determine whether enough small businesses have the capability
    to meet program requirements. If they do, then the solicitation
    is structured either as a local small business set-aside or to
    provide competitive advantages based on small business status
    as allowed by the Federal Acquisition Regulation.
        I am proud to report that we exceeded the Small Business
    Administration goals for the Federal Government of 23 percent
    with 28.7 percent in fiscal year 2009, 26.9 percent in fiscal
    year 2010 of our procurement dollars going to small businesses.
    For fiscal year 2011, so far we are slightly above the federal
    goal.
        In the aftermath of a disaster, up to 40 percent of small
    businesses fail to recover which can significantly hamper the
    community's recovery efforts. While state and local governments
    issue the majority of contracts within the disaster environment
    using FEMA funds, FEMA is dedicated to help communities rebuild
    by awarding its contracts directly to local small businesses to
    the maximum extent possible.
        To aid local business contracting, local business
    transition teams are deployed to the field to encourage timely
    transition of contracts to local small businesses following the
    initial disaster response. These teams engage with the local
    business community to identify products and services that can
    be provided locally.
        In addition to the local transition teams, Disaster
    Acquisition Response Teams or DARTs provide contract
    administration and oversight to local contractors. The DART
    members help local small businesses with issues that arise
    during performance periods and the review and timely submission
    of invoices to facilitate prompt payment.
        These techniques were used with great success in the
    aftermath of the April 2010 tornadoes in the Southwest. In the
    eight affected states, FEMA staff worked with State partners
    before, during, and after the disasters to identify local
    businesses that can provide needed supplies and services.
        In Alabama, Mississippi, Tennessee, Kentucky, and Georgia,
    over $13 million was awarded to local businesses and 90 percent
    of the local procurement initiatives went to small businesses.
        In Joplin, Missouri, a DART member worked with a small
    local business to ensure that they would be eligible to compete
    for FEMA contracts. They did this by answering questions and
    providing advice such as the importance of central contracting
    registration. Not only was this an opportunity for this
    business to contract with FEMA, but it was also a chance for
    this business to gain skills and approvals needed to
    successfully compete for government contracts in the future.
        In addition to our efforts, it is essential that individual
    businesses have emergency plans. Having a plan can increase the
    speed at which a business can continue its operations following
    a disaster. It is especially important that small businesses
    have an emergency plan since their size alone make them the
    most vulnerable private sector entities.
        In order to raise awareness to small businesses about the
    need for emergency planning, DHS and the Ad Council launched
    the Ready Business Campaign in September 2004. This initiative
    helps owners and managers of small- and medium-size businesses
    by providing them with the practical steps and easy-to-use
    templates that prepare them for emergencies.
        FEMA will continue to do its part in the recovery by
    encouraging local businesses to be prepared prior to disasters
    and providing contracting opportunities for them as much as
    possible.
        This concludes my statement. I will be happy to answer any
    questions you may have.
        [The summary of Mr. Sligh follows:]

        [GRAPHIC] [TIFF OMITTED] T3458.001

        Chair Landrieu. Thank you.
        General, please.

      STATEMENT OF BRIGADIER GENERAL THEODORE HARRISON, DIRECTOR,
    NATIONAL CONTRACTING ORGANIZATION, U.S. ARMY CORPS OF ENGINEERS

        General Harrison. Madam Chair, members of the Committee, I
    am Brigadier General Ted Harrison, Director of the U.S. Army
    Corps of Engineers, National Contracting Organization.
        Thank you for the opportunity to testify before you today
    concerning the role of small businesses in disaster response.
    The Corps continues to work to support FEMA in carrying out a
    wide variety of missions in response to the natural disasters
    throughout the Nation and we strive to maintain transparency in
    our contracting activities and welcome the oversight of our
    actions.
        I fully recognize the value that small businesses bring to
    our national economy. I am personally committed to using small
    businesses in performing our work, both in the normal course of
    business and in times of major natural disasters.
        After a Presidential declaration of disaster, we work to
    support local communities using local area set-asides permitted
    by the amended Stafford Act.
        First, I would like to address pre-disaster contracting.
    Under the national response framework, the Corps has been
    designated the coordinator for emergency response function
    number three, public works and engineering.
        When tasked by FEMA, the Corps is responsible for providing
    ice, water, debris removal, and temporary power. The Corps is
    also a support agency for emergency response function number
    six, mass care and housing, providing temporary roofing in the
    wake of a disaster.
        Due to the necessity to lean forward in time of need, the
    Corps developed the Advance Contracting Initiative or ACI
    contracts to quickly respond to major disasters. We used our
    ACI contracts to support recovery efforts after Hurricanes
    Katrina, Rita, and Wilma; and we are now using ACI contracts
    again to respond to tornado recovery missions in both Missouri
    and Alabama.
        Although it is always our plan that our ACI contracts are
    ready to effectively respond to all natural disasters, we have
    learned that sometimes the magnitude of disasters requires more
    contract capacity or geographic coverage than is available
    under the scope of existing ACI contracts. For example, after
    Katrina, the Corps needed four additional contracts to remove
    debris in both Mississippi and Louisiana.
        The Corps of Engineers is dedicated to employing small
    businesses in response to disaster. Small business
    subcontracting data for the Corps of Engineers response to the
    Gulf region's recovery through March of 2007 made it very clear
    how vital small business participation was to the recovery
    effort with 88 percent of all subcontracted dollars in
    Louisiana awarded to small businesses and 84 percent of dollars
    awarded in Mississippi going to small businesses.
        In response to the Joplin recovery, the Corps of Engineers
    has awarded approximately 45 percent of total dollars in
    support of the recovery directly to small businesses.
        With regard to the Corps overall small business
    performance, as of September 9 the Corps is exceeding all
    fiscal year 2011 small business goals for prime contracts. And
    also to date, fiscal year 2011 data reflects the Corps'
    contractors have awarded 63 percent of subcontracted dollars to
    small businesses.
        In regard to the GAO report, 10-723, overall the Corps
    successfully ensures that small businesses are provided the
    best opportunities to participate in the rebuilding of their
    local communities after disasters occur.
        The Corps is in the process of fully implementing the GAO
    recommendation to provide improved oversight to ensure that our
    contracting officers are monitoring the extent to which our
    contractors are meeting subcontracting goals and submitting
    subcontracting plans.
        I will be the first to say, however, that we should have
    better accountability for tracking subcontracting reports
    through contract completion but we are on the path to getting
    this right.
        The Corps has undertaken a number of steps to ensure full
    accountability in subcontract reporting which has been
    submitted for the record as a part of my testimony.
        Looking forward, I am committed to the Corps' continuing
    partnership with local contractors in moving to local area set-
    asides under the amended Stafford Act as soon as practicable
    and to local business contractors when market research
    indicates we have a viable small business within the local
    area.
        We will negotiate subcontracting plans with our large
    business contractors to enable small businesses in all social
    economic categories to support natural disaster response. Our
    contracting officers and small business specialists will ensure
    that proposed subcontracting goals from large businesses are
    both realistic and attainable but also challenge large
    businesses to reach higher and find great small businesses to
    assist in disaster response.
        The success of the federal small business program is a
    shared responsibility, and I applaud the efforts of the Senate
    Committee on Small Business and Entrepreneurship for holding
    agencies accountable to small business obligations.
        To close, I would like to thank you once again, Chairman
    Landrieu, for allowing the Corps of Engineers the opportunity
    to appear before this Committee to discuss our consideration of
    small business and local area small business awards in disaster
    response.
        Our Corps personnel continue to serve by helping response
    to natural disasters across the nation. We are proud to do so,
    and I will be happy to answer any questions that members of the
    Committee may have. Thank you.
        [The prepared statement of General Harrison follows:]

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        Chair Landrieu. Thank you, General.
        Mr. Woods.

