[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
ATTENTION NEEDED: MISMANAGEMENT AT THE SBA - THE ADMINISTRATOR RESPONDS
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HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JANUARY 7, 2016
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-035
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
MIKE BOST, Illinois
CRESENT HARDY, Nevada
NYDIA VELAZQUEZ, New York, Ranking Member
YVETTE CLARK, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
MARK TAKAI, Hawaii
Kevin Fitzpatrick, Staff Director
Emily Murphy, Deputy Staff Director for Policy
Jan Oliver, Deputy Staff Director for Operation
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 2
WITNESS
The Honorable Maria Contreras-Sweet, Administrator, United States
Small Business Administration, Washington, DC.................. 3
APPENDIX
Prepared Statement:
The Honorable Maria Contreras-Sweet, Administrator, United
States Small Business Administration, Washington, DC....... 35
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
ATTENTION NEEDED: MISMANAGEMENT AT THE SBA - THE ADMINISTRATOR RESPONDS
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THURSDAY, JANUARY 7, 2016
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, Luetkemeyer, Hanna,
Huelskamp, Gibson, Brat, Radewagen, Knight, Curbelo, Bost,
Hardy, Kelly, Velazquez, Hahn, Payne, Meng, Lawrence, Clarke,
Adams, and Moulton.
Chairman CHABOT. Good morning. I call this hearing to
order. I want to welcome back Small Business Administrator,
Maria Contreras-Sweet.
I think everyone here wants the same thing, and that is to
serve America's small businesses the best we can. Those of us
up here on the dais have, I think, an advantage. Our
constituents let us know how we are doing all the time, and on
an ongoing basis.
As the head of an agency, I sometimes worry that too often
you mostly hear from your own folks and from other Washington
bureaucrats. That is the only explanation for why the 69 GAO
identified concerns and problems have not been addressed.
Yesterday was not the first time that these issues have
been raised. Yesterday we heard some pretty serious concerns,
both by members of this Committee and from our GAO witness who
testified here yesterday about the management of the SBA.
Administrator Contreras-Sweet, since you were not with us
yesterday, I will recap those briefly with you, although I am
sure your staff has probably already given you a rundown.
I told the GAO witness yesterday that this kind of reminds
me of being a parent. If your teenager's room is a mess and
they have stuff thrown all over the place, let's say there are
70 items thrown on the floor, 69 to be exact, and they only
pick up seven of those items, you do not look at the 62
remaining on the floor and raise their allowance for having
made some progress.
The ongoing problems at the SBA as GAO identified span the
entire breadth of the agency, from information technology and
security, to staff management issues, from disaster response,
to fraud in your lending and contracting programs. It is a safe
bet that small businesses in our districts on both sides of the
aisle are paying the price for your agency's failures.
What we have here is a failure of confidence in the SBA,
and unfortunately, for good reason. Before this hearing is
over, I hope to hear a commitment from you to resolve as many
of these problems as possible by June 30, and I mean this year.
I do appreciate how accessible you have always been to
members of this Committee, and I request that your office start
providing monthly updates to our staff documenting your
progress.
If I were you, I would start with these IT and
cybersecurity deficiencies. That is what worries me the most,
and I will tell you why. We have seen the IRS hit, the State
Department, OPM, and even the White House hacked. Small
businesses trust the SBA, your agency, with their information.
Oftentimes, very sensitive information, that they do not want a
rival business or their neighbors or the Chinese Government to
have access to. Yesterday, GAO told us this information is not
adequately secured, and that cannot continue.
I want to make this simple. We are not asking you to defend
the SBA. We are asking you to do your best to fix it. I would
now yield to the ranking member for her opening statement.
Ms. VELAZQUEZ. Thank you, Mr. Chairman, and thank you for
holding this important hearing. As the only agency in the
federal government charged specifically with helping small
businesses grow and succeed, the Small Business Administration
is critical to our nation's overall economic health. All of its
functions serve to strengthen and preserve the foundation of
our economy.
For small businesses to fully reap the benefit from SBA's
programs, it is important for the agency to operate efficiently
and effectively, investing taxpayers' dollars wisely. As such,
one of the most important roles of this committee is conducting
vigorous oversight of the SBA and its activities, so we know
the agency is serving small businesses well, while spending
taxpayers' dollars wisely.
Yesterday, the committee heard from the Government
Accountability Office as it described a management report
requested by myself and former Chairman Graves. GAO testified
about a wide range of frankly, very troubling management
challenges, many of which have persisted for years.
I do fully recognize that many of these problems took root
before Administrator Contreras-Sweet's tenure, and furthermore,
she has demonstrated a commitment to addressing them.
With that said, there is still much work that needs to be
accomplished in terms of addressing GAO's recommendations. With
only 15 out of the 63 recommendations closed, there needs to be
more attention, not just to check the box, but to truly improve
the agency.
I understand the frequent changes in political leadership
create real difficulties for management. That is not an excuse
but rather a reality of the environment SBA functions in. Yet,
here you are, Ms. Contreras-Sweet, in the hot seat. You are the
administrator, and you will be asked to respond for 64
recommendations that have been made not only under your
leadership but the previous administration as well. I feel
optimistic about your commitment to tackle those issues, and we
are here to discuss how you intend to execute those
recommendations by GAO.
First and foremost, the agency's complex organizational
structure may be impeding its ability to perform its mission
effectively. Yesterday, it was raised time and time again that
SBA operates as a silo, resulting in inefficiencies and
duplication.
There also continue to be significant information
technology problems as well. The agency has yet to implement
more than 30 recommendations made by the Office of the
Inspector General related to IT security. This raises concerns
about whether SBA's data and system are potentially vulnerable
to breaches.
The SBA's standard operating procedures are also in need of
updating. By the agency's own admission, 74 of these provisions
require revision, and 31 should be cancelled, while another
nine still need to be stripped. Yet, we have not heard a
meaningful time frame as to when all of this will be
accomplished.
It is my hope that today the administrator can clarify
where the agency stands on these procedural notices.
These are just some of the long-standing issues raised in
GAO's analysis. There is always room for improvement. I was
heartened to hear that SBA has accepted most of GAO's
recommendations, and I look forward to learning how the
administrator is instituting change.
I recognize that as a political appointee, she is in the
difficult position of often having to answer for the work of
her predecessors, as well as the career officials that often
drive many key agency decisions.
With that, I would like to thank the administrator for
being here. I know your schedule is busy. As always, we
appreciate your participation. I thank the chairman, and I
yield back.
Chairman CHABOT. Thank you very much. The gentlelady yields
back. If Committee members have opening statements, I would ask
that they be submitted for the record.
A brief explanation of our time rules around here, which I
know you are already familiar with. We basically operate under
the 5 minute rule. You will be given 5 minutes to testify. If
you need a little more than that, we will give you a little
leeway since we only have one witness, as we did yesterday,
although he kept it, I think, within about 3 minutes. We are
not asking that you do that.
We will restrain ourselves by the same rules, 5 minutes,
and we will go back and forth between Republicans and
Democrats, of course.
We all know who you are. I am not going to give a long
explanation of who the Administrator is, but she is the 24th
Administrator of the United States Small Business
Administration, Maria Contreras-Sweet, and we welcome you here
this morning, and you are recognized for 5 minutes or perhaps
for a little bit longer if you need it. Thank you.
STATEMENT OF MARIA CONTRERAS-SWEET, ADMINISTRATOR, SMALL
BUSINESS ADMINISTRATION
Ms. CONTRERAS-SWEET. Let me just thank you and Ranking
Member Velazquez, and all the members of the Committee for
engaging in the work and giving me this opportunity to testify
before you today. It is nice to see you.
I would like to open just quickly with the review of fiscal
year 2015. It was one of the most successful years in our
agency's history. SBA reached historic levels for small
business lending under our flagship 7(a) loan guarantee
program, extending a whopping $23.5 billion in gross approvals.
This represents a 22 percent increase in the number of loan
approvals prior last year, a 23 percent increase in their
dollar value compared to 2014. These gains matter because FDIC
data shows that conventional small business lending has only
returned to 84 percent of pre-recessionary levels.
Filling those gaps in the marketplace is the very purpose
for which SBA was created. We made notable progress increasing
7(a) loans to businesses with the greatest difficulty accessing
capital, which is an important emphasis.
The dollar value of our loans was up year over year 22
percent to women, 23 percent to minorities, and 103 percent to
veterans. Our number of loan approvals was up by 29 percent. I
just said that.
These successes would not have been possible if not for the
swift work of your Committee. Due to our record breaking year,
SBA ran up against our statutory lending cap this August, 60
days before the end of our fiscal year. At the urging of our
stakeholders, our mutual stakeholders, in less than a week, I
want to repeat that, in less than a week, you passed a $4.5
billion increase in our 7(a) lending authority, and ushered its
passage onto the House floor.
Your leadership allowed entrepreneurs across the country to
continue to access the requisite capital they need to start,
repair, and grow their businesses.
SBA also shattered our record for small business investment
under our SBIC program. We grew our portfolio by 10 percent to
a record $25 billion. In fiscal year 2016, the 7(a), the 504,
and the SBIC program share an important common thread, and I
know you will appreciate this, all these programs are expected
to operate at zero subsidy this fiscal year.
Thanks to this Committee for working across the aisle to
include an omnibus bill to permanently reinstate of 504
refinancing authority and an increase in SBIC's Family of
Funds' limit. Both of these policy changes will inject much
needed capital into our small business ecosystem.
Another priority for the SBA is Federal contracting. The
U.S. Government awarded an all time high of 24.99 percent, well
over our mandated, congressional mandate, of 23 percent, of
Government contracts to small businesses, supporting about
550,000 American jobs.
We reached historic procurement levels for small
disadvantaged businesses and firms owned by women and veterans.
To summarize, SBA achieved a record year in small business
lending, a record year in investment, and a record year in
contracting, with no taxpayer subsidy needed to maintain this
momentum.
This is the context in which our hearing takes place today.
Let me take this opportunity to acknowledge the Government
Accountability Office for helping to confirm the areas of
shared concern and for offering constructive suggestions to
address them.
For my first days in office, I have prioritized the need to
modernize SBA operations enterprise-wide, to respond to the
technological, the demographic, and the globalization changes
that are transforming our small business economy.
To that end, I agree with many of the recommendations and
appreciate the opportunity to address them, to fully bring, Mr.
Chairman, the SBA into the 21st century.
My corporate, my Government, and my community banking
experiences will be brought to bear to make sure that you feel
comfortable and the American people feel confidence in our
systems, whether it be the enterprise risk management board
that I have established, and all the other systems I have put
in place.
We have implemented a number of mitigation measures that I
will get into later. My background, starting three businesses,
also impressed upon me the importance of optimizing ROI, return
on investment, when putting precious taxpayer dollars to use.
We have to take every measure to use those dollars wisely,
based on the best available data. In July of 2014, I
established an impact evaluation working group charged with
initiating and refining program evaluations for entrepreneurial
development programs.
I have held numerous meetings with key resource partners,
our SBDCs, SCORE, vets and so on, stressing the importance of
collecting meaningful metrics. We are currently performing in-
depth program evaluations across the agency. This includes the
most comprehensive assessment of the SBIC program in our
history, in collaboration with--yes, I wanted to make sure you
had confidence, so we went to the Library of Congress to do
this work. Our report is due out this spring.
We have also made significant strides in addressing the
information technology challenges included in the GAO report.
In fact, we are well underway of a major upgrade of our IT
systems. It starts with a comprehensive network infrastructure
modernization to give our systems greater capacity,
transparency, and reliability. We are in the final stages now
of moving our entire email system into the Cloud for more
security, reliability, and capacity. We are investing in mobile
technology, recognizing that our SBA field staff must go beyond
the walls of the Federal offices and go to consumers and to
small businesses where they are.
We also launched projects to modernize our lending and
contracting systems to re-engineer our disaster credit
management system, something I care deeply about.
This entire modernization agenda compliments our work to
update our lending partner platforms, the outward facing part
of SBA, by bringing advances such as automation, digital
signatures. Yes, I said e-signatures, and online matchmaking to
the entrepreneurs that we serve.
These are time saving and cost saving technology
enhancements that have encouraged community bankers to come
back to SBA in many instances or to expand their lending.
