[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
GAO AUDIT REVEALS HALF-MEASURES TAKEN BY SMALL BUSINESS ADVOCATES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CONTRACTING AND WORKFORCE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
OCTOBER 25, 2017
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 115-043
Available via the GPO Website: www.fdsys.gov
_________
U.S. GOVERNMENT PUBLISHING OFFICE
27-254 PDF WASHINGTON : 2018
____________________________________________________________________
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
TRENT KELLY, Mississippi
ROD BLUM, Iowa
JAMES COMER, Kentucky
JENNIFFER GONZALEZ-COLON, Puerto Rico
DON BACON, Nebraska
BRIAN FITZPATRICK, Pennsylvania
ROGER MARSHALL, Kansas
RALPH NORMAN, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
DWIGHT EVANS, Pennsylvania
STEPHANIE MURPHY, Florida
AL LAWSON, JR., Florida
YVETTE CLARK, New York
JUDY CHU, California
ALMA ADAMS, North Carolina
ADRIANO ESPAILLAT, New York
BRAD SCHNEIDER, Illinois
VACANT
Kevin Fitzpatrick, Majority Staff Director
Jan Oliver, Majority Deputy Staff Director and Chief Counsel
Adam Minehardt, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Knight................................................ 1
Hon. Stephanie Murphy............................................ 2
WITNESSES
Mr. William B. Shear, Director, Financial Markets and Community
Investment, United States Government Accountability Office,
Washington, DC................................................. 4
Mr. Robb N. Wong, Associate Administrator, Office of Government
Contracting and Business Development, United States Small
Business Administration, Washington, DC........................ 5
Mr. Kevin Boshears, Director, Office of Small and Disadvantaged
Business Utilization, Department of Homeland Security,
Washington, DC................................................. 6
APPENDIX
Prepared Statements:
Mr. William B. Shear, Director, Financial Markets and
Community Investment, United States Government
Accountability Office, Washington, DC...................... 15
Mr. Robb N. Wong, Associate Administrator, Office of
Government Contracting and Business Development, United
States Small Business Administration, Washington, DC....... 38
Mr. Kevin Boshears, Director, Office of Small and
Disadvantaged Business Utilization, Department of Homeland
Security, Washington, DC................................... 41
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
GAO Report................................................... 44
Responsible Business Lending Coalition....................... 201
Social Security Administration............................... 233
GAO AUDIT REVEALS HALF-MEASURES TAKEN BY SMALL BUSINESS ADVOCATES
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WEDNESDAY, OCTOBER 25, 2017
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Workforce,
Washington, DC.
The Subcommittees met, pursuant to call, at 11:00 a.m., in
Room 2360, Rayburn House Office Building, Hon. Steve Knight
[chairman of the Subcommittee] presiding.
Present: Representatives Knight, Chabot, Comer, Evans, and
Murphy.
Chairman KNIGHT. Good morning. This hearing will come to
order. And we will see as members will be coming in as we get
going.
Okay, we have heard time and time again that small business
contractors are good for the government and good for the
economy. They are innovators. Job creators increase competition
and save taxpayer dollars in the process. That is why there is
a statutory goal of awarding at least 23 percent of prime
contract dollars to small businesses. Given their importance,
we need to ensure that they have every opportunity to compete.
Today we are here to talk about a critically important
advocate for small contractors within our federal procurement
ecosystem, the Office of Small and Disadvantaged Business
Utilization, or OSDBUs, operate on the front lines of
government procurement, acting as a protector and champion of
small businesses within the federal contracting space.
These offices are charged with the implementation and
execution of contracting assistance, related functions and
duties, specifically fighting against unjustified contract
bundling. In order to protect and preserve the interests of
small businesses across the Federal Government, each agency
with procurement powers has its own OSDBU office. Thus, it is
important to access whether these offices are faithfully
executing the responsibilities given to them.
The GAO conducted a comprehensive audit of 24 federal
OSDBUs, accessing their compliance with the requirement laid
out in section 15(k) of the Small Business Act. While the
report indicated widespread and varying degrees of
noncompliance, some of GAO's results are particularly
troubling. GAO found several agencies were not complying with
specific functional requirements in the Small Business Act. We
will explore those in more detail today. Furthermore, OSDBU
directors are continuing to report to persons other than the
head or deputy head of the agency, and some directors are
holding collateral duties.
Each of the section 15(k) requirements serve a unique and
essential function. Any noncompliance may impede the OSDBU's
ability to effectively advocate for small contractors.
With that said, agencies responded to GAO's findings in
various ways. Many agreed, stating that they would begin
complying with the section 15(k) requirements. However, some
disagreed and argued that due to the nature of the requirement
and the office, that particular requirements are unsuitable for
them. Some further argued that the internal structure of the
agency poses barriers to compliance, and that noncompliance can
be attributed to the agency seeking efficiencies among its
programs and offices.
Agencies should not be allowed to flout the law. It is our
responsibility to conduct proper oversight by asking them to
explain why they are noncompliant, and explore options to
remedy the situation. However, I also understand each agency
has its own set of challenges, particularly OSDBUs in some of
the smaller ones. I hope to gain a deeper understanding today
of what these challenges might be.
Lastly, it is important for us to examine the Small
Business Procurement Advisory Council, or SBPAC. Led by the SBA
and comprised of OSDBU directors, SBPAC undertakes annual
reviews of OSDBU's compliance with its statutory requirements.
