[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
SBA MANAGEMENT REVIEW: OFFICE OF
GOVERNMENT CONTRACTS AND BUSINESS
DEVELOPMENT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONTRACTING AND WORKFORCE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
FEBRUARY 3, 2016
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-040
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
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Richard Hanna............................................... 1
Hon. Mark Takai.................................................. 2
WITNESS
Mr. John Shoraka, Associate Administrator, Office of Government
Contracts and Business Development, United States Small
Business Administration, Washington, DC, accompanied by Mr.
Eugene Cornelius, Deputy Associate Administrator for Field
Operations, United States Small Business Administration,
Washington, DC................................................. 3
APPENDIX
Prepared Statement:
Mr. John Shoraka, Associate Administrator, Office of
Government Contracts and Business Development, United
States Small Business Administration, Washington, DC,
accompanied by Mr. Eugene Cornelius, Deputy Associate
Administrator for Field Operations, United States Small
Business Administration, Washington, DC.................... 17
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
SBA MANAGEMENT REVIEW: OFFICE OF
GOVERNMENT CONTRACTS AND BUSINESS
DEVELOPMENT
----------
WEDNESDAY, FEBRUARY 3, 2016
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Workforce,
Washington, DC.
The subcommittee met, pursuant to call, at 3:00 p.m., in
Room 2360, Rayburn House Office Building. Hon. Richard Hanna
[chairman of the subcommittee] presiding.
Present: Representatives Hanna, Hardy, Kelly, Takai, and
Clarke.
Chairman HANNA. I call this hearing to order. Thank you,
everyone, for being here.
The Small Business Committee has spent the past month
conducting intensive oversight of the Small Business
Administration. Today, this Subcommittee is going to examine
the Office of Government Contracts and Business Development
(GCBD), which faces similar challenges, as do other parts of
the agency. Specifically within this program, SBA needs to do a
better job with human capital management, information
technology, and reducing organizational duplication. SBA's
untargeted use of voluntary early retirement authority and
voluntary separation incentive payments appear to have left the
GCBD without the personnel required to perform a statutory
mission. It is unclear why the SBA offers buyouts to
procurement center representatives (PCRs) knowing that under
the current law they would only replace a fraction of the
employees who just left. Likewise, why would the SBA buy out
the individual responsible for drafting procurement regulations
at the time when the SBA is not meeting its own statutory
deadlines? Similarly, the Inspector General found that the
GCBD's attempt to implement a unified IT system to track
HUBZone and 8(a) participants violated contract law and failed
to meet the office's requirements. The fact that a system
designed to reduce fraud and implement program oversight has
not yet been put into use is not acceptable. We can do better,
and we will do better. Additionally, GCBD seems to have offices
with duplicative and unclear missions, and too frequently
relies on evaluated field staff. Given that in Fiscal Year 2014
nearly 40 percent of all Federal contract dollars went to small
business, taxpayers deserve an organization that can
effectively manage prime contracting, subcontracting, 8(a)
HUBZones, women-owned businesses, and service-disabled veteran-
owned businesses contracting programs.
Indeed, GAO identified seven open recommendations with
which the GCBD agreed but had not yet done anything towards
implementation. Some of these requirements are simple to
accomplish since they would only require that the SBA take
actions already required by the law. These include submitting
the annual bundling and consolidation reports or tracking post-
completion success rates for participants in the mentor-protege
relationships. I also hope today we will get an honest answer
and candid answers from the SBA on what we need to do to fix
these problems.
With that, I yield to Ranking Member Takai for his opening
remarks.
Mr. TAKAI. Thank you, Mr. Chairman, and aloha. I know we
were supposed to have this hearing last week. I was looking
forward to it. I want to wish you a happy belated birthday.
Chairman HANNA. You got snowed in in Hawaii?
Mr. TAKAI. Yes. Last week, Monday was a very eventful day
for many of us, but yeah, happy birthday, Chairman.
The Federal Government is spending almost half a trillion
dollars annually on the purchase of goods and services needed
for its daily operations. As such, the U.S. Government remains
a consistent and reliable client, yet the Federal marketplace
is a hard space to break into. Recognizing the need for a
diverse market, Congress included goals for small business
participation in Federal procurement, and created a variety of
contracting programs to help small firms compete in the
marketplace.
The SBA Office of Government Contracting and Business
Development plays a vital role in this process. The GCBD Office
works with agencies to help them meet the small business goals.
It also implements and oversees programs used by many small
firms to start contracting with the government, and they have
been somewhat successful in these tasks. In Fiscal Year 2014,
the government surpassed the small business goals, awarding $91
billion, or almost 25 percent of the dollars to small
businesses. These awards allow the government to receive
quality goods and services at competitive prices and strengthen
its industrial base. However, as the Chairman noted, there is
always room for improvement, and this office is no exception.
The government as a whole and some agencies have failed to meet
all of the small business participation prime and
subcontracting goals. These failures deprive small business of
billions in contracting dollars.
Additionally, the Committee has seen a continued use of
bundling and consolidation through the years. Contract values
have risen so high that only a limited amount of businesses are
able to bid, resulting in fewer large firms receiving
contracts. It appears this trend has impacted the participants
in the SBA contracting programs as the number of firms in these
programs has also declined.
The ability of small businesses to compete in the Federal
marketplace has been adversely affected by the lack of staff in
the GCBD office as it continues to be understaffed. There are
currently only 50 procurement center representatives and 30
commercial market representatives overseeing millions of
contracting actions. Small businesses cannot be adequately
advocated for with such few numbers promoting their use and
ensuring that agencies are following the small business set-
aside procedures.
Lastly, SBA has been slow to implement changes made by this
Committee to SBA's contracting programs. These changes have
been aimed at increasing participation by small businesses and
removing barriers these firms face in competing for contracts.
