    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

     THE CUMULATIVE BURDEN OF PRESIDENT OBAMA'S EXECUTIVE ORDERS ON SMALL
                                  CONTRACTORS

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

                                    HEARING

                                   before the

        SUBCOMMITTEES ON INVESTIGATIONS, OVERSIGHT, AND REGULATIONS AND
                           CONTRACTING AND WORKFORCE

                                     OF THE

                          COMMITTEE ON SMALL BUSINESS
                                 UNITED STATES
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  HEARING HELD
                               SEPTEMBER 13, 2016

                                   __________

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                Small Business Committee Document Number 114-071
                  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

                       Kevin Fitzpatrick, Staff Director
                           Jan Oliver, Chief Counsel
                    Adam Minehardt, Minority Staff Director

                                C O N T E N T S

                               OPENING STATEMENTS

                                                                       Page
    Hon. Cresent Hardy...............................................     1
    Hon. Alma Adams..................................................     2

                                   WITNESSES

    Mr. James P. Hoffman, P.E., President, Summer Consultants, Inc.,
      McLean, VA, testifying on behalf of the American Council of
      Engineering Companies..........................................     5
    Ms. Donna S. Huneycutt, Co-Owner and Chief Operating Officer,
      WWC, LLC, Tampa, FL, testifying on behalf of the National
      Defense Industrial Association.................................     7
    Mr. Jimmy Christianson, Regulatory Counsel, Associated General
      Contractors of America, Arlington, VA..........................     8
    David Madland, Ph.D., Senior Fellow & Senior Advisor to the
      American Worker Project, Center for American Progress,
      Washington, DC.................................................    10

                                    APPENDIX

    Prepared Statements:
        Mr. James P. Hoffman, P.E., President, Summer Consultants,
          Inc., McLean, VA, testifying on behalf of the American
          Council of Engineering Companies...........................    25
        Ms. Donna S. Huneycutt, Co-Owner and Chief Operating Officer,
          WWC, LLC, Tampa, FL, testifying on behalf of the National
          Defense Industrial Association.............................    34
        Mr. Jimmy Christianson, Regulatory Counsel, Associated
          General Contractors of America, Arlington, VA..............    39
        David Madland, Ph.D., Senior Fellow & Senior Advisor to the
          American Worker Project, Center for American Progress,
          Washington, DC.............................................    54
    Questions for the Record:
        None.
    Answers for the Record:
        None.
    Additional Material for the Record:
        Statement of Chairman Richard Hanna..........................    65

     THE CUMULATIVE BURDEN OF PRESIDENT OBAMA'S EXECUTIVE ORDERS ON SMALL
                                  CONTRACTORS

                                  ----------

                          TUESDAY, SEPTEMBER 13, 2016

                      House of Representatives,
                   Committee on Small Business,
             Subcommittee on Investigations, Oversight,
                                       and Regulations,
                                         joint with the
             Subcommittee on Contracting and Workforce,
                                                        Washington, DC.
        The Subcommittees met, pursuant to call, at 10:00 a.m., in
    Room 2360, Rayburn House Office Building, Hon. Cresent Hardy
    [chairman of the Subcommittee on Investigations, Oversight, and
    Regulations] presiding.
        Present: Representatives Hardy, Knight, Hanna, Kelly,
    Adams, and Lawrence.
        Chairman HARDY. Good morning. I would like to call this
    hearing to order.
        I would like to start by thanking our witnesses, especially
    the small business owners who have traveled from different
    parts of the country, for being here.
        Today, we are going to take a look back at all the
    executive actions President Obama has taken throughout his
    presidency that have a direct effect on the Federal
    contractors. More specifically, we want to examine how these
    actions have affected small firms that do business with the
    Federal Government.
        Throughout this Congress, our full Committee, as well as
    several of our Subcommittees, including mine and Mr. Hanna's,
    have held hearings highlighting the negative outcomes of
    several of these actions, doing our best to defend the small
    business community. Regrettably, President Obama either was not
    listening, or worse, he simply ignored our appeals.
        For example, last September, Mr. Hanna and I held a joint
    hearing discussing the negative outcomes small businesses would
    have faced should Executive Order 13673, commonly referred to
    as ``the Blacklisting rule,'' become final. We received
    testimony at that hearing that would undermine the government's
    longstanding policy of maximizing contracting opportunities for
    small businesses and that it was an opportunity to extort
    settlements out of small businesses. These pleas were ignored
    by the Department of Labor, and the Blacklisting rule became
    final on August 24th.
        The Blacklisting rule is one of many new Federal
    regulations that have been spawned by the President's decree
    hampering economic growth in our small business communities.
        Aside from the circumventing of the Congress' legislative
    authority, I am particularly concerned that these executive
    actions will lead to fewer small businesses participating in
    the Federal marketplace.
        We need a healthy industrial base with many small
    businesses working to provide the government with innovative
    goods and cost-effective services. When fewer small businesses
    compete for federal contracts, the outcome will be less
    innovation and a higher cost to taxpayers.
        Regrettably, this exodus has already started. We currently
    have 100,000 fewer small businesses registered to do business
    with the Federal Government than we did just 4 years ago. This
    is not good for the United States.
        In meeting after meeting with my constituents back home in
    Nevada, and listening to small business after small business
    testify before this Subcommittee, I have come to the conclusion
    that Washington regulators, and particularly those appointed in
    the Obama administration, do not understand how much their
    actions affect the day-to-day operations of small firms.
        This is unfortunate, and I hope to work with this
    administration to make them understand just how difficult they
    are making it for small Federal contractors.
        We have an outstanding panel here today with us this
    morning, and I am very interested in hearing how bad it is
    getting out there for our small federal contractors. We will
    keep yelling, and maybe the President will finally hear us.
        Now I yield to the Ranking Member, Ms. Adams, for her
    opening statement.
        Ms. ADAMS. Thank you, Mr. Chairman, for holding this
    important meeting. To our panelists today, our witnesses, for
    your presence and your participation, I thank you as well.
        Each year, the Federal Government spends over $400 billion
    in taxpayer dollars to pay private companies for goods and
    services. In the past, Congress has used this significant
    financial might to help drive forward a number of policy goals.
    One such policy goal that is a priority for this Committee and
    for Congress is the participation of small businesses in the
    federal marketplace. As such, we have passed legislation aimed
    at ensuring all small businesses get a fair shot at these
    projects. Likewise, this Committee has worked in a bipartisan
    manner to help women- and minority-owned businesses navigate
    the procurement process, recognizing that as the country's
    largest consumer of goods and services, the Federal Government
    has the ability to use its buying power to advance priorities
    important to our Nation.
        President Obama signed several executive orders and
    presidential memorandum setting standards for contractors doing
    good work for the government, and while funds received from
    Federal contracts boost local economies and allow firms to hire
    more employees, some firms play by their own set of rules to
    win these lucrative dollars. As a result, law-abiding
    businesses are disadvantaged and pushed out of the marketplace.
    Therefore, these executive actions are aimed at leveling the
    playing field for all contractors. From ensuring that
    contracting officers are looking at labor law violations when
    evaluating a firm's responsibility to protecting employees from
    discrimination on the basis of sexual orientation and providing
    sick leave and a higher minimum wage, these executive actions
    cover a wide range of areas to not only protect employees, but
    also protect the government from undue risk. So we should be
    clear of the businesses that perform work for the government.
    The overwhelming majority comply with laws and do right by
    their employees while providing excellent goods and services at
    competitive prices.
        However, this Committee has heard of a number of bad actors
    that skirt the law and continue to receive Federal contract
    work. For instance, according to one report, almost half of the
    total initial penalty dollars assessed for Occupational Safety
    and Health Administration violations in 2012 were against
    companies holding Federal contracts. However, these businesses
    were rarely debarred or suspended from the federal marketplace
    as a result of their unsafe working environments.
        Labor laws are crucial to a healthy economy. Allowing
    habitual violators to continue working with the federal
    government without requiring remedies puts employees at risk of
    injury and the government at risk of delays and additional
    costs.
        So with regards to the executive orders on increasing wages
    and protecting employees seeking equal pay, studies have shown
    that higher wages lead to better quality of services, lower
    employee turnover, and more robust bidding by high-road
    employers, all of which improve the efficiency and the economy
    of federally contracted work.
        While these executive actions have resulted or will result
    in new processes and procedures for Federal contractors, many
    of the changes will fit into the existing procurement process
    with the contracting officer using additional criteria to
    consider. Yet, as we hear today, many small firms are concerned
    with the cumulative impact impacting all executive orders will
    have on their businesses. Small businesses provide quality
    goods and services at affordable prices, meaning a better deal
    for the government and the taxpayer, yet they have smaller
    margins, and new regulations can be harder for them to absorb.
    With small businesses creating over two-thirds of new jobs, our
    economy needs both small businesses and sufficient employee
    protections to properly operate. Accordingly, it is important
    that we find the balance in which small businesses are not
    overly burdened by complying with the guidelines, while not
    diluting the protections afforded to law-abiding contractors
    through these executive orders.
        With that, I look forward to hearing the witnesses'
    perspective on these important topics, and I yield back. Thank
    you, Mr. Chair.
        Chairman HARDY. Thank you, Ms. Adams.
        I would like to turn some time over to the chairman of the
    Subcommittee on Contracting and Workforce, Chairman Hanna.
        Chairman HANNA. Thank you, Chairman. I appreciate it.
        I am going to forego my statement today. So much of this is
    self-evident and it is often mostly, most of the time it is the
    case that witnesses have much more insight, and I do not want
    to take up any time to read my statement because I have a lot
    of questions and I want to get some feedback and want to take
    the time to do it. So thank you, Chairman.
        Chairman HARDY. Thank you, Mr. Chairman.
        If the Committee members have any opening statements
    prepared, I would like to ask that they submit them for the
    record.
        Now, I would like to explain how things kind of work around
    here, which many of you probably already know.
        You will have 5 minutes to deliver your testimony. The
    light will start out as green. When you have 1 minute
    remaining, the light will turn yellow, and finally, when your 5
    minutes is up, it will turn red. I ask you to adhere to this
    time limit if you could, please.
        Now, I would like to introduce our witnesses.
        Our first witness is Mr. James Hoffman, president of Summer
    Consultants, Inc., a small mechanical, electrical, and plumbing
    engineering firm in McLean, Virginia, testifying on behalf of
    the American Council of Engineering Companies. He possesses 24
    years of experience preparing studies and designs of federal
    historic and institutional facilities and complex renovation
    projects. Mr. Hoffman is a Project Manager for indefinite
    delivery, indefinite quantity contracts with Baltimore District
    of the Army Corps of Engineers Naval Facilities, Engineering
    Command Washington, and the National Institute of Standards and
    Technology. Other past and current federal experience includes
    work with the Architect of the Capitol, the 11th Wing of the
    Department of the Air Force, and the General Services
    Administration. Thank you for being here, Mr. Hoffman.
        Up next we have Ms. Donna Huneycutt, Chief Operating
    Officer and Co-owner of the Wittenberg Weiner Consulting,
    testifying on behalf of the National Defense Industrial
    Association, or the NDIA. Prior to joining the WWC, she
    practiced business immigration law representing Fleet Boston
    Financial and Vertex Pharmaceuticals. Previously, Ms. Huneycutt
    practiced corporate law in New York, focusing on private
    placement startups and structured finance. She holds a B.A.
    from the University of California-Berkeley, and a J.D. from
    Columbia University. She is an active member of the Committee
    on Acquisition Management and Small Business Division
    Legislative Affairs and Policy Team of the NDIA. She co-chaired
    the Small Business Committee on Pathways to Transformation,
    Response on Acquisition Reform prepared by the NDIA at the
    request of the Senate Arms Service Committee and the House Arms
    Service Committee. Thank you for being here, Ms. Huneycutt.
        Next, we have Jimmy Christianson, Regulatory Counsel for
    the Associated General Contractors, or the AGC. Working with
    AGC for nearly 6 years, Mr. Christianson lobbies Congress and
    federal agencies on transportation authorizations and
    appropriations, procurement, public-private partnership, labor,
    and environmental bills. He has success in this which he has
    led the enactment of favorable provisions in the National
    Defense Authorization Act for the fiscal years 2014, 2105, and
    2016; the Water Resources Reform and Development Act of 2014;
    and various appropriation bills. He also works with the
    association members from CEOs of multibillion-dollar companies
    to middle managers and business owners to identify, prioritize,
    and advance industries' legislative and regulatory agencies. He
    received his B.A. from the University of Pennsylvania and his
    J.D. from the University of Maine. Thank you for your
    participation, and we look forward to hearing from you, Mr.
    Christiansen.
        Now, I would like to yield to Ms. Adams to introduce our
    next witness.
        Ms. ADAMS. Thank you, Mr. Chair.
        It is my pleasure to introduce Dr. David Madland. Dr.
    Madland is a Senior Fellow and a Senior Advisor to the American
    Worker Project at the Center for American Progress. He has
    written extensively about the economy, including the middle
    class, economic inequality, retirement policy, labor unions,
    and workplace standards, such as the minimum wage. He has
    appeared frequently on television shows, including PBS
    NewsHour, and has been cited in publications such as The New
    York Times, The Wall Street Journal, and The Washington Post.
    Dr. Madland has a doctorate in government from Georgetown
    University and received his bachelor's degree from the
    University of California-Berkeley. Welcome, Dr. Madland.
        Chairman HARDY. Again, I would like to thank you all for
    being here.
        Mr. Hoffman, we will start with you. You have 5 minutes.

