[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
READY FOR LIFTOFF: THE IMPORTANCE OF SMALL BUSINESSES IN THE NASA
SUPPLY CHAIN
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 12, 2016
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-068
Available via the GPO Website: www.fdsys.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
CRESENT HARDY, Nevada
WARREN DAVIDSON, Ohio
NYDIA VELAZQUEZ, New York, Ranking Member
YVETTE CLARK, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
MARK TAKAI, Hawaii
Kevin Fitzpatrick, Staff Director
Jan Oliver, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Carlos Curbelo.............................................. 1
Hon. Grace Meng.................................................. 2
WITNESSES
Mr. Chris Carberry, CEO and Co-Founder, Explore Mars, Inc.,
Beverly, MA.................................................... 5
George Davis, Ph.D., President and Founder, Emergent Space
Technologies, Greenbelt, MD.................................... 7
Ms. Carol Craig, President and CEO, Craig Technologies, Cape
Canaveral, FL.................................................. 8
Mr. Stephen Gorevan, Chairman, Honeybee Robotics, Ltd., Brooklyn,
NY............................................................. 10
APPENDIX
Prepared Statements:
Mr. Chris Carberry, CEO and Co-Founder, Explore Mars, Inc.,
Beverly, MA................................................ 21
George Davis, Ph.D., President and Founder, Emergent Space
Technologies, Greenbelt, MD................................ 25
Ms. Carol Craig, President and CEO, Craig Technologies, Cape
Canaveral, FL.............................................. 29
Mr. Stephen Gorevan, Chairman, Honeybee Robotics, Ltd.,
Brooklyn, NY............................................... 31
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Letter from David A. Nesbitt, President, Matrix Composites,
Inc........................................................ 36
READY FOR LIFTOFF: THE IMPORTANCE OF SMALL BUSINESSES IN THE NASA
SUPPLY CHAIN
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TUESDAY, JULY 12, 2016
House of Representatives,
Committee on Small Business,
Subcommittee on Agriculture, Energy and Trade,
Washington, DC.
The Subcommittee met, pursuant to call, at 11:00 a.m., in
Room 2360, Rayburn House Office Building, Hon. Carlos Curbelo
[chairman of the Subcommittee] presiding.
Present: Representatives Curbelo, Brat, Meng, and Lawrence.
Chairman CURBELO. Good morning. I call this meeting to
order.
Thank you all for joining us today as we examine some of
the challenges small businesses face when doing business with
the National Aeronautics and Space Administration, or NASA. We
have an excellent panel of witnesses, and I look forward to
hearing their testimony.
During the 114th Congress, the Small Business Committee has
held numerous hearings on government contracting and
subcontracting issues, always seeking ways to make it easier
for small firms to do business with the Federal Government.
What we have learned over this time is disturbing. Over the
last 5 years, the number of contract actions with small
businesses fell by almost 60 percent, and one of the more
disturbing figures is that there are over 100,000 fewer small
firms registered to do business with the Federal Government
than there were in 2012. This data means we have a real
problem.
Another disturbing trend is that, starting in 2008 and
continuing to this day, we are seeing more business deaths than
we are business births each year. Small businesses are the
canary in the coal mine. When their role in Federal contracting
declines, we lose innovation, job creation, and competition,
leading to higher costs to the Federal Government. This is
obviously untenable going forward, and we at the Committee
remain dedicated to finding solutions to stop these trends, be
they regulatory, tax, capital access, or government contracting
related.
When most people think about the way NASA works, they think
of Cape Canaveral in Florida and the Kennedy Space Center in
Houston. While those certainly are main hubs, the small
businesses that work with NASA, be they prime contractors or
subcontractors, are located in all 50 States and in nearly
every single congressional district. NASA's presence throughout
the United States is larger than many might think.
Back in my home state of Florida, NASA spent nearly $487
million last year with $120 million of that going to small
businesses. In my congressional district, $1.1 million in small
business contracts have been signed for fiscal year 2016.
Flagship space programs, such as the current Space Launch
System, or SLS, and the Orion Spacecraft, are increasingly
important in providing opportunities for the small business
community. However, over the past few years, with the
retirement of the space shuttle program and the starting and
stopping of the Constellation program, we have seen signs of
uncertainty crop up in the supply chain. Too often small firms
are unsure as to what an administration will do with their
priorities or what Congress may or may not choose to fund
moving forward. These challenges discourage some small shops
from signing space contracts, instead opting for more reliable
general aviation contracts.
Certainty is essential in any business endeavor but is
absolutely mission critical for an exceptionally innovative and
forward-thinking space program. Designing next-generation
spacecraft requires time and, in recent years, thankfully,
there has been bipartisan consensus on the path forward for
human exploration of deep space. With a new administration
taking office in January, we must build upon that commitment
and provide the certainty the industry needs to continue
growing, innovating, and building our economy to ensure our
Nation continues its preeminence in human space flight.
Thank you again, and now I would like to yield to the
Ranking Member, Ms. Meng, for her opening remarks.
Ms. MENG. Thank you, Mr. Chairman, for holding this hearing
today. Since its inception, NASA has been providing young
children with aspirations of going to space. While not everyone
can make it through the vigorous training required to be an
astronaut, the missions undertaken by the agency have opened up
many opportunities for research businesses. Small businesses
have had many successes at NASA as various projects within the
agency have provided a platform for allowing these firms to
come up with inventive research and technologies that have
permitted us to explore deeper into space.
The space shuttle program in particular provided a long-
term project in which small businesses would continue
developing technology and to explore other uses of this
technology. As a result, there have been many small business
contributions that have now been incorporated into our daily
lives. For example, tiny LED chips originally used to grow
plants on the space shuttle and the International Space Station
have made their way into a noninvasive, handheld medical device
that provides relief for muscle and joint pain, and can also
help reduce certain side effects of chemotherapy.
Additionally, the autonomous rendezvous and docking
technology used to assist the space shuttle in servicing
satellites resulted in an eye-tracking device used in Lasik
vision correction surgery.
Yet, as we will hear today, the end of this program in 2011
and the changes in the space industry, have left many small
businesses in the supply chain looking for ways to continue
participating in the marketplace. This is particularly
troubling since small businesses affiliated with NASA are found
in every state across the nation.
In 2014, commercial space activities accounted for more
than 76 percent of spending in the industry. The United States
in particular has seen its share of commercial activities
increase. Of 86 global launches in 2015, 26 percent globally
were commercial, while 40 percent of U.S. launches were
commercial.
With this new reliance on commercial space providers and
many of these companies performing much of the manufacturing
themselves, it is vital that NASA ensure that its supply chain
is maintained for future space missions. This means renewed
emphasis on subcontracting opportunities and inclusion of small
businesses' technologies and new projects.
NASA has been successful in including small businesses in
its recent missions. Some of our witnesses here today have been
involved in the various Mars missions, and there are more than
800 small businesses contributing to the Orion mission designed
to carry astronauts further into the solar system than ever
traveled before.
However, we are seeing a decline in small business
participation overall at NASA. Since fiscal year 2013, the
agency has seen a decrease in dollars awarded to these firms.
Although NASA surpassed its prime small business goal of 17
percent, the dollars awarded to these firms did not grow
despite NASA seeing an increase of nearly $1 billion in dollars
eligible for award to small businesses.
In the other small business categories, NASA failed to meet
its goals for all groups except that of small disadvantaged
businesses.
Additionally, while NASA surpassed its overall small
business subcontracting goal, the agency still saw a decline of
over 30 percent from its fiscal year 2014 goal. We can also
expect participation to decrease in the current fiscal year as
the fiscal year 2016 goals set by the agency, in conjunction
with the Small Business Administration, have been set lower
than the previous year's goal. That is lower than NASA's actual
achievement level.
During today's hearing, I look forward to hearing about
challenges facing small businesses contracting with NASA and
its primes and how we can ensure that the new innovative ideas
small firms bring to the table continue to play a role into the
future of space exploration.
I thank all of the witnesses for being here today, and I
yield back the balance of my time.
Chairman CURBELO. Thank you, Ms. Meng.
If Committee members have an opening statement prepared, I
ask that they be submitted for the record.
I would like to take a moment to explain the timing lights
for you. You will each have 5 minutes to deliver your
testimony. The light starts off as green. When you have 1
minute remaining it will turn yellow. Finally, at the end of
your 5 minutes it will turn red. We ask all witnesses to do
their best to abide by the time.
Now, I would like to start introducing our witnesses. First
is Mr. Chris Carberry, CEO and co-founder of Explore Mars,
Inc., a nonprofit which was created to advance a goal of
sending humans to Mars within the next two decades. The
organization also encourages the use of STEM curriculum in the
classroom to instill a desire to pursue space exploration for
future generations. As CEO, he acts as the main liaison for
efforts in project ventures. He has been an international
spokesperson on behalf of various space-related entities on
numerous occasions.
Prior to joining Explore Mars, Mr. Carberry served as
executive director of the Mars Society. In his early career, he
acted as a member of the steering committee where he organized
congressional outreach efforts around the country. An author of
dozens of articles and op-ed pieces concerning space policy and
politics, Mr. Carberry has been featured on NBC Nightly News,
BBC World, NPR, and many other news outlets. Thank you for
being with us today, Mr. Carberry.
Up next we have Dr. George Davis, president and founder of
Emergent Space Technologies in Greenbelt, Maryland. He received
a Ph.D. in Aerospace Engineering from the University of Texas
at Austin for his research into the precise orbit determination
of low altitude satellites using the Global Positioning System.
His M.S. in aerospace engineering, also from the University of
Texas, was on on-orbit assembly operations for lunar and Mars
spacecraft. His interests include GPS applications, autonomous
spacecraft navigation, and orbit determination.
Prior to starting Emergent, he worked for the Technical
Services Division of the Orbital Sciences Corporation as a
support contractor at the NASA Goddard Space Flight Center. Dr.
Davis worked in the GPS Technology Group providing systems
engineering, algorithm development, receiver testing, and data
analysis support to a variety of missions, including the
International Space Station. Thank you for being here, Dr.
