[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
__________
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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
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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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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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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.]
APPENDIX MATERIAL SUBMITTED
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