[Senate Hearing 113-345]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-345
 
  SEQUESTRATION: SMALL BUSINESS CONTRACTORS WEATHERING THE STORM IN A 
                                CLIMATE 
                         OF FISCAL UNCERTAINTY 

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

                               ROUNDTABLE

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 20, 2013

                               __________

    Printed for the Committee on Small Business and Entrepreneurship

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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                    ONE HUNDRED THIRTEENTH CONGRESS

                              ----------                              
                   MARY L. LANDRIEU, Louisiana, Chair
                 JAMES E. RISCH, Idaho, Ranking Member
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
TOM HARKIN, Iowa                     MARCO RUBIO, Florida
MARIA CANTWELL, Washington           RAND PAUL, Kentucky
MARK L. PRYOR, Arkansas              TIM SCOTT, South Caarolina
BENJAMIN L. CARDIN, Maryland         DEB FISCHER, Nebraska
JEANNE SHAHEEN, New Hampshire        MICHAEL B. ENZI, Wyoming
KAY R. HAGAN, North Carolina         RON JOHNSON, Wisconsin
HEIDI HEITKAMP, North Dakota         JEFFREY S. CHIESA, New Jersey
EDWARD J. MARKEY, Massachusetts
                Jane Campbell, Democratic Staff Director
           Skiffington Holderness, Republican Staff Director



                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire..........     4
Heitkamp, Heidi, a U.S. Senator from North Dakota................    12

                           Witness Testimony

Antoinette, Peter, President and CEO, Nanocomp Technologies, Inc.     1
Ford, Antwanye, President and CEO, Enlightened, Inc..............     2
Misanin, Joseph, Deputy Director for Technology and Innovation, 
  Office of Small Business Programs, Department of Defense.......     2
Park, Jiyoung, Associate Administrator, Office of Small Business 
  Utilization, General Services Administration...................     2
Boshears, Kevin, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Homeland Security..........     3
Jenkins, Calvin, Deputy Associate Administrator, Office of 
  Government Contracts and Business Development, Small Business 
  Administration.................................................     3
Jordan, Joe, Administrator, Office of Federal Procurement Policy, 
  Office of Management and Budget................................     3
Harris, Dot, Director, Office of Small and Disadvantaged Business 
  Utilization, Department of Energy..............................     3
Vera, Mauricio, Director, Office of Small and Disadvantaged 
  Business Utilization, U.S. Agency for International Development     3
Smith, Willie H., Senior Procurement Executive, Department of 
  Transportation.................................................     3
Neal, Brandon, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Transportation.............     4
Jordan, Roger, Vice President of Government Relations, 
  Professional Services Council..................................     4
Priester, Nicole, President and CEO, Encore Solutions, Inc.......     4

          Alphabetical Listing and Appendix Material Submitted

Antoinette, Peter
    Testimony....................................................     1
    Prepared statement...........................................    26
Boshears, Kevin
    Testimony....................................................     3
Ford, Antwanye
    Testimony....................................................     2
    Prepared statement...........................................    29
Harris, Dot
    Testimony....................................................     3
    Prepared statement...........................................    40
Heitkamp, Heidi
    Opening statement............................................    12
Jenkins, Calvin
    Testimony....................................................     3
    Prepared statement...........................................    36
Jordan, Joe
    Testimony....................................................     3
Jordan, Roger
    Testimony....................................................     4
    Prepared statement...........................................    50
Landrieu, Hon. Mary L.
    Opening statement............................................     1
    Responses to post-hearing questions from:
        Joseph Misanin...........................................    63
        Jiyoung Park.............................................    64
        Calvin Jenkins...........................................    68
        Dot Harris...............................................    71
        Mauricio Vera............................................    74
        Willie H. Smith..........................................    77
    Letter dated April 1, 2013, to Seth D. Harris................    95
    Letter dated April 1, 2013, to Allison Macfarlane............   125
    Letter dated April 10, 2013, to Subra Suresh.................   129
Misanin, Joseph
    Testimony....................................................     2
Neal, Brandon
    Testimony....................................................     4
Park, Jiyoung
    Testimony....................................................     2
    Prepared statement...........................................    33
Priester, Nicole
    Testimony....................................................     4
    Prepared statement...........................................    53
Shaheen, Hon. Jeanne
    Opening statement............................................     8
    Responses to post-hearing questions from:
        Jiyoung Park.............................................    80
        Calvin Jenkins...........................................    85
        Dot Harris...............................................    87
        Willie H. Smith..........................................    92
Smith, Willie H.
    Testimony....................................................     3
    Prepared statement...........................................    47
USAID
    Responses to post-hearing questions for the record...........    57
    Letter to contractor dated March 12, 2013....................   140
    Letter to recipient dated March 12, 2013.....................   141
    Letter dated May 2, 2013.....................................   142
Vera, Mauricio
    Testimony....................................................     3
    Prepared statement...........................................    44
Letters and additional material submitted:
    U.S. Department of the Interior
        Letter dated June 13, 2013...............................    97
    U.S. Department of State
        Letter dated April 13, 2013..............................    99
    U.S. Department of Homeland Security
        Letter dated March 5, 2013...............................   102
        Letter dated April 30, 2013..............................   103
    Defense Information Systems Agency
        Letter dated April 22, 2013..............................   106
    The Under Secretary of Defense
        Letter dated May 10, 2013................................   107
    U.S. Department of Justice
        Letter dated May 29, 2013................................   110
    U.S. Department of Labor
        Letter dated June 11, 2013...............................   112
    The Secretary of Transportation
        Letter dated June 3, 2013................................   114
    U.S. Department of Education
        Letter dated April 22, 2013..............................   115
    U.S. Environmental Protection Agency
        Letter dated May 22, 2013................................   118
    Federal Deposit Insurance Corporation
        Letter dated April 30, 2013..............................   120
    General Services Administration
        Letter dated June 14, 2013...............................   122
    U.S. Nuclear Regulatory Commission
        Letter dated May 13, 2013................................   124
    National Science Foundation
        Letter dated April 30, 2013..............................   127
    U.S. Office of Personnel Management
        Letter dated June 13, 2013...............................   131
    U.S. Small Business Administration
        Letter dated May 15, 2013................................   132
    Smithsonian Institution
        Letter dated April 19, 2013..............................   135
    Social Security Administration
        Letter dated April 29, 2013..............................   137
    Department of the Treasury
        Letter dated May 23, 2013................................   138
    U.S. Department of Agriculture
        Letter dated June 12, 2013...............................   143
    Department of Veterans Affairs
        Letter dated April 30, 2013..............................   146
    Mid-Tier Advocacy
        Letter dated April 15, 2013..............................   147
    Chart titled ``Small Business Prime Contracting''               148
    The Retired Military Officers Association
        Letter dated June 7, 2013................................   149
    U.S. Department of Transportation
        Small Business Goaling Report............................   152


  SEQUESTRATION: SMALL BUSINESS CONTRACTORS WEATHERING THE STORM IN A 
                     CLIMATE OF FISCAL UNCERTAINTY

                              ----------                              


                        THURSDAY, JUNE 20, 2013

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:04 a.m., in 
Room 428, Russell Senate Office Building, Hon. Mary L. Landrieu 
(Chair of the Committee) presiding.
    Present: Senators Landrieu, Shaheen, and Heitkamp.