Davis.
Next, we have Ms. Carol Craig, founder and CEO of Craig
Technologies in Cape Canaveral, Florida. A self-described
accidental entrepreneur and unconventional CEO, Carol grew
Craig Technologies from 1 person in 1999 to nearly 400
associates today. Craig Technologies offers high-end custom
engineering and technical support services to include software
design and development, systems engineering and integration,
multidisciplinary engineering, training, and courseware
development, modeling and simulation, information technology
support, and integrated logistics support. She holds a B.A. in
Computer Science from Knox College, a B.S. in computer science
engineering from the University of Illinois, and a M.S. in
electrical and computer engineering from the University of
Massachusetts at Amherst, and is currently pursuing a Ph.D. in
systems engineering at Florida Tech. Thank you for your
participation in this hearing, Ms. Craig.
I now yield to Ms. Meng for the introduction of our next
and final witness.
Ms. MENG. It is my pleasure to introduce Mr. Stephen
Gorevan. Mr. Gorevan is the chairman of Honeybee Robotics
located in Brooklyn, New York. After only 3 years in operation,
Honeybee received its first NASA contract in 1986, and since
then has continued to design and develop innovative, reliable
systems for space. In fact, the company has supplied NASA with
critical technologies for its last three Mars missions. Mr.
Gorevan currently serves as a co-investigator on the science
teams for the Mars exploration rovers and the Mars Science
Laboratory SAM instrument, and is a member of the Venus Science
Definition Team. Welcome, Mr. Gorevan.
Chairman CURBELO. Well, with that, we will begin our
testimony, but I should say first that this is probably the
most impressive panel that I have been able to listen to since
arriving in Congress, so this is very exciting, and I am sure
Ms. Meng shares that sentiment.
Mr. Carberry, you may begin. Thank you.
STATEMENTS OF CHRIS CARBERRY, CEO AND CO-FOUNDER, EXPLORE MARS,
INC.; GEORGE DAVIS, PH.D., PRESIDENT AND FOUNDER, EMERGENT
SPACE TECHNOLOGIES; CAROL CRAIG, PRESIDENT AND CEO, CRAIG
TECHNOLOGIES; STEPHEN GOREVAN, CHAIRMAN, HONEYBEE ROBOTICS,
LTD.
STATEMENT OF CHRIS CARBERRY
Mr. CARBERRY. Thank you, Chairman Curbelo, Ranking Member
Meng, and members of the Subcommittee, for the invitation to
testify at today's hearing. I am honored to be here to discuss
the importance of small businesses to NASA supply chain and the
significant contribution such companies make to our Nation's
space program.
Explore Mars is a small, nonprofit space advocacy
organization that communicates regularly with industry,
including small businesses. As such, we are well-positioned to
report on fluctuations, as well as progress, space policy, and
how uncertainty impacts American business.
When the space shuttle was retired in 2011, it was not to
retreat from human space flight but because of safety concerns
in the wake of the Columbia accident and to free up funds to
build new launch systems for access to low Earth orbit, as well
as to take our Nation to destinations such as the Moon and
Mars. Unfortunately, uncertainty caused by politics and
budgetary fluctuations resulted in a growing gap between the
space shuttle program and these follow-on programs.
NASA's annual procurement numbers show that the space
program funding goes to small businesses in every State. Small
businesses received about $5 billion in contracts in fiscal
year 2015 and about $2.5 billion were awarded directly to small
businesses and prime contracts.
According to two recent NASA small business reports, more
than 800 small businesses from 47 States played a role in the
Orion crew capsule program, NASA's next-generation spacecraft
and, similarly, more than 800 small businesses in 43 States
have supported the Space Launch System, or SLS, NASA's new
exploration class rocket. With these vehicles and other
capabilities, NASA hopes to land humans on Mars beginning in
the 2030s.
But Mars is not a new goal. It has been one of NASA's
official goals under multiple administrations and Congresses,
as demonstrated by the enactment of the NASA Authorization Acts
of 2005, 2008, and 2010. Most recently, the House passed its
version of the NASA Authorization Act of 2015, stating that the
goal of the administration's exploration program shall be to
successfully conduct crude missions to the surface of Mars
beginning human exploration of that planet. Recent national
polling also suggests very strong support from the general
public, particularly when they are made aware that NASA
accounts for less than half of 1 percent of the Federal budget.
Today NASA, along with U.S. industry, international
partners, and others, is gearing up to achieve this goal. While
much work needs to be done, we are on the verge of restoring
American access to space for our astronauts. Hardware for deep
space missions is actually being built, and the first workshop
to discuss the potential landing zones for humans on Mars
actually just recently took place. Thanks to Congress, NASA's
budgets have achieved some stability in growth recently, but
only a few years ago budgetary uncertainty hit NASA and the
space industry particularly hard, leaving the space community,
including large and small businesses in crisis.
I recall meeting with a high-ranking NASA official a few
years ago who did not know whether his directorate budget would
be increased by $2 billion or reduced by $1 billion the
following year. In other words, he had $3 billion in budgetary
uncertainty, which is a tremendously large amount for any NASA
directorate. Needless to say, this directly impacted industrial
partners and subcontractors along the supply chain. In the same
timeframe, I spoke to numerous prime contractors who also
mentioned that this budgetary uncertainty impacted their
decision-making. They were hesitant to spend funds, which once
again resulted in a disproportionate impact on small
businesses.
Space exploration is clearly not just the business of large
corporations as I am sure will be made clear by the other
witnesses. Small businesses play an essential role in the
success of our space program, producing a myriad of products
and capabilities. To assure support for these businesses, we
must not be a penny wise and a pound foolish with NASA's
budget. It makes absolutely no sense to allow an even modest
reduction in NASA's budget, while at the same time removing any
prospect of NASA achieving its mandate for Mars, particularly
when only a little more and consistent funding will serve
taxpayers in a manner that will provide tremendous benefits to
our entire society and be remembered for millennia. There are
not too many Federal programs that can achieve anything
comparable.
We are approaching another major hurdle with the upcoming
change in administrations. Will we shift directions again and
throw our space program into turmoil or embrace our current
policy of sending humans to Mars? We have come so far in recent
years and it benefits no one if we radically change course
again, not NASA, not large businesses, not small businesses,
and certainly not the taxpayers of the United States.
In closing, Explore Mars would like to thank you for
holding this hearing to highlight this Nation's small business
innovations. We will be sending humans to Mars in the very near
future and it will be accomplished in large measure based on
the support we show for, and the efforts of, small businesses
around the United States.
Once again, thank you.
Chairman CURBELO. Thank you, Mr. Carberry.
Dr. Davis, you are recognized.
STATEMENT OF GEORGE DAVIS
Mr. DAVIS. Chairman Curbelo, Ranking Member Meng, and
members of the Committee, thank you for giving me the
opportunity to speak to you today.
Emergent Space Technologies, which I founded in 2001, is a
60-person aerospace engineering and software development firm
headquartered in Greenbelt, Maryland, with employees in
Maryland, Virginia, Texas, New Mexico, Colorado, and
California. We provide technical services and perform research
and development for NASA, NOAA, the Air Force, and DARPA.
NASA is our primary customer, and it is known for large,
complex space programs, so one might think that only large
businesses are capable of supporting its missions. In fact,
small businesses form a vital part of NASA's contractor
workforce. Simply look at the Orion Crew Vehicle, the Space
Launch System, the James Webb Space Telescope, and the Mars
2020 Rover, NASA's latest engineering marvels. You will see
that we are providing unique, technical expertise and
innovative engineering solutions.
Nonetheless, small businesses in the NASA supply chain face
many challenges. Chief among them is a diminishing supply of
small business set-asides. This is sometimes driven by contract
bundling in which smaller prime contracts are combined with or
bundled into larger contracts that are required under full and
open competitions, but is also due to the manner in which NASA
uses NAICS codes to establish prime contracting and
subcontracting opportunities for small businesses.
The North American Industry Classification System, or
NAICS, is used by federal agencies to classify businesses when
collecting, analyzing, and publishing statistical data related
to the U.S. economy. The Small Business Administration has
established size standards that are matched to the NAICS codes,
and they specify how large a business can be and still qualify
as small for federal contracts. These contracts are expressed
in either millions of dollars or numbers of employees. For
example, the NAICS codes for engineering services uses a
standard of $38.5 million in revenue for small businesses. The
NAICS for computer programming services uses a standard of
$27.5 million in revenue. These codes are most relevant to my
company and hundreds like us. However, their size standards are
roughly equivalent to a 150- to 250-person company, or about 3
to 4 times our size. The NAICS code for research and
development is used most frequently by NASA for small business
contracting considerations.
In February 2016, the SBA changed the standard from 500
employees to 1,000. This is 15 times larger than Emergent. For
another comparison, consider the U.S. Census Bureau's 2013
statistics of U.S. businesses, which shows that 99 percent of
our country's 5.7 million firms have less than 500 employees.
I recently studied the NASA prime contracts whose primary
requirements are science, engineering, or software, and are
strategically aligned with Emergent's business interests. There
are roughly 50 of such contracts. Of these, only 35 percent are
full and open competitions for companies of any size. That is
the good news. The bad news is only 14 percent are set aside
using the NAICS codes for engineering services or computer
programming services.
The standards set by the NAICS codes and the way they are
used by NASA to establish prime contracting opportunities for
small businesses is important. In government contracting, size
does matter. The more billable employees you have, the more you
can spread your G&A costs over those hours, and so your rates
are lower which makes you most cost competitive. Moreover, you
can afford more nonbillable employees for business development
and proposal writing, which is the lifeblood of our industry.