      STATEMENT OF BILL WOODS, DIRECTOR, ACQUISITION AND SOURCING
           MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. Woods. Chair Landrieu, Ranking Member Snowe, Senator
    Brown, thank you for inviting the Government Accountability
    Office to be here this morning. I would like to address three
    areas in the time we have this morning.
        First, I would like to address the general statutory and
    regulatory framework for how the government responds to major
    disasters and that would, of course, include an important piece
    of legislation, the Stafford Act.
        Second, I would like to update the numbers that we reported
    on back in July of 2010 on how the obligations were distributed
    in response to the major hurricanes, and then thirdly, I would
    like to address the area of subcontract monitoring.
        When the President declares a national emergency with
    respect to a major disaster, that brings in the provisions of
    the Stafford Act. In the area of contracting in particular, the
    Stafford Act allows for and, in fact, requires that preferences
    be used with respect to local area businesses, those businesses
    that are located within the area of the major disaster.
        There are a couple of ways that the Federal Acquisition
    Regulation provides for those preferences to be implemented.
    One is through the use of set-asides where the competition for
    contracts can be restricted to firms that are located within
    that affected area, and secondly, the Federal Acquisition
    Regulation allows for evaluation preferences in those contracts
    that may be awarded competitively.
        Importantly, the Stafford Act provides for transition from
    pre-existing contracts. We encourage the federal agencies to
    have contracts in place prior to these disasters, but the
    Stafford Act provides that those contracts should be
    transitioned to local businesses as quickly as possible. That
    does not mean canceling contracts, terminating existing
    contracts, but it does mean looking for opportunities at option
    periods, for example, or when major portions of a contract are
    completed to move that work from the pre-existing contractor to
    local businesses.
        It is very important that small businesses register with
    the central contractor registration system or CCR. That is an
    important way and, in fact, a required way for any business,
    and particularly small businesses, to be eligible for any of
    these contracts.
        Let me move now to the numbers. As I mentioned, we issued a
    report in July of 2010 covering a number of areas. Let me start
    with $20.5 billion which was the total amount of contracts
    awarded for disaster relief in the Gulf region.
        I should mention that all of these numbers are taken from
    the federal procurement data system. We updated our numbers
    through September 1 of this year. Those numbers will always
    tend to fluctuate.
        If we look at any given point in time and we come up with
    one number, if we look a week or a month or a year later, we
    are very likely to come up with a different number. And the
    reason is that agencies are constantly updating the information
    in the federal procurement data system.
        Agencies may be adding new obligations to existing
    contracts to cover new work or they may be de-obligating money
    when they discover that they do not need as much work as
    originally planned for.
        Chair Landrieu. So just repeat, for the record, Mr. Woods,
    that was $20 billion in a snapshot taken in September of this
    year?
        Mr. Woods. September 1 of this year. That is correct.
        Chair Landrieu. This year.
        Mr. Woods. That is correct.
        Chair Landrieu. $20 billion out of? Or what was the
    reference?
        Mr. Woods. That was the total amount of obligated funds.
        Chair Landrieu. Currently obligated to small businesses?
        Mr. Woods. Currently obligated funds nationwide to all
    businesses.
        Chair Landrieu. Got it.
        Chair Landrieu. Okay.
        Mr. Woods. When we look just at small businesses, we find
    that roughly a quarter of that amount has gone to small
    businesses, and of that quarter, about $2.6 billion has gone to
    small businesses nationwide, not in the Gulf region. $2.7
    billion has gone to small businesses in the Gulf region.
        When we break that down a little bit further for state-by-
    state, for example, we find that Louisiana is the largest
    recipient, small businesses in Louisiana are the largest
    recipients of that $2.7 billion. Louisiana businesses received
    about $1.4 billion of that amount.
        When we do further breakdowns, we look at the various
    socio-economic categories and we find that small disadvantaged
    businesses received $800 million of that $2.7 million. HUBZone
    firms, these are Historically Underutilized Business Zone
    firms, and they received about $560 million out of that $2.7
    million total Gulf region small business contracts.
        Women-owned businesses received about $381 million and
    veteran-owned businesses received about $270 million. There is
    much more detail in terms of these numbers in our prepared
    statement which I would like to submit for the record.
        Chair Landrieu. Thank you.
        Mr. Woods. Moving on to the third category about
    subcontracts, we looked at four agencies who had a major
    presence in helping address the disaster in the Gulf. These
    were the General Services Administration, the Department of
    Homeland Security including FEMA, the Corps of Engineers, and
    the rest of the Department of Defense.
        We broke out the Corps of Engineers from the rest of DOD
    primarily because we found at least three specific supplemental
    appropriations where the Congress provided money directly to
    the Corps and only for work in the Gulf. So we thought it
    appropriate to break out the Corps separately from the rest of
    DOD.
        We looked at 57 construction contracts. These were
    contracts that require subcontracting plans. Not all contracts
    require plans, but construction contracts that exceed $1.5
    million require the contractors to tell the agencies how they
    plan to address small businesses.
        Those large businesses are required to submit reports on a
    periodic basis to the agencies; and when we looked for those
    reports, we found that of the 57 contracts that I mentioned,
    the Corps of Engineers had 29 of those. But they were unable to
    provide to us those subcontract reports for 11 of those 29
    contracts.
        When we looked at DOD generally, they had 14 of those 57
    contracts and the rest of the department was unable to provide
    those reports to us for two of those contracts.
        We recommended that action needed to be taken to make sure
    that these agencies could monitor subcontract compliance by
    their prime contractors; and we understand, based on recent
    information, that those agencies have taken certain actions to
    do that.
        This concludes my prepared statement. I would be happy to
    take questions.
        [The prepared statement of Mr. Woods follows:]