  INTRODUCTORY REMARKS OF HON. MARY L. LANDRIEU, CHAIR, AND A 
                  U.S. SENATOR FROM LOUISIANA

    Chair Landrieu. Good morning, everyone. And, if you would 
find your seats--and welcome.
    I am happy to call this Small Business Roundtable together 
this morning, which is one of our traditional and very popular 
roundtables on a variety of subjects that we believe help to 
give voice to small business in America. I want to thank all of 
you for participating.
    And the subject of this roundtable is Small Business 
Contractors Weathering the Storm of Fiscal Uncertainty. In 
other words, sequestration is happening as we speak--across-
the-board cuts to a variety of different agencies.
    Of course, my position is that I hope we can move past 
sequestration to a more organized and orderly budget process 
for our agencies, departments and the Nation, but we have not 
gotten to that point yet.
    And so we have had many, many questions that I thought 
could be answered by this such roundtable--how is sequestration 
affecting small business, particularly those businesses that 
contract with the Federal Government--and that is why you all 
have been invited today.
    So I would like to start with Peter, and I would like you 
to introduce yourself. You have like 45 seconds. Say who you 
are, what you do and one sentence about why you are happy to be 
here.
    And you have got to press the button, talk, and you have to 
kind of lean into the microphone to be picked up.
    Mr. Antoinette. Peter Antoinette, Nanocomp Technologies in 
Merrimack, New Hampshire. Ninety-five percent of our business 
comes from the Department of Defense. We make advanced 
materials to lighten body armor, to reduce the weight of 
satellites and aircraft through carbon nanotechnology.
    And I am happy to be here because sequestration is 
hammering us right now as a small business and is hammering 
others in the greater New Hampshire area. As a member and as 
the director of the High Tech Council, I am seeing that too.
    Chair Landrieu. Thank you.
    Mr. Ford.
    Mr. Ford. Good morning. My name is Antwanye Ford, President 
and CEO of Enlightened, Inc. I am also the Chair of the Board 
for the D.C. Chamber of Commerce as well as the Presidential 
Council for the Black Chamber of Commerce.
    Enlightened, Inc. is a firm founded in 1999. We do cyber 
security, a lot of system integration work, as well as 
management consulting.
    I am very happy to be here to talk about sequestration. We 
are also being hammered in some of the work that we are doing 
across both DOD and civilian agencies, but we are also getting 
a little bit hammered on some of the local work we are doing in 
Washington, D.C. because some of the work we do at the local 
levels is grants--as you know, some of the work that is being 
passed down. So we are being hammered across the board.
    So I am happy to have a voice here and would love to be 
able to add some value where we can.
    Chair Landrieu. Mr. Misanin.
    Mr. Misanin. Good morning. My name is Joe Misanin. I am the 
Deputy Director for Technology and Innovation at the Department 
of Defense with responsibility for Small Business Innovation 
Research, Small Business Technology Transfer, Indian Incentive 
and the various funded programs.
    The department's commitment to maximizing opportunities for 
small business in DOD procurements remains stronger than ever, 
and I am looking forward to this discussion about the impacts 
of the sequester on small business performance within the 
agencies and what we can do about it.
    Thank you.
    Chair Landrieu. Thank you.
    Ms. Park.
    Ms. Park. Good morning. I am Jan Park with the General 
Services Administration.
    Chair Landrieu. Is your button pressed? And pull the mic 
closer to you, please.
    Ms. Park. Good morning. Jan Park with the General Services 
Administration. I oversee the Small Business Utilization 
Program at GSA. We really advocate for small business 
opportunity in Federal contracting through our agency, and our 
Acting Administrator testified earlier this week about GSA's 
commitment to small business.
    So I am pleased to be here. We have a strong record of 
contracting with small businesses, and I am happy to be here to 
hear how we can do even better.
    Chair Landrieu. Thank you.
    Go ahead.
    Mr. Boshears. Good morning. Kevin Boshears with the 
Department of Homeland Security, Director of the Office of 
Small and Disadvantaged Business Utilization. We are pleased to 
be here as well to talk about, despite the challenging 
environment, how we can continue to promote small businesses' 
participation in our department.
    Thank you for inviting me.
    Chair Landrieu. Thank you.
    Mr. Jenkins.
    Mr. Jenkins. Good morning. My name is Calvin Jenkins. I am 
the Deputy Associate Administrator for SBA's Office of 
Government Contracts and Business Development. Pretty much all 
of the small business set-aside programs are within our 
authority.
    Certainly, I am happy to be here, to look forward to the 
discussion on the impact of sequester on small businesses and 
talk about SBA's efforts to maximize opportunities during this 
trying time.
    Mr. Joe Jordan. Thank you, Madam Chair.
    Chair Landrieu. Mr. Jordan.
    Mr. Joe Jordan. I am Joe Jordan, Administrator for Federal 
Procurement Policy at the Office of Management and Budget, also 
formerly Associate Administrator for Government Contracting and 
Business Development at the Small Business Administration.
    I am happy to be here because it is always great to talk 
about the opportunities and challenges faced by small 
businesses with so many people in our community and also 
because sequestration is a bad policy and it will negatively 
impact small businesses, and I hope it is replaced with 
balanced deficit reduction.
    Chair Landrieu. Thank you, Mr. Jordan.
    Ms. Harris.
    Ms. Harris. Good morning. My name is Dot Harris. I am an 
assistant secretary at the Department of Energy with 
responsibility for economic impact and diversity for the 
agency. I am also Director of the OSDBU.
    I am happy to be here this morning because small business 
is important. I have been a previous small business owner 
myself. I understand the need and the support--that the 
agencies have to stand up to support small businesses.
    Glad to be here. Thank you.
    Chair Landrieu. Mr. Vera.
    Mr. Vera. Good morning. My name is Mauricio Vera. I am the 
Director of the Office of Small Business at the U.S. Agency for 
International Development.
    I am very happy to be here to discuss how we have improved 
at our agency with working with small businesses and to discuss 
what we see as the significant impact moving forward, beyond 
this year in particular, should the sequester situation 
continue.
    So I am happy to be here, and thank you very much for 
inviting me.
    Chair Landrieu. Thank you.
    Mr. Smith.
    Mr. Smith. Good morning. I am Willie Smith. I am the Senior 
Procurement Executive with the Department of Transportation. 
And one of my most important functions as Senior Procurement 
Executive is to facilitate an acquisition environment that 
supports the timely delivery and cost-effective delivery of 
goods and services to support our mission. Certainly, small 
businesses play a very important role in that.
    And bringing together the acquisition forces (contracting, 
program management, and technical) within the Department of 
Transportation to facilitate that goal is something that I 
spend a lot of time doing. So it is certainly good to be here 
to talk with you and explore ideas about how we can continue to 
operate effectively in sequestration and other austere budget 
environments.
    Chair Landrieu. Mr. Jordan. I mean Mr. Neal.
    Mr. Neal. Good morning. Brandon Neal on behalf of the U.S. 
Department of Transportation, Director of the Office of Small 
and Disadvantaged Business Utilization. I am here today to 
share some of our best practices across the agency, from the 
top-down, on how we are achieving our small business goals 
during the sequestration period.
    Chair Landrieu. Thank you.
    Mr. Jordan.
    Mr. Roger Jordan. Chairwoman, thank you.
    I am Roger Jordan with the Professional Services Council. 
We are a national trade association that represents Federal 
contractors that provide professional and technical services 
across all the government agencies.
    Pleased to be here this morning to talk about sequestration 
but also, more importantly, the broader impact of budget 
uncertainty and the impact that it is having on not just the 
agencies but also on contractors' ability to plan.
    Chair Landrieu. Ms. Priester.
    Ms. Priester. Good morning. My name is Nicole Priester, and 
I am the President and CEO of Encore Solutions, Inc., a woman-
owned 8(a) small business headquartered in Rockville, Maryland. 
And I am very happy to be here today to discuss how small 
businesses like my own have been negatively impacted by 
sequestration.
    Chair Landrieu. Well, as you can see, we have a very 
distinguished and knowledgeable panel, and I think this will be 
a very helpful and robust and informal discussion, which is the 
purpose of a roundtable as opposed to a formal hearing--to get 
actually more on the record that might be helpful as we explore 
this challenge.
    Let me recognize Senator Shaheen who is with us today. She 
wants to give brief opening remarks and introduce, I think, 
someone from New Hampshire.