This inaction has caused confusion among firms and contracting
personnel. Therefore, I am particularly interested in what the
GCBD office is doing to make sure these changes are made
quickly so that small businesses can start taking advantage of
these changes.
Mr. Chairman, we are seeing small businesses leave the
marketplace at high rates. As such, this hearing is critical to
determine what can be improved upon at the SBA to ensure that
these firms have equal access to contract opportunities. I look
forward to hearing from Mr. Shoraka about how SBA plans to
address some of these issues and determine how this Committee
can work with the SBA to see what can be done to ensure that
small businesses have access to the Federal marketplace.
Thank you, Mr. Chairman, and I yield back.
Chairman HANNA. Thank you.
I will not bother to explain the timing. You have been here
many times.
Our first witness today is Mr. John Shoraka, the Associate
Administrator for the Government Contracts and Business
Development. He has been in this role since December of 2011,
and of course, has testified before this Committee before.
Welcome back, and you may begin.
STATEMENT OF JOHN SHORAKA, ASSOCIATE ADMINISTRATOR, OFFICE OF
GOVERNMENT CONTRACTS AND BUSINESS DEVELOPMENT, SMALL BUSINESS
ADMINISTRATION
Mr. SHORAKA. Thank you, Chairman Hanna, Ranking Member
Takai, and members of the Subcommittee. Thank you for having me
and giving me the opportunity to testify here today.
Small businesses are agile, innovative, and affordable
partners for the Federal Government. Through small business
contracting, the Federal Government acts as a catalyst for
small business growth and innovation while supporting economic
security for the nation. Over the past 7 years, the
administration, Congress, SBA, and Federal agencies have been
focused on increasing small business contracting opportunities
across the Federal Government. This increased focus has
resulted in over $550 billion in Federal contracting dollars
being awarded to small businesses from Fiscal Year 2009 to
2014. Of that, $91.7 billion was awarded in Fiscal Year 2014,
which represents an incredible impact to the American economy,
that drives innovation, growth, job creation, and supports over
550,000 jobs across the nation.
In Fiscal Year 2013 and 2014, the Federal Government
exceeded the 23 percent goal, representing 2 consecutive years
of this achievement for the first time since 2005. Current
year-to-date performance for Fiscal Year 2015 demonstrates that
the Federal Government should again exceed the 23 percent goal,
along with three of the four socioeconomic categories. If
achieved, this would be the first time since the program's
inception that the women-owned small business goal of 5 percent
has been met. It would also be the 21st consecutive time the
small disadvantaged business goal has exceeded, and the fourth
consecutive year for achieving the small disadvantaged service-
disabled veteran-owned small business goal. These achievements
are the result of the dedicated and focused efforts of the
Small Business Administration and Federal agencies to support
small businesses as they play a critical role in building and
sustaining the nation's industrial base and strengthening our
economy.
Over the last few years, the SBA's Office of Government
Contracting and Business Development has begun a variety of
streamlining efforts to enhance and improve customer service,
create efficiencies, and reduce administrative burden on small
businesses. These efforts include significant improvements in
processing of HUBZone, 8(a), and Mentor-Protege applications,
and finalization of the HUBZone, 8(a), and WOSB standard
operating procedures. In addition, GCBD initiated efforts to
invest in IT solutions, which will provide efficiencies for our
interactions with our small business customers. Furthermore, as
we continue to support small business contracting
opportunities, Administrator Contreras-Sweet authorized the
hiring of 10 additional PCRs (procurement center
representatives) for oversight of Federal buying activities.
Of great importance, SBA implemented over 25 provisions
found in the Small Business Jobs Act of 2010 and subsequent
National Defense Authorization Act and is making great progress
on the remaining statutes. Provisions implemented include the
WOSB Industry Study; the WOSB Sole Source Rule; accountability
of senior executives; total and partial set-asides and reserves
under multiple award contracts; revisions to the reporting
structure of the Offices of Small and Disadvantaged Business
Utilization; including of overseas contracting in the Fiscal
Year 2016 goaling base; and increased training and
certification for our staff. We are also making significant
progress on implementing the Mentor-Protege Program to offer an
expanded program to all small businesses and have issued an
Advanced Notice of Proposed Rulemaking for the certification of
women-owned small business firms.
While we continue to support and improve contract
opportunities for small businesses, there are always
opportunities to build upon our strengths and improve in
certain areas. We acknowledge the recommendations from the
General Accountability Office and Inspector General that remain
open and need to be closed with urgency. Closure of open
recommendations is one of my highest priorities, and we are
actively working with the IG and the GAO to come to meaningful
resolutions that will benefit small businesses through improved
SBA policies and programs. We initiated and scheduled regular
face-to-face meetings with GAO and IG leaders, resulting in the
closure of nine GAO and three IG recommendations within the
past 12 months. The recently closed recommendations include
improving monitoring of and procedures used in assessing the
continuing eligibility of 8(a) firms and assessing resource
allocation of PCRs and commercial market representatives to
successfully carry out our duties. We take the remaining open
GAO and IG recommendations seriously and are committed to
resolve all of them.
In closing, I would like to recognize the commitment to
small business from Congress; in particular, from the House
Small Business Committee. I would also like to acknowledge the
commitment from the administration, our Federal agencies which
have recognized the value of small business, and remain
committed to providing meaningful contracting opportunities.
Led by Administrator Contreras-Sweet, we will continue to fight
for small business, to improve participation for firms to
compete for and successfully win contracting opportunities.
Thank you.
Chairman HANNA. Thank you.
Are you saying there is nothing wrong and that you are on
schedule and that you agree with everything that was alleged to
be wrong or incomplete? You still have final rules from 2013,
2014, and 2015. So why are we here? I know why we are here, but
what I hear you saying is that you are on schedule. Do you
agree with GAO?