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        Chair Landrieu. Thank you very much. I really appreciate
    the reports, and I want to call to the Committee's attention, I
    am sure in preparation for this meeting you know of this, but
    the GAO has just put out a report of Hurricanes Katrina and
    Rita, Federally Funded Programs Have Helped To Address The
    Needs Of The Gulf Coast.
        I know we are very focused, as we should be, on the
    disasters that are occurring as we speak, but the lessons
    learned and the applications of what we forced or tried to do
    after Hurricane Katrina and the Gulf Coast can be very, very
    helpful as we move forward in trying to contract with as many
    small businesses as possible in North Carolina, New Hampshire,
    Maine, and Massachusetts.
        The lessons learned, that is why I called this hearing
    because we want to see what we have improved and what gaps
    still exist. I really hope that the next year or two will
    result in smoother operations in terms of contracting with
    small businesses, that they get to work if they deserve it and
    if they are quality contractors that they get paid, because
    then if they do not, that just adds insult to injury and pours
    salt on the wound of a business struggling and not being able
    to be paid. So, I call your attention to this report.
        Let me ask you, Mr. Woods, based on the report that you
    have submitted and the testimony you have given, would you
    either state again or state for the first time the one or two
    areas that you think this Committee, in our oversight posture,
    should really focus on? Is it looking to see that these
    contracts are including these subs and that the records are
    complete or what would you suggest?
        Mr. Woods. We think it is very important that agencies
    monitor these plans. The agencies are required to exercise
    oversight of all their contracts and particularly how well
    contractors adhere to their subcontracting plans.
        We do not think that there is any way that the agencies can
    do that unless they are getting sufficient information from the
    contractors about how well they are performing, and the
    mechanism for doing that is to require the contractors to
    submit those plans on a periodic basis.
        If there is no one making sure that those contractors
    submit those plans, the agencies are not going to be well-
    positioned to exercise their oversight responsibilities.
        Chair Landrieu. In your opinion, and I would like you to
    jump in, General, does the Corps of Engineers have the
    administrative funding and resources necessary, in your view,
    Mr. Woods, and then I am going to ask you, General, to do the
    job we are asking them to do?
        Mr. Woods. I know that their budget has been very tightly
    stretched, at least in my view, for construction, new
    construction as well as operations and maintenance. I am not as
    familiar with their administrative line items.
        Chair Landrieu. In your review, is there a problem, in your
    professional opinion, with their lack of administrative
    capability or do you think that they have it, and they are just
    not doing it?
        Mr. Woods. We did not specifically address that issue in
    this report. However, I can tell you that we have constantly
    been looking at the capacity of agencies to carry out their
    responsibilities, practical oversight responsibilities in the
    contracting area. Across the government we have found that to
    be a huge challenge for all agencies.
        I will point out in particular, we did quite a bit of work
    looking at the response to Hurricanes Katrina and Rita very
    early on. In fact, I testified in New Orleans before you at
    that time and one of the issues we identified then was the lack
    of adequately trained personnel both in terms of training and
    numbers to carry out their responsibilities.
        We do not know whether that continues. Perhaps the General
    can address that. Certainly on a government-wide basis, we
    remain concerned about agencies having the right number of
    people trained to exercise oversight responsibilities.
        Chair Landrieu. Well, I think that is very, very important
    because in this climate of slashing budgets and saying there is
    a lot of fraud, waste, and abuse everywhere, which there is in
    some pockets, but you have got to be careful identifying it or
    you end up cutting the muscle that you need to carry out the
    work that we are requiring.
        General, can you add anything to that? Then I will have one
    question of Mr. Sligh and turn it over to Senator Snowe.
        General Harrison. Yes, Madam Chairman, in fact, as Mr.
    Woods pointed out, contract oversight and the resources to
    carry out that mission within the entire Department of Defense
    has been something that we have been challenged by over a
    period of at least 10 years.
        I think this was borne out in the Gansler Commission that
    came out in 2007 that looked at specifically Army contracting.
    The Department of Defense's ``Grow The Acquisition Workforce
    Initiative'' has put us on the road to help rebuild the
    contract oversight mechanisms within the department.
        The Corps of Engineers has been able to take advantage of
    that initiative to get 110 additional slots to be able to apply
    to contract oversight. So, I think that has been a factor.
        In the particular problem area of the oversight and follow
    up on subcontracting plans from contractors, you know, that has
    been part of the story. But we definitely had a problem in the
    Corps of Engineers. I think we are on the road to fixing that,
    both through leveraging the new electronic eSRS system that
    automates the reporting process and also to focus more and put
    command emphasis on follow-up of these reports.
        So, I think we are on the road to getting that fixed.
        Chair Landrieu. Let me ask you this. How long does a prime
    have to be in business before they can do work with the Corps
    of Engineers?
        The reason I ask is because right after a disaster I
    noticed that there are a lot more companies formed to start
    getting work, you know, from the Federal Government because, of
    course, they anticipate money being spent. Then companies that
    have been in business for a long time actually doing the work
    get passed over.
        Do you know if there is a requirement for somebody to be in
    business even 30 days before the disaster?
        General Harrison. Ma'am, to my knowledge, there is no
    period of time they have to be registered with the CCR.
        Chair Landrieu. I think this Committee should look very,
    very, very carefully at this. I do not know what the other
    members think, but I have real problems with companies that are
    not even in the business. I have problems with a furniture
    company, for instance, that has been in business for 50 years
    deciding overnight maybe that it can now be a levee-building
    company and submit bids to the Corps when there are any number
    of other companies that have been doing levee-building, and I
    think we should pursue that. So, there is no requirement now. I
    did not think there was.
        And finally, you mentioned that the Corps reporting
    requirement for prime contractors to report their subs, we
    talked about that having been improved.
        However, we are going to hear from one of our witnesses
    today that, in their opinion, it is still broken. Is it
    generally accepted practice to require subprimes to certify
    that it has paid their subcontractors? And if so, either yes or
    no or do you even care if these primes pay their subs?
        General Harrison. Ma'am, generally speaking, we focus on
    our prime contractors with whom we have privity of contract.
    There are a few occasions where we can enter into the payment
    of subcontractors where it is a construction contract and they
    are subject to the provisions of the Miller Act.
        However, for service contracts, generally speaking, we
    cannot get involved in that contractual relationship.
        Chair Landrieu. Okay. Let me ask you this. Do you have a
    website where subcontractors who have not been paid by their
    primes can register objections to further contracts being given
    to those primes until they get paid, almost like a lien against
    them?
        Mr. Woods. We do not, no, ma'am.
        Chair Landrieu. Okay. I think we should pursue that
    because, like Angie's list, if you want to hire a plumber you
    go to Angie's list. It is very simple. Technology allows that.
        You look to see the people that have used the service of a
    plumber. They like the service. A lot of people will use the
    plumber. If the plumber did not do a good job, most people will
    not use them.
        It is a very cost-efficient, effective way to try to
    separate the wheat from the sheaf, quality from, you know,
    fraudulent operators.
        So, let me turn it over to Senator Snowe. I think we are on
    the right path, Senator, but I am not sure we are there yet.
        Senator Snowe. I would agree, Chair Landrieu.
        Chair Landrieu. Thank you.
        Senator Snowe. Mr. Sligh, to follow up on the legislation
    that Senator Brown and I are introducing today as one way of
    ensuring predictability and stability as well as consistency in
    funding on disaster related events.
        Now, obviously you cannot always get it on the mark. It is
    a law of averages, but in this case, to provide a 10-year
    average. Can you speak to this question because, as I mentioned
    in my opening statement, obviously you have had to suspend
    certain efforts, due to the lack of funding, in order to
    provide for more immediate relief and the greater necessities
    as a result of a disaster. Also, how important are
    predictability and consistency when you have, on average, $11
    billion set aside for disaster related funds for all the
    agencies, as Chair Landrieu indicated, that cannot just be
    taken out of one agency such as Homeland Security?
        There are a variety of agencies that engage in disaster
    assistance. This would be on average $11 billion. Could you
    speak to that question and how this could help in some
    respects?
        Mr. Sligh. To some degree, ma'am. The financial aspects of
    running the agency is really not my area of responsibility.
    However, having a steady stream of funding is always helpful in
    planning and in execution so that, to the extent that we can
    have a constant stream of funding that can support our efforts
    with our partners, states, locals, and others, I think it is
    obviously beneficial and it obviously makes a lot of sense.
        Again though, that is really not my area of expertise in
    terms of the budget.
        Senator Snowe. I understand that. That would obviously be
    at the other level and certainly OMB and Congress are working
    on designing a budget as part of the budget process.
        Clearly in terms directly affecting your ability to provide
    the relief, both the immediate relief and then, of course, in
    tandem, the relief in beginning the rebuilding process.
        Mr. Sligh. Yes, ma'am.
        Senator Snowe. I was Chair of this Committee during the
    time of Hurricanes Katrina and Rita, so, I certainly understood
    the magnitude of these events and what was required, which was
    so much in the way of recovery.
        It was a very difficult process and we learned a lot from
    it, especially from our perspective. I think the issue that is
    pending on the floor is illustrative of the problems we are
    facing which is to have some kind of consistency and constancy
    with respect to funding so that it goes to the heart of what
    you are attempting to do.
        Mr. Sligh. Yes, ma'am.
        Senator Snowe. That is the issue, to get this all up and
    running now.
        You were mentioning that 40 percent of small businesses
    fail after a disaster. That is a high figure, almost
    staggering. Now, what can we do differently to avert that? Is
    there anything that we can do to mitigate that?
        For example, on this contracting issue which is what I want
    to get back to, this is so frustrating. I do not know how many
    hearings I have sat through on the issue of contracting, and
    the failure of agencies to do their due diligence when it comes
    to fulfilling their contracting responsibilities. It is truly
    frustrating.
        Can any of that help in this instance, particularly in the
    subcontracting requirements with small businesses? What can we
    do to change that, to help reduce the number of failures?
        Mr. Sligh. Well, within FEMA one of the things that we have
    done to help ourselves in that arena of subcontracting, we have
    established what we call DART teams. They are Disaster
    Acquisition Response Teams. Their entire focus is post-award.
    Once a contract is awarded, to make sure that it is
    administered properly and to make sure that the contractors
    live up to the terms and conditions of the contract.
        Prior to this year, we did not have that focus. Our
    contracting officers had both pre- and post-award
    responsibility, meaning they awarded contracts and they had the
    responsibility of doing contract administration.
        We found that that approach did not get us the result that
    we needed. So, we took resources from our pre-award pool of
    people who award contracts, move them over, gave them the sole
    focus of post-award, and these teams which are comprised of
    contracting officers who have had training and experience in
    post-award executing contracts and quality assurance
    specialist.
        They are deployed to the disasters. They take over the
    large major contract post-award activities. They review the
    subcontracting plans. They make sure that the contractors are
    staffing up in accordance with their plans; and when they are
    not, they are working with the contracting officers in
    Washington to take appropriate action with the contractor.
        They also have a focus which is with our local businesses