Discrepancies were found between GAO and SBPAC's review. This
is troubling since SBPAC's reviews influence SBA's small
business scorecard grades for each agency. Inaccurate SBPAC
reviews may ultimately impede Congress' ability to conduct
effective oversight over agency OSDBUs. Understanding this, we
should explore ways in which the SBPAC review process can be
improved and what additional controls can be put in place to
ensure objectivity and fairness in its future reviews.
Now, if you understood all that, great. We are halfway
there.
Ultimately, the lessons we take from examining today's GAO
report will help us understand how OSDBUs impact small
contractors nationwide. I look forward to hearing from our
witnesses. We will benefit from your perspective and I thank
you for being here today.
I now yield to the ranking member, Ms. Murphy, for her
opening statement.
Ms. MURPHY. Thank you, Mr. Chairman.
Each year the Federal Government procures more than $400
billion in goods and services from businesses around the
country through government contracts. The Small Business Act
established a governmentwide goal of awarding at least 23
percent of prime federal contracts to small businesses to
ensure that they receive their fair share of federal
contracting opportunities. Additionally, Offices of Small and
Disadvantaged Business Utilization, or OSDBUs, were created at
every federal agency to increase small business participation
in the federal procurement marketplace.
OSDBUs promote small business inclusion within an
individual agency's mandate and ensure that small firms are
treated fairly and equitably in the contracting process. In
this capacity, OSDBUs serve as one of the primary advocates for
small firms and offer them information and guidance on
contracting opportunities, both for prime contract awards and
subcontract awards. Additionally, they work with the SBA and
other agency officials to determine contracting goals for their
agency. Overall, OSDBUs serve a critical role in the
procurement process because they are well positioned to help
small businesses compete more successfully for Federal
Government contracts.
To ensure that these offices are fulfilling their mission,
the GAO has reviewed each agency's compliance with their
statutorily mandated functions. This hearing will address the
most recent report on efforts to encourage agencies to
voluntarily comply with reporting structure requirements for
the OSDBU director.
The GAO concluded that several agencies failed to comply
with the statute in a variety of ways, which may have
interfered with their ability to fully advocate for small
businesses as Congress had intended. Findings like these leave
us all concerned about the lack of assistance for small
contractors, many of whom rely on OSDBUs.
With the recent growth in federal contract spending, small
firms should be receiving opportunities commensurate with this
increase. However, the dollars and actions awarded to small
businesses have been somewhat stagnant since fiscal year 2005.
Moreover, small business contracting programs are vastly
underutilized as only 25 percent of these actions were awarded
through a small business set-aside or sole source contract.
Pursuant to statutory requirements, OSDBUs must work with
small businesses to ensure that they receive the maximum
practicable opportunity to compete for contracts. This
Committee shares that priority and, therefore, must hold OSDBUs
who do not meet these statutory requirements accountable for
their shortcomings. Today's hearing will provide background and
ideas needed to guide the Committee as we draft legislation to
address this problem.
I thank the witnesses for being here and look forward to
gaining more insight as to how we can make OSDBUs more
effective in meeting their mission. Thank you, and I yield
back.
Chairman KNIGHT. Thank you very much. And if Committee
members have an opening statement prepared, I ask that they be
submitted for the record.
Okay. I am going to take a minute to explain the timing.
Mr. Shear and Mr. Wong know exactly what I am going to say. You
have got 5 minutes. The lights will come on, when it goes to
yellow you have a minute, and then just start wrapping it up
when it gets to red, and then we will keep this thing moving.
Okay. I would now like to introduce our witnesses. Our
first witness is no stranger to us. It is Mr. William Shear,
director of Financial Markets and Community Investment Team at
the GAO. Mr. Shear has testified before this Committee on a
number of occasions, and been engaged with this Committee on a
wide range of small business topics. We again look forward to
Mr. Shear and hearing his perspective on finding this important
GAO report and we welcome you back today. It is always good to
see you.
Our second witness today is Mr. Robb Wong. Mr. Wong serves
as the associate administrator for the U.S. Small Business
Administration Office of Government Contracting Business
Development. He is responsible for advocating for small
businesses in the federal marketplace and oversees more than
$500 billion in total federal spending. This will be Mr. Wong's
second time testifying before this Subcommittee, and we are
very happy that he has come back and we look forward to your
statements.
Our third witness today is a newcomer, so we will break you
in easy, Mr. Kevin Boshears. Mr. Boshears serves as the
director of the Department of Homeland Security's Office of
Small and Disadvantaged Business Utilization and has served in
the position since May of 2003. Prior to that he served as the
director of Treasury Department OSDBU and worked as a
procurement analyst, providing guidance to small business
specialists located in Treasury's 12 bureaus. Mr. Boshears has
enjoyed a long and respectable career as an instructor,
teacher, and dedicated public servant in the small business
procurement arena. Needless to say, he brings a wealth of
knowledge and experience to the table. We welcome you to the
Subcommittee, and we look forward to your statements today.
Mr. Shear, you are now recognized for 5 minutes.
STATEMENTS OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND
COMMUNITY INVESTMENT, UNITED STATES GOVERNMENT ACCOUNTABILITY
OFFICE; ROBB N. WONG, ASSOCIATE ADMINISTRATOR, OFFICE OF
GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, UNITED STATES
SMALL BUSINESS ADMINISTRATION; KEVIN BOSHEARS, DIRECTOR, OFFICE
OF SMALL AND DISADVANTAGED BUSINESS UTILIZATION, DEPARTMENT OF
HOMELAND SECURITY
STATEMENT OF WILLIAM B. SHEAR
Mr. SHEAR. Thank you. Chairman Knight, Ranking Member
Murphy, and members of the Subcommittee, I am pleased to be
here today to discuss our recent work on the Office of Small
and Disadvantaged Business Utilization, often called OSDBUs.
