[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                   OVERSIGHT OF THE SBA'S WOMEN-OWNED SMALL 
                      BUSINESS FEDERAL CONTRACT PROGRAM

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              MAY 16, 2019

                               __________

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            Small Business Committee Document Number 116-021
             Available via the GPO Website: www.govinfo.gov
             
             
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                         ABBY FINKENAUER, Iowa
                          JARED GOLDEN, Maine
                          ANDY KIM, New Jersey
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                          JUDY CHU, California
                           MARC VEASEY, Texas
                       DWIGHT EVANS, Pennsylvania
                        BRAD SCHNEIDER, Illinois
                      ADRIANO ESPAILLAT, New York
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                         ANGIE CRAIG, Minnesota
                   STEVE CHABOT, Ohio, Ranking Member
   AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
                        TRENT KELLY, Mississippi
                          TROY BALDERSON, Ohio
                          KEVIN HERN, Oklahoma
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        TIM BURCHETT, Tennessee
                          ROSS SPANO, Florida
                        JOHN JOYCE, Pennsylvania

                Adam Minehardt, Majority Staff Director
     Melissa Jung, Majority Deputy Staff Director and Chief Counsel
                   Kevin Fitzpatrick, Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Jared Golden................................................     1
Hon. Pete Stauber................................................     3

                               WITNESSES

Mr. William B. Shear, Director, Financial Markets and Community 
  Investment, U.S. Government Accountability Office, Washington, 
  DC.............................................................     5
Mr. Robb N. Wong, Associate Administrator, Office of Government 
  Contracting and Business Development, U.S. Small Business 
  Administration, Washington, DC.................................     6

                                APPENDIX

Prepared Statements:
    Mr. William B. Shear, Director, Financial Markets and 
      Community Investment, U.S. Government Accountability 
      Office, Washington, DC.....................................    18
    Mr. Robb N. Wong, Associate Administrator, Office of 
      Government Contracting and Business Development, U.S. Small 
      Business Administration, Washington, DC....................    38
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    None.

 
  OVERSIGHT OF THE SBA'S WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT 
                                PROGRAM