Mr. SHORAKA. Sure.
Chairman HANNA. So do you agree with them completely?
Mr. SHORAKA. I think on their recommendations, we have
agreed to implement them. I do want to point out that a lot of
those recommendations that are still outstanding are from
before the time that I was with the SBA.
Chairman HANNA. But would not that mean that would be the
first thing you did when you got there, not the last thing?
Mr. SHORAKA. I think we want to make sure that we
prioritize in a way that achieves our objectives. In other
words, we prioritize in a way where we expand participation of
small businesses in the procurement world, and we achieve our
goals. I think indicated by our progress against the goals, we
have been pretty successful. And as I said, that is not to say
that there is not additional recommendations necessary to be
implemented, and we certainly, as I mentioned in the last 12
months, have been successful in sitting down face-to-face with
the IG and GAO, and we are certainly committed, as our
administrator said, to work through the remaining IG and GAO
recommendations.
Chairman HANNA. So to read between the lines, are you
saying that the timing and the order of the recommendations,
just because some are older, some are newer, that you have
prioritized them in a way that makes them logical and
concurrent?
Mr. SHORAKA. I think that is fair to say. I think it is
fair to say that as we look at these couple of things. One is
you mentioned the rulemaking process and reaction to the
statutes, and I want to clearly acknowledge that working with
this Committee and working with the Hill, there is a lot of
statutes and provisions in statutes that has helped level the
playing field for small businesses to participate in Federal
contracting, and we have worked diligently to implement a lot
of those provisions.
Chairman HANNA. Can you explain why you are buying people
out and then hiring new people at the same time to do the same
job?
Mr. SHORAKA. Yes. So obviously, as you know, the agency
went through a VERA/VSIP program. I am not the head of our HR
and I certainly do not want to comment on that topic, which is
something that our human resources office is responsible for,
but what I will say is the mention that you make with respect
to PCRs, we have done a significant analysis of where PCRs
should be located based on buying activity small business
opportunities and based on some of the folks that have retired
have reramped up in areas that were not previously covered. So
as you mentioned previously, obviously we have thousands of
buying activities to cover with limited resources. It is
important for us to analyze buying activities and the small
business opportunity that resides at the different types of
buying activities and readjust our coverage to make sure that
we are hitting the most opportune centers.
Chairman HANNA. So what you are really saying is that the
people who retired were not relevant to the workload
geographically?
Mr. SHORAKA. No. I think what I am saying is that it gave
us an opportunity to identify places where we might make a
significantly bigger impact.
Chairman HANNA. And presumably you bought people out rather
than ask them to move?
Mr. SHORAKA. No. Again, I would not tie the VERA/ VSIP
directly to the reassignment of PCRs. The VERA/VSIP decision is
a decision that was made by HR and the agency. What I am saying
is that in staffing back up with respect to PCRs, we have had
the opportunity to actually analyze where the greatest buying
activities are.
Chairman HANNA. I can appreciate that, but did their job
descriptions not allow you to move them around?
Mr. SHORAKA. Certainly.
Chairman HANNA. So again, the same question, why are we
laying them off?
Mr. SHORAKA. Right. I would have to get back to you, but
again----
Chairman HANNA. Can you do that for this Committee? I mean,
it is a legitimate question, especially when you are going to
go out and hire 10 more people, which you said----
Mr. SHORAKA. Sure. Happy to do that.
Chairman HANNA. Thank you very much.
Mr. Takai?
Mr. TAKAI. Thank you, Mr. Chair.
Last year I introduced legislation that was included in the
Fiscal Year 2016 NDAA, which allowed the Native Hawaiian
organizations to qualify for the HUBZone program. Understand,
this is my second year, but I understand this has been many
years in the making. Can you give me a timeline as to when SBA
will be able to release the corresponding regulations for this
particular change?
Mr. SHORAKA. Sure. I have been here now for 4 years, but I
come from the private sector, and coming to this side of the
fence, it is awakening a little bit with respect to the
rulemaking process. Not only do we have to draft the rule
internally and get it cleared through our building and through
our general counsel's office, but then it has to get
interagency clearance throughout all Federal agencies, right?
Because our rules oftentimes have an impact upon our sister
agencies. Interagency review period on a proposed rule
oftentimes is 90 days. Then we get it back and we make
adjustments, but then I think it is important, and I think you
would all agree, that we have a public comment period. Because
when we make rules, we want to make sure that our constituents
understand the impact with how it is going to impact their
business. And not only that, we want to make sure that we
gather their comments and incorporate that in. So that is
another 90 days. So that is two 3-month periods, so that is a
total of 6 months right off the back, and that is not even the
rulemaking process. Drafting, right? Once we have incorporated
the comments from the public, we will go out for a final 90 day
period for our interagency, our sister agencies to comment.
That is a total of 9 months, not including any drafting of
rules in that respect.
I will add that with respect to provisions where the intent
of Congress is very clear, as an example, the women-owned small
business sole sourcing provision or removal of the caps in the
Women-Owned Small Business program, we were able to work with
our sister agencies with OMB, to issue an interim final rule to
go out relatively quickly in a matter of 6 months. What we are
doing right now with respect to the NHO provisions and the
HUBZone provisions is trying to determine if we can move in an
interim final rule process or do we need to go through the
entire rulemaking process.
Mr. TAKAI. Okay. So notwithstanding the 9 months that you
mentioned, and this amendment also included disaster zones and
BRACs, so there are three components, I am assuming you are
going to move them altogether?
Mr. SHORAKA. Yes.
Mr. TAKAI. How much time is it going to take for your
office to get up to the 90 days? I am sorry, the 9 months?
Mr. SHORAKA. We work closely with our Office of General
Counsel. As was mentioned earlier, we have a number of
provisions that we are working to finalize, including the
mentor-protege rule, limitations on subcontracting, et cetera.