The Federal Government has a longstanding policy to
maximize contracting opportunities for small businesses. To
help increase small business visibility among federal agencies,
in 1978, Congress amended the Small Business Act to require
that all federal agencies with procurement powers establish an
OSDBU to advocate for small businesses. Section 15(k) of the
Small Business Act contains provisions related to OSDBUs.
We recently completed a report containing findings from an
extensive compliance audit where we examined 15(k) requirements
at 24 agencies. In addition, we examined the review by the
Small Business Procurement Advisory Council, called the SBPAC,
of OSDBU compliance with section 15(k) requirements. This
statement is based on our recent report.
With respect to our examination of compliance, demonstrated
compliance with selected section 15(k) requirements for the
OSDBU varied across the 24 agencies surveyed. Examples of GAO
findings include the following.
Five agencies did not demonstrate compliance with the
requirement to limit collateral duties of OSDBU directors.
Six agencies did not demonstrate compliance with the
requirement for compensation and seniority of OSDBU directors.
Nearly all agencies, 23 to be specific, demonstrated
compliance for four requirements on OSDBU director experience,
supervisory duties of the OSDBU director, identifying and
addressing significant bundling of contracts, and providing
assistance on payments.
Fifteen agencies demonstrated compliance with the
requirement to respond to notification by small business that a
solicitation unduly restricts the ability of the small business
to compete for the award.
For the one requirement for which we reviewed only 10
agencies, four OSDBU directors did not report directly to the
agency head or deputy head.
SBA chairs SBPAC and its members are nearly all OSDBU
directors. With respect to our examination of the SBPAC's
annual peer review, we found that SBA's assessment of
compliance differed from ours. Specifically, when we considered
the same section 15(k) requirements as the SBPAC review, our
compliance determinations did not align with SBPAC's 2016
organizational success factor scores. Other than reviewing
documentation agencies choose to provide, SBA's guidance for
the review panel does not indicate any other means by which
reviewers could obtain or clarify information about agencies'
compliance with section 15(k) requirements. We recognize that
neither the SBPAC nor any other entity, including ourselves,
can conduct this type of compliance audit that we have just
completed. However, we do think that the SBPAC should consider
our findings as it continues to work on a more in-depth review
process.
For the 19 of 24 agencies that did not demonstrate
compliance with section 15(k) requirements, we recommended that
they comply or report to Congress on why they had not complied,
including seeking any statutory flexibilities or exceptions
believed appropriate. We made one recommendation to SBA to
include more detailed guidance to SBPAC members for the annual
reviews.
Chairman Knight, Ranking Member Murphy, and members of the
Subcommittee, this concludes my statement. I would be pleased
to answer any questions that you may have.
Chairman KNIGHT. Thank you, Mr. Shear.
And Mr. Wong, you are now recognized for 5 minutes.
STATEMENT OF ROBB N. WONG
Mr. WONG. Thank you. Good morning.
Thank you, Chairman Knight. Thank you, Ranking Member
Murphy. I appreciate the opportunity to testify today,
particularly alongside Mr. Bill Shear from GAO and my
colleague, Kevin Boshears of DHS. SBA is fortunate to have a
good and constructive relationship with both of them.
In my role as Associate Administrator for SBA's Office of
Government Contracting and Business Development, I also chair
the SBPAC, which works collaboratively with the OSDBUs to
achieve the governmentwide small business goals. I hope to
bring a fresh set of eyes and perspective.
When I reviewed the GAO report I made several observations.
One, I see that the government, through the hard work of
the OSDBUs, has hit its small business goals for prime
contracting in each of the past 4 years. That is a noteworthy
achievement because these are seasoned, committed, small
business professionals and they do their job well.
Two, the GAO reports that several agencies and their OSDBU
programs are not in overall compliance with portions of the
15(k) requirements. This is a concern to me, particularly as a
lawyer. I believe that full compliance with the law is
essential.
In my opinion, the SBPAC must work collaboratively together
to balance both of these needs.
The purpose of the GAO report in this hearing is to make
the OSDBU program function even better, and SBA certainly
shares that goal. Of the 20 recommendations made in the report,
there is only one for SBA. The report recommends that we
provide more detailed guidance in our SBPAC review process.
Otherwise, the remaining recommendations involve other
agencies. For SBA's part, we have already begun to implement
changes in our review process through changing the scorecard
weighted goals and percentages as outlined in my written
testimony. Also, we have implemented peer review changes in
factoring in compliance requirements as part of our scorecard
process. Those changes will be in place for the upcoming fiscal
year 2017 evaluations.
Aside from the scorecard and peer review, I also mentioned
in my written testimony that I intend to use the SBPAC to
increase collaboration between SBA and the OSDBU directors. I
want us to share best practices and opportunities to increase
access across agencies. The bottom line is that I want us
collectively to best serve our small business customers.
Thank you, Mr. Chairman, and members of the Committee for
your continued interest in this program. I look forward to your
questions, and I yield back the balance of my time. Thank you.
Chairman KNIGHT. Thank you, Mr. Wong.
And Mr. Boshears, you are now recognized for 5 minutes.
STATEMENT OF KEVIN BOSHEARS
Mr. BOSHEARS. Chairman Knight, Ranking Member Murphy, and
distinguished members of the Subcommittee, I welcome the
opportunity to discuss with you today the Department of
Homeland Security's, DHS, award-winning small business
contracting program.
Since its inception, DHS has always been committed to small
business inclusion in its contracting program. And as the
director of the Office of Small and Disadvantaged Business
Utilization, OSDBU, I work throughout the department to promote
and develop strategies for small business participation in the
DHS contracting program and with other OSDBU directors, SBA and
the SBPAC, to promote federal-wide small business
participation.