 OPENING STATEMENT OF HON. JEANNE SHAHEEN, A U.S. SENATOR FROM 
                         NEW HAMPSHIRE

    Senator Shaheen. Well, I just want to first thank Chair 
Landrieu and the Ranking Member for having this roundtable 
discussion.
    As you all know because you have been dealing with the 
issues of sequestration--these automatic cuts that have gone 
into effect--they are creating real uncertainty and challenges 
for not just government agencies but for the small businesses 
who work for the government. So I think this is a very timely 
discussion, and hopefully, it will help spur some action here 
in Congress.
    I also wanted to thank Peter Antoinette, who is with a New 
Hampshire company, Nanocomp, for coming down and for sharing 
the challenges that you are facing.
    Peter's company is using very innovative technology. Having 
to deal with the kinds of impacts from sequestration right now 
can have a huge negative effect on potential for small 
companies like Peter's and others that are really innovative--I 
mean all of you who are on the panel can speak to this--as they 
are trying to get off the ground.
    So I especially appreciate your coming and for sharing your 
insights. Thank you all very much.

              OPENING STATEMENT OF CHAIR LANDRIEU

    Chair Landrieu. I am going to keep my opening remarks very 
brief for a couple of reasons. Our time, unfortunately for 
Senator Shaheen and I, is short because we have a markup on the 
Appropriations Committee that starts shortly. But the good news 
is Senator Heitkamp will be here--a member of our Committee--to 
continue to conduct. Both minority and majority staff are 
present. So this will continue to be in the record.
    Let me just acknowledge that this week, Senator, is the 
50th National Small Business Week that we have recognized at 
the Federal Government. And, of course, all over the country, 
states and jurisdictions acknowledge Small Business Week. It 
gives us an opportunity to really shine the spotlight on the 
great entrepreneurial spirit of America, which is a model for 
the world.
    We have 27 million small businesses in America, defined as 
anywhere from 1 to 500 employees, but most importantly, 35 
percent of all the patents across the board are held by small 
businesses. As you know, some of the most cutting-edge 
technology is being developed by small businesses in America.
    And they are absolutely the job creators of our economy. 
Sixty to sixty-five percent of all new jobs have been created 
by start-up small businesses.
    And, particularly in times of challenge, small businesses 
are more agile, quicker to be able sometimes to respond to very 
difficult, changing market situations.
    So the purpose of this hearing this morning--and we are 
joined by Senator Heitkamp.
    The purpose of this roundtable is to really hear from small 
businesses themselves that contract with the Federal Government 
and potentially, as you said, Mr. Ford, other governments--the 
District of Columbia--and the impact that sequestration is 
having on them because the last thing we want, I think in our 
view, or my view--let me just speak for myself, not for the 
entire Committee--is to stop job creation in America. We need 
to be promoting job creation. We need to be creating jobs.
    So I sent a letter, which prompted this hearing, at the 
request of several of my members, to the Federal agencies, 
asking for that information--how is sequester to your agency or 
your department affecting your small business goals as required 
by Federal law?
    And we wanted to hear not just from the agencies but from 
some small businesses to really test and trust what is truly 
going on, not that we do not believe our agencies, but we like 
to trust and verify on this Committee.
    So that is what this roundtable is about.
    To save time, I am going to submit the rest of my statement 
for the record, and I would like to begin the discussion.
    And, again, to our member, this is very free-wielding. I am 
going to start with one or two questions.
    If you want to respond, raise your placard like this. I 
will do my best to call on you.
    And, if the members have a question, they can just signal 
to me, or if they have a comment they would like to make.
    And we will take all of this information and have it for a 
good congressional record and share it with our counterpart on 
the House side as well.
    So let me just start, Mr. Jordan and Mr. Jenkins, with you. 
For just each of you, a two-minute sort of opening, or two or 
three minutes opening--from your positions as--Mr. Jordan, you 
are Office of Federal Procurement, Office of OMB. Mr. Jenkins, 
you are the Office of Government Contracting with the small 
business development.
    My question would be: How are your offices focused on this 
question?
    Are you or are you not?
    And, if you are, what are you doing?
    And if you are not, what should you be doing?
    Go ahead, Mr. Jordan.
    Mr. Joe Jordan. Absolutely, Madam Chair, and thank you 
again for holding this very important conversation.
    As I said, and as you said, sequester is bad policy. It 
absolutely will have negative impacts on businesses of all 
types, and that includes the job creating, innovative, 
entrepreneurial small businesses.
    The President--you mentioned this in your opening too--
called repeatedly for balanced deficit reduction to turn off 
the sequester.
    Small businesses are not immune from the negative effects 
of the sequester. That being said, there is a lot we are doing 
in general to promote small businesses, specifically small 
business contracts--obviously, a passion of mine coming from 
SBA to OMB.
    The President and the Administration have really been 
unwaivering in their commitment to small businesses in 
maximizing the utilization of small business contractors. If 
you look at what we did, not just what we are saying, the goal 
achievement against small business contracting goals has gone 
up repeatedly--the largest two-year increase in more than a 
decade. It looks like it is on a good upward track, and we will 
not declare victory until we meet or exceed the 23 percent.
    But we are doing a number of things. We are convening the 
White House Small Business Procurement Group. This brings the 
Deputy Secretary's real high-level folks within the agencies to 
the White House to discuss the challenges and, again, 
opportunities for small business contractors, share best 
practices and tools they can use--so just tools given to 
agencies by this Committee in Congress through the Small 
Business Jobs Act.
    My very first memo after getting confirmed at OFPP was to 
co-sign with Karen Mills and send out to all the agencies, 
saying here are three specific things we would like you to do 
to help increase small business utilization. And we are 
reconvening that group, in fact, next week.
    Chair Landrieu. Do you mind saying what those three things 
are?
    Mr. Joe Jordan. Absolutely. It was, first of all, looking 
for opportunities below the Simplified Acquisition Threshold--
the $150,000 level below which it is presumed that contracts 
will go to small businesses. And you really need to step up 
your utilization of small business there.
    Secondly, using Section 1331 of the Small Business Jobs Act 
that this Committee was incredibly helpful in passing, which 
allows set-asides on these multiple award contracts. Set-asides 
are the task orders for small businesses. So you can restrict 
that competition to just small businesses or the socioeconomic 
groups.
    And then, third, ensuring that at each agency there is 
high-level accountability to achieving that agency's goals. SBA 
sets specific goals for each agency that roll up to that 23 
percent for the government, and we need agency leadership 
really focused on meeting or exceeding there.
    We then set up a cross-agency performance goal for the 
government overall, both in meeting those numerical statutory 
goals but also in driving more innovative contracting methods--
finding new ways to get the dollars to small businesses.
    And then we have held a number of sessions with the Office 
of Science and Technology Policy, figuring out that piece.
    At the end of the day, a lot of this is awareness-building, 
both among the agencies and the contracting officer workforce, 
which I try to help promote through my office, through the 
Federal Acquisition Institute trainings and some of the memos 
and guidance documents that we issue.
    And then I know all the agencies do a tremendous amount of 
outreach to the small businesses. In fact, my boss, Sylvia 
Burwell, just spoke yesterday at the New Hampshire Business Day 
Luncheon with a number of great New Hampshire businesses.
    So those are some of the types of things we are trying to 
do.
    But, again, sequester is bad policy, and it is going to 
have a negative impact.
    Chair Landrieu. Mr. Jenkins.
    Mr. Jenkins. Thank you.
    Certainly, the SBA is clearly focused on the impact of 
sequester on small business and procurement opportunities. In 
fact, just yesterday I received an email about a small business 
who indicated how at a particular buying activity they lost an 