We have taken important steps on our human capital
management efforts. I am proud to work along side the thousands
of hard working dedicated public servants at SBA, and our
resource partners. I am committed to ensuring that the agency
has the talent required to effectively service America's
entrepreneurs.
We are currently crafting a comprehensive work plan which
will include both a skills gap assessment and a gap closure
plan. We have taken steps to address the SBA's aging workforce,
not just unique to SBA, but across the Federal Government a
challenge.
At the launch of the VERA VSIP program, I understood that
we wanted to offer employees an opportunity to make decisions,
to create openings so we could begin to fill those competency
gaps.
SBA is organizing our Presidential management fellow's
program to increase our impact. We are working with our
veterans. We are attracting more Peace Corps to our programs,
and I know you are going to love this, we installed the first
ever chief learning officer at SBA.
I have been on the job for 20 months, and I am proud of the
progress at this time, but the truth is that I could not have
done this without your commitment, and I am grateful for your
support. As a result of your leadership and the daily efforts
of our dedicated staff, I inherited an agency highly leveraged,
operating effectively, and focused on advancing and fulfilling
our statutory mission.
Again, the proof of the pudding is in the tasting, in the
eating, and I think the record of our historic achievements
speak to that. There is always room to improve, and that is
what we are here to talk about today. Yes, I am committed to
working with you to improve the services and give small
businesses the agency that they deserve and that taxpayers
expect. Thank you.
Chairman CHABOT. Thank you very much. I will yield to
myself 5 minutes to begin the questioning. Madam Administrator,
as I mentioned in my opening statement, the GAO witness
yesterday testified that SBA's IT security leaves the sensitive
information of small businesses and their owners vulnerable to
hackers, to theft, to fraud. Yet, the SBA has failed to
implement more than 30 of the Office of the Inspector General's
recommendations related to IT security, leaving small
businesses and individuals exposed.
What is being done to address these problems and when will
it be completed?
Ms. CONTRERAS-SWEET. I think that is a fair question,
Chairman. I honestly do. I think technology drives increasingly
more and more of our lives, from our microwave to our
smartphones. It has to be an essential part of our strategy at
SBA.
Just as an example, to show you the progress that I have
made since I arrived--the last time I was here, you asked me
about the LMAS system, the loan management accounting system.
That is the main body with which we interact with our lending
partners, an important function and purpose. It had been there
for a while working this way through. I committed to you that I
would get that done, and we done.
To say that we are now off the mainframe and that we have
an interoperable, a compatible system with today's technology
where we can unplug and play systems, is a wonderful
achievement that even many Fortune companies do not achieve,
and many in Government. I am proud that SBA has already
achieved that.
Chairman CHABOT. Let me ask you this then, and my time is
limited, as I am sure you know. I would like your commitment to
resolving the outstanding GAO recommendations by June 30, and
having our staff briefed on that progress on a monthly basis.
Do I have that commitment?
Ms. CONTRERAS-SWEET. I commit to you to reporting to you on
a regular basis and will work with Godspeed to make your
deadline.
Chairman CHABOT. We are shooting for the 30th, there are 30
things, let's get it done.
Ms. CONTRERAS-SWEET. Mr. Chairman, I was able to touch the
Pope while he was here, and I am hoping it infused me with the
ability to fulfill that----
Chairman CHABOT. You got closer than I did. Let me move on
to another question. When the GAO interviewed your district
personnel so they could do their review, your folks insisted on
having a lawyer present. Now, when this came up yesterday when
the GAO was here, Trent Kelly, a member of this Committee who
happens to be a former prosecutor and district attorney
himself, made, I think, an important observation. He said that
in his experience, when people lawyer up, as you folks did, it
often means they have something to hide.
Who made the decision to have a lawyer present, the need to
do that when the GAO, an arm of Congress, was just performing
its duty at the request of this body and at the request of the
former chairman and the ranking member? This was a bipartisan
request.
Ms. CONTRERAS-SWEET. You know, again, I think that is a
fair comment. I did not know that was happening. I was not
briefed. I do not know. That is one thing I want to say.
The second thing is if you have ever met our district
staff, I have to tell you, nothing intimidates these people. I
go out and meet with them. We have lawyers in the room. They
still tell me all the problems and challenges and the wonderful
things they are doing.
Chairman CHABOT. With all due respect, should you not know
who in your agency gave an order like this that interfered with
the GAO's effort to conduct an investigation? Again, the GAO is
a branch--we all get a paycheck. The taxpayers pay for us. We
should not have to lawyer up if we are talking.
Ms. CONTRERAS-SWEET. Mr. Chairman, you know, if I may just
respond, what I really wanted to say I have no idea if it was
the reverse, the reciprocal, and I will look into it, and I
will get back to you. It could have been that some of the
employees felt intimidated by an investigation and maybe wanted
somebody in their presence.
I understand--what I did get briefed on is that the I.G.,
Mr. Shear, in particular, said--maybe he had independent
ability to follow up through emails and was able to get the
information, and clearly by this report, you can see that
nothing was being hidden.
Chairman CHABOT. It should not take until June 30 to find
out who made that decision, so please get back to us.
Ms. CONTRERAS-SWEET. Fair enough.
Chairman CHABOT. I have limited time. I only have time for
one more question. The GAO review of the SBA stated, and I
quote ``In the September 2015 report, we found that the SBA has
not resolved many of its long-standing management challenges
due to lack of sustained priority attention over time.''
GAO went on to say ``This raises questions about the SBA's
sustained commitment to addressing management challenges.'' In
other words, dealing with the SBA's shortcomings and
deficiencies and, in many, cases failures, apparently just is
not a priority to some of your folks. Well, it is a priority to
this Committee. Why should we not question the SBA's sustained
commitment to improving itself, and you have indicated that you
are willing to do that, I appreciate that, we are willing to
work with you, so it can serve the needs of America's small
businesses all across this country?
Ms. CONTRERAS-SWEET. Well, let me just say with great
lament, when I read the report that these issues had begun in
the 1990s and some even as far back to the 1980s, so I
appreciate that I have been here for about 20 months. I think
that you will see that the progress that we have made is quite
remarkable, but as I mentioned to you, I am committed to
keeping this momentum going, and with the good Lord, making the
progress that your expectations meet.
I am absolutely committed to making sure that people
understand that this SBA is effective, and as I said, the
numbers prove it out. Sometimes it is not pretty, and it should
be a little prettier in terms of our documentation and our
processes.
But when you think of technology, we started a program
called LINC in this amount of time, that we were able to start
a program like Match.com--I do not know if any of you are
familiar with Match.com, but you do not have to tell me if you
are--the point is seriously that----
Chairman CHABOT. Just for the record, I know nothing about
it.
Ms. CONTRERAS-SWEET. I just want you to know that with that
system, we are now able to get data for prospective borrowers,
but this data is with the lender, 22,000 people have already
been connected in just a few short months. That is a remarkable
technological accomplishment. We are now introducing a new
platform with our lenders.
I understand there are challenges in documentation. I
commit to you working better on that. I want you to know the
work is getting done.
Chairman CHABOT. Thank you. My time has expired. Again,
just to reiterate, our number one priority is what is in the
best interest of America's small businesses. That is what this
hearing is about. Seventy percent of the new jobs created
across America is small businesses doing that. We need to do
our best for them.
I will now recognize the ranking member for 5 minutes.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. I would like to
enter into the record as a matter of clarification the fact
that in SOP 40-002, it is a requirement for legal counsel to be
present when district staff is being interviewed, so here it
is. It is part of the SOP.
I would like to ask the administrator--actually, I would
like to recommend that you start with 40-002 to remove barriers
to GAO access. You could start by updating this SOP, so that it
reflects there is no intention to prevent staff from speaking
to GAO or GAO gaining access to documents of the Small Business
Administration.
With that said, in the report, Administrator Contreras-
Sweet, GAO found that SBA still has not implemented disaster
program reforms, which this committee authored when I was chair
in 2008. I asked GAO the same question yesterday, but I would
like to hear your answer as well.
What are the main reasons why SBA has not established the
Immediate Disaster Assistance Program?
Ms. CONTRERAS-SWEET. You and I talked about that off line,
and I heard you loud and clear, and I did a little bit of
homework on that. Number one, I learned that we actually had
promulgated an interim rule and we put it out, so we put the
reg out. Then when we were recruiting banks, financial
institutions--quite frankly, you and I could hold a
roundtable--what they said is that the IDAP, the immediate
disaster assistance program----
Ms. VELAZQUEZ. Because my time is limited, I know you are
talking to lenders. What is the timeline for doing so?
Ms. CONTRERAS-SWEET. I am just saying that we already have
an interim rule for IDAP that we can use and deploy, start
using that. What we are trying to do now is recruit banks. When
you ask a bank to amortize a $25,000 loan, a $10,000 loan over
10 years, it is something that is not attractive to them,
especially because it has a low interest cap. Somehow, we have
to make it more attractive.
In the spirit of what you want, I wanted to assure you that
the Office of Disaster does provide loans, and we already did a
non-collateralized $25,000 loan that is now being processed in
7 days.
Ms. VELAZQUEZ. As you know, we have been dealing with the
issue of Sandy in New York. Many people and businesses who
qualified for those loans did not get them. We passed
legislation to reopen so businesses could reapply.
If you see some issues where you feel there has to be some
legislative fixes, we need to hear about it. Let's have that
discussion and get this program up and running, because we
cannot wait until the next natural disaster strikes and come
back here to be in the same position, asking the same
questions.
Ms. CONTRERAS-SWEET. Right. When I looked into that, I
agreed with you, and I did not want to rely on hearsay, and
that is why now I have put out a formal ANPR, a Notice of
Public Rulemaking, and that is out and available, and as soon
as we get that formal comment, we will respond back to you what
those remedies might be.
In the interim, I am also pushing forward on the EDAP and
the PDAP to make sure that all the complements that you
intended are executed in the way you imagined.
I just wanted to add, if I may, our disaster assistance, as
you know, has been something that is very, very important to
both of us, and that is why the day I was sworn in, I committed
to flying to the State of Washington to look at Oso,
Darrington, Arlington.
I went to the State of North Carolina to meet with Nikki
Haley when she was experiencing hers, and I am committed to
going to Missouri. Our team is already there. We have a dozen
employees in Missouri already examining the disaster to
determine the appropriate response.
The record shows that now, once we are given permission and
declare a disaster, we are there in 24 hours, Madam Ranking
Member.
Ms. VELAZQUEZ. Thank you. I just wanted to congratulate you
on the many successes including the 7(a) lending dollars,
contracting goals, exceeding those contracting goals. SBIC is
up to 10 percent. We could do better. That is the reason we are
here today. We need to update those SOPs because if the agency
cannot hold its resource partners accountable and there is
confusion as to how the programs are supposed to operate, that
will impede their success and businesses to be able to get the
assistance they need.
What have you done so far and what are you planning to do
to further upgrade the SOP problem? I do not want to impose
upon you to provide a report every month, but I want a
commitment that tells us you are really going to do everything
you can. You know, the next administration will be in place
pretty soon, a year and a half from now, and we need to see
what type of resources you are going to put into place. If
there is a lack of adequate resources for your agency to do the
work, we need to know so that in the next budget submission, it
is included that you need more funding.
Ms. CONTRERAS-SWEET. Thank you for that----
Chairman CHABOT. The gentlelady's time has expired. You can
answer the question, but I do want to make sure, on behalf of
the Committee, we do want a monthly update on what progress is
being made towards the deficiencies that the GAO has set out in
their review.
Ms. CONTRERAS-SWEET. I heard you, Mr. Chairman. Thank you.
Chairman CHABOT. Thank you.
Ms. CONTRERAS-SWEET. With great brevity, let me just say
for those of you who have not seen an SOP, this is a review, a
complete review and overhaul of the Department's way of
operating. Some of these are inches tall. This is an important
body of work. I want you to know that we have completed more
SOPs in the 20 months that I have been here than the prior 5
years combined. That is just to show you the momentum with
which I have taken this so seriously.
I am working hard to make up lost time, but I also want to
have it institutionalized, so that when somebody comes in, this
is work that has been harnessed and seized. To that point, we
already have over 30 more SOPs that we are interacting with and
that are pending in interaction that we think will show great
progress very soon.