        STATEMENTS OF JAMES P. HOFFMAN, P.E., PRESIDENT, SUMMER
       CONSULTANTS, INC.; DONNA S. HUNEYCUTT, CO-OWNER AND CHIEF
      OPERATING OFFICER, WITTENBERG WEINER CONSULTING, LLC; JIMMY
         CHRISTIANSON, REGULATORY COUNSEL, ASSOCIATED GENERAL
     CONTRACTORS OF AMERICA; DAVID MADLAND, PH.D.,SENIOR FELLOW &
      SENIOR ADVISOR, AMERICAN WORKER PROJECT CENTER FOR AMERICAN
                                PROGRESS

                     STATEMENT OF JAMES P. HOFFMAN

        Mr. HOFFMAN. Subcommittee Chairman Hanna, Chairman Hardy,
    Ranking Member Adams, and members of this Committee, I
    appreciate the opportunity to testify before you today about
    the issues surrounding the cumulative burden of President
    Obama's executive orders on small contractors.
        My name is James Hoffman, and I am the President of Summer
    Consulting, a mechanical, electrical, and plumbing engineering
    firm, headquartered in McLean, Virginia. Summer Consultants is
    a small business with 36 people, and we have been in the
    federal marketplace for over 50 years.
        My firm is an active member of the American Council of
    Engineering Companies, the voice of America's engineering
    industry. ACEC's over 5,000 member firms represent hundreds of
    thousands engineers and other specialists throughout the
    country that are engaged in a wide range of engineering work
    that propel the Nation's economy and enhance and safeguard
    America's quality of life. Almost 85 percent of these firms are
    small businesses. ACEC appreciates the efforts that the
    Department of Labor and the FAR Council play to ensure
    compliance with labor laws. The industry is committed to
    following the rules, but the Federal Government must understand
    the burdens on the private sector and that the cost is passed
    on to the government with duplicative requirements.
        The blacklisting rule creates burdens for engineering firms
    and other contractors working for federal agencies. While we
    understand the rationale behind the order, it should be noted
    that the bad actors are less than 0.01 percent of the total
    contracting workforce. Let me repeat that, less than 0.01
    percent of the total contracting workforce.
        The Sick Leave Executive Order also creates unnecessary
    administrative and financial burdens on contractors. While the
    Council supports paid sick leave, the amount of reporting and
    the changes required to implement the rule create more expense
    for contractors and the government. Most of the Council's firms
    offer equivalent paid sick leave, so the requirement is
    repetitive.
        These orders create a more burdensome and expensive process
    for federal contractors, which drives up taxpayer costs while
    driving businesses out of the Federal market. For example, my
    firm is a prime contractor and manages many subcontractors.
    Under the blacklisting rule, I will have to preclear my
    subcontractors before I develop a response. Developing a
    response takes time and focus away from other business as I
    develop the full scope of the requirements to make sure that
    the subcontractors have the business and ethical credentials to
    help me win the work. I question that I will be able to consult
    with both the contracting officer and the agency labor
    compliance advisor to find out if these subcontractors are
    okay, and I am concerned about the alleged labor violations, or
    violations that are beyond the 3-year period will be held
    against my firm or any subcontractors during the solicitation
    and within the context of the contract.
        My firm already reports compliance with the required rules
    and orders up to the applicable agency. Adding another set of
    reporting that is duplicative increases my overhead.
    Engineering firms across the Nation complain that contracting
    officers are looking to reduce firm overhead and expenses in
    this tight budget environment.
        Under the Sick Time rule, engineering firms also face
    increased overhead by mandating employee weekly sick time
    reports. This requires new systems and potentially adds
    employees to implement the changes, and generally, firms are
    typically paid on a monthly or biweekly cycle and report sick
    leave and other time off with each pay period. Member firms
    respond that implementation costs in the first year are
    estimated to be in excess of $50,000, with additional costs in
    the subsequent years.
        Both these rules will add to the overhead that the
    government is already trying to limit. Implementation of these
    rules will further add to those overhead expenses, putting
    firms in a difficult situation of possibly leaving the federal
    marketplace, which dilutes competition for critical services as
    taxpayers or adding costs to the agency if the expenses are
    accepted.
        I ask that the Committee consider asking the FAR Council
    and the Department of Labor to withdraw the proposed sick time
    guidance and the final blacklisting guidance, to redraft it to
    better align with the current contracting process. I also ask
    that the members of this Committee support either the House or
    Senate NDAA language to limit implementation of the FAR rule
    and DOL guidance.
        Thank you for the opportunity to participate in today's
    hearing, and I will be happy to respond to any questions from
    the Committee members.
        Chairman HARDY. Thank you for your testimony.
        Ms. Huneycutt?