Some of the innovative and inclusive initiatives DHS uses
include maintaining a web presence with helpful and timely
resources for small businesses, publishing an annual forecast
of contracting opportunities, and setting and monitoring DHS-
wide and component small business goals.
As this Committee knows very well, small businesses make
substantial contributions to the American economy and taxpayers
through innovation, job creation, cost savings, tax revenue.
For these reasons, the DHS OSDBU plays a key role in the
Department's efforts to promote meaningful communications with
industry. DHS is proud of its successful small business
contracting program, which has benefitted from strong support
from DHS senior leadership. For example, Acting Secretary
Elaine Duke and Undersecretary for Management Claire Grady, the
senior official performing the duties of the deputy secretary,
are both long-time supporters of the federal small business
contracting program throughout their distinguished careers.
They continue to offer strong support to the DHS OSDBU in their
current positions. DHS is also proud of its results from the
SBA's annual small business procurement scorecard. DHS has
received a grade of A or A+ each year between fiscal year 2009
and fiscal year 2016, making DHS the largest federal agency to
have such a consistent success record.
Finally, as evidence of the Department's efforts to
maintain a small business contracting program that promotes
small business prime contracts and small business subcontracts
under DHS large business prime contractors, DHS demonstrated
compliance with all of the section 15(k) requirements selected
by GAO for the review during a recent audit that is the topic
of this hearing.
Chairman Knight, Ranking Member Murphy, and distinguished
members of the Subcommittee, thank you again for the
opportunity to testify today on this important topic. I look
forward to your questions. Thank you.
Chairman KNIGHT. Quick and to the point.
We do have the Chairman of the Small Business Committee
here with us today, and we will ask him for all of the really
smart questions to be coming out.
I will start questions, and I will recognize myself for 5
minutes.
So I will ask just kind of a general question across the
board, and Mr. Shear, we will start with you. Some agencies
have stated in response to the GAO's findings that certain
functional requirements are unmet because those functions are
performed by another office within the agency. In light of
other competing priorities and limited budgets, should this be
of concern, particularly of small agencies?
Mr. SHEAR. The answer to that is yes. I think that whenever
any agency is not in compliance--cannot demonstrate
compliance--it raises the concern because the requirements are
there to serve a purpose. I was very glad to hear Robb Wong say
that. It is important that agencies be in compliance. One of
the things that we did in our interactions with the agencies
and that we raise as possibility in terms of asking for, let's
say, exceptions or things of that nature, is that there can be
circumstances in which it might make sense to create an
exception or to create some flexibility around some
requirements. But it is at the starting point, and many times
at our finishing point, there is the lack of compliance, of
demonstrated compliance that is a concern for us.
Chairman KNIGHT. And let me take that a little further. And
Mr. Wong, maybe you can help me out with this. What happens
with noncompliance? What is the mechanism now? If you are
finding out there is noncompliance, what is the next step?
Mr. WONG. So I can really only speak to the way that I have
been handling this for the last couple of months. But the first
thing I have done is try to educate myself about how many
Agencies have been out of compliance and then we seek to wonder
why. But in general, I will assure you, at least at this point,
that from my dealings with the OSDBUs, they are committed small
business professionals, and I do not think that anyone
willfully wants to be or is trying to willfully flout the law.
But when we do find someone that is out of compliance, I think
that it is important that they become compliant. I do believe
that if an exception is necessary, then we can obviously
advocate for that. But in general, if we find that somebody is
out of compliance, we will certainly try to, in my mind, I look
at things that because all of the 15(k) requirements are
complied with at some point by all of the agencies that we
have, so they are a good roadmap and they certainly serve a
purpose. So what we want to be able to do with the agencies
that are out of compliance is to educate them by collaborating
with them with best practices and trying to use the SBPAC to
share information to help others that are out of compliance to
get in compliance by following the example of other agencies
that have been able to comply.
Chairman KNIGHT. And I think that is the perfect answer. I
really do. I think that so many small businesses, you know,
whatever their dealings are with government, one of their
issues and one of the things that they talk to us about is
government is not working with me or they are not trying to
help me and figure out why I am not doing the right thing or
why I missed something. I could talk for my home State in
California. I dealt with an awful lot of agencies that were
more on the heavy-handed instead of the education. And a small
business is in business of making money so that they can
produce jobs and they can produce opportunities. And so I think
that part of our job, or at least the government's job, should
be let's help them get to a place where they will be in
compliance and they will understand what we are trying to do
and why this is so important. So I think that is a perfect
answer.
One last question and then I will go to Ms. Murphy. Given
that federal contracting has moved towards practices that may
be unfriendly to small business, such as strategic sourcing and
category management, how important do you think these section
15(k) requirements are to address concerns regarding small
businesses? And I will go to Mr. Boshears or Mr. Wong or
whoever wants to jump on in on that.
Mr. BOSHEARS. In my experience at DHS, and I believe this
will relate to your question about strategic sourcing.
I am sorry.
Chairman KNIGHT. No, you are good.
Mr. BOSHEARS. In regard to your question about strategic
sourcing and category management, I will reflect just briefly
on my experience at DHS with regard to section 15(k). What I
have observed is that being in compliance with section 15(k)
establishes the foundation and the framework to implement the
small business contracting program. I found that to be very
important in my work.