opportunity and the contracting officer indicated it was 
because of the sequestration, and so that was a key part of 
their procurement opportunity.
    But we are focused. As Joe mentioned, one of the things we 
do is negotiate goals with the 24 top contracting agencies--the 
24 CFO agencies. We negotiate very strict goals with them in 
order to set the governmentwide goal.
    We also have proactive engagement in the sense that we have 
procurement center representatives who are assigned to the 
various buying activities throughout the country, looking for 
opportunities.
    We have worked with our data folks, and we have developed 
some additional tools. One tool, in particular, is called the 
Procurement Opportunity Tool. We now can see all the 
procurements across the board that have gone to small business 
in a particular industry and then have a conversation or 
discussion with the agencies to find out why other procurements 
in those same industries are not going to small business. And 
we have made those tools available to each of the agencies, 
which is really critical.
    Also, accountability has been a key part for us, and we 
have developed a scorecard. Joe, when he was at the SBA, helped 
us redefine that and put a lot of methodology behind that 
scorecard. So now we can evaluate not just whether or not an 
agency has met or did not meet the goals but what effort the 
agency is actually putting forth.
    In a lot of cases, we are seeing a lot of good best 
practices that we can share across the various agencies, which 
have been tremendously helpful.
    So I think those are the three approaches--negotiate good, 
solid goals with the agencies; proactively engage the agencies; 
and also accountability in terms of a scorecarding of the 
agencies and finding out exactly where they stand at the end of 
the day.
    Chair Landrieu. Okay. I would like to ask you to submit 
that letter you referred to, to the record, and if any others 
have letters that they have received from small businesses, if 
you want to submit them to the record of this hearing.
    Mr. Jenkins. Sure.
    Chair Landrieu. Let me ask the agencies present--and we 
have the Department of Homeland Security, Department of 
Defense, Department of Transportation, Department of Small 
Business--to respond to what you heard from Mr. Jordan and Mr. 
Jenkins. Have any of the actions that they have taken been 
helpful to you all?
    And I would really like to hear from the Department of 
Defense since you have the largest amount.
    You can refer to this chart back here, members--the prime 
contracting for small businesses.
    And I do not know if the staff can pass these out to the 
members or push this up.
    But the Department of Defense has $57 billion that is 
directed by our law to direct to small business contracts. Now 
it is a small portion of their overall budget, but $57 billion 
is a big number, and it can have a major impact on companies 
and communities everywhere.
    We have--the next largest is the Department of Homeland 
Security, which I actually chair--$4.2 billion.
    Then we have General Services Administration--$1.4 billion.
    The Department of Energy is $1.3 billion.
    Department of Transportation is about $.73 billion.
    And then USAID is $.18 billion--$180 million.
    And others are much smaller.
    So let's start with the Department of Defense because this 
is where the impacts are probably going to be felt most 
broadly, most deeply and particularly because of just the 
geography of the Defense Department. Although it is broadly all 
over our country, I think we will feel some real effects here 
in Virginia and in Maryland among some of the businesses that 
are really within driving distance of this capital.
    So, go ahead.
    Mr. Misanin. Yes. Thank you.
    First, let me echo what Mr. Joe Jordan said--that the 
impact of the sequestration is bad, and it is accumulating, and 
the effects are going to get worse as we get closer to the end 
of the fiscal year.
    Let me first say that as a combination of having been 
impacted by the continuing resolution at the beginning of the 
year and then the sequester on the back end, it is really 
hurting small business performance.
    Just to give you an example, with the SBIR program, which I 
am familiar with, under a continuing resolution, budget 
allocations are not made under a continuing resolution. There 
is a delay until the final budget is enacted. So that hampers 
our ability to award SBIR contracts during the course of the 
year, or to get money to allocate to contracts.
    And then once the money was released, we got hit by the 
sequester. Well, the sequestration in the RDT&E account--there 
is going to be about an 8.6 percent reduction in available 
RDT&E. And if you go through the numbers, it is approximately 
100 SBIR Phase II Awards that we will not be able to accomplish 
this year.
    Chair Landrieu. Let's just explain what SBIR is for people 
that may not be familiar.
    Mr. Misanin. Okay. I am sorry.
    The Small Business Innovation Research Program is a program 
that is invoked by statute. It is funded through a set-aside 
procedure where you calculate a percentage of your extramural 
research and development budget, and there are thresholds for 
Agency participation. Your Agency budget has to exceed a 
certain threshold before you are required to participate in the 
program.
    And the focus of the program is to really unlock and 
leverage the innovation capacity of small businesses, 
especially in the technology spaces. The Department of Defense 
has been using it very successfully over the past 30 years of 
the program's existence, and my earlier discussion with some of 
the roundtable participants revealed they had started their 
companies with SBIR funding.
    But it is a very important program--it is a small 
percentage of the total RDT&E--extramural RDT&E--but it is 
important because of the emphasis and the focus on innovation 
and technology.
    And we have been able to link it up with other programs, 
such as the Rapid Innovation Fund, which provides similar 
funding to help bridge the so-called ``valley of death,'' to 
help these small business technologies get commercialized so 
that we can deploy them out into the field, on programs of 
record and into the hands of the warfighter.
    Chair Landrieu. I am going to recognize Senator Shaheen 
right now.
    Not only does this program take the best ideas that our 
small businesses and universities and others are coming up 
with, but they help to not only save taxpayers money because of 
the disruptive technology and innovation and efficiencies that 
they cause but, when spun out commercially, are some of the 
really bases of job creation in America.
    And this program--I am very happy. Our Committee led the 
reauthorization of the SBIR program. For seven years, it was 
stuck. We could not find a path forward. With the help of my 
staff, we found a path forward as a seven-year, I think--a six-
year authorization or seven?
    Six. Six-year authorization of this program.
    But now some of this good work is in jeopardy.
    And Senator Shaheen, I think you had a question or comment.
    Senator Shaheen. Well, as you are talking about the 
innovation that goes on in small businesses, I thought it would 
be interesting to hear from Mr. Antoinette, who is working with 
DOD and doing some of that innovation on what you are seeing as 
the result of the cutbacks.
    Mr. Antoinette. Yeah, I would say that this is the area 
that is getting most hit right now. Discretionary funds are 
being hit first.
    R&D is being sacrificed right now amongst the program 
people at the highest level, from the intelligence community 
all the way down into the everyday Armed Forces.
    Every one of the program managers we have worked with in 
science and technology, which is what it is given the acronym 
for, is getting the biggest hit right now.
    So we are actually going to be less innovative, with 
companies that are less able to absorb that, and so you are 
going to depend upon the primes who, because they report on an 
earnings per share of public basis, they cannot afford to be 
quite as innovative.
    So we are actually choking down some of these engines of 
innovation.
    For ourselves, we actually saw this start in last August. 
We had to go and lay off 15 percent of our force at year-end of 
last year as the--this is a perfect storm for us. This is not 
just a storm. This is a perfect storm.
    So the impacts we are seeing directly in Joe's world are 
the biggest programs that are getting hit are R&D.
    Chair Landrieu. Anybody else want to comment on anything 
similar--go ahead, Mr. Jordan.
    Mr. Roger Jordan. Yeah, I think Mr. Antoinette is 
absolutely right.
    As we have gone through this process, one of the things 
that we have been advocating for is not just attention to what 
the government buys, but it is how it buys it and how that 
affects innovation.
    And one of the trends that we have seen, as there is 
downward pressure on budgets, is this move towards lowest 
price, technically acceptable source selections. In essence, 