                    STATEMENT OF DONNA S. HUNEYCUTT

        Ms. HUNEYCUTT. Thank you. Good morning.
        Subcommittee Chairman Hanna and Chairman Hardy, Ranking
    Member Adams, and members of the Committee, thank you for the
    opportunity to appear before you this morning.
        I am here on behalf of the National Defense Industrial
    Association, the Nation's oldest and largest defense industry
    association, comprised of nearly 1,600 corporate and 90,000
    individual members.
        Small businesses are a critical component of the U.S.
    economy, serving as a catalyst for economic development,
    providing employment opportunities, and as the engine of new
    ideas and innovations. Accordingly, the federal government has
    established programs to ensure participation opportunities to
    small businesses to fulfill the public policy objectives of the
    Federal Acquisition Regulation, and access a source of
    innovative products and services for federal government
    customers. Explicit and implicit in the desired outcomes for
    small business programs is achieving effective competition by
    maximizing small business participation and enabling small
    businesses to grow through diversification of the goods and
    services they provide and expansion into the nongovernmental
    marketplace.
        As outlined at the onset of the FAR, the guiding principles
    of the federal acquisition system are to satisfy government
    customers by maximizing use of commercial products and
    services, utilizing contractors with superior past performance,
    and promoting competition. At the same time, the federal
    acquisition system shall minimize operation costs, conduct
    business with fairness and integrity, and fulfill policy
    objectives. The EOs attempt to fulfill the latter two guiding
    principles, but in the process, undermine each of the others.
        The rationale for the procurement-related EOs have been to
    ``promote economy and efficiency in procurement'' through their
    intended outcomes. Industry does not necessarily disagree with
    the logic, but rather, how that efficiency and economy is
    achieved. Supporting documentation for the EO on Fair Pay and
    Safe Workplaces states, ``The vast majority of federal
    contractors play by the rules.'' However, the implementation
    approach to each of the EOs punishes that vast majority of good
    actors through costly, government-unique compliance
    requirements, a particularly inefficient means to promote
    efficiency.
        The most efficient and economic means to fulfill the policy
    objectives of the EOs is to alter government buying practices.
    For example, the rationale for the Fair Pay and Safe Workplace
    EO is, ``Contractors that consistently adhere to labor laws are
    more likely to have workplace practices that enhance
    productivity and increase the likelihood of timely,
    predictable, and satisfactory delivery of goods and services to
    the federal government.'' Thus, if the government makes
    contract awards based on the offeror that provides a good or
    service for the best value, it would have already chosen an
    offeror that adheres to existing labor laws and has workplace
    practices that enhance productivity. Unfortunately, as industry
    has long pointed out, the government has poor buying habits
    that have equated ``best value'' with ``lowest cost,'' and
    valued compliance to government-unique requirements over actual
    performance in delivering goods and services, creating a
    perverse incentive to ``race to the bottom'' to win contracts.
        Congress has already passed sufficient legislation to
    ensure protections of federal contractor employees and to
    ensure that the government only contracts with responsible
    sources. The federal government should focus on enforcing the
    objectives of existing laws, rather than using EOs to prescribe
    in excessive detail how to comply.
        A major frustration for small businesses is that in many
    cases they agree with the intended outcome of an EO, such as
    providing for the well-being of federal contractor employees or
    making sure that competitors play by the rules, but object to
    the process by which the EOs have been developed and
    implemented.
        Small businesses are not only concerned with the collective
    impacts of the EOs on their bottom line, but also the
    detrimental impacts they will have on government customers and
    their ability to carry out missions, the most consequential of
    which is national security. In recent years, the Department of
    Defense, the federal government's biggest spender by a
    substantial margin, has placed a renewed emphasis on an
    innovation and acquisition reform, led by top officials in the
    Office of the Secretary of Defense and the Services.
        Unfortunately, the EOs undermine these initiatives. The
    resultant accumulation of government-unique requirements and
    their compliance costs will continue to deter new suppliers
    from entering the government marketplace and drive exits by
    firms already selling to the government, restricting
    competition.
        In closing, several of the recent EOs have, through flawed
    processes, installed burdensome, unnecessary, inefficient, and
    in many cases duplicative and overlapping regulatory regimes
    that have the cumulative effect of dramatically increasing the
    cost of doing business with the federal government. Over time,
    these will decrease efficiency and economy in federal
    procurement, while undermining small business growth and
    development, and limiting the federal government's access to
    innovative products and services to fulfill their needs.
        Thank you again for the opportunity to appear before you
    this morning, and I am happy to answer any questions you may
    have.
        Chairman HARDY. Thank you, Ms. Huneycutt.
        Mr. Christianson?

                    STATEMENT OF JIMMY CHRISTIANSON

        Mr. CHRISTIANSON. Chairman Hanna, Chairman Hardy, Ranking
    Member Adams, and members of the Committee, thank you for
    inviting the Associated General Contractors of America to
    testify today on this important topic. My name is Jimmy
    Christianson. I am Regulatory Counsel for AGC, which represents
    more than 26,000 union and open-shop commercial construction
    companies throughout the Nation.
        The construction industry has historically supported and
    provided opportunities for small businesses. It includes more
    than 660,000 firms throughout the United States, of which 93
    percent have fewer than 20 employees. Generally speaking, those
    employees may include cost estimators, proposal managers,
    superintendents, craft labor, equipment operators, and other
    staff whose primary purpose is construction work.
        The business of a construction small business is
    construction. When it comes to compliance issues, many small
    businesses may have one or two employees that handle safety,
    labor, human resources, and environmental compliance for the
    entire company. In many companies, the safety director is also
    the environmental compliance director. The human resource
    director is also the accountant and the general office manager.
    The reality is that small business employees are often working
    ``double duty'' because small businesses have extremely limited
    resources.
        That stated, abiding by laws and regulations is part of the
    cost of doing business. The requirements of the statutes and
    regulations imposed, however, can also represent barriers to
    entry for small emerging businesses and barriers of growth to
    existing ones. Laws and regulations are necessary to help
    maintain a level and competitive playing field. Nevertheless,
    not all laws are necessarily good laws, and similarly, not all
    regulations are necessarily good regulations or practical. Laws
    and regulations enacted and finalized, even with the best
    intentions, can have unintended consequences and needlessly
    duplicate or confuse existing legal frameworks.
        Of the more than 400 executive orders and presidential
    memoranda issued by President Obama, AGC has identified 22 that
    impact the construction contracting industry and its small
    businesses. Several of those actions, which I am happy to
    discuss in detail during the question-and-answer period, will
    individually and cumulatively expose small business
    construction contractors to significant legal costs, legal
    liabilities, and other risks. Small business contractors will
    have to consider these executive actions in the context of the
    potential risks versus rewards of participating in the federal
    construction market.
        Given the overall state of the economy today, as we
    experience a workforce shortage, more than two-thirds of our
    members say they are looking for workers. The private market,
    other markets out there are more competitive. They will have to
    consider whether they will continue to work in the federal
    market or, as they have told me, plan to or strongly consider
    walking away. The administration probably did not intend to
    drive small businesses out of the Federal market in
    implementing these actions; nevertheless, it appears to be a
    realistic impact.
        AGC looks forward to working with this Committee on ways to
    prevent small businesses from leaving the Federal market and
    addressing the problems with several of these executive
    actions. I hope today that we can talk about the practical
    realities that these executive orders place on small
    businesses. I hope we can talk about the reality that many
    small businesses already in the construction industry have
    Davis-Bacon requirements that require them to pay prevailing
    wage rates. How will these different executive orders on paid
    sick leave take into account, because many of them do not,
    existing statutory requirements that are already in there? We
    will also remember that most small businesses, veteran-owned
    small businesses, minority-owned small businesses, the small
    businesses we represent, consider their workers in many cases
    to be part of their family, just as many of you consider your
    employees and your congressional staff to be part of your
    family, and it is hard when rules and regulations come down
    that make them have to make decisions that have to say we have
    to let go of some members of our family.
        I look forward to your questions. Thank you.
        Chairman HARDY. Thank you, Mr. Christianson.
        Dr. Madland?