                              ----------                              


                         THURSDAY, MAY 16, 2019

                  House of Representatives,
               Committee on Small Business,
    Subcommittee on Contracting and Infrastructure,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:08 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Jared Golden 
[chairman of the Subcommittee] presiding.
    Present: Representatives Golden, Veasey, Hagedorn, and 
Stauber.
    Chairman GOLDEN. Good morning, everyone. The Committee will 
come to order. I want to thank everyone for joining us this 
morning, and I want to especially thank the witnesses for being 
here.
    Today, women make up more than 50 percent of the 
population. They have grown to be 47 percent of the workforce, 
and are increasing their footprint as business owners. As of 
last year, surveys indicate that women own 12.3 million 
companies, employ more than 9.2 million people, and generate 
$1.7 trillion in revenue.
    While great progress has been made in the number of women 
starting their own businesses, spurring economic growth, and 
creating jobs, challenges do remain. We hear from small 
businesses that what they need most often are access to markets 
and customers. As the largest purchaser of goods and services 
in the world, spending nearly $442 billion in fiscal year 2017, 
the Federal Government relies on small businesses to provide 
high quality goods and services at competitive prices.
    Recognizing the importance of women-owned small businesses 
and the difficulties they face in accessing Federal contracting 
opportunities, Congress created the Women-Owned Small Business 
program and the Small Business Reauthorization Act of 2000. 
Despite the clear intent of Congress to establish this program, 
it did not begin to operate until 2011, more than a decade 
after its passage.
    This program was designed to provide increased access to 
Federal contracting opportunities for women-owned small 
businesses, and economically disadvantaged women-owned small 
businesses, by allowing contracting officers to set aside 
specific contracts for certified firms. Doing so helps agencies 
achieve their statutory goal of 5 percent of Federal 
contracting dollars awarded to women-owned small businesses.
    However, since enactment, that 5 percent goal has only been 
met one time since 2013. And, again, we missed the mark in 
fiscal year 2017 with $20.8 billion going to women-owned 
businesses, about 4.7 percent of contracting dollars. We can, 
and simply must do better to hit the mark of 5 percent.
    A critical part of doing so is by finally implementing the 
changes made in the fiscal year 2015 National Defense 
Authorization Act. Legislation authored by Chairwoman Velazquez 
amended multiple provisions of the program, paving the way for 
much-needed reform.
    The first change, and the only one implemented to date, 
granted sole-source authority, allowing contracting officers 
the ability to award contracts, when appropriate, without a 
competitive process. This update put the Women-Owned Small 
Business program on a level playing field with all other Small 
Business Administration contracting programs.
    Secondly, the legislation removed a small business's 
ability to self-certify eligibility for the Women-Owned Small 
Business program, to address concerns of potential fraud.
    Finally, it made clear Congress's intent for the SBA to 
certify program participants. These two certification measures 
were intended to help prevent fraud and ensure that contracts 
are awarded to the intended recipients, women-owned small 
businesses. Much like the delayed implementation of the Women-
Owned Small Business program, we have seen, yet again, the SBA 
taking, if we want, I think, to be generous, an overly 
deliberatively process to implement the very clear intent of 
the legislative branch.
    In light of these implementation delays in 2017, the 
members of this committee requested GAO to review the program, 
and today's hearing gives us the opportunity to discuss their 
findings and recommendations. The report echoes the finding of 
prior GAO reports and those of the SBA Inspector General that 
the SBA has still not addressed ongoing oversight issues.
    For example, GAO previously recommended that SBA establish 
procedures to assess the performance of four third-party 
certifiers, private entities approved by SBA to certify the 
eligibility of women-owned small firms. While SBA conducted a 
compliance review of the certifiers in 2016, it has no plans to 
regularly monitor them. Thus, SBA cannot ensure that certifiers 
are fulfilling the requirements of their agreements as 
stipulated by the parties, and it is missing the opportunity to 
gain valuable information that could help improve the program's 
processes.
    By not improving its oversight of the program, SBA is 
limiting its ability to ensure third-party certifiers are 
following program requirements. Most troublesome is the lack of 
a certification process. After nearly 5 years, the agency has 
yet to implement its own certification program or implement 
self-certification, which increases the likelihood for fraud in 
the program. This is unacceptable.
    While I am glad to see SBA is taking this matter seriously 
by publishing a proposed rule for implementing the 
certification program on Tuesday of this week, I remain 
concerned about the duration of this process. It is difficult 
for me not to wonder when we would have seen this rule issued, 
had we not scheduled this hearing.
    It is encouraging to see that SBA plans to apply consistent 
certification standards across the programs and establish a 
free, electronic application process. Yet the fact that SBA 
relies so heavily on third-party certifiers who charge fees, 
raises some questions, despite the agency stating in the rule 
that it intends to perform compliance reviews of the 
certifiers. This flies in the face of the GAO's findings that 
SBA had no plans to regularly monitor them.
    With all this said, I look forward to working with SBA on 
this matter to ensure that a new certification program is 
promptly established and meets our objectives. We know that 
when it comes to Federal procurement, women-owned companies too 
often face an uphill battle to winning their fair share of 
contracts. That is precisely why the program was created in the 
first place--to create greater opportunity for female 
entrepreneurs and a fairer procurement process.
    This hearing gives us a chance to have an open dialogue so 
that we can work together to guarantee women have a seat at the 
table when it comes to doing business with the government.
    I thank both our witnesses for their attendance and 
insights into this important topic, and I would now like to 
yield to the Ranking Member, Mr. Stauber, for an opening 
statement.
    Mr. STAUBER. Well, thank you, Mr. Chairman.
    The Federal Government recognizes a long-standing policy 
that the government should aid, counsel, assist, and protect 
the interests of small business concerns, and that the Small 
Business Administration, along with other Federal agencies, do 
their utmost to promote this directive.
    To increase competition and encourage a diverse makeup of 
small businesses participating in the Federal marketplace, the 
Small Business Administration manages a variety of procurement 
programs that are exclusive to small business. These small 
business programs allow a protective space for small entities 
to flourish and thrive, so that they may later rise to compete 
in the open market.
    Among these programs is the Women-Owned Small Business 
program, designed specifically to encourage growth in 
industries where women-owned small businesses are 
underrepresented. The purpose of the program is a noble one. 
However, in order to ensure that the goals of the program are 
fully realized, the Federal Government must make certain the 
integrity of the program is intact.
    Unfortunately, government watchdogs have discovered that 
this may not be the case. The Government Accountability Office 
and the SBA Office of Inspector General identified several 
deficiencies in SBA's oversight of the Women-Owned Small 
Business program.
    First, the SBA significantly delayed adoption of two of the 
three critical changes to the Women-Owned Small Business 
program that were mandated by the fiscal year 2015 National 
Defense Authorization Act. The GAO pointed out that the SBA's 
enactment of the sole-source authority without implementing the 
front-end certification program, or eliminating the self-
certification option, may have exacerbated SBA's existing 
oversight deficiencies. Given that the law was passed nearly 4 
years ago, and the SBA just issued its proposed rule for the 
remaining changes 2 days ago, this egregious delay cannot be 
overstated.
    Let me be clear, the issuance of the proposed rule on May 
14th does not absolve the SBA. The will of Congress was clear, 
and the SBA's postponement is inexcusable.
    Furthermore, the GAO found that the SBA does not have 
adequate procedures in place to regularly monitor and assess 
the performance of third-party certifiers. This includes a lack 
of consistent compliance reviews and regular utilization of 
certifiers' monthly reports. This lack of oversight may create 
situations where ineligible, or fraudulent firms participate in 
the Women-Owned Small Business program.
    The GAO has also found that the agency conducted few 
examinations assessing a firm's eligibility in the Women-Owned 
Small Business program, and lacked a mechanism for evaluating 
its findings. This limits the agency's ability to detect and 
prevent potential fraud.
    The SBA continues to rely heavily on competitors utilizing 
the protest process to identify potential fraud, as opposed to 
actively rooting out ineligible firms themselves, which is 
inadequate to protect the integrity of the Women-Owned Small 
Business program.
    Lastly, the GAO concurred with the previous SBA Office of 
Inspector General report that women-owned small businesses set-
aside contracts were awarded using improper industry codes. 
Unfortunately, the agency seems to take this matter lightly, 
stating that this issue has a minimal impact on the program's 
purpose.
    While there are numerous deficiencies in the program, 
stakeholders did note positive aspects, specifically, that the 
program offers greater opportunities for women-owned small 
businesses.
    Today, I hope to understand the reasons why the SBA has not 
resolved its weakness and work with the administration to 
ensure that the program is operating efficiently, effectively, 
and with the utmost integrity moving forward.
    Thank you, Mr. Chairman, and I yield back.
    Chairman GOLDEN. Thank you, Mr. Stauber. The gentleman 
yields back. And if committee members have opening statements 
prepared, we would ask that they be submitted for the record.
    I would now like to introduce our witnesses. The first 
witness is Mr. William Shear, Director of GAO's Financial 
Markets and Community Investment Team. He leads GAO's work on 
community and economic development, small business, and Native 
American housing issues. As part of his portfolio, he oversees 
evaluations of the Small Business Administration's contracting 
disaster assistance, credit and counseling programs. Mr. Shear 
joined GAO more than 20 years ago. He has a master's degree in 
public policy and a Ph.D. in economics, both from the 
University of Chicago. He also served as an adjunct faculty 
member in the graduate program in city and regional planning at 
the University of Pennsylvania. Welcome, Mr. Shear.
    Our second witness is Mr. Robb Wong, Associate 
Administrator of SBA's Office of Government Contracting and 
Business Development since March of 2017. He has held multiple 
positions within the SBA. He started his career as an SBA 
attorney in the Office of the General Counsel, then was a 
Special Assistant U.S. Attorney in the Houston district office, 
and later was the SBA Acting District Director Counsel in the 
Lubbock district office--did I get that right?
    Mr. WONG. Lubbock.
    Chairman GOLDEN. Lubbock.
    Mr. WONG. Good enough.
    Chairman GOLDEN. All right. From 1996 to 2017, he was CEO 
for several small businesses that successfully use SBA's 
products and programs to enhance growth. Mr. Wong is a graduate 
of Georgetown University Law Center. Welcome, Mr. Wong.
    Mr. Shear, you are now recognized for 5 minutes.