And then in terms of strategic sourcing and category
management, we have to use the current federal contracting
system as our launch pad to understand how small businesses can
participate in that environment. For a small business advocate,
the small business constituents that are interested in doing
business with a federal agency like mine, DHS, or any federal
agency, what they want to know about is how can they identify
meaningful opportunities to participate? So if that comes in
the form of strategic sourcing, they would want to learn about
that, for example. If they are looking at the way an agency has
bought something in the past, they want to consider that. So
all of these types of things factor into their decision on how
to participate. So with this new landscape, those types of
things will still come into play.
Chairman KNIGHT. Thank you very much.
And I am going to move on to Ms. Murphy. And I recognize
her for 6 minutes and 32 seconds.
Ms. MURPHY. Thank you, Mr. Chairman.
Mr. Shear, the OSDBU reporting structure described in
section 15(k)(3) of the Small Business Act is in place to
ensure that those charged with advocating for small businesses
are in a position to influence contracting opportunities. In
multiple GAO reports concerning OSDBUs, you have emphasized the
correlation between an office's reporting structure and its
ability to effectively advocate on behalf of small businesses.
Can you elaborate on how an OSDBU's reporting structure can
affect an agency's ability to achieve small business
contracting goals?
Mr. SHEAR. Let me use one example that comes to mind
immediately and that is something that Kevin Boshears was just
talking about, strategic sourcing. So even though the report I
am discussing here is not addressing strategic sourcing,
certainly a lot of the apparatus around OSDBUs created by the
Small Business Act is to give a certain stature to the OSDBU
director to really affect, to really have resources in place to
reach out to small businesses, to influence policy of the
agency, whether it is talking about market research or whatever
other mechanisms there are, to make sure that there are
appropriate opportunities for small businesses.
So let me just refer back to we did a report now 3 years
ago on strategic sourcing and inclusion of small business. So
from the moment of going into DHS--I hope I do not embarrass
you, Kevin--but I will just say it was clear that he was at the
table with the DHS strategic sourcing working group and even
making decisions of when strategic sourcing would be used. So
that stature became even more important than when we talk about
just simple single award contracts. It became very important
that way. It became very important that they were using set-
asides within strategic sourcing in a way that I thought was
more pronounced than some of the other agencies used. So that
gives an example of where this structure can be very effective.
So, I think I will end it there unless you want to ask a
follow-up.
Ms. MURPHY. No, thank you. I appreciate that.
Well, Mr. Boshears, first, let me commend your office for
being the highest complying OSDBU, and thank you for being
here. Are there, from your perspective, having run a successful
program, are there any statutory changes you would recommend to
increase utilization of small business contracting programs?
Mr. BOSHEARS. Thank you for the question. In my work
effort, I get a tremendous amount of feedback directly from
small business owners and representatives themselves. So over
the past year or two, when I am having these discussions, and I
have them like on a daily basis, it is one of the joys of my
work. I listen for patterns. You know, if companies are
bringing up the same topic to me repeatedly from different
individual companies, it gets my attention. So I would say over
the past year or so, maybe a 2-year period, what the small
business that I have spoken with, they want to be able to
continue to have meaningful opportunities to participate.
Like, for example, suppose a small business has served as a
prime contractor on a small business set-aside contract and
they have done a really, really good job, they want to be able
to have, at least make an effort to keep doing that contract.
Like, if there is a recompetition later for the same work.
Well, in areas like strategic sourcing or category management
or governmentwide contracts, if the agency is changing
contracts, you know, moving from one method to another and that
small business is not on the second contract of choice, then
the company does not have an opportunity to, in their words,
rebid their work. So these are the types of things that have
come on my radar screen in the past couple of years because I
have heard that from hundreds of companies in my daily and
weekly phone calls and email exchanges. So as Mr. Shear
mentioned on one of GAO's reviews from several years ago on
strategic sourcing, when these discussions are taking place, it
is very important for the OSDBU director to use Mr. Shear's
words, ``have a seat at the table.'' Because, see, that is the
only way in my experience one can be an effective advocate.
You see, I hold the small business community in such high
regard. At DHS, for over 14 years now, the small business
community, they have done a magnificent job for us in support
of our mission and they are very, very good in what they do in
a wide variety of industries. So I want to be able to continue
to offer these meaningful opportunities to participate.
Experienced small business owners will tell you they
understand that there are different contract vehicles and
different ways of buying for the Federal Government, and they
will tell you, and they try to keep abreast of it. But it is
very important to keep that meaningful opportunity to
participate because that is where they flourish. And that is
where all the good things happen as a result of securing those
contracts.
Ms. MURPHY. Great. Thank you very much. And I will yield
back.
Chairman KNIGHT. Okay. And we will go to Mr. Comer for his
questions.
Mr. COMER. Thank you, Mr. Chairman.
Mr. Wong, first question. Once the SBPAC finds that a
statutory requirement is not met by OSDBU, what happens next?
Does the SBA conduct any oversight or investigation into
identified instances of noncompliance?
Mr. WONG. Thank you for the question, Congressman.
As I said before, I can only tell you what I have done over
the last couple of months since I have been there. But
compliance with the law is critical to me. I agree with Kevin
and Mr. Shear that it provides a framework upon which we can
analyze the small business community and that is the way that
we can help them the best. But when we find somebody that is
out of compliance, honestly, the first question I want to know
is why.
And what I have found is that in general, if somebody is
out of compliance and wants to be in compliance or needs to be
in compliance, then we have to be collaborative. We are not in
a supervisory position and we do not want to be I do not think,
but we have to work collaboratively as a community to work
together to bring them in compliance. One of the things I had
mentioned before is we like to team them with other agencies
that are in compliance with those goals so that they can share
best practices and simply just strategize on how to become
compliant and still be effective.