Given these advantages, it is extremely difficult for
companies of our size to compete with those that are 10 times
larger, especially when you have so few chances to develop
experience as a prime contractor. Emergent and other small
businesses like us have had to adapt to the shrinking
opportunities for prime contracting by focusing more on
subcontracting. The downside of being a subcontractor is that
we have less control over our own business destinies. We have
to work on multiple proposals with multiple primes, usually
simultaneously, just to increase the statistical likelihood
that we maintain our businesses, let alone grow them. Growing a
company through subcontracting alone is very difficult. As a
result, the most stable, successful small businesses in NASA's
supply chain are able to prime contracts. This is where we want
to be.
Two changes that NASA could make to help small businesses
are, one, expand its use of small business set-asides under the
engineering services and computer programming NAICS codes; and
two, use a size standard for emerging small businesses, which
is defined as 50 percent of the NAICS standard. This would help
create new small businesses and also give existing ones like
ours more opportunities to gain experience as a prime
contractor. Otherwise, it is virtually impossible to compete
for the larger set-asides under research and development.
In closing, I would again like to thank you for your time
today. I know you understand the importance of small businesses
as the backbone of our economy. All the great large businesses,
from Lockheed Martin to Boeing, to Microsoft and Apple started
out as small businesses at one time. In order for this trend to
continue in the aerospace industry, we need for NASA to expand
small business opportunities through set-asides targeted for
companies our size, not just the large small businesses.
Working on NASA projects is a dream come true for me and
for my employees. It is why we get up in the morning and go to
work, to play a role, even a small one, in advancing our
nation's knowledge of the universe and exploring our solar
system.
I have touched on some of the challenges in being a part of
the NASA supply chain, and there is more that I could discuss,
and I would therefore be happy to follow up with you and your
staff at your convenience.
Chairman CURBELO. Thank you, Dr. Davis.
Ms. Craig, you are recognized.
STATEMENT OF CAROL CRAIG
Ms. CRAIG. Thank you. Good morning, Chairman, Ranking
Member Meng, and the members of the Committee. I appreciate the
opportunity to testify today.
In 1999, I started Craig Technologies at my kitchen table.
My husband is a Navy officer and our repeated moves and
transitions led me down the entrepreneur path. By 2010, the
company was successful, profitable, and reputable. With
revenues topping $20 million and through strictly organic
funding I knew there was more opportunity to serve both
commercial and government clients with our brand of superior
service, and so I made the move into manufacturing.
My foray into manufacturing started small. I had a need for
quick and quality work and realized I could do it internally
with the correct approach. I purchased the assets of a small
machine shop and then invested wisely in supplemental
equipment, providing the company with a nimble production
facility that quickly garnered interest from existing NASA
supply chain members.
When KSC, Kennedy Space Center, leadership decided to
pursue a non-reimbursable Space Act Agreement with a company in
order to take over the remains of the NASA Shuttle Logistics
Depot, Craig Technologies bid on and eventually won the
opportunity to house and maintain the manufacturing equipment
for a period of 5 years and utilize it for any commercial
purpose. Now, keep in mind this was a non-reimbursable Space
Act Agreement, and so no money was exchanged, no contracts, it
was purely an entrepreneurial opportunity.
Since that time, I made the conscious decision to utilize
the profits from the successful engineering and technical
services division to fund the emerging aerospace solution side.
I did not utilize outside capital in order to preserve the
culture and autonomy that makes Craig Technologies so different
than other government contractors. We grew from $20 million in
2010, to $45 million today. We continue to provide outstanding
service and product to all of our customers with NASA as the
largest. As the commercial space industry grows around Cape
Canaveral and KSC continues to pursue public-private
partnerships through commercial crew and commercial cargo
contracts, the feature for astro and aerospace manufacturing in
Brevard County is poised for explosive growth and relevant
economic impact.
I tell you this backstory because it leads to where I am
today, at a crossroads of how to keep the manufacturing side
afloat while waiting for delayed payments, extended NASA
contract decisions, and lack of access to working capital
because of stringent banking regulations imposed by the federal
government. I have effectively robbed Peter to grow Paul. I did
so because it was the right thing to do, for our business, for
our employees, and for our community. I believe in our free
market system and always strive to offer the very best product
and service for the price agreed upon.
Unfortunately, the cards remain stacked against the small
business entrepreneur, even one who overcomes the odds and
makes it to the next level. Unforgiving and uninformed
covenants by lending institutions lead to myopic attitudes
towards growth in the government sector and the milestones that
point toward long-term stability and success.
Creating valuable employment opportunities in my community
still remains my number one goal and priority, but money has to
come in the front door on a logical and planned timeline in
order to properly budget and ensure the books remain solvent.
Manufacturing built this country. We lost it to cheaper and
inferior overseas suppliers and then we complained when the
jobs went away. Now there are numerous folks like myself who
are laying it all on the line to recover the industry. We need
help and we need it now. We do not want handouts, but rather a
fair and predictable system that ensures that payments are made
and contracts are satisfied without political whim. What if
more and more companies my size, like myself, are unable to
succeed and close their doors? The impact on communities and
our nation will be devastating.
NASA continues to explore and innovate and their supply
chain remains critical to both long and short-term success.
I urge you to report to the full body that commitment to a
clear path and mission with 10-year budget cycles is crucial to
the continuation of small business partnerships with NASA, and
collaboration with lending institutions through small business
offices within the agency will allow the banking world to
understand the nuances of our government contracting and work.
Pursuant to your questions, I offer my thanks for your
time.
Chairman CURBELO. Thank you, Ms. Craig.
Mr. Gorevan, you are recognized.
STATEMENT OF STEPHEN GOREVAN
Mr. GOREVAN. Mr. Chairman, Ranking Member Meng, and
distinguished members of the Subcommittee, thank you for the
opportunity to share my perspective as a small business
contractor to NASA. NASA, working with small businesses, is
creating amazing technologies for flight, for our exploration,
and together we help keep American innovation the envy of the
world.
Honeybee Robotics is a company I cofounded in 1983. The
company has been supporting NASA from our headquarters in the
Brooklyn Navy Yard and from our facilities in Colorado and
California. We build robots and mechanisms for tough
environments, such as planetary exploration spacecraft, and we
have worked for most of NASA's centers. To get an idea of the
kinds of things we do, I point to the Mars program, where
Honeybee Robotics has designed, built, and integrated vital
devices onboard all four spacecraft NASA has landed on the
surface of Mars since the year 2000. We have achieved several
firsts, including developing the first tools to break into
rocks on Mars and the first tool to sample ice on Mars.
Now I will take a little time to humbly make some
observations and suggestions with respect to NASA and small
businesses. First, while manned programs such as the Shuttle
and Orion are important to small business, NASA's Earth
science, planetary science, and exploration R&D are also
critical areas where small business can contribute to the
agency's mission.
Second, the ability for small businesses to deliver useful
technologies is dependent on long-term mission clarity.
Unfortunately, even when a small business has its technology
selected for flight, delays are frequent and project
cancelations are an ever-present risk. Small business
contractors often bear that risk and pay the price when the
nation's political leadership changes NASA's mission
priorities.
Third, small businesses face significant headwinds
competing for contracts that require matching investment. This
is because most space exploration innovations lack immediate
commercial application and matching requirements, which
effectively boxes out small businesses in favor of more highly
capitalized large businesses. Eliminating or reducing matching
investment requirements for small businesses, particularly new
small businesses, will liberate NASA to choose from companies
with the best technology, not only from those with sufficiently
large internal budgets.
Finally, I would like to say a word about the terrific
Small Business Innovation Research program, a program that has
proven vital to both small businesses and NASA. I submit here
two suggestions to improve the program, neither of which
requires new appropriations. First, if Congress would gradually
increase the share of funding that federal agencies allocate to
SBIRs from the current rate of about 3 percent up to 5 percent,
it would provide for a dramatic lift, I think, especially if
the new funding were spent to support technology once it exits
the phase two program. At that point, a company often finds
itself having developed a functional system but facing the so-
called valley of death before it can demonstrate commercial
viability or flight readiness.
Second, the SBIR program's success depends on the ability
to match NASA's needs. NASA currently places a communication
ban between companies and the agency when it releases its
solicitation. Instead, I suggest NASA take a page from the
Department of Defense, which holds a month-long prerelease
period when a small business can ask questions about the
technology requests. I believe that having this window of
dialogue prior to the formal NASA SBIR solicitation release
will produce higher quality, better targeted technology
development.
Today, Honeybee Robotics has grown and works in many
different fields for Uncle Sam and for private industry around
the world. We are having a fantastic run, actually, but in my
heart it all stems from NASA. I was one of those first graders
marched into our school cafeteria with the rest of the student
body and set before a stage-mounted television to watch the
launch of Friendship 7 carrying John Glenn to orbit. I have
never forgotten it and I was hooked hard. I wanted to work for
NASA ever since.
Blessedly, my childhood dream has come true, and now as a
professional and adult I have found NASA understands very well
the ways in which the small business community can help it
succeed with its mission. Thank you.
Chairman CURBELO. Thank you very much, Mr. Gorevan. Now, we
will begin the first round of questions. I will recognize
myself for 5 minutes.
Mr. Carberry, let us go big picture first because I think
it is important for our constituents to understand why we are
here and why we are having this conversation. Why is it so
important for the United States to push the limits of science
and space exploration? How does society broadly benefit from
this exercise?
Mr. CARBERRY. Frankly, it would be a much different world
if we had not done that. If we had not had the space program,
if we had not gone to the Moon, and done all the other things
we have done in space, and exploration in general. It has
benefited society enormously. One of the main reasons we should
push is to try to inspire kids to get a STEM education, get
into technical fields that benefit our entire society. It is
not just the economics that are affected directly by hiring
small businesses that are very important, but also think by
inspiring goals. Big goals like going to Mars or going back to
the Moon or elsewhere. It shows the country, and it shows the
world that we are still capable of big things, and I think this
translates into the economy as well. When the country has a
positive outlook and, can see that we are doing great things,
that translates directly to our economy. We have all seen that
economies are largely based on psychology; anybody watching the
stock market can see that. When the country feels that we are
doing exciting, bold things, and we are pushing the boundaries,
I think that has a dramatic impact on the overall feel of the
country and the economy as well.