I think we can work, you know, I do not want to commit to a
timeframe, but I think relatively speaking, 3 months, 4 months
to draft something that could go out for interagency comment is
reasonable.
Mr. TAKAI. Okay. Great. Thank you.
Over the past few years we have seen the average dollar
value of small business contracts go up and fewer small firms
participating in the marketplace. This is especially true with
some of the SBA programs in which we have seen the number of
participants actually decline. Why do you think this trend is
occurring, and what actions is the SBA taking to reverse it?
Mr. SHORAKA. Thank you. Thank you for that question. I
think that is a really important question in the sense that the
Federal Government, as we all know, has to buy smarter. We need
to figure out how to reduce budgets and buy smarter. Sometimes,
what that has looked like, is consolidation of requirements
into larger requirements and more complex requirements. What
happens then is you have a more complex and larger requirement
that sometimes a small business cannot pursue. We have been
working closely with the Office of Federal Procurement Policy
and GSA to make sure that when that happens, when a requirement
comes out that is consolidated or more complex, two things. One
is we received authority from Congress to allow for better
teaming for small businesses. In other words, opportunities for
small businesses to team up and jointly go after these larger
and more complex projects. That is one that we are working on
and hope to have finalized shortly. The other is if we are
setting up vehicles that are multi-year and very broad, are we
casting a broad enough net to bring in small businesses to
participate? And do we have on and off ramps? In other words,
if a limited number of small businesses are participating and
we are hitting our small business goal, that is a good thing,
right? But we want more small businesses to participate. So do
we have on and off ramps to allow new small businesses to come
on to do the work while the ones that have grown can graduate
from that particular vehicle? So there are certain things that
we are trying to implement in this environment to ensure that
small businesses play a fair share in the marketplace.
Mr. TAKAI. Thank you.
Thank you, Chairman.
Chairman HANNA. Mr. Hardy?
Mr. HARDY. Thank you, Mr. Chairman.
You know, as I sit here, I truly believe that the SBA is
doing some great work, but there are some major deficiencies
that I have concerns about. The GAO highlighted some specific
things that were to happen. I would just like to read a few of
these highlighted spots. It says, ``Provide clear and complete
guidance to PCRs and CMRs.'' That was a 2011 report. Also 2011,
``Require monthly GCAR data are verified.'' The 2013 report,
``While SBA agreed that the recommendation had not been
complied with at the time of the management report prompting
GAO to again recommend that the SBA file the required
reports.'' Then we go back here to the 2011 report again. It
talks about, ``There was little or no tracking of the prodigy
firms to see if the programs produced lasting benefits.''
Now, as a former small business owner myself, I just want
to explain this is really frustrating to me how this could
happen because it is not like we are short of manpower or like
there is not an obligation. I know it is a different type of
business, but it is still a business the way things operate. I
had a construction business, I had a concrete and aggregate
business, I had a golf course, and I had a restaurant. None of
them hardly fit in most cases together. But through that
process--I will just give you an example, my construction firm.
Within less than 3 years, I knew exactly, to the penny almost,
what it was going to cost me to lay a piece of pipe in the
ground, what size pipe, the depth. Every foot that I put in, I
knew what the cost was going to be. Just using that as an
example. I knew the difference between soil types, what it was
costing me. I knew which different teams were better at putting
certain things in the ground, and so we tracked that. That is
what the private sector does. In the restaurant business, you
know, when you are losing on something, you track it and find
out why certain things are not moving. You have to be flexible
and move and you have to respond. In the concrete and aggregate
business, we have to make sure that materials that we spend we
do not lose money on. And it is tracked. The private sector
does that in-house with their foreman, with whatever, people
that are already hired to make that happen. This is the
frustration in me. Why is this not happening at the SBA level
in whatever tracking is getting done?
Mr. SHORAKA. Thank you, Congressman.
I think that it is happening in a lot of instances. Again,
I do not want to discount the fact that we have, through our
staff, through the very people that work in these offices, have
been able to, for the first time in a long time, met the goals
with respect to the statutory requirements. I will say that
with respect to the GAO recommendations, there are a lot of the
recommendations where we have actually submitted material to
the GAO and are waiting for a response with respect to the
acceptability of have we met the requirements of that
recommendation.
Mr. HARDY. I just want to follow up. This Mentor-Protege
Program, as we know, 64 percent of this nation was employed by
small businesses, and now it is beyond decline. It is
collapsing. I think your program, this Mentor-Protege Program,
it is very important that we track that to find out which
businesses are succeeding and why, and how can we help, or
where are we getting in the way. I want to make sure that those
small businesses are successful, and I think that is what your
job is, to make sure that we get those reports so we can do our
job here.
So my frustration is, and only being here a year I cannot
really be too angry, but it cannot go on longer. We have got to
make sure what we can do to help those small businesses
succeed, find out why they are failing, so we can move in a
different direction to help those situations, and I think we
will see an economy grow again and move again. That is why the
SBA is so important to me.
Mr. SHORAKA. Thank you. Just one last comment on that. We
also feel, with the authority given with respect to expanding
the Mentor-Protege Program, not just in the 8(a) program but to
all small businesses, is an excellent vehicle for helping small
businesses grow and become acclimated with the Federal
procurement process. We are looking to implement that program
over the summer.
Mr. HARDY. Well, you know, in my area there are still the
small businesses and the chambers and folks that still meet
with me and have frustration. We have about $260 million worth
of military projects that go on out in our area with Nellis and
Creech out there. Very little of that goes to the small
businesses. It ends up being so convoluted and being involved
that it is very challenging for them to get some of those
projects. We need to maybe look at different avenues, how we
can team these small businesses together to make them maybe a
big business that have the opportunity to have some of the same
successes. So just an idea. Thank you for your time.