 STATEMENTS OF WILLIAM 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

                   STATEMENT OF WILLIAM SHEAR

    Mr. SHEAR. Thank you. Chairman Golden, Ranking Member 
Stauber, and members of the subcommittee, I am pleased to be 
here this morning to discuss our recent work on SBA's Women-
Owned Small Business program. Congress authorized the program 
in 2000, allowing contracting offices to set-aside procurements 
to women-owned small businesses in industries in which they are 
substantially underrepresented.
    The 2015 National Defense Authorization Act changed the 
program by: one, authorizing SBA to implement sole-source 
authority; two, eliminating the option for firms to self-
certify as being eligible for the program; and three, allowing 
SBA to implement a new certification process.
    Today, I will discuss: first, the extent to which SBA has 
implemented changes to the program, made by the 2015 NDAA; 
second, the extent to which SBA has implemented changes to 
address previously identified oversight deficiencies, including 
those we identified in our October 2014 report; and third, 
changes in the program's use since 2011, including since the 
2015 implementation of sole-source authority.
    First, SBA has implemented one of the three changes to the 
Women-Owned Small Business program authorized in the 2015 NDAA. 
As of early May 2019, SBA had not eliminated the option for 
program participants to self-certify that they are eligible to 
participate as required by the 2015 NDAA.
    In October 2017, SBA officials stated that SBA was 
publishing a proposed rule. However, the following year, in 
June 2018, SBA officials state that a cost analysis would be 
necessary before the draft rule could be sent to the Office of 
Management and Budget for review. Two days ago, on May 14th, 
SBA published a proposed rule, as part of its process, to 
eliminate self-certification and implement a new certification 
process.
    Second, SBA has not addressed program oversight 
deficiencies and recommendations in our October 2014 report. 
For example, we recommended that SBA establish procedures to 
assess the performance of the four third-party certifiers in 
accord with the requirements of the third-party certifier 
agreement and program regulations.
    We also made a recommendation to enhance eligibility 
examinations of businesses that register to participate in the 
program. While SBA generally agreed with our recommendations 
and conducted a compliance review of certifiers in 2016, it has 
not conducted another review of the certifiers since.
    Further, the implementation of sole-source authority, in 
light of these continued oversight deficiencies, can increase 
program risk. We maintain that our recommendations aimed at 
improving oversight should be addressed.
    In addition, our March 2019 report found that about 3.5 
percent of contracts using a program set-aside were awarded for 
ineligible goods or services from April 2011 through June 2018.
    Moving to the third part of my discussion on changes in the 
program's use since 2011, while Federal contractual obligations 
to all women-owned small businesses and program set-asides have 
increased since fiscal year 2012, WOSB program set-asides 
remain a small percentage.
    In fiscal year 2017, program contract obligations had grown 
to 3.8 percent of contract obligations to all women-owned small 
businesses for program-eligible goods or services. This was 
about $713 million.
    Chairman Golden, Ranking Member Stauber, and members of the 
subcommittee, this completes my prepared statement. I would be 
pleased to answer any questions that you may have.
    Chairman GOLDEN. Thank you, Mr. Shear.
    Mr. Wong, you are now recognized for opening statements for 
5 minutes.