that drives towards the lowest cost solution and drives 
innovation out of the process. There is an appropriate place 
for LPTA in the acquisition tool box, but we are seeing it 
being used more inappropriately these days because of the 
budget pressures, and it is driving the innovative-type work 
out of acquisitions.
    Chair Landrieu. Okay. Help me understand a little bit about 
this lowest price mandate. Where is that coming from?
    Mr. Roger Jordan. It is not necessarily a mandate, but--
well, one of the places that it first appeared was in the 
Department of Defense's Better Buying Power 1.0 initiative 
where there was an indication for a preference towards lowest 
price, technically acceptable.
    They have since, and more recently, come out with a Better 
Buying 2.0 initiative that seeks to offer some clarification, 
and it says, look, you have got to make sure you are using this 
appropriately.
    I think that the original message was use LPTA, and now 
they have walked back from that and said, make sure that you 
are only using it in the right cases, where innovation is not 
the desired outcome.
    Chair Landrieu. Okay. So we have self-corrected that, 
Department of Defense?
    It is not buying the cheapest item; it is buying the lowest 
cost item that actually is good and works?
    Mr. Roger Jordan. With regard to Better Buying Power (BBP), 
that is correct.
    [Laughter.]
    Chair Landrieu. Yes, because we would not want to buy 
something that is just cheap, but it does not--like the missile 
does not fire. That would not be good.
    So we have corrected that?
    Okay.
    Mr. Roger Jordan. Yes, in revised BBP guidance.
    Chair Landrieu. Okay. All right. Anybody else?
    Mr. Smith--and just put your cards up. Really, do not be 
shy. I know you all do not look like a shy group to me.
    So go ahead, Mr. Smith.
    Mr. Smith. Yes. I tend to focus more from an acquisition 
standpoint within the Department of Transportation on the 
overarching best value. Of course, lowest price, technically 
acceptable falls within the category of thinking through that, 
but your comments with regards to source selection and how that 
works, and the shared responsibility within the procurement and 
contracting community is something that is certainly important.
    Mr. Jordan talked--Joe Jordan talked about simplified 
acquisition and some of the set-asides for multiple awards.
    One of the things that we focus on at a more specific level 
within the departments, within the acquisition community, is 
understanding that shared responsibility between the 
requirements offices that identify what it is we buy and how 
much we buy, the contracts community, and making sure that we 
identify how to buy smarter and how to do all the kinds of 
things that you talked about with regards to source selection 
and identifying those requirements--more specifically to 
satisfy any number of agency objectives, to include 
socioeconomic programs. And then we all get involved in the 
process of making sure that we are administering those 
contracts.
    One of the best practices that we have put into place over 
the last three years that has worked quite effectively in 
helping us at least identify those kinds of opportunities is 
our Strategic Acquisition Council. We have 10 operating 
administrations that cover any number of transportation-related 
areas, from aviation to highways to bridges and all of the 
infrastructure kinds of things, or many of the infrastructure 
kinds of things, that we are focusing on across the country 
today.
    And, within that environment, each of those 10 operating 
administrations, the Chief Contracting Office as well as the 
Office of Small and Disadvantaged Business Utilization meet on 
a monthly basis, at least, to talk specifically about the kinds 
of strategies, the kinds of opportunities, the kinds of things 
that we can do to continue to ensure that we invest properly 
and focus on our small business community.
    So that is certainly a best practice for us that has been 
quite effective.
    Senator Heitkamp [presiding]. I think that we are hearing 
over and over again--and I am sorry you have got the rookie 
now. Mary had very important business.
    I think what we are hearing over and over again--because we 
always talk about small business in the realm of job creators, 
and this is the cutting edge. But we also know they are the 
innovators; they are the creators and they are people who help 
move along a whole lot of agendas.
    And, when we do not reward and when we do not honor those 
programs, we are not only squelching job creation, but we are 
also mortgaging the future on a lot of things that should be 
done right now that are not going to be done and will not be 
tried by much larger organizations.
    And I think that is a really important point to be making 
during this whole discussion because I think a lot of people 
think this about preferences and this is just about job 
creation, but it also is about the future.
    We know there are so many great small businesses that have 
grown into incredible enterprises for America. They start 
small, and because maybe they have been given a little 
opportunity, they then can jumpstart the future.
    Mr. Ford.
    Mr. Ford. Two points--one on SBIR programs. We were meeting 
with several companies that had done Phase I SBIRs, and we 
wanted to help them leverage the SBIRs in the DOD world. 
Sometimes what happened was when we wanted to leverage the 
programs we had program officers being concerned about the 
future of the SBIR program. So they were concerned about 
leveraging a Phase II SBIR because they did not know if they 
could get the Phase III because of funding.
    And so concerns occurred when we were looking to leverage 
that.
    On the second point, of lowest cost, technically 
acceptable, we have recently been hurt when we knew we had the 
right innovation and we knew we had the right solution. But the 
government was sort of pinned in with what they had to do, and 
they could not take advantage of some of the innovations that 
we had. And so we were looking for almost some way of logically 
determining when it is the right thing to do.
    Certainly, if it is a commodity or something like that, it 
makes sense. Certainly, if you are looking to move the bar and 
you are trying to leverage and do more with less and you need 
innovation to do something, it is something non-intuitive about 
lowest cost, technically acceptable if you are trying to push 
the bar and be more efficient via technology.
    So, if there is some way of getting a standard that I think 
the government could use to be able to say this makes sense to 
do lowest cost, technically acceptable in these types of 
venues--I think some of the strategies Mr. Smith talked about. 
I am assuming that is some of the conversations you guys are 
talking about.
    Senator Heitkamp. Yes.
    Joe.
    Mr. Misanin. Yes. I just want to follow up on my earlier 
remarks.
    So the direct impacts of the sequester can be measured and 
calculated and determined. However, we are about to be hit by 
the secondary and tertiary effects.
    Right now, we have had restrictions on travel, on 
training--and we have not been able to hold outreach events. We 
are canceling our Beyond Phase II SBIR event for the end of the 
year, normally held at the end of the year. We have over 1,200 
matchmaking sessions normally set up with Phase II awardees, 
with their industry primes, so they can find opportunities for 
commercialization. Our annual training for the workforce had to 
be cancelled.
    So all these things are having a ripple effect on our 
ability to find opportunities, do market research and just do a 
better job of assisting small business----
    Senator Heitkamp. Can I just ask a question?
    Mr. Misanin. Yes.
    Senator Heitkamp. Which is we understand those effects.
    But what did the agency do, or what did DOD do, to mitigate 
those effects--look at lower cost options, look at ways to do 
outreach that may not be consistent with the traditional 
programs that you would use to do the outreach?
    Mr. Misanin. Yes. Whenever there is a request now--we can 
still request outreach events and things of that nature, but 
the emphasis is more on doing things through web-based tools 
and virtual type meetings.
    Senator Heitkamp. And how have you found in comparison with 
traditional outreach versus how you are doing it now?
    What is the damage?
    Mr. Misanin. With the SBIR Beyond Phase II event, I 
mentioned 1,200 face-to-face meetings with the technologists at 
the companies that need the technology and the small 
businesses. That is not going to happen over the internet over 
a three-day period that we have the event. So I do not think 
you can compare the two, and the effectiveness is going to be 
much reduced.
    Senator Heitkamp. Okay. Mr. Antoinette.
    Mr. Antoinette. The impact that we are seeing directly is 
two-fold. One is paperwork, contracts and payments are 
beginning to slow. And a small company lives on very narrow 
margins of cash flow. So, as those get choked a bit or delayed 
a bit, the impact is direct.