Chairman HANNA. Ms. Clarke?
Ms. CLARKE. Thank you very much, Mr. Chairman, and to our
ranking member. And, of course, to Mr. Shoraka, thank you so
much for coming and briefing us, bringing us up to speed with
where you are with respect to all the recommendations that have
been before you and your agency.
I wanted to just comment that through your testimony, you
indicated that you have closed nine GAO recommendations and
three Inspector General recommendations in the last 12 months.
That is great. That is really good. I commend that effort that
you have put into addressing the list of recommendations. What
would you say are your next most pressing recommendations that
you are working on closing, and how much time do you expect
that those recommendations would take? And then finally, can
you just update us a bit more on the progress that you have
made in expanding and implementing the Mentor-Protege Program?
Mr. SHORAKA. Sure.
Ms. CLARKE. Thank you.
Mr. SHORAKA. Thank you, Congresswoman.
I think one of the areas where we are looking to finalize
some of the recommendations, and they touch on multiple
recommendations, both from the GAO and the IG, is the
finalization of our SOPs, our standard operating procedures,
around the 8(a) program, around the HUBZone program, and around
the Women-Owned Small Business program. I think that is
important for our sister agencies, our contracting community to
understand how the programs work. It is important for our
field, and it is important for our own staff. So we are looking
to finalize those SOPs within the next 6 months.
With respect to the Mentor-Protege Program, we had the roll
out last year for public comment. We received significant
public comments on the Mentor-Protege Program and wanted to
make sure that we incorporated industry's concerns in
finalizing a program. We think it is important to make sure
that we get it right. We think it is going to be a very useful
program. We have heard from industry about how soon can we get
involved in this Mentor-Protege Program, and we think it is
going to be very useful, but we wanted to make sure we got it
correct. The rule should be out in the final interagency review
process by the end of this month. That will take 3 months in
the interagency review process, so sometime over the summer the
rule should be published as a final rule.
But we did not stop there. We have had a parallel working
group for institutionalizing the programs. So we did not say,
let us wait until the rule is finalized and then we will figure
out how to institutionalize this program; we have actually had
a working group engaged from our field staff, engagement from
our general counsel's office, because it affects everybody,
right? To make sure that as we roll this out, as we
institutionalized it, we could dedicate the necessary resources
and that we had the processes, the workflow processes, the
approval processes, and I think something that was mentioned
before, the tracking processes. As we roll this out, do we have
a way to track what is the impact with respect to the program?
And not only the mentor-protege relationship with the benefits
flowing from the mentor to the protege, but also the joint
ventures that happen under that Mentor-Protege Program. Is the
protege getting their fair share of that contract? We want to
make sure the systems are there to be able to track that. But
we hope, and are planning, to have the program itself up and
running in a limited fashion by the end of the summer as well.
Ms. CLARKE. Are you looking at particular, I guess, sort of
regions in which you think that you can get it up and running
quicker and that you could sort of do a test trial, if you
will? Have you thought about that? What conditions would be the
best to really be able to drill down on the effectiveness of
it?
Mr. SHORAKA. The proposed rule when it went out, it
actually asked some questions around how do we create a--I do
not want to say pilot, but a limited roll out? And there were
questions about maybe focusing on areas where our goals had not
been met, like the women-owned small business or the HUBZone.
But the predominant feedback that we got is that there is a lot
of industry waiting for this to happen, and they felt it unfair
if we focused on one area rather than the other. We are going
to roll it out in some fashion at the end of the summer, and we
will see what the impact is to our resources to determine how
do we become gatekeepers to not overwhelm the staff that we
have.
Chairman HANNA. Thank you.
Mr. Kelly?
Mr. KELLY. Thank you, Mr. Chairman, and thank you, Ranking
Member Takai. I thank the witness for being here.
Over 3 years ago, as part of the 2013 National Defense
Authorization Act, Congress changed the process by which SBA is
to set size standards. On January 26, 2016, your office
published a final rule establishing size standards for
industries with employee-based size standards not part of
manufacturing, wholesale trade, or retail trade. In that rule,
your office stated that it was going to continue limiting the
number of size standards to anchor standards even though the
2013 National Defense Authorization Act said SBA may not limit
the number of size standards. While I maintain that this latest
rulemaking violated the Small Business Act, I was particularly
surprised to read in the rule that, I quote, ``As part of the
preparation for the next round of size standards review as
required by the''--and this is mine, 2010 Jobs Act, ``SBA is
currently reviewing and updating its current size standards
methodology white paper to incorporate the provisions of the
2013 National Defense Authorization Act to the extent
possible.'' This suggests that SBA believes it is acceptable to
pick and choose provisions of the NDAA so as not to upset its
white paper. Is your position, or is it the position of the
Small Business Administration that you think that a white paper
trumps a statute passed by Congress?
Mr. SHORAKA. No.
Mr. KELLY. Well, please explain why this is contrary to
that then.
Mr. SHORAKA. Sure. The Small Business Jobs Act of 2010
required the Small Business Administration to do a
comprehensive study on all of its size standards every 5 years.
In moving forward with that review--and it had not been done
for decades--in moving forward with that review, we went
through a public comment period with respect to our white
paper. So we drafted a methodology that we thought was
responsive to the Small Business Jobs Act of 2010, and we put
it out for public comment because, obviously, it is going to
affect our constituents. It is going to affect our small
businesses. We wanted to make sure it reflected their input as
well. That methodology, that white paper, was used for the full
cycle of the reviews based on the 2010 Small Business Jobs Act.