                   STATEMENT OF ROBB N. WONG

    Mr. WONG. Thank you. Mr. Chairman, Mr. Ranking Member, 
subcommittee members, thank you for the opportunity to testify 
today about the status of SBA's compliance with GAO's directive 
from my colleague, Mr. Shear, regarding the NDAA 15 and our 
compliance with the WOSB. On behalf of Mr. Chris Pilkerton, our 
Acting Administrator at SBA, we appreciate the opportunity to 
brief you on our progress.
    Some background first about our office. U.S. Government is 
the largest purchaser of goods and services. Spends about $450 
to $500 billion a year. We work collaboratively with all 
branches of government and small business professionals to make 
sure the opportunities for small business are present. We make 
sure that 23 percent of the money spent by government goes to 
small business.
    So--I also have some goals in that the goals in general are 
to make sure that our certifications are more useful to both 
small businesses and to government. And if we do that, then you 
will drive demand for the certifications, and you will increase 
contract awards to small business.
    Most importantly, we hold the public trust that when a 
contract is awarded to an SBA-certified small business, that 
they are qualified to receive it. We appreciate the assistance 
from GAO, and particularly Mr. Shear, who has been our 
colleague working with us to improve our quality control and 
compliance. In both 2017 and 2018, due to the improvements in 
policy and processes in our programs, we have exceeded the 23 
percent goal for the fifth and sixth consecutive years.
    More importantly, government has increased its spending 
with small businesses by almost 22 percent more than ever in 
history. This has meant more contracts for small businesses, 
and more importantly, more jobs for Americans. There has never 
been a better time to be a small business, government 
contractor.
    Our small business certifications are effectively our 
products. Business demands them, and government wants to use 
SBA-certified companies to solve their challenges.
    My office administers four socioeconomic programs: the 8(a) 
program, which you may know, which has been the backbone of our 
office, it is a 30-year-old program for socially and 
economically disadvantaged individuals.
    We have the HUBZone program which is also--it is for 
historically underutilized business zones. It is more or less 
like an economic development program. So it is not only 
designed to help the business but also a poor area. This 
program has historically also been broken. We have tried to fix 
that.
    Finally, I should also mention that the 8(a) program and 
the HUBZone program have certification processes whereby we do 
two things: We certify people when they get into the program, 
but more importantly, we continue to evaluate their 
qualifications after they get in, okay? I will get into the 
volume in a second.
    The WOSB program and the Service-Disabled Veteran programs 
are also what we look at. Those are self-certification programs 
which have, for lack of--we have significantly less oversight 
of those programs. Okay. Compared to 8(a) and HUBZone, I think 
the WOSB program, as it stands today, and prior to 2017 when I 
came in, as well as the SDVOSB program are more or less on the 
honor system. Okay. As you found and as you have alluded to, 
some people don't follow that, and I get that.
    Just to back up for a minute, I have been aware of these 
programs since I have been 15 years old. I worked with the SBA. 
One of the SBA's first 8(a) programs, okay, I packed the things 
in the warehouse, okay? Then I ran my own companies, went to 
school. I came to SBA for 10 years. I wrote regulations for 
these programs, and I administered these programs earlier. Then 
for the last 20 years, I had my own company, and I supported up 
to 15 other companies, growing them, growing jobs through these 
programs. I take my job very, very seriously.
    Within the first month after I was briefed on the current 
state of the programs, I was advised and immediately concerned 
that the NDAA 15 had directed us to implement a formal 
certification for WOSB. I learned essentially that nothing had 
been done.
    I also learned that while the responsibility had been 
directed, no funding was appropriated. As I testified before 
here at the HSBC, I am a lawyer, and I believe that we must 
comply with the law. After some analysis of size and volume, I 
learned that WOSB was about three times the size of our 
existing 8(a) and HUBZone programs.
    Concurrently, we were also being asked at the time to bring 
on--possibly bring on the VA's SDVOSB program, also a formal 
certification, and to combine it with our own. And the size of 
that program was similar to WOSB, three times what we were 
already doing with 8(a) or with HUBZone. I testified about this 
earlier last year.
    In short, the problem is one of scale. And so, when we look 
at things, why haven't we complied with Mr. Shear's directives, 
the answer was, based on the way that we were operating, we 
couldn't. So in general, it was a problem of scale. We were 
faced with a predicament that our volume of processing 
presently, with 8(a) and HUBZone, was 3,500 applications a 
year, and it was also 10,000 annual reviews.
    So it is 3,000--2,000 applications, as an example, for 
8(a), but you have 5,000 active companies that are already in 
the program. So we have to approve the applications, and once 
you are in, we have to continue to certify your eligibility, to 
make sure again, with the public trust, that when SBA-certified 
company receives a contract, they are qualified.
    So, the volume we were faced was 3,500 applications in, 
with 10,000 annual reviews. And we had to figure out, if we had 
to add both WOSB and NVA, we would move to a volume of 35,000 
applications, and up to 40,000 annual reviews. I should note 
that we also didn't get any funding, and we also--and we were 
also not getting any more staff.
    What we also realized was that status quo was not an 
option, but to me, neither was standing still. I can't tell you 
what happened before, but I can tell you what I did ever since 
I have been in office. We decided to get to work. We decided to 
reengineer our process using 8(a) as the backbone for all 
certifications because it has been our best tested program, it 
has been the most used program by government, and it has been 
the most helpful to government.
    We decided that the first thing we needed to do, before we 
did anything, was to come up with a blueprint, or a plan of 
action, for staffing, funding, that would serve us today and in 
the future. The blueprint emphasized unifying the common 
elements of eligibility and standardizing their processes and 
analysis.