                       STATEMENT OF DAVID MADLAND

        Dr. MADLAND. Thank you, Chairman Hardy and Chairman Hanna,
    Ranking Member Adams, and members of the Subcommittee. I very
    much appreciate the opportunity to be here.
        My name is David Madland. I am a Senior Fellow at the
    Center for American Progress Action Fund. CAP Action is an
    independent, nonpartisan, and progressive education and
    advocacy organization dedicated to improving the lives of
    Americans through ideas and actions.
        The President's executive actions that are the subject of
    today's hearing draw widespread support from a broad coalition
    of supporters. Not only do organizations representing workers,
    veterans, women, the elderly, and taxpayers support many of
    these actions, but so, too, do a number of small businesses.
    Many small businesses feel that these executive actions will
    help them compete on a level playing field and make the
    contracting process more welcoming to businesses like theirs.
    Indeed, in 2015, small business contracting, as a percentage of
    total government contracting, was at record high levels.
        Though I think the general points I make could be applied
    to most, if not all, of the President's contracting reforms, I
    will focus my remarks on those that address minimum wage,
    require paid sick, ban discrimination based on sexual
    orientation and gender identity, and ensure companies comply
    with workplace laws before getting new government contracts.
        The federal government has a long and successful history of
    starting important social changes with federal contractors. For
    example, President Lyndon Johnson prevented companies that
    contract with the federal government from discrimination on the
    basis of race, color, religion, sex, or national origin.
    Actions by President Richard Nixon furthered these protections.
    Ronald Reagan sought to promote minority contractors. Bill
    Clinton encouraged contractors in economically distressed
    areas. George W. Bush sought to ensure contractors employed
    only American citizens or legal residents.
        President Obama's efforts to raise standards for workers on
    federal contracts build on this history and are an important
    part of making the economy work for everyone, not just the
    wealthy few. In the United States today, wages have been
    stagnant for decades, while economic inequality is near record
    levels. Too many people are struggling to pay bills, especially
    those working in low-wage industries where wage theft is
    rampant as employers pay workers less than they are legally
    required. Many Americans cannot take time off if they get sick,
    and people often face discrimination because of their sexual
    orientation and gender identity. Discrimination based on race
    and gender still occurs, despite previous federal actions.
        At the same time these executive actions address important
    economic and social challenges, they also promote economy and
    efficiency in government contracting. The basic idea is that
    treating workers fairly leads to better results for taxpayers.
    Human capital is the core input into many federal contracts,
    and taxpayers receive the most efficient and effective
    utilization of all available manpower when workers are treated
    fairly.
        Not surprisingly, giving these benefits to taxpayers,
    businesses, and workers, many state and local governments have
    already implemented similar policies, and evidence shows that
    these policies tend to work pretty well. A study of New York
    City's paid sick leave found that after 1-1/2 years after the
    law went into effect, 86 percent of employers supported the
    policy.
        Studies examining LGBT contracting policies in state and
    local governments found that in almost all localities, any
    resistance to these policies was minimal and short-lived. The
    State of Maryland's living wage law conducted by the state
    found that the number of bids increased after the State adopted
    the policy by nearly 30 percent. Statements from officials in
    San Francisco and Los Angeles indicate that their responsible
    contracting systems have increased the pool of experienced
    firms willing to bid for their work. Private companies are also
    adopting similar wage and responsibility review processes.
        That is why there are a number of small businesses that
    support these kinds of policies. Indeed, a Maryland state
    contractor who first decided to bid only after the living wage
    was enacted said without these standards, ``the bids are a race
    to the bottom. That is not a relationship we want to have with
    our employees. Living wage puts all bidders on the same
    footing.''
        The president of American Small Business Chamber of
    Commerce explained that the President's executive order on the
    minimum wage will ``help level the playing field.'' A poll from
    the small business majority found that nearly 80 percent of
    small business owners support a law to ban discrimination
    against LGBT employees, and a hearing at this very Committee,
    construction contractor Bill Albanesi stated that the Fair Pay
    and Safe Workplace Executive Order ``makes good business
    sense.'' It makes good sense to vet the contractor before he
    gets a job. It is common in our industry. We do it all the time
    and we do not see it as being a burden to any legitimate fair
    contractor that is playing by the rules.
        In summary, executive actions help address problems in the
    economy and they are supported and help workers, businesses,
    and taxpayers. Thank you.
        Chairman HARDY. Thank you, Dr. Madland.
        I would like to begin our first round of questioning. I am
    going to yield myself along with everybody else as we go
    through.
        Mr. Hoffman, I would like to start with you. You know, a
    bad rule is a bad rule. But do you think some of these concerns
    that could have been alleviated by the DOL if they followed the
    Regulatory Flexibility Act and actually allowed small business
    firms to be part of that conversation to maybe come up with a
    better outcome. What are your thoughts on that?
        Mr. HOFFMAN. Yes, sir. Having a greater voice in these
    regulations is important, and the Office of Advocacy does an
    excellent job in listening to small businesses. We feel that
    greater input from the small and large business community into
    this far-reaching regulation is necessary to make it workable.
        Chairman HARDY. Thank you.
        Ms. Huneycutt, it is stated that there are about 100,000
    small businesses that have left the federal marketplace in just
    the last 4 years. Do you think any of these actions would make
    any of those small business firms ever want to come back doing
    business with the federal government with some of those actions
    that have been put in place?
        Ms. HUNEYCUTT. Well, I can tell you that there is a
    continuum along which each different firm is going to opt out
    of something. It might be with increasing layers of regulation
    which often conflict with each other or are hard to make work
    with state regulations or other agency regulations and require
    additional investments in, for example, recordkeeping systems
    and lawyers at 400- to $700 an hour. I can tell you that we
    recently spent $10,000 to implement a human resources
    information system that was totally compliant and is a
    commercial system, and now with the sick leave recordkeeping
    that will be required by the new EO, we will be required to
    potentially opt out of it or pay for special coding to have
    that work for us. So some firms are going to opt out, and my
    firm at this time does not engage in service contract work
    because the very prescriptive ways that the recordkeeping has
    to be done and things need to be structured are simply too
    pricey for us to implement and continue to run our business,
    although we actually do meet all of those objectives. So we
    have sick leave. We do not have any claims against us. And even
    still they are a barrier to entry to the SCA.
        Along that same continuum, unfortunately, what we are
    seeing is that there are a lot of firms that are opting out of
    compliance, and sinning first and asking forgiveness later. The
    contracting officers who are already so burdened with so many
    different pieces that they need to evaluate in a proposal
    really do not have the bandwidth or the autonomy to ensure
    compliance with those, especially in a lowest price,
    technically acceptable environment where costs are continually
    being driven down. So unfortunately, what we are seeing is that
    oftentimes the government is getting exactly the opposite of
    what it wants because it is rewarding the actors that are
    noncompliant without knowing it and driving compliant firms out
    of business.
        Chairman HARDY. Thank you.
        Mr. Christianson, in your testimony, you mentioned the use
    of project labor agreements for federal construction projects,
    executive order or your written testimony. Can you talk a
    little bit about how this might affect the open shop contractor
    or even those who are located in the right-to-work states?
        Mr. CHRISTIANSON. Sure. The fact is that the agency's
    position is that we leave it up to--we believe it is the
    decision of the contractor and laborer to come to a
    collectively bargained agreement, project labor agreement, and
    that government mandating those agreements is not a good idea
    because they do not have the expertise necessarily to do so.
    They do not have the parties in the construction industry to do
    so. But when you are dealing with open shop, take for example a
    very open shop area maybe in the middle of Nevada where there
    are not many union contractors, if you are all of a sudden
    mandating that there has to be some sort of union work in an
    area that is predominately open shop, you are going to have
    these companies basically change the way that they do work to
    do a project and they are probably just not going to fit the
    project.
        Chairman HARDY. Thank you.
        My time is expired. I would like to turn the time over to
    Ms. Adams.
        Ms. ADAMS. Thank you, Mr. Chair.
        Before we address the topic, I wanted to just get the
    panel's reaction to comments made by the CEO of Science
    Applications International Corporation, SAIC, last week in
    which the CEO indicated that small business set-asides and
    contract unbundling were making it harder for his company to
    get contracts. Do you feel like these comments are
    representative of what is going on in the federal marketplace?
    Anyone who would like to answer it?
        Mr. HOFFMAN. I will start. There are opportunities for
    large firms to participate with small firms in the federal
    market, there was recently passed legislation for mentor-
    protege. There are also other agreements, and recently there is
    the new Small Business Multi-Tier rule that is allowing prime
    contractors to count small business subcontracts to their goal.
    Ultimately, this is helping the agency to meet their small
    business goals. I think there is still opportunity for large
    firms to partner with small firms to get work done.
        Ms. ADAMS. Dr. Madland, do you have a comment?
        Dr. MADLAND. Yes. As I said in my opening statement, the
    share of government contract dollars that are going to small
    businesses is at record highs, which indicates that the
    President's efforts to focus on small business are working. Yet
    I think there is significant room for large contractors to do
    quite well because the scope of government dollars going to
    government contracts over the past several decades has
    increased significantly, so there is more total work out there
    even if a significant percentage now is going to small
    businesses.
        Ms. ADAMS. Okay. Thank you.
        Would anybody else like to comment? Yes, ma'am?
        Ms. HUNEYCUTT. I would agree as a small business that we
    are the beneficiaries of set-asides. I think that has been
    working increasingly well in the last couple of years. I wonder
    whether some of the reasons SAIC is having trouble competing is
    because a lot of the statutes that currently exist that were
    passed by Congress are not being enforced and small businesses
    have an easier time staying under the radar, thereby lowering
    their prices and becoming more price competitive. If they
    choose, or not knowingly, if they do not comply.
        Ms. ADAMS. Thank you, ma'am.
        Okay, Mr. Christianson, with many construction firms doing
    business in the millions, why is it so difficult for these
    firms to keep track of their legal infractions over a 3-year
    period?
        Mr. CHRISTIANSON. Construction is an inherently regional
    business. In many states, different coasts, you have different
    projects in different areas. You are working out of trailers.
    Especially in small businesses, you may not have the technology
    that a multibillion-dollar company has to track these things. I
    think the more fundamental question is why do the agencies that
    actually charge these contractors with infractions not have
    these records? They are the ones that are ultimately bringing
    these actions. Why are they asking contractors to do this?
    Should they not already have this information?
        Ms. ADAMS. Okay. Let me follow up. There has been a lot of
    discussion about the negative impact that these executive
    orders will have on small businesses. However, are there any
    welcomed changes that help those in your industry or are there
    areas where you feel more action is needed?
        Mr. CHRISTIANSON. I do not think so, what is going on here
    is there is more problems that are created. I think many of
    these are solutions looking for problems in the sense that, for
    example, with paid sick leave, most of our union contractors as
    we found out, do not really provide paid sick leave, because
    through collective bargaining, they collectively bargain for
    higher wages than even Davis-Bacon wages to take into account
    things like you are not working. It is a seasonal industry, so
    you are not working all the time. If you have paid sick leave
    during the time that people should be on the job, you are going
    to change construction schedules. You are going to delay
    projects, you are going to add to costs. We had one company,
    for example, that said take off the entire month of December.
    But now, because of the paid sick leave executive order, they
    are not going to be able to do that. Take off extra time for
    the holidays, they are not going to be able to do it.
        The other thing is, in certain states and cities, you have
    state paid sick leave rules. You have city paid sick leave
    rules and now federal paid sick leave rules. So if you are on a
    federal contract, some of your employees may have federal paid
    sick leave requirements. If you have a state contract, you have
    state paid sick leave requirements. And then local, what do you
    follow? That is really the problem.
        Ms. ADAMS. Thank you, sir. I am out of time.
        Mr. Chair, I yield back.
        Chairman HARDY. Thank you. I would like to turn the time
    over to Chairman Hanna.
        Chairman HANNA. You know, it is pretty clear we are in slow