Just know, I take those SOPs seriously, again, for the
institutionalization of our legacy.
Chairman CHABOT. The gentlelady's time has expired. The
gentleman from New York, Mr. Gibson, is recognized for 5
minutes.
Mr. GIBSON. Thank you, Mr. Chairman. I appreciate this
hearing. You know, with due respect, I will say right up front,
I am a little disappointed so far in the approach of the
hearing in terms of the responses. You know, the Chairman set a
tone, I think, at the outset that we really want to work
together going forward identifying all the deficiencies and the
shortcomings, but you know, in the opening set of remarks, I
certainly appreciate how you have pointed out what you did with
the resources to support small businesses. I want to state that
very clearly and sincerely.
But really the focus here is on improving what are very
disturbing findings from the GAO. Towards that end, my
colleague from New York, Mr. Hanna, leads a Subcommittee. They
did, I think, very strong work on behalf of the American people
with regard to procurement reforms. This was incorporated into
the National Defense Authorization Act in 2013. Yet, among the
findings from the GAO is there has been no action taken. The
law was very clear that action was to be taken within 6 months
of the implementation of that law.
My question to you is what explains why nothing has been
done on this score? Do you disagree with us on what was done?
If you do, it would have been nice to know that before now, but
if you agree with us, why has nothing been done?
Ms. CONTRERAS-SWEET. First of all, let me just thank you
for your service. I know you are an admirable veteran, and I
really salute the work that you have done in particularly
difficult zones in our world.
Let me just speak to if I have not shown or exhibited the
level of seriousness with which I take this work, I apologize.
Let me just say when I looked to see the momentum, because I
thought I should stress this to you, under prior
administrations, like in 2002, for example, there had been one
debarment. In 2003, one. In 2004, zero. Under my term, I have
already completed 47 of these, just to show you the momentum
with which I am approaching this work.
Please do not underestimate the commitment, this commitment
to you. I came from the State of California. I had in
California 42,000 employees to work with in one State. Do you
know here, to the ranking member's question, I have fewer than
2,000 employees.
In procurement, we have to partner, and we work very
closely with our strategic partners. If you just took the Air
Force alone, do you know that the Air Force has 22,000
captains--2,200 captains, excuse me, just captains alone.
Again, I have fewer than 2,000 employees across the agency.
Yet, we are managing a portfolio of $120 billion, the most
complex system of networks. We are procuring--we are
redirecting 23 percent of the largest procuring in the world to
small businesses successfully.
Yes, we are pushing to debar because I do not want any
fraud, waste, and abuse. I can tell you that when I started my
own personal business, I could not get certified as a woman
business. I could not confirm that I was a woman owned
business.
To me, to make sure we are doing those certifications is
important, but also more important, to make sure that people
are not getting in who do not deserve to be in the program and
are abusing the program and taking advantage of it, and taking
contracts from people who deserve them.
Our people are there fighting up against the Department of
Energy top officials, up against Department of Defense
officials. Our small business advocates, our PCRs, are in those
places where people do not like them to be because we are sharp
elbowing them to make sure every appropriate small business
opportunity goes to a small business.
Mr. GIBSON. Thank you, appreciate the passion that you
bring and the leadership to the organization. One just quick
follow up on that. As the chairman mentioned, and we are going
to be anticipating reports, monthly reports, I would hope that
in the first one, we will see an official response to the
implementation of this fiscal year 2013 National Defense
Authorization Act as it relates to the requirements we levied
upon the SBA.
I have very little time remaining. Let me just say from my
experiences leading formations, one of the things that concerns
me is the level of turnover in the SBA, so we are not going to
have time for you to respond, but also for the record, I would
like to know from your vantage point as the leader, what are
you doing to ensure continuity in terms of transition periods.
Really, two points. One is are you taking any executive
action to lessen the turnover, and then two, given those
realities, what SOPs do you have in place to ensure that when
new folks come on board, there is a good and effective
transition?
Mr. Chairman, I am sorry I am over and I yield back.
Chairman CHABOT. The gentleman's time has expired, but if
you could give a brief answer. Again, we are going to be
receiving reports, so you can go in more depth with the follow
up, but if you could make a brief response.
Ms. CONTRERAS-SWEET. Let me just say that to me one of the
most important things is to show people what their job is, to
give them clarity of purpose, and to reward them appropriately,
and to provide an environment where they are well resourced,
their scope of work is clearly defined, and they are well
resourced, as I said.
To that end, I have put in the first ever SBA chief
learning officer. I have up scaled the CLO/COE function in our
office where now I have somebody who actually has the
theoretical and the practical experience. I am holding town
halls, I am visiting every district office, to learn what the
challenges are across the country.
Let me just say across the Government, we have an aging
workforce challenge that we have to address. I have gone with
my chief of staff to try to recruit more people. We are holding
job fairs across the country. Just in the sort time I have been
there, I have hosted 10 job fairs. I have reached out to the
Peace Corps and our veterans to try to attract more skills and
competencies of discipline, of entrepreneurship, and
perseverance. I think it is beginning to pay off, sir.
Chairman CHABOT. Thank you. The gentleman's time has
expired. The gentlelady from California, Ms. Hahn, is
recognized for 5 minutes.
Ms. HAHN. Thank you, Mr. Chairman, ranking member. A very
interesting hearing, and I really want to thank Administrator
Maria Contreras-Sweet for being here, and just sitting here
listening to you, your answers in the first couple of
questions, has really restored my passion for small businesses
and what this agency is doing.
I had an opportunity to work with her when she was
secretary of California's Business Transportation and Housing
Agency. As Administrator, what I really appreciated is your
district staff, Victor Parker, and you both have come to my
district, and we have held roundtables, and we have toured
small businesses together.
The chairman's opening comment about sometimes all we hear
is from our own constituents about some of their problems, I
think you have actually heard the problems yourself because you
have been on the ground, you have been in our small businesses.
While certainly this hearing is about the recommendations
that we are trying to get responded to and reformed in the
administration, it is clear that your record year of lending to
small businesses, investing and contracting is really what I
care about, and I know maybe the priorities on this Committee
may be a little bit different, but that is my priority. That is
what I always heard, access to capital and Federal contracting,
and you are certainly addressing those previous weaknesses in
the agency.
It is clear that SBA has been around since 1953, and many
of these issues that were pointed out in the GAO report have
existed long before you and long before this administration.
Whether or not you can address every single one of them by
June, I do not know. I have no doubt that you are going to try,
and that is important to you.
One of the issues in the report that was important to me,
and I understand it is also a priority for you, is the women
owned small business program. This is, of course, a program
that allows women owned small businesses to compete for Federal
contracts.
Unfortunately, one of the things we found out was there
were problems verifying the eligibility of the applicants
resulting in contracts being awarded to men. Yikes. I know you
are working on this. Can you tell us where you are in the
process of making sure that those contracts indeed are being
awarded to the women owned businesses?
Ms. CONTRERAS-SWEET. Thank you. As you know, when I
arrived, you mandated that we achieve a 5 percent goal with
women owned small businesses, and to my great lament, we had
not reached a 5 percent goal for contracting with women. Women
are 50 percent of the population. I think it should be
something that should be achievable.
We came to you again, and I was delighted that Congress has
given us a brand new tool, sole source authority, where we have
now the ability to begin to certify businesses, so we can take
out any fraud, waste, and abuse. I just published to get the
proper feedback, to make sure we are following the right
procedures and processes, and not just implementing something
nilly-willy.
I am pleased to tell you that already we have that out and
we are already beginning to get comments, and we are going to
formalize them and create a process for certification that will
assure that people understand what is a woman owned small
business, that the standard is set, and that we have people
properly trained to be able to certify them.
Ms. HAHN. Thank you. I appreciate that. Certainly, in L.A.
County, you know, we have more women owned businesses than any
other county in the country. We are very proud of that, and for
me, that is a priority in this Committee, that clearly we are
supporting the women owned and minority owned businesses, in my
county, for sure, so I appreciate your work on that one concern
and recommendation.
Ms. CONTRERAS-SWEET. You have been a stalwart on behalf of
women, not only for the County of Los Angeles, but for your
country. Thank you for your leadership.
Ms. HAHN. Thank you. I yield back.
Chairman CHABOT. The gentlelady yields back. The gentleman
from Virginia, Mr. Brat, is recognized for 5 minutes.
Mr. BRAT. Thank you, Mr. Chairman. I will yield back my
time.
Chairman CHABOT. The gentlelady from American Samoa, who is
the chairman of the Subcommittee on Health and Technology, Ms.
Radewagen, is recognized for 5 minutes.
Ms. RADEWAGEN. Thank you, Mr. Chairman, and ranking member.
Madam Administrator, considering the recent new offices built
that may or may not provide redundant roles as other offices in
close proximity, was there any thought given to the U.S.
territories? Can you explain your rationale?
Ms. CONTRERAS-SWEET. I am sorry. The rationale for what?
Excuse me. I am sorry.
Ms. RADEWAGEN. Let me give you the question again. The U.S.
territories, the question was considering the recent new
offices built that may or may not provide redundant roles as
other offices in close proximity, was there any thought given
to the U.S. territories.
Ms. CONTRERAS-SWEET. I heard the question, I was trying to
understand. Are you saying we are building offices? I was just
trying to clarify.
Ms. RADEWAGEN. I think so.
Ms. CONTRERAS-SWEET. Because I am not aware that we are
building an office there. I am trying to understand the context
of the question. Let me just say that I would be delighted to
sit down with you to understand if you are not getting the
service levels that you deserve and you expect, to come back to
you with a plan.
Ms. RADEWAGEN. Thank you, Madam Administrator. Next, what
functions are performed by personnel in the agency's regional
offices?
Ms. CONTRERAS-SWEET. What are the personnel functions?
Ms. RADEWAGEN. Yes, what are the functions performed by the
personnel.
Ms. CONTRERAS-SWEET. I see.
Ms. RADEWAGEN. In the regional offices.
Ms. CONTRERAS-SWEET. Thank you. What we have at
headquarters is policy offices, so you will have, for example,
the GCBD, the Office of General Contracting and Business
Development. You will have an Office of Capital Access. We have
the various offices that operate the various programs, staff,
and line functions.
In the district offices where the magic all comes together,
there in the district office you will have a lending relations
specialist. You will have a BOS, business opportunity
specialist, working along side an EDSS, educational development
service specialist. All these people work together to create a
sense of community, to provide the full complement of services
that our resource partners need and entrepreneurs need, and our
lending partners and local governments.
I will give you an example. We have a challenge today where
while we can be a program provider, we also want to be a voice
for small business. One of the challenges we found in local
communities is they are the ones that license small business
formation, and in many instances, capital formation.
We launched a program called Start Up in a Day. Start Up in
a Day is where we go into the city to make sure they can put on
online responses so that small businesses can start their
business in a day without having to go through a labyrinth of
regulation.
Ms. RADEWAGEN. Thank you.
Ms. CONTRERAS-SWEET. They execute programs such as that.
Ms. RADEWAGEN. Have you examined whether those functions
could be performed by other personnel either at headquarters or
in the district offices, and thereby provide additional full-
time equivalent personnel for functions such as an increase in
the number of procurement center representatives?
Ms. CONTRERAS-SWEET. Honestly, having been an entrepreneur
and a community banker, I have thought about that, and it was a
tough call for me. I could convene and have everybody centered
and headquartered in Washington, D.C. and not connected to
community, but I decided that it was more important to be
embedded in the community and a part of the community, and
understand what those nuances in each neighborhood. I think the
numbers prove that is working well.
Ms. RADEWAGEN. Thank you. You do not have a chief
information officer, a position I presume that you consider
critical to the operation of the agency. Where are you in the
process of finding a permanent chief information officer? I
appreciate that you have a chief learning officer.
Ms. CONTRERAS-SWEET. The chief learning officer is more of
a human resource function, I should say. What I did is I went
to Silicon Valley, I went out to California, I have gone to the
East Coast, to try to find a really thoughtful, successful
person who knows how to procure and to execute.
Well, I think that I have some talents. I must say I am not
an expert in technology. I really wanted to make sure that I
had the top level of advice, to make sure that I was filling
the position appropriately. I have a strong person who has been
a dedicated employee of SBA as the acting, and I have now put
in what I call a chief design officer--digital officer, excuse
me, that is working with us to fully complement that team and
fill it in.