    in that they actually go out and work with the small local
    businesses to make sure that they are able to, as soon as
    possible, bid on our contract.
        One of the issues that we found is that a lot of the
    businesses do not plan for disasters. Therefore, when the
    disaster occurs, they have no strategy or plan for coming back
    online and being able to provide their services.
        So, one of the focuses that we have in the pre-disaster
    arena is to cause the businesses to start to think about, if I
    had a disaster, what do I do? How do I get my business back
    online?
        Senator Snowe. One question on the issue of payments, and I
    want to get to that in a moment as well with you General
    Harrison. Why are there such delays in payments to businesses?
        I cannot see in this age of technology why we cannot get
    this underway much more quickly, because obviously that could
    spell disaster in and of itself to small businesses just
    hanging on by barely a thread.
        We heard this testimony during the time of Hurricane
    Katrina. We had a series of small businesses come before the
    Committee, primarily from New Orleans, because that is
    predominantly a small business city.
        Why is it that we cannot get this done much more quickly
    and promptly?
        Mr. Sligh. One of the areas that we found was an issue for
    getting contractors paid, especially contractors who have not
    done business with the government before, and this goes to the
    heart of our local small businesses, probably have not done
    business with the Federal Government before.
        To a large extent, it is getting the paperwork right. It is
    submitting the right documentation to allow for payment to be
    made without having to re-submit that documentation.
        Part of the role of these DART teams that we have are to
    work with those small local businesses to help and educate them
    so that when they do submit their invoices, they go through the
    first time and do not get rejected or do not get held up for
    additional information.
        Senator Snowe. General Harrison, there will be a witness
    who will be testifying in the second panel, his name is Dale
    Rentrop with Tiger Tugz. He is a subcontractor to a prime
    contractor, and he was designated as a supply contractor;
    therefore, he was the prime contractor and did not have to have
    a bond.
        He is now out more than $1.4 million. This is a terrible
    issue because what it really does, as he indicates in his
    testimony, is give license to prime contractors to go out of
    business, and these poor small businesses that are doing this
    in good faith and diligence are now left holding the bag and
    they cannot even get reimbursed by the Federal Government for
    legitimate services or materials provided.
        General Harrison. Yes, ma'am. In fact, generally speaking,
    the contractors we do business with and their first-tier subs
    are good contractors.
        On occasion, you know, we run across those actors; and it
    is frustrating when we do not have privity of contract with the
    second or third tier sub. We are not in a position to be able
    to resolve a dispute between a subcontractor and one of his
    lower tier subs like the courts would be able to do. So, it
    puts us in an awkward position.
        Senator Snowe. I think that is a requirement we need to
    change. I think that anybody doing business with the Federal
    Government should be responsible; and the prime contractor,
    they are doing business with the Federal Government. They are
    responsible for everything. They should have to report,
    document and have a bond.
        This is not right, because these are trying times during
    these disaster-related issues. To have a contractor go out of
    business, is going to really deter others from getting
    involved.
        I think that is something we have to really look at very
    carefully and change.
        Thank you.
        Chair Landrieu. Absolutely. Thank you. Senator Brown.
        Senator Brown. Thank you. General, I find it kind of
    bewildering just listening to you testify. Some of these small
    businesses have been in business for generations. They pay
    their taxes. They are incorporated. They know what they are
    doing.
        Yet they cannot apparently complete paperwork to get paid
    by the Federal Government. So, what does that tell me? It tells
    me that there is something wrong with the process of filing a
    claim with the Federal Government. That it is either archaic or
    it does not make sense or it needs to be fixed or streamlined
    or something.
        I hear so much that the paperwork was rejected. Really.
    Why? It is not brain surgery. It just suggests that every
    government entity that deals in contracting needs to do a top
    to bottom streamlining review as to simplifying the paperwork
    so people can, in times of an emergency, have their business,
    they are flying by the seat of their pants anyway just trying
    to provide the service, make sure their families are safe, and
    then we are going to have them spend hours and hours and hours
    filling out paperwork.
        There has got to be an expedited process. That is my first
    suggestion.
        The second thing is that I have been dealing with Senator
    Carper on a lot of the waste, fraud, and abuse. I just got back
    from Afghanistan, contracting with the enemy. The biggest
    problem they are having now is the subs.
        You have people who are there from other countries who are
    now being left because many of the generals who are with U.S.
    corporations have taken their money. They have left the
    theater, and they are leaving these subs to fend for
    themselves.
        It seems to be very similar as to what is happening in
    situations here where you have prime contractors not paying
    their subs and the subs are left holding the bag.
        I would agree with both the Ranking Member and the Chair
    that we need to either have them all have a bond or have a
    certifying payment along the way.
        When they get paid, they have to have some type of
    verification or certification that, in fact, their subs have
    been paid; and if not, they should be barred forever for not
    doing their jobs and paying people.
        Getting specific now, General, new reports say many coastal
    communities in Massachusetts are having trouble with sea walls,
    obviously levees, beach scraping, and a whole host of things
    that the Army Corps has the authority to execute within their
    discretionary functions.
        Yet a lot of it has been frozen because of the backlog at
    headquarters. There always seems to be a backlog at
    headquarters. Sometimes when those projects get fixed, they get
    fixed the same way that they were, and then a big storm comes
    and they are broken again.
        Is there any discussion happening within the Corps that
    attempts to either remedy the backlog with the discretionary
    projects or re-evaluates the projects that are there to try to
    do it better so we do not continue this cycle?
        General Harrison. Senator, honestly, the question of
    prioritizing engineering projects is not really in my area of
    expertise. I would be happy to try to get some additional
    information.
        Senator Brown. Yes, I would like for you to submit it for
    the record, that would be great.
        General Harrison. Yes, sir.
        Chair Landrieu. Without objection.
        Senator Brown. Thank you.
        Mr. Woods I, like others, have been disturbed by the
    reported gaps in DOD and the Corps with regard to subcontracts
    during Katrina as I just mentioned.
        As I said, we deal with this stuff as Ranking Member of the
    Financial Management in HSGAC we deal with it all the time. How
    much would you say is reasonable to expect an agency to be
    familiar with the new online system?
        I ask this because when Katrina hit, all contractors were
    required to use the eSRS system, and I do not believe it really
    happened. Do you think that, given the glaring gaps in
    monitoring the several millions of dollars of contracts during
    Katrina, this was too gradual a phase-in or what?
        So, let us start with that.
        Mr. Woods. Well, you are right, Senator, there was a phase-
    in. Agencies across the board were migrating toward the
    electronic subcontractor reporting system environment and that
    took some time, probably too long.
        One of the reasons we identified for the lack of reports is
    not enough use of the eSRS system.
        The indications that we have received from the Department
    of Defense and the Corps, however, indicate significant
    progress in that area.
        The Corps is now fully up and running in terms of using the
    eSRS system and also at the department level we know that they
    have conducted extensive training sessions on the use of eSRS.
    So hopefully that situation is getting better.
        Senator Brown. Has the DOD caught up with that technology
    do you think at this point?
        Mr. Woods. It looks as though they have, sir, yes.
        Senator Brown. Thank you.
        Chair Landrieu. Senator Brown, thank you.
        Senator Hagan.
        Senator Hagan. Thank you, Madam Chairman, and also thanks
    for holding this hearing especially in light of Hurricane Irene
    that has just hit the eastern seaboard.
        Brigadier General Harrison, as part of the Corps of
    Engineers, so much of what affects us in North Carolina is
    dredging, and I was curious as to whether, if this is in your
    area, concerning the amount of funding that we actually give to
    the Corps of Engineers on an annual basis, but I also hear over
    and over again that the number of people who are in the
    business of dredging is also very small, and the number of
    dredges, things like that, this is something that is of concern
    all the time on the coastal areas in North Carolina, and the
    channels.
        General Harrison. Yes, ma'am. In fact, I was in Wilmington
    Monday visiting our district contracting office down there.
        As you know, we have our own dredging capability in the
    Corps of Engineers and also there is a commercial capability
    around the country. Of course, we try to balance what we do
    internally to the Corps of Engineers with what the commercial
    vendor base offers.
        I do not have specifics. Perhaps on your question, if you
    would like more information on the role that the Corps plays
    internally with dredging, I can get you that for the record,
    ma'am.
        Senator Hagan. How many dredges do you all have?
        General Harrison. Well, I do not know the exact number
    either.
        Senator Hagan. Well, all I know is I hear over and over
    again about the need for dredging, and it always seems like
    there is not enough, the backlog, they are in a different spot
    of the country, and it is like the roads, the highway system
    and you cannot operate unless you have deep enough channels and
    the sand out of the way.
        General Harrison. Yes, ma'am.
        Senator Hagan. And it is really an issue.
        Now let me ask another question, Brigadier General
    Harrison. It appears that about 45 percent of total dollars in
    support of the recovery and response to the tornadoes in
    Missouri were awarded to small businesses and that nearly 90
    percent of subcontracted dollars after Katrina and Rita were
    also awarded to small businesses, and I know that with
    Hurricane Irene the recovery and reconstruction efforts are
    underway and ongoing. But according to your testimony, prime
    contractors are required to report weekly for the first 90 days
    of their subcontracting goals.
        Can you estimate how many and how much of the subcontracts
    awarded to the Army Corps in North Carolina have actually gone
    to small businesses? And I know it is very soon to report this.
        General Harrison. Ma'am, actually I do not have that
    information with me. As you said, the information is still
    coming in. I can get you that information as of this week for
    the record, if you like.
        Senator Hagan. That would be great. Thank you.
        We were just talking about the Electronic Subcontracting
    Reporting System, and this would be a question for any of you.
    How is this working now in light of Hurricane Irene as far as
    the electronic reporting?
        Mr. Woods, you were commenting a little bit on it to
    Senator Brown.
        Mr. Woods. I cannot speak to the recent implementation, but
    we do know that both the Corps and the Department of Defense
    generally have made progress since our July 2010 report on
    getting up and running with eSRS reporting.
        Senator Hagan. Brigadier General Harrison, any update from
    your respective?
        General Harrison. Yes, ma'am. Not so much particular to the
    response to Irene but I think eSRS has provided us a tremendous
    tool because, one, it is more real-time, and two, it provides a
    capability at headquarters to be able to better monitor how we
    are following up on our subcontracting plans.
        So, I think that is part of the answer. I think the other
    answer is that we focus on making sure that we follow up on
    these reports.
        Senator Hagan. Mr. Sligh, in your discussion about the
    filling out of the reports, are they updated? Have they been
    updated recently? I hear too that people are concerned about
    the depth, the amount of information. A lot of these businesses
    have been in business and I know that there are seminars on how
    to deal with the Federal Government. But are they that
    complicated? And what can we do about it?
        Mr. Sligh. A lot of information, ma'am, is required and it
    can be, in particular for someone who has not dealt with the
    Federal Government before, a little bit overwhelming.
        I mean, that is one of the reasons why we established the
    teams that we did to actually go out during disasters to help
    people understand what it is they need to be able to provide so