    growth. Very slow growth. Historically slow growth. It is also
    true, Dr. Madland, that real wages have not gone up in a very,
    very long time, which nobody can be happy about.
        I have got 25 years in the Operating Engineers Union. I
    believe you are earnest in your perspective, but what bothers
    me about it, Dr. Madland, is so much of it is conjecture and
    subjective in its nature. I wonder, when you hear three other
    individuals say that these rules are burdensome and
    overcomplicated and are discouraging people from entering the
    marketplace--and of course, what you said is true, that there
    are more small businesses as a percentage of total government
    contracts, but it is also true that the number of distinct
    small businesses' actions has declined, and it is true that
    there are 100,000 less people.
        You do not believe these other three panelists? Do you
    think they are wrong or they are somehow saying something that
    is completely designed for their own self-interests? Because I
    hear this every day from business that it is not just the fact
    that these regulations are out there but that they are not
    considered in the process. It is the cumulative effect of it
    all. I do not see people out there trying to--I mean, one-tenth
    of 1 percent, sure they are bad actors, but why should you hold
    Mr. Hoffman responsible for every general contractor or
    subcontractor beneath him which he may or may not have any
    control over? Frankly, as you said, I think Mr. Hoffman
    mentioned that those are known people that it is the
    government's job to keep track of.
        This is not meant to be personal, but it is surprising to
    me that you can speak in such general terms about people and
    have very specific notions about overtime and new overtime
    rules and the 30-hour work week rule that even the
    Congressional Budget Office has said will cause up to 2 million
    people to leave their jobs. I am just interested.
        Dr. MADLAND. Sure. I think most of my testimony comes based
    on the experience when state and local governments implement
    similar policies. While I am by no means discounting the
    concerns that the panelists here have stated, you often find,
    before the policies get enacted, significant concerns, but
    after they go into a place they are less significant.
        Just to read one very small quote. This was San Francisco.
    The Vice President of the local Chamber of Commerce, which led
    the fight against the city's paid sick leave before it passed,
    reported that the law's impact was ``minimal,'' and that ``by
    and large paid sick days has not been much of an issue.'' We
    have actual evidence from, for example, I cited the Maryland
    study of the living wage where the first and only State to pass
    a living wage, much higher wages for government contracts, and
    they actually found that the number of bidders for state
    projects increased after they implemented the law.
        Chairman HANNA. I do not disagree that that person said
    that about that, and I do not know of the Maryland study. I
    will take your word for it. But do you think that really that
    is generally the preponderance of regulations and rules that--I
    mean, I was in business for 35 years. Mr. Hardy was. There is a
    point that people who have been successful in their lives say
    it is not worth it anymore. It is just too damn much work to
    keep up with the government. I am going to walk away. We have a
    lot of evidence to that, anecdotal and real, 100,000 businesses
    fewer. They are not sitting here whining at you. They are
    saying to you we want to do business with the federal
    government. We appreciate the opportunity, but at some point
    you are breaking our back and it is not worth it.
        I think that is the difference between the value system
    that you lay out which, one can prove individually yes or no,
    but that is what I hear, that we just kind of cannot take it
    anymore. Particularly, it strikes me that there is a point for
    a lot of people where they say, you know, I am out. It is not
    worth it. You are not worth it. The federal government is too
    complicated and too much in our face. I think that is a real
    concern.
        My time is up. Thanks.
        Chairman HARDY. Thank you.
        I would like to turn the time over to Congressman Kelly.
        Mr. KELLY. Thank you, Mr. Chairman and Chairman Hanna.
    Thank you both and Ranking Member. Thank all you witnesses for
    being here.
        Just as a follow-up, more in a comment than a question with
    Chairman Hanna. Having been a small business owner, throughout
    my August I spent almost every day at town halls and those type
    of things with local folk and small businesses, veterans, being
    a member of the Mississippi National Guard and serving for over
    30 years. I just left the National Guard Conference where I was
    there as a participant, not as a congressman.
        It confuses me that we have think tank people in here, and
    I am not just talking about this panel, but I am talking about
    the entirety of the panels that have been here in 14 months. We
    have think tank panels. We have government employees. We have
    academia people who say that these rules have no effect on
    small businesses, but I have yet to have a small business
    person sit at that table and say that they felt that we did not
    have any effect. Most of the people that we have in front are
    just like you, three small business owners who actually own
    small businesses who say it has a tremendous impact on how we
    do business and whether we do business.
        So I ask you to continue to fight as small businesses and
    continue to keep up the dialogue to let them know that these
    things impact because I, as you, and I think Mr. Christianson
    said this, as a small business owner, I know we pay our
    employers all that we can and we are going to preserve and keep
    and pay as well as we can, all small business employees because
    they are part of our family. They are. We want to see them do
    well.
        That being said, this week I had Kopis Mobile, which is an
    app business that does a lot with DOD, and they are anchored in
    Flowood, Mississippi. Aside from keeping small businesses from
    being created and putting small businesses out of business, I
    am also concerned about the negative impact these regulations
    are having on innovation.
        Ms. Huneycutt, can you talk a little more about how these
    actions will affect technological innovation?
        Ms. HUNEYCUTT. I have been following very closely the
    efforts to get Silicon Valley and more R&D-oriented commercial
    firms to participate in the bidding process for government
    work. I think it is something that is critical for maintaining
    our technological edge, particularly at DOD. They move at the
    speed of business.
        As an anecdote, I can tell you that we tried to team with a
    firm that provides a platform by which to--and we were looking
    at the State Department--by which to communicate through social
    media through a centralized hub that would send the same
    messaging out through Twitter and Facebook and all of these.
    They were flummoxed at the way that the process worked. They
    were flummoxed at all of the different ways that they would
    need to change their business model in order to be compliant,
    and the hoops, the time that it took. This is not how they are
    used to doing business.
        I would suggest, especially if you want to increase the
    participation of commercial firms in bidding for government
    work, you do not--either these regulations and these new
    requirements should be passed as comprehensive legislation. It
    is not unique to the government, so that everybody needs to
    engage in it. I would suggest that there be more enforcement of
    the way companies are characterizing the way they engage
    people, because oftentimes they will mischaracterize them as
    1099 subcontractors, have them sign a contract that says they
    are complying with everything, and then they get everything
    cheaper and there is not any real compliance there.
        I would suggest that you be aware that this puts commercial
    companies in a position where now they need to treat their
    government contract employees differently than their commercial
    contract employees, and they cannot treat them differently.
    That keeps them out of the government.
        Mr. KELLY. Mr. Hoffman, just briefly, have about 45 seconds
    left. What impact do all these new requirements have on the
    procurement process for small companies like yours?
        Mr. HOFFMAN. My question is how are we going to, for
    example, vet our subcontractors? I just had the opportunity to
    negotiate overhead rates with a government agency and they were
    pointing to one of the consultants as to having low overhead or
    lower rates on a different contract. I asked, well, what
    contract or what is the name of that firm so I can reference
    it? While they gave me the last four, they were not even
    willing to give me the name of the contractor. If they will not
    give me the name of the contractor in a straightforward
    environment, when will the government give me the name of a
    contractor which potentially is negative and they are worried
    about backlash or something like that? So I am concerned
    myself.
        Mr. KELLY. Thank you, Mr. Chairman. I yield back.
        Chairman HARDY. Thank you, Mr. Kelly. We will turn the time
    over to Mr. Knight.
        Mr. KNIGHT. Thank you, Mr. Chair.
        Just a couple of questions. I was reading through some
    articles and watching what government is doing and what
    business is trying to adhere to, and some of the comments by
    all of the panel today. It begs the question that if government
    does something, or they say they are going to do something and
    people rebel against it, but then it happens anyway, people
    just have to adhere to it and that is just the way it is. That
    is what I look at when we start talking about the overtime rule
    and we start talking about $15 an hour going across the country
    and what is happening in cities like Seattle since they have
    seen the biggest decline in jobs in restaurants since 2009
    since they have done the $15 an hour ordinance. So when
    government gets involved, too heavy-handed, then we tend to see
    a problem.
        But my questions are about something recently our Vice
    President said. He said, ``Because of the administration's
    efforts to rebuild the basic bargain, the economy has gone from
    crisis to recovery to resurgence. Today's expansion of overtime
    protections will build on this momentum.''
        Do any one of you or do all of you agree with this?
        Yes, sir?
        Dr. MADLAND. Yes. I think the overtime regulations are an
    important step forward to ensuring that workers, when they work
    more than 40 hours a week when they are lower income, will
    receive time and a half, which is the basic bargain of
    overtime. As you know, the standard had been eroded over
    decades so that very few salaried workers were receiving
    overtime. It used to be that the majority of salaried workers
    received overtime and the new regs will do that, which is part
    of how you ensure that workers have wages to spend that can go
    into the pockets of small business owners.
        Mr. CHRISTIANSON. We do not disagree necessarily that it
    has been a long time since the overtime wages have been
    increased or the thresholds have been increased. But the issue
    is the practicality of more than doubling that threshold and
    making small businesses have to adhere to that in under a
    year's time. To have to plan for that is really just not----
        Mr. KNIGHT. Before everyone continues I will put the second
    question on that, and maybe you can answer, too. Would any of
    your members be opposed to talking about an increase? We went
    from a little over 23,000 to almost 51,000. Would any of your
    members be opposed to talking about an increase that would
    probably put us into a more acceptable for small business,
    acceptable for continuing our economy to move forward? I am not
    trying to----
        Mr. CHRISTIANSON. We are always interested in talking. We
    did not really have the opportunity to talk. That is what
    happened here is we had an opportunity to talk about the
    impacts but it does not seem like the administration did any
    listening.
        Mr. KNIGHT. Okay. And again, I will say the flip side, too.
    It has been a long time since that has been changed. We do not
    keep minimum wage at 25 cents an hour. It moves and it ends up
    trying to be at a wage that is commensurate to the timeframe.
    Some people think that that is too low and some people think
    that the jumps are too high. But, when we talk about the
    overtime rule, and moving it, I think it is a 113 percent jump.
    That seems to me to be a jump that small business is going to
    not just push back on, but have a very difficult time adhering
    to.
        Mr. CHRISTIANSON. You know, you cannot get something from
    nothing. Small businesses are not all of a sudden going to be
    able to pay everyone overtime that are under this threshold.
    Some people are now going to be hourly workers. They basically
    feel like they have been demoted, which is not necessarily
    true, but just the reality if they want to stay on the job, the
    company has the same amount of finite limited amount of funds.
    They are going to readdress what level certain people are paid,
    how many hours people work, so that they can adjust
    accordingly.
        Mr. KNIGHT. In my last 20 seconds, do you think that that
    takes away some of the flexibility for small businesses?
    Because like you say, now we are going to turn some of them
    into hourly wages. In California, we have done some things that
    have taken away the ability for employers and employees to have
    a conversation, and say you have to have certain breaks at
    certain times, and if you do not have these certain breaks,
    then you are in violation. It takes away the flexibility. Then
    it turns it into, I am the employer, you are the employee, and
    that is the way it is and we do not talk and you follow the
    rules and I have to fill these forms out, and have a nice day.
        Yes, ma'am?
        Ms. HUNEYCUTT. My response is to what was discussed a
    little bit earlier. With the exempt rules referencing a higher
    salary point, I can tell you the practical impact that that has
    had on us where, actually, we have very few people that were
    below that point to begin with, but those that were near that
    point got pay raises because the cost of giving them another
    couple of thousand dollars raise was nothing compared to the
    cost of having to change our recordkeeping systems. But what
    that also means is that we are very hesitant to hire at that
    lower salary level or that lower wage level because, again, the
    cost of the recordkeeping, the cost of changing our payroll
    system. A lot of commercial payroll companies do not--actually,
    if that is global they will be abiding by that. If it is a
    government-specific thing, a lot of commercial payroll
    companies, human resources information systems companies, will
    not accommodate that. So you are back to square one having to
    look for another service or having to pay to customize their