We are getting candidates. We are going to the right places
to find the right people. It is tough Government-wide to
attract top technology talent because of the salary structure
and compensation in Government compared to the private sector.
I am determined, and I think we are going to be successful
to do it.
Ms. RADEWAGEN. I think you do need a chief information
officer.
Ms. CONTRERAS-SWEET. Agreed.
Ms. RADEWAGEN. Thank you very much.
Ms. CONTRERAS-SWEET. Thank you. Agreed.
Ms. RADEWAGEN. I yield back, Mr. Chairman.
Chairman CHABOT. Thank you very much. I would just note
that the gentlelady is absolutely correct. In fact, by statute
it is required to have a CIO. We urge you to get that done,
please.
Ms. CONTRERAS-SWEET. Yes.
Chairman CHABOT. We will now move to the gentlelady from
New York, Ms. Meng, who is the ranking member of the
Agriculture, Energy and Trade Subcommittee.
Ms. HAHN. You skipped over Ms. Lawrence.
Chairman CHABOT. Sorry about that. I was given the wrong
card. Ms. Lawrence? Did you get here when we started?
Ms. LAWRENCE. Yes.
Chairman CHABOT. Go right ahead, you have 5 minutes.
Ms. LAWRENCE. Thank you so much. I want to thank the chair
and our ranking member. I want to say, Madam Administrator,
your responses to the questions have been--I sit on Oversight.
I am used to speaking to our Department heads and leaders in
our Government.
It is refreshing to have an Administrator who first of all
shows commitment and enthusiasm about your responsibility, but
you have been able to answer with a proactive response to these
questions and concerns. I want you to know that is refreshing
and I appreciate it.
In addition to that, it is important that we do have
reviews of Departments. The fact that the GAO has identified
areas that we can improve, we as a Government need to look at
those areas, but our commitment and our focus should be on how
do we move forward. With that, I want to say I am very
encouraged by your leadership.
I wanted to follow up again on something I am very
passionate about that I share with my colleague, Congresswoman
Hahn, and that is about the women and minority owned
businesses. For the record, the women owned businesses grew by
more than 25 percent and minority owned grew by 38 percent
between 2007 and 2012.
If you want to say how did we grow our economy, it was on
the women owned and minority owned businesses in America. We
should be very committed and focused on that area.
The majority of the women owned businesses that have opened
has been in health care and social assistance. How is the SBA
encouraging and promoting women and minorities to open
businesses in technology, manufacturing, and the engineering
industry?
Ms. CONTRERAS-SWEET. That is a very, very important
question because we have to make sure we are moving forward in
terms of the skills that the American workforce really needs. I
appreciate where you are going.
Let me just give you two broad answers. One is that just to
make sure that we are getting more people who traditionally
have not been given access to capital, we have taken some very
aggressive steps. We had zeroed out fees on loans under
$150,000. That is an important thing, just so that the cost
structure is better for the borrower.
Second, I have recruited more and more outlets, credit
unions. We had not really engaged credit unions to the extent
that I think they can be engaged. They are non-profit. They are
not paying taxes. They willingly agree to enter into a
partnership with SBA in an unprecedented way, so I am pleased.
Instead of having people knock on the door of a bank and
another bank and another bank, what I wanted to do was put up
this program that I call ``LINC,'' it is where again a
prospective borrower answers some simple questions and then
they are connected to financial institutions.
As I referenced earlier, over 22,000 people have already
made matches. In fact, the last time I was in this room, there
was a woman who was sitting in this audience who said as a
result of LINC, she was able to take a very usurious rate loan
and make it a more attractive loan, and as a result, increased
her cash flow, her EBIT, and is now growing. Those are the
kinds of stories I get across the country.
The second point about making certain we are getting people
into tech, in the STEM fields, which you allude to, we have
launched a program that we call ``InnovateHER.'' When I say
``program,'' it is an outreach initiative.
What we wanted to do is to say to women who we do not see
in Silicon Valley and doing the scale ups at the same rate--
``InnovateHER'' is spelled h-e-r, the last three letters. It is
a national effort to reach out to women to say hack, disrupt,
invent, change industries, you, too, can be in cybersecurity,
you, too, can be in precision medicine, you, too, can be in
aeroponics.
We need to get women in the non-traditional fields, so this
effort of rolling this out is getting women engaged. We had
last year 100 various competitions in women engaging, and
beginning to disrupt industries that they belonged to.
I am proud of that progress, but again, we will continue to
do it, and we invite you to come in and participate this
Women's History Month in March where we will be convening the
winners of those competitions.
Ms. LAWRENCE. Thank you so much. Before my time rolls out,
I also wanted to comment on--you have addressed extremely well
how you are putting in place standard operating plans, and how
you are addressing that. I want to make sure that we are
supporting you, giving you the tools that you need. You
complimented us a couple of times for the action that we have
take.
It is not so much just getting a report from you, but also
when you identify there are areas that the Government could
support the Small Business Administration, that we are getting
those on a regular basis, too. Thank you.
Ms. CONTRERAS-SWEET. Thank you.
Chairman CHABOT. The gentlelady's time has expired, but you
can answer the question.
Ms. CONTRERAS-SWEET. Just as I stated earlier, we have
closed 14 SOPs after not having seen anything closed, more than
in the prior 4 years combined, as I said. We have an additional
41 pending and working collaboratively with the GAO, so the
momentum is strong, and I do commit to you that we will double
what we did last year. Thank you.
Chairman CHABOT. Thank you. The gentlelady's time has
expired. The gentleman from California, Mr. Knight, is
recognized for 5 minutes.
Mr. KNIGHT. Thank you, Mr. Chairman. Madam Administrator, I
have just a couple of questions. One of them is on the line of
the CIO, and I know you have been there for 20 months. This is
a critical position. I understand that someone is overseeing
this position as an assistant.
Would we believe that person would have the same
responsibilities as a CIO would, would they respond to your
expectations? As I understand it, responds to the COO and not
to you. Would that continue to be when the CIO is hired at some
future date, would they still continue to respond to the COO or
would they come to you?
Ms. CONTRERAS-SWEET. That is a fair question. Let me just
say that in the structure, the organizational structure, as we
have it, the operations--we have a deputy administrator who is
sort of, if you will, I do not want to use the term, you could
say the chief operating officer. The bowels of the
organization, the functions that run and rev up the engine and
are torqued all report into the deputy administrator. That is
generally the way the SBA has operated.
This person reports in through that function, and it is
working. This person has been hugely successful. I just had him
present at an entire town hall. I want to tell you, few people
in our agency enjoy these when we put them on, but we think
they are important ways to distribute information. He received
one of the loudest applauses for the moves that he is making to
put us on the Cloud, to make that move. He is getting now
laptops for our field operations people so they can go to meet
and participate in----
Mr. KNIGHT. This would still come to you at some point; is
that correct?
Ms. CONTRERAS-SWEET. Oh, sure. It is a very flat
organization, and I make myself available. I participate in
weekly senior staff meetings. I am seeing this person on a
regular basis.
Mr. KNIGHT. I understand the day to day operations and how
the process works. At some point, there are going to be
responsibilities and decisions that are going to have to be
made, that are going to have to be made by you or be on your
door step. I just want to make sure that is clear, especially
when a CIO is hired.
The 69 items, I know that people have made a lot of this,
and you being in there for 20 months and these items coming up
after that, seven items being cleared up and 62 items still
being on the docket. As a leader of an organization such as
yourself or any one of us, there must be prioritization, and
you must put out the fires first and then start working on the
issues that you think are number 1 through number, in this
case, 69.
Would you say that any of these items are not on that list?
In other words, would you say hey, I have looked at these 69
items, yes, there are some good items here, there are some
things we want to work on, some issues that we want to fix, but
there are some of them, and just by one of your statements that
you say some of these might not be needed, could you explain
parts of these or any of these issues, these 69, that might not
be needed or you might not work on?
Ms. CONTRERAS-SWEET. You know, I track these. I just want
you to know I track them. I receive this report on a regular
basis. What I want to tell you is as I dissected them again, I
noted, and I think you did, too, that the GAO stated that some
stem from the 1980s and 1990s, so we are working through them
as I mentioned.
I am doing that. In other words, I think they are all
important and they are all vital, but I am prioritizing. For
example, the disaster. There are two that were disaster
oriented. We pushed those out as a priority. I am going through
and sifting, making sure that I am----
Mr. KNIGHT. Basically, what I want to get to is we have a
prioritization of basically 1 through 69, we are going to knock
these items out. Lastly, we have an aging workforce in many
industries, but there is probably no more difficult industry
than the IT area in this country.
We are producing about 150,000 jobs a year in software, IT,
coding, and all of these types of positions. It is very
difficult to get them into Government jobs, as I understand the
pay is not as good.
What kind of policies, what are you pushing forward so we
can get these young 20-30 year olds that know up-to-date IT,
know up-to-date software, and you can push them into the SBA?
Ms. CONTRERAS-SWEET. Thank you. I would like to have, if
you would, the budget the GE has. I think those commercials are
fantastic where they say oh, you are going to go work for GE,
you know, too bad you are not going to go work for a hip, happy
place. I feel their pain, do you know what I am saying.
That is why I said we are really trying to reach out to
Peace Corps' types, to veteran types. I am going to more
college fairs. We are traveling to the coast as well as the
middle part of the state, if you will, to brand SBA. I hope you
felt our efforts, for example, during Small Business Saturday,
which is the weekend of Thanksgiving. I was not just talking
about supporting small businesses, but also as making SBA an
attractive place to work.
To that end, we are working through millennial channels. I
just retained a fabulous producer and very popular gentleman
with youth, Mike Muse, who is now doing video spots for me and
placing them out in different industries. I partner with
anybody who is willing to help me amplify the opportunities at
SBA.
More important to the point is I write the correct job
description, so we are not just hiring the same people again.
That is what I have undertaken as a priority, to make sure the
job descriptions speak to the future, and then when they come
in, for example, the PMSs that I have right now, since I have
very limited H.R. training budget, I give them rotational
opportunities. I give them an opportunity to be mentored. We
are just trying to shake it up.
Mr. KNIGHT. I appreciate that. I know my time has expired,
Mr. Chair. Thank you.
Chairman CHABOT. The gentleman's time has expired. Now, the
gentlelady from New York. I apologize for the mix up before.
Ms. MENG. That is okay. Thank you, Madam Administrator, for
being here today, and also for all the work that you have been
doing, traveling all throughout the country to various
districts, including ours in New York, hearing directly from
small businesses about their problems and concerns.
I, too, echo the sentiments of my colleagues, especially
Ms. Lawrence, in appreciating your passion, enthusiasm, and
great efforts while being Administrator.
My question is in response to the GAO's recommendations,
the agency has said that it is currently restricted from
collecting data from resource partners, or that the agency does
not have adequate information collection systems for some
programs, which makes program evaluations difficult.
Can you expand on this and explain how these restrictions
and lack of adequate collection systems are preventing the SBA
from conducting evaluations, and what efforts can Congress
undertake to help remove any data collection restrictions and
help the SBA collect important data from the resource partners?
Ms. CONTRERAS-SWEET. I think data collection is fundamental
in evaluations, assessments, and strategic planning. You have
to start with good data, rich data. I am pleased that in each
of my outreach efforts, whether it is our SCORE partners, our
SBDCs, the SBICs--just stop me if I am using too many acronyms,
I apologize. I do not like jargon, so I do not mean to do that.
Our resource partners, let me just say that they are
collecting rich data, but there is a natural screen in how much
they give to us. We have reached agreement on 10 measures that
we can agree on about encounters of capital formation, business
start's, contracting, those kinds of things. That data is
collected and it is mined, and it is utilized.
Then we get qualitative data, not just the quantitative,
but we also work on qualitative interactions, meaning focus
study groups and interactions in roundtables that I have
hosted, for example, with you around the country, and with the
chairman and the ranking member and others.
My disappointment, if you will, and a way in which you
could help me, is that for me, a critical data point would be
an unique identifier. I am not trying to invade privacy. It can
be any numeric number, it can be part of an alphabet, but for
me, when someone says they have served 100 people in a day, I
do not know if that is somebody that came in twice that one day
or if that is 100 different people.