    that we get it right the first time and we do not get this back
    and forth in terms of invoices and those types of things.
        So, it is not necessarily the easiest thing in the world
    for somebody who has not dealt with the Federal Government----
        Senator Hagan. The problem with small businesses, they do
    not have a back room of all the staffers that have the time and
    are being paid to fill out that form. Typically, it is the
    owner who is also managing the project and staying up all night
    to be sure it gets done.
        It seems like maybe we need to look at revising the
    paperwork. And can it be done online?
        Mr. Sligh. Our registration, yes, ma'am.
        Senator Hagan. The paperwork can all be done online?
        Mr. Sligh. Yes, ma'am. And we do run into a problem
    sometimes that the small businesses do not have that capability
    in which we extend our capability to them. They can come in,
    fill out the paperwork and submit it online at our joint field
    offices as opposed to going somewhere else during generally a
    hectic period of time to be able to submit the paperwork.
        Senator Hagan. One of the problems, especially in rural
    areas, they have is a very, very slow dial-up, and that is
    something we obviously are working on, especially with the
    layout of broadband in the lot of our rural areas. But that is
    also a problem.
        It seems to me that we should be looking strictly for
    contracts that are dealing with small businesses and that we
    ought to figure out a way to revise the paperwork so it is at
    least readily understandable without having a bevy of staffers
    working on that.
        Mr. Sligh. Yes, ma'am.
        Chair Landrieu. Thank you, Senator.
        Senator Shaheen, and we are going to try to move to our
    second panel in about five or seven minutes, if we can.
        Senator Shaheen. Thank you, Senator Landrieu and Ranking
    Member Snowe. Thank you both for organizing the hearing today.
        New Hampshire, like so many states in the Northeast, was
    affected by Hurricane Irene. We had roads and bridges washed
    out. We had people lose their businesses and their homes; and
    so, we very much appreciate the effort that is going on through
    the various federal agencies to help the folks who have been
    affected. Thank you all very much for the work that you do.
        Mr. Woods, I came in in the middle of your testimony and so
    I missed part of it, and I just want to make sure I understood
    accurately what you had to say. You were talking about the
    requirement for contractors to submit plans if they had a
    project over $1.5 million. Is that correct?
        Mr. Woods. That is correct.
        Senator Shaheen. Do their plans have to encompass all of
    these subcontractors who are working for them or are these subs
    required to also submit plans?
        Mr. Woods. No. The subcontractors are not required to
    submit plans. This is just at the prime contract level. The
    threshold that I mentioned, the $1.5 million, that is just for
    construction contracts. There is a lower threshold generally.
    But for construction, it is a $1.5 million threshold.
        These plans basically will tell the agency how the
    contractors plan to engage with small businesses, and they are
    required to make their best efforts to comply with those plans,
    and that is why it is so important that they provide the
    reports to the agencies and that the agencies review those
    plans so that they can determine for themselves whether the
    contractors are, in fact, making good-faith efforts to fulfill
    those plans.
        Senator Shaheen. Well, and again, you may have addressed
    this in your testimony before I arrived, but how do we track
    the progress toward ensuring that small businesses get their
    required percentage of the work?
        Mr. Woods. Well, on a government-wide basis, the small
    business administration does that. On a contract by contract
    basis, it is these subcontract reporting reports from the prime
    contractors that are the mechanism for tracking that.
        Senator Shaheen. And so, under the Stafford Act do each of,
    the Army Corps for example, FEMA, Homeland Security, whoever is
    involved in a disaster, do you also track how many small
    businesses get those awards?
        Mr. Woods. That is tracked, yes. My colleagues are shaking
    their heads as confirmation of that.
        Senator Shaheen. Is that information available publicly
    anywhere?
        Mr. Woods. Do you know if eSRS is publicly available?
        General Harrison. I do not know if it is publicly available
    but it is certainly available within the government I would
    imagine. I do not know if it is public access. I would have to
    find out for you, ma'am.
        Senator Shaheen. That would be helpful. I am sure it is
    available to us as members of Congress. As we are trying to
    help communicate with people who are affected by the disaster,
    are there ways that we can let people know about contracting
    opportunities in local communities?
        General Harrison. I can answer that. With regard to the
    Corps of Engineers, we work closely with a lot of our PTACs as
    one way that we make sure that they help us advertise the fact
    that we have requirements, particularly after a natural
    disaster.
        We also have a website in the Corps of Engineers that is
    particularly focused on debris contractors where they can sign
    up and make themselves known to us so that after a natural
    disaster, you know, we can more expeditiously do market
    research and determine the capability within a general area.
        Senator Shaheen. Do you maintain a database of various
    small businesses that are able to do certain work?
        General Harrison. Yes, ma'am. They are able to sign up and
    list their capabilities and we maintain that database. Yes,
    ma'am.
        Senator Shaheen. And again, is that database available to
    the public?
        General Harrison. It is available to the public.
        Senator Shaheen. Thank you.
        Thank you, Madam Chair.
        Chair Landrieu. Thank you. Senator McCaskill, we are going
    to move to the second panel.
        Senator McCaskill. That is great.
        Chair Landrieu. Okay, because I understand you want to
    question the second panel.
        Senator McCaskill. Say a few things.
        Chair Landrieu. Say a few things. Okay.
        Thank you all very much. We are going to follow up, and I
    wish that you all could stay as long as you can to hear some of
    the testimony from the second panel. I think it would be very
    instructive as you seek to do your jobs even better.
        Senator Snowe and I are going to meet in the next couple of
    days to talk about what we have learned, because we really have
    these disasters under way right now in places like Missouri,
    flooding through the Midwest, and now most recently on the East
    Coast.
        We want the very best practices put forward for these
    communities, and we have even learned this morning that there
    potentially could still be some gaps. We are going to work
    very, very diligently and as quickly as we can and we ask you
    to do the same.
        For instance, and the last thing I will say, General, to
    you as you are giving out Corps contracts along the East Coast,
    although it is not a requirement yet from us, you might not
    want to give contracts to people who have never been in
    business and you might want to require some kind of bonding
    provision, just by rule to make sure that these subs are going
    to get paid so we do not see some of the same heartache that we
    have seen down in the Gulf Coast.
        Thank you, and I appreciate your attention.
        If we could move to the second panel and to save time as
    they are coming forward, I would like to go ahead and start the
    introductions. First, Mrs. Terri Bennett is Program Manager of
    the Heartland Procurement Technical Assistance Center (PTAC) in
    Joplin, Missouri. The PTAC currently assists businesses in 21
    counties in southwest Missouri and is the statewide program in
    Kansas. It is the only PTAC in the nation to cross a state line
    other than Native American PTACs. We are looking forward to
    hearing from you, Mrs. Bennett.
        Sid Davis is President and Owner of Big John's Heavy
    Equipment, Inc. Big John's was started in 1955 by his spotter,
    and Sid has run the family business since 1986. He is a former
    Marine officer. I would also note he is a certified Kansas City
    Barbecue Society judge. Thank you. I wish you would have
    brought us some barbecue today, Mr. Davis.
        Next, of course, is Dale Rentrop, Junior, Founder and Owner
    of Tiger Towing, Inc. and Tiger Tugz. He is from Berwick,
    Louisiana, and a second generation tug boat operator. I am
    very, very pleased, Dale, that you could be with us today.
        Finally, Mrs. Mindy Nunez Airhart, Marketing Director of
    Southern Services and Equipment. Her company is in a heavy
    construction, metal fabrication contractor in St. Bernard. She
    is a graduate of Tulane University and has a lot of interesting
    observations and information for us from her experience as her
    parish was completely destroyed after Hurricane Katrina.
        So, Senator McCaskill, do you want to ask the first
    question? We will open the panel.
        Senator McCaskill. I am so proud of the folks that are here
    from Missouri, and I thank you so much, Madam Chair, for giving
    me the opportunity to come in and sit with you today on your
    Committee and the important work you are doing.
        I have to leave at 11:45. So, I just wanted to ask if I
    could put a quick statement on the record right now.
        Chair Landrieu. That would be great, and then that way you
    can leave.
        Senator McCaskill. Then if I have to leave. Hopefully, I
    will not have to and we will get there but if we do.
        Let me just say that the people that you are going to hear
    from today are really important to your work. Particularly, the
    Manager of the Heartland Procurement Technical Assistance
    Center.
        Many people are not familiar with it, I am sure that the
    Chairman and the Ranking Member are, but back in the 1980s
    there was a bill passed in the defense authorization that
    creates these technical assistance centers to help people
    contract with the Federal Government.
        Primarily, this has been in the defense arena because that
    is where there are so many contracting opportunities. But it
    applies across the board in terms of the Federal Government. I
    think you will hear some very powerful testimony from two of
    our many heroes that we have in Joplin, from Teresa Bennett and
    from Sid Davis, both of whom can tell you how it worked in
    there with the technical assistance of the procurement centers
    coming into the area immediately and immediately beginning
    reaching out to FEMA.
        I think Teresa will tell you that FEMA did not reach out to
    her. She reached out to FEMA, but it allowed that capability of
    hooking up contractors that had worked with the Federal
    Government that are locally based that had navigated the very
    difficult terrain that has been referenced already in the
    hearing about how you work with the Federal Government.
        The other thing I want to say on the record is that this is
    a time of great discontent in our country about our government,
    and I think we are naive if we do not acknowledge and talk
    about it.
        I understand there are many reasons why people are cynical
    about the Federal Government and about our work here. But it
    was interesting to me in Joplin that on the heels of the most
    unbelievable tragedy, one that I am sure you can relate to,
    Madam Chairman, but unless you were there in the hours after it
    happened I think it is hard to describe the devastation that
    occurred in this community.
        The loss of life. When you have an entire one third of the
    entire community wiped out and all of the sudden when I go back
    to Joplin, and I will tell you candidly, Joplin is a place
    where I heard a lot of complaints about the Federal Government
    during my time in public office, going back there now and
    listening to the community leaders talk about the value of
    FEMA, the value of SBA, the value of CDBG, the value of EDA,
    the value of the procurement center that is also another
    federal program, it does reassure, I think, people at any
    moment they really need it, and this is not just a bunch of
    payrolls without a purpose.
        There are thousands and thousands of people who work for
    the Federal Government that care very deeply, like Teresa,
    about doing their job well in terms of being there at a time of
    disaster.
        I have been proud of what has been done in Joplin. Most of
    the credit, and I do not want to stop this statement without
    saying, goes to the people of Joplin. The citizens of Joplin
    that came together.
        They got a good assistance from the federal agencies, and I
    think it is a moment that we need to reflect on especially at
    this time of really heightened, heated rhetoric against the
    Federal Government on so many fronts.
        So, thank you for giving me the opportunity to speak. I
    know you will learn from the people from Joplin. I always learn
    from the people of Joplin when I take an opportunity to go to
    Joplin and listen, and I have been proud to try to assist in
    any way I can and we continue to be here for you guys.
        As the Chairman will tell you, the hardest part about any
    recovery is not in the weeks right after, the hardest part is
    making those commitments be real months and months after the
    tragedy has occurred, long after the cameras have cleared.
        So, I am here for the long haul as I know the community of
    Joplin is and thank you, Madam Chairman, very much for giving
    me the opportunity to speak.
        Chair Landrieu. Thank you, Senator McCaskill, I appreciate
    it and your very appropriate remarks.
        Ms. Bennett, why don't we go ahead and start with you?