    You are trying to figure out then payroll, trying to figure 
out what you are going to invest in. Are you overstaffed?
    Unfortunately, we would have to say goodbye to people, and 
we do not like doing that.
    My entire company would fit in this room, and if I have to 
say goodbye to 15 people, I know each and every one of them. 
That is not what you want to do, ever.
    You want to double it. You want to make this room smaller.
    So our concern is the way the actual wheels are going to be 
impacted, by the cash flow situations out of the government and 
the processing of this. And we already know that you folks are 
under pressure in contracts and contracting.
    We are really concerned when they say, well, you have not 
seen anything yet; wait until July. It does give us a little 
bit of pause.
    Senator Heitkamp. I want to comment because I think one of 
the things that we are seeing over and over again is baseline 
functions that will have to be performed are being delayed or 
are being done very inefficiently. And so somebody is going to 
have to cut the check. Somebody is going to have to do that 
work.
    When we lose the ability to efficiently pay the bills or do 
what we are supposed to be doing, there is a direct casualty to 
especially a small business who operates on a much lower cash 
flow function.
    Mr. Jordan.
    Mr. Roger Jordan. Yeah, again, I think that is absolutely 
right.
    One of the first comments I made in my written statement 
was that it is the delays that we saw leading up to 
sequestration which was really a killer for small businesses.
    Small business do not have the capability to maintain a 
bench of staff that they anticipate they will need as they wait 
for an award to come out, and we saw them, therefore, having to 
cut staff. Where the department would normally have made an 
award, they just were not confident doing so because they were 
not sure that the funding stream was going to be there.
    I think the flipside of this is that withholding or 
delaying those decisions even further has an impact on the 
government in that a lot of times, just by making awards, there 
are savings built in to new acquisitions over the long run. So, 
in a sense, the government is also robbing itself by making 
those delays at the same time it is hurting small businesses.
    Senator Heitkamp. Well, I would make the point that any 
good business charges you a little extra if you do not pay your 
bills on time. So how is this actually helping the government 
to save money when they are operating kind of basic functions 
inefficiently?
    I guess, Mr. Jordan, I see you nodding and, obviously, very 
concerned from a perspective of OMB when you are not able to do 
baseline functions efficiently as a result of not having 
adequate staff.
    Mr. Joe Jordan. Yeah, absolutely. I would both point to the 
fact that due to the sequester and its meat-axe, across-the-
board cut, and the devastating effects we have, ensure that 
agencies are focused on mission-critical needs and have that 
mission first of all, but there is no doubt that you have these 
negative ancillary effects.
    We certainly keep small businesses top of mind at all 
times, and we think about the intersection of some of the 
negative consequences of sequester and small businesses.
    You mentioned payment, and we have heard that. We had 
worked quite hard as a community to institute what is called 
Quick Pay, where small business prime contractors got paid in 
half the time of typical contractors, and that was a big 
success.
    So we expanded it and said we are going to pay all 
contractors quickly, and then they have the responsibility to 
pay their small business subcontractors in half the time. And 
we heard great response to that.
    But, unfortunately, due to the cash flow crunch of 
sequester, as Joe mentioned, the Defense Department had to turn 
off the quick pay for the larger primes, and therefore, that 
has a deleterious effect on the small business subs.
    So we are very hopeful that we can move beyond the 
sequester and reinstitute some of those sorts of policies and 
continue our firm commitment to maximizing our utilization of 
small businesses, both at the prime and subcontracting level.
    Senator Heitkamp. And the interesting thing is that in all 
of this, when you look at sequester, I think some people think 
there are functions that are not going to be done, that there 
are opportunities that will not be realized. But what people do 
not realize is that baseline functions that have to be 
performed by any large organizations are not getting done 
efficiently. Therefore, we are kind of robbing Peter to pay 
Paul because there is not net financial gain on behalf of the 
government.
    And I will call on Mr. Ford, but I want to talk about this 
from two standpoints, which is, one, the disruption of 
expectations under current contracts. This is where we are 
right now. This is the uncertainty. We are not getting paid on 
time.
    But the concern that I also have, for small business in 
particular, is the lack of predictability into the future. So 
what you might be doing to prepare for a new contract, what you 
might be doing to prepare for new innovation, new thinking, you 
have now tapped down.
    And the time value of money, the value of time in all of 
this, in getting this innovation--how have we delayed and how 
have we troughed that innovation and for what period of time?
    I would like comments on that as well.
    Mr. Ford.
    Mr. Ford. I think I am glad you brought those up. Those are 
the points I was really looking to make.
    One of the things that has affected us was project delays 
due to funding uncertainty on projects that we were tracking 
for over a year, and almost two years, where we have put in the 
research; we put in the time.
    I know Mr. Neal and Mr. Vera and Mr. Boshears have said: 
Get there two years ahead of time. Put in the time. Make sure 
you get to know folks. Make sure they understand who you are.
    And then that particular opportunity never comes out. So 
that time was wasted.
    As a small business, we do not have that type of time to 
invest that effort.
    Another opportunity is potential cuts.
    I mean we do some work for the Department of Justice. There 
were significant cuts in that area, and so we had layoffs also, 
where we had people that were doing the job; the customer was 
satisfied; yet, the cuts had to occur. Options had to not be 
renewed because of the uncertainty of that particular budget 
cut.
    And so that uncertainty has affected us even as much as, 
interesting enough, an unanticipated competitor in our market 
now is large businesses. So the impact to some of the large 
businesses around the Beltway have made them all of a sudden 
enter into opportunities that they previously would not have 
looked at.
    So now, all of a sudden, if there is a $20 million or $30 
million-opportunity----
    Senator Heitkamp. You are saying it used to be small 
potatoes to them----
    Mr. Ford. Yes.
    Senator Heitkamp [continuing]. And now it may be the gravy?
    Mr. Ford. Now this is good meat for them.
    [Laughter.]
    And I am showing up, and all of a sudden, my mentors and 
partners are now my competitors.
    To government agencies, if they can get Large Business X 
versus Enlightened for the same price, it is a comfort for 
them. And that was unanticipated from a competitive analysis 
perspective.
    Senator Heitkamp. Mr. Antoinette.
    Mr. Antoinette. Well, obviously, when you do not have 
predictability, you really have to be very cautious, especially 
when you do not have a lot of big cash reserves. So that 
impacts us as a small business and most of the small businesses 
I am aware of.
    Unfortunately, it has also impacted capital markets, and 
the availability of capital in general has been impacted. 
Venture capitalists will not talk to you about defense-style 
businesses. They were always skeptical. Now it is like you are 
laughed out of the room.
    Banks--so you say go get a bank. Find a bank. Well, if you 
are bankable, then the banks are looking at the same types of 
uncertainties and say, well, you know, we are not certain that 
you are a good risk either.
    So it is a two-fold impact. Not only is it an impact on the 
businesses directly. It is an impact on capital markets, the 
availability of capital for growth companies which is often 
equity-based, venture-type, or it is on traditional banking 
where you are just not going to get a hearing.
    So, there, where are you? You are between a real rock and a 
hard place.
    Senator Heitkamp. I think that this is such a great point 
about doing things in Congress in regular order, which means 
that you know basically what the amounts are. Even if these 
sequestration dollar amounts had been built into regular order, 
you would know where it is.
    I think this uncertainty of knowing where these cuts are 
coming from and the uncertainty of knowing how the agencies are 
going to apply the cuts have created tremendous uncertainty for 
small business, tremendous uncertainty for our contractors. 
And, as a result we are going to narrow the number of 