Mr. COMER. Okay. In the memo it says, ``Across the board,
agencies cited inadequate staffing levels, organizational
structural barriers, and limited budgets as reasons for
noncompliance.'' Could anyone on the panel answer this? If
anyone would like to elaborate on any of those particular
issues and what stands out the most. Would anyone like to
comment on that?
Mr. SHEAR. Hearing silence I will be brave and try to
answer the question.
Mr. COMER. There you go.
Mr. SHEAR. No, I appreciate the question. It is a very good
question. Where I think that for some agencies that have lower
levels of contracting activity, some of the granularity in the
requirements might be something that this Committee might want
to consider in its interactions. But for the most part I come
back to what has already been stated. There is a severe
concern, as a starting point, and many times as an ending
point, there is a severe concern when an agency is not in
compliance, especially I would say to some of the larger
issues, whether it is dealing with bundling, whether it is the
level of seniority of the individual, the reporting
relationship, those are very important factors here.
And even though we had agencies that came forward and said
this requirement, let's just say for example on collateral
duties, does not make sense for us, and we can be sympathetic
to a point with that and really consider what they are saying.
I would be glad to answer questions about that type of
situation.
There is a real concern when it is, to use an expression
that Kevin just used, having a place at the table, of really
being an advocate, it is a concern. And when we asked, at every
interview we had with agencies, so across the 24 agencies, we
asked the question, ``Are there any of these provisions in the
Small Business Act that we are examining that you think are
less important than some of the others and maybe should be
considered for statutory changes?'' We got silence.
So the only time where we got input directly saying
something had to be done, it was very specific to that agency.
And so there was a lack of the agencies coming forward and just
saying this is what we think should be done, at least for the
smaller contracting shops.
Mr. COMER. Thank you, Mr. Chairman. I yield back.
Chairman KNIGHT. Mr. Shear, just real quickly, or Mr.
Evans, when the GAO does its audit report and it comes out, how
much of the findings can you then go back to the agencies and
say these are the corrections that we think are the best
corrections or the best steps you can take? Or is it up to the
agencies to figure out what steps you need to take to correct
this?
Mr. SHEAR. It is a great question. Okay, thanks. It is a
great question. I will answer it in a general way first.
Whenever we make recommendations, agencies are not required
to implement our recommendations, but they tend to have a
pretty high rate of addressing our recommendations. So in this
case we have one case where we have not been very successful. I
mean, our last OSDBU report was now 6 years ago. And in our
recommendations we had a statement that the agency should come
into compliance or explain to Congress why not. So the general
answer is we are always willing to work with agencies and we do
not want to make recommendations that micromanage them, that
says you shall do this, such as stating you should put this
person in place or you should institute this specific
procedure. But we try to make them general enough that they can
incorporate our recommendations within the context of how they
run their agencies.
So when we are asked, and I note there is a lot of
interaction between SBA and us on open recommendations, when
they ask us we will say these are the types of things that we
are looking for. We tend to look for general actions that are
in the spirit of recommendations, of taking actions to address
deficiencies that we have identified in our reports. So I know
this is a very high-level answer, but that generally
illustrates how things can work with agencies, whether it is in
this arena or with other types of recommendations.
Chairman KNIGHT. Okay. Very good.
Mr. Evans, you are recognized.
Mr. EVANS. Thank you, Mr. Chairman.
This is to the panel. How are each of you and your entities
engaged with efforts to supply diversity and diversity among
your outreach within the contracting programs?
Mr. SHEAR. I feel like it is a question that is more about
what OSDBUs and the agencies do in their small business
programs.
Mr. EVANS. Correct.
Mr. SHEAR. I will just state that we, on behalf of this
Committee, and I have testified on HUBZone and on different
programs that are meant to reach out to different socioeconomic
categories, we have certainly done work on the 8(a) business
development program and those various programs. So we evaluate.
So I always say we evaluate. We do not actually go out and
administer anything. But we have had a focus over the years
with our body of work on how well those programs work.
Mr. WONG. Thank you for the question. I would say from
SBA's point of view, we do focus on the how. And my job that I
look at very simply is we want to make it easier for the public
and the companies who want our certifications, make it easier
for them to get them. But I think that we also have a
responsibility to help them to make more money by using them.
So I take a look at the socioeconomic categories every day and
I have a lot of familiarity over the last 25, 30 years with
those programs. I am constantly thinking of additional things,
either through process, through policy, or through advocacy to
make more opportunities, and effectively, to increase the
supply of contracts that can be executed by these small
businesses. I can certainly talk to you at another time about
the specific things I have in mind. Thank you.
Mr. BOSHEARS. At DHS, for the past 14 years, we have a
history of supporting all of the small and socioeconomic
programs available to the Federal Government. And we found that
to use the private sector phrase, ``supplier diversity,'' that
that has been a tremendous strength to us. By actively engaging
with the small business community as part of our overall effort
on industry engagement and participating in a number of
outreach activities all around the country, including some we
host ourselves, we found that by helping to identify these
meaningful opportunities, supporting the various small business
set-aside programs, we have a very diverse pool within our
small business contractor base that has stepped forward, took a
very sincere effort to understand the DHS mission, and then
through their contract work, in effect, support the mission. So
it has been a tremendous benefit to us, and we certainly plan
to continue that effort.
Mr. EVANS. Let me just follow up a little bit then. What
areas do you feel can be strengthened?
Mr. BOSHEARS. Within our program?
Mr. EVANS. Yes.
Mr. BOSHEARS. Well, we always want to look for improvement.