      STATEMENT OF TERRI BENNETT, PROGRAM MANAGER, HEARTLAND PTAC

        Ms. Bennett. Okay.
        Chair Landrieu. If you could try to limit it to four
    minutes each, I know we gave you five, but let's see what you
    can do and we will try to be generous here as much as we can.
    We do want to get to a time of questions before 12 o'clock.
    Thank you.
        Ms. Bennett. I will read as fast as I can. Chairman
    Landrieu, Senator Snowe, distinguished Senators, thank you for
    the opportunity to testify today----
        Chair Landrieu. If you could pull the mike a little closer.
    All of you have to pull this mike a little closer and kind of
    lean into it.
        Ms. Bennett. Is that better?
        Chair Landrieu. Better.
        Ms. Bennett. I am honored to speak on behalf of the
    Procurement Technical Assistance Center at Missouri Southern
    State University in Joplin, Missouri along with my colleagues
    in 93 PTACs across the country and the small businesses that we
    serve.
        First of all, I would like to express my gratitude and
    appreciation for your leadership and efforts on the half of the
    businesses across the nation.
        Again, I am Terri Bennett and I am Program Manager for
    Heartland PTAC. Our sole purpose, and we are passionate about
    it, is to help businesses become capable government contractors
    to provide the highest quality and best value for the taxpayer
    and create a strong and vibrant economic base for our
    communities.
        Sid Davis with Big John's Heavy Equipment, Incorporated,
    who is also testifying today, happens to be one of our clients.
    We assist small businesses every day, offering training events,
    bid matching, and one-on-one counseling.
        We help them understand government contract and procedures
    and requirements. We guide them through the federal contracting
    registration process and much more.
        We assist the government agencies by locating and educating
    contractors which can provide the products and services that
    they need. As you might imagine, we have been intensely
    involved with the small business participation and disaster
    recovery over the last few months.
        Following such a disaster, awarding the right contracts to
    the right businesses can be daunting for the agency and the
    vendors. Time is short. Requirements are large and diverse. The
    lack of electricity and the phone service make it difficult for
    agencies to contact potential bidders and for the bidders to
    access and respond to solicitations.
        I would like to take just a minute to explain some of our
    activities and illustrate the challenges and some of the
    avenues for addressing them. We helped locate and contact
    appropriate vendors often upon short notice.
        Many of our clients records included cell phone numbers
    which are not accessible to FEMA and the Corps. So we helped
    them reach them. In one instance, we were notified by the Army
    Corps at noon one day about a contract that had to be awarded
    that day to begin work by that evening or the very next
    morning. We were able to contact a number of clients, one of
    whom was awarded a $492,000 contract that afternoon.
        We help businesses secure and expedite registrations. I
    know the first panel talked a lot about CCR. That is exactly
    what we do. We help them with that and we can expedite it for
    them.
        We helped access records for one client whose office,
    including his business records, were destroyed, and we had
    information to help him get his registration up and running
    again.
        We offered our resources, e-mail lists, and community
    forums to advertise solicitations. We provided computer access
    to businesses as they needed it.
        I applaud the Corps and FEMA for their efforts to contract
    with local firms and I am gratified by their willingness to
    work with us to that end.
        Our knowledge of local contractors coupled with the ability
    to assist additional businesses in quickly becoming contract
    ready resulted in significantly more local contract awards than
    would have otherwise been made.
        To date, our clients have reported to us almost $52 million
    in contracts for the disaster recovery. That being said, the
    situation is still far from perfect. As I mentioned earlier,
    many of these solicitations are far too large, diverse, and
    complex for small businesses to address alone.
        The very short turnaround time makes teaming almost
    impossible. In addition, a few major contracts that were
    awarded were canceled after a short time which can be very
    detrimental to small businesses.
        Accurate and timely information on upcoming solicitations
    can still be hard to come by. We would certainly welcome the
    opportunity to work with the agencies to explore how the
    process might be improved further.
        Having lived through the tornado and its aftermath, I have
    a greater appreciation for how difficult it is to make local
    awards after a disaster. But that realization simply
    strengthens my conviction that the PTACs can be a critical
    partner in disaster recovery efforts.
        We are pleased that FEMA and other agencies recognize this
    and hope the future collaborations will be even more
    comprehensive to truly maximize small business participation.
        Our position as established contracting assistance
    resources with deep roots in local communities makes PTACs
    ideal as a central clearinghouse for disaster contracting
    information.
        Particularly in the chaos following a national disaster,
    minimizing confusion and maximizing the flow of accurate
    information is paramount to success.
        Thank you for your time this morning, for your strong
    support of PTACs over the years, but most of all, thank you for
    your unceasing commitment to support our Nation's small
    businesses.
        [The prepared statement of Ms. Bennett follows:]

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        [GRAPHIC] [TIFF OMITTED] T3458.025

        Chair Landrieu. Thank you, Ms. Bennett.
        Mr. Davis.

    STATEMENT OF SID DAVIS, PRESIDENT, BIG JOHN'S HEAVY EQUIPMENT,
                                  INC.

        Mr. Davis. Thank you, Chairwoman Landrieu, and Committee.
    Responding to emergencies in southwest Missouri is nothing new
    for us. One city always reinforces and helps another city,
    people, business. So, what happened on May 22 was just normal
    business down in our part of the country.
        Within minutes after the tornado hit, we immediately went
    out there and started doing recovery, opening roads, looking
    for victims, finding housing, shelter, reinforcing law
    enforcement, getting roads, communications open.
        So, with that as our basic framework, within the first week
    a group of us were selected as the cleanup contractors for the
    city of Joplin, and that is where Terri was making
    recommendations and how we came into the picture.
        The city of Joplin was divided into six areas, and I was
    fortunate and given the opportunity to cleanup the hardest hit
    area. Then, when we get to questions, I could sure add to some
    good stories about how the Federal Government interrelated and
    how they made that work and why we were successful.
        But within that two-month period that we did the cleanup,
    we moved the most product per day just simply because we made a
    commitment to excellence and quality control and work with all
    the federal agencies.
        The best aspect of small business in times of crisis are
    that we can bring our past experiences where we had help and
    support where we did for others as well as ourselves.
        Specifically, everyone who I worked with are just top-
    quality people of character. What gave my area some credibility
    was the fact is I relied very heavily upon my experience as a
    Marine officer where I was trained to organize, direct, and
    control, just get in, get it done in the environment.
        We could easily work with FEMA. We could easily work with
    the Army Corps of Engineers. And, as the situation changed, we
    could respond to what their needs are.
        The second reason I think we were successful in southwest
    Missouri was because of our family values that we brought back
    in. I am a second generation in Big John's Heavy Equipment. The
    old-timers who trained us in character and integrity and in
    responsibility, we just stepped up and lived those out and not
    shrank back.
        But because small business has to be profitable every day
    to survive, that is why we are the best to be called on during
    emergencies. This entrepreneurial spirit cannot be duplicated
    by anyone who actually does not have skin in the game.
        And in fact, the folks that come in from out of town, they
    are not as dedicated as we were seeing to that our community
    was put back on its feet.
        Just as I take my responsibility as a Marine offers
    seriously, I took my responsibility as a small business serious
    and we placed our values along with the community's needs and
    that is why we were able to recover and do what we did.
        What the Federal Government provides us small businesses is
    an opportunity to use our existing talents for our community,
    and we have a lot of statistics and when you get to questions
    is that over 50 percent of our schools were destroyed, damaged
    but yet our schools opened up on time.
        We took a major hit in our medical facilities but yet our
    hospitals and medical facilities are open and going. We lost
    over 500 businesses. Within 60 days, over 70 percent of those
    businesses are reestablished and we will have an additional 20
    some percent back on its feet within an additional 30 days.
        So, it is things like this that we brought in in working
    with FEMA, the Army Corps of Engineers, the City of Joplin, and
    the Federal Government as well.
        [The prepared statement of Mr. Davis follows:]

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        [GRAPHIC] [TIFF OMITTED] T3458.027

        Chair Landrieu. Thank you, Mr. Davis, and I am interested,
    very interested in hearing how FEMA worked with you on some of
    the things that they expedited and streamlined for that debris
    removal, et cetera.
        Dale.