    We could process all applications as similarly as possible, 
and reduce their variation as much as possible. It would retain 
their quality and help to ensure the public trust.
    Good news. The main part of the blueprint has recently been 
completed. It will soon be finished entirely. But with that bit 
of completion, we were able to, again, attack the questions and 
concerns that Mr. Shear has raised. This necessary blueprint 
was the first step for giving us clarity about our present 
state, and also for future funding and staffing and production 
needs. It would have been irresponsible, prior to this point, 
to have made any such requests for staffing or funding without 
this blueprint. Most importantly, the blueprint has also guided 
us in establishing how we would address the concerns of NDAA 15 
and the best way to address Mr. Shear's concerns.
    In that regard, a proposed rule, establishing the formal 
certification program, was filed on May 9th, and it was 
published a couple days ago. Based on the rulemaking process, 
we estimate June of 2021 before the actual implementation of 
the certification program. We have begun the process of meeting 
with third-party certifiers, and we have established a schedule 
to meet with them regularly and periodically.
    We are moving in the right direction, as quickly and 
responsibly as we can, and certainly within the first month of 
me taking office. We will continue to work diligently and to 
comply with the law, and with you and--with your and Mr. 
Shear's directions.
    This has not been a fast process, admittedly, but it is 
necessary. It is the smart thing to do. If we are making good 
progress--we are making good progress. It has and will remain 
top of mind for me until it is done. There is a lot of work 
still to be done.
    I have been blessed to work with a strong leader, Mrs. 
McMahon, and now Mr. Chris Pilkerton, who support our actions, 
with our deputy, Barb Carson, whose support and co-leadership 
is invaluable to our team, now and in the future, and to our 
agency. And with a team of coworkers who has believed in our 
vision, and upon whose experience and efforts are the backbone 
of our office, we have made significant progress in advancing 
policy, processes, to deliver a more effective program to small 
businesses and government.
    This is just a brief glimpse of where we are and what we 
have been doing over the last 2 years, to the WOSB program, and 
to all of our programs, and I am ready to answer any questions 
you may have.
    Chairman GOLDEN. Thank you very much, Mr. Wong, for that 
opening testimony. And we will now move to questions from the 
committee, and I will begin by recognizing myself for the first 
5 minutes.
    Mr. Wong, I appreciate what you had to say here in laying 
out how you have been working on implementation of this 
requirement from Congress since you came into this role in 
2017. One of my favorite leaders that I have followed closely, 
Colin Powell, has this wonderful saying that I try and stick 
by, which is, after 30 days in a new position, you own it. That 
is the departure line from which you don't get to make excuses 
for the problems that were left for you to take over. So I was 
encouraged to hear you say, within a month, that you were 
beginning to try and move forward with these changes and 
reviewing some of the recommendations of GAO as well.
    You can't necessarily speak for the decisions of your 
predecessor. I make the assumption that a decision was made at 
SBA to go ahead and move forward with the first part, which was 
allowing for the sole-source authority in order to maximize the 
economic opportunities for women-owned small businesses as 
quickly as possible, and then to look secondly at the self-
certification piece.
    I think the problem being that it has taken so long. It has 
left quite a wide window there where we are increasing 
opportunities. You know, we are also leaving the program and 
the integrity of the program at risk. And I understand you are 
trying to find the right balance to not push people away from 
trying to get that certification and participate and bid, 
while, you know, at the same time, trying to find ways to make 
sure that the program is not being abused is very important.
    My gut instinct would be that this--some of these problems 
that we have talked about, whether it be oversight of third-
party certifiers, oversight of program participants, or use of 
the WOSB program, under ineligible NAICS codes, in many ways, 
had to do with staffing shortages, with funding shortages, with 
a lack of technology and the resources needed to upgrade them, 
and things of that nature. So I appreciate that you are saying 
that you had to take time to look and see what those resources 
were. I would have encouraged SBA to try and move more quickly 
on that.
    And with that, I would just open it up to you to maybe lay 
out, in your opinion, having done that review, what are the 
staffing needs? What are the technology upgrade needs, or 
challenges that you face? And what additional funding do you 
need to successfully move forward with the intent of the law 
passed by Congress in 2015, under the NDAA, and what resources 
do you need to do it, as best as possible?
    Mr. WONG. Thank you for the opportunity, and I am going to 
probably disappoint you. I don't know. We have to--we have to 
generally look, what we try to do--it isn't a flippant answer. 
We have come up with the blueprint of how we want to do this in 
general. In general, what I tried to do is to satisfy--is to 
comply with the law, with the amount of people that we have, 
and within the budget that we have, okay? The utopian scenario 
would be that we have perfect--we have perfect intakes of all 
qualified small businesses, and that we can give everyone an 
annual review, just as rigorously each time every year. With 
the existing staffing levels that we have, we cannot.
    So we are doing additional things. We are doing risk-based 
analysis. We are trying, again, to do as much quality as we 
can. We are not making a sacrifice to quality. Okay? That may 
happen. We can be criticized on the amount that we are doing 
and the vigilance that we are doing, but I can guarantee that 
we are trying to do everything we can without asking for help. 
We will use the blueprint which we have, the original one. So 
we are getting staffing levels and we are getting what I think 
are more responsible requests for budget together.
    To put it a different way, I think that the law, based on 
how it looked, it assumed we would just simply set up another 
silo. So in our office, as an example--we have roughly 50 
people within our office--we utilize up to--with the entire 
process for 8(a), we probably use close to--more than 100, 
including people in the field, just to administer a program for 