I think an unique identifier would be very useful in being
able to track longitudinally what our actual accomplishments
are. That is what I am very seriously looking into. I have
discussed this with our resource partners, and they are
beginning to be, I feel, some are more amenable than others,
but with your help, we can get there.
Ms. MENG. Thank you. My last question is about human
capital management. From yesterday's hearing, we talked about
how the GAO report identified challenges at the agency, one of
which was the need to prioritize transformation in the area of
human capital. Do you agree, and what is being done about that?
Ms. CONTRERAS-SWEET. Yes. I should have just mentioned to
you more to the point about your prior concern, at the agency,
what I have done is I have put together an interagency
evaluation working group so that all the program heads are not
just working with our resource partners but also what measures
matter to them, so they are also mining the correct data, and
we can build proper evaluations to be more responsive to the
management challenges that we are addressing here today. I just
wanted to speak to that.
With respect to human capital, as I mentioned, when we talk
about the district offices, as the Congresswoman from the
islands mentioned earlier, the Samoa Islands, our teams,
because we have one of the best leverage factors around, again,
understanding we are fewer than 2,000 employees, leveraging
these kinds of numbers, managing the Federal Government
procurement process, and the kinds of things that we do, we do
leverage up.
These district offices in many instances have five or six
employees, and when you and I host a conference with 500 people
who need their help, it is a lot of lifting. In any instance
that we could take a serious look at the structure, meaning
size of SBA, I think it would go a long way.
Ms. MENG. Thank you. I yield back.
Chairman CHABOT. Thank you. The gentlelady yields back. The
gentleman from Florida, Mr. Curbelo, who is chairman of the
Subcommittee on Agriculture, Energy and Trade, is recognized
for 5 minutes.
Mr. CURBELO. Thank you, Mr. Chairman, and thank you, Madam
Administrator, for being here today, and thank you also for
visiting South Florida last year. It was a pleasure to see you
at Florida International University.
I think one of the complaints that most of us hear most
frequently about Government is that it is dysfunctional, that
Government is incompetent, Government is unaccountable.
Yesterday in the GAO representative's testimony, one of the
things that struck me the most was that the GAO perceives a
breakdown in communication at the SBA, that employees do not
have forums in which they can express their frustrations,
perhaps their views on how things can be done differently.
Do you perceive that there is a culture at the SBA where
employees do not feel that freedom to express their views, to
share their concerns, and to share perhaps their contributions
with regard to how the SBA could be run more efficiently, more
effectively, and more competently?
Ms. CONTRERAS-SWEET. Yes. I think communications is
foundational to running an effective organization. There are
formal and informal processes. Sometimes people communicate
more by standing by the fountain, the water fountain, than
anything else. We have to make sure that we are managing
communications because not communicating, the absence of
communication, does challenge an organization.
Just to share with you the systems that we have in place,
first and foremost, we start with an annual strategic meeting,
one time, where we bring the entire field operations together
with the heads of program offices, and we have a full
interaction for a three day setting, to set priorities and then
to talk about execution and accountability, time frame, and so
forth. That is number one.
Number two, we follow up with a weekly engagement. I am on
the phone or my chief of staff on a weekly basis with every
district director and in many instances the DDD, the deputy
district directors, are on the phone engaging with us.
On a daily basis, we have what we call the ``SBA Daily,''
and I know it is not a great name, but I have to tell you that
people are really drawn to this because it tells them exactly
what is going on on any given day with respect to anything that
is happening in SBA.
I visit district offices, the program officers visit
district offices. Then I hold roundtables with every one of the
teams, and I walk floors. For Heaven's sake, on Thanksgiving, I
was passing out tangerines. On Halloween, I joined them for
festivities.
We have informal, formal, and then we have special as
needed events like town halls, so we do not wait for those, if
we need to have a special town hall, we engage in that, too.
I have to tell you again, these are people who are fighting
and are in the district, creating success every day, and I do
not see them being shy about communicating.
Mr. CURBELO. Madam Administrator, sometimes communication
only flows from the top down. You are comfortable that at the
agency right now, there is an environment in which employees
from the rank and file to those in leadership positions can
express their views, their frustrations, their joys, with their
superiors, and really create that culture of information
sharing that I think is essential for the competent functioning
of any organization?
You feel comfortable that culture exists today? Do you
think there could be improvements? Do you find any validity in
the concerns expressed by the GAO with regards to communication
within the SBA?
Ms. CONTRERAS-SWEET. Well, if the GAO stated it, somebody
must have said to him that there was a challenge, so I have to
take that seriously. There is no question about I have to take
that seriously.
Again, my reality is that they step forward at town halls.
It is an open town hall. I take people out to lunch and say
what is going on. I walk floors and tell me--I get emails from
people. I feel if the GAO is making this comment, I will look
into it, there must be a challenge.
Mr. CURBELO. Thank you very much. Thank you, Mr. Chairman.
I yield back.
Chairman CHABOT. Thank you very much. The gentleman yields
back. The gentlelady from New York, Ms. Clarke, is recognized
for 5 minutes.
Ms. CLARKE. Thank you, Mr. Chairman, and I thank our
ranking member. I want to thank the Administrator, and just say
to you that I want to thank you for a number of things.
One, for being engaged on the front lines of the small
business marketplace and being a visible change agent for small
businesses across our Nation. I can attest to the fact that you
have been out across this country. You were in the 9th
Congressional District meeting with small businesses. I think
that is refreshing in and of itself.
You are dealing with an agency that has challenges. There
is no doubt about that. I think you have demonstrated here
today through your testimony the passion and drive that you
have for the small business ecosystem across our Nation, and
you have displayed in today's hearing a response to the
challenges of the 21st century SBA.
I appreciate the innovative and creative approach you are
taking to doing more with less. One of the things that has not
been really drilled down on and that really struck me in this
conversation today is the fact that you have 2,000 employees
for the United States of America and its territories.
When we think about the numbers of small businesses across
this Nation, you are doing a mammoth task. Certainly, there is
always room for improvement, but what I have been impressed
with today is your commitment to meeting these challenges head
on, and that is critical.
If indeed you are able to leave that legacy for whomever
will be next in your shoes, that will take us a long way in
making sure that the 21st century SBA is meeting all of the
goals that we have for small businesses in our communities
across this Nation.
The one thing that I would like to do, because I think I
have heard the answers that I need to hear today with respect
to the recommendations of the GAO, and I feel assured that you
are paying keen attention to those recommendations, is that I
want to encourage you to look at how you can do more engagement
with the small business ecosystems in the U.S. territories and
the District of Columbia, strengthening them, quite frankly.
I would use the example of Puerto Rico. Because of the
challenge they are facing economically, there is going to be a
need for undergirding small business, and to the extent that we
can be a part of helping them to stabilize just the marketplace
on the ground for small business will go a long way as families
struggle with the climate that has been created due to the
challenges Puerto Rico is facing overall with its economy.
Having said that, if you would like to respond, that is
fine. If not, go to it. I am convinced you are focused like a
laser on what needs to be done, and I want to encourage you to
keep up that stride.
Ms. CONTRERAS-SWEET. Thank you.
Ms. CLARKE. I yield back, Mr. Chairman.
Chairman CHABOT. Thank you. The gentlelady yields back. The
gentleman from----
Ms. CONTRERAS-SWEET. May I respond?
Chairman CHABOT. We have a response. Go ahead.
Ms. CONTRERAS-SWEET. I just wanted to compliment you on the
outreach that we did in your district, and I thought it was
really superb, so thank you for convening such a stellar group
of people.
I think you raise an important point, and that is we have a
program called the HUBZone program, the historically
underutilized business zone program. I traveled to Puerto Rico
to meet with the Governor, to meet with communities and local
officials to understand the rate of debt that every Puerto
Rican is assuming, you know, that looms large, so it is a
serious issue.
I have some tools, so I wanted to deploy those tools that
we have. We went there with again our contracting
relationships. We went in to say a couple of things. We said we
want to make sure we are bringing corporations in to procure
from the small businesses here. We want to make sure that the
Federal Government is showing up here. We put on a conference
of about 30 major procurers to focus on Puerto Rico.
I did not want to stop there because for small businesses,
even when they get a contract, what happens is sometimes it
takes the Government too long to pay, so we have to look at the
minutia on some of these things.
In that instance, we launched two programs with the White
House. One is called ``SupplierPay,'' which is where we say to
large corporations, we will pay you in two weeks if you pay
small businesses in two weeks, and a QuickPay program, which is
we pay small businesses in two weeks if they are doing business
with the Federal Government, so we are now driving that through
as well. It is giving again people more capital and cash flow
to be able to grow their business.
Chairman CHABOT. Thank you. The gentlelady yields back. The
gentleman from Mississippi, Mr. Kelly, is recognized for 5
minutes.
Mr. KELLY. Thank you, Mr. Chairman, and thank you, Madam
Administrator, for being here and answering questions.
I, too, am encouraged. It seems like you want to work and
to fix all these things, and I am very encouraged by that.
That being said, I found in whatever walk of life, whether
it be in the military and commanding a battalion, or whether it
be a district attorney and prosecuting a murder case, or
whether it be working at McRae's, which was a department store
when I worked there, I have often found that priorities in a
business plan are so important regardless, and not just for the
overall, but for each individual task that you want to do.
I have heard a lot of talk about what you have done, and I
am very impressed with that. I am also very impressed and
thankful and grateful for your response to Mississippi, to the
recent tornadoes, where I lost several victims' lives in my
district and millions of dollars in property.
I hope that you will keep a check, checking on my folks,
and making sure that SBA does all they can with disaster relief
in Mississippi, which has been declared a Federal emergency.
I guess my question is have you prioritized the 62 of the
69 GAO objectives they have for you, have you prioritized
those, and if so, have you decided--going back to a college,
CPM and those things, you can do some things simultaneous, some
things you cannot do until the other things are done, is there
a matrix or chart? In the military, we call it a ``horse
blanket.'' You have to accomplish these tasks.
Do you have an overall strategic plan that says these are
the tasks, this is when we are going to accomplish them,
further, this is the person that has the rose pinned on them to
accomplish this, and deadlines or a plan of action for each of
those 62 that have not been accomplished?
Furthermore, same thing, IT. You have to get the CIO hired,
I think, in order to address the IT issues appropriately. I
would encourage you do the same thing with those 30 that are
outstanding that the I.G. pointed out in the IT area.
If you could address what you have done to do those things.
Ms. CONTRERAS-SWEET. Thank you. Again, let me just say that
as I mentioned earlier, I looked at them, prioritized them,
rated them, if you will, and started with what I think is the
priority, and that is what I am doing.
You are right. Some of them you cannot achieve until the
other is complete. That is why I focused on the disaster, these
investment funds are really important to the SBICs, so that is
why I went to the Library of Congress to help me study and to
do that, so you would have confidence in the research and the
metrics, the measures and the evaluation.
It is why we put in an evaluation program for six different
items here. We will continue to do that work. Yes.
Let me just continue to share with you that process does
matter, as you say. You know, I came in. I left my small
business that I created. I started three different businesses.
I left my small business to do something here.
If it is not enduring, then what was the point. I am not
just here to tell you about what we have done. That is why I am
here in a collegial fashion. I understand the importance of
institutional memory and documentation, to make certain that
the next person who I will be handing this to in not so many
months will be able to continue on this journey.
I thank you for your engagement and for your thoughtful
consideration.
Mr. KELLY. Let me tell you, I came here with a whole
different attitude than now. I think you are a dynamic leader,
and I think you have some opportunities. I am trying to give
you some things, and if you do not put it in writing, I can
tell you as a commander, if it is not written, it does not
matter how good the organization is, we tend to lose that.
The second thing, you have talked a lot about what you have
done with SOPs. SOPs are so important. From my military
background, we cannot operate without SOPs. They have to be
current and they have to be active, and they have to be
applicable.
I hear you saying you are putting 41 new SOPs into
practice, but my follow up question would be to that how many
of the old SOPs and the duplicative SOPs have you taken out of
action because when people are confused as to which SOP, it is
just as important to do away with the old as it is to enact the
new, so I would like to hear if you have addressed that or if
you intend to address the duplicative or otherwise.