       STATEMENT OF DALE RENTROP, JR., PRESIDENT, TIGER TUGZ, LLC

        Mr. Rentrop. Thank you for allowing me to be here today and
    speak with you all. I really appreciate it.
        I am here today to describe my experiences in working with
    the Corps of Engineers two times. First was in 2006. I
    chartered a tugboat to go to work on a Corps project in New
    Orleans.
        And the way we do business in the private sector is if Sid
    wants to hire me he will call me and hire me and I will go to
    work. If I do a bad job, he will fire me.
        But in any case, I have put a tug to work over there and I
    got paid for the first month's worth of work but then the
    second month's worth of work I did not get paid, $120,000.
        Now, this was not my boat. This was Sid's boat. I paid Sid
    for his boat. I took the hit. The job disappeared. The
    corporation disappeared. I found out later the corporation was
    formed 30 days prior to the letting of the contract and now
    they are gone.
        Somewhat of a similar situation is happening now where we
    have a contractor who is not a contractor but is made a
    contractor and he got a $68 million contract from the Corps.
        This contract was fatally flawed from the start. It should
    never have been allowed to proceed. But I was just so proud to
    put my tug boats to work rebuilding the levees around New
    Orleans. It meant so much to me that I would probably have went
    in there blindly, and I guess I did in retrospect.
        But in any case, I will tell you a little bit about it, and
    this is a 15-minute informational package that I am going to
    try to squeeze into four.
        We mobilized the project on January 4 of 2010. Our
    equipment sat there on payroll for approximately 90 days before
    we were instructed to begin the project.
        Now, we were called there for inspection purposes only. We
    sat there truly crewed, full barges, everything ready to go. We
    did not get paid $439,000 and a change.
        We started moving clay on March 6 and we moved all the way
    from March 6 to June 4. I have invoiced a total of $557,000 to
    my contractor. I have been paid $195 and change; the total
    outstanding $311,000.
        The project barges, I do not own barges. I chartered them
    from some people in New Orleans. I currently still owe them
    $38,000. These barges at the end of this project had to be
    cleaned, surveyed, repaired, and return to their owner.
        I was not contractually responsible for that, but as I was
    the charterer of the barges, the responsibility was left to me.
    I still owe those people that clean these barges $133,000, and
    they are from New Orleans.
        I also chartered to inland deck barges in which to put the
    excavators on top of for offloading. We started the operation.
    During the offload operation, the barges were basically damage
    to a point of--anyway they were damaged $214,000 in which the
    owner of the barges looks to me to pay. Excuse me.
        My contractor was terminated on June 3. The prime
    approached me to continue the project. I agreed to continue the
    project and went on a day-rate basis only. You paying me for my
    equipment on a per-day basis.
        At the end of nine days, I requested to get paid because I
    could not pay my captains and deckhands anymore. He refused to
    pay me. I left the job. That cost $149,000.
        The Corps terminated the marine portion of the project on
    or about August 5 of 2010. The project owes Tiger Tugz to date
    $1,400,000. There are also a first-tier sub and a second-tier
    sub that are about at the same level of debt.
        The Corps classified this contract as a supply contract,
    and this is not a supply contract. A supply contract is the
    provision of paper clips or glasses, from my point of view.
        All civil projects and construction projects are bonded. So
    if we do not get paid, we go lien the bond and we have an
    avenue to get paid. There is no bond here. I do not know why it
    was classified as a supply contract. Obviously, they were not
    supplying paper clips. This was a major, major construction
    project. It was worth $68 million. That is what the contract
    was let for.
        The prime contract in this case, like we spoke of earlier,
    is an attorney from North Louisiana. He has never been a
    contractor, does not own a piece of equipment. How could you
    manage a $68 million contract?
        There is a settlement proposal that we put together
    according to Federal Acquisition Regulations, we put it
    together. In fact, my other second-tier subcontractor with me,
    the offloader, submitted a settlement proposal directly to the
    Corps last week and they summarily rejected it.
        So, we are going through the proper procedures but still
    the Corps, and I can go back and talk about it. We have begged
    and pleaded and knocked on doors, and we even had meetings and
    it is a stone wall act. It is a complete stonewall.
        There are procedures that can be followed. But General
    Davis's statement, no, they cannot get involved, they cannot
    get involved. But they can get involved.
        The difference between what the General said and my case is
    that this case involves a termination for the government's
    convenience. It is not a normal circumstance; and under FAR
    49.108-7, it says that the contracting officer may get involved
    to settle problems between the prime and the sub.
        So, it is in writing. It is prefaced by case law. I have it
    here.
        There are not specific regulatory procedures allowing the
    Corps of Engineers to come in and get involved in settling
    these things. And so far to date, the Corps is refusing to do
    so.
        Last in closing, I am way over and I apologize. I thank you
    all for providing me this forum and this opportunity to voice
    what happens to small business and this happens in south
    Louisiana a lot, and I do not know why.
        Perhaps this testimony can be a catalyst that can lead to
    more small business contracting opportunities with our
    government and bring about a change in the Corps practices
    regarding the contracting of small businesses.
        Just right quick before I end, when I took this project, I
    had four tugs and employed about 32 people. I had my fifth tug,
    brand-new tug being built. I was going to employ six to eight
    more people. That would have brought me up to 38 people.
        At present, and in large part due to this contract, I have
    three tugs and I work 16 people because I am having to
    liquidate my assets just to stay in business and to pay the
    people I owe. Like I mentioned earlier, I owe from this project
    and it is a total of $693,000 that I owe in the process of
    executing my work for the government.
        And I brought along two examples of what happens when you
    cannot pay. Two lawsuits. I am being sued professionally and
    personally. And I thank you all very much.
        [The prepared statement of Mr. Rentrop follows:]

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        Chair Landrieu. Mr. Rentrop, we are so sorry for what has
    happened here, and Senator Snowe and I are going to do
    everything we can to not only fix your situation as quickly as
    we can do but to make sure this never happens again to
    legitimate contractors such as yourself doing more than an
    honest days work, having legitimately been in business doing
    work that is desperately needed.
        It is a shame and a tragedy, and I personally am going to
    get involved to help you with your situation and any others
    similarly situated. I am aware of a few others, actually a
    dozen or more contractors, while the Corps is listening, and
    while FEMA is listening, out of Livingston Parish that do not
    have the amount of money on the line that you do, were engaged
    in different kind of work.
        It was a debris removal contract as opposed to a
    construction, levee construction contract. But I bet in my
    office alone I have a half a dozen sort of similar situations.
    We are going to work through each one, and we are going to see
    what the law allows and what the agency will do and absolutely
    see why legal actions can be brought against a prime contractor
    that has obviously not operated in good faith.
        Go ahead, Ms. Nunez Airhart.

       STATEMENT OF MINDY NUNEZ AIRHART, MARKETING DIRECTOR AND
     ASSISTANT TO THE PRESIDENT, SOUTHERN SERVICES AND EQUIPMENT,
                                  INC.

        Ms. Nunez Airhart. Good morning, Chairwoman Landrieu,
    Ranking Member Snowe, and distinguished members of the
    Committee.
        My story is different but I still think it is important as
    well. My family owns a heavy construction and metal fabrication
    company in St. Bernard Parish. In 2005 our parish was decimated
    in the waters caused by Hurricane Katrina and the resulting
    failure of the federal levee protection system.
        My parents, myself, and every single one of our employees
    lost their homes. Our offices and our workshop were destroyed,
    and we lost about $1 million in machinery.
        Since then, our family has persevered and has rebuilt our
    entire business with help from the Federal Government.
        Making the decision to reopen our business in devastated
    St. Bernard Parish was not an easy one but it was the only
    option that we felt that we had. We did not know that the
    government would become our biggest customers in the years to
    come.
        Before the flood, our company was certified in the SBA's
    8(a) program for disadvantaged companies. After Katrina's
    landfall, the Corps of Engineers was able to sole-source
    emergency construction contracts to our company for the
    rebuilding effort. As the Corps personnel learned that our
    company performed tasks on time and on budget, we began to get
    a larger share of the hurricane recovery contracts.
        Although the 8(a) program is not designed to funnel work to
    small businesses in disasters, it certainly had its advantages
    for both our company and the Corps. They were able to quickly
    sole-source these contracts to capable small businesses without
    the delay of putting them up for competitive bid. This was
    especially important for the type of emergency projects crucial
    to New Orleans after the flood.
        However, federal regulations need to be re-examined
    regarding the SBA guidelines for 8(a) businesses in the event
    of a disaster. After catastrophes like Hurricane Katrina,
    government contracts are often the only work available to open
    and functioning 8(a) businesses.
        In our case out of over 100 clients, only one was open
    after the storm. Therefore, the majority of our revenue was
    earned from emergency government contracts. The unintended
    result of this was that we found ourselves with a
    disproportionate mix of revenue from the government which is
    prohibited by the SBA in that program. We were penalized for
    this by being deemed ineligible for sole-source contracts.
        We would like to propose that 8(a) companies located in
    devastated areas whose employees are also victims of the
    disaster be given a waiver for the revenue mix requirement for
    the remainder of their 8(a) term. This would ensure these
    businesses could continue fulfilling an important role in
    rebuilding their own communities and employing their own local
    workers who are also affected by that disaster.
        Furthermore, the most important thing the U.S. Government
    can do to spur the economy in these communities is to forgive
    commercial SBA loans. In our case, we used our loan to buy new
    machinery, new equipment, office furniture, computers. This
    loan must be repaid, and to have to make a loan to repurchase
    everything that was already paid for before the storm, is
    financially devastating.
        The $6000 monthly note on our SBA loan is a huge factor in
    the financial health of our company. On top of the astronomical
    taxes small businesses already pay, these loan payments are an
    incredible burden that we did not factor into our business
    plan. To forgive commercial SBA loans relating to the failure
    of the Federal levee system would not only be an ethical deed,
    but a smart economic move as well. It would spur business and
    job growth in those areas.
        In summary, it is important to note that while the
    government is vital to helping communities recover after
    disasters, the American small business owner will use their own
    blood, sweat, and tears to rebuild.
        Our story is not unique. It unfolded thousands of times
    throughout the Gulf Coast region and continues today. It was
    through hard work, persistence, and dedication of the people of
    southeast Louisiana, people like our family, that small
    businesses were able to return after the storm and become
    stronger and more successful.
        We only ask that the government be considerate and fair in
    realizing that small business owners carry a heavy burden under
    normal circumstances and deserve a helping hand while
    rebuilding their communities after a disaster. Thank you.
        [The prepared statement of Ms. Nunez Airhart follows:]