    recordkeeping.
        Particularly, a lot of the work that is done at the lower
    wage levels, a lot of it can be automated. I do think that some
    firms will be looking to automation or noncompliance or other
    ways to--from my point of view, for my company only, it is
    really the recordkeeping and changing. If you have 15 different
    categories of employees, it is very hard to keep track of what
    the rules are. The employees say, well, he is getting this, why
    can I not get that? It sows some havoc.
        Mr. KNIGHT. Thank you. My time is well expired. Thank you,
    Mr. Chair.
        Chairman HARDY. Thank you. There is a desire to go around
    with another round of questions, so I am going to start off
    with Ms. Adams if she would like.
        Ms. ADAMS. Thank you, Mr. Chair.
        Mr. Christianson, I wanted to follow up on something. You
    hinted about the lack of consistency between federal and state
    laws regarding regulations. If there were better consistencies
    between the federal and state statutes, would you be open to an
    executive order that promotes paid leave and other similar
    measures?
        Mr. CHRISTIANSON. The fact is an executive order cannot do
    that. It is not lawful. They cannot change state law by
    executive fiat. So the question itself is one that I do not
    think is even realistic.
        Ms. ADAMS. Well, not so much lawful, but what about
    consistency?
        Mr. CHRISTIANSON. If the federal government contracts were
    to fall in line with other requirements, that would be,
    beneficial assuming that requirement in itself is beneficial.
        Ms. ADAMS. Okay, Mr. Hoffman, much of the objections to the
    Fair Pay and Safe Workplace Executive Order center on
    blacklisting, the idea that contracting officers are spoiling
    to disqualify firms for superfluous reasons. Do you feel that
    these concerns have been addressed in the final rules that the
    Department of Labor has issued?
        Mr. HOFFMAN. Right now, it is not clear to me the concept
    of, first of all, that something is going to occur in 3 days.
    Our experience with contracting officers is things do not
    happen that quickly. If it is an issue of an allegation,
    perhaps there should be an investigation. Is that adequate time
    to do that? Are we going to provide records or provide
    information to the private sector so that we can select our
    teammates correctly? I gave an example earlier as to whether
    that actually happens. I gave a very simple example, we cannot
    even identify who is the prime contract on a contract number,
    though at some point I will figure it out. So, I have some
    doubts.
        Ultimately, it seems to me, Ms. Adams, that we have these
    different reports and the government collects them. If we could
    take the information that we already have and act upon that and
    put in a secure deposit repository, collect all the information
    that we are already collecting, that would be a good idea. It
    strikes me that the government has fantastic intentions, but we
    have a significant amount of regulation, and not all regulation
    is good. We would really like to go ahead and design innovative
    solutions for our clients and not looking back at forms and
    annual reports and this and that. Potentially hiring people to
    do administrative compliance is not growing the business.
        Ms. ADAMS. Thank you, sir.
        Dr. Madland, while we recognize the concerns that some
    small firms have expressed regarding the new overtime rules, as
    well as the increase in minimum wage, can you discuss some of
    the benefits for employers and the economy as a result of the
    changes?
        Dr. MADLAND. Sure. The basic story, as I said, wages have
    been stagnant for quite some time. They are just starting to
    tick up. That has caused a lack of overall demand in the
    economy, which has reduced new hiring by small businesses and
    all businesses because there is not enough new consumers out
    there. Raising people's wages through the minimum wage and
    through overtime will help boost overall demand in the economy,
    which can help create a virtuous cycle and grow the larger
    economy.
        Ms. ADAMS. Thank you. I yield back, Mr. Chair.
        Chairman HARDY. Thank you. I turn some time over to Mr.
    Hanna.
        Chairman HANNA. Thank you, Chairman.
        What I hear here is people who fundamentally agree with one
    another, but it is the preponderance and the lack of input that
    is given that is not adequate. In a national debate, it is
    really discouraging to hear both parties vilify small business
    in one way or another, because we both know the business of
    America is business and that is really where all the jobs come
    from and all the growth, the growth that we are not seeing
    right now.
        You had a phrase, Dr. Madland, that you used, and I am not
    taking a position on it. I am wondering what you mean by the
    term ``wage theft.'' I can imagine what you mean by it, but I
    think what I see out there is people who feel put upon that in
    order to run a business well, you cannot have every outcome
    perfect. A lot of time in the government's pursuit of a perfect
    outcome, it actually does what that common phrase is, it kills
    the goose. That a certain amount of slippage, which you may
    regard as something wrong or illegal or immoral or unethical,
    is really part of, not that anyone on any case would approve
    it, but the ability of business to do business in an
    environment that is welcoming and not punitive, where they are
    not always feeling like they are probably, likely, on every
    given day doing something wrong, is also important. Businesses
    need to be let to do what it is they do best and government
    does not always have the best answer for that. It has the
    outcome it likes, but it does not get there necessarily in the
    right way.
        The overtime rule. I have talked to a lot of people who
    have no problem with what the President has done other than
    they doubled it. I have spoken to a lot of businesses that say
    if you went to 35,000, we get it. I would be the first person
    to admit that there are companies out there that take advantage
    of that, just like Ms. Huneycutt talked about 1099s. There are
    companies that take advantage of the 1099 rule. You see that
    playing out in court, and I agree that is wrong because it
    denies benefits and keeps people out of a system that provides
    them with a decent lifestyle and hope for a decent--but what do
    you mean by ``wage theft?'' Do you feel as though businesses
    are bad somehow? I know you are going to say no, but what do
    you mean?
        Dr. MADLAND. Wage theft is when companies do not pay the
    legally required wages. That typically means they are paying
    less than, for example, the minimum wage. One of the key
    examples actually in support of the Fair Pay and Safe Workplace
    Executive Order was a worker named Helen Avalos, who worked up
    at Walter Reed as a contractor janitor. Her company just
    stopped paying her, stopped paying her and all the other
    workers. She has got rent, got kids. Does not have, you know,
    low income. What is she going to do? The company continued to
    receive new government contracts. That is kind of what I mean
    by wage theft. It is breaking the law by failing to pay legally
    required wages. The independent contractors----
        Chairman HANNA. But are there not laws that cover that in
    the State of Virginia? I mean, the minimum wage laws?
        Dr. MADLAND. Yes. But if they are not doing it, that is
    wage theft. That is what wage theft is, is breaking----
        Chairman HANNA. I mean, she has recourse without the
    federal government getting involved in it.
        Dr. MADLAND. She was working as a federal contractor and,
    no, she actually did not really have much recourse. She and her
    coworkers protested outside and said what is going on? It was
    weeks of not getting paid.
        Chairman HANNA. Okay. I accept that. I am sure it is true.
    I have no reason to believe otherwise. But how about the notion
    that one incident or a bunch of incidents would give you cause
    to react to affect thousands, if not millions, of businesses
    around the country so that the actual--and this is the common
    complaint--that the benefits of what you have done are real and
    positive, but yet they cost much, much more than they are worth
    and that the government does not really look at that?
        Dr. MADLAND. I think you are talking about the Fair Pay and
    Safe Workplaces. For most companies without legal violations,
    they will simply check a box certifying they do not have legal
    violations, akin to what is done for tax violations. For those
    that do, there will be some additional reporting requirements.
    However, again, the goal of those reporting----
        Chairman HANNA. I am sorry. Go ahead. I do not mean to
    interrupt you.
        Dr. MADLAND. The goal of those reporting requirements is to
    provide sort of a warning to have further review of the
    company's larger----
        Chairman HANNA. But you heard what Ms. Huneycutt said, that
    these recording requirements, which you say are a few hours,
    other people say are tens if not hundreds of hours, you do not
    have a good perspective on what it actually costs these
    businesses going forward, and that you are placing a
    disproportionate cost on tens of thousands of businesses
    without regard to that cost because of the outcome you desire,
    that perhaps that should be taken into account.
        Dr. MADLAND. Yes. Obviously, you need to weigh the cost and
    the benefits and the time that is required.
        Chairman HANNA. It does not feel like you do.
        Dr. MADLAND. Well, as I said, most of the time, most
    companies will have a very simple process. There will be a more
    involved process for companies with legal violations. But
    again, the goal is to get those companies into compliance with
    the law, that seems like a worthy goal. Also, the studies of
    the cost estimates suggest it is going to be less than a cent
    for every hundred dollars of federal contracts of the
    additional cost, and that is a burden, but also, you are
    helping draw in more law-abiding companies that then will want
    to contract with the government that are familiar with similar
    processes. Lots of private companies----
        Chairman HANNA. Losing a hundred thousand companies does
    not support that and does not support that notion. Also, the
    cost that we--excuse me, Mr. Hardy, just 1 second. Do you mind?
    The cost associated with it, I have never heard of anybody who
    would say to you it is 1 penny on a dollar. But with that I
    yield back. Thank you, Dr. Madland.
        Chairman HARDY. Thank you. And I would like to go ahead and
    let Ms. Huneycutt, she had the desire to address that question,
    and yield my time to it.
        Ms. HUNEYCUTT. Sure. It sounds to me like that situation is
    already addressed by DOL regulations, which do not permit an
    employer to have somebody work and then not pay them. There are
    very specific regulations regarding the timeliness of payment,
    so that already exists. Again, my concern remains the same,
    which is that if we diffuse the responsibility for enforcement
    to the contracting officers, then they really do not have the
    bandwidth to do this or the autonomy. They are going to say,
    well, that is really DOL's enforcement issue and I am not going
    to worry about it until DOL tells me something. DOL is going to
    say that is the contracting officer's responsibility and I am
    not going to enforce it until the contracting officer tells me
    something. My concern is that with the increasing layers or
    duplicative regulations there will be less accountability and
    more bad actors invited to leverage that.
        Chairman HARDY. Thank you.
        One quick question I would like to address, and of these
    100,000 contractors we have lost in the last 4 years, Mr.
    Christianson, being a small business owner myself in the past,
    and going from two or three employees and working your way up
    to 350 over time, when you step into the contracting world with
    the government agencies, do you believe that other small
    businesses that are say 50 and under will have the ability to
    step into this field? Because now you have grown your internal
    staff or office staff to two or three times the size that you
    would have had at a normal site. Do you believe these
    contractors, are you hearing that as some of the challenges?
    Would you like to elaborate on that? Anybody else who would
    like to?
        Mr. CHRISTIANSON. First of all, Mr. Kelly mentioned or
    acknowledged that I am a small business owner. I am not. I am a
    regulatory counsel. I do not have that honor of being a small
    business owner, I represent them.
        Chairman HARDY. But you work with many small businesses?
        Mr. CHRISTIANSON. Work with many, and I have my job in many
    thanks to the regulations and the confusion that the President
    has put forth. AGC created this position recently for me as a
    result of all the questions small businesses were asking. So I,
    in part, am part of the job growth lawyers as a result of this.
    I do not think that is what you all think of job growth when
    you think of small businesses.
        But on your question, in the commercial construction
    industry, small businesses could be $36.5 million or below. If
    you have a contractor that is $5 million versus $30 million,
    and you are going after the same set-aside work and now you
    have to comply with equally confusing and burdensome
    regulations, your overhead costs as a percentage if you are
    that $5 million company is going to be way higher than that one
    for that $30 million company. So you are now at a competitive
    disadvantage completely. You are going to have to hire, not me
    as the association lawyer, me as the outside counsel because I
    can tell you that I talked to our general counsel before
    coming. He does not know of any commercial construction company
    that had their own in-house lawyers or attorney below $100
    million. They hire outside counsel at $400 an hour and hire
    consultants to do this.
        Chairman HARDY. Thank you.
        Anybody else care to elaborate on that?
        With that, that is the final question. Again, I want to
    thank each of you [our panelists] for being here today and
    testifying.
        Small businesses play a critical role in our federal
    marketplace. A vibrant, competitive, and robust small business
    sector lowers prices, spurs innovation, and creates jobs. As
    all of us here at our Committee, Democrat and Republican alike,
    recognize the importance of having worked in a bipartisan
    fashion throughout the 114th Congress, passing numerous pieces
    of legislation designed to help small firms compete in the
    federal marketplace.
        Unfortunately, our President is either unable to understand
    how hard it is complying with these executive actions for small
    businesses, or worse, unwilling to listen. We here on the Small
    Business Committee, will continue to speak up and fight so that
    the folks have a seat at the table.
        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 11:21 a.m., the Subcommittees were
    adjourned.]
                                A P P E N D I X