Ms. CONTRERAS-SWEET. Yes, thank you. Again, one of the last
businesses I started was a community bank. I have to tell you,
I present some things to my board about above the line metrics,
and then I am in the organization running the below the line
metrics, so I understand exactly what you are talking about--to
make sure if I have to reach--how many sales numbers I am going
to complete, how many sales calls, how many sales people. All
those below the line metrics that we have to have to manage a
proper organization.
I respect your training and understand it. I have tracked
ISO certification, lean start-ups, lean manufacturing, Myers
and Briggs. I have been through so many trainings, ad nauseam.
Excuse me, sir.
I appreciate what you are saying and I think it is
important to prioritize, to sift, as I stated earlier, and to
make sure that we are doing what matters soon, the 80/20 rule.
Thank you.
Chairman CHABOT. The gentleman's time has expired. Thank
you. The gentlelady from North Carolina, Ms. Adams, who is the
ranking member of the Investigations, Oversight and Regulations
Subcommittee, is recognized for 5 minutes.
Ms. ADAMS. Thank you, Mr. Chair. Thank you to the ranking
member as well, and to you, Madam Administrator. I appreciate
you being here and your testimony.
I am going to skip asking about the implementation of the
recommendations because we have already talked about that. Are
there budgetary impediments that Congress can address to assist
the SBA in moving more expeditiously?
Ms. CONTRERAS-SWEET. I very much appreciate the question
because absolutely, there are budgetary constraints. I am
trying to be as resourceful as possible, for example, in
training, as I alluded to earlier. To travel, to have someone
to travel, to come in even to headquarters is an expense. I
have to put them up. I have to put up a per diem. I am trying
to be as resourceful as I can, for example, to put on more
webinars for training, to use local tools. I am putting people
in clusters so they are doing mentoring.
You know, I am trying to do what I can with what I have,
but if you wanted to have a serious conversation about the
budget, in California, I had 14 different departments, Highway
Patrol, DMV, Caltrans, Department of Real Estate, Housing. It
was a challenge to run them. I had an unique opportunity that
few people have, and that is to create a new department, the
Department of Managed Health Care, that is still operating now,
I think, as one of the better government run programs in the
State of California.
It was an entirely different thing to start with the slate,
a clean slate, and say this is the talent, this is the core
competencies I am after. Clearly, when you are refining an
organization, it is a little more nuanced than it is to just
start from fresh.
I would be delighted to engage in that conversation because
that really requires a very thoughtful answer that you truly
deserve.
Ms. ADAMS. Great. Thank you very much. Let me just turn to
the issue of program performance evaluations. GAO found that
SBA has made limited progress in addressing the lack of program
evaluations. Without evaluations, SBA lacks critical
information for ensuring the validity and effectiveness of its
goals, objectives, and strategies, as well as the validity and
effectiveness of both new and existing programs.
For example, SBA has for many years conducted an annual
client survey to evaluate the effectiveness of its management
training programs. Are there any plans to survey SBA loan
recipients to determine if the SBA's loan guarantee programs
are meeting client needs, and if not, why not?
Ms. CONTRERAS-SWEET. I can just give you an example of some
of the data points that we are receiving, business start's,
revenue growth, job creation, retention, capital infusion, new
markets, which ones are exporting, contracts acquired,
innovation milestones, client demographics, the usefulness of
the services, and most important, customer satisfaction.
These are metrics that we are tracking. As I mentioned
earlier, I am interested in an unique identifier so that I can
track the person longitudinally, because I think that is really
a vital point. Again, that is on the specifics of our resource
partners and our public to understand what they are using.
What we are also doing is trying to understand where the
entrepreneurs are, so we have--I understand that we are in
Federal Government space and not every entrepreneur, to my
disappointment, thinks of coming to SBA in the Federal office
for entrepreneurial support. That is why I have deployed our
team to go out and to find, for example, in these innovation
hubs and these incubators, the growth accelerators that are
across the country, and we are learning there, too, what
millennials need that might be different from our core
entrepreneurs, that might be different from our women,
veterans. These are market segmentations.
With the advent of technological evolution, we are now able
to do much more targeted digital marketing to people. I would
like to have that kind of capacity, to answer your budget
question, and how to discern whether we are actually fulfilling
the customer satisfaction that the taxpayers and more
importantly the American entrepreneurs deserve to compete in an
ever evolving globalized economy.
Ms. ADAMS. Great. Thank you very much for your responses.
Again, thank you for your service. I yield back, Mr. Chair.
Chairman CHABOT. Thank you. The gentlelady yields back. The
gentleman from Nevada, Mr. Hardy, who is chairman of the
Subcommittee on Investigations, Oversight and Regulations, is
recognized for 5 minutes.
Mr. HARDY. Thank you, Mr. Chairman. Thank you, Madam
Administrator, for being here. I, too, am excited and grateful
for your energy and your passion, and what you are trying to
accomplish here.
I still have concerns. I am concerned about what I have
read. I am concerned about what I have heard and what I have
seen. This agency is to aid, counsel, to assist, to protect
small businesses that are vital to this economy. Also, they are
supposed to act in a manner that is efficient and nimble like
our small businesses are.
An agency for fiscal year 2015 was intended to support
about $30 billion, I think, in small business financing, $80
billion in Federal contracts. This is not only large numbers,
but it is also concerning, yet the key findings is we have
serious challenges out there with this administration, and this
is troubling for Nevadans, troubling for America, troubling for
the economy.
Although, I, too, agree with what my colleague on the other
side of the aisle just said. We have seen growth in the
economy, and I do believe that the SBA is vital in that growth,
and has assisted in that growth in the economy. That shows how
important this Department is.
With these concerns that the GAO has, I have a couple of
questions here for you. What is the simple impact on the SBA in
utilizing the old outdated SOPs? That is the first question.
Another question I would like to ask, you have been here 20
months, why is the average--I think we have had 10
administrators in less than 8 years or eight administrators in
less than 10 years, what is going on?
Ms. CONTRERAS-SWEET. You know, as I looked at the chart, I
was really intrigued by the GAO's report and how far back it
went. You know, two things, and I did a little research,
personal research one evening, because it was just interesting
to me personally.
I saw that in some instances, the SBA administrator was
promoted to a larger agency. You know, you have to have certain
skills to be an entrepreneurship, so different things were
taking place, but we are a victim of the political process.
With every new administration, you have a new appointment.
Generally, people take a four year run and then leave, and you
bring in the second bench. I hope I am not the second bench.
Mr. HARDY. It appears to me you have been one of the
longest here. I appreciate that. It means you must be having
success or you must have some passion for what you are doing.
Do you have a succession plan for what is going on when you
leave or any of your administrators leave? Do you have a
succession plan in order?
Ms. CONTRERAS-SWEET. What you said is SBA is an effective,
valuable, and critical organization in our country. I agree
with you.
When I traveled, I just met recently a young man named
Kevin who said because of $150,000 loan that he got from SBA
after everybody else denied him, he was able to build a little
company that has now become Under Armour. I was able to meet
with the family in San Diego. With a little bit of help from
SBIR, they were able to build an international global
marketplace like----
Mr. HARDY. I would like to go right to the question, do you
have a succession plan in place?
Ms. CONTRERAS-SWEET. Yes, to that extent, I want this to be
an enjoined legacy, so I am not just meeting with our political
appointments, I meet with our SECs and with the program offices
on a weekly basis, we are meeting with them, to infuse the
entire organization down to the bowels of the organization with
a sense of priority and value system that we have, and you
write it more importantly for institutional purposes, you put
it into job descriptions and performance rewards.
Mr. HARDY. Back to that other question, what is the impact
of small business on the SBA utilizing the outdated SOPs? Do
you believe there is a major impact here?
Ms. CONTRERAS-SWEET. Since we have so many different
vehicles----
Mr. HARDY. I would just like a yes or no on that. I have
another question.
Ms. CONTRERAS-SWEET. Okay, sir. Yes, we are reviewing the
SOPs as I mentioned. As I mentioned, I am addressing them
faster than any administrator in the last few years. We are
making good progress. I will continue to address that work.
Mr. HARDY. Also, in your testimony you stated that you
require senior management to be directly responsible in
ensuring and reviewing the dissemination of the SOPs in their
jurisdiction. Can you expand on what you have asked there, and
also, could you tell me what they are reporting, do you have a
report on their findings?
Ms. CONTRERAS-SWEET. Right. They are required, sir, to
certify every year their SOPs. Sometimes, there are no changes.
Sometimes, there are refinements, nuances, and sometimes they
need a major overhaul. We have already overhauled, for example,
the disaster one, as I mentioned. We have overhauled the SBIC
one, as I mentioned.
This is the kind of work that we have been pushing, and
again, these are arduous processes, but we are doing them, we
are undertaking them at unprecedented levels, and we commit to
reporting to you and reporting back the momentum that we are
building on.
Mr. HARDY. Sorry, Mr. Chairman. Indulge me----
Chairman CHABOT. If you have something real quick.
Mr. HARDY. I just want to ask if they had been reporting to
you, your administrators?
Ms. CONTRERAS-SWEET. Oh, sure; yes.
Mr. HARDY. Thank you.
Ms. CONTRERAS-SWEET. We have a very flat organization, so I
see the program officers individually and on a weekly basis in
our program senior staff meetings. Thank you for your service
in construction, you have a marvelous story.
Mr. HARDY. You studied well.
Ms. CONTRERAS-SWEET. Thank you, sir.
Chairman CHABOT. The Administrator is not the Administrator
for nothing. She has done her research, no question about that.
The chair would just note for the record, this is being
broadcast by C-SPAN. For the tens of dozens of people all
across America that are watching this, an ``SOP'' by the way is
standard operating procedure. I am sure they are all wondering
what the heck that was.
I will now turn to the gentleman from New Jersey, Mr.
Payne, who is recognized for 5 minutes.
Mr. PAYNE. Thank you, Mr. Chairman, and to our ranking
member. Madam Administrator, once again, good to see you. I had
the opportunity to have you in my district for a small business
roundtable, not necessarily with me, but with Senator Cory
Booker, but it fell in my congressional district.
Ms. CONTRERAS-SWEET. We had two, actually.
Mr. PAYNE. I will not hold that against you, that you were
there with the Senator.
Ms. CONTRERAS-SWEET. You got the podium for quite a while.
Mr. PAYNE. Yes, I did. First, I just want to commend you
for being able to move around the country as you have done
during the course of your tenure. It does not go unnoticed that
you really have spread yourself far and wide across the Nation
in order to support small business efforts throughout this
country.
There have been some issues around retention of senior
leadership. If I am going over something that has already been
addressed, please forgive me. There have been 41 changes in
senior level positions at the SBA in the last decade. The GAO
report gave multiple recommendations to increase human capital,
specifically noting the SBA still has not developed workforce
plans, conducted skill assessments, updated SOPs, or
established training goals.
What are you doing to address these human capital issues in
senior leadership and in the SBA regional district offices?
Ms. CONTRERAS-SWEET. Yes, again, I think that continuity is
important to ensure that we have continuous program
effectuation, so I am committed to that work, as I referenced
earlier to that end. We are reconstructing many of the job
descriptions to make certain they are forward looking and
responding to the evolving technology and communications
standards, and just generally, the way entrepreneurship is
going.
Earlier, the member mentioned the importance of being
nimble, so it is an art form as well as a science, I must say,
to be able to be nimble and make sure you are following SOPs
and GPRA and GPRAMA, the General Performance and Results
Modernization Act, and JOBS Act 2010 and JOBS Act 2012, Dodd-
Frank, Sarbanes-Oxley, and Gramm-Leach-Bliley, and this is my
life, right, to make sure that I am crossing every ``t'' and
dotting every ``i'' as I try to be nimble and agile and
responsive to the evolving emergence of entrepreneurship and
the globalization of it.
It is a challenge, and you want to attract the best and the
brightest. I think SBA is a very exciting place, and I must
tell you, Congressman, that I was really disappointed because
of the characterization--these allegations are not valid.
I respect the GAO, but I must tell you that each and every
day the SBA employees are working hard and they are dedicated,
and I think people do not have an appreciation that when we
have a district office, we are talking about half a dozen
people who are managing States and managing business partners,
lending and local officials and State officials.