organizations who will be competing for this business and, as a 
result long-term, will not have the options that businesses 
have.
    And, Kevin, I cannot see the bottom of your name, so you 
are just going to get called Kevin.
    [Laughter.]
    Mr. Boshears. Thank you.
    Kevin is what everyone calls me anyway.
    Senator Heitkamp. Okay.
    Mr. Boshears. Last week I met with a small business who 
does business with Homeland Security, and he described our 
current environment as a dark cloud hanging over his head. And 
that stuck in my mind because I think that is the way it feels 
to many of us, certainly him.
    And I asked him, well, how are you going to handle it? What 
are you going to do?
    And he said, well, I am going to focus on my customers. I 
am going to focus on my employees. And I am going to try to 
ride out the storm.
    The conversation was telling, and I am glad I had it. And I 
have not had that descriptive, but I have had similar 
conversations with many other contractors, like even Mr. Ford.
    Senator Heitkamp. I think--and, Mr. Jenkins or Jordan, if 
you want to comment on this.
    But it just seems to me that it is not just the reduction 
in expenditures. It is the uncertainty of where these are 
coming from and what is going to happen long-term.
    You do not want to make the adjustments if you think that 
those dollars are going to be reinstated when we do get back to 
regular order. We know we have taken a double whammy, and there 
may be additional dollars.
    So how do you weather the storm in the meantime, especially 
when you are no longer bankable or venture capitalists will no 
longer look at your innovations?
    So I would appreciate your comment.
    Mr. Joe Jordan. I would say three things, Senator, in full 
agreement.
    The first is, yes, there is a reduction. But that is 
likely, given our fiscal environment, to happen anyway.
    But it is the second piece where it is across the board and 
indiscriminate in the way that the sequester works--the meat-
axe that it takes to the budget--as opposed to targeted and 
focused reductions which we have already done good things 
around, like reducing management support services by 15 
percent--a place where we saw some overspending and we said we 
are going to focus on that--or strategic sourcing where we can 
simultaneously increase small business utilization but get some 
of the same goods and services for lower prices. That is not 
the way the sequester works.
    And then the third piece is just like you said; it causes a 
lot of this uncertainty. And when we are pushing agencies to do 
really robust acquisition planning, the market research 
required to go out and find all of these great small 
businesses--some of that--you know, there is certainly an 
impact there both in terms of the resources the agencies have 
and then the behaviors driven by uncertainty in either 
acquisition or just budgetary environments at large.
    I absolutely agree with you.
    Senator Heitkamp. Mr. Jenkins.
    Mr. Jenkins. Yeah, I think----
    Senator Heitkamp. I guess my direct question to you is: 
What advice do you give small business owners in terms of how 
to weather this storm or whether there is a light at the end of 
the tunnel and it is not the train?
    Mr. Jenkins. Yes, it is really a tough question.
    I mean, one of the things that we certainly look at is how 
you can enter into strategic alliances and partnerships because 
as the number of procurement opportunities is dwindling 
sometimes there could be opportunities to team up with other 
firms. And so we, as part of the Jobs Act and as part of the 
National Defense Authorization Act, have put a few things in 
place.
    We have a pilot under the Jobs Act in which we awarded 
grants to 11 organizations around the country to figure out how 
they can bring groups of small businesses together that can 
potentially go after some of the larger procurements--
procurements that they may not be able to get because of 
sequestration.
    And also, we are looking at, under the National Defense 
Authorization Act, a new mentor-protege program that will 
affect all small businesses, not just the three that were added 
under the Jobs Act. Again, we believe that will be critical.
    Teaming, joint venturing, strategic alliances--I think are 
the way to go.
    And you mentioned also the lending side. SBA's loan 
portfolio was affected--affected to the point of over $900 
million that will not be made available to small businesses; 
over 22,000 jobs.
    So we really have some challenges in front of us, and we do 
have to come up with some great ideas.
    Senator Heitkamp. Yes, and I will tell you this; in North 
Dakota, we have a Bank of North Dakota. You may be familiar 
with that. It is the only one in the country.
    I cannot begin to tell you the significance of the SBA loan 
guarantees in terms of innovation in our state. We do not shove 
off all the risk to you all, but sharing that risk on 
innovation is absolutely critical.
    And you can only imagine, I mean, because we will never be 
able to document the great ideas and the great innovations that 
might have come had we been able to finance that innovation in 
a climate that is very difficult given the contraction of 
capital in the post-financial crisis era, along with banks 
looking at--especially your local community bank looking at--
increased pressure from regulators on excessive risk.
    And so this is very concerning to me--that we are 
contracting capital.
    There are number of folks here we have not--oh, Mr. Vera?
    Mr. Vera. Yes. Thank you.
    I just wanted to echo what some of my colleagues have 
stated. At USAID, we have improved significantly over the last 
few years in how we work with small businesses, and we feel we 
have built some momentum there.
    And the sequester, along with the CR and some of the 
delays, have caused us to pause, and reconsider some of our 
projected new procurements because of the budget uncertainty 
coming down the line.
    And so I think what has happened in result is that a lot of 
our large operations and maintenance contracts, which are 
generally large business, are continuing, but our new smaller, 
more innovative types of requirements are being reconsidered, 
or maybe they are being cut back in scope.
    And, secondly, I also wanted to echo what Mr. Ford has said 
about competition from the larger businesses. We specialize in 
international development--which is a niche market. That is, we 
work with many large and small businesses that specialize in 
this area. Over the past couple of years we have seen a lot 
more new entries into this market from DOD-type contractors, 
and so that has caused additional competition for our small 
business partners.
    Senator Heitkamp. I applaud the Chairwoman for bringing you 
all together and listening to this discussion because it is so 
critical in terms of not hitting a trough that is going to go 
on for four years before we kind of climb out of it. We are 
doing great work. We are being collaborative.
    And so I guess my question is, especially for the agencies, 
beyond this kind of hearing, have you all kind of gotten 
together and said let's strategize, in an era of sequestration 
for the next how many months that we are in this?
    And I would like to tell you that I believe that we could 
fix this tomorrow.
    It is not going to get fixed tomorrow. I can guarantee you 
that, if there is one thing I can guarantee--that the fix is 
not going to come anytime soon.
    So, in that environment, what are you all doing 
collaboratively among the agencies to begin to address kind of 
a holding or hovering pattern that could, in fact, sustain the 
good work you have already done and maintain that until we work 
our way out of this?
    Mr. Joe Jordan. Well, if I may, you are absolutely right 
that these types of collaborative discussions are so important, 
not just during these periods----
    Senator Heitkamp. Right.
    Mr. Joe Jordan [continuing]. But also just to maximize 
utilization.
    So I mentioned in my opening about the White House Small 
Business Procurement Group, which is something that we started 
back when I was at SBA. You know, the President cares a lot 
about this issue, and so he has brought the deputy secretaries 
of every agency, along with the OSDBUs and sometimes the senior 
procurement executives, together over at the White House.
    And SBA Administrator, Karen Mills, and I are actually co-
chairing the next meeting of this just next week. We have kept 
it going to ensure that whatever the fiscal circumstances, we 
have a chance to maximize small businesses' utilization.
    And then it is really important to hear from folks, not 
just the agencies but from all around. I had a chance, luckily, 
to go to Jamestown, North Dakota and engage with a lot of the 
small businesses there and both the lending and the contracting 
officers. I will tell you the story about almost getting 
stranded at Devil's Lake Airport.
    But it is really important because we have got a number of 
viewpoints----
    Senator Heitkamp. Could you share that with FAA and the 
Central Air----
    [Laughter.]