But as for actual programming, I think it is very important
that we have to find a way, stick with the program, and show
people that we actually mean it. We have had a problem over the
last, well, multiple decades, actually, when starting programs,
then there is a change in administration, then we shift
directions and we start from scratch again, and we never seem
to make traction. People begin to lose faith that we are
actually going to get it done. As a number of people have
mentioned, we are at a very pivotal moment right now going into
the next administration. If we can really continue the momentum
and start accelerating that momentum into the next
administration, I think we can achieve some really remarkable
things that will impact the country dramatically, as well as
the entire world.
Chairman CURBELO. Thank you, Mr. Carberry.
Dr. Davis, you mentioned something about prospective
employees and their preferences for small firms, particularly
younger workers. What do you think they find attractive about
working at small firms as opposed to the larger, better-known
firms?
Mr. DAVIS. That is an experience I had. Before I started
Emergent, I was working for a large company, and then I took a
hiatus from the aerospace industry and I worked for an IT
company for a couple of years. It was a very different
environment over there. Aerospace is a very top-down, military
style chain of command, with lots of rules and regulations. I
go to an IT company where people wear shorts and flip-flops,
and I can just go walk into the president's office and have a
conversation with him. That would never happen in the company I
worked for.
When I started Emergent, I wanted to have that same kind of
atmosphere and feel. This was in the early 2000s. I noticed it
was not as hard to recruit young engineers to a small aerospace
company, and I think it is because growing up with the Internet
and social media, they just have this idea that work should not
be as formal as the way mom and dad did it. They want to go to
these smaller companies where culture is very important.
So I am sure at your company, Craig Technologies and at
Honeybee, we know our employees. We know their children. There
is this sense of camaraderie and teamwork, and that is what
young people want at work. It is the kind of place that we
wanted to start and have as our businesses. I think it is
increasing, you know, I started out having to make comparisons
between, hey, you come work for me and it might be a little
more risky than going to the larger companies but at least you
will have more say in what you do. That is another aspect of
it.
I have to make that case less and less now. I just tell
them, hey, come work for Emergent. We do really cool stuff. We
do cutting-edge research. We work for these customers on these
projects. They walk around our building and they talk to people
and they just say, you know what? This is the kind of firm that
I want to be in. I think for recruiting the younger engineers
who have advanced degrees, 60 percent of our employees have a
master's or a Ph.D. in engineering or computer science, they
want to come work for these smaller businesses. It is critical
for the aerospace industry, is recruiting that high-tech talent
to the space program.
Chairman CURBELO. Thank you, Dr. Davis.
Now I would like to recognize Ms. Meng.
Ms. MENG. My question is for Mr. Carberry, or anyone can
probably answer. Like many other agencies, and as you have all
mentioned, NASA has seen its budget reduced and fluctuated. Mr.
Carberry, in your testimony, you discuss how budget uncertainty
results in cautious spending from major contractors. Do you
have examples of how this has disproportionately impacted small
businesses, and do you believe that NASA has made necessary
adjustments to ensure that small businesses still receive their
fair share of contracting opportunities regardless of the
budget, and what more should NASA do?
Mr. CARBERRY. I can send you specific examples, but I think
one of the biggest problems was, and this was a few years ago,
largely coming out after the retirement of the shuttle, but
also after the change in administrations we shifted course
again. For a while, because there was a lot of disagreement
within the space community itself, everybody was in limbo. It
was similar in the budget itself. The budget was fluctuating at
the time, so people were not as anxious to invest money in
NASA. We did not quite know where we were going, when there is
not a clear path, it is difficult. At least from the experience
I had talking with the prime contractors, they are not quite
sure which direction, if we are going to go to the Moon, we are
going to go to Mars, we are going to go to an asteroid. If we
are not quite sure what the direction is and what the timeline
is on that, it is very difficult for them to plan. If they are
not planning, they are very hesitant to actually invest the
funds.
I can actually get you more specific information directly
on it, as it filtered down or did not filter down to small
businesses, but I recall very clearly in all these
conversations, how worried everybody was and they did not know
where we were going. In addition to budget, it is overall
direction and keeping clarity in policy because even if you
have a full budget, if you do not know where you are going, it
is hard to make these investments.
Ms. MENG. Do you think NASA has done an adequate job, or
what more should it do in helping transitioning these small
businesses from programs that have concluded, like the shuttle
program, to its newer missions? In terms of more clarity in
policy and vision, do you all feel that that is the major
issue?
Mr. DAVIS. There is a number of missions that are much
smaller and less visible than the shuttle, the station, SLS,
and those kinds of things, the planetarium missions, Earth
science and space science missions. All of those missions feed
the NASA pipeline, and cancellation of any of those missions
can have a devastating effect on a small business. Much larger
businesses who have deeper pockets might be able to ride out a
cancellation while they find work elsewhere. Maybe they lose
some profit. Small business can have its subcontract canceled
and people can lose jobs. When someone loses their job, they
may exit the industry and not come back.
I go back to what Mr. Carberry said about having certainty
in the planning of how, these missions are funded and how, they
are appropriated. We even look into the legislation to see what
is coming, and we expect those to be there, and we plan on
those being there. Our customers, NASA and their primes, expect
all those things to be there. When those get suddenly canceled,
there is not much NASA can do about that, it is out of their
control sometimes. So I would have to say that the budgetary
certainty is just critical.
Mr. GOREVAN. This is a very tough problem and I really
cannot point to a specific solution, but the cancellations are
especially difficult.
I worked on a joint U.S.-European mission, and I can tell
you, there are some things about the way the European Space
Agency works with respect to competition that I do not really
like myself, but there is a reputation among the Europeans, for
some reason, they are more consistent. When they say they are
going to do a mission, they finish it. I am not an expert on
why that is, but I think that NASA or Congress should try to
look into why this is so.
Back when the Rosetta Mission started, NASA was part of it,
and I was part of the JPL version of that mission, and it was a
little embarrassing. I mean, we had terrific technology, and we
went down the road and we were canceled. I mean, the American
segment. Rosetta went on to glory, but the American segment was
canceled and it was in stark contrast to the Europeans
continuing on for 12 more years to a very successful mission.
Ms. MENG. Thank you. I yield back.
Chairman CURBELO. Thank you, Ms. Meng.
Mr. Brat, you are recognized for 5 minutes.
Mr. BRAT. Chairman, I yield my time to the chair.
Chairman CURBELO. I thank the gentleman.
Ms. Lawrence, you are recognized for 5 minutes.
Ms. LAWRENCE. Thank you.
Many people do not associate the State of Michigan, which I
am from and represent, as being associated with the space
exploration, but small businesses in my state play a major role
in manufacturing products. In the fiscal year 2015 alone, NASA
awarded contracts to over 50 small businesses in the State of
Michigan. One example is SpaceX, a major design and
manufacturing company focusing on rockets and spaceships, which
spent over $22 million with suppliers in Michigan, including
$3.3 million to businesses in my district. More importantly, 75
percent of Space X suppliers are small businesses, so that is
something I am very proud of. Your comments today really
resonate with me because it has a direct impact on my small
businesses.
Dr. Davis, I co-chaired a bipartisan caucus, the
Congressional Investment in American Skilled Trade Workforce.
You spoke of the educational level of your employees. I am
always looking for ways to get younger Americans interested in
the STEM professions. I am sure you employ, all of you, skilled
trade workers, and you also know that the average skilled trade
workers are in their fifties, and we are not generating the
next workforce to replace them when they decide to retire. Many
of us grew up and got excited about the space industry by being
forced in our classes to sit down and watch it on TV, like you
Mr. Gorevan, but in your opinion, what are the best ways to
attract young individuals to pursue a career in your field?
Mr. DAVIS. I serve on the External Advisory Committee for
the Aerospace Department at the University of Texas at Austin,
so I get to interact with students quite a bit. One change I
have seen in the last 10 years at the university level has been
hands-on engineering experience building CubeSats and small
UAVs. The students are working on these projects. We did not do
this back in the 1980s when I was in school. They come out with
hands-on experience building things and are learning how to
solder and learning how to wire, and learning how these systems
work so when they are done they have significant confidence and
experience and they want to go do bigger things.
Now you see high schools are building CubeSats. Thomas
Jefferson High School in Virginia has been building CubeSats
for about 5 to 7 years, and I have been to the International
Space Station Utilization Conference a couple of times. Last
year it was in Boston and they had a whole panel session on
high school students from Chicago and other cities that were
working on CubeSats and projects that would go up into the
station as part of a hosted payload experiment. So I think
pushing that further down into middle schools and into
elementary schools, and it does not have to be a CubeSat. You
know, building a model plane and then going outside and flying
it, the technology, the products are there. You go to a hobby
shop and you can buy things now and build it yourself that was
not available to us 20, 30 years ago. So I think it is that
hands-on. Kids need to be engaged.
My kids look at the space program as what Dad does. That is
cool, but when they go on the Internet or they go to the movie
theater they see things that look almost real, they say, how
come you are not doing that? And I am like, well, son, that is
not real, but some day it will be if people like you get the
education and go on and do it. We need to start early, earlier
than we thought. High school is not early enough. You need to
get them in middle school, and if you can, in elementary
school.
Ms. LAWRENCE. I thank you for your understanding of our
challenge in America. To sustain your economy and your
industry, we must invest in the skilled trade workforce. I
encourage you to not only talk individually to your family, but
also provide opportunities to connect to your local
communities. Have a day in your facility where you bring in
young people and expose them to what you do. We do have to
connect it to the movies or else they do not get it. Say, you
can go into this field and create what you see on the movies.
I heard what you said about the changes in administration,
and that is something that has resonated. I thank you for
bringing that to our attention because I think about the
funding and sources that are available but not about how that
change of administration that directly impacts the investment
into your company. Thank you so much for being here.
I yield back.
Chairman CURBELO. Thank you, Ms. Lawrence.
I recognize myself for 5 minutes.