These people have to be artful, and they have to be
diligent and strong communicators, and have to lift up branding
opportunities through massive media communications efforts.
It is a very important skill set that we need, and the
salary structures are somewhat restricted, but it is
Government, and I respect the situation. I am managing through
it. I think again we will continue to evolve these job
descriptions to attract people, to show them their work is
meaningful.
The studies that I have read say that people care about
compensation but more importantly, they care about the
meaningfulness of their work. I am here to remind them of that
every single day.
There is not anything that makes me happier, like the man I
just met at the airport, my last flight, who said he was an
aspiring doctor, and he could not figure out how to start his
business, and he received a $50,000 loan from SBA, and he
became a doctor, and is now 72 years old, and served our
country by providing health care services to America.
Mr. PAYNE. Do you feel the compensation levels in your
Department may be curtailing your ability to maintain the best
and the brightest?
Ms. CONTRERAS-SWEET. Well, I have to tell you, I did not
intend to get into this, but the SBA structure, the salary
structure, is not comparable to other Cabinet offices. I would,
given an opportunity, be happy to address that and give you a
comparison analysis.
In many ways, it is a complex challenge. In many ways, I
want mobility. You want mobility in an organization to continue
to create opportunities for the younger folks coming in. On the
other hand, you want constancy, and you want knowledge, and you
want a historical framework.
Again, delicate challenges that I address every day, every
single day, I am trying to do this. I actually reached out to
OPM, the Office of Personnel Management, and to PPO, the
President's Personnel Office, to talk about how we make sure
that SBA employees are given opportunities at Treasury, at
Commerce, at the State Department, USTR, and they are now
getting opportunities. That is the good news. The bad news is
that now while I have upward mobility, I now have to find new
talent to fill those slots.
Mr. PAYNE. Right.
Chairman CHABOT. The gentleman's time has expired.
Mr. PAYNE. Thank you.
Chairman CHABOT. Thank you very much. The gentleman's time
has expired. The gentleman from Missouri, Mr. Luetkemeyer, who
is vice chairman of this Committee, is recognized for 5
minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman, and welcome,
Madam Administrator. I got in a little bit late but I know that
you commented that you would be willing to come to Missouri, my
home state, which has experienced a weather disaster recently.
We certainly welcome you to come.
My only comment would be that rather than spend your time
there, if you would have your folks be willing to respond more
quickly to our needs and our concerns, that would be really
appreciated, because that is where we need the help. If you
want to come and see it, you are more than welcome. You will
see a lot of water.
With regards to that, what do you see happening, where do
you see the SBA going, what is your response at this point to
the disasters that are happening as we sit here right now?
Ms. CONTRERAS-SWEET. First, let me just assure you that I
deployed my team even before we had been designated as a
disaster in the area. There are certain circumstances that have
to be met. I already have about 10 employees already assessing
and going out and conducting that study. As soon as we are
given the orders and are able to go, we are now getting there
in 24 hours, so it is a remarkable achievement.
Overall, as I mentioned, I have traveled now to Washington
to see how we responded there. I have traveled to Texas, to
North Carolina, to meet with Governor Nikki Haley. I am trying
to get out to understand what the refinements are that need to
take place, and as a result, we have put in some what I think
are important changes.
We used to do this manually, where we would send out the
information to victims of disasters. Now, when they come into
our offices, we have the technology to do it, so we can track
them better and give them information more efficiently. I am
sorry.
Mr. LUETKEMEYER. We are getting to be able to deploy the
folks to be able to do the work, that is great. A question for
you, the next question I have here is with regard to in 2008,
the Small Business Disaster Response Loan Improvement Act was
signed by Congress. Eight years later, these bridge loans do
not seem to be able to be had. Why are we not implementing
this, especially in a time like this?
Ms. CONTRERAS-SWEET. I think----
Mr. LUETKEMEYER. Is it a program worth having, I guess that
is the first question.
Ms. CONTRERAS-SWEET. Well, the financial institutions are
having a problem adopting it, to be honest. They say it is hard
for them to process a $10,000 loan that if not repaid by our
permanent disaster program that we do, that we would provide
them, then they have to amortize it for 10 years at a very low
interest rate, so it is not----
Mr. LUETKEMEYER. It is not a practical program?
Ms. CONTRERAS-SWEET. The financial institutions are
resisting it, and I am asking to put them on the record for
formal comment as to what we need to do to make them work, but
meanwhile, I----
Mr. LUETKEMEYER. If it does not work, it has two choices,
either fix it or get rid of it.
Ms. CONTRERAS-SWEET. That is the point. We are working with
them to get the answers, but meanwhile, sir, I think this is
important, what we put in is an uncollateralized $25,000 loan
that we can do directly through SBA, and we are processing them
now in 7 days.
In the spirit of what we are trying to accomplish, the----
Mr. LUETKEMEYER. Are you authorized to make direct loans?
Ms. CONTRERAS-SWEET. Pardon me?
Mr. LUETKEMEYER. Are you authorized to make direct loans?
Ms. CONTRERAS-SWEET. That is what the Office of Disaster
Assistance does, we make direct loans for people who are
physically or economically affected by a disaster, for renters,
as well, it is important to note. This is the only office that
makes direct loans; correct.
Mr. LUETKEMEYER. Perfect. That is news to me because last
time we had a director in here and she wanted the ability--did
not want the ability to make direct loans, which was
interesting.
Also, with regard to what is going on, all of this
information that you are going to be accumulating, with regard
to the hacks that have been happening with OPM and the IRS, how
are you protecting your data?
Ms. CONTRERAS-SWEET. First, to assure the American people,
because as the chairman just mentioned, we have other people
listening in, let me just say that the SBA operates with
financial institutions. They do not join our system until they
are assured that the data is protected.
Mr. LUETKEMEYER. That begs the question, do you at the SBA
have the same protocols and under the same bank secrecy laws
and data concerns and protections as the banks are?
Ms. CONTRERAS-SWEET. We operate under NIST, which is the
National Institute of Standards and Technology, so we operate
under different guidelines, but similar protocols. In that
regard, we are working toward what we call a ``Rev 4 level,''
which is the standard in Government, and SBA is comfortable
with the work we are doing, and----
Mr. LUETKEMEYER. You are not there yet, is what you just
said?
Ms. CONTRERAS-SWEET. Well, it is----
Mr. LUETKEMEYER. You said you were working toward it, so
obviously you are not there yet.
Ms. CONTRERAS-SWEET. That is right. I mean, I want to be
honest with you. I am here to be honest with you.
Mr. LUETKEMEYER. I am sure it raises some concerns by our
citizens in dealing with the SBA about the protection of their
information.
Chairman CHABOT. The gentleman's time expired, but go ahead
and answer.
Ms. CONTRERAS-SWEET. Thank you, I appreciate that, Mr.
Chairman. Again, the fact that the financial institutions who
review our system and audit our system are comfortable
connecting gives me some solace, but I have an auditor that
comes in to tell us, and they found no material weaknesses in
our system. We have not had a breach, but I have nonetheless
made sure that we have processed--for example, we have moved
our mainframe to a modern----
Mr. LUETKEMEYER. Madam Administrator, just as a closing
thought here, I appreciate what you are saying, but whenever
you say that we are doing this according to all these protocols
and you have a GAO study that says you are way behind on
getting things done with regard to their assessment, not being
able to do everything, when you have standard operating
procedures that are being called into question, I am not sure
that the citizens can have great faith in what you were just
saying.
It certainly concerns me, but I do appreciate your
willingness to work on it, and I appreciate your comments.
Thank you, and thank you, Mr. Chairman.
Chairman CHABOT. The gentleman's time has expired.
Ms. CONTRERAS-SWEET. Mr. Luetkemeyer, I just wanted to say
that I promised you lunch the last time if I did not fulfill my
goal, and I want you to know that I think you owe me lunch
because SBA-1 is now up and operating. We have several thousand
banks that have joined us, and it is working. You have to come
over and take a look at it. I think you will really be pleased,
sir.
Chairman CHABOT. I think the cafeteria is still open. In
all seriousness, I want to thank the Administrator for her
participation today. I certainly appreciate your enthusiasm and
your energy that you brought to this hearing. I especially
appreciate your willingness to do everything within your power
to implement the 62 out of 69 GAO recommendations, which still
need to be resolved.
As I mentioned, my greatest concern is on the IT security
issue, because we have seen the White House, for God's sake, as
well as a whole bunch of other Federal entities hacked,
sometimes by China, we think, and these small businesses give
you a lot of sensitive information, so let's protect that.
I appreciate your commitment to do that and report to us on
a regular basis. We said monthly. We are willing to be
reasonable. Just keep us informed and let's get this done as
quickly as possible.
Ms. CONTRERAS-SWEET. Mr. Chairman, the good news is that
SBA, while working ardently on these goals, is working in
collaboration with our sister agencies, Homeland Security, with
the FBI, and all of the other organizations available to all of
the Government services.
Again, I want to put confidence into the system. We are
working with serious financial institutions. I used to run the
Department of Motor Vehicles at DMV, and I changed the driver's
license. As soon as you fix it, there is another system that
comes in to hack it. This is something that has to be an effort
ongoing.
Chairman CHABOT. I certainly agree with you. There is
nothing that brings more confidence to the American people than
dealing with the Department of Motor Vehicles.
Thank you very much. We appreciate your testimony. Members
will have 5 days to supplement their reports and add additional
questions.
If there is no further business to come before the
Committee, we are adjourned. Thank you very much.
Ms. CONTRERAS-SWEET. Thank you, sir.
[Whereupon, at 12:52 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Thank you, Chairman Chabot, Ranking Member Velazquez, and
members of this committee for the opportunity to testify.
I'd like to open today with a quick review of Fiscal Year
2015. It was one of the most successful years in our agency's
history. SBA achieved a 22 percent increase in the number of
loans, and a 23 percent increase in the dollar value of those
loans, compared to FY14. These gains matter because FDIC data
shows that conventional small business lending has only
returned to 84 percent of its pre-recession level, adjusted for
inflation. Filling those gaps in the marketplace is the very
purpose for which the SBA was created.
We made notable progress increasing 7(a) loans to
businesses with the greatest difficulty accessing capital.
The dollar value of our loans was up, year-
over-year, 22 percent to women, 23 percent to
minorities, and 103 percent to veterans.
Our number of loan approvals was up 29
percent to women, 27 percent to minorities, and 47
percent to veterans.
These successes would not have been possible if not for the
swift work of this committee this past summer. Due to our
record-breaking year, SBA ran up against our statutory lending
cap this August, two months before the end of the fiscal year.
At the urging of SBA and our stakeholders, in less than a
week, you passed a $4.5 billion increase in our 7(a) authority
and ushered its passage on the House floor. Your leadership
allowed entrepreneurs across the country to continue accessing
the requisite capital to start and grow their businesses.
In addition to our historic loan volume, SBA also
accelerated our small business investment under the SBIC
program. We grew our portfolio by 10 percent to a record $25
billion.
And in FY16, the 7(a), 504, and SBIC programs will share a
common thread: All three programs are expected to operate at
zero subsidy.
Thanks to this committee for working across the aisle to
include in the omnibus the permanent reinstatement of 504
Refinancing Authority and an increase in the SBIC program's
family of funds limit. These policy changes will each inject
significant capital into our small business ecosystem.
Another priority area for the SBA is federal contracting.
The federal government awarded an all-time high of 24.99
percent of government contracts to small businesses, supporting
550,000 American jobs. We reached historic procurement levels
for small disadvantaged businesses and firms owned by women and
service-disabled vets.
To summarize: A record year in small business lending, a
record year in investment, a record year in contracting, with
zero taxpayer subsidy needed to sustain our momentum. This is
the context in which today's hearing takes place.
Let me take this opportunity to acknowledge the Government
Accountability Office (GAO) for identifying areas of shared
concern and offering constructive suggestions to address them.
From my very first days in office, I have prioritized the need
to modernize SBA's operations, enterprise-wide, to respond to
the technological, demographic and globalization changes that
are transforming our small business economy. To that end, I
agree with many of the GAO's recommendations and appreciate
this opportunity to update you on our efforts to bring SBA
fully into the 21st century.
I was pleased to read that the GAO's review acknowledges
SBA's recent strides to address management challenges.