What I would like to see within the DHS framework is really a
continuation of things that we started years ago, but that we
are putting more emphasis on now. Like, for example, industry
engagement and communication with the industry is important for
all size businesses who want to operate in federal contracting,
but it is especially important for the small business community
because they, again, I talk to so many companies, they share
their thoughts with me so they are always with me. You know,
they do not have big marketing budgets. You know, they have
scarce resources so they have to find ways to be effective in
those efforts.
So one of the things that they have told me is that if by
targeting three to five federal agencies as potential
customers, they can focus their efforts. And with the
consideration of various teaming arrangements that are very
common in federal space, small businesses can actively engage
with target agencies, including DHS as an illustration. And
then on the federal and DHS side of the fence, if we can
continue to identify these meaningful opportunities that I
mentioned briefly a few minutes ago, we can continue to do
this. And again, it is a benefit to DHS because these firms
help us meet the mission.
Mr. EVANS. Thank you, Mr. Chairman. I yield back the
balance.
Chairman KNIGHT. Thank you, Mr. Evans.
Well, it has been a fruitful meeting. I appreciate all the
members. I think Ms. Murphy and I have worked kind of in a
teamwork to try and understand some of these issues and try and
correct some of these problems. Some of these are very
difficult and they are difficult to understand. You throw out a
thousand acronyms at us. It is like being on Armed Services and
trying to understand everything that is going on. But the crux
of it is understanding what small business is going through and
how small business can kind of work through a problem, work
through an issue.
And I love what Mr. Wong said. Be educated on something and
try not to make the same mistake and be able to comply in the
future. So it is very important that we talk about this and
that maybe we make some changes to this.
So today's hearing is a perfect example of the critical
oversight function of this Subcommittee on Contracting and Work
Force. It is the responsibility of the OSDBUs to advocate for
small contractors, and it is Congress' duty to ensure that
these statutory responsibilities are being met. GAO's work with
this report and the valuable testimony from all of our
witnesses allows us to identify where the gaps are and pinpoint
weaknesses where legislative action or continued oversight may
be necessary. What we have learned today will be critical in
promoting small business success in the federal contracting
space.
I ask unanimous consent that members have 5 legislative
days to submit statements and supporting materials for the
record.
Without objection, so ordered.
This hearing is now adjourned.
[Whereupon, at 11:51 a.m., the Subcommittee was adjourned.]
A P P E N D I X
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Chairman Knight, Ranking Member Murphy, and Members of the
Subcommittee, thank you for inviting me to testify before you
today. SBA and the Offices of Small and Disadvantaged Business
Utilization (OSDBU) at the federal agencies work side by side
and play a critical role in helping small businesses obtain
access to federal contracts.
The Administrator, through the Office Government
Contracting & Business Development, chairs the Small Business
Procurement Advisory Council (SBPAC). The purpose of the SBPAC
is to discuss government contracting policies and share best
practices with the OSDBU directors at the federal agencies to
further promote contracting opportunities for small business.
The SBPAC meets on a monthly basis. SBA, as the agency
responsible for reporting on small business federal government
contracting achievement, establishes federal agency goals; so
goaling, performance, and sharing of best practices are regular
topics of discussion for the SBPAC. Many years ago, SBA created
the Scorecard, which was intended to evaluate federal agency
effectiveness on achieving their small business contracting
goals against performance. Over the years, it has changed as
Administrations have changed. The Scorecard has also increased
senior executive level engagement with small business
contracting, as it is a matter of public record, and has
significantly contributed toward the federal government meeting
its statutory small business prime contracting goal for the 4th
year in a row in FY 2016. In FY 2016, the government exceeded
the Small Disadvantaged Business goal, and for the fifth
consecutive year, the Service-Disabled Veteran Owned Small
Business goal; achieving its highest performance ever in awards
to concerns owned and controlled by service-disabled veterans.
Prior to FY 2017, each agency received a letter grade based
on its performance as follows: 80% of the grade was small
business prime contracting performance in each of the 5 socio-
economic categories, 10% of the grade was the agencies'
subcontracting performance in each of the 5 socio-economic
categories, and 10% of the grade was a peer review of success
factors, essentially steps and actions that federal agencies
should take to meet the small business prime contracting and
subcontracting goals.
The success in meeting the small business prime contracting
goal has been accompanied by a review of the number of
contracts actually awarded to individual small business
concerns. Thus, in Section 868 of the National Defense
Authorization Act of 2016, Congress directed SBA to adjust the
Scorecard rating values and bring greater balance to better
understand small business engagement. As a result, beginning in
FY 2017, the small business prime contracting weighted goal is
lowered from 80% to 50% of the agency's grade, subcontracting
is raised from 10% to 20%, and a new required factor is the
comparison of the number of small business concerns awarded
prime contracts in one fiscal year compared to a prior fiscal
year. In FY 2017, this comparison will account for 10% of an
agency's grade. In addition, the National Defense4
Authorization Act of 2013 directed the SBPAC to conduct a peer
review of OSDBU compliance with the requirements of Section
15(k) of the Small Business Act. For FY 2017, SBA has
implemented OSDBU peer review changes as part of the Scorecard
process. As the Government Accountability Office (GAO) noted,
this OSDBU peer review will now account for 20% of an Agency's
grade (in FY 2017). In accordance with GAO's recommendations,
SBA will provide agencies with more detailed guidelines on the
peer review process. The Scorecard and peer review process is
an iterative process, and we annually adjust various aspects in
response to changes in law, policies or priorities. The point
of all of this, SBA, the OSDBUs, and the Scorecard process, is
to encourage agencies to provide small businesses access to
government prime contracts and subcontracts.