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The Cumulative Burden of President Obama's Executive Orders on
                           Small Contractors

            Testimony before the Committee on Small Business

                 United States House of Representatives

       Subcommittee on Investigations, Oversight and Regulations

                                  And

               Subcommittee on Contracting and Workforce

                           Donna S. Huneycutt

                  Co-Owner and Chief Operating Officer

                                WWC, LLC

                             On behalf of:

                National Defense Industrial Association

                                10:00 AM

                      Tuesday, September 13, 2016

                Rayburn House Office Building, Room 2360

        Chairman Chabot, Ranking Member Velazquez, and Members of
    the Subcommittees, thank you for the opportunity to appear
    before you this morning. I am here this morning on behalf of
    the National Defense Industrial Association, the nation's
    oldest and largest defense industry association, comprised of
    nearly 1,600 corporate and 90,000 individual members. While
    several Executive Orders (EOs) issued in recent years have, or
    will have, a detrimental impact on small businesses that
    contract with the federal government, such as the Department of
    Labor's so-called ``Overtime Rule'', for the purposes of my
    testimony this morning I would like to focus on the EOs
    specific to government procurement or federal contractors.

        Small businesses are a critical component of the U.S.
    economy, serving as a catalyst for economic development,
    providing employment opportunities, and as the engine of new
    ideas and innovations. Accordingly, the Federal Government has
    established programs to ensure participation opportunities to
    small businesses to fulfill the public policy objectives of the
    Federal Acquisition Regulation (FAR), and access a source of
    innovative products and services for Federal Government
    customers. Explicit and implicit in the desired outcomes for
    small business programs is achieving effective competition by
    maximizing small business participation and enabling small
    businesses to grow through diversification of the goods and
    services they provide and expansion into the nongovernmental
    marketplace.

        Several EOs and Presidential Memoranda specific to
    government procurement or federal contractors have overwhelmed
    small business contractors and undermined small business goals.
    Small businesses have borne the cost of having to understand
    not only additions and changes to the Federal Acquisition
    Regulation (FAR) and regulations of various Departments and
    agencies, but also how the agencies will implement those
    changes. This requires careful study of resulting agency
    procedures, guidance, and instructions, in addition to
    projecting workforce behaviors, which are largely driven by the
    actual or perceived interpretation of the original regulations
    by oversight actors (Government Accountability Office, agency
    Inspectors Generals, etc.). Once those are understood, small
    businesses must incur significant initial and reoccurring
    compliance costs. These costs place a burden on small business,
    and take the place of investments in research and development
    (R&D), human capital, and other means to grow businesses.

        As outlined at the onset of the FAR, the guiding principles
    of the Federal Acquisition System are to satisfy government
    customers by maximizing use of commercial products and
    services, utilizing contractors with superior past performance,
    and promoting competition. At the same time, the Federal
    Acquisition System is to minimize operation costs, conduct
    business with fairness and integrity and fulfill policy
    objectives. The EOs attempt to fulfill the latter two guiding
    principles, but in the process, undermine each of the others.

        The rationale for the procurement-related EOs have been to
    ``promote economy and efficiency in procurement'' through their
    intended outcomes. Industry does not necessarily disagree with
    the logic, but rather, how that efficiency and economy is
    achieved. Supporting documentation for the EO on Fair Pay and
    Safe Workplace states, ``the vast majority of federal
    contractors play by the rules.'' \1\ However, the
    implementation approach to each of the EOs punishes that vast
    majority of good actors through costly, government-unique
    compliance requirements--a particularly inefficient means to
    promote efficiency. In fact, the proliferation of government-
    unique requirements imposed by the EOs undermines efficiency
    and economy by limiting the government to suppliers that are
    willing and able to comply. Their neither promotes competition,
    innovation, nor does it maximize the use of commercial products
    and services.
    ---------------------------------------------------------------------------
        \1\ See ``FACT SHEET: Fair Pay and Safe Workplaces Executive
    Order.'' Available at: https://www.whitehouse.gov/the-press-office/
    2014/07/31/fact-sheet-fair-pay-and-safe-workplaces-executive-order.