I think at least one of you said that your firm was
starting to look at other sources of business, such as general
aviation, because it is more stable and because it is more
predictable. Is this prevalent among small firms like yours,
like these? What are the risks for NASA if that trend
continues? Ms. Craig, maybe do you want to take that?
Ms. CRAIG. Sure. Actually, since I started the company,
diversity was very, very important to me for that very reason.
You cannot count on necessarily the Department of Defense or
NASA with all the different budgets. In our manufacturing
facility, we were kind of a victim of the same thing we have
been talking about, the planned programs and budget cuts that
you expected. Everyone was excited because the shuttle
capability could be maintained and we are today where we are
now 4 years later. We should have been there 2 years ago. But
we absolutely had that plan and have done it where you need to
diversify.
The problem that happens at NASA is they are counting on
the timelines. They are counting on their suppliers to deliver.
Even if the timeline is solid, there might be changes in
specifications, design engineering, and you have to be held, a
requirement by NASA, they still need those timelines to be met.
There is no flexibility for a supplier to say, oh, but I have
another customer that needs this done at this same time so you
are going to have to slide to the side. I think that is the
challenge, and that is why we start to look for diversification
into other areas. But what is going to happen is pretty soon no
one is going to want to do business with NASA at the expense of
the other customers.
Chairman CURBELO. So yours is not the only firm that is
doing this, you are seeing this from colleagues?
Ms. CRAIG. Yes. I have colleagues who have said I will not
do business with some of the large tier one suppliers to NASA
anymore. They are smaller organizations but their are varied
reasons. One is the regulations, all the paperwork, the
certifications and, all that, but also the sliding timelines,
lack of payment, and things like that. There are a lot of those
decisions being made.
Chairman CURBELO. Do you consider this a midterm or long-
term threat to NASA's ability to meet its mission, if suppliers
are focusing on other business opportunities?
Ms. CRAIG. I would say so because it also takes NASA time
to build up a supplier, then if the supplier no longer wants to
do business or can no longer do business, now they have to move
and find more suppliers. So it is costing them money as well.
So yeah, I think that is a significant problem. The budgets are
a significant problem, too, because quality is important, set-
asides are somewhat important, but it all becomes dollars.
Chairman CURBELO. Does anyone else want to add to that? Dr.
Davis?
Mr. DAVIS. Yes, I would like to add to that.
We have looked at diversifying our customer base. The DOD
and the intel communities have much larger budgets than NASA,
and space situational awareness is becoming an increasingly big
part of what these organizations are looking at, so it is a
natural place for us to go. It is difficult, but when you are
faced with uncertainty with NASA and, not a lot of opportunity
to prime, at least we know that the DOD budgets are going to be
stable and funded over long periods of time. If we are going to
make that commitment, there is probably some payoff. It may
take a while to get to there, but we are also looking at
branching out into health care and other sectors just because,
again, the budgets there are much bigger and seemingly more
reliable.
I have talked to young people, high school and college age,
who are aware that NASA's budget changes with administrations
and there is uncertainty in that. And so they are like, well, I
am not going to go into aerospace engineering. I am going to go
into civil engineering because my parents have told me that
NASA is just not a reliable place to go work. To me, it is sad
that our nation and the young people who are getting the
education to become the workforce of tomorrow cannot rely on
the space program as a place to get good, high-paying, high-
tech jobs that are going to be there.
Chairman CURBELO. Let me take you back to NAICS, which you
mentioned during your testimony as well. Do you think that is a
potential quick fix for some of the challenges firms like yours
are facing? Do you have any specific recommendations on how we
may reclassify these firms or come up with new definitions?
Mr. DAVIS. Sure. I think the biggest challenge is a company
of my size, if we are going to compete for a proposal, you are
going up against three or four other companies and it is knock-
down, drag-out competition. To take on a company that is much,
much larger than us is an unfair fight. It is like putting a
featherweight against a heavyweight, you are not going to win
that battle very often. Using those NAICS codes, the
engineering services and the custom computer programming
services more often as a small business set-aside gives us more
of those chances. But even then, if you want to start new
businesses, you have to create a new code or a standard that is
even smaller than that. Right? A 250-person company is still 4
times larger than mine, so if I am going to compete with them
for a proposal, they are going to have 4 times the advantage in
my opinion. But if there was a smaller code that, say, limited
the size to 100 or maybe $15 million, $10 million in revenue,
that would make the competition a lot more fair and balanced,
and I think that would encourage new small businesses to start
up.
It is intimidating to write a proposal, the transaction
cost to write a NASA proposal is quite high. You have to put
together a 100-, 150-page book that has technical, management,
costs, past performance, and then all the plans that go along
with that. Obviously, larger companies have a big advantage in
that. If you want the new small businesses to come up, you have
to narrow the competition down and you have to make the
transaction costs lower.
Chairman CURBELO. Thank you, Dr. Davis.
Ms. Meng, do you have any additional questions?
Ms. MENG. I just wanted to inquire about the online
resources that NASA has to help individuals and small
businesses interested in working with NASA. Are small
businesses using these resources at all or do you rely on trade
associations for guidance? How can the online resources be
improved if they are not being used enough? Maybe Ms. Craig or
Mr. Gorevan?
Mr. GOREVAN. I am sorry, online resources for finding
people to work for you?
Ms. MENG. Business opportunities with NASA.
Mr. GOREVAN. Oh, business opportunities with NASA.
Ms. MENG. Yes.
Mr. GOREVAN. Of course,we use online resources at my
company. The SBIR program is heavily based online and we make
quite a bit of use of these types of things. I think since 2013
alone we have had 61 NASA contracts that all came from online
sources, so I would say that they are very useful. I cannot
really point to any improvements that are really necessary
except I think perhaps maybe identifying some of the contacts
that we could talk to. As I mentioned in my testimony,
sometimes when these online solicitations are released we are
not allowed to speak to anyone, and as I said, the Department
of Defense does allow a month period where you can talk to
people. I think it would be better for both parties if that was
allowed to happen at NASA.
Ms. CRAIG. I will comment on that, also. When we were about
10 employees, I had initially tried to pursue what you are
talking about, the online resources, whether it was for--there
is one FedBizOpps or it is the NASA, trying to find
opportunities, but increasingly was told if you are looking
there you are behind the power curve. We had to invest in
third-party companies or products. There are some other,
GovWin, e-pipeline at the time, and then you are able to get
all the information to really more effectively bid on
opportunities. There is somewhat of an issue and that may be
government-wide, globally when it comes to finding those
opportunities, and that is some of the struggles of small
business. You have to be out there making your case and it
takes 18 months or more to be able to make that case,
understand what the customer wants, go in and speak with them
and be intelligent enough to bid on a particular opportunity. A
lot of that is done through subcontracting, but that is a long
timeline, and a lot of companies cannot survive that long,
especially on the uncertainty of whether or not you are going
to have that opportunity. So there could be ways to improve by
providing more information and more opportunity to come in and
discuss, like you said, with the SBIRs. They do it very well.
That would be helpful, but, it is a challenge, especially for
the really small companies that cannot afford third-party
companies.
Mr. DAVIS. I would like to add to that. We use GovWin,
which is a third-party service, and then the NASA online
resources are kind of secondary. So you start with GovWin and
then you go to the online resources. The one online resource
that NASA could improve is the forecast, and that forecast
needs to be updated regularly. It is supposed to be updated
quarterly. That does not always happen. Then the information
that is in there has to be true and accurate. They do not
always update who the person is, who is the CEO or the COTAR or
whatever. I will see an opportunity on GovWin and I will get
all I can get from GovWin, but then I will also go to this
forecast for the various NASA centers and then try to match
that up with what I see from GovWin. Just having that more
accurate and updated timely would be good.
I think the biggest challenge is that in government
contracting there is no how-to manual for us to start our
businesses. No one said, hey, this is what you do, step one,
step two, step three. This is how you do business with NASA.
When I have read those things I am like that is not how you do
business with NASA, if you did that you would have no business.
They should probably engage with some small businesses that
have some real war stories to tell that can say this resource
is not really useful, and neither is this one. You get these
small business specialists, and bless their heart, they are
trying to work hard and help us out, but a lot of times I just
feel like they do not really know the challenges that we face
and the things that we have to overcome, and the actual
information that we do need.
For example, when I started my company, I was blissfully
ignorant of the need for a contract vehicle. I just thought you
could start a company and be smart and have good ideas, and
somehow you would be connected up to this money that would come
to you to do work. It turns out, no, you have to have a
contract vehicle, you have to have a prime contractor. That
prime contractor may or may not let you on their contract. Even
if NASA wanted that company, I need that company, the prime
contractor may say, no, they were on my proposal team so I do
not need to have them on. I have seen that happen. That has
happened to me, and that is a barrier. The blocking and
tackling of being a small business in the government
contracting world, that kind of information could be very
useful to small businesses. I do not see that in the online
resources.
Ms. MENG. Thank you. I yield back.
Chairman CURBELO. I want to thank all of you for your time
this morning. We have learned a lot, and our goal here is to
make sure that the small business community in our country can
thrive and grow and create opportunities for every American,
but especially for those who need them the most. Young people
who are looking for work, immigrants, low-income people, small
businesses have unique access to those types of individuals,
and I am very grateful to all of you and to all of our
colleagues who participated today.
For more than 50 years, American global leadership in human
space exploration and space science has been a bright shining
light of innovation, technological advancement, and scientific
achievement. Small businesses are the foundation of the
industrial base needed to maintain and build upon that
advantage. We here at the Small Business Committee are
committed to expanding small business opportunities to conduct
business with NASA and throughout the Federal Government.
I ask unanimous consent that members have 5 legislative
days to submit statements and supporting materials for the
record.
Without objection, so ordered.
We are adjourned.
[Whereupon, at 12:06 p.m., the Subcommittee was adjourned.]