The Scorecard is typically released in the spring or
summer, several months after conclusion of the fiscal year.
There are several reasons for this. Agencies are given several
months to validate their data in the Federal Procurement Data
System. Large Prime Contractors and contracting officers are
also given several months to enter and validate data in the
electronic subcontract reporting system. At a point to be
determined in February 2018, we will receive the official data
for FY 2017 prime contracting. Subcontracting data will follow
and we will use this information to calculate the agencies'
performance for goaling purposes and for the number of
contracts awarded to small businesses. While this is going on,
the peer review process will be going on. At some point in the
spring or summer of 2018, we will announce the FY 2017
scorecard performance.
As the Associate Administrator for Government Contracting
and Business Development, I intend to use the SBPAC to increase
collaboration between SBA and the OSDBU directors to serve our
customers, the agencies that award contracts to small business
concerns. Sharing best practices but also sharing opportunities
so that we can increase access across agencies. Collaboration
between the OSDBUs and SBA will enable us, as advocates for
small business, to pivot and meet the challenges of the ever-
changing marketplace. For example, as work shifts to category
management, we need to shift our focus to ensure open and on-
going small business access to these prime contracts and to
also focus on small business subcontracting, holding prime
contractors accountable if they do not meet their
subcontracting plan goals. With the help of the OSDBU
community, we can work together to find solutions and ideas
that will ensure and improve small business participation.
Thank you once again for your support of SBA and the small
business community, and for the opportunity to appear before
you today.
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Introduction
Chairman Knight, Ranking Member Murphy, and distinguished
Members of the Subcommittee, I appreciate the opportunity to
appear before you today as the Department of Homeland
Security's (DHS) Director of the Office of Small and
Disadvantaged Business Utilization (OSDBU) to discuss DHS's
small business contracting program. I am honored to serve in
this role and the others I have enjoyed as a career public
servant for over 27 years, which includes my time with the
Department of Treasury and Justice.
In support of the DHS mission, the primary role of the
OSDBU is to promote and develop strategies for small business
participation in the DHS contracting program. In accordance
with the Small Business Act, similar offices exist in all major
federal agencies because small business inclusion in federal
contracting is a government-wide policy objective. Small
businesses make substantial contributions to the American
economy and taxpayers through innovation, job creation, cost
savings, and tax revenue.
DHS has a robust, award-winning small business contracting
program that promotes small business prime contracts and small
business subcontracts under large business prime contractors.
In fiscal year (FY) 2009, the U.S. Small Business
Administration (SBA) developed the annual Small Business
Procurement Scorecard for the 24 Chief Financial Officer
federal agencies. The scorecard uses a letter grade based
methodology with six potential grades (A+, A, B, C, D, and F).
The scorecard measures small business prime contracting
accomplishments, small business subcontracting accomplishments,
and other factors prescribed by SBA. DHS has received a grade
of ``A'' or ``A+'' each year between FY 2009 and FY 2016,
making DHS the largest federal agency to have such a consistent
success record. Based on DHS's FY 2017 anticipated achievements
and DHS's understanding of SBA's methodology, the Department
anticipates receiving another favorable score for FY 2017 when
SBA releases its scorecard in 2018.
Implementation
Since its inception, DHS has always been committed to small
business inclusion in its contracting program. To implement the
program, the DHS OSDBU Director reports to the Deputy
Secretary, and works closely with the Under Secretary for
Management, the Chief Procurement Office, and each of the
Component Heads of Contracting Activity. Also, the DHS OSDBU
Director serves as a member of the Small Business Procurement
Advisory Council (SBPAC) and actively participates in the
monthly SBPAC meetings hosted by SBA. Moreover, the DHS OSDBU
plays a key role in the Department's efforts to promote
meaningful communications with industry.
Acting Secretary Elaine Duke and Under Secretary for
Management Claire Grady, the Senior Official Performing the
Duties of the Deputy Secretary, are both long-time supporters
of the federal small business contracting program throughout
their distinguished careers. They continue to offer strong
support to the DHS OSDBU in their current positions.
Over the years, the DHS small business contracting program
has been successful due to a number of innovative and inclusive
initiatives, such as:
Maintaining a web presence with helpful and
timely resources for small businesses;
Supporting Small Business Specialists in
each contracting activity;
Publishing an annual forecast of contracting
opportunities;
Conducting outreach activities, including
monthly vendor outreach sessions featuring pre-arranged
15 minute appointments with DHS Small Business
Specialists and DHS Large Business Prime Contractor
representatives;
Listing large business prime contractors
with subcontracting opportunities;
Promoting the DHS Mentor-Protege program;
Hosting an annual small business awards
ceremony to recognize DHS small business contractors
and DHS employees;
Overseeing a small business review process
for all procurements expected to exceed $150,000 in
order to ensure contracting to small businesses is
considered prior to using unrestricted competition;
Setting and monitoring DHS-wide and
Component small business goals;
Conducting an annual three-day small
business training session for DHS Component Small
Business Specialists and OSDBU personnel; and
Helping design DHS-wide multiple award
contracts with built-in set aside authority (using
Section 1331 of the Small Business Jobs Act).
In a recent U.S. Government Accountability Office (GAO)
report titled, ``Actions Needed to Demonstrate and Better
Review Compliance with Select Requirements for Small Business
Advocates,'' DHS demonstrated compliance with all 12 of the 12
requirements selected by GAO for review. The GAO report had no
recommendations for DHS.
Conclusion
Chairman Knight, Ranking Member Murphy, and distinguished
Members of the Subcommittee, thank you again for the
opportunity to testify today and I look forward to your
questions.
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