We thought it was not necessarily appropriate to change the
rules of the game in the middle of the game. What we wanted to
do was make sure that we did the entire 5-year review process,
and in fact, with these last three rules, we did come in
exactly on target with respect to doing a comprehensive review
in 5 years. And the rule actually said, the Small Business Jobs
Act of 2010, said once you are done you are going to have to
keep doing it over and over again every 5 years. That is why we
are going out with a white paper, incorporating the provisions
of NDAA 13, and going to public comment to make sure we are
getting it correct in the next full comprehensive revisions.
Mr. KELLY. I would just, as a lawyer by trade, I would tell
you that law changes all the time, and as a former district
attorney, I could not rely on a 2010 law when a 2013 law
superseded it. So you have to agree with the most current law,
whether you want to or not. The most current, even if they
conflict, you go with the most current that the ruling body
has.
My next question is in your testimony you talk about the
percentage of small business eligible dollars that went to
small businesses. From the staff, I understand that about 19
percent of all Federal contract dollars are excluded from these
goals, but the SBA does not consider these small business
eligible. However, I understand that the 2013 National Defense
Authorization Act required that SBA revise and publish its
goaling guidelines by June of 2013 and that the new guidelines
required to eliminate most of these exclusions. Why has the SBA
not done this yet?
Mr. SHORAKA. We did revise the goaling base in 2014. We did
an analysis. After the National Defense Authorization Act of
2013, we actually had our Office of General Counsel conduct an
analysis of what is excluded and what is not excluded, and do
we have any justification for excluding anything. Based on that
analysis, there were revisions to the goaling base in 2014, and
then the one major change, which would have a significant
impact on agencies, particularly with agencies doing work
overseas, was overseas contracts, contracts performed overseas.
That change in inclusion of the overseas goaling base will be
effective in 2016, but we wanted to make sure we engaged our
sister agencies because of the impact it is going to have on
the procurement workforce, and we spent the better part of the
latter half of 2014 and 2015 working with the procurement
workforce to make sure we got it right.
Mr. KELLY. I thank you for your testimony. Mr. Chairman, I
yield back.
Chairman HANNA. I will ask another question if no one
minds. We will be called for votes very soon.
One of the issues with all of this is the time it takes to
get things done, right? You know that. That is part of why you
are here today. This Committee wants to help. We are all in the
same place here in terms of our desire to help small
businesses. But what are you doing? The time it takes for small
business rules to get through the FAR Council, and you
mentioned that you expect some final rules to be issued soon on
2013, and we know that once these rules are written, it can
take more years, maybe even 2 or 3 more years. So that is
partially a statement but partially I want to ask you how can
this Committee help you change that? Because that is really a
lot of why we have these hearings is complaints over
performance implying that you are not doing your job. You think
you are. We are saying, ``Okay, but.'' My question to you is,
are there things we can do to help you get this done assuming
everyone is in earnest in terms of their desire to finish what
they start?
Mr. SHORAKA. I think you mentioned the FAR Council. I think
the FAR Council has competing priorities, right? So they are
responsible for Federal acquisition, not only just small
business acquisition and the Federal acquisition rulemaking
process. If there is a clearer or cleaner way with the
administrator working with the FAR Council might be something
that would be helpful.
Chairman HANNA. Are you prepared to write something and
tell us what that would look like?
Mr. SHORAKA. Certainly. I would be happy to consider that
and come back with some recommendations.
The other point that, you know, obviously, we have touched
on today, there are always competing priorities within the
agency with respect to what is most important? What can have
the most significant impact for our small business
constituents? We feel they are our customers, as I am sure you
do. So what do we focus on? And quite frankly, some of the
times it can be a resource question because we have limited
resources, so we are going to focus on the things that we feel
are going to have the biggest impact with respect to small
business participation in the Federal marketplace.
Chairman HANNA. So you can get back to us and let us know?
Mr. SHORAKA. Sure.
Chairman HANNA. I realize you have to speak to, perhaps,
Ms. Sweet.
Mr. SHORAKA. Of course.
Chairman HANNA. Is there anyone else who would like to ask
additional questions?
Mr. Takai? Go ahead. Votes have not been called yet, so if
you are here, we would just as soon keep going.
Mr. TAKAI. Thank you, Mr. Chairman.
The 8(a) program is the main vehicle in which minority-
owned businesses enter the Federal marketplace. However, there
have been a number of cases that have challenged the
constitutionality of the 8(a) contracting program, and some
such as the Roth case have been successful. What steps is the
SBA taking to protect this important program from
constitutional challenges?
Mr. SHORAKA. Thank you. Our Office of General Counsel is
very much involved with the Department of Justice, as well as
Commerce. We worked closely with Commerce. We worked very
closely with some very well-known and nationally-recognized
statisticians to defend the program with respect to how the
program works to serve an underserved community and what the
disparity is with respect to the underserved community actually
participating in the Federal marketplace. We are absolutely
committed in making sure that this program benefits the
underserved community. We are absolutely committed in defending
the program, and we have worked very closely with Commerce, as
well as the Department of Justice to make sure that the program
is protected. I will add that when we did the Women-owned Small
Business Study with respect to industries where women-owned
small businesses are underrepresented, we used the same
methodology that proved to be very successful in the Rothe
case, to make sure that our study in underrepresentation in the
Women-Owned Small Business program was similar to how the 8(a)
program was defended.
Mr. TAKAI. Okay. And a follow-up. Is the SBA currently
collecting on circumstances in which non-8(a) businesses have
claimed that they have been discriminated against?
Mr. SHORAKA. I could not answer that off the top of my
head, but I am happy to get back. Not that I am aware of, but
happy to get back on that.
Mr. TAKAI. Okay. Thank you.
In October 2014, a report on the Women-Owned Small Business
program, the GAO has previously recommended that the SBA should
establish and implement comprehensive procedures to monitor and
assess performance of third-party certifiers in the women's
procurement program. What is the progress that you have made in
implementing this recommendation?