    Mr. Joe Jordan. A number of really tremendous viewpoints 
from the contractors who do not--right now, we are doing a lot 
more convening here in town, given the travel restrictions, and 
yet, our need to make sure that we engage with all these 
vendors--but it is really important that we continue to figure 
out ways to collaborate with everyone, both from the agencies 
and the great firms outside the Beltway.
    Senator Heitkamp. Well--and I think it is very important 
that--you know, I look at this sometimes from the standpoint of 
somebody out there who is, obviously, a citizen, a taxpayer, 
deeply concerned about our deficit, deeply concerned about our 
opportunity. What are the discussions that we need to have with 
taxpayers about the effects of something like this that we know 
long-term will cost us money?
    They understand maintenance. They understand that they need 
to keep things in good working order in order to avoid a 
catastrophe down the line. And I think that we have not done a 
very good job talking about how sequestration has resulted, in 
a very real way, delayed maintenance that is going to cost us 
money.
    And I am not just talking about buildings and machinery. I 
am talking about this kind of effort, this kind of 
collaboration, which gets stalled out because we do not nurture 
it; we do not maintain it.
    There was another question?
    Oh, there you go, Mr. Jenkins.
    Mr. Jenkins. Yes, I just want to add on to what Joe has 
mentioned.
    In addition to the White House Small Business Group--
working group--we also have what is called the Small Business 
Procurement Advisory Council. We meet monthly with all of the 
24 CFO agencies. We talk about best practices. They discuss 
some of the challenges that they are having, and we try to work 
through some of those issues and talk about some of those 
policy changes we can make, some regulatory changes we can make 
that can make it easier for them.
    We bring them up to speed on all of the changes. As I 
mentioned before, the Small Business Jobs Act had 19 changes in 
it that affect small business, and we are implementing those 
regulations.
    And then NDA, which was signed this year by the President, 
has a number of new regulations and tools that will hopefully 
help them going forward.
    But the idea is to constantly have that collaboration with 
them.
    Senator Heitkamp. I guess I applaud all those efforts, but 
my question is, what more could you be doing to help small 
business weather this storm, working together or working within 
your own agency?
    And I would be curious about some of the folks who--Ms. 
Harris?
    Ms. Harris. Good morning.
    Senator Heitkamp. Good morning.
    Ms. Harris. When it comes to us working with other 
agencies, the Department of Energy signed an MOU with the 
Minority Business Development Agency, a part of the Department 
of Commerce, specifically for us to focus more on some of the 
socioeconomic classes that we have not fared well in.
    So that is one area that we are working with David Hinson 
and his team. We are touching a lot of women-owned business, 
veterans, HUBZones and minority-owned businesses to focus and 
partner more together.
    We have worked not only--after the MOU has been signed, we 
have done a collaborations between listening sessions for small 
businesses all across the country. So we have partnered 
together on a number of other events as well.
    So that is helping us to really not only look at, 
specifically, small businesses in general but look at some of 
those areas across agencies we should not need to improve, and 
that is socioeconomic classes.
    Senator Heitkamp. Any of the other agencies want to comment 
about additional--yes, Mr. Neal.
    Mr. Neal. Sure. The Department of Transportation--one of 
the ways we look to collaborate is we invite the other agencies 
to participate in our Small Business Days, which essentially 
are vending/matchmaking sessions. And so I can say at least 
every agency who is in this room has participated and been a 
part of our matchmaking session, in addition to some small 
business owners--Mr. Ford and Ms. Priester, who have also 
attended.
    And we seem to see a long-term effect in terms of helping 
businesses grow with that matchmaking session we have at the 
headquarters. And, of course, it is free of charge.
    And so we invite small businesses from all over the 
country. We tend to have at least 400 to 500 small businesses 
come to be a part of this opportunity.
    Another way to collaborate is we have 11 cooperative 
agreements through our field offices that are in 11 major 
cities across the country, and I know they work directly with 
the agencies too on some of our programming aspects.
    And so we have two main programs--one, the bonding 
education program in which we have a partnership with Surety 
and Fidelity Association of America, and also, we have a short-
term lending program.
    And a lot of our lenders work directly with SBA and other 
agencies as well too.
    So we seem to find that working pretty well.
    Senator Heitkamp. Mr. Neal, have you changed anything since 
sequestration in terms of your outreach or how you look at it?
    Mr. Neal. A lot of our outreach now is web-based.
    Senator Heitkamp. And are you experiencing the same outcome 
that there is less contact, and it is less efficient and 
effective contact?
    Mr. Neal. Yes.
    Senator Heitkamp. Okay.
    Mr. Neal. Yes.
    Senator Heitkamp. So sometimes that handshake and that 
sitting in the room together can really make a difference.
    Mr. Neal. Absolutely. Absolutely. We are always looking for 
ways to think outside the box, but, yes.
    Senator Heitkamp. Yes. I mean, I think anybody who has done 
a substantial amount of business will tell you, you can do a 
lot web-based, but somehow sitting down and having that face-
to-face conversation can be much more effective.
    So, Joe.
    Mr. Misanin. Thank you.
    The importance of the agencies getting together to share 
best practices cannot be overemphasized because even within the 
department we have a lot of initiatives that are ongoing and 
they will not be completed for a while yet. So it is good that 
we get together, status these things and determine what we can 
do.
    One of the things we recently thought about is the 
Undersecretary is interacting with the prime contractors and 
industry to establish kind of a board to monitor the impacts of 
the sequester on the supplier base, on small businesses in 
particular, so that we can develop a quick reaction capability. 
When we see it, we will do something about it.
    Senator Heitkamp. Is there going to be an opportunity to 
basically document those impacts and then share those impacts, 
particularly with this Committee?
    Mr. Misanin. Oh, absolutely, once the formal body and 
process is established. The interagency process is how we will 
share that information.
    Senator Heitkamp. Right. I mean, I guess when you look at 
all of the work that is being done kind of piece-mealed, the 
need to kind of appreciate and understand the innovation that 
these agencies have taken to try and respond to some of these 
concerns--that is all good work.
    But, for policy purposes, you need it at the mile-high 
look-down level so you can see the true impact, not just in 
Transportation or in DOD or in Energy. You can see the true 
impact on innovation that could be kind of encouraging economic 
growth that is not being done because of this meat-cleaver 
approach to budgeting.
    I am going to have to go.
    And I really just so appreciate this discussion because I 
think it is critical.
    It is critical that the American public understand that 
what small business does is not just create jobs. But it is 
innovative. It is creative. It is cutting-edge. It is the 
places where people think and have a unique relationship to 
survival that can really drive true opportunity into the 
future.
    The record will be open for another two weeks.
    I know that from my standpoint--and the Chairwoman can also 
share any additional questions that she has--I am very 
interested in what the agencies are doing to collaborate on how 
they can minimize the impact, both from the standpoint of 
current contracts and current obligations, but also future 
predictability for small business and minimize the impact of 
the sequester on small business.
    Like you said, the large organizations have figured out a 
way to, all of a sudden, become very interested in what you are 
doing, and they have a few more people to be reading the 
Federal Register, right? They have a few more people to be 
watching the opportunities than what you do.
    So I really want to thank the small business folks who have 
been here, who have shared their ideas and their thoughts with 
us.
    I want to applaud the agencies who seem genuinely very 
committed to small business and small business development.
    And we look forward to continuing this dialogue as we go 
through this process.
    And I will adjourn the hearing.
    [Whereupon, at 11:06 a.m., the hearing was adjourned.]



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