A P P E N D I X
Ready for Liftoff: The Importance of Small Businesses in the NASA
Supply Chain
United States House of Representatives
Committee on Small Business
Subcommittee on Agriculture, Energy, and Trade
Testimony of Chris Carberry
Chief Executive Officer, Explore Mars, Inc
July 12, 2016
Thank you Chairman Curbelo, Ranking Member Meng, and
Members of the Subcommittee, for the invitation to testify at
today's hearing. I am honored to be here to discuss the
importance of small businesses to NASA's supply chain and the
significant contributions such companies have made in the past
and will continue to make to our nation's space exploration
programs.
Explore Mars is a small, non-profit, space advocacy
organization that communicates regularly with industry,
including small businesses, on an ongoing basis. As such, we
are well-positioned to report on the fluctuations, as well as
progress, in space policy over the last few years and how
budgetary and policy uncertainties impact American businesses,
in particular, small businesses.
When the Space Shuttle was retired in 2011, it was not to
signal an American retreat from human space flight. Rather it
was because of safety concerns in the wake of the Columbia
accident as well as to enable the United States to transition
to new generations of more cost-effective launch vehicles and
to build systems capable of taking our nation beyond Low Earth
Orbit (LEO) to destinations such as the Moon and Mars.
Unfortunately, uncertainty caused by politics and budget
fluctuations caused a gap between the Space Shuttle program and
these follow-on programs.
NASA's annual procurement numbers show that space program
funding supports small businesses in each and every state.
Small businesses received about $5 billion in contracts during
Fiscal Year 2015, including about $2.5 billion awarded directly
to small businesses in prime contracts. According to two recent
NASA small business reports, more than 800 small businesses
from 47 states have played a role in the Orion crew capsule
program--NASA's next generation spacecraft designed to carry
astronauts to deep space destinations. Similarly, more than 800
small businesses in 43 states have supported the Space Launch
System (SLS)--NASA's new exploration-class rocket. This supply
chain is not limited to human space flight. Innumerable small
businesses have supported other valuable programs at NASA, such
as the Mars Science Laboratory, with the Curiosity rover that
has been robotically exploring Mars for the past four years, as
well as other science and technology programs.
Indeed, NASA's supply chain provides tens of thousands of
jobs around the country. These are good, high-paying jobs that
contribute in many ways to their local economies. In addition,
opportunities to work on NASA's space programs--to accomplish
that which humanity has never accomplished before--serve to
inspire our nation's youth to go into science, technology,
engineering, and math (STEM) fields, building the highly-
skilled workforce of the future.
NASA currently hopes to land humans on Mars beginning in
the 2030s. Landing humans on Mars is not a new goal. It has
been a priority since the days of the Apollo Program, and it
has been one of NASA's official goals under multiple
Administrations and Congresses, as demonstrated by the
enactment of NASA Authorization Acts of 2005 (P.L. 109-155),
2008 (P.L. 110-422), and 2010 (P.L. 111-267). Most recently,
the House of Representatives passed its version of a NASA
Authorization Act of 2015, stating in Section 201(a) that
``Human exploration deeper into the Solar System shall be a
core mission of the Administration. It is the policy of the
United States that the goal of the Administration's exploration
program shall be to successfully conduct a crewed mission to
the surface of Mars to begin human exploration of that
planet...'' Recent national public opinion polling has also
shown that there is overwhelming support by the American people
for this goal. This is particularly true when they are made
aware that our space program is not (as is the subject of myth)
an expensive luxury, but actually accounts for less than one-
half of one percent of the federal budget while providing
critical benefits to our economy, our national security, and
our leadership position in the world.
Today NASA, along with U.S. industry, international
partners, and others, is gearing up to achieve this goal. We
are on the verge of restoring American access to space for our
astronauts, while hardware for deep space missions is now
actually being built, and the first workshop to discuss
potential landing zones on Mars was recently held (with more to
come). We are bringing our nation back to deep space with
American innovation, ingenuity, and technical prowess and
manufacturing--U.S. industry is hiring highly-skilled engineers
and technicians, building state-of-the-art facilities, bending
metal and test-firing engines that will get humans back to
beyond Earth's orbit for the first time in over 40 years. As
CEO of Explore Mars, I am afforded the opportunity to work with
NASA, academia, and industry that together are developing
architectures our nation needs to regain access to deep space
and get to Mars within our lifetimes. Explore Mars hosts
several events every year to not only bring space exploration
stakeholders together to review potential architectures, but
these events also inform the public and our elected officials
of how deep space exploration inspires innovation, technology
development, and job growth throughout the nation--from large
corporations to small businesses. We need to continue with this
momentum and work with our elected officials to ensure we
continue on this Journey to Mars with NASA supported by
America's small businesses.
In order to sustain this momentum, however, adequate
funding is critical. But almost equally important is budgetary
and policy stability. Without all three, it will be impossible
to move forward.
Thanks to the support of Congress, NASA's funding has
achieved some stability and growth recently. But only a few
years ago budgetary uncertainty hit NASA and the space industry
particularly hard--leaving the space community--including
businesses, both big and small--in crisis and in a state of
immense uncertainty. I recall meeting with a high ranking NASA
official several years ago who didn't know whether his
directorate's budget would be increased by $2 billion or
reduced by $1 billion the following year. In other words, he
had $3 billion in budgetary uncertainty--which is a
tremendously significant amount for any NASA directorate.
Needless to say, this directly impacted industrial partners and
subcontractors along the supply chain. Such uncertainty and
fluctuations are especially tough on small businesses that
often get hit the hardest by cutbacks. In this same timeframe,
I was told by more than one of the major contractors that
because of an unclear policy and budget director, they were
forced to be very cautious about spending and investing funds,
which results in a disproportionate impact to the small
businesses in the supply chain. This is no way to run a long-
term project, let alone a space program.
Space exploration is not JUST the business of large
corporations--as I am sure will be made clear by the other
witnesses. Small businesses play an essential role not just in
the success of our space program, but in the nation's aerospace
and defense industries overall. The major players in space
procurement do not make all the nuts, bolts, pins, fabric,
windows, switches, wiring harnesses and the other myriad parts
in a spacecraft inside their own factories. These items are
contracted out, much of it to small businesses that can make
these parts in bulk at a much cheaper rate and for other
customers as well. Unlike many other contracts, NASA contracts
often have more value than just the `dollar value' would
indicate. An example if this appeared in an article in the San
Jose Mercury News a few years ago. It highlighted the pride a
worker felt for his contribution to the Apollo Program that
landed humans on the Moon. He had not worked on life support,
propulsion, or some other major system. He had installed some
hooks that supported the astronaut's hammocks while on the
surface of the Moon. Yet he felt, and rightfully so, that he
had contributed to humanity's first voyages to the Moon.
One thing is clear: We must not allow the uncertainties of
the past to prevail again. We must advance--and accelerate--
into the next administration. There is strong bi-partisan
support for the goal of sending humans to Mars, and there is
clear excitement about that goal from the general public. We
must harness that strong consensus.
We must not be ``penny wise and pound foolish'' with the
NASA budget. It makes no sense to allow even a modest reduction
in NASA's budget, while at the same time removing any prospect
of NASA achieving its mandate. Particularly when only a little
more--and consistent--funding will serve the taxpayers in a
manner that will provide tremendous benefits to our entire
society and be remembered for millennia. There are not many
federal programs that can achieve anything comparable.
We are approaching another major hurdle, and that is the
uncertainty that traditionally accompanies a change in
Administrations. Will we once again shift directions and throw
our space program--and the small business community upon which
its success depends--into turmoil, or will we fully embrace our
current policy of sending humans to Mars? We have come so far
in recent years, and it benefits no one if we radically change
course again. Not NASA, not large businesses, not small
businesses, and certainly not the taxpayers of the United
States.
In closing, Explore Mars would like to thank you for taking
the time to hold this hearing and highlight this nation's small
business innovations! We WILL be sending humans to Mars in the
very near future. And it will be accomplished in large measure
based upon the support that we show for, and on the efforts of,
those small businesses around the United States.
Again, thank you!
Testimony of
Dr. George W. Davis, CEO
Emergent Space Technologies, Inc.
before the
U.S. House of Representatives Committee on Small Business
Ready for Liftoff: The Importance of Small Businesses in the NASA
Supply Chain
July 12, 2016
Chairman Chabot, Ranking Member Velazquez and members of
the Committee on Small Business, thank you for giving me the
opportunity to speak to yo on the importance of Small
Businesses in the NASA Supply Chain.
Emergent Space Technologies is a 60-person aerospace
engineering firm headquartered in Greenbelt, Maryland. With
additional locations in Texas, New Mexico, Colorado, California
and Virginia, we provide technical services and perform
research and development for NASA, NOAA, the Air Force and
DARPA. Our offerings include space mission design, development,
and integration and test services, as well as flight and ground
software technology development.
NASA is known for large, complex programs such as the Space
Shuttle, the International Space Station, the Hubble Space
Telescope and the Mars Science Laboratory, so one might think
that only Large Businesses are capable of supporting its
missions. In fact, Small Businesses form a vital part of NASA's
contractor workforce. Simply look at today's engineering
marvels: Orion Crew Vehicle, Space Launch System, James Webb
Space Telescope and Mars 2020 rover, as well as dozens of
smaller, lesser known programs. You will see that we are making
unique contributions to NASA's most challenging missions.
Small Businesses typically start up around their founders'
technical expertise. For Emergent, it was my background in
spacecraft Guidance, Navigation and Control, or GN&C. GN&C is
critical for any space mission, but especially for those that
require, for example: precise pointing; rendezvous, proximity
operations and docking; deep space navigation; and entry,
descent and landing. NASA and its Large Businesses prime
contractors once had a monopoly on GN&C expertise, but many of
today's engineers, especially the younger ones, prefer smaller
companies. This is also true for software engineering. When I
started Emergent in 2001, I had taken a hiatus from the
aerospace industry to work in the IT industry. It is there
where I saw how modern software was developed. I wanted to
combine it with expert GN&C algorithms to help NASA and the Air
Force enable autonomous space missions. This takes great
software, so you need great software developers, most of which
are lured to Silicon Valley, rather than NASA.