Mr. SHORAKA. Thank you. We actually conducted--we do
reviews of women-owned small business firms in the WOSB
repository, and this past year we implemented the reviews of
the third-party certifiers. And as I mentioned earlier, we are
in the process of finalizing our standard operating procedures
around the Women-Owned Small Business program, and those
standard operating procedures will have incorporated in them
the review of the third-party certifiers. So we have conducted
one review already this past year, and moving forward we intend
to conduct them on a regular basis.
Mr. TAKAI. Okay, thank you. And then one last question, Mr.
Chairman.
You had mentioned including overseas contracts in the near
future as part of its baseline use to rate small business
goaling at each agency. I am just curious to find out what
outreach has been made to other agencies to alert them of this
change and what steps they can do to increase the small
business participation in this effort.
Mr. SHORAKA. Yes, thank you. That is one of the reasons
when we talk about the National Defense Authorization Act of
2013 and the effective date with respect to increasing overseas
contracts in 2016. One of the things that we have done over the
last couple of years is engage the agencies most affected by
this. And as you can imagine, Department of Defense is one of
them, State is one of them, and USAID, U.S. Agency for
International Development is the other. We have been working
very closely with their Office of Small and Disadvantaged
Business Utilization, with their chief acquisition officers, to
make sure that they understand this impact. As we establish
their goals for 2016, their goals reflected the impact. State,
for example, when we include overseas performance, they have a
significant reduction in performance when it comes to small
business procurement. So, of course, we want to give them a
stretch goal, but we do not want to give them a goal that is
not reasonable. We have worked with them very closely in
establishing a goal. Same with Department of Defense and USAID.
Mr. TAKAI. Okay, thank you. Thank you, Mr. Chairman.
Chairman HANNA. Mr. Hardy?
Mr. HARDY. Thank you, Mr. Chairman.
Last year, the GAO recommended that the SBA take better
steps to better ensure that firms are notified of the changes
in HUBZone 1 designations that may affect their participation
in the program. However, the mapping tools on the SBA website
appear to be out-of-date and hard to use. I guess I would like
to know what the SBA is doing to improve those for the next
round of redesignation.
Mr. SHORAKA. As part of our overall government contracting
IT solutions, the mapping solution is one of the areas we will
be focused on. But in the interim, we have implemented a lower
tech way of informing all our firms with respect to
redesignation. So on an ongoing basis, we send out emails to
our firms to make sure that they are aware of any
redesignations, and even though you mentioned that the maps
could potentially be out-of-date from time to time, we also
have spreadsheets of all the zip codes that include the
designation areas. But this will be part of the IT solution
package for government contracting and business development
that we are speaking of.
Mr. HARDY. Thank you. What is the status of the one track
system SBA purchased several years ago to track participants in
the 8(a) and the HUBZone 1 program, and why did the IG and the
GAO object to the procurement of what SBA is doing to ensure
that there is no solid monitoring system for these firms?
Mr. SHORAKA. So with respect to the systems that exist,
there are legacy systems that exist that monitor both the 8(a)
program and the HUBZone program. The one track system, which
went through the development process of identifying
requirements, both in the 8(a) and the HUBZone program, was a
system that did not necessarily meet all of the requirements as
had been identified. What happened with those requirements is
that that is what has been rolled up into the new IT for SBA,
or we call SBA-1 for government contracting. So those
requirements that were identified through that process are
being implemented through the SBA-1 initiative. What I would
say is that, you know, I cannot speak obviously to our
acquisition team at the SBA and some of the findings form the
OIG with respect to the acquisition process, but what I would
say is that as we move forward with this project, the IT
improvement or SBA-1, we have engaged the White House's Digital
Services team to make sure that we do a solid roadmap, and we
have engaged a small business firm to implement it in what they
call ``agile development.'' I am not an IT person, but I have
been briefed on what that means, but it means that we get a
deliverable or something to test every 2 to 3 weeks, and we
have seen that working already around the Women-Owned Small
Business program. So we are encouraged with the progress so
far, and that is a system that will be rolled out to the 8(a)
and the HUBZone programs as well.
Mr. HARDY. Thank you. I would just like to make a
statement. You know, I truly believe some of the economic
values that have happened in the recent year or so has come
from the SBA and some of its improvements that it has done. I
believe this program is vital to small businesses, which is
vital to our economy, so I believe that you guys are a vital
asset that needs to continue to evolve and become more
efficient, more effective, which will again help in some
avenues with the growth of our economy. So please continue to
try to be innovative and help us help you whatever we can. So
that is a statement I truly believe or I would not say it.
Mr. SHORAKA. Thank you, sir.
Chairman HANNA. Thank you.
Of course, we are aware that 2016, the National Defense
Authorization Act has a whole new package of things for you to
deal with, right?
Mr. SHORAKA. Absolutely.
Chairman HANNA. We have not finished 2013. We are piling on
again. What we would like to do is not see it take 3, then 2 or
3 more years, 6 or 7 years to implement this. Anything we can
do to help you to that end. I learned that your HR person--I
was going to ask you to go back and you why they were buying
people out and hiring people when they can move them around. I
learned that whoever that person was works for the Department
of Homeland Security now. And I would ask you to get back to us
with any recommendations.
Mr. SHORAKA. Absolutely.
Chairman HANNA. Like Mr. Hardy said clearly, we are here to
help.
Mr. SHORAKA. Thank you.
Chairman HANNA. If there are on further questions for our
witness, I would like to thank you for your time and testimony.
As I have said before, given the hundreds of billions of
dollars in Federal contracts that are at stake each year,
ensuring small businesses have the opportunity to compete for
Federal, prime, and subcontracting is very important. This will
not happen without properly structured staffing of the GCBD. I
am glad that H.R. 4341, which this Committee has successfully
marked up in this past month, I would ask that the GAO do a
deeper dive, take a look at this, get back to us, and let us
know how we can help organizationally and going forward because
as Mr. Hardy said, it is critical, and I run into people every
day in my private life that take advantage of the services the
SBA provides.