5,000 active applicants, okay? That is the one that is the 
best, where we have a rigorous intake process, and then we have 
a rigorous annual recertification--or excuse me--it is a 
continuing eligibility.
    We are faced with, if it was only setting up a silo, again, 
for the WOSB program, based on the volume, and based on the 
number of common elements that are common in terms of 
eligibility for WOSB and for the 8(a) program, we would have to 
increase the staff, and we would--by three times, okay? I was 
quickly apprised by our CFO, no. So I think that the easy thing 
would have said, Well, what can we do? Well, I am not like 
normal people. I figured we will find a way, or we will make 
one. And that is why I am so grateful for the team that we 
have, because they are willing to accept that vision, I said, 
we can't do nothing.
    You know, the American public needs our certifications. Put 
a different way, if we don't hold the public trust, they will 
take the programs away. What good are they? And, so, we need to 
make sure, again, maybe as a lawyer, but we need to make sure, 
just like with 8(a), we want to turn all of our programs in 
with that same standard.
    But we are trying to do everything that you are asking us 
to do. Most of the things you are asking us to do, as an 
example, are already in the 8(a) program. The challenge, again, 
is to move basically for something that is anywhere from six to 
10 times larger than what we are doing with the people we have, 
and that is what the blueprint is helping us to do. We are 
going--effectively, instead of horizontal silos, we have turned 
it into a processing shop, so that the people that we have, and 
the analysts that we have, and the different levels of analyst 
that we have, can process all applications. And they can do it 
today with HUBZone and 8(a), but then as we take on WOSB or--
and if we take on Service-Disabled Veterans, we should be okay.
    At that point, though, we don't have a number, and we don't 
have staffing. But initially, I remember that when we had 
originally asked, in the previous hearing, for how we would 
look at all of the processing, it was a very, very large----
    Chairman GOLDEN. I will stop you there, sir. Knowing that 
we got a few other members that are going to want to ask some 
questions, and not knowing what their timeline is, I am going 
to go ahead and turn it right over to the Ranking Member, Mr. 
Stauber. Thank you.
    Mr. STAUBER. I thank you, Mr. Chair.
    Mr. Shear, Mr. Wong, thanks for your testimony. You both 
have a lot of experience. There is no doubt about it.
    So, Mr. Wong, you have only been in this position for a 
couple years. Couple of questions. The GAO report indicates the 
new certification process will be in place by January 1, of 
2020. Did you just say 2021?
    Mr. WONG. Yes, sir.
    Mr. STAUBER. Okay. I want you to look from the women-owned 
businesses across this country. This is the frustrating thing 
that they are seeing. Because all it takes, Mr. Wong, is one or 
two fraudulent businesses to take the legitimacy out of a 
woman-owned business for contracts, et cetera. It is just 
purely unacceptable. And I am not blaming you. I like when your 
boss says, ``make it happen.'' And I think you have articulated 
kind of how you are going to get there. But 5 years later, 
after Congress asked you to put this forward, this is a 
problem. And I am glad you are in your position right now, to 
be able to say, ``we are going to do something.'' But to me, it 
is unacceptable. From northern Minnesota, this is simply 
unacceptable, the timeline, that when Congress enacts that 
legislation, we ask that the small business folks, take it and 
bring it across the country.
    As we always talk in this committee, Mr. Wong, that small 
businesses are the engine of our economy, we need this quicker. 
Because I don't want any businesses owned--legitimately owned 
by women, to go out of business because of inaction by you or 
anybody else in your office.
    So I am disappointed that it is--you gave the answer 2021. 
I believe it is the truthful answer, but I want you to know 
that the women-owned business across this country are not going 
to be happy about that. And to me, it is unacceptable. I am not 
putting blame on you.
    The second thing is, has the Small Business conducted a 
cost analysis of the 2015 NDAA SB women-owned, small business 
certification program, and if so, what did the agency find?
    Mr. WONG. Okay. So to your second point first, this is--we 
will just get the bad news out of the way. In operating a 
business--it is what I know how to do--we have got to be able 
to, first, understand how to define success, and then how to 
measure it, right? And so that is why this blueprint has been 
so important. We have had to basically take--based on the 
volume that we are getting--and I want to make this clear, it 
is not an excuse, it is an explanation--we can't use the 
mechanisms that we--we can't use the processes that we have 
been doing before.
    Mr. STAUBER. And so to that, are you going to explain the 
changes?
    Mr. WONG. Yes.
    Mr. STAUBER. Go ahead.
    Mr. WONG. So we have kind of had to, you know, at least on 
the blueprint, we have to tear down what we have done before. 
We have to break down those silos. We have to take people--for 
example, you have common elements. In 8(a), you have roughly 
nine elements of eligibility; WOSB has eight of those same 
elements. So, in my opinion, if you look at ownership and 
control as two of the elements which are critical for, are you 
the person that you say you are, and are you qualified? We need 
to get the same answer. We need to get it quickly from the same 
analyst. But we have an analyst sitting over here that doesn't 
talk to an analyst over here.
    But so what I think in general--and then we have people 
that, the process we would do is, they do it from start to 
finish. There are different grade levels, different abilities. 
Well, some people are good at handling, you know, I am a fat 
guy, so I will just use this example. I am really good at 
eating dessert, okay? But if you gave me a full meal, I will 
take 10 hours because I can't get through the vegetables. All 
right? If you break these teams up into what they are good at, 
and if you make it common as possible, and you can set up a 
system, so that they can look and see what they have to do for 
the analysis, it goes much better. None of that was here.
    So I had to--you know, with our team, we had to come up 
with that, okay? So, God bless Barb Carson. She is the one that 
is shepherding through this blueprint. The blueprint will be 
here while I am here and in the future for all of our SBA 
employees. We have people there that have devoted their careers 
to this, more than 20 years each for this. That is how long 