Emergent responded to this ``scarcity of talent'' problems
by developing a network that spans both industry and academia
and leverages modern social media such as Facebook and
LinkedIn. As a result, we have found a niche in the aerospace
industry by finding top talent in both GN&C and in software
development, often in the same person. These are a rare breed,
so you have to be intentional about your search. In this
manner, Emergent, and Small Businesses like us, play a vital
role in recruiting new and necessary talent to NASA programs.
Small Businesses are also critical sources of innovation
for NASA. Over the last 20 years, NASA's R&D budget has been
drastically reduced. NASA's budget is largely driven but its
missions, and missions largely do not pay for R&D. They pay for
low-risk, flight-proven space technology, particularly when it
comes to the spacecraft bus, the launch vehicle and the ground
system. As a result, NASA has increasingly relied on Small
Businesses to come up with innovative solutions to challenging
problems through the Small Business Innovation Research (SBIR)/
Small Business Technology Transfer Research (STTR) program.
Emergent is an active participation in this program, generating
roughly 15% of our revenue. The SBIR-STTR program helps pay for
NASA research while also creating good, high-skilled jobs for
our economy.
Despite our role in the NASA Supply Chain, Small Businesses
face many challenges. Chief among them is the diminishing
supply of adequate Small Business Set-Asides, especially for
Emerging Small Businesses. This is often driven by contract
bundling, in which smaller prime contracts are combined with,
or bundled into, larger contracts that are acquired under full
and open competitions that only Large Businesses can
realistically prime. While it might seem more efficient for
NASA to do so, it is our experience that economies of scale
generally do not apply to government contracting. More
importantly, it takes away opportunities to grow from the Small
Businesses, especially new ones and those without the
``disadvantaged'' designation. A good way to look at this issue
is through the federal government's use of NAICS codes.
The North American Industry Classification System, or
NAICS, is the standard used by federal agencies in classifying
businesses for the purpose of collecting, analyzing, and
publishing statistical data related to the U.S. economy. The
Small Business Administration (SBA) has established Small
Business Size Standards matched to the NAICS codes. The size
standards are expressed in either millions of dollars or number
of employees and specify how large a business can be and still
qualify as a Small Business for federal government contracts.
Engineering Services are assigned the NAICS code 541330, and
the associated SBA standard limits the Small Businesses to
$38.5M in revenue when using the Military and Aerospace
exception. Similarly, Custom Computer Programming Services are
assigned NAICS code 541511 and this limits the Small Business
to $27.5M in revenue. These codes are roughly equivalent to
150-200 employee companies, or 2-4 times the size of Emergent.
The more frequently used standard for small-business set-asides
is NAICS code 541712, or Research and Development in the
Physical, Engineering, and Life Sciences. As of February 2016,
this standard limits Small Business at 1,000 or 1,250
employees, depending on the requirement. This is 8-10 times
larger than the standard set by the 541330 and 541511 codes.
According to the U.S. Census Bureau's 2013 Statistics of U.S.
Businesses, 99% of the United States' 5,775,055 firms have less
than 500 employees. This seems inconsistent with the Small
Business size standard set by NAICS code 541712, which limits
Small Businesses to 1,000 or 1,250 employees!
I recently studied the NASA prime contracts whose primary
requirements are science-, engineering- or software-related and
are strategically aligned with our business capabilities and
interests. There are roughly 50 such contracts. Of these, 60%
are Small Business Set-Asides. That is the good news. The bad
news is that over half are set aside with the 541712 NAICS
code. Only 4 are set-aside using 541330 and 3 are set-aside
using 541511, and these numbers appear to be dwindling over
time. For example, a contract at NASA Kennedy Space Center was
recently changed from a small business set-aside under 541330
to full and open competition. This contract has been
successfully managed by Small Businesses for more than a
decade, but was for some reason changed despite there being
more than adequate competition.
The standards set by the NAICS codes and the way they are
used by NASA to establish prime contracting opportunities for
Small Businesses is important. In federal contracting, size
does matter. The bigger you are, the lower your rates, which
makes you more competitive in cost-driven competitions.
Moreover, the bigger you are, the more personnel you can afford
to develop your business opportunity pipeline and write
proposals, which is the lifeblood of our industry. It is
extremely difficult for companies of our size to compete with
those that are 8-10 times larger, especially when you have so
few chances to develop past performance experience.
Emergent and other Small Businesses like us have had to
adapt to shrinking opportunities for prime contracting within
by focusing more on subcontracting and also by looking to
Department of Defense opportunities. For many companies, the
latter is just not practical or even feasible. The downside to
being just a subcontractor is that we have to work multiple
proposals, usually simultaneously, just to increase the
statistical likelihood that we maintain, not grow, our revenue.
Losing contracts and therefore personnel can put you out of
business.
Two changes that NASA could make to help us out are to (1)
expand its use of small business set-aside under the 541330 and
541511 NAICS codes, and (2) use the size standard for Emerging
Small Business, which is 50 percent of the NAICS standard. This
would give more opportunities for companies like Emergent to
gain experience as a prime contractor and grow our base so that
we can eventually pursue the larger set-asides that use the
541712 NAICS code. It comes down to risk versus reward. I can
spend a tremendous amount of time and money trying to beat out
a 1,000-person company for a prime contract, assuming I can
assemble a credible team for the broad scope typically
associated with these large contracts, or I can try to get on
multiple prime contractor teams as a subcontractor teammate and
hope we win one or more of the opportunities being pursued. In
the latter case, I have little to no control over the destiny
of my company.
Another challenge Small Businesses face in supporting NASA
is the long-term stability of the SBIR-STTR program. Many U.S.
Small Businesses rely on the SBIR/STTR program for seed funding
in developing a unique product. Others, like Emergent, rely on
it to perform strategic R&D for NASA, Air Force and DARPA.
Ultimately this funding translates into jobs, both now and in
the future. As Albert Einstein once said, ``if we knew what we
were doing, we would not call it research.'' Congress can help
Small Businesses by continuing its strong support of the SBIR-
STTR program, especially when it comes to reauthorization in
FY2020. Any delay or disruption in this vital program could
result in the loss of thousands of job across the country.
Specifically, for NASA, I would like to see the well-known
``valley of death'' problem addressed. As you may know, a Phase
I SBIR contract is 6 months in duration and results in a proof-
of-concept demonstration. A Phase 2 SBIR contract is 24 months
in duration and results in a prototype. While the Phase 1
contract is being executed, however, the performing firm has to
write and submit its Phase 2 proposal. The time it takes to
evaluate and award the Phase 2 proposal takes months, causing a
funding gap which in turn causes the Small Business to redeploy
its personnel, or worse, lay them off. The Department of
Defense SBIR/STTR program addresses this funding chasm by
requiring the Small Business proposers to also bid a 4-month
Option Period as part of their Phase 1 proposal. If awarded
Phase 2, the Option Period contract provides continuity until
the Phase 2 contract can be executed. This would prevent loss
of revenue and valuable personnel, which as I have previously
stated is not easy to find.
In closing, I would again like to thank Chairman Chabot,
Ranking Member Velazquez and members of the Committee for
giving me the opportunity to testify on the importance of Small
Businesses to NASA's Supply Chain. Working on NASA projects is
a dream come true for me and my employees. It's why we get up
in the morning and go to work: to play a role, even a small
one, in advancing our nation's knowledge of the universe and in
exploring our solar system. I have touched on some of the
challenges in being a part of the NASA Supply Chain, and there
is more that I could discuss that my brief time will not allow.
I would therefore be happy to follow-up with you and your staff
at your convenience. In the meantime, please continue to give
NASA your legislative support.
Ms. Carol Craig, President and CEO of Craig Technologies,
Cap Canaveral, FL
In 1999, I started Craig Technologies at my kitchen table.
My husband is a Navy officer and our repeated moves and
transitions led me down the entrepreneur path. By 2010, the
company was successful, profitable and reputable. With revenues
topping $20 million and strictly organic funding, I knew there
was more opportunity to serve both commercial and government
clients with our brand of superior service. My foray into
manufacturing started small. I had a need for quick and quality
work and realized I could do it internally with the correct
approach. Purchasing the assets of a small machine shop and
investing wisely in supplemental equipment provided the company
with a nimble production facility that quickly garnered
interest from existing NASA supply chain members. When KSC
leadership decided to pursue a Space Act Agreement with a
company in order to take over the remains of the National
Shuttle Logistics Depot, Craig Technologies bid on and
eventually won the opportunity to house and maintain the
manufacturing equipment for a period of 5 years and utilize it
for any commercial purpose. Since that time, I made the
conscious decision to utilize profits from the successful
Engineering and Technical Services Division to fund the nascent
Aerospace Solutions side. I did not utilize outside capital in
order to preserve the culture and autonomy that makes Craig
Technologies so different than other government contractors. We
grew from $20 million in 2010 to $45 million today. We continue
to provide outstanding service and product to all of our
customers with NASA as the largest. As the commercial space
industry grows around Cape Canaveral and KSC continues to
pursue public/private partnerships through Commercial Crew and
Commercial Cargo contracts, the future for astro- and aero-
space manufacturing in Brevard County Florida is poised for
explosive growth and relevant economic impact.
I tell you this back story because it leads to where I am
today--at a crossroads of how to keep the manufacturing side
afloat while waiting for delayed payments, extended NASA
contract decisions and lack of access to working capital
because of stringent banking regulations imposed by the Federal
Government. I've effectively robbed Peter to grow Paul. I did
so because it was the right thing to do--for our business, for
our employees and for our community. I believe in our free
market system and always strive to offer the very best product
and/or service for the price agreed upon. Unfortunately, the
cards remain stacked against a small business entreprenuer--
even one who overcomes the odds and makes it to the next level.