Specifically, the report notes that I have prioritized improved
human capital management, IT, and the 8(a) Business Development
Program. The report also notes that these efforts have already
begun to show progress. The report highlights SBA's renewed
attention to address some internal control weaknesses that the
GAO and the SBA Office of Inspector General (OIG) identified as
an Agency management challenge. This renewed attention has
produced positive results. Since the beginning of FY 2015, SBA
has resolved:
14 of the 63 open GAO audit recommendations,
and
150 of the 199 open OIG audit
recommendations.
SBA further provided updates to GAO on 32 recommendations
in FY 2015 and an additional 9 in FY 2016 to date. These
numbers mark a significant improvement in closing out
recommendations for the Agency. In fact, we resolved more GAO
recommendations in FY 2015 than in the previous four years
combined. This progress came after I personally met with the
Comptroller General of the GAO and made it clear that resolving
recommendations was a top priority for the entire agency during
my tenure.
One of our most significant strides is the creation of an
Enterprise Risk Management (ERM) Board chaired by my Deputy
Administrator. The ERM Board has established a special sub-
committee solely to address open GAO and OIG audit
recommendations. In addition we have designated a GAO/OIG
Recommendations Resolution Officer who reports directly to the
Director of Risk Management in the Office of the Chief
Operating Officer, whose principal work is to pursue enhanced
audit closure strategies. With the ERM Board's attention, I am
confident in the continued momentum in closing out
recommendations during the remainder of FY 2016.
The GAO report recommends that SBA take certain corrective
actions around each of its recommendations. Let me take this
opportunity to outline the actions we are taking for each of
these specific recommendations.
1.) Recommendation: To improve management of the
Small Business Administration and to ensure that SBA
assesses the effectiveness of its programs, the SBA
Administrator should prioritize resources to conduct
additional program evaluations.
My background in banking impressed upon me the importance
of managing risk to optimize the return on investment. When we
put precious taxpayer dollars to use, we have to make every
effort to use those dollars wisely, based on the best available
data. I wholeheartedly agree that evaluations are important to
understanding the efficacy of SBA's programs.
Evaluation of a number of programs is well under way. SBA
established an economic impact evaluation working group in July
2014 with a learning agenda, and the group has been developing
evaluation plans. The working group developed a methodology for
conducting impact evaluations of the agency's programs using
administrative data sources residing at SBA and in other
federal agencies, such as the U.S. Census Bureau and the Bureau
of Labor Statistics. Numerous SBA program offices participate
in this working group, including our Offices of Investment and
Innovation, Disaster Assistance, Capital Access,
Entrepreneurial Development, and Veterans Business Development.
As a result of their participation, each of these offices has
either developed its own program evaluation methodology or
established a program evaluation framework and begun initial
data collection.
For example, SBA's Office of Investment and Innovation,
which has begun to work with the Library of Congress to assess
the comprehensive impact of the Small Business Investment
Company (SBIC) program. The SBA also has completed three credit
program evaluations following OMB Circular A-129 guidelines.
The Agency evaluated the 7(a) guaranteed loan program, SBIC
debenture program and the 504 Certified Development Company
loan program.
The Agency remains concerned about its ability to collect
some key data on small businesses' resource partners who are in
many instances the first point of contact with small
businesses. To this end, I've engaged our resource partners to
address the criticality of and methodology for proper
evaluation metrics. SBA has also begun incorporating
requirements into grants and contract solicitations that
awardees provide not only the agreed upon service, but also
data to allow more robust evaluations of program effectiveness.
The Agency looks forward to continuing to work with Congress to
address these limitations.
2.) Recommendation: To improve management of the
Small Business Administration and to ensure that SBA
fully meets GPRAMA requirements, the SBA Administrator
should use the results of additional evaluations it
conducts in its strategic planning process and ensure
the agency's next strategic plan includes required
information on program evaluations, including a
schedule of future evaluations.
The SBA is currently developing a framework for evaluations
and data collection (see recommendation 1). Once completed, the
evaluations will be incorporated into the next SBA strategic
plan and will help shape the agency's strategic goals and
objectives. The process of drafting the next strategic plan
will begin in FY 2017. A list of future evaluations will be
incorporated into the new plan.
3.) Recommendation: To improve management of the
Small Business Administration and to improve SBA's
human capital management, the SBA Administrator should
complete a workforce plan that includes key principles
such as a competency and skills gap assessment and long
term strategies to address skills imbalances.
We've taken important actions on our human capital
management. I am proud to work alongside so many dedicated
public servants at the SBA, and we're working to ensure that
the Agency has the talent required to continue serving
America's entrepreneurs in the 21st century. We're currently
drafting a comprehensive workforce plan, which will include
both a skills gap analysis and a gap closure plan. We
anticipate that the workforce plan will be issued in March of
this year.
We have taken several steps to address the SBA's aging
workforce within current budgetary constraints. More than 150
employees took early retirement under the VERA VSIP program,
allowing us to recruit candidates with specific competencies.
Considering the public-facing nature of our work, we
prioritized filling key openings in our field operations. SBA
is also reorganizing our Presidential Management Fellows
program to increase their impact. We've increased our veterans
hiring and partnered with the Peace Corps to attract service-
oriented volunteers to fill SBA positions at the conclusion of
their missions.
We have also hired SBA's first-ever Chief Learning Officer/
Chief of Organizational Effectiveness (CLO) to help existing
staff acquire new skills to advance their careers and fill
critical agency needs. The CLO is responsible for the
implementation of our enterprise learning function, drawing
upon best practices from the public and private sectors. The
CLO's chief responsibilities include formulating and
implementing the agency's learning and development strategy;
establishing goals and objectives that support the strategy;
developing quantitative and qualitative research and reporting
findings associated with each of the goals; and assessing the
agency's progress in achieving those goals. Placing a premium
on workforce upskilling, SBA will expand education, training,
certification, mentoring, and broaden opportunities available
to employees at all levels. These actions will build leadership
capacity, improve our talent management, and foster a culture
of continuous learning.
4.) Recommendation: To improve management of the
Small Business Administration and to improve SBA's
human capital management, the SBA Administrator sho9uld
incorporate into its next training plan key principles
such as goals and measures for its training programs
and input on employee development goals.
SBA has identified learning and development goals we will
include in the workforce plan. Upon completion of the
competency assessment (referenced in Response 3), the SBA will
use the results to inform additional measures for employee
development. To support the achievement of overarching goals
outlined in the Agency's learning and development strategy, SBA
will set quantifiable targets with specific timeframes at the
program level. The Agency's CLO, working closely with senior
management, will subsequently measure learning effectiveness
and return on investment associated with each of the supporting
programs. Assessing progress and outcomes against targets will
strengthen transparency and accountability.
5.) Recommendation: To improve management of the
Small Business Administration and to ensure that SBA's
organizational structure helps the agency meet its
mission, the SBA Administrator should document the
assessment of the Agency's organizational structure,
including any necessary changes to, for example, better
ensure areas of authority, responsibility, and lines of
reporting are clear and defined.
When I arrived at the Agency in April 2014, I undertook a
full review of SBA's organizational structure. While I believe
our structure and lines of reporting are well defined in the
current structure, we are continually examining the
possibilities. Our goal is to optimize SBA's service delivery
systems to ensure that entrepreneurs and small businesses
receive the support they need as efficiently as possible.
In this regard, we analyzed and instituted several
structural changes in FY 2015. For example, the Office of Field
Operations (OFO) completed a position review for its Managers,
Business Opportunity Specialists, Lender Relations Specialists,
and Economic Development Specialists. We incorporated the
identified attributes into updated Position Descriptions. OFO
revised critical elements and performance standards as a
result. We have established an Office of Intergovernmental
Affairs to address streamlining challenges at the local
government level, where most small business licensing occurs.
The Office of the Chief Information Officer underwent an
organizational restructuring at the division level to improve
workflow.
6.) Recommendation: To improve management of the
Small Business Administration and to ensure that SBA
can effectively identify, assess, and manage risks, the
SBA Administrator should develop its enterprise risk
management consistent with GAO's risk management
framework and document the specific steps that the
agency plans to take to implement its enterprise risk
management process.
As GAO reported, SBA designated a senior agency official as
the Director of Risk Management in October 2013. Early in my
tenure I met with the Director, and in October 2014, I approved
the creation of an Enterprise Risk Management Board. We
formalized the composition of the ERM Board in April 2015, and
added a dedicated Enterprise Risk Program Manager in June 2015.
Together they have been developing a comprehensive Enterprise
Risk Management (ERM) process. I believe it is critical that we
continue to develop and document the ERM process to address
ever-evolving risks. As a former community banker, I have a
keen appreciation for the importance of managing risk. We are
making considerable progress with implementation of our ERM
process and will continue to monitor this critical function to
ensure milestones are met.
Recognizing the importance of this work, I appointed the
highest-ranking official under my command, SBA's Deputy
Administrator, as Chairman of the ERM Board. They have met 12
times from May to December 2015. One of the early projects of
the ERM Board was to draft an SBA ERM Board Charter, which I
approved on December 18, 2015. I remain personally committed to
developing an ERM program that meets SBA leadership needs and
is in compliance withy GAO and evolving OMB guidance.
7.) Recommendation: To improve management of the
Small Business Administration and to improve SBA's
program and management guidance, the SBA Administrator
should set time frames for periodically reviewing and
updating its SOPs as appropriate.
SBA has in place Standard Operating Procedure 00 23
(Directives Management Program), which outlines the creation,
format, clearing, publishing and distribution of formal SOPs
and their revisions. SOP 00 23 requires an annual attestation
by the head of each program office that a review of their SOPs
has determined the following: 1) no revisions are required, 2)
the SOP(s) are under review, 3) the SOP(s) are being revised,
and/or 4) the SOP(s) may be canceled. In an effort to improve
our SOP updates, I have required senior management to be
directly responsible for ensuring the review and dissemination
of SOPs under their jurisdiction. While the GAO reported that
71 SOPs had not been updated since the 90s, and some not since
the 80s, SBA has already updated approximately 15% of its SOPs
in the last two years. SBA Program heads are working diligently
to continue this momentum.
8.) Recommendation: To improve management of the
Small Business Administration and to help ensure that
SBA's IT operations and maintenance investments are
continuing to meet business and customer needs and the
agency's strategic goals, the SBA Administrator should
direct the appropriate officials to perform an annual
operational analysis on all SBA investments in
accordance with OMB guidance.
By the end of FY2015, we successfully completed operational
analysis for each of SBA's investments that have operations and
maintenance components. OCIO conducts the operational analyse4s
on an annual basis, but also conducts them on an as-needed
basis when issues arise. We continue to complete operational
analysis for each of these investments during their system life
cycles, and we maintain the documentation for required OMB
reporting of investment artifacts.
SBA has made significant strides in addressing the
information technology challenges. We're in the midst of a
major upgrade of our IT systems. It starts with a comprehensive
network infrastructure modernization to give our systems
greater capacity and reliability. We are in the final stages of
moving our entire email system into the cloud. Additionally,
we're investing in mobile technology because we recognize that
our SBA team members in the field need to get out beyond the
walls of federal offices and meet entrepreneurs where they are.
As you know, we have also launched projects to modernize our
loan and contracting systems and to re-engineer our disaster
credit management system.
This modernization agenda complements our work to update
our external platforms by bringing advances such as automation,
digital signatures, greater transparency, reliability and
online matchmaking to our lending partners and the
entrepreneurs we mutually serve. These time-saving and cost-
saving technological enhancements have encouraged community
bankers, CDFIs, and credit unions across the country to
initiate or increase their SBA lending.
I've been on the job at SBA for 20 months, and I'm proud of
the progress we have made in that time. But the truth is,
members of this committee have been committed to building a
strong SBA since long before I arrived. As a result of your
leadership and the daily efforts of our dedicated staff, I
inherited an agency highly leveraged and operating at a high
level in fulfilling our statutory mission.
The proof is in our record-breaking performance.
Of course, there is always room to improve, and I look
forward to continuing to work with all of you, your staff, the
Inspector General and the GAO to make the reforms necessary to
deliver the services that small businesses seek as well as the
systems and controls that taxpayers expect and deserve.
Thank you.
[all]