they been there with a broken system. We are trying to rebuild 
this system in a new way that is more efficient and help them 
so that we can get this volume.
    So to your point, we are doing the cost analysis and the 
staffing analysis. I would love another opportunity to come 
back and make an ask, and I would love to have your support.
    Mr. STAUBER. Mr. Wong, that brings me to my second 
question. Does the SBA know what staff resource levels are 
necessary to fully operate this program?
    Mr. WONG. We are getting there.
    Mr. STAUBER. Okay.
    Mr. WONG. And to the point, just so that you know, with the 
current level we have, we are basically trying to increase 
their workload by six times, okay, with a thank you very much, 
I appreciate you, okay? We are going to try and do as much as 
we can. We can't do all of it, but we will get some of it done, 
ever mindful of the responsibilities we have to the women 
business owners, to the minority business owners, to the 
historically underutilized business owners, and the public 
trust, okay? It is a slow process, and I am sorry to say, but 
it is my best estimate. I would rather have you flay me in 
public, because I am strong enough, I can take it. I think the 
system will work.
    Mr. STAUBER. Thank you, Mr. Wong.
    Mr. Chair, I yield back.
    Chairman GOLDEN. Thank you, Mr. Stauber.
    I would now go ahead and recognize Mr. Marc Veasey for 5 
minutes.
    Mr. VEASEY. I thank you, Mr. Chairman.
    I wanted to ask about women and the loans that they 
receive. I know that, obviously, that that is a big deal with 
SBA, women being able to receive loans and have access to 
capital. When you ask women entrepreneurs one of the reasons 
why they can't expand their business, it is access to capital, 
with lots of smaller, minority-owned businesses. I believe that 
women received about--women make up about 30 percent of small 
businesses in the country, but received about 17 percent of the 
SBA-backed conventional loans. What are you all trying to do to 
help that number out a little bit? And I believe out of the 
total dollars that were given out, that women-owned businesses 
only received about 4.4 percent of those with SBA conventional 
loans, and I was just curious what you all were doing to 
address that issue?
    Mr. WONG. Thank you for that question, sir. The loan 
policies and programs--I can give you an anecdotal answer. The 
loan policies and programs are handled by OCA, Mr. Manger. But 
I can tell you that the way that we would help women to get 
loans is by getting more contracts for them, and more 
opportunities, okay?
    So, what I told the committee previously, and I will 
reiterate here, with my team's efforts while we are doing all 
of these things together, over the last 2 years, I am very 
proud to say that through their efforts, we have grown small 
business opportunities by 22 percent. By any measure of a 
market, I think that is a great job.
    Mr. VEASEY. Twenty-two percent for women?
    Mr. WONG. No, 22 percent overall. So, historically, before 
I came to office, historically, the government had spent about 
$99.9 billion with small business, I believe in 2013 or 2014. 
In 2017, we raised that historical number to $105 billion, and 
last year, 2018, we raised it again to $121 billion.
    So there are more opportunities for small businesses, and, 
particularly, for women-owned small businesses, but if--
generally, how I would run a business is that if you can get 
these contracts you are more creditworthy, and then you have 
more access to loans.
    Mr. VEASEY. Do you have any way to break down exactly what 
percentage that you just pointed out, of those moneys were 
received by women?
    Mr. WONG. I could ask. I don't carry--we don't calculate 
that in our office, but I can certainly get that information.
    Mr. VEASEY. And in areas where you all have had success in 
working with women businesses, like with the MicroLoan Program 
that the SBA runs, I believe that women-owned businesses 
received about 57.4 percent, according to one study that I saw, 
of the successful MicroLoan Program that you guys run. Have you 
looked at ways how you could expand those sorts of programs 
where women have--women-owned businesses have shown to be very 
successful?
    Mr. WONG. In general, that is a great idea. We haven't 
looked at it that specifically, but I can tell you that we have 
looked at--we have looked at loans, we have looked at 
counseling, and we have looked at contracting. And I think that 
we need to do--we are doing a better job of cross-pollinating 
our areas together, because I think that SBA as a whole, if you 
look at us as a community, you know, in theory, you get 
counseling, you go into business, get contracts, and then you 
use loans to continue to grow, okay?
    Mr. VEASEY. I would ask in, you know, the last minute that 
I have if, you know, when you come back, or if you could get 
back to the committee at a future date, with something in 
writing on the feasibility of being able to expand those 
programs where women are already doing well, I think that would 
be really great. I think that would be good data for the 
committee to see. I know I would like to see it.
    Mr. WONG. Okay.
    Mr. VEASEY. Thank you.
    Mr. Chairman, I yield back.
    Chairman GOLDEN. Thank you very much. I wanted to go ahead 
and shift gears a little bit in a second round of questions.
    Mr. Shear, could you just talk a little bit, from your 
perspective and the work that you did, reviewing this program 
at the request of this committee. What are some of the 
difficulties that you think have led to the delay in moving 
forward with these new requirements of SBA?
    Mr. SHEAR. You are asking an excellent question, and I am 
going to do my best to answer, but some of it is a mystery to 
me and our team members. We were told, now almost 2 years ago, 
that SBA was about 1 or 2 months away from having a proposed 
rule. And we couldn't see how much progress had been made 
within the agency on that. We also knew that the person who was 
the director of Government Contracting and Business Development 
had taken actions, such as the review of the--the one-time 
review of the third-party certifiers, and certainly stated the 
intent to make that an ongoing process, and to try to address 
our recommendations.
    So in a sense, when we were looking--like, in 2017, we saw 
a situation where the agency was moving forward. Then--so the 
idea that a month or two might have been too ambitious, but 
then we were told it is going to take the agency longer to do 
that and there is a new director of the program. And when we 
were told it is going to take longer, we asked for simple 
things like, Do you have a project plan? Do you have a project 
plan with timelines?