Unforgiving and uninformed covenants by lending institutions
lead to myopic attitudes towards growth in the government
sector and the milestones that point toward long term stability
and success. Creating valuable employment opportunities in my
community remains my number one goal and priority. But money
has to come in the front door on a logical and planned timeline
in order to properly budget and ensure the books remain
solvent. Manufacturing built this country. We list it to
cheaper and inferior overseas suppliers and then complained
when the jobs went away. Now there are numerous folks like
myself who are laying it all on the line to recover the
industry. We need help and we need it now. We don't want
handouts, but rather a fair and predictable system that ensures
payments are made and contracts satisfied without political
whim. What if more and more companies like myself are unable to
succeed and close their doors. The impact on communities and
our nation will be devastating.
NASA continues to explore and innovate. And their supply
chain remains critical to both long and short term success. I
urge you to report to the full body that commitment to a clear
path and mission with 10 year budget cycles is crucial to the
continuation of small business partnerships with NASA. And
collaboration with lending institutions through small business
offices within the agency will allow the banking world to
understand the nuances of government contracting and work.
Pursuant to your questions, I offer my thanks for your time.
Written Testimony of Stephen Gorevan
Chairman and Co-Founder of Honeybee Robotics, Ltd.
The Brooklyn Navy Yard
Building 128, Suite 121
63 Flushing Avenue, Unit 150
Brooklyn, NY 11205
Subcommittee on Agriculture, Energy, and Trade
House Committee on Small Business
``Ready for Liftoff: The Importance of Small Businesses in the NASA
Supply Chain''
July 12, 2016
Mr. Chairman and Members of the House Subcommittee on
Agriculture, Energy, and Trade:
Thank you for the opportunity to share our perspective as a
small business contractor to NASA. We believe that NASA and
small businesses have a strong and mutually beneficial
relationship. Organizations such as ours play an important role
in creating enabling technologies for NASA while doing our part
to keep American innovation the envy of the world.
I co-founded Honeybee Robotics in 1983, and my company has
worked as a small business contractor to NASA for 30 years. Our
headquarters is in New York, and we maintain satellite offices
in Longmont, Colorado and Pasadena, California. Our specialty
is in building robotic and electromechanical systems that
operate reliably in the toughest environments, such as
planetary exploration and spacecraft systems. Over the years we
have worked with the majority of NASA's research and space
flight centers, winning contracts for pioneering early-stage
development as well as flight missions that range from
planetary exploration to the Orion spacecraft.
We have been fortunate to contribute flight hardware to all
the spacecraft that NASA has landed on Mars since 2000, and in
the process Honeybee has achieved a succession of firsts on
Mars. Our Rock Abrasion Tools on the 2003 Mars Exploration
Rovers Spirit and Opportunity were the first tools to access
the inside of rocks on Mars. The Rock Abrasion Tool on
Opportunity is operating in its thirteenth year, some fifty
times its original mission life. Our Phoenix scoop for the 2007
Phoenix Mars Lander was the first tool to sample water on Mars.
Our Sample Manipulation System for the 2011 Mars Science
Laboratory acts as a robotic laboratory assistant, moving
samples to the rover's instruments so it can detect even traces
of molecules associated with life. We designed and built all
these systems in our New York headquarters--and as a lifelong
New Yorker, I would venture that our facility's clean room was
the most pristine place in all of New York City.
Flagship manned space programs such as the Space Shuttle
and Orion are certainly important in providing opportunities
for the small business community, but NASA has set up a robust
system for technology development outside these high-profile
programs. From our perspective, the opportunities for small
businesses outside these flagship programs--in areas such as
Earth Science, Planetary Science, and Exploration Research and
Development--are more numerous and in some ways more important
for the sustained attention necessary for technology
development. As a result, I would encourage the members to
consider the effects of all NASA's programs, not only its
highest-profile human space missions, in considering how small
business can support NASA's mission.
The Small Business Innovation Research (SBIR) program is an
excellent mechanism by which small businesses are encouraged to
deliver relevant technologies to NASA in a competitive manner.
NASA also supports many other specific funding mechanisms that
allow small businesses to grow and commercialize new
technologies. The funding in these contracts is almost always
spent quickly by the contracting company on skilled domestic
labor, materials, and direct expenses. We believe this is an
effective use of public resources to spur economic activity and
innovation.
Honeybee Robotics is a testament to the mutually beneficial
relationship between NASA and the small business community.
But, there are areas for improvement that will serve three
purposes: to deliver better technologies to NASA; to strengthen
the growth and commercial prospects for innovative small
businesses; and to maintain the technology and economic
leadership of the United States into the next generation and
beyond.
In preparing this testimony, Honeybee consulted several of
our friends and business associates in the small business
community. The statements to follow affect many of us, and
reflect a shared perspective of ways that NASA could enhance
the ways it engages small businesses. The goal is to level the
playing field such that small businesses can compete with
larger companies on technology and cost-effectiveness so that
NASA can be as successful in its mission as possible.
First, the ability for small businesses to develop and
deliver relevant, cost-effective technology is highly dependent
on long-term mission clarity. As resource-constrained
organizations, we are sensitive to the prospect of developing
technologies for missions that are cancelled in the next
political cycle. The preparation and execution of mission
requirements can take a decade or longer. It is exceptionally
difficult to develop a technology to flight readiness.
Unfortunately, when a small business does manage to get its
technology selected for a flight program, the uncertainty,
delays, and outright cancellation of funding remains a very
real risk. Sometimes these delays are a result of Congressional
budgeting, such as continuing resolutions that delay funding.
Sometimes funding is at risk due to reductions in directed
expenditures, the effects of which can flow through prime
contractors and lead to small businesses losing subcontracts.
And sometimes interruptions are a result of inconsistency in
program development roadmaps, which can lead to long breaks
between program stages that cause small businesses to lose
talent and momentum while they wait months or years for the
next phase to take effect. The net effect of uncertainty is
that too often the small business contractors for NASA bear the
risk and pay the price when Congress or the Executive branch
changes the priorities it directs NASA to focus on.
Second, I want to highlight the headwind small businesses
face when they seek to develop flight technologies or
commercialize systems through contracts that require private
matching investment. I would recommend such investment be
eliminated for small businesses due to the chilling effect it
places on technology development and the inherent advantages
more highly capitalized businesses have in this situation.
As an example, NASA's 2016 Next Space Technologies for
Exploration Partnerships (NextSTEP) is a public-private
partnership model that seeks commercial development of space
exploration capabilities for human missions beyond low-Earth
orbit. This Broad Agency Announcement solicitation requires a
minimum cost sharing threshold, i.e. private company
investment, for businesses to be eligible. The details of this
requirement pose problems. The solicitations often restrict the
eligible in-kind investment to resources spent within the last
year, so investments from years prior are not considered. They
also require that a portion of the actual contract contain a
matching investment (such as 50% of the investment must be made
during execution of the contract). As a result, NASA is limited
in the size of the award it can grant to a small business with
relatively little capital to invest, independent of the value
that NASA would get from the technology.
Some form of private investment requirements can make sense
for a device or technology that can be utilized in other
industries, where a small business can make a ROI calculation.
But in practical terms, much of the technology for space
exploration does not have immediate commercial application. The
effect of the cost-sharing model is to box out small businesses
in favor of more highly capitalized large businesses that have
more significant R&D budgets, even if those businesses do not
make as efficient use of NASA funds for technology development.
I would suggest that Congress consider the benefits of
making small businesses exempt from the ``in-kind''
contribution requirement that now discourages and limits small,
innovative companies from participating in projects that NASA
has identified as important to its mission. To further enhance
the extent that small businesses can participate, I would also
suggest that the amount of money a large company contracts to a
small business be directly deducted from the large company's
contribution requirement. The effect of this change will be
that large companies gain an incentive to work with small,
innovative companies. Another option would be to include any
money NASA has invested in SBIRs as deductible from a small
business's private contributions, which is consistent with the
spirit of the SBIR program and NASA's charter to encourage
industry and innovation.
Finally, with regard to the SBIR program, I would make two
recommendations to strengthen this program that has proven
critical to both small businesses and NASA alike. Neither
requires new appropriations for Federal research and
development budgets.
First, the SBIR program is budget-neutral, but a critical
source of funding for small business innovation. I recommend
that Congress increase the share of funding that Federal
agencies allocate to SBIR from the current sub-3% up to 5%,
with increases enacted gradually over the next decade. The most
effective use of these funds would be to direct most of the
increase to maturing technology after the initial Phase II
program. Small businesses such as Honeybee face what's known as
a ``valley of death'' between Phase II, when we have a
functional prototype, and commercialization or flight
readiness. It is rare for us to find an immediate need at NASA
where our SBIR-funded technology satisfies a specific problem.
Instead, often the technology waits for a mission, or requires
more investment to prove viability in a commercial or NASA
application. Enabling a transition to greater technology
development after Phase II, rather than straight to
commercialization, would help small businesses contribute more
to flagship projects.
Second, the SBIR program's success depends on the ability
to match NASA's needs with the capabilities of small businesses
across the country. Unfortunately, it can be challenging for
small businesses to understand the details of a technology
request that NASA issues based solely on the written
solicitation. NASA currently institutes a communication ban
between companies and the Contracting Officer's Technical
Representative once it issues the solicitation of SBIR and STTR
topics. Our understanding is that the intent is to prevent one
organization from gaining an unfair advantage with information
not available to the larger community.
On the other hand, organizations such as the Department of
Defense have found a way to share information with a pre-
release of SBIR topics. During the pre-release, small
businesses have one month to ask questions about the technology
and how it fits into larger programs before the communication
blackout takes effect. This enables the small business to
better match its technology with the goals of the organization
and present higher-quality development plans. We recommend NASA
follow suit by opening communications on SBIR topics for a
reasonable period before instituting a ban on contact outside
the formal proposal response channels.
In light of my suggestions above, I want to emphasize that
for small businesses, NASA remains one of the Federal
government's most supportive organizations. I believe NASA
understands the ways in which the small business community can
help it succeed with its mission, and it takes seriously its
mandate to provide opportunities for small businesses such as
Honeybee Robotics to thrive. We are excited for what the future
holds and, along with our small business colleagues, look
forward to the exciting and important missions ahead.
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