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        Chair Landrieu. Thank you. Your testimony, all four of you,
    has been terrific, very specific and clear, and I think we are
    going to be able to use a lot of what you said to beef up our
    efforts.
        So, let me just ask you each and then I will turn it over
    to Senator Snowe. Is there anything else that each of you would
    like to say for a minute to just either reemphasize a specific
    suggestion that you have that you think would go a long way in
    making sure that small businesses in areas that have been
    affected by disasters are included in that recovery effort
    under the contracting provisions with the Federal Government
    and is there anything else that you just would like to
    underline or emphasize, starting with you, Mrs. Bennett?
        Ms. Bennett. Thank you. I would like to emphasize, of
    course, what I do know that PTACs could help in a disaster. We
    are right there. We know the small businesses and the local
    businesses that can help in such a disaster, and that is what
    we did.
        We would like to work more with the Federal Government
    agencies in trying to help them find those businesses even more
    than what we do. I did some research, and I wanted to find the
    right person at FEMA who knew who to contact that was going to
    be in Joplin doing the work that needed to be done. I knew it
    is much better than to just leave a message with someone who
    does not know anything because we did not have time to wait.
        Chair Landrieu. But you reached out to FEMA. They did not
    try to find you?
        Ms. Bennett. Not that I know of.
        Chair Landrieu. That is something that we need to do.
        Ms. Bennett. I did reach out and found them. And then it
    was the next day, though, that they did return my phone call
    and we started working together.
        Chair Landrieu. Mr. Davis.
        Mr. Davis. In the questions you asked the preceding panel,
    a lot of the things I physically observed and lived through.
    For example, most of 8(a)s, WBAs, and DBAs were not qualified.
    When they would contact me for work in my strong period, they
    were just a name and one individual. They did not have
    companies. They would go to work for us.
        Chair Landrieu. Were they local 8(a)s that contacted you or
    people from all over the country?
        Mr. Davis. Both.
        Chair Landrieu. And you did not find that they were
    qualified? That is not what Mindy testified. She was obviously
    a qualified 8(a) and did good work, and I did not want you to
    misinterpret what I said.
        I said there are contractors out there that are not
    qualified. I did not say they were 8(a) or not 8(a). I am not
    trying to make a judgment about that. I just said there are
    obviously contractors that get work that are not qualified,
    whether they are large, in this case they had to be
    relatively--well, I do not know. The $68 million contract is
    not a small contract. It is not $1.5 million. It is not $5
    million. It is $68 million.
        But nonetheless, you were contacted by some companies that
    were 8(a)s or women-owned businesses that you thought were not
    qualified, and so, you did not include them in your bids.
        Mr. Davis. Well, in order to meet the requirement, I sort
    of knew a lot of folks and I found a lot of folks that were
    just simply titles.
        Chair Landrieu. Oh, that were trying, just newly formed or
    et cetera, et cetera, and they were not really in the business.
    Right. That is what I said.
        Mr. Davis. Right, that is what you were talking about
    earlier, and that is something I had to sort through very
    diligently in order to accomplish and put together a group that
    could actually to the work.
        The other thing I would like to emphasize is what Dale here
    was talking about on his side is that we have got to be very
    careful, as small businesses, who we go to work for as prime
    contractors because some of them just have a history of poor
    character and financial things that are not correct.
        And one of the clauses that those--and I do not know if you
    call them predatory prime contractors is that they put clauses
    in their contract that says that if you do not finish your work
    assigned, they do not have to pay you.
        So, what they will do is they will move, they will get you
    started, and then they will move something or they will take
    work away from you and just force you to move away, and then
    they say I do not have to pay you.
        Chair Landrieu. The predatory primes we need to be focused
    on. Dale?
        Mr. Rentrop. Yeah, just to add on to what he said. That is
    exactly what goes on because they move on from your subcontract
    and they find somebody else which is what happened in my
    instance. They moved on from me to the next one. They kept in
    the contract, and they just keep the Ponzi going.
        Just by way of point, the tug company that took my place
    lasted two weeks and it sank four barges full of earth and
    clay. That is just the way it goes.
        But just to further that, you know, I mean, that is what we
    have been given is the same, we cannot get involved, we cannot
    get involved in, we cannot get involved in, we cannot get
    involved in.
        And the more we look, and I am a tug boat operator. Last
    week, I was in an engine room changing out a main engine. So,
    we do not get involved in this. But there are ways they can get
    involved, and the more I look in the FAR and the CFRs it is
    right here.
        You can get involved in. So that the act of saying no, we
    cannot and just stopping it right there, I mean, we have been
    doing this, we have been going after this for a year.
        Chair Landrieu. We promise you, we are involved today, and
    we will help you. And I thank you and I would love to see you
    right after the hearing if we could for a minute.
        Ms. Airhart, is there anything else you want to add?
        Ms. Nunez Airhart. I do. In addition to my specific
    recommendations in my testimony, I want to state for the record
    that we have had nothing but good experiences with the Corps
    and good experiences with getting paid, and getting paid on
    time.
        They usually, in most instances, pay us within 14 business
    days because we are a small business. Now, we do know how to
    complete the paperwork so I guess that is a part of it.
        I also want to state for the record that we have had
    nothing but praise for the Louisiana PTAC which has helped us
    tremendously, Mr. Bob Dempsey specifically.
        In the earlier panel, you mentioned that maybe we should
    have more requirements for bonding. While I certainly agree
    with that, I just want to let you know that it is very hard for
    a small business to get bonding. You have to have money to get
    bonding. So, if you do not have any money, you cannot get a
    bond.
        It is sort of a Catch-22. We were lucky in our experiences
    right after the storm, we did not have bonding experience
    capability before the storm. After the storm, we found a large
    construction company that acted as a mentor. They introduced us
    to their bonding company, and eventually we did get bonding,
    and that is how we grew. But it is really hard for a small
    company to get bonding, especially if you do not have money in
    the bank.
        I agree with your thoughts that the government needs to
    maybe do some regulations to where you can get involved in the
    second and third tier subcontracts because currently exactly
    they cannot get involved in but I think that is because of the
    way the law is written.
        I have one third-tier contractor right now who is not
    getting paid by his second-tier contractor on my contract, and
    there is nothing I can do about it, not one thing. And I feel
    very bad for this man because he did the work, and it is not
    fair.
        But I paid the second the guy. The second guy did not pay
    the third guy. There is nothing I can do about it.
        I also agree that there should be a requirement that
    businesses have to be in business for a certain period of time
    before they can be awarded disaster contracts.
        That is it.
        Chair Landrieu. Senator Snowe.
        Senator Snowe. Thank you, Chair Landrieu, and I want to
    thank each and every one of you. I know you all have shared
    some extraordinary stories of perseverance and persistence and
    courage in the face of tremendous adversity and physical
    destruction in your respective communities and triumphed over
    tragedy.
        So, I thank each and every one of you for your
    contributions and the role that you have played. I am sorry,
    and I regret the hardships that you have endured. Mr. Rentrop,
    and I will certainly work with the Chair to see what we can do
    to resolve this terrible situation for you that should never
    have occurred.
        We have learned a lot from it. In the mean time, to resolve
    your specific situation which I know has to be an exceptional
    burden, we want to help you out in that regard.
        Ms. Bennett, you were mentioning, and I think the
    Procurement Technical Assistance Centers, the PTACs, do great
    work and obviously they did in this case in Joplin, Missouri,
    that we all saw the horrendous devastation that unfolded in
    Missouri and specifically in Joplin.
        I think it is absolutely remarkable that 50 percent of the
    schools were destroyed and yet that they opened on time. That
    is just an amazing story.
        You suggested that PTAC should be a disaster contracting
    clearinghouse for information. Are you making that
    recommendation?
        Ms. Bennett. I think that the PTACs could be very helpful
    in helping businesses understand what is needed by the Federal
    Government, and also helping the Federal Government get the
    message out to the small businesses.
        You know, we do counsel them one-on-one and we can help
    them understand information. We also have a network throughout
    the country of PTACs where we are all connected. We can talk to
    other PTACs. And Maine and Louisiana have very good PTACs as
    well, and I think it could be beneficial for all involved to
    have the PTACs in there a little more tighter and helping make
    sure that the disasters are taken care of the best we can with
    small businesses.
        Senator Snowe. Yes. I think that is an excellent idea,
    because it is basically a clearinghouse for all of that
    information. You can go to one location, one resource for all
    of that information that is required, especially during a
    disaster.
        Even having a data bank of, you know, registered vendors in
    communities in the event that there is a disaster. Again,
    getting back to some of the issues that Mr. Rentrop has
    confronted.
        And, Mr. Davis, you recognized, I gather, that some of
    these contractors just would not cut the mustard, as we would
    say in Maine. But you recognized that at the outset from their
    applications which makes me wonder why the Federal Government
    did not, in this case with Mr. Rentrop and a prime contractor,
    because you recognized that some just would not work. Obviously
    they had not been in the business. It was obviously temporary.
        Mr. Davis. Well, Senator, I have got an opinion and that is
    it is all based on money. In our case, we were doing a good
    job. We had carried 80 percent of the load of the cleanup and
    then they decided that what we were doing needed to be rebid.
    So, they set us off to the side for another set of contractors
    who would go to work. So, it is all based on money.
        Chair Landrieu. But you were local in Joplin?
        Mr. Davis. Yes, ma'am.
        Chair Landrieu. They set you aside because you were either
    too big or they wanted to give other people an opportunity or
    what was it?
        Mr. Davis. No. They said we were in violation of the
    Stafford Act, that we were an emergency response appointed to
    get in and get it done through Phillips Jordan, which was my
    prime contractor. And then, the Army Corps of Engineers came in
    and said that, because of the Stafford Act, they were required
    to rebid our project.
        So, our portion of it came to a close and they brought new
    contractors in.
        Chair Landrieu. I think I can understand that the Stafford
    Act may say in the early 30 or 60 days in an emergency you can
    issue contracts without bids, but at a certain point you have
    to bid the work.
        You would understand that for protection of the taxpayer
    that the taxpayers do not want to over pay. They might have to
    initially but I think the idea is that you would have to bid
    the work. So when you rebid the work, you were not awarded the
    contract. Is that what you are saying?
        Mr. Davis. Well, the type of contractor that Dale is
    talking about here were the people that were courting us, and
    it did not take very long after going on line and finding out
    their history to realize that I did not want anything to do
    with them.
        I would not bid with them. I just quietly went off to the
    side.
        Chair Landrieu. Okay. Dale, do you want to add anything?
        Mr. Rentrop. Nothing I can think of. I think Sid covers it
    pretty well. You see that there is a climate of disaster
    chasers. Mr. Sid operates a business, and so do you. A lot of
    times we just do not have the time or even the wherewithal. The
    first time I had ever heard of a CCR was yesterday, and it kind
    of shocked somebody.
        It is kind of hard because we are out there bidding
    projects and running tugs all over the southern United States
    and they are complicated just like yours is, and we do not know
    the opportunities are even there and even after.
        But we really have to be careful who we work for. You know,
    there are a lot of predatory primes out there. This is my
    second one in two tries.
        Senator Snowe. Thank you.
        Chair Landrieu. Thank you all so much. The meeting is
    adjourned and we appreciate it. The record will stay open for
    two weeks if anybody wants to submit any additional
    information. Thank you.
        [Whereupon, at 12:05 p.m., the Committee was adjourned.]

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