I would ask unanimous consent that every member has 5
legislative days to submit statements and supporting material
or the record. Without objection, this hearing is closed. Thank
you.
[Whereupon, at 3:56 p.m., the subcommittee was adjourned.]
A P P E N D I X
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
To Chairman Hanna, Ranking Member Takai, and members of the
Subcommittee, [to Chairman Chabot, Ranking Member Velazquez,
and member of the full committee present] thank you for the
opportunity to testify.
Small businesses are agile, innovative, and affordable
partners for the federal government. Through small business
contracting, the federal government acts as a catalyst for
small business growth and innovation, while supporting the
economic security of the nation. Over the past seven (7) years,
the Administration, Congress, SBA, and federal agencies have
been focused on increasing small business contracting
opportunities across the federal government. This increased
focus has resulted in over $550.7 billion in federal
contracting dollars being awarded to small businesses from
Fiscal Year (FY) 2009-2014, with $91.7 billion of small
business eligible contracting dollars being awarded in FY 2014.
The $91.7 billion in small business contracts represents an
incredible impact to the American economy that drives
innovation, growth, job creation, and support for over 550,000
jobs across the Nation.
In FY 2013 and 2014, the federal government exceeded the 23
percent small business prime contracting procurement goal,
representing two (2) consecutive years of this achievement for
the first time since FY 2005. Current year-to-date performance
for FY 2015, demonstrates that the federal government should
again exceed the 23 percent goal, along with three (3) of the
four (4) socio-economic goals--Women Owned Small Business
(WOSB), Service Disabled Veteran Owned Small Business (SDVOSB),
and Small Disadvantaged Business (SDB). If achieved, this would
be the first time since the program's inception that the WOSB
goal of 5 percent has been met. It would also mark the 21st
consecutive time the SDB contracting goal is exceeded and the
4th consecutive year of achieving the SDVOSB contracting goal.
The past and expected achievements for FY 2015 are the result
of the dedicated and focused efforts by the SBA and federal
agencies to support small businesses, as they play a critical
role in building and sustaining the nation's industrial base
and strengthening the economy.
Over the last few years, the SBA Office of Government
Contracting and Business Development (GCBD) has begun a variety
of programmatic streamlining and process improvements efforts
to enhance and improve customer service, create efficiencies,
and reduce the administrative burdens on small business firms.
These on-going efforts include, but are not limited to,
significant improvements in processing both HUBZone and 8(a)
Program applications, reduced timelines for 8(a) Mentor Protege
agreements, and finalization of the HUBZone, 8(a), and WOSB
programs' Standard Operating Procedures, which are nearing
final agency approval. In addition, GCBD initiated efforts to
invest in technological solutions, which will provide
efficiencies for our interactions with small businesses.
Furthermore, as we continue to support of small businesses
contracting opportunities, Administrator Contreras-Sweet
authorized the hiring of 10 additional Procurement Center
Representatives (PCRs), to support oversight of federal buying
center activities to ensure compliance with small business
regulations.
Of great importance, SBA has implemented over twenty-five
provisions from the Small Business Jobs Act of 2010 and the
National Defense Authorization Acts (NDAAs) of 2013, 2014 and
2015, and is making great progress on all other remaining
statutes. Provisions implemented to date include completion of
the WOSB Industry study, finalization of the WOSB sole source
rule, accountability of senior executives, total and partial
set-asides and reserves under multiple award contracts,
revisions to the reporting structure of Office of Small
Disadvantaged Business Utilization (OSDBU), inclusion of
overseas contracting in the FY16 goaling base, and increased
training and certification for staff. Also, we have been making
significant progress on implementing the Mentor Protege Program
(MPP) to offer an expanded program to all small businesses, and
issued an advanced notice of proposed rulemaking for
certification of WOSB firms.
While we continue to work to support and improve
contracting opportunities for small businesses, there are
always opportunities to build upon our strengths and improve in
certain areas. We acknowledged the recommendations from the
Government Accountability Office (GAO) and Inspector General
(IG) that remain open and need to be closed with urgency.
Closure of open recommendations is one of my highest priorities
and we are actively working with the IG and GAO to come to
meaningful resolutions that will benefit small businesses
through improved SBA policies and practices. We have initiated
and scheduled regular face-to-face meetings with GAO and IG
leaders resulting in closure of nine (9) GAO recommendations
and three (3) IG Recommendations within the last 12 months. The
recently closed recommendations include improving monitoring of
and procedures used in assessing the continuing eligibility of
8(a) firms and assessing resources allocated for PCR and
Commercial Center Representatives (CMRs) to successfully carry
out their duties. We take the remaining open GAO and IG
recommendations seriously and are committed to resolving them.
Additionally, we are highly committed to implementing any
remaining statutes and programmatic improvements to reduce
unnecessary burdens placed on small businesses in SBA's
processes and procedures. We are working intensely to
incorporate the remaining statutes from past NDAAs into
approved policies and regulations intended to allow an even
playing field for small businesses. We expect many of the
remaining statutes to be finalized in 2016, including the WOSB
certification rule, teaming and joint venture rules, and the
final MPP rule, along with a functioning MPP program. Further,
we will review program processes, including the 8(a) annual
review, and the HUBZone and WOSB Programs.
In closing, I would like to recognize the commitment to
small businesses from the Congress, in particular, the House
Small Business Committee. I also acknowledge the commitment
from the Administration and federal agencies, which have
recognized the value of small businesses, and remained
committed to providing meaningful contracting opportunities.
Led by Administrator Contreras-Sweet, we will continue to fight
for small businesses to improve participation for firms to
compete and successfully win federal contracting opportunities.
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