        Further, the most efficient and economic means to fulfill
    the public policy objectives of the EOs is to alter government
    buying practices. For example, the rationale for the Fair Pay
    and Safe Workplaces EO is ``Contractors that consistently
    adhere to labor laws are more likely to have workplace
    practices that enhance productivity and increase the likelihood
    of timely, predictable, and satisfactory delivery of goods and
    services to the Federal Government.'' Thus, if the government
    makes contract awards based on the offeror that provides a good
    or service for the best value, or in other words, the offeror
    most likely to deliver or perform on time, predictably, and
    with satisfactory performance, it would have chosen an offeror
    that adheres to existing labor laws and has workplace practices
    that enhance productivity. Unfortunately as industry has long
    pointed out, the government has poor buying habits that have
    equated ``best value'' with ``lowest cost'' and valued
    compliance to government-unique requirements over actual
    performance in delivering goods and services, creating a
    ---------------------------------------------------------------------------
    perverse incentive to ``race to the bottom'' to win contracts.

        Congress has already passed sufficient legislation to
    ensure protections of federal contractor employees, and to
    ensure that the government only contracts with responsible
    sources. Rather than using EOs to alter the enforcement or
    interpretation of legislation, the Federal Government should
    ensure that they are enforcing existing laws to ensure
    protections for workers, and then alter buying practices to
    reward best value.

        A major frustration for small businesses is that in many
    cases they agree with the intended outcome of an EO such as,
    providing for the well being of federal contractor employees,
    or making sure that competitors play by the rules, but object
    to the process by which the EOs have been developed and
    implemented and the resulting burdens. This starts with the
    Federal Government's assessment of burdens on small entities.
    The Small Business Administration's (SBA) independent Office of
    the Advocate \2\ has commented that the Federal Government
    underestimated the compliance costs and entities affected in
    implementing regulations for Fair Pay and Safe Workplaces, Paid
    Sick Leave for Federal Contractors, and Establishing a Minimum
    Wage for Federal Contractors EOs. Unfortunately, since the EOs
    are published without the public vetting inherent in the
    legislative process, the public has no means of providing
    input, or accountability, on the likely burdens prior to
    publication.
    ---------------------------------------------------------------------------
        \2\ Regulatory comments by the SBA Office of Advocacy can be found
    here: https://www.sba.gov/category/advocacy-navigation-structure/
    legislative-actions/regulatory-comment-letters.

        This lack of engagement with small businesses prior to
    development of the EO, or their implementing regulations, has
    resulted in unnecessarily burdensome requirements. For
    instance, the proposed rule to implement EO 13706,
    ``Establishing Paid Sick Leave for Federal Contractors,''
    requires federal contractors to ``calculate an employee's
    accrual of paid sick leave no less frequently than at the
    conclusion of each workweek,'' and provide an employee in
    writing their accrued sick leave at the employee's request.
    However, most companies have internal business systems
    calibrated for bi-weekly or semi-monthly pay periods, which is
    the same frequently for employees to input hours worked or
    taken for leave. Forcing small businesses to invest in
    customized business systems or man hours to adjust to these
    intervals, while accommodating the various standard and
    nonstandard employee schedules within their business, is
    unnecessary, and does not ``increase efficiency and cost
    savings in the work performed by parties that contract with the
    Federal Government,'' as the EO intends. Or in the case of the
    ``Fair Pay and Safe Workplaces'' EO, the implementing
    ``guidance,'' was not subjected to the rulemaking process,
    despite its ``regulatory nature,'' as pointed out by the SBA
    Office of the Advocate. Further, implementation of the EOs have
    not provided adequate compliance support for small businesses.
    For example, the FAR rules implementing EO 13627,
    ``Strengthening Protections Against Trafficking In Persons In
    Federal Contracts,'' was made effective without
    Congressionally-mandated guidance to help contractors comply
    with new requirements, severely limiting the ability of small
    ---------------------------------------------------------------------------
    business to comply most effectively with new regulations.

        One EO in particular, Fair Pay and Safe Workplaces, is
    simply unfair to businesses of all sizes. Under this EO, small
    businesses would have to disclose alleged and adjudicated
    violations of 14 Federal laws and EOs in addition to yet-to-be
    fully-determined equivalent state laws in the preceding three
    years to either government contracting officers (COs), or the
    Department of Labor (DoL). Once disclosed, the DoL or CO (with
    help from agency labor compliance advisors [ALCAs]) would
    determine, based on the details of the alleged or adjudicated
    violations and any mitigating factors, whether they are
    serious, repeated, willful, and/or pervasive in making a
    responsibility determination.

        Aside from the enormous associated compliance burden, the
    EO unfairly places these subjective determinations in the hands
    of COs who are incredibly risk averse and untrained in labor
    law. Although they are able to seek the advice of an ALCA, DoD
    alone for instance, has nearly 24,000 contracting officers
    (COs) that enter into contracts worth billions of dollars
    annually, with only one DoD ALCA and a handful of
    representatives. Common sense indicates that the small-dollar
    contracts that SBs compete for as primes would at the bottom of
    the list of priorities for ALCAs, leaving the onus on COs to
    assess and interpret actual and alleged violations and a range
    of mitigating factors, and leaving scarce resources for the
    government to engage with small business to develop and
    implement labor compliance plans. This aligns with industry's
    long-stated contention that this EO is punitive-based, with the
    intent of blacklisting businesses, rather than the supposed
    intent of ``helping companies improve.''

        Small businesses are not only concerned with the collective
    impacts of the EOs on their bottom-line, but also the
    detrimental impacts they will have on government customers and
    their ability to carry out missions, the most consequential of
    which is national security. In recent years, the Department of
    Defense (DoD), Federal Government's biggest spender by a
    substantial margin, has placed a renewed emphasis on innovation
    and acquisition reform, led by top officials in the Office of
    the Secretary of Defense and the Services. These efforts have
    been initiated as a result of the current state of the
    acquisition process, which is unable to keep up with the rapid
    pace of technological innovation and security threats, and the
    reality that innovation is driven by private sector R&D,
    requiring DoD to access nontraditional and commercial suppliers
    that have historically been deterred from the government
    marketplace by procurement policies, to stay at the forefront
    of technological innovation.

        Unfortunately, the EOs undermine these initiatives. The
    resultant accumulation of government-unique requirements and
    their compliance costs will continue to deter new suppliers
    from entering the government marketplace and drive exits by
    firms already selling to the government, restricting
    competition. Further, Fair Pay and Safe Workplaces, alone,
    figures to drive a substantial increase in bid protests,
    slowing down the acquisition process even more.

        In closing, several of the recent EOs have, through flawed
    processes, installed burdensome, unnecessary, inefficient, and
    in many cases duplicative and overlapping regulatory regimes
    that have the cumulative effect of dramatically increasing the
    cost of doing businesses with the federal government. Over
    time, these will decrease efficiency and economy in federal
    procurement, while undermining small business growth and
    development, and limiting the Federal Government's access to
    innovative products and services to fulfill their needs, in
    direct contradiction of ongoing initiatives.

        Thank you again for the opportunity to appear before you
    this morning and I am happy to answer any questions you may
    have.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                          Opening Statement of

                         Chairman Richard Hanna

                   House Committee on Small Business

             Subcommittee on Contracting and the Workforce

    Hearing: ``The Cumulative Burden of President Obama's Executive
                     Actions on Small Contractors''

                           September 13, 2016

        Thank you, Chairman Hardy. I, too, would like to start by
    thanking the witnesses for taking time from their busy
    schedules to be with us. We really do appreciate it.

        Most of the issues we will examine today are not new. As
    Chairman Hardy mentioned in his opening statement, the Small
    Business Committee has done extensive work over the past two
    years to improve how small businesses work with the federal
    government. During the 114th Congress, our Committee has
    reported nearly 40 pieces of bipartisan legislation aimed at
    making it easier for small firms to do business with the
    federal government. Nearly 20 of these bills became law as part
    of last year's National Defense Authorization--and nearly 20
    more are still in play in this year's NDAA.

        The bipartisan work we have done here in the Small Business
    Committee is stark contrast to what President Obama has done
    during his time in office. Since 2009, the President has issued
    15 Executive Orders and presidential memoranda that
    specifically relate to government contracting. While these
    mandates may be well-intentioned, too often the cost
    significantly outweigh the benefits. In fact, it is estimated
    that compliance with unique government regulations costs almost
    30 cents of every contract dollar--a figure sure to increase as
    more of these executive actions are fully implemented.

        To make matters worse, we have seen time and time again
    that the proposed regulations stemming from these executive
    actions consistently fail to comply with the Regulatory
    Flexibility Act, or RFA. At its most basic, the RFA is a
    simple, yet critical law that mandates that federal agencies
    give small businesses a seat at the table when they are
    developing both proposed and final rules.

        In recent years, agencies' inability to comply with the RFA
    has created further difficulties for small businesses. For
    example, agencies frequently publish regulations that have
    significant flaws in their economic impact analyses or lack a
    discussion of significant alternatives that reduce impacts on
    small businesses.

        Agencies also certify rules as not having a significant
    economic impact on a substantial number of small businesses but
    fail to provide a factual basis for this conclusion as the law
    requires. Sometimes agencies do not conduct the kind of
    affirmative outreach that is required under the RFA and
    accordingly limit the opportunity for small businesses to
    provide adequate input in the rulemaking process.
    Unfortunately, the regulations that have come out of these
    presidential actions are no different in their lack of small
    business input. These issues cannot persist or we will continue
    to see innovative small firms exiting the federal marketplace,
    leaving taxpayers on the hook for more expensive products
    purchased by our federal agencies.

        We have an excellent panel with us today and I look forward
    to hearing their testimony. Again, thank you all for being
    here.