    Because the steps in rulemaking are pretty straightforward. 
We did a report 2 years ago on this office and the rulemaking 
process and the steps that go into it and how much time it 
takes. So why couldn't the agency give us timelines? So, I 
don't know what was going on behind the scenes and weather 
there were any disagreements within the agency, so I can't 
speak to that.
    Now, I first saw the proposed rule in draft form last 
Wednesday and read through it, as did members of my team. In 
looking at it, I am not going to comment directly on the 
proposed rule, because the public-comment process is a very 
important one, and we don't interfere with that. But in reading 
it, I am still at a loss to try to figure out why this proposed 
rule took so long to complete. And part of it is the failure of 
SBA just to say to us, What steps are you going through to 
complete this rule? That is like bread-and-butter type 
questions we always ask, especially when timelines are 
involved. So the agency really hasn't been responsive to us. 
And so it is a mystery.
    Chairman GOLDEN. Thank you for that.
    I am going to go ahead and recognize Mr. Stauber.
    Mr. STAUBER. I thank you, Mr. Chair.
    Mr. Shear, you just reiterated the frustration in what 
greater America has in some of the inadequacy of our 
government.
    Mr. Wong, the SBA operates programs that are authorized--
unauthorized by Congress. Given the lack of funding and 
resources you have referenced, can the SBA go back and try to 
reallocate some of the resources which are going to 
unauthorized programs, to congressionally mandated programs, 
like WOSB?
    Mr. WONG. At least as regards WOSB, we went to our CFO, and 
the answer was that they could not provide the level of funding 
that at the time, when we had asked them about setting up 
another silo, they said Absolutely not, we don't have that 
funding. Whether it can be reallocated, I don't know. I leave 
that up to the CFO. He, generally, had been somebody that if we 
needed help and he could do it--I don't know what he does, but, 
you know, I don't know. But I know that we asked, and I know 
that the answer was no.
    Mr. STAUBER. I yield back.
    Chairman GOLDEN. So, just listening to all this, Mr. Wong, 
I just want to, you know, state, and maybe ask--and I think we 
can follow up with some of this in writing--I would just make 
note that you pointed out in your testimony, in some of your 
responses to the questions, it sounds to me that there are 
concerns about new requirements, without additional resources 
and funding. And, you know, I think that you are a mission-
oriented person. You want to get the job done, you want to do 
it right, you want to do it the very best that you can.
    Congress told SBA to go ahead and do something, and you 
were trying to do it within existing resources without asking 
for more of them, which I understand. And I think Mr. Stauber 
was spot on when he talked about the concerns about the damage 
that can be done when something like this takes too long, to 
the integrity of the program, and the impact it can have on the 
women-owned small businesses who should be competing, and 
should be winning these opportunities to contract with the 
government. I would just point out that, from my perspective, 
at some point, there is a responsibility for SBA to provide, 
back to Congress, whatever issues there are that are holding 
them back from moving forward with implementation in a timely 
manner.
    You know, it seems you are describing an interaction 
internally within SBA where people are saying no. Certainly, it 
is dependent upon us to ask these questions to give you the 
opportunity to come back to and tell us what you need, and that 
is what we are doing right now.
    So, I would ask that we get something back in writing, 
detailing exactly what is the cost in moving forward with the 
self-certification, with the certification, you know, process 
that is required of third-party certifiers? What resources do 
you need in order to move forward and do so, you know, 
appropriately?
    So, you know, we will follow up with something in writing 
and ask for that back, but, really, I think that is, you know, 
the politics of what something costs in taxpayer dollars, I 
think, belongs rightfully up here among these members and in 
Congress, to talk about whether or not we should be spending 
more to move forward with something like this. And so, you 
know, I appreciate the feedback.
    Mr. STAUBER. Thank you, Mr. Chair. Just wanted to say thank 
you to you both. Mr. Wong, it is not a great seat to sit in 
today, you know, but with your experience, and I really 
appreciate your honesty, and that is the feedback we need. But 
please know that the concerns for women-owned small business is 
a priority for us, and please, as Chairman Golden talked about, 
please come back with those written statements on how we are 
going to go forward in a manner that is extremely timely, and 
your--you know, I have faith in your experience that you will 
come back and break down those silos and make it work. So I 
thank you to you both.
    I yield back.
    Chairman GOLDEN. I think I would add to that, too, Mr. 
Wong, if we could--and I think we may have already requested 
this, but just in case, as well, we would request in writing a 
timeline for implementation of the program, how you intend to 
complete this work by January of 2021. I think we noted 
originally in the committee information that it was January of 
2020. I don't know if that is, you know, incorrect information. 
It slid a year. That is fine, but let's see the timeline on 
paper so we can continue to do the oversight that is necessary. 
And we want to work with you to make this work.
    With that, I would just go ahead with a closing statement. 
The Women-Owned Small Business program aims to expand 
contracting opportunities for women, but as we have heard 
today, untimely implementation of reforms, coupled, at times, 
with nonexistent oversight, threatens to defeat congressional 
intent. Women entrepreneurs and the business they own have 
been, and will continue to be, a driving force in our economy.
    Competing in the Federal marketplace is an integral part of 
the role that they play. And as we seek for ways to improve 
this program, we look forward to working with SBA to ensure 
that these and future reforms are implemented.
    I would ask unanimous consent that members have 5 
legislative days to submit statements and supporting materials 
for the record. Without objection, so ordered. And if there is 
no further business to come before the committee, we are 
adjourned. Thank you.
    [Whereupon, at 11:02 p.m., the Subcommittee was adjourned.]
                            
                            
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